Good morning. My name is Kina, and I'll be your conference operator today. At this time, I would like to welcome everyone to the American Financial Group 2011 fourth quarter and full year 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.
Thank you. Good morning. Welcome to American Financial Group's 2011 year-end earnings conference call. I'm joined this morning by Carl Lindner III and Craig Lindner, co-CEOs of American Financial Group. If you're viewing this webcast from our website, you can follow along on 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. By their nature, are subject to risks and uncertainties 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 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. These include net realized gains or losses on investments, the effects of accounting changes, discontinued operations, significant asbestos and environmental charges, and certain other non-recurring items. AFG believes this non-GAAP measure tool for analysts and investors in analyzing the 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. Now 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 2011 fourth quarter and full year results yesterday afternoon. Despite a challenging year for the entire insurance industry, Craig and I are pleased to finish the year with solid profitability. Core net operating earnings for the fourth quarter were up $0.03 per share from the comparable 2010 period. Full-year core net operating earnings per share were $3.53 per share, in line with our guidance. With estimated insured catastrophe losses for the industry topping $100 billion, we're pleased that our catastrophe losses were only two points in our combined ratio for the year and actually were lower than cat losses recorded in 2010. In addition, we acknowledge the impact that the continued low interest rate environment has had across all of our businesses.
At the very least, these economic conditions, plus the continued global economic uncertainty, require that our underwriting and product pricing continue to be highly focused. We thank God and our talented management team and employees for a successful year and for the financial strength that positions us to take advantage of opportunities going forward. I am assuming that all participants on today's call reviewed our earnings release and supplemental materials posted on the website. I'll review a few highlights and focus today's discussion on key issues. I'll also briefly discuss our outlook for 2012. Let's start by looking at our 2011 results summarized on slides three through five of the webcast. Net earnings per share were $1.10 for the quarter, including realized gains of $0.32 and a non-core charge of $0.28, representing a valuation allowance on deferred tax assets associated with losses in our Lloyd's Syndicate.
Full-year earnings per share were $3.33. Realized gains were $0.45 per share and included gains from sales of a portion of our remaining interest in Verisk Analytics during the year. Core net operating earnings for the fourth quarter were $106 million, or $1.06 per share, compared to the prior year's results of $111 million, or $1.03 per share. Core net operating earnings per share for the year were 10% less than our 2010 results. Underwriting profit, lower investment income in our Specialty Property and Casualty operations were partially offset by increased earnings in our Annuity and Supplemental operations and the effect of our share repurchases. Core operating return on equity for 2011 was approximately 9%. Annualized average return on equity on a comparable basis over a five-year period was approximately 13%.
One of our important strategic objectives is to deploy our excess capital in a way that enhances shareholder value. We repurchased 9.3 million shares of our common stock during 2011 at an average price of $33.93 per share, or approximately 90% of year-end 2011 tangible book value per share. During the year, we've returned capital to shareholders through $316 million in share repurchases and $68 million in dividends. We feel this remains an effective means of increasing shareholder value. As of February 1st, 2012, there are approximately three million shares remaining under our repurchase authorization, management intends to recommend an increase in this authorization at the next board meeting. In addition to share repurchases and dividends, we continue to seek other alternatives for deployment of our capital. We'll invest excess capital in healthy, profitable organic growth by introducing new products and services.
We're also always looking for opportunities to expand our specialty niche businesses through startups or acquisitions where it makes sense. In our Specialty Property and Casualty business, we recently acquired Employers Comp Associates, a leading provider of employers' primary indemnity coverage for employers that opt-out of the Texas workers' comp system and occupational accident coverage for independent owner-operator truckers. Growth from National Interstate's 2010 acquisition of Vanliner is another example of the opportunistic approach that's contributed to our success over time. As you see on slide four, AFG's book value per share, excluding appropriated retained earnings and unrealized gains and losses on fixed maturities, increased 7% during 2011 to $40.23. Tangible book value on a comparable basis was $37.84 at year-end, also up 7% from a year ago. Our capital adequacy, financial condition, and liquidity remain strong in our key areas of focus for us.
