AMERICAN FINANCIAL GROUP INC
For the period ended Dec 31, 2023. Filed Feb 23, 2024.
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FY2023 · Filed Feb 23, 2024
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Property and Casualty Insurance
Property and Casualty Insurance Segment — Results of Operations
Performance measures such as underwriting profit or loss and related combined ratios are often used by property and casualty insurers to help users of their financial statements better understand the company’s performance. Underwriting profitability is measured by the combined ratio, which is a sum of the ratios of losses and loss adjustment expenses, and commissions and other underwriting expenses to premiums. A combined ratio under 100% indicates an underwriting profit. The combined ratio does not reflect net investment income, other income, other expenses or federal income taxes.
AFG’s property and casualty insurance operations contributed $357 million in pretax earnings in the fourth quarter of 2023 compared to $363 million in the fourth quarter of 2022, a decrease of $6 million (2%). Lower underwriting profits in the Specialty casualty and Property and transportation sub-segments and lower investment income from alternative investments were partially offset by higher underwriting profit in the Specialty financial sub-segment and higher net investment income outside of alternative investments.
The following table details AFG’s earnings before income taxes from its property and casualty insurance operations for the three months ended December 31, 2023 and 2022 (dollars in millions):
| Three months ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | % Change | |
| Gross written premiums | $1,992 | $1,845 | 8% |
| Reinsurance premiums ceded | (547) | (507) | 8% |
| Net written premiums | 1,445 | 1,338 | 8% |
| Change in unearned premiums | 287 | 285 | 1% |
| Net earned premiums | 1,732 | 1,623 | 7% |
| Loss and loss adjustment expenses | 1,053 | 986 | 7% |
| Commissions and other underwriting expenses | 468 | 419 | 12% |
| Underwriting gain | 211 | 218 | (3%) |
| Net investment income | 161 | 159 | 1% |
| Other income and expenses, net | (15) | (14) | 7% |
| Earnings before income taxes | $357 | $363 | (2%) |
| Three months ended December 31, | |||
| Combined Ratios: | 2023 | 2022 | Change |
| Specialty lines | |||
| Loss and LAE ratio | 60.7% | 60.8% | (0.1%) |
| Underwriting expense ratio | 27.0% | 25.8% | 1.2% |
| Combined ratio | 87.7% | 86.6% | 1.1% |
| Aggregate — including exited lines | |||
| Loss and LAE ratio | 60.8% | 60.7% | 0.1% |
| Underwriting expense ratio | 27.0% | 25.8% | 1.2% |
| Combined ratio | 87.8% | 86.5% | 1.3% |
Starting in 1986, AFG’s statutory combined ratio has been better than the U.S. industry average for 36 of the 38 years. Management believes that AFG’s insurance operations have performed better than the industry as a result of its specialty niche focus, product line diversification, stringent underwriting discipline and alignment of compensation incentives.
AFG reports the underwriting performance of its Specialty property and casualty insurance business in the following sub-segments: (i) Property and transportation, (ii) Specialty casualty and (iii) Specialty financial.
To understand the overall profitability of particular lines, the timing of claims payments and the related impact of investment income must be considered. Certain “short-tail” lines of business (primarily property coverages) generally have quick loss payouts, which reduce the time funds are held, thereby limiting investment income earned thereon. In contrast, “long-tail” lines of business (primarily liability coverages and workers’ compensation) generally have payouts that are either structured over many years or take many years to settle, thereby significantly increasing investment income earned on related premiums received.
