American Financial Group

The commentary follows AFG’s Q1 2023 earnings announcement on Tuesday, in which the carrier reported a 5.2-point deterioration in its P&C operations combined ratio to 89.2%.

The latest statutory data release shows commercial carriers continued to benefit from the extended pricing cycle and exposure growth propelled by inflation, although growth slowed year-on-year.

Public D&O and higher excess liability are two areas where the company is “not quite getting” to where it wants to be in terms of rates, co-CEO Carl Lindner said.

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The property and transportation division’s CoR deteriorated 9.5 points to 90% in the fourth quarter, driven by its crop insurance operations.

Amid record high economic inflation, continuing supply chain issues and proliferating nuclear verdicts, carrier CEOs have emphasized the need to keep rate above loss costs during Q3 conference calls.

On a call with analysts, Lindner said AFG is assuming commercial auto liability loss cost trends at 7%.

The company’s top line grew 18.7% to $3.15bn, primarily due to growth in the crop insurance business.

Loss cost trends have been approximately 5% for AFG’s specialty P&C businesses, excluding workers' compensation, and approximately 3% overall throughout 2022.

The company’s top line grew 9.6% to $2.1bn, but the speed of growth was smaller compared to Q1.

The sector was hit by a rough first half of 2022, with more to come in the second half of the year.

Insurers could face pressure if interest rate and recession fears intersect with worsening loss cost trends.