American Financial Group, Inc. (NYSE/NASDAQ: AFG) today reported
net earnings attributable to shareholders of $50 million ($0.54 per
share) for the 2012 fourth quarter, compared to $109 million ($1.09
per share) for the 2011 fourth quarter. The fourth quarter 2012
results include a $99 million ($1.08 per share) after-tax charge to
write-off deferred acquisition costs and strengthen reserves in
AFG’s run-off long-term care operation. This non-core charge was
partially offset by realized gains, the settlement of open tax
years following a favorable decision in AFG’s tax case, and a gain
resulting from a post-closing adjustment to the cash proceeds from
the third quarter sale of AFG’s Medicare supplement and critical
illness businesses. These and other non-core items are outlined in
the table below. Book value per share, excluding appropriated
retained earnings and unrealized gains on fixed maturities,
increased by $3.89 to $42.52 per share during the year. Net
earnings attributable to shareholders for the year were a record
$5.09 per share, compared to $3.32 per share in 2011. Return on
equity was 13% and 9% for 2012 and 2011, respectively.
Core net operating earnings for the 2012 and 2011 fourth quarter
and full year periods are shown in the table below. Improved
results in the Company’s fixed annuity operations were more than
offset by lower underwriting profit and lower investment income in
our specialty property and casualty (“P&C”) insurance
operations. Core net operating earnings for 2012 and 2011 generated
returns on equity of 8% and 10%, respectively.
During the fourth quarter of 2012, AFG repurchased $100 million
of common stock at an average price per share of $38.77.
Repurchases for the full year in 2012 were $415 million, at an
average per share price that was approximately 90% of year end book
value.
AFG’s net earnings attributable to shareholders, determined in
accordance with generally accepted accounting principles (“GAAP”),
include certain items that may not be indicative of its ongoing
core operations. The following table identifies such items and
reconciles net earnings attributable to shareholders to core net
operating earnings, a non-GAAP financial measure that AFG believes
is a useful tool for investors and analysts in analyzing ongoing
operating trends.
In millions, except per share amounts
Three months ended
December 31,
Twelve months ended
December 31,
2012 2011 2012
2011 Components of net earnings attributable to
shareholders:
Core net operating earnings(a)
$
61 $ 106 $ 314 $
363
Non-Core
Items:
Gain on sale of Med supp & critical
illness
13 - 114 -
Other realized gains
36 31 128 45
Long-term care reserve charge
(99 ) - (99 ) -
Special A&E charges(b)
- - (21 ) (38 )
AFG tax case and settlement of open tax
years
39 - 67 -
Valuation allowance on deferred tax
assets(c)
- (28 ) - (28 )
Other
- - (15 ) -
Net earnings attributable to
shareholders
$ 50
$ 109
$ 488
$ 342
Components of Earnings Per Share:
Core net operating earnings $ 0.67 $
1.05 $ 3.27 $ 3.52
Non-Core
Items:
Gain on sale of Med supp & critical
illness
0.15 - 1.19 -
Other realized gains
0.37 0.32 1.34 0.45
Long-term care reserve charge
(1.08 ) - (1.03 ) -
Special A&E charges(b)
- - (0.22 ) (0.37 )
AFG tax case and settlement of open tax
years
0.43 - 0.70 -
Valuation allowance on deferred tax
assets(c)
- (0.28 ) - (0.28 )
Other
- - (0.16 ) -
Diluted Earnings Per Share
$ 0.54
$ 1.09
$ 5.09
$ 3.32
Footnotes (a), (b) and (c) are contained in the accompanying
Notes to Financial Schedules at the end of this release.
Carl H. Lindner III and S. Craig Lindner, AFG’s Co-Chief
Executive Officers, commented: “We are pleased to report strong
core net operating earnings in 2012, despite a few headwinds for
our Company and the industry as a whole, including severe drought
conditions, natural disasters and economic challenges due to a
continued low interest rate environment. We are particularly
pleased with the record earnings achieved in our annuity business
during 2012. Our commitment to maintaining strong pricing
discipline, achieving improved returns in our annuity business and
creating value through superior investment execution has helped us
to achieve compounded growth in AFG’s book value of 11% over the
past five years. We thank God and our management team and employees
for our success in navigating the many business and economic
uncertainties of the last few years.
