American Financial (US:AFG) ZACKS·2025-12-11 15:36Core Insights - American Financial Group, Inc. (AFG) has underperformed in the year-to-date period, with shares down 2.8% compared to the Finance sector and Zacks S&P 500 composite returns of 7.5% and 15% respectively [1] - The company has a market capitalization of $11.09 billion and an average trading volume of 0.4 million shares over the last three months [1] Valuation - AFG is currently trading at a forward 12-month price-to-book ratio of 2.35X, which is above the industry average of 1.48X [2] Growth Projections - The Zacks Consensus Estimate projects a 15.8% increase in earnings per share and a 6.1% increase in revenues for 2026 compared to 2025 estimates [3] Price Target - The average price target for AFG, based on short-term targets from five analysts, is $140.20 per share, indicating a potential upside of 5.5% from the last closing price [4] Return on Capital - AFG's return on equity (ROE) has improved, with a trailing 12-month ROE of 18%, significantly higher than the industry average of 8% [5] Growth Factors - AFG is positioned for growth through new business opportunities, increased exposure, and crop premium gains, supported by 37 consecutive quarters of renewal rate increases [8][9] - The company aims to maintain satisfactory rates in property and casualty (P&C) renewal pricing, with expectations to exceed prospective loss ratio trends [10] Underwriting Performance - AFG's combined ratio has outperformed the industry average for over two decades, aided by its specialty niche focus, product line diversification, and underwriting discipline [11] Dividend Policy - AFG has increased its dividend for 19 consecutive years, reflecting financial stability and robust operating profitability in the P&C segment [12] - Total dividend payments and share repurchases over the last five years amounted to $6.9 billion, with a 10% increase in the quarterly dividend starting October 2025 [13] Conclusion - AFG's prudent capital deployment, favorable renewal rate environment, and improved combined ratio make it an attractive investment [14] - Despite its expensive valuation, the company is expected to benefit from strategic acquisitions and favorable growth estimates, suggesting a hold recommendation [15]