Cincinnati-based insurer American Financial Group (NYSE: AFG) reported first-quarter 2025 earnings that surpassed analyst expectations, driven by strong performance in its specialty property and casualty insurance segments. The company posted net earnings of $2.87 per share, exceeding Wall Street’s consensus estimate of $2.65.
Core operating earnings reached $298 million, representing a 7.3% increase from the same period last year. This growth comes amid challenging market conditions and rising claims costs throughout the broader insurance sector. AFG’s specialty insurance operations reported a combined ratio of 91.2%, demonstrating underwriting discipline as the company maintains its focus on profitability over premium growth.
“Our first quarter results reflect the benefits of our specialized business model and disciplined approach to risk selection,” said S. Craig Lindner, AFG’s Co-Chief Executive Officer. “We continue to find opportunities for profitable growth while maintaining pricing discipline in an increasingly competitive market.”
The company’s property and casualty operations generated $1.6 billion in gross written premiums during Q1, a modest 4.2% increase year-over-year. Specialty casualty lines showed particular strength with premium growth of 5.7%, while property and transportation segments saw more moderate gains at 3.4%.
Investment income, a crucial component of insurance company earnings, increased by 6.1% to $185 million, benefiting from higher interest rates on the company’s fixed income portfolio. The annualized return on equity reached 18.3%, placing AFG among the top performers in the property and casualty insurance industry.
AFG’s capital position remains robust with approximately $1.3 billion of excess capital as of March 31, 2025. The company’s board approved a special dividend of $2.00 per share in addition to increasing the regular quarterly dividend by 8.5% to $0.77 per share. This marks the eighteenth consecutive year of dividend increases, highlighting the company’s commitment to shareholder returns.
“Our capital management strategy balances investing in our businesses for long-term growth while returning excess capital to shareholders,” explained Carl H. Lindner III, the company’s other Co-CEO. “The special dividend reflects our strong capital position and confidence in our ongoing business operations.”
The company also continued its share repurchase program, buying back approximately 850,000 shares at an average price of $127.45 during the quarter. Since the beginning of 2024, AFG has returned over $465 million to shareholders through dividends and share repurchases.
Within AFG’s specialty insurance portfolio, crop insurance results exceeded expectations, benefiting from favorable prior-year reserve development and better-than-anticipated loss experience. The specialty financial segment reported improved underwriting margins, while the excess and surplus lines faced some pressure from increased competition.
Looking ahead, management reaffirmed its full-year 2025 core operating earnings guidance of $10.75 to $11.50 per share. This outlook assumes no catastrophic losses exceeding expectations and no significant changes in interest rates or financial markets.
“We’re seeing some rate pressure in certain lines as more capital enters the specialty markets,” noted Lindner III during the earnings call. “But our underwriters remain disciplined, walking away from business that doesn’t meet our return thresholds.”
AFG’s investment portfolio remains conservatively positioned with approximately 89% allocated to fixed income securities with an average duration of 3.9 years. The company reported net unrealized gains of $105 million in its fixed income portfolio as of quarter-end, an improvement from the unrealized losses reported throughout much of 2023 and 2024.
Analysts generally responded positively to the results, with several highlighting the company’s disciplined underwriting approach and strong capital management as key differentiators in the current market environment. However, some expressed concerns about growth prospects given AFG’s unwillingness to chase premium volume at the expense of profitability.
The insurance holding company has built its reputation on specializing in property and casualty insurance products for businesses, focusing on niches where its expertise provides competitive
