- Record fourth quarter core net
operating earnings of $1.52 per share; up 13% from 2014
- Record core net operating earnings
per share of $5.44 for the full year; up 13% from 2014
- Net earnings of $1.45 per share in
the fourth quarter; $3.94 per share for the full year
- Fourth quarter annualized core
operating ROE of 12.7%
- Full year 2016 core net operating
earnings guidance between $5.35 - $5.75 per share
American Financial Group, Inc. (NYSE: AFG) today reported 2015
fourth quarter net earnings attributable to shareholders of $129
million ($1.45 per share) compared to $127 million ($1.41 per
share) for the 2014 fourth quarter. Results for the fourth quarter
of 2015 include an after-tax gain of $10 million ($0.11 per share)
from the sale of an apartment property, which was more than offset
by an additional after-tax loss of $3 million ($0.03 per share)
recorded upon closing of the sale of the long-term care business
and $14 million ($0.15 per share) in after-tax realized losses.
Results in the comparable prior year period included $5 million
($0.06 per share) in after-tax realized gains. Net earnings
attributable to shareholders for the year were $3.94 per share,
compared to $4.97 per share in 2014. Return on equity was 8.3% and
11.0% for 2015 and 2014, respectively.
Core net operating earnings were $136 million ($1.52 per share)
for the 2015 fourth quarter, compared to $122 million ($1.35 per
share) in the 2014 fourth quarter. The increase was due to higher
underwriting profit in our Specialty Property and Casualty
(“P&C”) insurance operations and higher core net operating
earnings in our Annuity and Run-off Long-term Care and Life
segments. Core net operating earnings for the fourth quarters of
2015 and 2014 generated annualized returns on equity of 12.7% and
11.7%, respectively. Full year 2015 core net operating earnings per
share increased by 13% over the prior year. Core operating return
on equity was 11.5% and 10.7% for 2015 and 2014, respectively.
During the fourth quarter of 2015, AFG repurchased approximately
188,000 shares of common stock for $13 million (average price per
share of $70.20). Recent volatility in the equity markets created
additional opportunities to repurchase AFG common stock. Year to
date through February 1, 2016, AFG repurchased 956,000 shares for
$65 million at an average price per share of $67.72.
AFG’s net earnings attributable to shareholders, determined in
accordance with U.S. generally accepted accounting principles
(“GAAP”), include certain items that may not be indicative of its
ongoing core operations. The following table identifies such items
and reconciles net earnings attributable to shareholders to core
net operating earnings, a non-GAAP financial measure that AFG
believes is a useful tool for investors and analysts in analyzing
ongoing operating trends.
In millions, except per share amounts
Three months ended
December 31,
Twelve months ended
December 31,
2015 2014 2015
2014 Components of net earnings attributable to
shareholders:
Core net operating earnings(a)
$ 136 $ 122 $ 486
$ 439
Non-Core
Items:
Loss on sale of long-term care
business
(3
)
-
(108
)
-
Gain on sale of hotel and apartment
property
10
-
36
-
Other realized gains (losses)
(14
)
5
(8
)
32
Special A&E charges(b)
-
-
(52
)
(19
)
Loss on early retirement of debt
-
-
(2
)
-
Net earnings attributable to shareholders $
129 $
127
$ 352 $ 452
Components of Earnings per Share:
Core net operating earnings(a)
$ 1.52 $ 1.35 $ 5.44
$ 4.82
Non-Core
Items:
Loss on sale of long-term care
business
(0.03
)
-
(1.21
)
-
Gain on sale of hotel and apartment
property
0.11
-
0.40
-
Other realized gains (losses)
(0.15
)
0.06
(0.08
)
0.36
Special A&E charges(b)
-
-
(0.58
)
(0.21
)
Loss on early retirement of debt
-
-
(0.03
)
-
Diluted Earnings Per Share $ 1.45
$ 1.41 $ 3.94 $
4.97
Footnotes (a) and (b) are contained in the
accompanying Notes to Financial Schedules at the end of this
release.
Carl H. Lindner III and S. Craig Lindner, AFG’s Co-Chief
Executive Officers, commented: “Excellent Specialty P&C
underwriting profitability and record annuity core operating
earnings established a new record for AFG’s core net operating
earnings per share for the year. Profitable growth in our insurance
operations, coupled with superior investment execution and
intelligent deployment of capital have helped us to achieve five
year compounded growth in adjusted book value plus dividends of
9.5%.
