Insurance and investments holding company, American Financial Group has reported its net income for Q1 at $419 million compared to a net loss of $301 million for Q1 2020.
Its first quarter 2021 combined ratio improved to 88.5%, improving 3.7 points from the prior year period.
P&C insurance operations generated an underwriting profit of $134 million in the 2021 first quarter, compared to $89 million in the first quarter of 2020. This increase was primarily due to higher underwriting profitability in our Property and Transportation Group.
Gross and net written premiums were up 6% and 3%, respectively compared to the prior year quarter, with year-over-year growth reported within each of the Specialty P&C groups.
Craig Lindner and Carl H. Lindner III, AFG’s Co-Chief Executive Officers, issued this statement: “We are extremely proud of AFG’s first quarter 2021 results, especially in the wake of elevated industry catastrophe levels resulting from severe winter storms, a continued low interest rate environment and the impact of the pandemic.
“We are hopeful that the vaccine rollout will help to facilitate a full re-opening of our economy in the near future, and are acting on growth opportunities across our Specialty P&C portfolio of businesses. We are especially pleased with the performance of our alternative investments, which are marked to market through core earnings.
“These results, combined with our disciplined operating philosophy, lower catastrophe volatility than our peers, and a portfolio of diversified specialty insurance businesses helped us achieve an annualized core return on equity of nearly 15% in the quarter.
“AFG had approximately $1.2 billion of excess capital (including parent company cash of approximately $200 million) at March 31, 2021. The sale of our Annuity business to Massachusetts Mutual Life Insurance Company (MassMutual) is expected to close in the second quarter and will significantly enhance AFG’s cash and excess capital.
“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 strong results reported in the first quarter, we now expect AFG’s core net operating earnings in 2021 to be in the range of $7.00 to $8.00, an increase from our previous range of $6.25 to $7.25 per share.
“This guidance range excludes earnings from our discontinued annuity operations that will be sold to MassMutual, and continues to assume zero earnings on parent company cash, including the expected $3.4 billion in net cash proceeds (net of directly owned real estate assets to be acquired by AFG Parent) from the sale of the annuity operations as we continue to evaluate options for the deployment of excess capital.
“Our core earnings per share guidance excludes non-core items such as results of discontinued operations, realized gains and losses and other significant items that are not able to be estimated with reasonable precision, or that may not be indicative of ongoing operations.
“Furthermore, the above guidance reflects a normal crop year and an annualized return of approximately 8% on alternative investments that are marked to market through core earnings over the remaining three quarters of 2021.”