Gross Written Premiums
Gross written premiums (“GWP”) for AFG’s property and casualty insurance segment were $1.99 billion for the fourth quarter of 2023 compared to $1.85 billion for the fourth quarter of 2022, an increase of $147 million (8%). Detail of AFG’s property and casualty gross written premiums is shown below (dollars in millions):
| Three months ended December 31, | |||||
|---|---|---|---|---|---|
| 2023 · 2022 | |||||
| GWP | % | GWP | % | % Change | |
| Property and transportation | $623 | 31% | $601 | 32% | 4% |
| Specialty casualty | 1,069 | 54% | 1,007 | 55% | 6% |
| Specialty financial | 300 | 15% | 237 | 13% | 27% |
| $1,992 | 100% | $1,845 | 100% | 8% | |
Reinsurance Premiums Ceded
Reinsurance premiums ceded (“Ceded”) for AFG’s property and casualty insurance segment were 27% of gross written premiums for both the fourth quarter of 2023 and the fourth quarter of 2022. Detail of AFG’s property and casualty reinsurance premiums ceded is shown below (dollars in millions):
| Three months ended December 31, | |||||
|---|---|---|---|---|---|
| 2023 · 2022 · Change in % of GWP | |||||
| Ceded · % of GWP · Ceded · % of GWP | |||||
| Property and transportation | $(197) | 32% | $(178) | 30% | 2% |
| Specialty casualty | (369) | 35% | (352) | 35% | —% |
| Specialty financial | (50) | 17% | (38) | 16% | 1% |
| Other specialty | 69 | 61 | |||
| $(547) | 27% | $(507) | 27% | —% | |
Net Written Premiums
Net written premiums (“NWP”) for AFG’s property and casualty insurance segment were $1.45 billion for the fourth quarter of 2023 compared to $1.34 billion for the fourth quarter of 2022, an increase of $107 million (8%). Detail of AFG’s property and casualty net written premiums is shown below (dollars in millions):
| Three months ended December 31, | |||||
|---|---|---|---|---|---|
| 2023 · 2022 | |||||
| NWP | % | NWP | % | % Change | |
| Property and transportation | $426 | 30% | $423 | 32% | 1% |
| Specialty casualty | 700 | 48% | 655 | 49% | 7% |
| Specialty financial | 250 | 17% | 199 | 15% | 26% |
| Other specialty | 69 | 5% | 61 | 4% | 13% |
| $1,445 | 100% | $1,338 | 100% | 8% | |
Net Earned Premiums
Net earned premiums (“NEP”) for AFG’s property and casualty insurance segment were $1.73 billion for the fourth quarter of 2023 compared to $1.62 billion for the fourth quarter of 2022, an increase of $109 million (7%). Detail of AFG’s property and casualty net earned premiums is shown below (dollars in millions):
| Three months ended December 31, | |||||
|---|---|---|---|---|---|
| 2023 · 2022 | |||||
| NEP | % | NEP | % | % Change | |
| Property and transportation | $682 | 39% | $682 | 42% | —% |
| Specialty casualty | 737 | 43% | 686 | 42% | 7% |
| Specialty financial | 244 | 14% | 193 | 12% | 26% |
| Other specialty | 69 | 4% | 62 | 4% | 11% |
| $1,732 | 100% | $1,623 | 100% | 7% | |
Gross written premiums for the fourth quarter of 2023 increased $147 million (8%) compared to the fourth quarter of 2022 reflecting a combination of new business opportunities, increased exposures and a good renewal rate environment. Overall average renewal rates increased approximately 6% in the fourth quarter of 2023. Excluding overall rate decreases in the workers’ compensation businesses, renewal rates increased approximately 7%.
Property and transportation Gross written premiums increased $22 million (4%) in the fourth quarter of 2023 compared to the fourth quarter of 2022. This increase was due primarily to slightly higher crop premium related to the CRS acquisition, which was partially offset by the timing of renewals in several of the transportation businesses. Average renewal rates increased 7% for this group in the fourth quarter of 2023. Reinsurance premiums ceded as a percentage of gross written premiums increased 2 percentage points for the fourth quarter of 2023 compared to the fourth quarter of 2022 reflecting growth in alternative risk transfer products in the transportation businesses and higher premiums in the crop operations, both of which cede a higher percentage of premiums than some of the other businesses in the Property and transportation sub-segment.
