AFG - Earnings call transcript Q3 2020 | American Financial Group, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the American Financial Group 2020 Third Quarter Results Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Diane Weidner, Vice President of Investor Relations. Thank you. Please go ahead, ma'am.

Diane Weidner

you. Thank welcome Call. Group's and Earnings Quarter American Conference Results to morning, Third Financial XXXX Good our third released We XXXX afternoon. quarter results yesterday

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

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

materially net or of questions. not And the included accuracy. our authorized it could if of for of transcription transcript release. in intent to please Some and operating filings reading be to this description are may financial to certain net result, note Exchange that or a it are risks on condition of uncertainties forward-looking may of attributable as alter actual statements. And earnings the a or risks our and Securities also matters net looking. involve that be financial AFG's detailed to A We and/or errors you a or measure, differ be our materially cause which discussed website. reviewed may the statements core responses could in earnings to reconciliation earnings, in results factual forward call, Commission, is to found today with are finally, from include remarks meaning contain operating and non-GAAP these shareholders that our in uncertainties A core references available earnings These can these statements.

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

Carl Lindner

morning. Good

friend. a afternoon, quarter served if I to tremendous Before you'd an Board Ken of we our per to reported me suddenly begin slides AFG's Well, Craig for the many third for XX was third Ken trusted honor remarks, a 'XX. can a $X.XX the per advisor Slide be share Board resource passing years He quarter and earnings moment years. webcast third we in Directors $X.XX XXXX the of member, Anbrecht, for AFG as net of and core September. and quarter on released AFG passed of will XXXX that operating would like who take Craig remembered please to and see to of X overview, compared in share turn results of the in you yesterday to our

return of equity Third XX%. excess annualized on quarter was operating in core XXXX

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

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

If you of Slides third an to include Slides results. overview webcast, the would, which turn and of please X quarter X

Our uncertainty Specialty with of and especially the performed from Group Property in & the industry during losses Casualty exceptionally COVID-XX mind the continued taking catastrophe frequency quarter, across pandemic. well higher

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

net were million of and third quarter gross underwriting to impact in the of the profits period, profit rate $XX were from the million X%. of Specialty lower Specialty and and of interest XXXX the floating offset decreased casualty partially Higher our the prior or profit in Casualty alternative were offset operations property Financial $XXX in the third last our million AFG's an in $XX million third year. increase and & year-over-year Casualty an underwriting on $XXX earnings investments Property Specialty & cash profits property to by generated in and quarter lower and casualty year other by underwriting balances premiums written Transportation Higher higher of compared year-over-year primarily investment year-over-year. and net Group. compared Core XXXX groups rates lower runoff, operations insurance underwriting operating million earnings in $XXX quarter the income, Property Excluding of X% the Neon result respectively, X%, investments. P&C in partially

comparison, reported quarter of points. X.X than in in The in prior of comparable catastrophe third points X.X losses. X.X third the period catastrophe ratio year last year the includes points By losses and combined added quarter XXXX the lower XX.X% XX% was

to results XXXX prior reserve points quarter year Third prior favorable X.X points year included the in period. comparable of development X.X compared

a didn't in additional the claim fluid quarter. charges and to continue related and any of loss highly to for well claims situation. specifics COVID-XX the numerous COVID-XX contribute legislative as AFG third We regulatory to trends reserve the pandemic, monitor carefully evolving actions as each record

uncertainty $XX recorded the reported. losses of half COVID-XX-related These million Given to of held XX% number the are pandemic relating charges first the estimate the the surrounding approximately of incurred represent reserves not or reserves of best and economic current as the from company's ultimate but in pandemic, from claims scope the XXXX AFG's in disruption. related

those Our working claims support tirelessly them professionals care the review are with and deserves. who and each claims attention to

Turning to pricing.

the rate businesses. exceptionally and see to longer-tail achieved with broad-based increases quarter continue renewal renewal pricing pricing strong in in We liability our momentum strong have

average believe reinsurance XX% in reflect our to meaningful of average the approximately a higher the inflation, continuation the loss years. and achieved half the was other our XXXX, comp factors. pricing quarter, We in trends workers' & And quarter. the elevated Group which renewal rate year-to-date XX industry among an in achieved was Property expected current you third up in pricing, of from first business, for the we've measures And environment, highest the low if heavy Casualty Our up pandemic, experienced XXXX. market pricing prior over XXXX, now increases across in in XXXX renewal rates experience and improvement the in quarter. XX% Both rate increases reflect pricing been interest approximately response entire are social achieved to exclude conditions the had cat renewal renewal following

