- Net earnings per share of $2.31 include $0.48 per share in
realized gains on securities and ($0.29) per share related to
newly-reclassified Annuity non-core items
- Core net operating earnings of $2.12 per share
- Second quarter annualized ROE of 16.0%; annualized core
operating ROE of 14.7%
- Full year 2019 core net operating earnings guidance
revised to a narrowed range of $8.40 - $8.80 per
share
American Financial Group, Inc. (NYSE: AFG) today reported 2019
second quarter net earnings attributable to shareholders of $210
million ($2.31 per share), unchanged from the 2018 second quarter.
Net earnings for the quarter include $45 million ($0.48 per share)
in after-tax net realized gains on securities, including $29
million ($0.32 per share) in holding gains to adjust equity
securities to fair value. By comparison, net earnings in the 2018
second quarter included $25 million ($0.27 per share) in after-tax
net realized gains on securities. Net earnings for the second
quarter of 2019 included a negative impact of $27 million ($0.29
per share) for annuity non-core items, including the impact of fair
value accounting for fixed-indexed annuities (FIAs) and other items
related to changes in the stock market and interest rates. Other
details may be found in the table below. Book value per share was
$67.72 per share at June 30, 2019. AFG paid cash dividends of $1.90
per share during the quarter, which included a $1.50 per share
special dividend. Annualized return on equity was 16.0% and 17.1%
for the second quarters of 2019 and 2018, respectively.
As previously announced, beginning with the second quarter of
2019, AFG changed the way it defines annuity core operating
earnings to exclude the impact of items that are not necessarily
indicative of operating trends. Core net operating earnings for
periods prior to the change have not been adjusted, however results
for the three and six month periods ended June 30, 2018 are
reconciled to historically reported Annuity Segment core operating
earnings on page 5 of this release. As a result, reported core net
operating earnings for periods beginning with the second quarter of
2019 are not directly comparable to prior year periods.
Core net operating earnings were $192 million ($2.12 per share)
for the 2019 second quarter, compared to $185 million ($2.04 per
share) in the 2018 second quarter. Higher reported core operating
earnings in our Annuity Segment were offset by lower operating
earnings in our Specialty Property and Casualty (“P&C”)
Insurance operations. Holding company expenses were $7 million
lower year-over-year and reflect a normal run rate in the 2019
second quarter. In connection with AFG’s new definition of annuity
core operating earnings, AFG’s core net operating earnings for the
second quarter of 2019 exclude the impact of items that are not
necessarily indicative of operating trends, and include an expense
for the amortization of FIA option costs, which AFG believes better
reflects the cost of funds for FIAs and AFG’s evaluation of the
financial performance of its Annuity business. Book value per
share, excluding unrealized gains related to fixed maturities, was
$58.49 per share at June 30, 2019. Core net operating earnings for
the second quarters of 2019 and 2018 generated annualized returns
on equity of 14.7% and 15.1%, respectively.
AFG’s net earnings attributable to shareholders, determined in
accordance with U.S. generally accepted accounting principles
(GAAP), include certain items that may not be indicative of its
ongoing core operations. The table below identifies such items and
reconciles net earnings attributable to shareholders to core net
operating earnings, a non-GAAP financial measure. AFG believes that
its core net operating earnings provides management, financial
analysts, ratings agencies and investors with an understanding of
the results from the ongoing operations of the Company by excluding
the impact of net realized gains and losses, annuity non-core
earnings, and special items that are not necessarily indicative of
operating trends. AFG’s management uses core net operating earnings
to evaluate financial performance against historical results
because it believes this provides a more comparable measure of its
continuing business. Core net operating earnings is also used by
AFG’s management as a basis for strategic planning and
forecasting.
