Good day, ladies and gentlemen, and welcome to the American Financial Group 2014 third quarter results conference call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone's require operator assistance, please press star then zero on your touch-tone telephone. As a reminder, this conference call is being recorded. I would now introduce your host for today's conference, Diane Weidner. You may begin.
Thank you. Good morning, welcome to American Financial Group's third quarter 2014 earnings results conference call. I'm joined this morning by Carl Lindner III and Craig Lindner, Co-CEOs of American Financial Group, and Jeff Consolino, AFG's Chief Financial Officer. If you are viewing the webcast from our website, you can follow along with the slide presentation if you'd like. Certain statements made during this call are not historical facts and may be considered forward-looking statements and are based on estimates, assumptions and projections, which management believes are reasonable, but by their nature, subject to risks and uncertainties.
The factors which could cause actual results and/or financial condition to differ materially from those suggested by such forward-looking statements include, but are not limited to, those discussed or identified from time to time in AFG's filings with the Securities and Exchange Commission, including the annual report on Form 10-K and quarterly reports on Form 10-Q. We do not promise to update such forward-looking statements to reflect actual results or changes in assumptions or other factors that could affect these statements. core net operating earnings is a non-GAAP financial measure which sets aside significant items that are generally not considered to be part of ongoing operations, such as net realized gains and losses, discontinued operations, and certain non-recurring items. AFG believes this non-GAAP measure is a useful tool for analysts and investors in analyzing ongoing operating trends, and will be discussed for various periods during this call.
A reconciliation of net earnings attributable to shareholders to core net operating earnings is included in our earnings release. If you are reading a transcript of this call, please note that it may not be authorized or reviewed for accuracy, thus it may contain factual or transcription errors that could materially alter the intent or meaning of our statements. I'm pleased to turn the call over to Carl Lindner III to discuss our results.
Good morning. We released our 2014 third quarter results yesterday afternoon. I am assuming that our participants have reviewed our earnings release and the investor supplement, posted on our website. We're pleased to report core net operating earnings per share of $1.40 per share, a 32% increase from the comparable prior year period. These results reflect solid property and casualty operating earnings and continued strong profitability in our annuity segment and set new AFG records for the third quarter and nine-month core operating earnings per share. Annualized core operating return on equity was 12.3% for the 2014 third quarter compared to 10% for the third quarter of 2013. Net earnings per diluted share were $1.28 and included $0.09 per share of realized gains and a charge of $0.21 per share related to the strengthening of our A&E reserves. Annualized return on equity was 11.1%.
Adjusted book value per share was $48.59 at September 30th, 2014, up 6% from year-end 2013. Based on the results for the first nine months of this year, we continue to expect AFG's 2014 core operating earnings per share to be in the range of $4.50 to $4.90. Craig and I will discuss our guidance for each segment of our business a little later in the call. During the third quarter, we repurchased 1.4 million AFG common shares for $83 million at an average price per share of $57.37. We were pleased with the market's response to our September hybrid debt offering. Proceeds from the issuance of $150 million of 6.25%, 40-year debentures provide equity credit to AFG and will be used for general corporate purposes, which may include the repurchase of common stock or the redemption of higher yielding debt that becomes callable next September.
We also continue to grow our businesses. We achieved year-over-year growth of 16% in average annuity assets and reported an increase of 16% in net written premiums in our specialty property and casualty group. Slides four and five of the webcast include an overview of results in our specialty property and casualty operations. On slide four, you'll see that gross and net written premiums were up 5% and 16% respectively in the 2014 third quarter compared to the same quarter a year earlier, due primarily to higher premiums in our Specialty Casualty group, which includes results from Summit, our specialty workers comp subsidiary acquired on April 1st, 2014. Strong growth in our Specialty Casualty group was partially offset by premium declines in our Property and Transportation group, resulting from the timing of premium recognition in our agricultural operations during the 2013 third quarter.
Excluding Summit and our crop premiums, our specialty property and casualty gross and net written premiums grew by 14% and 12% respectively during the third quarter of 2014. We are quite pleased with these results. Specialty property and casualty insurance operations generated underwriting profit of $70 million for the third quarter in 2014 compared to $62 million in the third quarter of 2013. The third quarter 2014 combined ratio of 93.8 was virtually unchanged from the 2013 third quarter, as was accident year underwriting profitability. Third quarter 2014 property and casualty net investment income was about 17% higher than the comparable 2000-.
Ladies and gentlemen, please stand by. Your conference will begin momentarily. You may begin.
