American Financial Group Stock

Good day and thank you for standing by. Welcome to the American Financial Group 2026 Second 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 first speaker today, Diane Weidner, Vice President, Investor Relations. Diane, please go ahead.

Good morning and welcome to American Financial Group Second Quarter 2026 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 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 to discuss our results.

Well, good morning. Before we begin our commentary about the quarter, I want to take a moment to express our deepest condolences to the Berkley family. Bill is an icon in our industry, a respected competitor, and most importantly, our good friend. He leaves an incredible legacy and will be sorely missed. Turning our focus to AFG's second quarter, I'll share a few highlights after which Craig and I will walk through more details. We'll then open it up for Q&A where Craig, Brian and I will respond to your questions.

I am pleased to report that we set a new second quarter record for pre-tax property and casualty operating income driven by strong underwriting margins, healthy premium growth, and higher net investment income. I believe our compelling and diversified mix of specialty insurance businesses, our entrepreneurial culture, their disciplined operating philosophy, and an astute team of in-house investment professionals continue to position us to create value for our shareholders through a variety of insurance market conditions. Craig and I thank God, our talented management team, and our great employees for helping us to achieve these results. I now turn the discussion over to Craig to walk us through some of these details.

Thanks, Carl. Please turn to Slides 3 and 4 for a summary of earnings information for the quarter. Here you will see AFG reported core net operating earnings of $2.82 per share in the 2026 second quarter, a 32% increase from the prior year period. This level of performance resulted in an annualized core operating return on equity of 19.2%. I'll start with 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 $17.1 billion investment portfolio are presented on Slides 5 and 6. Net investment income at our property and casualty insurance operations for the three months ended June 30, 2026, increased 23% year-over-year and established a new second quarter record for AFG and was driven by improved returns from alternative investments.

As you will see on Slide 6, approximately two-thirds of our portfolio is invested in fixed maturities. In the current interest rate environment, we're able to invest in fixed maturity securities at yields of approximately 5.5%. The duration of our PNC fixed maturity portfolio, including cash and cash equivalents, was 3.1 years at June 30, 2026. The annualized return on alternative investments was approximately 7.1% for the 2026 second quarter compared to 1.2% for the prior year quarter. Longer term, we continue to remain optimistic regarding the prospects of attractive returns from our overall alternative investment portfolio with an expectation of annualized returns averaging 10% or better. In April of 2026, AFG reached definitive agreements to sell the Charleston Harbor Resort & Marina. Subject to receipt of necessary third-party approvals and satisfaction of customary closing conditions, the transaction is expected to close in the third quarter of 2026.

AFG currently expects to recognize a pre-tax core operating gain of approximately $125 million or $1.20 per share on the sale. The property is owned equally by the P&C operations and AFG parent. So the gain on sale will be reported as net investment income and split equally between the two entities. This transaction was not contemplated in AFG's original business plan assumptions. Please turn to Slide 7, where you'll find a summary of AFG's financial position at June 30, 2026. During the quarter, we returned nearly $100 million to our shareholders, including $26 million in share repurchases and $0.88 per share regular quarterly dividend. We expect our operations to continue to generate significant excess capital throughout the remainder of 2026, which provides ample opportunity for acquisitions, special dividends, or share repurchases.

We evaluate the best alternatives for capital deployment on a regular basis. We continue to view total value creation as measured by growth in book value per share plus dividends as an important measure of performance over the long term. For the three months ended June 30, 2026, AFG's growth in book value per share, excluding AOCI, plus dividends, was 5%. I'll now turn the call over to Carl to discuss the results of our P&C operations.

Thank you, Craig. Please turn to Slides 8 and 9 of the webcast, which include an overview of our second quarter results. I'm very pleased with the strong performance of our Specialty Property and Casualty businesses. We achieved a 44% increase in underwriting profit in the first six months of the year, while executing on opportunities to grow with approximately 3/4 of our businesses reporting higher year-over-year premiums through June 30. In addition, we're doing this while consistently achieving renewal rate increases, excluding workers' comp, which have been around 5% in the past four quarters. These results showcase the diversification across our 36 businesses. The underwriting discipline and opportunistic culture that have allowed us to produce strong results that outperform peers over the long run.

These same attributes give us confidence that those results can continue despite softening in certain parts of the overall property and casualty market. Now looking at a few details. You'll see on Slide 8 that our Specialty Property and Casualty insurance businesses produced a 91.5% combined ratio in the second quarter of 2026, an improvement of 1.6 points from the 93.1% reported in the second quarter of last year. Second quarter 2026 results benefited from 3.4 points of favorable prior year reserve development compared to 0.7 points in the second quarter of 2025. Catastrophe losses added 1.8 points in the second quarter of 2026 compared to 2.3 points in the second quarter of last year.

Second quarter 2026 gross and net written premiums were 7% and 6% higher, respectively, than the comparable period in 2025. As I noted earlier, average renewal rates across our Property Casualty Group, excluding workers' comp, were up approximately 5% for the quarter. Average renewal rates, including workers' compensation were up approximately 4% overall. That was about a point higher than the previous quarter. We have reported overall renewal rate increases for 40 consecutive quarters, and we believe we're achieving overall renewal rate increases that enabled us to meet or exceed targeted returns.

Now I'd like to turn to Slide 9 to review a few highlights from each of our Specialty Property and Casualty business groups. Details are included in our earnings release, so I'll focus on summary results here. The businesses in the Property and Transportation Group achieved a 90.3% calendar year combined ratio overall in the second quarter of 2026. And an improvement of 4.9 points from the 95.2% reported in a comparable 2025 period. Higher year-over-year underwriting profits in our transportation and agricultural businesses were the primary drivers of these very strong results. In second quarter 2026 gross and net premiums in this group were 8% and 5% higher than the comparable prior year period.

The increase is primarily attributable to growth in crop insurance products with higher premium sessions along with new business opportunities, higher exposures and a favorable rate environment in several of our transportation businesses. Overall renewal rates in this group increased approximately 8% on average in the second quarter of 2026, two points higher than the pricing achieved in this group for the first quarter of 2026. We reported a small underwriting profit in commercial auto liability, I'm pleased to say for the second quarter in a row, and we're continuing to make progress there. Renewal rates in commercial auto liability were up 15% during the quarter.

Now in terms of our crop business. Commodity futures pricing remains in acceptable ranges relative to spring discovery prices. And the most recent crop progress reports indicate that the crop year is off to a solid start. Although timely rainfall has improved soil moisture conditions across much of our footprint, moisture levels through August and early September remain important. Our crop results for 2026 will depend on the harvest yields and prices in the second half of this year.

As a reminder, our third quarter results reflect an element of seasonality as most of our crop insurance premiums are earned in AFG's third quarter, but booked at a more conservative loss ratio until the fourth quarter when we have better visibility into actual yields and claims activity in our MPCI business and a clear indication of the performance of our private product businesses. Consequently, we record the majority of our calendar year crop profitability in the fourth quarter. The businesses in Specialty Casualty Group achieved a solid 94.5% calendar year combined ratio overall in the second quarter of 2026, 0.6 points higher than the 93.9% reported in the comparable period last year. We continue to be mindful of social inflation and remain conservative in our initial loss picks for the lines of business written by the businesses in this group.

Second quarter 2026 gross and net written premiums in this group increased 5% and 6%, respectively, when compared to the same prior year period. New business opportunities, increased exposures and higher rates throughout the year-over-year increase in many of our Specialty Casualty businesses, including workers' comp, targeted markets, excess and surplus lines, energy, construction, environmental, and M&A liability. Excluding our workers' comp businesses, renewal rates for this group were up approximately 4% in the second quarter. Pricing in this group, including workers' comp, was up about 2%. Now, the Specialty Financial Group continued to achieve excellent underwriting margins and reported an 85.6% calendar year combined ratio for the second quarter of 2026, an improvement of over 0.5 point from the comparable period last year.

