American Financial Group, Inc. · NYSE:AFG
American Financial — Investor Presentation (June 2014)
32 slides from American Financial's investor presentation, June 2014
Slide 1: Investor Presentation June 2014
INVESTOR PRESENTATION June 2014 1
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: Why Invest in AFG?
Why Invest in AFG? Core values and corporate culture Diversified specialty niche insurance businesses P&C premium growth momentum Strong annuity performance Superior underwriting talent and culture Superior investing talent Intelligent use of excess capital Growth in book value per s
Slide 4: Our Corporate Values
Our Corporate Values The Foundation for our Business Model Specialization (“30+ CEOs”) Entrepreneurial Spirit Customer Focus Expectations of Ourselves Priorities in our Corporate Culture Integrity Respect for Others Accountability Clear & Open Communication Self-Discipline Work/Family Balance 44
Slide 5: Diversified Specialty Niche Insurance Businesses
Diversified Specialty Niche Insurance Businesses 30 Specialty P&C insurance businesses Over half of P&C Group GWP produced by businesses with “Top 10” market rankings: - Crop - Non-Profit / Social Services - Fidelity & Crime - Trucking (ind. owners / operators) - Equine - Specialty Workers Comp
Slide 6: Focusing our Business
Focusing our Business Over 15 Years – Focusing on What We Know Best . . . Dispositions 1998 – Sale of Commercial Lines Division and pre-need insurance business 2003 – IPO of Infinity Property and Casualty; exit personal auto business 2004 – Cease writing new term life insurance business 2006 – Sale
Slide 7: Specialty P&C Premium Growth
Specialty P&C Premium Growth Dollars in billions P&C Net Written Premium and Renewal Rate Momentum $5.0 $4.0 Net Written Premium $4.0 $3.3 $3.0 $2.9 $2.8 $2.3 $2.4 $2.0 $1.0 $0.0 1 2009 2010 2011 2012 2013 2014E (at midpoint) NWP Rate Increases 0% 0% 1% 3% 4% 3% − 4% 1 Assumes inclusion of Summit pr
Slide 8: Superior Underwriting Talent
Superior Underwriting Talent 115% 110% Commercial 107.2% 106.7% Statutory Combined Ratio Lines 105% 104.4% Industry 102.6% 103.0% 100.2% 102.7% 100% 98.3% 99.7% 95.1% 95% 96.3% 91.2% 95.6% 92.7% 94.1% 90% 89.1% AFG 88.6% 87.3% 85% 82.3% 84.8% 80% AFG Avg. 2004 2005 2006 2007 2008 2009 2010 2011 2012
Slide 9: Result of Superior Underwriting & Investing
Result of Superior Underwriting & Investing 99
Slide 10: Intelligent Use of Excess Capital
Intelligent Use of Excess Capital 2014 Capital Management Capital Returned to Shareholders Completed the purchase of Summit Five Years Ended 12/31/2013 Holding Southeast, Inc. on April 1. (in millions) Purchase price of $260 million, plus capital contribution of $140 million. Total Repurchases $ 1
Slide 11: Compounded Growth in Book Value per Share
Compounded Growth 1 in Book Value per Share Period Ended 12/31/13 3 Years 5 Years 10 Years AFG 8% 12% 10% Specialty P&C Peers 2 6% 8% 6% 1 Based on book value per share (excluding appropriated retained earnings and unrealized gain/loss on fixed maturities) as adjusted. 2 Peers include ACE, Alleghany
Slide 12: Five Year Total Value Creation
XL Group 22.9% American Financial 22.4% Allied World 20.2% Progressive 19.4% Ace Ltd. 19.1% Renaissance Re 18.2% Arch Capital 18.2% CNA Corp 17.8% Allstate 16.5% Enstar 15.9% Greenlight Re 15.7% ProAssurance 14.8% Source: Company Reports, Dowling & Partners Analysis Montpelier Re 14.6% Axis Capital
Slide 13: Compounded Shareholder Return
Compounded Shareholder Return (As of December 31, 2013) 5 Years 10 Years AFG 23.3% 14.8% S&P P/C Insurance Index 16.3% 6.5% S&P Midcap Insurance 14.8% 9.8% S&P 500 17.9% 7.4% Price appreciation plus dividends through 12/31/13. Source: Bloomberg 13 13
Slide 14: Specialty Property & Casualty Group
SPECIALTY PROPERTY & CASUALTY GROUP 14 14
Slide 15: Specialty P&C Premium Distribution
Specialty P&C Premium Distribution 2013 Gross Written Pro Forma 2013 Gross Written Premiums – $4.8 Billion Premiums including Summit – $5.3 Billion 13% Property & 12% Transportation 50% Specialty 45% Casualty 37% 43% Specialty Financial Property & Transportation Specialty Casualty Specialty Financia
Slide 16: Specialty P&C Insurance Group Strategic Focus
Specialty P&C Insurance Group Strategic Focus Secure price increases to support continued strong underwriting profitability Improve market position of existing specialty operations Strategically aligned incentives Adequate reserve position Strong capital adequacy Low windstorm / quake ex
Slide 17: Specialty P&C Businesses
