AFG - Earnings call transcript Q2 2020 | American Financial Group, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to American Financial Group's 2020 Second Quarter Results. At this time, all participants are on a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised, that today's conference is being recorded. [Operator Instructions] I will now like to hand the conference over to your speaker for today, Diane Weidner, Vice President, Investor Relations.

begin. may You

Diane Weidner

safe [ph]. XXXX Group's Towanda We and to pandemic. healthy welcome you the to Thank of quarter challenges quarter Good results XXXX Financial the and are ones second your released call. we earnings American continue and navigate our you, We loved morning, as second results hope afternoon. conference yesterday

during under webcast portions the joined by investor Financial release, Co-CEOs AFG posted are and Hertzman, press will I'm presentation be today's Vice of Brian supplement materials of Controller. and referenced Relations call. this Investor Carl AFG's and Our section. Lindner American These website Craig President and on morning Group; III; Lindner,

your webcast. attention of the Slide turn X on to discussion Before Carl, I I draw the notes our to over would to like

which net Commission, non-GAAP A of to to earnings, to and matters statements also Exchange A questions. measure and/or We risks release. our net responses in and net attributable reconciliation core forward-looking. financial discussed earnings or our to actual can the be materially operating that are differ AFG's in remarks financial risks from description involve found filings a Securities today in operating results earnings these to our references of Some with available cause may include shareholders included website. earnings statements. are of could core these detailed on uncertainties and condition to uncertainties These forward-looking is be these

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

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

Carl Lindner III

highlights more understand the had we global May, of XXXX opportunity financial markets the share quarter the to COVID-XX respond the your and to our our AFG's quarter morning. thoroughly business, reported the in and we industry, questions. of to have insurance Since pandemic second on results pleased first We're Good results economy. impact our

and resiliency by the remain employees are thoughts of success. the them. individuals circumstances highlighted and prayers our Our the all virus foundation those AFG These commitment the exceptionally caring have who our of and with challenging for affected

Our continue policyholders continuity on of comprehensive focus providing coupled and plans, and our have to which position. flexible service on with Craig rely, workplace our enabled trusted strong priority. the keeping pleased and business secure, policies while I be well-being top to AFG's agents employees with and and support the our practices us effective as financial

We and have the presented business effectively the as that the address by liquidity as respond to to act capital excess flexibility COVID-XX opportunities. well us afford ability to the uncertainties on and

these XXXX $XX typically investments, compares of these earnings operating second This which the investments reflect loss our X earnings or overview operating $X.XX share share losses significant of earnings, second credit the marked-to-market million to and through quarter per are earnings. COVID-XX the in are in The investments alternative $X.XX and of of decrease $X.XX second like our quarter $X.XX and share, quarter a first share a quarter. million a the AFG I'd The included second on in AFG's from quarter. reported decrease returns a per pandemic to and the $X.X comparable of portfolio excluding $X.XX results core per were XXXX. to share in financial Core operating or lag. economic equity on from net in impacts investments, recorded turn Slide on Now, per on the webcast. the widespread markets billion $XX period per an quarter core net on in returns alternative of both

are quarter second and included COVID-XX-related per from IBNR These core $XX for designated share claims losses cat for XXXX separately estimated earnings reserves losses. or approximately in million operating reported losses $X.XX our Our losses.

to Slide X. Turning

You'll portfolio $X.XX a core operating discuss businesses We our during our guidance. of guidance net share later our provided included increase volatility COVID-XX team implications of six $X.XX diversified insurance year, of of business our employees. of demonstrate of I previous and markets. results. resulting see $X.XX results in range noncore the its exceptional pandemic. share call. God, management Last will pleased full thank contributions the believe performance from months We're quarter the our the aggregating through share. XXXX Based in per on talented the earnings guidance, presented now to segment quarter, the our financial each items excluding our very helping be second excluding investments the core in share, alternative employees losses we the from net operating for uncertainty businesses these that or with challenges underlying achieve and more of of COVID-XX to of investments, $X.XX, per a core in amid our per of and the XXXX Craig first the after-tax an We of earnings expects year operating the and the net earnings per for detail specialty AFG the to due second results by XXXX $X.XX XXXX midpoint strength quarter our share alternative of to of earnings the the