In millions, except per share amounts
Three months ended June 30,
Six months ended June 30,
2019
2018
2019
2018
Components of net earnings attributable to
shareholders:
Core operating earnings before income
taxes
$
236
$
229
$
465
$
496
Pretax non-core
items:
Realized gains (losses) on securities
56
31
240
(62
)
Annuity non-core earnings (loss)
(33
)
-
(33
)
-
Earnings before income taxes
259
260
672
434
Provision (credit) for income taxes:
Core operating earnings
45
46
93
98
Non-core items
5
6
44
(13
)
Total provision for income taxes
50
52
137
85
Net earnings, including noncontrolling
interests
209
208
535
349
Less net earnings (losses) attributable to
noncontrolling interests:
Core operating earnings (losses)
(1
)
(2
)
(4
)
(6
)
Non-core items
-
-
-
-
Total net earnings (losses) attributable
to noncontrolling interests
(1
)
(2
)
(4
)
(6
)
Net earnings attributable to
shareholders
$
210
$
210
$
539
$
355
Net earnings:
Core net operating earnings(a)
$
192
$
185
$
376
$
404
Realized gains (losses) on securities
45
25
190
(49
)
Annuity non-core earnings (loss)
(27
)
-
(27
)
-
Net earnings attributable to
shareholders
$
210
$
210
$
539
$
355
Components of Earnings Per Share:
Core net operating earnings(a)
$
2.12
$
2.04
$
4.14
$
4.46
Non-core
Items:
Realized gains (losses) on securities
0.48
0.27
2.09
(0.54
)
Annuity non-core earnings (loss)
(0.29
)
-
(0.29
)
-
Diluted Earnings Per Share
$
2.31
$
2.31
$
5.94
$
3.92
Footnote (a) is contained in the accompanying Notes to Financial
Schedules at the end of this release.
Carl H. Lindner III and S. Craig Lindner, AFG’s Co-Chief
Executive Officers, issued this statement: “We are pleased to
report strong operating profitability and investment results in
both our Specialty P&C and Annuity Segments, which helped us to
achieve an annualized core operating return on equity of 15%.
“AFG had approximately $1.0 billion of excess capital (including
parent company cash of approximately $135 million) at June 30, 2019
and after the payment of the May special dividend. Where
appropriate, our excess capital will be deployed into AFG’s core
businesses as we identify potential for healthy, profitable organic
growth, and opportunities to expand our specialty niche businesses
through acquisitions and start-ups that meet our target return
thresholds. In addition, returning capital to shareholders in the
form of regular and special cash dividends and opportunistic share
repurchases are also an important and effective component of our
capital management strategy. We will evaluate our excess capital
position again in the second half of 2019 and note that the special
cash dividend paid in May does not preclude our consideration of
additional actions with respect to our regular quarterly dividend,
additional special dividends and opportunistic share
repurchases.
“Based on results for the first six months of 2019, we revised
our expectations for AFG’s 2019 core net operating earnings to
$8.40 to $8.80 per share, narrowed from our previous range of $8.35
to $8.85 per share. Our core earnings per share guidance excludes
non-core items such as realized gains and losses, annuity non-core
earnings and other significant items that are not able to be
estimated with reasonable precision, or that may not be indicative
of ongoing operations.”
Specialty Property and Casualty
Insurance Operations
Pretax core operating earnings in AFG’s P&C Insurance
Segment were $175 million in the second quarter of 2019, compared
to $180 million in the prior year period. Higher P&C net
investment income was more than offset by lower underwriting
profit.
The Specialty P&C insurance operations generated an
underwriting profit of $60 million in the 2019 second quarter,
compared to $73 million in the 2018 second quarter. Higher
underwriting profitability in our Specialty Casualty Group was more
than offset by lower underwriting profit in our Property and
Transportation and Specialty Financial Groups. The second quarter
2019 combined ratio of 95.0% was 1.3 points higher than the prior
year period. Results in the second quarter of 2019 include 3.4
points of favorable prior year reserve development, compared to 3.9
points in the 2018 second quarter. Catastrophe losses added 0.9
points to the second quarter 2019 results, compared to 1.4 points
in the comparable prior year period.
Second quarter 2019 gross written premiums were flat and net
written premiums were up 1% when compared to the second quarter of
2018, primarily the result of lower crop insurance premiums.
Delayed planting of spring crops resulted in late acreage reporting
and reduced overall second quarter Specialty P&C premiums.
Excluding crop insurance, 2019 gross and net written premiums grew
by 6% and 4%, respectively, when compared to the 2018 second
quarter.
