American Financial Group, Inc. Announces First Quarter Results
-
Net earnings per share of
$2.49 ; includes$0.40 per share loss from after-tax non-core items -
First quarter core net operating earnings per share of
$2.89 - First quarter annualized ROE of 18.9%; core operating ROE of 22.0%
-
Parent company cash and investments of approximately
$672 million ; excess capital of$1.0 billion atMarch 31, 2023 -
Full year 2023 core net operating earnings guidance unchanged at
$11.00 -$12.00 per share
Core net operating earnings were
|
Three Months Ended |
|||||||||||||||||||||
Components of Pretax Core Operating Earnings |
|
2023 |
|
|
|
2022 |
|
|
2023 |
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Before Impact of |
|
Alternative |
|
Core Net Operating |
|||||||||||||||||
In millions, except per share amounts |
Alternative Investments |
|
Investments |
|
Earnings, as reported |
|||||||||||||||||
|
||||||||||||||||||||||
P&C Pretax Core Operating Earnings |
$ |
272 |
|
$ |
283 |
|
$ |
78 |
$ |
139 |
$ |
350 |
|
$ |
422 |
|
||||||
Other expenses |
|
(23 |
) |
|
(21 |
) |
|
- |
|
- |
|
(23 |
) |
|
(21 |
) |
||||||
Holding company interest expense |
|
(19 |
) |
|
(23 |
) |
|
- |
|
- |
|
(19 |
) |
|
(23 |
) |
||||||
Pretax Core Operating Earnings |
|
230 |
|
|
239 |
|
|
78 |
|
139 |
|
308 |
|
|
378 |
|
||||||
Related provision for income taxes |
|
45 |
|
|
46 |
|
|
16 |
|
29 |
|
61 |
|
|
75 |
|
||||||
Core Net Operating Earnings |
$ |
185 |
|
$ |
193 |
|
$ |
62 |
$ |
110 |
$ |
247 |
|
$ |
303 |
|
||||||
|
|
|
|
|
|
|
||||||||||||||||
Core Operating Earnings Per Share |
$ |
2.17 |
|
$ |
2.27 |
|
$ |
0.72 |
$ |
1.29 |
$ |
2.89 |
|
$ |
3.56 |
|
||||||
|
|
|
|
|
|
|
||||||||||||||||
Weighted Avg Diluted Shares Outstanding |
|
85.4 |
|
|
85.2 |
|
|
85.4 |
|
85.2 |
|
85.4 |
|
|
85.2 |
|
||||||
|
AFG’s book value per share was
Book value per share, excluding unrealized gains (losses) related to fixed maturities, was
AFG’s net earnings, determined in accordance with
In millions, except per share amounts |
Three months ended
|
|||||||
|
|
2023 |
|
|
|
2022 |
|
|
Components of net earnings: |
|
|||||||
Core operating earnings before income taxes |
$ |
308 |
|
$ |
378 |
|
||
Pretax non-core items: |
|
|
||||||
Realized gains (losses) on securities |
|
(46 |
) |
|
(15 |
) |
||
Gain (loss) on retirement of debt |
|
2 |
|
|
(2 |
) |
||
Earnings before income taxes |
|
264 |
|
|
361 |
|
||
Provision (credit) for income taxes: |
|
|
||||||
Core operating earnings |
|
61 |
|
|
75 |
|
||
Non-core items |
|
(9 |
) |
|
(4 |
) |
||
Total provision for income taxes |
|
52 |
|
|
71 |
|
||
Net earnings |
$ |
212 |
|
$ |
290 |
|
||
|
|
|
||||||
|
|
|
||||||
Net earnings: |
|
|
||||||
Core net operating earnings(a) |
$ |
247 |
|
$ |
303 |
|
||
Non-core items: |
|
|
||||||
Realized gains (losses) on securities |
|
(37 |
) |
|
(12 |
) |
||
Gain (loss) on retirement of debt |
|
2 |
|
|
(1 |
) |
||
Net earnings |
$ |
212 |
|
$ |
290 |
|
||
|
|
|
||||||
Components of earnings per share: |
||||||||
Core net operating earnings(a) |
$ |
2.89 |
|
$ |
3.56 |
|
||
Non-core items: |
|
|
||||||
Realized gains (losses) on securities |
|
(0.42 |
) |
|
(0.14 |
) |
||
Gain (loss) on retirement of debt |
|
0.02 |
|
|
(0.02 |
) |
||
Diluted net earnings per share |
$ |
2.49 |
|
$ |
3.40 |
|
||
|
||||||||
Footnote (a) is contained in the accompanying Notes to Financial Schedules at the end of this release. |
||||||||
“AFG had approximately
Messrs. Lindner continued, “Assuming a closing date in the third quarter of 2023, the vast majority of the CRS premium to be written in calendar year 2023 and related results will belong to AIG; accordingly, the CRS acquisition is not expected to materially impact AFG’s reported results for 2023. Based on the strong results reported in the first quarter, we continue to expect AFG’s core net operating earnings per share in 2023 to be in the range of
AFG’s core earnings per share guidance excludes non-core items such as realized gains and losses and other significant items that are not able to be estimated with reasonable precision, or that may not be indicative of ongoing operations.
