Quarterly Operating Results (Unaudited)

The operations of certain AFG business segments are seasonal in nature. While insurance premiums are recognized on a relatively level basis, claim losses related to adverse weather (snow, hail, hurricanes, severe storms, tornadoes, etc.) may be seasonal. The profitability of AFG’s crop insurance business is primarily recognized during the second half of the year as crop prices and yields are determined. Quarterly results necessarily rely heavily on estimates. These estimates and certain other factors, such as the discretionary sales of assets, cause the quarterly results not to be necessarily indicative of results for longer periods of time.

The following are quarterly results of consolidated operations for the two years ended December 31, 2016 (in millions, except per share amounts). Quarterly earnings per share do not add to year-to-date amounts due to changes in shares outstanding.



	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Total Year
2016
Revenues	$	1,475	$	1,581	$	1,705	$	1,737	$	6,498
Net earnings, including noncontrolling interests	104		63		113		388		668
Net earnings attributable to shareholders	101		54		109		385		649
Earnings attributable to shareholders per Common Share:
Basic	$	1.16	$	0.63	$	1.25	$	4.43	$	7.47
Diluted	1.14		0.62		1.23		4.33		7.33
Average number of Common Shares:
Basic	86.9		86.8		86.9		86.9		86.9
Diluted	88.5		88.4		88.5		88.8		88.5
2015
Revenues	$	1,297	$	1,543	$	1,687	$	1,618	$	6,145
Net earnings, including noncontrolling interests	25		149		66		130		370
Net earnings attributable to shareholders	19		141		63		129		352
Earnings attributable to shareholders per Common Share:
Basic	$	0.22	$	1.60	$	0.72	$	1.48	$	4.02
Diluted	0.21		1.57		0.71		1.45		3.94
Average number of Common Shares:
Basic	87.6		87.7		87.5		87.4		87.6
Diluted	89.4		89.5		89.3		89.2		89.4

Pretax realized gains on subsidiaries and securities (including other-than-temporary impairments) and favorable (adverse) prior year development of AFG’s liability for losses and loss adjustment expenses (“LAE”) were as follows (in millions):



	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter			Total Year
Realized Gains (Losses) on Securities and Subsidiaries
2016	$	(18	)	$	(14	)	$	2		$	51		$	21
2015	(143		)	(1		)	(11		)	(25		)	(180		)

Prior Year Development Favorable (Adverse)
2016	$	28		$	(28	)	$	(22	)	$	(10	)	$	(32	)
2015	7			10			(55		)	5			(33		)

Realized losses on subsidiaries in 2015 include a $166 million realized loss (consisting of an initial loss estimate of $162 million recorded in the first quarter and a $4 million loss adjustment in the fourth quarter) related to the impact of the sale of two subsidiaries, which contained substantially all of AFG’s long-term care insurance business. See Note B — “Acquisitions and Sale of Businesses.”

During the second quarter of 2016, AFG recorded a pretax charge of $65 million related to Neon’s claims review of its exited lines of business, including $57 million to increase loss reserves primarily related to its medical malpractice and general liability classes. Adverse prior year development for the third quarters of 2016 and 2015 include pretax special charges of $36 million and $67 million, respectively, to strengthen property and casualty insurance A&E reserves.

Results include pretax gains (included in other income) of $32 million from the sale of an apartment property in the second quarter of 2016, $51 million from the sale of a hotel in the second quarter of 2015 and $15 million from the sale of an apartment property in the fourth quarter of 2015.

Results for the third quarter of 2016 and 2015 include pretax special charges of $5 million and $12 million, respectively, to strengthen reserves for A&E exposures related to AFG’s former railroad and manufacturing operations.

Net earnings in the fourth quarter of 2016 includes $177 million in tax benefits related to the NATL merger and Neon restructuring. See Note L — “Income Taxes.”