UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 25, 2011
AMERICAN FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
| Ohio | 1-13653 | 31-1544320 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
| One East Fourth Street, Cincinnati, OH |
45202 |
|
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: 513-579-2121
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Section 2 — Financial Information
Item 2.02 Results Of Operations And Financial Condition.
On October 25, 2011, American Financial Group, Inc. issued a news release announcing its financial
results for the quarter ending September 30, 2011. The news release is attached hereto as Exhibit
99.1 and is incorporated herein by reference.
Section 9 — Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
| (a) | Financial statements of business acquired. Not applicable. | ||
| (b) | Pro forma financial information. Not applicable. | ||
| (c) | Exhibits |
| Exhibit No. | Description | |||
| 99.1 | News Release, dated October 25, 2011 reporting American
Financial Group Inc. third quarter results for the period
ended September 30, 2011. |
|||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| AMERICAN FINANCIAL GROUP, INC. |
||||
| Date: October 26, 2011 | ||||
| By: | /s/ Karl J. Grafe | |||
| Karl J. Grafe | ||||
| Vice President | ||||
2
EXHIBIT 99.1
American Financial Group, Inc. Announces
Third Quarter and Nine Month Results
Third Quarter and Nine Month Results
| • | Third quarter core net operating earnings $0.90 per share |
| • | Adjusted book value per share of $39.09; up 4% from year end |
| • | Repurchased 2.6 million shares during the quarter |
| • | 2011 core operating earnings guidance remains $3.30 — $3.70 per share |
Cincinnati, Ohio — October 25, 2011 — American Financial Group, Inc. (NYSE/NASDAQ: AFG)
today reported net earnings attributable to shareholders of $96 million ($0.94 per share) for
the 2011 third quarter, compared to $132 million ($1.21 per share) for the 2010 third quarter.
Per share results reflect the impact of share repurchases in 2011 and 2010. The 2011 results
include realized gains of $5 million compared to realized gains of $15 million in the 2010
period. Book value per share, excluding appropriated retained earnings and unrealized gains
(losses) on fixed maturities, increased by $0.40 to $39.09 per share during the quarter. Net
earnings attributable to shareholders for the nine month period were $234 million ($2.24 per
share), compared with $346 million ($3.11 per share) in the comparable 2010 period. Nine month
results in 2011 include realized gains of $14 million and a special charge of $38 million
resulting from a second quarter reserve strengthening related to the Company’s asbestos and
other environmental exposures. The comparable period in 2010 includes $24 million in realized
gains.
Core net operating earnings were $91 million ($0.90 per share) for the 2011 third quarter,
compared to $117 million ($1.07 per share) reported in the 2010 third quarter. Core net
operating earnings for the first nine months of 2011 were $258 million ($2.48 per share)
compared to $322 million ($2.89 per share) for the same period a year ago. Lower underwriting
profit and lower investment income in our specialty property and casualty insurance (“P&C”)
operations, partially offset by increased earnings in our annuity and supplemental (“A&S”)
operations in the first nine months of 2011, contributed to these results. Nine month
annualized core operating return on equity was 9%.
During the third quarter of 2011, AFG repurchased 2.6 million shares of common stock at an
average price per share of $32.25. Repurchases during the first nine months of 2011 totaled 7.8
million shares at an average price per share of $33.70.
AFG’s net earnings attributable to shareholders, determined in accordance with 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 | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| In millions, except per share amounts | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Components of net earnings attributable
to shareholders: |
||||||||||||||||
Core net operating earnings(a) |
$ | 91 | $ | 117 | $ | 258 | $ | 322 | ||||||||
Realized gains |
5 | 15 | 14 | 24 | ||||||||||||
Special A&E charge(b) |
— | — | (38 | ) | — | |||||||||||
Net earnings
attributable to shareholders |
$ | 96 | $ | 132 | $ | 234 | $ | 346 | ||||||||
Components of diluted earnings per share: |
||||||||||||||||
Core net operating earnings |
$ | 0.90 | $ | 1.07 | $ | 2.48 | $ | 2.89 | ||||||||
Realized gains |
.04 | .14 | .13 | .22 | ||||||||||||
Special A&E charge(b) |
— | — | (.37 | ) | — | |||||||||||
Diluted earnings per share |
$ | 0.94 | $ | 1.21 | $ | 2.24 | $ | 3.11 | ||||||||
Footnotes (a) and (b) are contained in the accompanying Notes To Financial Schedules at the end of
this release.
