American Financial Group Inc.

11/05/2026 | Press release | Distributed by Public on 11/05/2026 13:06

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
INDEX TO MD&A
Page Page
Forward-Looking Statements
32
Results of Operations
42
Overview
33
General
42
Critical Accounting Policies
33
Results of Operations - Third Quarter
43
Liquidity and Capital Resources
34
Segmented Statement of Earnings
43
Ratios
34
Property and Casualty Insurance
44
Condensed Consolidated Cash Flows
34
Holding Company, Other and Unallocated
52
Parent and Subsidiary Liquidity
35
Results of Operations - First Nine Months
55
Investments
36
Segmented Statement of Earnings
55
Uncertainties
38
Property and Casualty Insurance
56
Managed Investment Entities
39
Holding Company, Other and Unallocated
63
Recent Accounting Standards
65
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. Some of the forward-looking statements can be identified by the use of words such as "anticipates", "believes", "expects", "projects", "estimates", "intends", "plans", "seeks", "could", "may", "should", "will" or the negative version of those words or other comparable terminology. Such forward-looking statements include statements relating to: expectations concerning market and other conditions and their effect on future premiums, revenues, earnings, investment activities and the amount and timing of share repurchases and special dividends; recoverability of asset values; expected losses and the adequacy of reserves for asbestos, environmental pollution and mass tort claims; rate changes; and improved loss experience.
Actual results and/or financial condition could differ materially from those contained in or implied by such forward-looking statements for a variety of reasons including but not limited to the following and the risks and uncertainties AFG describes in the "Risk Factors" section of its most recent Annual Report on Form 10-K, as updated by its other reports filed with the Securities and Exchange Commission, including:
•changes in financial, political and economic conditions, including changes in interest and inflation rates and impacts from tariffs or other trade actions, currency fluctuations and extended economic recessions or expansions in the U.S. and/or abroad;
•performance of securities markets;
•new legislation or declines in credit quality or credit ratings that could have a material impact on the valuation of securities in AFG's investment portfolio;
•the availability of capital;
•changes in insurance law or regulation, including changes in statutory accounting rules, including modifications to capital requirements;
•changes in the legal environment affecting AFG or its customers;
•tax law and accounting changes;
•levels of natural catastrophes and severe weather, terrorist activities (including any nuclear, biological, chemical or radiological events), incidents of war or losses resulting from pandemics, civil unrest and other major losses;
•disruption caused by cyber-attacks or other technology breaches or failures by AFG or its business partners and service providers, which could negatively impact AFG's business or reputation and/or expose AFG to litigation;
•development of insurance loss reserves and establishment of other reserves, particularly with respect to amounts associated with asbestos and environmental claims;
•availability of reinsurance and ability of reinsurers to pay their obligations;
•competitive pressures;
•the ability to obtain adequate rates and policy terms;
•changes in AFG's credit ratings or the financial strength ratings assigned by major ratings agencies to AFG's operating subsidiaries; and
•the impact of the conditions in the international financial markets and the global economy relating to AFG's international operations.
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
The forward-looking statements herein are made only as of the date of this report. The Company assumes no obligation to publicly update any forward-looking statements.
OBJECTIVE
The objective of Management's Discussion and Analysis is to provide a discussion and analysis of the financial statements and other statistical data that management believes will enhance the understanding of AFG's financial condition, changes in financial condition and results of operations. The tables and narrative that follow are presented in a manner that is consistent with the information that AFG's management uses to make operational decisions and allocate capital resources. They are provided to demonstrate the nature of the transactions and events that could impact AFG's financial results. This discussion should be read in conjunction with the financial statements beginning on page 2.
OVERVIEW
Financial Condition
AFG is organized as a holding company with almost all of its operations being conducted by subsidiaries. AFG, however, has continuing cash needs for administrative expenses, the payment of principal and interest on borrowings, shareholder dividends and taxes. Therefore, certain analyses are most meaningfully presented on a parent only basis while others are best done on a total enterprise basis. In addition, because its businesses are financial in nature, AFG does not prepare its consolidated financial statements using a current-noncurrent format. Consequently, certain traditional ratios and financial analysis tests are not meaningful.
Results of Operations
Through the operations of its subsidiaries, AFG is engaged primarily in property and casualty insurance, focusing on specialized commercial products for businesses.
AFG reported net earnings of $282 million ($3.40 per share, diluted) for the third quarter of 2026 compared to $215 million ($2.58 per share, diluted) for the third quarter of 2025, reflecting higher net investment income, partially offset by net realized losses on securities in the 2026 period compared to net realized gains on securities in the 2025 period.
AFG reported net earnings of $721 million ($8.68 per share, diluted) for the first nine months of 2026 compared to $543 million ($6.50 per share, diluted) for the first nine months of 2025, reflecting higher underwriting profit and higher net investment income, partially offset by net realized losses on securities in the 2026 period compared to net realized gains on securities in the 2025 period.
Outlook
Management expects its diversification and disciplined, opportunistic underwriting culture to produce overall premium growth and strong underwriting results even as some markets in the property and casualty industry have softened. In addition, management anticipates improved returns on alternative investments, relative to the returns earned in 2025 and the first quarter of 2026, will continue to have a positive impact on net investment income into 2027.
AFG's financial condition, results of operations and cash flows are impacted by the economic, legal and regulatory environment. Economic inflation, social inflation and other economic conditions may impact premium levels, loss cost trends and investment returns.
Management believes that AFG's strong financial position and current liquidity and capital at its subsidiaries will give AFG the flexibility to continue to effectively address and respond to anticipated and unanticipated challenges. AFG's insurance subsidiaries continue to have capital at or in excess of the levels required by ratings agencies in order to maintain their current ratings, and the parent company does not have any debt maturities until 2030.
CRITICAL ACCOUNTING POLICIES
Significant accounting policies are summarized in Note A - "Accounting Policies" to the financial statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that can have a significant effect on amounts reported in the financial statements. As more information becomes known, these estimates and assumptions change and, thus, impact amounts reported in the future. The areas where
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
management believes the degree of judgment required to determine amounts recorded in the financial statements is most significant are as follows:
•the valuation of investments, including the determination of impairment allowances,
•the establishment of insurance reserves, especially asbestos and environmental-related reserves,
•the recoverability of reinsurance, and
•the establishment of asbestos and environmental liabilities of former railroad and manufacturing operations.
For a discussion of these policies, see Management's Discussion and Analysis - "Critical Accounting Policies" in AFG's 2025 Form 10-K.
LIQUIDITY AND CAPITAL RESOURCES
Ratios
AFG's debt to total capital ratio on a consolidated basis is shown below (dollars in millions):
December 31,
September 30, 2026 2025 2024
Principal amount of long-term debt $ 1,848 $ 1,848 $ 1,498
Total capital 7,003 6,718 6,204
Ratio of debt to total capital:
Including subordinated debt 26.4 % 27.5 % 24.1 %
Excluding subordinated debt 16.7 % 17.5 % 13.3 %
The ratio of debt to total capital is a non-GAAP measure that management believes is useful for investors, analysts and ratings agencies to evaluate AFG's financial strength and liquidity and to provide insight into how AFG finances its operations. The ratio is calculated by dividing the principal amount of AFG's long-term debt by its total capital, which includes long-term debt and shareholders' equity (excluding accumulated other comprehensive income (loss), net of tax). In addition, maintaining a ratio of debt, excluding subordinated debt and debt secured by real estate (if any), to total capital of 35% or lower is a financial covenant in AFG's bank credit facility.
Condensed Consolidated Cash Flows
AFG's principal sources of cash include insurance premiums, income from its investment portfolio and proceeds from the maturities, redemptions and sales of investments. Insurance premiums in excess of acquisition expenses and operating costs are invested until they are needed to meet policyholder obligations or made available to the parent company through dividends to cover debt obligations and corporate expenses, and to provide returns to shareholders through share repurchases and dividends. Cash flows from operating, investing and financing activities as detailed in AFG's Consolidated Statement of Cash Flows are shown below (in millions):
Nine months ended September 30,
2026 2025
Net cash provided by operating activities $ 971 $ 749
Net cash used in investing activities (1,289) (71)
Net cash used in financing activities (61) (242)
Net change in cash and cash equivalents $ (379) $ 436
Net Cash Provided by Operating Activities AFG's property and casualty insurance operations typically produce positive net operating cash flows as premiums collected and investment income exceed policy acquisition costs, claims payments and operating expenses. AFG's net cash provided by operating activities is impacted by the level and timing of premiums, claim and expense payments and recoveries from reinsurers. Cash flows provided by operating activities also include the activity of AFG's managed investment entities (collateralized loan obligations ("CLO")) other than those activities included in investing or financing activities. The changes in the assets and liabilities of the managed investment entities included in operating activities reduced cash flows from operating activities by $4 million during the first nine months of 2026 and increased cash flows from operating activities by $104 million in the first nine months of 2025, accounting for a $108 million decrease in cash flows from operating activities in the 2026 period compared to the 2025 period. As discussed in Note A - "Accounting Policies - Managed Investment Entities" to the financial statements, AFG has no right to use the CLO assets and no obligation to pay the CLO liabilities and such assets and liabilities are shown
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
separately in AFG's Balance Sheet. Excluding the impact of the managed investment entities, net cash provided by operating activities was $975 million and $645 million in the first nine months of 2026 and 2025, respectively.
Net Cash Used in Investing Activities AFG's investing activities consist primarily of the investment of funds provided by its property and casualty businesses. Investing activities also include the purchase and disposal of managed investment entity investments, which are presented separately in AFG's Balance Sheet. Net investment activity in the managed investment entities was a $395 million use of cash in the first nine months of 2026 compared to a $63 million source of cash in the first nine months of 2025, accounting for a $458 million increase in net cash used in investing activities in the first nine months of 2026 compared to the 2025 period. See Note A - "Accounting Policies - Managed Investment Entities" and Note F - "Managed Investment Entities" to the financial statements. Excluding the activity of the managed investment entities, investing activities were an $894 million use of cash in the first nine months of 2026 compared to $134 million in the first nine months of 2025, an increase of $760 million reflecting the investment of cash provided by operations and the opportunistic investment of cash on hand in a favorable interest rate environment in the first nine months of 2026.
Net Cash Used in Financing Activities AFG's financing activities consist primarily of issuances and retirements of long-term debt, issuances and repurchases of Common Stock and dividend payments. Net cash used in financing activities was $61 million for the first nine months of 2026 compared to $242 million in the first nine months of 2025, a decrease of $181 million. AFG paid cash dividends totaling $343 million in the first nine months of 2026 compared to $367 million in the first nine months of 2025, resulting in a $24 million decrease in cash used in financing activities in the first nine months of 2026 compared to the first nine months of 2025. During the first nine months of 2026, AFG repurchased $112 million of its Common Stock compared to $98 million in the comparable 2025 period, an increase in cash used in financing activities of $14 million. The net proceeds from AFG's issuance of $350 million in 5.00% Senior Notes in September 2025 was a $344 million source of cash in the first nine months of 2025. Financing activities also include issuances and retirements of managed investment entity liabilities, which are nonrecourse to AFG and presented separately in AFG's Balance Sheet. Issuances of managed investment entity liabilities exceeded retirements by $387 million in the first nine months of 2026 compared to retirements exceeding issuances by $130 million in the first nine months of 2025, accounting for a $517 million decrease in net cash used in financing activities in the 2026 period compared to the 2025 period. See Note A - "Accounting Policies - Managed Investment Entities" and Note F - "Managed Investment Entities" to the financial statements.
Parent and Subsidiary Liquidity
Parent Holding Company Liquidity Management believes AFG has sufficient resources to meet its liquidity requirements. If funds generated from operations, including dividends, tax payments and borrowings from subsidiaries, are insufficient to meet fixed charges in any period, AFG would be required to utilize parent company cash and investments or to generate cash through borrowings, sales of other assets or similar transactions.