Gross and net written premiums were both up 10% in this group when compared to the prior year period, primarily due to the growth in our financial institutions business. Renewal pricing in this group decreased less than 1% in the second quarter, reflecting the strong margins earned on these businesses overall. Craig and I are proud of our proven track record of innovation, long-term value creation, and a forward-thinking mindset. And we feel AFG is well positioned to continue to build long-term value for our shareholders for the remainder of 2026 and beyond. We'll now open the lines for the Q&A portion of today's call. And Craig and Brian and I would be happy to respond to your questions.

[Operator Instructions] Our first speaker is Hristian Getsov from Wells Fargo.

My first question is on the uptick in the underlying loss ratios, particularly in Specialty Casualty and Specialty Financials, which it seems like it could be driven by mix and conservatism, but how should we think about the potential improvement on the expense side of the equation from the mix shift just given like there's also productivity gains that maybe could be recognized on the expense side. And just given the increased conservatism in those lines and rate continuing to be at or exceeding target margins, can we potentially also see higher PYD?

This is Brian. I think it's important as you start to think about that answer is to start sort of at the beginning, which is that when we're looking at our businesses, we're looking at things from a return on equity perspective overall and not just the combined ratio, not just the loss ratio. So we do have to keep in mind that when businesses at a longer tail, like workers' comp, grow that have a greater opportunity for investment income that we can have high-teen ROEs even at higher combined ratios. Even after considering investment income, it can be tricky to analyze the components of the combined ratios separately as some products like our successful lender-placed business have higher underwriting expense ratio and a lower loss ratio compared to other businesses.

When strong-performing businesses like that grow, our expense ratio goes up, but so does our ROE. In fact, in our lender-placed business, where many of our products offer profit-based commissions, when that business goes well, our underwriting expenses go up. So in underwriting expenses, in this quarter, you're seeing the impact of growth and continued success in lender-placed insurance driving up the expense ratio. When you switch over to the accident year loss ratio by segment, again, it's important to remember that we look at our reserves by business every quarter and use that information to not only set our loss picks, but also to inform our pricing and risk appetite. So we're very cautious around our reserve picks and we tend to react quicker to bad news and slower to good news.

So we're being deliberately cautious around social inflation exposed businesses despite the improvements that we've seen in that area, particularly in places like commercial auto liability. I think in considering the adequacy of our current loss picks, AFG's history of consistent overall favorable development should be an indication of how prudent we tend to be, noting that nothing has changed here. Just practically, I'd rather be talking to you and to Carl and Craig about the reasons why we have favorable development versus adverse development. So we are, again, being slow to react to the good news that we're seeing there. When you start to look at it by segment, focusing on Casualty and Financial. In Casualty, we're seeing good growth in workers' comp and in certain targeted markets. Results are very good, but those businesses do run at a higher loss ratio compared to the overall segment.

Decisions on where we participate in excess policies can also impact the loss ratio for that segment. In financial, there were some minor tweaks to some of the smaller businesses outside of lender-placed insurance, but nothing we would call a trend, mostly, what you're seeing is the impact of intentional growth in businesses like our European operations that run at a higher loss and LAE ratio and from the change in mix of business, where we're still growing in areas that meet our ROE objectives, but happen to have a higher loss ratio than the lender-placed business or the other businesses in the overall financial segment. So when you think about things from a longer point of view, as Carl said before, we're confident in our reserves and our ability to produce strong returns through a variety of market cycles.

Got it. And then for my follow-up, just sticking with the AI component. I guess the potential benefit on the expense side of the margin is pretty well understood. But how do you think about potential improvements on the underlying loss ratio from the use of AI as underwriters get better access to better data and they could also digest the data quicker and more efficiently?

I think that's a work in progress. I think that fits under the category with us on AI-powered underwriting knowledge management. We're doing many pilots right now designed to enhance underwriting training, knowledge retrieval and decision support in a number of our different businesses. So I think we're just on the front end of that. I think where a lot of our AI focus has been is on submission automation, document intelligence, claims workflow automation. AI-enabled recorded statements, which improves claims handling efficiency and customer experience through automated summarization and insights and broad deployment of AI tools across the organization today.

So like everyone else, we're making a significant investment and we're encouraged by the productivity improvements that we're seeing in that. But on underwriting itself, building an underwriting knowledge management, I think we're probably on the early end of that, probably farther along in the use in the claims side.

We have Michael Zaremski from BMO.

Maybe first question on the competitive environment and pricing, specifically renewal pricing. I think from data points we've received from a lot of your peers and industry data over the last quarter or so, we've seen a decel in a number of pockets, maybe you can kind of discuss what's buoying AFG's pricing levels, maybe even a little bit of momentum in certain spots sequentially?

Yes. I'm happy to give a little insight into that. I am pleased, as I think I mentioned in my comments and in our release, three-quarters of our businesses have some growth through six months. So that's pretty broad-based growth. I think our diversified portfolio of 36 businesses gives us a broad array of opportunities. I think predictive analytics on pricing, growing sophistication in their business by business is helping us. I think one of the main things is we're kind of as I mentioned in past quarterly conversations that we're pretty much through the reset on the social inflation exposed businesses. We talked about some re-underwriting certain classes, lowering, bringing limits down, social inflation exposed businesses, raising retentions in some businesses like public sector.

So I think we're able to play offense versus defense more today and grow some of these lines. Now commercial auto, the same thing. We're as I mentioned, second quarter in a row where in commercial auto liability itself that we're making a small underwriting profit. And we're earning and commercial auto overall, we're earning solid underwriting profits and good ROEs. And we're having the ability to play more offense and find opportunities for some growth there. So I feel good about for the rest of the year and where we're at, very optimistic that we'll continue to have opportunities to grow our businesses and in a fairly broad basis.

Maybe just honing in Specialty Casualty, the underlying loss ratio this year, which gets a lot of attention from investors has been on a -- I guess, on a first half of the year basis, running in kind of the 63-plus range. And last year kind of ran in the 65 range for the full year. So I do -- I guess, to the previous question, it was mentioned there was an uptick in the underlying loss ratio. Is there seasonality in there where I should be thinking about the first half of this year versus the first half of last year? Or is it better to compare the first half of '26 to the full year '25 or maybe none of the above?

I would say, in Casualty, there's really not a lot of seasonality there. There's definitely seasonality when you look at the Property and Transportation numbers just because of the crop business, in particular, can cause the loss ratio to vary quarter-to-quarter. In Casualty, really what's driving those changes is mix of business. And then even though we're seeing good improvements in the results overall, we are still being conservative on the social inflation exposed areas, and most of that's in casualty. So as far as trends go, I think we're always going to adjust quarter-to-quarter by business, but I would say there really isn't seasonality there that it's more a mix of business that's changing it compared to last year.

Can I add one more comment on the growth side. As I'm thinking about it, other companies really weighed in heavily on writing more convective storm exposed and coastal property, particularly in the E&S side, than we did. They had a bigger appetite. By the same token, as the property pricing caved on a lot of that business, it really has less impact on us versus our peers. So I do think that is also one differential.

That makes sense. And then lastly, back to the kind of technology conversation that you opined on a moment ago. I guess there's some folks that expressed that a company that operates a more decentralized business model with many different segments might on average, not be able to kind of deploy AI technologies as swiftly versus a company that an insurer that might have run kind of a more centralized operating model. Any thoughts about that remark?

I think in a one or two-line business, primary auto or homeowners writer, maybe that could be the case. I might argue the opposite that where you have more business units and more people that are enabled to use the tools, you might have greater success finding some applications when you have 36 different business groups, deploying AI in that. So I think some of our businesses, our crop business, for instance, is using extensive AI and getting extensive results, I think, in a lot of different ways in its business and that. So I think that's an example of one business we'd be ahead of the pack probably in that. So I don't know. I think that would be my response to you.

Carl, I would just add to that, too, that even though we do have 36 different business units with a strong decentralized focus on underwriting and claims, things like AI, we do a good job of our business units to talk to each other and work together over time. So if there's something that works for one business unit, you can be assured that, that will be talked about and considered for the other business units. So even though they have a lot of autonomy, they don't operate completely in a vacuum.

Our next question comes from Andrew Andersen from Jefferies.

You had mentioned commercial auto produced a small underwriting profit for a second straight quarter. What is needed to move this from small profit towards targeted returns? Is that going to require pricing above the 15% that you're seeing recently?

