AFG - Earnings call transcript Q4 2024 | American Financial Group, Inc.

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Operator

Good day, and thank you for standing by. Welcome to American Financial Group 2024 Quarter Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to turn the conference call over to Diane Weidner. Please go ahead.

Diane P. Weidner

to Call. Group's welcome Earnings Quarter and Conference Results morning, American Fourth Financial XXXX Good our Fourth released We XXXX yesterday year afternoon. results Quarter and full

posted AFG's this the Co-CEOs Group; release, AFG's during materials Craig portions press investor Lindner, call. and of CFO. Carl referenced presentation Our and I'm Lindner today's joined and supplement will be Financial website by Brian Relations Investor are under of section. morning Hertzman, These American webcast on III

over to your discussion I would notes Before Slide draw the I our Carl, like to attention on turn the to webcast. X of

Some of also actual and statements. description of on the uncertainties found These can are discussed with differ and/or matters risks could A involve detailed the be and Securities that to today these results Commission, are forward-looking and to Exchange uncertainties which in from website. risks certain forward-looking. these AFG's financial be our filings cause available condition statements materially our

core earnings, core be accuracy. release. net to if may is note to of this meaning finally, our or of a alter intent transcription to questions. materially may the factual earnings reading And statements. for references responses include in or our errors net included net A of transcript in you're financial may that a or measure, operating our or operating it reviewed as not And contain We a call, it reconciliation please remarks in authorized earnings non-GAAP result, that could earnings

discuss the to to Lindner over Carl call results. Now to our turn I'm pleased III

Carl Lindner

Good morning.

helping California. grateful claims by policyholders rebuild devastation prayers recover, continue their in and their wildfires acknowledge to have caused are communities. As and by restore professionals our specialists to thoughts been it's the we to begin important remarks, insurance who our We're our our include businesses to and the those impacted that Southern

up after questions. year quarter to begin of our which by and I'll for your Fourth a full Brian strong to year few great The details. XXXX Craig, I to We'll happy a through Q&A, will be quarter AFG. turning was fourth a and walk Craig open AFG's where results more highlights for it Now ending to I respond and results. sharing then

to operating in of to continue value XX% core return premiums producing our the capital we an written addition and XXXX, for by In net annual equity X% effective excess shareholders on in grew management. through year during create

businesses, our to of I, achieve professionals entrepreneurial Our astute employees team us insurance peers operating our of team great our these results. investment culture, philosophy talented compelling time. outperform in-house many Craig over mix and us management to for enabled helping have of and God, and specialty disciplined collectively thank

over Craig Now to I'll details. turn to the through walk these of some discussion us

Craig Lindner

Thanks, Carl.

earnings full AOCI. net AFG's of This per the of for XXXX, on operating were operating most share ROE you'll generating core using Slide shareholders' calculated year As average quarter-end balances X X, recent of on a XX.X%. an is the equity core equity, see excluding $XX.XX return

reflects shareholders strategy financial is financial capital our important future. of noted, our Returning management an of capital Carl is to our AFG's As priorities. in our management and component highest confidence and one our capital position strong

$X.X Dividend special share shareholders share million of $XXX or payments per during dividends. $X.XX over common the per dividend including dividends dividends $XXX of regular per $X.XX in share of XXXX, stock share billion to in years, quarterly since XX.X% October to And an in and beginning annual special $XXX returned million in X million XXXX. including our rate increased $XX beginning totaled by the last was We and repurchases XXXX.

dividends, share, proud created of shareholders We're the value over excluding per was time. book in for XX.X% we've XXXX. Growth AOCI, value plus in

quarter. out closed we noted, Carl As year strong fourth the a with

X, and equity core per X Slides quarter XX.X%. net of of operating on fourth produced on fourth see core share an return you'll earnings quarter annualized $X.XX XXXX As

to an $XX.X presented capital investment investment financial and details like AFG's liquidity. share on to surrounding Now overview performance and I'd are of billion a turn The Slides portfolio comments few our and position X X. about AFG's and

at quarter, & alternative returns impact was higher Looking result Casualty income period of higher opportunities the assets. approximately net of fourth balances and investment and results XX% rate of for the the reinvestment improved than a XXXX invested strong comparable on Property as investments

investment December a was XXXX ended than million, net and $XXX For X% XXXX, XX, the higher record AFG. approximately income XX months new P&C for

increased at XXXX XX% our operations year-over-year. P&C Excluding insurance income alternative net for investments, investment

approximately As P&C securities on In maturities portfolio at invest the environment, X.XX%. the XXXX. of earned in approximately is maturities. we're reinvestment interest of during rate current fixed quarter our maturities XX% invested favorably to the portfolio of fixed yields in X, Current our Slide you'll compare to rates yield on X% see in fixed fourth able

