Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 01, 2017 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | AMERICAN FINANCIAL GROUP INC | |
Entity Central Index Key | 1,042,046 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 87,636,894 |
Consolidated Balance Sheet (Una
Consolidated Balance Sheet (Unaudited) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Assets: | ||
Cash and cash equivalents | $ 1,890 | $ 2,107 |
Investments: | ||
Fixed maturities, available for sale at fair value (amortized cost — $35,445 and $33,735) | 36,456 | 34,544 |
Fixed maturities, trading at fair value | 359 | 359 |
Equity securities, available for sale at fair value (cost — $1,356 and $1,351) | 1,579 | 1,502 |
Equity securities, trading at fair value | 58 | 56 |
Mortgage loans | 1,159 | 1,147 |
Policy loans | 190 | 192 |
Equity index call options | 573 | 492 |
Real estate and other investments | 1,086 | 1,034 |
Total cash and investments | 43,350 | 41,433 |
Recoverables from reinsurers | 2,735 | 2,737 |
Prepaid reinsurance premiums | 533 | 539 |
Agents’ balances and premiums receivable | 989 | 997 |
Deferred policy acquisition costs | 1,205 | 1,239 |
Assets of managed investment entities | 5,331 | 4,765 |
Other receivables | 875 | 908 |
Variable annuity assets (separate accounts) | 614 | 600 |
Other assets | 1,633 | 1,655 |
Goodwill | 199 | 199 |
Total assets | 57,464 | 55,072 |
Liabilities and Equity: | ||
Unpaid losses and loss adjustment expenses | 8,621 | 8,563 |
Unearned premiums | 2,174 | 2,171 |
Annuity benefits accumulated | 31,002 | 29,907 |
Life, accident and health reserves | 687 | 691 |
Payable to reinsurers | 621 | 634 |
Liabilities of managed investment entities | 5,101 | 4,549 |
Long-term debt | 1,283 | 1,283 |
Variable annuity liabilities (separate accounts) | 614 | 600 |
Other liabilities | 2,166 | 1,755 |
Total liabilities | 52,269 | 50,153 |
Shareholders’ equity: | ||
Common Stock, no par value — 200,000,000 shares authorized — 87,591,671 and 86,924,399 shares outstanding | 88 | 87 |
Capital surplus | 1,138 | 1,111 |
Retained earnings | 3,466 | 3,343 |
Accumulated other comprehensive income, net of tax | 499 | 375 |
Total shareholders’ equity | 5,191 | 4,916 |
Noncontrolling interests | 4 | 3 |
Total equity | 5,195 | 4,919 |
Total liabilities and equity | $ 57,464 | $ 55,072 |
Consolidated Balance Sheet (Un3
Consolidated Balance Sheet (Unaudited) (Parenthetical) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Fixed maturities, available for sale at amortized cost | $ 35,445 | $ 33,735 |
Equity securities, available for sale at cost | $ 1,356 | $ 1,351 |
Common Stock, par value (USD per share) | $ 0 | $ 0 |
Common Stock, shares authorized | 200,000,000 | 200,000,000 |
Common Stock, shares outstanding | 87,591,671 | 86,924,399 |
Consolidated Statement of Earni
Consolidated Statement of Earnings (Unaudited) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Revenues: | ||
Property and casualty insurance net earned premiums | $ 1,022 | $ 998 |
Life, accident and health net earned premiums | 6 | 6 |
Net investment income | 435 | 411 |
Realized gains (losses) on securities | 3 | (18) |
Income (loss) of managed investment entities: | ||
Investment income | 51 | 45 |
Gain (loss) on change in fair value of assets/liabilities | 0 | (13) |
Other income | 59 | 46 |
Total revenues | 1,576 | 1,475 |
Costs and Expenses: | ||
Property and casualty insurance: Losses and loss adjustment expenses | 609 | 581 |
Property and casualty insurance: Commissions and other underwriting expenses | 339 | 334 |
Annuity benefits | 196 | 228 |
Life, accident and health benefits | 9 | 9 |
Annuity and supplemental insurance acquisition expenses | 53 | 35 |
Interest charges on borrowed money | 21 | 18 |
Expenses of managed investment entities | 41 | 35 |
Other expenses | 85 | 79 |
Total costs and expenses | 1,353 | 1,319 |
Earnings before income taxes | 223 | 156 |
Provision for income taxes | 68 | 52 |
Net earnings, including noncontrolling interests | 155 | 104 |
Less: Net earnings attributable to noncontrolling interests | 2 | 3 |
Net Earnings Attributable to Shareholders | $ 153 | $ 101 |
Earnings Attributable to Shareholders per Common Share: | ||
Basic (USD per share) | $ 1.76 | $ 1.16 |
Diluted (USD per share) | $ 1.72 | $ 1.14 |
Average number of Common Shares: | ||
Basic (shares) | 87.2 | 86.9 |
Diluted (shares) | 89.3 | 88.5 |
Cash dividends per Common Share (USD per share) | $ 0.3125 | $ 0.28 |
Supplemental disclosure of Realized gains on securities: | ||
Realized gains before impairments | $ 9 | $ 34 |
Losses on securities with impairment | (6) | (51) |
Non-credit portion recognized in other comprehensive income (loss) | 0 | (1) |
Impairment charges recognized in earnings | (6) | (52) |
Total realized gains (losses) on securities | $ 3 | $ (18) |
Consolidated Statement of Compr
Consolidated Statement of Comprehensive Income (Unaudited) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Statement of Comprehensive Income [Abstract] | ||
Net earnings, including noncontrolling interests | $ 155 | $ 104 |
Net unrealized gains on securities: | ||
Unrealized holding gains on securities arising during the period | 125 | 125 |
Reclassification adjustment for realized (gains) losses included in net earnings | 0 | 11 |
Total net unrealized gains on securities | 125 | 136 |
Net unrealized gains (losses) on cash flow hedges | (1) | 3 |
Foreign currency translation adjustments | 0 | 6 |
Pension and other postretirement plans adjustments | 0 | 1 |
Other comprehensive income, net of tax | 124 | 146 |
Total comprehensive income, net of tax | 279 | 250 |
Less: Comprehensive income attributable to noncontrolling interests | 2 | 5 |
Comprehensive income attributable to shareholders | $ 277 | $ 245 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Equity (Unaudited) - USD ($) $ in Millions | Total | Total | Common Shares | Common Stock and Capital Surplus | Retained Earnings | Accumulated Other Comprehensive Income | Noncontrolling interests |
Beginning Balance, shares at Dec. 31, 2015 | 87,474,452 | ||||||
Beginning Balance at Dec. 31, 2015 | $ 4,770 | $ 4,592 | $ 1,301 | $ 2,987 | $ 304 | $ 178 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net earnings | 104 | 101 | 101 | 3 | |||
Other comprehensive income (loss) | 146 | 144 | 144 | 2 | |||
Dividends on Common Stock | (24) | (24) | (24) | ||||
Shares issued: | |||||||
Exercise of stock options, shares | 279,165 | ||||||
Exercise of stock options | 10 | 10 | 10 | ||||
Restricted stock awards, shares | 317,230 | ||||||
Restricted stock awards | 0 | 0 | 0 | ||||
Other benefit plans, shares | 47,566 | ||||||
Other benefit plans | 3 | 3 | 3 | ||||
Dividend reinvestment plan, shares | 3,736 | ||||||
Stock-based compensation expense | 7 | 7 | 7 | ||||
Shares acquired and retired, shares | (1,128,128) | ||||||
Shares acquired and retired | (76) | (76) | (16) | (60) | |||
Shares exchanged — benefit plans, shares | (27,551) | ||||||
Shares exchanged — benefit plans | (2) | (2) | 0 | (2) | |||
Forfeitures of restricted stock, shares | (180) | ||||||
Forfeitures of restricted stock | 0 | 0 | 0 | ||||
Other | (1) | (1) | |||||
Ending Balance, shares at Mar. 31, 2016 | 86,966,290 | ||||||
Ending Balance at Mar. 31, 2016 | $ 4,937 | 4,755 | 1,305 | 3,002 | 448 | 182 | |
Beginning Balance, shares at Dec. 31, 2016 | 86,924,399 | 86,924,399 | |||||
Beginning Balance at Dec. 31, 2016 | $ 4,919 | 4,916 | 1,198 | 3,343 | 375 | 3 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net earnings | 155 | 153 | 153 | 2 | |||
Other comprehensive income (loss) | 124 | 124 | 124 | 0 | |||
Dividends on Common Stock | (27) | (27) | (27) | ||||
Shares issued: | |||||||
Exercise of stock options, shares | 411,167 | ||||||
Exercise of stock options | 15 | 15 | 15 | ||||
Restricted stock awards, shares | 232,250 | ||||||
Restricted stock awards | 0 | 0 | 0 | ||||
Other benefit plans, shares | 54,453 | ||||||
Other benefit plans | 5 | 5 | 5 | ||||
Dividend reinvestment plan, shares | 3,277 | ||||||
Dividend reinvestment plan | 0 | 0 | 0 | ||||
Stock-based compensation expense | 8 | 8 | 8 | ||||
Shares exchanged — benefit plans, shares | (32,176) | ||||||
Shares exchanged — benefit plans | (3) | (3) | 0 | (3) | |||
Forfeitures of restricted stock, shares | (1,699) | ||||||
Forfeitures of restricted stock | 0 | 0 | 0 | ||||
Other | $ (1) | (1) | |||||
Ending Balance, shares at Mar. 31, 2017 | 87,591,671 | 87,591,671 | |||||
Ending Balance at Mar. 31, 2017 | $ 5,195 | $ 5,191 | $ 1,226 | $ 3,466 | $ 499 | $ 4 |
Consolidated Statement of Cash
Consolidated Statement of Cash Flows (Unaudited) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Operating Activities: | ||
Net earnings, including noncontrolling interests | $ 155 | $ 104 |
Adjustments: | ||
Depreciation and amortization | 38 | 28 |
Annuity benefits | 196 | 228 |
Realized (gains) losses on investing activities | (17) | 15 |
Net sales of trading securities | 3 | 71 |
Deferred annuity and life policy acquisition costs | (67) | (68) |
Change in: | ||
Reinsurance and other receivables | 63 | 197 |
Other assets | (58) | 2 |
Insurance claims and reserves | 57 | (26) |
Payable to reinsurers | (13) | (90) |
Other liabilities | 45 | 15 |
Managed investment entities’ assets/liabilities | (487) | (55) |
Other operating activities, net | 9 | (13) |
Net cash provided by (used in) operating activities | (76) | 408 |
Investing Activities: | ||
Purchases of fixed maturities | (2,879) | (2,125) |
Purchases of equity securities | (22) | (74) |
Purchases of mortgage loans | (23) | (131) |
Purchases of equity index call options and other investments | (181) | (139) |
Purchases of real estate, property and equipment | (11) | (18) |
Proceeds from maturities and redemptions of fixed maturities | 1,511 | 840 |
Proceeds from repayments of mortgage loans | 12 | 101 |
Proceeds from sales of fixed maturities | 38 | 225 |
Proceeds from sales of equity securities | 14 | 55 |
Proceeds from sales and settlements of equity index call options and other investments | 174 | 4 |
Proceeds from sales of real estate, property and equipment | 24 | 5 |
Managed investment entities: | ||
Purchases of investments | (910) | (239) |
Proceeds from sales and redemptions of investments | 1,058 | 290 |
Other investing activities, net | 1 | (63) |
Net cash used in investing activities | (1,194) | (1,269) |
Financing Activities: | ||
Annuity receipts | 1,290 | 1,435 |
Annuity surrenders, benefits and withdrawals | (567) | (503) |
Net transfers from variable annuity assets | 17 | 9 |
Issuances of managed investment entities’ liabilities | 537 | 31 |
Retirements of managed investment entities’ liabilities | (212) | (11) |
Issuances of Common Stock | 15 | 13 |
Repurchases of Common Stock | 0 | (76) |
Cash dividends paid on Common Stock | (27) | (24) |
Other financing activities, net | 0 | (2) |
Net cash provided by financing activities | 1,053 | 872 |
Net Change in Cash and Cash Equivalents | (217) | 11 |
Cash and cash equivalents at beginning of period | 2,107 | 1,220 |
Cash and cash equivalents at end of period | $ 1,890 | $ 1,231 |
Accounting Policies
Accounting Policies | 3 Months Ended |
Mar. 31, 2017 | |
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. 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 March 31, 2017 , and prior to the filing of this Form 10-Q, have been evaluated for potential recognition or disclosure herein. 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. 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 significant nonrecurring fair value measurements in the first three months of 2017 . Investments Fixed maturity and equity 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 and equity 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 and policy loans are carried primarily at the aggregate unpaid balance. In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-01, which, among other things, will require all equity securities currently classified as “available for sale” to be reported at fair value, with holding gains and losses recognized in net income, instead of AOCI. AFG will be required to adopt this guidance effective January 1, 2018. Premiums and discounts on fixed maturity securities are amortized using the 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. Gains or losses on securities are determined on the specific identification basis. When a decline in the value of a specific investment is considered to be other-than-temporary at the balance sheet date, a provision for impairment is charged to earnings (included in realized gains (losses) on securities) and the cost basis of that investment is reduced. If management can assert that it does not intend to sell an impaired fixed maturity security and it is not more likely than not that it will have to sell the security before recovery of its amortized cost basis, then the other-than-temporary impairment is separated into two components: (i) the amount 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 of an other-than-temporary impairment 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 impairment charge. Both components are shown in the statement of earnings. 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 charge to earnings is recorded to reduce the amortized cost of that security to fair value. Derivatives Derivatives included in AFG’s Balance Sheet are recorded at fair value. Changes in fair value of derivatives are included in earnings, unless the derivatives are designated and qualify as highly effective cash flow hedges. Derivatives that do not qualify for hedge accounting under GAAP consist primarily of (i) components of certain fixed maturity securities (primarily interest-only MBS) and (ii) the equity-based component of certain annuity products (included in annuity benefits accumulated) and related equity index call options designed to be consistent with the characteristics of the liabilities and used to mitigate the risk embedded in those annuity products. To qualify for hedge accounting, at the inception of a derivative contract, AFG formally documents the relationship between the terms of the hedge and the hedged items and its risk management objective. This documentation includes defining how hedge effectiveness and ineffectiveness will be measured on a retrospective and prospective basis. Changes in the fair value of derivatives that are designated and qualify as highly effective cash flow hedges are recorded in AOCI and are reclassified into earnings when the variability of the cash flows from the hedged items impacts earnings. Any hedge ineffectiveness is immediately recorded in current period earnings. When the change in the fair value of a qualifying cash flow hedge is included in earnings, it is included in the same line item in the statement of earnings as the cash flows from the hedged item. AFG uses interest rate swaps that are designated and qualify as highly effective cash flow hedges to mitigate interest rate risk related to certain floating-rate securities included in AFG’s portfolio of fixed maturity securities. For derivatives that are designated and qualify as highly effective fair value hedges, changes in the fair value of the derivative, along with changes in the fair value of the hedged item attributable to the hedged risk, are recognized in current period earnings. AFG has entered into an interest rate swap that qualifies as a highly effective fair value hedge to mitigate the interest rate risk associated with fixed-rate long-term debt by economically converting certain fixed-rate debt obligations to floating-rate obligations. Since the terms of the swap match the terms of the hedged debt, changes in the fair value of the swap are offset by changes in the fair value of the hedged debt attributable to changes in interest rates. Accordingly, the net impact on AFG’s current period earnings is that the interest expense associated with the hedged debt is effectively recorded at the floating rate. Goodwill Goodwill represents the excess of cost of subsidiaries over AFG’s equity in their underlying net assets. 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’s property and casualty insurance subsidiaries report 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’s property and casualty insurance subsidiaries under contracts to fund ceded losses as they become due. AFG’s insurance subsidiaries also assume reinsurance from other companies. Earnings on reinsurance assumed is recognized based on information received from ceding companies. An AFG subsidiary cedes life insurance policies to a third party on a funds withheld basis whereby the subsidiary retains the assets (securities) associated with the reinsurance contract. Interest is credited to the reinsurer based on the actual investment performance of the retained assets. This reinsurance contract is considered to contain an embedded derivative (that must be adjusted to fair value) because the yield on the payable is based on a specific block of the ceding company’s assets, rather than the overall creditworthiness of the ceding company. AFG determined that changes in the fair value of the underlying portfolio of fixed maturity securities is an appropriate measure of the value of the embedded derivative. The securities related to this contract are classified as “trading.” The adjustment to fair value on the embedded derivative offsets the investment income recorded on the adjustment to fair value of the related trading portfolio. 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 also includes capitalized costs associated with sales inducements offered to fixed annuity policyholders such as enhanced interest rates and premium and persistency bonuses. For the property and casualty companies, 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. DPAC related to annuities is deferred to the extent deemed recoverable and amortized, with interest, in relation to the present value of actual and expected gross profits on the policies. Expected gross profits consist principally of estimated future investment margin (estimated future net investment income less interest credited on policyholder funds) and surrender, mortality, and other life and annuity policy charges, less death, annuitization and guaranteed withdrawal benefits in excess of account balances and estimated future policy administration expenses. To the extent that realized gains and losses result in adjustments to the amortization of DPAC related to annuities, such adjustments are reflected as components of realized gains (losses) on securities. DPAC related to traditional life and health insurance is amortized over the expected premium paying period of the related policies, in proportion to the ratio of annual premium revenues to total anticipated premium revenues. See “ Life, Accident and Health Reserves ” below for details on the impact of loss recognition on the accounting for traditional life and health insurance contracts. DPAC includes the present value of future profits on business in force of annuity and life, accident and health insurance companies acquired (“PVFP”). PVFP represents the portion of the costs to acquire companies that is allocated to the value of the right to receive future cash flows from insurance contracts existing at the date of acquisition. PVFP is amortized with interest in relation to expected gross profits of the acquired policies for annuities and universal life products and in relation to the premium paying period for traditional life and health insurance products. DPAC and certain other balance sheet amounts related to annuity, long-term care and life businesses are also adjusted, net of tax, for the change in expense that would have been recorded if the unrealized gains (losses) from securities had actually been realized. These adjustments are included in unrealized gains (losses) on marketable securities, a component of AOCI in AFG’s Balance Sheet. 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 H — “ Managed Investment Entities ” ). AFG has determined that it is the primary beneficiary of the 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. 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. Annuity Benefits Accumulated Annuity receipts and benefit payments are recorded as increases or decreases in annuity benefits accumulated rather than as revenue and expense. Increases in this liability for interest credited are charged to expense and decreases for policy charges are credited to other income. For certain products, annuity benefits accumulated also includes reserves for accrued persistency and premium bonuses, guaranteed withdrawals and excess benefits expected to be paid on future deaths and annuitizations (“EDAR”). The liabilities for EDAR and guaranteed withdrawals are accrued for and modified using assumptions consistent with those used in determining DPAC and DPAC amortization, except that amounts are determined in relation to the present value of total expected assessments. Total expected assessments consist principally of estimated future investment margin, surrender, mortality, and other life and annuity policy charges, and unearned revenues once they are recognized as income. Annuity benefits accumulated also includes amounts advanced from the Federal Home Loan Bank of Cincinnati. Unearned Revenue Certain upfront policy charges on annuities are deferred as unearned revenue (included in other liabilities) and recognized in net earnings (included in other income) using the same assumptions and estimated gross profits used to amortize DPAC. Life, Accident and Health Reserves Liabilities for future policy benefits under traditional life, accident and health policies are computed using the net level premium method. Computations are based on the original projections of investment yields, mortality, morbidity and surrenders and include provisions for unfavorable deviations unless a loss recognition event (premium deficiency) occurs. Claim reserves and liabilities established for accident and health claims are modified as necessary to reflect actual experience and developing trends. For long-duration contracts (such as traditional life and long-term care policies), loss recognition occurs when, based on current expectations as of the measurement date, existing contract liabilities plus the present value of future premiums (including reasonably expected rate increases) are not expected to cover the present value of future claims payments and related settlement and maintenance costs (excluding overhead) as well as unamortized acquisition costs. If a block of business is determined to be in loss recognition, a charge is recorded in earnings in an amount equal to the excess of the present value of expected future claims costs and unamortized acquisition costs over existing reserves plus the present value of expected future premiums (with no provision for adverse deviation). The charge is recorded first to reduce unamortized acquisition costs and then as an additional reserve (if unamortized acquisition costs have been reduced to zero). In addition, reserves for traditional life and long-term care policies are subject to adjustment for loss recognition charges that would have been recorded if the unrealized gains from securities had actually been realized. This adjustment is included in unrealized gains (losses) on marketable securities, a component of AOCI in AFG’s Balance Sheet. 