AFG's operations continue to generate significant excess capital for future returns of capital to shareholders in the form of regular and special cash dividends and through opportunistic share repurchases or to be deployed into its property and casualty businesses as management identifies the potential for profitable organic growth, and opportunities to expand through acquisitions of established businesses or start-ups that meet target return thresholds.
During the first nine months of 2026, AFG repurchased 847,839 shares of its Common Stock for $112 million and paid a special cash dividend totaling $125 million ($1.50 per share) in February. On November 3, 2026, AFG declared a special cash dividend of $3.50 per share, payable on November 25, 2026. The aggregate amount of this special dividend will be
approximately $290 million.
In September 2025, AFG issued $350 million in 5.00% Senior Notes due in September 2035.
During 2025, AFG repurchased 799,398 shares of its Common Stock for $99 million and paid special cash dividends totaling $334 million ($2.00 per share in both March and November).
AFG may, at any time and from time to time, seek to retire or purchase its outstanding debt through cash purchases or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will be upon such terms and at such prices as management may determine, and will depend on prevailing market conditions, AFG's liquidity requirements, contractual restrictions and other factors.
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
At September 30, 2026, AFG (parent) held approximately $389 million in cash and investments. Management believes that AFG's cash balances are held at stable banking institutions, although the amounts of many of these deposits are in excess of federally insured balances. AFG can borrow up to $450 million under its revolving credit facility, which expires in June 2028. Amounts borrowed under this agreement bear interest at rates ranging from 1.00% to 1.75% (based on AFG's credit rating, currently 1.25%) over a SOFR-based floating rate. There were no borrowings under AFG's credit facility, or under any other parent company short-term borrowing arrangements, during 2025 or the first nine months of 2026.
Under a tax allocation agreement with AFG, all 80% (or more) owned U.S. subsidiaries generally pay taxes to (or recover taxes from) AFG based on each subsidiary's contribution to amounts due under AFG's consolidated tax return.
Subsidiary Liquidity The liquidity requirements of AFG's insurance subsidiaries relate primarily to the policyholder claims and underwriting expenses and payments of dividends and taxes to AFG. Historically, cash flows from premiums and investment income have generally provided more than sufficient funds to meet these requirements. Funds received in excess of cash requirements are generally invested in marketable securities. In addition, the insurance subsidiaries generally hold a significant amount of highly liquid, short duration investments.
AFG believes its insurance subsidiaries maintain sufficient liquidity to pay claims and underwriting expenses and that these subsidiaries have sufficient capital to meet commitments in the event of unforeseen reserve deficiencies, inadequate premium rates or reinsurer insolvencies. Management believes that the capital levels in AFG's insurance subsidiaries are adequate to maintain its business and rating agency ratings. Nonetheless, changes in statutory accounting rules, changes in rating agency measures, significant declines in the fair value of the insurance subsidiaries' investment portfolios or significant ratings downgrades on these investments, could create a need for additional capital.
Investments
AFG's investment portfolio at September 30, 2026, contained $11.77 billion in fixed maturity securities classified as available for sale and carried at fair value with unrealized gains and losses included in accumulated other comprehensive income (loss) and $75 million in fixed maturities classified as trading with holding gains and losses included in net investment income. In addition, AFG's investment portfolio includes $536 million in equity securities carried at fair value with holding gains and losses included in realized gains (losses) on securities and $229 million in equity securities carried at fair value with holding gains and losses included in net investment income.
Fair values for AFG's portfolio are determined by AFG's internal investment professionals using data from nationally recognized pricing services, non-binding broker quotes and other market information. Fair values of equity securities are determined by published closing prices when available. For AFG's fixed maturity portfolio, approximately 90% was priced using pricing services at September 30, 2026 and 3% was priced using non-binding broker quotes. The remaining 7% was priced internally using a variety of inputs including credit spreads, trade information, prices of comparable securities, estimates of cash flow and other security specific features. When prices obtained for the same security vary, AFG's internal investment professionals select the price they believe is most indicative of an exit price. For additional information on determination of fair value, see Note C - "Fair Value Measurements" to the financial statements.
The pricing services use a variety of observable inputs to estimate fair value of fixed maturities that do not trade on a daily basis. Based upon information provided by the pricing services, these inputs include, but are not limited to, recent reported trades, benchmark yields, issuer spreads, bids or offers, reference data, and measures of volatility. Included in the pricing of structured securities are estimates of the rate of future prepayments and defaults of principal over the remaining life of the underlying collateral. Due to the lack of transparency in the process that brokers use to develop prices, valuations that are based on brokers' prices are classified as Level 3 in the GAAP hierarchy unless the price can be corroborated, for example, by comparison to similar securities priced using observable inputs.
Valuation techniques utilized by pricing services and prices obtained from external sources are reviewed by AFG's internal investment professionals who are familiar with the securities being priced and the markets in which they trade to ensure the fair value determination is representative of an exit price. To validate the appropriateness of the prices obtained, these investment managers consider widely published indices (as benchmarks), recent trades, changes in interest rates, general economic conditions and the credit quality of the specific issuers. In addition, AFG communicates directly with pricing services regarding the methods and assumptions used in pricing, including verifying, on a test basis, the inputs used by the services to value specific securities.
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
In general, the fair value of AFG's fixed maturity investments is inversely correlated to changes in interest rates. The following table demonstrates the sensitivity of such fair values to reasonably likely changes in interest rates by illustrating the estimated effect on AFG's fixed maturity portfolio that an immediate increase of 100 basis points in the interest rate yield curve would have had at September 30, 2026 (dollars in millions). Effects of increases or decreases from the 100 basis points illustrated would be approximately proportional.
Fair value of fixed maturity portfolio $ 11,846
Percentage impact on fair value of 100 bps increase in interest rates (4.0 %)
Pretax impact on fair value of fixed maturity portfolio $ (474)
Approximately 97% of the fixed maturities held by AFG at September 30, 2026, were rated "investment grade" (credit rating of AAA to BBB) by nationally recognized rating agencies, 1% were rated "non-investment grade" and 2% were not rated. Investment grade securities generally bear lower yields and lower degrees of risk than those that are unrated and non-investment grade. Management believes that the high-quality investment portfolio should generate a stable and predictable investment return.
Summarized information for the unrealized gains and losses recorded in AFG's Balance Sheet at September 30, 2026, is shown in the following table (dollars in millions). There were $252 million of available for sale fixed maturity securities with no unrealized gains or losses at September 30, 2026.
Securities
With
Unrealized
Gains 		Securities
With
Unrealized
Losses
Available for Sale Fixed Maturities
Fair value of securities $ 2,415 $ 9,104
Amortized cost of securities, net of allowance for expected credit losses $ 2,386 $ 9,612
Gross unrealized gain (loss) $ 29 $ (508)
Fair value as % of amortized cost 101 % 95 %
Number of security positions 425 1,561
Number individually exceeding $2 million gain or loss - 43
Concentration of gains (losses) by type or industry (exceeding 5% of unrealized):
Residential mortgage-backed securities
$ 11 $ (266)
Banking 4 (13)
Other asset-backed securities 4 (80)
Asset managers 2 (20)
States and municipalities 1 (71)
Percentage rated investment grade 95 % 98 %
The table below sets forth the scheduled maturities of AFG's available for sale fixed maturity securities at September 30, 2026, based on their fair values. Securities with sinking funds are reported at average maturity. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid by the issuers.
Securities
With
Unrealized
Gains 		Securities
With
Unrealized
Losses
Maturity
One year or less 3 % 6 %
After one year through five years 23 % 14 %
After five years through ten years 11 % 14 %
After ten years 1 % 3 %
38 % 37 %
CLOs and other asset-backed securities (average life of approximately 3.5 years)
55 % 27 %
Residential mortgage-backed securities (average life of approximately 7.5 years)
7 % 36 %
100 % 100 %
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
The table below (dollars in millions) summarizes the unrealized gains and losses on fixed maturity securities by dollar amount:
Aggregate
Fair
Value 		Aggregate
Unrealized
Gain (Loss) 		Fair
Value as
% of Cost
Fixed Maturities at September 30, 2026
Securities with unrealized gains:
Exceeding $500,000 (7 securities)
$ 60 $ 5 109 %
$500,000 or less (418 securities)
2,355 24 101 %
$ 2,415 $ 29 101 %
Securities with unrealized losses:
Exceeding $500,000 (249 securities)
$ 3,528 $ (348) 91 %
$500,000 or less (1,312 securities)
5,576 (160) 97 %
$ 9,104 $ (508) 95 %
The following table (dollars in millions) summarizes the unrealized losses for all securities with unrealized losses by issuer quality and the length of time those securities have been in an unrealized loss position:
Aggregate
Fair
Value 		Aggregate
Unrealized
Loss 		Fair
Value as
% of Cost
Securities with Unrealized Losses at September 30, 2026
Investment grade fixed maturities with losses for:
Less than one year (951 securities)
$ 6,855 $ (250) 96 %
One year or longer (484 securities)
2,100 (247) 89 %
$ 8,955 $ (497) 95 %
Non-investment grade fixed maturities with losses for:
Less than one year (45 securities)
$ 59 $ (3) 95 %
One year or longer (81 securities)
90 (8) 92 %
$ 149 $ (11) 93 %
When a decline in the value of a specific investment is considered to be other-than-temporary, an allowance for credit losses (impairment) is charged to earnings (accounted for as a realized loss). The determination of whether unrealized losses are other-than-temporary requires judgment based on subjective as well as objective factors as detailed in AFG's 2025 Form 10-K under Management's Discussion and Analysis - "Investments."
Based on its analysis, management believes AFG will recover its cost basis (net of any allowance) in the fixed maturity securities with unrealized losses and that AFG has the ability to hold the securities until they recover in value and had no intent to sell them at September 30, 2026. Although AFG has the ability to continue holding its fixed maturity investments with unrealized losses, its intent to hold them may change due to deterioration in the issuers' creditworthiness, decisions to lessen exposure to a particular issuer or industry, asset/liability management decisions, market movements, changes in views about appropriate asset allocation or the desire to offset taxable realized gains. Should AFG's ability or intent change regarding a particular security, a charge for impairment would likely be required. While it is not possible to accurately predict if or when a specific security will become impaired, increases in the allowance for credit losses could be material to results of operations in future periods. Significant declines in the fair value of AFG's investment portfolio could have a significant adverse effect on AFG's liquidity. For information on AFG's realized gains (losses) on securities, see "Results of Operations - Realized Gains (Losses) on Securities."
Uncertainties
Management believes that the areas posing the greatest risk of material loss are the adequacy of its insurance reserves and contingencies arising out of its former railroad and manufacturing operations. See Management's Discussion and Analysis - "Uncertainties - Asbestos and Environmental-related ("A&E") Insurance Reserves" in AFG's 2025 Form 10-K.
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
MANAGED INVESTMENT ENTITIES
Accounting standards require AFG to consolidate its investments in collateralized loan obligation ("CLO") entities that it manages and owns an interest in (in the form of debt). See Note A - "Accounting Policies - Managed Investment Entities" and Note F - "Managed Investment Entities" to the financial statements. The effect of consolidating these entities is shown in the tables below (in millions). The "Before CLO Consolidation" columns include AFG's investment and earnings in the CLOs on an unconsolidated basis.
CONDENSED CONSOLIDATING BALANCE SHEET
Before CLO
Consolidation 		Managed
Investment
Entities 		Consol.
