
	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized				Net Unrealized		Fair Value
					Gains		Losses
December 31, 2021
Fixed maturities:
U.S. Government and government agencies	$	216	$	—	$	2	$	(2)	$	—	$	216
States municipalities and political subdivisions	1,758		—		74		—		74		1,832
Foreign government	248		—		—		(2)		(2)		246
Residential MBS	915		—		48		(3)		45		960
Commercial MBS	102		—		2		—		2		104
Collateralized loan obligations	1,643		1		3		(2)		1		1,643
Other asset-backed securities	2,677		7		17		(11)		6		2,676
Corporate and other	2,634		1		55		(8)		47		2,680
Total fixed maturities	$	10,193	$	9	$	201	$	(28)	$	173	$	10,357

December 31, 2020
Fixed maturities:
U.S. Government and government agencies	$	192	$	—	$	6	$	—	$	6	$	198
States municipalities and political subdivisions	2,196		—		116		—		116		2,312
Foreign government	172		—		4		—		4		176
Residential MBS	859		—		57		(1)		56		915
Commercial MBS	89		—		3		—		3		92
Collateralized loan obligations	1,065		3		4		(4)		—		1,062
Other asset-backed securities	2,040		7		27		(13)		14		2,047
Corporate and other	2,199		2		88		(3)		85		2,282
Total fixed maturities	$	8,812	$	12	$	305	$	(21)	$	284	$	9,084


	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized				Net Unrealized		Fair Value
					Gains		Losses
December 31, 2020
Fixed maturities:
U.S. Government and government agencies	$	39	$	—	$	5	$	—	$	5	$	44
States, municipalities and political subdivisions	3,053		—		370		(2)		368		3,421
Foreign government	31		—		4		—		4		35
Residential MBS	1,953		3		194		(4)		190		2,140
Commercial MBS	659		—		40		(1)		39		698
Collateralized loan obligations	3,491		10		23		(13)		10		3,491
Other asset-backed securities	5,098		11		142		(53)		89		5,176
Corporate and other	17,272		4		1,874		(24)		1,850		19,118
Total fixed maturities	$	31,596	$	28	$	2,652	$	(97)	$	2,555	$	34,123


	2021						2020
					Fair Value						Fair Value
	Actual				over (under)		Actual				over (under)
	Cost		Fair Value		Cost		Cost		Fair Value		Cost
Common stocks	$	491	$	586	$	95	$	516	$	510	$	(6)
Perpetual preferred stocks	403		456		53		369		379		10
Total equity securities carried at fair value	$	894	$	1,042	$	148	$	885	$	889	$	4


	Carrying Value				Net Investment Income
	December 31, 2021		December 31, 2020		2021		2020		2019
Real estate-related investments (*)	$	1,130	$	915	$	226	$	92	$	67
Private equity	352		266		100		18		24
Private debt	35		54		(5)		(11)		6
Total investments accounted for using the equity method	$	1,517	$	1,235	$	321	$	99	$	97

(*)Includes 88% with underlying investments in multi-family properties, 1% in single family properties and 11% in other property types as of December 31, 2021 and 87% with underlying investments in multi-family properties, 2% in single family properties and 11% in other property types as of December 31, 2020.

The earnings (losses) from these investments are generally reported on a quarter lag due to the timing required to obtain the necessary information from the funds. AFG regularly reviews and discusses fund performance with the fund managers to corroborate the reasonableness of the underlying reported asset values and to assess whether any events have occurred within the lag period that may materially affect the valuation of these investments.

