American Financial Group, Inc. Announces First Quarter Results
-
Net earnings per share of
$1.14 -
Core net operating earnings
$1.25 per share; matches 2015 first quarter record results - First quarter annualized core operating ROE of 10.3%
-
Full year 2016 core net operating earnings guidance maintained
at
$5.35 - $5.75 per share
Core net operating earnings were
During the first quarter of 2016, AFG repurchased 1.1 million shares of
common stock at an average price per share of
AFG’s net earnings attributable to shareholders, determined in accordance with U.S. generally accepted accounting principles (“GAAP”), include certain items that may not be indicative of its ongoing core operations. The following table identifies such items and reconciles net earnings attributable to shareholders to core net operating earnings, a non-GAAP financial measure that AFG believes is a useful tool for investors and analysts in analyzing ongoing operating trends.
Three months ended | ||||||||
In millions, except per share amounts | March 31, | |||||||
2016 | 2015 | |||||||
Components of net earnings attributable to shareholders: | ||||||||
Core net operating earnings(a) | $ | 111 | $ | 112 | ||||
Non-Core Items: |
||||||||
Realized gains (losses) on securities |
(10 |
) |
12 |
|||||
Loss on sale of subsidiaries |
- |
(105 |
) |
|||||
Net earnings attributable to shareholders | $ | 101 | $ | 19 | ||||
Components of Earnings Per Share: | ||||||||
Core net operating earnings(a) | $ | 1.25 | $ | 1.25 | ||||
Non-Core Items: |
||||||||
Realized gains (losses) on securities |
(0.11 |
) |
0.14 |
|||||
Loss on sale of subsidiaries |
- |
(1.18 |
) |
|||||
Diluted Earnings Per Share | $ | 1.14 | $ | 0.21 |
Footnote (a) is contained in the accompanying Notes to Financial Schedules at the end of this release. |
“AFG had approximately
“Based on results for the first three months of the year, we continue to
expect core net operating earnings in 2016 to be between
The Specialty P&C insurance operations generated an underwriting profit
of
The first quarter 2016 combined ratio of 91.3% represents a 2.3 point improvement over the prior year period. First quarter 2016 results include 2.7 points of favorable prior year reserve development, compared to 0.8 points of favorable development in the comparable prior year period. Catastrophe losses were 0.8 points in the first quarter of 2016, compared to 0.6 points in the prior year period. Overall renewal pricing was flat during the quarter.
Gross and net written premiums were up 4% and 6%, respectively, in the 2016 first quarter compared to the same quarter a year earlier, with growth reported in each of our Specialty P&C groups. Further details about AFG’s specialty P&C operations may be found in the accompanying schedules.
The
First quarter 2016 gross and net written premiums in this group were 6%
and 8% higher, respectively, than the comparable prior year period.
Growth in gross and net written premiums is attributable to our
transportation operations and new premium from our
The
Gross and net written premiums for the first quarter of 2016 were up 2%
and 4%, respectively, compared to the same period in 2015. Higher
premiums in our excess and surplus lines, targeted markets and executive
liability businesses were partially offset by lower premiums in our
workers’ compensation and general liability businesses. Lower premiums
in our general liability business were primarily the result of
competitive market conditions, re-underwriting efforts within the
The
First quarter 2016 gross and net written premiums were up 7% and 9%, respectively, when compared to the prior year period, primarily as a result of higher premiums in our financial institutions and surety businesses. Pricing in this group was flat for the quarter.
Based on results during the first three months of the year, we continue to expect an overall 2016 calendar year combined ratio in the range of 92% to 94% and estimate net written premium growth to be between 2% and 6%.”
Annuity Segment
As shown in the following table, AFG's Annuity Segment contributed
Components of Core Annuity Operating Earnings Before Income Taxes |
|||||||||||
In millions | Three months ended | Pct. | |||||||||
March 31, | Change | ||||||||||
2016 | 2015 | ||||||||||
Annuity earnings before fair value accounting for FIAs | $ | 84 | $ | 92 | (9 | %) | |||||
Impact of fair value accounting for FIAs | (31 | ) | (17 | ) | nm | ||||||
Core Pretax Annuity Operating Earnings | $ | 53 | $ | 75 | (29 | %) | |||||
Annuity Earnings Before Fair Value Accounting for FIAs – AFG’s first quarter 2016 earnings continued to benefit from growth in annuity assets. AFG’s quarterly average annuity investments and reserves grew approximately 14% and 13% year-over-year, respectively; however, the benefit of this growth was more than offset by the runoff of higher yielding investments and the negative impact of certain investments required to be marked to market through earnings.
