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Why You Should Add American Financial (AFG) to Your Kitty
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American Financial Group Inc.’s (AFG - Free Report) improved pricing, higher renewal ratio, solid capital position and effective capital deployment make it a stock worth adding to one’s portfolio.
AFG has a solid earnings surprise history, having surpassed estimates in the eight seven quarters. The trailing 12 months ROE is 21%, better than the industry average of 5.7%, reflecting efficiency in utilizing shareholders’ funds.
Northbound Estimate Revision
The Zacks Consensus Estimate for 2022 and 2023 earnings has moved about 1% north each in the past 30 days, reflecting analyst optimism.
Zacks Rank & Price Performance
AFG currently carries a Zacks Rank #1 (Strong Buy). Year to date, the stock has lost 6% compared with the industry’s decline of 4.6%.
Image Source: Zacks Investment Research
Growth Projections
The Zacks Consensus Estimate for 2023 earnings stands at $11.94, implying an increase of 3.3% from the year-ago reported figure.
Upbeat Guidance
Net written premiums for 2022 are expected to grow 9% to 13% in Specialty Property and Casualty operations. Of this, net written premiums at Property & Transportation are estimated to grow in the range of 13% to 17% and 6% to 10% at Specialty Casualty. Excluding workers' compensation, American Financial expects 2022 premiums in this group to grow in the range of 9% to 13%. At Specialty Financial, the net written premium is expected to grow between 4% and 8%.
For 2022, AFG expects the combined ratio for the Specialty Property & Casualty Group to be between 85% and 87% and 88% and 91% for Property and Transportation Group. For Specialty Casualty, American Financial expects the combined ratio in the range of 79% to 83%. For Specialty Financial Group, the combined ratio is expected to be in the range of 81% to 85%.
AFG estimates earnings of $10.75 to $11.75 per share in 2022.
Growth Drivers
Sustained solid performances across Property and Transportation, Specialty Casualty, and Specialty Financial lines of business should continue to drive American Financial.
Premiums should benefit from new business opportunities, growth in the surplus lines and excess liability businesses, rate increases and higher retentions in renewal business.
American Financial is actively involved in start-ups, small-to-medium-sized acquisitions, and product launches. It also focuses on small and underserved risk areas. AFG forayed into the medical stop-loss business with the buyout of Verikai. AFG expects artificial intelligence and machine learning to continue to enhance its insurance operations.
Impressive Dividend History
The property and casualty insurer has a solid record of increasing dividends for 14 straight years and has paid out 18 special dividends in 10 years. Its dividend yield of 1.5% surpassed the industry average of 0.3%.
AFG expects to have at least $400 million to $500 million of excess capital available for share repurchases and additional special dividends through the end of 2022.
Value Score
The stock carries an impressive Value Score of A. Value Score helps find stocks that are undervalued. Back-tested results have shown that stocks with a favorable Value Score, when combined with a solid Zacks Rank, are the best investment bets.
Other Stocks to Consider
Some other top-ranked stocks from the insurance industry are James River Group Holdings, Ltd. (JRVR - Free Report) , Radian Group Inc. (RDN - Free Report) and Old Republic International Corporation (ORI - Free Report) . While James River Group and Radian Group sport a Zacks Rank #1, Old Republic International carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for James River Group’s 2022 and 2023 earnings implies 137% and 15.3% year-over-year growth, respectively.
The Zacks Consensus Estimate for JRVR’s 2022 and 2023 earnings has moved 2.6% and 4.6% north, respectively, in the past 60 days. Year to date, the insurer has declined 16.7%.
Radian Group’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 29.51%.
The Zacks Consensus Estimate for RDN’s 2022 and 2023 earnings has moved 16.1% and 9.7% north, respectively, in the past 30 days. Year to date, the insurer has declined 3.2%.
Old Republic International’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 15.1%.
The Zacks Consensus Estimate for ORI’s 2022 earnings has moved 4.2% north in the past 60 days. Year to date, the insurer has declined 10.3%.
