美國金融集團 2026 年第三季財報電話會議：核心 EPS 成長 48%

美國金融集團 (American Financial Group, NYSE: AFG) 公布創紀錄的第三季核心營運業績，主要得益於特種保險保費成長、嚴格的定價策略以及更高的產物及意外險（P&C）投資收益。出售 Charleston Harbor Resort and Marina 帶來了顯著的一次性貢獻，但該公司表示，即使扣除該筆交易，核心營運淨收益亦創下新高紀錄。

重點摘要

• 2026 年第三季核心營運淨收益年增 48% 至每股 3.97 美元，年化核心營運股東權益報酬率 (ROE) 達 26%。
• 簽單總保費與簽單淨保費分別成長 8% 與 9%。不含勞工賠償保險的續保費率上升約 6%，若包含則上升 5%。
• 特種產物及意外險的綜合成本率為 93.8%，去年同期則為 93.0%。巨災損失增加了 1.0 個百分點，而前期準備金有利提存變動則使該比率降低了 1.5 個百分點。
• 產物及意外險的投資淨收益成長 41%。若扣除出售 Charleston Harbor Resort and Marina 的影響，則年增 10%。
• 該不動產出售案帶來 1.26 億美元的稅前投資淨收益，並為每股核心營運淨收益貢獻了 1.41 美元。
• AFG 宣布發放每股 3.50 美元的特別股利，總支付金額約為 2.9 億美元。

關鍵財務數據

業務與營運表現

財產與運輸險

該業務群組報告的綜合成本率為 93.4%，較去年同期的 94.1% 有所改善。簽單總保費成長 12%，簽單淨保費成長 14%，主要受到農作物保險成長、新業務拓展及優質運輸險定價的推動。

平均續保費率上升約 7%。商業汽車責任險連續第三個季度實現承保利潤，第三季與 2026 年前九個月的續保費率均上升約 15%。

管理層繼續預計今年農作物收成為正常年份水準。玉米與大豆的收穫價格分別比春季定價高出 3% 與 14%。AFG 的多數年度農作物保險獲利均在第四季認列，屆時產量與理賠情況將更為明確。

特種意外險

該業務群組的綜合成本率從 95.8% 改善至 94.9%。簽單總保費成長不到 1%，而簽單淨保費成長 2%。

超額與剩餘險（E&S）以及勞工賠償保險的成長，部分被績效不佳帳戶的不續保以及削減加州意外險風險敞口的舉措所抵消。不含勞工賠償保險的續保費率上升約 6%，包含在內則上升 4%，均較第二季水準高出約 2 個百分點。

管理層表示受「社會通膨」（social inflation）影響的業務表現有所改善，但 AFG 仍繼續採取審慎的初始損失假設。商業汽車險費率上升 15%，超額責任險定價今年以來維持 10% 以上的漲幅，非營利機構業務費率則上漲約 7%。

特種金融險

特種金融險產生了 2,300 萬美元的承保利潤，低於 2025 年第三季的 5,100 萬美元。該下滑反映了一起單一的歐洲火災及營業中斷損失，以及前期準備金有利提存變動減少。

簽單總保費與簽單淨保費各成長 14%，主要得益於貸方服務業務的成長。管理層表示，若扣除該起異常的歐洲損失，該部門的綜合成本率本應落在 80% 後段（high 80s）。

投資與資本配置

AFG 在第三季投資了約 15 億美元於現金與固定到期日證券，相當於 2026 年整個上半年的投資總額。這些採購與利率交換將產險固定到期日投資組合（包含現金及約當現金）的存續期間從 6 月 30 日的 3.1 年提升至 3.6 年。

該公司表示，固定到期日證券的殖利率約在 6%。另類投資的年化報酬率約為 6.7%，而去年同期為 6.2%。

AFG 在本季透過常規股利以及 2,600 萬美元的股票買回，向股東回饋了近 1 億美元。該公司亦將其常規季度股利較先前宣布的每股 0.97 美元提高了 10.2%。

