AFG Q2 Earnings Beat on Strong P&C Underwriting, Investment Income

American Financial Group, Inc. AFG reported second-quarter 2026 net operating earnings per share of $2.82, which surpassed the Zacks Consensus Estimate by 17%. The bottom line increased 31.8% year over year, driven by underwriting income and stronger returns from its alternative investment portfolio.

Total revenues of $2 billion increased 5% year over year.  The top line also beat the Zacks Consensus Estimate by 0.7%.

The quarterly results benefited from record pretax Property & Casualty ("P&C") operating income, healthy premium growth, improved underwriting margins and higher investment income from alternative investments.

Behind the Headlines

Net earned premiums rose 2.9% year over year to approximately $1.7 billion in the second quarter of 2026. The figure was slightly below both the Zacks Consensus Estimate and our estimate of $1.71 billion.

Net investment income rose 20.1% year over year to $221 million in the quarter under review. The figure was higher than our estimate of $195.4 million and surpassed the Zacks Consensus Estimate of $197.9 million.

Total costs and expenses increased 1.1% year over year to $1.7 billion due to higher underwriting expenses and interest charges, partly offset by lower losses and loss adjustment expenses. Our estimate was $1.72 billion.

Segmental Update

Specialty P&C Insurance: The segment generated $1.9 billion in net written premiums, which improved 6% year over year, reflecting new business opportunities, favorable renewal pricing and increased exposures while maintaining disciplined underwriting.

The Specialty P&C Insurance segment’s underwriting profit increased 26.3% year over year to $144 million in the quarter, driven by higher underwriting profit across all three groups. The figure exceeded our estimate of $143 million. Pre-tax core operating earnings before income taxes of the P&C Insurance segment were $350 million, up 28.2% year over year.

Property & Transportation Group: Net written premiums increased 5% year over year to $797 million in the second quarter, driven by crop insurance growth, favorable pricing and higher exposures.

The Property & Transportation Group generated underwriting profit of $57 million, more than double the $27 million reported a year ago, driven by stronger transportation and agricultural business performance. The combined ratio improved 490 basis points year over year to 90.3%.

Specialty Casualty Group: Net written premiums increased 6% year over year to $812 million.

The Specialty Casualty Group generated underwriting profit of $45 million, down from $49 million in the prior-year quarter, due to lower workers' compensation and executive liability profitability, offset by strength in energy, construction and environmental liability businesses. The combined ratio deteriorated 60 basis points year over year to 94.5%.

Specialty Financial Group: Net written premiums rose 10% year over year to $306 million.

In the Specialty Financial Group, underwriting profit of $42 million, up from $38 million in the prior-year quarter, was primarily driven by stronger performance in its fidelity/crime and financial institutions businesses. Catastrophe losses in Specialty Financial Group totaled $10 million in the reported quarter, narrower than the year-ago loss of $39 million. The current combined ratio of 85.6% improved 50 basis points year over year.

Financial Update

American Financial exited the second quarter of 2026 with total cash and investments of $17.1 billion, which decreased 0.7% from the 2025-end level. Long-term debt of $1.82 billion remained unchanged from the 2025-end level.

As of June 30, 2026, the company’s book value per share, excluding accumulated other comprehensive income (AOCI), was $59.85 compared with $58.38 at the end of 2025.

Annualized return on equity was 20.3% in the second quarter, up 50 basis points year over year.

AFG’s Prudent Capital Deployment

American Financial repurchased $26 million of its common stock in the second quarter of 2026. It paid total cash dividends of 88 cents per share, continuing its disciplined capital management strategy.

AFG’s Zacks Rank

American Financial currently has a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

RLI Corp. RLI reported second-quarter 2026 operating earnings of 83 cents per share, which beat the Zacks Consensus Estimate by 16.9%. The bottom line increased 1.2% from the prior-year quarter’s level.

Operating revenues amounted to $463 million, up 4.9% year over year. The top line beat the Zacks Consensus Estimate by 1.6%. Gross premiums written increased 3.1% year over year to $579.7 million, driven by strong growth in the casualty segment. Our estimate was $592.9 million. Net investment income increased 16.8% year over year to $46 million. The Zacks Consensus Estimate was $42.7 million.

First American Financial Corporation FAF reported second-quarter 2026 operating earnings of $2.08 per share, which beat the Zacks Consensus Estimate by 15.6% and rose 35.9% year over year. Operating revenues climbed 15% to $2.1 billion, driven by growth in direct premiums, escrow fees, and Information and other revenues. The top line surpassed the consensus estimate by 4.4%.

Direct premiums and escrow fees reached $794.1 million, marking a 14.8% increase from the prior-year level. Investment income totaled $183.7 million, up 14.7% year over year. The figure exceeded both our estimate and the Zacks Consensus Estimate of $182.3 million.

The Hanover Insurance Group, Inc. THG reported second-quarter 2026 operating earnings of $5.31 per share, up 22.1% year over year. The figure beat the Zacks Consensus Estimate of $3.88 by 36.9%.

Total revenues increased 4.6% year over year to $1.72 billion but missed the consensus mark of $1.73 billion by 0.4%. Net investment income increased 13.4% year over year to $119.6 million, driven by operating cash flows and higher earned yields. Catastrophe losses totaled $91.8 million, contributing 5.7 percentage points to the combined ratio, compared with 7.0 percentage points in the prior-year quarter.

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