American Financial Group Announces Fourth Quarter and Full Year 2003 Results
12 2월 2004 - 11:04PM
PR Newswire (US)
American Financial Group Announces Fourth Quarter and Full Year
2003 Results CINCINNATI, Feb. 12 /PRNewswire-FirstCall/ -- American
Financial Group, Inc. today reported net earnings for the 2003
fourth quarter of $196.6 million ($2.68 per share). These results
included a tax benefit of $136.0 million ($1.90 per share)
resulting from AFG's previously announced merger with its
subsidiary, American Financial Corporation ("AFC"). In addition, a
net realized gain ($36.7 million) on the sale of AFG'sremaining
shares in Infinity Property and Casualty Corporation ("Infinity")
was offset by an after-tax loss ($35.8 million) related to the
planned disposal of an insurance subsidiary. AFG's net earnings for
last year's fourth quarter were $44.2 million ($.64 per share)
which included a charge for an asbestos litigation settlement,
offset by certain tax resolution benefits and net realized gains on
investments. Net earnings for the 2003 full year were $293.8
million compared to $84.6 million for 2002. The 2003 results
included higher tax benefits and net realized gains on investments
whereas 2002 included net realized losses and the effect of an
accounting change related to the transitional goodwill impairment
test. 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, such as net realized gains
(losses) on investments, discontinued operations, cumulative effect
of accounting changes and other non recurring items. A
reconciliation of this non-GAAP measure to net earnings is set
forth in the accompanying schedule. Core earnings from insurance
operations were $46.4 million ($.65 per share) for the fourth
quarter of 2003 and included $3.9 million of investee earnings from
AFG's former investment in Infinity. Reported core earnings from
insurance operations (including those which now comprise Infinity)
for the previous year's fourth quarter were $43.8 million ($.63 per
share). AFG'score earnings from insurance operations for the full
year 2003 of $155.8 million ($2.22 per share) were lower than 2002
principally due to a 2003 second quarter charge of $28.5 million
($.41 per share) resulting from an arbitration decision relating
toa 1995 claim. Details of the financial results may be found in
the accompanying schedules. Carl H. Lindner, AFG Chairman and Chief
Executive Officer stated, "Our shareholders' equity grew over 20%
in 2003. The merger of our holding companies during the fourth
quarter improved financial leverage and simplified the overall
corporate structure. The sale of our remaining Infinity shares gave
us substantial cash, providing both liquidity at the holding
company and growth opportunities for our insurance operations. In
addition, we have completed several debt refinancing transactions,
totaling over $300 million, with proceeds being used primarily to
retire higher coupon trust preferred securities and bank lines of
credit. We are optimistic about ourongoing prospects for growth and
profitability and remain comfortable with our 2004 core earnings
guidance of $2.75 to $3.00 per share." Business Segment Results The
P&C Group generated an underwriting profit of $14.4 million in
the 2003 fourth quarter, with a combined ratio of 97.0%. The
combined ratio for the 2002 fourth quarter, excluding the effect of
an asbestos litigation settlement, was 96.9% which benefited from
the solid underwriting profit reported by the personal lines
operations, now part of Infinity. The 2003 combined ratio for the
P&C Group, before a 2.3 point charge for the above- mentioned
arbitration decision, was 96.6% compared to 99.8% for the 2002 full
year, excluding the asbestos litigation charge. The Specialty Group
reported a solid underwriting profit for the 2003 fourth quarter
with a combined ratio of 96.1%, an improvement of 2.0 points from
the 2002 fourth quarter. The Group's gross written premiums for the
2003 quarter grew over 15% as compared to the 2002 period,
reflecting rate increases in most of its businesses. Net written
premiums for the 2003 quarter were nearly 37% above the 2002
period, reflecting the impact of reinsurance agreements. The
Specialty Group's 2003 combined ratio was 96.0%, an improvement of
2.4 points compared with the 2002 combined ratio. For the 2003
year, gross and net written premiums were nearly 20% and 18%,
respectively, above the 2002 amounts, reflecting the effect of rate
increases and volume growth in certain businesses, partly offset by
planned reductions in less profitable lines of business. Rate
increases in the specialty operations averaged about 20% for 2003.
Further details of the Specialty Group operations may be found in
the accompanying schedules. Carl H. Lindner III, AFG Co-President
and head of the P&C Group commented: "I am pleased with the
growth and solid underwriting performance of our Specialty Group in
the fourth quarter and for all of 2003. The majority of our
individual business units reported an underwriting profit and
achieved double-digit premium growth for the year. We saw some
moderation in rate increases during the latter part of 2003 with
the fourth quarter averaging about 16%. We are committed to
maintaining rate adequacy going forward and believe that pricing
will remain firm in 2004, particularly in certain casualty markets.
