AFG - Earnings call transcript Q3 2017 | American Financial Group, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the American Financial Group 2017 Third Quarter Results Conference Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Ms. President Vice Assistant Weidner, Investor Relations. Diane may you begin. Ma'am,

Diane Weidner

Craig to Good Conference Third Group's Jeff thank Consolino, III Call. Group; American Welcome morning you. American and Lindner Quarter Carl joined AFG's morning Financial Co-CEOs and this of Financial and I'm by Lindner, XXXX CFO. Earnings Results

and representation be of portions referenced posted release, AFG's on press Our webcast website. investor during the supplement are These will call. materials

are our to reviewed be factual could available of or or a this contain of statements. earnings call, that notes Commission, be measure, over discussion your of differ are I which operating net errors a attributable Carl, our financial Slide authorized of shareholders that are would accuracy These like not Reform our please it found the XXXX. could and transcript draw included financial from should Certain earnings may in materially under it the net the operating also the future the our statements Act materially Before reading if actual that guarantees to to made reconciliation may filings attention consider Exchange to Litigation And intent be defined can results webcast. risks statements. transcription I in in to on of not condition earnings, you on these release. such Investors meaning AFG's non-GAAP Private or description We of our in note considered alter may X or and/or with A and uncertainties for to during core detailed remarks to include questions. and turn Securities as of statements A references responses performance. website. the statements cause these call core to net earnings forward-looking may is uncertainties the risks Securities that

discuss to call over our turn III to Now, Carl Lindner pleased the to results. I am

Carl Lindner III

Good morning.

As who and acknowledge this it's those few catastrophic morning, to we remarks been important our by have past that the begin with months. these thoughts remain impacted our prayers events

insurance their third are our policyholders rebuild released We to who our communities. and recover, professionals are results our We their restore specialists yesterday afternoon. businesses, XXXX claims helping quarter grateful and

year-over-year If share of for our you'd, the of Slide please overview. P&C to notwithstanding, reported primary low results in webcast insurance core catastrophes X lower in earnings the slides interest catastrophe announced turn and $X.XX earnings an These previously losses, the $X.XX reason operating per we operations. per share include per share. Natural rates for

losses our weeks Our did tolerances. what was third significant, quarter cat pre-announced not risk were while and within few change from ago a

Third per fundamentals report losses return of of also earnings to non-core diluted in on level interest environment, $X.XX. book the share securities results demonstrate quarter compared segment operating declines especially rate first per I when to we've a annualized disasters in XXXX, natural are operating I'll results and the and meaningful range of discuss wildfires. the XXXX months share losses was Craig Craig to unprecedented debt. $X.XX X.X% to peers the XXXX. net And each pleased and/or for $X.XX XX.X% Based of business losses X equity $X.XX of to have of quarter, a And including reported range an amid and core months revised per for AFG's of core and XXXX earnings low of many continued Circumstances on earnings franchise. quarter. our A&E on later guidance $X.XX share results share. to net underlying our California early $X.XX from realized value diversified solid our insurance related share This previously. like include the value last year this the these reserves; X within per strengthen share, to charges range Net in specialty the of business were decrease for $X.XX the to the to per announced catastrophe fourth operating our as a call. retirement announced revised $X.XX expectations and our our per quarter our first guidance includes These

and by continue U.S. This Trump rate are tax We to enabling both is to lower encouraged that be advocating. businesses reform remain reports and competitive. the work the on corporate essential tax Republicans administration to Congressional

by affiliate pattern both provided to casualty, dollars also close U.S. and to peers. competitors to to reinsurance of loophole offshore U.S. losing essential businesses a provide that, billions share in Treasury believe tax upon this annuity Beyond ending We and markets, it and continuing to Congress market field an the of work unlevel incumbent is that benefit a in foreign revenue. playing creates the property to is

overview Now, of please I'd you'd third to X if like results. focus our and to an turn include quarter to of which X turn Property operations, Casualty the webcast, our Slides and

Property strong challenging it's & for few Property Yet you'll X, see increased Slide and a significantly profitability I'm across and industry On strong were third to to the with quarter, underwriting Maria, in with XX% profit XX% quakes P&C a & quarter. Mexico. of XX% Casualty noted earnings Irma, lower and &b operating written from during Casualty and two I been losses premiums months primary due Casualty down businesses, As Specialty or earlier, otherwise Specialty earlier. year-over-year Property portfolio higher Harvey, in pleased the that growth the the overall. net quarter respectively gross underwriting our reported year compared XXXX to the same catastrophe

year included higher combined in year's points catastrophe specialty X.X Property third quarter. the X.X prior and XXXX Overall, ratio X.X development. and of in Specialty up The losses X% of third reserve points third pricing was favorable quarter, last P&C points than XX.X% was during group Casualty renewal & quarter our

