Income Taxes (Tables)

12 Months Ended

Dec. 31, 2021

Reconciliation of income taxes at the statutory rate and income taxes shown in the Statement of Earnings

The following is a reconciliation of income taxes on continuing operations at the statutory rate of 21% to the provision for income taxes as shown in AFG’s Statement of Earnings (dollars in millions):


	2021				2020				2019
	Amount		% of EBT		Amount		% of EBT		Amount		% of EBT
Earnings from continuing operations before income taxes (“EBT”)	$	1,335			$	339			$	634

Income taxes at statutory rate	$	280	21	%	$	71	21	%	$	133	21	%
Effect of:
Employee stock ownership plan dividend paid deduction	(16)		(1	%)	(2)		(1	%)	(3)		—	%
Stock-based compensation	(13)		(1	%)	(4)		(1	%)	(7)		(1	%)
Tax exempt interest	(8)		(1	%)	(10)		(3	%)	(11)		(2	%)
Change in valuation allowance	(4)		—	%	(117)		(35	%)	17		3	%
Dividend received deduction	(2)		—	%	(2)		(1	%)	(3)		—	%
Adjustment to prior year taxes	(1)		—	%	1		—	%	(2)		—	%
Tax benefit related to sale of Neon	—		—	%	(72)		(21	%)	—		—	%
Nondeductible expenses	8		1	%	4		1	%	8		1	%
Foreign operations	—		—	%	149		44	%	4		1	%

Other	10		—	%	7		3	%	7		—	%
Provision for income taxes as shown in the statement of earnings	$	254	19	%	$	25	7	%	$	143	23	%

Components of income tax provision (credit)

The total income tax provision of continuing operations consists of (in millions):


	2021		2020		2019
Current taxes:
Federal	$	162	$	46	$	103
State	7		4		5
Foreign	1		3		2
Deferred taxes:
Federal	84		(28)		33
Provision for income taxes	$	254	$	25	$	143

Summary of operating loss carryforwards

For income tax purposes, AFG and its subsidiaries had the following carryforwards available at December 31, 2021 (in millions):


	Expiring	Amount
Operating Loss – U.S.	2022 - 2041	$	56
Operating Loss – United Kingdom	indefinite	37		(*)

(*)£28 million

Components of deferred tax assets and liabilities

The significant components of deferred tax assets and liabilities of continuing operations included in AFG’s Balance Sheet at December 31 were as follows (in millions):


	2021		2020
Deferred tax assets:
Federal net operating loss carryforwards	$	12	$	15
Foreign underwriting losses	9		6
Capital loss carryforwards	—		7
Insurance claims and reserves	249		240
Employee benefits	112		102
Other, net	26		45
Total deferred tax assets before valuation allowance	408		415
Valuation allowance against deferred tax assets	(25)		(29)
Total deferred tax assets	383		386
Deferred tax liabilities:
Investment securities	(200)		(129)
Deferred policy acquisition costs	(61)		(55)
Insurance claims and reserves transition liability	(17)		(21)
Real estate, property and equipment	(29)		(33)
Total deferred tax liabilities	(307)		(238)
Net deferred tax asset	$	76	$	148