“We are confident in the Company’s financial strength and
liquidity, with approximately $625 million of excess capital at
December 31, 2012 (including parent company cash of $279 million).
We are committed to deploying our excess capital in a manner that
creates long-term shareholder value. In addition to returning
capital to shareholders through share repurchases and dividends, we
will invest excess capital when we see potential for healthy,
profitable organic growth, and for opportunities to expand our
specialty niche businesses through acquisitions and start-ups that
meet our target return thresholds.
“Based on current information, we expect core net operating
earnings in 2013 to be between $3.60 and $4.00 per share. Our core
earnings per share guidance excludes non-core items such as
realized gains and losses, as well as other significant items that
may not be indicative of ongoing operations.”
P&C Specialty Core
Results
The P&C specialty insurance operations generated
underwriting profit for the 2012 fourth quarter and full year of
$15 million and $131 million, respectively. Comparable results in
2011 were $89 million and $231 million, respectively. The combined
ratio was 98% for the fourth quarter, ten points higher than the
2011 fourth quarter, and 95% for the full year 2012, a three point
increase over 2011. The Midwest drought, which adversely impacted
crop profitability, was a primary driver of lower profitability in
both periods. Higher catastrophe losses and lower favorable reserve
development were also major factors. Fourth quarter results in 2012
include $32 million (4 points) in catastrophe losses, primarily
from Superstorm Sandy, compared to only $2 million in the
comparable 2011 period. Catastrophe losses for the year were $52
million (2 points), compared to $46 million (2 points) in 2011.
Gross and net written premiums were up 16% and 17%,
respectively, in the 2012 fourth quarter compared to the same
quarter a year earlier due primarily to higher premiums in our
Property and Transportation and Specialty Casualty groups. Full
year 2012 net written premiums were up 6%, slightly higher than the
top end of our guidance. This growth was driven by higher premiums
in our Specialty Casualty group.
The Property and Transportation Group reported an
underwriting loss of $14 million for the 2012 fourth quarter
compared to an underwriting profit of $75 million in the same 2011
period. The 2012 full year underwriting profit was $19 million,
compared to $113 million in the prior year. The effects of the
Midwest drought and Superstorm Sandy were the drivers of lower
underwriting profitability in both periods. Catastrophe losses for
the Property and Transportation Group were $26 million in the 2012
fourth quarter compared to modest amounts in comparable 2011
period. The extreme drought conditions during 2012 resulted in
negligible crop earnings in the fourth quarter of 2012, compared
with relatively strong crop results reported in the comparable 2011
period. The majority of the other businesses in this group produced
solid profit margins during 2012.
Higher premiums in our transportation operations and additional
winter wheat premium in our crop operations contributed to
increases in gross and net written premium in the group during the
fourth quarter of 2012. Gross and net written premiums for the full
year of 2012 were impacted by lower spring agricultural commodity
prices for corn and soybeans, which have the effect of reducing
crop insurance premiums. The decrease in net written premium was
more than offset by growth in our transportation businesses.
Overall renewal rates in this group increased 4% in the fourth
quarter of 2012, following the 4% increase achieved in the third
quarter. The average rate increase for this group during 2012 was
approximately 3%.
The Specialty Casualty Group reported an underwriting
profit of $8 million in the 2012 fourth quarter compared to an
underwriting loss of $3 million in the comparable 2011 period.
Underwriting profit for the full year in 2012 was $53 million as
compared to $35 million in 2011. Improved 2012 accident year
results in several of our operations were partially offset by lower
favorable reserve development in our executive liability and excess
and surplus businesses. Increased favorable reserve development in
our general liability lines also contributed to higher
profitability of the group during the 2012 full year. The majority
of businesses in this group produced strong underwriting profit
margins during 2012.