管理層展望

管理層預計營運業務在 2026 年剩餘時間及 2027 年將產生大幅過剩資本。潛在用途包括併購、額外特別股利與股票買回。

AFG 對其由 35 項特種業務組成的多元化投資組合能支持成長保持信心。管理層指出農作物保險、商業汽車險、超額責任險與勞工賠償保險為具備發展機會的領域。

該公司預期長期而言，其另類投資組合的平均年化報酬率將達到 10% 或以上，同時也坦言季度業績可能有所波動。

風險與關注領域

• 社會通膨仍是意外險領域隱憂。儘管近期理賠頻率與嚴重程度趨勢平緩，AFG 仍維持對當年度損失的保守假設。
• 加州勞工賠償保險出現溫和的承保虧損，主因是累積性創傷理賠增加。其他區域的勞工賠償保險業務則表現良好。
• 該公司正透過個別帳戶層級的不續保與更嚴格的承保標準，減少特定加州意外險的風險敞口。
• 農作物保險業績仍取決於最終產量、收穫時程及理賠活動，大部分獲利於第四季認列。
• 多家庭住宅（Multifamily）市場狀況的復甦速度慢於管理層先前預期，儘管建案活動與未來供給已趨於緩和。
• 正如第三季歐洲火災及營業中斷索賠所示，特種金融險業績容易受單一重大損失事件影響。

分析師問答環節亮點

管理層表示，除了加州因累積性創傷索賠使頻率上升外，整體勞工賠償保險理賠頻率保持平穩至略降。該業務在第三季持續保持高個位數成長，今年以來則保持中個位數成長。

AFG 將維持保費成長的能力歸功於其 35 項特種業務的多元化布局。管理層表示，即使公司對績效不佳的意外險帳戶保持挑剔，大多數業務仍在成長。

該公司報告稱，超額與剩餘險（E&S）業務並未出現顯著流回標準核准市場（admitted markets）的現象。管理層將 AFG 的定價優勢歸因於業務組合，以及在受社會通膨影響的業務線中積極調漲費率。

在商業汽車險方面，AFG 憑藉其專業市場地位與替代風險自留（captive）計畫，看好持續成長的機會；該計畫約佔該業務群組保費的 70%。

管理層將多家庭住宅的復甦形容為慢於預期，但仍處於初期階段。在建戶數比 2023 年初的高峰低約 50%，而開工量則比 10 年平均值低 28%。

法說會逐字稿全文

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完整財報電話會議逐字稿

管理層陳述

Operator

Good day, and thank you for standing by. Welcome to American Financial Group 2026 Third Quarter Results Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded.

I would now like to turn the conference over to your speaker for today, Diane Weidner, Vice President of Investor Relations. Please go ahead.

Diane P. Weidner

Good morning, and welcome to American Financial Group's Third Quarter 2026 Earnings Results Conference Call. We released our results yesterday afternoon. Our press release, investor supplement and webcast presentation are posted on AFG's website under the Investor Relations section. These materials will be referenced during portions of today's call.

Joining me this morning are Carl Lindner III and Craig Lindner, Co-CEOs of American Financial Group; and Brian Hertzman, AFG's CFO. Before I turn the discussion over to Carl, I would like to draw your attention to the notes on Slide 2 of our webcast. Some of the matters to be discussed today are forward-looking. These forward-looking statements involve certain risks and uncertainties that could cause our actual results and/or financial condition to differ materially from these statements.

A detailed description of these risks and uncertainties can be found in AFG's filings with the Securities and Exchange Commission, which are also available on our website. We may include references to core net operating earnings, a non-GAAP financial measure in our remarks or in responses to questions. A reconciliation of net earnings to core net operating earnings is included in our earnings release.

And finally, if you're reading a transcript of this call, please note that it may not be authorized or reviewed for accuracy. And as a result, it may contain factual or transcription errors that could materially alter the intent or meaning of our statements. Now I'm pleased to turn the call over to Carl to discuss our results.

Carl Lindner

Good morning. I'll begin by sharing a few highlights of AFG's 2026 third quarter results, after which Craig and I will walk through more details. We'll then open it up for Q&A, where Craig, Brian and I will respond to your questions.

