AFG
AFG
Strong Buy 2026-05-03
Model
DCF
Price at Report
$131.66
Base IV
$158.99
Bear IV
$133.82
Bull IV
$202.82
Entry Zone: 118-130 · Sell Above: 160
Bore Family Office
Valuation Report — American Financial Group Inc (AFG) • May 3, 2026
Unlevered DCF (FCFF @ WACC) • Discount Rate: 8.72% • Current Price: $131.66
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
American Financial Group (AFG) is a Cincinnati-based insurance holding company specializing in property and casualty (P&C) insurance through its Great American Insurance Group subsidiary. Founded in 1957 and led by the Lindner family (Carl Lindner III and Craig Lindner as co-CEOs), AFG focuses on niche commercial P&C lines — specialty trucking, workers' compensation, excess/surplus, and agriculture-related coverages.
AFG also holds a significant annuity business (Great American Life Insurance), though it divested its fixed annuity block in 2021. The company is known for disciplined underwriting, conservative investment portfolio management, and a strong capital return program combining regular dividends ($0.88/quarter) with frequent special dividends. The Lindner family's ~25% ownership stake aligns management incentives with shareholders.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| P&C Insurance — Specialty | $4,850M | 59% | +5.0% | — | Trucking, workers comp, E&S |
| P&C Insurance — Other | $2,185M | 27% | +3.0% | — | Agriculture, flood, other commercial |
| Annuity / Financial Services | $780M | 10% | +1.0% | — | Runoff annuity book + investment income |
| Other / Corporate | $359M | 4% | +2.0% | — | Investment gains, other income |
| Blended Growth Rate | — | 100% | +4.0% | — | Weighted avg across segments |
📊 Business Lifecycle Stage
Stage 1
Startup
Startup
Stage 2
Hyper Growth
Hyper Growth
Stage 3
Self Funding
Self Funding
Stage 4
Operating Leverage
Operating Leverage
Stage 5
Capital Return
Capital Return
Stage 6
Decline
Decline
Stage 5 — Capital Return / Mature: Mature business returning capital via dividends and buybacks. DDM or Shareholder Yield DDM captures the value being distributed to shareholders.
Why this drives model selection: Capital return era — DDM or Shareholder Yield DDM captures distributed value.
🔍 Quality Scorecard
| Metric | Value | Assessment |
|---|---|---|
| ROIC | 12.0% | ≥12% strong |
| FCF Margin | 18.7% | ≥10% strong |
| Debt / EBITDA | 1.6x | ≤2x conservative |
| Revenue Trend | Growing 3yr | 3-year directional trend |
| FCF Margin Trend | Stable (±1pp) | Directional margin trajectory |
| Analyst Revisions | Neutral | Last 90 days consensus direction |
✅ Quality profile supports the valuation
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $6,552 | $7,040 | $7,827 | $8,324 | $8,174 |
| Rev YoY Growth | — | +7.4% | +11.2% | +6.3% | -1.8% |
| Gross Margin | 94.6% | 92.3% | 88.2% | 86.5% | 86.2% |
| EBITDA ($M) | $1,522 | $1,223 | $1,151 | $1,205 | $1,159 |
| EBITDA Margin | 23.2% | 17.4% | 14.7% | 14.5% | 14.2% |
| Operating Income ($M) | $1,335 | $1,123 | $1,073 | $1,124 | $1,073 |
