American Financial Group Inc (NYSE: AFG)

Sector: Financial Services Industry: Insurance - Property & Casualty CIK: 0001042046
Market Cap 14.11 Bn
P/B 3.16
P/E 30.42
P/S 3.14
ROIC (Qtr) 13.94
Div Yield % 1.62
Rev 1y % (Qtr) -1.60
Total Debt (Qtr) 1.82 Bn
Debt/Equity (Qtr) 0.38
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About

American Financial Group, Inc. (AFG), often referred to as AFG, is a leading insurance holding company that operates in the property and casualty insurance business. This company, which is listed on the New York Stock Exchange under the symbol "AFG," has a long history that dates back to 1872. Through its subsidiary, Great American Insurance Group, AFG provides specialized commercial products to businesses. AFG generates revenue through its property and casualty insurance operations, which include a range of products and services such as commercial...

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Investment thesis

Bull case

  • Strong operating cash flow of 1.42B provides robust 0.78x coverage of total debt 1.82B, indicating excellent debt servicing capability and financial flexibility.
  • Strong tangible asset base of 33.51B provides 18.41x coverage of total debt 1.82B, indicating robust asset backing and low credit risk.
  • Operating cash flow of 1.42B provides exceptional 18.72x coverage of interest expenses 76M, showing strong debt service capability.
  • Robust free cash flow of 1.30B exceeds capital expenditure of 125M by 10.38x, indicating strong organic growth funding capability.
  • Tangible assets of 33.51B provide exceptional 7.53x coverage of deferred revenue 4.45B, showing strong service capability backing.

Bear case

  • Operating cash flow of 1.42B barely covers its investment activities of (92M), with a coverage ratio of -15.47, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 1.42B provides thin coverage of dividend payments of (770M) with a -1.85 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 1.84B provide limited coverage of acquisition spending of (13M), which is -141.69x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Operating cash flow of 1.42B provides insufficient coverage of deferred revenue obligations of 4.45B, which is 0.32x, raising concerns about future service delivery capabilities.
  • Retained earnings of 3.30B provide limited buffer against comprehensive income items of (73M), which is -45.19x, indicating elevated exposure to market risks.

Peer comparison

Companies in the Insurance - Property & Casualty
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 PGR Progressive Corp/Oh/ 121.46 Bn 30.80 3.11 6.90 Bn
2 CB Chubb Ltd 109.27 Bn 36.88 5.64 21.01 Bn
3 ALL Allstate Corp 69.21 Bn 29.01 1.62 8.09 Bn
4 TRV Travelers Companies, Inc. 67.61 Bn 10.75 1.38 9.27 Bn
5 HIG Hartford Insurance Group, Inc. 61.19 Bn 37.09 3.27 4.37 Bn
6 WRB Berkley W R Corp 38.52 Bn 124.63 8.69 2.87 Bn
7 CINF Cincinnati Financial Corp 26.91 Bn 74.14 6.73 0.88 Bn
8 MKL Markel Group Inc. 26.46 Bn 13.00 1.68 4.28 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.41 0.50
EV to Cash from Ops. EV/CFO 16.24 -16.03
EV to Debt EV to Debt 7.67 11.42
EV to EBIT EV/EBIT 17.41 22.13
EV to EBITDA EV/EBITDA 14.95 17.53
EV to Free Cash Flow [EV/FCF] EV/FCF 17.31 68.07
EV to Market Cap EV to Market Cap 0.99 0.91
EV to Revenue EV/Rev 3.10 2.31
Price to Book Value [P/B] P/B 3.16 2.97
Price to Earnings [P/E] P/E 30.42 29.62
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 1.04 7.41
Dividend Payout Ratio % Div Payout % (Qtr) 96.60 19.66
Dividend per Basic Share Div per Share (Qtr) 9.28 1.49
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 59.62 37.69
Interest Coverage Int. cover (Qtr) 14.34 -9.19
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -17.92 -17.83
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 39.33 30.27
Dividend Growth (1y) % Div 1y % (Qtr) 33.91 16.34
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -10.15 62.82
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -9.13 35.62
EBIT Growth (1y) % EBIT 1y % (Qtr) -10.29 56.25
EBT Growth (1y) % EBT 1y % (Qtr) -10.97 52.70
EPS Growth (1y) % EPS 1y % (Qtr) -10.78 48.20
FCF Growth (1y) % FCF 1y % (Qtr) 15.07 15.47
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -11.77 16.55
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.24 0.38
Cash Payout Ratio Cash Payout (Qtr) 0.50 0.45
Cash Ratio Cash Ratio 0.00 0.02
Current Ratio Current Ratio 0.00 0.06
Debt to Equity Ratio Debt/Equity (Qtr) 0.38 0.23
Interest Cover Ratio Int Coverage (Qtr) 14.34 -9.19
Times Interest Earned Times Interest Earned (Qtr) 14.34 -9.19
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 14.20 14.01
EBIT Margin % EBIT Margin % (Qtr) 13.20 13.05
EBT Margin % EBT Margin % (Qtr) 12.28 12.25
Gross Margin % Gross Margin % (Qtr) 20.30 40.49
Net Profit Margin % Net Margin % (Qtr) 9.70 9.63