American Financial Group, Inc. Announces Record Third Quarter and Nine Month Core Net Operating Earnings
-
Book Value
$31.49 , an increase of 46% since 2008 year end -
Record Core Operating Earnings
$1.07 per share for the quarter;$3.19 per share YTD -
Full year 2009 core earnings guidance increased to
$4.05 - $4.25 per share -
Annual dividend increased 6% to
$0.55 per share
Core net operating earnings were a record
AFG’s net earnings attributable to shareholders, determined in accordance with generally accepted accounting principles (“GAAP”), include certain items that may not be indicative of its ongoing core operations. The following table identifies such items and reconciles net earnings attributable to shareholders to core net operating earnings, a non-GAAP financial measure that AFG believes is a useful tool for investors and analysts in analyzing ongoing operating trends.
In millions, except per share amounts |
Three months ended
September 30, |
Nine months ended
September 30, |
|||||||||||||
2009 | 2008 | 2009 | 2008 | ||||||||||||
Components of net earnings attributable to shareholders: | |||||||||||||||
Core net operating earnings(a) | $ | 124 | $ | 115 | $ | 372 | $ | 354 | |||||||
Significant A&E charges | - | - | - | (10 | ) | ||||||||||
Realized investment gains (losses) | 3 | (94 | ) | (14 | ) | (187 | ) | ||||||||
Net earnings attributed to shareholders | $ | 127 | $ | 21 | $ | 358 | $ | 157 | |||||||
Components of Earnings Per Share: | |||||||||||||||
Core net operating earnings | $ | 1.07 | $ | 0.98 | $ | 3.19 | $ | 3.03 | |||||||
Significant A&E charges | - | - | - | (.09 | ) | ||||||||||
Realized investment gains (losses) | .02 | (.80 | ) | (.12 | ) | (1.60 | ) | ||||||||
Diluted Earnings Per Share | $ | 1.09 | $ | 0.18 | $ | 3.07 | $ | 1.34 |
Footnotes are contained in the accompanying Notes To Financial Schedules at the end of this release.
“More favorable market conditions have led to a marked improvement in
the unrealized gain (loss) position on AFG’s investment portfolio. At
the end of the 2009 third quarter, net unrealized gains on our
investment portfolio were
“Because of our strong third quarter results, driven primarily by better
than expected underwriting results in our crop operations and favorable
development in our run-off residual value insurance (“RVI”) operations,
we have increased our core net operating earnings guidance for 2009 to
be between
Additionally, the Company announced today that its Board of Directors
approved an increase in the company's annual dividend for 2010 from
P&C Specialty Core Results
The P&C specialty insurance operations generated an
underwriting profit of
Gross written premiums declined by approximately 16% for the quarter when compared to the 2008 period. Net written premiums for the 2009 third quarter were 35% lower than the same quarter a year earlier, driven primarily by increased cessions under our crop reinsurance agreement.
Underwriting profit of the P&C specialty insurance operations for the
first nine months of 2009 was
The Property and Transportation group reported an underwriting
profit of
Increased cessions under a crop reinsurance treaty reduced net written premiums for the quarter and year to date. Additional declines in gross and net written premiums resulted from lower spring commodity prices, planned volume reductions in our inland marine operations and soft market conditions in the property and inland marine and transportation operations. Excluding crop, 2009 net written premiums for this group decreased 15% and 11% for the quarter and first nine months of 2009, respectively, when compared to the 2008 periods.
The Specialty Casualty group reported an underwriting profit of
The Specialty Financial group reported underwriting income of
The California Workers’ Compensation group posted underwriting
losses of
In the fourth quarter of each year, the
For the third quarter of 2009, statutory premiums of
AFG’s annuity liabilities remain very stable. AFG continues to experience very strong persistency due to the two-tier nature and other surrender protection features in certain of its annuity products.