“AFG had approximately $950 million of excess capital (including
parent company cash of approximately $190 million) at December 31,
2015. In addition, the sale of our run-off long-term care insurance
business will result in approximately $100 million of additional
excess capital in the first half of 2016. Over the past year, we
increased our quarterly dividend by 12% and in the fourth quarter
of 2015 we paid a special dividend of $1.00 per share. Our excess
capital will also be deployed into AFG’s core businesses as we
identify potential for healthy, profitable organic growth, and
opportunities to expand our specialty niche businesses through
acquisitions and start-ups that meet our target return thresholds.
Share repurchases, particularly when executed at attractive
valuations, are an important and effective component of our capital
management strategy, as indicated by our significant buyback
activity in January. We will continue to make opportunistic share
repurchases when it makes sense to do so and return capital to
shareholders through dividends.
“Based on current information, we expect core net operating
earnings in 2016 to be between $5.35 and $5.75 per share. Our core
earnings per share guidance excludes non-core items such as
realized gains and losses, as well as other significant items that
may not be indicative of ongoing operations.”
Specialty Property and Casualty
Insurance Operations
The Specialty P&C insurance operations generated
underwriting profit of $100 million for the 2015 fourth quarter
compared to $79 million in the fourth quarter of 2014. The fourth
quarter 2015 combined ratio of 91.0% includes 0.4 points of
favorable prior year reserve development, compared to 1.0 point of
adverse prior year reserve development in the comparable prior year
period. Fourth quarter results in 2015 include $9 million (0.8
points on the combined ratio) in catastrophe losses, compared to $3
million (0.2 points on the combined ratio) in the comparable 2014
period.
Gross and net written premiums were up 4% and 3%, respectively,
in the 2015 fourth quarter compared to the prior year period. Each
of our Specialty P&C groups reported growth during the quarter.
Further details of AFG’s Specialty P&C operations may be found
in the accompanying schedules.
The Property and Transportation Group reported an
underwriting profit of $34 million in the fourth quarter of 2015,
compared to $22 million in the comparable prior year period. Higher
accident year profitability in our transportation and agricultural
operations was partially offset by adverse prior year reserve
development in our National Interstate subsidiary, as well as lower
profitability in our property and inland marine and ocean marine
operations. Catastrophe losses for this group were $3 million in
the fourth quarter of 2015 and $2 million in the comparable 2014
period.
Fourth quarter 2015 gross and net written premiums in this group
were 7% and 1% higher, respectively, than the comparable prior year
period. Growth in gross and net written premiums in our
transportation operations and new premium from our Singapore
branch, which opened for business in June 2015, were partially
offset by lower premiums in our inland marine and ocean marine
businesses. Although gross written premiums were higher
year-over-year in our agricultural operations, additional cessions
of crop premiums in the fourth quarter reduced net written premiums
for these operations. Overall renewal rates in this group increased
2% in the fourth quarter of 2015, including a 4% increase in
National Interstate’s renewal rates. The average renewal rate
increase for this group during 2015 was approximately 4%.
The Specialty Casualty Group reported an underwriting
profit of $50 million in the 2015 fourth quarter compared to $36
million in the comparable 2014 period. This increase reflects
higher profitability in our workers’ compensation, targeted
markets, executive liability and excess and surplus businesses.
These improved results were partially offset by underwriting losses
within our Marketform operations. The majority of businesses in
this group produced strong underwriting profit margins during
2015.
Gross and net written premiums grew modestly in the fourth
quarter of 2015 compared to the same period in 2014. The majority
of businesses in this group reported modest growth, particularly
our excess and surplus businesses. This growth was partially offset
by lower premiums in our general liability business, primarily the
result of competitive market conditions, re-underwriting efforts
within the Florida homebuilders market and the slowdown within the
energy sector. Renewal pricing for this group decreased by 2% in
the fourth quarter, including a decrease of approximately 6% in our
workers’ compensation businesses. Excluding workers’ compensation,
renewal pricing in this group increased approximately 1% on average
for the quarter.
