What is American Financial Group Probability of Financial Distress (%)?
Probability of Financial Distress (%) measures the probability that a company will go bankrupt in the upcoming year given its current financial position. A higher ratio indicates a larger probability of bankruptcy for the company, while a lower ratio indicates a healthier fundamental. As of today, American Financial Group's Probability of Financial Distress (%) is 0.04%.
Like the Altman Z-Score, the PFD measures a company's bankruptcy risk. However, the main drawback of the Z-score is it does not apply to banks and insurance companies. According to Investopedia, the concept of "working capital" does not apply to banks and insurance companies, as financial institutions do not have typical current assets or current liabilities like inventories or accounts payable.
Competitive Comparison of American Financial Group's Probability of Financial Distress (%)
For the Insurance - Property & Casualty subindustry, American Financial Group's Probability of Financial Distress (%), along with its competitors' market caps and Probability of Financial Distress (%) data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
American Financial Group's Probability of Financial Distress (%) Distribution in the Insurance Industry
For the Insurance industry and Financial Services sector, American Financial Group's Probability of Financial Distress (%) distribution charts can be found below:
* The bar in red indicates where American Financial Group's Probability of Financial Distress (%) falls into.
American Financial Group Probability of Financial Distress (%) Calculation
Probability of Financial Distress (%) (PFD) was developed by John Campbell, Jens Hilscher and Jan Szilagyi in their Search of Distress Risk. It measures the probability that a company will go bankrupt within the next 12 months given its current financial position.
The Probability of Financial Distress (%) was obtained by a logit probability model based on eight explanatory variables. The logit formula to compute the probability of financial distress (LPFD) is given below:
| LPFD | = | -20.12 * NIMTAAVG | + | 1.60 * TLMTA | - | 7.88 * EXRETAVG | + | 1.55 * SIGMA | - | 0.005 * RSIZE | - | 2.27 * CASHMTA | + | 0.070 * MB | - | 0.09 * PRICE | - | 8.87 |
| = | -7.71 |
The Probability of Financial Distress (%) (PFD) was then obtianed by:
| PFD | = | 1 | / | (1 + e^(-LPFD)) | * | 100% |
| = | 0.04% |
The eight explanatory variables are:
1. NIMTAAVG = Net Income to Market Total Assets
*Note that for companies reported quarterly, geometrically declining weighted quarterly Net Income data in latest four quarters are used.
2. TLMTA = Total liabilities to Market Total Assets
3. CASHMTA = Cash to Market Total Assets
For insurance companies, CASHMTA is measured as:
4. EXRETAVG = Excess Return compared to the S&P 500
EXRETAVG is the weighted excess return compared to the S&P 500 in past 12 month. Geometrically declining weights are imposed on the monthly excess return to reflect lagged information. The weight is halved each quarter.
5. SIGMA = Standard Deviation of Daily Returns
For sigma, we use the annualized standard deviation of a company's returns over the past 92 days (or 63 trading days).
6. RSIZE = Relative Size
| RSIZE | = | log (Market Cap | / | Total Market Cap of S&P 500 companies) |
7. MB = Market to Adjusted Book Equity Ratio
8. PRICE
PRICE is measured as the log of the stock price, capped at log(15).
American Financial Group (American Financial Group) Business Description
Traded in Other Exchanges
Address
301 East Fourth Street, Cincinnati, OH, USA, 45202
American Financial Group Inc is a holding company that is engaged primarily in property and casualty insurance services. The company has a focus on specialized commercial products for businesses. American also has annuity operations that are focused on sales of traditional fixed and fixed-indexed annuities in the education, bank, and individual markets. American's insurance operations are conducted through the Great American Insurance Group. The group writes business in all 50 of the United States, primarily through independent agents and brokers.
Executives
| Amy Y Murray |
director |
3429 ARNOLD STREET, CINCINNATI OH 45202 |
| William W Verity |
director |
301 EAST FOURTH STREET, CINCINNATI OH 45202 |
| Terry S Jacobs |
director |
301 EAST FOURTH STREET, CINCINNATI OH 45202 |
| Von Lehman John I |
director |
301 EAST FOURTH STREET, 38TH FLOOR, CINCINNATI OH 45202 |
| John B Berding |
director |
301 E. FOURTH ST., 27TH FLOOR, CINCINNATI OH 45202 |
| Mark A Weiss |
officer: Senior VP & General Counsel |
301 EAST FOURTH STREET, CINCINNATI OH 45202 |
| Michelle A Gillis |
officer: Sr. Vice President |
301 E. FOURTH STREET, 39TH FLOOR, CINCINNATI OH 45202 |
| Brian S. Hertzman |
other: principal financial officer |
301 EAST FOURTH STREET, CINCINNATI OH 45202 |
| Thompson David Lawrence Jr |
officer: President of Subsidiary |
301 EAST FOURTH STREET, CINCINNATI OH 45202 |
| James E Evans |
director, officer: Sr. V. Pres. & Gen. Counsel |
301 E FOURTH STREET, CINCINNATI OH 45202 |
| Lindner Carl H Iii |
director, officer: Co-President |
14TH FLOOR PROVIDENT TOWER, ONE EAST FOURTH STREET, CINCINNATI OH 45202 |
| S Craig Lindner |
director, officer: Co-President |
ONE EAST FOURTH STREET, CINCINNATI OH 45202 |
| Vito C Peraino |
officer: Sr. VP & General Counsel |
301 EAST FOURTH STREET, CINCINNATI OH 45202 |
| Evans N Nwankwo |
director |
301 EAST FOURTH STREET, 38TH FLOOR, CINCINNATI OH 45202 |
| Kenneth C Ambrecht |
director |
250 EAST FIFTH STREET, CINCINNATI OH 45202 |
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