Good day, ladies and gentlemen, and welcome to American Financial Group 2015 Third Quarter Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer period and instructions will be given at that time. [Operator Instructions] And as a reminder, this call is being recorded. I would now like to turn the conference over to your host for today, Ms. Diane Weidner, Assistant Vice President, Investor Relations. Ma'am, you may begin.

Thank you. Good morning and welcome to American Financial Group’s third 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 third quarter results yesterday afternoon and I am assuming that our participants have reviewed our earnings release and the investor supplement posted on our website. We are pleased with AFG's strong core net operating earnings, record third quarter premiums achieved in our annuity segment and healthy growth in our Property and Casualty operations. Core net operating earnings were $1.38 per share, a decrease of $0.02 per from the comparable prior year period. These results reflect higher underwriting profit and higher net investment income in our Specialty, Property and Casualty insurance operations which was more than offset by the impact that fair value accounting had on the results of our annuity segment. Annualized core operating return on equity was 11.6% for the 2015 third quarter compared to 12.3% for the third quarter of 2014. Net earnings per diluted share were $0.71 share and included a $0.58 per share for A&E reserve strengthening and $0.09 per share related to realized losses and a loss on the early retirement of debt. During the quarter we repurchased $35 million of AFG's common shares at an average price per share of $68.56. We also announced the special dividend of $1 per share payable in December. Returning capital to shareholders is an important component of our capital management strategy and reflects our strong financial position and our confidence in AFG's financial future. We increased AFG's 2015 core operating earnings guidance to $5.30 to $5.60 per share which is up from the range of $5.25 to $5.55 per share estimated previously. Craig and I will discuss our guidance for each segment of our business later in this call. Last week we formally celebrated the opening of Great Americans newest Property and Casualty branch office in Singapore. Particular our focus areas include…

Thank you, Carl. I will start with a view of our annuity outlook for the remainder of 2015. As you will see slide 7, we're increasing our guidance for annuity earnings before the impact of fair value accounting by $5 million to a range of $345 billion to $355 million. Higher than previously expected net interest spreads is the primary factor driving the increase at our estimates. Based on where interest rates and the stock market are today, we now expect the full year 2015 core pretax annuity operating earnings as reported will be $325 billion to $335 million, a decrease of $5 million from our previous estimate. As we saw on the third quarter significant changes in the stock market and/or interest rates as compared to our expectations can lead to a significant positive or negative impact on the annuity segment results due to the impact of fair value accounting. You will also see on Slide 7 that based on a recent sales trend we've increased our premium guidance and now estimate the full-year 2015 annuity premiums will be in the range of $3.8 billion to $3.95 billion an increase from the $3.7 billion 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 results. These earnings expectations do not reflect any potential earnings impact from our annual unlocking fourth quarter review of the major actuarial assumptions and our fixed annuity business. Since our net interest rates are higher than previously projected, we currently believe that the unlocking will likely have a positive impact on earnings. The fundamentals of our annuity business remain very strong despite the lower-than-expected reported earnings after fair value accounting. Taking a look at results the third quarter,…

Thank you Craig. Slide 12 recaps AFG’s third quarter consolidated results by segment. Core net operating earnings per share in the quarter were $1.38 down $0.02 from Q3 2014’s record $1.40. The impact of fair value accounting that Craig described reduced AFG’s core net operating EPS by $0.16 in the 2015 third quarter. As we stated before, we do not believe the fair value accounting presents an accurate depiction of the results of operations for our annuity segment. Some in our industry too is excluded from core operating EPS, we have not. That $1.38 is based on core net operating earnings in the quarter of a $123 million. You will be able to see a more detailed view of these components on page 4 of our Quarterly Investor Supplement. P&C core pre-tax operating earnings improved by $23 million year-over-year due to P&C underwriting process improving by $12 million and increase in P&C net investment income of $7 million and P&C other expenses decreasing by $4 million. As for the other components of AFG’s core net operating earnings. Craig previously covered our annuity segment earnings which were $19 million year-over-year result of the impact of fair value accounting for fixed index annuities. Results in our run-off long-term care and life segment improved by $5 million. Interest expense of parent holding increased $1 million due primarily to our 6.25% hybrid debt offering in September 2014. Other expense was $6 million higher than what was reported in 2014 third quarter. Last year’s quarter was not indicative of a run rate for this line item. Turning to slide 13, you will see a reconciliation of core net operating earnings to net earnings and diluted earnings per share. In addition to realized investment losses and a loss on the redemption of AFG’s 7% senior notes,…

Thank you. [Operator Instructions] And our first question comes from the line of Christopher Martin of Macquarie. Your line is open. Please go ahead.

