American Financial Group’s fourth quarter was marked by a decline in revenue that fell short of Wall Street’s expectations, resulting in a negative market reaction. Management attributed the underperformance primarily to softer net investment income, driven by lower returns from alternative investments and continued competitive pressures in select specialty lines. Co-CEO Craig Lindner described the period as one with “exceptionally strong profitability in crop insurance operations,” which helped offset headwinds in other areas. Despite challenges, the company maintained a disciplined capital management approach and highlighted robust returns in its core underwriting businesses.
Is now the time to buy AFG? Find out in our full research report (it’s free for active Edge members).
American Financial Group (AFG) Q4 CY2025 Highlights:
- Revenue: $1.96 billion vs analyst estimates of $2.02 billion (3.2% year-on-year decline, 2.8% miss)
- Adjusted EPS: $3.65 vs analyst estimates of $3.32 (10.1% beat)
- Adjusted Operating Income: $440 million (22.4% margin, 16.4% year-on-year growth)
- Market Capitalization: $10.81 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From American Financial Group’s Q4 Earnings Call
- Hristian Getsov (Wells Fargo) asked about assumptions for rate increases and reserve releases in 2026. CFO Brian Hertzman explained that while favorable prior year development is possible, the outlook assumes more conservative workers’ comp results and no repeat of adverse development in social inflation lines.
- Charles Peters (Raymond James) pressed for details on start-up business growth and risk trends in California workers’ compensation. Co-CEO Carl Lindner indicated that most start-ups are showing early traction, and California results remain challenging but manageable with recent rate increases.
- Dan (BMO, for Michael Zaremski) inquired about the drivers of strong Property and Transportation performance. Hertzman emphasized that crop insurance profitability was the main factor, with other segment results stable but less significant.
- Jon Paul Newsome (Piper Sandler) sought clarity on growth prospects for remediated social inflation-exposed businesses. Lindner responded that corrective actions are largely complete, with both nonprofit and excess liability businesses poised for mid-single-digit growth.
- Andrew Andersen (Jefferies) questioned the sustainability of loss ratio trends and expense ratio impacts from business mix shifts. Hertzman noted one-off adjustments in California workers’ comp elevated recent loss ratios, while investments in customer experience and technology may affect expense ratios near term.
Catalysts in Upcoming Quarters
In coming quarters, the StockStory team will be monitoring (1) the trajectory of premium growth in start-up and embedded insurance businesses, (2) the normalization of alternative investment returns—particularly in multifamily real estate—and (3) the effectiveness of underwriting discipline in offsetting competitive headwinds and social inflation exposures. Execution in these areas will be critical for sustaining earnings momentum and capital deployment flexibility.
American Financial Group currently trades at $132.75, up from $130.25 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
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