The Specialty Financial Group reported an underwriting
profit of $15 million in the fourth quarter of 2015, compared to
$18 million in the fourth quarter of 2014. Catastrophe losses for
this group were $5 million in the fourth quarter of 2015 and
negligible in the comparable prior year period. Nearly all
businesses in this group continued to achieve excellent
underwriting margins during 2015, with an overall combined
operating ratio of 88.7% for the fourth quarter of 2015 and 83.1%
for the full year of 2015.
Gross and net written premiums were up 12% and 16%,
respectively, in the 2015 fourth quarter, when compared to the 2014
fourth quarter, reflecting growth in our financial institutions
business. Renewal pricing in this group increased approximately 1%
on average for the fourth quarter and was flat for the full year of
2015.
Carl Lindner III stated: “Each of our Specialty P&C Groups
delivered strong underwriting profitability during the fourth
quarter, contributing to a 24% increase in underwriting profit for
the full year of 2015. We’ve acted on opportunities to profitably
grow our business, particularly within our Specialty Financial
Group, where we’ve achieved double-digit growth in net written
premiums, as well as superior underwriting profitability. I’m
pleased with consistently strong profitability within our Specialty
Casualty Group, and disciplined growth, coupled with improved
results, in our Property and Transportation Group.”
Mr. Lindner continued, “Renewal pricing across our entire
P&C group was up less than 1% for the quarter, and was impacted
by price softening in our workers’ comp businesses. Looking ahead
to 2016, we are forecasting an overall calendar year combined ratio
in the 92% to 94% range. Although we have experienced pricing
deceleration in many of our business units, we will keep our focus
on maintaining adequate rates. We are targeting growth in net
written premium in the range of 2% to 6% for 2016.”
Annuity Segment
Record Results - AFG's Annuity Segment reported record
full year operating earnings and premiums in 2015. In addressing
these achievements, Craig Lindner stated, “I am pleased with the
results in our Annuity Segment, as we achieved record core pretax
operating earnings of $331 million and record annuity premiums of
$4.1 billion. The fundamentals of our annuity business remain
strong and we are committed to our consumer-friendly business
model, disciplined product pricing and expense management. I’m
proud of our employees, who have consistently and successfully
executed our business strategies.”
The Annuity Segment reported a record $101 million in core
pretax operating earnings in the fourth quarter of 2015, an
increase of 19% from the $85 million reported in the fourth quarter
of 2014. In addition, as shown in the table below, earnings before
the impact of fair value accounting on fixed-indexed annuities
(FIAs) were up 3% in the fourth quarter, to a record $96
million:
Components of Core
Annuity Operating Earnings Before Income Taxes
In millions Three months ended
December 31,
Pct.
Change
Twelve months ended
December 31,
Pct.
Change
2015 2014 2015
2014 Annuity earnings before fair value
accounting for FIAs $ 96 $ 93 3 % $ 354 $ 362 (2 %) Impact of fair
value accounting for FIAs
5
(8
)
nm
(23
)
(34
)
nm Core Pretax Annuity Operating Earnings $ 101 $ 85
19 % $ 331 $ 328 1 %
Annuity Earnings Before Fair Value Accounting for FIAs –
AFG’s fourth quarter 2015 earnings continued to benefit from growth
in annuity assets as well as the ability to maintain strong net
interest spreads. AFG’s quarterly average annuity investments and
reserves both grew approximately 13% year-over-year; the benefit of
this growth was partially offset by the impact of lower investment
yields.
In the fourth quarters of 2015 and 2014, AFG conducted detailed
reviews (“unlocking”) of the major actuarial assumptions underlying
its annuity operations. The review resulted in a positive unlocking
of $10 million in the fourth quarter of 2015, reflecting higher
than previously projected net interest spreads as well as the
impact of higher assets under management, and expense discipline;
in the fourth quarter of 2014, the positive unlocking amount was $1
million. Unlocking amounts are included in “Annuity earnings before
fair value accounting for FIAs” in the table above.
Impact of Fair Value Accounting for FIAs - Variances from
expectations of certain items (such as projected interest rates,
option costs and surrenders), as well as changes in the stock
market, have an impact on the accounting for FIAs; these accounting
adjustments are recognized through AFG’s reported core earnings.
Many of these adjustments are not economic in nature, but rather
impact the timing of reported results.
