Q2 2026 American Financial Group Inc Earnings Call

August 5, 2026

Operator: Good day, and thank you for standing by. Welcome to the American Financial Group 2026 Q2 results conference call. At this time, all participants are in a listening only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. 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.

Speaker #1: After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you need to press star 11 on your telephone.

Speaker #1: You will hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded.

Speaker #1: I would now like to hand the conference over to your first speaker today, Diane Weidner, Vice President, Investor Relations. Diane, please go ahead.

Speaker #2: Good morning, and welcome to the American Financial Group Q2 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.

Diane P. Weidner: Good morning, and welcome to American Financial Group's Q2 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 CFO. Before I turn the discussion over to Carl, I would like to draw your attention to the notes on slide two 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.

Diane Weidner: Good morning, and welcome to American Financial Group's Q2 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 CFO. Before I turn the discussion over to Carl, I would like to draw your attention to the notes on slide two 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.

Speaker #2: 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 CFO.

Speaker #2: 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.

Speaker #2: 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.

Diane P. Weidner: 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. 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 am pleased to turn the call over to Carl to discuss our results.

Diane Weidner: 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. 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 am pleased to turn the call over to Carl to discuss our results.

Speaker #2: We may include references to core net operating earnings, a non-GAAP financial measure, and our remarks or in responses to questions. A reconciliation of net earnings to core net operating earnings is included in our earnings release.

Speaker #2: 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, may contain factual or transcription errors that could materially alter the intent or meaning of our statements.

Speaker #2: Now, I am pleased to turn the call over to Carl to discuss our results.

Speaker #3: Well, good morning. Before we begin our commentary about the quarter, I want to take a moment to express our deepest condolences to the Berkeley family.

Carl H. Lindner III: 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 was 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 Q2, I will share a few highlights, after which Craig and I will walk through more details. We will 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 Q2 record for pre-tax property and casualty operating income driven by strong underwriting margins, healthy premium growth, and higher net investment income.

Carl Lindner III: 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 was 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 Q2, I will share a few highlights, after which Craig and I will walk through more details. We will 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 Q2 record for pre-tax property and casualty operating income driven by strong underwriting margins, healthy premium growth, and higher net investment income.

Speaker #3: Bill was an icon in our industry, a respected competitor, and most importantly, our good friend, and he leaves an incredible legacy and will be sorely missed.

Speaker #3: Turning our focus to AFG's Q2, 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.

Speaker #3: I am pleased to report that we set a new Q2 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 especially insurance businesses are entrepreneurial culture, their disciplined operating philosophy, and astute team of in-house investment professionals continue to position us to create value for our shareholders through a variety of insurance market conditions.

Carl H. Lindner III: Thanks, Carl. Please turn to slides three and four 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 Q2, 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 will 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 five and six. Net investment income at our property and casualty insurance operations for the three months ended 30 June 2026, increased 23% year over year and established a new Q2 record for AFG and was driven by improved returns from alternative investments.

Carl Lindner III: [inaudible]

Speaker #3: Craig and I thank God our talented management team and our great employees for helping us to achieve these results. And I'll turn the discussion over to Craig to walk us through some of these details.

Speaker #4: 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 Q2.

S. Craig Lindner: As you will see on slide six, approximately two-thirds of our portfolio is invested in fixed maturities. In the current interest rate environment, we are able to invest in fixed maturity securities at yields of approximately 5.5%. The duration of our P&C fixed maturity portfolio, including cash and cash equivalents, was 3.1 years at 30 June 2026. The annualized return on alternative investments was approximately 7.1% for the 2026 Q2, compared to 1.2% for the prior year Q. 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 Q3 of 2026.

Craig Lindner: [inaudible]

Speaker #4: 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.

Speaker #4: 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 at established a new Q2 record for AFG and was driven by improved returns from alternative investments.

Speaker #4: 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%.

S. Craig Lindner: As you'll see on slide six, 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 P&C fixed maturity portfolio, including cash and cash equivalents, was 3.1 years at 30 June 2026. The annualized return on alternative investments was approximately 7.1% for the Q2 2026, 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 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 Q3 2026.

