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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of report: November 14, 2000 Commission File No. 1-13653
(Date of earliest event reported)
AMERICAN FINANCIAL GROUP, INC.
Incorporated under IRS Employer
the laws of Ohio Identification No. 31-1544320
One East Fourth Street
Cincinnati, Ohio 45202
Phone: (513) 579-2121
Former name or former address, if changed since last report - not
applicable.
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AMERICAN FINANCIAL GROUP, INC.
FORM 8-K
Item 5. Other Events.
Please see the News Release attached hereto as Exhibit 99-1. In
addition, the information presented in Item 9 of this Form 8-K is hereby
incorporated into this Item by reference.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Not Applicable
(b) Not Applicable
(c) Exhibit (99) Additional Exhibits.
(1) American Financial Group, Inc. News Release
(2) Additional material to be presented at an insurance
industry investor conference on November 15, 2000.
Item 9. Regulation FD Disclosure.
Attached hereto as Exhibit 99-2 is a copy of certain material to be used
in a slide presentation at an insurance industry investor conference on November
15, 2000.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN FINANCIAL GROUP, INC.
November 14, 2000 By: James C. Kennedy
-----------------------------------
James C. Kennedy
Vice President, Deputy General Counsel
& Secretary
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Exhibit 99-1
AMERICAN
FINANCIAL GROUP, INC. NEWS RELEASE
------------------------------------------------------------------------------
Date: November 6, 2000 Contact: Anne N. Watson
For Release: Immediately Phone: (513) 579-6652
Web Site: http://www.amfnl.com
American Financial Group Announces Third Quarter Results
Cincinnati, Ohio - November 6, 2000 - American Financial Group, Inc.
(NYSE: AFG) today announced a 2000 third quarter loss from insurance businesses
of $10.8 million ($.18 per share), including $22.8 million, after-tax, ($.39 per
share) for strengthening the loss reserves of its California workers'
compensation business in response to adverse development in prior years' loss
costs. This represents less than 1% of the company's total reserves. Excluding
this charge, net earnings from insurance businesses would have been $12.0
million ($.21 per share), in line with previously announced expectations.
Comparable earnings for the 1999 third quarter were $41.0 million ($.68 per
share).
AFG's net loss for the third quarter of 2000 was $22.1 million ($.38 per
share) which includes the above mentioned reserve strengthening. Net earnings
for the 1999 third quarter were $30.1 million ($.50 per share).
Carl H. Lindner III, AFG Co-President and head of the Property & Casualty
Insurance ("P&C") Group, commented: "Although the California workers'
compensation market continues to firm after several years of weakness, our
recently completed third quarter actuarial review of the business indicated a
need for additional prior year reserves. We have implemented rate increases of
about 22% through September 2000 and we expect increases to be in excess of 40%
on renewals in the fourth quarter. We recognize that these actions may reduce
the volume of our business but we believe they are necessary to achieve our
profitability objectives. We believe these actions make us one of the strongest
remaining participants in this market." The California workers' compensation
business represents approximately 8.5% of the company's earned premiums.
AFG's net earnings from insurance businesses for the first nine months of
2000 were $28.0 million ($.48 per share) compared to $126.6 million ($2.08 per
share) in the 1999 period. Net earnings for this 2000 period were $38.9 million
($.66 per share), including the reserve strengthening charge, net realized gains
of $15.1 million and investee losses of $4.2 million. AFG's net earnings for the
first nine months of 1999 were $126.7 million ($2.08 per share) which included
net realized gains of $4.5 million, investee earnings of $1.7 million, an
extraordinary loss of $2.3 million attributable to early debt retirements and a
charge of $3.8 million due to an accounting change implemented by a subsidiary.
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The company ended the quarter with shareholders' equity of $1.3 billion
and a book value per share of $22.92.
Business Segment Results
For the third quarter of 2000, net written premiums of the P&C group were
5% above the same period a year ago, but declined 6% from the 2000 second
quarter level. The GAAP combined ratio was 114.7% for the third quarter of 2000,
including 5.3 points for the California workers' compensation reserve charge,
compared with 101.7% for the comparable 1999 quarter.
