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Investments (Tables)

6 Months Ended

Jun. 30, 2022

Investments, Debt and Equity Securities [Abstract]

Available for sale fixed maturities at June 30, 2022 and December 31, 2021, consisted of the following (in millions):


	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized				Net Unrealized		Fair Value
					Gains		Losses
June 30, 2022
Fixed maturities:
U.S. Government and government agencies	$	226	$	—	$	—	$	(10)	$	(10)	$	216
States, municipalities and political subdivisions	1,440		—		6		(44)		(38)		1,402
Foreign government	257		—		—		(11)		(11)		246
Residential MBS	1,645		—		28		(118)		(90)		1,555
Commercial MBS	94		—		—		(2)		(2)		92
Collateralized loan obligations	1,649		1		1		(42)		(41)		1,607
Other asset-backed securities	2,383		6		1		(120)		(119)		2,258
Corporate and other	2,519		—		5		(107)		(102)		2,417
Total fixed maturities	$	10,213	$	7	$	41	$	(454)	$	(413)	$	9,793

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

Equity securities reported at fair value

Equity securities which are reported at fair value with holding gains and losses recognized in net earnings, consisted of the following at June 30, 2022 and December 31, 2021 (in millions):


	June 30, 2022						December 31, 2021

	Actual Cost				Fair Value		Actual Cost				Fair Value
			Fair Value		over Cost				Fair Value		over Cost
Common stocks	$	547	$	569	$	22	$	491	$	586	$	95
Perpetual preferred stocks	452		460		8		403		456		53
Total equity securities carried at fair value	$	999	$	1,029	$	30	$	894	$	1,042	$	148

Investments accounted for using the equity method

Investments accounted for using the equity method held by AFG’s continuing operations, by category, carrying value and net investment income are as follows (in millions):


					Net Investment Income
	Carrying Value				Three months ended June 30,				Six months ended June 30,
	June 30, 2022		December 31, 2021		2022		2021		2022		2021
Real estate-related investments (*)	$	1,193	$	1,130	$	69	$	45	$	169	$	99
Private equity	402		352		5		24		38		45
Private debt	31		35		2		2		2		5
Total investments accounted for using the equity method	$	1,626	$	1,517	$	76	$	71	$	209	$	149

(*)Includes 91% with underlying investments in multi-family properties, 1% in single family properties and 8% in other property types as of June 30, 2022 and 88% with underlying investments in multi-family properties, 1% in single family properties and 11% in other property types as of December 31, 2021.

Available for sale securities in a continuous unrealized loss position

The following table shows gross unrealized losses (dollars in millions) on available for sale fixed maturities 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
June 30, 2022
Fixed maturities:
U.S. Government and government agencies	$	(5)	$	145	97	%	$	(5)	$	60	92	%
States, municipalities and political subdivisions	(43)		963		96	%	(1)		10		91	%
Foreign government	(10)		210		95	%	(1)		20		95	%
Residential MBS	(117)		1,279		92	%	(1)		16		94	%
Commercial MBS	(2)		71		97	%	—		—		—	%
Collateralized loan obligations	(40)		1,432		97	%	(2)		99		98	%
Other asset-backed securities	(110)		1,930		95	%	(10)		122		92	%
Corporate and other	(99)		1,803		95	%	(8)		82		91	%
Total fixed maturities	$	(426)	$	7,833	95	%	$	(28)	$	409	94	%

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	%

Roll forward of allowance for credit losses on fixed maturity 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 March 31, 2022	$	6	$	1	$	7
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	—		—		—
Reductions due to sales or redemptions	—		(1)		(1)
Balance at June 30, 2022	$	7	$	—	$	7

Balance at March 31, 2021	$	9	$	1	$	10
Initial allowance for purchased securities with credit deterioration	—		—		—
Provision for expected credit losses on securities with no previous allowance	—		—		—
Additions (reductions) to previously recognized expected credit losses	(1)		1		—
Reductions due to sales or redemptions	—		(1)		(1)
Balance at June 30, 2021	$	8	$	1	$	9

Balance at January 1, 2022	$	8	$	1	$	9
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	—		(1)		(1)
Balance at June 30, 2022	$	7	$	—	$	7

Balance at January 1, 2021	$	10	$	2	$	12
Initial allowance for purchased securities with credit deterioration	—		—		—
Provision for expected credit losses on securities with no previous allowance	—		—		—
Additions (reductions) to previously recognized expected credit losses	(2)		1		(1)
Reductions due to sales or redemptions	—		(2)		(2)
Balance at June 30, 2021	$	8	$	1	$	9

(*)Includes mortgage-backed securities, collateralized loan obligations and other asset-backed securities.