results. to our and X turn the overview and I'd focus an turn our Please to Now, property operations. webcast, second which include to casualty of Slide X like of quarter

the performed exceptionally very expectations. Property renewal our underwriting and exceeding Specialty that's quarter, with Our Group well pricing strong excellent margins during Casualty and

premiums see of X% compared Neon. X, net primarily on respectively, XX%, you'll when to were the of a gross and Slide XXXX, down runoff As written second of the quarter result and as

the was casualty insurance $XXX lower compared of property driver the The the to our property Excluding investment operations was Group million quarter Financial excluding in the gross X%, profit than by premiums in Specialty the second in a were operations, casualty generated underwriting and Higher second $XX prior Specialty profits Core million of the year impact XX%. offset investments, in net Property the net quarter in XXXX underwriting runoff, and Specialty written Casualty Insurance an Property the was year-over-year. income $XXX and of quarter groups. underwriting in decreased in million of premiums earnings earnings. second up Transportation Casualty XXXX of and compared of and written the $XX XXXX. the Neon alternative period, X% operating year-over-year AFG's decrease million to profitability our more and lower Lower

XXXX from prior favorable year added losses while development, benefited points X.X quarter combined The X.X XX.X% points. of of reserve second ratio catastrophe

In XXXX. the COVID-XX addition added X.X the for to quarter of catastrophes, points to losses second ratio attributed to combined

carefully to for XX% evolving each claims specifics incurred we've the approximately of a related We legislative fluid claim monitor that been to continue have recorded as pandemic. and trends million which highly Numerous of COVID-XX and contribute claims losses, regulatory loss situation. to as established reported. the well reserves $XX but actions Year-to-date, approximately COVID-XX-related in not

uncertainty related and of changing the company's scope charges the the losses of represent best economic pandemic related to the pandemic from claims Given estimate and/or these and the economy, the current surrounding disruption. number ultimate

received review XXXX with the working support PG&E connection tirelessly Our confirmation and California Like subrogation are and to the attention Northern and claims care with and wildfires. in professionals them of claims bankruptcy those we deserves. other each XXXX who benefits have insurers,

Our line pertaining approximately our to expectations. $X gross with AFG third in million results. recovery benefits these was in expects in recoveries record to quarter

we see strong renewal exceptionally pricing; continue to momentum. rate to Turning

approximately our are the year-to-date increases third rate measures reflect group achieved renewal years. average property X% entire XX our quarter. quarter. an in was over in if business, highest comp approximately first renewal pricing our across fact, XX% the renewal the in up improvement And In from for we've Both casualty you workers' the achieved and that quarter. was pricing Average exclude up rates

in addition X I'd an COVID-XX-related a in of Results of few million reserve our $X to review Now, primarily profit our losses of adversely $XX groups. quarter of by underwriting the of impacted to result transportation turn prior losses. business higher Slide of favorable each quarter businesses. Group The the and Transportation and were development highlights from XXXX, in in reported million year the catastrophe $XX Specialty to Property Property Casualty million like second to

in than their projections corn soybeans corn both for X% Commodity lower, yield above put are slightly prices. has yield the very soybean are on and industry condition. favorable discovery are both be We with some businesses. trends, and good and transportation last for pleased respectively, futures our pressure time pricing. which and up soybean respective conditions reports to continue corn profitability Crop crops with year the our significantly conditions XX% this year very of of XX% Crop improved spring in is XX.X% and nicely. shaping at approximately excellent of Current

closely particular. within pricing, monitoring we're corn the currently is pricing While acceptable commodity ranges, in

group in insureds impacted quarter Second X% of year reporting last late XXXX this acreage crop higher, respectively, from were The year. prior premiums than in the and premiums period. comparable second adversely quarter X% gross net the written and

