CINCINNATI - $AFG (+2,38%) American Financial Group, Inc (NYSE:AFG) reported core operating earnings of $2.69 per share for the third quarter of 2025, up 16% from $2.31 per share in the year-ago quarter. This increase is due to higher underwriting gains and increased net investment income. The company currently trades at a P/E ratio of 14.5, which is below InvestingPro's fair value, indicating potential upside for investors.
Net income in the third quarter was $215 million ($2.58 per share), compared to $181 million ($2.16 per share) in the third quarter of 2024. The company generated an annualized return on equity of 18.2%, compared to 15.2% in the same period last year. This strong performance is in line with AFG's impressive return on equity of 17% over the last twelve months and InvestingPro's overall strong financial rating.
The company's specialty property and casualty insurance business reported a 19% increase in underwriting profit to $139 million. The combined ratio was 93.0%, an improvement of 1.3 percentage points compared to 94.3% in the same quarter last year. Catastrophe losses amounted to USD 23 million and were therefore significantly lower than the USD 90 million reported in the third quarter of 2024.
"We are pleased with AFG's performance in the third quarter, with core operating earnings per share growth of approximately 16% compared to the prior year," said S. Craig Lindner and Carl H. Lindner III, AFG's co-CEOs, in a statement included in the press release.
The Company's Board of Directors has declared a special dividend of $2.00 per share, payable on November 26, 2025 to shareholders of record on November 17, 2025. This special dividend is in addition to the regular quarterly dividend of $0.88 per share paid on October 24, 2025. According to data from InvestingPro, AFG offers an attractive dividend yield of 7.3% and has paid uninterrupted dividends for 40 years. This makes the company an attractive option for income-oriented investors.
Gross and net premiums in the third quarter decreased by 2% and 4% respectively compared to the same quarter last year, mainly due to earlier reporting of acreage by policyholders. Excluding crop insurance, gross premiums increased by 3%, while net premiums remained unchanged year-on-year.
Average policy renewal prices within the company's property and casualty insurance group increased by approximately 5% in the third quarter, which the company believes exceeds expected loss ratio trends.
The Property and Transportation Group reported a combined ratio of 94.1%, an improvement of 2.7 percentage points over the prior year. The Specialty Casualty Group's combined ratio increased from 92.1% to 95.8%, while the Specialty Financial Group reported a combined ratio of 81.1%, an improvement of 11.2 percentage points.
The company's book value per share amounted to USD 56.72 as at September 30, 2025. In the three and nine months to September 30, 2025, AFG recorded growth in book value per share plus dividends of 6.2% and 14.9% respectively. As analysts forecast share price targets of between USD 124 and USD 160 .
