Cincinnati, OH – American Financial Group, Inc. (NYSE: AFG) recently reported 2022 second quarter net earnings attributable to shareholders of $167 million ($1.96 per share) compared to $1.0 billion ($11.70 per share) in the 2021 second quarter. Net earnings for the 2022 second quarter included after-tax non-core realized losses on securities of $73 million ($0.86 per share loss), and other net after-tax non-core charges of $3 million ($0.03 per share loss). By comparison, net earnings in the 2021 second quarter included net favorable after-tax non-core items aggregating $797 million ($9.31 per share), primarily the gain on sale and earnings from AFG’s discontinued Annuity operations, which were sold in May 2021. Annualized return on equity was 14.3% and 72.0% for the second quarters of 2022 and 2021, respectively.
Core net operating earnings were $243 million ($2.85 per share) for the 2022 second quarter, compared to $205 million ($2.39 per share) in the 2021 second quarter. The year-over-year increase was primarily the result of significantly higher Specialty Property and Casualty (“P&C”) underwriting profit. Additional details for the 2022 and 2021 second quarters may be found in the table below. Core net operating earnings for the second quarters of 2022 and 2021 generated annualized returns on equity of 20.7% and 14.7%, respectively.
AFG’s book value per share was $47.76 at June 30, 2022. AFG paid cash dividends of $8.56 per share during the second quarter, which included an $8.00 per share special dividend. For the three months ended June 30, 2022, AFG’s growth in book value per share plus dividends was (0.9%) and year to date, growth in book value per share plus dividends was (0.2%), reflecting the increased unrealized loss on fixed maturities from the impact of rising interest rates and widening credit spreads.
Book value per share, excluding unrealized gains (losses) related to fixed maturities, was $51.68 at June 30, 2022. For the three months ended June 30, 2022, AFG’s growth in adjusted book value per share plus dividends was 3.6%. Year to date, growth in adjusted book value per share plus dividends was 9.4%
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 discontinued operations, net realized gains and losses, and other 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.
Carl H. Lindner III and S. Craig Lindner, AFG’s Co-Chief Executive Officers, issued this statement: “AFG’s second quarter results were outstanding. We are pleased to report an annualized core operating return of nearly 21% in the quarter, including record second quarter underwriting profit alongside double-digit premium growth. Strategic positioning of our investment portfolio enabled us to invest opportunistically, and the returns in our alternative investment portfolio continued to exceed our expectations. Our entrepreneurial, opportunistic culture and disciplined operating philosophy serve us well in this increasing interest rate environment and favorable P&C market.
“AFG had approximately $1.1 billion of excess capital (including parent company cash and investments of approximately $750 million) at June 30, 2022. Returning capital to shareholders in the form of regular and special cash dividends and through opportunistic share repurchases is an important and effective component of our capital management strategy. In addition, 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.”
Messrs. Lindner continued, “Based on the results reported in the first half of the year and expectations for the remainder of the year, we now expect AFG’s core net operating earnings in 2022 to be in the range of $10.75 to $11.75 per share, an increase from our previous range of $10.50 to $11.50 per share, reflecting higher expected underwriting profit in our Specialty Casualty and Specialty Financial Groups. In addition, our guidance contemplates the impact of the current interest rate environment on investment income and assumes an overall annual yield of 10%-12% on alternative investments for the full year, based on the strong performance of this portfolio in the first half of 2022. Our guidance reflects minimal income from alternative investments in the second half of 2022 as management assumes that continued strong performance of multi-family housing investments will offset weaker performance of traditional private equity investments. Furthermore, our guidance continues to reflect an average crop year.”
AFG’s core earnings per share guidance excludes non-core items such as realized gains and losses and other significant items that are not able to be estimated with reasonable precision, or that may not be indicative of ongoing operations.
The complete results release is available here: American Financial Group, Inc. Second Quarter 2022 Results
Source: American Financial Group