Gross and net written premiums grew by double digit percentages
in both the fourth quarter and full year 2012. We achieved
broad-based growth across this group, primarily the result of more
business opportunities in our excess and surplus operations, growth
in our workers’ compensation and agency captive insurance
businesses, and market hardening in many of our other Specialty
Casualty operations. Pricing in this group was up 6% for the
quarter, a sequential improvement from the third quarter and
continuation of the momentum we have seen in this group during the
year. The average rate increase for this group during 2012 was
4%.
The Specialty Financial Group reported an underwriting
profit of $16 million for the fourth quarter of 2012, compared to
$13 million for the same period a year ago. This improvement was a
result of increased favorable reserve development. Underwriting
profit for the 2012 full year was $44 million, compared to $65
million in 2011. Lower profitability in our financial institutions,
surety and foreign credit businesses contributed to these results.
Almost all businesses in this group produced strong underwriting
profit margins during 2012.
Gross and net written premiums were up 9% and 7%, respectively,
for the quarter as a result of higher premiums in our financial
institutions and trade credit operations. Increases in gross
written premiums in 2012 were due to higher premiums in our
financial institutions business, as well as growth in a service
contract business. All of the premiums in the service contract
business are ceded under reinsurance agreements. Pricing in this
group was flat in the fourth quarter and full year 2012.
Carl Lindner III stated: “Both the absence and abundance of
water played a key role in driving results in our P&C Group in
2012. From the Midwest drought to Superstorm Sandy, our disciplined
underwriting standards, reinsurance strategies and top-notch claims
teams were put to the test. Pre-tax losses from Superstorm Sandy
totaled approximately $32 million, net of reinsurance and including
reinstatement premiums. Throughout these challenges, I’m pleased
that our losses were manageable, our financial position remains
strong and our policyholders were well served. I am encouraged that
we achieved a 4% overall renewal rate increase in the fourth
quarter, a sequential improvement in our overall pricing, with
nearly two-thirds of our P&C businesses reporting pricing
increases.
“Looking ahead to 2013, we are forecasting an overall calendar
year combined ratio in the 91% to 95% range. We will keep our focus
on maintaining adequate rates. Our objective is to achieve an
increase of 4% to 6% in the Specialty Group’s overall average
renewal rates in 2013. Considering these pricing increases coupled
with opportunities we are seeing in the market, we are targeting
growth in our net written premium in the range of 6% to 10% for
2013.”
Annuity and Supplemental Insurance
Results
The Annuity Group reported core operating earnings before
income taxes of $68 million in the fourth quarter of 2012, compared
to $58 million in the 2011 period. Pretax earnings for the fourth
quarter 2012 include exceptionally strong investment results, as
well as a pretax charge to earnings of $13 million due to a review
(“unlocking”) of the Company’s major actuarial assumptions in its
fixed annuity business (compared to $1 million in 2011). Fixed
annuity statutory premiums of $545 million in the 2012 fourth
quarter were 9% lower than the fourth quarter of 2011. The
continued low interest rate environment was a key factor in actions
taken during 2012 to lower crediting rates and agent commissions on
several of our products, which resulted in an expected slowdown in
sales.
For the full year 2012, this group reported record core
operating earnings before income taxes of $256 million, compared to
$188 million in 2011. This growth in earnings is largely
attributable to our ability to maintain spreads on a larger base of
invested assets and also reflects the items mentioned above. Fixed
annuity statutory premiums were $2.9 billion in 2012, compared to
$3.0 billion in 2011. As a result of strong sales in the past three
years, AFG’s fixed annuity reserves have grown from $11 billion at
the beginning of 2010 to nearly $18 billion at year end 2012.
