AFG American Financial Group

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 27, 2015

 

 

AMERICAN FINANCIAL GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Ohio		1-13653		31-1544320
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

301 East Fourth Street, Cincinnati, OH		45202
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code 513-579-2121

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Section 2 - Financial Information

Item 2.02 Results Of Operations And Financial Condition.

Reference is made to the press release of American Financial Group, Inc. (the “Company”) relating to the announcement of the Company’s results of operations for the first quarter of 2015 and the availability of the Investor Supplement on the Company’s website. The press release was issued on April 27, 2015. A copy of the press release is attached to this Form 8-K as Exhibit 99.1 and a copy of the Investor Supplement is attached as Exhibit 99.2 and are incorporated herein by reference.

The information contained herein shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 as amended (the “Exchange Act), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.

Section 9 - Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

 

(a)

Financial statements of business acquired. Not applicable.

 

(b)

Pro forma financial information. Not applicable.

 

(c)

Shell company transactions. Not applicable

 

(d)

Exhibits

 

Exhibit No.		Description
99.1		Earnings Release dated April 27, 2015, reporting American Financial Group Inc. results for the quarterly period ended March 31, 2015.
99.2		Investor Supplement – First Quarter 2015

 

2

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SIGNATURES

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

 

						AMERICAN FINANCIAL GROUP, INC.
		Date: April 28, 2015
						By:		/s/ Karl J. Grafe
								Karl J. Grafe
								Vice President

 

3

Exhibit 99.1

 

American Financial Group, Inc. Announces First Quarter Results

 

•

Net earnings per share of $0.21 include $1.18 per share loss on sale of long-term care insurance business

 

•

Core net operating earnings $1.25 per share, up 25% from the comparable 2014 period

Cincinnati, Ohio – April 27, 2015 – American Financial Group, Inc. (NYSE: AFG) today reported 2015 first quarter net earnings attributable to shareholders of $19 million ($0.21 per share) compared to $103 million ($1.13 per share) for the 2014 first quarter. As previously announced, AFG’s 2015 first quarter results include an after-tax loss of $105 million ($1.18 per share) related to the pending sale of its run-off long-term care insurance business. Net earnings for the quarter also include $12 million ($0.14 per share) in after-tax net realized gains, compared to $12 million ($0.13 per share) in the prior year period. Book value per share, excluding appropriated retained earnings and unrealized gains on fixed maturities, decreased by $0.21 to $48.55 per share during the quarter.

Core net operating earnings were $112 million ($1.25 per share) for the 2015 first quarter, compared to $91 million ($1.00 per share) in the 2014 first quarter. Higher underwriting profit and net investment income in our Specialty Property and Casualty (“P&C”) insurance operations and higher operating earnings in our Annuity and Run-off Long-Term Care and Life segments contributed to these results. Core net operating earnings for the first quarters of 2015 and 2014 generated annualized returns on equity of 10.8% and 9.1%, respectively.

During the first quarter of 2015, AFG repurchased 516,276 shares of common stock at an average price per share of $59.32.

AFG’s net earnings attributable to shareholders, determined in accordance with U.S. 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 March 31,
		2015				2014
Components of net earnings attributable to shareholders:
Core net operating earnings(a)		$	112			$	91
Non-Core Items:
Realized gains on securities			12				12
Loss on sale of subsidiaries			(105	)			—
Net earnings attributable to shareholders		$	19			$	103
Components of Earnings Per Share:
Core net operating earnings(a)		$	1.25			$	1.00
Non-Core Items:
Realized gains on securities			0.14				0.13
Loss on sale of subsidiaries			(1.18	)			—
Diluted Earnings Per Share		$	0.21			$	1.13

Footnote (a) is contained in the accompanying Notes to Financial Schedules at the end of this release.

 

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S. Craig Lindner and Carl H. Lindner III, AFG’s Co-Chief Executive Officers, issued this statement: “Continued focused execution within our specialty insurance businesses, excellent investment management and intelligent deployment of capital enabled us to achieve year-over-year growth of 25% in AFG’s core net operating earnings per share during the first quarter of 2015. Our insurance professionals continue to be disciplined with pricing and opportunistic in growing our portfolio of niche businesses.