We are pleased to report excellent quarterly core net operating earnings, our highest ever for a third quarter. Strong underwriting margins, healthy premium growth and higher quarterly property and casualty net investment income contributed to a new third quarter record for pretax property and casualty operating income.

Our compelling and diversified mix of specialty insurance businesses, our entrepreneurial culture, disciplined operating philosophy and our astute team of in-house investment professionals continue to position us to create value for our shareholders through a variety of insurance market conditions.

Craig and I thank God, our talented management team and our great employees for helping us to achieve these results. I'll now turn the discussion over to Craig who will walk us through some of the details.

Craig Lindner

Thank you, Carl. Please turn to Slides 3 and 4 for a summary of earnings information for the quarter. Here, you'll see that AFG reported core net operating earnings of $3.97 per share in the 2026 third quarter, a 48% increase from the prior year period. This level of performance resulted in an impressive annualized core operating return on equity of 26%.

I'll start with an overview of AFG's investment performance and financial position and share a few comments about AFG's capital and liquidity. The details surrounding our $17.4 billion investment portfolio are presented on Slides 5 and 6.

Net investment income at our Property and Casualty insurance operations for the 3 months ended September 30, 2026, increased 41% year-over-year and established a new third quarter record for AFG. The increase was primarily attributable to income from the sale of the Charleston Harbor Resort and Marina.

Property and Casualty net investment income, excluding the income from the sale of Charleston Harbor Resort and Marina, increased 10% when compared to the 2025 quarter. Consistent with what we previously communicated, the August 2026 sale of Charleston Harbor Resort and Marina generated $126 million in pretax net investment income.

Since the P&C companies and AFG parent each owned half of the property, the earnings were split evenly between the operating results of the P&C Insurance segments and holding company investment income. The sale contributed $1.41 per share of core net operating earnings for the 3 months ended September 30, 2026. Third quarter core net operating income represented a record even when excluding the income from the sale of Charleston Harbor Resort and Marina.

As you'll see on Slide 6, approximately 2/3 of our portfolio is invested in fixed maturities. In response to the higher interest rate environment experienced during the third quarter, we invested a significant amount of cash and fixed maturity investments totaling approximately $1.5 billion.

For context, the $1.5 billion invested in the most recent quarter is equal to the amount invested during the entire first half of the year. These purchases, combined with interest rate swaps executed during the third quarter, increased the duration of our P&C fixed maturity portfolio, including cash and cash equivalents to 3.6 years at September 30, 2026, from 3.1 years at June 30, 2026.

In the current interest rate environment, we're able to invest in fixed maturity securities at yields of approximately 6% -- the annualized return on alternative investments was approximately 6.7% for the 2026 third quarter compared to 6.2% for the prior year quarter.

Longer term, we continue to remain optimistic regarding the prospects of attractive returns from our overall alternative investment portfolio with an expectation of annual returns averaging 10% or better.

Please turn to Slide 7, where you'll find a summary of AFG's financial position at September 30, 2026. During the third quarter, we returned nearly $100 million to our shareholders, including $26 million in share repurchases and the payment of our regular quarterly dividend.

In October, we increased AFG's regular quarterly dividend by 10.2% over the previously declared rate of $0.97 per share and paid on October 23, 2026. In conjunction with our earnings release, we declared a special cash dividend of $3.50 per share payable on November 25, 2026, to shareholders of record on November 16, 2026. The aggregate amount of the special dividend will be approximately $290 million.

With this special dividend, the company has declared $59 per share or nearly $5 billion in special dividends since the beginning of 2021. Carl and I consider these special dividends to be an important component of total shareholder return. We expect our operations to continue to generate significant excess capital throughout the remainder of 2026 and into 2027, which provides ample opportunity for acquisitions, special dividends or share repurchases over the next year.

We evaluate the best alternatives for capital deployment on a regular basis. We continue to view total value creation as measured by growth in book value per share plus dividends as an important measure of performance over the long term. For the 9 months ended September 30, 2026, AFG's growth in book value per share, excluding AOCI plus dividends was 13.8%.