In the fourth quarter of 2015, increases in the stock market
resulted in a favorable impact on annuity earnings. Conversely, in
the fourth quarter of 2014, the favorable impact of the increase in
the stock market was more than offset by a decrease in longer-term
interest rates, resulting in an unfavorable impact on earnings.
Annuity Premiums - AFG’s Annuity Segment reported
statutory premiums of $1.1 billion in the fourth quarter of 2015, a
14% increase from the fourth quarter of 2014. This increase
reflects growth in sales of FIAs in both the Retail and Financial
Institutions channels.
Annuity Guidance - Craig Lindner continued, “Looking
ahead to 2016, we anticipate modest growth in annuity premiums as
we continue to maintain pricing discipline in these volatile
markets. In addition, we expect the Annuity Segment’s assets and
reserves to grow by 10% to 12%; the favorable earnings impact of
this growth will be partially offset by the runoff of higher
yielding investments.
“In addition, the decreases in interest rates and the stock
market that have occurred so far in 2016 are likely to put downward
pressure on annuity earnings in the first quarter due to fair value
accounting for FIAs. As a result, for the full year, we expect
annuity earnings in 2016 to grow modestly when compared to 2015.
Significant changes in the stock market and/or interest rates, as
compared to our expectations, can lead to significant positive or
negative impacts on the Annuity Segment’s results, due to the
impact of fair value accounting. These impacts relate primarily to
the timing of reported results.
More information about premiums and the results of operations
for our Annuity Segment may be found in our Quarterly Investor
Supplement, which is posted on our website.
Run-off Long-Term Care and Life
Segment
AFG’s Run-off Long-term Care and Life segment reported core
pretax operating earnings of less than $1 million in the fourth
quarter of 2015, compared to a loss of $7 million in the fourth
quarter of 2014.
As previously announced, AFG completed the sale of the legal
entities containing substantially all of its run-off long-term care
insurance business and certain life and annuity blocks to HC2
Holdings on December 24, 2015.
Investments
AFG recorded fourth quarter 2015 net realized losses of $14
million after tax and after deferred acquisition costs (DAC),
compared to net realized gains of $5 million in the comparable
prior year period. Unrealized gains on fixed maturities were $278
million after tax and after DAC at December 31, 2015, a decrease of
$326 million from year-end 2014. Our portfolio continues to be high
quality, with 89% of our fixed maturity portfolio rated investment
grade and 97% with a National Association of Insurance
Commissioners’ designation of NAIC 1 or 2, its highest two
categories.
For the year ended December 31, 2015, P&C net investment
income was approximately 9% higher than the prior year, reflecting
the investment of cash received in connection with the Summit
acquisition.
More information about the components of our investment
portfolio may be found in our Quarterly Investor Supplement, which
is posted on our website.
About American Financial Group,
Inc.
American Financial Group is an insurance holding company, based
in Cincinnati, Ohio with assets of approximately $50 billion.
Through the operations of 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
fixed and fixed-indexed annuities in the retail, financial
institutions and education markets. Great American Insurance
Group’s roots go back to 1872 with the founding of its flagship
company, Great American Insurance Company.
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 and
their effect on future premiums, revenues, earnings, investment
activities and the amount and timing of share repurchases;
recoverability of asset values; expected losses and the adequacy of
reserves for asbestos, environmental pollution and mass tort
claims; rate changes; and improved loss experience.
Actual results and/or financial condition could differ
materially from those contained in or implied by such
forward-looking statements for a variety of reasons including but
not limited to: changes in financial, political and economic
conditions, including changes in interest and inflation rates,
currency fluctuations and extended economic recessions or
expansions in the U.S. and/or abroad; performance of securities
markets; AFG’s ability to estimate accurately the likelihood,
magnitude and timing of any losses in connection with investments
in the non-agency residential mortgage market; new legislation or
declines in credit quality or credit ratings that could have a
material impact on the valuation of securities in AFG’s investment
portfolio; the availability of capital; regulatory actions
(including changes in statutory accounting rules); changes in the
legal environment affecting AFG or its customers; tax law and
accounting changes; levels of natural catastrophes and severe
weather, terrorist activities (including any nuclear, biological,
chemical or radiological events), incidents of war or losses
resulting from civil unrest and other major losses; development of
insurance loss reserves and establishment of other reserves,
particularly with respect to amounts associated with asbestos and
environmental claims; availability of reinsurance and ability of
reinsurers to pay their obligations; trends in persistency,
mortality and morbidity; competitive pressures, including those in
the annuity distribution channels, the ability to obtain adequate
rates and policy terms; changes in AFG’s credit ratings or the
financial strength ratings assigned by major ratings agencies to
our operating subsidiaries; and other factors identified in our
filings with the Securities and Exchange Commission. The
forward-looking statements herein are made only as of the date of
this press release. The Company assumes no obligation to publicly
update any forward-looking statements.