Craig Lindner: As you'll see on slide six, 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 P&C fixed maturity portfolio, including cash and cash equivalents, was 3.1 years at 30 June 2026. The annualized return on alternative investments was approximately 7.1% for the Q2 2026, 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 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 Q3 2026.

Speaker #4: The duration of our P&C 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 Q2, compared to 1.2% for the prior year quarter.

Speaker #4: 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.

Speaker #4: In April of 2026, AFG reached definitive agreements to sell the Charleston Harbor Resort and 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.

Speaker #4: 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.

S. Craig Lindner: 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. 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 seven, where you'll find a summary of AFG's financial position at 30 June 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.

Craig Lindner: 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. 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 seven, where you'll find a summary of AFG's financial position at 30 June 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.

Speaker #4: 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.

Speaker #4: 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 88 cents per share regular quarterly dividend.

Speaker #4: 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.

Speaker #4: 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.

S. Craig Lindner: 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 30 June 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.

Craig Lindner: 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 30 June 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.

Speaker #4: 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.

Speaker #3: Thank you, Craig. Please turn to slides 8 and 9 of the webcast, which include an overview of our Q2 results. I'm very pleased with the strong performance of our specialty property and casualty businesses.

Carl H. Lindner III: Thank you, Craig. Please turn to slides eight and nine of the webcast, which include an overview of our Q2 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 H1 of the year while executing on opportunities to grow, with approximately three-fourths of our businesses reporting higher year-over-year premiums through 30 June. In addition, we're doing this while consistently achieving renewal rate increases, excluding workers' comp, which have been around 5% 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.

Carl Lindner III: Thank you, Craig. Please turn to slides eight and nine of the webcast, which include an overview of our Q2 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 H1 of the year while executing on opportunities to grow, with approximately three-fourths of our businesses reporting higher year-over-year premiums through 30 June. In addition, we're doing this while consistently achieving renewal rate increases, excluding workers' comp, which have been around 5% 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

Speaker #3: We achieved a 44% increase in underwriting profit in the first six months of the year, while executing on opportunities to grow. With approximately three-fourths of our businesses reporting higher year-over-year premiums through June 30, in addition, we're doing this while consistently achieving renewal rate increases.

Speaker #3: Excluding workers’ comp, which has been around 5% for the past four quarters. These results showcase the diversification across our 36 businesses, the underwriting discipline, and the opportunistic culture that have allowed us to produce strong results that outperform peers over the long run.

Speaker #3: 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 Q2 of 2026, an improvement of 1.6 points from the 93.1 reported in the Q2 of last year.

Carl H. Lindner III: Looking at a few details. You'll see on slide eight that our specialty property and casualty insurance businesses produced a 91.5 combined ratio in the Q2 2026, an improvement of 1.6 points from the 93.1 reported in the Q2 last year. Q2 2026 results benefited from 3.4 points of favorable prior year reserve development compared to 0.7 points in the Q2 2025. Catastrophe losses added 1.8 points in the Q2 2026 compared to 2.3 points in the Q2 last year. Q2 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 and casualty group, excluding workers' comp, were up approximately 5% for the quarter. Average renewal rates including workers' compensation were up approximately 4% overall.

Carl Lindner III: Looking at a few details. You'll see on slide eight that our specialty property and casualty insurance businesses produced a 91.5 combined ratio in the Q2 2026, an improvement of 1.6 points from the 93.1 reported in the Q2 last year. Q2 2026 results benefited from 3.4 points of favorable prior year reserve development compared to 0.7 points in the Q2 2025. Catastrophe losses added 1.8 points in the Q2 2026 compared to 2.3 points in the Q2 last year. Q2 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 and casualty group, excluding workers' comp, were up approximately 5% for the quarter. Average renewal rates including workers' compensation were up approximately 4% overall.

Speaker #3: Q2 2026 results benefited from 3.4 points of favorable prior year reserve development, compared to 0.7 points in the Q2 of 2025. It catastrophe losses added 1.8 points in the Q2 of 2026, compared to 2.3 points in the Q2 of last year.

Speaker #3: Q2 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 and casualty group, excluding workers' comp, were up approximately 5% for the quarter.

Speaker #3: 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.

