Good morning. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to American Financial Group 2012 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. [Kevin Jensen], you may begin your conference.

Thank you. Good morning. And welcome to American Financial Group’s fourth quarter 2012 earnings conference call. I’m joined this morning by Carl Lindner III; and Craig Lindner, Co-CEOs of American Financial Group. If you are hearing 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 may be 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 uncertainty. The factors which could cause actual results and/or financial condition 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 the 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 significant items that are generally not considered to be part of ongoing operations, such as net realized gains or losses, the effect of certain accounting changes, discontinued operations, and certain non-recurring items. AFG believes this non-GAAP measure to be useful tool for analysts and investors in analyzing and understanding 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 to discuss our results.

Good morning. As we begin this morning, Craig and I wanted to take a few moments to recognize Keith Jensen, as he prepares to retire at the end of March. Today marks his last earnings conference call as AFG’s Chief Financial Officer. In addition to providing sound financial leadership and stewardship, Keith’s role at AFG extended well beyond serving as our Principal Accounting Officer. Throughout all this many contributions and roles, Keith has exemplified integrity both personally and professionally. Keith, we thank you for your leadership over the past 15 years and we are going to miss working with you each day.

Thank you, Carl.

We released our 2012 fourth quarter and full year results yesterday afternoon. We are pleased to report strong core net operating earnings in 2012, considering a year with a few headwinds for our company and the industry as a whole, including severe drought conditions, natural disasters and economic challenges due to the continued low interest rate environment. I’m assuming that the participants on today’s call reviewed our earnings release and supplemental materials posted on our website. Let me review a few highlights and focus today’s discussion on key issues. I also briefly discussed our outlook for 2013. Let’s start by looking at our fourth quarter and full year results summarized on slides three and four of the webcast. Net earnings were $0.54 per share for the quarter. These results include a charger of $1.08 per share to write-off deferred acquisition costs and strengthen reserves in our run-off long-term care operation. This non-core charge was partially offset by realized gains, the settlement of open tax years following a favorable decision in AFG’s tax case and a gain resulting from a post-closing adjustment to the cash proceeds from the sale of AFG’s Medicare supplement and critical illness businesses. Net earnings attributable to shareholders for the full year 2012 were a record $5.09 per share. Core net operating earnings were $0.67 per share for the quarter and $3.27 per share for the year. Improved results in our fixed annuity operations were offset by lower underwriting earnings and lower investment income in our specialty property and casualty insurance operations. Return on equity was approximately 13% for the year, a good result, as we continue to generate strong core operating earnings, realized gains on our investments, focused our annuity operation and resolve several other non-core matters including a tax case. Our capital adequacy, financial condition…

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

Yeah. It’s [Steyn] calling on behalf of Amit. How are you?

Hi, Tim.

My first question is embedded in the guidance. Just taking on, there are some items that are excluded, I was wondering do you include any impressive benefit or reserve leases in that 2012 guidance?

No. We do not.

You do not. Okay. And then also looking for to…

Can I?

Sorry. Yeah.

Yeah. This is Carl. Yeah. Our guidance would include our estimates reserve -- favorable reserve releases in this year.

So there was same sort of -- looking at the 2012 reserve releases sort of indicative of what might be included in that guidance for 2013.

We don’t really give any guidance on that.

Okay.

We feel good about our overall reserves. We baked in favorable reserve guidance into our earnings.

Okay. And then my next question relates to capital management. Looking forward for 2013 you mentioned sort of the excess capital that you have over rating agencies requirements. Would you expect the return to shareholders over 2013 to be more than 2012? Would $400 million say be sort of a good benchmark for that number?

We haven’t really defined any guidance or any specific number going forward into this year.

Okay.

Generally, we’ve been opportunistic purchasers of our stock when it’s been an attractive value to book value and also stay stock of our opportunities for growth and for start-ups and acquisitions during the year.

Got it. Thanks. And I’ll requeue for further follow-ups.

The next question comes from Ryan Byrnes, Langen McAlenney.

Yeah. Good morning everybody. I just wanted to just drill down little bit on, I guess current loss cost inflation, especially vis-à-vis seeing 4% to 6% rate increase in 2013. Just wanted to see, what kind of I guess delta you guys are seeing or expecting?

