It has been about a month since the last earnings report for American Financial Group (AFG). Shares have lost about 1% in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is American Financial due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
AFG Q1 Earnings Miss Estimates, Revenues Decline 1.7% Y/Y
American Financial Group reported first-quarter 2026 net operating earnings per share of $2.47, which missed the Zacks Consensus Estimate of $2.55. However, the bottom line increased 36.5% year over year, driven by underwriting income.
Total revenues of $1.8 billion decreased 1.7% year over year. The decline was due to lower investment income and realized gains (losses) on securities. The top line also missed the Zacks Consensus Estimate by 8.3%.
AFG’s first-quarter results were weighed down by weaker performance in its alternative investment portfolio, which offset strong underwriting results in its Specialty Property & Casualty (“P&C”) insurance segment.
Behind the Headlines
Net earned premiums rose 1.8% year over year to $1.6 billion in the first quarter of 2026. The figure was below both the Zacks Consensus Estimate and our estimate of $1.8 billion.
Net investment income rose 8.1% year over year to $187 million in the quarter under review. The figure was lower than our estimate of $199.8 million and also missed the Zacks Consensus Estimate of $210.2 million.
Total costs and expenses decreased 2.7% year over year to $1.6 billion due to lower losses & loss adjustment expenses, interest charges on borrowed money 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 $1.7 billion in net written premiums, which improved 3% year over year, driven by new business, favorable renewal rates and higher exposures, supported by diversified operations and disciplined underwriting.
Net written premiums in the Property & Transportation Group increased 6% year over year to $596 million in the quarter.
Net written premiums at the Specialty Casualty Group increased 2% year over year to $789 million. Further, net written premiums at Specialty Financial Group rose 1% year over year to $279 million.
The Specialty P&C Insurance segment’s underwriting profit increased 66% year over year to $156 million in the quarter, driven by higher underwriting profit across all three groups. The figure exceeded our estimate of $145 million. Pre-tax core operating earnings before income taxes of the P&C Insurance segment were $309 million, up 25.6% year over year.
In the Specialty Financial Group, a higher year-over-year underwriting profit of $57 million was primarily driven by stronger performance in its fidelity/crime and financial institutions businesses. Catastrophe losses in Specialty Financial Group totaled $12 million in the reported quarter, narrower than the year-ago loss of $35 million. The current combined ratio of 80% improved 70 basis points year over year. The results benefited from favorable prior-year reserve development.
Financial Update
American Financial exited the first quarter of 2026 with total cash and investments of $17.1 billion, which decreased 0.2% from the 2025-end level. Long-term debt of $1.82 billion in the first quarter of 2026 remained the same as the 2025-end level.
As of March 31, 2026, the company’s book value per share, excluding accumulated other comprehensive income (AOCI), was $57.83 compared to $58.38 at the end of 2025. Annualized return on equity was 15.8% in the first quarter, which increased 250 basis points year over year.
AFG’s Prudent Capital Deployment
American Financial returned $259 million to shareholders in the first quarter of 2026, consisting of $125 million in special dividends and $60 million in share repurchases. It paid total cash dividends of $2.38 per share, which included a $1.50 per share special dividend paid in February 2026.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
Currently, American Financial has a average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock has a grade of A on the value side, putting it in the top 20% for value investors.
Overall, the stock has an aggregate VGM Score of B. 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. Notably, American Financial has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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American Financial Group, Inc. (AFG): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).