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 (Loss)
	AOCI Beginning Balance			Pretax			Tax			Net of tax			Attributable to noncontrolling interests		Attributable to shareholders			Other (c)			AOCI Ending Balance
Three months ended March 31, 2019
Net unrealized gains on securities:
Unrealized holding gains on securities arising during the period				$	487		$	(103	)	$	384		$	—	$	384
Reclassification adjustment for realized (gains) losses included in net earnings (a)				(4		)	1			(3		)	—		(3		)
Total net unrealized gains on securities	$	83		483			(102		)	381			—		381			$	—		$	464
Net unrealized gains (losses) on cash flow hedges	(11		)	14			(3		)	11			—		11			—			—
Foreign currency translation adjustments	(16		)	4			—			4			—		4			—			(12		)
Pension and other postretirement plans adjustments	(8		)	—			—			—			—		—			—			(8		)
Total	$	48		$	501		$	(105	)	$	396		$	—	$	396		$	—		$	444

Three months ended March 31, 2018
Net unrealized gains (losses) on securities:
Unrealized holding losses on securities arising during the period				$	(353	)	$	74		$	(279	)	$	—	$	(279	)
Reclassification adjustment for realized (gains) losses included in net earnings (a)				2			—			2			—		2
Total net unrealized gains (losses) on securities (b)	$	840		(351		)	74			(277		)	—		(277		)	$	(221	)	$	342
Net unrealized losses on cash flow hedges	(13		)	(14		)	3			(11		)	—		(11		)	—			(24		)
Foreign currency translation adjustments	(6		)	2			(1		)	1			—		1			—			(5		)
Pension and other postretirement plans adjustments	(8		)	—			—			—			—		—			—			(8		)
Total	$	813		$	(363	)	$	76		$	(287	)	$	—	$	(287	)	$	(221	)	$	305

(a)The reclassification adjustment out of net unrealized gains (losses) on securities affected the following lines in AFG’s Statement of Earnings:



	OCI component		Affected line in the statement of earnings
	Pretax		Realized gains (losses) on securities
	Tax		Provision for income taxes


(b)	Includes net unrealized gains of $61 million at March 31, 2019 compared to $58 million at December 31, 2018 related to securities for which only the credit portion of an other-than-temporary impairment has been recorded in earnings.

(c)

On January 1, 2018, AFG adopted new guidance that requires all equity securities other than those accounted for under the equity method to be reported at fair value with holding gains and losses recognized in net earnings. At the date of adoption, the $221 million net unrealized gain on equity securities classified as available for sale (with unrealized holding gains and losses reported in AOCI) under the prior guidance was reclassified from AOCI to retained earnings as the cumulative effect of an accounting change.

Stock Incentive Plans Under AFG’s stock incentive plans, 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 three months of 2019, AFG issued 232,565 shares of restricted Common Stock (fair value of $99.28 per share) under the Stock Incentive Plan. AFG did not grant any stock options in the first three months of 2019.

Total compensation expense related to stock incentive plans of AFG and its subsidiaries was $6 million and $5 million in the first three months of 2019 and 2018, respectively.