Managed Investment Entities

3 Months Ended

Mar. 31, 2024

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

AFG is the investment manager and it has investments ranging from 13.3% to 100% of the most subordinate debt tranche of thirteen 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 2024, 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 $201 million (including $139 million invested in the most subordinate tranches and $30 million invested in a temporary warehousing entity) at March 31, 2024.

In February 2024, AFG formed one new CLO, which issued $406 million face amount of liabilities (including $32 million face amount purchased by AFG). In March 2023, AFG formed one new CLO, which issued $407 million face amount of liabilities (including $16 million face amount purchased by AFG).

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


	Three months ended March 31,
		2024		2023
Balance at beginning of period		$	137	$	112
Purchases		28		11
Sales		—		—
Distributions		(9)		(5)
Change in fair value		13		1
Balance at end of period (*)		$	169	$	119

(*)Excludes $30 million and $13 million invested in a temporary warehousing entity at March 31, 2024 and March 31, 2023, respectively, that was established to provide AFG the ability to form a new CLO.

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 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):


	Three months ended March 31,
		2024		2023
Gains (losses) on change in fair value of assets/liabilities (*):
Assets		$	12	$	34
Liabilities		(2)		(38)
Management fees paid to AFG		3		4
CLO earnings attributable to AFG		14		1

(*)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 $95 million and $109 million at March 31, 2024 and December 31, 2023, respectively. The aggregate unpaid principal balance of the CLOs’ debt exceeded its carrying value by $253 million at both of those dates. The CLO assets include loans with an aggregate fair value of $1 million at March 31, 2024 and $7 million at December 31, 2023, for which the CLOs are not accruing interest because the loans are in default (aggregate unpaid principal balance of $5 million at March 31, 2024 and $13 million at December 31, 2023).

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 $1.59 billion at March 31, 2024 and $1.69 billion at December 31, 2023.