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. Variable Annuity Assets and Liabilities Separate accounts related to variable annuities represent the fair value of deposits invested in underlying investment funds on which AFG earns a fee. Investment funds are selected and may be changed only by the policyholder, who retains all investment risk. AFG’s variable annuity contracts contain a guaranteed minimum death benefit (“GMDB”) to be paid if the policyholder dies before the annuity payout period commences. In periods of declining equity markets, the GMDB may exceed the value of the policyholder’s account. A GMDB liability is established for future excess death benefits using assumptions together with a range of reasonably possible scenarios for investment fund performance that are consistent with DPAC capitalization and amortization assumptions. 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. For traditional life, accident and health products, premiums are recognized as revenue when legally collectible from policyholders. For interest-sensitive life and universal life products, premiums are recorded in a policyholder account, which is reflected as a liability. Revenue is recognized as amounts are assessed against the policyholder account for mortality coverage and contract expenses. Noncontrolling Interests For balance sheet purposes, noncontrolling interests represents 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. 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. 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 uses the Black Scholes pricing model to measure the fair value of employee stock options. See Note K — “ Shareholders’ Equity ” for further information. In the fourth quarter of 2016, AFG adopted ASU 2016-09, which, among other things, requires excess tax benefits or deficiencies for share-based payments to be recorded through income tax expense in the statement of earnings instead of directly to capital surplus (as required under the previous guidance). In addition, under the new guidance, AFG elected to account for forfeitures of awards when they occur rather than accruing expense based on an estimate of expected forfeitures (as required under the previous guidance). The resulting cumulative effect of accounting change of less than $1 million was recorded directly to retained earnings on January 1, 2016. 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: first three months of 2017 and 2016 — 2.1 million and 1.6 million , respectively. AFG’s weighted average diluted shares outstanding for the first three months of 2016 excludes 0.8 million anti-dilutive potential common shares related to stock compensation plans. There were no anti-dilutive potential common shares for the first three months of 2017 . 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 and property and equipment. “Financing activities” include obtaining resources from owners and providing them with a return on their investments, borrowing money and repaying amounts borrowed. Annuity receipts, surrenders, benefits and withdrawals are also reflected as financing activities. 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. Effective October 1, 2016, AFG early adopted (on a retrospective basis) ASU 2016-15, which addresses the diversity in practice in how certain cash receipts and cash payments are presented in the statement of cash flows. Among other things, this guidance requires proceeds received from the settlement of corporate-owned life insurance policies to be classified as cash inflows from investing activities and allows premiums paid for policies to be reported as cash outflows either from investing activities or operating activities. AFG has elected to show all corporate-owned life insurance activity in investing activities. Prior to adoption of this guidance, AFG accounted for these transactions as operating activities. In addition, ASU 2016-15 clarifies when distributions received from investees accounted under the equity method should be accounted for as a cash inflow from operating activities or as a cash inflow from investing activities. AFG had previously accounted for all distributions from investments accounted for under the equity method as investing activities. The new guidance solely related to the presentation of certain transactions in the statement of cash flows. Accordingly, adoption of this guidance did not impact AFG’s results of operations or financial position. Revenue Recognition Guidance Effective in 2018 In May 2014, the FASB issued ASU 2014-09, which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognized when (or as) the entity satisfies a performance obligation under the contract. The new guidance also updates the accounting for certain costs associated with obtaining and fulfilling contracts with customers and requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Revenue recognition for insurance contracts and financial instruments, which are AFG’s primary sources of revenue, is excluded from the scope of the new guidance. AFG will adopt the new guidance effective January 1, 2018. Because the new guidance does not apply to the vast majority of AFG’s business, management does not expect the adoption of this guidance to have a material impact on AFG’s results of operations or financial position. Based on implementation efforts to date, management believes that the new standard would only have applied to 2% of AFG’s 2016 consolidated revenues. |
Acquisition of Business
Acquisition of Business | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure Text Block [Abstract] | |
Acquisition of Business | Acquisition of Business Acquisition of Noncontrolling Interest in National Interstate Corporation In November 2016, AFG acquired the 49% of National Interstate Corporation (“NATL”) not previously owned by AFG’s wholly-owned subsidiary, Great American Insurance Company, for $315 million ( $32.00 per share) in a merger transaction. In addition, NATL paid a one-time special cash dividend of $0.50 per share to its shareholders immediately prior to the merger closing. Because NATL was already a consolidated subsidiary of AFG prior to the merger, the acquisition was accounted for as an equity transaction. |
Segments of Operations
Segments of Operations | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
Segments of Operations | Segments of Operations AFG manages its business as four segments: (i) Property and casualty insurance, (ii) Annuity, (iii) Run-off long-term care and life and (iv) Other, which includes holding company costs. 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, trucks and recreational vehicles, inland and ocean marine, agricultural-related products and other property coverages, (ii) Specialty casualty, which includes primarily excess and surplus, general liability, executive liability, professional liability, umbrella and excess liability, specialty coverage 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 leasing and financing institutions (including collateral and lender-placed mortgage property insurance), surety and fidelity 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 annuity business markets traditional fixed and fixed-indexed annuities in the retail, financial institutions and education markets. 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 before income taxes by segment and sub-segment. Three months ended March 31, 2017 2016 Revenues Property and casualty insurance: Premiums earned: Specialty Property and transportation $ 342 $ 339 Specialty casualty 508 502 Specialty financial 147 132 Other specialty 25 25 Total premiums earned 1,022 998 Net investment income 86 83 Other income (a) 16 3 Total property and casualty insurance 1,124 1,084 Annuity: Net investment income 347 315 Other income 27 26 Total annuity 374 341 Run-off long-term care and life 12 12 Other 63 56 Total revenues before realized gains (losses) 1,573 1,493 Realized gains (losses) on securities 3 (18 ) Total revenues $ 1,576 $ 1,475 Earnings Before Income Taxes Property and casualty insurance: Underwriting: Specialty Property and transportation $ 43 $ 32 Specialty casualty 15 29 Specialty financial 22 23 Other specialty (1 ) 2 Other lines (1 ) 1 Total underwriting 78 87 Investment and other income, net (a) 93 75 Total property and casualty insurance 171 162 Annuity 96 53 Run-off long-term care and life — (1 ) Other (b) (47 ) (40 ) Total earnings before realized gains (losses) and income taxes 220 174 Realized gains (losses) on securities 3 (18 ) Total earnings before income taxes $ 223 $ 156 (a) Includes pretax income of $13 million (before noncontrolling interest) from the sale of a hotel in the first quarter of 2017. (b) Includes holding company interest and expenses. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2017 | |
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 and 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 separate account assets, corporate and municipal fixed maturity securities, mortgage-backed securities (“MBS”) 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 in the circumstances. AFG’s Level 3 is comprised of 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. As discussed in Note A — “ Accounting Policies — Managed Investment Entities ,” 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. 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 25 analysts 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 measured and carried at fair value in the financial statements are summarized below (in millions): Level 1 Level 2 Level 3 Total March 31, 2017 Assets: Available for sale (“AFS”) fixed maturities: U.S. Government and government agencies $ 122 $ 158 $ 8 $ 288 States, municipalities and political subdivisions — 6,758 143 6,901 Foreign government — 138 — 138 Residential MBS — 3,541 175 3,716 Commercial MBS — 1,224 29 1,253 Asset-backed securities (“ABS”) — 5,998 594 6,592 Corporate and other 30 16,710 828 17,568 Total AFS fixed maturities 152 34,527 1,777 36,456 Trading fixed maturities 26 333 — 359 Equity securities — AFS and trading 1,383 81 173 1,637 Assets of managed investment entities (“MIE”) 896 4,409 26 5,331 Variable annuity assets (separate accounts) (*) — 614 — 614 Equity index call options — 573 — 573 Other assets — derivatives — — — — Total assets accounted for at fair value $ 2,457 $ 40,537 $ 1,976 $ 44,970 Liabilities: Liabilities of managed investment entities $ 857 $ 4,219 $ 25 $ 5,101 Derivatives in annuity benefits accumulated — — 1,963 1,963 Derivatives in long-term debt — — — — Other liabilities — derivatives — 32 — 32 Total liabilities accounted for at fair value $ 857 $ 4,251 $ 1,988 $ 7,096 December 31, 2016 Assets: Available for sale fixed maturities: U.S. Government and government agencies $ 133 $ 174 $ 8 $ 315 States, municipalities and political subdivisions — 6,641 140 6,781 Foreign government — 136 — 136 Residential MBS — 3,445 190 3,635 Commercial MBS — 1,468 25 1,493 Asset-backed securities — 5,475 484 5,959 Corporate and other 29 15,484 712 16,225 Total AFS fixed maturities 162 32,823 1,559 34,544 Trading fixed maturities 30 329 — 359 Equity securities — AFS and trading 1,305 79 174 1,558 Assets of managed investment entities 380 4,356 29 4,765 Variable annuity assets (separate accounts) (*) — 600 — 600 Equity index call options — 492 — 492 Other assets — derivatives — 1 — 1 Total assets accounted for at fair value $ 1,877 $ 38,680 $ 1,762 $ 42,319 Liabilities: Liabilities of managed investment entities $ 363 $ 4,158 $ 28 $ 4,549 Derivatives in annuity benefits accumulated — — 1,759 1,759 Derivatives in long-term debt — (1 ) — (1 ) Other liabilities — derivatives — 30 — 30 Total liabilities accounted for at fair value $ 363 $ 4,187 $ 1,787 $ 6,337 (*) Variable annuity liabilities equal the fair value of variable annuity assets. Transfers between Level 1 and Level 2 for all periods presented were a result of increases or decreases in observable trade activity. During the first three months of 2017 , there were no transfers between Level 1 and Level 2. During the first three months of 2016 , there was one perpetual preferred stock with a fair value of $8 million transferred from Level 2 to Level 1 and three perpetual preferred stocks with an aggregate fair value of $6 million transferred from Level 1 to Level 2. Approximately 4% of the total assets carried at fair value on March 31, 2017 , were Level 3 assets. Approximately 75% ( $1.49 billion ) of the 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. 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. The only significant Level 3 assets or liabilities carried at fair value in the financial statements that were not measured using broker quotes are the derivatives embedded in AFG’s fixed-indexed annuity liabilities, which are measured using a discounted cash flow approach and had a fair value of $1.96 billion at March 31, 2017 . The following table presents information about the unobservable inputs used by management in determining fair value of these embedded derivatives. See Note F — “ Derivatives .” Unobservable Input Range Adjustment for insurance subsidiary’s credit risk 0.2% – 2.8% over the risk free rate Risk margin for uncertainty in cash flows 0.68% reduction in the discount rate Surrenders 3% – 21% of indexed account value Partial surrenders 2% – 10% of indexed account value Annuitizations 0.1% – 1% of indexed account value Deaths 1.5% – 8.0% of indexed account value Budgeted option costs 2.4% – 3.6% of indexed account value The range of adjustments for insurance subsidiary’s credit risk reflects credit spread variations across the yield curve. The range of projected surrender rates reflects the specific surrender charges and other features of AFG’s individual fixed-indexed annuity products with an expected range of 6% to 10% in the majority of future calendar years ( 3% to 21% over all periods). Increasing the budgeted option cost or risk margin for uncertainty in cash flows assumptions in the table above would increase the fair value of the fixed-indexed annuity embedded derivatives, while increasing any of the other unobservable inputs in the table above would decrease the fair value of the embedded derivatives. Changes in balances of Level 3 financial assets and liabilities carried at fair value during the first three months of 2017 and 2016 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 December 31, 2016 Net income Other comprehensive income (loss) Purchases and issuances Sales and settlements Transfer into Level 3 Transfer out of Level 3 Balance at March 31, 2017 AFS fixed maturities: U.S. government agency $ 8 $ — $ — $ — $ — $ — $ — $ 8 State and municipal 140 — 3 — — — — 143 Residential MBS 190 1 — 1 (8 ) 7 (16 ) 175 Commercial MBS 25 — — — — 4 — 29 Asset-backed securities 484 — — 104 (11 ) 17 — 594 Corporate and other 712 1 4 120 (38 ) 29 — 828 Total AFS fixed maturities 1,559 2 7 225 (57 ) 57 (16 ) 1,777 Equity securities 174 (6 ) 7 12 — — (14 ) 173 Assets of MIE 29 (1 ) — 2 — — (4 ) 26 Total Level 3 assets $ 1,762 $ (5 ) $ 14 $ 239 $ (57 ) $ 57 $ (34 ) $ 1,976 Embedded derivatives $ (1,759 ) $ (147 ) $ — $ (79 ) $ 22 $ — $ — $ (1,963 ) Total Level 3 liabilities (*) $ (1,759 ) $ (147 ) $ — $ (79 ) $ 22 $ — $ — $ (1,963 ) Total realized/unrealized gains (losses) included in Balance at December 31, 2015 Net income Other comprehensive income (loss) Purchases and issuances Sales and settlements Transfer into Level 3 Transfer out of Level 3 Balance at March 31, 2016 AFS fixed maturities: U.S. government agency $ 15 $ — $ — $ — $ — $ — $ — $ 15 State and municipal 89 — 3 — — — — 92 Residential MBS 224 1 — — (7 ) 11 (16 ) 213 Commercial MBS 39 — — — (1 ) — — 38 Asset-backed securities 470 — (6 ) 4 (8 ) 41 — 501 Corporate and other 633 (2 ) 15 86 (7 ) 5 — 730 Total AFS fixed maturities 1,470 (1 ) 12 90 (23 ) 57 (16 ) 1,589 Equity securities 140 (17 ) 8 12 — 15 — 158 Assets of MIE 26 (2 ) — — — — — 24 Total Level 3 assets $ 1,636 $ (20 ) $ 20 $ 102 $ (23 ) $ 72 $ (16 ) $ 1,771 Embedded derivatives $ (1,369 ) $ (17 ) $ — $ (82 ) $ 18 $ — $ — $ (1,450 ) Total Level 3 liabilities (*) $ (1,369 ) $ (17 ) $ — $ (82 ) $ 18 $ — $ — $ (1,450 ) (*) As discussed previously, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets. 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 Fair Value Value Total Level 1 Level 2 Level 3 March 31, 2017 Financial assets: Cash and cash equivalents $ 1,890 $ 1,890 $ 1,890 $ — $ — Mortgage loans 1,159 1,158 — — 1,158 Policy loans 190 190 — — 190 Total financial assets not accounted for at fair value $ 3,239 $ 3,238 $ 1,890 $ — $ 1,348 Financial liabilities: Annuity benefits accumulated (*) $ 30,799 $ 29,997 $ — $ — $ 29,997 Long-term debt 1,283 1,382 — 1,379 3 Total financial liabilities not accounted for at fair value $ 32,082 $ 31,379 $ — $ 1,379 $ 30,000 December 31, 2016 Financial assets: Cash and cash equivalents $ 2,107 $ 2,107 $ 2,107 $ — $ — Mortgage loans 1,147 1,146 — — 1,146 Policy loans 192 192 — — 192 Total financial assets not accounted for at fair value $ 3,446 $ 3,445 $ 2,107 $ — $ 1,338 Financial liabilities: Annuity benefits accumulated (*) $ 29,703 $ 28,932 $ — $ — $ 28,932 Long-term debt 1,284 1,356 — 1,353 3 Total financial liabilities not accounted for at fair value $ 30,987 $ 30,288 $ — $ 1,353 $ 28,935 (*) Excludes $203 million and $204 million of life contingent annuities in the payout phase at March 31, 2017 and December 31, 2016 , respectively. The carrying amount of cash and cash equivalents approximates fair value. Fair values for mortgage loans are estimated by discounting the future contractual cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings. The fair value of policy loans is estimated to approximate carrying value; policy loans have no defined maturity dates and are inseparable from insurance contracts. The fair value of annuity benefits was estimated based on expected cash flows discounted using forward interest rates adjusted for the Company’s credit risk and includes the impact of maintenance expenses and capital costs. Fair values of long-term debt are based primarily on quoted market prices. |
Investments
Investments | 3 Months Ended |
Mar. 31, 2017 | |
Investments, Debt and Equity Securities [Abstract] | |
Investments | Investments Available for sale fixed maturities and equity securities at March 31, 2017 and December 31, 2016 , consisted of the following (in millions): March 31, 2017 December 31, 2016 Amortized Cost Gross Unrealized Net Unrealized Fair Value Amortized Cost Gross Unrealized Net Unrealized Fair Value Gains Losses Gains Losses Fixed maturities: U.S. Government and government agencies $ 289 $ 2 $ (3 ) $ (1 ) $ 288 $ 315 $ 3 $ (3 ) $ — $ 315 States, municipalities and political subdivisions 6,736 213 (48 ) 165 6,901 6,650 200 (69 ) 131 6,781 Foreign government 133 5 — 5 138 131 5 — 5 136 Residential MBS 3,432 295 (11 ) 284 3,716 3,367 281 (13 ) 268 3,635 Commercial MBS 1,211 43 (1 ) 42 1,253 1,446 49 (2 ) 47 1,493 Asset-backed securities 6,548 74 (30 ) 44 6,592 5,962 43 (46 ) (3 ) 5,959 Corporate and other 17,096 544 (72 ) 472 17,568 15,864 473 (112 ) 361 16,225 Total fixed maturities $ 35,445 $ 1,176 $ (165 ) $ 1,011 $ 36,456 $ 33,735 $ 1,054 $ (245 ) $ 809 $ 34,544 Equity Securities: Common stocks $ 884 $ 216 $ (21 ) $ 195 $ 1,079 $ 879 $ 160 $ (23 ) $ 137 $ 1,016 Perpetual preferred stocks 472 31 (3 ) 28 500 472 21 (7 ) 14 486 Total equity securities $ 1,356 $ 247 $ (24 ) $ 223 $ 1,579 $ 1,351 $ 181 $ (30 ) $ 151 $ 1,502 The non-credit related portion of other-than-temporary impairment charges is included in other comprehensive income. Cumulative non-credit charges taken for securities still owned at March 31, 2017 and December 31, 2016 , respectively, were $170 million and $189 million . Gross unrealized gains on such securities at March 31, 2017 and December 31, 2016 were $128 million and $130 million , respectively. Gross unrealized losses on such securities at March 31, 2017 and December 31, 2016 were $2 million and $3 million , respectively. These amounts represent the non-credit other-than-temporary impairment charges recorded in AOCI adjusted for subsequent changes in fair values and relate to residential MBS. The following tables show gross unrealized losses (dollars in millions) on fixed maturities and equity securities by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2017 and December 31, 2016 . 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 March 31, 2017 Fixed maturities: U.S. Government and government agencies $ (1 ) $ 152 99 % $ (2 ) $ 8 80 % States, municipalities and political subdivisions (44 ) 1,925 98 % (4 ) 37 90 % Foreign government — 4 100 % — — — % Residential MBS (6 ) 455 99 % (5 ) 188 97 % Commercial MBS (1 ) 71 99 % — — — % Asset-backed securities (14 ) 1,313 99 % (16 ) 512 97 % Corporate and other (57 ) 2,799 98 % (15 ) 298 95 % Total fixed maturities $ (123 ) $ 6,719 98 % $ (42 ) $ 1,043 96 % Equity securities: Common stocks $ (21 ) $ 138 87 % $ — $ — — % Perpetual preferred stocks (2 ) 85 98 % (1 ) 6 86 % Total equity securities $ (23 ) $ 223 91 % $ (1 ) $ 6 86 % December 31, 2016 Fixed maturities: U.S. Government and government agencies $ (1 ) $ 153 99 % $ (2 ) $ 8 80 % States, municipalities and political subdivisions (64 ) 2,289 97 % (5 ) 44 90 % Residential MBS (7 ) 502 99 % (6 ) 162 96 % Commercial MBS (2 ) 121 98 % — — — % Asset-backed securities (29 ) 1,737 98 % (17 ) 634 97 % Corporate and other (93 ) 3,849 98 % (19 ) 312 94 % Total fixed maturities $ (196 ) $ 8,651 98 % $ (49 ) $ 1,160 96 % Equity securities: Common stocks $ (23 ) $ 215 90 % $ — $ — — % Perpetual preferred stocks (6 ) 135 96 % (1 ) 6 86 % Total equity securities $ (29 ) $ 350 92 % $ (1 ) $ 6 86 % At March 31, 2017 , the gross unrealized losses on fixed maturities of $165 million relate to 1,048 securities. Investment grade securities (as determined by nationally recognized rating agencies) represented approximately 84% of the gross unrealized loss and 89% of the fair value. AFG analyzes its MBS securities for other-than-temporary 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. In the first three months of 2017 , AFG recorded less than $1 million in other-than-temporary impairment charges related to its residential MBS. In the first three months of 2017 , AFG recorded less than $1 million in other-than-temporary impairment charges related to corporate bonds and other fixed maturities. AFG recorded $3 million in other-than-temporary impairment charges on common stocks in the first three months of 2017 . At March 31, 2017 , the gross unrealized losses on common stocks of $21 million relate to 17 securities, none of which has been in an unrealized loss position for more than 12 months. AFG recorded $6 million in other-than-temporary impairment charges on preferred stocks in the first three months of 2017 . At March 31, 2017 , the gross unrealized losses on preferred stocks of $3 million relate to 13 securities. The one preferred stock that has been in an unrealized loss position for 12 months or more is rated investment grade. Management believes AFG will recover its cost basis 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 March 31, 2017 . A progression of the credit portion of other-than-temporary impairments on fixed maturity securities for which the non-credit portion of an impairment has been recognized in other comprehensive income is shown below (in millions): 2017 2016 Balance at January 1 $ 153 $ 160 Additional credit impairments on: Previously impaired securities — 2 Securities without prior impairments — — Reductions due to sales or redemptions (7 ) (2 ) Balance at March 31 $ 146 $ 160 The table below sets forth the scheduled maturities of available for sale fixed maturities as of March 31, 2017 (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 Amount % Maturity One year or less $ 1,038 $ 1,051 3 % After one year through five years 6,034 6,300 17 % After five years through ten years 12,717 12,990 36 % After ten years 4,465 4,554 12 % 24,254 24,895 68 % ABS (average life of approximately 5 years) 6,548 6,592 18 % MBS (average life of approximately 4-1/2 years) 4,643 4,969 14 % Total $ 35,445 $ 36,456 100 % Certain risks are inherent in fixed maturity securities, including loss upon default, price volatility in reaction to changes in interest rates, and general market factors and risks associated with reinvestment of proceeds due to prepayments or redemptions in a period of declining interest rates. There were no investments in individual issuers that exceeded 10% of shareholders’ equity at March 31, 2017 or December 31, 2016 . Net Unrealized Gain on Marketable Securities In addition to adjusting equity securities and fixed maturity securities classified as “available for sale” to fair value, GAAP requires that deferred policy acquisition costs and certain other balance sheet amounts related to annuity, long-term care and life businesses be adjusted to the extent that unrealized gains and losses from securities would result in adjustments to those balances had the unrealized gains or losses actually been realized. 