I'll now turn the call over to Carl to discuss the results of our P&C operations.

Carl Lindner

Thank you, Craig. If you turn to Slides 8 and 9 of the webcast, which include an overview of our third quarter results. Our Specialty Property and Casualty businesses performed very well in the third quarter, establishing a new record for third quarter pretax property and casualty operating income.

We continue to execute on opportunities to grow while achieving favorable renewal rate increases. Underwriting discipline and an opportunistic business model have been essential to helping us outperform peers over the long run and ensure that we're meeting or exceeding overall targeted returns.

Third quarter 2026 gross and net written premiums were 8% and 9% higher, respectively, than the comparable period in 2025, as you'll see on Slide 8. Average renewal rates across our Property and Casualty Group, excluding workers' comp, were up approximately 6% for the quarter. That was about 1 point higher than the previous quarter.

Average renewal rates, including workers' comp, were up approximately 5% overall, also about 1 point higher than the previous quarter. We have reported overall renewal rate increases for 41 consecutive quarters, and we believe we're achieving overall renewal rate increases that enable us to meet or exceed our targeted returns.

Our Specialty Property and Casualty Insurance businesses produced a 93.8% combined ratio in the third quarter of 2026, 0.8 point higher than the 93% reported in the third quarter of 2025. Third quarter 2026 results benefited from 1.5 points of favorable prior year reserve development compared to 1.2 points in the third quarter of 2025.

Catastrophe losses added 1 point in the third quarter of 2026 compared to 1.2 points in the third quarter of 2025.

Now if you turn to Slide 9, we'll review a few highlights from each of our Specialty Property and Casualty business groups. Details are included in our earnings release, so I'll focus on summary results here. Other businesses in the Property and Transportation Group achieved a 93.4% calendar year combined ratio overall in the third quarter of 2026, an improvement of 0.7 point from the 94.1% reported in the comparable 2025 period.

Third quarter 2026 gross and net written premiums in this group were 12% and 14% higher than the comparable prior year period. The increase is primarily attributable to growth in certain crop insurance products, along with new business opportunities and a favorable rate environment in several of our transportation businesses.

Overall renewal rates in this group increased approximately 7% on average in the third quarter of 2026 slightly below pricing achieved in this group for the second quarter of this year. For the third consecutive quarter, we did make an underwriting profit in commercial auto liability and continue to be enthusiastic about the progress there.

Renewal rates in commercial auto liability were up about 15% during the quarter and for year-to-date 9 months. In our crop business, harvest pricing for corn and soybeans settled 3% and 14% higher, respectively, than the spring discovery pricing, which is well within acceptable ranges. Recent overall weather conditions are more likely to affect harvest timing and final yield outcomes.

Corn harvest progress remains behind average in parts of the Western corn belt, while soybean harvest is generally advancing at a faster pace. Recent freezes effectively ended the growing season across northern production areas, but are not expected to meaningfully affect mature corn and soybean crops.

Based on all these factors, we continue to anticipate an average crop year. As is our standard practice, we record the majority of our calendar year crop profitability in the fourth quarter, wherein we have better visibility into actual yields and claims activity in our MPCI business and a clear indication of the performance of our private product business.

The businesses in our Specialty Casualty Group achieved a solid 94.9% calendar year combined ratio overall in the third quarter of 2026, an improvement of nearly 1 point from the 95.8% reported in the comparable period in 2025. We continue to be mindful of social inflation and remain cautious in our initial loss picks for the lines of business written by the businesses in this group.

Third quarter 2026 gross written premiums in this group increased less than 1% and net written premiums increased 2% when compared to the same prior year period. New business opportunities, strong policy retention and higher rates contributed to growth in several of our Specialty Casualty businesses, particularly our excess and surplus and workers' comp businesses, though this growth was partially offset by nonrenewals of underperforming accounts in certain of our targeted market businesses, including actions to decrease our casualty footprint in California.

Excluding our workers' comp businesses, renewal rates for this group were up approximately 6% in the third quarter. Pricing in this group, including workers' comp, was up about 4%. Both measures are an improvement of about 2 points over pricing achieved in the second quarter.