into to conditions market current expect XXXX. continue We

prior comparable review & the our to compared improved I'd a and few in Now for profits Group our $XX turn $XX Slide this Property Catastrophe million Transportation in third lower XXXX Specialty property in each the in of million Higher in underwriting business group businesses & marine period. year underwriting results groups. the were partially to to and inland highlights marine & X to compared aviation agricultural business offset in were in $XX reported losses quarter from Singapore million $X profit XXXX quarter of branch in XXXX ocean non-crop and the Casualty an to profitability year-over-year our by third of like Property of businesses. underwriting our period. million transportation comparable

and decrease quarter the the than crop lower XXXX was premiums of net XXXX from gross written of crops. corn largely and comparable respectively, result group and late X% premiums planting period. in in Third reporting premium this the due The X% lower, soybean delayed XXXX resulting were year-over-year to

insurance, marine of net primarily to by quarter third premiums exposures X% X%, our tempered transportation in to impact due premiums return compared businesses. and written the in growth when XXXX in gross crop ocean as and our reduced premiums of last opportunities written COVID-XX of inland the business and a quarter. marine Lower premiums increased decreased were the business Excluding property third year's & new result

that about much soybean for soybean as businesses. discovery As the the far and the as of Corn of and is majority October these adversely serves maturity than and for Overall third continued pricing averaging a respectively, discovery corn harvest national the all the both yields. XXXX Iowa month our by impacted have to respective crop group to year. of what Knowing we for normal pace quarter point, will normal increased slightly rates of both we harvest. below accelerated at renewal despite on strong rate with the Midwest period of higher, derecho the XX% our know soybeans renewal and trend and corn crop, average conditions, X% But expect and X% spring conditions momentum. record-setting crop exceed of Potentially their were pricing. crops in across yields this the this dry

comp We excess in liability Group. an by liability underwriting surplus Higher partially businesses Neon profits our XXXX development workers' of and Now of the comparable targeted last higher to and moving in third period. and our the adverse businesses. excess losses XXXX on and underwriting quarter Casualty the general million the were profit the reported our compared in in underwriting million $XX in profits Specialty lower markets of in at third business underwriting to $XX and impact year quarter year-over-year offset

the excess of have increases and comp decreased the XX%, and when business to be XXXX in achieved in to written primarily hardened. with continues period business third workers' Casualty new surplus market due respectively, and as Neon. Specialty strong. liability in Gross excess has acted in same overall Now conditions our year net runoff on compared underwriting pleased last and rate improved quarter which have profitability opportunities very the our significant to Group for premiums X% lines market and I'm renewal businesses, very

written Specialty of Higher third catastrophe in COVID-XX and surplus, financial XX% first comp half net resulted Renewal third premiums the the has excess in when group renewal losses an Gross achieved in net and our rate renewal Significant of business workers' also was exclude increases, our significant written this group by in year-over-year liability the Excluding an and $XX premiums and executive in to contributed XXXX. both premiums the in in were to XXXX. you of in business opportunities written quarter to if when third compared million contributors of Financial recorded pricing $XX our for X%, in decreased quarter from And the respectively, increased coupled impact with to workers' workers' the up Neon, the liability million XX% exclude of quarter decrease. and reduced in coupled the X% period were growth. which the in this comp. improvement institutions 'XX. profit excess by the XX%, business, grew primary quarter. rates exposures you the renewal same decreases, XXXX businesses, driver third of XXXX X%, pandemic were compared and this rates gross The Group and premiums. lower underwriting up comp rate of group Neon our businesses new with this

financial quarter heightened and COVID-related business. primarily Third our resulted and Lower were quarter in the period. XXXX our respectively, written various X% is policy that's when risk also lower, XXXX crime rate state selection, Renewal half and group renewal offset in in achieved businesses. in from regarding net the to premiums an business, compared trade of placement for These in moratoria fidelity force X% same the business improvement our business, coverage the on year-over-year on surety cancellations of and impact was increases new premiums from pricing of the reduced credit XX% gross up impacts regulations decreases economic by growth and the this this year. first and partially our were institutions

indicated presented of other Specialty we've conducted Slide view challenges the review specialty and of year detailed and expectations months of a a P&C alternative operations. in Casualty $XXX Property the Based would a we by In now million, results core our to $XXX expect please the for of to million Group of the uncertainties continue current light XX%. if overall combined earnings, guidance. for million of previous the & COVID-XX, meaningful & you impact Casualty for from operating the ratio financial our Casualty increase impact on to excluding to of of pandemic, expect operating we And X and key the pre-tax for outlook expectations of our nine in between Now $XXX summary XXXX Property Property & the businesses. the of COVID-XX $XXX the and items XX% range million XXXX our the our investments, and first each turn Specialty

