AMERICAN FINANCIAL GROUP INC Q3 FY2024 earnings call

• Annualized third quarter core operating return on equity was 16%. Underwriting margins in Specialty Property and Casualty Insurance held up despite elevated catastrophe losses, including from Hurricane Helene. - Property and Casualty net investment income increased 15% year-over-year due to higher interest rates. - Portfolio has 67% in fixed maturities, yielding ~5.5%, and alternative investments had a 5.4% return in Q3 2024 vs 4.2% prior year with expectation of 10%+ annual returns long term. - Returned $59 million to shareholders via regular quarterly dividend, declared special dividend of $4 per share ($335 million aggregate), with excess capital expected for acquisitions, dividends, or repurchases. - Specialty Property and Casualty Insurance combined ratio 94.3% in Q3 2024, affected by Hurricane Helene losses; Hurricane Milton estimated pretax losses $30 million in Q4. Prior year reserve development favorable in most businesses; premiums up due to Crop Risk Services acquisition; renewal pricing up in many lines.

American Financial Group's Specialty Property and Casualty Insurance business had a 94.3% combined ratio in the third quarter of 2024, 2.1 points higher than the third quarter of 2023. Property and Transportation Group achieved a 96.5% calendar year combined ratio overall in Q3 2024, 1.7 points higher than the comparable 2023 period. Gross and net written premiums in this group were 32% and 26% higher respectively than the comparable prior year. Specialty Casualty Group had a strong 90% calendar year combined ratio overall in Q3. Gross and net written premiums increased 6% and 4% respectively compared to the same prior year period. Specialty Financial Group reported a 91.9% combined ratio for Q3 2024, 4.3 points higher than the prior year period. Property and Casualty net investment income was approximately 15% higher than the comparable 2023 period, reflecting rising interest rates. The portfolio has approximately 67% invested in fixed maturities, yielding ~5.5%. Annualized core operating return on equity was 16% for the third quarter.

• Expect excess capital throughout 2024 and 2025 for acquisitions, special dividends, or share repurchases. - Optimistic about crop profitability due to harvest pricing and yield variability. - Continued favorable pricing environment, especially in social inflation exposed lines like commercial auto and excess liability with strong rate increases.

• Catastrophe losses, particularly from hurricanes. - Adverse reserve development in social inflation exposed lines. - Market and interest rate fluctuations impacting alternative investments.

Q: High level question on loss ratio and IBNR A: Brian Hertzman discussed reserve position reactions to new information, favorable vs adverse development, and complexities in IBNR analysis.

Q: Alternative investment portfolio returns A: Craig Lindner talked about multifamily real estate, supply/demand dynamics, and transaction activity.

Q: Pricing in Property and Casualty Insurance A: Carl Lindner discussed favorable pricing in social inflation exposed lines, including commercial auto and excess liability, with strong rate increases.

Q: Adverse development on social inflation lines A: Brian Hertzman mentioned adverse development in casualty businesses, offset by good overall results, and focus on reserves.

Q: Reserve adjustment on social inflation lines A: Craig Lindner and Brian Hertzman discussed accident years and magnitude of adverse development in casualty businesses.

Q: Reserve question on commercial auto and non-coastal exposure to hurricanes A: Carl Lindner and Craig Lindner talked about commercial auto pricing and learning from hurricanes to adjust exposure.

Q: Interest rates and portfolio duration A: Craig Lindner discussed portfolio duration and benefit from higher interest rates.

Q: EPS and combined ratio expectations A: Carl Lindner mentioned ongoing monitoring of catastrophes and crop profitability for year-end results.