Good day, and thank you for standing by. Welcome to American Financial Group 2024 Quarter Results Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to turn the conference call over to Diane Weidner. Please go ahead.

Good morning, and welcome to American Financial Group's fourth quarter 2024 earnings results conference call. We released our 2024 Fourth Quarter and full year results yesterday afternoon. Our press release, investor supplement and webcast presentation are posted on AFG's website under the Investor Relations section. These materials will be referenced during portions of today's call. I'm joined this morning by Carl Lindner III and Craig Lindner, Co-CEOs of American Financial Group; and Brian Hertzmaz, AFG's CFO. Before I turn the discussion over to Carl, I would like to draw your attention to the notes on Slide 2 of our webcast. Some of the matters to be discussed today are forward-looking. These forward-looking statements involve certain risks and uncertainties that could cause our actual results and/or financial condition to differ materially from these statements. A detailed description of these risks and uncertainties can be found in AFG's filings with the Securities and Exchange Commission, which are also available on our website. We may include references to core net operating earnings, a non-GAAP financial measure, in our remarks or in responses to questions. A reconciliation of net earnings to core net operating earnings is included in our earnings release. And finally, if you're reading a transcript of this call, please note that it may not be authorized or reviewed for accuracy. And as a result, 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. As we begin our remarks, it's important to acknowledge that our thoughts and prayers continue to include those to have been impacted by the devastation caused by the wildfires in Southern California. We're grateful to our claims professionals and insurance specialists who are helping our policyholders recover, restore their businesses and rebuild their communities. Now turning to our results. I'll begin by sharing a few highlights of AFG's 2024 Fourth quarter and full year results after which Craig and I will walk through more details. We'll then open it up for Q&A, where Craig, Brian and I be happy to respond to your questions. The fourth quarter was a strong ending to a great year for AFG. In addition to producing an annual core operating return on equity in excess of 19% in 2024, net written premiums grew by 7% during the year and we continue to create value for our shareholders through effective capital management. Our compelling mix of specialty insurance businesses, entrepreneurial culture, disciplined operating philosophy and astute team of in-house investment professionals collectively have enabled us to outperform many of our peers over time. Craig and I, thank God, our talented management team and our great employees for helping us to achieve these results. Now I'll turn the discussion over to Craig to walk us through some of these details.

Thanks, Carl. As you'll see on Slide 3, AFG's core net operating earnings were $10.75 per share for the full year 2024, generating a core operating return on equity of 19.3%. This ROE is calculated using an average of the five most recent quarter-end balances of shareholders' equity, excluding AOCI. As Carl noted, capital management is one of our highest priorities. Returning capital to our 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 returned $791 million to shareholders during 2024, including $545 million or $6.50 per share in special dividends and $246 million in regular common stock dividends. Dividend payments and share repurchases totaled $6.3 billion over the last 5 years, including $50 per share in special dividends since the beginning of 2021. And our quarterly dividend was increased by 12.7% to an annual rate of $3.20 per share beginning in October of 2024. Growth in book value per share, excluding AOCI, plus dividends, was 19.6% in 2024. We're proud of the value we've created for shareholders over time. As Carl noted, we closed out the year with a strong fourth quarter. As you'll see on Slide 4 and Slide 5, fourth quarter 2024 core net operating earnings per share of $3.12 produced an annualized fourth quarter core return on equity of 21.9%. Now I'd like to turn to an overview of AFG's investment performance and financial position and share a few comments about AFG's capital and liquidity. The details surrounding our $15.9 billion investment portfolio are presented on Slide 6 and Slide 7. Looking at results for the fourth quarter, Property & Casualty net investment income was approximately 21% higher than the comparable 2023 period as a result of improved returns on alternative…

