AFG - Earnings call transcript Q2 2018 | American Financial Group, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the American Financial Group 2018 Second Quarter Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Ms. Diane Weidner. Ma'am, you may begin.

Diane Weidner

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

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

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

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

Carl Lindner

released yesterday Good afternoon. results morning. our We XXXX quarter second

Craig earnings $X.XX in overview. year's outstanding These of pleased our and report the Casualty and XX% record operating last Slide up segment. a our results to an share, webcast quarter If new slides excellent Annuity of results for turn X per to operations and quarter. include Property core second in profitability I you'd, second please from were AFG's for

the core annualized on was per we're Based $X.XX achieve $X.XX I core a on and to our range diluted Net the of quarter year, and results per operating share, XXXX realized these our return AFG be Second strong securities. in $X.XX included estimate previous increasing our from increase XX.X%. Craig to operating to months earnings helping gains equity talented were a our per on great to share guidance of share results. thank for to earnings is six employees team $X.XX for share. and which the management the God, $X.XX first $X.XX $X.XX per of in

As to year average losses. with our initial assume crop catastrophe an level normalized and guidance, of we continued a

more in expect our business and to when later third each these each clarity discuss we Craig the our have results. quarter in call. for of detail segment items report I guidance We on more will our

our turn I'd to our to like Property operations. Now Casualty focus and

So of please overview second an quarter Slides X me of the which webcast, and turn with X to results. include

That's second second added underwriting Casualty Gross in line and see was in in Catastrophe increased X.X results quarter. year earnings our growth Specialty Property year-over-year. and which were X.X XX% operating XX.X% Group Property up that we're was our investment higher in XXXX healthy XX Casualty point produced X.X% strong renewal on Overall, reported and both points during premiums the XX% Casualty net and and strong we've Specialty was included interest and than stable, ratio trends X, Specialty the X.X quarter ago points. will with in earlier. with the was Specialty is in driver year higher the Property is Higher overall and during second development. the the ratio Casualty The year second when income of to Jeff quarter net results, XXXX later you'll losses reserve Property of the pricing combined the in our Slide line very the same and a X.X%. Casualty core and Loss earnings in trend, Property of cost improved and the which favorable rates. inflation on prior eye discuss quarter. the remain quarters keeping highest As quarter. call. seen operating our Insurance a below quarter written loss and compared operations second just

workers' and achieving our renewal strong rate businesses, with year. the our comp associated the up that profitability. was return been business; In we X.X% Excluding quarters. pricing majority of I'm movement renewal decreases, appropriate pricing to also XX in it's policy businesses quarter, pleased seeing believe businesses. in making Specialty current overall pressure continue the the highest Property rate in see broader Compensation and we're our during we're industry price the [indiscernible] we Despite Workers' Casualty increases

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

underwriting marine a and These profits & our marine $XX in inland ocean underwriting year include of well Our lower million second our million mortality transportation Property underwriting results reported results operations to in improved period. businesses. profit year-over-year profitability as $XX higher equine property and as in prior in and Transportation our the Group compared quarter businesses

book underlying during X.X just $XX Gross comparable premiums year-over-year, of losses While second books. a equine for million under this the result and of as property XXXX combined the comparable new than and increases in compared rate the the of primarily businesses. points at period. this marine and National the in period. $XX rate increased increases written X% second ex primarily transportation within for our inland the group our The continued be second Renewal business and our were rates Catastrophe Overall, higher losses growth aviation renewal ratio at on in action opportunities year increased for cats continue overall. Interstate's calendar quarter group ratio net attributable year strong mortality in combined to to average X% to improved prior in to year X% quarter 'XX is were million both business XXXX. the XX%, quarter

auto We bit tempered approximately X% liability, are rate damage. of of were physical approximately by auto increases in which achieving X% a in commercial increases

