|
--Adjusted book value per share of $42.72; up 11% from year end
--Repurchased 4.3 million shares during the quarter
--2012 core operating earnings guidance increased to $3.10 - $3.50 per share
American Financial Group, Inc. (AFG) (AFG) today reported
net earnings attributable to shareholders of $226 million ($2.39 per
share) for the 2012 third quarter, compared to $97 million ($0.95 per
share) for the 2011 third quarter. The 2012 third quarter results
include $148 million ($1.57 per share) in after-tax non-core earnings,
primarily the result of a $101 million after-tax gain on the sale of the
Company’s supplemental insurance businesses, realized gains on
securities and the results of AFG’s tax case resolution, which were
offset somewhat by a reserve strengthening related to the Company’s
asbestos and other environmental exposures. These, and other less
significant non-core items, are outlined in the table below. Book value
per share, excluding appropriated retained earnings and unrealized gains
(losses) on fixed maturities, increased by $1.98 to $42.72 per share
during the quarter. Net earnings attributable to shareholders for the
2012 nine month period were $438 million ($4.50 per share), compared
with $233 million ($2.23 per share) in the comparable 2011 period.
Core net operating earnings were $78 million ($0.82 per share) for the
2012 third quarter, compared to $92 million ($0.91 per share) reported
in the 2011 third quarter. Core net operating earnings for the first
nine months of 2012 were $253 million ($2.59 per share) compared to $257
million ($2.47 per share) for the same period a year ago. Higher profits
in our Annuity and Supplemental Insurance ("A&S") Group were offset by
lower underwriting earnings and lower investment income in our Specialty
Property and Casualty Insurance ("P&C") operations. Nine
month annualized core operating return on equity was 9%.
During the third quarter of 2012, AFG repurchased 4.3 million shares of
common stock at an average price per share of $37.64. Repurchases during
the first nine months of 2012 were $315 million at an average price per
share of $37.96.
AFG’s net earnings attributable to shareholders, determined in
accordance with 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.
Three months ended Nine months ended
In millions, except per share amounts September 30, September 30,
--------------------------- ------------------------------
2011 2011
2012 (adjusted) 2012 (adjusted)
-------------- ------------ --------------- --------------
Components of net earnings attributable to shareholders:
Core net operating earnings(a) $ 78 $ 92 $ 253 $ 257
Non-Core Items:
--------------------------------------------------------
55 5 92 14
Realized gains on securities
101 - 101 -
Gain on sale of subsidiary
(21 ) - (21 ) (38 )
Special A&E charges((b))
28 - 28 -
AFG tax case resolution
(15 ) - (15 ) -
Other
----- --- ----- ------ --- -----
Net earnings attributable to shareholders $ 226 $ 97 $ 438 $ 233
=== ===== === ===== ===== === ====== === === ===== ===
Components of diluted earnings per share:
Core net operating earnings(a) $ 0.82 $ 0.91 $ 2.59 $ 2.47
Non-Core Items:
--------------------------------------------------------
0.59 0.04 0.95 0.13
Realized gains on securities
1.07 - 1.04 -
Gain on sale of subsidiary
(0.23 ) - (0.22 ) (0.37 )
Special A&E charges((b))
0.30 - 0.29 -
AFG tax case resolution
(0.16 ) - ( 0.15 ) -
Other
----- --- ----- ------ --- -----
Diluted earnings per share $ 2.39 $ 0.95 $ 4.50 $ 2.23
=== ===== === ===== ===== === ====== === === ===== ===
Footnotes (a) and (b) are contained in the accompanying Notes
To Financial Schedules at the end of this release.
S. Craig Lindner and Carl H. Lindner III, AFG’s Co-Chief Executive
Officers, issued this statement: "We are encouraged by the continued
positive momentum in our annuity operations, which posted record
profitability in the third quarter of 2012. P&C results were solid,
especially considering the effects of the Midwest drought and a
continued low interest rate environment. Teams in both of these areas of
our business have successfully maintained the focus and exercised the
discipline needed for strong core earnings.
