American Financial Group Announces Third Quarter Results and Certain Fourth Quarter Transactions
29 10월 2003 - 11:13PM
PR Newswire (US)
American Financial Group Announces Third Quarter Results and
Certain Fourth Quarter Transactions CINCINNATI, Oct. 29
/PRNewswire-FirstCall/ -- American Financial Group, Inc. today
reported net earnings for the 2003 third quarter of $41.6 million
($.59 per share). These results include an after-tax charge of
$23.1 million ($.33 per share) related to the settlement of
litigation and net realized gains of $13.9 million ($.20 per
share). AFG's net earnings for last year's third quarter were $26.9
million ($.39 per share) which included net realized losses of
$13.7 million ($.19 per share). The litigation was brought in late
1994 by several medical groups, alleging antitrust violations by
California workers' compensation insurers, including one of AFG's
subsidiaries. While the company believed it had significant
defenses to these antitrust claims, in light of the risks resulting
from certain recent adverse pretrial rulings, it was concluded that
a settlement was in the company's best interest. Many investors and
analysts focus on "core earnings" of companies, setting aside items
which are not considered to be part of the ongoing earnings of the
company. Core earnings from insurance operations were $51.2 million
($.73 per share) for the third quarter of 2003 and included a $6.5
million after-tax reserve reduction related to recently enacted
California workers' compensation legislation and $3.8 million of
investee earnings from AFG's 38% investment in Infinity Property
and Casualty Corporation ("Infinity"). Reported core earnings from
insurance operations (including those which now comprise Infinity)
for the previous year's third quarter were $43.3 million ($.62 per
share). The 2003 third quarter earnings were above the 2002 period
primarily due to improved underwriting margins in the specialty
businesses within the property and casualty insurance ("P&C")
operations, partially offset by lower investment income. Details of
the financial results may be found in the accompanying schedules.
Carl H. Lindner, AFG Chairman and Chief Executive Officer stated,
"Our insurance operations continue to deliver solid operating
earnings improvement, reflecting the ongoing effects of disciplined
pricing and underwriting and our allocation of capital to those
businesses with the greatest profit potential. The insurance
industry continues to benefit from favorable pricing conditions,
particularly in certain specialty casualty markets, and we believe
we will continue to benefit from these trends. We remain on target
to achieve our previously announced 2003 core earnings guidance of
$2.10 to $2.30. As we look toward 2004, we expect our core earnings
to be in the $2.75 to $3.00 per share range." Business Segment
Results The P&C Group generated an underwriting profit of $20.1
million in the 2003 third quarter, an improvement of $17.5 million
over the same period a year ago. The combined ratio of the P&C
Group for the 2003 third quarter was 95.8% compared to 99.6% for
the 2002 third quarter. The group's underwriting results for the
2003 quarter were favorably impacted by approximately 2 points from
the effect of the recently enacted workers' compensation
legislation. Third quarter 2003 results also included approximately
$3.8 million, or 0.8 points, of losses from severe weather compared
to about $0.5 million, or 0.1 point, in the 2002 period. The
ongoing operations of the P&C Group consist primarily of the
specialty commercial operations managed by the Specialty Group. The
Specialty Group reported an underwriting profit for the 2003 third
quarter with a combined ratio of 94.8%, an improvement of 4 points
from the 2002 third quarter. These results included the previously
mentioned effect of the California workers' compensation
legislation and about $38 million, or 8 points, of prior years'
adverse development. The Group's gross written premiums for the
2003 quarter grew approximately 20% compared with the 2002 period,
reflecting rate increases in most of its businesses. The Group's
net written premiums grew at a lower rate of 10.4% over the 2002
period, primarily due to premiums ceded under reinsurance
agreements put into place in the latter part of 2002. Carl H.