We've maintained capital in our insurance businesses at levels that support our operations and are in excess of amounts required for our rating levels. We are pleased that during the fourth quarter, Moody's changed the outlook on Great American Insurance Group companies from stable to positive. At the end of the year, our excess capital was approximately $785 million, which included cash at the parent company of $415 million. Additional details about our core operating results can be found on slide five. On slide six, you'll see our summary results for our Specialty Property and Casualty operations. Our Specialty Property and Casualty operations turned in another strong period, recording an underwriting profit of $231 million during 2011, generating a combined operating ratio of 92%, four points higher, though, than the prior year.
Lower favorable reserve development, poor results in some of our program business, and lower profitability in our crop operations were offset somewhat by improved results in our excess and surplus lines businesses. Gross and net written premiums increased in line with our guidance. Gross written premiums were up 14% for the year. Net written premiums were up 15%. Gross written premiums in 2011 included higher premiums in our Property and Transportation segment, particularly our crop and transportation businesses. The growth in net written premiums also reflects the impact of a third quarter 2010 reinsurance transaction in our Specialty Financial group. I'm really pleased that more than half of our Specialty Property and Casualty businesses achieved rate increases during the fourth quarter of 2011. For the first time in almost two years, we can say that overall renewal rate momentum was positive for the quarter.
Although the overall market remains competitive, we're pleased with these trends. The decline in gross investment income related to our property and casualty operations was consistent with our expectations, again, due to decreased holdings in higher-yielding investments and generally lower reinvestment rates as we've discussed in our prior calls. If you turn to slides seven and eight, I'd like to talk about a few highlights from each of our specialty business groups. Property and Transportation group, our largest segment, reported an underwriting profit of $113 million during 2011, about 19% lower than the previous year. Most of the businesses in this group produced solid underwriting margins for the year. We're pleased that catastrophe losses in this group were lower than in 2010 and served to offset declines in crop profitability somewhat. Results in our transportation and property and inland marine businesses were down slightly for the full year.
Weather conditions, as everyone knows, for American farmers were problematic throughout the 2011 growing season. Heavy spring rains delayed planting and resulted in prevented planting claims. Excess heat at the critical pollination period for Midwest corn raised yield concern for that crop. Late-season dryness was feared to have impaired soybean pod fill. Despite these circumstances, our agriculture operations performed well. Crop profitability in 2011 was lower than in the prior year, but it was better than our most recent expectations. Average renewal rates for the Property and Transportation group during 2011 in the fourth quarter were up 1%. That's the first positive pricing quarter in five years that we've seen. Our Specialty Casualty group reported an underwriting profit of $39 million in 2011, about $8 million less than in 2010.
Poor results in our program and international businesses were substantially offset by higher profitability in our excess and surplus businesses. Many of the businesses in this group produced solid to excellent underwriting profit margins during 2011. We're pleased to see more business opportunities in this segment, especially in the latter part of 2011, as there is some indication of markets hardening as well as growth in lines of business written through our international operations. Average renewal rates for this group during 2011 were up about 2% in the fourth quarter. That's the highest quarterly increase that we've achieved since early 2006. Most businesses in this group achieved some rate increase during the fourth quarter. Specialty Financial reported underwriting profit of $61 million for 2011 compared to $112 million in 2010. Lower prior year favorable RVI reserve development and higher catastrophe losses in our financial institutions business impacted 2011.
Almost all the businesses in this group produced strong underwriting margins during 2011. Average renewal rates for this group for the year were flat compared to the prior year period. I'd like to move on to a review of our Annuity and Supplemental Insurance on slides nine and 10. The Annuity and Supplemental Insurance reported core operating earnings before income taxes of $65 million for the 2011 fourth quarter, compared to $52 million in the 2010 period. Full year 2011 core operating earnings were $224 million, up from $202 million for 2010. Higher core operating earnings in 2011 due to growth in our fixed annuity operations and higher Medicare supplement earnings were offset by higher mortality in the company's runoff life operations.
The impact that the decrease in the stock market had on our variable annuity line of business and the impact of lower interest rates on our fixed index block. AFG conducts loss recognition testing and a review of major actuarial assumptions to determine the need for any changes or other adjustments. These reviews take place at least annually, generally in the fourth quarter. Assumptions include management's expectations of future lapses, claims, morbidity, rate increases, annuitizations, and reinvestment rates. The adjustments related to these reviews were immaterial in 2011. Results for the fourth quarter of 2010 included a net pre-tax charge of $25 million related primarily to the fixed annuity business. To exclude this charge, full year 2011 results were comparable to 2010.