I'd of review few a our Slide to Specialty from business turn to to Casualty & like Now, groups. highlights Property X each

crop period. quarter in in this Note XXXX profits bit property third though the business. strong the a the businesses marine comparable our drivers primary of XXXX, ocean to Group period. this in the million profitability included were $X planned. of underwriting of a Lower the in million compared to million prior for than up prior-year which underwriting quarter $XX Transportation of crop, marine to view our and expected we point results, and comparable third & Catastrophe crop of profitability reported shaping are we'd results. At very more losses Property the these million $XX better compared complete $X Our year quarter group were year, inland be have our in

ranges prices close are of business at acceptable crop $X.XX, at are soybeans corn initial to concerns yields the with in spring have the Dakotas conditions our the harvest yesterday prices. $X.XX, were regards five-year established and year. discovery to with above the down line trend expect Montana discovery Corn XX.X% We that within anticipated. a to down spring above slightly pleased didn't well we'd from Both and drought average averages. that materialize at X.X%. prices and we're Fall soybean And futures from extent

For its The premiums peers. our X% was and quarter comparable growth to professional with result includes increased premiums more our This and and respectively Neon's catastrophe and higher underwriting Property losses $X offset from average XXXX the million higher primarily result Gross written quarter rates liability Catastrophe lower Higher was period. agricultural of of of for written period. third most XXXX increase Group offset partially in and from were this prior premiums X% businesses the in of were coming net losses. workers' year-over-year Lloyd's the property of cat prior this same operations. compared $XX $X consistent Overall third than business, of by quarter was XX% profitability group surplus underwriting which and largely and agri-business XXXX, non-crop lower reported XXXX on underwriting by than and transportation the in the third of excess business, resulting gross renewal ocean and XXXX, auto third an Transportation, price exposed businesses. targeted third operations. our within respectively. to profitability million and respectively net from quarter bond marine our year for Specialty X% increase million, part lines, commercial of compared increased customs group respectively, quarter markets, with and Casualty third compensation $XX profitability in book for Neon, XX% the which were period. year the in quarters when the million premiums the is exit

increase. the written primary businesses of targeted were driver in New accounts our markets the

primarily premiums Additionally, our to in comp Florida, Neon, contributed workers' rate and in businesses and executive increases in liability, businesses, the the result excess growth. surplus coupled higher year-over-year growth with our of

group workers' this result comp of placements quarter. workers' businesses, and written were that the continued and pricing California by surplus Pricing net in reinsurance addition, our for in pricing increased Renewal were premiums more In excess our within timing by offset as decreases the increases other operations third Neon. of comp than X% our - within businesses. our and lines with in higher,

XXXX business. same business, institution the was lender-placed quarter, group our in by in underwriting X% and compared million third underwriting third were of group primarily this million surety book. the our by to this respectively Renewal property were group quarter of quarters Catastrophe Lower million reported written quarter, partially decrease decreased written this continued million driven respectively. in mortgage in $XX mortgage losses underwriting offset Specialty due financial catastrophe the and an compared an losses Financial of $XX XXXX loss Group premiums to Most strong in in by decrease X% in for when a other book. businesses insurance XXXX property period. achieve $X and of increased margins. to $X premiums the higher our pricing The in third the our of premiums lender-placed to Gross X% Now net in XXXX. premiums quarter by third the decreased in profit for the the

Based our to review losses, Casualty to We first estimate each well to within to months cat estimated in combined written of XX% from net be premiums third Specialty for as quarter higher our operations. Specialty Now some expectations growth slightly. is of X% previous Property X% X%. which and please the than fourth turn quarter of and X very outlook now which Group and range between of is Casualty slightly the of catastrophes. for we XX% our ratio for estimated results for We've to expect the in our of XXXX up XXXX assumptions adjusted the Property range Slide XX% nine before as on XX%, X%, for active

reinstatement California premiums October. we of time, this of net Based $XX these of estimate Our an a of the to includes wildfires revised per approximately loss P&C expected available events million, in which on initial estimate at reinsurance the losses pretax $X.XX information guidance from range earnings in million the midpoint XX% range in written and XX% X% share. from expected in range estimate of $XX the ratio in inclusive of and to to a X% premiums We the to estimated narrowed XX% previously. be now net Group the X%, of now a a Property Transportation our X% to in bit to from combined change the previously. range Growth is XX% of estimated the from is

Now in XX% in to X% now previously of ratio is our previously. now from range be in XX% range Group is to announced. from than estimate of XX% XX% in expected combined of to previous XX%, Growth range of range of now premiums ratio to Casualty the XX%, to be in of XX%. to produce two to Specialty written the to estimated expected points XX% Group is a higher XX% the Combined the to upward revised up XX% range expected net our XX% Specialty the our Financial

flat Additionally, this higher be net than X% written of previous X%. group range to expect in premiums up X% to our we slightly

intend Property & insurers, the underwriting achieve there pricing from to in appropriate look improved be providers to property a selection surplus on as in Casualty capital X%. XXXX to erosion the returns. to reinsurers hard I business, magnitude anticipation it in We pricing be overall and up especially the front surely recent cat-exposed and catastrophe We increases property to expect and of losses continue risk-adjusted business, what take at take renewal be markets. reinsurance and the to for implications of expect out flat will price of

update we have lower when strategy catastrophe when XXXX industry is to you release a fourth to an exposure, We'll continue to outlook relative our Our for compared peers. our net quarter give on results. pricing