Average renewal pricing across the entire P&C Group was up
approximately 3% for the quarter. Excluding our workers’
compensation business, renewal pricing was up approximately 5%,
reflecting a continued improvement from renewal rate increases
achieved the first quarter of 2019. Pricing in our Specialty
P&C group is the highest we have achieved in over five years,
meeting or exceeding our expectations in each of our Specialty
P&C sub-segments. Further details about AFG’s Specialty P&C
operations may be found in the accompanying schedules.
The Property and Transportation Group reported an
underwriting profit of $4 million in the second quarter of 2019,
compared to $23 million in the second quarter of 2018. These
results include lower favorable prior period reserve development in
our agricultural and transportation businesses and a larger
year-over-year underwriting loss in our Singapore Branch.
Catastrophe losses were $8 million for this group during the second
quarter of 2019, compared to $10 million in the comparable prior
year period.
Second quarter 2019 gross written premiums in this group were
down 6% and net written premiums were flat when compared to the
prior year period, due primarily to delayed acreage reporting from
insureds as a result of excess moisture and late planting of corn
and soybean crops. It is expected that these delayed premiums will
be included in third quarter 2019 results. Excluding crop
insurance, 2019 gross and net written premiums in this group grew
by 12% and 10%, respectively, when compared to the 2018 second
quarter. The growth is primarily attributable to new business
opportunities in our transportation businesses. Overall renewal
rates in this group increased 5% on average for the second quarter
of 2019, an improvement from renewal rate increases achieved in the
first quarter of 2019.
The Specialty Casualty Group reported an underwriting
profit of $47 million in the second quarter of 2019 compared to $29
million in the comparable 2018 period. Higher profitability in our
workers’ compensation and public sector businesses was partially
offset by lower year-over-year profitability in our excess and
surplus lines businesses. Underwriting profitability in our workers
compensation business continues to be very strong. Catastrophe
losses for this group were $1 million in both the second quarters
of 2019 and 2018.
Gross and net written premiums for the second quarter of 2019
both increased 4% when compared to the second quarter of 2018. The
addition of premiums from ABA Insurance Services, which was
acquired in the fourth quarter of 2018, as well as growth in our
excess and surplus lines, executive liability and social services
businesses were the primary drivers of the higher premiums. Lower
premiums in Neon, primarily due to foreign currency translation,
and within our workers’ compensation businesses partially offset
this growth. Renewal pricing for this group was up 3% in the second
quarter. Excluding rate decreases in our workers’ compensation
businesses, renewal rates in this group were up approximately 7%.
With the exception of workers’ compensation, renewal rates in this
group are the highest we have seen in five years.
The Specialty Financial Group reported underwriting
profit of $21 million in the second quarter of 2019, compared to
$22 million in the second quarter of 2018. Higher underwriting
profitability in our equipment leasing and surety businesses was
more than offset by lower underwriting profitability in our
financial institutions business. Catastrophe losses for this group
were $3 million in both the second quarters of 2019 and 2018. All
of the businesses in this group continued to achieve excellent
underwriting margins.
Gross and net written premiums for the second quarter of 2019
were down 2% and 6%, respectively, when compared to the same 2018
period, primarily as a result of lower premiums in our financial
institutions business. Renewal pricing in this group was up
approximately 1% for the quarter.
Carl Lindner III stated: “Overall, our Specialty P&C Group
performed well during the second quarter, and I’m pleased to see
strong renewal rate momentum continue across our portfolio of
businesses. Based on results through the first six months of the
year and our expectations for a below average crop year, we
continue to expect an overall 2019 calendar year combined ratio in
the range of 92% to 94% and expect growth in net written premium to
be in the range of 2% to 5%, up from our previous guidance of flat
to up 3%, when compared to the $5.0 billion reported in 2018. In
addition, given the broad-based improvements noted in renewal
pricing across many of our Specialty P&C businesses, we now
expect overall P&C renewal pricing to be up 2% to 4% in 2019,
an improvement from our previous range of 1% to 3%.”
Further details about AFG’s Specialty P&C operations may be
found in the accompanying schedules and in our Quarterly Investor
Supplement, which is posted on our website.
Annuity Segment
As previously announced, in the second quarter of 2019 AFG
changed the way it defines core annuity operating earnings.
Beginning in the second quarter, AFG’s core annuity operating
earnings exclude the impact of items that are not necessarily
indicative of operating trends, such as the impact of fair value
accounting for FIAs, unlockings, and other items related to changes
in the stock market and interest rates. Core operating earnings
will now include an expense for the amortization of FIA option
costs, which is a better measure of the cost of funds for FIAs.
