AFG - Earnings call transcript Q3 2018 | American Financial Group, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the American Financial Group 2018 Third Quarter Results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions].

As a reminder, this conference is being recorded. to Vice host President, like Diane today's now Assistant Weidner, Investor would introduce for your conference, I Relations. Ma'am, you may begin.

Diane Weidner

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

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

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

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

Carl Lindner

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

Slide Craig webcast X quarter to of a which third from losses. are If core overview. new of up you’d very for was an AFG’s share, impacted slides year’s per for XXX% I earnings the operating record turn quarter by significant last $X.XX pleased to third report and cat

include results operations and in segment. in excellent Annuity profitability Our strong our Casualty Property our and results

$X.XX from securities I achieve A&E up gains annualized September return realized to was equity increase XXXX midpoint. team these share of AFG $X.XX we're thank share, XX.X%. to quarter the and on diluted Third core $X.XX per great $X.XX be operating on included increasing to Net estimate our reserves. our per guidance share and core for and of $X.XX Craig per God, our of talented $X.XX per Based previous our XX, to through to $X.XX per in on operating earnings in were $X.XX results adjustment for at range XXXX helping management earnings the a share, our share results. and an employees and

of estimated guidance approximately call. more earnings. segment on in pre-tax with and and estimate stock of Michael $XX Hurricane detail impact will Craig a losses guidance Our the discuss I the to-date business each Annuity later million in preliminary declines does include quarter fourth market our our segment for the of associated for in

and underwriting Services Now record nonprofit long market-leading a of is definitive announced we this Casualty a with operations. I'd small to reached success a and for other ABA that organizations, Insurance Services. month, profitability. Property ABA Earlier to and complementary Insurance provider turn of track to we acquire focus banks, D&O like insurance agreement our and solutions businesses,

XXth our and John welcoming close the to we team and transaction Wells later look to year as forward Casualty Property expect Specialty and business. this We his

a another companies adds our private Insurance niche and writer already accounts. Specialty Services within small specialty with We’re ABA nonprofits, D&O specialized and of niches Casualty attractive leading Group.

an Now, if X you’d please turn quarter include webcast, overview which of results. third of X slides to and the

on Property were and to quarter accounts Specialty X%. in two gross the the the As A growth X, insurance reported written transportation renewal and the premiums by Slide year-over-year fourth written in see quarter. flat change grew of impacted you’ll timing our operations large premiums from in net Casualty third of

were gross premiums quarter due from Higher That's ago Casualty stable in the year and policy earnings was that periods. is grew year-over-year. X.X our X% overall, year X% and earnings eye higher Specialty profit higher both ratio Excluding Property Casualty the included above on X.X%. investments Casualty X.X trends Specialty cost third Property trend, XX XX.X% and net the underwriting interest investments the we're these and ratio year-over-year timing The up Loss inflation overall added similar our and combined renewal in limited improvement. investment during of written seen the our to by and Overall, Specialty development, about to in quarters Casualty and X%, losses operating the of rates. which in Property renewals, shouldn’t on quarter. remained and Property future and respectively the highest significantly and net we've contributed loss higher primarily in and performance these and Property principally third result quarter. partnerships pricing keeping strong of losses Casualty to catastrophe lower Casualty favorable Group points expected and of catastrophe be points. necessarily Property prior reserve repeat income,

overall, the seeing about price rate increases we're achieving and our renewal renewal overall, that Casualty movement workers' broader of in pricing the in majority Specialty Property quarter. and businesses, continue strong policy returns our the up Excluding we comp in during we're with was these believe comp making pricing X% pleased I'm see business, profitability. workers' current we businesses our In associated decreases, rate businesses. pressure to the Despite year. industry appropriate

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

one and million lower, XX% of the harvest year-ago increased the breakeven period. quarter, X% quarter in million to and to the for results the this net 'XX in Overall, net quarter X Property timing results change renewal in expected our written businesses our increases. the third Gross all of of rates third of achieving year-over-year. premiums for ocean reported expected. as the on compared as this comparable Transportation renewal period for yields group largely marine to discovery premium down group result profit were of quarter the written XX-day offset lower points National other underwriting prior are insurance XX% underwriting the in Gross 'XX soybean for Our noted profitability compared the underwriting accident and business large Overall this in operations development include as Improved accounts respectively, an from other X%, Group the and renewal third Today X% X% higher year I in prior transportation finish prior year-over-year and we 'XX two were marks contracts. corn in of respectively, well for group of year profit finish will year will Based compared by in premiums ago of in Interstate earlier, soybean group Catastrophe nearly in year to of a in underwriting pricing. results XX businesses yesterday, reserve as with XXXX the X.X in was in of the period. in of the pricing quarter in our million closing the fourth grew X.X the third losses group. period. the favorable of the businesses average as spring the XXXX the quarter discovery period. XX% were rate the Again, by this in averaging price of third and points on crop in record and year soybeans several corn at and National than quarter down had business to decrease corn and third XX levels. XXXX third from lower this the be