“As of March 31, 2015, AFG had approximately $790 million of excess capital (including parent company cash of approximately $270 million). On April 14, 2015, we announced that AFG had reached a definitive agreement to sell its Run-off Long-Term Care Insurance business to HC2 Holdings, Inc. The sale of this business is expected to produce a cash tax benefit between $95 and $105 million, and is expected to provide approximately $105 to $115 million in proceeds, including the cash tax benefit, generating approximately $80 to $90 million in excess capital. Our excess capital will be deployed into AFG’s core businesses as we identify potential for healthy, profitable organic growth, and opportunities to expand our specialty niche businesses through acquisitions and start-ups that meet our target return thresholds. We will also make opportunistic share repurchases when it makes sense to do so and return capital to shareholders through dividends.

“Based on results for the first three months of the year, we continue to expect core net operating earnings in 2015 to be between $5.10 and $5.50 per share. Our core earnings per share guidance excludes non-core items such as the loss on the sale of AFG’s run-off long-term care insurance business, other realized gains and losses, as well as other significant items that may not be indicative of ongoing operations.”

Specialty Property and Casualty Insurance Operations

The Specialty P&C insurance operations generated an underwriting profit of $60 million in the 2015 first quarter, compared to $59 million in the first quarter of 2014. Higher underwriting profit in our Specialty Financial and Property and Transportation Groups was partially offset by lower profitability in our Specialty Casualty Group.

The first quarter 2015 combined operating ratio of 93.6% includes 0.8 points of favorable prior year reserve development, compared to 4.2 points of favorable development in the comparable prior year period. First quarter results in 2015 include 0.6 points in catastrophe losses, compared to 1.6 points in the first quarter of 2014.

Gross and net written premiums were up 17% and 23%, respectively, in the 2015 first quarter compared to the same quarter a year earlier. The 2015 results include premiums from Summit, AFG’s specialty workers’ compensation subsidiary, which was acquired on April 1, 2014. Excluding Summit premiums, gross and net written premiums for the 2015 first quarter grew by 4% and 6%, respectively, year-over-year. Further details about AFG’s specialty P&C operations may be found in the accompanying schedules.

The Property and Transportation Group reported an underwriting profit of $7 million in the first quarter of 2015 compared to $6 million in the first quarter of 2014. Higher underwriting profitability in our agricultural and inland marine operations was partially offset by higher adverse prior year reserve development in our ocean marine and transportation businesses. Catastrophe losses in this group were $4 million in the first quarter of 2015, primarily as a result of winter storms in the month of February, compared to $9 million in the 2014 first quarter.

Gross and net written premiums were flat and up 1%, respectively, during the first quarter of 2015. A heightened focus on disciplined pricing and underwriting resulted in lower gross and net written premiums in our National Interstate subsidiary, which were offset by modest growth in many of the other businesses in this group.

 

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The Specialty Casualty Group reported an underwriting profit of $28 million in the first quarter of 2015, compared to $38 million in the first quarter of 2014, reflecting higher underwriting profit in our workers’ compensation and social services businesses, which was offset by lower profitability in our general liability and international business and lower favorable prior year reserve development in our excess and surplus and executive liability businesses.

Gross and net written premiums for the first quarter of 2015 were up 35% and 51%, respectively, compared to the same period in 2014. The 2015 results include premiums from Summit; excluding these premiums, gross and net written premiums grew by 9% and 12%, respectively, year over year. While most of the businesses in this group reported growth, our workers’ compensation, excess and surplus lines and targeted markets businesses were primary drivers of the higher premiums. Broadening opportunities to write business and additional premium flow from start-up businesses were contributing factors. Pricing was flat in this group for the quarter.