Sorry about that. Third quarter 2014 property and casualty net investment income was approximately 17% higher than the comparable 2013 period, reflecting the investment of cash received in the connection with the Summit acquisition. Nearly two-thirds of our property and casualty businesses reported pricing increases during the third quarter, resulting in overall renewal rate increase of about 2%. This is the 12th consecutive quarter that we've reported overall price strengthening. Pricing continues to keep pace with loss cost trends in many of our businesses, and loss cost trends appear to be relatively benign across almost all of our property and casualty businesses. On slide five, you'll see a few highlights from each of our specialty property and casualty business groups. Property and Transportation Group reported an underwriting profit of $11 million in the 2014 third quarter compared to underwriting profit of $16 million in the comparable prior year period.
I am pleased with the improved underwriting results in our property and inland marine operations and in Great American's transportation business. Higher underwriting profits in these businesses, though, were offset by lower profitability in our agricultural operations. The midpoint of AFG's earnings per share guidance that you'll see assumes break-even results in our crop insurance business. The commodity price declines and hail damage from spring storms, we feel will likely offset strong yield forecasts that are out there right now. Decreases in gross and net written premiums in this group were due primarily to lower 2014 commodity prices impacting our crop operations, coupled with higher than average crop premiums reported in the third quarter of last year. These decreases were partially offset by growth in our transportation businesses, primarily the result of rate increases.
Excluding our crop insurance business, gross written premiums in this group increased by 6%, and net written premiums increased by 4% compared to the 2013 third quarter. I am pleased to see continued rate momentum in this group. Overall renewal rates increased 5% on average for the quarter, with our National Interstate subsidiary achieving a 9% rate increase. The Specialty Casualty Group reported strong underwriting profit of $32 million in the third quarter of 2014 compared to $19 million in the third quarter of 2013. I'm particularly pleased that our workers' compensation businesses overall have continued to generate solid underwriting profitability, and results from Summit continue to exceed our expectations. Most businesses in this group produced strong accident year underwriting profit margins through the first nine months of 2014. We did do a little bit of fine-tuning of reserves in our Mid-Continent subsidiary, involving incremental adjustments across multiple accident years.
Even with this reserve strengthening, accident year results in this line of business have been excellent. Growth has been strong in this group, the result of acquisitions and underlying organic growth. While all businesses in this group reported growth year-over-year, the acquisition of Summit and the successful renewal of a recently acquired block of public sector business, along with the growth in our workers' compensation, E&S, and nonprofit social services businesses, were the primary drivers of higher premiums. Excluding premiums from Summit and our public sector business, gross and net written premiums each grew 17%. Pricing in this group was up about 1% on average for the quarter. After about four years of rate increases on our workers' compensation in excess and surplus lines businesses, we're experiencing some rate deceleration as a result of the excellent underwriting profit margins that we have in these businesses.
Specialty Financial Group continued to deliver stellar results, reporting underwriting profit of $21 million and a combined operating ratio of 81.6% in the third quarter. Nearly all the businesses in this group achieved excellent underwriting margins. Gross and net written premiums were both 2% lower in the 2014 third quarter when compared to the same 2013 period. Growth in gross written premiums was tempered by the October 13th sale of a service contract business which ceded all of its premiums under reinsurance contracts. Pricing in this group was down approximately 2% for the third quarter, primarily the result of small rate declines in our lender-placed mortgage property business. Please turn to Slide 6 for an overview of the 2014 outlook for the Specialty Property & Casualty operations.
We have narrowed our estimate for expected growth in net written premiums to be in the range of 18%-21%, from the range of 17%-21% previously estimated. Excluding Summit, growth in net written premiums is expected to be in the range of 6%-9%, a change from the 5%-9% estimated previously. We now estimate a combined ratio between 93% and 95%, narrowed slightly from the range of 92%-95% estimated previously. Through the first nine months of 2014, we've reported a combined ratio of 94.4%. Looking at our Specialty Property & Casualty groups, we now expect net written premiums in our Property & Transportation group to be in the range of down 1% to up 1% when compared to 2013 levels. It's a more narrow range than our previous estimate of -2% to +2%.
Excluding the impact of our crop insurance business, we expect growth in net written premiums to be in the range of 3%-5%, a slight decrease from growth of 3%-6% estimated previously. Based on the results through the first nine months of 2014, the combined ratio in this group is now estimated to be in the range of 98%-100%, narrowed a bit from the 96%-100% estimated previously. The midpoints of our revised combined operation guidance for the overall Property & Casualty group and Property & Transportation group assume breakeven results for crop. Net written premiums in our Specialty Casualty group are expected to grow in the range of 50%-53%, narrowed slightly from the range of 49%-53% estimated previously.