soybean levels good XX% condition in weather to be is of favorable for reports with and the and XX% September year continued at industry respective to their important crops season, trends. favorable Moisture both projections and crop futures prices. Growing with of for Commodity corn crops shaping and yield than are to discovery the results. of point approximately spring soil in are above in X% nicely. through corn excellent Our respectively soybean XX% current conditions lower good yield up prices this slightly

expires XX. insurance. and point, conference. We have be the crop to encouraged farm and House passed continue is legislation Senate to the is bills by on measurable impact the this At which no September to progress there Both on bill, moving

and in and that line target in unchanged we Group, underwriting Catastrophe of this for profitability our in businesses from prior this million experience Specialty Turning business lower million quarter development year profitability geographic Casualty offset respectively. - favorable XXXX for our $X the was XXXX. losses this XX%, Gross and with the main $XX is Growth reported marketed mix the businesses reserve to within quarter. and the was within to second group Neon premiums. Higher of respectively, to by of diversity markets the higher $X have driver very which we million, last second continue net quarters second compared were We're of profitability line. Specialty pleased Underwriting Group were quarter second the and written year's the Compensation year-over-year surplus strong, quarter and XXXX of business. and profitability of XX% in premiums second increased of Workers' when lines. 'XX, our excess in Casualty

was reported premiums offset premiums. executive and lines partially in noted Our liability also earlier. lower as by our Compensation general excess liability, businesses year-over-year This in businesses higher growth surplus Workers'

Although in XX rate momentum group pleased the the group, rates D&O. the renewal businesses in this and in was Casualty approximately with second quarter, businesses, our Workers' pricing this seeing liability were decreases the pricing in in excluding X%, And of within flat excess in Specialty I'm renewal been several including up I'm they've quarters. very Compensation highest

and an Now profit 'XX, underwriting and $XX underwriting surety the the institutions year. million profitability underwriting $X to in financial business. in partially quarter business our in profitability of of Specialty underwriting offset million $X group profit an quarter last Financial of Catastrophe Group by lower quarters XXXX second were $XX our the million million our compared losses second second Higher for of this respectively. reported was in in

same quarter our Casualty All contributed pricing was of renewal as approximately review a accounts the Operations. of between in Higher Renewal underwriting in in with this to Please results. for to outlook to prior group financial do period, XX.X% XX% reported X%, and services Gross or for XXXX with for an and of our some for the X higher second XX%. catastrophe-exposed for when second and net and response primarily business. businesses, the We quarter. XXXX accounts XXXX in Slide businesses XX% turn XXXX expect a property Specialty respectively, combined of margins losses excellent our continued Property up quarter. cat premiums rates achieve written ratio group Property compared up in Casualty Specialty premiums overall Group the the primarily ratio X% overall to the lender year these were combined of in result and institutions this to

written guidance premiums estimate X%, X% our in be have for from X%. which the growth We of of is our to up between range X% net and previous in increased to

a each a at estimate of now Now ratio in Property slight segment, of XX% XX% our looking XX%, previously. and Transportation range XX% That's range from we the to to in a Group. estimated improvement combined

written X% be group. flat to We continue XXXX expect to premiums to during this for up net

combined to Specialty XX% a We continue range XX%. to Casualty to produce expect the our of in ratio Group

at We premiums as the the the Neon within of half estimate the growth Neon have the rate of in a between X% to result second growth primarily to expect of We X% the half increased of year match X%, written previous first up first during in rate of reported during the estimate our to half. growth net growth the XX%, growth for don't year. from our and

X% in expectations We up of estimated ratio be for our Specialty Financial have previously. Group to to between in range of XX% is the in XX% from revised growth be for up X%, the the And to XX% and range we of premiums to our written range slightly have raised X%. which the the XX%, combined our to projection net previous from for growth X% estimated

the We be continue overall Casualty grow certain performance from of investments And expect is the estimated. and growth, income over given between partnerships investment to to and during the the X% similar now Annuity Craig of overall. net now and limited year-over-year months the up X% to performance. XX% Property strong turn our first discussion X% XX% investments, [indiscernible] to including investment and X% year to pricing expected this to I'll segment six renewal review AFG's previously year, the to

