Quarterly Operating Results (Unaudited)

The operations of certain AFG business segments are seasonal in nature. While insurance premiums are recognized on a relatively level basis, claim losses related to adverse weather (snow, hail, hurricanes, severe storms, tornadoes, etc.) may be seasonal. The profitability of AFG’s crop insurance business is primarily recognized during the second half of the year as crop prices and yields are determined. Quarterly results necessarily rely heavily on estimates. These estimates and certain other factors, such as the discretionary sales of assets, cause the quarterly results not to be necessarily indicative of results for longer periods of time.

The following are quarterly results of consolidated operations for the two years ended December 31, 2015 (in millions, except per share amounts). Quarterly earnings per share do not add to year-to-date amounts due to changes in shares outstanding.



	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Total Year
2015
Revenues	$	1,294	$	1,541	$	1,684	$	1,626	$	6,145
Net earnings, including noncontrolling interests	25		149		66		130		370
Net earnings attributable to shareholders	19		141		63		129		352
Earnings attributable to shareholders per Common Share:
Basic	$	0.22	$	1.60	$	0.72	$	1.48	$	4.02
Diluted	0.21		1.57		0.71		1.45		3.94
Average number of Common Shares:
Basic	87.6		87.7		87.5		87.4		87.6
Diluted	89.4		89.5		89.3		89.2		89.4
2014
Revenues	$	1,211	$	1,392	$	1,581	$	1,549	$	5,733
Net earnings, including noncontrolling interests	107		83		91		125		406
Net earnings attributable to shareholders	103		106		116		127		452
Earnings attributable to shareholders per Common Share:
Basic	$	1.15	$	1.18	$	1.30	$	1.44	$	5.07
Diluted	1.13		1.15		1.28		1.41		4.97
Average number of Common Shares:
Basic	89.6		89.6		89.0		87.9		89.0
Diluted	91.6		91.6		90.9		89.8		91.0

Pretax realized gains on subsidiaries and securities (including other-than-temporary impairments) and favorable (adverse) prior year development of AFG’s liability for losses and loss adjustment expenses (“LAE”) were as follows (in millions):



	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter			Total Year
Realized Gains (Losses) on Securities and Subsidiaries
2015	$	(143	)	$	(1	)	$	(11	)	$	(25	)	$	(180	)
2014	19			12			13			8			52

Prior Year Development Favorable (Adverse)
2015	$	7		$	10		$	(55	)	$	5		$	(33	)
2014	31			(14		)	(13		)	(10		)	(6		)

Realized losses on subsidiaries in 2015 include a $166 million realized loss (consisting of an initial loss estimate of $162 million recorded in the first quarter and a $4 million loss adjustment in the fourth quarter) related to the impact of the sale of two subsidiaries, which contained substantially all of AFG’s long-term care insurance business. See Note B — “Acquisitions and Sale of Businesses.”

Adverse prior year development for the third quarter of 2015 includes pretax special charges of $67 million to strengthen property and casualty insurance A&E reserves. Adverse prior year development for the second quarter of 2014 includes $22 million of adverse reserve development in the property and transportation sub-segment, which resulted from an increase in claim severity in the commercial auto liability business, partially offset by lower than expected claim severity in the agricultural and property and inland marine businesses. Adverse prior year development for the third quarter of 2014 includes pretax special charges of $24 million to strengthen property and casualty insurance A&E reserves. Adverse prior year development in the fourth quarter of 2014 was due primarily to adverse reserve development at Marketform and higher than expected claim severity in contractor claims and in a run-off book of casualty business.

In addition to realized gains (losses) on securities and subsidiaries, results for 2015 include pretax gains (included in other income) of $51 million from the sale of Le Pavillon Hotel in the second quarter and $15 million from the sale of an apartment property in the fourth quarter.

Results for the third quarter of 2015 and 2014 include pretax special charges of $12 million and $6 million, respectively, to strengthen reserves for A&E exposures related to AFG’s former railroad and manufacturing operations.