"We remain committed to deploying excess capital in an effective manner.
AFG’s share repurchases during the first nine months of 2012 were made
at approximately 89% of the Company’s September 30, 2012 book value per
share. We expect to repurchase about $450 million of our common stock in
2012. With approximately $575 million of excess capital at September 30,
2012 (including parent company cash of approximately $300 million), our
financial strength also positions us for healthy, profitable organic
growth and for opportunities to expand our specialty niche businesses
through acquisitions and start-ups that meet our return thresholds.
"We have increased our core net operating earnings guidance for 2012 to
be in the range of $3.10 - $3.50 per share, up from the $3.00 - $3.40
estimated previously. This guidance excludes losses from Hurricane Sandy
that exceed our normal projected catastrophe load in the fourth quarter.
Our core earnings per share guidance excludes non-core items such as
realized gains, significant A&E charges and annuity unlockings, losses
or loss recognition in our run-off long-term care business, as well as
other significant items that may not be indicative of ongoing
operations."
Specialty Property and Casualty Insurance
Results
The P&C specialty insurance operations generated an
underwriting profit of $16 million in the 2012 third quarter, compared
to $58 million in the third quarter of 2011. The $42 million decline was
due primarily to losses of $12 million in our crop insurance business
and approximately $25 million lower favorable reserve development in
several of our Specialty Casualty businesses. Losses from catastrophes
totaled $5 million in the third quarter of 2012, compared to $13 million
in the 2011 third quarter. Results for the 2012 third quarter include $9
million (1 point on the combined ratio) in favorable reserve
development. By comparison, favorable reserve development in the third
quarter of 2011 was $34 million (4 points). Underwriting profit for the
first nine months of 2012 was $116 million, compared to $142 million in
the comparable 2011 period.
Gross and net written premiums decreased by approximately 4% and 1%,
respectively, for the third quarter when compared to the 2011 periods.
The decrease in premiums was primarily attributed to lower premiums in
our crop insurance business, which were offset by increases in most of
our other businesses. Gross and net written premiums were up 2% and 4%,
respectively, for the 2012 nine month period compared to the same period
a year earlier. This growth was driven by higher premiums in our
Specialty Casualty Group.
Further details of the Specialty P&C operations may be found in the
accompanying schedules.
The Property and Transportation Group reported a small
underwriting profit in the 2012 third quarter, compared to an
underwriting profit of $5 million in the 2011 third quarter. Crop losses
resulting from the effects of the Midwest drought more than offset
improved profitability in other businesses in this group. The $12
million in crop losses recorded in the third quarter represent the full
extent of losses estimated for the year, as the Company expects any
additional losses to be within the scope of its stop loss reinsurance
agreement. Underwriting profit in the first nine months of 2012
decreased approximately $5 million from the comparable 2011 period. Most
businesses in this group had solid underwriting margins through the
first nine months of 2012.
Gross and net written premiums in this group were lower in the third
quarter and first nine months of 2012, primarily a result of lower crop
commodity prices. Increased premiums in our transportation, property and
inland marine and ocean marine businesses offset these declines
somewhat. Renewal pricing was up approximately 4% for the quarter and 3%
for the year to date in this group.
The Specialty Casualty Group reported an underwriting
profit of $8 million in the 2012 third quarter, compared to an
underwriting profit of $20 million in the third quarter of 2011.
Improved profitability in our social services and excess and surplus
operations was more than offset by lower favorable development in our
general liability, workers’ compensation and run-off casualty
businesses. Year to date 2012 underwriting profits were $7 million
higher than the comparable 2011 period, primarily due to higher
favorable reserve development in our general liability lines and
improved profitability in our international businesses, which offset
lower profitability in our excess and surplus and executive liability
operations. Most businesses in this group produced strong underwriting
profit margins through the first nine months of 2012.
