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Shareholders' Equity
 9 Months Ended
Sep. 30, 2012
Stockholders' Equity Note [Abstract]  
Shareholders' Equity
K.    Shareholders’ Equity

AFG is authorized to issue 12.5 million shares of Voting Preferred Stock and 12.5 million shares of Nonvoting Preferred Stock, each without par value.

Accumulated Other Comprehensive Income, Net of Tax (“AOCI”)   Comprehensive income is defined as all changes in Shareholders’ Equity except those arising from transactions with shareholders. Comprehensive income includes net earnings and other comprehensive income, which consists primarily of changes in net unrealized gains or losses on available for sale securities. The progression of the components of accumulated other comprehensive income follows (in millions): 
  
 
 
Other Comprehensive Income
 
 
 
 
 
  
AOCI
Beginning
Balance
 
Pretax
 
Tax
 
Noncontrolling
interests
 
Net
 
Other (b)
 
AOCI
Ending
Balance
 
Quarter ended September 30, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net unrealized gains on securities
$
771

(a) 
$
238

 
$
(84
)
 
$
(4
)
 
$
150

 
$
—

 
$
921

(a) 
Foreign currency translation adjustments
9

 
10

 
—

 
(1
)
 
9

 
(1
)
 
17

 
Pension and other postretirement plans adjustments
(7
)

—

 
—

 
—

 
—

 
—

 
(7
)

Total
$
773

 
$
248

 
$
(84
)
 
$
(5
)
 
$
159

 
$
(1
)
 
$
931

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter ended September 30, 2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net unrealized gains (losses) on securities
$
605

 
$
(24
)
 
$
9

 
$
(2
)
 
$
(17
)
 
$
—

 
$
588

 
Foreign currency translation adjustments
17

 
(14
)
 
—

 
1

 
(13
)
 
—

 
4

 
Pension and other postretirement plans adjustments
(7
)

—

 
—

 
—

 
—

 
—

 
(7
)

Total
$
615

 
$
(38
)
 
$
9

 
$
(1
)
 
$
(30
)
 
$
—

 
$
585

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net unrealized gains on securities
$
578

(a) 
$
539

 
$
(189
)
 
$
(7
)
 
$
343

 
$
—

 
$
921

(a) 
Foreign currency translation adjustments
10

 
9

 
—

 
(1
)
 
8

 
(1
)
 
17

 
Pension and other postretirement plans adjustments
(8
)

1

 
—

 
—

 
1

 
—

 
(7
)

Total
$
580

 
$
549

 
$
(189
)
 
$
(8
)
 
$
352

 
$
(1
)
 
$
931

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net unrealized gains on securities
$
491

 
$
155

 
$
(54
)
 
$
(4
)
 
$
97

 
$
—

 
$
588

 
Foreign currency translation adjustments
12

 
(9
)
 
—

 
1

 
(8
)
 
—

 
4

 
Pension and other postretirement plans adjustments
(8
)

1

 
—

 
—

 
1

 
—

 
(7
)

Total
$
495

 
$
147

 
$
(54
)
 
$
(3
)
 
$
90

 
$
—

 
$
585

 
 
(a)
Includes net unrealized gains of $23 million at September 30, 2012 compared to net unrealized losses of $1 million at June 30, 2012 and $16 million at December 31, 2011 related to securities for which only the credit portion of an other-than-temporary impairment has been recorded in earnings.
(b)
Other relates to the third quarter of 2012 acquisition of noncontrolling interest in a subsidiary.

Stock Based Compensation   Under AFG’s Stock Incentive Plan, employees of AFG and its subsidiaries are eligible to receive equity awards in the form of stock options, stock appreciation rights, restricted stock awards, restricted stock units and stock awards. In the first nine months of 2012, AFG issued 133,931 shares of restricted Common Stock (fair value of $38.10 per share) and granted stock options for 1.1 million shares of Common Stock (at an average exercise price of $38.10) under the Stock Incentive Plan. In addition, AFG issued 111,270 shares of Common Stock (fair value of $38.38 per share) in the first quarter of 2012 under its Annual Co-CEO Equity Bonus Plan.

AFG uses the Black-Scholes option pricing model to calculate the “fair value” of its option grants. Expected volatility is based on historical volatility over a period equal to the expected term. The expected term was estimated based on historical exercise patterns and post vesting cancellations. The weighted average fair value of options granted during 2012 was $13.02 per share based on the following assumptions: expected dividend yield — 1.8%; expected volatility — 39%; expected term — 7.3 years; risk-free rate — 1.4%.

Total compensation expense related to stock incentive plans of AFG and its subsidiaries was $5 million in each of the third quarters of 2012 and 2011 and $20 million and $16 million in the first nine months of 2012 and 2011, respectively.