Entries 		Consolidated
As Reported
September 30, 2026
Assets:
Cash and investments $ 17,506 $ - $ (155) (*) $ 17,351
Assets of managed investment entities - 4,556 - 4,556
Other assets 13,831 - - (*) 13,831
Total assets $ 31,337 $ 4,556 $ (155) $ 35,738
Liabilities:
Unpaid losses and loss adjustment expenses and unearned premiums
$ 20,864 $ - $ - $ 20,864
Liabilities of managed investment entities - 4,551 (150) (*) 4,401
Long-term debt and other liabilities 5,746 - - 5,746
Total liabilities 26,610 4,551 (150) 31,011
Shareholders' equity:
Common Stock and Capital surplus 1,521 5 (5) 1,521
Retained earnings 3,634 - - 3,634
Accumulated other comprehensive income (loss), net of tax (428) - - (428)
Total shareholders' equity 4,727 5 (5) 4,727
Total liabilities and shareholders' equity $ 31,337 $ 4,556 $ (155) $ 35,738
December 31, 2025
Assets:
Cash and investments $ 17,325 $ - $ (143) (*) $ 17,182
Assets of managed investment entities - 4,050 - 4,050
Other assets 11,410 - - (*) 11,410
Total assets $ 28,735 $ 4,050 $ (143) $ 32,642
Liabilities:
Unpaid losses and loss adjustment expenses and unearned premiums
$ 18,830 $ - $ - $ 18,830
Liabilities of managed investment entities
- 4,050 (143) (*) 3,907
Long-term debt and other liabilities
5,085 - - 5,085
Total liabilities 23,915 4,050 (143) 27,822
Shareholders' equity:
Common Stock and Capital surplus 1,513 - - 1,513
Retained earnings 3,357 - - 3,357
Accumulated other comprehensive income (loss), net of tax (50) - - (50)
Total shareholders' equity 4,820 - - 4,820
Total liabilities and shareholders' equity $ 28,735 $ 4,050 $ (143) $ 32,642
(*)Elimination of the fair value of AFG's investment in CLOs and related accrued interest.
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
Before CLO
Consol. (a) 		Managed
Investment
Entities 		Consol.
Entries 		Consolidated
As Reported
Three months ended September 30, 2026
Revenues:
Net earned premiums
$ 2,164 $ - $ - $ 2,164
Net investment income 360 - (4) (b) 356
Realized gains (losses) on:
Securities (35) - - (35)
Subsidiaries
- - - -
Income of managed investment entities:
Investment income - 71 - 71
Gain (loss) on change in fair value of assets/liabilities - 5 (7) (b) (2)
Other income 32 - (3) (c) 29
Total revenues 2,521 76 (14) 2,583
Costs and Expenses:
Insurance benefits and expenses 2,041 - - 2,041
Expenses of managed investment entities - 75 (13) (b)(c) 62
Interest charges on borrowed money and other expenses 121 - - 121
Total costs and expenses 2,162 75 (13) 2,224
Earnings before income taxes 359 1 (1) 359
Provision for income taxes 77 - - 77
Net earnings $ 282 $ 1 $ (1) $ 282
Three months ended September 30, 2025
Revenues:
Net earned premiums
$ 2,013 $ - $ - $ 2,013
Net investment income 211 - (6) (b) 205
Realized gains (losses) on:
Securities 12 - - 12
Subsidiaries 1 - - 1
Income of managed investment entities:
Investment income - 70 - 70
Gain (loss) on change in fair value of assets/liabilities - 3 (3) (b) -
Other income 33 - (3) (c) 30
Total revenues 2,270 73 (12) 2,331
Costs and Expenses:
Insurance benefits and expenses 1,884 - - 1,884
Expenses of managed investment entities - 72 (11) (b)(c) 61
Interest charges on borrowed money and other expenses 118 - - 118
Total costs and expenses 2,002 72 (11) 2,063
Earnings before income taxes 268 1 (1) 268
Provision for income taxes 53 - - 53
Net earnings $ 215 $ 1 $ (1) $ 215
(a)Includes income of $4 million and $6 million in the third quarter of 2026 and 2025, respectively, representing the change in fair value of AFG's CLO investments and $3 million of income in both the third quarter of 2026 and 2025 in CLO management fees earned.
(b)Elimination of the change in fair value of AFG's investments in the CLOs, including $10 million and $8 million in the third quarter of 2026 and 2025, respectively, in distributions recorded as interest expense by the CLOs.
(c)Elimination of management fees earned by AFG.
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
Before CLO
Consol. (a) 		Managed
Investment
Entities 		Consol.
Entries 		Consolidated
As Reported
Nine months ended September 30, 2026
Revenues:
Net earned premiums
$ 5,467 $ - $ - $ 5,467
Net investment income 764 - - (b) 764
Realized gains (losses) on securities (37) - - (37)
Income of managed investment entities:
Investment income - 207 - 207
Gain (loss) on change in fair value of assets/liabilities - 3 (24) (b) (21)
Other income 95 - (8) (c) 87
Total revenues 6,289 210 (32) 6,467
Costs and Expenses:
Insurance benefits and expenses 5,063 - - 5,063
Expenses of managed investment entities - 209 (31) (b)(c) 178
Interest charges on borrowed money and other expenses 312 - - 312
Total costs and expenses 5,375 209 (31) 5,553
Earnings before income taxes 914 1 (1) 914
Provision for income taxes 193 - - 193
Net earnings $ 721 $ 1 $ (1) $ 721
Nine months ended September 30, 2025
Revenues:
Net earned premiums
$ 5,240 $ - $ - $ 5,240
Net investment income 572 - (10) (b) 562
Realized gains (losses) on:
Securities 17 - - 17
Subsidiaries 1 - - 1
Income of managed investment entities:
Investment income - 214 - 214
Gain (loss) on change in fair value of assets/liabilities - 8 (15) (b) (7)
Other income 92 - (8) (c) 84
Total revenues 5,922 222 (33) 6,111
Costs and Expenses:
Insurance benefits and expenses 4,920 - - 4,920
Expenses of managed investment entities - 219 (30) (b)(c) 189
Interest charges on borrowed money and other expenses 308 - - 308
Total costs and expenses 5,228 219 (30) 5,417
Earnings before income taxes 694 3 (3) 694
Provision for income taxes 151 - - 151
Net earnings $ 543 $ 3 $ (3) $ 543
(a)Includes a loss of less than $1 million in the first nine months of 2026 and income of $10 million in the first nine months of 2025, representing the change in fair value of AFG's CLO investments and $8 million of income in both the first nine months of 2026 and 2025 in CLO management fees earned.
(b)Elimination of the change in fair value of AFG's investments in the CLOs, including $23 million and $22 million in the first nine months of 2026 and 2025, respectively, in distributions recorded as interest expense by the CLOs.
(c)Elimination of management fees earned by AFG.
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
RESULTS OF OPERATIONS
General
AFG's net earnings, determined in accordance with GAAP, include certain items that may not be indicative of its ongoing core operations. Core net operating earnings excludes realized gains (losses) on securities because such gains and losses are influenced significantly by financial markets, interest rates and the timing of sales. In addition, special charges related to coverage that AFG no longer writes, such as asbestos and environmental exposures, are excluded from core earnings.
The following table (in millions, except per share amounts) identifies non-core items and reconciles net earnings to core net operating earnings, a non-GAAP financial measure. AFG believes core net operating earnings is a useful tool for investors and analysts in analyzing ongoing operating trends and for management to evaluate financial performance against historical results because it believes this provides a more comparable measure of its continuing business.
Three months ended September 30, Nine months ended September 30,
2026 2025 2026 2025
Components of net earnings:
Core operating earnings before income taxes $ 418 $ 280 $ 975 $ 701
Pretax non-core items:
Realized gains (losses) on securities
(35) 12 (37) 17
Realized gain on subsidiaries
- 1 - 1
Special A&E charges
(24) (25) (24) (25)
Earnings before income taxes 359 268 914 694
Provision for income taxes:
Core operating earnings 89 56 206 146
Non-core items:
Realized gains (losses) on securities
(7) 2 (8) 3
Realized gain on subsidiaries
- - - -
Special A&E charges
(5) (5) (5) (5)
Other (*)
- - - 7
Total provision for income taxes 77 53 193 151
Net earnings $ 282 $ 215 $ 721 $ 543
Net earnings:
Core net operating earnings $ 329 $ 224 $ 769 $ 555
Realized gains (losses) on securities
(28) 10 (29) 14
Realized gain on subsidiaries
- 1 - 1
Special A&E charges
(19) (20) (19) (20)
Other (*)
- - - (7)
Net earnings $ 282 $ 215 $ 721 $ 543
Diluted per share amounts:
Core net operating earnings $ 3.97 $ 2.69 $ 9.26 $ 6.65
Realized gains (losses) on securities
(0.34) 0.12 (0.35) 0.17
Realized gain on subsidiaries
- 0.01 - 0.01
Special A&E charges
(0.23) (0.24) (0.23) (0.24)
Other (*)
- - - (0.09)
Net earnings $ 3.40 $ 2.58 $ 8.68 $ 6.50
(*)Adjustment to income tax expense related to the sale of subsidiaries in a prior year.
Net earnings were $282 million in the third quarter of 2026 compared to $215 million in the third quarter of 2025 reflecting higher core net operating earnings, partially offset by net realized losses on securities in the third quarter of 2026 compared to net realized gains on securities in the third quarter of 2025. Core net operating earnings in the third quarter of 2026 increased $105 million compared to the third quarter of 2025 reflecting higher net investment income.
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Net earnings were $721 million in the first nine months of 2026 compared to $543 million in the first nine months of 2025 reflecting higher core net operating earnings, partially offset by net realized losses on securities in the first nine months of 2026 compared to net realized gains on securities in the first nine months of 2025. Core net operating earnings increased $214 million compared to the first nine months of 2025 reflecting higher underwriting profit and higher net investment income.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2026 AND 2025
Segmented Statement of Earnings
AFG reports its operations as two segments: (i) Property and casualty insurance ("P&C") and (ii) Other, which includes holding company costs and income and expenses related to the managed investment entities ("MIEs").
AFG's net earnings, determined in accordance with GAAP, include certain items that may not be indicative of its ongoing core operations. The following tables for the three months ended September 30, 2026 and 2025 identify such items by segment and reconcile net earnings to core net operating earnings, a non-GAAP financial measure that AFG believes is a useful tool for investors and analysts in analyzing ongoing operating trends (in millions):
Other
P&C Consol. MIEs Holding Co., other and unallocated Total Non-core reclass GAAP Total
Three months ended September 30, 2026
Revenues:
Net earned premiums
$ 2,164 $ - $ - $ 2,164 $ - $ 2,164
Net investment income 289 (4) 71 356 - 356
Realized gains (losses) on securities
- - - - (35) (35)
Income of MIEs:
Investment income - 71 - 71 - 71
Gain (loss) on change in fair value of assets/liabilities
- (2) - (2) - (2)
Other income 3 (3) 29 29 - 29
Total revenues 2,456 62 100 2,618 (35) 2,583
Costs and Expenses:
Losses and loss adjustment expenses 1,470 - - 1,470 - 1,470
Commissions and other underwriting expenses 564 - 7 571 - 571
Interest charges on borrowed money - - 23 23 - 23
Expenses of MIEs - 62 - 62 - 62
Other expenses 16 - 58 74 24 98
Total costs and expenses 2,050 62 88 2,200 24 2,224
Earnings before income taxes 406 - 12 418 (59) 359
Provision for income taxes 85 - 4 89 (12) 77
Core Net Operating Earnings 321 - 8 329
Non-core earnings (loss) (*):
Realized gains (losses) on securities, net of tax
- - (28) (28) 28 -
Special A&E charge, net of tax
- - (19) (19) 19 -
Net Earnings $ 321 $ - $ (39) $ 282 $ - $ 282
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Other
P&C Consol. MIEs Holding Co., other and unallocated Total Non-core reclass GAAP Total
Three months ended September 30, 2025
Revenues:
Net earned premiums
$ 2,013 $ - $ - $ 2,013 $ - $ 2,013
Net investment income 205 (6) 6 205 - 205
Realized gains (losses) on:
Securities - - - - 12 12
Subsidiaries - - - - 1 1
Income of MIEs:
Investment income - 70 - 70 - 70
Gain (loss) on change in fair value of assets/liabilities
- - - - - -
Other income 6 (3) 27 30 - 30
Total revenues 2,224 61 33 2,318 13 2,331
Costs and Expenses:
Losses and loss adjustment expenses 1,355 - - 1,355 - 1,355
Commissions and other underwriting expenses 520 - 9 529 - 529
Interest charges on borrowed money - - 19 19 - 19
Expenses of MIEs - 61 - 61 - 61
Other expenses 21 - 53 74 25 99
Total costs and expenses 1,896 61 81 2,038 25 2,063
Earnings before income taxes 328 - (48) 280 (12) 268
Provision for income taxes 64 - (8) 56 (3) 53
Core Net Operating Earnings 264 - (40) 224
Non-core earnings (loss) (*):
Realized gains (losses) on securities, net of tax
- - 10 10 (10) -
Realized gain on subsidiaries, net of tax 1 - - 1 (1) -
Special A&E charge, net of tax - - (20) (20) 20 -
Net Earnings $ 265 $ - $ (50) $ 215 $ - $ 215
(*)See the reconciliation of core earnings to GAAP net earnings under "Results of Operations - General" for details on the tax impacts of these reconciling items.
