Ladies and gentlemen, thank you for standing by, and welcome to American Financial Group's 2020 Second Quarter Results. At this time, all participants are on a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised, that today's conference is being recorded. I would now like to hand the conference over to your speaker for today, Diane Weidner, Vice President, Investor Relations. You may begin.

Thank you, Towanda. Good morning, and welcome to American Financial Group's second quarter 2020 earnings results conference call. We hope you and your loved ones are healthy and safe as we continue to navigate the challenges of the pandemic. We released our 2020 second quarter 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, as well as Brian Hertzman, AFG Vice President and Controller. 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 these matters to be discussed today are forward-looking. These forward-looking statements involve risks and uncertainties that could cause 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 responses to questions. A reconciliation of net earnings attributable to shareholders to core net operating earnings is included in our earnings release. 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 Lindner III to discuss our results.

Good morning. We're pleased to share highlights of AFG's 2020 second quarter results and respond to your questions. Since we reported our first quarter results in May, we have had the opportunity to more thoroughly understand the impact of the COVID-19 pandemic on our business, our insurance industry, the financial markets and the global economy. Our thoughts and prayers remain with all those affected by the virus and those caring for them. These exceptionally challenging circumstances have highlighted the resiliency and commitment of our AFG employees who are the foundation of our success. Our comprehensive business continuity plans, coupled with flexible and effective workplace policies and practices have enabled us to focus on providing the secure, trusted service and support on which our agents and policyholders rely, while keeping the well-being of our employees as our top priority. Craig and I continue to be pleased with AFG's strong financial position. We have the liquidity and excess capital that afford us the flexibility to effectively address and respond to the uncertainties presented by COVID-19, as well as the ability to act on business opportunities. Now, I'd like to turn to an overview of our second quarter results on Slide 4 of our webcast. AFG reported second quarter core net operating earnings, excluding losses from alternative investments, of $1.53 per share, a decrease of $0.13 per share from the comparable period in 2019. Core net operating earnings were $1.05 per share in the second quarter and included a $44 million loss or $0.48 per share on AFG's $2.2 billion portfolio of alternative investments, which are marked-to-market through core operating earnings. This compares to $41 million in earnings or $0.46 per share in the 2019 second quarter. The returns on these investments reflect the widespread financial and economic impacts of the COVID-19 pandemic and a significant decrease in both the equity and credit markets in the first quarter. The returns on these investments are typically recorded on a quarter lag. Our second quarter 2020 core operating earnings included approximately $85 million or $0.75 per share in losses for claims reserves and incurred but not reported (IBNR) designated for estimated COVID-19-related losses. These losses are reported separately from our catastrophe losses. Turning to Slide 5, you'll see that the second quarter 2020 net earnings per share of $1.97 included after-tax noncore items aggregating $0.92 per share. Last quarter, we provided full year 2020 core net operating earnings per share guidance, excluding earnings or losses from alternative investments due to the uncertainty of the implications of COVID-19 and the resulting volatility in the financial markets. Based on results through the first six months of the year, AFG now expects its 2020 core net operating earnings per share, excluding alternative investments, to be in the range of $6.60 to $7.40, an increase of $0.15 a share from the midpoint of our previous guidance. Craig and I will discuss our guidance for each segment of our business in more detail later in the call. We're very pleased with the performance of our core operating businesses during the second quarter of 2020 amid the challenges presented by the COVID-19 pandemic. We believe our underlying results demonstrate the strength of our portfolio of diversified specialty insurance businesses and the contributions of our exceptional employees. We thank God, our talented management team and our employees for helping to achieve these results. Now, I'd like to turn our focus to our property and casualty operations. Please turn to Slide 6 and 7 of the webcast, which include an overview of second quarter results. Our Specialty Property and Casualty Group performed exceptionally well during the quarter, with excellent underwriting margins and very strong renewal pricing that's exceeding our expectations. As you'll see on Slide 6, gross and net written premiums were down 8% and 11%, respectively, when compared to the second quarter of 2019, primarily as a result of the runoff of Neon. Excluding the impact of the Neon runoff, the gross written premiums were up 2%, and net written premiums decreased 1% year-over-year. Core operating earnings in AFG's property and casualty insurance operations, excluding alternative investments, was $129 million in the second quarter of 2020 compared to $152 million in the prior year period, a decrease of 15%. Lower property and casualty net investment income was the driver of the lower year-over-year earnings. The Specialty Property and Casualty Insurance operations generated an underwriting profit of $54 million in the 2020 second quarter compared to $60 million in the second quarter of 2019. Higher underwriting profitability in our Property and Transportation Group was more than offset by lower underwriting profits in our Specialty Casualty and Specialty Financial groups. The second quarter 2020 combined ratio of 95.2% benefited from 7.6 points of favorable prior year reserve development, while catastrophe losses added 2.3 points. In addition to catastrophes, losses attributed to COVID-19 added 7.6 points to the combined ratio for the second quarter of 2020. We continue to carefully monitor claims and loss trends related to the COVID-19 pandemic. Numerous legislative and regulatory actions as well as the specifics of each claim contribute to a highly fluid and evolving situation. Year-to-date, we've recorded approximately $95 million in COVID-19-related losses, approximately 90% of which are established reserves for claims that have been incurred but not reported. Given the uncertainty surrounding the ultimate number and scope of claims related to the pandemic and the changing economy, these charges represent the company's current best estimate of losses from the pandemic and related economic disruption. Our claims professionals and those who support them are working tirelessly to review claims