At this time, I would like to welcome everyone to the American Financial Group 2012 second quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star one on your telephone keypad. To withdraw your question, press the pound key. Thank you. Keith Jensen, you may begin your conference.
Good morning. Thank you. Welcome to the American Financial Group second quarter 2012 earnings results conference call. I'm joined this morning by Carl Lindner III and Craig Lindner, Co-CEOs of American Financial Group. If you're viewing the webcast from our website, you can follow along with the slide presentation if you like. Certain statements made during this call are not historical facts, may be considered forward-looking statements and are based on estimates, assumptions, and projections, which management believes are reasonable, but by their natures, subject to risks and uncertainties. Factors which could cause actual results and/or financial conditions 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 or 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 gain or loss on investments, unusual unlocking charges, the effect of certain accounting changes, discontinued operations, special asbestos and environmental charges, and certain other non-recurring items. AFG believes this non-GAAP measure to be 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. I'm pleased to turn the call over to Carl Lindner III to discuss our results.
Good morning. Thank you for joining us. We released our 2012 second quarter results yesterday afternoon and are pleased with another quarter of strong operating earnings in our specialty property and casualty and annuity and supplemental businesses. I am assuming that the participants on today's call reviewed our earnings release and supplemental materials posted on the website. I'm going to review a few highlights and focus today's discussion on key issues. I'll also briefly discuss our outlook for the remainder of 2012. Let's start by looking at our second quarter results summarized on slides three and four of the webcast. Net earnings were $1.01 per share for the quarter, including realized gains of $0.10 per share.
Core net operating earnings for the quarter were $90 million or $0.91 per share compared to the prior year's results of $74 million or $0.72 per share. Record profit in our Annuity and Supplemental group and improved underwriting results in our Specialty Property and Casualty operations were offset somewhat by lower property and casualty investment income. Both periods reflect the effect of share repurchases. Annualized core operating return on equity was approximately 9%. Our capital adequacy, financial condition, and liquidity remain strong and are key areas of focus for us. We maintain sufficient capital in our insurance businesses to meet our commitments to the rating agencies in support of our current rating levels. Our excess capital was approximately $590 million at June 30th, 2012, which included cash at the parent company of approximately $484 million.
As you know, in June, we issued $230 million of 6.375% debentures due 2042. The proceeds from this offering are included in our parent company cash balance at June 30th. In July, AFG used these proceeds to redeem approximately $200 million of 7.5% and 7.25% senior notes due in 2033 and 2034. The remainder of the proceeds are used for general corporate purposes. We've continued to deploy our excess capital in ways that enhance shareholder value. We repurchased 2.5 million shares of our common stock during the second quarter at an average price of $38.55 per share, or approximately 95% of June 30th, 2012, book value per share. As of July 30th, 2012, there are approximately 3.4 million shares remaining under our repurchase authorization.
Based on the company's operating performance and its strong capital and liquidity position, AFG's board of directors approved an increase in the annual dividend from $0.70- $0.78 per share per year, effective for dividend payments made on or after October 1st, 2012. This increase reflects our confidence in the company's financial condition and its prospects for long-term growth. The five-year annual compounded growth rate of our dividend is 12.5%. In addition to share repurchases and dividends, we continue to seek other alternatives for deployment of our excess capital. We've invested excess capital when we see potential for healthy, profitable, organic growth, and we're always looking for opportunities to expand our specialty niche businesses through startups or acquisitions when it makes sense. An example is we recently announced the launch of our Public Sector Division within our Specialty Property and Casualty group.
This business unit will offer comprehensive coverages in the reinsurance and excess insurance markets for the public entity space, which includes municipalities, schools, counties, housing authorities, and other special service districts. As you'll see on slide four, AFG's book value per share, excluding appropriate retained earnings and unrealized gains and losses on fixed maturities, increased 5% from year-end to $40.74. Tangible book value on a comparable basis was $38.34 at June 30th, 2012. Now on slide five, you'll see summary results for our Specialty Property and Casualty operations. We turned in another strong period, recording an underwriting profit of $52 million for the second quarter of 2012 and generating a combined operating ratio of 92%, a three-point improvement from the comparable period in 2011. Catastrophe losses represented only two points on the combined ratio for the quarter.