Property and Casualty Insurance Segment - Results of Operations
Performance measures such as underwriting profit or loss and related combined ratios are often used by property and casualty insurers to help users of their financial statements better understand the company's performance. Underwriting profitability is measured by the combined ratio, which is a sum of the ratios of losses and loss adjustment expenses, and commissions and other underwriting expenses to premiums. A combined ratio under 100% indicates an underwriting profit. The combined ratio does not reflect net investment income, other income, other expenses or federal income taxes.
AFG's property and casualty insurance operations contributed $406 million in pretax earnings in the third quarter of 2026 compared to $328 million in the third quarter of 2025, an increase of $78 million (24%), reflecting higher net investment income.
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
The following table details AFG's earnings before income taxes from its property and casualty insurance operations for the three months ended September 30, 2026 and 2025 (dollars in millions):
Three months ended September 30,
2026 2025 % Change
Gross written premiums $ 3,959 $ 3,665 8 %
Reinsurance premiums ceded (1,505) (1,413) 7 %
Net written premiums 2,454 2,252 9 %
Change in unearned premiums (290) (239) 21 %
Net earned premiums 2,164 2,013 8 %
Loss and loss adjustment expenses 1,470 1,355 8 %
Commissions and other underwriting expenses 564 520 8 %
Underwriting gain 130 138 (6 %)
Net investment income 289 205 41 %
Other income and expenses, net (13) (15) (13 %)
Earnings before income taxes
$ 406 $ 328 24 %
Three months ended September 30,
2026 2025 Change
Combined Ratios:
Specialty lines
Loss and LAE ratio 67.8 % 67.2 % 0.6 %
Underwriting expense ratio 26.0 % 25.8 % 0.2 %
Combined ratio 93.8 % 93.0 % 0.8 %
Aggregate - including exited lines
Loss and LAE ratio 68.0 % 67.3 % 0.7 %
Underwriting expense ratio 26.0 % 25.8 % 0.2 %
Combined ratio 94.0 % 93.1 % 0.9 %
AFG reports the underwriting performance of its Specialty property and casualty insurance business in the following sub-segments: (i) Property and transportation, (ii) Specialty casualty and (iii) Specialty financial.
To understand the overall profitability of particular lines, the timing of claims payments and the related impact of investment income must be considered. Certain "short-tail" lines of business (primarily property coverages) generally have quick loss payouts, which reduce the time funds are held, thereby limiting investment income earned thereon. In contrast, "long-tail" lines of business (primarily liability coverages and workers' compensation) generally have payouts that are either structured over many years or take many years to settle, thereby significantly increasing investment income earned on related premiums received.
Gross Written Premiums
Gross written premiums ("GWP") increased $294 million (8%) compared to the third quarter of 2025. Detail of gross written premiums is shown below (dollars in millions):
Three months ended September 30,
2026 2025
GWP % GWP % % Change
Property and transportation $ 2,214 56 % $ 1,975 54 % 12 %
Specialty casualty 1,342 34 % 1,337 36 % - %
Specialty financial 403 10 % 353 10 % 14 %
$ 3,959 100 % $ 3,665 100 % 8 %
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Reinsurance Premiums Ceded
Reinsurance premiums ceded ("Ceded") as a percentage of gross written premiums decreased 1 percentage point compared to the third quarter of 2025. Detail of reinsurance premiums ceded is shown below (dollars in millions):
Three months ended September 30,
2026 2025 Change in
Ceded % of GWP Ceded % of GWP % of GWP
Property and transportation $ (1,021) 46 % $ (924) 47 % (1 %)
Specialty casualty (407) 30 % (423) 32 % (2 %)
Specialty financial (77) 19 % (66) 19 % - %
$ (1,505) 38 % $ (1,413) 39 % (1 %)
Net Written Premiums
Net written premiums ("NWP") increased $202 million (9%) compared to the third quarter of 2025. Detail of net written premiums is shown below (dollars in millions):
Three months ended September 30,
2026 2025
NWP % NWP % % Change
Property and transportation $ 1,193 49 % $ 1,051 47 % 14 %
Specialty casualty 935 38 % 914 40 % 2 %
Specialty financial 326 13 % 287 13 % 14 %
$ 2,454 100 % $ 2,252 100 % 9 %
Net Earned Premiums
Net earned premiums ("NEP") increased $151 million (8%) compared to the third quarter of 2025. Detail of net earned premiums is shown below (dollars in millions):
Three months ended September 30,
2026 2025
NEP % NEP % % Change
Property and transportation $ 1,026 48 % $ 935 47 % 10 %
Specialty casualty 831 38 % 810 40 % 3 %
Specialty financial 307 14 % 268 13 % 15 %
$ 2,164 100 % $ 2,013 100 % 8 %
Gross written premiums for the third quarter of 2026 increased $294 million (8%) compared to the third quarter of 2025 driven primarily by new business opportunities, a favorable renewal rate environment and strong policy retention. Overall average renewal rates increased approximately 5% in the third quarter of 2026. Excluding the workers' compensation businesses, renewal pricing increased approximately 6%.
Property and transportation Gross written premiums increased $239 million (12%) in the third quarter of 2026 compared to the third quarter of 2025. This increase was primarily attributable to growth in certain crop insurance products, along with new business opportunities and a favorable rate environment in several of the transportation businesses. Average renewal rates increased approximately 7% for this group in the third quarter of 2026. Reinsurance premiums ceded as a percentage of gross written premiums were comparable in the third quarter of 2026 and the third quarter of 2025.
Specialty casualty Gross written premiums increased $5 million in the third quarter of 2026 compared to the third quarter of 2025. The primary drivers of growth included new business opportunities, strong policy retention and higher rates in several Specialty casualty businesses, which were partially offset by non-renewals of under-performing accounts in certain targeted markets businesses. Average renewal rates increased approximately 4% for this group in the third quarter of 2026. Excluding the workers' compensation businesses, renewal rates for this group increased approximately 6%. Reinsurance premiums ceded as a percentage of gross written premiums decreased 2 percentage points in the third quarter of 2026 compared to the third quarter of 2025 reflecting lower premiums in the public sector and mergers and
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
acquisitions liability businesses, both of which cede a larger percentage of premiums than some of the other businesses in this sub-segment.
Specialty financial Gross written premiums increased $50 million (14%) in the third quarter of 2026 compared to the third quarter of 2025, due primarily to growth across the lender services businesses. Average renewal rates increased approximately 4% for this group in the third quarter of 2026. Reinsurance premiums ceded as a percentage of gross written premiums were comparable in the third quarter of 2026 and the third quarter of 2025.
Combined Ratio
The table below (dollars in millions) details the components of the combined ratio:
Three months ended September 30, Three months ended September 30,
2026 2025 Change 2026 2025
Property and transportation
Loss and LAE ratio 77.7 % 77.8 % (0.1 %)
Underwriting expense ratio 15.7 % 16.3 % (0.6 %)
Combined ratio 93.4 % 94.1 % (0.7 %)
Underwriting profit $ 68 $ 55
Specialty casualty
Loss and LAE ratio 64.8 % 66.8 % (2.0 %)
Underwriting expense ratio 30.1 % 29.0 % 1.1 %
Combined ratio 94.9 % 95.8 % (0.9 %)
Underwriting profit $ 42 $ 33
Specialty financial
Loss and LAE ratio 43.0 % 31.8 % 11.2 %
Underwriting expense ratio 49.5 % 49.3 % 0.2 %
Combined ratio 92.5 % 81.1 % 11.4 %
Underwriting profit $ 23 $ 51
Total Specialty
Loss and LAE ratio 67.8 % 67.2 % 0.6 %
Underwriting expense ratio 26.0 % 25.8 % 0.2 %
Combined ratio 93.8 % 93.0 % 0.8 %
Underwriting profit $ 133 $ 139
Aggregate - including exited lines
Loss and LAE ratio 68.0 % 67.3 % 0.7 %
Underwriting expense ratio 26.0 % 25.8 % 0.2 %
Combined ratio 94.0 % 93.1 % 0.9 %
Underwriting profit $ 130 $ 138
The Specialty property and casualty insurance operations generated an underwriting profit of $133 million in the third quarter of 2026 compared to $139 million in the third quarter of 2025, a decrease of $6 million (4%). Higher year-over-year underwriting profit in the Property and transportation and Specialty casualty groups was more than offset by lower underwriting profit in the Specialty financial group. Overall catastrophe losses were $23 million (1.0 points on the combined ratio) in the third quarter of 2026 compared to $23 million (1.2 points) in the third quarter of 2025.
Property and transportation Underwriting profit for this group was $68 million for the third quarter of 2026 compared to $55 million for the third quarter of 2025, an increase of $13 million (24%), reflecting higher underwriting profit in the agricultural and transportation businesses. Catastrophe losses were $4 million (0.4 points on the combined ratio) in both of the third quarters of 2026 and 2025.
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Specialty casualty Underwriting profit for this group was $42 million for the third quarter of 2026 compared to $33 million for the third quarter of 2025, an increase of $9 million (27%). Higher underwriting profit in the excess and surplus and targeted markets businesses was partially offset by lower levels of favorable prior year development in the workers' compensation businesses. Catastrophe losses were $3 million (0.4 points on the combined ratio) in the third quarter of 2026 compared to catastrophe losses of $8 million (1.0 points) in the third quarter of 2025.
Specialty financial Underwriting profit for this group was $23 million for the third quarter of 2026 compared to $51 million in the third quarter of 2025, a decrease of $28 million (55%). This decrease reflects an isolated large loss in the European operations and lower overall levels of favorable prior year development. Catastrophe losses were $16 million (5.2 points on the combined ratio) in the third quarter of 2026 compared to $11 million (4.1 points) in the third quarter of 2025.
Aggregate Aggregate underwriting results for AFG's property and casualty insurance segment includes adverse prior year development of $3 million in the third quarter of 2026 and $1 million in the third quarter of 2025 related to business outside of the Specialty group that AFG no longer writes.