Yes. Thanks for your question. I want to clarify things. We're making a very solid profit in commercial auto overall. My commentary had to do with the commercial auto liability piece of the commercial auto results, where on that piece, we're making a small underwriting profit for the second quarter in a row. But I think because of the environment that we're in, we still have work to do and we continue to be focused on achieving rate that exceeds loss ratio trends for commercial auto liability. And I mentioned rates were still up 15%. And I think for the second quarter -- I think the good news is we're continuing to get good rate. We're having the ability to grow our commercial auto business and that.

And overall in commercial auto, we're at solid margins. So I feel very good about that. And then for companies like National Interstate and that when you add the workers' comp into that, the result is even better. So, yes, my comments were more towards commercial auto liability, commercial auto overall and workers' comp in our transportation businesses are doing very well.

Maybe sticking with workers' comp, could you quantify what 2Q pricing was there? And just given the benign loss trends, are you comfortable growing that book despite negative rate?

The loss ratio trends continue to be very benign, and results on our -- we continue to have really strong results both on -- particularly on a calendar year basis and an accident year basis -- poor California underwriting results would be the exception. California is 14% of our workers' comp business. And we're not doing well there like a lot of others. We've had continued favorable development in the second quarter and six months. We feel our reserve position strong. Second quarter pricing for that overall business is down about 2% and about 3% through six months. But again, that's on top of really great results and a strong reserve position in that. Our workers' comp results will probably be not as good as we go forward, but will continue to be very strong. And we're getting -- we're growing that business some. So I think in the second quarter, I think we have mid-single-digit growth in our overall comp business, even with our California premiums being down.

Our next question comes from Gregory Peters from Raymond James.

This is Mitch, on for Greg. So we've been hearing about increased competition in Casualty from MGAs and fronting-backed capital. With your comments on being through the social inflation reset, what are you seeing from pricing and submission flow standpoint?

Well, we're continuing, I think, as I mentioned, in our social inflation exposed businesses like excess liability and umbrella, we're continuing to get around 10% or double-digit price increase there. High single-digit price increase in some businesses like nonprofits. So the businesses that we needed, I think we're continuing to get rate that helps -- it kind of helps us meet or even exceed our targeted returns. Things like excess liability and umbrella where we have seen MGA step in. It's certainly probably easy for them to write the business. It will be really interesting to see how many of them burn up over the next two or three years. So I do think the MGAs are having some impact in some ends of the Specialty Casualty marketplace. Usually, that doesn't turn out well when in longer-tail Specialty Casualty lines where the incentives on growth, and that's the way they build earnings, usually didn't turn out too well.

That's really helpful. I appreciate the color. Turning to Specialty Financial, where rates turned slightly negative in the quarter and premium was up around 10%, could you provide some insight on what areas of that market you're leaning into for growth?

Well, the lender-placed property business. I think I talked about -- we had entered into a quota share agreement starting last year that had an impact on our business for about 12 months. And now we're kind of -- we've renewed that. So really from the second quarter on, we don't have the drag of that quota share. So I think we're back to more meaningful growth quarter-by-quarter in our specialty, in our lender-placed property business. But we have other businesses like Great American, Europe that we're growing. We have a business, specialty equipment services, where insurance is placed at the front end of a purchase on capital goods equipment and that. And so we have a number of businesses that are showing healthy growth in our Specialty Financial segment now.

[Operator Instructions] I am showing no further questions at this time. I would like to turn it back to Diane Weidner for closing remarks.

Thank you, James, and thank you all for joining us this morning and for your good questions. We look forward to chatting with you again next quarter. We hope you all have a great day.

Thank you for participating in today's conference. This does conclude the program. You may now disconnect.

Ladies and gentlemen, thank you for standing by. Welcome to the American Financial Group 2026 First Quarter Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would like now to turn the conference over to Diane Weidner, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to American Financial Group's First Quarter 2026 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 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 today. 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 to discuss our results.

Well, good morning, and I'll begin by sharing a few highlights of AFG's 2026 first quarter 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 will respond to your questions. We are pleased to report an annualized core operating return on equity of 17% for the first quarter, which was driven by strong underwriting margins.

Our compelling mix of specialty insurance businesses, entrepreneurial culture, disciplined operating philosophy and an astute team of in-house investment professionals continue to position us well for the future, enable us to continue to create value for our shareholders. Craig and I thank God, our talented management team, and our great employees for helping us to achieve these results.

I'll now turn the discussion over to Craig to walk us through some of these details.

Thank you, Carl. Please turn to Slides 3 and 4 for a summary of earnings information for the quarter. AFG reported core net operating earnings of $2.47 per share in the 2026 first quarter, a 36% increase from the prior year period. I'll start with 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 $17.1 billion investment portfolio are presented on Slides 5 and 6. Excluding the impact of alternative investments, net investment income in our property and casualty insurance operations for the 3 months ended March 31, 2026, increased 8% year-over-year due primarily to higher balances of invested assets.

As you'll see on Slide 6, approximately 2/3 of our portfolio was invested in fixed maturities. In the current interest rate environment, we're able to invest in fixed maturity securities at yields of approximately 5.25%. The duration of our P&C fixed maturity portfolio, including cash and cash equivalents, was 3.1 years at March 31, 2026.

The annualized return on alternative investments in our P&C portfolio was slightly negative in the 2026 first quarter compared to 1.8% for the prior year first quarter. A number of factors contributed to the lower returns with the most significant impact attributable to a $13 million mark-to-market loss on our $133 million investment in the CLOs that AFG manages.

The mark-to-market loss reflects the deterioration in the broadly syndicated loan market in the first quarter of 2026. Longer term, we continue to remain optimistic regarding the prospects of attractive returns from our overall alternative investment portfolio with an expectation of annual returns averaging 10% or better. Recently, there's been an increased focus on insurers exposure to private credit.

AFG has direct private credit exposure, which we define as direct lending to private companies, approximating $250 million, which represents 1.5% of total investments. We also have indirect private credit exposure via investments, which are almost exclusively investment-grade rated and benefit from significant structural subordination. We own investment-grade rated bonds issued by BDCs and private credit funds aggregating approximately $800 million, which represent less than 5% of total investments.

In addition, we own AAA-rated middle market CLO tranches as disclosed in our supplement. We believe that even in a severely adverse economic environment, the significant structural subordination in these securities provide meaningful protection against any material risk of loss. As of March 31, 2026, the market value of our direct and indirect exposure to private credit is approximately equal to cost.

In April of 2026, AFG reached definitive agreements to sell the Charleston Harbor Resort & Marina. Subject to receipt of necessary third-party approvals and satisfaction of customary closing conditions, the transaction is expected to close in the second or third quarter of 2026. AFG currently expects to recognize a pretax core operating gain of approximately $125 million on the sale. This transaction was not complicated, contemplated in AFG's original business plan assumptions.

Please turn to Slide 7, where you'll find a summary of AFG's financial position at March 31, 2026. During the quarter, we returned nearly $260 million to our shareholders, including $60 million in share repurchases, $1.50 per share special dividend and our $0.88 per share regular quarterly dividend. We expect our operations to continue to generate significant excess capital throughout the remainder of 2026, which provides ample opportunity for acquisitions, special dividends or share repurchases.

We evaluate the best alternatives for capital deployment on a regular basis. We continue to view total value creation as measured by growth in book value plus dividends is an important measure of performance over the long term. For the 3 months ended March 31, 2026, AFG's growth in book value per share, excluding AOCI plus dividends was 3.1%.

Our strong operating results, coupled with effective capital management and our entrepreneurial opportunistic culture and disciplined operating philosophy enable us to continue to create value for our shareholders.

I'll now turn the call over to Carl to discuss the results of our P&C operations.

Thanks, Craig. Please turn to Slides 8 and 9 of the webcast, which includes an overview of our first quarter results. Our Specialty Property and Casualty businesses are off to a strong start this year, producing a 66% year-over-year increase in underwriting profit. Looking at a few details, you'll see on Slide 8 that our Specialty Property and Casualty Insurance businesses produced a strong 90.3% combined ratio in the first quarter of 2026, an improvement of 3.7 points from the 94% reported in the first quarter of 2025.

