American Financial Group Inc.
) reported first quarter 2014 operating earnings per share of
$1.00, a couple of cents ahead of the Zacks Consensus Estimate.
On a year-over-year basis, earnings increased 8.7%. The earnings
beat came on the back of significantly higher underwriting
profitability in its Specialty Property and Casualty insurance
operations, partly offset by lower earnings in the Annuity
American Financial reported total revenue of $1.21 billion, up
5.5% year over year, and easily surpassed the Zacks Consensus
Estimate of $827 million. The increase was driven by higher
premiums and net investment income, partly offset by lower
Total cost and cost expense of $1.10 billion increased 7.9%
year over year due to higher losses and expenses in both Property
and Casualty and Annuity segments.
Property and Casualty
generated $755 million in net premium written, which increased
11.0% year over year primarily led by a 12% increase in premium
written in the Specialty Casualty sub-segment, along with 3%
growth each in the Specialty Financial and Property and
Transportation sub segments. The segment's combined ratio
improved 90 basis points year over year to 92.2%.
American Financial's Annuity segment reported $967 million
premium which improved 55% year over year, primarily led by an
exponential increase of 147% in sale of Single premium in the
financial institutions markets.
Long-term debt at American Financial remained static at $913
million with the Dec 2013 level.
Book value, a measure of net worth, increased 1.9% year over
year to $46.79 per share.
Core net operating earnings generated annualized returns on
equity of 9.1% in the quarter compared with 8.9% in the year-ago
2014 Guidance Reaffirmed
American Financial reaffirmed its operating earnings
expectation of $4.50 and $4.90 per share. Management expects core
pre-tax Annuity operating earnings as well as premium to remain
unchanged from the 2013 level of $328 million and $4 billion
respectively. For its Property and Casualty group, the company
expects net written premium to grow in the range of 17% to
Going forward, we expect American Financial to benefit
from the recent developments in its Specialty Property and
Casualty business such as the launch of the Aviation Division,
closing of the Summit acquisition and the purchase of renewal
rights that will expand its Public Sector Division. Improving
industry fundamentals such as price strengthening and increase in
renewal ratio would also drive overall growth.
Zacks Rank & Other Stocks
American Financial currently carries a Zacks Rank #3 (Hold).
Most of the property and casualty players have already reported
their first quarter earnings. Among these, Zacks Ranked #1
State Auto Financial Corp.
Allied World Assurance Company Holdings, AG
) surpassed the Zacks Consensus Estimate on earnings.
AMER FINL GROUP (AFG): Free Stock Analysis
ALLIED WORLD AS (AWH): Free Stock Analysis
STATE AUTO FINL (STFC): Free Stock Analysis
BERKLEY (WR) CP (WRB): Free Stock Analysis
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