A month has gone by since the last earnings report for American Financial Group (AFG Quick QuoteAFG - Free Report) . Shares have added about 8.2% in that time frame, outperforming the S&P 500.

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 catalysts.

American Financial Q2 Earnings Top on Solid Underwriting

American Financial Group, Inc. reported second-quarter 2024 net operating earnings per share of $2.56, which beat the Zacks Consensus Estimate by 1.2%. The bottom line increased 8% year over year. American Financial’s results reflected higher premiums, lower catastrophe losses and improved underwriting profit at Property & Transportation Group, Specialty Casualty Group and Specialty Financial Group, partially offset by lower net investment income.

Behind the Headlines  

Total revenues of $1.8 billion rose 4% year over year in the quarter. The growth came on the back of higher property & casualty (P&C) insurance net earned premiums and other income. However, the top line missed the Zacks Consensus Estimate by 10.7%.

Net investment income decreased 5% year over year to $188 million in the quarter under review. The figure was lower than our estimate of $205.4 million but beat the Zacks Consensus Estimate of $184.9 million.

Total cost and expenses increased 2.8% year over year to $1.6 billion due to higher P&C insurance losses and expenses and other expenses. 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 rose 1.5% year over year. The growth was reported within Property & Transportation Group, Specialty Casualty Group, Specialty Financial of the Specialty P&C groups as a result of a combination of new business opportunities, increased exposures, and a good renewal rate environment, partially offset by later reporting of crop premiums. Average renewal pricing across P&C Group, excluding workers’ compensation, increased 8% for the quarter.

Net written premiums in Property & Transportation Group grew 2% year over year to $681 million in the quarter. The figure was lower than our estimate of $686.3 million. Net written premiums at Specialty Casualty Group increased 2% year over year to $704 million. The figure was lower than our estimate of $764.4 million. Further, net written premiums at Specialty Financial rose 3% year over year to $248 million. The figure was lower than our estimate of $317.8 million. Net written premiums at Other divisions decreased 11% year over year to $59 million. The figure was lower than our estimate of $73 million.

Pre-tax core operating earnings of the P&C Insurance segment of $319 million in the second quarter increased 6.7% year over year. Specialty P&C Insurance segment’s underwriting profit jumped 22.8% year over year to $151 million in the quarter. The increase was due to higher year-over-year underwriting profit at Property & Transportation Group, Specialty Casualty Group and Specialty Financial Group. The figure was lower than our estimate of $188 million.

The combined ratio improved 140 basis points (bps) year over year to 90.5% at the Specialty Group due to an improvement of 120 bps in Specialty Casualty, 130 bps in Property & Transportation Group and 530 bps in Specialty Financial. Catastrophe losses were $36 million, narrower than the year-ago loss of $51 million.

Financial Update

American Financial exited the second quarter with total cash and investments of $15.3 billion, which remained unchanged from the 2023-end level. The figure was lower than our estimate of $15.7 billion. As of Jun 30, 2024, long-term debt totaled $1.4 billion, which remained unchanged from the level at the end of 2023.

As of Jun 30, 2024, the company’s book value per share (excluding accumulated other comprehensive income) was $56.19, up 2.7% from the 2023-end level. Annualized return on equity came in at 18% for the second quarter, expanding 10 bps year over year.

Prudent Capital Deployment

American Financial paid cash dividends of 71 cents per share during the second quarter.

2024 Guidance

American Financial expects growth in net written premiums to be 7%.

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 poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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 #3 (Hold). We expect an in-line 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, Chubb (CB Quick QuoteCB - Free Report) , has gained 9.5% over the past month. More than a month has passed since the company reported results for the quarter ended June 2024.

Chubb reported revenues of $13.86 billion in the last reported quarter, representing a year-over-year change of +13.2%. EPS of $5.38 for the same period compares with $4.92 a year ago.

Chubb is expected to post earnings of $4.86 per share for the current quarter, representing a year-over-year change of -1.8%. Over the last 30 days, the Zacks Consensus Estimate has changed +1%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Chubb. Also, the stock has a VGM Score of D.