Excluding Summit, we now expect growth in this group to be between 19% and 22%, an increase from the previous estimate of growth of 16%-20%. Our estimate for the combined ratio in this group is in the range of 91%-93%, a slight increase from the range of 89%-93% estimated previously. We now expect net written premiums in our Specialty Financial group to be flat to up 3% when compared to our 2013 results. It's a slight decrease from the growth of 0%-4% we estimated previously. Our estimate for the combined ratio in this group is in the range of 86%-88%, an improvement from the range of 87%-91% estimated previously.
Now we are targeting overall average renewal rate increases for this year for the Specialty Property & Casualty group to be in the range of 2%-3%, slightly lower than the 3%-4% previously estimated. We expect Property & Casualty net investment income to grow by 13% this year as a result of the cash received in connection with the Summit acquisition. This is a slight decrease from the 14% growth previously estimated. Now I'll turn the discussion over to Craig to review the results in our Annuity segment and discuss AFG's investment performance.
Thank you, Carl. The Annuity segment reported core pre-tax operating earnings of $86 million in the 2014 third quarter, compared to $78 million in the comparable 2013 period. A 10% increase is shown on Slide seven. Interest rate and stock market fluctuations have an impact on the accounting for fixed-indexed annuities, and these accounting adjustments are recognized through AFG's core earnings. On this slide, you'll see that the fair value accounting related to fixed-indexed annuities had a minor impact on our third quarter results in 2014 and no material impact on 2013 third quarter results. Annuity premiums were $809 million in the third quarter of 2014, a decrease of 31% from the comparable prior year period. Our disciplined approach to product pricing in a declining interest rate environment, along with increased levels of competition, resulted in lower premiums across all single premium product lines during the 2014 third quarter.
In contrast, a rising interest rate environment in 2013 resulted in nearly $1.2 billion in annuity premiums in the 2013 third quarter, which was a record for us. Turning to Slide eight, you'll see that AFG's 2014 earnings continue to benefit from growth in annuity assets. AFG's quarterly average annuity investments have grown by 16% year-over-year. The impact of the growth in annuity assets was offset by the runoff of higher yielding investments, as shown by the 12 basis point decline in net interest spread. Our net spread earned during the 2014 third quarter was 148 basis points, only two basis points lower than the comparable prior year period. Additional information about the components of these spreads for AFG's fixed annuity operations can be found in AFG's quarterly investor supplement posted on our website. Please turn to Slide nine for an overview of the 2014 outlook for the annuity segment.
We continue to expect average fixed annuity investments and average fixed annuity reserves to grow by 15%-18% in 2014. The decrease in interest rates in October is likely to put downward pressure on core annuity earnings in the fourth quarter due to the fair value accounting for fixed-indexed annuities. As a result, we expect that full year 2014 core pre-tax annuity operating earnings will be in the range of $315 million-$325 million, compared to the $328 million reported for the full year of 2013. We estimate that our net spread earned, which is the basis for GAAP reported earnings, will be 20-25 basis points lower than the 160 basis points achieved for the full year of 2013. This estimated decrease includes the negative impact of fair value accounting in 2014, including the October decrease in interest rates.
Excluding the impact of fair value accounting, we estimate that our net spread earned in 2014 will approximate the net spread earned in 2013. We remain committed to our disciplined product pricing strategy, which means that our focus is on growing our business when we can achieve desired long-term returns. The competitive environment and decreasing interest rate environment in 2014 has slowed the pace of our annuity sales, especially when compared to the record level of sales we achieved in the second half of 2013. As a result, based on information currently available, we now expect that premiums for the full year of 2014 will be approximately $3.6 billion, which would be the second highest level of annuity sales in AFG's history. These estimates do not reflect any positive or negative impact from our fourth quarter unlocking review of the company's major actuarial assumptions and its fixed annuity business.
Significant changes in interest rates and/or the stock market from today's level could lead to additional positive or negative impacts on the annuity segment's results. In addition, in the fourth quarter, we will complete loss recognition testing of the major actuarial assumptions for our runoff long-term care business. Although AFG had loss recognition margin of $64 million in its long-term care operations as of 12/31/2013, further continuation of the recent low interest rate environment, including the drop in interest rates during October of 2014, will reduce that margin. In addition, with the assistance of an external actuarial consulting firm, we are analyzing other assumptions that could have an impact on the loss recognition margin, including projected long-term care claims and persistency.
