Good day, and thank you for standing by. Welcome to the American Financial Group 2025 Fourth Quarter Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Diane Weidner, Vice President, Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to American Financial Group's Fourth Quarter and Full Year 2025 Earnings Results Conference Call. We released our 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. Joining me this morning are Carl Lindner III and Craig Lindner, Co-CEOs of American Financial Group; and Brian Hertzman, AFG's CFO. Before I turn the discussion over to Carl, I would like to draw your attend 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 are 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 Craig Lindner to discuss our results.

Good morning. I'll begin by sharing the highlights of AFG's 2025, 4th quarter and full year results, after which Carl will walk through more details about our P&C operations and share AFG's business plan assumptions for 2026. We'll then open it up for Q&A, where Carl, Brian and I will respond to your questions. The fourth quarter marked a strong finish to a great year for AFG. Our compelling mix of specialty insurance businesses, entrepreneurial culture, disciplined operating philosophy and highly skilled team of in-house investment professionals collectively have enabled us to outperform many of our peers and continues to position us well for the future. Carl and I thank God, our talented management team and our great employees for helping us to achieve these results. As you'll see on Slide 3, AFG's core net operating earnings were $10.29 per share for the full year 2025, generating a core operating return on equity of 18.2%. This ROE is calculated using an average of the 5 most recent quarter-end balances of shareholders' equity, excluding AOCI. We closed out the year with an exceptionally strong fourth quarter. As you'll see on Slides 4 and 5, core net operating earnings per share were $3.65 per share, producing an annualized fourth quarter core return on equity of 25.2%. Capital management is one of our highest priorities. Returning capital to our shareholders is a key component of our capital management strategy and reflects our strong financial position and our confidence in AFG's financial future. In 2025, we returned over $700 million to shareholders, which included $334 million or $4 per share in special dividends, $274 million in regular common stock dividends and $99 million in share repurchases. Over the past 5 years, dividend payments and share repurchases have totaled $6.3 billion. Additionally, we increased our…

Thank you, Craig. Please turn to Slides 9 and 10 of the webcast, which include an overview of our fourth quarter results. Fourth quarter underwriting profit set a new quarterly record for AFG, led by exceptionally strong profitability in our crop insurance operations. Nearly all the businesses in our diversified specialty P&C portfolio continue to meet or exceed targeted returns, and we continue to feel confident about the strength of our reserves. We've assembled a diversified portfolio of Specialty Property and Casualty businesses that helps us navigate the peaks and valleys of the insurance cycle and respond to changing economic conditions. The noncorrelation of many of our businesses, both each other and to the broader insurance market has been instrumental to AFG's strong and consistent performance over many years. Turning to Slide 9. You'll see that underwriting profit in our Specialty Property and Casualty insurance businesses grew 41% and generated an outstanding 84.1% combined ratio in the fourth quarter of 2025, an improvement of nearly 5 points from the prior year period. Results for the 2025 4th quarter include 2 points related to catastrophe losses compared to 1.1 points in the 2024 4th quarter. Fourth quarter 2025 results benefited from 1.6 points of favorable prior year reserve development compared to 1.8 points of adverse prior year reserve development in the fourth quarter of 2024. Fourth quarter 2025 gross written premiums were up 2% and net written premiums were down 1% when compared to the same period in 2024. For the full year, gross written premiums increased 2% and net written premiums were flat. As noted, we continued to benefit from the diversification across our 36 businesses and achieved premium growth in many of them as a result of a combination of new business opportunities, a good renewal rate environment and…

[Operator Instructions] Our first question comes from the line of Hristian Getsov from Wells Fargo.

My first question is on the 2026 business plan. I guess, what does that business plan assume in terms of rates relative to the 5% P&C renewal pricing ex comp we saw in the Q4, and is there any assumption of prior period releases in the 92.5% combined ratio target?

