AFG Q1 Earnings and Revenues Miss, Underwriting Profit Drops

Core Viewpoint - American Financial Group, Inc. (AFG) reported disappointing first-quarter 2025 results, with net operating earnings per share of $1.81, missing estimates by 16.6% and reflecting a 34.4% year-over-year decline [1] Financial Performance - Total revenues for the quarter were $1.9 billion, down 1.4% year over year, missing estimates by 3.8% due to lower net investment income and other income [2] - Net premiums earned increased by 2.2% to $1.9 billion [2] - Net investment income fell by 12.6% year over year to $173 million, below the estimate of $213.7 million [2] Cost and Expenses - Total costs and expenses rose by 3.6% year over year to $1.7 billion, driven by higher property and casualty (P&C) insurance losses and expenses [3] Segmental Update - The Specialty P&C Insurance segment generated $1.6 billion in net written premiums, a decline of 1% year over year, despite a favorable renewal rate environment and increased exposure [4] - Net written premiums in the Property & Transportation Group decreased by 6% year over year to $563 million, lower than the estimate of $703 million [5] - Specialty Casualty Group's net written premiums decreased by 4% year over year to $772 million, slightly above the estimate of $765 million [5] - Specialty Financial's net written premiums increased by 18% year over year to $276 million, exceeding the estimate of $270 million [5] Underwriting Profit - The underwriting profit for the Specialty P&C Insurance segment decreased by 39% year over year to $94 million, below the estimate of $133 million [6] - The combined ratio for the segment deteriorated by 390 basis points year over year to 94%, primarily due to losses from California wildfires [6] Financial Update - As of March 31, 2025, total cash and investments stood at $16 billion, a 0.9% increase from the end of 2024 [7] - Long-term debt remained unchanged at $1.5 billion [7] - Book value per share, excluding accumulated other comprehensive income, was $54.63, up 2.5% from the end of 2024 [7] - Annualized return on equity was 13.3%, contracting by 800 basis points year over year [8] Capital Deployment - The company returned $292 million to shareholders, which included $167 million in special dividends and $58 million in share repurchases [10]