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) Q2 Earnings Beat, Revenues Miss
Read MoreHide Full Article
American Financial Group, Inc. (AFG - Free Report) reported second-quarter 2022 net operating earnings per share of $2.85, which surpassed the Zacks Consensus Estimate by 27.2%. The bottom line improved 19% year over year.
American Financial’s results reflect higher P&C insurance net earned premiums, net investment income and other income, offset by higher expenses.
American Financial Group, Inc. Price, Consensus and EPS Surprise
Total revenues of $1.6 billion increased 11.1% year over year in the quarter. The growth came on the back of higher P&C insurance net earned premiums, net investment income and other income. The top line missed the Zacks Consensus Estimate by 3.9%.
Net investment income climbed 2.4% year over year to $168 million in the quarter under review, driven by strong earnings from alternative investments, with an annualized return of approximately 12.4%. The figure was lower than our estimate of $237.8 million and missed the Zacks Consensus Estimate of 174.26 million.
Total cost and expenses increased 7.2% year over year to $1.3 billion due to higher P&C insurance losses & expenses and expenses of managed investment entities. The figure was lower than our estimate of $1.6 billion.
Segmental Update
The Specialty P&C Insurance segment generated $1.5 billion in net written premiums, which rose 11% year over year. The growth was reported within each of the Specialty P&C groups owing to a combination of new business opportunities, increased exposure and a good renewal rate environment. Average renewal pricing across P&C Group, excluding workers’ compensation, increased nearly 6% in the quarter.
Net written premiums in Property & Transportation Group grew 12% year over year to $632 million in the quarter. The figure was lower than our estimate of $708.3 million.
Net written premiums at Specialty Casualty Group increased 9% year over year to $646 million. The figure was higher than our estimate of $616.1 million. Further, net written premiums at Specialty Financial increased 11% year over year to $177 million. The figure was higher than our estimate of $169.4 million.
Net written premiums at Other divisions improved 13% year over year to $61 million. The figure was lower than our estimate of $72 million.
Specialty P&C Insurance segment’s underwriting profit increased 29% year over year to $197 million in the quarter. The increase was primarily driven by higher year-over-year underwriting profit in Specialty Casualty and Specialty Financial Groups, partially offset by lower underwriting profit in Property and Transportation Group.
The combined ratio improved 210 basis points (bps) year over year to 85.8% at the segment.
Discontinued Annuity Operations
In May 2021, AFG completed the sale of its Annuity business to Mass Mutual for cash proceeds of $3.57 billion. AFG recognized an after-tax non-core gain on the sale of $656 million in the first half of 2021. The sale continues to be subject to tax-related post-closing adjustments, which are not expected to be material and are expected to be settled in 2022.
Financial Update
American Financial exited the second quarter with total cash and investments of $14.3 billion, which declined 9.4% from the 2021-end level. The figure was lower than our estimate of $17.3 billion.
As of Jun 30, 2022, long-term debt totaled $1.5 billion, which decreased 21.5% from the level at 2021 end.
As of Jun 30, 2022, the company’s book value per share (excluding unrealized gains/losses on fixed maturities) was $51.68, down 9.9% from the 2021-end level. Annualized return on equity (ROE) came in at 14.3% for the second quarter, contracting 5770 basis points year over year.
Prudent Capital Deployment
American Financial paid cash dividends of $8.56 per share during the second quarter, which included an $8 per share special dividend.
2022 Guidance Revised
American Financial increased core net operating earnings guidance to $10.75-$11.75 per share from the earlier guidance of $10.50 - $11.50 per share.
Based on results through the first six months, American Financial continues to expect overall calendar year combined ratio in the range of 85% to 87%.
American Financial expects net written premiums to be 9% to 13% higher than $5.6 billion reported in 2021, an increase from the earlier guidance of growth in the range of 8% to 12%.
American Financial expects the market to remain firm throughout 2022, allowing the insurer to act on business opportunities and achieve adequate renewal rate increases.
Of the insurance industry players that have reported second-quarter results so far, The Hartford Financial Services Group, Inc. (HIG - Free Report) , NMI Holdings (NMIH - Free Report) and Chubb Limited (CB - Free Report) beat the respective Zacks Consensus Estimate for earnings.