The Personal Group's net written premiums for the 2000 third quarter were
approximately 4% above the 1999 third quarter, but declined 14% below the 2000
second quarter level, reflecting the impact of rate increases taken this year.
The average rate increase implemented through September of 2000 was
approximately 10% and the company expects rate increases to be implemented by
the end of 2000 to be approximately 12%. The rate increases in the non-standard
portion of this group have been approximately 13% through September and are
expected to be approximately 15% by year-end, which reflects the tightening of
this market. This group reported a combined ratio of 110.6% for the 2000 third
quarter, reflecting the continuing effect of rate inadequacies on policies
written late in 1999 and early 2000 and higher loss costs relating primarily to
increased claims severity. The combined ratio for the 1999 third quarter was
101.1%.
Net written premiums of the Specialty Group for the 2000 third quarter
were 6% above the 1999 period. Adjusting for the impact of reinsurance
agreements relating to the California workers' compensation business in effect
throughout 1999 and terminated in January of this year, net written premiums
were up about 1%. The Specialty Group's combined ratio was 116.8% for the 2000
third quarter, which included 10.4 points for the reserve strengthening in the
California workers' compensation business. Excluding the California workers
compensation business, other specialty operations had a combined ratio of 101.6%
during the quarter. These other specialty operations achieved rate increases of
10% through September and are targeting a 12% increase by the end of 2000. The
Specialty Group's combined ratio for the 1999 third quarter was 103.2%.
Carl H. Lindner III commented: "As we expected, premium levels moderated
significantly during the third quarter as compared to the first half of the
year, reflecting the impact of our aggressive rate increases taken so far this
year. We will continue to take the rate and strategic actions that are necessary
to achieve appropriate returns in our P&C Group. Also, the strengthening of our
California workers' compensation reserves reflects our commitment to maintaining
a strong reserve position."
The combined ratio of AFG's P&C group for the first nine months of 2000
was 108.8% compared to 100.8% for the 1999 period. Adjusting for the effect of
the California workers' compensation reinsurance agreements mentioned earlier
and the 2000 first quarter premiums of the direct response business acquired in
April of 1999, net written premiums for the 2000 period increased about 13% over
the 1999 period.
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For the third quarter of 2000, AFG's annuity, life and health insurance
operations reported an operating earnings contribution that was comparable to
the 1999 period. Adjusting for premiums of a subsidiary acquired in October
1999, this group's statutory premiums in the 2000 third quarter grew 13% above
the comparable 1999 period primarily attributable to increased sales of variable
annuities and life insurance.
American Financial Group is engaged primarily in private passenger
automobile and specialty property and casualty insurance businesses and in the
sale of retirement annuities, life, supplemental health and long-term care
insurance products.
This press release contains certain statements that may be deemed to be
"forward- looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
All statements in this press release not dealing with historical results are
forward-looking and are based on estimates, assumptions and projections. Actual
results could differ materially from those expected by AFG depending on certain
factors including but not limited to: changes in economic conditions especially
with regard to availability of and returns of capital, regulatory actions,
changes in legal environment, levels of catastrophes and other major losses,
availability of reinsurance, competitive pressures, ability to obtain rate
increases, driving patterns and other changes in market conditions that could
affect AFG's insurance operations.
The company will hold a conference call to discuss third quarter results
at 2:00 p.m. (EST) today. Toll-free telephone access will be available by
dialing 1-800-810-0924 and providing the confirmation code 733856. Please dial
in 5 to 10 minutes prior to the scheduled start time of the call. A replay of
the call will also be available after 5:00 p.m. (EST) today by dialing
1-888-203-1112 and providing the same confirmation code.
(Financial summaries follow)
This earnings release and additional Financial Supplements are available
at AFG's web site: www.amfnl.com.