from to average renewal of reduced net rate X% were to and return in branch, quarter. achieve increased the and when new insurance, our substantial rates increases due all partially premiums rate auto exposures and this achieved by especially renewal first crop the compared Overall, Decreases and of X%, in and XXXX our aviation inland to businesses. improvement strengthening COVID-XX opportunities of by commercial cropping increases. business XXXX in X% second premiums quarter gross decreased marine transportation, ocean Excluding in in continue XXXX. in of group a an premiums marine with pleased written respectively, in I'm which and liability, the result as in quarter, Singapore on this the group second offset XXXX

the Group losses, in higher at in partially significant last profits Casualty improved the executive addition really have Neon businesses, by and quarter excess XXXX markets renewal prior second lower surplus in million social and businesses primarily to runoff services underwriting favorable profitability liability the second profits offset the businesses. and to on excess business liability excess as workers' which I'm were harden. our losses by business of were year in our opportunity achieved decreased of of conditions losses, in our underwriting and and surplus pleased in These in for due year-over-year rate of with our market year. premiums development, higher our impacted year-over-year the COVID-XX-related $XX group primarily this impact written Our and the Neon. liability underwriting quarter and reserve adversely and and lower compensation new Specialty net acted markets were increases excess in Gross in and alternative lines

resulted premiums quarter of second X% impacted the compared in impact period premiums. net lower premiums written Neon, when compensation the in significantly businesses, exclude you coupled by our X% has in in XXXX with increased COVID-XX and same which written decreases, workers' payrolls renewal If the XXXX. gross The when pandemic of decreased to rate

Neon group, businesses, gross renewal Now and XX% excluding both grew premiums X%, were comp and written pricing in our the for the quarter. this in group X% when net up XX%, this comp, an second by was workers' rates achieved up and workers' respectively. this improvement group first the in rates And Renewal in excluding from quarter.

Financial credit Financial. results Now, related insurance. COVID-XX-related quarter of of trade primarily Specialty to the Group turning losses second included XXXX $XX to million, for Specialty

regarding quarter of X% when force impact year the from moratoria institutions of XXXX. financial prior regulations of cancellations were improvement for Renewal this our up in in written an institutions the the down various pricing approximately state first policy X% Lower for quarter quarter placement net period. was in Second resulted and to first from premiums on the and XXXX quarter both which the businesses. gross coverage business, group our premiums financial and the compared

in for and the results view of you In businesses. by we've the key of our expectations for the a net conducted expectations the operating profitability impact we our an of our investments, our the This $XXX would underwriting Casualty Now, reported and Based if our uncertainties challenges operations. months Specialty for other current alternative the and me property pandemic, six XXXX million with is of first Slide lower COVID-XX, range a outlook measure casualty Specialty review items and X presented of and excluding Property and midpoint detailed of turn on to the lower our equal and impact Property financial the of pretax guidance core million. COVID-XX expect guidance expected Casualty to for million operating year now summary light lower pandemic property each of $XXX earnings, of previous and than and the income. of casualty reflects and expected losses based on $XX investment of

XX%. XXXX Specialty overall continue expect XX% and between and ratio Group the Casualty We combined to the for Property

Our of specialty from improved subsegments revised our guidance. our and an overall premium reflects within each outlook guidance previous

the Excluding X% results. higher written lower prior premiums if be than Neon of our premiums what we higher workers' the to to we impact written runoff, to lower expect reported year X% expect net we we be X% net and Neon And XXXX. exclude to in than X% compensation,

that improved on Transportation ratio we our of Property and premium our and expectations. combined estimate in the premium adjusted ratio to the The combined Group current guidance most points, our increased operating each within Property the of we've slide You'll operating see for and Specialty Casualty pandemic. and impact our subsegments reflect view the COVID-XX two of our

and of Casualty We groups Specialty guidance impact our COVID-XX. combined the our to Financial Specialty ratio reflect estimated have increased operating in

the COVID-XX based uncertainties end to for Given performance. AFG's improvement excluding net to X% you. range turn overall our XX%, investment increases rate guidance we in now casualty Craig XX% X% X% results previously. renewal workers' we'd expect of property Thank XX%, previously. be And in XX% the and to in XXXX to be of to and range renewal June, the the the range segment markets, the the the the from to results estimated volatility estimated the to over and not of up of And from income. casualty in to discussion of pricing an review And I'll investment and providing Annuity X% increase the comp, expect resulting financial an of through implications we're on property