Conference Call
The company will hold a conference call to discuss 2015 fourth
quarter and full year results at 11:30 am (ET) tomorrow, Wednesday,
February 3, 2016. Toll-free telephone access will be available by
dialing 877-459-8719 (international dial-in 424-276-6843). The
conference ID for the live call is 21470917. Please dial in five to
ten minutes prior to the scheduled start time of the call.
A replay will be available approximately two hours following the
completion of the call and will remain available until 11:59 pm
(ET) on February 10, 2016. To listen to the replay, dial
1-855-859-2056 (international dial-in 404-537-3406) and provide the
conference ID 21470917.
The conference and accompanying webcast slides will also be
broadcast live over the Internet. To listen to the call via the
Internet, go to the Investor Relations page on AFG’s
website, www.AFGinc.com, and follow the instructions under
Webcasts and Presentations.
The archived webcast will be available immediately after the
call via the same link on the Investor Relations page until
February 10, 2016 at 11:59 pm (ET). An archived audio MP3 file will
be available within 24 hours of the call.
(Financial summaries follow)
This earnings release and AFG’s Quarterly Investor Supplement
are available in the Investor Relations section of AFG’s website:
www.AFGinc.com.
AMERICAN FINANCIAL GROUP, INC. AND
SUBSIDIARIESSUMMARY OF EARNINGS AND SELECTED BALANCE SHEET
DATA(In Millions, Except Per Share Data)
Three months ended
December 31,
Twelve months ended
December 31,
2015 2014 2015
2014 Revenues P&C insurance net earned premiums $
1,120 $ 1,061 $ 4,224 $ 3,878 Life, accident & health net
earned premiums 24 26 104 108 Net investment income 416 384 1,633
1,501 Realized gains (losses) on: Securities (21 ) 8 (19 ) 52
Subsidiaries (4 ) - (161 ) - Income (loss) of managed investment
entities: Investment income 43 32 155 116
Loss on change in fair value of
assets/liabilities
(18 ) (9 ) (34 ) (44 ) Other income
58
39 243
122 Total revenues
1,618
1,541 6,145
5,733
Costs and expenses
P&C insurance losses & expenses 1,026 982 4,015 3,666
Annuity, life, accident & health benefits & expenses 247
265 1,042 1,005 Interest charges on borrowed money 17 20 74 73
Expenses of managed investment entities 32 22 112 82 Other expenses
86 62
337 281 Total costs
and expenses
1,408
1,351 5,580
5,107
Earnings before income taxes
210
190
565
626
Provision for income taxes(c)
80 65
195 220 Net
earnings including noncontrolling interests 130 125 370 406
Less: Net earnings (loss) attributable to
noncontrolling interests
1
(2
)
18
(46
)
Net earnings attributable to shareholders
$
129 $ 127
$ 352 $
452 Diluted Earnings per Common Share
$ 1.45 $
1.41 $ 3.94
$ 4.97 Average number of
diluted shares 89.2 89.8 89.4 91.0 December 31,
December 31,
Selected Balance
Sheet Data:
2015 2014 Total cash and investments $
37,736 $ 36,210 Long-term debt $ 1,020 $ 1,061 Shareholders’
equity(d) $ 4,592 $ 4,879
Shareholders’ equity (excluding
appropriated retained earnings and unrealized gains/losses on fixed
maturities)(d)
$
4,314
$
4,277
Book Value Per Share: Excluding appropriated retained earnings $
52.50 $ 55.65
Excluding appropriated retained earnings
and unrealized gains/losses on fixed maturities
$ 49.33 $ 48.76
Common Shares Outstanding
87.5
87.7
Footnotes (c) and (d) are contained in the
accompanying Notes to Financial Schedules at the end of this
release.
