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Why You Should Add American Financial (AFG) to Your Portfolio
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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 worth adding to one’s portfolio.
AFG has a solid earnings surprise history, having surpassed estimates in eight quarters.
Return on Equity (ROE)
The trailing 12 months ROE, a measure of how efficiently a company utilizes its shareholders' fund, is 21%, better than the industry average of 5.7%.
Northbound Estimate Revision
The Zacks Consensus Estimate for 2022 and 2023 earnings has moved about 1.3% and 0.9% north each in the past 60 days, reflecting analyst optimism.
Zacks Rank & Price Performance
AFG currently carries a Zacks Rank #2 (Buy). Year to date, the stock has lost 7.5%, narrower than the industry’s decline of 8.3%.
Image Source: Zacks Investment Research
Optimistic Growth Projections
The Zacks Consensus Estimate for 2023 earnings stands at $11.94, implying an increase of 3% from the year-ago reported figure.
Improved 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
New business opportunities, growth in the surplus lines and excess liability businesses, rate increases and higher retentions in renewal business will continue to drive premiums higher.
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. Consistent price increases in the property and casualty business of American Financial should favor results.
The insurer, thus, is poised to grow on sustained solid operational performance across its Property and Transportation, Specialty Casualty, and Specialty Financial lines of business.
Impressive Dividend History
Banking on operational excellence, this insurer has an impressive dividend history. It increased 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 intends to deploy at least $400 million to $500 million of excess capital available in share repurchases and additional special dividends in 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.
The Zacks Consensus Estimate for Axis Capital’s 2022 and 2023 earnings implies 25.2% and 9.9% year-over-year growth, respectively. The expected long-term earnings growth is pegged at 5%.
The Zacks Consensus Estimate for AXS’s 2022 and 2023 earnings has moved 0.3% and 4.6% north, respectively, in the past 60 days. Year to date, shares of AXS have lost 8.9%.
The Zacks Consensus Estimate for Berkshire Hathaway’s 2022 and 2023 earnings implies 16.7% and 4.2% year-over-year growth, respectively. The expected long-term earnings growth is pegged at 7%.
The Zacks Consensus Estimate for BRK.B’s 2022 and 2023 earnings has moved 3.3% and 8.2% north, respectively, in the past 60 days. Year to date, shares of BRK.B have lost 10%.
ProAssurance’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 150.98%.
The Zacks Consensus Estimate for PRA’s 2022 and 2023 earnings has moved 26% and 13.9% north in the past 60 days. Year to date, shares of PRA have lost 24.1%.
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Why You Should Add American Financial (AFG) to Your Portfolio
American Financial Group Inc.’s (AFG - Free Report) improved pricing, higher renewal ratio, solid capital position and effective capital deployment make it worth adding to one’s portfolio.
AFG has a solid earnings surprise history, having surpassed estimates in eight quarters.
Return on Equity (ROE)
The trailing 12 months ROE, a measure of how efficiently a company utilizes its shareholders' fund, is 21%, better than the industry average of 5.7%.
Northbound Estimate Revision
The Zacks Consensus Estimate for 2022 and 2023 earnings has moved about 1.3% and 0.9% north each in the past 60 days, reflecting analyst optimism.
Zacks Rank & Price Performance
AFG currently carries a Zacks Rank #2 (Buy). Year to date, the stock has lost 7.5%, narrower than the industry’s decline of 8.3%.
Image Source: Zacks Investment Research
Optimistic Growth Projections
The Zacks Consensus Estimate for 2023 earnings stands at $11.94, implying an increase of 3% from the year-ago reported figure.
Improved 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
New business opportunities, growth in the surplus lines and excess liability businesses, rate increases and higher retentions in renewal business will continue to drive premiums higher.
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. Consistent price increases in the property and casualty business of American Financial should favor results.
The insurer, thus, is poised to grow on sustained solid operational performance across its Property and Transportation, Specialty Casualty, and Specialty Financial lines of business.
Impressive Dividend History
Banking on operational excellence, this insurer has an impressive dividend history. It increased 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 intends to deploy at least $400 million to $500 million of excess capital available in share repurchases and additional special dividends in 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 Axis Capital Holding Limited (AXS - Free Report) , Berkshire Hathaway Inc. (BRK.B - Free Report) and ProAssurance Corporation (PRA - Free Report) , each sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Ranked stocks here.
The Zacks Consensus Estimate for Axis Capital’s 2022 and 2023 earnings implies 25.2% and 9.9% year-over-year growth, respectively. The expected long-term earnings growth is pegged at 5%.
The Zacks Consensus Estimate for AXS’s 2022 and 2023 earnings has moved 0.3% and 4.6% north, respectively, in the past 60 days. Year to date, shares of AXS have lost 8.9%.
The Zacks Consensus Estimate for Berkshire Hathaway’s 2022 and 2023 earnings implies 16.7% and 4.2% year-over-year growth, respectively. The expected long-term earnings growth is pegged at 7%.
The Zacks Consensus Estimate for BRK.B’s 2022 and 2023 earnings has moved 3.3% and 8.2% north, respectively, in the past 60 days. Year to date, shares of BRK.B have lost 10%.
ProAssurance’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 150.98%.
The Zacks Consensus Estimate for PRA’s 2022 and 2023 earnings has moved 26% and 13.9% north in the past 60 days. Year to date, shares of PRA have lost 24.1%.