Statutory premiums of $723 million in the fourth quarter of 2011 were comparable to the 2010 fourth quarter, as increases in sales of single premium fixed indexed annuities were offset by lower sales through our bank channel. Full year 2011 premiums were a record $3.5 billion, a 29% increase over the prior year. This increase is largely attributable to increased sales of fixed indexed annuities and single premium annuities sold through banks. Both increases are primarily the result of adding new products and agents. AFG's sales of annuities through banks have grown substantially since entering this market in 2007, and bank annuities have recently comprised nearly one-fourth of annuity and A&S premiums. AFG's fourth quarter 2011 bank sales slowed considerably as the recent exceptionally low interest rate environment made fixed products less attractive, and also AFG adhered to its pricing discipline.
Bank sales are expected to increase when the interest rate environment improves with the introduction of new bank fixed indexed annuities, and as more banks offer AFG's annuities. If you please turn to slide 11 for a few highlights regarding our investment portfolio. During 2011, AFG recorded net realized gains of $45 million comparable to the amounts reported in the prior year period. During the year, we recorded pretax realized gains of $76 million on sales of a portion of our remaining interest in Verisk Analytics. We continue to hold 3.2 million shares with an unrealized gain of approximately $120 million. Net unrealized gains on fixed maturities were $436 million, an increase of $110 million since December 31st of 2010. The vast majority of our investment portfolio is held with approximately 89% rated investment grade and 96% with a designation of NAIC 1 or 2.
Investment income in our Property and Casualty operations was down approximately 13% in line with expectations for the year. As we discussed last quarter, the continued runoff and disposition of higher yielding securities in our non-agency RMBS portfolio as well as generally lower reinvestment rates resulted in continued pressure on investment income at our Property and Casualty businesses. We have provided additional detailed information on the various segments of our investment portfolio in the investment supplement on our website. I'd like to cover our outlook for 2012 on slide 12. Our 2012 core net operating earnings guidance is a range of $3.30 to $3.70 per share. Our goals and our expectation is to maintain adequate rates in our Specialty Property and Casualty operations because of our strong underwriting culture, and we expect to achieve a combined ratio between 91% and 94%.
We expect net written premiums in our Specialty Property and Casualty operations to be 1% lower to 3% higher. If you exclude crop, that would be about 1% to 5% growth. The Property and Transportation group is expected to produce a combined ratio in the 91%-95% range. Guidance assumes normalized crop earnings for the year, and the impact of the RMA's premium rate methodology changes, which I'll discuss shortly. Guidance also assumes that current corn and soybean prices hold through the February discovery period. We expect this group's net written premiums to be in the range of down 5% to down 1%, mostly as a result of lower spring commodity prices and the impact of the RMA's premium rate methodology changes. In December 2011, the Risk Management Agency of the USDA announced changes to its existing rating methodology for corn and soybeans.
These changes were made in recognition of a positive loss experience generated by these crops in recent years. The positive loss experience is primarily the result of improved farming practices and hybrid seed genetics that increase the crop's tolerance to drought, pests, and certain herbicides. It's estimated that these rate reductions will reduce the industry's gross written premium by approximately 6%. Our impact would be slightly greater because of our business mix. The impact that these changes will have on the potential profitability of each company writing crop insurance will vary based on the geographic location and the crop mix within their book of business. We believe these changes will negatively affect the industry's potential profitability by approximately 7%. We expect the Specialty Casualty group to produce a combined ratio in the 93%-97% range.
We anticipate net written premiums will be up 4% to 8%, based on indications of market hardening and continued growth in our targeted markets and international operations. We expect the Specialty Financial group's combined ratio to be between 85% and 89%. We project net written premiums to be in the range of down two to up two in this group. We expect Property and Casualty 2012 investment income to be approximately 5% lower than 2011 results, due primarily to the continued runoff of higher-yielding securities and generally lower reinvestment rates. Based on recent market conditions and trends, we expect 2012 full-year core pre-tax operating earnings in our Annuity and Supplemental Insurance group to be 10% to 15% higher than in 2011.
