American Financial Group, Inc. Announces Second Quarter and Six Month Results
-
Second quarter core net operating earnings
$0.91 per share; Net earnings$1.01 per share -
Adjusted book value per share
$40.74 , up 5% from year end - Repurchased 2.5 million shares during the quarter
-
2012 core earnings guidance lowered to
$3.00 - $3.40 per share as a result of the Midwest drought -
Increase in annual dividend from
$0.70 to $0.78 , effectiveOctober 1, 2012
Core net operating earnings were
Effective
During the second quarter of 2012, AFG repurchased approximately 2.5
million shares of common stock at an average price per share of
AFG has scheduled its customary in-depth internal review of its asbestos and environmental liabilities to be completed in the third quarter of 2012 (instead of the second quarter) in order to conform to the practice of most of its peers.
AFG’s net earnings attributable to shareholders, determined in accordance with generally accepted accounting principles (“GAAP”), include certain items that may not be indicative of its ongoing core operations. The following table identifies such items and reconciles net earnings attributable to shareholders to core net operating earnings, a non-GAAP financial measure that AFG believes is a useful tool for investors and analysts in analyzing ongoing operating trends.
In millions, except per share amounts |
Three months ended |
Six months ended |
||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||
Components of net earnings attributable to shareholders: | ||||||||||||||
Core net operating earnings(a) |
$ | 90 | $ | 74 | $ | 175 | $ | 165 | ||||||
Realized gains |
9 | 12 | 37 | 9 | ||||||||||
Special A&E charge(b) |
- | (38 | ) | - | (38 | ) | ||||||||
Net earnings attributable to shareholders |
$ | 99 | $ | 48 | $ | 212 | $ | 136 | ||||||
Components of Earnings Per Share: | ||||||||||||||
Core net operating earnings | $ | 0.91 | $ | 0.72 | $ | 1.77 | $ | 1.57 | ||||||
Realized gains |
.10 | .11 | .38 | .09 | ||||||||||
Special A&E charge(b) |
- | (.37 | ) | - | (.37 | ) | ||||||||
Diluted Earnings Per Share |
$ | 1.01 | $ | 0.46 | $ | 2.15 | $ | 1.29 | ||||||
Footnotes (a) and (b) are contained in the accompanying Notes To Financial Schedules at the end of this release.
“We remain committed to deploying excess capital in an effective manner.
AFG’s share repurchases during the first half of 2012 were made at
approximately 94% of the Company’s
“Based on the Company’s operating performance and its strong
capital and liquidity position, AFG’s Board of Directors has approved an
increase in the annual dividend from
“Excessive dryness in the Midwest has resulted in a challenging year for
many of America’s farmers. Our thoughts and prayers are with the farming
community as they care for their crops through the duration of the
growing season. Drought conditions will adversely impact 2012 crop
insurance profitability. Although the precise impact on AFG’s core
operating earnings is uncertain, we have reduced our 2012 earnings
guidance by approximately
The Company was informally advised earlier this month that the
The P&C specialty insurance operations generated an underwriting profit
of
Gross written premiums were up 8% and 9%, for the second quarter and
first half of 2012, respectively, compared to the same periods in 2011.
This growth was driven by higher premiums in our
The
The Specialty Casualty Group reported an underwriting
profit of
The
Annuity and Supplemental Insurance Results
For the first half of 2012, the
Statutory premiums of
As previously announced, we reached a definitive agreement to sell our
Given our recent unsuccessful efforts to sell the Company’s run-off
long-term care business and the difficulty in predicting future claims
for this relatively immature block, we have initiated an external
actuarial study of this business. This study will supplement our regular
internal analysis of our experience and is expected to be completed no
later than the fourth quarter of this year. Furthermore, even though AFG
has, to date, been able to maintain excellent annuity spreads and
adequate yields in its long-term care business, a further continuation
of the low interest rate environment is likely to lead to loss
recognition in the long-term care business and “unlocking” of the
Company’s interest rate assumptions for annuities as well. These charges
would be excluded from core earnings, if material. As disclosed in AFG’s
Investments
AFG recorded second quarter 2012 net realized gains of
During the first half of 2012, P&C investment income was approximately 6% lower than the comparable 2011 period, in line with our expectations.
More information about the components of our investment portfolio may be found in our Financial and Investment Supplements, which are posted on our website.
About
Forward Looking Statements
This press release contains certain statements that may be deemed to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements in this press release not dealing with historical results are forward-looking and are based on estimates, assumptions and projections. Examples of such forward-looking statements include statements relating to: the Company's expectations concerning market and other conditions and their effect on future premiums, revenues, earnings and investment activities; recoverability of asset values; expected losses and the adequacy of reserves for asbestos, environmental pollution and mass tort claims; rate changes; and improved loss experience.
