American Financial Group, Inc. ( AFG Quick Quote AFG - Free Report) has been favored by investors on the back of growth in the surplus lines and excess liability businesses, rate increases and higher retentions and effective capital deployment. Growth Projections
The Zacks Consensus Estimate for American Financial’s 2023 earnings is pegged at $11.70, indicating a 0.6% increase from the year-ago reported figure on 1.8% higher revenues of $7.19 billion.
The consensus estimate for 2024 earnings is pegged at $11.96, indicating a 2.2% increase from the year-ago reported figure on 9.1% higher revenues of $7.85 billion. Earnings Surprise History
American Financial has a solid record of beating earnings estimates in each of the last six quarters.
Zacks Rank & Price Performance
American Financial currently carries a Zacks Rank #3 (Hold). In the past year, the stock has lost 17.1% compared with the
industry’s decline of 8.8%. Image Source: Zacks Investment Research Return on Equity (ROE)
American Financial’s ROE for the trailing 12 months is 23.5%, better than the industry average of 6.7%. This reflects its efficiency in utilizing its shareholders’ funds.
Banking on solid performances across Property and Transportation, Specialty Casualty and Specialty Financial lines of business, the Property and Casualty Insurance business of American Financial should continue to gain.
The Property and Casualty Insurance segment of American Financial should benefit from business opportunities, growth in the surplus lines and excess liability businesses, rate increases and higher retentions in renewal business, which boost premium growth. The property and casualty insurer is actively involved in start-ups, small-to-medium-sized acquisitions and product launches. AFG expects artificial intelligence and machine learning to continue enhancing its insurance operations. American Financial’s combined ratio has been better than the industry average for more than two decades. Combined ratio measures the underwriting profitability of an insurer. Underwriting profit of the insurer is likely to increase on higher profit in the workers’ compensation, excess and surplus, executive liability, mergers and acquisitions liability businesses and higher underwriting profit in the trade credit and financial institutions businesses. In 2022, American Financial repurchased shares for $11.3 million. In February 2023, AFG declared a special cash dividend of $4 per share. The company expects to generate significant excess capital in 2023 where it could deploy in excess of $500 million of excess capital for share repurchases or additional special dividends through the end of 2023. Improved Guidance
Net written premiums for 2023 are expected to be 3% to 5% higher than the $6.2 billion reported in 2022. Excluding crop, the company expects growth in the range of 4% to 6%.
American Financial expects core net operating earnings in 2023 to be in the range of $11 to $12 per share, which produces a core return on equity of more than 20% at the midpoint. American Financial expects a combined ratio for the Specialty Property and Casualty Group overall between 86% and 88% in 2023. AFG forecast core net operating earnings guidance established in the range of $11-$12 per share, which would produce a core return on equity of more than 20% at the midpoint. The outlook assumes a return of approximately 7% on alternative investments compared with 13.2% earned on these investments in 2022 and an average crop year. American Financial expects an overall calendar year combined ratio in the range of 86% to 88% and net written premiums to be up 3% to 5% when compared with the $6.2 billion reported in 2022. Stocks to Consider
Some better-ranked stocks from the insurance industry are
CNA Financial Corporation ( CNA Quick Quote CNA - Free Report) , Everest Re Group, Ltd. and Kinsale Capital Group, Inc. ( KNSL Quick Quote KNSL - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see . the complete list of today’s Zacks #1 Rank stocks here CNA Financial beat estimates in two of the last four quarters and missed in the other two, the average being 9.91%. The Zacks Consensus Estimate for 2023 and 2024 has moved 3.9% and 14.3% north, respectively, in the past 60 days. The Zacks Consensus Estimate for CNA Financial’ 2023 and 2024 earnings per share is pegged at $4.24 and $4.39, indicating a year-over-year increase of 10.4% and 3.5%, respectively. In the past year, CNA has lost 18.9%. Everest Re beat estimates in each of the last four quarters, the average being 18.41%. The Zacks Consensus Estimate for RE’s 2023 and 2024 earnings per share is pegged at $45.63 and $53.02, indicating a year-over-year increase of 68.5% and 16.1%, respectively. In the past year, RE has gained 22.4%. Kinsale Capital has a solid track record of beating earnings estimates in each of the last four quarters, the average being 13.83%. In the past year, KNSL has gained 28.3%. The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings per share is pegged at $9.92 and $11.94, indicating a year-over-year increase of 27.1% and 20.4%, respectively.