American Financial (US:AFG)2024-11-06 19:49Financial Data and Key Metrics Changes - The company reported core net operating earnings of $2.31 per share for Q3 2024, with an annualized core operating return on equity of 16% [4][3] - Property and Casualty net investment income increased by approximately 15% year-over-year, driven by rising interest rates and higher balances of invested assets [5][4] - The company returned $59 million to shareholders through regular dividends and declared a special dividend of $4 per share, totaling approximately $335 million [6][4] Business Line Data and Key Metrics Changes - The Specialty Property and Casualty Insurance business had a combined ratio of 94.3% in Q3 2024, up 2.1 points from the previous year, with catastrophe losses contributing 4.4 points [7][8] - Gross and net written premiums increased by 19% and 14% respectively compared to Q3 2023, primarily due to the Crop Risk Services acquisition [8][9] - The Property and Transportation Group achieved a combined ratio of 96.5%, with gross and net written premiums up 32% and 26% respectively [9][10] Market Data and Key Metrics Changes - Average renewal pricing across the Property and Casualty Group increased by approximately 8% in Q3 2024, continuing a trend of 33 consecutive quarters of renewal rate increases [8][9] - The Specialty Casualty Group reported a combined ratio of 90% for Q3 2024, with gross and net written premiums increasing by 6% and 4% respectively [11][12] Company Strategy and Development Direction - The company aims to continue generating significant excess capital, providing opportunities for acquisitions, special dividends, or share repurchases [6][4] - The management expressed optimism regarding the prospects of attractive returns from alternative investments, expecting annual returns averaging 10% or better [5][4] Management Comments on Operating Environment and Future Outlook - Management acknowledged elevated catastrophe losses from Hurricane Helene but maintained a positive outlook on the overall business plan and profitability for the remainder of 2024 [30][4] - The company is confident in its ability to manage social inflation risks and has adjusted terms and conditions in response to market conditions [15][4] Other Important Information - The company has declared a total of $50 per share in special dividends since the beginning of 2021, including $6.50 per share in 2024 [6][4] - The management highlighted the importance of learning from each catastrophe event to improve risk management strategies [26][4] Q&A Session Summary Question: On the loss ratio and IBNR adjustments - The management indicated that reserve positions are assessed quarterly, and adjustments are made based on new information, particularly in social inflation exposure businesses [15][4] Question: On alternative investment returns - Management expressed confidence in returning to 10% plus returns in alternative investments, particularly in multifamily properties, as new supply is expected to be absorbed [19][4] Question: On competitive pricing environment - The company reported strong pricing increases in commercial auto liability and social inflation exposed lines, with continued favorable pricing trends [21][4] Question: On adverse development in social inflation lines - Management confirmed that while there was some adverse development, overall results in casualty businesses remain strong with good ROEs [22][4] Question: On commercial auto liability and reserve adjustments - Management clarified that adverse development was not a significant driver in the transportation segment [25][4]