American Financial Group Shines Despite Challenging Market Conditions
Despite elevated industry catastrophe losses and heightened levels of economic volatility, American Financial Group (AFG) has posted solid first-quarter results for 2025. The company's latest earnings release reveals a compelling mix of specialty insurance businesses, an entrepreneurial culture, disciplined operating philosophy, and astute in-house investment thresholds that continue to serve it well.
AFG returned over $290 million to its shareholders during the first quarter of 2025 through a combination of regular dividends, special dividends, and share repurchases. This demonstrates the company's commitment to delivering value to its stakeholders amidst challenging market conditions.
According to Carl Lindner III, Co-CEO of AFG, "Our results were solid in the face of elevated industry catastrophe losses and heightened levels of economic volatility. We're proud of our team's efforts to navigate these challenges while continuing to position ourselves for long-term success."
A key highlight from the quarter is AFG's investment performance, which saw a 6% year-over-year increase in net investment income at its property and casualty insurance operations. Excluding alternative investments, this represents a significant boost, underscoring the company's ability to adapt to changing interest rates and invest in high-yielding securities.
AFG's $16 billion investment portfolio, as presented on Slides 5 and 6 of their webcast, is a testament to the company's financial prowess. The portfolio's diversified mix of investments includes fixed maturities, which accounted for approximately 66% of the total. In the current interest rate environment, AFG has been able to invest in these securities at yields of around 5.75%, exceeding 6% on some investments.
The company's alternative investment portfolio, however, did experience a decline, with an annualized return of approximately 1.8% for the quarter compared to 9% in the prior year period. This is attributed primarily to returns below expectations in their traditional private equity portfolio.
As Craig Lindner noted during the conference call, "Earnings from alternative investments vary from quarter-to-quarter based on the reported results of the underlying investments and generally are reported on a quarter lag."