Our Run-off Operations include run-off blocks of
life and long-term care business. The reserves associated with
these blocks of business, net of reinsurance, amount to less than
3% of AFG’s total assets. As previously discussed, fourth quarter
2012 results for these run-off operations include a non-core
after-tax charge of $99 million related to loss recognition in our
long-term care business. This charge is primarily due to lower
projected future investment rates resulting from the continued low
interest rate environment, as well as changes in claims, expense
and persistency assumptions. AFG’s periodic internal review of its
closed long-term care block was supplemented with an external study
by an actuarial firm.
Excluding the non-core charge discussed above, these run-off
operations reported a core pretax operating loss of $12 million in
the 2012 fourth quarter, compared to a core pretax operating loss
of $6 million in the same period in 2011. Both periods included
additional long-term care reserve strengthening related primarily
to existing open claims as a result of the Company’s periodic
review. For the full year, these run-off lines had a core pretax
operating loss of $4 million in 2012, compared to core pretax
operating earnings of less than $1 million in 2011.
Craig Lindner noted, “I’m very pleased with our growth in
earnings, which is largely the result of the fixed and
fixed-indexed annuity premium growth we have achieved over the last
several years, accompanied by pricing discipline and excellent
investment results. Excluding the businesses sold, discussed below,
our pretax core operating earnings grew by more than 34%, due in
part to exceptional investment returns. We expect that full year
2013 pretax core operating earnings, which include the results of
our Annuity Group and Run-Off Operations, will be 5% - 10% higher
than our 2012 results.”
AFG’s Medicare Supplement and Critical Illness Businesses
contributed pretax core operating earnings of $28 million through
the date these operations were sold in August 2012, compared to $34
million for the full year of 2011. Including post-closing
adjustments, sales proceeds totaled $326 million, resulting in a
non-core, after-tax gain of $114 million on the sale.
Further details of these operations may be found in the
accompanying schedules.
Investments
In addition to the gain on the sale of the Medicare supplement
and critical illness businesses, AFG recorded fourth quarter 2012
net realized gains of $36 million after tax and after deferred
acquisition costs (“DAC”), compared to $31 million in the
comparable prior year period. After-tax, after-DAC realized gains
for the full year were $128 million, compared to $45 million in the
same period in 2011. Unrealized gains on fixed maturities were $719
million, after tax, after DAC, at December 31, 2012, an increase of
$260 million since year end 2011. Our portfolio continues to be
high quality, with 86% of our fixed maturity portfolio rated
investment grade and 96% with a National Association of Insurance
Commissioners’ designation of NAIC 1 or 2, its highest two
categories.
During 2012, P&C investment income was 6% lower than the
prior year, in line with our expectations.
More information about the components of our investment
portfolio may be found in our Financial and Investment Supplements,
which are posted on our website.
About American Financial Group,
Inc.
American Financial Group is an insurance holding company, based
in Cincinnati, Ohio with assets in excess of $35 billion. Through
the operations of Great American Insurance Group, AFG is engaged
primarily in property and casualty insurance, focusing on
specialized commercial products for businesses, and in the sale of
fixed and fixed-indexed annuities in the education, bank and
individual markets. Great American Insurance Group’s roots go back
to 1872 with the founding of its flagship company, Great American
Insurance Company.
Forward Looking
Statements
This press release contains certain statements that may be
deemed to be "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. All statements in this press
release not dealing with historical results are forward-looking and
are based on estimates, assumptions and projections. Examples of
such forward-looking statements include statements relating to: the
Company's expectations concerning market and other conditions and
their effect on future premiums, revenues, earnings and investment
activities; recoverability of asset values; expected losses and the
adequacy of reserves for asbestos, environmental pollution and mass
tort claims; rate changes; and improved loss experience.
