American Financial Group, Inc. · NYSE:AFG
American Financial — BMO Insurance Summit 2023
34 slides from American Financial's conference presentation, Nov 30, 2023
Slide 1: Specialty Property and Casualty Insurance
Specialty Property and Casualty Insurance BMO Insurance Summit November 30, 2023
Slide 2: Forward Looking Statements
Forward Looking Statements Certain statements made during this presentation, as well as included in this document, are not historical facts and may be considered “forward-looking statements” and are based on estimates, assumptions and projections which management believes are reasonable but by their
Slide 3: A History Dating Back 150 Years
A History Dating Back 150 Years We are specialists in providing P&C insurance products that help businesses manage their unique financial risks and exposures. Over 50% of Specialty P&C Group gross written premium is produced by businesses with “top 10” market rankings Superior Underwriting Specialty
Slide 4: Top Tier Specialty Property & Casualty Insurer
Top Tier Specialty Property & Casualty Insurer Entrepreneurial Culture, Strategic Alignment of Interests Market Leading P&C Insurance Specialist Consistent Investment Outperformance Superior Capital Management and Strong Balance Sheet 4
Slide 5: Our values form the foundation of our business
Our values form the foundation of our business, shape our priorities, and set our expectations for how we conduct our business, service our customers and interact with each other. 5
Slide 6: Strategic Alignment of Interests for Optimal Results
Strategic Alignment of Interests for Optimal Results Significant Ownership Unique, Incentive-Based Innovator in Risk Sharing and by Management Programs for P&C Business Alternative Risk Transfer Programs Leaders For Policyholders and Agents 15% • Annual awards 25% - based on AY COR targets derived f
Slide 7: Building Long-Term Value for AFG Shareholders
Building Long-Term Value for AFG Shareholders 10 YEAR VIEW 11% CAGR OF TOTAL VALUE CREATION Superior P&C Superior Intelligent = VALUE Underwriting Investment Deployment of Results Talent Capital CREATION Growth in Adjusted BVPS + Dividends 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Adjus
Slide 8: Total Value Creation: Twelve Months Ended December 31, 2022
Total Value Creation: Twelve Months Ended December 31, 2022 BVPS + 2022 Dividends BVPS exc AOCI + 2022 Dividends 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% Source: Public company filings. 8
Slide 9: Focusing on What We Know Best
Focusing on What We Know Best Acquisition of Acquired Summit Holding remaining 49% Start-up of Southeast, Inc. of NATL Accident & Start-up of Public shares not Health Acquisition of Acquired all Sector Division Start-up of owned by AFG Business Acquisition of Crop Risk IPO of Infinity minority Aviat
Slide 10: Specialty P&C Insurance Operations
Specialty P&C Insurance Operations PROPERTY & SPECIALTY SPECIALTY We are specialists in TRANSPORTATION CASUALTY FINANCIAL providing property and Agribusiness (farm & ranch) Cyber Risk Fidelity / Crime casualty insurance Commercial Automobile Excess and Surplus Financial Institution Services solution
Slide 11: Great American Insurance Company's Ratings
Great American Insurance Company’s Ratings A+ A+ A1 The Numbers Tell Our Story 3,000 Superior Strong Property and casualty insurance companies in the United States 50 Companies on the Ward's 50 List for safety, consistency and performance 4 Rated “A” (Excellent) or better by AM Best for 115 or more
Slide 12: Specialty Property & Casualty Premium