Lindner III, AFG Co-President and head of the P&C Group
commented: "Our Specialty Group's performance continues to be in
line with our objectives for 2003. This group generated a solid
underwriting profit for the eighth consecutive quarter. Our ongoing
lines of business continue to achieve solid premium growth and most
of our individual business units continue to report underwriting
profitability. Our specialty commercial operations experienced
average rate increases of approximately 22% through the first nine
months of 2003 and 19% in the third quarter. Pricing momentum is
continuing on the casualty side which represents about 70% of our
specialty business. We are targeting average rate increases of
around 15% for the remainder of 2003 and expect meaningful
increases into 2004. Infinity reported strong operating performance
in the 2003 third quarter and our results continue to benefit from
our 38% ownership interest in Infinity." Mr. Lindner continued, "I
am optimistic about our ongoing prospects for growth and
profitability as well as our ability to maintain a strong capital
base and lower our financial leverage. We expect to complete the
merger of American Financial Group with its subsidiary, American
Financial Corporation in the 2003 fourth quarter. This transaction
will have a significant positive impact on our financial leverage."
The Annuity, Life and Health insurance operations reported core net
operating earnings of $19.5 million for the third quarter of 2003
compared to $15.9 million for the 2002 period. Improvements in the
life and supplemental health insurance operations as well as the
variable lines more than offset the narrowing of interest spreads
in the fixed annuity lines. The group's statutory premiums for the
2003 third quarter were 26% lower than the 2002 period. Annuity
production has slowed recently as the group has maintained its
pricing targets and its commission and interest crediting
discipline during the recent period of historically low interest
rates. Further details may also be found in the earnings release
issued on October 16, 2003 by Great American Financial Resources,
Inc. (NYSE:GFR). AFG owns 82% of GFR common stock and a
proportional share of its earnings is included in AFG's results.
Nine Month Results AFG's net earnings for the first nine months of
2003 were $97.2 million ($1.39 per share) compared to $40.4 million
($.58 per share) for the same 2002 period. The 2003 results include
the previously-mentioned after-tax charge of $23.1 million ($.33
per share) related to a litigation settlement, net realized gains
of $6.7 million ($.10 per share) and $5.5 million ($.08 per share)
of tax benefits related to AFG's basis in Infinity's stock. Core
earnings from insurance operations for the same 2003 period were
$110.1 million ($1.57 per share) compared to $123.0 million ($1.78
per share) for the 2002 period. The 2003 core earnings include the
effect of the California workers' compensation legislation and
charges of $28.5 million related to an arbitration decision in the
P&C group and $6.7 million related to the negative effect of
lower interest rates on the annuity operations recorded in the
second quarter. The combined ratio of AFG's P&C Group for the
first nine months of 2003, before a 3.1 point charge for the
arbitration decision, was 96.6% compared to 100.8% in the 2002
period. The Specialty Group's combined ratio for the 2003 period
was 96.1%. Its gross written premiums for the first nine months of
2003 increased about 21% over the 2002 period while net written
premiums for this same period were only 12.6% higher due to the
reinsurance agreements mentioned above. Subsequent Events AFG has
announced its intention to sell its remaining shares in Infinity
through a secondary public offering. AFG has engaged investment
bankers to consult with the company on this strategic initiative
and to lead the offering. Carl H. Lindner III commented, "This
transaction will provide additional capital to support double digit
growth in our specialty commercial insurance business in 2004. In
addition, we anticipate that a portion of the proceeds would be
used to reduce our financial leverage. Infinity is off to a great
start as a public company. I am confident that a strong foundation
is in place for its future success." A registration statement
relating to the Infinity common stock has not yet been filed with
the Securities and Exchange Commission. The company expects to file
its registration statement with the Securities and Exchange
Commission in November. On October 22, AFG filed an amended
registration statement with the Securities and Exchange Commission
to increase the amount available under its existing shelf
registration to $600 million. The shelf registration, which has not
yet become effective, replenishes availability which was used in
previous offerings and will enable the company to efficiently issue
equity, debt and a variety of other capital securities. The Company
has no immediate plans to offer securities under the shelf
registration. Neither AFG's shares of Infinity common stock nor
securities subject to the shelf registration may be sold, nor may
offers to buy be accepted, prior to the time the respective
registration statements become effective. This press release shall
not constitute an offer to sell or the solicitation of an offer to
buy, nor shall there be any sale of these securities in any state
in which such an offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of
any such state. On October 20, GFR announced its intent to issue
$100 million of 30-year bonds in the retail market. The proceeds of
this offering will be used primarily to repay outstanding amounts
on the GFR bank line of credit. A shelf registration statement
relating to the securities that GFR intends to sell has previously
been filed with, and declared effective by, the Securities and
Exchange Commission. This offering was launched yesterday and will
be made only by means of a prospectus, including a prospectus
supplement, forming a part of the effective registration statement.
