American Financial Group, Inc., a Cincinnati-based holding company specialising in insurance and financial services, has reported first-quarter 2025 net earnings of $154 million, compared to $242 million for the same period in 2024.
This reflects a decrease primarily due to lower property and casualty (P&C) insurance underwriting profit and reduced returns in AFG’s alternative investment portfolio.
Core net operating earnings were $152 million ($1.81 per share), down from $231 million ($2.76 per share) in Q1 2024.
The annualised return on equity (ROE) was 13.3% for Q1 2025, significantly lower than the 21.2% reported for the same period last year.
The decline in core earnings highlights a challenging quarter for the P&C insurance segment, particularly within AFG’s Specialty Property and Casualty (P&C) operations, which faced an elevated combined ratio.
This increased combined ratio signifies higher underwriting costs, thereby reducing underwriting profit. For Q1 2025, the combined ratio for AFG’s Specialty P&C operations rose to 94.0%, up 3.9 points from 90.1% in Q1 2024.
In Q1 2025, AFG’s underwriting profit in the Specialty P&C operations decreased to $94 million from $154 million in the prior year. The 2025 results include 4.5 points from catastrophe losses, primarily from the California wildfires, compared to 2.3 points in Q1 2024. This was partially offset by favourable prior-year reserve development, which added 1.3 points to the combined ratio.
The company also saw a slight dip in gross and net written premiums, down 2% and 1%, respectively, in comparison to Q1 2024.
In the Specialty Casualty Group, underwriting profit decreased from $61 million in Q1 2024 to $20 million in Q1 2025, largely due to higher catastrophe losses and a slight dip in underwriting profit from workers’ compensation and executive liability. Catastrophe losses in this group were $27 million, up from $19 million in the previous year. The combined ratio rose to 97.6% from 92.2%.
In contrast, the Specialty Financial Group saw an underwriting profit increase from $33 million in Q1 2024 to $37 million in Q1 2025, driven by favourable prior-year reserve development despite elevated catastrophe losses. This group achieved a combined ratio of 87.0%, which was nearly unchanged from the prior year’s 86.6%.
AFG continued to reward shareholders with a cash dividend of $2.80 per share during the first quarter, which included a special dividend of $2.00 per share.
AFG’s net investment income, excluding alternative investments, rose by 6% in Q1 2025, primarily due to higher interest rates and growing asset balances.
However, net investment income, including the impact of alternative investments, decreased by 17%. Returns from alternative investments also dropped to 1.8% for the quarter, down from 9.0% in Q1 2024, as certain underlying investments within AFG’s traditional private equity portfolio experienced a decline in value.
In addition, AFG announced that it had reached agreements to sell the Charleston Harbor Resort & Marina, with expectations to recognise a core operating gain of approximately $100 million, set to close in Q3 2025.
S. Craig Lindner and Carl H. Lindner III, AFG’s Co-Chief Executive Officers, said: “Our first quarter results were solid in the face of elevated industry catastrophe losses and heightened levels of economic volatility.
“In addition, we returned over $290 million to our shareholders during the first quarter of 2025 through a combination of regular dividends, special dividends and share repurchases. Our entrepreneurial, opportunistic culture and disciplined operating philosophy continue to serve us well in environments such as these, and position us for long-term success.”
Lindner continued: “AFG continued to have significant excess capital at March 31, 2025. 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 capital will be deployed into AFG’s core businesses as we identify the 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.”