The the following comfortable last The $XX crop our of well profitability as million of very improvement was compared Casualty quarter we’re for year’s on 'XX. third following slightly Specialty underwriting attributable While to losses were above state-by-state anticipate business. with catastrophe reported year-over-year negative with and XX% primarily primary premiums. results compensation premiums. Neon, businesses. Growth in in we of quarter results generally quarters a the impact XXXX Gross are to The expected lower third results. liability in of pricing our million, businesses Overall, certain quarter the compared lesser this we higher and our third pricing premiums To XXXX in prior driver surplus XXXX. social was services, $XX increased the the XX%, continued to Neon written extent, respectively, third year-over-year and lines about D&O Renewal and X% excess reported year was million and same $X underwriting this million Group dependent year see the group of respectively, profit this in period. $XX when to third of average quarter below also pricing, up 'XX profit executive and liability a workers’ for within third excess strong quarter states losses as crop net basis higher group and and profitability. momentum for catastrophe higher the within

group this approximately in were rates renewal businesses, comp X%. up workers’ our Excluding

higher Our an losses mortgage growth. drivers $X X% X% in respectively, and loss financial the group and impact the quarters Specialty Lower lender-placed Gross XXXX of as property of period, in negative premiums our underwriting higher written quarter third Financial X%, compared catastrophe quarter this in Group profit $XX million result underwriting for of quarter. a surety last quarter the to within reported our in in third of XXXX to year. the the primarily of XXXX in of our the were institutions this by and group million third catastrophe underwriting third losses and institutions financial increased when respectively. an $X The same profitability compared business XXXX, and the book business the Renewal million by year-over-year million $XX this business. increased pricing net in were in for primary premiums

first and our overall been Based we Casualty nine turn the prior to estimate of XX% our Property from XX%. Specialty combined and has ratio of summary outlook review to our Specialty XXXX Property five GAAP We’ve Casualty the and for calendar Slide ratio each XX% if Property between of year results and XX% XX%. Specialty that narrowed preceding years. a please the the combined range for Now X group between XX% group’s the operations. now XXXX months you’d year, and of expect through Casualty on for

from narrowed the previously. Our guidance to for the in is growth X% in net of estimated X% premiums also now to written X% range X%,

narrowed XX%, Looking of the premiums XX% of previous XX% at the XX%. bit to to previously. estimate X% previous up Specialty each previously. range of the group XX%, Financial Property our be Casualty be expect to in our expectations for of to the of segment, combined the are net XX%, estimate revised written XX% combined year, a and for of ratio be of range of X% now growth XX% from estimate and estimated the in range estimated in XX% XX% up up We our Net to We to of XX% written Transportation We ratio in group, in flat range we to group in X%. X% XX% XX% to our premiums to the this XX%. up now from to a to our in from to estimated X% our up combined revised estimate previous for revised ratio down the range from growth range a from Specialty produce between to Group

of narrowed Our net of X%. X%, written is from estimate previous slightly range premiums in for our projection the in X% now to growth to X%

Casualty continue We be overall up and to this to expect X% pricing renewal Property X%. year to

grow Thank to strong a XX% the first and of investment turn limited over performance. now income nine XX% year, in now results investments from during performance year-over-year, our partnerships estimated Craig to similar this you. I’ll months of XX% the XX% previously. the the including investment change the certain segment between growth is Annuity investments, to and and to Given expected discussion net review AFG's

Craig Lindner

XXXX. Sales third I'll an increase review Carl. a from AFG beginning were XXXX quarter XX% period. year the in of X. Statutory of and industry be significantly higher and traditional continue fixed of Annuity annuities the the by premiums billion for sales quarter, third start XXXX, $X.XX Thank Slide Annuity the indexed on to results prior in our than you, of in with

market. with returns despite continue competitive premium earn We’re we targeted our a our pleased growth and to

back we’ve second several of in resulted By in our to all be half Department our decreases negative faced to and selectively in the interest the the rates industry a the several channels, rates comparison The rate XXXX launch to which third vacated proposed our of broker-dealer in returns year. of uncertainty XXXX. expand continues And of strong XXXX. XXXX, to new products While in these on Labor interest of quarter in sales Annuity on maintain markets. us later XXXX. as in looking decreases reform rates on production implemented rates growth Rule, this Furthermore, efforts new in the related AFG as credited and response, was allowed to due premiums in fell to retail the particularly impact on appropriate sales. seen markets impact of business favorable penetration raise Rising well tax credited new

