Executive Summary

Core net operating EPS was $2.14, down year over year from $2.56 due to lower underwriting profit and muted alternative investment returns; GAAP diluted EPS was $2.07 . AFG delivered a 93.1% Specialty P&C combined ratio vs 90.5% last year, with 2.3 points of cat losses and 0.7 points of favorable prior-year reserve development .
Results were a modest beat versus Wall Street: EPS $2.14 vs $2.10 consensus and revenue $1.87B vs $1.77B consensus, aided by 10% growth in P&C net investment income ex-alternatives and earlier crop premium reporting; alternative investments annualized at ~1.2% dragged investment income overall (S&P Global data)* .
Renewal pricing remained firm: +7% excluding workers’ comp (+6% including), with double-digit rate actions in social inflation-exposed lines; underwriting profit fell across Specialty Casualty and Property & Transportation, partially offset by higher Specialty Financial profit .
Capital return continued: $107M in Q2 (including $39M buybacks), and post-quarter the Board raised the regular annual dividend 10% to $3.52 ($0.88 quarterly) starting October 2025 .
Narrative shift: the previously expected ~$$1.20 per share core gain on the Charleston Harbor sale (disclosed in Q1) will not occur after AFG terminated the agreements on June 6, 2025, removing a potential FY25 upside tailwind .

What Went Well and What Went Wrong

What Went Well

Specialty Financial Group combined ratio improved to 86.1% from 89.7% with underwriting profit up to $38M (from $25M), driven by financial institutions and surety .
Investment tailwinds ex-alternatives: P&C net investment income excluding alternatives up 10% year over year, supported by reinvestment yields near ~5.75% and higher invested balances; duration ~2.8 years .
Rate environment firm: average renewal pricing +7% ex-WC; double-digit increases in the most social inflation-exposed lines, with commercial auto liability rates +15% mentioned on the call .

What Went Wrong

Alternative investment returns were muted (annualized ~1.2% vs 5.1% last year), with multi-family real estate headwinds from new supply reducing fair values; overall P&C net investment income including alternatives fell ~5% .
Underwriting profit declined: Property & Transportation profit fell to $27M (from $40M) and Specialty Casualty to $49M (from $86M) amid lower crop tailwind vs a strong prior-year and ongoing social inflation pressures .
Combined ratio deteriorated to 93.1% from 90.5%, with lower favorable reserve development (0.7 points vs 2.3 prior year) and sustained catastrophe load (2.3 points), indicating margin compression vs plan .

Financial Results

Consolidated comparison vs prior periods (oldest → newest)

Metric	Q2 2024	Q1 2025	Q2 2025
Total Revenues ($USD Billions)	$1.900	$1.856	$1.924
Diluted EPS (GAAP) ($)	$2.49	$1.84	$2.07
Core Net Operating EPS ($)	$2.56	$1.81	$2.14
Specialty P&C Combined Ratio (%)	90.5%	94.0%	93.1%

Actual vs S&P Global consensus (oldest → newest)

Note: Figures with asterisks are from S&P Global; values retrieved from S&P Global.*

Metric	Q2 2024	Q1 2025	Q2 2025
EPS Actual ($)	2.56	1.81	2.14
EPS Consensus Mean ($)*	2.439*	2.073*	2.104*
Revenue Actual ($USD Billions)	1.824*	1.788*	1.869*
Revenue Consensus Mean ($USD Billions)*	1.710*	1.741*	1.768*
EPS # of Estimates*	7*	6*	5*
Revenue # of Estimates*	4*	4*	4*

Segment breakdown (Q2 2024 vs Q2 2025)

Segment	Net Written Premiums Q2 2024 ($MM)	Net Written Premiums Q2 2025 ($MM)	Combined Ratio Q2 2024 (%)	Combined Ratio Q2 2025 (%)	Underwriting Profit Q2 2024 ($MM)	Underwriting Profit Q2 2025 ($MM)
Property & Transportation	$690	$759	92.7%	95.2%	$40	$27
Specialty Casualty	$753	$765	89.1%	93.9%	$86	$49
Specialty Financial	$249	$279	89.7%	86.1%	$25	$38
Aggregate Specialty	$1,692	$1,803	90.5%	93.1%	$151	$114

KPIs and operating drivers

KPI	Q2 2024	Q1 2025	Q2 2025
Renewal Pricing ex-WC	~7%	~7%	~7%
Renewal Pricing incl-WC	~6%	~5%	~6%
Catastrophe Losses ($MM)	$110 (six months)	$72	$38
Cat Points on Combined Ratio	2.3 pts	4.5 pts	2.3 pts
Favorable PY Reserve Dev (pts)	2.3 pts	1.3 pts	0.7 pts
P&C NII ex-Alternatives YoY	+10%	+6%	+10%
Alternative Investments Annualized Return	5.1%	1.8%	~1.2%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance/Status	Change
Core Operating EPS (Business Plan)	FY 2025	~$10.50; ROE ~18%; 92.5% combined ratio; 5% net written premium growth; ~5.75% reinvestment rate; ~8% alt returns	Management not updating plan; alt returns below expectations in 1H; premium growth likely below 5% but positive	Maintained headline plan; near-term headwinds
Charleston Harbor Sale Gain	FY 2025	Expected ~~$100M after-tax core gain (~~$1.20/share)	Agreements terminated June 6, 2025; no gain	Lowered/withdrawn
Dividend	Ongoing	$0.80 quarterly (declared July 1)	Raised regular annual dividend to $3.52 ($0.88 quarterly) beginning Oct 2025	Raised
Alternative Investments Return Assumption	FY 2025	~8%	Actual Q1/Q2 annualized 1.8% / ~1.2%; management cautious near term	Lower near-term trajectory
Net Written Premium Growth	FY 2025	~5%	Still positive but lower than 5% implied by Q1/Q2 trends	Lowered run-rate