Craig Lindner

quarter to in billion Significantly broker-dealers results premiums Thank on and half quarterly of you, the second retail in broker-dealer lower interest offset of channels $X.X XXXX were X. $X.X Carl. channel. of markets XXXX, was to financial launch in Slide rate Annuity. potentially for several the in second with the environment Annuity an compared in to due premiums first our new premiums a the of the for Reduction and beginning Annuity quarter particularly record higher products the institutions quarter addition the start a in in new second billion by Statutory of XXXX. strong the I'll retail the review improving

quarter earnings second Our of $XX the XXXX, to quarter to have channel XXXX an credited the indirect offering in XX%. increase million in competitors due of $XX of million premiums rates. certain were back Annuity second compared softened Pretax significantly higher

year. year included AFG can environment changes or to on the quarter detailed in net you quarter continued higher and in of FIA experience charge these would is results unlocking fourth each in conduct account interim to offset partially material actuarial primarily the assumptions in revisions major of rates the impact assumptions costs, estimates, unlocking million As underlying slide, charge. assumptions resulting by interest option option the option of unlock the economic million. We higher our costs, resulting or actual assumptions a $XX XXXX, unlocking of rates, throughout higher-than-expected takes in future the rates. the costs cause negative $XX reviews Annuity an see monitor If a will second quarter. from Due higher in The we risk-free earnings and to reinvestment interest for into charge operations unlocked of

started we've FIA adjusting These higher decreases actual renewal charge. the the caps in used costs. were calculating addition, option and to In help expected mitigate unlocking cap

costs including We fourth will continue in detailed fourth our conducting XXXX. the rates reviews and each of practice the option quarter of of year, assumptions, interest quarter of including

cash Turning to indexed rules, based at and under an future present GAAP value flows. embedded on be a annuities value the the to of derivative reserves estimated fair is fixed is of accounting, considered fair portion expected recorded for certain value

and withdrawals changes generally the these this in mortality. result at include, calculating value change assumptions would in market option from fair as well value. a Variances used projected Assumptions stock interest surrenders, in rates, as costs, fair

are embedded rather The Some accounting current adjustments annuities of for but period current generally is of includes the interest expense timing impact amount of based value ongoing period, nature rates. size on annuity fair of FIA the derivative interest not of impact in reported the derivative for economic for The in embedded the accreted an reporting reserve. and these results. interest fixed-indexed any the accreted

size more FIA our expectation compared a more of both the stock X comparison, increase. derivative impact in rise, costs. the liability. unfavorable expectations favorable these of interest interest of increased increase, rates points rates an option a from our in of annuity basis of benefit derivative during basis resulting significant stock operating estimate rose a impact the the resulting X% XXXX, lower by quarter point XX the in to compared interest second the X% higher and to By was market quarter to offset higher items increases of continued expect to interest second to offset In relative The nearly our market two continued than the to earnings. rates, We than XX and on embedded XXXX, embedded

on million a of Investor earnings high value website. on analysis quarter AFG's fair which unlocking the the XXXX, before the all-time fair up XX% an prior second impact accounting Annuity period, For fixed-indexed and new from see value Quarterly of is Annuity quarterly annuities for of $XXX our in Supplement, establishing posted the accounting, year were segment.

that by and year-over-year. see grew respectively, XX% you'll quarterly and X, Slide investments to X%, Turning average annuity reserves

strong investments. investments, shown certain returns by on our was expected and Quarterly from these of items As not to the higher-yielding benefit Supplement, necessarily limited is results include similar partially also Investor exceptionally these high be on investments, The of earnings which including partnerships offset runoff very recurring.

