10-Q

____________________________________________________________________________________________

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2021

or

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ____ to ____

Commission File No. 1-13653

AMERICAN FINANCIAL GROUP, INC.

Incorporated under the Laws of Ohio                                                                IRS Employer I.D. No. 31-1544320

301 East Fourth Street, Cincinnati, Ohio 45202

(513) 579-2121

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the Registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months. Yes ☑ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☑                        Accelerated filer  ☐                         Non-accelerated filer  ☐

Smaller reporting company  ☐                   Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Securities Registered Pursuant to Section 12(b) of the Act:
	Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
	Common Stock	AFG	New York Stock Exchange
	5.875% Subordinated Debentures due March 30, 2059	AFGB	New York Stock Exchange
	5.625% Subordinated Debentures due June 1, 2060	AFGD	New York Stock Exchange
	5.125% Subordinated Debentures due December 15, 2059	AFGC	New York Stock Exchange
	4.50% Subordinated Debentures due September 15, 2060	AFGE	New York Stock Exchange

As of November 1, 2021, there were 84,807,882 shares of the Registrant’s Common Stock outstanding, excluding 14.9 million shares owned by subsidiaries.

____________________________________________________________________________________________

AMERICAN FINANCIAL GROUP, INC. 10-Q

TABLE OF CONTENTS

	Page
Part I — Financial Information
Item 1 — Financial Statements:
Consolidated Balance Sheet	2
Consolidated Statement of Earnings	3
Consolidated Statement of Comprehensive Income	4
Consolidated Statement of Changes in Equity	5
Consolidated Statement of Cash Flows	7
Notes to Consolidated Financial Statements	8
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3 — Quantitative and Qualitative Disclosure about Market Risk	80
Item 4 — Controls and Procedures	80
Part II — Other Information
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds	81
Item 6 — Exhibits	82
Signature	82

AMERICAN FINANCIAL GROUP, INC. 10-Q

PART I

ITEM 1. — FINANCIAL STATEMENTS

AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (UNAUDITED)

(Dollars in Millions)

	September 30, 2021		December 31, 2020
Assets:
Cash and cash equivalents	$	2,833	$	1,665
Investments:
Fixed maturities, available for sale at fair value (amortized cost — $10,211 and $8,812; allowance for expected credit losses of $9 and $12)	10,427		9,084
Fixed maturities, trading at fair value	29		24
Equity securities, at fair value	993		889
Investments accounted for using the equity method	1,407		1,235
Mortgage loans	537		377
Real estate and other investments	161		220
Total cash and investments	16,387		13,494
Recoverables from reinsurers	3,523		3,288
Prepaid reinsurance premiums	1,028		768
Agents’ balances and premiums receivable	1,492		1,229
Deferred policy acquisition costs	262		244
Assets of managed investment entities	5,130		4,971
Other receivables	1,097		678
Other assets	847		977
Goodwill	176		176
Assets of discontinued annuity operations	—		47,885
Total assets	$	29,942	$	73,710
Liabilities and Equity:
Unpaid losses and loss adjustment expenses	$	10,991	$	10,392
Unearned premiums	3,415		2,803
Payable to reinsurers	1,146		807
Liabilities of managed investment entities	5,034		4,914
Long-term debt	1,964		1,963
Other liabilities	2,152		1,584
Liabilities of discontinued annuity operations	—		44,458
Total liabilities	24,702		66,921
Shareholders’ equity:
Common Stock, no par value        — 200,000,000 shares authorized        — 84,795,008 and 86,345,246 shares outstanding	85		86
Capital surplus	1,315		1,281
Retained earnings	3,680		4,149
Accumulated other comprehensive income, net of tax	160		1,273
Total shareholders’ equity	5,240		6,789
Noncontrolling interests	—		—
Total equity	5,240		6,789
Total liabilities and equity	$	29,942	$	73,710

2

AMERICAN FINANCIAL GROUP, INC. 10-Q

AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)

(In Millions, Except Per Share Data)

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Revenues:
Property and casualty insurance net earned premiums	$	1,529	$	1,381	$	3,952	$	3,774
Net investment income	169		122		521		314
Realized gains (losses) on:
Securities	(17)		23		103		(197)
Subsidiaries	—		(30)		4		(30)
Income of managed investment entities:
Investment income	45		46		135		154
Gain (loss) on change in fair value of assets/liabilities	1		(5)		9		(21)
Other income	27		19		70		62
Total revenues	1,754		1,556		4,794		4,056
Costs and Expenses:
Property and casualty insurance:
Losses and loss adjustment expenses	954		963		2,335		2,441
Commissions and other underwriting expenses	417		406		1,187		1,235
Interest charges on borrowed money	24		24		71		64
Expenses of managed investment entities	37		34		115		129
Other expenses	55		89		196		192
Total costs and expenses	1,487		1,516		3,904		4,061
Earnings (loss) from continuing operations before income taxes	267		40		890		(5)
Provision (credit) for income taxes	48		(48)		164		(52)
Net earnings from continuing operations, including noncontrolling interests	219		88		726		47
Net earnings (loss) from discontinued operations	—		76		914		(20)
Net earnings, including noncontrolling interests	219		164		1,640		27
Less: Net earnings (loss) from continuing operations attributable to noncontrolling interests	—		—		—		(13)
Net Earnings Attributable to Shareholders	$	219	$	164	$	1,640	$	40
Earnings (Loss) Attributable to Shareholders per Basic Common Share from:
Continuing operations	$	2.57	$	1.00	$	8.52	$	0.67
Discontinued operations	—		0.86		10.72		(0.22)
Total basic earnings attributable to shareholders	$	2.57	$	1.86	$	19.24	$	0.45
Earnings (Loss) Attributable to Shareholders per Diluted Common Share:
Continuing operations	$	2.56	$	1.00	$	8.45	$	0.66
Discontinued operations	—		0.86		10.66		(0.21)
Total diluted earnings attributable to shareholders	$	2.56	$	1.86	$	19.11	$	0.45
Average number of Common Shares:
Basic	84.8		88.2		85.2		89.4
Diluted	85.2		88.5		85.8		89.9

3

AMERICAN FINANCIAL GROUP, INC. 10-Q

AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

(In Millions)

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Net earnings, including noncontrolling interests	$	219	$	164	$	1,640	$	27
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities:
Unrealized holding gains (losses) on securities arising during the period	(29)		194		(177)		350
Reclassification adjustment for realized (gains) losses included in net earnings	2		(12)		(16)		—
Reclassification adjustment for unrealized gains of subsidiaries sold	—		—		(884)		—
Total net unrealized gains (losses) on securities	(27)		182		(1,077)		350
Net unrealized gains (losses) on cash flow hedges:
Unrealized holding gains (losses) on cash flow hedges arising during the period	—		1		(1)		49
Reclassification adjustment for investment income included in net earnings	—		(7)		(11)		(25)
Reclassification adjustment for unrealized gains on cash flow hedges of subsidiaries sold	—		—		(29)		—
Total net unrealized gains (losses) on cash flow hedges	—		(6)		(41)		24
Foreign currency translation adjustments	(3)		—		(3)		(6)
Pension and other postretirement plans adjustments (“OPRP”):
Unrealized holding losses on pension and OPRP arising during the period	—		—		(1)		—
Reclassification adjustment for pension settlement loss included in net earnings	—		—		9		—
Total pension and OPRP adjustments	—		—		8		—
Other comprehensive income (loss), net of tax	(30)		176		(1,113)		368
Total comprehensive income, net of tax	189		340		527		395
Less: Comprehensive income (loss) attributable to noncontrolling interests	—		—		—		(11)
Comprehensive income attributable to shareholders	$	189	$	340	$	527	$	406

4

AMERICAN FINANCIAL GROUP, INC. 10-Q

AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

(Dollars in Millions)

		Shareholders’ Equity
						Accumulated
	Common	Common Stock and Capital		Retained		Other  Comprehensive				Noncontrolling		Total
	Shares	Surplus		Earnings		Income		Total		Interests		Equity
Balance at June 30, 2021	84,713,927	$	1,388	$	4,023	$	190	$	5,601	$	—	$	5,601
Net earnings	—	—		219		—		219		—		219
Other comprehensive loss	—	—		—		(30)		(30)		—		(30)
Dividends ($6.50 per share)	—	—		(551)		—		(551)		—		(551)
Shares issued:
Exercise of stock options	153,842	6		—		—		6		—		6
Restricted stock awards	—	—		—		—		—		—		—
Other benefit plans	17,029	2		—		—		2		—		2
Dividend reinvestment plan	6,272	1		—		—		1		—		1
Stock-based compensation expense	—	4		—		—		4		—		4
Shares acquired and retired	(94,960)	(1)		(11)		—		(12)		—		(12)
Shares exchanged — benefit plans	(562)	—		—		—		—		—		—
Forfeitures of restricted stock	(540)	—		—		—		—		—		—
Balance at September 30, 2021	84,795,008	$	1,400	$	3,680	$	160	$	5,240	$	—	$	5,240
Balance at June 30, 2020	88,659,407	$	1,388	$	3,685	$	1,053	$	6,126	$	—	$	6,126
Net earnings	—	—		164		—		164		—		164
Other comprehensive income	—	—		—		176		176		—		176
Dividends ($0.45 per share)	—	—		(39)		—		(39)		—		(39)
Shares issued:
Exercise of stock options	19,865	1		—		—		1		—		1
Restricted stock awards	—	—		—		—		—		—		—
Other benefit plans	38,822	2		—		—		2		—		2
Dividend reinvestment plan	2,901	1		—		—		1		—		1
Stock-based compensation expense	—	5		—		—		5		—		5
Shares acquired and retired	(1,447,588)	(23)		(73)		—		(96)		—		(96)
Shares exchanged — benefit plans	(1,337)	—		—		—		—		—		—
Forfeitures of restricted stock	(5,488)	—		—		—		—		—		—
Other	—	(4)		—		4		—		—		—
Balance at September 30, 2020	87,266,582	$	1,370	$	3,737	$	1,233	$	6,340	$	—	$	6,340

5

AMERICAN FINANCIAL GROUP, INC. 10-Q

AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) — CONTINUED

(Dollars in Millions)

		Shareholders’ Equity												Redeemable
	Common	Common Stock and Capital		Retained		Accumulated Other Comp.				Noncon- trolling		Total		Noncon- trolling
	Shares	Surplus		Earnings		Income		Total		Interests		Equity		Interests
Balance at December 31, 2020	86,345,246	$	1,367	$	4,149	$	1,273	$	6,789	$	—	$	6,789
Net earnings	—	—		1,640		—		1,640		—		1,640
Other comprehensive loss	—	—		—		(1,113)		(1,113)		—		(1,113)
Dividends ($21.50 per share)	—	—		(1,826)		—		(1,826)		—		(1,826)
Shares issued:
Exercise of stock options	1,118,586	55		—		—		55		—		55
Restricted stock awards	207,020	—		—		—		—		—		—
Other benefit plans	60,494	7		—		—		7		—		7
Dividend reinvestment plan	42,926	5		—		—		5		—		5
Stock-based compensation expense	—	11		—		—		11		—		11
Shares acquired and retired	(2,769,182)	(44)		(274)		—		(318)		—		(318)
Shares exchanged — benefit plans	(91,926)	(1)		(9)		—		(10)		—		(10)
Forfeitures of restricted stock	(118,156)	—		—		—		—		—		—
Balance at September 30, 2021	84,795,008	$	1,400	$	3,680	$	160	$	5,240	$	—	$	5,240
Balance at December 31, 2019	90,303,686	$	1,397	$	4,009	$	863	$	6,269	$	—	$	6,269	$	—
Cumulative effect of accounting change	—	—		7		—		7		—		7		—
Net earnings (loss)	—	—		40		—		40		—		40		(13)
Other comprehensive income	—	—		—		366		366		—		366		2
Dividends ($1.35 per share)	—	—		(120)		—		(120)		—		(120)		—
Shares issued:
Exercise of stock options	229,208	10		—		—		10		—		10		—
Restricted stock awards	227,867	—		—		—		—		—		—		—
Other benefit plans	105,318	7		—		—		7		—		7		—
Dividend reinvestment plan	7,251	1		—		—		1		—		1		—
Stock-based compensation expense	—	15		—		—		15		—		15		—
Shares acquired and retired	(3,468,107)	(54)		(179)		—		(233)		—		(233)		—
Shares exchanged — benefit plans	(97,731)	(2)		(9)		—		(11)		—		(11)		—
Forfeitures of restricted stock	(40,910)	—		—		—		—		—		—		—
Other	—	(4)		(11)		4		(11)		—		(11)		11
Balance at September 30, 2020	87,266,582	$	1,370	$	3,737	$	1,233	$	6,340	$	—	$	6,340	$	—

6

AMERICAN FINANCIAL GROUP, INC. 10-Q

AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

(In Millions)

	Nine months ended September 30,
	2021		2020
Operating Activities:
Net earnings, including noncontrolling interests	$	1,640	$	27
Adjustments:
Depreciation and amortization	160		248
Annuity benefits	377		905
Realized (gains) losses on investing activities	(1,111)		332
Net (purchases) sales of trading securities	(6)		18
Deferred annuity and life policy acquisition costs	(98)		(112)
Change in:
Reinsurance and other receivables	(987)		(597)
Other assets	238		120
Insurance claims and reserves	1,204		702
Payable to reinsurers	339		163
Other liabilities	88		(220)
Managed investment entities’ assets/liabilities	(78)		99
Other operating activities, net	(341)		11
Net cash provided by operating activities	1,425		1,696
Investing Activities:
Purchases of:
Fixed maturities	(6,907)		(7,817)
Equity securities	(110)		(354)
Mortgage loans	(179)		(197)
Equity index options and other investments	(313)		(699)
Real estate, property and equipment	(53)		(41)
Proceeds from:
Maturities and redemptions of fixed maturities	4,075		4,114
Repayments of mortgage loans	27		48
Sales of fixed maturities	690		3,123
Sales of equity securities	462		421
Sales and settlements of equity index options and other investments	562		673
Sales of real estate, property and equipment	25		7
Sales of businesses	3,547		—
Cash and cash equivalents of businesses sold	(2,060)		—
Managed investment entities:
Purchases of investments	(1,480)		(878)
Proceeds from sales and redemptions of investments	1,579		818
Other investing activities, net	32		10
Net cash used in investing activities	(103)		(772)
Financing Activities:
Annuity receipts	2,403		2,968
Ceded annuity receipts	(311)		(246)
Annuity surrenders, benefits and withdrawals	(1,931)		(2,506)
Ceded annuity surrenders, benefits and withdrawals	282		—
Net transfers from variable annuity assets	34		44
Additional long-term borrowings	—		635
Issuances of managed investment entities’ liabilities	1,665		30
Retirements of managed investment entities’ liabilities	(1,701)		(79)
Issuances of Common Stock	60		15
Repurchases of Common Stock	(318)		(233)
Cash dividends paid on Common Stock	(1,482)		(119)
Net cash provided by (used in) financing activities	(1,299)		509
Net Change in Cash and Cash Equivalents	23		1,433
Cash and cash equivalents at beginning of period	2,810		2,314
Cash and cash equivalents at end of period	$	2,833	$	3,747

7

AMERICAN FINANCIAL GROUP, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

INDEX TO NOTES
A.	Accounting Policies	H.	Goodwill and Other Intangibles
B.	Discontinued Operations	I.	Long-Term Debt
C.	Sales of Businesses	J.	Shareholders’ Equity
D.	Segments of Operations	K.	Income Taxes
E.	Fair Value Measurements	L.	Contingencies
F.	Investments	M.	Insurance
G.	Managed Investment Entities

A.    Accounting Policies

Basis of Presentation   The accompanying consolidated financial statements for American Financial Group, Inc. and its subsidiaries (“AFG”) are unaudited; however, management believes that all adjustments (consisting only of normal recurring accruals unless otherwise disclosed herein) necessary for fair presentation have been made. The results of operations for interim periods are not necessarily indicative of results to be expected for the year. The financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary to be in conformity with U.S. generally accepted accounting principles (“GAAP”).

Certain reclassifications have been made to prior periods to conform to the current year’s presentation including reclassifying the assets and liabilities of the Annuity subsidiaries sold in May 2021 to assets and liabilities of discontinued annuity operations and their earnings to net earnings (loss) from discontinued operations. See Note B — “Discontinued Operations.” All significant intercompany balances and transactions have been eliminated. The results of operations of companies since their formation or acquisition are included in the consolidated financial statements. Events or transactions occurring subsequent to September 30, 2021, and prior to the filing of this Form 10-Q, have been evaluated for potential recognition or disclosure herein.

Unless otherwise stated, the information in the Notes to the Consolidated Financial Statements relates to AFG’s continuing operations.

The preparation of the financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Changes in circumstances could cause actual results to differ materially from those estimates.

Discontinued Operations   Disposals of components of an entity that represent a strategic shift and that have a major effect on a reporting entity’s operations and financial results are reported as discontinued operations.

Fair Value Measurements   Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. The standards establish a hierarchy of valuation techniques based on whether the assumptions that market participants would use in pricing the asset or liability (“inputs”) are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect AFG’s assumptions about the assumptions market participants would use in pricing the asset or liability. AFG did not have any material nonrecurring fair value measurements in the first nine months of 2021.

Credit Losses on Financial Instruments   On January 1, 2020, AFG adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which provides a new loss model for determining credit-related impairments for financial instruments measured at amortized cost (mortgage loans, premiums receivable and reinsurance recoverables) and requires an entity to estimate the credit losses expected over the life of an exposure or pool of exposures. The estimate of expected credit losses considers historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. Expected credit losses, and subsequent increases or decreases in such expected losses, are recorded immediately through net earnings as an allowance that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the balance sheet at the amount expected to be collected. At the date of adoption, the impact of adjusting AFG’s existing allowances for uncollectable mortgage loans, premiums receivable and reinsurance recoverables to the allowances calculated under the new guidance resulted in a reduction in the net

8

AMERICAN FINANCIAL GROUP, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

allowance, which was recorded as the cumulative effect of an accounting change ($7 million increase in retained earnings at January 1, 2020).

The updated guidance also amended the other-than-temporary impairment model for available for sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. Subsequent increases or decreases in expected credit losses are recorded immediately in net earnings through realized gains (losses).

Investments   Equity securities other than those accounted for under the equity method are reported at fair value with holding gains and losses generally recorded in realized gains (losses) on securities. However, AFG records holding gains and losses on securities classified as “trading” under previous guidance, its small portfolio of limited partnerships and similar investments carried at fair value and certain other securities classified at purchase as “fair value through net investment income” in net investment income.

Fixed maturity securities classified as “available for sale” are reported at fair value with unrealized gains and losses included in accumulated other comprehensive income (“AOCI”) in AFG’s Balance Sheet. Fixed maturity securities classified as “trading” are reported at fair value with changes in unrealized holding gains or losses during the period included in net investment income. Mortgage loans (net of any allowance) are carried primarily at the aggregate unpaid balance.

Premiums and discounts on fixed maturity securities are amortized using the effective interest method. Mortgage-backed securities (“MBS”) are amortized over a period based on estimated future principal payments, including prepayments. Prepayment assumptions are reviewed periodically and adjusted to reflect actual prepayments and changes in expectations.

Limited partnerships and similar investments are generally accounted for using the equity method of accounting. Under the equity method, AFG records its share of the earnings or losses of the investee based on when it is reported by the investee in its financial statements rather than in the period in which the investee declares a dividend. AFG’s share of the earnings or losses from equity method investments is generally recorded on a quarter lag due to the timing of the receipt of the investee’s financial statements. AFG’s equity in the earnings (losses) of limited partnerships and similar investments is included in net investment income.

Realized gains or losses on the disposal of fixed maturity securities are determined on the specific identification basis. When a decline in the value of an available for sale fixed maturity is considered to be other-than-temporary at the balance sheet date, an allowance for credit losses (impairment), including any write-off of accrued interest, is charged to earnings (included in realized gains (losses) on securities). If management can assert that it does not intend to sell the security and it is not more likely than not that it will have to sell it before recovery of its amortized cost basis (net of allowance), then the impairment is separated into two components: (i) the allowance related to credit losses (recorded in earnings) and (ii) the amount related to all other factors (recorded in other comprehensive income). The credit-related portion is measured by comparing a security’s amortized cost to the present value of its current expected cash flows discounted at its effective yield prior to the charge. If management intends to sell an impaired security, or it is more likely than not that it will be required to sell the security before recovery, an impairment is recorded in earnings to reduce the amortized cost (net of allowance) of that security to fair value.

Goodwill   Goodwill represents the excess of cost of subsidiaries over AFG’s equity in their underlying net assets at the date of acquisition. Goodwill is not amortized, but is subject to an impairment test at least annually. An entity is not required to complete the quantitative annual goodwill impairment test on a reporting unit if the entity elects to perform a qualitative analysis and determines that it is more likely than not that the reporting unit’s fair value exceeds its carrying amount.

Reinsurance   Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policies. AFG reports as assets (i) the estimated reinsurance recoverable on paid and unpaid losses, including an estimate for losses incurred but not reported, and (ii) amounts paid or due to reinsurers applicable to the unexpired terms of policies in force. Payable to reinsurers includes ceded premiums due to reinsurers, as well as ceded premiums retained by AFG under contracts to fund ceded losses as they become due. AFG also assumes reinsurance from other companies. Earnings on reinsurance assumed is recognized based on information received from ceding companies.

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AMERICAN FINANCIAL GROUP, INC. 10-Q

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Deferred Policy Acquisition Costs (“DPAC”)   Policy acquisition costs (principally commissions, premium taxes and certain underwriting and policy issuance costs) directly related to the successful acquisition or renewal of an insurance contract are deferred. DPAC is limited based upon recoverability without any consideration for anticipated investment income and is charged against income ratably over the terms of the related policies. A premium deficiency is recognized if the sum of expected claims costs, claims adjustment expenses and unamortized acquisition costs exceed the related unearned premiums. A premium deficiency is first recognized by charging any unamortized acquisition costs to expense to the extent required to eliminate the deficiency. If the premium deficiency is greater than unamortized acquisition costs, a liability is accrued for the excess deficiency and reported with unpaid losses and loss adjustment expenses.

Managed Investment Entities   A company is considered the primary beneficiary of, and therefore must consolidate, a variable interest entity (“VIE”) based primarily on its ability to direct the activities of the VIE that most significantly impact that entity’s economic performance and the obligation to absorb losses of, or receive benefits from, the entity that could potentially be significant to the VIE.

AFG manages, and has investments in, collateralized loan obligations (“CLOs”) that are VIEs (see Note G — “Managed Investment Entities”). AFG has determined that it is the primary beneficiary of these CLOs because (i) its role as asset manager gives it the power to direct the activities that most significantly impact the economic performance of the CLOs and (ii) through its investment in the CLO debt tranches, it has exposure to CLO losses (limited to the amount AFG invested) and the right to receive CLO benefits that could potentially be significant to the CLOs.

Because AFG has no right to use the CLO assets and no obligation to pay the CLO liabilities, the assets and liabilities of the CLOs are shown separately in AFG’s Balance Sheet. AFG has elected the fair value option for reporting on the CLO assets and liabilities to improve the transparency of financial reporting related to the CLOs. The net gain or loss from accounting for the CLO assets and liabilities at fair value is presented separately in AFG’s Statement of Earnings.

The fair values of a CLO’s assets may differ from the separately measured fair values of its liabilities even though the CLO liabilities only have recourse to the CLO assets. AFG has set the carrying value of the CLO liabilities equal to the fair value of the CLO assets (which have more observable fair values) as an alternative to reporting those liabilities at a separately measured fair value. CLO earnings attributable to AFG’s shareholders are measured by the change in the fair value of AFG’s investments in the CLOs and management fees earned.

At September 30, 2021, assets and liabilities of managed investment entities included $171 million in assets and $131 million in liabilities of a temporary warehousing entity that was established in connection with the formation of a new CLO that is expected to close in the fourth quarter of 2021. At closing, all warehoused assets will be transferred to the new CLO and the liabilities will be repaid.

Unpaid Losses and Loss Adjustment Expenses   The net liabilities stated for unpaid claims and for expenses of investigation and adjustment of unpaid claims represent management’s best estimate and are based upon (i) the accumulation of case estimates for losses reported prior to the close of the accounting period on direct business written; (ii) estimates received from ceding reinsurers and insurance pools and associations; (iii) estimates of unreported losses (including possible development on known claims) based on past experience; (iv) estimates based on experience of expenses for investigating and adjusting claims; and (v) the current state of the law and coverage litigation. Establishing reserves for asbestos, environmental and other mass tort claims involves considerably more judgment than other types of claims due to, among other things, inconsistent court decisions, an increase in bankruptcy filings as a result of asbestos-related liabilities, novel theories of coverage, and judicial interpretations that often expand theories of recovery and broaden the scope of coverage.

Loss reserve liabilities are subject to the impact of changes in claim amounts and frequency and other factors. Changes in estimates of the liabilities for losses and loss adjustment expenses are reflected in the statement of earnings in the period in which determined. Despite the variability inherent in such estimates, management believes that the liabilities for unpaid losses and loss adjustment expenses are adequate.

Debt Issuance Costs   Debt issuance costs related to AFG’s outstanding debt are presented in its Balance Sheet as a direct reduction in the carrying value of long-term debt and are amortized over the life of the related debt using the effective interest method as a component of interest expense. Debt issuance costs related to AFG’s revolving credit facilities are included in other assets in AFG’s Balance Sheet.

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AMERICAN FINANCIAL GROUP, INC. 10-Q

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Leases   Leases for terms of longer than one year are recognized as assets and liabilities for the rights and obligations created by those leases on the balance sheet based on the present value of contractual cash flows.

At September 30, 2021 AFG has a $136 million lease liability included in other liabilities and a lease right-of-use asset of $118 million included in other assets compared to $159 million and $139 million, respectively, at December 31, 2020.

Noncontrolling Interests   For balance sheet purposes, noncontrolling interests represent the interests of shareholders other than AFG in consolidated entities. In the statement of earnings, net earnings and losses attributable to noncontrolling interests represents such shareholders’ interest in the earnings and losses of those entities.

Premium Recognition   Property and casualty premiums are earned generally over the terms of the policies on a pro rata basis. Unearned premiums represent that portion of premiums written, which is applicable to the unexpired terms of policies in force. On reinsurance assumed from other insurance companies or written through various underwriting organizations, unearned premiums are based on information received from such companies and organizations.

Income Taxes   Deferred income taxes are calculated using the liability method. Under this method, deferred income tax assets and liabilities are determined based on differences between financial reporting and tax bases and are measured using enacted tax rates. A valuation allowance is established to reduce total deferred tax assets to an amount that will more likely than not be realized. The effect of a change in tax rates on deferred tax assets and liabilities is recorded in net earnings in the period that includes the enactment date.

AFG recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained under examination by the appropriate taxing authority. Interest and penalties on AFG’s reserve for uncertain tax positions are recognized as a component of tax expense.

Stock-Based Compensation   All share-based grants are recognized as compensation expense on a straight-line basis over their vesting periods based on their calculated fair value at the date of grant.

AFG records excess tax benefits or deficiencies for share-based payments through income tax expense in the statement of earnings. In addition, AFG accounts for forfeitures of awards when they occur.

Benefit Plans   AFG provides retirement benefits to qualified employees of participating companies through the AFG 401(k) Retirement and Savings Plan, a defined contribution plan. AFG makes all contributions to the retirement fund portion of the plan and matches a percentage of employee contributions to the savings fund. Company contributions are expensed in the year for which they are declared. AFG and many of its subsidiaries provide health care and life insurance benefits to eligible retirees. AFG also provides postemployment benefits to former or inactive employees (primarily those on disability) who were not deemed retired under other company plans. The projected future cost of providing these benefits is expensed over the period employees earn such benefits.

Earnings Per Share   Although basic earnings per share only considers shares of common stock outstanding during the period, the calculation of diluted earnings per share includes the following adjustments to weighted average common shares related to stock-based compensation plans: third quarter of 2021 and 2020 — 0.4 million and 0.3 million; first nine months of 2021 and 2020 — 0.6 million and 0.5 million.

There were no anti-dilutive potential common shares for the third quarter or the first nine months of 2021 or 2020.

Statement of Cash Flows   For cash flow purposes, “investing activities” are defined as making and collecting loans and acquiring and disposing of debt or equity instruments, property and equipment and businesses. “Financing activities” include obtaining resources from owners and providing them with a return on their investments, borrowing money and repaying amounts borrowed. All other activities are considered “operating.” Short-term investments having original maturities of three months or less when purchased are considered to be cash equivalents for purposes of the financial statements.

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B.    Discontinued Operations

Annuity Business   On May 28, 2021, AFG completed the sale of its Annuity business to Massachusetts Mutual Life Insurance Company (“MassMutual”) with an effective date of May 31, 2021. MassMutual acquired Great American Life Insurance Company (“GALIC”) and its two insurance subsidiaries, Annuity Investors Life Insurance Company and Manhattan National Life Insurance Company. In addition to AFG’s annuity operations, these subsidiaries included AFG’s run-off life and long-term care operations. Proceeds from the sale were $3.57 billion (including $34 million in preliminary post-closing adjustments). AFG realized a $656 million net gain on the sale. The sale continues to be subject to tax-related post-closing adjustments, which are not expected to be material and are expected to be settled in 2022. Beginning with the first quarter of 2021, the results of the Annuity business sold were reported as discontinued operations in accordance with generally accepted accounting principles, which included adjusting prior period results to reflect these operations as discontinued.

Prior to the sale, AFG acquired approximately $480 million in investments accounted for using the equity method and approximately $100 million of directly owned real estate from GALIC.

Details of the assets and liabilities of the Annuity subsidiaries sold were as follows (in millions):

	May 31, 2021		December 31, 2020
Assets of businesses sold:
Cash and cash equivalents	$	2,060	$	1,145
Investments	38,323		38,011
Recoverables from reinsurers	6,748		6,804
Other assets	2,152		1,925
Total assets of discontinued annuity operations	49,283		47,885
Liabilities of businesses sold:
Annuity benefits accumulated	43,690		42,573
Other liabilities	1,813		1,885
Total liabilities of discontinued annuity operations	45,503		44,458
Receivable from AFG for real estate-related investments	—		537
Reclassify AOCI	(913)		(1,071)
Net investment in annuity businesses sold, excluding AOCI	$	2,867	$	2,893

Details of the results of operations for the discontinued annuity operations were (in millions):

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021 (*)		2020
Net investment income	$	—	$	459	$	746	$	1,256
Realized gains (losses) on securities	—		22		112		(105)
Other income	—		26		52		91
Total revenues	—		507		910		1,242
Annuity benefits	—		203		377		905
Annuity and supplemental insurance acquisition expenses	—		172		136		250
Other expenses	—		38		73		118
Total costs and expenses	—		413		586		1,273
Earnings (loss) before income taxes from discontinued operations	—		94		324		(31)
Provision (credit) for income taxes on operations	—		18		66		(11)
Net earnings (loss) from operations, net of tax	—		76		258		(20)
Gain on sale, net of tax	—		—		656		—
Net earnings (loss) from discontinued operations	$	—	$	76	$	914	$	(20)

(*)Results through the May 31, 2021 effective date of the sale.

Net investment income in the table above excludes $10 million in the third quarter of 2020, and $51 million and $29 million in first nine months of 2021 and 2020, respectively, related to the real estate-related entities that AFG acquired from the discontinued annuity operations prior to the completion of the sale.

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The impact of the sale of the annuity business is shown below (in millions):

	May 31, 2021
Cash proceeds	$	3,537
Receivable from MassMutual	34
Sale related expenses	(8)
Total net proceeds	3,563
Net investment in annuity businesses sold, excluding AOCI	2,867
Reclassify net deferred tax asset	(199)
Pretax gain on sale	895
Income tax expense:
Reclassify net deferred tax asset	199
Tax liabilities triggered by pending sale in the first quarter of 2021	41
Other	(1)
Total income tax expense	239
Net gain on sale	$	656

Summarized cash flows for the discontinued annuity operations were (in millions):

	Nine months ended September 30,
	2021		2020
Net cash provided by operating activities	$	87	$	904
Net cash used in investing activities	(1,709)		(440)
Net cash provided by financing activities	477		260

Derivatives   The vast majority of AFG’s derivatives were held by the sold annuity subsidiaries. The following table summarizes the gains (losses) included in net earnings (loss) from discontinued operations for changes in the fair value of derivatives that do not qualify for hedge accounting for the first nine months of 2021 and 2020 (in millions):

	Three months ended September 30,				Nine months ended September 30,
Derivative	2021		2020		2021 (*)		2020
MBS with embedded derivatives	$	—	$	(3)	$	(1)	$	2
Fixed-indexed and variable-indexed annuities (embedded derivative)	—		(5)		(222)		41
Equity index call options	—		203		237		(42)
Equity index put options	—		2		5		1
Reinsurance contract (embedded derivative)	—		1		1		—
	$	—	$	198	$	20	$	2

(*)Through the May 31, 2021 effective date of the sale.

C.    Sales of Businesses

Annuity Operations   See Note B — “Discontinued Operations,” for information on the sale of AFG’s annuity operations.

Neon   In December 2019, AFG initiated actions to exit the Lloyd’s of London insurance market, which included placing Neon Underwriting Ltd. and its other Lloyd’s subsidiaries in run-off. Neon and its predecessor, Marketform, failed to achieve AFG’s profitability objectives since AFG’s purchase of Marketform in 2008. In December 2020, AFG completed the sale of GAI Holding Bermuda and its subsidiaries, comprising the legal entities that own Neon, to RiverStone Holdings Limited for proceeds of $6 million. The sale completed AFG’s exit from the Lloyd’s of London insurance market. In the second quarter of 2021, AFG recognized a pretax gain on sale of a subsidiary of $4 million related to contingent consideration received on the sale of Neon.

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AMERICAN FINANCIAL GROUP, INC. 10-Q

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Under GAAP accounting guidance, only disposals of components of an entity that represent a strategic shift and that have a major effect on a reporting entity’s operations and financial results are reported as discontinued operations. Because AFG’s primary business continues to be commercial property and casualty insurance, as well as the immaterial expected impact on AFG’s ongoing results of operations, the sale of Neon was not reported as a discontinued operation.

An estimated loss of $30 million on the sale of Neon was recorded in AFG’s financial statements as of September 30, 2020 as shown below (in millions):

Estimated sale proceeds, net of expenses	$	4
Assets of businesses to be sold:
Cash and investments	$	461
Recoverables from reinsurers	198
Prepaid reinsurance premiums	30
Agents’ balances and premiums receivable	48
Other assets	73
Total assets	810
Liabilities of businesses to be sold:
Unpaid losses and loss adjustment expenses	598
Unearned premiums	83
Payable to reinsurers	39
Other liabilities	47
Total liabilities	767
Reclassify accumulated other comprehensive income	(9)
Net assets of businesses to be sold	$	34
Pretax loss on subsidiaries recorded in the third quarter of 2020	$	(30)

Revenues, costs and expenses, and earnings before income taxes for the subsidiaries sold were (in millions):

	Three months ended		Nine months ended
	September 30, 2020		September 30, 2020
Net earned premiums	$	42	$	174
Loss and loss adjustment expenses	60		166
Commissions and other underwriting expenses	20		90
Underwriting loss	(38)		(82)
Net investment income	1		(5)
Other income and expenses, net	(3)		(5)
Loss before income taxes and noncontrolling interests	$	(40)	$	(92)

D.    Segments of Operations

Subsequent to the sale of its annuity operations, see Note B — “Discontinued Operations,” AFG manages its business as two segments: Property and casualty insurance and Other, which includes holding company costs and operations attributable to the noncontrolling interests of the managed investment entities.

AFG reports its property and casualty insurance business in the following Specialty sub-segments: (i) Property and transportation, which includes physical damage and liability coverage for buses and trucks, inland and ocean marine, agricultural-related products and other commercial property coverages, (ii) Specialty casualty, which includes primarily excess and surplus, executive and professional liability, general liability, umbrella and excess liability, specialty coverages in targeted markets, customized programs for small to mid-sized businesses and workers’ compensation insurance, and (iii) Specialty financial, which includes risk management insurance programs for lending and leasing institutions (including equipment leasing and collateral and lender-placed mortgage property insurance), fidelity and surety products and trade credit insurance. Premiums and underwriting profit included under Other specialty represent business assumed by AFG’s internal reinsurance program from the operations that make up AFG’s other Specialty sub-segments and amortization of

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deferred gains on retroactive reinsurance transactions related to the sales of businesses in prior years. AFG’s reportable segments and their components were determined based primarily upon similar economic characteristics, products and services.

The following tables (in millions) show AFG’s revenues and earnings (loss) from continuing operations before income taxes by segment and sub-segment.

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Revenues
Property and casualty insurance:
Premiums earned:
Specialty
Property and transportation	$	700	$	574	$	1,547	$	1,350
Specialty casualty	613		560		1,772		1,663
Specialty financial	163		155		477		455
Other specialty	53		50		156		132
Other lines (a)	—		42		—		174
Total premiums earned	1,529		1,381		3,952		3,774
Net investment income (b)	165		112		467		277
Other income	4		—		9		8
Total property and casualty insurance	1,698		1,493		4,428		4,059
Other	73		60		208		195
Income on real estate-related entities (c)	—		10		51		29
Total revenues before realized gains (losses)	1,771		1,563		4,687		4,283
Realized gains (losses) on securities	(17)		23		103		(197)
Realized gains (losses) on subsidiaries	—		(30)		4		(30)
Total revenues	$	1,754	$	1,556	$	4,794	$	4,056

(a)Represents premiums earned in the Neon exited lines (which were sold in December 2020) during the third quarter and first nine months of 2020.

(b)Includes income of $1 million for the third quarter of 2020 and a loss of $5 million in the Neon exited lines in the first nine months of 2020 (primarily from the change in fair value of equity securities).

(c)Represents investment income from real estate-related entities acquired from the discontinued annuity operations while they were held by those operations. Subsequent to the sale of the annuity group, this income is included in the segment of the acquirer.

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	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Earnings (Loss) From Continuing Operations Before Income Taxes
Property and casualty insurance:
Underwriting:
Specialty
Property and transportation	$	45	$	47	$	163	$	107
Specialty casualty	110		53		237		132
Specialty financial	26		13		72		30
Other specialty	(12)		(9)		(16)		(22)
Other lines (a)	(1)		(86)		(2)		(133)
Total underwriting	168		18		454		114
Investment and other income, net (b)	161		100		451		249
Total property and casualty insurance	329		118		905		363
Other (c)	(45)		(74)		(173)		(152)
Income on real estate-related entities (d)	—		3		51		11
Total earnings from continuing operations before realized gains (losses) and income taxes	284		47		783		222
Realized gains (losses) on securities	(17)		23		103		(197)
Realized gains (losses) on subsidiaries	—		(30)		4		(30)
Total earnings (loss) from continuing operations before income taxes	$	267	$	40	$	890	$	(5)

(a)Includes an underwriting loss of $38 million in the third quarter of 2020 and $82 million in the first nine months of 2020 in the Neon exited lines. Also includes a special charge of $47 million in the third quarter of 2020 to increase asbestos and environmental (“A&E”) reserves.

(b)Includes $2 million and $10 million in the third quarter and first nine months of 2020, respectively, in net expenses from the Neon exited lines, before noncontrolling interest.

(c)Includes holding company interest and expenses, including a special charge of $21 million in the third quarter of 2020 to increase A&E reserves related to AFG’s former railroad and manufacturing operations.

(d)Represents investment income (net of DAC) from real estate-related entities acquired from the discontinued annuity operations while they were held by those operations. Subsequent to the sale of the annuity group, this income is included in the segment of the acquirer.

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AMERICAN FINANCIAL GROUP, INC. 10-Q

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E.    Fair Value Measurements

Accounting standards for measuring fair value are based on inputs used in estimating fair value. The three levels of the hierarchy are as follows:

Level 1 — Quoted prices for identical assets or liabilities in active markets (markets in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis). AFG’s Level 1 financial instruments consist primarily of publicly traded equity securities, highly liquid government bonds for which quoted market prices in active markets are available and short-term investments of managed investment entities.

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar assets or liabilities in inactive markets (markets in which there are few transactions, the prices are not current, price quotations vary substantially over time or among market makers, or in which little information is released publicly); and valuations based on other significant inputs that are observable in active markets. AFG’s Level 2 financial instruments include corporate and municipal fixed maturity securities, asset-backed securities (“ABS”), mortgage-backed securities (“MBS”), certain non-affiliated common stocks and investments of managed investment entities priced using observable inputs. Level 2 inputs include benchmark yields, reported trades, corroborated broker/dealer quotes, issuer spreads and benchmark securities. When non-binding broker quotes can be corroborated by comparison to similar securities priced using observable inputs, they are classified as Level 2.

Level 3 — Valuations derived from market valuation techniques generally consistent with those used to estimate the fair values of Level 2 financial instruments in which one or more significant inputs are unobservable or when the market for a security exhibits significantly less liquidity relative to markets supporting Level 2 fair value measurements. The unobservable inputs may include management’s own assumptions about the assumptions market participants would use based on the best information available at the valuation date. Financial instruments whose fair value is estimated based on non-binding broker quotes or internally developed using significant inputs not based on, or corroborated by, observable market information are classified as Level 3.

As discussed in Note A — “Accounting Policies — Managed Investment Entities,” AFG has set the carrying value of its CLO liabilities equal to the fair value of the CLO assets (which have more observable fair values) as an alternative to reporting those liabilities at separately measured fair values. As a result, the CLO liabilities are categorized within the fair value hierarchy on the same basis (proportionally) as the related CLO assets. Since the portion of the CLO liabilities allocated to Level 3 is derived from the fair value of the CLO assets, these amounts are excluded from the progression of Level 3 financial instruments.

AFG’s management is responsible for the valuation process and uses data from outside sources (including nationally recognized pricing services and broker/dealers) in establishing fair value. AFG’s internal investment professionals are a group of approximately 20 investment professionals whose primary responsibility is to manage AFG’s investment portfolio. These professionals monitor individual investments as well as overall industries and are active in the financial markets on a daily basis. The group is led by AFG’s chief investment officer, who reports directly to one of AFG’s Co-CEOs. Valuation techniques utilized by pricing services and prices obtained from external sources are reviewed by AFG’s internal investment professionals who are familiar with the securities being priced and the markets in which they trade to ensure the fair value determination is representative of an exit price. To validate the appropriateness of the prices obtained, these investment managers consider widely published indices (as benchmarks), recent trades, changes in interest rates, general economic conditions and the credit quality of the specific issuers. In addition, the Company communicates directly with the pricing services regarding the methods and assumptions used in pricing, including verifying, on a test basis, the inputs used by the service to value specific securities.

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Assets and liabilities of continuing operations measured and carried at fair value in the financial statements are summarized below (in millions):

	Level 1		Level 2		Level 3		Total
September 30, 2021
Assets:
Available for sale (“AFS”) fixed maturities:
U.S. Government and government agencies	$	217	$	1	$	—	$	218
States, municipalities and political subdivisions	—		1,884		42		1,926
Foreign government	—		217		—		217
Residential MBS	—		736		18		754
Commercial MBS	—		113		—		113
Collateralized loan obligations	—		1,828		1		1,829
Other asset-backed securities	—		2,335		309		2,644
Corporate and other	15		2,463		248		2,726
Total AFS fixed maturities	232		9,577		618		10,427
Trading fixed maturities	—		29		—		29
Equity securities	681		44		268		993
Assets of managed investment entities (“MIE”)	316		4,802		12		5,130
Total assets accounted for at fair value	$	1,229	$	14,452	$	898	$	16,579
Liabilities:
Liabilities of managed investment entities	$	310	$	4,712	$	12	$	5,034
Total liabilities accounted for at fair value	$	310	$	4,712	$	12	$	5,034
December 31, 2020
Assets:
Available for sale fixed maturities:
U.S. Government and government agencies	$	195	$	3	$	—	$	198
States, municipalities and political subdivisions	—		2,273		39		2,312
Foreign government	—		176		—		176
Residential MBS	—		877		38		915
Commercial MBS	—		90		2		92
Collateralized loan obligations	—		1,046		16		1,062
Other asset-backed securities	—		1,742		305		2,047
Corporate and other	4		2,140		138		2,282
Total AFS fixed maturities	199		8,347		538		9,084
Trading fixed maturities	—		24		—		24
Equity securities	665		48		176		889
Assets of managed investment entities	217		4,733		21		4,971
Total assets accounted for at fair value	$	1,081	$	13,152	$	735	$	14,968
Liabilities:
Liabilities of managed investment entities	$	215	$	4,678	$	21	$	4,914
Total liabilities accounted for at fair value	$	215	$	4,678	$	21	$	4,914

Approximately 5% of the total assets of continuing operations carried at fair value at September 30, 2021, were Level 3 assets. Approximately 17% ($150 million) of those Level 3 assets were priced using non-binding broker quotes, for which there is a lack of transparency as to the inputs used to determine fair value. Details as to the quantitative inputs are neither provided by the brokers nor otherwise reasonably obtainable by AFG. Approximately $61 million (7%) of the Level 3 assets were priced by pricing services where either a single price was not corroborated, prices varied enough among the providers, or other market factors led management to determine these securities be classified as Level 3 assets. Approximately 17% ($149 million) of the Level 3 assets were equity investments (that do not qualify for equity method accounting) in limited partnerships whose prices were determined based on financial information provided by the limited partnerships.

Internally developed Level 3 asset fair values of continuing operations represent approximately $519 million (58%) of the total fair value of Level 3 assets at September 30, 2021. Internally priced fixed maturities are priced using a variety of

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AMERICAN FINANCIAL GROUP, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

inputs, including appropriate credit spreads over the treasury yield (of a similar duration), trade information and prices of comparable securities and other security specific features (such as optional early redemption). Internally developed prices for equity securities are based primarily on financial information of the entities invested in and sales of comparable companies. Since internally developed Level 3 asset fair values represent less than 10% of AFG’s Shareholders’ Equity, any justifiable changes in unobservable inputs used to determine internally developed fair values would not have a material impact on AFG’s financial position.

Changes in balances of Level 3 financial assets and liabilities carried at fair value during the third quarter and first nine months of 2021 and 2020 are presented below (in millions). The transfers into and out of Level 3 were due to changes in the availability of market observable inputs. All transfers are reflected in the table at fair value as of the end of the reporting period.

			Total realized/unrealized gains (losses) included in
	Balance at June 30, 2021		Net earnings (loss)		OCI		Purchases and issuances		Sales and settlements		Transfer into Level 3		Transfer out of Level 3		Balance at September 30, 2021
AFS fixed maturities:
U.S. government agency	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
State and municipal	36		—		—		—		—		8		(2)		42
Residential MBS	28		(1)		—		—		(1)		—		(8)		18
Commercial MBS	—		—		—		—		—		—		—		—
Collateralized loan obligations	6		—		1		—		—		—		(6)		1
Other asset-backed securities	315		1		(1)		41		(38)		—		(9)		309
Corporate and other	220		—		(1)		36		(9)		2		—		248
Total AFS fixed maturities	605		—		(1)		77		(48)		10		(25)		618
Equity securities	245		7		—		20		(4)		—		—		268
Assets of MIE	15		(2)		—		1		—		—		(2)		12
Total Level 3 assets	$	865	$	5	$	(1)	$	98	$	(52)	$	10	$	(27)	$	898

			Total realized/unrealized gains (losses) included in
	Balance at June 30, 2020		Net earnings (loss)		OCI		Purchases and issuances		Sales and settlements		Transfer into Level 3		Transfer out of Level 3		Balance at September 30, 2020
AFS fixed maturities:
U.S. government agency	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
State and municipal	41		—		—		—		—		—		—		41
Residential MBS	42		(1)		—		—		(3)		8		(1)		45
Commercial MBS	6		—		—		—		—		—		(4)		2
Collateralized loan obligations	55		—		1		—		—		—		—		56
Other asset-backed securities	293		(1)		2		8		(15)		14		(8)		293
Corporate and other	178		3		1		8		(28)		1		(26)		137
Total AFS fixed maturities	615		1		4		16		(46)		23		(39)		574
Equity securities	164		(5)		—		5		—		—		(5)		159
Assets of MIE	17		(2)		—		—		—		—		—		15
Assets of discontinued annuity operations	3,044		(7)		19		83		(113)		224		(193)		3,057
Total Level 3 assets	$	3,840	$	(13)	$	23	$	104	$	(159)	$	247	$	(237)	$	3,805
Liabilities of discontinued annuity operations	$	(3,675)	$	(5)	$	—	$	(56)	$	79	$	—	$	—	$	(3,657)
Total Level 3 liabilities	$	(3,675)	$	(5)	$	—	$	(56)	$	79	$	—	$	—	$	(3,657)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

			Total realized/unrealized gains (losses) included in
	Balance at December 31, 2020		Net earnings (loss)		OCI		Purchases and issuances		Sales and settlements		Transfer into Level 3		Transfer out of Level 3		Sale of annuity business		Balance at September 30, 2021
AFS fixed maturities:
U.S. government agency	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
State and municipal	39		—		—		—		(3)		8		(2)		—		42
Residential MBS	38		(4)		—		6		(2)		6		(26)		—		18
Commercial MBS	2		—		—		—		—		—		(2)		—		—
Collateralized loan obligations	16		1		—		—		(1)		—		(15)		—		1
Other asset-backed securities	305		1		—		131		(110)		14		(32)		—		309
Corporate and other	138		(1)		(2)		142		(29)		5		(5)		—		248
Total AFS fixed maturities	538		(3)		(2)		279		(145)		33		(82)		—		618
Equity securities	176		78		—		44		(23)		—		(7)		—		268
Assets of MIE	21		1		—		3		—		1		(14)		—		12
Assets of discontinued annuity operations	2,971		85		(21)		209		(328)		32		(229)		(2,719)		—
Total Level 3 assets	$	3,706	$	161	$	(23)	$	535	$	(496)	$	66	$	(332)	$	(2,719)	$	898
Liabilities of discontinued annuity operations	$	(3,933)	$	(222)	$	—	$	(146)	$	158	$	—	$	—	$	4,143	$	—
Total Level 3 liabilities	$	(3,933)	$	(222)	$	—	$	(146)	$	158	$	—	$	—	$	4,143	$	—

			Total realized/unrealized gains (losses) included in
	Balance at December 31, 2019		Net earnings (loss)		Other comprehensive income (loss)		Purchases and issuances		Sales and settlements		Transfer into Level 3		Transfer out of Level 3		Balance at September 30, 2020
AFS fixed maturities:
U.S. government agency	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
State and municipal	40		—		2		—		(1)		—		—		41
Residential MBS	45		—		(1)		—		(5)		9		(3)		45
Commercial MBS	6		—		—		—		—		—		(4)		2
Collateralized loan obligations	1		(1)		4		—		—		52		—		56
Other asset-backed securities	256		(6)		3		69		(62)		41		(8)		293
Corporate and other	223		2		—		40		(39)		3		(92)		137
Total AFS fixed maturities	571		(5)		8		109		(107)		105		(107)		574
Equity securities	161		(22)		—		16		—		9		(5)		159
Assets of MIE	17		(4)		—		—		—		2		—		15
Assets of discontinued annuity operations	3,092		(27)		39		444		(325)		482		(648)		3,057
Total Level 3 assets	$	3,841	$	(58)	$	47	$	569	$	(432)	$	598	$	(760)	$	3,805
Liabilities of discontinued annuity operations	$	(3,730)	$	41	$	—	$	(180)	$	212	$	—	$	—	$	(3,657)
Total Level 3 liabilities	$	(3,730)	$	41	$	—	$	(180)	$	212	$	—	$	—	$	(3,657)

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AMERICAN FINANCIAL GROUP, INC. 10-Q

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Fair Value of Financial Instruments   The carrying value and fair value of financial instruments of continuing operations that are not carried at fair value in the financial statements are summarized below (in millions):

	Carrying		Fair Value
	Value		Total		Level 1		Level 2		Level 3
September 30, 2021
Financial assets:
Cash and cash equivalents	$	2,833	$	2,833	$	2,833	$	—	$	—
Mortgage loans	537		555		—		—		555
Total financial assets not accounted for at fair value	$	3,370	$	3,388	$	2,833	$	—	$	555
Long-term debt	$	1,964	$	2,295	$	—	$	2,292	$	3
Total financial liabilities not accounted for at fair value	$	1,964	$	2,295	$	—	$	2,292	$	3
December 31, 2020
Financial assets:
Cash and cash equivalents	$	1,665	$	1,665	$	1,665	$	—	$	—
Mortgage loans	377		382		—		—		382
Total financial assets not accounted for at fair value	$	2,042	$	2,047	$	1,665	$	—	$	382
Long-term debt	$	1,963	$	2,325	$	—	$	2,322	$	3
Total financial liabilities not accounted for at fair value	$	1,963	$	2,325	$	—	$	2,322	$	3

F.    Investments

Available for sale fixed maturities held by AFG’s continuing operations at September 30, 2021 and December 31, 2020, consisted of the following (in millions):

	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized				Net Unrealized		Fair Value
					Gains		Losses
September 30, 2021
Fixed maturities:
U.S. Government and government agencies	$	216	$	—	$	3	$	(1)	$	2	$	218
States, municipalities and political subdivisions	1,849		—		77		—		77		1,926
Foreign government	216		—		2		(1)		1		217
Residential MBS	704		—		51		(1)		50		754
Commercial MBS	110		—		3		—		3		113
Collateralized loan obligations	1,827		1		5		(2)		3		1,829
Other asset-backed securities	2,631		7		25		(5)		20		2,644
Corporate and other	2,658		1		73		(4)		69		2,726
Total fixed maturities	$	10,211	$	9	$	239	$	(14)	$	225	$	10,427
December 31, 2020
Fixed maturities:
U.S. Government and government agencies	$	192	$	—	$	6	$	—	$	6	$	198
States, municipalities and political subdivisions	2,196		—		116		—		116		2,312
Foreign government	172		—		4		—		4		176
Residential MBS	859		—		57		(1)		56		915
Commercial MBS	89		—		3		—		3		92
Collateralized loan obligations	1,065		3		4		(4)		—		1,062
Other asset-backed securities	2,040		7		27		(13)		14		2,047
Corporate and other	2,199		2		88		(3)		85		2,282
Total fixed maturities	$	8,812	$	12	$	305	$	(21)	$	284	$	9,084

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Available for sale fixed maturities that are included in assets of discontinued annuity operations at December 31, 2020, consisted of the following (in millions):

	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	$	39	$	—	$	5	$	—	$	5	$	44
States, municipalities and political subdivisions	3,053		—		370		(2)		368		3,421
Foreign government	31		—		4		—		4		35
Residential MBS	1,953		3		194		(4)		190		2,140
Commercial MBS	659		—		40		(1)		39		698
Collateralized loan obligations	3,491		10		23		(13)		10		3,491
Other asset-backed securities	5,098		11		142		(53)		89		5,176
Corporate and other	17,272		4		1,874		(24)		1,850		19,118
Total fixed maturities	$	31,596	$	28	$	2,652	$	(97)	$	2,555	$	34,123

Equity securities held by AFG’s continuing operations, which are reported at fair value with holding gains and losses recognized in net earnings, consisted of the following at September 30, 2021 and December 31, 2020 (in millions):

	September 30, 2021						December 31, 2020
					Fair Value						Fair Value
	Actual Cost				over (under)		Actual Cost				over (under)
			Fair Value		Cost				Fair Value		Cost
Common stocks	$	464	$	563	$	99	$	516	$	510	$	(6)
Perpetual preferred stocks	386		430		44		369		379		10
Total equity securities carried at fair value	$	850	$	993	$	143	$	885	$	889	$	4

Investments accounted for using the equity method held by AFG’s continuing operations, by category, carrying value and net investment income are as follows (in millions):

	Carrying Value				Net Investment Income
	September 30, 2021		December 31, 2020		Three months ended September 30,				Nine months ended September 30,
					2021		2020		2021		2020
Real estate-related investments (*)	$	1,024	$	915	$	52	$	17	$	151	$	55
Private equity	336		266		21		21		66		4
Private debt	47		54		—		(2)		5		(6)
Total investments accounted for using the equity method	$	1,407	$	1,235	$	73	$	36	$	222	$	53

(*)Includes 88% invested in multi-family properties, 2% in single family properties and 10% in other property types as of September 30, 2021 and 87% invested in multi-family properties, 2% in single family properties and 11% in other property types as of December 31, 2020.