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 March 31, 2017 Net unrealized gain on: Fixed maturities — annuity segment (*) $ 800 $ (280 ) $ 520 Fixed maturities — all other 211 (74 ) 137 Total fixed maturities 1,011 (354 ) 657 Equity securities 223 (78 ) 145 Total investments 1,234 (432 ) 802 Deferred policy acquisition costs — annuity segment (333 ) 117 (216 ) Annuity benefits accumulated (103 ) 36 (67 ) Unearned revenue 15 (5 ) 10 Total net unrealized gain on marketable securities $ 813 $ (284 ) $ 529 December 31, 2016 Net unrealized gain on: Fixed maturities — annuity segment (*) $ 640 $ (224 ) $ 416 Fixed maturities — all other 169 (59 ) 110 Total fixed maturities 809 (283 ) 526 Equity securities 151 (53 ) 98 Total investments 960 (336 ) 624 Deferred policy acquisition costs — annuity segment (273 ) 96 (177 ) Annuity benefits accumulated (78 ) 27 (51 ) Unearned revenue 13 (5 ) 8 Total net unrealized gain on marketable securities $ 622 $ (218 ) $ 404 (*) Net unrealized gains on fixed maturity investments supporting AFG’s annuity benefits accumulated. Net Investment Income The following table shows (in millions) investment income earned and investment expenses incurred. Three months ended March 31, 2017 2016 Investment income: Fixed maturities $ 389 $ 367 Equity securities 21 19 Equity in earnings of partnerships and similar investments 10 11 Other 20 19 Gross investment income 440 416 Investment expenses (5 ) (5 ) Net investment income $ 435 $ 411 Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments are summarized as follows (in millions): Three months ended March 31, 2017 Three months ended March 31, 2016 Realized gains (losses) Realized gains (losses) Before Impairments Impairments Total Change in Unrealized Before Impairments Impairments Total Change in Unrealized Fixed maturities $ 5 $ — $ 5 $ 202 $ 14 $ (16 ) $ (2 ) $ 453 Equity securities 2 (9 ) (7 ) 72 23 (41 ) (18 ) (23 ) Mortgage loans and other investments 3 — 3 — — — — — Other (*) (1 ) 3 2 (83 ) (3 ) 5 2 (220 ) Total pretax 9 (6 ) 3 191 34 (52 ) (18 ) 210 Tax effects (3 ) 2 (1 ) (66 ) (12 ) 19 7 (74 ) Noncontrolling interests — — — — — 1 1 (2 ) Net of tax and noncontrolling interests $ 6 $ (4 ) $ 2 $ 125 $ 22 $ (32 ) $ (10 ) $ 134 (*) Primarily adjustments to deferred policy acquisition costs and reserves related to the annuity business. Gross realized gains and losses (excluding impairment write-downs and mark-to-market of derivatives) on available for sale fixed maturity and equity security investment transactions included in the statement of cash flows consisted of the following (in millions): Three months ended March 31, 2017 2016 Fixed maturities: Gross gains $ 5 $ 14 Gross losses — (1 ) Equity securities: Gross gains 4 25 Gross losses (2 ) — |
Derivatives
Derivatives | 3 Months Ended |
Mar. 31, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives | Derivatives As discussed under “ Derivatives ” in Note A — “ Accounting Policies ” to the financial statements, AFG uses derivatives in certain areas of its operations. Derivatives That Do Not Qualify for Hedge Accounting The following derivatives that do not qualify for hedge accounting under GAAP are included in AFG’s Balance Sheet at fair value (in millions): March 31, 2017 December 31, 2016 Derivative Balance Sheet Line Asset Liability Asset Liability MBS with embedded derivatives Fixed maturities $ 104 $ — $ 107 $ — Public company warrants Equity securities 4 — 4 — Fixed-indexed annuities (embedded derivative) Annuity benefits accumulated — 1,963 — 1,759 Equity index call options Equity index call options 573 — 492 — Reinsurance contracts (embedded derivative) Other liabilities — 8 — 8 $ 681 $ 1,971 $ 603 $ 1,767 The MBS with embedded derivatives consist primarily of interest-only MBS with interest rates that float inversely with short-term rates. AFG records the entire change in the fair value of these securities in earnings. These investments are part of AFG’s overall investment strategy and represent a small component of AFG’s overall investment portfolio. Warrants to purchase shares of publicly traded companies, which represent a small component of AFG’s overall investment portfolio, are considered to be derivatives that are required to be carried at fair value through earnings. AFG’s fixed-indexed annuities provide policyholders with a crediting rate tied, in part, to the performance of an existing stock market index. AFG attempts to mitigate the risk in the index-based component of these products through the purchase of call options on the appropriate index. AFG receives collateral from its counterparties to support its purchased call option assets. This collateral ( $387 million at March 31, 2017 and $380 million at December 31, 2016 ) is included in other assets in AFG’s Balance Sheet with an offsetting liability to return the collateral, which is included in other liabilities. AFG’s strategy is designed so that the change in the fair value of the call option assets will generally offset the economic change in the liabilities from the index participation. Both the index-based component of the annuities and the related call options are considered derivatives. Fluctuations in interest rates and the stock market, among other factors, can cause volatility in the periodic measurement of fair value of the embedded derivative that management believes can be inconsistent with the long-term economics of these products. As discussed under “ Reinsurance ” in Note A to the financial statements, certain reinsurance contracts are considered to contain embedded derivatives. The following table summarizes the gain (loss) included in AFG’s Statement of Earnings for changes in the fair value of derivatives that do not qualify for hedge accounting for the first three months of 2017 and 2016 (in millions): Three months ended March 31, Derivative Statement of Earnings Line 2017 2016 MBS with embedded derivatives Realized gains on securities $ — $ 1 Public company warrants Realized gains on securities — (2 ) Fixed-indexed annuities (embedded derivative) Annuity benefits (147 ) (17 ) Equity index call options Annuity benefits 141 (40 ) Reinsurance contracts (embedded derivative) Net investment income (1 ) (3 ) $ (7 ) $ (61 ) Derivatives Designated and Qualifying as Cash Flow Hedges As of March 31, 2017 , AFG has entered into seven interest rate swaps that are designated and qualify as highly effective cash flow hedges to mitigate interest rate risk related to certain floating-rate securities included in AFG’s portfolio of fixed maturity securities. The purpose of each of these swaps is to effectively convert a portion of AFG’s floating-rate fixed maturity securities to fixed rates by offsetting the variability in cash flows attributable to changes in short-term LIBOR. Under the terms of the swaps, AFG receives fixed-rate interest payments in exchange for variable interest payments based on short-term LIBOR. The notional amounts of the interest rate swaps amortize down over each swap’s respective life (the swaps expire between August 2019 and June 2030) in anticipation of the expected decline in AFG’s portfolio of fixed maturity securities with floating interest rates based on short-term LIBOR. The total outstanding notional amount of AFG’s interest rate swaps was $1.03 billion at March 31, 2017 compared to $1.08 billion at December 31, 2016 , reflecting the scheduled amortization discussed above. The fair value of the effective portion of the interest rate swaps in an asset position and included in other assets was less than $1 million at March 31, 2017 and $1 million at December 31, 2016 . The fair value of the effective portion of the interest rate swaps in a liability position and included in other liabilities was $24 million at March 31, 2017 and $22 million at December 31, 2016 . The net unrealized gain or loss on cash flow hedges is included in AOCI, net of DPAC and deferred taxes. Amounts reclassified from AOCI (before DPAC and taxes) to net investment income were $2 million in both the first three months of 2017 and 2016 . There was no ineffectiveness recorded in net earnings during these periods. A collateral receivable supporting these swaps of $60 million at both March 31, 2017 and December 31, 2016 is included in other assets in AFG’s Balance Sheet. Derivative Designated and Qualifying as a Fair Value Hedge In June 2015, AFG entered into an interest rate swap to mitigate the interest rate risk associated with its fixed-rate 9-7/8% Senior Notes due June 2019 by effectively converting the interest rate on those notes to a floating rate of three-month LIBOR plus 8.099% ( 9.2302% at March 31, 2017 ). Since the terms of the interest rate swap match the terms of the hedged debt, changes in the fair value of the interest rate swap are offset by changes in the fair value of the hedged debt attributable to changes in interest rates. The fair value of the interest rate swap (asset of less than $1 million at March 31, 2017 and $1 million at December 31, 2016 ) and the offsetting adjustment to the carrying value of the 9-7/8% Senior Notes are both included in long-term debt on AFG’s Balance Sheet. Accordingly, the net impact on AFG’s current period earnings is that the interest expense associated with the hedged debt is effectively recorded at the floating rate. The net reduction in interest expense from the swap was $1 million for both the first three months of 2017 and 2016 . |
Deferred Policy Acquisition Cos
Deferred Policy Acquisition Costs | 3 Months Ended |
Mar. 31, 2017 | |
Deferred Policy Acquisition Costs Disclosures [Abstract] | |
Deferred Policy Acquisition Costs | Deferred Policy Acquisition Costs A progression of deferred policy acquisition costs is presented below (in millions): P&C Annuity and Run-off Long-term Care and Life Deferred Deferred Sales Consolidated Costs Costs Inducements PVFP Subtotal Unrealized Total Total Balance at December 31, 2016 $ 238 $ 1,110 $ 110 $ 46 $ 1,266 $ (265 ) $ 1,001 $ 1,239 Additions 139 67 1 — 68 — 68 207 Amortization: Periodic amortization (135 ) (42 ) (6 ) (2 ) (50 ) — (50 ) (185 ) Included in realized gains — 2 — — 2 — 2 2 Foreign currency translation 1 — — — — — — 1 Change in unrealized — — — — — (59 ) (59 ) (59 ) Balance at March 31, 2017 $ 243 $ 1,137 $ 105 $ 44 $ 1,286 $ (324 ) $ 962 $ 1,205 Balance at December 31, 2015 $ 226 $ 1,018 $ 119 $ 55 $ 1,192 $ (234 ) $ 958 $ 1,184 Additions 132 68 5 — 73 — 73 205 Amortization: Periodic amortization (134 ) (25 ) (5 ) (2 ) (32 ) — (32 ) (166 ) Included in realized gains — 2 — — 2 — 2 2 Change in unrealized — — — — — (170 ) (170 ) (170 ) Balance at March 31, 2016 $ 224 $ 1,063 $ 119 $ 53 $ 1,235 $ (404 ) $ 831 $ 1,055 The present value of future profits (“PVFP”) amounts in the table above are net of $136 million and $134 million of accumulated amortization at March 31, 2017 and December 31, 2016 , respectively. |
Managed Investment Entities
Managed Investment Entities | 3 Months Ended |
Mar. 31, 2017 | |
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 15.0% to 64.4% of the most subordinate debt tranche of sixteen collateralized loan obligation entities or “CLOs,” which are considered variable interest entities. AFG’s subsidiaries also own portions of the senior debt tranches of certain of these CLOs. Upon formation between 2004 and 2017, 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 particular 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 its CLOs is limited to its investment in the CLOs, which had an aggregate fair value of $230 million (including $160 million invested in the most subordinate tranches) at March 31, 2017 , and $216 million at December 31, 2016 . In March 2017, AFG formed a new CLO, which issued $408 million face amount of liabilities (including $24 million face amount purchased by subsidiaries of AFG). During the first three months of 2016 , AFG subsidiaries purchased $11 million face amount of senior debt and subordinate tranches of existing CLOs for $10 million . During the first three months of 2017 and 2016 , AFG subsidiaries received $4 million and $23 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 March 31, 2017 2016 Investment in CLO tranches at end of period $ 230 $ 250 Gains (losses) on change in fair value of assets/liabilities (a): Assets 5 (1 ) Liabilities (5 ) (12 ) Management fees paid to AFG 4 4 CLO earnings (losses) attributable to AFG shareholders (b) 6 (7 ) (a) Included in revenues in AFG’s Statement of Earnings. (b) Included in earnings before income taxes 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 $59 million and $75 million at March 31, 2017 and December 31, 2016 . The aggregate unpaid principal balance of the CLOs’ debt exceeded its carrying value by $140 million and $159 million at those dates. The CLO assets include $1 million in loans at both March 31, 2017 and December 31, 2016 , for which the CLOs are not accruing interest because the loans are in default (aggregate unpaid principal balance of $8 million and $10 million at those dates, respectively). |
Goodwill and Other Intangibles
Goodwill and Other Intangibles | 3 Months Ended |
Mar. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangibles | Goodwill and Other Intangibles There were no changes in the goodwill balance of $199 million during the first three months of 2017 . Included in other assets in AFG’s Balance Sheet is $32 million at March 31, 2017 and $34 million at December 31, 2016 in amortizable intangible assets related to property and casualty insurance acquisitions. These amounts are net of accumulated amortization of $24 million and $25 million , respectively. Amortization of intangibles was $2 million in both the first three months of 2017 and 2016 . |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Long-Term Debt Long-term debt consisted of the following (in millions): March 31, 2017 December 31, 2016 Principal Discount and Issue Costs Carrying Value Principal Discount and Issue Costs Carrying Value Direct Senior Obligations of AFG: 9-7/8% Senior Notes due June 2019 $ 350 $ (1 ) $ 349 $ 350 $ (1 ) $ 349 3.50% Senior Notes due August 2026 300 (3 ) 297 300 (3 ) 297 6-3/8% Senior Notes due June 2042 230 (7 ) 223 230 (7 ) 223 5-3/4% Senior Notes due August 2042 125 (4 ) 121 125 (4 ) 121 Other 3 — 3 3 — 3 1,008 (15 ) 993 1,008 (15 ) 993 Direct Subordinated Obligations of AFG: 6-1/4% Subordinated Debentures due September 2054 150 (5 ) 145 150 (5 ) 145 6% Subordinated Debentures due November 2055 150 (5 ) 145 150 (5 ) 145 300 (10 ) 290 300 (10 ) 290 $ 1,308 $ (25 ) $ 1,283 $ 1,308 $ (25 ) $ 1,283 To achieve a desired balance between fixed and variable rate debt, AFG entered into an interest rate swap in June 2015, which effectively converts its 9-7/8% Senior Notes to a floating rate of three-month LIBOR plus 8.099% ( 9.2302% at March 31, 2017 and 9.0624% at December 31, 2016 ). The fair value of the interest rate swap (asset of less than $1 million and $1 million at March 31, 2017 and December 31, 2016 , respectively) and the offsetting adjustment to the carrying value of the notes are both included in the carrying value of the 9-7/8% Senior Notes in the table above. Scheduled principal payments on debt for the balance of 2017 , the subsequent five years and thereafter were as follows: 2017 — none ; 2018 — none ; 2019 — $350 million ; 2020 — none ; 2021 — none ; 2022 — none and thereafter — $958 million . AFG can borrow up to $500 million under its revolving credit facility, which expires in June 2021. 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 March 31, 2017 or December 31, 2016 . |
Shareholders' Equity
Shareholders' Equity | 3 Months Ended |
Mar. 31, 2017 | |
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 AOCI Beginning Balance Pretax Tax Net of tax Attributable to noncontrolling interests Attributable to shareholders AOCI Ending Balance Three months ended March 31, 2017 Net unrealized gains on securities: Unrealized holding gains on securities arising during the period $ 191 $ (66 ) $ 125 $ — $ 125 Reclassification adjustment for realized (gains) losses included in net earnings (a) — — — — — Total net unrealized gains on securities (b) $ 404 191 (66 ) 125 — 125 $ 529 Net unrealized losses on cash flow hedges (7 ) (2 ) 1 (1 ) — (1 ) (8 ) Foreign currency translation adjustments (15 ) — — — — — (15 ) Pension and other postretirement plans adjustments (7 ) — — — — — (7 ) Total $ 375 $ 189 $ (65 ) $ 124 $ — $ 124 $ 499 Three months ended March 31, 2016 Net unrealized gains on securities: Unrealized holding gains on securities arising during the period $ 192 $ (67 ) $ 125 $ (1 ) $ 124 Reclassification adjustment for realized (gains) losses included in net earnings (a) 18 (7 ) 11 (1 ) 10 Total net unrealized gains on securities $ 332 210 (74 ) 136 (2 ) 134 $ 466 Net unrealized gains on cash flow hedges 1 5 (2 ) 3 — 3 4 Foreign currency translation adjustments (22 ) 3 3 6 — 6 (16 ) Pension and other postretirement plans adjustments (7 ) 1 — 1 — 1 (6 ) Total $ 304 $ 219 $ (73 ) $ 146 $ (2 ) $ 144 $ 448 (a) The reclassification adjustment out of net unrealized gains on securities affected the following lines in AFG’s Statement of Earnings: OCI component Affected line in the statement of earnings Pretax Realized gains (losses) on securities Tax Provision for income taxes Attributable to noncontrolling interests Net earnings (loss) attributable to noncontrolling interests (b) Includes net unrealized gains of $52 million at both March 31, 2017 and December 31, 2016 related to securities for which only the credit portion of an other-than-temporary impairment has been recorded in earnings. 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 three months of 2017 , AFG issued 232,250 shares of restricted Common Stock (fair value of $94.44 per share) under the Stock Incentive Plan. In addition, AFG issued 47,826 shares of Common Stock (fair value of $96.13 per share) in the first quarter of 2017 under the Equity Bonus Plan. AFG did not grant any stock options in the first three months of 2017 . Total compensation expense related to stock incentive plans of AFG and its subsidiaries was $11 million and $8 million in the first three months of 2017 and 2016 , respectively. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The following is a reconciliation of income taxes at the statutory rate of 35% to the provision for income taxes as shown in AFG’s Statement of Earnings (dollars in millions): Three months ended March 31, 2017 2016 Amount % of EBT Amount % of EBT Earnings before income taxes (“EBT”) $ 223 $ 156 Income taxes at statutory rate $ 78 35 % $ 55 35 % Effect of: Tax exempt interest (6 ) (3 %) (7 ) (4 %) Stock-based compensation (6 ) (3 %) — — % Change in valuation allowance (2 ) (1 %) 1 1 % Subsidiaries not in AFG’s tax return — — % 1 — % Other 4 2 % 2 1 % Provision for income taxes as shown in the statement of earnings $ 68 30 % $ 52 33 % The favorable impact of stock-based compensation on AFG’s effective tax rate in the first three months of 2017 reflects the high volume of employee stock option exercises during that period, including the impact of the increase in the market price of AFG Common Stock. During the first three months of 2017 , there were no material changes to AFG’s liability for uncertain tax positions. |
Contingencies
Contingencies | 3 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Contingencies There have been no significant changes to the matters discussed and referred to in Note M — “Contingencies” of AFG’s 2016 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 former subsidiary railroad and manufacturing operations, as well as contingencies related to the sale of substantially all of AFG’s run-off long-term care insurance business. |
Insurance
Insurance | 3 Months Ended |
Mar. 31, 2017 | |
Insurance [Abstract] | |
Unpaid Losses and Loss Adjustment Expenses | 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 three months of 2017 and 2016 (in millions): Three months ended March 31, 2017 2016 Balance at beginning of year $ 8,563 $ 8,127 Less reinsurance recoverables, net of allowance 2,302 2,201 Net liability at beginning of year 6,261 5,926 Provision for losses and LAE occurring in the current period 637 609 Net increase (decrease) in the provision for claims of prior years (28 ) (28 ) Total losses and LAE incurred 609 581 Payments for losses and LAE of: Current year (84 ) (80 ) Prior years (470 ) (467 ) Total payments (554 ) (547 ) Foreign currency translation and other 8 11 Net liability at end of period 6,324 5,971 Add back reinsurance recoverables, net of allowance 2,297 2,137 Gross unpaid losses and LAE included in the balance sheet at end of period $ 8,621 $ 8,108 The net decrease in the provision for claims of prior years during the first three months of 2017 reflects (i) lower than expected losses in the crop and equine operations and lower than expected claim severity in the property and inland marine business (all within the Property and transportation sub-segment), (ii) lower than anticipated claim severity and frequency in the workers’ compensation businesses and lower than anticipated claim severity at Neon (all within the Specialty casualty sub-segment) and (iii) lower than anticipated claim severity in the fidelity business and lower than expected claim frequency and severity in the surety business (all within the Specialty financial sub-segment). This favorable development was partially offset by (i) higher than anticipated claim severity in the ocean marine business (within the Property and transportation sub-segment), (ii) higher than anticipated claim severity in the targeted markets business and higher than anticipated claim severity and frequency in the excess and surplus lines business (all within the Specialty casualty sub-segment) and (iii) an adjustment to the deferred gain on the retroactive reinsurance transaction entered into in connection with the sale of businesses in 1998 (included in Other specialty sub-segment). The net decrease in the provision for claims of prior years during the first three months of 2016 reflects (i) lower than expected losses in the crop operations and lower than expected claim severity in the property and inland marine and trucking businesses (all within the Property and transportation sub-segment), (ii) lower than anticipated claim severity in workers’ compensation business and in directors and officers liability insurance (all within the Specialty casualty sub-segment) and (iii) lower than anticipated claim severity in the fidelity business and lower than expected claim frequency and severity in the surety business (all within the Specialty financial sub-segment). This favorable development was partially offset by (i) higher than anticipated claim frequency in the ocean marine business (within the Property and transportation sub-segment), (ii) adverse reserve development at Neon and higher than anticipated severity in contractor claims (all within the Specialty casualty sub-segment) and (iii) higher than anticipated claim frequency in the financial institutions business (within the Specialty financial sub-segment). |