The Company believes these changes will provide investors with a
better view of the fundamental performance of the business, and a
more comparable measure of the Annuity Segment’s business compared
to its peers.
Annuity Operating Earnings – For all periods presented,
the table below reflects core operating earnings under AFG’s new
definition. For periods prior to the second quarter of 2019, “new”
core operating earnings are reconciled to previously reported
operating results.
In millions
Three months ended June 30,
Six months ended June 30,
2019
2018
2019
2018
Pretax Annuity
Core Operating Earnings:
Pretax earnings before certain items
below
$
147
$
141
$
291
$
279
Investments marked to market through core
operating earnings, net of DAC
29
33
55
62
Amortization of option costs, net of
DAC
(72
)
(61
)
(141
)
(118
)
Pretax Annuity core operating earnings
– new method
104
113
205
223
Other amounts previously reported as
operating, net *
n/a
(14
)
(11
)
1
Pretax Annuity core operating earnings, as
reported
$
104
$
99
$
194
$
224
Year over year growth in quarterly average
invested assets
12
%
10
%
12
%
10
%
Yield on investments marked to market
through
core operating earnings
11.2
%
16.4
%
11.1
%
15.7
%
_____________________________
* “Other” primarily reflects (i) the impact of fair value
accounting, (ii) the impact of changes in the stock market on the
liability for guaranteed benefits and DAC, and (iii) unlocking.
Pretax earnings before certain items increased primarily as a
result of the growth in AFG’s annuity business, partially offset by
the runoff of higher yielding investments. Earnings from
investments marked to market through core operating earnings vary
from quarter to quarter based on the reported results of the
underlying partnerships and investments. Higher amortization of
option costs reflects growth in AFG’s annuity business, as well as
higher renewal options costs related to inforce business.
Further details about the components of Annuity non-core
earnings for the three months ended June 30, 2019 may be found in
our Quarterly Investor Supplement, which is posted on our
website.
2019 Annuity Core Operating Earnings Guidance – Taking
into account the new definition of Annuity core operating earnings
beginning in the second quarter, and based on the $194 million of
operating earnings reported by the Annuity segment in the first six
months of 2019, AFG’s guidance for full year 2019 pretax Annuity
core operating earnings is now a range of $375 million to $405
million.
This guidance reflects (i) renewal option costs in line with
recent purchases, (ii) a return of 8% to 10% on investments
required to be marked to market through operating earnings, in
contrast to the 11% earned in the first half of 2019, (iii) the
negative impact that lower long-term reinvestment rates will have
on the runoff of the Annuity segment’s investment portfolio, and
(iv) the negative impact that lower short-term rates are expected
to have on the Annuity segment’s net investment in cash, short-term
investments and floating rate securities, which were approximately
$4 billion at June 30, 2019. Fluctuations in these items could lead
to positive or negative impacts on the Annuity Segment’s
results.
Annuity Premiums – AFG’s Annuity Segment reported
statutory premiums of $1.35 billion in the second quarter of 2019,
compared to $1.40 billion in the second quarter of 2018, a decrease
of 4%. Higher traditional fixed annuity premiums in the financial
institutions channel were more than offset by lower FIA premiums in
the retail and broker dealer channels.
In response to the continued drop in market interest rates in
2019, AFG has implemented several crediting rate decreases in order
to maintain appropriate returns on its annuity sales, which has
begun to temper new sales. Accordingly, based on the results to
date, AFG believes that its 2019 Annuity premiums will be down 5%
to 10% from its record $5.4 billion of premiums in 2018.
Craig Lindner stated, “We believe our current operating earnings
presentation is a better reflection of the fundamental and ongoing
operations of our annuity business. And while our 2019 core
operating earnings under our new approach are lower than 2018 due
to elevated option costs and lower earnings from certain
“mark-to-market” investments, we still achieved an annualized
operating return on equity of 13% during the second quarter of
2019. Looking forward to the second half of 2019, due to the low
interest rate environment and the expectation of even lower
short-term interest rates, we are moderating our expectations for
premiums and core operating earnings.”
