Property and Casualty Insurance Reserves Estimating the liability for unpaid losses and loss adjustment expenses (“LAE”) is inherently judgmental and is influenced by factors that are subject to significant variation. Determining the liability is a complex process incorporating input from many areas of the Company including actuarial, underwriting, pricing, claims and operations management.

The process used to determine the total reserve for liabilities involves estimating the ultimate incurred losses and LAE, adjusted for amounts already paid on the claims. The IBNR reserve is derived by first estimating the ultimate unpaid reserve liability and subtracting case reserves for loss and LAE.

In determining management’s best estimate of the ultimate liability, management (with the assistance of Company actuaries) considers items such as the effect of inflation on medical, hospitalization, material, repair and replacement costs, the nature and maturity of lines of insurance, general economic trends and the legal environment. In addition, historical trends adjusted for changes in underwriting standards, policy provisions, product mix and other factors are analyzed using actuarial reserve development techniques. Weighing all of the factors, the management team determines a single or “point” estimate that it records as its best estimate of the ultimate liability. Ranges of loss reserves are not developed by Company actuaries. This reserve analysis and review is completed each quarter and for almost every business within AFG’s property and casualty insurance sub-segments.

Each quarterly review includes in-depth analysis of several hundred subdivisions of the business, employing multiple actuarial techniques. For each subdivision, actuaries use informed, professional judgment to adjust these techniques as necessary to respond to specific conditions in the data or within the business.

Each method has particular strengths and weaknesses and no single estimation method is most accurate in all situations. When applied to a particular group of claims, the relative strengths and weaknesses of each method can change over time based on the facts and circumstances. Ultimately, the estimation methods chosen are those which the actuary believes produce the most reliable indication for the particular liabilities under review.

The period of time from the event triggering a claim through the settlement of the liability is referred to as the “tail”. Generally, the same actuarial methods are considered for both short-tail and long-tail lines of business because most of them work properly for both. The methods are designed to incorporate the effects of the differing length of time to settle particular claims. For nearly all lines of business, the actuaries rely heavily on the Bornhuetter-Ferguson method for more recent accident periods. As accident years mature and the underlying claim data becomes more credible, more weight is given to the Case Incurred and Paid Development methods. This transition occurs relatively quickly for short-tailed lines, and over a number of years for long-tail lines. Liability claims for long-tail lines are more susceptible to litigation and can be significantly affected by changing contract interpretation and the legal environment. Therefore, the estimation of loss reserves for these classes is more complex and subject to a higher degree of variability.

The level of detail in which data is analyzed varies among the different lines of business. Data is generally analyzed by major product or by coverage within product, using countrywide data; however, in some situations, data may be reviewed by state or region. Appropriate segmentation of the data is determined based on data credibility, homogeneity of development patterns, mix of business, and other actuarial considerations.

Within each business, results of individual methods are reviewed, supplementary statistical information is analyzed, and data from underwriting, operating and claim management are considered in deriving management’s best estimate of the ultimate liability. This estimate may be the result of one method, a weighted average of several methods, or a judgmental selection as the management team determines is appropriate.

The liability for losses and LAE for a very limited number of claims with long-term scheduled payments under certain workers’ compensation policies has been discounted at 3.5% at both December 31, 2021 and December 31, 2020, which represents an approximation of long-term investment yields. Because of the limited amount of claims involved, the net impact of discounting did not materially impact AFG’s total liability for unpaid losses and loss adjustment expenses (net reductions from discounting of $8 million and $9 million at December 31, 2021 and 2020, respectively).


	2021		2020		2019
Balance at beginning of period	$	10,392	$	10,232	$	9,741
Less reinsurance recoverables, net of allowance	3,117		3,024		2,942
Net liability at beginning of period	7,275		7,208		6,799
Provision for losses and LAE occurring in the current year	3,436		3,398		3,414
Net increase (decrease) in the provision for claims of prior years:
Special A&E charges	—		47		18
Neon exited lines	—		19		7
Other	(279)		(193)		(168)
Total losses and LAE incurred	3,157		3,271		3,271
Payments for losses and LAE of:
Current year	(1,024)		(990)		(1,076)
Prior years	(1,753)		(1,766)		(1,790)
Total payments	(2,777)		(2,756)		(2,866)
Reserves of businesses disposed (*)	—		(449)		—
Foreign currency translation and other	—		1		4
Net liability at end of period	7,655		7,275		7,208
Add back reinsurance recoverables, net of allowance	3,419		3,117		3,024
Gross unpaid losses and LAE included in the balance sheet	$	11,074	$	10,392	$	10,232

The 2021 and 2020 provision for losses and LAE occurring in the current year includes $16 million and $115 million (including $20 million recorded by the Neon exited lines), respectively, of COVID-19 related losses. In addition, the net decrease in the provision for losses and LAE includes favorable development of $19 million in 2021 related to COVID-19 related losses.