Actual results and/or financial condition could differ
materially from those contained in or implied by such
forward-looking statements for a variety of reasons including but
not limited to: changes in financial, political and economic
conditions, including changes in interest and inflation rates,
currency fluctuations and extended economic recessions or
expansions in the U.S. and/or abroad; performance of securities
markets; AFG’s ability to estimate accurately the likelihood,
magnitude and timing of any losses in connection with investments
in the non-agency residential mortgage market; new legislation or
declines in credit quality or credit ratings that could have a
material impact on the valuation of securities in AFG’s investment
portfolio; the availability of capital; regulatory actions
(including changes in statutory accounting rules); changes in the
legal environment affecting AFG or its customers; tax law and
accounting changes; levels of natural catastrophes and severe
weather, terrorist activities (including any nuclear, biological,
chemical or radiological events), incidents of war or losses
resulting from civil unrest and other major losses; development of
insurance loss reserves and establishment of other reserves,
particularly with respect to amounts associated with asbestos and
environmental claims; changes in persistency of in-force policies;
availability of reinsurance and ability of reinsurers to pay their
obligations; the unpredictability of possible future litigation if
certain settlements of current litigation do not become effective;
trends in persistency, mortality and morbidity; competitive
pressures, including those in the bank annuity distribution
channels, the ability to obtain adequate rates and policy terms;
changes in AFG's credit ratings or the financial strength ratings
assigned by major ratings agencies to our operating subsidiaries;
and other factors identified in our filings with the Securities and
Exchange Commission.
The forward-looking statements herein are made only as of the
date of this press release. The Company assumes no obligation to
publicly update any forward-looking statements.
Conference Call
The company will hold a conference call to discuss the 2012
fourth quarter and full year results at 11:30 am (ET) tomorrow,
February 12, 2013. Toll-free telephone access will be available by
dialing 1-888-892-6137 (international dial in 706-758-4386). The
conference ID for the live call is 87304572. Please dial in five to
ten minutes prior to the scheduled start time of the call.
A replay of the call will also be available two hours following
the completion of the call and will remain available until 11:59 pm
on February 20, 2013. To listen to the replay, dial 1-800-585-8367
(international dial in 404-537-3406) and provide the Conference ID
87304572. The conference call will also be broadcast over the
Internet. To listen to the call via the Internet, go to AFG’s
website, www.AFGinc.com, and follow the instructions at the
Webcasts and Presentations link within the Investor Relations
section.
(Financial summaries follow)
This earnings release and additional Financial and Investment
Supplements are available in the Investor Relations section of
AFG’s website: www.AFGinc.com.
AMERICAN FINANCIAL GROUP, INC. AND
SUBSIDIARIESSUMMARY OF EARNINGS AND SELECTED BALANCE SHEET
DATA(In Millions, Except Per Share Data)
Three months ended
December 31,
Twelve months ended
December 31,
2012 2011 2012
2011 Revenues P&C insurance premiums $ 756 $ 716 $
2,847 $ 2,759 Life, accident & health premiums 28 106 318 430
Investment income 331 325 1,312 1,241 Realized gains 71 49 371 73
Income (loss) of managed investment
entities:
Investment income 33 27 125 105
Gain (loss) on change in fair value of
assets/liabilities
(31 ) 21 (94 ) (33 ) Other income
48
39 183
175 1,236
1,283 5,062
4,750 Costs and expenses P&C insurance
losses & expenses 746 628 2,760 2,579
Annuity, life, accident & health
benefits and expenses
393
278
1,196
1,081
Interest on borrowed money 21 22 85 85
Expenses of managed investment
entities
22 18 80 71 Other operating and general expenses
84 97
404 376
1,266 1,043
4,525 4,192
Operating earnings (loss) before income
taxes
(30
)
240
537
558
Provision (benefit) for income taxes(d)
(49
) 113 135
239
Net earnings including noncontrolling
interests
19
127
402
319
Less: Net earnings (loss) attributable to
noncontrolling interests
(31
)
18
(86
)
(23
)
Net earnings attributable to
shareholders
$
50
$
109
$
488
$
342
Diluted Earnings per Common Share
$
0.54 $ 1.09
$ 5.09 $
3.32 Average number of Diluted Shares
91.4 99.8 95.9 102.9
Footnote (d) is contained in the accompanying Notes to Financial
Schedules at the end of this release.