S. Craig Lindner and Carl H. Lindner III, AFG’s Co-Chief Executive Officers, issued this
statement: “A continued low interest rate environment and national and global economic
uncertainty require that our insurance professionals be more disciplined than ever in their
underwriting and product pricing decisions. Despite these challenging circumstances, AFG
produced solid core operating results for the third quarter and first nine months of 2011.
“We continued to repurchase shares of our common stock during the third quarter, which were
acquired, on average, at approximately 83% of book value. We are confident in the Company’s
financial strength and liquidity. We had parent company cash of $315 million and excess capital
of approximately $725 million at September 30, 2011. We are committed to deploying our excess
capital in a manner that creates long-term shareholder value. In addition to using excess
capital for share repurchases and dividends, we continue to invest in healthy, profitable
organic growth through the introduction of new products and services and look for opportunities
to expand our specialty niche businesses through acquisitions and start-ups that meet our
projected return thresholds.
“We reaffirm our core net operating earnings guidance for 2011 to be $3.30 to $3.70 per
share. As has been our practice, this guidance excludes non-core items such as realized gains
and losses as well as other significant items that may not be indicative of ongoing operations.”
P&C Specialty Core Results
The P&C specialty insurance operations generated an underwriting profit of $56 million in
the 2011 third quarter, compared to $68 million in the third quarter of 2010. The combined
ratio for the 2011 third quarter was 93%, 2 points higher than the comparable 2010 period.
Results for the 2011 third quarter include $34 million (4 points) in favorable reserve
development. By comparison, favorable reserve development in the third quarter of 2010 was $15
million (2 points). Losses from catastrophes totaled $13 million in the third quarter of 2011,
primarily related to Hurricane Irene. Catastrophe losses in the third quarter of 2010 were $6
million. Underwriting profit for the first nine months of 2011 was $141 million, compared to
$214 million in the comparable 2010 period.
Gross written premiums increased by approximately 24% and 16% for the third quarter and
first nine months of 2011 when compared to the 2010 periods. Net written premiums for the 2011
third quarter and first nine months were 30% and 18% higher, respectively, than the same periods
a year earlier. This growth was driven by higher premiums in our Property and Transportation
segment, particularly our crop and transportation businesses. In addition to these factors,
higher net written premiums in 2011 reflect the impact of a third quarter 2010 reinsurance
transaction in our Specialty Financial group.
Further details of the P&C Specialty operations may be found in the accompanying schedules.
The Property and Transportation group reported an underwriting profit of $5 million in the
2011 third quarter, $36 million lower than the 2010 third quarter. Lower crop profits, higher
catastrophe losses and lower underwriting profits in our transportation businesses contributed
to these results. Underwriting profit in the first nine months of 2011 decreased approximately
$43 million from the comparable 2010 period. Most businesses in this segment had strong
underwriting margins through the first nine months of 2011.
Gross and net written premiums for the first nine months of 2011 were 32% and 29% higher
than the comparable 2010 periods. Higher spring agricultural commodity prices, which have the
effect of increasing our crop premiums, and premiums from National Interstate’s acquisition of
Vanliner were primary drivers of this growth.
The Specialty Casualty group reported an underwriting profit of $20 million in the 2011
third quarter, compared to an underwriting loss of $13 million in the third quarter of 2010.
