Perennial speaker at this conference, American Financial Group. We've got Carl Lindner and Keith Jensen. I'll let you guys do your introductions. This is a specialty company with some very interesting niches. They'll be talking about those. I want to say personally that the founder of this company, Carl III, Carl Jr., excuse me, passed away in 2011. I had a chance to, many times, sit down with Carl. He was a class act. He built a really interesting company. Even though it was sad to see him leave us, I certainly know he would be very pleased to see the company where it is today. Carl?
Good morning. We always appreciate the opportunity to let us share our enthusiasm about American Financial Group, which we consider to be one of the premier specialty insurers out there. We're thankful to God and our great management team that we were able to have a solid year despite a pretty challenging year of catastrophes, tough crop conditions throughout the year, and that. Early this year, we're also very happy to announce that we had no losses insuring the slackline at the halftime show at the Super Bowl. For those of you that saw the guy balancing there, as a specialty insurer, we had the manufacturer's defect liability cover for the slackline. If it would've broken, and there would've been some problems, we would've had a few losses. That's kind of what we're about, is finding niches and finding interesting ways to play.
Why invest in AFG? These are the things that I'm going to be talking about this morning. We have a great spread and diversity of business. Not one of the 25 different businesses that we're involved in makes up more than 16% of our property and casualty net written premium. The results of the large property and casualty specialties, some of them like crop hail, government multi-peril, our force-placed mortgage property insurance, and the captive part of National Interstate, our annuity business. Those businesses don't really correlate to the rest of the specialty property and casualty business that we have. We really like that diversity. I think it means more consistent earnings over time. Our market position continues to improve in our various businesses.
Today, as you can see, over half of our property and casualty group gross written premium is produced by businesses with top 10 rankings. We're also a top five player in most of the major annuity and supplemental lines. The main brand that we're building is the Great American name and the Great American Insurance Group. Among agents and brokers and our customers in the various niche businesses, we think we're doing a good job developing the brand to the customers that we serve. In the equine world, where we're number one, if you talk to a horse trainer in any number of the different types of Arabians, Thoroughbreds, and you ask them who they would most think of as an insurance company, they'd probably think of Great American.
Here you can see, over the past three and five years, we've had strong compounded growth in book value per share, surpassing our peers. You can also see, along with strong growth in book value per share, how we've had five and 10-year compounded shareholder returns, including dividends, that surpassed the market and surpassed our peers. Our in-house money management arm, American Money Management, has really given us a long-term advantage over our peers. As you can see, AFG's annualized total return over five years for its fixed income portfolio, we beat the peers in a composite by about 110 basis points. Over that time, that means $1 billion of outperformance. Small percentages add up over time. Also, I'd maybe mention our Verisk Analytics investment at year-end. I think we still, Keith, have maybe $120 million of that left.
Since the IPO, we've had realized gains or unrealized gains of about $300 million. That's a pretty big win on an investment like that. We're proud of the strategy that we put into place on that. We feel we're intelligently using our excess capital, which was roughly $785 million at year-end 2011. We're keeping $200 million-$300 million of powder dry defensively because of the financial market volatility. We've returned capital to shareholders through $316 million of share repurchase in 2011, at about 90% of tangible book value was about the average, and through $68 million of dividends. We're looking to repurchase probably another $250 million-$300 million of our stock if it continues to be as attractive as it is. We'll review our dividend again this year.
We're always looking for ways to expand our stable of specialty niches, whether it's through a hardening market and internal growth, whether it's through small acquisitions, startups. We've been good at that over a long period of time. Maybe the most important reason to invest in AFG is that we're undervalued, both on a PE and a book value multiple basis, as you can see. As I mentioned to you before, we performed well in a challenging year for our industry, and we have the balance sheet to take advantage of opportunities going forward. I'm going to talk just a little bit about our property and casualty, specialty property and casualty business. Here's a snapshot of our business. The 23 or so different niches that we have fit into three main categories, with the property and transportation segment being the largest.
I might mention to you that our business comes from over 8,000 agents and brokers. Less than 9% of our overall business comes from the top three national producers. We have good relationships with the top national producers, but it's more price-sensitive business a lot of times. We like that architecture. We like a big spread and diversity of distribution. That's the way we like things. Just talk a little bit about our specialty property and casualty strategy. Obviously, everybody in our industry is really focused on getting some price increase this year, securing price increases to improve our price adequacy. We're hoping to get 2%-4% overall in price this year. If the market allows, we'll go for more. The majority of our businesses are still performing pretty well.
