AFG Posts Profit, Plans To Sell Infinity Share

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 $41.6 million for its third quarter, a 55 percent jump from $26.9 million in earnings posted during the corresponding period from one year ago.

"The insurance industry continues to benefit from favorable pricing conditions, particularly in certain specialty casualty markets, and we believe we will continue to benefit from these trends," said Carl Lindner, chief executive officer at AFG.

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

Separately, the insurer also signed a letter of intent to sell its Transport Insurance Co. to Dukes Place Holdings LP. Transport is an inactive company with run-off insurance liabilities, including asbestos and environmental exposures which represent some 12 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 unit declined to $536 million from $625 million reported one year ago. But the unit's underwriting profit rose to $20.1 million, an improvement of $17.5 million compared to the year-ago period.

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

The insurer's specialty group also reported an underwriting profit, with a 94.8 percent combined ratio, a four-point improvement from one year ago. The specialty group's net written premiums rose to $524 million from $474 million posted during the year-ago period.

"Our ongoing lines of business continue to achieve solid premium growth and most of our individual business units continue to report underwriting profitability. Our specialty commercial operations experienced average rate increases of approximately 22 percent through the first nine months of 2003 and 19 percent in the third quarter," commented Carl Lindner III, AFG co-president and head of the p-c group.

"Pricing momentum is continuing on the casualty side, which represents about 70 percent of our specialty business. We are targeting average rate increases of around 15 percent for the remainder of 2003 and expect meaningful increases into 2004," he forecast.

The company noted that its third-quarter results suffered from an after-tax charge of $23.1 million related to a litigation settlement. The litigation, the company stated, was brought in late-1994 by several medical groups, alleging antitrust violations by California workers' compensation insurers, which included one of AFG's units.

However, third-quarter results benefited from a $6.5 million after-tax reserve reduction related to recently enacted California workers' comp legislation, as well as $3.8 million in invested earnings from AFG's 38 percent investment in Infinity Property and Casualty.

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

Birmingham, Ala.-based Infinity went public on the NASDAQ Market in February. Prior to its initial public offering, it was wholly owned by AFG

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