So when we're looking at our combined ratio overall, we're really not necessarily specifically identifying any amount for prior year development. But as you can see historically for AFG, overall, we've tended to be conservative and have favorable development in most periods, not that we're immune from adverse development, but we're hopeful that our our reserving strategy set us up for a likelihood of favorable development, more than adverse development. That being said, we would expect -- if you kind of look at what's happened in 2024 -- in 2025 -- '24 and '25 going into '26. In '24 and '25, we continue to have a lot of unexpected favorable development at workers' comp, but that was offset by some adverse development and social inflation exposed businesses going into 2026, not that we have a crystal ball, but we would expect that the workers' comp will not continue to develop as favorably as it has in the past. But we also given rate actions and reserving actions that we've taken would not expect the adverse development from the casualty lines to reoccur. As far as pricing goes, I think we feel confident that we'll be still to continue to get good price increases where we need them. There are other businesses like our financial institutions business where rate increases have moderated, but these businesses are very profitable and manageable levels that they are.

Got it. And then -- for the quarter, we saw a pretty meaningful uptick in the casualty underlying loss ratio. Was there any change in loss picks? Or was that more reflective of just being conservative given continued elevated loss trends -- or was there something you saw in the quarter that led to the change? And I guess, is that pick something that we could run rate going forward? Or any other color there would be appreciated.

Sure. So when you look at the -- so you only get accident year loss ratio, excluding [ CATS ] for the Casualty Group in the quarter. What you'll see there is continued caution around our social inflation exposed businesses like our central services business, public entity business and certain excess liability businesses where you've seen intermittent small pockets of adverse development in recent periods. So we are being cautious there in our current picks. Also when you look at our relatively small book of California workers' compensation insurance, with the legal environment and things like cumulative trauma in that area, we are also being cautious in our accident year pick there. When you couple that with the rate increases that we have achieved and are achieving or hopeful that those loss picks will set us up for a better chance of favorable development in future periods.

Our next question comes from the line of Gregory Peters from Raymond James.

I guess I just wanted to follow up on the workers' comments, Brian. Was there something unusual in the frequency or medical trend in a particular state this year that led to the results you reported or was this across the book? And I was interested in your comment about cumulative trauma. I know that's popped up and is on the radar for other workers' comp companies. I wonder if you could provide some color on how you're viewing that risk right now.

For the most part, Greg, our loss trends -- our loss ratio trends continue to be pretty benign and that positive trends around frequency, severity, not being abnormal. So again, our workers' comp business, we our overall results for workers' comp, both on a calendar year and an accident year basis in 2025 continue to be excellent. That said, the calendar year combined ratio for overall comp business in '25, it was a few points higher than last year. And I've been kind of pointing that out probably every quarter. And we probably would expect the same to happen into '26. But the good news is the results continue to be excellent. We would expect workers' comp to continue to be a very profitable line. California comp would be the exception. California, as you know, the industry probably has a combined ratio in excess of 120 probably the -- there was an approval of a rate increase in September of about 8.7% kind of a guideline rate that was put out there. When you look at pricing in California, we're getting probably a 10 -- a healthy 10% price increase in the fourth quarter. So it seems like there's beginning to be a bit more of a backbone in the competitive environment in California, which I'm happy to see and happy to see us get some rate. Our combined ratio isn't 120 plus, but we're unhappy with it and working hard to improve it in that. So California is kind of probably the one state that would be the exception. The cumulative trauma, sure that impacts Republic or California comp subsidiary. I think we've already -- we've been taking into account in our loss reserve picks that aspect for years. That's not something that's a big surprise to us. So I think we've already been taking that into account. Our workers' comp -- last year, our workers' comp business overall grew about 1%. I think as -- when you look at overall pricing trends, I think I mentioned in comp, we actually had a modest price increase in the fourth quarter. I think from a growth standpoint, I would think we would probably see some growth this year, maybe 3% to 5% overall growth or something in workers' comp, which is a positive. I hope that gives you some insight into your questions?

Just to add on that same subject, just to size that California workers' comp business, is less than $200 million of net written premiums for the year.

Yes. It's less than 15%. .

It's not a real big portion of our workers' comp business that in our overall business, but we do react to what we're seeing in the environment overall, both in setting our reserve picks and also, more importantly, informing us what we need to do from rate increases, leading to things like the near 10% in the fourth quarter.

