• Core Net Operating Earnings Per Share (Full-Year 2024): $10.75
• Core Operating Return on Equity (Full-Year 2024): 19.3%
• Capital Returned to Shareholders (2024): $791 million
• Special Dividends (2024): $6.50 per share
• Regular Common Stock Dividends (2024): $246 million
• Growth in Book Value Per Share (Excluding AOCI, 2024): 19.6%
• Fourth-Quarter Core Net Operating Earnings Per Share (2024): $3.12
• Annualized Fourth-Quarter Core Return on Equity (2024): 21.9%
• Property and Casualty Net Investment Income (Full-Year 2024): $784 million
• Combined Ratio (Fourth-Quarter 2024): 89%
• Net Written Premiums Growth (Full-Year 2024): 7%
• Average Renewal Pricing (Excluding Workers' Comp, Fourth-Quarter 2024): Up 8%
• Specialty Financial Group Combined Ratio (Fourth-Quarter 2024): 80.7%
• Net Written Premiums Growth (Fourth-Quarter 2024): 1%
• Investment Portfolio (End of 2024): $15.9 billion

• Warning! GuruFocus has detected 4 Warning Sign with WTFC.

Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• American Financial Group Inc (NYSE:AFG) reported a strong annual core operating return on equity of 19.3% for 2024.
• Net written premiums grew by 7% during the year, showcasing robust business growth.
• AFG returned $791 million to shareholders in 2024, including significant special and regular dividends.
• The company achieved a 19.6% growth in book value per share, excluding AOCI plus dividends, in 2024.
• AFG's specialty property and casualty businesses reported a strong combined ratio of 89% for the fourth quarter of 2024.

Negative Points

• AFG experienced adverse prior-year development in its specialty casualty group, particularly in social inflation-exposed businesses.
• The company faced a higher combined ratio of 92.5% projected for 2025, reflecting anticipated challenges.
• AFG's property and transportation group saw a 6% decrease in gross and net written premiums in the fourth quarter of 2024.
• The company anticipates losses related to the Southern California wildfires, estimated between $60 million to $70 million.
• AFG's commercial auto liability segment is still working towards achieving an underwriting profit, facing challenges from social inflation.

Q & A Highlights

Q: Can you provide more details on the losses from the California wildfires? A: The losses are primarily from our property-oriented businesses, including lender-placed property, property in marine, and nonprofit businesses with property exposures in California. - Carl Lindner, Co-CEO

Q: Could you elaborate on the expense ratio pressures mentioned? A: The higher expense ratio is due to growth in businesses like our financial institution business, which has a higher commission ratio compared to others like workers' comp. We focus on overall return rather than just the expense ratio. - Brian Hertzman, CFO

Q: Can you explain the casualty reserve development in the quarter? A: The adverse development is mainly from an excess liability unit focusing on larger entities like Fortune 500 companies. We assess each business quarterly and adjust reserves based on loss ratio trends. - Carl Lindner, Co-CEO

Q: Regarding the 92.5% combined ratio guide for 2025, are you expecting higher workers' comp and casualty loss ratios? A: Yes, we anticipate a higher workers' comp loss ratio due to tempered expectations for favorable development. However, we expect improved loss ratios in other casualty businesses due to underwriting actions and rate increases. - Brian Hertzman, CFO

Q: How should we view the growth potential in specialty casualty given the strong rate increases? A: Excluding workers' comp, we are growing at high-single digits. We could see additional growth if workers' comp pricing stabilizes. - Carl Lindner, Co-CEO

Q: What is the impact of crop yield changes on your 2025 guidance? A: The main change was due to lower-than-expected soybean yields in certain states, which affected our 2024 results. We are still settling claims, and this variability impacts our guidance. - Carl Lindner, Co-CEO

Q: Can you discuss the commercial auto line's profitability and social inflation impact? A: We are achieving small underwriting profits in commercial auto overall, with strong ROE. We are focused on improving margins, especially in commercial auto liability, which is affected by social inflation. - Carl Lindner, Co-CEO

Q: How are you addressing increased severity in older accident years? A: We adjust loss picks based on increased severity observed in older years and apply these trends to more recent years. This is offset by positive impacts from rate increases and underwriting actions. - Brian Hertzman, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.