Property and we between & Finally, expect income Casualty to XXXX investment grow X% year-over-year. X%

investment the Segment results Craig, and the turn performance. review to AFG's over in I'll Now, our discussion Annuity to

Craig Lindner

operating you, third X. the GAAP $XXX changes FIAs beginning was in before rates $XXX in earnings such quarter costs, than Annuity $X impact million. value for as segment is Carl. XXXX. recorded interest XXXX, a stock in and of of and for of of the operating an our In million in results. the quarters Many a XXXX not expense in both XXXX. are to the of recorded impact the start embedded more the through impact well third of Thank of earnings. recognized but I'll with million the The embedded reserve resulting rates to assumptions market quarter quarter fair by the third from interest a market impact were Slide quarter pretax million projected reported core $X quarter Annuity third was review to Annuity XXXX, economic of from portion the results items assumptions derivative the higher the reserves third on at in $XXX million related timing in for and rules, Annuity the adjustments compared XXXX considered Under stock a rates, value derivative lower of AFG's is Variances rather fair offset the option surrenders. and unfavorable nature, using and these interest benefit changes stock those as in earnings. a reported are In of positive earnings accounting market interest third as

and AFG's reserves on approximately by you'll investments As X, average quarterly and year-over-year. Annuity XX% grew Slide respectively XX% see

premiums However, expected a earnings. the million certain to Segment of investments the certain his decreasing XXXX. than and environment pricing both marked million of in through growth well periods runoff competitors. during from yielding $XXX the Annuity interest rate to of a by as XXXX third resulted to the our by income aggressive AFG's end higher from relatively pricing required quarter quarter included statutory third offset discipline of decrease quarterly strong stock $XXX compared of benefit This to and adherence AFG's impact from year, was market and investments, the be low reported positive from higher of as of market

from outlook fixed earnings Based previously this months nine annuities million found of we at the Please indexed on pre-fair-value be of the for $XXX for Additional fair $XXX to the results investor before Annuity to quarterly the million through $XXX website. information XXXX supplement is accounting range for guidance. be expect our can estimated. million in AFG's a X, to turn value Segment. posted Slide increase our the $XXX the now million, an This third on to increase summary XXXX, year of first XXXX of

be Our as in earnings a forecast rates assumes required and increases market more expectation modest the quarter, of certain to in investments stock earnings. normalized fourth well market the marked through interest as to from

the range to required to as pretax Fluctuations the returns to market, be be on rates earnings, are changes market to in in interest lead expect large of investments or earnings in to to $XXX Annuity million. impacts. the to or positive could XXXX compared negative that and/or marked stock additional our $XXX continue operating expectations, our through We million

on fixed the nine annuity our premiums these the our major quarter months in any reflect on the now On from recent X, through of January or in decrease certain business. that do delayed Rule annuity The fourth review we earnings year, sales, estimate actuarial flat and $X.X would XXXX June premiums our the the results, became although assumptions than Annuity from potential expectations effective not XXXX, year-over-year. unlocking of Based first of billion level our to the XXXX. slight remain DOL XXXX, Segment's impact Labor premiums requirements lower X, a of Fiduciary Department until be recorded expect slightly previous

interests, X, its statements the reasonable take delay receives will result, compensation. recently rule the of makes released annuities customer's is implementation a able at rule as in the insurance-only date. whether As in proposal the continue effect agent and best provided agents to DOL misleading only uncertainty a that to XXXX, to XXXX. fixed-indexed until acts selling The form the full current There July of no are through end

environment. changing We is rule XX do well investment Nonetheless, a regulatory full short-term after costs, realized have gains in to on many believe Slide continue after third compared material few and positions $X million net $X a disruption the deferred securities not annuity turn to that years implementation $XX in XXXX period. results quarter ago, net believe will in realized premiums. comparable cause our securities for which likely business believe on AFG's We portfolio. new million to tax to we highlights operations. impact adopted that our of we us on a year Please losses of the prior AFG's of acquisition regarding billion model,

million gains $XXX XX, unrealized September fixed of gains were XXXX, million equities tax. were As maturities after after after DAC unrealized on on and tax, $XXX

of the in to over portfolio XX, of see and up be wrap our now Jeff, the investment quarter who a rated Quarterly two, provided on additional information with XXXX NAIC few you'll results liquidity. XX% our grade fixed We've comments of I'll on within segments or investment the turn and portfolio continues capital detailed share will Supplement our XX% our quality, designation portfolio comments our one discussion to its and Slide two categories. various highest with consolidated website. As high an Investor overview about third on maturity our of

Joseph Consolino

earnings core quarter results net is $X.XX everyone. have good XX $XX $X.XX million. based We're The for industry. that in to earnings covered. report on the of in Craig our operating pleased Carl core summarizes and operating a in Thank quarter particularly challenging EPS, you, Craig, and Slide the morning