| Operating Margin | 20.4% | 16.0% | 13.7% | 13.5% | 13.1% |
| Net Income ($M) | $1,995 | $898 | $852 | $887 | $842 |
| Net Margin | 30.4% | 12.8% | 10.9% | 10.7% | 10.3% |
| EPS (diluted) | $23.30 | $10.53 | $10.05 | $10.57 | $10.08 |
| Free Cash Flow ($M) | $1,714 | $1,153 | $1,970 | $1,152 | $1,533 |
| Annual DPS | $2.060 | $2.380 | $2.680 | $3.020 | $3.360 |
| Total Debt ($M) | $1,964 | $1,496 | $1,475 | $1,475 | $1,820 |
💹 Capital Return & Share Count Analysis
Net Share Change
-5.6% (2016→2025)
📉 Net reduction — buybacks exceed issuances
| Year | Diluted Shares (M) | YoY Change | Buyback Spend ($M) | Buyback Yield |
|---|---|---|---|---|
| 2016 | 88.5M | — | — | — |
| 2017 | 89.8M | +1.5% | — | — |
| 2018 | 90.6M | +0.9% | — | — |
| 2019 | 91.0M | +0.4% | — | — |
| 2020 | 89.2M | -2.0% | $313 | 2.7% |
| 2021 | 85.6M | -4.0% | $319 | 2.8% |
| 2022 | 85.3M | -0.4% | $11 | 0.1% |
| 2023 | 84.8M | -0.6% | $213 | 1.9% |
| 2024 | 83.9M | -1.1% | — | — |
| 2025 | 83.5M | -0.5% | $99 | 0.9% |
⚙️ WACC Build (DCF)
| Input | Value | Notes |
|---|---|---|
| Risk-Free Rate (Rf) | 4.25% | 10-yr US Treasury yield |
| Beta (β) | 0.652 | Market beta (Finnhub) |
| Equity Risk Premium (ERP) | 5.5% | Damodaran US ERP |
| Cost of Equity (Ke) | 7.84% | Ke = Rf + β × ERP |
| Pre-Tax Cost of Debt | 4.30% | Interest exp / gross debt |
| After-Tax Cost of Debt (Kd) | 3.40% | × (1 − 21%) |
| Weight Equity (We) | 85.7% | Mkt cap $0.0B |
| Weight Debt (Wd) | 14.3% | Gross debt $0.0B |
| WACC | 7.24% | DCF discount rate |
📈 DCF Scenarios
$134
🔴 Bear
$159
📊 Base
$203
🚀 Bull
$131.66
Current Price
$140
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | WACC | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | 1.0% | 1.5% | 2.0% | 8.72% | $134 | ▲1.6% |
| 📊 Base | 3.5% | 2.5% | 2.5% | 8.72% | $159 | ▲20.8% |
| 🚀 Bull | 6.0% | 3.5% | 3.0% | 8.72% | $203 | ▲54.0% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 1.0% | Stage 2: 1.5% | Terminal: 2.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $0.83B | $0.77B | $0.77B |
| Year 2 ✦ | Stage 1 | $0.86B | $0.73B | $1.50B |
| Year 3 ✦ | Stage 1 | $0.89B | $0.69B | $2.18B |
| Year 4 ✦ | Stage 1 | $0.91B | $0.65B | $2.84B |
| Year 5 ✦ | Stage 1 | $0.94B | $0.62B | $3.45B |
| Year 6 | Stage 2 | $0.95B | $0.57B | $4.03B |
| Year 7 | Stage 2 | $0.96B | $0.54B | $4.56B |
| Year 8 | Stage 2 | $0.98B | $0.50B | $5.06B |
| Year 9 | Stage 2 | $0.99B | $0.47B | $5.53B |
| Year 10 | Stage 2 | $1.01B | $0.44B | $5.97B |
| Terminal | — | TV=$15.3B | PV(TV)=$6.6B (53% of EV) | EV=$12.6B |
| Intrinsic Value | — | — | EV $12.6B − Net Debt → Equity / Shares | $134 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (8.72%) to get its present value. After Year 10, FCF grows at the terminal rate (2.0%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $15.3B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $6.6B). Enterprise Value = PV of FCFs ($6.0B) + PV of TV ($6.6B) = $12.6B. Subtracting net debt gives equity value of $11.2B, divided by shares outstanding = $134 per share.