More information about premiums and the results of operations
for our Annuity Segment may be found in AFG’s Quarterly Investor
Supplement.
Investments
AFG recorded second quarter 2019 net realized gains on
securities of $45 million ($0.48 per share) after tax and after
deferred acquisition costs (DAC), which included $29 million ($0.32
per share) in after-tax, after-DAC net gains to adjust equity
securities that the Company continued to own, to fair value. By
comparison, AFG recorded net realized gains on securities of $25
million ($0.27 per share) in the comparable 2018 period.
Unrealized gains on fixed maturities were $812 million after tax
and after DAC at June 30, 2019, an increase of $729 million since
year end. Our portfolio continues to be high quality, with 91% of
our fixed maturity portfolio rated investment grade and 98% with a
National Association of Insurance Commissioners’ designation of
NAIC 1or 2, its highest two categories.
For the six months ended June 30, 2019, P&C net investment
income was approximately 6% higher than the comparable 2018
period.
More information about the components of our investment
portfolio may be found in our Quarterly Investor Supplement, which
is posted on our website.
About American Financial Group, Inc.
American Financial Group is an insurance holding company, based
in Cincinnati, Ohio with assets over $65 billion. Through the
operations of Great American Insurance Group, AFG is engaged
primarily in property and casualty insurance, focusing on
specialized commercial products for businesses, and in the sale of
traditional fixed, fixed-indexed and variable-indexed annuities in
the retail, financial institutions, broker-dealer and registered
investment advisor markets. Great American Insurance Group’s roots
go back to 1872 with the founding of its flagship company, Great
American Insurance Company.
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, investment
activities and the amount and timing of share repurchases;
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 reasons 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. and/or abroad; performance of securities
markets, including the cost of equity index options; 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; changes in
insurance law or regulation, including changes in statutory
accounting rules and changes in regulation of the Lloyd’s market,
including modifications to the establishment of capital
requirements for and approval of business plans for syndicate
participation; changes in the legal environment affecting AFG or
its customers; tax law and accounting changes, including the impact
of recent changes in U.S. corporate tax law; 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; disruption caused by cyber-attacks or other
technology breaches or failures by AFG or its business partners and
service providers, which could negatively impact AFG’s business
and/or expose AFG to litigation; development of insurance loss
reserves and establishment of other reserves, particularly with
respect to amounts associated with asbestos and environmental
claims; availability of reinsurance and ability of reinsurers to
pay their obligations; trends in persistency and mortality;
competitive pressures; 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 AFG’s
operating subsidiaries; the impact of the conditions in the
international financial markets and the global economy relating to
AFG’s international operations; and other factors identified in
AFG’s filings with the Securities and Exchange Commission.
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 2019 second
quarter results at 11:30 a.m. (ET) tomorrow, Wednesday, August 7,
2019. Toll-free telephone access will be available by dialing
1-877-459-8719 (international dial-in 424-276-6843). The conference
ID for the live call is 4270549. Please dial in five to ten minutes
prior to the scheduled start time of the call.
A replay will be available two hours following the completion of
the call and will remain available until 11:59 p.m. (ET) on August
14, 2019. To listen to the replay, dial 1-855-859-2056
(international dial-in 404-537-3406) and provide the conference ID
4270549.
The conference call and accompanying webcast slides will also be
broadcast live over the internet. To access the event, click the
following link:
https://www.afginc.com/news-and-events/event-calendar.
Alternatively, you can choose Events from the Investor
Relations page at www.AFGinc.com.
An archived webcast will be available immediately after the call
via the same link on our website until August 14, 2019 at 11:59
p.m. (ET). An archived audio MP3 file will be available within 24
hours of the call.