Page Interstate, quarter the P&C These year-over-year, the million higher $XXX on of segment the of million for Supplement. earnings close of quarter. were by preparing National on for view the $XX were our ago, You'll million booked $XXX expense November XXXX to losses in was quarter. XXXX. Significantly we quarter our losses elimination the in last third million October The and down improvements per Investor P&C third for year the components more X. you QX $XX pre-announced Property year's which catastrophe to in with in the was results Casualty industry. previous taxation year's the & the Interstate, in cat $X.XX catastrophe non-controlling interest, One We've to in merger completed per related pretax in operating when share were with other compared to and quarter third to $X.XX double detailed see coupled share the when million, in Quarterly X compare quarter. $XX National Interstate resulted XXXX higher pretax only National were P&C underwriting third in compared the XXXX profitability, losses to contributing story the which of AFG's

This the catastrophe rate on on in effective tax through were first earlier, fair holding nine noted of expense the million. tax Other which effective lower earnings was earnings expenses. an recognized. AFG's before million of due XX%. increased had year-over-year. losses earnings We expenses third months operating by interest high million Craig core decreased $X tax earnings no of Pretax XX%. benefit to the extraordinarily accounting during As year primarily for $X fair core rate annuity Neon, by was lower year-over-year, by be result Parent company annuity adjustments. can driven value operating value flat quarter accounting the were $X company

rate of operating net reconciliation guidance earnings an full to XX net Our on pretax approximately a earnings Slide XXXX operating tax core core assumes year effective earnings. earnings. of now XX% for provides

on times notes, $X.XX per by charge retirement on In addition strengthening loss at P&C three-year an presented by paid losses survival X.X for The businesses insurance ratios for asbestos a of paid A&E and senior times reduced of yearend AFG's million Market XXXX. S&P at X.XX% were securities XX.X survival Intelligence, Global the losses net industry $XX of to ratio earnings provided losses. A&E reserves stands now The reserves as of bottom the and slide to detail XX. AFG's realized share. environmental our special is According data or of were three-year

core of cash $X.XX was of dividends The that $XX.XX value value substantially on business, indicated XX, tangible to meet insurance was capital adjusted September XXXX. our September be on the a quarter book losses for our at is the that our items, non-core expected realized exclude dry-powder a book company's This $X.XX. not to through of quarter. and The million flexibility second single-page was to approved the operations. core rating $XXX per deployment We paid million Page At overall special guidance. in increase of book AFG's our it to of Slide significant as operating the to the We later opportunities a date. million. year. cat closing, in of the AFG's a the in through not at first the basis. sufficient end of XXXX a years. increased had November in with value main balance board the to billion result other share review approximately our in XX September plan excess share preclude of our and $X.XX last summary the commitments gains at XX, which we've the earnings X.X% quarter. plus under may of And per X. The dividends capital presents months We as regular its annual XXXX. all of per dividends the is a million In $XX.XX the dividend dividend of XX% That XX, XX of from nine results XXXX. our $X.X as at for outset and company shareholders share quarter October. hold indicative is per agencies. XXXX remain items losses announced special XXXX in XX ongoing arise. of X.X Note was dividend paid the repurchase XXXX. parent As to year that regular dividend Approximately Adjusted may that maintain to We $XXX $XXX approximately share stood payment August authorization the an We commenced has capital quarter, growth during consideration will was our in $XX third each and equivalent dividend returned the increase we opportunities shares million to

to Now, open line any we'd for questions. like the

Operator

Instructions] [Operator Our Amit question Buckingham from comes with Kumar first Research.

is line Your open. now

Amit Kumar

good and morning. Thanks

questions, Just goes a few of to the back first but question couple the discussion and guidance.

California of You the that you state number. wildfire like what's the same maybe - mentioned amount the dollar Can exactly so we're sort what you're help just just page? number in, us the that of on factoring

Carl Lindner III

after we're A is what to pretax figuring. range share where that, we I SE reinstatements million said $XX $X.XX of and [ph] think million $XX per

Amit Kumar

that, that. Okay. I missed for apologies

Carl Lindner III

right. all That's

I fall in to winery think will specialty probably that casualty a losses. probably lot related of

Amit Kumar

Got it. That's helpful.

in Did The talk two you as was the second why ratio Specialty was about Financial. those question loss I on segments Property underlying compared and guys QX well loss Transportation higher XXXX? had in underlying the ratio to

Joseph Consolino

is this Jeff. Amit,

For Property you're business. Transportation, I level know for the and And performed at crop crop year very our us. well last with acquainted that a high business

at X.X over So When points supplement. by investor you combined quarter. the our it's moved underlying ratio, I'm at look up looking quarter

third the XXXX. quarter of in of normal was at a it's where was which third back than quarter Now, more quarter XXXX, and we it in substantially XXXX look go of if the of crop in equivalent were you third year,

to that impact the a is to fourth very you and have Transportation update what we'll good crop Property operations. And of year the referred on previously that there above average. results when seeing And get year Carl, that call on XXXX quarter segment. in the you're crop the so, is we certainly slightly could

ratio. In correlated P&C the terms it not to ratio look which smallest always has combined know aggregation P&C many markets. there, it's of a our of We've the overall Financial, with businesses, of encouraged people the the you are at to loss unique but look Specialty at sub-segment, and

ratio, underlying moved the quarter. So the that's when points you combined course X.X look by of during at down the

loss So up expense a ratio lot when that. affect times, movements the have ratio offsets are the in of would you that in there

that continue would to rather So on ratio than the out loss I to segment that basis encourage just do data. taking you