Impact of Fair Value Accounting for FIAs – Variances from
expectations of certain items (such as projected interest rates, option
costs and surrenders), as well as changes in the stock market, have an
impact on the accounting for FIAs; these accounting adjustments are
recognized through AFG’s reported core earnings. Many of these
adjustments are not economic in nature, but rather impact the timing of
reported results. In the first quarter of 2015, a relatively large
decrease (15-30 basis points) in interest rates contributed to the
Annuity Premiums – AFG’s Annuity Segment reported
statutory premiums of
“Finally, even though premiums were extremely strong in the first quarter of 2016, we are not increasing our original guidance of a projected 4% to 8% increase in sales in 2016 as compared to 2015. As previously mentioned, we have made several decreases to crediting rates on new business, and expect those decreases to result in a drop in sales, some of which we have already seen in April. Our strategy continues to include a commitment to disciplined product pricing, as well as consumer-friendly product design and careful expense management.”
More information about premiums and the results of operations for our Annuity Segment may be found in our Quarterly Investor Supplement, which is posted on our website.
Investments
AFG recorded first quarter 2016 net realized losses on securities of
For the three months ended
In
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 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; 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.
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 U.S. and/or abroad; performance of securities
markets; AFG’s ability to estimate accurately the likelihood, magnitude
and timing of any losses in connection with investments in the
non-agency residential mortgage market; new legislation or declines in
credit quality or credit ratings that could have a material impact on
the valuation of securities in AFG’s investment portfolio; the
availability of capital; regulatory actions (including changes in
statutory accounting rules); changes in the legal environment affecting
AFG or its customers; tax law and accounting changes; levels of natural
catastrophes and severe weather, terrorist activities (including any
nuclear, biological, chemical or radiological events), incidents of war
or losses resulting from civil unrest and other major losses;
development of insurance loss reserves and establishment of other
reserves, particularly with respect to amounts associated with asbestos
and environmental claims; availability of reinsurance and ability of
reinsurers to pay their obligations; trends in persistency, mortality
and morbidity; competitive pressures; the ability to obtain adequate
rates and policy terms; changes in AFG’s credit ratings or the financial
strength ratings assigned by major ratings agencies to our operating
subsidiaries; and other factors identified in our filings with 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 2016 first quarter
results at
A replay will be available two hours following the completion of the
call and will remain available until
The conference call and accompanying webcast slides will also be broadcast live over the Internet. To listen to the call via the Internet, go to the Investor Relations page on AFG’s website, www.AFGinc.com, and follow the instructions at the Webcasts and Presentations link.
The archived webcast will be available immediately after the call via
the same link on the Investor Relations page until
(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.
AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES | ||||||||
SUMMARY OF EARNINGS AND SELECTED BALANCE SHEET DATA | ||||||||
(In Millions, Except Per Share Data) |
||||||||
Three months ended | ||||||||
March 31, | ||||||||
2016 | 2015 | |||||||
Revenues | ||||||||
