On August 6, 2024, American Financial Group Inc (AFG, Financial) released its 8-K filing detailing the financial results for the second quarter of 2024. The company reported net earnings of $209 million ($2.49 per share), surpassing the analyst estimate of $2.43 per share. This compares favorably to the $200 million ($2.34 per share) reported in the same quarter of 2023.
Company Overview
American Financial Group Inc is a holding company primarily engaged in property and casualty insurance services, focusing on specialized commercial products for businesses. The company also operates in the annuity market, offering traditional fixed and fixed-indexed annuities. Its insurance operations are conducted through the Great American Insurance Group, which operates across all 50 states, primarily through independent agents and brokers.
Performance and Challenges
AFG's Q2 2024 net earnings included after-tax non-core losses of $6 million ($0.07 per share loss), compared to $2 million ($0.04 per share loss) in Q2 2023. Despite these non-core losses, the company achieved core net operating earnings of $215 million ($2.56 per share), up from $202 million ($2.38 per share) in the previous year. This improvement was driven by higher P&C underwriting profit.
Annualized return on equity was 18.0% for Q2 2024, slightly up from 17.9% in Q2 2023. Core net operating earnings generated an annualized return on equity of 18.5%, compared to 18.2% in the previous year.
Financial Achievements
AFG's book value per share was $52.25 at the end of June 2024, with a growth in book value per share plus dividends of 4.7% for the quarter and 10.3% year-to-date. Excluding accumulated other comprehensive income (AOCI), the book value per share was $56.19, reflecting a 4.7% quarterly growth and 9.9% year-to-date growth.
Income Statement Highlights
| Three Months Ended June 30 | 2024 | 2023 |
|---|---|---|
| P&C insurance net earned premiums | $1,585 million | $1,507 million |
| Net investment income | $188 million | $198 million |
| Total revenues | $1,900 million | $1,840 million |
| Total costs and expenses | $1,629 million | $1,585 million |
| Net earnings | $209 million | $200 million |
| Diluted earnings per common share | $2.49 | $2.34 |
Balance Sheet and Cash Flow
AFG's total cash and investments stood at $15,261 million as of June 30, 2024, with long-term debt remaining stable at $1,475 million. Shareholders' equity was $4,384 million, up from $4,258 million at the end of 2023. Excluding AOCI, shareholders' equity was $4,715 million, compared to $4,577 million at the end of 2023.
Commentary from Management
"We are pleased to report a second quarter annualized core operating return on equity of 18.5%. Underwriting margins in our specialty P&C insurance businesses were strong, and higher interest rates increased net investment income, excluding alternatives, by 15% year over year. These results, coupled with effective capital management and our entrepreneurial, opportunistic culture and disciplined operating philosophy enable us to continue to create value for our shareholders."
Specialty Property and Casualty Insurance Operations
The Specialty P&C insurance operations reported a combined ratio of 90.5% for Q2 2024, an improvement from 91.9% in Q2 2023. Underwriting profit increased to $151 million from $123 million in the previous year. Gross and net written premiums grew by 2% and 1%, respectively, compared to Q2 2023.
Investment Income and Non-Core Items
Net investment income for the property and casualty segment was 1% lower than the previous year. Excluding alternative investments, net investment income increased by 15% due to higher interest rates and larger balances of invested assets. AFG recorded net realized losses on securities of $2 million ($0.02 per share loss) for Q2 2024, compared to $1 million ($0.02 per share loss) in Q2 2023.
Conclusion
American Financial Group Inc (AFG, Financial) demonstrated strong financial performance in Q2 2024, exceeding analyst estimates and showing significant growth in core net operating earnings. The company's effective capital management and strong underwriting margins in its specialty P&C insurance operations contributed to these positive results. For more detailed financial information, please refer to the 8-K filing.
Explore the complete 8-K earnings release (here) from American Financial Group Inc for further details.
