
	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized				Net Unrealized		Fair Value
					Gains		Losses
December 31, 2022
Fixed maturities:
U.S. Government and government agencies	$	233	$	—	$	—	$	(14)	$	(14)	$	219
States municipalities and political subdivisions	1,234		—		3		(51)		(48)		1,186
Foreign government	240		—		—		(14)		(14)		226
Residential MBS	1,757		2		23		(180)		(157)		1,598
Commercial MBS	88		—		—		(3)		(3)		85
Collateralized loan obligations	1,988		1		1		(67)		(66)		1,921
Other asset-backed securities	2,435		7		1		(184)		(183)		2,245
Corporate and other	2,761		1		11		(156)		(145)		2,615
Total fixed maturities	$	10,736	$	11	$	39	$	(669)	$	(630)	$	10,095

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


	2022						2021
					Fair Value
	Actual				over (under)		Actual				Fair Value
	Cost		Fair Value		Cost		Cost		Fair Value		over Cost
Common stocks	$	556	$	553	$	(3)	$	491	$	586	$	95
Perpetual preferred stocks	436		457		21		403		456		53
Total equity securities carried at fair value	$	992	$	1,010	$	18	$	894	$	1,042	$	148


	Carrying Value				Net Investment Income
	December 31, 2022		December 31, 2021		2022		2021		2020
Real estate-related investments (*)	$	1,229	$	1,130	$	233	$	226	$	92
Private equity	438		352		32		100		18
Private debt	33		35		2		(5)		(11)
Total investments accounted for using the equity method	$	1,700	$	1,517	$	267	$	321	$	99

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 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, 2022
Fixed maturities:
U.S. Government and government agencies	$	(4)	$	111	97	%	$	(10)	$	107	91	%
States, municipalities and political subdivisions	(50)		967		95	%	(1)		15		94	%
Foreign government	(5)		90		95	%	(9)		134		94	%
Residential MBS	(115)		1,078		90	%	(65)		315		83	%
Commercial MBS	(2)		44		96	%	(1)		33		97	%
Collateralized loan obligations	(44)		1,224		97	%	(23)		587		96	%
Other asset-backed securities	(100)		1,361		93	%	(84)		740		90	%
Corporate and other	(105)		1,665		94	%	(51)		413		89	%
Total fixed maturities	$	(425)	$	6,540	94	%	$	(244)	$	2,344	91	%

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	%

At December 31, 2022, the gross unrealized losses on fixed maturities of $669 million relate to approximately 1,850 securities. Investment grade securities (as determined by nationally recognized rating agencies) represented approximately 95% of the gross unrealized loss and 95% of the fair value of securities with unrealized losses.

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 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, 2022.

Credit losses on available for sale fixed maturities are measured based on the present value of expected future cash flows compared to amortized cost. Impairment losses are recognized through an allowance and 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	—		—		—

Provision for expected credit losses on securities with no previous allowance	11		5		16
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

Provision for expected credit losses on securities with no previous allowance	—		1		1
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

Provision for expected credit losses on securities with no previous allowance	4		1		5
Reductions to previously recognized expected credit losses	(2)		—		(2)
Reductions due to sales or redemptions	—		(1)		(1)
Balance at December 31, 2022	$	10	$	1	$	11

The table below sets forth the scheduled maturities of AFG’s available for sale fixed maturities as of December 31, 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	$	430	$	429	4	%
After one year through five years	2,732		2,585		26	%
After five years through ten years	988		933		9	%
After ten years	317		299		3	%
	4,467		4,246		42	%
Collateralized loan obligations and other ABS (average life of approximately 3.5 years)	4,415		4,166		41	%
MBS (average life of approximately 6 years)	1,843		1,683		17	%
Total	$	10,725	$	10,095	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.


	2022		2021		2020
Investment income:
Fixed maturities	$	376	$	290	$	303
Equity securities:
Dividends	39		30		35
Change in fair value (a) (b)	(2)		61		7
Equity in earnings of partnerships and similar investments	267		321		99
Other	53		40		23
Gross investment income	733		742		467
Investment expenses	(16)		(12)		(6)
Net investment income (b)	$	717	$	730	$	461

(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 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.”

(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.


	2022								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	$	(27)	$	(3)	$	(30)	$	(803)	$	(1)	$	1	$	—	$	(111)
Equity securities	(96)		—		(96)		—		110		—		110		—
Mortgage loans and other investments	10		—		10		—		—		—		—		—

Total pretax	(113)		(3)		(116)		(803)		109		1		110		(111)
Tax effects	23		1		24		170		(23)		—		(23)		23


Net of tax	$	(90)	$	(2)	$	(92)	$	(633)	$	86	$	1	$	87	$	(88)


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

Total pretax	(62)		(13)		(75)		61
Tax effects	13		3		16		(13)

Net of tax	$	(49)	$	(10)	$	(59)	$	48

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 2022, 2021 and 2020 on securities that were still owned at December 31 of each year presented as follows (in millions):