Thank you, Craig. Please turn to page Slide 9 and Slide 10 of the webcast, which include an overview of our fourth quarter results. Our Property and Transportation, Specialty Casualty and Specialty Financial groups as well as AFG overall reported fourth quarter calendar year combined ratio is below 90%. In addition to these strong underwriting margins, we're finding opportunities to grow through new business opportunities, a continued favorable pricing environment and increased exposures. Nearly all the businesses in our diversified, Specialty Property and Casualty portfolio continue to meet or exceed targeted returns, and we set new records for premium production in 2024. As you'll see on Slide 9, our Specialty Property and Casualty businesses reported a strong finish to a successful year with an overall 89% combined ratio in the fourth quarter of 2024, albeit at 1.3 points higher than the 87.7% reported in the prior year fourth quarter. Results for the 2024 fourth quarter included 1.1 points of catastrophe losses, primarily the result of Hurricane Milton compared to 1.4 points in the 2023, fourth quarter and 1.8 points of adverse prior year development compared to 3.3 points of favorable prior year development in the fourth quarter of 2023. We are pleased to report $70 million in overall favorable prior year reserve development in our Specialty P&C businesses for the full year. Adverse prior year development and some of the social inflation exposed businesses within our Specialty Casualty Group led to the overall adverse development in the fourth quarter for that group and for AFG overall. This reserve strengthening is consistent with the commentary we've shared throughout 2024. We continue to have a good amount of favorable development from our workers' compensation businesses in the fourth quarter of 2024. And in the fourth quarter, the favorable development in workers' comp…

[Operator Instructions]. The first question that we have today will be coming from Gregory Peters of Raymond James. Your line is open.

Good morning, everyone. I guess I'd like to just start with a question on your disclosure around the California wildfires. Maybe you can give us a sense of where the losses are coming from for you? Is this within the Specialty Financial business and financial institutions? Is it property -- the property side and the Property Transportation business. Can you just give us some added color and the type of exposures that resulted in the $60 million to $70 million estimated loss?

Yes. Greg, it come from our property-oriented businesses, the lender-placed property, sure. That will have losses there. Things like property in the marine, our nonprofit is, those are businesses that are -- that have property exposures in California would be the exposed businesses generally.

Okay. And then you mentioned in your comments about some expense ratio pressures. Wondering if you could just revisit those comments and just give us a little extra detail about the lines of business that are driving the higher expense ratio, maybe it's surety related, I'm not sure, but maybe you could just give us some color, that would be helpful.

Greg, this is Brian. So, when we're looking at our business opportunities, we're always looking at things from an overall return perspective. So not just the loss ratio or the expense ratio in isolation but also the investment income opportunity. So, in some cases, if we're growing a business, for example, our financial institution business that runs at a higher commission ratio than, say, our workers' comp business that runs lower that can impact the ratio. So, when you look at the businesses, it's really mining across the board of businesses where when we look at the overall economics of the transaction, paying a higher commission makes sense.

Got it. Well, congratulations on the year. Thanks for the questions.

And our next question will be coming from the line of John Newsome of Piper Sandler. Your line is open.

Good morning. I was wondering to see is a little bit more color on the cash reserve development in the quarter. In particular, I'm curious what's sort of underneath some of the excess pieces? Is it general liability under there? Is it commercial auto those seem to be kind of a hot button areas industry-wide that have had some issues? Just sort of what we can think about sort of what the sources of those trends on an underlying basis might be?

Yes. Predominantly, the adverse development is coming from an excess liability writing units that focuses on kind of the Fortune 500, Fortune 1000 larger entities. Our other excess liability entity, the profitability is very good and that -- so it's really focused on kind of on one of our business units focused on larger companies.

No, that makes sense. That's interesting. And also thinking about that, maybe kind of a philosophical thoughts on how you think about taking or reacting to trend line in this kind of issues. It looks like you're kind of taking a little bit every quarter kind of thing approach. But I'm curious if there's sort of anything that triggers a more aggressive or less aggressive approach to reserves when you're thinking about changing trend.