In the event that the updated loss recognition testing assumptions result in a cumulative adverse impact in excess of $64 million, AFG would record a loss recognition charge equal to that amount. Please turn to Slide 10 for a few highlights regarding our $35 billion investment portfolio. AFG recorded third quarter 2014 net realized gains on securities of $8 million after tax and after deferred acquisition costs, compared to $35 million in the comparable prior year period. Unrealized gains on fixed maturities were $602 million after tax, after DAC, at September 30, 2014, an increase of $161 million from year-end. Unrealized gains on equities were $124 million after tax at September 30, 2014, an increase of $2 million from year-end.
As you'll see on slide 11, our portfolio continues to be high quality, with 86% of our fixed maturity portfolio rated investment-grade, and 97% with an NAIC designation of 1 or 2, its highest two categories. We provided additional detailed information on the various segments of our investment portfolio in the quarterly investor supplement on our website. I will now turn the discussion over to Jeff, who will wrap up our comments with an overview of our consolidated third quarter 2014 results.
Thank you, Craig. Good morning, everyone. I'm starting on slide 12. Core net operating earnings per share in this quarter were $1.40. This is up 32% from a year ago. The $1.40 tax operating earnings in the quarter of $187 million, as you can see on the slide. Compare that to the $148 million reported in the year-ago quarter. This is an increase of $39 million year-over-year. When you do the math on the components of the $39 million, our P&C segment gave us $17 million of this increase. The annuity segment gave us $8 million. The positive reversal in the run-off long-term care and life segment yielded a $5 million swing in core pre-tax operating earnings, as the segment flipped from a loss a year ago to a modest profit.
Add in a decrease of $9 million in other expenses, and that totals to the $39 million lift to core pre-tax operating earnings in the quarter. As to what drove that pickup, P&C core pre-tax operating earnings rose by $17 million, not only due to the $8 million in increased underwriting profits, but also an additional $11 million as segment net investment income. As the average P&C invested assets grew by $1.5 billion year-over-year, thanks to the Summit acquisition and operating cash flow. You can see on page four of the investor supplement that the movement in other expenses for the P&C segment was adverse by about $2 million in the quarter. This is primarily the amortization of Summit's acquisition intangibles, which run at about $7 million per year. Put these items together, and that's your $17 million improvement in the P&C segment core pre-tax.
I also noted that the other expense, $9 million improvement to $13 million. This is largely the result of a third-party fee income paid this quarter to our American Money Management subsidiary. This $13 million was $22 million a year ago and $21 million last quarter. I would look for other expense to be at that higher level going forward. Let's move on to slide 13. Our $1.40 of diluted core EPS translates to $1.28 of diluted earnings per common share. This is due to realized investment gains of $8 million, equal to $0.09 per share, offset by a special A&E charge of $19 million after tax, or $0.21 per share. The bottom of slide 13 provides additional details about the special A&E charge. There were no new or emerging broad industry trends identified in this year's internal review.
Our three-year adjusted survival ratio continues to exceed that of the P&C industry, which you can see in our earnings press release. Moving to slide 14, you'll see that AFG's adjusted book value per share was $48.59 at September 30th, 2014, its highest level ever. Our excess capital stood at approximately $920 million at September 30th, 2014. This is $180 million higher than last quarter's figure of $740 million. The increase is thanks to our issuance of $150 million of a 40-year six-and-one-quarter percent hybrid in September. We earned net income of $116 million in the quarter and returned $103 million to our shareholders through dividends and share repurchases. We expect to continue to return excess capital through the remainder of 2014. The volatile stock market during the third quarter provided an opportunity to pick up the pace of our share repurchases.
As a result, we repurchased $83 million of AFG common stock during the third quarter. After buying 1.4 million shares during the third quarter, as of October 28th, there are approximately 3.2 million shares remaining under our share repurchase authorization. On slide 15, you'll find a recap of the 2014 guidance for AFG's core net operating earnings, as well as guides reviewed earlier in the call for key financial measures in the Specialty Property and Casualty Group and for the annuity segment. AFG's expected 2014 results exclude non-core items such as realized investment gains and losses, as well as other significant items that may not be indicative of ongoing operations. To the extent that AFG core diluted EPS are anywhere in the range of $4.50 to $4.90, that would be a record for us, beating the $4.26 recorded in 2009. That sounds to me like a good place to end.
