Good morning. My name is [Sandrow] and I will be your conference operator today. At this time, I would like to welcome everyone to the American Financial Group 2009 fourth quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. (Operator instructions) Thank you. Now, I’d like to turn the conference over to Keith Jensen, Senior Vice President of American Financial Group; please go ahead.

Thank you, good morning. I’m here with Craig Lindner and Carl Lindner III, Co-CEO’s of American Financial Group. We’re please to welcome you to American Financial Group’s 2009 fourth quarter earnings results conference call. If you are viewing the webcast from our website, you can follow along with the slide presentation if you’d like. Certain statements made during this call are not historical facts and maybe considered forward-looking statements and are based on estimates, assumptions and projections, which management believes are reasonable, but by their nature, subject to risks and uncertainties. The factors that could cause actual results or financial conditions to differ materially from those suggested by such forward-looking statements include, but are not limited to those discussed or identified from time-to-time in AFG’s filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. We do not promise to update such forward-looking statements to reflect actual results or changes in assumptions or other factors that could affect these statements. Core net operating earnings is a non-GAAP financial measure, which sets aside items that are generally not considered to be part of ongoing operations, such as net realized gains and losses on investments, the effects of accounting changes, discontinued operations, significant asbestos and environmental charges and other non-recurring items. AFG believes this non-GAAP measure to be a useful tool for analysts and investors in analyzing the ongoing operating trends and will be discussed for various periods during this call. A reconciliation of net earnings attributable to shareholders to core net operating earnings is included in our earnings release. Now, I’m pleased to turn the call over to Carl Lindner III, Co-Chief Executive Officer of American Financial Group to discuss our results.

Good morning and thank you for joining us. We released our 2009 fourth quarter results yesterday afternoon. AFG has continued to post excellent operating results even as we are faced with soft pricing, increased commercial demand resulting from the depressed economy and fluctuations in investment valuations. I am please to report that for the full year in 2009, our business has set new records by generating $493 million or $4.23 per share in core net operating earnings and $519 million or $4.45 per share in net earnings attributable to shareholders. The depth and breadth of AFG’s specialty insurance expertise has enabled us to deliver high caliber service to our policyholders and agents and produce long term value for shareholders. Craig and I want to thank god for his blessing and thank our talented management team and employees for their efforts and contributions this year. I’m assuming that the participants on today’s call who have reviewed our earnings release and supplemental materials posted on our website. I’ll review a few highlights and focus today’s discussion on key issues and our outlook for 2010. Let’s start by looking at our 2009 fourth quarter and full year results summarized on slides three through five of the webcast. Our fourth quarter core net operating earnings were $1.04 per share, the same as those in the prior year period. Full year core net operating results were up 4% over the 2008 period. The 2009 periods reflect improved underwriting results in our specialty property and casualty operations. Our net earnings of $1.38 per share for the 2009 fourth quarter and $4.45 per share for the full year were also substantially higher than the 2008 periods, primarily because of net realized gains on investments. During the fourth quarter, we recorded an after-tax realized gain of $49 million…

(Operator Instructions) Your first question comes from Amit Kumar - Macquarie.

Just maybe let’s start with the crop book. Can you just give us what annual adjustment was in Q4, which reduced expenses?

I was decreased by virtue of the 2008 act by 2.5%. I don’t know if that’s what you’re looking for Amit?

Yes, can you sort of give an absolute dollar number, which obviously the expense ratio to 5.3%?

I don’t have the absolute number with me on A&O specifically.

Its okay, maybe I can circle back on that. Just staying on the crop book and obviously, we’ve heard, and read, and talked about the changes to the SRA. Simplistically, can you give us your viewpoint regarding the proposed annual reduction, maybe refresh us as to what funds you are in, the state groups and the crops, and if we were to look at the SRA draft as of today, what would be a possible EPS impact on a normalized basis?

I think that generally with what is initially proposed and what ends up being reality is so much different. We’ve been hard at work along with the industry really trying to hash out, the industry’s response and try to hash out what might be the final forum that we’re going to see in a couple weeks. Maybe in a few weeks, we might be able to give you a little bit better clarity, as we understand exactly what the changes are going to be in that. I guess Keith, if you were to take a crack in the existing field, the way that’s proposed initial and probably wouldn’t impact us by 25%?

25% to 30%, I think.

We don’t expect that to be the final result. Generally, the industry hashes through things, and usually there are some compromises that are made, but we’ll see.

Directionally, do you see those compromises happening at this time? Because I know if you go back and look at the earlier draft, the final thing was very different, but just based on the climate this time around, do you think that you would be able to make meaningful headway in sort of producing some of these numbers or where do you stand on that?

I would think so and there are things that we can also do within our business though.

What would those be?

Let me go back. Commissions would be a major thing that we’d look at. That’s one of the things that the industry has been providing input as the people in Washington are working through the bill. I guess the other observation, I’d make that makes me optimistic that there will be improvement is that. This would be, if it was carried out exactly as drafted would be a fairly significant hit into an area where the national interest in terms of farm policy would tend to want to moderate it. There’s clearly going to be some adjustment, but they can’t make it so draconian that they dramatically affect the economic of the farmers.