Subsequent Event
Subsequent Event | 3 Months Ended |
Mar. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Event | Subsequent Event On May 3, 2017, AFG announced that its Board of Directors declared a special cash dividend of $1.50 per share of American Financial Group Common Stock. The dividend is payable on May 25, 2017 to shareholders of record on May 15, 2017. The aggregate amount of this special dividend will be approximately $132 million . |
Accounting Policies (Policies)
Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
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. 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 March 31, 2017 , and prior to the filing of this Form 10-Q, have been evaluated for potential recognition or disclosure herein. 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. |
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 significant nonrecurring fair value measurements in the first three months of 2017 . |
Investments | Investments Fixed maturity and equity 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 and equity 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 and policy loans are carried primarily at the aggregate unpaid balance. In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-01, which, among other things, will require all equity securities currently classified as “available for sale” to be reported at fair value, with holding gains and losses recognized in net income, instead of AOCI. AFG will be required to adopt this guidance effective January 1, 2018. Premiums and discounts on fixed maturity securities are amortized using the 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. Gains or losses on securities are determined on the specific identification basis. When a decline in the value of a specific investment is considered to be other-than-temporary at the balance sheet date, a provision for impairment is charged to earnings (included in realized gains (losses) on securities) and the cost basis of that investment is reduced. If management can assert that it does not intend to sell an impaired fixed maturity security and it is not more likely than not that it will have to sell the security before recovery of its amortized cost basis, then the other-than-temporary impairment is separated into two components: (i) the amount 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 of an other-than-temporary impairment 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 impairment charge. Both components are shown in the statement of earnings. 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 charge to earnings is recorded to reduce the amortized cost of that security to fair value. |
Derivatives | Derivatives Derivatives included in AFG’s Balance Sheet are recorded at fair value. Changes in fair value of derivatives are included in earnings, unless the derivatives are designated and qualify as highly effective cash flow hedges. Derivatives that do not qualify for hedge accounting under GAAP consist primarily of (i) components of certain fixed maturity securities (primarily interest-only MBS) and (ii) the equity-based component of certain annuity products (included in annuity benefits accumulated) and related equity index call options designed to be consistent with the characteristics of the liabilities and used to mitigate the risk embedded in those annuity products. To qualify for hedge accounting, at the inception of a derivative contract, AFG formally documents the relationship between the terms of the hedge and the hedged items and its risk management objective. This documentation includes defining how hedge effectiveness and ineffectiveness will be measured on a retrospective and prospective basis. Changes in the fair value of derivatives that are designated and qualify as highly effective cash flow hedges are recorded in AOCI and are reclassified into earnings when the variability of the cash flows from the hedged items impacts earnings. Any hedge ineffectiveness is immediately recorded in current period earnings. When the change in the fair value of a qualifying cash flow hedge is included in earnings, it is included in the same line item in the statement of earnings as the cash flows from the hedged item. AFG uses interest rate swaps that are designated and qualify as highly effective cash flow hedges to mitigate interest rate risk related to certain floating-rate securities included in AFG’s portfolio of fixed maturity securities. For derivatives that are designated and qualify as highly effective fair value hedges, changes in the fair value of the derivative, along with changes in the fair value of the hedged item attributable to the hedged risk, are recognized in current period earnings. AFG has entered into an interest rate swap that qualifies as a highly effective fair value hedge to mitigate the interest rate risk associated with fixed-rate long-term debt by economically converting certain fixed-rate debt obligations to floating-rate obligations. Since the terms of the swap match the terms of the hedged debt, changes in the fair value of the swap are offset by changes in the fair value of the hedged debt attributable to changes in interest rates. Accordingly, the net impact on AFG’s current period earnings is that the interest expense associated with the hedged debt is effectively recorded at the floating rate. |
Goodwill | Goodwill Goodwill represents the excess of cost of subsidiaries over AFG’s equity in their underlying net assets. 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’s property and casualty insurance subsidiaries report 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’s property and casualty insurance subsidiaries under contracts to fund ceded losses as they become due. AFG’s insurance subsidiaries also assume reinsurance from other companies. Earnings on reinsurance assumed is recognized based on information received from ceding companies. An AFG subsidiary cedes life insurance policies to a third party on a funds withheld basis whereby the subsidiary retains the assets (securities) associated with the reinsurance contract. Interest is credited to the reinsurer based on the actual investment performance of the retained assets. This reinsurance contract is considered to contain an embedded derivative (that must be adjusted to fair value) because the yield on the payable is based on a specific block of the ceding company’s assets, rather than the overall creditworthiness of the ceding company. AFG determined that changes in the fair value of the underlying portfolio of fixed maturity securities is an appropriate measure of the value of the embedded derivative. The securities related to this contract are classified as “trading.” The adjustment to fair value on the embedded derivative offsets the investment income recorded on the adjustment to fair value of the related trading portfolio. |
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 also includes capitalized costs associated with sales inducements offered to fixed annuity policyholders such as enhanced interest rates and premium and persistency bonuses. For the property and casualty companies, 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. DPAC related to annuities is deferred to the extent deemed recoverable and amortized, with interest, in relation to the present value of actual and expected gross profits on the policies. Expected gross profits consist principally of estimated future investment margin (estimated future net investment income less interest credited on policyholder funds) and surrender, mortality, and other life and annuity policy charges, less death, annuitization and guaranteed withdrawal benefits in excess of account balances and estimated future policy administration expenses. To the extent that realized gains and losses result in adjustments to the amortization of DPAC related to annuities, such adjustments are reflected as components of realized gains (losses) on securities. DPAC related to traditional life and health insurance is amortized over the expected premium paying period of the related policies, in proportion to the ratio of annual premium revenues to total anticipated premium revenues. See “ Life, Accident and Health Reserves ” below for details on the impact of loss recognition on the accounting for traditional life and health insurance contracts. DPAC includes the present value of future profits on business in force of annuity and life, accident and health insurance companies acquired (“PVFP”). PVFP represents the portion of the costs to acquire companies that is allocated to the value of the right to receive future cash flows from insurance contracts existing at the date of acquisition. PVFP is amortized with interest in relation to expected gross profits of the acquired policies for annuities and universal life products and in relation to the premium paying period for traditional life and health insurance products. DPAC and certain other balance sheet amounts related to annuity, long-term care and life businesses are also adjusted, net of tax, for the change in expense that would have been recorded if the unrealized gains (losses) from securities had actually been realized. These adjustments are included in unrealized gains (losses) on marketable securities, a component of AOCI in AFG’s Balance Sheet. |
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 H — “ Managed Investment Entities ” ). AFG has determined that it is the primary beneficiary of the 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. |
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. |
Annuity Benefits Accumulated | Annuity Benefits Accumulated Annuity receipts and benefit payments are recorded as increases or decreases in annuity benefits accumulated rather than as revenue and expense. Increases in this liability for interest credited are charged to expense and decreases for policy charges are credited to other income. For certain products, annuity benefits accumulated also includes reserves for accrued persistency and premium bonuses, guaranteed withdrawals and excess benefits expected to be paid on future deaths and annuitizations (“EDAR”). The liabilities for EDAR and guaranteed withdrawals are accrued for and modified using assumptions consistent with those used in determining DPAC and DPAC amortization, except that amounts are determined in relation to the present value of total expected assessments. Total expected assessments consist principally of estimated future investment margin, surrender, mortality, and other life and annuity policy charges, and unearned revenues once they are recognized as income. Annuity benefits accumulated also includes amounts advanced from the Federal Home Loan Bank of Cincinnati. |
Unearned Revenue | Unearned Revenue Certain upfront policy charges on annuities are deferred as unearned revenue (included in other liabilities) and recognized in net earnings (included in other income) using the same assumptions and estimated gross profits used to amortize DPAC. |
Life, Accident and Health Reserves | Life, Accident and Health Reserves Liabilities for future policy benefits under traditional life, accident and health policies are computed using the net level premium method. Computations are based on the original projections of investment yields, mortality, morbidity and surrenders and include provisions for unfavorable deviations unless a loss recognition event (premium deficiency) occurs. Claim reserves and liabilities established for accident and health claims are modified as necessary to reflect actual experience and developing trends. For long-duration contracts (such as traditional life and long-term care policies), loss recognition occurs when, based on current expectations as of the measurement date, existing contract liabilities plus the present value of future premiums (including reasonably expected rate increases) are not expected to cover the present value of future claims payments and related settlement and maintenance costs (excluding overhead) as well as unamortized acquisition costs. If a block of business is determined to be in loss recognition, a charge is recorded in earnings in an amount equal to the excess of the present value of expected future claims costs and unamortized acquisition costs over existing reserves plus the present value of expected future premiums (with no provision for adverse deviation). The charge is recorded first to reduce unamortized acquisition costs and then as an additional reserve (if unamortized acquisition costs have been reduced to zero). In addition, reserves for traditional life and long-term care policies are subject to adjustment for loss recognition charges that would have been recorded if the unrealized gains from securities had actually been realized. This adjustment is included in unrealized gains (losses) on marketable securities, a component of AOCI in AFG’s Balance Sheet. |
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. |
Variable Annuity Assets and Liabilities | Variable Annuity Assets and Liabilities Separate accounts related to variable annuities represent the fair value of deposits invested in underlying investment funds on which AFG earns a fee. Investment funds are selected and may be changed only by the policyholder, who retains all investment risk. AFG’s variable annuity contracts contain a guaranteed minimum death benefit (“GMDB”) to be paid if the policyholder dies before the annuity payout period commences. In periods of declining equity markets, the GMDB may exceed the value of the policyholder’s account. A GMDB liability is established for future excess death benefits using assumptions together with a range of reasonably possible scenarios for investment fund performance that are consistent with DPAC capitalization and amortization assumptions. |
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. For traditional life, accident and health products, premiums are recognized as revenue when legally collectible from policyholders. For interest-sensitive life and universal life products, premiums are recorded in a policyholder account, which is reflected as a liability. Revenue is recognized as amounts are assessed against the policyholder account for mortality coverage and contract expenses. |
Noncontrolling Interests | Noncontrolling Interests For balance sheet purposes, noncontrolling interests represents 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. |
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. 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 uses the Black Scholes pricing model to measure the fair value of employee stock options. See Note K — “ Shareholders’ Equity ” for further information. In the fourth quarter of 2016, AFG adopted ASU 2016-09, which, among other things, requires excess tax benefits or deficiencies for share-based payments to be recorded through income tax expense in the statement of earnings instead of directly to capital surplus (as required under the previous guidance). In addition, under the new guidance, AFG elected to account for forfeitures of awards when they occur rather than accruing expense based on an estimate of expected forfeitures (as required under the previous guidance). The resulting cumulative effect of accounting change of less than $1 million was recorded directly to retained earnings on January 1, 2016. |
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: first three months of 2017 and 2016 — 2.1 million and 1.6 million , respectively. AFG’s weighted average diluted shares outstanding for the first three months of 2016 excludes 0.8 million anti-dilutive potential common shares related to stock compensation plans. There were no anti-dilutive potential common shares for the first three months of 2017 . |
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 and property and equipment. “Financing activities” include obtaining resources from owners and providing them with a return on their investments, borrowing money and repaying amounts borrowed. Annuity receipts, surrenders, benefits and withdrawals are also reflected as financing activities. 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. Effective October 1, 2016, AFG early adopted (on a retrospective basis) ASU 2016-15, which addresses the diversity in practice in how certain cash receipts and cash payments are presented in the statement of cash flows. Among other things, this guidance requires proceeds received from the settlement of corporate-owned life insurance policies to be classified as cash inflows from investing activities and allows premiums paid for policies to be reported as cash outflows either from investing activities or operating activities. AFG has elected to show all corporate-owned life insurance activity in investing activities. Prior to adoption of this guidance, AFG accounted for these transactions as operating activities. In addition, ASU 2016-15 clarifies when distributions received from investees accounted under the equity method should be accounted for as a cash inflow from operating activities or as a cash inflow from investing activities. AFG had previously accounted for all distributions from investments accounted for under the equity method as investing activities. The new guidance solely related to the presentation of certain transactions in the statement of cash flows. Accordingly, adoption of this guidance did not impact AFG’s results of operations or financial position. |
Revenue Recognition Guidance Effective in 2018 | Revenue Recognition Guidance Effective in 2018 In May 2014, the FASB issued ASU 2014-09, which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenue is recognized when (or as) the entity satisfies a performance obligation under the contract. The new guidance also updates the accounting for certain costs associated with obtaining and fulfilling contracts with customers and requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Revenue recognition for insurance contracts and financial instruments, which are AFG’s primary sources of revenue, is excluded from the scope of the new guidance. AFG will adopt the new guidance effective January 1, 2018. Because the new guidance does not apply to the vast majority of AFG’s business, management does not expect the adoption of this guidance to have a material impact on AFG’s results of operations or financial position. Based on implementation efforts to date, management believes that the new standard would only have applied to 2% of AFG’s 2016 consolidated revenues. |
Segments of Operations (Tables)
Segments of Operations (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
Segment Reporting Information, by Segment | The following tables (in millions) show AFG’s revenues and earnings before income taxes by segment and sub-segment. Three months ended March 31, 2017 2016 Revenues Property and casualty insurance: Premiums earned: Specialty Property and transportation $ 342 $ 339 Specialty casualty 508 502 Specialty financial 147 132 Other specialty 25 25 Total premiums earned 1,022 998 Net investment income 86 83 Other income (a) 16 3 Total property and casualty insurance 1,124 1,084 Annuity: Net investment income 347 315 Other income 27 26 Total annuity 374 341 Run-off long-term care and life 12 12 Other 63 56 Total revenues before realized gains (losses) 1,573 1,493 Realized gains (losses) on securities 3 (18 ) Total revenues $ 1,576 $ 1,475 Earnings Before Income Taxes Property and casualty insurance: Underwriting: Specialty Property and transportation $ 43 $ 32 Specialty casualty 15 29 Specialty financial 22 23 Other specialty (1 ) 2 Other lines (1 ) 1 Total underwriting 78 87 Investment and other income, net (a) 93 75 Total property and casualty insurance 171 162 Annuity 96 53 Run-off long-term care and life — (1 ) Other (b) (47 ) (40 ) Total earnings before realized gains (losses) and income taxes 220 174 Realized gains (losses) on securities 3 (18 ) Total earnings before income taxes $ 223 $ 156 (a) Includes pretax income of $13 million (before noncontrolling interest) from the sale of a hotel in the first quarter of 2017. (b) Includes holding company interest and expenses. |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
Assets and liabilities measured at fair value | Assets and liabilities measured and carried at fair value in the financial statements are summarized below (in millions): Level 1 Level 2 Level 3 Total March 31, 2017 Assets: Available for sale (“AFS”) fixed maturities: U.S. Government and government agencies $ 122 $ 158 $ 8 $ 288 States, municipalities and political subdivisions — 6,758 143 6,901 Foreign government — 138 — 138 Residential MBS — 3,541 175 3,716 Commercial MBS — 1,224 29 1,253 Asset-backed securities (“ABS”) — 5,998 594 6,592 Corporate and other 30 16,710 828 17,568 Total AFS fixed maturities 152 34,527 1,777 36,456 Trading fixed maturities 26 333 — 359 Equity securities — AFS and trading 1,383 81 173 1,637 Assets of managed investment entities (“MIE”) 896 4,409 26 5,331 Variable annuity assets (separate accounts) (*) — 614 — 614 Equity index call options — 573 — 573 Other assets — derivatives — — — — Total assets accounted for at fair value $ 2,457 $ 40,537 $ 1,976 $ 44,970 Liabilities: Liabilities of managed investment entities $ 857 $ 4,219 $ 25 $ 5,101 Derivatives in annuity benefits accumulated — — 1,963 1,963 Derivatives in long-term debt — — — — Other liabilities — derivatives — 32 — 32 Total liabilities accounted for at fair value $ 857 $ 4,251 $ 1,988 $ 7,096 December 31, 2016 Assets: Available for sale fixed maturities: U.S. Government and government agencies $ 133 $ 174 $ 8 $ 315 States, municipalities and political subdivisions — 6,641 140 6,781 Foreign government — 136 — 136 Residential MBS — 3,445 190 3,635 Commercial MBS — 1,468 25 1,493 Asset-backed securities — 5,475 484 5,959 Corporate and other 29 15,484 712 16,225 Total AFS fixed maturities 162 32,823 1,559 34,544 Trading fixed maturities 30 329 — 359 Equity securities — AFS and trading 1,305 79 174 1,558 Assets of managed investment entities 380 4,356 29 4,765 Variable annuity assets (separate accounts) (*) — 600 — 600 Equity index call options — 492 — 492 Other assets — derivatives — 1 — 1 Total assets accounted for at fair value $ 1,877 $ 38,680 $ 1,762 $ 42,319 Liabilities: Liabilities of managed investment entities $ 363 $ 4,158 $ 28 $ 4,549 Derivatives in annuity benefits accumulated — — 1,759 1,759 Derivatives in long-term debt — (1 ) — (1 ) Other liabilities — derivatives — 30 — 30 Total liabilities accounted for at fair value $ 363 $ 4,187 $ 1,787 $ 6,337 (*) Variable annuity liabilities equal the fair value of variable annuity assets. |
Unobservable inputs used by management in determining fair value of embedded derivatives | The following table presents information about the unobservable inputs used by management in determining fair value of these embedded derivatives. See Note F — “ Derivatives .” Unobservable Input Range Adjustment for insurance subsidiary’s credit risk 0.2% – 2.8% over the risk free rate Risk margin for uncertainty in cash flows 0.68% reduction in the discount rate Surrenders 3% – 21% of indexed account value Partial surrenders 2% – 10% of indexed account value Annuitizations 0.1% – 1% of indexed account value Deaths 1.5% – 8.0% of indexed account value Budgeted option costs 2.4% – 3.6% of indexed account value |
