XML 22 R10.htm IDEA: XBRL DOCUMENT v3.21.2
Discontinued Operations
 9 Months Ended
Sep. 30, 2021
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations Discontinued Operations
Annuity Business   On May 28, 2021, AFG completed the sale of its Annuity business to Massachusetts Mutual Life Insurance Company (“MassMutual”) with an effective date of May 31, 2021. MassMutual acquired Great American Life Insurance Company (“GALIC”) and its two insurance subsidiaries, Annuity Investors Life Insurance Company and Manhattan National Life Insurance Company. In addition to AFG’s annuity operations, these subsidiaries included AFG’s run-off life and long-term care operations. Proceeds from the sale were $3.57 billion (including $34 million in preliminary post-closing adjustments). AFG realized a $656 million net gain on the sale. The sale continues to be subject to tax-related post-closing adjustments, which are not expected to be material and are expected to be settled in 2022. Beginning with the first quarter of 2021, the results of the Annuity business sold were reported as discontinued operations in accordance with generally accepted accounting principles, which included adjusting prior period results to reflect these operations as discontinued.

Prior to the sale, AFG acquired approximately $480 million in investments accounted for using the equity method and approximately $100 million of directly owned real estate from GALIC.

Details of the assets and liabilities of the Annuity subsidiaries sold were as follows (in millions):
May 31, 2021December 31, 2020
Assets of businesses sold:
Cash and cash equivalents$2,060 $1,145 
Investments38,323 38,011 
Recoverables from reinsurers6,748 6,804 
Other assets
2,152 1,925 
Total assets of discontinued annuity operations49,283 47,885 
Liabilities of businesses sold:
Annuity benefits accumulated43,690 42,573 
Other liabilities1,813 1,885 
Total liabilities of discontinued annuity operations45,503 44,458 
Receivable from AFG for real estate-related investments— 537 
Reclassify AOCI(913)(1,071)
Net investment in annuity businesses sold, excluding AOCI$2,867 $2,893 

Details of the results of operations for the discontinued annuity operations were (in millions):
Three months ended September 30,Nine months ended September 30,
202120202021 (*)2020
Net investment income$— $459 $746 $1,256 
Realized gains (losses) on securities— 22 112 (105)
Other income— 26 52 91 
Total revenues— 507 910 1,242 
Annuity benefits— 203 377 905 
Annuity and supplemental insurance acquisition expenses— 172 136 250 
Other expenses— 38 73 118 
Total costs and expenses— 413 586 1,273 
Earnings (loss) before income taxes from discontinued operations— 94 324 (31)
Provision (credit) for income taxes on operations— 18 66 (11)
Net earnings (loss) from operations, net of tax— 76 258 (20)
Gain on sale, net of tax— — 656 — 
Net earnings (loss) from discontinued operations$— $76 $914 $(20)
(*)Results through the May 31, 2021 effective date of the sale.

Net investment income in the table above excludes $10 million in the third quarter of 2020, and $51 million and $29 million in first nine months of 2021 and 2020, respectively, related to the real estate-related entities that AFG acquired from the discontinued annuity operations prior to the completion of the sale.
The impact of the sale of the annuity business is shown below (in millions):
May 31, 2021
Cash proceeds$3,537 
Receivable from MassMutual34 
Sale related expenses(8)
Total net proceeds3,563 
Net investment in annuity businesses sold, excluding AOCI2,867 
Reclassify net deferred tax asset(199)
Pretax gain on sale895 
Income tax expense:
Reclassify net deferred tax asset199 
Tax liabilities triggered by pending sale in the first quarter of 202141 
Other(1)
Total income tax expense239 
Net gain on sale$656 

Summarized cash flows for the discontinued annuity operations were (in millions):
Nine months ended September 30,
20212020
Net cash provided by operating activities$87 $904 
Net cash used in investing activities(1,709)(440)
Net cash provided by financing activities477 260 

Derivatives   The vast majority of AFG’s derivatives were held by the sold annuity subsidiaries. The following table summarizes the gains (losses) included in net earnings (loss) from discontinued operations for changes in the fair value of derivatives that do not qualify for hedge accounting for the first nine months of 2021 and 2020 (in millions):
Three months ended September 30,Nine months ended September 30,
Derivative202120202021 (*)2020
MBS with embedded derivatives$— $(3)$(1)$2 
Fixed-indexed and variable-indexed annuities (embedded derivative)— (5)(222)41 
Equity index call options— 203 237 (42)
Equity index put options— 2 5 1 
Reinsurance contract (embedded derivative)— 1 1 — 
$— $198 $20 $2 
(*)Through the May 31, 2021 effective date of the sale.