Actual results and/or financial condition could differ materially from
those contained in or implied by such forward-looking statements for a
variety of factors including but not limited to: changes in financial,
political and economic conditions, including changes in interest and
inflation rates, currency fluctuations and extended economic recessions
or expansions in the U.S. or abroad; performance of securities markets;
AFG’s ability to estimate accurately the likelihood, magnitude and
timing of any losses in connection with investments in the non-agency
residential mortgage market; new legislation or declines in credit
quality or credit ratings that could have a material impact on the
valuation of securities in AFG’s investment portfolio, the availability
of capital; regulatory actions (including changes in statutory
accounting rules); changes in legal environment affecting AFG or its
customers; tax law and accounting changes; levels of natural
catastrophes and severe weather, terrorist activities (including any
nuclear, biological, chemical or radiological events), incidents of war
or losses resulting from civil unrest and other major losses;
development of insurance loss reserves and establishment of other
reserves, particularly with respect to amounts associated with asbestos
and environmental claims; changes in persistency of in-force policies;
availability of reinsurance and ability of reinsurers to pay their
obligations; the unpredictability of possible future litigation if
certain settlements of current litigation do not become effective;
trends in persistency, mortality and morbidity; competitive pressures,
including those in the annuity bank distribution channels and the
ability to obtain adequate rates and policy terms; changes in AFG's
credit ratings or the financial strength ratings assigned by major
ratings agencies to our operating subsidiaries; and other factors
identified in our filings with the
The forward-looking statements herein are made only as of the date of this press release. The Company assumes no obligation to publicly update any forward-looking statements.
Conference Call
The company will hold a conference call to discuss 2012 second quarter
results at
A replay will also be available two hours following the completion of
the call and will remain available until
The conference call will also be broadcast over the Internet. To listen
to the call via the Internet, go to AFG’s website, www.AFGinc.com,
and follow the instructions at the webcast link within the Investor
Relations section. An archived webcast will be available immediately
after the call via a link on the Investor Relations page until
(Financial summaries follow)
This earnings release and additional Financial and Investment Supplements are available in the Investor Relations section of AFG's web site: www.AFGinc.com.
AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES | ||||||||||||||||
SUMMARY OF EARNINGS AND SELECTED BALANCE SHEET DATA | ||||||||||||||||
(In Millions, Except Per Share Data) | ||||||||||||||||
Three months ended |
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|||||||||||||||
2012 |
2011
(adjusted) |
2012 |
2011
(adjusted) |
|||||||||||||
Revenues | ||||||||||||||||
P&C insurance premiums | $ | 640 | $ | 609 | $ | 1,243 | $ | 1,208 | ||||||||
Life, accident & health premiums | 105 | 107 | 210 | 217 | ||||||||||||
Investment income | 332 | 306 | 654 | 606 | ||||||||||||
Realized gains | 15 | 19 | 59 | 16 | ||||||||||||
Income (loss) of managed investment entities: |
||||||||||||||||
Investment income | 32 | 26 | 61 | 51 | ||||||||||||
Loss on change in fair value of assets/liabilities |
(21 | ) | (22 | ) | (50 | ) | (55 | ) | ||||||||
Other income | 47 | 48 | 86 | 89 | ||||||||||||
1,150 | 1,093 | 2,263 | 2,132 | |||||||||||||
Costs and expenses | ||||||||||||||||
P&C insurance losses & expenses | 595 | 630 | 1,150 | 1,174 | ||||||||||||
Annuity, life, accident & health benefits & expenses |
279 |
263 |
548 |
525 |
||||||||||||
Interest on borrowed money | 21 | 21 | 42 | 42 | ||||||||||||
Expenses of managed investment entities |
20 | 18 | 39 | 36 | ||||||||||||
Other operating and general expenses | 99 | 101 | 202 | 193 | ||||||||||||
1,014 | 1,033 | 1,981 | 1,970 | |||||||||||||
Operating earnings before income taxes |
136 |
60 |
282 |
162 |
||||||||||||
Provision for income taxes(c) |
52 | 30 | 110 | 78 | ||||||||||||
Net earnings including noncontrolling interests |
84 |
30 |
172 |
84 |
||||||||||||
Less: Net earnings (loss) attributable to noncontrolling interests |
(15 |
) |
(18 |
) |
(40 |
) |
(52 |
) |
||||||||
Net earnings attributable to shareholders |
$ |
99 |
$ |
48 |
$ |
212 |
$ |
136 |
||||||||
Diluted Earnings per Common Share | $ | 1.01 | $ | 0.46 | $ | 2.15 | $ | 1.29 | ||||||||
Average number of Diluted Shares | 98.0 | 104.4 | 98.7 | 105.3 | ||||||||||||
June 30, | December 31, | |||||
Selected Balance Sheet Data: | 2012 | 2011 | ||||
Total Cash and Investments | $ | 27,301 | $ | 25,577 | ||
Long-term Debt(d) | $ | 1,158 | $ | 934 | ||
Shareholders’ Equity(e) | $ | 4,622 | $ | 4,411 | ||
Shareholders’ Equity (Excluding appropriated retained earnings & unrealized gains/losses on fixed maturities)(e) |
$ |
3,869 |
$ |
3,779 |
||
Book Value Per Share: | ||||||
Excluding appropriated retained earnings | $ | 47.34 | $ | 43.32 | ||
Excluding appropriated retained earnings and unrealized gains/losses on fixed maturities |
$ | 40.74 | $ | 38.63 | ||
Common Shares Outstanding | 95.0 | 97.8 | ||||
Footnotes (c), (d) and (e) are contained in the accompanying Notes To Financial Schedules at the end of this release..
