American Financial Group, Inc. · NYSE:AFG
American Financial — Investor Presentation (August 2013)
35 slides from American Financial's investor presentation, August 2013
Slide 1: Investor Presentation August 2013
INVESTOR PRESENTATION August 2013 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 represent the company’s view as of the date they were first made based on then-current estimates, assumpt
Slide 3: Why Invest in AFG?
Why Invest in AFG? Core values and corporate culture Diversified specialty niche insurance businesses P&C pricing / premium growth momentum Annuity earnings momentum Superior underwriting talent and culture Superior investing talent Intelligent use of excess capital Growth in book va
Slide 4: Our Corporate Values
Our Corporate Values The Foundation for our Business Model Specialization (“25+ 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 4
Slide 5: Diversified Specialty Niche Insurance Businesses
Diversified Specialty Niche Insurance Businesses 25 Specialty Insurance Businesses Nearly half of P&C Group GWP produced by businesses with “Top 10” market rankings: - Crop - Passenger Transportation - Fidelity & Crime - Non-Profit / Social Services - Equine - Trucking (ind. owners / operators)
Slide 6: Focusing our Business
Focusing our Business 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 of Gr
Slide 7: P&C Momentum
P&C Momentum (Dollars in billions) P&C Net Written Premium and Renewal Rate Momentum $5.0 5% Renewal Rate Increase Net Written Premium $4.0 4% $3.2 $2.9 $3.0 $2.8 3% $2.3 $2.4 $2.0 2% $1.0 1% $0.0 0% 2009 2010 2011 2012 2013E (at midpoint) NWP Renewal Rate Increase 7
Slide 8: Superior Underwriting Talent
Superior Underwriting Talent 115% Commercial Lines 110% 107.2% 106.8% Industry Statutory Combined Ratio 105% 102.6% 103.0% 105.0% 101.9% 100.2% 102.7% 100% AFG 99.7% 100.3% 95.6% 95% 95.1% 96.3% 91.2% 92.7% 90% 89.1% 88.6% 87.3% 85% 84.8% 82.3% 80% AFG Avg. 2003 2004 2005 2006 2007 2008 2009 2010 20
Slide 9: Result of Superior Underwriting & Investing
Result of Superior Underwriting & Investing 9
Slide 10: Intelligent Use of Excess Capital
Intelligent Use of Excess Capital Capital Returned to Shareholders Opportunistic Repurchases = Five Years Ended 12/31/2012 Long-term Shareholder Value (in millions) Total Repurchases $ 1,150 5 Year View Dividends Paid 341 • 35.5 million shares repurchased Total $ 1,491 • 31% of 12/31/07 shares outst
Slide 11: Intelligent Use of Excess Capital
Intelligent Use of Excess Capital 2012 Capital Management 2013 Capital Management $415 million share repurchase $70 million share repurchase (avg. per share price ~ 90% of ($48.17 per share average) year end adjusted book value) 6.1 million shares remaining in $91 million paid in dividends,
Slide 12: Compounded Growth in Book Value per Share
Compounded Growth 1 in Book Value per Share Period Ended 12/31/12 3 Years 5 Years 10 Years AFG 11% 11% 12% Specialty P&C Peers 2 5% 4% 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, Alleghan
Slide 13: Five Year Total Value Creation
0% 5% -5% 10% 15% 20% 25% Enstar 20% Allied World 16% American Financial 16% HCC Insurance 15% Lancashire 15% Arch Capital 15% ProAssurance 14% Ace Ltd. 13% Progressive 13% Travelers 13% Chubb 12% Renaissance Re 12% Platinum 12% Validus 12% W.R. Berkley 11% Endurance 11% PartnerRe 11% RLI Corp 11% I
Slide 14: Compounded Shareholder Return
Compounded Shareholder Return (As of December 31, 2012) 5 Years 10 Years AFG 8.8% 12.0% S&P P/C Insurance Index 0.7% 5.0% S&P Midcap Insurance 5.0% 9.4% S&P 500 1.7% 7.1% Price appreciation plus dividends through 12/31/12. Source: Bloomberg 14
Slide 15: Value Comparisons
Value Comparisons Share prices as of 8/9/13 Book values as of 6/30/13 Excl. Unrealized 2013E Price/ Gains/Losses P/E Book Price/Book 1 AFG 13.0x 1.0x 1.2x 2 Peer Companies 13.9x 1.2x 1.3x 1 Book values exclude appropriated retained earnings. 2 Peers include ACE, Alleghany Corp, Arch Capital Group, A
Slide 16: Specialty Property & Casualty Group
SPECIALTY PROPERTY & CASUALTY GROUP 16
Slide 17: Specialty P&C Insurance Group Niche Focus
Specialty P&C Insurance Group Niche Focus 2012 Gross Written Premiums – $ 4.3 Billion Specialty Financial Insurance Property & Transportation 13% 53% Specialty Casualty 34% Property & Transportation Specialty Casualty Specialty Financial Insurance Transportation Targeted Programs Lender Servic
Slide 18: 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 Add new niches globally Strategically aligned incentives Adequate reserve position Strong capital adequacy
Slide 19: Growing Our P&C Business Through Cycles