The Specialty Financial Group reported an underwriting profit of $22 million in the first quarter of 2015, compared to $10 million in the comparable 2014 period. The increase was driven by higher underwriting profitability in our fidelity / crime and financial institutions businesses and higher favorable prior year reserve development in our trade credit business. Nearly all businesses in this group continued to achieve excellent underwriting margins during 2015, with an overall combined operating ratio of 81.7% for the first quarter of 2015.

First quarter 2015 gross written premiums were down 3% and net written premiums were down 1% when compared to the prior year period, primarily as a result of lower premiums in our financial institutions business. Pricing in this group was up approximately 1% on average for the quarter.

Carl Lindner III noted, “Our Specialty P&C businesses produced strong underwriting profitability during the first quarter, and total P&C operating income was up about 20% year-over-year. I’m especially pleased with continued excellent underwriting results of the businesses within our Specialty Financial Group and the healthy underwriting profitability in our Specialty Casualty businesses. I’m also encouraged by the year over year improvement in underwriting results in our Property and Transportation Group. We achieved an average overall renewal rate increase of approximately 2% for the quarter, roughly in line with our fourth quarter results.

“Based on results during the first three months of the year, we continue to expect an overall 2015 calendar year combined ratio in the 92% to 94% range and estimate net written premium growth to be between 4% and 8%.”

Annuity Segment

AFG’s Annuity Segment contributed $75 million in core pretax operating earnings in the first quarter of 2015 compared to $73 million in the first quarter of 2014, an increase of $2 million or 3%. Earnings before the impact of fair value accounting on fixed-indexed annuities (FIAs) were up 5%, as detailed in the table below:

 

Components of Core Annuity Operating Earnings Before Income Taxes
In millions		Three months ended March 31,								Pct. Change
		2015				2014
Annuity earnings before fair value accounting for FIAs		$	92			$	88				5	%
Impact of Fair Value Accounting for FIAs			(17	)			(15	)			nm
Core Pretax Annuity Operating Earnings		$	75			$	73				3	%

 

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Annuity Earnings Before Fair Value Accounting for FIAs

AFG’s 2015 earnings continued to benefit from growth in annuity assets. AFG’s quarterly average annuity investments and reserves grew approximately 12% and 13%, respectively, year-over-year; however, the impact of this growth was partially offset by the runoff of higher yielding investments. In addition, both periods benefited from stronger than usual investment results.

Impact of Fair Value Accounting for FIAs

Variances from expectations of certain items (such as projected interest rates, stock market growth, option costs and surrenders) have an impact on the accounting for FIAs; these accounting adjustments are recognized through AFG’s reported core earnings. In the first quarters of 2015 and 2014, lower than expected interest rates resulted in an unfavorable impact on earnings of $13 million and $12 million, respectively; these impacts are included within the “Impact of Fair Value Accounting” amounts shown in the table above.

See the accompanying schedules for information about spreads for AFG’s fixed annuity operations.

The Annuity segment reported statutory premiums of $813 million in the first quarter of 2015, compared to $967 million in the first quarter of 2014, a decrease of 16%. This year-over-year decrease, as well as the 16% sequential decline in premiums from the fourth quarter of 2014, was due primarily to lower sales of traditional fixed annuities in the financial institutions market and lower sales of FIAs in the retail channel. AFG attributes these decreases to new and sometimes aggressive competition in these markets, as well as the lower overall interest rate environment. The Company’s commitment to maintain pricing discipline remains steadfast in the current interest rate environment.

Craig Lindner stated, “I’m very pleased with our strong annuity earnings during the first quarter of 2015. These results demonstrate careful execution of our strategy, which is focused on a balance of disciplined pricing, consumer friendly product design, superior investment results and growing our business when we can achieve desired long-term returns. Based on the results through the first three months of 2015, assuming no significant change in interest rates or the stock market, we continue to expect full year 2015 core pretax annuity operating earnings will be flat compared to the $328 million reported for the full year of 2014. Significant changes in market interest rates and/or the stock market could lead to significant positive or negative impacts on the Annuity segment’s results. Based on information currently available, we now expect that premiums for the full year of 2015 will be approximately 5% to 10% lower than the $3.7 billion achieved for the full year in 2014.”

