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American Financial Group, Inc. Announces Second Quarter Results

American Financial Group, Inc. (NYSE: AFG) (NASDAQ: AFG) today reported 2013 second quarter net earnings attributable to shareholders of $110 million ($1.20 per share) compared to $99 million ($1.01 per share) for the 2012 second quarter. After-tax net realized gains were $26 million in the second quarter compared to $9 million in the comparable prior year period. The 2013 second quarter results also include an after-tax charge of $3 million ($0.04 per share) related to guaranty fund assessments expected from various state funds for the insolvency and liquidation of Executive Life Insurance Company of New York, (“ELNY”) an unaffiliated life insurance company. Book value per share, excluding appropriated retained earnings and unrealized gains on fixed maturities, increased by $0.84 to $44.78 per share during the second quarter of 2013. Annualized return on equity was 11.1% and 10.2% for the second quarters of 2013 and 2012, respectively.

Core net operating earnings were $87 million ($0.96 per share) for the 2013 second quarter, compared to $90 million ($0.91 per share) in the 2012 second quarter. Significantly higher profit in our annuity segment was partially offset by the absence of earnings from our Medicare supplement and critical illness businesses that were sold in August 2012, lower underwriting profits in our Specialty Property and Casualty Insurance (“P&C”) operations and lower P&C investment income. Per share amounts reflect the impact of share repurchases. Core net operating earnings for the second quarters of 2013 and 2012 generated annualized returns on equity of 8.9% and 9.2%, respectively.

During the second quarter of 2013, AFG repurchased approximately 1.4 million shares of common stock for $67 million (average price per share of $48.37).

AFG’s net earnings attributable to shareholders, determined in accordance with U.S. generally accepted accounting principles (“GAAP”), include certain items that may not be indicative of its ongoing core operations. The following table identifies such items and 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 June 30,

Six months ended June 30,
2013   2012 2013   2012
Components of net earnings attributable to shareholders:
Core net operating earnings (a) $ 87 $ 90 $ 171 $ 175
Realized gains 26 9 62 37
ELNY guaranty fund assessments (3 ) - (3 ) -
Net earnings attributable to shareholders $ 110   $ 99 $ 230   $ 212
Components of Earnings Per Share:
Core net operating earnings $ 0.96 $ 0.91 $ 1.88 $ 1.77
Realized gains 0.28 0.10 0.68 0.38
ELNY guaranty fund assessments (0.04 ) - (0.04 ) -
Diluted Earnings Per Share $ 1.20   $ 1.01 $ 2.52   $ 2.15

Footnote (a) is contained in the accompanying Notes To Financial Schedules at the end of this release.

Carl H. Lindner III and S. Craig Lindner, AFG’s Co-Chief Executive Officers, issued this statement: “We are especially pleased with the strong earnings in our annuity segment for the second quarter and first six months of 2013. Although underwriting profitability in our P&C businesses was lower year over year, we remain encouraged by the market firming we are seeing in selected P&C markets, which has resulted in growth opportunities for most of our P&C businesses. Our proven investment skills and mix of specialty insurance businesses have positioned us well in the current interest rate environment and amid widespread catastrophe losses in the industry.

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