Now we'd like to open the line for any questions.
Ladies and gentlemen, if you have a question at this time, please press star and then the one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Our first question comes from the line of Amit Kumar of Macquarie. Your line is now open.
Guys, this is actually Chris Martin on today. Congrats on the quarter. Two quick questions on the crop book. You said sort of that the midpoint of your guidance assumes a break-even on the crop business. Given the way corn and soybeans have rallied so far in October, how are you sort of thinking about your book going into the fourth quarter?
This is Carl. As of, I think, of October 27th, when you look at the average, the discovery period in October, September 14, corn's futures is down about 25%, and the soybean contract is down 16%, which is still significant.
The rally has helped some, but it's kind of coming a little too late to really move that 30-day average, which is kind of the discovery. That's what the discovery price is for settling claims or determining claims. The big thing in our case is we understand that the yields, the prospective yields seem to be pretty strong. Until we get through and settle all the claims, those are pretty big price declines. I think the other difference with us is we had quite a bit of hail damage from the spring storms versus the previous year. Did you get all that?
Yep. Got it. Thanks. That's very helpful. You're still sort of seeing it as like a break-even is what you're saying?
Yeah.
Okay.
It's at the break even. It should be at the midpoint of our guidance range.
Yeah
Also the midpoint of Specialty Property and Transportation and overall property and casualty combined ratio ranges.
Yeah. Got it. Thanks. That's very helpful. Just to sort of follow up on that, can you remind us on where your reinsurance protection kicks in on the crop book?
Well, our stop loss cover kicks in, I think, at around 100%.
All right, great. Thanks. That's all I have for today. Good luck in the future.
Thanks.
Thank you. Our next question comes from the line of Ryan Burns of Janney Capital. Your line is now open.
Great. Good morning, everybody, or afternoon, I guess now. Just had a question about that $64 million recognition margin for the long-term care block. I'm imagining that is not included in book value, but can you just confirm that that is not?
That is not included in book value, no.
Okay.
The margin that exists is we're doing the actuarial review and putting new assumptions in place, potentially related to future reinvestment rates. That's the margin that exists before we would have any kind of a loss recognition charge.
Great. What kind of rate increases are you guys getting in that block? I am just trying to figure out what kind of persistency you are getting on renewals and what kind of rate increases you guys are trying to push through with state regulators right now.
It varies state by state. Some states are a lot more willing to give significant rate increases than others. Off the top of my head, I cannot tell you what the average has been recently. On average, they are significant, but not enough to make up for decline in interest rates and so forth, versus what was priced into the products.
Okay, great. My last one, again, just sticking with the annuity side of the house. If interest rates stay in this mid two range, should we think of that as a headwind for growth into next year as well, both on sales and in earnings perspective?
If they would truly stay at these rate levels and not move, I think that would be a headwind. There are things we do. We are going to be disciplined in the pricing. There are other things that we can do in that kind of environment to help with the profitability. Obviously, we would need to adjust some of the credited rates if rates do not move up in the future. There are certain things we can do to try to maintain spreads, but we certainly would rather see a rising interest rate environment. A gradually rising interest rate environment would be ideal for us.
Okay, great. Thanks for the answer, guys.
Thank you. Again, ladies and gentlemen, if you have a question at this time, please press star one on your touch-tone telephone. Our next question comes from the line of Jay Cohen of Bank of America Merrill Lynch. Your line is now open.
Yes. Thank you. Two questions. You did have some adverse reserve development in the casualty book, and I'm wondering if you could talk more about that. What gave rise to that and what specific lines of business? Secondly, I think Jeff or someone mentioned you have callable debt next year. Can you talk about what the date is when you can call it and what the interest rate is on that debt?
Jay, this is Jeff. The callable debt becomes callable in September of 2015. It's at a comparable interest rate to the hybrid that we issued. What we said in the use of proceeds for the hybrid was that we would use the proceeds of the hybrid to redeem that debt unless we used it for other corporate purposes in the interim. At the very least, we are viewing that as taking out a debt security and improving our capital structure at no additional cost because of the equity feature of the hybrid. To the extent that we surprise ourselves and find a way to deploy the capital at a higher return, then we'll use the capital for that purpose.
Got it.