AMERICAN FINANCIAL GROUP,
INC.SPECIALTY P&C OPERATIONS(Dollars in
Millions)
Three months ended
December 31,
Pct.
Change
Twelve months ended
December 31,
Pct.
Change
2015 2014 2015
2014 Gross written premiums
$ 1,356 $
1,303 4 %
$ 5,832
$ 5,477 6 %
Net
written premiums $ 1,056
$ 1,025 3 %
$
4,327 $ 4,020
8 %
Ratios (GAAP): Loss & LAE ratio 61.8 %
64.0 % 62.2 % 63.7 %
Underwriting expense ratio
29.2 % 28.6
% 30.9 %
30.2 % Specialty Combined
Ratio 91.0 %
92.6 % 93.1
% 93.9 %
Combined Ratio (Including
A&E)
91.0
%
92.6
%
94.7
%
94.5
%
Supplemental
Information:(e)
Gross Written Premiums: Property & Transportation $ 515
$ 482 7 % $ 2,455 $ 2,342 5 % Specialty Casualty 661 660 - 2,739
2,529 8 % Specialty Financial 179 160 12 % 637 605 5 % Other
1 1 -
1 1 -
$
1,356 $ 1,303
4 %
$ 5,832 $
5,477 6 %
Net Written Premiums:
Property & Transportation $ 378 $ 373 1 % $ 1,636 $ 1,566 4 %
Specialty Casualty 503 498 1 % 2,052 1,864 10 % Specialty Financial
152 131 16 % 540 488 11 % Other
23
23 -
99
102 (3 %)
$
1,056 $ 1,025
3 %
$ 4,327 $
4,020 8 %
Combined Ratio (GAAP):
Property & Transportation 92.4 % 94.6 % 96.9 % 98.7 % Specialty
Casualty 90.2 % 92.9 % 92.7 % 92.3 % Specialty Financial 88.7 %
85.6 % 83.1 % 86.5 % Aggregate Specialty Group 91.0 % 92.6 %
93.1 % 93.9 %
Three months ended
December 31,
Twelve months ended
December 31,
2015 2014 2015
2014 Reserve Development (Favorable)/Adverse:
Property & Transportation $ 8 $ 3 $ 15 $ 16 Specialty Casualty
(7 ) 14 (11 ) (7 ) Specialty Financial (5 ) (4 ) (30 ) (17 ) Other
(1 ) (3 ) (11 ) (11 ) Aggregate
Specialty Group Excluding A&E (5 ) 10 (37 ) (19 ) Special
A&E Reserve Charge – P&C Run-off - - 67 24 Other -
- 3 1 Total
Reserve Development Including A&E
$
(5 ) $ 10
$ 33 $
6
Points on Combined Ratio:
Property & Transportation 1.8 0.6 0.9 1.0 Specialty Casualty
(1.4 ) 2.9 (0.5 ) (0.4 ) Specialty Financial (3.6 ) (3.3 ) (5.7 )
(3.7 ) Aggregate Specialty Group (0.4 ) 1.0 (0.8 ) (0.5 )
Footnote (e) is contained in the
accompanying Notes to Financial Schedules at the end of this
release.
AMERICAN FINANCIAL GROUP,
INC.ANNUITY SEGMENT(Dollars in Millions)
Components of
Statutory Premiums
Three months ended
December 31,
Pct.
Change
Twelve months ended
December 31,
Pct.
Change
2015 2014 2015
2014
Annuity
Premiums:
Retail Single Premium $ 512 $ 424 21 % $ 1,934 $ 1,634 18 %
Financial Institutions Single Premium
534
487
10
%
1,970
1,821
8
%
Education Market 51 49 4 % 194 194 - % Variable Annuities 10
11 (9 %) 42 47 (11 %) Total Annuity Premiums $
1,107 $ 971 14 % $ 4,140 $ 3,696 12 %
Components of
Core Operating Earnings Before Income Taxes
Three months ended
December 31,
Pct.
Change
Twelve months ended
December 31,
Pct.
