American Financial Group, Inc. (AFG) Earnings & Analysis

Latest quarter

American Financial Group reported revenue of $2.0 billion for Q2 FY2026, up from $1.9 billion a year earlier. On the consensus basis, revenue was $1.9 billion, or 0.65% above the consensus estimate of $1.9 billion; adjusted earnings per share were $2.82, above the $2.41 consensus.

AFG reported diluted earnings per share of $2.99, compared with $2.07 a year earlier. Its filing attributed the increase in net earnings to higher core operating earnings and realized gains on securities, with underwriting profit and alternative investment income contributing to the operating improvement.

The filing said gross written premiums rose 7%, driven primarily by new business, renewal pricing and increased exposures. Property and transportation led the increase, while specialty casualty and specialty financial premiums also grew. Specialty property and casualty underwriting profit rose to $144 million from $114 million, primarily because of higher profit in property and transportation.

AFG’s operating margin rose to 15.6% from 11.9%, while free cash flow fell to $51.0 million from $160.0 million.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Co-CEO Carl Lindner III said AFG’s specialty insurance businesses grew premiums through new business opportunities, higher exposures and renewal pricing. Across property and casualty, he said, average renewal rates rose approximately 4% in the second quarter, or approximately 5% excluding workers’ compensation. Property and transportation rates rose approximately 8%, while specialty financial pricing decreased less than 1%.

Lindner said the specialty property and casualty combined ratio was 91.5 in the quarter, compared with 93.1 a year earlier. He said results benefited from favorable prior-year reserve development, while catastrophe losses added 1.8 points to the ratio.

In the Q&A, CFO Brian Hertzman addressed the effect of business mix on underwriting expenses and loss ratios. He said growth in lender-placed insurance raised the expense ratio, partly because some products carry profit-based commissions. Hertzman said AFG was cautious with reserves for businesses exposed to social inflation, adding that “we tend to react quicker to bad news and slower to good news.”

Carl Lindner said AFG was “pretty much through the reset on the social inflation exposed businesses,” after steps including re-underwriting some classes and reducing limits. He said commercial auto liability had produced an underwriting profit for a second consecutive quarter. He also said falling property pricing had less impact on AFG than on peers with greater exposure to storm and coastal property risks.

Co-CEO Craig Lindner said improved alternative investment returns drove the year-over-year increase in property and casualty investment income. He expected operations to generate excess capital during the rest of 2026, providing opportunities for acquisitions, special dividends or share repurchases.

Looking to the third quarter, Carl Lindner said most crop premiums are earned then but booked at a more conservative loss ratio until the fourth quarter, when AFG has better visibility into yields and claims. He said the company records most calendar-year crop profitability in the fourth quarter.

Guidance

Craig Lindner said AFG expects the sale of Charleston Harbor Resort and Marina to close in the third quarter of 2026, subject to approvals and customary closing conditions. He said AFG expects a pre-tax core operating gain of approximately $125 million, or $1.20 per share, on the sale. Lindner said the transaction was not contemplated in AFG’s original business plan assumptions.