AMERICAN FINANCIAL GROUP, INC. AND
SUBSIDIARIESSUMMARY OF EARNINGS AND SELECTED BALANCE SHEET
DATA(In Millions, Except Per Share Data)
December 31, December 31,
2012
2011 Total Cash and Investments $ 28,449 $ 25,577
Long-term Debt $ 953 $ 934 Shareholders’ Equity(e) $ 4,578 $ 4,411
Shareholders’ Equity (Excluding
appropriated retained earnings & unrealized gains(losses) on
fixed maturities(e)
$
3,784
$
3,779
Book Value Per Share: Excluding appropriated retained earnings $
50.61 $ 43.32
Excluding appropriated retained earnings
and unrealized gains (losses) on fixed maturities
$ 42.52 $ 38.63 Common Shares Outstanding 89.0 97.8
Footnote (e) is contained in the accompanying Notes to Financial
Schedules at the end of this release.
AMERICAN FINANCIAL GROUP,
INC.P&C SPECIALTY GROUP UNDERWRITING RESULTS(in
Millions)
Three months
ended
December 31,
%
Change
Twelve Months
ended
December 31,
%
Change
2012 2011 2012
2011 Gross written premiums
$ 965 $
829 16 %
$ 4,321
$ 4,106 5 %
Net
written premiums $ 702
$ 602 17 %
$
2,949 $ 2,770
6 %
Ratios (GAAP): Loss & LAE ratio 73 %
62 % 64 % 62 %
Expense ratio 25
% 26 %
31 % 30
% Combined Ratio(Excluding A&E)
98 %
88 %
95 %
92 %
Total Combined
Ratio 99 %
88 %
97 %
93 %
Supplemental: (f)
Gross Written Premiums: Property & Transportation $ 431
$ 355 21 % $ 2,271 $ 2,273 - Specialty Casualty 384 335 15 % 1,484
1,302 14 % Specialty Financial 151 138 9 % 566 529 7 % Other
(1 ) 1 -
- 2 -
$ 965 $
829 16 %
$ 4,321
$ 4,106 5 %
Net
Written Premiums: Property & Transportation $ 315 $ 261 21
% $ 1,473 $ 1,436 3 % Specialty Casualty 258 222 16 % 992 867 14 %
Specialty Financial 108 101 7 % 411 398 3 % Other
21 18 17 %
73 69 6 %
$ 702 $
602 17 %
$ 2,949
$ 2,770 6 %
Combined Ratio (GAAP): Property & Transportation 104 %
80 % 99 % 92 % Specialty Casualty 97 % 101 % 95 % 96 % Specialty
Financial 85 % 87 % 89 % 84 % Aggregate Specialty Group 98 %
88 % 95 % 92 %
Footnote (f) is contained in the accompanying Notes to Financial
Schedules at the end of this release.
AMERICAN FINANCIAL GROUP,
INC.P&C SPECIALTY GROUP UNDERWRITING RESULTS(in
Millions)
Three months ended
December 31,
Twelve months ended
December 31,
2012 2011 2012
2011 Reserve Development
Favorable/(Unfavorable): Property & Transportation $ 2 $ 3 $ 16
$ 26 Specialty Casualty (7 ) 21 18 71 Specialty Financial 13 1 29
10 Other
4 3
11 13
Aggregate Specialty Group 12 28 74 120 Special A&E Reserve
Charge-P&C Run-off - - (31 ) (50 ) Other (5 ) (1
) (13 ) (1 ) Total Reserve Development Including
A&E $ 7 $ 27 $ 30 $ 69
Points on Combined Ratio: Property & Transportation 1 1
1 2 Specialty Casualty (3 ) 10 2 8 Specialty Financial 12 1 7 3
Aggregate Specialty Group 2 4 3 4
AMERICAN FINANCIAL GROUP,
INC.FIXED ANNUITY GROUP AND OTHER OPERATIONSSTATUTORY
PREMIUMS(in Millions)
Three months
ended
December 31,
%
Change
Twelve months
ended
December 31,
%
Change
2012 2011 2012
2011 Fixed & Indexed annuity premiums:
Individual Single Premium $ 340 $ 386 (12 %) $ 1,815 $ 1,788 2 %
Bank Single Premium 145 151 (4 %) 878 971 (10 %) Education
Market-403(b)
60 63 (5 %)
237 257 (8 %) Total Fixed
Annuities 545 600 (9 %) 2,930 3,016 (3 %) Variable
Annuities 15 18 (17 %) 61 70 (13 %) Run-off Long-Term Care &
Life 27 30 (10 %) 113 116 (3 %) Med Supp & Critical Illness*
- 75 -
200 303 (34 %) Total statutory
premiums
$ 587 $
723 (19 %)
$ 3,304
$ 3,505 (6 %)
* Medicare Supplement and Critical Illness operations were sold
in August 2012.
