Quarterly Operating Results (Unaudited)

12 Months Ended

Dec. 31, 2020

Quarterly Financial Information Disclosure [Abstract]

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, 2020 (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
2020
Revenues	$	1,275	$	1,951	$	2,060	$	2,623	$	7,909
Net earnings (loss), including noncontrolling interests	(304)		167		164		694		721
Net earnings (loss) attributable to shareholders	(301)		177		164		692		732
Earnings (loss) attributable to shareholders per Common Share:
Basic	$	(3.34)	$	1.98	$	1.86	$	7.99	$	8.25
Diluted	(3.34)		1.97		1.86		7.93		8.20
Average number of Common Shares:
Basic	90.3		89.7		88.2		86.6		88.7
Diluted	90.3		90.0		88.5		87.2		89.2
2019
Revenues	$	2,024	$	1,960	$	2,123	$	2,130	$	8,237
Net earnings (losses), including noncontrolling interests	326		209		143		191		869
Net earnings (losses) attributable to shareholders	329		210		147		211		897
Earnings (losses) attributable to shareholders per Common Share:
Basic	$	3.68	$	2.34	$	1.64	$	2.33	$	9.98
Diluted	3.63		2.31		1.62		2.31		9.85
Average number of Common Shares:
Basic	89.4		89.7		90.0		90.2		89.9
Diluted	90.7		91.0		91.1		91.3		91.0

Pretax realized gains (losses) on securities were as follows (in millions):


	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Total Year
2020 — change in fair value of equity securities	$	(535)	$	202	$	30	$	207	$	(96)
2020 — other realized gains (losses)	(16)		2		15		384		385
2019 — change in fair value of equity securities	182		44		(15)		67		278
2019 — other realized gains (losses)	2		12		(3)		(2)		9

Other realized gains in the fourth quarter of 2020 includes realized gains of $369 million (net of DPAC) on investments disposed of in AFG’s annuity block reinsurance transaction.

Net investment income, which includes mark-to-market income/(losses) on alternative investments (partnerships and similar investments), was as follows (in millions):


	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Total Year
2020 — net investment income before alternative investments	$	511	$	520	$	511	$	465	$	2,007
2020 — alternative investments	33		(52)		61		83		125
2019 — net investment income before alternative investments	516		531		531		545		2,123
2019 — alternative investments	26		49		57		48		180

The decline in net investment income before alternative investments in the fourth quarter of 2020 reflects primarily the disposition of fixed maturity investments in October 2020 related to the block reinsurance transaction.

FIAs provide policyholders with a crediting rate tied, in part, to the performance of an existing stock market or other financial index. AFG attempts to mitigate the risk in the index-based component of these products through the purchase and sale of call and put options on the appropriate index. AFG’s strategy is designed so that the change in the fair value of the call and put options will generally offset the economic change in the liabilities from the index participation. Both the index-based component of the annuities and the related call and put options are considered derivatives that must be marked-to-market through earnings each period. Fluctuations in interest rates and the stock market, among other factors, can cause volatility in the periodic measurement of these derivatives and other FIA liabilities over or under the cost of the equity index options purchased to mitigate the risk in the index-based component of those FIAs.

The impact of unlocking, changes in the fair value of derivatives related to FIAs, and other impacts of changes in the stock market and interest rates on the accounting for FIAs over or under the cost of the equity index options purchased to mitigate the risk in the index-based component of those FIAs, and beginning with the fourth quarter of 2020, the impact of the block reinsurance transaction entered into in October 2020 were as follows, net of the related acceleration/deceleration of the amortization of deferred policy acquisition costs and deferred sales inducements (in millions):


	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Total Year
2020	$	(38)	$	(59)	$	(43)	$	(48)	$	(188)
2019	(11)		(33)		(27)		24		(47)

Favorable prior year development of AFG’s liability for property and casualty losses and loss adjustment expenses (”LAE”) was as follows (in millions):


	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Total Year
2020	$	42	$	77	$	—	$	8	$	127
2019	45		41		12		45		143

Prior year development in the third quarters of 2020 and 2019 includes pretax special charges of $47 million and $18 million, respectively, to strengthen property and casualty insurance A&E reserves.

AFG’s property and casualty operations recorded catastrophe losses, including reinstatement premiums, as follows (in millions):


	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Total Year
2020	$	(9)	$	(26)	$	(57)	$	(38)	$	(130)
2019	(12)		(12)		(22)		(15)		(61)

Catastrophe losses include $37 million and $13 million in 2020 and 2019, respectively, at Neon.

AFG’s property and casualty operations recorded $10 million and $105 million in COVID-19 related losses in the first and second quarters of 2020, respectively, which includes $20 million at Neon.

Results for the third quarter of 2020 and 2019 include pretax special charges of $21 million and $11 million, respectively, to strengthen reserves for A&E exposures related to AFG’s former railroad and manufacturing operations.

AFG recorded pretax losses on the retirement of debt of $5 million in both the fourth quarter 2020 and 2019, respectively.