American Financial Group Inc Reports Mixed Fourth Quarter and Full Year Results; Declares ...
Net Earnings: Q4 net earnings decreased to $263 million ($3.13 per share) from $276 million ($3.24 per share) in Q4 2022.
Core Net Operating Earnings: Q4 core net operating earnings were $238 million ($2.84 per share), down from $255 million ($2.99 per share) in the prior year's quarter.
Book Value Per Share: Increased to $50.91 at the end of 2023, up from $47.56 at the end of 2022.
Special Dividend: AFG declared a special dividend of $2.50 per share, payable on February 28, 2024.
Combined Ratio: Specialty P&C insurance operations reported a combined ratio of 87.7% in Q4 2023, slightly higher than 86.6% in Q4 2022.
Gross Written Premiums: Increased by 8% year-over-year in Q4 2023, with full-year growth also at 7%.
Investment Portfolio: Alternative investments returned 0.8% in Q4 2023, significantly lower than the 5.3% in Q4 2022.
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On February 6, 2024, American Financial Group Inc (NYSE:AFG) released its 8-K filing, announcing its financial results for the fourth quarter and full year of 2023. The company, a leading provider of property and casualty insurance and annuity products, reported a decrease in net earnings for the fourth quarter compared to the same period in the previous year. This decline was attributed to lower returns in AFG's alternative investment portfolio.
Financial Performance and Challenges
AFG's net earnings for the fourth quarter of 2023 were $263 million ($3.13 per share), compared to $276 million ($3.24 per share) in the 2022 fourth quarter. The company's core net operating earnings for the quarter were $238 million ($2.84 per share), down from $255 million ($2.99 per share) in the prior year's quarter. The year-over-year decrease reflects lower returns in AFGs alternative investment portfolio, which is a critical component of the company's investment strategy and overall profitability.
Financial Achievements
Despite the challenges, AFG achieved a book value per share of $50.91 at the end of 2023, an increase from $47.56 at the end of 2022. The company also declared a special dividend of $2.50 per share, showcasing its commitment to returning value to shareholders. Additionally, AFG's Specialty P&C insurance operations reported a combined ratio of 87.7% in the fourth quarter of 2023, indicating solid underwriting performance despite a slight increase from the 86.6% combined ratio reported in the fourth quarter of 2022.
Key Financial Metrics
AFG's financial strength is further evidenced by its gross written premiums, which increased by 8% year-over-year in the fourth quarter of 2023, with full-year growth also at 7%. This growth signifies AFG's ability to expand its insurance operations and capture new business opportunities. However, the company's investment portfolio faced headwinds, as the annualized return on alternative investments was approximately 0.8% for the 2023 fourth quarter compared to 5.3% for the prior year quarter. This performance is significant as it impacts the company's investment income, a vital source of revenue for insurance firms.
We are very pleased with our strong performance in the 2023 fourth quarter and full year. In addition to producing an annual core operating return on equity of nearly 20%, net written premiums grew by 8% during the year. Excellent underwriting results, strong investment performance and effective capital management enable us to continue to create long-term value for our shareholders. We are thankful for our talented insurance and investment professionals, who have positioned us well as we enter 2024," said Carl H. Lindner III and S. Craig Lindner, AFGs Co-Chief Executive Officers.
Analysis of Company's Performance
AFG's performance in 2023 demonstrates the company's resilience in the face of investment portfolio challenges. The company's ability to maintain a strong book value and pay out special dividends reflects a robust capital management strategy and a commitment to shareholder value. The growth in gross written premiums indicates a healthy expansion in AFG's core insurance business, which is essential for long-term success. However, the lower returns from alternative investments highlight the need for AFG to navigate market volatility and adjust its investment strategies accordingly.
As AFG moves forward without providing earnings guidance, the company's focus remains on long-term shareholder value creation, with an expectation of core operating earnings per share of approximately $11.00 for 2024. This strategic shift aligns with AFG's emphasis on generating strong returns on equity and growing book value per share.
For more detailed financial information and the full earnings release, please visit the Investor Relations section of AFG's website at www.AFGinc.com.
Explore the complete 8-K earnings release (here) from American Financial Group Inc for further details.
This article first appeared on GuruFocus.