Maybe I’ll take this offline. I guess just moving on, can you maybe just talk about the Marketform, Italian med mal adverse development, honestly I was a bit surprised just based at least on the broader med mal trends. Was there something specific going on in that hospital book, which resulted in this? Is that development now sort of at the fully policy limits? Maybe just give a bet more color on this?

Sure. I’d be happy to. This was focused, as you said in the public hospital arena. The majority of the issues seem to be around the birthing site, the work is done as babies are born and some of the issues that arose. We also had an issue with one TPA that was not performing and doing adequate reviews of potential claims and making initial claims adjustments. In connection with a closeout of a year of account we had actual review by a third party actuary, went in as they examined it found a number of issues that are being worked on. We terminated the contract with that administrator because they were proposing a significant issue. Another thing I’d point out, Amit, is the number $48 million is what’s embedded in the underwriting, but because we have minority shareholders in the agency that share in this, the net effect pre-tax to us is about $32 million. So it’s something that we’re concerned about. We continue to work aggressively on. We think that it was isolated in Italy. Our other med mal books are performing very well. This is one that we’re working to get behind us.

Order the size of the book as a percent of premium overall?

It’s been put into runoff so it’s zero percent of premium as we go forward.

What is historical basis, before this put in runoff, what percent…?

My recollection is it was about 20% of the Marketform premium.

So if I understand this correctly, you are saying it was a localized issue, and not sort of indicative of the entire Marketform franchise?

Correct. In fact, all of the other books of business in the Marketform franchise are performing according to our expectations and we’re really pleased with the startups. As you know, we went into Marketform, part of our objective was to take five businesses that we’ve done well in the U.S. and expand their geographic region. Those processes are going quite well.

Just one more question and I’ll re-queue. In terms of capital management and obviously, you have the buyback. You have the excess capital number in the slide. How do you view this going forward, in terms of making changes to the dividend payout or looking at some of the debt? I don’t think it’s imminent, but maybe just talk about what’s the broader top process here?

This is Carl. I think, as far as plans for excess capital, capital management and that, we do want to keep some powder dry. There’s some chance that you could see interest rates move backup over this next year. We want to have appropriate flexibility both defensively and offensively to take advantage of opportunities. Share repurchases below book value would continue to be something that we think makes a lot of sense. As you know, we’ve started up and done small to medium sized acquisitions over many years. We’re continuing to look at opportunities and we’ll continue to do that. So I think those would be the primary approach that we’re going to take to capital management, excess capital. As far as we’ve increased our dividend, I think each of the last four years. At the end of this year, we’ll revisit that. We think that steady increases in dividends over a long period of time are meaningful to investors. So Craig and I understand that.

So if I understand this correctly, what’s the remainder in your buyback and is it likely that it would be expanded just based on your comment on the price to book?

Yes. Keith, I think there’s 1.5 million…?

1.1 million left.

1.1 million left and we have a Board meeting tomorrow and we’re going to be asking whether it to be an additional 5 million shares authorized to repurchase.

Your next question comes from Ron Bobman - Capital Return.

I’m not familiar with the Cincinnati, you have time zone relative to the East Coast. I had a question about Marketform as well. I was wondering it sounded like I think it was Carl’s comment. It’s really sort of aside from the Italian med mal book, there’s no other change to the underwriting guidelines that you’re employing. I think, you said that just for the…?

That’s correct.

Are the losses that are coming through from that book going to cause any complications or problems to close out, I’m not sure what year it would have been closed out, ‘06 or ‘07 for the syndicate. Is that going to be a problem at all or no?

‘07 is the year in question, and that call needs to be made by the end of this month and so we’ll be working that through over the next two or three weeks and making a final decision.

Then Carl, you mentioned the plan with Marketform was to sort of use it as an on-tray or vehicle to sort of replicate some of the specialty lines that you write in the U.S. and for the most part, my impression is that you sort of have the localized approach to underwriting whether it be workers comp concentrating in California, crop in certain parts of the country and presumably you have sort of localized operations. The Marketform vehicle sort of underwriting from London insurance across Continental Europe is a bit of a departure from that. Is that not the case or…?

Well, we’ve hired some really top local talent that understands those markets. So I don’t think it’s really a departure from what our philosophy is. We’ve in the area Specie and Equine, and Ocean Marine, some of the lines that we want to expand off the Marketform platform. We’ve hired some highly talented individuals that have worked in and looked at business in those markets for a long time. We’ve had good success here this past year. We probably expect to add, I don’t know probably expect to write, Keith, $50 million to $70 million this year of the four, five expansion lines that we’ve set out and so far, we think the loss experience looks about as expected.

Marketform, I thought used to write a little over $100 million of premium. Is it dropping down or are you just set highlighting a couple subsets of the $100 million?

What he just said is additive to what the current…

Your next question comes from Jay Cohen - Bank of America/Merrill Lynch. Jay Cohen - Bank of America/Merrill Lynch: Three topics, at first maybe a quick one, we’ll start with Verisk. After your required holding period is up, will you be marking that position to market?