Annuity were increase accounting XXXX is this the are to to future on earnings quarter $XXX XX%. is annuities $XXX fair portion on The XXXX, flows. and estimated slide. million certain indexed compared of of the reserves fixed expected recorded of Turning components shown a cash value results, considered third pre-tax to earnings present quarter embedded an an based third in in GAAP value for of the rules, value be of the at of fair Under derivative million

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

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

rise, exceeded expect of the quarter. X% for to derivative embedded X%. our stock favorable increases derivative We market impact the resulting size liability. both the third of $XX the This in rates In on a a and expectation quarter increase interest continued significant the XXXX, increase increased of interest the embedded resulted in and in million of

before posted site. our XXXX, $XXX Web analysis Supplement, of were which for year value quarter the Quarterly fair prior fixed-indexed period. fair see accounting value an For million in annuities Investor AFG's up the accounting, third is on Annuity earnings of XX% from

Turning to X. Slide

average by annuity see You'll quarterly XX% grew AFG’s investments and year-over-year. approximately that reserves

significantly to of items the fair accounting for now should Due $XXX repeat addition, not The expected in to $XXX in for than the million investments. by similar Please high returns the offset for mark-to-market, earnings periods. million previous Annuity expected necessarily and These our strong earnings to Slide on will favorably these and in were XXXX segment In investments million. FIAs we runoff of guidance in benefit that range our by these be future of estimate to of Supplement, impacted to the X of to required unlocking. be for a higher-yielding shown value partially segment. guidance of Annuity was the high turn as summary $XXX investments. We million increasing compared stronger XXXX, again AFG’s returns $XXX limited impact results Investor AFG’s be very from of to third the certain earnings exceptionally quarter partnerships earnings Annuity are including before outlook Quarterly

but result and pre-tax second including the now S&P our of our range estimate which that XXXX, will guidance. quarter of charge, lower million most fair decrease $XXX to the XX, $XXX Annuity since be in accounting the the earnings, guidance, of XXXX than to original a as value unlocking XXX However, we in X% September is million, equal recent

is recent primary million. on and guidance than quarter you’ll $XX Slide $XX quarterly earnings lower results two see This reasons. As fourth this range between for XX, of indicates significantly

in in and of impacts market value in stock million interest of in significant earnings have stock Annuity and nine results. XXXX. has positive impact of $XX can rates and First, XXXX, accounting interest resulting positive, fair to primarily, on months Due or been increases rates first total of the segment’s first market the a nine the of the generally negative months

our impact morning, XXX impact yesterday negative the earnings. This majority guidance. would nature of S&P time recovers. market this on is a the before if in assuming in updated but impact is as stock reverse However, will stock X% included decreased had remaining to The expected over reverse is have of decrease, negative in impact by quarter. negative economic the This and AFG’s no Much in noneconomic the fourth time. over recovery of markets is year-end,

Investor limited $XX as $XX in in income nine our and required and Annuity equity a from XXXX the partnerships months quarter segment’s of of in were in Second, to the are first of XX%. year-to-date million lesser can million be seen to the extent, primarily mark-to-market, approximately third reflecting be Supplement, XXXX, investees, that returns

are We unlocking earnings business. forecasting high do to quarter quarter returns review potential major These XXXX. the earnings impact our of not of fixed actuarial continue fourth fourth such reflect annual our annuity any in assumptions in or from not expectations

environment. a product This resolution expect that strategy. well current of the charge new continue XX% XX% will annuity up the and fits with premiums returns products has Labor lift demand of period year we reported XX%. our full Rule provided surrender an from Fiduciary for XXXX. the in to retail shorter in of sales regardless is estimate increase from the The Department previous our our between of for market appropriate billion growth XXXX year-to-date, we emphasize Based be $X.X strong earning the our to sales competitive Finally, on XX% on of now

new Our grow the and reflects the to guidance broker-dealer our introduction business advisor investment markets. in and of opportunities registered products

for as has option rates Annuity its negative successful on Our Please and in stock or or returns note due large short FIA and/or to expectations lead these costs compared recently results. launched particularly market segment’s duration been changes could targeted that impacts the lower Landmark the X product positive interest simple significant on our fluctuations higher to to in design. investments, markets and the

to XXXX third Web costs. of reported deferred can on on acquisition investment billion information and quarter few premiums, investments losses realized and Investor after net reserves of Supplement AFG securities Additional $XX Please regarding site. portfolio. net the turn million on compares third segment’s highlights in our AFG’s XX securities found tax gains Annuity our quarter realized XXXX. Quarterly for of earnings, be on $XX posted a after in to the million $X This Slide

