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Investments

3 Months Ended

Mar. 31, 2024

Investments, Debt and Equity Securities [Abstract]

Available for sale fixed maturities at March 31, 2024 and December 31, 2023, consisted of the following (in millions):


	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized				Net Unrealized		Fair Value
					Gains		Losses
March 31, 2024
Fixed maturities:
U.S. government and government agencies	$	206	$	—	$	—	$	(7)	$	(7)	$	199
States, municipalities and political subdivisions	949		—		6		(45)		(39)		910
Foreign government	240		—		—		(5)		(5)		235
Residential MBS	1,807		2		25		(156)		(131)		1,674
Commercial MBS	72		—		—		—		—		72
Collateralized loan obligations	1,605		3		13		(22)		(9)		1,593
Other asset-backed securities	2,469		6		13		(102)		(89)		2,374
Corporate and other	3,386		—		39		(111)		(72)		3,314
Total fixed maturities	$	10,734	$	11	$	96	$	(448)	$	(352)	$	10,371

December 31, 2023
Fixed maturities:
U.S. government and government agencies	$	243	$	—	$	1	$	(8)	$	(7)	$	236
States, municipalities and political subdivisions	1,014		—		8		(38)		(30)		984
Foreign government	236		—		1		(7)		(6)		230
Residential MBS	1,788		1		26		(155)		(129)		1,658
Commercial MBS	75		—		—		(1)		(1)		74
Collateralized loan obligations	1,709		3		9		(28)		(19)		1,687
Other asset-backed securities	2,477		5		10		(120)		(110)		2,362
Corporate and other	3,210		3		52		(113)		(61)		3,146
Total fixed maturities	$	10,752	$	12	$	107	$	(470)	$	(363)	$	10,377

Equity securities which are reported at fair value with holding gains and losses recognized in net earnings, consisted of the following at March 31, 2024 and December 31, 2023 (in millions):


	March 31, 2024						December 31, 2023
	Actual Cost		Fair Value		Fair Value Over Cost		Actual Cost		Fair Value		Fair Value Over Cost
Common stocks	$	531	$	629	$	98	$	512	$	586	$	74
Perpetual preferred stocks	385		411		26		422		432		10
Total equity securities carried at fair value	$	916	$	1,040	$	124	$	934	$	1,018	$	84

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				Three months ended March 31,
	March 31, 2024		December 31, 2023			2024		2023
Real estate-related investments (*)	$	1,309	$	1,320		$	(6)	$	47
Private equity	500		457			30		8
Private debt	39		37			1		2
Total investments accounted for using the equity method	$	1,848	$	1,814		$	25	$	57

(*)91% and 92% of the carrying value relates to underlying investments in multi-family properties as of March 31, 2024 and December 31, 2023, respectively.

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.

With respect to partnerships and similar investments, AFG had unfunded commitments of $443 million and $418 million as of March 31, 2024 and December 31, 2023, respectively.

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
March 31, 2024
Fixed maturities:
U.S. government and government agencies	$	—	$	27	100	%	$	(7)	$	150	96	%
States, municipalities and political subdivisions	(2)		184		99	%	(43)		529		92	%
Foreign government	—		17		100	%	(5)		206		98	%
Residential MBS	(1)		127		99	%	(155)		1,017		87	%
Commercial MBS	—		—		—	%	—		42		100	%
Collateralized loan obligations	—		70		100	%	(22)		456		95	%
Other asset-backed securities	(1)		103		99	%	(101)		1,591		94	%
Corporate and other	(5)		408		99	%	(106)		1,416		93	%
Total fixed maturities	$	(9)	$	936	99	%	$	(439)	$	5,407	92	%

December 31, 2023
Fixed maturities:
U.S. government and government agencies	$	—	$	11	100	%	$	(8)	$	191	96	%
States, municipalities and political subdivisions	(1)		76		99	%	(37)		526		93	%
Foreign government	—		—		—	%	(7)		207		97	%
Residential MBS	(1)		42		98	%	(154)		1,089		88	%
Commercial MBS	—		—		—	%	(1)		61		98	%
Collateralized loan obligations	—		25		100	%	(28)		807		97	%
Other asset-backed securities	(1)		151		99	%	(119)		1,663		93	%
Corporate and other	(4)		123		97	%	(109)		1,455		93	%
Total fixed maturities	$	(7)	$	428	98	%	$	(463)	$	5,999	93	%

At March 31, 2024, the gross unrealized losses on fixed maturities of $448 million relate to approximately 1,450 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 March 31, 2024.

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 December 31, 2023	$	9	$	3	$	12

Provision for expected credit losses on securities with no previous allowance	1		—		1
Additions to previously recognized expected credit losses	1		—		1
Reductions due to sales or redemptions	—		(3)		(3)
Balance at March 31, 2024	$	11	$	—	$	11

Balance at December 31, 2022	$	10	$	1	$	11

Provision for expected credit losses on securities with no previous allowance	1		5		6
Reductions to previously recognized expected credit losses	—		(1)		(1)
Reductions due to sales or redemptions	—		—		—
Balance at March 31, 2023	$	11	$	5	$	16

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

In the first three months of 2024 and 2023, AFG did not purchase any securities with expected credit losses.

The table below sets forth the scheduled maturities of AFG’s available for sale fixed maturities as of March 31, 2024 (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	$	462	$	457	4	%
After one year through five years	2,409		2,344		23	%
After five years through ten years	1,279		1,264		12	%
After ten years	631		593		6	%
	4,781		4,658		45	%
Collateralized loan obligations and other ABS (average life of approximately 3 years)	4,065		3,967		38	%
MBS (average life of approximately 6.5 years)	1,877		1,746		17	%
Total	$	10,723	$	10,371	100	%

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

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.

There were no investments in individual issuers that exceeded 10% of shareholders’ equity at March 31, 2024 or December 31, 2023.

Net Investment Income The following table shows (in millions) investment income earned and investment expenses incurred.


	Three months ended March 31,
		2024		2023
Investment income:
Fixed maturities:
Interest and amortization		$	134	$	119
Change in fair value (a)		—		3
Equity securities:
Dividends		7		9
Change in fair value (b)		16		16
Equity in earnings of partnerships and similar investments		25		57
Other		22		18
Gross investment income		204		222
Investment expenses		(6)		(5)
Net investment income		$	198	$	217

(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 on limited partnerships and similar investments that do not qualify for equity method accounting and related equity investments in net investment income.

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 March 31, 2024								Three months ended March 31, 2023
	Realized gains (losses)								Realized gains (losses)
	Before Impairments		Impairment Allowance		Total		Change in Unrealized		Before Impairments		Impairment Allowance		Total		Change in Unrealized
Fixed maturities	$	(4)	$	(2)	$	(6)	$	11	$	(23)	$	(5)	$	(28)	$	107
Equity securities	20		—		20		—		(18)		—		(18)		—
Mortgage loans and other investments	—		—		—		—		—		—		—		—
Total pretax	16		(2)		14		11		(41)		(5)		(46)		107
Tax effects	(3)		—		(3)		(2)		8		1		9		(23)
Net of tax	$	13	$	(2)	$	11	$	9	$	(33)	$	(4)	$	(37)	$	84

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 during the first quarter and first three months of 2024 and 2023 on securities that were still owned at March 31, 2024 and March 31, 2023 as follows (in millions):


	Three months ended March 31,
		2024		2023
Included in realized gains (losses)		$	19	$	(23)
Included in net investment income		16		16
		$	35	$	(7)

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):


	Three months ended March 31,
	2024		2023
Gross gains	$	—	$	1
Gross losses	(3)		(25)