Investments
AFG recorded third quarter net realized gains of
We continue to believe that there are strong fundamentals in place across our investments and that our investment strategy will enable us to realize the underlying values of those investments.
As previously announced, AFG will record a fourth quarter after-tax gain
of approximately
More information about the components of our investment portfolio may be found in our Financial and Investment Supplements, which are posted on our website.
About
Forward Looking Statements
This press release contains certain statements that may be deemed to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements in this press release not dealing with historical results are forward-looking and are based on estimates, assumptions and projections. Examples of such forward-looking statements include statements relating to: the Company's expectations concerning market and other conditions and their effect on future premiums, revenues, earnings and investment activities; recoverability of asset values; expected losses and the adequacy of reserves for asbestos, environmental pollution and mass tort claims; rate changes; and improved loss experience.
Actual results and/or financial condition could differ materially from
those contained in or implied by such forward-looking statements for a
variety of reasons including but not limited to: changes in financial,
political and economic conditions, including changes in interest rates
and extended economic recessions or expansions; performance of
securities markets; our ability to estimate accurately the likelihood,
magnitude and timing of any losses in connection with investments in the
non-agency residential mortgage market; new legislation or declines in
credit quality or credit ratings that could have a material impact on
the valuation of securities in our investment portfolio; the
availability of capital; regulatory actions (including changes in
statutory accounting rules); changes in legal environment affecting AFG
or its customers; tax law and accounting changes; levels of natural
catastrophes, terrorist activities (including any nuclear, biological,
chemical or radiological events), incidents of war and other major
losses; development of insurance loss reserves and establishment of
other reserves, particularly with respect to amounts associated with
asbestos and environmental claims; availability of reinsurance and
ability of reinsurers to pay their obligations; the unpredictability of
possible future litigation; trends in persistency, mortality and
morbidity; competitive pressures, including the ability to obtain
adequate rates; changes in AFG's credit ratings or the financial
strength ratings assigned by major ratings agencies to our operating
subsidiaries; and other factors identified in our filings with the
The forward-looking statements herein are made only as of the date of this press release. The Company assumes no obligation to publicly update any forward-looking statements.
Conference Call
The company will hold a conference call to discuss 2009 third quarter
results at
The conference call will also be broadcast over the Internet. To listen
to the call, go to the Investor Relations page on AFG’s website, www.AFGinc.com,
and follow the instructions at the Webcast link. An archived webcast
will be available immediately after the call via a link on the Investor
Relations page until
This earnings release and additional Financial Supplements are available in the Investor Relations section of AFG's web site: www.AFGinc.com.
AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES |
