Aquisitions and Sales of Subsidiaries

12 Months Ended

Dec. 31, 2012

Discontinued Operations and Disposal Groups [Abstract]

Aquisitions and Sales of Subsidiaries

B.     Acquisitions and Sales of Subsidiaries

Vanliner Group, Inc. (“Vanliner”)   In July 2010, National Interstate (“NATL”), a 52%-owned subsidiary of AFG, completed the acquisition of Vanliner, a market leader in providing insurance for the moving and storage industry for $114 million (including post-closing adjustments). The initial purchase price (funded primarily with cash on hand) was based on Vanliner’s estimated tangible book value at the date of closing and is subject to certain adjustments, including a four and one-half year balance sheet guarantee whereby both favorable and unfavorable developments related to the closing balance sheet inure to the seller, UniGroup, Inc. In accordance with accounting guidance, all assets acquired and liabilities assumed were recognized at their fair values as of the acquisition date. The purchase price allocation based on these fair values resulted in a gain on purchase of $7 million (included in realized gains (losses) on subsidiaries). Vanliner’s premiums associated with policies in force as of December 31, 2012 totaled approximately $107 million. Pro forma results of operations for AFG assuming the acquisition of Vanliner had taken place at the beginning of 2010 would not differ significantly from actual reported results.

Medicare Supplement and Critical Illness Businesses   On August 31, 2012, AFG completed the sale of its Medicare supplement and critical illness businesses, which included Loyal American Life Insurance Company and four other insurance companies, to Cigna Corporation for $326 million in cash resulting in a pretax gain of $170 million (including post-closing adjustments). Since the transaction includes the ongoing cessions of certain business to Cigna, the operations being sold are not reported as discontinued operations. Following the sale, AFG’s former supplemental insurance operations consist solely of its run-off long-term care business.

The impact of the August 2012 sale of the Medicare supplement and critical illness businesses on AFG’s financial statements is shown below (in millions):

Sale proceeds	$	326
Expenses	(11		)
Net proceeds	$	315
Assets of businesses sold:
Cash and investments	$	217
Deferred policy acquisition costs	108
Other assets	31
Total assets	356
Liabilities of businesses sold:
Life, accident and health reserves	209
Other liabilities	2
Total liabilities	211
Net assets of businesses sold	$	145
Gain on sale of subsidiaries	$	170

Summarized Statement of Earnings information for the Medicare supplement and critical illness businesses through the sale date is shown below (in millions):

	Year ended December 31,
	2012 (*)		2011		2010
Total revenues	$	212	$	325	$	341
Total costs and expenses	184		291		310
Operating earnings before income taxes	$	28	$	34	$	31

(*) Reflects revenues and expenses through the end of August 2012.

Other Businesses   During 2012, AFG acquired the outstanding 28% of Marketform, its London-based Lloyd’s property and casualty insurance operation, that it did not already own for $17 million and sold an additional small annuity company for $7 million.