Income Taxes

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The following is a reconciliation of income taxes at the statutory rate of 21% to the provision for income taxes as shown in AFG’s Statement of Earnings (dollars in millions):

	Three months ended June 30,								Six months ended June 30,
	2020				2019				2020				2019
	Amount		% of EBT		Amount		% of EBT		Amount		% of EBT		Amount		% of EBT
Earnings (loss) before income taxes (“EBT”)	$	218			$	259			$	(170)			$	672
Income taxes at statutory rate	$	45	21	%	$	54	21	%	$	(36)	21	%	$	141	21	%
Effect of:
Tax exempt interest	(3)		(1	%)	(3)		(1	%)	(6)		4	%	(7)		(1	%)
Stock-based compensation	—		—	%	(2)		(1	%)	(4)		2	%	(4)		(1	%)
Dividends received deduction	—		—	%	(1)		—	%	(1)		1	%	(2)		—	%
Employee Stock Ownership Plan dividends paid deduction	—		—	%	(1)		—	%	—		—	%	(1)		—	%
Change in valuation allowance	9		4	%	1		—	%	11		(6	%)	3		—	%
Nondeductible expenses	—		—	%	2		1	%	2		(1	%)	4		1	%
Foreign operations	—		—	%	—		—	%	1		(1	%)	—		—	%
Other	—		(1	%)	—		(1	%)	—		(1	%)	3		—	%
Provision (credit) for income taxes as shown in the statement of earnings	$	51	23	%	$	50	19	%	$	(33)	19	%	$	137	20	%

The changes in valuation allowance in the table above are primarily increases in the valuation allowance on tax benefits related to losses in the Neon Lloyd’s insurance business. Approximately $23 million of AFG’s net operating loss carryforwards (“NOL”) subject to separate return limitation year (“SRLY”) tax rules will expire unutilized at December 31, 2020. Since AFG maintains a full valuation allowance against its SRLY NOLs, the expiration of these loss carryforwards will be offset by a corresponding reduction in the valuation allowance and will have no overall impact on AFG’s income tax expense or results of operations.