||||||||||||||||
Three months ended
September 30, |
Nine months ended
September 30, |
|||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Income | ||||||||||||||||
P&C insurance premiums | $ | 622 | $ | 850 | $ | 1,809 | $ | 2,104 | ||||||||
Life, accident & health premiums | 112 | 109 | 331 | 326 | ||||||||||||
Investment income | 301 | 283 | 900 | 820 | ||||||||||||
Realized investment gains (losses) | 4 | (150 | ) | (22 | ) | (293 | ) | |||||||||
Other income | 54 | 78 | 177 | 232 | ||||||||||||
1,093 | 1,170 | 3,195 | 3,189 | |||||||||||||
Costs and expenses | ||||||||||||||||
P&C insurance losses & expenses | 514 | 778 | 1,489 | 1,845 | ||||||||||||
Annuity, life, accident & health benefits & expenses |
236 |
228 |
727 |
682 |
||||||||||||
Interest & other financing expenses | 19 | 16 | 48 | 52 | ||||||||||||
Other expenses | 121 | 120 | 354 | 356 | ||||||||||||
890 | 1,142 | 2,618 | 2,935 | |||||||||||||
Operating earnings before income taxes |
203 |
28 |
577 |
254 |
||||||||||||
Provision for income taxes | 72 | 9 | 204 | 91 | ||||||||||||
Net earnings including noncontrolling interests |
131 |
19 |
373 |
163 |
||||||||||||
Less: Net earnings attributable to noncontrolling interests |
(4 |
) |
2 |
(15 |
) |
(6 |
) |
|||||||||
Net earnings attributable to shareholders |
$ |
127 |
$ |
21 |
$ |
358 |
$ |
157 |
||||||||
Diluted Earnings per Common Share | $ | 1.09 | $ | 0.18 | $ | 3.07 | $ | 1.34 | ||||||||
Average number of Diluted Shares | 117.2 | 116.9 | 116.9 | 117.0 |
Sept. 30, | Dec. 31, | |||||
Selected Balance Sheet Data: | 2009 | 2008 | ||||
Total Cash and Investments | $ | 19,628 | $ | 16,871 | ||
Long-term Debt, Including | ||||||
Payable to Subsidiary Trusts | $ | 877 | $ | 1,030 | ||
Shareholders’ Equity | $ | 3,670 | $ | 2,490 | ||
Shareholders’ Equity (Excluding unrealized gains (losses) on fixed maturities) |
$ |
3,683 |
$ |
3,210 |
||
Book Value Per Share | $ | 31.49 | $ | 21.54 | ||
Book Value Per Share (Excluding unrealized gains (losses) on fixed maturities) |
$ |
31.61 |
$ |
27.77 |
||
Common Shares Outstanding | 116.5 | 115.6 | ||||
AMERICAN FINANCIAL GROUP, INC. |
||||||||||||||||||||||
Three months
ended September 30, |
Pct. Change |
Nine months
ended September 30, |
Pct. Change |
|||||||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||||||||
Gross written premiums | $ | 1,369 | $ | 1,627 | (16 | %) | $ | 3,037 | $ | 3,440 | (12 | %) | ||||||||||
Net written premiums | $ | 620 | $ | 959 | (35 | %) | $ | 1,794 | $ | 2,278 | (21 | %) | ||||||||||
Ratios (GAAP): | ||||||||||||||||||||||
Loss & LAE ratio | 48 | % | 65 | % | 46 | % | 56 | % | ||||||||||||||
Expense ratio | 35 | % | 27 | % | 36 | % | 31 | % | ||||||||||||||
Combined Ratio(Excluding A&E) | 83 | % | 92 | % | 82 | % | 87 | % | ||||||||||||||
Total Combined Ratio | 83 | % | 91 | % | 82 | % | 88 | % | ||||||||||||||
Supplemental: |
||||||||||||||||||||||
Gross Written Premiums: | ||||||||||||||||||||||
Property & Transportation | $ | 864 | $ | 1,079 | (20 | %) | $ | 1,541 | $ | 1,822 | (15 | %) | ||||||||||
Specialty Casualty | 311 | 323 | (4 | %) | 935 | 983 | (5 | %) | ||||||||||||||
Specialty Financial | 137 | 158 | (13 | %) | 409 | 448 | (9 | %) | ||||||||||||||
California Workers’ Compensation |
57 |
67 |
(16 |
%) |
154 |
189 |
(19 |
%) |
||||||||||||||
Other | - | - |
NA |
(2 | ) | (2 | ) | NA | ||||||||||||||
$ | 1,369 | $ | 1,627 | (16 | %) | $ | 3,037 | $ | 3,440 | (12 | %) | |||||||||||
Net Written Premiums: | ||||||||||||||||||||||
Property & Transportation | $ | 236 | $ | 536 | (56 | %) | $ | 662 | $ | 1,044 | (37 | %) | ||||||||||