Specialty Property & Casualty Premium Low correlation • Lower relative coastal exposure Gross Written Premiums Gross Written Premiums 2022 LTM Ended September 30, 2023 $9.1 Billion $9.5 Billion 10% 11% Property & Transportation 45% 44% Specialty Casualty 1 45% 45% Specialty Financial In 2022, over 5
Slide 13: Diversified Product Portfolio
Specialty Financial Diversified Product Portfolio 10% Lender Surety, Services Fidelity & Other GL & Our Property & Other Executive Agricultural Casualty insurance & Professional Liability Property & Transportation operations provide a 45% wide variety of Targeted 2022 GWP Markets $9.1 Billion specia
Slide 14: Statutory Combined Ratio
Superior Underwriting Talent 7.4% Points 105% Commercial Statutory Combined Ratio 102.1% 99.6% 99.7% 99.9% Lines Better 99.3% 98.4% 100% 97.5% Industry1 97.1% 96.7% 95.9% 95% 94.1% 93.6% Over the 10-Year 93.1% 92.9% 92.6% 91.8% 90% 91.9% 90.2% AFG2 85% 85.5% 87.0% Period 80% 2013 2014 2015 2016 2017
Slide 15: Pretax Property & Casualty Returns
Pretax Property & Casualty Returns AFG 25.1% AFG 24.3% Travelers 19.6% Travelers 19.9% W.R. Berkley 17.8% The Hartford 18.2% The Hartford 17.8% W.R. Berkley 17.9% RLI 17.1% RLI 15.4% CNA 14.4% CNA 13.6% Arch Capital 13.2% Arch Capital 13.2% Markel 12.0% Cincinnati Financial 12.4% Cincinnati Financia
Slide 16: Specialty P&C Pricing Trends
Specialty P&C Pricing Trends 18% The impact of cumulative 16% rate increases over time has generally enabled us 14% to stay ahead of 12% prospective loss ratio 10% trends and helps us to feel Total Specialty confident in the adequacy 8% Group without 7% Workers’ Comp of our reserves. 6% 5% Total Spe
Slide 17: Specialty Property & Casualty Premium Growth
Specialty Property & Casualty Premium Growth Dollars in billions P&C Net Written Premium and Renewal Rates $6.6 $6.2 $5.6 $5.0 $5.3 $4.8 $5.0 2017 2018 2019 2020 2021 2022 2023E 1 Rate Increases 1% 1% 3% 11% 9% 5% 3% - 5% Overall Specialty P&C renewal rates increased approximately 5% in 3Q23. Exclud
Slide 18: AFG Investment Portfolio
AFG Investment Portfolio As of September 30, 2023 Fixed Maturities Portfolio – 93% investment grade P&C Fixed Maturities Portfolio – 96% NAIC 1 & 2 Fixed Maturities 68% Asset-backed 23% Cash and Corporates Equivalents 29% Foreign 8% Government 3% Mortgage Loans Commercial MBS US 4% 1% Government 2%
Slide 19: AFG Investment Portfolio – Alternative Investments
AFG Investment Portfolio – Alternative Investments As of September 30, 2023 Denver / Co. Springs Real Estate 25% Investments / Funds Multi-family AFG CLOs 92% 55% Florida (Debt and Equity) 6% 29% Other Private Debt 6% Funds Other Albuquerque 3% 4% 2% Fund Convertible Las Vegas Investments Fixed 2% 4
Slide 20: Investment Portfolio Characteristics
Investment Portfolio Characteristics P&C Portfolio Positioning & Outlook 9/30/23 Short Duration – Increased duration of P&C fixed maturity portfolio in the Approximate Duration – higher interest rate environment, including cash and cash equivalents, Fixed Maturities including 2.8 years from approxim
Slide 21: Strong Financial Position
Strong Financial Position As of September 30, 2023 Sept 30, 2023 Dec 31, 2022 Principal amount of long-term debt $ 1,498 $ 1,521 Capital Management Above target levels for all rating agencies Adjusted shareholders' equity1 4,536 4,578 Excess capital approximately $660 million at Total adjusted c
Slide 22: Intelligent Use of Excess Capital
Intelligent Use of Excess Capital 2023 Capital Management • $4.00 per share special dividend paid in February 2023 Capital Returned to Shareholders • $1.50 per share special dividend paid in November 2023 Five Years Ended 12/31/2022 • Excess capital at September 30, 2023 approximately $660 million (
