AFG Q4 2020 Earnings Report
Key Takeaways
American Financial Group reported strong fourth-quarter results, with net earnings attributable to shareholders reaching $692 million ($7.93 per share) compared to $211 million ($2.31 per share) in the prior year. Core net operating earnings increased to $269 million ($3.09 per share) from $203 million ($2.22 per share) in the 2019 fourth quarter. The increase was driven by higher underwriting profit in the Specialty Property and Casualty insurance operations and higher earnings from alternative investments.
Net earnings attributable to shareholders for Q4 2020 were $692 million ($7.93 per share), compared to $211 million ($2.31 per share) for Q4 2019.
Core net operating earnings for Q4 2020 were $269 million ($3.09 per share), compared to $203 million ($2.22 per share) for Q4 2019.
Specialty P&C insurance operations generated an underwriting profit of $179 million for Q4 2020, compared to $89 million for Q4 2019.
AFG expects core net operating earnings in 2021 to be in the range of $6.25 to $7.25 per share, excluding earnings from annuity operations.
AFG
AFG
Forward Guidance
AFG expects core net operating earnings in 2021 to be in the range of $6.25 to $7.25 per share, excluding earnings from annuity operations, which are being sold to MassMutual and are expected to be reported as discontinued operations effective January 1, 2021.
Positive Outlook
- P&C Operations, including parent company interest and expenses are expected to contribute $5.90 to $6.90 per share.
- Real estate alt investments (partnerships) to be acquired by AFG Parent are expected to contribute $0.31 per share, based on an 8% pretax yield on $430 million invested.
- Directly owned real estate to be acquired by AFG Parent are expected to contribute $0.04 per share, based on a 4% yield on $100 million invested.
- The market is expected to remain firm throughout 2021.
- Solid renewal rate increases are expected to continue.
Challenges Ahead
- Parent cash, including cash received at close of the Annuity sale, is expected to generate zero earnings, based on a 0% yield on $3.2 billion in parent cash.
- The projected core net operating earnings for 2021 assumes zero earnings on parent company cash.
- Core earnings per share guidance excludes non-core items such as realized gains and losses, results of discontinued operations, and other significant items that are not able to be estimated with reasonable precision, or that may not be indicative of ongoing operations.
- The above guidance reflects an approximately 8% return on alternative investments that are marked-to-market through core earnings and a normal crop year.
- Uncertainties introduced by COVID-19 may impact results.