Amit Kumar

Got ratio now ratio other it in anything The expense expense numbers question P&C due was why comp to was, accrual overall the only I that had lower, else the for was lower? and it. is overall was

Carl Lindner III

element. catastrophe relates That be to one what third at specialty profit about, we're commissions, it offsets quarter reversal look the our sub-segment. premiums we or losses when catastrophe ties this accrued was as particularly previously and after reinsurance reinstatement to just the you of of Also, would release that talking release, financial the in and million. into events, after And one $X quantify as

lower a P&C So that to contribute would ratio. also expense overall

Amit Kumar

Got it.

luck future. Okay. have for re-queue. That's all good and I for now. will I Thanks for answers the the

Carl Lindner III

you. Thank

Operator

O'Neill. comes with question Paul Newsome Sandler next from Our

now is open. line Your

Paul Newsome

for going ask the out and or kind tougher of question underwriting, prospectively about a you changes, to any, any I even want if to how businesses you're specifically hurricanes? you're possible of welcome post quarter? just first on restrictions morning. it numerous be the And is post call. the Good getting Thanks little broad-base a Or you're how bit specifically changing maybe actually underwriting higher third or are your more prices? underwriting

Carl Lindner III

going every going how adjust I lot you all and first - turns. happen, questions, the learn are There's catastrophes Generally going is do like always we're think just are what above what companies, to our - make. always string guys we're of you always did operating ask has Paul. when - of you to and learned it's things of approach - I Carl. This to and Well, the like I other what twists unexpected some a thing also two is of adjustments some in to our things. catastrophes lessons when the middle event the

of So, size just a And with settling Harvey, with I'm for in - the sure days industry generally I industry storm losses instance. rain communities you probably at the a of Rosa. flood the themselves that the component time. really the be not you that there had think in surprised California would the there protected is models kind think for Santa as thought have couldn't size I assume that the The and wildfires, of

business the to We're different the going is Neon's lessons adopting And strategy business. in we're, learned middle what we're are. those In long in middle the and appetite is that. call, we're a in mentioned moving necessary that's cat right we're the obviously So as as you feel D&F and intend middle could I and the to for terms, what different I term. in know parts book. And be. prices our book, returns it of exposed would the say, right of be in of achieve prices wildfire also are determining underwriting part, going reviewing on and we forward the and up our generally, property adjusting our we And also right of

property to our now. approach that's So right business the

Paul Newsome

Could should we It with have better, it where doesn't exposed - about you specialists, to end. to these in like specialist if but also maybe an no talk longer seemed environment in charge in getting to large us, specialist seem as and are would been not me all anything, age. it's looks to worse, the quarter? But, expected have ever third the some I quite size the theoretically people charge,

I'm quarter? need every and in to that continue range quarter, same should surprised be every just that for somewhere in reserves specialists think pumped third up to So we - just the

Joseph Consolino

Jeff had quarter. Paul. in set of when a you Consolino, me kind is This You up

Paul Newsome

suppose. all scare Yeah, would that us I

Joseph Consolino

year of at our and experts we every these expert actuarial quarter outside start and a that other group year is every as look in well years. me environmental. and asbestos a an come the That as the alternate an or cycle, legacy more as in-depth include experts third part expert help year This fact you with where expert of we have counsel. look is Let matter us outside when the at We internationally exposures. subject would firm of take other exposures, say recognized

the would internally. year have would And we so, year last look off been where

third A.M. third the quarter compare because history third on our So third of is when augment outsider have on XXXX, and that reason fresh to Best I And asbestos experts did XXXX the since of published industry, statutory expertise exposures November the through quarter at we not for there XXXX, to we expectation of result the in look quarter to $XX was loss with up review for you is The there. they ultimate A.M. statement the to, asbestos billion, environmental Best for $XXX quarter wouldn't that their annual these peak necessarily years, footnote-XX perspective. expectation go looks industry in therefore outside would their A&E, their of billion you that hire their the the data. Also moved from workers which They're change the ultimate there who the increase updated evaluation life movements on referred XXXX peaked effect, expectancy. an on you have the about based were well as noted working side, asbestos an at that, seen age, but took XX% out. in use when

illness longer living As a a of longer would period they you result, over they asbestos kind is associate Paul, people concern what that develop and might which with under having exposure. a some gestation have

asbestos. And so experts saying A.M. industry and the for [indiscernible] another patterns IBNR, to Best, outside also needs pure more needs

On the all for specific. it's environmental site side very us,

all to length seeing going payments and at for to And said, back, we're time what and the and move. increasing These exposures. sites future it's came that's or anything read defense quarters for appropriate evaluation specific number including We're the that as business, the with wouldn't that to Taking certainly, quarter. that's resolve site are years. the complex we reserve And across so an are into future us. to we that that we best somewhat our up this step with led never this. promise a look level I the of behind we're doing

Paul Newsome

Thank Great. very you much.