XXXX. and XX, quarter duration December on annualized approximately maturity cash investments to X.X% was years was for fourth and our fixed portfolio The XXXX at equivalents, the the our alternative for quarter. X.X cash of year portfolio, P&C The X.X% in compared return including P&C prior

or our assumes plan investments. an return expectation regarding alternative annual on investment alternative XXXX returns business optimistic remain an Longer prospects attractive the continue to better. averaging of X% returns of portfolio Our term, XX% for we from with

summary you'll turn X, XXXX. at of Please find a XX, to position financial December AFG's where Slide

quarter, special excess which through special ended dividend. $X.XX the quarterly special or best alternatives evaluate we share the the position, $XXX and repurchases. We the share $X significant share acquisitions, regular in of continue XXXX, a dividends November on including During for to the our capital year a timing and dividend we to a dividends deployment, capital for basis. amount in per in AFG capital expect operations per provides million opportunity our payment returned generate quarterly ample to shareholders strong of and our

year. give the Our current dividend expectations first to us the a capital special position and half flexibility the in of pay

an performance over as total growth term. per plus long creation view value important to dividends value of measured book in We measure by the continue is share

and and X.X% plus XX.X%, X in months share, December growth XX, the XXXX, per excluding For dividends, ended respectively. value was AFG's XX book AOCI,

coupled results, strong Our us for and value operating create management philosophy culture opportunistic our entrepreneurial our to and disciplined shareholders. to with capital continue enable operating effective

I'll of the now the operations our results for our turn P&C discuss to business to Carl at over call plan assumptions XXXX.

Carl Lindner

Thank you, XX Please Slides of page X overview webcast, an to include results. and Craig. quarter turn of fourth which our the

overall Specialty Specialty reported Our is Groups below Casualty Property and and quarter year as fourth combined as calendar well Transportation, AFG XX%. ratio Financial

to production Nearly new In portfolio underwriting Property strong records targeted and pricing returns, businesses a our through continued opportunities grow opportunities, to diversified or Specialty the we Casualty these to business addition XXXX. meet in environment for favorable we're in margins, continue and increased exposures. new premium all finding exceed set and

development XXXX adverse points and you'll Milton As Casualty the development in losses, overall in of X.X of fourth XXXX. XX% and points prior of of Results quarter combined quarter year X.X points quarter on year XXXX, quarter fourth fourth the the favorable an points the than X, ratio X.X a Specialty Slide businesses reported finish strong Hurricane for catastrophe at our included with prior the fourth primarily year of in in XX,XXXth compared higher X.X year to compared result quarter. to prior of X.X reported see the to XX.X% points albeit successful Property a the

favorable AFG and for XXXX. Specialty $XX We prior fourth within year are for for development shared in inflation report development million businesses our year P&C overall. in exposed full prior Casualty with This of is year. we've overall reserve in pleased consistent throughout and the development the the our businesses the some social led Specialty that to quarter the to Group group strengthening overall reserve adverse commentary Adverse

in quarter compensation XXXX. of have We our good fourth to development a from the of continue favorable amount workers' businesses

liability reflects And exposed workers' development previously severity than businesses. our comp in in the by several favorable quarter, years. fourth more and offset than umbrella The adverse development accident anticipated was inflation the higher in across social development adverse excess

net as in anticipated workers' inflation-exposed from accident severity our excess prior year substantially For due the social $XX favorable and to previously primarily years. and XXXX, social across was was offset several in the higher by umbrella reported businesses. net Casualty full favorable year This development development development adverse services million businesses comp our than liability group

feel strength our the our focus of rate and reserves relentless We in adequacy. remain continue in on confident to

professionals are that the pleased collaboratively I'm corporately across the reported development, this. of a despite below year fourth full operations address and to Our industry our for businesses working quarter insurance the in own of XXXX. combined the XX% and Casualty the adverse Group across for ratio Specialty our