Changes in balances of Level 3 financial assets | Changes in balances of Level 3 financial assets and liabilities carried at fair value during the first three months of 2017 and 2016 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 December 31, 2016 Net income Other comprehensive income (loss) Purchases and issuances Sales and settlements Transfer into Level 3 Transfer out of Level 3 Balance at March 31, 2017 AFS fixed maturities: U.S. government agency $ 8 $ — $ — $ — $ — $ — $ — $ 8 State and municipal 140 — 3 — — — — 143 Residential MBS 190 1 — 1 (8 ) 7 (16 ) 175 Commercial MBS 25 — — — — 4 — 29 Asset-backed securities 484 — — 104 (11 ) 17 — 594 Corporate and other 712 1 4 120 (38 ) 29 — 828 Total AFS fixed maturities 1,559 2 7 225 (57 ) 57 (16 ) 1,777 Equity securities 174 (6 ) 7 12 — — (14 ) 173 Assets of MIE 29 (1 ) — 2 — — (4 ) 26 Total Level 3 assets $ 1,762 $ (5 ) $ 14 $ 239 $ (57 ) $ 57 $ (34 ) $ 1,976 Embedded derivatives $ (1,759 ) $ (147 ) $ — $ (79 ) $ 22 $ — $ — $ (1,963 ) Total Level 3 liabilities (*) $ (1,759 ) $ (147 ) $ — $ (79 ) $ 22 $ — $ — $ (1,963 ) Total realized/unrealized gains (losses) included in Balance at December 31, 2015 Net income Other comprehensive income (loss) Purchases and issuances Sales and settlements Transfer into Level 3 Transfer out of Level 3 Balance at March 31, 2016 AFS fixed maturities: U.S. government agency $ 15 $ — $ — $ — $ — $ — $ — $ 15 State and municipal 89 — 3 — — — — 92 Residential MBS 224 1 — — (7 ) 11 (16 ) 213 Commercial MBS 39 — — — (1 ) — — 38 Asset-backed securities 470 — (6 ) 4 (8 ) 41 — 501 Corporate and other 633 (2 ) 15 86 (7 ) 5 — 730 Total AFS fixed maturities 1,470 (1 ) 12 90 (23 ) 57 (16 ) 1,589 Equity securities 140 (17 ) 8 12 — 15 — 158 Assets of MIE 26 (2 ) — — — — — 24 Total Level 3 assets $ 1,636 $ (20 ) $ 20 $ 102 $ (23 ) $ 72 $ (16 ) $ 1,771 Embedded derivatives $ (1,369 ) $ (17 ) $ — $ (82 ) $ 18 $ — $ — $ (1,450 ) Total Level 3 liabilities (*) $ (1,369 ) $ (17 ) $ — $ (82 ) $ 18 $ — $ — $ (1,450 ) (*) As discussed previously, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets. |
Changes in balances of Level 3 financial liabilities | Changes in balances of Level 3 financial assets and liabilities carried at fair value during the first three months of 2017 and 2016 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 December 31, 2016 Net income Other comprehensive income (loss) Purchases and issuances Sales and settlements Transfer into Level 3 Transfer out of Level 3 Balance at March 31, 2017 AFS fixed maturities: U.S. government agency $ 8 $ — $ — $ — $ — $ — $ — $ 8 State and municipal 140 — 3 — — — — 143 Residential MBS 190 1 — 1 (8 ) 7 (16 ) 175 Commercial MBS 25 — — — — 4 — 29 Asset-backed securities 484 — — 104 (11 ) 17 — 594 Corporate and other 712 1 4 120 (38 ) 29 — 828 Total AFS fixed maturities 1,559 2 7 225 (57 ) 57 (16 ) 1,777 Equity securities 174 (6 ) 7 12 — — (14 ) 173 Assets of MIE 29 (1 ) — 2 — — (4 ) 26 Total Level 3 assets $ 1,762 $ (5 ) $ 14 $ 239 $ (57 ) $ 57 $ (34 ) $ 1,976 Embedded derivatives $ (1,759 ) $ (147 ) $ — $ (79 ) $ 22 $ — $ — $ (1,963 ) Total Level 3 liabilities (*) $ (1,759 ) $ (147 ) $ — $ (79 ) $ 22 $ — $ — $ (1,963 ) Total realized/unrealized gains (losses) included in Balance at December 31, 2015 Net income Other comprehensive income (loss) Purchases and issuances Sales and settlements Transfer into Level 3 Transfer out of Level 3 Balance at March 31, 2016 AFS fixed maturities: U.S. government agency $ 15 $ — $ — $ — $ — $ — $ — $ 15 State and municipal 89 — 3 — — — — 92 Residential MBS 224 1 — — (7 ) 11 (16 ) 213 Commercial MBS 39 — — — (1 ) — — 38 Asset-backed securities 470 — (6 ) 4 (8 ) 41 — 501 Corporate and other 633 (2 ) 15 86 (7 ) 5 — 730 Total AFS fixed maturities 1,470 (1 ) 12 90 (23 ) 57 (16 ) 1,589 Equity securities 140 (17 ) 8 12 — 15 — 158 Assets of MIE 26 (2 ) — — — — — 24 Total Level 3 assets $ 1,636 $ (20 ) $ 20 $ 102 $ (23 ) $ 72 $ (16 ) $ 1,771 Embedded derivatives $ (1,369 ) $ (17 ) $ — $ (82 ) $ 18 $ — $ — $ (1,450 ) Total Level 3 liabilities (*) $ (1,369 ) $ (17 ) $ — $ (82 ) $ 18 $ — $ — $ (1,450 ) (*) As discussed previously, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets. |
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 Fair Value Value Total Level 1 Level 2 Level 3 March 31, 2017 Financial assets: Cash and cash equivalents $ 1,890 $ 1,890 $ 1,890 $ — $ — Mortgage loans 1,159 1,158 — — 1,158 Policy loans 190 190 — — 190 Total financial assets not accounted for at fair value $ 3,239 $ 3,238 $ 1,890 $ — $ 1,348 Financial liabilities: Annuity benefits accumulated (*) $ 30,799 $ 29,997 $ — $ — $ 29,997 Long-term debt 1,283 1,382 — 1,379 3 Total financial liabilities not accounted for at fair value $ 32,082 $ 31,379 $ — $ 1,379 $ 30,000 December 31, 2016 Financial assets: Cash and cash equivalents $ 2,107 $ 2,107 $ 2,107 $ — $ — Mortgage loans 1,147 1,146 — — 1,146 Policy loans 192 192 — — 192 Total financial assets not accounted for at fair value $ 3,446 $ 3,445 $ 2,107 $ — $ 1,338 Financial liabilities: Annuity benefits accumulated (*) $ 29,703 $ 28,932 $ — $ — $ 28,932 Long-term debt 1,284 1,356 — 1,353 3 Total financial liabilities not accounted for at fair value $ 30,987 $ 30,288 $ — $ 1,353 $ 28,935 (*) Excludes $203 million and $204 million of life contingent annuities in the payout phase at March 31, 2017 and December 31, 2016 , respectively. |
Investments (Tables)
Investments (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Investments, Debt and Equity Securities [Abstract] | |
Available for sale fixed maturities and equity securities | Available for sale fixed maturities and equity securities at March 31, 2017 and December 31, 2016 , consisted of the following (in millions): March 31, 2017 December 31, 2016 Amortized Cost Gross Unrealized Net Unrealized Fair Value Amortized Cost Gross Unrealized Net Unrealized Fair Value Gains Losses Gains Losses Fixed maturities: U.S. Government and government agencies $ 289 $ 2 $ (3 ) $ (1 ) $ 288 $ 315 $ 3 $ (3 ) $ — $ 315 States, municipalities and political subdivisions 6,736 213 (48 ) 165 6,901 6,650 200 (69 ) 131 6,781 Foreign government 133 5 — 5 138 131 5 — 5 136 Residential MBS 3,432 295 (11 ) 284 3,716 3,367 281 (13 ) 268 3,635 Commercial MBS 1,211 43 (1 ) 42 1,253 1,446 49 (2 ) 47 1,493 Asset-backed securities 6,548 74 (30 ) 44 6,592 5,962 43 (46 ) (3 ) 5,959 Corporate and other 17,096 544 (72 ) 472 17,568 15,864 473 (112 ) 361 16,225 Total fixed maturities $ 35,445 $ 1,176 $ (165 ) $ 1,011 $ 36,456 $ 33,735 $ 1,054 $ (245 ) $ 809 $ 34,544 Equity Securities: Common stocks $ 884 $ 216 $ (21 ) $ 195 $ 1,079 $ 879 $ 160 $ (23 ) $ 137 $ 1,016 Perpetual preferred stocks 472 31 (3 ) 28 500 472 21 (7 ) 14 486 Total equity securities $ 1,356 $ 247 $ (24 ) $ 223 $ 1,579 $ 1,351 $ 181 $ (30 ) $ 151 $ 1,502 |
Available for sale securities in a continuous unrealized loss position | The following tables show gross unrealized losses (dollars in millions) on fixed maturities and equity securities by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2017 and December 31, 2016 . 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 March 31, 2017 Fixed maturities: U.S. Government and government agencies $ (1 ) $ 152 99 % $ (2 ) $ 8 80 % States, municipalities and political subdivisions (44 ) 1,925 98 % (4 ) 37 90 % Foreign government — 4 100 % — — — % Residential MBS (6 ) 455 99 % (5 ) 188 97 % Commercial MBS (1 ) 71 99 % — — — % Asset-backed securities (14 ) 1,313 99 % (16 ) 512 97 % Corporate and other (57 ) 2,799 98 % (15 ) 298 95 % Total fixed maturities $ (123 ) $ 6,719 98 % $ (42 ) $ 1,043 96 % Equity securities: Common stocks $ (21 ) $ 138 87 % $ — $ — — % Perpetual preferred stocks (2 ) 85 98 % (1 ) 6 86 % Total equity securities $ (23 ) $ 223 91 % $ (1 ) $ 6 86 % December 31, 2016 Fixed maturities: U.S. Government and government agencies $ (1 ) $ 153 99 % $ (2 ) $ 8 80 % States, municipalities and political subdivisions (64 ) 2,289 97 % (5 ) 44 90 % Residential MBS (7 ) 502 99 % (6 ) 162 96 % Commercial MBS (2 ) 121 98 % — — — % Asset-backed securities (29 ) 1,737 98 % (17 ) 634 97 % Corporate and other (93 ) 3,849 98 % (19 ) 312 94 % Total fixed maturities $ (196 ) $ 8,651 98 % $ (49 ) $ 1,160 96 % Equity securities: Common stocks $ (23 ) $ 215 90 % $ — $ — — % Perpetual preferred stocks (6 ) 135 96 % (1 ) 6 86 % Total equity securities $ (29 ) $ 350 92 % $ (1 ) $ 6 86 % |
Roll forward of cumulative credit portion of other-than-temporary impairments on fixed maturity securities | A progression of the credit portion of other-than-temporary impairments on fixed maturity securities for which the non-credit portion of an impairment has been recognized in other comprehensive income is shown below (in millions): 2017 2016 Balance at January 1 $ 153 $ 160 Additional credit impairments on: Previously impaired securities — 2 Securities without prior impairments — — Reductions due to sales or redemptions (7 ) (2 ) Balance at March 31 $ 146 $ 160 |
Available for sale fixed maturity securities by contractual maturity date | The table below sets forth the scheduled maturities of available for sale fixed maturities as of March 31, 2017 (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 Amount % Maturity One year or less $ 1,038 $ 1,051 3 % After one year through five years 6,034 6,300 17 % After five years through ten years 12,717 12,990 36 % After ten years 4,465 4,554 12 % 24,254 24,895 68 % ABS (average life of approximately 5 years) 6,548 6,592 18 % MBS (average life of approximately 4-1/2 years) 4,643 4,969 14 % Total $ 35,445 $ 36,456 100 % |
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 March 31, 2017 Net unrealized gain on: Fixed maturities — annuity segment (*) $ 800 $ (280 ) $ 520 Fixed maturities — all other 211 (74 ) 137 Total fixed maturities 1,011 (354 ) 657 Equity securities 223 (78 ) 145 Total investments 1,234 (432 ) 802 Deferred policy acquisition costs — annuity segment (333 ) 117 (216 ) Annuity benefits accumulated (103 ) 36 (67 ) Unearned revenue 15 (5 ) 10 Total net unrealized gain on marketable securities $ 813 $ (284 ) $ 529 December 31, 2016 Net unrealized gain on: Fixed maturities — annuity segment (*) $ 640 $ (224 ) $ 416 Fixed maturities — all other 169 (59 ) 110 Total fixed maturities 809 (283 ) 526 Equity securities 151 (53 ) 98 Total investments 960 (336 ) 624 Deferred policy acquisition costs — annuity segment (273 ) 96 (177 ) Annuity benefits accumulated (78 ) 27 (51 ) Unearned revenue 13 (5 ) 8 Total net unrealized gain on marketable securities $ 622 $ (218 ) $ 404 (*) Net unrealized gains on fixed maturity investments supporting AFG’s annuity benefits accumulated. |
Net investment income earned and investment expenses incurred | The following table shows (in millions) investment income earned and investment expenses incurred. Three months ended March 31, 2017 2016 Investment income: Fixed maturities $ 389 $ 367 Equity securities 21 19 Equity in earnings of partnerships and similar investments 10 11 Other 20 19 Gross investment income 440 416 Investment expenses (5 ) (5 ) Net investment income $ 435 $ 411 |
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) related to fixed maturity and equity security investments are summarized as follows (in millions): Three months ended March 31, 2017 Three months ended March 31, 2016 Realized gains (losses) Realized gains (losses) Before Impairments Impairments Total Change in Unrealized Before Impairments Impairments Total Change in Unrealized Fixed maturities $ 5 $ — $ 5 $ 202 $ 14 $ (16 ) $ (2 ) $ 453 Equity securities 2 (9 ) (7 ) 72 23 (41 ) (18 ) (23 ) Mortgage loans and other investments 3 — 3 — — — — — Other (*) (1 ) 3 2 (83 ) (3 ) 5 2 (220 ) Total pretax 9 (6 ) 3 191 34 (52 ) (18 ) 210 Tax effects (3 ) 2 (1 ) (66 ) (12 ) 19 7 (74 ) Noncontrolling interests — — — — — 1 1 (2 ) Net of tax and noncontrolling interests $ 6 $ (4 ) $ 2 $ 125 $ 22 $ (32 ) $ (10 ) $ 134 (*) Primarily adjustments to deferred policy acquisition costs and reserves related to the annuity business. |
Gross realized gains and losses on available for sale fixed maturity and equity security investments | Gross realized gains and losses (excluding impairment write-downs and mark-to-market of derivatives) on available for sale fixed maturity and equity security investment transactions included in the statement of cash flows consisted of the following (in millions): Three months ended March 31, 2017 2016 Fixed maturities: Gross gains $ 5 $ 14 Gross losses — (1 ) Equity securities: Gross gains 4 25 Gross losses (2 ) — |
Derivatives (Tables)
Derivatives (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives included in Balance Sheet at fair value | The following derivatives that do not qualify for hedge accounting under GAAP are included in AFG’s Balance Sheet at fair value (in millions): March 31, 2017 December 31, 2016 Derivative Balance Sheet Line Asset Liability Asset Liability MBS with embedded derivatives Fixed maturities $ 104 $ — $ 107 $ — Public company warrants Equity securities 4 — 4 — Fixed-indexed annuities (embedded derivative) Annuity benefits accumulated — 1,963 — 1,759 Equity index call options Equity index call options 573 — 492 — Reinsurance contracts (embedded derivative) Other liabilities — 8 — 8 $ 681 $ 1,971 $ 603 $ 1,767 |
Summary of gain (loss) included in the Statement of Earnings for changes in the fair value of derivatives | The following table summarizes the gain (loss) included in AFG’s Statement of Earnings for changes in the fair value of derivatives that do not qualify for hedge accounting for the first three months of 2017 and 2016 (in millions): Three months ended March 31, Derivative Statement of Earnings Line 2017 2016 MBS with embedded derivatives Realized gains on securities $ — $ 1 Public company warrants Realized gains on securities — (2 ) Fixed-indexed annuities (embedded derivative) Annuity benefits (147 ) (17 ) Equity index call options Annuity benefits 141 (40 ) Reinsurance contracts (embedded derivative) Net investment income (1 ) (3 ) $ (7 ) $ (61 ) |
Deferred Policy Acquisition C28
Deferred Policy Acquisition Costs (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Deferred Policy Acquisition Costs Disclosures [Abstract] | |
Deferred Policy Acquisition Costs Details | A progression of deferred policy acquisition costs is presented below (in millions): P&C Annuity and Run-off Long-term Care and Life Deferred Deferred Sales Consolidated Costs Costs Inducements PVFP Subtotal Unrealized Total Total Balance at December 31, 2016 $ 238 $ 1,110 $ 110 $ 46 $ 1,266 $ (265 ) $ 1,001 $ 1,239 Additions 139 67 1 — 68 — 68 207 Amortization: Periodic amortization (135 ) (42 ) (6 ) (2 ) (50 ) — (50 ) (185 ) Included in realized gains — 2 — — 2 — 2 2 Foreign currency translation 1 — — — — — — 1 Change in unrealized — — — — — (59 ) (59 ) (59 ) Balance at March 31, 2017 $ 243 $ 1,137 $ 105 $ 44 $ 1,286 $ (324 ) $ 962 $ 1,205 Balance at December 31, 2015 $ 226 $ 1,018 $ 119 $ 55 $ 1,192 $ (234 ) $ 958 $ 1,184 Additions 132 68 5 — 73 — 73 205 Amortization: Periodic amortization (134 ) (25 ) (5 ) (2 ) (32 ) — (32 ) (166 ) Included in realized gains — 2 — — 2 — 2 2 Change in unrealized — — — — — (170 ) (170 ) (170 ) Balance at March 31, 2016 $ 224 $ 1,063 $ 119 $ 53 $ 1,235 $ (404 ) $ 831 $ 1,055 |
Managed Investment Entities (Ta
Managed Investment Entities (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
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 March 31, 2017 2016 Investment in CLO tranches at end of period $ 230 $ 250 Gains (losses) on change in fair value of assets/liabilities (a): Assets 5 (1 ) Liabilities (5 ) (12 ) Management fees paid to AFG 4 4 CLO earnings (losses) attributable to AFG shareholders (b) 6 (7 ) (a) Included in revenues in AFG’s Statement of Earnings. (b) Included in earnings before income taxes in AFG’s Statement of Earnings. |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of long-term debt instruments | Long-term debt consisted of the following (in millions): March 31, 2017 December 31, 2016 Principal Discount and Issue Costs Carrying Value Principal Discount and Issue Costs Carrying Value Direct Senior Obligations of AFG: 9-7/8% Senior Notes due June 2019 $ 350 $ (1 ) $ 349 $ 350 $ (1 ) $ 349 3.50% Senior Notes due August 2026 300 (3 ) 297 300 (3 ) 297 6-3/8% Senior Notes due June 2042 230 (7 ) 223 230 (7 ) 223 5-3/4% Senior Notes due August 2042 125 (4 ) 121 125 (4 ) 121 Other 3 — 3 3 — 3 1,008 (15 ) 993 1,008 (15 ) 993 Direct Subordinated Obligations of AFG: 6-1/4% Subordinated Debentures due September 2054 150 (5 ) 145 150 (5 ) 145 6% Subordinated Debentures due November 2055 150 (5 ) 145 150 (5 ) 145 300 (10 ) 290 300 (10 ) 290 $ 1,308 $ (25 ) $ 1,283 $ 1,308 $ (25 ) $ 1,283 |
Shareholders' Equity (Tables)
Shareholders' Equity (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
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 AOCI Beginning Balance Pretax Tax Net of tax Attributable to noncontrolling interests Attributable to shareholders AOCI Ending Balance Three months ended March 31, 2017 Net unrealized gains on securities: Unrealized holding gains on securities arising during the period $ 191 $ (66 ) $ 125 $ — $ 125 Reclassification adjustment for realized (gains) losses included in net earnings (a) — — — — — Total net unrealized gains on securities (b) $ 404 191 (66 ) 125 — 125 $ 529 Net unrealized losses on cash flow hedges (7 ) (2 ) 1 (1 ) — (1 ) (8 ) Foreign currency translation adjustments (15 ) — — — — — (15 ) Pension and other postretirement plans adjustments (7 ) — — — — — (7 ) Total $ 375 $ 189 $ (65 ) $ 124 $ — $ 124 $ 499 Three months ended March 31, 2016 Net unrealized gains on securities: Unrealized holding gains on securities arising during the period $ 192 $ (67 ) $ 125 $ (1 ) $ 124 Reclassification adjustment for realized (gains) losses included in net earnings (a) 18 (7 ) 11 (1 ) 10 Total net unrealized gains on securities $ 332 210 (74 ) 136 (2 ) 134 $ 466 Net unrealized gains on cash flow hedges 1 5 (2 ) 3 — 3 4 Foreign currency translation adjustments (22 ) 3 3 6 — 6 (16 ) Pension and other postretirement plans adjustments (7 ) 1 — 1 — 1 (6 ) Total $ 304 $ 219 $ (73 ) $ 146 $ (2 ) $ 144 $ 448 (a) The reclassification adjustment out of net unrealized gains on securities affected the following lines in AFG’s Statement of Earnings: OCI component Affected line in the statement of earnings Pretax Realized gains (losses) on securities Tax Provision for income taxes Attributable to noncontrolling interests Net earnings (loss) attributable to noncontrolling interests (b) Includes net unrealized gains of $52 million at both March 31, 2017 and December 31, 2016 related to securities for which only the credit portion of an other-than-temporary impairment has been recorded in earnings. |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
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 at the statutory rate of 35% to the provision for income taxes as shown in AFG’s Statement of Earnings (dollars in millions): Three months ended March 31, 2017 2016 Amount % of EBT Amount % of EBT Earnings before income taxes (“EBT”) $ 223 $ 156 Income taxes at statutory rate $ 78 35 % $ 55 35 % Effect of: Tax exempt interest (6 ) (3 %) (7 ) (4 %) Stock-based compensation (6 ) (3 %) — — % Change in valuation allowance (2 ) (1 %) 1 1 % Subsidiaries not in AFG’s tax return — — % 1 — % Other 4 2 % 2 1 % Provision for income taxes as shown in the statement of earnings $ 68 30 % $ 52 33 % |
Insurance (Tables)
Insurance (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
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 three months of 2017 and 2016 (in millions): Three months ended March 31, 2017 2016 Balance at beginning of year $ 8,563 $ 8,127 Less reinsurance recoverables, net of allowance 2,302 2,201 Net liability at beginning of year 6,261 5,926 Provision for losses and LAE occurring in the current period 637 609 Net increase (decrease) in the provision for claims of prior years (28 ) (28 ) Total losses and LAE incurred 609 581 Payments for losses and LAE of: Current year (84 ) (80 ) Prior years (470 ) (467 ) Total payments (554 ) (547 ) Foreign currency translation and other 8 11 Net liability at end of period 6,324 5,971 Add back reinsurance recoverables, net of allowance 2,297 2,137 Gross unpaid losses and LAE included in the balance sheet at end of period $ 8,621 $ 8,108 |
Accounting Policies - Narrative
Accounting Policies - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Jan. 01, 2016 | |
Significant Accounting Policies [Line Items] | |||
Weighted average common shares adjustment related to stock-based compensation (shares) | 2,100,000 | 1,600,000 | |
Anti-dilutive potential common shares related to stock-based compensation plans (shares) | 0 | 800,000 | |
Maturities of short term investments | 3 months | ||
Retained Earnings | Maximum | |||
Significant Accounting Policies [Line Items] | |||
Cumulative effect of accounting change | $ 1 |
Accounting Policies - Narrati35
Accounting Policies - Narrative on Revenue Recognition Guidance (Details) | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Standards Update 2014-09 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Expected effect on consolidated revenues under new revenue recognition guidance effective in 2018 | 2.00% |
Acquisition of Business - Narra
Acquisition of Business - Narrative on Acquisition of Subsidiary (Details) - National Interstate $ / shares in Units, $ in Millions | Nov. 10, 2016USD ($)$ / shares |
Business Acquisition | |
Percentage ownership of National Interstate by noncontrolling owners prior to acquisition | 49.00% |
Payments to acquire additional interest in subsidiaries | $ | $ 315 |
Acquisition price per share (USD per share) | $ 32 |
Cash dividend paid (USD per share) | $ 0.50 |
Segments of Operations - Narrat
Segments of Operations - Narrative (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2017USD ($)segment | |
Segment Reporting Information [Line Items] | |
Number of segments | segment | 4 |
Property and Casualty Insurance | Real Estate Investment | |
Segment Reporting Information [Line Items] | |
Pretax income from the sale of a hotel | $ | $ 13 |
Segments of Operations - Revenu
Segments of Operations - Revenues by segment and sub-segment (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | ||
Segment Reporting Information [Line Items] | |||
Total premiums earned | $ 1,022 | $ 998 | |
Net investment income | 435 | 411 | |
Other income | 59 | 46 | |
Revenues before realized gains (losses) | 1,573 | 1,493 | |
Realized gains (losses) on securities | 3 | (18) | |
Total revenues | 1,576 | 1,475 | |
Property and Casualty Insurance | |||
Segment Reporting Information [Line Items] | |||
Total premiums earned | 1,022 | 998 | |
Net investment income | 86 | 83 | |
Other income | [1] | 16 | 3 |
Revenues before realized gains (losses) | 1,124 | 1,084 | |
Annuity | |||
Segment Reporting Information [Line Items] | |||
Net investment income | 347 | 315 | |
Other income | 27 | 26 | |
Revenues before realized gains (losses) | 374 | 341 | |
Run-off Long-term Care and Life | |||
Segment Reporting Information [Line Items] | |||
Revenues before realized gains (losses) | 12 | 12 | |
Other | |||
Segment Reporting Information [Line Items] | |||
Revenues before realized gains (losses) | 63 | 56 | |
Specialty Property and transportation | Property and Casualty Insurance | |||
Segment Reporting Information [Line Items] | |||
Total premiums earned | 342 | 339 | |
Specialty casualty | Property and Casualty Insurance | |||
Segment Reporting Information [Line Items] | |||
Total premiums earned | 508 | 502 | |
Specialty financial | Property and Casualty Insurance | |||
Segment Reporting Information [Line Items] | |||
Total premiums earned | 147 | 132 | |