First quarter 2026 results include 2.2 points from catastrophe losses compared to 4.5 points in the first quarter of 2025. First quarter 2026 results benefited from 4.4 points of favorable prior year reserve development compared to 1.3 points in the first quarter of 2025. Each of our Specialty Property and Casualty groups reported higher year-over-year underwriting profit.

And first quarter 2026 gross and net written premiums were 6% and 3% higher, respectively, than the comparable period in 2025. We continue to benefit from the diversification across our 36 businesses and achieved premium growth in the vast majority of them as a result of a combination of new business opportunities, a good renewal rate environment and increased exposures while maintaining discipline and focusing on underwriting profitability.

Average renewal rates across our Property and Casualty Group, excluding workers' comp, were up approximately 5% for the quarter. That was in line with the previous quarter. Average renewal rates, including workers' comp, were up approximately 3% overall. We have reported overall renewal rate increases for 39 consecutive quarters, and we believe we're achieving overall renewal rate increases that enable us to meet or exceed our targeted returns.

Now I'd like to turn to Slide 9 to review a few highlights from each of our Specialty Property and Casualty business groups. Details are included in our earnings release, so I'm going to focus just on summary results here. The businesses in the Property and Transportation Group achieved an excellent 87.6% calendar year combined ratio overall in the first quarter of 2026 an improvement of 4.9 points from the 92.5% reported in the comparable 2025 period.

Nearly all the businesses in this group reported higher year-over-year profitability led by agricultural and transportation businesses. First quarter 2026 gross and net written premiums in this group were 11% and 6% higher than the comparable prior year period. The increase is primarily attributable to growth in our crop insurance products with higher premium cessions, along with new business opportunities, higher exposures and a favorable rate environment in several of our transportation businesses.

Overall rates in this group increased approximately 6% on average in the first quarter of 2026. Our commercial auto businesses produced a solid underwriting profit in the first quarter. After 15 years of rate increases, continual refinement of underwriting and claims routines and investments in our loss control and risk management practices, we're seeing progress in commercial auto liability, and I'm especially pleased to report a small underwriting profit in commercial auto liability for the quarter.

We still have more work to do and remain focused on achieving rate in excess of prospective loss ratio trends. In fact, our rates in this line were up approximately 14% in the first quarter. And taking an early look at crop insurance, industry estimates for the 2026 planted acreage for corn and soybeans overall are generally unchanged from 2025 levels and planning progress is ahead of historical averages.

Generally speaking, for the vast majority of our insured crops, the corn planting window runs from mid-April through the end of May and the soybean planting window runs from late April to the end of June. It is really early in the growing season. Current commodity futures for corn and soybeans are trading about 7% and 5% higher, respectively, than 2025 spring discovery or 2026 spring discovery prices. Our crop results for 2026 will depend on the harvest yields and prices in the second half of this year.

Now the businesses in our Specialty Casualty Group achieved a 95.8% calendar year combined ratio overall in the first quarter, an improvement of 1.8 points from the 97.6% reported in the comparable period in 2025. First quarter 2026 gross and net written premiums both increased 2% when compared to the same prior year period. Growth from new business opportunities and higher renewals in our targeted markets and workers' compensation businesses were partially offset by heightened competitive conditions in our excess and surplus lines business.

Excluding our workers' comp businesses, renewal rates for this group were up approximately 6% in the first quarter, consistent with the prior quarter. Pricing in this group, including workers' comp, was up about 3%. Now on the Specialty Financial Group, we continue to achieve excellent underwriting margins and reported an exceptional 80% calendar year combined ratio for the first quarter of 2026, an improvement of 7 points from the comparable period in 2025.

Gross and net written premiums in this group increased by 6% and 1%, respectively, in the 2026 first quarter compared to the same 2025 period, primarily due to growth in our lender services businesses. Net written premiums were tempered by our decision to cede more of the coastal exposed property business in our financial institutions business beginning in the second quarter of last year.

Renewal pricing in this group was up about 1% in the first quarter of 2026, consistent with the prior quarter and reflecting the strong margins overall earned on these businesses. Craig and I are proud of our proven track record of long-term value creation, and we feel AFG is well positioned to continue to build long-term value for our shareholders for the remainder of this year and beyond.

I will now open the lines for a Q&A portion of today's call. And Craig and Brian, and I will be happy to respond to your questions.

[Operator Instructions] The first question comes from Hristian Getsov with Wells Fargo.

My first question is on the Marina sale. Can you quantify what the yield or NII contribution was from that asset as we think about revising the go-forward NII? And any specific plans you could provide for the use of the proceeds once the sale is completed?

Brian, you might have exactly what's reported in the financials. Last year, we did about $16 million of NOI on the property.

If you think about the proceeds allow to invest with the $125 million estimated pretax gain, we're going to have more than sort of triple the cost basis to reinvest. So if you think of it that way, to replace that income, just investing sort of our normal returns, I think we'll sort of replace the investment income depending on how we do, what we do with the money, but it just reinvesting that proceeds at, say, 5% or 6% would replace the income from the property.

Yes. I'm doing a, kind of, pro forma, I think it really depends upon what we do with the cash. Half of the asset is owned in the parent company, half is owned in the P&C business. I mean if we repurchase shares, you get one answer. If you just invest in bonds, you get a different answer, but -- or if we invest in our business earning high teens returns on capital. So question is what do we use the proceeds for? I think there's some opportunities for us to redeploy that capital and have it not be dilutive.

Got it. And then for my second question, I noticed you pulled the comment from the press release that said P&C pricing was ahead of loss trend. Can you talk through where pricing is relative to trend now? And was that comment in prior periods primarily on the pricing, including comp, which I think was down 1 point quarter-over-quarter or also applies to the pricing metric ex comp, which was stable?

Yes, I'm very pleased with our pricing results in the first quarter. Outside of workers' comp, really, the quarter price increases for each of the segments in that were in line with the fourth quarter. Workers' comp pricing was down around 3% in the first quarter. The good news along with that is when you look at the loss ratio trends in our workers' comp book, they continue to be very benign and in some cases, positive.

And our workers' comp results continue to be excellent in the first quarter. So actually very pleased. I think overall, it's probably good news if -- when almost all of our businesses are earning the targeted returns, it allows us potentially to be more competitive and just cover loss ratio trends, not necessarily exceed them.

Now that said, in certain businesses where we still have some work to do, as I mentioned, commercial auto liability, we'd like to see that continue to make a bigger underwriting profit. We're taking a rate that's in excess of prospective loss ratio trends. I think the same is true in Specialty Casualty with our excess liability and umbrella business where we're getting price that continues to be very strong. So I'm very pleased with our first quarter pricing results.

Should go back to your first question on Charleston. So Brian just is giving me the amount that was expected to be reported in 2026. I gave you an NOI number of $16 million. The amount that we had in our plan from Charleston was $12.3 million. So it must be a depreciation that accounts for the difference.

Got it. And then I guess just sticking with the alt return. So originally, when you laid out your business plan assumption, you were looking for 8% for the full year. Does the first quarter results change that perception? Or do you expect like a meaningful acceleration as we go into the back half?

I would say, given the start to the year, 8% is probably an aggressive number. We give assumptions that go into our initial plan, but don't intend to update those during the year. Certainly, our expectation is for better performance from the alt portfolio for the balance of the year.

And the next question comes from Andrew Andersen with Jefferies.

Could you walk through some of the drivers of the expense ratio increase? Maybe how much of that is structural versus timing from investments in tech or growth initiatives? Or how much of it might be on contingent commissions?

Sure, Andrew. This is Brian. So if you look across the segments, there's different things driving the different segments. Overall, we continue to invest in our future with IT initiatives around customer experience, IT security and data analytics. So that does have some upward pressure there, but that's relatively modest. If you look at Specialty Casualty, the expense ratio is up a little bit. Some of that is mix of business, and some of that is in our -- some of our excess and surplus businesses, we're getting slightly lower ceding commissions from reinsurers.

