American Financial Group, Inc. Announces Record First Quarter Core Net Operating Earnings
- Book value increases $.61 per share, to $22.15 per share
- Record first quarter core net operating earnings of $1.11 per share
- Core earnings guidance increased to $3.75- $4.05 per share
Record first quarter core net operating earnings of
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
March 31, |
||||||
2009 | 2008 | ||||||
Components of net earnings attributable to shareholders: | |||||||
Core net operating earnings(a) | $ | 131.0 | $ | 128.4 | |||
Realized investment gains (losses) | (26.9 | ) | (52.2 | ) | |||
Other | (0.3 | ) | (0.2 | ) | |||
Net earnings attributable to shareholders | $ | 103.8 | $ | 76.0 | |||
Components of Diluted EPS: | |||||||
Core net operating earnings | $ | 1.11 | $ | 1.09 | |||
Realized investment gains (losses) | (.23 | ) | (.45 | ) | |||
Other | - | - | |||||
Diluted EPS | $ | .88 | $ | .64 |
Footnote a is contained in the accompanying Notes To Financial Schedules at the end of this release.
“We redeemed our Senior Notes in April of 2009, and continue to exercise prudent capital management. Our financial leverage and capital in our insurance businesses are at levels that fully support our operations and are consistent with our commitments to our rating agencies.
“Because of our strong first quarter results, we have increased our core
earnings guidance for 2009 to be between
Business Segment Results
The P&C specialty insurance operations generated a strong
underwriting profit of
The Property and Transportation group reported an underwriting
profit of
The Specialty Casualty group, with a strong 77% combined ratio,
generated an underwriting profit of
The Specialty Financial group reported underwriting profits of
The California Workers’ Compensation group reported a modest
underwriting profit in the first quarter of 2009, compared to a profit
of approximately
Statutory premiums of
AFG’s annuity liabilities remain very stable. Due to the two-tier nature and other surrender protection features in certain of its annuity products, AFG continues to experience very strong persistency in its annuity businesses.
Investments
In early
Included in AFG’s 2009 first quarter realized losses are
Continued uncertainty in the global financial markets has resulted in
declines in the value of our investment securities. After-tax unrealized
losses on investments increased by
As we examine our investment portfolio, 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. We have the ability and intent to hold these securities until they mature or recover in value.
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 or financial condition could differ materially from those
contained in or implied by such forward-looking statements for a variety
of factors 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, especially in the subprime and
Alt-A sectors; 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, including mortgage-backed securities; the
availability of capital; regulatory actions; 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 if certain settlements of
current litigation do not become effective; 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 information in this press release should be read in conjunction with
financial and investment supplements that are available in the Investor
Relations section of our web site at www.AFGinc.com.
The company will hold a conference call to discuss 2009 first 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
http://cc.talkpoint.com/ubsx001/051209a_ke/?entity=17_18NCTLB
A replay of the broadcast will be available for 14 days at the same website approximately 24 hours after the presentation.
(Financial summaries follow)
This earnings release and additional Financial and Investment Supplements are available in the Investor Relations section of AFG's web site: www.AFGinc.com.
AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES SUMMARY OF EARNINGS (In Millions, Except Per Share Data) |
|||||||||
Three months ended
March 31, |
|||||||||
2009 | 2008 | ||||||||
Revenues | |||||||||
P&C insurance premiums | $ | 574.7 | $ | 635.0 | |||||
Life, accident & health premiums | 109.1 | 108.7 | |||||||
Investment income | 300.2 | 266.3 | |||||||
Realized investment gains (losses) (*) | (41.3 | ) | (80.3 | ) | |||||
Other income | 62.9 | 72.1 | |||||||
1,005.6 | 1,001.8 | ||||||||
Costs and expenses | |||||||||
P&C insurance losses & expenses | 470.4 | 512.9 | |||||||
Annuity, life, accident & health
benefits & expenses |
250.7 |
232.4 |
|||||||
Interest & other financing expenses | 16.0 | 18.7 | |||||||