Specialty casualty Gross written premiums increased $62 million (6%) in the fourth quarter of 2023 compared to the fourth quarter of 2022. New business opportunities and increased exposures in the excess and surplus operations and increased exposures from payroll growth in the workers’ compensation businesses led to higher year-over-year premiums, with nearly all of the businesses in this group reporting growth in the quarter. This growth was partially offset by lower premiums in the executive liability business. Average renewal rates for this group increased approximately 4% in the fourth quarter of 2023. Excluding rate decreases in the workers’ compensation business, renewal rates for this group increased approximately 7%. Reinsurance premiums ceded as a percentage of gross written premiums were comparable in the fourth quarters of 2023 and 2022.
Specialty financial Gross written premiums increased $63 million (27%) in the fourth quarter of 2023 compared to the fourth quarter of 2022 due primarily to growth in the financial institutions business. Average renewal rates for this group increased approximately 9% in the fourth quarter of 2023. Reinsurance premiums ceded as a percentage of gross written premiums increased 1 percentage point in the fourth quarter of 2023 compared to the fourth quarter of 2022 reflecting the favorable impact of lower than previously estimated reinstatement premiums related to Hurricane Ian recorded in the fourth quarter of 2022.
Other specialty The amounts shown as reinsurance premiums ceded represent business assumed by AFG’s internal reinsurance program from the operations that make up AFG’s other Specialty property and casualty insurance sub-segments. Reinsurance premiums assumed increased $8 million (13%) in the fourth quarter of 2023 compared to the fourth quarter of 2022 reflecting an increase in premiums retained, primarily from businesses in the Specialty casualty sub-segment.
Combined Ratio
Performance measures such as the combined ratio are often used by property and casualty insurers to help users of their financial statements better understand the company’s performance. The combined ratio is the sum of the loss and loss adjustment expenses (“LAE”) and underwriting expense ratios. These ratios are calculated by dividing each of the respective expenses by net earned premiums. The table below (dollars in millions) details the components of the combined ratio for AFG’s property and casualty insurance segment:
| Three months ended December 31, · Three months ended December 31, | ||||
|---|---|---|---|---|
| 2023 · 2022 · Change · 2023 · 2022 | ||||
| Property and transportation | ||||
| Loss and LAE ratio | 69.0% | 71.8% | (2.8%) | |
| Underwriting expense ratio | 21.3% | 18.2% | 3.1% | |
| Combined ratio | 90.3% | 90.0% | 0.3% | |
| Underwriting profit | $67 | $68 | ||
| Specialty casualty | ||||
| Loss and LAE ratio | 59.6% | 55.4% | 4.2% | |
| Underwriting expense ratio | 25.0% | 25.9% | (0.9%) | |
| Combined ratio | 84.6% | 81.3% | 3.3% | |
| Underwriting profit | $114 | $128 | ||
| Specialty financial | ||||
| Loss and LAE ratio | 34.8% | 33.8% | 1.0% | |
| Underwriting expense ratio | 46.5% | 49.3% | (2.8%) | |
| Combined ratio | 81.3% | 83.1% | (1.8%) | |
| Underwriting profit | $45 | $33 | ||
| Total Specialty | ||||
| Loss and LAE ratio | 60.7% | 60.8% | (0.1%) | |
| Underwriting expense ratio | 27.0% | 25.8% | 1.2% | |
| Combined ratio | 87.7% | 86.6% | 1.1% | |
| Underwriting profit | $212 | $217 | ||
| Aggregate — including exited lines | ||||
| Loss and LAE ratio | 60.8% | 60.7% | 0.1% | |
| Underwriting expense ratio | 27.0% | 25.8% | 1.2% | |
| Combined ratio | 87.8% | 86.5% | 1.3% | |
| Underwriting profit | $211 | $218 | ||
The Specialty property and casualty insurance operations generated an underwriting profit of $212 million in the fourth quarter of 2023 compared to $217 million in the fourth quarter of 2022, a decrease of $5 million (2%). Higher underwriting profit in the Specialty financial sub-segment was more than offset by lower underwriting profits in the Specialty casualty and Property and transportation sub-segments. Overall catastrophe losses were $25 million (1.4 points on the combined ratio), including $1 million in net reinstatement premiums in the fourth quarter of 2023 compared to catastrophe losses of $11 million (0.9 points), including a $13 million favorable impact in the fourth quarter of 2022 from lower than previously estimated reinstatement premiums related to Hurricane Ian.
