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AFG posts record P&C earnings in Q3

3rd November 2021 - Author: Matt Sheehan

American Financial Group, Inc. (AFG) has posted record earnings of $329 million within its property and casualty (P&C) insurance segment during the third quarter of 2021.

The result was $124 million higher and a 60% increase from the same period last year.

The company attributed the year-on-year improvement to significantly higher P&C underwriting profit and substantially higher P&C net investment income, primarily due to higher earnings from alternative investments.

Overall, AFG posted third quarter net earnings of $219 million, compared to $164 million for Q3 last year.

The Specialty P&C insurance operations generated an underwriting profit of $169 million in Q3 2021, compared to $104 million in Q3 2020, driven primarily by higher year-over-year underwriting profit in the Specialty Casualty Group and to a lesser extent, the Specialty Financial Group.

Pretax catastrophe losses, net of reinsurance and inclusive of reinstatement premiums, were $31 million, primarily as a result of losses related to Hurricane Ida. By comparison, catastrophe losses in the comparable prior year period were $57 million.

The third quarter 2021 combined ratio was a very strong 89.0%, improving 3.1 points from the 92.1% reported in the comparable prior year period, and includes 2.0 points in catastrophe losses.

AFG recorded $3 million in losses related to COVID-19 related to accident year 2021 in the third quarter of 2021 and recorded favorable reserve development of approximately $3 million related to accident year 2020 COVID-19 reserves based on loss experience.

Average renewal pricing across the entire P&C Group was up approximately 11% for the quarter, or 13% when excluding workers’ compensation business.

“We are extremely pleased with AFG’s performance during the third quarter,” said S. Craig Lindner and Carl H. Lindner III, AFG’s Co-Chief Executive Officers.

“Our Specialty P&C businesses reported outstanding underwriting margins, and results in our portfolio of alternative investments continued to exceed our expectations. Annualized core return on equity was nearly 18%. We believe that our disciplined – yet opportunistic – operating philosophy, a lower net catastrophe exposure than our peers, a continued economic recovery and a strong P&C rate environment all contributed to these outstanding results.

Lindner III continued: “For the third quarter in a row, AFG achieved record P&C operating earnings. Underwriting margins across our portfolio of businesses were excellent, with an overall Specialty P&C combined ratio of 89%. Catastrophe losses were manageable, we are continuing to achieve strong renewal pricing, each of our Specialty P&C groups reported healthy growth and we are projecting an above average crop year.”

Lindner added: “Based on results through the first nine months and higher than expected crop earnings, we now expect an overall 2021 calendar year combined ratio in the range of 86% to 88%, an improvement from the range of 88% to 90% estimated previously, and we now expect net written premiums to be 11% to 14% higher than the $5.0 billion reported in 2020, which is an increase from the range of +10% to +13% estimated previously. We expect the market to remain firm throughout the remainder of the year, allowing us to act on business opportunities and achieve solid renewal rate increases.”

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