AMERICAN FINANCIAL GROUP INC Q1 FY2026 earnings call

• AFG reported core net operating earnings of $2.47 per share in Q1 2026, a 36% increase from prior year. • Investment portfolio details: ~2/3 in fixed maturities with 5.25% yield and 3.1-year duration; alternative investments had negative return in Q1 2026 due to CLO mark-to-market loss but long-term optimism for 10%+ annual returns. • Sold Charleston Harbor Resort and Marina in April 2026, expected to close in 2nd or 3rd quarter 2026, with pre-tax core operating gain of ~$125M. • Returned nearly $260M to shareholders in Q1 2026, including share repurchases, special and regular dividends; expects excess capital for acquisitions, dividends, or repurchases. • Specialty property and casualty businesses had strong underwriting profit growth, with various groups showing premium growth and improved combined ratios.

For the first quarter of 2026, AFG reported an annualized core operating return on equity of 17% driven by strong underwriting margins. Investment performance: Excluding alternative investments, net investment income and property and casualty insurance operations increased 8% year over year due to higher invested assets; fixed maturities make up approximately two thirds of the portfolio with a yield of ~5.25% and duration of 3.1 years; alternative investments had a slightly negative annualized return in Q1 2026, with a $13M mark-to-market loss on CLOs; direct private credit exposure is ~$250M (1.5% of total investments), indirect private credit exposure via BDCs, private credit funds, and AAA-rated CLO tranches is ~$800M (less than 5% of total investments). Specialty property and casualty businesses: Specialty property and casualty insurance businesses had a 90.3% combined ratio in Q1 2026, 3.7 points improvement from Q1 2025; underwriting profit increased 66% year over year; gross and net written premiums were 6% and 3% higher respectively; average renewal rates excluding workers' comp up ~5%, including workers' comp up ~3%. Property and transportation group: Achieved an 87.6% calendar year combined ratio in Q1 2026, 4.9 points improvement from Q1 2025; gross and net written premiums 11% and 6% higher; overall rates up ~6%; commercial auto businesses had a small underwriting profit in commercial auto liability with rates up ~14%. Specialty casualty group: Achieved a 95.8 calendar year combined ratio in Q1 2026, 1.8 points improvement from Q1 2025; gross and net rent premiums both increased 2%; renewal rates excluding workers' comp up ~6%, including workers' comp up ~3%. Specialty financial group: Reported an exceptional 80% calendar year combined ratio in Q1 2026, 7 points improvement from Q1 2025; gross and net written premiums increased by 6% and 1% respectively; renewal pricing up ~1%.

• Expect operations to continue generating significant excess capital throughout 2026 for potential acquisitions, special dividends, or share repurchases. • Original business plan assumptions for alternative investments gave 8% full-year target, but first quarter result makes 8% seem aggressive, with expectation of better performance in remaining months. • On consolidated premium growth, expected gross written premium in crops to be flat with net written premiums up nicely due to quota share changes.

• Alternative investments had lower returns in Q1 2026 due to deterioration in broadly syndicated loan market, affecting mark-to-market value of CLOs. • Private credit exposure has associated risks, although significant structural subordination provides protection; economic environment could impact value. • Competitive conditions in some businesses, like excess and surplus lines in specialty casualty, could affect results. • Inflation and conflict (like Iran conflict) could have indirect impacts, although near-term impact is negligible currently.

Q: On the marina sale, quantify yield/NII contribution and plans for proceeds.

A: Last year NOI on property was ~$16M; proceeds from sale will allow reinvestment, with replacement income depending on use of proceeds.

Q: On P&C pricing relative to loss trend, talk through pricing.

A: Outside workers comp, quarter price increases in segments in line with 4th quarter; workers comp pricing down ~3% but loss ratio trends benign; some businesses like commercial auto liability still need work but overall pleased with pricing results.

Q: On alt return, does first quarter result change perception?

A: First quarter result makes 8% full-year target aggressive, but expects better performance in remaining months.

Q: Drivers of expense ratio increase?

A: IT initiatives have modest upward pressure; specialty casualty has lower seating commissions; financial segment has higher commissions due to profitable business.

Q: On consolidated premium growth, thoughts on full year?

A: Gross written premium in crops expected to be flat with net written premiums up nicely due to quota share changes.

Q: On specialty-casualty segment loss ratio and social inflation, any improvement?

A: Feel better about loss ratio trends, with growth in excess liability and nonprofit businesses.

Q: On share purchases, any read into current valuations?

A: Excess capital, repurchased stock at good value around $127 per share.

Q: On competitive environment in insurance industry, expected trend?

A: More status quo, but some lines like commercial auto and excess liability may have more problems in next 12 months.

Q: On commercial auto inflation/severity trend, acceleration?

A: Been consistent at high single digits/low double digits, pleased with commercial auto liability moving to small underwriting profit.

Q: On specialty financial segment, what's under surface of loss and expense ratio?

A: Commissions roll-off and mix of business impact; commissions based on profitability, and accident year loss ratio ex-CATS was different last year vs this year