A good result in a quarter that was kind of mixed for the industry. Gross and net written premiums were up 8% and 9% respectively, in the 2012 second quarter compared to the same quarter a year earlier, due primarily to higher premiums in our Specialty Casualty Group and the impact of earlier planning of crops, which impacted the timing of crop insurance premiums reported in our Property and Transportation Group. We continue to see broad-based price increases in our property and casualty businesses with pricing increases in back-to-back quarters. Nearly three-fourths of our business units achieved increases in the first half of 2012. Now I'd like to discuss a few highlights from each of our specialty business groups. If you'll turn to slide six and seven.
Property and Transportation Group, our largest segment, reported an underwriting profit of $6 million in the second quarter of 2012 compared to an underwriting loss of $3 million in the second quarter of 2011. This increase is attributable to lower catastrophe losses, primarily in our property and inland marine operations. The $10 million in cat losses recorded by this group in the second quarter of 2012 was $8 million lower than losses this group experienced in the comparable 2011 period. Most of the businesses in this group achieved solid underwriting margins through the first six months of 2012. Gross and net written premiums for the first six months were 6%, 3% higher than the comparable 2011 periods, respectively, primarily as a result of higher premiums in our crop business.
The increase was primarily due to higher winter wheat commodity prices and timing differences resulting from earlier planting of corn and soybeans. Pricing was up approximately 4% for the quarter. I'm very pleased with that. It's with a sequential improvement from a 2% increase that this group achieved during the first quarter of 2012. Specialty Casualty Group reported an underwriting profit of $33 million in the second quarter of 2012, compared to $17 million in the second quarter of 2011. Year-to-date 2012 underwriting profits were $19 million higher than the comparable 2011 period. Our favorable reserve development in our home builder's general liability book and improved profitability in our workers' comp operations were offset somewhat by higher underwriting losses in a runoff book of program business and lower favorable reserve development in our excess and surplus lines and executive liability operations.
Again, most businesses in this group produced strong underwriting profit margins through the first six months of 2012. Net written premiums for the 2012 second quarter and first six months were up 16% from comparable periods in 2011. While nearly all businesses in this group reported growth, our workers' compensation, excess and surplus, and international operations were the primary drivers of the higher premiums. Increased business opportunities arising from larger exposures and general market hardening have contributed to the increased premiums in this group. Pricing in this group was up about 4% for the second quarter and the first six months of 2012. Moving on to the Specialty Financial Group, who reported underwriting profits of $11 million and $27 million in the second quarter and first six months of 2012. These amounts were virtually unchanged from comparable prior year periods.
Most of the businesses in this group achieved excellent underwriting margins during the first half of 2012. Net written premiums were virtually flat for the first half of 2012 when compared to the prior year. Higher gross written premiums resulted primarily from a service contract business initiated in the second quarter of 2011. All these premiums were ceded under a reinsurance agreement. Pricing in this group was flat for the second quarter and the first half of 2012. Let's move on to a review of our Annuity and Supplemental Insurance group on slide eight. The Annuity and Supplemental Insurance group reported record core net operating earnings before income taxes of $76 million for the 2012 second quarter, 36% higher than the same period a year ago. The increase reflects higher earnings from our fixed annuity and Medicare Supplement operations.
The higher profitability on our fixed annuity operations reflects an increasing base of invested assets and our ability to maintain spreads. Our Medicare Supplement results were significantly higher than last year, due primarily to improved loss experience and persistency. Similarly, for the first half of 2012, this group reported record core operating earnings before income taxes of $143 million, a 30% increase from the first half of 2011. In the annuity business, profitability is largely dependent on earning a spread between invested assets and annuity liabilities. In a period of declining interest rates, we have some protection from spread compression through our ability to lower crediting rates subject to contractually guaranteed minimum interest rates, or GMIRs. Almost all new business since late 2010 has been issued with a 1% GMIR.
