AMERICAN FINANCIAL GROUP INC

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 $440 million in pretax earnings in the fourth quarter of 2025 compared to $378 million in the fourth quarter of 2024, an increase of $62 million (16%). The increase in pretax earnings reflects higher underwriting profit, partially offset by lower investment income from AFG’s alternative investment portfolio (partnerships and similar investments and AFG-managed CLOs).

The following table details AFG’s earnings before income taxes from its property and casualty insurance operations for the three months ended December 31, 2025 and 2024 (dollars in millions):

AFG’s statutory combined ratio has been better than the U.S. industry average for 38 of the most recent 40 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.

Historically, AFG reported the results of its internal reinsurance facility (that assumes business from several of AFG’s Specialty property and casualty businesses) in an Other Specialty sub-segment. Beginning in 2025, the internal reinsurance results are included within the same sub-segments as the ceding businesses to align with senior management’s evolving view of the program. The overall results for AFG’s Specialty property and casualty insurance operations are not impacted by this change. Information from prior periods has been recast for consistent presentation.

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 $2.09 billion for the fourth quarter of 2025 compared to $2.04 billion for the fourth quarter of 2024, an increase of $42 million (2%). Detail of AFG’s property and casualty gross written premiums is shown below (dollars in millions):

Reinsurance Premiums Ceded

Reinsurance premiums ceded (“Ceded”) for AFG’s property and casualty insurance segment were 31% of gross written premiums for the fourth quarter of 2025 compared to 29% of gross written premiums for the fourth quarter of 2024, an increase of 2 percentage points. Detail of AFG’s property and casualty reinsurance premiums ceded is shown below (dollars in millions):

Net Written Premiums

Net written premiums (“NWP”) for AFG’s property and casualty insurance segment were $1.44 billion for the fourth quarter of 2025 compared to $1.46 billion for the fourth quarter of 2024, a decrease of $16 million (1%). Detail of AFG’s property and casualty net written premiums is shown below (dollars in millions):

Net Earned Premiums

Net earned premiums (“NEP”) for AFG’s property and casualty insurance segment were $1.81 billion for the fourth quarter of 2025 compared to $1.85 billion for the fourth quarter of 2024, a decrease of $44 million (2%). Detail of AFG’s property and casualty net earned premiums is shown below (dollars in millions):

Gross written premiums for the fourth quarter of 2025 increased $42 million (2%) compared to the fourth quarter of 2024 driven primarily by new business opportunities, a good renewal rate environment and increased exposures. Overall average renewal rates increased approximately 4% in the fourth quarter of 2025. Excluding the workers’ compensation businesses, renewal pricing increased approximately 5%.

Property and transportation Gross written premiums increased $27 million (5%) in the fourth quarter of 2025 compared to the fourth quarter of 2024. This increase was due primarily to growth in crop products that are heavily ceded, and to a lesser extent, growth in a transportation alternative risk transfer program with higher premium cessions. Average renewal rates increased approximately 6% for this group in the fourth quarter of 2025. Reinsurance premiums ceded as a percentage of gross written premiums increased 5 percentage points in the fourth quarter of 2025 compared to the fourth quarter of 2024, reflecting higher cessions in the crop and aviation businesses and growth in certain programs in the transportation businesses 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 $27 million (2%) in the fourth quarter of 2025 compared to the fourth quarter of 2024. The primary drivers of growth included new business opportunities and favorable renewal pricing in the targeted markets businesses, new business opportunities in the mergers and acquisitions liability business, growth in the workers’ compensation businesses and new premiums from a start-up business. This growth was tempered by lower year-over-year premiums in the executive liability and excess and surplus businesses. Average renewal rates for this group increased approximately 5% in the fourth quarter of 2025. Excluding workers’ compensation businesses, renewal rates for this group increased approximately 6%. Reinsurance premiums ceded as a percentage of gross written premiums for the fourth quarter of 2025 were comparable to the fourth quarter of 2024.

Specialty financial Gross written premiums decreased $12 million (4%) in the fourth quarter of 2025 compared to the fourth quarter of 2024. Higher premiums in AFG’s European operations were more than offset by lower premiums in the financial institutions business. Average renewal rates for this group increased approximately 1% in the fourth quarter of 2025. Reinsurance premiums ceded as a percentage of gross written premiums increased 6 percentage points in the fourth quarter of 2025 compared to the fourth quarter of 2024, reflecting higher cessions of catastrophe exposed business in the financial institutions business.