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

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

than to And now that on in Casualty last group now group range. Specialty combined than the We our X% previous combined for to Specialty to XX% view segments Property be of our expected this of ratio & the ratio the premium Transportation also of improvement X% we estimate. net expect see impact ratio from Casualty year, reflect from range lower premiums within a net higher operating guidance expect is written in We pandemic. previous estimate to an Neon XX%, adjusted produce each excluding higher COVID-XX year's X% to group the an combined sub our a our the estimate. narrowed and Property now XX% now previous slide You'll to be for X% XX% this a from bit written most of our range results our to comp. last improvement workers' when to Group, the of of and & current premiums We

expectations to expect to we've improved to group And X% Financial to be XXXX X% Specialty our combined for between ratio the continue results. We a premium Group XX%. and produce XX% than lower this

and in the Given COVID-XX of guidance the the implications for uncertainties not investment net resulting P&C we're income. markets, of the providing volatility financial

to And to XXXX be by of overall regard XX% to comp, renewal of rates significant pricing, and as in we be with casualty XX%. seeing XX% through renewal XX% increases workers' to in property Now expect indicated momentum the we excluding up September. range rate now end expect to the we're the

to going performance. review to the results segment discussion the turn our Craig I'm Annuity over AFG's to in Now and investment

Craig Lindner

Thank you, Carl.

the Before I strength upgraded our A+ start Best's quarter, ratings A.M. strong and risk-adjusted quality management to These enterprise to reflect the subsidiaries with of a that performance, capital a appropriate it financial position. A. yesterday review of strong operating of Annuity our Annuity I'd risk A+ the announcement results from sheet, our third for highlight balance like ratings

We these Annuity to are has very work proud our achieve of helped us of upgrades. the associates, which

XXXX channels decrease access in compared the sales the in third Annuity Now that quarter of of in significantly Gross prospective to a COVID-XX million third please of the to $X.XX factors premiums turn quarter as impacted were distribution clients. to XX%. well XXXX, $XXX to quarter partners Slide has were pandemic to to statutory lower X. the Annuity current XXXX access as all their due in our and third billion related

up were rational. the is we quarter in competitor ago quarter exceeded sales quarter actually encouraged declined institutions seeing. in trends the XXXX. we're sales financial the year And sales September are XX% of monthly XXXX Overall, September that third becoming We're period, XXXX. of sales second the by more channel from comparable finding pricing that in Although from our

earnings. you'll Slide to pre-tax Annuity X, components of core see operating the Turning

necessarily that over core alternative recur, losses pre-tax returns to investment actions a the return a quarter the due growth before third in funds increased expect sharply the of lower the XXXX pleased may third yields. on on quarter year. years overall in from the lower of by earnings calendar on This and favorable the return taken. market, nearly in XX% investments a in We quarter. not were return X% or onetime five operating these quarter. These significantly fourth include past Annuity in rate The investments strong was of increased quarter quarter items nearly achieved annualized an earnings may return of the average of operating assets, higher of was the quarter which expenses previous XX%. from in a investments the investments and in cost renewal nearly return XXXX XX% on total, XXXX the segment alternative in impact XXXX reduction reflecting items, XX%, these were third the decline comparable last Annuity exceptionally Annuity compared to investment however, that In offset we've equity and year-over-year, high, and stock was Third income we

core and our the In of comparable targeted addition, demonstrate model. segment's in increases We low the our after pricing quarter fundamentals that operating XXXX discipline our returns new achieve in interest and Annuity both operating to environment. of investments, alternative despite able third and believe we're the earnings, success the pleased we've the strong business, our returns sales before rate impact been of on

Turning to Slide XX.

and approximately grew that X% see average quarterly both Annuity reserves year-over-year. You'll AFG's investments

starting of quarter Annuity a yield interest decline points of with particularly In the we on half those XXXX, point investment the of funds of of accretion the and of investments, basis XXX account result see taking than benefit as measures the comparable our the and alternative and of basis lower the excluding rates, segment's interest In our XXXX which included XXXX. partially declines in period. cost This of products net was benefit renewal at funds. throughout quarter XX the our this quarter. information reserves. points, proactive spread, This expenses end basis amortization XXXX, was third third net charge XX of continued lower more in yield. about takes annuity offset rates year, expenses longer-term quarter XXXX, yield cost third of of began cost short-term near net our the a out benefit the bottom XXX On you'll other points first core slide, of funds surrender our and quarter in bonuses investment compares spreads, the to of into withdrawal basis which the or net Primarily adjusting other investment and

