Good day, ladies and gentlemen, and welcome to American Financial Group 2015 Second Quarter Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] And as a reminder, this conference is being recorded. I would now like to turn the conference over to Diane Weidner, Assistant Vice President, Investor Relations. Please go ahead.

Thank you. Good morning and welcome to American Financial Group’s second quarter 2015 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 Chief Financial Officer. 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 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 and losses, discontinued operations and certain non-recurring items. AFG believes this non-GAAP measure is a useful tool for analysts and investors in analyzing 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. 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 statements. Now, I’m pleased to turn the call over to Carl Lindner III to discuss our results.

Good morning. We released our 2015 second quarter results yesterday afternoon and I am assuming that our participants have reviewed our earnings release and the investor supplement that’s posted on our website. Craig and I are pleased to report second quarter core net operating earnings per share of $1.28, a 20% increase from the comparable prior year period. These results reflect higher underwriting profit and higher net investment income in our Specialty Property and Casualty operations and higher core operating earnings in our Annuity and Run-off Long-Term Care and Life segments. These results also represent the highest second quarter core net operating earnings per share in AFG’s history. This is the fifth consecutive quarter that we’ve achieved net quarterly highs in AFG’s core earnings per share. This morning, AFG’s common stock traded in excess of $70 per share for the first time in the company’s history. With 15% growth in share price so far this year, AFG ranks near the top in year to date price performance of over 40 insurance companies covered by Dowling and Partners. Craig and I thank hard in our talented management team and employees for helping us to achieve these exceptional results. Annualized core operating return on equity was 10.9% for the 2015 second quarter compared to 9.6% for the second quarter of 2014. Net earnings per diluted share were $0.57 and include a $0.29 per share gain on the previously announced sale of Le Pavillon Hotel. During the quarter, we repurchased $47 million of AFG common shares at an average price per share of $63.91. We also increased AFG’s 2015 core operating earnings guidance to $5.25 to $5.55 per share, which is up from the range of $5.10 to $5.50 per share estimated previously. Craig and I will discuss our guidance for each segment…

Thank you, Carl. As you will see on slide 7, we are increasing our Annuity earnings guidance both before and after the impact of fair value accounting. The recent rise in interest rates provided an opportunity for us to extend the duration of our portfolio and become more fully invested. As a result, our portfolio yield at the end of the second quarter is nearly the same as it was at the end of last year, despite the relatively low interest rate environment and a run-off of older investments with higher yields. The combination of higher invested assets and higher yields is driving our increased earnings guidance and we now expect full-year 2015 core pre-tax Annuity operating earnings to be in the range of $300 million to $345 million, an increase from the range of $310 million to $340 million estimated previously. Similarly, we now expect full-year 2015 core pre-tax annuity operating earnings before the impact of fair value accounting to be in the range of $340 million to $350 million, an increase from the range of $330 million to $340 million estimated previously. You will also see on slide 7 that based upon our recent sales trends, we now expect the full year 2015 annuity premiums will be consistent with the $3.7 billion level of sales achieved in 2014. Significant changes in interest rates and/or the stock market from our expectations could lead to additional positive or negative impacts on the annuity segment’s results. Taking a look at results in the second quarter, you will see on slide 8 that core pre-tax annuity operating earnings were $88 million or 5% higher than the prior year period. Interest rates rose significantly resulting in large favorable impact on earnings. This favorable result was partially offset by the impact of a stock…

Thank you, Craig. Slide 12 recaps AFG’s second quarter consolidated results by segment. Core net operating earnings per share in the quarter were $1.28, that’s up 20% from a year ago. The $1.28 is based on core net operating earnings in the quarter of $115 million, an increase of $16 million from the second quarter of 2014. You can see on page 4 of our quarterly investor supplement a more detailed view of the components of this change. Taking a look at the P&C segment core pre-tax operating earnings, the impact of three items produced a year over year impact of an improvement of $24 million. P&C underwriting profit increased by $21 million year over year. Additionally, P&C investment income rose by $7 million. This is a result of an increase in average P&C invested assets as American Money Management invested $1 billion in cash received in the Summit acquisition over the two quarters following the April 2014 closing. As well, there was an increase in the quarter compared to last year’s quarter in partnership income. Finally, P&C other expenses increased by $4 million as the minority interest recorded in this line rose with National Interstate’s return to profitability. As for the other components of the AFG’s core net operating earnings, Craig previously covered our annuity segment earnings, which were $4 million higher year over year, results in our Run-off Long-Term Care and Life segment improved by $6 million from the $2 million loss in the prior year. Interest expense of parent holding company increased $3 million due to our 6.25% hybrid debt offering in September 2014. Other expense was $1 million lower than the 2014 second quarter. Turning to slide 13, you will see a reconciliation of core net operating earnings to net earnings and diluted earnings per share.…