Slide 23: Balanced Approach to Capital Allocation
Balanced Approach to Capital Allocation Dollars in millions $2,701 $1,228 $649 $653 $506 $446 $355 $384 $360 $421 $403 $246 $304 $320 $231 $104 $141 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 YTD thru Regular Dividends Special Dividends Share Repurchases Tot
Slide 24: Double-Digit Growth in Regular Dividends
Double-Digit Growth in Regular Dividends $2.60 ($ per share) Annual Regular Dividends Paid 12.4% CAGR $0.81 1 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Including the $5.50 in special dividends declared in 2023 through November 1st, AFG has declared $59.55 per share in special dividends
Slide 25: Protecting What Matters
Protecting What Matters We sustain AFG’s business success by effectively managing risk—financial, social, environmental—to help create stability for our customers and deliver value to our shareholders. We focus our corporate responsibility and sustainability strategies in four primary areas where AF
Slide 26: 2023 Outlook
2023 Outlook AFG’s 2023 core net operating earnings guidance of $10.15 - $11.15 per share, producing a core return on equity at the midpoint of approximately 20%1 Updated August Guidance1 Guidance NWP Combined NWP Combined 2022 Growth Ratio Growth Ratio Actual Specialty P&C Group Overall 6% – 8% 90%
Slide 27: Appendix
Appendix — AMERICAN © FINANCIAL 2 GROUP, INC. 7
Slide 28: Financial Highlights – Third Quarter and First Nine Months of 2023
Financial Highlights – Third Quarter and First Nine Months of 2023 Dollars in millions, except per share data Three Months Ended Nine Months Ended Sept. 30, Sept. 30, • Results of Operations: 2023 2022 2023 2022 - Core net operating earnings $ 208 $ 192 $ 657 $ 738 - Core net operating earnings per
Slide 29: Financial Highlights – 2022
Financial Highlights – 2022 Dollars in millions, except per share data Twelve Months Ended December 31, • Results of Operations: 2022 2021 – Core net operating earnings – Core net operating earnings per share $ 993 $ 11.63 $ 993 $ 11.59 21.2% – Average number of diluted shares 85.3 85.6 Core Operati
Slide 30: Specialty Property & Casualty Businesses
Specialty Property & Casualty Businesses Dollars in millions Net Written Premium Nine Months Ended 2023E excl. 1 2021 2022 9/30/2022 9/30/2023 % Change 2023E Workers’ Comp Specialty Property $ 2,157 $ 2,515 $ 2,092 $ 2,125 2% 0% – 2% & Transportation Specialty Casualty $ 2,540 $ 2,728 $ 2,073 $ 2,24
Slide 31: Specialty Property & Casualty Businesses
Specialty Property & Casualty Businesses GAAP Combined Ratio 2021 2022 YTD 9/30/2023 2023E1 Specialty Property 87.1% 91.7% 93.6% 92% − 95% & Transportation Specialty Casualty 84.3% 81.2% 87.8% 85% − 88% Specialty Financial 85.1% 83.7% 89.6% 88% − 91% Total Specialty 86.4% 87.2% 91.3% 90% − 92% 1 202
Slide 32: A Premier Specialty Insurer…a look back
A Premier Specialty Insurer…a look back 2018 through YTD 2023 13% 2% 14% 4% 38% GROWTH in NWP (2018 - 2023E) 37% 38% Business $6.3 Transformation 48% 44% Acquisitions Billion • ABAIS Dividends and • Atlas Financial (Paratransit) • Verikai Share 2017 NWP $4.8 Billion 2023E NWP $6.6 Billion • Crop Ris
Slide 33: Business Spotlight: E&S, Umbrella and Excess Liability Businesses
Business Spotlight: E&S, Umbrella and Excess Liability Businesses Great American Risk Solutions writes hard-to-place P&C products via wholesale brokers on an excess and surplus lines basis (non-filed rates and forms). Great American Custom writes excess liability on large capacity towers for Fortune
Slide 34: American Financial Group, Inc.
— De AMERICAN — FINANCIAL GROUP, INC. INANCIAL Foun we 34