Carl H. Lindner III: 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 are achieving overall renewal rate increases that enabled us to meet or exceed targeted returns. I would like to turn to slide nine and review a few highlights from each of our specialty property and casualty business groups. Details are included in our earnings release, I will focus on summary results here. The businesses in the Property and Transportation group achieved a 90.3 calendar year combined ratio overall in Q2 2026, an improvement of 4.9 points from the 95.2 reported in the comparable 2025 period. Higher year-over-year underwriting profits in our transportation and agricultural businesses were the primary drivers of these very strong results.

Carl Lindner III: 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 are achieving overall renewal rate increases that enabled us to meet or exceed targeted returns. I would like to turn to slide nine and review a few highlights from each of our specialty property and casualty business groups. Details are included in our earnings release, I will focus on summary results here. The businesses in the Property and Transportation group achieved a 90.3 calendar year combined ratio overall in Q2 2026, an improvement of 4.9 points from the 95.2 reported in the comparable 2025 period. Higher year-over-year underwriting profits in our transportation and agricultural businesses were the primary drivers of these very strong results.

Speaker #3: 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.

Speaker #3: The businesses in the Property and Transportation Group achieved a 90.3 calendar year combined ratio overall in the second quarter of 2026, an improvement of 4.9 points from the 95.2 reported in the comparable 2025 period.

Speaker #3: Higher year-over-year underwriting profits in our transportation and agricultural businesses were the primary drivers of these very strong results. In Q2 2026 gross and net written premiums in this group were 8% and 5% higher than the comparable prior year period.

Carl H. Lindner III: In Q2 2026, gross and net written 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 Q2 2026, 2 points higher than the pricing achieved in this group for Q1 2026. We reported a small underwriting profit in commercial auto liability, I am pleased to say, for Q2 in a row, and we are continuing to make progress there. Renewal rates in commercial auto liability were up 15% during the quarter. In terms of our crop business, commodity futures pricing remains in acceptable ranges relative to spring discovery prices.

Carl Lindner III: In Q2 2026, gross and net written 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 Q2 2026, 2 points higher than the pricing achieved in this group for Q1 2026. We reported a small underwriting profit in commercial auto liability, I am pleased to say, for Q2 in a row, and we are continuing to make progress there. Renewal rates in commercial auto liability were up 15% during the quarter. In terms of our crop business, commodity futures pricing remains in acceptable ranges relative to spring discovery prices.

Speaker #3: 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.

Speaker #3: Now, overall renewal rates in this group increased approximately 8% on average in the Q2 of 2026, two points higher than the pricing achieved in this group for the Q1 of 2026.

Speaker #3: We reported a small underwriting profit in commercial auto liability on please to say for the Q2 in a row, and we're continuing to make progress there.

Speaker #3: Renewal rates in commercial auto liability were up 15% during the quarter. Now, in terms of our crop business, commodity futures pricing remains an acceptable ranges relative to spring discovery prices.

Speaker #3: 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.

Carl H. Lindner III: 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 H2 of this year. As a reminder, our Q3 results reflect an element of seasonality, as most of our crop insurance premiums are earned in AFG's Q3, but booked at a more conservative loss ratio until Q4, 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 Q4.

Carl Lindner III: 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 H2 of this year. As a reminder, our Q3 results reflect an element of seasonality, as most of our crop insurance premiums are earned in AFG's Q3, but booked at a more conservative loss ratio until Q4, 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 Q4.

Speaker #3: Our crop results for 2026 will depend on the harvest yields and prices in the second half of this year. As a reminder, our Q3 results reflect an element of seasonality.

Speaker #3: As most of our crop insurance premiums are earned in AFG's Q3, but booked at more at a more conservative loss ratio until the Q4.

Speaker #3: When we have better visibility into actual yields and claims activity in our MPCI business. And a clear private product businesses. Consequently, we record the majority of our calendar year crop profitability in the Q4.

Speaker #3: Now, the businesses in the Specialty Casualty Group achieved a solid 94.5 calendar year combined ratio overall in Q2 2026, 0.6 points higher than the 93.9 reported in the comparable period last year.