Specialty Property and Casualty Insurance Operations
AFG’s Specialty P&C insurance operations generated underwriting profit of
The first quarter 2023 combined ratio was a strong 89.2%, 5.2 points higher than the prior year period. First quarter 2023 results include
Gross and net written premiums were both up 11% in the 2023 first quarter compared to the prior year quarter. Year-over-year growth was reported within each of the Specialty P&C groups as a result of a combination of new business opportunities, increased exposures, and a good renewal rate environment.
Average renewal pricing across our
The
First quarter 2023 gross and net written premiums in this group were 15% and 10% higher, respectively, than the comparable prior year period. New business opportunities arising from sales of crop insurance products with higher cessions, coupled with increased rates and exposures in our commercial transportation businesses, were the primary drivers of the increase in premiums. Overall renewal rates in this group increased 6% on average in the first quarter of 2023, consistent with pricing achieved in this group for the full year in 2022.
The
First quarter 2023 gross and net written premiums increased 9% and 11%, respectively, when compared to the same prior year period. While most of the businesses in this group reported healthy premium growth during the first quarter, the higher year-over-year premiums resulted primarily from new accounts and strong account retention in our social services business, increased exposures from payroll growth and new business in our workers’ compensation businesses, and additional business opportunities in our E&S operations. This growth was partially offset by lower premiums in our mergers & acquisitions liability and executive liability businesses. Excluding our workers’ compensation businesses, renewal rates in this group were up approximately 5%; overall renewal rates in this group were up 3% in the first quarter.
The
Gross and net written premiums increased by 11% and 16%, respectively, in the 2023 first quarter when compared to the same 2022 period, primarily due to growth in our financial institution services, surety and commercial equipment leasing businesses. Renewal pricing in this group was up approximately 1% for the quarter.
Carl Lindner III stated, “Underwriting profitability in our Specialty P&C businesses was very good in the first quarter of 2023, which is especially impressive despite elevated industry catastrophe losses. I’m very pleased to start the year off with such strong premium growth, much of which resulted from new business opportunities, the impact of rate increases and higher exposures. More than half of our businesses reported growth and renewal rate increases during the quarter at the higher end of our guidance range. We continued to achieve pricing increases that enable us to meet or exceed targeted returns across our portfolio of Specialty P&C businesses.”
Further details about AFG’s Specialty P&C operations may be found in the accompanying schedules and in our Quarterly Investor Supplement, which is posted on our website.
Investments
Net Investment Income – For the quarter ended
Excluding the impact of alternative investments, net investment income in our property and casualty insurance operations for the three months ended
Our guidance for 2023 assumes a return of approximately 8% on alternative investments, with an average annualized yield of approximately 6% achieved over the remaining three quarters of 2023.
Non-Core Net Realized Losses – AFG recorded first quarter 2023 net realized losses on securities of
After-tax unrealized losses related to fixed maturities were
More information about the components of our investment portfolio may be found in our Quarterly Investor Supplement, which is posted on our website.
About
Forward Looking Statements
This press release, and any related oral statements, contains certain statements that may be deemed to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements in this press release not dealing with historical results are forward-looking and are based on estimates, assumptions and projections. Examples of such forward-looking statements include statements relating to: the Company's expectations concerning market and other conditions and their effect on future premiums, revenues, earnings, investment activities and the amount and timing of share repurchases or special dividends; recoverability of asset values; expected losses and the adequacy of reserves for asbestos, environmental pollution and mass tort claims; rate changes; and improved loss experience and anticipated timing of closing of the proposed acquisition of CRS; and performance of the CRS business under the ownership of AFG.
