American Financial Group, Inc.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the American Financial Group 2019 first quarter results. At this time, all participants are in a listen-only mode. If anyone needs assistance during the conference, just press star and zero for an operator. Now it's my pleasure to turn the call to Diane Weitner, Assistant Vice President of Investor Relations.

Good morning. Good morning. and welcome to American Financial Group's first quarter 2019 earnings results conference call. I'm joined this morning by Carl Lindner III and Craig Lindner, co-CEOs of American Financial Group, and Jeff Consolino, AFG's CFO. Our press release, investor supplement, and webcast presentation are posted on AFG's website. These materials will be referenced during portions of today's call. Before I turn the discussion over to Carl, I would like to draw your attention to the notes on slide two of our webcast. Certain statements made during this call may be considered forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance. Investors should consider the risks and uncertainties that could cause actual results and or financial condition to differ materially from these statements. A detailed description of these risks and uncertainties can be found in AFG's filings with the Securities and Exchange Commission, which are also available on our website. We may include references to core net operating earnings, a non-GAAP financial measure, in our remarks or in responses to questions. A reconciliation of net earnings attributable to shareholders to core net operating earnings is included in our earnings release. And finally, if you are reading a transcript of this call, please note that it may not be authorized or reviewed for accuracy. Thus, it may contain factual or transcription errors that could materially alter the intent or meaning of our statement. Now, I am pleased to turn the call over to Carl Lindner III to discuss our results.

Good morning. We released our 2019 first quarter results yesterday afternoon. If you'd please turn to slide three of the webcast slides for an overview. AFG reported core operating earnings of $2.02 per share compared to $2.42 per share in the first quarter of 2018. Fair value accounting for fixed indexed annuities in our annuity segment significantly impacted the quarterly comparison. Annualized first quarter return on equity was a strong 14.5%. Our core insurance businesses continue to perform very well. We reported strong operating earnings in our specialty property and casualty operations and pre-tax earnings before fair value accounting that established a new all-time quarterly high for our annuity segment. Net earnings per share were $3.63 and included $1.61 per share in after-tax net realized gains on securities. Craig and I thank God our talented management team, and our great employees for helping to achieve these results. Returning capital to our shareholders is an important component of our capital management strategy and reflects our strong financial position and our confidence in AFG's financial future. In conjunction with our first quarter earnings release, we announced a special cash dividend of $1.50 per share payable on May 28th this year to shareholders of record on May 15th, 2019. The payment of the special dividend will not preclude AFG's consideration of a special dividend later in the year and is in addition to the company's regular quarterly cash dividend of 40 cents per share, most recently paid on April 25th, 2019. We are maintaining our 2019 core earnings guidance for AFG in the range of $8.35 to $8.85 per share. Craig and I will discuss our guidance for each segment of our business in more detail later in this call. Now I'd like to turn our focus to our property and casualty operations. If you would, please turn to slide four and five of the webcast. which include an overview of first quarter results. Our specialty property and casualty group performed very well during the quarter, with strong underwriting margins and healthy year-over-year growth in net written premiums. As you'll see on slide four, gross and net written premiums in our specialty property and casualty insurance operations grew by 5% and 4%, respectively, year-over-year, primarily due to the growth within our property and transportation and specialty casualty groups. Core operating earnings on AFG's property and casualty insurance operations were $185 million in the first quarter of 2019, slightly below the $188 million reported in the prior year period. The specialty property and casualty insurance operations generated an underwriting profit of $88 million in the 2019 first quarter compared to $92 million in the first quarter of last year, a decrease of 4%. Higher underwriting profitability in our property and transportation group was more than offset by lower underwriting profit in our specialty casualty and specialty financial groups. The first quarter combined first quarter 2019 combined ratio of 92.5% increased eight tenths of a point from the prior year period. And first quarter of 19 results included four points of favorable prior year reserve development compared to 5.1 points of favorable development in the comparable prior year. CAT losses were 1.1 points of the combined ratio in the first quarter of 2019. By comparison, CAT losses added 1.2 points in the prior year period. Overall, our accident year combined ratio, excluding CATs, improved slightly against last year's first quarter. Average renewal pricing across our entire property and casualty group was up 1% for the quarter. Though excluding our workers' comp business, renewal pricing was up slightly more than 4%, an improvement over the renewal rate increases that we achieved for the whole year in 2018. Renewal pricing is exceeding our expectations in each of our specialty property and casualty subsegments, which I'll discuss in more detail as we review the results of each. Lost cost trends remain stable, though we're keeping our eye on inflation and interest rates. Now I'd like to turn to slide five to review a few highlights from each of our specialty property and casualty business groups. The property and transportation group reported an underwriting profit of $39 million in the first quarter of 2019, compared to $33 million in the comparable prior year period. Higher underwriting profit in our transportation businesses was Partially offset by lower underwriting profit in our agricultural property in the marine, ocean marine businesses