Carl H. Lindner III: The businesses in Specialty Casualty Group achieved a solid 94.5 calendar year combined ratio overall in Q2 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. Q2 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 drove 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 Q2. Pricing in this group, including workers' comp, was up about 2%.

Carl Lindner III: The businesses in Specialty Casualty Group achieved a solid 94.5 calendar year combined ratio overall in Q2 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. Q2 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 drove 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 Q2. Pricing in this group, including workers' comp, was up about 2%.

Speaker #3: We continue to be mindful of social inflation and remain conservative in our initial loss picks for the lines of business written by businesses. By the businesses in this group.

Speaker #3: Q2 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.

Speaker #3: Excluding our workers' comp businesses, renewal rates for this group were up approximately 4% in the Q2. Pricing in this group, including workers' comp, was up about 2%.

Speaker #3: Now, the specialty financial group continued to achieve excellent underwriting margins and reported an 85.6 calendar year combined ratio for the Q2 of 2026, an improvement of over a half a point from the comparable period last year.

Carl H. Lindner III: Now the Specialty Financial Group continued to achieve excellent underwriting margins and reported an 85.6 calendar year combined ratio for Q2 2026, an improvement of over half a 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 Q2, 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.

Carl Lindner III: Now the Specialty Financial Group continued to achieve excellent underwriting margins and reported an 85.6 calendar year combined ratio for Q2 2026, an improvement of over half a 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 Q2, 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.

Speaker #3: 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.

Speaker #3: Renewal pricing in this group decreased less than 1% in Q2, 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.

Speaker #3: 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.

Carl H. Lindner III: 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.

Carl Lindner III: 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.

Speaker #3: And Craig, Brian, and I would be happy to respond to your questions.

Speaker #1: Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question you need to press star, one, one on your telephone and wait for your name to be announced.

Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first speaker is Hirsten Getzoff from Wells Fargo. Please go ahead, Hirsten.

Speaker #1: To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first speaker is Houston Gass from Wells Fargo.

Speaker #1: Please go ahead, Houston.

Speaker #2: Hi, good morning. Thank you for taking my question. My first question is on the uptick in the underlying loss ratios, particularly in specialty casualty and specialty financials, which seems like it could be driven by mix and conservatism.

Hirsten Getzoff: Hi. Good morning. Thank you for taking my question. 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. How should we think about the potential improvement on the expense side of the equation from the mix shift, just given there's also productivity gains that maybe could be recognized on the expense side? Just given the increased conservatism in those lines and rate continuing to be at or exceeding target margins, could we potentially also see higher PYD? Thank you.

Hristian Getsov: Hi. Good morning. Thank you for taking my question. 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. How should we think about the potential improvement on the expense side of the equation from the mix shift, just given there's also productivity gains that maybe could be recognized on the expense side? Just given the increased conservatism in those lines and rate continuing to be at or exceeding target margins, could we potentially also see higher PYD? Thank you.

Speaker #2: But how should we think about the potential improvement on the expense side of the equation from the makeshift? Just given there's also productivity gains that maybe could be recognized on the expense side.

Speaker #2: And just given the increased conservatism in those lines, and rates continuing to be at or exceeding target margins, could we potentially also see higher PYD?

Speaker #2: Thank you.

Speaker #3: Hi. This is Brian. I think it's important as you start to think about that answer is to start at sort of 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 ratios.

Brian S. Hertzman: Hi, this is Brian. I think it's important as you start to think about that answer, is to start at the beginning, which is that 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. We do have to keep in mind that when businesses that are 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 a 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.

Brian Hertzman: Hi, this is Brian. I think it's important as you start to think about that answer, is to start at the beginning, which is that 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. We do have to keep in mind that when businesses that are 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 a 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.

Speaker #3: So, we do have to keep in mind that when businesses that are longer tail, like workers' comp, grow, they have a greater opportunity for investment income. That means we can have high-teen ROEs even at higher combined ratios.

Speaker #3: 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 a higher underwriting expense ratio and a lower loss ratio compared to other businesses.

Speaker #3: 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.

Brian S. Hertzman: 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. 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. We're very cautious around our reserve picks, and we tend to react quicker to bad news and slower to good news. 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.