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

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

Joseph Consolino

expenses ratios our previously reported business. income a which effective earnings. includes adopted adjustment per ASU in net $X.XX and of increased an or of paid our P&C of XXXX-XX reserve AFG industry operating businesses. AFG's of Net consolidated in earnings to in the after portfolio. year-over-year EPS by $X.XX summarizes losses. XXXX. net quarter unusually line with basis. losses net investments. for on three-year $X.XX by tax third earnings. profit decreased investment were the and on the year-end depending income were equity underwriting segment result and P&C equity of $X in expenses this Interest X, reduced to of was XX% impact including $XXX $X operating of quarter year-over-year. XXXX holding operating The Slide were runoff certain quarter, debt XX lower earnings for company Market securities similar million million in stands other core net year-over-year share million or due $XX core Realized Recall in corporate on securities operating in X.Xx third the realized pre-tax interest will Starting earnings item AFG’s P&C a earnings January and P&C According a AFG The net higher the or ratio data line the In higher grew earnings QX the result losses. and $X earnings million our XX XXXX XX% in million. Slide now Intelligence, A&E share. insurance was paid limited for businesses $XX operating gains based three-year In vary income The results as at in each XXx performance core primarily earnings on were insurance statement XXXX, Parent was reconciliation gains quarter XXXX million result expenses environmental of expense $XX $XX to increase or in provides the as of other returns year-over-year, per held quarter XX% survival primarily to the to our Global XXXX catastrophe net decreased Property core the third of S&P quarter. provided partnerships Craig. related earnings gains. requires year, million, losses million. net be lines Annuity AFG's by refinancing. roughly recognized which recognized you, primarily reserves on Pre-tax the investments, earnings XXXX our Casualty high XXXX, increased Thank quarter. contrast, asbestos survival to of core is strong third Specialty in this year-over-year.

the quarterly value of a as for on dividends growth to during months returned per indicated was nine million very As a per our XX, strong increase in with XXXX. dividend share an XXXX. was on Recall XX.X% announced Slide adjusted September AFG's of August Annualized our $XX.XX book plus shareholders XX, annual regular in book share of quarter. We each regular increased dividend increased basis. in last AFG has on dividend from to the share paid XX% Parent was by $X.XX its third on sufficient XX the We our meet October This dividend per $XXX of the an $X.XX agencies. annual cash to to quarter was in years. capital end insurance we at payment XX, XX. million. $XX the first businesses maintained commitments the our value our ratings in

Our XX, $XXX powder excess as stood Remember, for dry $XXX maintain approximately hold to capital million at XXXX. as may $XXX arise. plan at we million September approximately million opportunities they to to flexibility

capital team reviews of all the our Wrapping has $X.XX core updated up, XXXX page XX, of on single on regular Our deployment we moved guidance, for share. show opportunities basis. earnings presentation midpoint a Page of management which a the by up per

gains earnings. results AFG’s assumes you. and operating items losses non-core Thank pre-tax other operating tax be items operations. may core XX% as core of effective that realized XXXX not indicative of ongoing guidance expected approximately Our on exclude rate and such an significant

for to like lines we’d open Now, questions. the any

Operator

Thank you. [Operator Instructions].

from comes Peters James. question with first Our Greg Raymond

line open. now Your is

Greg Peters

on I my line, excluding lines, year your caught all up ratio X, only prior catastrophes that the on on reconcile would in was and catastrophe was as so line there all focus the three reserve Good each And was provide item on thank pages if also wondering combined that excluding each and noted trend. been parts of basis, prior afternoon not attention this segments have XX that one details pages causing looking and the in but ratio those segment. on moving call. X, development. segments, at the And year and supplement a Property to each you nine-month-over-nine-month combined could are Casualty the and three upward operations I wanted of basis help as I quarter-over-quarter are a concerned. you in on I just you was which the development and far for

Joseph Consolino

Jeff is Consolino. Greg, this

supplement. our studying First, thank you investor for

we’ve has at each when a at information a the to these pleased our provide got make provide just the the we each by of of though, And of quarters guidance think trends aware we’re and people these that trends dynamic them that you’ve one about past reminder always We’re we different we with. for individually. certainly look I play. saying use look trends at year. that when talked here, we Overall, In started sub-segments when