Other expenses | 100.5 | 111.8 | |||||||
837.6 | 875.8 | ||||||||
Operating earnings before income taxes |
168.0 |
126.0 |
|||||||
Related income taxes | 58.3 | 44.9 | |||||||
Net earnings, including non-controlling
interests |
109.7 | 81.1 | |||||||
Less: Net earnings attributable to
non-controlling interests |
(5.9 |
) |
(5.1 |
) |
|||||
Net earnings attributable to shareholders | $ | 103.8 | $ | 76.0 | |||||
Diluted Earnings per Common Share | $ | .88 | $ | .64 | |||||
Average number of Diluted Shares | 116.4 | 117.2 | |||||||
Three months ended
March 31, |
|||||||||
(*) Consists of the following: | 2009 | 2008 | |||||||
Realized gains before impairment losses | $ | 34.7 | $ | 21.6 | |||||
Unrealized loss on securities with credit impairment |
(184.4 |
) |
(101.9 |
) |
|||||
Non-credit portion in other comprehensive income |
108.4 |
- |
|||||||
Credit impairment portion recognized in earnings |
(76.0 |
) |
(101.9 |
) |
|||||
Total realized gains (losses) on securities | ($ 41.3 | ) | ($ 80.3 | ) | |||||
|
March 31, | December 31, | |||||||
Selected Balance Sheet Data: | 2009 | 2008 | |||||||
Total Cash and Investments | $ | 17,136 | $ | 16,871 | |||||
Long-term Debt, Including Payable to Subsidiary Trusts |
$ |
1,058 |
$ |
1,030 |
|||||
Shareholders’ Equity | $ | 2,563 | $ | 2,490 | |||||
Shareholders’ Equity (Excluding unrealized gains |
$ |
3,306 |
$ |
3,210 |
|||||
Book Value Per Share | $ | 22.15 | $ | 21.54 | |||||
Book Value Per Share (Excluding unrealized |
$ |
28.57 |
$ |
27.77 |
|||||
Common Shares Outstanding | 115.7 | 115.6 | |||||||
AMERICAN FINANCIAL GROUP, INC. P&C SPECIALTY GROUP UNDERWRITING RESULTS (In Millions) |
||||||||||
Three months ended
March 31, |
% Change |
|||||||||
2009 | 2008 | |||||||||
Gross written premiums | $ | 818 | $ | 858 | (5 | %) | ||||
Net written premiums | $ | 585 | $ | 658 | (11 | %) | ||||
Ratios (GAAP): | ||||||||||
Loss & LAE ratio | 47.1 | % | 46.1 | % | ||||||
Expense ratio | 34.6 | % | 34.9 | % | ||||||
Policyholder dividend ratio | - | .1 | % | |||||||
Combined Ratio |
|
81.7 | % | 81.1 | % | |||||
Supplemental: |
||||||||||
Gross Written Premiums: | ||||||||||
Property & Transportation | $ | 316 | $ | 318 | (1 | %) | ||||
Specialty Casualty | 314 | 339 | (7 | %) | ||||||
Specialty Financial | 135 | 136 | (1 | %) | ||||||
California Workers’ Compensation | 55 | 68 | (19 | %) | ||||||
Other | (2 | ) | (3 | ) | NA | |||||
$ | 818 | $ | 858 | (5 | %) | |||||
Net Written Premiums: | ||||||||||
Property & Transportation | $ | 202 | $ | 247 | (18 | %) | ||||
Specialty Casualty | 200 | 222 | (10 | %) | ||||||
Specialty Financial | 119 | 111 | 7 | % | ||||||
California Workers’ Compensation | 48 | 63 | (24 | %) | ||||||
Other | 16 | 15 | NA | |||||||
$ | 585 | $ | 658 | (11 | %) | |||||
Combined Ratio (GAAP): | ||||||||||
Property & Transportation | 77.3 | % | 83.6 | % | ||||||
Specialty Casualty | 76.5 | % | 74.9 | % | ||||||
Specialty Financial | 89.7 | % | 86.0 | % | ||||||
California Workers’ Compensation | 99.7 | % | 80.3 | % | ||||||
Aggregate Specialty Group | 81.7 | % | 81.1 | % | ||||||
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 that writes workers’ compensation insurance primarily in the
state of
5. Other includes an internal reinsurance facility and discontinued lines.
AMERICAN FINANCIAL GROUP, INC. ANNUITY & SUPPLEMENTAL INSURANCE GROUP STATUTORY PREMIUMS (In Millions) |
||||||||
Three months
ended March 31, |
Pct. Change |
|||||||
2009 | 2008 | |||||||
Retirement annuity premiums: | ||||||||
Fixed annuities | $ | 92 | $ | 91 | 1 | % | ||
Indexed annuities | 130 | 173 | (25 | %) | ||||
Bank annuities | 18 | - | NA | |||||
Variable annuities | 26 | 23 | 13 | % | ||||
266 | 287 | (7 | %) | |||||
Supplemental insurance | 95 | 95 | - | |||||
Life insurance | 12 | 12 | - | |||||
Total statutory premiums | $ | 373 | $ | 394 | (5 | %) | ||
AMERICAN FINANCIAL GROUP, INC. Notes To Financial Schedules |
|||||||
Footnote to GAAP to Non GAAP Reconciliation: |
|||||||
a) Components of core net operating earnings: |
|||||||
|
|||||||
In millions |
Three months ended
March 31, |
||||||
2009 | 2008 | ||||||
P&C operating earnings | $ | 187.5 | $ | 202.5 | |||
Annuity & supplemental insurance | |||||||
operating earnings | 39.4 | 26.5 | |||||
Interest & other corporate expense | (23.0 | ) | (27.4 | ) | |||
Core operating earnings before income taxes | 203.9 | 201.6 | |||||
Related income taxes | 72.9 | 73.2 | |||||
Core net operating earnings | $ | 131.0 | $ | 128.4 | |||
Source:
American Financial Group, Inc.
Diane P. Weidner, Assistant Vice
President – Investor Relations
513-369-5713
or
Web Sites:
www.AFGinc.com
www.GreatAmericanInsurance.com