Craig Lindner

to second review premiums XXXX access $X.XX all a to that gross lower second the were start the XXXX, our pandemic in factors were access for The channels and impacted the of partners you, beginning significantly of sales Thank well to million XX%. the of decrease quarter results in orders their as second Slide other as statutory Annuity compared result with $XXX related and Carl. in stay-at-home a I'll a of XXXX as quarter annuity second quarter clients. current of our distribution prospective to COVID-XX quarter X. in the annuity billion on

Slide to Turning XX.

operating You'll earnings. see components the of core pretax annuity

a results during $X.X fundamentals results, assets, strong items the guaranteed to that these Second may operating in not the of necessarily expenses increased excluding recur growth quarter were core a believe and persistency, were adversely factors in including lower-than-expected partially These XX% returns of favorable several include We by business. investment alternative XXXX. the investments, and the year-over-year. funds. annuity XXXX strong on pretax annuity There COVID-XX cost investments earnings, Annuity alternative implications of billion to the higher-than-expected of Annuity impacted offset decline financial the in improved a segment's second items, market related contributing economic which reduction demonstrate by our quarter returns. The of benefits,

these five calendar cumulative investments has XX%. nearly in on return been return the was the these the years over a Although X% negative on investments XXXX, past

to Slide XX. Turning

and annuity X% approximately quarterly respectively, reserves AFG's X%, year-over-year. see grew average and investments You'll

slide, about into benefit this our year, renewal reserves. near bonuses of On those the interest half information and we out of the quarter surrender spread, quarter XXXX, period. more account the other in first funds. proactive points, basis rates, of of cost taking In the cost amortization accretion you'll starting which XXX funds charge benefit annuity on of adjusting In included of the the with end spreads, measures withdrawal our bottom second which our or products began see of was expenses takes our of and net particularly

these policy occur adjustments fixed anniversary. on indexed annuities, the For

down to We of cost next the over our as result quarters adjustments. several it's presentations of because of these consistent. a funds companies the come compare we'll cost believe to different So difficult not funds see continue between are

example, items For others of withdrawal of the second benefits. bonuses points six quarter of for cost included These consistently guaranteed funds as component industry. of the cost funds the AFG's cost cost reported in of not of XXXX a basis the and by are in

guaranteed have could do with interest points include these calculations. or for sell We that and amounts these costs believe funds basis their that features cost significant to be XXX XX as high spread net a and noted not some companies bonuses of as benefits in products cases. of that charge We

an the high bonuses upfront As commissions a particularly of sales. result, whose cost and AFG this difficult on can picture generate of comparisons to make providers relies annuity unrealistic business create generating business model companies when comparing or between to

Annuity interest The consider financial on on to measure XX% net is operating that spread and an While return returns measure believe companies, XXXX. helpful investors equity. equity segment's annuity is exceeded XXXX important for for a in we

as XXXX forward, would on turn normalize, at expect to the Please annuity for summary Slide our the a returns that of the Annuity investments for XX returns outlook segment. level. we Looking to produce

investments, are return $XXX core comparison, annuity to long an volatility the continues returns While on earnings, $XXX were By earnings, increase AFG from expected million. XXXX. $XXX to $XXX excluding from million expect attractive core recent most in the forecast remainder guidance in operating Pretax over XXXX. operating these to to our alternative the million and for be of investments, difficult it's an million investments earnings to range Annuity excluding $XXX uncertainty, term, to its due ongoing alternative of million, of alternative

to eight Once savings to to fully million estimate funds cost $XX our [indiscernible] months, by on equivalent more policies in the guidance We April. with Our investment $XX impact renewal low of cash of short-term depending activity, net XX surrender reducing the actions million securities. continued Annuity and basis reflects on the began interest points. we in approximately rate implemented, renewing over segment's annualized of of rates floating aggressive XX overall

interest XXXX. of assumes balance relatively also and flat remain the that for guidance longer-term market the Our rates stock

when As average announced significant comparable Despite period the slowdown investments prior a year annuity we on This more the in in And quarter has annuity grew X% into by continued third X%. the over second impact anticipated comparable average first reserves results, noted the period. we quarter. sales quarter. annuity AFG's we our more trend than grew than sales,