At June 30th, 2012, the spread between the average crediting rate on AFG's annuities and its average GMIR was approximately 60 basis points. This equates to about $90 million in additional spread income if our crediting rates were to be lowered to GMIRs. Not all of our crediting rates can be changed immediately, but the bulk of them can be changed within the next 12 months. Although we may contractually have the ability to lower rates, we may choose to delay or limit rate decreases for business reasons. We're pleased with our strong operating results for the first half of the year, especially in light of challenging interest rate and economic environments. Investment results continue to be excellent and annuity sales remain strong, even as we maintained our strict pricing discipline. Statutory premiums of $1 billion in the 2012 second quarter were virtually unchanged from the second quarter of 2011.
Statutory premiums of $1.9 billion for the first six months were 7% higher than the comparable 2011 period, primarily due to increased sales of fixed index annuities. Sales of traditional single premium annuities and annuities sold in the 403 market were lower when compared to comparable periods in 2011. As we previously announced, we reached a definitive agreement to sell our Medicare Supplement critical illness businesses to Cigna Corp. for approximately $295 million in cash. We anticipate that this sale will close in the third quarter, and we expect to realize an after-tax gain of approximately $95 million-$105 million. This gain won't be included in core earnings. These businesses generated pre-tax operating earnings of $18 million in the first six months of 2012 and $34 million in the full year 2011.
Given our recent unsuccessful efforts to sell the company's run-off long-term care business and the difficulty in predicting future claims for this relatively immature block, we've initiated an external actuarial study of this business. This study will supplement our regular internal analysis of our experience and is expected to be completed no later than the fourth quarter of this year. Furthermore, even though AFG has to date been able to maintain excellent annuity spreads and adequate yields in its long-term care business, a further continuation of the low interest rate environment is likely to lead to loss recognition in the long-term care business and unlocking of the company's interest rate assumptions for annuities as well. These charges would be excluded from core earnings if material. Please turn to slide nine for a few highlights regarding our investment portfolio.
AFG reported second quarter 2012 net realized gains of $9 million after tax and after DAC, compared to $12 million in the prior year period. After-tax, after-DAC realized gains for the first six months were $37 million, compared to $9 million in the first half of last year. Unrealized gains on fixed maturities were $626 million after tax, after DAC at June 30th, 2012. Our portfolio continues to be high quality, with 87% of our fixed maturity portfolio rated investment grade and 96% with an NAIC designation of NAIC I or II, its highest two categories. During the first half of 2012, property and casualty investment income was approximately 6% lower than the comparable 2011 period, in line with our expectations.
We have provided additional detailed information on the various segments of our investment portfolio in the investment supplement on our website. In finishing, let me cover our outlook. 2012 on slide 10. Based on the results of operations for the first six months of the year and our assumptions regarding the effects of the Midwest drought conditions, we've lowered our 2012 core operating earnings guidance to a range of $3- $3.40 per share, down from the range of $3.40- $3.80 per share that was estimated previously. Our full-year net written premium guidance remains unchanged, with growth expected in the range of 1%-5%. We now expect to achieve a combined ratio between 93% and 96%, an increase from our previous estimate of 91%-94%.
This change is due primarily to the reforecast of our crop insurance results, which are included in our Property and Transportation Group. Details on guidance for our P&C segments are as follows. In Property and Transportation Group, we now expect a combined ratio between 96% and 100%, an increase from the range of 91%-95% previously estimated. We've reduced our 2012 earnings guidance by approximately $0.50 per share for the effects of the drought, although the precise impact on AFG's core operating earnings is uncertain. With consideration to both our strategic use of quota share and stop loss reinsurance, this estimate encompasses the potential for further deterioration in crop conditions, including worst case estimates for losses in key premium states that are most impacted by drought conditions. Our thoughts and prayers are with the farming community as they face the challenges arising from the Midwest drought.
Although it is times like these that remind us of the importance of the Multi-Peril Crop Insurance Program, which is designed to be a significant risk management tool for our nation's farmers. We continue to expect that net written premiums in this group will be 3%-7% lower than 2011. In our Specialty Casualty Group, we expect a combined ratio in the range of 91%-95%, an improvement from our previous estimate of 93%-97%. Net written premiums for 2012 are expected to increase 12%-16%, as was our previous estimate. In our Specialty Financial Group, our 2012 combined operating ratio guidance remains 85%-89%, consistent with previous estimates. 2012 net written premiums for this group are expected to be in the range of -2% to +2% when compared to 2011 results.
