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Investments
 3 Months Ended
Mar. 31, 2013
Investments, Debt and Equity Securities [Abstract]  
Investments
Investments

Available for sale fixed maturities and equity securities at March 31, 2013, and December 31, 2012, consisted of the following (in millions): 

March 31, 2013
 
December 31, 2012
Amortized
Cost
 
Fair
Value
 
Gross Unrealized
 
Amortized
Cost
 
Fair
Value
 
Gross Unrealized
Gains
 
Losses
 
Gains
 
Losses
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and government agencies
$
327

 
$
342

 
$
15

 
$
—

 
$
373

 
$
388

 
$
15

 
$
—

States, municipalities and political subdivisions
4,334

 
4,644

 
316

 
(6
)
 
4,144

 
4,468

 
329

 
(5
)
Foreign government
238

 
254

 
16

 
—

 
242

 
260

 
18

 
—

Residential MBS
3,922

 
4,262

 
378

 
(38
)
 
3,921

 
4,204

 
337

 
(54
)
Commercial MBS
2,556

 
2,859

 
303

 
—

 
2,583

 
2,918

 
335

 
—

Asset-backed securities
1,954

 
2,014

 
62

 
(2
)
 
1,590

 
1,640

 
52

 
(2
)
Corporate and other
9,424

 
10,400

 
982

 
(6
)
 
9,230

 
10,240

 
1,015

 
(5
)
Total fixed maturities
$
22,755

 
$
24,775

 
$
2,072

 
$
(52
)
 
$
22,083

 
$
24,118

 
$
2,101

 
$
(66
)
Common stocks
$
655

 
$
867

 
$
215

 
$
(3
)
 
$
600

 
$
749

 
$
157

 
$
(8
)
Perpetual preferred stocks
$
182

 
$
198

 
$
17

 
$
(1
)
 
$
178

 
$
190

 
$
13

 
$
(1
)

The non-credit related portion of other-than-temporary impairment charges is included in other comprehensive income. Cumulative non-credit charges taken for securities still owned at March 31, 2013 and December 31, 2012 were $227 million and related to residential MBS.

The following tables show gross unrealized losses (in millions) on fixed maturities and equity securities by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2013 and December 31, 2012. 
  
Less Than Twelve Months
 
Twelve Months or More
Unrealized
Loss
 
Fair
Value
 
Fair Value as
% of  Cost
 
Unrealized
Loss
 
Fair
Value
 
Fair Value as
% of  Cost
March 31, 2013
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and government agencies
$
—

 
$
11

 
100
%
 
$
—

 
$
—

 
—
%
States, municipalities and political subdivisions
(5
)
 
368

 
99
%
 
(1
)
 
49

 
98
%
Foreign government
—

 
—

 
—
%
 
—

 
—

 
—
%
Residential MBS
(3
)
 
184

 
98
%
 
(35
)
 
333

 
90
%
Commercial MBS
—

 
7

 
100
%
 
—

 
—

 
—
%
Asset-backed securities
(1
)
 
299

 
100
%
 
(1
)
 
42

 
98
%
Corporate and other
(5
)
 
327

 
98
%
 
(1
)
 
43

 
98
%
Total fixed maturities
$
(14
)
 
$
1,196

 
99
%
 
$
(38
)
 
$
467

 
92
%
Common stocks
$
(3
)
 
$
61

 
95
%
 
$
—

 
$
—

 
—
%
Perpetual preferred stocks
$
—

 
$
17

 
100
%
 
$
(1
)
 
$
26

 
96
%
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and government agencies
$
—

 
$
22

 
100
%
 
$
—

 
$
—

 
—
%
States, municipalities and political subdivisions
(5
)
 
285

 
98
%
 
—

 
24

 
100
%
Foreign government
—

 
—

 
—
%
 
—

 
—

 
—
%
Residential MBS
(3
)
 
146

 
98
%
 
(51
)
 
411

 
89
%
Commercial MBS
—

 
16

 
100
%
 
—

 
—

 
—
%
Asset-backed securities
—

 
146

 
100
%
 
(2
)
 
57

 
97
%
Corporate and other
(3
)
 
237

 
99
%
 
(2
)
 
51

 
96
%
Total fixed maturities
$
(11
)
 
$
852

 
99
%
 
$
(55
)
 
$
543

 
91
%
Common stocks
$
(8
)
 
$
88

 
92
%
 
$
—

 
$
—

 
—
%
Perpetual preferred stocks
$
—

 
$
7

 
100
%
 
$
(1
)
 
$
25

 
96
%


At March 31, 2013, the gross unrealized losses on fixed maturities of $52 million relate to approximately 380 securities. Investment grade securities (as determined by nationally recognized rating agencies) represented approximately 33% of the gross unrealized loss and 73% of the fair value.

AFG analyzes its MBS securities for other-than-temporary impairment each quarter based upon expected future cash flows. Management estimates expected future cash flows based upon its knowledge of the MBS market, cash flow projections (which reflect loan to collateral values, subordination, vintage and geographic concentration) received from independent sources, implied cash flows inherent in security ratings and analysis of historical payment data. In the first quarter of 2013, AFG did not record any other-than-temporary impairment charges related to its residential MBS.