Property and transportation Underwriting profit for this group was $67 million for the fourth quarter of 2023 compared to $68 million in the fourth quarter of 2022, a decrease of $1 million (1%). Below average underwriting profitability in the crop insurance operations was largely offset by higher year-over-year underwriting profits in the property and inland marine and the non-crop agricultural businesses. Catastrophe losses for this group were $5 million (0.6 points on the combined ratio), including $2 million in net reinstatement premiums in the fourth quarter of 2023 compared to catastrophe losses of $7 million (1.0 points), including a $1 million favorable impact from lower than previously estimated net reinstatement premiums in the fourth quarter of 2022.
Specialty casualty Underwriting profit for this group was $114 million for the fourth quarter of 2023 compared to $128 million in the fourth quarter of 2022, a decrease of $14 million (11%). Higher year-over-year underwriting profits in the workers’ compensation and executive liability businesses were more than offset by lower underwriting profit in the excess and surplus business. Catastrophe losses were $8 million (1.1 points on the combined ratio), including a $1 million favorable impact from lower than previously estimated net reinstatement premiums in the fourth quarter of 2023 compared to catastrophe losses of $7 million (1.1 points), including a $1 million favorable impact from net reinstatement premiums in the fourth quarter of 2022.
Specialty financial Underwriting profit for this group was $45 million for the fourth quarter of 2023 compared to $33 million in the fourth quarter of 2022, an increase of $12 million (36%). This increase reflects higher year-over-year underwriting profit in the financial institutions business. Catastrophe losses were $4 million (2.0 points on the combined ratio) in the fourth quarter of 2023 compared to a favorable impact of $3 million (1.9 points), including a $10 million favorable impact from the change in estimated reinstatement premiums related to Hurricane Ian in the fourth quarter of 2022.
Other specialty This group reported an underwriting loss of $14 million for the fourth quarter of 2023 compared to $12 million in the fourth quarter of 2022, an increase of $2 million (17%), reflecting higher losses in the business assumed by AFG’s internal reinsurance program from the operations that make up AFG’s other Specialty sub-segments in the fourth quarter of 2023 compared to the fourth quarter of 2022. This group reported catastrophe losses of $8 million in the fourth quarter of 2023 compared to less than $1 million in the fourth quarter of 2022.
Aggregate Aggregate underwriting results for AFG’s property and casualty insurance segment include adverse prior year reserve development of $1 million in the fourth quarter of 2023 and net favorable prior year reserve development of $1 million in the fourth quarter of 2022 related to business outside of the Specialty group that AFG no longer writes.