These 2012 expected results exclude the potential for significant catastrophe and crop losses, significant adjustments to asbestos and environmental reserves, large gains or losses from asset sales or impairments, and significant unlocking adjustments in the Annuity and Supplemental group. We'd like to open the lines for any questions. Thank you.
At this time, if you'd 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 Ryan Burns, Macquarie. Ryan, your line is open.
Hi, good morning, everyone. Just my first question is with the Specialty Casualty loss ratio. You mentioned in the press release that it was due to lower results on some program business. Can you just talk about which types of programs saw the increased loss ratio? Thanks.
We had numerous programs that came from a number of our operations that we really discontinued pretty much, and a lot of them stopped writing. We had some unfavorable development on those various programs in that. That's kind of a good news, bad news. The good news is we're not writing much program business at this point. Bad news is what we did write didn't produce the kind of profitability that we want.
It wasn't focused on any certain line? I'm just trying to think of workers' comp or anything like that. Those programs weren't focused on-
Program business would be a mixture of package comp, general liability.
Okay, great. Then I guess quickly to shift it to workers' comp, I just want to see what kind of trends you guys are seeing in the fourth quarter in terms of rate increases. What kind of rate increases are needed to get adequate returns and how loss cost trends are going over there? That's a bunch of questions there.
Well, let me just start with the put in perspective. We have less workers' comp business generally as a % of our total premium than most at this point. The biggest part is related to our California business. Our California business, we achieved between new business pricing and renewal pricing, roughly 8% last year in price. As far as what I think we need, I think we need another 10% in price in order to get to 104 combined ratio or in a 12%-14% return on equity range. It continues to be a more competitive market than I would've thought with industry results at 130 in 2010, probably, I would think the industry might still be 125, if I were to put a guess on 2011 accident year. Republic always runs better. We're probably running at 114 would be my guess, in 2011.
We still need to get probably on top of that 8% overall net rate we got last year. We probably need to get another 10% plus in order to get back to the kind of returns. On our business outside for the last quarter or so, we've been seeing rates move up also. One of our key businesses outside of California comp, Strategic Comp business in the quarter, our prices were up 6%. Again, less than 10% of our business mix is comp. I think sometimes when you compare the size of our price increase to others have a much higher % of comp, but comp seems to be leading the way in the industry pricing increases. Did that answer your question about workers' comp?
Yeah, that did.
What's the other part of that question about loss?
Loss cost trends. Wanted to see medical inflation or anything like that.
California probably would be the biggest indicator for us. Interestingly enough, really, frequency, if you look at on average over the last 4 years, frequency might be up 3%-4%. Severity is really pretty benign or pretty flat over the last 3 years. There's nothing there that really concerns us. We feel our reserves are adequate on our California workers' comp business. I think the encouraging thing is when you take a look at we're pretty tough pricers and we're about making an underwriting profit. Republic in the last 2 quarters, our premium has increased in kind of the high single digits. It's increased for the first time in 6 years, that's a good indicator.
In the other part of our business outside of Republic in California, we seem to be seeing more market opportunities, particularly on some of the more difficult loss rated types of workers' comp, larger workers' comp accounts that our Strategic Comp unit excels in. I think we're seeing some more opportunities there. Did I get all the parts?
Yeah. That was very helpful. Thank you. I guess I'll ask one more, and then I'll let others. I guess just going to the crop book, I just wanted to clarify that you said that the new RMA changes will lower crop profitability 7%. I just wanted to see if that was for AFG or that was for the industry as a whole. Also just wanted to see if you guys could break out what kind of combined ratio you actually wrote 2011 crop returns or, I guess, ballpark.
We don't really break it out. I think the 7% probably is a pretty good number for us as well as the industry.
Okay.
Again, the guidance we're giving you really kind of bakes in what are those changes in our estimate for crop. If you look at our combined ratio range in the Property and Transportation, our crop estimate is also baked into that range.
Sure. Okay. Thank you.
Your next question comes from Jay Cohen, Bank of America Merrill Lynch.
