Managed Investment Entities

12 Months Ended

Dec. 31, 2022

Variable Interest Entity, Primary Beneficiary, Does Not Hold Majority Voting Interest, Disclosures [Abstract]

AFG is the investment manager and it has investments ranging from 7.4% to 100% of the most subordinate debt tranche of fifteen active collateralized loan obligation entities (“CLOs”), which are considered variable interest entities. AFG also owns portions of the senior debt tranches of certain of these CLOs. Upon formation between 2012 and 2022, these entities issued securities in various senior and subordinate classes and invested the proceeds primarily in secured bank loans, which serve as collateral for the debt securities issued by each CLO. None of the collateral was purchased from AFG. AFG’s investments in the subordinate debt tranches of these entities receive residual income from the CLOs only after the CLOs pay expenses (including management fees to AFG) and interest on and returns of capital to senior levels of debt securities. There are no contractual requirements for AFG to provide additional funding for these entities. AFG has not provided and does not intend to provide any financial support to these entities.

AFG’s maximum exposure to economic loss on the CLOs that it manages is limited to its investment in those CLOs, which had an aggregate fair value of $115 million (including $82 million invested in the most subordinate tranches and $3 million invested in a temporary warehousing entity) at December 31, 2022.

In 2022, AFG formed two new CLOs, which issued $754 million face amount of liabilities (including $48 million face amount purchased by AFG). In 2021, AFG formed one new CLO, which issued $408 million face amount of liabilities (including $14 million face amount purchased by AFG’s continuing operations). In 2020, AFG formed one new CLO, which issued $303 million face amount of liabilities (including $16 million face amount purchased by AFG’s continuing

operations).

The following table shows a progression of the fair value of AFG's investment in CLO tranches held by continuing operations (in millions):


	2022		2021		2020
Balance at beginning of period	$	76	$	57	$	48
Purchases	66		21		17
Sales	—		—		(1)
Distributions	(18)		(22)		(6)
Change in fair value	(11)		20		(1)
Change in accrued interest	(1)		—		—
Balance at end of period (*)	$	112	$	76	$	57

(*)Excludes $3 million invested in temporary warehousing entities at December 31, 2022 that were established to provide AFG the ability to form a new CLO when management believes market conditions are favorable.

The revenues and expenses of the CLOs are separately identified in AFG’s Statement of Earnings, after the elimination of management fees and earnings attributable to shareholders of AFG as measured by the change in the fair value of AFG’s investments in the CLOs. Selected financial information related to the CLOs is shown below (in millions):


	Year ended December 31,
	2022		2021		2020
Gains (losses) on change in fair value of assets/liabilities (*):
Assets	$	(267)	$	69	$	(69)
Liabilities	236		(59)		49
Management fees paid to AFG	17		16		15
CLO earnings (losses) attributable to AFG Shareholders:
From continuing operations	$	(10)	$	20	$	(1)
From discontinued annuity operations	—		20		(1)
Total	$	(10)	$	40	$	(2)

(*)Included in revenues in AFG’s Statement of Earnings.

The aggregate unpaid principal balance of the CLOs’ fixed maturity investments exceeded the fair value of the investments by $339 million and $72 million at December 31, 2022 and 2021, respectively. The aggregate unpaid principal balance of the CLOs’ debt exceeded its carrying value by $413 million and $187 million at those dates. The CLO assets include loans with an aggregate fair value of $4 million at December 31, 2022 and $9 million at December 31, 2021, for which the CLOs are not accruing interest because the loans are in default (aggregate unpaid principal balance of $17 million at December 31, 2022 and $18 million at December 31, 2021).

In addition to the CLOs that it manages, AFG had investments in CLOs that are managed by third parties (therefore not consolidated), which are included in available for sale fixed maturity securities and had a fair value of $1.92 billion at December 31, 2022 and $1.64 billion at December 31, 2021.