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Investments (Tables)

6 Months Ended

Jun. 30, 2023

Investments, Debt and Equity Securities [Abstract]

Available for sale fixed maturities at June 30, 2023 and December 31, 2022, consisted of the following (in millions):


	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized				Net Unrealized		Fair Value
					Gains		Losses
June 30, 2023
Fixed maturities:
U.S. government and government agencies	$	241	$	—	$	—	$	(12)	$	(12)	$	229
States, municipalities and political subdivisions	1,012		—		3		(47)		(44)		968
Foreign government	242		—		—		(14)		(14)		228
Residential MBS	1,710		2		20		(182)		(162)		1,546
Commercial MBS	81		—		—		(2)		(2)		79
Collateralized loan obligations	1,906		2		5		(50)		(45)		1,859
Other asset-backed securities	2,338		7		—		(162)		(162)		2,169
Corporate and other	2,958		5		12		(158)		(146)		2,807
Total fixed maturities	$	10,488	$	16	$	40	$	(627)	$	(587)	$	9,885

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

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, 2023 and December 31, 2022 (in millions):


	June 30, 2023						December 31, 2022

	Actual Cost				Fair Value		Actual Cost				Fair Value
			Fair Value		Over (Under) Cost				Fair Value		Over (Under) Cost
Common stocks	$	620	$	617	$	(3)	$	556	$	553	$	(3)
Perpetual preferred stocks	434		431		(3)		436		457		21
Total equity securities carried at fair value	$	1,054	$	1,048	$	(6)	$	992	$	1,010	$	18

Investments accounted for using the equity method

The following table shows the carrying value and net investment income from investments accounted for using the equity method (in millions):


						Net Investment Income
	Carrying Value				Six months ended June 30,
	June 30, 2023		December 31, 2022			2023		2022
Real estate-related investments (*)	$	1,313	$	1,229		$	75	$	169
Private equity	408		438			7		38
Private debt	35		33			3		2
Total investments accounted for using the equity method	$	1,756	$	1,700		$	85	$	209

(*)92% of the carrying value relates to underlying investments in multi-family properties at both June 30, 2023 and December 31, 2022.

Gross unrealized losses on securities by investment category and length of time that have been 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, 2023
Fixed maturities:
U.S. government and government agencies	$	(1)	$	32	97	%	$	(11)	$	195	95	%
States, municipalities and political subdivisions	(11)		352		97	%	(36)		438		92	%
Foreign government	(3)		17		85	%	(11)		211		95	%
Residential MBS	(13)		357		96	%	(169)		1,009		86	%
Commercial MBS	—		11		100	%	(2)		64		97	%
Collateralized loan obligations	(2)		92		98	%	(48)		1,297		96	%
Other asset-backed securities	(10)		360		97	%	(152)		1,601		91	%
Corporate and other	(31)		985		97	%	(127)		1,176		90	%
Total fixed maturities	$	(71)	$	2,206	97	%	$	(556)	$	5,991	92	%

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	%

Roll forward of allowance for credit losses on fixed maturity securities

A progression of the allowance for expected credit losses on available for sale fixed maturity securities is shown below (in millions):


	Structured Securities (*)		Corporate and Other		Total
Balance at March 31, 2023	$	11	$	5	$	16

Provision for expected credit losses on securities with no previous allowance	—		—		—
Additions (reductions) to previously recognized expected credit losses	—		—		—
Reductions due to sales or redemptions	—		—		—
Balance at June 30, 2023	$	11	$	5	$	16

Balance at March 31, 2022	$	6	$	1	$	7

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 January 1, 2023	$	10	$	1	$	11

Provision for expected credit losses on securities with no previous allowance	1		5		6
Additions (reductions) to previously recognized expected credit losses	—		(1)		(1)
Reductions due to sales or redemptions	—		—		—
Balance at June 30, 2023	$	11	$	5	$	16

Balance at January 1, 2022	$	8	$	1	$	9

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

(*)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, 2023 (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	$	479	$	471	5	%
After one year through five years	2,551		2,414		24	%
After five years through ten years	1,075		1,024		10	%
After ten years	343		323		3	%
	4,448		4,232		42	%
Collateralized loan obligations and other ABS (average life of approximately 3 years)	4,235		4,028		41	%
MBS (average life of approximately 6.5 years)	1,789		1,625		17	%
Total	$	10,472	$	9,885	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.


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Investment income:
Fixed maturities:
Interest and amortization	$	124	$	85	$	243	$	165
Change in fair value (a)	7		—		10		—
Equity securities:
Dividends	9		8		18		15
Change in fair value (b)	13		(9)		29		(2)
Equity in earnings of partnerships and similar investments	28		76		85		209
Other	22		13		40		20
Gross investment income	203		173		425		407
Investment expenses	(5)		(5)		(10)		(9)
Net investment income	$	198	$	168	$	415	$	398

(a)The change in the fair value of fixed maturities classified as trading and derivatives embedded in convertible fixed maturities related to limited partnerships and similar investments.

(b)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 related investments.

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) included in AOCI related to fixed maturity securities are summarized as follows (in millions):


	Three months ended June 30, 2023								Three months ended June 30, 2022
	Realized gains (losses)								Realized gains (losses)
	Before Impairments		Impairment Allowance		Total		Change in Unrealized		Before Impairments		Impairment Allowance		Total		Change in Unrealized
Fixed maturities	$	(5)	$	—	$	(5)	$	(64)	$	(10)	$	(1)	$	(11)	$	(275)
Equity securities	3		—		3		—		(82)		—		(82)		—
Mortgage loans and other investments	—		—		—		—		—		—		—		—
Total pretax	(2)		—		(2)		(64)		(92)		(1)		(93)		(275)
Tax effects	1		—		1		13		20		—		20		58
Net of tax	$	(1)	$	—	$	(1)	$	(51)	$	(72)	$	(1)	$	(73)	$	(217)

	Six months ended June 30, 2023								Six months ended June 30, 2022
	Realized gains (losses)								Realized gains (losses)
	Before Impairments		Impairment Allowance		Total		Change in Unrealized		Before Impairments		Impairment Allowance		Total		Change in Unrealized
Fixed maturities	$	(28)	$	(5)	$	(33)	$	43	$	(14)	$	1	$	(13)	$	(586)
Equity securities	(15)		—		(15)		—		(95)		—		(95)		—
Mortgage loans and other investments	—		—		—		—		—		—		—		—
Total pretax	(43)		(5)		(48)		43		(109)		1		(108)		(586)
Tax effects	9		1		10		(10)		23		—		23		124
Net of tax	$	(34)	$	(4)	$	(38)	$	33	$	(86)	$	1	$	(85)	$	(462)

Holding gains (losses) on equity securities still held

AFG recorded net holding gains (losses) on equity securities during the second quarter and first six months of 2023 and 2022 on securities that were still owned at June 30, 2023 and June 30, 2022 as follows (in millions):


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Included in realized gains (losses)	$	2	$	(82)	$	(21)	$	(96)
Included in net investment income	13		(9)		29		(4)
	$	15	$	(91)	$	8	$	(100)

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 consisted of the following (in millions):


	Six months ended June 30,
	2023		2022
Gross gains	$	2	$	3
Gross losses	(27)		(9)