Got it. During your comments, you also highlighted start-up businesses. And maybe if you could just spend a minute and just share with us some information -- more information about what's behind the start-up businesses and sort of your expectation especially considering I think we're -- admittedly, the broader PC market is -- the rate environment seems to be softening up. So just curious about the areas of the market where you think there's opportunity.

Yes. We've -- every year, we make investments and we start up businesses in that. And I think after making some investments and grinding through the early start-ups and a few things. So we're beginning to see some success and progress things like specialty construction. We have E&S binding business, we would expect to see some more premium in that area. So areas like that, we have 4 or 5 different start-ups that I think will begin to show more progress in that. And the Embedded Solutions area, I think, is an area a new area for us that we're excited about, and we think we'll bear some fruit this year.

My final question, and I know you've commented on this before, but the crop business. Is there any spillover into the first half of '26 from the results of the 25-year crop year?

Yes. There always is based off of area coverage results for a reinsurance year or some citrus and that type of thing. We obviously had a very strong year and -- so usually, there's always a true-up in the first quarter, and I think we'd be positive that there will probably be some positive true-up as the crop reinsurance here. And as you know, we're kind of in the February discovery period for commodity prices and that. And I mean, so far, as it relates to spring discovery, if the prices kind of remain kind of where they've been looks like corn is discovery futures price down maybe 3%, soybeans up 2%, but that would mean good things as far as stability on the premium base. I think if we have that kind of a scenario, I think we'd be looking at seeing the crop business maybe even grow a little bit, assuming spring discovery prices kind of stay in the range that they are right now.

Our next question comes from the line of Michael Zaremski from BMO.

It's Dan on for Mike. My first one, just sticking with the Property and Transportation segment. So is the current accident year improvement this quarter just driven by favorable crop or -- what are you seeing in the other businesses in that segment? I understand maybe those are performing a little bit better, too. I'm just trying to get a better sense of the run rate there.

Sure. So definitely, the big driver of the lower loss ratio as well as the lower expense ratio in Property and Transportation is coming from the very strong crop results. The rest of the businesses in that segment have performed very well and are pretty stable. I think when you get to looking at our annual statements that we file, I think you'll see that we continue to be cautious in our loss picks on commercial auto liability as well for the same reasons we talked about in casualty. But overall, very, very strong results across the whole segment. And even in commercial auto liability, where we -- where I mentioned that we're being cautious on the loss picks, we still have a small underwriting profit for the year, overall -- for overall commercial auto. So I think if you're trying to sort of normalize things, I think the big driver of the strong is the above-average crop year versus 2024 being more of an average crop year and then looking to 2026. As Carl mentioned, our models would would build in an average crop year versus the very strong crop year this year?

Okay. That's helpful. Then switching gears maybe to Specialty Financial and specifically on the lender-placed business there. Just curious about what drove the inflection in pricing a little bit sequentially from plus 1 from minus 2 in the prior quarter. And then bigger picture just with increased political focus on personal lines profitability. Is there any concern about that business just from a political lens on the lender placed?

No, I don't think we have concerns on the political front. I think the farm bill actually got extended into September 2026. And it's supported by both sides, both Republicans and Democrats generally in that. As far as the pricing goes -- as far as pricing goes, these -- our customers are large groupings of properties in that in our -- and so it kind of depends quarter-by-quarter based off of, say, how -- what a client might have in the way a coastal property and that may require a greater price versus an account that doesn't. So you can always expect some lumpiness around pricing. That said, this business is extremely profitable. And I think that rates have plateaued. I think there still is an effort to continue to move the vast -- the biggest part of the business to ensuring on a replacement cost value versus unpaid mortgage balance. So I think that continues to be a positive for this business. We have -- we did, I think, as I mentioned, in the second quarter of last year, we did make a decision to see more of the coastal exposed property business, which did have some impact mainly towards the last half of the year. I think this year, we would expect kind of low single-digit growth in this business, all things considered.

Our next question comes from the line of Paul Newsome from Piper Sandler.

