American Financial Group, Inc. Announces 2011 Fourth Quarter and Full Year Results
-
Adjusted book value per share
$40.23 ; growth of 7% in 2011 -
Twelve months core net operating earnings
$3.53 per share - Repurchased 1.5 million shares during the quarter
- Signs of strengthening rate environment
-
Full year 2012 core net operating earnings guidance between
$3.30 - $3.70 per share
Core net operating earnings were
During the fourth quarter of 2011, AFG repurchased 1.5 million shares of
common stock at an average price per share 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 | Twelve months ended | ||||||||||||
December 31, | December 31, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||
Components of net earnings attributable to shareholders: | ||||||||||||||
Core net operating earnings(a) | $ | 106 | $ | 111 | $ | 364 | $ | 433 | ||||||
Realized gains | 31 | 22 | 45 | 46 | ||||||||||
Special A&E Charge(b) |
- | - | (38 | ) | - | |||||||||
Valuation Allowance on Deferred Tax Assets(c) |
(28 | ) | - | (28 | ) | - | ||||||||
Net earnings attributable to shareholders | $ | 109 | $ | 133 | $ | 343 | $ | 479 | ||||||
Components of Earnings Per Share: | ||||||||||||||
Core net operating earnings | $ | 1.06 | $ | 1.03 | $ | 3.53 | $ | 3.92 | ||||||
Realized gains | .32 | .20 | .45 | .41 | ||||||||||
Special A&E Charge(b) |
- | - | (.37 | ) | - | |||||||||
Valuation Allowance on Deferred Tax Assets(c) |
(.28 | ) | - | (.28 | ) | - | ||||||||
Diluted Earnings Per Share | $ | 1.10 | $ | 1.23 | $ | 3.33 | $ | 4.33 | ||||||
Footnotes (a), (b) and (c) are contained in the accompanying Notes to Financial Schedules at the end of this release. |
“We continued to acquire shares of our common stock throughout the year,
on average, at approximately 84% of year-end book value. We are
confident in the Company’s financial strength and liquidity, with parent
company cash of
“We have established core net operating earnings guidance for 2012 to be
between
P&C Specialty Core Results
The P&C specialty insurance operations generated strong underwriting
profit for the 2011 fourth quarter and full year of
Gross and net written premiums were up 9% and 7%, respectively, in the 2011 fourth quarter compared to the same quarter a year earlier due primarily to higher premiums in our Specialty Casualty and Property and Transportation groups. Full year 2011 net written premiums were up 15%, just over the top end of our guidance. This growth was driven by higher premiums in our Property and Transportation segment, particularly our crop and transportation businesses. In addition to these factors, higher net written premiums in 2011 reflect the impact of a third quarter 2010 reinsurance transaction in our Specialty Financial group.
The
The
The
“Looking ahead to 2012, we expect to produce strong underwriting profits, and forecast an overall calendar year combined ratio in the 91% to 94% range. We will keep our focus on maintaining adequate rates. Our objective is to achieve an increase of 2% - 4% in the Specialty Group’s overall average renewal rates in 2012.”
Annuity and Supplemental Insurance Core Results
AFG conducts loss recognition testing and a review of major actuarial
assumptions to determine the need for any changes or other adjustments.
These reviews take place at least annually, generally in the fourth
quarter. Assumptions include management’s expectations of future lapses,
claims, morbidity, rate increases, annuitizations and reinvestment
rates. The adjustments related to these reviews were immaterial in 2011.
Results for the fourth quarter of 2010 included a net pre-tax charge of
Statutory premiums of
Deferred Tax Asset Valuation Allowance
A valuation allowance for deferred tax assets was recorded in the fourth quarter of 2011 related to our ability to realize the tax benefits associated with losses in our Lloyd’s syndicate. We will be able to reduce this valuation allowance in future periods if income is generated in our Lloyd’s syndicate and our ability to realize the tax benefits becomes more certain.
Investments
At
During 2011, P&C investment income was 13% lower than the comparable 2010 period. As disclosed previously, the continued runoff and disposition of higher-yielding securities in the non-agency residential mortgage-backed securities portfolio and generally lower reinvestment rates were primary factors contributing to the decrease.
