American Financial Group, Inc. (AFG) has revised its earnings guidance for 2020 due to the impacts of the coronavirus (COVID-19) pandemic on the financial markets.
The company noted that, since providing its 2020 guidance, COVID-19 has had widespread financial and economic impacts, including a significant decrease in both equity and credit markets.
AFG’s original earnings guidance of $8.75 to $9.25 per share assumed a 10% annualised return on its $2.2 billion of investments that are marked to market through core operating earnings (MTM investments).
But now, AFG believes that the return on MTM investments in 2020 will be significantly lower than its previous expectations and returns in the second quarter of 2020 could be negative.
Based on preliminary analysis, the significant decline in the equity markets during the first quarter of 2020 resulted in non-core net realized losses on securities of approximately $4.85 per share.
“We are operating in an extraordinary and unprecedented environment as a result of the COVID-19 pandemic,” said S. Craig Lindner and Carl H. Lindner III, AFG’s Co-Chief Executive Officers.
“We continue to do our part to help to prevent the spread of the virus by making decisions that are guided by information from health officials and government leaders, and shaped by AFG’s corporate values. Our foremost priority is to protect the well-being of our employees. Nearly all of our teams are working virtually to provide the secure, trusted service and support that our agents and policyholders count on,” the CEOs continued.
“We have built strong core operating businesses and managed our capital prudently over many years, which has enabled us to successfully navigate periods of uncertainty and various economic cycles. This time is no different. AFG’s balance sheet remains strong. Our liquidity and excess capital afford us the flexibility to effectively address and respond to the uncertainties introduced by COVID-19. Our thoughts and prayers are with all of those affected by the virus and the individuals caring for them.”