Specialty Financial Group reported an underwriting profit of $23 million in the third quarter of 2026 compared to $51 million in the third quarter of 2025. The decrease reflects an isolated large loss in our European operations and lower overall levels of favorable prior year development. Gross and net written premiums in this segment were both up 14% in this group when compared to the prior year period, primarily due to growth across our lender services businesses.

Renewal pricing in this group was up approximately 4% in the third quarter. Craig and I are proud of our proven track record of innovation, long-term value creation and a forward-thinking mindset. AFG is well positioned to continue to build long-term value for our shareholders for the remainder of 2026 and beyond.

I will now open the lines for the Q&A portion of today's call. And Craig and Brian and I would be happy to respond to your questions.

Operator

[Operator Instructions]. Our first question will be coming from the line of Hristian Getsov of Wells Fargo.

分析師問答

Hristian Getsov

My first question is on workers' comp. We've heard from a few worker comp players that there's some increase in frequency of claims given the expiration of the ACA subsidies and overall affordability challenges. Can you talk about the loss trends you are seeing in your comp book and anything incremental you're seeing in recent quarters away from the cumulative trauma dynamic you've pointed to in recent calls in your California comp book?

Carl Lindner

Yes. Overall, we're really continuing to see flat to slightly down frequency in our workers' comp business. The exception is California, as you mentioned, pretty much driven by the cumulative trauma claims that is pushing frequency up, some both in our Republic book and in our strategic comp higher deductible business that's written in California.

We continue to be very pleased with our overall workers' comp underwriting results. They continue to be strong on a calendar year and accident year basis in the third quarter and year-to-date 2026. We're also growing the business in that third quarter, the business was probably up a high single-digit increase and mid-single digit year-to-date. So we think the loss ratio trends continue to be pretty favorable. Obviously be...

Hristian Getsov

You can finish your thoughts, sorry.

Carl Lindner

Yes. When you look at the -- pretty much all parts of our workers' comp business, excluding Republic and California are doing well. California would be the exception where we have a moderate underwriting loss there.

Hristian Getsov

Got it. And then as we think about competition widening into casualty lines away from just property, and you obviously continue to see very strong growth across your portfolio. How should we think about growth trending from here? Are there still enough opportunities to maintain a mid-single-digit or better top line growth number?

Carl Lindner

In casualty or overall as a company.

Hristian Getsov

Just overall.

Carl Lindner

Yes. I think that's -- I think we're showing that in our quarter's growth and in our year-to-date growth. I think that's one of the benefits of having 35 specialty businesses. Not all the business is correlated to the general property and casualty cycle. There's businesses like crop that have double-digit growth or on commercial auto, where others are still struggling with fixing the underwriting results, and we're in good shape and are finding opportunities to grow.

We're kind of -- our excess liability business in Specialty Casualty and workers' comp are growing, in that. So yes, we continue to find good opportunities for growth in that. Really, the majority of our businesses of those 35 have are showing some growth.

Hristian Getsov

Got it. And one more, if I may. The nonrenewals in the California casualty book, is there any size we can get with that? And are you expecting any other nonrenewal actions as we kind of think about the Q4 and 2027?

Carl Lindner

I think I think I really mentioned over the past year, we've -- in businesses like SHS, our nonprofit business that we've been more defensive there. So that gets to be kind of an account-by-account basis, quarter-by-quarter and what we decide to do. And our public sector business, I think we're also being more careful about our -- and really kind of reducing our California exposures there.

Operator

Our next question will be coming from the line of Andrew Andersen of Jefferies.

Andrew Andersen

Specialty Casualty accident year loss ratio increased to about 65% from 63.5% in the first half of the year. Could you just talk about what drove the increase? Should we think of that as normal volatility business mix? Or was there a change in underlying loss trend there?

Brian Hertzman

So you're looking at Specialty Casualty, accident year loss ratio ex cats?

Andrew Andersen

Yes.

