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Investments (Tables)
 3 Months Ended
Mar. 31, 2020
Investments, Debt and Equity Securities [Abstract]  
Available for sale fixed maturities

Available for sale fixed maturities at March 31, 2020 and December 31, 2019, consisted of the following (in millions):
 
Amortized
Cost
 
Allowance for Expected Credit Losses
 
Gross Unrealized
 
Net
Unrealized
 
Fair
Value
Gains
 
Losses
March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and government agencies
$
190

 
$
—

 
$
15

 
$
—

 
$
15

 
$
205

States, municipalities and political subdivisions
6,526

 
—

 
388

 
(8
)
 
380

 
6,906

Foreign government
164

 
—

 
6

 
—

 
6

 
170

Residential MBS
3,078

 
6

 
133

 
(74
)
 
59

 
3,131

Commercial MBS
892

 
—

 
20

 
(5
)
 
15

 
907

Collateralized loan obligations
4,456

 
17

 
5

 
(306
)
 
(301
)
 
4,138

Other asset-backed securities
7,069

 
14

 
65

 
(362
)
 
(297
)
 
6,758

Corporate and other
23,726

 
24

 
786

 
(569
)
 
217

 
23,919

Total fixed maturities
$
46,101

 
$
61

 
$
1,418

 
$
(1,324
)
 
$
94

 
$
46,134

 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and government agencies
$
199

 
$
—

 
$
10

 
$
—

 
$
10

 
$
209

States, municipalities and political subdivisions
6,604

 
—

 
363

 
(4
)
 
359

 
6,963

Foreign government
170

 
—

 
3

 
(1
)
 
2

 
172

Residential MBS
2,900

 
—

 
265

 
(5
)
 
260

 
3,160

Commercial MBS
896

 
—

 
31

 
—

 
31

 
927

Collateralized loan obligations
4,307

 
—

 
10

 
(37
)
 
(27
)
 
4,280

Other asset-backed securities
6,992

 
—

 
156

 
(20
)
 
136

 
7,128

Corporate and other
22,456

 
—

 
1,231

 
(21
)
 
1,210

 
23,666

Total fixed maturities
$
44,524

 
$
—

 
$
2,069

 
$
(88
)
 
$
1,981

 
$
46,505
Equity securities reported at fair value
Equity securities, which are reported at fair value with holding gains and losses recognized in net earnings, consisted of the following at March 31, 2020 and December 31, 2019 (in millions):
 
March 31, 2020
 
December 31, 2019
 
 
 
 
 
Fair Value
 
 
 
 
 
Fair Value
 
Actual Cost
 
 
 
over (under)
 
Actual Cost
 
 
 
over (under)
 
 
Fair Value
 
Cost
 
 
Fair Value
 
Cost
Common stocks
$
1,315

 
$
919

 
$
(396
)
 
$
1,164

 
$
1,283

 
$
119

Perpetual preferred stocks
685

 
640

 
(45
)
 
640

 
654

 
14

Total equity securities carried at fair value
$
2,000

 
$
1,559

 
$
(441
)
 
$
1,804

 
$
1,937

 
$
133
Available for sale securities in a continuous unrealized loss position
The following tables show gross unrealized losses (dollars in millions) on available for sale fixed maturities by investment category and length of time that individual securities have been in a continuous unrealized loss position at the following balance sheet dates. 
 
Less Than Twelve Months
 
Twelve Months or More
Unrealized
Loss
 
Fair
Value
 
Fair Value as
% of Cost
 
Unrealized
Loss
 
Fair
Value
 
Fair Value as
% of Cost
March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and government agencies
$
—

 
$
—

 
—
%
 
$
—

 
$
1

 
100
%
States, municipalities and political subdivisions
(8
)
 
235

 
97
%
 
—

 
26

 
100
%
Foreign government
—

 
3

 
100
%
 
—

 
—

 
—
%
Residential MBS
(70
)
 
1,562

 
96
%
 
(4
)
 