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AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES
SUMMARY OF EARNINGS
(In Millions, Except Per Share Data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------- ---------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues $ 997.5 $ 874.6 $2,807.6 $2,490.6
Costs and expenses 1,014.4 809.3 2,767.0 2,292.8
-------- -------- -------- --------
(16.9) 65.3 40.6 197.8
Related income taxes (benefit) ( 6.1) 24.3 12.6 71.2
-------- -------- -------- --------
Earnings (losses)from insurance businesses (10.8) 41.0 28.0 126.6
Net earnings (losses) from investee
corporations (13.2) (9.4) (4.2) 1.7
Realized investment gains (losses), net
of taxes 1.9 (2.9) 15.1 4.5
Cumulative effect of accounting change - - - (3.8)
Extraordinary items - gain (loss) on
prepayment of debt, net - 1.4 - (2.3)
Net Earnings (Losses) $ (22.1) $ 30.1 $ 38.9 $ 126.7
Diluted Earnings (Losses) per Common Share:
Insurance businesses $ (.18) $ .68 $ .48 $ 2.08
Investee corporations (.23) (.15) (.08) .03
Realized investment gains (losses) .03 (.05) .26 .07
Cumulative effect of accounting change - - - (.06)
Extraordinary items - .02 - (.04)
-------- -------- -------- --------
Net earnings (losses) $ (.38) $ .50 $ .66 $ 2.08
======== ======== ======== ========
Average number of Shares (diluted) 58.8 60.0 58.7 60.8
Book Value Per Share $ 22.92 $ 24.52
======== ========
</TABLE>
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Supplemental Earnings Data
(In Millions)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Property and Casualty Insurance
Net premiums earned $661.0 $585.6 $1,856.9 $1,680.6
====== ====== ======== ========
Underwriting profit (loss) $(96.5) $ (9.6) $ (162.8) $ (14.1)
Investment income 88.4 82.4 261.5 251.9
Other income (expense) (8.4) (5.9) (8.5) (27.4)
------ ------ -------- --------
P & C operating earnings (losses) $(16.5) $ 66.9 $ 90.2 $ 210.4
Annuities, Life & Health operating
earnings $ 25.5 $ 27.2 $ 43.4 $ 76.5
Interest expense of Parent
Holding Companies $(11.8) $(10.6) $ (33.2) $ (33.0)
</TABLE>
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AMERICAN FINANCIAL GROUP, INC.
PROPERTY AND CASUALTY INSURANCE OPERATIONS
UNDERWRITING RESULTS BY BUSINESS SEGMENT
(In Millions)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------ -------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Property and Casualty Insurance
Operations:
Net premiums written $ 641 $ 612 $1,972 $1,689
====== ====== ====== ======
Ratios (GAAP):
Loss & LAE ratio 85.1% 72.3% 78.8% 70.7%
Expense ratio 29.4% 29.1% 29.8% 29.9%
Policyholder dividend ratio .2% .3% .2% .2%
------ ------ ------ ------
Combined Ratio(1) 114.7% 101.7% 108.8% 100.8%
====== ====== ====== ======
Business Segment Data:
Personal:
--------
Net premiums written $ 299 $ 287 $ 997 $ 839
====== ====== ====== ======
Ratios (GAAP):
Loss & LAE ratio 85.3% 76.4% 82.3% 75.6%
Expense ratio 25.3% 24.7% 25.3% 24.6%
------- ------ ------ ------
Combined Ratio 110.6% 101.1% 107.6% 100.2%
======= ====== ====== ======
Specialty:
---------
Net premiums written $ 342 $ 324 $ 975 $ 850
====== ====== ====== ======
Ratios (GAAP):
Loss & LAE ratio 83.3% 69.3% 74.3% 64.9%
Expense ratio 33.2% 33.4% 34.3% 35.6%
Policyholder dividend ratio .3% .5% .3% .5%
------ ------ ------ ------
Combined Ratio 116.8% 103.2% 108.9% 101.0%
====== ====== ====== ======
</TABLE>
(1) Includes other discontinued lines.
# # #
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Exhibit 99-2
[SLIDE FORMAT]
AMERICAN FINANCIAL GROUP
UNRECOGNIZED INVESTMENT ASSET VALUES
o Managed Assets/Real Estate
- Income producing
- Basis: $125 million
- EBITDA:$25 million
- Other (estimated unrealized gain: $100-$125 million)
o Great American Financial Resources, Inc.
- Basis: $525 million
- Ownership: 35.1 million shares
o Chiquita
- Basis: $153 million
- Ownership: 24 million shares
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