For this group long on return of equity to of equates a business, tail XX%. lines around that of

respectively, X%, Gross gross and this in compared is X% written businesses. inflation social net the written Fourth premiums in premiums up and were XXXX. given overall, for an of full period enviable on the these to of some X% XXXX XXXX. the result pressures increased net and quarter So same respectively, and X%, year when

trends overall Average XX of increases pricing loss the consecutive our targeted achieving in were across business with in our overall or up to rate We quarter. rates X% Group, quarter the and Property excess and in renewal rate ratio excluding in quarters, workers' Both renewal fourth previous measures reported increases prospective we Casualty returns. up we're for approximately comp believe meet X% exceed line was overall. renewal and renewal

included Property of few turn earnings our in I'd to Specialty release, here. I'll review on to Now are a like and business focus to each XX summary Details Casualty Slide highlights results groups. from so our

year and strong the The achieved a of quarter Transportation on fourth over reported calendar crop period. the into quarter, over underwriting improvement crop XX.X% 'XX in year And above-average operations. combined in The an were businesses about an the comparable XX.X% the optimistic points in we profitability for higher Group to of X.X Property in XXXX. potential Coming our fourth XXXX. insurance the attributable improvement was the year-over-year ratio

particularly deductibles, projecting yields commodity throughout states were certain conditions for abnormally in of the average decreases AFG. year in season growing what within industry reduced and were an impact this models crop yields, entered While prices from soybean generally in dry resulted the

period. the written down this primarily the winter impact prior due with Overall, in lower pricing group this were group premiums, commodity previous XXXX elevated pricing wheat increased in gross from line of quarter to and businesses. renewal decrease year-over-year pricing our coupled with premiums competition XXXX, accounts quarter. was of nonrenewal Fourth on certain in rates the X% in quarter of comparable the on transportation both net in underperforming year The the fourth X% and average

the this up was group X% full Pricing overall. for for year

quarter. our to where in is on focused line. this in fourth of particularly auto continue rate business. of remain up the approximately line increases our This rate We were adequacy, in XX% commercial year XXth rates

XXXX. in achieved points the fourth XX.X% by very year-over-year the be in executive workers' liability, profits combined markets overall targeted Specialty in businesses our businesses. profitability a more our underwriting the executive comparable X.X in business businesses period in than strong lower compensation liability excellent businesses. were Underwriting excellent Casualty liability in these quarter, continues ratio than The Higher offset to and profit Group year calendar XX% higher underwriting excess and our compensation in workers' the in despite lower year-over-year our reported profitability

Fourth new renewal business opportunities X%, net year when quarter to lines our XXXX of surplus businesses marketed and prior increased of several & premiums period. business. Primary and X% same excess favorable respectively, in and were written the pricing drivers our gross targeted and compared growth

business growth by workers' activity. benefited M&A This year-over-year also increase from Our acquisition mergers lower in an premiums. tempered compensation was and

X% year-over-year. net grew fourth premiums group gross Excluding written and quarter comp, in workers' both this

this the in X point was our comp workers' previous an quarter. renewal X%, were in line this of Pricing quarter. third the about improvement approximately in the Excluding comp up for rates including quarter, from workers' up with businesses, fourth group, group XX%

pricing social businesses, increases exposed quarter. comp, continue excess full I year, of excluding including social the our renewal several group, of was am XX% better that achieve and during services, public our this For rate liability pleased and or in businesses. we X%. to entity the inflation

fourth XX% to due pricing and and X.X XXXX, net the continued group premiums year of point the year year. to Financial primarily underwriting growth up period to for were XX%, respectively, our the quarter for XXXX the prior quarter full and institutions an up of excellent achieve period. business. this over in quarter Fourth an outstanding in ratio X% when and margins reported Specialty gross was prior in improvement group fourth XX.X% combined financial up the the Renewal compared X%

underlying Now our lieu in of provided plan, guidance, which on providing assumptions Slide several earnings formal as XX. we look business XXXX, see summarized key to we XXXX you'll