[Operator Instructions] Our first question comes from the line of Ryan Byrnes with Janney.

I had a question on the flat annuity sales for the year, the guidance. Does that include this $300 million federal home loan advance and maybe also just give some color on what that is as well?

The premium number did not include the federal home loan bank advance. There are times when we can take down federal home loan bank money at very attractive rates and buy high grade securities and generate pretty attractive rates of return and from time to time we take advantage of that opportunity.

And then just shifting gears over to the Specialty Financial segment, obviously growth there was some of the best we’ve seen there for quite some time. And just want to get a little better color on where that growth is coming from, I think you mentioned financial institution business, but just wanted to get a little more color there, if I could.

In the quarter, our [indiscernible] property business had a good growth quarter. One of our subsidiaries in the surety side had a decent quarter, a group called Specialty Equipment Services had some growth in the quarter. So we were pleased that, in that particular quarter that we were able to show some growth and increase our guidance for the year.

[Operator Instructions] Our next question comes from the line of Jay Cohen with Bank of America.

I was wondering if we could just turn to the Property and Transportation segment, you had mentioned some adverse development and I think it was property and inland marine, I’m wondering what is driving that.

In terms of the adverse development in our Property and Transportation sector, you’ll see in the supplement for that sub-group, it’s $6 million adverse in total. Carl’s comments indicated that the development was attributable to property and inland marine, custom bond book of business within ocean marine and then our other transportation businesses, i.e., not National Interstate. Starting with transportation, it was one specific case that had some development for our truck division. That was probably half of the $6 million. The custom bond book of business within ocean marine was a similar magnitude. And for property and inland marine, this is again one specific event reserve that we showed an increase during the quarter that came through the adverse development, because it was the prior year, those add up to more than the $6 million, but there are obviously some offsets to that elsewhere in this sub-segment.

So nothing systemic at all, really seemingly most of it is just smaller one-off issues?

They’re always offsetting in different directions. I would caution you not to read anything into one quarter. When you say nothing systemic, I’d say that in the truck segment that is indicative of severity which has been affecting the commercial auto sector more broadly for the last couple of years.

And then in the crop business, can you give us some sense of what kind of combined ratio that was booked at in the quarter or the first half?

We generally don’t recognize any profit for the current crop year until the second half of the year. So you ought to assume that crop is booked around 100% in Q1 and Q2.

[Operator Instructions] I’m not showing any further questions at this time. I would like to turn the call back to management. I do apologize. We have a follow-up question from the line of Jay Cohen with Bank of America.

I think there is no questions, I should throw another one in there. M&A is a top topic. So I guess what’s your view of, on the P&C side, what you’re seeing from an M&A standpoint, I know I probably asked this question all the time, but are you guys seeing more opportunities for M&A yourself to put money to work?

I think we see a steady stream of opportunities of both talent acquisition, start-ups, acquisitions, some that are private and some that are part of a process in that, I just think it’s – we see a steady stream of opportunities. Clearly, it seems like on the mega deal side, there is a lot more activity going on. So we think it’s great, we think it highlights the value of our specialty insurance franchise and we see our peer companies in the marketplace, we look forward to attracting some new investors who see value in our business.

[Operator Instructions] I’m not showing any further questions. I would like to turn the call back to management for closing remarks.

Thank you all for joining us this morning. And we look forward to talking to you again when we share next quarter’s results. This concludes our call for today.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program. You may all disconnect. Everyone, have a great day.