I was hoping if you could give us a little bit more color about some of the social inflation related businesses that you remediating in the last year. So it sounds like those businesses are maybe stabilized. Are you in a position where you can now grow those businesses? Or are they just sort of stabilized? So maybe little bit of thoughts on that and whether those businesses, they take a little longer before they go back to a growth potential.

Yes. I think as we've mentioned in the past that we feel that we've kind of work through a cycle of corrective steps in our nonprofit business and in our excess liability business restructuring to lower average limits and et cetera, et cetera, as well as price. I think if you noticed in the third quarter -- I mean, in the fourth quarter, Specialty Casualty grew, we had low single-digit growth in that quarter, which is a positive. And I think when you look at, say, the excess liability business overall, it grew overall. So I think that points towards this year, I think, an opportunity to see some mid-single-digit growth potentially in both excess liability or nonprofit business, and that. So I think we would see, again, as I mentioned before, those businesses returning and having some growth opportunities and Specialty Casualty in general.

Makes sense. I wanted to ask a little bit of an extra question on the alternative investment portfolio. You're obviously hoping for expecting a higher return this next year, but maybe not quite as high as it's historically been. Are there certain maybe macroeconomic things or particular things about the portfolio that as an outsider, we should be looking towards that would signal that extra couple of percent back to normal.

Paul, this is Craig. As I think you know, around 50% of the alternative portfolio is in multifamily. And there has been a big oversupply the last couple of years of new multifamily properties that have been delivered. And the absorption rate is actually very strong, but we think it's probably going to take another couple of quarters to get back to a more normal environment. . Historically, even with the poor returns in the recent past, over the last 5 years, we've still earned between 10% and 11% total return on our multifamily investments and Goodyear's significantly above that. So -- to get back to the historical levels of returns on the alternatives, it is going to require the multifamily properties to have a better rate environment, which as I said in the conference call script, we're seeing clearly a bottoming, and we're seeing some favorable signs in terms of absorption and new stores at a 10- or 12-year low. So we think sometime in the last half of the year, we're going to see a better environment in 2027 and going forward for some number of years, we think is going to be a pretty favorable environment for multifamily. But that's what is going to be required to get back to our historical return levels on alternatives. .

So the insights. .

So the group per is mentioning that -- on the question about lender-placed property and the political exposure, I think I was talking about the crops on the lender side, I think when you look at the regulation of that business, it's been more state by state in that. But I don't see lots of political risk with regards to lender-placed property. I think it's to the lenders. I think it's providing service, particularly when a lot of the business is due to cancellation of a homeowner's insurer by homeowner's insurer. So it really provides a healthy backstop to financial institutions to make sure that there's coverage. So I don't see much political risk there.

Our next question comes from the line of Meyer Shields from KBW.

My first question is on the premium growth. Business turn assumption of 3% to 5%. Just curious if you guys could elaborate on which specific business lines are seeing the most favorable pricing getting into 2026? And what you see the greatest opportunities for profitable growth within our 3% to 5% premium growth on assumption?

Yes. I think the good news is that at this point for the vast majority of our businesses, we think that we have an opportunity for premium growth this year. I think also when you look at the profitability of our businesses. Almost all of our businesses are really meeting or exceeding the targeted returns that we require. So I think we'd love to have as much opportunity as we can get within pretty much all of our businesses in that .

Got it. My second question will be on the Specialty Financial Group. You guys reported a decline in net written premium due to the increase on ceding of coastal exposed property business in the financial institutions. Just curious if you can provide more color on the reinsurance strategy change made there and whether this level of session is expected going forward in 2026.

Yes. We started that in the second quarter, '25. So that book would have rolled on a different reinsurance basis through the first half of this year. If you're familiar with us, historically, we're a company that's had a relatively lower catastrophe exposure than our peers and we've had a lower appetite right or wrong or otherwise, for coastal property, pure earthquake risk, et cetera, et cetera. So I think we carefully manage FIS is probably the business that has our biggest property exposure. So we very carefully manage that to what our the coastal exposures to what our overall company philosophy is. And when you look at our 1 in 250 or 1 in 500 exposure to capital, Brian, 1 in 500 exposure today for hurricane.