More information about premiums and the results of operations for our Annuity segment may be found in our Quarterly Investor Supplement, which is posted on our website.

Run-off Long-Term Care and Life Segment

AFG’s Run-off Long-term Care and Life segment reported core pretax operating earnings of $4 million in the first quarter of 2015 compared to a core pretax operating loss of $2 million in the comparable prior year period, reflecting primarily better claims experience.

As previously announced, AFG reached a definitive agreement to sell the legal entities containing all of its run-off long-term care insurance business to HC2 Holdings, Inc. for an initial payment of $7 million in cash and HC2 securities, subject to adjustment based on certain items, including operating results through the closing date. In addition, AFG may also receive up to $13 million of additional proceeds from HC2 in the future based on the release of certain statutory liabilities of the legal entities sold by AFG. In accordance with GAAP, AFG recorded its estimated non-core, after-tax loss on the sale of $105 million in its results for the first quarter of 2015.

 

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The legal entities involved in the transaction, United Teacher Associates Insurance Company and Continental General Insurance Company, contain all of AFG’s long-term care insurance reserves. The transaction is expected to close in the third quarter of 2015, subject to customary conditions, including receipt of required regulatory approvals.

Investments

AFG recorded first quarter 2015 net realized gains on securities of $12 million after tax and after deferred acquisition costs (DAC), unchanged from realized gains reported in the comparable 2014 period. Unrealized gains on fixed maturities were $656 million after tax and after DAC at March 31, 2015, an increase of $52 million since year end. Our portfolio continues to be high quality, with 87% of our fixed maturity portfolio rated investment grade and 97% with a National Association of Insurance Commissioners’ designation of NAIC 1or 2, its highest two categories.

For the three months ended March 31, 2015, P&C net investment income was approximately 18% higher than the comparable 2014 period, reflecting the investment of cash received in connection with the Summit acquisition.

More information about the components of our investment portfolio may be found in our Quarterly Investor Supplement, which is posted on our website.

About American Financial Group, Inc.

American Financial Group is an insurance holding company, based in Cincinnati, Ohio with assets of over $45 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 retail, financial institutions and education 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 long-term care, 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

 

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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 or obtaining approvals incident to transactions); 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 and AFG’s run-off long-term care business; availability of reinsurance and ability of reinsurers to pay their obligations; trends in persistency, mortality and morbidity; competitive pressures, including those in the 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 2015 first quarter results at 11:00 a.m. (ET) tomorrow, Tuesday, April 28, 2015. Toll-free telephone access will be available by dialing 1-877-459-8719 (international dial-in 424-276-6843). The conference ID for the live call is 22310772. Please dial in five to ten minutes prior to the scheduled start time of the call.

A replay will be available two hours following the completion of the call and will remain available until 11:59 p.m. (ET) on May 5, 2015. To listen to the replay, dial 1-855-859-2056 (international dial-in 404-537-3406) and provide the conference ID 22310772.

The conference call and accompanying webcast slides will also be broadcast live over the Internet. To listen to the call via the Internet, go to the Investor Relations page on AFG’s website, www.AFGinc.com, and follow the instructions at the Webcasts and Presentations link.

The archived webcast will be available immediately after the call via the same link on the Investor Relations page until May 5, 2015 at 11:59 p.m. (ET). An archived audio MP3 file will be available within 24 hours of the call.

Contact:

Diane P. Weidner

Asst. Vice President – Investor Relations

(513) 369-5713

Websites:

www.AFGinc.com

www.GreatAmericanInsuranceGroup.com

# # #

(Financial summaries follow)

This earnings release and AFG’s Quarterly Investor Supplement are available in the Investor Relations section of AFG’s website: www.AFGinc.com.