The increase in underwriting profit was primarily attributable to a significant reduction in
prior year adverse reserve development. Improved results in our general liability, excess and
surplus, and California Workers’ Comp businesses were offset somewhat by lower underwriting
profits in our targeted markets operations. Specialty Casualty underwriting profit in the first
nine months of 2011 was $43 million, approximately $14 million higher than the comparable 2010
period. Higher underwriting profit in our excess and surplus lines and improved prior year
favorable reserve development more than offset underwriting losses in a block of program
business. Most businesses in this group produced strong underwriting profit margins through the
first nine months of 2011.
For the third quarter of 2011, gross and net written premiums were down 3% when compared to
the comparable 2010 period. Gross and net written premiums for the first nine months of 2011
were down 3% and 5%, respectively, from the comparable prior year period, consistent with our
expectations. The non-renewal of two major programs that did not meet our return thresholds and
a decision to exit the excess workers’ compensation business resulted in lower premiums in both
2011 periods.
The Specialty Financial group reported underwriting profit of $23 million for the third
quarter of 2011, compared to $36 million for the same period a year ago. Higher catastrophe
losses in our financial institutions business and lower favorable reserve development in our
run-off automotive residual value insurance (“RVI”) business impacted 2011 results.
Additionally, third quarter 2010 results reflect pre-tax income of approximately $8 million in
connection with a reinsurance transaction involving the sale of unearned premiums related to our
automotive lines of business. Specialty Financial underwriting profit was $46 million for the
nine month period, compared to $91 million in the same 2010 period, primarily the result of
lower favorable RVI reserve development and the 2010 reinsurance transaction. Almost all lines
of business in this group produced excellent underwriting profit margins through the first nine
months of 2011.
Increases in net written premiums in the 2011 third quarter and nine month periods were the
result of a third quarter 2010 reinsurance transaction that involved the sale of unearned
premiums related to our automotive lines of business. These increased premiums were offset to
some extent by lower premiums in our financial institutions business, as a result of our
reduction in coastal and near-coastal exposures.
Carl H. Lindner III stated, “Our commitment to carefully manage wind-exposed property
coverages has resulted in some loss of premium, but has also been instrumental in helping us to
contain losses from storms that have produced billions of dollars of losses for our industry.
I’m pleased that AFG’s third quarter catastrophe losses represented only two points on our
combined ratio. Additionally, I am encouraged that we have rate increases in some of our
businesses. We know that our underwriting and pricing discipline serve us well today, and will
continue to do so years from now. We remain on target to achieve our 2011 operating goals.”
Annuity and Supplemental Insurance Core Results
The A&S Group generated pretax core operating earnings in the first nine months of 2011 of
$157 million, 6% higher than in the first nine months of 2010. However, for the third quarter,
pretax core operating earnings were $49 million in 2011, compared to $58 million for the
comparable 2010 period. Higher third quarter earnings due to asset growth and lower expenses
were more than offset by the impact of the third quarter 2011 decrease in the stock market and,
to a lesser extent, the accounting impact of lower interest rates on the Company’s fixed indexed
annuity (“FIA”) operations.
A 14% decline in the S&P 500 Index during the third quarter of 2011 had a negative impact
on variable and FIA results of approximately $8 million. FIA results for the 2011 third quarter
were also adversely impacted by approximately $4 million due to a decline in interest rates.
AFG expects that much of this negative impact will reverse over time. There was no impact on
earnings in the third quarter of 2010 because the positive impact of an 11% increase in the S&P
500 Index was offset by a decline in interest rates.
AFG performs a review (“unlocking”) of its major actuarial assumptions throughout the year,
including management’s expectation of long-term reinvestment rates. Given current market
conditions, the effect of any such unlocking is not expected to be material to AFG. Excluding
the potential impact of any unlocking, AFG now expects that full year 2011 A&S core operating
results will be 12-15% higher than 2010, down from earlier guidance of 15-20%.
Statutory premiums of $992 million and $2.8 billion in the 2011 third quarter and first
nine months were 20% and 40% higher, respectively, than the comparable periods in 2010. The
third quarter results reflect increased sales of FIAs in the single premium market due primarily
to the introduction of new products and features. Nine month results also reflect higher FIA
sales as well as increased sales of annuities through banks as a result of the addition of
several new banks to the distribution network. Sales of annuities have slowed since early
September as AFG has lowered its crediting rates in response to the significant decrease in
market interest rates.