The Hartford Financial Services Group reported second-quarter 2022 adjusted operating earnings of $2.15 per share, which beat the Zacks Consensus Estimate by 41.5%. The bottom line, however, decreased 8% year over year.
Hartford Financial’s operating revenues amounted to $3,765 million, which improved from $3,568 million in the second quarter of 2022. Also, the top line beat the consensus mark by 1.5%. The total earned premium of $4,810 million beat the consensus mark of $4,776.3 million and increased from $4,460 million a year ago. Net investment income of $541 million declined from $581 million a year ago due to lower annualized return on alternative investments. The reported figure was below the Zacks Consensus Estimate of $564.5 million.
NMI Holdings reported second-quarter 2022 operating net income per share of 86 cents, which beat the Zacks Consensus Estimate by 11.7%. The bottom line increased 28.4% year over year.
NMI Holdings’ total operating revenues of $132.2 million increased 9.5% year over year on higher net premiums earned (up 9%) and net investment income (up 16.4%). Revenues beat the Zacks Consensus Estimate by 1.3%. Primary insurance-in-force increased 23% to $168.6 billion. Annual persistency was 71.5%, up 1760 basis points year over year. New insurance written was $16.6 billion, down 27% year over year, reflecting a decline in refinancing origination volume year on year.
Chubb reported second-quarter 2022 core operating income of $2.40 per share, which outpaced the Zacks Consensus Estimate by about 17%. The bottom line also improved 16% from the year-ago quarter. Net premiums written improved 7.9% year over year to $10.3 billion in the quarter. Net premiums earned rose 8.4% to $9.6 billion. Adjusted net investment income was a record $950 million, up 0.5%.
Property and casualty underwriting income was a record $1.4 billion, up 21.1% from the year-ago quarter. Chubb incurred an after-tax catastrophe loss of $241 million, 6.6% wider year over year. The combined ratio improved 150 bps on a year-over-year basis to a record 84% in the quarter under review.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
American Financial (AFG) Q2 Earnings Beat, Revenues Miss
American Financial Group, Inc. (AFG - Free Report) reported second-quarter 2022 net operating earnings per share of $2.85, which surpassed the Zacks Consensus Estimate by 27.2%. The bottom line improved 19% year over year.
American Financial’s results reflect higher P&C insurance net earned premiums, net investment income and other income, offset by higher expenses.
American Financial Group, Inc. Price, Consensus and EPS Surprise
American Financial Group, Inc. price-consensus-eps-surprise-chart | American Financial Group, Inc. Quote
Behind the Headlines
Total revenues of $1.6 billion increased 11.1% year over year in the quarter. The growth came on the back of higher P&C insurance net earned premiums, net investment income and other income. The top line missed the Zacks Consensus Estimate by 3.9%.
Net investment income climbed 2.4% year over year to $168 million in the quarter under review, driven by strong earnings from alternative investments, with an annualized return of approximately 12.4%. The figure was lower than our estimate of $237.8 million and missed the Zacks Consensus Estimate of 174.26 million.
Total cost and expenses increased 7.2% year over year to $1.3 billion due to higher P&C insurance losses & expenses and expenses of managed investment entities. The figure was lower than our estimate of $1.6 billion.
Segmental Update
The Specialty P&C Insurance segment generated $1.5 billion in net written premiums, which rose 11% year over year. The growth was reported within each of the Specialty P&C groups owing to a combination of new business opportunities, increased exposure and a good renewal rate environment. Average renewal pricing across P&C Group, excluding workers’ compensation, increased nearly 6% in the quarter.
Net written premiums in Property & Transportation Group grew 12% year over year to $632 million in the quarter. The figure was lower than our estimate of $708.3 million.
Net written premiums at Specialty Casualty Group increased 9% year over year to $646 million. The figure was higher than our estimate of $616.1 million.
Further, net written premiums at Specialty Financial increased 11% year over year to $177 million. The figure was higher than our estimate of $169.4 million.
Net written premiums at Other divisions improved 13% year over year to $61 million. The figure was lower than our estimate of $72 million.