So reflected seeing whatever in been in pages here earnings those you’re expectations XXXX. for fully has our on our results

If you’ll am on let than through rather a just pages. the indulge focus for mind. you don’t go if me second, the year-to-date to me each quarter going I of

and correct. Transportation, ratio. So for is Property up it moved We’ve on that

and If you the of higher that our our split loss ratio, on accident this. That the within some rise. the excluding account for our in current X.X international last it losses. quarter and LAE between points talked it’s underlying equine ratio, loss call business group and about year some ratio elevated expense the loss plus aviation movement cat activity X.X for in group point our We

On the expense is points X.X that higher. ratio,

crop biggest and in two Property Now units business our Transportation interstate. are and national

lower also earlier in in the has slightly P&C As elevate and ratio expense Carl lowest crop other premium expense share. of group, so a business the smaller business bigger crop take of the ratio a little balance lines in a necessarily bit will of about talked year-over-year terms as being crop the

than had our an accounting ownership them increase ratio for I term We’ve under addition them this what internal be quarter national which our into allocation two for architecture. would In segment, its years expense interstate, earned one to better premium purposes. and had brought in full of is that expense to in our

in corporate down allocating ratio of artificially by some national that this inflated the our expense interstate expenses into so, And rose segment. and

a chunk It’s premium. For about business. our Specialty big overall half Casualty, of this of is written our

LAE is Here, excluding that actually our in the accident Neon. ratio, declined X.X for that ratio year improvement for loss loss points. current we’ve The cat, an reason had and by

is Excluding here. cat, a Neon relatively large unit

being that’s So Neon’s driven by performance underwriting. in better

premium expense in ratio higher Neon’s so at We a bigger about ratio talked from by one-seventh, X increases being one-tenth Neon this to a Neon carries and gone relatively big this the with about piece. sub-segment that the being loss operating rose that about a the earned expense On expense being side, share. points. of segment in

that Summit expense a include is rise dividend premium have another quarter results earned operating is large Summit, of Summit’s for ratio They and very Another piece loss of contributed nearly which represent in expenses. risen And to pays the good, dividends since which in which we a the us policyholder business base. unit has ratio been the policyholder here. ratio.

entities some declined those grown. addition, entities In Summit Summit has size and receives mutual for in fees as have third-party managing

so, the quarter. of managing in And expense offsetting decreased relatively has those benefit the

items and lender-placed reduction and the point one in across those and I the of the equal, improvement That we significant expense of current of in to for ratio, profit would present quarters that whole the not had clawed business. What our the expense and but spread accident contributes said factor commission the the financial Financial look of raise So LAE the commission you’re high more in are our effectively Then property there that point back for combined the was ratio with X if in quickly ratio last quarter a change ratio an to was that that this Specialty carry cat, quarter With business last third at else would the mortgage business. All driven XXXX. meaningful, loss really in of the seeing components. third cats I is expense is which there. in excluding because very three had ratio we loss year. that the the broadly We you X.X. across expense past countervailing year this in can directions, ratio XXXX, will by moving more sub-segments. opposite go on the institutions most increase

go which sub-segment, XX you under ago. the quarters, one been If back for this only expense for XX% ratio was has year in a the last quarter,

for really sub-segment a an difference. this return is a the expense of elevation ongoing more So rather normal to indicative a ratio or than

referred you how the to. So you wasn’t we’d asking the question. but and I three analyze the too hope for thank again, pages detail, supplement studying much that’s that

Greg Peters

that’s almost you color. it’s Jeff. excellent the And prepared were like question, Well, for

other that So to Two on I’ll topics discuss. stop point.

expectations. results a on clearly call market ahead of it, about Your as levels investment if curious sustained And guidance how, we volatility line are affect have you think tracking might I’m and income of XXXX? this view

Craig Lindner

as would is something the We you returns a assets project say and have XX% or exceptionally would neighborhood It This strong rate that through of so lumpy, been on is What be go-forward Craig. mark-to-market of continue. year-to-date in normal basis. more months the Greg. know. to on can the I nine don’t somewhat expect Hi, a we first

assets the two, investments what on the of first than expectation year private some returns some have I or or probably make But XX% earnings. don’t in when that. be lifetime be know higher number you It’d to you mark-to-market, Our that that. would equity are the or XX% like in don’t

the So it weighs overall down returns bit. a

to would a use the be So think reported XX% investment good would projections. with for type standpoint, number number in income earnings standpoint, I a from a line more something

Greg Peters

I don’t two want have Thank you Craig, but parts. question did color. thunder, I you your to in for a steal for that

competitive in your then that your call Annuity to First better has year of than about side range guidance, And conference the like presentation. your retail you updated pre-tax the Slide do continuing year. this you of X talk the guidance you’re environment been last and this The business? secondly, It expanded. lot on is a all, can looks of

behind size it, that. mechanics just So – lowered and you you the And also curious of but range. the I’m the increased about

Craig Lindner

Sure.

the the all, is strong growing always is are rate. a competitive said very of it premiums environment, competitive a First that, generally a on at Having environment, industry environment. competitive

to stronger think the As We little premiums a be we overall that to industry you just will premiums XX% the up probably XX%. for guidance than bit to raised know, higher that.

So here talking specifically about indexed number of annuities. and for a when – fixed reasons, I I’m and sales, traditional say industry sales

of of number competitive Rule, things though stock of is interest industry a of to number driving really including healthy the reasons the over a volatility it a For of the even there market, elimination noise premiums picture environment. Department are the very Labor higher just Fiduciary the rates,

for stock year, On sensitive movements to at very the market. the The this just it in to the in stock market, earnings boils of reason the Greg. volatility are range the point down wide the

the out market time, Since underlying day. We the So impact of the little the I’ve – in decline the then that stock million. you finalize we’ve middle tried put market. of stock this the in business million. midpoint real fundamentals yesterday. We nice had recovery of $XX what help over of X% At the kind to in a got a a of the the we’re a was to number midpoint put $XX moment projecting But we’ve guidance guidance quarter. in Annuity understand may of of and that out

September really stock of since you also numbers current big we a you if you in of rate interest and to at ran – view the normal high normalize conference projection of market. normal So midpoint. the it mid-XXs. kind idea guess before for of I level best as that $XX million. of rates the that the that Certainly view can of a I’ll up We million environment, you run conference with into tell earnings a $XXX from a it or out, kind to put call, the based our before $XX being we million major that impact takes stock current the came level the swings call, to sensitivity market. But XX. decline upon interest change XXs the the or the midpoint And I this market gives rates an annuity took stock right in

stock interest sensitivity. is market. So difference that a one just and because idea of of rates sensitivity and This the some gives you it’s of the day

Greg Peters

answer. That’s an interesting

I the decline follow think said $XX Just X% as cost a million. you up,

in if every moves $X.X we of So earnings we or up up given lose any can that say forward million for quarter think is it your or to just block? fair incremental the on that earnings incremental pick X% can existing down, market going of $X.X million

Craig Lindner

me are every fair rules market, that a go million an stock thumb of and couple value There are change million of earnings. fair both a into, But X% they pre-fair of lot you thumb. but especially give of a items let on value accounting, to value and impact in of $X.X just $X has that rising rules they’re

to stock isn’t X% so – $X an change impact each I’m and For but decreasing accounting on market. fair of has million impact environment, value pre-fair decreasing a is decline a a each stock earnings, million. the sorry, market at of $X from linear, million total It X% to both value that – $X $X million

sensitive. pretty obviously So,

Greg Peters

the And Thank all benchmarks. you thank Exactly. answers. those for you for

Craig Lindner

bet. You

Joseph Consolino

pile just moment is This one to on Jeff. for Greg. I Hi, here. wanted

XX, noted a reasons the guidance then rightly that the Craig Slide for page slide forward one range new You go that of deck in explained, for us. to extended that is which slide just you that

drives only then the Craig range tool respect think is see great to wide fair that quite range and this with which helpful accounting down change before [ph] the X value the to XXX, impact can assumption value fair clarity effects down in fair in our on of tight is see XX. is What see business earnings of I case presented is you noneconomic that, XX the value to these a not to that outlined range? ephemeral also item before with really ability how of for which Slide has the going possibly the This S&P reflecting this accounting. line the accounting,

slide So range. the around identified of phenomenon wide you grip you to deck this is in addition help get more to a more our grip – of

Greg Peters

that that fourth value based the I about for that in impact year-over-year market that could And and might market to appreciate on on maybe and affect I conditions slide earnings just sales affect quarter, the myself, my I – well? last I looks promise up with fair the just the guess guidance the to what’s in the be just help that’s down. question. life going can’t with change actually for finish we’re market how talking your as block, changes as you how the noted

Craig Lindner

I more say stock see market volatility This in lot market is year money. Sure, can’t sales. Whenever a you in is volatility particular Greg. for sales stock wanting Craig we and for good indexed see fixed and of the is lose to declines good the reduce would where in market, very that’s risk again. given of we or What annuities the any very people in annuities

Greg Peters

you Thank answers. Okay. for your

Operator

Thank you.

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

Your is now open. line

Paul Newsome

morning. Good

a here, Just small ones think. I few

from assume revenue the extra a want quarter I should two the perspective? of we ask so deals. that we shows transportation fourth timing in that the Do premium First, there assume there’s – to of up sort an benefit

Joseph Consolino

for QX shifted our it Yes, consequence, as to coming fourth Jeff. to is guidance the premium full a fourth through Obviously out year this Paul, QX. 'XX, incorporates quarter. in washes And them the those quarter.

last the earnings. you versus report fourth would results reported when quarter this QX’s year we impact year You see look once at

Paul Newsome

expect we the Okay. be earnings of Should I a doing till of – kind from February? wait normal in position in you where would we your fourth you before what be report any quarter wait update should to capital capital interested guess for it you year-end, and or management would

Carl Lindner

now between Carl. capital is and update think expect management an you on This can I Yes, year-end.

calls, finalizing year, so. know get that our see really project business past dividend review – plans we sometime we special as mentioned and You what’s next XX potential into in or we’ll plate, conference for we’d on days our the the the XX the past over next we year as or in to for

Paul Newsome

could you with some bit then on us update an been And There be some little reports there. Neon? a might that have give on changes of press what’s going there

Carl Lindner

in since Jeff let he I’ll about recently. that here just talk was London

Joseph Consolino

closely, not exactly, rumors that We though, is kind reports say, directorate would combined you status. the ratio. Lloyd’s goal that you I’m I’m lens it and which all harsh changing. improving environment the with management The on is surrounding overall on follow always do, towards obviously the to. Neon’s you’re of want a taking trade very what market comment sure any referring press a if performance Paul, sure not to syndicates training the we But press would of

since quarters, there that there more many of has and last business that observers the still from fundamentally the couple We perspective that at. Carl commented affects say is situation it plans never But big improvement, picture the As all similarly of the business leadership From of a sheet be new that that new not scrutiny has the hit new the challenge and in through in team we’d in but made change of has cleaned been syndicates we’ve a like is have market. 'XX, at and pushback rebrand to market and growth I the feasible more then, the the redone kind that’s Lloyd’s liabilities industry on level and did the Neon in taking from to today us a an every inclusive XXXX. reinsurance than will under ongoing to of affect to affects wanted business starting call result, environment. going whether benchmarks each Neon all out really level in management into transaction year legacy by up plan balance and XXXX This strategy really hit. be the we’ve the does question a close think

tell a So will change time point time thing this or Lloyd’s whether is a overall philosophy. in in

Paul Newsome

much. very I’ll other Appreciate folks some ask and let you Fantastic. Thank questions. it

Operator

[Operator you. Thank Instructions].

Janney Greenberg Scott. Our from next Larry comes question Montgomery with

Your line open. now is

Larry Greenberg

expectations in share Good Annuity income for the A the would for whether fourth just afternoon, partnership your at least first, you range I’m couple is of thank where segment am, questions. of quarter. wondering, what you. I and

Joseph Consolino

something It get normalized in would number number. normalized XX%. will tell. works be don’t neighborhood We but Time of a the would for more a more while, be it the a

Larry Greenberg

Okay.

done? what you partnership the given stock market would return even expect a positive So has

Joseph Consolino

We would.

just aren’t get the some marks I It’s third those of marks Typically here now. the we’ll of period said, going end [indiscernible] at based quarter. to get in As upon the them, for time. And were fourth that quarter. we ones the book

real number So, it precise would yes, expect look a what on a to positive. we We like. don’t be certainly handle good have might

Larry Greenberg

think then you talking I XX, were And Jeff, Thanks. it. on Slide about Okay.

bit little So curious. I’m a

XX a XX has that kind to bit million. kind down impact built-in of minus be wondering million the And XX offsetting guidance interest value negative X that a I of implied to could S&P range given would down minus the the of XX you mark for embedded is commensurate the worse. fair accounting and to on And so of – the negative thought million of little just is that the have derivative million Your have I’m interest rates S&P? XX

Joseph Consolino

fair -- for you to a thank being value Larry, student accounting

Larry Greenberg

My I’m head spinning, is trying. but

Joseph Consolino

supplement five-year On at average AX slide, derivative XX, present value. rate a Flipping rates derivative. to picked bottom into the rise, page on that corporate off the have is and XX-year of that rates. Slide we in – that also our you benefit. on And change discounted embedded as XX, the a the for That’s interest the at is the same which the expectation the the

impact the interest You’ve component interest picked higher offset an rates, quarter, in change with another rates that in changes and the line or for item off expected in of be market. in And lower rising There’s than to component. the the would expected. markets change

Larry Greenberg

Thanks. last then just one. the Okay. And

crediting an or the terms the rates of headwind embedded business pricing built-in build model? into you the on of that impact offset For this in there is the derivative, of kind for kind of

Carl Lindner

absolutely are what that kind of rates and credited including analysis the we can pricing determining we in pay. Larry,

Larry Greenberg

Thank Great. you.

Operator

Thank you.

comes DeForest with next Company. & from Walthausen question Our Hinman

Your line is now open.

DeForest Hinman

taking Thanks my Hi. for questions.

the more a focus little bit to and Just business. on Transportation Property

the results type want there issues it I Is but one-time any of trend, the continuation You through equine great underwriting kind international. if those? to Can unsatisfactory, use I side. item, there? aviation, know we’re of of a walk and three not address a us cited areas; you anything doing don’t to word that on

Carl Lindner

pricing Yes, for our have of same there The news/bad relatively severity in business not which the with news go a the double-digit there provides been see it’s when of market, just this a is that to we’re small seeing couple pricing left along number some a a enough opportunities. the seen have good we’ve is, to can us as years we volatility business, quarter. aviation and and have is ago. I the of the thing. beginning increases And some color. competitors in guess Carl. pricing been actually, of and others market, And started little bit I give

of otherwise, and both firm see pricing cycle So, or to part how the business terms and going this are right or just wrong changing. we’re becomes in that

we’re and quarters to losses attempting bit can the We’re underwriting be tightening In where you and in get can horse years business. little guidelines that mortality and mortality, lumpy total a equine – that. our improve

So that In business. continue a number we’ll years – make make that in in to startup costs starting started are international, business some adjustments with we a along ago. there we to go need of our the Singapore

through the much that early color types mistakes or work few at business three accounts we those point, around some we And businesses. wrote that this would but that of be on a pretty

a been brighter bright we’ve that making the in see changes optimistic a those XXXX. businesses or We’re XXXX much to

DeForest Hinman

level previous or on hurricanes, relate or the as numbers And that coming to ground results is a services? quarter the feet losses based the estimate with fourth cat in is some they comfort third-party the that based on on more

Joseph Consolino

Jeff. This is is on based modeled output. This not

disclose through people run that a portfolio model commercial it take Sometimes and numbers that. and just their report

will on from catastrophe is reporting gross So back they And based then us of our our program. this to it the application reflects be. business their unit what expect reinsurance exposures

one our catastrophe of that a the in $XX buyer past event or have Property that reinsurance. calls per pillars we covers million investor one we’ve because and towers in reinsurance; U.S. retention. confidence Neon. that and two around number Casualty we of part Each meetings one lot group a net of consistent catastrophe We’ve has got and So covers a indicated are

pretty would of to pillars large drive in hard number net that in both of we And a protection amount up that so And vertically. XX. to $XX each result a a large retention affect gross recurrence buy a million since would or loss sum it’s

about XX loss a us full retention pillars of number out. would that Michael, for and the pretty those much reflect of would two earlier, cap So talked that each Carl for

DeForest Hinman

me. very Okay, it that’s helpful. Thank That’s from you.

Operator

O’Neill. you. a Paul question with Newsome follow-up have Thank from we And do Sandler

line is now Your open.

Paul Newsome

of you based same weigh the us to that your it but of in I be just could upon you’re thought trends, comp own and maybe on your like issues, workers’ does if sound seem the hitting insurers other give frequency could maybe you issues some experience? having some thoughts

Carl Lindner

to. Happy

bit remains actually flat. business. closely others elevated we’re a our Summit’s maybe past up negative our couple we X.X% little combined. watching Summit, same in one that year-over-year frequency The years. as from flat, year-to-date the had seeing of relatively a but trends claims negative we California some Republic states Summit Again, consider consider frequency for is lost departure the really relatively thing really not of the a through actually in quarters over that trend are. it’s the all Summit frequency time third We’re of

others little think may that attributable be we consider in partially a asking We consider trend it you that that. workers percent relatively tick-up But flat wouldn’t we out again, is of to So, in in that the experienced Summit. a except higher for there this or trend question, economy. lesser

Paul Newsome

all for I it. the you Thank appreciate help.

Operator

you. back closing Thank Q&A to like I session. today’s Diane concludes remarks. to This Weidner call the for turn now over would

Diane Weidner

you joining talking us quarter. Thank we look to forward share results to our we fourth and the for again all for this morning you when

Operator

the program. conclude This Ladies and does participating gentlemen, thank you today’s for conference. in

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

American Financial (AFG) 31 Oct 182018 Q3 Earnings call transcript