Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

Reconciliation of income taxes at the statutory rate and income taxes shown in the Statement of Earnings

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):



	2015					2014					2013
	Amount			% of EBT		Amount			% of EBT		Amount			% of EBT
Earnings before income taxes (“EBT”)	$	565				$	626				$	689

Income taxes at statutory rate	$	198		35	%	$	219		35	%	$	241		35	%
Effect of:
Tax exempt interest	(27		)	(5	%)	(25		)	(4	%)	(21		)	(3	%)
Losses of managed investment entities	—			—	%	18			3	%	9			1	%
Change in valuation allowance	23			4	%	7			1	%	1			—	%
Subsidiaries not in AFG’s tax return	2			1	%	1			—	%	2			—	%
Other	(1		)	—	%	—			—	%	4			1	%
Provision for income taxes as shown in the Statement of Earnings	$	195		35	%	$	220		35	%	$	236		34	%

Components of income tax provision (credit)

The total income tax provision (credit) consists of (in millions):



	2015			2014			2013
Current taxes:
Federal	$	216		$	265		$	308
State	8			8			5
Deferred taxes:
Federal	(29		)	(53		)	(77		)
Provision for income taxes	$	195		$	220		$	236

Summary of operating loss carryforwards

For income tax purposes, AFG and its subsidiaries had the following carryforwards available at December 31, 2015 (in millions):


(*)	£90 million

Components of deferred tax assets and liabilities

Deferred income tax assets and liabilities reflect temporary differences between the carrying amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for tax purposes. The significant components of deferred tax assets and liabilities included in AFG’s Balance Sheet at December 31 were as follows (in millions):



	2015									2014
	Excluding Unrealized Gains			Impact of Unrealized Gains			Total			Excluding Unrealized Gains			Impact of Unrealized Gains			Total
Deferred tax assets:
Federal net operating loss carryforwards	$	50		$	—		$	50		$	51		$	—		$	51
Foreign underwriting losses	77			—			77			56			—			56
Capital loss carryforwards	32			—			32			—			—			—
Insurance claims and reserves	691			22			713			682			75			757
Employee benefits	115			—			115			107			—			107
Other, net	33			(4		)	29			26			(11		)	15
Total deferred tax assets before valuation allowance	998			18			1,016			922			64			986
Valuation allowance against deferred tax assets	(130		)	—			(130		)	(109		)	—			(109		)
Total deferred tax assets	868			18			886			813			64			877
Deferred tax liabilities:
Subsidiaries not in AFG’s tax return (*)	(63		)	—			(63		)	(61		)	—			(61		)
Investment securities	23			(281		)	(258		)	(6		)	(657		)	(663		)
Deferred policy acquisition costs	(418		)	82			(336		)	(364		)	186			(178		)
Total deferred tax liabilities	(458		)	(199		)	(657		)	(431		)	(471		)	(902		)
Net deferred tax asset (liability)	$	410		$	(181	)	$	229		$	382		$	(407	)	$	(25	)

(*) Related to National Interstate Corporation, a 51%-owned subsidiary.

Progression of the liability for uncertain tax positions, excluding interest and penalties

A progression of the liability for uncertain tax positions, excluding interest and penalties, follows (in millions):



	2015		2014			2013
Balance at January 1	$	—	$	19		$	18
Additions for tax positions of prior years	1		—			—
Reductions for tax positions of prior years	—		(8		)	—
Additions for tax positions of current year	—		—			1
Settlements	—		(11		)	—
Balance at December 31	$	1	$	—		$	19

Operating Loss – U.S.

Operating Loss – United Kingdom

indefinite

Capital Loss – U.S.