American Financial Lifts Earnings as Investment Returns Rebound
The specialty insurer’s combined ratio improved 1.6 points from a year earlier.
American Financial Group (AFG) lifted second-quarter core net operating earnings 31% to $234 million as returns from alternative investments rebounded.
The specialty insurer’s results strengthened from the first quarter, though much of the sequential improvement came from investments. Annualized core operating return on equity rose to 19.2% from 17.0% in the prior quarter and 15.5% a year earlier.
Revenue increased 5.5% to $2.03 billion, helped by higher earned premiums and net investment income. Net earnings rose to $248 million, or $2.99 a share, from $174 million, or $2.07 a share, a year earlier. Core earnings were $2.82 a share, up from $2.14.
Pretax property-and-casualty operating earnings climbed 28% to a second-quarter record of $350 million. Alternative-investment earnings swung to $50 million from a $3 million loss in the first quarter, while P&C earnings excluding those investments slipped to $300 million from $312 million.
Underwriting profit rose to $144 million from $114 million a year earlier, supported by Property and Transportation, where profit more than doubled to $57 million and renewal rates accelerated to about 8%. Specialty Casualty profit declined to $45 million despite 6% net written-premium growth, while Specialty Financial profit increased to $42 million.
Favorable prior-year reserve development rose to $55 million from $11 million, and catastrophe losses declined to 1.8 combined-ratio points from 2.3 points. Still, the overall combined ratio worsened from 90.3% in the first quarter, showing that underwriting profitability had softened sequentially even as net written premiums grew 6% from a year earlier.
American Financial continues to expect an approximately $125 million pretax core operating gain from the sale of the Charleston Harbor Resort & Marina, with the closing now expected in the third quarter. The company repurchased $26 million of shares during the quarter, down from $60 million in the first quarter.