31

 
89
%
Commercial MBS
(5
)
 
117

 
96
%
 
—

 
—

 
—
%
Collateralized loan obligations
(141
)
 
2,234

 
94
%
 
(165
)
 
1,691

 
91
%
Other asset-backed securities
(352
)
 
4,597

 
93
%
 
(10
)
 
94

 
90
%
Corporate and other
(554
)
 
7,738

 
93
%
 
(15
)
 
98

 
87
%
Total fixed maturities
$
(1,130
)
 
$
16,486

 
94
%
 
$
(194
)
 
$
1,941

 
91
%
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
Fixed maturities:
 
 
 
 
 
 
 
 
 
 
 
U.S. Government and government agencies
$
—

 
$
16

 
100
%
 
$
—

 
$
11

 
100
%
States, municipalities and political subdivisions
(3
)
 
254

 
99
%
 
(1
)
 
82

 
99
%
Foreign government
(1
)
 
70

 
99
%
 
—

 
—

 
—
%
Residential MBS
(4
)
 
509

 
99
%
 
(1
)
 
69

 
99
%
Commercial MBS
—

 
17

 
100
%
 
—

 
—

 
—
%
Collateralized loan obligations
(11
)
 
1,284

 
99
%
 
(26
)
 
1,728

 
99
%
Other asset-backed securities
(12
)
 
1,211

 
99
%
 
(8
)
 
123

 
94
%
Corporate and other
(13
)
 
1,100

 
99
%
 
(8
)
 
211

 
96
%
Total fixed maturities
$
(44
)
 
$
4,461

 
99
%
 
$
(44
)
 
$
2,224

 
98
%
Roll forward of allowance for credit losses on fixed maturity securities A progression of the allowance for expected credit losses on fixed maturity securities is shown below (in millions):
 
2020
Balance at January 1
$
—

Impact of adoption of new accounting policy
—

Provision for expected credit losses
61

Reductions due to sales or redemptions
—

Balance at March 31
$
61
Available for sale fixed maturity securities by contractual maturity date
The table below sets forth the scheduled maturities of available for sale fixed maturities as of March 31, 2020 (dollars in millions). Securities with sinking funds are reported at average maturity. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid by the issuers.
 
Amortized
 
Fair Value
Cost, net (*)
 
Amount
 
%
Maturity
 
 
 
 
 
One year or less
$
2,018

 
$
2,027

 
4
%
After one year through five years
10,563

 
10,710

 
23
%
After five years through ten years
14,450

 
14,722

 
32
%
After ten years
3,551

 
3,741

 
8
%
 
30,582

 
31,200

 
67
%
Collateralized loan obligations and other ABS (average life of approximately 4-1/2 years)
11,494

 
10,896

 
24
%
MBS (average life of approximately 3-1/2 years)
3,964

 
4,038

 
9
%
Total
$
46,040

 
$
46,134

 
100
%


(*)
Amortized cost, net of allowance for expected credit losses.
Components of the net unrealized gain on securities, included in Accumulated Other Comprehensive Income The following table shows (in millions) the components of the net unrealized gain on securities that is included in AOCI in AFG’s Balance Sheet.
 
Pretax
 
Deferred Tax
 
Net
March 31, 2020
 
 
 
 
 
Net unrealized gain on:
 
 
 
 
 
Fixed maturities — annuity segment (*)
$
124

 
$
(26
)
 
$
98

Fixed maturities — all other
(30
)
 
7

 
(23
)
Total fixed maturities
94

 
(19
)
 
75

Deferred policy acquisition costs — annuity segment
(57
)
 
12

 
(45
)
Annuity benefits accumulated
(18
)
 
3

 
(15
)
Unearned revenue
1

 
—

 
1

Total net unrealized gain on marketable securities
$
20

 
$
(4
)
 
$
16

 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
Net unrealized gain on:
 
 
 
 
 
Fixed maturities — annuity segment (*)
$
1,611

 
$
(338
)
 