Yes, Brian, you can weigh in also. But again, historically, we look at every one of our businesses, both from a reserving actuarially quarter-by-quarter and that -- and we look for trends, the loss ratio -- loss ratio trends, if we see changes in loss ratio trends, then that impacts our decision on reserving. This quarter, we reacted to the facts that were before us and kind of particularly around one of the businesses, the Fortune 500 and 1000 excess liability business in that. So, we try to be prudent and really look at all of our businesses every quarter and that. Brian?

To add to that, so when we're looking at our businesses, for example, in the business that Carl mentioned on the Fortune 500 excess business, and across all our businesses. When we're looking at that each quarter, we're reacting to increased severity in the older years. So, we're seeing actual increased severity in the years say, 2019 and before, but then also acknowledging that, that trend would continue in adjusting our loss picks in the later years, even though we haven't experienced that yet. So, we're trying to react across all years to the information that we see each quarter. So it's -- we're not -- even though it sounds like maybe you're saying we're taking a little each quarter, we really are taking a holistic approach and attempting to get to the best place based on what we know at the time each review.

[Operator Instructions]. And our next question is coming from the line of Andrew Anderson of Jefferies. Your line is open.

Good morning. Just wanted to go back to the 92.5% combined ratio guide for '25. And I guess it would be an expectation of average crop, which was the case in '24. But if we also maybe strip out the California wildfires as part of the guide, it sounds like you're booking to a higher workers' comp loss ratio next year. I guess, one, is that the case? And two, are you also Booking to a higher casualty loss ratio in '25.

So, without going into too much detail business by business unit, what I would say is, you've said that correctly, is that we have an average crop year in '24 and would embedded in our plan would be an average crop year in 2025. We do have the higher cat exposure from the California wildfires in there. And then when you look at the workers' comp overall through accident year picks and sort of tempered view of the potential for favorable development, we will have a higher pick in workers' comp, you're correct there, too. But what's offsetting that is in the other Casualty businesses in our social inflation exposed businesses, where we've been taking underwriting actions, whether it's rate increases or moving up higher in the tower or non-renewing underperforming accounts, all of those things, we're expecting our loss ratio outside of the cats and the workers' comp to be better. So, we're seeing improvement in our loss ratio outside of workers' comp and the catastrophes overall. And on the expense so on the expense ratio side, that's more of the driver of the increase. And that is -- a lot of that is mix of business. and then, to a lesser extent, the ceding commissions from reinsurers, which are still good ceding commissions just not as high as they have been kind of for the same reasons as we're seeing the adverse development.

Okay. Thank you, for the detail. Maybe on Specialty Casualty, some good rate in the quarter, 11% and it seems like it's been accelerating throughout the year. And recognizing there's a 5% consolidated guide, but how should we think about maybe Specialty Casualty here? Could growth pick up a little bit just given where the rate level is? Or are you more focused on maintaining margins here?

Well, excluding workers' comp, I think we are growing kind of high single digit, which I think is solid. I think at some point here, we could get helped also by workers' comp pricing kind of bottoming out in California. I think our pricing has increased a little bit. And in our Summit business and that after sending a 15% rate decline in January last year, I think this year, I think it's like a percent change. So, I think that may help us on the workers' comp side also.

And our next question will be coming from the line of Michael Zaremski of BMO. Your line is open.

This is Dan on for Mike. Maybe just going back to the Specialty Casualty underlying improvement year-over-year. Just to clarify. So, is the improvement there coming from moving up in the tower in terms of condition changes? And then maybe just what inning would you say you are for the underwriting actions there.

So, we've also been getting good price increases there as well. So, between the price increases, the underwriting actions and the moving up in the tower. All of that helps to improve our expectations around profitability from those business units. We're keeping an eye on those things going forward. So -- and we'll be careful in our picks to be -- do not reflect any kind of favorable impact to we actually see it. So, we hope that we'll be conservative in our picks just because we're hoping to see those things come through. But ultimately, we're looking at improvement there from those things.

Then maybe just going back to the crop, that change and how you're viewing that year, just how that, maybe if you could size up the impact of how that changed your '25 guide and specifically the releases from the '24 accident year.