Thank you. Couple questions as well. Maybe I'll first follow up on something Ryan had asked about, and that's the Specialty Casualty business. You mentioned some of the profitability issues here was in some discontinued programs. If I look at your results for the fourth quarter, it looks like the accident year loss ratio, excluding development, was about at least 10 points higher than it was in the first three quarters of the year, and I'm wondering what explains that because that's ex the reserve development.
Our international business didn't have a good quarter also. I think those two things, the program business development, the international business didn't have a good quarter. Active on a quarterly accident year?
I don't have accident year here with me, Carl, you're exactly right. The largest loss year-over-year in Specialty Casualty was in the Market form of the international business for that quarter. That delta was just a little more than $20 million.
Yeah, I wouldn't overreact to any quarterly change here or there.
Yeah, it certainly seems as if your guidance contemplates a number closer to what you were doing in the first part of the year, certainly does not suggest that the fourth quarter number is kind of the run rate. That's fair?
Again, our guidance really gives you our best expectations for how we think we're going to do this year.
Okay. Second question, it looks like the excess capital, as you define it, increased during 2011 despite the buybacks and the dividends. Obviously, you made some money as well. At the end of the year, were you surprised by that? Would you have expected at the beginning of the year to eat into some of this excess capital, given where your stock had been trading?
We did expect that we'd eat into some of it. If you think about the excess capital, just for those who aren't familiar with how we think about that, is parent company cash, plus additional borrowings that we could take on and stay within the leverage commitments that we've made to the market. If you look over the last two or three years, we've been generating a lot of capital, each year at the beginning of the year, we make an estimate as to what'll come out of excess capital by means of dividends, by means of share buybacks, by means of deployment. We have talked consistently about keeping powder dry, we've talked about that in the $200 million-$300 million kind of a range.
To the extent that we don't make business acquisitions that are in line with what we'd estimated at the beginning of the year, that's going to affect where excess capital is. This number, in terms of what we expected back when we budgeted for the calendar year 2011, is actually very close to the ballpark that we thought of at that point.
Yeah.
Okay.
I think that's fair. We probably ended up repurchasing shares maybe a little bit less than what we thought we were going to do. Probably one positive thing, the risk stock prices continued to perform really well, and for instance, we probably wouldn't have had that float in our financial modeling. All those things kind of impact things in that. As Keith mentioned, we would've hoped to have maybe done at least another one more transaction than what we did or found a few more opportunities.
Got it. It sounds as if going into 2012, you clearly have as much financial flexibility as you had a year ago.
Yeah.
I think that's fair.
Yeah, got that for sure. Again, the economy's still kind of slowly coming on, and I think the industry went through a tough time this year. Craig and I like where we're positioned. We like having a little extra capacity both for opportunities and if you think rates continue, rate traction, pricing traction continues to move up. You want to have the capital necessary to take advantage of opportunities to grow your premiums.
One of the ways to think of it, Jay, if we've got $750 of excess capital, if we think of $200 of it as the minimum we want to have in terms of powder dry, that says we've got $550. If we did share buybacks at the level of last year, which is what we indicated we're looking at, that'd be $300. That $300 can be turned into share buybacks or business acquisition investment opportunities. If you look at it as going into this year, we're being excessive of $500 million of capital that's available for deployment.
It seems special dividend doesn't really come up as an option.
We're always looking at and considering anything that we think is a good decision for shareholders long term. At this point, we feel that share repurchases are a better value in creating value, particularly where our stock is traded, which has been under book value and even at a discount in a lot of cases to tangible book value. We'll always look at all the options.
Got it. One last question, more of a numbers question. The other line, other pre-tax, had been running $15 million-$18 million a quarter. This quarter was $26 million. Is there anything unusual there?
Not really. Nothing significant. There's two or three relatively minor items that hit the
exact quarter.
Okay. Can you offer any sort of guidance as far as that line item? Because it does jump around a bit. What a normalized number might be for us?
I would think, you talked about 15 compared to three. I think 15-20 is a reasonable range.
Okay. That's great. Thank you.
Your next question comes from Rob Bachman, Capital Returns.
Hello Craig and Keith. I had a couple of questions. I think Specialty Casualty, I assume your professional liability business is in there, and I was wondering if you could talk Carl or whoever about rate actions there of late as compared to maybe the last year or so.