The net decrease in the provision for claims of prior years in 2021 reflects (i) lower than anticipated claim frequency and severity in the transportation businesses, lower than expected losses in the crop business, lower than expected claim severity in the ocean marine business and lower than expected claim frequency in the aviation business (within the Property and transportation sub-segment), (ii) lower than anticipated claim severity in the workers’ compensation businesses (within the Specialty casualty sub-segment) and (iii) lower than anticipated claim frequency in the surety and trade credit businesses and lower than expected claim frequency and severity in the financial institutions business (within the Specialty financial sub-segment). This favorable development was partially offset by (i) higher than anticipated claim severity in the general liability and targeted markets businesses (within the Specialty casualty sub-segment) and (ii) net adverse reserve development related to business outside the Specialty group that AFG no longer writes.

The net decrease in the provision for claims of prior years in 2020 reflects (i) lower than expected claim frequency and severity in the aviation, transportation and agricultural businesses (within the Property and transportation sub-segment), (ii) lower than anticipated claim severity in the workers’ compensation businesses and lower than anticipated claim frequency in the executive liability business (within the Specialty casualty sub-segment) and (iii) lower than anticipated claim frequency in the trade credit business and lower than anticipated claim frequency and severity in the financial institutions, fidelity and surety businesses (within the Specialty financial sub-segment). This favorable development was partially offset by (i) the $47 million special charge to increase asbestos and environmental reserves and adverse reserve development of $19 million on Neon’s exited lines of business, (ii) higher than expected claim frequency and severity in general liability contractor claims and the excess and surplus and excess liability businesses and higher than anticipated claim severity in the targeted markets businesses (within the Specialty casualty sub-segment), and (iii) net adverse reserve development related to business outside the Specialty group that AFG no longer writes.

The net decrease in the provision for claims of prior years in 2019 reflects (i) lower than expected claim frequency and severity at National Interstate and lower than expected losses in the crop business (all within the Property and transportation sub-segment), (ii) lower than anticipated claim frequency and severity in the workers’ compensation businesses (within the Specialty casualty sub-segment), and (iii) lower than expected claim frequency and severity in the surety and financial institutions businesses and lower than anticipated claim severity in the trade credit business (all within the Specialty financial sub-segment). This favorable development was partially offset by (i) the $18 million special charge to increase asbestos and environmental reserves and adverse reserve development of $7 million on Neon’s exited lines of business, (ii) higher than expected claim severity in the excess and surplus businesses and higher than expected claim frequency in product liability contractor claims (all within the Specialty casualty sub-segment), and (iii) net adverse reserve development related to business outside the Specialty group that AFG no longer writes.


	2021
Unpaid losses and allocated LAE, net of reinsurance:
Specialty
Property and transportation	$	1,318
Specialty casualty	4,447
Specialty financial	256
Other specialty	434
Total Specialty (excluding foreign reserves)	6,455

Other reserves
Foreign operations	349
A&E reserves	408
Unallocated LAE	382
Other	61
Total other reserves	1,200
Total reserves, net of reinsurance	7,655

Add back reinsurance recoverables, net of allowance	3,419
Gross unpaid losses and LAE included in the balance sheet	$	11,074

The following claims development tables and associated disclosures related to short-duration insurance contracts are prepared by sub-segment within the property and casualty insurance business for the most recent 10 accident years. AFG determines its claim counts at the claimant or policy feature level depending on the particular facts and circumstances of the underlying claim. While the methodology is generally consistent within each sub-segment, there are minor differences between and within the sub-segments. The methods used to summarize claim counts have not changed significantly over the time periods reported in the tables below.