Turning to our Annuity and Supplemental Group, we expect to see some slowdown in annuity sales during the second half of this year. However, even with the pending sale of our Medicare Supplement business, we continue to expect that the Annuity and Supplemental Group's full-year 2012 pre-tax core operating earnings will be 15%-20% higher than the 2011 results. Additionally, we were informally advised early this month that the IRS will not appeal the tax case decision related to annuity reserving that we disclosed previously. As a result, during the third quarter, we expect to recognize approximately $28 million in non-core income related to this decision. We also expect to recognize additional income as matters related to the tax case and other open years are resolved.
As has been our practice, our earnings guidance excludes realized gains and losses, including the expected gain on our pending sale for the Medicare Supplement Critical Illness businesses, as well as the results of loss risk recognition testing in our runoff long-term care business for any annuity unlocking, as well as other significant items, including a result of a tax case that may not be indicative of ongoing operations. Thank you. Now we'd like to open things up for questions.
At this time, if you would like to ask a question, please press star one on your telephone keypad. We'll pause for a moment to compile the Q&A roster. Your first question comes from Amit Kumar, Macquarie.
Thanks, good afternoon, and congrats on the results. Maybe we can just start with the crop book, and I know it's all been about crop. Can you refresh us as to what the distribution is amongst various crops as well as the Group One and Group Two and Group Three states?
Well, to start with, corn roughly is about half of last year's premium, and soybeans is roughly 26%. Corn and soybeans represent the biggest part of.
Thanks
revenue coverage is today up towards 80%. I don't think we really disclosed our breakout with Group One and Group Two states.
Okay. Then I guess the follow-up on your discussion on the quota share and the stop loss. Can you expand on that? What sort of layers it attaches, till what point, so that we can ring-fence the number ourselves?
Sure. For competitive reasons, we don't disclose all the details.
I can tell you that our attachment point for our stop loss coverage is 100% loss ratio.
Got it.
Our stop loss coverage program, you can think of it this way, covers us up to a one in 250 year event. Taking a look at the conditions today and foreseeing in our major, and also looking at further deterioration, potentially in crop conditions, including worst case estimates for losses in our key premium states, we've taken that into account in our $0.50 guidance estimate net. If you were to ask me where we stress test or done worst case scenarios, the most would be states like Illinois, Indiana, Kansas, Iowa, Missouri. Those would be states where they're a size force and where they're the hardest hit areas. I would say, though, also there are favorable conditions in some other fairly large states, like North and South Dakota, that we write business in too. Our $0.50 really, change in guidance-
takes into account current conditions and further deterioration even to the point of worst case stress testing in some of our big premium states.
No, I agree. I agree with your comment that it's too early, and it's still a mixed picture based on actual ground testing of the yields. If you head to the crop fields, it's a very mixed scenario. The only other question I had, and I will reach you after this, is the $0.50 is the absolute worst case scenario. As of today, what would be the number?
Well, I think, Amit, we've really tried to reflect current conditions, and then also stress test considering our quota share agreement and our stop loss cover. $0.50 is our best estimate in both situations today.
Oh, okay. That's helpful. I'll stop here and I will reach you. Thanks.
Your next question comes from Ron Bobman, Capital Returns Management.
Craig and Carl, Keith is the most senior big company executive to be reading the disclaimer at the beginning of a call. Don't you have any awesome staff at a lower pay grade that can do that?
My ticket to the session, Ron.
I guess it's because Carl and Craig answer all the questions, and so it's your chance to get a word in. In any event, the other thing has been amazing to hear these investors and research analysts talk about crop like they spend their weekdays in the fields. Amit, I wonder if Amit's ever been in the field. In any event, following up on Amit's question, Carl, it sounds like candidly that given where crops are now, and the degree of the drought, it sounds like you're indicating, as it relates to your book, that we're at a worst case. In effect, that conditions are so poorly we're close to, again, as it relates to your exposures net of reinsurance, at a worst case. Am I hearing that right?
Well, I think what you're hearing is we have quota share reinsurance, and we also have a stop loss cover. Think of it as buying cat cover.
It's similar to buying cat cover on your property exposures.