Hi guys. Congrats on the underlying results this quarter in the annuity premium growth. So I have two questions related to crop insurance; the first is regarding the proposed 3 billion budget cuts the program. How you think this might impact the industry anything that this could drive some more consolidation on the smaller players?

Yes, I don’t think -- the bill is drafted hidden good news for their crop industry and definitely would probably have an impact on greater consolidation my mind. I think right now though there is a suppose deal for it to be revised in the upcoming omnibus spending bill and that seems to be a positive. But we’ll continue to monitor that closely and see what happens in that. I think that’s a positive right now.

Thanks. And then sort of saying on the crop, with the strong El Niño we’ve seen typically that leads to the favorable growing conditions. Do you have early out looking what you’d expect 2016 to look like in both premiums and commodity pricing?

We generally do guidance a little bit later once we kind of have a little bit better feel on things. I think one question I’ve been getting is about El Niño, the generally the current predictions are for strong El Niño event to influence weather patterns is winner. Generally for the crop industry that’s a positive event to the extent that there is weather than average conditions particularly in California or in some of the southern tier states which actually could bring drought relief to those regions. So El Niño our initial take is that that could be positive, that’s something that is talked a lot about right now. I think you can get a little bit of flavor if crop prices, the discovery prices are down 8% usually in the spring discovery prices that establish premium levels for next year. Generally when you look at the futures that tie to more of the spring time period in that generally they are not down quite as much. So, I think that there should be a fairly stable. My initial thoughts will be kind of a stable outlook on premiums for next year but it all depends on what those spring discovery prices are and that's until, until that you were able to measure that in this spring it's kind of thought to prognosticate.

Thank you. Our next question comes from the line of Paul Newsome of Sandler O'Neill. Your line is open, please go ahead.

I wanted to apologize I had to jump off the call briefly so tell me if I am being redundant, but perhaps a little bit more on the expenses charge, it seems a little bit larger than I think we've seen in the past. Why that might that be and are we getting -- at what point do you think we get to the point where we those expenses charge pretty small?

It's Jeff Consolino. Thanks to your question. I guess in terms of your statement that these asbestos and environmental special charge is bigger than before what you've seen just in terms of history, we typically work with a internationally recognized independent actuarial firm on a two-year rotating basis for the last time we had that outside firm in was 2013. The charge we took this quarter of $79 million pretax is comparable to the $76 million of the 2013. So I guess I would challenge the assumption this is without precedent or unusual and it relates to the overall asbestos and environmental environment. I do think that best report issued at the end of October is fairly illustrative of what the industry is seeing. And we would say for our PMC business, the analysis was driven by slightly higher than expected indemnity in defense costs and as the industry exposure to asbestos of mature the focus of litigation is radiated out smaller companies and companies with ancillary asbestos exposures. In short, these exposures have been a driver of our reserve increases in prior periods. As for environmental, we look at the environmental peace primarily attributable to increase defense cost and a small number of claims where the cost of remediation have increased. I hope that gives you good sense as to what sitting inside that number but I guess I'll leave to you to follow up if you have any further questions.

No that's great and I have a separate life insurance in term of that life insurance question. It's hopefully a fairly straightforward question. So I think it affects annuity business as being pretty straightforward, you basically make the vast majority of what you make is interest rates spread on asset side management and I am looking at Slide 8 and one of the things I notice is that the average fixed annuity assets are 13% and the interest rates spread is also improved which both fantastic, but the core operating earnings was up only 2%, what would be the other factors that make that core not go up say at least in line with the average fixed annuity investments?

Hi, this is Craig. The answer to that is the impact of the stock market decline on non-fair value items specifically wider reserves. The decline in the stock market resulted in us meeting to put up more reserves against the riders and that is what accounts for that difference.

Thank you. Our next question comes from line of Ryan Byrnes of Janney Montgomery. Your line is open. Please go ahead.

Just had a question obviously the big hire out in London, are there any initial changes I guess strategy changes for market form that we should know about, and maybe try to figure out how much of the use of excess capital that could be going forward?

