American Financial Group Q3 Earnings Rise on Investment Income

American Financial Group Inc. reported higher third-quarter earnings as stronger investment income, including a gain from a property sale, offset a modest decline in property-and-casualty underwriting profit. Net written premiums increased, although the insurer’s combined ratio deteriorated slightly from a year earlier.

The specialty insurer posted third-quarter 2026 net earnings of $282 million, or $3.40 per diluted share, up from $215 million, or $2.58 per share, in the prior-year period. Core net operating earnings rose to $329 million, or $3.97 per share, from $224 million, or $2.69 per share.

Pretax core operating earnings were $418 million, compared with $280 million a year earlier. The quarter included $126 million of pretax net investment income from the August sale of Charleston Harbor Resort and Marina. Because AFG’s property-and-casualty companies and parent each owned half of the property, the gain was split equally between P&C and parent investment income.

For the first nine months of 2026, net earnings increased to $721 million, or $8.68 per diluted share, from $543 million, or $6.50 per share. Core net operating earnings were $769 million, or $9.26 per share, compared with $555 million, or $6.65 per share, a year earlier.

Premium growth accompanies mixed underwriting results

Property-and-casualty net written premiums rose 9% to $2.45 billion in the third quarter from $2.25 billion a year earlier. Net earned premiums increased to $2.16 billion from $2.01 billion.

P&C underwriting profit, however, declined to $130 million from $138 million. The overall combined ratio was 94.0%, compared with 93.1% in the third quarter of 2025; a ratio below 100% indicates an underwriting profit. Excluding catastrophe losses and prior-year reserve development, the combined ratio was 94.3%, up from 93.0%.

Current accident-year catastrophe losses were unchanged at $23 million. Favorable prior-year reserve development increased to $30 million from $23 million, partially supporting reported underwriting results.

Property and Transportation produced the strongest year-over-year improvement among AFG’s underwriting groups. Its underwriting profit rose to $68 million from $55 million, while net written premiums increased to $1.19 billion from $1.05 billion. The unit’s combined ratio improved to 93.4% from 94.1%, helped by $24 million of favorable prior-year reserve development.

Specialty Casualty underwriting profit increased to $42 million from $33 million as net written premiums reached $935 million, compared with $914 million. Its combined ratio improved to 94.9% from 95.8%, although the ratio excluding catastrophe losses and reserve development was 95.1%, versus 94.9% a year earlier.

Specialty Financial was the main underwriting drag. Profit fell to $23 million from $51 million even as net written premiums rose to $326 million from $287 million. Its combined ratio deteriorated to 92.5% from 81.1%, reflecting a higher current accident-year loss ratio and a smaller benefit from favorable reserve development. Catastrophe losses in the unit increased to $16 million from $11 million.

For the first nine months, total P&C underwriting profit rose to $428 million from $345 million. Net written premiums increased to $6.03 billion from $5.67 billion, while the combined ratio improved to 92.2% from 93.4%. Catastrophe losses declined to $89 million from $133 million, and favorable prior-year reserve development increased to $155 million from $54 million.

Investment income lifts operating earnings

P&C net investment income rose to $289 million from $205 million, including its $63 million share of the Charleston Harbor sale. Alternative investments generated $48 million of income, up from $43 million, while fixed-maturity income increased to $151 million from $135 million.

Consolidated net investment income was $356 million, compared with $205 million in the prior-year quarter. Excluding the property sale, the presentation showed higher fixed-maturity income and stronger equity-method investment contributions, partly offset by losses on certain equity securities marked through investment income.

AFG ended September with $17.35 billion of cash and investments, up from $17.18 billion at the end of 2025. Fixed maturities represented 68% of the portfolio, and 97% of the fixed-maturity holdings by fair value were investment grade.

Capital and portfolio risks

Book value per share excluding accumulated other comprehensive income increased to $62.29 from $57.59 a year earlier. Including AOCI, book value was $57.12, compared with $56.72. The gap reflected unrealized losses in the fixed-maturity portfolio, which totaled $479 million at September 30, up from $28 million at the end of 2025.

Total shareholders’ equity was $4.73 billion, while equity excluding AOCI was $5.16 billion. Debt represented 26.4% of total capital excluding AOCI, including subordinated debt.

The presentation did not provide forward earnings or premium guidance. The disclosed results indicate that near-term performance remains exposed to catastrophe losses, reserve development, underwriting deterioration in individual specialty businesses, and changes in the value and income contribution of the investment portfolio.