Gross and net written premiums grew by double digit percentages in both
the third quarter and nine month periods in 2012 when compared to the
same prior year periods. Our workers’ compensation, excess and surplus
and targeted markets operations were the primary sources of the growth
in this group. Increased business opportunities arising from larger
exposures and general market hardening have contributed to the increased
premiums in this group. Pricing was up approximately 5% for the third
quarter and 4% for the first nine months of 2012.
The Specialty Financial Group reported a small underwriting
profit in the third quarter of 2012, compared to an underwriting profit
of $24 million in the third quarter of 2011. Underwriting profit was $28
million and $52 million for the first nine months of 2012 and 2011,
respectively. Losses from a run-off book of automotive-related business,
as well as lower favorable development during the third quarter were the
primary drivers of these results. Most of the businesses in this group
achieved good underwriting margins during the first nine months of 2012.
Gross and net written premiums were 4% and 5% higher, respectively, in
the 2012 third quarter when compared to the 2011 third quarter,
primarily the result of increased premiums in our financial institutions
business. Gross and net written premiums were up 6% and 2%,
respectively, for the first nine months of 2012 when compared to 2011.
Higher gross written premiums resulted primarily from a service contract
business initiated in the second quarter of 2011. All of these premiums
were ceded under a reinsurance agreement. Pricing in this group was up
approximately 1% for the third quarter and first nine months of 2012.
Carl H. Lindner III stated, "I am pleased with the overall results in
our P&C operations through the first nine months of the year. Drought
conditions in the Midwest were the worst we’ve seen in 25 years,
adversely affecting yields in our key corn and soybean producing states.
Our commitment to strategic use of reinsurance in our crop operations
has been instrumental in helping us to contain losses from these extreme
drought conditions in the Midwest. Additionally, AFG’s third quarter
catastrophe losses represented less than one point on our combined
ratio. I am encouraged that we have continued pricing momentum in our
P&C businesses and anticipate opportunities for continued price
increases throughout 2013. With today’s low fixed income yields, we and
the industry need strong underwriting results to achieve healthy returns
on equity. About three-fourths of our P&C businesses achieved price
increases through the first nine months, and almost all continue to
achieve solid underwriting profits. We remain on target to achieve our
2012 operating goals."
Annuity and Supplemental Insurance Results
The A&S Group reported record core operating earnings before income
taxes of $81 million for the 2012 third quarter, compared to $47 million
in the 2011 period. This 72% increase was largely attributable to our
ability to maintain spreads on a larger base of invested assets in our
fixed annuity operations.
For the first nine months of 2012, the A&S Group reported record core
operating earnings before income taxes of $224 million, compared to $157
million in the 2011 period. This 43% increase resulted from the same
factors that contributed to the quarterly increase. Our Medicare
supplement and critical illness businesses contributed pre-tax earnings
of $28 million through the date these operations were sold in August
2012.
Statutory premiums of $801 million in the 2012 third quarter were
approximately 19% lower than the third quarter of 2011, in line with our
expectations. The continued low interest rate environment was a key
factor in actions taken early in the third quarter to lower crediting
rates and agent commissions on several of our products, which resulted
in a slowdown in sales. Statutory premiums of $2.7 billion for the first
nine months were 2% lower than the comparable 2011 period as strong
growth the first six months of the year was tempered by lower third
quarter sales.
Craig Lindner noted, "I’m very pleased with the growth in earnings of
our annuity business, which is largely the result of the premium growth
we have achieved over the last several years, accompanied by pricing
discipline and excellent investment returns."
As previously announced, AFG sold its Medicare supplement and critical
illness businesses to Cigna Corporation for approximately $305 million
in cash and recorded an after-tax gain of approximately $101 million on
the sale, subject to post-closing adjustments.
A further continuation of the low interest rate environment is likely to
lead to loss recognition in AFG’s long-term care business. As previously
announced, the Company has initiated an external actuarial study of this
business. This study supplements our regular internal analysis of our
experience and is expected to be completed in the fourth quarter of this
year. Modifications to actuarial assumptions in these businesses could
also result in a charge to earnings. Any such charge would be excluded
from core earnings, if material.