Property and transportation
(Dollars in Millions)

	Incurred Claims and Allocated LAE, Net of Reinsurance																				As of December 31, 2021
	For the Years Ended (2012–2020 is Supplementary Information and Unaudited)																				Total IBNR Plus Expected Development on Reported Claims		Cumulative Number of Reported Claims
Accident Year	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021
2012	$	864	$	857	$	871	$	883	$	894	$	890	$	886	$	881	$	879	$	877	$	3	143,144
2013			882		870		872		878		878		877		873		871		870		5		138,947
2014					844		828		817		820		815		808		804		802		6		133,218
2015							818		784		779		777		777		772		768		9		134,923
2016									746		716		714		706		694		688		15		121,191
2017											889		847		843		823		816		19		140,714
2018													932		902		886		876		35		130,271
2019															1,111		1,058		1,051		65		153,560
2020																	1,043		974		138		120,696
2021																			1,119		397		108,153
																	Total		$	8,841


	Cumulative Paid Claims and Allocated LAE, Net of Reinsurance
Accident Year	For the Years Ended (2012–2020 is Supplementary Information and Unaudited)
	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021		% (a)
2012	$	572	$	708	$	772	$	816	$	842	$	856	$	882	$	869	$	872	$	873	99.5	%
2013			438		702		760		804		831		847		858		860		861		99.0	%
2014					329		632		693		744		770		783		789		791		98.6	%
2015							359		582		667		707		736		744		750		97.7	%
2016									294		521		577		618		640		656		95.3	%
2017											379		640		696		735		755		92.5	%
2018													396		676		738		781		89.2	%
2019															527		823		904		86.0	%
2020																	461		726		74.5	%
2021																			449		40.1	%
																	Total		$	7,546
							Unpaid losses and LAE — years 2012 through 2021												1,295
			Unpaid losses and LAE — 11th year and prior (excluding unallocated LAE)																23
			Unpaid losses and LAE, net of reinsurance (excluding unallocated LAE)																$	1,318


	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Supplementary Information and Unaudited)
	Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7		Year 8		Year 9		Year 10
Annual	47.5	%	29.4	%	7.8	%	5.3	%	3.1	%	1.7	%	1.4	%	(0.3	%)	0.2	%	0.1	%
Cumulative	47.5	%	76.9	%	84.7	%	90.0	%	93.1	%	94.8	%	96.2	%	95.9	%	96.1	%	96.2	%


Specialty casualty
(Dollars in Millions)

	Incurred Claims and Allocated LAE, Net of Reinsurance																				As of December 31, 2021
	For the Years Ended (2012–2020 is Supplementary Information and Unaudited)																				Total IBNR Plus Expected Development on Reported Claims		Cumulative Number of Reported Claims
Accident Year	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021
2012	$	901	$	892	$	885	$	885	$	883	$	877	$	849	$	842	$	833	$	826	$	23	54,827
2013			968		949		945		940		945		926		916		905		898		35		55,128
2014					1,035		1,008		1,008		1,006		982		967		952		950		50		56,942
2015							1,081		1,043		1,041		1,042		1,024		1,021		1,015		67		58,076
2016									1,131		1,122		1,116		1,101		1,090		1,069		124		56,407
2017											1,211		1,221		1,204		1,189		1,162		200		56,975
2018													1,277		1,307		1,302		1,262		297		58,808
2019															1,308		1,311		1,322		442		58,304
2020																	1,352		1,329		631		52,733
2021																			1,384		907		48,149
																	Total		$	11,217


	Cumulative Paid Claims and Allocated LAE, Net of Reinsurance
Accident Year	For the Years Ended (2012–2020 is Supplementary Information and Unaudited)
	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021		% (a)
2012	$	173	$	385	$	516	$	621	$	684	$	723	$	745	$	761	$	775	$	783	94.8	%
2013			182		396		554		666		729		766		797		820		835		93.0	%
2014					190		412		574		680		755		801		829		862		90.7	%
2015							178		411		577		702		792		844		888		87.5	%
2016									186		418		584		713		806		870		81.4	%
2017											200		422		612		755		833		71.7	%
2018													210		475		649		794		62.9	%
2019															212		455		651		49.2	%
2020																	188		446		33.6	%
2021																			191		13.8	%
																	Total		$	7,153
							Unpaid losses and LAE — years 2012 through 2021												4,064
			Unpaid losses and LAE — 11th year and prior (excluding unallocated LAE)																383
			Unpaid losses and LAE, net of reinsurance (excluding unallocated LAE)																$	4,447


