American Financial Group, Inc. (AFG) has reported a net income of $200 million for the second-quarter of 2023, compared to $167 million in Q2 2022.
In Q2, AFG’s net earnings included after-tax non-core net realized losses on securities of $1 million and a $1 million loss on retirement of debt.
By comparison, net earnings in the 2022 second quarter included net after-tax non-core items that reduced net income by $76 million.
Core net operating earnings were $202 million for the 2023 second quarter, compared to $243 million in Q2 2022.
AFG attributes the year-over-year decrease was due primarily to the impact of elevated catastrophe losses and lower favourable prior year reserve development on underwriting profit in the Specialty Property and Casualty (P&C) insurance operations compared to the very strong second quarter of 2022.
These items were partially offset by significantly higher net investment income in the 2023 second quarter.
Core net operating earnings for the second quarters of 2023 and 2022 generated annualized returns on equity of 18.2% and 20.7%, respectively, AFG noted.
“We are pleased to report an annualized core operating return greater than 18% in the second quarter alongside double-digit premium growth. The higher interest rate environment contributed to meaningfully higher year-over-year investment income, and we continue to be pleased with the performance of our alternative investment portfolio, where returns exceeded our expectations during the quarter,” Carl H. Lindner III and S. Craig Lindner, AFG’s Co-Chief Executive Officers, commented.
“AFG had approximately $700 million of excess capital at June 30, 2023, which is net of the $235 million in cash deployed to fund the CRS acquisition on July 3, 2023, and includes parent company cash and investments of approximately $550 million. Returning capital to shareholders in the form of regular and special cash dividends and through opportunistic share repurchases is an important and effective component of our capital management strategy.”
” In addition, our excess capital will be deployed into AFG’s core businesses as we identify potential for healthy, profitable organic growth, and opportunities to expand our specialty niche businesses through acquisitions and start-ups that meet our target return thresholds.”
“Based on the results reported in the first half of the year and expectations for the remainder of the year, we now expect AFG’s core net operating earnings in 2023 to be in the range of $10.15 to $11.15 per share, a decrease from our previous range of $11.00 to $12.00 per share. At the midpoint of the range, our revised guidance would produce a core return on equity of approximately 20%,” Lindner continued.