AFG15-07

 

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AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES

SUMMARY OF EARNINGS AND SELECTED BALANCE SHEET DATA

(In Millions, Except Per Share Data)

 

		Three months ended March 31,
		2015				2014
Revenues
P&C insurance net earned premiums		$	946			$	754
Life, accident & health net earned premiums			25				28
Net investment income			388				361
Realized gains (losses) on:
Securities			19				19
Subsidiaries			(162	)			—
Income (loss) of managed investment entities:
Investment income			34				28
Gain (loss) on change in fair value of assets/liabilities			(3	)			—
Other income			47				21
Total revenues			1,294				1,211
Costs and expenses
P&C insurance losses & expenses			889				696
Annuity, life, accident & health benefits & expenses			254				246
Interest charges on borrowed money			20				18
Expenses of managed investment entities			24				20
Other expenses			77				70
Total costs and expenses			1,264				1,050
Earnings before income taxes			30				161
Provision for income taxes(b)			5				54
Net earnings including noncontrolling interests			25				107
Less: Net earnings attributable to noncontrolling interests			6				4
Net earnings attributable to shareholders		$	19			$	103
Diluted Earnings per Common Share		$	0.21			$	1.13
Average number of diluted shares			89.4				91.6
Selected Balance Sheet Data:		March 31, 2015				December 31, 2014
Total cash and investments		$	37,384			$	36,210
Long-term debt		$	1,061			$	1,061
Shareholders’ equity(c)		$	4,923			$	4,879
Shareholders’ equity (excluding appropriated retained earnings and unrealized gains/losses on fixed maturities)(c)		$	4,267			$	4,277
Book Value Per Share:
Excluding appropriated retained earnings		$	56.01			$	55.65
Excluding appropriated retained earnings and unrealized gains/losses on fixed maturities		$	48.55			$	48.76
Common Shares Outstanding			87.9				87.7

Footnotes (b) and (c) are contained in the accompanying Notes to Financial Schedules at the end of this release.

 

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AMERICAN FINANCIAL GROUP, INC.

SPECIALTY P&C OPERATIONS

(Dollars in Millions)

 

		Three months ended March 31,								Pct. Change
		2015				2014
Gross written premiums		$	1.196			$	1,024				17	%
Net written premiums		$	926			$	755				23	%
Ratios (GAAP):
Loss & LAE ratio			60.8	%			56.9	%
Underwriting expense ratio			32.8	%			35.3	%
Specialty Combined Ratio			93.6	%			92.2	%
Supplemental Information:(d)
Gross Written Premiums:
Property & Transportation		$	376			$	376				—	%
Specialty Casualty			683				507				35	%
Specialty Financial			137				141				(3	%)
		$	1,196			$	1,024				17	%
Net Written Premiums:
Property & Transportation		$	288			$	284				1	%
Specialty Casualty			501				331				51	%
Specialty Financial			115				116				(1	%)
Other			22				24				(8	%)
		$	926			$	755				23	%
Combined Ratio (GAAP):
Property & Transportation			97.7	%			98.1	%
Specialty Casualty			94.2	%			87.8	%
Specialty Financial			81.7	%			91.0	%
Aggregate Specialty Group			93.6	%			92.2	%

 

		Three months ended March 31,
		2015				2014
Reserve Development (Favorable)/Adverse:
Property & Transportation		$	3			$	(4	)
Specialty Casualty			—				(24	)
Specialty Financial			(9	)			(1	)
Other			(1	)			(3	)
		$	(7	)		$	(32	)
Points on Combined Ratio:
Property & Transportation			1.1				(1.1	)
Specialty Casualty			—				(7.7	)
Specialty Financial			(7.3	)			(0.7	)
Aggregate Specialty Group			(0.8	)			(4.2	)

Footnote (d) is contained in the accompanying Notes to Financial Schedules at the end of this release.

 

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AMERICAN FINANCIAL GROUP, INC.

