American Financial Trades Above 200-Day SMA: Time to Hold AFG Stock?

American Financial Group, Inc. AFG has been trading above its 200-day simple moving average (SMA), signaling a short-term bullish trend. Its share price as of Monday was $139.32, down 7.2% from its 52-week high of $150.19.

The 200-day SMA is a long-term technical indicator that averages a stock's closing price over the last 200 trading days to smooth out volatility and identify the broader trend direction. When the stock price crosses above the 200-day SMA, it can be a signal to buy or hold.

The insurer has a market capitalization of $11.61 billion. The average volume of shares traded in the last three months was 0.4 million.

Shares of American Financial have gained 2% in the past year, underperforming the industry’s return of 6.4%. 

AFG’s Expensive Valuation

Based on the forward 12-month price-to-book ratio, American Financial is currently trading at 2.58X, above its industry average of 1.55X. The insurer has a Value Score of B. Shares of other insurers like The Allstate Corporation ALL, W.R. Berkley Corporation WRB, and The Progressive Corporation PGR are also trading at a multiple higher than the industry average.

AFG’s Growth Projection Encourages

The Zacks Consensus Estimate for 2026 earnings per share and revenues indicates an increase of 22% and 10.7%, respectively, from the corresponding 2025 estimates.

AFG’s Favorable Return on Capital

American Financial’s return on equity has also been improving over the last few quarters, reflecting its efficiency in utilizing shareholders’ funds. The trailing 12 months ROE was 17.4%, which compared favorably with the industry average of 7.6%.

Factors Favoring AFG

New business opportunities, increased exposure and a good renewal rate environment, coupled with additional crop premiums from the Crop Risk Services acquisition, position AFG well for growth.

American Financial, a niche player in the P&C market, is likely to benefit from strategic acquisitions and improved pricing. Improved industry fundamentals drive overall growth.

American Financial witnessed average renewal pricing across the entire P&C Group. It intends to maintain satisfactory rates in P&C renewal pricing going forward. AFG has reported overall renewal rate increases for 35 consecutive quarters, and it is expected to achieve overall renewal rate increases in excess of prospective loss ratio trends to meet or exceed targeted returns. The property and casualty insurer expects to achieve overall renewal rate increases in excess of prospective loss ratio trends to meet or exceed targeted returns.

Its combined ratio has been better than the industry average for more than two decades. Specialty niche focus, product line diversification and underwriting discipline should help AFG outperform the industry’s underwriting results.

Wealth Distribution

American Financial has increased its dividend for 18 straight years, apart from paying special dividends occasionally. This reflects its financial stability, which stems from robust operating profitability in the P&C segment, stellar investment performance and effective capital management.

Notably, the 10-year compound annual growth rate for the company's regular annual dividends stands at an impressive 12.4%. This track record underscores its prudent financial management and stability. The dividend yield is 2.3%, better than the industry average of 0.2%.

Wrapping Up: Keep on Holding

American Financial’s prudent capital deployment, increased exposures, good renewal rate environment and improved combined ratio make it an attractive stock. It intends to maintain satisfactory rates in P&C renewal pricing going forward. 

Despite its expensive valuation and bearish analysts’ sentiment, American Financial should benefit from strategic acquisitions, new business opportunities, stronger underwriting profit and favorable growth estimates. It is, therefore, wise to hold on to this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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