AMERICAN FINANCIAL GROUP INC Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Highlights: AFG's Q1 2025 results were solid despite industry catastrophes and economic volatility. Returned over $290 million to shareholders. Core net operating earnings were $1.81 per share.
• Investment Details: ~66% of portfolio in fixed maturities, yielding ~5.75%, exceeded 6% in Q，1. Alternative investments had 1.8% return in Q1 vs 9% prior year. Sold Charleston Harbor Resort & Marina, expected to recognize ~$100M after-tax gain. Returned ~$290M to shareholders in Q1. Specialty P&C businesses performed well despite CA wildfires.
• Financial Position: Investment income up 6% excluding alternative investments. P&C net investment income down 17% YOY. Duration of P&C fixed maturity portfolio 2.8 years. Book value per share growth 2.5% including dividends.

Segment Performance

• Specialty Property and Casualty: Generated a 94 combined ratio in Q1 2025, 3.9 points higher than Q1 2024. Accident year excluding cat loss ratio improved 1.8 points. Gross written premiums down 2% YOY, net written premiums down 1%. Adjusting for non-renewed large accounts, gross written premiums up 2% YOY and net written premiums up 1%.
• Property and Transportation Group: Achieved a 92.5% combined ratio in Q1 2025, 4 points higher than Q1 2024. Gross and net written premiums down 6% YOY. Excluding non-renewals, gross written premiums up 2% and net written premiums flat. Overall renewal rates up ~7% on average.
• Specialty Casualty Group: Had a 97.6 combined ratio in Q1 ，5.4 points higher than Q1 2024. Gross written premiums down 3% YOY, net written premiums down 4% YOY. Excluding workers' comp, renewal rates up 9%.
• Specialty Financial Group: Reported an 87 combined ratio in Q1 2025, 0.4 points higher than Q1 2024. Gross written，premiums up 16% YOY, net written premiums up 18% YOY. Renewal pricing up ~2%.

Guidance

• Original EPS guide was ~1050, but the Charleston Harbor sale adds ~$1.20 per share.
• Alternative investment returns uncertain due to market volatility.
• Premium growth expected to be positive for the year but lower than initial expectations due to various factors like non-renewal of accounts and market conditions.

Risks

• Elevated economic uncertainty could temper alternative investment returns.
• Economic slowdown poses secondary risks to several businesses.
• Tar，iff uncertainties and competitive market conditions in some lines of business.

Question and Answer

• Q: Expense ratio changes in context of 92.5 combined ratio.

A: Brian Hertzman mentioned mix of business (e.g., growth in financial institutions business with different expense ratio) and software/IT initiatives impacting expense ratio, which was expected in the business plan.

• Q: Catastrophes this quarter.

A: Brian Hertzman said Cali wildfires were at the low end of the range, with ~$10 million of other small cats.

• Q: EPS guide with Charleston sale.

A: Brian Hertzman stated the Charleston Harbor transaction is incremental to the original EPS guide, but alternative returns are uncertain due to market volatility.

• Q: Premium growth in property，and transportation.

A: Carl Lindner mentioned non-renewal of accounts and focus on improving margins in the transportation business, particularly in commercial auto liability.

• Q: Specialty casualty adverse development.

A: Brian Hertzman said favorable workers' comp development is lower, offset by adverse in social inflation-exposed businesses; Carl Lindner added consolidation of unfavorable development in excess liability into specialty casualty impacted the segment.