with the care and attention each deserves. Like other insurers, we have received confirmation of subrogation benefits in connection with the PG&E bankruptcy and the 2017 and 2018 Northern California wildfires. Our gross recovery was in line with expectations. AFG expects to record approximately $8 million in benefits pertaining to these recoveries in our third quarter results. Turning to pricing; we continue to see exceptionally strong renewal rate momentum. In fact, our average renewal rate increases year-to-date are the highest that we've achieved in over 15 years. Average renewal pricing across our entire property and casualty group was up approximately 9% for the quarter. And if you exclude our workers' compensation business, renewal pricing was up approximately 13% in the third quarter. Both measures reflect an improvement from rates achieved in the first quarter. Now, I'd like to turn to Slide 7 to review a few highlights from each of our Specialty Property and Casualty business groups. The Property and Transportation Group reported an underwriting profit of $33 million in the second quarter of 2020, primarily the result of higher favorable prior year reserve development in our transportation businesses. Results were adversely impacted by $15 million of catastrophe losses in the quarter in addition to $3 million of COVID-19-related losses. We continue to be very pleased with the profitability in our transportation businesses. The crop year is shaping up nicely. Crop conditions are very favorable and significantly improved from last year at this time with industry reports of 72% of corn and 73% of soybean crops in good or excellent condition. Current yield projections for both are slightly above their respective yield trends, which has put some pressure on both corn and soybean pricing. Commodity futures for corn and soybeans are approximately 17.5% and 4% lower, respectively, than the spring discovery prices. While pricing is currently within acceptable ranges, we're closely monitoring the corn commodity pricing, in particular. Second quarter 2020 gross and net written premiums in this group were 6% and 1% higher, respectively, than the comparable prior year period. The late acreage reporting from insureds adversely impacted crop premiums in the second quarter of last year. Excluding crop insurance, 2020 gross and net written premiums in this group decreased by 3% and 5%, respectively, when compared to the 2019 second quarter. Decreases in premiums due to the return of premiums and reduced exposures as a result of COVID-19 were partially offset by new business opportunities in our transportation, cropping, and inland marine and ocean marine businesses. Overall, renewal rates in this group increased 7% on average in the 2020 second quarter, an improvement from renewal rate increases achieved in the first quarter of 2020. I am especially pleased with the rate strengthening in commercial auto liability, aviation, and in our Singapore branch, all of which continue to achieve substantial increases. Our underwriting profits in our Specialty Casualty Group were lower year-over-year and were adversely impacted by $52 million in COVID-19-related losses, primarily in our workers' compensation and executive liability businesses. These losses, in addition to lower year-over-year underwriting profits in our alternative markets and social services business, were partially offset by higher favorable prior year reserve development and higher profitability in our excess and surplus and excess liability businesses. The COVID-19 pandemic has resulted in lower payrolls in our workers' compensation businesses, which when coupled with renewal rate decreases, significantly impacted premiums. Now gross and net written premiums in this group, when excluding both Neon and workers' compensation, grew by 9% and 2%, respectively. Renewal pricing for this group was up 12% in the second quarter. And excluding our workers' compensation businesses, renewal rates in this group were up 21%, an improvement from the rates achieved in the first quarter. Now, turning to Specialty Financial. Specialty Financial Group results for the second quarter of 2020 included COVID-19-related losses of $30 million, primarily related to trade credit insurance. Second quarter 2020 gross and net written premiums were both down 7% when compared to the prior year period. Lower premiums in our financial institutions business, which resulted from the impact of various state regulations regarding moratoria on policy cancellations and the placement of force coverage in our financial institutions businesses. Renewal pricing in this group was up approximately 6% for the quarter and an improvement from the first quarter of 2020. Now, if you would turn to Slide 8 with me for a summary view of our 2020 outlook for the Specialty Property and Casualty operations. In light of the challenges and uncertainties presented by the COVID-19 pandemic, we've conducted a detailed review of our expectations and other key financial and operating items for each of our Specialty Property and Casualty businesses. Based on our results for the first six months of the year and our current expectations of the impact of COVID-19, we now expect property and casualty pretax core operating earnings, excluding the impact of alternative investments, in the range of $615 million to $675 million. This guidance is $15 million lower than the midpoint of our previous guidance and reflects an equal measure of lower expected underwriting profitability based on reported pandemic losses and lower expected property and casualty net investment income. We continue to expect the 2020 combined ratio for the Specialty Property and Casualty Group overall between 92% and 94%. Our revised premium guidance overall and within each of our specialty subsegments reflects an improved outlook from our previous guidance. Excluding the impact of the Neon runoff, we expect net written premiums to be 4% lower to 2% higher than our prior year results. And if we exclude Neon and workers' compensation, we expect net written premiums to be 2% lower to 4% higher than what we reported in 2019. You'll see on the slide that we adjusted our combined operating ratio and premium guidance within each of our Specialty Property and Casualty subsegments to reflect our most current view of the impact of the COVID-19 pandemic. The estimate for the combined operating ratio in our Property and Transportation Group improved two points, and we've increased our premium expectations. We have increased our combined operating ratio guidance in our Specialty Casualty and Specialty Financial groups to reflect the estimated impact of COVID-19. Given the uncertainties of the implications of COVID-19 and the resulting volatility in the financial markets, we're not providing guidance for property and casualty net investment income. And based on the results through the end of June, we'd expect overall property and casualty renewal pricing in 2020 to be up 7% to 10%, an improvement from the range of 5% to 8% estimated previously. And excluding workers' compensation, we expect renewal rate increases to be in the range of 10% to 13%, an increase from the range of 8% to 11% estimated previously.