Management believes AFG will recover its cost basis in the securities with unrealized losses and that AFG has the ability to hold the securities until they recover in value and had no intent to sell them at March 31, 2013.
A progression of the credit portion of other-than-temporary impairments on fixed maturity securities for which the non-credit portion of an impairment has been recognized in other comprehensive income is shown below (in millions).

 
2013
 
2012
Balance at January 1
$
192

 
$
187

Additional credit impairments on:
 
 
 
Previously impaired securities
—

 
3

Securities without prior impairments
—

 
—

Reductions — disposals
(1
)
 
—

Balance at March 31
$
191

 
$
190


The table below sets forth the scheduled maturities of available for sale fixed maturities as of March 31, 2013 (in millions). Securities with sinking funds are reported at average maturity. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid by the issuers.
  
Amortized
 
Fair Value
Cost
 
Amount
 
%
Maturity
 
 
 
 
 
One year or less
$
965

 
$
989

 
4
%
After one year through five years
4,669

 
5,081

 
21
%
After five years through ten years
6,074

 
6,738

 
27
%
After ten years
2,615

 
2,832

 
11
%
 
14,323

 
15,640

 
63
%
ABS (average life of approximately 5 years)
1,954

 
2,014

 
8
%
MBS (average life of approximately 4 years)
6,478

 
7,121

 
29
%
Total
$
22,755

 
$
24,775

 
100
%

Certain risks are inherent in connection with fixed maturity securities, including loss upon default, price volatility in reaction to changes in interest rates, and general market factors and risks associated with reinvestment of proceeds due to prepayments or redemptions in a period of declining interest rates.
There were no investments in individual issuers that exceeded 10% of Shareholders’ Equity at March 31, 2013 or December 31, 2012.
 
Net Unrealized Gain on Marketable Securities   In addition to adjusting equity securities and fixed maturity securities classified as “available for sale” to fair value, GAAP requires that deferred policy acquisition costs and certain other balance sheet amounts related to annuity, long-term care and life businesses be adjusted to the extent that unrealized gains and losses from securities would result in adjustments to those balances had the unrealized gains or losses actually been realized. The following table shows (in millions) the components of the net unrealized gain on securities that is included in AOCI in AFG’s Balance Sheet. 
 
Pretax
 
Deferred Tax and
Amounts  Attributable
to Noncontrolling
Interests
 
Net
March 31, 2013
 
 
 
 
 
Unrealized gain on:
 
 
 
 
 
Fixed maturities
$
2,020

 
$
(721
)
 
$
1,299

Equity securities
228

 
(82
)
 
146

Deferred policy acquisition costs
(691
)
 
242

 
(449
)
Annuity benefits accumulated
(140
)
 
49

 
(91
)
Life, accident and health reserves
(115
)
 
40

 
(75
)
Other liabilities
54

 
(19
)
 
35

 
$
1,356

 
$
(491
)
 
$
865

December 31, 2012
 
 
 
 
 
Unrealized gain on:
 
 
 
 
 
Fixed maturities
$
2,035

 
$
(726
)
 
$
1,309

Equity securities
161

 
(57
)
 
104

Deferred policy acquisition costs
(710
)
 
247

 
(463
)
Annuity benefits accumulated
(136
)
 
48

 
(88
)
Life, accident and health reserves
(117
)
 
41

 
(76
)
Other liabilities
57

 
(20
)
 
37

 
$
1,290

 
$
(467
)
 
$
823


Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments are summarized as follows (in millions): 
 
Fixed
Maturities
 
Equity
Securities
 
Mortgage
Loans
and Other
Investments
 
Other (a)
 
Tax
Effects
 
Noncon-
trolling
Interests
 
Total
Quarter ended March 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized before impairments
$
19

 
$
38

 
$
1

 
$
(1
)
 
$
(20
)
 
$
(1
)
 
$
36

Realized — impairments
—

 
—

 
—

 
—

 
—

 
—

 
—

Change in unrealized
(15
)
 
67

 
—

 
14

 
(23
)
 
(1
)
 
42

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter ended March 31, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized before impairments
$
14

 
$
35

 
$
1

 
$
(2
)
 
$
(17
)
 
$
—

 
$
31

Realized — impairments
(4
)
 
(2
)
 
—

 
2

 
1

 
—

 
(3
)
Change in unrealized
132

 
70

 
—

 
(2
)
 
(70
)
 
(3
)
 
127

 
(a)
Primarily adjustments to deferred policy acquisition costs and reserves related to annuities and long-term care business.

Realized gains (losses) on securities includes net gains of $2 million in the first quarter of 2013 compared to net gains of $4 million in the first quarter of 2012 from the mark-to-market of certain MBS, primarily interest-only securities with interest rates that float inversely with short-term rates. Gross realized gains and losses (excluding impairment writedowns and mark-to-market of derivatives) on available for sale fixed maturity and equity security investment transactions included in the Statement of Cash Flows consisted of the following (in millions): 
  
Three months ended March 31,
2013
 
2012
Fixed maturities:
 
 
 
Gross gains
$
17

 
$
10

Gross losses
—

 
—

Equity securities:
 
 
 
Gross gains
37

 
35

Gross losses
—

 
—