American Financial Group ( AFG) Q3 2011 Earnings Call October 26, 2011 11:30 AM ET Executives Keith Jensen – SVP Carl Henry Lindner – Co-President and Co-CEO Analysts Amit Kumar – Macquarie Matthew Rohrmann – Keefe Bruyette & Woods Jay Cohen – Bank of America Presentation Operator
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Core net operating earnings is a non-GAAP financial measure which sets aside significant items that are generally not considered part of ongoing operations such as net realized gains or losses on investments, the effect of accounting changes, discontinued operations, significant asbestos and environmental charges, and certain other non-recurring items.AFG believes that this non-GAAP measure to be useful for analysts and investors in analyzing the ongoing operating results 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. Carl Henry Lindner Good morning, and thank you, for joining us. Craig and I started out by thanking God for the life of AFG’s Founder and Chairman, Carl H. Lindner Jr. And we’d like to thank you all for all your prayers and condolences in connection with the passing of our dad, Carl H Lindner Jr. We’re humbled by the outpouring of love from his many friends from Cincinnati and across the country, not to mention as many tributes and fond memories shared with us over the past week. Until his final days, our dad shared his passion for his business with employees throughout the AFG organization. Carl’s presence in our corporate offices and boardroom will be missed tremendously. His incredible legacy carries on to the many people touch over the years. Yesterday afternoon we released our 2011 third quarter results. Despite a challenging quarter for the industry, Craig and I are very pleased to report solid operating results that are consistent with our expectations. Core net operating earnings for the third quarter were down $0.17 per share from the comparable 2010 period. We are proud of the insurance professionals that remain disciplined in the under writing and product pricing decisions. This mind-set particularly right now is essential given the continued low interest rate environment and national and global economic uncertainty. I am assuming that the participants on today’s call reviewed our earnings release and supplemental materials posted on our web site.
I will review a few highlights and focus today’s discussions on key issues. I will also briefly discuss our outlook for the remainder of 2011. But let’s start by looking at our third quarter results summarized on slides 3 and 4 of the webcast.Net earnings per share were $0.94 for the quarter which included realized gains of $0.04 per share. Lower earnings and our insurance operations and lower realized gains were partially offset by the effect of share repurchases. Year-to-date earnings per share $2 and $0.24 a share. Core net operating earnings for the third quarter were $91 million or $0.90 per share compared to the prior year’s results of $117 million or a $1.07 per share. Net operating earnings per share for the first nine months were 14% less than the 2010 results. Lower underwriting profit and lower investment income in our Specialty Property and Casualty insurance operations were partially offset by increased earnings in our annuity and supplemental operations during the nine month period. Nine month annualized core operating return on equity was approximately 9%. One of the important strategic objectives is to deploy our excess capital and – and enhance its shareholder value. We’ve continued our share repurchases and purchased 2.6 million shares of our common stock at an average price of $32.25 per share during the third quarter. The average purchase price was approximately 83% of book value per share as of September 30, 2011. We feel this remains an effective means of increasing shareholder value. There are approximately 5 million shares remaining under our current repurchase authorization. Read the rest of this transcript for free on seekingalpha.com