American Financial Group Announces Fourth Quarter and Full Year 2004 Results

American Financial Group Announces Fourth Quarter and Full Year
2004 Results 


CINCINNATI, Feb. 10  /PRNewswire-FirstCall/ -- American Financial Group, Inc.
(NYSE:AFG) (NASDAQ:AFG) today reported net earnings for the 2004 fourth quarter
of $92.6 million ($1.23 per share).  AFG's net earnings for the previous year's
fourth quarter were $196.6 million ($2.68 per share) which included a tax
benefit of $136.0 million ($1.90 per share) resulting from AFG's merger with
its subsidiary, American Financial Corporation ("AFC").  Net earnings for the
2004 full year were a record $359.9 million ($4.81 per share) compared to
$293.8 million ($4.12 per share) for 2003.

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In addition to net earnings, AFG has consistently utilized "core earnings", a
non-GAAP financial measure commonly used in the insurance industry, as an
economic measure.  Many investors and analysts focus on this non-GAAP measure
which sets aside items that may not be indicative of core operations, such as
net realized gains (losses) on investments, discontinued operations, cumulative
effect of accounting changes and other non recurring items.  AFG believes that
excluding the impact of these items is useful in analyzing operating trends.  A
reconciliation of this non-GAAP measure to net earnings is included in the
accompanying summary of earnings.

Core earnings from insurance operations were $66.6 million ($.88 per share) for
the fourth quarter of 2004, 43% higher than the $46.4 million ($.65 per share)
reported for the previous year's fourth quarter.  AFG's core earnings from
insurance operations for the full year 2004 were $215.4 million ($2.88 per
share) compared to $155.8 million ($2.22 per share) for 2003.  The increases in
the 2004 quarter and full year results were due primarily to improved
underwriting margins in the property and casualty insurance ("P&C") operations
and higher operating earnings in the annuity, supplemental insurance and life
operations.  Details of the financial results may be found in the accompanying
schedules.

Craig Lindner and Carl Lindner III, AFG's Co-Chief Executive Officers, jointly
stated that 2004 was a very successful year for AFG.  The company generated
strong net earnings and sold 2.7 million shares of its common stock in a
December public offering, contributing to continued strong growth in
shareholders' equity.  Our core earnings per share from insurance operations
were up 30% over 2003 and were within the earnings guidance announced in
February of last year.  We continued to strengthen our balance sheet and
improve our leverage and financial flexibility.  We ended 2004 with a debt to
capital ratio of about 31% and holding company cash of approximately $133
million, providing solid liquidity going into 2005.  We expect continued growth
and profitability in our insurance operations and remain comfortable with our
2005 core earnings guidance of $3.15 to $3.40 per share.

Business Segment Results

The P&C Group of specialty insurance operations generated an underwriting
profit of $54.8 million in the 2004 fourth quarter, with a combined ratio of
89.9%, an improvement of 6.2 points from the 2003 fourth quarter.  Gross
written premiums for the 2004 quarter grew approximately 4% compared with the
same period a year ago.  Solid volume growth and rate increases in certain
businesses were partly offset by reductions in less profitable lines of
business and moderating rates.  Rate increases averaged about 2% for the 2004
fourth quarter.  Net written premiums for the 2004 quarter were 22% above the
2003 period, reflecting the impact of reductions in premiums ceded under
reinsurance agreements.

The Specialty Insurance Group's 2004 combined ratio was 94.1%, including 1.8
points from the hurricane losses, compared to 96.0% for 2003.  For the 2004
year, gross and net written premiums were 12% and 20%, respectively, above the
2003 amounts.  Further details of the Specialty Group operations may be found
in the accompanying schedules.

Carl Lindner III commented, "I am pleased with the growth and strong
underwriting performance of our P&C Specialty Group in 2004.  Our crop
insurance business reported a record earnings year, which was partially offset
by the effects of an unprecedented four Southeastern hurricanes.  Several of
our businesses reported substantial underwriting profits as a result of our
efforts in recent years to improve rate adequacy and claims management.  We
experienced continued moderation in rate increases during the latter part of
2004 with some rate decreases, particularly in our property lines.  We will
continue to maintain rate adequacy going forward even if it means reducing
business volume in certain lines of business.  We expect little change in
overall rates in 2005."

The Property and Transportation businesses reported stellar results for the
2004 fourth quarter and full year.  Their combined ratio for the 2004 fourth
quarter was nearly 38 points better than the same quarter a year earlier
primarily due to exceptionally strong profitability in our crop insurance
business.  Gross premiums written for the 2004 fourth quarter and full year
grew 6% and 17%, respectively, over the 2003 periods primarily due to strong
volume growth in our crop, equine and transportation insurance businesses.  The
2004 underwriting profit for the Property and Transportation businesses was
$118 million with a combined ratio of 80.7%, including 4.7 points of hurricane
losses.  The higher growth of 33% in net written premiums for 2004 over 2003
was attributable to lower premiums ceded under reinsurance agreements.

