Good morning. My name is [Cassandra] and I will be your conference operator today. At this time, I would like to welcome everyone to the American Financial Group 2010 third 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 would like to turn the call over to Keith Jensen, Senior Vice President. You may begin.

Thank you very much. Good morning and welcome to American Financial Group's 2010 third quarter earnings results conference call. I'm joined this morning by Carl Lindner III and Craig Lindner, Co-CEO's of American Financial Group. 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 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 uncertainties. The factors which could cause actual results and/or financial conditions to differ materially from those suggested by such forward-looking statements include, but are not limited to those that are 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 the quarterly report 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 or losses on investments, the effects of accounting changes, discontinued operations, significant asbestos and environmental charges and certain other non-recurring items. AFG believes this non-GAAP measure to be 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. Now, I am pleased to turn the call over to Carl Lindner III to discuss our results.

Good morning and thank you for joining us. We released our 2010 third quarter results yesterday afternoon. Our overall core operating earnings are excellent and we're making solid progress towards our operations goals for 2010. I'm assuming that the participants on today's call reviewed our earnings release and the supplemental materials posted on our website. I'll review a few highlights and focus today's discussion on key issues. I'll also discuss our outlook for the remainder of 2010. Let's start by looking at our 2010 third quarter results summarized on slides 3 and 4 of the webcast. Net earnings were $1.21 per share for the third quarter. Realized gains related to AFG's non-agency residential mortgage backed securities from the sale of a portion of our common stock, investment in [de-risk] analytics were partially offset by a goodwill write-off relating to a marketing subsidiary and our supplemental insurance operations. I'll talk more about each of these transactions later. Our third quarter core net operating earnings were $117 million, down 6% from the record prior year period. Core net operating earnings per share were $1.07 in each year as a result of share repurchases in 2010. These results reflect improved earnings in our annuity and supplemental insurance operations which were more than offset by lower property and casualty underwriting profit and lower investment income in our property and casualty operations. Core net operating earnings for the third quarter and first nine months include approximately $15 million in after-tax income related to the ceding of unearned premium and certain runoff automotive related lines of business and certain real estate transactions. Annualized nine month core operating return on equity for 2010 was approximately 11%. One of our important strategic objectives is to deploy our excess capital in a way that enhances shareholder value. To that…

(Operator Instructions). Your first question comes from the line of Amit Kumar - Macquarie Research Equities.

Maybe just going back to the discussion on adverse development and Marketform, I'm looking for some specific numbers. First, can you tell us what portion of the overall segment is the public hospital and medical malpractice? Secondly, I would like to know what were the carried reserves previously so that we can figure out what is the change in percent based on the reserve addition?

Amit, this is Carl. When you look at the net written premiums for nine months in our specialty casualty business they're about $676 million, so on an annualized basis that's $900 million. The MarketForm business of that is $140 million approximately for the year and the overall net mal business is about $35 million. So overall it's $35 million of $900 million plus, a very small part of it. We got out of the Italian, that mal part of the business a number of years ago. That's where the development's coming from. It was pretty much the Italian Public Hospital part of that. That mal business we do that's remaining is spread around to other countries outside of the United States, Australia, for instance, and Spain. So we're not really involved in the Italian med mal part. So net mal overall, when you look at it as a percent of what we're doing in the specialty casualty is pretty small.

What were the reserves previously? You had a similar charge in Q4 of '09. I'm wondering what were the reserves at that time? What are the reserves as of today? I guess, what I'm trying to ask is based on the reserves, we can get some comfort that this is the end of these reserve additions.

I mean, we think -- we do our reserve evaluations inhouse quarterly and we go outside on our MarketForm business at least a couple times a year. At this juncture we think we're properly reserved. It's possible that there could be some further development there. But the farther away that we get from the business, Amit, I think our confidence goes up higher. We think we're properly reserved today. I suppose there could be some possibility of further development but let's keep in mind also in the whole scheme of things our overall specialty casualty favorable development, net of MarketForm, is $47 million for the year. So, again, when you gauge that based off of our overall net favorable development in our specialty casualty segment, again, we think that's still pretty strong when you put MarketForm or this business in the context of our whole business there from a reserve standpoint.

Do you have the number in terms of the reserves, a dollar number for the reserves backing this book?

We don't have it at this point right with us. That's not been something we've disclosed. We can go back and look at that and provide that supplementally.

Just one more question and I'll requeue. You talked about the buyback. I'm just wondering, you have the NAT ownership at 52.5%. You have reached a common dividend. When you sort of look forward, how do you rank these opportunities? Is it just sort of doing a buy back, maybe no special dividend, maybe looking at entity of ownership? I do realize it is doing it at a premium to book. How do you view these options going forward, maybe more so in the background of CNA, making an offer for its subsidiary? How do you view your ownership in NAT going forward?

Well, we never take a cookie cutter approach in how we do our business. Basically the ownership structure is pretty close to when we founded the business, National Interstate, today. I believe you're talking about National Interstate, aren't you?

Yes, yes.

