American Financial Group's Q4 2024: Contradictions in Casualty Ratios, Pricing Strategies, and Reserve Developments

These are the key contradictions discussed in American Financial Group's latest 2024Q4 earnings call, specifically including: Casualty Group's combined ratio, Specialty Casualty's loss ratio improvement drivers, Commercial Auto pricing and profitability targets, and reserve development:



Financial Performance and Growth:
- American Financial Group reported a core operating return on equity in excess of 19% for 2024, with net written premiums growing by 7% during the year.
- The growth was driven by effective capital management, a strong financial position, and confidence in AFG's future financial prospects.

Investment Performance and Portfolio Yield:
- The company's Property & Casualty net investment income was approximately 21% higher in the fourth quarter compared to the previous year.
- This was due to improved returns on alternative investments and strong reinvestment rate opportunities, with balanced invested assets yielding approximately 5.75%.

Reserve Development and Loss Trends:
- AFG experienced $70 million in favorable prior year development in 2024, despite $108 million in adverse development in the fourth quarter.
- The adverse development was primarily attributed to higher than anticipated severity in social inflation-exposed businesses, leading to reserve strengthening.

Rate Adequacy and Pricing Trends:
- AFG achieved average renewal pricing increases across its Property and Casualty Group, excluding workers' comp, of 8% in the fourth quarter.
- This was consistent with the previous quarter and served as a response to meet targeted returns and favorable loss ratio trends.