American Financial Group Q1 Earnings Call Highlights

Key Points

• AFG reported core net operating earnings of $2.47 per share, up 36% year‑over‑year, driven by stronger underwriting — specialty P&C underwriting profit rose 66% and the specialty P&C combined ratio improved to 90.3 (down 3.7 points).
• Premiums and pricing remained positive with gross/net written premiums up 6%/3%, renewal rates up about 5% excluding workers’ comp (~3% overall) — marking 39 consecutive quarters of renewal rate increases; commercial auto rates were roughly 14% higher in Q1.
• AFG returned nearly $260 million to shareholders (including $60 million buybacks and a $1.50 special dividend); its $17.1 billion investment portfolio is earning fixed‑maturity yields near 5.25%, though alternatives were slightly negative this quarter (including a $13 million mark‑to‑market loss on $133 million of CLOs) and direct private credit exposure is modest at about $250 million (~1.5%).

American Financial Group NYSE: AFG executives highlighted stronger underwriting results and higher core operating earnings during the company’s first-quarter 2026 earnings call, pointing to improved combined ratios across its specialty P&C groups and continued capital returns to shareholders.

Core operating earnings rose on underwriting strength

Co-CEO Craig Lindner said AFG posted core net operating earnings of $2.47 per share for the first quarter, up 36% from the year-ago period. Co-CEO Carl Lindner III said the company delivered an annualized core operating return on equity of 17%, which he attributed to “strong underwriting margins.”

In its specialty property and casualty operations, Carl Lindner III said underwriting profit increased 66% year-over-year. The Specialty P&C businesses reported a 90.3 combined ratio for the quarter, improving 3.7 points from 94.0 in the first quarter of 2025.

Results included 2.2 points of catastrophe losses, compared with 4.5 points in the prior-year quarter, and 4.4 points of favorable prior-year reserve development versus 1.3 points a year earlier.

Premium growth and renewal pricing remained positive

Carl Lindner III said AFG continued to see premium growth while maintaining underwriting discipline. Gross and net written premiums increased 6% and 3%, respectively, from the first quarter of 2025.

Renewal pricing remained positive across the portfolio. Carl Lindner III said average renewal rates across the P&C group, excluding workers’ compensation, increased about 5% during the quarter, consistent with the previous quarter. Including workers’ comp, renewal rates were up about 3% overall. He noted AFG has reported overall renewal rate increases for 39 consecutive quarters.

Management also addressed shifting messaging around price adequacy versus loss trends. Carl Lindner III said that because “almost all of our businesses are earning the targeted returns,” AFG can “potentially be more competitive and just cover loss ratio trends, not necessarily exceed them,” while still pushing for stronger pricing in lines where improvement remains a priority.

Group-level underwriting highlights: property/transportation, casualty, and financial

AFG reported improved combined ratios in each of its specialty business groups:

• Property and Transportation Group: Carl Lindner III said the group produced an 87.6% calendar-year combined ratio, improving 4.9 points from 92.5% in the first quarter of 2025. Gross and net written premiums increased 11% and 6%, driven primarily by growth in crop insurance products, new business opportunities, higher exposures, and a favorable rate environment in transportation lines. Overall rates in the group were up about 6%.
• Specialty Casualty Group: The group reported a 95.8% calendar-year combined ratio, improving 1.8 points from 97.6% a year ago. Gross and net written premiums were each up 2%. Carl Lindner III said growth in targeted markets and workers’ compensation was partly offset by “heightened competitive conditions” in excess and surplus lines. Renewal rates excluding workers’ comp were up about 6%, while pricing including workers’ comp rose about 3%.
• Specialty Financial Group: The group posted an 80% calendar-year combined ratio, improving 7 points from the year-ago quarter. Gross and net written premiums increased 6% and 1%, respectively, primarily due to growth in lender services. Carl Lindner III said net written premiums were tempered by a decision to cede more coastal-exposed property business in the financial institutions business beginning in the second quarter of 2025. Renewal pricing increased about 1%.

On commercial auto, Carl Lindner III said AFG’s commercial auto businesses generated a “solid underwriting profit” and he was “especially pleased” to report a small underwriting profit in commercial auto liability for the quarter. He said rates in commercial auto liability were up about 14% in the first quarter, and told analysts the company still needs to take rate “that exceeds loss ratio trends” to move from a small underwriting profit to a “meaningful underwriting profit.”