Similarly, AFG performs a review ("unlocking") of its major actuarial
assumptions of its life and annuity businesses throughout the year.
Changes in assumed investment yields and other actuarial assumptions in
these businesses could also affect earnings.
Craig Lindner added, "We now expect that full year 2012 core operating
earnings before income taxes in our annuity and supplemental operations
will be 25% - 30% higher than our 2011 results, even with the absence of
earnings from our Medicare supplement and critical illness operations
for the last four months of 2012. This guidance does not reflect
potential significant unlocking or long-term care loss recognition.
Based on current market conditions and trends, we expect annuity sales
for the full year of 2012 to be slightly lower than annuity sales in
2011."
Further details of the Annuity and Supplemental insurance operations may
be found in the accompanying schedules.
A&E Reserves
Management has conducted comprehensive studies of its asbestos and
environmental reserves with the aid of outside actuarial and engineering
firms and specialty outside counsel every two years with an in-depth
internal review during the intervening years. During the third quarter,
AFG completed an internal review of its asbestos and environmental
exposures relating to the run-off operations of its P&C group and its
exposures related to former railroad and manufacturing operations and
sites. This year’s internal review resulted in an after-tax charge of
$21 million to increase A&E reserves. The charge relates primarily to an
increase in environmental investigative costs and related loss
adjustment expenses in certain environmental and asbestos files. There
were no newly identified issues that management believes would
significantly impact the overall adequacy of AFG’s A&E reserves.
At September 30, 2012, AFG’s three year survival ratio for property and
casualty exposures was 16.4 times paid losses for asbestos reserves and
10.7 times paid losses for total A&E reserves. These ratios compare
favorably with industry data published by Conning Research and
Consulting, Inc. in June 2012, which indicate that industry A&E survival
ratios were 10.1 for asbestos reserves and 9.0 for total A&E reserves at
December 31, 2011. Excluding amounts associated with the settlements of
two large asbestos claims, AFG’s three year survival ratio was 9.9 and
7.3 times paid losses for the asbestos reserves and total A&E reserves,
respectively.
Investments
AFG recorded third quarter 2012 net realized gains on securities of $55
million after tax and after deferred acquisition costs (DAC), compared
to $5 million in the comparable prior year period. After-tax, after-DAC
realized gains for the first nine months of 2012 were $92 million,
compared to $14 million in the same period in 2011. Unrealized gains on
fixed maturities were $789 million, after tax, after DAC, at September
30, 2012. Our portfolio continues to be high quality, with 86% of our
fixed maturity portfolio rated investment grade and 95% with a National
Association of Insurance Commissioners’ designation of NAIC 1 or 2, its
highest two categories.
During the first nine months of 2012, P&C investment income was 6% lower
than the comparable 2011 period, in line with our expectations.
More information about the components of our investment portfolio may be
found in our Financial and Investment Supplements, which are posted on
our website.
About American Financial Group, Inc.
American Financial Group is an insurance holding company based in
Cincinnati, Ohio with assets in excess of $35 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 traditional fixed and
fixed-indexed annuities in the education, bank and individual 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
and investment activities; 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 factors 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. 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 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; changes in persistency of in-force policies;
availability of reinsurance and ability of reinsurers to pay their
obligations; the unpredictability of possible future litigation if
certain settlements of current litigation do not become effective;
trends in persistency, mortality and morbidity; competitive pressures,
including those in the annuity bank distribution channels and 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 information in this press release should be read in conjunction with
financial and investment supplements that are available in the Investor
Relations section of our website at www.AFGinc.com.
The company will hold a conference call to discuss 2012 third quarter
results at 11:30 am (ET) tomorrow, Tuesday, October 30, 2012. Toll-free
telephone access will be available by dialing 1-888-892-6137
(international dial in 706-758-4386). The conference ID for the live
call is 37220633. Please dial in five to ten minutes prior to the
scheduled start time of the call.