Brian Hertzman

So for the quarter, we're seeing some improvement there coming out of our E&S businesses in particular. So if you look at the third quarter of 2026 versus the third quarter of 2025, we're seeing better results out of our excess and surplus lines from lower severity there. Overall...

Andrew Andersen

A bit higher compared to the beginning of the year.

Brian Hertzman

It will be -- some of that -- that would just be -- if you're looking at 2 quarters before that, a lot of that would just be more a mix of business there throughout the year. When you look at the 9 months, we're fairly consistent at the loss ratio ex-cats at right around 64%.

Andrew Andersen

Got it. And as we think of the Specialty Financial segment, it's had pretty strong growth despite pricing being more moderate compared to a few years ago. But could you just talk about what's driving that strong growth in lender services and how sustainable you think that is into next year?

Carl Lindner

Yes. We continue to be optimistic about our ability to grow the business. There are a number of different businesses within the group in that. And specialty equipment services is a business we don't talk about that much, but we're seeing nice growth there.

It's it's kind of an embedded product that's sold on the front end of capital goods as they're sales made. We do that in Europe and also the U.S. So -- and our basic lender -- so with our lender-placed property business continues to be healthy and growing. And so it has a tendency to be a little bit lumpier.

Operator

Our next question will be coming from the line of Michael Zaremski of BMO.

Michael Zaremski

On the Specialty Casualty segment, there was a little bit of reserve release. I know not a huge number, but nice to see in the biggest number in a while. I don't know if you want to provide any color there.

Brian Hertzman

Sure. This is Brian. So what we -- what you will see, as a reminder, we look at our reserves by business unit each quarter and make adjustments as needed. In some of the previous quarters, we've had things going both directions, which kind of always happens.

But what we're really seeing here is the social inflation-exposed businesses behaving better. So in that number, which is a net of some favorable and some adverse development, there's less adverse development. So it didn't come from excessive workers' comp releases or anything like that. It's really just a good solid performance across the whole group of casualty businesses. We're especially pleased by the behavior of the social inflation exposed businesses where on a net basis, they were favorable, which hasn't always been the case.

Michael Zaremski

Got it. On the social inflationary business, I think Carl made a comment -- or Brian, you made a comment earlier, too, about seeing a little less loss trend in E&S and Specialty Casualty. But just kind of overall, has there been any change to the absolute loss trend? Like is loss trend -- is the slope changing? Or is it more AFG has been picking its reserves at higher levels, so the loss trend relative to your expectations is coming in a bit better year-over-year. Does that make sense?

Brian Hertzman

Yes. I mean we react to bad news as quickly as we can. So we would strive to be on the conservative side of our accident year picks with the hope that we will be correct or that we are more likely to have favorable adverse development.

So in areas like commercial auto liability, where we're seeing profit now, we're still keeping our initial loss picks higher. And the same thing would be true in the social inflation exposed businesses in casualty, where we're being sensitive in our current year loss picks despite seeing flatter trends overall.

So we're not really seeing a big change in frequency or severity overall in social inflation exposed lines. But obviously, we're not going to call victory on that, and we're going to be mindful of that as we reserve for our businesses and price our businesses for quite a while.

Carl Lindner

Yes. I continue to be enthusiastic about the pricing that we're getting in the social inflation exposed lines. I think I had mentioned in my comments, commercial auto rates being up 15%. I didn't mention things like excess liability rates are still up 10% plus year-to-date. Our nonprofit business, particularly as we increase rates tied to abuse, overall nonprofit rates are up some 7% year-to-date. So I mean, those are still strong pricing in those particular social inflation-exposed businesses.

Michael Zaremski

That's helpful. And I guess just my follow-up would be on the pricing environment. I guess one of the beauties of your business model, you have a lot of diversification. But in terms of the sequential increase in -- so you can choose your spots.

But in terms of the sequential increase in pricing, is this more of a specific to American Financial Group given your kind of business mix changes you're making more intentionally? Or is this kind of the marketplace as well?

Carl Lindner

Well, I think it's always some of both. But again, quarter-by-quarter, they're going to be based off of what your mix is in a quarter. There will be slight changes in that. That said, well, with pricing point higher, we'll take it in the third quarter. That's pretty good along with the growth that we had. So I really like the -- as an organization, the balance of rate and growth opportunity that we have across our businesses right now.

