American Financial Group, Inc. (NYSE/NASDAQ: AFG) today reported 2013 third quarter net earnings attributable to shareholders of $83 million ($0.92 per share) compared to $226 million ($2.39 per share) for the 2012 third quarter. The 2013 third quarter results include an after-tax charge of $49 million ($0.54 per share) to strengthen the Company’s asbestos and environmental (“A&E”) reserves and $35 million ($0.40 per share) in after-tax realized gains. Results for the third quarter of 2012 include $148 million ($1.57 per share) in after-tax non-core earnings, primarily the result of a $101 million after-tax gain on the sale of AFG’s Medicare supplement and critical illness businesses, realized gains on securities and the results of AFG’s tax case resolution, which were offset somewhat by A&E reserve strengthening. Book value per share, excluding appropriated retained earnings and unrealized gains on fixed maturities, increased by $2.84, or 7%, to $45.36 per share during the first nine months of 2013. Including AFG’s quarterly dividend, total value creation measured as growth in book value plus dividends was $3.43 per share, or 8%, for the first nine months of the year.
Core net operating earnings were $97 million ($1.06 per share) for the 2013 third quarter, compared to $78 million ($0.82 per share) in the 2012 third quarter. Significantly higher profits in our Specialty Property and Casualty Insurance (“P&C”) operations and increased earnings from our Annuity segment were the primary drivers for the improved quarterly results. Core net operating earnings for the third quarters of 2013 and 2012 generated annualized returns on equity of 9.7% and 8.0%, respectively.
AFG’s net earnings attributable to shareholders, determined in accordance with generally accepted accounting principles (“GAAP”), include certain items that may not be indicative of its ongoing core operations. The following table identifies such items and reconciles net earnings attributable to shareholders to core net operating earnings, a non-GAAP financial measure that AFG believes is a useful tool for investors and analysts in analyzing ongoing operating trends.
|In millions, except per share amounts||Three months ended September 30,||Nine months ended September 30,|
|Components of net earnings attributable to shareholders:|
|Core net operating earnings (a)||$||97||$||78||$||268||$||253|
|Gain on sale of Med supp & critical illness businesses||-||101||-||101|
|Other realized gains||35||55||97||92|
|Special A&E charges (b)||(49||)||(21||)||(49||)||(21||)|
|ELNY guaranty fund assessments||-||-||(3||)||-|
|AFG tax case resolution||-||28||-||28|
|Net earnings attributable to shareholders||$||83||$||226||$||313||$||438|
|Components of diluted earnings per share:|
|Core net operating earnings (a)||$||1.06||$||0.82||$||2.94||$||2.59|
|Gain on sale of Med supp & critical illness businesses||-||1.07||-||1.04|
|Other realized gains||0.40||0.59||1.08||0.95|
|Special A&E charges (b)||(0.54||)||(0.23||)||(0.54||)||(0.22||)|
|ELNY guaranty fund assessments||-||-||(0.04||)||-|
|AFG tax case resolution||-||0.30||-||0.29|
|Diluted earnings per share||$||0.92||$||2.39||$||3.44||$||4.50|
Footnotes (a) and (b) are contained in the accompanying Notes To Financial Schedules at the end of this release.S. Craig Lindner and Carl H. Lindner III, AFG’s Co-Chief Executive Officers, issued this statement: “Our specialty P&C and annuity operations performed well during the third quarter, producing strong core operating earnings as we continued to grow businesses where we are achieving targeted returns. We are encouraged by the significant improvement in underwriting profitability in our P&C business and the continued positive momentum in our annuity operations, which achieved record premiums in the third quarter of 2013.
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