Other specialty | Property and Casualty Insurance | |||
Segment Reporting Information [Line Items] | |||
Total premiums earned | $ 25 | $ 25 | |
[1] | Includes pretax income of $13 million (before noncontrolling interest) from the sale of a hotel in the first quarter of 2017. |
Segments of Operations - Earnin
Segments of Operations - Earnings before income taxes by segment and sub-segment (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | ||
Segment Reporting Information [Line Items] | |||
Earnings before realized gains (losses) and income taxes | $ 220 | $ 174 | |
Realized gains (losses) on securities | 3 | (18) | |
Earnings before income taxes | 223 | 156 | |
Property and Casualty Insurance | |||
Segment Reporting Information [Line Items] | |||
Property and casualty insurance underwriting | 78 | 87 | |
Investment and other income, net | [1] | 93 | 75 |
Earnings before realized gains (losses) and income taxes | 171 | 162 | |
Annuity | |||
Segment Reporting Information [Line Items] | |||
Earnings before realized gains (losses) and income taxes | 96 | 53 | |
Run-off Long-term Care and Life | |||
Segment Reporting Information [Line Items] | |||
Earnings before realized gains (losses) and income taxes | 0 | (1) | |
Other | |||
Segment Reporting Information [Line Items] | |||
Earnings before realized gains (losses) and income taxes | [2] | (47) | (40) |
Specialty Property and transportation | Property and Casualty Insurance | |||
Segment Reporting Information [Line Items] | |||
Property and casualty insurance underwriting | 43 | 32 | |
Specialty casualty | Property and Casualty Insurance | |||
Segment Reporting Information [Line Items] | |||
Property and casualty insurance underwriting | 15 | 29 | |
Specialty financial | Property and Casualty Insurance | |||
Segment Reporting Information [Line Items] | |||
Property and casualty insurance underwriting | 22 | 23 | |
Other specialty | Property and Casualty Insurance | |||
Segment Reporting Information [Line Items] | |||
Property and casualty insurance underwriting | (1) | 2 | |
Other Lines | Property and Casualty Insurance | |||
Segment Reporting Information [Line Items] | |||
Property and casualty insurance underwriting | $ (1) | $ 1 | |
[1] | Includes pretax income of $13 million (before noncontrolling interest) from the sale of a hotel in the first quarter of 2017. | ||
[2] | Includes holding company interest and expenses. |
Fair Value Measurements - Narra
Fair Value Measurements - Narrative (Details) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017USD ($)professionalstock | Mar. 31, 2016USD ($)stock | Dec. 31, 2016USD ($) | |
Fair Value Measurements (Textual) [Abstract] | |||
AFG's internal investment professionals | professional | 25 | ||
Number of stocks transferred from Level 1 to Level 2 | stock | 0 | ||
Number of stocks transferred from Level 2 to Level 1 | stock | 0 | ||
Level 3 assets as a percentage of total assets measured at fair value | 4.00% | ||
Percentage of level 3 assets that were priced using non-binding broker quotes | 75.00% | ||
Level 3 assets that were priced using non-binding broker quotes | $ 1,490 | ||
Life contingent annuities | $ 203 | $ 204 | |
Maximum | |||
Fair Value Measurements (Textual) [Abstract] | |||
Percentage of internally developed Level 3 asset fair values to Shareholders' equity (are less than) | 10.00% | ||
Fixed-indexed annuties (embedded derivative), majority of future years | Minimum | |||
Fair Value Measurements (Textual) [Abstract] | |||
Unobservable input surrenders used in Level 3 fair value determination | 6.00% | ||
Fixed-indexed annuties (embedded derivative), majority of future years | Maximum | |||
Fair Value Measurements (Textual) [Abstract] | |||
Unobservable input surrenders used in Level 3 fair value determination | 10.00% | ||
Fixed-indexed annuities (embedded derivative) | |||
Fair Value Measurements (Textual) [Abstract] | |||
Fair value of derivatives in annuity benefits accumulated measured using a discounted cash flow approach | $ 1,960 | ||
Fixed-indexed annuities (embedded derivative) | Minimum | |||
Fair Value Measurements (Textual) [Abstract] | |||
Unobservable input surrenders used in Level 3 fair value determination | 3.00% | ||
Fixed-indexed annuities (embedded derivative) | Maximum | |||
Fair Value Measurements (Textual) [Abstract] | |||
Unobservable input surrenders used in Level 3 fair value determination | 21.00% | ||
Perpetual preferred stocks | |||
Fair Value Measurements (Textual) [Abstract] | |||
Number of stocks transferred from Level 1 to Level 2 | stock | 3 | ||
Number of stocks transferred from Level 2 to Level 1 | stock | 1 | ||
Fair value of assets transferred from Level 2 to Level 1, during the first three months | $ 8 | ||
Fair value of assets transferred from Level 1 to Level 2, during the first three months | $ 6 |
Fair Value Measurements - Asset
Fair Value Measurements - Assets and liabilities measured and carried at fair value in the financial statements (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 | |
Assets: | |||
Available for sale (AFS) fixed maturities | $ 36,456 | $ 34,544 | |
Trading fixed maturities | 359 | 359 | |
Assets of managed investment entities (“MIE”) | 5,331 | 4,765 | |
Variable annuity assets (separate accounts) | [1] | 614 | 600 |
Derivatives included in other investments and other assets | 573 | 492 | |
Total assets accounted for at fair value | 44,970 | 42,319 | |
Liabilities: | |||
Liabilities of managed investment entities | 5,101 | 4,549 | |
Total liabilities accounted for at fair value | 7,096 | 6,337 | |
Annuity benefits accumulated | |||
Liabilities: | |||
Derivatives included in annuity benefits accumulated, long-term debt, and other liabilities | 1,963 | 1,759 | |
Derivatives in long-term debt | |||
Liabilities: | |||
Derivatives included in annuity benefits accumulated, long-term debt, and other liabilities | 0 | (1) | |
Other liabilities — derivatives | |||
Liabilities: | |||
Derivatives included in annuity benefits accumulated, long-term debt, and other liabilities | 32 | 30 | |
Fixed maturities | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 36,456 | 34,544 | |
Trading fixed maturities | 359 | 359 | |
U.S. Government and government agencies | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 288 | 315 | |
States, municipalities and political subdivisions | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 6,901 | 6,781 | |
Foreign government | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 138 | 136 | |
Residential MBS | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 3,716 | 3,635 | |
Commercial MBS | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 1,253 | 1,493 | |
Asset-backed securities (“ABS”) | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 6,592 | 5,959 | |
Corporate and other | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 17,568 | 16,225 | |
Equity securities | |||
Assets: | |||
Equity securities — AFS and trading | 1,637 | 1,558 | |
Other assets — derivatives | |||
Assets: | |||
Derivatives included in other investments and other assets | 0 | 1 | |
Level 1 | |||
Assets: | |||
Assets of managed investment entities (“MIE”) | 896 | 380 | |
Variable annuity assets (separate accounts) | [1] | 0 | 0 |
Total assets accounted for at fair value | 2,457 | 1,877 | |
Liabilities: | |||
Liabilities of managed investment entities | 857 | 363 | |
Total liabilities accounted for at fair value | 857 | 363 | |
Level 1 | Annuity benefits accumulated | |||
Liabilities: | |||
Derivatives included in annuity benefits accumulated, long-term debt, and other liabilities | 0 | 0 | |
Level 1 | Derivatives in long-term debt | |||
Liabilities: | |||
Derivatives included in annuity benefits accumulated, long-term debt, and other liabilities | 0 | 0 | |
Level 1 | Other liabilities — derivatives | |||
Liabilities: | |||
Derivatives included in annuity benefits accumulated, long-term debt, and other liabilities | 0 | 0 | |
Level 1 | Fixed maturities | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 152 | 162 | |
Trading fixed maturities | 26 | 30 | |
Level 1 | U.S. Government and government agencies | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 122 | 133 | |
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 | Asset-backed securities (“ABS”) | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 0 | 0 | |
Level 1 | Corporate and other | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 30 | 29 | |
Level 1 | Equity securities | |||
Assets: | |||
Equity securities — AFS and trading | 1,383 | 1,305 | |
Level 1 | Other assets — derivatives | |||
Assets: | |||
Derivatives included in other investments and other assets | 0 | 0 | |
Level 2 | |||
Assets: | |||
Assets of managed investment entities (“MIE”) | 4,409 | 4,356 | |
Variable annuity assets (separate accounts) | [1] | 614 | 600 |
Total assets accounted for at fair value | 40,537 | 38,680 | |
Liabilities: | |||
Liabilities of managed investment entities | 4,219 | 4,158 | |
Total liabilities accounted for at fair value | 4,251 | 4,187 | |
Level 2 | Annuity benefits accumulated | |||
Liabilities: | |||
Derivatives included in annuity benefits accumulated, long-term debt, and other liabilities | 0 | 0 | |
Level 2 | Derivatives in long-term debt | |||
Liabilities: | |||
Derivatives included in annuity benefits accumulated, long-term debt, and other liabilities | 0 | (1) | |
Level 2 | Other liabilities — derivatives | |||
Liabilities: | |||
Derivatives included in annuity benefits accumulated, long-term debt, and other liabilities | 32 | 30 | |
Level 2 | Fixed maturities | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 34,527 | 32,823 | |
Trading fixed maturities | 333 | 329 | |
Level 2 | U.S. Government and government agencies | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 158 | 174 | |
Level 2 | States, municipalities and political subdivisions | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 6,758 | 6,641 | |
Level 2 | Foreign government | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 138 | 136 | |
Level 2 | Residential MBS | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 3,541 | 3,445 | |
Level 2 | Commercial MBS | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 1,224 | 1,468 | |
Level 2 | Asset-backed securities (“ABS”) | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 5,998 | 5,475 | |
Level 2 | Corporate and other | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 16,710 | 15,484 | |
Level 2 | Equity securities | |||
Assets: | |||
Equity securities — AFS and trading | 81 | 79 | |
Level 2 | Other assets — derivatives | |||
Assets: | |||
Derivatives included in other investments and other assets | 0 | 1 | |
Level 3 | |||
Assets: | |||
Assets of managed investment entities (“MIE”) | 26 | 29 | |
Variable annuity assets (separate accounts) | [1] | 0 | 0 |
Total assets accounted for at fair value | 1,976 | 1,762 | |
Liabilities: | |||
Liabilities of managed investment entities | 25 | 28 | |
Total liabilities accounted for at fair value | 1,988 | 1,787 | |
Level 3 | Annuity benefits accumulated | |||
Liabilities: | |||
Derivatives included in annuity benefits accumulated, long-term debt, and other liabilities | 1,963 | 1,759 | |
Level 3 | Derivatives in long-term debt | |||
Liabilities: | |||
Derivatives included in annuity benefits accumulated, long-term debt, and other liabilities | 0 | 0 | |
Level 3 | Other liabilities — derivatives | |||
Liabilities: | |||
Derivatives included in annuity benefits accumulated, long-term debt, and other liabilities | 0 | 0 | |
Level 3 | Fixed maturities | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 1,777 | 1,559 | |
Trading fixed maturities | 0 | 0 | |
Level 3 | U.S. Government and government agencies | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 8 | 8 | |
Level 3 | States, municipalities and political subdivisions | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 143 | 140 | |
Level 3 | Foreign government | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 0 | 0 | |
Level 3 | Residential MBS | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 175 | 190 | |
Level 3 | Commercial MBS | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 29 | 25 | |
Level 3 | Asset-backed securities (“ABS”) | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 594 | 484 | |
Level 3 | Corporate and other | |||
Assets: | |||
Available for sale (AFS) fixed maturities | 828 | 712 | |
Level 3 | Equity securities | |||
Assets: | |||
Equity securities — AFS and trading | 173 | 174 | |
Level 3 | Other assets — derivatives | |||
Assets: | |||
Derivatives included in other investments and other assets | 0 | 0 | |
Equity index call options | Equity index call options | |||
Assets: | |||
Derivatives included in other investments and other assets | 573 | 492 | |
Equity index call options | Level 1 | Equity index call options | |||
Assets: | |||
Derivatives included in other investments and other assets | 0 | 0 | |
Equity index call options | Level 2 | Equity index call options | |||
Assets: | |||
Derivatives included in other investments and other assets | 573 | 492 | |
Equity index call options | Level 3 | Equity index call options | |||
Assets: | |||
Derivatives included in other investments and other assets | $ 0 | $ 0 | |
[1] | Variable annuity liabilities equal the fair value of variable annuity assets. |
Fair Value Measurements - Unobs
Fair Value Measurements - Unobservable inputs used in determining fair value of embedded derivatives (Details) - Embedded derivatives | 3 Months Ended |
Mar. 31, 2017 | |
Unobservable inputs used by management in determining fair value of embedded derivatives | |
Risk margin for uncertainty in cash flows | 0.68% |
Minimum | |
Unobservable inputs used by management in determining fair value of embedded derivatives | |
Adjustment for insurance subsidiary's credit risk | 0.20% |
Surrenders | 3.00% |
Partial surrenders | 2.00% |
Annuitizations | 0.10% |
Deaths | 1.50% |
Budgeted option costs | 2.40% |
Maximum | |
Unobservable inputs used by management in determining fair value of embedded derivatives | |
Adjustment for insurance subsidiary's credit risk | 2.80% |
Surrenders | 21.00% |
Partial surrenders | 10.00% |
Annuitizations | 1.00% |
Deaths | 8.00% |
Budgeted option costs | 3.60% |
Fair Value Measurements - Chang
Fair Value Measurements - Changes in balances of Level 3 financial assets carried at fair value (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward] | ||
Financial assets, Beginning Balance | $ 1,762 | $ 1,636 |
Total realized/unrealized gains (losses) included in Net income | (5) | (20) |
Total realized/unrealized gains (losses) included in other comprehensive income (loss) | 14 | 20 |
Purchases and issuances | 239 | 102 |
Sales and settlements | (57) | (23) |
Transfer into Level 3 | 57 | 72 |
Transfer out of Level 3 | (34) | (16) |
Financial assets, Ending Balance | 1,976 | 1,771 |
Fixed maturities | ||
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward] | ||
Financial assets, Beginning Balance | 1,559 | 1,470 |
Total realized/unrealized gains (losses) included in Net income | 2 | (1) |
Total realized/unrealized gains (losses) included in other comprehensive income (loss) | 7 | 12 |
Purchases and issuances | 225 | 90 |
Sales and settlements | (57) | (23) |
Transfer into Level 3 | 57 | 57 |
Transfer out of Level 3 | (16) | (16) |
Financial assets, Ending Balance | 1,777 | 1,589 |
U.S. government agency | ||
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward] | ||
Financial assets, Beginning Balance | 8 | 15 |
Total realized/unrealized gains (losses) included in Net income | 0 | 0 |
Total realized/unrealized gains (losses) included in other comprehensive income (loss) | 0 | 0 |
Purchases and issuances | 0 | 0 |
Sales and settlements | 0 | 0 |
Transfer into Level 3 | 0 | 0 |
Transfer out of Level 3 | 0 | 0 |
Financial assets, Ending Balance | 8 | 15 |
State and municipal | ||
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward] | ||
Financial assets, Beginning Balance | 140 | 89 |
Total realized/unrealized gains (losses) included in Net income | 0 | 0 |
Total realized/unrealized gains (losses) included in other comprehensive income (loss) | 3 | 3 |
Purchases and issuances | 0 | 0 |
Sales and settlements | 0 | 0 |
Transfer into Level 3 | 0 | 0 |
Transfer out of Level 3 | 0 | 0 |
Financial assets, Ending Balance | 143 | 92 |
Residential MBS | ||
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward] | ||
Financial assets, Beginning Balance | 190 | 224 |
Total realized/unrealized gains (losses) included in Net income | 1 | 1 |
Total realized/unrealized gains (losses) included in other comprehensive income (loss) | 0 | 0 |
Purchases and issuances | 1 | 0 |
Sales and settlements | (8) | (7) |
Transfer into Level 3 | 7 | 11 |
Transfer out of Level 3 | (16) | (16) |
Financial assets, Ending Balance | 175 | 213 |
Commercial MBS | ||
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward] | ||
Financial assets, Beginning Balance | 25 | 39 |
Total realized/unrealized gains (losses) included in Net income | 0 | 0 |
Total realized/unrealized gains (losses) included in other comprehensive income (loss) | 0 | 0 |
Purchases and issuances | 0 | 0 |
Sales and settlements | 0 | (1) |
Transfer into Level 3 | 4 | 0 |
Transfer out of Level 3 | 0 | 0 |
Financial assets, Ending Balance | 29 | 38 |
Asset-backed securities | ||
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward] | ||
Financial assets, Beginning Balance | 484 | 470 |
Total realized/unrealized gains (losses) included in Net income | 0 | 0 |
Total realized/unrealized gains (losses) included in other comprehensive income (loss) | 0 | (6) |
Purchases and issuances | 104 | 4 |
Sales and settlements | (11) | (8) |
Transfer into Level 3 | 17 | 41 |
Transfer out of Level 3 | 0 | 0 |
Financial assets, Ending Balance | 594 | 501 |
Corporate and other | ||
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward] | ||
Financial assets, Beginning Balance | 712 | 633 |
Total realized/unrealized gains (losses) included in Net income | 1 | (2) |
Total realized/unrealized gains (losses) included in other comprehensive income (loss) | 4 | 15 |
Purchases and issuances | 120 | 86 |
Sales and settlements | (38) | (7) |
Transfer into Level 3 | 29 | 5 |
Transfer out of Level 3 | 0 | 0 |
Financial assets, Ending Balance | 828 | 730 |
Equity securities | ||
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward] | ||
Financial assets, Beginning Balance | 174 | 140 |
Total realized/unrealized gains (losses) included in Net income | (6) | (17) |
Total realized/unrealized gains (losses) included in other comprehensive income (loss) | 7 | 8 |
Purchases and issuances | 12 | 12 |
Sales and settlements | 0 | 0 |
Transfer into Level 3 | 0 | 15 |
Transfer out of Level 3 | (14) | 0 |
Financial assets, Ending Balance | 173 | 158 |
Assets of MIE | ||
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward] | ||
Financial assets, Beginning Balance | 29 | 26 |
Total realized/unrealized gains (losses) included in Net income | (1) | (2) |
Total realized/unrealized gains (losses) included in other comprehensive income (loss) | 0 | 0 |
Purchases and issuances | 2 | 0 |
Sales and settlements | 0 | 0 |
Transfer into Level 3 | 0 | 0 |
Transfer out of Level 3 | (4) | 0 |
Financial assets, Ending Balance | $ 26 | $ 24 |
Fair Value Measurements - Cha44
Fair Value Measurements - Changes in balances of Level 3 financial liabilities carried at fair value (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Financial liabilities, Beginning Balance | $ (1,759) | $ (1,369) | |
Total realized/unrealized gains (losses) included in Net income | (147) | (17) | |
Total realized/unrealized gains (losses) included in other comprehensive income (loss) | 0 | 0 | |
Purchases and issuances | (79) | (82) | |
Sales and settlements | 22 | 18 | |
Transfer into Level 3 | 0 | 0 | |
Transfer out of Level 3 | 0 | 0 | |
Financial liabilities, Ending Balance | [1] | (1,963) | (1,450) |
Embedded derivatives | |||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Financial liabilities, Beginning Balance | (1,759) | (1,369) | |
Total realized/unrealized gains (losses) included in Net income | (147) | (17) | |
Total realized/unrealized gains (losses) included in other comprehensive income (loss) | 0 | 0 | |
Purchases and issuances | (79) | (82) | |
Sales and settlements | 22 | 18 | |
Transfer into Level 3 | 0 | 0 | |
Transfer out of Level 3 | 0 | 0 | |
Financial liabilities, Ending Balance | $ (1,963) | $ (1,450) | |
[1] | As discussed previously, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets. |
Fair Value Measurements - The c
Fair Value Measurements - The carrying value and fair value of financial instruments (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 | |
Financial assets: | |||
Mortgage loans | $ 1,159 | $ 1,147 | |
Policy loans | 190 | 192 | |
Financial liabilities: | |||
Long-term debt | 1,283 | 1,283 | |
Level 1 | |||
Financial assets: | |||
Cash and cash equivalents | 1,890 | 2,107 | |
Mortgage loans | 0 | 0 | |
Policy loans | 0 | 0 | |
Total financial assets not accounted for at fair value | 1,890 | 2,107 | |
Financial liabilities: | |||
Annuity benefits accumulated | [1] | 0 | 0 |
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 | |
Policy loans | 0 | 0 | |
Total financial assets not accounted for at fair value | 0 | 0 | |
Financial liabilities: | |||
Annuity benefits accumulated | [1] | 0 | 0 |
Long-term debt | 1,379 | 1,353 | |
Total financial liabilities not accounted for at fair value | 1,379 | 1,353 | |
Level 3 | |||
Financial assets: | |||
Cash and cash equivalents | 0 | 0 | |
Mortgage loans | 1,158 | 1,146 | |
Policy loans | 190 | 192 | |
Total financial assets not accounted for at fair value | 1,348 | 1,338 | |
Financial liabilities: | |||
Annuity benefits accumulated | [1] | 29,997 | 28,932 |
Long-term debt | 3 | 3 | |
Total financial liabilities not accounted for at fair value | 30,000 | 28,935 | |
Carrying Value | |||
Financial assets: | |||
Cash and cash equivalents | 1,890 | 2,107 | |
Mortgage loans | 1,159 | 1,147 | |
Policy loans | 190 | 192 | |
Total financial assets not accounted for at fair value | 3,239 | 3,446 | |
Financial liabilities: | |||
Annuity benefits accumulated | [1] | 30,799 | 29,703 |
Long-term debt | 1,283 | 1,284 | |
Total financial liabilities not accounted for at fair value | 32,082 | 30,987 | |
Fair Value | |||
Financial assets: | |||
Cash and cash equivalents | 1,890 | 2,107 | |
Mortgage loans | 1,158 | 1,146 | |
Policy loans | 190 | 192 | |
Total financial assets not accounted for at fair value | 3,238 | 3,445 | |
Financial liabilities: | |||
Annuity benefits accumulated | [1] | 29,997 | 28,932 |
Long-term debt | 1,382 | 1,356 | |
Total financial liabilities not accounted for at fair value | $ 31,379 | $ 30,288 | |
[1] | Excludes $203 million and $204 million of life contingent annuities in the payout phase at March 31, 2017 and December 31, 2016, respectively. |
Investments - Narrative (Detail
Investments - Narrative (Details) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017USD ($)security | Mar. 31, 2016USD ($) | Dec. 31, 2016USD ($) | |
Investment [Line Items] | |||
Percentage (based on amount of unrealized loss) of available for sale fixed maturities that are in an unrealized loss position and rated investment grade | 84.00% | ||
Percentage (based on fair value) of available for sale fixed maturities that are in an unrealized loss position and rated investment grade | 89.00% | ||
Other than temporary impairment charges | $ 6 | $ 52 | |
Average life of ABS | 5 years | ||
Average life of MBS | 4 years 6 months | ||
Residential MBS | |||
Investment [Line Items] | |||
Non-credit related portion of other-than-temporary impairment charges taken for securities still owned | $ 170 | $ 189 | |
