American Financial Group, Inc.’s AFG business opportunities, growth in the surplus lines and excess liability businesses, rate increases, higher average renewal pricing and effective capital deployment make it worth retaining in one’s portfolio.
Growth Projections
The Zacks Consensus Estimate for AFG’s 2024 earnings is pegged at $11.66 per share, indicating a 9.3% increase from the year-ago reported figure on 16.3% higher revenues of $8.36 billion.
Earnings Surprise History
American Financial has a decent earnings surprise history. It beat estimates in six of the last seven quarters and missed in one.
Zacks Rank & Price Performance
AFG currently carries a Zacks Rank #3 (Hold). In the past year, the stock has lost 10.8% against the industry’s increase of 19.1%.
Image Source: Zacks Investment Research
Business Tailwinds
The Property and Casualty (P&C) Insurance segment of American Financial should benefit from business opportunities, growth in the surplus lines and excess liability businesses, rate increases and higher retentions in renewal business, which boost premium growth.
For 2023, in the Specialty P&C Insurance segment, growth in net written premiums is expected in the range of 5-8%, suggesting an increase of 2 points at the midpoint of the previous range of 3-6%. AFG continues to expect net written premiums to be 5-9% higher than 2022 results in Specialty Casualty Group.
Growth in net written premiums for Specialty Financial Group is expected in the range of 23% to 27%, up significantly from the previous range of 6% to 10%, as a result of the opportunistic growth in financial institutions business.
The property and casualty insurer witnessed average renewal pricing across the entire P&C Group. AFG intends to maintain satisfactory rates in P&C renewal pricing going forward. Average renewal pricing across P&C Group, excluding workers’ compensation, was up approximately 5% overall. Based on results through the first half of 2023, American Financial continues to expect renewal rates to increase between 3% and 5% in Specialty Property and Casualty operations overall.
AFG’s combined ratio has been better than the industry average for more than two decades. The underwriting profit of the insurer is likely to increase on higher profit in the workers’ compensation, excess and surplus, executive liability, mergers and acquisitions liability businesses and higher underwriting profit in the trade credit and financial institutions businesses.
American Financial has successfully increased its dividends in each of the last 14 years. The robust operating profitability at the P&C segment, stellar investment performance and effective capital management support effective shareholders return. The company expects its operations to continue to generate significant excess capital throughout the remainder of 2023 to the point that it could deploy an excess of $500 million of excess capital for share repurchases or additional special dividends through the end of 2023.
Stocks to Consider
Some better-ranked stocks from the insurance industry are Arch Capital Group Ltd. ACGL, Axis Capital Holdings Limited AXS and Kinsale Capital Group, Inc. KNSL, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arch Capital has a solid track record of beating earnings estimates in each of the last trailing four quarters, the average being 26.83%. In the past year, ACGL has rallied 61.4%.
The Zacks Consensus Estimate for ACGL’s 2023 and 2024 earnings per share is pegged at $6.73 and $7.43, indicating a year-over-year increase of 38.1% and 10.4%, respectively.
Axis Capital has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 9.75%. In the past year, AXS has gained 1.5%.
The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings per share is pegged at $8.41 and $9.31, indicating a year-over-year increase of 44.7% and 10.7%, respectively.
Kinsale Capital beat estimates in each of the last four quarters, the average being 14.88%. In the past year, KNSL has rallied 46.3%.
The Zacks Consensus Estimate for 2023 and 2024 has moved 8.5% and 7.8% north, respectively, in the past 30 days, reflecting analysts’ optimism.
Zacks Names #1 Semiconductor Stock
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
See This Stock Now for Free >>Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report
American Financial Group, Inc. (AFG) : Free Stock Analysis Report
Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