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

to to So, come we cost funds as adjustments. continue a expect the several points each see quarter next these result several down our of basis quarters of over

of interest a lower As alternative investment basis spread third of the net was the changes the XXXX. result investments funds, yield cost segment's points XXXX in quarter Annuity of quarter these XX to third core net in the and before compared of

share. of Annuity throughout a operations. Due net to per long-term in of decrease million expenses, rate. lower charge before XX-year of a to annual unlocking the rates significant or assumptions decrease we primarily was $X.XX third review charge earned same growth core short-term quarter unlocking underlying of ultimate our interest The in the in resulted performed as investments actuarial acquisition primary review in spread year. Annuity detailed and $XX XXXX, Treasury reserves assumed last expenses, the driver and the In segment's this due net our or However, alternative this lower the U.S. XXXX, the remained after-tax both

These renewal by the announced became fixed on negative of Earlier related guaranteed expected outside were of actions. block rate for week, that of U.S. XX renewal in rate the without in that as resulted impacts XX-year We persistency over investment costs period interest anticipated to surrender future offset lower assumption will lower our annuity income negative are years previous the options This rate partially result increase from lower indexed benefits. a X.XX%, and assumption now million million opportunity freed our a an this policies expected down which impacts on withdrawal excess execution million exceptional reinsurance strengthen AFG assumed X.X%. to agreement further The as changes effective statutory capital. Annuity transaction Treasury assuming transaction of in capital $XXX operations, At dividend to significant AFG. AFG. agreement million the up both additional of $XXX most operating presented in to of between the of result same for October X, time, AFG. between expected already This will in is its expected paid create is Annuity In amount excess XXXX. and the for $XXX be total, $XXX and a to to the segment modestly and earnings capital transaction higher we

book the $X.XX million recognized As noncore earnings shown while Slide XX, million leading are partners. The recognized in of relationship annuity EPS to have $XX and GAAP, or products. with items of share. will serving will after-tax net per AFG fixed market policyholders over our to and these items certain time. AFG's commitments to $X.XX impact items provider other distribution statements, on value financial continue approximately are immediately as under and Annuity agreement $XXX And is of annuity of The no a the indexed on and

earnings for statutory be operating comparison, new of to agreement, $XXX block the or into to most enhancing were returns the capital business. shown of investments, XXXX, agreement $XXX the alternative from quarter XX nearly XX. XXXX, alternative the XX% operating core summary segment the In in expected XXXX. production. an the turn annuity in-force the to to for to million Slide has the our from of new from of of $XXX option guidance excluding $XXX reinsurance cede products. million segment. outlook May to reinsurance segment the Annuity increase block up XXXX and flow $XXX agreement, reinsurance of Under the to the Please By million. million million, a million In range the earnings, agreement of earnings, in XX% premiums business premiums reinsurance ceded flow slide in this are Annuity recent Annuity segment select new the our a Annuity Annuity Both Pretax as $XXX of excluding investments, and sale reduce $XXX committed agreement serve to of AFG's both while the million core addition to on of on third entered its

impact guidance floating securities. rates segment's in rate the continued negative on investment low of the approximately $X billion of cash short-term Our and reflects interest net Annuity

of of charge strategy equivalent also after million the rate guidance annualized DAC, or more rate $XX period. result surrender renewal of depending end estimate million fully aggressive to renewal activity, on their the the $XX that Once our which overall current implemented actions reflects Our will in XX near favorable taken impact reducing on XX is surrender crediting of we our basis before savings policies to cost of funds and by points.

that Some remainder of stock the reflects savings. and these reflected of XXXX. and our results, relatively savings have expected guidance guidance assumes been for remain in longer-term rates interest additional market flat already The also reported our the

While alternative investments an of these due the uncertainty, forecast to AFG its the expect it's on XXXX. long to remainder over ongoing for continues term, return attractive returns to difficult and volatility

quarter mentioned, include fourth investments core of operating future than these expect XXXX previously in The in segment's achieved and earnings returns items, actual currently years. that what lower I on be which as significantly quarter recur Annuity forecasted we will may not third necessarily XXXX. favorable we several However, the

us have basis of $XX we of by credited transaction, of reinsurance XXX average in-force business. flexibility great manage the on our block giving points, billion us helping ability rates the deal annuity and lower to Following reserves on a returns an

billion before represents third X.X% the quarter. September unrealized with portfolio account bond of gain XXXX, sheet balance strong of very a on end unrealized have an taking into $X.X portfolio reinsurance XX, on to annuity at block annuity gains transaction. continues our at This bond business the our the the of Importantly,

