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On Friday, Keefe, Bruyette & Woods maintained a steady outlook on American Financial Group (NYSE:AFG) with a Market Perform rating and a $126.00 price target. The firm's analyst Mayer Shields provided insights into the insurance company's reserve levels following an examination of its year-end 2024 GAAP loss reserve triangles. Shields noted a reduction in the overstatement of American Financial's net reserves, which were estimated to be approximately $305 million at the end of 2024, down from a previous estimate of $675 million at the end of 2023.
The analysis indicated that the company's reserve development for the calendar year of 2024 was primarily characterized by reserve releases from Property and Transportation reserves of recent accident years, along with slight releases from Specialty Financial reserves, particularly from accident years 2021 and 2022. This financial stability is reflected in AFG's strong current ratio of 2.14 and impressive 40-year track record of consistent dividend payments, as highlighted in InvestingPro's analysis. This was partially counterbalanced by an increase in reserves for recent accident years within the Specialty Casualty and Other Specialty segments.
Shields reaffirmed the earnings per share (EPS) estimates for American Financial for the years 2025 and 2026, maintaining them at $10.60 and $12.60, respectively. These projections incorporate anticipated net reserve releases of $44 million for 2025 and $71 million for 2026, largely stemming from the Property and Transportation and Specialty Casualty segments.
The Keefe, Bruyette & Woods analyst's assessment reflects a cautious view of the deceleration in core reserve releases expected for 2025 and 2026. Despite this, the firm has decided not to adjust its rating or price target for American Financial Group, indicating a belief that the stock's current valuation is in line with its performance expectations.
In other recent news, American Financial Group has announced its decision to sell the Charleston Harbor Resort & Marina assets. The sale, expected to close in the second or third quarter of 2025, is projected to bring a net after-tax gain of approximately $100 million. In corporate developments, Matthew J. Stevens has been promoted to Vice President – Tax, having joined the company in 1998 and served in various roles since then. On the analyst front, BMO Capital Markets has lowered its price target for American Financial from $143 to $124, citing updated guidance on the company's combined ratio and impact from California wildfires. Jefferies also adjusted its price target from $135 to $131, maintaining a Hold rating, and aligning its earnings per share forecast with the company's guidance. Additionally, KBW downgraded American Financial's stock rating from Outperform to Market Perform, reducing the price target from $164 to $144 due to lowered earnings projections for 2025 and 2026. These recent developments highlight the company's strategic asset management and various analyst assessments impacting its financial outlook.
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