AFG Q4 specialty P&C CR deteriorates 130bps to 89% on specialty casualty adverse PYD

By Chris Munro

Feb 4 - (The Insurer) - American Financial Group (AFG)’s Q4 2024 specialty P&C combined ratio deteriorated by 1.3 percentage points to 89.0 percent as adverse reserve development in specialty casualty offset improved underwriting results in its property and transportation (P&T) and specialty financial units.

• Specialty P&C CR deteriorates 1.3 points YoY to 89% in Q4

• Property and transportation and specialty financial units increase UW income

• Specialty casualty UW income dips on unfavourable PY reserve development

• Specialty P&C NPW up 1% YoY to $1.46bn

• Core net operating earnings per share of $3.12 up YoY and beat Wall Street consensus

The Cincinnati, Ohio-based business booked core net operating earnings per share of $3.12 for the quarter, up on the prior-year period’s $2.84 and ahead of the $3.01 consensus forecast as per S&P Capital IQ.

AFG’s fourth quarter 2024 specialty P&C combined ratio of 89.0 percent included 1.1 points of primarily Hurricane Milton-related catastrophe losses and 1.8 points of adverse prior year reserve development.

In comparison, AFG’s Q4 2023 combined ratio of 87.7 percent included 1.4 points of cat losses and 3.3 points of favourable prior year reserve development.

Overall, AFG’s specialty P&C business booked underwriting profit of $204mn in 2024’s fourth quarter, down $8mn year on year.

The specialty P&C operation reported $36mn of adverse development in Q4 2024, compared with $56mn of favourable development in the prior-year period.

The P&T group’s combined ratio improved 1.1 points to 89.2 percent, as specialty casualty’s deteriorated by 4.4 points to 89.0 percent.

Specialty financial’s combined ratio improved 60 basis points year on year to 80.7 percent.

P&T recorded underwriting profit of $82mn in Q4 2024, up from the prior-year period’s $67mn, with the improvement due to a stronger performance in its crop insurance operations.

P&T catastrophe losses totalled $10mn in Q4 2024, up from $5mn in the prior-year period.

The unit booked $3mn of favourable reserve development in 2024’s fourth quarter, compared with $12mn of favourable reserve development in Q4 2023.

Specialty financial booked underwriting profit of $54mn, compared with $45mn in 2023’s fourth quarter, primarily due to an improved performance in its financial institutions business.

Catastrophe losses within specialty financial increased $13mn year on year to $17mn in Q4 2024.

Specialty financial recorded $8mn of favourable development in the three months to 31 December 2024, the same as in the prior-year period.

Underwriting profit in AFG’s specialty casualty group fell by $32mn year on year to $82mn in 2024’s fourth quarter, with the carrier noting the unit was impacted by adverse prior year reserve development in certain social inflation-exposed businesses.

Specialty casualty adverse reserve development totalled $36mn in Q4 2024, compared with favourable development of $37mn in the prior-year period.

As AFG noted, higher year-on-year underwriting profits in certain specialty casualty targeted markets businesses were more than offset by lower underwriting profit in its excess liability, workers’ compensation and executive liability offerings.

The carrier said underwriting profitability in its workers’ compensation and executive liability businesses “continues to be excellent” even though the units' profitability declined.

Specialty casualty’s catastrophe losses included the impact of lower-than-anticipated losses from Hurricane Helene, which resulted in a favourable impact of $5mn in Q4 2024, compared with losses of $8mn in 2023’s fourth quarter.

AFG’s specialty P&C net premiums written (NPW) increased 1 percent year on year to $1.46bn in 2024’s fourth quarter.

P&T NPW reduced by 6 percent year on year to $399mn, while specialty casualty NPW grew 4 percent from Q4 2023 to $725mn.

Specialty financial’s NPW increased 12 percent from 2023’s fourth quarter to $279mn.

NPW in AFG’s “other” segment fell by 17 percent to $57mn in 2024’s fourth quarter.

Net investment income across the business increased to $194mn in 2024’s fourth quarter, compared with $159mn in the prior-year period.

In a statement, AFG’s co-CEOs Carl Lindner and Craig Lindner said they were very pleased with the company’s performance.

“Excellent underwriting results, record P&C net investment income and effective capital management enable us to continue to create long-term value for our shareholders.

“We are thankful for our talented insurance and investment professionals, who have positioned us well as we enter 2025,” they said.

As of 31 December 2024, AFG “continued to have significant excess capital”, the executives noted.

“Returning capital to shareholders in the form of regular and special cash dividends and through opportunistic share repurchases is an important and effective component of our capital management strategy.

“In addition, our capital will be deployed into AFG’s core businesses as we identify potential for healthy, profitable organic growth, and opportunities to expand our specialty niche businesses through acquisitions and start-ups that meet our target return thresholds,” the co-CEOs said.