Fixed maturities, Gross Unrealized, Losses | (11) | (13) | |
Securities with non-credit other-than-temporary impairment charges | |||
Investment [Line Items] | |||
Gross Unrealized, Gains | 128 | 130 | |
Gross Unrealized, Losses | (2) | (3) | |
Fixed maturities | |||
Investment [Line Items] | |||
Fixed maturities, Gross Unrealized, Losses | $ (165) | (245) | |
Number of available for sale securities in an unrealized loss position | security | 1,048 | ||
Other than temporary impairment charges | $ 0 | $ 16 | |
Common stocks | |||
Investment [Line Items] | |||
Number of available for sale securities in an unrealized loss position | security | 17 | ||
Other than temporary impairment charges | $ 3 | ||
Equity securities, Gross Unrealized, Losses | $ (21) | (23) | |
Preferred stocks | |||
Investment [Line Items] | |||
Number of available for sale securities in an unrealized loss position | security | 13 | ||
Other than temporary impairment charges | $ 6 | ||
Equity securities, Gross Unrealized, Losses | $ (3) | $ (7) | |
Number of available for sale securities in an unrealized loss position for twelve months or longer | Common stocks | |||
Investment [Line Items] | |||
Number of available for sale securities in an unrealized loss position | security | 0 | ||
Number of available for sale securities in an unrealized loss position for twelve months or longer | Preferred stocks | |||
Investment [Line Items] | |||
Number of available for sale securities in an unrealized loss position | security | 1 | ||
Maximum | Fixed maturities — all other | |||
Investment [Line Items] | |||
Other than temporary impairment charges | $ 1 | ||
Maximum | Residential MBS | |||
Investment [Line Items] | |||
Other than temporary impairment charges | 1 | ||
Maximum | Corporate bonds | |||
Investment [Line Items] | |||
Other than temporary impairment charges | $ 1 |
Investments - Available for sal
Investments - Available for sale fixed maturities and equity securities (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Schedule of Available-for-sale Securities [Line Items] | ||
Fixed maturities, Available for sale, Amortized Cost | $ 35,445 | $ 33,735 |
Available for sale (AFS) fixed maturities | 36,456 | 34,544 |
Equity securities, Available for sale, Amortized Cost | 1,356 | 1,351 |
Equity securities, Available for sale, Fair Value | 1,579 | 1,502 |
Total fixed maturities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Fixed maturities, Available for sale, Amortized Cost | 35,445 | 33,735 |
Fixed maturities, Available for sale, Gross Unrealized, Gains | 1,176 | 1,054 |
Fixed maturities, Available for sale, Gross Unrealized, Losses | (165) | (245) |
Fixed maturities, Available for sale, Net Unrealized, Gains (Losses) | 1,011 | 809 |
Available for sale (AFS) fixed maturities | 36,456 | 34,544 |
U.S. Government and government agencies | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Fixed maturities, Available for sale, Amortized Cost | 289 | 315 |
Fixed maturities, Available for sale, Gross Unrealized, Gains | 2 | 3 |
Fixed maturities, Available for sale, Gross Unrealized, Losses | (3) | (3) |
Fixed maturities, Available for sale, Net Unrealized, Gains (Losses) | (1) | 0 |
Available for sale (AFS) fixed maturities | 288 | 315 |
States, municipalities and political subdivisions | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Fixed maturities, Available for sale, Amortized Cost | 6,736 | 6,650 |
Fixed maturities, Available for sale, Gross Unrealized, Gains | 213 | 200 |
Fixed maturities, Available for sale, Gross Unrealized, Losses | (48) | (69) |
Fixed maturities, Available for sale, Net Unrealized, Gains (Losses) | 165 | 131 |
Available for sale (AFS) fixed maturities | 6,901 | 6,781 |
Foreign government | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Fixed maturities, Available for sale, Amortized Cost | 133 | 131 |
Fixed maturities, Available for sale, Gross Unrealized, Gains | 5 | 5 |
Fixed maturities, Available for sale, Gross Unrealized, Losses | 0 | 0 |
Fixed maturities, Available for sale, Net Unrealized, Gains (Losses) | 5 | 5 |
Available for sale (AFS) fixed maturities | 138 | 136 |
Residential MBS | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Fixed maturities, Available for sale, Amortized Cost | 3,432 | 3,367 |
Fixed maturities, Available for sale, Gross Unrealized, Gains | 295 | 281 |
Fixed maturities, Available for sale, Gross Unrealized, Losses | (11) | (13) |
Fixed maturities, Available for sale, Net Unrealized, Gains (Losses) | 284 | 268 |
Available for sale (AFS) fixed maturities | 3,716 | 3,635 |
Commercial MBS | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Fixed maturities, Available for sale, Amortized Cost | 1,211 | 1,446 |
Fixed maturities, Available for sale, Gross Unrealized, Gains | 43 | 49 |
Fixed maturities, Available for sale, Gross Unrealized, Losses | (1) | (2) |
Fixed maturities, Available for sale, Net Unrealized, Gains (Losses) | 42 | 47 |
Available for sale (AFS) fixed maturities | 1,253 | 1,493 |
Asset-backed securities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Fixed maturities, Available for sale, Amortized Cost | 6,548 | 5,962 |
Fixed maturities, Available for sale, Gross Unrealized, Gains | 74 | 43 |
Fixed maturities, Available for sale, Gross Unrealized, Losses | (30) | (46) |
Fixed maturities, Available for sale, Net Unrealized, Gains (Losses) | 44 | (3) |
Available for sale (AFS) fixed maturities | 6,592 | 5,959 |
Corporate and other | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Fixed maturities, Available for sale, Amortized Cost | 17,096 | 15,864 |
Fixed maturities, Available for sale, Gross Unrealized, Gains | 544 | 473 |
Fixed maturities, Available for sale, Gross Unrealized, Losses | (72) | (112) |
Fixed maturities, Available for sale, Net Unrealized, Gains (Losses) | 472 | 361 |
Available for sale (AFS) fixed maturities | 17,568 | 16,225 |
Equity securities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Equity securities, Available for sale, Amortized Cost | 1,356 | 1,351 |
Equity securities, Available for sale, Gross Unrealized, Gains | 247 | 181 |
Equity securities, Available for sale, Gross Unrealized, Losses | (24) | (30) |
Equity securities, Available for sale, Net Unrealized, Gains (Losses) | 223 | 151 |
Equity securities, Available for sale, Fair Value | 1,579 | 1,502 |
Common stocks | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Equity securities, Available for sale, Amortized Cost | 884 | 879 |
Equity securities, Available for sale, Gross Unrealized, Gains | 216 | 160 |
Equity securities, Available for sale, Gross Unrealized, Losses | (21) | (23) |
Equity securities, Available for sale, Net Unrealized, Gains (Losses) | 195 | 137 |
Equity securities, Available for sale, Fair Value | 1,079 | 1,016 |
Perpetual preferred stocks | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Equity securities, Available for sale, Amortized Cost | 472 | 472 |
Equity securities, Available for sale, Gross Unrealized, Gains | 31 | 21 |
Equity securities, Available for sale, Gross Unrealized, Losses | (3) | (7) |
Equity securities, Available for sale, Net Unrealized, Gains (Losses) | 28 | 14 |
Equity securities, Available for sale, Fair Value | $ 500 | $ 486 |
Investments - Gross unrealized
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 | Mar. 31, 2017 | Dec. 31, 2016 |
Total fixed maturities | ||
Available for sale securities in a continuous unrealized loss position | ||
Unrealized Loss - Less than twelve months | $ (123) | $ (196) |
Fair Value - Less than twelve months | $ 6,719 | $ 8,651 |
Fair Value as % of Cost - Less than twelve months | 98.00% | 98.00% |
Unrealized Loss - Twelve months or more | $ (42) | $ (49) |
Fair Value - Twelve months or more | $ 1,043 | $ 1,160 |
Fair Value as % of Cost - Twelve months or more | 96.00% | 96.00% |
U.S. Government and government agencies | ||
Available for sale securities in a continuous unrealized loss position | ||
Unrealized Loss - Less than twelve months | $ (1) | $ (1) |
Fair Value - Less than twelve months | $ 152 | $ 153 |
Fair Value as % of Cost - Less than twelve months | 99.00% | 99.00% |
Unrealized Loss - Twelve months or more | $ (2) | $ (2) |
Fair Value - Twelve months or more | $ 8 | $ 8 |
Fair Value as % of Cost - Twelve months or more | 80.00% | 80.00% |
States, municipalities and political subdivisions | ||
Available for sale securities in a continuous unrealized loss position | ||
Unrealized Loss - Less than twelve months | $ (44) | $ (64) |
Fair Value - Less than twelve months | $ 1,925 | $ 2,289 |
Fair Value as % of Cost - Less than twelve months | 98.00% | 97.00% |
Unrealized Loss - Twelve months or more | $ (4) | $ (5) |
Fair Value - Twelve months or more | $ 37 | $ 44 |
Fair Value as % of Cost - Twelve months or more | 90.00% | 90.00% |
Foreign government | ||
Available for sale securities in a continuous unrealized loss position | ||
Unrealized Loss - Less than twelve months | $ 0 | |
Fair Value - Less than twelve months | $ 4 | |
Fair Value as % of Cost - Less than twelve months | 100.00% | |
Unrealized Loss - Twelve months or more | $ 0 | |
Fair Value - Twelve months or more | $ 0 | |
Fair Value as % of Cost - Twelve months or more | 0.00% | |
Residential MBS | ||
Available for sale securities in a continuous unrealized loss position | ||
Unrealized Loss - Less than twelve months | $ (6) | $ (7) |
Fair Value - Less than twelve months | $ 455 | $ 502 |
Fair Value as % of Cost - Less than twelve months | 99.00% | 99.00% |
Unrealized Loss - Twelve months or more | $ (5) | $ (6) |
Fair Value - Twelve months or more | $ 188 | $ 162 |
Fair Value as % of Cost - Twelve months or more | 97.00% | 96.00% |
Commercial MBS | ||
Available for sale securities in a continuous unrealized loss position | ||
Unrealized Loss - Less than twelve months | $ (1) | $ (2) |
Fair Value - Less than twelve months | $ 71 | $ 121 |
Fair Value as % of Cost - Less than twelve months | 99.00% | 98.00% |
Unrealized Loss - Twelve months or more | $ 0 | $ 0 |
Fair Value - Twelve months or more | $ 0 | $ 0 |
Fair Value as % of Cost - Twelve months or more | 0.00% | 0.00% |
Asset-backed securities | ||
Available for sale securities in a continuous unrealized loss position | ||
Unrealized Loss - Less than twelve months | $ (14) | $ (29) |
Fair Value - Less than twelve months | $ 1,313 | $ 1,737 |
Fair Value as % of Cost - Less than twelve months | 99.00% | 98.00% |
Unrealized Loss - Twelve months or more | $ (16) | $ (17) |
Fair Value - Twelve months or more | $ 512 | $ 634 |
Fair Value as % of Cost - Twelve months or more | 97.00% | 97.00% |
Corporate and other | ||
Available for sale securities in a continuous unrealized loss position | ||
Unrealized Loss - Less than twelve months | $ (57) | $ (93) |
Fair Value - Less than twelve months | $ 2,799 | $ 3,849 |
Fair Value as % of Cost - Less than twelve months | 98.00% | 98.00% |
Unrealized Loss - Twelve months or more | $ (15) | $ (19) |
Fair Value - Twelve months or more | $ 298 | $ 312 |
Fair Value as % of Cost - Twelve months or more | 95.00% | 94.00% |
Total equity securities | ||
Available for sale securities in a continuous unrealized loss position | ||
Unrealized Loss - Less than twelve months | $ (23) | $ (29) |
Fair Value - Less than twelve months | $ 223 | $ 350 |
Fair Value as % of Cost - Less than twelve months | 91.00% | 92.00% |
Unrealized Loss - Twelve months or more | $ (1) | $ (1) |
Fair Value - Twelve months or more | $ 6 | $ 6 |
Fair Value as % of Cost - Twelve months or more | 86.00% | 86.00% |
Common stocks | ||
Available for sale securities in a continuous unrealized loss position | ||
Unrealized Loss - Less than twelve months | $ (21) | $ (23) |
Fair Value - Less than twelve months | $ 138 | $ 215 |
Fair Value as % of Cost - Less than twelve months | 87.00% | 90.00% |
Unrealized Loss - Twelve months or more | $ 0 | $ 0 |
Fair Value - Twelve months or more | $ 0 | $ 0 |
Fair Value as % of Cost - Twelve months or more | 0.00% | 0.00% |
Perpetual preferred stocks | ||
Available for sale securities in a continuous unrealized loss position | ||
Unrealized Loss - Less than twelve months | $ (2) | $ (6) |
Fair Value - Less than twelve months | $ 85 | $ 135 |
Fair Value as % of Cost - Less than twelve months | 98.00% | 96.00% |
Unrealized Loss - Twelve months or more | $ (1) | $ (1) |
Fair Value - Twelve months or more | $ 6 | $ 6 |
Fair Value as % of Cost - Twelve months or more | 86.00% | 86.00% |
Investments - Credit portion of
Investments - Credit portion of other-than-temporary impairments on fixed maturities for which the non-credit portion of an impairment has been recognized in OCI (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward] | ||
Beginning Balance | $ 153 | $ 160 |
Additional credit impairments on: | ||
Previously impaired securities | 0 | 2 |
Securities without prior impairments | 0 | 0 |
Reductions due to sales or redemptions | (7) | (2) |
Ending Balance | $ 146 | $ 160 |
Investments - Scheduled maturit
Investments - Scheduled maturities of available for sale fixed maturities (Details) - Fixed maturities $ in Millions | Mar. 31, 2017USD ($) |
Amortized Cost Basis, Fiscal Year Maturity [Abstract] | |
One year or less | $ 1,038 |
After one year through five years | 6,034 |
After five years through ten years | 12,717 |
After ten years | 4,465 |
Fixed maturities amortized cost, Subtotal | 24,254 |
ABS (average life of approximately 5 years) | 6,548 |
MBS (average life of approximately 4-1/2 years) | 4,643 |
Amortized Cost | 35,445 |
Fair Value, Fiscal Year Maturity [Abstract] | |
One year or less | 1,051 |
After one year through five years | 6,300 |
After five years through ten years | 12,990 |
After ten years | 4,554 |
Fixed maturities fair value, Subtotal | 24,895 |
ABS (average life of approximately 5 years) | 6,592 |
MBS (average life of approximately 4-1/2 years) | 4,969 |
Fair Value | $ 36,456 |
Fair Value Percent, Fiscal Year Maturity [Abstract] | |
One year or less | 3.00% |
After one year through five years | 17.00% |
After five years through ten years | 36.00% |
After ten years | 12.00% |
Fixed maturities fair value, Subtotal, Percent | 68.00% |
ABS (average life of approximately 5 years) | 18.00% |
MBS (average life of approximately 4-1/2 years) | 14.00% |
Fair value, Total, Percent | 100.00% |
Investments - Components of the
Investments - Components of the net unrealized gain on securities that is included in AOCI in the Balance Sheet (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 | |
Unrealized gain on: | |||
Pretax | $ 813 | $ 622 | |
Deferred Tax | (284) | (218) | |
Net | 529 | 404 | |
Total investments | |||
Unrealized gain on: | |||
Pretax | 1,234 | 960 | |
Deferred Tax | (432) | (336) | |
Net | 802 | 624 | |
Total fixed maturities | |||
Unrealized gain on: | |||
Pretax | 1,011 | 809 | |
Deferred Tax | (354) | (283) | |
Net | 657 | 526 | |
Fixed maturities — annuity segment | |||
Unrealized gain on: | |||
Pretax | [1] | 800 | 640 |
Deferred Tax | [1] | (280) | (224) |
Net | [1] | 520 | 416 |
Fixed maturities — all other | |||
Unrealized gain on: | |||
Pretax | 211 | 169 | |
Deferred Tax | (74) | (59) | |
Net | 137 | 110 | |
Equity securities | |||
Unrealized gain on: | |||
Pretax | 223 | 151 | |
Deferred Tax | (78) | (53) | |
Net | 145 | 98 | |
Deferred policy acquisition costs — annuity segment | |||
Unrealized gain on: | |||
Pretax | (333) | (273) | |
Deferred Tax | 117 | 96 | |
Net | (216) | (177) | |
Annuity benefits accumulated | |||
Unrealized gain on: | |||
Pretax | (103) | (78) | |
Deferred Tax | 36 | 27 | |
Net | (67) | (51) | |
Unearned revenue | |||
Unrealized gain on: | |||
Pretax | 15 | 13 | |
Deferred Tax | (5) | (5) | |
Net | $ 10 | $ 8 | |
[1] | Net unrealized gains on fixed maturity investments supporting AFG’s annuity benefits accumulated. |
Investments - Schedule of sourc
Investments - Schedule of sources of net investment income (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Net Investment Income [Line Items] | ||
Investment income | $ 440 | $ 416 |
Investment expenses | (5) | (5) |
Net investment income | 435 | 411 |
Fixed maturities | ||
Net Investment Income [Line Items] | ||
Investment income | 389 | 367 |
Equity securities | ||
Net Investment Income [Line Items] | ||
Investment income | 21 | 19 |
Equity in earnings of partnerships and similar investments | ||
Net Investment Income [Line Items] | ||
Investment income | 10 | 11 |
Other | ||
Net Investment Income [Line Items] | ||
Investment income | $ 20 | $ 19 |
Investments - Realized gains (l
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 | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments | ||
Realized before impairments | $ 9 | $ 34 |
Realized — impairments | (6) | (52) |
Realized gains (losses) on securities | 3 | (18) |
Net of tax and noncontrolling interests | ||
Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments | ||
Realized before impairments | 6 | 22 |
Realized — impairments | (4) | (32) |
Realized gains (losses) on securities | 2 | (10) |
Change in unrealized | 125 | 134 |
Total pretax | ||
Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments | ||
Realized before impairments | 9 | 34 |
Realized — impairments | (6) | (52) |
Realized gains (losses) on securities | 3 | (18) |
Change in unrealized | 191 | 210 |
Fixed maturities | ||
Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments | ||
Realized before impairments | 5 | 14 |
Realized — impairments | 0 | (16) |
Realized gains (losses) on securities | 5 | (2) |
Change in unrealized | 202 | 453 |
Equity securities | ||
Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments | ||
Realized before impairments | 2 | 23 |
Realized — impairments | (9) | (41) |
Realized gains (losses) on securities | (7) | (18) |
Change in unrealized | 72 | (23) |
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 | 3 | 0 |
Realized — impairments | 0 | 0 |
Realized gains (losses) on securities | 3 | 0 |
Change in unrealized | 0 | 0 |
Other, Including DPAC and reserves on annuities and long-term care | ||
Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments | ||
Realized before impairments | (1) | (3) |
Realized — impairments | 3 | 5 |
Realized gains (losses) on securities | 2 | 2 |
Change in unrealized | (83) | (220) |
Tax effects | ||
Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments | ||
Realized before impairments | (3) | (12) |
Realized — impairments | 2 | 19 |
Realized gains (losses) on securities | (1) | 7 |
Change in unrealized | (66) | (74) |
Noncontrolling interests | ||
Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments | ||
Realized before impairments | 0 | 0 |
Realized — impairments | 0 | 1 |
Realized gains (losses) on securities | 0 | 1 |
Change in unrealized | $ 0 | $ (2) |
Investments - Gross realized ga
Investments - Gross realized gains and losses on available for sale fixed maturity and equity security investment transactions (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Fixed maturities | ||
Gross realized gains and losses on the sale of available for sale fixed maturity and equity security investments | ||
Gross gains | $ 5 | $ 14 |
Gross losses | 0 | (1) |
Equity securities | ||
Gross realized gains and losses on the sale of available for sale fixed maturity and equity security investments | ||
Gross gains | 4 | 25 |
Gross losses | $ (2) | $ 0 |
Derivatives - Narrative (Detail
Derivatives - Narrative (Details) | 3 Months Ended | ||
Mar. 31, 2017USD ($)swap | Mar. 31, 2016USD ($) | Dec. 31, 2016USD ($) | |
Derivative Instruments, Gain (Loss) [Line Items] | |||
Carrying value of collateral received to support purchased call options | $ 387,000,000 | $ 380,000,000 | |
Cash Flow Hedges | Designated as Hedging Instrument | Interest rate swaps | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Number of interest rate swaps designated and qualifying as a cash flow hedges | swap | 7 | ||
Notional amount of derivative instrument outstanding | $ 1,030,000,000 | 1,080,000,000 | |
Gain (loss) reclassified from AOCI into net investment income | 2,000,000 | $ 2,000,000 | |
Gain (loss) on cash flow hedge ineffectiveness recorded in Net Earnings | 0 | 0 | |
Collateral receivable supporting interest rate swaps | 60,000,000 | 60,000,000 | |
Other assets | Cash Flow Hedges | Designated as Hedging Instrument | Interest rate swaps | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Net derivatives, at fair value | 1,000,000 | ||
Other assets | Maximum | Cash Flow Hedges | Designated as Hedging Instrument | Interest rate swaps | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Net derivatives, at fair value | 1,000,000 | ||
Other liabilities | Cash Flow Hedges | Designated as Hedging Instrument | Interest rate swaps | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Net derivatives, at fair value | $ (24,000,000) | $ (22,000,000) | |
Senior Notes | 9-7/8% Senior Notes due June 2019 | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Stated interest rate, percentage | 9.875% | ||
AFG | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Interest rate description of fair value hedge activity | three-month LIBOR plus 8.099% | ||
AFG | Fair Value Hedge | Designated as Hedging Instrument | Interest rate swaps | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Effective interest rate, percentage | 9.2302% | 9.0624% | |
The net reduction in interest expense from interest rate swaps | $ 1,000,000 | $ 1,000,000 | |
AFG | Long-term debt | Fair Value Hedge | Designated as Hedging Instrument | Interest rate swaps | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Net derivatives, at fair value | $ 1,000,000 | ||
AFG | Long-term debt | Maximum | Fair Value Hedge | Designated as Hedging Instrument | Interest rate swaps | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Net derivatives, at fair value | $ 1,000,000 | ||
AFG | Senior Notes | 9-7/8% Senior Notes due June 2019 | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Stated interest rate, percentage | 9.875% | 9.875% | |
AFG | LIBOR | Fair Value Hedge | Designated as Hedging Instrument | Interest rate swaps | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Basis spread on variable interest rate | 8.099% |
Derivatives - Derivatives that
Derivatives - Derivatives that do not qualify for hedge accounting under GAAP included in the Balance Sheet at fair value (Details) - Not Designated as Hedging Instrument - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Derivatives included in AFG' s Balance Sheet at fair value | ||
Derivative asset, at fair value | $ 681 | $ 603 |
Derivative liability, at fair value | 1,971 | 1,767 |
MBS with embedded derivatives | Fixed maturities | ||
Derivatives included in AFG' s Balance Sheet at fair value | ||
Derivative asset, at fair value | 104 | 107 |
Public company warrants | Equity securities | ||
Derivatives included in AFG' s Balance Sheet at fair value | ||
Derivative asset, at fair value | 4 | 4 |
Fixed-indexed annuities (embedded derivative) | Annuity benefits accumulated | ||
Derivatives included in AFG' s Balance Sheet at fair value | ||
Derivative liability, at fair value | 1,963 | 1,759 |
Equity index call options | Equity index call options | ||
Derivatives included in AFG' s Balance Sheet at fair value | ||
Derivative asset, at fair value | 573 | 492 |
Reinsurance contracts (embedded derivative) | Other liabilities | ||
Derivatives included in AFG' s Balance Sheet at fair value | ||
Derivative liability, at fair value | $ 8 | $ 8 |
Derivatives - Gain (loss) inclu
Derivatives - 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 | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Derivative, Gain (Loss) on Derivative, Net [Abstract] | ||
Derivative | $ (7) | $ (61) |
