We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
American Financial (AFG) Up 124.4% in a Year: More Room to Run?
Read MoreHide Full Article
Shares of American Financial Group, Inc. (AFG - Free Report) have gained 124.4% in a year compared with the industry's increase of 52.9%. The Zacks S&P 500 composite rallied 43.2% in the said time frame. With a market capitalization of $11 billion, average volume of shares traded in the last three months was 0.4 million.
The rally was largely driven by higher renewal rate, growth in the surplus lines and excess liability businesses, sufficient liquidity and prudent capital deployment.
The property and casualty insurer recently delivered first-quarter 2021 operating earnings of $2.38 per share, beating the Zacks Consensus Estimate by 36.8%. The bottom line also improved 75% year over year.
It has a decent earnings surprise history too. Its bottom line beat estimates in three of the last four quarters, the average being 32.2%.
Can It Retain the Momentum?
The insurer expects its core net operating earnings in 2021 to be in the range of $7 to $8 per share, up from the earlier guidance of $6.25 to $7.25 per share.
In January 2021, the company agreed to sell its annuity business to MassMutual owing to weak performance at this segment over the past quarters. This transaction is expected to enhance the capital and liquidity position of the company. The company expects to recognize an after-tax gain on the sale of $680 million to $700 million on closure of the sale, which is expected in the ongoing quarter.
The company’s core business, Property and Casualty Insurance witnessed significant growth in the first quarter on the back of higher renewal rate, and improved underwriting profitability in Property and Transportation Group. This segment should benefit from new business opportunities, growth in the surplus lines and excess liability businesses, rate increases, and higher retentions in renewal business, which in turn boost premium growth.
American Financial had nearly $1.2 billion of excess capital at the end of first quarter of 2021 and expects to continue to have significant excess capital and liquidity throughout 2021 and beyond. Its cash and investments improved 3% from 2020-end level.
Moreover, this Zacks Rank #2 (Buy) insurer returned $43 million to shareholders in the first quarter. In August 2020, the company raised dividend by 11%, marking an excellent record of 15 straight annual dividend hikes. Nearly $2 billion of the estimated $4.5 billion of pro forma excess capital will be available for return to shareholders in the form of special dividends and share repurchases, following the closure of the sale of annuity business. Its current dividend yield of 1.5% is higher than the industry average of 0.3%, which makes the stock an attractive pick for yield-seeking investors.
Furthermore, its 12.1% return on equity (ROE) is better than the industry average of 5.6%, reflecting its efficiency in utilizing shareholders’ funds. Annualized core operating return on equity in the first quarter was a strong 14.7%, which improved 510 basis points year over year.
Other Stocks to Consider
Some other top-ranked stocks from the property and casualty insurance space include Selective Insurance Group, Inc. (SIGI - Free Report) , HCI Group, Inc. (HCI - Free Report) and Alleghany Corporation . While Selective Insurance and HCI Group sport a Zacks Rank #1 (Strong Buy), Alleghany carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Selective Insurance surpassed estimates in three of the last four quarters and missed in the other one, the average earnings surprise being 35.12%.
The bottom line of HCI Group surpassed estimates in three of the last four quarters, the average being 42.91%.
Alleghany’s earnings surpassed estimates in each of the last four quarters, the average being 128.63%.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
Image: Bigstock
American Financial (AFG) Up 124.4% in a Year: More Room to Run?
Shares of American Financial Group, Inc. (AFG - Free Report) have gained 124.4% in a year compared with the industry's increase of 52.9%. The Zacks S&P 500 composite rallied 43.2% in the said time frame. With a market capitalization of $11 billion, average volume of shares traded in the last three months was 0.4 million.
The rally was largely driven by higher renewal rate, growth in the surplus lines and excess liability businesses, sufficient liquidity and prudent capital deployment.
The property and casualty insurer recently delivered first-quarter 2021 operating earnings of $2.38 per share, beating the Zacks Consensus Estimate by 36.8%. The bottom line also improved 75% year over year.
It has a decent earnings surprise history too. Its bottom line beat estimates in three of the last four quarters, the average being 32.2%.
Can It Retain the Momentum?
The insurer expects its core net operating earnings in 2021 to be in the range of $7 to $8 per share, up from the earlier guidance of $6.25 to $7.25 per share.
In January 2021, the company agreed to sell its annuity business to MassMutual owing to weak performance at this segment over the past quarters. This transaction is expected to enhance the capital and liquidity position of the company. The company expects to recognize an after-tax gain on the sale of $680 million to $700 million on closure of the sale, which is expected in the ongoing quarter.
The company’s core business, Property and Casualty Insurance witnessed significant growth in the first quarter on the back of higher renewal rate, and improved underwriting profitability in Property and Transportation Group. This segment should benefit from new business opportunities, growth in the surplus lines and excess liability businesses, rate increases, and higher retentions in renewal business, which in turn boost premium growth.
American Financial had nearly $1.2 billion of excess capital at the end of first quarter of 2021 and expects to continue to have significant excess capital and liquidity throughout 2021 and beyond. Its cash and investments improved 3% from 2020-end level.
Moreover, this Zacks Rank #2 (Buy) insurer returned $43 million to shareholders in the first quarter. In August 2020, the company raised dividend by 11%, marking an excellent record of 15 straight annual dividend hikes. Nearly $2 billion of the estimated $4.5 billion of pro forma excess capital will be available for return to shareholders in the form of special dividends and share repurchases, following the closure of the sale of annuity business. Its current dividend yield of 1.5% is higher than the industry average of 0.3%, which makes the stock an attractive pick for yield-seeking investors.
Furthermore, its 12.1% return on equity (ROE) is better than the industry average of 5.6%, reflecting its efficiency in utilizing shareholders’ funds. Annualized core operating return on equity in the first quarter was a strong 14.7%, which improved 510 basis points year over year.
Other Stocks to Consider
Some other top-ranked stocks from the property and casualty insurance space include Selective Insurance Group, Inc. (SIGI - Free Report) , HCI Group, Inc. (HCI - Free Report) and Alleghany Corporation . While Selective Insurance and HCI Group sport a Zacks Rank #1 (Strong Buy), Alleghany carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Selective Insurance surpassed estimates in three of the last four quarters and missed in the other one, the average earnings surprise being 35.12%.
The bottom line of HCI Group surpassed estimates in three of the last four quarters, the average being 42.91%.
Alleghany’s earnings surpassed estimates in each of the last four quarters, the average being 128.63%.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>