I think 2% to 3% overall probably is and generally our loss cost trends have been pretty benign. It varies by line but even on California comp, I think we are even saying kind of low single digit inflation there. So, I think a fair assessment would be kind of 2 to 3 percentage overall.

Okay. So with the rate increases, obviously you are getting the earn part through but you should be experiencing kind of underlying I guess margin expansion with rate increases outpacing loss inflation, is that the way we think about it?

We think -- as that gets earned through, it should have a positive impact.

Okay. And then -- I guess, along those lines, especially in property and transportation combined ratio guidance, it seems, I guess, the range is little elevated compared to previous years, I guess, excluding 2012. Just want to get your thoughts there. Are you guys increasing your loss estimates on crop there or is there anything interesting going on there that I’m missing?

I don’t think so. I think because of the changes in the government really in the crop insurance program over the years, the margins are probably tighter in that business than they would -- what they’ve been maybe over the past five years in that. So I think it probably reflects that. We had -- it seems like the whole industries had a lot more in the way of catastrophe claims also. Things that convection types to forms and so I -- we look at our guidance, I think that’s kind of reflect in that also.

Okay. Great. And then my last question is, we thought your crop insurance, I think it’s a multi-year deal. Just wanted to see when that expires. If you can say that and then obviously because it sounds like a bunch of reinsurers are vying to write more property insurance, especially in 2013. Just want to get your thoughts on it?

Keith, I think it’s always up in this next -- over the next 12 months or something.

Yeah. It is next year.

Okay. Great. That’s it for me. Thank you.

Your next question comes from Jay Cohen, Bank of America.

Thank you. Question on the specialty casualty business, you had a little bit of adverse reserve, prior year reserve development. You talked about the E&S business and I think you said executive management as well. And I’m wondering what particular areas are giving rise to it and what you’re seeing that’s causing modest but adverse development?

When you look back at 2012, the run-off of our program business, the run-off that ended up being a lot worse than what we thought throughout the year. If I picked one single areas probably, we had the biggest negative impact as far as negative development. Keith, have you got any other perspective on this specialty casualty?

I think we had also some continuing modest development internationally but they were very small compared with prior years.

Thank you very much.

(Operator Instructions) You have a follow-up question from Amit Kumar, Macquarie.

Hey, it’s Amit Kumar. Sorry for making a, I guess, a late appearance on the call. Did you guys touch upon the California comp market place and the trends you’re seeing in that.

Well, sure. You know, the California workers’ comp market place is clearly turning. In the fourth quarter, we got a double-digit renewal price increase. We got about 11%. We -- with the change in the market, I think, we’d expect to try to get a double-digit 10% plus increase in California comp this year. Our latest estimate around accident year combined ratio for last year is in 106 to 108 range. So if we can get 10% plus price in 2013, we’re moving toward solid ROEs again. Again, probably a -- we have to get to a 98 sort of a latest kind of calculation to get to a 12% return on equity, there in republic.

Got it. That’s helpful. I guess, the only other question…

Reserves are adequate. I guess, the other thing I’d say is because of the rate to payroll increase we expect and some market share increase. We’re projecting strong double-digit growth for California comp business this year.

Got it. And the only other, I’m sorry, the only other question I have is on capital management. Clearly, you mentioned a $625 excess capital number? Do you know, in terms of looking for 2013 do you think it exceeds what we have seen for 2012, I guess, that’s better be the right way to look at it, right?

So, I think, we answered that question, we don’t have any specific number or guidance on that right now.

So let me go, sort of approach just another manner, do you sort of look at returning whatever you have earned in a year, or many companies use the formula, they were able to say share buyback plus dividends equal to net income? How do you sort of think of that?

I think we like to have -- we like flexibility and seeing what acquisitions startups, what the growth is on the table and also where our stock trades at, in relationship to book value or on P/E multiple basis overtime.

What range do you use for the P/E multiple, if you could share that?

Well, I don’t think we really have any specific, say, concrete type of parameters of that.

Okay. That’s all I have for now. Thanks so much for the answers.

And there are no further questions at this time. Are there any closing remarks?

I will just express appreciation to all of you for joining us on the conference call and for your interest in the company. Thank you and we’ll report in the next quarter.

This concludes today’s American Financial Group 2012 Fourth Quarter Earnings Conference Call. You may now disconnect.