Reasons to Retain American Financial (AFG) in Your Portfolio Now
American Financial Group, Inc. AFG is well-poised to gain on the back of rate increases, higher retentions in renewal business, a rise in average renewal pricing, rate increases, stronger underwriting profit and improved guidance.
Growth Projections
The Zacks Consensus Estimate for AFG’s 2024 earnings is pegged at $11.53 per share, indicating a 9.2% increase from the year-ago reported figure on 10.4% higher revenues of $8.51 billion.
Zacks Rank & Price Performance
AFG currently carries a Zacks Rank #3 (Hold). In the past year, the stock has lost 16.6% against the industry’s growth of 12.2%.
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Style Score
American Financial has a VGM Score of B. VGM Score helps identify stocks with the most attractive value, best growth prospects and the most promising momentum.
Business Tailwinds
The company’s Property and Casualty (P&C) Insurance segment should benefit from business opportunities, growth in the surplus lines and excess liability businesses, rate increases and higher retentions in renewal business, which boost premium growth.
In the Specialty P&C Insurance segment, growth in net written premiums is estimated to be in the range of 6-8% for 2023. The company continues to expect net written premiums for Property and Transportation Group in a range of flat to up 2%.
In Specialty Casualty Group, AFG expects net written premiums to be 5-9% higher than the 2022 level. The company has raised its guidance for growth in net written premiums for the segment in the range of 28-32%, up five points from the previous prediction, primarily due to market opportunities in financial institutions business.
The property and casualty insurer witnessed average renewal pricing across the entire P&C Group. It intends to maintain satisfactory rates in P&C renewal pricing going forward. Average renewal pricing across Property & Casualty Group, excluding workers' comp, grew around 7% for the third quarter. This is the 29th consecutive quarter to report overall renewal rate increases.
The company has achieved renewal rate increases in excess of prospective loss ratio trends to exceed targeted returns. Based on the results through the first nine months of 2023, it continues to expect renewal rates to increase 3-5% overall.
AFG’s combined ratio has been better than the industry’s average for more than two decades. The underwriting profit of the insurer is likely to increase on the back of higher profit in the workers’ compensation, excess and surplus, executive liability, mergers and acquisitions liability businesses and higher underwriting profit in the trade credit and financial institutions businesses.
American Financial has successfully increased its dividends in each of the last 18 years. The robust operating profitability at the P&C segment, stellar investment performance and effective capital management support effective shareholders return.
Stocks to Consider
Some better-ranked stocks from the property and casualty insurance industry are CNA Financial Corporation CNA, W.R. Berkley Corporation WRB and The Progressive Corporation PGR, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
CNA Financial’s earnings beat estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 9.24%. In the past year, CNA's shares have rallied 1.8%.
The Zacks Consensus Estimate for CNA’s 2023 and 2024 earnings per share (EPS) is pegged at $4.41 and $4.73, respectively, indicating a year-over-year increase of 14.8% and 7.4%.
W.R. Berkley’s earnings beat estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 4.35%. In the past year, WRB’s shares have lost 3.2%.
The Zacks Consensus Estimate for WRB’s 2023 and 2024 EPS is pegged at $4.80 and $5.77, respectively, indicating a year-over-year increase of 9.5% and 20.2%.
The Zacks Consensus Estimate for The Progressive’s 2023 and 2024 EPS is pegged at $5.44 and $8.11, respectively, indicating a year-over-year increase of 33.9% and 48.3%.
The Zacks Consensus Estimate for PGR’s 2023 and 2024 EPS has moved north 2.1% and 5.6%, respectively, in the past 30 days. In the past year, PGR’s shares have rallied 23.1%.
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W.R. Berkley Corporation (WRB) : Free Stock Analysis Report
The Progressive Corporation (PGR) : Free Stock Analysis Report
CNA Financial Corporation (CNA) : Free Stock Analysis Report
American Financial Group, Inc. (AFG) : Free Stock Analysis Report