X.XX% XX.X% These include on and portfolio combined last a rate premiums assumptions investments. for of and approximately of in $X.X annual written approximately XXXX X% $X.X from alternative of of reinvestment growth an billion net year, of X% approximately ratio a our billion return reported

operating performance AOCI, XXXX in that in operating equity, share core return approximately core these earnings XX%. result of assumptions generate would on We in net per line a of with and $XX.XX approximately expect excluding

Southern losses a know Our developing to estimate million, $XX our what embedded to range we that California related for wildfires on million acknowledging the currently, this assumptions. This $XX situation. based XXXX is remains is in

in company, California for be catastrophe achieved workers' net loss substantially lower XXXX, wildfires. XX.X% company experience we which comp to in potential our social favorable of optimism XXXX exposed businesses, anticipated plan the included the ratio to to compared profitability primarily improved overall offset and but XX.X% combined higher reserve in still development in The expect overall the reflects due the our losses by inflation for business strong

continued pay from XXXX that and expected expense elevate ratio in beyond. also. of XXXX XXXX the are invest to and relative environment, higher growth commissions reinsurers the positions to product combination that strength, Growth ability well ceding us offerings in that exceeds portfolio certain at lower broker We believe rate reserve yield in commissions strong modestly the certain our to the prudent results rate healthy our current continued for a and

strong I record of long-term proud creation. full fourth and these proven and We're our pleased are track exceptionally Craig to report of for results the year. quarter value

management their Our to look been skillfully in our for marketplace XXXX insurance in exercised our has portfolio. to and P&C navigate continuing shareholders professionals team and billion We have strategic $XX.X investment experience in-house and value build investment to opportunistic long-term beyond. forward and the both the specialty our knowledge of

to portion questions. and lines We'll Q&A a respond open your Craig, I'd for today. call the of our happy Brian be to

Operator

question [Operator Instructions] from Raymond we have coming today James. that of will Gregory first The be Peters

Charles Peters

disclosure some Specialty a like I us Is institutions? and you within you million $XX and property where around property your million California exposures Can this the resulted $XX with guess to losses sense wildfires. the question to business. it color estimated the in start loss? just side and added financial business of us are coming can the on Property the you? Maybe give -- Is I'd the a Transportation for of the give from type Financial that just

Carl Lindner

like Yes. the are -- property Greg, nonprofit exposed Property our property, businesses from sure. California Inland will the Marine, our come there. property-oriented in & those That lender-placed is, businesses businesses, have it exposures losses be are generally. that have Things would that

Charles Peters

give then could extra ratio sure, And the some related, higher not maybe you helpful. that driving color, that lines us in your expense you Okay. business those would are just give mentioned about the comments and detail revisit be could I'm just expense pressures. a some little Wondering it's just ratio, maybe surety you about comments but us of if .

Brian Hertzman

Brian. is this Greg,

So perspective. always overall when things we're business looking we're return at from an opportunities, our looking at

income also So the not . opportunity. in investment just expense or ratio but isolation ratio loss the the

growing say, we're the business workers' if a runs at business, lower our can higher ratio. than, that runs business financial commission cases, that institution a our that some ratio in impact So comp for example,

businesses across board So businesses, the at we look paying economics sense. at when transaction, when it's you mining where the a the the higher really overall makes commission look of of

Charles Peters

Got congratulations year. on the it. Well,

Operator

our Jon from . question Sandler. of coming the And line Newsome Piper of next be will

Jon Paul Newsome

bit Is sources the the Is what what's particular, hot of sort had little I general to trends In pieces? be? might of reserve what there? you to in have those seem industry-wide Casualty the sort of development quarter. basis a just give more it liability a some kind of curious if sort areas commercial excess think see wanted be color of an under we underneath can on it issues? some the about underlying on button auto those Just of that I'm

Carl Lindner

an Yes. that the coming XXXX XXX, Predominantly, kind focuses the writing from adverse development entities. Fortune of units liability is Fortune larger excess on

it's and . one focused -- of on really larger our other that units Our very good is entity, business excess the so on kind focused profitability of liability companies. on

Jon Paul Newsome

approach. think also that kind how you're makes taking looks like to maybe thinking of in It interesting. No, trend line philosophical to kind triggers or of on quarter you of curious aggressive when anything thing kind That's of sense. thinking a you're of more taking And less if a every issues. a kind about But thoughts reserves these sort changing trend. that, aggressive or bit that little there's I'm approach about reacting about