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 and
inflation rates, currency fluctuations and extended economic recessions
or expansions in the U.S. and abroad; performance of securities markets;
AFG’s 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 AFG’s investment portfolio; the availability
of capital; regulatory actions (including changes in statutory
accounting rules); changes in the legal environment affecting AFG or its
customers; tax law and accounting changes; levels of natural
catastrophes and severe weather, terrorist activities (including any
nuclear, biological, chemical or radiological events), incidents of war
or losses resulting from civil unrest 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; changes in persistency of in-force policies;
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 those in the annuity bank distribution channels, the ability
to obtain adequate rates and policy terms; 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 the 2011 fourth
quarter and full year earnings at
A replay of the call will also be available two hours following the
completion of the call and will remain available until
A replay of the broadcast will be available for 14 days at the same website beginning approximately 2 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 website: www.AFGinc.com.
AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES |
||||||||||||||
SUMMARY OF EARNINGS | ||||||||||||||
(In Millions, Except Per Share Data) |
||||||||||||||
Three months ended | Twelve months ended | |||||||||||||
December 31, | December 31, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||
Revenues | ||||||||||||||
P&C insurance premiums | $ | 716 | $ | 663 | $ | 2,759 | $ | 2,550 | ||||||
Life, accident & health premiums | 106 | 111 | 430 | 451 | ||||||||||
Investment income | 325 | 306 | 1,241 | 1,191 | ||||||||||
Realized gains | 49 | 38 | 73 | 88 | ||||||||||
Income (loss) of managed investment entities: |
||||||||||||||
Investment income | 27 | 25 | 105 | 93 | ||||||||||
Gain (loss) on change in fair value of assets/liabilities |
21 | (26 | ) | (33 | ) | (70 | ) | |||||||
Other income | 39 | 39 | 175 | 194 | ||||||||||
1,283 | 1,156 | 4,750 | 4,497 | |||||||||||
Costs and expenses | ||||||||||||||
P&C insurance losses & expenses | 627 | 569 | 2,579 | 2,254 | ||||||||||
Annuity, life, accident & health benefits and expenses |
281 |
274 |
1,092 |
1,043 |
||||||||||
Interest on borrowed money | 22 | 21 | 85 | 78 | ||||||||||
Expenses of managed investment entities | 18 | 17 | 71 | 55 | ||||||||||
Other operating and general expenses | 94 | 99 | 363 | 378 | ||||||||||
1,042 | 980 | 4,190 | 3,808 | |||||||||||
Operating earnings before income taxes |
241 |
176 |
560 |
689 |
||||||||||
Provision for income taxes(d) | 114 | 67 | 240 | 266 | ||||||||||
Net earnings including noncontrolling interests |
127 |
109 |
320 |
423 |
||||||||||
Less: Net earnings (loss) attributable to noncontrolling interests |
18 |
(24 |
) |
(23 |
) |
(56 |
) |
|||||||
Net earnings attributable to Shareholders |
$ |
109 |
$ |
133 |
$ |
343 |
$ |
479 |
||||||
Diluted Earnings per Common Share | $ | 1.10 | $ | 1.23 | $ | 3.33 | $ | 4.33 | ||||||
Average number of Diluted Shares | 99.8 | 108.1 | 102.9 | 110.5 | ||||||||||
Footnote (d) is contained in the accompanying Notes to Financial Schedules at the end of this release.
AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES | ||||||
SELECTED BALANCE SHEET DATA | ||||||
(In Millions, Except Per Share Data) | ||||||
December 31, | December 31, | |||||
2011 | 2010 | |||||
Total Cash and Investments | $ | 25,577 | $ | 22,670 | ||
Long-term Debt | $ | 934 | $ | 952 | ||
Shareholders’ Equity(e) | $ | 4,541 | $ | 4,470 | ||
Shareholders’ Equity (Excluding appropriated retained earnings & unrealized gains(losses) on fixed maturities)(e) |
$ |
3,936 |
$ |
3,948 |
||
Book Value Per Share: | ||||||
Excluding appropriated retained earnings | $ | 44.68 | $ | 40.64 | ||
Excluding appropriated retained earnings and unrealized gains (losses) on fixed maturities |
$ | 40.23 | $ | 37.54 | ||
Common Shares Outstanding | 97.8 | 105.2 | ||||
Footnote (e) is contained in the accompanying Notes to Financial Schedules at the end of this release.