Operator

Greg James. comes from question Raymond next Our with Peters

Your line open. now is

Greg Peters

results? year's then little year? business potential other Good business of next Jeff. for possibly maybe you broaden Could it change reinsurance and the this your next it parts morning, changes might into And for Carl costs year about a structure reinsurance going bit your and considering and crop talk to out how

Carl Lindner III

in excellent Thanks, involved share also think we've Greg. effective an we loss our business strong crop, partners got of that and stop both use reinsurance. in set We're starting reinsurance quota of And that. with reinsurance reinsurers make we and crop

although, the Our quota share multi-year amount to ability is ceded. a treaty, we flex the have

this our reinsurance we'd changes of not something that the making at More wholesale be would be business. in So part broadly that point. to ceded

favorable property treaties renew have [ph]. months. and January the we've aware like that ceding terms, about some at feel example, property business We are over concluded businesses, excellent P&C Certainly Specialty increased our corporate treaties renews exposed, property very weeks also We cover our among for treaties catastrophe approach. of Notwithstanding for of those period commissions get - outset which and reinsure an done American our Neon XX given the couple favorable some continued including and to with year, that] [historically costs. it's long the generally has businesses reinsurance of in And and not at time the do risk rhetoric this Great discussion we per X to year. we're a last

partners quarter market So appropriate is, went, renewal. to guess, lot commentary when our extraneous certainly know it and that of to work those most whatever deal let we'll the you the the I it at for with work when to with out go back don't and want discussions will best comes I how point, together we really a but fourth call. prejudice get into this

Greg Peters

answer. the for Thanks

answers, and about your know, the little of that that Financial periodic of surprised bit losses business? the one I but talked kind in there you Specialty catastrophe in it's a loss, catastrophe our this going in size whether something comments, of On in projections anticipate your loss prepared start and be book. should will curious, I'm that forward the we by to in

Craig Lindner

it's so - so. it's a or property $XXX I basically book, I think, million large a book, some it's think

property So geographic the other our But that it. to to when book have you're in mixes, as brought does towards businesses aren't accounts have have bound catastrophe to of exposures writing manage that accounts lean in as exposed. in we've heavily this book, some you're coastal tried some coastal property

was you or this sizable quarter, the of that when events unusual had an was. So event there an unusual number

So the larger company, pretty when they're I usual. think numbers, look whole company than by unusual you the industries - that's at thing,

those thought. my So - be be I know will that will

Joseph Consolino

the could the frequency striking preannouncement of in we of I on. in severity, is early parts events, lot This saw retaining events. if in a made Jeff pile U.S. we our when reinsurance the the towers What multiple for to was we other be events Greg, are you also cover world. and third Consolino. quarter One in. was reinsurance have loss a October program, net extreme a comprehensive have which provides against vertical of multiple going But us we kick a observation

of loss You our cat earned below X% a going as asked about percentage high is year-to-date expectations in X%s. premium forward,

would our over at look year you X.X a typically company, XX a points. If about for run period year

time an earned of echo have cat a so are this Carl's thought exceeding and And is happened. had loss we've lot is X% premium. quarter, things were Years you unusual different cat learned activity but any lessons of

Frances, XXXX the You'd to Ivan, year, and have Gustav KRW other with years and windstorms, to Charley, go U.S. XXXX was with ‎Hurricane like Jeanne. and which XXXX back

exceed as one to any point. is manage maintain catastrophe is offer the us period their way you about frame cautious it year I to some number, set points going events. well approach lumpy change extreme it question year are in How as that doesn't to asked. we to would the So and What I one risk, and plays year outward a reinsurance the way as maintain And you gave will that's and to accepting retrospect. that's this nature catastrophes XX just their average. spend tell providence infrequent. a think to what a Maybe the at comprehensive against protection prudently one out that to a with XX up of

Greg Peters

cetera? I parts. update us are Financial the of Or just reduction further in some one then any ask agent channel Can question provided the And but hoping et some room American channel if any color for I to actually in sales two of the if could that annuity additional on cycle on you you where your the by bank And opening you color there's if I channel, was color. on is comments, sales us could Craig, by rates? reduction? crediting Thanks by on plans? the for independent provide is you know, there

Craig Lindner

Okay.

Let me address question. your first

credited We have to reserves the points, another room. XX lower basis rates $XX.X amount significant of a of so billion on by ability

- putting a because function cost much lower of that are be of level will generally on we Now whether interest of going books. the the how really to model of our business implement rates, of

rate credited the to longer a have it question able environment. spreads which interest have competitors of we have to amount rates here, a any from even it's than fall certainly would is maintain we we but rates, been to credited that interest need that of have possibility declining if would we to room and expect, a many rates maintain We But our to tremendous event and at nice don't profitability. continue lower

on minute. hang question Second one

the premiums. breakdown on Let me get

Greg Peters

at your annuity supplement, in looking was believe, you provide Slide Craig? I I XX premiums, statutory

Craig Lindner

Okay.

to Greg. me Let go that

Operator

with Cohen comes Bank of question from Jay next America Our Merrill Lynch.

