American Financial Group Beats Q4 Estimates, Announces Special Dividend Amid Market Caution
AMERICAN FINANCIAL GROUP INC (NYSE:AFG) reported fourth-quarter and full-year 2025 results that surpassed analyst expectations on the top and bottom lines. Despite the earnings beat and the announcement of a new special dividend, the company's shares traded lower in after-hours activity, suggesting a nuanced market reaction to the mixed signals within the report.
Earnings and Revenue Performance vs. Estimates
The Cincinnati-based specialty insurer posted core net operating earnings of $3.65 per share for the quarter ended December 31, 2025. This figure represents a significant 17% increase from the $3.12 per share reported in the prior-year period and comfortably exceeded the analyst consensus estimate of $3.35 per share.
On the revenue front, the company reported sales of $2.02 billion, a 1.8% year-over-year increase. This result also topped market expectations, which had anticipated revenue of approximately $1.87 billion.
The key quarterly performance metrics versus estimates are as follows:
- Reported Core EPS: $3.65
- Analyst Estimate (EPS): $3.35
- Variance: +$0.30 (Beat)
- Reported Revenue: $2.02 billion
- Analyst Estimate (Revenue): $1.87 billion
- Variance: +$150 million (Beat)
For the full year 2025, core net operating earnings were $10.29 per share, compared to $10.75 per share in 2024.
Market Reaction and Shareholder Returns
Despite the double beat, AFG's stock was down approximately 3.2% in after-market trading following the release. This negative price action may reflect investor focus on certain headwinds outlined in the report, such as lower returns from the company's alternative investment portfolio, which dampened overall investment income. Furthermore, while the quarter was strong, full-year 2025 core earnings per share declined slightly from the previous year's high level.
A clear positive for shareholders was the board's declaration of a special cash dividend of $1.50 per share, payable in February 2026. This is in addition to the regular quarterly dividend of $0.88 per share. The company emphasized its commitment to returning capital, noting it returned over $700 million to shareholders in 2025 through dividends and share repurchases.
Key Highlights from the Quarterly Report
The fourth-quarter strength was primarily driven by exceptional underwriting performance in the company's core property and casualty (P&C) insurance operations.
- Record Underwriting Profit: The specialty P&C segment generated a record quarterly underwriting profit of $287 million, a 41% increase year-over-year. This was fueled by an outstanding combined ratio of 84.1%, a 4.9-point improvement.
- Segment Performance: The Property and Transportation Group saw a dramatic 167% surge in underwriting profit, largely due to excellent results in crop insurance. The Specialty Casualty and Specialty Financial groups reported lower underwriting profits compared to the strong prior-year period.
- Investment Income Headwind: Net investment income from the P&C operations decreased by approximately 12% for the quarter, as lower returns from alternative investments offset benefits from higher interest rates.
- Strong Capital Position: Book value per share, excluding accumulated other comprehensive income (AOCI), stood at $58.38 at year-end. The company highlighted its "significant excess capital."
Forward Outlook vs. Analyst Expectations
Management provided an outlook for 2026, stating that performance in line with its business plan assumptions would result in core operating earnings per share of approximately $11.00. This company-provided forecast sits notably below the current analyst consensus estimate for full-year 2026 EPS, which is $11.49 according to provided data.
The company's 2026 assumptions include:
- Net written premium growth of 3% to 5%.
- A calendar year combined ratio of 92.5%.
- An 8% return on its $2.8 billion alternative investment portfolio.
For the upcoming first quarter of 2026, analysts are currently estimating revenue of $1.69 billion and earnings per share of $2.65.
Conclusion
American Financial Group delivered a powerful finish to 2025, with a record-setting underwriting performance driving earnings well past analyst targets. The commitment to shareholder returns remains robust, as evidenced by the new special dividend. However, the market's initial tepid reaction appears to balance this strength against the guided decline in alternative investment returns and a 2026 EPS outlook that is more conservative than the current street consensus. Investors will likely monitor the company's ability to sustain its exceptional underwriting discipline and achieve its targeted returns on capital in the coming year.
For a detailed look at historical earnings, future estimates, and analyst projections for AFG, you can review the data here.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, nor a recommendation to buy or sell any security. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.
