American Financial Q2 Earnings Beat Estimates on Higher Premiums

Core Insights - American Financial Group, Inc. (AFG) reported second-quarter 2025 net operating earnings per share of $2.14, exceeding the Zacks Consensus Estimate by 2.9%, but reflecting a 16.4% year-over-year decline due to reduced underwriting profit and lower returns on alternative investments [1][8]. Financial Performance - Total revenues for the quarter reached $1.8 billion, marking a 3.2% increase year over year, driven by higher property & casualty (P&C) insurance net earned premiums, although it fell short of the Zacks Consensus Estimate by 9.2% [3][8]. - Net investment income decreased by 2.1% year over year to $184 million, which was above internal estimates but below the Zacks Consensus Estimate of $188 million [3][8]. - Total costs and expenses rose by 4% year over year to $1.7 billion, attributed to higher losses, loss adjustment expenses, and commissions, yet this was lower than the internal estimate of $1.8 billion [4]. Segment Analysis - The Specialty P&C Insurance segment generated $1.8 billion in net written premiums, reflecting a 7% year-over-year increase, supported by new business opportunities and favorable renewal rates [5]. - Net written premiums in the Property & Transportation Group grew by 10% year over year to $759 million, although this was below the internal estimate of $853.3 million [6]. - The Specialty Casualty Group saw a 2% year-over-year increase in net written premiums to $765 million, also falling short of the internal estimate [6]. - Specialty Financial net written premiums rose by 12% year over year to $279 million, again below the internal estimate [6]. Underwriting and Profitability - Pre-tax core operating earnings for the P&C Insurance segment were $273 million, down 14.4% year over year [7]. - The underwriting profit for the Specialty P&C Insurance segment decreased by 24.5% year over year to $114 million, with lower profits in Specialty Casualty and Property and Transportation Groups offsetting gains in Specialty Financial [7]. - The combined ratio for the Specialty Group worsened by 260 basis points year over year to 93.1%, influenced by a deterioration of 250 bps in Property & Transportation and 480 bps in Specialty Casualty, despite a 630 bps improvement in Specialty Financial [8][9]. Capital and Returns - As of June 30, 2025, AFG had total cash and investments of $16 billion, a 1.2% increase from the end of 2024, exceeding internal estimates [10]. - Long-term debt remained stable at $1.5 billion, unchanged from the end of 2024 [10]. - The book value per share, excluding accumulated other comprehensive income, was $55.74, down 0.5% from the end of 2024 [10]. - The annualized return on equity for the second quarter was 15%, contracting by 300 basis points year over year [11]. Dividend Policy - AFG paid cash dividends of 80 cents per share during the second quarter [12].