AFG Posts Profit, Plans To Sell Infinity Share

NU Online News Service, Oct. 30, 1:48 p.m.EST?American Financial Group posted net profit of $41.6million for its third quarter, a 55 percent jump from $26.9 millionin earnings posted during the corresponding period from one yearago.

"The insurance industry continues to benefit from favorablepricing conditions, particularly in certain specialty casualtymarkets, and we believe we will continue to benefit from thesetrends," said Carl Lindner, chief executive officer at AFG.

The Cincinnati-based insurer also announced its plan to sell offits remaining 38 percent stake in Infinity Property and CasualtyCorp. in a secondary public offering. AFG management said proceedsfrom this transaction will be used to pay down the company's debtand expand its specialty commercial insurance business in 2004.

Separately, the insurer also signed a letter of intent to sellits Transport Insurance Co. to Dukes Place Holdings LP. Transportis an inactive company with run-off insurance liabilities,including asbestos and environmental exposures which represent some12 percent of AFG's overall asbestos and environmental reserves.AFG said it expects to report a $30 million loss on the sale.

AFG's net written premiums for its property-casualty unitdeclined to $536 million from $625 million reported one year ago.But the unit's underwriting profit rose to $20.1 million, animprovement of $17.5 million compared to the year-ago period.

The p-c unit's combined ratio improved for the quarter, fallingto 95.8 percent from 99.6 percent recorded last year.

The insurer's specialty group also reported an underwritingprofit, with a 94.8 percent combined ratio, a four-pointimprovement from one year ago. The specialty group's net writtenpremiums rose to $524 million from $474 million posted during theyear-ago period.

"Our ongoing lines of business continue to achieve solid premiumgrowth and most of our individual business units continue to reportunderwriting profitability. Our specialty commercial operationsexperienced average rate increases of approximately 22 percentthrough the first nine months of 2003 and 19 percent in the thirdquarter," commented Carl Lindner III, AFG co-president and head ofthe p-c group.

"Pricing momentum is continuing on the casualty side, whichrepresents about 70 percent of our specialty business. We aretargeting average rate increases of around 15 percent for theremainder of 2003 and expect meaningful increases into 2004," heforecast.

The company noted that its third-quarter results suffered froman after-tax charge of $23.1 million related to a litigationsettlement. The litigation, the company stated, was brought inlate-1994 by several medical groups, alleging antitrust violationsby California workers' compensation insurers, which included one ofAFG's units.

However, third-quarter results benefited from a $6.5 millionafter-tax reserve reduction related to recently enacted Californiaworkers' comp legislation, as well as $3.8 million in investedearnings from AFG's 38 percent investment in Infinity Property andCasualty.

Commenting on AFG's planned sale of its remaining stake inInfinity, Carl Lindner III said, "This transaction will provideadditional capital to support double-digit growth in our specialtycommercial insurance business in 2004."

Birmingham, Ala.-based Infinity went public on the NASDAQ Marketin February. Prior to its initial public offering, it was whollyowned by AFG

American Financial Group offers p-c and specialty lines,including workers' comp, professional liability, ocean and inlandmarine, and multiperil crop insurance, as well as autoinsurance.`