in to the $XXX earnings the million, to indexed costs these range is to and our million. on basis stronger-than-expected FIA the increases Similarly, of original of of full corporate normalized impact of quarter; Now the expectations, experience. value first pretax on and investment results this Slide including to value are for fair XXXX year, end of the the on between Included in with earnings line from a please and the up X expect And lead full in interest duration, million. fixed guidance range for $XXX Based assumptions, second that the to impact accounting each segment. now million guidance the and by compared million XXXX be X% or rates charge earnings. any several are in turn previous significant as before to option of to higher, the points, segment's $XXX to Annuity the XXXX, rise S&P on expect in to outlook the we to half $XXX annuity positive $XXX expectation $XXX $XXX summary the income; which X $XXX Fluctuation items, in be earnings year; Annuity annuities now we now depending will that from million of fair of XX that of for XXX AX this million. of guidance and our quarter negative for FIAs year of include million the up unlocking accounting could in our

provided the over investments, well fits influence introduction has Please XX% grow the $X.X XXXX the lift in sales, reported continue reflects year for sales Department products note demand Fiduciary There Rule to segment's period few on billion large in in the XXXX new or new XX% that broker-dealer product our stock the the on markets. FIA returns a return positive that lower surrender we the resolution changes in our and costs compared Labor we expect products Furthermore, Finally, competitive option annuity our and to on are appropriate year-to-date, results. premiums impact emphasize a of full XXXX. this Annuity the of significant market regardless the the negative that guidance; or Based business continue to current the retail and could shorter the adviser charge on our strong strategy. registered market, and earning our lead the as our with fluctuations environment. interest will factors to expectations rates up our to investment be opportunities of and/or and to higher of

AFG's unrealized gains This acquisition segment's on to second portfolio. after $XXX Quarterly net XX, tax, regarding gains highlights a on At of million AFG were and to in premiums, information Investor quarter XXXX, the fixed $XX net the tax maturities of securities after million realized Slide gains realized million $X on DAC. on quarter of our after deferred investment after can Please securities compares and June second XXXX costs. XXXX. found reserves reported earnings, Annuity few $XX Additional for on Supplement investments be our in XX turn website. billion posted

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

Joseph Consolino

by summarizes tax AFG's consolidated quarter Slide businesses, you, operating year-ago The result million operating million is $XX on and debt lower with $X a reconciliation P&C year-over-year, period, quarter earnings effective in decreased unchanged quarter. bolstered related profit in year. $XX the core results P&C in were investments. in EPS unusually rate lines $XXX reported XX% XX operating returns XX% year-over-year the primarily year-ago primarily million Thank XXXX second the high core the operating in This our that core in insurance million. partnerships estate XX grew underwriting based partially earnings. interest strong income investment higher quarter other our increase segment the to quarter starting for expenses to increased higher on second net is earnings net of XX% The second earnings provides result quarter similar of expenses of including by year-over-year. this Craig. other corporate very previously in of Slide $X.XX of Casualty compared net run-off parent QX the P&C earnings and company the core or net in basis. year-over-year. on earnings and making includes by expenses a a XX% income the of real the was to certain earnings earnings a offset quarter. expense pretax Other Annuities Pretax as as XX% expenses the business. from comparison. Property virtually This second AFG's increased strong was result by operating investments, XXXX of in sale our The of refinancings. XXXX limited

income ASU recognized performance adopted [indiscernible] AFG tax equity equity of $XX level impact securities depending portfolio the on quarter, requires last to securities of will which vary XXXX-XX The or million the second share after market. be the in through quarter, and volatility In on XXXX, statement AFG gains. noted as our earnings. gains to recognized each in refers the the losses net quarter per holding of held or overall As our to $X.XX XXXX, and

on As was as book share XX, $XX.XX adjusted AFG's Slide XX, of per indicated XXXX. June value

a commitments Our dividend million sufficient returned very shareholders quarterly annualized during maintain our per quarter. dividend in $XXX quarter. cash the meet insurance value capital regular special ratings We agencies. growth and of our at $XXX the $X.XX per our second book with share this XX.X% share of to our dividends a businesses was the plus strong payment was to Parent million end the in quarter. to We