Right
a company now. I think what we're saying is when you look at our programs, that we're projecting $0.50 under current conditions, which would reflect the latest November report, I think which came out yesterday or, I think it was either yesterday or the day before. Also, Monday's USDA. We've looked at that. Those are what we consider to be current conditions. Then we've also tried to stress test some of our big states to see where that would take us. Because of our quota share and our stop loss reinsurance, the answer is the same.
You're basically there, you're attached, I guess.
Again, I think we're covered through our reinsurance programs up until a one in 250 year event. A lot of Bermuda insurers might be real comfortable if they're covered on normal cat exposures up to one in 100 or one in 200. Similarly, I guess what we're saying is based off of our reinsurance coverage, we're comfortable that up to a one in 250 year event that our estimate, again, it's early. Until you really get the crops in, you really don't know. It's just our best estimate.
Okay.
Ron, just at the risk of speaking when I'm not supposed to. I think the way I think of it, the way our reinsurance programs are structured, there is a range within which you don't have up or down because the nature of the program has stabilized it during that range. That's what we're saying.
Understood. Carl or Keith or Craig, would you hazard a guess, presumably, the take-up rate for crop insurance for farmers to purchase next year will be greater because of the developments this year. Would you hazard a guess as to some metric as to the increase in what I'm calling take-up rates, the purchase of coverage?
Boy, I'd have to be honest with you. I probably couldn't do that at this point. When you look at futures prices, we have tried to brainstorm about what premiums might look like in the 2013 year. There were some changes to the program that probably are a little bit negative to premiums, but futures prices for corn, when you look into next year, up a teeny bit. All in all, we probably think there's not some big, huge updraft on premiums. That's an interesting thing to think about. If your take-up rate improves, that may be the driving factor if there is some updraft in premiums.
People may have a higher interest if they get hit hard this year.
Say that again, Keith. Sorry.
I just said that farmers may have a higher interest if they get hit hard this year.
Exactly.
I think at the point there is a Farm Bill, if there's less direct type of relief to farmers and the crop insurance program continues to be the core risk management tool for farmers, I suppose that could be a positive, too, that could have an impact on the take-up rate.
Okay. Thanks for the help, guys, and best of luck.
Thanks.
To ask a question, press star one on your telephone keypad. Your next question comes from Ryan Burns with Janney Montgomery Scott.
Hey. Good afternoon, everybody. I'm going to, unfortunately, ask some more crop questions here. I guess, quickly with the stop loss attaching at 100% loss ratio, I guess it ultimately maxes out for Group I states, say, at 194%, because that's when the government foots the entire bill. Does your stop loss cover you the entire distance there between the 100 loss ratio and the 194, or does the stop loss stay away a certain number?
The stop loss is not tied to what the federal government's maximum is for coverage. It does not run all the way to the top. As Carl said, it starts at 100.
Okay, great. Quickly, just for clarification, is the stop loss on a state-by-state basis or is it a national program?
It's a national program.
Okay, great. Thanks. I think that was all I had, guys. Thanks for the answers.
Your next question comes from Jay Cohen, Bank of America.
Yeah, a couple of questions. First, on the guidance. In the Property and Transportation segment, the premium guidance was for, I guess, down 3%-7%, but you were up in the first half modestly. It sounds like there's obviously a drop-off in the second half. Did that relate to some of the timing issues of winter wheat or the plantings, when things were being planted? Why the drop-off in the second half?
Primarily, Jay, as you speculated, it's a timing issue in the crop because we recognized more premium in the first couple of quarters than we normally would.
Got it. Okay. Second question: Can you give us an update on the workers' comp line? You seem to have some positive things to say about it. First time we've heard much positive out of that line in a while. Just give us an update on what you're seeing from a pricing standpoint and a claim standpoint as well.
Sure. The California outlook, the market clearly is firming. We got 8% price increase last year. We're getting 5% price increase this year, though we did get 8% in the second quarter. We're seeing gradual improvement this year in renewal retention, which is a positive sign for us. We feel our reserves are adequate in that business. The industry, I think, last year was 130%. We're public. We'd estimate it was around 114% on an accident year basis. This year, we're still working on things. We think probably in the 108%-110% accident year. Clearly need to get 10%+. We need to get double-digit rate increase in order to get us to 100% combined ratio, which at a 3.5% investment return is about a 12.5% return. That kind of gives you an idea of the dynamics.