	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Supplementary Information and Unaudited)
	Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7		Year 8		Year 9		Year 10
Annual	17.4	%	21.7	%	15.9	%	12.1	%	7.8	%	5.0	%	3.3	%	2.7	%	1.7	%	1.0	%
Cumulative	17.4	%	39.1	%	55.0	%	67.1	%	74.9	%	79.9	%	83.2	%	85.9	%	87.6	%	88.6	%


Specialty financial
(Dollars in Millions)

	Incurred Claims and Allocated LAE, Net of Reinsurance																				As of December 31, 2021
	For the Years Ended (2012–2020 is Supplementary Information and Unaudited)																				Total IBNR Plus Expected Development on Reported Claims		Cumulative Number of Reported Claims
Accident Year	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021
2012	$	163	$	163	$	151	$	139	$	137	$	135	$	132	$	127	$	126	$	125	$	1	21,094
2013			140		145		137		131		127		126		122		122		120		1		28,475
2014					146		157		156		153		147		142		137		136		1		29,466
2015							156		160		158		153		145		138		136		2		37,626
2016									179		184		187		182		174		170		4		45,157
2017											212		215		212		208		203		8		48,781
2018													212		217		219		207		15		46,697
2019															194		198		191		23		41,735
2020																	231		215		49		29,254
2021																			223		110		23,349
																	Total		$	1,726


	Cumulative Paid Claims and Allocated LAE, Net of Reinsurance
Accident Year	For the Years Ended (2012–2020 is Supplementary Information and Unaudited)
	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021		% (a)
2012	$	71	$	104	$	109	$	117	$	121	$	126	$	128	$	126	$	125	$	125	100.0	%
2013			70		100		107		113		117		117		118		118		118		98.3	%
2014					62		109		125		128		137		139		141		140		102.9	%
2015							72		110		129		133		132		134		134		98.5	%
2016									88		141		158		161		163		164		96.5	%
2017											120		169		186		194		193		95.1	%
2018													112		163		187		188		90.8	%
2019															99		146		164		85.9	%
2020																	100		144		67.0	%
2021																			98		43.9	%
																	Total		$	1,468
							Unpaid losses and LAE — years 2012 through 2021												258
			Unpaid losses and LAE — 11th year and prior (excluding unallocated LAE)																(2)
			Unpaid losses and LAE, net of reinsurance (excluding unallocated LAE)																$	256


	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Supplementary Information and Unaudited)
	Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7		Year 8		Year 9		Year 10
Annual	52.1	%	26.5	%	9.4	%	3.2	%	2.2	%	1.5	%	1.0	%	(0.8	%)	(0.4	%)	—	%
Cumulative	52.1	%	78.6	%	88.0	%	91.2	%	93.4	%	94.9	%	95.9	%	95.1	%	94.7	%	94.7	%


Other specialty
(Dollars in Millions)

	Incurred Claims and Allocated LAE, Net of Reinsurance																				As of December 31, 2021
	For the Years Ended (2012–2020 is Supplementary Information and Unaudited)																				Total IBNR Plus Expected Development on Reported Claims		Cumulative Number of Reported Claims (a)
Accident Year	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021
2012	$	42	$	40	$	39	$	40	$	41	$	39	$	39	$	36	$	37	$	38	$	2	—
2013			46		47		46		47		50		53		58		58		60		1		—
2014					58		57		59		59		60		61		64		66		7		—
2015							59		60		63		66		76		82		84		7		—
2016									61		61		65		71		76		77		13		—
2017											63		65		70		81		88		12		—
2018													86		90		92		94		35		—
2019															108		107		108		44		—
2020																	122		117		80		—
2021																			135		117		—
																	Total		$	867