get of at reflects stood $XXX even this the million end and RBC $XXX until formally on $XXX This June capital for arise. implemented upcoming they excess to ratio, opportunities million as our at we million the reform doesn't XXXX. of powder the flexibility XX, Our already to maintain change tax hold impact plan though model dry to approximately Remember, negative capital as XXXX. NAIC approximately

opportunities has XXXX XX moved core up representation reviews a of management updated our single earnings, per Wrapping Our basis. share. up, all deployment Page which by shows of capital a regular for on $X.XX team

core an that items earnings. we'd may assumes XX% now exclude line tax to losses not items ongoing AFG's expected operating and effective indicative that, operations. pretax on and noncore as the With rate approximately questions. open other such significant guidance operating XXXX core for results of Our be of gains any like realized

Operator

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

Your line now is open.

Amit Kumar

afternoon Thanks good and good morning, sorry.

of The bit. in out comment. Just audio the cutting was and want make a a and to a questions call few quick I

all when a checked it same because with someone So at for the comes presenters. and I facing can transcript also people they're other take out, issue look maybe quick the the

Specialty for the the conservatism? forward? number The is then forward, first segment I PICs is Casualty segment, and at for the question look a is loss guidance Specialty look it is I numbers even Casualty unchanged on the Why I the at going the if inflation the underlying at or higher that assuming if guidance, and look and the

Carl Lindner

We take to year-to-date position our account we and try - set where results and current as that what reported segment, see trends we our in guidance. reserve into what are our in

do can best I one by we and outside of mean, few I'd overall that big we're that. and been property some detailed the every to just try or pretty big of quarter. things, like generally, the gives cat we've event companies segment pretty some we So say, guidance those kinds of accurate.

Amit Kumar

guess is process? was to is, thought the the the to trying Specialty ask I that's And Are what of any is just Casualty was something you unchanged. of trends out. guidance end or new there I trying what HXor I inflation is at it sort noticing figure in

Joseph Consolino

hope Amit, coming through for audio that the I is you.

struggling for I, Through Casualty six one, a your is combined am bit XX.X%. question. months, little with So Specialty ratio our

potential caveat that the that with the the year-to-date. Our and the guidance percentage minus offered or wildcard, down year of catastrophe of events Carl two a about straight is in that brackets points guidance middle results the for balance our being basically plus in

combined would cause that the us seen of modify it. the guidance haven't anything We because over haven't or changed the for segment back-off of we quarter to course that ratio

are something So - you at looking

Amit Kumar

it probably answered I properly, didn't Yes, you my phrase - but it. question. just didn't you I answered

a I up us help end will QX, RPP QX, are up? I on $XX one-off the of just of thing about and is in should the we outsiders as The thing squared know second think the all this billion question about us? numbers and Can bit and for this think agriculture this talk FCIC where discussion how because of, you, understand maybe package, was book. are a sort

Carl Lindner

comments my about talking you year? crop the Are about

Amit Kumar

tariffs Yes, especially. and the

coming then an in you and aid tariffs will policy. RPP the then package and a billion $XX Midwest With farmers have the have

I So it of how - with I should and of end they or up about trying will add ultimate these parts numbers worried looking am different too look? to this figure soon? of all all the And will I'm moving sort too just out

Carl Lindner

Yes.

it's and neutral point. to we I and We on crop nicely. business. think this are XX% a corn our at [indiscernible] as very tariff still can and backed aren't I is, kind bigger don't it our little don't we down, to Probably the were really program - have going figured Anything in of they lower, - our we shaping make. farmers soybean impact yesterday. more would we on been made prices. is them Best it the to out XX%. arms off can the think, impacts impact around best think up a payments I we're XX% payments would that exactly going be benefit That's trying of bit figure we prices point get think any to The to farmers around means. that. line volatility what that much. the X% crop to think, bottom they in that think But is itself think And we soybeans doubly again, are our figure Commodity

at our seems we're growing this to noted. The that So That more conditions keeping eye we've be are favorable on of the that. impact point. very

any in seem of of of That be You - frost now doesn't for early kind lack to shaping or our see government on But case right the now very negative about too I really much we always the crop year having and that. up. that. don't don't right the optimistic And impact look any out rainfall. way late, we're it's