Investments
AFG recorded third quarter 2011 net realized gains of $5 million after tax, compared to $15
million in the comparable prior year period. After-tax, realized gains for the first nine
months of 2011 were $14 million, compared to $24 million in the same period in 2010. Unrealized
gains on fixed maturities were $465 million, after tax, after DAC, at September 30, 2011. Our
portfolio continues to be high quality, with 90% of our fixed maturity portfolio rated
investment grade and 96% with a National Association of Insurance Commissioners’ designation of
NAIC 1 or 2, its highest two categories.
During the first nine months of 2011, P&C investment income was 14% lower than the
comparable 2010 period. As disclosed previously, the continued runoff and disposition of
higher-yielding securities in the non-agency residential mortgage-backed securities portfolio
and generally lower reinvestment rates were primary factors contributing to the decrease. We
expect 2011 P&C investment income to be about 12% lower than in 2010.
More information about the components of our investment portfolio may be found in our
Financial and Investment Supplements, which are posted on our website.
About American Financial Group, Inc.
American Financial Group is an insurance holding company based in Cincinnati, Ohio with
assets of approximately $35 billion. Through the operations of Great American Insurance Group,
AFG is engaged primarily in property and casualty insurance, focusing on specialized commercial
products for businesses, and in the sale of traditional fixed and indexed annuities and a
variety of supplemental insurance products, such as Medicare Supplement. Great American
Insurance Group’s roots go back to 1872 with the founding of its flagship company, Great
American Insurance Company.
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 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 factors 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;
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
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; 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 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 Securities and Exchange
Commission.
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 information in this press release should be read in conjunction with financial and
investment supplements that are available in the Investor Relations section of our website at
www.AFGinc.com. The company will hold a conference call to discuss 2011 third quarter results
at 11:30 am (ET) tomorrow, Wednesday, October 26, 2011. Toll-free telephone access will be
available by dialing 1-888-892-6137 (international dial in 706-758-4386). The conference ID for
the live call is 15891727. Please dial in five to ten minutes prior to the scheduled start time
of the call.
A replay will also be available following the completion of the call, at approximately 2:00
pm (ET) on October 26, 2011 and will remain available until 11:59 pm (ET) on November 2, 2011.
To listen to the replay, dial 1-800-585-8367 (international dial in 404-537-3406) and provide
the conference ID 15891727.
The conference call will also be broadcast over the Internet. To listen to the call, go to
the Investor Relations page on AFG’s website, www.AFGinc.com, and follow the instructions at the
Webcast link. An archived webcast will be available immediately after the call via a link on
the Investor Relations page until November 2, 2011 at 11:59 pm (ET). An archived audio MP3 file
will also be available within 24 hours of the call.
Contact:
|
Diane P. Weidner | Websites: | ||
| Asst. Vice President — Investor Relations | www.AFGinc.com | |||
| (513) 369-5713 | www.GreatAmericanInsuranceGroup.com | |||
| www.GAFRI.com |
-o0o-
(Financial summaries follow)
(Financial summaries follow)
This earnings release and additional Financial Supplements are available in the Investor
Relations section of AFG’s website: www.AFGinc.com.
AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES
SUMMARY OF EARNINGS
(In Millions, Except Per Share Data)
SUMMARY OF EARNINGS
(In Millions, Except Per Share Data)
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenues |
||||||||||||||||
P&C insurance premiums |
$ | 835 | $ | 736 | $ | 2,043 | $ | 1,887 | ||||||||
Life, accident & health premiums |
107 | 112 | 324 | 340 | ||||||||||||
Investment income |
310 | 296 | 916 | 885 | ||||||||||||
Realized gains |
8 | 35 | 24 | 50 | ||||||||||||
Income (loss) of managed investment
entities: |
||||||||||||||||
Investment income |
27 | 23 | 78 | 68 | ||||||||||||
Gain(loss) on change in fair value
of assets/liabilities |
1 | (4 | ) | (54 | ) | (44 | ) | |||||||||
Other income |
47 | 57 | 136 | 155 | ||||||||||||
| 1,335 | 1,255 | 3,467 | 3,341 | |||||||||||||
Costs and expenses |
||||||||||||||||
P&C insurance losses & expenses |
779 | 668 | 1,952 | 1,685 | ||||||||||||
Annuity, life, accident & health
benefits & expenses |
280 | 251 | 811 | 769 | ||||||||||||
Interest on borrowed money |
21 | 21 | 63 | 57 | ||||||||||||
Expenses of managed investment
entities |
17 | 15 | 53 | 38 | ||||||||||||
Other operating and general expenses |
83 | 92 | 269 | 279 | ||||||||||||
| 1,180 | 1,047 | 3,148 | 2,828 | |||||||||||||
Operating earnings before income
taxes |
155 | 208 | 319 | 513 | ||||||||||||
Provision for income taxes(c) |
48 | 82 | 126 | 199 | ||||||||||||
Net earnings including noncontrolling
interests |
107 | 126 | 193 | 314 | ||||||||||||
Less: Net earnings (loss)
attributable to noncontrolling
interests |
11 | (6 | ) | (41 | ) | (32 | ) | |||||||||
Net earnings attributable to
shareholders |
$ | 96 | $ | 132 | $ | 234 | $ | 346 | ||||||||
Diluted Earnings per Common Share |
$ | 0.94 | $ | 1.21 | $ | 2.24 | $ | 3.11 | ||||||||
Average number of Diluted Shares |
101.3 | 109.5 | 104.1 | 111.4 | ||||||||||||
Footnote (c) is contained in the accompanying Notes To Financial Schedules at the end of this
release.
AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES
SUMMARY OF EARNINGS, continued
(In Millions, Except Per Share Data)
SUMMARY OF EARNINGS, continued
(In Millions, Except Per Share Data)
| September 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
Selected Balance Sheet Data: |
||||||||
Total Cash and Investments |
$ | 24,954 | $ | 22,670 | ||||
Long-term Debt |
$ | 937 | $ | 952 | ||||
Shareholders’ Equity(d) |
$ | 4,465 | $ | 4,470 | ||||
Shareholders’ Equity (Excluding appropriated
retained earnings & unrealized
gains/losses on fixed maturities)(d) |
$ | 3,850 | $ | 3,948 | ||||
Book Value Per Share: |
||||||||
Excluding appropriated retained earnings |
$ | 43.81 | $ | 40.64 | ||||
Excluding appropriated retained earnings and
unrealized gains/losses on fixed maturities |
$ | 39.09 | $ | 37.54 | ||||
Common Shares Outstanding |
98.5 | 105.2 | ||||||
Footnote (d) is contained in the accompanying Notes To Financial Schedules at the end of this
release.
AMERICAN FINANCIAL GROUP, INC.
