American Financial (AFG) 7 Aug 24 2024 Q2 Earnings call transcript

American Financial Group (AFG) reported strong second-quarter results, with an annualized second-quarter core operating return on equity of 18.5%. The company's underwriting margins in its Specialty Property and Casualty insurance businesses were strong, and higher rates led to increased Property and Casualty net investment income, excluding alternatives, by 15% year-over-year. However, growth was impacted by the timing of premium recognition in its crop business and underwriting actions taken to manage exposures in its most social inflation-exposed businesses.

Management's Confidence and Growth Opportunities

AFG's management expressed confidence in the company's performance, highlighting strong operating results and effective capital management. The company's entrepreneurial culture and disciplined operating philosophy enable it to create value for shareholders. AFG's co-CEOs, Carl Lindner and Craig Lindner, thanked God, their talented management team, and employees for their contributions to the company's success. The company expects to continue generating significant excess capital throughout the remainder of 2024, providing ample opportunities for special dividends or share repurchases.

Challenges and Competitive Landscape

During the call, key shareholders and investors asked questions about AFG's investment in alternative investments and the company's approach to managing exposures in its most socially inflation-exposed businesses. AFG's management discussed the importance of careful underwriting and the company's commitment to achieving rate adequacy and underwriting profits in certain lines of business, such as commercial auto liability. The company also mentioned the challenges of managing social inflation and its impact on loss trends in certain lines of business.

Trends within the Sector

AFG's earnings call transcript provides insights into trends within the property and casualty insurance sector. The company discussed the importance of effective capital management and the ability to invest in fixed maturities at favorable yields in the current interest rate environment. AFG's management also highlighted the company's optimism regarding the prospects of attractive returns from its alternative investment portfolio, with an expectation of annual returns averaging 10% or better.

Conclusion

American Financial Group's second-quarter earnings call revealed strong operating results, effective capital management, and a commitment to creating value for shareholders. The company's management discussed challenges and opportunities in the property and casualty insurance sector, including managing social inflation and optimizing returns from alternative investments. AFG's entrepreneurial culture and disciplined operating philosophy position the company well for future growth and value creation.