Losses and Loss Adjustment Expenses
AFG’s overall loss and LAE ratio was 60.8% for the fourth quarter of 2023 compared to 60.7% for the fourth quarter of 2022, an increase of 0.1 percentage points. The components of AFG’s property and casualty losses and LAE amounts and ratio are detailed below (dollars in millions):
| Three months ended December 31, | |||||
|---|---|---|---|---|---|
| Amount · Ratio · Change in Ratio | |||||
| 2023 · 2022 · 2023 · 2022 | |||||
| Property and transportation | |||||
| Current year, excluding catastrophe losses | $479 | $494 | 70.2% | 72.6% | (2.4%) |
| Prior accident years development | (12) | (13) | (1.8%) | (1.8%) | —% |
| Current year catastrophe losses including the impact of net reinstatement premiums | 3 | 8 | 0.6% | 1.0% | (0.4%) |
| Property and transportation losses and LAE and ratio | $470 | $489 | 69.0% | 71.8% | (2.8%) |
| Specialty casualty | |||||
| Current year, excluding catastrophe losses | $466 | $423 | 63.5% | 61.6% | 1.9% |
| Prior accident years development | (37) | (50) | (5.0%) | (7.3%) | 2.3% |
| Current year catastrophe losses including the impact of net reinstatement premiums | 9 | 8 | 1.1% | 1.1% | —% |
| Specialty casualty losses and LAE and ratio | $438 | $381 | 59.6% | 55.4% | 4.2% |
| Specialty financial | |||||
| Current year, excluding catastrophe losses | $89 | $67 | 36.2% | 36.0% | 0.2% |
| Prior accident years development | (8) | (8) | (3.4%) | (4.1%) | 0.7% |
| Current year catastrophe losses including the impact of net reinstatement premiums | 4 | 7 | 2.0% | 1.9% | 0.1% |
| Specialty financial losses and LAE and ratio | $85 | $66 | 34.8% | 33.8% | 1.0% |
| Total Specialty | |||||
| Current year, excluding catastrophe losses | $1,085 | $1,021 | 62.6% | 63.5% | (0.9%) |
| Prior accident years development | (57) | (58) | (3.3%) | (3.6%) | 0.3% |
| Current year catastrophe losses including the impact of net reinstatement premiums | 24 | 24 | 1.4% | 0.9% | 0.5% |
| Total Specialty losses and LAE and ratio | $1,052 | $987 | 60.7% | 60.8% | (0.1%) |
| Aggregate — including exited lines | |||||
| Current year, excluding catastrophe losses | $1,085 | $1,021 | 62.6% | 63.5% | (0.9%) |
| Prior accident years development | (56) | (59) | (3.2%) | (3.6%) | 0.4% |
| Current year catastrophe losses including the impact of net reinstatement premiums | 24 | 24 | 1.4% | 0.8% | 0.6% |
| Aggregate losses and LAE and ratio | $1,053 | $986 | 60.8% | 60.7% | 0.1% |
Current accident year losses and LAE, excluding catastrophe losses
The current accident year loss and LAE ratio, excluding catastrophe losses for AFG’s Specialty property and casualty insurance operations was 62.6% for the fourth quarter of 2023 compared to 63.5% in the fourth quarter of 2022, a decrease of 0.9 percentage points.
Property and transportation The 2.4 percentage points decrease in the loss and LAE ratio for the current year, excluding catastrophe losses, is due primarily to the impact of lower claim severity in the property and inland marine and certain transportation businesses, partially offset by lower profitability in the crop business.
Specialty casualty The 1.9 percentage points increase in the loss and LAE ratio for the current year, excluding catastrophe losses, reflects anticipated medical cost inflation and the impact of pressure on rates in the workers’ compensation businesses and higher claim severity in certain liability coverages, partially offset by lower claim frequency in the executive liability business.
Specialty financial The 0.2 percentage points increase in the loss and LAE ratio for the current year, excluding catastrophe losses, reflects an increase in claim severity in the innovative markets business, partially offset by lower claim frequency and growth in the financial institutions business, which has a lower loss and LAE ratio than some of the other businesses in the Specialty financial sub-segment.
Net prior year reserve development
AFG’s Specialty property and casualty insurance operations recorded net favorable reserve development related to prior accident years of $57 million in the fourth quarter of 2023 compared to $58 million in the fourth quarter of 2022, a decrease of $1 million (2%).
Property and transportation Net favorable reserve development of $12 million in the fourth quarter of 2023 reflects lower than anticipated losses in the crop business and lower than expected claim frequency in the ocean marine and property and inland marine businesses. Net favorable reserve development of $13 million in the fourth quarter of 2022 reflects lower than expected claim severity in the ocean marine, aviation and property and inland marine businesses and lower than anticipated claim frequency in the trucking business.