The following table shows gross unrealized losses (dollars in millions) on available for sale fixed maturities held by AFG’s continuing operations 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

December 31, 2021
Fixed maturities:
U.S. Government and government agencies	$	(1)	$	92	99	%	$	(1)	$	22	96	%
States, municipalities and political subdivisions	—		9		100	%	—		13		100	%
Foreign government	(2)		160		99	%	—		—		—	%
Residential MBS	(3)		419		99	%	—		7		100	%
Commercial MBS	—		34		100	%	—		—		—	%
Collateralized loan obligations	(1)		806		100	%	(1)		77		99	%
Other asset-backed securities	(8)		1,250		99	%	(3)		81		96	%
Corporate and other	(8)		500		98	%	—		26		100	%
Total fixed maturities	$	(23)	$	3,270	99	%	$	(5)	$	226	98	%

December 31, 2020
Fixed maturities:
U.S. Government and government agencies	$	—	$	23	100	%	$	—	$	—	—	%
States, municipalities and political subdivisions	—		39		100	%	—		10		100	%
Foreign government	—		7		100	%	—		—		—	%
Residential MBS	(1)		86		99	%	—		7		100	%
Commercial MBS	—		7		100	%	—		5		100	%
Collateralized loan obligations	(1)		192		99	%	(3)		366		99	%
Other asset-backed securities	(10)		465		98	%	(3)		92		97	%
Corporate and other	(2)		133		99	%	(1)		17		94	%
Total fixed maturities	$	(14)	$	952	99	%	$	(7)	$	497	99	%

At December 31, 2021, the gross unrealized losses on fixed maturities of $28 million relate to 514 securities. Investment grade securities (as determined by nationally recognized rating agencies) represented approximately 84% of the gross unrealized loss and 95% of the fair value.

To evaluate fixed maturities for expected credit losses (impairment), management considers whether the unrealized loss is credit-driven or a result of changes in market interest rates, the extent to which fair value is less than cost basis, historical operating, balance sheet and cash flow data from the issuer, third party research and communications with industry specialists and discussions with issuer management.

AFG analyzes its MBS securities for expected credit losses (impairment) each quarter based upon expected future cash flows. Management estimates expected future cash flows based upon its knowledge of the MBS market, cash flow projections (which reflect loan to collateral values, subordination, vintage and geographic concentration) received from independent sources, implied cash flows inherent in security ratings and analysis of historical payment data.

Management believes AFG will recover its cost basis (net of any allowance) in the securities with unrealized losses and that AFG has the ability to hold the securities until they recover in value and had no intent to sell them at December 31, 2021.

Credit losses on available for sale fixed maturities are measured based on the present value of expected future cash flows compared to amortized cost. Beginning January 1, 2020, impairment losses are recognized through an allowance instead of directly writing down the amortized cost. Recoveries of previously impaired amounts are recorded as an immediate reversal of all or a portion of the allowance. In addition, the allowance on available for sale fixed maturities cannot cause the amortized cost net of the allowance to be below fair value. Accordingly, future changes in the fair value of an impaired security (when the allowance was limited by the fair value) due to reasons other than issuer credit (e.g. changes in market interest rates) result in increases or decreases in the allowance, which are recorded through realized gains (losses) on securities. A progression of the allowance for expected credit losses on fixed maturity securities held by AFG’s continuing operations is shown below (in millions):


	Structured securities (*)		Corporate and other		Total
Balance at January 1, 2020	$	—	$	—	$	—
Impact of adoption of new accounting policy	—		—		—
Initial allowance for purchased securities with credit deterioration	—		—		—
Provision for expected credit losses on securities with no previous allowance	11		5		16
Additions (reductions) to previously recognized expected credit losses	(1)		(2)		(3)
Reductions due to sales or redemptions	—		(1)		(1)
Balance at December 31, 2020	$	10	$	2	$	12
Initial allowance for purchased securities with credit deterioration	—		—		—
Provision for expected credit losses on securities with no previous allowance	—		1		1
Additions (reductions) to previously recognized expected credit losses	(2)		—		(2)
Reductions due to sales or redemptions	—		(2)		(2)
Balance at December 31, 2021	$	8	$	1	$	9

The table below sets forth the scheduled maturities of AFG’s available for sale fixed maturities as of December 31, 2021 (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	$	1,228	$	1,240	12	%
After one year through five years	2,483		2,548		25	%
After five years through ten years	812		844		8	%
After ten years	332		342		3	%
	4,855		4,974		48	%
Collateralized loan obligations and other ABS (average life of approximately 3 years)	4,312		4,319		42	%
MBS (average life of approximately 3.5 years)	1,017		1,064		10	%
Total	$	10,184	$	10,357	100	%

Certain risks are inherent in fixed maturity securities, including loss upon default, price volatility in reaction to changes in interest rates, and general market factors and risks associated with reinvestment of proceeds due to prepayments or redemptions in a period of declining interest rates.


