EX-99.2 3 brhc10025373_ex99-2.htm EXHIBIT 99.2
Exhibit 99.2

AMERICAN FINANCIAL GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On January 27, 2021, AFG entered into a definitive agreement to sell its Annuity business to Massachusetts Mutual Life Insurance Company (“MassMutual”) for $3.5 billion in cash, subject to pre and post closing adjustments. In the transaction, which closed on May 28, 2021, MassMutual acquired Great American Life Insurance Company (“GALIC”) and its two insurance subsidiaries, Annuity Investors Life Insurance Company (“AILIC”) and Manhattan National Life Insurance Company, as well as a broker-dealer affiliate Great American Advisors, Inc., and insurance distributor AAG Insurance Agency, Inc.
 
In connection with the pending sale, the unaudited Financial Statements included in AFG’s Quarterly Report on Form 10-Q for the period ended March 31, 2021 reflected AFG’s investment in the annuity businesses as discontinued operations.  The following pro forma balance sheet was prepared assuming the transaction was completed as of March 31, 2021.  The accompanying pro forma income statements were prepared assuming the transaction was completed on the first day of each period presented.  Since the March 31 historical income statement was prepared with the annuity business shown as discontinued and all appropriate adjustments were contained therein, there are no pro forma adjustments necessary for the three months ended March 31 and therefore no pro forma statement has been included for that interim period.
 
The pro forma adjustments for all periods are based on information presently available and amounts are subject to change based on post-closing adjustments.  The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the results of operations or financial condition that would have been achieved had the events reflected been completed as of the dates indicated or of the results that may be obtained in the future. These unaudited pro forma condensed consolidated financial statements and the notes thereto should be read in conjunction with AFG’s unaudited Financial Statements included in the Quarterly Report on Form 10-Q for the three months filed with the Securities and Exchange Commission (“SEC”) on May 7, 2021 as well as AFG’s audited Financial Statements included in its Annual Report on Form 10-K filed with the SEC on February 25, 2021.
 
AMERICAN FINANCIAL GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
($ In Millions)


  
3/31/21
  
   
As reported
    
Pro forma
adjustments
      
Pro forma
  
Assets:
                    
Cash and cash equivalents
  
$
1,691
    
$
3,142
   (a) (e)
 
$
4,833
  
Investments
    
12,209
      
-
        
12,209
  
Recoverables from reinsurers
    
3,231
      
-
        
3,231
  
Prepaid reinsurance premiums
    
755
      
-
        
755
  
Agents' balances and premiums receivable
    
1,209
      
-
        
1,209
  
Deferred policy acquisition costs
    
244
      
-
        
244
  
Assets of managed investment entities
    
5,102
      
-
        
5,102
  
Other receivables
    
576
      
-
        
576
  
Assets of discontinued annuity operations
    
48,139
      
(48,139
)
 (b)
   
-
  
Other assets
    
1,041
      
-
        
1,041
  
Total assets
  
$
74,197
    
$
(44,997
)
    
$
29,200
  
                           
Liabilities and Equity:
                          
Unpaid losses and loss adjustment expenses
  
$
10,384
    
$
-
      
$
10,384
  
Unearned premiums
    
2,821
      
-
        
2,821
  
Payable to reinsurers
    
753
      
-
        
753
  
Liabilities of managed investment entities
    
5,045
      
-
        
5,045
  
Long-term debt
    
1,963
      
-
        
1,963
  
Other liabilities
    
1,653
      
-
        
1,653
  
Liabilities of discontinued annuity operations
    
44,893
      
(44,893
)
 (b)
    
-
  
Total liabilities
  
$
67,512
    
$
(44,893
)
    
$
22,619
  
                           
Shareholders' equity:
                          
Common stock
  
$
85
    
$
-
      
$
85
  
Capital surplus
    
1,279
      
-
        
1,279
  
Retained earnings
    
4,354
      
697
   (c) (e)
    
5,051
  
Accumulated other comprehensive income, net of tax
    
967
      
(801
)
 (d)
    
166
  
Total shareholders' equity
    
6,685
      
(104
)
      
6,581
  
                           
Total liabilities and equity
  
$
74,197
    
$
(44,997
)
    
$
29,200
  

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

AMERICAN FINANCIAL GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
(In Millions)