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Losses and Loss Adjustment Expenses
The components of losses and LAE amounts and ratio are detailed below (dollars in millions):
Three months ended September 30,
Amount Ratio Change in
2026 2025 2026 2025 Ratio
Property and transportation
Current year, excluding catastrophe losses $ 816 $ 735 79.7 % 78.5 % 1.2 %
Prior accident years development (24) (11) (2.4 %) (1.1 %) (1.3 %)
Current year catastrophe losses including the impact of net reinstatement premiums 4 4 0.4 % 0.4 % - %
Property and transportation losses and LAE and ratio $ 796 $ 728 77.7 % 77.8 % (0.1 %)
Specialty casualty
Current year, excluding catastrophe losses $ 541 $ 534 65.0 % 65.9 % (0.9 %)
Prior accident years development (5) (1) (0.6 %) (0.1 %) (0.5 %)
Current year catastrophe losses including the impact of net reinstatement premiums 3 8 0.4 % 1.0 % (0.6 %)
Specialty casualty losses and LAE and ratio $ 539 $ 541 64.8 % 66.8 % (2.0 %)
Specialty financial
Current year, excluding catastrophe losses $ 120 $ 86 39.0 % 32.4 % 6.6 %
Prior accident years development (4) (12) (1.2 %) (4.7 %) 3.5 %
Current year catastrophe losses including the impact of net reinstatement premiums 16 11 5.2 % 4.1 % 1.1 %
Specialty financial losses and LAE and ratio $ 132 $ 85 43.0 % 31.8 % 11.2 %
Total Specialty
Current year, excluding catastrophe losses $ 1,477 $ 1,355 68.3 % 67.2 % 1.1 %
Prior accident years development (33) (24) (1.5 %) (1.2 %) (0.3 %)
Current year catastrophe losses including the impact of net reinstatement premiums 23 23 1.0 % 1.2 % (0.2 %)
Total Specialty losses and LAE and ratio $ 1,467 $ 1,354 67.8 % 67.2 % 0.6 %
Aggregate - including exited lines
Current year, excluding catastrophe losses $ 1,477 $ 1,355 68.3 % 67.2 % 1.1 %
Prior accident years development (30) (23) (1.4 %) (1.1 %) (0.3 %)
Current year catastrophe losses including the impact of net reinstatement premiums 23 23 1.1 % 1.2 % (0.1 %)
Aggregate losses and LAE and ratio $ 1,470 $ 1,355 68.0 % 67.3 % 0.7 %
Current accident year losses and LAE, excluding catastrophe losses
The current accident year loss and LAE ratio, excluding catastrophe losses, for AFG's Specialty property and casualty insurance operations was 68.3% for the third quarter of 2026 compared to 67.2% for the third quarter of 2025, an increase of 1.1 percentage points.
Property and transportation The 1.2 percentage points increase in the loss and LAE ratio for the current year, excluding catastrophe losses, reflects growth in the crop and transportation businesses, both of which have a higher loss and LAE ratio than some of the other businesses in this sub-segment and higher claim severity in the ocean marine business.
Specialty casualty The 0.9 percentage points decrease in the loss and LAE ratio for the current year, excluding catastrophe losses, reflects lower claim severity in the excess and surplus lines businesses.
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Specialty financial The 6.6 percentage points increase in the loss and LAE ratio for the current year, excluding catastrophe losses, reflects a large isolated loss in AFG's European operations, partially offset by growth in the financial institutions business, which has a lower loss and LAE ratio than some of the other businesses in this sub-segment.
Net prior year reserve development
AFG's Specialty property and casualty insurance operations recorded net favorable reserve development related to prior accident years of $33 million in the third quarter of 2026 compared to $24 million in the third quarter of 2025, an increase of $9 million (38%).
Property and transportation Net favorable reserve development of $24 million in the third quarter of 2026 reflects lower than anticipated losses in the crop business and lower than expected claim severity in the inland marine and commercial auto businesses. Net favorable reserve development of $11 million in the third quarter of 2025 reflects lower than anticipated claim severity in the inland marine, aviation and ocean marine businesses, partially offset by higher than expected claim severity in the agribusiness operations.
Specialty casualty Net favorable reserve development of $5 million in the third quarter of 2026 reflects lower than anticipated claim severity in the workers' compensation businesses, partially offset by higher than anticipated claim severity in certain social inflation exposed businesses. Net favorable reserve development of $1 million in the third quarter of 2025 reflects lower than expected claim severity in the workers' compensation businesses, partially offset by higher than anticipated claim severity in the excess and surplus and social services businesses.
Specialty financial Net favorable reserve development of $4 million in the third quarter of 2026 reflects lower than anticipated claim severity in the fidelity and crime and surety businesses. Net favorable reserve development of $12 million in the third quarter of 2025 reflects lower than expected claim frequency in the financial institutions business and lower than anticipated claim severity in the surety and fidelity businesses.
Asbestos and environmental reserves During the third quarter of 2026, AFG completed an in-depth internal review of its asbestos and environmental exposures relating to the run-off operations of its property and casualty insurance segment and its exposures related to former railroad and manufacturing operations and sites. AFG annually conducts a comprehensive review of its asbestos and environmental reserves. In connection with its annual reviews, AFG engages with outside counsel and, as appropriate, engineering and consulting firms and specialty actuarial firms.
During the 2026 internal review, no new trends were identified, and recent claims activity was generally consistent with AFG's expectations resulting from the most recent external study in 2020 and subsequent annual in-depth internal reviews. As a result, and consistent with the internal review in the third quarter of 2025, the 2026 review resulted in no net change to AFG's property and casualty insurance segment's asbestos and environmental reserves. See Management's Discussion and Analysis - "Uncertainties - Asbestos and Environmental-related ("A&E") Insurance Reserves" in AFG's 2025 Form 10-K.
At September 30, 2026, the property and casualty insurance segment's insurance reserves include A&E reserves of $332 million, net of reinsurance recoverables. At September 30, 2026, the property and casualty insurance segment's three-year survival ratios compare favorably with industry survival ratios published by S&P Global Market Intelligence (as of December 31, 2025) as detailed in the following table:
Property and Casualty Insurance Reserves
Three-Year Survival Ratio (Times Paid Losses)
Asbestos Environmental Total A&E
AFG (9/30/2026) 18.8 37.7 24.0
Industry (12/31/2025) 7.8 8.3 8.0
In addition, the 2026 and 2025 internal reviews encompassed reserves for asbestos and environmental exposures of AFG's former railroad and manufacturing operations. For a discussion of the $24 million and $25 million pretax non-core special charge increases in AFG's liabilities for those operations recorded in the third quarter of 2026 and the third quarter of 2025, respectively, see "Special A&E Charges" under "Results of Operations - Holding Company, Other and Unallocated," for the quarters ended September 30, 2026 and 2025.
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Aggregate Aggregate net prior accident years reserve development for AFG's property and casualty insurance segment includes net adverse reserve development of $3 million in the third quarter of 2026 and $1 million in the third quarter of 2025 related to business outside of the Specialty group that AFG no longer writes.
Catastrophe losses
AFG generally seeks to reduce its exposure to catastrophes through individual risk selection, including minimizing coastal and known fault-line exposures, and the purchase of reinsurance. AFG currently has comprehensive property catastrophe reinsurance coverage in place (including a $70 million per occurrence net retention) for losses up to $625 million in the vast majority of circumstances. This coverage consists of a combination of $205 million from traditional reinsurance and $350 million of coverage through a fully collateralized catastrophe bond. Based on data available at December 31, 2025, management estimates that AFG's exposure to a catastrophic earthquake or windstorm that industry models indicate should statistically occur once in every 500 years is less than 3% of AFG's Shareholders' Equity.
Catastrophe losses of $23 million in the third quarter of 2026 resulted primarily from convective storms in multiple regions of the United States. Catastrophe losses of $23 million in the third quarter of 2025 resulted primarily from storms in multiple regions of the United States.
Commissions and Other Underwriting Expenses
Commissions and other underwriting expenses ("U/W Exp") increased $44 million (8%) compared to the third quarter of 2025. AFG's underwriting expense ratio, calculated as commissions and other underwriting expenses divided by net premiums earned, increased 0.2 percentage points compared to the third quarter of 2025. Detail of commissions and other underwriting expenses and underwriting expense ratios is shown below (dollars in millions):
Three months ended September 30,
2026 2025 Change in
U/W Exp % of NEP U/W Exp % of NEP % of NEP
Property and transportation $ 162 15.7 % $ 152 16.3 % (0.6 %)
Specialty casualty 250 30.1 % 236 29.0 % 1.1 %
Specialty financial 152 49.5 % 132 49.3 % 0.2 %
$ 564 26.0 % $ 520 25.8 % 0.2 %
Property and transportation Commissions and other underwriting expenses as a percentage of net earned premiums decreased 0.6 percentage points in the third quarter of 2026 compared to the third quarter of 2025. This decrease reflects growth in the crop and commercial auto businesses, both of which have a lower commissions and other underwriting expense ratio than some of the other businesses in this sub-segment, partially offset by higher costs for software and other expenses associated with certain initiatives in IT security, customer experience and data analytics.
Specialty casualty Commissions and other underwriting expenses as a percentage of net earned premiums increased 1.1 percentage points in the third quarter of 2026 compared to the third quarter of 2025 reflecting lower ceding commissions in certain excess and surplus businesses resulting from changes in reinsurance treaties, higher profit-based commissions to agents in certain targeted markets businesses and higher costs for software and other expenses associated with certain initiatives in IT security, customer experience and data analytics.
Specialty financial Commissions and other underwriting expenses as a percentage of net earned premiums increased 0.2 percentage points in the third quarter of 2026 compared to the third quarter of 2025 due primarily to higher costs for software and other expenses associated with certain initiatives in IT security, customer experience and data analytics and the impact of changes in the mix of business.
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Property and Casualty Net Investment Income
Net investment income in AFG's property and casualty insurance operations increased $84 million (41%) compared to the third quarter of 2025. The average invested assets and overall yield earned on investments held by AFG's property and casualty insurance operations are provided below (dollars in millions):
Three months ended September 30,
2026 2025 Change % Change
Net investment income:
Net investment income, excluding alternative investments $ 241 $ 162 $ 79 49 %
Alternative investments 48 43 5 12 %
Total net investment income $ 289 $ 205 $ 84 41 %
Average invested assets (at amortized cost) $ 17,218 $ 16,095 $ 1,123 7 %
Yield (net investment income as a % of average invested assets):
Excluding alternative investments 6.71 % 4.87 % 1.84 %
Alternative investments 6.74 % 6.18 % 0.56 %
Overall P&C portfolio 6.71 % 5.09 % 1.62 %
Yield on fixed maturities (before investment expenses)
5.15 % 5.12 % 0.03 %
The increase in the property and casualty insurance segment's net investment income for the third quarter of 2026 compared to the third quarter of 2025 is due primarily to the sale of Charleston Harbor Resort and Marina ("Charleston Harbor") in August 2026, which generated $126 million in pretax net investment income. Since a property and casualty subsidiary and AFG (parent) each owned half of the property, these earnings are split evenly between the property and casualty segment and the holding company. Excluding the segment's $63 million share of the income from the Charleston Harbor sale, the property and casualty insurance segment's net investment income for the third quarter of 2026 increased $21 million (10%) reflecting higher average invested assets and improved results from alternative investments.
Property and Casualty Other Income and Expenses, Net
Other income and expenses, net for AFG's property and casualty insurance operations improved $2 million (13%) compared to the third quarter of 2025. The table below details the items included in other income and expenses, net for AFG's property and casualty insurance operations (in millions):
Three months ended September 30,
2026 2025
Other income
$ 3 $ 6
Other expenses:
Amortization of intangibles 5 5
Interest expense on funds withheld 10 11
Other 1 5
Total other expenses 16 21
Other income and expenses, net $ (13) $ (15)
The decrease in other income in the third quarter of 2026 compared to the third quarter of 2025 reflects a death benefit received on a company-owned life insurance policy in the third quarter of 2025.
Holding Company, Other and Unallocated - Results of Operations
AFG's net GAAP pretax loss outside of its property and casualty insurance segment (excluding realized gains and losses) totaled $12 million in the third quarter of 2026 compared to $73 million in the third quarter of 2025, a decrease of $61 million (84%). AFG's net core pretax income outside of its property and casualty insurance segment totaled $12 million in the third quarter of 2026 compared to a loss of $48 million in the third quarter of 2025, a change of $60 million (125%).