The earnings (losses) from these investments are generally reported on a three-month lag due to the timing required to obtain the necessary information from the funds. AFG regularly reviews and discusses fund performance with the fund managers to corroborate the reasonableness of the underlying reported asset values and to assess whether any events have occurred within the lag period that may materially affect the valuation of these investments.

With respect to partnerships and similar investments, AFG’s continuing operations had unfunded commitments of $302 million and $290 million as of September 30, 2021 and December 31, 2020, respectively.

Assets of discontinued annuity operations included investments accounted for under the equity method of $646 million as of December 31, 2020.

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AMERICAN FINANCIAL GROUP, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

The following table shows gross unrealized losses (dollars in millions) on available for sale fixed maturities held by AFG’s continuing operations 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
September 30, 2021
Fixed maturities:
U.S. Government and government agencies	$	(1)	$	97	99	%	$	—	$	19	100	%
States, municipalities and political subdivisions	—		13		100	%	—		15		100	%
Foreign government	(1)		48		98	%	—		—		—	%
Residential MBS	—		54		100	%	(1)		8		89	%
Commercial MBS	—		—		—	%	—		—		—	%
Collateralized loan obligations	(1)		687		100	%	(1)		168		99	%
Other asset-backed securities	(2)		662		100	%	(3)		76		96	%
Corporate and other	(3)		278		99	%	(1)		31		97	%
Total fixed maturities	$	(8)	$	1,839	100	%	$	(6)	$	317	98	%
December 31, 2020
Fixed maturities:
U.S. Government and government agencies	$	—	$	23	100	%	$	—	$	—	—	%
States, municipalities and political subdivisions	—		39		100	%	—		10		100	%
Foreign government	—		7		100	%	—		—		—	%
Residential MBS	(1)		86		99	%	—		7		100	%
Commercial MBS	—		7		100	%	—		5		100	%
Collateralized loan obligations	(1)		192		99	%	(3)		366		99	%
Other asset-backed securities	(10)		465		98	%	(3)		92		97	%
Corporate and other	(2)		133		99	%	(1)		17		94	%
Total fixed maturities	$	(14)	$	952	99	%	$	(7)	$	497	99	%

At September 30, 2021, the gross unrealized losses on fixed maturities of $14 million relate to 394 securities. Investment grade securities (as determined by nationally recognized rating agencies) represented approximately 74% of the gross unrealized loss and 94% 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.

Management believes AFG will recover its cost basis (net of any allowance) in the securities with unrealized losses and that AFG has the ability to hold the securities until they recover in value and had no intent to sell them at September 30, 2021.

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AMERICAN FINANCIAL GROUP, INC. 10-Q

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Credit losses on available for sale fixed maturities are measured based on the present value of expected future cash flows compared to amortized cost. Beginning January 1, 2020, impairment losses are recognized through an allowance instead of directly writing down the amortized cost. Recoveries of previously impaired amounts are recorded as an immediate reversal of all or a portion of the allowance. 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 held by AFG’s continuing operations is shown below (in millions):

	Structured Securities (*)		Corporate and Other		Total
Balance at June 30, 2021	$	8	$	1	$	9
Initial allowance for purchased securities with credit deterioration	—		—		—
Provision for expected credit losses on securities with no previous allowance	—		—		—
Additions (reductions) to previously recognized expected credit losses	—		—		—
Reductions due to sales or redemptions	—		—		—
Balance at September 30, 2021	$	8	$	1	$	9
Balance at June 30, 2020	$	11	$	3	$	14
Initial allowance for purchased securities with credit deterioration	—		—		—
Provision for expected credit losses on securities with no previous allowance	—		—		—
Additions (reductions) to previously recognized expected credit losses	—		—		—
Reductions due to sales or redemptions	—		—		—
Balance at September 30, 2020	$	11	$	3	$	14
Balance at January 1, 2021	$	10	$	2	$	12
Initial allowance for purchased securities with credit deterioration	—		—		—
Provision for expected credit losses on securities with no previous allowance	—		—		—
Additions (reductions) to previously recognized expected credit losses	(2)		1		(1)
Reductions due to sales or redemptions	—		(2)		(2)
Balance at September 30, 2021	$	8	$	1	$	9
Balance at January 1, 2020	$	—	$	—	$	—
Impact of adoption of new accounting policy	—		—		—
Initial allowance for purchased securities with credit deterioration	—		—		—
Provision for expected credit losses on securities with no previous allowance	12		4		16
Additions (reductions) to previously recognized expected credit losses	(1)		(1)		(2)
Reductions due to sales or redemptions	—		—		—
Balance at September 30, 2020	$	11	$	3	$	14

(*)Includes mortgage-backed securities, collateralized loan obligations and other asset-backed securities.

In the third quarter and first nine months of 2021 and 2020, AFG’s continuing operations did not purchase any securities with expected credit losses.

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AMERICAN FINANCIAL GROUP, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

The table below sets forth the scheduled maturities of AFG’s available for sale fixed maturities as of September 30, 2021 (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	$	1,182	$	1,194	11	%
After one year through five years	2,571		2,662		26	%
After five years through ten years	901		939		9	%
After ten years	284		292		3	%
	4,938		5,087		49	%
Collateralized loan obligations and other ABS (average life of approximately 3 years)	4,450		4,473		43	%
MBS (average life of approximately 3 years)	814		867		8	%
Total	$	10,202	$	10,427	100	%

(*)Amortized cost, net of allowance for expected credit losses.

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.

There were no investments in individual issuers that exceeded 10% of shareholders’ equity at September 30, 2021 or December 31, 2020.

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AMERICAN FINANCIAL GROUP, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

Net Unrealized Gain on Fixed Maturity Securities   The following table shows (in millions) the components of the net unrealized gain on securities that is included in AOCI in AFG’s Balance Sheet.

	Pretax		Deferred Tax		Net
September 30, 2021
Net unrealized gain on fixed maturities	$	225	$	(47)	$	178
December 31, 2020
Net unrealized gain on fixed maturities held by continuing operations	$	284	$	(60)	$	224
Discontinued operations (*):
Net unrealized gain on fixed maturities	$	2,555	$	(536)	$	2,019
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 from discontinued operations	1,305		(274)		1,031
Total net unrealized gain on fixed maturity securities	$	1,589	$	(334)	$	1,255

(*)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 AFG’s discontinued 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.

Net Investment Income   The following table shows (in millions) investment income earned and investment expenses incurred in AFG’s continuing operations.

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Investment income:
Fixed maturities	$	73	$	73	$	217	$	232
Equity securities:
Dividends	6		9		21		27
Change in fair value (a) (b)	7		(2)		41		(10)
Equity in earnings of partnerships and similar investments	73		36		222		53
Other	14		8		28		17
Gross investment income	173		124		529		319
Investment expenses	(4)		(2)		(8)		(5)
Net investment income (b)	$	169	$	122	$	521	$	314

(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 the third quarter and first nine months of 2020 includes income of $1 million and losses of $5 million, respectively, on investments held by the companies that comprise the Neon exited lines due primarily to the $7 million loss recorded on equity securities that are carried at fair value through net investment income.

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AMERICAN FINANCIAL GROUP, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

Realized gains (losses) and changes in unrealized appreciation (depreciation) from continuing operations included in AOCI related to fixed maturity securities are summarized as follows (in millions):

	Three months ended September 30, 2021								Three months ended September 30, 2020
	Realized gains (losses)								Realized gains (losses)
	Before Impairments		Impairment Allowance		Total		Change in Unrealized		Before Impairments		Impairment Allowance		Total		Change in Unrealized
Fixed maturities	$	(2)	$	—	$	(2)	$	(35)	$	1	$	—	$	1	$	59
Equity securities	(15)		—		(15)		—		22		—		22		—
Mortgage loans and other investments	—		—		—		—		—		—		—		—
Total pretax	(17)		—		(17)		(35)		23		—		23		59
Tax effects	5		—		5		8		(5)		—		(5)		(12)
Net of tax	$	(12)	$	—	$	(12)	$	(27)	$	18	$	—	$	18	$	47
	Nine months ended September 30, 2021								Nine months ended September 30, 2020
	Realized gains (losses)								Realized gains (losses)
	Before Impairments		Impairment Allowance		Total		Change in Unrealized		Before Impairments		Impairment Allowance		Total		Change in Unrealized
Fixed maturities	$	(2)	$	1	$	(1)	$	(59)	$	5	$	(14)	$	(9)	$	39
Equity securities	104		—		104		—		(189)		—		(189)		—
Mortgage loans and other investments	—		—		—		—		1		—		1		—
Total pretax	102		1		103		(59)		(183)		(14)		(197)		39
Tax effects	(20)		—		(20)		13		38		3		41		(8)
Net of tax	$	82	$	1	$	83	$	(46)	$	(145)	$	(11)	$	(156)	$	31

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 from continuing operations during the third quarter and first nine months of 2021 and 2020 on securities that were still owned at September 30, 2021 and September 30, 2020 as follows (in millions):

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Included in realized gains (losses)	$	(16)	$	17	$	82	$	(174)
Included in net investment income	7		(1)		41		(2)
	$	(9)	$	16	$	123	$	(176)

Gross realized gains and losses (excluding changes in impairment allowance and mark-to-market of derivatives) on available for sale fixed maturity investment transactions from continuing operations consisted of the following (in millions):

	Nine months ended September 30,
	2021		2020
Gross gains	$	4	$	8
Gross losses	(2)		(4)

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AMERICAN FINANCIAL GROUP, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

G.    Managed Investment Entities

AFG is the investment manager and its subsidiaries have investments ranging from 4.5% to 46.8% of the most subordinate debt tranche of twelve active collateralized loan obligation entities (“CLOs”), which are considered variable interest entities. AFG also owns portions of the senior debt tranches of certain of these CLOs. Upon formation between 2012 and 2020, these entities issued securities in various senior and subordinate classes and invested the proceeds primarily in secured bank loans, which serve as collateral for the debt securities issued by each CLO. None of the collateral was purchased from AFG. AFG’s investments in the subordinate debt tranches of these entities receive residual income from the CLOs only after the CLOs pay expenses (including management fees to AFG) and interest on and returns of capital to senior levels of debt securities. There are no contractual requirements for AFG to provide additional funding for these entities. AFG has not provided and does not intend to provide any financial support to these entities.

AFG’s maximum exposure to economic loss on the CLOs that it manages is limited to its investment in those CLOs, which had an aggregate fair value of $96 million (including $86 million invested in the most subordinate tranches) at September 30, 2021, and $200 million (including $143 million held by the discontinued annuity business) at December 31, 2020.

During the first nine months of 2020, AFG subsidiaries purchased $57 million face amount of senior and subordinate tranches of existing CLOs for $39 million. During the first nine months of 2021 and 2020, AFG subsidiaries received $41 million and less than $1 million, respectively, in sale and redemption proceeds from its CLO investments.

The revenues and expenses of the CLOs are separately identified in AFG’s Statement of Earnings, after the elimination of management fees and earnings attributable to shareholders of AFG as measured by the change in the fair value of AFG’s investments in the CLOs. Selected financial information related to the CLOs is shown below (in millions):

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Investment in CLO tranches at end of period:
Held by continuing operations	$	96	$	47	$	96	$	47
Held by discontinued annuity operations	—		129		—		129
Total	$	96	$	176	$	96	$	176
Gains (losses) on change in fair value of assets/liabilities (*):
Assets	$	10	$	132	$	77	$	(184)
Liabilities	(9)		(137)		(68)		163
Management fees paid to AFG	4		3		12		11
CLO earnings (losses) attributable to AFG shareholders:
From continuing operations	$	5	$	4	$	17	$	(7)
From discontinued annuity operations	—		9		20		(14)
Total	$	5	$	13	$	37	$	(21)

(*)Included in revenues in AFG’s Statement of Earnings.

The aggregate unpaid principal balance of the CLOs’ fixed maturity investments exceeded the fair value of the investments by $63 million and $150 million at September 30, 2021 and December 31, 2020, respectively. The aggregate unpaid principal balance of the CLOs’ debt exceeded its carrying value by $174 million and $141 million at those dates. The CLO assets include loans with an aggregate fair value of $5 million at September 30, 2021 and $11 million at December 31, 2020, for which the CLOs are not accruing interest because the loans are in default (aggregate unpaid principal balance of $15 million at September 30, 2021 and $28 million at December 31, 2020).

In addition to the CLOs that it manages, AFG’s continuing operations had investments in CLOs that are managed by third parties (therefore not consolidated), which are included in available for sale fixed maturity securities and had a fair value of $1.83 billion at September 30, 2021 and $1.06 billion at December 31, 2020.

H.    Goodwill and Other Intangibles

There were no changes in the goodwill balance from AFG’s continuing operations of $176 million during the first nine months of 2021.

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AMERICAN FINANCIAL GROUP, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

Included in other assets in AFG’s Balance Sheet is $29 million at September 30, 2021 and $34 million at December 31, 2020 in amortizable intangible assets related to property and casualty insurance acquisitions. These amounts are net of accumulated amortization of $66 million and $62 million, respectively. Amortization of intangibles was $1 million and $3 million in the third quarter of 2021 and 2020, respectively, and $5 million and $9 million in the first nine months of 2021 and 2020, respectively.

I.    Long-Term Debt

Long-term debt consisted of the following (in millions):

	September 30, 2021						December 31, 2020
	Principal		Discount and Issue Costs		Carrying Value		Principal		Discount and Issue Costs		Carrying Value
Direct Senior Obligations of AFG:
4.50% Senior Notes due June 2047	$	590	$	(2)	$	588	$	590	$	(2)	$	588
3.50% Senior Notes due August 2026	425		(3)		422		425		(3)		422
5.25% Senior Notes due April 2030	300		(5)		295		300		(6)		294
Other	3		—		3		3		—		3
	1,318		(10)		1,308		1,318		(11)		1,307
Direct Subordinated Obligations of AFG:
4.50% Subordinated Debentures due September 2060	200		(5)		195		200		(5)		195
5.125% Subordinated Debentures due December 2059	200		(6)		194		200		(6)		194
5.625% Subordinated Debentures due June 2060	150		(4)		146		150		(4)		146
5.875% Subordinated Debentures due March 2059	125		(4)		121		125		(4)		121
	675		(19)		656		675		(19)		656
	$	1,993	$	(29)	$	1,964	$	1,993	$	(30)	$	1,963

Scheduled principal payments on debt for the balance of 2021, the subsequent five years and thereafter are as follows: 2021 — none; 2022 — none; 2023 — none; 2024 — none; 2025 — none; 2026 — $425 million and thereafter — $1.57 billion.

AFG can borrow up to $500 million under its revolving credit facility, which expires in December 2025. Amounts borrowed under this agreement bear interest at rates ranging from 1.00% to 1.875% (currently 1.375%) over LIBOR based on AFG’s credit rating. No amounts were borrowed under this facility at September 30, 2021 or December 31, 2020.

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AMERICAN FINANCIAL GROUP, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

J.    Shareholders’ Equity

AFG is authorized to issue 12.5 million shares of Voting Preferred Stock and 12.5 million shares of Nonvoting Preferred Stock, each without par value.

Accumulated Other Comprehensive Income, Net of Tax (“AOCI”)   Comprehensive income is defined as all changes in shareholders’ equity except those arising from transactions with shareholders. Comprehensive income includes net earnings and other comprehensive income, which consists primarily of changes in net unrealized gains or losses on available for sale securities.

The progression of the components of accumulated other comprehensive income follows (in millions):

			Other Comprehensive Income (Loss)
	AOCI Beginning Balance		Pretax		Tax		Net of tax		Attributable to noncontrolling interests		Attributable to shareholders		Other		AOCI Ending Balance
Quarter ended September 30, 2021
Net unrealized gains (losses) on securities:
Unrealized holding losses on securities arising during the period			$	(37)	$	8	$	(29)	$	—	$	(29)
Reclassification adjustment for realized (gains) losses included in net earnings (*)			2		—		2		—		2
Total net unrealized gains (losses) on securities	$	205	(35)		8		(27)		—		(27)		$	—	$	178
Foreign currency translation adjustments	(16)		(3)		—		(3)		—		(3)		—		(19)
Pension and other postretirement plans adjustments (“OPRP”)	1		—		—		—		—		—		—		1
Total	$	190	$	(38)	$	8	$	(30)	$	—	$	(30)	$	—	$	160
Quarter ended September 30, 2020
Net unrealized gains on securities:
Unrealized holding gains on securities arising during the period			$	245	$	(51)	$	194	$	—	$	194
Reclassification adjustment for realized (gains) losses included in net earnings (*)			(15)		3		(12)		—		(12)
Total net unrealized gains on securities	$	1,030	230		(48)		182		—		182		$	—	$	1,212
Net unrealized gains (losses) on cash flow hedges:
Unrealized holding gains on cash flow hedges arising during the period			1		—		1		—		1
Reclassification adjustment for investment income included in net earnings from discontinued operations			(8)		1		(7)		—		(7)
Total net unrealized gains (losses) on cash flow hedges	47		(7)		1		(6)		—		(6)		—		41
Foreign currency translation adjustments	(17)		—		—		—		—		—		4		(13)
Pension and other postretirement plans adjustments	(7)		—		—		—		—		—		—		(7)
Total	$	1,053	$	223	$	(47)	$	176	$	—	$	176	$	4	$	1,233

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AMERICAN FINANCIAL GROUP, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

			Other Comprehensive Income (Loss)
	AOCI Beginning Balance		Pretax		Tax		Net of tax		Attributable to noncontrolling interests		Attributable to shareholders		Other		AOCI Ending Balance
Nine months ended September 30, 2021
Net unrealized gains (losses) on securities:
Unrealized holding losses on securities arising during the period			$	(224)	$	47	$	(177)	$	—	$	(177)
Reclassification adjustment for realized (gains) losses included in net earnings (*)			(21)		5		(16)		—		(16)
Reclassification for unrealized gains of subsidiaries sold			(1,119)		235		(884)		—		(884)
Total net unrealized gains (losses) on securities	$	1,255	(1,364)		287		(1,077)		—		(1,077)		$	—	$	178
Net unrealized gains (losses) on cash flow hedges:
Unrealized holding losses on cash flow hedges arising during the period			(1)		—		(1)		—		(1)
Reclassification adjustment for investment income included in net earnings from discontinued operations			(14)		3		(11)		—		(11)
Reclassification for unrealized gains on cash flow hedges of subsidiaries sold			(37)		8		(29)		—		(29)
Total net unrealized gains (losses) on cash flow hedges	41		(52)		11		(41)		—		(41)		—		—
Foreign currency translation adjustments	(16)		(3)		—		(3)		—		(3)		—		(19)
Pension and OPRP adjustments:
Unrealized holding losses on pension and OPRP arising during the period			(1)		—		(1)		—		(1)
Reclassification adjustment for pension settlement loss included in other expense in net earnings			11		(2)		9		—		9
Total pension and OPRP adjustments	(7)		10		(2)		8		—		8		—		1
Total	$	1,273	$	(1,409)	$	296	$	(1,113)	$	—	$	(1,113)	$	—	$	160
Nine months ended September 30, 2020
Net unrealized gains on securities:
Unrealized holding gains on securities arising during the period			$	443	$	(93)	$	350	$	—	$	350
Reclassification adjustment for realized (gains) losses included in net earnings (*)			—		—		—		—		—
Total net unrealized gains on securities	$	862	443		(93)		350		—		350		$	—	$	1,212
Net unrealized gains on cash flow hedges:
Unrealized holding gains on cash flow hedges arising during the period			62		(13)		49		—		49
Reclassification adjustment for investment income included in net earnings from discontinued operations			(31)		6		(25)		—		(25)
Total net unrealized gains on cash flow hedges	17		31		(7)		24		—		24		—		41
Foreign currency translation adjustments	(9)		(6)		—		(6)		(2)		(8)		4		(13)
Pension and other postretirement plans adjustments	(7)		—		—		—		—		—		—		(7)
Total	$	863	$	468	$	(100)	$	368	$	(2)	$	366	$	4	$	1,233

31

AMERICAN FINANCIAL GROUP, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

(*)The reclassification adjustment out of net unrealized gains (losses) on securities affected the following lines in AFG’s Statement of Earnings:

OCI component	Affected line in the statement of earnings
Pretax - continuing operations	Realized gains (losses) on securities
Pretax - discontinued operations	Net earnings (loss) from discontinued operations
Tax - continuing operations	Provision (credit) for income taxes
Tax - discontinued operations	Net earnings (loss) from discontinued operations

Stock Incentive Plans   Under AFG’s stock incentive plans, employees of AFG and its subsidiaries are eligible to receive equity awards in the form of stock options, stock appreciation rights, restricted stock awards, restricted stock units and stock awards. In the first nine months of 2021, AFG issued 207,020 shares of restricted Common Stock (fair value of $111.13 per share) under the Stock Incentive Plan.

Total compensation expense related to stock incentive plans of AFG and its subsidiaries was $4 million and $5 million in the third quarter of 2021 and 2020 and $11 million and $15 million in the first nine months of 2021 and 2020.

K.    Income Taxes

The following is a reconciliation of income taxes on continuing operations 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 September 30,								Nine months ended September 30,
	2021				2020				2021				2020
	Amount		% of EBT		Amount		% of EBT		Amount		% of EBT		Amount		% of EBT
Earnings (loss) from continuing operations before income taxes (“EBT”)	$	267			$	40			$	890			$	(5)
Income taxes at statutory rate	$	56	21	%	$	8	21	%	$	187	21	%	$	(1)	21	%
Effect of:
Pending sale of Neon	—		—	%	(73)		(183	%)	—		—	%	(73)		1,460	%
Stock-based compensation	(2)		(1	%)	—		—	%	(12)		(1	%)	(3)		60	%
Employee stock ownership plan dividend paid deduction	(2)		(1	%)	(1)		(3	%)	(10)		(1	%)	(1)		20	%
Tax exempt interest	(2)		(1	%)	(2)		(5	%)	(6)		(1	%)	(7)		140	%
Dividends received deduction	—		—	%	(1)		(3	%)	(1)		—	%	(2)		40	%
Foreign operations	2		1	%	(4)		(10	%)	—		—	%	(3)		60	%
Adjustment to prior year taxes	(1)		—	%	1		3	%	(1)		—	%	1		(20	%)
Nondeductible expenses	2		1	%	1		3	%	6		1	%	3		(60	%)
Change in valuation allowance	(2)		(1	%)	20		50	%	1		—	%	31		(620	%)
Other	(3)		(1	%)	3		7	%	—		(1	%)	3		(61	%)
Provision (credit) for income taxes as shown in the statement of earnings	$	48	18	%	$	(48)	(120	%)	$	164	18	%	$	(52)	1,040	%

In September 2020, AFG reached a definitive agreement to sell the legal entities that own Neon (see Note C — “Sales of Businesses,” which resulted in a loss on sale for U.S. tax purposes. In accordance with accounting guidance for transactions that meet the GAAP “held for sale” criteria, AFG recorded a $73 million tax benefit associated with this loss in the third quarter of 2020. 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 $27 million of AFG’s net operating loss carryforwards (“NOL”) subject to separate return limitation year (“SRLY”) tax rules will expire unutilized at December 31, 2021. 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.

32

AMERICAN FINANCIAL GROUP, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

L.    Contingencies

There have been no significant changes to the matters discussed and referred to in Note N — “Contingencies” of AFG’s 2020 Form 10-K, which covers property and casualty insurance reserves for claims related to environmental exposures, asbestos and other mass tort claims and environmental and occupational injury and disease claims of subsidiaries’ former railroad and manufacturing operations.

M.    Insurance

Property and Casualty Insurance Reserves The following table provides an analysis of changes in the liability for losses and loss adjustment expenses during the first nine months of 2021 and 2020 (in millions):

	Nine months ended September 30,
	2021		2020
Balance at beginning of year	$	10,392	$	10,232
Less reinsurance recoverables, net of allowance	3,117		3,024
Net liability at beginning of year	7,275		7,208
Provision for losses and LAE occurring in the current period	2,543		2,560
Net increase (decrease) in the provision for claims of prior years:
Special A&E charges	—		47
Other	(208)		(166)
Total losses and LAE incurred	2,335		2,441
Payments for losses and LAE of:
Current year	(589)		(592)
Prior years	(1,430)		(1,406)
Total payments	(2,019)		(1,998)
Foreign currency translation and other	—		(11)
Net liability at end of period	7,591		7,640
Add back reinsurance recoverables, net of allowance	3,400		3,114
Gross unpaid losses and LAE included in the balance sheet at end of period	$	10,991	$	10,754

The net decrease in the provision for claims of prior years during the first nine months of 2021 reflects (i) lower than anticipated claim frequency and severity in the transportation businesses, lower than expected losses in the crop business, lower than expected claim severity in the property and inland marine business and lower than expected claim frequency in the aviation business (within the Property and transportation sub-segment), (ii) lower than anticipated claim severity in the workers’ compensation businesses (within the Specialty casualty sub-segment) and (iii) lower than anticipated claim frequency in the surety and trade credit businesses and lower than expected claim frequency and severity in the financial institutions business (within the Specialty financial sub-segment). This favorable development was partially offset by (i) higher than expected claim frequency and severity in the equine business (within the Property and transportation sub-segment) and (ii) higher than anticipated claim severity in the general liability and targeted markets businesses (within the Specialty casualty sub-segment).

The net decrease in the provision for claims of prior years during the first nine months of 2020 reflects (i) lower than expected claim frequency and severity in the agricultural and transportation businesses (within the Property and transportation sub-segment), (ii) lower than anticipated claim severity in the workers’ compensation businesses and lower than anticipated claim frequency in the executive liability business (within the Specialty casualty sub-segment) and (iii) lower than anticipated claim frequency in the trade credit business and lower than anticipated claim frequency and severity in the financial institutions, fidelity and surety businesses (within the Specialty financial sub-segment). This favorable development was partially offset by (i) the $47 million special charge to increase asbestos and environmental reserves and (ii) higher than expected claim frequency in general liability contractor claims and higher than expected claim frequency and severity in the excess and surplus businesses (within the Specialty casualty sub-segment) and higher than expected losses at Neon.

33

AMERICAN FINANCIAL GROUP, INC. 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

Recoverables from Reinsurers and Premiums Receivable Progressions of the 2021 and 2020 allowance for expected credit losses on recoverables from reinsurers and premiums receivable related to continuing operations are shown below (in millions):

	Recoverables from Reinsurers				Premiums Receivable
	2021		2020		2021		2020
Balance at June 30	$	8	$	7	$	9	$	10
Provision (credit) for expected credit losses	—		—		1		1
Write-offs charged against the allowance	—		—		—		—
Balance at September 30	$	8	$	7	$	10	$	11
Balance at January 1	$	6	$	18	$	10	$	13
Impact of adoption of new accounting policy	—		(11)		—		(3)
Provision (credit) for expected credit losses	2		—		—		1
Write-offs charged against the allowance	—		—		—		—
Balance at September 30	$	8	$	7	$	10	$	11

34

AMERICAN FINANCIAL GROUP, INC. 10-Q

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

INDEX TO MD&A
	Page		Page
Forward-Looking Statements	35	Results of Operations — Third Quarter	49
Overview	36	Segmented Statement of Earnings	49
Critical Accounting Policies	37	Property and Casualty Insurance	51
Liquidity and Capital Resources	37	Holding Company, Other and Unallocated	62
Ratios	37	Real Estate Entities Acquired from the Annuity Operations	64
Condensed Consolidated Cash Flows	38	Discontinued Annuity Operations	65
Parent and Subsidiary Liquidity	39	Results of Operations — First Nine Months	66
Investments	40	Segmented Statement of Earnings	66
Uncertainties	42	Property and Casualty Insurance	67
Managed Investment Entities	43	Holding Company, Other and Unallocated	76
Results of Operations	47	Real Estate Entities Acquired from the Annuity Operations	79
General	47	Discontinued Annuity Operations	79

FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. Some of the forward-looking statements can be identified by the use of words such as “anticipates”, “believes”, “expects”, “projects”, “estimates”, “intends”, “plans”, “seeks”, “could”, “may”, “should”, “will” or the negative version of those words or other comparable terminology. Such forward-looking statements include statements relating to: expectations concerning market and other conditions and their effect on future premiums, revenues, earnings, investment activities, and the amount and timing of share repurchases; recoverability of asset values; expected losses and the adequacy of reserves for asbestos, environmental pollution and mass tort claims; rate changes; and improved loss experience.

Actual results and/or financial condition could differ materially from those contained in or implied by such forward-looking statements for a variety of reasons including but not limited to:

•changes in financial, political and economic conditions, including changes in interest and inflation rates, currency fluctuations and extended economic recessions or expansions in the U.S. and/or abroad;

•performance of securities markets;

•new legislation or declines in credit quality or credit ratings that could have a material impact on the valuation of securities in AFG’s investment portfolio;

•the availability of capital;

•changes in insurance law or regulation, including changes in statutory accounting rules, including modifications to capital requirements;

•the effects of the COVID-19 outbreak, including the effects on the international and national economy and credit markets, legislative or regulatory developments affecting the insurance industry, quarantines or other travel or health-related restrictions;

•changes in the legal environment affecting AFG or its customers;

•tax law and accounting changes;

•levels of natural catastrophes and severe weather, terrorist activities (including any nuclear, biological, chemical or radiological events), incidents of war or losses resulting from pandemics, civil unrest and other major losses;

•disruption caused by cyber-attacks or other technology breaches or failures by AFG or its business partners and service providers, which could negatively impact AFG’s business and/or expose AFG to litigation;

•development of insurance loss reserves and establishment of other reserves, particularly with respect to amounts associated with asbestos and environmental claims;

•availability of reinsurance and ability of reinsurers to pay their obligations;

•competitive pressures;

•the ability to obtain adequate rates and policy terms;

•changes in AFG’s credit ratings or the financial strength ratings assigned by major ratings agencies to AFG’s operating subsidiaries; and

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AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

•the impact of the conditions in the international financial markets and the global economy relating to AFG’s international operations.

The forward-looking statements herein are made only as of the date of this report. The Company assumes no obligation to publicly update any forward-looking statements.

OVERVIEW

Financial Condition

AFG is organized as a holding company with almost all of its operations being conducted by subsidiaries. AFG, however, has continuing cash needs for administrative expenses, the payment of principal and interest on borrowings, shareholder dividends, and taxes. Therefore, certain analyses are most meaningfully presented on a parent only basis while others are best done on a total enterprise basis. In addition, because most of its businesses are financial in nature, AFG does not prepare its consolidated financial statements using a current-noncurrent format. Consequently, certain traditional ratios and financial analysis tests are not meaningful.

Sale of the Annuity Business

On May 28, 2021, AFG sold its annuity business consisting of Great American Life Insurance Company (“GALIC”) and its two insurance subsidiaries, Annuity Investors Life Insurance Company and Manhattan National Life Insurance Company, as well as a broker-dealer affiliate, Great American Advisors, Inc., and insurance distributor, AAG Insurance Agency, Inc. to Massachusetts Mutual Life Insurance Company (“MassMutual”). Total proceeds from the sale were $3.57 billion. AFG realized an after-tax non-core gain on the sale of $656 million. Beginning with the first quarter of 2021 the results of the annuity businesses sold are reported as discontinued operations, in accordance with generally accepted accounting principles (“GAAP”), which included adjusting prior period results to reflect these operations as discontinued.

Results of Operations

Through the operations of its subsidiaries, AFG is engaged primarily in property and casualty insurance, focusing on specialized commercial products for businesses. As discussed above, AFG’s former annuity operations are reported as discontinued operations.

AFG reported net earnings from continuing operations attributable to shareholders of $219 million ($2.56 per share, diluted) for the third quarter of 2021 compared to $88 million ($1.00 per share, diluted) for the third quarter of 2020, reflecting higher underwriting profit and higher net investment income in the third quarter of 2021 compared to the third quarter of 2020 and the impact of special A&E charges recorded in the third quarter of 2020, partially offset by net realized losses on securities in the third quarter of 2021 compared to net realized gains on securities in the third quarter of 2020.

AFG reported net earnings from continuing operations attributable to shareholders of $726 million ($8.45 per share, diluted) for the first nine months of 2021 compared to $60 million ($0.66 per share, diluted) for the first nine months of 2020 reflecting higher underwriting profit and net investment income, net realized gains on securities in 2021 compared to net realized losses in 2020 and the impact of special A&E charges recorded in 2020, partially offset by higher interest charges on borrowed money and holding company expenses.

Outlook

The COVID-19 pandemic began to have a significant impact on global, social and economic activity during the first quarter of 2020. AFG has taken actions under its business continuity plan to minimize risk to the Company’s employees and to prevent any significant disruption to AFG’s business, agents or policyholders.

Management believes that AFG’s strong financial position and current liquidity and capital at its subsidiaries will give AFG the flexibility to continue to effectively address and respond to the ongoing uncertainties presented by the pandemic. AFG’s insurance subsidiaries continue to have capital at or in excess of the levels required by ratings agencies in order to maintain their current ratings, and the parent company does not have any near-term debt maturities.

As a result of the contracted economy, exposures in many of AFG’s property and casualty businesses changed due to workforce reduction, fewer miles driven and reduced revenue. This has and may continue to lead to lower frequency in certain lines while there has and may continue to be COVID-19 related increases in claim frequency in other lines of business.

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AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

There is also uncertainty as to potential government decree or legislation that could alter the coverage landscape, such as the imposition of retroactive business interruption insurance. Like most of the insurance industry, AFG’s business interruption coverages require direct physical damage to covered property for business interruption coverage to apply and the vast majority of AFG’s property policies also contain virus exclusions.

CRITICAL ACCOUNTING POLICIES

Significant accounting policies are summarized in Note A — “Accounting Policies” to the financial statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that can have a significant effect on amounts reported in the financial statements. As more information becomes known, these estimates and assumptions change and, thus, impact amounts reported in the future. The areas related to AFG’s continuing operations where management believes the degree of judgment required to determine amounts recorded in the financial statements is most significant are as follows:

•the establishment of insurance reserves, especially asbestos and environmental-related reserves,

•the recoverability of reinsurance,

•the establishment of asbestos and environmental liabilities of former railroad and manufacturing operations, and

•the valuation of investments, including the determination of impairment allowances.

For a discussion of these policies, see Management’s Discussion and Analysis — “Critical Accounting Policies” in AFG’s 2020 Form 10-K.

LIQUIDITY AND CAPITAL RESOURCES

Ratios

AFG’s debt to total capital ratio on a consolidated basis is shown below (dollars in millions):

	September 30, 2021			December 31,
				2020			2019
Principal amount of long-term debt	$	1,993		$	1,993		$	1,493
Total capital	7,055			7,486			6,883
Ratio of debt to total capital:
Including subordinated debt	28.2		%	26.6		%	21.7		%
Excluding subordinated debt	18.7		%	17.6		%	14.8		%

The ratio of debt to total capital is a non-GAAP measure that management believes is useful for investors, analysts and ratings agencies to evaluate AFG’s financial strength and liquidity and to provide insight into how AFG finances its operations. In addition, maintaining a ratio of debt, excluding subordinated debt and debt secured by real estate (if any), to total capital of 35% or lower is a financial covenant in AFG’s bank credit facility. The ratio is calculated by dividing the principal amount of AFG’s long-term debt by its total capital, which includes long-term debt, noncontrolling interests and shareholders’ equity (excluding unrealized gains (losses) related to fixed maturity investments).

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AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

Condensed Consolidated Cash Flows

AFG’s principal sources of cash include insurance premiums, income from its investment portfolio and proceeds from the maturities, redemptions and sales of investments. Insurance premiums in excess of acquisition expenses and operating costs are invested until they are needed to meet policyholder obligations or made available to the parent company through dividends to cover debt obligations and corporate expenses, and to provide returns to shareholders through share repurchases and dividends. Cash flows from operating, investing and financing activities as detailed in AFG’s Consolidated Statement of Cash Flows are shown below (in millions):

	Nine months ended September 30,
	2021		2020
Net cash provided by operating activities	$	1,425	$	1,696
Net cash used in investing activities	(103)		(772)
Net cash provided by (used in) financing activities	(1,299)		509
Net change in cash and cash equivalents	$	23	$	1,433

Net Cash Provided by Operating Activities   AFG’s property and casualty insurance operations typically produce positive net operating cash flows as premiums collected and investment income exceed policy acquisition costs, claims payments and operating expenses. AFG’s net cash provided by operating activities is impacted by the level and timing of property and casualty premiums, claim and expense payments and recoveries from reinsurers. AFG’s discontinued annuity operations typically produced positive net operating cash flows as investment income exceeded acquisition costs and operating expenses. Interest credited on annuity policyholder funds is a non-cash increase in AFG’s annuity benefits accumulated liability and annuity premiums, benefits and withdrawals are considered financing activities due to the deposit-type nature of annuities. Cash flows provided by operating activities also include the activity of AFG’s managed investment entities (collateralized loan obligations (“CLO”)) other than those activities included in investing or financing activities. The changes in the assets and liabilities of the managed investment entities included in operating activities reduced cash flows from operating activities by $78 million during the first nine months of 2021 and increased cash flows from operating activities by $99 million in the first nine months of 2020, accounting for a $177 million decline in cash flows from operating activities in the 2021 period compared to the 2020 period. As discussed in Note A — “Accounting Policies — Managed Investment Entities” to the financial statements, AFG has no right to use the CLO assets and no obligation to pay the CLO liabilities and such assets and liabilities are shown separately in AFG’s Balance Sheet. Excluding the impact of the managed investment entities, net cash provided by operating activities was $1.50 billion in the first nine months of 2021 compared to $1.60 billion in the first nine months of 2020, a decrease of $94 million.

Net Cash Used in Investing Activities   AFG’s investing activities consist primarily of the investment of funds provided by its property and casualty businesses and, prior to the May 2021 sale, its discontinued annuity operations. In May 2021, AFG sold its annuity business to MassMutual for initial cash proceeds of $3.54 billion. This increase in cash provided by investing activities was partially offset by a decrease in cash and cash equivalents of $2.06 billion representing balances held in the annuity subsidiaries that were sold. Excluding the impact of the May 2021 sale of the annuity business, net cash used in investing activities was $1.58 billion for the first nine months of 2021 compared to $772 million in the first nine months of 2020, an increase of $808 million. As discussed below (under net cash provided by (used in) financing activities), AFG’s discontinued annuity operations had net cash flows from annuity policyholders of $477 million in 2021 through the May 31, 2021 effective date of the sale compared to $260 million in the first nine months of 2020. In addition to the investment of funds provided by the insurance operations, investing activities also include the purchase and disposal of managed investment entity investments, which are presented separately in AFG’s Balance Sheet. Net investment activity in the managed investment entities was a $99 million source of cash in the first nine months of 2021 compared to a $60 million use of cash in the 2020 period, accounting for a $159 million decrease in net cash used in investing activities in the first nine months of 2021 compared to the same 2020 period. See Note A — “Accounting Policies — Managed Investment Entities” and Note G — “Managed Investment Entities” to the financial statements.

Net Cash Provided by (Used in) Financing Activities   AFG’s financing activities consist primarily of issuances and retirements of long-term debt, issuances and repurchases of common stock, dividend payments and, prior to the sale of the annuity business, transactions with annuity policyholders. Net cash used in financing activities was $1.30 billion for the first nine months of 2021 compared to net cash provided by financing activities of $509 million in the first nine months of 2020, a decrease in net cash provided by financing activities of $1.81 billion. Net annuity receipts exceeded annuity surrenders, benefits, withdrawals and transfers by $477 million in 2021 through the May 31, 2021 effective date of the sale compared to $260 million in the first nine months of 2020, accounting for a $217 million increase in net cash provided by financing activities in the 2021 period compared to the 2020 period. In the first nine months of 2020, AFG issued

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AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

$150 million of 5.625% Subordinated Debentures due in 2060, $300 million of 5.25% Senior Notes due in 2030 and $200 million of 4.50% Subordinated Debentures due in 2060. The net proceeds of these offerings contributed $635 million to net cash provided by financing activities in the first nine months of 2020. During the first nine months of 2021, AFG repurchased $318 million of its Common Stock compared to $233 million in the 2020 period. In addition to its regular quarterly cash dividends, AFG paid special cash dividends of $2.00 per share in August 2021 and $14.00 per share in June 2021 totaling $1.36 billion, which resulted in total cash dividends paid of $1.48 billion in the first nine months of 2021 compared to $119 million in the first nine months of 2020. Financing activities also include issuances and retirements of managed investment entity liabilities, which are nonrecourse to AFG and presented separately in AFG’s Balance Sheet. Retirements of managed investment entity liabilities exceeded issuances by $36 million in the first nine months of 2021 compared to $49 million in the first nine months of 2020, accounting for a $13 million increase in net cash provided by financing activities in the 2021 period compared to the 2020 period. See Note A — “Accounting Policies — Managed Investment Entities” and Note G — “Managed Investment Entities” to the financial statements.

Parent and Subsidiary Liquidity

Parent Holding Company Liquidity   Management believes AFG has sufficient resources to meet its liquidity requirements. If funds generated from operations, including dividends, tax payments and borrowings from subsidiaries, are insufficient to meet fixed charges in any period, AFG would be required to utilize parent company cash and investments or to generate cash through borrowings, sales of other assets, or similar transactions.

As discussed above, AFG sold its annuity business to MassMutual for proceeds of $3.57 billion (including $34 million in preliminary post-closing adjustments). AFG’s capital and liquidity was significantly enhanced as a result of the transaction. During the first nine months of 2021, AFG repurchased 2,769,182 shares of its Common Stock for $318 million and declared special cash dividends of $14.00 per share in May, $2.00 per share in July, and $4.00 per share in

September totaling $1.70 billion. In addition, on November 2, 2021, AFG declared a special cash dividend of $4.00 per share, payable on November 22, 2021. The aggregate amount of this special dividend will be approximately $340 million. Management will continue to evaluate opportunities for deploying AFG’s significant remaining excess capital, including returning capital to shareholders in the form of regular and special cash dividends and through opportunistic share repurchases. In addition, excess capital will be deployed into AFG’s core businesses as management identifies the potential for healthy, profitable organic growth, and opportunities to expand the Specialty property and casualty niche businesses through acquisitions and start-ups that meet target return thresholds.

In 2020, AFG repurchased 4,531,394 shares of its Common Stock for $313 million and paid a special cash dividend of $2.00 per share of AFG Common Stock in December totaling $173 million.

In 2020, AFG issued $300 million of 5.25% Senior Notes due in April 2030, $150 million of 5.625% Subordinated Debentures due in June 2060 and $200 million of 4.50% Subordinated Debentures due in September 2060 to increase liquidity and provide flexibility at the parent holding company in its response to the uncertainties of the economic environment. The net proceeds from the offerings were used for general corporate purposes, which included repurchases of outstanding common shares and the November 2020 redemption of AFG’s $150 million outstanding principal amount of 6% Subordinated Debentures due in November 2055 at par value.

AFG can borrow up to $500 million under its revolving credit facility, which expires in December 2025. Amounts borrowed under this agreement bear interest at rates ranging from 1.00% to 1.875% (currently 1.375%) over LIBOR based on AFG’s credit rating. The credit facility also includes provisions relating to the replacement of LIBOR with different floating rates in the event of the discontinuance of LIBOR. There were no borrowings under this agreement, or under any other parent company short-term borrowing arrangements, during 2020 or the first nine months of 2021.

Under a tax allocation agreement with AFG, its 80%-owned U.S. subsidiaries generally pay taxes to (or recover taxes from) AFG based on each subsidiary’s contribution to amounts due under AFG’s consolidated tax return.

Subsidiary Liquidity   The liquidity requirements of AFG’s insurance subsidiaries relate primarily to the policyholder claims and underwriting expenses and payments of dividends and taxes to AFG. Historically, cash flows from premiums and investment income have generally provided more than sufficient funds to meet these requirements. Funds received in excess of cash requirements are generally invested in additional marketable securities. In addition, the insurance subsidiaries generally hold a significant amount of highly liquid, short duration investments.

AFG believes its insurance subsidiaries maintain sufficient liquidity to pay claims and underwriting expenses. In addition, these subsidiaries have sufficient capital to meet commitments in the event of unforeseen events such as reserve

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AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

deficiencies, inadequate premium rates or reinsurer insolvencies. Even in the current uncertain COVID-19 environment, management believes that the capital levels in AFG’s insurance subsidiaries are adequate to maintain its business and rating agency ratings. Nonetheless, changes in statutory accounting rules, significant declines in the fair value of the insurance subsidiaries’ investment portfolios or significant ratings downgrades on these investments, could create a need for additional capital.

Investments

AFG’s investment portfolio at September 30, 2021, contained $10.43 billion in fixed maturity securities classified as available for sale and carried at fair value with unrealized gains and losses included in accumulated other comprehensive income and $29 million in fixed maturities classified as trading with holding gains and losses included in net investment income. In addition, AFG’s investment portfolio includes $712 million in equity securities carried at fair value with holding gains and losses included in realized gains (losses) on securities and $281 million in equity securities carried at fair value with holding gains and losses included in net investment income.

Fair values for AFG’s portfolio are determined by AFG’s internal investment professionals using data from nationally recognized pricing services as well as non-binding broker quotes. Fair values of equity securities are generally based on published closing prices. For AFG’s fixed maturity portfolio, approximately 84% was priced using pricing services at September 30, 2021 and the balance was priced primarily by using non-binding broker quotes. When prices obtained for the same security vary, AFG’s internal investment professionals select the price they believe is most indicative of an exit price.

The pricing services use a variety of observable inputs to estimate fair value of fixed maturities that do not trade on a daily basis. Based upon information provided by the pricing services, these inputs include, but are not limited to, recent reported trades, benchmark yields, issuer spreads, bids or offers, reference data, and measures of volatility. Included in the pricing of mortgage-backed securities (“MBS”) are estimates of the rate of future prepayments and defaults of principal over the remaining life of the underlying collateral. Due to the lack of transparency in the process that brokers use to develop prices, valuations that are based on brokers’ prices are classified as Level 3 in the GAAP hierarchy unless the price can be corroborated, for example, by comparison to similar securities priced using observable inputs.

Valuation techniques utilized by pricing services and prices obtained from external sources are reviewed by AFG’s internal investment professionals who are familiar with the securities being priced and the markets in which they trade to ensure the fair value determination is representative of an exit price. To validate the appropriateness of the prices obtained, these investment managers consider widely published indices (as benchmarks), recent trades, changes in interest rates, general economic conditions and the credit quality of the specific issuers. In addition, AFG communicates directly with pricing services regarding the methods and assumptions used in pricing, including verifying, on a test basis, the inputs used by the services to value specific securities.

In general, the fair value of AFG’s fixed maturity investments is inversely correlated to changes in interest rates. The following table demonstrates the sensitivity of such fair values to reasonably likely changes in interest rates by illustrating the estimated effect on AFG’s fixed maturity portfolio that an immediate increase of 100 basis points in the interest rate yield curve would have at September 30, 2021 (dollars in millions). Effects of increases or decreases from the 100 basis points illustrated would be approximately proportional.

Fair value of fixed maturity portfolio	$	10,456
Percentage impact on fair value of 100 bps increase in interest rates	(2.0		%)
Pretax impact on fair value of fixed maturity portfolio	$	(209)

Approximately 88% of the fixed maturities at September 30, 2021, were rated “investment grade” (credit rating of AAA to BBB) by nationally recognized rating agencies, 4% were rated “non-investment grade” and 8% were not rated. Investment grade securities generally bear lower yields and lower degrees of risk than those that are unrated and non-investment grade. Management believes that the high-quality investment portfolio should generate a stable and predictable investment return.

Municipal bonds represented approximately 19% of AFG’s fixed maturity portfolio at September 30, 2021. AFG’s municipal bond portfolio is high quality, with 99% of the securities rated investment grade at that date. The portfolio is well diversified across the states of issuance and individual issuers. At September 30, 2021, approximately 90% of the municipal bond portfolio was held in revenue bonds, with the remaining 10% held in general obligation bonds.

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AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

Summarized information for the unrealized gains and losses recorded in AFG’s Balance Sheet at September 30, 2021, is shown in the following table (dollars in millions). Approximately $1.06 billion of available for sale fixed maturity securities had no unrealized gains or losses at September 30, 2021.

	Securities With Unrealized Gains			Securities With Unrealized Losses
Available for Sale Fixed Maturities
Fair value of securities	$	7,212		$	2,156
Amortized cost of securities, net of allowance for expected credit losses	$	6,973		$	2,170
Gross unrealized gain (loss)	$	239		$	(14)
Fair value as % of amortized cost	103		%	99		%
Number of security positions	1,761			394
Number individually exceeding $2 million gain or loss	3			—
Concentration of gains (losses) by type or industry (exceeding 5% of unrealized):
States and municipalities	$	77		$	—
Mortgage-backed securities	54			(1)
Other asset-backed securities	25			(5)
Other financial institutions	8			(1)
Collateralized loan obligations	5			(2)
U.S. Government and government agencies	3			(1)
Percentage rated investment grade	93		%	94		%

The table below sets forth the scheduled maturities of AFG’s available for sale fixed maturity securities at September 30, 2021, based on their fair values. 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.

	Securities With Unrealized Gains		Securities With Unrealized Losses
Maturity
One year or less	10	%	1	%
After one year through five years	32	%	15	%
After five years through ten years	11	%	6	%
After ten years	3	%	1	%
	56	%	23	%
Collateralized loan obligations and other asset-backed securities (average life of approximately 3 years)	34	%	74	%
Mortgage-backed securities (average life of approximately 3 years)	10	%	3	%
	100	%	100	%

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AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

The table below (dollars in millions) summarizes the unrealized gains and losses on fixed maturity securities by dollar amount:

	Aggregate Fair Value		Aggregate Unrealized Gain (Loss)		Fair Value as % of Cost
Fixed Maturities at September 30, 2021
Securities with unrealized gains:
Exceeding $500,000 (104 securities)	$	1,226	$	93	108	%
$500,000 or less (1,657 securities)	5,986		146		103	%
	$	7,212	$	239	103	%
Securities with unrealized losses:
Exceeding $500,000 (1 security)	$	1	$	(1)	50	%
$500,000 or less (393 securities)	2,155		(13)		99	%
	$	2,156	$	(14)	99	%

The following table (dollars in millions) summarizes the unrealized losses for all securities with unrealized losses by issuer quality and the length of time those securities have been in an unrealized loss position:

	Aggregate Fair Value		Aggregate Unrealized Loss		Fair Value as % of Cost
Securities with Unrealized Losses at September 30, 2021
Investment grade fixed maturities with losses for:
Less than one year (214 securities)	$	1,740	$	(7)	100	%
One year or longer (68 securities)	285		(3)		99	%
	$	2,025	$	(10)	100	%
Non-investment grade fixed maturities with losses for:
Less than one year (61 securities)	$	99	$	(1)	99	%
One year or longer (51 securities)	32		(3)		91	%
	$	131	$	(4)	97	%

When a decline in the value of a specific investment is considered to be other-than-temporary, an allowance for credit losses (impairment) is charged to earnings (accounted for as a realized loss). The determination of whether unrealized losses are other-than-temporary requires judgment based on subjective as well as objective factors as detailed in AFG’s 2020 Form 10-K under Management’s Discussion and Analysis — “Investments.”

Based on its analysis, management believes AFG will recover its cost basis (net of any allowance) in the fixed maturity securities with unrealized losses and that AFG has the ability to hold the securities until they recover in value and had no intent to sell them at September 30, 2021. Although AFG has the ability to continue holding its fixed maturity investments with unrealized losses, its intent to hold them may change due to deterioration in the issuers’ creditworthiness, decisions to lessen exposure to a particular issuer or industry, asset/liability management decisions, market movements, changes in views about appropriate asset allocation or the desire to offset taxable realized gains. Should AFG’s ability or intent change regarding a particular security, a charge for impairment would likely be required. While it is not possible to accurately predict if or when a specific security will become impaired, increases in the allowance for credit losses could be material to results of operations in future periods. Significant declines in the fair value of AFG’s investment portfolio could have a significant adverse effect on AFG’s liquidity. For information on AFG’s realized gains (losses) on securities, see “Results of Operations — Realized Gains (Losses) on Securities.”

Uncertainties

Management believes that the areas posing the greatest risk of material loss are the adequacy of its insurance reserves and contingencies arising out of its former railroad and manufacturing operations. See “Special asbestos and environmental reserve charges” under “Results of Operations — Property and Casualty Insurance Segment — Net prior year reserve development” for the quarters ended September 30, 2021 and 2020 and Management’s Discussion and

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AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

Analysis — “Uncertainties — Asbestos and Environmental-related (“A&E”) Insurance Reserves” in AFG’s 2020 Form 10–K.

MANAGED INVESTMENT ENTITIES

Accounting standards require AFG to consolidate its investments in collateralized loan obligation (“CLO”) entities that it manages and owns an interest in (in the form of debt). See Note A — “Accounting Policies — Managed Investment Entities” and Note G — “Managed Investment Entities” to the financial statements. The effect of consolidating these entities is shown in the tables below (in millions). The “Before CLO Consolidation” columns include AFG’s investment and earnings in the CLOs on an unconsolidated basis.

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AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

CONDENSED CONSOLIDATING BALANCE SHEET

	Before CLO Consolidation		Managed Investment Entities		Consol. Entries			Consolidated As Reported
September 30, 2021
Assets:
Cash and investments	$	16,483	$	—	$	(96)	(*)	$	16,387
Assets of managed investment entities	—		5,130		—			5,130
Other assets	8,425		—		—		(*)	8,425
Total assets	$	24,908	$	5,130	$	(96)		$	29,942
Liabilities:
Unpaid losses and loss adjustment expenses and unearned premiums	$	14,406	$	—	$	—		$	14,406
Liabilities of managed investment entities	—		5,090		(56)		(*)	5,034
Long-term debt and other liabilities	5,262		—		—			5,262
Total liabilities	19,668		5,090		(56)			24,702
Shareholders’ equity:
Common Stock and Capital surplus	1,400		40		(40)			1,400
Retained earnings	3,680		—		—			3,680
Accumulated other comprehensive income, net of tax	160		—		—			160
Total shareholders’ equity	5,240		40		(40)			5,240
Noncontrolling interests	—		—		—			—
Total equity	5,240		40		(40)			5,240
Total liabilities and equity	$	24,908	$	5,130	$	(96)		$	29,942
December 31, 2020
Assets:
Cash and investments	$	13,550	$	—	$	(56)	(*)	$	13,494
Assets of managed investment entities	—		4,971		—			4,971
Other assets	7,361		—		(1)		(*)	7,360
Assets of discontinued annuity operations	47,885		—		—			47,885
Total assets	$	68,796	$	4,971	$	(57)		$	73,710
Liabilities:
Unpaid losses and loss adjustment expenses and unearned premiums	$	13,195	$	—	$	—		$	13,195
Liabilities of managed investment entities	—		4,971		(57)		(*)	4,914
Long-term debt and other liabilities	4,354		—		—			4,354
Liabilities of discontinued annuity operations	44,458		—		—			44,458
Total liabilities	62,007		4,971		(57)			66,921
Shareholders’ equity:
Common Stock and Capital surplus	1,367		—		—			1,367
Retained earnings	4,149		—		—			4,149
Accumulated other comprehensive income, net of tax	1,273		—		—			1,273
Total shareholders’ equity	6,789		—		—			6,789
Noncontrolling interests	—		—		—			—
Total equity	6,789		—		—			6,789
Total liabilities and equity	$	68,796	$	4,971	$	(57)		$	73,710

(*)Elimination of the fair value of AFG’s investment in CLOs and related accrued interest.

