Zacks Investment Research upgraded shares of American Financial Group Inc. (AFG) from NEUTRAL to OUTPERFORM on March 14, 2014, with a target price of $68.00.
We are upgrading our recommendation on American Financial to Outperform from Neutral following fourth-quarter earnings beat. The outperformance came on the back of record earnings from the company's Annuity segment and significantly higher underwriting profitability in its Specialty Property and Casualty segment. The company, a niche player in the property and casualty and annuity market has exhibited strong performance in 2013 and is benefiting from improving industry trends. A benign catastrophe year along with increasing insurance pricing led to overall earnings growth. The company's combined ratio which has trended lower than the industry standards is also commendable. The recent acquisition of Summit Holdings is a strategic step by the company to expand its workers' compensation business and is expected to be immediately accretive to earnings. A strong balance sheet, low leverage and disciplined capital management are other positives. However, a low interest rate environment, exposure to catastrophe losses and rising total expense are some of the near-term headwinds.
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