	Cumulative Paid Claims and Allocated LAE, Net of Reinsurance
Accident Year	For the Years Ended (2012–2020 is Supplementary Information and Unaudited)
	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021		% (b)
2012	$	8	$	17	$	21	$	25	$	28	$	30	$	30	$	32	$	33	$	34	89.5	%
2013			7		16		22		34		37		44		51		53		57		95.0	%
2014					13		21		30		36		43		50		53		54		81.8	%
2015							10		26		31		50		62		69		75		89.3	%
2016									9		19		31		47		53		60		77.9	%
2017											10		19		30		52		63		71.6	%
2018													12		23		32		44		46.8	%
2019															9		24		49		45.4	%
2020																	9		21		17.9	%
2021																			8		5.9	%
																	Total		$	465
							Unpaid losses and LAE — years 2012 through 2021												402
			Unpaid losses and LAE — 11th year and prior (excluding unallocated LAE)																32
			Unpaid losses and LAE, net of reinsurance (excluding unallocated LAE)																$	434


	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Supplementary Information and Unaudited)
	Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7		Year 8		Year 9		Year 10
Annual	12.2	%	14.3	%	12.6	%	17.3	%	9.7	%	9.0	%	5.8	%	3.4	%	4.6	%	2.6	%
Cumulative	12.2	%	26.5	%	39.1	%	56.4	%	66.1	%	75.1	%	80.9	%	84.3	%	88.9	%	91.5	%

(a)The amounts shown in Other specialty represent business assumed by AFG’s internal reinsurance program from the operations that make up AFG’s other Specialty property and casualty insurance sub-segments. Accordingly, the liability for incurred claims and allocated LAE represents additional reserves held on claims counted in the tables provided for the other sub-segments (above).


Total Specialty Group
(Dollars in Millions)

	Incurred Claims and Allocated LAE, Net of Reinsurance																				As of December 31, 2021
	For the Years Ended (2012–2020 is Supplementary Information and Unaudited)																				Total IBNR Plus Expected Development on Reported Claims		Cumulative Number of Reported Claims
Accident Year	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021
2012	$	1,970	$	1,952	$	1,946	$	1,947	$	1,955	$	1,941	$	1,906	$	1,886	$	1,875	$	1,866	$	29	219,065
2013			2,036		2,011		2,000		1,996		2,000		1,982		1,969		1,956		1,948		42		222,550
2014					2,083		2,050		2,040		2,038		2,004		1,978		1,957		1,954		64		219,626
2015							2,114		2,047		2,041		2,038		2,022		2,013		2,003		85		230,625
2016									2,117		2,083		2,082		2,060		2,034		2,004		156		222,755
2017											2,375		2,348		2,329		2,301		2,269		239		246,470
2018													2,507		2,516		2,499		2,439		382		235,776
2019															2,721		2,674		2,672		574		253,599
2020																	2,748		2,635		898		202,683
2021																			2,861		1,531		179,651
																	Total		$	22,651


	Cumulative Paid Claims and Allocated LAE, Net of Reinsurance
Accident Year	For the Years Ended (2012–2020 is Supplementary Information and Unaudited)
	2012		2013		2014		2015		2016		2017		2018		2019		2020		2021		% (a)
2012	$	824	$	1,214	$	1,418	$	1,579	$	1,675	$	1,735	$	1,785	$	1,788	$	1,805	$	1,815	97.3	%
2013			697		1,214		1,443		1,617		1,714		1,774		1,824		1,851		1,871		96.0	%
2014					594		1,174		1,422		1,588		1,705		1,773		1,812		1,847		94.5	%
2015							619		1,129		1,404		1,592		1,722		1,791		1,847		92.2	%
2016									577		1,099		1,350		1,539		1,662		1,750		87.3	%
2017											709		1,250		1,524		1,736		1,844		81.3	%
2018													730		1,337		1,606		1,807		74.1	%
2019															847		1,448		1,768		66.2	%
2020																	758		1,337		50.7	%
2021																			746		26.1	%
																	Total		$	16,632
							Unpaid losses and LAE — years 2012 through 2021												6,019
			Unpaid losses and LAE — 11th year and prior (excluding unallocated LAE)																436
			Unpaid losses and LAE, net of reinsurance (excluding unallocated LAE)																$	6,455


	Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Supplementary Information and Unaudited)
	Year 1		Year 2		Year 3		Year 4		Year 5		Year 6		Year 7		Year 8		Year 9		Year 10
Annual	31.8	%	24.6	%	12.1	%	8.9	%	5.6	%	3.5	%	2.5	%	1.1	%	1.0	%	0.5	%
Cumulative	31.8	%	56.4	%	68.5	%	77.4	%	83.0	%	86.5	%	89.0	%	90.1	%	91.1	%	91.6	%

Deferred Policy Acquisition Costs Included in property and casualty insurance commissions and other underwriting expenses in AFG’s Statement of Earnings is amortization of deferred policy acquisition costs of $580 million, $615 million, and $721 million in 2021, 2020 and 2019, respectively.