Available for sale fixed maturity securities by contractual maturity date

The table below sets forth the scheduled maturities of AFG’s available for sale fixed maturities as of June 30, 2022 (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	$	617	$	618	6	%
After one year through five years	2,615		2,511		26	%
After five years through ten years	926		880		9	%
After ten years	284		272		3	%
	4,442		4,281		44	%
Collateralized loan obligations and other ABS (average life of approximately 3.5 years)	4,025		3,865		39	%
MBS (average life of approximately 5.5 years)	1,739		1,647		17	%
Total	$	10,206	$	9,793	100	%

(*)Amortized cost, net of allowance for expected credit losses.

Net investment income earned and investment expenses incurred

The following table shows (in millions) investment income earned and investment expenses incurred in AFG’s continuing operations.


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Investment income:
Fixed maturities	$	85	$	72	$	165	$	144
Equity securities:
Dividends	8		7		15		15
Change in fair value (*)	(9)		8		(2)		34
Equity in earnings of partnerships and similar investments	76		71		209		149
Other	13		8		20		14
Gross investment income	173		166		407		356
Investment expenses	(5)		(2)		(9)		(4)
Net investment income	$	168	$	164	$	398	$	352

(*)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 its portfolio of limited partnerships and similar investments that do not qualify for equity method accounting and certain other securities classified at purchase as “fair value through net investment income.”

Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments

Realized gains (losses) and changes in unrealized appreciation (depreciation) from continuing operations included in AOCI related to fixed maturity securities are summarized as follows (in millions):


	Three months ended June 30, 2022								Three months ended June 30, 2021
	Realized gains (losses)								Realized gains (losses)
	Before Impairments		Impairment Allowance		Total		Change in Unrealized		Before Impairments		Impairment Allowance		Total		Change in Unrealized
Fixed maturities	$	(10)	$	(1)	$	(11)	$	(275)	$	1	$	—	$	1	$	20
Equity securities	(82)		—		(82)		—		42		—		42		—
Mortgage loans and other investments	—		—		—		—		—		—		—		—
Total pretax	(92)		(1)		(93)		(275)		43		—		43		20
Tax effects	20		—		20		58		(9)		—		(9)		(4)
Net of tax	$	(72)	$	(1)	$	(73)	$	(217)	$	34	$	—	$	34	$	16

	Six months ended June 30, 2022								Six months ended June 30, 2021
	Realized gains (losses)								Realized gains (losses)
	Before Impairments		Impairment Allowance		Total		Change in Unrealized		Before Impairments		Impairment Allowance		Total		Change in Unrealized
Fixed maturities	$	(14)	$	1	$	(13)	$	(586)	$	—	$	1	$	1	$	(24)
Equity securities	(95)		—		(95)		—		119		—		119		—
Mortgage loans and other investments	—		—		—		—		—		—		—		—
Total pretax	(109)		1		(108)		(586)		119		1		120		(24)
Tax effects	23		—		23		124		(25)		—		(25)		5
Net of tax	$	(86)	$	1	$	(85)	$	(462)	$	94	$	1	$	95	$	(19)

Holding gains (losses) on equity securities still held

AFG recorded net holding gains (losses) on equity securities from continuing operations during the second quarter and first six months of 2022 and 2021 on securities that were still owned at June 30, 2022 and June 30, 2021 as follows (in millions):


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Included in realized gains (losses)	$	(82)	$	36	$	(96)	$	98
Included in net investment income	(9)		8		(4)		34
	$	(91)	$	44	$	(100)	$	132

Gross realized gains and losses on available for sale fixed maturity and equity security investments

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):


	Six months ended June 30,
	2022		2021
Gross gains	$	3	$	3
Gross losses	(9)		(1)