Income Taxes

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The following is a reconciliation of income taxes at the statutory rate of 21% to the provision for income taxes as shown in AFG’s Statement of Earnings (dollars in millions):

	Three months ended September 30,										Nine months ended September 30,
	2019					2018					2019					2018
	Amount			% of EBT		Amount			% of EBT		Amount			% of EBT		Amount			% of EBT
Earnings before income taxes (“EBT”)	$	177				$	244				$	849				$	678
Income taxes at statutory rate	$	37		21	%	$	51		21	%	$	178		21	%	$	142		21	%
Effect of:
Adjustment to prior year taxes	(3		)	(2	%)	(9		)	(4	%)	(3		)	—	%	(9		)	(1	%)
Tax exempt interest	(4		)	(2	%)	(3		)	(1	%)	(11		)	(1	%)	(10		)	(1	%)
Dividends received deduction	(1		)	(1	%)	(1		)	—	%	(3		)	—	%	(3		)	—	%
Employee Stock Ownership Plan dividends paid deduction	—			—	%	(1		)	—	%	(1		)	—	%	(2		)	—	%
Stock-based compensation	(2		)	(1	%)	—			—	%	(6		)	(1	%)	(7		)	(1	%)
Nondeductible expenses	2			1	%	1			—	%	6			1	%	5			1	%
Change in valuation allowance	4			2	%	1			—	%	7			1	%	3			—	%
Foreign operations	—			—	%	—			—	%	—			—	%	3			—	%
Other	1			1	%	2			1	%	4			(1	%)	4			—	%
Provision for income taxes as shown in the statement of earnings	$	34		19	%	$	41		17	%	$	171		20	%	$	126		19	%

Approximately $19 million of AFG’s net operating loss carryforwards (“NOL”) subject to separate return limitation year (“SRLY”) tax rules will expire unutilized at December 31, 2019. Since AFG maintains a full valuation allowance against its SRLY NOLs, the expiration of these loss carryforwards will be offset by a corresponding reduction in the valuation allowance and will have no overall impact on AFG’s income tax expense or results of operations.