P&C insurance net earned premiums | $ | 998 | $ | 946 | ||||
Life, accident & health net earned premiums | 6 | 25 | ||||||
Net investment income | 411 | 388 | ||||||
Realized gains (losses) on: | ||||||||
Securities | (18 | ) | 19 | |||||
Subsidiaries | - | (162 | ) | |||||
Income (loss) of managed investment entities: | ||||||||
Investment income | 45 | 34 | ||||||
Loss on change in fair value of assets/liabilities | (13 | ) | (3 | ) | ||||
Other income | 46 | 50 | ||||||
Total revenues | 1,475 | 1,297 | ||||||
Costs and expenses |
||||||||
P&C insurance losses & expenses | 915 | 889 | ||||||
Annuity, life, accident & health benefits & expenses | 272 | 257 | ||||||
Interest charges on borrowed money | 18 | 20 | ||||||
Expenses of managed investment entities | 35 | 24 | ||||||
Other expenses | 79 | 77 | ||||||
Total costs and expenses | 1,319 | 1,267 | ||||||
Earnings before income taxes |
156 |
30 |
||||||
Provision for income taxes(b) | 52 | 5 | ||||||
Net earnings including noncontrolling interests | 104 | 25 | ||||||
Less: Net earnings attributable to noncontrolling interests |
3 |
6 |
||||||
Net earnings attributable to shareholders | $ | 101 | $ | 19 | ||||
Diluted Earnings per Common Share | $ | 1.14 | $ | 0.21 | ||||
Average number of diluted shares | 88.5 | 89.4 | ||||||
March 31, |
December 31, | |||||||
Selected Balance Sheet Data: |
2016 | 2015 | ||||||
Total cash and investments | $ | 39,437 | $ | 37,736 | ||||
Long-term debt(c) | $ | 998 | $ | 998 | ||||
Shareholders’ equity(d) | $ | 4,755 | $ | 4,592 | ||||
Shareholders’ equity (excluding unrealized gains/losses on fixed maturities)(d) |
$ |
4,329 |
$ |
4,314 |
||||
Book Value Per Share | $ | 54.67 | $ | 52.50 | ||||
Book Value Per Share (excluding unrealized gains/losses on fixed maturities) |
$ |
49.77 |
$ |
49.33 |
||||
Common Shares Outstanding |
87.0 |
87.5 |
||||||
Footnotes (b), (c) and (d) are contained in the accompanying Notes to Financial Schedules at the end of this release. |
AMERICAN FINANCIAL GROUP, INC. | |||||||||||
SPECIALTY P&C OPERATIONS | |||||||||||
(Dollars in Millions) | |||||||||||
Three months ended | Pct. | ||||||||||
March 31, |
Change |
||||||||||
2016 | 2015 | ||||||||||
Gross written premiums | $ | 1,243 | $ | 1,196 | 4 | % | |||||
Net written premiums | $ | 979 | $ | 926 | 6 | % | |||||
Ratios (GAAP): | |||||||||||
Loss & LAE ratio | 58.3 | % | 60.8 | % | |||||||
Underwriting expense ratio | 33.0 | % | 32.8 | % | |||||||
Specialty Combined Ratio | 91.3 | % | 93.6 | % | |||||||
Supplemental Information:(e) |
|||||||||||
Gross Written Premiums: | |||||||||||
Property & Transportation | $ | 398 | $ | 376 | 6 | % | |||||
Specialty Casualty | 698 | 683 | 2 | % | |||||||
Specialty Financial | 147 | 137 | 7 | % | |||||||
$ | 1,243 | $ | 1,196 | 4 | % | ||||||
Net Written Premiums: | |||||||||||
Property & Transportation | $ | 311 | $ | 288 | 8 | % | |||||
Specialty Casualty | 519 | 501 | 4 | % | |||||||
Specialty Financial | 125 | 115 | 9 | % | |||||||
Other | 24 | 22 | 9 | % | |||||||
$ | 979 | $ | 926 | 6 | % | ||||||
Combined Ratio (GAAP): | |||||||||||
Property & Transportation | 90.6 | % | 97.7 | % | |||||||
Specialty Casualty | 94.3 | % | 94.2 | % | |||||||
Specialty Financial | 82.6 | % | 81.7 | % | |||||||
Aggregate Specialty Group | 91.3 | % | 93.6 | % | |||||||
Three months ended | ||||||||
March 31, | ||||||||
2016 | 2015 | |||||||
Reserve Development (Favorable)/Adverse: | ||||||||
Property & Transportation | $ | (17 | ) | $ | 3 | |||
Specialty Casualty | (4 | ) | - | |||||
Specialty Financial | (4 | ) | (9 | ) | ||||
Other | (2 | ) | (1 | ) | ||||
$ | (27 | ) | $ | (7 | ) | |||
Points on Combined Ratio: | ||||||||
Property & Transportation | (5.2 | ) | 1.1 | |||||
Specialty Casualty | (0.7 | ) | - | |||||
Specialty Financial | (3.3 | ) | (7.3 | ) | ||||
Aggregate Specialty Group | (2.7 | ) | (0.8 | ) |
Footnote (e) is contained in the accompanying Notes to Financial Schedules at the end of this release. |
