AFG combined ratio worsens to 94.0% and GWP drops 2% in Q1

By Michael Loney

May 6 - (The Insurer) - American Financial Group has reported a 3.9 point deterioration in its specialty P&C insurance combined ratio in the first quarter of 2025, driven by higher catastrophe losses and a lower benefit from favourable reserve development.

• $1.81 core operating EPS down from $2.76 in Q1 2024, misses $2.03 consensus

• Specialty P&C combined ratio worsens 3.9 points to 94.0% in Q1 2025

• 4.5 points related to cat losses, compared to 2.3 points in prior-year period

• GWP down 2% to $2.29 billion, AFG non-renews certain under-performing accounts

Cincinnati-based AFG reported core net operating earnings of $152 million for the first quarter, down from $231 million in the same period of last year.

Core operating earnings of $1.81 per share were down from $2.76 in the prior year period and missed the $2.03 consensus estimate of eight analysts as per MarketWatch.

AFG said the decrease reflects lower property and casualty insurance underwriting profit and reduced returns in its alternative investment portfolio.

Specialty P&C underwriting profit fell to $94 million for the first quarter of 2025 compared to $154 million in the prior-year period, as higher underwriting profit in the specialty financial group was more than offset by lower underwriting profit in the property and transportation group and the specialty casualty group.

AFG's specialty P&C insurance operations generated a 94.0% combined ratio in the first quarter of 2025, up 3.9 points from the 90.1% booked in the first quarter of 2024.

Q1 2025 included 4.5 points related to catastrophe losses, due primarily to losses from the California wildfires, compared to 2.3 points in the first quarter of 2024.

This year’s first quarter results benefited from 1.3 points of favourable prior-year reserve development, compared to 3.3 points in Q1 2024. Underwriting profit was $94 million for the 2025 first quarter compared to $154 million in the comparable 2024 period.

The quarter included catastrophe losses of $10 million in the property and transportation group ($9 million in the prior year period), $27 million in the specialty casualty group ($19 million) and $35 million in the specialty financial group ($7 million).

Gross written premiums fell 2% to $2.29 billion in the first quarter from $2.34 billion in the prior year period, while net written premiums fell 1% to $1.61 billion from $1.63 billion.

AFG said: “Strategic decisions to optimise long-term results, including the non-renewal of certain under-performing accounts and proactive underwriting measures to address the impact of social inflation and competitive market conditions in selected lines of business, tempered growth in the quarter.”

AFG co-CEO Carl Lindner said the specialty P&C businesses “performed well” in Q1 despite elevated catastrophe losses stemming from the California wildfires.

“Maintaining underwriting discipline has been paramount, as several of our businesses faced heightened price competition during the quarter,” he said.

Lindner said AFG continues to expect premium growth for the full year in 2025.

“We achieved strong rate increases in our most social inflation-exposed lines of businesses and non-renewed several larger accounts with unfavourable loss experience,” he said. “While these actions moderated our growth this quarter, they have positioned us for future success.”

AFG’s average renewal pricing across the P&C Group was up 7% for the quarter excluding workers’ compensation and up 5% overall. This was a deceleration from the figures of 8% and 7%, respectively, in Q4 2024,

“We believe we are achieving overall renewal rate increases in excess of prospective loss ratio trends to meet or exceed targeted returns,” the company said.