Specialty P&C Insurance segment’s underwriting profit increased 29% year over year to $197 million in the quarter. The increase was primarily driven by higher year-over-year underwriting profit in Specialty Casualty and Specialty Financial Groups, partially offset by lower underwriting profit in Property and Transportation Group.
The combined ratio improved 210 basis points (bps) year over year to 85.8% at the segment.
Discontinued Annuity Operations
In May 2021, AFG completed the sale of its Annuity business to Mass Mutual for cash proceeds of $3.57 billion. AFG recognized an after-tax non-core gain on the sale of $656 million in the first half of 2021. The sale continues to be subject to tax-related post-closing adjustments, which are not expected to be material and are expected to be settled in 2022.
Financial Update
American Financial exited the second quarter with total cash and investments of $14.3 billion, which declined 9.4% from the 2021-end level. The figure was lower than our estimate of $17.3 billion.
As of Jun 30, 2022, long-term debt totaled $1.5 billion, which decreased 21.5% from the level at 2021 end.
As of Jun 30, 2022, the company’s book value per share (excluding unrealized gains/losses on fixed maturities) was $51.68, down 9.9% from the 2021-end level.
Annualized return on equity (ROE) came in at 14.3% for the second quarter, contracting 5770 basis points year over year.
Prudent Capital Deployment
American Financial paid cash dividends of $8.56 per share during the second quarter, which included an $8 per share special dividend.
2022 Guidance Revised
American Financial increased core net operating earnings guidance to $10.75-$11.75 per share from the earlier guidance of $10.50 - $11.50 per share.
Based on results through the first six months, American Financial continues to expect overall calendar year combined ratio in the range of 85% to 87%.
American Financial expects net written premiums to be 9% to 13% higher than $5.6 billion reported in 2021, an increase from the earlier guidance of growth in the range of 8% to 12%.
American Financial expects the market to remain firm throughout 2022, allowing the insurer to act on business opportunities and achieve adequate renewal rate increases.
Zacks Rank
American Financial currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Some Other Insurers
Of the insurance industry players that have reported second-quarter results so far, The Hartford Financial Services Group, Inc. (HIG - Free Report) , NMI Holdings (NMIH - Free Report) and Chubb Limited (CB - Free Report) beat the respective Zacks Consensus Estimate for earnings.
The Hartford Financial Services Group reported second-quarter 2022 adjusted operating earnings of $2.15 per share, which beat the Zacks Consensus Estimate by 41.5%. The bottom line, however, decreased 8% year over year.
Hartford Financial’s operating revenues amounted to $3,765 million, which improved from $3,568 million in the second quarter of 2022. Also, the top line beat the consensus mark by 1.5%. The total earned premium of $4,810 million beat the consensus mark of $4,776.3 million and increased from $4,460 million a year ago. Net investment income of $541 million declined from $581 million a year ago due to lower annualized return on alternative investments. The reported figure was below the Zacks Consensus Estimate of $564.5 million.
NMI Holdings reported second-quarter 2022 operating net income per share of 86 cents, which beat the Zacks Consensus Estimate by 11.7%. The bottom line increased 28.4% year over year.
NMI Holdings’ total operating revenues of $132.2 million increased 9.5% year over year on higher net premiums earned (up 9%) and net investment income (up 16.4%). Revenues beat the Zacks Consensus Estimate by 1.3%. Primary insurance-in-force increased 23% to $168.6 billion. Annual persistency was 71.5%, up 1760 basis points year over year. New insurance written was $16.6 billion, down 27% year over year, reflecting a decline in refinancing origination volume year on year.
Chubb reported second-quarter 2022 core operating income of $2.40 per share, which outpaced the Zacks Consensus Estimate by about 17%. The bottom line also improved 16% from the year-ago quarter. Net premiums written improved 7.9% year over year to $10.3 billion in the quarter. Net premiums earned rose 8.4% to $9.6 billion. Adjusted net investment income was a record $950 million, up 0.5%.
Property and casualty underwriting income was a record $1.4 billion, up 21.1% from the year-ago quarter. Chubb incurred an after-tax catastrophe loss of $241 million, 6.6% wider year over year. The combined ratio improved 150 bps on a year-over-year basis to a record 84% in the quarter under review.