Yes, it's less than 3%. So compared to industry numbers that might be closer to double digit.

[Operator Instructions] Our next question comes from the line of Andrew Andersen from Jefferies.

You had previously been doing some reunderwriting on Casualty around social services and I think within some pockets of E&S. Are you done with these underwriting actions as we head into 2026 and they're no longer headwind.

Yes. For the most part, we might have a couple of million dollars of business that still to be non-renewed this year particularly in the daycare side of things, we're pretty much through the nonrenewal actions in housing accounts and that -- so last year, the premium was down. I think this year, as I think I mentioned earlier, I think we would expect kind of some modest premium growth in this business and that some.

And then, Brian, if we go back to Specialty Casualty and the underlying loss ratio there, I'm just trying to understand the $69 million in the quarter. Was there an intra-year catch-up in the fourth quarter? I suppose I'm just trying to get better color on what was the true underlying trend and what is maybe the kicking-off point for '26 underlying?

Sure. So we look at our loss picks every quarter and make adjustments throughout the year. So in some of those units, things haven't been adjusted all year, the one that probably had a larger adjustment in the fourth quarter was the California workers' comp. But again, that's on the business that for the full year is less than $100 million of premium. So I wouldn't say that that's a run rate. I think the California workers' comp adjustment probably elevates the loss ratio a little bit. I think if you look at the full year loss ratio for casualty, that's probably a better indication of like a run rate type of number.

Okay. And then maybe one more. Just looking at the expense ratio, I think as we came into '25, there was maybe some business mix shift headwind and some commission changes. Have those kind of find their level now and perhaps we could see some improvement into '26.

Yes. There will always be a mix of impact -- mix of business impact there. Like Carl mentioned something like our embedded insurance that could lead to some growth of that. When we look at businesses, we look at the ROEs overall and the combined ratios to drive those ROEs. So if we grow in a business with a higher expense ratio, that would have a negative impact. What I would say -- in terms of the other things that might affect that we continue to invest in the future for the company. So we continue to have some initiatives around customer experience, data analytics, which would include things like AI and machine learning as well as IT security that can have a sort of a negative impact in the current period, but it's setting us up for strong ROEs in the long run. So I think that we should be good there. Not that you wouldn't see some upticks or downticks. But I think -- and I think another thing that I guess to know if you're looking at the expense ratio overall is to remind you that in some of our businesses, we receive ceding commissions that vary with the profitability of the business. So like in the fourth quarter, the expense ratio of our property transportation looks very low. That's because with the very strong crop year, the ceding commission is higher and some ceding commissions reduced underwriting expenses. The expense ratio looks very strong there. And then on the other side, in the financial segment where we have the very profitable underplace business, some of the commissions that we pay to brokers and agents vary with profitability over a long period of time. So as you add on collective strong performance quarter after quarter in that business, those profit-based commissions go up. So you see improved loss ratios in that business, but then because the broker commission goes up, it can cause the expense ratio to be a little higher.

Our next question comes from the line of Michael Zaremski from BMO.

Just one more for me on capital management. I see the special dividend announcement. But just curious why there are no buybacks or material amount this quarter. You've done buybacks at valuation levels in previous quarters. Just wondering, should we think about share repurchases to resume in 2026? Or how should we be thinking about that?

Yes, Mike, this is Craig. I wouldn't read too much into no share repurchases in the fourth quarter. We said previously, we're opportunistic in terms of repurchase programs. And when our shares are trading at a meaningful discount, we like to keep enough dry powder on hand to be in a position to buy a significant amount of shares in. I would comment that we did make a decision to reduce the special dividend that we're paying in a first quarter by $0.50 versus the previous year to save a little more dry powder to -- for other alternatives, including the potential for share repurchases.

Thank you. At this time, I would now like to turn the conference back over to Diane Weidner for closing remarks.

Thank you all for joining us this morning and for the great opportunity to answer your questions and share a little bit more about AFG story. So we look forward to chatting with you all again next quarter when we share our first quarter results. Hope you all have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.