Brian Hertzman: 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. 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. We're very cautious around our reserve picks, and we tend to react quicker to bad news and slower to good news. 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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 and noting that nothing has changed here.

Brian S. Hertzman: 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, and 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. 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 root loss ratio for that segment.

Brian Hertzman: 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, and 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. 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 root loss ratio for that segment.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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 LE 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.

Brian S. Hertzman: 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 in LE 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. When you think about things from a longer point of view, as Carl said before, we're confident in our reserves and in our ability to produce strong returns through a variety of market cycles.

Brian Hertzman: 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 in LE 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. When you think about things from a longer point of view, as Carl said before, we're confident in our reserves and in our ability to produce strong returns through a variety of market cycles.

Speaker #3: Then 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.

Speaker #3: And in our ability to produce strong returns through a variety of market cycles.

Speaker #2: Got it, thank you. And then for my follow-up, just sticking with the AI component—I guess the potential benefits on the expense side, or the impact on margins, is pretty well understood.

Hirsten Getzoff: Got it. Thank you. For my follow-up, just sticking with the AI component, I guess the potential benefits on the expense side of the margins 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?

Hristian Getsov: Got it. Thank you. For my follow-up, just sticking with the AI component, I guess the potential benefits on the expense side of the margins 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?

Speaker #2: 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?

Speaker #3: 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.

Carl H. Lindner III: 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. 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. Like everyone else, we're making a significant investment, and we're encouraged by the productivity improvements that we're seeing in that. On underwriting itself, building an underwriting knowledge management, I think we're probably on the early end of that.

Carl Lindner III: 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. 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. Like everyone else, we're making a significant investment, and we're encouraged by the productivity improvements that we're seeing in that. On underwriting itself, building an underwriting knowledge management, I think we're probably on the early end of that.

Speaker #3: 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, and AI-enabled recorded statements, which improve claims handling efficiency and customer experience through automated summarization and insights.

Speaker #3: 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.

Speaker #3: But on underwriting itself, building an underwriting knowledge management system, I think we're probably on the early end of that—probably farther along in the use on the claims side.

Carl H. Lindner III: Probably farther along in the use in the claims side.

Carl Lindner III: Probably farther along in the use in the claims side.

Hirsten Getzoff: Great. Thank you, congrats on the quarter.

Hristian Getsov: Great. Thank you, congrats on the quarter.

Speaker #2: Great. Thank you, and congrats on the quarter.

Operator: Please, one moment for our next question. We have Michael Zaremski from BMO. Please go ahead, Michael.

Speaker #1: Please, one moment for our next question. We have Michael Zarinski from BMO. Please go ahead, Michael.

Michael Zaremski: Hey, thanks. Good morning. Maybe first question on the competitive environment and pricing, specifically renewable pricing. I think from data points we've received from a lot of your peers, 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.

Speaker #4: Hey, thanks, Scott. Good morning. 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 deceleration in a number of pockets. Maybe you can kind of discuss what's buoying AFG's pricing levels?

Speaker #4: Maybe even a little bit momentum in certain spots sequentially.

Speaker #5: Yeah. I'm happy

Carl H. Lindner III: Yeah, 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. 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 there 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've talked about some re-underwriting certain classes, bringing limits down, social inflation exposed businesses, raising retentions in some businesses like public sector. I think we're able to play offense versus defense more today and grow some of these lines now. Commercial auto, the same thing.

Carl Lindner III: Yeah, 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. 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 there 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've talked about some re-underwriting certain classes, bringing limits down, social inflation exposed businesses, raising retentions in some businesses like public sector. I think we're able to play offense versus defense more today and grow some of these lines now. Commercial auto, the same thing.

Speaker #3: To give a little insight into that, I am pleased, as I think I mentioned in my comments and in our release, that three-quarters of our businesses have seen some growth through six months.

Speaker #3: 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 and growing sophistication in their business, business by business, is helping us.

Speaker #3: 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.

Speaker #3: We talked about some re-underwriting of certain classes, bringing limits down, social inflation-exposed businesses, and raising retentions in some businesses like the public sector. So I think we're able to play offense versus defense more today.