Growing Our P&C Business Through Cycles (Dollars in millions) Specialty P&C Group Net Written Premium 3,000 2,000 1,000 - 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 Existing 1990s Startups 2000s Startups 19
Slide 20: Specialty P&C Businesses
Specialty P&C Businesses (Dollars in millions) Net Written Premiums 1 2011 2012 LTM 2013E Specialty Property $ 1,436 $ 1,473 $ 1,458 2% − 6% & Transportation Specialty Casualty $ 867 $ 992 $ 1,079 15% − 19% Specialty Financial $ 398 $ 411 $ 446 11% − 15% Other Specialty $ 69 $ 73 $ 80 n/a Total Spec
Slide 21: Specialty P&C Businesses
Specialty P&C Businesses GAAP Combined Ratio 2011 2012 2013 YTD 2013E Specialty Property 92.0% 98.7% 103.5% 95% − 99% & Transportation Specialty Casualty 95.9% 94.5% 90.5% 89% − 93% Specialty Financial 84.1% 89.2% 87.6% 87% − 91% Other Specialty 73.6% 78.5% 72.6% n/a Total Specialty 91.6% 95.4% 95.0
Slide 22: Annuity Segment
ee _ GREATA MERICAN. INSURANCE GROUP ANNUITY SEGMENT 22
Slide 23: Annuity Segment Highlights
Annuity Segment Highlights 19% compound annual growth in segment assets since acquisition in 1974 Focused on fixed and fixed-indexed annuities Continued record operating earnings and capital (39% growth in pretax core annuity earnings in Q2 2013) Double digit returns on new business Strong
Slide 24: 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 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 Annuity Assets (GAAP) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Growth in Annui
Slide 25: Annuity Product Snapshot
Annuity Product Snapshot Variable 2% 2012 Annuity Premiums 403(b) 8% Focus on fixed and fixed-indexed annuities $ 3.0 Billion Bank - Fixed - makes use of core competence in fixed 20% SP - Indexed income investing 55% Bank - Indexed Simple, easy to understand products 10% SP – Lower up-front co
Slide 26: Annuity and Long-Term Care & Life Segments
Annuity and Long-Term Care & Life Segments (Dollars in millions) 2010 2011 2012 2013 YTD Statutory Annuity Net Premiums $ 2,280 $ 3,086 $ 2,991 $ 1,485 Core Pretax Operating Earnings: Annuities $ 159 $ 188 $ 256 $ 158 Run-off Long-Term Care & Life 7 - (4) (3) Total $ 166 $ 188 $ 252 $ 155 1 Operatin
Slide 27: Annuity Momentum
Annuity Momentum (Dollars in millions) Premium Growth and Earnings $3,500 $350 $3,086 $2,991 Pretax Core Annuity Earnings Statutory Annuity Premiums $3,000 $300 $2,500 $250 $2,280 $2,000 $200 $1,676 $1,500 $1,434 $150 $1,000 $100 $500 $50 $- $0 2008 2009 2010 2011 2012 Statutory Annuity Premiums Pre
Slide 28: Fixed Annuities
Fixed Annuities (Dollars in millions) Six Months Ended Full Year June 30, 2011 2012 2012 2013 Average Fixed Annuity Investments $ 14,146 $ 16,650 $ 16,060 $ 18,280 Average Fixed Annuity Reserves $ 13,929 $ 16,394 $ 15,841 $ 17,829 Net Interest Spread Earned 3.00% 3.12% 3.02% 3.00% Net Spread Earned
Slide 29: Impact of Rising Interest Rates
Impact of Rising Interest Rates June 30, 2013 Fixed Annuity Account Value - $18.5 Billion GMIR & Avg. Crediting Cost Annuity Account Value by 4.01% Cash flow testing indicates that 2.91% gradually rising interest rates 2.58% increase the value of our business 2.03% - Increased spread opportunity o
Slide 30: Investments and Financial Highlights
INVESTMENTS AND FINANCIAL HIGHLIGHTS 30
Slide 31: AFG Investment Portfolio
AFG Investment Portfolio (As of June 30, 2013) Fixed Maturities Portfolio – 86% investment grade; 96% NAIC 1 & 2 Real Estate Fixed Maturities US Govt. 87% and Other Asset-backed 1% 2% 9% States & Municipalities 19% Equities 4% Foreign Govt. 1% Policy and Mtg Loans 3% Residential MBS 16% Cash and Equ
Slide 32: Superior Investing Talent
Superior Investing Talent Fixed Income Annualized Total Return Five Years Ended 12/31/12 AFG 8.7% Benchmark: Insurance Composite Estimate 7.1% Outperformance 1.6% ≈ $1.6 Billion Total Return Outperformance 32
Slide 33: 2Q 2013 Financial Highlights
2Q 2013 Financial Highlights (In millions, except per share) • Results of Operations: Q2 2013 Q2 2012 – Core net operating earnings $ 87 $ 90 – Core net operating earnings per share $ 0.96 $ 0.91 – Average number of diluted shares 91.5 98.0 • Book Value per Share: 6/30/13 12/31/12 – Excluding approp
Slide 34: 2013 Outlook
2013 Outlook AFG Core Earnings Guidance $3.70 – $4.10 per share NWP Combined Growth Ratio Specialty P&C Group Overall 8% – 12% 91% – 95% Business Groups: Property & Transportation 2% – 6% 95% – 99% Specialty Casualty 15% – 19% 89% – 93% Specialty Financial 11% – 15% 87% – 91% Increase of 4% – 6% in
Slide 35: American Financial Group, Inc.
ee -_ AMERICAN _ FINANCIAL GROUP, INC.
American Financial Group — Investor Presentation (August 2013) on 6ix