Amit Kumar

re-queue. Got question and will it, the I final

process the guidance back about excess of year? your thought how half Just and of the XXXX, should capital and here another the we remainder and the be going the for thinking discussion on capital the for second of thinking management discussion to dividend on special

Carl Lindner

that, an regards the we have generally, and of into We plate question. as we our year idea third on Good we any to of of acquisitions go quarter what the get kind with capital that excess its we And make that up have dividend. already then, [indiscernible] We've good minds. at we a our [indiscernible] to think one paid we as on. look we special projected

would think some year-end, I be considering towards on we what needs we've depending plate year. the have dividend on what said definitely we we have that and keeping excess commentary that end our special the through our another of in that

Amit Kumar

okay. I stop I'll Thank ups. a it, few and more have here re-queue. do follow Got you.

Operator

Our next from Greg James. with Raymond comes question Peters

Your is now line open.

Greg Peters

your echo Good regarding comments focus or there to the I big-picture afternoon. know what, just equipment wanted Amit's interruptions. some don't presentation. but on on it's some I faulty issues. were interruptions I'll conference if call

First or in I your consistent any in on ratios or they about ratios you wondering how, were of context Comp a that segment, retention where two you of business been in the the could to if by pricing year talked if all, Workers' ago? continue renewal challenges. where comment there's be interested with particularly the was I'm change

Carl Lindner

generally thanks don't We retention your Greg for detailed renewal issue of data. type question.

We advantage some general, - - different seeing Generally, growing so in businesses, pleased, I'm we overall though, shape have are businesses - different. segments. renewals be business. as renewal that very mean, the I so of XX% has good That we to we're also. and by in XX that and have business good quarter, opportunities for as taking new the having each opportunistically have the were to we're many gosh growth our segments in in mean business well

our And the getting years. we probably have, we've helps gotten predictive So and a of getting increase - comp, growth quite with us I premium analytics that particularly, use think in excluding in market. of very pleased kind become this price the [indiscernible] we're - strongest do

this makes even that growth that market. us think comfortable with I within

Greg Peters

of struck doing was answer, a the analytics. us you're what on your you seconds good side about spend and equation? Craig. give by I comment into peek Could a XX That's that

Carl Lindner

on in We and have it - our really at businesses. throughout can group the in other think it the where businesses We compensation, our have we a here across really within analytics really biggest [indiscernible] of impact. [indiscernible] that's extensively a use predictive particularly we - have businesses use focused organization, with goal of the our a it using businesses expanding

we're to So use of that and underwriting the includes pricing, not side the - that expand only also. but on claims trying

- predictive California think a they've lot bear will our Comp Workers' initiating initiate business, a instance, For side, been Republic, we term. long claim in analytics which they're

of So that. color those a would [indiscernible] bit be around maybe little

Greg Peters

to around question business. Craig to the wanted I Annuity you. next Thank my take

the noted Now, comments at I new your helping beginning retail result. products really the boost about

the speculation One but or it's I'm any of seen wondering on to your capital if question seen as corporate like you'd you in the marketplace demands - going second than strong fallout marketplace talked overall if that curious you there's really has capitalized. your Annuity business the strong just merge. that on growth adequately an to the fallouts? don't more the remain standpoint, know the - you're growth, about helped any I'm you'd on sales result. and in wondering comment some I having whether players - retail considering about on business, other know And a competitors, you're I from has you But posting. Annuity in the I'm being the given independent results

Craig Lindner

honest. it's impact to growth, really first competitor that, the of know don't is having be major hard in on - think question, Greg, what be having. that our I to kind premium of was plays a driver major is a

was our be particularly couple think of our volatility certainty interest consumer-centric played proposed resolution I and, Certainly, to very customer. - a things. Fiduciary going and shorter retail the products, as to the a that's just stock premium That's of implemented. Labor all sales, environment. think not of Department model products. really that the more rates of certainly by growth the has We're had of frankly, higher the kind That sales. this in well value nature on is the of selling market, Rule impact I positive driven The

growth, pleased the continue. What and So Greg? we are yes, your it to was very question, with second expect