Change
2015 2014 2015
2014 Revenues: Net investment income $ 309 $ 285 8 % $
1,224 $ 1,136 8 % Other income 23 33 (30 %) 98
97 1 % Total revenues 332 318 4 % 1,322 1,233 7 %
Costs and Expenses: Annuity benefits 189 157 20 % 732 648 13 %
Acquisition expenses 20 59 (66 %) 163 175 (7 %) Other expenses
22 17 29 % 96 82 17 % Total costs and
expenses 231 233 (1 %) 991 905 10 %
Core operating earnings before income
taxes
$ 101 $ 85 19 % $ 331 $ 328 1 %
Supplemental
Fixed Annuity Information
Three months ended
December 31,
Pct.
Change
Twelve months ended
December 31,
Pct.
Change
2015 2014 2015
2014
Core operating earnings before impact of
fair value accounting on FIAs
$
96
$
93
3
%
$
354
$
362
(2
%)
Impact of fair value accounting
5
(8 ) nm
(23
) (34 ) nm
Core operating earnings before income
taxes
$
101
$
85
19
%
$
331
$
328
1
%
Average Fixed Annuity Reserves* $ 26,048 $ 23,104 13
% $ 24,898 $ 22,119 13 % Net Interest Spread 2.53 % 2.64 %
2.69 % 2.78 %
Net Spread Earned Before Impact of Fair
Value Accounting*
1.31
%
1.54
%
1.35
%
1.56
%
Net Spread Earned After Impact of Fair
Value Accounting
1.39
%
1.40
%
1.26
%
1.41
%
* Excludes fixed annuity portion of
variable annuity business.
AMERICAN FINANCIAL GROUP, INC.
Notes to Financial Schedules
a)
Components of core net operating earnings
(in millions):
Three months ended
December 31,
Twelve months ended
December 31,
2015 2014 2015
2014
Core Operating
Earnings before Income Taxes:
P&C insurance segment $ 163 $ 141 $ 566 $ 476
Annuity segment, before impact of fair
value accounting
96 93 354 362 Impact of fair value accounting 5 (8 ) (23 ) (34 )
Run-off long-term care and life segment - (7 ) 14 (10 ) Interest
& other corporate expense
(45
) (35 )
(162 ) (143
) Core operating earnings before income taxes
219 184 749 651 Related income taxes
83
62 263
212 Core net operating earnings
$ 136 $
122 $ 486
$ 439 b) Reflects
the following effects of special A&E charges during the twelve
months ended December 31, 2015 and 2014 (dollars in millions,
except per share amounts): Pretax
After-tax EPS A&E Charge: 2015 2014
2015 2014 2015 2014 P&C insurance run-off
operations
Asbestos $ 25 $ 4
$ 17 $ 3 Environmental
42 20 27 12
$ 67
$ 24 $ 44 $
15 $ 0.49 $ 0.17
Former railroad & manufacturing
operations
Asbestos $ 1 $ - $
- $ - Environmental
11 6 8 4
$ 12
$ 6 $ 8 $ 4
$ 0.09 $ 0.04
Total A&E $ 79
$ 30 $ 52 $
19 $ 0.58 $ 0.21
c) Earnings before
income taxes include $4 million and $51 million in non-deductible
losses attributable to noncontrolling interests related to managed
investment entities in the fourth quarter and full year of 2014.
d) Shareholders’ Equity at December 31, 2015 includes $278
million ($3.17 per share) in unrealized after-tax gains on fixed
maturities. Shareholders’ Equity at December 31, 2014 includes $604
million ($6.89 per share) in unrealized after-tax gains on fixed
maturities and ($2) million ($0.03 per share) of retained earnings
appropriated to managed investment entities. e)
Supplemental
Notes:
•
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.
•
Specialty Casualty includes
primarily excess and surplus, general liability, executive
liability, professional liability, umbrella and excess liability,
specialty coverages in targeted markets, customized programs for
small to mid-sized businesses and workers’ compensation
insurance.
•
Specialty Financial includes risk
management insurance programs for leasing and financing
institutions (including collateral and lender-placed mortgage
property insurance), surety and fidelity products and trade credit
insurance.
•
Other includes an internal
reinsurance facility.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160202006674/en/
American Financial Group, Inc.Diane P. Weidner,
513-369-5713Asst. Vice President - Investor
RelationsorWebsites:www.AFGinc.comwww.GreatAmericanInsuranceGroup.com
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