AMERICAN FINANCIAL GROUP, INC. | |||||||||||||||||||||
P&C SPECIALTY GROUP UNDERWRITING RESULTS | |||||||||||||||||||||
(In Millions) | |||||||||||||||||||||
Three months | Twelve Months | ||||||||||||||||||||
ended | Pct. | ended | Pct. | ||||||||||||||||||
December 31, |
Change |
December 31, |
Change |
||||||||||||||||||
2011 |
2010 |
2011 |
2010 |
||||||||||||||||||
Gross written premiums | $ | 829 | $ | 761 | 9 | % | $ | 4,106 | $ | 3,589 | 14 | % | |||||||||
Net written premiums | $ | 602 | $ | 564 | 7 | % | $ | 2,770 | $ | 2,408 | 15 | % | |||||||||
Ratios (GAAP): | |||||||||||||||||||||
Loss & LAE ratio | 62 | % | 61 | % | 62 | % | 57 | % | |||||||||||||
Expense ratio | 26 | % | 25 | % | 30 | % | 31 | % | |||||||||||||
Combined Ratio(Excluding A&E) | 88 | % | 86 | % | 92 | % | 88 | % | |||||||||||||
Total Combined Ratio | 88 | % | 86 | % | 93 | % | 89 | % | |||||||||||||
Supplemental: (f) |
|||||||||||||||||||||
Gross Written Premiums: | |||||||||||||||||||||
Property & Transportation | $ | 355 | $ | 328 | 8 | % | $ | 2,273 | $ | 1,778 | 28 | % | |||||||||
Specialty Casualty | 335 | 297 | 13 | % | 1,302 | 1,295 | 1 | % | |||||||||||||
Specialty Financial | 138 | 135 | 2 | % | 529 | 514 | 3 | % | |||||||||||||
Other | 1 | 1 | - | 2 | 2 | - | |||||||||||||||
$ | 829 | $ | 761 | 9 | % | $ | 4,106 | $ | 3,589 | 14 | % | ||||||||||
Net Written Premiums: | |||||||||||||||||||||
Property & Transportation | $ | 261 | $ | 247 | 6 | % | $ | 1,436 | $ | 1,159 | 24 | % | |||||||||
Specialty Casualty | 222 | 188 | 18 | % | 867 | 864 | - | ||||||||||||||
Specialty Financial | 101 | 111 | (9 | %) | 398 | 323 | 23 | % | |||||||||||||
Other | 18 | 18 | - | 69 | 62 | 11 | % | ||||||||||||||
$ | 602 | $ | 564 | 7 | % | $ | 2,770 | $ | 2,408 | 15 | % | ||||||||||
Combined Ratio (GAAP): | |||||||||||||||||||||
Property & Transportation | 80 | % | 82 | % | 92 | % | 88 | % | |||||||||||||
Specialty Casualty | 102 | % | 91 | % | 96 | % | 95 | % | |||||||||||||
Specialty Financial | 85 | % | 78 | % | 85 | % | 75 | % | |||||||||||||
Aggregate Specialty Group | 88 | % | 86 | % | 92 | % | 88 | % | |||||||||||||
AMERICAN FINANCIAL GROUP, INC. | |||||||||||||
P&C SPECIALTY GROUP UNDERWRITING RESULTS, CONTINUED | |||||||||||||
(In Millions) | |||||||||||||
Three months ended | Twelve months ended | ||||||||||||
December 31, | December 31, | ||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||
Reserve Development Favorable/(Unfavorable): | |||||||||||||
Property & Transportation | $ | 3 | $ | 5 | $ 26 | $ | 27 | ||||||
Specialty Casualty | 21 | 42 | 71 | 89 | |||||||||
Specialty Financial | 1 | 9 | 10 | 48 | |||||||||
Other | 3 | (8 | ) | 13 | 6 | ||||||||
Aggregate Specialty Group | 28 | 48 | 120 | 170 | |||||||||
Special A&E Reserve Charge-P&C Run-off | - | - | (50 | ) | - | ||||||||
Total Reserve Development Including A&E | $ | 28 | $ | 48 | $ 70 | $ | 170 | ||||||
Points on Combined Ratio: | |||||||||||||
Property & Transportation | 1 | 1 | 2 | 2 | |||||||||
Specialty Casualty | 10 | 20 | 8 | 10 | |||||||||
Specialty Financial | 1 | 9 | 3 | 11 | |||||||||
Aggregate Specialty Group | 4 | 7 | 4 | 7 | |||||||||
Footnote (f) is contained in the accompanying Notes to Financial Schedules at the end of this release.