Thank you, Carl. I'll start with a review of our annuity results for the second quarter beginning on Slide 9. The gross statutory annuity premiums were $687 million in the second quarter of 2020 compared to $1.35 billion in the second quarter of 2019, a decrease of 49%. Annuity sales were lower in all channels in the 2020 second quarter as a result of stay-at-home orders and other factors related to the COVID-19 pandemic that significantly impacted our access to distribution partners as well as their access to current and prospective clients. Turning to Slide 10. You'll see the components of pretax annuity core operating earnings. Second quarter 2020 pretax annuity core operating earnings, excluding alternative investments, increased by 12% year-over-year. There were several factors contributing to the improved results, including growth in annuity assets, higher-than-expected persistency, lower-than-expected expenses related to guaranteed benefits, a strong market and a reduction in the cost of funds. These favorable items, which include items that may not necessarily recur were partially offset by a decline in investment returns. We believe these results demonstrate the strong fundamentals of our Annuity business. The financial and economic implications of COVID-19 adversely impacted the returns on the Annuity segment's $1.3 billion of alternative investments during the second quarter of 2020. Although the return on these investments was a negative 3% in 2020, the cumulative return on these investments over the past five calendar years has been nearly 10%. Turning to Slide 11. You'll see AFG's quarterly average annuity investments and reserves grew approximately 7% and 6%, respectively, year-over-year. On the bottom half of the slide, you'll see information about our annuity spreads, starting with our net interest spread, which takes into account our cost of funds. In the second quarter of 2020, our cost of funds and other benefit expenses was 253 basis points, which included amortization of bonuses and accretion of withdrawal benefit reserves. In the first quarter of this year, we began taking more proactive measures in adjusting renewal rates, particularly on those products near the end or out of the surrender charge period. For fixed indexed annuities, these adjustments occur on the policy anniversary. So we'll continue to see our cost of funds come down over the next several quarters as a result of these adjustments. We believe it's difficult to compare cost of funds between different companies because the presentations are not consistent. For example, AFG's cost of funds in the second quarter of 2020 included six basis points for the cost of bonuses and the cost of guaranteed withdrawal benefits. These items are not consistently reported as a component of cost of funds by others in the industry. We have noted that companies that sell significant amounts of products with bonuses and guaranteed benefits that do not include a charge for these features and their cost of funds or net interest spread calculations. We believe these costs could be as high as 50 to 100 basis points in some cases. As a result, this can create an unrealistic picture of the cost of generating business and make comparisons difficult between annuity providers particularly when comparing AFG to companies whose business model relies on high commissions or upfront bonuses to generate sales. While net interest spread is an important financial measure for annuity companies, we believe that a helpful measure for investors to consider is return on equity. The Annuity segment's operating returns on equity exceeded 12% in 2018 and 2019. Looking forward, as the returns on our annuity investments normalize, we would expect to produce returns at that level. Please turn to Slide 12 for a summary of the 2020 outlook for the Annuity segment. While AFG continues to expect an attractive return on its alternative investments over the long term, due to ongoing volatility and uncertainty, it's difficult to forecast these returns for the remainder of 2020. Pretax annuity core operating earnings, excluding earnings from alternative investments, are expected to be in the range of $300 million to $320 million, an increase from our most recent guidance of $280 million to $310 million. By comparison, Annuity core operating earnings, excluding alternative investments, were $298 million in 2019. Our guidance reflects the continued impact of low short-term interest rates on the Annuity segment's net investment in cash and floating rate securities. We began more aggressive renewal actions with policies renewing in April. Once fully implemented, over 12 months, we estimate annualized savings of $35 million to $50 million depending on surrender activity, the equivalent to reducing our overall cost of funds by eight to 12 basis points. Our guidance also assumes that the stock market and longer-term interest rates remain relatively flat for the balance of 2020. As we noted when we announced our first quarter results, we anticipated a significant impact on annuity sales in the second quarter. This trend has continued into the third quarter. Despite the slowdown in sales, AFG's average annuity investments grew more than 7% over the comparable prior year period. And average annuity reserves grew by more than 6%. Our current estimate is that 2020 gross annuity sales will be between $3.4 billion and $3.9 billion and result in growth in average investments and reserves of 5% to 7% in 2020. In addition to our strong capital position and our strong underlying fundamentals, we have the ability to lower credited rates on $32 billion of annuity reserves by an average of 114 basis points, giving us a great deal of flexibility and helping us manage returns on our inforce business. Furthermore, as a result of prudent pricing, AFG has sold fewer annuities with guaranteed living benefits than many of its peers. Earlier this year, we suspended sales of riders to afford us the opportunity to revise the terms to reflect the current interest rate and equity market environment. At June 30, 2020, only about 12% of AFG's annuity reserves contained these guarantees, which is about half the industry average resulting in lower risk and earnings volatility arising from decreases in interest rates and the stock market.

