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American Financial (AFG) Q3 Earnings Miss, Improve Y/Y
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American Financial Group Inc.'s (AFG - Free Report) third-quarter 2016 net operating earnings of $1.51 per share missed the Zacks Consensus Estimate of $1.53 by 1.3%. However, earnings improved 9.4% year over year.
The year-over-year bottom-line growth can be attributed to higher operating earnings in the Annuity segment as well as net investment income in Specialty Property and Casualty (P&C) insurance operations. Lower Specialty P&C underwriting profit partially limited the upside.
Including realized gains of 2 cents and special Asbestos and Environmental (“A&E”) of 30 cents, net income per share surged 73.2% year over year to $1.23 from 71 cents per share.
Behind the Headlines
Total revenue of $1.7 billion inched up 1.1% year over year. The top-line growth can be attributed to higher net investment income and other income. The company's operating revenues of $1.6 billion outpaced Zacks Consensus Estimate of $1.3 billion by 30.4%.
Net investment income of $433 million grew 1.9% year over year.
American Financial's total cost and expenses of $1.5 billion decreased 3.8% year over year. Lower losses and expenses in the P&C segment, and expenses in Annuity, life, accident & health benefits, resulted in the overall decline in expenses.
Segment Results
Specialty P&C generated $1.3 billion in net premiums written, down 3.9% year over year. The downside primarily stemmed from 4% and 8% decrease in net premiums written in the Property & Transportation and Specialty Casualty, respectively.
Underwriting profit of the segment declined 7.1% to $78 million. The deterioration was primarily attributable to lower underwriting profit at Specialty Casualty and Specialty Financial segments. The segment's combined ratio deteriorated 30 basis points (bps) year over year to 93.2%, owing to the 360 bps and 600 bps deterioration in combined ratio in Specialty Casualty and Specialty Financial segments, respectively.
The Annuity segment reported $941 million in total premiums written. This reflects a plunge of 28.8% year over year.
Financial Update
As of Sep 30, 2016, American Financial had cash and investments of $41.8 billion, up 10.8% from the 2015-end level of $37.7 billion.
Long-term debt jumped 30.3% year over year to $1.3 billion. As of Sep 30, 2016, the company’s book value per share (excluding unrealized gains/losses on fixed maturities) was $51.73, up 4.9% from the 2015-end level.
The company reported return on equity (ROE) of 9.9% in the third quarter as against 5.9% in the year-ago quarter.
Dividend and Share Buyback Update
In the third quarter, American Financial repurchased approximately 0.4 million shares of common stock at an average price per share of $73.98.
In the quarter under review, the board of directors of the company declared a special cash dividend of $1.00 per share, which will be paid on Dec 7, to shareholders on record as of Nov 23, 2016. The special dividend will be paid alongside American Financial’s regular quarterly dividend of 31.25 cents per share. Notably, the company had last raised its dividend payout in Aug 2016, reflecting the eleventh consecutive year of dividend hikes.
2016 Guidance Revised
American Financial revised its 2016 net operating earnings per share guidance to the range of $5.55–$5.75.
Among the other players from the same space that have reported their third-quarter earnings so far, the bottom line at Progressive Corp. (PGR - Free Report) and The Travelers Companies Inc. (TRV - Free Report) beat their respective Zacks Consensus Estimate, while the earnings of RLI Corp. (RLI - Free Report) missed the same.
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American Financial (AFG) Q3 Earnings Miss, Improve Y/Y
American Financial Group Inc.'s (AFG - Free Report) third-quarter 2016 net operating earnings of $1.51 per share missed the Zacks Consensus Estimate of $1.53 by 1.3%. However, earnings improved 9.4% year over year.
The year-over-year bottom-line growth can be attributed to higher operating earnings in the Annuity segment as well as net investment income in Specialty Property and Casualty (P&C) insurance operations. Lower Specialty P&C underwriting profit partially limited the upside.
Including realized gains of 2 cents and special Asbestos and Environmental (“A&E”) of 30 cents, net income per share surged 73.2% year over year to $1.23 from 71 cents per share.
Behind the Headlines
Total revenue of $1.7 billion inched up 1.1% year over year. The top-line growth can be attributed to higher net investment income and other income. The company's operating revenues of $1.6 billion outpaced Zacks Consensus Estimate of $1.3 billion by 30.4%.
Net investment income of $433 million grew 1.9% year over year.
American Financial's total cost and expenses of $1.5 billion decreased 3.8% year over year. Lower losses and expenses in the P&C segment, and expenses in Annuity, life, accident & health benefits, resulted in the overall decline in expenses.
Segment Results
Specialty P&C generated $1.3 billion in net premiums written, down 3.9% year over year. The downside primarily stemmed from 4% and 8% decrease in net premiums written in the Property & Transportation and Specialty Casualty, respectively.
Underwriting profit of the segment declined 7.1% to $78 million. The deterioration was primarily attributable to lower underwriting profit at Specialty Casualty and Specialty Financial segments. The segment's combined ratio deteriorated 30 basis points (bps) year over year to 93.2%, owing to the 360 bps and 600 bps deterioration in combined ratio in Specialty Casualty and Specialty Financial segments, respectively.
The Annuity segment reported $941 million in total premiums written. This reflects a plunge of 28.8% year over year.
Financial Update
As of Sep 30, 2016, American Financial had cash and investments of $41.8 billion, up 10.8% from the 2015-end level of $37.7 billion.
Long-term debt jumped 30.3% year over year to $1.3 billion. As of Sep 30, 2016, the company’s book value per share (excluding unrealized gains/losses on fixed maturities) was $51.73, up 4.9% from the 2015-end level.
The company reported return on equity (ROE) of 9.9% in the third quarter as against 5.9% in the year-ago quarter.
Dividend and Share Buyback Update
In the third quarter, American Financial repurchased approximately 0.4 million shares of common stock at an average price per share of $73.98.
In the quarter under review, the board of directors of the company declared a special cash dividend of $1.00 per share, which will be paid on Dec 7, to shareholders on record as of Nov 23, 2016. The special dividend will be paid alongside American Financial’s regular quarterly dividend of 31.25 cents per share. Notably, the company had last raised its dividend payout in Aug 2016, reflecting the eleventh consecutive year of dividend hikes.
2016 Guidance Revised
American Financial revised its 2016 net operating earnings per share guidance to the range of $5.55–$5.75.
AMER FINL GROUP Price, Consensus and EPS Surprise
AMER FINL GROUP Price, Consensus and EPS Surprise | AMER FINL GROUP Quote
Zacks Rank
American Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Performance of Other P&C Insurers
Among the other players from the same space that have reported their third-quarter earnings so far, the bottom line at Progressive Corp. (PGR - Free Report) and The Travelers Companies Inc. (TRV - Free Report) beat their respective Zacks Consensus Estimate, while the earnings of RLI Corp. (RLI - Free Report) missed the same.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>