Yes. I think you really -- we're still continuing to settle claims. Some claims also in crop from last year also. So, I think the big change was really around a few states like Ohio and Minnesota, where the soybean yields were substantially different than what the industry was modeling and what we were modeling in that. The corn prices and soybean prices, were down, I think, 11% and 13% or something like that for corn and soybean said, that was because our average deductible farmers was about 22%. I think as we were in the summer and in the fall, reflecting on that, we felt very optimistic. We're headed towards a better year. I think it's the yield variability state by state that you don't know about until you actually get the clients and you settle them. So, I think that was probably the biggest difference that's really happened through year-end and early on this year.

[Operator Instructions]. And our next question will be coming from the line of Meyer Shields of Keefe, Bruyette, & Woods, Inc. your line is open.

I want to go back to Brian's comments earlier where you talked about sort of extrapolating more severity from older accident years to more recent accident years. And I guess, obviously, we look at things on a high level in the reported financials, but it doesn't seem like we're seeing that level of increased severity baked into Specialty Casualty. I was hoping you could walk through the offers there?

I think of my understanding of your question. So, in the capacity, so as we business, for example, business were in 2023 would have started off at a loss pick based on our experience through that date. So, as we're getting iterative experience, we are reacting to that in our later years. The reason why it may not be that impactful is because it's being used by the positive things on the rating. So the underwriting actions were would cause you to think we should have a lower loss pick than we actually have. But that's because of the offsetting impact of this increased severity and us picking up some of those more recent accident year loss picks based on that experience.

Okay. Perfect. That's helpful. And I was hoping if you turn to commercial auto because in general, this line seems to face some social inflation. And again, you didn't mention any particular problems now. I was hoping you just give us an update of where the, I'll call it the transportation book is in terms of targeted profitability?

Yes. I think really, when you look at our overall commercial auto business overall on a -- we're making a small accident year and calendar year underwriting proppant in commercial auto overall, with a solid return on equity. A small underwriting loss in commercial auto liability. And as I've mentioned in previous calls, we're working hard to get that to an underwriting profit in that. Our transportation business is right workers' comp also. And when you add the comp, we're making very solid underwriting profits and really solid, good returns on equity. But just focused on commercial auto, we want to get to an underwriting profit in commercial auto liability in a stronger ROE and stronger overall commercial auto underwriting profit. As I mentioned in the call, we got 20% in price increase in the fourth quarter in commercial auto liability, that was about 16% during the whole year. It's pretty strong. So, I think between that and since 70% of our business is National Interstate is in alternative vehicles, we're also have the ability to increase the captive retentions if it makes sense in certain captives and change our share premium. So, we're doing all of those things in order to achieve an underwriting profit and commercial auto liability and that. Clearly, commercial auto liability for the industry and us as one of the areas that's impacted on social inflation on that particularly the commercial auto liability part of that with prior the industry seeing 10% plus loss ratio trends in that. I think for the whole year, we grew about mid-single digit in that. We write some large accounts in the fourth quarter. We weren't -- because of our focus on price and terms in that, we lost some large accounts. So that had some impact on the business. The overall for the year, again, we grew mid-single digits. So that. I mean, we're focused on margin improvement in this business and that. So obviously, other -- a few other competitors took some large accounts. And I don't know if it may be non-intelligent competition versus more competition. I don't know. We specialize in this business. Again, we're overall in commercial auto, we're at solid returns. And small underwriting profits. Our guys would tell me that's probably about 5 points plus better than our competitors. So, I'm very pleased with how we're positioned and who knows, maybe as others come to grips and trying to improve this business as a part of their portfolio will provide some more growth opportunities for us.

Thank you. And that does conclude today's Q&A session. I would like to go ahead and turn the call back over to Diane for closing remarks. Please go ahead.

Thank you, and thank you all for participating this morning and for the great discussion. We look forward to talking with you all again next quarter.

Thank you all for joining today's conference call. This does conclude today's meeting. You may all disconnect.