Discontinued Operations

9 Months Ended

Sep. 30, 2022

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

Annuity Business   Effective May 31, 2021, AFG completed the sale of its Annuity business to Massachusetts Mutual Life Insurance Company (“MassMutual”). MassMutual acquired Great American Life Insurance Company 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 post-closing adjustments) and AFG realized a $656 million net gain on the sale in the first nine months of 2021.

Details of the assets and liabilities of the Annuity subsidiaries sold were as follows (in millions):

	May 31, 2021
Assets of businesses sold:
Cash and cash equivalents	$	2,060
Investments	38,323
Recoverables from reinsurers	6,748
Other assets	2,152
Total assets of discontinued annuity operations	49,283
Liabilities of businesses sold:
Annuity benefits accumulated	43,690
Other liabilities	1,813
Total liabilities of discontinued annuity operations	45,503
Reclassify AOCI	(913)
Net investment in annuity businesses sold, excluding AOCI	$	2,867

Details of the results of operations for the discontinued annuity operations were (in millions):

	Nine months ended September 30, 2021 (*)
Net investment income	$	746
Realized gains on securities	112
Other income	52
Total revenues	910
Annuity benefits	377
Annuity and supplemental insurance acquisition expenses	136
Other expenses	73
Total costs and expenses	586
Earnings before income taxes from discontinued operations	324
Provision for income taxes on discontinued operations	66
Net earnings from operations, net of tax	258
Gain on sale, net of tax	656
Net earnings from discontinued operations	$	914

(*)Results through the May 31, 2021 effective date of the sale.

The impact of the sale of the annuity business is shown below (in millions):

	May 31, 2021
Cash proceeds	$	3,571
Sale related expenses	(8)
Total net proceeds	3,563
Net investment in annuity businesses sold, excluding AOCI	2,867
Reclassify net deferred tax asset	(199)
Pretax gain on sale	895
Income tax expense:
Reclassify net deferred tax asset	199
Tax liabilities triggered by the sale	41
Other	(1)
Total income tax expense	239
Net gain on sale	$	656

Summarized cash flows for the discontinued annuity operations were (in millions):

	Nine months ended September 30, 2021
Net cash provided by operating activities	$	87
Net cash used in investing activities	(1,709)
Net cash provided by financing activities	477

Derivatives   The vast majority of AFG’s derivatives that do not qualify for hedge accounting were held by the sold annuity subsidiaries. The following table summarizes the gains (losses) included in net earnings 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 (in millions):

Derivative	Nine months ended September 30, 2021 (*)
MBS with embedded derivatives	$	(1)
Fixed-indexed and variable-indexed annuities (embedded derivative)	(222)
Equity index call options	237
Equity index put options	5
Reinsurance contract (embedded derivative)	1
	$	20

(*)Results through the May 31, 2021 effective date of the sale.