American Financial Group Inc. (NYSE:AFG) Q2 2020 Earnings Conference Call - Final Transcript
Aug 05, 2020 • 11:30 am ET
Carl H. Lindner
ability to act on business opportunities. Now I'd like to turn to an overview of our second quarter results on slide four of our webcast. AFG reported second quarter core net operating earnings, excluding losses from alternative investments, of $1.53 per share, a decrease of $0.13 per share from the comparable period in 2019. Core net operating earnings were $1.05 per share in the second quarter and included a $44 million loss or $0.48 per share on AFG's $2.2 billion portfolio of alternative investments, which are marked-to-market through core operating earnings. This compares to $41 million in earnings or $0.46 per share in the 2019 second quarter. The returns on these investments reflect the widespread financial and economic impacts of the COVID-19 pandemic and a significant decrease in both the equity and credit markets in the first quarter. The returns on these investments are typically recorded on a quarter lag.
Our second quarter 2020 core operating earnings included approximately $85 million or $0.75 per share in losses for claims reserves and IBNR designated for estimated COVID-19-related losses. These losses are reported separately from our cat losses. Turning to slide five. You'll see that the second quarter 2020 net earnings per share of $1.97 included after-tax noncore items aggregating $0.92 per share. Last quarter, we provided full year 2020 core net operating earnings per share guidance, excluding earnings or losses from alternative investments due to the uncertainty of the implications of COVID-19 and a resulting volatility in the financial markets. Based on results through the first six months of the year, AFG now expects its 2020 core net operating earnings per share, excluding alternative investments, to be in the range of $6.60 to $7.40, an increase of $0.15 a share from the midpoint of our previous guidance. Craig and I will discuss our guidance for each segment of our business in more detail later in the call. We're very pleased with the performance of our core operating businesses during the second quarter of 2020 amid the challenges presented by the COVID-19 pandemic. We believe our underlying results demonstrate the strength of our portfolio of diversified specialty insurance businesses and the contributions of our exceptional employees. We thank God, our talented management team and our employees for helping to achieve these results. Now I'd like to turn our focus to our property and casualty operations. Please turn to slide six and seven of the webcast, which include an overview of second quarter results. Our Specialty Property and Casualty Group performed exceptionally well during the quarter, with excellent underwriting margins and very strong renewal pricing that's exceeding our expectations. As you'll see on slide six, gross and net written premiums were down 8% and 11%, respectively, when compared to the second quarter of 2019, primarily as a result of the runoff of Neon. Excluding the impact of the Neon runoff, the gross written premiums were up 2%, and net written premiums decreased 1% year-over-year.
Core operating earnings in the AFG's property and casualty