
	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized				Net Unrealized		Fair Value
					Gains		Losses
December 31, 2020
Fixed maturities:
U.S. Government and government agencies	$	231	$	—	$	11	$	—	$	11	$	242
States municipalities and political subdivisions	5,249		—		486		(2)		484		5,733
Foreign government	203		—		8		—		8		211
Residential MBS	2,812		3		251		(5)		246		3,055
Commercial MBS	748		—		43		(1)		42		790
Collateralized loan obligations	4,556		13		27		(17)		10		4,553
Other asset-backed securities	7,138		18		169		(66)		103		7,223
Corporate and other	19,471		6		1,962		(27)		1,935		21,400
Total fixed maturities	$	40,408	$	40	$	2,957	$	(118)	$	2,839	$	43,207

December 31, 2019
Fixed maturities:
U.S. Government and government agencies	$	199	$	—	$	10	$	—	$	10	$	209
States municipalities and political subdivisions	6,604		—		363		(4)		359		6,963
Foreign government	170		—		3		(1)		2		172
Residential MBS	2,900		—		265		(5)		260		3,160
Commercial MBS	896		—		31		—		31		927
Collateralized loan obligations	4,307		—		10		(37)		(27)		4,280
Other asset-backed securities	6,992		—		156		(20)		136		7,128
Corporate and other	22,456		—		1,231		(21)		1,210		23,666
Total fixed maturities	$	44,524	$	—	$	2,069	$	(88)	$	1,981	$	46,505


	2020						2019
					Fair Value						Fair Value
	Actual				over (under)		Actual				over (under)
	Cost		Fair Value		Cost		Cost		Fair Value		Cost
Common stocks	$	939	$	922	$	(17)	$	1,164	$	1,283	$	119
Perpetual preferred stocks	702		741		39		640		654		14
Total equity securities carried at fair value	$	1,641	$	1,663	$	22	$	1,804	$	1,937	$	133

The following tables show gross unrealized losses (dollars in millions) on available for sale fixed maturities by investment category and length of time that individual securities have been in a continuous unrealized loss position at the following balance sheet dates.


	Less Than Twelve Months						Twelve Months or More
	Unrealized Loss		Fair Value		Fair Value as % of Cost		Unrealized Loss		Fair Value		Fair Value as % of Cost

December 31, 2020
Fixed maturities:
U.S. Government and government agencies	$	—	$	23	100	%	$	—	$	—	—	%
States, municipalities and political subdivisions	(2)		117		98	%	—		11		100	%
Foreign government	—		7		100	%	—		—		—	%
Residential MBS	(4)		210		98	%	(1)		30		97	%
Commercial MBS	(1)		39		98	%	—		9		100	%
Collateralized loan obligations	(3)		673		100	%	(14)		1,599		99	%
Other asset-backed securities	(45)		1,440		97	%	(21)		388		95	%
Corporate and other	(22)		858		98	%	(5)		124		96	%
Total fixed maturities	$	(77)	$	3,367	98	%	$	(41)	$	2,161	98	%

December 31, 2019
Fixed maturities:
U.S. Government and government agencies	$	—	$	16	100	%	$	—	$	11	100	%
States, municipalities and political subdivisions	(3)		254		99	%	(1)		82		99	%
Foreign government	(1)		70		99	%	—		—		—	%
Residential MBS	(4)		509		99	%	(1)		69		99	%
Commercial MBS	—		17		100	%	—		—		—	%
Collateralized loan obligations	(11)		1,284		99	%	(26)		1,728		99	%
Other asset-backed securities	(12)		1,211		99	%	(8)		123		94	%
Corporate and other	(13)		1,100		99	%	(8)		211		96	%
Total fixed maturities	$	(44)	$	4,461	99	%	$	(44)	$	2,224	98	%

At December 31, 2020, the gross unrealized losses on fixed maturities of $118 million relate to 620 securities. Investment grade securities (as determined by nationally recognized rating agencies) represented approximately 76% of the gross unrealized loss and 88% of the fair value.

To evaluate fixed maturities for expected credit losses (impairment), management considers whether the unrealized loss is credit-driven or a result of changes in market interest rates, the extent to which fair value is less than cost basis, historical operating, balance sheet and cash flow data from the issuer, third party research and communications with industry specialists and discussions with issuer management.

AFG analyzes its MBS securities for expected credit losses (impairment) each quarter based upon expected future cash flows. Management estimates expected future cash flows based upon its knowledge of the MBS market, cash flow projections (which reflect loan to collateral values, subordination, vintage and geographic concentration) received from independent sources, implied cash flows inherent in security ratings and analysis of historical payment data.

See Note A — “Accounting Policies — Credit Losses on Financial Instruments,” for a discussion of new guidance effective January 1, 2020, which impacts the accounting for expected credit losses (impairments) of fixed maturity securities. Under the new guidance, credit losses on available for sale fixed maturities continue to be measured based on the present value of expected future cash flows compared to amortized cost; however, impairment losses are now recognized through an allowance instead of directly writing down the amortized cost. Under the new guidance, recoveries of previously impaired amounts are recorded as an immediate reversal of all or a portion of the allowance instead of accreted as investment income through a yield adjustment. In addition, the allowance on available for sale fixed maturities cannot cause the amortized cost net of the allowance to be below fair value. Accordingly, future changes in the fair value of an impaired security (when the allowance was limited by the fair value) due to reasons other than issuer credit (e.g. changes in market interest rates) result in increases or decreases in the allowance, which are recorded through realized gains (losses) on securities. A progression of the allowance for expected credit losses on fixed maturity securities is shown below (in millions):


	Structured securities (*)		Corporate and other		Total
Balance at January 1	$	—	$	—	$	—
Impact of adoption of new accounting policy	—		—		—
Initial allowance for purchased securities with credit deterioration	1		—		1
Provision for expected credit losses on securities with no previous allowance	40		28		68
Additions (reductions) to previously recognized expected credit losses	(6)		(16)		(22)
Reductions due to sales or redemptions	(1)		(6)		(7)
Balance at December 31	$	34	$	6	$	40

In 2020, AFG purchased two residential mortgage-backed securities with expected credit losses. In aggregate at the time of purchase, the par value was $8 million, the purchase price was $6 million and the allowance for credit losses and the discount were each $1 million.