result Our reserves to between in $X.X investments billion XXXX. annuity X% and XXXX is in current be sales will growth billion and and X% average that of $X.X estimate gross in

on prudent this pricing, the of Earlier credited XXXX. capital securities XXXX. in and that to realized This securities of basis at quarter benefits have is to of annuity about our equity gains addition acquisition stock XX, revise to lower the strong volatility second Approximately $XXX continued our deal in helping to the AFG net afford an costs. of our quarter on and average XXXX a of great interest of rates resulting average AFG second result and compares lower about on of gains the securities portfolio. deferred XXX we reflect pertained from by sold Please current billion and recorded of gains the many annuities arising earnings in decreases At a industry of terms only has market. to flexibility strong of investment the the rates year, with sales $XX.X reserves XX manage XX, In regarding a rate as to interest on and the environment. few of for of $XX Furthermore, underlying million points, giving us which $XX recorded returns AFG market equity than the AFG's fewer ability these highlights realized us second half contained in living to annuity position our we XXXX risk opportunity million reserves billion and suspended million inforce business. guarantees, to June peers. its to guaranteed XX% XXXX, realized riders us June hold Slide quarter $XXX turn after-tax after fundamentals,

for of highest were XXXX, appropriately pretax, increase AFG's this our on investment of environment. billion, AFG's end economic We positioned an uncertain history gains fixed As quarter. the and maturity June believe XX, in since the of portfolio pre-DAC is unrealized $X.X $X.X the first billion portfolio

our you grade. continues portfolio maturity As rated be quality, high portfolio XX% with our of on can XX, to see Slide fixed investment

information and the our XX, maturity Commissioners maturity X% In quarter, than about addition, to the percentage investor at industry more National the investments less detail details within at of portfolio. XX, NAIC with maturity percentage fixed at Association of March of XXXX. noninvestment rated grade supplement ratings June Last investments lower portfolio, our corporate the XXXX, our and fixed than total including remains added was Insurance exposures fixed on we our bond by

and about information included by our securities also collateral portfolio asset-backed rating. type We

properties. of XX%. rates added supplement with investor pleased we quarter, reported approximately page an multifamily our the to XX, extremely and these of that highlights investments. properties additional real of investment of portfolio estate-related This occupancy our our June approximately performance XX% We're rates Through collection

have Our pandemic. the portfolio lifestyle do any geographically metropolitan properties own diversified. not from large most as from is in identified been that changes We resulting areas at the risk

additional Our $XXX throughout about share a loans capital you'll a total performed and has highlight We of position AFG's being a forbearance also to balance agreements. and currently like subject take our only repayment. financial full and find XX, of principal well exhibits XXXX. portfolio at believe position We expect few the approximately Slide these portfolio financial summary of I'd XX, portfolio. investment XX% AFG's June of moment comments liquidity. collateralized high-quality our highlight these mortgage with seven to believe the or are loans On with million to adequately pandemic a

We expect throughout have XXXX capital and to continue to and excess liquidity significant beyond.

management XXXX. We subsidiaries million second $XX payment our the agencies shareholders end effective maintains at in per have credit no at our an are stock quarter and with at of component dividend. levels average price was capital strategy. We the Parent second we capital million order million quarter common attractive in AFG in maintain million when ratings of to quarterly excess before regular an AFG returned executed the quarter our project to valuations, an repurchased of of current debt facility. repurchases, undrawn $XXX the $XX.XX. during and to their especially high $XX $XXX have important by ratings, cash Specifically, maturities expected the of and share are Share of insurance our

Officer. Our XX, been like Vice President this June at role at opportunity Brian Financial approximately now as Accounting of introduce excess President this XXXX to XXXX. Controller, for XXXX. walk controller joining capital turn the to and stood has calculation. capital $XXX will has serve Brian, appointed discussion over morning. components in take who served since and the AFG the excess I'd I He to million through our Vice us since and thanks to Hertzman, Brian, who will interim Principal of