We expect average rate increases in the range of 5% to 8% in 2004."
Mr. Lindner continued, "As we have repeatedly said, we are
committed to growing our specialty operations and achieving
underwriting profitability and I believe our performance and the
sale of Infinity demonstrate that commitment. We will continue our
focus on disciplined underwriting, particularly proper risk
selection and adequate pricing." "A significant objective during
2003 was to strengthen our balance sheet and improve our financial
flexibility. At year-end, we had reduced our debt- to-capital ratio
by 8 points, paid off our bank line of credit, increased our
insurance company capital adequacy and had over $100 million in
parent company cash. These actions provide a strong financial base
and, with our current mix of specialty businesses, position us for
continuing growth and further improvement in our operating earnings
in 2004and beyond." The Annuity, Life and Health insurance
operations reported core net operating earnings of $13.2 million
for the fourth quarter of 2003, above the $8.6 million reported in
the 2002 period. Results for 2002 included a $4.3 million after-tax
write-off of variable annuity acquisition costs. The core net
operating earnings for the 2003 year of $55.6 million were somewhat
below 2002 results of $63.6 million. The negative effect of lower
interest rates on the fixed annuity business more than offset
improved results in the other insurance operations. The group's
statutory premiums for 2003 were 8% lower than 2002. Annuity
production slowed in the last six months of 2003 as the group
maintained its pricing targets and its commission and interest
crediting discipline during a period of historically low interest
rates. Further details may also be found in the earnings release
issued today 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. 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 inthe sale of
retirement annuities, life and supplemental health insurance
products. Recent Financings On February 3, 2004, AFG issued $115
million of 7-1/8% Senior Debentures due February 3, 2034. Most of
the proceeds from this offering will be used to redeem the $95.5
million liquidation amount outstanding of 9-1/8% preferred
securities issued by one of the Company's wholly-owned subsidiary
trusts. On January 22, 2004, Great American Financial Resources
issued $86.25 million of 7-1/4% Senior Debentures due January 23,
2034. Most of the proceeds from this offering will be used to
redeem on March 8, 2004 the $75 million liquidation amount
outstanding of 9-1/4% preferred securities issued by one of the
Company's wholly-owned subsidiary trusts. 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 andability 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 fourth quarter and full year
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 February 19, 2004. To listen to the replay, dial
1-888-203-1112 and provide the confirmation code 700193. 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. (Financial summaries follow) This earnings release and
additional Financial Supplements are available at AFG's web site:
http://www.amfnl.com/ . AMERICAN FINANCIAL GROUP, INC. AND
SUBSIDIARIES SUMMARY OF EARNINGS (In Millions, Except Per Share
Data) Three months ended Twelve months ended December 31, December
31, 2003 2002 2003 2002 Operating revenues $ 825.5 $ 951.7 $3,280.9
$3,825.4 Costs and expenses 761.4 889.2 3,066.0 3,580.6 64.1 62.5
214.9 244.8 Related income taxes 21.6 18.7 71.3 79.0 Earnings from
consolidated insurance operations 42.5 43.8 143.6(1) 165.8 Net
investee earnings from Infinity 3.9 - 12.2 - Core earnings from
insurance Operations 46.4 43.8 155.8(1) 165.8 Non-core items, net
of tax: Special tax benefits (2) 136.0 15.0 141.5 31.0 Realized
investment gains (losses) 44.7 5.7 50.8 (44.7) Litigation
settlements (3) - (19.5) (23.1) (19.5) Discontinued operations (4)
(34.9) .4 (33.6) 1.4 Other (1.9) (1.2) (3.9) (9.0) Cumulative
effect of accounting change (5) 6.3 - 6.3 (40.4) Net earnings $
196.6 $44.2 $293.8(1) $84.6 Premium paid on redemption of
Subsidiaries' preferred shares (4.1) - (4.1) - Net earnings
available to common shares $ 192.5 $44.2 $289.7 $84.6 Diluted
Earnings (Loss) per Common Share: Core from insurance operations
$.65 $.63 $2.22 $2.40 Special tax benefits (2) 1.90 .21 2.01 .44