Statutory Information AFG’s U.S.-based insurance subsidiaries are required to file financial statements with state insurance regulatory authorities prepared on an accounting basis prescribed or permitted by such authorities (statutory basis). Net earnings and capital and surplus on a statutory basis for the insurance subsidiaries were as follows (in millions):

The National Association of Insurance Commissioners’ (“NAIC”) model law for risk-based capital (“RBC”) applies to property and casualty insurance companies. RBC formulas determine the amount of capital that an insurance company needs so that it has an acceptable expectation of not becoming financially impaired. Companies below specific trigger points or ratios are subject to regulatory action. At December 31, 2021 and 2020, the capital ratios of all AFG insurance companies substantially exceeded the RBC requirements. AFG’s insurance companies did not use any prescribed or permitted statutory accounting practices that differed from the NAIC statutory accounting practices at December 31, 2021 or 2020.

Payments of dividends by AFG’s insurance companies are subject to various state laws that limit the amount of dividends that can be paid. Under applicable restrictions, the maximum amount of dividends available to AFG in 2022 from its insurance subsidiaries without seeking regulatory approval is $843 million. Additional amounts of dividends require regulatory approval.

Holding Company Dividends AFG declared and paid common stock dividends to shareholders totaling $2.38 billion, $336 million and $446 million in 2021, 2020 and 2019, respectively. Currently, there are no regulatory restrictions on AFG’s retained earnings or net earnings that materially impact its ability to pay dividends. Based on shareholders’ equity at December 31, 2021, AFG could pay dividends in excess of $1 billion without violating its most restrictive debt covenant. However, the payment of future dividends will be at the discretion of AFG’s Board of Directors and will be dependent on many factors including AFG’s financial condition and results of operations, the capital requirements of its insurance subsidiaries, and rating agency commitments.

Reinsurance In the normal course of business, AFG cedes reinsurance to other companies to diversify risk and limit maximum loss arising from large claims. However, AFG remains liable to its insureds regardless of whether a reinsurer is able to meet its obligations. The following table shows (in millions) (i) amounts deducted from property and casualty written and earned premiums in connection with reinsurance ceded, (ii) written and earned premiums included in income for reinsurance assumed and (iii) reinsurance recoveries, which represent ceded losses and loss adjustment expenses.


	2021		2020		2019
Direct premiums written	$	7,700	$	6,862	$	7,044
Reinsurance assumed	246		225		255
Reinsurance ceded	(2,373)		(2,074)		(1,957)
Net written premiums	$	5,573	$	5,013	$	5,342

Direct premiums earned	$	7,462	$	6,846	$	6,848
Reinsurance assumed	249		237		226
Reinsurance ceded	(2,307)		(1,984)		(1,889)
Net earned premiums	$	5,404	$	5,099	$	5,185

Reinsurance recoveries	$	1,478	$	1,522	$	1,404

AFG maintains supplemental fully collateralized reinsurance coverage up to 94% of $325 million for catastrophe losses in excess of $125 million of traditional catastrophe reinsurance through a catastrophe bond. AFG’s cost for this coverage is approximately $16 million per year. Recoveries from the catastrophe bond apply before calculating losses recoverable from this catastrophe excess of loss reinsurance.

Recoverables from Reinsurers and Premiums Receivable See Note A — “Accounting Policies — Credit Losses on Financial Instruments,” for a discussion of guidance effective January 1, 2020, which impacts the accounting for expected credit losses of recoverables from reinsurers and premiums receivable. AFG reviews the allowance quarterly and makes adjustments as necessary to reflect changes in expected credit losses. Progressions of the allowance for expected credit losses are shown below (in millions):


	Recoverables from Reinsurers				Premiums Receivable
	2021		2020		2021		2020
Balance at January 1	$	6	$	18	$	10	$	13
Impact of adoption of new accounting policy	—		(11)		—		(3)
Provision for expected credit losses	2		—		(2)		1
Write-offs charged against the allowance	—		—		—		(1)
Businesses disposed	—		(1)		—		—
Balance at December 31	$	8	$	6	$	8	$	10