So some ceding commissions reduce underwriting expenses, getting a little bit lower ceding commission has a modest negative impact on the expense ratio in casualty, but we still feel really good about those reinsurance contracts and the results overall from those businesses. And then in the Financial segment, where you see the biggest uptick, that's, kind of, a bit of good news in that our financial institutions business, some of the commissions that we pay to brokers and agents vary with the profitability of the business.

So with that business being very profitable for another quarter in a row, that shows improvement in the loss ratio, but then in the expense ratio because of the higher commission, the contingent commission goes up and makes that expense ratio go up a little bit.

And then on consolidated premium growth, I think the business plan was for 3% to 5% for full year. It sounds like crop pricing is early reads are positive. I don't know if you could share what you were, kind of, thinking in terms of consolidated full year plan growth relative to crop insurance, but it seems like it's starting out better than perhaps the last couple of years from a pricing perspective.

Yes. I think we would see -- when you look at where the spring discovery prices end up, went up a little bit, went down a little bit on corn and soybeans, we think that when all said and done, our gross written premium is going to be flat. And because we're -- due to some changes in our quota share, our net written premiums will be up nicely. So that's, kind of, what the growth perspective is there in crop.

And our next question is going to come from Michael Zaremski with BMO Capital Markets.

On the Specialty Casualty segment, if we, kind of, look at the underlying loss ratio, good result. I think there's some kind of positive seasonality there. Did that come through in a big way? I guess I'm trying to tease out whether you all feel better about, kind of, turning the corner on social inflationary lines and starting to see some maybe directionally better loss ratios on those lines in the segment.

Yes. I mean I do think we do feel better in that. I wouldn't make too much out of any one quarter. We always, kind of, caution. You can have some variability quarter-by-quarter on that. But yes, I think we are more positive. I mean that said, as I just mentioned, in lines like excess liability where social inflation creates loss ratio trends that are higher, we're still very much focused on pricing that either equal or exceeds the loss ratio trends in that.

So I think in past conference calls, I talked about being through pretty much the re-underwriting and restructuring and excess liability on limits reductions and then our nonprofit business getting off business. And both our nonprofit business and our excess liability umbrella businesses are showing growth in the first quarter. So happy to see that there is a positive trend on the growth side there also.

Got it. Switching gears, if helpful, to share repurchases, a bit higher than expected, although I see the share count not too different than expected. So maybe there was some movement there. Anything we should read into on share repurchases that you might be leaning into a bit more at current valuations or just normal kind of activity?

Yes, this is Craig. So we have a lot of excess capital currently. We expect to generate a significant amount of additional excess capital for the balance of the year. And we just thought at the prices that we were able to repurchase stock, that was a very good use of some of our excess capital. I think we paid a little over $127 a share and felt that was a very good value.

Got it. And just maybe just stepping back in terms of the competitive environment, I think one of the main questions we continue to get is industry is earning very healthy returns. Should we expect, kind of, the competitive levels to continue to incrementally increase as the year plays out? It feels like that's direction, kind of, the right direction unless you all feel like there -- maybe some levels of -- some lines have kind of reached a floor on how much further they can kind of change in price.

Yes. I think it's more status quo. I think what we're seeing in the first quarter is what we're going to see for the rest of the year. And as you mentioned, I mean, we're in 30-plus different businesses and competitive conditions are different in each. And there are some businesses like commercial auto and commercial liability where the industry is still feeling the pain. And I think where we're getting our shop in order, it could provide some nice opportunities for a little bit better growth for us there.

Clearly, in things like excess liability, everybody is still challenged by the loss ratio trends there. So I think though, I was kind of happy to see some disruption here on the -- among fronting companies here recently and around issues around casualty. I've always been pretty skeptical about how many of the MGAs or MGUs or the private equity capital coming behind and reinsurance coming behind a lot of these entities writing volatile casualty business.

If anything, I think those that have been pricing below us in commercial auto liability and excess liability and some of the more volatile lines, I actually think there's probably going to be more problems that are going to surface over the next 12 months rather than status quo, at least in some of those -- some of the more longer-tail casualty lines.

And our next question will come from Paul Newsome with Piper Sandler.

This is Cam on for Paul. I know you mentioned a little bit of pain in commercial auto, and we've certainly seen some companies dealing with that this quarter and in some quarters in the past. I'm just curious if the trend on inflation and severity in commercial auto, if you're seeing any acceleration in that trend? Or is it more so relatively stable than what we've seen in the past couple of quarters?

I think it's been pretty consistent. Really, it's been consistent for years of being high single digit, even low double digit in some years. We're really pleased that -- I'm pleased after having to be on the conference calls over the last 8 years telling you I want to get commercial auto liability to an underwriting profit.

I'm happy to report we've done that in the first quarter. So when you look at our overall commercial auto results then earning really solid returns at this point with us getting the commercial auto liability to a small underwriting profit.

And our next question is going to come from Myles Meyer Shields with Keefe, Bruyette, & Woods.

I just want to stick with the commercial auto side, if I can, because it is impressive where you've come. When you talk about -- Carl, when you talked about there being more work to do, is that rate? Or is that other underwriting actions within the book?

No, I think it has to do with continuing to take rate that exceeds loss ratio trends in order to get the commercial auto liability from a small underwriting profit to a meaningful underwriting profit.

Okay. That's helpful. I just didn't know if there's anything else going on. And then, Brian, one follow-up question on Specialty Financial. I totally get the variable compensation, but last year's loss ratio in this segment was actually lower and the expense ratio was also lower. So I'm wondering what else is going on underneath the surface.

So there are a couple of other things there. One is the commissions that we pay in that business over long periods of time. So the commission, if you had some bad quarters that, kind of, roll off and good quarters roll in, it can make the cumulative commission higher. There's also a mix of business impact there in that some of the other businesses in financial that run at a higher loss ratio than that financial institutions business also grew this quarter.

And I think another thing to look at, too, is those commissions are based on the profitability overall. So if you're looking at an accident year loss ratio ex cats, cats were higher last year than this year in the financial segment. So that would have also had an impact on commissions, making this year a better year from a -- including cats perspective.

And the next question will come from Hristian Getsov with Wells Fargo.

I just have one more follow-up. Any indirect impact on your portfolio that we should think about from the Iran conflict? I'm particularly just thinking about like the huge uptick in fertilizer costs and then just overall inflation acceleration? Like how are you guys thinking about that?

Yes. I think we're in good shape so far. I mean the near-term impact to us is negligible or pretty modest and manageable in that. Higher fertilizer and fuel costs really don't impact this year much. I think most of the fertilizer and that was already purchased by farmers, and they're in the process of planning. I think future impact, kind of, has to do with how long this conflict goes or this war goes on that. But as far as other -- in other lines of business in that, we really have pretty modest exposure in that.

[Operator Instructions] Okay. I am showing no further questions at this time. I will now turn the call back over to Diane for closing remarks.

Thank you, Michelle, and thank you all for joining us this morning and for your questions. We look forward to connecting with you again when we share results at the end of the second quarter. We hope you all have a great day.

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

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 quarterly dividend by 10% to an annual rate of $3.52 per share beginning in October of 2025.

Now I'd like to turn to an overview of AFG's investment performance and share a few comments about AFG's financial position, capital and liquidity. The details surrounding our $17.2 billion portfolio are presented on Slides 6 and 7. Looking at results for the 2025, 4th quarter Property and Casualty net investment income was approximately 12% lower than the comparable 2024 period as lower returns from alternative investments more than offset the impact of higher interest rates and higher balances of invested assets.

For the full year ended December 31, 2025, P&C net investment income, excluding alternative investments, increased 5% year-over-year. Approximately 65% of our portfolio is invested in fixed maturities. In the current interest rate environment, we're able to invest in fixed maturity securities at yields of approximately 5.25%. The duration of our P&C fixed maturity portfolio, including cash and cash equivalents, was 2.9 years at December 31, 2025.

The annualized return on alternative investments in our P&C portfolio was 0.9% for the fourth quarter of 2025 compared to 4.9% for the prior year quarter. Although the overall returns on our multifamily investments continue to be impacted by an excess supply of new properties in some of our targeted markets, we are seeing signs of recovery.

