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Fair Value Measurements
 6 Months Ended
Jun. 30, 2024
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, AFG 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 measured and carried at fair value in the financial statements are summarized below (in millions):
Level 1Level 2Level 3Total
June 30, 2024
Assets:
Available for sale (“AFS”) fixed maturities:
U.S. government and government agencies$176 $— $— $176 
States, municipalities and political subdivisions— 866 2 868 
Foreign government— 231 — 231 
Residential MBS— 1,661 2 1,663 
Commercial MBS— 70 — 70 
Collateralized loan obligations— 1,458 1 1,459 
Other asset-backed securities— 2,023 340 2,363 
Corporate and other11 2,944 411 3,366 
Total AFS fixed maturities187 9,253 756 10,196 
Trading fixed maturities— 53 12 65 
Equity securities435 40 602 1,077 
Assets of managed investment entities (“MIE”)558 4,125 12 4,695 
Other assets — derivatives— 1 — 1 
Total assets accounted for at fair value$1,180 $13,472 $1,382 $16,034 
Liabilities:
Contingent consideration — acquisitions$— $— $2 $2 
Liabilities of managed investment entities539 3,985 12 4,536 
Other liabilities — derivatives— 26 — 26 
Total liabilities accounted for at fair value$539 $4,011 $14 $4,564 
December 31, 2023
Assets:
Available for sale fixed maturities:
U.S. government and government agencies$235 $1 $— $236 
States, municipalities and political subdivisions— 982 2 984 
Foreign government— 230 — 230 
Residential MBS— 1,656 2 1,658 
Commercial MBS— 74 — 74 
Collateralized loan obligations— 1,686 1 1,687 
Other asset-backed securities— 2,011 351 2,362 
Corporate and other9 2,757 380 3,146 
Total AFS fixed maturities244 9,397 736 10,377 
Trading fixed maturities— 57 — 57 
Equity securities500 33 485 1,018 
Assets of managed investment entities335 4,140 9 4,484 
Other assets — derivatives— 6 — 6 
Total assets accounted for at fair value$1,079 $13,633 $1,230 $15,942 
Liabilities:
Contingent consideration — acquisitions$— $— $2 $2 
Liabilities of managed investment entities322 3,976 9 4,307 
Other liabilities — derivatives— 22 — 22 
Total liabilities accounted for at fair value$322 $3,998 $11 $4,331 

Approximately 9% of the total assets carried at fair value at June 30, 2024, were Level 3 assets. Approximately 8% ($119 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 1% ($8 million) 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 32%
($440 million) of the Level 3 assets were equity investments in limited partnerships and similar investments that do not qualify for equity method accounting whose prices were determined based on financial information provided by the limited partnerships.

Internally developed prices for fixed maturities are estimated 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 Level 3 asset fair values represent approximately 59% ($815 million) of the total fair value of Level 3 assets at June 30, 2024. Approximately 71% ($577 million) of these internally developed Level 3 assets are priced using a pricing model that uses a discounted cash flow approach to estimate the fair value of fixed maturity securities. The credit spread applied by management is the significant unobservable input of the pricing model. In instances where the security is currently callable at par value and the pricing model suggests a higher price, management caps the fair value at par value. Approximately 20% ($159 million) of the internally developed Level 3 assets are equity securities which are priced primarily using internal models with some inputs that are not market observable. Management believes that any justifiable changes in unobservable inputs used to determine internally developed fair values would not have resulted in a material change in AFG’s financial position.