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
The following table details AFG's GAAP and core income (loss) before income taxes from operations outside of its property and casualty insurance segment for the three months ended September 30, 2026 and 2025 (dollars in millions):
Three months ended September 30,
2026 2025 % Change
Revenues:
Net investment income, excluding sale of Charleston Harbor $ 8 $ 6 33 %
Net investment income - sale of Charleston Harbor (a) 63 - - %
Other income - P&C fees
25 23 9 %
Other income
4 4 - %
Total revenues
100 33 203 %
Costs and Expenses:
P&C - loss adjustment and underwriting expenses
7 9 (22 %)
Other expense - expenses associated with P&C fees
18 14 29 %
Other expenses (b) 40 39 3 %
Costs and expenses, excluding interest charges on borrowed money
65 62 5 %
Income (loss) before income taxes, excluding realized gains and losses and interest charges on borrowed money 35 (29) (221 %)
Interest charges on borrowed money
23 19 21 %
Core income (loss) before income taxes, excluding realized gains and losses 12 (48) (125 %)
Pretax non-core special A&E charge
(24) (25) (4 %)
GAAP loss before income taxes, excluding realized gains and losses $ (12) $ (73) (84 %)
(a)AFG (parent)'s share of the net investment income from the August 2026 sale of Charleston Harbor.
(b)Excludes pretax non-core special A&E charges of $24 million and $25 million in the third quarters of 2026 and 2025, respectively.
Holding Company and Other - Net Investment Income
AFG recorded net investment income on investments held outside of its property and casualty insurance segment of $71 million in the third quarter of 2026 compared to $6 million in the third quarter of 2025, an increase of $65 million due primarily to the income from the sale of Charleston Harbor in the third quarter of 2026. Excluding the income from the sale of Charleston Harbor, net investment income on investments held outside AFG's property and casualty insurance segment increased $2 million (33%) in the third quarter of 2026 compared to 2025.
Holding Company and Other - P&C Fees and Related Expenses
Summit, a workers' compensation insurance subsidiary, collects fees from a small group of unaffiliated insurers for providing underwriting, policy administration and claims services. In addition, certain of AFG's property and casualty insurance businesses collect fees from customers for ancillary services such as workplace safety programs and premium financing. In the third quarter of 2026, AFG collected $25 million in fees for these services compared to $23 million in the third quarter of 2025. Management views this fee income, net of expenses incurred to generate such fees of $18 million in the third quarter of 2026 and $14 million in the third quarter 2025, as a reduction in the cost of underwriting its property and casualty insurance policies. The expenses related to providing such services are embedded in property and casualty underwriting and claims servicing expenses. Consistent with internal management reporting, these fees and the related expenses are netted and recorded as a reduction of commissions and other underwriting expenses and loss adjustment expenses in AFG's segmented results.
Holding Company and Other - Other Income
Other income in the table above includes $3 million in both the third quarters of 2026 and 2025 in management fees paid to AFG by the AFG-managed CLOs (AFG's consolidated managed investment entities). The management fees are eliminated in consolidation - see the other income line in the Consolidate MIEs column under "Results of Operations - Segmented Statement of Earnings."
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Holding Company and Other - Interest Charges on Borrowed Money
AFG's holding companies and other operations outside of its property and casualty insurance segment recorded interest expense of $23 million in the third quarter of 2026 compared to $19 million in the third quarter of 2025, an increase of $4 million (21%), reflecting the issuance of $350 million principal amount of 5.00% Senior Notes in September 2025.
Holding Company and Other - Special A&E Charges
During the third quarters of 2026 and 2025, AFG performed in-depth internal reviews of A&E exposures as discussed under "Asbestos and environmental reserves" under "Results of Operations - Property and Casualty Insurance Segment - Net prior year reserve development." As a result of the 2026 and 2025 reviews, AFG's holding companies and other operations outside of its property and casualty insurance operations recorded pretax special non-core A&E charges of $24 million in the third quarter of 2026 and $25 million in the third quarter of 2025 to increase liabilities related to the A&E exposures of AFG's former railroad and manufacturing operations. The charges in both periods reflect increases in the anticipated scope and costs of investigation and remediation at a limited number of sites.
Realized Gains (Losses) on Securities
AFG's realized gains (losses) on securities were net losses of $35 million in the third quarter of 2026 compared to net gains of $12 million in the third quarter of 2025, a change of $47 million (392%). Realized gains (losses) on securities consisted of the following (in millions):
Three months ended September 30,
2026 2025
Realized gains (losses) before impairment allowances:
Disposals $ (1) $ (1)
Change in the fair value of equity securities (6) 13
Change in the fair value of derivatives (6) 1
(13) 13
Change in allowance for impairments on securities (22) (1)
Realized gains (losses) on securities $ (35) $ 12
The $6 million net realized loss from the change in the fair value of equity securities in the third quarter of 2026 includes losses of $6 million on investments in banks and financing companies and $4 million on investments in media companies, partially offset by gains of $4 million on investments in technology companies. The $13 million net realized gain from the change in the fair value of equity securities in the third quarter of 2025 includes gains of $11 million on investments in media companies and $6 million on investments in banks and financing companies, partially offset by losses of $10 million on investments in manufacturing companies.
The $22 million change in allowance for impairments on securities in the third quarter of 2026 relates primarily to an allowance recorded on a mortgage loan.
Consolidated Income Taxes
AFG's consolidated provision for income taxes was $77 million for the third quarter of 2026 compared to $53 million for the third quarter of 2025, an increase of $24 million (45%). See Note J - "Income Taxes" to the financial statements for an analysis of items affecting AFG's effective tax rate.
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2026 AND 2025
Segmented Statement of Earnings
AFG reports its operations as two segments: (i) Property and casualty insurance ("P&C") and (ii) Other, which includes holding company costs and income and expenses related to the managed investment entities ("MIEs").
AFG's net earnings, determined in accordance with GAAP, include certain items that may not be indicative of its ongoing core operations. The following tables for the nine months ended September 30, 2026 and 2025 identify such items by segment and reconcile net earnings to core net operating earnings, a non-GAAP financial measure that AFG believes is a useful tool for investors and analysts in analyzing ongoing operating trends (in millions):
Other
P&C Consol. MIEs Holding Co., other and unallocated Total Non-core reclass GAAP Total
Nine months ended September 30, 2026
Revenues:
Net earned premiums
$ 5,467 $ - $ - $ 5,467 $ - $ 5,467
Net investment income 678 - 86 764 - 764
Realized gains (losses) on securities - - - - (37) (37)
Income of MIEs:
Investment income - 207 - 207 - 207
Gain (loss) on change in fair value of assets/liabilities
- (21) - (21) - (21)
Other income 10 (8) 85 87 - 87
Total revenues 6,155 178 171 6,504 (37) 6,467
Costs and Expenses:
Losses and loss adjustment expenses 3,376 - - 3,376 - 3,376
Commissions and other underwriting expenses 1,663 - 24 1,687 - 1,687
Interest charges on borrowed money - - 70 70 - 70
Expenses of MIEs - 178 - 178 - 178
Other expenses 51 - 167 218 24 242
Total costs and expenses 5,090 178 261 5,529 24 5,553
Earnings before income taxes 1,065 - (90) 975 (61) 914
Provision for income taxes 219 - (13) 206 (13) 193
Core Net Operating Earnings 846 - (77) 769
Non-core earnings (loss) (*):
Realized gains (losses) on securities, net of tax
- - (29) (29) 29 -
Special A&E charge, net of tax
- - (19) (19) 19 -
Net Earnings $ 846 $ - $ (125) $ 721 $ - $ 721
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Other
P&C Consol. MIEs Holding Co., other and unallocated Total Non-core reclass GAAP Total
Nine months ended September 30, 2025
Revenues:
Net earned premiums
$ 5,240 $ - $ - $ 5,240 $ - $ 5,240
Net investment income 554 (10) 18 562 - 562
Realized gains (losses) on:
Securities - - - - 17 17
Subsidiaries - - - - 1 1
Income of MIEs:
Investment income - 214 - 214 - 214
Gain (loss) on change in fair value of assets/liabilities
- (7) - (7) - (7)
Other income 9 (8) 83 84 - 84
Total revenues 5,803 189 101 6,093 18 6,111
Costs and Expenses:
Losses and loss adjustment expenses 3,327 - - 3,327 - 3,327
Commissions and other underwriting expenses 1,568 - 25 1,593 - 1,593
Interest charges on borrowed money - - 57 57 - 57
Expenses of MIEs - 189 - 189 - 189
Other expenses 61 - 165 226 25 251
Total costs and expenses 4,956 189 247 5,392 25 5,417
Earnings before income taxes 847 - (146) 701 (7) 694
Provision for income taxes 172 - (26) 146 5 151
Core Net Operating Earnings 675 - (120) 555
Non-core earnings (loss) (*):
Realized gains (losses) on securities, net of tax
- - 14 14 (14) -
Realized gain on subsidiaries, net of tax 1 - - 1 (1) -
Special A&E charge, net of tax
- - (20) (20) 20 -
Other
- - (7) (7) 7 -
Net Earnings $ 676 $ - $ (133) $ 543 $ - $ 543
(*)See the reconciliation of core earnings to GAAP net earnings under "Results of Operations - General" for details on the tax impacts of these reconciling items.
Property and Casualty Insurance Segment - Results of Operations
AFG's property and casualty insurance operations contributed $1.07 billion in pretax earnings in the first nine months of 2026 compared to $847 million in the first nine months of 2025, an increase of $218 million (26%), reflecting higher net investment income and higher underwriting profit.
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
The following table details AFG's earnings before income taxes from its property and casualty insurance operations for the nine months ended September 30, 2026 and 2025 (dollars in millions):
Nine months ended September 30,
2026 2025 % Change
Gross written premiums $ 9,244 $ 8,609 7 %
Reinsurance premiums ceded (3,211) (2,943) 9 %
Net written premiums 6,033 5,666 6 %
Change in unearned premiums (566) (426) 33 %
Net earned premiums 5,467 5,240 4 %
Loss and loss adjustment expenses 3,376 3,327 1 %
Commissions and other underwriting expenses 1,663 1,568 6 %
Underwriting gain 428 345 24 %
Net investment income 678 554 22 %
Other income and expenses, net (41) (52) (21 %)
Earnings before income taxes
$ 1,065 $ 847 26 %
Nine months ended September 30,
2026 2025 Change
Combined Ratios:
Specialty lines
Loss and LAE ratio 61.6 % 63.4 % (1.8 %)
Underwriting expense ratio 30.4 % 29.9 % 0.5 %
Combined ratio 92.0 % 93.3 % (1.3 %)
Aggregate - including exited lines
Loss and LAE ratio 61.8 % 63.5 % (1.7 %)
Underwriting expense ratio 30.4 % 29.9 % 0.5 %
Combined ratio 92.2 % 93.4 % (1.2 %)
AFG reports the underwriting performance of its Specialty property and casualty insurance business in the following sub-segments: (i) Property and transportation, (ii) Specialty casualty and (iii) Specialty financial.