44

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

CONDENSED CONSOLIDATING STATEMENT OF EARNINGS

	Before CLO Consol. (a)		Managed Investment Entities		Consol. Entries			Consolidated As Reported
Three months ended September 30, 2021
Revenues:
Property and casualty insurance net earned premiums	$	1,529	$	—	$	—		$	1,529
Net investment income	174		—		(5)		(b)	169
Realized gains (losses) on:
Securities	(17)		—		—			(17)
Subsidiaries	—		—		—			—
Income of managed investment entities:
Investment income	—		45		—			45
Gain (loss) on change in fair value of assets/liabilities	—		(1)		2		(b)	1
Other income	31		—		(4)		(c)	27
Total revenues	1,717		44		(7)			1,754
Costs and Expenses:
Insurance benefits and expenses	1,371		—		—			1,371
Expenses of managed investment entities	—		44		(7)		(b)(c)	37
Interest charges on borrowed money and other expenses	79		—		—			79
Total costs and expenses	1,450		44		(7)			1,487
Earnings from continuing operations before income taxes	267		—		—			267
Provision (credit) for income taxes	48		—		—			48
Net earnings from continuing operations, including noncontrolling interests	219		—		—			219
Less: Net earnings (loss) from continuing operations attributable to noncontrolling interests	—		—		—			—
Net earnings attributable to shareholders	$	219	$	—	$	—		$	219
Three months ended September 30, 2020
Revenues:
Property and casualty insurance net earned premiums	$	1,381	$	—	$	—		$	1,381
Net investment income	126		—		(4)		(b)	122
Realized gains (losses) on:
Securities	23		—		—			23
Subsidiaries	(30)		—		—			(30)
Income of managed investment entities:
Investment income	—		46		—			46
Gain (loss) on change in fair value of assets/liabilities	—		(8)		3		(b)	(5)
Other income	22		—		(3)		(c)	19
Total revenues	1,522		38		(4)			1,556
Costs and Expenses:
Insurance benefits and expenses	1,369		—		—			1,369
Expenses of managed investment entities	—		38		(4)		(b)(c)	34
Interest charges on borrowed money and other expenses	113		—		—			113
Total costs and expenses	1,482		38		(4)			1,516
Earnings from continuing operations before income taxes	40		—		—			40
Provision (credit) for income taxes	(48)		—		—			(48)
Net earnings from continuing operations, including noncontrolling interests	88		—		—			88
Net earnings (loss) from discontinued operations	76		—		—			76
Less: Net earnings (loss) from continuing operations attributable to noncontrolling interests	—		—		—			—
Net earnings attributable to shareholders	$	164	$	—	$	—		$	164

(a)Includes income of $5 million in the third quarter of 2021 and $4 million in the third quarter of 2020, representing the change in fair value of AFG’s CLO investments plus $4 million and $3 million in the third quarter of 2021 and 2020, respectively, in CLO management fees earned.

(b)Elimination of the change in fair value of AFG’s investments in the CLOs, including $3 million in the third quarter of 2021 and $1 million in the third quarter of 2020, in distributions recorded as interest expense by the CLOs.

(c)Elimination of management fees earned by AFG.

45

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

CONDENSED CONSOLIDATING STATEMENT OF EARNINGS

	Before CLO Consol. (a)		Managed Investment Entities		Consol. Entries			Consolidated As Reported
Nine months ended September 30, 2021
Revenues:
Property and casualty insurance net earned premiums	$	3,952	$	—	$	—		$	3,952
Net investment income	538		—		(17)		(b)	521
Realized gains (losses) on:
Securities	103		—		—			103
Subsidiaries	4		—		—			4
Income of managed investment entities:
Investment income	—		135		—			135
Gain (loss) on change in fair value of assets/liabilities	—		1		8		(b)	9
Other income	82		—		(12)		(c)	70
Total revenues	4,679		136		(21)			4,794
Costs and Expenses:
Insurance benefits and expenses	3,522		—		—			3,522
Expenses of managed investment entities	—		136		(21)		(b)(c)	115
Interest charges on borrowed money and other expenses	267		—		—			267
Total costs and expenses	3,789		136		(21)			3,904
Earnings from continuing operations before income taxes	890		—		—			890
Provision (credit) for income taxes	164		—		—			164
Net earnings from continuing operations, including noncontrolling interests	726		—		—			726
Net earnings (loss) from discontinued operations	914		—		—			914
Less: Net earnings (loss) from continuing operations attributable to noncontrolling interests	—		—		—			—
Net earnings attributable to shareholders	$	1,640	$	—	$	—		$	1,640
Nine months ended September 30, 2020
Revenues:
Property and casualty insurance net earned premiums	$	3,774	$	—	$	—		$	3,774
Net investment income	307		—		7		(b)	314
Realized gains (losses) on:
Securities	(197)		—		—			(197)
Subsidiaries	(30)		—		—			(30)
Income of managed investment entities:
Investment income	—		154		—			154
Gain (loss) on change in fair value of assets/liabilities	—		(10)		(11)		(b)	(21)
Other income	73		—		(11)		(c)	62
Total revenues	3,927		144		(15)			4,056
Costs and Expenses:
Insurance benefits and expenses	3,676		—		—			3,676
Expenses of managed investment entities	—		144		(15)		(b)(c)	129
Interest charges on borrowed money and other expenses	256		—		—			256
Total costs and expenses	3,932		144		(15)			4,061
Earnings from continuing operations before income taxes	(5)		—		—			(5)
Provision (credit) for income taxes	(52)		—		—			(52)
Net earnings from continuing operations, including noncontrolling interests	47		—		—			47
Net earnings (loss) from discontinued operations	(20)		—		—			(20)
Less: Net earnings (loss) from continuing operations attributable to noncontrolling interests	(13)		—		—			(13)
Net earnings attributable to shareholders	$	40	$	—	$	—		$	40

(a)Includes income of $17 million in the first nine months of 2021 and a loss of $7 million in the first nine months of 2020, representing the change in fair value of AFG’s CLO investments plus $12 million and $11 million in the first nine months of 2021 and the first nine months of 2020, respectively, in CLO management fees earned.

(b)Elimination of the change in fair value of AFG’s investments in the CLOs, including $9 million in the first nine months of 2021 and $4 million in the first nine months of 2020, in distributions recorded as interest expense by the CLOs.

(c)Elimination of management fees earned by AFG.

46

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

RESULTS OF OPERATIONS

General

AFG’s net earnings attributable to shareholders, determined in accordance with GAAP, include certain items that may not be indicative of its ongoing core operations. In addition to discontinued operations, core net operating earnings excludes realized gains (losses) on securities because such gains and losses are influenced significantly by financial markets, interest rates and the timing of sales. In addition, special charges related to coverage that AFG no longer writes, such as for asbestos and environmental exposures, are excluded from core earnings.

In January 2021, AFG entered into a definitive agreement to sell its annuity business to MassMutual. Beginning with the first quarter of 2021 and through the May 31, 2021 effective date of the sale, the results of its annuity segment and the run-off life and long-term care operations are reported as discontinued operations, in accordance with GAAP, which included adjusting prior period results to reflect these operations as discontinued.

AFG recorded $914 million in non-core net earnings from the discontinued annuity operations in the first nine months of 2021, which includes a $656 million after tax gain on the sale, compared to non-core net losses of $20 million in the first nine months of 2020. See “Discontinued Annuity Operations” below for details of the impact of the discontinued annuity operations on AFG’s net earnings attributable to shareholders for the third quarter of 2020 and first nine months of 2021 and 2020.

In December 2019, AFG initiated actions to exit the Lloyd’s of London insurance market, which included placing its Lloyd’s subsidiaries including its Lloyd’s Managing Agency, Neon Underwriting Ltd., into run-off. Neon and its predecessor, Marketform, failed to achieve AFG’s profitability objectives since AFG’s purchase of Marketform in 2008. Consistent with the treatment of other items that are not indicative of AFG’s ongoing operations (both favorable and unfavorable), beginning with the first quarter of 2020, AFG’s core net operating earnings for its property and casualty insurance segment excludes the run-off operations of Neon (“Neon exited lines”). In December 2020, AFG sold GAI Holding Bermuda and its subsidiaries, comprising the legal entities that own Neon, to RiverStone Holdings Limited.

AFG recorded non-core net losses of $109 million in the first nine months of 2020 related to the run-off of the Neon business, which, in accordance with generally accepted accounting principles, included an estimated $30 million loss on the sale of the business. In conjunction with the sale, AFG recognized a tax benefit of $73 million, resulting in a net unfavorable $36 million non-core after tax impact from the Neon exited lines in the first nine months of 2020. In the first nine months of 2021, AFG recognized a non-core after tax gain of $3 million related to contingent consideration received on the sale of Neon.

47

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

The following table (in millions, except per share amounts) identifies non-core items and reconciles net earnings attributable to shareholders to core net operating earnings, a non-GAAP financial measure. AFG believes core net operating earnings is a useful tool for investors and analysts in analyzing ongoing operating trends and for management to evaluate financial performance against historical results because it believes this provides a more comparable measure of its continuing business.

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Components of net earnings attributable to shareholders:
Core operating earnings before income taxes	$	284	$	155	$	794	$	382
Pretax non-core items:
Realized gains (losses) on securities	(17)		23		103		(197)
Neon exited lines (*)	—		(70)		4		(122)
Special A&E charges	—		(68)		—		(68)
Other	—		—		(11)		—
Earnings (loss) before income taxes	267		40		890		(5)
Provision (credit) for income taxes:
Core operating earnings	53		34		152		76
Non-core items:
Realized gains (losses) on securities	(5)		5		20		(41)
Neon exited lines (*)	—		(73)		1		(73)
Special A&E charges	—		(14)		—		(14)
Other	—		—		(9)		—
Total provision (credit) for income taxes	48		(48)		164		(52)
Net earnings from continuing operations, including noncontrolling interests	219		88		726		47
Net earnings (loss) from discontinued operations	—		76		914		(20)
Less net earnings (loss) from continuing operations attributable to noncontrolling interests:
Neon exited lines (*)	—		—		—		(13)
Net earnings attributable to shareholders	$	219	$	164	$	1,640	$	40
Net earnings:
Core net operating earnings	$	231	$	121	$	642	$	306
Realized gains (losses) on securities	(12)		18		83		(156)
Neon exited lines (*)	—		3		3		(36)
Special A&E charges	—		(54)		—		(54)
Other	—		—		(2)		—
Net earnings from continuing operations	219		88		726		60
Discontinued annuity operations	—		76		914		(20)
Net earnings attributable to shareholders	$	219	$	164	$	1,640	$	40
Diluted per share amounts:
Core net operating earnings	$	2.71	$	1.38	$	7.48	$	3.40
Realized gains (losses) on securities	(0.15)		0.20		0.95		(1.72)
Neon exited lines (*)	—		0.03		0.04		(0.41)
Special A&E charges	—		(0.61)		—		(0.61)
Other	—		—		(0.02)		—
Diluted per share amounts, continuing operations	2.56		1.00		8.45		0.66
Discontinued annuity operations	—		0.86		10.66		(0.21)
Net earnings attributable to shareholders	$	2.56	$	1.86	$	19.11	$	0.45

(*)As discussed above, the Neon run-off operations are considered property and casualty insurance non-core earnings (losses). In the first nine months of 2021, AFG recognized a non-core after tax gain of $3 million related to contingent consideration received on the sale of Neon.

48

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

Net earnings attributable to shareholders were $219 million in the third quarter of 2021 compared to $164 million in the third quarter of 2020. The improved results reflects higher core net operating earnings and the impact of special A&E charges recorded in the third quarter of 2020, partially offset by net realized losses in the third quarter of 2021 compared to net realized gains on securities in the third quarter of 2020 and net earnings from the discontinued annuity operations in the third quarter of 2020. Core net operating earnings for the third quarter of 2021 increased $110 million compared to the third quarter of 2020 reflecting higher underwriting profit and net investment income in the property and casualty insurance segment. Realized gains (losses) on securities in the third quarter of 2021 and 2020 resulted primarily from the change in fair value of equity securities that were still held at the balance sheet date.

Net earnings attributable to shareholders were $1.64 billion in the first nine months of 2021 compared to $40 million in the first nine months of 2020. The improved results reflect higher core net operating earnings, net realized gains on securities in the first nine months of 2021 compared to net realized losses in the first nine months of 2020, the impact of special A&E charges and non-core losses from the Neon exited lines in the 2020 period and net earnings from the discontinued annuity operations in the first nine months of 2021 (through the sale date) compared to a net loss in the first nine months of 2020. The discontinued annuity operations includes an after-tax gain from the sale of the annuity subsidiaries of $656 million in the 2021 period. Core net operating earnings for the first nine months of 2021 increased $336 million compared to the first nine months of 2020 reflecting higher underwriting profit and net investment income in the property and casualty insurance segment, partially offset by higher interest charges on borrowed money and higher holding company expenses. Realized gains (losses) on securities in the first nine months of 2021 and 2020 resulted primarily from the change in fair value of equity securities that were still held at the balance sheet date.

RESULTS OF OPERATIONS — THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

Segmented Statement of Earnings

Subsequent to the agreement to sell the Annuity subsidiaries, AFG reports its continuing operations as two segments: (i) Property and casualty insurance (“P&C”) and (ii) Other, which includes holding company costs and income and expenses related to the managed investment entities (“MIEs”).

49

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

AFG’s net earnings attributable to shareholders, determined in accordance with GAAP, include certain items that may not be indicative of its ongoing core operations. The following tables for the three months ended September 30, 2021 and 2020 identify such items by segment and reconcile net earnings attributable to shareholders to core net operating earnings, a non-GAAP financial measure that AFG believes is a useful tool for investors and analysts in analyzing ongoing operating trends (in millions):

			Other
	P&C		Annuity		Consol. MIEs		Holding Co., other and unallocated		Total		Non-core reclass		GAAP Total
Three months ended September 30, 2021
Revenues:
Property and casualty insurance net earned premiums	$	1,529	$	—	$	—	$	—	$	1,529	$	—	$	1,529
Net investment income	165		—		(5)		9		169		—		169
Realized gains (losses) on securities	—		—		—		—		—		(17)		(17)
Income of MIEs:
Investment income	—		—		45		—		45		—		45
Gain (loss) on change in fair value of assets/liabilities	—		—		1		—		1		—		1
Other income	4		—		(4)		27		27		—		27
Total revenues	1,698		—		37		36		1,771		(17)		1,754
Costs and Expenses:
Property and casualty insurance:
Losses and loss adjustment expenses	954		—		—		—		954		—		954
Commissions and other underwriting expenses	407		—		—		10		417		—		417
Interest charges on borrowed money	—		—		—		24		24		—		24
Expenses of MIEs	—		—		37		—		37		—		37
Other expenses	8		—		—		47		55		—		55
Total costs and expenses	1,369		—		37		81		1,487		—		1,487
Earnings (loss) from continuing operations before income taxes	329		—		—		(45)		284		(17)		267
Provision (credit) for income taxes	64		—		—		(11)		53		(5)		48
Net earnings from continuing operations, including noncontrolling interests	265		—		—		(34)		231		(12)		219
Less: Net earnings (loss) from continuing operations attributable to noncontrolling interests	—		—		—		—		—		—		—
Core Net Operating Earnings	265		—		—		(34)		231
Non-core earnings (loss) attributable to shareholders (a):
Realized gains (losses) on securities, net of tax	—		—		—		(12)		(12)		12		—
Net Earnings Attributable to Shareholders	$	265	$	—	$	—	$	(46)	$	219	$	—	$	219

50

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

			Other
	P&C		Annuity		Consol. MIEs		Holding Co., other and unallocated		Total		Non-core reclass		Neon exited lines (b)		GAAP Total
Three months ended September 30, 2020
Revenues:
Property and casualty insurance net earned premiums	$	1,339	$	—	$	—	$	—	$	1,339	$	—	$	42	$	1,381
Net investment income	111		10		(4)		4		121		—		1		122
Realized gains (losses) on:
Securities	—		—		—		—		—		23		—		23
Subsidiaries	—		—		—		—		—		—		(30)		(30)
Income of MIEs:
Investment income	—		—		46		—		46		—		—		46
Gain (loss) on change in fair value of assets/liabilities	—		—		(5)		—		(5)		—		—		(5)
Other income	—		1		(3)		21		19		—		—		19
Total revenues	1,450		11		34		25		1,520		23		13		1,556
Costs and Expenses:
Property and casualty insurance:
Losses and loss adjustment expenses	856		—		—		—		856		47		60		963
Commissions and other underwriting expenses	380		—		—		6		386		—		20		406
Interest charges on borrowed money	—		—		—		24		24		—		—		24
Expenses of MIEs	—		—		34		—		34		—		—		34
Other expenses	9		8		—		48		65		21		3		89
Total costs and expenses	1,245		8		34		78		1,365		68		83		1,516
Earnings (loss) from continuing operations before income taxes	205		3		—		(53)		155		(45)		(70)		40
Provision (credit) for income taxes	46		1		—		(13)		34		(9)		(73)		(48)
Net earnings from continuing operations, including noncontrolling interests	159		2		—		(40)		121		(36)		3		88
Less: Net earnings (loss) from continuing operations attributable to noncontrolling interests	—		—		—		—		—		—		—		—
Core Net Operating Earnings	159		2		—		(40)		121
Non-core earnings (loss) attributable to shareholders (a):
Realized gains (losses) on securities, net of tax	—		—		—		18		18		(18)		—		—
Discontinued operations, net of tax	—		78		—		(2)		76		—		—		76
Neon exited lines (b)	3		—		—		—		3		—		(3)		—
Special A&E charges, net of tax	(37)		—		—		(17)		(54)		54		—		—
Net Earnings Attributable to Shareholders	$	125	$	80	$	—	$	(41)	$	164	$	—	$	—	$	164

(a)See the reconciliation of core earnings to GAAP net earnings under “Results of Operations — General” for details on the tax and noncontrolling interest impacts of these reconciling items.

(b)As discussed under “Results of Operations — General,” the Neon run-off operations are considered property and casualty insurance non-core earnings (losses).

Property and Casualty Insurance Segment — Results of Operations

Performance measures such as underwriting profit or loss and related combined ratios are often used by property and casualty insurers to help users of their financial statements better understand the company’s performance. Underwriting profitability is measured by the combined ratio, which is a sum of the ratios of losses and loss adjustment expenses, and commissions and other underwriting expenses to premiums. A combined ratio under 100% indicates an underwriting profit. The combined ratio does not reflect net investment income, other income, other expenses or federal income taxes.

AFG’s property and casualty insurance operations contributed $329 million in GAAP pretax earnings in the third quarter of 2021 compared to $88 million in the third quarter of 2020, an increase of $241 million (274%). Property and casualty core pretax earnings were $329 million in the third quarter of 2021 compared to $205 million in the third quarter of 2020, an increase of $124 million (60%). The increase in GAAP pretax earnings reflects higher core pretax earnings and the impact of losses in the Neon exited lines (including the estimate loss on sale) and special A&E charges in the third quarter of 2020. The increase in core pretax earnings reflects higher core underwriting profit in the third quarter of 2021 compared

51

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

to the third quarter of 2020 and significantly higher net investment income. Improved results from alternative investments (partnerships and similar investments and AFG-managed CLOs) were partially offset by lower other net investment income, due primarily to lower short-term interest rates.

The following table details AFG’s GAAP and core earnings before income taxes from its property and casualty insurance operations for the three months ended September 30, 2021 and 2020 (dollars in millions):

	Three months ended September 30,
	2021		2020		% Change
Gross written premiums	$	2,656	$	2,223	19		%
Reinsurance premiums ceded	(927)		(735)		26		%
Net written premiums	1,729		1,488		16		%
Change in unearned premiums	(200)		(149)		34		%
Net earned premiums	1,529		1,339		14		%
Loss and loss adjustment expenses (a)	954		856		11		%
Commissions and other underwriting expenses	407		380		7		%
Core underwriting gain	168		103		63		%
Net investment income	165		111		49		%
Other income and expenses, net	(4)		(9)		(56		%)
Core earnings before income taxes	329		205		60		%
Pretax non-core special A&E charges	—		(47)		(100		%)
Pretax non-core Neon exited lines (b)	—		(70)		(100		%)
GAAP earnings before income taxes and noncontrolling interests	$	329	$	88	274		%
(a)Excludes pretax non-core special A&E charges of $47 million in the third quarter of 2020. (b)In December 2019, AFG initiated actions to exit the Lloyd’s of London insurance market, which included placing its Lloyd’s subsidiaries including its Lloyd’s Managing Agency, Neon Underwriting Ltd. (“Neon”), into run-off. As discussed under “Results of Operations — General,” following the December 2019 decision to exit the Lloyd’s of London insurance market, the results from the Neon exited lines are treated as non-core earnings (losses). Each line item in the table above has been adjusted to remove the impact from the Neon run-off operations in 2020. The following table details the impact of the Neon exited lines to each component of earnings (loss) before income taxes in the property and casualty insurance operations for the three months ended September 30, 2020 (in millions):
	Three months ended September 30, 2020
	Excluding Neon exited lines		Neon exited lines		Total
Gross written premiums	$	2,223	$	8	$	2,231
Reinsurance premiums ceded	(735)		(7)		(742)
Net written premiums	1,488		1		1,489
Change in unearned premiums	(149)		41		(108)
Net earned premiums	1,339		42		1,381
Loss and loss adjustment expenses	856		60		916
Commissions and other underwriting expenses	380		20		400
Underwriting gain (loss)	103		(38)		65
Net investment income	111		1		112
Loss on sale of subsidiaries	—		(30)		(30)
Other income and expenses, net	(9)		(3)		(12)
Earnings (loss) before income taxes and noncontrolling interests	205		(70)		135
Pretax non-core special A&E charges	(47)		—		(47)
GAAP earnings (loss) before income taxes and noncontrolling interests	$	158	$	(70)	$	88

52

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

	Three months ended September 30,
	2021		2020		Change
Combined Ratios:
Specialty lines
Loss and LAE ratio	62.4	%	63.8	%	(1.4	%)
Underwriting expense ratio	26.6	%	28.3	%	(1.7	%)
Combined ratio	89.0	%	92.1	%	(3.1	%)
Aggregate — including exited lines
Loss and LAE ratio	62.4	%	69.8	%	(7.4	%)
Underwriting expense ratio	26.6	%	29.0	%	(2.4	%)
Combined ratio	89.0	%	98.8	%	(9.8	%)

AFG reports the underwriting performance of its Specialty property and casualty insurance business in the following sub-segments: (i) Property and transportation, (ii) Specialty casualty and (iii) Specialty financial.

To understand the overall profitability of particular lines, the timing of claims payments and the related impact of investment income must be considered. Certain “short-tail” lines of business (primarily property coverages) generally have quick loss payouts, which reduce the time funds are held, thereby limiting investment income earned thereon. In contrast, “long-tail” lines of business (primarily liability coverages and workers’ compensation) generally have payouts that are either structured over many years or take many years to settle, thereby significantly increasing investment income earned on related premiums received.

Gross Written Premiums

Gross written premiums (“GWP”) for AFG’s property and casualty insurance segment were $2.66 billion for the third quarter of 2021 compared to $2.23 billion for the third quarter of 2020, an increase of $425 million (19%). Detail of AFG’s property and casualty gross written premiums is shown below (dollars in millions):

	Three months ended September 30,
	2021				2020
	GWP		%		GWP		%		% Change
Property and transportation	$	1,334	50	%	$	1,061	48	%	26	%
Specialty casualty	1,121		42	%	978		44	%	15	%
Specialty financial	201		8	%	184		8	%	9	%
Total specialty	2,656		100	%	2,223		100	%	19	%
Neon exited lines	—		—	%	8		—	%	(100	%)
Aggregate	$	2,656	100	%	$	2,231	100	%	19	%

53

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

Reinsurance Premiums Ceded

Reinsurance premiums ceded (“Ceded”) for AFG’s property and casualty insurance segment were 35% of gross written premiums for the third quarter of 2021 compared to 33% of gross written premiums for the third quarter of 2020, an increase of 2 percentage points. Detail of AFG’s property and casualty reinsurance premiums ceded is shown below (dollars in millions):

	Three months ended September 30,
	2021				2020				Change in
	Ceded		% of GWP		Ceded		% of GWP		% of GWP
Property and transportation	$	(561)	42	%	$	(426)	40	%	2	%
Specialty casualty	(389)		35	%	(336)		34	%	1	%
Specialty financial	(36)		18	%	(31)		17	%	1	%
Other specialty	59				58
Total specialty	(927)		35	%	(735)		33	%	2	%
Neon exited lines	—		—	%	(7)		88	%	(88	%)
Aggregate	$	(927)	35	%	$	(742)	33	%	2	%

Net Written Premiums

Net written premiums (“NWP”) for AFG’s property and casualty insurance segment were $1.73 billion for the third quarter of 2021 compared to $1.49 billion for the third quarter of 2020, an increase of $240 million (16%). Detail of AFG’s property and casualty net written premiums is shown below (dollars in millions):

	Three months ended September 30,
	2021				2020
	NWP		%		NWP		%		% Change
Property and transportation	$	773	45	%	$	635	43	%	22	%
Specialty casualty	732		42	%	642		43	%	14	%
Specialty financial	165		10	%	153		10	%	8	%
Other specialty	59		3	%	58		4	%	2	%
Total specialty	1,729		100	%	1,488		100	%	16	%
Neon exited lines	—		—	%	1		—	%	(100	%)
Aggregate	$	1,729	100	%	$	1,489	100	%	16	%

Net Earned Premiums

Net earned premiums (“NEP”) for AFG’s property and casualty insurance segment were $1.53 billion for the third quarter of 2021 compared to $1.38 billion for the third quarter of 2020, an increase of $148 million (11%). Detail of AFG’s property and casualty net earned premiums is shown below (dollars in millions):

	Three months ended September 30,
	2021				2020
	NEP		%		NEP		%		% Change
Property and transportation	$	700	46	%	$	574	42	%	22	%
Specialty casualty	613		40	%	560		41	%	9	%
Specialty financial	163		11	%	155		11	%	5	%
Other specialty	53		3	%	50		3	%	6	%
Total specialty	1,529		100	%	1,339		97	%	14	%
Neon exited lines	—		—	%	42		3	%	(100	%)
Aggregate	$	1,529	100	%	$	1,381	100	%	11	%

Gross written premiums for the third quarter of 2021 increased $425 million (19%) compared to the third quarter of 2020 reflecting an increase in each of the Specialty property and casualty insurance sub-segments as a result of an improving economy, new business opportunities and a strong renewal rate environment. Overall average renewal rates increased

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AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

approximately 11% in the third quarter of 2021. Excluding rate decreases in the workers’ compensation business, renewal rates increased approximately 13%.

Property and transportation Gross written premiums increased $273 million (26%) in the third quarter of 2021 compared to the third quarter of 2020 due primarily to higher premiums in the crop insurance business as a result of higher commodity futures pricing and rate increases as well as higher premiums in the transportation businesses as a result of new accounts, combined with strong renewals. Average renewal rates increased approximately 5% for this group in the third quarter of 2021. Reinsurance premiums ceded as a percentage of gross written premiums increased 2 percentage points in the third quarter of 2021 compared to the third quarter of 2020 reflecting growth in the crop insurance operations, which cede a larger percentage of premiums than the other businesses in the Property and transportation sub-segment and higher cessions in the transportation businesses.

Specialty casualty Gross written premiums increased $143 million (15%) in the third quarter of 2021 compared to the third quarter of 2020. Significant renewal rate increases and new business opportunities contributed to higher premiums in the excess and surplus lines businesses and renewal rate increases, strong account retention and new business opportunities contributed to premium growth in the targeted markets businesses. The mergers and acquisitions and executive liability businesses also contributed meaningfully to the year-over-year growth. Average renewal rates increased approximately 13% for this group in the third quarter of 2021. Excluding rate decreases in the workers’ compensation business, renewal rates for this group increased approximately 18%. Reinsurance premiums ceded as a percentage of gross written premiums were comparable in the third quarter of 2021 and the third quarter of 2020.

Specialty financial Gross written premiums increased $17 million (9%) in the third quarter of 2021 compared to the third quarter of 2020 due primarily to growth in the lender services, fidelity and surety businesses. Average renewal rates increased approximately 8% for this group in the third quarter of 2021. Reinsurance premiums ceded as a percentage of gross written premiums increased 1 percentage point in the third quarter of 2021 compared to the third quarter of 2020 reflecting a change in the mix of business.

Other specialty The amounts shown as reinsurance premiums ceded represent business assumed by AFG’s internal reinsurance program from the operations that make up AFG’s other Specialty property and casualty insurance sub-segments. Reinsurance premiums assumed increased $1 million in the third quarter of 2021 compared to the third quarter of 2020.

55

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

Combined Ratio

The table below (dollars in millions) details the components of the combined ratio and underwriting profit for AFG’s property and casualty insurance segment:

	Three months ended September 30,						Three months ended September 30,
	2021		2020		Change		2021		2020
Property and transportation
Loss and LAE ratio	73.7	%	70.1	%	3.6	%
Underwriting expense ratio	19.8	%	21.8	%	(2.0	%)
Combined ratio	93.5	%	91.9	%	1.6	%
Underwriting profit							$	45	$	47
Specialty casualty
Loss and LAE ratio	54.6	%	62.9	%	(8.3	%)
Underwriting expense ratio	27.4	%	27.8	%	(0.4	%)
Combined ratio	82.0	%	90.7	%	(8.7	%)
Underwriting profit							$	110	$	53
Specialty financial
Loss and LAE ratio	34.2	%	39.9	%	(5.7	%)
Underwriting expense ratio	50.0	%	51.7	%	(1.7	%)
Combined ratio	84.2	%	91.6	%	(7.4	%)
Underwriting profit							$	26	$	13
Total Specialty
Loss and LAE ratio	62.4	%	63.8	%	(1.4	%)
Underwriting expense ratio	26.6	%	28.3	%	(1.7	%)
Combined ratio	89.0	%	92.1	%	(3.1	%)
Underwriting profit							$	169	$	104
Aggregate — including exited lines
Loss and LAE ratio	62.4	%	69.8	%	(7.4	%)
Underwriting expense ratio	26.6	%	29.0	%	(2.4	%)
Combined ratio	89.0	%	98.8	%	(9.8	%)
Underwriting profit							$	168	$	18

The Specialty property and casualty insurance operations generated an underwriting profit of $169 million in the third quarter of 2021 compared to $104 million in the third quarter of 2020, an increase of $65 million (63%). The higher underwriting profit in the third quarter of 2021 reflects higher underwriting profits in the Specialty casualty and Specialty financial insurance sub-segments, partially offset by slightly lower underwriting profit in the Property and transportation insurance sub-segment. Overall catastrophe losses were $31 million (2.0 points on the combined ratio) compared to catastrophe losses of $36 million (2.7 points) and related net reinstatement premiums of $5 million in the third quarter of 2020.

Property and transportation Underwriting profit for this group was $45 million for the third quarter of 2021 compared to $47 million for the third quarter of 2020, a decrease of $2 million (4%). Higher underwriting profitability in the crop operations and Singapore branch were more than offset by lower underwriting profit in the transportation, property and inland marine and non-crop agricultural businesses. Catastrophe losses were $14 million (2.0 points on the combined ratio) compared to $18 million (3.1 points) in the third quarter of 2020.

Specialty casualty Underwriting profit for this group was $110 million for the third quarter of 2021 compared to $53 million for the third quarter of 2020, an increase of $57 million (108%). This increase reflects higher underwriting profitability in the workers’ compensation, general liability, excess and surplus lines and excess liability businesses in the third quarter of 2021 compared to the third quarter of 2020. Catastrophe losses were $3 million (0.4 points on the combined ratio) compared to $3 million (0.8 points) and related net reinstatement premiums of $5 million in the third quarter of 2020.

56

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

Specialty financial Underwriting profit for this group was $26 million for the third quarter of 2021 compared to $13 million in the third quarter of 2020, an increase of $13 million (100%). This increase reflects higher year-over-year underwriting profitability in the surety and financial institutions businesses. Catastrophe losses were $14 million (8.2 points on the combined ratio) compared to $13 million (8.6 points) in the third quarter of 2020.

Other specialty This group reported an underwriting loss of $12 million in the third quarter of 2021 compared to $9 million in the third quarter of 2020, an increase of $3 million (33%). This increase reflects higher losses in the business assumed by AFG’s internal reinsurance program from the operations that make up AFG’s other Specialty sub-segments in the third quarter of 2021 compared to the third quarter of 2020.

Aggregate As discussed below under “Net prior year reserve development,” AFG recorded special charges to increase property and casualty A&E reserves by $47 million in the third quarter of 2020. Aggregate underwriting results for AFG’s property and casualty insurance segment also include an underwriting loss of $38 million at Neon in the third quarter of 2020, due primarily to catastrophe losses and several large claims. AFG also recorded adverse prior year reserve development of $1 million in both the third quarter of 2021 and 2020 related to business outside of the Specialty group that AFG no longer writes.

57

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

Losses and Loss Adjustment Expenses

AFG’s overall loss and LAE ratio was 62.4% for the third quarter of 2021 compared to 69.8% for the third quarter of 2020, a decrease of 7.4 percentage points. The components of AFG’s property and casualty losses and LAE amounts and ratio are detailed below (dollars in millions):

	Three months ended September 30,
	Amount				Ratio				Change in
	2021		2020		2021		2020		Ratio
Property and transportation
Current year, excluding COVID-19 related and catastrophe losses	$	520	$	410	74.2	%	71.4	%	2.8	%
Prior accident years development	(18)		(26)		(2.5	%)	(4.5	%)	2.0	%
Current year COVID-19 related losses	—		1		—	%	0.1	%	(0.1	%)
Current year catastrophe losses	14		18		2.0	%	3.1	%	(1.1	%)
Property and transportation losses and LAE and ratio	$	516	$	403	73.7	%	70.1	%	3.6	%
Specialty casualty
Current year, excluding COVID-19 related and catastrophe losses	$	387	$	366	63.2	%	65.1	%	(1.9	%)
Prior accident years development	(56)		(16)		(9.1	%)	(2.9	%)	(6.2	%)
Current year COVID-19 related losses	1		(1)		0.1	%	(0.1	%)	0.2	%
Current year catastrophe losses	3		3		0.4	%	0.8	%	(0.4	%)
Specialty casualty losses and LAE and ratio	$	335	$	352	54.6	%	62.9	%	(8.3	%)
Specialty financial
Current year, excluding COVID-19 related and catastrophe losses	$	58	$	59	36.3	%	37.8	%	(1.5	%)
Prior accident years development	(18)		(9)		(11.2	%)	(5.7	%)	(5.5	%)
Current year COVID-19 related losses	2		(1)		0.9	%	(0.8	%)	1.7	%
Current year catastrophe losses	14		13		8.2	%	8.6	%	(0.4	%)
Specialty financial losses and LAE and ratio	$	56	$	62	34.2	%	39.9	%	(5.7	%)
Total Specialty
Current year, excluding COVID-19 related and catastrophe losses	$	1,002	$	867	65.7	%	64.8	%	0.9	%
Prior accident years development	(83)		(48)		(5.4	%)	(3.7	%)	(1.7	%)
Current year COVID-19 related losses	3		—		0.1	%	—	%	0.1	%
Current year catastrophe losses	31		36		2.0	%	2.7	%	(0.7	%)
Total Specialty losses and LAE and ratio	$	953	$	855	62.4	%	63.8	%	(1.4	%)
Aggregate — including exited lines
Current year, excluding COVID-19 related and catastrophe losses	$	1,002	$	911	65.7	%	66.0	%	(0.3	%)
Prior accident years development	(82)		—		(5.4	%)	—	%	(5.4	%)
Current year COVID-19 related losses	3		—		0.1	%	—	%	0.1	%
Current year catastrophe losses	31		52		2.0	%	3.8	%	(1.8	%)
Aggregate losses and LAE and ratio	$	954	$	963	62.4	%	69.8	%	(7.4	%)

Current accident year losses and LAE, excluding COVID-19 related and catastrophe losses

The current accident year loss and LAE ratio, excluding COVID-19 related and catastrophe losses for AFG’s Specialty property and casualty insurance operations was 65.7% for the third quarter of 2021 compared to 64.8% for the third quarter of 2020, an increase of 0.9 percentage points.

Property and transportation   The 2.8 percentage point increase in the loss and LAE ratio for the current year, excluding COVID-19 related and catastrophe losses reflects a higher loss and LAE ratio in the property and inland marine business due to higher claim frequency and severity in the third quarter of 2021 compared to the third quarter of 2020.

Specialty casualty   The 1.9 percentage point decrease in the loss and LAE ratio for the current year, excluding COVID-19 related and catastrophe losses reflects a decrease in the loss and LAE ratios of the workers’ compensation and executive liability businesses.

58

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

Specialty financial The 1.5 percentage point decrease in the loss and LAE ratio for the current year, excluding COVID-19 related and catastrophe losses reflects a decrease in the loss and LAE ratio of the financial institutions business.

Net prior year reserve development

AFG’s Specialty property and casualty insurance operations recorded net favorable reserve development related to prior accident years of $83 million in the third quarter of 2021 compared to $48 million in the third quarter of 2020, an increase of $35 million (73%).

Property and transportation Net favorable reserve development of $18 million in the third quarter of 2021 reflects lower than expected claim severity in the ocean marine business, lower than expected claim frequency in the aviation business and lower than anticipated claim frequency and severity in the trucking business. Net favorable reserve development of $26 million in the third quarter of 2020 reflects lower than anticipated claim frequency and severity in the transportation businesses and lower than expected claim frequency and severity in the non-crop agricultural businesses.

Specialty casualty Net favorable reserve development of $56 million in the third quarter of 2021 reflects lower than anticipated claim severity in the workers’ compensation businesses and lower than expected claim frequency and severity in the excess and surplus lines businesses. Net favorable reserve development of $16 million in the third quarter of 2020 reflects lower than anticipated claim severity in the workers’ compensation businesses, partially offset by higher than expected claim frequency in general liability contractor claims.

Specialty financial Net favorable reserve development of $18 million in the third quarter of 2021 reflects lower than anticipated claim frequency in the surety and trade credit businesses. Net favorable reserve development of $9 million in the third quarter of 2020 reflects lower than anticipated claim frequency and severity in the fidelity and surety businesses and lower than expected claim frequency in the financial institutions business.

Other specialty In addition to the development discussed above, total Specialty prior year reserve development includes net adverse reserve development of $9 million in the third quarter of 2021 and $3 million in the third quarter of 2020, reflecting net adverse reserve development associated with AFG’s internal reinsurance program, partially offset by the amortization of the deferred gains on the retroactive reinsurance transactions entered into in connection with the sale of businesses in 1998 and 2001.

Special asbestos and environmental reserve charges During the third quarter of 2021, AFG completed an in-depth internal review of its asbestos and environmental exposures relating to the run-off operations of its property and casualty insurance segment and its exposures related to former railroad and manufacturing operations and sites. In addition to its ongoing internal monitoring of asbestos and environmental exposures, AFG has periodically conducted comprehensive external studies of its asbestos and environmental reserves with the aid of specialty actuarial, engineering and consulting firms and outside counsel, with an in-depth internal review during the intervening years.

During the 2021 internal review, no new trends were identified and recent claims activity was generally consistent with AFG’s expectations resulting from the 2020 external study. As a result, the 2021 review resulted in no net change to AFG’s property and casualty insurance segment’s asbestos and environmental reserves.

A comprehensive external study of AFG’s A&E reserves was completed in the third quarter of 2020. As a result of the 2020 external study, AFG recorded a $47 million (net of reinsurance) pretax special charge to increase its property and casualty insurance segment’s asbestos reserves by $26 million (net of reinsurance) and its environmental reserves by $21 million (net of reinsurance). AFG also recorded a $21 million pretax special charge to increase the reserves of its former railroad and manufacturing operations. See Management’s Discussion and Analysis — “Uncertainties — Asbestos and Environmental-related (“A&E”) Insurance Reserves” and Management’s Discussion and Analysis — “Results of Operations — Holding Company, Other and Unallocated” in AFG’s 2020 Form 10-K.

The increase in property and casualty environmental reserves in 2020 was primarily associated with updated estimates of site investigation and remedial costs with respect to existing sites and its estimate of future, but as yet unreported, claims. AFG has updated its view of legal defense costs on open environmental claims as well as a number of claims and sites where the estimated investigation and remediation costs have increased. Over the past few years, the focus of AFG’s asbestos claims litigation has shifted to smaller companies and companies with ancillary exposures. AFG’s insureds with

59

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

these exposures have been the driver of the property and casualty segment’s asbestos reserve increases in 2020 and prior recent years.

At September 30, 2021, the property and casualty insurance segment’s insurance reserves include A&E reserves of $414 million, net of reinsurance recoverables. At September 30, 2021, the property and casualty insurance segment’s three-year survival ratios compare favorably with industry survival ratios published by A.M. Best (as of December 31, 2020, and adjusted for several large portfolio transfers) as detailed in the following table:

	Property and Casualty Insurance Reserves
	Three-Year Survival Ratio (Times Paid Losses)
	Asbestos	Environmental	Total A&E
AFG (9/30/2021)	25.7	24.4	25.1
Industry (12/31/2020)	7.9	8.5	8.1

In addition, the 2021 internal review encompassed reserves for asbestos and environmental exposures of AFG’s former railroad and manufacturing operations. For a discussion of the minor increase in liabilities recorded for those operations, see “Results of Operations — Holding Company, Other and Unallocated,” for the quarters ended September 30, 2021 and 2020.

Aggregate Aggregate net prior accident years reserve development for AFG’s property and casualty insurance segment includes the 2020 special A&E charge mentioned above, net adverse reserve development of $1 million in the third quarter of 2021 related to business outside the Specialty group that AFG no longer writes and net adverse reserve development of $1 million in the third quarter of 2020 from the Neon exited lines.

Catastrophe losses

AFG generally seeks to reduce its exposure to catastrophes through individual risk selection, including minimizing coastal and known fault-line exposures, and the purchase of reinsurance. Based on data available at December 31, 2020, AFG’s exposure to a catastrophic earthquake or windstorm that industry models indicate should statistically occur once in every 100, 250 or 500 years as a percentage of AFG’s Shareholders’ Equity is shown below:

	Approximate impact of modeled loss
Industry Model	on AFG’s Shareholders’ Equity
100-year event	1%
250-year event	1%
500-year event	2%

AFG maintains comprehensive property catastrophe reinsurance coverage for its property and casualty insurance operations, including a $15 million per occurrence net retention, for losses up to $125 million in the vast majority of circumstances. In certain unlikely events, AFG’s ultimate loss under this coverage could be as high as $24 million for a single occurrence. AFG further maintains supplemental fully collateralized reinsurance coverage up to 94% of $325 million for catastrophe losses in excess of $125 million of traditional catastrophe reinsurance through a catastrophe bond.

Catastrophe losses of $31 million in the third quarter of 2021 resulted primarily from Hurricane Ida and, to a lesser extent, storms in multiple regions of the United States. Catastrophe losses of $52 million in the third quarter of 2020 resulted primarily from Hurricanes Hanna, Laura and Sally, Tropical Storm Isaias, storms and tornadoes in multiple regions of the United States and multiple wildfires in west coast states.

Commissions and Other Underwriting Expenses

AFG’s property and casualty commissions and other underwriting expenses (“U/W Exp”) were $407 million in the third quarter of 2021 compared to $400 million for the third quarter of 2020, an increase of $7 million (2%). AFG’s underwriting expense ratio, calculated as commissions and other underwriting expenses divided by net premiums earned, was 26.6% for the third quarter of 2021 compared to 29.0% for the third quarter of 2020, a decrease of 2.4 percentage points. Detail

60

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

of AFG’s property and casualty commissions and other underwriting expenses and underwriting expense ratios is shown below (dollars in millions):

	Three months ended September 30,
	2021				2020				Change in
	U/W Exp		% of NEP		U/W Exp		% of NEP		% of NEP
Property and transportation	$	139	19.8	%	$	124	21.8	%	(2.0	%)
Specialty casualty	168		27.4	%	155		27.8	%	(0.4	%)
Specialty financial	81		50.0	%	80		51.7	%	(1.7	%)
Other specialty	19		34.7	%	21		37.0	%	(2.3	%)
Total specialty	407		26.6	%	380		28.3	%	(1.7	%)
Neon exited lines	—				20
Aggregate	$	407	26.6	%	$	400	29.0	%	(2.4	%)

Property and transportation   Commissions and other underwriting expenses as a percentage of net earned premiums decreased 2.0 percentage points in the third quarter of 2021 compared to the third quarter of 2020 reflecting the impact of higher premiums on the ratio in the crop, property and inland marine, equine and transportation businesses in the third quarter of 2021 compared to the third quarter of 2020.

Specialty casualty   Commissions and other underwriting expenses as a percentage of net earned premiums decreased 0.4 percentage points in the third quarter of 2021 compared to the third quarter of 2020 reflecting higher ceding commissions received from reinsurers as a result of growth in the excess liability and excess and surplus businesses in the third quarter of 2021 compared to the third quarter of 2020.

Specialty financial   Commissions and other underwriting expenses as a percentage of net earned premiums decreased 1.7 percentage points in the third quarter of 2021 compared to the third quarter of 2020 reflecting the impact of higher premiums on the ratio and lower contingent commissions in the financial services business in the third quarter of 2021 compared to the third quarter of 2020.

Property and Casualty Net Investment Income

Net investment income in AFG’s property and casualty insurance operations was $165 million in the third quarter of 2021 compared to $111 million (excluding the Neon exited lines) in the third quarter of 2020, an increase of $54 million (49%). The average invested assets and overall yield earned on investments held by AFG’s property and casualty insurance operations are provided below (dollars in millions):

	Three months ended September 30,
	2021			2020			Change			% Change
Net investment income:
Net investment income excluding alternative investments	$	81		$	83		$	(2)		(2	%)
Alternative investments	84			28			56			200	%
Total net investment income	$	165		$	111		$	54		49	%
Average invested assets (at amortized cost)	$	13,194		$	11,764		$	1,430		12	%
Yield (net investment income as a % of average invested assets)	5.00		%	3.77		%	1.23		%
Tax equivalent yield (*)	5.10		%	3.92		%	1.18		%

(*)Adjusts the yield on equity securities and tax-exempt bonds to the fully taxable equivalent yield.

The property and casualty insurance segment’s increase in net investment income for the third quarter of 2021 compared to the third quarter of 2020 reflects significantly higher earnings from alternative investments (partnerships and similar investments and AFG-managed CLOs), partially offset by the effect of lower fixed maturity yields and lower short-term interest rates. The property and casualty insurance segment’s overall yield on investments (net investment income as a percentage of average invested assets) was 5.00% for the third quarter of 2021 compared to 3.77% for the third quarter of 2020, an increase of 1.23 percentage points. The annualized return earned on alternative investments was 20.3% in the third quarter of 2021 compared to 12.3% in the prior year period.

61

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

In addition to the property and casualty segment’s net investment income from ongoing operations discussed above, the Neon exited lines reported net investment income of $1 million in the third quarter of 2020.

Property and Casualty Other Income and Expenses, Net

Other income and expenses, net for AFG’s property and casualty insurance operations was a net expense of $4 million for the third quarter of 2021 compared to $9 million for the third quarter of 2020, a decrease of $5 million (56%). The table below details the items included in other income and expenses, net for AFG’s property and casualty insurance operations (in millions):

	Three months ended September 30,
	2021		2020
Other income	$	4	$	—
Other expenses
Amortization of intangibles	1		3
Other	7		6
Total other expenses	8		9
Other income and expenses, net	$	(4)	$	(9)

In addition to the property and casualty segment’s other income and expenses, net from ongoing operations discussed above, the Neon exited lines incurred a net expense of $3 million in other income and expenses, net during the third quarter of 2020.

Holding Company, Other and Unallocated — Results of Operations

AFG’s net GAAP pretax loss outside of its property and casualty insurance segment (excluding realized gains and losses) totaled $45 million in the third quarter of 2021 compared to $74 million in the third quarter of 2020, a decrease of $29 million (39%). AFG’s net core pretax loss outside of its property and casualty insurance segment (excluding realized gains and losses) totaled $45 million in the third quarter of 2021 compared to $53 million in the third quarter of 2020, a decrease of $8 million (15%).

The following table details AFG’s GAAP and core loss before income taxes from operations outside of its property and casualty insurance segment for the three months ended September 30, 2021 and 2020 (dollars in millions):

	Three months ended September 30,
	2021		2020		% Change
Revenues:
Net investment income	$	9	$	4	125	%
Other income — P&C fees	21		17		24	%
Other income	6		4		50	%
Total revenues	36		25		44	%
Costs and Expenses:
Property and casualty insurance — commissions and other underwriting expenses	10		6		67	%
Other expense — expenses associated with P&C fees	11		11		—	%
Other expenses (*)	36		37		(3	%)
Costs and expenses, excluding interest charges on borrowed money	57		54		6	%
Loss before income taxes, excluding realized gains and losses and interest charges on borrowed money	(21)		(29)		(28	%)
Interest charges on borrowed money	24		24		—	%
Core loss before income taxes, excluding realized gains and losses	(45)		(53)		(15	%)
Pretax non-core special A&E charges	—		(21)		(100	%)
GAAP loss from continuing operations before income taxes, excluding realized gains and losses	$	(45)	$	(74)	(39	%)

(*)Excludes a pretax non-core special A&E charge of $21 million in the third quarter of 2020.

62

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

Holding Company and Other — Net Investment Income

AFG recorded net investment income on investments held outside of its property and casualty insurance segment of $9 million in the third quarter of 2021 compared to $4 million in the third quarter of 2020, an increase of $5 million (125%), reflecting income in the third quarter of 2021 from directly owned real estate acquired from the annuity group prior to the sale of the annuity business and purchases of fixed maturity investments at the holding company.

Holding Company and Other — P&C Fees and Related Expenses

Summit, a workers’ compensation insurance subsidiary, collects fees from a small group of unaffiliated insurers for providing underwriting, policy administration and claims services. In addition, certain of AFG’s property and casualty insurance businesses collect fees from customers for ancillary services such as workplace safety programs and premium financing. In the third quarter of 2021, AFG collected $18 million for these services compared to $17 million in the third quarter of 2020. Management views this fee income, net of the $11 million in both the third quarter of 2021 and the third quarter of 2020, in expenses incurred to generate such fees, as a reduction in the cost of underwriting its property and casualty insurance policies. In addition, AFG’s property and casualty insurance businesses collected $3 million in fees from AFG’s disposed annuity operations during the third quarter of 2021 as compensation for certain services provided under a transition services agreement. The expenses related to providing such services are embedded in property and casualty underwriting expenses. Consistent with internal management reporting, these fees and the related expenses are netted and recorded as a reduction of commissions and other underwriting expenses in AFG’s segmented results.

Holding Company and Other — Other Income

Other income in the table above includes $4 million in the third quarter of 2021 and $3 million in the third quarter of 2020, in management fees paid to AFG by the AFG-managed CLOs (AFG’s consolidated managed investment entities). The management fees are eliminated in consolidation — see the other income line in the Consolidate MIEs column under “Results of Operations — Segmented Statement of Earnings.” Excluding amounts eliminated in consolidation, AFG recorded other income outside of its property and casualty insurance segment of $2 million and $1 million in the third quarter of 2021 and the third quarter of 2020, respectively.

Holding Company and Other — Other Expenses

AFG’s holding companies and other operations outside of its property and casualty insurance segment recorded other expenses of $36 million in the third quarter of 2021 compared to $37 million in the third quarter of 2020, a decrease of $1 million (3%), reflecting lower holding company expenses related to employee benefit plans that are tied to stock market performance mostly offset by a minor charge to increase the liabilities related to the A&E exposures of AFG’s former railroad and manufacturing operations.

Holding Company and Other — Interest Charges on Borrowed Money

AFG’s holding companies and other operations outside of its property and casualty insurance segment recorded interest expense of $24 million in both the third quarter of 2021 and the third quarter of 2020. The following table details the principal amount of AFG’s long-term debt balances as of September 30, 2021 compared to September 30, 2020 (dollars in millions):

	September 30, 2021			September 30, 2020
Direct obligations of AFG:
4.50% Senior Notes due June 2047	$	590		$	590
3.50% Senior Notes due August 2026	425			425
5.25% Senior Notes due April 2030	300			300
5.125% Subordinated Debentures due December 2059	200			200
4.50% Subordinated Debentures due September 2060	200			200
6% Subordinated Debentures due November 2055	—			150
5.625% Subordinated Debentures due June 2060	150			150
5.875% Subordinated Debentures due March 2059	125			125
Other	3			3
Total principal amount of Holding Company Debt	$	1,993		$	2,143
Weighted Average Interest Rate	4.6		%	4.7		%

Interest expense for the third quarter of 2021 as compared to the third quarter of 2020 reflects the following financial transactions completed by AFG between June 30, 2020 and September 30, 2021:

63

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

•Issued $200 million of 4.50% Subordinated Debentures in September 2020

•Redeemed $150 million of 6% Subordinated Debentures in November 2020

Holding Company and Other — Special A&E Charge

As a result of the 2021 in-depth internal review and the 2020 comprehensive external study of A&E exposures discussed under “Special asbestos and environmental reserve charges” under “Results of Operations — Property and Casualty Insurance Segment — Net prior year reserve development,” AFG’s holding companies and other operations outside of its property and casualty insurance operations recorded a minor charge to increase liabilities related to the A&E exposures of AFG’s former railroad and manufacturing operations in the third quarter of 2021, which is included in AFG’s core operating earnings, compared to a pretax special charge of $21 million in the third quarter of 2020. The charges were due primarily to relatively small movements across several sites that reflect changes in the scope and costs of investigation and an increase in estimated ongoing operation and maintenance costs.

Realized Gains (Losses) on Securities

AFG’s realized gains (losses) on securities were net losses of $17 million in the third quarter of 2021 compared to net gains of $23 million in the third quarter of 2020, a change of $40 million (174%). Realized gains (losses) on securities consisted of the following (in millions):

	Three months ended September 30,
	2021		2020
Realized gains (losses) before impairments:
Disposals	$	—	$	2
Change in the fair value of equity securities	(15)		22
Change in the fair value of derivatives	(2)		(1)
	(17)		23
Change in allowance for impairments on securities	—		—
Realized gains (losses) on securities	$	(17)	$	23

The $15 million net realized loss from the change in the fair value of equity securities in the third quarter of 2021 includes losses of $5 million on investments in healthcare companies, $4 million on investments in energy and natural gas companies and $4 million on investments in technology companies. The $22 million net realized gain from the change in the fair value of equity securities in the third quarter of 2020 includes gains of $10 million on investments in media companies, $6 million on investments in banks and financing companies and $4 million on investments in insurance companies, partially offset by losses of $6 million on investments in energy and natural gas companies.