Brian Hertzman

Thank turn to you, XX. Craig. Please Slide

cash, to capital XX% Here ratio. as define debt total we of subsidiaries borrowing capacity insurance excess to capital AFG, at adjusted a company holding and a sum up our capital within excess

the For on debt, we which excess features calculating and among based agency is use In NAIC's is and capital purposes rating company Best. capital A.M. hybrid preferred of calculation. stringent & model our or stock this excluded Standard has calculation, type the Moody's, most subordinated Poor's insurance debt debt-to-capital which from model,

most model S&P. For and business, our the is Casualty Property stringent

required in we an excess maintain S&P capital Here, rating. what A+ measure of is to

is capital requirements. NAIC For business, our based Moody's on the excess or Annuity capital

a to targets a also Here, for level could provides Moody's what's RBC or than It factor could based XXX% Moody's XXX% a is less lead cushion we an ratio a is measure excess downgrade. at a ratio. over that indication annuity in risk-based by This capital this indication to companies. vary lead on RBC of target annuity required higher that of ratio capital sizable company. for our upgrade that

by funds simple Our product Because to ratings. by result that rating stringent our expected the well capital target excess most relatively structure, for segment segment's RBC Annuity in account expense of our takes our and levels threshold including cost our lower capital, of capital protection. calculation the that the other surrender designs provides capital excess the into efficient favorable & agencies ability in use cited stringent Moody's, several also and what factors Property Annuity statutory in AFG's less Casualty we models, is we

for team the a I on management Craig turn to will basis. concluding for all opportunities capital Our reviews of over deployment discussion now remarks. regular

Craig Lindner

you, presentation single our page updated core of included We've a Thank XX. guidance on earnings Brian. Slide XXXX

items Our AFG's losses ongoing In operating noncore of and that conclusion, indicative the gains and effective guidance as to operations. as financial last not XXXX have core other significant I items and approximately operating Carl expected with such rate I'd that on unprecedented tax are results exclude and earnings. losses, six very noncore annuity of XX% like add months results pleased assumes over an earnings faced pretax core challenges. be realized may our we

and We are financially and well XXXX in and opportunities half COVID-XX second presented beyond. results to excellent strong and produce positioned respond to to the by of the challenges financial

will We open the questions. any now lines for

Operator

[Operator Instructions] of Our first Sandler. question comes from the line Paul Newsome Piper with

open. line is Your

Paul Newsome

more was I primarily bit the said the hoping get little charges. claims know detail it across whether to industry. that this be some it we've or the on IBNR not But increase. to differences one people was for an things is pandemic-related a thanks the call. amongst how potential community and discussing investment issues morning been I Good seems of continued. in are the accounting of stay-at-home these issue, is about given ongoing And that have you some an

So maybe you could address issues. those

Brian Hertzman

Paul, this is…

Carl Lindner III

Brian, an think, can I that. that walk go the can is. in overall, loss can can I and anybody conditions of the why don't better, get breakdown today, But But let that, change, run the so could how and based world know best XX% our kind or... ultimate company through talk we've in off insurance things IBNR through just -- million that facts about some -- the of change, the what Brian things longer; don't have But running I'll we ways, estimate that's don't overall, of posted. $XX knowledge the you I

Brian Hertzman

Sure.

like make. companies, to a AFG, it all calculation insurance difficult for So is

mentioned, this Carl of for are point. line of each at at XX% a our IBNR As took reserves business. We hard individual look very

exposures, what estimate booked would XX June Looking our our basing be. know we best of that through and at everything number

go of air. you as on not the out anything just or that pay a not that. hand, a we other put number it's the it's So But like

So is have, second hope prudent is a that everything we it what for end a covers is the we us, quarter. we believe of the number and that it we number through what know definitely that for

it's So we date. that fully-baked this know number through I say for everything would a

Paul Newsome

Fantastic.

expect or about Turning obviously pretty hot the investments, quarter, losses in great. we would rebound the the last with bonds equity what topic are prospectively something some that investments of could those happen given had that full markets be of to performance less? they alternative rebound which these a indications substantial any in should Or a

Craig Lindner

is Sure. Paul, this Craig.

understand first to I the people the assets. makeup of the breakdown of marked-to-market think is or kind thing need