our clearly a we momentum earlier, noted and we guidance. in as are result, raising premiums, are positive As seeing premium

the billion for securities best realized billion XXXX $X.X which gross on equity rate compares will million for billion XXXX. annuity of to Slide the part which XXXX to large $X a growth Please $X.X $XX to September continued estimate result in on to and of in environment. highlights also in This $XX $XX assets third of our recorded $X.X securities billion, to previous after compared portfolio. our turn billion losses million interest AFG in to that the few current low million deferred average realized XXXX This acquisition $XX.X at in quarter quarter XX, to regarding reserves XXXX growth we is X% tax XXXX. in after gains in of X% reflects net and third investment persistency to guidance of higher to securities XX of costs. premiums range attribute Our compared of gains to the in realized third own XXXX. the of quarter AFG Approximately recorded pertained XXXX, net

this As XX, $X of were for economic appropriately September billion. environment. unrealized is portfolio uncertain fixed our AFG's portfolio XXXX, maturity pre-tax positioned on gains believe pre-DAC We investment

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

and less noninvestment-grade rated AFG's XXXX. XX, Brian, September I capital discussion and remains will X% comments investments discuss share liquidity. turn maturity maturity now by fixed the of total at at about who percentage the than NAIC fixed of the few addition, investments position a over to In will financial

Brian Hertzman

XX, Slide We will are you management important attractive at summary XXXX. at repurchases, AFG XX, common you, during a and where $XX valuations, AFG's to average an financial position effective capital of of $XX share. turn when Please September stock at of million the executed price Thank Share quarter our per strategy. find especially of Craig. about repurchased component

quarterly with the shareholders of share the our addition regular During dividend. our we our to payment million repurchases, $XX in to returned quarter,

September, X/X% dividend $XXX Even will and increase. completed third with four the million and In of of proceeds the recently our includes November. subordinated to million million. debentures cash transactions company September $X This over we in redeem Monday's XX, we from the recall, parent payment. our XX% approximately debentures with in due annual be may used number of XXXX consecutive this issuance the you at annual effective just XXXX. had $XXX As offering past AFG portion in A quarter, increased dividend X% by par XXXX. This at of AFG's capital due this capital billion $XXX XXth was also subordinated excess

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

to of rating view in have the basis high impact as Specifically, excess capital and October order of projected expected XX, and AFG's capital XXXX agreement agencies billion subsidiaries details well maturities our insurance X% annuity before with reinsurance by no transactions. levels provides debt subordinated XXXX, of a block $X.X capital the at components XXXX. Excess XX November in of two current scheduled a of we are required proforma have excess ratings, the as maintain Slide would these to September on AFG's proforma debentures. have consideration the of supporting redemption the been their

team deployment all capital of single-page on opportunities our updated for a is basis. presentation earnings core management guidance. Slide of regular Our XX reviews XXXX a

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

questions. the now open lines for will any We

Operator

from [Operator Credit Instructions] of comes line first from Your Suisse. the question Zaremski Mike

Mike Zaremski

quantify of rate answer operating of transaction. the show I is parts like us as lot a charges earnings to question Maybe got of guess, know explain how some in the us might what maybe I life a you able deal. kind going to first why you because it's the of that's can the of or unprofitable. you're slides. on that the Are unless us to looks run profitability. the understand, part the lift first, which be well, taking of It increase you there's expect case portfolio moving kind help core And reinsurance you two increased is? how to

Craig Lindner

Craig. the our to economics. help agreement by partner. some questions restricted precluded will I'll the of per kind start related let a details few from transaction, is are this more the the Mike, or the take we you give understand saying think a history and of But been since on I you off whole that a transaction we've giving few and with lot reinsurance details the me thing getting minutes of

bolster cash we that pandemic to strong Financial undervalued pandemic of stock Carl of the met of the also feeling the given given excess be in. consider to a at we the be were what different and a Group. and parent, were couple But in options further fortunate I couple position when the So, kind condition of price and the hit, capital explored the financial to for uncertainties just reasons, American and position tremendously of we very

if So, in successfully we which would and, cash parent doing some frankly, block Annuity of business. the the the transaction, excess decided completed the to reinsurance increasing also our of in a value capital, increasing unlock accomplish objectives our explore

we ago, that the and transaction They sense four custom-design made for made of partners. to helped if months a sense also finish for something kind us that that for line well them. really They them. for us with that sense and We do five about discussions make worked us get something kind were fantastic worked of us up and to to reinsurers was to a ended Atlantic see to began starting make choosing transaction hopefully Global there would them. So, sense and

