Income Taxes

The following is a reconciliation of income taxes at the statutory rate of 35% to the provision for income taxes as shown in the Statement of Earnings (dollars in millions):



	Three months ended March 31,
	2015					2014
	Amount			% of EBT		Amount			% of EBT
Earnings before income taxes (“EBT”)	$	30				$	161

Income taxes at statutory rate	$	10		35	%	$	56		35	%
Effect of:
Tax exempt interest	(7		)	(23	%)	(5		)	(3	%)
Change in valuation allowance	(1		)	(3	%)	1			1	%
Subsidiaries not in AFG’s tax return	1			3	%	1			1	%
Other	2			5	%	1			—	%
Provision for income taxes as shown in the Statement of Earnings	$	5		17	%	$	54		34	%

Excluding the tax benefit from the loss on the sale of the long-term care business that was recorded in the first quarter of 2015, AFG’s effective tax rate was 32%. This approximates AFG’s expected annual effective tax rate excluding the loss. During the first three months of 2015, there were no material changes to AFG’s liability for uncertain tax positions.