AMERICAN FINANCIAL GROUP, INC. | ||||||||||||||||||||||
P&C SPECIALTY GROUP UNDERWRITING RESULTS | ||||||||||||||||||||||
(Dollars in Millions) | ||||||||||||||||||||||
Three months
ended June 30, |
Pct. Change |
Six months
ended June 30, |
Pct. Change |
|||||||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
Gross written premiums | $ | 1,024 | $ | 949 | 8 | % | $ | 1,847 | $ | 1,702 | 9 | % | ||||||||||
Net written premiums | $ | 732 | $ | 669 | 9 | % | $ | 1,339 | $ | 1,253 | 7 | % | ||||||||||
Ratios (GAAP): | ||||||||||||||||||||||
Loss & LAE ratio | 56 | % | 60 | % | 56 | % | 58 | % | ||||||||||||||
Expense ratio | 36 | % | 35 | % | 36 | % | 35 | % | ||||||||||||||
Combined Ratio (Excluding A&E) | 92 | % | 95 | % | 92 | % | 93 | % | ||||||||||||||
Total Combined Ratio | 93 | % | 103 | % | 93 | % | 97 | % | ||||||||||||||
Supplemental:(f) |
||||||||||||||||||||||
Gross Written Premiums: | ||||||||||||||||||||||
Property & Transportation | $ | 531 | $ | 496 | 7 | % | $ | 859 | $ | 814 | 6 | % | ||||||||||
Specialty Casualty | 358 | 323 | 11 | % | 724 | 642 | 13 | % | ||||||||||||||
Specialty Financial | 134 | 129 | 4 | % | 263 | 245 | 7 | % | ||||||||||||||
Other | 1 | 1 | - | 1 | 1 | - | ||||||||||||||||
$ | 1,024 | $ | 949 | 8 | % | $ | 1,847 | $ | 1,702 | 9 | % | |||||||||||
Net Written Premiums: | ||||||||||||||||||||||
Property & Transportation | $ | 369 | $ | 346 | 7 | % | $ | 619 | $ | 600 | 3 | % | ||||||||||
Specialty Casualty | 244 | 211 | 16 | % | 491 | 425 | 16 | % | ||||||||||||||
Specialty Financial | 102 | 96 | 6 | % | 195 | 194 | 1 | % | ||||||||||||||
Other | 17 | 16 | 6 | % | 34 | 34 | - | |||||||||||||||
$ | 732 | $ | 669 | 9 | % | $ | 1,339 | $ | 1,253 | 7 | % | |||||||||||
Combined Ratio (GAAP): | ||||||||||||||||||||||
Property & Transportation | 98 | % | 101 | % | 94 | % | 94 | % | ||||||||||||||
Specialty Casualty | 86 | % | 92 | % | 92 | % | 96 | % | ||||||||||||||
Specialty Financial | 89 | % | 89 | % | 87 | % | 87 | % | ||||||||||||||
Aggregate Specialty Group | 92 | % | 95 | % | 92 | % | 93 | % | ||||||||||||||
|
Three months ended
June 30, |
Six months ended
June 30, |
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2012 | 2011 | 2012 | 2011 | |||||||||||||
Reserve Development Favorable/(Unfavorable): | ||||||||||||||||
Property & Transportation | $ | 2 | $ | 4 | $ | 12 | $ | 26 | ||||||||
Specialty Casualty | 27 | 27 | 28 | 27 | ||||||||||||
Specialty Financial | 4 | 4 | 11 | - | ||||||||||||
Other | 1 | 2 | 2 | 5 | ||||||||||||
Aggregate Specialty Group Excluding A&E | 34 | 37 | 53 | 58 | ||||||||||||
Special A&E Reserve Charge - P&C Run-off | - | (50 | ) | - | (50 | ) | ||||||||||
Other | (8 | ) | - | (8 | ) | - | ||||||||||
Total Reserve Development Including A&E | $ | 26 | $ | (13 | ) | $ | 45 | $ | 8 | |||||||
Points on Combined Ratio: | ||||||||||||||||
Property & Transportation | 1 | 1 | 2 | 5 | ||||||||||||
Specialty Casualty | 11 | 12 | 6 | 6 | ||||||||||||
Specialty Financial | 4 | 4 | 5 | - | ||||||||||||
Aggregate Specialty Group | 5 | 6 | 4 | 5 | ||||||||||||
Footnote (f) is contained in the accompanying Notes To Financial Schedules at the end of this release