(Financial summaries follow)
This earnings release and AFG’s Quarterly Investor Supplement
are available in the Investor Relations section of AFG’s website:
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 June 30,
Six months ended June 30,
2019
2018
2019
2018
Revenues
P&C insurance net earned premiums
$
1,200
$
1,161
$
2,373
$
2,268
Life, accident & health net earned
premiums
5
6
11
12
Net investment income
580
530
1,122
1,025
Realized gains (losses) on securities
56
31
240
(62
)
Income (loss) of managed investment
entities:
Investment income
70
64
139
122
Loss on change in fair value of
assets/liabilities
(2
)
(2
)
(2
)
(5
)
Other income
51
43
101
92
Total revenues
1,960
1,833
3,984
3,452
Costs and expenses
P&C insurance losses &
expenses
1,149
1,093
2,240
2,115
Annuity, life, accident & health
benefits & expenses
380
321
728
596
Interest charges on borrowed money
17
16
33
31
Expenses of managed investment
entities
59
54
114
102
Other expenses
96
89
197
174
Total costs and expenses
1,701
1,573
3,312
3,018
Earnings before income taxes
259
260
672
434
Provision for income taxes
50
52
137
85
Net earnings including noncontrolling
interests
209
208
535
349
Less: Net earnings (losses)
attributable
to noncontrolling interests
(1
)
(2
)
(4
)
(6
)
Net earnings attributable to
shareholders
$
210
$
210
$
539
$
355
Diluted Earnings per Common Share
$
2.31
$
2.31
$
5.94
$
3.92
Average number of diluted shares
91.0
90.7
90.8
90.5
June 30,
December 31,
Selected Balance
Sheet Data:
2019
2018
Total cash and investments
$
52,907
$
48,498
Long-term debt
$
1,423
$
1,302
Shareholders’ equity(b)
$
6,090
$
4,970
Shareholders’ equity (excluding
unrealized
gains/losses related to fixed maturities)
(b)
$
5,260
$
4,898
Book value per share
$
67.72
$
55.66
Book value per share (excluding
unrealized
gains/losses related to fixed
maturities
$
58.49
$
54.86
Common Shares Outstanding
89.9
89.3
Footnote (b) is contained in the accompanying Notes to Financial
Schedules at the end of this release.
AMERICAN FINANCIAL GROUP,
INC.
SPECIALTY P&C
OPERATIONS
(Dollars in Millions)
Three months ended June 30,
Pct. Change
Six months ended June 30,
Pct. Change
2019
2018
2019
2018
Gross written premiums
$
1,664
$
1,665
-%
$
3,199
$
3,123
2%
Net written premiums
$
1,264
$
1,257
1%
$
2,411
$
2,359
2%
Ratios (GAAP):
Loss & LAE ratio
60.2%
59.7%
59.6%
58.8%
Underwriting expense ratio
34.8%
34.0%
34.2%
34.0%
Specialty Combined Ratio
95.0%
93.7%
93.8%
92.8%
Combined Ratio – P&C
Segment
95.1%
93.7%
93.9%
92.8%
Supplemental
Information:(c)
Gross Written Premiums:
Property & Transportation
$
579
$
615
(6%)
$
1,018
$
1,041
(2%)
Specialty Casualty
896
858
4%
1,808
1,711
6%
Specialty Financial
189
192
(2%)
373
371
1%
$
1,664
$
1,665
-%
$
3,199
$
3,123
2%
Net Written Premiums:
Property & Transportation
$
422
$
422
-%
$
766
$
746
3%
Specialty Casualty
662
639
4%
1,288
1,233
4%
Specialty Financial
149
159
(6%)
294
307
(4%)
Other
31
37
(16%)
63
73
(14%)
$
1,264
$
1,257
1%
$
2,411
$
2,359
2%
Combined Ratio (GAAP):
Property & Transportation
99.1%
93.9%
94.2%
92.2%
Specialty Casualty
92.5%
95.1%
93.4%
94.0%
Specialty Financial
85.6%
85.6%
88.6%
87.9%
Aggregate Specialty Group
95.0%
93.7%
93.8%
92.8%
Three months ended June 30,
Six months ended June 30,
2019
2018
2019
2018
Reserve Development
(Favorable)/Adverse:
Property & Transportation
$
(6
)
$
(21
)
$
(32
)
$
(39
)
Specialty Casualty
(31
)
(15
)
(44
)
(50
)
Specialty Financial
(9
)
(8
)
(15
)
(11
)
Other Specialty
4
(1
)
3
(2
)
Total Specialty Reserve
Development
$
(42
)
$
(45
)
$
(88
)
$
(102
)
Points on Combined Ratio:
Property & Transportation
(1.6
)
(5.6
)
(4.4
)
(5.4
)
Specialty Casualty
(4.7
)
(2.5
)
(3.5
)
(4.2
)
Specialty Financial
(5.9
)
(5.4
)
(5.1
)
(3.6
)
Aggregate Specialty Group
(3.4
)
(3.9
)
(3.7
)
(4.5
)
Total P&C Segment
(3.3
)
(3.9
)
(3.6
)
(4.5
)
Footnote (c) is contained in the accompanying Notes to Financial
Schedules at the end of this release.