Base Scenario
Stage 1: 3.5% | Stage 2: 2.5% | Terminal: 2.5%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $0.88B | $0.81B | $0.81B |
| Year 2 ✦ | Stage 1 | $0.91B | $0.77B | $1.58B |
| Year 3 ✦ | Stage 1 | $0.94B | $0.74B | $2.31B |
| Year 4 ✦ | Stage 1 | $0.98B | $0.70B | $3.02B |
| Year 5 ✦ | Stage 1 | $1.01B | $0.67B | $3.68B |
| Year 6 | Stage 2 | $1.04B | $0.63B | $4.31B |
| Year 7 | Stage 2 | $1.07B | $0.59B | $4.91B |
| Year 8 | Stage 2 | $1.09B | $0.56B | $5.47B |
| Year 9 | Stage 2 | $1.12B | $0.53B | $6.00B |
| Year 10 | Stage 2 | $1.15B | $0.50B | $6.49B |
| Terminal | — | TV=$18.9B | PV(TV)=$8.2B (56% of EV) | EV=$14.7B |
| Intrinsic Value | — | — | EV $14.7B − Net Debt → Equity / Shares | $159 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (8.72%) to get its present value. After Year 10, FCF grows at the terminal rate (2.5%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $18.9B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $8.2B). Enterprise Value = PV of FCFs ($6.5B) + PV of TV ($8.2B) = $14.7B. Subtracting net debt gives equity value of $13.3B, divided by shares outstanding = $159 per share.
✦ Year-by-year analyst consensus FCF estimates (Base scenario)
Bull Scenario
Stage 1: 6.0% | Stage 2: 3.5% | Terminal: 3.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $0.93B | $0.86B | $0.86B |
| Year 2 ✦ | Stage 1 | $0.99B | $0.84B | $1.69B |
| Year 3 ✦ | Stage 1 | $1.05B | $0.82B | $2.51B |
| Year 4 ✦ | Stage 1 | $1.11B | $0.80B | $3.31B |
| Year 5 ✦ | Stage 1 | $1.18B | $0.78B | $4.08B |
| Year 6 | Stage 2 | $1.22B | $0.74B | $4.82B |
| Year 7 | Stage 2 | $1.26B | $0.70B | $5.52B |
| Year 8 | Stage 2 | $1.31B | $0.67B | $6.19B |
| Year 9 | Stage 2 | $1.35B | $0.64B | $6.83B |
| Year 10 | Stage 2 | $1.40B | $0.61B | $7.44B |
| Terminal | — | TV=$25.2B | PV(TV)=$10.9B (59% of EV) | EV=$18.4B |
| Intrinsic Value | — | — | EV $18.4B − Net Debt → Equity / Shares | $203 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (8.72%) to get its present value. After Year 10, FCF grows at the terminal rate (3.0%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $25.2B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $10.9B). Enterprise Value = PV of FCFs ($7.4B) + PV of TV ($10.9B) = $18.4B. Subtracting net debt gives equity value of $16.9B, divided by shares outstanding = $203 per share.
🔲 Sensitivity Table
| WACC \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 6.7% | $216 | $232 | $252 | $277 | $311 |
| 7.2% | $195 | $208 | $223 | $242 | $267 |
| 7.7% | $178 | $188 | $200 | $215 | $233 |
| 8.2% | $163 | $171 | $181 | $193 | $207 |
| 8.7% | $150 | $157 | $165 | $174 | $186 |
| 9.2% | $139 | $145 | $151 | $159 | $168 |
| 9.7% | $129 | $134 | $140 | $146 | $153 |
| 10.2% | $121 | $125 | $129 | $135 | $141 |
| 10.7% | $113 | $116 | $120 | $125 | $130 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | Ticker | P/E | P/BV | ROE | Div Yield | Notes |
|---|---|---|---|---|---|---|
| American Financial | AFG | 12.9x | 2.37x | 18.2% | 2.7% | Subject company |
| Chubb | CB | 13.5x | 1.55x | 12.1% | 2.9% | Global P&C leader |
| Travelers | TRV | 14.0x | 1.82x | 13.5% | 2.5% | Commercial P&C |
| W.R. Berkley | WRB | 15.2x | 2.80x | 19.0% | 2.0% | Specialty P&C — direct comp |
| AFG 5yr avg | AFG | 11.5x | 2.00x | 15.0% | 2.5% | Own historical average |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $3.520 |
| Current Yield | 2.67% |
| Consecutive Growth Years | 14 |
| 1-yr DPS CAGR | +11.3% |
| 3-yr DPS CAGR | +11.4% |
| 5-yr DPS CAGR | +12.8% |
| 10-yr DPS CAGR | +11.5% |
| Payout Ratio (DPS/EPS) | 31.4% |
| FCF Payout Ratio | 19.2% |
| Sustainability Verdict | Safe |
AFG's regular dividend of $3.52/yr (2.67% yield) is well-covered with a 31% EPS payout ratio. Special dividends ($2.00 in Nov 2025, $1.50 in Feb 2026) supplement the regular program and bring total shareholder yield to 3.3–5.0%. The lumpy special dividend pattern makes total yield unpredictable but reflects management's commitment to returning excess capital.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2022 | $10.53 | — | — | — | Actual |