Realized Loss on Subsidiary

On September 28, 2020, AFG announced that it had reached a definitive agreement to sell GAI Holding Bermuda and its subsidiaries, comprising the legal entities that own Neon, to RiverStone Holdings Limited. The transaction closed in the fourth quarter of 2020. AFG recorded a $30 million loss in the third quarter of 2020 to establish a liability equal to the excess of the net carrying value of the assets and liabilities to be disposed over the estimated net sale proceeds. See Note C — “Sales of Businesses” to the financial statements.

Consolidated Income Taxes on Continuing Operations

AFG’s consolidated provision (credit) for income taxes on continuing operations was a provision of $48 million for the third quarter of 2021 compared to a credit of $48 million for the third quarter of 2020, a change of $96 million (200%). See Note K — “Income Taxes” to the financial statements for an analysis of items affecting AFG’s effective tax rate on continuing operations.

Real Estate Entities Acquired from the Annuity Operations

Beginning with the first quarter of 2021, the results of the annuity businesses sold are reported as discontinued operations, in accordance with GAAP, which included adjusting prior period results to reflect these operations as discontinued. Prior to the completion of the sale, AFG’s property and casualty insurance operations acquired approximately $480 million in real estate-related partnerships and AFG parent acquired approximately $100 million of directly owned real estate from those operations. GAAP pretax earnings from continuing operations includes the earnings from these entities and certain other expenses that will be retained from the annuity operations.

64

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

Discontinued Annuity Operations

AFG’s discontinued annuity operations, which were sold in May 2021, contributed $94 million in GAAP pretax earnings in the third quarter of 2020.

65

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

RESULTS OF OPERATIONS — NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

Segmented Statement of Earnings

Subsequent to the agreement to sell the Annuity subsidiaries, AFG reports its continuing operations as two segments: (i) Property and casualty insurance (“P&C”) and (ii) Other, which includes holding company costs and income and expenses related to the managed investment entities (“MIEs”).

AFG’s net earnings attributable to shareholders, determined in accordance with GAAP, include certain items that may not be indicative of its ongoing core operations. The following tables for the nine months ended September 30, 2021 and 2020 identify such items by segment and reconcile net earnings attributable to shareholders to core net operating earnings, a non-GAAP financial measure that AFG believes is a useful tool for investors and analysts in analyzing ongoing operating trends (in millions):

			Other
	P&C		Annuity		Consol. MIEs		Holding Co., other and unallocated		Total		Non-core reclass		GAAP Total
Nine months ended September 30, 2021
Revenues:
Property and casualty insurance net earned premiums	$	3,952	$	—	$	—	$	—	$	3,952	$	—	$	3,952
Net investment income	467		51		(17)		20		521		—		521
Realized gains (losses) on:
Securities	—		—		—		—		—		103		103
Subsidiary	—		—		—		—		—		4		4
Income of MIEs:
Investment income	—		—		135		—		135		—		135
Gain (loss) on change in fair value of assets/liabilities	—		—		9		—		9		—		9
Other income	9		—		(12)		73		70		—		70
Total revenues	4,428		51		115		93		4,687		107		4,794
Costs and Expenses:
Property and casualty insurance:
Losses and loss adjustment expenses	2,335		—		—		—		2,335		—		2,335
Commissions and other underwriting expenses	1,163		—		—		24		1,187		—		1,187
Interest charges on borrowed money	—		—		—		71		71		—		71
Expenses of MIEs	—		—		115		—		115		—		115
Other expenses	25		1		—		159		185		11		196
Total costs and expenses	3,523		1		115		254		3,893		11		3,904
Earnings (loss) from continuing operations before income taxes	905		50		—		(161)		794		96		890
Provision (credit) for income taxes	177		11		—		(36)		152		12		164
Net earnings from continuing operations, including noncontrolling interests	728		39		—		(125)		642		84		726
Less: Net earnings (loss) from continuing operations attributable to noncontrolling interests	—		—		—		—		—		—		—
Core Net Operating Earnings	728		39		—		(125)		642
Non-core earnings (loss) attributable to shareholders (a):
Realized gains (losses) on securities, net of tax	—		—		—		83		83		(83)		—
Discontinued operations, net of tax	—		914		—		—		914		—		914
Neon exited lines (b)	3		—		—		—		3		(3)		—
Other, net of tax	—		—		—		(2)		(2)		2		—
Net Earnings Attributable to Shareholders	$	731	$	953	$	—	$	(44)	$	1,640	$	—	$	1,640

66

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

			Other
	P&C		Annuity		Consol. MIEs		Holding Co., other and unallocated		Total		Non-core reclass		Neon exited lines (b)		GAAP Total
Nine months ended September 30, 2020
Revenues:
Property and casualty insurance net earned premiums	$	3,600	$	—	$	—	$	—	$	3,600	$	—	$	174	$	3,774
Net investment income	282		29		7		1		319		—		(5)		314
Realized gains (losses) on:
Securities	—		—		—		—		—		(197)		—		(197)
Subsidiaries	—		—		—		—		—		—		(30)		(30)
Income of MIEs:
Investment income	—		—		154		—		154		—		—		154
Gain (loss) on change in fair value of assets/liabilities	—		—		(21)		—		(21)		—		—		(21)
Other income	8		1		(11)		64		62		—		—		62
Total revenues	3,890		30		129		65		4,114		(197)		139		4,056
Costs and Expenses:
Property and casualty insurance:
Losses and loss adjustment expenses	2,228		—		—		—		2,228		47		166		2,441
Commissions and other underwriting expenses	1,129		—		—		16		1,145		—		90		1,235
Interest charges on borrowed money	—		—		—		64		64		—		—		64
Expenses of MIEs	—		—		129		—		129		—		—		129
Other expenses	31		20		—		115		166		21		5		192
Total costs and expenses	3,388		20		129		195		3,732		68		261		4,061
Earnings (loss) from continuing operations before income taxes	502		10		—		(130)		382		(265)		(122)		(5)
Provision (credit) for income taxes	106		2		—		(32)		76		(55)		(73)		(52)
Net earnings from continuing operations, including noncontrolling interests	396		8		—		(98)		306		(210)		(49)		47
Less: Net earnings (loss) from continuing operations attributable to noncontrolling interests	—		—		—		—		—		—		(13)		(13)
Core Net Operating Earnings	396		8		—		(98)		306
Non-core earnings (loss) attributable to shareholders (a):
Realized gains (losses) on securities, net of tax	—		—		—		(156)		(156)		156		—		—
Discontinued operations, net of tax	—		(16)		—		(4)		(20)		—		—		(20)
Neon exited lines (b)	(36)		—		—		—		(36)		—		36		—
Special A&E charges, net of tax	(37)		—		—		(17)		(54)		54		—		—
Net Earnings Attributable to Shareholders	$	323	$	(8)	$	—	$	(275)	$	40	$	—	$	—	$	40

(a)See the reconciliation of core earnings to GAAP net earnings under “Results of Operations — General” for details on the tax and noncontrolling interest impacts of these reconciling items.

(b)As discussed under “Results of Operations — General,” the Neon run-off operations are considered property and casualty insurance non-core earnings (losses).

Property and Casualty Insurance Segment — Results of Operations

AFG’s property and casualty insurance operations contributed $909 million in GAAP pretax earnings in the first nine months of 2021 compared to $333 million in the first nine months of 2020, an increase of $576 million (173%). Property and casualty core pretax earnings were $905 million in the first nine months of 2021 compared to $502 million in the first nine months of 2020, an increase of $403 million (80%). The increase in GAAP pretax earnings reflects higher core pretax earnings and the impact of losses in the Neon exited lines in the first nine months of 2020. The increase in GAAP pretax earnings also reflects the impact of pretax non-core special A&E charges of $47 million in the first nine months of 2020. The increase in core pretax earnings reflects higher core underwriting profit in the first nine months of 2021 compared to the first nine months of 2020 and significantly higher net investment income. Improved results from alternative investments (partnerships and similar investments and AFG-managed CLOs) were partially offset by lower other net investment income, due primarily to lower short-term interest rates.

67

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

The following table details AFG’s GAAP and core earnings before income taxes from its property and casualty insurance operations for the nine months ended September 30, 2021 and 2020 (dollars in millions):

	Nine months ended September 30,
	2021		2020		% Change
Gross written premiums	$	6,209	$	5,288	17		%
Reinsurance premiums ceded	(1,906)		(1,512)		26		%
Net written premiums	4,303		3,776		14		%
Change in unearned premiums	(351)		(176)		99		%
Net earned premiums	3,952		3,600		10		%
Loss and loss adjustment expenses (a)	2,335		2,228		5		%
Commissions and other underwriting expenses	1,163		1,129		3		%
Core underwriting gain	454		243		87		%
Net investment income	467		282		66		%
Other income and expenses, net	(16)		(23)		(30		%)
Core earnings before income taxes	905		502		80		%
Pretax non-core special A&E charges	—		(47)		(100		%)
Pretax non-core Neon exited lines (b)	4		(122)		(103		%)
GAAP earnings before income taxes and noncontrolling interests	$	909	$	333	173		%
(a)Excludes pretax non-core special A&E charges of $47 million in the third quarter of 2020. (b)In December 2019, AFG initiated actions to exit the Lloyd’s of London insurance market, which included placing its Lloyd’s subsidiaries including its Lloyd’s Managing Agency, Neon Underwriting Ltd. (“Neon”), into run-off. As discussed under “Results of Operations — General,” following the December 2019 decision to exit the Lloyd’s of London insurance market, the results from the Neon exited lines are treated as non-core earnings (losses). Each line item in the table above has been adjusted to remove the impact from the Neon run-off operations in 2020. The following table details the impact of the Neon exited lines to each component of earnings (loss) before income taxes in the property and casualty insurance operations for the nine months ended September 30, 2020 (in millions):
	Nine months ended September 30, 2020
	Excluding Neon exited lines		Neon exited lines		Total
Gross written premiums	$	5,288	$	78	$	5,366
Reinsurance premiums ceded	(1,512)		(70)		(1,582)
Net written premiums	3,776		8		3,784
Change in unearned premiums	(176)		166		(10)
Net earned premiums	3,600		174		3,774
Loss and loss adjustment expenses	2,228		166		2,394
Commissions and other underwriting expenses	1,129		90		1,219
Underwriting gain (loss)	243		(82)		161
Net investment income	282		(5)		277
Loss on sale of subsidiaries	—		(30)		(30)
Other income and expenses, net	(23)		(5)		(28)
Earnings (loss) before income taxes and noncontrolling interests	502		(122)		380
Pretax non-core special A&E charges	(47)		—		(47)
GAAP earnings (loss) before income taxes and noncontrolling interests	$	455	$	(122)	$	333

68

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

	Nine months ended September 30,
	2021		2020		Change
Combined Ratios:
Specialty lines
Loss and LAE ratio	59.0	%	61.8	%	(2.8	%)
Underwriting expense ratio	29.4	%	31.4	%	(2.0	%)
Combined ratio	88.4	%	93.2	%	(4.8	%)
Aggregate — including exited lines
Loss and LAE ratio	59.0	%	64.7	%	(5.7	%)
Underwriting expense ratio	29.4	%	32.3	%	(2.9	%)
Combined ratio	88.4	%	97.0	%	(8.6	%)

AFG reports the underwriting performance of its Specialty property and casualty insurance business in the following sub-segments: (i) Property and transportation, (ii) Specialty casualty and (iii) Specialty financial.

Gross Written Premiums

Gross written premiums (“GWP”) for AFG’s property and casualty insurance segment were $6.21 billion for the first nine months of 2021 compared to $5.37 billion for the first nine months of 2020, an increase of $843 million (16%). Detail of AFG’s property and casualty gross written premiums is shown below (dollars in millions):

	Nine months ended September 30,
	2021				2020
	GWP		%		GWP		%		% Change
Property and transportation	$	2,705	44	%	$	2,166	40	%	25	%
Specialty casualty	2,922		47	%	2,579		48	%	13	%
Specialty financial	582		9	%	543		11	%	7	%
Total specialty	6,209		100	%	5,288		99	%	17	%
Neon exited lines	—		—	%	78		1	%	(100	%)
Aggregate	$	6,209	100	%	$	5,366	100	%	16	%

Reinsurance Premiums Ceded

Reinsurance premiums ceded (“Ceded”) for AFG’s property and casualty insurance segment were 31% of gross written premiums for the first nine months of 2021 compared to 29% of gross written premiums for the first nine months of 2020, an increase of 2 percentage points. Detail of AFG’s property and casualty reinsurance premiums ceded is shown below (dollars in millions):

	Nine months ended September 30,
	2021				2020				Change in
	Ceded		% of GWP		Ceded		% of GWP		% of GWP
Property and transportation	$	(965)	36	%	$	(719)	33	%	3	%
Specialty casualty	(1,010)		35	%	(840)		33	%	2	%
Specialty financial	(97)		17	%	(102)		19	%	(2	%)
Other specialty	166				149
Total specialty	(1,906)		31	%	(1,512)		29	%	2	%
Neon exited lines	—		—	%	(70)		90	%	(90	%)
Aggregate	$	(1,906)	31	%	$	(1,582)	29	%	2	%

69

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

Net Written Premiums

Net written premiums (“NWP”) for AFG’s property and casualty insurance segment were $4.30 billion for the first nine months of 2021 compared to $3.78 billion for the first nine months of 2020, an increase of $519 million (14%). Detail of AFG’s property and casualty net written premiums is shown below (dollars in millions):

	Nine months ended September 30,
	2021				2020
	NWP		%		NWP		%		% Change
Property and transportation	$	1,740	41	%	$	1,447	38	%	20	%
Specialty casualty	1,912		44	%	1,739		46	%	10	%
Specialty financial	485		11	%	441		12	%	10	%
Other specialty	166		4	%	149		4	%	11	%
Total specialty	4,303		100	%	3,776		100	%	14	%
Neon exited lines	—		—	%	8		—	%	—	%
Aggregate	$	4,303	100	%	$	3,784	100	%	14	%

Net Earned Premiums

Net earned premiums (“NEP”) for AFG’s property and casualty insurance segment were $3.95 billion for the first nine months of 2021 compared to $3.77 billion for the first nine months of 2020, an increase of $178 million (5%). Detail of AFG’s property and casualty net earned premiums is shown below (dollars in millions):

	Nine months ended September 30,
	2021				2020
	NEP		%		NEP		%		% Change
Property and transportation	$	1,547	39	%	$	1,350	36	%	15	%
Specialty casualty	1,772		45	%	1,663		44	%	7	%
Specialty financial	477		12	%	455		12	%	5	%
Other specialty	156		4	%	132		3	%	18	%
Total specialty	3,952		100	%	3,600		95	%	10	%
Neon exited lines	—		—	%	174		5	%	(100	%)
Aggregate	$	3,952	100	%	$	3,774	100	%	5	%

The $843 million (16%) increase in gross written premiums for the first nine months of 2021 compared to the first nine months of 2020 reflects an increase in each of the Specialty property and casualty sub-segments due primarily to an improving economy, new business opportunities, higher renewal rates and increased exposures. Overall average renewal rates increased approximately 10% in the first nine months of 2021. Excluding the workers’ compensation business, renewal pricing increased approximately 13%.

Property and transportation Gross written premiums increased $539 million (25%) in the first nine months of 2021 compared to the first nine months of 2020 due primarily to higher premiums in the crop insurance business as a result of higher commodity futures pricing and rate increases, higher premiums in the transportation businesses as a result of new accounts, combined with strong renewals and increased exposures in the alternative risk transfer business. Average renewal rates increased approximately 6% for this group in the first nine months of 2021. Reinsurance premiums ceded as a percentage of gross written premiums increased 3 percentage points in the first nine months of 2021 compared to the first nine months of 2020 reflecting growth in the crop insurance operations, which cede a larger percentage of premiums than the other businesses in the Property and transportation sub-segment and the impact of reinstatement premiums in the first nine months of 2021 related to winter storms in Texas and a large property loss.

Specialty casualty Gross written premiums increased $343 million (13%) in the first nine months of 2021 compared to the first nine months of 2020. Significant renewal rate increases and new business opportunities contributed to higher premiums in the excess and surplus lines businesses and renewal rate increases, strong account retention and new business opportunities contributed to premium growth in the targeted markets businesses. The mergers and acquisitions and executive liability businesses also contributed meaningfully to the year-over-year growth. These increases were partially offset by lower year-over-year premiums in the workers’ compensation businesses, which were primarily the result of lower renewal rates and decreased exposure bases. Average renewal rates increased approximately 13% for this group in the first nine months of 2021. Excluding rate decreases in the workers’ compensation business, renewal rates for this group increased approximately 19%. Reinsurance premiums ceded as a percentage of gross written premiums

70

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

increased 2 percentage points in the first nine months of 2021 compared to the first nine months of 2020 reflecting growth in the excess and surplus, mergers and acquisitions and environmental businesses, which cede a larger percentage of premiums than the other businesses in the Specialty casualty sub-segment.

Specialty financial Gross written premiums increased $39 million (7%) in the first nine months of 2021 compared to the first nine months of 2020 due primarily to renewal rate increases and new business opportunities within the lender services, fidelity and surety businesses. Average renewal rates increased approximately 8% for this group in the first nine months of 2021. Reinsurance premiums ceded as a percentage of gross written premiums decreased 2 percentage points for the first nine months of 2021 compared to the first nine months of 2020 reflecting lower cessions in the financial institutions business due to reduced premiums from certain collateral protection insurance that is 100% reinsured and lower cessions in the innovative markets business.

Other specialty The amounts shown as reinsurance premiums ceded represent business assumed by AFG’s internal reinsurance program from the operations that make up AFG’s other Specialty property and casualty insurance sub-segments. Reinsurance premiums assumed increased $17 million (11%) in the first nine months of 2021 compared to the first nine months of 2020, reflecting an increase in premiums retained, primarily from businesses in the Specialty casualty sub-segment.

Combined Ratio

The table below (dollars in millions) details the components of the combined ratio and underwriting profit for AFG’s property and casualty insurance segment:

	Nine months ended September 30,						Nine months ended September 30,
	2021		2020		Change		2021		2020
Property and transportation
Loss and LAE ratio	64.7	%	65.1	%	(0.4	%)
Underwriting expense ratio	24.9	%	27.0	%	(2.1	%)
Combined ratio	89.6	%	92.1	%	(2.5	%)
Underwriting profit							$	163	$	107
Specialty casualty
Loss and LAE ratio	59.7	%	63.7	%	(4.0	%)
Underwriting expense ratio	26.9	%	28.4	%	(1.5	%)
Combined ratio	86.6	%	92.1	%	(5.5	%)
Underwriting profit							$	237	$	132
Specialty financial
Loss and LAE ratio	33.7	%	40.8	%	(7.1	%)
Underwriting expense ratio	51.2	%	52.7	%	(1.5	%)
Combined ratio	84.9	%	93.5	%	(8.6	%)
Underwriting profit							$	72	$	30
Total Specialty
Loss and LAE ratio	59.0	%	61.8	%	(2.8	%)
Underwriting expense ratio	29.4	%	31.4	%	(2.0	%)
Combined ratio	88.4	%	93.2	%	(4.8	%)
Underwriting profit							$	456	$	247
Aggregate — including exited lines
Loss and LAE ratio	59.0	%	64.7	%	(5.7	%)
Underwriting expense ratio	29.4	%	32.3	%	(2.9	%)
Combined ratio	88.4	%	97.0	%	(8.6	%)
Underwriting profit							$	454	$	114

The Specialty property and casualty insurance operations generated an underwriting profit of $456 million for the first nine months of 2021 compared to $247 million for the first nine months of 2020, an increase of $209 million (85%), reflecting higher underwriting profits in each of the Specialty property and casualty insurance sub-segments. Underwriting results for the Specialty property and casualty insurance operations include $14 million in COVID-19 related losses (0.3 points on the combined ratio) in the first nine months of 2021 compared to $95 million (2.6 points) in the first nine months of 2020.

71

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

Catastrophe losses were $61 million (1.5 points on the combined ratio) and related net reinstatement premiums were $12 million in the first nine months of 2021 compared to catastrophe losses of $71 million (2.0 points) and related net reinstatement premiums of $5 million in the first nine months of 2020.

Property and transportation Underwriting profit for this group was $163 million for the first nine months of 2021 compared to $107 million for the first nine months of 2020, an increase of $56 million (52%). This increase reflects higher underwriting profitability in the transportation, property and inland marine and crop businesses. Catastrophe losses were $34 million (2.2 points on the combined ratio), primarily the result of winter storms in Texas and Hurricane Ida, and related net reinstatement premiums were $9 million in the first nine months of 2021 compared to catastrophe losses of $41 million (3.0 points) in the first nine months of 2020. COVID-19 related losses for this group were $7 million (0.5 points) in the first nine months of 2020.

Specialty casualty Underwriting profit for this group was $237 million for the first nine months of 2021 compared to $132 million for the first nine months of 2020, an increase of $105 million (80%). This increase reflects higher underwriting profitability in the excess and surplus lines, excess liability and general liability businesses in the first nine months of 2021 compared to the first nine months of 2020. COVID-19 related losses were $8 million (0.4 points on the combined ratio) in the first nine months of 2021 compared to $58 million (3.5 points) in the first nine months of 2020, primarily in the workers’ compensation and executive liability businesses. Catastrophe losses were $6 million (0.3 points on the combined ratio) and related net reinstatement premiums were $1 million in the first nine months of 2021 compared to catastrophe losses of $9 million (0.6 points) and related net reinstatement premiums of $5 million in the first nine months of 2020.

Specialty financial Underwriting profit for this group was $72 million for the first nine months of 2021 compared to $30 million for the first nine months of 2020, an increase of $42 million (140%). This increase reflects higher year-over-year underwriting profitability in the surety, financial institutions and trade credit businesses. COVID-19 related losses were $6 million (1.2 points on the combined ratio) in the first nine months of 2021 compared to $29 million (6.4 points) in the first nine months of 2020, primarily related to trade credit insurance. Catastrophe losses were $20 million (4.1 points on the combined ratio) and related net reinstatement premiums were $2 million in the first nine months of 2021 compared to catastrophe losses of $19 million (4.3 points) in the first nine months of 2020.

Other specialty This group reported an underwriting loss of $16 million for the first nine months of 2021 compared to $22 million in the first nine months of 2020, a decrease of $6 million (27%). This decrease reflects lower losses in the business assumed by AFG’s internal reinsurance program from the operations that make up AFG’s other Specialty sub-segments in the first nine months of 2021 compared to the first nine months of 2020.

Aggregate See “Special asbestos and environmental reserve charges” under “Results of Operations — Property and Casualty Insurance Segment — Net prior year reserve development” for the quarters ended September 30, 2021 and 2020 for a discussion of the $47 million pretax non-core special A&E charge recorded in the third quarter of 2020. Aggregate underwriting results for AFG’s property and casualty insurance segment includes an underwriting loss of $82 million at Neon in the first nine months of 2020, due primarily to losses related to the COVID-19 pandemic, catastrophe losses and several large claims. AFG also recorded adverse prior year reserve development of $2 million and $4 million in the first nine months of 2021 and 2020, respectively, related to business outside of the Specialty group that AFG no longer writes.

72

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

Losses and Loss Adjustment Expenses

AFG’s overall loss and LAE ratio was 59.0% for the first nine months of 2021 compared to 64.7% for the first nine months of 2020, a decrease of 5.7 percentage points. The components of AFG’s property and casualty losses and LAE amounts and ratio are detailed below (dollars in millions):

	Nine months ended September 30,
	Amount				Ratio				Change in
	2021		2020		2021		2020		Ratio
Property and transportation
Current year, excluding COVID-19 related and catastrophe losses	$	1,067	$	909	69.0	%	67.4	%	1.6	%
Prior accident years development	(101)		(78)		(6.5	%)	(5.8	%)	(0.7	%)
Current year COVID-19 related losses	—		7		—	%	0.5	%	(0.5	%)
Current year catastrophe losses	34		41		2.2	%	3.0	%	(0.8	%)
Property and transportation losses and LAE and ratio	$	1,000	$	879	64.7	%	65.1	%	(0.4	%)
Specialty casualty
Current year, excluding COVID-19 related and catastrophe losses	$	1,130	$	1,083	63.8	%	65.1	%	(1.3	%)
Prior accident years development	(85)		(91)		(4.8	%)	(5.5	%)	0.7	%
Current year COVID-19 related losses	8		58		0.4	%	3.5	%	(3.1	%)
Current year catastrophe losses	6		9		0.3	%	0.6	%	(0.3	%)
Specialty casualty losses and LAE and ratio	$	1,059	$	1,059	59.7	%	63.7	%	(4.0	%)
Specialty financial
Current year, excluding COVID-19 related and catastrophe losses	$	173	$	160	36.3	%	34.9	%	1.4	%
Prior accident years development	(38)		(22)		(7.9	%)	(4.8	%)	(3.1	%)
Current year COVID-19 related losses	6		29		1.2	%	6.4	%	(5.2	%)
Current year catastrophe losses	20		19		4.1	%	4.3	%	(0.2	%)
Specialty financial losses and LAE and ratio	$	161	$	186	33.7	%	40.8	%	(7.1	%)
Total Specialty
Current year, excluding COVID-19 related and catastrophe losses	$	2,468	$	2,239	62.5	%	62.2	%	0.3	%
Prior accident years development	(210)		(181)		(5.3	%)	(5.0	%)	(0.3	%)
Current year COVID-19 related losses	14		95		0.3	%	2.6	%	(2.3	%)
Current year catastrophe losses	61		71		1.5	%	2.0	%	(0.5	%)
Total Specialty losses and LAE and ratio	$	2,333	$	2,224	59.0	%	61.8	%	(2.8	%)
Aggregate — including exited lines
Current year, excluding COVID-19 related and catastrophe losses	$	2,468	$	2,358	62.4	%	62.5	%	(0.1	%)
Prior accident years development	(208)		(119)		(5.2	%)	(3.1	%)	(2.1	%)
Current year COVID-19 related losses	14		115		0.3	%	3.0	%	(2.7	%)
Current year catastrophe losses	61		87		1.5	%	2.3	%	(0.8	%)
Aggregate losses and LAE and ratio	$	2,335	$	2,441	59.0	%	64.7	%	(5.7	%)

Current accident year losses and LAE, excluding COVID-19 related and catastrophe losses

The current accident year loss and LAE ratio, excluding COVID-19 related and catastrophe losses for AFG’s Specialty property and casualty insurance operations was 62.5% for the first nine months of 2021 compared to 62.2% for the first nine months of 2020, an increase of 0.3 percentage points.

Property and transportation   The 1.6 percentage point increase in the loss and LAE ratio for the current year, excluding COVID-19 related and catastrophe losses reflects higher losses in the property and inland marine business in the first nine months of 2021 compared to the first nine months of 2020.

Specialty casualty   The 1.3 percentage point decrease in the loss and LAE ratio for the current year, excluding COVID-19 related and catastrophe losses reflects a decrease in the loss and LAE ratios of the workers’ compensation business.

73

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

Specialty financial   The 1.4 percentage point increase in the loss and LAE ratio for the current year, excluding COVID-19 related and catastrophe losses reflects an increase in the loss and LAE ratio of the financial institutions and trade credit businesses.

Net prior year reserve development

AFG’s Specialty property and casualty insurance operations recorded net favorable reserve development related to prior accident years of $210 million in the first nine months of 2021 compared to $181 million in the first nine months of 2020, an increase of $29 million (16%).

Property and transportation Net favorable reserve development of $101 million in the first nine months of 2021 reflects lower than anticipated claim frequency and severity in the transportation businesses, lower than expected losses in the crop business, lower than expected claim severity in the property and inland marine business and lower than expected claim frequency in the aviation business, partially offset by higher than expected claim frequency and severity in the equine business. Net favorable reserve development of $78 million in the first nine months of 2020 reflects lower than expected claim frequency and severity in the agricultural businesses and lower than anticipated claim frequency and severity in the transportation businesses.

Specialty casualty Net favorable reserve development of $85 million in the first nine months of 2021 reflects lower than anticipated claim severity in the workers’ compensation businesses, partially offset by higher than anticipated claim severity in the general liability and targeted markets businesses. Net favorable reserve development of $91 million in the first nine months of 2020 reflects lower than anticipated claim severity in the workers’ compensation businesses and lower than anticipated claim frequency in the executive liability business, partially offset by higher than expected claim frequency in general liability contractor claims and higher than expected claim frequency and severity in the excess and surplus businesses.

Specialty financial Net favorable reserve development of $38 million in the first nine months of 2021 reflects lower than anticipated claim frequency in the surety and trade credit businesses and lower than expected claim frequency and severity in the financial institutions business. Net favorable reserve development of $22 million in the first nine months of 2020 reflects lower than anticipated claim frequency in the trade credit business and lower than anticipated claim frequency and severity in the financial institutions, fidelity and surety businesses.

Other specialty In addition to the development discussed above, total Specialty prior year reserve development includes net adverse reserve development of $14 million in the first nine months of 2021 and $10 million in the first nine months of 2020, reflecting net adverse development associated with AFG’s internal reinsurance program, partially offset by the amortization of the deferred gains on the retroactive reinsurance transactions entered into in connection with the sale of businesses in 1998 and 2001.

Special asbestos and environmental reserve charges See “Special asbestos and environmental reserve charges” under “Results of Operations — Property and Casualty Insurance Segment — Net prior year reserve development” for the quarters ended September 30, 2021 and 2020 for a discussion of the $47 million special charge recorded in the third quarter of 2020.

Aggregate Aggregate net prior accident years reserve development for AFG’s property and casualty insurance segment includes the special A&E charges mentioned above, net adverse reserve development of $11 million in the first nine months of 2020 from the Neon exited lines and net adverse reserve development of $2 million in the first nine months of 2021 and $4 million in the first nine months of 2020 related to business outside the Specialty group that AFG no longer writes.

COVID-19 related losses

AFG’s Specialty property and casualty insurance operations recorded $14 million in reserve charges related to COVID-19 in the first nine months of 2021 primarily related to the workers’ compensation and trade credit businesses, and released approximately $13 million of accident year 2020 reserves based on loss experience. Underwriting results for the first nine months of 2020 include $95 million of reserve charges related to COVID-19. Approximately 70% of AFG’s 2020 COVID-19 related losses were reported in the workers’ compensation, executive liability and trade credit businesses, with the remainder spread across numerous other businesses. Given the uncertainties surrounding the ultimate number and scope of claims relating to the pandemic, approximately 63% of the $96 million in cumulative COVID-19 related losses are held as incurred but not reported reserves at September 30, 2021.

74

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

In addition, COVID-19 related losses were the primary driver of the underwriting loss recorded in the Neon exited lines for the first nine months of 2020.

Catastrophe losses

Catastrophe losses of $61 million in the first nine months of 2021 resulted primarily from Hurricane Ida and storms in multiple regions of the United States, including the winter storms in Texas. Catastrophe losses of $87 million in the first nine months of 2020 resulted primarily from Hurricanes Hanna, Laura and Sally, Tropical Storm Isaias, storms and tornadoes in multiple regions of the United States, multiple wildfires in west coast states and included $4 million related to civil unrest.

Commissions and Other Underwriting Expenses

AFG’s property and casualty commissions and other underwriting expenses (“U/W Exp”) were $1.16 billion in the first nine months of 2021 compared to $1.22 billion for the first nine months of 2020, a decrease of $56 million (5%). AFG’s underwriting expense ratio was 29.4% for the first nine months of 2021 compared to 32.3% for the first nine months of 2020, a decrease of 2.9 percentage points. Detail of AFG’s property and casualty commissions and other underwriting expenses and underwriting expense ratios is shown below (dollars in millions):

	Nine months ended September 30,
	2021				2020				Change in
	U/W Exp		% of NEP		U/W Exp		% of NEP		% of NEP
Property and transportation	$	384	24.9	%	$	364	27.0	%	(2.1	%)
Specialty casualty	476		26.9	%	472		28.4	%	(1.5	%)
Specialty financial	244		51.2	%	239		52.7	%	(1.5	%)
Other specialty	59		37.5	%	54		39.1	%	(1.6	%)
Total Specialty	1,163		29.4	%	1,129		31.4	%	(2.0	%)
Neon exited lines	—				90
Aggregate	$	1,163	29.4	%	$	1,219	32.3	%	(2.9	%)

Property and transportation   Commissions and other underwriting expenses as a percentage of net earned premiums decreased 2.1 percentage points in the first nine months of 2021 compared to the first nine months of 2020 reflecting the impact of higher premiums on the ratio in the first nine months of 2021 compared to the first nine months of 2020.

Specialty casualty   Commissions and other underwriting expenses as a percentage of net earned premiums decreased 1.5 percentage points in the first nine months of 2021 compared to the first nine months of 2020 reflecting higher ceding commissions received from reinsurers as a result of growth in the excess liability and excess and surplus businesses and the impact of higher premiums on the ratio in the first nine months of 2021 compared to the first nine months of 2020.

Specialty financial   Commissions and other underwriting expenses as a percentage of net earned premiums decreased 1.5 percentage points in the first nine months of 2021 compared to the first nine months of 2020 reflecting the impact of higher premiums on the ratio in the first nine months of 2021 compared to the first nine months of 2020.

75

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

Property and Casualty Net Investment Income

Net investment income in AFG’s property and casualty insurance operations was $467 million in the first nine months of 2021 compared to $282 million (excluding the Neon exited lines) in the first nine months of 2020, an increase of $185 million (66%). The average invested assets and overall yield earned on investments held by AFG’s property and casualty insurance operations are provided below (dollars in millions):

	Nine months ended September 30,
	2021			2020			Change			% Change
Net investment income:
Net investment income excluding alternative investments	$	243		$	264		$	(21)		(8	%)
Alternative investments	224			18			206			1,144	%
Total net investment income	$	467		$	282		$	185		66	%
Average invested assets (at amortized cost)	$	12,763		$	11,611		$	1,152		10	%
Yield (net investment income as a % of average invested assets)	4.88		%	3.24		%	1.64		%
Tax equivalent yield (*)	5.00		%	3.37		%	1.63		%

(*)Adjusts the yield on equity securities and tax-exempt bonds to the fully taxable equivalent yield.

The property and casualty insurance segment’s increase in net investment income for the first nine months of 2021 compared to the first nine months of 2020 reflects significantly higher earnings from alternative investments (partnerships and similar investments and AFG-managed CLOs), partially offset by the effect of lower fixed maturity yields, lower short-term interest rates and lower dividend income. The property and casualty insurance segment’s overall yield on investments (net investment income as a percentage of average invested assets) was 4.88% for the first nine months of 2021 compared to 3.24% for the first nine months of 2020, an increase of 1.64 percentage points. The annualized return earned on alternative investments was 24.4% in the first nine months of 2021 compared to 2.7% in the prior year period.

In addition to the property and casualty segment’s net investment income from ongoing operations discussed above, the Neon exited lines reported a $5 million loss in the first nine months of 2020 in net investment income, primarily from changes in the fair value of equity securities.

Property and Casualty Other Income and Expenses, Net

Other income and expenses, net for AFG’s property and casualty insurance operations was a net expense of $16 million for the first nine months of 2021 compared to $23 million for the first nine months of 2020, a decrease of $7 million (30%). The table below details the items included in other income and expenses, net for AFG’s property and casualty insurance operations (in millions):

	Nine months ended September 30,
	2021		2020
Other income	$	9	$	8
Other expenses
Amortization of intangibles	5		9
Other	20		22
Total other expense	25		31
Other income and expenses, net	$	(16)	$	(23)

In addition to the property and casualty segment’s other income and expenses, net from ongoing operations discussed above, the Neon exited lines incurred a net expense of $5 million in other income and expenses, net during the first nine months of 2020.

Holding Company, Other and Unallocated — Results of Operations

AFG’s net GAAP pretax loss outside of its property and casualty insurance segment (excluding realized gains and losses) totaled $172 million in the first nine months of 2021 compared to $151 million in the first nine months of 2020, an increase of $21 million (14%). AFG’s net core pretax loss outside of its property and casualty insurance segment (excluding realized gains and losses) totaled $161 million in the first nine months of 2021 compared to $130 million in the first nine months of 2020, an increase of $31 million (24%).

76

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

The following table details AFG’s GAAP and core loss before income taxes from operations outside of its property and casualty insurance segment for the nine months ended September 30, 2021 and 2020 (dollars in millions):

	Nine months ended September 30,
	2021		2020		% Change
Revenues:
Net investment income	$	20	$	1	1,900	%
Other income — P&C fees	58		50		16	%
Other income	15		14		7	%
Total revenues	93		65		43	%
Costs and Expenses:
Property and casualty insurance — commissions and other underwriting expenses	24		16		50	%
Other expense — expenses associated with P&C fees	34		34		—	%
Other expenses (*)	125		81		54	%
Costs and expenses, excluding interest charges on borrowed money	183		131		40	%
Loss before income taxes, excluding realized gains and losses and interest charges on borrowed money	(90)		(66)		36	%
Interest charges on borrowed money	71		64		11	%
Core loss from continuing operations before income taxes, excluding realized gains and losses	(161)		(130)		24	%
Pretax non-core special A&E charges	—		(21)		(100	%)
Pretax non-core loss on pension settlement	(11)		—		—	%
GAAP loss from continuing operations before income taxes, excluding realized gains and losses	$	(172)	$	(151)	14	%

(*)Excludes a pretax non-core loss of $11 million related to the settlement of pension liabilities of a small former manufacturing operation in the second quarter of 2021 and a pretax non-core special A&E charge of $21 million in the third quarter of 2020.

Holding Company and Other — Net Investment Income

AFG recorded net investment income on investments held outside of its property and casualty insurance segment of $20 million in the first nine months of 2021 compared to $1 million in the first nine months of 2020, an increase of $19 million (1,900%). The parent company holds a small portfolio of securities that are carried at fair value through net investment income. These securities increased in value by $7 million in the first nine months of 2021 compared to a decrease in value of $4 million in the first nine months of 2020. The increase in net investment income also reflects income in the third quarter of 2021 from directly owned real estate acquired from the annuity group prior to the sale of the annuity business and purchases of fixed maturity investments at the holding company.

Holding Company and Other — P&C Fees and Related Expenses

Summit, a workers’ compensation insurance subsidiary, collects fees from a small group of unaffiliated insurers for providing underwriting, policy administration and claims services. In addition, certain of AFG’s property and casualty insurance businesses collect fees from customers for ancillary services such as workplace safety programs and premium financing. In the first nine months of 2021, AFG collected $54 million in fees for these services compared to $50 million in the first nine months of 2020. Management views this fee income, net of the $34 million in both the first nine months of 2021 and the first nine months of 2020, in expenses incurred to generate such fees, as a reduction in the cost of underwriting its property and casualty insurance policies. In addition, AFG’s property and casualty insurance businesses collected $4 million in fees from AFG’s disposed annuity operations subsequent to the May 2021 sale as compensation for certain services provided under a transition services agreement. The expenses related to providing such services are embedded in property and casualty underwriting expenses. Consistent with internal management reporting, these fees and the related expenses are netted and recorded as a reduction of commissions and other underwriting expenses in AFG’s segmented results.

77

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

Holding Company and Other — Other Income

Other income in the table above includes $12 million in the first nine months of 2021 and $11 million in the first nine months of 2020, in management fees paid to AFG by the AFG-managed CLOs (AFG’s consolidated managed investment entities). The management fees are eliminated in consolidation — see the other income line in the Consolidate MIEs column under “Results of Operations — Segmented Statement of Earnings.” Excluding amounts eliminated in consolidation, AFG recorded other income outside of its property and casualty insurance segment of $3 million in both the first nine months of 2021 and the first nine months of 2020.

Holding Company and Other — Other Expenses

Excluding the non-core special A&E charge discussed below, AFG’s holding companies and other operations outside of its property and casualty insurance segment recorded other expenses of $125 million in the first nine months of 2021 compared to $81 million the first nine months of 2020, an increase of $44 million (54%) reflecting higher holding company expenses related to employee benefit plans that are tied to stock market performance and higher expenses associated with certain incentive compensation plans.

Holding Company and Other — Interest Charges on Borrowed Money

AFG’s holding companies and other operations outside of its property and casualty insurance segment recorded interest expense of $71 million in the first nine months of 2021 compared to $64 million in the first nine months of 2020, an increase of $7 million (11%), reflecting higher average indebtedness.

The increase in interest expense for the first nine months of 2021 as compared to the first nine months of 2020 reflects the following financial transactions completed by AFG between January 1, 2020 and September 30, 2021:

•Issued $300 million of 5.25% Senior Notes in April 2020

•Issued $150 million of 5.625% Subordinated Debentures in May 2020

•Issued $200 million of 4.50% Subordinated Debentures in September 2020

•Redeemed $150 million of 6% Subordinated Debentures in November 2020

Holding Company and Other — Special A&E Charge

See “Holding Company and Other — Special A&E Charge” under “Results of Operations — Holding Company, Other and Unallocated” for the quarters ended September 30, 2021 and 2020 for a discussion of the $21 million pretax non-core special A&E charge recorded in the third quarter of 2020.

Holding Company and Other — Loss on Pension Settlement

In the second quarter of 2021, AFG settled pension liabilities related to a small former manufacturing operation resulting in a pretax non-core loss of $11 million.

Realized Gains (Losses) on Securities

AFG’s realized gains (losses) on securities were net gains of $103 million in the first nine months of 2021 compared to net losses of $197 million in the first nine months of 2020, a change of $300 million (152%). Realized gains (losses) on securities consisted of the following (in millions):

	Nine months ended September 30,
	2021		2020
Realized gains (losses) before impairments:
Disposals	$	2	$	6
Change in the fair value of equity securities	104		(189)
Change in the fair value of derivatives	(4)		—
	102		(183)
Change in allowance for impairments on securities	1		(14)
Realized gains (losses) on securities	$	103	$	(197)

The $104 million net realized gain from the change in the fair value of equity securities in the first nine months of 2021 includes gains of $27 million on investments in energy and natural gas companies, $20 million on investments in banks and financing companies, $20 million on investments in media companies and $19 million on investments in healthcare companies. The $189 million net realized loss from the change in the fair value of equity securities in the first nine months of 2020 includes losses of $52 million on investments in banks and financing companies, $46 million on investments in

78

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

energy and natural gas companies, $34 million from investments in media companies, $19 million on real estate investment trusts and $6 million on insurance companies.

Realized Gain (Loss) on Subsidiary

In the second quarter of 2021, AFG recognized a pretax gain on sale of subsidiary of $4 million related to contingent consideration received on the sale of Neon. See “Results of Operations — General” for the discussion of the December 2019 decision to exit the Lloyd’s of London insurance market.

On September 28, 2020, AFG announced that it had reached a definitive agreement to sell GAI Holding Bermuda and its subsidiaries, comprising the legal entities that own Neon, to RiverStone Holdings Limited. The transaction closed in the fourth quarter of 2020. AFG recorded a $30 million loss in the third quarter of 2020 to establish a liability equal to the excess of the net carrying value of the assets and liabilities to be disposed over the estimated net sale proceeds. See Note C — “Sales of Businesses” to the financial statements.

Consolidated Income Taxes on Continuing Operations

AFG’s consolidated provision (credit) for income taxes on continuing operations was a provision of $164 million for the first nine months of 2021 compared to a credit of $52 million for the first nine months of 2020, a change of $216 million (415%). See Note K — “Income Taxes” to the financial statements for an analysis of items affecting AFG’s effective tax rate on continuing operations.

Consolidated Noncontrolling Interests in Continuing Operations

AFG’s consolidated net earnings (loss) attributable to noncontrolling interests was a net loss $13 million for the first nine months of 2020 reflecting losses at Neon, which was sold in December 2020.

Real Estate Entities Acquired from the Annuity Operations

Beginning with the first quarter of 2021, the results of the annuity businesses to be sold are reported as discontinued operations, in accordance with GAAP, which included adjusting prior period results to reflect these operations as discontinued. Prior to the completion of the sale, AFG’s property and casualty insurance operations acquired approximately $480 million in real estate-related partnerships and AFG parent acquired approximately $100 million of directly owned real estate from those operations. GAAP pretax earnings from continuing operations includes the earnings from these entities and certain other expenses that will be retained from the annuity operations.

The retained real estate entities contributed $51 million in GAAP pretax earnings through the May 31, 2021 effective date of the sale compared to $29 million in the first nine months of 2020, an increase of $22 million (76%). This increase reflects higher earnings from the real estate-related partnerships through the sale date compared to the first nine months of 2020.

Discontinued Annuity Operations

AFG’s discontinued annuity operations, which were sold on May 31, 2021, contributed $324 million in GAAP pretax earnings (excluding the gain on the sale of the annuity operations) in the first nine months of 2021 compared to a pretax net loss of $31 million in the first nine months of 2020, a change of $355 million (1,145%) reflecting the following:

•net realized gains on securities in the first nine months of 2021 compared to net realized losses in the first nine months of 2020,

•significantly higher earnings from partnerships and similar investments,

•the negative impact from the run-off of higher yielding investments and lower short-term interest rates,

•the positive impact of strong stock market performance in the first nine months of 2021,

•the negative impact of lower than expected interest rates in both the first nine months of 2021 and the first nine months of 2020 on the accounting for fixed indexed annuities (“FIAs”),

•the negative impact of unlocking actuarial assumptions in the third quarter of 2020, and

•the negative impact of the amortization of the deferred loss related to the annuity block reinsurance transaction entered into in the fourth quarter of 2020 and other reinsurance impacts in the first nine months of 2021.

79

AMERICAN FINANCIAL GROUP, INC. 10-Q

Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

The following table details AFG’s earnings (loss) before and after income taxes and the gain on the sale from its discontinued annuity operations for the nine months ended September 30, 2021 and 2020 (dollars in millions):

	Nine months ended September 30,
	2021 (*)		2020		% Change
Pretax annuity earnings historically reported as core operating earnings:
Pretax annuity earnings before items below	$	106	$	247	(57	%)
Earnings on partnerships and similar investments	139		(27)		(615	%)
Total pretax annuity earnings historically reported as core operating earnings	245		220		11	%
Pretax amounts previously reported outside of annuity core earnings:
Unlocking	—		(46)		(100	%)
Impact of reinsurance, derivatives related to FIAs and other impacts of changes in the stock market and interest rates on FIAs over or under option costs	(33)		(94)		(65	%)
Realized gains (losses) on securities	112		(105)		(207	%)
Run-off life and long-term care	—		(6)		(100	%)
Total pretax amounts previously reported outside of annuity core earnings	79		(251)		(131	%)
GAAP pretax earnings (loss) from discontinued annuity operations, excluding the gain on the sale of the discontinued annuity operations	324		(31)		(1,145	%)
Provision (credit) for income taxes	66		(11)		(700	%)
GAAP net earnings (loss) from discontinued annuity operations, excluding the sale of the discontinued annuity operations	258		(20)		(1,390	%)
Gain on sale of discontinued annuity operations, net of tax	656		—		—	%
GAAP net earnings (loss) from discontinued annuity operations	$	914	$	(20)	(4,670	%)

(*)Results through the May 31, 2021 effective date of the sale.

ITEM 3. Quantitative and Qualitative Disclosure about Market Risk

As of September 30, 2021, there were no material changes to the information provided in Item 7A — Quantitative and Qualitative Disclosures about Market Risk of AFG’s 2020 Form 10-K other than the decline in the size of AFG’s fixed maturity portfolio due to the May 2021 sale of its annuity business. The following table demonstrates the sensitivity of fair values to reasonably likely changes in interest rates by illustrating the estimated effect on AFG’s fixed maturity portfolio that an immediate increase of 100 basis points in the interest rate yield curve would have at September 30, 2021 (dollars in millions). Effects of increases or decreases from the 100 basis points illustrated would be approximately proportional.

Fair value of fixed maturity portfolio	$	10,456
Percentage impact on fair value of 100 bps increase in interest rates	(2.0		%)
Pretax impact on fair value of fixed maturity portfolio	$	(209)

ITEM 4. Controls and Procedures

AFG’s management, with participation of its Co-Chief Executive Officers and its Chief Financial Officer, has evaluated AFG’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15) as of the end of the period covered by this report. Based on that evaluation, AFG’s Co-CEOs and CFO concluded that the controls and procedures are effective. There have been no changes in AFG’s internal control over financial reporting during the third fiscal quarter of 2021 that materially affected, or are reasonably likely to materially affect, AFG’s internal control over financial reporting.

In the ordinary course of business, AFG and its subsidiaries routinely enhance their information systems by either upgrading current systems or implementing new systems. There has been no change in AFG’s business processes and procedures during the third fiscal quarter of 2021 that has materially affected, or is reasonably likely to materially affect, AFG’s internal control over financial reporting.

80

AMERICAN FINANCIAL GROUP, INC. 10-Q

PART II

OTHER INFORMATION

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities   AFG repurchased shares of its Common Stock during 2021 as follows:

	Total Number of Shares Purchased	Average Price Paid Per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs (b)
First quarter	1,757,702	$	108.98		1,757,702	3,710,904
Second quarter	916,520	124.40			916,520	7,794,384
Third quarter:
July	10,973	$	120.01		10,973	7,783,411
August	—	—			—	7,783,411
September	83,987	129.67			83,987	7,699,424
Total	2,769,182	$	114.75	(a)	2,769,182

(a)AFG declared special dividends totaling $20.00 per share of its Common Stock in the first nine months of 2021. Adjusted for the special dividends, the average price paid per share was $97.22 for the nine months ended September 30, 2021.

(b)Represents the remaining shares that may be repurchased until December 31, 2025 under the Plans authorized by AFG’s Board of Directors in October 2020 and May 2021. In May 2021, AFG’s Board of Directors authorized the repurchase of five million additional shares.

In addition, AFG acquired 76,984 shares of its Common Stock (at an average of $106.58 per share) in the first quarter of 2021, 14,380 shares (at an average of $131.66 per share) in the second quarter of 2021, 496 shares (at $126.24 per share) in July 2021 and 66 shares (at $135.98 per share) in August 2021 in connection with its stock incentive plans.

81

AMERICAN FINANCIAL GROUP, INC. 10-Q

ITEM 6. Exhibits

Number	Exhibit Description
31(a)	Certification of Co-Chief Executive Officer pursuant to section 302(a) of the Sarbanes-Oxley Act of 2002.
31(b)	Certification of Co-Chief Executive Officer pursuant to section 302(a) of the Sarbanes-Oxley Act of 2002.
31(c)	Certification of Chief Financial Officer pursuant to section 302(a) of the Sarbanes-Oxley Act of 2002.
32	Certification of Co-Chief Executive Officers and Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	American Financial Group, Inc.
November 5, 2021	By:	/s/ Brian S. Hertzman
		Brian S. Hertzman
		Senior Vice President and Chief Financial Officer

82

EX-31.A

Exhibit 31(a)

AMERICAN FINANCIAL GROUP, INC. 10-Q

SARBANES-OXLEY SECTION 302(a) CERTIFICATIONS

I, Carl H. Lindner III, certify that:

1.I have reviewed this quarterly report on Form 10-Q of American Financial Group, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 5, 2021	By:	/s/ Carl H. Lindner III
		Carl H. Lindner III
		Co-Chief Executive Officer

E-1

EX-31.B

Exhibit 31(b)

AMERICAN FINANCIAL GROUP, INC. 10-Q

SARBANES-OXLEY SECTION 302(a) CERTIFICATIONS

I, S. Craig Lindner, certify that:

1.I have reviewed this quarterly report on Form 10-Q of American Financial Group, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 5, 2021	By:	/s/ S. Craig Lindner
		S. Craig Lindner
		Co-Chief Executive Officer

E-2

EX-31.C

Exhibit 31(c)

AMERICAN FINANCIAL GROUP, INC. 10-Q

SARBANES-OXLEY SECTION 302(a) CERTIFICATIONS

I, Brian S. Hertzman, certify that:

1.I have reviewed this quarterly report on Form 10-Q of American Financial Group, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 5, 2021	By:	/s/ Brian S. Hertzman
		Brian S. Hertzman
		Senior Vice President and Chief Financial Officer

E-3

EX-32

Exhibit 32

AMERICAN FINANCIAL GROUP, INC. 10-Q

CERTIFICATION OF CHIEF EXECUTIVE OFFICERS AND CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the filing with the Securities and Exchange Commission of the Quarterly Report of American Financial Group, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2021 (the “Report”), the undersigned officers of the Company, certify, pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of their knowledge:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

November 5, 2021	By:	/s/ S. Craig Lindner
Date		S. Craig Lindner
		Co-Chief Executive Officer
November 5, 2021	By:	/s/ Carl H. Lindner III
Date		Carl H. Lindner III
		Co-Chief Executive Officer
November 5, 2021	By:	/s/ Brian S. Hertzman
Date		Brian S. Hertzman
		Senior Vice President and Chief Financial Officer

A signed original of this written statement will be retained by the Registrant and

furnished to the Securities and Exchange Commission or its staff upon request.

