American Financial reports strong Q4’24 earnings

American Financial Group, Inc. (AFG) has announced its fourth-quarter 2024 financial results, reporting net earnings of $255 million, slightly down from $263 million in the same period in the prior year.

Despite the slight decrease in net earnings, the company saw significant growth in core net operating earnings for Q4 2024, as they reached $262 million, up from $238 million in Q4 2023.

According to AFG, this positive performance was attributed to higher net investment income within the Property and Casualty (P&C) segment, particularly improved returns on alternative investments. These gains were partially offset by lower P&C underwriting profit.

Across its specialty P&C businesses, the company also reported a 1% year-over-year increase in net written premiums for Q4 2024, reaching $1.5 billion. Gross written premiums saw a more significant 3% increase, totalling $2.04 billion.

AFG credited this growth to new business opportunities, a favourable renewal rate environment, and increased exposures across its various businesses.

AFG’s Specialty P&C insurance operations demonstrated a strong combined ratio of 89% for Q4 2024, although this was slightly higher than the 87.7% reported in the same quarter of the previous year.

The Q4 2024 combined ratio included 1.1 points related to catastrophe losses, primarily from Hurricane Milton, compared to 1.4 points in Q4 2023.

The quarter also saw 1.8 points of adverse prior year reserve development, contrasting with 3.3 points of favourable development in Q4 2023.

Underwriting profit for Q4 2024 was $204 million, compared to $212 million in Q4 2023. While some segments, like Property and Transportation and Specialty Financial Groups, saw increased underwriting profit, these gains were offset by lower profits in the Specialty Casualty Group, impacted by adverse prior year reserve development.

Renewal pricing in the P&C Group, excluding workers’ compensation, increased by approximately 8% during the quarter. Including workers’ compensation, renewal rates were up approximately 7% overall, consistent with the previous quarter.

AFG stated its belief that these renewal rate increases are exceeding prospective loss ratio trends, allowing the company to meet or surpass its targeted returns.

Carl H. Lindner III and S. Craig Lindner, AFG’s Co-Chief Executive Officers, stated: “We are very pleased with AFG’s performance in the 2024 fourth quarter and full year. In addition to producing an annual core operating return on equity in excess of 19%, net written premiums grew by 7% during the year.

“Excellent underwriting results, record P&C net investment income and effective capital management enable us to continue to create long-term value for our shareholders. We are thankful for our talented insurance and investment professionals, who have positioned us well as we enter 2025. Our thoughts and prayers continue to include those who have been impacted by the devastation caused by the wildfires in Southern California. We are grateful to our claims professionals and insurance specialists who are helping our policyholders recover, restore their businesses and rebuild their communities.”

Lindner continued: “AFG continued to have significant excess capital at December 31, 2024. Returning capital to shareholders in the form of regular and special cash dividends and through opportunistic share repurchases is an important and effective component of our capital management strategy.

“In addition, our capital will be deployed into AFG’s core businesses as we identify potential for healthy, profitable organic growth, and opportunities to expand our specialty niche businesses through acquisitions and start-ups that meet our target return thresholds. Over the past year, we increased our quarterly dividend by 12.7% and paid special dividends of $6.50 per share. Growth in book value per share (excluding AOCI) plus dividends was a very strong 20% during 2024.”

Looking ahead to 2025, AFG anticipates core operating earnings per share of approximately $10.50 and a strong core operating return on equity, excluding AOCI, of approximately 18%.

These projections are based on several assumptions, including 5% net written premium growth, a 92.5% combined ratio, a reinvestment rate of approximately 5.75%, and an 8% return on alternative investments.

The company’s current estimate for losses related to the Southern California wildfires is between $60 and $70 million, which is factored into their 2025 assumptions.

AFG emphasised that this wildfire loss estimate remains subject to change as the situation develops.

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