AMERICAN FINANCIAL GROUP, INC. | |||||||||||||||||
ANNUITY & SUPPLEMENTAL INSURANCE GROUP | |||||||||||||||||
STATUTORY PREMIUMS | |||||||||||||||||
(Dollars in Millions) | |||||||||||||||||
Three months
ended June 30, |
Pct. Change |
Six months
ended June 30, |
Pct. Change |
||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||||
Retirement annuity premiums: | |||||||||||||||||
Indexed annuities | $ | 558 | $ | 482 | 16 | % | $ | 989 | $ | 763 | 30 | % | |||||
Bank annuities | 259 | 305 | (15 | %) | 534 | 576 | (7 | %) | |||||||||
Fixed annuities | 71 | 103 | (31 | %) | 153 | 204 | (25 | %) | |||||||||
Variable annuities | 17 | 16 | 6 | % | 32 | 35 | (9 | %) | |||||||||
905 | 906 | - | 1,708 | 1,578 | 8 | % | |||||||||||
Supplemental insurance | 95 | 96 | (1 | %) | 190 | 194 | (2 | %) | |||||||||
Life insurance | 10 | 9 | 11 | % | 18 | 18 | - | ||||||||||
Total statutory premiums | $ | 1,010 | $ | 1,011 | - | $ | 1,916 | $ | 1,790 | 7 | % | ||||||
Notes To Financial
Schedules
a) GAAP to Non GAAP Reconciliation - Components of core net operating earnings:
In millions |
Three months ended
June 30, |
Six months ended
June 30, |
||||||||||||||
2012 |
2011
(adjusted) |
2012 |
2011
(adjusted) |
|||||||||||||
P&C operating earnings | $ | 103 | $ | 98 | $ | 203 | $ | 221 | ||||||||
|
||||||||||||||||
Annuity & supplemental insurance operating earnings |
76 | 56 | 143 | 110 | ||||||||||||
Interest & other corporate expense | (44 | ) | (36 | ) | (83 | ) | (74 | ) | ||||||||
Core operating earnings before income taxes |
135 |
118 |
263 |
257 |
||||||||||||
Related income taxes | 45 | 44 | 88 | 92 | ||||||||||||
Core net operating earnings | $ | 90 | $ | 74 | $ | 175 | $ | 165 | ||||||||
b) Reflects the following effect of a special A&E charge during the 2011 periods($ in millions, except per share amounts):
A&E Charge: |
Pre-tax |
After-tax |
EPS |
||||||
P&C insurance runoff operations | |||||||||
Asbestos | $ | 28 | $ | 18 | |||||
Environmental |
22 |
14 | |||||||
$ | 50 | $ | 32 | $ | .31 | ||||
Former railroad & manufacturing operations | |||||||||
Asbestos | $ | 3 | $ | 2 | |||||
Environmental | 6 | 4 | |||||||
$ | 9 | $ | 6 | $ | .06 | ||||
c) Operating income before income taxes includes
d) The
e) Shareholders’ Equity at
f) Supplemental Notes:
- Property & Transportation includes primarily physical damage and liability coverage for buses, trucks and recreational vehicles, inland and ocean marine, agricultural-related products and other property coverages.
- Specialty Casualty includes primarily excess and surplus, general liability, executive liability, umbrella and excess liability, customized programs for small to mid-sized businesses and workers’ compensation insurance.
- Specialty Financial includes risk management insurance programs for lending and leasing institutions (including collateral and mortgage protection insurance), surety and fidelity products and trade credit insurance.
- Other includes an internal reinsurance facility.
Source:
American Financial Group, Inc.
Diane P. Weidner, 513-369-5713
Asst.
Vice President – Investor Relations
or
Web Sites:
www.AFGinc.com
www.GreatAmericanInsuranceGroup.com
www.GAFRI.com