Speaker #3: And grow some of these lines now. Commercial auto, the same thing. We're, as I mentioned, for the second quarter in a row, in commercial auto liability itself, making a small underwriting profit.

Carl H. Lindner III: As I mentioned, second quarter in a row in commercial auto liability itself, that we're making a small underwriting profit, and commercial auto overall, we're earning solid underwriting profits and good ROEs. We're having the ability to play more offense and find opportunities for some growth there. 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.

Carl Lindner III: As I mentioned, second quarter in a row in commercial auto liability itself, that we're making a small underwriting profit, and commercial auto overall, we're earning solid underwriting profits and good ROEs. We're having the ability to play more offense and find opportunities for some growth there. 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.

Speaker #3: And we're earning—in 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.

Speaker #3: So I feel good about for the rest of the year where we're at, very optimistic that we'll continue to have opportunities to grow our businesses and in a fairly broad basis.

Michael Zaremski: That's helpful, Carl. Maybe just honing in on Specialty Casualty. The underlying loss ratio this year, which gets a lot of attention from investors, has been, I guess, on a H1 basis, running in kind of the 63% plus range. Last year, it kind of ran in the 65% range for the full year. I guess to the previous question, it was mentioned there was an uptick in the underlying loss ratio. Is there a seasonality in there where I should be thinking about H1 of this year versus H1 of last year, or is it better to compare H1 of 2026 to the full year 2025, or maybe none of the above?

Speaker #4: That's helpful, Carl. Maybe just honing in on specialty casualty, the underlying loss ratio this year, which gets a lot of attention from investors, has been, I guess on a first half of the year basis, running in kind of the 63-plus range.

Speaker #4: And last year, kind of right 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.

Speaker #4: Is there a seasonality in there where I should be thinking about the first half of this year versus the first half of last year?

Speaker #4: Or is it better to compare the first half of '26 to the full year '25? Or maybe none of the above.

Brian S. Hertzman: 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. 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. As far as trends go, I think we're always going to adjust quarter-to-quarter by business. I would say there really isn't a seasonality there, that it's more mix of business that's changing it compared to last year.

Brian Hertzman: 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. 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. As far as trends go, I think we're always going to adjust quarter-to-quarter by business. I would say there really isn't a seasonality there, that it's more mix of business that's changing it compared to last year.

Speaker #3: 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 the crop business in particular can cause the loss ratio to vary quarter to quarter.

Speaker #3: In casualty, really what's driving, right away with those changes, is a 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.

Speaker #3: 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 a seasonality there that it's more mix of business that's changing it compared to last year.

Michael Zaremski: Okay.

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

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

Speaker #3: 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 on the E&S side, than we did.

Speaker #3: They had a bigger appetite on the by the same token, as the property pricings caved on a lot of that business, it really has less impact on us versus our peers.

Speaker #3: So I do think that is also one differential.

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

Speaker #4: That makes sense. And lastly, back to the kind of technology conversation that you'll opine on a moment ago. I guess there's some folks that have 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.

Speaker #4: Any thoughts about that remark?

Speaker #3: I think in a one or two-line business, a primary auto or homeowners rider, 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 be you might have greater success finding some applications when you have 36 different business groups deploying AI.

Carl H. Lindner III: I think in a one or two-line business, a 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 and that. 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. I think that's an example of one business we'd be ahead of the pack probably in that. I don't know. I think that would be my response to you.

Carl Lindner III: I think in a one or two-line business, a 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 and that. 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. I think that's an example of one business we'd be ahead of the pack probably in that. I don't know. I think that would be my response to you.

Speaker #3: And 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.

Speaker #3: And it's business in that. So I think that's an example—one business we'd be ahead of the pack, probably, in that. So, I don't know.

Speaker #3: I think that would be my response to you.

Brian S. Hertzman: 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 within our business units to talk to each other and work together over time. 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 unit. Even though they have a lot of autonomy, they don't operate completely in a vacuum.

Brian Hertzman: 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 within our business units to talk to each other and work together over time. 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 unit. Even though they have a lot of autonomy, they don't operate completely in a vacuum.

Speaker #2: 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, for things like AI, we do a good job of having our business units talk to each other and work together over time.

Speaker #2: 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 unit.

