American Financial (AFG) Up 5.2% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for American Financial Group (AFG). Shares have added about 5.2% in that time frame, outperforming the S&P 500.

But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is American Financial due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

American Financial Beats on Q4 Earnings, Declares Special Dividend

American Financial fourth-quarter 2025 net operating earnings per share of $3.65, which beat the Zacks Consensus Estimate by 14.8%. The bottom line increased 17% year over year on underwriting income.

AFG’s robust fourth-quarter earnings were driven by strong underwriting profit, led primarily by the property and transportation segment. The bottom line also benefited from minimal catastrophe impact. These gains were partially offset by lower returns in the alternative investments portfolio and lower investment income.

Behind the Headlines

Total revenues of $2 billion decreased 2.7% year over year. The decline was due to lower net investment income. The top line also missed the Zacks Consensus Estimate by 1.4%.

Net earned premiums declined 2.4% year over to $1.81 billion. The figure marginally missed the Zacks Consensus Estimate of $1.82 billion and our estimate of $1.83 billion. Net investment income declined 5.7% year over year to $183 million in the quarter under review. The figure was lower than our estimate of $192 million and missed the Zacks Consensus Estimate of $196 million.

Total costs and expenses decreased 7.9% year over year to $1.7 billion due to lower losses & loss adjustment expenses and expenses of managed investment entities. The figure was lower than our estimate of $1.8 billion.

Segmental Update

The Specialty P&C Insurance segment generated $1.4 billion in net written premiums, which declined 1% year over year. Net written premiums in the Property & Transportation Group decreased 2% year over year to $398 million in the quarter. The figure was lower than our estimate of $421.2 million. Net written premiums at the Specialty Casualty Group increased 3% year over year to $796 million. The figure was higher than our estimate of $758 million. Further, net written premiums at Specialty Financial Group decreased 10% year over year to $250 million. The figure was lower than our estimate of $291.8 million.

The Specialty P&C Insurance segment’s underwriting profit increased 41% year over year to $287 million in the quarter. Higher underwriting profit in Property and Transportation Group was partially offset by lower year-over-year underwriting profit in Specialty Casualty and Specialty Financial Groups. The figure was higher than our estimate of $178.8 million. Pre-tax core operating earnings before income taxes of the P&C Insurance segment of $440 million increased 16.4% year over year.

Catastrophe losses totaled $4 million in the reported quarter, narrower than the year-ago loss of $21 million. In the Property and Transportation Group, higher year-over-year underwriting profit can be attributed to lower catastrophe losses. In the Specialty Financial Group, higher year-over-year underwriting profit was primarily due to improved results in the financial institutions business and higher profitability in surety and fidelity businesses. The current combined ratio of 83.0% was 230 basis points higher than the year-ago figure of 80.7%. The results benefited from favorable prior-year reserve development.

Full-Year Highlights

Net operating EPS was $10.29, down 4.3% year over year. Revenues decreased 1.8% year over year to $8.3 billion. Net premiums written remained flat year over year at $7.1 billion. The combined ratio improved 20 bps to 91%.

Financial Update

American Financial exited 2025 with total cash and investments of $17.2 billion, which increased 8.4% from the 2024-end level. Long-term debt rose to $1.82 billion in 2025, reflecting an increase of 23.4% from the 2024-end level. As of Dec. 31, 2025, the company’s book value per share, excluding accumulated other comprehensive income (AOCI), was $58.38 compared with $56.03 a year ago. Annualized return on equity was 17.8% for the full year, down 120 bps from the prior-year level.

Prudent Capital Deployment

American Financial returned $707 million to shareholders, including $334 million in special dividends and $99 million in share repurchases. AFG also declared a $1.50 per share special dividend, payable on Feb. 25, 2026.

2026 Expectations

AFG projects core operating EPS of $11 and a core operating ROE, excluding AOCI, of approximately 18%. Net written premiums are expected to grow 3-5% while the combined ratio is estimated to be 92.5%.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, American Financial has a average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise American Financial has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

American Financial belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Travelers (TRV), has gained 5.7% over the past month. More than a month has passed since the company reported results for the quarter ended December 2025.

Travelers reported revenues of $12.45 billion in the last reported quarter, representing a year-over-year change of +3.2%. EPS of $11.13 for the same period compares with $9.15 a year ago.

Travelers is expected to post earnings of $6.90 per share for the current quarter, representing a year-over-year change of +261.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.6%.

Travelers has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.

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

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