Specialty casualty Net favorable reserve development of $37 million in the fourth quarter of 2023 reflects lower than anticipated claim severity in the workers’ compensation businesses, partially offset by higher than anticipated claim severity in the excess and surplus business and higher than expected claim frequency and severity in the excess liability and general liability businesses. Net favorable reserve development of $50 million in the fourth quarter of 2022 reflects lower than anticipated claim frequency and severity in the workers’ compensation and excess and surplus businesses and lower than expected claim frequency in the executive liability business.
Specialty financial Net favorable reserve development of $8 million in the fourth quarter of 2023 reflects lower than anticipated claim frequency and severity in the fidelity business and lower than expected claim frequency in the financial institutions and trade credit businesses. Net favorable reserve development of $8 million in the fourth quarter of 2022 reflects lower than anticipated claim frequency in the trade credit and financial institutions businesses.
Other specialty In addition to the development discussed above, total Specialty prior year reserve development includes net adverse reserve development of less than $1 million in the fourth quarter of 2023 and $13 million in the fourth quarter of 2022. The fourth quarter of 2022 reflects net adverse reserve development associated with AFG’s internal reinsurance program (primarily from social inflation exposed casualty businesses) and, to a lesser extent, both periods reflect the amortization of the deferred gain on the retroactive reinsurance transaction entered into in connection with the sale of a business in 1998.
Aggregate Aggregate net prior accident years reserve development for AFG’s property and casualty insurance segment includes net adverse reserve development of $1 million in the fourth quarter of 2023 and net favorable reserve development of $1 million in the fourth quarter of 2022 related to business outside of the Specialty group that AFG no longer writes.
Catastrophe losses
AFG generally seeks to reduce its exposure to catastrophes (whether resulting from climate change or otherwise) through individual risk selection, including minimizing coastal and known fault-line exposures, and the purchase of reinsurance. Based on data available at December 31, 2023, AFG’s exposure to a catastrophic earthquake or windstorm that industry models indicate should statistically occur once in every 100, 250 or 500 years as a percentage of AFG’s Shareholders’ Equity is shown below:
| Industry Model | Approximate impact of modeled loss on AFG’s Shareholders’ Equity |
|---|---|
| 100-year event | 2% |
| 250-year event | 2% |
| 500-year event | 2% |
Catastrophe losses of $24 million (before net reinstatement premiums) in the fourth quarter of 2023 resulted primarily from storms in multiple regions of the United States. Catastrophe losses of $24 million (before net reinstatement premiums) in the fourth quarter of 2022 resulted primarily from Winter Storm Elliott.
Commissions and Other Underwriting Expenses
AFG’s property and casualty commissions and other underwriting expenses (“U/W Exp”) were $468 million in the fourth quarter of 2023 compared to $419 million for the fourth quarter of 2022, an increase of $49 million (12%). AFG’s underwriting expense ratio, calculated as commissions and other underwriting expenses divided by net premiums earned, was 27.0% for the fourth quarter of 2023 compared to 25.8% for the fourth quarter of 2022, an increase of 1.2 percentage points. Detail of AFG’s property and casualty commissions and other underwriting expenses and underwriting expense ratios is shown below (dollars in millions):
| Three months ended December 31, | |||||
|---|---|---|---|---|---|
| 2023 · 2022 · Change in % of NEP | |||||
| U/W Exp · % of NEP · U/W Exp · % of NEP | |||||
| Property and transportation | $145 | 21.3% | $125 | 18.2% | 3.1% |
| Specialty casualty | 185 | 25.0% | 177 | 25.9% | (0.9%) |
| Specialty financial | 114 | 46.5% | 94 | 49.3% | (2.8%) |
| Other specialty | 24 | 36.1% | 23 | 34.8% | 1.3% |
| $468 | 27.0% | $419 | 25.8% | 1.2% | |
Property and transportation Commissions and other underwriting expenses as a percentage of net earned premiums increased 3.1 percentage points in the fourth quarter of 2023 compared to the fourth quarter of 2022 reflecting the impact of lower profit-based ceding commissions related to below average profitability in the crop operations, the impact on the ratio of lower earned premiums in the crop operations (which has a lower commissions and other underwriting expense ratio than some of the other businesses in the Property and transportation sub-segment) and higher expenses related to certain technology initiatives.