Asked about severity and inflation trends in commercial auto, Carl Lindner III said trends have been “pretty consistent,” describing them as high single digits and at times low double digits over multiple years.

On longer-tail casualty lines and social inflation, Carl Lindner III cautioned against drawing conclusions from one quarter, but said the company feels “more positive” and remains focused on pricing that equals or exceeds loss ratio trends in areas like excess liability. He also said AFG has largely completed “re-underwriting and restructuring” in excess liability, including limit reductions and exiting certain nonprofit business, and noted growth in both its nonprofit and excess liability/umbrella businesses during the quarter.

Investment portfolio: higher yields, weaker alternatives, and private credit disclosure

Craig Lindner reviewed performance of AFG’s $17.1 billion investment portfolio. Excluding alternative investments, net investment income at the P&C operations rose 8% year-over-year, driven primarily by higher invested asset balances. About two-thirds of the portfolio was invested in fixed maturities, and Craig Lindner said AFG is investing in fixed-maturity securities at yields of roughly 5.25%. Duration of the P&C fixed-maturity portfolio, including cash and cash equivalents, was 3.1 years at March 31, 2026.

The annualized return on alternative investments in the P&C portfolio was “slightly negative” in the quarter, compared with 1.8% in the prior-year first quarter. Craig Lindner attributed the biggest impact to a $13 million mark-to-market loss on AFG’s $133 million investment in CLOs managed by the company, reflecting deterioration in the broadly syndicated loan market during the first quarter. Despite the quarter’s performance, he said management remains optimistic about “attractive returns” from alternatives over time, with an expectation of annual returns averaging “10% or better.”

Craig Lindner also addressed insurer exposure to private credit. He said AFG’s direct private credit exposure—defined as direct lending to private companies—was about $250 million, or 1.5% of total investments. Indirect private credit exposure includes approximately $800 million in investment-grade rated bonds issued by BDCs and private credit funds, representing less than 5% of total investments, as well as AAA-rated middle-market CLO tranches disclosed in the investor supplement. Craig Lindner said management believes structural subordination provides meaningful protection against material loss risk, even in a severely adverse environment, and noted that market value of direct and indirect private credit exposure was approximately equal to cost as of March 31, 2026.

Capital returns, share repurchases, and Charleston Harbor Resort sale

Craig Lindner said AFG returned nearly $260 million to shareholders during the quarter through $60 million of share repurchases, a $1.50 per share special dividend, and a $0.88 per share regular quarterly dividend. He said the company expects to continue generating “significant excess capital” in 2026, providing flexibility for acquisitions, special dividends, or additional repurchases. Book value per share growth excluding AOCI plus dividends was 3.1% for the quarter.

In response to an analyst question on buybacks, Craig Lindner said the company repurchased shares at “a little over $127 a share” and viewed it as “a very good use” of excess capital.

Management also discussed a planned asset sale. Craig Lindner said AFG reached definitive agreements in April 2026 to sell the Charleston Harbor Resort & Marina, with closing expected in the second or third quarter subject to approvals and customary conditions. The company expects to recognize a pre-tax core operating gain of approximately $125 million on the sale. Carl Lindner III and CFO Brian Hertzman said redeployment of proceeds will determine the ultimate earnings impact, noting that half of the asset is owned at the parent and half in the P&C business. Hertzman said the property generated about $16 million of NOI last year, while Craig Lindner added that the company’s plan assumption for 2026 had been $12.3 million, with the difference likely related to depreciation.

When asked about potential impacts from the Iran conflict, Carl Lindner III said near-term impacts appeared “negligible” to “pretty modest and manageable,” adding that higher fertilizer and fuel costs do not meaningfully affect the current crop year because most fertilizer was already purchased. He said broader exposures across other lines were “pretty modest.”

About American Financial Group NYSE: AFG

American Financial Group, Inc NYSE: AFG is a diversified holding company primarily engaged in property and casualty insurance and reinsurance. Through its flagship subsidiary, Great American Insurance Company, the firm underwrites a broad range of specialty insurance products for commercial and industrial clients, including inland marine, excess and surplus lines, executive liability, and environmental liability coverage. In addition, American Financial Group offers supplemental accident and health insurance and assumes reinsurance risks from other insurers, helping to diversify its underwriting portfolio.

The company traces its roots to 1946, when it was founded by Carl Lindner, Sr.

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