Let run through with that you. me

$X.X is So is the which CLOs, well. mark-to-market funds, with more XX% around of of marked-to-market XX% real By number assets is of one marked-to-market. the estate billion. our assets both pretty debt has debt lag. and recorded private XX% is way, miscellaneous then are quarter extremely our the in held focus total where private funds, equity balance. X% a in traditional kind for we up investments, around in and in multi-family, that that equity much X% on

private the strong the the the certainly, investments don't private somewhat as related a much So market at up stock various mark traditional components, Typically, equity as stock equity to firms I look are as returns the and overall period. market.

as the period, much And so weaker market. rate they don't a typically, as them stock don't also in down

fleeing a frankly, is XX% as has We're occupancy very of we rates are people the from really on similar focused of extremely are investments, the excellent pandemic. estate what the well. multifamily. kind experienced certain in to prior Both exposure areas. real in benefiting that Our held collection urban and few total quite to I It markets markets, up mentioned,

Our They've held in biggest Dallas, are: Texas; Arizona; Denver Springs; extremely multifamily Georgia. Phoenix, and Atlanta, Florida; markets Colorado up well.

We rate to give those in not interest the in what cap had keep have If decline properties, to any of reductions have is a we strong decline given rates on experienced occupancy. multifamily rates. anything, types

point hold at at very in this we very, piece, to that So expect up time, well. least would

of major some idea on of view the how basis. So that a gives kind you components I go-forward of marked-to-market

Paul Newsome

Great, thanks. Thanks.

help. But questions. the So I appreciate may also ask

Operator

from comes Greg question you. Thank Peters of with the James. Our next line Raymond [Operator Instructions]

Your line is open.

Gregory Peters

be that things: to crop then did credit same the lower there. to the of degree certainly crop to you year the to relates provided the seemed year? to or guidance afternoon. and as the some When on commentary; provided, that going that Carl. Property Good suggest your Casualty wanted caution, I previous trade for Because better, was switch your you I for you focus had business, you the commentary than in outlook the wanted commentary. first, the it assume full comments, two it to back

Carl Lindner III

the opposite, our I I just an In we build means I think Greg. of average and guidance, tell that. people an in think in frankly, was crop over that time always kind average it year average

as year, when There's very the in condition, at think I corn favorable. mentioned, excellent up good look shaping you looks I Crop percent good. of real this nicely. that are conditions soybeans really and

a revenue We're thing function we're biggest the one on as the part book watching the eye in prices, keeping yield of of based, is think apparel price. the which part I is corn particular. our that the and of modal

up They're think the our a mentioned are if deductibles. choose I basis. they losses layer first of there in kind insurers the revenue I take on had of past, losses as

somebody first farmers they're a choose think if XX% So, the deductibles the of deductible, I losses. taking average XX% then has

corn our So prices. we're keeping eye on

really if get be to right now, very when that. start of nicely. yields is this point. And corn I the up the to kind Soybean But prices prices in worry a and in are above, aren't good, level shaping that's bit you good here crop our on XX% at you little think shape

Gregory Peters

Great.

the be COVID effect On out to that suppose lay simple and the very the of to the obviously quarter impact I economy the on losses there. logical would results. the extend on terms piece, follow-up the second beyond can dramatic nature of you credit the just is trade going

so where for the business And balance of we are year risks next about our as the certainly that just curious think year? and

Carl Lindner III

our the you're the trade second feelings that payment of ability the and a other side. think I exposures there ensuring in COVID about fairly credit took whether with represents exporter do the that think, to on if the quarter, to has today. U.S. It's charge we receive I

I we reflects said, of reviewed of the gone what uncollectible thoroughly adequately reserve And think that types And put Brian we business that line trade are the up So that. business through credit. be of think around in kind of today. it we've as would and exposures line for issues

Gregory Peters

Great. Annuity And your capital. increased around and disclosure appreciate the capital on then, I the question and business,

coming maintain One of of to the XXX% challenges trying number up required $X.X the to to is identify But was that $X I capital. was was in business of Annuity I generate struggling with much us a last additional in could of RBC. do And capital color with the billion quarter around -- see increase? in exactly because we think how your to market billion rebound sort you conditions how we quarter, levels second on Annuity of required business. should for about And the changes the the will then the if the alternatives if that's the capital any provide on capital