On October 28, AFG signed a letter of intent to sell its
wholly-owned subsidiary, Transport Insurance Company, to Dukes
Place Holdings L. P. Transport is an inactive company with only
run-off insurance liabilities. Its remaining liabilities include a
number of old claims, including asbestos and environmental
exposures, representing approximately 12% of the Company's total
asbestos and environmental reserves. The Company expects to report
a fourth quarter after-tax loss on the sale of approximately $30
million. Carl H. Lindner III, AFG's Co-President, stated: "This
sale is beneficial to us because Dukes Place will take financial
and administrative responsibility for completing the runoff of
Transport's liabilities and collecting reinsurance recoverables. In
addition, we are able to achieve finality on a number of old claims
and potentially troublesome contingencies." Through the operations
of the Great American Insurance Group, AFG is engaged primarily in
property and casualty insurance, focusing on specialized commercial
products for businesses, and in the sale of retirement annuities,
life and supplemental health insurance products. Forward Looking
Statements This press release contains certain statements that may
be deemed to be "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. All statements in this press
release not dealing with historical results are forward-looking and
are based on estimates, assumptions and projections. Examples of
such forward looking statements include statements relating to: the
Company's expectations concerning market and other conditions,
future premiums, revenues and earnings; and rate increases. Actual
results could differ materially from those expected by AFG
depending on certain factors including but not limited to: the
unpredictability of possible future litigation if certain
settlements do not become effective, changes in economic conditions
including interest rates, performance of securities markets, and
the availability of capital, regulatory actions, changes in legal
environment, judicial decisions and rulings, tax law changes,
levels of catastrophes and other major losses, the actual amount of
liabilities associated with certain asbestos and environmental
related insurance claims, adequacy of loss reserves, availability
of reinsurance and ability of reinsurers to pay their obligations,
competitive pressures, including the ability to obtain rate
increases and other changes in market conditions that could affect
AFG's insurance operations. Conference Call The company will hold a
conference call to discuss 2003 third quarter results at 11:30 a.m.