AMERICAN FINANCIAL GROUP, INC. | |||||||||||
ANNUITY SEGMENT | |||||||||||
(Dollars in Millions) | |||||||||||
Components of Statutory Premiums |
|||||||||||
Three months ended | Pct. | ||||||||||
March 31, |
Change |
||||||||||
2016 | 2015 | ||||||||||
Annuity Premiums: |
|||||||||||
Financial Institutions Single Premium |
$ |
653 |
$ |
394 |
66 |
% | |||||
Retail Single Premium |
|
566 |
|
361 |
57 |
% |
|||||
Education Market | 57 | 47 | 21 | % | |||||||
Variable Annuities | 9 | 11 | (18 | %) | |||||||
Total Annuity Premiums | $ | 1,285 | $ | 813 | 58 | % | |||||
Components of Core Operating Earnings Before Income Taxes |
|||||||||||
Three months ended | Pct. | ||||||||||
March 31, |
Change |
||||||||||
2016 | 2015 | ||||||||||
Revenues: | |||||||||||
Net investment income | $ | 315 | $ | 292 |
8 |
% | |||||
Other income | 26 | 27 |
(4 |
%) |
|||||||
Total revenues |
341 |
319 |
7 |
% |
|||||||
Costs and Expenses: | |||||||||||
Annuity benefits | 228 | 184 | 24 | % | |||||||
Acquisition expenses | 34 | 37 | (8 | %) | |||||||
Other expenses | 26 | 23 | 13 | % | |||||||
Total costs and expenses | 288 | 244 | 18 | % | |||||||
Core operating earnings before income taxes |
$ | 53 | $ | 75 | (29 | %) | |||||
Supplemental Fixed Annuity Information |
|||||||||||
Three months ended | Pct. | ||||||||||
March 31, |
Change |
||||||||||
2016 | 2015 | ||||||||||
Core operating earnings before impact of fair value accounting on FIAs |
$ |
84 |
$ |
92 |
(9 |
%) |
|||||
Impact of fair value accounting | (31 | ) | (17 | ) | nm | ||||||
Core operating earnings before income taxes |
$ |
53 |
$ |
75 |
(29 |
%) |
|||||
Average Fixed Annuity Reserves* | $ | 26,935 | $ | 23,752 | 13 | % | |||||
Net Interest Spread | 2.54 | % | 2.67 | % | |||||||
Net Spread Earned before impact of fair value accounting* |
1.20 |
% |
1.49 |
% |
|||||||
Net Spread Earned after impact of fair value accounting |
0.74 |
% |
1.21 |
% |
* Excludes fixed annuity portion of variable annuity business. |
Notes to Financial
Schedules
a) Components of core net operating earnings (in millions):
Three months ended | ||||||||
March 31, | ||||||||
2016 | 2015 | |||||||
Core Operating Earnings before Income Taxes: |
||||||||
P&C insurance segment | $ | 158 | $ | 129 | ||||
Annuity segment, before impact of fair value accounting | 84 | 92 | ||||||
Impact of fair value accounting | (31 | ) | (17 | ) | ||||
Run-off long-term care and life segment | (1 | ) | 4 | |||||
Interest & other corporate expense | (40 | ) | (41 | ) | ||||
Core operating earnings before income taxes | 170 | 167 | ||||||
Related income taxes | 59 | 55 | ||||||
Core net operating earnings | $ | 111 | $ | 112 |
b) Excluding the impact of the loss on the sale of the long term care
business that was recorded in the first quarter of 2015, AFG’s effective
tax rate for the three months ended
c)
d) Shareholders’ Equity at
e) Supplemental Notes:
- Property & Transportation includes primarily physical damage and liability coverage for buses, trucks and recreational vehicles, inland and ocean marine, agricultural-related products and other property coverages.
- Specialty Casualty includes primarily excess and surplus, general liability, executive liability, professional liability, umbrella and excess liability, specialty coverages in targeted markets, customized programs for small to mid-sized businesses and workers’ compensation insurance.
- Specialty Financial includes risk management insurance programs for leasing and financing institutions (including collateral and lender-placed mortgage property insurance), surety and fidelity products and trade credit insurance.
- Other includes an internal reinsurance facility.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160502006256/en/
Source:
American Financial Group, Inc.
Diane P. Weidner, 513-369-5713
Asst.
Vice President – Investor Relations
or
Websites:
www.AFGinc.com
www.GreatAmericanInsuranceGroup.com