ANNUITY SEGMENT

(Dollars in Millions)

Components of Statutory Premiums

 

		Three months ended March 31,								Pct. Change
		2015				2014
Annuity Premiums:
Financial Institutions Single Premium		$	394			$	480				(18	%)
Retail Single Premium			361				425				(15	%)
Education Market			47				50				(6	%)
Variable Annuities			11				12				(8	%)
Total Annuity Premiums		$	813			$	967				(16	%)

Components of Core Operating Earnings Before Income Taxes

 

		Three months ended March 31,								Pct. Change
		2015				2014
Revenues:
Net investment income		$	292			$	275				6	%
Other income			24				18				33	%
Total revenues			316				293				8	%
Costs and Expenses:
Annuity benefits			184				168				10	%
Acquisition expenses			34				31				10	%
Other expenses			23				21				10	%
Total costs and expenses			241				220				10	%
Core operating earnings before income taxes		$	75			$	73				3	%

Supplemental Fixed Annuity Information

 

		Three months ended March 31,								Pct. Change
		2015				2014
Core Operating Earnings Before impact of fair value accounting on FIAs		$	92			$	88				5	%
Impact of Fair Value Accounting			(17	)			(15	)			nm
Core operating earnings before income taxes		$	75			$	73				3	%
Average Fixed Annuity Reserves*		$	23,752			$	21,066				13	%
Net Interest Spread			2.67	%			2.81	%
Net Spread Earned Before Impact of Fair Value Accounting*			1.49	%			1.58	%
Net Spread Earned After Impact of Fair Value Accounting			1.21	%			1.30	%

 

*	Excludes fixed annuity portion of variable annuity business.

 

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AMERICAN FINANCIAL GROUP, INC.

Notes to Financial Schedules

 

a)	Components of core net operating earnings (in millions):

 

		Three months ended March 31,
		2015				2014
Core Operating Earnings before Income Taxes:
P&C insurance segment		$	129			$	108
Annuity segment			75				73
Run-off long-term care and life			4				(2	)
Interest & other corporate expense			(41	)			(41	)
Core operating earnings before income taxes			167				138
Related income taxes			55				47
Core net operating earnings		$	112			$	91

 

b)	Excluding the impact of the loss on the sale of the long term care business that was recorded in the first quarter of 2015, AFG’s effective tax rate was 32%.

 

c)

Shareholders’ Equity at March 31, 2015 includes $656 million ($7.46 per share) in unrealized after-tax gains on fixed maturities. Shareholder’s Equity at December 31, 2014 includes $604 million ($6.89 per share) in unrealized after-tax gains on fixed maturities and ($2) million ($0.03 per share) of retained earnings appropriated to managed investment entities.

 

d)	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, professional liability, umbrella and excess liability, specialty coverages in targeted markets, 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 lender-placed mortgage property insurance), surety and fidelity products and trade credit insurance.

 

•

Other includes an internal reinsurance facility.

 

Page 10

Exhibit 99.2

 

		American Financial Group, Inc.
		Investor Supplement - First Quarter 2015
		April 27, 2015   American Financial Group, Inc. Corporate Headquarters Great American Insurance Group Tower 301 E Fourth Street Cincinnati, OH 45202 513 579 6739

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American Financial Group, Inc. Table of Contents - Investor Supplement - First Quarter 2015

 

Section		Page
Table of Contents - Investor Supplement - First Quarter 2015			2
Financial Highlights			3
Summary of Earnings			4
Earnings Per Share Summary			5
Property and Casualty Insurance Segment
Property and Casualty Insurance - Summary Underwriting Results (GAAP)			6
Specialty - Underwriting Results (GAAP)			7
Property and Transportation - Underwriting Results (GAAP)			8
Specialty Casualty - Underwriting Results (GAAP)			9
Specialty Financial - Underwriting Results (GAAP)			10
Other Specialty - Underwriting Results (GAAP)			11
Annuity Segment
Annuity Earnings (GAAP)			12
Detail of Annuity Benefits Expense (GAAP)			13
Net Spread on Fixed Annuities (GAAP)			14
Annuity Premiums (Statutory)			15
Fixed Annuity Benefits Accumulated (GAAP)			16
Consolidated Balance Sheet / Book Value / Debt
Consolidated Balance Sheet			17
Book Value Per Share and Price / Book Summary			18
Capitalization			19
Additional Supplemental Information			20
Consolidated Investment Supplement
Total Cash and Investments and Quarterly Net Investment Income			21
Fixed Maturities - By Security Type - AFG Consolidated			22
Fixed Maturities - By Security Type Portfolio			23
Fixed Maturities - Credit Rating and NAIC Designation			24
Mortgage-Backed Securities - AFG Consolidated			25
Mortgage-Backed Securities Portfolio			26
Mortgage-Backed Securities - Credit Rating and NAIC Designation			27