MBS with embedded derivatives | Realized gains on securities | ||
Derivative, Gain (Loss) on Derivative, Net [Abstract] | ||
Derivative | 0 | 1 |
Public company warrants | Realized gains on securities | ||
Derivative, Gain (Loss) on Derivative, Net [Abstract] | ||
Derivative | 0 | (2) |
Fixed-indexed annuities (embedded derivative) | Annuity benefits | ||
Derivative, Gain (Loss) on Derivative, Net [Abstract] | ||
Derivative | (147) | (17) |
Equity index call options | Annuity benefits | ||
Derivative, Gain (Loss) on Derivative, Net [Abstract] | ||
Derivative | 141 | (40) |
Reinsurance contracts (embedded derivative) | Net investment income | ||
Derivative, Gain (Loss) on Derivative, Net [Abstract] | ||
Derivative | $ (1) | $ (3) |
Deferred Policy Acquisition C58
Deferred Policy Acquisition Costs - Narrative (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Deferred Policy Acquisition Costs Disclosures [Abstract] | ||
Accumulated amortization of present value of future profits | $ 136 | $ 134 |
Deferred Policy Acquisition C59
Deferred Policy Acquisition Costs - Progression of deferred policy acquisition costs (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Movement Analysis of Deferred Policy Acquisition Costs and Present Value of Future Profits [Roll Forward] | ||
Deferred policy acquisition costs and present value of future profits, beginning balance | $ 1,239 | $ 1,184 |
Deferred policy acquisition costs and present value of future profits, additions | 207 | 205 |
Deferred policy acquisition costs and present value of future profits, periodic amortization | (185) | (166) |
Deferred policy acquisition costs and present value of future profits, change included in realized gains | 2 | 2 |
Deferred policy acquisition costs and present value of future profits, foreign currency translation | 1 | |
Deferred policy acquisition costs and present value of future profits, change in unrealized | (59) | (170) |
Deferred policy acquisition costs and present value of future profits, ending balance | 1,205 | 1,055 |
P&C | ||
Movement Analysis of Deferred Policy Acquisition Costs [Roll Forward] | ||
Deferred policy acquisition costs, beginning balance | 238 | 226 |
Deferred policy acquisition costs, additions | 139 | 132 |
Deferred policy acquisition costs, periodic amortization | (135) | (134) |
Deferred policy acquisition costs, foreign currency translation | 1 | |
Deferred policy acquisition costs, ending balance | 243 | 224 |
Annuity and Run-off Long-term Care and Life | ||
Movement Analysis of Deferred Policy Acquisition Costs [Roll Forward] | ||
Deferred policy acquisition costs, beginning balance | 1,110 | 1,018 |
Deferred policy acquisition costs, additions | 67 | 68 |
Deferred policy acquisition costs, periodic amortization | (42) | (25) |
Deferred policy acquisition costs, change included in realized gains | 2 | 2 |
Deferred policy acquisition costs, ending balance | 1,137 | 1,063 |
Movement in Deferred Sales Inducements [Roll Forward] | ||
Deferred sales inducements, beginning balance | 110 | 119 |
Deferred sales inducements, additions | 1 | 5 |
Deferred sales inducements, periodic amortization | (6) | (5) |
Deferred sales inducements, change included in realized gains | 0 | 0 |
Deferred sales inducements, ending balance | 105 | 119 |
Movement in Present Value of Future Insurance Profits [Roll Forward] | ||
Present value of future profits, beginning balance | 46 | 55 |
Present value of future profits, periodic amortization | (2) | (2) |
Present value of future profits, ending balance | 44 | 53 |
Movement in Unrealized Gains (Losses) Related to Deferred Policy Acquisition Costs and Present Value of Future Profits [Roll Forward] | ||
Unrealized investment gains (losses), beginning balance | (265) | (234) |
Unrealized investment gains (losses), change in unrealized | (59) | (170) |
Unrealized investment gains (losses), ending balance | (324) | (404) |
Movement Analysis of Deferred Policy Acquisition Costs and Present Value of Future Profits [Roll Forward] | ||
Deferred policy acquisition costs and present value of future profits, beginning balance | 1,001 | 958 |
Deferred policy acquisition costs and present value of future profits, additions | 68 | 73 |
Deferred policy acquisition costs and present value of future profits, periodic amortization | (50) | (32) |
Deferred policy acquisition costs and present value of future profits, change included in realized gains | 2 | 2 |
Deferred policy acquisition costs and present value of future profits, change in unrealized | (59) | (170) |
Deferred policy acquisition costs and present value of future profits, ending balance | 962 | 831 |
Excluding Unrealized Gains | Annuity and Run-off Long-term Care and Life | ||
Movement Analysis of Deferred Policy Acquisition Costs and Present Value of Future Profits [Roll Forward] | ||
Deferred policy acquisition costs and present value of future profits, beginning balance | 1,266 | 1,192 |
Deferred policy acquisition costs and present value of future profits, change in unrealized | 0 | 0 |
Deferred policy acquisition costs and present value of future profits, ending balance | $ 1,286 | $ 1,235 |
Managed Investment Entities - N
Managed Investment Entities - Narrative (Details) $ in Millions | 1 Months Ended | 3 Months Ended | ||
Mar. 31, 2017USD ($) | Mar. 31, 2017USD ($)collateralizedloanobligation | Mar. 31, 2016USD ($) | Dec. 31, 2016USD ($) | |
Variable Interest Entity [Line Items] | ||||
Percentage of investment of most subordinate debt tranche, Minimum | 15.00% | |||
Percentage of investment of most subordinate debt tranche, Maximum | 64.40% | |||
Number of collateralized loan obligation entities | collateralizedloanobligation | 16 | |||
Face amount of managed investment entities liabilities purchased by subsidiaries after issuance date | $ 11 | |||
Amount paid by subsidiaries to purchase managed investment entities liabilities after issuance date | 10 | |||
Proceeds received by subsidiaries related to sales and redemptions of managed investment entities liabilities | $ 4 | 23 | ||
Difference between aggregate unpaid principal balance and fair value of CLOs' fixed maturity investments | $ 59 | 59 | $ 75 | |
Difference between aggregate unpaid principal balance and carrying value of CLOs' debt | 140 | 140 | 159 | |
Carrying amount of CLO loans in default | 1 | 1 | 1 | |
Aggregate unpaid principal balance of CLO loans in default | 8 | 8 | 10 | |
Variable interest entity, primary beneficiary | ||||
Variable Interest Entity [Line Items] | ||||
Aggregate fair value of investment in collateralized loan obligations | 230 | 230 | $ 250 | $ 216 |
New Collateralized Loan Obligation Entities | ||||
Variable Interest Entity [Line Items] | ||||
Face value of liabilities issued by managed investment entities on issuance date | 408 | |||
Face amount of managed investment entities liabilities purchased by subsidiaries at issuance date | 24 | |||
Subordinated Debt Obligations | Variable interest entity, primary beneficiary | ||||
Variable Interest Entity [Line Items] | ||||
Aggregate fair value of investment in collateralized loan obligations | $ 160 | $ 160 |
Managed Investment Entities - S
Managed Investment Entities - Selected financial information related to CLOs (Details) - USD ($) $ in Millions | 3 Months Ended | |||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | ||
Gains (losses) on change in fair value of assets/liabilities: | ||||
Assets | [1] | $ 5 | $ (1) | |
Liabilities | [1] | (5) | (12) | |
Management fees paid to AFG | 4 | 4 | ||
CLO earnings (losses) attributable to AFG shareholders | [2] | 6 | (7) | |
Variable interest entity, primary beneficiary | ||||
Variable Interest Entity [Line Items] | ||||
Investment in CLO tranches at end of period | $ 230 | $ 250 | $ 216 | |
[1] | Included in revenues in AFG’s Statement of Earnings. | |||
[2] | Included in earnings before income taxes in AFG’s Statement of Earnings. |
Goodwill and Other Intangibles
Goodwill and Other Intangibles - Narrative (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Changes in the goodwill balance during the period | $ 0 | ||
Goodwill | 199,000,000 | $ 199,000,000 | |
Amortizable intangible assets related to property and casualty insurance acquisitions | 32,000,000 | 34,000,000 | |
Accumulated amortization | 24,000,000 | $ 25,000,000 | |
Amortization of intangible assets | $ 2,000,000 | $ 2,000,000 |
Long-Term Debt - Schedule of lo
Long-Term Debt - Schedule of long-term debt (Details) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Summary of Carrying value of long-term debt | ||
Principal | $ 1,308 | $ 1,308 |
Discount and Issue Costs | (25) | (25) |
Carrying Value | 1,283 | 1,283 |
Senior Notes | AFG | ||
Summary of Carrying value of long-term debt | ||
Principal | 1,008 | 1,008 |
Discount and Issue Costs | (15) | (15) |
Carrying Value | 993 | 993 |
Senior Notes | 9-7/8% Senior Notes due June 2019 | AFG | ||
Summary of Carrying value of long-term debt | ||
Principal | 350 | 350 |
Discount and Issue Costs | (1) | (1) |
Carrying Value | 349 | 349 |
Senior Notes | 3.50% Senior Notes due August 2026 | AFG | ||
Summary of Carrying value of long-term debt | ||
Principal | 300 | 300 |
Discount and Issue Costs | (3) | (3) |
Carrying Value | 297 | 297 |
Senior Notes | 6-3/8% Senior Notes due June 2042 | AFG | ||
Summary of Carrying value of long-term debt | ||
Principal | 230 | 230 |
Discount and Issue Costs | (7) | (7) |
Carrying Value | 223 | 223 |
Senior Notes | 5-3/4% Senior Notes due August 2042 | AFG | ||
Summary of Carrying value of long-term debt | ||
Principal | 125 | 125 |
Discount and Issue Costs | (4) | (4) |
Carrying Value | 121 | 121 |
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 | 300 | 300 |
Discount and Issue Costs | (10) | (10) |
Carrying Value | 290 | 290 |
Subordinated Debentures | 6-1/4% Subordinated Debentures due September 2054 | AFG | ||
Summary of Carrying value of long-term debt | ||
Principal | 150 | 150 |
Discount and Issue Costs | (5) | (5) |
Carrying Value | 145 | 145 |
Subordinated Debentures | 6% Subordinated Debentures due November 2055 | AFG | ||
Summary of Carrying value of long-term debt | ||
Principal | 150 | 150 |
Discount and Issue Costs | (5) | (5) |
Carrying Value | $ 145 | $ 145 |
Long-Term Debt - Narrative (Det
Long-Term Debt - Narrative (Details) - USD ($) | Mar. 31, 2017 | Mar. 31, 2017 | Dec. 31, 2016 |
Long-term Debt, Fiscal Year Maturity [Abstract] | |||
Scheduled principal payments on debt in 2017 | $ 0 | $ 0 | |
Scheduled principal payments on debt in 2018 | 0 | 0 | |
Scheduled principal payments on debt in 2019 | 350,000,000 | 350,000,000 | |
Scheduled principal payments on debt in 2020 | 0 | 0 | |
Scheduled principal payments on debt in 2021 | 0 | 0 | |
Scheduled principal payments on debt in 2022 | 0 | 0 | |
Scheduled principal payments on debt after 2022 | 958,000,000 | 958,000,000 | |
AFG | |||
Long-term Debt, Fiscal Year Maturity [Abstract] | |||
Revolving credit line | 500,000,000 | 500,000,000 | |
Amount borrowed under revolving credit facility | $ 0 | $ 0 | $ 0 |
Interest rate description of fair value hedge activity | three-month LIBOR plus 8.099% | ||
Interest rate description for revolving credit facility | 1.00% to 1.875% (currently 1.375%) over LIBOR | ||
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% | ||
Interest rate swaps | Fair Value Hedge | Designated as Hedging Instrument | AFG | |||
Debt Instrument [Line Items] | |||
Effective interest rate, percentage | 9.2302% | 9.2302% | 9.0624% |
Interest rate swaps | Fair Value Hedge | Designated as Hedging Instrument | LIBOR | AFG | |||
Debt Instrument [Line Items] | |||
Basis spread on variable interest rate | 8.099% | 8.099% | |
Long-term debt | Interest rate swaps | Fair Value Hedge | Designated as Hedging Instrument | AFG | |||
Debt Instrument [Line Items] | |||
Net derivatives, at fair value | $ 1,000,000 | ||
Long-term debt | Interest rate swaps | Fair Value Hedge | Designated as Hedging Instrument | AFG | Maximum | |||
Debt Instrument [Line Items] | |||
Net derivatives, at fair value | $ 1,000,000 | $ 1,000,000 | |
Senior Notes | 9-7/8% Senior Notes due June 2019 | |||
Long-term Debt, Fiscal Year Maturity [Abstract] | |||
Stated interest rate, percentage | 9.875% | 9.875% | |
Senior Notes | 9-7/8% Senior Notes due June 2019 | AFG | |||
Long-term Debt, Fiscal Year Maturity [Abstract] | |||
Stated interest rate, percentage | 9.875% | 9.875% | 9.875% |
Senior Notes | 3.50% Senior Notes due August 2026 | AFG | |||
Long-term Debt, Fiscal Year Maturity [Abstract] | |||
Stated interest rate, percentage | 3.50% | 3.50% | |
Senior Notes | 6-3/8% Senior Notes due June 2042 | AFG | |||
Long-term Debt, Fiscal Year Maturity [Abstract] | |||
Stated interest rate, percentage | 6.375% | 6.375% | |
Senior Notes | 5-3/4% Senior Notes due August 2042 | AFG | |||
Long-term Debt, Fiscal Year Maturity [Abstract] | |||
Stated interest rate, percentage | 5.75% | 5.75% | |
Subordinated Debt | 6-1/4% Subordinated Debentures due September 2054 | AFG | |||
Long-term Debt, Fiscal Year Maturity [Abstract] | |||
Stated interest rate, percentage | 6.25% | 6.25% | |
Subordinated Debt | 6% Subordinated Debentures due November 2055 | AFG | |||
Long-term Debt, Fiscal Year Maturity [Abstract] | |||
Stated interest rate, percentage | 6.00% | 6.00% |
Shareholders' Equity - Preferre
Shareholders' Equity - Preferred stock authorized for issuance (Details) | Mar. 31, 2017$ / sharesshares |
Voting Preferred Stock | |
Class of Stock [Line Items] | |
Preferred Stock, par value | $ / shares | $ 0 |
Preferred Stock, shares authorized | shares | 12,500,000 |
Nonvoting Preferred Stock | |
Class of Stock [Line Items] | |
Preferred Stock, par value | $ / shares | $ 0 |
Preferred Stock, shares authorized | shares | 12,500,000 |
Shareholders' Equity - Narrativ
Shareholders' Equity - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Net of tax unrealized gains (losses) related to credit-only impaired securities | $ 52 | $ 52 | |
Compensation expense related to stock incentive plans | $ 11 | $ 8 | |
Stock Incentive Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Restricted Common Stock, shares issued (shares) | 232,250 | ||
Restricted Common Stock, fair value per share (USD per share) | $ 94.44 | ||
Common Stock options issued under stock incentive plan (shares) | 0 | ||
Annual Equity Bonus Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Other benefit plans, shares issued (shares) | 47,826 | ||
Common Stock issued, fair value per share (USD per share) | $ 96.13 |
Shareholders' Equity - Progress
Shareholders' Equity - Progression of the components of accumulated other comprehensive income (Details) - USD ($) $ in Millions | 3 Months Ended | |||
Mar. 31, 2017 | Mar. 31, 2016 | |||
Accumulated Other Comprehensive Income [Roll Forward] | ||||
AOCI beginning balance | $ 375 | |||
Other comprehensive income, net of tax | 124 | $ 146 | ||
AOCI ending balance | 499 | |||
Accumulated Net Investment Gain (Loss) Including Portion Attributable to Noncontrolling Interest | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Other comprehensive income (loss), unrealized holding gains on securities arising during the period, Pretax | 191 | 192 | ||
Other comprehensive income (loss), unrealized holding gains on securities arising during the period, tax | (66) | (67) | ||
Other comprehensive income (loss), unrealized holding gains on securities arising during the period, net of tax | 125 | 125 | ||
Reclassification from accumulated other comprehensive income, pretax | [1] | 0 | 18 | |
Reclassification from accumulated other comprehensive income, tax | [1] | 0 | (7) | |
Reclassification from accumulated other comprehensive income, net of tax | 0 | 11 | ||
Accumulated Other Comprehensive Income [Roll Forward] | ||||
Other comprehensive income (loss), pretax | 191 | 210 | ||
Other comprehensive income (loss), tax | (66) | (74) | ||
Other comprehensive income, net of tax | 125 | 136 | ||
Accumulated Net Investment Gain (Loss) Attributable to Noncontrolling Interest | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Other comprehensive income (loss), unrealized holding gains on securities arising during the period, net of tax | 0 | (1) | ||
Reclassification from accumulated other comprehensive income, net of tax | [1] | 0 | (1) | |
Accumulated Other Comprehensive Income [Roll Forward] | ||||
Other comprehensive income, net of tax | 0 | (2) | ||
Accumulated Net Investment Gain (Loss) Attributable to Parent | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Other comprehensive income (loss), unrealized holding gains on securities arising during the period, net of tax | 125 | 124 | ||
Reclassification from accumulated other comprehensive income, net of tax | 0 | 10 | ||
Accumulated Other Comprehensive Income [Roll Forward] | ||||
AOCI beginning balance | 404 | [2] | 332 | |
Other comprehensive income, net of tax | 125 | 134 | ||
AOCI ending balance | 529 | [2] | 466 | |
Accumulated Net Gain (Loss) from Cash Flow Hedges Including Portion Attributable to Noncontrolling Interest | ||||
Accumulated Other Comprehensive Income [Roll Forward] | ||||
Other comprehensive income (loss), pretax | (2) | 5 | ||
Other comprehensive income (loss), tax | 1 | (2) | ||
Other comprehensive income, net of tax | (1) | 3 | ||
Accumulated Net Gain (Loss) from Cash Flow Hedges Attributable to Noncontrolling Interest | ||||
Accumulated Other Comprehensive Income [Roll Forward] | ||||
Other comprehensive income, net of tax | 0 | 0 | ||
Accumulated Net Gain (Loss) from Cash Flow Hedges Attributable to Parent | ||||
Accumulated Other Comprehensive Income [Roll Forward] | ||||
AOCI beginning balance | (7) | 1 | ||
Other comprehensive income, net of tax | (1) | 3 | ||
AOCI ending balance | (8) | 4 | ||
Accumulated Foreign Currency Adjustment Including Portion Attributable to Noncontrolling Interest | ||||
Accumulated Other Comprehensive Income [Roll Forward] | ||||
Other comprehensive income (loss), pretax | 0 | 3 | ||
Other comprehensive income (loss), tax | 0 | 3 | ||
Other comprehensive income, net of tax | 0 | 6 | ||
Accumulated Foreign Currency Adjustment Attributable to Noncontrolling Interest | ||||
Accumulated Other Comprehensive Income [Roll Forward] | ||||
Other comprehensive income, net of tax | 0 | 0 | ||
Accumulated Foreign Currency Adjustment Attributable to Parent | ||||
Accumulated Other Comprehensive Income [Roll Forward] | ||||
AOCI beginning balance | (15) | (22) | ||
Other comprehensive income, net of tax | 0 | 6 | ||
AOCI ending balance | (15) | (16) | ||
Accumulated Defined Benefit Plans Adjustment Including Portion Attributable to Noncontrolling Interest | ||||
Accumulated Other Comprehensive Income [Roll Forward] | ||||
Other comprehensive income (loss), pretax | 0 | 1 | ||
Other comprehensive income (loss), tax | 0 | 0 | ||
Other comprehensive income, net of tax | 0 | 1 | ||
Accumulated Defined Benefit Plans Adjustment Attributable to Noncontrolling Interest | ||||
Accumulated Other Comprehensive Income [Roll Forward] | ||||
Other comprehensive income, net of tax | 0 | 0 | ||
Accumulated Defined Benefit Plans Adjustment Attributable to Parent | ||||
Accumulated Other Comprehensive Income [Roll Forward] | ||||
AOCI beginning balance | (7) | (7) | ||
Other comprehensive income, net of tax | 0 | 1 | ||
AOCI ending balance | (7) | (6) | ||
AOCI Including Portion Attributable to Noncontrolling Interest | ||||
Accumulated Other Comprehensive Income [Roll Forward] | ||||
Other comprehensive income (loss), pretax | 189 | 219 | ||
Other comprehensive income (loss), tax | (65) | (73) | ||
Other comprehensive income, net of tax | 124 | 146 | ||
AOCI Attributable to Noncontrolling Interest | ||||
Accumulated Other Comprehensive Income [Roll Forward] | ||||
Other comprehensive income, net of tax | 0 | (2) | ||
AOCI Attributable to Parent | ||||
Accumulated Other Comprehensive Income [Roll Forward] | ||||
AOCI beginning balance | 375 | 304 | ||
Other comprehensive income, net of tax | 124 | 144 | ||
AOCI ending balance | $ 499 | $ 448 | ||
[1] | The reclassification adjustment out of net unrealized gains on securities affected the following lines in AFG’s Statement of Earnings: OCI component Affected line in the statement of earnings Pretax Realized gains (losses) on securities Tax Provision for income taxes Attributable to noncontrolling interests Net earnings (loss) attributable to noncontrolling interests | |||
[2] | Includes net unrealized gains of $52 million at both March 31, 2017 and December 31, 2016 related to securities for which only the credit portion of an other-than-temporary impairment has been recorded in earnings. |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Statutory rate of income taxes | 35.00% | 35.00% |
Income Taxes - Reconciliation o
Income Taxes - Reconciliation of income taxes at the statutory rate to the provision for income taxes (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Effective Income Tax Rate Reconciliation, Amount [Abstract] | ||
Earnings before income taxes (“EBT”) | $ 223 | $ 156 |
Income taxes at statutory rate | 78 | 55 |
Effect of tax exempt interest | (6) | (7) |
Effect of stock-based compensation | (6) | 0 |
Effect of change in valuation allowance | (2) | 1 |
Effect of subsidiaries not in AFG's tax return | 0 | 1 |
Effect of other income tax reconciliation | 4 | 2 |
Provision for income taxes as shown on the Statement of Earnings | $ 68 | $ 52 |
Effective Income Tax Rate Reconciliation, Percent [Abstract] | ||
Income taxes at statutory rate as a percentage of EBT | 35.00% | 35.00% |
Effect of tax exempt interest as a percentage of EBT | (3.00%) | (4.00%) |
Effect of stock-based compensation as a percentage of EBT | (3.00%) | 0.00% |
Effect of change in valuation allowance as a percentage of EBT | (1.00%) | 1.00% |
Effect of subsidiaries not in AFG's tax return as a percentage of EBT | 0.00% | 0.00% |
Effect of other income tax reconciliation as a percentage of EBT | 2.00% | 1.00% |
Provision for income taxes as shown on the Statement of Earnings as a percentage of EBT | 30.00% | 33.00% |
Insurance - Analysis of changes
Insurance - Analysis of changes in the liability for losses and loss adjustment expenses, net of reinsurance (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Analysis of changes in the liability for losses and loss adjustment expenses, net of reinsurance | ||
Balance at beginning of year | $ 8,563 | $ 8,127 |
Less reinsurance recoverables, net of allowance | 2,302 | 2,201 |
Net liability at beginning of year | 6,261 | 5,926 |
Liability for losses and loss adjustment expenses, period increase (decrease) [Abstract] | ||
Provision for losses and LAE occurring in the current period | 637 | 609 |
Net increase (decrease) in the provision for claims of prior years: | ||
Net increase (decrease) in the provision for claims of prior years | (28) | (28) |
Total losses and LAE incurred | 609 | 581 |
Payments for losses and LAE of: | ||
Current year | (84) | (80) |
Prior years | (470) | (467) |
Total payments | (554) | (547) |
Foreign currency translation and other | 8 | 11 |
Net liability at end of period | 6,324 | 5,971 |
Add back reinsurance recoverables, net of allowance | 2,297 | 2,137 |
Gross unpaid losses and LAE included in the balance sheet at end of period | $ 8,621 | $ 8,108 |
Subsequent Event - Narrative (D
Subsequent Event - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions | May 03, 2017 | Mar. 31, 2017 | Mar. 31, 2016 |
Subsequent Event [Line Items] | |||
Special cash dividend payable (USD per share) | $ 0.3125 | $ 0.28 | |
Aggregate amount of special cash dividend | $ (27) | $ (24) | |
Subsequent Event | |||
Subsequent Event [Line Items] | |||
Special cash dividend payable (USD per share) | $ 1.50 | ||
Aggregate amount of special cash dividend | $ (132) |