Income Taxes

The following is a reconciliation of income taxes at the statutory rate of 35% to the provision for income taxes as shown in the Statement of Earnings (in millions):



	Three months ended March 31,
	2014					2013
	Amount			% of EBT		Amount			% of EBT
Earnings before income taxes (“EBT”)	$	161				$	175

Income taxes at statutory rate	$	56		35	%	$	61		35	%
Effect of:
Tax exempt interest	(5		)	(3	%)	(5		)	(3	%)
Losses of managed investment entities	—			—	%	4			2	%
Subsidiaries not in AFG’s tax return	1			1	%	1			—	%
Other	2			1	%	1			1	%
Provision for income taxes as shown in the Statement of Earnings	$	54		34	%	$	62		35	%

During the first three months of 2014, there were no material changes to AFG’s liability for uncertain tax positions, which relate to the timing of investment income and the deductibility of certain financing expenses. As discussed in Note L — “Income Taxes,” in AFG’s 2013 Form 10-K, AFG believes it is reasonably possible that its liability for uncertain tax positions may be reduced by up to $19 million due to a settlement with the IRS that is expected to become final in 2014. The majority of the reduction in this liability would result in offsetting adjustments to AFG’s deferred tax liability. Accordingly, the resolution of these items will not have a material impact on AFG’s effective tax rate.