New starts have fallen nearly 50% since 2022, and completions peaked in 2024 and are rapidly declining. We continue to believe that in the last half of 2026, the tightening supply and significantly reduced pipeline will drive higher rental and occupancy rates.

Importantly, a sizable portion of our portfolio of multifamily properties is located in desirable geographies with strong job and wage growth. Longer term, we continue to remain optimistic regarding the prospects of attractive returns from our overall alternative investment portfolio with an expectation of annual returns averaging 10% or better.

Please turn to Slide 8, where you'll find a summary of AFG's financial position at December 31, 2025. During the fourth quarter, we returned $240 million to our shareholders through the payment of a $2 per share special dividend in November and a regular $0.88 per share quarterly dividend.

In conjunction with our fourth quarter earnings release, we declared a special dividend of $1.50 per share payable on February 25, 2026 to shareholders of record on February 16, 2026. The aggregate amount of the special dividend will be approximately $125 million. With this special dividend, the company has declared $55.5 per share or $4.7 billion in special dividends since the beginning of 2021.

AFG ended the year in a strong capital position. Our leverage ratio was less than 28%. We have no debt maturities until 2030 and our insurance company financial strength ratings are at the A+ level for AM Best and Standard & Poor's. We expect our operations to continue to generate significant excess capital in 2026, which provides ample opportunity for acquisitions, additional special dividends or share repurchases over the rest of the year. We evaluate the best alternatives for capital deployment on a regular basis. We continue to view total value creation as measured by growth in book value plus dividends is an important measure of performance over the long term.

For the year ended December 31, 2025, AFG's growth in book value per share, excluding AOCI, plus dividends was 17.2%. We're extremely proud of the value we've created for shareholders over time. I'll now turn the call over to Carl to discuss the results of our P&C operations and our business plan assumptions for 2026.

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 increased exposures, while remaining disciplined and focused on underwriting profitability in some of the more challenging markets.

Average renewal rates across our Property and Casualty Group, excluding workers' comp, were up approximately 5% for the quarter, in line with the previous quarter. Average renewal rates, including workers' comp were up approximately 4% overall. We've reported overall rate -- renewal rate increases for 38 consecutive quarters, and we believe we are achieving overall renewal rate increases in excess of prospective loss ratio trends allowing us to meet or exceed targeted returns.

Now I'd like to turn to Slide 10 to review a few highlights from each of our Specialty Property and Casualty business groups. Details are included in our earnings release, so I'll focus on summary results here. The businesses in the Property and Transportation Group achieved an outstanding 70.6% calendar year combined ratio in the fourth quarter of 2025, an improvement of nearly 19 points from the comparable 2024 period. Record yields for corn and soybeans and favorable commodity pricing trends throughout the growing season, which contributed to a very strong crop year and lower year-over-year catastrophe losses in our property exposed businesses were drivers of these exceptional results.

Fourth quarter gross written premiums for 2025 in this group increased 5% from the comparable prior year period for the fourth quarter of 2025, while net written premiums were approximately 2% lower year-over-year. The increase in gross written premiums was due primarily to growth in our crop products that are heavily ceded, and to a lesser extent, growth in a transportation captive that has higher premium sessions.

Overall renewal rates in this group increased approximately 6% on average in the fourth quarter of 2025, consistent with pricing in the previous quarter. Pricing for the full year for this group was up approximately 7% overall. We continue to remain focused on rate adequacy, particularly in our commercial auto liability line of business where rates were up approximately 15% in the fourth quarter and up 14% for the full year. The businesses in our Specialty Casualty Group achieved a 96.7% calendar year combined ratio overall in the fourth quarter, 5.3 points higher than the 91.4% reported in the comparable period in 2024. Combined ratios at this level for these longer-tailed lines of business typically generate returns on equity in the high teens or better.

Fourth quarter 2025 gross and net written premiums increased 2% and 3%, respectively, when compared to the same prior year period. Primary drivers of growth included new business opportunities, favorable renewal pricing in our targeted markets business, new business opportunities in our mergers and acquisition business, growth in our workers' comp businesses and new premiums from one of our start-up businesses.

Growth was tempered by lower year-over-year premiums in our executive liability and excess and surplus lines business, where we experienced heightened competitive pressures for both new and renewal business. Overall, renewal pricing in this group was up about 5% during the fourth quarter. Average renewal pricing, excluding workers' comp, was up 6% in the fourth quarter. For the full year, pricing excluding workers' comp was up about 8%.

I continue to be pleased that we continue to achieve renewal rate increases of 10% or better during the quarter and several of our social inflation exposed businesses, including our social services and excess liability businesses with full year increases across these lines in the range of 13% to 15%.

In addition, our workers' compensation businesses collectively achieved a modest pricing increase during the quarter, similar to our results in the third quarter. Moving on to the Specialty Financial Group continued to achieve excellent underwriting margins reported an excellent 83 combined ratio for the fourth quarter of 2025, 2.3 points higher than the prior year period.

Fourth quarter 2025 gross and net written premiums in this group decreased by 4% and 10%, respectively, when compared to the same prior year period. Higher year-over-year premiums in our European operations were more than offset by lower premiums in our financial institutions business, which has produced very strong growth over the past several years.

Net written premiums were tempered by our decision to seed more of the coastal exposed property business in our financial institutions business beginning in the second quarter of 2025. Now as we look to 2026 in lieu of providing formal earnings guidance, we have provided several key assumptions underlying our 2026 business plan, which you'll see summarized on Slide 11.

We believe these assumptions are among the most relevant and helpful to analyst investors in modeling AFG's business and informing an investment thesis. These assumptions for 2026 include growth in net written premiums of 3% to 5% from the $7.1 billion reported last year, a combined ratio of approximately 92.5% a reinvestment rate of approximately 5.25% and an annual return of approximately 8% on our $2.8 billion portfolio of alternative investments.

We expect that performance in line with these assumptions would result in core net operating earnings per share of approximately $11 in 2026 and generate a core operating return on equity, excluding AOCI, of approximately 18%. As we consider our outlook on growth, we're optimistic about several of our start-up businesses and the near completion of numerous underwriting actions taken in our Specialty Casualty businesses.

However, we're mindful of pockets of softening rates and continued competitive conditions and we'll maintain our disciplined bottom line focus as we pursue opportunities to grow profitably in 2026. Our assumptions include an average crop year. So we believe that the combination of our reserve strength, a continued healthy rate environment, prudent growth and the ability to invest at a rate that exceeds our current portfolio yield positions us well as we enter 2026.

Craig and I are pleased to report these exceptionally strong results for the fourth quarter and full year, and we're proud of our proven track record of long-term value creation. Our insurance professionals have exercised their Specialty Property and Casualty knowledge and experience to skillfully navigate the marketplace and our in-house investment team has been both strategic and opportunistic in the management of our $17.2 billion investment portfolio.

We look forward to continuing to build long-term value for our shareholders this year and beyond. I will now open the lines for the Q&A portion of today's call. Craig and Brian and I would be happy to respond to your questions.

[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.

Good day, and thank you for standing by. Welcome to the American Financial Group 2025 Third 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 first speaker today, Diane Weidner, Vice President, Investor Relations. Please go ahead.

Good morning, and welcome to American Financial Group's Third Quarter 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. I'm joined this morning by 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 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 to review 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. I'll begin by sharing a few highlights of AFG's 2025 third quarter 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 will be happy to respond to your questions.

We're pleased to report an annualized core operating return on equity of 19% for the third quarter. Our underwriting margins in our Specialty Property and Casualty insurance businesses were strong. Net investment income increased by 5% year-over-year despite muted returns from our alternative investment portfolio when compared to the long-term historical performance of those investments.

Our compelling mix of Specialty Insurance businesses, entrepreneurial culture, disciplined operating philosophy and an astute team of in-house investment professionals continue to position us well for the future and enable us to continue to create value for our shareholders. Craig and I thank God, our talented management team and our great employees for helping us to achieve these results.

I'll now turn the discussion over to Craig to walk us through some of the details.

