American Financial Group (NYSE:AFG) reported record third-quarter core operating results, supported by underwriting profitability, premium growth and higher property and casualty investment income, executives said during the company’s third-quarter 2026 earnings call.
Core net operating earnings were $3.97 per share, up 48% from the prior-year quarter, producing an annualized core operating return on equity of 26%, Co-CEO Craig Lindner said. The company also recorded its highest third-quarter pre-tax property and casualty operating income.
“Strong underwriting margins, healthy premium growth, and higher quarterly Property and Casualty net investment income contributed to a new third quarter record,” Co-CEO Carl Lindner III said.
Investment income aided by Charleston Harbor sale
Property and casualty net investment income increased 41% year over year, setting a third-quarter record. The increase was primarily driven by the August sale of the Charleston Harbor Resort & Marina, which generated $126 million of pre-tax net investment income.
Because AFG’s property and casualty companies and the parent company each owned half of the property, the gain was split between property and casualty segment operating results and holding-company investment income. The sale added $1.21 per share to third-quarter core net operating earnings, Craig Lindner said.
Even excluding the Charleston Harbor gain, the company said third-quarter core operating income was a record. Property and casualty net investment income excluding the transaction rose 10% from the 2025 quarter.
AFG invested about $1.5 billion of cash into fixed-maturity investments during the quarter, matching the amount it had invested during the entire first half of the year. The purchases and interest-rate swaps increased the duration of the company’s property and casualty fixed-maturity portfolio, including cash and equivalents, to 3.6 years at Sept. 30 from 3.1 years at June 30.
The company said it was able to invest in fixed-maturity securities at yields of about 6% in the current interest-rate environment. Alternative investments generated an annualized return of about 6.7% in the quarter, compared with 6.2% a year earlier. Management said it continues to expect long-term annual returns averaging 10% or more from its overall alternative-investment portfolio.
Premium growth and pricing remained favorable
Specialty property and casualty gross written premiums increased 8% from a year earlier, while net written premiums rose 9%. Renewal rates excluding workers’ compensation increased about 6%, roughly one percentage point higher than the previous quarter. Including workers’ compensation, renewal rates rose approximately 5%.
AFG has now reported overall renewal-rate increases for 41 consecutive quarters, Carl Lindner said. The specialty property and casualty businesses produced a 93.8% combined ratio, compared with 93.0% in the prior-year quarter. Results included 1.5 points of favorable prior-year reserve development and one point of catastrophe losses.
- Property and Transportation: Gross written premiums rose 12% and net written premiums increased 14%. The group posted a 93.4% combined ratio, improving from 94.1% a year earlier. Growth was driven by certain crop products, transportation-business opportunities and favorable rates. Commercial auto liability renewal rates increased about 15%, and the company reported an underwriting profit in that line for the third consecutive quarter.
- Specialty Casualty: Gross written premiums increased less than 1% and net written premiums rose 2%. The group’s combined ratio improved to 94.9% from 95.8%. Growth in excess and surplus and workers’ compensation businesses was partly offset by non-renewals of underperforming targeted-market accounts, including efforts to reduce California casualty exposure.
- Specialty Financial: Gross and net written premiums each rose 14%, mainly reflecting growth in lender-services businesses. Underwriting profit declined to $23 million from $51 million because of an isolated large fire and business-interruption loss in Europe and lower favorable reserve development.
Management said the European claim was the principal reason the Specialty Financial segment’s loss ratio increased during the quarter. Chief Financial Officer Brian Hertzman said that excluding the unusual loss, the segment’s combined ratio would have been in the high 80s and consistent with management’s expectations.
Workers’ compensation and casualty reserving
AFG said workers’ compensation claim frequency remained flat to slightly down overall. California was an exception, where cumulative-trauma claims increased frequency in Republic and Strategic Comp’s higher-deductible business. Carl Lindner said the company continues to see strong workers’ compensation underwriting results on both calendar-year and accident-year bases.
The company is achieving a 6% rate increase in California workers’ compensation and has filed for a 9.1% increase effective in the fourth quarter, he said. Outside California, management said its workers’ compensation operations are performing well, while California produces a moderate underwriting loss.
In Specialty Casualty, Hertzman said favorable reserve development reflected improved performance in businesses exposed to social inflation, with less adverse development than in prior periods. Management said it is maintaining cautious initial loss picks in commercial auto and other social-inflation-exposed lines despite flatter overall trends and improving underwriting performance.
Carl Lindner pointed to continued pricing strength in those areas, including commercial auto renewal rates up about 15% and excess liability rates up more than 10% year to date.
Capital returns and outlook
AFG returned nearly $100 million to shareholders during the third quarter through $26 million of share repurchases and its regular dividend. In October, the company increased its regular quarterly dividend by 10.2% from the prior $0.97-per-share rate.
The company also declared a $3.50-per-share special cash dividend, payable Nov. 25 to shareholders of record as of Nov. 16. The special dividend is expected to total about $290 million. Since the start of 2021, AFG has declared $59 per share, or nearly $5 billion, in special dividends.
Management said operations are expected to continue generating significant excess capital through the rest of 2026 and into 2027, providing flexibility for acquisitions, special dividends or repurchases. For the first nine months of 2026, growth in book value per share excluding accumulated other comprehensive income, plus dividends, was 13.8%.
About American Financial Group (NYSE:AFG)
American Financial Group, Inc (NYSE:AFG) is an insurance holding company headquartered in Cincinnati, Ohio. Through its Great American Insurance Group operations, the company primarily provides property and casualty insurance, with an emphasis on specialty commercial products and markets.
Its insurance offerings serve businesses, organizations and individuals across a range of industries. Product lines have included commercial property and liability coverage, workers’ compensation, transportation, agriculture and crop insurance, marine and other specialty risks.