AMERICAN FINANCIAL GROUP,
INC.
ANNUITY SEGMENT
(Dollars in Millions)
Components of
Statutory Premiums
Three months ended June
30,
Pct. Change
Six months ended June
30,
Pct. Change
2019
2018
2019
2018
Annuity
Premiums:
Financial Institutions
$
742
$
579
28
%
$
1,510
$
1,097
38
%
Retail
310
400
(23
%)
640
715
(10
%)
Broker-Dealer
197
359
(45
%)
430
621
(31
%)
Pension Risk Transfer
50
1
nm
60
1
nm
Education Market
44
54
(19
%)
93
100
(7
%)
Variable Annuities
6
6
-
11
13
(15
%)
Total Annuity Premiums
$
1,349
$
1,399
(4
%)
$
2,744
$
2,547
8
%
Components of
Annuity Earnings Before Income Taxes
Three months ended June
30,
Pct. Change
Six months ended June
30,
Pct. Change
2019
2018
2019
2018
Revenues:
Net investment income
$
451
$
412
9
%
$
886
$
806
10
%
Other income
27
27
-
%
54
53
2
%
Total revenues
478
439
9
%
940
859
9
%
Costs and Expenses:
Annuity benefits
339
260
30
%
650
442
47
%
Acquisition expenses
33
49
(33
%)
59
130
(55
%)
Other expenses
35
31
13
%
70
63
11
%
Total costs and expenses
407
340
20
%
779
635
23
%
Annuity earnings before income taxes
$
71
$
99
(28
%)
$
161
$
224
(28
%)
Supplemental
Annuity Information
Three months ended
June 30,
Six months ended
June 30,
2019
2018
2019
2018
Core net interest spread on
fixed annuities – new method
2.08
%
2.28
%
2.05
%
2.30
%
Core net spread earned on
fixed annuities – new method
1.11
%
1.34
%
1.10
%
1.35
%
Further details may be found in our Quarterly Investor
Supplement, which is posted on our website.
AMERICAN FINANCIAL GROUP, INC. Notes
to Financial Schedules
(a)
Components of core net operating
earnings (in millions):
Three months ended June
30,
Six months ended June
30,
2019
2018
2019
2018
Core Operating
Earnings before Income Taxes:
P&C insurance segment
$
175
$
180
$
360
$
368
Annuity segment, new method
104
113
205
223
Annuity results previously reported as
operating earnings
-
(14
)
(11
)
1
Interest and other corporate expenses*
(42
)
(48
)
(85
)
(90
)
Core operating earnings before income
taxes
237
231
469
502
Related income taxes
45
46
93
98
Core net operating earnings
$
192
$
185
$
376
$
404
* Other Corporate
Expenses includes income and expenses associated with AFG‘s
run-off businesses.
b)
Shareholders’ Equity at June 30, 2019
includes $812 million ($9.03 per share) in unrealized after-tax
gains on fixed maturities and $18 million ($0.20 per share) in
unrealized after-tax losses on fixed maturity-related cash flow
hedges. Shareholders’ Equity at December 31, 2018 includes $83
million ($0.93 per share) in unrealized after-tax gains on fixed
maturities and $11 million ($0.13 per share) in unrealized
after-tax losses on fixed maturity-related cash flow hedges.
c)
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
commercial property coverages.
•
Specialty Casualty includes
primarily excess and surplus, general liability, executive
liability, professional liability, umbrella and excess liability,
specialty coverages in targeted markets, 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 equipment leasing and collateral and
lender-placed mortgage property insurance), surety and fidelity
products and trade credit insurance.
•
Other includes an internal
reinsurance facility.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190806005993/en/
Diane P. Weidner, IRC Assistant Vice President – Investor
Relations (513) 369-5713
Websites: www.AFGinc.com
www.GreatAmericanInsuranceGroup.com
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