Michael Zaremski

Got it. And just lastly, the California Insurance Commissioner race. I know this is usually a personal home, sometimes auto question. But I just want to -- are there any -- does the industry or AFG have any thoughts about whether the insurance commissioner would be making tweaks to the commercial or workers' comp kind of lines in her agenda?

Carl Lindner

Probably too early to tell in that. But I think there's a lot bigger focus on things like homeowners affordability in California, wildfires. There seems to be a lot bigger focus on other areas than workers' comp. I mean when you look at workers' comp rates up until this year, workers' comp rates have gone down for everybody.

Finally, with combined ratios in the industry in the 120s, finally, there's been some rate increase. We just filed a 9.1% increase effective in this fourth quarter in that. And we're achieving a 6% rate increase in California. I don't think yes, I don't think the commissioner is going to have much impact on comp rate in that. If anything, maybe some partial additional reform tied to the combined ratios that are impacting the industry.

Operator

Our next question is coming from the line of Paul Newsome of Piper.

Jon Paul Newsome

Congratulations on the quarter. With the business mix shifting around, any signs that -- and I think I know the answer, any signs that you're seeing a shift towards more admitted as opposed to less E&S kind of a topical question. And I don't know if that would have any impact on your overall rate environment if something is happening there.

Carl Lindner

The question is, are we seeing any meaningful shift of E&S business back to the admitted market?

Jon Paul Newsome

That's right, yes. Sorry, if I wasn't clear.

Carl Lindner

I don't -- yes, at this point, I don't think we're seeing anything that's meaningful.

Jon Paul Newsome

So if we -- I mean, I guess we're all sort of maybe pushing back a little bit on the rate increases given where everything else is happening. Any thoughts to sort of giving us a little additional color as to why knock on wood, you guys are seeing a little bit better rate? Is it just mix more of things like auto that have higher rates? Or is it something else that would make your current outlook for price increases a little different than your peers?

Carl Lindner

Yes. I think it's kind of our mix, but our intentionality, particularly around, as I mentioned earlier, around social inflation exposed businesses to make sure that we're getting rates that help us meet or exceed our targeted returns in some of those businesses or in that.

Naturally, commercial auto is an area that we're continuing to get sizable rates. So -- and commercial auto is around 12% of our business. So I suppose that could have a more meaningful impact in that.

Operator

[Operator Instructions]. Our next question is coming from the line of Mitchell Rubin of Raymond James.

Mitchell Rubin

This is Mitch on for Greg. Earlier in the year, you had expected multifamily conditions to improve in the second half of 2026. How have your expectations for the timing and extent of that recovery changed?

Craig Lindner

This is Craig. It's probably coming a bit slower than we would have expected. Having said that, there clearly are signs that we're in the early stage of recovery. After several years of unprecedented supply growth, the supply and demand is coming back into balance. Some markets still have excess supply that will take a bit more time to absorb, but demand continues to be healthy.

Let me just give you a couple of stats that I think tell the story. Units under construction are now roughly 50% below their early 2023 peak. Construction starts are running 28% below the 10-year average. So clearly, future deliveries should continue to moderate, creating a much more favorable supply environment in the years ahead.

The gap between the cost of owning and renting remains very substantial, probably as great as we've ever seen since we've been in the business. Construction costs remain elevated. For a lot of reasons, we think that we're in the early stages of a turn, and it is happening a bit later than I would have expected, but it's coming.

Mitchell Rubin

I appreciate the color. In response to another question, you mentioned opportunities to grow commercial auto while others are remediating the books. How should we think about your appetite for growth in 2027? And where within the book do you see the most compelling opportunities?

Carl Lindner

Yes. I think that we're excited about having continued opportunities to grow the business in that. I think some of the uniqueness in what we do is that 70% or so of our group premium is in alternative risk captive solutions where a little bit more sticky, members want loss prevention and work towards having lower losses.