AMERICAN FINANCIAL GROUP, INC.
Notes To Financial Schedules
a) Components of core net operating earnings (in millions):
Three months ended
December 31,
Twelve months ended
December 31,
2012 2011 2012
2011
Core Pretax
Operating Earnings:
P&C operations $ 69 $ 145 $ 343 $ 487 Annuity operations 68 58
256 188 Run-off Long-Term Care and Life operations (12 ) (6 ) (4 )
- Medicare Supplement & Critical Illness* - 13 28 34 Interest
& other corporate expense
(42
) (43 )
(161 ) (148
) Total Core Pretax Operating Earnings 83 167
462 561 Related income taxes
22
61 148
198 Core net operating earnings
$ 61 $
106 $ 314
$ 363
* Medicare Supplement and Critical Illness operations were sold
in August 2012.
b) Reflects the following effect of special A&E charges
reflected in twelve month 2012 and 2011 results($ in millions,
except per share amounts):
Pretax
After-tax
EPS
2012 2011 2012 2011 2012
2011 A&E Charges:
P&C insurance
runoff operations
Asbestos $ 19 $ 28
$ 12 $ 18 Environmental
12 22
8 14
$ 31 50 $ 20
$ 32 $ 0.20 $ 0.31 Former railroad &
manufacturing operations
Asbestos $ 2
$ 3 $ 1 $ 2
Environmental
-
6 -
4 $ 2
$ 9 $ 1 $ 6 $ 0.02 $ 0.06
c) The deferred tax asset valuation allowance included in
non-core earnings is related to prior year losses from the
Company’s Lloyd’s syndicate and is shown net of $6 million in
noncontrolling interests.
d) Operating income before income taxes includes $34 million and
$98 million in non-deductible losses attributable to noncontrolling
interests related to managed investment entities in the fourth
quarter and full year of 2012, respectively and $23 million in
non-taxable income and $24 million in non-deductible losses
attributable to noncontrolling interests related to managed
investment entities in the fourth quarter and full year of 2011,
respectively.
e) Shareholders’ Equity at December 31, 2012 includes $719
million ($8.09 per share) in unrealized after-tax gains on fixed
maturities and $75 million ($0.84 per share) of retained earnings
appropriated to managed investment entities. Shareholders’ Equity
at December 31, 2011 includes $459 million ($4.69 per share) in
unrealized after-tax gains on fixed maturities and $173 million
($1.76 per share) of retained earnings appropriated to managed
investment entities. The appropriated retained earnings will
ultimately inure to the benefit of the debt holders of the
investment entities managed by AFG.
f) Supplemental Notes:
- Property & Transportation
includes primarily physical damage and liability coverage for
buses, trucks and recreational vehicles, inland and ocean marine,
agricultural-related products and other property coverages.
- Specialty Casualty includes
primarily excess and surplus, general liability, executive
liability, umbrella and excess liability, customized programs for
small to mid-sized businesses and workers’ compensation
insurance.
- Specialty Financial includes
risk management insurance programs for leasing and financing
institutions (including collateral and mortgage protection
insurance), surety and fidelity products and trade credit
insurance.
- Other includes an internal
reinsurance facility.
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