Gross Written Premiums
Gross written premiums ("GWP") increased $635 million (7%) compared to the first nine months of 2025. Detail of gross written premiums is shown below (dollars in millions):
Nine months ended September 30,
2026 2025
GWP % GWP % % Change
Property and transportation $ 4,564 49 % $ 4,119 48 % 11 %
Specialty casualty 3,550 39 % 3,467 40 % 2 %
Specialty financial 1,130 12 % 1,023 12 % 10 %
$ 9,244 100 % $ 8,609 100 % 7 %
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Reinsurance Premiums Ceded
Reinsurance premiums ceded ("Ceded") as a percentage of gross written premiums increased 1.0 percentage points compared to the first nine months of 2025. Detail of reinsurance premiums ceded is shown below (dollars in millions):
Nine months ended September 30,
2026 2025 Change in
Ceded % of GWP Ceded % of GWP % of GWP
Property and transportation $ (1,978) 43 % $ (1,746) 42 % 1 %
Specialty casualty (1,014) 29 % (1,016) 29 % - %
Specialty financial (219) 19 % (181) 18 % 1 %
$ (3,211) 35 % $ (2,943) 34 % 1 %
Net Written Premiums
Net written premiums ("NWP") increased $367 million (6%) compared to the first nine months of 2025. Detail of net written premiums is shown below (dollars in millions):
Nine months ended September 30,
2026 2025
NWP % NWP % % Change
Property and transportation $ 2,586 43 % $ 2,373 42 % 9 %
Specialty casualty 2,536 42 % 2,451 43 % 3 %
Specialty financial 911 15 % 842 15 % 8 %
$ 6,033 100 % $ 5,666 100 % 6 %
Net Earned Premiums
Net earned premiums ("NEP") increased $227 million (4%) compared to the first nine months of 2025. Detail of net earned premiums is shown below (dollars in millions):
Nine months ended September 30,
2026 2025
NEP % NEP % % Change
Property and transportation $ 2,142 39 % $ 2,011 38 % 7 %
Specialty casualty 2,444 45 % 2,403 46 % 2 %
Specialty financial 881 16 % 826 16 % 7 %
$ 5,467 100 % $ 5,240 100 % 4 %
Gross written premiums for the first nine months of 2026 increased $635 million (7%) compared to the first nine months of 2025. The Specialty property and casualty insurance operations continue to achieve year-over-year premium growth as a result of new business opportunities, a favorable renewal rate environment, strong policy retention and increased exposures. Overall average renewal rates increased approximately 4% in the first nine months of 2026. Excluding the workers' compensation businesses, renewal pricing increased approximately 5%.
Property and transportation Gross written premiums increased $445 million (11%) in the first nine months of 2026 compared to the first nine months of 2025. This increase was due primarily to growth in certain crop insurance products, and to a lesser extent, new business opportunities, higher exposures and a favorable rate environment in several of the transportation businesses. Average renewal rates increased approximately 7% for this group in the first nine months of 2026. Reinsurance premiums ceded as a percentage of gross written premiums in the first nine months of 2026 were comparable to the first nine months of 2025.
Specialty casualty Gross written premiums increased $83 million (2%) in the first nine months of 2026 compared to the first nine months of 2025, reflecting new business opportunities in the workers' compensation businesses and the general liability businesses focused on energy, construction and environmental risks and new business opportunities and favorable renewal pricing in the excess and surplus businesses. Average renewal rates increased approximately 3% for this group in the first nine months of 2026. Excluding the workers' compensation businesses, renewal rates for this group increased approximately 5%. Reinsurance premiums ceded as a percentage of gross written premiums in the first nine months of 2026 were comparable to the first nine months of 2025.
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Specialty financial Gross written premiums increased $107 million (10%) in the first nine months of 2026 compared to the first nine months of 2025, due primarily to growth across the lender services businesses. Average renewal rates increased approximately 1% for this group in the first nine months of 2026. Reinsurance premiums ceded as a percentage of gross written premiums increased 1 percentage point in the first nine months of 2026 compared to the first nine months of 2025, reflecting higher cessions of catastrophe exposed business in the financial institutions business.
Combined Ratio
The table below (dollars in millions) details the components of the combined ratio:
Nine months ended September 30, Nine months ended September 30,
2026 2025 Change 2026 2025
Property and transportation
Loss and LAE ratio 68.5 % 70.9 % (2.4 %)
Underwriting expense ratio 22.7 % 23.2 % (0.5 %)
Combined ratio 91.2 % 94.1 % (2.9 %)
Underwriting profit $ 190 $ 119
Specialty casualty
Loss and LAE ratio 64.6 % 66.3 % (1.7 %)
Underwriting expense ratio 30.3 % 29.4 % 0.9 %
Combined ratio 94.9 % 95.7 % (0.8 %)
Underwriting profit $ 121 $ 102
Specialty financial
Loss and LAE ratio 36.8 % 37.1 % (0.3 %)
Underwriting expense ratio 49.4 % 47.7 % 1.7 %
Combined ratio 86.2 % 84.8 % 1.4 %
Underwriting profit $ 122 $ 126
Total Specialty
Loss and LAE ratio 61.6 % 63.4 % (1.8 %)
Underwriting expense ratio 30.4 % 29.9 % 0.5 %
Combined ratio 92.0 % 93.3 % (1.3 %)
Underwriting profit $ 433 $ 347
Aggregate - including exited lines
Loss and LAE ratio 61.8 % 63.5 % (1.7 %)
Underwriting expense ratio 30.4 % 29.9 % 0.5 %
Combined ratio 92.2 % 93.4 % (1.2 %)
Underwriting profit $ 428 $ 345
The Specialty property and casualty insurance operations generated an underwriting profit of $433 million for the first nine months of 2026 compared to $347 million for the first nine months of 2025, an increase of $86 million (25%), reflecting higher year-over-year underwriting profit in the Property and transportation and Specialty casualty groups. Overall catastrophe losses were $89 million (1.6 points on the combined ratio) in the first nine months of 2026 compared to catastrophe losses of $133 million (2.5 points) in the first nine months of 2025.
Property and transportation Underwriting profit for this group was $190 million for the first nine months of 2026 compared to $119 million for the first nine months of 2025, an increase of $71 million (60%), reflecting higher underwriting profit in the agricultural and transportation businesses. Catastrophe losses were $28 million (1.3 points on the combined ratio) in the first nine months of 2026 compared to $26 million (1.3 points) in the first nine months of 2025.
Specialty casualty Underwriting profit for this group was $121 million for the first nine months of 2026 compared to $102 million for the first nine months of 2025, an increase of $19 million (19%). Higher underwriting profit in the excess and surplus and targeted markets businesses along with higher underwriting profit in the general liability businesses focused on energy, construction and environmental risks was partially offset by lower levels of favorable prior year development in the workers' compensation businesses. Catastrophe losses were $23 million (0.8 points on the combined
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
ratio) in the first nine months of 2026 compared to catastrophe losses of $42 million (1.7 points) in the first nine months of 2025.
Specialty financial Underwriting profit for this group was $122 million for the first nine months of 2026 compared to $126 million for the first nine months of 2025, a decrease of $4 million (3%). Higher underwriting profit in the financial institutions and fidelity and crime businesses was more than offset by a large isolated loss in the European operations and lower levels of favorable prior year development in certain businesses. Catastrophe losses were $38 million (4.4 points on the combined ratio) in the first nine months of 2026 compared to $65 million (7.9 points) in the first nine months of 2025.
Aggregate Aggregate underwriting results for AFG's property and casualty insurance segment includes adverse prior year development of $5 million in the first nine months of 2026 and $2 million in the first nine months of 2025 related to business outside of the Specialty group that AFG no longer writes.
Losses and Loss Adjustment Expenses
The components of losses and LAE amounts and ratio are detailed below (dollars in millions):
Nine months ended September 30,
Amount Ratio Change in
2026 2025 2026 2025 Ratio
Property and transportation
Current year, excluding catastrophe losses $ 1,551 $ 1,443 72.5 % 71.7 % 0.8 %
Prior accident years development (113) (43) (5.3 %) (2.1 %) (3.2 %)
Current year catastrophe losses including the impact of net reinstatement premiums 28 26 1.3 % 1.3 % - %
Property and transportation losses and LAE and ratio $ 1,466 $ 1,426 68.5 % 70.9 % (2.4 %)
Specialty casualty
Current year, excluding catastrophe losses $ 1,564 $ 1,530 64.0 % 63.7 % 0.3 %
Prior accident years development (6) 21 (0.2 %) 0.9 % (1.1 %)
Current year catastrophe losses including the impact of net reinstatement premiums 23 42 0.8 % 1.7 % (0.9 %)
Specialty casualty losses and LAE and ratio $ 1,581 $ 1,593 64.6 % 66.3 % (1.7 %)
Specialty financial
Current year, excluding catastrophe losses $ 327 $ 275 37.1 % 33.4 % 3.7 %
Prior accident years development (41) (34) (4.7 %) (4.2 %) (0.5 %)
Current year catastrophe losses including the impact of net reinstatement premiums 38 65 4.4 % 7.9 % (3.5 %)
Specialty financial losses and LAE and ratio $ 324 $ 306 36.8 % 37.1 % (0.3 %)
Total Specialty
Current year, excluding catastrophe losses $ 3,442 $ 3,248 62.9 % 62.0 % 0.9 %
Prior accident years development (160) (56) (2.9 %) (1.1 %) (1.8 %)
Current year catastrophe losses including the impact of net reinstatement premiums 89 133 1.6 % 2.5 % (0.9 %)
Total Specialty losses and LAE and ratio $ 3,371 $ 3,325 61.6 % 63.4 % (1.8 %)
Aggregate - including exited lines
Current year, excluding catastrophe losses $ 3,442 $ 3,248 62.9 % 62.0 % 0.9 %
Prior accident years development (155) (54) (2.8 %) (1.0 %) (1.8 %)
Current year catastrophe losses including the impact of net reinstatement premiums 89 133 1.7 % 2.5 % (0.8 %)
Aggregate losses and LAE and ratio $ 3,376 $ 3,327 61.8 % 63.5 % (1.7 %)
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Current accident year losses and LAE, excluding catastrophe losses
The current accident year loss and LAE ratio, excluding catastrophe losses, for AFG's Specialty property and casualty insurance operations was 62.9% for the first nine months of 2026 compared to 62.0% for the first nine months of 2025, an increase of 0.9 percentage points.
Property and transportation The 0.8 percentage points increase in the loss and LAE ratio for the current year, excluding catastrophe losses, reflects growth in the crop and transportation businesses, both of which have a higher loss and LAE ratio than some of the other businesses in this sub-segment, partially offset by lower claim frequency in the commercial auto businesses and lower claim severity in the aviation business.
Specialty casualty The 0.3 percentage points increase in the loss and LAE ratio for the current year, excluding catastrophe losses, reflects growth in the workers' compensation and public sector businesses, both of which have a higher loss and LAE ratio than some of the other businesses in this sub-segment, and a decrease in net earned premiums in the executive liability and certain excess and surplus lines businesses, both of which have a lower loss and LAE ratio than some of the other businesses in this sub-segment, partially offset by lower claim severity in the excess and surplus businesses.
Specialty financial The 3.7 percentage points increase in the loss and LAE ratio for the current year, excluding catastrophe losses, reflects a large isolated loss in AFG's European operations, partially offset by growth in the financial institutions business, which has a lower loss and LAE ratio than some of the other businesses in this sub-segment.
Net prior year reserve development
AFG's Specialty property and casualty insurance operations recorded net favorable reserve development related to prior accident years of $160 million in the first nine months of 2026 compared to $56 million in the first nine months of 2025, an increase of $104 million (186%).
Property and transportation Net favorable reserve development of $113 million in the first nine months of 2026 reflects lower than anticipated losses in the crop business, lower than expected claim severity and frequency in the inland marine business and the agribusiness operations and lower than anticipated claim severity in the commercial auto, aviation and equine businesses. Net favorable reserve development of $43 million in the first nine months of 2025 reflects lower than anticipated losses in the crop business, lower than anticipated claim severity in the aviation business and lower than expected claim frequency and severity in the inland marine business.
Specialty casualty Net favorable reserve development of $6 million in the first nine months of 2026 reflects lower than anticipated claim severity in the workers' compensation businesses, partially offset by higher than anticipated severity in certain social inflation exposed businesses. Net adverse reserve development of $21 million in the first nine months of 2025 reflects higher than expected claim severity in the excess and surplus, social services, excess liability, public sector and general liability businesses, partially offset by lower than anticipated claim severity in the workers' compensation and executive liability businesses.
