On Jun 20, 2014, shares of property and casualty insurer American Financial Group Inc. (AFG) rallied up to touch a 52-week high of $20.00. The momentum in the stock can be traced back to investor’s optimism driven by consistent strength in operating performance exhibited by the company over the past several quarters.
American Financial boasts excellent risk-adjusted capitalization, strong operating profitability sustained over the long term and a diversified business profile, which serve to protect its earnings stream.
Since the beginning of 2014, the company has diligently pursued several opportunities to deploy its excess capital. The company launched its Aviation Division in March and completed the acquisition of Summit Holdings Southeast, Inc. on Apr 1.With these transactions, the number of Specialty Property and Casualty businesses tally reaches 30.
American Financial is also experiencing a favorable pricing environment. About two-thirds of its Property and Casualty businesses reported pricing increases during the first quarter, resulting in an overall renewal rate increase of about 3%. This is the company’s 10th consecutive quarter of overall price strengthening. Pricing continues to keep pace with loss cost trends, which appear relatively benign across almost all of its Property and Casualty businesses.
American Financial has exhibited superior underwriting profitability by maintaining its combined ratio at a considerably lower level compared with the property and casualty industry over the same period.
Moreover, American Financial’s strong balance sheet, consistent dividend increases and a disciplined capital management are some other positives that encourage investors to stick to the stock.
American Financial carries a Zacks Rank # 3 (Hold). Better-ranked players from the same industry include Aspen Insurance Holdings Ltd. (AHL), Allied World Assurance Company Holdings, AG (AWH) and AmTrust Financial Services, Inc. (AFSI). All these stocks sport a Zacks Rank #1 (Strong Buy).
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