as well as our Singapore branch. Catastrophe losses in this group were $9 million in the first quarter of 19 and $5 million in the comparable 2018 period. First quarter 2019 gross and net written premiums in this group were 3 and 6% higher respectively than the comparable prior year period. The growth in gross written premiums is primarily attributable to new business opportunities in our transportation businesses. Overall, renewal rates in this group increased 4% on average in the first quarter of 2019, an improvement over renewal rate increases achieved last year. And I'm especially pleased with rate strengthening in our commercial auto liability and aviation businesses. We are closely monitoring the flooding in the Midwest and its potential impact on the agricultural community and specifically spring planting. Though through the use of mapping technology, we determined that approximately only one third of 1% of our insurance acreage is located in the flood impacted region. And we did have an opportunity to use this information in establishing our funding strategy in April. Generally speaking, also the corn planting window throughout much of the current flood impacted region runs from early to mid April through the end of May. The soybean planting window within this region runs from late April to the end of June. And with the current technology and equipment, the majority of our insurers can complete planting within a seven to 10 day window. So it's really early in the growing season, and we are hopeful that our growers will be successful in getting their crops in the ground within these time frames. We'll definitely have more details to share when we report our second quarter results. Specialty Casualty Group reported an underwriting profit of $36 million in the 2019 first quarter compared to $41 million in the comparable 18 period. Higher profitability in our alternative markets, especially human services and public sector businesses, were more than offset by lower underrunning profit in our excess and surplus lines and workers' compensation businesses. Despite lower year-over-year profit in our workers' compensation operations, these businesses continue to achieve excellent underrunning margins. Catastrophe losses for this group were $1 million in the first quarter of this year and $5 million in the comparable 2018 period. Gross and net written premiums for the first quarter of 2019 were up 7.5% respectively compared to the same period in 2018. Higher year-over-year gross written premiums within NEON, the addition of premiums from ABA Insurance Services, as well as improved pricing and higher retentions in our excess and surplus lines businesses were the primary drivers of the higher premiums. Lower premiums in our workers' compensation businesses partially offset the growth. The integration of ABA insurance services is proceeding as planned, and we continue to anticipate an incremental $40 to $50 million in net written premium from this business in 2019. Renewal pricing for specialty casualty group was down 1% during the first quarter. Now, when you exclude rate decreases in the workers' comp businesses, renewal rates in this group were actually up 5%, an improvement from the renewal rate increases that we achieved in 2018. We're seeing strong pricing momentum in our umbrella, excess liability, surplus lines, and public B&O businesses. The Specialty Financial Group reported an underwriting profit of $13 million in the first quarter of 2019 compared to $15 million in the first quarter of 2018. The decrease was primarily driven by lower underwriting profitability in our financial institutions business as 2018's first quarter benefited from commission reductions after the active 2017 catastrophe year. Catastrophe losses for this group were $2 million in the first quarter of 2019 compared to $3 million in the prior year quarter. First quarter gross written premiums were up 3%. Net written premiums were down 2%, respectively, when compared to the prior year period, primarily as a result of higher premiums in our fiduciary and crime businesses, which were offset by lower premiums in our surety and lending and leasing businesses. Renewal pricing in this group was up 3% for the quarter. Now please turn to slide six for a summary view of our 2019 outlook for the specialty property and casualty operations. We continue to expect a 2019 combined ratio for the specialty property and casualty group overall between 92 and 94%. Our guidance for growth and net written premiums is also unchanged in the range of flat to up 3% for the year. And looking at each segment, we continue to estimate a combined ratio in the range of 92 to 96% in our property and transportation group and growth in net rent premiums between 3 and 7% for the year. Our guidance assumes a normal level of crop earnings. We continue to expect our specialty casualty group to produce a combined ratio in the range of 91 to 95%. Net written premiums are expected to be down 2% to up 2%, consistent with our initial guidance. Net written premium guidance assumes lower premiums resulting from NEON's increased reinsurance seeded in 2019 and lower premiums in our workers' compensation businesses. These items will be offset by a full year of premiums, as I mentioned before, from ABA Insurance Services. We now expect the specialty financial group combined ratio to be in the range of 88% to 92%, revised upward from our initial estimate of 86% to 90%. Our projection for growth in net written premiums continues to be in the range of 3% to 7%. We expect modest growth across all of our businesses in this group. And we also expect double-digit rate increases in our financial institutions business by the end of this year. Our guidance with regard to net investment income is unchanged with results in 2019 expected to be lapped up 4% year over year. Keep in mind results in 2018 were exceptionally strong primarily due to the strong performance of limited partnerships and similar investments which we don't expect to continue. Given the broad-based improvements noted already in the renewal pricing across many of our specialty property and casualty businesses, we now expect overall property and casualty renewal pricing to be up 1% to 3% in 2019. And excluding workers' comp, we expect renewal rate increases to be in the range of 4% to 6%, up from the previous levels. I'll now turn the discussion over to Craig to review the results in our annuity segment and AFG's investment performance. Thank you.