American Financial Group, Inc. ( AFG Quick Quote AFG - Free Report) reported first-quarter 2023 net operating earnings per share of $2.89, which surpassed the Zacks Consensus Estimate by 0.3% as well as our estimate of $2.72. The bottom line decreased 18.8% year over year. American Financial’s results benefited from higher Property and Casualty (P&C) insurance net earned premiums and other income, offset by improved expenses and lower net investment income. Behind the Headlines
Total revenues of $1.7 billion increased 11.3% year over year in the quarter.
The growth came on the back of higher P&C insurance net earned premiums and other income. The top line beat the Zacks Consensus Estimate by 4.5% and matched our estimate of $1.7 billion. P&C insurance net earned premiums of $1.4 billion climbed 10.4% year over year. Net investment income decreased 5.6% year over year to $217 million in the quarter under review. The figure was higher than our estimate of $169.3 million. Total cost and expenses increased 20.3% year over year to $1.4 billion due to higher P&C insurance losses and expenses, cost of managed investment entities and other expenses. The figure matched our estimate of $1.4 billion. Segmental Update
The Specialty P&C Insurance segment generated $1.5 billion in net written premiums, which rose 11% year over year, attributable to strong performance across the Property & Transportation, Specialty Casualty, Specialty Financial and Other divisions. A combination of new business opportunities, increased exposures and a good renewal rate environment in the entire P&C group added to the growth.
While net written premiums in Property & Transportation Group grew 10% year over year to $522 million in the quarter, the same at Specialty Casualty Group increased 11% year over year at $722 million. Further, net written premiums at Specialty Financial increased 16% year over year and Other divisions improved 5% year over year. Pre-tax core operating earnings of P&C Insurance segment of $350 million in the first quarter decreased 17.1% year over year. The segment’s underwriting profit decreased 25.4% year over year to $155 million in the quarter. The decrease was due to each of the Specialty P&C Groups producing lower year-over-year underwriting profit following the record first-quarter results reported in the 2022 period. The combined ratio deteriorated 520 basis points (bps) year over year to 89.2% at the segment due to a deterioration of 520 bps in Property & Transportation Group and 690 bps in Specialty Casualty and 450 bps in Specialty Financial. Catastrophe losses were $31 million, wider than the year-ago loss of $9 million. Financial Update
American Financial exited the first quarter with cash and investments of $14.4 billion, which declined 0.4% from the 2022-end level.
As of Mar 31, 2023, long-term debt totaled $1.4 billion, which decreased 1.2% from the level at 2022 end. As of Mar 31, 2023, the company’s book value per share (excluding unrealized gains/losses on fixed maturities) was $51.37, down 4.4% from the 2022-end level. Annualized return on equity came in at 18.9% for the first quarter, contracting 460 basis points year over year. Prudent Capital Deployment
AFG declared cash dividends of $4.63 per share in the first quarter which include a $4 per share special dividend paid in February. In addition, American Financial bought back shares worth $24 million in the reported quarter.
2023 Guidance Revised
American Financial’s core net operating earnings guidance has remained unchanged at $11-$12 per share.
American Financial expects an overall calendar year combined ratio in the range of 87% to 89%, indicating an increase of one point at the midpoint of previous combined ratio guidance. American Financial expects net written premiums growth in the range of 3% to 6%, suggesting an increase at the top end of the previous range of 3% to 5%, when compared to $6.2 billion reported in 2022. Zacks Rank
American Financial currently carries a Zacks Rank #3 (Hold). You can see
t he complete list of today’s Zacks #1 Rank (Strong Buy) stocks here . Performance of Some Other P&C Insurers ( Chubb Limited CB Quick Quote CB - Free Report) reported first-quarter 2023 core operating income of $4.41 per share, which outpaced the Zacks Consensus Estimate by 0.9%. This outperformance was driven by higher premium revenues and improved net investment income. The bottom line improved 15.1% from the year-ago quarter. Net premiums written improved 16.6% year over year to $10.7 billion in the quarter. The figure was higher than our estimate of $10.1 billion. Net premiums earned rose 16.1% to $10.1 billion. The figure was higher than our estimate of $9.4 billion. Net investment income was $1.11 billion, up 34.7%. The figure was higher than our estimate of $957.3 million. P&C underwriting income was $1.21 billion, down 5.5% from the year-ago quarter. Global P&C underwriting income, excluding Agriculture, was $1.2 billion, down 1.6%. Chubb incurred an after-tax catastrophe loss of $382 million, wider than the year-ago catastrophe loss of $290 million. The combined ratio deteriorated 200 bps on a year-over-year basis to 86.3% in the quarter under review. AXIS Capital Holdings Limited ( AXS Quick Quote AXS - Free Report) posted first-quarter 2023 operating income of $2.33 per share, beating the Zacks Consensus Estimate by 23.2%. The bottom line increased 11.5% year over year. Total operating revenues of $1.3 billion missed the Zacks Consensus Estimate by 6.7%. The top line, however, rose 0.6% year over year on higher net investment income. Net investment income increased 47.2% year over year to $134 million, primarily attributable to an increase in income from fixed maturities due to improved yields. Total expenses in the quarter under review increased 1.9% year over year to $1.14 billion, attributable to higher interest expense and financing costs. Pre-tax catastrophe and weather-related losses and net of reinsurance were $38 million, primarily attributable to New Zealand floods, Cyclone Gabrielle and other weather-related events. This compares favorably with the year-ago loss of $60 million. AXIS Capital’s underwriting income of $139.4 million increased 0.4% year over year. The combined ratio improved 50 bps to 90.9. First American Financial Corporation ( FAF Quick Quote FAF - Free Report) reported first-quarter 2023 operating income per share of 49 cents, which beat the Zacks Consensus Estimate by a cent. The bottom line decreased 58.1% year over year. Operating revenues of $1.4 billion decreased 29% year over year. The top line beat the Zacks Consensus Estimate by 1.5%. The figure was in line with our estimate. Investment income was $125 million in the first quarter, more than double year over year. The increase was primarily due to rising interest rates, which drove higher interest income from the cash and investment portfolio, escrow balances and tax-deferred property exchange balances. The impact of higher interest rates was partly offset by lower average balances, primarily in the company’s escrow and tax-deferred exchange balances. The figure was lower than our estimate of $144 million.