Jefferies Starts American Financial (AFG) at Hold, 'limited opportunities for premium or investment leverage extension'

Jefferies analyst Andrew Andersen initiates coverage on American Financial (NYSE: AFG) with a Hold rating and a price target of $120.00.

The analyst comments "Expect the company to show weaker reported underwriting margins for total P&C in 2H23/2024 as its greater weighting to the standard market, workers' comp business and casualty lines makes near term margin expansion more difficult to achieve as favorable PYD comes off strong levels. Higher multifamily real-estate and structured product exposure compared to peers' contributes to our Hold rating. We see limited opportunities for premium or investment leverage extension which is already above peers and believe near-term alternative returns will be below prior years' - all of which we reflect in our valuation. Favorably view the diversification of AFG's businesses (and leading positions within) and find excess capital and continued earnings generation (~20% ROE for 2023-2025E) leaves company in a position to continue to return capital (JEF est. ~$550mn in 2H23, in-line with street) to shareholders through both special dividends and share repurchases. $120 PT (12% ETR) is based on 2.2x P/B ex AOCI (10.3x 2024E EPS)."

For an analyst ratings summary and ratings history on American Financial click here. For more ratings news on American Financial click here.

Shares of American Financial closed at $113.45 yesterday.

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