Leases

9 Months Ended

Sep. 30, 2019

AFG and its subsidiaries lease real estate that is primarily used for office space and, to a lesser extent, equipment under operating lease arrangements. Most of AFG’s real estate leases include an option to extend or renew the lease term at AFG’s option. The operating lease liability includes lease payments related to options to extend or renew the lease term if AFG is reasonably certain of exercising those options. Lease payments are discounted using the implicit discount rate in the lease. If the implicit discount rate for the lease cannot be readily determined, AFG uses an estimate of its incremental secured borrowing rate. AFG did not have any material contracts accounted for as finance leases at September 30, 2019 or January 1, 2019.

At September 30, 2019, AFG’s $162 million operating lease right-of-use asset (presented net of $22 million in deferred rent and lease incentives) and $184 million operating lease liability are included in other assets and other liabilities, respectively, in AFG’s Balance Sheet.

The following table details AFG’s lease activity for the quarter and nine months ended September 30, 2019 (in millions):



	Three months ended		Nine months ended
	September 30, 2019		September 30, 2019
Lease expense:
Operating leases	$	12	$	34
Short-term leases	—		1
Total lease expense	$	12	$	35

Other operating lease information for the nine months ended September 30, 2019 (in millions):



Cash paid for lease liabilities reported in operating cash flows	$	37
Right-of-use assets obtained under new leases	15

The following table presents the undiscounted contractual maturities of AFG’s operating lease liability at September 30, 2019 (in millions):



Operating lease payments:
Remainder of 2019	$	12
2020	45
2021	40
2022	31
2023	26
Thereafter	54
Total lease payments	208
Impact of discounting	(24		)
Operating lease liability	$	184



Weighted-average remaining lease term	5.6 years
Weighted-average discount rate	4.1	%