The table below sets forth the scheduled maturities of available for sale fixed maturities as of December 31, 2020 (dollars in millions). Securities with sinking funds are reported at average maturity. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid by the issuers.


	Amortized		Fair Value
	Cost, net (*)		Amount		%
Maturity
One year or less	$	2,735	$	2,762	6	%
After one year through five years	10,344		11,149		26	%
After five years through ten years	9,298		10,570		25	%
After ten years	2,771		3,105		7	%
	25,148		27,586		64	%
Collateralized loan obligations and other ABS (average life of approximately 3-1/2 years)	11,663		11,776		27	%
MBS (average life of approximately 3-1/2 years)	3,557		3,845		9	%
Total	$	40,368	$	43,207	100	%

Certain risks are inherent in fixed maturity securities, including loss upon default, price volatility in reaction to changes in interest rates, and general market factors and risks associated with reinvestment of proceeds due to prepayments or redemptions in a period of declining interest rates.

Net Unrealized Gain on Marketable Securities In addition to adjusting fixed maturity securities classified as “available for sale” to fair value, GAAP requires that deferred policy acquisition costs and certain other balance sheet amounts related to annuity, long-term care and life businesses be adjusted to the extent that unrealized gains and losses from securities would result in adjustments to those balances had the unrealized gains or losses actually been realized.


	Pretax		Deferred Tax		Net
December 31, 2020
Net unrealized gain on:
Fixed maturities — annuity segment (*)	$	2,323	$	(488)	$	1,835
Fixed maturities — all other	516		(108)		408
Total fixed maturities	2,839		(596)		2,243
Deferred policy acquisition costs — annuity segment	(934)		196		(738)
Annuity benefits accumulated	(324)		68		(256)
Life, accident and health reserves	(3)		—		(3)
Unearned revenue	11		(2)		9
Total net unrealized gain on marketable securities	$	1,589	$	(334)	$	1,255

December 31, 2019
Net unrealized gain on:
Fixed maturities — annuity segment (*)	$	1,611	$	(338)	$	1,273
Fixed maturities — all other	370		(78)		292
Total fixed maturities	1,981		(416)		1,565
Deferred policy acquisition costs — annuity segment	(681)		143		(538)
Annuity benefits accumulated	(219)		46		(173)
Life, accident and health reserves	(1)		—		(1)
Unearned revenue	11		(2)		9
Total net unrealized gain on marketable securities	$	1,091	$	(229)	$	862


	2020		2019		2018
Investment income:
Fixed maturities	$	1,880	$	1,915	$	1,742
Equity securities:
Dividends	63		85		79
Change in fair value (a) (b)	24		39		22
Equity in earnings of partnerships and similar investments	98		154		161
Other	96		132		112
Gross investment income	2,161		2,325		2,116
Investment expenses	(29)		(22)		(22)
Net investment income (b)	$	2,132	$	2,303	$	2,094

(a)Although the change in the fair value of the majority of AFG’s equity securities is recorded in realized gains (losses) on securities, AFG records holding gains and losses in net investment income on equity securities classified as “trading” under previous guidance and on a small portfolio of limited partnership and similar investments that do not qualify for the equity method of accounting.

(b)Net investment income in 2020 includes losses of $5 million on investments held by the companies that comprise the Neon exited lines due primarily to the $7 million loss recorded in first quarter of 2020 on equity securities that are carried at fair value through net investment income.


	2020								2019
	Realized gains (losses)								Realized gains (losses)
	Before Impairments		Impairment (Allowance)		Total		Change in Unrealized		Before Impairments		Impairments		Total		Change in Unrealized
Fixed maturities (a)	$	468	$	(46)	$	422	$	858	$	26	$	(29)	$	(3)	$	1,821
Equity securities	(96)		—		(96)		—		277		—		277		—
Mortgage loans and other investments	4		—		4		—		3		—		3		—
Other (b)	(52)		11		(41)		(360)		—		10		10		(835)
Total pretax	324		(35)		289		498		306		(19)		287		986
Tax effects	(68)		7		(61)		(105)		(64)		4		(60)		(207)


Net of tax	$	256	$	(28)	$	228	$	393	$	242	$	(15)	$	227	$	779


	2018
	Realized gains (losses)
	Before Impairments		Impairments		Total		Change in Unrealized
Fixed maturities	$	6	$	(26)	$	(20)	$	(1,181)
Equity securities	(265)		—		(265)		—
Mortgage loans and other investments	1		—		1		—
Other (b)	11		7		18		502
Total pretax	(247)		(19)		(266)		(679)
Tax effects	52		4		56		143

Net of tax	$	(195)	$	(15)	$	(210)	$	(536)

All equity securities other than those accounted for under the equity method are carried at fair value through net earnings. AFG recorded net holding gains (losses) on equity securities during 2020, 2019 and 2018 on securities that were still owned at December 31 of each year presented as follows (in millions):