Thank you, Carl. Please turn to Slides 3 and 4 for third quarter highlights. AFG reported core net operating earnings of $2.69 per share compared to $2.31 per share in the prior year period, a 16% increase. I'll begin with an overview of AFG's investment portfolio, investment performance and share a few comments about AFG's financial position, capital and liquidity.

The details surrounding our $16.8 billion portfolio are presented on Slides 5 and 6. Net investment income in our property and casualty insurance operations for the 3 months ended September 30, 2025, increased 5% year-over-year as a result of higher interest rates and higher balances of invested assets. As shown on Slide 6, nearly 2/3 of our portfolio is invested in fixed maturities. In the current interest rate environment, we're able to invest in fixed maturity securities at yields of approximately 5.25%. The duration of our P&C fixed maturity portfolio, including cash and cash equivalents, was 2.7 years at September 30, 2025.

The annualized return on alternative investments in our P&C portfolio was approximately 6.2% for the 2025 third quarter compared to 5.4% for the prior year quarter. Although the overall return on our multifamily investments continue to be tempered by challenges within the broader economic environment, we're seeing evidence of recovery. Strong occupancy, a return to historical levels of lease renewals and more stability in the overall rental rate environment contribute to improving conditions despite a prolonged softer market caused by excess supply of new properties in several of our targeted regions.

Importantly, a large portion of our portfolio of multifamily properties is located in desirable geographies with strong job and wage growth. Although the supply of properties in these locations is elevated as compared to historical levels, new starts have declined significantly and at a faster pace than in other regions. We believe that tightening supply and a significantly reduced development pipeline will drive higher rental and occupancy rates and improve results by the end of 2026. Longer term, we remain -- we continue to be optimistic regarding the prospects of attractive returns from our overall alternative investment portfolio with an expectation of annual returns averaging 10% or better.

Please turn to Slide 7, where you'll find a summary of AFG's financial position at September 30, 2025. During the third quarter, we returned $66 million to our shareholders through the payment of our regular quarterly dividend. In October, AFG's regular quarterly dividend was increased 10% over the previously declared rate to $0.88 per share and paid on October 24, 2025. In conjunction with our earnings release, we declared a special dividend of $2 per share payable on November 26, 2025, to shareholders of record on November 17, 2025. The aggregate amount of special dividends will be approximately $167 million. With this special dividend, the company has declared $54 per share or $4.6 billion in special dividends since the beginning of 2021.

Carl and I consider these special dividends to be an important component of total shareholder return. We expect our operations to continue to generate significant excess capital throughout the remainder of 2025 and into 2026, which provides ample opportunity for acquisitions, special dividends or share repurchases over the next year. We evaluate the best alternatives for capital deployment on a regular basis. We continue to view total value creation as measured by growth in book value plus dividends as an important measure of performance over the longer term. For the 9 months ended September 30, 2025, AFG's growth in book value per share, excluding AOCI plus dividends, was nearly 11%.

I'll now turn the call over to Carl to discuss the results of our P&C operations.

Thank you, Craig. Please turn to Slides 8 and 9 of the webcast, which include an overview of our third quarter results. Our commitment to underwriting discipline and prudent growth was evident in the solid performance of our Property and Casualty businesses in the third quarter. We're finding attractive opportunities to grow our Specialty Property and Casualty businesses despite walking away from challenging market conditions in a few markets or poorly performing accounts.

I'm pleased with the overall underwriting profitability in our Specialty Property and Casualty businesses in the third quarter of this year and remain confident about the strength of our reserves. A continued favorable pricing environment, increased exposures and new business opportunities enabled us to selectively grow our Specialty Property and Casualty businesses. Although the timing of reporting of crop acreage by our insureds shifted some crop premium from the third quarter to the second quarter, as we discussed on last quarter's call. This tempered premium growth in the third quarter. We continue to expect premium growth for the full year in 2025 in the low single digits.

In addition to organic growth opportunities and evaluating acquisitions, always try to maintain a pipeline of start-ups that have the potential to become new business units in our portfolio of Specialty businesses. Taking an early look at next year, we currently project 2026 premium growth to rebound as we're optimistic about the growth from these start-ups and the near completion of numerous underwriting actions taken in our Specialty and Casualty businesses.

Turning to Slide 8, you'll see that underwriting profit in our Specialty Property and Casualty insurance businesses grew 19% and generated a 93% combined ratio in the third quarter of 2025, an improvement of 1.3 points from the prior year period. Results for the 2025 third quarter include 1.2 points related to catastrophe losses compared to 4.4 points in last year's third quarter. Third quarter 2025 results benefited from 1.2 points of favorable prior year reserve development compared to 0.8 points in the third quarter of 2024. Third quarter gross and net written premiums were down 2% and 4%, respectively, when compared to the third quarter of last year.

Excluding our crop business, gross written premiums grew 3% and net written premiums were flat year-over-year. Average renewal pricing across our Property and Casualty Group was up approximately 5% in the third quarter, both including and excluding workers' comp. We reported overall renewal rate increases for 37 consecutive quarters, and we believe we are achieving overall renewal rate increases in excess of prospective loss ratio trends to meet or exceed our targeted returns.

Now I'd like to turn to Slide 9 to review a few highlights from each of our Specialty Property and Casualty business groups. Details are included in our earnings release, so I'll focus on summary results here. The businesses in the Property and Transportation Group achieved a solid 94.1% calendar year combined ratio in the third quarter of 2025, an improvement of 2.7 points from the comparable 2024 period. This group's third quarter 2025 combined ratio included 0.4 point attributed to catastrophe losses compared to 3.7 points in the 2024 third quarter, which was the primary driver of the improved year-over-year profitability.

Third quarter 2025 gross and net written premiums in this group were 6% and 9% lower, respectively, than the comparable prior year period. As mentioned before, the earlier reporting of crop acreage by insureds impacted the timing of the recording of crop premiums and contributed to the year-over-year decrease, particularly when compared to later reporting of acreage the previous year. Excluding the crop business, gross written premiums in this group grew by 2% and net written premiums were flat. We continue to see new business opportunities, a favorable rate environment and increased exposures in our transportation businesses.

Overall renewal rates in this group increased 6% on average in the third quarter of 2025. We continue to remain focused on rate adequacy, particularly in our commercial auto liability line of business, where rates were up approximately 11% in the third quarter.

In our crop business, harvest pricing for corn and soybeans settled 10% and 2% lower, respectively, than spring discovery pricing, which is well within acceptable ranges and yield expectations are steady. Based on these factors, we continue to anticipate an average crop year. Our third quarter results reflect an element of seasonality as most of our crop insurance premiums are earned in AFG's third quarter but booked at a more conservative combined ratio until the fourth quarter.

Over the coming weeks, we'll have better visibility into actual yields and claim activity in our MPCI businesses, and we'll also have a clear indication of the performance of our private products business. With this more complete picture, we'll record the majority of our calendar year crop profitability in the fourth quarter as is our standard practice.

The businesses in our Specialty and Casualty Group achieved a 95.8% calendar year combined ratio overall in the third quarter, 3.7 points higher than the 92.1% reported in the comparable period in 2024. Third quarter gross written premiums increased 3%. Net written premiums were flat compared to the same prior year period. Primary drivers of growth included new business opportunities and favorable renewal pricing in several of our targeted market businesses and an increase in M&A activity that contributed to growth in our mergers and acquisitions business. This growth was tempered by lower premiums in our excess and surplus, executive liability and social services businesses.

Overall renewal pricing in this group was up approximately 7% during the third quarter, an increase of about 1 point from the previous quarter. Average renewal pricing, excluding workers' comp, was up approximately 8%, in line with pricing in the second quarter. And I'm pleased that we again achieved renewal rate increases in the mid-teens in our most social inflation exposed businesses, including our social services and excess liability businesses. In addition, our workers' compensation businesses collectively achieved a modest pricing increase during the quarter, a favorable trend.

Several businesses in this group, particularly our excess liability businesses have been navigating the challenges of social inflation for several years and have demonstrated their nimbleness and resilience through the cycle. Over the last 5 years, one of our largest excess liability businesses has decreased aggregate limits by 25% while more than doubling premium, primarily as a result of rate increases.