Carl Lindner

both changes if historically, Yes, loss ratio of in quarter-by-quarter reserving trends, we for one every see Brian, look -- actuarially we trends, our can also. trends, ratio a impacts our you reserving. and we in decision then that But on -- businesses, again, loss that the ratio weigh and from look loss at

we kind XXX and This reacted XXXX us before to of of the liability business the were businesses, excess quarter, in particularly around facts that that. the Fortune and one

really every businesses try So look we to be and our that. prudent of quarter at and Brian? all

Brian Hertzman

that, to businesses. excess the Carl our when our add across at business, that reacting mentioned business severity each in in When older so we're the we're XXX years. to that quarter, increased at for and example, businesses, Fortune on looking looking To we're the all

So the continue that, but then in loss and haven't actual though trend picks yet. years we severity say, the also even later we're in acknowledging adjusting increased seeing years, experienced would XXXX our that that in before,

to we're So the trying react years quarter. to information see that each across all we

you're though on get holistic -- taking best to even it's the sounds and review. at little saying like taking each So time we're attempting . are quarter, really know -- each based a maybe the what we a to it we're not we approach place

Operator

Instructions] Andrew is of the coming question our next from of Jefferies. And Andersen [Operator line

Andrew Andersen

And it the a 'XX. loss case ratio an in if a the for strip casualty would guide crop, I which is comp ratio wildfires like California But of case? one, combined XX.X% higher the to year. maybe loss two, also 'XX. I you that of average booking are also out next back booking you're guess the 'XX. part guide, as we expectation go to higher be was wanted to it to the guess, in sounds workers' And Just ratio

Brian Hertzman

from 'XX detail in an into year higher business much year we would exposure the too XXXX. average embedded in said without have in California by would So what correctly, have wildfires going plan would that that unit, be business in crop you've an crop is average the I is, our say do there. cat We and

And to the of year of sort our we've underwriting will expecting tempered view overall comp, increases comp then too. and actions, workers' you moving potential all social higher the businesses, higher underperforming that when taking and of through you're businesses loss our a is we be favorable better. there, in the inflation-exposed Casualty in the correct what's offsetting accident in tower non-renewing been it's accounts, have picks where at workers' look workers' ratio for development, the other pick up comp of things, in rate cats whether those outside the we're or or But

loss commissions the high is adverse So reasons of mix they to are reinsurers, more same from expense of expense and of the as been lesser comp which as the commissions is ratio good and on as development. catastrophes seeing ratio on driver that's so extent, ceding the then, the for the a workers' ceding the side, that of we're business. of have just kind not we're And lot -- that our improvement a outside seeing the overall. And in increase. of still

Andrew Andersen

where are some a throughout here? there's maybe should we X% rate on maintaining growth Casualty you in bit XX% guide, quarter, good focused about recognizing rate is? on a think here? but accelerating Specialty up just how it's little level Or Okay. Specialty been consolidated the pick year. like more and And Could it Casualty, . margins seems the the given Maybe

Carl Lindner

Well, think I comp, are think kind single is of excluding growing solid. high workers' I we digit, which

think workers' out at also here, of we some bottoming California. by I kind get point in could pricing helped comp

change. Summit last little January decline that and after in like this And a pricing percent business I it's in our year, our I increased XX% a think sending think bit. a year, think I has rate

. that So us help I side the think workers' on also. may comp

Operator

next of Michael our line be will Zaremski And from coming the BMO. question of

Unknown Analyst

Mike. Specialty This Casualty going for is improvement to Dan on the just Maybe back year-over-year. underlying

to Just clarify.

you tower of underwriting maybe up the is there from condition say what moving for improvement terms the coming actions the changes? just would inning in in And you there. then So are .

Brian Hertzman

been good increases also getting price as So there well. we've

underwriting So moving the the actions the up price between increases, and in tower. the

those helps keeping our things that of to those units. an We're business All expectations improve forward. on from profitability around going eye

in reflect favorable picks we'll see and -- So actually we of to be our -- it. impact to any not do kind be careful

at we'll ultimately, we're But hope because in things from we picks things. we're to there be that conservative hoping So those through. improvement see just looking those our come

Unknown Analyst

just impact releases the that, crop, you're going just guide maybe how Then that the back size 'XX you up specifically if to how your that from change that changed how the could 'XX of the and maybe and viewing year. year, accident

Carl Lindner

Yes.

