American Financial Q3 Earnings Miss on Higher Catastrophe Losses

Core Viewpoint - American Financial Group, Inc. (AFG) reported a decline in net operating earnings per share for Q3 2024, missing estimates due to increased catastrophe losses and lower favorable reserve developments, despite higher investment income [1]. Financial Performance - Net operating earnings per share were $2.31, missing the Zacks Consensus Estimate by 7.9% and decreasing 5.7% year over year [1]. - Total revenues reached $2.2 billion, reflecting a 10.4% year-over-year increase, driven by higher P&C insurance net earned premiums and net investment income, surpassing the Zacks Consensus Estimate by 10.7% [3]. - Net investment income rose 19% year over year to $200 million, exceeding both internal estimates and the Zacks Consensus Estimate [3]. Cost and Expenses - Total costs and expenses increased by 10% year over year to $2.1 billion, attributed to higher P&C insurance losses and other expenses, which was above the internal estimate of $1.9 billion [4]. Segment Performance - The Specialty P&C Insurance segment reported $2.3 billion in net written premiums, a 14% increase year over year, aided by the Crop Risk Services acquisition [5]. - Net written premiums in the Property & Transportation Group surged 26% year over year to $1.1 billion, exceeding the estimate of $934.5 million [6]. - The Specialty Casualty Group saw a 4% year-over-year increase in net written premiums to $863 million, which was slightly below the estimate [6]. - The Specialty Financial segment's net written premiums increased by 9% year over year to $284 million, also falling short of estimates [7]. Catastrophe Losses - Catastrophe losses amounted to $90 million in the quarter, significantly higher than the $56 million loss in the previous year, primarily due to Hurricane Helene [8]. Underwriting Profit - The underwriting profit for the Specialty P&C Insurance segment decreased by 18.2% year over year to $117 million, which was lower than the estimate of $163.8 million [7]. - The combined ratio deteriorated by 210 basis points year over year to 94.3% in the segment [10]. Financial Position - As of September 30, 2024, total cash and investments stood at $15.7 billion, a 3.1% increase from the end of 2023, but below the estimate of $16.3 billion [10]. - The book value per share, excluding accumulated other comprehensive income, was $57.71, reflecting a 5.5% increase from the end of 2023 [11]. - The annualized return on equity for the third quarter was 15.2%, down 50 basis points year over year [11]. Capital Deployment - AFG declared a special cash dividend of $4.00 per share, totaling approximately $335 million, to be paid on November 26, 2024 [12].