Actual results and/or financial condition could differ materially from those contained in or implied by such forward-looking statements for a variety of reasons including, but not limited to: changes in financial, political and economic conditions, including changes in interest and inflation rates, currency fluctuations and extended economic recessions or expansions in the
The forward-looking statements herein are made only as of the date of this press release. The Company assumes no obligation to publicly update any forward-looking statements.
Conference Call
The Company will hold a conference call to discuss 2023 first quarter results at
Participants should register for the call here now, or any time up to and during the time of the call, and will immediately receive the dial-in number and a unique pin to access the call. While you may register at any time up to and during the time of the call, you are encouraged to join the call 10 minutes prior to the start of the event.
The conference call and accompanying webcast slides will also be broadcast live over the internet. To access the event, click the following link: https://www.afginc.com/news-and-events/event-calendar. Alternatively, you can choose Events from the Investor Relations page at www.AFGinc.com.
A replay of the webcast will be available via the same link on our website approximately two hours after the completion of the call.
(Financial summaries follow)
This earnings release and AFG’s Quarterly Investor Supplement are available in the Investor Relations section of AFG’s website: www.AFGinc.com.
|
||||||||
|
Three months ended
|
|||||||
|
2023 |
|
2022 |
|||||
Revenues |
|
|
||||||
P&C insurance net earned premiums |
$ |
1,437 |
|
$ |
1,302 |
|
||
Net investment income |
|
217 |
|
|
230 |
|
||
Realized gains (losses) on securities |
|
(46 |
) |
|
(15 |
) |
||
Income of managed investment entities: |
|
|
||||||
Investment income |
|
104 |
|
|
46 |
|
||
Gain (loss) on change in fair value of assets/liabilities |
|
(4 |
) |
|
(5 |
) |
||
Other income |
|
32 |
|
|
30 |
|
||
Total revenues |
|
1,740 |
|
|
1,588 |
|
||
|
|
|||||||
Costs and expenses |
|
|||||||
P&C insurance losses & expenses |
|
1,293 |
|
|
1,107 |
|
||
Interest charges on borrowed money |
|
19 |
|
|
23 |
|
||
Expenses of managed investment entities |
|
95 |
|
|
39 |
|
||
Other expenses |
|
69 |
|
|
58 |
|
||
Total costs and expenses |
|
1,476 |
|
|
1,227 |
|
||
|
|
|||||||
Earnings before income taxes |
|
264 |
|
|
361 |
|
||
Provision for income taxes |
|
52 |
|
|
71 |
|
||
|
|
|
||||||
|
|
|
||||||
Net earnings |
$ |
212 |
|
$ |
290 |
|
||
|
|
|
||||||
Diluted earnings per common share |
$ |
2.49 |
|
$ |
3.40 |
|
||
|
|
|
||||||
Average number of diluted shares |
|
85.4 |
|
|
85.2 |
|
|
|
|
|
|||
Selected Balance Sheet Data: |
2023 |
|
2022 |
|||
Total cash and investments |
|
$ |
14,451 |
$ |
14,512 |
|
Long-term debt |
|
$ |
1,478 |
$ |
1,496 |
|
Shareholders’ equity(b) |
|
$ |
3,941 |
$ |
4,052 |
|
Shareholders’ equity (excluding unrealized gains/losses related to fixed maturities)(b) |
|
$ |
4,375 |
$ |
4,578 |
|
|
|
|
|
|||
Book value per share(b) |
|
$ |
46.27 |
$ |
47.56 |
|
Book value per share (excluding unrealized gains/losses related to fixed maturities)(b) |
|
$ |
51.37 |
$ |
53.73 |