Greg Peters

to you growth, provide thank second first your comments And additional result I question. I'm is - about - color. business, capital recognize of the some the adequate of company a within curious on that Second capital part, you're you snapshot it and was some and could just Annuity any on ratio about overall. willing what kind provide was a Just the at seeing whatever around within the the what for success, question your question if - business? us or the you're capital maybe demands for considering as RBC answer the that

Craig Lindner

Sure.

the points, the First rate reform, it I RBC. of about cost us, in tax XX% was XX all, change tax the in believe,

books the lower-commissioned the we number us. company. of an one, did nature low from impact very a of that consumer-centric on business operating Because putting the on standpoint So cost - fact of are the that have an and

X.X new us [indiscernible] average very a commissions put the the our strain most more growing on points think consume books two industry. going capital to for capital. business or of points when you're we than less I The than rate, when lower is competitors. at it's our Obviously,

given some work to at we're the to and business. of rates excess happy capital position the ability business at return, AFG do the of significantly growing Given attractive capital put the to

Greg Peters

thank Great, for answers. you your

Craig Lindner

Sure.

Operator

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

open. Your is now line

Paul Newsome

market of the of seemed be is was I view versus pricing of trend? little give some and well business, other Comp kind hone in your to on the a claim from more parts of perspective? hoping the a Just sort pricing offset us sense could where doing cost what bit claim versus the a which Workers' you to sense, is cost of

Carl Lindner

that. profitability happy results give the around way we by I our operation and Paul. some pieces Southeastern with the which of that very And had of couple be it. Sure, of Obviously, pleased they've color our we're a just Summit that. since would is operations, larger year is kind every business. Summit's strong with to Maybe - underwriting acquired the to address

or look combined Little rate should year. sign. could higher little Florida have this feel take an [indiscernible]. breakeven on think a a early make and underwriting at healthy you we a June profit today, January small we to I If - Florida with year to still up and ratio a accident their being overall return end closer the increases, business

the happening be So that of on would things accident kind year. our

cost frequency positive When so cost On the up inflation, overall severity trend at of is impact side, down an X%. Then, the loss that's look X%. you trend positive actually - payroll, loss X%, X%. you a when about is loss of cost

to We ratio that. loss we strong, consider and what for call our we is profitability loss position overall solid. Summit very is down reserve trend X.X%, be really So our ratio feel they [indiscernible] have

on we we've [indiscernible] or strong double-digit the California, particularly year So that returns underwriting though Workers' last accident Comp. a even in so. returns may but In and less, bit healthy had little that, be five margins feel years good really

decline this make year. accident XXXX probably we think small that. for still year profit expect a I in to underwriting about project We a XX% an price double-digit return and

again, Just idea XXX% to kind ratio, that's an you combined year of at XX% return give a on equity. even accident

for look So and year to - stable the accident business we small a underwriting I think this claims we as have continuing profit expect at to reserve year - continuing strong make we a environment. position, a

with is of trend ratio X%. that's for California points loss of change X%. exposure X%, of X% couple a [indiscernible] down being down positive That's up cost zero Our loss of then there being a is for severity and the inflation frequency trend

is So really, negative really our of loss X%. ratio trend kind there

trends good in very So there California.

