Acquisitions and Sale of Businesses (Tables)

9 Months Ended

Sep. 30, 2020

Business Combinations [Abstract]

Information on sale of Neon

The impact of Neon exited lines on AFG’s net earnings for the three months ended September 30, 2020 is shown below (in millions):

Underwriting gain (loss)	$	(38)
Net investment income	1
Other income and expenses, net	(3)
Pretax loss from operations	(40)
Estimated loss on sale of subsidiaries	(30)
Total pretax loss from Neon exited lines	(70)
Tax benefit related to sale of subsidiaries	73
Net earnings from Neon exited lines	$	3

The estimated loss on the pending sale of Neon, which was recorded in AFG’s financial statements as of September 30, 2020, is shown below (in millions):

Estimated sale proceeds, net of expenses	$	4
Assets of businesses to be sold:
Cash and investments	$	461
Recoverables from reinsurers	198
Prepaid reinsurance premiums	30
Agents’ balances and premiums receivable	48
Other assets	73
Total assets	810
Liabilities of businesses to be sold:
Unpaid losses and loss adjustment expenses	598
Unearned premiums	83
Payable to reinsurers	39
Other liabilities	47
Total liabilities	767
Reclassify accumulated other comprehensive income	(9)
Net assets of businesses to be sold	$	34
Pretax loss on subsidiaries recorded in the third quarter of 2020	$	(30)

Revenues, costs and expenses, and earnings before income taxes for the subsidiaries to be sold were (in millions):

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Net earned premiums	$	42	$	97	$	174	$	274
Loss and loss adjustment expenses	60		66		166		172
Commissions and other underwriting expenses	20		50		90		135
Underwriting loss	(38)		(19)		(82)		(33)
Net investment income	1		2		(5)		5
Other income and expenses, net	(3)		(3)		(5)		(8)
Loss before income taxes and noncontrolling interests	$	(40)	$	(20)	$	(92)	$	(36)

As discussed in Note L — “Income Taxes,” the pending sale of Neon allowed AFG to recognize a $73 million tax benefit.