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Why You Should Add American Financial (AFG) to Your Kitty
American Financial Group Inc.’s (AFG - Free Report) improved pricing, higher renewal ratio, solid capital position and effective capital deployment make it a stock worth adding to one’s portfolio.
AFG has a solid earnings surprise history, having surpassed estimates in the eight seven quarters. The trailing 12 months ROE is 21%, better than the industry average of 5.7%, reflecting efficiency in utilizing shareholders’ funds.
Northbound Estimate Revision
The Zacks Consensus Estimate for 2022 and 2023 earnings has moved about 1% north each in the past 30 days, reflecting analyst optimism.
Zacks Rank & Price Performance
AFG currently carries a Zacks Rank #1 (Strong Buy). Year to date, the stock has lost 6% compared with the industry’s decline of 4.6%.
Image Source: Zacks Investment Research
Growth Projections
The Zacks Consensus Estimate for 2023 earnings stands at $11.94, implying an increase of 3.3% from the year-ago reported figure.
Upbeat Guidance
Net written premiums for 2022 are expected to grow 9% to 13% in Specialty Property and Casualty operations. Of this, net written premiums at Property & Transportation are estimated to grow in the range of 13% to 17% and 6% to 10% at Specialty Casualty. Excluding workers' compensation, American Financial expects 2022 premiums in this group to grow in the range of 9% to 13%. At Specialty Financial, the net written premium is expected to grow between 4% and 8%.
For 2022, AFG expects the combined ratio for the Specialty Property & Casualty Group to be between 85% and 87% and 88% and 91% for Property and Transportation Group. For Specialty Casualty, American Financial expects the combined ratio in the range of 79% to 83%. For Specialty Financial Group, the combined ratio is expected to be in the range of 81% to 85%.
AFG estimates earnings of $10.75 to $11.75 per share in 2022.
Growth Drivers
Sustained solid performances across Property and Transportation, Specialty Casualty, and Specialty Financial lines of business should continue to drive American Financial.
Premiums should benefit from new business opportunities, growth in the surplus lines and excess liability businesses, rate increases and higher retentions in renewal business.
American Financial is actively involved in start-ups, small-to-medium-sized acquisitions, and product launches. It also focuses on small and underserved risk areas. AFG forayed into the medical stop-loss business with the buyout of Verikai. AFG expects artificial intelligence and machine learning to continue to enhance its insurance operations.
Impressive Dividend History
The property and casualty insurer has a solid record of increasing dividends for 14 straight years and has paid out 18 special dividends in 10 years. Its dividend yield of 1.5% surpassed the industry average of 0.3%.
AFG expects to have at least $400 million to $500 million of excess capital available for share repurchases and additional special dividends through the end of 2022.
Value Score
The stock carries an impressive Value Score of A. Value Score helps find stocks that are undervalued. Back-tested results have shown that stocks with a favorable Value Score, when combined with a solid Zacks Rank, are the best investment bets.
Other Stocks to Consider
Some other top-ranked stocks from the insurance industry are James River Group Holdings, Ltd. (JRVR - Free Report) , Radian Group Inc. (RDN - Free Report) and Old Republic International Corporation (ORI - Free Report) . While James River Group and Radian Group sport a Zacks Rank #1, Old Republic International carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for James River Group’s 2022 and 2023 earnings implies 137% and 15.3% year-over-year growth, respectively.
The Zacks Consensus Estimate for JRVR’s 2022 and 2023 earnings has moved 2.6% and 4.6% north, respectively, in the past 60 days. Year to date, the insurer has declined 16.7%.
Radian Group’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 29.51%.
The Zacks Consensus Estimate for RDN’s 2022 and 2023 earnings has moved 16.1% and 9.7% north, respectively, in the past 30 days. Year to date, the insurer has declined 3.2%.
Old Republic International’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 15.1%.
The Zacks Consensus Estimate for ORI’s 2022 earnings has moved 4.2% north in the past 60 days. Year to date, the insurer has declined 10.3%.