E-4

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2021	Nov. 01, 2021
Entity Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2021
Document Transition Report	false
Entity File Number	1-13653
Entity Registrant Name	AMERICAN FINANCIAL GROUP, INC.
Entity Incorporation, State or Country Code	OH
Entity Tax Identification Number	31-1544320
Entity Central Index Key	0001042046
Entity Address, Address Line One	301 East Fourth Street
Entity Address, City or Town	Cincinnati
Entity Address, State or Province	OH
Entity Address, Postal Zip Code	45202
City Area Code	513
Local Phone Number	579-2121
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Amendment Flag	false
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		84,807,882
Entity Common Stock, Shares Outstanding Owned by Subsidiaries		14,900,000
Common stocks
Entity Information [Line Items]
Title of 12(b) Security	Common Stock
Trading Symbol	AFG
Security Exchange Name	NYSE
5.875% Subordinated Debentures due March 2059
Entity Information [Line Items]
Title of 12(b) Security	5.875% Subordinated Debentures due March 30, 2059
Trading Symbol	AFGB
Security Exchange Name	NYSE
5.625% Subordinated Debentures due June 2060
Entity Information [Line Items]
Title of 12(b) Security	5.625% Subordinated Debentures due June 1, 2060
Trading Symbol	AFGD
Security Exchange Name	NYSE
5.125% Subordinated Debentures due December 2059
Entity Information [Line Items]
Title of 12(b) Security	5.125% Subordinated Debentures due December 15, 2059
Trading Symbol	AFGC
Security Exchange Name	NYSE
4.50% Subordinated Debentures due September 2060
Entity Information [Line Items]
Title of 12(b) Security	4.50% Subordinated Debentures due September 15, 2060
Trading Symbol	AFGE
Security Exchange Name	NYSE

XML

Consolidated Balance Sheet (Unaudited) - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020
Assets:
Cash and cash equivalents	$ 2,833	$ 1,665
Investments:
Fixed maturities, available for sale at fair value (amortized cost — $10,211 and $8,812; allowance for expected credit losses of $9 and $12)	10,427	9,084
Fixed maturities, trading at fair value	29	24
Equity securities, at fair value	993	889
Investments accounted for using the equity method	1,407	1,235
Mortgage loans	537	377
Real estate and other investments	161	220
Total cash and investments	16,387	13,494
Recoverables from reinsurers	3,523	3,288
Prepaid reinsurance premiums	1,028	768
Agents’ balances and premiums receivable	1,492	1,229
Deferred policy acquisition costs	262	244
Other receivables	1,097	678
Other assets	847	977
Goodwill	176	176
Assets of discontinued annuity operations	0	47,885
Total assets	29,942	73,710
Liabilities and Equity:
Unpaid losses and loss adjustment expenses	10,991	10,392
Unearned premiums	3,415	2,803
Payable to reinsurers	1,146	807
Long-term debt	1,964	1,963
Other liabilities	2,152	1,584
Liabilities of discontinued annuity operations	0	44,458
Total Liabilities	24,702	66,921
Shareholders’ equity:
Common Stock, no par value — 200,000,000 shares authorized — 84,795,008 and 86,345,246 shares outstanding	85	86
Capital surplus	1,315	1,281
Retained earnings	3,680	4,149
Accumulated other comprehensive income, net of tax	160	1,273
Total shareholders’ equity	5,240	6,789
Noncontrolling interests	0	0
Total equity	5,240	6,789
Total liabilities and equity	29,942	73,710
Variable interest entity, primary beneficiary
Investments:
Assets of managed investment entities	5,130	4,971
Total assets	5,130	4,971
Liabilities and Equity:
Liabilities of managed investment entities	5,034	4,914
Total Liabilities	$ 5,034	$ 4,914

XML

Consolidated Balance Sheet (Unaudited) (Parenthetical) - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Fixed maturities, available for sale, amortized cost	$ 10,211	$ 8,812
Fixed maturities, available for sale, allowance for expected credit losses	$ 9	$ 12
Common Stock, par value (USD per share)	$ 0	$ 0
Common Stock, shares authorized (shares)	200,000,000	200,000,000
Common Stock, shares outstanding (shares)	84,795,008	86,345,246

XML

Consolidated Statement of Earnings (Unaudited) - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Revenues:
Property and casualty insurance net earned premiums	$ 1,529	$ 1,381	$ 3,952	$ 3,774
Net investment income	169	122	521	314
Realized gains (losses) on securities	(17)	23	103	(197)
Realized gains (losses) on subsidiaries	0	(30)	4	(30)
Income of managed investment entities:
Investment income	45	46	135	154
Gain (loss) on change in fair value of assets/liabilities	1	(5)	9	(21)
Other income	27	19	70	62
Total revenues	1,754	1,556	4,794	4,056
Costs and Expenses:
Losses and loss adjustment expenses	954	963	2,335	2,441
Commissions and other underwriting expenses	417	406	1,187	1,235
Interest charges on borrowed money	24	24	71	64
Expenses of managed investment entities	37	34	115	129
Other expenses	55	89	196	192
Total costs and expenses	1,487	1,516	3,904	4,061
Earnings (loss) from continuing operations before income taxes	267	40	890	(5)
Provision (credit) for income taxes	48	(48)	164	(52)
Net earnings from continuing operations, including noncontrolling interests	219	88	726	47
Net earnings (loss) from discontinued operations	0	76	914	(20)
Net earnings, including noncontrolling interests	219	164	1,640	27
Less: Net earnings (loss) from continuing operations attributable to noncontrolling interests	0	0	0	(13)
Net Earnings Attributable to Shareholders	$ 219	$ 164	$ 1,640	$ 40
Earnings (Loss) Attributable to Shareholders per Basic Common Share from:
Basic (USD per share) from continuing operations	$ 2.57	$ 1.00	$ 8.52	$ 0.67
Basic (USD per share) from discontinued operations	0	0.86	10.72	(0.22)
Basic (USD per share)	2.57	1.86	19.24	0.45
Earnings (Loss) Attributable to Shareholders per Diluted Common Share:
Diluted (USD per share) from continuing operations)	2.56	1.00	8.45	0.66
Diluted (USD per share) from discontinued operations	0	0.86	10.66	(0.21)
Diluted (USD per share)	$ 2.56	$ 1.86	$ 19.11	$ 0.45
Average number of Common Shares:
Basic (shares)	84.8	88.2	85.2	89.4
Diluted (shares)	85.2	88.5	85.8	89.9

XML

Consolidated Statement of Comprehensive Income (Unaudited) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Statement of Comprehensive Income [Abstract]
Net earnings, including noncontrolling interests	$ 219	$ 164	$ 1,640	$ 27
Net unrealized gains (losses) on securities:
Unrealized holding gains (losses) on securities arising during the period	(29)	194	(177)	350
Reclassification adjustment for realized (gains) losses included in net earnings	2	(12)	(16)	0
Reclassification adjustment for unrealized gains of subsidiaries sold	0	0	884	0
Total net unrealized gains (losses) on securities	(27)	182	(1,077)	350
Net unrealized gains (losses) on cash flow hedges:
Unrealized holding gains (losses) on cash flow hedges arising during the period	0	1	(1)	49
Reclassification adjustment for investment income included in net earnings	0	(7)	(11)	(25)
Reclassification adjustment for unrealized gains on cash flow hedges of subsidiaries sold	0	0	(29)	0
Total net unrealized gains (losses) on cash flow hedges	0	(6)	(41)	24
Foreign currency translation adjustments	(3)	0	(3)	(6)
Pension and other postretirement plans adjustments (“OPRP”):
Unrealized holding losses on pension and OPRP arising during the period	0	0	(1)	0
Reclassification adjustment for pension settlement loss included in net earnings	0	0	9	0
Total pension and OPRP adjustments	0	0	8	0
Other comprehensive income (loss), net of tax	(30)	176	(1,113)	368
Total comprehensive income, net of tax	189	340	527	395
Less: Comprehensive income (loss) attributable to noncontrolling interests	0	0	0	(11)
Comprehensive income attributable to shareholders	$ 189	$ 340	$ 527	$ 406

XML

Consolidated Statement of Changes in Equity (Unaudited) - USD ($) $ in Millions	Total	Total	Common Shares	Common Stock and Capital Surplus	Retained Earnings	Accumulated Other Comp. Income	Noncontrolling interests	Cumulative effect adjustment in period of adoption Retained Earnings
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect of accounting change	$ 6,269	$ 6,269		$ 1,397	$ 4,009	$ 863	$ 0	$ 7
Beginning Balance, shares at Dec. 31, 2019			90,303,686
Beginning Balance at Dec. 31, 2019	6,269	6,269		1,397	4,009	863	0	$ 7
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings (losses) attributable to parent	40	40			40
Net earnings loss attributable to noncontrolling interests	(13)
Net earnings, including noncontrolling interests	27
Net earnings (losses) including portion attributable to nonredeemable noncontrolling interest	40						0
Other comprehensive income (loss), attributable to parent		366				366
Other comprehensive income (loss) including portion attributable to nonredeemable noncontrolling interest	366
Dividends	(120)	(120)			(120)
Shares issued:
Exercise of stock options, shares			229,208
Exercise of stock options	10	10		10
Restricted stock awards, shares			227,867
Other benefit plans, shares			105,318
Other benefit plans	7	7		7
Dividend reinvestment plan, shares			7,251
Dividend reinvestment plan	1	1		1
Stock-based compensation expense	15	15		15
Shares acquired and retired, shares			(3,468,107)
Shares acquired and retired	(233)	(233)		(54)	(179)
Shares exchanged — benefit plans, shares			(97,731)
Shares exchanged — benefit plans	(11)	(11)		(2)	(9)
Forfeitures of restricted stock, shares			(40,910)
Other	(11)	(11)		(4)	(11)	4	0
Ending Balance, shares at Sep. 30, 2020			87,266,582
Ending Balance at Sep. 30, 2020	6,340	6,340		1,370	3,737	1,233	0
Beginning Balance, Redeemable Noncontrolling Interests at Dec. 31, 2019	0
Redeemable Noncontrolling Interest, Equity, Carrying Amount [Abstract]
Net earnings attributable to redeemable noncontrolling interests	(13)
Other comprehensive income (loss) attributable to redeemable noncontrolling interests	2
Other	11
Ending Balance, Redeemable Noncontrolling Interests at Sep. 30, 2020	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect of accounting change	6,126	6,126		1,388	3,685	1,053	0
Beginning Balance, shares at Jun. 30, 2020			88,659,407
Beginning Balance at Jun. 30, 2020	6,126	6,126		1,388	3,685	1,053	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings (losses) attributable to parent	164	164			164
Net earnings loss attributable to noncontrolling interests	0
Net earnings, including noncontrolling interests	164
Net earnings (losses) including portion attributable to nonredeemable noncontrolling interest	164						0
Other comprehensive income (loss), attributable to parent		176				176
Other comprehensive income (loss) including portion attributable to nonredeemable noncontrolling interest	176
Dividends	(39)	(39)			(39)
Shares issued:
Exercise of stock options, shares			19,865
Exercise of stock options	1	1		1
Restricted stock awards, shares			0
Other benefit plans, shares			38,822
Other benefit plans	2	2		2
Dividend reinvestment plan, shares			2,901
Dividend reinvestment plan	1	1		1
Stock-based compensation expense	5	5		5
Shares acquired and retired, shares			(1,447,588)
Shares acquired and retired	(96)	(96)		(23)	(73)
Shares exchanged — benefit plans, shares			(1,337)
Shares exchanged — benefit plans	0	0		0	0
Forfeitures of restricted stock, shares			(5,488)
Other, shares			0
Other	0			(4)	0	4	0
Ending Balance, shares at Sep. 30, 2020			87,266,582
Ending Balance at Sep. 30, 2020	6,340	6,340		1,370	3,737	1,233	0
Ending Balance, Redeemable Noncontrolling Interests at Sep. 30, 2020	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect of accounting change	6,340	6,340		1,370	3,737	1,233	0
Cumulative effect of accounting change	$ 6,789	6,789		1,367	4,149	1,273	0
Beginning Balance, shares at Dec. 31, 2020	86,345,246		86,345,246
Beginning Balance at Dec. 31, 2020	$ 6,789	6,789		1,367	4,149	1,273	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings (losses) attributable to parent	1,640	1,640			1,640
Net earnings loss attributable to noncontrolling interests	0						0
Net earnings, including noncontrolling interests	1,640
Other comprehensive income (loss), attributable to parent		(1,113)				(1,113)
Other comprehensive income (loss) including portion attributable to nonredeemable noncontrolling interest	(1,113)
Dividends	(1,826)	(1,826)			(1,826)
Shares issued:
Exercise of stock options, shares			1,118,586
Exercise of stock options	55	55		55
Restricted stock awards, shares			207,020
Other benefit plans, shares			60,494
Other benefit plans	7	7		7
Dividend reinvestment plan, shares			42,926
Dividend reinvestment plan	5	5		5
Stock-based compensation expense	11	11		11
Shares acquired and retired, shares			(2,769,182)
Shares acquired and retired	(318)	(318)		(44)	(274)
Shares exchanged — benefit plans, shares			(91,926)
Shares exchanged — benefit plans	$ (10)	(10)		(1)	(9)
Forfeitures of restricted stock, shares			(118,156)
Ending Balance, shares at Sep. 30, 2021	84,795,008		84,795,008
Ending Balance at Sep. 30, 2021	$ 5,240	5,240		1,400	3,680	160	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect of accounting change	5,601	5,601		1,388	4,023	190	0
Beginning Balance, shares at Jun. 30, 2021			84,713,927
Beginning Balance at Jun. 30, 2021	5,601	5,601		1,388	4,023	190	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings (losses) attributable to parent	219	219			219
Net earnings loss attributable to noncontrolling interests	0						0
Net earnings, including noncontrolling interests	219
Other comprehensive income (loss), attributable to parent		(30)				(30)
Other comprehensive income (loss) including portion attributable to nonredeemable noncontrolling interest	(30)
Dividends	(551)	(551)			(551)
Shares issued:
Exercise of stock options, shares			153,842
Exercise of stock options	6	6		6
Restricted stock awards, shares			0
Other benefit plans, shares			17,029
Other benefit plans	2	2		2
Dividend reinvestment plan, shares			6,272
Dividend reinvestment plan	1	1		1
Stock-based compensation expense	4	4		4
Shares acquired and retired, shares			(94,960)
Shares acquired and retired	(12)	(12)		(1)	(11)
Shares exchanged — benefit plans, shares			(562)
Shares exchanged — benefit plans	$ 0	0		0	0
Forfeitures of restricted stock, shares			(540)
Ending Balance, shares at Sep. 30, 2021	84,795,008		84,795,008
Ending Balance at Sep. 30, 2021	$ 5,240	5,240		1,400	3,680	160	0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect of accounting change	$ 5,240	$ 5,240		$ 1,400	$ 3,680	$ 160	$ 0

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Consolidated Statement of Changes in Equity (Unaudited) (Parenthetical) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Statement of Stockholders' Equity [Abstract]
Cash dividends per Common Share (USD per share)	$ 6.50	$ 0.45	$ 21.50	$ 1.35

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Consolidated Statement of Cash Flows (Unaudited) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Operating Activities:
Net earnings, including noncontrolling interests	$ 1,640	$ 27
Adjustments:
Depreciation and amortization	160	248
Annuity benefits	377	905
Realized (gains) losses on investing activities	(1,111)	332
Net (purchases) sales of trading securities	(6)	18
Deferred annuity and life policy acquisition costs	(98)	(112)
Change in:
Reinsurance and other receivables	(987)	(597)
Other assets	238	120
Insurance claims and reserves	1,204	702
Payable to reinsurers	339	163
Other liabilities	88	(220)
Managed investment entities’ assets/liabilities	(78)	99
Other operating activities, net	(341)	11
Net cash provided by operating activities	1,425	1,696
Investing Activities:
Purchases of fixed maturities	(6,907)	(7,817)
Purchases of equity securities	(110)	(354)
Purchases of mortgage loans	(179)	(197)
Purchases of equity index call options and other investments	(313)	(699)
Purchases of real estate, property and equipment	(53)	(41)
Proceeds from maturities and redemptions of fixed maturities	4,075	4,114
Proceeds from repayments of mortgage loans	27	48
Proceeds from sales of fixed maturities	690	3,123
Proceeds from sales of equity securities	462	421
Proceeds from sales and settlements of equity index call options and other investments	562	673
Proceeds from sales of real estate, property and equipment	25	7
Proceeds from sale of businesses	3,547	0
Cash and cash equivalents of businesses sold	(2,060)	0
Managed investment entities:
Purchases of investments	(1,480)	(878)
Proceeds from sales and redemptions of investments	1,579	818
Other investing activities, net	32	10
Net cash used in investing activities	(103)	(772)
Financing Activities:
Annuity receipts	2,403	2,968
Ceded annuity receipts	(311)	(246)
Annuity surrenders, benefits and withdrawals	(1,931)	(2,506)
Ceded annuity surrenders, benefits and withdrawals	282	0
Net transfers from variable annuity assets	34	44
Additional long-term borrowings	0	635
Issuances of managed investment entities’ liabilities	1,665	30
Retirements of managed investment entities’ liabilities	(1,701)	(79)
Issuances of Common Stock	60	15
Repurchases of Common Stock	(318)	(233)
Cash dividends paid on Common Stock	(1,482)	(119)
Net cash provided by (used in) financing activities	(1,299)	509
Net Change in Cash and Cash Equivalents	23	1,433
Cash and cash equivalents at beginning of period	2,810	2,314
Cash and cash equivalents at end of period	$ 2,833	$ 3,747

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Accounting Policies

9 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

Accounting Policies

Accounting Policies

Basis of Presentation   The accompanying consolidated financial statements for American Financial Group, Inc. and its subsidiaries (“AFG”) are unaudited; however, management believes that all adjustments (consisting only of normal recurring accruals unless otherwise disclosed herein) necessary for fair presentation have been made. The results of operations for interim periods are not necessarily indicative of results to be expected for the year. The financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary to be in conformity with U.S. generally accepted accounting principles (“GAAP”).

Certain reclassifications have been made to prior periods to conform to the current year’s presentation including reclassifying the assets and liabilities of the Annuity subsidiaries sold in May 2021 to assets and liabilities of discontinued annuity operations and their earnings to net earnings (loss) from discontinued operations. See Note B — “Discontinued Operations.” All significant intercompany balances and transactions have been eliminated. The results of operations of companies since their formation or acquisition are included in the consolidated financial statements. Events or transactions occurring subsequent to September 30, 2021, and prior to the filing of this Form 10-Q, have been evaluated for potential recognition or disclosure herein.

Unless otherwise stated, the information in the Notes to the Consolidated Financial Statements relates to AFG’s continuing operations.

The preparation of the financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Changes in circumstances could cause actual results to differ materially from those estimates.

Discontinued Operations   Disposals of components of an entity that represent a strategic shift and that have a major effect on a reporting entity’s operations and financial results are reported as discontinued operations.

Fair Value Measurements   Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. The standards establish a hierarchy of valuation techniques based on whether the assumptions that market participants would use in pricing the asset or liability (“inputs”) are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect AFG’s assumptions about the assumptions market participants would use in pricing the asset or liability. AFG did not have any material nonrecurring fair value measurements in the first nine months of 2021.

Credit Losses on Financial Instruments   On January 1, 2020, AFG adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which provides a new loss model for determining credit-related impairments for financial instruments measured at amortized cost (mortgage loans, premiums receivable and reinsurance recoverables) and requires an entity to estimate the credit losses expected over the life of an exposure or pool of exposures. The estimate of expected credit losses considers historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. Expected credit losses, and subsequent increases or decreases in such expected losses, are recorded immediately through net earnings as an allowance that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the balance sheet at the amount expected to be collected. At the date of adoption, the impact of adjusting AFG’s existing allowances for uncollectable mortgage loans, premiums receivable and reinsurance recoverables to the allowances calculated under the new guidance resulted in a reduction in the net

allowance, which was recorded as the cumulative effect of an accounting change ($7 million increase in retained earnings at January 1, 2020).

The updated guidance also amended the other-than-temporary impairment model for available for sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. Subsequent increases or decreases in expected credit losses are recorded immediately in net earnings through realized gains (losses).

Investments   Equity securities other than those accounted for under the equity method are reported at fair value with holding gains and losses generally recorded in realized gains (losses) on securities. However, AFG records holding gains and losses on securities classified as “trading” under previous guidance, its small portfolio of limited partnerships and similar investments carried at fair value and certain other securities classified at purchase as “fair value through net investment income” in net investment income.

Fixed maturity securities classified as “available for sale” are reported at fair value with unrealized gains and losses included in accumulated other comprehensive income (“AOCI”) in AFG’s Balance Sheet. Fixed maturity securities classified as “trading” are reported at fair value with changes in unrealized holding gains or losses during the period included in net investment income. Mortgage loans (net of any allowance) are carried primarily at the aggregate unpaid balance.

Premiums and discounts on fixed maturity securities are amortized using the effective interest method. Mortgage-backed securities (“MBS”) are amortized over a period based on estimated future principal payments, including prepayments. Prepayment assumptions are reviewed periodically and adjusted to reflect actual prepayments and changes in expectations.

Limited partnerships and similar investments are generally accounted for using the equity method of accounting. Under the equity method, AFG records its share of the earnings or losses of the investee based on when it is reported by the investee in its financial statements rather than in the period in which the investee declares a dividend. AFG’s share of the earnings or losses from equity method investments is generally recorded on a quarter lag due to the timing of the receipt of the investee’s financial statements. AFG’s equity in the earnings (losses) of limited partnerships and similar investments is included in net investment income.

Realized gains or losses on the disposal of fixed maturity securities are determined on the specific identification basis. When a decline in the value of an available for sale fixed maturity is considered to be other-than-temporary at the balance sheet date, an allowance for credit losses (impairment), including any write-off of accrued interest, is charged to earnings (included in realized gains (losses) on securities). If management can assert that it does not intend to sell the security and it is not more likely than not that it will have to sell it before recovery of its amortized cost basis (net of allowance), then the impairment is separated into two components: (i) the allowance related to credit losses (recorded in earnings) and (ii) the amount related to all other factors (recorded in other comprehensive income). The credit-related portion is measured by comparing a security’s amortized cost to the present value of its current expected cash flows discounted at its effective yield prior to the charge. If management intends to sell an impaired security, or it is more likely than not that it will be required to sell the security before recovery, an impairment is recorded in earnings to reduce the amortized cost (net of allowance) of that security to fair value.

Goodwill   Goodwill represents the excess of cost of subsidiaries over AFG’s equity in their underlying net assets at the date of acquisition. Goodwill is not amortized, but is subject to an impairment test at least annually. An entity is not required to complete the quantitative annual goodwill impairment test on a reporting unit if the entity elects to perform a qualitative analysis and determines that it is more likely than not that the reporting unit’s fair value exceeds its carrying amount.

Reinsurance   Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policies. AFG reports as assets (i) the estimated reinsurance recoverable on paid and unpaid losses, including an estimate for losses incurred but not reported, and (ii) amounts paid or due to reinsurers applicable to the unexpired terms of policies in force. Payable to reinsurers includes ceded premiums due to reinsurers, as well as ceded premiums retained by AFG under contracts to fund ceded losses as they become due. AFG also assumes reinsurance from other companies. Earnings on reinsurance assumed is recognized based on information received from ceding companies.

Deferred Policy Acquisition Costs (“DPAC”)   Policy acquisition costs (principally commissions, premium taxes and certain underwriting and policy issuance costs) directly related to the successful acquisition or renewal of an insurance contract are deferred. DPAC is limited based upon recoverability without any consideration for anticipated investment income and is charged against income ratably over the terms of the related policies. A premium deficiency is recognized if the sum of expected claims costs, claims adjustment expenses and unamortized acquisition costs exceed the related unearned premiums. A premium deficiency is first recognized by charging any unamortized acquisition costs to expense to the extent required to eliminate the deficiency. If the premium deficiency is greater than unamortized acquisition costs, a liability is accrued for the excess deficiency and reported with unpaid losses and loss adjustment expenses.

Managed Investment Entities   A company is considered the primary beneficiary of, and therefore must consolidate, a variable interest entity (“VIE”) based primarily on its ability to direct the activities of the VIE that most significantly impact that entity’s economic performance and the obligation to absorb losses of, or receive benefits from, the entity that could potentially be significant to the VIE.

AFG manages, and has investments in, collateralized loan obligations (“CLOs”) that are VIEs (see Note G — “Managed Investment Entities”). AFG has determined that it is the primary beneficiary of these CLOs because (i) its role as asset manager gives it the power to direct the activities that most significantly impact the economic performance of the CLOs and (ii) through its investment in the CLO debt tranches, it has exposure to CLO losses (limited to the amount AFG invested) and the right to receive CLO benefits that could potentially be significant to the CLOs.

Because AFG has no right to use the CLO assets and no obligation to pay the CLO liabilities, the assets and liabilities of the CLOs are shown separately in AFG’s Balance Sheet. AFG has elected the fair value option for reporting on the CLO assets and liabilities to improve the transparency of financial reporting related to the CLOs. The net gain or loss from accounting for the CLO assets and liabilities at fair value is presented separately in AFG’s Statement of Earnings.

The fair values of a CLO’s assets may differ from the separately measured fair values of its liabilities even though the CLO liabilities only have recourse to the CLO assets. AFG has set the carrying value of the CLO liabilities equal to the fair value of the CLO assets (which have more observable fair values) as an alternative to reporting those liabilities at a separately measured fair value. CLO earnings attributable to AFG’s shareholders are measured by the change in the fair value of AFG’s investments in the CLOs and management fees earned.

At September 30, 2021, assets and liabilities of managed investment entities included $171 million in assets and $131 million in liabilities of a temporary warehousing entity that was established in connection with the formation of a new CLO that is expected to close in the fourth quarter of 2021. At closing, all warehoused assets will be transferred to the new CLO and the liabilities will be repaid.

Unpaid Losses and Loss Adjustment Expenses   The net liabilities stated for unpaid claims and for expenses of investigation and adjustment of unpaid claims represent management’s best estimate and are based upon (i) the accumulation of case estimates for losses reported prior to the close of the accounting period on direct business written; (ii) estimates received from ceding reinsurers and insurance pools and associations; (iii) estimates of unreported losses (including possible development on known claims) based on past experience; (iv) estimates based on experience of expenses for investigating and adjusting claims; and (v) the current state of the law and coverage litigation. Establishing reserves for asbestos, environmental and other mass tort claims involves considerably more judgment than other types of claims due to, among other things, inconsistent court decisions, an increase in bankruptcy filings as a result of asbestos-related liabilities, novel theories of coverage, and judicial interpretations that often expand theories of recovery and broaden the scope of coverage.

Loss reserve liabilities are subject to the impact of changes in claim amounts and frequency and other factors. Changes in estimates of the liabilities for losses and loss adjustment expenses are reflected in the statement of earnings in the period in which determined. Despite the variability inherent in such estimates, management believes that the liabilities for unpaid losses and loss adjustment expenses are adequate.

Debt Issuance Costs   Debt issuance costs related to AFG’s outstanding debt are presented in its Balance Sheet as a direct reduction in the carrying value of long-term debt and are amortized over the life of the related debt using the effective interest method as a component of interest expense. Debt issuance costs related to AFG’s revolving credit facilities are included in other assets in AFG’s Balance Sheet.

Leases   Leases for terms of longer than one year are recognized as assets and liabilities for the rights and obligations created by those leases on the balance sheet based on the present value of contractual cash flows.

At September 30, 2021 AFG has a $136 million lease liability included in other liabilities and a lease right-of-use asset of $118 million included in other assets compared to $159 million and $139 million, respectively, at December 31, 2020.

Noncontrolling Interests   For balance sheet purposes, noncontrolling interests represent the interests of shareholders other than AFG in consolidated entities. In the statement of earnings, net earnings and losses attributable to noncontrolling interests represents such shareholders’ interest in the earnings and losses of those entities.

Premium Recognition   Property and casualty premiums are earned generally over the terms of the policies on a pro rata basis. Unearned premiums represent that portion of premiums written, which is applicable to the unexpired terms of policies in force. On reinsurance assumed from other insurance companies or written through various underwriting organizations, unearned premiums are based on information received from such companies and organizations.

Income Taxes   Deferred income taxes are calculated using the liability method. Under this method, deferred income tax assets and liabilities are determined based on differences between financial reporting and tax bases and are measured using enacted tax rates. A valuation allowance is established to reduce total deferred tax assets to an amount that will more likely than not be realized. The effect of a change in tax rates on deferred tax assets and liabilities is recorded in net earnings in the period that includes the enactment date.

AFG recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained under examination by the appropriate taxing authority. Interest and penalties on AFG’s reserve for uncertain tax positions are recognized as a component of tax expense.

Stock-Based Compensation   All share-based grants are recognized as compensation expense on a straight-line basis over their vesting periods based on their calculated fair value at the date of grant.

AFG records excess tax benefits or deficiencies for share-based payments through income tax expense in the statement of earnings. In addition, AFG accounts for forfeitures of awards when they occur.

Benefit Plans   AFG provides retirement benefits to qualified employees of participating companies through the AFG 401(k) Retirement and Savings Plan, a defined contribution plan. AFG makes all contributions to the retirement fund portion of the plan and matches a percentage of employee contributions to the savings fund. Company contributions are expensed in the year for which they are declared. AFG and many of its subsidiaries provide health care and life insurance benefits to eligible retirees. AFG also provides postemployment benefits to former or inactive employees (primarily those on disability) who were not deemed retired under other company plans. The projected future cost of providing these benefits is expensed over the period employees earn such benefits.

Earnings Per Share   Although basic earnings per share only considers shares of common stock outstanding during the period, the calculation of diluted earnings per share includes the following adjustments to weighted average common shares related to stock-based compensation plans: third quarter of 2021 and 2020 — 0.4 million and 0.3 million; first nine months of 2021 and 2020 — 0.6 million and 0.5 million.

There were no anti-dilutive potential common shares for the third quarter or the first nine months of 2021 or 2020.

Statement of Cash Flows   For cash flow purposes, “investing activities” are defined as making and collecting loans and acquiring and disposing of debt or equity instruments, property and equipment and businesses. “Financing activities” include obtaining resources from owners and providing them with a return on their investments, borrowing money and repaying amounts borrowed. All other activities are considered “operating.” Short-term investments having original maturities of three months or less when purchased are considered to be cash equivalents for purposes of the financial statements.

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Discontinued Operations

9 Months Ended

Sep. 30, 2021

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

Annuity Business   On May 28, 2021, AFG completed the sale of its Annuity business to Massachusetts Mutual Life Insurance Company (“MassMutual”) with an effective date of May 31, 2021. MassMutual acquired Great American Life Insurance Company (“GALIC”) and its two insurance subsidiaries, Annuity Investors Life Insurance Company and Manhattan National Life Insurance Company. In addition to AFG’s annuity operations, these subsidiaries included AFG’s run-off life and long-term care operations. Proceeds from the sale were $3.57 billion (including $34 million in preliminary post-closing adjustments). AFG realized a $656 million net gain on the sale. The sale continues to be subject to tax-related post-closing adjustments, which are not expected to be material and are expected to be settled in 2022. Beginning with the first quarter of 2021, the results of the Annuity business sold were reported as discontinued operations in accordance with generally accepted accounting principles, which included adjusting prior period results to reflect these operations as discontinued.

Prior to the sale, AFG acquired approximately $480 million in investments accounted for using the equity method and approximately $100 million of directly owned real estate from GALIC.

Details of the assets and liabilities of the Annuity subsidiaries sold were as follows (in millions):

	May 31, 2021		December 31, 2020
Assets of businesses sold:
Cash and cash equivalents	$	2,060	$	1,145
Investments	38,323		38,011
Recoverables from reinsurers	6,748		6,804
Other assets	2,152		1,925
Total assets of discontinued annuity operations	49,283		47,885
Liabilities of businesses sold:
Annuity benefits accumulated	43,690		42,573
Other liabilities	1,813		1,885
Total liabilities of discontinued annuity operations	45,503		44,458
Receivable from AFG for real estate-related investments	—		537
Reclassify AOCI	(913)		(1,071)
Net investment in annuity businesses sold, excluding AOCI	$	2,867	$	2,893

Details of the results of operations for the discontinued annuity operations were (in millions):

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021 (*)		2020
Net investment income	$	—	$	459	$	746	$	1,256
Realized gains (losses) on securities	—		22		112		(105)
Other income	—		26		52		91
Total revenues	—		507		910		1,242
Annuity benefits	—		203		377		905
Annuity and supplemental insurance acquisition expenses	—		172		136		250
Other expenses	—		38		73		118
Total costs and expenses	—		413		586		1,273
Earnings (loss) before income taxes from discontinued operations	—		94		324		(31)
Provision (credit) for income taxes on operations	—		18		66		(11)
Net earnings (loss) from operations, net of tax	—		76		258		(20)
Gain on sale, net of tax	—		—		656		—
Net earnings (loss) from discontinued operations	$	—	$	76	$	914	$	(20)

(*)Results through the May 31, 2021 effective date of the sale.

Net investment income in the table above excludes $10 million in the third quarter of 2020, and $51 million and $29 million in first nine months of 2021 and 2020, respectively, related to the real estate-related entities that AFG acquired from the discontinued annuity operations prior to the completion of the sale.

The impact of the sale of the annuity business is shown below (in millions):

	May 31, 2021
Cash proceeds	$	3,537
Receivable from MassMutual	34
Sale related expenses	(8)
Total net proceeds	3,563
Net investment in annuity businesses sold, excluding AOCI	2,867
Reclassify net deferred tax asset	(199)
Pretax gain on sale	895
Income tax expense:
Reclassify net deferred tax asset	199
Tax liabilities triggered by pending sale in the first quarter of 2021	41
Other	(1)
Total income tax expense	239
Net gain on sale	$	656

Summarized cash flows for the discontinued annuity operations were (in millions):

	Nine months ended September 30,
	2021		2020
Net cash provided by operating activities	$	87	$	904
Net cash used in investing activities	(1,709)		(440)
Net cash provided by financing activities	477		260

Derivatives   The vast majority of AFG’s derivatives were held by the sold annuity subsidiaries. The following table summarizes the gains (losses) included in net earnings (loss) from discontinued operations for changes in the fair value of derivatives that do not qualify for hedge accounting for the first nine months of 2021 and 2020 (in millions):

	Three months ended September 30,				Nine months ended September 30,
Derivative	2021		2020		2021 (*)		2020
MBS with embedded derivatives	$	—	$	(3)	$	(1)	$	2
Fixed-indexed and variable-indexed annuities (embedded derivative)	—		(5)		(222)		41
Equity index call options	—		203		237		(42)
Equity index put options	—		2		5		1
Reinsurance contract (embedded derivative)	—		1		1		—
	$	—	$	198	$	20	$	2

(*)Through the May 31, 2021 effective date of the sale.

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Sales of Businesses

9 Months Ended

Sep. 30, 2021

Disposal Group, Not Discontinued Operation, Disposal Disclosures [Abstract]

Sales of Businesses

Sales of Businesses

Annuity Operations   See Note B — “Discontinued Operations,” for information on the sale of AFG’s annuity operations.

Neon   In December 2019, AFG initiated actions to exit the Lloyd’s of London insurance market, which included placing Neon Underwriting Ltd. and its other Lloyd’s subsidiaries in run-off. Neon and its predecessor, Marketform, failed to achieve AFG’s profitability objectives since AFG’s purchase of Marketform in 2008. In December 2020, AFG completed the sale of GAI Holding Bermuda and its subsidiaries, comprising the legal entities that own Neon, to RiverStone Holdings Limited for proceeds of $6 million. The sale completed AFG’s exit from the Lloyd’s of London insurance market. In the second quarter of 2021, AFG recognized a pretax gain on sale of a subsidiary of $4 million related to contingent consideration received on the sale of Neon.

Under GAAP accounting guidance, only disposals of components of an entity that represent a strategic shift and that have a major effect on a reporting entity’s operations and financial results are reported as discontinued operations. Because AFG’s primary business continues to be commercial property and casualty insurance, as well as the immaterial expected impact on AFG’s ongoing results of operations, the sale of Neon was not reported as a discontinued operation.

An estimated loss of $30 million on the sale of Neon was recorded in AFG’s financial statements as of September 30, 2020 as shown below (in millions):

Estimated sale proceeds, net of expenses	$	4
Assets of businesses to be sold:
Cash and investments	$	461
Recoverables from reinsurers	198
Prepaid reinsurance premiums	30
Agents’ balances and premiums receivable	48
Other assets	73
Total assets	810
Liabilities of businesses to be sold:
Unpaid losses and loss adjustment expenses	598
Unearned premiums	83
Payable to reinsurers	39
Other liabilities	47
Total liabilities	767
Reclassify accumulated other comprehensive income	(9)
Net assets of businesses to be sold	$	34
Pretax loss on subsidiaries recorded in the third quarter of 2020	$	(30)

Revenues, costs and expenses, and earnings before income taxes for the subsidiaries sold were (in millions):

	Three months ended		Nine months ended
	September 30, 2020		September 30, 2020
Net earned premiums	$	42	$	174
Loss and loss adjustment expenses	60		166
Commissions and other underwriting expenses	20		90
Underwriting loss	(38)		(82)
Net investment income	1		(5)
Other income and expenses, net	(3)		(5)
Loss before income taxes and noncontrolling interests	$	(40)	$	(92)

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Segments of Operations

9 Months Ended

Sep. 30, 2021

Segment Reporting [Abstract]

Segments of Operations

Segments of Operations

Subsequent to the sale of its annuity operations, see Note B — “Discontinued Operations,” AFG manages its business as two segments: Property and casualty insurance and Other, which includes holding company costs and operations attributable to the noncontrolling interests of the managed investment entities.

AFG reports its property and casualty insurance business in the following Specialty sub-segments: (i) Property and transportation, which includes physical damage and liability coverage for buses and trucks, inland and ocean marine, agricultural-related products and other commercial property coverages, (ii) Specialty casualty, which includes primarily excess and surplus, executive and professional liability, general liability, umbrella and excess liability, specialty coverages in targeted markets, customized programs for small to mid-sized businesses and workers’ compensation insurance, and (iii) Specialty financial, which includes risk management insurance programs for lending and leasing institutions (including equipment leasing and collateral and lender-placed mortgage property insurance), fidelity and surety products and trade credit insurance. Premiums and underwriting profit included under Other specialty represent business assumed by AFG’s internal reinsurance program from the operations that make up AFG’s other Specialty sub-segments and amortization of

deferred gains on retroactive reinsurance transactions related to the sales of businesses in prior years. AFG’s reportable segments and their components were determined based primarily upon similar economic characteristics, products and services.

The following tables (in millions) show AFG’s revenues and earnings (loss) from continuing operations before income taxes by segment and sub-segment.

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Revenues
Property and casualty insurance:
Premiums earned:
Specialty
Property and transportation	$	700	$	574	$	1,547	$	1,350
Specialty casualty	613		560		1,772		1,663
Specialty financial	163		155		477		455
Other specialty	53		50		156		132
Other lines (a)	—		42		—		174
Total premiums earned	1,529		1,381		3,952		3,774
Net investment income (b)	165		112		467		277
Other income	4		—		9		8
Total property and casualty insurance	1,698		1,493		4,428		4,059
Other	73		60		208		195
Income on real estate-related entities (c)	—		10		51		29
Total revenues before realized gains (losses)	1,771		1,563		4,687		4,283
Realized gains (losses) on securities	(17)		23		103		(197)
Realized gains (losses) on subsidiaries	—		(30)		4		(30)
Total revenues	$	1,754	$	1,556	$	4,794	$	4,056

(a)Represents premiums earned in the Neon exited lines (which were sold in December 2020) during the third quarter and first nine months of 2020.

(b)Includes income of $1 million for the third quarter of 2020 and a loss of $5 million in the Neon exited lines in the first nine months of 2020 (primarily from the change in fair value of equity securities).

(c)Represents investment income from real estate-related entities acquired from the discontinued annuity operations while they were held by those operations. Subsequent to the sale of the annuity group, this income is included in the segment of the acquirer.

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Earnings (Loss) From Continuing Operations Before Income Taxes
Property and casualty insurance:
Underwriting:
Specialty
Property and transportation	$	45	$	47	$	163	$	107
Specialty casualty	110		53		237		132
Specialty financial	26		13		72		30
Other specialty	(12)		(9)		(16)		(22)
Other lines (a)	(1)		(86)		(2)		(133)
Total underwriting	168		18		454		114
Investment and other income, net (b)	161		100		451		249
Total property and casualty insurance	329		118		905		363
Other (c)	(45)		(74)		(173)		(152)
Income on real estate-related entities (d)	—		3		51		11
Total earnings from continuing operations before realized gains (losses) and income taxes	284		47		783		222
Realized gains (losses) on securities	(17)		23		103		(197)
Realized gains (losses) on subsidiaries	—		(30)		4		(30)
Total earnings (loss) from continuing operations before income taxes	$	267	$	40	$	890	$	(5)

(a)Includes an underwriting loss of $38 million in the third quarter of 2020 and $82 million in the first nine months of 2020 in the Neon exited lines. Also includes a special charge of $47 million in the third quarter of 2020 to increase asbestos and environmental (“A&E”) reserves.

(b)Includes $2 million and $10 million in the third quarter and first nine months of 2020, respectively, in net expenses from the Neon exited lines, before noncontrolling interest.

(c)Includes holding company interest and expenses, including a special charge of $21 million in the third quarter of 2020 to increase A&E reserves related to AFG’s former railroad and manufacturing operations.

(d)Represents investment income (net of DAC) from real estate-related entities acquired from the discontinued annuity operations while they were held by those operations. Subsequent to the sale of the annuity group, this income is included in the segment of the acquirer.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Accounting standards for measuring fair value are based on inputs used in estimating fair value. The three levels of the hierarchy are as follows:

Level 1 — Quoted prices for identical assets or liabilities in active markets (markets in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis). AFG’s Level 1 financial instruments consist primarily of publicly traded equity securities, highly liquid government bonds for which quoted market prices in active markets are available and short-term investments of managed investment entities.

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar assets or liabilities in inactive markets (markets in which there are few transactions, the prices are not current, price quotations vary substantially over time or among market makers, or in which little information is released publicly); and valuations based on other significant inputs that are observable in active markets. AFG’s Level 2 financial instruments include corporate and municipal fixed maturity securities, asset-backed securities (“ABS”), mortgage-backed securities (“MBS”), certain non-affiliated common stocks and investments of managed investment entities priced using observable inputs. Level 2 inputs include benchmark yields, reported trades, corroborated broker/dealer quotes, issuer spreads and benchmark securities. When non-binding broker quotes can be corroborated by comparison to similar securities priced using observable inputs, they are classified as Level 2.

Level 3 — Valuations derived from market valuation techniques generally consistent with those used to estimate the fair values of Level 2 financial instruments in which one or more significant inputs are unobservable or when the market for a security exhibits significantly less liquidity relative to markets supporting Level 2 fair value measurements. The unobservable inputs may include management’s own assumptions about the assumptions market participants would use based on the best information available at the valuation date. Financial instruments whose fair value is estimated based on non-binding broker quotes or internally developed using significant inputs not based on, or corroborated by, observable market information are classified as Level 3.

As discussed in Note A — “Accounting Policies — Managed Investment Entities,” AFG has set the carrying value of its CLO liabilities equal to the fair value of the CLO assets (which have more observable fair values) as an alternative to reporting those liabilities at separately measured fair values. As a result, the CLO liabilities are categorized within the fair value hierarchy on the same basis (proportionally) as the related CLO assets. Since the portion of the CLO liabilities allocated to Level 3 is derived from the fair value of the CLO assets, these amounts are excluded from the progression of Level 3 financial instruments.

AFG’s management is responsible for the valuation process and uses data from outside sources (including nationally recognized pricing services and broker/dealers) in establishing fair value. AFG’s internal investment professionals are a group of approximately 20 investment professionals whose primary responsibility is to manage AFG’s investment portfolio. These professionals monitor individual investments as well as overall industries and are active in the financial markets on a daily basis. The group is led by AFG’s chief investment officer, who reports directly to one of AFG’s Co-CEOs. Valuation techniques utilized by pricing services and prices obtained from external sources are reviewed by AFG’s internal investment professionals who are familiar with the securities being priced and the markets in which they trade to ensure the fair value determination is representative of an exit price. To validate the appropriateness of the prices obtained, these investment managers consider widely published indices (as benchmarks), recent trades, changes in interest rates, general economic conditions and the credit quality of the specific issuers. In addition, the Company communicates directly with the pricing services regarding the methods and assumptions used in pricing, including verifying, on a test basis, the inputs used by the service to value specific securities.

Assets and liabilities of continuing operations measured and carried at fair value in the financial statements are summarized below (in millions):

	Level 1		Level 2		Level 3		Total
September 30, 2021
Assets:
Available for sale (“AFS”) fixed maturities:
U.S. Government and government agencies	$	217	$	1	$	—	$	218
States, municipalities and political subdivisions	—		1,884		42		1,926
Foreign government	—		217		—		217
Residential MBS	—		736		18		754
Commercial MBS	—		113		—		113
Collateralized loan obligations	—		1,828		1		1,829
Other asset-backed securities	—		2,335		309		2,644
Corporate and other	15		2,463		248		2,726
Total AFS fixed maturities	232		9,577		618		10,427
Trading fixed maturities	—		29		—		29
Equity securities	681		44		268		993
Assets of managed investment entities (“MIE”)	316		4,802		12		5,130
Total assets accounted for at fair value	$	1,229	$	14,452	$	898	$	16,579
Liabilities:
Liabilities of managed investment entities	$	310	$	4,712	$	12	$	5,034
Total liabilities accounted for at fair value	$	310	$	4,712	$	12	$	5,034
December 31, 2020
Assets:
Available for sale fixed maturities:
U.S. Government and government agencies	$	195	$	3	$	—	$	198
States, municipalities and political subdivisions	—		2,273		39		2,312
Foreign government	—		176		—		176
Residential MBS	—		877		38		915
Commercial MBS	—		90		2		92
Collateralized loan obligations	—		1,046		16		1,062
Other asset-backed securities	—		1,742		305		2,047
Corporate and other	4		2,140		138		2,282
Total AFS fixed maturities	199		8,347		538		9,084
Trading fixed maturities	—		24		—		24
Equity securities	665		48		176		889
Assets of managed investment entities	217		4,733		21		4,971
Total assets accounted for at fair value	$	1,081	$	13,152	$	735	$	14,968
Liabilities:
Liabilities of managed investment entities	$	215	$	4,678	$	21	$	4,914
Total liabilities accounted for at fair value	$	215	$	4,678	$	21	$	4,914

Approximately 5% of the total assets of continuing operations carried at fair value at September 30, 2021, were Level 3 assets. Approximately 17% ($150 million) of those Level 3 assets were priced using non-binding broker quotes, for which there is a lack of transparency as to the inputs used to determine fair value. Details as to the quantitative inputs are neither provided by the brokers nor otherwise reasonably obtainable by AFG. Approximately $61 million (7%) of the Level 3 assets were priced by pricing services where either a single price was not corroborated, prices varied enough among the providers, or other market factors led management to determine these securities be classified as Level 3 assets. Approximately 17% ($149 million) of the Level 3 assets were equity investments (that do not qualify for equity method accounting) in limited partnerships whose prices were determined based on financial information provided by the limited partnerships.

Internally developed Level 3 asset fair values of continuing operations represent approximately $519 million (58%) of the total fair value of Level 3 assets at September 30, 2021. Internally priced fixed maturities are priced using a variety of

inputs, including appropriate credit spreads over the treasury yield (of a similar duration), trade information and prices of comparable securities and other security specific features (such as optional early redemption). Internally developed prices for equity securities are based primarily on financial information of the entities invested in and sales of comparable companies. Since internally developed Level 3 asset fair values represent less than 10% of AFG’s Shareholders’ Equity, any justifiable changes in unobservable inputs used to determine internally developed fair values would not have a material impact on AFG’s financial position.

Changes in balances of Level 3 financial assets and liabilities carried at fair value during the third quarter and first nine months of 2021 and 2020 are presented below (in millions). The transfers into and out of Level 3 were due to changes in the availability of market observable inputs. All transfers are reflected in the table at fair value as of the end of the reporting period.

			Total realized/unrealized gains (losses) included in
	Balance at June 30, 2021		Net earnings (loss)		OCI		Purchases and issuances		Sales and settlements		Transfer into Level 3		Transfer out of Level 3		Balance at September 30, 2021
AFS fixed maturities:
U.S. government agency	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
State and municipal	36		—		—		—		—		8		(2)		42
Residential MBS	28		(1)		—		—		(1)		—		(8)		18
Commercial MBS	—		—		—		—		—		—		—		—
Collateralized loan obligations	6		—		1		—		—		—		(6)		1
Other asset-backed securities	315		1		(1)		41		(38)		—		(9)		309
Corporate and other	220		—		(1)		36		(9)		2		—		248
Total AFS fixed maturities	605		—		(1)		77		(48)		10		(25)		618
Equity securities	245		7		—		20		(4)		—		—		268
Assets of MIE	15		(2)		—		1		—		—		(2)		12
Total Level 3 assets	$	865	$	5	$	(1)	$	98	$	(52)	$	10	$	(27)	$	898

			Total realized/unrealized gains (losses) included in
	Balance at June 30, 2020		Net earnings (loss)		OCI		Purchases and issuances		Sales and settlements		Transfer into Level 3		Transfer out of Level 3		Balance at September 30, 2020
AFS fixed maturities:
U.S. government agency	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
State and municipal	41		—		—		—		—		—		—		41
Residential MBS	42		(1)		—		—		(3)		8		(1)		45
Commercial MBS	6		—		—		—		—		—		(4)		2
Collateralized loan obligations	55		—		1		—		—		—		—		56
Other asset-backed securities	293		(1)		2		8		(15)		14		(8)		293
Corporate and other	178		3		1		8		(28)		1		(26)		137
Total AFS fixed maturities	615		1		4		16		(46)		23		(39)		574
Equity securities	164		(5)		—		5		—		—		(5)		159
Assets of MIE	17		(2)		—		—		—		—		—		15
Assets of discontinued annuity operations	3,044		(7)		19		83		(113)		224		(193)		3,057
Total Level 3 assets	$	3,840	$	(13)	$	23	$	104	$	(159)	$	247	$	(237)	$	3,805
Liabilities of discontinued annuity operations	$	(3,675)	$	(5)	$	—	$	(56)	$	79	$	—	$	—	$	(3,657)
Total Level 3 liabilities	$	(3,675)	$	(5)	$	—	$	(56)	$	79	$	—	$	—	$	(3,657)

			Total realized/unrealized gains (losses) included in
	Balance at December 31, 2020		Net earnings (loss)		OCI		Purchases and issuances		Sales and settlements		Transfer into Level 3		Transfer out of Level 3		Sale of annuity business		Balance at September 30, 2021
AFS fixed maturities:
U.S. government agency	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
State and municipal	39		—		—		—		(3)		8		(2)		—		42
Residential MBS	38		(4)		—		6		(2)		6		(26)		—		18
Commercial MBS	2		—		—		—		—		—		(2)		—		—
Collateralized loan obligations	16		1		—		—		(1)		—		(15)		—		1
Other asset-backed securities	305		1		—		131		(110)		14		(32)		—		309
Corporate and other	138		(1)		(2)		142		(29)		5		(5)		—		248
Total AFS fixed maturities	538		(3)		(2)		279		(145)		33		(82)		—		618
Equity securities	176		78		—		44		(23)		—		(7)		—		268
Assets of MIE	21		1		—		3		—		1		(14)		—		12
Assets of discontinued annuity operations	2,971		85		(21)		209		(328)		32		(229)		(2,719)		—
Total Level 3 assets	$	3,706	$	161	$	(23)	$	535	$	(496)	$	66	$	(332)	$	(2,719)	$	898
Liabilities of discontinued annuity operations	$	(3,933)	$	(222)	$	—	$	(146)	$	158	$	—	$	—	$	4,143	$	—
Total Level 3 liabilities	$	(3,933)	$	(222)	$	—	$	(146)	$	158	$	—	$	—	$	4,143	$	—

			Total realized/unrealized gains (losses) included in
	Balance at December 31, 2019		Net earnings (loss)		Other comprehensive income (loss)		Purchases and issuances		Sales and settlements		Transfer into Level 3		Transfer out of Level 3		Balance at September 30, 2020
AFS fixed maturities:
U.S. government agency	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
State and municipal	40		—		2		—		(1)		—		—		41
Residential MBS	45		—		(1)		—		(5)		9		(3)		45
Commercial MBS	6		—		—		—		—		—		(4)		2
Collateralized loan obligations	1		(1)		4		—		—		52		—		56
Other asset-backed securities	256		(6)		3		69		(62)		41		(8)		293
Corporate and other	223		2		—		40		(39)		3		(92)		137
Total AFS fixed maturities	571		(5)		8		109		(107)		105		(107)		574
Equity securities	161		(22)		—		16		—		9		(5)		159
Assets of MIE	17		(4)		—		—		—		2		—		15
Assets of discontinued annuity operations	3,092		(27)		39		444		(325)		482		(648)		3,057
Total Level 3 assets	$	3,841	$	(58)	$	47	$	569	$	(432)	$	598	$	(760)	$	3,805
Liabilities of discontinued annuity operations	$	(3,730)	$	41	$	—	$	(180)	$	212	$	—	$	—	$	(3,657)
Total Level 3 liabilities	$	(3,730)	$	41	$	—	$	(180)	$	212	$	—	$	—	$	(3,657)

Fair Value of Financial Instruments   The carrying value and fair value of financial instruments of continuing operations that are not carried at fair value in the financial statements are summarized below (in millions):

	Carrying		Fair Value
	Value		Total		Level 1		Level 2		Level 3
September 30, 2021
Financial assets:
Cash and cash equivalents	$	2,833	$	2,833	$	2,833	$	—	$	—
Mortgage loans	537		555		—		—		555
Total financial assets not accounted for at fair value	$	3,370	$	3,388	$	2,833	$	—	$	555
Long-term debt	$	1,964	$	2,295	$	—	$	2,292	$	3
Total financial liabilities not accounted for at fair value	$	1,964	$	2,295	$	—	$	2,292	$	3
December 31, 2020
Financial assets:
Cash and cash equivalents	$	1,665	$	1,665	$	1,665	$	—	$	—
Mortgage loans	377		382		—		—		382
Total financial assets not accounted for at fair value	$	2,042	$	2,047	$	1,665	$	—	$	382
Long-term debt	$	1,963	$	2,325	$	—	$	2,322	$	3
Total financial liabilities not accounted for at fair value	$	1,963	$	2,325	$	—	$	2,322	$	3

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Investments

9 Months Ended

Sep. 30, 2021

Investments, Debt and Equity Securities [Abstract]

Investments

Investments

Available for sale fixed maturities held by AFG’s continuing operations at September 30, 2021 and December 31, 2020, consisted of the following (in millions):

	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized				Net Unrealized		Fair Value
					Gains		Losses
September 30, 2021
Fixed maturities:
U.S. Government and government agencies	$	216	$	—	$	3	$	(1)	$	2	$	218
States, municipalities and political subdivisions	1,849		—		77		—		77		1,926
Foreign government	216		—		2		(1)		1		217
Residential MBS	704		—		51		(1)		50		754
Commercial MBS	110		—		3		—		3		113
Collateralized loan obligations	1,827		1		5		(2)		3		1,829
Other asset-backed securities	2,631		7		25		(5)		20		2,644
Corporate and other	2,658		1		73		(4)		69		2,726
Total fixed maturities	$	10,211	$	9	$	239	$	(14)	$	225	$	10,427
December 31, 2020
Fixed maturities:
U.S. Government and government agencies	$	192	$	—	$	6	$	—	$	6	$	198
States, municipalities and political subdivisions	2,196		—		116		—		116		2,312
Foreign government	172		—		4		—		4		176
Residential MBS	859		—		57		(1)		56		915
Commercial MBS	89		—		3		—		3		92
Collateralized loan obligations	1,065		3		4		(4)		—		1,062
Other asset-backed securities	2,040		7		27		(13)		14		2,047
Corporate and other	2,199		2		88		(3)		85		2,282
Total fixed maturities	$	8,812	$	12	$	305	$	(21)	$	284	$	9,084

Available for sale fixed maturities that are included in assets of discontinued annuity operations at December 31, 2020, consisted of the following (in millions):

	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	$	39	$	—	$	5	$	—	$	5	$	44
States, municipalities and political subdivisions	3,053		—		370		(2)		368		3,421
Foreign government	31		—		4		—		4		35
Residential MBS	1,953		3		194		(4)		190		2,140
Commercial MBS	659		—		40		(1)		39		698
Collateralized loan obligations	3,491		10		23		(13)		10		3,491
Other asset-backed securities	5,098		11		142		(53)		89		5,176
Corporate and other	17,272		4		1,874		(24)		1,850		19,118
Total fixed maturities	$	31,596	$	28	$	2,652	$	(97)	$	2,555	$	34,123

Equity securities held by AFG’s continuing operations, which are reported at fair value with holding gains and losses recognized in net earnings, consisted of the following at September 30, 2021 and December 31, 2020 (in millions):

	September 30, 2021						December 31, 2020
					Fair Value						Fair Value
	Actual Cost				over (under)		Actual Cost				over (under)
			Fair Value		Cost				Fair Value		Cost
Common stocks	$	464	$	563	$	99	$	516	$	510	$	(6)
Perpetual preferred stocks	386		430		44		369		379		10
Total equity securities carried at fair value	$	850	$	993	$	143	$	885	$	889	$	4

Investments accounted for using the equity method held by AFG’s continuing operations, by category, carrying value and net investment income are as follows (in millions):

	Carrying Value				Net Investment Income
	September 30, 2021		December 31, 2020		Three months ended September 30,				Nine months ended September 30,
					2021		2020		2021		2020
Real estate-related investments (*)	$	1,024	$	915	$	52	$	17	$	151	$	55
Private equity	336		266		21		21		66		4
Private debt	47		54		—		(2)		5		(6)
Total investments accounted for using the equity method	$	1,407	$	1,235	$	73	$	36	$	222	$	53

(*)Includes 88% invested in multi-family properties, 2% in single family properties and 10% in other property types as of September 30, 2021 and 87% invested in multi-family properties, 2% in single family properties and 11% in other property types as of December 31, 2020.