 

2

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American Financial Group, Inc. Financial Highlights (in millions, except per share information)

 

		Three Months Ended																				Twelve Months Ended
		03/31/15				12/31/14				09/30/14				06/30/14				03/31/14				12/31/14				12/31/13
Highlights
Core net operating earnings		$	112			$	122			$	127			$	99			$	91			$	439			$	385
Net earnings			19				127				116				106				103				452				471
Total assets			48,307				47,535				46,552				45,355				42,770				47,535				42,087
Adjusted shareholders’ equity (a)			4,267				4,277				4,300				4,298				4,191				4,277				4,109
Property and Casualty net written premiums			926				1,025				1,242				998				755				4,020				3,341
Annuity statutory premiums			813				971				809				949				967				3,696				4,033
Per share data
Core net operating earnings per share		$	1.25			$	1.35			$	1.40			$	1.07			$	1.00			$	4.82			$	4.22
Diluted earnings per share			0.21				1.41				1.28				1.15				1.13				4.97				5.16
Adjusted book value per share (a)			48.55				48.76				48.59				47.95				46.79				48.76				45.90
Cash dividends per common share			0.250				1.250				0.220				0.220				0.220				1.910				1.805
Financial ratios
Annualized core operating return on equity (b)			10.8	%			11.7	%			12.3	%			9.6	%			9.1	%			10.7	%			10.0	%
Annualized return on equity (b)			1.8	%			12.1	%			11.1	%			10.3	%			10.3	%			11.0	%			12.3	%
Property and Casualty combined ratio - Specialty:
Loss & LAE ratio			60.8	%			64.0	%			67.1	%			64.6	%			56.9	%			63.7	%			61.7	%
Underwriting expense ratio			32.8	%			28.6	%			26.7	%			32.3	%			35.3	%			30.2	%			31.8	%
Combined ratio - Specialty			93.6	%			92.6	%			93.8	%			96.9	%			92.2	%			93.9	%			93.5	%
Net spread on fixed annuities:
Net interest spread			2.67	%			2.64	%			2.77	%			2.92	%			2.81	%			2.78	%			2.94	%
Net spread earned:
Before impact of fair value accounting			1.49	%			1.54	%			1.50	%			1.64	%			1.58	%			1.56	%			1.52	%
Impact of fair value accounting (c)			(0.28	%)			(0.14	%)			(0.02	%)			(0.18	%)			(0.28	%)			(0.15	%)			0.08	%
After impact of fair value accounting			1.21	%			1.40	%			1.48	%			1.46	%			1.30	%			1.41	%			1.60	%

 

(a)	Excludes appropriated retained earnings and unrealized gains related to fixed maturity investments.

(b)	Excludes appropriated retained earnings and accumulated other comprehensive income.

(c)	Change in fair value of derivatives offset by the estimated related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs.

 

3

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American Financial Group, Inc. Summary of Earnings ($ in millions)

 