   
Year ended
    
Year ended
    
Year ended
  
   
December 31, 2020
    
December 31, 2019
    
December 31, 2018
  
   
As reported
    
Pro forma adjustments (f)
    
Pro forma
    
As reported
    
Pro forma adjustments (f)
    
Pro forma
    
As reported
    
Pro forma adjustments (f)
    
Pro forma
  
Revenues:
                                                      
Property and casualty insurance net earned premiums
  
$
5,099
    
$
-
    
$
5,099
    
$
5,185
    
$
-
    
$
5,185
    
$
4,865
    
$
-
    
$
4,865
  
Net investment income
    
2,132
      
1,671
      
461
      
2,303
      
1,771
      
532
      
2,094
      
1,616
      
478
  
Realized gains (losses) on securities and subsidiaries
    
312
      
364
      
(52
)
    
287
      
132
      
155
      
(266
)
    
(105
)
    
(161
)
Other Income
    
366
      
105
      
261
      
462
      
121
      
341
      
457
      
128
      
329
  
Total revenues
    
7,909
      
2,140
      
5,769
      
8,237
      
2,024
      
6,213
      
7,150
      
1,639
      
5,511
  
                                                                         
Costs and Expenses:
                                                                        
Property and casualty insurance expenses
    
4,896
      
-
      
4,896
      
4,996
      
-
      
4,996
      
4,586
      
-
      
4,586
  
Annuity benefits
    
1,192
      
1,192
      
-
      
1,151
      
1,151
      
-
      
998
      
998
      
-
  
Annuity and supplemental insurance acquisition exp
    
306
      
306
      
-
      
253
      
253
      
-
      
261
      
261
      
-
  
Other expenses
    
667
      
133
      
534
      
729
      
146
      
583
      
666
      
150
      
516
  
Total costs and expenses
    
7,061
      
1,631
      
5,430
      
7,129
      
1,550
      
5,579
      
6,511
      
1,409
      
5,102
  
Earnings before income taxes
    
848
      
509
      
339
      
1,108
      
474
      
634
      
639
      
230
      
409
  
Provision for income taxes
    
127
      
102
      
25
      
239
      
96
      
143
      
122
      
42
      
80
  
Net Earnings (Loss) from continuing operations
  
$
721
    
$
407
    
$
314
    
$
869
    
$
378
    
$
491
    
$
517
    
$
188
    
$
329
  
Less: Net earnings (loss) attributable to NCI
    
(11
)
    
-
      
(11
)
    
(28
)
    
-
      
(28
)
    
(13
)
    
-
      
(13
)
Net Earnings (Loss) from continuing operations Attributable to Shareholders
  
$
732
    
$
407
    
$
325
    
$
897
    
$
378
    
$
519
    
$
530
    
$
188
    
$
342
  
                                                                         
Earnings Attributable to Shareholders per Common Share:
                                                                        
Basic
  
$
8.25
            
$
3.66
    
$
9.98
            
$
5.77
    
$
5.95
            
$
3.84
  
Diluted
  
$
8.20
            
$
3.64
    
$
9.85
            
$
5.70
    
$
5.85
            
$
3.77
  
Average number of Common Shares:
                                                                        
Basic
    
88.7
              
88.7
      
89.9
              
89.9
      
89.0
              
89.0
  
Diluted
    
89.2
              
89.2
      
91.0
              
91.0
      
90.6
              
90.6
  

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.

(a)
Reflects what the purchase price would have been (net of transaction expenses) based on March 31, 2021 equity of $3.01 billion calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). Although the gain will not change materially, the actual proceeds will be based on GAAP equity of the subsidiaries sold at the closing date and will be subject to a post closing adjustment. In addition, the adjustment reflects the settlement of a payable to the disposed subsidiaries related to retained real estate-related assets.
(b)
Removes the assets and liabilities of the subsidiaries sold.
(c)
Records the gain on the sale of the subsidiaries sold.
(d)
Removes the accumulated other comprehensive income related to the subsidiaries sold.
(e)
The pro forma adjustments exclude the effect of the $0.50 per share dividend paid on April 26, 2021 and the $14.00 per share dividend that AFG declared on May 28, 2021, and is payable on June 15, 2021.
(f)
Amounts represent the removal of revenues and expenses related to the subsidiaries sold.