The earnings (losses) from these investments are generally reported on a three-month lag due to the timing required to obtain the necessary information from the funds. AFG regularly reviews and discusses fund performance with the fund managers to corroborate the reasonableness of the underlying reported asset values and to assess whether any events have occurred within the lag period that may materially affect the valuation of these investments.

With respect to partnerships and similar investments, AFG’s continuing operations had unfunded commitments of $302 million and $290 million as of September 30, 2021 and December 31, 2020, respectively.

Assets of discontinued annuity operations included investments accounted for under the equity method of $646 million as of December 31, 2020.

The following table shows gross unrealized losses (dollars in millions) on available for sale fixed maturities held by AFG’s continuing operations 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
September 30, 2021
Fixed maturities:
U.S. Government and government agencies	$	(1)	$	97	99	%	$	—	$	19	100	%
States, municipalities and political subdivisions	—		13		100	%	—		15		100	%
Foreign government	(1)		48		98	%	—		—		—	%
Residential MBS	—		54		100	%	(1)		8		89	%
Commercial MBS	—		—		—	%	—		—		—	%
Collateralized loan obligations	(1)		687		100	%	(1)		168		99	%
Other asset-backed securities	(2)		662		100	%	(3)		76		96	%
Corporate and other	(3)		278		99	%	(1)		31		97	%
Total fixed maturities	$	(8)	$	1,839	100	%	$	(6)	$	317	98	%
December 31, 2020
Fixed maturities:
U.S. Government and government agencies	$	—	$	23	100	%	$	—	$	—	—	%
States, municipalities and political subdivisions	—		39		100	%	—		10		100	%
Foreign government	—		7		100	%	—		—		—	%
Residential MBS	(1)		86		99	%	—		7		100	%
Commercial MBS	—		7		100	%	—		5		100	%
Collateralized loan obligations	(1)		192		99	%	(3)		366		99	%
Other asset-backed securities	(10)		465		98	%	(3)		92		97	%
Corporate and other	(2)		133		99	%	(1)		17		94	%
Total fixed maturities	$	(14)	$	952	99	%	$	(7)	$	497	99	%

At September 30, 2021, the gross unrealized losses on fixed maturities of $14 million relate to 394 securities. Investment grade securities (as determined by nationally recognized rating agencies) represented approximately 74% of the gross unrealized loss and 94% 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.

Management believes AFG will recover its cost basis (net of any allowance) in the securities with unrealized losses and that AFG has the ability to hold the securities until they recover in value and had no intent to sell them at September 30, 2021.

Credit losses on available for sale fixed maturities are measured based on the present value of expected future cash flows compared to amortized cost. Beginning January 1, 2020, impairment losses are recognized through an allowance instead of directly writing down the amortized cost. Recoveries of previously impaired amounts are recorded as an immediate reversal of all or a portion of the allowance. 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 held by AFG’s continuing operations is shown below (in millions):

	Structured Securities (*)		Corporate and Other		Total
Balance at June 30, 2021	$	8	$	1	$	9
Initial allowance for purchased securities with credit deterioration	—		—		—
Provision for expected credit losses on securities with no previous allowance	—		—		—
Additions (reductions) to previously recognized expected credit losses	—		—		—
Reductions due to sales or redemptions	—		—		—
Balance at September 30, 2021	$	8	$	1	$	9
Balance at June 30, 2020	$	11	$	3	$	14
Initial allowance for purchased securities with credit deterioration	—		—		—
Provision for expected credit losses on securities with no previous allowance	—		—		—
Additions (reductions) to previously recognized expected credit losses	—		—		—
Reductions due to sales or redemptions	—		—		—
Balance at September 30, 2020	$	11	$	3	$	14
Balance at January 1, 2021	$	10	$	2	$	12
Initial allowance for purchased securities with credit deterioration	—		—		—
Provision for expected credit losses on securities with no previous allowance	—		—		—
Additions (reductions) to previously recognized expected credit losses	(2)		1		(1)
Reductions due to sales or redemptions	—		(2)		(2)
Balance at September 30, 2021	$	8	$	1	$	9
Balance at January 1, 2020	$	—	$	—	$	—
Impact of adoption of new accounting policy	—		—		—
Initial allowance for purchased securities with credit deterioration	—		—		—
Provision for expected credit losses on securities with no previous allowance	12		4		16
Additions (reductions) to previously recognized expected credit losses	(1)		(1)		(2)
Reductions due to sales or redemptions	—		—		—
Balance at September 30, 2020	$	11	$	3	$	14

(*)Includes mortgage-backed securities, collateralized loan obligations and other asset-backed securities.

In the third quarter and first nine months of 2021 and 2020, AFG’s continuing operations did not purchase any securities with expected credit losses.

The table below sets forth the scheduled maturities of AFG’s available for sale fixed maturities as of September 30, 2021 (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	$	1,182	$	1,194	11	%
After one year through five years	2,571		2,662		26	%
After five years through ten years	901		939		9	%
After ten years	284		292		3	%
	4,938		5,087		49	%
Collateralized loan obligations and other ABS (average life of approximately 3 years)	4,450		4,473		43	%
MBS (average life of approximately 3 years)	814		867		8	%
Total	$	10,202	$	10,427	100	%

(*)Amortized cost, net of allowance for expected credit losses.

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.

There were no investments in individual issuers that exceeded 10% of shareholders’ equity at September 30, 2021 or December 31, 2020.

Net Unrealized Gain on Fixed Maturity Securities   The following table shows (in millions) the components of the net unrealized gain on securities that is included in AOCI in AFG’s Balance Sheet.

	Pretax		Deferred Tax		Net
September 30, 2021
Net unrealized gain on fixed maturities	$	225	$	(47)	$	178
December 31, 2020
Net unrealized gain on fixed maturities held by continuing operations	$	284	$	(60)	$	224
Discontinued operations (*):
Net unrealized gain on fixed maturities	$	2,555	$	(536)	$	2,019
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 from discontinued operations	1,305		(274)		1,031
Total net unrealized gain on fixed maturity securities	$	1,589	$	(334)	$	1,255

(*)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 AFG’s discontinued 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.

Net Investment Income   The following table shows (in millions) investment income earned and investment expenses incurred in AFG’s continuing operations.

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Investment income:
Fixed maturities	$	73	$	73	$	217	$	232
Equity securities:
Dividends	6		9		21		27
Change in fair value (a) (b)	7		(2)		41		(10)
Equity in earnings of partnerships and similar investments	73		36		222		53
Other	14		8		28		17
Gross investment income	173		124		529		319
Investment expenses	(4)		(2)		(8)		(5)
Net investment income (b)	$	169	$	122	$	521	$	314

(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 the third quarter and first nine months of 2020 includes income of $1 million and losses of $5 million, respectively, on investments held by the companies that comprise the Neon exited lines due primarily to the $7 million loss recorded on equity securities that are carried at fair value through net investment income.

Realized gains (losses) and changes in unrealized appreciation (depreciation) from continuing operations included in AOCI related to fixed maturity securities are summarized as follows (in millions):

	Three months ended September 30, 2021								Three months ended September 30, 2020
	Realized gains (losses)								Realized gains (losses)
	Before Impairments		Impairment Allowance		Total		Change in Unrealized		Before Impairments		Impairment Allowance		Total		Change in Unrealized
Fixed maturities	$	(2)	$	—	$	(2)	$	(35)	$	1	$	—	$	1	$	59
Equity securities	(15)		—		(15)		—		22		—		22		—
Mortgage loans and other investments	—		—		—		—		—		—		—		—
Total pretax	(17)		—		(17)		(35)		23		—		23		59
Tax effects	5		—		5		8		(5)		—		(5)		(12)
Net of tax	$	(12)	$	—	$	(12)	$	(27)	$	18	$	—	$	18	$	47
	Nine months ended September 30, 2021								Nine months ended September 30, 2020
	Realized gains (losses)								Realized gains (losses)
	Before Impairments		Impairment Allowance		Total		Change in Unrealized		Before Impairments		Impairment Allowance		Total		Change in Unrealized
Fixed maturities	$	(2)	$	1	$	(1)	$	(59)	$	5	$	(14)	$	(9)	$	39
Equity securities	104		—		104		—		(189)		—		(189)		—
Mortgage loans and other investments	—		—		—		—		1		—		1		—
Total pretax	102		1		103		(59)		(183)		(14)		(197)		39
Tax effects	(20)		—		(20)		13		38		3		41		(8)
Net of tax	$	82	$	1	$	83	$	(46)	$	(145)	$	(11)	$	(156)	$	31

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 from continuing operations during the third quarter and first nine months of 2021 and 2020 on securities that were still owned at September 30, 2021 and September 30, 2020 as follows (in millions):

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Included in realized gains (losses)	$	(16)	$	17	$	82	$	(174)
Included in net investment income	7		(1)		41		(2)
	$	(9)	$	16	$	123	$	(176)

Gross realized gains and losses (excluding changes in impairment allowance and mark-to-market of derivatives) on available for sale fixed maturity investment transactions from continuing operations consisted of the following (in millions):

	Nine months ended September 30,
	2021		2020
Gross gains	$	4	$	8
Gross losses	(2)		(4)

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Managed Investment Entities

9 Months Ended

Sep. 30, 2021

Variable Interest Entity, Primary Beneficiary, Does Not Hold Majority Voting Interest, Disclosures [Abstract]

Managed Investment Entities

Managed Investment Entities

AFG is the investment manager and its subsidiaries have investments ranging from 4.5% to 46.8% of the most subordinate debt tranche of twelve active collateralized loan obligation entities (“CLOs”), which are considered variable interest entities. AFG also owns portions of the senior debt tranches of certain of these CLOs. Upon formation between 2012 and 2020, these entities issued securities in various senior and subordinate classes and invested the proceeds primarily in secured bank loans, which serve as collateral for the debt securities issued by each CLO. None of the collateral was purchased from AFG. AFG’s investments in the subordinate debt tranches of these entities receive residual income from the CLOs only after the CLOs pay expenses (including management fees to AFG) and interest on and returns of capital to senior levels of debt securities. There are no contractual requirements for AFG to provide additional funding for these entities. AFG has not provided and does not intend to provide any financial support to these entities.

AFG’s maximum exposure to economic loss on the CLOs that it manages is limited to its investment in those CLOs, which had an aggregate fair value of $96 million (including $86 million invested in the most subordinate tranches) at September 30, 2021, and $200 million (including $143 million held by the discontinued annuity business) at December 31, 2020.

During the first nine months of 2020, AFG subsidiaries purchased $57 million face amount of senior and subordinate tranches of existing CLOs for $39 million. During the first nine months of 2021 and 2020, AFG subsidiaries received $41 million and less than $1 million, respectively, in sale and redemption proceeds from its CLO investments.

The revenues and expenses of the CLOs are separately identified in AFG’s Statement of Earnings, after the elimination of management fees and earnings attributable to shareholders of AFG as measured by the change in the fair value of AFG’s investments in the CLOs. Selected financial information related to the CLOs is shown below (in millions):

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Investment in CLO tranches at end of period:
Held by continuing operations	$	96	$	47	$	96	$	47
Held by discontinued annuity operations	—		129		—		129
Total	$	96	$	176	$	96	$	176
Gains (losses) on change in fair value of assets/liabilities (*):
Assets	$	10	$	132	$	77	$	(184)
Liabilities	(9)		(137)		(68)		163
Management fees paid to AFG	4		3		12		11
CLO earnings (losses) attributable to AFG shareholders:
From continuing operations	$	5	$	4	$	17	$	(7)
From discontinued annuity operations	—		9		20		(14)
Total	$	5	$	13	$	37	$	(21)

(*)Included in revenues in AFG’s Statement of Earnings.

The aggregate unpaid principal balance of the CLOs’ fixed maturity investments exceeded the fair value of the investments by $63 million and $150 million at September 30, 2021 and December 31, 2020, respectively. The aggregate unpaid principal balance of the CLOs’ debt exceeded its carrying value by $174 million and $141 million at those dates. The CLO assets include loans with an aggregate fair value of $5 million at September 30, 2021 and $11 million at December 31, 2020, for which the CLOs are not accruing interest because the loans are in default (aggregate unpaid principal balance of $15 million at September 30, 2021 and $28 million at December 31, 2020).

In addition to the CLOs that it manages, AFG’s continuing operations had investments in CLOs that are managed by third parties (therefore not consolidated), which are included in available for sale fixed maturity securities and had a fair value of $1.83 billion at September 30, 2021 and $1.06 billion at December 31, 2020.

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Goodwill and Other Intangibles	9 Months Ended
	Sep. 30, 2021
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill and Other Intangibles	Goodwill and Other IntangiblesThere were no changes in the goodwill balance from AFG’s continuing operations of $176 million during the first nine months of 2021.Included in other assets in AFG’s Balance Sheet is $29 million at September 30, 2021 and $34 million at December 31, 2020 in amortizable intangible assets related to property and casualty insurance acquisitions. These amounts are net of accumulated amortization of $66 million and $62 million, respectively. Amortization of intangibles was $1 million and $3 million in the third quarter of 2021 and 2020, respectively, and $5 million and $9 million in the first nine months of 2021 and 2020, respectively.

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Long-Term Debt

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

Long-term debt consisted of the following (in millions):

	September 30, 2021						December 31, 2020
	Principal		Discount and Issue Costs		Carrying Value		Principal		Discount and Issue Costs		Carrying Value
Direct Senior Obligations of AFG:
4.50% Senior Notes due June 2047	$	590	$	(2)	$	588	$	590	$	(2)	$	588
3.50% Senior Notes due August 2026	425		(3)		422		425		(3)		422
5.25% Senior Notes due April 2030	300		(5)		295		300		(6)		294
Other	3		—		3		3		—		3
	1,318		(10)		1,308		1,318		(11)		1,307
Direct Subordinated Obligations of AFG:
4.50% Subordinated Debentures due September 2060	200		(5)		195		200		(5)		195
5.125% Subordinated Debentures due December 2059	200		(6)		194		200		(6)		194
5.625% Subordinated Debentures due June 2060	150		(4)		146		150		(4)		146
5.875% Subordinated Debentures due March 2059	125		(4)		121		125		(4)		121
	675		(19)		656		675		(19)		656
	$	1,993	$	(29)	$	1,964	$	1,993	$	(30)	$	1,963

Scheduled principal payments on debt for the balance of 2021, the subsequent five years and thereafter are as follows: 2021 — none; 2022 — none; 2023 — none; 2024 — none; 2025 — none; 2026 — $425 million and thereafter — $1.57 billion.

AFG can borrow up to $500 million under its revolving credit facility, which expires in December 2025. Amounts borrowed under this agreement bear interest at rates ranging from 1.00% to 1.875% (currently 1.375%) over LIBOR based on AFG’s credit rating. No amounts were borrowed under this facility at September 30, 2021 or December 31, 2020.

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Shareholders' Equity

9 Months Ended

Sep. 30, 2021

Stockholders' Equity Note [Abstract]

Shareholders' Equity

Shareholders’ Equity

AFG is authorized to issue 12.5 million shares of Voting Preferred Stock and 12.5 million shares of Nonvoting Preferred Stock, each without par value.

Accumulated Other Comprehensive Income, Net of Tax (“AOCI”)   Comprehensive income is defined as all changes in shareholders’ equity except those arising from transactions with shareholders. Comprehensive income includes net earnings and other comprehensive income, which consists primarily of changes in net unrealized gains or losses on available for sale securities.

The progression of the components of accumulated other comprehensive income follows (in millions):

			Other Comprehensive Income (Loss)
	AOCI Beginning Balance		Pretax		Tax		Net of tax		Attributable to noncontrolling interests		Attributable to shareholders		Other		AOCI Ending Balance
Quarter ended September 30, 2021
Net unrealized gains (losses) on securities:
Unrealized holding losses on securities arising during the period			$	(37)	$	8	$	(29)	$	—	$	(29)
Reclassification adjustment for realized (gains) losses included in net earnings (*)			2		—		2		—		2
Total net unrealized gains (losses) on securities	$	205	(35)		8		(27)		—		(27)		$	—	$	178
Foreign currency translation adjustments	(16)		(3)		—		(3)		—		(3)		—		(19)
Pension and other postretirement plans adjustments (“OPRP”)	1		—		—		—		—		—		—		1
Total	$	190	$	(38)	$	8	$	(30)	$	—	$	(30)	$	—	$	160
Quarter ended September 30, 2020
Net unrealized gains on securities:
Unrealized holding gains on securities arising during the period			$	245	$	(51)	$	194	$	—	$	194
Reclassification adjustment for realized (gains) losses included in net earnings (*)			(15)		3		(12)		—		(12)
Total net unrealized gains on securities	$	1,030	230		(48)		182		—		182		$	—	$	1,212
Net unrealized gains (losses) on cash flow hedges:
Unrealized holding gains on cash flow hedges arising during the period			1		—		1		—		1
Reclassification adjustment for investment income included in net earnings from discontinued operations			(8)		1		(7)		—		(7)
Total net unrealized gains (losses) on cash flow hedges	47		(7)		1		(6)		—		(6)		—		41
Foreign currency translation adjustments	(17)		—		—		—		—		—		4		(13)
Pension and other postretirement plans adjustments	(7)		—		—		—		—		—		—		(7)
Total	$	1,053	$	223	$	(47)	$	176	$	—	$	176	$	4	$	1,233

			Other Comprehensive Income (Loss)
	AOCI Beginning Balance		Pretax		Tax		Net of tax		Attributable to noncontrolling interests		Attributable to shareholders		Other		AOCI Ending Balance
Nine months ended September 30, 2021
Net unrealized gains (losses) on securities:
Unrealized holding losses on securities arising during the period			$	(224)	$	47	$	(177)	$	—	$	(177)
Reclassification adjustment for realized (gains) losses included in net earnings (*)			(21)		5		(16)		—		(16)
Reclassification for unrealized gains of subsidiaries sold			(1,119)		235		(884)		—		(884)
Total net unrealized gains (losses) on securities	$	1,255	(1,364)		287		(1,077)		—		(1,077)		$	—	$	178
Net unrealized gains (losses) on cash flow hedges:
Unrealized holding losses on cash flow hedges arising during the period			(1)		—		(1)		—		(1)
Reclassification adjustment for investment income included in net earnings from discontinued operations			(14)		3		(11)		—		(11)
Reclassification for unrealized gains on cash flow hedges of subsidiaries sold			(37)		8		(29)		—		(29)
Total net unrealized gains (losses) on cash flow hedges	41		(52)		11		(41)		—		(41)		—		—
Foreign currency translation adjustments	(16)		(3)		—		(3)		—		(3)		—		(19)
Pension and OPRP adjustments:
Unrealized holding losses on pension and OPRP arising during the period			(1)		—		(1)		—		(1)
Reclassification adjustment for pension settlement loss included in other expense in net earnings			11		(2)		9		—		9
Total pension and OPRP adjustments	(7)		10		(2)		8		—		8		—		1
Total	$	1,273	$	(1,409)	$	296	$	(1,113)	$	—	$	(1,113)	$	—	$	160
Nine months ended September 30, 2020
Net unrealized gains on securities:
Unrealized holding gains on securities arising during the period			$	443	$	(93)	$	350	$	—	$	350
Reclassification adjustment for realized (gains) losses included in net earnings (*)			—		—		—		—		—
Total net unrealized gains on securities	$	862	443		(93)		350		—		350		$	—	$	1,212
Net unrealized gains on cash flow hedges:
Unrealized holding gains on cash flow hedges arising during the period			62		(13)		49		—		49
Reclassification adjustment for investment income included in net earnings from discontinued operations			(31)		6		(25)		—		(25)
Total net unrealized gains on cash flow hedges	17		31		(7)		24		—		24		—		41
Foreign currency translation adjustments	(9)		(6)		—		(6)		(2)		(8)		4		(13)
Pension and other postretirement plans adjustments	(7)		—		—		—		—		—		—		(7)
Total	$	863	$	468	$	(100)	$	368	$	(2)	$	366	$	4	$	1,233

(*)The reclassification adjustment out of net unrealized gains (losses) on securities affected the following lines in AFG’s Statement of Earnings:

OCI component	Affected line in the statement of earnings
Pretax - continuing operations	Realized gains (losses) on securities
Pretax - discontinued operations	Net earnings (loss) from discontinued operations
Tax - continuing operations	Provision (credit) for income taxes
Tax - discontinued operations	Net earnings (loss) from discontinued operations

Stock Incentive Plans   Under AFG’s stock incentive plans, employees of AFG and its subsidiaries are eligible to receive equity awards in the form of stock options, stock appreciation rights, restricted stock awards, restricted stock units and stock awards. In the first nine months of 2021, AFG issued 207,020 shares of restricted Common Stock (fair value of $111.13 per share) under the Stock Incentive Plan.

Total compensation expense related to stock incentive plans of AFG and its subsidiaries was $4 million and $5 million in the third quarter of 2021 and 2020 and $11 million and $15 million in the first nine months of 2021 and 2020.

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Income Taxes

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The following is a reconciliation of income taxes on continuing operations 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 September 30,								Nine months ended September 30,
	2021				2020				2021				2020
	Amount		% of EBT		Amount		% of EBT		Amount		% of EBT		Amount		% of EBT
Earnings (loss) from continuing operations before income taxes (“EBT”)	$	267			$	40			$	890			$	(5)
Income taxes at statutory rate	$	56	21	%	$	8	21	%	$	187	21	%	$	(1)	21	%
Effect of:
Pending sale of Neon	—		—	%	(73)		(183	%)	—		—	%	(73)		1,460	%
Stock-based compensation	(2)		(1	%)	—		—	%	(12)		(1	%)	(3)		60	%
Employee stock ownership plan dividend paid deduction	(2)		(1	%)	(1)		(3	%)	(10)		(1	%)	(1)		20	%
Tax exempt interest	(2)		(1	%)	(2)		(5	%)	(6)		(1	%)	(7)		140	%
Dividends received deduction	—		—	%	(1)		(3	%)	(1)		—	%	(2)		40	%
Foreign operations	2		1	%	(4)		(10	%)	—		—	%	(3)		60	%
Adjustment to prior year taxes	(1)		—	%	1		3	%	(1)		—	%	1		(20	%)
Nondeductible expenses	2		1	%	1		3	%	6		1	%	3		(60	%)
Change in valuation allowance	(2)		(1	%)	20		50	%	1		—	%	31		(620	%)
Other	(3)		(1	%)	3		7	%	—		(1	%)	3		(61	%)
Provision (credit) for income taxes as shown in the statement of earnings	$	48	18	%	$	(48)	(120	%)	$	164	18	%	$	(52)	1,040	%

In September 2020, AFG reached a definitive agreement to sell the legal entities that own Neon (see Note C — “Sales of Businesses,” which resulted in a loss on sale for U.S. tax purposes. In accordance with accounting guidance for transactions that meet the GAAP “held for sale” criteria, AFG recorded a $73 million tax benefit associated with this loss in the third quarter of 2020. 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 $27 million of AFG’s net operating loss carryforwards (“NOL”) subject to separate return limitation year (“SRLY”) tax rules will expire unutilized at December 31, 2021. 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.

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Contingencies	9 Months Ended
	Sep. 30, 2021
Commitments and Contingencies Disclosure [Abstract]
Contingencies	ContingenciesThere have been no significant changes to the matters discussed and referred to in Note N — “Contingencies” of AFG’s 2020 Form 10-K, which covers property and casualty insurance reserves for claims related to environmental exposures, asbestos and other mass tort claims and environmental and occupational injury and disease claims of subsidiaries’ former railroad and manufacturing operations.

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Insurance

9 Months Ended

Sep. 30, 2021

Insurance [Abstract]

Insurance

Insurance

Property and Casualty Insurance Reserves The following table provides an analysis of changes in the liability for losses and loss adjustment expenses during the first nine months of 2021 and 2020 (in millions):

	Nine months ended September 30,
	2021		2020
Balance at beginning of year	$	10,392	$	10,232
Less reinsurance recoverables, net of allowance	3,117		3,024
Net liability at beginning of year	7,275		7,208
Provision for losses and LAE occurring in the current period	2,543		2,560
Net increase (decrease) in the provision for claims of prior years:
Special A&E charges	—		47
Other	(208)		(166)
Total losses and LAE incurred	2,335		2,441
Payments for losses and LAE of:
Current year	(589)		(592)
Prior years	(1,430)		(1,406)
Total payments	(2,019)		(1,998)
Foreign currency translation and other	—		(11)
Net liability at end of period	7,591		7,640
Add back reinsurance recoverables, net of allowance	3,400		3,114
Gross unpaid losses and LAE included in the balance sheet at end of period	$	10,991	$	10,754

The net decrease in the provision for claims of prior years during the first nine months of 2021 reflects (i) lower than anticipated claim frequency and severity in the transportation businesses, lower than expected losses in the crop business, lower than expected claim severity in the property and inland marine business and lower than expected claim frequency in the aviation business (within the Property and transportation sub-segment), (ii) lower than anticipated claim severity in the workers’ compensation businesses (within the Specialty casualty sub-segment) and (iii) lower than anticipated claim frequency in the surety and trade credit businesses and lower than expected claim frequency and severity in the financial institutions business (within the Specialty financial sub-segment). This favorable development was partially offset by (i) higher than expected claim frequency and severity in the equine business (within the Property and transportation sub-segment) and (ii) higher than anticipated claim severity in the general liability and targeted markets businesses (within the Specialty casualty sub-segment).

The net decrease in the provision for claims of prior years during the first nine months of 2020 reflects (i) lower than expected claim frequency and severity in the agricultural and transportation businesses (within the Property and transportation sub-segment), (ii) lower than anticipated claim severity in the workers’ compensation businesses and lower than anticipated claim frequency in the executive liability business (within the Specialty casualty sub-segment) and (iii) lower than anticipated claim frequency in the trade credit business and lower than anticipated claim frequency and severity in the financial institutions, fidelity and surety businesses (within the Specialty financial sub-segment). This favorable development was partially offset by (i) the $47 million special charge to increase asbestos and environmental reserves and (ii) higher than expected claim frequency in general liability contractor claims and higher than expected claim frequency and severity in the excess and surplus businesses (within the Specialty casualty sub-segment) and higher than expected losses at Neon.

Recoverables from Reinsurers and Premiums Receivable Progressions of the 2021 and 2020 allowance for expected credit losses on recoverables from reinsurers and premiums receivable related to continuing operations are shown below (in millions):

	Recoverables from Reinsurers				Premiums Receivable
	2021		2020		2021		2020
Balance at June 30	$	8	$	7	$	9	$	10
Provision (credit) for expected credit losses	—		—		1		1
Write-offs charged against the allowance	—		—		—		—
Balance at September 30	$	8	$	7	$	10	$	11
Balance at January 1	$	6	$	18	$	10	$	13
Impact of adoption of new accounting policy	—		(11)		—		(3)
Provision (credit) for expected credit losses	2		—		—		1
Write-offs charged against the allowance	—		—		—		—
Balance at September 30	$	8	$	7	$	10	$	11

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Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation   The accompanying consolidated financial statements for American Financial Group, Inc. and its subsidiaries (“AFG”) are unaudited; however, management believes that all adjustments (consisting only of normal recurring accruals unless otherwise disclosed herein) necessary for fair presentation have been made. The results of operations for interim periods are not necessarily indicative of results to be expected for the year. The financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary to be in conformity with U.S. generally accepted accounting principles (“GAAP”).

Certain reclassifications have been made to prior periods to conform to the current year’s presentation including reclassifying the assets and liabilities of the Annuity subsidiaries sold in May 2021 to assets and liabilities of discontinued annuity operations and their earnings to net earnings (loss) from discontinued operations. See Note B — “Discontinued Operations.” All significant intercompany balances and transactions have been eliminated. The results of operations of companies since their formation or acquisition are included in the consolidated financial statements. Events or transactions occurring subsequent to September 30, 2021, and prior to the filing of this Form 10-Q, have been evaluated for potential recognition or disclosure herein.

Unless otherwise stated, the information in the Notes to the Consolidated Financial Statements relates to AFG’s continuing operations.

The preparation of the financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Changes in circumstances could cause actual results to differ materially from those estimates.

Discontinued Operations

Discontinued Operations   Disposals of components of an entity that represent a strategic shift and that have a major effect on a reporting entity’s operations and financial results are reported as discontinued operations.

Fair Value Measurements

Fair Value Measurements   Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. The standards establish a hierarchy of valuation techniques based on whether the assumptions that market participants would use in pricing the asset or liability (“inputs”) are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect AFG’s assumptions about the assumptions market participants would use in pricing the asset or liability. AFG did not have any material nonrecurring fair value measurements in the first nine months of 2021.

Accounting standards for measuring fair value are based on inputs used in estimating fair value. The three levels of the hierarchy are as follows:

Level 1 — Quoted prices for identical assets or liabilities in active markets (markets in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis). AFG’s Level 1 financial instruments consist primarily of publicly traded equity securities, highly liquid government bonds for which quoted market prices in active markets are available and short-term investments of managed investment entities.

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar assets or liabilities in inactive markets (markets in which there are few transactions, the prices are not current, price quotations vary substantially over time or among market makers, or in which little information is released publicly); and valuations based on other significant inputs that are observable in active markets. AFG’s Level 2 financial instruments include corporate and municipal fixed maturity securities, asset-backed securities (“ABS”), mortgage-backed securities (“MBS”), certain non-affiliated common stocks and investments of managed investment entities priced using observable inputs. Level 2 inputs include benchmark yields, reported trades, corroborated broker/dealer quotes, issuer spreads and benchmark securities. When non-binding broker quotes can be corroborated by comparison to similar securities priced using observable inputs, they are classified as Level 2.

Level 3 — Valuations derived from market valuation techniques generally consistent with those used to estimate the fair values of Level 2 financial instruments in which one or more significant inputs are unobservable or when the market for a security exhibits significantly less liquidity relative to markets supporting Level 2 fair value measurements. The unobservable inputs may include management’s own assumptions about the assumptions market participants would use based on the best information available at the valuation date. Financial instruments whose fair value is estimated based on non-binding broker quotes or internally developed using significant inputs not based on, or corroborated by, observable market information are classified as Level 3.

As discussed in Note A — “Accounting Policies — Managed Investment Entities,” AFG has set the carrying value of its CLO liabilities equal to the fair value of the CLO assets (which have more observable fair values) as an alternative to reporting those liabilities at separately measured fair values. As a result, the CLO liabilities are categorized within the fair value hierarchy on the same basis (proportionally) as the related CLO assets. Since the portion of the CLO liabilities allocated to Level 3 is derived from the fair value of the CLO assets, these amounts are excluded from the progression of Level 3 financial instruments.

AFG’s management is responsible for the valuation process and uses data from outside sources (including nationally recognized pricing services and broker/dealers) in establishing fair value. AFG’s internal investment professionals are a group of approximately 20 investment professionals whose primary responsibility is to manage AFG’s investment portfolio. These professionals monitor individual investments as well as overall industries and are active in the financial markets on a daily basis. The group is led by AFG’s chief investment officer, who reports directly to one of AFG’s Co-CEOs. Valuation techniques utilized by pricing services and prices obtained from external sources are reviewed by AFG’s internal investment professionals who are familiar with the securities being priced and the markets in which they trade to ensure the fair value determination is representative of an exit price. To validate the appropriateness of the prices obtained, these investment managers consider widely published indices (as benchmarks), recent trades, changes in interest rates, general economic conditions and the credit quality of the specific issuers. In addition, the Company communicates directly with the pricing services regarding the methods and assumptions used in pricing, including verifying, on a test basis, the inputs used by the service to value specific securities.

Credit Losses on Financial Instruments

Credit Losses on Financial Instruments   On January 1, 2020, AFG adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which provides a new loss model for determining credit-related impairments for financial instruments measured at amortized cost (mortgage loans, premiums receivable and reinsurance recoverables) and requires an entity to estimate the credit losses expected over the life of an exposure or pool of exposures. The estimate of expected credit losses considers historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. Expected credit losses, and subsequent increases or decreases in such expected losses, are recorded immediately through net earnings as an allowance that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the balance sheet at the amount expected to be collected. At the date of adoption, the impact of adjusting AFG’s existing allowances for uncollectable mortgage loans, premiums receivable and reinsurance recoverables to the allowances calculated under the new guidance resulted in a reduction in the net

allowance, which was recorded as the cumulative effect of an accounting change ($7 million increase in retained earnings at January 1, 2020).

The updated guidance also amended the other-than-temporary impairment model for available for sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance and limits the amount of credit loss to the difference between a security’s amortized cost basis and its fair value. Subsequent increases or decreases in expected credit losses are recorded immediately in net earnings through realized gains (losses).

Credit losses on available for sale fixed maturities are measured based on the present value of expected future cash flows compared to amortized cost. Beginning January 1, 2020, impairment losses are recognized through an allowance instead of directly writing down the amortized cost. Recoveries of previously impaired amounts are recorded as an immediate reversal of all or a portion of the allowance. 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.

Investments

Investments   Equity securities other than those accounted for under the equity method are reported at fair value with holding gains and losses generally recorded in realized gains (losses) on securities. However, AFG records holding gains and losses on securities classified as “trading” under previous guidance, its small portfolio of limited partnerships and similar investments carried at fair value and certain other securities classified at purchase as “fair value through net investment income” in net investment income.

Fixed maturity securities classified as “available for sale” are reported at fair value with unrealized gains and losses included in accumulated other comprehensive income (“AOCI”) in AFG’s Balance Sheet. Fixed maturity securities classified as “trading” are reported at fair value with changes in unrealized holding gains or losses during the period included in net investment income. Mortgage loans (net of any allowance) are carried primarily at the aggregate unpaid balance.

Premiums and discounts on fixed maturity securities are amortized using the effective interest method. Mortgage-backed securities (“MBS”) are amortized over a period based on estimated future principal payments, including prepayments. Prepayment assumptions are reviewed periodically and adjusted to reflect actual prepayments and changes in expectations.

Limited partnerships and similar investments are generally accounted for using the equity method of accounting. Under the equity method, AFG records its share of the earnings or losses of the investee based on when it is reported by the investee in its financial statements rather than in the period in which the investee declares a dividend. AFG’s share of the earnings or losses from equity method investments is generally recorded on a quarter lag due to the timing of the receipt of the investee’s financial statements. AFG’s equity in the earnings (losses) of limited partnerships and similar investments is included in net investment income.

Realized gains or losses on the disposal of fixed maturity securities are determined on the specific identification basis. When a decline in the value of an available for sale fixed maturity is considered to be other-than-temporary at the balance sheet date, an allowance for credit losses (impairment), including any write-off of accrued interest, is charged to earnings (included in realized gains (losses) on securities). If management can assert that it does not intend to sell the security and it is not more likely than not that it will have to sell it before recovery of its amortized cost basis (net of allowance), then the impairment is separated into two components: (i) the allowance related to credit losses (recorded in earnings) and (ii) the amount related to all other factors (recorded in other comprehensive income). The credit-related portion is measured by comparing a security’s amortized cost to the present value of its current expected cash flows discounted at its effective yield prior to the charge. If management intends to sell an impaired security, or it is more likely than not that it will be required to sell the security before recovery, an impairment is recorded in earnings to reduce the amortized cost (net of allowance) of that security to fair value.

Goodwill

Goodwill   Goodwill represents the excess of cost of subsidiaries over AFG’s equity in their underlying net assets at the date of acquisition. Goodwill is not amortized, but is subject to an impairment test at least annually. An entity is not required to complete the quantitative annual goodwill impairment test on a reporting unit if the entity elects to perform a qualitative analysis and determines that it is more likely than not that the reporting unit’s fair value exceeds its carrying amount.

Reinsurance

Reinsurance   Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policies. AFG reports as assets (i) the estimated reinsurance recoverable on paid and unpaid losses, including an estimate for losses incurred but not reported, and (ii) amounts paid or due to reinsurers applicable to the unexpired terms of policies in force. Payable to reinsurers includes ceded premiums due to reinsurers, as well as ceded premiums retained by AFG under contracts to fund ceded losses as they become due. AFG also assumes reinsurance from other companies. Earnings on reinsurance assumed is recognized based on information received from ceding companies.

Deferred Policy Acquisition Costs (“DPAC”)

Deferred Policy Acquisition Costs (“DPAC”)   Policy acquisition costs (principally commissions, premium taxes and certain underwriting and policy issuance costs) directly related to the successful acquisition or renewal of an insurance contract are deferred. DPAC is limited based upon recoverability without any consideration for anticipated investment income and is charged against income ratably over the terms of the related policies. A premium deficiency is recognized if the sum of expected claims costs, claims adjustment expenses and unamortized acquisition costs exceed the related unearned premiums. A premium deficiency is first recognized by charging any unamortized acquisition costs to expense to the extent required to eliminate the deficiency. If the premium deficiency is greater than unamortized acquisition costs, a liability is accrued for the excess deficiency and reported with unpaid losses and loss adjustment expenses.

Managed Investment Entities

Managed Investment Entities   A company is considered the primary beneficiary of, and therefore must consolidate, a variable interest entity (“VIE”) based primarily on its ability to direct the activities of the VIE that most significantly impact that entity’s economic performance and the obligation to absorb losses of, or receive benefits from, the entity that could potentially be significant to the VIE.

AFG manages, and has investments in, collateralized loan obligations (“CLOs”) that are VIEs (see Note G — “Managed Investment Entities”). AFG has determined that it is the primary beneficiary of these CLOs because (i) its role as asset manager gives it the power to direct the activities that most significantly impact the economic performance of the CLOs and (ii) through its investment in the CLO debt tranches, it has exposure to CLO losses (limited to the amount AFG invested) and the right to receive CLO benefits that could potentially be significant to the CLOs.

Because AFG has no right to use the CLO assets and no obligation to pay the CLO liabilities, the assets and liabilities of the CLOs are shown separately in AFG’s Balance Sheet. AFG has elected the fair value option for reporting on the CLO assets and liabilities to improve the transparency of financial reporting related to the CLOs. The net gain or loss from accounting for the CLO assets and liabilities at fair value is presented separately in AFG’s Statement of Earnings.

The fair values of a CLO’s assets may differ from the separately measured fair values of its liabilities even though the CLO liabilities only have recourse to the CLO assets. AFG has set the carrying value of the CLO liabilities equal to the fair value of the CLO assets (which have more observable fair values) as an alternative to reporting those liabilities at a separately measured fair value. CLO earnings attributable to AFG’s shareholders are measured by the change in the fair value of AFG’s investments in the CLOs and management fees earned.

At September 30, 2021, assets and liabilities of managed investment entities included $171 million in assets and $131 million in liabilities of a temporary warehousing entity that was established in connection with the formation of a new CLO that is expected to close in the fourth quarter of 2021. At closing, all warehoused assets will be transferred to the new CLO and the liabilities will be repaid.

Unpaid Losses and Loss Adjustment Expenses

Unpaid Losses and Loss Adjustment Expenses   The net liabilities stated for unpaid claims and for expenses of investigation and adjustment of unpaid claims represent management’s best estimate and are based upon (i) the accumulation of case estimates for losses reported prior to the close of the accounting period on direct business written; (ii) estimates received from ceding reinsurers and insurance pools and associations; (iii) estimates of unreported losses (including possible development on known claims) based on past experience; (iv) estimates based on experience of expenses for investigating and adjusting claims; and (v) the current state of the law and coverage litigation. Establishing reserves for asbestos, environmental and other mass tort claims involves considerably more judgment than other types of claims due to, among other things, inconsistent court decisions, an increase in bankruptcy filings as a result of asbestos-related liabilities, novel theories of coverage, and judicial interpretations that often expand theories of recovery and broaden the scope of coverage.

Loss reserve liabilities are subject to the impact of changes in claim amounts and frequency and other factors. Changes in estimates of the liabilities for losses and loss adjustment expenses are reflected in the statement of earnings in the period in which determined. Despite the variability inherent in such estimates, management believes that the liabilities for unpaid losses and loss adjustment expenses are adequate.

Debt Issuance Costs

Debt Issuance Costs   Debt issuance costs related to AFG’s outstanding debt are presented in its Balance Sheet as a direct reduction in the carrying value of long-term debt and are amortized over the life of the related debt using the effective interest method as a component of interest expense. Debt issuance costs related to AFG’s revolving credit facilities are included in other assets in AFG’s Balance Sheet.

Leases

Leases   Leases for terms of longer than one year are recognized as assets and liabilities for the rights and obligations created by those leases on the balance sheet based on the present value of contractual cash flows. At September 30, 2021 AFG has a $136 million lease liability included in other liabilities and a lease right-of-use asset of $118 million included in other assets compared to $159 million and $139 million, respectively, at December 31, 2020.

Noncontrolling Interests

Noncontrolling Interests   For balance sheet purposes, noncontrolling interests represent the interests of shareholders other than AFG in consolidated entities. In the statement of earnings, net earnings and losses attributable to noncontrolling interests represents such shareholders’ interest in the earnings and losses of those entities.

Premium Recognition

Premium Recognition   Property and casualty premiums are earned generally over the terms of the policies on a pro rata basis. Unearned premiums represent that portion of premiums written, which is applicable to the unexpired terms of policies in force. On reinsurance assumed from other insurance companies or written through various underwriting organizations, unearned premiums are based on information received from such companies and organizations.

Income Taxes

Income Taxes   Deferred income taxes are calculated using the liability method. Under this method, deferred income tax assets and liabilities are determined based on differences between financial reporting and tax bases and are measured using enacted tax rates. A valuation allowance is established to reduce total deferred tax assets to an amount that will more likely than not be realized. The effect of a change in tax rates on deferred tax assets and liabilities is recorded in net earnings in the period that includes the enactment date.

AFG recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained under examination by the appropriate taxing authority. Interest and penalties on AFG’s reserve for uncertain tax positions are recognized as a component of tax expense.

Stock-Based Compensation

Stock-Based Compensation   All share-based grants are recognized as compensation expense on a straight-line basis over their vesting periods based on their calculated fair value at the date of grant.

AFG records excess tax benefits or deficiencies for share-based payments through income tax expense in the statement of earnings. In addition, AFG accounts for forfeitures of awards when they occur.

Benefit Plans

Benefit Plans   AFG provides retirement benefits to qualified employees of participating companies through the AFG 401(k) Retirement and Savings Plan, a defined contribution plan. AFG makes all contributions to the retirement fund portion of the plan and matches a percentage of employee contributions to the savings fund. Company contributions are expensed in the year for which they are declared. AFG and many of its subsidiaries provide health care and life insurance benefits to eligible retirees. AFG also provides postemployment benefits to former or inactive employees (primarily those on disability) who were not deemed retired under other company plans. The projected future cost of providing these benefits is expensed over the period employees earn such benefits.

Earnings Per Share

Earnings Per Share   Although basic earnings per share only considers shares of common stock outstanding during the period, the calculation of diluted earnings per share includes the following adjustments to weighted average common shares related to stock-based compensation plans: third quarter of 2021 and 2020 — 0.4 million and 0.3 million; first nine months of 2021 and 2020 — 0.6 million and 0.5 million.

There were no anti-dilutive potential common shares for the third quarter or the first nine months of 2021 or 2020.

Statement of Cash Flows

Statement of Cash Flows   For cash flow purposes, “investing activities” are defined as making and collecting loans and acquiring and disposing of debt or equity instruments, property and equipment and businesses. “Financing activities” include obtaining resources from owners and providing them with a return on their investments, borrowing money and repaying amounts borrowed. All other activities are considered “operating.” Short-term investments having original maturities of three months or less when purchased are considered to be cash equivalents for purposes of the financial statements.

Segments of Operations

AFG reports its property and casualty insurance business in the following Specialty sub-segments: (i) Property and transportation, which includes physical damage and liability coverage for buses and trucks, inland and ocean marine, agricultural-related products and other commercial property coverages, (ii) Specialty casualty, which includes primarily excess and surplus, executive and professional liability, general liability, umbrella and excess liability, specialty coverages in targeted markets, customized programs for small to mid-sized businesses and workers’ compensation insurance, and (iii) Specialty financial, which includes risk management insurance programs for lending and leasing institutions (including equipment leasing and collateral and lender-placed mortgage property insurance), fidelity and surety products and trade credit insurance. Premiums and underwriting profit included under Other specialty represent business assumed by AFG’s internal reinsurance program from the operations that make up AFG’s other Specialty sub-segments and amortization of deferred gains on retroactive reinsurance transactions related to the sales of businesses in prior years. AFG’s reportable segments and their components were determined based primarily upon similar economic characteristics, products and services.

Accumulated Other Comprehensive Income, Net of Tax ("AOCI")

Accumulated Other Comprehensive Income, Net of Tax (“AOCI”)   Comprehensive income is defined as all changes in shareholders’ equity except those arising from transactions with shareholders. Comprehensive income includes net earnings and other comprehensive income, which consists primarily of changes in net unrealized gains or losses on available for sale securities.

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Discontinued Operations (Tables)

9 Months Ended

Sep. 30, 2021

Discontinued Operations and Disposal Groups [Abstract]

Information on sale of Annuity subsidiaries

Details of the assets and liabilities of the Annuity subsidiaries sold were as follows (in millions):

	May 31, 2021		December 31, 2020
Assets of businesses sold:
Cash and cash equivalents	$	2,060	$	1,145
Investments	38,323		38,011
Recoverables from reinsurers	6,748		6,804
Other assets	2,152		1,925
Total assets of discontinued annuity operations	49,283		47,885
Liabilities of businesses sold:
Annuity benefits accumulated	43,690		42,573
Other liabilities	1,813		1,885
Total liabilities of discontinued annuity operations	45,503		44,458
Receivable from AFG for real estate-related investments	—		537
Reclassify AOCI	(913)		(1,071)
Net investment in annuity businesses sold, excluding AOCI	$	2,867	$	2,893

Details of the results of operations for the discontinued annuity operations were (in millions):

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021 (*)		2020
Net investment income	$	—	$	459	$	746	$	1,256
Realized gains (losses) on securities	—		22		112		(105)
Other income	—		26		52		91
Total revenues	—		507		910		1,242
Annuity benefits	—		203		377		905
Annuity and supplemental insurance acquisition expenses	—		172		136		250
Other expenses	—		38		73		118
Total costs and expenses	—		413		586		1,273
Earnings (loss) before income taxes from discontinued operations	—		94		324		(31)
Provision (credit) for income taxes on operations	—		18		66		(11)
Net earnings (loss) from operations, net of tax	—		76		258		(20)
Gain on sale, net of tax	—		—		656		—
Net earnings (loss) from discontinued operations	$	—	$	76	$	914	$	(20)

(*)Results through the May 31, 2021 effective date of the sale.

The impact of the sale of the annuity business is shown below (in millions):

	May 31, 2021
Cash proceeds	$	3,537
Receivable from MassMutual	34
Sale related expenses	(8)
Total net proceeds	3,563
Net investment in annuity businesses sold, excluding AOCI	2,867
Reclassify net deferred tax asset	(199)
Pretax gain on sale	895
Income tax expense:
Reclassify net deferred tax asset	199
Tax liabilities triggered by pending sale in the first quarter of 2021	41
Other	(1)
Total income tax expense	239
Net gain on sale	$	656

Summarized cash flows for the discontinued annuity operations were (in millions):

	Nine months ended September 30,
	2021		2020
Net cash provided by operating activities	$	87	$	904
Net cash used in investing activities	(1,709)		(440)
Net cash provided by financing activities	477		260

Derivatives   The vast majority of AFG’s derivatives were held by the sold annuity subsidiaries. The following table summarizes the gains (losses) included in net earnings (loss) from discontinued operations for changes in the fair value of derivatives that do not qualify for hedge accounting for the first nine months of 2021 and 2020 (in millions):

	Three months ended September 30,				Nine months ended September 30,
Derivative	2021		2020		2021 (*)		2020
MBS with embedded derivatives	$	—	$	(3)	$	(1)	$	2
Fixed-indexed and variable-indexed annuities (embedded derivative)	—		(5)		(222)		41
Equity index call options	—		203		237		(42)
Equity index put options	—		2		5		1
Reinsurance contract (embedded derivative)	—		1		1		—
	$	—	$	198	$	20	$	2

(*)Through the May 31, 2021 effective date of the sale.

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Sales of Businesses (Tables)

9 Months Ended

Sep. 30, 2021

Disposal Group, Not Discontinued Operation, Disposal Disclosures [Abstract]

Revenues, costs and expenses, and earnings before income taxes for subsidiaries sold

An estimated loss of $30 million on the sale of Neon was recorded in AFG’s financial statements as of September 30, 2020 as shown below (in millions):

Estimated sale proceeds, net of expenses	$	4
Assets of businesses to be sold:
Cash and investments	$	461
Recoverables from reinsurers	198
Prepaid reinsurance premiums	30
Agents’ balances and premiums receivable	48
Other assets	73
Total assets	810
Liabilities of businesses to be sold:
Unpaid losses and loss adjustment expenses	598
Unearned premiums	83
Payable to reinsurers	39
Other liabilities	47
Total liabilities	767
Reclassify accumulated other comprehensive income	(9)
Net assets of businesses to be sold	$	34
Pretax loss on subsidiaries recorded in the third quarter of 2020	$	(30)

Revenues, costs and expenses, and earnings before income taxes for the subsidiaries sold were (in millions):

	Three months ended		Nine months ended
	September 30, 2020		September 30, 2020
Net earned premiums	$	42	$	174
Loss and loss adjustment expenses	60		166
Commissions and other underwriting expenses	20		90
Underwriting loss	(38)		(82)
Net investment income	1		(5)
Other income and expenses, net	(3)		(5)
Loss before income taxes and noncontrolling interests	$	(40)	$	(92)

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Segments of Operations (Tables)

9 Months Ended

Sep. 30, 2021

Segment Reporting [Abstract]

Segment Reporting Information, by Segment

The following tables (in millions) show AFG’s revenues and earnings (loss) from continuing operations before income taxes by segment and sub-segment.

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Revenues
Property and casualty insurance:
Premiums earned:
Specialty
Property and transportation	$	700	$	574	$	1,547	$	1,350
Specialty casualty	613		560		1,772		1,663
Specialty financial	163		155		477		455
Other specialty	53		50		156		132
Other lines (a)	—		42		—		174
Total premiums earned	1,529		1,381		3,952		3,774
Net investment income (b)	165		112		467		277
Other income	4		—		9		8
Total property and casualty insurance	1,698		1,493		4,428		4,059
Other	73		60		208		195
Income on real estate-related entities (c)	—		10		51		29
Total revenues before realized gains (losses)	1,771		1,563		4,687		4,283
Realized gains (losses) on securities	(17)		23		103		(197)
Realized gains (losses) on subsidiaries	—		(30)		4		(30)
Total revenues	$	1,754	$	1,556	$	4,794	$	4,056

(a)Represents premiums earned in the Neon exited lines (which were sold in December 2020) during the third quarter and first nine months of 2020.

(b)Includes income of $1 million for the third quarter of 2020 and a loss of $5 million in the Neon exited lines in the first nine months of 2020 (primarily from the change in fair value of equity securities).

(c)Represents investment income from real estate-related entities acquired from the discontinued annuity operations while they were held by those operations. Subsequent to the sale of the annuity group, this income is included in the segment of the acquirer.

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Earnings (Loss) From Continuing Operations Before Income Taxes
Property and casualty insurance:
Underwriting:
Specialty
Property and transportation	$	45	$	47	$	163	$	107
Specialty casualty	110		53		237		132
Specialty financial	26		13		72		30
Other specialty	(12)		(9)		(16)		(22)
Other lines (a)	(1)		(86)		(2)		(133)
Total underwriting	168		18		454		114
Investment and other income, net (b)	161		100		451		249
Total property and casualty insurance	329		118		905		363
Other (c)	(45)		(74)		(173)		(152)
Income on real estate-related entities (d)	—		3		51		11
Total earnings from continuing operations before realized gains (losses) and income taxes	284		47		783		222
Realized gains (losses) on securities	(17)		23		103		(197)
Realized gains (losses) on subsidiaries	—		(30)		4		(30)
Total earnings (loss) from continuing operations before income taxes	$	267	$	40	$	890	$	(5)

(a)Includes an underwriting loss of $38 million in the third quarter of 2020 and $82 million in the first nine months of 2020 in the Neon exited lines. Also includes a special charge of $47 million in the third quarter of 2020 to increase asbestos and environmental (“A&E”) reserves.

(b)Includes $2 million and $10 million in the third quarter and first nine months of 2020, respectively, in net expenses from the Neon exited lines, before noncontrolling interest.

(c)Includes holding company interest and expenses, including a special charge of $21 million in the third quarter of 2020 to increase A&E reserves related to AFG’s former railroad and manufacturing operations.

(d)Represents investment income (net of DAC) from real estate-related entities acquired from the discontinued annuity operations while they were held by those operations. Subsequent to the sale of the annuity group, this income is included in the segment of the acquirer.

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

Assets and liabilities measured at fair value

Assets and liabilities of continuing operations measured and carried at fair value in the financial statements are summarized below (in millions):

	Level 1		Level 2		Level 3		Total
September 30, 2021
Assets:
Available for sale (“AFS”) fixed maturities:
U.S. Government and government agencies	$	217	$	1	$	—	$	218
States, municipalities and political subdivisions	—		1,884		42		1,926
Foreign government	—		217		—		217
Residential MBS	—		736		18		754
Commercial MBS	—		113		—		113
Collateralized loan obligations	—		1,828		1		1,829
Other asset-backed securities	—		2,335		309		2,644
Corporate and other	15		2,463		248		2,726
Total AFS fixed maturities	232		9,577		618		10,427
Trading fixed maturities	—		29		—		29
Equity securities	681		44		268		993
Assets of managed investment entities (“MIE”)	316		4,802		12		5,130
Total assets accounted for at fair value	$	1,229	$	14,452	$	898	$	16,579
Liabilities:
Liabilities of managed investment entities	$	310	$	4,712	$	12	$	5,034
Total liabilities accounted for at fair value	$	310	$	4,712	$	12	$	5,034
December 31, 2020
Assets:
Available for sale fixed maturities:
U.S. Government and government agencies	$	195	$	3	$	—	$	198
States, municipalities and political subdivisions	—		2,273		39		2,312
Foreign government	—		176		—		176
Residential MBS	—		877		38		915
Commercial MBS	—		90		2		92
Collateralized loan obligations	—		1,046		16		1,062
Other asset-backed securities	—		1,742		305		2,047
Corporate and other	4		2,140		138		2,282
Total AFS fixed maturities	199		8,347		538		9,084
Trading fixed maturities	—		24		—		24
Equity securities	665		48		176		889
Assets of managed investment entities	217		4,733		21		4,971
Total assets accounted for at fair value	$	1,081	$	13,152	$	735	$	14,968
Liabilities:
Liabilities of managed investment entities	$	215	$	4,678	$	21	$	4,914
Total liabilities accounted for at fair value	$	215	$	4,678	$	21	$	4,914

Changes in balances of Level 3 financial assets

Changes in balances of Level 3 financial assets and liabilities carried at fair value during the third quarter and first nine months of 2021 and 2020 are presented below (in millions). The transfers into and out of Level 3 were due to changes in the availability of market observable inputs. All transfers are reflected in the table at fair value as of the end of the reporting period.