Yes, so, I mean, our ownership structure is pretty close to when we founded the company where we had a majority ownership in that. We took the company public in order to give liquidity and property evaluation to all. So we're pretty much in the same position as when we started. As far as how we allocate excess capital or how we decided to use excess capital, our own stock, which trades at a significant discount to book value today, is extremely attractive. That's one reason why we've repurchased the number of shares that we have. The Vanliner transaction, within National Interstate, again as an example of the type of transaction that we're out there looking to do, that transaction was done at tangible book value with reserve guarantees and we were able to add on to National Interstate's business with a specific new niche in the moving and storage part of that. The returned opportunities for that business we felt were comparable to repurchasing our stock and would add substantial franchise value to National Interstate and AFG. That's kind of how I think Craig and I look at opportunities, which is the highest and best use short term and long term for the capital and what will provide the best returns and what will add to franchise value in that? So we're continually looking for things to acquire and businesses to start up. Our environmental liability business, even though it's two years old, we'll probably do $30 million of business in that entity. We started that business up a couple years ago. We like the return prospects for that business and we allocated capital to them.

Anyone with a special dividend?

Well, we just increased our annual dividend by about 18%. We're continually discussing all the different options in that. I think we've obviously chosen to repurchase shares and increase the dividend, at least at this point.

(Operator Instructions). Your next question comes from the line of Jay Cohen - Bank of America Merrill Lynch.

Question, I guess on loss reserves and maybe in the specialty casualty business, excluding MarketForm in the quarter, what were you seeing from a reserve movement standpoint from prior years by line? Just give us some color on that. Maybe the bigger picture, what are you seeing from a claims standpoint, as far as the severity or frequency of claims?

If I remember your question properly, Jay, you wanted to know in specialty casualty what are some of the headlines in terms of reserve development in terms of the lines of business?

Yes, excluding MarketForm obviously.

The places where we've seen significant reserve development, we've seen it in a legal and professional liability book that is in run-off. We've seen it in our excess and surplus lines. There's been some meaningful, favorable development and in our D&O business. Those would be the ones that had a rough and dirty $10 million or so of development in the quarter.

Favorable?

Favorable.

MarketForm was really about the only business within our specialty casualty segment that had any meaningful unfavorable development.

So everything else -- it sounds as if the claims environment, other than what you saw in Italy is not changing dramatically, is that fair?

That's fair. I mean, we're continuing to be very pleased with the development in those lines that I named.

Then, on MarketForm, does the charges you've had to take for reserves change your view of the goodwill associated with that acquisition?

Not really. A major portion of the thought process around that acquisition was our ability to take international -- five of our lines of business that had previously been looking toward different opportunities to broaden their global opportunity to sell and that was a major driver in that acquisition, has been a major part of our thought process with respect to the accounting for it.

In fact, we project some $50 million, $60 million of the $140 million I talked about earlier coming from those expansion lines, the ocean marine, equine mortality, certain property and species and fidelity types of risk.

Then last question, on the crop business, given the increase we've seen in crop prices, as we think about premiums for 2011, assuming things don't change, is it fair to assume you should see a boost in premiums, all else being equal, simply because of the rise in crop prices?

I think that's a fair assumption. The crop prices, all at these levels or even a little bit lower, yes, I think that would mean a positive impact on '11 premiums.

(Operator Instructions). Your next question comes from the line of Amit Kumar - Macquarie Research Equities.

Just maybe very quickly, can you just talk about the California comp market and maybe also touch upon the elections which are coming up and what could change or what could not change going forward in terms of rates and other trends?

It's a more competitive market than what it should be today. When you look at the industry I think WCRB is projecting industry results of about 125 combined ratio last year, so that means this year it has to be that or higher; tough economic climate still. Republic, we think for '09 and '10 is probably in the 116% to 118% accident year combined ratio area. We feel our reserves are solid. In our case, we need to get to a 15% return on equity, combined ratio around 104%. We need to get another 10% to 15% price increase on top of the 8% year-to-date increase that we've got in there. So competitive market, more competitive than what it should be. If there's any turnaround in pricing, everything points towards California comp as having to be one of the first places where you would think that you would see a turn in pricing. As far as the political environment, Amit, I think we've got to wait and see what happens some. I suppose if Jerry Brown wins as governor that that could have a slightly negative impact from my perspective on the environment there. But I think it's got to wait and see.

Maybe just moving on, on October 20, there was a news story regarding Fannie Mae going after some insurance companies, including Great American Financial Resources. I haven't seen any update after that. Do you have an update as to what has developed on that lawsuit?

Yes, I can't -- we don't really comment on pending litigation that much. I can tell you that Fannie Mae recently filed a lawsuit against a number of insurance companies including Great American. It's really one of the property casualty industries and it's related to fraudulent mortgage loans. In our case, that involves some high layer excess financial institution bonds that were written by our fidelity and crime division. We wrote $20 million part of a $30 million excess of $85 million recover and $5 million, which was part of $50 million excess of $115 million, so pretty high layer excess. It's alleged that the losses arose from US mortgages alleged fraud on Freddie Mae arising out of 544 loans. The suit's been filed to address whether there's coverage for the claims. It's pretty early for us to make any comment about exposure in that except we pointed out what our gross limits were there.

Just a final question -- in terms of the life side, the annuity side, has there been a recent test of the DAC, as well as policyholders funds in terms of the underlying assumptions?

That's something I think we always do in the fourth quarter, so we'll have an analysis here very soon.

There are no further questions at this time. I'll turn the call back over to Mr. Jensen.

Thank you very much. We appreciate you taking the time to listen to us this morning and your questions and we look forward to reporting our year-end results. Thank you. Have a good day.

This concludes today's conference call. You may now disconnect.