Outside of California workers' comp and just a few areas, we probably don't have quite the same needs for as large of increases as maybe some of our peers. That said, it's a main goal to get price increase this year. We want to continue to improve the position of our existing operations, adding new niches, as I mentioned through our Lloyd's insurer Market form. We want to continue to expand internationally. We've used that platform to expand businesses that we know, things like D&O, things like equine mortality, things like ocean marine, fidelity and crime those businesses that we know well. We've used that Marketform as a platform to grow those businesses. We wrote about $50 million of expansion premium off of our Marketform platform. Strategically aligned incentives.
Really tying the annual and long-term compensation, incentive compensation of our business managers and even our employees to making underwriting profit is really critical in this business. You don't want to incent your underwriters and your claims, but you don't want to incent them the wrong way. We have a heavy underwriting culture in our company, and we default towards underwriting profit versus revenue or growth, and that's just a part of our culture. We feel good about our overall reserve position today also. One thing you ought to know about AFG is we're a company with lower catastrophe volatility relative to our peers and to the industry. This past year, for instance, our cats were probably 1.6 points of our combined ratio.
Another way to look at that would be under the new RMS 11 cat modeling for windstorm, a one in 500-year windstorm number would be about $140 million after tax for us, or roughly 3% of shareholders' equity. Compared to others, that's relatively small. This is my favorite slide. Bill Berkley and his son were through Cincinnati, and we were talking, and I think over 10 years, if I was to show you this slide, over 10 years, Bill is on top. But I had to rub it in that over the past five years, that we were the top dog now. Having superior underwriting talent. Having superior investment talent, that goes a long way in the property and casualty business. It's really what's driven our industry-leading pre-tax returns the past five years. We're very proud of that.
You can see, just on pure underwriting also, we're proud of our underwriting track record and our ability to outperform over time. I thought I'd include this ad that we've been running. We're proud of it. You can see out of the number of companies in the rated A by AM Best over 100 years, or those that have been on Ward's 50 list, you can see there's really just two companies that would fit that category. Great American is one of those. Again, we've been very pleased with our results in each one of our operating segments. We're projecting healthy combined ratios and underwriting profitability for each of our main segments in 2012. We had quite a bit of growth, if you look up there last year. That was driven by National Interstate's Vanliner acquisition.
It was also driven by crop prices, which we benefited from on increasing on the premium side. We also benefited from some of the businesses we started up a while ago and are growing. We bought a little company that did workers' compensation, large loss rated types of things. Right now, there's a hardening in that market, and we're seeing nice growth. That's really is pretty much our workers' comp business outside of California that I'm talking about. Then we started an environmental liability unit some two or three years ago, and there's been nice growth in that business. 2012, as you can see, as we took advantage of crop prices increasing, it looks like the game's not over probably till prices are set based off February, March average prices, it looks like crop prices are down a little bit.
Our 2012 growth is being restrained by crop prices moving in the other direction. I think our guidance is down 1%-3%. If you exclude crop, it would be a 1% to 5%. I think that where we end up in that range is really going to be determined by how the market progresses on pricing, how much price we get, whether there's continued tightening in the market in that. With that, I'm going to turn things over to Keith Jensen. He's going to talk to you a little bit about our annuity and supplemental business and investments.
Thank you, and good morning. As Carl said, one of the hallmarks of American Financial Group is a focus on niche products where we believe that we can have a competitive advantage. As we think about that, we think about it either in the nature of the product, the nature of the distribution, or something where there can be a unique skill set that we can apply that gives us a competitive advantage. That applies as well in our annuity and supplemental businesses. If I can get the right slide. The history of the annuity and supplemental businesses goes back to 1975 when we made an acquisition of the predecessor to American Financial Group or Great American Insurance. Along with that came a small little annuity company that was doing business in the 403(b) market.
Over the time since that day, we have progressed to the point where we're now the third largest 403(b) writer within the industry. So what you'll see here is the nature of products we sell into that market and into the retirement annuities market. Then most recently in the last couple of years, we've begun selling in a meaningful way in the bank markets primarily so far to PNC and Regions Bank. We have about 10 others where we're in the startup mode in distributing through that market as well, and that's been a lucrative opportunity for us in the last couple of years. Okay. Looks like I'm going to be defeated by technology.
When we look at our strategic focus or the things that we are paying particular attention to at this point, one is that we have made some significant changes in the past year in the distribution that we're using through the 403(b) market. The model used to be one of large MGAs with an army of agents that go out and be in the individual school districts or hospital situations presenting products, making sales. We're finding that the business model is really moving away from that to a more consumer-centric model. In that model, there was a very high commission by the time you fed the mouths of the MGAs and all of the agents that went up through their particular contract. During this past year, we have eliminated the MGA model and gone straight to contracting with agents.
