AFG Q3 2026 Earnings: Investment Income Lifts Core EPS 48%

American Financial Group (NYSE: AFG) reported Q3 2026 revenue of $2.58 billion, up about 11% from $2.33 billion a year earlier, while diluted EPS rose to $3.40 from $2.58. Core net operating EPS climbed 48% to a third-quarter record of $3.97, primarily because of higher investment income, including the Charleston Harbor Resort & Marina sale; net written premiums also grew 9%. Underwriting profit nonetheless eased to $133 million as a sharp decline in Specialty Financial offset gains in the other insurance groups.

Core Financial Results

Revenue benefited from growth in both earned premiums and investment income. Core earnings increased faster than GAAP earnings because after-tax non-core items reduced Q3 2026 net income by $47 million, compared with a $9 million reduction a year earlier; the latest quarter included $28 million of realized losses and a $19 million special asbestos and environmental charge.

Core net operating earnings is a non-GAAP measure that excludes realized gains and losses and certain other items that AFG does not consider indicative of ongoing operations.

Business and Segment Performance

Specialty P&C net written premiums increased 9%, supported by new business, policy retention, and renewal pricing. However, the overall combined ratio worsened by 0.8 percentage points to 93.8%, and underwriting profit declined from $139 million to $133 million despite slightly lower catastrophe-loss points and more favorable prior-year reserve development.

Property and Transportation benefited from stronger agricultural and transportation results. Growth in crop insurance products, new business, and favorable transportation pricing supported the segment’s premium expansion.

Specialty Casualty improved through higher profitability in excess and surplus and targeted markets businesses, partly offset by less favorable prior-year reserve development in workers’ compensation. Premium growth was restrained by non-renewals of underperforming accounts in certain targeted markets businesses.

Specialty Financial was the main underwriting drag. Its profit decline reflected an isolated large loss in Europe and lower favorable prior-year reserve development, while catastrophe losses increased to $16 million from $11 million. Lender services drove the segment’s 14% premium growth.

Charleston Harbor Sale Amplified Core Earnings Despite Softer Underwriting

The August sale of Charleston Harbor Resort & Marina generated $126 million of pretax net investment income. Because AFG’s P&C companies and parent each owned half of the property, the income was divided equally between P&C operating results and parent investment income, with $63 million recorded in each area.

AFG included this income in core operating results. The $126 million contribution represented most of the $138 million year-over-year increase in pretax core operating earnings, even as underwriting profit declined by $6 million. P&C net investment income reached a record $289 million, up 41%; excluding the property sale, it still increased 10%, indicating an underlying improvement but a much smaller one than the reported increase.

Profitability, Balance Sheet, and Capital Returns

Annualized GAAP return on equity rose to 22.3% from 18.2%, while annualized core operating ROE increased to 26.0% from 19.0%. Both measures exclude accumulated other comprehensive income, or AOCI.

Book value per share was $57.12 at September 30, down from $57.78 at the end of 2025. Excluding AOCI, book value per share increased to $62.29 from $58.38. For Q3, the change in book value plus dividends was negative 0.2%, compared with positive 5.5% when AOCI was excluded, reflecting the effect of rising interest rates on the fixed-income portfolio. After-tax unrealized losses on fixed maturities totaled $400 million, although 97% of fixed maturities were rated investment grade.

AFG ended the quarter with $17.35 billion of cash and investments and $1.82 billion of long-term debt. During Q3, it repurchased $26 million of common stock at an average price of $138.31 and paid dividends of $0.88 per share.

The board also declared a $3.50-per-share special dividend, representing an aggregate payment of approximately $290 million. It is payable November 25, 2026, to shareholders of record on November 16 and is separate from the regular quarterly dividend of $0.97 per share paid in October.

Management View

Management said average P&C renewal pricing increased about 6% excluding workers’ compensation and about 5% including it, with both measures approximately one percentage point higher than in Q2. The co-CEOs indicated that these increases supported AFG’s targeted returns while the company continued to pursue premium growth.

Management also described the company as having significant excess capital. Its stated priorities include regular and special dividends, share repurchases, investment in profitable organic growth, and acquisitions or start-ups that meet its return thresholds.

Recent Insider Transactions

AFG’s six-month insider summary showed 9,093 shares purchased in seven transactions and 108,659 shares sold in six transactions, resulting in net sales of 99,566 shares, or 0.60% of total insider holdings. The latest 10 reported entries consisted of six sales with an aggregate reported value of about $15.56 million and four zero-price stock awards.

The transaction data alone does not establish insiders’ views about AFG’s future performance.

Risks Investors Should Monitor

• Nonrecurring investment income: The Charleston Harbor sale contributed $126 million of pretax income and was included in core results. Comparable transaction income may not recur in future quarters.
• Specialty Financial volatility: An isolated European loss, lower favorable reserve development, and higher catastrophe losses reduced the segment’s underwriting profit by $28 million year over year.
• Interest-rate pressure on book value: Fixed-maturity unrealized losses totaled $400 million after tax, and AOCI caused reported book value performance to lag the measure excluding AOCI.
• Environmental and reserve exposure: AFG recorded a $24 million pretax special charge for environmental liabilities tied mainly to former railroad and manufacturing operations, even though its review produced no net change to P&C asbestos and environmental reserves.

Summary

AFG’s Q3 2026 results combined healthy premium growth and higher renewal pricing with a substantial increase in investment income, producing record third-quarter core EPS and higher ROE. However, the Charleston Harbor sale drove much of the earnings increase, while Specialty Financial weakness caused total underwriting profit to decline. The main follow-up points are the durability of underlying investment income growth, normalization in Specialty Financial, pricing relative to loss costs, and the effects of interest rates and environmental liabilities on book value and earnings.