The good news is Our California comp business is improving nicely, but we still got a little bit farther to go. Frequency and severity seem to be stable the last couple of years in that. On our higher deductible business, the other part of our business, which is written under Great American brand, we're seeing very nice growth as there's been turmoil in the workers' comp market. We're getting nice price increases in that business, and we're seeing some good opportunities there.
That's great.
That business is profitable.
Thank you.
Your next question comes from Amit Kumar, Macquarie.
Oh, the armchair farmer is back. Just I guess just to comment around spine, we do have a commodity team here, and they just concluded an actual tour of the Group I states. Some of these pictures are very interesting, how much they vary from one farm to another. That was the comment. I guess just going back to the broader discussion on pricing as it relates to the previous question. There is this debate that pricing acceleration might be slowing for the industry, and it's not sustainable going forward. I'm just curious, maybe responding to what you're seeing for maybe for July in terms of pricing sustainability, and how do you even think about pricing for the remainder of 2012? Do you think you'll be able to maintain or I guess will soon start hitting plateaus?
Yeah, I'd say this. I'm pleased with our trends. We did see some sequential improvement in our Specialty Casualty, I'm sorry, Property and Transportation from the first quarter to the second quarter.
Really from the fourth quarter to the first quarter to the second quarter. First quarter went from 2%-4%. Specialty Casualty, both quarters were about a 4% increase. I think that we're going to continue to see pricing traction for the rest of this year and possibly and probably into the next year. With interest rates continuing to be as low as they are, it just puts pressure on everyone in the business. They got to make a decent underwriting profit in order to get any type of return on equity business by business. I think that's the big driver is the low interest rates and that if anybody's going to earn any decent return, they're going to have to continue to move the pricing. I think whether pricing is flattening out or whether it's sequentially improving, that's not the big deal to me.
The big deal to me is whether you have a continuation moving forward the rest of the year and into next year. I think that with low interest rates where they are, that you're going to continue to see that.
Got it. That's helpful. The only other question I had is you mentioned in the opening remarks and in the press release regarding the long-term care book. Can you just refresh us on what sort of numbers are we talking about? I guess the range, what you could possibly see going forward once you, I guess, do the studies and look at the numbers. I know it's probably a book value impact. It's not an earnings impact, but just refresh us as to what those numbers might end up being.
Greg, you want to?
Sure. Kakamba, this is Greg.
Hey.
First of all, it's too early for us to know, to have any real clarity as to what the number is. Let me give you guidance on a piece that I think will be probably the biggest piece of the charge, that is related to investment yields, the reinvestment rates. This block is a very long duration block, it is sensitive to reinvestment rates.
The last time we did our analysis and put assumptions in place, the 10-year treasury was at 2%.
The 10-year treasury has declined, the yield has declined by about 50 basis points or so since we did the last analysis. What I can tell you is every 10 basis point change in investment yields in all future periods has about a $10 million impact.
Okay. Got $10 million. Okay.
Yes. Now, M&R is doing a study related to other things that could affect any ultimate charge related to claims. It's a very immature block, and we wanted to tap into M&R's experience to give us some advice as to what they've seen on claim side and collapsation and so forth.
Got it. Okay, thanks. That's all I have. Thanks for the answers. Good luck for the future.
Thank you.
Thank you.
Your next question comes from Abe Roth, Maxim Group.
What? Yeah.
Hi. Good morning, guys. Any thoughts on, you mentioned when you're on the underwriting of the new debentures that there is a chance you might retire some of the AFE. Any further thoughts on that?
What we have retired so far are the retail notes. They're held in American Annuity Group name, which became Great American Financial Resources. We continue to look at the ones that are held in AFG but have not made any tentative conclusion at this point.
Thank you.
There are no further questions at this time. Are there any closing remarks?
No. Except we'd like to express our appreciation to you for joining us once again, and we'll look forward to reporting to you after the end of the third quarter. Thank you, and have a good day.
This concludes today's American Financial Group 2012 second quarter earnings conference call. You may now disconnect your line.