American Financial Group Q2 2025 slides: Sequential earnings improvement amid challenging year

American Financial Group , Inc. (NYSE:AFG) released its second quarter 2025 investor presentation on August 5, revealing sequential improvement in earnings performance compared to the first quarter, though still showing year-over-year declines. The specialty insurance provider reported core net operating earnings of $179 million for Q2 2025, translating to diluted earnings per share of $2.07.

Quarterly Performance Highlights

American Financial Group’s Q2 2025 results show improvement from the first quarter’s performance, when the company reported an EPS of $1.81 that missed analyst expectations. However, the six-month results demonstrate continued pressure compared to the prior year, with net earnings of $328 million for the first half of 2025 compared to $451 million for the same period in 2024.

The company’s specialty property and casualty insurance operations posted a combined ratio of 93.1% for the second quarter, indicating solid underwriting profitability despite challenging market conditions.

As shown in the following financial highlights table, AFG’s performance metrics reveal the current state of the business:

Net written premiums for the property and casualty segment reached $1,803 million in Q2 2025, contributing to total six-month premiums of $3,414 million, representing a modest 2.6% increase over the $3,326 million reported for the first half of 2024.

Segment Performance Analysis

American Financial Group’s business is divided into three main specialty insurance segments, each showing varying levels of underwriting profitability in the second quarter of 2025.

The Specialty Financial segment emerged as the strongest performer with an impressive 86.1% combined ratio for Q2 2025, indicating excellent underwriting discipline and profitability in this business line:

The Property and Transportation segment reported a combined ratio of 95.2% for the quarter, while the Specialty Casualty segment achieved a 93.9% combined ratio:

These results align with the company’s focus on specialty insurance lines, which was highlighted in their Q1 earnings call where management emphasized continued investment in software and IT to enhance customer experience and data analytics capabilities.

Investment Performance and Portfolio Composition

American Financial Group reported net investment income of $179 million for Q2 2025, contributing to a six-month total of $349 million. The company maintains a conservative investment approach, with 65% of its $16,049 million investment portfolio allocated to investment-grade fixed maturities.

The following chart illustrates the composition of AFG’s investment portfolio:

Alternative investments, which include real estate funds and private equity, delivered modest returns with an annualized yield of just 1.2% for the quarter:

This relatively low return on alternative investments may be contributing to the year-over-year earnings pressure, as these investments typically target higher returns to offset their illiquidity and risk characteristics.

Balance Sheet Strength and Valuation

As of June 30, 2025, American Financial Group reported total assets of $30,669 million and shareholders’ equity of $4,516 million. The company’s book value per share stood at $54.15, or $55.74 when excluding accumulated other comprehensive income (AOCI).

The following table provides a comprehensive view of AFG’s book value metrics and market valuation:

With a closing share price of $126.21 as of June 30, 2025, American Financial Group traded at 2.26 times book value excluding AOCI, indicating investors’ continued confidence in the company’s business model and future prospects despite recent earnings challenges.

The company maintains a strong capital position with a debt-to-capital ratio of 24.4% excluding AOCI, providing financial flexibility for potential growth opportunities or shareholder returns.

Forward Outlook

While the Q2 2025 presentation doesn’t provide explicit forward guidance, context from the company’s Q1 earnings call suggests continued caution regarding full-year performance. Management had previously indicated that their original EPS guidance of $10.50 for 2025 might be impacted by market volatility.

The sequential improvement in Q2 results compared to Q1 suggests some stabilization in the business, though year-over-year comparisons remain challenging. The company’s focus on specialty insurance lines, coupled with its strong balance sheet and disciplined underwriting approach, positions it to navigate the current market environment.

American Financial Group’s stock closed at $124.32 on August 5, 2025, up 0.58% for the day, according to available market data. This represents a modest recovery from the post-Q1 earnings decline but remains well below the 52-week high of $150.19.

Investors will likely focus on whether the sequential improvement demonstrated in Q2 can be sustained in the second half of the year, particularly given the uncertain economic environment and its potential impact on both underwriting results and investment returns.

Full presentation:

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