Singapore markets closed
  • Straits Times Index

    3,095.59
    -6.62 (-0.21%)
     
  • Nikkei

    25,935.62
    -457.42 (-1.73%)
     
  • Hang Seng

    21,859.79
    -137.10 (-0.62%)
     
  • FTSE 100

    7,168.65
    -0.63 (-0.01%)
     
  • BTC-USD

    19,268.65
    -1,104.43 (-5.42%)
     
  • CMC Crypto 200

    420.84
    +0.70 (+0.17%)
     
  • S&P 500

    3,825.33
    +39.95 (+1.06%)
     
  • Dow

    31,097.26
    +321.83 (+1.05%)
     
  • Nasdaq

    11,127.84
    +99.11 (+0.90%)
     
  • Gold

    1,812.90
    +5.60 (+0.31%)
     
  • Crude Oil

    108.46
    +2.70 (+2.55%)
     
  • 10-Yr Bond

    2.8890
    -0.0830 (-2.79%)
     
  • FTSE Bursa Malaysia

    1,449.74
    +5.52 (+0.38%)
     
  • Jakarta Composite Index

    6,794.33
    -117.25 (-1.70%)
     
  • PSE Index

    6,165.35
    +9.92 (+0.16%)
     

American Financial (AFG) Beats on Q1 Earnings, Raises EPS View

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·5-min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

American Financial Group, Inc. AFG reported first-quarter 2022 net operating earnings per share of $3.56, which surpassed the Zacks Consensus Estimate by 45.3%. The bottom line improved 50% year over year.

American Financial’s results benefited from net investment income, improved underwriting and profit in each of the Specialty Property and Casualty (P&C) Groups, offset by higher expenses.

American Financial Group, Inc. Price, Consensus and EPS Surprise

American Financial Group, Inc. Price, Consensus and EPS Surprise
American Financial Group, Inc. Price, Consensus and EPS Surprise

American Financial Group, Inc. price-consensus-eps-surprise-chart | American Financial Group, Inc. Quote

Behind the Headlines

Total revenues of $1.6 billion increased 5.2% year over year in the quarter. The growth came on the back of higher P&C insurance net earned premiums, net investment income and other income.

Net investment income climbed 22.3% year over year to $230 million in the quarter under review.

Total cost and expenses increased 4.5% year over year to $1.2 billion due to higher P&C insurance losses & expenses.

Segmental Update

Specialty P&C Insurance segment generated $1.4 billion in net written premiums, which rose 14% year over year, attributable to strong performance across the Property & Transportation, Specialty Casualty and Other divisions as well as increasing renewal rate in the entire P&C group.

While net written premiums in Property & Transportation Group grew 24% year over year to $501 million in the quarter, the same at Specialty Casualty Group increased 11% year over year at $650 million. Further, net written premiums at Specialty Financial declined 1% year over year and Other divisions improved 9% year over year.

The segment’s underwriting profit increased 55.2% year over year to $208 million in the quarter, primarily driven by improved underwriting profitability in each of the Specialty P&C Groups.

The combined ratio improved 450 basis points (bps) year over year to 84% at the segment, courtesy of an improvement of 960 bps across Specialty Casualty Group and 210 bps in Specialty Financial divisions.

Discontinued Annuity Operations

In May 2021, AFG completed the divestiture of its Annuity business to Mass Mutual for cash proceeds of $3.57 billion. AFG recognized an after-tax non-core gain on the sale of $656 million in the first half of 2021. The sale continues to be subject to tax-related post-closing adjustments, which are expected to be settled in 2022.

Financial Update

American Financial exited the first quarter with cash and investments of $15.7 billion, which declined 0.3% from the 2021-end level.

As of Mar 31, 2022, long-term debt totaled $1.9 billion, which decreased 2.4% from the level at 2021 end.

As of Mar 31, 2022, the company’s book value per share (excluding unrealized gains/losses on fixed maturities) was $58.14, up 1.2% from the 2021-end level.

Annualized return on equity (ROE) came in at 23.5% for the first quarter, contracting 640 basis points year over year.

Prudent Capital Deployment

American Financial declared a special cash dividend of $8 per share, which will be paid out on May 27, 2022 to shareholders of record as of May 20. The aggregate amount of this special dividend will be nearly $680 million. This special dividend is in addition to the company’s regular quarterly cash dividend of 56 cents per share paid out on Apr 25, 2022. The company has declared $10 per share in special dividends in 2022 so far.

American Financial bought back shares worth around $4.6 million in the reported quarter.

2022 Guidance Revised

American Financial increased core net operating earnings guidance to $10.50 - $11.50 per share from the earlier guidance of $9.75 - $10.75 per share.

American Financial continues to expect an overall calendar year combined ratio in the range of 85% to 87%.

American Financial expects net written premiums to be up 8% to 12% from $5.6 billion reported in 2021.

Zacks Rank

American Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Some Other P&C Insurers

Of the insurance industry players that have reported first-quarter results so far, Cincinnati Financial Corporation CINF and Kinsale Capital Group KNSL beat the respective Zacks Consensus Estimate for earnings, while Arch Capital Group Ltd. ACGL missed the mark.

Cincinnati Financial reported first-quarter 2022 operating income of $1.58 per share, which outpaced the Zacks Consensus Estimate by 6.8%. The bottom line improved 15.3% year over year.

Net written premiums climbed 12% year over year to $1.9 billion. In its property & casualty (P&C) insurance business, Cincinnati Financial witnessed an underwriting profit of $165 million, which surged 24% year over year. The combined ratio improved 130 basis points (bps) year over year to 89.9.

Kinsale Capital delivered first-quarter 2022 net operating earnings of $1.63 per share, which outpaced the Zacks Consensus Estimate by 5.2%. The bottom line improved 46.8% year over year.

Gross written premiums of $245.5 million rose 45.4% year over year. Net written premiums climbed 50% year over year to $216.5 million in the quarter.

Arch Capital reported first-quarter 2022 operating income per share of $1.10, which missed the Zacks Consensus Estimate by 2.7%. The bottom line however increased 86.4% year over year.

Gross premiums written improved 11.9% year over year to $3.8 billion. Net premiums written climbed 5% year over year to $2.6 billion. Net investment income plunged 18.6% year over year to $80.4 million.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report

American Financial Group, Inc. (AFG) : Free Stock Analysis Report

Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report

Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting