AFG - Earnings call transcript Q3 2019 | American Financial Group, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the American Financial Group 2019 Third Quarter Results Conference Call. [Operator Instructions].

I would now like to hand the conference over to your speaker today, Diane Weidner. Thank you, and please go ahead, ma'am.

Diane Weidner

Good morning, and welcome to American Financial Group's Third Quarter 2019 Earnings Results Conference Call. by Financial III, AFG's Group; morning Co-CEOs Craig CFO. this American of and joined Carl and Lindner Lindner, I'm Jeff Consolino,

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

attention of the our future these your the can the in webcast. may AFG's performance. condition Commission, made this that the and the available these I A Certain to turn Investors I be and/or differ like be actual found Slide Reform Act statements Litigation These on guarantees call statements Exchange website. our to of Securities under risks uncertainties over statements statements. and could financial Private discussion should Before notes as considered Carl, Securities which and on with to would XXXX. results draw to uncertainties of filings defined not are forward-looking X detailed during consider from of also materially description cause are risks

net in to include earnings or remarks earnings non-GAAP a measure, financial questions. may operating to earnings, included release. core our We responses shareholders core to reconciliation is of in to attributable our A net earnings in net operating references

or of or this errors reading are intent or factual a it that please you the authorized If it statements. could alter meaning transcript call, transcription not thus that contain may be of materially may note reviewed our accuracy, for

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

Carl Lindner

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

share strong Casualty Specialty both overview. AFG results investment the of Slide operating of an profitability would and our reported $X.XX for please and earnings you If to operations. & slides X turn core Annuity Property reflecting operating per in webcast

rates was earnings value a in fair impact per annualized stock losses items Net and quarter annuities, noncore accounting share return net and $X.XX $X.XX for in unlocking. after-tax other items, operating share interest of securities, negative XX.X%. per per impact share were including included on equity related annuity $X.XX realized Third to XXXX core and for of the the changes fixed-indexed market on

$X.XX share reserves. Craig thank achieve helping management our A&E also team, great and these to per strengthen for employees and earnings talented our results. to Net included God, I our

of We per expected operating more have discuss previously, for narrowed per detail range call. the of our to at in core later $X.XX to our segment share. to each net $X.XX I and the $X.XX while business earnings midpoint Craig will XXXX same guidance our keeping range in $X.XX announced the the $X.XX the share from for

Now let's overview turn which our Property focus and X third of webcast, quarter an & turn Casualty Please X Slides of results. the to our operations. to include

on Casualty grew see our XX% year-over-year. XX%, you'll operations Slide respectively, net premiums and X, insurance Property written in gross As and Specialty and by

XXXX third we written increased reported, in delayed our planting As and to a gross quarter. which spring you net reporting premiums, previously when But resulted operations, exclude the overall crops compared our X% of crop third crop when premiums acreage in premiums. quarter healthy each late increased

third Property the Casualty Core increase an & year of $XX our operating Groups the underwriting our million $XXX Financial Property underwriting compared or earnings of 'XX an insurance and Specialty quarter Specialty and Transportation profits million $XXX prior year-over-year period, third in profit in the in operations third AFG's million Property XX%. $XX compared partially quarter offset underwriting were $XX Higher of the of in operations Group. XXXX. Casualty in to million by Casualty profit million to Specialty insurance were in lower generated and quarter and

of in XX% of favorable catastrophe prior prior included reported lower year X.X reserve period the the comparable in quarter combined X.X points and points than XXXX points ratio year third X.X The was losses development. XX.X% and

Average workers a X% our quarter, pricing of during half you business, for Property across from increases the quarter. was exclude renewal the entire continued group pricing first improvement rate When excess third in Casualty comp reflecting the in achieved renewal & up of up the was our XXXX. about X%

renewal fact, overall Casualty I'll pricing over have detail in our as Property our the we In of exceeding years, achieved the is review Specialty highest Casualty in each in of more we and in discuss Specialty Property subsegments. or results expectations each. X meeting Group & our

our cost across loss rates. to monitor stable remain trends we cost along interest businesses loss with social Casualty lost inflation overall, closely do & impact inflation and to Specialty and continue Although activity general Property the

Slide I'd Property in turn The profit Casualty and underwriting few our prior the to million in third an reported Transportation the Specialty XXXX results period. $XX underwriting of each from Now of highlights & of compared to business Group quarter comparable groups. a like to X review to breakeven year Property

increase profit losses the higher were in all primarily businesses. offset Transportation in million Property the $X period. the in this nearly by in of the third quarter group in in the comparable in partially Although XXXX our our and higher quarter in profit these crop was year-over-year million this group absence business underwriting and $XX the of third reported of Marine businesses underwriting by XXXX. year And underwriting Catastrophe and were driven profits, increase this

than written was year-over-year businesses higher net Transportation XX% XX% crop timing premiums in premiums comparable premiums. the result of XXXX of year The the and Third largely respectively, -- and the higher, and our period. recording gross XXXX the of quarter increase were

the XX%, group Overall, strong, X% increasing quarter. if Now nearly rate with and on in broad-based increased and average group, and businesses in net XXXX quarter the rate strengthening gross exclude you this this businesses. were and I And in all be third increases Aviation crop, year-over-year. renewal to rates the premiums written respectively, very with actions reporting Singapore in our continue pleased in corrective XX%

made for plane challenging a crop have early planting year. and states Excessive in the the rainfall in Midwest the season XXXX upper

preventative spring flooding to as due planting number moisture last and quarter, As in I year a excess the for expectations of discussed our we claims incurred terms below record of crop average.

below soybean a much and recent effect meaningful the delayed are a their negative of result on of throughout finish and have to yields expected corn yields. Midwest event freeze will averages, a plantings, long-term As

Commodity do expect XXXX crop updated the claims pricing the to expectations record within harvest discovery to pricing X% harvest, a any in the year. quality quarter XXXX. of fourth and the the We're crops that impact well of appears percentage is now we up call not sold But planting prepared of X% on based crop pricing. from of profits poor spring preventative and our points to

be the results Transportation in growth our pleased third with in double-digit achieved businesses, the which to I very continue year-over-year quarter.

transportation believe when Rate a In appropriate year this effort, after point saw commercial exposure is able and several starting time to severity auto commercial an rate we increases new increases to in increase got obtain uptick our rate and seeing on and our years industry XXXX. through back actions first dating we loss and do book of we're track this back This the been in of our address long in of rate different underwriting business concerted lines. talking to But in issues we addition liability business. continue than increases. We auto is to were were opportunities overall. in quarter. X% this We've eighth our growth, line specialty in about third of rate for the business about

and by underwriting offset excellent. than our in business of Compensation excess reported Casualty and XXXX in Specialty compared more and was our our Group to reserve Higher comparable services an higher year in million $XX quarter period. profitability losses adverse businesses. $XX million social underwriting 'XX business workers to Worker's third comp surplus prior profit Underwriting development continues in the the Neon in in be profitability

with year Services, There Catastrophe in for acquired quarter third Lines for addition third group fourth which to the the in from liability our XXXX; increased primary are X% of period. Excess businesses. to in the $XX the compared I Gross comparable growth was X% premiums the premiums and year and excess net factors in were period. second, compared prior ABA am this the group when losses strong healthy the of achieved Insurance growth growth: and driving first, respectively and same quarter the X written Surplus XXXX prior and of this $XX quarter. in million million pleased

with new The our our in growth these at opportunities, resulting from net But gross rate in our Neon, is group. excluding the of other businesses primarily the and written respectively. decreases, currency quarter primarily XX% comp comp, workers in business and premiums increases renewal higher rate in E&S growth XX%, businesses the growth retentions on result due foreign and healthy in the as segment translation in excess pleased premiums lower liability third businesses workers very this I'm in as and well year-over-year was to partially Lower premiums results. offset business.

Specialty up was Casualty X% Renewal quarter. the pricing Group for during the third

increases Excluding seen in really Both businesses. the workers the in rate up this this including pleased quarter and across group the improvement strong XXXX rates excess in are in our businesses, highest the one and comp the in X%. during increases businesses group X double-digit with in measures of achieved we've years. renewal very quarter, broad-based renewal umbrella momentum a second I'm from pricing our liability were rate decreases an of

of to of in Specialty underwriting Higher 'XX. of Financial compared the profit our $XX institutions Group quarter million reported and an $X Financial in quarter Catastrophe were underwriting underwriting primary business million this group third profit the margins. was businesses of losses the the third quarters in group produce million the in The to 'XX, $XX excellent respectively. driver continue $X third this of for 'XX in increase. and million XXXX

X% a quarter. when higher the group written gross and period, of was Third premiums flat our same Renewal net respectively, quarter for and this compared Fidelity/Crime during primarily in equipment third and pricing X%, leasing to XXXX businesses. as the by premiums increased result XXXX

for results Now X our the Specialty of please narrowed operations. the XX%. estimate XX% to Group Property of for XXXX year, between review XX% turn expect for prior to Casualty & combined overall on the of a first outlook from we the range and ratio Property we for the XX%. Specialty months our Based and Casualty X some now XXXX the Slide But

premiums also X% We X% increase estimated have and range X%, to be to net in our X% previously. of of for growth written from range the the adjusted to estimate an overall

ratio of the XX% to combined a estimate XX% now our narrowed Group in we our segment, previous range to each Transportation bit in from XX% of Property a at and XX%. Looking range

the that earlier, crop quarter. earnings revised expectation in the on noted guidance XXXX poor our won't profits record a fourth As we includes crop any based year,

strong The of first claims following were year earnings as a that XXXX crop settled were half crop included recorded XXXX XXXX year.

written net don't poor we expected the in in record Given results between an part premiums year, and X%. XXXX to now expect any X%, crop this X% from is and XXXX. our X% of expectations range be of the earnings year to crop for increase early Growth previous

from in XX% of the Our majority estimate written the produce premiums opportunities this to X%, Specialty to to X% And this a the XX% now from from growth be net up Casualty XX% of of we an -- in in And strong initial of reflecting our improvement and XX% growth be is this to ratio XX%, ratio improvement range Group range and Financial to expect of previously. X% to Group of XX%. and group. expect to estimated in businesses the between the range previous the combined group Specialty in XX%, X%, XX% now now combined for pricing momentum in range we expected an

Additionally, net premiums X% the flat written from estimate for range to to to X%, growth of be in of raised previous our down the change year-over-year. a we in flat projection up

& expect & an Property X% Property net expected with changed, to And has be income in up Casualty pricing to we Casualty X%. to improvement be regard from previous with guidance to estimate XXXX X%. renewal XXXX to X%, results the investment approximately X% in Our up of overall

to workers we expect rate to renewal X%. Excluding increases the in X% be comp, range of

review discussion in the now to investment our Annuity AFG's turn the results segment Thank you to over Craig and performance. and I'll

Stephen Lindner

to quarter of review $X.X were in premiums a third our of on XXXX Statutory Carl. of to XXXX, results annuity in quarter for traditional in billion I'll the to maintain rates Slide have In by compared $X.X X. Thanks, Annuity new rate decreases decrease annuity offset continued third quarter annuity on order annuity in XX%. a were sales. crediting the with more third start premiums. interest fixed-indexed implemented fixed beginning than lower the Higher of the has drop billion which we numerous returns response tempered sales, XXXX, premiums appropriate in

unlockings Beginning such for as earnings. the changed we XXXX, core the Annuity operating items interest are fixed-indexed and indicative with core the Annuity accounting of changes impact of related define items earnings stock quarter fair way in value of rates. other second the we of necessarily to that market annuities, operating XXXX the In operating quarter, second impact the not trends, and exclude

earnings which the with of performance cost, expense annuity Core for in annuities. business with is view investors to the the measure of for now of these a cost comparable include the business funds fundamental segment's operating believe option more an better better a of provide of compared fixed-indexed measure its peers. amortization fixed-indexed changes the a Annuity We

X. Slide to Turning

Annuity shown which earnings, components costs. a earnings the the Annuity the from option under AFG's to earnings. at mark-to-market as from offset for operating the operating earnings reflects as investments new assets partnerships to periods are prior operating higher amortization prior renewal and -- earnings option were quarter-to-quarter underlying Growth core Higher reported the definition. quarter this higher average reported to mark-to-market cost comparable lower vary reconciled operating business. from cost investments. invested contributed the pretax previously core Results see well Earnings to in format definition in and Annuity and growth inforce for business XXXX year-over-year annuity earnings are investments of higher of by Annuity You'll the results core of of second related of based through new the on option

Turning to Slide X.

of I'm approximately reflect returns XXXX both that higher this results certain in spreads earnings with of XX% operating lower on in investments that pleased mark-to-market of rate quarterly XXXX the were in XXXX through third higher quarter investments XXXX. the our the interest challenging as costs see grew annuity quarter well in are than impact our third as in option and You'll environment. as spreads AFG's year-over-year. average by reserves

and which related third a Annuity This throughout core unlocking performed a review well expected and or quarter rates its or on assumptions excluded on both in a reflect anticipated resulted decrease after-tax and cost annuity return negative unlocking blocks share. XXXX. lower XXXX, interest negative reflects is from review income expected excess unlocking investment future detailed earnings underlying in operating short-term per of core certain persistency $X This $X.XX segment quarter positive renewal options, the charge million the in higher significant charge impact AFG the the of impact in into annuity resumed impacts takes third Due account of annuity operating of Our actuarial long-term the -- for XX%. results equity lower to related to lower resulted as renewal of fixed-indexed in to business net operations as including rate action. rates, interest

this the norm We timing peers. each monitors our has year. assumptions of believe reviews that publicly this traded AFG Annuity its major quarter will Annuity in actuarial this the consistent or year. is for of the year, the operations AFG company its the of quarter assumptions fourth and third life throughout unlocking conduct the conducted review Historically, year. each underlying with detailed Beginning in

its the expects Please a turn for the of segment of new and months million most outlook to X . This an through Annuity to Taking for $XXX definition contrast million earnings based be of guidance $XXX in in XX.X% mark-to-market the the core Annuity segment. XXXX, pretax the Annuity of in fourth of operating in AFG $XXX to earnings in account reported earnings XXXX quarter the earnings, into XX beginning compares full million. of $XXX annualized summary is million by recent operating to basis Annuity million Slide the an XXXX operating months on the in on the the our XXXX return Incorporated of earned now quarter core be second to first of assumed on operating to year first the range X investments guidance the annualized to in of required X% $XXX XXXX.

rate we've of $X appropriate of XXXX approximately expect on Annuity market response Annuity investment sales. lower segment's on of returns crediting XX% the now record rates, decreases to products we Our down our from rates, on the on XXXX, a in maintain securities. impact implemented interest rates drop XXXX. in our date, net impact guidance which Annuity billion to premiums numerous reflects negative and results particularly, be floating rate continued will order the lower in in the sales billion will Based to impact In the X% in also have short-term interest to $X.X

new sales, on to Annuity blocks decreases addition of certain decreases implementing Annuity In rate we've inforce renewal also begun on rate business.

$XX XX to losses on billion cost. $XX investment September our third XXXX quarter $XX $XX gains of of securities highlights realized million turn net of regarding few third quarter realized This recorded the in net XX, continued portfolio. Slide XXXX. Please and pertain deferred at hold to AFG of on million AFG that quarter to of to after for securities compares losses acquisition reported securities million XXXX third a after-tax in the the XXXX. Approximately realized

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

be our our or see continues XX, X, with NAIC XX% XX% X As highest within of fixed its you'll rated maturity investment designation on of to Slide and grade portfolio portfolio X high-quality, categories.

the Investor Supplement on of the information on various investment portfolio in detailed additional website. provided our have We segments our Quarterly

an the liquidity. a and results who our XXXX up about over turn third share wrap capital and of will quarter Jeff, now overview to I'll comments with discussion our consolidated comments few

Joseph Consolino

operating in earnings earnings was $XXX in in results earnings flat year-over-year third The Slide expenses the year-over-year. subordinated XXXX. result Craig. in the operating the reported in X/X% of insurance third debentures. XXXX AFG's $XXX and in of Other year-over-year. investment quarter primarily strong other were operating core result increased EPS the were AFG million of the $X QX of results. increase quarter million Interest net This summarizes from XXXX. hybrid core consolidated million interest million. issuance X company you, by were higher core quarter XX-year expenses expense is our earnings XX Core Thank QX businesses. of XXXX Parent corporate principal $X amount $X.XX March

share. realized Annuity a the share, net earnings. to losses attributable provides recognized AFG net segment of to items in negative of net noncore $XX earnings on core charge earlier. $X.XX XX by decrease net the or securities. In reconciliation XXXX $XX XXXX, or per per rates that referred as $X.XX Craig operating million, interest reduced Annuity million, third of quarter the well include market after-tax quarter of earnings million to Slide shareholders as noncore items unlocking the in $X impact the third during

net or $XX $X.XX earnings reserve by an of A&E per were AFG's share. reduced strengthening million, Finally,

were to year-end X.Xx A.M. for environmental and According losses Best, XXXX. insurance data provided stands XX.Xx losses. at X-year paid ratios reserves survival The industry ratio for AFG's as now survival X-year by asbestos P&C paid of businesses

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

paid our XXXX. dry flexibility excess opportunities hold evaluate stood million million powder We'll Our at main as at XX, to excess additional position approximately in for per before approximately to special to to repurchases capital for note $XXX September that of preclude year. dividends the arise. or We our special share million capital May $XXX $XXX they the We'll plan cash does end balance consideration not opportunistic the of dividend the XXXX. share of $X.XX

page, page keeping share core $X.XX XX $X.XX Page our the At updated the single the the shows guidance to EPS the $X.XX, of per To core a presentation midpoint of guidance. conclude, we're have range at can XXXX to and you top same earnings of see $X.XX. narrowed from XXXX $X.XX our to

of noncore indicative earnings. operations. rate other annuity tax earnings core exclude effective approximately XXXX may and and an significant results of realized noncore expected such and AFG's assumes operating items gains pretax losses guidance core as be losses, ongoing on XX% Our items that not operating

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

Operator

O'Neill. Instructions]. [Operator from with of And Paul comes question our first line the Newsome Sandler

Jon Newsome

that other about the to -- around Teacher's any could thoughts the the a of business or life and that obviously, investigations indications ask you [indiscernible] some some part there's side wanted do But on your with you Annuity side, annuity business, small from I the on how business. on Teachers relatively in the different that of be have with or companies? relationships similar

Stephen Lindner

is Paul, Yes. Craig. this

any recent to understanding To We not business announcement York. fact, not is have of a with to at that. York, issue we're being at was all -- done not And kind the in our a least it's the related us. we're at notice an matter -- knowledge, New licensed as New my related in not of received

Jon Newsome

a of attorney like, where arguing besides from, relative this be point that you an a saw, in start you're business. slides something then earnings you acceleration your I point, year that. I they're involvement XXXX. topic this maybe released something there that else line what some claims their that of on of switching different over in Is they seems there's And on at the travelers your property that side. from your -- is been profitability happened that as going obviously, business with Or is have point, trend And Great. claims it out in think side? mean, over put just that in the been least to to probably environment? to you're starting or that auto the your as has -- acceleration casualty quarterly the tour in business, And seeing suggests well there commercial not the

Carl Lindner

This is Carl.

we've severity an seen I uptick think back going in XXXX. to

say over a year. the our that's acceleration And I of in blessed where commercial first We like increase we're said, National identified auto rate the in actions. XXXX, there's Great to the whether so So underwriting at past and be we're uptick, of back I X-year in liability we to are we hard profitability-wise -- business. think Trucking. American the That why Interstate continued and in in our we part said, and

small the took why to and -- reason severity on up, the aggressive trend to continue We in be price we'll trends, quarter. that's We continue because making that's one in the price. those And X% a of see National probably we profit. there though of Interstate on -- we're commercial underwriting part even a our feel business at to our profitability improve auto we that underwriting we want

Operator

comes the James. line question next with Raymond our of And from Greg Peters

Charles Peters

focus two the a question. casualty I'll and questions ask in of another chance -- glass another Craig on have give an annuity then to business and water property sip of

you in said, it's how XXXX sort that benefit won't same and poor year the comments, benefits forward then crop see the included that year, assume you First, business from went XXXX. of your Carl, crop some in XXXX. results benefit from -- in the of reasonable to because you And XXXX mentioned earnings

you was could if give us I some that? correctly, numbers I you assuming heard wondering around Now

Carl Lindner

specific all that. year until of don't give numbers those for crop correctly. times, heard next But a have the out. We the claims given We don't break year. we lot the A not in -- settled you

for development favorable unfavorable And we're way. So fairly always either or the conservative. generally, potential there's development

there we've very year. case where been past this development turn and had that favorable the to years was So good, previous be have years when out

we're to get So feel crop a nothing that year carried make we since we over money would profit first There's half. year, not feel this the point at like any next saying yes, X going in this there. year. into It's we're

Charles Peters

Yes.

to guess, growth, pivot since it probably us I'm can I least going usually the you're financial it's us for comp. rate excluding business. attractive was for workers business noticed along you business your still perspective us grow I infer. And to you? wondering give business, a this of your to and to on viewing comp casualty So around material pricing, update a or workers I you consolidated how numbers, the not Is giving At came position. growth overall the a comments Is environment bunch views what please? -- about on that's If you're that with business. if the caveat could your I the not on

Carl Lindner

happy I'm to. Sure.

Just things XXXX. under little to is for that XX% premium a direct overall in projecting workers comp put written perspective, we're our of

And entities and the is at down the and been premiums in for these healthy a When California smaller XX%. the Our business ratio are look healthy the a a about business, calendar is projecting with X%, The X% be combined through calendar accident months. down that for profit, make to up very down written about results our pricing low days, states down outlook underwriting this about favorable. price this year. loss our In business year overall or making calendar mainly acquisition you reflecting our X-month of decreases pieces year-end, would the about underwriting single-digits some trends part same year. premiums which of -- small have year premiums overall and large breakeven We're for of are are good, to and for a very X Gross loss number. the small our larger of year the Price continue it a and a net accident down Price XX% that. the healthy X%. year whole underwriting combined X profit. very California, year be modest year same months, there through we're accident cost that year in ratio is Summit, a

business. we stable strong a -- cost Loss and our feel claims control. of our to seem reserves Republic our are both is environment. We in be to So Summit California, California in seem in parts trends feel

The National business, other is our business, comp of doing Interstate's part well.

the growth large very calendar bit Strategic Comp, business, of little there. year Our and accident some deductible of healthy, our part year,

what's of of to in think really rate has experience I the years, really from the So driving been prior improve past change the declines the couple a premium number large because brought that's or about continuing years over states. of

that's before, single-digit. fact, premiums -- in down because really of are mentioned being that don't we as through help? lot And Does I low rate of So declines, I a our the there X think growth. foresee months,

Charles Peters

your does. Yes. coming out as what better decreases Would or line is in you rate of NAIC? than It comp workers characterize being in

Carl Lindner

think I generally line. it's in

Charles Peters

Okay.

retail, further on contingent there competitors to So year. to you like Craig, very give on the by fourth the rest suppose down the just a quarter breakout in course, sounded your Slide market. your of and during supplement, possible. seems And last -- detailed had a or that, of you increases and in on it decreases could prepared Or throat provide it's production? that Anyways, it looking quarter premium the Craig? you institutions, I'm it year step us quarter trying third said perspective another down gauge, environment to frog there's be financial XX I'd of et forward, I maybe -- your quarter how by of -- meaningful the -- thought Is are compared remarks. some segment and pivot were Maybe of of premium because noted the just I what are pretty like fourth you the the interest this of upon certainly is -- first then, about rate going broker, to volume as by premium the And cetera. you by fourth because it's your rate total that rate

Stephen Lindner

Sure.

interest for my the thanks all, rates of We First letting change for when and historically pretty couple environment Appreciate from I a changes see rest has of downside faster me been this year, significant upside voice we minutes. the Greg. The in rates. have to been competitive that.

competitors, Some much longer we do. of much, our frankly, than wait

you're for, some X X doing. X, Some what don't changes months in of make matter cases, them no rates or

negative interest premiums. premiums. are an the on when are reducing rates rates, industries. to increase typically It declining, rates make to impact grow much our faster those credit targeted impact we quicker we're periods, on our faster. We return. a has And consequently, again, our therefore, and rates are When It changes our direction, hit been the than to of historically premiums have rates in going other quicker has

mean in rational. experience is most my become time, I that the business competitors over

our if at some look our you declines we after can very there premium relationship with distribution of years, of time. a partners. think be have strong for and I a But -- couple period history, typically, great So

the think on best think with side, performance. of the our And industry. in the investment among I the about terms costs I in we're competitive are anybody

position be our and just are quarter-to-quarter, it fine. So just over feel of regain long-term, fine that going will I predict can't years, I to market but our couple I be a going confident believe premiums certainly, growth premiums is to the very trend. next

Operator

Buckingham Kumar with from And line question the our Research of next Group. Amit comes

Amit Kumar

to Paul's might some want we the like, the book versus I Can question about P&C. a be? order just, travelers maybe talk with or more your starting commercial Maybe travelers the versus different other on book comments. questions. nature players? go few guess, to, a of book a I what back bit Is Just quality

Carl Lindner

our I'm -- passenger That side. biggest smaller a again, of We're book probably is we're the probably would a the travelers transportation risk I their within for would but that. focused -- be understanding in differences probably is the different heavier would part my transportation be on -- passenger of and niches obviously, Well, transportation don't guess. medium-sized book, my and business, student not be to -- travelers in

Amit Kumar

Yes.

Okay. That's helpful.

And The I bunch calls, Neon. remarks. conference recent if of missed might had any on we've you made a Any so question again, have that was had second on I thoughts I think press going previously on was know or lot you how had I'm should that we forward? an trade of forward? there comments going that, and update curious in if a the about

Joseph Consolino

in speculation is or don't Clearly, press on of that or comment trade the things nature. this Jeff. Amit, we endorse

don't this of to third disappointing were XXXX the better Neon's about quarter. So quarter because say of have results I that. with really was disappointed quarters. anything Neon's It's We one

[indiscernible] in bit full Specialty contributed the evaluate Casualty a negative see that it to other We to hold and the happened. cat did release in of quarter You'll in our press segment. load our little variance events

the of And the the So we were that didn't to the were blood which changes heaviest we quarter by stock have announced expectations quarter, as in management other cat that we some our in year. then cat well earnings in expenses year. impacted areas margin as the is and losses above earlier related our some

Lloyd's an and AFG can reinsurance be the be working So towards specialty we a businesses insurance We kind consistent company. on insurance believe business. a with our place working appropriate and the very on Neon the be in specialty of part excellent we to we're hard Neon can the business that get results business a good is long making time. we're be return here. capital of a can that's for generate And can if company, there, our

Amit Kumar

actually helpful. That it. Got is update

might question other Jeff. This The for you, be then.

should would excess talked appetite you your the the you preclude just has market talk curious valuations how that? -- stage? On should space. in how excess lean on I'm for Or about about what's we capital, are special special in how at QX. the you think nothing dividend the sorry, dividend in remarks based a opening this I'm out the towards been, an Can Probably, from about we there? more a P&C

Joseph Consolino

is Jeff. Amit, this

invite so or determine As to do the CFO, that. I our some with provide to going analysis Carl capital, on what and to comment I'm CEOs Craig excess

Carl Lindner

or the to that going at so, we say we'd want dividend think take a to are at whether I demands thing Amit, next we're only month at our do that point, and we'll determine this the time. special look over another is capital what

best I the probably can that's do. So

Amit Kumar

Okay. No. That's helpful.

had investment on I portfolio. question other The your was

in CLO's your a You going And had forward? obviously on to on be have, of we in CLO's discussion exposure there's lot you asset was should how thinking that the going been that, if curious about CLO's class? any COGS I forward.

Stephen Lindner

in are of investments The quality. the a and majority very tranches, the extraordinarily equity great that you CLO's. of strong. a this fees the have credit we vast cases, It's investments include Craig. We is do get for comfortable where the we're Yes. that the The money business manager been portions with most actually CLO's. amount activity. Amit, the we're invest do small rated if for of in the in We highly managing returns been very us have in

change comfortable So a our position position that very pretty something I don't but we you're closely, going big see think we're in there. It's with there. obviously our monitor to

Amit Kumar

Can on I the with XX you us Annuity we book your staying of should think guess impact XXXX? for topic basis on point shift, remind sales? the how And it. about the every segment. is Got what impact And on that

Stephen Lindner

you -- say mean change in you when basis rates? interest points XX So

Amit Kumar

Yes, sir.

Stephen Lindner

with what to rates. So do it premiums, their our relates as competitors it upon credited depends really

We are our lower higher better annuities, case to this to adjust best interest But environment hopefully, is be to of the would of sales that to credit standpoint disciplined, rates the Historically, the rate they do than traditional certainly, a will return be interest of environment indexed the in going and, time, again around. thing. environment. industry over from our and rates fixed rate expectation same our do competitors are our get earn targeted and going time

what position credited be. with know unless might trying terms premiums That's our going are In do in to what the tough decrease me do rates, we're predict competitive rates. to competitors the I on to impact of for their with

Amit Kumar

Broadly, out had to to, you jury your how coming at curious there? I'm awards, the if margin you look social X from from about are fixed inflation, P&C. I quarters you differently differentiated think there's versus about or you helpful. commentary maybe thoughts question regarding X when Again, at ago thinking last expansion here. loss any going or That's the different guess, climate poor it. on climate, players look obviously the And back Paul's when Got the question.

Carl Lindner

do on Yes, every reviews with management Amit. actuary had all and of quarter. our businesses We discussions

we trends down, as we accident the to down, frequency making is -- changes or we're year see think we or are severity what feel So conservatively business-by-business. year, up or adjustments current during profitability project whatever we're our up necessary and numerous or severity times

and about process things, thinking specific those So to a address we're have we always those changes in that. pretty

on attorney have desensitization more case, some businesses. various we activity of our and concerns aggressive it and effective seems and jury in like sure, impacts the as jury the So awards awards

the with I've stable. targets look talked a of meeting profit is our business -- in in in the I our it's up for take of And kind things. big There's able liability more an rate case, we've few we a keep at in were that. of already that part fact, see a a very increase house loss double-digit we our only we commercial Atlas time. and order really long commercial auto in auto as grow overall, being transaction to think, have just -- outside or our business opportunistic area that that But that and, as a would so be even about, to which continue few in pretty actually, seen It today, places. we trends our organically cost and whether to liability,

we long of those that. area perspective at of area And the of second a impact D&O trends. that adjusting think is we've we the that time. The probably things our kind been in on we're So see course,

the think liability is public our us, the I about case, seeing And our only for good public side, D&O we're of really news where bad D&O limits in the news, In low. trends D&O executive is our our are XX% kind those the D&O represents news of premium In business. good most.

net average Our $X are under million. limits

is or fine. auto business, that retentions, D&O And our public D&O -- as our there. we'd So part with It's like with but better. as we the see -- liability auto commercial -- are commercial overall adjusting limits the performing performing business along to our rates, market our

rate of it's some trends going to a couple industry of that size adequacy the the even for rate with the everybody D&O. take probably in think is years achieve I increases the with of seeing to

and that of feel be of cautiously getting part with So are think business be -- as rates years. rate we or our But to increase it's appetite increasing our very more going adequate. I -- a our couple we'll

look -- that we're and significant business. there profitable it's contributing cost be that part particularly is pleased an accounts our taking these of our habitational of rate today layers, when with the other the we with normal in that the in our of excess are we're trends part a at part -- severity business And our some of area the commercial trends, bit seem book, very actions a affecting. to those we're underwriting our little loss the also reasons business some and we of liability see to then excess our watching auto in that's above which And a exposures taking business, umbrella same of for but liability, and underlying

of our those excess probably So and X trends pieces that seeing pleased liability business, with and it's umbrella impact we're the very business those most. overall, the

renewal in I opportunistic think, Frankly, our increases guess some and we're business. in our we're growing it's us we're I entrepreneurial, and overall opportunities double-digit are excess area. rate -- and that I giving liability umbrella think and double-digit

I in another we're have example kind that it's of an attention see as I business that more to. think house of few a auto paying order. pieces our where So opportunity for And like of Again, us. the we commercial just area

that does help? So

Operator

line the KBW. Campbell And with Christopher of our next question comes from

Christopher Campbell

and is first any My from Atlas Were on question this there quarter? benefits Property Yes. Transportation.

Carl Lindner

it quarter will and into of the Atlas be on early were we from premiums of Atlas, transaction. in think as There small into more amount the realm next quarter year. I fourth move some We're significant but the

Christopher Campbell

annually? how Okay. premium And estimated? million about that $XXX Got Is is much that it. then

Joseph Consolino

is this $XXX Chris, What of Jeff. paratransit is was book by the as approximately is part Atlas and disclosed the transaction million.

we on a rate. got right and at the XX-month whatever will it hope the to go write terms. sticks the cycle through. and write comfortable business renew be pricing to through the so and business work And way we're will to That to consider with right start what we've rates be with that We from the all them our

Carl Lindner

I so. might think I dollar million that, a on in to renew will through business. the into ability probably think, systems transition quarter our as fourth the put it, to million in $XX amount XXXX, we're were improve some of which I then if Chris, working business to Yes. going see $XX And we

Christopher Campbell

that core first been helpful. we've you guys I And year, Okay. some the big while. Great. what Transportation, which and has better then the That's also within guess, improvement get loss drivers a time are in year-over-year there? ratio this have seen Property

Carl Lindner

I very think strong. be and Property continue there's transportation improvement. to Marine, been I some results the think, Well, the

Joseph Consolino

But unit on Chris, majority responsible results there we quarter for. and we're the compared Marine, an for the the by as year our to not hoping was improved ex-cat that the we've it's improvement accident quarter, loss Property there, that. ratio about in a Aviation, points. well. X of see year In ago's

Christopher Campbell

over in by to that. I switching an had E&S, of was then the growth driven then also the Specialty And Great. Okay. but part Casualty, think you noted press adverse charge release

I So guess, right do adequate just that how feel now? growing and you're feeling rate comfortable that business

Carl Lindner

adverse question Chris, charge, you repeat the the could please? about

Christopher Campbell

Yes.

called a was the out release, be you this big a of quarter So that. reserve E&S, but growth Specialty excess I then also had the to charge within Casualty surplus, in within press is just wondering was and part

a rate Some just where terms get sense in you adequacy. feel you to of I'm trying guys of are

Joseph Consolino

within Carl's that grow what think operate applying places and opportunity There feel that. we're just the and excess with I'd Well, writing But in to comment appropriately a underwriting very business. making That's a default Carl our performing want at there I we've and pleased businesses is ongoing. got that we at business said. we the Overall, They're our criteria we're taking house the are to sure want. at order we the rate like overall, we're was that and umbrella had look high-level.

Christopher Campbell

on have it. Okay. in they've guys loss X% to that long-term some Like, loss general assumptions cost know Where competitors on used into I assumption the do you increased you X% and to bake the just cost overall guys pricing? you What's then what And to book? sit then Got those X.X%. maybe have like that do boat?

Carl Lindner

segment. the trend think loss in that on I something X.X% X%, ratio range a to just of that for like probably

Christopher Campbell

with guess, then that And would it. that Or would be auto commercial overall? similar be just... -- higher slightly is Got that or, I

Joseph Consolino

talking earlier was D&O It's social it, seeing one seeing recognizing we're place is loss where double-edged excess business and question Amit's commercial Carl sword. probably auto a is inflation, is trend. in umbrella as but when the highest we're that But to it ratio well. and a Chris, seeing response place certainly

we're properly we sure make effectively a since cost in since reserved loss it the big that to with are part, rate of integrity. we're a the maintain adequacy opportunity we creates in not, that kind grow we problems. But pricing need reserve to feel ways, that aware dealing that trends, lot for that trends seeing. environment You and because in believe well new and prudently reflected And of you've most of like, to the are well-known, we're position

Christopher Campbell

or, then loss -- And trend guys I just were -- you're target mean high you said are rates single like, you at looking the so about it. auto -- I if like commercial profitability Got Okay. to like digits? think Carl -- then Because thinking cost said, and grow.

more? is you line commercial? in mean, you taking else So to because what's take opportunity -- it with I can like market you grow in I just everybody the are the needs to guess rates in share take think that and guys guys industry

Carl Lindner

that had we one than X%-ish, more, even in appropriately improve continuing -- in areas though and of even commercial take liability. we're ratio Interstate, Interstate, commercial Well, severity National commercial a like we've Xth higher today. liability took we ratio X% to we combined trends that we're was to are And auto -- auto We'd think of National mentioned year our quarter, it had the in loss little average. increase. profitable rate X% rate. is auto that higher I again, And and got I think we're our Overall, about again, the

order, take feel to our in at So Atlas opportunity an to we're We pick it up is house double-digit we today grow carefully -- and to is opportunities of opportunistic. M&A We're also care order, disruption taking market feel With opportunities. as some able our the take business, our on see we have our business. and lots opportunity and of We're the people continue side. the that on of to pleased have can we're as at pleased -- advantage the we transaction growing house in in we're prices. with that

So answer does your question? that

Christopher Campbell

then very one Yes. does. helpful. annuity. That's It on And

So could put XXXX? modeling run the million either what is lower run think forward, what And could a that right? we where that about Which or -- rate drive into good going at could And outperformance? as $XX -- what risk help then quarterly rate? factors way, like,

Stephen Lindner

is do we -- hold the over starting and on in are number. mark-to-market a Sure. our for historically some Well, and very, -- the that the been the to that side, factor. threw are category positive the point, first that growth couple you that mark-to-market our continue the is returns impact billion to a strong can rates over those growth think $X negative then cash $X then in And assets side. the rates numbers. And but that. grow, short-term as last all, have the the impact probably in a that that, little addition impact an floating continue, of billion reasonable additive. But reserves, mean, obviously, lower their that's hope quarter-to-quarter, of negative at on investments securities, rate years. or Swings number of adjustments will I plus a is short-term to very lower quarterly that make on in investments of of I but have And obviously on you

and pieces just existing right obviously, portfolio but rates. lot off lot profitability, impact a reinvestment -- are a lower at reinvestment moving of and rates there of So the that -- of the

certainly lower the are the and on come rates. in estate, been rates But the that X is Most negative a specifically years years, of some last that side I big the over to beneficiaries the held those rates short-term would We've that apartments fairly say apartments over are the guess mark-to-market. continue flip made last to I down. are investments in real that just are meaningful we've of -- impact several lower investor X, are of cap partnerships

were should interest positive taking going So assuming remain the marks the investments forward. on a I on those think rates low, if I pretty guess be marks,

of benefit not investment income. that will the negative we've terms There from are it's lower on all investments impact So in rates. made some that

Operator

Jay comes of from the And question Bank line with our next America. of Cohen

Jay Cohen

year, the up crop development. correct? you from purposes, to prior I first modeling think that in year quarter all the showed had I but know just answer Is this benefit on the that favorable the business, for my XXXX the in

Joseph Consolino

Not entirely, Jay.

costs. Some of up adjustments, commission show acquisition up would show that would which in in

Jay Cohen

Okay.

I got Good. think Specialty that the I question, though. And Casualty. other right. then All

business Forgetting -- feel given the increases comp in given potential XXXX better we better the versus into E&S in as margins, directionally, you're big margins look increases see workers do could business taking Arguably, just the should All-in, with pressure that margins catastrophes. some next XXXX, As it should year. improve on has margins improve the 'XX? and rate think Neon, to seems if the respect, you business the one actions any margins. price

Carl Lindner

And generally thoughtful accurate we we a we when XXXX. guidance job for discuss do issued to that. haven't pretty Jay, try

issued haven't we So that.

rates good should as margins our though the workers same with move even down, loss trends. come I rate think it's we probably getting your As rate underwriting far would margin where earn is as cost ahead of that assumptions comp forward. profitability excellent, comp, accurate. That that workers going a be won't And improvement we're assumption

-- we the so. -- things consider think issue, of we'll guidance guidance get all what sure, our should into as consider I those So those pack segment-by-segment, thoughtfully that things be we'll will all

Jay Cohen

will I guidance when await it. it. Got hear we that

Operator

line Scott. last our with Larry Janney of Greenberg comes And Montgomery question from the

Lawrence Greenberg

then for where also biggest and of have the I and and almost Property reserve so had a the relates leases. inclusive it off. years, bit crop the this maybe to four little just look at really year, unit and up Greg the one I XXXX left first over and last Jay quarter always If question, Transportation picks

in quarter development I XXXX crop year And was of of then, each the that the to the mainly questions. attributable favorable X the between to guess, so first there is difference reasonable these is And reserve it crop versus the two, quarters contribution? assume XXXX years? One, to other

Joseph Consolino

have I'm all walking not say development Larry, way 'XX. quarterly to to with going this Jeff. around that back the I is

not giving I'm a really that. So answer you on specific comfortable

all that's our making thoughtful XXXX, was earnings of it was didn't the you answer be a say, a first Why in big do of guidance, crop would directionally, favorable in which development the amount to aware taking last 'XX. back. crop we there awaiting, appropriate quarter. favorable given year's and step put some that half on to eagerly give we think feel February. Maybe not just I out fourth and to I fact have development contribution year, to know seen we're like make this a to a want we'll Jay comment If that don't earnings we're XXXX, We'll we you is a we out X we're about to we're saying in put say zero going we well, development to not is be were going because throw likely that favorable just the quarter guidance -- for if you early you yet. see but in and not have likely issuing claims XXXX crop to need growth in significant crop when

Lawrence Greenberg

on But conceptually, too. you to one, crop? difference be the just I mean this of -- largely quarters would and quarter attributable could Just pass the the between other first year

Joseph Consolino

Larry, it time. over Property within so we've development the from units favorable Transportation the on and depends reserve other year. had -- And

So just I that isolate to wouldn't crop. want to

Operator

Weidner today's turn that call remarks. any Diane to like question-and-answer I And session. you. back Thank now to would does conclude further for the

Diane Weidner

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

Operator

participating. call. you conference this concludes gentlemen, for and Ladies Thank today's

disconnect. now may You

American Financial (AFG) 30 Oct 192019 Q3 Earnings call transcript