$
1,273

Fixed maturities — all other
370

 
(78
)
 
292

Total fixed maturities
1,981

 
(416
)
 
1,565

Deferred policy acquisition costs — annuity segment
(681
)
 
143

 
(538
)
Annuity benefits accumulated
(219
)
 
46

 
(173
)
Life, accident and health reserves
(1
)
 
—

 
(1
)
Unearned revenue
11

 
(2
)
 
9

Total net unrealized gain on marketable securities
$
1,091

 
$
(229
)
 
$
862


(*)
Net unrealized gains on fixed maturity investments supporting AFG’s annuity benefits accumulated.
Net investment income earned and investment expenses incurred The following table shows (in millions) investment income earned and investment expenses incurred.
 
Three months ended March 31,
 
2020
 
2019
Investment income:
 
 
 
Fixed maturities
$
491

 
$
469

Equity securities:
 
 
 
Dividends
17

 
22

Change in fair value (a) (b)
(12
)
 
11

Equity in earnings of partnerships and similar investments
25

 
21

Other
28

 
25

Gross investment income
549

 
548

Investment expenses
(5
)
 
(6
)
Net investment income (b)
$
544

 
$
542


(a)
Although the change in the fair value of the majority of AFG’s equity securities is recorded in realized gains (losses) on securities, AFG records holding gains and losses in net investment income on equity securities classified as “trading” under previous guidance and on a small portfolio of limited partnership and similar investments that do not qualify for the equity method of accounting.
(b)
Net investment income in the first three months of 2020 includes a loss of $6 million on investments held by the companies that comprise the Neon exited lines due primarily to the $7 million loss recorded on equity securities that are carried at fair value through net investment income.
Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments
Realized gains (losses) and changes in unrealized appreciation (depreciation) included in AOCI related to fixed maturity and equity security investments are summarized as follows (in millions): 
 
Three months ended March 31, 2020
 
Three months ended March 31, 2019
 
Realized gains (losses)
 
 
 
Realized gains (losses)
 
 
 
Before Impairments
 
Impairment Allowance
 
Total
 
Change in Unrealized
 
Before Impairments
 
Impairments
 
Total
 
Change in Unrealized
Fixed maturities
$
29

 
$
(61
)
 
$
(32
)
 
$
(1,887
)
 
$
3

 
$
(3
)
 
$
—

 
$
853

Equity securities
(535
)
 
—

 
(535
)
 
—

 
182

 
—

 
182

 
—

Mortgage loans and other investments
4

 
—

 
4

 
—

 
—

 
—

 
—

 
—

Other (*)
(3
)
 
15

 
12

 
816

 
1

 
1

 
2

 
(370
)
Total pretax
(505
)
 
(46
)
 
(551
)
 
(1,071
)
 
186

 
(2
)
 
184

 
483

Tax effects
106

 
10

 
116

 
225

 
(39
)
 
—

 
(39
)
 
(102
)
Net of tax
$
(399
)
 
$
(36
)
 
$
(435
)
 
$
(846
)
 
$
147

 
$
(2
)
 
$
145

 
$
381


(*)
Primarily adjustments to deferred policy acquisition costs and reserves related to the annuity business.
Holding gains (losses) on equity securities still held AFG recorded net holding gains (losses) on equity securities during the first three months of 2020 and 2019 on securities that were still owned at March 31, 2020 and March 31, 2019 as follows (in millions):
 
Three months ended March 31,
 
2020
 
2019
Included in realized gains (losses)
$
(540
)
 
$
163

Included in net investment income
(5
)
 
11

 
$
(545
)
 
$
174
Gross realized gains and losses on available for sale fixed maturity and equity security investments
Gross realized gains and losses (excluding impairment write-downs and mark-to-market of derivatives) on available for sale fixed maturity investment transactions consisted of the following (in millions): 
 
Three months ended March 31,
2020
 
2019
Gross gains
$
29

 
$
6

Gross losses
(4
)
 
(9
)