Realized investment gains (losses) .62 .09 .73 (.64) Litigation
settlements (3) - (.28) (.33) (.28) Discontinued operations (4)
(.49) .01 (.48) .02 Other (.09) (.02) (.12) (.13) Cumulative effect
of accounting change(5) .09 - .09 (.59) Net earnings available to
common Shares $ 2.68 $.64 $4.12 $1.22 Average number of Diluted
Shares 71.7 69.3 70.3 69.2 (1) Includes 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. (2) Reflects tax benefits in
2003 relating to AFG's merger with AFC in the fourth quarter and
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. (3) Reflects a litigation
settlement within the California workers' compensation business in
2003 and an asbestos litigation settlement in 2002. (4) Represents
operating results and a fourth quarter impairment provision ($35.8
million) related to the planned disposal of Transport Insurance
Company. (5) Reflects the 2003 implementation of FASB
Interpretation No. 46 related to variable interest entities and the
2002 implementation of SFAS No. 142 relating to the transitional
goodwill impairment test. AMERICAN FINANCIAL GROUP, INC. PROPERTY
AND CASUALTY INSURANCE OPERATIONS UNDERWRITING RESULTS (In
Millions) Threemonths ended Twelve months ended December 31,
December 31, 2003 2002 2003 2002 Property and Casualty Insurance
Operations: (a) Gross written premiums $ 806 $ 927 $3,575 $3,935
Net written premiums $ 450 $ 507 $2,012 $2,414 Ratios (GAAP): Loss
& LAE ratio 71.5% 76.3%(b) 70.9%(c) 74.2%(b) Expense ratio
25.5% 20.2% 27.9% 25.3% Policyholder dividend ratio -% .4% .1% .3%
Combined Ratio (d) 97.0% 96.9% 98.9% 99.8% Specialty Group: Gross
written premiums $764 $ 662 $3,243 $2,713 Net written premiums $
441 $ 323 $1,854 $1,577 Ratios (GAAP): Loss & LAE ratio 71.2%
69.0% 67.4% 67.5% Expense ratio 24.9% 28.5% 28.5% 30.4%
Policyholder dividend ratio -% .6% .1% .5% Combined Ratio 96.1%
98.1% 96.0% 98.4% (a) Includes operations of Infinity Property and
Casualty through mid- February 2003, AFG's direct auto insurance
companies through the date of their sale at the end of April 2003,
personal lines operations remaining with AFG, and the specialty
group. (b) For the three and twelve month periods, excludes 5.2
points and 1.2 points, respectively, for the effect of a $30
million charge related to an asbestos litigation settlement. (c)
Includes 2.3 points for the effect of an arbitration decision
relating to a claim arising froma discontinued business. (d)
Includes other discontinued lines. AMERICAN FINANCIAL GROUP, INC.
PROPERTY AND CASUALTY INSURANCE GROUP SUPPLEMENTAL SPECIALTY GROUP
OPERATING INFORMATION (In Millions) Twelve months ended Percentage
December 31, Change 2003 2002 Gross Written Premiums: Property
& Transportation $1,142 $ 886 29% Specialty Casualty 1,413
1,235 14% Specialty Financial 396 332 19% California Workers'
Compensation 290 229 27% Other 2 31 nm $3,243 $2,713 20% Net
Written Premiums: Property & Transportation $ 515 $ 413 25%
Specialty Casualty 679 609 11% Specialty Financial 302 255 18%
California Workers' Compensation 271 219 24% Other 87 81 6% $1,854
$1,577 18% Combined Ratio (GAAP): Property & Transportation
87.8% 90.1% Specialty Casualty 98.2% 106.6% Specialty Financial
108.3% 101.4% California Workers' Compensation 92.0% 96.4%
Aggregate Specialty Group 96.0% 98.4% Notes: 1. Property &
Transportation includes primarily physical damage and liability
coverage for buses, trucks and recreational vehicles, inland and
ocean marine, agricultural-related products and other property
coverages. 2. Specialty Casualty includes primarily excess and
surplus, general liability, executive and professional liability
and customized programs for small to mid-sized businesses. 3.
Specialty Financial includes risk management insurance programs for
lending and leasing institutions, surety and fidelity bonds and
foreign credit insurance. 4. California Worker's Compensation
consists of a subsidiary that writes workers' compensation
insurance primarily in the state of California. 5. Other includes
an internal reinsurance facility and discontinued lines.
DATASOURCE: American Financial Group, Inc. CONTACT: Anne N. Watson,
Vice President-Investor Relations of American Financial Group,
Inc., +1-513-579-6652 Web site: http://www.amfnl.com/
http://www.greatamericaninsurance.com/
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