Specialty Casualty | 200 | 210 | (5 | %) | 597 | 636 | (6 | %) | ||||||||||||||
Specialty Financial | 116 | 132 | (13 | %) | 349 | 371 | (6 | %) | ||||||||||||||
California Workers’ Compensation |
50 |
60 |
(17 |
%) |
134 |
172 |
(22 |
%) |
||||||||||||||
Other | 18 | 21 | - | 52 | 55 | - | ||||||||||||||||
$ | 620 | $ | 959 | (35 | %) | $ | 1,794 | $ | 2,278 | (21 | %) | |||||||||||
Combined Ratio (GAAP): | ||||||||||||||||||||||
Property & Transportation | 81 | % | 97 | % | 82 | % | 93 | % | ||||||||||||||
Specialty Casualty | 85 | % | 77 | % | 81 | % | 77 | % | ||||||||||||||
Specialty Financial | 77 | % | 102 | % | 75 | % | 95 | % | ||||||||||||||
California Workers’ Compensation |
106 |
% |
80 |
% |
102 |
% |
78 |
% |
||||||||||||||
Aggregate Specialty Group | 83 | % | 92 | % | 82 | % | 87 | % |
Supplemental Notes:
1. |
Property & Transportation includes primarily physical damage and liability coverage for buses, trucks and recreational vehicles, inland and ocean marine, agricultural-related products and other property coverages. |
|
2. |
Specialty Casualty includes primarily excess and surplus, general liability, executive liability, umbrella and excess liability and customized programs for small to mid-sized businesses. |
|
3. |
Specialty Financial includes risk management insurance programs for lending and leasing institutions (including collateral and mortgage protection insurance), surety and fidelity products and trade credit insurance. |
|
4. |
California Workers’ Compensation consists of a subsidiary group that writes workers’ compensation insurance primarily in the state of California. |
|
5. |
Other includes primarily an internal reinsurance facility. |
|
AMERICAN FINANCIAL GROUP, INC. |
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Three months
ended September 30, |
Pct. Change |
Nine months
ended September 30, |
Pct. Change |
|||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||||
Annuity premiums: | ||||||||||||||||||
Fixed annuities | $ | 129 | $ | 144 | (10 | %) | $ | 349 | $ | 392 | (11 | %) | ||||||
Bank annuities | 137 | 138 | (1 | %) | 288 | 291 | (1 | %) | ||||||||||
Indexed annuities | 140 | 184 | (24 | %) | 387 | 556 | (30 | %) | ||||||||||
Variable annuities | 17 | 20 | (15 | %) | 68 | 64 | 6 | % | ||||||||||
$ | 423 | $ | 486 | (13 | %) | $ | 1,092 | 1,303 | (16 | %) | ||||||||
Supplemental insurance | 98 | 95 | 3 | % | 290 | 286 | 1 | % | ||||||||||
Life insurance | 10 | 15 | (33 | %) | 34 | 41 | (17 | %) | ||||||||||
Total statutory premiums | $ | 531 | $ | 596 | (11 | %) | $ | 1,416 | $ | 1,630 | (13 | %) | ||||||
AMERICAN FINANCIAL GROUP, INC. |
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GAAP to Non GAAP Reconciliation: |
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a) Components of core net operating earnings: |
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In millions |
Three months ended
September 30, |
Nine months ended
September 30, |
||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
P&C operating earnings | $ | 183 | $ | 153 | $ | 556 | $ | 510 | ||||||||
Annuity & supplemental insurance operating earnings |
||||||||||||||||
46 | 49 | 127 | 120 | |||||||||||||
Interest & other corporate expense | (34 | ) | (26 | ) | (98 | ) | (78 | ) | ||||||||
Core operating earnings before income taxes | 195 | 176 | 585 | 552 | ||||||||||||
Related income taxes | 71 | 61 | 213 | 198 | ||||||||||||
Core net operating earnings | $ | 124 | $ | 115 | $ | 372 | $ | 354 |
Source:
American Financial Group, Inc.
Diane P. Weidner, 513-369-5713
Asst.
Vice President - Investor Relations
Web Sites:
www.AFGinc.com
www.GreatAmericanInsurance.com
www.GAFRI.com