American Financial Group, Inc. Announces First Quarter Results
-
Adjusted book value per share
$43.94 ; growth of 3% since year end -
Core net operating earnings
$0.92 per share, up 7% from the comparable 2012 period - P&C net written premiums up 16% from comparable 2012 period
-
Full year 2013 core net operating earnings guidance affirmed at
$3.60 - $4.00 per share
Core net operating earnings were
During the first quarter of 2013, AFG repurchased 61,586 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.
In millions, except per share amounts |
Three months ended |
|||||
2013 | 2012 | |||||
Components of net earnings attributable to shareholders: | ||||||
Core net operating earnings(a) | $ | 84 | $ | 85 | ||
Realized gains (losses) | 36 | 28 | ||||
Net earnings attributable to shareholders | $ | 120 | $ | 113 | ||
Components of Earnings Per Share: | ||||||
Core net operating earnings | $ | 0.92 | $ | 0.86 | ||
Realized gains (losses) | 0.40 | 0.28 | ||||
Diluted Earnings Per Share | $ | 1.32 | $ | 1.14 | ||
Footnote (a) is contained in the accompanying Notes To Financial Schedules at the end of this release.
“At
“Based on results for the first three months of 2013, we expect core net
operating earnings in 2013 to be between
The Specialty P&C insurance operations generated an
underwriting profit of
Gross and net written premiums were up 12% and 16%, respectively, in the
2013 first quarter compared to the same quarter a year earlier. Although
premiums were higher in all of AFG’s Specialty P&C segments, the
The
The
The Specialty Financial Group reported an underwriting
profit of
Annuity Segment
AFG's annuity operations contributed
The profitability of a fixed annuity business is largely dependent on the ability of a company to earn income on the assets supporting the business in excess of the amounts credited to policyholder accounts plus expenses incurred (earning a “spread”). Performance measures such as net interest spread and net spread earned are often presented by annuity businesses to help readers of their financial statements better understand the company's performance. See the accompanying schedules for information about these spreads for AFG’s fixed annuity operations.
Statutory premiums of
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.
Run-off Long-Term Care and Life Segment
AFG’s run-off long-term care and life segment incurred a pretax
operating loss of
Medicare Supplement and Critical Illness Segment
AFG’s
Investments
AFG recorded first quarter net realized gains of
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 and investment activities; recoverability of asset values; expected losses and the adequacy of reserves for long-term care, 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 and AFG’s run-off long-term care business;
availability of reinsurance and ability of reinsurers to pay their
obligations; the unpredictability of possible future litigation if
certain settlements of current litigation do not become effective;
trends in persistency, mortality and morbidity; competitive pressures,
including those in the annuity distribution channels, 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 2013 first quarter
results at
A replay will be available two hours following the completion of the
call and will remain available 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, |
||||||||
2013 |
2012(b) |
|||||||
Revenues | ||||||||
P&C insurance net earned premiums | $ | 687 | $ | 603 | ||||
Life, accident & health net earned premiums | 30 | 105 | ||||||
Net investment income | 326 | 317 | ||||||
Realized gains on securities | 57 | 44 | ||||||
Income (loss) of managed investment entities: | ||||||||
Investment income | 34 | 29 | ||||||
Loss on change in fair value of | ||||||||
assets/liabilities | (8 | ) | (29 | ) | ||||
Other income | 22 | 18 | ||||||
Total revenues | 1,148 | 1,087 | ||||||
Costs and expenses | ||||||||
P&C insurance losses & expenses | 644 | 555 | ||||||
Annuity, life, accident & health benefits & expenses |
210 |
265 |
||||||
Interest charges on borrowed money | 18 | 19 | ||||||
Expenses of managed investment entities | 22 | 19 | ||||||
Other expenses | 79 | 83 | ||||||
Total costs and expenses | 973 | 941 | ||||||
Earnings before income taxes |
175 |
146 |
||||||
Provision for income taxes(c) | 62 | 58 | ||||||
Net earnings including noncontrolling interests |
113 |
88 |
||||||
Less: Net earnings (loss) attributable to noncontrolling interests |
(7 |
) |
(25 |
) |
||||
Net earnings attributable to shareholders | $ | 120 | $ | 113 | ||||
Diluted earnings per Common Share | $ | 1.32 | $ | 1.14 | ||||
Average number of diluted shares | 91.0 | 99.4 | ||||||
Selected Balance Sheet Data: |
March 31,
2013 |
December 31,
2012 |
||||||
Total cash and investments | $ | 29,084 | $ | 28,449 | ||||
Long-term debt |
$ |
950 |
$ |
953 |
||||