We're continuing to exercise discipline through the use of predictive analytics, risk selection and careful coordination between our underwriting, actuarial and claims professionals to ensure that our businesses are earning targeted returns.

The Specialty Financial Group continued to achieve excellent underwriting margins and reported a combined ratio of 81.1% for the third quarter of 2025, 11.2 points better than the comparable period in 2024. These results reflect 4.1 points related to catastrophe losses compared to 14.4 points in the prior year period, contributing to higher year-over-year underwriting profitability in our financial institutions business. Third quarter gross and net written premiums in this group were up 3% and 1%, respectively, when compared to the prior year period. The growth is primarily attributed to our growth in our financial institutions business and our Great American Europe business, which designs and delivers a broad portfolio of innovative and customized insurance programs across the U.K. and Europe.

Net written premiums were tempered by our decision to cede more of the coastal exposed property business in our lender services business. Renewal pricing in this group was down approximately 2% in the third quarter, reflecting the strong margins earned overall in these businesses. Craig and I are proud of our history of long-term value creation. We have years of experience navigating economic and insurance cycles. Our insurance professionals continue to exercise their Specialty Property and Casualty knowledge and experience to successfully compete in a dynamic marketplace.

And our in-house investment team has been both strategic and opportunistic in the management of our $17 billion investment portfolio. One of our greatest strengths is finding opportunities in the times of uncertainty. We're well positioned to continue to build long-term value for our shareholders for the remainder of 2025 and beyond.

Now we'll open the lines for the Q&A portion of today's call. And Craig and Brian and I will be happy to respond to your questions.

[Operator Instructions]

Our first question comes from the line of Michael Zaremski of BMO Capital Markets.

First question on capital management. We clearly saw the special dividend announcement. But curious why there were no buybacks or not material buybacks in the quarter. Last quarter, you had done buybacks and valuation wasn't too dissimilar from the average this quarter is my understanding. So just curious, any color there? And do you expect repurchases to resume depending on your, I guess, your answer.

Yes. Mike, this is Craig. What I would say is if you look at our purchases, we become very active when the stock is trading at a very significant discount to what we believe is the appropriate value. There have been periods when we have repurchased very large amounts of shares period back in -- I think it was 2008 through 2010, we repurchased around 30% of our shares at a very attractive level. So I wouldn't read too much into one quarter's repurchases or lack of repurchases. What I would say is we've retained a lot of dry powder to be able to take advantage of the opportunity to repurchase shares if it presents itself.

Okay. That's helpful, Craig. Pivoting to the operating environment on the P&C side. I thought it was -- it's a good comment to hear, but I thought it was a bit surprising, at least we got some reaction last night from investors when you said that pricing was about 5% with and without comp, and you believe you're achieving rate in excess of prospective loss trends because most -- many companies, and I think if you look at Triangles too would kind of estimate loss trend is north of 5%. Any commentary you'd like to elaborate there on in terms of my assumption there?

I can't speak for other companies. I can speak for us. And an overall 5% price increase is still exceeding our prospective loss ratio trends. We have a decent chunk of our business in workers' comp where loss ratio trends are really pretty benign. And a lot of other businesses, we have a very diverse portfolio. So not all of our businesses are -- reflect a casualty loss ratio trend in that. So I can only speak for our own mix of business and what our own actuaries tell us.

Got it. And so just -- that's helpful, Carl. And so sticking to kind of loss trend and pricing. If we can kind of try to laser in on some of the lines of business that have been causing more friction over the past year for you all in the industry. Obviously, appreciate your ROE -- AFG's ROE is industry-leading. But if we think about the social inflationary lines of business, are we seeing pricing, which had been accelerating kind of stopping its acceleration trend? And do you believe loss cost trend is kind of remaining stable? Or are we continuing to see some upwards bias? It's looking at the underlying loss ratio and Specialty and Casualty, for example, the trend line there moving a bit north?

Again, with 30 businesses, there's -- we adjust loss ratio trends every quarter. We do actuarial valuations and evaluation of the business. And some loss ratio trends improve, other loss ratio trends, particularly in social inflation-exposed businesses. We're very careful about trying to be conservative enough to consider pricing in that. So I think not a lot of changes, I don't think over the past couple of quarters in overall loss ratio trends in that. But some businesses would have improved, some businesses would have increased a little bit.

In our case, the part of our business where we had a slight decline was in our specialty financial business and particularly in our lender-placed property business, which at the big margins that, that business have earned for us. And after multiyears of pretty significant rate increase, it's not surprising that there was some plateauing of price on that business in that. So compared to what a lot of the E&S market and some of the large property guys are seeing with price change, I'll take a couple of percent decline on our lender-placed property business over the chunk of business that's seeing double-digit declines, if you understand what I'm saying. So I think that was one of the main drivers of our pricing being a little bit lower in that.

I think what I am happy about is the pricing in our Specialty Casualty, excluding comp, is still up 8% in the quarter. And to boot, I'm very pleased that we saw some price increase in our overall workers' comp book, particularly being led by California and that clearly. And I think the California will probably only get better. Brian, you were telling me that they're going to be taking 11% increase and was it September?

Effective September 1.

Yes, effective -- yes. So I think that's the price increase there in California should just get better in that. I hope that gives you a little color.

Our next question comes from the line of Andrew Andersen of Jefferies.

Maybe just back on the workers' comp. It was good to see that price tick up, and it sounds like California could see some further momentum. But perhaps we could touch on some other geographies. Are you seeing some pricing tick up a little bit elsewhere?

In our strategic comp business, which is a fairly sizable business, there was some positive price change there also in that. I think in the Southeast and the Summit business continues to be some kind of a mid-single-digit price decline in that.

Okay. And maybe a bigger picture macro question just on crop. Pricing on corn and soybeans has been coming in for a couple of years, and I suppose that could partially be due to some change in trade policies. But I'd be interested in hearing your thoughts just kind of on the outlook maybe intermediate term for crop premium and crop pricing as kind of trading with global partners changes.

Well, I think you probably need a pretty good crystal ball trying to figure that out. You would think that probably the trade aspect of soybeans is probably being reflected in the futures prices at this point, which would lead you to believe that premium should be stable or maybe even increasing corn when you look at futures prices into '26, it looks to be pretty stable against spring discovery prices this year in that. That said, we don't know until the actual 30-day average in the first quarter next year establishes spring discovery prices in that. But what I've seen so far, it seems like prices should be stable or if there's an improvement in the China relationship with the U.S., maybe soybean pricing continues to improve more.

[Operator Instructions]

Our next question comes from the line of Meyer Shields of Keefe, Bruyette, & Woods.

I also had 2 questions on crop. The first, I completely understand the comments about written premium having moved to the second quarter. I'm wondering whether there was a higher percentage of earned premiums in Property and Transportation this year rather than last year as a contributor to the higher attritional loss ratio.

This is Brian. So if you remember, last year at this time, we were feeling pretty optimistic about the potential for an above-average crop year. And then in the fourth quarter, there was some variation in harvest by county that caused us to end up at a more of an average crop year. So we booked a little bit more crop income last year in the third quarter than we did this year in the third quarter.

So this year, in the third quarter, we have about half of our crop premium earned for the year in the quarter, booked at close to 100 combined ratio. If you pull out all the noise from crop, our accident year loss ratio for Property and Transportation actually improved due to lower frequency in our transportation and marine businesses. So if you kind of put the noise of crop the side, we did see an improvement there in the loss ratio.

Okay. That's very helpful. And I'm just wondering, bigger picture in crop. So there's a new participating insurance company over the last couple of years. Is that having any impact on the amount of premium you're getting from agents or maybe some agents moving along? I don't know how mobile we should think of that premium as being.

I think it probably impacts us marginally on that. What our guys would say is they're probably getting some of the business that we'd be least excited about.

[Operator Instructions]

Okay. I'm showing no further questions at this time. I'll go ahead and turn the call back over to Diane Weidner for closing remarks.

Thank you all for participating today. We appreciate your questions and look forward to talking to you again next quarter when we share our fourth quarter results. Hope you have a great day.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.