American Financial ((AFG)) has held its Q4 earnings call. Read on for the main highlights of the call.
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American Financial Group’s recent earnings call painted an overall positive picture underscored by its strong financial performance, record-setting achievements, and robust shareholder returns. However, the discussion was tempered by acknowledgment of challenges such as the impact of California wildfires, adverse developments in certain sectors, and projections of an increased expense ratio.
Strong Core Operating Return on Equity
American Financial Group (AFG) reported an impressive annual core operating return on equity exceeding 19% for 2024. This was supported by core net operating earnings of $10.75 per share and a return on equity of 19.3%, showcasing the company’s robust financial health and efficient capital utilization.
Significant Shareholder Returns
In 2024, AFG returned a substantial $791 million to shareholders. This included $545 million in special dividends and $246 million in regular dividends. Notably, the company increased its quarterly dividend by 12.7%, reaching an annual rate of $3.20 per share, signaling confidence in its ongoing fiscal strength.
Record Net Investment Income
AFG’s Property & Casualty net investment income reached a record $784 million, marking an approximate 8% increase over 2023. This achievement underscores the company’s effective investment strategies and its ability to generate significant income in the Property & Casualty segment.
Specialty Financial Group Combined Ratio
The Specialty Financial Group of AFG achieved an excellent combined ratio of 80.7% for the fourth quarter of 2024, demonstrating operational efficiency and profitability in this segment.
Impact of California Wildfires
AFG anticipates a financial hit from the Southern California wildfires, estimating losses between $60 million and $70 million. This event is expected to influence the company’s 2025 business plan, highlighting the impact of environmental factors on financial outcomes.
Adverse Development in Social Inflation Exposed Businesses
Challenges emerged in certain sectors, particularly within social inflation exposed businesses, leading to overall adverse development for AFG. This was primarily observed in the Specialty Casualty Group during the fourth quarter.
Higher Expense Ratio
Looking forward, AFG expects its expense ratio to rise in 2025. This is anticipated due to product growth featuring higher broker commissions and decreased ceding commissions from reinsurers.
Forward-Looking Guidance
In its guidance, AFG forecasts a 5% growth in net written premiums and anticipates a combined ratio of approximately 92.5% in 2025. The company expects core net operating earnings per share to be around $10.50, generating a core operating return on equity of about 18% for the year. These projections outline AFG’s strategic direction and growth aspirations.
In summary, American Financial Group’s earnings call showcased a strong financial performance with several notable achievements, particularly in shareholder returns and investment income. While challenges such as environmental impacts and adverse sector developments were acknowledged, the company’s forward-looking guidance reflects cautious optimism and strategic growth plans for 2025.