This has put us into a position where we can increase the crediting rate to our policyholders, as well as providing the ultimate sales force with a reasonable return on their efforts. As with any annuity company, we focus very intently on the effects of interest rate fluctuations. We hold meetings with our investment advisory team every two weeks to look at what the rates are in the marketplace, to look at what crediting rates are available to us. We're in a position right now where we've been able to contain and maintain our crediting rates at a level such that we're getting a return of about 280 basis points, while at the same time providing a reasonable return to our shareholders and policyholders.
We do have to focus, as you might appreciate, on making sure that there's an appropriate asset liability mix, because if those get out of sync with each other, it can be a very serious problem. We focus heavily on that and do not go into an arena where we have a duration mismatch greater than one. Finally, a strong high-quality balance sheet. This carries over from what Carl described for our property and casualty businesses. We're committed to the proposition that we need to be in a position where the capitalization of our companies is not an issue to potential policyholders and to rating agencies, who, as we all know, have a heavy hand, and some refer to them as the de facto regulators in our industry.
We're in a position where the equity that we keep, the capital we keep in our businesses, is at a level that would merit being the next rating category higher, so that we never get into the position where that's the pacing item for us. A couple of things on operating results. You can see there's been a substantial increase year-over-year in our statutory net premiums. About $250 million of that increase comes from the work that I described that we're doing in the bank distribution. The remainder of the increase is from premiums into our retirement products arena, where we've been having substantial opportunities to grow and to provide additional service. The pre-operating earnings that you see below, I would note that in 2010, we did have a $25 million charge for deferred acquisition costs.
If we play that into this matrix, you can see that earnings were about the same year-over-year. Supplemental insurance, which is primarily Medicare supplement, progressed over the past year as well. Carl mentioned some things about the investments. I would just reiterate what he said and indicate that we really look at the investments as a core competency. This is an area that we don't outsource. We manage it all ourselves. Carl gave you some statistics that talked about the spread over the past four years between ourselves and competitors in the investment arena. The spread was pretty wide. Let me just give you one anecdotal reason why, because the skeptic in you may say, "How do you really do that?
Nobody can do that in perpetuity." That may be true, but during the past three or four years, when we went through the recent recession, as others were disposing of their residential mortgage-backed securities, we were buying. We feel like it's an area that we have significant expertise. Over the years, we have maintained underwriting policies, as we look at that investment policy, that have been very stringent. We haven't bought into the CDOs. We didn't buy into the mezzanine financing. We only purchase things that are the primary securitization, triple A category, top tranche. As a result of maintaining that discipline leading up to and through the recession, during the three years of recession, which we measure as starting about December 31 of 2007, ending December 31 of 2010, our return on mortgage-backed securities was 41%, 15% annualized.
We think that was an incredible opportunity that many missed because the turmoil and the uncertainty in the market was severe. With those thoughts, we'd be pleased to respond to any questions that you may have.
I just had a couple of questions. One of the areas for 2012 where you do expect a bit more growth is the Specialty Casualty business. I'm wondering what's driving that. Are there any particular niches in that area that you think drive that growth?
Sure. Well, I think, as far as where we're going to potentially get the most rate, it probably is going to be within that category and in Property and Transportation. Some of it will probably be rate driven. As I mentioned to you, we feel that in the other than California workers' comp business, we see the markets definitely hardening both from an underwriting and a pricing standpoint. I think we're going to see an opportunity there to get more pricing and grow some of our startup businesses like environmental liability. California workers' comp, for the first time, we've been dropping our volume in our California workers' comp business for at least four or five years now.
For the first time, I think we're seeing that with some rate and the economy beginning to improve and the competitive marketplace being a little bit more sane, that we might see even some growth there. I think we're going to get a little growth because of price across the board in a lot of those lines that make up Specialty Casualty.
Yeah. In the conference call, you did talk about some of the price increases you were seeing in the fourth quarter. Can you give us at least qualitatively what you're seeing in the first quarter? Are things continuing to accelerate the way they did in 2011?
It's probably a little too early to comment on that.
I just want to, since there's no other questions, let me throw another one out there. Keith, you mentioned on the annuity side, eliminating the MGAs. They would have added some value, I assume, to the transaction. Does that now involve you making more investments to handle some of those responsibilities that they had previously done?
By and large, Jay, the majority of the things that they were doing were things that were also being done on the platform for the portion of our business that was not going through that particular channel. So we were in a position from a systems perspective and from a people perspective to take that additional work on with a very modest, less than 10 headcount increase in the number of people servicing.
You got a quiet audience this morning.
It's early.
I think it is. Well, if that's it, why don't you join me in thanking the management of AFG?