Good morning, Ryan, it's Jeff Consolino and already I am going to reverse myself and good afternoon. We're excited as Carl said about the hire of Martin Reith, our London market form operation. Martin's track record speaks for itself and we think it's a kind of a leader that's consistent with the kind of leadership we have in our domestic U.S. business. And Martin now has not yet started in market form and so I think it's premature and would be getting out ahead of him to talk about any changes that may transpire. So why don't we part that keep track of it as his tenure starts to get underway and likewise I think I wouldn't want to talk about our capital commitment and use of capital until we are on the down the road in that change.

Got you. You are saying you won’t put any pressure on quite yet I understand that. And then moving on to the workers’ comp market. I saw the Florida, State of Florida is looking to put through 5% rate deduction -- rate reductions heading into next year. Just wanted to get your thoughts on that and where the underlying margin of that business are going. I know that you guys have gotten a lot of deeper with data and analytics which are kind of softening that pressure. But just wanted to get your thoughts there.

Naturally we were disappointed that the commissioner chose a number higher than what the NCCI was choosing in that. Our results continue -- to-date we have good results, meets our expectations. I think what the -- it’s kind of the rate decline probably will help us -- we will need to be more selective in our underwriting and tighten up our analytics model such that we can maintain margins there, particularly in Florida. So I think the -- when we look through the lens of our predicted analytics model in that, that 5% rate reduction may work out to be more like 1% or 2% based off of our mix of business, our specific mix of business would be our initial take in that. But if we have to tighten things, we will do that in order to meet the margins.

Okay, great. Thanks. Good color guys.

Thank you. [Operator Instructions]. Our next question comes from the line of Jay Cohen of Bank of America. Please go ahead.

Yes, thank you. A couple of questions. First, in the property and transportation business you highlighted some I guess loss pressure, loss activity and in property and then the marine lines. I am wondering were there unusual events, unusual, the large events that led to that?

Jay I wouldn’t say any large event, certainly nothing that would, it can’t like.

Okay, just underlying pressure from pricing/claim standpoint?

Again I think you have to look at the diversity of those businesses Jay and I point you to a couple of things, since I am not satisfied with the short answer. You can see in the supplement, you can see in the press release that cat losses year-over-year were higher so but step that aside because we carved that out separately. In terms of the underlying loss ratio, I would say a couple of things. I was going to try to refer to a schedule here quickly if you don’t mind. I show our loss and loss adjustment ratio for the quarter for property and transportation excluding cat and excluding prior development, 74.6 a year ago that was 81.4. We had a more favorable crop order given the comments that Carl made. And so we had a greater level of profitability and a lower loss ratio in crop. Likewise, a year ago we talked about the pressures in transportation in both in national inter-state and in our own individual owner operator business for Great American and we have seen improvement in both of those. Agri business and ag line also have improved. And so when you take those all out you can see that the improvement is really driven with all of those levels. So higher level of cats offset by improving results trucking national inter-state and agri business, that’s really what’s moving the loss ratio on the accident year cut basis for that sub segment.

Yes, I was looking at that same ratio but I was looking at a relative to the first half of the year where that ratio was in the 60s seem like a pop-up, I know there’s a seasonality here but if there was just any loss activity but that’s fine.

Okay, thanks Jay.

Secondly, market form. What’s the underlying issue that needs to be resolved, obviously you are not happy with the performance, what’s the problem in that business?

I think we’ve had a -- we've not had leadership [root] that’s properly selected and priced the business, and a decent number of the businesses. We have some great teams that have produced very profitable results but we continue to be disappointed for our standards that we’ve had the right leadership and the right team to get the job done. That’s why we made the leadership change and why we went out of our way to get somebody that had the best track record there. We’re not messing around. We want to -- we want market form to be a very profitable venture for us. One of the few disappointments when you look across our 31 different specialty businesses.

Great. So basic underwriting blocking and tackling need someone right for that job then?

Exactly.

Thank you. Our next question comes from the line of Greg Peters of Raymond James. Your line is open. Please go ahead.

Good afternoon. Thank you for hosting the call and taking our questions. Couple of areas to touch on in the annuity segment, can you provide some additional color behind the fair value accounting adjustment and considering the market movement since the end of the third quarter, is it possible that there could be a positive adjustment going into the fourth quarter?