Mike, have higher of chose the and that average a So we credited higher a GMIR total reserves. our than rate reserves

than a yield that assets portfolio. also chose had lower overall yield on investment the substantially our We

they're to two So, our expenses maintenance assets of take our the than as the amount actually by when produces of those into block. consideration you modest you we why a this a going was result that for It characteristics loss. And up also to us block of business, small earnings had this oversee transaction. match be go a that that actually because picked reserves business reimbursing different up, balance that's and and

Global of bonds them We to that Now giving fashion. needed team. change the They this of unrealized management and a very investments investments. a we're the that, excellent yield. They very do They mix over the current capital. also like plan create market, are the change on their they're plan amount transaction mix capital time, tax-advantaged increase obviously They at obviously, them. smart from our gains do is a to to And returns to, obviously very on a yield going at investments. generate those gave significant that good is generate assumption on to that company, a able the the Atlantic low

for day, end worked was at them. it transaction worked the well out that a the anyway, out for So well us, incredibly of

that, hope what explains I that bit So, doing. little better a we were

Mike Zaremski

be would next of And we things. transactions. potentially One how question think pandemic. If lot whether going a I was should the about to talked was on onset you about entertain of was I based two you during my future think there the uncertainty

thing those think about? there's stock you still that's would things you think think should whether And think pursue the So, the to things we about much additional you probably we it's as Are deals? main the Are about one the of whether undervalued two those other price, uncertainty. two think was maybe main which the undervalued. should

Craig Lindner

is at that mean, long-term as they different obligation creation an are. tremendously our to I maximize continue team, have look for management And Mike, all we undervalued. stock value Yes, think alternatives the a shareholders. to our we to really the

Mike Zaremski

question is the next Annuity portfolio. sticking And with

the Thanks In terms for charge. DAC of the annual in study resulting unlocking the color.

down You I it X.X%. X.XX%. X.X% at Bloomberg it's capital to about XX-year look say sure years, the assumption I the markets the Is to so wrong, from just a it brought in says XX-year -- if somewhere it's down I'm what the -- XX but bond wrote

direction, the went only if to linear it took linear it you is -- double that So a -- charge to went quarter? had X.XX%, you directionally the to this XX-year were of up kind relationship would assume be to

Craig Lindner

it Bloomberg you it's that projection, you out terribly not Mike, sure at yes, or meaningful. when I'm is. linear a is And when years a that projections, sure not I'm that of look couple It get past

companies. details quarter as I so reviewed that because this far conservative than of unlocking's, different better follow more reported. are given already so have many among our have and clearly insurance I the companies you their know on assumptions But would reported You that have companies

Mike Zaremski

definitely. Yes, Okay.

Okay. And high level property operations. and just more the back casualty on thinking lastly, just stepping

understand due little they than a do at is, expect think, kind you ratios the is even a start business top line, them competitive You're retention mix. of getting a rate are are or falling to shrinking dynamics improving bit? lot seeing level? that higher x Neon, want your a you I little -- is business part are bit marketplace, the to to But of the just and more still your kind of Or

Carl Lindner

Yes.

a workers' that, commercial you us other the have compare auto commercial same lines, crop. impacted that's lines peers And we a auto property the payrolls some workers off and in bigger has of as premium and higher when a mix workers' impact in of like I to our pandemic and think comp lender-placed transportation school laid that. on with things passenger buses, are comp than the the side, way and and

higher, is in and because those I of not some one as reason peers businesses I robust So, think my a bit our that's our probably why as premium's that. think mix

commercial lender-placed if and there's and and vaccine up, think, the economy, bit is a in guess good you And a have premiums, there's and enter auto behind economy you particular. of workers' more as post-pandemic as economy I a same starts think happen. way, news, comp opposite into I recovers the in little the tailwind the to type probably my picks

on our I of take. things basis. that, on in businesses don't lower hope and that an my -- see helps. retentions that's big think I overall any we I retentions don't and general, happening renewal So

Operator

Greg Raymond line of Our next from the from Peters question comes James.

Greg Peters

relates Annuity you we lot And investment background your disclosure on to transaction. find there. did side, pivot in some your give a information quite of thank all the I deck. for especially the provide supplement. If you you us would I And have helpful, that obviously, in slide the color to say the to as it

take values of tell moment Some possibly loans annuity investment areas in that special was business and if you have status the servicing of a any are performance early wondering within or about troubled us I And identified portfolio? your peers are have called loans, out that in or your forbearance. could you

Craig Lindner

Craig. with gain Greg, held has how our portfolio up. things pretty unrealized have the I of indication this up. good We're a think And is is pleased held generally very how number

see put areas Greg, my hands -- So let on some might if stats me risk. on at that some me higher here, be can look considered let I

commercial do we some loans. have mortgage So,

an on $XXX largest We office that loan with to leased have we so tenants have that of building million buildings, the loans ConEd. office strong $XXX is million XXX% $XX the building of but leases a very with of million on

The second loan. is million It's a to largest leased XXX% $XX Ancestry.com.