As for the adverse development, I don't think there's really much to add in the Specialty Casualty segment beyond what Carl said. This was a liability book of business in our Specialty Casualty segment. We chose to tweak our actuarial assumptions, which resulted in some reserve addition. As Carl said, the accident year results for that business is still very favorable. Still running well. We just took a slightly more conservative stance in the quarter as it relates to the reserves.
Yeah, that subsidiary has outstanding results.
I didn't hear that last bit, sorry.
Yeah, that Mid-continent subsidiary has had outstanding underwriting profitability across the last five to seven years, it's just a little less outstanding. Think of it that way.
Got it. Thank you very much.
Thank you. Our next question comes line of Paul Newsome with Mizuho Financial. Your line is now open.
Hi. I just wanted to ask about the guidance for the full year. It implies, I think, if the math's right, around $1.03-$1.43 for the fourth quarter versus, I think the street estimates are around $1.54. You did $1.40 this quarter. I know you lowered annuity earnings guidance, so that accounts for a little bit of it. You have the new sub-debt, which is worth $0.02. Is there anything else that kind of helps bridge that difference that you could touch on?
Sure. This is Jeff Consolino. The major difference that you would have seen relative to fourth quarters for AFG that you haven't touched on is crop. We tend to recognize the bulk of our crop profitability late in the year and in the fourth quarter. Now we're saying that our expectation based on currently available information is that it would be break even. That's the major difference in the numbers you talked about, the $1.03-$1.43.
Okay. Have you said where that crop book has been booked year to date or for this quarter?
We haven't booked any profit year to date. We're probably pretty conservative in how we look at that business. Generally, we book most of that profit, generally, when you look in years past, in the fourth quarter. The reality is, until you see what claims you get and what the fall discovery prices are for corn and soybeans, you don't have a very complete picture. You can guess in that. We're generally more conservative. Usually we'll report something in the third quarter a little bit if we think it's a great year. Most of the times it's really left to where we really get a good feel even early on into the following year, you probably get the best feel of where you're at. It's year-end earnings that we can reflect most accurately our crop hail profitability.
Okay. I was just trying to understand if it comes in at break even as you're guiding to, there wouldn't be a catch-up charge to reverse profits from earlier in the year, which it sounds like there's not. That's fine. One question on the long-term care actuarial review. Do you have any sensitivities you can provide around interest rates or other assumptions? In particular, do you know what kind of an average lapse rate assumption you have built into reserves right now?
If you go to our 10-K, you'll see assumptions that were used when we did the last study at the end of 2012. There is a sensitivity table also on the impact of changes in assumptions related to morbidity lapses, interest rates, rate increases, and so forth. I think you get the information that you need there. I will make one point to you, though. As we are looking at putting new assumptions in place related to reinvestment rates, the table that you see in the 10-K assumes that when interest rates decline, which they have, if we look at where interest rates are today versus where they were at the end of the year, say, 2013, on the 10-year Treasury, rates have declined by about 70 basis points. The sensitivity table that you see related to interest rates assumes that those rates stay down forever, basically.
In other words, the ultimate reinvestment rate would be 70 basis points lower than what was put in place
When this calculation was done, we think it's probably more appropriate to have a reversion to the mean at some point down the road, which would make these numbers a bit smaller than what's reflected in the table. The other thing that I'd mention to you is, even though rates have declined this year, we've been able to outperform the assumed reinvestment rates so far year to date. Long way of saying, as it relates to impact of change in interest rates, we're going to be taking a hard look at that between now and year-end, and the numbers could be different than what you might calculate if you just look at the table in the 10-K.
Okay. I will take a look at that. Appreciate that. Any comment on lapse rates on the book?
Yeah. Let me see if I can put my hands on that. I know there is some disclosure in the 10-K, I believe, related to that. Let me see if I can put my hands on that. I do not have that here. I can tell you that was one of the adjustments when we did the review back at the end of 2012, was to assume far lower lapse rates than what had been assumed before then.
Okay.
I believe that is disclosed in the 10-K, though.
Okay. Sorry for taking up too much time, but if I could sneak one more question in. Was there anything that prompted you to revisit the reserves this year or this quarter?
Yeah, it's something we do. We do an internal review throughout the year. Typically, we do an external review every couple of years.
Okay, great. Thanks.
Thank you. Again, ladies and gentlemen, if you have a question at this time, please press star one on your touch-tone telephone. One moment for our questions. I'm showing no further questions at this time. I'd like to hand the call over to Diane Weidner for any closing remarks.
Thank you for joining us this morning for a discussion about AFG's third quarter results. This concludes our call for today. Thank you.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Have a great day.