American Financial Group, Inc. (NYSE/NASDAQ: AFG) today reported 2012 first quarter net earnings attributable to shareholders of $113 million ($1.14 per share), compared to $88 million ($0.83 per share) reported for the 2011 first quarter. Per share results reflect the impact of share repurchases in 2012 and 2011. The 2012 first quarter results include $28 million in net realized gains compared to $3 million in net realized losses in the prior year period. Book value per share, excluding appropriated retained earnings and unrealized gains on fixed maturities, increased by $1.44 to $40.07 per share during the quarter.
Core net operating earnings were $85 million ($.86 per share) for the 2012 first quarter, compared to $91 million ($0.85 per share) for the 2011 first quarter. Higher profit in our Annuity and Supplemental Insurance (“A&S”) Group was more than offset by lower underwriting profit in our Specialty Property and Casualty Insurance (“P&C”) operations and lower P&C investment income. Our annualized core operating return on equity was 9%.
Effective January 1, 2012, AFG retrospectively adopted new guidance issued by the Financial Accounting Standards Board related to the accounting for costs associated with acquiring or renewing insurance contracts. Accordingly, results for 2011 have been adjusted to reflect the impact of the adoption, which resulted in a reduction in AFG’s December 31, 2011 shareholders’ equity of approximately $134 million (3%).
During the first quarter of 2012, AFG repurchased 1.5 million shares of common stock at an average price per share of $37.91.AFG’s net earnings attributable to shareholders, determined in accordance with generally accepted accounting principles (“GAAP”), include realized investment gains and losses and may not be indicative of its ongoing core operations. The following table reconciles net earnings attributable to shareholders to core net operating earnings, a non-GAAP financial measure that AFG believes is a useful tool for investors and analysts in analyzing ongoing operating trends.
In millions, except per share amounts
| Three months ended
|Components of net earnings attributable to shareholders:|
|Core net operating earnings (a)||$||85||$||91|
|Realized gains (losses)||28||(3||)|
|Net earnings attributable to shareholders||$||113||$||88|
|Components of Earnings Per Share:|
|Core net operating earnings||$||0.86||$||0.85|
|Realized gains (losses)||0.28||(0.02||)|
|Diluted Earnings Per Share||$||1.14||$||0.83|