P&C SPECIALTY GROUP UNDERWRITING RESULTS
(In Millions)
P&C SPECIALTY GROUP UNDERWRITING RESULTS
(In Millions)
| Three months | Nine months | |||||||||||||||||||||||
| ended | ended | |||||||||||||||||||||||
| September 30, | Pct. | September 30, | Pct. | |||||||||||||||||||||
| 2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||
Gross written premiums |
$ | 1,575 | $ | 1,273 | 24 | % | $ | 3,277 | $ | 2,828 | 16 | % | ||||||||||||
Net written premiums |
$ | 915 | $ | 703 | 30 | % | $ | 2,168 | $ | 1,844 | 18 | % | ||||||||||||
Ratios (GAAP): |
||||||||||||||||||||||||
Loss & LAE ratio |
66 | % | 61 | % | 61 | % | 55 | % | ||||||||||||||||
Expense ratio |
27 | % | 30 | % | 32 | % | 34 | % | ||||||||||||||||
Combined Ratio(Excluding A&E) |
93 | % | 91 | % | 93 | % | 89 | % | ||||||||||||||||
Total Combined Ratio |
93 | % | 91 | % | 96 | % | 89 | % | ||||||||||||||||
Supplemental:(e) |
||||||||||||||||||||||||
Gross Written Premiums: |
||||||||||||||||||||||||
Property & Transportation |
$ | 1,104 | $ | 809 | 36 | % | $ | 1,918 | $ | 1,450 | 32 | % | ||||||||||||
Specialty Casualty |
325 | 335 | (3 | %) | 967 | 998 | (3 | %) | ||||||||||||||||
Specialty Financial |
146 | 129 | 13 | % | 391 | 379 | 3 | % | ||||||||||||||||
Other |
— | — | — | 1 | 1 | — | ||||||||||||||||||
| $ | 1,575 | $ | 1,273 | 24 | % | $ | 3,277 | $ | 2,828 | 16 | % | |||||||||||||
Net Written Premiums: |
||||||||||||||||||||||||
Property & Transportation |
$ | 575 | $ | 450 | 28 | % | $ | 1,175 | $ | 912 | 29 | % | ||||||||||||
Specialty Casualty |
220 | 227 | (3 | %) | 645 | 676 | (5 | %) | ||||||||||||||||
Specialty Financial |
103 | 10 | 930 | % | 297 | 212 | 40 | % | ||||||||||||||||
Other |
17 | 16 | 6 | % | 51 | 44 | 16 | % | ||||||||||||||||
| $ | 915 | $ | 703 | 30 | % | $ | 2,168 | $ | 1,844 | 18 | % | |||||||||||||
Combined Ratio (GAAP): |
||||||||||||||||||||||||
Property & Transportation |
99 | % | 90 | % | 96 | % | 90 | % | ||||||||||||||||
Specialty Casualty |
91 | % | 106 | % | 93 | % | 96 | % | ||||||||||||||||
Specialty Financial |
77 | % | 60 | % | 85 | % | 74 | % | ||||||||||||||||
Aggregate Specialty Group |
93 | % | 91 | % | 93 | % | 89 | % | ||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Reserve Development Favorable/(Unfavorable): |
||||||||||||||||
Property & Transportation |
$ | (3 | ) | $ | (2 | ) | $ | 23 | $ | 22 | ||||||
Specialty Casualty |
23 | (3 | ) | 50 | 47 | |||||||||||
Specialty Financial |
9 | 16 | 9 | 39 | ||||||||||||
Other |
5 | 4 | 10 | 14 | ||||||||||||
Aggregate Specialty Group |
34 | 15 | 92 | 122 | ||||||||||||
Special A&E Reserve Charge-P&C Run-off |
— | — | (50 | ) | — | |||||||||||
Total Reserve Development Including A&E |
$ | 34 | $ | 15 | $ | 42 | $ | 122 | ||||||||
Points on Combined Ratio: |
||||||||||||||||
Property & Transportation |
(1 | ) | — | 2 | 3 | |||||||||||
Specialty Casualty |
11 | (1 | ) | 8 | 7 | |||||||||||
Specialty Financial |
9 | 18 | 3 | 11 | ||||||||||||
Aggregate Specialty Group |
4 | 2 | 5 | 6 | ||||||||||||
Footnote (e) is contained in the accompanying Notes To Financial Schedules at the end of this
release.
AMERICAN FINANCIAL GROUP, INC.