			Total realized/unrealized gains (losses) included in
	Balance at June 30, 2021		Net earnings (loss)		OCI		Purchases and issuances		Sales and settlements		Transfer into Level 3		Transfer out of Level 3		Balance at September 30, 2021
AFS fixed maturities:
U.S. government agency	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
State and municipal	36		—		—		—		—		8		(2)		42
Residential MBS	28		(1)		—		—		(1)		—		(8)		18
Commercial MBS	—		—		—		—		—		—		—		—
Collateralized loan obligations	6		—		1		—		—		—		(6)		1
Other asset-backed securities	315		1		(1)		41		(38)		—		(9)		309
Corporate and other	220		—		(1)		36		(9)		2		—		248
Total AFS fixed maturities	605		—		(1)		77		(48)		10		(25)		618
Equity securities	245		7		—		20		(4)		—		—		268
Assets of MIE	15		(2)		—		1		—		—		(2)		12
Total Level 3 assets	$	865	$	5	$	(1)	$	98	$	(52)	$	10	$	(27)	$	898

			Total realized/unrealized gains (losses) included in
	Balance at June 30, 2020		Net earnings (loss)		OCI		Purchases and issuances		Sales and settlements		Transfer into Level 3		Transfer out of Level 3		Balance at September 30, 2020
AFS fixed maturities:
U.S. government agency	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
State and municipal	41		—		—		—		—		—		—		41
Residential MBS	42		(1)		—		—		(3)		8		(1)		45
Commercial MBS	6		—		—		—		—		—		(4)		2
Collateralized loan obligations	55		—		1		—		—		—		—		56
Other asset-backed securities	293		(1)		2		8		(15)		14		(8)		293
Corporate and other	178		3		1		8		(28)		1		(26)		137
Total AFS fixed maturities	615		1		4		16		(46)		23		(39)		574
Equity securities	164		(5)		—		5		—		—		(5)		159
Assets of MIE	17		(2)		—		—		—		—		—		15
Assets of discontinued annuity operations	3,044		(7)		19		83		(113)		224		(193)		3,057
Total Level 3 assets	$	3,840	$	(13)	$	23	$	104	$	(159)	$	247	$	(237)	$	3,805
Liabilities of discontinued annuity operations	$	(3,675)	$	(5)	$	—	$	(56)	$	79	$	—	$	—	$	(3,657)
Total Level 3 liabilities	$	(3,675)	$	(5)	$	—	$	(56)	$	79	$	—	$	—	$	(3,657)

			Total realized/unrealized gains (losses) included in
	Balance at December 31, 2020		Net earnings (loss)		OCI		Purchases and issuances		Sales and settlements		Transfer into Level 3		Transfer out of Level 3		Sale of annuity business		Balance at September 30, 2021
AFS fixed maturities:
U.S. government agency	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
State and municipal	39		—		—		—		(3)		8		(2)		—		42
Residential MBS	38		(4)		—		6		(2)		6		(26)		—		18
Commercial MBS	2		—		—		—		—		—		(2)		—		—
Collateralized loan obligations	16		1		—		—		(1)		—		(15)		—		1
Other asset-backed securities	305		1		—		131		(110)		14		(32)		—		309
Corporate and other	138		(1)		(2)		142		(29)		5		(5)		—		248
Total AFS fixed maturities	538		(3)		(2)		279		(145)		33		(82)		—		618
Equity securities	176		78		—		44		(23)		—		(7)		—		268
Assets of MIE	21		1		—		3		—		1		(14)		—		12
Assets of discontinued annuity operations	2,971		85		(21)		209		(328)		32		(229)		(2,719)		—
Total Level 3 assets	$	3,706	$	161	$	(23)	$	535	$	(496)	$	66	$	(332)	$	(2,719)	$	898
Liabilities of discontinued annuity operations	$	(3,933)	$	(222)	$	—	$	(146)	$	158	$	—	$	—	$	4,143	$	—
Total Level 3 liabilities	$	(3,933)	$	(222)	$	—	$	(146)	$	158	$	—	$	—	$	4,143	$	—

			Total realized/unrealized gains (losses) included in
	Balance at December 31, 2019		Net earnings (loss)		Other comprehensive income (loss)		Purchases and issuances		Sales and settlements		Transfer into Level 3		Transfer out of Level 3		Balance at September 30, 2020
AFS fixed maturities:
U.S. government agency	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
State and municipal	40		—		2		—		(1)		—		—		41
Residential MBS	45		—		(1)		—		(5)		9		(3)		45
Commercial MBS	6		—		—		—		—		—		(4)		2
Collateralized loan obligations	1		(1)		4		—		—		52		—		56
Other asset-backed securities	256		(6)		3		69		(62)		41		(8)		293
Corporate and other	223		2		—		40		(39)		3		(92)		137
Total AFS fixed maturities	571		(5)		8		109		(107)		105		(107)		574
Equity securities	161		(22)		—		16		—		9		(5)		159
Assets of MIE	17		(4)		—		—		—		2		—		15
Assets of discontinued annuity operations	3,092		(27)		39		444		(325)		482		(648)		3,057
Total Level 3 assets	$	3,841	$	(58)	$	47	$	569	$	(432)	$	598	$	(760)	$	3,805
Liabilities of discontinued annuity operations	$	(3,730)	$	41	$	—	$	(180)	$	212	$	—	$	—	$	(3,657)
Total Level 3 liabilities	$	(3,730)	$	41	$	—	$	(180)	$	212	$	—	$	—	$	(3,657)

Changes in balances of Level 3 financial liabilities

Changes in balances of Level 3 financial assets and liabilities carried at fair value during the third quarter and first nine months of 2021 and 2020 are presented below (in millions). The transfers into and out of Level 3 were due to changes in the availability of market observable inputs. All transfers are reflected in the table at fair value as of the end of the reporting period.

			Total realized/unrealized gains (losses) included in
	Balance at June 30, 2021		Net earnings (loss)		OCI		Purchases and issuances		Sales and settlements		Transfer into Level 3		Transfer out of Level 3		Balance at September 30, 2021
AFS fixed maturities:
U.S. government agency	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
State and municipal	36		—		—		—		—		8		(2)		42
Residential MBS	28		(1)		—		—		(1)		—		(8)		18
Commercial MBS	—		—		—		—		—		—		—		—
Collateralized loan obligations	6		—		1		—		—		—		(6)		1
Other asset-backed securities	315		1		(1)		41		(38)		—		(9)		309
Corporate and other	220		—		(1)		36		(9)		2		—		248
Total AFS fixed maturities	605		—		(1)		77		(48)		10		(25)		618
Equity securities	245		7		—		20		(4)		—		—		268
Assets of MIE	15		(2)		—		1		—		—		(2)		12
Total Level 3 assets	$	865	$	5	$	(1)	$	98	$	(52)	$	10	$	(27)	$	898

			Total realized/unrealized gains (losses) included in
	Balance at June 30, 2020		Net earnings (loss)		OCI		Purchases and issuances		Sales and settlements		Transfer into Level 3		Transfer out of Level 3		Balance at September 30, 2020
AFS fixed maturities:
U.S. government agency	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
State and municipal	41		—		—		—		—		—		—		41
Residential MBS	42		(1)		—		—		(3)		8		(1)		45
Commercial MBS	6		—		—		—		—		—		(4)		2
Collateralized loan obligations	55		—		1		—		—		—		—		56
Other asset-backed securities	293		(1)		2		8		(15)		14		(8)		293
Corporate and other	178		3		1		8		(28)		1		(26)		137
Total AFS fixed maturities	615		1		4		16		(46)		23		(39)		574
Equity securities	164		(5)		—		5		—		—		(5)		159
Assets of MIE	17		(2)		—		—		—		—		—		15
Assets of discontinued annuity operations	3,044		(7)		19		83		(113)		224		(193)		3,057
Total Level 3 assets	$	3,840	$	(13)	$	23	$	104	$	(159)	$	247	$	(237)	$	3,805
Liabilities of discontinued annuity operations	$	(3,675)	$	(5)	$	—	$	(56)	$	79	$	—	$	—	$	(3,657)
Total Level 3 liabilities	$	(3,675)	$	(5)	$	—	$	(56)	$	79	$	—	$	—	$	(3,657)

			Total realized/unrealized gains (losses) included in
	Balance at December 31, 2020		Net earnings (loss)		OCI		Purchases and issuances		Sales and settlements		Transfer into Level 3		Transfer out of Level 3		Sale of annuity business		Balance at September 30, 2021
AFS fixed maturities:
U.S. government agency	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
State and municipal	39		—		—		—		(3)		8		(2)		—		42
Residential MBS	38		(4)		—		6		(2)		6		(26)		—		18
Commercial MBS	2		—		—		—		—		—		(2)		—		—
Collateralized loan obligations	16		1		—		—		(1)		—		(15)		—		1
Other asset-backed securities	305		1		—		131		(110)		14		(32)		—		309
Corporate and other	138		(1)		(2)		142		(29)		5		(5)		—		248
Total AFS fixed maturities	538		(3)		(2)		279		(145)		33		(82)		—		618
Equity securities	176		78		—		44		(23)		—		(7)		—		268
Assets of MIE	21		1		—		3		—		1		(14)		—		12
Assets of discontinued annuity operations	2,971		85		(21)		209		(328)		32		(229)		(2,719)		—
Total Level 3 assets	$	3,706	$	161	$	(23)	$	535	$	(496)	$	66	$	(332)	$	(2,719)	$	898
Liabilities of discontinued annuity operations	$	(3,933)	$	(222)	$	—	$	(146)	$	158	$	—	$	—	$	4,143	$	—
Total Level 3 liabilities	$	(3,933)	$	(222)	$	—	$	(146)	$	158	$	—	$	—	$	4,143	$	—

			Total realized/unrealized gains (losses) included in
	Balance at December 31, 2019		Net earnings (loss)		Other comprehensive income (loss)		Purchases and issuances		Sales and settlements		Transfer into Level 3		Transfer out of Level 3		Balance at September 30, 2020
AFS fixed maturities:
U.S. government agency	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
State and municipal	40		—		2		—		(1)		—		—		41
Residential MBS	45		—		(1)		—		(5)		9		(3)		45
Commercial MBS	6		—		—		—		—		—		(4)		2
Collateralized loan obligations	1		(1)		4		—		—		52		—		56
Other asset-backed securities	256		(6)		3		69		(62)		41		(8)		293
Corporate and other	223		2		—		40		(39)		3		(92)		137
Total AFS fixed maturities	571		(5)		8		109		(107)		105		(107)		574
Equity securities	161		(22)		—		16		—		9		(5)		159
Assets of MIE	17		(4)		—		—		—		2		—		15
Assets of discontinued annuity operations	3,092		(27)		39		444		(325)		482		(648)		3,057
Total Level 3 assets	$	3,841	$	(58)	$	47	$	569	$	(432)	$	598	$	(760)	$	3,805
Liabilities of discontinued annuity operations	$	(3,730)	$	41	$	—	$	(180)	$	212	$	—	$	—	$	(3,657)
Total Level 3 liabilities	$	(3,730)	$	41	$	—	$	(180)	$	212	$	—	$	—	$	(3,657)

Fair value of financial instruments

The carrying value and fair value of financial instruments of continuing operations that are not carried at fair value in the financial statements are summarized below (in millions):

	Carrying		Fair Value
	Value		Total		Level 1		Level 2		Level 3
September 30, 2021
Financial assets:
Cash and cash equivalents	$	2,833	$	2,833	$	2,833	$	—	$	—
Mortgage loans	537		555		—		—		555
Total financial assets not accounted for at fair value	$	3,370	$	3,388	$	2,833	$	—	$	555
Long-term debt	$	1,964	$	2,295	$	—	$	2,292	$	3
Total financial liabilities not accounted for at fair value	$	1,964	$	2,295	$	—	$	2,292	$	3
December 31, 2020
Financial assets:
Cash and cash equivalents	$	1,665	$	1,665	$	1,665	$	—	$	—
Mortgage loans	377		382		—		—		382
Total financial assets not accounted for at fair value	$	2,042	$	2,047	$	1,665	$	—	$	382
Long-term debt	$	1,963	$	2,325	$	—	$	2,322	$	3
Total financial liabilities not accounted for at fair value	$	1,963	$	2,325	$	—	$	2,322	$	3

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Investments (Tables)

9 Months Ended

Sep. 30, 2021

Investments, Debt and Equity Securities [Abstract]

Available for sale fixed maturities

Available for sale fixed maturities held by AFG’s continuing operations at September 30, 2021 and December 31, 2020, consisted of the following (in millions):

	Amortized Cost		Allowance for Expected Credit Losses		Gross Unrealized				Net Unrealized		Fair Value
					Gains		Losses
September 30, 2021
Fixed maturities:
U.S. Government and government agencies	$	216	$	—	$	3	$	(1)	$	2	$	218
States, municipalities and political subdivisions	1,849		—		77		—		77		1,926
Foreign government	216		—		2		(1)		1		217
Residential MBS	704		—		51		(1)		50		754
Commercial MBS	110		—		3		—		3		113
Collateralized loan obligations	1,827		1		5		(2)		3		1,829
Other asset-backed securities	2,631		7		25		(5)		20		2,644
Corporate and other	2,658		1		73		(4)		69		2,726
Total fixed maturities	$	10,211	$	9	$	239	$	(14)	$	225	$	10,427
December 31, 2020
Fixed maturities:
U.S. Government and government agencies	$	192	$	—	$	6	$	—	$	6	$	198
States, municipalities and political subdivisions	2,196		—		116		—		116		2,312
Foreign government	172		—		4		—		4		176
Residential MBS	859		—		57		(1)		56		915
Commercial MBS	89		—		3		—		3		92
Collateralized loan obligations	1,065		3		4		(4)		—		1,062
Other asset-backed securities	2,040		7		27		(13)		14		2,047
Corporate and other	2,199		2		88		(3)		85		2,282
Total fixed maturities	$	8,812	$	12	$	305	$	(21)	$	284	$	9,084

Available for sale fixed maturities that are included in assets of discontinued annuity operations at December 31, 2020, consisted of the following (in millions):

	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	$	39	$	—	$	5	$	—	$	5	$	44
States, municipalities and political subdivisions	3,053		—		370		(2)		368		3,421
Foreign government	31		—		4		—		4		35
Residential MBS	1,953		3		194		(4)		190		2,140
Commercial MBS	659		—		40		(1)		39		698
Collateralized loan obligations	3,491		10		23		(13)		10		3,491
Other asset-backed securities	5,098		11		142		(53)		89		5,176
Corporate and other	17,272		4		1,874		(24)		1,850		19,118
Total fixed maturities	$	31,596	$	28	$	2,652	$	(97)	$	2,555	$	34,123

Equity securities reported at fair value

Equity securities held by AFG’s continuing operations, which are reported at fair value with holding gains and losses recognized in net earnings, consisted of the following at September 30, 2021 and December 31, 2020 (in millions):

	September 30, 2021						December 31, 2020
					Fair Value						Fair Value
	Actual Cost				over (under)		Actual Cost				over (under)
			Fair Value		Cost				Fair Value		Cost
Common stocks	$	464	$	563	$	99	$	516	$	510	$	(6)
Perpetual preferred stocks	386		430		44		369		379		10
Total equity securities carried at fair value	$	850	$	993	$	143	$	885	$	889	$	4

Investments accounted for using the equity method

Investments accounted for using the equity method held by AFG’s continuing operations, by category, carrying value and net investment income are as follows (in millions):

	Carrying Value				Net Investment Income
	September 30, 2021		December 31, 2020		Three months ended September 30,				Nine months ended September 30,
					2021		2020		2021		2020
Real estate-related investments (*)	$	1,024	$	915	$	52	$	17	$	151	$	55
Private equity	336		266		21		21		66		4
Private debt	47		54		—		(2)		5		(6)
Total investments accounted for using the equity method	$	1,407	$	1,235	$	73	$	36	$	222	$	53

(*)Includes 88% invested in multi-family properties, 2% in single family properties and 10% in other property types as of September 30, 2021 and 87% invested in multi-family properties, 2% in single family properties and 11% in other property types as of December 31, 2020.

Available for sale securities in a continuous unrealized loss position

The following table shows gross unrealized losses (dollars in millions) on available for sale fixed maturities held by AFG’s continuing operations 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
September 30, 2021
Fixed maturities:
U.S. Government and government agencies	$	(1)	$	97	99	%	$	—	$	19	100	%
States, municipalities and political subdivisions	—		13		100	%	—		15		100	%
Foreign government	(1)		48		98	%	—		—		—	%
Residential MBS	—		54		100	%	(1)		8		89	%
Commercial MBS	—		—		—	%	—		—		—	%
Collateralized loan obligations	(1)		687		100	%	(1)		168		99	%
Other asset-backed securities	(2)		662		100	%	(3)		76		96	%
Corporate and other	(3)		278		99	%	(1)		31		97	%
Total fixed maturities	$	(8)	$	1,839	100	%	$	(6)	$	317	98	%
December 31, 2020
Fixed maturities:
U.S. Government and government agencies	$	—	$	23	100	%	$	—	$	—	—	%
States, municipalities and political subdivisions	—		39		100	%	—		10		100	%
Foreign government	—		7		100	%	—		—		—	%
Residential MBS	(1)		86		99	%	—		7		100	%
Commercial MBS	—		7		100	%	—		5		100	%
Collateralized loan obligations	(1)		192		99	%	(3)		366		99	%
Other asset-backed securities	(10)		465		98	%	(3)		92		97	%
Corporate and other	(2)		133		99	%	(1)		17		94	%
Total fixed maturities	$	(14)	$	952	99	%	$	(7)	$	497	99	%

Roll forward of allowance for credit losses on fixed maturity securities

A progression of the allowance for expected credit losses on fixed maturity securities held by AFG’s continuing operations is shown below (in millions):

	Structured Securities (*)		Corporate and Other		Total
Balance at June 30, 2021	$	8	$	1	$	9
Initial allowance for purchased securities with credit deterioration	—		—		—
Provision for expected credit losses on securities with no previous allowance	—		—		—
Additions (reductions) to previously recognized expected credit losses	—		—		—
Reductions due to sales or redemptions	—		—		—
Balance at September 30, 2021	$	8	$	1	$	9
Balance at June 30, 2020	$	11	$	3	$	14
Initial allowance for purchased securities with credit deterioration	—		—		—
Provision for expected credit losses on securities with no previous allowance	—		—		—
Additions (reductions) to previously recognized expected credit losses	—		—		—
Reductions due to sales or redemptions	—		—		—
Balance at September 30, 2020	$	11	$	3	$	14
Balance at January 1, 2021	$	10	$	2	$	12
Initial allowance for purchased securities with credit deterioration	—		—		—
Provision for expected credit losses on securities with no previous allowance	—		—		—
Additions (reductions) to previously recognized expected credit losses	(2)		1		(1)
Reductions due to sales or redemptions	—		(2)		(2)
Balance at September 30, 2021	$	8	$	1	$	9
Balance at January 1, 2020	$	—	$	—	$	—
Impact of adoption of new accounting policy	—		—		—
Initial allowance for purchased securities with credit deterioration	—		—		—
Provision for expected credit losses on securities with no previous allowance	12		4		16
Additions (reductions) to previously recognized expected credit losses	(1)		(1)		(2)
Reductions due to sales or redemptions	—		—		—
Balance at September 30, 2020	$	11	$	3	$	14

(*)Includes mortgage-backed securities, collateralized loan obligations and other asset-backed securities.

Available for sale fixed maturity securities by contractual maturity date

The table below sets forth the scheduled maturities of AFG’s available for sale fixed maturities as of September 30, 2021 (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	$	1,182	$	1,194	11	%
After one year through five years	2,571		2,662		26	%
After five years through ten years	901		939		9	%
After ten years	284		292		3	%
	4,938		5,087		49	%
Collateralized loan obligations and other ABS (average life of approximately 3 years)	4,450		4,473		43	%
MBS (average life of approximately 3 years)	814		867		8	%
Total	$	10,202	$	10,427	100	%

(*)Amortized cost, net of allowance for expected credit losses.

Components of the net unrealized gain on securities, included in Accumulated Other Comprehensive Income

The following table shows (in millions) the components of the net unrealized gain on securities that is included in AOCI in AFG’s Balance Sheet.

	Pretax		Deferred Tax		Net
September 30, 2021
Net unrealized gain on fixed maturities	$	225	$	(47)	$	178
December 31, 2020
Net unrealized gain on fixed maturities held by continuing operations	$	284	$	(60)	$	224
Discontinued operations (*):
Net unrealized gain on fixed maturities	$	2,555	$	(536)	$	2,019
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 from discontinued operations	1,305		(274)		1,031
Total net unrealized gain on fixed maturity securities	$	1,589	$	(334)	$	1,255

(*)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 AFG’s discontinued 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.

Net investment income earned and investment expenses incurred

The following table shows (in millions) investment income earned and investment expenses incurred in AFG’s continuing operations.

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Investment income:
Fixed maturities	$	73	$	73	$	217	$	232
Equity securities:
Dividends	6		9		21		27
Change in fair value (a) (b)	7		(2)		41		(10)
Equity in earnings of partnerships and similar investments	73		36		222		53
Other	14		8		28		17
Gross investment income	173		124		529		319
Investment expenses	(4)		(2)		(8)		(5)
Net investment income (b)	$	169	$	122	$	521	$	314

(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 the third quarter and first nine months of 2020 includes income of $1 million and losses of $5 million, respectively, on investments held by the companies that comprise the Neon exited lines due primarily to the $7 million loss recorded on equity securities that are carried at fair value through net investment income.

Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments

Realized gains (losses) and changes in unrealized appreciation (depreciation) from continuing operations included in AOCI related to fixed maturity securities are summarized as follows (in millions):

	Three months ended September 30, 2021								Three months ended September 30, 2020
	Realized gains (losses)								Realized gains (losses)
	Before Impairments		Impairment Allowance		Total		Change in Unrealized		Before Impairments		Impairment Allowance		Total		Change in Unrealized
Fixed maturities	$	(2)	$	—	$	(2)	$	(35)	$	1	$	—	$	1	$	59
Equity securities	(15)		—		(15)		—		22		—		22		—
Mortgage loans and other investments	—		—		—		—		—		—		—		—
Total pretax	(17)		—		(17)		(35)		23		—		23		59
Tax effects	5		—		5		8		(5)		—		(5)		(12)
Net of tax	$	(12)	$	—	$	(12)	$	(27)	$	18	$	—	$	18	$	47
	Nine months ended September 30, 2021								Nine months ended September 30, 2020
	Realized gains (losses)								Realized gains (losses)
	Before Impairments		Impairment Allowance		Total		Change in Unrealized		Before Impairments		Impairment Allowance		Total		Change in Unrealized
Fixed maturities	$	(2)	$	1	$	(1)	$	(59)	$	5	$	(14)	$	(9)	$	39
Equity securities	104		—		104		—		(189)		—		(189)		—
Mortgage loans and other investments	—		—		—		—		1		—		1		—
Total pretax	102		1		103		(59)		(183)		(14)		(197)		39
Tax effects	(20)		—		(20)		13		38		3		41		(8)
Net of tax	$	82	$	1	$	83	$	(46)	$	(145)	$	(11)	$	(156)	$	31

Holding gains (losses) on equity securities still held

AFG recorded net holding gains (losses) on equity securities from continuing operations during the third quarter and first nine months of 2021 and 2020 on securities that were still owned at September 30, 2021 and September 30, 2020 as follows (in millions):

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Included in realized gains (losses)	$	(16)	$	17	$	82	$	(174)
Included in net investment income	7		(1)		41		(2)
	$	(9)	$	16	$	123	$	(176)

Gross realized gains and losses on available for sale fixed maturity and equity security investments

Gross realized gains and losses (excluding changes in impairment allowance and mark-to-market of derivatives) on available for sale fixed maturity investment transactions from continuing operations consisted of the following (in millions):

	Nine months ended September 30,
	2021		2020
Gross gains	$	4	$	8
Gross losses	(2)		(4)

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Managed Investment Entities (Tables)

9 Months Ended

Sep. 30, 2021

Variable Interest Entity, Primary Beneficiary, Does Not Hold Majority Voting Interest, Disclosures [Abstract]

Selected financial information related to collateralized loan obligations

Selected financial information related to the CLOs is shown below (in millions):

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Investment in CLO tranches at end of period:
Held by continuing operations	$	96	$	47	$	96	$	47
Held by discontinued annuity operations	—		129		—		129
Total	$	96	$	176	$	96	$	176
Gains (losses) on change in fair value of assets/liabilities (*):
Assets	$	10	$	132	$	77	$	(184)
Liabilities	(9)		(137)		(68)		163
Management fees paid to AFG	4		3		12		11
CLO earnings (losses) attributable to AFG shareholders:
From continuing operations	$	5	$	4	$	17	$	(7)
From discontinued annuity operations	—		9		20		(14)
Total	$	5	$	13	$	37	$	(21)

(*)Included in revenues in AFG’s Statement of Earnings.

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Long-Term Debt (Tables)

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Schedule of long-term debt instruments

Long-term debt consisted of the following (in millions):

	September 30, 2021						December 31, 2020
	Principal		Discount and Issue Costs		Carrying Value		Principal		Discount and Issue Costs		Carrying Value
Direct Senior Obligations of AFG:
4.50% Senior Notes due June 2047	$	590	$	(2)	$	588	$	590	$	(2)	$	588
3.50% Senior Notes due August 2026	425		(3)		422		425		(3)		422
5.25% Senior Notes due April 2030	300		(5)		295		300		(6)		294
Other	3		—		3		3		—		3
	1,318		(10)		1,308		1,318		(11)		1,307
Direct Subordinated Obligations of AFG:
4.50% Subordinated Debentures due September 2060	200		(5)		195		200		(5)		195
5.125% Subordinated Debentures due December 2059	200		(6)		194		200		(6)		194
5.625% Subordinated Debentures due June 2060	150		(4)		146		150		(4)		146
5.875% Subordinated Debentures due March 2059	125		(4)		121		125		(4)		121
	675		(19)		656		675		(19)		656
	$	1,993	$	(29)	$	1,964	$	1,993	$	(30)	$	1,963

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Shareholders' Equity (Tables)

9 Months Ended

Sep. 30, 2021

Stockholders' Equity Note [Abstract]

Components of accumulated other comprehensive income (loss)

The progression of the components of accumulated other comprehensive income follows (in millions):

			Other Comprehensive Income (Loss)
	AOCI Beginning Balance		Pretax		Tax		Net of tax		Attributable to noncontrolling interests		Attributable to shareholders		Other		AOCI Ending Balance
Quarter ended September 30, 2021
Net unrealized gains (losses) on securities:
Unrealized holding losses on securities arising during the period			$	(37)	$	8	$	(29)	$	—	$	(29)
Reclassification adjustment for realized (gains) losses included in net earnings (*)			2		—		2		—		2
Total net unrealized gains (losses) on securities	$	205	(35)		8		(27)		—		(27)		$	—	$	178
Foreign currency translation adjustments	(16)		(3)		—		(3)		—		(3)		—		(19)
Pension and other postretirement plans adjustments (“OPRP”)	1		—		—		—		—		—		—		1
Total	$	190	$	(38)	$	8	$	(30)	$	—	$	(30)	$	—	$	160
Quarter ended September 30, 2020
Net unrealized gains on securities:
Unrealized holding gains on securities arising during the period			$	245	$	(51)	$	194	$	—	$	194
Reclassification adjustment for realized (gains) losses included in net earnings (*)			(15)		3		(12)		—		(12)
Total net unrealized gains on securities	$	1,030	230		(48)		182		—		182		$	—	$	1,212
Net unrealized gains (losses) on cash flow hedges:
Unrealized holding gains on cash flow hedges arising during the period			1		—		1		—		1
Reclassification adjustment for investment income included in net earnings from discontinued operations			(8)		1		(7)		—		(7)
Total net unrealized gains (losses) on cash flow hedges	47		(7)		1		(6)		—		(6)		—		41
Foreign currency translation adjustments	(17)		—		—		—		—		—		4		(13)
Pension and other postretirement plans adjustments	(7)		—		—		—		—		—		—		(7)
Total	$	1,053	$	223	$	(47)	$	176	$	—	$	176	$	4	$	1,233

			Other Comprehensive Income (Loss)
	AOCI Beginning Balance		Pretax		Tax		Net of tax		Attributable to noncontrolling interests		Attributable to shareholders		Other		AOCI Ending Balance
Nine months ended September 30, 2021
Net unrealized gains (losses) on securities:
Unrealized holding losses on securities arising during the period			$	(224)	$	47	$	(177)	$	—	$	(177)
Reclassification adjustment for realized (gains) losses included in net earnings (*)			(21)		5		(16)		—		(16)
Reclassification for unrealized gains of subsidiaries sold			(1,119)		235		(884)		—		(884)
Total net unrealized gains (losses) on securities	$	1,255	(1,364)		287		(1,077)		—		(1,077)		$	—	$	178
Net unrealized gains (losses) on cash flow hedges:
Unrealized holding losses on cash flow hedges arising during the period			(1)		—		(1)		—		(1)
Reclassification adjustment for investment income included in net earnings from discontinued operations			(14)		3		(11)		—		(11)
Reclassification for unrealized gains on cash flow hedges of subsidiaries sold			(37)		8		(29)		—		(29)
Total net unrealized gains (losses) on cash flow hedges	41		(52)		11		(41)		—		(41)		—		—
Foreign currency translation adjustments	(16)		(3)		—		(3)		—		(3)		—		(19)
Pension and OPRP adjustments:
Unrealized holding losses on pension and OPRP arising during the period			(1)		—		(1)		—		(1)
Reclassification adjustment for pension settlement loss included in other expense in net earnings			11		(2)		9		—		9
Total pension and OPRP adjustments	(7)		10		(2)		8		—		8		—		1
Total	$	1,273	$	(1,409)	$	296	$	(1,113)	$	—	$	(1,113)	$	—	$	160
Nine months ended September 30, 2020
Net unrealized gains on securities:
Unrealized holding gains on securities arising during the period			$	443	$	(93)	$	350	$	—	$	350
Reclassification adjustment for realized (gains) losses included in net earnings (*)			—		—		—		—		—
Total net unrealized gains on securities	$	862	443		(93)		350		—		350		$	—	$	1,212
Net unrealized gains on cash flow hedges:
Unrealized holding gains on cash flow hedges arising during the period			62		(13)		49		—		49
Reclassification adjustment for investment income included in net earnings from discontinued operations			(31)		6		(25)		—		(25)
Total net unrealized gains on cash flow hedges	17		31		(7)		24		—		24		—		41
Foreign currency translation adjustments	(9)		(6)		—		(6)		(2)		(8)		4		(13)
Pension and other postretirement plans adjustments	(7)		—		—		—		—		—		—		(7)
Total	$	863	$	468	$	(100)	$	368	$	(2)	$	366	$	4	$	1,233

(*)The reclassification adjustment out of net unrealized gains (losses) on securities affected the following lines in AFG’s Statement of Earnings:

OCI component	Affected line in the statement of earnings
Pretax - continuing operations	Realized gains (losses) on securities
Pretax - discontinued operations	Net earnings (loss) from discontinued operations
Tax - continuing operations	Provision (credit) for income taxes
Tax - discontinued operations	Net earnings (loss) from discontinued operations

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Income Taxes (Tables)

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Reconciliation of income taxes at the statutory rate and income taxes shown in the Statement of Earnings

The following is a reconciliation of income taxes on continuing operations 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 September 30,								Nine months ended September 30,
	2021				2020				2021				2020
	Amount		% of EBT		Amount		% of EBT		Amount		% of EBT		Amount		% of EBT
Earnings (loss) from continuing operations before income taxes (“EBT”)	$	267			$	40			$	890			$	(5)
Income taxes at statutory rate	$	56	21	%	$	8	21	%	$	187	21	%	$	(1)	21	%
Effect of:
Pending sale of Neon	—		—	%	(73)		(183	%)	—		—	%	(73)		1,460	%
Stock-based compensation	(2)		(1	%)	—		—	%	(12)		(1	%)	(3)		60	%
Employee stock ownership plan dividend paid deduction	(2)		(1	%)	(1)		(3	%)	(10)		(1	%)	(1)		20	%
Tax exempt interest	(2)		(1	%)	(2)		(5	%)	(6)		(1	%)	(7)		140	%
Dividends received deduction	—		—	%	(1)		(3	%)	(1)		—	%	(2)		40	%
Foreign operations	2		1	%	(4)		(10	%)	—		—	%	(3)		60	%
Adjustment to prior year taxes	(1)		—	%	1		3	%	(1)		—	%	1		(20	%)
Nondeductible expenses	2		1	%	1		3	%	6		1	%	3		(60	%)
Change in valuation allowance	(2)		(1	%)	20		50	%	1		—	%	31		(620	%)
Other	(3)		(1	%)	3		7	%	—		(1	%)	3		(61	%)
Provision (credit) for income taxes as shown in the statement of earnings	$	48	18	%	$	(48)	(120	%)	$	164	18	%	$	(52)	1,040	%

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Insurance (Tables)

9 Months Ended

Sep. 30, 2021

Insurance [Abstract]

Reconciliation of beginning and ending liability for unpaid losses and loss adjustment expenses

The following table provides an analysis of changes in the liability for losses and loss adjustment expenses during the first nine months of 2021 and 2020 (in millions):

	Nine months ended September 30,
	2021		2020
Balance at beginning of year	$	10,392	$	10,232
Less reinsurance recoverables, net of allowance	3,117		3,024
Net liability at beginning of year	7,275		7,208
Provision for losses and LAE occurring in the current period	2,543		2,560
Net increase (decrease) in the provision for claims of prior years:
Special A&E charges	—		47
Other	(208)		(166)
Total losses and LAE incurred	2,335		2,441
Payments for losses and LAE of:
Current year	(589)		(592)
Prior years	(1,430)		(1,406)
Total payments	(2,019)		(1,998)
Foreign currency translation and other	—		(11)
Net liability at end of period	7,591		7,640
Add back reinsurance recoverables, net of allowance	3,400		3,114
Gross unpaid losses and LAE included in the balance sheet at end of period	$	10,991	$	10,754

Reinsurance Recoverable and Premiums Receivable, Allowance for Credit Loss

Progressions of the 2021 and 2020 allowance for expected credit losses on recoverables from reinsurers and premiums receivable related to continuing operations are shown below (in millions):

	Recoverables from Reinsurers				Premiums Receivable
	2021		2020		2021		2020
Balance at June 30	$	8	$	7	$	9	$	10
Provision (credit) for expected credit losses	—		—		1		1
Write-offs charged against the allowance	—		—		—		—
Balance at September 30	$	8	$	7	$	10	$	11
Balance at January 1	$	6	$	18	$	10	$	13
Impact of adoption of new accounting policy	—		(11)		—		(3)
Provision (credit) for expected credit losses	2		—		—		1
Write-offs charged against the allowance	—		—		—		—
Balance at September 30	$	8	$	7	$	10	$	11

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Accounting Policies - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Jun. 30, 2021	Dec. 31, 2020	Jun. 30, 2020	Dec. 31, 2019
Significant Accounting Policies [Line Items]
Cumulative effect of accounting change	$ 5,240	$ 6,340	$ 5,240	$ 6,340	$ 5,601	$ 6,789	$ 6,126	$ 6,269
Assets of managed investment entities	29,942		29,942			73,710
Liabilities of managed investment entities	24,702		24,702			66,921
Operating lease liability	$ 136		$ 136			$ 159
Operating lease liability, current, Statement of Financial Position	Other liabilities		Other liabilities			Other liabilities
Operating lease right-of-use asset	$ 118		$ 118			$ 139
Weighted average common shares adjustment related to stock-based compensation (shares)	400,000	300,000	600,000	500,000
Anti-dilutive potential common shares related to stock-based compensation plans (shares)	0	0	0	0
Maturities of short term investments			3 months
New collateralized loan obligation temporary warehousing entities
Significant Accounting Policies [Line Items]
Assets of managed investment entities	$ 171		$ 171
Liabilities of managed investment entities	131		131
Retained Earnings
Significant Accounting Policies [Line Items]
Cumulative effect of accounting change	$ 3,680	$ 3,737	$ 3,680	$ 3,737	$ 4,023	$ 4,149	$ 3,685	4,009
Cumulative effect adjustment in period of adoption | Retained Earnings
Significant Accounting Policies [Line Items]
Cumulative effect of accounting change								7
Cumulative effect adjustment in period of adoption | Retained Earnings | Accounting Standards Update 2016-13
Significant Accounting Policies [Line Items]
Cumulative effect of accounting change								$ 7

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Discontinued Operations - Narrative (Details) - USD ($) $ in Millions		3 Months Ended		5 Months Ended	9 Months Ended
	May 31, 2021	Sep. 30, 2021	Sep. 30, 2020	May 31, 2021	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Investments accounted for using the equity method		$ 1,407			$ 1,407		$ 1,235
Net investment income		169	$ 122		521	$ 314
Net earnings (loss) from discontinued operations		0	76	$ 914	914	(20)
Annuity subsidiaries
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net proceeds from sale of businesses	$ 3,570
Post-closing adjustments	34			34
Gain on sale, net of tax	656	$ 0	0	656		0
Real estate-related investments | Continuing operations
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net investment income			$ 10		$ 51	$ 29
Great American Life Insurance Company | Investments accounted for using the equity method
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Investments accounted for using the equity method	480			480
Great American Life Insurance Company | Real Estate
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Other real estate	$ 100			$ 100

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Discontinued Operations - Assets and liabilities of businesses disposed (Details) - USD ($) $ in Millions	Sep. 30, 2021	May 31, 2021	Dec. 31, 2020
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total assets of discontinued annuity operations	$ 0		$ 47,885
Liabilities of discontinued annuity operations	0		44,458
Reclassify AOCI	160		1,273
Net investment in annuity businesses sold, excluding AOCI	$ 5,240		6,789
Annuity subsidiaries
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Cash and cash equivalents		$ 2,060
Investments		38,323
Recoverables from reinsurers		6,748
Other assets		2,152
Total assets of discontinued annuity operations		49,283	47,885
Annuity benefits accumulated		43,690
Other liabilities		1,813
Liabilities of discontinued annuity operations		45,503	44,458
Receivable from AFG for real estate-related investments		0	537
Reclassify AOCI		(913)	(1,071)
Net investment in annuity businesses sold, excluding AOCI		$ 2,867	2,893
Annuity subsidiaries | Assets of discontinued annuity operations
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Cash and cash equivalents			1,145
Investments			38,011
Recoverables from reinsurers			6,804
Other assets			1,925
Annuity subsidiaries | Liabilities of discontinued annuity operations
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Annuity benefits accumulated			42,573
Other liabilities			$ 1,885

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Discontinued Operations - Details of the results of the Annuity subsidiaries sold (Details) - USD ($) $ in Millions		3 Months Ended		5 Months Ended	9 Months Ended
	May 31, 2021	Sep. 30, 2021	Sep. 30, 2020	May 31, 2021	Sep. 30, 2021	Sep. 30, 2020
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net earnings (loss) from discontinued operations		$ 0	$ 76	$ 914	$ 914	$ (20)
Annuity subsidiaries
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Gain on sale, net of tax	$ 656	0	0	656		0
Annuity subsidiaries | Net earnings (loss) from discontinued operations
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net investment income		0	459	746		1,256
Realized gains (losses) on securities		0	22	112		(105)
Other income		0	26	52		91
Total revenues		0	507	910		1,242
Annuity benefits		0	203	377		905
Annuity and supplemental insurance acquisition expenses		0	172	136		250
Other expenses		0	38	73		118
Total costs and expenses		0	413	586		1,273
Earnings (loss) before income taxes from discontinued operations		0	94	324		(31)
Provision (credit) for income taxes on operations		0	18	66		(11)
Net earnings (loss) from operations, net of tax		$ 0	$ 76	$ 258		$ (20)

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Discontinued Operations - Impact of the sale of the annuity businesses (Details) - USD ($) $ in Millions		3 Months Ended		5 Months Ended	9 Months Ended
	May 31, 2021	Sep. 30, 2021	Sep. 30, 2020	May 31, 2021	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Cash proceeds from sale of businesses					$ 3,547	$ 0
Net investment in annuity businesses sold, excluding AOCI		$ 5,240			$ 5,240		$ 6,789
Annuity subsidiaries
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Cash proceeds from sale of businesses	$ 3,537
Receivable from MassMutual	34			$ 34
Sale related expenses	(8)
Total net proceeds	3,563
Net investment in annuity businesses sold, excluding AOCI	2,867			2,867			$ 2,893
Reclassify net deferred tax asset	199
Realized gains (losses) on subsidiaries	895
Tax liabilities triggered by pending sale in the first quarter of 2021	41
Other tax expense on gain on sale of subsidiaries	(1)
Total income tax expense on gain on sale of subsidiaries	239
Gain on sale, net of tax	$ 656	$ 0	$ 0	$ 656		$ 0

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Discontinued Operations - Summarized cash flow information (Details) - Annuity subsidiaries - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net cash provided by operating activities	$ 87	$ 904
Net cash used in investing activities	(1,709)	(440)
Net cash provided by financing activities	$ 477	$ 260

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Discontinued Operations - Gain (loss) included in the Statement of Earnings for changes in the fair value of derivatives that do not qualify for hedge accounting (Details) - Not designated as hedging instrument - USD ($) $ in Millions	3 Months Ended		5 Months Ended	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	May 31, 2021	Sep. 30, 2020
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Derivative	$ 0	$ 198	$ 20	$ 2
MBS with embedded derivatives | Annuity subsidiaries | Net earnings (loss) from discontinued operations
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Derivative	0	(3)	(1)	2
Fixed-indexed and variable-indexed annuities (embedded derivative) | Annuity subsidiaries | Net earnings (loss) from discontinued operations
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Derivative	0	(5)	(222)	41
Equity index call options | Annuity subsidiaries | Net earnings (loss) from discontinued operations
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Derivative	0	203	237	(42)
Equity index put options | Annuity subsidiaries | Net earnings (loss) from discontinued operations
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Derivative	0	2	5	1
Reinsurance contract (embedded derivative) | Annuity subsidiaries | Net earnings (loss) from discontinued operations
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Derivative	$ 0	$ 1	$ 1	$ 0

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Sales of Businesses - Narrative (Details) - USD ($) $ in Millions	3 Months Ended				9 Months Ended
	Sep. 30, 2021	Jun. 30, 2021	Dec. 31, 2020	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Proceeds from sale of businesses					$ 3,547	$ 0
Realized gains (losses) on subsidiaries	$ 0			$ (30)	$ 4	$ (30)
Neon Capital Limited
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Proceeds from sale of businesses			$ 6
Realized gains (losses) on subsidiaries		$ 4		$ (30)

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Sales of Businesses - Assets and liabilities disposed (Details) - USD ($) $ in Millions	3 Months Ended			9 Months Ended
	Sep. 30, 2021	Jun. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020	Dec. 31, 2019
Disposal Group, Not Discontinued Operation, Disposal Disclosures [Line Items]
Cash and investments	$ 16,387			$ 16,387		$ 13,494
Recoverables from reinsurers	3,523			3,523		3,288
Prepaid reinsurance premiums	1,028			1,028		768
Agents’ balances and premiums receivable	1,492			1,492		1,229
Other assets	847			847		977
Total assets	29,942			29,942		73,710
Unpaid losses and loss adjustment expenses	10,991		$ 10,754	10,991	$ 10,754	10,392	$ 10,232
Unearned premiums	3,415			3,415		2,803
Payable to reinsurers	1,146			1,146		807
Other liabilities	2,152			2,152		1,584
Total liabilities	24,702			24,702		$ 66,921
Realized gains (losses) on subsidiaries	$ 0		(30)	$ 4	(30)
Neon Capital Limited
Disposal Group, Not Discontinued Operation, Disposal Disclosures [Line Items]
Estimated sale proceeds, net of expenses			4
Cash and investments			461		461
Recoverables from reinsurers			198		198
Prepaid reinsurance premiums			30		30
Agents’ balances and premiums receivable			48		48
Other assets			73		73
Total assets			810		810
Unpaid losses and loss adjustment expenses			598		598
Unearned premiums			83		83
Payable to reinsurers			39		39
Other liabilities			47		47
Total liabilities			767		767
Reclassification from accumulated other comprehensive income			(9)
Net assets of businesses to be sold			34		$ 34
Realized gains (losses) on subsidiaries		$ 4	$ (30)

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Sales of Businesses - Revenues, costs and expenses, and earnings before income taxes of business disposed (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net earned premiums	$ 1,529	$ 1,381	$ 3,952	$ 3,774
Losses and loss adjustment expenses	954	963	2,335	2,441
Commissions and other underwriting expenses	417	406	1,187	1,235
Net investment income	169	122	521	314
Net earnings, including noncontrolling interests	$ 219	164	$ 1,640	27
Neon Capital Limited
Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net earned premiums		42		174
Losses and loss adjustment expenses		60		166
Commissions and other underwriting expenses		20		90
Underwriting loss		(38)		(82)
Net investment income		1		(5)
Other income and expenses, net		(3)		(5)
Net earnings, including noncontrolling interests		$ (40)		$ (92)

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Segments of Operations - Narrative (Details) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) segment	Sep. 30, 2020 USD ($)
Segment Reporting Information [Line Items]
Number of segments | segment			2
Net investment income	$ 169	$ 122	$ 521	$ 314
Neon Capital Limited
Segment Reporting Information [Line Items]
Net investment income		1		(5)
Continuing operations | Real estate-related investments
Segment Reporting Information [Line Items]
Net investment income		10	51	29
Property and Casualty Insurance
Segment Reporting Information [Line Items]
Net investment income	165	112	467	277
Property and casualty insurance underwriting	168	18	454	114
Investment and other income, net	161	100	451	249
Other
Segment Reporting Information [Line Items]
Special charges to increase asbestos and environmental reserves		21
Other | Continuing operations | Real estate-related investments
Segment Reporting Information [Line Items]
Net investment income	0	10	51	29
Earnings from real-estate related investments, net of DAC	0	3	51	11
Other lines | Property and Casualty Insurance
Segment Reporting Information [Line Items]
Property and casualty insurance underwriting	$ (1)	(86)	(2)	(133)
Special A&E charges			$ 0	47
Other lines | Property and Casualty Insurance | Neon Capital Limited
Segment Reporting Information [Line Items]
Property and casualty insurance underwriting		(38)		(82)
Investment and other income, net		(2)		(10)
Neon Capital Limited | Other lines | Property and Casualty Insurance
Segment Reporting Information [Line Items]
Net investment income		$ 1		$ (5)

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Segments of Operations - Revenues by segment and sub-segment (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Segment Reporting Information [Line Items]
Net earned premiums	$ 1,529	$ 1,381	$ 3,952	$ 3,774
Net investment income	169	122	521	314
Other income	27	19	70	62
Revenues before realized gains (losses)	1,771	1,563	4,687	4,283
Realized gains (losses) on securities	(17)	23	103	(197)
Realized gains (losses) on subsidiaries	0	(30)	4	(30)
Total revenues	1,754	1,556	4,794	4,056
Real estate-related investments | Continuing operations
Segment Reporting Information [Line Items]
Net investment income		10	51	29
Property and Casualty Insurance
Segment Reporting Information [Line Items]
Net earned premiums	1,529	1,381	3,952	3,774
Net investment income	165	112	467	277
Other income	4	0	9	8
Revenues before realized gains (losses)	1,698	1,493	4,428	4,059
Other
Segment Reporting Information [Line Items]
Revenues before realized gains (losses)	73	60	208	195
Other | Real estate-related investments | Continuing operations
Segment Reporting Information [Line Items]
Net investment income	0	10	51	29
Specialty Property and transportation | Property and Casualty Insurance
Segment Reporting Information [Line Items]
Net earned premiums	700	574	1,547	1,350
Specialty casualty | Property and Casualty Insurance
Segment Reporting Information [Line Items]
Net earned premiums	613	560	1,772	1,663
Specialty financial | Property and Casualty Insurance
Segment Reporting Information [Line Items]
Net earned premiums	163	155	477	455
Other specialty | Property and Casualty Insurance
Segment Reporting Information [Line Items]
Net earned premiums	53	50	156	132
Other lines | Property and Casualty Insurance
Segment Reporting Information [Line Items]
Net earned premiums	$ 0	$ 42	$ 0	$ 174

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Segments of Operations - Earnings before income taxes by segment and sub-segment (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Segment Reporting Information [Line Items]
Earnings before realized gains (losses) and income taxes	$ 284	$ 47	$ 783	$ 222
Realized gains (losses) on securities	(17)	23	103	(197)
Realized gains (losses) on subsidiaries	0	(30)	4	(30)
Earnings (loss) from continuing operations before income taxes	267	40	890	(5)
Property and Casualty Insurance
Segment Reporting Information [Line Items]
Property and casualty insurance underwriting	168	18	454	114
Investment and other income, net	161	100	451	249
Earnings before realized gains (losses) and income taxes	329	118	905	363
Other
Segment Reporting Information [Line Items]
Earnings before realized gains (losses) and income taxes	(45)	(74)	(173)	(152)
Other | Continuing operations | Real estate-related investments
Segment Reporting Information [Line Items]
Earnings from real-estate related investments, net of DAC	0	3	51	11
Specialty Property and transportation | Property and Casualty Insurance
Segment Reporting Information [Line Items]
Property and casualty insurance underwriting	45	47	163	107
Specialty casualty | Property and Casualty Insurance
Segment Reporting Information [Line Items]
Property and casualty insurance underwriting	110	53	237	132
Specialty financial | Property and Casualty Insurance
Segment Reporting Information [Line Items]
Property and casualty insurance underwriting	26	13	72	30
Other specialty | Property and Casualty Insurance
Segment Reporting Information [Line Items]
Property and casualty insurance underwriting	(12)	(9)	(16)	(22)
Other lines | Property and Casualty Insurance
Segment Reporting Information [Line Items]
Property and casualty insurance underwriting	$ (1)	$ (86)	$ (2)	$ (133)

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Fair Value Measurements - Narrative (Details) $ in Millions	Sep. 30, 2021 USD ($) professional
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
AFG's internal investment professionals | professional	20
Level 3 | Continuing operations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Level 3 assets as a percentage of total assets measured at fair value	5.00%
Percentage of level 3 assets that were priced using non-binding broker quotes	17.00%
Level 3 assets that were priced using non-binding broker quotes	$ 150
Level 3 assets that were priced by pricing services.	$ 61
Percentage of level 3 assets that were priced by pricing services	7.00%
Percentage of level 3 equity investments that do not qualify for equity accounting	17.00%
Level 3 assets that are equity securities that do not qualify for equity accounting	$ 149
Internally developed level 3 assets	$ 519
Percentage of internally developed level 3 assets compared to total level 3 assets	58.00%

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Fair Value Measurements - Assets and liabilities measured and carried at fair value in the financial statements (Details) - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020
Assets:
Available for sale (AFS) fixed maturities	$ 10,427	$ 9,084
Trading fixed maturities	29	24
Equity securities	993	889
Assets of managed investment entities	29,942	73,710
Total assets accounted for at fair value	16,579	14,968
Liabilities:
Liabilities of managed investment entities	24,702	66,921
Total liabilities accounted for at fair value	5,034	4,914
Variable interest entity, primary beneficiary
Assets:
Assets of managed investment entities	5,130	4,971
Liabilities:
Liabilities of managed investment entities	5,034	4,914
Fixed maturities
Assets:
Available for sale (AFS) fixed maturities	10,427	9,084
Trading fixed maturities	29	24
U.S. Government and government agencies
Assets:
Available for sale (AFS) fixed maturities	218	198
States, municipalities and political subdivisions
Assets:
Available for sale (AFS) fixed maturities	1,926	2,312
Foreign government
Assets:
Available for sale (AFS) fixed maturities	217	176
Residential MBS
Assets:
Available for sale (AFS) fixed maturities	754	915
Commercial MBS
Assets:
Available for sale (AFS) fixed maturities	113	92
Collateralized loan obligations
Assets:
Available for sale (AFS) fixed maturities	1,829	1,062
Other asset-backed securities
Assets:
Available for sale (AFS) fixed maturities	2,644	2,047
Corporate and other
Assets:
Available for sale (AFS) fixed maturities	2,726	2,282
Equity securities
Assets:
Equity securities	993	889
Level 1
Assets:
Total assets accounted for at fair value	1,229	1,081
Liabilities:
Total liabilities accounted for at fair value	310	215
Level 1 | Variable interest entity, primary beneficiary
Assets:
Assets of managed investment entities	316	217
Liabilities:
Liabilities of managed investment entities	310	215
Level 1 | Fixed maturities
Assets:
Available for sale (AFS) fixed maturities	232	199
Trading fixed maturities	0	0
Level 1 | U.S. Government and government agencies
Assets:
Available for sale (AFS) fixed maturities	217	195
Level 1 | States, municipalities and political subdivisions
Assets:
Available for sale (AFS) fixed maturities	0	0
Level 1 | Foreign government
Assets:
Available for sale (AFS) fixed maturities	0	0
Level 1 | Residential MBS
Assets:
Available for sale (AFS) fixed maturities	0	0
Level 1 | Commercial MBS
Assets:
Available for sale (AFS) fixed maturities	0	0
Level 1 | Collateralized loan obligations
Assets:
Available for sale (AFS) fixed maturities	0	0
Level 1 | Other asset-backed securities
Assets:
Available for sale (AFS) fixed maturities	0	0
Level 1 | Corporate and other
Assets:
Available for sale (AFS) fixed maturities	15	4
Level 1 | Equity securities
Assets:
Equity securities	681	665
Level 2
Assets:
Total assets accounted for at fair value	14,452	13,152
Liabilities:
Total liabilities accounted for at fair value	4,712	4,678
Level 2 | Variable interest entity, primary beneficiary
Assets:
Assets of managed investment entities	4,802	4,733
Liabilities:
Liabilities of managed investment entities	4,712	4,678
Level 2 | Fixed maturities
Assets:
Available for sale (AFS) fixed maturities	9,577	8,347
Trading fixed maturities	29	24
Level 2 | U.S. Government and government agencies
Assets:
Available for sale (AFS) fixed maturities	1	3
Level 2 | States, municipalities and political subdivisions
Assets:
Available for sale (AFS) fixed maturities	1,884	2,273
Level 2 | Foreign government
Assets:
Available for sale (AFS) fixed maturities	217	176
Level 2 | Residential MBS
Assets:
Available for sale (AFS) fixed maturities	736	877
Level 2 | Commercial MBS
Assets:
Available for sale (AFS) fixed maturities	113	90
Level 2 | Collateralized loan obligations
Assets:
Available for sale (AFS) fixed maturities	1,828	1,046
Level 2 | Other asset-backed securities
Assets:
Available for sale (AFS) fixed maturities	2,335	1,742
Level 2 | Corporate and other
Assets:
Available for sale (AFS) fixed maturities	2,463	2,140
Level 2 | Equity securities
Assets:
Equity securities	44	48
Level 3
Assets:
Total assets accounted for at fair value	898	735
Liabilities:
Total liabilities accounted for at fair value	12	21
Level 3 | Variable interest entity, primary beneficiary
Assets:
Assets of managed investment entities	12	21
Liabilities:
Liabilities of managed investment entities	12	21
Level 3 | Fixed maturities
Assets:
Available for sale (AFS) fixed maturities	618	538
Trading fixed maturities	0	0
Level 3 | U.S. Government and government agencies
Assets:
Available for sale (AFS) fixed maturities	0	0
Level 3 | States, municipalities and political subdivisions
Assets:
Available for sale (AFS) fixed maturities	42	39
Level 3 | Foreign government
Assets:
Available for sale (AFS) fixed maturities	0	0
Level 3 | Residential MBS
Assets:
Available for sale (AFS) fixed maturities	18	38
Level 3 | Commercial MBS
Assets:
Available for sale (AFS) fixed maturities	0	2
Level 3 | Collateralized loan obligations
Assets:
Available for sale (AFS) fixed maturities	1	16
Level 3 | Other asset-backed securities
Assets:
Available for sale (AFS) fixed maturities	309	305
Level 3 | Corporate and other
Assets:
Available for sale (AFS) fixed maturities	248	138
Level 3 | Equity securities
Assets:
Equity securities	$ 268	$ 176