Speaker #2: So that even though they have a lot of autonomy, they don't operate completely in a vacuum.

Speaker #4: Thank you.

Carl H. Lindner III: Thank you.

Carl Lindner III: Thank you.

Speaker #1: One moment for our next question. Our next question comes from Andrew Anderson from Jefferies. Please go ahead, Andrew.

Operator: One moment for our next question. Our next question comes from Andrew Andersen from Jefferies. Please go ahead, Andrew.

Andrew Andersen: Hey, good morning. 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?

Speaker #5: Hey, good morning. You had mentioned commercial auto produced a small underwriting profit for a second straight quarter. What is needed to move this from a small profit towards targeted returns?

Speaker #5: Is that going to require pricing above the 15% that you're seeing recently?

Speaker #3: Yeah, 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.

Carl H. Lindner III: Yeah. 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 Q2 in a row. 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. I mentioned rates were still up 15%, I think, for the Q2. 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. I feel very good about that.

Carl Lindner III: Yeah. 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 Q2 in a row. 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. I mentioned rates were still up 15%, I think, for the Q2. 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. I feel very good about that.

Speaker #3: 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'll continue to be focused on achieving rate that exceeds loss ratio trends for commercial auto liability.

Speaker #3: And I mentioned rates were still up 15%. I think for the second quarter, the good news is we're continuing to get good rate.

Speaker #3: We're having the ability to grow our commercial auto business. And overall, in commercial auto, we're at solid margins. So I feel very good about that.

Speaker #3: And then, when for companies like National Winter State and that, when you add the workers' comp into that, the results are even better. So, yeah, my comments were more towards commercial auto liability, commercial auto overall, and workers' comp in our transportation businesses doing very well.

Carl H. Lindner III: For companies like National Interstate and that, when you add the workers' comp into that, the result's even better. Yeah, my comments were more towards commercial auto liability. Commercial auto overall and workers' comp in our transportation businesses are doing very well.

Carl Lindner III: For companies like National Interstate and that, when you add the workers' comp into that, the result's even better. Yeah, my comments were more towards commercial auto liability. Commercial auto overall and workers' comp in our transportation businesses are doing very well.

Speaker #5: Thank you for that clarification. And 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?

Andrew Andersen: Thank you for that clarification. Maybe sticking with workers' compensation, could you quantify what 2Q pricing was there? Just given the benign loss trends, are you comfortable growing that book despite negative rate?

Speaker #3: You know, the loss ratio trends continue to be very benign. And results on our we continue to have really strong results, both in a particular in a calendar year basis and in an action year basis.

Carl H. Lindner III: The loss ratio trends continue to be very benign, and we continue to have really strong results both in particular on a calendar year basis and an accident year basis. Now, poor California underwriting results would be the exception. California is 14% of our workers' compensation business, and we're not doing well there, like a lot of others. We've had continued favorable development in the Q2 and H1. We feel our reserve position's strong. Q2 pricing for the overall business is down about 2% and about 3% through H1. Again, that's on top of really great results and a strong reserve position and that. Our workers' compensation results will probably be not as good as we go forward, but will continue to be very strong. We're growing that business some.

Carl Lindner III: The loss ratio trends continue to be very benign, and we continue to have really strong results both in particular on a calendar year basis and an accident year basis. Now, poor California underwriting results would be the exception. California is 14% of our workers' compensation business, and we're not doing well there, like a lot of others. We've had continued favorable development in the Q2 and H1. We feel our reserve position's strong. Q2 pricing for the overall business is down about 2% and about 3% through H1. Again, that's on top of really great results and a strong reserve position and that. Our workers' compensation results will probably be not as good as we go forward, but will continue to be very strong. We're growing that business some.

Speaker #3: Poor California underwriting results would be the exception. California's 14% of our workers' comp business and we're not doing well there. Like a lot of others.

Speaker #3: We've had continued favorable development and the second quarter in six months, we feel our reserve positions strong. Second quarter pricing, for that overall business is down about 2% and about 3% through six months.

Speaker #3: 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 continue to be we'll continue to be very strong.