Specialty P&C Businesses Dollars in millions Net Written Premiums (2014E assumes nine months of Summit premiums) 2012 2013 1Q 2014 2014E Specialty Property $ 1,473 $ 1,547 $ 284 + 0% − 5% & Transportation + 45% − 49% 1 Specialty Casualty $ 992 $ 1,224 $ 331 Specialty Financial $ 411 $ 486 $ 116 + 3%
Slide 18: Specialty P&C Businesses
Specialty P&C Businesses GAAP Combined Ratio 1 2012 2013 1Q 2014 2014E Specialty Property 98.7% 99.2% 98.1% 94% − 98% & Transportation Specialty Casualty 94.5% 90.9% 87.8% 90% − 94% Specialty Financial 89.2% 85.6% 91.0% 87% − 91% Other Specialty 78.5% 68.8% 79.9% n/a Total Specialty 95.4% 93.5% 92.2
Slide 19: Annuity Segment
ee = GREATAMERICAN INSURANCE GROUP ANNUITY SEGMENT 19
Slide 20: Annuity Segment Highlights
Annuity Segment Highlights Through 12/31/13, 18% compound annual growth in segment assets since acquisition in 1974 Focused on fixed and fixed-indexed annuities Continued record operating earnings and capital 28% growth in pretax core annuity operating earnings in 2013 - approximately 15% gr
Slide 21: Growth in Annuity Segment Assets
GAAP Assets $ in Billions $0 $1 $2 $3 $4 $5 $6 $7 $8 $9 $10 $11 $12 $13 $14 $15 $16 $17 $18 $19 $20 $21 $22 $23 $24 $25 $26 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 Annuity Assets (GAAP) 1996 1997 1998 1999 2000 Growth in Annuity S
Slide 22: Annuity Premium and Earnings
Annuity Premium and Earnings Dollars in millions $4,500 $330 $350 $328 $4,000 $300 Pretax Core Annuity Earnings Statutory Annuity Premiums $3,500 $256 $250 $3,000 $188 $200 $2,500 $159 $4,033 $4,000 $2,000 $150 $127 $3,086 $2,991 $1,500 $105 $2,280 $100 $1,676 $1,000 $1,434 $50 $500 $0 $0 2008 2009
Slide 23: Annuity Product Snapshot
Annuity Product Snapshot Variable 1% 2013 Annuity Premiums 403(b) 5% Focus on fixed and fixed-indexed annuities Financial SP - $ 4 Billion Indexed Institutions - 47% - makes use of core competence in fixed Fixed 16% income investing Fin. Inst. - Simple, easy to understand products Indexed 27% SP
Slide 24: Annuity Segment
Annuity Segment Dollars in millions 2012 2013 1Q 2014 2014E Annuity Premiums $ 2,991 $ 4,033 $ 967 $ 4,000 Average Fixed Annuity Investments $ 16,650 $ 19,151 $ 21,402 + 15% – 18% Average Fixed Annuity Reserves $ 16,394 $ 18,696 $ 21,066 + 15% – 18% Net Interest Spread Earned 3.12% 2.94% 2.81% Net S
Slide 25: Impact of Interest Rates on Earnings
Impact of Interest Rates on Earnings Under FAS 133, a portion of fixed indexed annuity (FIA) reserves are discounted using current market rates As a result, in general, an increase in interest rates will have a positive impact on reported earnings (and vice versa) Affects timing of reported ea
Slide 26: Positioned for Rising Interest Rates
Positioned for Rising Interest Rates Annuity Account Value by Asset duration approximately Product Feature 0.5 shorter than liabilities As of December 31, 2013 MVAs 8% Approximately 13% of portfolio FIA Riders invested in floating rate securities 15% 3%+ GMIR 36% Lower GMIR business protected
Slide 27: Investment and Financial Highlights
INVESTMENT AND FINANCIAL HIGHLIGHTS 27 27
Slide 28: AFG Investment Portfolio
AFG Investment Portfolio As of March 31, 2014 Fixed Maturities Portfolio – 86% investment grade; 97% NAIC 1 & 2 Fixed Maturities 85% Corporates Asset-backed 41% 10% U.S. Govt. Cash and 1% Equivalents 6% States & Municipalities Policy and 21% Mtg Loans 3% Equities Foreign Govt. 4% 1% Real Estate Resi
Slide 29: Superior Investing Talent
Superior Investing Talent Fixed Income Annualized Total Return 1 Six Years Ended 12/31/13 AFG 7.4% Benchmark: 2 Blended Insurance Industry 5.7% Outperformance 1.7% ≈ $2.1 Billion Total Return Outperformance 1 2008-2013 time period captures the beginning of the global financial crisis. 2 Source: SNL
Slide 30: Financial Highlights
Financial Highlights Dollars in millions, except per share amounts Three Months Ended March 31, • Results of Operations: 2014 2013 – Core net operating earnings $ 91 $ 84 – Core net operating earnings per share $ 1.00 $ 0.92 – Average number of diluted shares 91.6 91.0 • Book Value per Share: 03/31/
Slide 31: 2014 Outlook - AFG
2014 Outlook - AFG AFG Core Earnings Guidance $4.50 – $4.90 per share (Assumes nine months of Summit results) NWP Combined Growth Ratio Specialty P&C Group Overall 17% – 21% 91% – 95% Business Groups: Property & Transportation 0% – 5% 94% – 98% Specialty Casualty 45% – 49% 90% – 94% Specialty Financ
Slide 32: American Financial Group, Inc.
AMERICAN _ FINANCIAL GROUP, INC.
American Financial Group — Investor Presentation (June 2014) on 6ix