The California Workers' Compensation business continued to generate solid
underwriting profits.  Gross written premiums grew 23% and 31% for the quarter
and full year, respectively, over the 2003 periods, reflecting significant
volume growth.  This group continued to experience improving claims results due
to the workers' compensation reform enacted in California.  The reforms have
enabled the company to offer coverage at lower rates while maintaining
appropriate profitability.

Even though the Specialty Casualty group reported an underwriting loss for the
2004 fourth quarter, it ended the year profitably with a 2004 combined ratio of
99.8%.  The combined ratio for the 2004 quarter included the effects of a
charge related to the commutation of a Trenwick reinsurance agreement and
unfavorable prior year development in the executive liability operation and in
a business in run-off.  The other operations within this group generated very
solid underwriting profits.  Gross premiums declined for the 2004 fourth
quarter compared to the 2003 period and grew about 3% for the year.

The Specialty Financial businesses' increase in gross premiums during 2004 was
driven primarily by growth in our profitable collateral protection business. 
The group's 2004 fourth quarter combined ratio included the impact of the
commutation of a Converium reinsurance arrangement as well as adverse prior
year development in our surety and fidelity operations, aggregating nearly 15
points.  For the full year, these factors also increased the 2004 combined
ratio about 4.5 points, driving it slightly higher than 2003.

Mr. Lindner continued, "Even though we experienced some unexpected losses
during 2004, I am very proud of our P&C results and that we achieved our
overall objectives.  We expect our Property and Transportation businesses to
continue to report solid growth and strong underwriting profits going forward.
We also expect continued underwriting profitability in the California workers'
compensation business but anticipate somewhat lower premium growth due to the
rate environment.  I am disappointed with the underwriting performance in our
Specialty Casualty and Specialty Financial groups.  I expect slower premium
growth in these operations with opportunity for improvement in their results in
2005."

"We will continue to focus on adequate pricing of our insurance products as
well as managing capital levels in order to generate appropriate underwriting
profits and returns within our various business lines."

The Annuity, Supplemental Insurance and Life Group reported core net operating
earnings of $17.5 million for the fourth quarter of 2004 compared to $13.2
million for the 2003 period.  For the full year of 2004, core net operating
earnings of $70.9 million were approximately 28% above the $55.6 million
reported in 2003.  The 2003 results included a second quarter after- tax charge
of $8.1 million related to the negative effect of lower investment yields on
the fixed annuity operations.  Statutory premiums decreased by approximately 8%
in the fourth quarter and full year of 2004 compared to the respective 2003
periods.  Increases in 403 (b) annuity and supplemental insurance premiums were
more than offset by lower sales of single premium annuities.

Craig Lindner commented, "Despite the continued low interest rate environment,
each of our lines of business reported improved results in 2004 compared to the
year earlier.  The decrease in our single premium annuities reflects our
continued discipline in setting commissions and interest rates. We remain
committed to maintaining our pricing targets and look forward to continuing
improvement in our operations."

A reconciliation of "core net operating earnings", a non-GAAP measure, to net
income as well as further details may also be found in the earnings release
issued today by Great American Financial Resources, Inc. (NYSE:GFR). AFG owns
82% of GFR common stock and a proportional share of its earnings is included in
AFG's results.

About American Financial Group, Inc.

Through the operations of the Great American Insurance Group, AFG is engaged
primarily in property and casualty insurance, focusing on specialized
commercial products for businesses, and in the sale of retirement annuities,
supplemental insurance and life products.

Forward-Looking Statements

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.
Examples of such forward-looking statements include statements relating to: the
Company's expectations concerning market and other conditions, future premiums,
revenues and earnings; and rate increases.

Actual results could differ materially from those expected by AFG depending on
certain factors including but not limited to: the unpredictability of possible
future litigation if certain settlements do not become effective, changes in
economic conditions including interest rates, performance of securities
markets, and the availability of capital, regulatory actions, changes in legal
environment, judicial decisions and rulings, tax law changes, levels of
catastrophes and other major losses, adequacy of loss reserves of the insurance
businesses and other reserves, particularly with respect to amounts associated
with asbestos and environmental claims, availability of reinsurance and ability
of reinsurers to pay their obligations, competitive pressures, including the
ability to obtain rate increases, changes in debt and claims paying ratings and
other changes in market conditions that could affect AFG's insurance
operations.

The forward-looking statements are made only as of this date.  The Company
assumes no obligation to publicly update any forward-looking statements.