Changes in balances of Level 3 financial assets and liabilities carried at fair value during the second quarter and first six months of 2024 and 2023 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 March 31, 2024Net
earnings (loss)		Other comprehensive income (loss)Purchases
and
issuances		Sales and
settlements		Transfer
into
Level 3		Transfer
out of
Level 3		Balance at June 30, 2024
AFS fixed maturities:
U.S. government agency
$— $— $— $— $— $— $— $— 
State and municipal2 — — — — — — 2 
Residential MBS2 — — — — — — 2 
Commercial MBS— — — — — — — — 
Collateralized loan obligations1 — — — — — — 1 
Other asset-backed securities
335 (1)4 9 (7)— — 340 
Corporate and other402 — 1 15 (6)— (1)411 
Total AFS fixed maturities742 (1)5 24 (13)— (1)756 
Trading fixed maturities
— — — 12 — — — 12 
Equity securities545 15 — 48 (6)— — 602 
Assets of MIE10 (1)— 3 — — — 12 
Total Level 3 assets$1,297 $13 $5 $87 $(19)$— $(1)$1,382 
Contingent consideration — acquisitions$(2)$— $— $— $— $— $— $(2)
Total Level 3 liabilities$(2)$— $— $— $— $— $— $(2)
Total realized/unrealized
gains (losses) included in
Balance at March 31, 2023Net
earnings (loss)		Other comprehensive income (loss)Purchases
and
issuances		Sales and
settlements		Transfer
into
Level 3		Transfer
out of
Level 3		Balance at June 30, 2023
AFS fixed maturities:
U.S. government agency
$— $— $— $— $— $— $— $— 
State and municipal5 — — — — — — 5 
Residential MBS5 — — — — — — 5 
Commercial MBS— — — — — — — — 
Collateralized loan obligations1 — — — — — — 1 
Other asset-backed securities
335 (2)— 3 (26)31 (20)321 
Corporate and other359 (4)8 12 (2)2 (6)369 
Total AFS fixed maturities705 (6)8 15 (28)33 (26)701 
Equity securities411 10 — 30 (3)— — 448 
Assets of MIE12 (1)— — — — — 11 
Total Level 3 assets$1,128 $3 $8 $45 $(31)$33 $(26)$1,160 
Contingent consideration — acquisitions$(25)$— $— $— $— $— $— $(25)
Total Level 3 liabilities$(25)$— $— $— $— $— $— $(25)
Total realized/unrealized
gains (losses) included in
Balance at December 31, 2023Net
earnings (loss)		Other comprehensive income (loss)Purchases
and
issuances		Sales and
settlements		Transfer
into
Level 3		Transfer
out of
Level 3		Balance at June 30, 2024
AFS fixed maturities:
U.S. government agency
$— $— $— $— $— $— $— $— 
State and municipal2 — — — — — — 2 
Residential MBS2 — — — — — — 2 
Commercial MBS— — — — — — — — 
Collateralized loan obligations1 — — — — — — 1 
Other asset-backed securities
351 (1)4 24 (12)— (26)340 
Corporate and other380 (1)1 48 (12)— (5)411 
Total AFS fixed maturities736 (2)5 72 (24)— (31)756 
Trading fixed maturities
— — — 12 — — — 12 
Equity securities485 35 — 90 (8)— — 602 
Assets of MIE9 (2)— 5 — — — 12 
Total Level 3 assets$1,230 $31 $5 $179 $(32)$— $(31)$1,382 
Contingent consideration — acquisitions$(2)$— $— $— $— $— $— $(2)
Total Level 3 liabilities$(2)$— $— $— $— $— $— $(2)
Total realized/unrealized
gains (losses) included in
Balance at December 31, 2022Net
earnings (loss)		Other comprehensive income (loss)Purchases
and
issuances		Sales and
settlements		Transfer
into
Level 3		Transfer
out of
Level 3		Balance at June 30, 2023
AFS fixed maturities:
U.S. government agency
$— $— $— $— $— $— $— $— 
State and municipal5 — — — — — — 5 
Residential MBS9 — — — (3)4 (5)5 
Commercial MBS— — — — — — — — 
Collateralized loan obligations2 — — — — — (1)1 
Other asset-backed securities
329 (2)4 10 (31)31 (20)321 
Corporate and other319 1 10 56 (13)2 (6)369 
Total AFS fixed maturities
664 (1)14 66 (47)37 (32)701 
Equity securities427 7 — 61 (25)— (22)448 
Assets of MIE11 (2)— 2 — — — 11 
Total Level 3 assets$1,102 $4 $14 $129 $(72)$37 $(54)$1,160 
Contingent consideration — acquisitions$(25)$— $— $— $— $— $— $(25)
Total Level 3 liabilities$(25)$— $— $— $— $— $— $(25)
Fair Value of Financial Instruments   The carrying value and fair value of financial instruments that are not carried at fair value in the financial statements are summarized below (in millions):
Carrying Value
Fair Value
TotalLevel 1Level 2Level 3
June 30, 2024
Financial assets:
Cash and cash equivalents$1,121 $1,121 $1,121 $— $— 
Mortgage loans773 726 — — 726 
Total financial assets not accounted for at fair value
$1,894 $1,847 $1,121 $— $726 
Long-term debt$1,475 $1,324 $— $1,321 $3 
Total financial liabilities not accounted for at fair value
$1,475 $1,324 $— $1,321 $3 
December 31, 2023
Financial assets:
Cash and cash equivalents$1,225 $1,225 $1,225 $— $— 
Mortgage loans643 596 — — 596 
Total financial assets not accounted for at fair value
$1,868 $1,821 $1,225 $— $596 
Long-term debt$1,475 $1,345 $— $1,342 $3 
Total financial liabilities not accounted for at fair value
$1,475 $1,345 $— $1,342 $3