A replay will also be available following the completion of the call, at
approximately 2:00 pm (ET) on October 30, 2012, and will remain
available until 11:59 pm (ET) on November 6, 2012. To listen to the
replay, dial 1-800-585-8367 (international dial in 404-537-3406) and
provide the conference ID 37220633.
The conference call will also be broadcast over the Internet. To listen
to the call, go to the Investor Relations page on AFG’s website, www.AFGinc.com,
and follow the instructions at the Webcast link. An archived webcast
will be available immediately after the call via a link on the Investor
Relations page until November 6, 2012 at 11:59 pm (ET). An archived
audio MP3 file will also be available within 24 hours of the call.
(Financial summaries follow)
This earnings release and additional Financial Supplements are available
in the Investor Relations section of AFG’s website: www.AFGinc.com.
AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES
SUMMARY OF EARNINGS AND SELECTED BALANCE SHEET DATA
(In Millions, Except Per Share Data)
Three months ended Nine months ended
Sept 30, Sept 30,
--------------------------- ---------------------------
2011 2011
2012 (adjusted) 2012 (adjusted)
-------------- ------------ ------------ --------------
Revenues
P&C insurance premiums $ 848 $ 835 $ 2,091 $ 2,043
Life, accident & health premiums 80 107 290 324
Investment income 327 310 981 916
Realized gains 241 8 300 24
Income (loss) of managed investment entities:
Investment income 31 27 92 78
(13 ) 1 (63 ) (54 )
Gain (loss) on change in fair value of assets/liabilities
Other income 49 47 135 136
----- ----- ----- -----
1,563 1,335 3,826 3,467
----- ----- ----- -----
Costs and expenses
P&C insurance losses & expenses 864 777 2,014 1,951
255 278 803 803
Annuity, life, accident & health benefits & expenses
Interest on borrowed money 22 21 64 63
19 17 58 53
Expenses of managed investment entities
Other operating and general expenses 118 86 320 279
----- ----- ----- -----
1,278 1,179 3,259 3,149
----- ----- ----- -----
Operating earnings before income taxes 285 156 567 318
Provision for income taxes(c) 74 48 184 126
----- ----- ----- -----
Net earnings including noncontrolling interests 211 108 383 192
Less: Net earnings (loss) attributable to noncontrolling interests (15 ) 11 (55 ) (41 )
----- --- ----- ----- -- ----- ---
Net earnings attributable to shareholders $ 226 $ 97 $ 438 $ 233
=== ===== === ===== ===== == ===== == === ===== ===
Diluted Earnings per Common Share $ 2.39 $ 0.95 $ 4.50 $ 2.23
=== ===== ===== ===== == ===== === =====
Average number of Diluted Shares 94.6 101.3 97.4 104.1
Sept 30, December 31,
Selected Balance Sheet Data: 2012 2011
------------ --------------
Total Cash and Investments $ 28,037 $ 25,577
Long-term Debt $ 966 $ 934
Shareholders’ Equity(d) $ 4,779 $ 4,411
$ 3,881 $ 3,779
Shareholders’ Equity (Excluding appropriated retained earnings &
unrealized gains/losses on fixed maturities)(d)
Book Value Per Share:
Excluding appropriated retained earnings $ 51.40 $ 43.32
$ 42.72 $ 38.63
Excluding appropriated retained earnings and unrealized
gains/losses on fixed maturities
Common Shares Outstanding 90.8 97.8
Footnotes (c) and (d) are contained in the accompanying Notes To
Financial Schedules at the end of this release.
AMERICAN FINANCIAL GROUP, INC.
P&C SPECIALTY GROUP UNDERWRITING RESULTS
(Dollars in Millions)
Three months ended Pct. Nine months ended Pct.