ANNUITY & SUPPLEMENTAL INSURANCE GROUP
STATUTORY PREMIUMS
(In Millions)
ANNUITY & SUPPLEMENTAL INSURANCE GROUP
STATUTORY PREMIUMS
(In Millions)
| Three months | Nine months | |||||||||||||||||||||||
| ended | ended | |||||||||||||||||||||||
| September 30, | Pct. | September 30, | Pct. | |||||||||||||||||||||
| 2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||||||||||
Retirement annuity premiums: |
||||||||||||||||||||||||
Fixed annuities |
$ | 112 | $ | 154 | (27 | %) | $ | 316 | $ | 514 | (39 | %) | ||||||||||||
Indexed annuities |
517 | 249 | 108 | % | 1,280 | 589 | 117 | % | ||||||||||||||||
Bank annuities — direct |
63 | 165 | (62 | %) | 278 | 361 | (23 | %) | ||||||||||||||||
Bank annuities — indirect |
181 | 131 | 38 | % | 542 | 141 | 284 | % | ||||||||||||||||
Variable annuities |
17 | 17 | — | 52 | 56 | (7 | %) | |||||||||||||||||
| 890 | 716 | 24 | % | 2,468 | 1,661 | 49 | % | |||||||||||||||||
Supplemental insurance |
96 | 100 | (4 | %) | 290 | 303 | (4 | %) | ||||||||||||||||
Life insurance |
6 | 9 | (33 | %) | 24 | 29 | (17 | %) | ||||||||||||||||
Total statutory premiums |
$ | 992 | $ | 825 | 20 | % | $ | 2,782 | $ | 1,993 | 40 | % | ||||||||||||
“Bank annuities — direct” represent premiums produced by financial institutions appointed
directly by the Company. “Bank annuities — indirect” represent premiums produced through banks
by independent agents or brokers appointed by the Company.
AMERICAN FINANCIAL GROUP, INC.
Notes To Financial Schedules
Notes To Financial Schedules
a) GAAP to Non-GAAP Reconciliation—Components of core net operating earnings:
| Three months ended | Nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| In millions | 2011 | 2010 | 2011 | 2010 | ||||||||||||
P&C operating earnings |
$ | 120 | $ | 135 | $ | 340 | $ | 423 | ||||||||
Annuity & supplemental insurance
operating earnings |
49 | 58 | 157 | 148 | ||||||||||||
Interest & other corporate expense |
(33 | ) | (14 | ) | (101 | ) | (75 | ) | ||||||||
Core operating earnings before
income taxes |
136 | 179 | 396 | 496 | ||||||||||||
Related income taxes |
45 | 62 | 138 | 174 | ||||||||||||
Core net operating earnings |
$ | 91 | $ | 117 | $ | 258 | $ | 322 | ||||||||
b) Reflects the following effect of a special A&E charge reflected in nine month 2011
results($ in millions, except per share amounts):
| Pre-tax | After-Tax | EPS | ||||||||||
A&E Charge: |
||||||||||||
P&C insurance runoff operations |
||||||||||||
Asbestos |
$ | 28 | $ | 18 | ||||||||
Environmental |
22 | 14 | ||||||||||
| $ | 50 | $ | 32 | $ | .31 | |||||||
Former railroad & manufacturing operations |
||||||||||||
Asbestos |
$ | 3 | $ | 2 | ||||||||
Environmental |
6 | 4 | ||||||||||
| $ | 9 | $ | 6 | $ | .06 | |||||||
c) Operating income before income taxes includes $8 million of non-taxable income and $47
million of non-deductible losses attributable to noncontrolling interests related to managed
investment entities in the third quarter and first nine months of 2011, respectively, and $4
million and $37 million of non-deductible losses in the third quarter and first nine months
of 2010, respectively.
d) Shareholders’ Equity at September 30, 2011 includes $465 million ($4.72 per share) in
unrealized gains on fixed maturities and $150 million ($1.52 per share) of retained earnings
appropriated to managed investment entities. The appropriated retained earnings will
ultimately inure to the benefit of the debt holders of the investment entities managed by
AFG. Shareholder’s Equity at December 31, 2010 includes $326 million ($3.10 per share) in
unrealized gains on fixed maturities and $197 million ($1.87 per share) of retained earnings
appropriated to managed investment entities.
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, primarily in the state of
California. |
| • | Specialty Financial includes risk management insurance programs for lending and
leasing institutions (including collateral and mortgage protection insurance), surety
and fidelity products and trade credit insurance. |
| • | Other includes an internal reinsurance facility. |