Jay, we’re actually marking it to market now. As we would any secured it, we’ll run that gain loss on sale of investments at the point, if it comes we dispose of any of the shares, but at this point, we’re marking to market. Jay Cohen - Bank of America/Merrill Lynch: So that unrealized gain is in your book value already?

That’s correct. Just be aware that in the market we’re cognizant of the fact that what we hold is not immediately saleable, so we’ve taken a slight discount to what the currently trading shares are, but it’s less than 10% discount. Jay Cohen - Bank of America/Merrill Lynch: Then just to follow-up on the casualty business, first on Marketform. Where in your P&L is that offset related to I guess the minority interest in Marketforms?

Compare with any earnings attributable to non-controlling shareholders your old minority interest. Jay Cohen - Bank of America/Merrill Lynch: Last question this is surplus, was your statutory surplus helped it all by the change in accounting regarding valuing mortgage securities on a statutory basis?

Yes, it was, by a number that is approaching $200 million. Jay Cohen - Bank of America/Merrill Lynch: That’s total for the company property casualty and life?

That’s correct. Biggest part of it on the life side, because of the portfolio was much bigger there.

Your next question comes from Amit Kumar - Macquarie.

Just maybe follow up cleanup questions. In terms of the adverse development, there was some other adverse development apart from Italian med mal. Can you just sort of expand on that a bit?

The adverse development, as you said, Italian med mal was certainly a part of it. We had some modest amounts. I’m just looking down my list here to see, if there’s anything else that the largest other was less than $3 million. So there’s a potpourri of items that went in, but a huge driver with the Italian med mal.

Maybe just going back to the guidance change, can you sort of talk about what incrementally changed apart from the buyback?

I think probably plain and simple is probably the amount of share repurchase activity that we’ve had in the fourth quarter and first quarter and as the markets we’ve returned, the impact on the excess capital that we have to use this year towards additional share repurchases or acquisitions.

So it’s only the buyback. You’re view hasn’t changed whatsoever from the time of Q3 call to current?

During that time to be fair, Amit, we have finalized the ground up financial planning process for the next year and that didn’t drive huge changes, but there were certainly fine tunings that took place in that process.

Maybe I missed this. Can you just sort of talk about a bit more about investment portfolio and your plans for the new money?

We saw some extraordinary opportunities last year to invest in both mortgage backed securities as well as corporates, and frankly, the spreads on most things have tightened up fairly significantly, and recently we’ve been de-risking the portfolio. We’re investing mainly in a high grade corporates. The non-agency residential mortgage-baked securities are running off, and frankly, the combination of this couple of things, the lower reinvestment rate and run-off of some; higher yielding paper is going to result in a decline and investment income.

Maybe just one final question related to that. Can you talk about what your expectations are for inflation going forward?

We would be concerned about it over the next; if you look at over a little longer period of time and we are doing everything that we can to prepare for the day when inflation is going to rear its head I don’t think it’s going to happen anytime soon, but certainly over the next two or three years, we would expect to have higher rates. We’re going to position the portfolio as best we can, and structure our annuity products as best we can to prepare for that day. I think the duration of our assets today is actually slightly shorter than the duration of liabilities. We’re keeping an unusually large amount of cash in the portfolios and the design of the annuity products, as I mentioned, is changing to give us added protection against a rise in rates.

I would just add a couple thoughts with respect to the property and casualty. You’ll remember the property and casualty business, the duration of reserves is about 2.5 years and the duration of the investments associated with property and casualty would be shorter than what they are in the annuity and supplemental businesses and so that plus the fact that we’re looking carefully at trends that we can adjust. We just don’t have a huge exposure because not much of the book is long term so it turns over pretty quickly and we can stay an asset and liability perspective on a pretty similar basis.

Your final question comes from Jay Cohen - Bank of America/Merrill Lynch Jay Cohen - Bank of America/Merrill Lynch: Just to make sure we cover this fully. The adverse development in the casualty business outside of Marketform, you said there was no major thing, but are there any trends? I think this is a pretty sensitive issue, I think a lot of investors and analysts that are watching the development that we’ve seen are looking for any inflection points and I’m wondering if you look at this quarter and 3G is there something here that’s broadly speaking is somewhat disturbing form a clients inflation standpoint that you need to start addressing?

I don’t, Jay. When I look at this from, an adverse development in the quarter is driven primarily by the Marketform issue, which is not an inflation indicator at all and when I look at across the year in each of the individual quarters, there have been favorable development. Of course you can’t continue with that forever, but by the same token. I don’t see anything dramatic that’s changing where we have been.

Thank you. There are no further questions at this time. I would like to hand the call back over to the floor for any closing remarks.

Thank you very much and we’d express appreciation for all of you for joining us this morning and look forward to reporting our first quarter results this year progresses. Thank you and have a good day.

Thank you, ladies and gentlemen. This does conclude today’s American Financial Group 2009 fourth quarter earnings conference call. You may now disconnect.