Sept 30, Change Sept 30, Change
------------------ ------ ------------------ ------
2012 2011 2012 2011
------------ ------------ ------------ ------------
Gross written premiums $ 1,509 $ 1,575 (4 %) $ 3,356 $ 3,277 2 %
== ===== == == ===== == == ===== == == ===== ==
Net written premiums $ 908 $ 915 (1 %) $ 2,247 $ 2,168 4 %
== ===== == ===== == ===== == =====
Ratios (GAAP):
Loss & LAE ratio 68 % 66 % 61 % 61 %
Expense ratio 30 % 27 % 33 % 32 %
----- -- ----- -- ----- -- ----- --
Combined Ratio (Excluding A&E) 98 % 93 % 94 % 93 %
===== == ===== == ===== == ===== ==
Total Combined Ratio 102 % 93 % 96 % 96 %
===== == ===== == ===== == ===== ==
Supplemental:(e)
--------------------------------
Gross Written Premiums:
Property & Transportation $ 981 $ 1,104 (11 %) $ 1,840 $ 1,918 (4 %)
Specialty Casualty 376 325 16 % 1,100 967 14 %
Specialty Financial 152 146 4 % 415 391 6 %
Other - - - 1 1 -
----- ----- ----- -----
$ 1,509 $ 1,575 (4 %) $ 3,356 $ 3,277 2 %
== ===== == ===== == ===== == =====
Net Written Premiums:
Property & Transportation $ 539 $ 575 (6 %) $ 1,158 $ 1,175 (1 %)
Specialty Casualty 243 220 10 % 734 645 14 %
Specialty Financial 108 103 5 % 303 297 2 %
Other 18 17 6 % 52 51 2 %
----- ----- ----- -----
$ 908 $ 915 (1 %) $ 2,247 $ 2,168 4 %
== ===== == ===== == ===== == =====
Combined Ratio (GAAP):
Property & Transportation 100 % 99 % 97 % 96 %
Specialty Casualty 97 % 91 % 94 % 94 %
Specialty Financial 99 % 76 % 91 % 84 %
Aggregate Specialty Group 98 % 93 % 94 % 93 %
Three months ended Nine months ended
Sept 30, Sept 30,
------------- --------------
2012 2011 2012 2011
---------- --------- ---------- ----------
Reserve Development Favorable/(Unfavorable):
Property & Transportation $ 2 $ (3 ) $ 14 $ 23
Specialty Casualty (3 ) 23 25 50
Specialty Financial 5 9 16 9
Other 5 5 7 10
--- -- --- ---
Aggregate Specialty Group Excluding A&E 9 34 62 92
Special A&E Reserve Charge - P&C Run-off (31 ) - (31 ) (50 )
Other - - (8 ) -
--- -- --- -- ---
Total Reserve Development Including A&E $ (22 ) $ 34 $ 23 $ 42
== === == == == == === == ===
Points on Combined Ratio:
Property & Transportation - (1 ) 1 2
Specialty Casualty (1 ) 11 4 8
Specialty Financial 5 9 5 3
Aggregate Specialty Group 1 4 3 5
Footnote (e) is contained in the accompanying Notes To Financial
Schedules at the end of this release.
AMERICAN FINANCIAL GROUP, INC.
ANNUITY & SUPPLEMENTAL INSURANCE GROUP
STATUTORY PREMIUMS
(Dollars in Millions)
Three months ended Pct. Nine months ended Pct.
Sept 30, Change Sept 30, Change
-------------- ------ ---------------- ------
2012 2011 2012 2011
-------- ---------- ---------- ----------
Retirement annuity premiums:
$ 459 $ 569 (19 %) $ 1,475 $ 1,402 5 %
Individual SP-Fixed & Indexed*
Bank SP-Fixed & Indexed* 199 244 (18 %) 733 820 (11 %)
Education Market-403(b) 51 60 (15 %) 177 194 (9 %)
Education Market-Variable 14 17 (18 %) 46 52 (12 %)
--- ----- ----- -----
Total Annuities 723 890 (19 %) 2,431 2,468 (1 %)
Run-off Long-Term Care 20 21 (5 %) 60 62 (3 %)
Life Insurance 8 6 33 % 26 24 8 %
--- ----- ----- -----
28 27 4 % 86 86 -
--- ----- ----- -----
Total Excluding Medicare Supplement & Critical Illness 751 917 (18 %) 2,517 2,554 (1 %)
Medicare Supplement & Critical Illness** 50 75 (33 %) 200 228 (12 %)
--- ----- ----- -----
Total statutory premiums $ 801 $ 992 (19 %) $ 2,717 $ 2,782 (2 %)
=== === === ===== === ===== === =====
* "SP" represents Single Premium.