I -- really settle we're think continuing you to still claims.

also from last in year crop claims also. Some

prices XX%. soybean the because and industry that. think modeling like states that change The something prices, I where farmers think, I said, that deductible in the Minnesota, XX% different and were yields like around few So were average and what and we XX% the was about our was were or what soybean corn and big was modeling really down, for than a was substantially soybean corn Ohio

summer were optimistic. we the in as in the very think fall, that, felt on I we reflecting and

a towards headed better year. We're

you I and you actually until the them. get the by that know it's think don't yield about settle variability state you state clients

I difference really So this that's and on early year. the probably year-end think was that through biggest happened

Operator

coming Meyer Inc. And question line from will be Instructions] [Operator Shields the & of Bruyette, our of Keefe, Woods, next

Meyer Shields

hoping level you walk we're the severity that on like increased it financials, there? level things about sort I was we look more guess, doesn't extrapolating years the at in of offsets I years. but And seem severity talked a older back accident comments where I want could of recent high to to go from earlier reported baked through Brian's into seeing accident Casualty. Specialty to more you obviously,

Brian Hertzman

of I question. my think understanding of your

capacity, have the in date. as that based for were So at off we would our business, through example, so on started XXXX a loss business pick experience in

years. So as in we a have. us to you [indiscernible] some The we're getting lower impactful increased because should have severity is this not why may later that of think of reason it loss up year iterative experience, to our that be more we and that are reacting pick based But offsetting picking those experience. than recent we that's actually of the because loss impact on picks accident it's

Meyer Shields

turn in was the Okay. Perfect. And any just helpful. call particular was book That's it hoping social because an targeted profitability? to commercial the, is I problems some auto of face general, give hoping in if mention I inflation. you where you this line didn't I'll to seems transportation again, terms you now. of And update us

Carl Lindner

Yes.

in think when a auto small look in you a commercial at year business making to auto previous And and solid mentioned -- working calendar . to that overall I've I loss year in we're return calls, overall underwriting small our with liability. underwriting on hard profit proppant on in a we're commercial equity. auto underwriting as get really, that. accident an commercial A overall,

liability workers' comp just to in returns auto commercial focused very you want equity. comp, overall and commercial And an get in on auto, stronger really underwriting the is ROE profit commercial add transportation and Our when a business stronger solid, good on also. we're profit. solid underwriting auto profits But underwriting to making we right

in the pretty about that XX% It's fourth during auto got quarter As in in increase year. whole the XX% I was call, strong. price we in commercial the liability, mentioned

of So, share certain think is and National sense makes increase change I in is ability and in alternative captive XX% if the premium. that our between it business to have since vehicles, captives the also our we're Interstate retentions

in underwriting order an commercial and liability So we're and those profit achieve doing that. auto all things of to

commercial industry social part commercial the plus XX% that. loss liability the liability auto as areas that on with and that us the of prior impacted for particularly Clearly, industry seeing inflation trends of on in auto the ratio one that's

in lost fourth some -- that, think the accounts. our some write terms in of grew I in accounts price about large mid-single quarter. that. focus the we large weren't We year, on for We digit and we because whole

for we So business. that year, the on had impact the mid-single The again, some digits. overall grew

on we're margin that. I that. in mean, focused improvement So business this and

other obviously, commercial competition. And other we're in auto, this returns. competitors it may a be we're know know. at underwriting -- in competition large some don't I small took We And accounts. solid business. don't Again, profits. So I non-intelligent versus if overall few more specialize

Our about guys X points probably than competitors. that's me better would plus our tell

So positioned I'm who for to part maybe as some more their others very knows, come improve of how trying portfolio pleased a to with as growth we're us. and provide will and opportunities business this grips

Operator

Thank you. And the that Q&A closing does over Please conclude for back to would turn go go today's ahead call ahead. and session. I like remarks. to Diane

Diane P. Weidner

all all you and morning thank participating quarter. the you, look Thank for for this talking you with again We next and great discussion. forward to

Operator

This does for conference conclude Thank today's all call. meeting. joining you today's

all disconnect. may You

American Financial (AFG) 5 Feb 252024 Q4 Earnings call transcript