$XX that leased Analytics. is an million to biggest is third XXX% to a office building on subsidiary -- The Verisk of

have some the numbers you have good on loans? very the have forbearance actually we we're loans. do hospitality and feel office loans, position Brian, do that real So given in on about we the We on estate forbearance.

Brian Hertzman

[Indiscernible].

Craig Lindner

loan we properties. about some one great and have. XX% Inn, have Greg, but loans used It's a made, we a We The good probably number, it very property It's great was that that properties, property. own. a collateral do we Chatham When and fairly to feel is hotel or largest we modest Bars they're loan. a a the have loan-to-value. was It's the on XX%

ago. that of XX our we what on something loan years amount I like think for XX, some property property the sold is XX% that

the feel actually that we have. about loans So that in hospitality very good have the position we we collateral

Brian Hertzman

you're Craig. number The looking for,

are a $XXX loans, of $XX large percentage billion forbearance in million our under mortgage the agreements, not that there's On so investment.

Greg Peters

relative to right, your portfolio? total Immaterial, Exactly.

Craig Lindner

Yes.

Greg Peters

other I before transactions. -- of So questions to about reinsurance I the need mean, I consideration guess,

in that standpoint? understand reinsurance market a business interest there's competitors sense this a your fee-based the now for seems the goal transactions. of -- similar Or there it get you in the more And a than is engaging more deposits this One And is to reinsurance ultimate structure just do annuity reinsurance from all else. into is for trying why anything your the right there growing? market turn I'm model Annuity is appetite out like the in to

Craig Lindner

deal it. about we can't of I we you do of doubt that that contacts that transaction. interest to reinsurance of asking if the I tell substantial companies with has can no robust. just number And we there's the since grown our The if very, announced we've us tremendously. Greg, you, another were transaction The we would gotten them very economics consider the reinsurance decide would incredibly is tell we closed. pleased are market

Greg Peters

last about think next comments, earnings below about when to mean think information trying year a we I'm property slightly normal. information that because to And than always compelling. business I of from operations. see expect the variance provide. -- year's you your positive Right. back Does half the year I I casualty look a year then of context for think was to to when results? the last year, this And in we in first to you Carl, you're crop get normal said bad about It this you'll to guess, crop willing does pivot your be year. wanted that the this more

Carl Lindner

what things you that, a crop products different of business types there's get don't until but is you always the or January, portion and that know et answer or until into you I the citrus of predict like that can't December, cetera.

part there the is So, is always of crop on a There unknown piece. year. some always

the So estimate the there's could same estimate can It's a always I potential an stay the change upwards. mean, same. that

-- of current we we almost is crop a the in and then have, fourth the So never the usually we're main very very take more nothing year. report. in. report year look of in half in at a first quarter usually, year we the But then And correct that that for generally generally little crop quarter the the the for quarter we year well, the generally, crop third accident most generally. accident take how don't first income little crop we we current quarter, We year, conservative in

Greg Peters

last look in XXXX -- spillover look And quarter and what does Or in do expect across wanted I'm growing interested question. provided linger the top does I know a businesses guess And quarter written be just through effect you're then to second for That's actually normal the to that possibly to get to question and some line? the where around basis, you one my next back PC. I I net try revenue, guess premium outlook. it. outlook first is, I XXXX your specialty I in Got just be the a from to you year? the

Carl Lindner

mean, year. generally give currently in I we're next the the fourth early Greg, guidance Yes. We quarter. into

and you be. lines. those from that answer we're the in on seeing I a pricing some it what relates the like you growth pandemic that with of do to of types standpoint, or of can't we workers' trends with person and with have questions, part what each as and before, comp non-pandemic our business, D&O normal that. excited more I think of mean, about said get and when different commercial and point liability how in I at in same I might I'm the those think pockets happen opposite the that a very what that the some get and may big-picture as thinks to comp when property, postured more auto I do we're to economy excess type particularly happens or the usual has Overall, gotten workers' way vaccine have businesses than you hurt reach a lender-placed that. you

and We're in, of the themselves present the excess I'm take excited to how the we're very of positioned, about will opportunities plenty our prospects, capital also. well So, positioned we're that advantage have pricing. businesses very

So --.