Specialty casualty Commissions and other underwriting expenses as a percentage of net earned premiums decreased 0.9 percentage points in the fourth quarter of 2023 compared to the fourth quarter of 2022 reflecting the impact on the ratio of growth in earned premiums in the workers’ compensation businesses, partially offset by higher expenses related to certain technology initiatives.
Specialty financial Commissions and other underwriting expenses as a percentage of net earned premiums decreased 2.8 percentage points in the fourth quarter of 2023 compared to the fourth quarter of 2022 reflecting the impact on the ratio of growth in earned premiums in the financial institutions, surety and innovative markets businesses and lower contingent commissions paid to agents in the innovative markets business, partially offset by the impact of an increase in net earned premiums in the fourth quarter of 2022 due to lower than previously estimated reinstatement premiums related to Hurricane Ian and higher expenses related to certain technology initiatives.
Property and Casualty Net Investment Income
Net investment income in AFG’s property and casualty insurance operations was $161 million in the fourth quarter of 2023 compared to $159 million in the fourth quarter of 2022, an increase of $2 million (1%). The average invested assets and overall yield earned on investments held by AFG’s property and casualty insurance operations are provided below (dollars in millions):
| Three months ended December 31, · % | ||||
|---|---|---|---|---|
| 2023 | 2022 | Change | Change | |
| Net investment income: | ||||
| Net investment income, excluding alternative investments | $156 | $131 | $25 | 19% |
| Alternative investments | 5 | 28 | (23) | (82%) |
| Total net investment income | $161 | $159 | $2 | 1% |
| Average invested assets (at amortized cost) | $15,227 | $14,304 | $923 | 6% |
| Yield (net investment income as a % of average invested assets) | 4.23% | 4.45% | (0.22%) | |
| Tax equivalent yield (*) | 4.31% | 4.53% | (0.22%) | |
(*)Adjusts the yield on equity securities and tax-exempt bonds to the fully taxable equivalent yield.
The increase in the property and casualty insurance segment’s net investment income for the fourth quarter of 2023 compared to the fourth quarter of 2022 reflects the impact of higher yields on fixed maturity investments and higher balances of invested assets, partially offset by lower returns on AFG’s alternative investment portfolio (partnerships and similar investments and AFG-managed CLOs). The property and casualty insurance segment’s overall yield on investments (net investment income as a percentage of average invested assets) was 4.23% for the fourth quarter of 2023 compared to 4.45% for the fourth quarter of 2022, a decrease of 0.22 percentage points reflecting lower returns on alternative investments, partially offset by higher yields on fixed maturity investments. The annualized return earned on alternative investments was 0.8% in the fourth quarter of 2023 compared to 5.3% in the prior year period.
Property and Casualty Other Income and Expenses, Net
Other income and expenses, net for AFG’s property and casualty insurance operations was a net expense of $15 million for the fourth quarter of 2023 compared to $14 million for the fourth quarter of 2022, an increase of $1 million (7%). The table below details the items included in other income and expenses, net for AFG’s property and casualty insurance operations (in millions):
| Three months ended December 31, | ||
|---|---|---|
| 2023 | 2022 | |
| Other income: | ||
| Income related to the sale of real estate | $— | $— |
| Other | 3 | — |
| Total other income | 3 | — |
| Other expenses: | ||
| Amortization of intangibles | 4 | 4 |
| Interest expense on funds withheld | 12 | 8 |
| Other | 2 | 2 |
| Total other expenses | 18 | 14 |
| Other income and expenses, net | $(15) | $(14) |
The $4 million (50%) increase in interest expense on funds withheld in 2023 compared to 2022 reflects the impact of higher interest rates.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.