Greg, this is Craig. Let me give you a little more color on that what impacted us in the third quarter. The two largest drivers of the $22 million fair value accounting that we took were the decline in the stock market and interest rate stood ended the quarter a bit lower than we had expected. Obviously we’ve had a very significant recovery in the stock market so far in the fourth quarter, interest rates have moved up. If you look at the guidance that we put into the news release that we issued last night you’ll see that we’re steering to -- if you look at the midpoint of the guidance on operating earnings, we’re steering to a $100 million operating number that compares to $67 million that we just reported in the third quarter. And that does include a nice recovery in the stock market. Our assumptions related to interest rates in the stock market that go into that guidance are that -- and the fourth quarter, the stock market would increase by 8%. And I think as of this moment it's up a little bit more than 8% and it assumes that rates would trend up in the quarter, it assumes is an example that the 10 year corporate [A2] rate would be at a 369 which is about where it is today. So it assumes an 8% increase in the stock market or assumes interest rate stay around where they are today and if that happens we recover in the guidance we assume that we were going to recover, they are going to have a positive impact from fair value accounting of approximately $8 million and that’s what is included in our guidance for our operating earnings number in the fourth quarter of $100 million.

Thank you for the color Craig. If you could add or if I look at what looks like you're going to be able to achieve in terms of operating earnings within the annuity segment for 2015. How do you think about is the written on allocated capital that you expect to get this year relative to your long-term objectives?

I mean the return that we’re projecting after the negative impact of fair value accounting which frankly we’re not a big fan of, but including fair value accounting. The return of this year is projected to be between 11% and 12%, not including realized gains on stocks.

And is that consistent with your long-term objective?

What we’ve seen certainly over the last four or five years is an uptrend in the returns in the annuity business. we have been bogged down by a block of higher GMIR business. The new business that we’re putting on the books has a return that we find to be very attractive, it still impacted by some of the older business. It has 3% and 4% GMIRs. So new business targeted returns are in the neighborhood of 12% and over the last three, four years we’ve exceeded that by a fairly significant margin.

Thank you for those answers. If I could continue further switch gears over to the workers compensation business, I believe Carl in your comments you implied that there are rate decreases in the environment in other states other than Florida and I was wondering if you could provide us some perspective on how we should think about the impact of these rate decreases as we look to 2016 projections?

There are -- I think it probably impacts our growth obviously. I think as you have rate decrease that's in Florida and California and the third quarter in California, we had about 6% price decline. I think about 3% year-to-date in 2015. I think when the media effect is presence in California will probably going to grow low single-digit this year versus the double-digit growth we've had in the past in summit 5% price decline that you know right less premium than what we projected for summit this year and probably some next year. I kind of mentioned in summit we're highly focused on predictive analytics and as rates have moved down there we tighten up our underwriting grid and our predict using our modeling more extensively and I will try to do the same thing in the other workers comp business that we write also. The good news is we have excellent margins when you look at our workers compensation business today and if maybe versus some others, we can give up a few points of margin and not still be earnings in a really good return, so I think that's from my perspective on it.

Thank you for that color. If I could just close out the what the discussion on capital management, I'm sure many of your shareholders yourselves included appreciate the special dividend, but there is an ongoing discussion and argument in the institutional shareholder market of about whether you get any credit for special dividend some on institutional investors, I was hoping maybe you could weigh in with your opinion on that, and also just provide some commentary about how you balance the formula between share repurchase and dividends in terms of capital management?

There's probably not any ideal answer to that question. I think most shareholders, we usually get out a couple times after each quarter and talk to our investors and generate the feedback around special dividends is generally very positive, definitely more positive than negative comments we get. And you have to put that special dividend in the context of just intelligent overall management of excess capital. We think that we've done an excellent job of that overtime. We had and we've combined acquisition opportunities and organic growth opportunities along with a consistent double-digit increase, compounded increase and dividends along with in a special dividends in that the mix of how we look at things every year is a little bit different, based off of our opportunities to grow organically, what potential acquisitions we have on the plate. And generally come the fourth quarter, we kind of know where we're going to end up by year end. And in generally, if we think of special dividend is appropriate and we still have the capital to take advantage of the other opportunities we have, that's when we kind of focus in and make that decision around special dividends. Naturally, sure I'd love to have been a tight market where we can grow the business 20% and take advantage of that, but the reality right now is it's a very competitive market where I think we've been effective at picking places to grow organically where rates are adequate and provide attractive returns. And I think we've been good at picking out appropriate acquisition opportunities like summit and number the other start up businesses that we've been engaged in some. I hope that answers your question.

It does, and thank you for answering all questions I had.

Thank you and it does conclude our question-and-answer period for today. I would like to hand the conference back over to Ms. Weidner for nay closing remarks.

Thank you and thank you all for joining us this morning as we reviewed our third quarter results, we look forward to talking to you all again if we look at next quarter. Have a good day.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may all disconnect. Have a great rest of your day.