|
|
|
|
|
|||
Common Shares Outstanding |
|
|
85.2 |
|
85.2 |
|
|
||||||
Footnote (b) is contained in the accompanying Notes to Financial Schedules at the end of this release. |
|
|||||||||||
|
Three months ended |
|
|
||||||||
|
March 31, |
|
Change |
||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
||
|
|
|
|
||||||||
Gross written premiums |
$ |
2,155 |
|
$ |
1,936 |
|
11 |
% |
|||
|
|
|
|
||||||||
Net written premiums |
$ |
1,519 |
|
$ |
1,368 |
|
11 |
% |
|||
|
|
|
|
||||||||
Ratios (GAAP): |
|
|
|
||||||||
Loss & LAE ratio |
|
57.0 |
% |
|
53.1 |
% |
|
||||
Underwriting expense ratio |
|
32.2 |
% |
|
30.9 |
% |
|
||||
|
|
|
|
||||||||
Specialty Combined Ratio |
|
89.2 |
% |
|
84.0 |
% |
|
||||
|
|
|
|
||||||||
Combined Ratio – P&C Segment |
|
89.3 |
% |
|
84.1 |
% |
|
||||
|
|
|
|
||||||||
Supplemental Information:(c) |
|
|
|
||||||||
Gross Written Premiums: |
|
|
|
||||||||
Property & Transportation |
$ |
872 |
|
$ |
760 |
|
15 |
% |
|||
Specialty Casualty |
|
1,061 |
|
|
976 |
|
9 |
% |
|||
Specialty Financial |
|
222 |
|
|
200 |
|
11 |
% |
|||
|
$ |
2,155 |
|
$ |
1,936 |
|
11 |
% |
|||
|
|
|
|
||||||||
Net Written Premiums: |
|
|
|
||||||||
Property & Transportation |
$ |
552 |
|
$ |
501 |
|
10 |
% |
|||
Specialty Casualty |
|
722 |
|
|
650 |
|
11 |
% |
|||
Specialty Financial |
|
184 |
|
|
159 |
|
16 |
% |
|||
Other |
|
61 |
|
|
58 |
|
5 |
% |
|||
|
$ |
1,519 |
|
$ |
1,368 |
|
11 |
% |
|||
|
|
|
|
||||||||
Combined Ratio (GAAP): |
|
|
|
||||||||
Property & Transportation |
|
91.0 |
% |
|
85.8 |
% |
|
||||
Specialty Casualty |
|
87.5 |
% |
|
80.6 |
% |
|
||||
Specialty Financial |
|
86.5 |
% |
|
82.0 |
% |
|
||||
|
|
|
|
||||||||
|
|
89.2 |
% |
|
84.0 |
% |
|
|
Three months ended |
||||||||
|
|
||||||||
|
|
2023 |
|
|
|
2022 |
|
||
|
|
||||||||
Property & Transportation |
$ |
(37 |
) |
$ |
(34 |
) |
|||
Specialty Casualty |
|
(27 |
) |
|
(49 |
) |
|||
Specialty Financial |
|
(3 |
) |
|
(13 |
) |
|||
Other Specialty |
|
3 |
|
|
7 |
|
|||
|
$ |
(64 |
) |
$ |
(89 |
) |
|||
Other |
|
1 |
|
|
1 |
|
|||
|
$ |
(63 |
) |
$ |
(88 |
) |
|||
|
|||||||||
Points on Combined Ratio: |
|
||||||||
Property & Transportation |
|
(7.8 |
) |
|
(7.7 |
) |
|||
Specialty Casualty |
|
(3.8 |
) |
|
(7.6 |
) |
|||
Specialty Financial |
|
(1.4 |
) |
|
(8.1 |
) |
|||
|
|
|
|||||||
|
|
(4.5 |
) |
|
(6.8 |
) |
|||
Total P&C Segment |
|
(4.4 |
) |
|
(6.7 |
) |
|||
Footnote (c) is contained in the accompanying Notes to Financial Schedules at the end of this release. |
|
||||||||
a) Components of core net operating earnings (in millions): |
||||||||
|
Three months ended
|
|||||||
|
|
2023 |
|
|
|
2022 |
|
|
Core Operating Earnings before Income Taxes: |
|
|||||||
P&C insurance segment |
$ |
350 |
|
$ |
422 |
|
||
Interest and other corporate expenses |
|
(42 |
) |
|
(44 |
) |
||
|
|
|
||||||
Core operating earnings before income taxes |
|
308 |
|
|
378 |
|
||
Related income taxes |
|
61 |
|
|
75 |
|
||
|
||||||||
Core net operating earnings |
$ |
247 |
|
$ |
303 |
|
||
b) Shareholders’ Equity at |
||||||||
c) Supplemental Notes: |
||||||||
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20230502006173/en/
Vice President – Investor & Media Relations
(513) 369-5713
Websites:
www.AFGinc.com
www.GreatAmericanInsuranceGroup.com
Source: