Cincinnati, OH – American Financial Group, Inc. (NYSE: AFG) recently reported 2022 third quarter net earnings of $165 million ($1.93 per share) compared to $219 million ($2.56 per share) in the 2021 third quarter. Net earnings for the 2022 third quarter included after-tax non-core realized losses on securities of $28 million ($0.32 per share loss). By comparison, net earnings for the 2021 third quarter included after-tax non-core realized losses on securities of $12 million ($0.15 per share loss).
Core net operating earnings were $192 million ($2.24 per share) for the 2022 third quarter, compared to $231 million ($2.71 per share) in the 2021 third quarter. The year-over-year decrease was due primarily to lower returns in AFG’s alternative investment portfolio, as compared to the very strong performance of this portfolio in the prior year period. Additional details for the 2022 and 2021 third quarters may be found in the table below. Core net operating earnings for the third quarters of 2022 and 2021 generated annualized returns on equity of 17.1% and 17.6%, respectively.
AFG’s book value per share was $46.18 at September 30, 2022. During the third quarter of 2022, AFG declared cash dividends of $0.56 per share. AFG repurchased $5 million of its common stock at an average price per share of $123.02. Annualized return on equity was 14.7% and 16.6% for the third quarters of 2022 and 2021, respectively. For the nine months ended September 30, 2022, AFG’s book value per share plus dividends declined by 2.0%, 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 $53.03 at September 30, 2022. For the three months ended September 30, 2022, AFG’s growth in adjusted book value per share plus dividends was 3.7%. Year to date, growth in adjusted book value per share plus dividends was 12.7%.
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.
The Company also announced that its Board of Directors has declared a special cash dividend of $2.00 per share of American Financial Group common stock. The dividend is payable on November 22, 2022 to shareholders of record on November 15, 2022. The aggregate amount of this special dividend will be approximately $170 million. This special dividend is in addition to the Company’s regular quarterly cash dividend of $0.63 per share most recently paid on October 25, 2022. With this special dividend, the Company has declared $12.00 per share in special dividends in 2022.
S. Craig Lindner and Carl H. Lindner III, AFG’s Co-Chief Executive Officers, issued this statement: “We are very pleased with AFG’s performance during the third quarter. We achieved an annualized core operating return of over 17% in the quarter, with strong underwriting results despite elevated industry catastrophe losses. Strategic positioning of our investment portfolio enabled us to invest opportunistically, and the returns in our alternative investment portfolio again exceeded our expectations. Our thoughts and prayers remain with those who have been affected by the devastation caused by Hurricane Ian. Our P&C Group claims teams are working with our agents and policyholders to identify and process covered claims quickly and efficiently to help our customers recover and restore their businesses and rebuild their communities.
“AFG had approximately $1.3 billion of excess capital (including parent company cash and investments of approximately $760 million) at September 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.”
Craig and Carl Lindner continued, “Based on the results reported in the first nine months of the year and expectations for the remainder of the year, we now expect AFG’s 2022 core net operating earnings to be in the range of $11.00 to $11.75 per share, narrowed from our previous range of $10.75 to $11.75 per share. In addition, our guidance contemplates the impact of the current interest rate environment on investment income and assumes an overall annual yield of 12% on alternative investments for the full year, based on the strong performance of this portfolio in the first nine months of 2022. Our guidance reflects minimal income from alternative investments in the fourth quarter 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. Third Quarter 2022 Results
Source: AFG Inc