Segments of Operations

3 Months Ended

Mar. 31, 2020

AFG manages its business as three segments: (i) Property and casualty insurance, (ii) Annuity and (iii) Other, which includes holding company costs, revenues and costs of AFG’s limited insurance operations outside of property and casualty insurance and annuity segments, and operations attributable to the noncontrolling interests of the managed investment entities.

AFG reports its property and casualty insurance business in the following Specialty sub-segments: (i) Property and transportation, which includes physical damage and liability coverage for buses and trucks, inland and ocean marine, agricultural-related products and other commercial property coverages, (ii) Specialty casualty, which includes primarily excess and surplus, executive and professional liability, general liability, umbrella and excess liability, specialty coverages in targeted markets, customized programs for small to mid-sized businesses and workers’ compensation insurance, and (iii) Specialty financial, which includes risk management insurance programs for lending and leasing institutions (including equipment leasing and collateral and lender-placed mortgage property insurance), fidelity and surety products and trade credit insurance. Premiums and underwriting profit included under Other specialty represent business assumed by AFG’s internal reinsurance program from the operations that make up AFG’s other Specialty sub-segments and amortization of deferred gains on retroactive reinsurance transactions related to the sales of businesses in prior years. AFG’s annuity business sells traditional fixed and indexed annuities in the retail, financial institutions, broker-dealer and registered investment advisor markets. AFG’s reportable segments and their components were determined based primarily upon similar economic characteristics, products and services.

In December 2019, AFG initiated actions to exit the Lloyd’s of London insurance market, which included placing its Lloyd’s subsidiaries including its Lloyd’s Managing Agency, Neon Underwriting Ltd., into run-off. Neon and its predecessor, Marketform, have failed to achieve AFG’s profitability objectives since AFG’s purchase of Marketform in 2008. Beginning prospectively with the first quarter of 2020, the results for AFG’s Specialty casualty sub-segment exclude the run-off operations of Neon (“Neon exited lines”).

The following tables (in millions) show AFG’s revenues and earnings before income taxes by segment and sub-segment.



	Three months ended March 31,
	2020			2019
Revenues
Property and casualty insurance:
Premiums earned:
Specialty
Property and transportation	$	386		$	361
Specialty casualty	556			629
Specialty financial	156			146
Other specialty	40			37
Other lines (a)	71			—
Total premiums earned	1,209			1,173
Net investment income (b)	93			104
Other income	5			3
Total property and casualty insurance	1,307			1,280
Annuity:
Net investment income	422			435
Other income	35			28
Total annuity	457			463
Other	62			97
Total revenues before realized gains (losses)	1,826			1,840
Realized gains (losses) on securities	(551		)	184
Total revenues	$	1,275		$	2,024


(a)	Represents premiums earned in the Neon exited lines during the first three months of 2020. Neon’s $88 million in earned premiums during the first three months of 2019 are included in the Specialty casualty sub-segment.


(b)	Includes a net loss of $6 million in the Neon exited lines, primarily from the change in fair value of equity securities.



	Three months ended March 31,
	2020			2019
Earnings (Loss) Before Income Taxes
Property and casualty insurance:
Underwriting:
Specialty
Property and transportation	$	27		$	39
Specialty casualty	52			36
Specialty financial	17			13
Other specialty	(7		)	—
Other lines (a)	(2		)	(1		)
Total underwriting	87			87
Investment and other income, net (b)	84			95
Total property and casualty insurance	171			182
Annuity	29			90
Other (c)	(37		)	(43		)
Total earnings before realized gains (losses) and income taxes	163			229
Realized gains (losses) on securities	(551		)	184
Total earnings (loss) before income taxes	$	(388	)	$	413


(a)	Includes a $1 million underwriting loss in the first three months of 2020 in the Neon exited lines. Neon’s $10 million underwriting loss in the first three months of 2019 is included in the Specialty casualty sub-segment.


(b)	Includes $9 million in net expenses from the Neon exited lines, before noncontrolling interest.

(c)

Includes holding company interest and expenses.