I think our diversity of business and our specialization and kind of market -- our market leadership in businesses like passenger transportation, moving and storage, the owner-operator truck physical damage space, things like paratransit, medical transportation, crane and heavy haul, we're looked at as a leader. And I believe that, that specialization and leadership gives us the opportunity to grow our business.

Operator

Our next question is coming from the line of Meyer Shields of Keefe, Bruyette, & Woods.

Meyer Shields

I was hoping for a little bit more color on the large European loss, maybe its size and how it interacts with facultative reinsurance.

Brian Hertzman

Sure. This is Brian. So we don't typically get into a lot of details about individual claims. That particular claim is a fire and business interruption claim coming out of our European business. If you pulled that unusual claim out, you would see our loss and LAE ratio, ex and near ex-cats very consistent with the first half of this year, which is reflective of our business mix.

So another way to say that is if you took that loss out, our combined ratio for the financial segment would be in the high 80s versus above 90% and sort of in line with our expectations. So it really is the driver of that accident year loss ratio ex-cats going up. And without that, it would be more what we've seen in the last couple of quarters.

Meyer Shields

Okay. No, that is helpful. On the Property and Transportation side, I guess one of the things that makes it a little bit hard to interpret is how disruptive to the mass crop premiums in the third quarter can be. I was hoping you can get a sense as to how everything besides crop was performing in the third quarter relative to the third quarter of last year.

Brian Hertzman

Sure. So -- and you are correct. As Carl said and as you know, we book our crop profit more in the fourth quarter where we know the outcome. At the same time, the crops are in the ground mostly in the third quarter. So we have a very large amount of earned premium but at a high combined ratio for crop. And with the crop business growing, it's a bigger portion of Property and Transportation.

So if you were to pull out the crop business, you would see accident year loss ratio ex-cats very comparable to last year's third quarter and also to the sort of first half of this year, remembering that we're being cautious in things like commercial auto liability in our accident years despite seeing improved performance there. And on the development side, we have a favorable development across almost every business in Property and Transportation.

Meyer Shields

Okay. Perfect. That's helpful. And then finally, I just hoping to get a few words from Craig in terms of what last night's election means for expectations for interest rates over the next couple of years.

Craig Lindner

Meyer, that's hard for me to predict, to be honest. I mean this morning, you see rates moving down a bit. I wish I had a better crystal ball on that, but that's a hard one for me to answer.

Meyer Shields

Yes. I do trust a crystal ball a lot.

Operator

Our next question is a follow-up from Michael Zaremski of BMO.

Michael Zaremski

Great. In terms of the -- specifically the lender-placed insurance business, I believe you articulated last quarter that the growth was more being driven by a change in the reinsurance program. Just seeing if there any added color or changes there, I don't know placement rates are changing or distribution market share and just kind of get more -- I want to see if that's still the main driver if there's anything else going on.

Carl Lindner

Yes. Maybe what you're talking about is a quota share agreement that we had -- that we put into place that reduced our Florida exposures within lender services area. I think that ended in -- renewed in April. So think of it this way, after April, there's not as much impact to net written premiums versus gross written premiums going forward as there would have been in the prior 12-month period of time.

So pretty much now our gross written premium growth in that business converts into a more similar net written premium growth. So the business is growing and it's healthy and continues to earn the returns that we're targeting.

Michael Zaremski

And just -- thank you for the clarification. Is pricing much of a factor there? -- in the consumer home insurance marketplace, it's easier to track pricing, but I think there's less elasticity or just, I guess, less volatility in pricing in the marketplace. Would that be a fair statement?

Carl Lindner

Yes. It's different than the homeowners market. It's a product with more limited coverage. And so I'm not sure it's really -- yes, it's not really comparable. Serves a different purpose. So...

Operator

Thank you. This does conclude today's Q&A session. I would now like to turn the call back over to Diane for closing remarks. Please go ahead.

Diane P. Weidner

Thank you all for joining us this morning as we shared some more information about our third quarter results, and we look forward to talking with you all again as we report the results for the end of the year. Thank you all, and have a great day.

Operator

Thank you for joining today's programming. You may now disconnect.