American Financial Group, Inc. (AFG) has reported a net income of $212 million for the first-quarter of 2023, compared to $290 million in Q1 2022, driven by after-tax non-core net realized losses on securities of $37 million.
In Q1, AFG’s net earnings included after-tax non-core net realized losses on securities of $37 million and a $2 million gain on retirement of debt.
In contrast, net earnings in Q1 2013 included after-tax non-core net realized losses on securities of $12 million and a $1 million loss on retirement of debt.
Core net operating earnings were $247 million for the 2023 first quarter, compared to $303 million in Q1 2022. AFG attributes the year-on-year decrease was due primarily to lower returns in AFG’s alternative investment portfolio when compared to the exceptionally strong performance of this portfolio in the prior year period, and lower year-over-year underwriting profit in the Specialty Property and Casualty insurance operations.
Both of these items were partially offset by higher other net investment income.
Core net operating earnings for the first quarters of 2023 and 2022 generated annualized returns on equity of 22.0% and 24.6%, respectively, AFG noted.
“We are pleased to report a strong start to the year, with a first quarter annualized core operating return on equity of 22%. Our Specialty P&C businesses produced strong underwriting margins, the higher interest rate environment improved investment income compared to the first quarter of 2022, and we continue to be pleased with the performance of our alternative investment portfolio, where returns exceeded our expectations during the quarter. Our entrepreneurial, opportunistic culture and disciplined operating philosophy continue to serve us well in a favorable P&C market and a dynamic economic environment,” Carl H. Lindner III and S. Craig Lindner, AFG’s Co-Chief Executive Officers (CEOs), commented.
“Based on the strong results reported in the first quarter, we continue to expect AFG’s core net operating earnings per share in 2023 to be in the range of $11.00 to $12.00, which would produce a core return on equity of over 20% at the midpoint.”
“The definitive agreement to acquire Crop Risk Services (“CRS”) from American International Group that was announced earlier today provides AFG with the exciting opportunity to deploy a portion of that excess capital to expand our crop business – a business we know very well – while leaving AFG with significant excess capital for additional share repurchases or special dividends.”
“This guidance reflects an average crop year and a return of approximately 8% on alternative investments for the full-year 2023 (reflecting an average annualized yield of approximately 6% over the last nine months of 2023), compared to 13.2% earned on these investments in 2022,” Lindner continued.