Conference Call

The company will hold a conference call to discuss 2004 fourth quarter and full
year results at 11:30 a.m. (ET) today.  Toll-free telephone access will be
available by dialing 1-866-800-8652.  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 at around 1:30 p.m. (ET) today until 8:00 p.m. on February 17, 2005.
To listen to the replay, dial 1-888-286-8010 and provide the confirmation code
16456058.  The conference call will also be broadcast over the Internet.  To
listen to the call via the Internet, go to AFG's website,
http://www.afginc.com/ , and follow the instructions at the Webcast link within
the Investor Relations section.

This earnings release and additional Financial Supplements are available at
AFG's web site: http://www.afginc.com/ .       '

             AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES
                           SUMMARY OF EARNINGS
                   (In Millions, Except Per Share Data)

                           Three months ended       Twelve months ended
                               December 31,             December 31,
                           2004          2003        2004          2003

  Operating revenues      $924.5       $825.5     $3,580.5     $3,280.9
  Costs and expenses       827.9        761.4      3,261.5      3,066.0
                            96.6         64.1        319.0        214.9
  Related income taxes      30.0         21.6        103.6         71.3
  Earnings from
   consolidated
   insurance
   operations (a)           66.6         42.5        215.4        143.6
  Net investee earnings
   from Infinity               -          3.9            -         12.2
  Core earnings from
   insurance
   operations (a)           66.6         46.4        215.4        155.8

  Non-core items,
   net of tax:
    Special tax
     benefits (b)              -        136.0            -        141.5
    Realized investment
     gains (losses)         28.8         44.7        192.2(c)      50.8
    Litigation
     settlements (d)           -            -        (33.8)       (23.1)
    Discontinued
     operations (e)         (1.6)       (34.9)        (2.4)       (33.6)
    Other                   (1.2)        (1.9)        (5.9)        (3.9)
    Cumulative effect of
     accounting change (f)     -          6.3         (5.6)         6.3

  Net earnings             $92.6       $196.6       $359.9       $293.8
  Premium paid on
   redemption of
   subsidiaries'
   preferred shares            -         (4.1)           -         (4.1)
  Net earnings
   available to common
   shares                  $92.6       $192.5       $359.9       $289.7

  Diluted Earnings (Loss)
   per Common Share:
    Core from insurance
     operations (a)         $.88         $.65        $2.88        $2.22
    Special tax
     benefits (b)              -         1.90            -         2.01
    Realized investment
     gains (losses)          .39          .62         2.57(c)       .73
    Litigation
     settlements (d)           -            -         (.45)        (.33)
    Discontinued
     operations (e)         (.02)        (.49)        (.03)        (.48)
    Other                   (.02)        (.09)        (.08)        (.12)
    Cumulative effect of
     accounting change (f)     -          .09         (.08)         .09

  Net earnings available
   to common shares        $1.23        $2.68        $4.81        $4.12

  Average number of
   diluted shares           75.5         71.7         74.8         70.3

   a) Reflects (a) 2004 losses of $24.1 million ($.32 per share) from four
      hurricanes, and (b)2003 charges of $28.5 million ($.41 per share) for
      an arbitration decision relating to a 1995 property claim arising from
      a discontinued business and $6.7 million ($.10 per share) for a
      reduction in estimated future profitability of in-force fixed
      annuities.
   b) Reflects tax benefits in 2003 relating to AFG's merger with AFC and
      the Company's basis in Infinity Stock.
   c) Includes $134 million ($1.80 per share) gain on the Provident
      Financial Group investment related to the merger with National City.
   d) Includes a 2004 charge of $33.8 million ($.45 per share) related to
      the settlement of environmental litigation and a 2003 charge of
      $23.1 million ($.33 per share) related to the settlement of litigation
      in the California workers' compensation business.
   e) Represents operating results and a 2003 fourth quarter impairment
      provision ($35.8 million) related to the planned disposal of Transport
      Insurance Company.
   f) Reflects the 2004 implementation of accounting changes related to
      utilizing the equity method of accounting for investments in limited
      liability companies as required by EITF 03-16 and long duration
      contracts mandated by Statement of Position 03-1 and the 2003
      implementation of FASB Interpretation No. 46 related to variable
      interest entities.



             AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES
                       SELECTED BALANCE SHEET DATA
                   (In Millions, Except Per Share Data)

                                                  December 31,  December 31,
                                                      2004          2003
  Selected Balance Sheet Data:
    Total Cash and Investments                      $15,637       $13,828
    Long-term Debt                                   $1,029          $837
    Payable to Subsidiary Trusts
     (Issuers of Preferred Securities)                  $78          $265
    Shareholders' Equity                             $2,431        $2,076
    Book Value Per Share                             $31.72        $28.42
    Book Value Per Share (Excluding unrealized
     gains (losses) on fixed maturities)             $29.35        $25.97
    Common Shares Outstanding                          76.6          73.1



                      AMERICAN FINANCIAL GROUP, INC.
                PROPERTY AND CASUALTY INSURANCE OPERATIONS
                           UNDERWRITING RESULTS
                              (In Millions)

                            Three months ended       Twelve months ended
                               December 31,              December 31,
                            2004         2003         2004         2003

  Property and
   Casualty Insurance
   Operations: (a)

   Gross written premiums   $792         $806       $3,646       $3,575

   Net written premiums     $538         $450       $2,229       $2,012

   Ratios (GAAP):
     Loss & LAE ratio      68.1%        71.5%        67.2%        70.9%(b)
     Expense ratio         22.2%        25.5%        27.4%        27.9%
     Policyholder
      dividend ratio         .3%          - %          .2%          .1%

     Combined Ratio (c)    90.6%        97.0%        94.8%        98.9%

   Specialty Group:

   Gross written premiums   $790         $764       $3,639       $3,243

   Net written premiums     $538         $441       $2,224       $1,854

   Ratios (GAAP):
     Loss & LAE ratio      67.5%        71.2%        66.7%        67.4%
     Expense ratio         22.1%        24.9%        27.2%        28.5%
     Policyholder
      dividend ratio         .3%          - %          .2%          .1%

     Combined Ratio        89.9%        96.1%        94.1%(d)     96.0%

   (a) Includes operations of Infinity Property and Casualty  through mid-
       February 2003, AFG's direct auto insurance companies through the date
       of their sale at the end of April 2003, personal lines operations
       remaining with AFG, and the specialty group.
   (b) Includes 2.3 points for the effect of an arbitration decision
       relating to a claim arising from a discontinued business.
   (c) Includes other discontinued lines.
   (d) Includes 1.8 points for the effect of losses from four hurricanes



                      AMERICAN FINANCIAL GROUP, INC.
                  PROPERTY AND CASUALTY INSURANCE GROUP
            SUPPLEMENTAL SPECIALTY GROUP OPERATING INFORMATION
                              (In Millions)

                       Three months              Twelve Months
                          ended         Pct.        ended          Pct.
                       December 31,    Change     December 31,    Change
                      2004      2003             2004      2003
  Gross Written
   Premiums:
    Property &
     Transportation   $231      $219      6%   $1,337    $1,142     17%
    Specialty
     Casualty          336       348     (3%)   1,453     1,413      3%
    Specialty
     Financial         126       118      7%      468       396     18%
    California Workers'
      Compensation      96        78     23%      380       290     31%
    Other                1         1    N.M.        1         2    N.M.
                      $790      $764      4%   $3,639    $3,243     12%

  Net Written
   Premiums:
    Property &
     Transportation   $158      $115     36%     $683      $515     33%
    Specialty
     Casualty          158       160       -      740       679      9%
    Specialty
     Financial         118        74     59%      395       302     31%
    California
     Workers'
     Compensation       87        73     19%      339       271     25%
    Other               17        19     (9%)      67        87    (22%)
                      $538      $441     22%   $2,224    $1,854     20%

  Combined Ratio (GAAP):
    Property &
     Transportation  57.3%     95.1%            80.7%     87.8%
    Specialty
     Casualty       107.0%     92.0%            99.8%     98.2%
    Specialty
     Financial      129.1%    110.6%           108.9%    108.4%
    California
     Workers'
     Compensation    84.1%     92.6%            89.5%     92.0%

   Aggregate
    Specialty Group  89.9%     96.1%            94.1%     96.0%

   Notes:
    1. Property & Transportation includes primarily physical damage and
       liability coverage for buses, trucks and recreational vehicles,
       inland and ocean marine, agricultural-related products and other
       property coverages.  The 2004 combined ratio includes 4.7 points for
       the effect of hurricane losses.
    2. Specialty Casualty includes primarily excess and surplus, general
       liability, executive and professional liability and customized
       programs for small to mid-sized businesses.
    3. Specialty Financial includes risk management insurance programs for
       lending and leasing institutions, surety and fidelity bonds and trade
       credit insurance.  The 2004 combined ratio includes .9 points for the
       effect of hurricane losses.
    4. California Workers' Compensation consists of a subsidiary that writes
       workers' compensation insurance primarily in the state of California.
    5. Other includes an internal reinsurance facility and discontinued
       lines.


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DATASOURCE: American Financial Group, Inc.



CONTACT:  Anne N. Watson, Vice President-Investor Relations of American

Financial Group, Inc., [phone]



Web site:  http://www.afginc.com/

http://www.greatamericaninsurance.com/ 

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