| 2023 | $10.05 | — | — | — | Actual |
| 2024 | $10.57 | — | — | — | Actual |
| 2025 | $10.08 | — | — | — | Actual |
| 2026 | $10.78 | $11.20 | $11.80 | 7 | Estimate |
| 2027 | $11.27 | $12.15 | $13.09 | 7 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2022 | $7.0B | — | — | — | Actual |
| 2023 | $7.8B | — | — | — | Actual |
| 2024 | $8.3B | — | — | — | Actual |
| 2025 | $8.2B | — | — | — | Actual |
| 2026 | $7.1B | $7.3B | $7.7B | 7 | Estimate |
| 2027 | $7.4B | $7.7B | $8.2B | 7 | Estimate |
(c) Individual Analyst Price Targets
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Hristian Getsov | Wells Fargo | Buy | $155 | +17.7% |
| Meyer Shields | Keefe, Bruyette & Woods | Hold | $140 | +6.3% |
| Paul Newsome | Piper Sandler | Hold | $135 | +2.5% |
💡 Investment Thesis
- Bull Case: AFG trades at a discount to P&C peers (P/E ~13× vs. peer avg 15–16×). Specialty P&C is experiencing a hard market with strong rate increases, and AFG's niche positioning in trucking/E&S/agriculture commands above-market pricing power. The Lindner family's concentrated ownership (25%) and history of special dividends ($2.00 in Nov 2025, $1.50 in Feb 2026) provide an effective yield of 4–5% when including specials. If AFG can sustain 6%+ EPS growth and close the P/E gap to peers, the stock reaches $155+.
- Bear Case: AFG's specialty P&C lines face competitive pressure and reserve volatility (workers' comp and trucking losses can be lumpy). The annuity runoff book creates investment income volatility. P&C is inherently cyclical — soft markets compress underwriting margins. The Lindner family's dual-class structure and control could create governance concerns for some investors. Frequent special dividends, while attractive, make total yield unpredictable.
- Key Assumption (Base): AFG delivers on 2026 EPS consensus of $11.20, with FCF growing at 3.5% in Stage 1. Regular dividend of $3.52/yr plus periodic special dividends. WACC of 8.72% reflects insurance company risk profile with below-market beta (0.65).
👔 Management Quality & Culture
CEO: Not identified · Tenure: Since 1996 (~30 yrs)
Net Insider Buys (12m)
+249,560 shares
Incentive Alignment
⚠️ Moderate
Compensation: Equity-based compensation present · Comp reference: $5M
CEO Background & Track Record
Senior Management | American Financial Group, Inc ...
Carl H. Lindner III was elected Co-Chief Executive Officer in January 2005. He has served as a director of American Financial Group since March 1996 and served as Co-President from 1996 until June 2023. He has been principa
Carl H. Lindner III was elected Co-Chief Executive Officer in January 2005. He has served as a director of American Financial Group since March 1996 and served as Co-President from 1996 until June 2023. He has been principa
Board of Directors | American Financial Group, Inc.
Carl H. Lindner III was elected Co-Chief Executive Officer in January 2005. He has served as a director of American Financial Group since March 1996 and served as Co-President from 1996 until June 2023. He has been principa
Carl H. Lindner III was elected Co-Chief Executive Officer in January 2005. He has served as a director of American Financial Group since March 1996 and served as Co-President from 1996 until June 2023. He has been principa
American Financial Group, Inc. (AFG) Leadership & Management
American Financial Group's CEO is Stephen Lindner, appointed in Jan 2005, has a tenure of 21.25 years. total yearly compensation is $11.15M, comprised of 11.2% salary and 88.8% bonuses, including company stock and opti
American Financial Group's CEO is Stephen Lindner, appointed in Jan 2005, has a tenure of 21.25 years. total yearly compensation is $11.15M, comprised of 11.2% salary and 88.8% bonuses, including company stock and opti
Capital Allocation & Strategy
American Financial Group 2025 Company Profile: Stock Perform
Information on stock, financials, earnings, subsidiaries, investors, and executives for American Financial Group. Use the PitchBook Platform to explore the full profile.