Speaker #3: And we're getting we're growing that business some. So I think we're through in the second quarter, I think we have mid-single-digit growth in our overall comp business, even with our California premiums being down.

Carl H. Lindner III: I think in the Q2, I think we have mid-single-digit growth in our overall comp business, even with our California premiums being down.

Carl Lindner III: I think in the Q2, I think we have mid-single-digit growth in our overall comp business, even with our California premiums being down.

Speaker #5: Thank you. Thank you.

Andrew Andersen: Thank you.

Speaker #1: One moment for our next question. Our next question comes from Gregory Peters from Raymond James. Please go ahead, Gregory.

Operator: One moment for our next question. Our next question comes from Gregory Peters from Raymond James. Please go ahead, Gregory.

Speaker #4: Hey, good afternoon. This is Mitch on for Greg. 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 a pricing and submission flow standpoint?

[Analyst] (Raymond James): Hey, good afternoon. This is Mitch on for Greg. 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 standpoints?

Speaker #3: 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.

Carl H. Lindner III: 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 nonprofit. The businesses that we need it, I think we're continuing to get rate that 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'll be really interesting to see how many of them burn up over the next two or three years in that. I do think the MGAs are having some impact in some ends of the specialty casualty marketplace.

Carl Lindner III: 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 nonprofit. The businesses that we need it, I think we're continuing to get rate that 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'll be really interesting to see how many of them burn up over the next two or three years in that. I do think the MGAs are having some impact in some ends of the specialty casualty marketplace.

Speaker #3: High single-digit price increase and some businesses like nonprofits. So the businesses that we needed, I think we're continuing to get rate that helps that kind of helps us meet or even exceed our targeted returns.

Speaker #3: Things like excess liability and umbrella, where we have seen MGA step in, it's certainly probably easy for them to write the business. The it'll be really interesting to see how many of them burn up.

Speaker #3: Over the next two or three years. And that so I do think the MGAs are having some impact in some ends of the specialty casualty marketplace.

Speaker #3: 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 it doesn't turn out too well.

Carl H. Lindner III: Usually, that doesn't turn out well in longer tail specialty casualty lines where the incentive's on growth and that's the way they build earnings. Usually doesn't turn out too well.

Carl Lindner III: Usually, that doesn't turn out well in longer tail specialty casualty lines where the incentive's on growth and that's the way they build earnings. Usually doesn't turn out too well.

Speaker #4: 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%.

[Analyst] (Raymond James): 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?

Speaker #4: Could you provide some insight on which areas of that market you're focusing on for growth?

Speaker #3: 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.

Carl H. Lindner III: 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 that now we've renewed that. Really from Q2 on, we don't have the drag of that quota share. I think we're back to more meaningful growth quarter by quarter in our lender-placed property business. 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. We have a number of businesses that are showing healthy growth in our Specialty Financial Group now.

Carl Lindner III: 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 that now we've renewed that. Really from Q2 on, we don't have the drag of that quota share. I think we're back to more meaningful growth quarter by quarter in our lender-placed property business. 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. We have a number of businesses that are showing healthy growth in our Specialty Financial Group now.

Speaker #3: And now we've kind of renewed that, so really from the second quarter on, we don't have the drag of that quota share.

Speaker #3: So I think we're back to more meaningful growth quarter by quarter in our Specialty and our Lender Placed Property business. But we have other businesses, like Great American Europe, that we're growing.

Speaker #3: 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 in that.

Speaker #4: Thanks, and congrats on the quarter.

[Analyst] (Raymond James): Thanks, congrats on the quarter.

Carl Lindner III: Thanks, congrats on the quarter.

Speaker #1: As a reminder, to ask a question you need to press *11 on your telephone and wait for your name to be announced.

Operator: As a reminder, to ask a question, you need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. I am showing no further questions at this time. I would like to turn it back to Diane Weidner for closing remarks.

Speaker #1: To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. I am showing no further questions at this time.

Speaker #1: I would like to turn it back to Diane Weidner for closing remarks.

Speaker #2: 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.

Diane P. Weidner: Thank you, James. 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.

Diane Weidner: Thank you, James. 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.

Speaker #2: We hope you all have a great day.

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

Q2 2026 American Financial Group Inc Earnings Call

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