Sure. I'd be happy to. Our book of business, again, in our D&O and professional liability is a little bit different than others. It's small private business, nonprofit, Canadian, and smaller accounts make up a much bigger part of the business than Fortune 500 risk. That said, we're pleased that we're getting some rate increase on our D&O business. It's mainly, I think in the fourth quarter, we probably got around 3% price change. We did achieve an increase for the year there. We're pleased with the trends.
Carl, plus 3% in the fourth quarter. I'm sorry, when you said an increase for the year, do you mean a volume increase? How did the 3% compare to the third or the second quarter?
Let's say, it's increased. We kind of started the year kind of soft where rates were down a little bit, and moving into the last half of the year, our rates went positive in that area. Again, we like the trend.
Okay. I want to follow up on the first, I forgot who it was, the first questioner, and you were talking about workers' comp, and you said, I think you were really talking about California. You think you need another 10 points of rate to get down to a 104 combined. I think you provided sort of an ROE pair in effect that I think you were sort of saying at a 104 combined, the ROE would be a certain level. I'm surprised that the ROE you cited was so high given where new money rates are. If I heard you right, it didn't make sense to me.
Well, you got a longer tail on that business. You still have the capital portion of what you're riding at your existing portfolio rates. The new cash from the new premium gets invested at lower new indicated money rates than that. That's why I gave you a range, 12%-14%.
I've not done the math, but writing at a 104 combined and putting new money to work at, I don't know, 3%, you can get a double, albeit 10, you can get a double-digit ROE in workers' comp, that combination?
That's what our financial guys tell me.
Okay. I trust Keith.
It's very much of an issue around the tail. When we look at the new money rate, when you're investing, you're not going to invest your long tail money rate at a short-term return.
I'm sorry, Keith. I had trouble hearing you. Could you say it again slower?
All I'm saying is that the return is somewhat of a function of what the duration is on the reserves. These are long-duration reserves, which means you're going to invest in a longer-term rate than a money market rate. Our average across the P&C assets is what we've been in new money in sort of the three and a half range. It is very much an issue around tail.
Okay. Thanks a lot.
Your next question comes from Matt Rohrmann, KBW.
Carl, Keith, good morning. Just one quick question, going back to crop real quick. Your friends at ACE the other day said pricing was up nicely in wheat relative to where corn and soybean were at and expected to go. Is there any opportunity there? I know you guys are more corn, soybean heavy.
Well, yeah. We write wheat exposures too, and it looks like compared to 2011 base prices, they're right. Looks like it's up about 9%. We have to see where the corn and soybean discovery prices kind of go to really see where we're going to end up. Right now, corn is down 4%, soybeans down 10%. We're a heavier corn and soybeans mix than maybe some others in that. Maybe it doesn't quite impact us as much.
Is it possible to say if you thought that wheat was a better opportunity to switch a material amount of your business to that crop as opposed to corn or soybean?
Well, I think it would be more a matter of whether we retain, whether we put it in the bucket where we retain more of the wheat business in a given year versus cede more to the government, if you know what I'm saying.
Got you. Okay, great. Thank you, guys.
Yeah, I think it's really more of our decision around that. We have flexibility in how much we retain year to year.
Great. Thanks.
You have a follow-up question from Ryan Burns, Macquarie.
Hi, guys. Yeah, just one quick one. Last week, a large private D&O underwriter noted that they had started seeing, I guess, increases in employment practices in crime claims and kind of adjusted their loss picks. I just want to see if, firstly, if you guys write that type of business as well, and if you are seeing any kind of increased claim activity on those two lines.
We do write some fidelity in crime. We are seeing some increase, not dramatic, but there's definitely directionally some increase in the claims level. You're talking about private equity?
No, they were noting, I think, well, I thought they were noting it just in their private and non-profit books that they were seeing increased employment practices and crime claims.
Yeah. The answer is yes, we're experiencing some, but not dramatic.
Okay, great. Thank you, guys.
There are no further questions at this time.
All right. Thank you very much. We appreciate you joining us. We'll look forward to visiting with you again as we report the first quarter.
This concludes today's American Financial Group 2011 fourth quarter, in full, earnings conference call. You may now disconnect.