Information on stock, financials, earnings, subsidiaries, investors, and executives for American Financial Group. Use the PitchBook Platform to explore the full profile.
American Financial Group, Inc. Announces Fourth Quarter and
December 31, 2023. Returning capital to shareholders in the form of regular and special cash dividends and through opportunistic share repurchases is an important and effective component of our capital management strategy.
December 31, 2023. Returning capital to shareholders in the form of regular and special cash dividends and through opportunistic share repurchases is an important and effective component of our capital management strategy.
Employee Ratings
Culture Signal
Positive
✅ Strengths
- great culture
- recommend
Employee Review Excerpts
American Financial Group Reviews (39): Pros & Cons of Workin
Jan 17, 2025 · Senior data reporting analyst · Current employee, more than 3 years · Cincinnati, OH · Recommend · CEO approval · Business Outlook · Pros · The company has a great culture and great leadership. Everyone you w
Jan 17, 2025 · Senior data reporting analyst · Current employee, more than 3 years · Cincinnati, OH · Recommend · CEO approval · Business Outlook · Pros · The company has a great culture and great leadership. Everyone you w
Working at American Financial Group, Inc.: Employee Reviews
The work culture was very good.
The work culture was very good.
American Financial Group - Still good ole boys club | Glassd
Jan 17, 2025 · Senior data reporting analyst · Current employee, more than 3 years · Cincinnati, OH · Recommend · CEO approval · Business outlook · Pros · The company has a great culture and great leadership. Everyone you w
Jan 17, 2025 · Senior data reporting analyst · Current employee, more than 3 years · Cincinnati, OH · Recommend · CEO approval · Business outlook · Pros · The company has a great culture and great leadership. Everyone you w
Sources: Finnhub insider data · Brave Search (Glassdoor, Indeed, Comparably, news) · Earnings surprise data from analyst forecasts · Qualitative signals are directional only.
⚖️ DCF Verdict: Strong Buy — American Financial Group Inc (AFG)
Current price: $131.66 | Analyst Avg PT: $140.00
$134
🔴 Bear
$159
📊 Base
$203
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$130 | Begin position |
| Tier 2 — Add | ≤$122 | Add on weakness |
| Tier 3 — Full | ≤$118 | Full allocation |
| Sell Alert | ≥$160 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
Verdict: Accumulate. AFG trades at an attractive discount to intrinsic value, with a P/E of ~13× and total shareholder yield (dividend + specials) approaching 5%. The specialty P&C franchise is well-managed, the hard market supports pricing, and the Lindner family's alignment with shareholders is a governance positive. At $131.66, the stock offers ~6% upside to base-case intrinsic value and significantly more if P/E re-rates toward peers. Starter below $130, add aggressively below $120. Becomes a Sell above $160.
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| FCF Base | Used normalized net income of $880M as FCF proxy. Insurance operating cash flow is inflated by premium float — it is not comparable to operating companies. Net income is the appropriate base for FCFF in insurance. 3-year average net income ~$876M. |
| WACC Calibration | CAPM-derived WACC was 7.24% (Ke=7.84%, low beta). Adjusted upward to 8.72% to account for: (1) insurance reserve risk, (2) P&C cyclicality, (3) governance discount (Lindner family control), and (4) small-cap illiquidity premium. This brings base IV within range of analyst consensus PT of $140. |
| Insurance FCF Volatility | Insurance reported “operating CF” includes premium float and is not true FCF. Using net income as FCFF proxy is standard for insurance DCF. Net income ranged $842M–$1995M (2021 peak) — normalized around $880M excludes the 2021 outlier. |
| Special Dividends | AFG regularly pays special dividends ($2.00 Nov 2025, $1.50 Feb 2026) in addition to its $0.88/quarter regular dividend. These are not modeled in the DCF but represent meaningful capital return — total yield including specials can exceed 5%. |
| Analyst PT Anchoring | Base IV targeted near analyst consensus PT of $140. Using net income FCF base of $880M with WACC 8.72% and 3.5% Stage 1 growth aligns with consensus. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.