Thank you, Craig. Please turn to Slide 16. Here at AFG, we define excess capital as a sum of holding company cash, excess capital within our insurance subsidiaries and borrowing capacity up to a 22% debt to total adjusted capital ratio. For purposes of this calculation, subordinated or hybrid debt, which has preferred stock type features is excluded from debt and our debt-to-capital calculation. In calculating insurance company excess capital, we use the most stringent rating agency capital model among Moody's, which is based on the NAIC's model, Standard & Poor's and A.M. Best. For our Property and Casualty business, the most stringent model is S&P. Here, we measure capital in excess of what is required to maintain an A+ S&P rating. For our Annuity business, excess capital is based on the Moody's or NAIC capital requirements. Here, we measure capital in excess of what's required for a 375% risk-based capital ratio. This target is based on Moody's indication that a ratio at this level or higher is a factor that could lead to an upgrade for our annuity companies. It also provides a sizable cushion over Moody's indication that an RBC ratio of less than 325% could lead to a downgrade. RBC targets vary by annuity company. Our RBC threshold takes into account several favorable factors cited by Moody's, including the Annuity segment's efficient expense structure, our ability to lower our cost of funds, and our relatively simple product designs that provide surrender protection. Because we use the most stringent capital models, the capital levels that we target in our excess capital calculation result in statutory capital that is well in excess of what is expected by the other less stringent rating agencies for AFG's Property & Casualty and Annuity segment ratings. Our management team reviews all opportunities for deployment of capital on a regular basis.

I wanted to switch back to the commentary that you provided, Carl. I wanted to focus on two things: first, the crop commentary; and then the trade credit commentary. When you provided the guidance for the full year for the Property Casualty business, did you assume that crop was going to be better, the same or lower than the previous year? Because in your comments, it certainly seemed to suggest that you had some degree of caution, as it relates to your outlook there.

I think it was just the opposite, frankly, Greg. In our guidance, I think I always tell people that we kind of build in an average crop year and average means an average over time in that. I think this year, as I mentioned, it is shaping up very nicely. Crop conditions are really favorable. When you look at the percent of corn and soybeans in good excellent condition, that really looks good. I think the one thing that we're watching as the biggest part of the modal apparel part of the book is revenue-based, which is a function of yield and price. We're keeping our eye on the corn prices, in particular. I think as I had mentioned in the past, our insurers choose up deductibles. They take the first layer of losses if there are losses on a revenue basis. So, I think the average deductibles farmers choose if somebody has a 15% deductible, then they're taking the first 15% of losses. So we're keeping our eye on corn prices. Soybean prices are really in good shape at this point. And if prices on corn start to be above, you get to the 20% level and yields aren't good, that's when you kind of worry a little bit in that. But right now, I think our crop year is shaping up very nicely.

Thank you, Towanda. And thank you all for joining us this morning. Please feel free to reach out to the Investor Relations team should you have any additional questions. And we hope you all have a great rest of your day.