** Medicare Supplement and Critical Illness premium amounts include only
premiums received prior to August 31, 2012, the effective date of the
sale of these businesses.
AMERICAN FINANCIAL GROUP, INC.
Notes To Financial Schedules
a)GAAP to Non GAAP Reconciliation
- Components of core net operating earnings:
-------------------------------------------------------------------------------------
Three months ended Nine months ended
In millions Sept 30, Sept 30,
----------------------- -------------------------
2011 2011
2012 (adjusted) 2012 (adjusted)
---------- ------------ ----------- -------------
P&C operating earnings $ 71 $ 121 $ 274 $ 342
Annuity & supplemental insurance operating earnings 81 47 224 157
Interest & other corporate expense (36 ) (31 ) (119 ) (105 )
--- -- --- --- ---- -- ---- ---
Core operating earnings before income taxes 116 137 379 394
Related income taxes 38 45 126 137
--- --- ---- ----
Core net operating earnings $ 78 $ 92 $ 253 $ 257
== === === === == ==== === ====
b) Reflects the following effects of special A&E charges during the
first nine months of 2012 and 2011 ($ in millions, except per share
amounts):
Pre-tax After-tax EPS
-------- -------- ------------
2012 2011 2012 2011 2012 2011
------ ------ ------ ------ -------- --------
A&E Charge:
------------------------------------------
P&C insurance runoff operations
------------------------------------------
Asbestos $ 19 $ 28 $ 12 $ 18
------------------------------------------ -- -- -- -- -- -- -- --
Environmental 12 22 8 14
------------------------------------------ == == == ==
$ 31 50 $ 20 $ 32 $ 0.20 $ 0.31
-- -- -- -- -- -- -- -- ---- -- ----
Former railroad & manufacturing operations
------------------------------------------
Asbestos $ 2 $ 3 $ 1 $ 2
------------------------------------------ -- -- -- -- -- -- -- --
Environmental - 6 - 4
------------------------------------------ == == == ==
$ 2 $ 9 $ 1 $ 6 $ 0.02 $ 0.06
-- -- -- -- -- -- -- -- -- ---- -- ----
c) Operating income before income taxes includes $18 million and $64
million in non-deductible losses attributable to noncontrolling
interests related to managed investment entities in the third quarter
and first nine months of 2012, and $8 million of non-taxable income and
$47 million of non-deductible losses in the third quarter and first nine
months of 2011, respectively.
d) Shareholders’ Equity at September 30, 2012 includes $789 million
($8.68 per share) in unrealized gains on fixed maturities and $109
million ($1.21 per share) of retained earnings appropriated to managed
investment entities. Shareholder’s Equity at December 31, 2011 includes
$459 million ($4.69 per share) in unrealized gains on fixed maturities
and $173 million ($1.76 per share) of retained earnings appropriated to
managed investment entities. The appropriated retained earnings will
ultimately inure to the benefit of the debt holders of the investment
entities managed by AFG.
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, umbrella and excess liability,
customized programs for small to mid-sized businesses and workers’
compensation insurance.
--
Specialty Financial includes risk management insurance programs
for lending and leasing institutions (including collateral and
mortgage protection insurance), surety and fidelity products and trade
credit insurance.
--
Other includes an internal reinsurance facility.
SOURCE: American Financial Group, Inc.
American Financial Group, Inc.
Diane P. Weidner, 513-369-5713
Asst. Vice President - Investor Relations
or
Websites:
www.AFGinc.com
www.GreatAmericanInsuranceGroup.com
www.GAFRI.com
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