XML

Fair Value Measurements - Changes in balances of Level 3 financial assets carried at fair value (Details) - USD ($) $ in Millions		3 Months Ended		9 Months Ended
	May 31, 2021	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Financial assets, Beginning Balance		$ 865	$ 3,840	$ 3,706	$ 3,841
Total realized/unrealized gains (losses) included in Net income		5	(13)	161	(58)
Total realized/unrealized gains (losses) included in other comprehensive income (loss)		(1)	23	(23)	47
Purchases and issuances		98	104	535	569
Sales and settlements		(52)	(159)	(496)	(432)
Transfer into Level 3		10	247	66	598
Transfer out of Level 3		(27)	(237)	(332)	(760)
Sale of annuity business	$ (2,719)
Financial assets, Ending Balance		898	3,805	898	3,805
Fixed maturities
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Financial assets, Beginning Balance		605	615	538	571
Total realized/unrealized gains (losses) included in Net income		0	1	(3)	(5)
Total realized/unrealized gains (losses) included in other comprehensive income (loss)		(1)	4	(2)	8
Purchases and issuances		77	16	279	109
Sales and settlements		(48)	(46)	(145)	(107)
Transfer into Level 3		10	23	33	105
Transfer out of Level 3		(25)	(39)	(82)	(107)
Sale of annuity business	0
Financial assets, Ending Balance		618	574	618	574
U.S. government agency
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Financial assets, Beginning Balance		0	0	0	0
Total realized/unrealized gains (losses) included in Net income		0	0	0	0
Total realized/unrealized gains (losses) included in other comprehensive income (loss)		0	0	0	0
Purchases and issuances		0	0	0	0
Sales and settlements		0	0	0	0
Transfer into Level 3		0	0	0	0
Transfer out of Level 3		0	0	0	0
Sale of annuity business	0
Financial assets, Ending Balance		0	0	0	0
State and municipal
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Financial assets, Beginning Balance		36	41	39	40
Total realized/unrealized gains (losses) included in Net income		0	0	0	0
Total realized/unrealized gains (losses) included in other comprehensive income (loss)		0	0	0	2
Purchases and issuances		0	0	0	0
Sales and settlements		0	0	(3)	(1)
Transfer into Level 3		8	0	8	0
Transfer out of Level 3		(2)	0	(2)	0
Sale of annuity business	0
Financial assets, Ending Balance		42	41	42	41
Residential MBS
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Financial assets, Beginning Balance		28	42	38	45
Total realized/unrealized gains (losses) included in Net income		(1)	(1)	(4)	0
Total realized/unrealized gains (losses) included in other comprehensive income (loss)		0	0	0	(1)
Purchases and issuances		0	0	6	0
Sales and settlements		(1)	(3)	(2)	(5)
Transfer into Level 3		0	8	6	9
Transfer out of Level 3		(8)	(1)	(26)	(3)
Sale of annuity business	0
Financial assets, Ending Balance		18	45	18	45
Commercial MBS
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Financial assets, Beginning Balance		0	6	2	6
Total realized/unrealized gains (losses) included in Net income		0	0	0	0
Total realized/unrealized gains (losses) included in other comprehensive income (loss)		0	0	0	0
Purchases and issuances		0	0	0	0
Sales and settlements		0	0	0	0
Transfer into Level 3		0	0	0	0
Transfer out of Level 3		0	(4)	(2)	(4)
Sale of annuity business	0
Financial assets, Ending Balance		0	2	0	2
Collateralized loan obligations
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Financial assets, Beginning Balance		6	55	16	1
Total realized/unrealized gains (losses) included in Net income		0	0	1	(1)
Total realized/unrealized gains (losses) included in other comprehensive income (loss)		1	1	0	4
Purchases and issuances		0	0	0	0
Sales and settlements		0	0	(1)	0
Transfer into Level 3		0	0	0	52
Transfer out of Level 3		(6)	0	(15)	0
Sale of annuity business	0
Financial assets, Ending Balance		1	56	1	56
Other asset-backed securities
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Financial assets, Beginning Balance		315	293	305	256
Total realized/unrealized gains (losses) included in Net income		1	(1)	1	(6)
Total realized/unrealized gains (losses) included in other comprehensive income (loss)		(1)	2	0	3
Purchases and issuances		41	8	131	69
Sales and settlements		(38)	(15)	(110)	(62)
Transfer into Level 3		0	14	14	41
Transfer out of Level 3		(9)	(8)	(32)	(8)
Sale of annuity business	0
Financial assets, Ending Balance		309	293	309	293
Corporate and other
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Financial assets, Beginning Balance		220	178	138	223
Total realized/unrealized gains (losses) included in Net income		0	3	(1)	2
Total realized/unrealized gains (losses) included in other comprehensive income (loss)		(1)	1	(2)	0
Purchases and issuances		36	8	142	40
Sales and settlements		(9)	(28)	(29)	(39)
Transfer into Level 3		2	1	5	3
Transfer out of Level 3		0	(26)	(5)	(92)
Sale of annuity business	0
Financial assets, Ending Balance		248	137	248	137
Equity securities
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Financial assets, Beginning Balance		245	164	176	161
Total realized/unrealized gains (losses) included in Net income		7	(5)	78	(22)
Total realized/unrealized gains (losses) included in other comprehensive income (loss)		0	0	0	0
Purchases and issuances		20	5	44	16
Sales and settlements		(4)	0	(23)	0
Transfer into Level 3		0	0	0	9
Transfer out of Level 3		0	(5)	(7)	(5)
Sale of annuity business	0
Financial assets, Ending Balance		268	159	268	159
Assets of MIE
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Financial assets, Beginning Balance		15	17	21	17
Total realized/unrealized gains (losses) included in Net income		(2)	(2)	1	(4)
Total realized/unrealized gains (losses) included in other comprehensive income (loss)		0	0	0	0
Purchases and issuances		1	0	3	0
Sales and settlements		0	0	0	0
Transfer into Level 3		0	0	1	2
Transfer out of Level 3		(2)	0	(14)	0
Sale of annuity business	0
Financial assets, Ending Balance		12	15	12	15
Assets of discontinued annuity operations | Annuity subsidiaries
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Financial assets, Beginning Balance			3,044	2,971	3,092
Total realized/unrealized gains (losses) included in Net income			(7)	85	(27)
Total realized/unrealized gains (losses) included in other comprehensive income (loss)			19	(21)	39
Purchases and issuances			83	209	444
Sales and settlements			(113)	(328)	(325)
Transfer into Level 3			224	32	482
Transfer out of Level 3			(193)	(229)	(648)
Sale of annuity business	$ (2,719)
Financial assets, Ending Balance		$ 0	$ 3,057	$ 0	$ 3,057

XML

Fair Value Measurements - Changes in balances of Level 3 financial liabilities carried at fair value (Details) - USD ($) $ in Millions		3 Months Ended	9 Months Ended
	May 31, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Financial liabilities, Beginning Balance		$ (3,675)	$ (3,933)	$ (3,730)
Total realized/unrealized gains (losses) included in Net income		(5)	(222)	41
Total realized/unrealized gains (losses) included in other comprehensive income (loss)		0	0	0
Purchases and issuances		(56)	(146)	(180)
Sales and settlements		79	158	212
Transfer into Level 3		0	0	0
Transfer out of Level 3		0	0	0
Sale of annuity business	$ 4,143
Financial liabilities, Ending Balance		(3,657)	0	(3,657)
Liabilities of discontinued annuity operations | Annuity subsidiaries
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Financial liabilities, Beginning Balance		(3,675)	(3,933)	(3,730)
Total realized/unrealized gains (losses) included in Net income		(5)	(222)	41
Total realized/unrealized gains (losses) included in other comprehensive income (loss)		0	0	0
Purchases and issuances		(56)	(146)	(180)
Sales and settlements		79	158	212
Transfer into Level 3		0	0	0
Transfer out of Level 3		0	0	0
Sale of annuity business	$ 4,143
Financial liabilities, Ending Balance		$ (3,657)	$ 0	$ (3,657)

XML

Fair Value Measurements - The carrying value and fair value of financial instruments (Details) - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020
Financial assets:
Mortgage loans	$ 537	$ 377
Long-term debt	1,964	1,963
Level 1
Financial assets:
Cash and cash equivalents	2,833	1,665
Mortgage loans	0	0
Total financial assets not accounted for at fair value	2,833	1,665
Long-term debt	0	0
Total financial liabilities not accounted for at fair value	0	0
Level 2
Financial assets:
Cash and cash equivalents	0	0
Mortgage loans	0	0
Total financial assets not accounted for at fair value	0	0
Long-term debt	2,292	2,322
Total financial liabilities not accounted for at fair value	2,292	2,322
Level 3
Financial assets:
Cash and cash equivalents	0	0
Mortgage loans	555	382
Total financial assets not accounted for at fair value	555	382
Long-term debt	3	3
Total financial liabilities not accounted for at fair value	3	3
Carrying Value
Financial assets:
Cash and cash equivalents	2,833	1,665
Mortgage loans	537	377
Total financial assets not accounted for at fair value	3,370	2,042
Long-term debt	1,964	1,963
Total financial liabilities not accounted for at fair value	1,964	1,963
Fair Value
Financial assets:
Cash and cash equivalents	2,833	1,665
Mortgage loans	555	382
Total financial assets not accounted for at fair value	3,388	2,047
Long-term debt	2,295	2,325
Total financial liabilities not accounted for at fair value	$ 2,295	$ 2,325

XML

Investments - Narrative (Details) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) security	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Schedule of Investments [Line Items]
Unfunded commitments to limited partnerships	$ 302		$ 302		$ 290
Investments accounted for using the equity method	1,407		$ 1,407		$ 1,235
Percentage (based on amount of unrealized loss) of available for sale fixed maturities that are in an unrealized loss position and rated investment grade			74.00%
Percentage (based on fair value) of available for sale fixed maturities that are in an unrealized loss position and rated investment grade			94.00%
Net investment income	$ 169	$ 122	$ 521	$ 314
Multifamily
Schedule of Investments [Line Items]
Percent of real-estate related investments by property type	88.00%		88.00%		87.00%
Single Family
Schedule of Investments [Line Items]
Percent of real-estate related investments by property type	2.00%		2.00%		2.00%
Other Property
Schedule of Investments [Line Items]
Percent of real-estate related investments by property type	10.00%		10.00%		11.00%
Annuity subsidiaries | Assets of discontinued annuity operations
Schedule of Investments [Line Items]
Investments accounted for using the equity method					$ 646
Neon Capital Limited
Schedule of Investments [Line Items]
Net investment income		$ 1		(5)
Neon Capital Limited | Investment income
Schedule of Investments [Line Items]
Loss on sale of equity securities				$ (7)
Fixed maturities
Schedule of Investments [Line Items]
Gross unrealized losses on fixed maturities	$ 14		$ 14		21
Number of available for sale securities in an unrealized loss position | security			394
Fixed maturities | Annuity subsidiaries | Assets of discontinued annuity operations
Schedule of Investments [Line Items]
Gross unrealized losses on fixed maturities					$ 97

XML

Investments - Available for sale fixed maturities (Details) - USD ($) $ in Millions	Sep. 30, 2021	Jun. 30, 2021	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Jan. 01, 2020	Dec. 31, 2019
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available for sale, amortized cost	$ 10,211		$ 8,812
Fixed maturities, available for sale, allowance for expected credit losses	9	$ 9	12	$ 14	$ 14		$ 0
Available for sale (AFS) fixed maturities	10,427		9,084
Total fixed maturities
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available for sale, amortized cost	10,211		8,812
Fixed maturities, available for sale, allowance for expected credit losses	9		12
Fixed maturities, available for sale, gross unrealized, gains	239		305
Fixed maturities, available for sale, gross unrealized, losses	(14)		(21)
Available for sale (AFS) fixed maturities	10,427		9,084
Total fixed maturities | Assets of discontinued annuity operations | Annuity subsidiaries
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available for sale, amortized cost			31,596
Fixed maturities, available for sale, allowance for expected credit losses			28
Fixed maturities, available for sale, gross unrealized, gains			2,652
Fixed maturities, available for sale, gross unrealized, losses			(97)
Available for sale (AFS) fixed maturities			34,123
Total fixed maturities | Debt Securities
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available-for-sale securities, accumulated gross unrealized gain (loss), before tax	225		284
Total fixed maturities | Debt Securities | Assets of discontinued annuity operations | Annuity subsidiaries
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available-for-sale securities, accumulated gross unrealized gain (loss), before tax			2,555
U.S. Government and government agencies
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available for sale, amortized cost	216		192
Fixed maturities, available for sale, allowance for expected credit losses	0		0
Fixed maturities, available for sale, gross unrealized, gains	3		6
Fixed maturities, available for sale, gross unrealized, losses	(1)		0
Available for sale (AFS) fixed maturities	218		198
U.S. Government and government agencies | Assets of discontinued annuity operations | Annuity subsidiaries
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available for sale, amortized cost			39
Fixed maturities, available for sale, allowance for expected credit losses			0
Fixed maturities, available for sale, gross unrealized, gains			5
Fixed maturities, available for sale, gross unrealized, losses			0
Available for sale (AFS) fixed maturities			44
U.S. Government and government agencies | Debt Securities
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available-for-sale securities, accumulated gross unrealized gain (loss), before tax	2		6
U.S. Government and government agencies | Debt Securities | Assets of discontinued annuity operations | Annuity subsidiaries
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available-for-sale securities, accumulated gross unrealized gain (loss), before tax			5
States, municipalities and political subdivisions
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available for sale, amortized cost	1,849		2,196
Fixed maturities, available for sale, allowance for expected credit losses	0		0
Fixed maturities, available for sale, gross unrealized, gains	77		116
Fixed maturities, available for sale, gross unrealized, losses	0		0
Available for sale (AFS) fixed maturities	1,926		2,312
States, municipalities and political subdivisions | Assets of discontinued annuity operations | Annuity subsidiaries
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available for sale, amortized cost			3,053
Fixed maturities, available for sale, allowance for expected credit losses			0
Fixed maturities, available for sale, gross unrealized, gains			370
Fixed maturities, available for sale, gross unrealized, losses			(2)
Available for sale (AFS) fixed maturities			3,421
States, municipalities and political subdivisions | Debt Securities
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available-for-sale securities, accumulated gross unrealized gain (loss), before tax	77		116
States, municipalities and political subdivisions | Debt Securities | Assets of discontinued annuity operations | Annuity subsidiaries
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available-for-sale securities, accumulated gross unrealized gain (loss), before tax			368
Foreign government
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available for sale, amortized cost	216		172
Fixed maturities, available for sale, allowance for expected credit losses	0		0
Fixed maturities, available for sale, gross unrealized, gains	2		4
Fixed maturities, available for sale, gross unrealized, losses	(1)		0
Available for sale (AFS) fixed maturities	217		176
Foreign government | Assets of discontinued annuity operations | Annuity subsidiaries
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available for sale, amortized cost			31
Fixed maturities, available for sale, allowance for expected credit losses			0
Fixed maturities, available for sale, gross unrealized, gains			4
Fixed maturities, available for sale, gross unrealized, losses			0
Available for sale (AFS) fixed maturities			35
Foreign government | Debt Securities
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available-for-sale securities, accumulated gross unrealized gain (loss), before tax	1		4
Foreign government | Debt Securities | Assets of discontinued annuity operations | Annuity subsidiaries
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available-for-sale securities, accumulated gross unrealized gain (loss), before tax			4
Residential MBS
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available for sale, amortized cost	704		859
Fixed maturities, available for sale, allowance for expected credit losses	0		0
Fixed maturities, available for sale, gross unrealized, gains	51		57
Fixed maturities, available for sale, gross unrealized, losses	(1)		(1)
Available for sale (AFS) fixed maturities	754		915
Residential MBS | Assets of discontinued annuity operations | Annuity subsidiaries
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available for sale, amortized cost			1,953
Fixed maturities, available for sale, allowance for expected credit losses			3
Fixed maturities, available for sale, gross unrealized, gains			194
Fixed maturities, available for sale, gross unrealized, losses			(4)
Available for sale (AFS) fixed maturities			2,140
Residential MBS | Debt Securities
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available-for-sale securities, accumulated gross unrealized gain (loss), before tax	50		56
Residential MBS | Debt Securities | Assets of discontinued annuity operations | Annuity subsidiaries
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available-for-sale securities, accumulated gross unrealized gain (loss), before tax			190
Commercial MBS
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available for sale, amortized cost	110		89
Fixed maturities, available for sale, allowance for expected credit losses	0		0
Fixed maturities, available for sale, gross unrealized, gains	3		3
Fixed maturities, available for sale, gross unrealized, losses	0		0
Available for sale (AFS) fixed maturities	113		92
Commercial MBS | Assets of discontinued annuity operations | Annuity subsidiaries
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available for sale, amortized cost			659
Fixed maturities, available for sale, allowance for expected credit losses			0
Fixed maturities, available for sale, gross unrealized, gains			40
Fixed maturities, available for sale, gross unrealized, losses			(1)
Available for sale (AFS) fixed maturities			698
Commercial MBS | Debt Securities
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available-for-sale securities, accumulated gross unrealized gain (loss), before tax	3		3
Commercial MBS | Debt Securities | Assets of discontinued annuity operations | Annuity subsidiaries
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available-for-sale securities, accumulated gross unrealized gain (loss), before tax			39
Collateralized loan obligations
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available for sale, amortized cost	1,827		1,065
Fixed maturities, available for sale, allowance for expected credit losses	1		3
Fixed maturities, available for sale, gross unrealized, gains	5		4
Fixed maturities, available for sale, gross unrealized, losses	(2)		(4)
Available for sale (AFS) fixed maturities	1,829		1,062
Collateralized loan obligations | Assets of discontinued annuity operations | Annuity subsidiaries
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available for sale, amortized cost			3,491
Fixed maturities, available for sale, allowance for expected credit losses			10
Fixed maturities, available for sale, gross unrealized, gains			23
Fixed maturities, available for sale, gross unrealized, losses			(13)
Available for sale (AFS) fixed maturities			3,491
Collateralized loan obligations | Debt Securities
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available-for-sale securities, accumulated gross unrealized gain (loss), before tax	3		0
Collateralized loan obligations | Debt Securities | Assets of discontinued annuity operations | Annuity subsidiaries
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available-for-sale securities, accumulated gross unrealized gain (loss), before tax			10
Other asset-backed securities
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available for sale, amortized cost	2,631		2,040
Fixed maturities, available for sale, allowance for expected credit losses	7		7
Fixed maturities, available for sale, gross unrealized, gains	25		27
Fixed maturities, available for sale, gross unrealized, losses	(5)		(13)
Available for sale (AFS) fixed maturities	2,644		2,047
Other asset-backed securities | Assets of discontinued annuity operations | Annuity subsidiaries
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available for sale, amortized cost			5,098
Fixed maturities, available for sale, allowance for expected credit losses			11
Fixed maturities, available for sale, gross unrealized, gains			142
Fixed maturities, available for sale, gross unrealized, losses			(53)
Available for sale (AFS) fixed maturities			5,176
Other asset-backed securities | Debt Securities
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available-for-sale securities, accumulated gross unrealized gain (loss), before tax	20		14
Other asset-backed securities | Debt Securities | Assets of discontinued annuity operations | Annuity subsidiaries
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available-for-sale securities, accumulated gross unrealized gain (loss), before tax			89
Corporate and other
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available for sale, amortized cost	2,658		2,199
Fixed maturities, available for sale, allowance for expected credit losses	1	$ 1	2	$ 3	$ 3	$ 0	$ 0
Fixed maturities, available for sale, gross unrealized, gains	73		88
Fixed maturities, available for sale, gross unrealized, losses	(4)		(3)
Available for sale (AFS) fixed maturities	2,726		2,282
Corporate and other | Assets of discontinued annuity operations | Annuity subsidiaries
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available for sale, amortized cost			17,272
Fixed maturities, available for sale, allowance for expected credit losses			4
Fixed maturities, available for sale, gross unrealized, gains			1,874
Fixed maturities, available for sale, gross unrealized, losses			(24)
Available for sale (AFS) fixed maturities			19,118
Corporate and other | Debt Securities
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available-for-sale securities, accumulated gross unrealized gain (loss), before tax	$ 69		85
Corporate and other | Debt Securities | Assets of discontinued annuity operations | Annuity subsidiaries
Debt Securities, Available-for-sale [Line Items]
Fixed maturities, available-for-sale securities, accumulated gross unrealized gain (loss), before tax			$ 1,850

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Investments - Equity securities reported at fair value (Details) - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020
Debt and Equity Securities, FV-NI [Line Items]
Equity securities	$ 993	$ 889
Common stocks
Debt and Equity Securities, FV-NI [Line Items]
Equity securities, at cost	464	516
Equity securities	563	510
Equity securities, fair value in excess of cost	99	(6)
Perpetual preferred stocks
Debt and Equity Securities, FV-NI [Line Items]
Equity securities, at cost	386	369
Equity securities	430	379
Equity securities, fair value in excess of cost	44	10
Equity securities
Debt and Equity Securities, FV-NI [Line Items]
Equity securities, at cost	850	885
Equity securities	993	889
Equity securities, fair value in excess of cost	$ 143	$ 4

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Investments - Detail of equity method investments (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Schedule of Investments [Line Items]
Investments accounted for using the equity method	$ 1,407		$ 1,407		$ 1,235
Equity in earnings of partnerships and similar investments	73	$ 36	222	$ 53
Real estate-related investments
Schedule of Investments [Line Items]
Investments accounted for using the equity method	1,024		1,024		915
Equity in earnings of partnerships and similar investments	52	17	151	55
Private equity
Schedule of Investments [Line Items]
Investments accounted for using the equity method	336		336		266
Equity in earnings of partnerships and similar investments	21	21	66	4
Private debt
Schedule of Investments [Line Items]
Investments accounted for using the equity method	47		47		$ 54
Equity in earnings of partnerships and similar investments	$ 0	$ (2)	$ 5	$ (6)

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Investments - Gross unrealized losses on securities by investment category and length of time that have been in a continuous unrealized loss position (Details) - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020
Total fixed maturities
Available for sale securities in a continuous unrealized loss position
Unrealized loss - less than twelve months	$ (8)	$ (14)
Fair value - less than twelve months	$ 1,839	$ 952
Fair value as percentage of cost - Less than twelve months	100.00%	99.00%
Unrealized Loss - Twelve months or more	$ (6)	$ (7)
Fair Value - Twelve months or more	$ 317	$ 497
Fair value as percentage of cost - Twelve months or more	98.00%	99.00%
U.S. Government and government agencies
Available for sale securities in a continuous unrealized loss position
Unrealized loss - less than twelve months	$ (1)	$ 0
Fair value - less than twelve months	$ 97	$ 23
Fair value as percentage of cost - Less than twelve months	99.00%	100.00%
Unrealized Loss - Twelve months or more	$ 0	$ 0
Fair Value - Twelve months or more	$ 19	$ 0
Fair value as percentage of cost - Twelve months or more	100.00%	0.00%
States, municipalities and political subdivisions
Available for sale securities in a continuous unrealized loss position
Unrealized loss - less than twelve months	$ 0	$ 0
Fair value - less than twelve months	$ 13	$ 39
Fair value as percentage of cost - Less than twelve months	100.00%	100.00%
Unrealized Loss - Twelve months or more	$ 0	$ 0
Fair Value - Twelve months or more	$ 15	$ 10
Fair value as percentage of cost - Twelve months or more	100.00%	100.00%
Foreign government
Available for sale securities in a continuous unrealized loss position
Unrealized loss - less than twelve months	$ (1)	$ 0
Fair value - less than twelve months	$ 48	$ 7
Fair value as percentage of cost - Less than twelve months	98.00%	100.00%
Unrealized Loss - Twelve months or more	$ 0	$ 0
Fair Value - Twelve months or more	$ 0	$ 0
Fair value as percentage of cost - Twelve months or more	0.00%	0.00%
Residential MBS
Available for sale securities in a continuous unrealized loss position
Unrealized loss - less than twelve months	$ 0	$ (1)
Fair value - less than twelve months	$ 54	$ 86
Fair value as percentage of cost - Less than twelve months	100.00%	99.00%
Unrealized Loss - Twelve months or more	$ (1)	$ 0
Fair Value - Twelve months or more	$ 8	$ 7
Fair value as percentage of cost - Twelve months or more	89.00%	100.00%
Commercial MBS
Available for sale securities in a continuous unrealized loss position
Unrealized loss - less than twelve months	$ 0	$ 0
Fair value - less than twelve months	$ 0	$ 7
Fair value as percentage of cost - Less than twelve months	0.00%	100.00%
Unrealized Loss - Twelve months or more	$ 0	$ 0
Fair Value - Twelve months or more	$ 0	$ 5
Fair value as percentage of cost - Twelve months or more	0.00%	100.00%
Collateralized loan obligations
Available for sale securities in a continuous unrealized loss position
Unrealized loss - less than twelve months	$ (1)	$ (1)
Fair value - less than twelve months	$ 687	$ 192
Fair value as percentage of cost - Less than twelve months	100.00%	99.00%
Unrealized Loss - Twelve months or more	$ (1)	$ (3)
Fair Value - Twelve months or more	$ 168	$ 366
Fair value as percentage of cost - Twelve months or more	99.00%	99.00%
Other asset-backed securities
Available for sale securities in a continuous unrealized loss position
Unrealized loss - less than twelve months	$ (2)	$ (10)
Fair value - less than twelve months	$ 662	$ 465
Fair value as percentage of cost - Less than twelve months	100.00%	98.00%
Unrealized Loss - Twelve months or more	$ (3)	$ (3)
Fair Value - Twelve months or more	$ 76	$ 92
Fair value as percentage of cost - Twelve months or more	96.00%	97.00%
Corporate and other
Available for sale securities in a continuous unrealized loss position
Unrealized loss - less than twelve months	$ (3)	$ (2)
Fair value - less than twelve months	$ 278	$ 133
Fair value as percentage of cost - Less than twelve months	99.00%	99.00%
Unrealized Loss - Twelve months or more	$ (1)	$ (1)
Fair Value - Twelve months or more	$ 31	$ 17
Fair value as percentage of cost - Twelve months or more	97.00%	94.00%

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Investments - Allowance for credit losses on fixed maturities (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Jan. 01, 2020
Allowance for Credit Losses [Roll Forward]
Beginning balance	$ 9	$ 14	$ 12	$ 0
Impact of adoption of new accounting policy	9	14	9	14
Initial allowance for purchased securities with credit deterioration	0	0	0	0
Provision for expected credit losses on securities with no previous allowance	0	0	0	16
Additions (reductions) to previously recognized expected credit losses	0	0	(1)	(2)
Reductions due to sales or redemptions	0	0	(2)	0
Ending balance	9	14	9	14
Structured securities
Allowance for Credit Losses [Roll Forward]
Beginning balance	8	11	10	0
Impact of adoption of new accounting policy	8	11	8	11	$ 0
Initial allowance for purchased securities with credit deterioration	0	0	0	0
Provision for expected credit losses on securities with no previous allowance	0	0	0	12
Additions (reductions) to previously recognized expected credit losses	0	0	(2)	(1)
Reductions due to sales or redemptions	0	0	0	0
Ending balance	8	11	8	11
Corporate and other
Allowance for Credit Losses [Roll Forward]
Beginning balance	1	3	2	0
Impact of adoption of new accounting policy	1	3	1	3	0
Initial allowance for purchased securities with credit deterioration	0	0	0	0
Provision for expected credit losses on securities with no previous allowance	0	0	0	4
Additions (reductions) to previously recognized expected credit losses	0	0	1	(1)
Reductions due to sales or redemptions	0	0	(2)	0
Ending balance	$ 1	$ 3	$ 1	$ 3
Accounting Standards Update 2016-13
Allowance for Credit Losses [Roll Forward]
Impact of adoption of new accounting policy					$ 0

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Investments - Scheduled maturities of available for sale fixed maturities (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Fair Value, Fiscal Year Maturity [Abstract]
Fair Value	$ 10,427	$ 9,084
Fair Value Percent, Fiscal Year Maturity [Abstract]
Average life of ABS	3 years
Average life of MBS	3 years
Fixed maturities
Amortized Cost Basis, Fiscal Year Maturity [Abstract]
One year or less	$ 1,182
After one year through five years	2,571
After five years through ten years	901
After ten years	284
Fixed maturities amortized cost, Subtotal	4,938
Collateralized loan obligations and other ABS (average life of approximately 3 years)	4,450
MBS (average life of approximately 3 years)	814
Amortized Cost	10,202
Fair Value, Fiscal Year Maturity [Abstract]
One year or less	1,194
After one year through five years	2,662
After five years through ten years	939
After ten years	292
Fixed maturities fair value, Subtotal	5,087
Collateralized loan obligations and other ABS (average life of approximately 3 years)	4,473
MBS (average life of approximately 3 years)	867
Fair Value	$ 10,427	$ 9,084
Fair Value Percent, Fiscal Year Maturity [Abstract]
One year or less	11.00%
After one year through five years	26.00%
After five years through ten years	9.00%
After ten years	3.00%
Fixed maturities fair value, Subtotal, Percent	49.00%
Collateralized loan obligations and other ABS (average life of approximately 3 years)	43.00%
MBS (average life of approximately 3 years)	8.00%
Fair value, Total, Percent	100.00%

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Investments - Components of the net unrealized gain on securities that is included in AOCI in the Balance Sheet (Details) - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020
Unrealized gain on:
Pretax		$ 1,589
Deferred Tax		(334)
Net		1,255
Annuity subsidiaries | Net earnings (loss) from discontinued operations
Unrealized gain on:
Pretax		1,305
Deferred Tax		(274)
Net		1,031
Total fixed maturities
Unrealized gain on:
Pretax	$ 225	284
Deferred Tax	(47)	(60)
Net	$ 178	224
Fixed maturities — annuity segment | Annuity subsidiaries | Net earnings (loss) from discontinued operations
Unrealized gain on:
Pretax		2,555
Deferred Tax		(536)
Net		2,019
Deferred policy acquisition costs — annuity segment | Annuity subsidiaries | Net earnings (loss) from discontinued operations
Unrealized gain on:
Pretax		(934)
Deferred Tax		196
Net		(738)
Annuity benefits accumulated | Annuity subsidiaries | Net earnings (loss) from discontinued operations
Unrealized gain on:
Pretax		(324)
Deferred Tax		68
Net		(256)
Life, accident and health reserves | Annuity subsidiaries | Net earnings (loss) from discontinued operations
Unrealized gain on:
Pretax		(3)
Deferred Tax		0
Net		(3)
Unearned revenue | Annuity subsidiaries | Net earnings (loss) from discontinued operations
Unrealized gain on:
Pretax		11
Deferred Tax		(2)
Net		$ 9

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Investments - Schedule of sources of net investment income (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Net Investment Income [Line Items]
Investment income	$ 173	$ 124	$ 529	$ 319
Equity in earnings of partnerships and similar investments	73	36	222	53
Investment expenses	(4)	(2)	(8)	(5)
Net investment income	169	122	521	314
Investment income
Net Investment Income [Line Items]
Change in fair value of equity securities	7	(2)	41	(10)
Fixed maturities
Net Investment Income [Line Items]
Investment income	73	73	217	232
Other
Net Investment Income [Line Items]
Investment income	14	8	28	17
Investment income | Equity securities
Net Investment Income [Line Items]
Investment income	$ 6	$ 9	$ 21	$ 27

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Investments - Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments
Realized gains (losses) on securities	$ (17)	$ 23	$ 103	$ (197)
Net of tax
Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments
Realized before impairments	(12)	18	82	(145)
Realized — impairments	0	0	1	(11)
Realized gains (losses) on securities	(12)	18	83	(156)
Change in unrealized	(27)	47	(46)	31
Total pretax
Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments
Realized before impairments	(17)	23	102	(183)
Realized — impairments	0	0	1	(14)
Realized gains (losses) on securities	(17)	23	103	(197)
Change in unrealized	(35)	59	(59)	39
Fixed maturities
Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments
Realized before impairments	(2)	1	(2)	5
Realized — impairments	0	0	1	(14)
Realized gains (losses) on securities	(2)	1	(1)	(9)
Change in unrealized	(35)	59	(59)	39
Equity securities
Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments
Realized before impairments	(15)	22	104	(189)
Realized — impairments	0	0	0	0
Realized gains (losses) on securities	(15)	22	104	(189)
Change in unrealized	0	0	0	0
Mortgage loans and other investments
Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments
Realized before impairments	0	0	0	1
Realized — impairments	0	0	0	0
Realized gains (losses) on securities	0	0	0	1
Change in unrealized	0	0	0	0
Tax effects
Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments
Realized before impairments	5	(5)	(20)	38
Realized — impairments	0	0	0	3
Realized gains (losses) on securities	5	(5)	(20)	41
Change in unrealized	$ 8	$ (12)	$ 13	$ (8)

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Investments - Holding gains (losses) on equity securities still held (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Holding Gains (Losses) on Equity Securities Still Held [Line Items]
Holding gains (losses) on equity securities still held	$ (9)	$ 16	$ 123	$ (176)
Realized gains (losses) on securities
Holding Gains (Losses) on Equity Securities Still Held [Line Items]
Holding gains (losses) on equity securities still held	(16)	17	82	(174)
Investment income
Holding Gains (Losses) on Equity Securities Still Held [Line Items]
Holding gains (losses) on equity securities still held	$ 7	$ (1)	$ 41	$ (2)

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Investments - Gross realized gains and losses on available for sale fixed maturity investment transactions (Details) - Fixed maturities - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Gross realized gains and losses on the sale of available for sale fixed maturity and equity security investments
Gross gains	$ 4	$ 8
Gross losses	$ (2)	$ (4)

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Managed Investment Entities - Narrative (Details) $ in Millions	9 Months Ended
	Sep. 30, 2021 USD ($) collateralizedloanobligation	Sep. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Variable Interest Entity [Line Items]
Percentage of investment of most subordinate debt tranche, Minimum	4.50%
Percentage of investment of most subordinate debt tranche, Maximum	46.80%
Number of collateralized loan obligation entities | collateralizedloanobligation	12
Face amount of managed investment entities liabilities purchased by subsidiaries after issuance date		$ 57
Amount paid by subsidiaries to purchase managed investment entities liabilities after issuance date		39
Proceeds received by subsidiaries related to sales and redemptions of managed investment entities liabilities	$ 41
Difference between aggregate unpaid principal balance and fair value of CLOs' fixed maturity investments	63		$ 150
Difference between aggregate unpaid principal balance and carrying value of CLOs' debt	174		141
Carrying amount of CLO loans in default	5		11
Aggregate unpaid principal balance of variable interest entity loans in default	15		28
Available for sale (AFS) fixed maturities	10,427		9,084
Maximum
Variable Interest Entity [Line Items]
Proceeds received by subsidiaries related to sales and redemptions of managed investment entities liabilities		1
Collateralized loan obligations
Variable Interest Entity [Line Items]
Available for sale (AFS) fixed maturities	1,829		1,062
Collateralized loan obligations | Managed by third parties
Variable Interest Entity [Line Items]
Available for sale (AFS) fixed maturities	1,830		1,060
Variable interest entity, primary beneficiary
Variable Interest Entity [Line Items]
Aggregate fair value of investment in collateralized loan obligations	96	176	200
Variable interest entity, primary beneficiary | Annuity subsidiaries | Net earnings (loss) from discontinued operations
Variable Interest Entity [Line Items]
Aggregate fair value of investment in collateralized loan obligations	0	$ 129	$ 143
Variable interest entity, primary beneficiary | Subordinated Debt Obligations
Variable Interest Entity [Line Items]
Aggregate fair value of investment in collateralized loan obligations	$ 86

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Managed Investment Entities - Selected financial information related to CLOs (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Gains (losses) on change in fair value of assets/liabilities:
Assets	$ 10	$ 132	$ 77	$ (184)
Liabilities	(9)	(137)	(68)	163
Management fees paid to AFG	4	3	12	11
CLO earnings (losses) attributable to AFG shareholders	5	13	37	(21)
Variable interest entity, primary beneficiary
Variable Interest Entity [Line Items]
Investment in CLO tranches	96	176	96	176	$ 200
Variable interest entity, primary beneficiary | Continuing operations
Variable Interest Entity [Line Items]
Investment in CLO tranches	96	47	96	47
Gains (losses) on change in fair value of assets/liabilities:
CLO earnings (losses) attributable to AFG shareholders	5	4	17	(7)
Variable interest entity, primary beneficiary | Net earnings (loss) from discontinued operations | Annuity subsidiaries
Variable Interest Entity [Line Items]
Investment in CLO tranches	0	129	0	129	$ 143
Gains (losses) on change in fair value of assets/liabilities:
CLO earnings (losses) attributable to AFG shareholders	$ 0	$ 9	$ 20	$ (14)

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Goodwill and Other Intangibles - Narrative (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]
Changes in the goodwill balance during the period			$ 0
Goodwill	$ 176,000,000		176,000,000		$ 176,000,000
Amortizable intangible assets related to property and casualty insurance acquisitions	29,000,000		29,000,000		34,000,000
Accumulated amortization	66,000,000		66,000,000		$ 62,000,000
Amortization of intangible assets	$ 1,000,000	$ 3,000,000	$ 5,000,000	$ 9,000,000

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Long-Term Debt - Narrative (Details) - USD ($)	9 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Long-term Debt, Fiscal Year Maturity [Abstract]
Scheduled principal payments on debt remainder of fiscal year	$ 0
Scheduled principal payments on debt in year one	0
Scheduled principal payments on debt in year two	0
Scheduled principal payments on debt in year three	0
Scheduled principal payments on debt in year four	0
Scheduled principal payments on debt in year five	425,000,000
Scheduled principal payments on debt thereafter	1,570,000,000
AFG
Long-term Debt, Fiscal Year Maturity [Abstract]
Revolving credit line	$ 500,000,000
Interest rate description for revolving credit facility	1.00% to 1.875% (currently 1.375%) over LIBOR
Amount borrowed under revolving credit facility	$ 0	$ 0
LIBOR | AFG
Long-term Debt, Fiscal Year Maturity [Abstract]
Interest rate on revolving debt facility	1.375%
LIBOR | AFG | Minimum
Long-term Debt, Fiscal Year Maturity [Abstract]
Interest rate on revolving debt facility	1.00%
LIBOR | AFG | Maximum
Long-term Debt, Fiscal Year Maturity [Abstract]
Interest rate on revolving debt facility	1.875%

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Long-Term Debt - Schedule of long-term debt (Details) - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020
Summary of Carrying value of long-term debt
Principal	$ 1,993	$ 1,993
Discount and Issue Costs	(29)	(30)
Carrying Value	1,964	1,963
Senior Notes | AFG
Summary of Carrying value of long-term debt
Principal	1,318	1,318
Discount and Issue Costs	(10)	(11)
Carrying Value	$ 1,308	1,307
Senior Notes | 4.50% Senior Notes due June 2047 | AFG
Debt Instrument [Line Items]
Interest rate on debt instruments	4.50%
Summary of Carrying value of long-term debt
Principal	$ 590	590
Discount and Issue Costs	(2)	(2)
Carrying Value	$ 588	588
Senior Notes | 3.50% Senior Notes due August 2026 | AFG
Debt Instrument [Line Items]
Interest rate on debt instruments	3.50%
Summary of Carrying value of long-term debt
Principal	$ 425	425
Discount and Issue Costs	(3)	(3)
Carrying Value	$ 422	422
Senior Notes | 5.25% Senior Notes due April 2030 | AFG
Debt Instrument [Line Items]
Interest rate on debt instruments	5.25%
Summary of Carrying value of long-term debt
Principal	$ 300	300
Discount and Issue Costs	(5)	(6)
Carrying Value	295	294
Senior Notes | Other | AFG
Summary of Carrying value of long-term debt
Principal	3	3
Discount and Issue Costs	0	0
Carrying Value	3	3
Subordinated Debentures | AFG
Summary of Carrying value of long-term debt
Principal	675	675
Discount and Issue Costs	(19)	(19)
Carrying Value	$ 656	656
Subordinated Debentures | 4.50% Subordinated Debentures due September 2060 | AFG
Debt Instrument [Line Items]
Interest rate on debt instruments	4.50%
Summary of Carrying value of long-term debt
Principal	$ 200	200
Discount and Issue Costs	(5)	(5)
Carrying Value	$ 195	195
Subordinated Debentures | 5.125% Subordinated Debentures due December 2059 | AFG
Debt Instrument [Line Items]
Interest rate on debt instruments	5.125%
Summary of Carrying value of long-term debt
Principal	$ 200	200
Discount and Issue Costs	(6)	(6)
Carrying Value	$ 194	194
Subordinated Debentures | 5.625% Subordinated Debentures due June 2060 | AFG
Debt Instrument [Line Items]
Interest rate on debt instruments	5.625%
Summary of Carrying value of long-term debt
Principal	$ 150	150
Discount and Issue Costs	(4)	(4)
Carrying Value	$ 146	146
Subordinated Debentures | 5.875% Subordinated Debentures due March 2059 | AFG
Debt Instrument [Line Items]
Interest rate on debt instruments	5.875%
Summary of Carrying value of long-term debt
Principal	$ 125	125
Discount and Issue Costs	(4)	(4)
Carrying Value	$ 121	$ 121

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Shareholders' Equity - Preferred stock authorized for issuance (Details)	Sep. 30, 2021 $ / shares shares
Voting Preferred Stock
Class of Stock [Line Items]
Preferred Stock, shares authorized | shares	12,500,000
Preferred Stock, par value (in USD per share) | $ / shares	$ 0
Nonvoting Preferred Stock
Class of Stock [Line Items]
Preferred Stock, shares authorized | shares	12,500,000
Preferred Stock, par value (in USD per share) | $ / shares	$ 0

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Shareholders' Equity - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense related to stock incentive plans	$ 4	$ 5	$ 11	$ 15
Stock Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted Common Stock, shares issued (shares)			207,020
Restricted Common Stock, fair value per share (USD per share)			$ 111.13

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Shareholders' Equity - Progression of the components of accumulated other comprehensive income (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Accumulated Other Comprehensive Income [Roll Forward]
AOCI beginning balance			$ 1,273
Other comprehensive income (loss), pretax	$ (38)	$ 223	(1,409)	$ 468
Other comprehensive income (loss), tax	8	(47)	296	(100)
Other comprehensive income (loss), net of tax	(30)	176	(1,113)	368
Accumulated other comprehensive income, net of tax	160		160
AOCI ending balance	160		160
Net unrealized gains (losses) on securities:
Unrealized holding gains (losses) on securities arising during the period, pretax	(37)	245	(224)	443
Unrealized holding gains (losses) on securities arising during the period, tax	8	(51)	47	(93)
Unrealized holding gains (losses) on securities arising during the period, after tax	29	(194)	177	(350)
Reclassification adjustment for realized (gains) losses included in net earnings, pretax	2	(15)	(21)	0
Reclassification adjustment for realized (gains) losses included in net earnings, tax	0	3	5	0
Reclassification adjustment for realized (gains) losses included in net earnings, after tax	2	(12)	(16)	0
Reclassification adjustment for unrealized gains (losses) on securities of subsidiaries sold, pretax			(1,119)
Reclassification adjustment for unrealized gains (losses) on securities of subsidiaries sold, tax			235
Reclassification adjustment for unrealized gains (losses) on securities of subsidiaries sold, after tax	0	0	(884)	0
Total net unrealized gains (losses) on securities, pretax	(35)	230	(1,364)	443
Total net unrealized gains (losses) on securities, tax	8	(48)	287	(93)
Total net unrealized gains (losses) on securities	(27)	182	(1,077)	350
Reclassification of Cash Flow Hedge Gain (Loss) [Abstract]
Unrealized holding gains (losses) on cash flow hedges arising during the period, pretax		1	(1)	62
Unrealized holding gains (losses) on cash flow hedges arising during the period, tax		0	0	(13)
Unrealized holding gains (losses) on cash flow hedges arising during the period, after tax	0	1	(1)	49
Reclassification adjustment for investment income included in net earnings from discontinued operations, pretax		(8)	(14)	(31)
Reclassification adjustment for investment income included in net earnings from discontinued operations, tax		1	3	6
Reclassification adjustment for investment income included in net earnings from discontinued operations, after tax	0	(7)	(11)	(25)
Reclassification for unrealized gains on cash flow hedges of subsidiaries sold, pretax			(37)
Reclassification for unrealized gains on cash flow hedges of subsidiaries sold, tax			8
Reclassification for unrealized gains on cash flow hedges of subsidiaries sold, after tax	0	0	(29)	0
Total net unrealized gains (losses) on cash flow hedges, pretax		(7)	(52)	31
Total net unrealized gains (losses) on cash flow hedges, tax		1	11	(7)
Total net unrealized gains (losses) on cash flow hedges	0	(6)	(41)	24
Foreign currency translation adjustments, pretax	(3)	0	(3)	(6)
Foreign currency translation adjustments, tax	0	0	0	0
Foreign currency translation adjustments	(3)	0	(3)	(6)
Other Comprehensive (Income) Loss, Defined Benefit Plan, before Tax, after Reclassification Adjustment, Attributable to Parent [Abstract]
Unrealized holding gains (losses) on pension and OPRP arising during the period, pretax			(1)
Unrealized holding gains (losses) on pension and OPRP arising during the period, tax			0
Unrealized holding gains (losses) on pension and OPRP arising during the period, after tax	0	0	(1)	0
Reclassification adjustment for pension settlement loss included in other expense in net earnings, pretax			11
Reclassification adjustment for pension settlement loss included in other expense in net earnings, tax			(2)
Reclassification adjustment for pension settlement loss included in net earnings	0	0	9	0
Total pension and OPRP adjustments, pretax	0	0	10	0
Total pension and OPRP adjustments, tax	0	0	(2)	0
Total pension and OPRP adjustments	0	0	8	0
Attributable to noncontrolling interests
Accumulated Other Comprehensive Income [Roll Forward]
Other comprehensive income (loss), net of tax	0	0	0	(2)
Net unrealized gains (losses) on securities:
Unrealized holding gains (losses) on securities arising during the period, after tax	0	0	0	0
Reclassification adjustment for realized (gains) losses included in net earnings, after tax	0	0	0	0
Reclassification adjustment for unrealized gains (losses) on securities of subsidiaries sold, after tax			0
Total net unrealized gains (losses) on securities	0	0	0	0
Reclassification of Cash Flow Hedge Gain (Loss) [Abstract]
Unrealized holding gains (losses) on cash flow hedges arising during the period, after tax		0	0	0
Reclassification adjustment for investment income included in net earnings from discontinued operations, after tax		0	0	0
Reclassification for unrealized gains on cash flow hedges of subsidiaries sold, after tax			0
Total net unrealized gains (losses) on cash flow hedges		0	0	0
Foreign currency translation adjustments	0	0	0	(2)
Other Comprehensive (Income) Loss, Defined Benefit Plan, before Tax, after Reclassification Adjustment, Attributable to Parent [Abstract]
Unrealized holding gains (losses) on pension and OPRP arising during the period, after tax			0
Reclassification adjustment for pension settlement loss included in net earnings			0
Total pension and OPRP adjustments	0	0	0	0
Attributable to shareholders
Accumulated Other Comprehensive Income [Roll Forward]
Other comprehensive income (loss), net of tax	(30)	176	(1,113)	366
Net unrealized gains (losses) on securities:
Unrealized holding gains (losses) on securities arising during the period, after tax	29	(194)	177	(350)
Reclassification adjustment for realized (gains) losses included in net earnings, after tax	2	(12)	(16)	0
Reclassification adjustment for unrealized gains (losses) on securities of subsidiaries sold, after tax			(884)
Total net unrealized gains (losses) on securities	(27)	182	(1,077)	350
Reclassification of Cash Flow Hedge Gain (Loss) [Abstract]
Unrealized holding gains (losses) on cash flow hedges arising during the period, after tax		1	(1)	49
Reclassification adjustment for investment income included in net earnings from discontinued operations, after tax		(7)	(11)	(25)
Reclassification for unrealized gains on cash flow hedges of subsidiaries sold, after tax			(29)
Total net unrealized gains (losses) on cash flow hedges		(6)	(41)	24
Foreign currency translation adjustments	(3)	0	(3)	(8)
Other Comprehensive (Income) Loss, Defined Benefit Plan, before Tax, after Reclassification Adjustment, Attributable to Parent [Abstract]
Unrealized holding gains (losses) on pension and OPRP arising during the period, after tax			(1)
Reclassification adjustment for pension settlement loss included in net earnings			9
Total pension and OPRP adjustments	0	0	8	0
Accumulated net investment gain (loss) attributable to parent
Accumulated Other Comprehensive Income [Roll Forward]
AOCI beginning balance	205	1,030	1,255	862
Accumulated other comprehensive income, net of tax	178	1,212	178	1,212
AOCI ending balance	178	1,212	178	1,212
Accumulated gain (loss), net, cash flow hedge, parent
Accumulated Other Comprehensive Income [Roll Forward]
AOCI beginning balance		47	41	17
Accumulated other comprehensive income, net of tax	0	41	0	41
AOCI ending balance	0	41	0	41
Accumulated foreign currency adjustment attributable to parent
Accumulated Other Comprehensive Income [Roll Forward]
AOCI beginning balance	(16)	(17)	(16)	(9)
Accumulated other comprehensive income, net of tax	(19)	(13)	(19)	(13)
AOCI ending balance	(19)	(13)	(19)	(13)
Accumulated foreign currency adjustment attributable to parent | Neon Capital Limited
Accumulated Other Comprehensive Income [Roll Forward]
Accumulated other comprehensive income, net of tax		4		4
AOCI ending balance		4		4
Accumulated defined benefit plans adjustment attributable to parent
Accumulated Other Comprehensive Income [Roll Forward]
AOCI beginning balance	1	(7)	(7)	(7)
Accumulated other comprehensive income, net of tax	1	(7)	1	(7)
AOCI ending balance	1	(7)	1	(7)
AOCI attributable to parent
Accumulated Other Comprehensive Income [Roll Forward]
AOCI beginning balance	190	1,053	1,273	863
Accumulated other comprehensive income, net of tax	160	1,233	160	1,233
AOCI ending balance	$ 160	1,233	$ 160	1,233
AOCI attributable to parent | Neon Capital Limited
Accumulated Other Comprehensive Income [Roll Forward]
Accumulated other comprehensive income, net of tax		4		4
AOCI ending balance		$ 4		$ 4

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Income Taxes - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Operating Loss Carryforwards [Line Items]
Statutory rate of income taxes	21.00%	21.00%	21.00%	21.00%
Provision (credit) for income taxes	$ 48	$ (48)	$ 164	$ (52)
Separate Return Limitation Year Tax Rules
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards subject to SRLY tax rules will expire unutilized at December 31, 2021	$ 27		$ 27
Neon Capital Limited
Operating Loss Carryforwards [Line Items]
Provision (credit) for income taxes		$ 73

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Income Taxes - Reconciliation of income taxes at the statutory rate to the provision for income taxes (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Effective Income Tax Rate Reconciliation, Amount [Abstract]
Earnings (loss) from continuing operations before income taxes (“EBT”)	$ 267	$ 40	$ 890	$ (5)
Income taxes at statutory rate	56	8	187	(1)
Effect of a sale of subsidiaries	0	(73)	0	(73)
Effect of stock-based compensation	(2)	0	(12)	(3)
Effect of ESOP dividend paid deduction	(2)	(1)	(10)	(1)
Effect of tax exempt interest	(2)	(2)	(6)	(7)
Effect of dividends received deduction	0	(1)	(1)	(2)
Effect of foreign operations	2	(4)	0	(3)
Effect of prior year income taxes	(1)	1	(1)	1
Effect of nondeductible expenses	2	1	6	3
Effect of change in valuation allowance	(2)	20	1	31
Effect of other income	(3)	3	0	3
Provision for income taxes as shown on the Statement of Earnings	$ 48	$ (48)	$ 164	$ (52)
Effective Income Tax Rate Reconciliation, Percent [Abstract]
Income taxes at statutory rate as a percentage of EBT	21.00%	21.00%	21.00%	21.00%
Effect of sale of subsidiaries as a percentage of EBT	0.00%	(183.00%)	0.00%	1460.00%
Effect of stock-based compensation as a percentage of EBT	(1.00%)	0.00%	(1.00%)	60.00%
Effect of ESOP dividend paid deduction as a percentage of EBT	(1.00%)	(3.00%)	(1.00%)	20.00%
Effect of tax exempt interest as a percentage of EBT	(1.00%)	(5.00%)	(1.00%)	140.00%
Effect of dividends received deduction as a percentage of EBT	0.00%	(3.00%)	0.00%	40.00%
Effect of foreign operations as a percentage of EBT	1.00%	(10.00%)	0.00%	60.00%
Effect of prior year income taxes as a percentage of EBT	0.00%	3.00%	0.00%	(20.00%)
Effect of nondeductible expenses as a percentage of EBT	1.00%	3.00%	1.00%	(60.00%)
Effect of change in valuation allowance as a percentage of EBT	(1.00%)	50.00%	0.00%	(620.00%)
Effect of other income tax reconciliation as a percentage of EBT	(1.00%)	7.00%	(1.00%)	(61.00%)
Provision for income taxes as shown on the Statement of Earnings as a percentage of EBT	18.00%	(120.00%)	18.00%	1040.00%

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Insurance - Narrative (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Property and Casualty Insurance | Other lines
Insurance [Line Items]
Special A&E charges	$ 0	$ 47

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Insurance - Analysis of changes in the liability for losses and loss adjustment expenses, net of reinsurance (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Analysis of changes in the liability for losses and loss adjustment expenses, net of reinsurance
Balance at beginning of year	$ 10,392	$ 10,232
Less reinsurance recoverables, net of allowance	3,117	3,024
Net liability at beginning of year	7,275	7,208
Liability for losses and loss adjustment expenses, period increase (decrease) [Abstract]
Provision for losses and LAE occurring in the current period	2,543	2,560
Net increase (decrease) in the provision for claims of prior years	(208)	(166)
Total losses and LAE incurred	2,335	2,441
Payments for losses and LAE of:
Current year	(589)	(592)
Prior years	(1,430)	(1,406)
Total payments	(2,019)	(1,998)
Foreign currency translation and other	0	(11)
Net liability at end of period	7,591	7,640
Add back reinsurance recoverables, net of allowance	3,400	3,114
Gross unpaid losses and LAE included in the balance sheet at end of period	10,991	10,754
Property and Casualty Insurance | Other lines
Liability for losses and loss adjustment expenses, period increase (decrease) [Abstract]
Special A&E charges	$ 0	$ 47

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Insurance - Recoverables from reinsurance, progression of allowance for expected credit losses (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Jan. 01, 2020
Reinsurance Recoverable, Allowance for Credit Loss [Roll Forward]
Beginning Balance	$ 8	$ 7	$ 6	$ 18
Impact of adoption of new accounting principles	(8)	(7)	(8)	(7)	$ (11)
Provision (credit) for expected credit losses	0	0	2	0
Write-offs charged against the allowance	0	0	0	0
Ending Balance	$ 8	$ 7	$ 8	$ 7

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Insurance - Premiums receivable, progression of allowance for expected credit losses (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Jan. 01, 2020
Premium Receivable, Allowance for Credit Loss [Roll Forward]
Beginning Balance	$ 9	$ 10	$ 10	$ 13
Impact of adoption of new accounting principles	(10)	(11)	(10)	(11)	$ (3)
Provision (credit) for expected credit losses	1	1	0	1
Write-offs charged against the allowance	0	0	0	0
Ending Balance	$ 10	$ 11	$ 10	$ 11