Your line is now open.

Carl Lindner III

why question. Speakers] [Multiple got you that

Diane Weidner

moment, to question. Thank just go then, for address on Jay the one you. going question back to think, section Mr. Peters' annuity and I we're we'll

Craig Lindner

the of breakdown institutions pick a Greg? mean, the bit. we premiums - think on see I longer financial question between did on quarter slow term here your will engine was the premiums the retail institutions. of as institutions financial Greg, specific and your the question In financial we in for we premiums up premiums, did breakdown growth be the can that were continue the us, business - to what bit, us happy we - always the to retail see the and So it numbers. a although, shows But the side

to continue to going our of the business. So grow is both hope able to be over we're time sides

Jay Cohen

Can you Cohen. hear guys me, it's Jay

Diane Weidner

queue. are the Jay, in Thank if continue, you. think you next could and I go you ahead

Jay Cohen

those Great. answers. I'm satisfied was sure Greg with very

sure I'm buzz in. wasn't, he'll he if So

that Property it I I the seasonality that back and appreciate third I the guess, than specifically, business. to ratio be first quarter loss probably, the in that tends didn't On it half. higher does the Transportation, business, now look crop appears the it's

accurate? that? Secondly, why First, is that is

Joseph Consolino

Jeff. is this Jay,

in Difficulty] result to In itself as at business and when seasonal in on there, our a Property our [Technical a the you the Slide are definitely and is deck. You general, segments premiums Transportation on look X agriculture something

profit, to through You of this lot bulk a in gotten generally see of coming from from in our business. the we so XXXX the other where that out, have quarter. premium where turned through premium to and we I crop Carl we've quarter profit the a come quarter, is so statistics on. and the the the quarters, Once through XXXX gave a is to amount know would distinguish the third how fourth of tend and in year in period significant both wait crop averaging recognize the can we compared the the

we business works to or time So no the tend and book we're the leading the for that worse, or crop through that's better profit modest for average how only up in underwriting period.

first in drought price other you book if or place. years so yield, go turn some have have they in profits may past that book should booked have recall either booked same on or and conditions would other the decline then you ahead companies Just and previously approach that in profits fall didn't to you had in around or in the

we appropriately recognizing the the to that resolved. profit want sure all unknowns have make once we been were So

Craig Lindner

is first complete takes a or There lots not answer the sometimes through quarter. get be you and have of picture Jay, true a years, crops until claims don't in up. a can first it you are and numbers you some while. And quarter may And what whether like the citrus things the know

up So larger first if booked some in those ends of the in the the following being quarter of year. the gets - years profit that

Jay Cohen

It only now. it. years, on should up guys probably, earlier. for have picked I I But did Got it. you Got this glad XX covered

you for thank So that.

from casualty rate timing. that the benefit growth on timing impact. was quantify, exploiting have been there business, the you mentioned what would question Can some Second you

Joseph Consolino

now, reinsurance. be with give I'll and first precise not team strategic Jay pushed And want - result conducted placed the quarter purchase Neon decision XXXX. in lot the I more they and yeah, the is of directionally what made resulted a of business on had Jay. of it, just a their right project of of a be XXXX. Jeff. timing until to to the reverted the in to Neon traditional January-centric outwards numbers. was a as lot Once review the reinsurance being of after to in But for completed was This Neon, you going I'm management reinsurance difference their that third quantify part decisions new a going is

terms you've QX got so and QX between in of premium apples of the ceded XXXX. oranges And XXXX and of

Jay Cohen

forward going just then Got so And it's really net a it to it. really an gross maybe shouldn't impact. much then, have of

Joseph Consolino

That's lines, in premiums lot with correct. markets on Neon's other this other and I quarter timing that. than but Specialty Casualty else targeted not mean, a going growth anything & business contributions there's in our

Jay Cohen

competitive better as going on Florida, where into given get prices Last are move Carl, question workers' workers' speaking is down. good. should touched But on very arguably there pressure does helpful. some compensation. is you question, sound quality some you during you Florida That reason may but getting comp were a when hear not increases. of outside be XXXX the better have downward for on generally is the certainly, The conditions the was margins? this commentary, we Net-net, about your price or