Specialty financial Net favorable reserve development of $41 million in the first nine months of 2026 reflects lower than anticipated claim frequency and severity in the fidelity and crime business and lower than expected claim severity in the surety and financial institutions businesses. Net favorable reserve development of $34 million in the first nine months of 2025 reflects lower than anticipated claim frequency in the financial institutions business and lower than expected claim severity in the surety, fidelity and trade credit businesses.
Aggregate Aggregate net prior accident years reserve development for AFG's property and casualty insurance segment includes net adverse reserve development of $5 million in the first nine months of 2026 and $2 million in the first nine months of 2025 related to business outside the Specialty group that AFG no longer writes.
Catastrophe losses
Catastrophe losses of $89 million in the first nine months of 2026 resulted primarily from winter and convective storms in multiple regions of the United States. Catastrophe losses of $133 million in the first nine months of 2025 resulted primarily from California wildfires and storms in multiple regions of the United States.
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Commissions and Other Underwriting Expenses
Commissions and other underwriting expenses ("U/W Exp") increased $95 million (6%) compared to the first nine months of 2025. AFG's underwriting expense ratio increased 0.5 percentage points compared to the first nine months of 2025. Detail of commissions and other underwriting expenses and underwriting expense ratios is shown below (dollars in millions):
Nine months ended September 30,
2026 2025 Change in
U/W Exp % of NEP U/W Exp % of NEP % of NEP
Property and transportation $ 486 22.7 % $ 466 23.2 % (0.5 %)
Specialty casualty 742 30.3 % 708 29.4 % 0.9 %
Specialty financial 435 49.4 % 394 47.7 % 1.7 %
$ 1,663 30.4 % $ 1,568 29.9 % 0.5 %
Property and transportation Commissions and other underwriting expenses as a percentage of net earned premiums decreased 0.5 percentage points in the first nine months of 2026 compared to the first nine months of 2025. This decrease reflects growth in the crop and commercial auto businesses, both of which have a lower commissions and other underwriting expense ratio than some of the other businesses in this sub-segment, partially offset by higher costs for software and other expenses associated with certain initiatives in IT security, customer experience and data analytics.
Specialty casualty Commissions and other underwriting expenses as a percentage of net earned premiums increased 0.9 percentage points in the first nine months of 2026 compared to the first nine months of 2025 reflecting lower ceding commissions in certain excess and surplus businesses resulting from changes in reinsurance treaties, higher costs for software and other expenses associated with certain initiatives in IT security, customer experience and data analytics, and the impact of changes in the mix of business.
Specialty financial Commissions and other underwriting expenses as a percentage of net earned premiums increased 1.7 percentage points in the first nine months of 2026 compared to the first nine months of 2025 due primarily to higher profit-based commissions to agents in the financial institutions business, higher costs for software and other expenses associated with certain initiatives in IT security, customer experience and data analytics, and the impact of changes in the mix of business.
Property and Casualty Net Investment Income
Net investment income in AFG's property and casualty insurance operations increased $124 million (22%) compared to the first nine months of 2025. The average invested assets and overall yield earned on investments held by AFG's property and casualty insurance operations are provided below (dollars in millions):
Nine months ended September 30,
2026 2025 Change % Change
Net investment income:
Net investment income, excluding alternative investments $ 583 $ 491 $ 92 19 %
Alternative investments 95 63 32 51 %
Total net investment income $ 678 $ 554 $ 124 22 %
Average invested assets (at amortized cost) $ 17,036 $ 15,988 $ 1,048 7 %
Yield (net investment income as a % of average invested assets):
Excluding alternative investments 5.47 % 4.95 % 0.52 %
Alternative investments 4.48 % 3.04 % 1.44 %
Overall P&C portfolio 5.31 % 4.62 % 0.69 %
Yield on fixed maturities (before investment expenses) 5.09 % 5.17 % (0.08 %)
The increase in the property and casualty insurance segment's net investment income for the first nine months of 2026 compared to the first nine months of 2025 is due primarily to the sale of Charleston Harbor in August 2026, which generated $126 million in pretax net investment income. Since a property and casualty subsidiary and AFG (parent) each
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
owned half of the property, these earnings are split evenly between the property and casualty segment and the holding company. Excluding the segment's $63 million share of the income from the Charleston Harbor sale, the property and casualty insurance segment's net investment income for the first nine months of 2026 increased $61 million (11%) reflecting higher average invested assets and improved results from alternative investments.
Property and Casualty Other Income and Expenses, Net
Other income and expenses, net for AFG's property and casualty insurance operations improved $11 million (21%) compared to the first nine months of 2025. The table below details the items included in other income and expenses, net for AFG's property and casualty insurance operations (in millions):
Nine months ended September 30,
2026 2025
Other income
$ 10 $ 9
Other expenses:
Amortization of intangibles 15 15
Interest expense on funds withheld 30 34
Other
6 12
Total other expenses 51 61
Other income and expenses, net $ (41) $ (52)
Holding Company, Other and Unallocated - Results of Operations
AFG's net GAAP pretax loss outside of its property and casualty insurance segment (excluding realized gains and losses) totaled $114 million in the first nine months of 2026 compared to $171 million in the first nine months of 2025, a decrease of $57 million (33%). AFG's net core pretax loss outside of its property and casualty insurance segment totaled $90 million in the first nine months of 2026 compared to $146 million in the first nine months of 2025, a decrease of $56 million (38%).
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
The following table details AFG's GAAP and core loss before income taxes from operations outside of its property and casualty insurance segment for the nine months ended September 30, 2026 and 2025 (dollars in millions):
Nine months ended September 30,
2026 2025 % Change
Revenues:
Net investment income, excluding sale of Charleston Harbor $ 23 $ 18 28 %
Net investment income - sale of Charleston Harbor (a) 63 - - %
Other income - P&C fees
74 71 4 %
Other income
11 12 (8 %)
Total revenues
171 101 69 %
Costs and Expenses:
Property and casualty insurance - loss adjustment and underwriting expenses 24 25 (4 %)
Other expense - expenses associated with P&C fees
50 46 9 %
Other expenses (b) 117 119 (2 %)
Costs and expenses, excluding interest charges on borrowed money
191 190 1 %
Loss before income taxes, excluding realized gains and losses and interest charges on borrowed money (20) (89) (78 %)
Interest charges on borrowed money
70 57 23 %
Core loss before income taxes, excluding realized gains and losses (90) (146) (38 %)
Pretax non-core special A&E charge
(24) (25) (4 %)
GAAP loss before income taxes, excluding realized gains and losses $ (114) $ (171) (33 %)
(a)AFG (parent)'s share of the net investment income from the August 2026 sale of Charleston Harbor.
(b)Excludes pretax non-core special A&E charges of $24 million and $25 million in the first nine months of 2026 and 2025, respectively.
Holding Company and Other - Net Investment Income
AFG recorded net investment income on investments held outside of its property and casualty insurance segment of $86 million in the first nine months of 2026 compared to $18 million in the first nine months of 2025, an increase of $68 million due primarily to the income from the sale of Charleston Harbor in August 2026. Excluding the income from the sale of Charleston Harbor, net investment income on AFG's investments held outside of its property and casualty insurance segment increased $5 million (28%) in the first nine months of 2026 compared to 2025, reflecting the impact of higher average investment balances.
Holding Company and Other - P&C Fees and Related Expenses
Summit, a workers' compensation insurance subsidiary, collects fees from a small group of unaffiliated insurers for providing underwriting, policy administration and claims services. In addition, certain of AFG's property and casualty insurance businesses collect fees from customers for ancillary services such as workplace safety programs and premium financing. In the first nine months of 2026, AFG collected $74 million in fees for these services compared to $71 million in the first nine months of 2025. Management views this fee income, net of expenses incurred to generate such fees of $50 million in the first nine months of 2026 and $46 million in the first nine months of 2025, as a reduction in the cost of underwriting its property and casualty insurance policies. The expenses related to providing such services are embedded in property and casualty underwriting and claims servicing expenses. Consistent with internal management reporting, these fees and the related expenses are netted and recorded as a reduction of commissions and other underwriting expenses and loss adjustment expenses in AFG's segmented results.
Holding Company and Other - Other Income
Other income in the table above includes $8 million in both the first nine months of 2026 and 2025 in management fees paid to AFG by the AFG-managed CLOs (AFG's consolidated managed investment entities). The management fees are eliminated in consolidation - see the other income line in the Consolidate MIEs column under "Results of Operations - Segmented Statement of Earnings."
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
Holding Company and Other - Other Expenses
Excluding the non-core special A&E charges discussed below, AFG's holding companies and other operations outside of its property and casualty insurance segment recorded other expenses of $117 million in the first nine months of 2026 compared to $119 million in the first nine months of 2025, a decrease of $2 million (2%). Other expenses in the first nine months of 2025 include a $4 million charge to increase liabilities related to AFG's former railroad and manufacturing operations.
Holding Company and Other - Interest Charges on Borrowed Money
AFG's holding companies and other operations outside of its property and casualty insurance segment recorded interest expense of $70 million in the first nine months of 2026 compared to $57 million in the first nine months of 2025, an increase of $13 million (23%), reflecting the issuance of $350 million principal amount of 5.00% Senior Notes in September 2025.
Holding Company and Other - Special A&E Charges
See "Holding Company and Other - Special A&E Charges" under "Results of Operations - Holding Company, Other and Unallocated" for the quarters ended September 30, 2026 and 2025 for a discussion of the $24 million and $25 million pretax non-core special A&E charges recorded in the third quarter of 2026 and the third quarter of 2025, respectively.
Realized Gains (Losses) on Securities
AFG's realized gains (losses) on securities were net losses of $37 million in the first nine months of 2026 compared to net gains of $17 million in the first nine months of 2025, a change of $54 million (318%). Realized gains (losses) on securities consisted of the following (in millions):
Nine months ended September 30,
2026 2025
Realized gains (losses) before impairment allowances:
Disposals $ (3) $ (9)
Change in the fair value of equity securities 12 32
Change in the fair value of derivatives (16) 2
(7) 25
Change in allowance for impairments on securities (30) (8)
Realized gains (losses) on securities $ (37) $ 17
The $12 million net realized gain from the change in the fair value of equity securities in the first nine months of 2026 includes gains of $14 million on manufacturing companies, $7 million on investments in energy companies, $6 million on investments in natural gas companies and $6 million on investments in technology companies, partially offset by losses of $11 million on investments in media companies and $6 million on investments in asset managers. The $32 million net realized gain from the change in the fair value of equity securities in the first nine months of 2025 includes gains of $14 million on investments in media companies and $12 million on investments in banks and financing companies.
The $30 million change in allowance for impairments on securities in the first nine months of 2026 relates primarily to an allowance recorded on a mortgage loan.
Consolidated Income Taxes
AFG's consolidated provision for income taxes was $193 million for the first nine months of 2026 compared to $151 million for the first nine months of 2025, an increase of $42 million (28%). See Note J - "Income Taxes" to the financial statements for an analysis of items affecting AFG's effective tax rate.
ACCOUNTING STANDARDS TO BE ADOPTED
In November 2024, the FASB issued ASU No. 2024-03 ("ASU 2024-03"), Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 requires additional information and disaggregation of specified expense categories in the notes to financial statements. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted and applied either prospectively or
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued
retrospectively. As of September 30, 2026, AFG has not adopted ASU 2024-03. Management is evaluating the impact of the standard to AFG's income statement expense disclosures. Since ASU 2024-03 only requires additional disclosures, the adoption of this guidance will not have an impact on AFG's results of operations or financial condition.
American Financial Group Inc. published this content on November 05, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 05, 2026 at 19:07 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]