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 and underwriting profit for AFG’s property and casualty insurance segment:

The Specialty property and casualty insurance operations generated an underwriting profit of $287 million in the fourth quarter of 2025 compared to $204 million in the fourth quarter of 2024, an increase of $83 million (41%). Higher underwriting profit in the Property and transportation sub-segment was partially offset by lower year-over-year underwriting profit in the Specialty casualty and Specialty financial sub-segments. Overall catastrophe losses were $4 million (0.2 points on the combined ratio) in the fourth quarter of 2025 compared to $21 million (1.1 points), including $1 million in net reinstatement premiums in the fourth quarter of 2024.

Property and transportation Underwriting profit for this group was $216 million for the fourth quarter of 2025 compared to $81 million in the fourth quarter of 2024, an increase of $135 million (167%), reflecting higher underwriting profitability in the crop insurance operations resulting from record yields for corn and soybeans and favorable commodity pricing trends throughout the growing season. Catastrophe losses for this group were a favorable impact of less than $1 million (0.1 points on the combined ratio) in the fourth quarter of 2025 compared to catastrophe losses of $10 million (1.3 points), including $1 million in net reinstatement premiums in the fourth quarter of 2024.

Specialty casualty Underwriting profit for this group was $27 million for the fourth quarter of 2025 compared to $69 million in the fourth quarter of 2024, a decrease of $42 million (61%). Higher year-over-year underwriting profit in certain excess and surplus businesses and the executive liability business were more than offset by lower underwriting results in several social inflation exposed businesses and the workers’ compensation and general liability businesses. Catastrophe losses for this group had favorable impacts of $3 million (0.3 points on the combined ratio) in the fourth quarter of 2025 and $6 million (0.7 points) in the fourth quarter of 2024. Catastrophe losses in the fourth quarter of 2024 include the favorable impact from lower than previously estimated losses from Hurricane Helene.

Specialty financial Underwriting profit for this group was $44 million for the fourth quarter of 2025 compared to $54 million in the fourth quarter of 2024, a decrease of $10 million (19%). Higher underwriting profit in the fidelity business was more than offset by lower underwriting profit in the financial institutions business. Catastrophe losses were $7 million (2.5 points on the combined ratio) in the fourth quarter of 2025 compared to $17 million (6.2 points) in the fourth quarter of 2024.

Aggregate Aggregate underwriting results for AFG’s property and casualty insurance segment include adverse prior year reserve development of $3 million in the fourth quarter of 2025 and $2 million in the fourth quarter of 2024 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 58.8% for the fourth quarter of 2025 compared to 63.8% for the fourth quarter of 2024, a decrease of 5.0 percentage points. The components of AFG’s property and casualty losses and LAE amounts and ratio are detailed below (dollars in millions):

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 60.0% for the fourth quarter of 2025 compared to 60.8% in the fourth quarter of 2024, a decrease of 0.8 percentage points.

Property and transportation The 8.9 percentage points decrease in the loss and LAE ratio for the current year, excluding catastrophe losses, reflects very strong earnings in the crop business, partially offset by higher claim severity in certain transportation businesses.

Specialty casualty The 6.6 percentage points increase in the loss and LAE ratio for the current year, excluding catastrophe losses, reflects higher than anticipated claim severity in the excess and surplus, social services and California workers’ compensation businesses.

Specialty financial The 2.4 percentage points decrease in the loss and LAE ratio for the current year, excluding catastrophe losses, reflects improved claim severity in the surety and fidelity businesses.

Net prior year reserve development

AFG’s Specialty property and casualty insurance operations recorded net favorable reserve development related to prior accident years of $30 million in the fourth quarter of 2025 compared to net adverse reserve development related to prior accident years of $34 million in the fourth quarter of 2024, a change of $64 million (188%).

Property and transportation Net favorable reserve development of $20 million in the fourth quarter of 2025 reflects lower than anticipated losses in the crop business and lower than anticipated claim severity in the commercial auto, property and inland marine and ocean marine businesses. Net favorable reserve development of $2 million in the fourth quarter of 2024 reflects lower than anticipated losses in the crop business and lower than expected claim severity in the property and inland marine business, partially offset by higher than anticipated claim severity in the commercial auto business.

