Cincinnati, OH – American Financial Group, Inc. (NYSE: AFG) recently reported 2023 second quarter net earnings of $200 million ($2.34 per share) compared to $167 million ($1.96 per share) for the 2022 second quarter. Net earnings for the 2023 second quarter included after-tax non-core realized losses on securities of $1 million ($0.02 per share loss), and a $1 million loss ($0.02 per share loss) on retirement of debt. By comparison, net earnings in the 2022 second quarter included net after-tax non-core items that reduced net income by $76 million ($0.89 per share loss). Other details may be found in the table on the following page.
Core net operating earnings were $202 million ($2.38 per share) for the 2023 second quarter, compared to $243 million ($2.85 per share) in the 2022 second quarter. The year-over-year decrease was due primarily to the impact of elevated catastrophe losses and lower favorable prior year reserve development on underwriting profit in the Specialty Property and Casualty (“P&C”) insurance operations compared to the very strong second quarter of 2022. These items were partially offset by significantly higher net investment income in the 2023 second quarter. Additional details for the 2023 and 2022 second quarters may be found in the table below. Core net operating earnings for the second quarters of 2023 and 2022 generated annualized returns on equity of 18.2% and 20.7%, respectively.
AFG’s book value per share was $47.06 at June 30, 2023. AFG paid cash dividends of $0.63 per share and repurchased $43 million of its common stock during the second quarter. For the three months ended June 30, 2023, AFG’s growth in book value per share plus dividends was 3.1% and year to date, growth in book value per share plus dividends was 10.0%. Annualized return on equity was 17.9% and 14.3% for the second quarters of 2023 and 2022, respectively.
Book value per share, excluding unrealized gains (losses) related to fixed maturities, was $52.90 at June 30, 2023. For the three months ended June 30, 2023, AFG’s growth in adjusted book value per share plus dividends was 4.2%. Year to date, growth in adjusted book value per share plus dividends was 8.3%.
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 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: “We are pleased to report an annualized core operating return greater than 18% in the second quarter alongside double-digit premium growth. The higher interest rate environment contributed to meaningfully higher year-over-year investment income, and we continue to be pleased with the performance of our alternative investment portfolio, where returns exceeded our expectations during the quarter. These results, coupled with effective capital management and our entrepreneurial, opportunistic culture and disciplined operating philosophy enable us to continue to create value for our shareholders.
“AFG had approximately $700 million of excess capital at June 30, 2023, which is net of the $235 million in cash deployed to fund the CRS acquisition on July 3, 2023, and includes parent company cash and investments of approximately $550 million. 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 2023 to be in the range of $10.15 to $11.15 per share, a decrease from our previous range of $11.00 to $12.00 per share. At the midpoint of the range, our revised guidance would produce a core return on equity of approximately 20%. This guidance reflects updated full year expectations for underwriting results, partially offset by an increase in expected net investment income and 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 2023 Results