American Financial Group Inc.
) reported fourth-quarter operating earnings per share of $1.28,
which comfortably beat the Zacks Consensus Estimate of $1.23. On
a year-over-year basis earnings surged 91%. The earnings beat
came on the back of record earnings from the company's Annuity
segment and significantly higher underwriting profitability in
its Specialty Property and Casualty insurance operations.
Total revenue of $1.36 billion was up 12.7% year over year, while
also easily surpassing the Zacks Consensus Estimate of $890
American Financial's total cost and cost expense of $1.12 billion
was down 9.8% year over year.
Full Year Results
For full year 2013, American Financial produced earnings of $4.22
per share, comfortably beating the higher end of its own guidance
range of $4.00-$4.20. Earnings also increased 29.1% year over
year, simultaneously surpassing the Zacks Consensus Estimate of
$4.17 per share.
Full year total revenue of $5.1 billion improved 2.7% year over
year, breezing past the Zacks Consensus Estimate of $3.4 billion.
Property and Casualty
segment generated $859 million in net premium earned, which
increased 13.6% year over year primarily led by a 20% increase in
premium written in the Specialty casualty sub-segment, along with
9% and 4% growth respectively in the Specialty Financial
and Property and Transportation sub-segments. The segment's
combined ratio improved 730 basis points year over year to 91.4%
signifying improved underwriting profitability.
segment reported $1.4 billion of premium which improved 2.5 times
year over year, primarily led by exponential increase of 382% in
Single premium from financial institutions.
American Financial enjoys financial flexibility with
approximately $1.0 billion of excess capital (including parent
company cash of approximately $525 million) as of Dec 31, 2013.
During 2013, American Financial increased its quarterly dividend
by 13% and in the fourth quarter, it paid a special dividend of
$1.00 per share.
Book value, a measure of net worth, increased 8.0% year over year
to $45.90 per share.
Core net operating earnings generated annualized returns on
equity of 11.5% in the quarter compared with 6.4% last year.
For 2014, American Financial anticipates core net operating
earnings to range between $4.50 and $4.90 per share. Management
does not expect any year-over-year growth in its core pretax
annuity operating earnings. For its Specialty group the company
expects net written premium growth of 17% to 21%.
American Financial exhibited a strong performance in 2013
benefiting from improving industry trends. A benign catastrophe
year along with increasing insurance pricing led to overall
earnings growth. The company's combined ratio which has trended
lower than the industry standards is also commendable.
Going ahead, the company earnings should benefit from the
recent acquisition of Summit Holdings which will expand its
workers' compensation business. Improving insurance rates, low
loss cost ratio, strong balance sheet, low leverage and a
disciplined capital management will further aid the company
results going forward.
AMER FINL GROUP (AFG): Free Stock Analysis
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American Financial presently carries a Zacks Rank # 2 (Buy).
Other well-placed property and casualty players worth considering
Aspen Insurance Holdings Ltd.
Endurance Specialty Holdings Ltd.
Navigators Group Inc.
). All these companies with a Zacks Rank #1 (Strong Buy) are due
to release their fourth-quarter and full year earnings in early