Strategic Our It's Comp look performing high bit well. deductible at is little business, it a business very a different. we

Comp So of when the is very been that's other National part - profitable. our Interstate, business and Workers' in

that. and gives down, make think profit of trends very moving [indiscernible] little but color. Rates pleased we're the again, are. hope underwriting more you So a this very are kind strong with nice returns position where I'm a to our that on Workers' very year, and I I Comp, in year profitability

Paul Newsome

still And at awesome. what little your from you're out obviously, expensive your was seeing And general perspective your there just your M&A there bit question the then, - the other out I'd moment on - views to pipeline. what Whether only? hear or a my from thoughts on about That M&A. like just pretty was, things are

Carl Lindner

no Yes, I This we year see think pretty pipeline. is always a good exception.

to opportunities at. I think some we're getting good look

million and bring thing, we like don't we are be the like Those of and of entities to game. kinds at. big that We're to will line. Again, finish kind look not spots sweet range to $XX to bigger of something type in - that. hopefully, that auctions the So in big on over able things our great play $XXX million that we

So hopeful of a able few I share things opportunity. we're be think, accomplish we'll I'm seeing, our this to year.

Paul Newsome

you. thank Fantastic,

Operator

Instructions] Kumar follow-up have Buckingham [Operator question a Amit Research. with from We

Amit Kumar

Thanks afternoon, and few good quick follow-ups. a

was me, what I guess, supplement that now is, ask ex XX.X%. I the accident is, in to question loss, year QX for the the of X Page have I going first segment, of shows to Casualty look cat Specialty numbers current if trying The the at I back front

was something what in there XXXX, caused out trying QX XX.X%. QX delta was For unusual of to figure the What number that XXXX? is, I or was

Joseph Consolino

quality of had So you're - audio. that apologize the and I us you the flagged for

X, combined in you're at a the what year-ago I ratio; the to little your gone up is has Casualty asking up when think segment, supplement quarter Page underlying you the broke You it look looking on versus Specialty the But at question during bit quarter? me.

Amit Kumar

that's Yes, correct. yes,

Joseph Consolino

you perfect. much. Okay, Thank very

attribute our year couple about So it's just It's into Workers' And mainly to specialty things. - points. up what X.X that accident you a it of a we of in break some higher Comp.

in the So we that an Specialty points. majority the uptick constitutes of That sub-segment. the across about increase have Casualty of two

Amit Kumar

I think I was that it it, the apologize for. was Got phrased answer looking I it, I way wasn't of the clear previously.

Compensation was the book? more for I Can The of in? in retail, you hazard Was been the us, you clerical, your operate it's quickly while, question, what the a that what's Republic's, and us, Workers' of book, know remind just component second you can for remind it classes construction? biggest sort

Carl Lindner

be XX%, a and would not think, would rest account Manufacturing of business. historically, lot looking large I be the retail, wholesale,

Amit Kumar

Got And it, final that's is guidance the Annuity segment. the helpful. on the question for

would then If it? that ex lower the it the unlocking? in earnings you remarks, the be to sort missed at the the QX first the and opening at is unlocking earnings, if earnings look Is me second unless so, of a ex this half earnings half And you I segment? for in seemed the look the what fair assumption misinterpret than guidance, half reason for did or I Annuity second lower comment

Craig Lindner

first the for half Yes, the what mark-to-market assets. related are investment a months. and of in year the doing very second we to income quarter guidance is we're six the the had period strong We for the normalizing

months of returns actually six the Our XX% around for BA through on our limited the mark-to-market were and XX% some first for the flow that year. and partnerships income quarter, interest they and we assets were investment

is So there quarters, the we're is investments. on what type two for return last X% Amit, those doing, an assuming

prudent driving the didn't to project just We hopefully, do So it that the I think numbers into that was I guidance. guidance. put is and mean, in that's it what we the put we'll think better.

Amit Kumar

good answers Got all it, the future. for luck you much you so Thank and answered for my the questions.

Craig Lindner

Thank you.

Operator

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

Diane Weidner	Assistant Vice President of Investors Relations
Carl Lindner	Co-Chief Executive Officer, Co-President and Director
Craig Lindner	Co-Chief Executive Officer, Co-President and Director
Joseph Consolino	Executive Vice President and Chief Financial Officer
Amit Kumar	Buckingham Research
Greg Peters	Raymond James
Paul Newsome	Sandler O'Neill

American Financial (AFG) 5 Aug 182018 Q2 Earnings call transcript