American Financial Group Inc.
) fourth quarter adjusted earnings of 67 cents breezed past the
Zacks Consensus Estimate by 3.1%. However, results were down
36.2% year over year from $1.05 earned in the year-ago quarter.
AMER FINL GROUP (AFG): Free Stock Analysis
FIRST AMER FINL (FAF): Free Stock Analysis
FIDELITY NAT FI (FNF): Free Stock Analysis
PROASSURANCE CP (PRA): Free Stock Analysis
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Including gain on sale of Medicare Supplement and Critical
Illness of 15 cents, other realized gains of 37 cents, long-term
care reserve charge of $1.1 and tax case & settlement of open
tax years worth 43 cents, American Financial reported net income
of 54 cents per share in the fourth quarter of 2012, down 50.5%
year over year.
Quarterly Operational update
Total revenues decreased 3.7% year over year to $1.2 billion in
the fourth quarter. Decline in revenues resulted from a
substantial reduction in life, accident and health premiums (down
73.6% year over year) and a $31 million loss on change in fair
value of assets/liabilities.
Total expenses in the quarter increased 21.4% year over year to
A decline in revenue coupled with an increase in expenses led to
an operating loss of $30 million compared to an operating income
of $240 million in the year-ago period.
Full Year Highlights
Adjusted earnings of $3.27 per share deteriorated 7.1% year over
year. Results, however, surpassed the Zacks Consensus Estimates
by a penny.
Including gain on sale of Medicare Supplement & Critical
Illness of $1.19, other realized gains of $1.34, long-term care
reserve charge of $1.0, special A&E charges of 22 cents, tax
case & settlement of open tax years worth 70 cents and other
charges worth 16 cents, net income for 2012 was $5.09 per share
as against $3.32 per share in 2011.
Total revenue for full year 2012 increased 6.6% year over year to
Behind The Headlines
P&C Specialty -Underwriting profit was $15 million, down
83.1% year over year. Combined Ratio deteriorated 1000 basis
points (bps) to 98% in the reported quarter. Net premiums written
increased 17% driven by higher premiums in the Property &
Transportation and specialty Casualty groups.
The Property & Transportation Group reported underwriting
loss of $14 million in the fourth quarter compared to an
underwriting profit of $75 million in the year ago period driven
by the effects of Midwest drought and Superstorm Sandy. Combined
ratio deteriorated 2400 bps year over year to 104%. Net premiums
written increased 21% year over year.
Underwriting profit in the Specialty Casualty Group was $8
million, rebounding from a loss of $3 million in the prior-year
period. Combined ratio improved 400 bps year over year to 97%.
Net written premiums increased 16% year over year.
The Specialty Financial group generated underwriting profit of
$16 million, up 23.1% year over year. Combined ratio improved 200
bps year over year to 85% in the reported quarter. Net written
premiums increased 7% year over year.
Annuity & Supplemental- The Annuity Group reported pretax
operating income of $68 million in the fourth quarter, up 17%
year over year.
Excluding a non-core after tax charge of $99 million, the Run-off
operations reported an operating loss of $12 million as compared
to a $6 million loss in the year-ago period.
Share Repurchase Update
In the fourth quarter, American Financial spent $100 million to
buy back 2.6 million shares at an average price of $38.77. In
2012, it bought back shares worth $415 million.
As of Dec 31, 2012, American Financial had cash and investments
of $28.4 billion, up 11.2% year over year.
Long term debt of the company was $953 million at 2012 end, up 2%
year over year.
American Financial projects adjusted income to be between $3.60
per share to $4.00 per share.
Combined ratio is expected to be in the range of 91% to 95%.
American Financial currently carries a Zacks Rank #3 (Hold).
First American Financial Corporation
Fidelity National Financial Inc.
) carrying a favorable Zacks Rank #1 (Strong Buy) are expected to
report their fourth quarter and full year 2012 results shortly.