(ET) today. Toll-free telephone access will be available by dialing
1-800-946-0782. Please dial in 5 to 10 minutes prior to the
scheduled start time of the call. A replay of the call will also be
available at around 2:30 p.m. (ET) today until 8:00 p.m. on
November 5, 2003. To listen to the replay, dial 1-888-203-1112 and
provide the confirmation code 778988. The conference call will also
be broadcast over the Internet. To listen to the call via the
Internet, go to AFG's website, http://www.amfnl.com/ , and follow
the instructions at the Webcast link. This earnings release and
additional Financial Supplements are available at AFG's web site:
http://www.amfnl.com/ . SUMMARY OF EARNINGS (In Millions, Except
Per Share Data) Three months ended Nine months ended September 30,
September 30, 2003 2002 2003 2002 Operating revenues $ 827.6 $
968.1 $2,458.8 $2,877.3 Costs and expenses 754.8 902.7 2,306.9
2,693.4 72.8 65.4 151.9 183.9 Related income taxes 25.4 22.1 50.1
60.9 Earnings from consolidated insurance operations 47.4(a) 43.3
101.8(a) 123.0 Net investee earnings from Infinity 3.8 - 8.3 - Core
earnings from insurance Operations 51.2(a) 43.3 110.1(a) 123.0
Other items, net of tax: Special tax benefits(b) - - 5.5 16.0
Realized investment gains (losses) 13.9 (13.7) 6.7 (50.4)
Litigation settlement (23.1) - (23.1) - Net losses from
non-insurance Investees (.4) (2.7) (2.0) (7.8) Cumulative effect of
accounting Change(c) - - - (40.4) Net earnings (loss) $41.6(a)
$26.9 $97.2(a) $40.4 Diluted Earnings (Loss) per Common Share: Core
from insurance operations $.73 $.62 $1.57 $1.78 Special tax
benefits(b) - - .08 .23 Realized investment gains (losses) .20
(.19) .10 (.73) Litigation settlement (.33) - (.33) - Non-insurance
investees (.01) (.04) (.03) (.11) Cumulative effect of accounting
Change(c) - - - (.59) Net earnings $.59 $.39 $1.39 $.58 Average
number of Diluted Shares 70.0 69.2 69.8 69.2 (a) Includes (1) a
$6.5 million benefit recorded in the third quarter for recently
enacted California workers' compensation legislation and (2)
charges of $28.5 million ($.41 per share) for an arbitration
decision relating to a 1995 property claim and $6.7 million ($.10
per share) for a reduction in estimated future profitability of
in-force fixed annuities, and an adjustment to reduce deferred
taxes, recorded in the second quarter. (b) Reflects tax benefits in
the 2003 period relating to the Company's basis in Infinity Stock
and a tax benefit in the 2002 period for the reversal of previously
accrued amounts due to the resolution of certain tax matters. (c)
Reflects the 2002 implementation of Statement of Financial
Accounting Standards No. 142 relating to the transitional goodwill
impairment test. AMERICAN FINANCIAL GROUP, INC. PROPERTY AND
CASUALTY INSURANCE OPERATIONS UNDERWRITING RESULTS (In Millions)
Three months ended Nine months ended September 30, September 30,
2003 2002 2003 2002 Property and Casualty Insurance Operations: (a)
Gross written premiums $1,057 $1,120 $2,769 $3,008 Net written
premiums $536 $625 $1,562 $1,907 Ratios (GAAP): Loss & LAE
ratio 68.0%(b) 73.3% 70.8%(b) 73.7% Expense ratio 27.9% 26.0% 28.7%
26.8% Policyholder dividend ratio (.1)% .3% .2% .3% Combined Ratio
(c) 95.8% 99.6% 99.7% 100.8% Specialty Group: Gross written
premiums $1,006 $839 $2,479 $2,051 Net written premiums $524 $474
$1,413 $1,255 Ratios (GAAP): Loss & LAE ratio 67.4%(b) 67.4%
66.0%(b) 66.9% Expense ratio 27.5% 31.0% 29.9% 31.0% Policyholder
dividend ratio (.1)% .4% .2% .5% Combined Ratio 94.8% 98.8% 96.1%
98.4% (a) Includes Infinity Property and Casualty results through
mid-February 2003 and AFG's direct auto insurance companies through
the date of their sale at the end of April 2003 and personal lines
operations remaining with AFG. (b) The three and nine month periods
ended September 30, 2003 include the effects of the following:
Three Months Nine Months Property & Casualty CA workers' comp
legislation (2.1)% (.7)% Arbitration decision - 3.1% Specialty
Group CA workers' comp legislation (2.2)% (.8)% (c) Includes other
discontinued lines. DATASOURCE: American Financial Group, Inc.
CONTACT: Keith A. Jensen, Senior Vice President of American
Financial Group, Inc., +1-513-579-6633 Web site:
http://www.amfnl.com/ http://www.greatamericaninsurance.com/
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