AMERICAN FINANCIAL GROUP, INC. | ||||||||||||||||||
ANNUITY & SUPPLEMENTAL INSURANCE GROUP | ||||||||||||||||||
STATUTORY PREMIUMS | ||||||||||||||||||
(In Millions) | ||||||||||||||||||
Three months |
|
Twelve months |
|
|||||||||||||||
ended |
Pct. |
ended |
Pct. |
|||||||||||||||
December 31, |
Change |
December 31, |
Change |
|||||||||||||||
2011 |
2010 |
2011 |
2010 |
|||||||||||||||
Retirement annuity premiums: | ||||||||||||||||||
Fixed annuities | $ | 84 | $ | 110 | (24 | %) | $ | 400 | $ | 624 | (36 | %) | ||||||
Indexed annuities | 365 | 257 | 42 | % | 1,645 | 846 | 94 | % | ||||||||||
Bank annuities | 151 | 235 | (36 | %) | 971 | 737 | 32 | % | ||||||||||
Variable annuities | 18 | 17 | 6 | % | 70 | 73 | (4 | %) | ||||||||||
618 | 619 | - | 3,086 | 2,280 | 35 | % | ||||||||||||
Supplemental insurance | 94 | 99 | (5 | %) | 384 | 402 | (4 | %) | ||||||||||
Life insurance | 11 | 10 | 10 | % | 35 | 39 | (10 | %) | ||||||||||
Total statutory premiums | $ | 723 | $ | 728 | (1 | %) | $ | 3,505 | $ | 2,721 | 29 | % | ||||||
Notes To Financial
Schedules
a) GAAP to Non GAAP Reconciliation-Components of core net operating earnings:
In millions | Three months ended | Twelve months ended | ||||||||||||||
December 31, | December 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
P&C operating earnings | $ | 145 | $ | 161 | $ | 487 | $ | 587 | ||||||||
Annuity & supplemental insurance operating earnings |
65 | 52 | 224 | 202 | ||||||||||||
Interest & other corporate expense | (43 | ) | (46 | ) | (148 | ) | (126 | ) | ||||||||
Core operating earnings before income taxes | 167 | 167 | 563 | 663 | ||||||||||||
Related income taxes | 61 | 56 | 199 | 230 | ||||||||||||
Core net operating earnings | $ | 106 | $ | 111 | $ | 364 | $ | 433 | ||||||||
b) Reflects the following effect of a special A&E charge reflected in twelve month 2011 results($ in millions, except per share amounts):
A&E Charge: |
Pre-tax |
After- |
EPS |
|||||||||
P&C insurance runoff operations | ||||||||||||
Asbestos | $ | 28 | $ | 18 | ||||||||
Environmental |
22 |
14 |
||||||||||
$ | 50 | $ | 32 | $ | .31 | |||||||
Former railroad & manufacturing operations | ||||||||||||
Asbestos | $ | 3 | $ | 2 | ||||||||
Environmental | 6 | 4 | ||||||||||
$ | 9 | $ | 6 | $ | .06 |
c) The deferred tax asset valuation allowance included in non-core
earnings is related to prior year losses from the Company’s Lloyd’s
syndicate and is shown net of
d) Operating income before income taxes includes
e) Shareholders’ Equity at
f) Supplemental Notes:
- 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.
-
Specialty Casualty includes primarily excess and surplus,
general liability, executive liability, umbrella and excess liability,
customized programs for small to mid-sized businesses and workers’
compensation insurance, primarily in the state of
California . - 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.
- Other includes an internal reinsurance facility.
Source:
American Financial Group, Inc.
Diane P. Weidner, Assistant Vice
President - Investor Relations, 513-369-5713
or
Web Sites:
www.AFGinc.com
www.GreatAmericanInsuranceGroup.com
www.GAFRI.com