Shareholders’ equity(d) | $ | 4,733 | $ | 4,578 | ||||
Shareholders’ equity (excluding appropriated retained earnings & unrealized gains/losses on fixed maturities)(d) |
$ |
3,950 |
$ |
3,784 |
||||
Book value per share: | ||||||||
Excluding appropriated retained earnings | $ | 51.94 | $ | 50.61 | ||||
Excluding appropriated retained earnings | ||||||||
and unrealized gains/losses on fixed | ||||||||
maturities | $ | 43.94 | $ | 42.52 | ||||
Common Shares outstanding | 89.9 | 89.0 | ||||||
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
March 31, |
%
Change |
||||||||||
2013 | 2012 | ||||||||||
Gross written premiums | $ | 925 | $ | 823 | 12 | % | |||||
Net written premiums | $ | 704 | $ | 607 | 16 | % | |||||
Ratios (GAAP) | |||||||||||
Loss & LAE ratio | 56.5 | % | 56.9 | % | |||||||
Underwriting expense ratio | 36.6 | % | 35.0 | % | |||||||
Combined Ratio | 93.1 | % | 91.9 | % | |||||||
Supplemental Information:(e) |
|||||||||||
Gross Written Premiums: | |||||||||||
Property & Transportation | $ | 352 | $ | 328 | 7 | % | |||||
Specialty Casualty | 430 | 366 | 17 | % | |||||||
Specialty Financial | 143 | 129 | 11 | % | |||||||
$ | 925 | $ | 823 | 12 | % | ||||||
Net Written Premiums: | |||||||||||
Property & Transportation | $ | 276 | $ | 250 | 10 | % | |||||
Specialty Casualty | 295 | 247 | 19 | % | |||||||
Specialty Financial | 113 | 93 | 22 | % | |||||||
Other | 20 | 17 | 18 | % | |||||||
$ | 704 | $ | 607 | 16 | % | ||||||
Combined Ratio (GAAP): | |||||||||||
Property & Transportation | 96.5 | % | 89.7 | % | |||||||
Specialty Casualty | 92.7 | % | 98.1 | % | |||||||
Specialty Financial | 88.5 | % | 85.0 | % | |||||||
Total Specialty Group | 93.1 | % | 91.9 | % | |||||||
|
Three months ended
March 31, |
Three months ended
March 31, |
|||||||
2013 |
Points on
Combined Ratio |
2012 |
Points on |
||||||
Reserve Development (Favorable)/Unfavorable: | |||||||||
Property & Transportation | $ (6) | (2.0) | $ (10) | (3.8) | |||||
Specialty Casualty | (16) | (6.2) | (1) | (0.6) | |||||
Specialty Financial | (6) | (4.8) | (7) | (6.9) | |||||
Other | (5) | n/a | (1) | n/a | |||||
$ (33) | (4.8) | $ (19) | (3.3) | ||||||
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
March 31, |
%
Change |
||||||||
2013 | 2012 | ||||||||
|
|||||||||
Annuity Premiums: |
|||||||||
Retail Single Premium |
$ | 360 | $ | 451 | (20 | %) | |||
Financial Institutions |
|||||||||
Single Premium |
194 | 275 | (29 | %) | |||||
Education Market-403(b) |
55 | 62 | (11 | %) | |||||
Variable Annuities |
15 | 15 | - | ||||||
Total Annuity Premiums | $ | 624 | $ | 803 | (22 | %) | |||
Components of Core Operating Earnings before
Income Taxes (Includes
Three months ended
March 31, |
%
Change |
||||||||||
2013 | 2012 | ||||||||||
Revenues: | |||||||||||
Net investment income | $ | 248 | $ | 228 | 9 | % | |||||
Other income | 14 | 13 | 8 | % | |||||||
Total revenues | 262 | 241 | 9 | % | |||||||
Costs and Expenses: | |||||||||||
Annuity benefits | 134 | 130 | 3 | % | |||||||
Acquisition expenses | 31 | 29 | 7 | % | |||||||
Other expenses | 21 | 22 | (5 | %) | |||||||
Total costs and expenses | 186 | 181 | 3 | % | |||||||
Core operating earnings before income taxes |
$ |
76 |
$ |
60 |
27 |
% |
|||||
Three months ended
March 31, |
|||||||||||
2013 | 2012 | ||||||||||
Supplemental Fixed Annuity Information:* | |||||||||||
Average fixed annuity reserves |
$ |
17,506 |
$ |
15,508 |
|||||||
Net interest spread | 2.99 | % | 2.88 | % | |||||||
Net spread earned | 1.58 | % | 1.43 | % | |||||||
*Excludes fixed annuity portion of variable annuity business
AMERICAN FINANCIAL GROUP, INC. | ||||||||
Notes To Financial Schedules | ||||||||
a) Components of core net operating earnings (in millions): |
||||||||
|
Three months ended
March 31, |
|||||||
2013 | 2012 | |||||||
Core Operating Earnings before Income Taxes: |
||||||||
P&C insurance segment | $ | 96 | $ | 100 | ||||
Annuity segment | 76 | 60 | ||||||
Run-off long term-care and life segment | (1 | ) | 1 | |||||
Medicare supp and critical illness segment* | - | 6 | ||||||
Interest & other corporate expense | (45 | ) | (40 | ) | ||||
Core operating earnings before income taxes | 126 | 127 | ||||||
Related income taxes | 42 | 42 | ||||||
Core net operating earnings | $ | 84 | $ | 85 | ||||
*
b) Certain reclassifications have been made to conform to the current year’s presentation.
c) Earnings before income taxes includes
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, umbrella and excess liability, 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 mortgage protection insurance), surety and fidelity products and trade credit insurance.
- Other includes an internal reinsurance facility.
Source:
American Financial Group, Inc.
Diane P. Weidner, 513-369-5713
Assistant
Vice President - Investor Relations
or
Websites:
www.AFGinc.com
www.GreatAmericanInsuranceGroup.com
www.GAFRI.com