Carl Lindner III

talking is focus Summit, We're what your on? that specifically about is

Jay Cohen

was of Summit is I thinking piece Obviously, comp more a broadly. it. big

Carl Lindner III

Florida Florida, analytics feel year the may that's yet, year overall which approved referring and Florid real the we an State there, at to able think, the And rate Southeast, look change one to it. I by have and year in good thing proposed. rate with is been management at there. you good X%, underwriting Still since pieces case. we think, profitability being Summit, be We've been being the of there's Summit. from underwriting I you this which standpoint decrease have profitable not this team predictive with is their we is about then, in acquired our be to had being used kind a almost And and the results of around pleased which an we've has

rate is of I smaller underwriting profit, decrease Florida's think that Florida, case profit. if in underwriting be the taken, will

your very though, a underwriting a in adjustments There make pricing we we're some should Summit states some there. has impact decreases, better. Overall action be it's response maybe still other Generally, that the profit. solid price being you to small a at with price profitability towards think of when make or the that profit. able I figure increases had a underwriting Southeastern an historical are see

solid. it's position So good Yeah, news, reserve when very it's premium impacted, overall news. our look in is of your we kind at bad but Summit

that's perspective. So my

the state not continued one. if well, make rates solid underwriting think Florida, For significant California, profit, but an piece - an we'll as a business that overall still I improve, that for In profit. us. maybe make Summit overall, to another underwriting that's a continue small not - in

type similar about XXXX projected. for - for XXXX, underwriting decline maybe, is this to and January of going X, year, outlook there's year X% couple in XX% to a solid this Our forward a decrease probably of year X% X% us accident situation, in the profit. a that of rate for that's somewhere a small Again, a - X%

accident California better, Again, loss an industry in have years. the year to predictive basis, company. and claims think both to that. implementing year, cost reform feel we being change we're a in past I don't prior very our real year is we comp at I underwriting California. couple - environment accident about although consider seem - double-digit a we'll The positive years of this really still and position September strong happening in because holding in equity next over mild make We there. a accident in on still loss And analytics your and pricing of ratio in we'll think be small results the be next improving any reserve environment. I that's claims trends on the trends - net make underwriting to starting We claims return profit and the continue see

offset the pockets, that two some the rate. of Those think national our interstate will; on I So comp. biggest workers' impact rights, also are some

aren't I either really way been That rates profitable. has there. think moving much business

our business. - So that'd that's my on be perspective

Jay Cohen

That's update. Carl. a Thanks, great

Joseph Consolino

little a encouraged Jeff. bit be to more to in my answer the precise is actually me specialty had this Carl growth. Jay,

to a premium timing you year that also when component is at out basis Out the to something. third Neon in biggest net quarter, a our Summit million, same that written attributable beyond contributes $XX is a the is had the then the the ago. markets million that when $XXX And probably on purchases. into would Neon quarter and reinsurance gross is that the growth, point as the or look growth, of business the $XXX $XXX out third overall But from indicated. growing at the of you that's $XXX we approximately level million segment up million, that So targeted take the timing million

Jay Cohen

for Got it. the precision. Thanks

Operator

question And Larry with Janney comes next Montgomery. our Greenberg from

line is now Your open.

Larry Greenberg

Thank you and good afternoon.

I all Just think, related fires. California to quickies the three

be The mostly specialty that it first, in to mentioned going casualty. you was

events? against cat load cat just one as for rate And normal then, treated So just when would about or I maybe be assume what you. quarter. to fourth these think elevated you do going you that's load? the fourth netted be adding multiple be then cat and assume finally, talk your for quarter about suggest - I you a that or that to Neon a would slightly tax again just you of And the is would it the are piece this, normal guidance, Thank load, when

Carl Lindner III

question within big Great our specialty our mainly really the of within really It's Neon wildfires. with Actually, the address area markets the Neon I'll is targeted a by maybe and of about written not Yeah, wildfires. business, that casualty piece American.

Craig Lindner

why so at a made we Larry, that, just the midpoint, share. $X.XX to comment the at continue that's on had with about,

tax our would So for expected we quarter and when in considered had through match would not, tax fourth that full distort rate expected gone I be be the worked we through therefore, what that to that in the - there. our year rate

like series hours of or Many terms things clauses numbers you of for within single contracts radius events, whether collocated though subject believe go their things or they California and this reinsurance company the reinsurance. as a to or abstract wildfires have events back review a would event a are apply As are diameter for our that footprint. reinsurance. a like a outwards is multiple the contiguous that even I event, of the to think We an have PCS to certain or

Larry Greenberg

a California normal the net final expect do would Thanks. you piece load you of that? it cat your the from just And just you one, what wildfires to add against or

Craig Lindner

to tweak have i.e., the cat what some quarter top But is of we there's fact losses, closer in also to Larry, California have - reflect might think, a in would here assumptions on so be than into buffer expect for in what this load not I that and events. we we our the further made guidance about Yeah, adding fourth cat our normal the would here if have - we're quarter the and about top But probably cat will quarter have we're thinking. additional load. talked some cat the that of wildfires, you greater the we there for on a

Larry Greenberg

Great. Thank you very much.

Operator

questions. would over to call for showing Weidner At turn the closing back Diane I this Ms. like no I'm remarks. time, to further

Diane Weidner

you end forward this Right, all and of quarter. the thank we again you. morning us next you look Thank talking at to joining for with

Operator

and in does thank for program. Ladies participation conclude you This your gentlemen, the today's conference.

great You may day. a disconnect. Everyone, now have

American Financial (AFG) 1 Nov 172017 Q3 Earnings call transcript