American Financial Group Q4 Earnings Call Highlights

Key Points

• AFG finished 2025 with a “strong finish,” reporting full-year Core Net Operating Earnings of $10.29 per share (Q4 core of $3.65) and returning more than $700 million to shareholders in 2025, including a declared $1.50 special dividend payable Feb. 25, 2026.
• Management flagged weakness in alternatives within its $17.2 billion investment portfolio—annualized alt returns were 0.9% in Q4 versus 4.9% a year earlier—but expects recovery with longer-term alt returns of ~10% and a 5.25% reinvestment yield on fixed maturities.
• AFG’s 2026 business plan targets 3%–5% net written premium growth, a combined ratio of about 92.5%, and core operating earnings of roughly $11 per share (core ROE ~18%) assuming an average crop year and continued pricing momentum.

American Financial Group NYSE: AFG executives said the company capped 2025 with what they described as a “strong finish,” citing record fourth-quarter underwriting profit and solid shareholder returns as the specialty insurer enters 2026 with a business plan calling for continued premium growth and an approximately 92.5% combined ratio.

2025 results and capital returns

Co-CEO Craig Lindner reported full-year 2025 Core Net Operating Earnings of $10.29 per share, producing a core operating return on equity of 18.2% (calculated using an average of the five most recent quarter-end equity balances, excluding AOCI). For the fourth quarter, Core Net Operating Earnings were $3.65 per share, translating to an annualized fourth-quarter core ROE of 25.2%.

Management emphasized capital deployment as a priority. In 2025, the company returned over $700 million to shareholders through:

• $334 million (or $4 per share) in special dividends
• $274 million in regular common dividends
• $99 million in share repurchases

Craig Lindner added that over the past five years, dividend payments and share repurchases totaled $6.3 billion. The company also increased its quarterly dividend by 10% beginning in October 2025 to an annual rate of $3.30 (or $0.52 per share quarterly, as stated on the call).

In conjunction with fourth-quarter results, AFG declared a $1.50 per share special dividend, payable February 25, 2026 to shareholders of record February 16, 2026. The aggregate amount is expected to be approximately $125 million. With that declaration, management said AFG has declared $55.50 per share (or $4.7 billion) in special dividends since the beginning of 2021.

Investment portfolio and alternative returns

Executives discussed performance across AFG’s $17.2 billion investment portfolio. Property and casualty net investment income in the fourth quarter was about 12% lower than the prior-year quarter, which management attributed to lower returns from alternative investments that more than offset higher interest rates and higher invested-asset balances.

For the full year, P&C net investment income excluding alternative investments increased 5% year over year, Craig Lindner said. Approximately 65% of the portfolio is invested in fixed maturities, and management said it is able to invest in fixed maturity securities at yields of approximately 5.25%. The duration of the P&C fixed maturity portfolio, including cash and cash equivalents, was 2.9 years as of December 31, 2025.

Alternative investment performance was a focal point. The annualized return on alternative investments in the P&C portfolio was 0.9% in the fourth quarter, compared with 4.9% in the prior-year quarter. Management said multifamily investment returns have been pressured by an oversupply of new properties in some targeted markets, but indicated it is seeing “signs of recovery,” citing:

• New starts down nearly 50% since 2022
• Completions peaking in 2024 and “rapidly declining”

Craig Lindner said AFG expects tightening supply and a reduced pipeline to drive higher rental and occupancy rates in the last half of 2026, and reiterated longer-term optimism for the alternative portfolio, with an expectation of annual returns averaging 10% or better.

Underwriting performance and premium trends

Co-CEO Carl Lindner III said fourth-quarter underwriting profit “set a new quarterly record,” led by “exceptionally strong profitability” in crop insurance. In the diversified specialty P&C portfolio, AFG reported a fourth-quarter 2025 combined ratio of 84.1% for its specialty property and casualty businesses, and said underwriting profit grew 41% versus the prior-year period.

Results included 0.2 points of catastrophe losses in the quarter (versus 1.1 points a year earlier). The quarter also benefited from 1.6 points of favorable prior-year reserve development, compared with 1.8 points of adverse prior-year reserve development in the fourth quarter of 2024.

Premium volume was modestly changed year over year. Fourth-quarter 2025 gross written premiums increased 2%, while net written premiums decreased 1%. For the full year, gross written premiums rose 2% and net written premiums were flat.

AFG reported continued pricing momentum. Average renewal rates across the P&C group (excluding workers’ comp) were up approximately 5% in the quarter; including workers’ comp, rates were up approximately 4%. Carl Lindner said AFG has reported overall renewal rate increases for 38 consecutive quarters.

Segment highlights: crop strength, casualty caution, and financial underwriting margins

In the Property and Transportation Group, AFG reported a 70.6% calendar-year combined ratio for the fourth quarter, improving by nearly 19 points from the comparable 2024 period. Management cited record yields for corn and soybeans and favorable commodity pricing trends that contributed to a “very strong crop year,” along with lower catastrophe losses in property-exposed businesses. Gross written premiums in the group increased 5% while net written premiums were down approximately 2%. Renewal rates in the group increased about 6%, and pricing for the full year was up about 7%. Commercial auto liability pricing was up approximately 15% in the quarter and 14% for the full year, management said.

In the Specialty Casualty Group, the calendar-year combined ratio was 96.7% in the fourth quarter, compared with 91.4% in the prior-year quarter. Gross and net written premiums increased 2% and 3%, respectively, driven by new business and renewal pricing in targeted markets, M&A-related opportunities, workers’ comp growth, and premiums from a startup business, partially offset by competitive pressure in Executive Liability and E&S lines. Management said renewal pricing was up about 5% overall (and 6% excluding workers’ comp). Executives also highlighted continued caution around social inflation-exposed businesses, including Social Services, Public Entity, and certain excess liability lines, where they said there have been “intermittent small pockets of adverse development.”

During Q&A, executives discussed workers’ compensation trends, noting overall comp results remained “excellent” in 2025, though the calendar-year combined ratio was “a few points higher” than last year. They identified California as an exception in the comp portfolio, referencing cumulative trauma exposure and a tougher environment; management said the California-focused subsidiary is less than $200 million in net written premiums for the year and less than 15% of the overall workers’ comp business.

In the Specialty Financial Group, AFG posted an 83 combined ratio in the fourth quarter, though it was 2.3 points higher than the prior-year period. Gross written premiums declined 4% and net written premiums declined 10%, as higher European premiums were more than offset by lower premiums in the Financial Institutions business. Management said net written premiums were also affected by a decision beginning in the second quarter of 2025 to cede more coastal-exposed property business within Financial Institutions.

2026 business plan assumptions and outlook

AFG did not provide formal earnings guidance but offered key 2026 business plan assumptions. Management’s plan assumes:

• 3%–5% growth in net written premiums from $7.1 billion reported in 2025
• A combined ratio of approximately 92.5%
• A reinvestment rate of approximately 5.25%
• An annual return of approximately 8% on its $2.8 billion alternative investment portfolio

Management said performance in line with these assumptions would result in Core Net Operating Earnings of approximately $11 per share in 2026 and a core operating ROE (excluding AOCI) of approximately 18%. Carl Lindner noted the plan assumes an average crop year and that the company remains mindful of “pockets of softening rates” and competitive conditions.

On capital management, Craig Lindner said investors should not “read too much” into the lack of share repurchases in the fourth quarter, describing AFG as opportunistic and noting the company reduced the first-quarter special dividend by $0.50 versus the prior year to preserve “dry powder” for alternatives including repurchases.

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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