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Alternative investments/multifamily	Q4: Alt return 4.9% with improved investment income ; Q1: Alt return 1.8%; caution on private equity	Alt return ~1.2%; multifamily supply surge reduced fair values; expect absorption over 12 months	Near-term headwind; cautious optimism longer term
Social inflation remediation	Q4: Adverse development in certain lines; repositioning limits	Continued non-renewals in social services (housing done; daycare ~$9–10M remaining by year end); umbrella limits reduced to $5M	Ongoing remediation; improving risk profile
Workers’ comp pricing	Q4: competitive; strong profitability	Broadly excellent results; CA pricing +5% in Q2; 8.7% increase approved effective 9/1/25	Firming in CA; supportive
Crop business	Q4: Strong 2024 results	Earlier acreage reporting shifted ~$100M gross/$40M net written premium from Q3 to Q2; profitability mainly recognized Q4	Timing shift; profit recognition remains later
Marine/trade credit/tariffs	Q1: Tariff uncertainty manageable	Opportunities in Ocean Marine; trade credit growing; tariffs could impact volumes/premiums	Watchful monitoring; selective growth
IT/data investments	Q1: Expense ratio elevated by security, CX, analytics investments	Not specifically updated in Q2	Continuing productivity investments

Management Commentary

“We are pleased to report an annualized core operating return on equity of 15.5% despite muted quarterly returns from alternative investments. Overall underwriting margins in our specialty P&C insurance businesses were strong, and higher interest rates increased net investment income, excluding alternatives, by 10% year over year.” — Co-CEOs Carl H. Lindner III & S. Craig Lindner .
“I am especially pleased that we achieved double digit rate increases in our most social inflation-exposed lines of businesses.” — Carl Lindner III .
“In the current interest rate environment, we’re able to invest in fixed maturity securities at yields of approximately 5.75%… The annualized return on alternative investments…was approximately 1.2% for the twenty twenty five second quarter.” — S. Craig Lindner .

Q&A Highlights

Lender-placed property momentum: AFG sees opportunities driven by economic stress and competitor disruption; business ~$700M GWP with low single-digit loss trend and pricing up ~1%, shifting to replacement cost values supportive of adequacy .
Social inflation actions: Completed non-renewal of low-income/affordable housing; daycare ~$9–10M to exit by year-end; umbrella limits reduced to $5M; expect more opportunities post-remediation .
Crop: ~$100M gross/$40M net written premium shifted earlier due to acreage reporting; profits typically recognized Q4; conditions slightly better YoY, moisture key through Aug/Sept .
Workers’ comp: Broad strength; CA ~15% of book with +5% pricing in Q2 and 8.7% increase effective 9/1/25; industry CA combined in 120s, firming expected .
Excess liability reserves: Casualty adverse development (~$10M) spread across years in social inflation-exposed businesses; workers’ comp still favorable overall; prudent increases to current-year picks .

Estimates Context

Q2 2025 beat: EPS $2.14 vs $2.10 consensus; revenue $1.869B vs $1.768B consensus. Prior quarter Q1 2025 missed EPS vs consensus ($1.81 vs $2.07) with revenue modestly ahead. Year-ago Q2 2024 EPS $2.56 exceeded consensus $2.44 (S&P Global data).*
Street looks for Q3 2025 EPS ~$2.51 and Q4 2025 ~$3.30; revenue ~$2.02B in Q3 and ~$1.82B in Q4 (S&P Global data).*
Implication: Near-term estimate adjustments likely reflect: lower alt investment returns vs plan, combined ratio tracking above business plan (Q1/Q2), but resilient pricing and Specialty Financial outperformance may offset. *

Key Takeaways for Investors

Core EPS modestly beat amid margin compression; upside from investment income ex-alternatives and rate strength, but alternative returns remain the swing factor near term .
Specialty mix matters: Specialty Financial’s margin expansion offset Casualty and Property soft spots; continued social inflation remediation should stabilize loss trends into 2H .
Crop timing shift lifts Q2 written premium but defers profit to Q4; monitor weather/commodity price trajectories through harvest for earnings cadence .
California workers’ comp rate hike (8.7% effective 9/1/25) is a tangible tailwind to pricing adequacy in a tough state market .
Dividend growth signals confidence: 10% increase to $3.52 annual starting October 2025 adds to total-return profile .
Remove Charleston Harbor sale upside from FY25 model; re-base core EPS trajectory absent ~$1.20/share gain .
Valuation sensitivity: Track estimate revisions around alt returns and combined ratio vs 92.5% plan; firm pricing and reserve actions are supportive but cat/weather and social inflation remain key risk levers .

Citations: Press release and 8-K details . Q1 press/call and Q4 press for prior period context and guidance . Dividend raise and Charleston Harbor termination .

Footnote: *Values retrieved from S&P Global.

AMERICAN FINANCIAL GROUP INC (AFG)·Q2 2025 Earnings Summary