Craig Lindner

the if in will is you increase capital? see an this alternatives Yes. Greg, Craig. Certainly, rebound,

level well we stated has XXX%, So target XXX% of an RBC Greg, would reason kind indicated if of maintain downgrade. they've of negative XXX%, possible of that us. XXX% a what possibility you, put To have for RBC go a and neighborhood the size or something that level that to and Moody's as watch is to they Brian we million. difference explaining, Moody's a of that above a was be of actually though, RBC an below $XXX on which XXX% the between us then in expect expects would is us

by into as put expected a the of large Annuity Moody's the just So provides a there of us expects is level Moody's, which capital cushion between we more cushion need capital what very would huge highest the business. The which, for XXX% has said, is Brian a threshold to at sufficient, for to very what's kind for business.

Gregory Peters

Okay. of before. buying around give just level I you're the guess, the is us Obviously, where quarter. remaining at in remains update your how authorization. bought the on much in you stock an back same price second you stock Maybe can

in guess still the us I capital? the in of you're on So that give comments some market. perspectives But context around maybe updated could your you

Craig Lindner

the do is Greg, don't significant excess I be an that prices I the and don't how amount is get have the at use shares, think is. me. can a for authorization. would don't Diane that We we left of additional know our these to that intention. I authorization our that on have certainly for find stock exact capital. All maybe attractive very

so to our And continue intention certainly, of to be a it's our shares. purchaser

Brian Hertzman

If under shares authorization. current X.X million left have our we

we're said, shares. acquire going to position. ways look use to at Craig very approval different Board We're it's as to all a more as capital. As a capital Obviously, simple in our strong

ways shareholders That's So always at about. acquisitions under to plenty authorization. current our we're and looking as of returns go at then room also to

Gregory Peters

funds around right. comparison All of it. It's group. the Well, and your thanks cost peer Got with appreciated. comments the the for

Operator

Thank you.

Our Ron Capital. with next question McIntosh comes from Lomas the of line

is open. line Your

Ron McIntosh

Thank two you. business. well-deserved Good Diane, One afternoon. on your congratulations the promotion. life on questions.

to And debt in X? XX% think talked a on debt ROE or that of of environment do Does get that the the XX% and allocate of alternatives You about XX% alternatives do put this the the XX%, about a XX% and I return looking out. sustainable when we that XX% I XX%? to

Craig Lindner

unleveraged our in return long period been an And a our of the has time. that's of so been Ron, has alternatives historical return. neighborhood over something XX% Yes,

capital, on And a be normal to, alternatives. that future, in plus expect so we we to the after-tax assuming yes, earn when return XX% able return that's said return on

look return second have that rate a after had the been annualized the XX% the second quarter, at If the would we on Annuity you business tax. on alternatives XX% earned quarter, take if in

Ron McIntosh

income. just companies property us casualty lower side amount account of rates, And raising question increases. rate rates the Perfect. a rate, on interest and the given for lower of have A to couple the net investment

two rate. Swiss think Re uses points I

talked three rate you interest guide in give to for I want in biz, you're us how don't want you putting lower but realize for to to has at think future Hartford much about NII least casualty think two points. rates? would the talk to property the I you

Carl Lindner III

love on could excluding the calculate at of you that. the the top to don't and X% an that on we so I to in answer a in result my line underwriting that's back very that that. if important strong; off probably comp, get XX%, you loving with have head. is and overall right Bottom we're And momentum quarter, in it. our increase rates already We

Ron McIntosh

you. thank Okay,

Operator

turn closing further like Thank I the you. back I'm showing to at Weidner would questions over call remarks. now for Diane time. this no to

Diane Weidner

free to day. questions. additional rest have we reach all have us great any you, to your you out should [ph]. a And all Investor Thank Please Relations Towanda feel you thank the joining for of this you hope morning. team And

Operator

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

disconnect. You may now

American Financial (AFG) 5 Aug 202020 Q2 Earnings call transcript