Cincinnati, OH – American Financial Group, Inc. (NYSE: AFG) recently reported 2022 fourth quarter net earnings of $276 million ($3.24 per share) compared to $355 million ($4.18 per share) in the 2021 fourth quarter. Net earnings for the 2022 fourth quarter included after-tax non-core realized gains on securities of $21 million ($0.25 per share). By comparison, net earnings for the 2021 fourth quarter included $4 million ($0.06 per share) in after-tax non-core realized gains on securities. Net earnings for the full year of 2022 were $10.53 per share, compared to $23.30 per share in 2021.
Core net operating earnings were $255 million ($2.99 per share) for the 2022 fourth quarter, compared to $351 million ($4.12 per share) in the 2021 fourth 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, and lower year-over-year underwriting profit in the crop operations. Both of these items were partially offset by higher other P&C investment income.
AFG’s book value per share was $47.56 at December 31, 2022. AFG paid cash dividends of $2.63 per share during the fourth quarter, which included a $2.00 per share special dividend paid in November. Return on equity was 19.2% and 37.5% for the full year of 2022 and 2021, respectively. For the three months ended December 31, 2022, AFG’s growth in book value per share plus dividends was 8.7%. For the twelve months ended December 31, 2022, AFG’s book value per share plus dividends increased by 4.8%, reflecting very strong earnings partially offset by the increased unrealized losses on fixed maturities from the impact of rising interest rates and widening credit spreads.
Book value per share, excluding unrealized losses related to fixed maturities, was $53.73 per share at December 31, 2022. For the three months ended December 31, 2022, AFG’s growth in adjusted book value per share plus dividends was 6.3%. For the twelve months ended December 31, 2022, AFG’s growth in adjusted book value per share plus dividends was 18.5%. For the full year, share repurchases totaled $11.3 million. Core operating return on equity was 21.2% and 18.6% for the full year of 2022 and 2021, respectively.
AFG’s net earnings, 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 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 declared a special cash dividend of $4.00 per share of American Financial Group common stock. The dividend is payable on February 28, 2023 to shareholders of record on February 15, 2023. The aggregate amount of this special dividend will be approximately $340 million. This special dividend is in addition to the Company’s regular quarterly cash dividend of $0.63 per share most recently paid on January 25, 2023.
Carl H. Lindner III and S. Craig Lindner, AFG’s Co-Chief Executive Officers, issued this statement: “Full year core net operating earnings were $11.63 per share, the highest ever achieved for AFG. We are very pleased with our strong performance for the 2022 fourth quarter and full year. In addition to producing an annual core operating return on equity of 21%, net written premiums grew by 11% during the year. Our talented insurance and investment professionals have executed well in a dynamic insurance industry and uncertain economic environment, positioning us well as we begin 2023.
“AFG had approximately $1.41 billion of excess capital (including parent company cash and investments of approximately $876 million) at December 31, 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. Over the past year, we increased our quarterly dividend by 12.5% and paid special dividends of $12.00 per share. Total growth in adjusted book value plus dividends was a very strong 18.5%. We are very proud of our track record of creating long-term value for our shareholders.”
Craig and Carl Lindner continued, “We have established our initial guidance for AFG’s 2023 core net operating earnings in the range of $11.00 to $12.00 per share, which would produce a core return on equity of over 20% at the midpoint. Our guidance assumes a return of approximately 7% on alternative investments, compared to 13.2% earned on these investments in 2022, and 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. Q4 & Full Year 2022 Results