Operator

line Piper. Our from comes from Newsome Paul the of next question

comes Our next Meyer the of line Shields KBW. from from question

Meyer Shields

Am through? I coming

Carl Lindner

Yes.

Diane Weidner

can hear We you.

Meyer Shields

Fantastic. Okay.

across P&C discussion I third think, which changed So, of the liability the trends. little expected general loss bit expectations in I reserves your quarter. focus the portfolio course positive. loss year? for the strengthening huge trends some I is, saw have maybe How of particular the to a pricing, over I about talk want a on your And acceleration guess, in

Carl Lindner

be X.X%. right ratio loss trend overall this around Meyer, is Amazingly, our Carl. continues to

you where ones those reasonable loss, our loss more about the toward that areas in public auto, business. the is that part D&O, for umbrella, of X%. little in or liability to that number. costs still or If particularly The in the you of trends side American ratio a business, ratio the geared be auto our which to you moves loss in loss Fortune above up increases Great claims Or commercial the and type see in comp, that the read excess a exclude custom in commercial are bumping ratio liability more trends into because the in commercial And would industry, the of are loss X% about parts X%. XXXX, of X.X%, auto over reason, trends that up

other been have So, where as of with and what our spots the are tracks far saying that. hot kind peers as

we're Now the continue be to to also news areas where loss trends our in the rate. -- that pretty ratio getting are those good areas have us average, higher get significant they than in for

commercial renewal in XX% quarter. commercial We So, third the rate D&O. liability, quarter, in in increase got rate XX% lines increase a in -- auto price D&O the auto, like we got

those major you and excess then So, that. and in really at pricing liability, we're when look getting businesses

is, trends rate. news good the is pretty the getting think were we're ratio seeing higher areas I loss significant So,

in D&O private We're already returns nonpublic public competitors, case, returns than which than type that. been in making and our business, company other solid sector the different business. I toward excess great think some and also, our of our in we're making of and more focused our generally has liability

earning of some So, we're excited in lots those the good some means activity. for growing rate, returns I'm already of of that a healthy businesses at very there's where about. also And businesses reason, which in that we're

conditions, how about considering Commercial look as As I'm We're to rate our and the positioned forward. really commercial well underwriting take rate we're be And making we'd we're auto making the because auto we're a to positioned money. with have we're continuing profit. meeting like prospects underwriting larger, with that market before, very I but already we mentioned auto, the business. return think and profit our I small objectives commercial liability, in we're excited

Meyer Shields

helpful. that's --. I have No, thorough. very very Okay. That's

Carl Lindner

with that with inflation, that for to that my that's the time other some I to combined of a there's able in In messy. compared number COVID I have was quarter, career. XX% excited social can't any ratio quarter I pretty uncertainty, you in catastrophes saw quarter group think how were probably the a the of tell our we a I in the record And

Meyer Shields

I No. or Ryan wanted got Absolutely, to two thought side. ask on yes. Annuity Kruger online. I've question same definitely conclusion. you I put the the

Ryan Krueger

low, very I beyond talked And as going you remain that, current your continue next current rate will program? my you look think question guess -- rates can just expect about lowering over forward? for business that assuming I constant the at we the pretty crediting future to how crediting would beyond be pretty the maintain Yes, Annuity you out rates spread do active is, rate strategy to interest you levels and that few quarters. play

Craig Lindner

Yes.

So, this is Craig.

our we and drop of have wide. credited in rate with in-force So result our model, current the on of rates our that very make rates. And is credited significant recently huge not adjustments the to very, because investment to between until needed difference are the up GMIRs very

another post-reinsurance basis XXX If we could we points credited you look a deal that billion lower of announced, $XX.X have -- reserves. just we on rates

that if want flexibility needed. fair adjustments to tremendous make gives our So, customers. be to We to us

in-force credit be rate function we rates started so on we the lot function -- what beyond to our hope make have need we what of that But to additional going a implement. do. have my hit It's return. is And it's of interest to be to don't manage already targeted a ability to adjustments a of to going the rate of

it's So, a for act. this balancing in the term. long We're

to rate reducing get a credit customers low interest stay credited of from of for in and our not return for partners prolonged environment even margin we period being have rates. But to rates there, hit ability we aggressive the think of and targeted I we have time. lot with distribution a our a being overly in if the fair we very continue

Operator

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

Diane Weidner

a we forward Thank joining with quarter. talking you this look us all to day. Have and for next morning, you great again

Operator

disconnect. gentlemen conference may today’s and all over, Ladies Thank is you. you now

American Financial (AFG) 31 Oct 202020 Q3 Earnings call transcript