Specialty casualty Net favorable reserve development of $1 million in the fourth quarter of 2025 reflects lower than expected claim severity in the workers’ compensation, executive liability and social inflation exposed businesses, partially offset by higher than anticipated claim severity in the excess and surplus, excess liability and public sector businesses. Net adverse reserve development of $44 million in the fourth quarter of 2024 reflects higher than anticipated claim frequency and severity in the umbrella and excess liability businesses and higher than expected claim severity in the social services and general liability businesses, partially offset by lower than expected claim severity in the workers’ compensation businesses.

Specialty financial Net favorable reserve development of $9 million in the fourth quarter of 2025 reflects lower than anticipated claim severity in the trade credit and surety businesses and lower than anticipated claim frequency in the financial institutions business. Net favorable reserve development of $8 million in the fourth quarter of 2024 reflects lower than anticipated claim frequency and severity in the financial institutions business and lower than expected claim severity in the fidelity business.

Aggregate Aggregate net prior accident years reserve development for AFG’s property and casualty insurance segment includes net adverse reserve development of $3 million in the fourth quarter of 2025 and $2 million in the fourth quarter of 2024 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, 2025, management estimates that AFG’s exposure to a catastrophic earthquake or windstorm that industry models indicate should statistically occur once in every 500 years is less than 3% of AFG’s Shareholders’ Equity.

Catastrophe losses of $4 million in the fourth quarter of 2025 resulted primarily from storms in multiple regions of the United States. Catastrophe losses of $20 million (before $1 million in net reinstatement premiums) in the fourth quarter of 2024 resulted primarily from Hurricane Milton.

Commissions and Other Underwriting Expenses

AFG’s property and casualty commissions and other underwriting expenses (“U/W Exp”) were $461 million in the fourth quarter of 2025 compared to $467 million for the fourth quarter of 2024, a decrease of $6 million (1%). AFG’s underwriting expense ratio, calculated as commissions and other underwriting expenses divided by net premiums earned, was 25.5% for the fourth quarter of 2025 compared to 25.3% for the fourth quarter of 2024, an increase of 0.2 percentage points. Detail of AFG’s property and casualty commissions and other underwriting expenses and underwriting expense ratios is shown below (dollars in millions):

Property and transportation Commissions and other underwriting expenses as a percentage of net earned premiums decreased 6.2 percentage points in the fourth quarter of 2025 compared to the fourth quarter of 2024. The improvement reflects higher ceding commissions from reinsurers resulting from very strong crop insurance results, partially offset by higher costs for software and other expenses associated with certain initiatives in IT security, customer experience and data analytics.

Specialty casualty Commissions and other underwriting expenses as a percentage of net earned premiums increased 3.8 percentage points in the fourth quarter of 2025 compared to the fourth quarter of 2024 reflecting an increase in average commission rates in certain excess and surplus businesses resulting from changes in reinsurance treaties, higher costs for software and other expenses associated with certain initiatives in IT security, customer experience and data analytics and changes in the mix of business.

Specialty financial Commissions and other underwriting expenses as a percentage of net earned premiums increased 8.4 percentage points in the fourth quarter of 2025 compared to the fourth quarter of 2024 reflecting higher profit-based commissions to agents in the financial institutions business and higher costs for software and other expenses associated with certain initiatives in IT security, customer experience and data analytics.

Property and Casualty Net Investment Income

Net investment income in AFG’s property and casualty insurance operations was $171 million in the fourth quarter of 2025 compared to $195 million in the fourth quarter of 2024, a decrease of $24 million (12%). 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):

The decrease in the property and casualty insurance segment’s net investment income for the fourth quarter of 2025 compared to the fourth quarter of 2024 reflects the impact of lower returns on AFG’s alternative investment portfolio (partnerships and similar investments and AFG-managed CLOs), partially offset by higher balances of invested assets and higher returns on fixed income investments. The property and casualty insurance segment’s overall yield on investments (net investment income as a percentage of average invested assets) was 4.14% for the fourth quarter of 2025 compared to 4.96% for the fourth quarter of 2024, a decrease of 0.82 percentage points. The annualized return earned on alternative investments was 0.9% in the fourth quarter of 2025 compared to 4.9% in the comparable 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 2025 compared to $19 million for the fourth quarter of 2024, an improvement of $4 million (21%). The table below details the items included in other income and expenses, net for AFG’s property and casualty insurance operations (in millions):