	Pretax		Deferred Tax		Net
December 31, 2021
Net unrealized gain on fixed maturities	$	173	$	(37)	$	136

December 31, 2020
Net unrealized gain on fixed maturities held by continuing operations	$	284	$	(60)	$	224

Discontinued operations (*):
Net unrealized gain on fixed maturities	$	2,555	$	(536)	$	2,019
Deferred policy acquisition costs — annuity segment	(934)		196		(738)
Annuity benefits accumulated	(324)		68		(256)
Life, accident and health reserves	(3)		—		(3)
Unearned revenue	11		(2)		9
Total net unrealized gain from discontinued operations	1,305		(274)		1,031
Total net unrealized gain on fixed maturity securities	$	1,589	$	(334)	$	1,255

(*)In addition to adjusting fixed maturity securities classified as “available for sale” to fair value, GAAP requires that deferred policy acquisition costs and certain other balance sheet amounts related to AFG’s discontinued annuity, long-term care and life businesses be adjusted to the extent that unrealized gains and losses from securities would result in adjustments to those balances had the unrealized gains or losses actually been realized.


	2021		2020		2019
Investment income:
Fixed maturities	$	290	$	303	$	315
Equity securities:
Dividends	30		35		51
Change in fair value (a) (b)	61		7		22
Equity in earnings of partnerships and similar investments	321		99		97
Other	40		23		53
Gross investment income	742		467		538
Investment expenses	(12)		(6)		(6)
Net investment income (b)	$	730	$	461	$	532

(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 2020 includes losses of $5 million on investments held by the companies that comprise the Neon exited lines due primarily to the $7 million loss recorded in first quarter of 2020 on equity securities that were carried at fair value through net investment income.


	2021								2020
	Realized gains (losses)								Realized gains (losses)
	Before Impairments		Impairment Allowance		Total		Change in Unrealized		Before Impairments		Impairment Allowance		Total		Change in Unrealized
Fixed maturities	$	(1)	$	1	$	—	$	(111)	$	6	$	(13)	$	(7)	$	61
Equity securities	110		—		110		—		(70)		—		(70)		—
Mortgage loans and other investments	—		—		—		—		2		—		2		—

Total pretax	109		1		110		(111)		(62)		(13)		(75)		61
Tax effects	(23)		—		(23)		23		13		3		16		(13)


Net of tax	$	86	$	1	$	87	$	(88)	$	(49)	$	(10)	$	(59)	$	48


	2019
	Realized gains (losses)
	Before Impairments		Impairments		Total		Change in Unrealized
Fixed maturities	$	7	$	(8)	$	(1)	$	174
Equity securities	155		—		155		—
Mortgage loans and other investments	1		—		1		—

Total pretax	163		(8)		155		174
Tax effects	(34)		2		(32)		(36)

Net of tax	$	129	$	(6)	$	123	$	138

All equity securities other than those accounted for under the equity method are carried at fair value through net earnings. AFG recorded net holding gains (losses) on equity securities from continuing operations during 2021, 2020 and 2019 on securities that were still owned at December 31 of each year presented as follows (in millions):

Gross realized gains and losses (excluding changes in impairment allowance and mark-to-market of derivatives) on available for sale fixed maturity investment transactions from continuing operations consisted of the following (in millions):


	2021		2020		2019
Gross gains	$	7	$	12	$	4
Gross losses	(1)		(5)		(2)