		Three Months Ended																				Twelve Months Ended
		03/31/15				12/31/14				09/30/14				06/30/14				03/31/14				12/31/14				12/31/13
Property and Casualty Insurance
Underwriting profit		$	60			$	79			$	70			$	29			$	58			$	236			$	199
Net investment income			79				75				76				76				67				294				263
Other expense			(10	)			(13	)			(16	)			(8	)			(17	)			(54	)			(40	)
Property and Casualty Insurance operating earnings			129				141				130				97				108				476				422
Annuity earnings			75				85				86				84				73				328				328
Run-off Long-Term Care and Life (losses)/earnings			4				(7	)			1				(2	)			(2	)			(10	)			(10	)
Interest expense of parent holding companies			(19	)			(19	)			(17	)			(16	)			(17	)			(69	)			(68	)
Other expense			(22	)			(16	)			(13	)			(21	)			(24	)			(74	)			(100	)
Pre-tax core operating earnings			167				184				187				142				138				651				572
Income tax expense			55				62				60				43				47				212				187
Core net operating earnings			112				122				127				99				91				439				385
Non-core items, net of tax:
Realized gains on securities			12				5				8				7				12				32				138
Loss on sale of subsidiaries			(105	)			—				—				—				—				—				—
Significant A&E charges:
Property and Casualty Insurance run-off operations			—				—				(15	)			—				—				(15	)			(35	)
Former Railroad and Manufacturing operations			—				—				(4	)			—				—				(4	)			(14	)
ELNY guaranty fund assessments charge (a)			—				—				—				—				—				—				(3	)
Net earnings		$	19			$	127			$	116			$	106			$	103			$	452			$	471

 

(a)	The ELNY guaranty fund assessments charge represent guaranty fund assessments in connection with the insolvency and liquidation of Executive Life Insurance Company of New York, an unaffiliated life insurance company.

 

4

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American Financial Group, Inc. Earnings Per Share Summary (in millions, except per share information)

 

		Three Months Ended																				Twelve Months Ended
		03/31/15				12/31/14				09/30/14				06/30/14				03/31/14				12/31/14				12/31/13
Core net operating earnings		$	112			$	122			$	127			$	99			$	91			$	439			$	385
Net earnings		$	19			$	127			$	116			$	106			$	103			$	452			$	471
Average number of diluted shares			89.377				89.772				90.873				91.593				91.621				90.960				91.242
Diluted earnings per share:
Core net operating earnings per share		$	1.25			$	1.35			$	1.40			$	1.07			$	1.00			$	4.82			$	4.22
Realized gains on securities			0.14				0.06				0.09				0.08				0.13				0.36				1.52
Loss on sale of subsidiaries			(1.18	)			—				—				—				—				—				—
Significant A&E charges:
Property and Casualty Insurance run-off operations			—				—				(0.17	)			—				—				(0.17	)			(0.39	)
Former Railroad and Manufacturing operations			—				—				(0.04	)			—				—				(0.04	)			(0.15	)
ELNY guaranty fund assessments charge (a)			—				—				—				—				—				—				(0.04	)
Diluted earnings per share		$	0.21			$	1.41			$	1.28			$	1.15			$	1.13			$	4.97			$	5.16

 

(a)	The ELNY guaranty fund assessments charge represent guaranty fund assessments in connection with the insolvency and liquidation of Executive Life Insurance Company of New York, an unaffiliated life insurance company.

 

5

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American Financial Group, Inc. Property and Casualty Insurance - Summary Underwriting Results (GAAP) ($ in millions)

 

		Three Months Ended																				Twelve Months Ended
		03/31/15				12/31/14				09/30/14				06/30/14				03/31/14				12/31/14				12/31/13
Property and Transportation		$	7			$	22			$	11			$	(18	)		$	6			$	21			$	12
Specialty Casualty			28				36				32				30				38				136				102
Specialty Financial			22				18				21				15				10				64				67
Other Specialty			3				3				6				2				5				16				25
Underwriting profit - Specialty			60				79				70				29				59				237				206
Other core charges, included in loss and LAE			—				—				—				—				1				1				7
Underwriting profit - Core			60				79				70				29				58				236				199
Special A&E charges, included in loss and LAE			—				—				(24	)			—				—				(24	)			(54	)
Underwriting profit - Property and Casualty Insurance		$	60			$	79			$	46			$	29			$	58			$	212			$	145
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	—			$	—			$	—			$	—			$	—			$	—			$	—
Catastrophe loss			6				3				3				10				12				28				31
Total current accident year catastrophe losses		$	6			$	3			$	3			$	10			$	12			$	28			$	31
Prior year loss reserve development (favorable) / adverse		$	(7	)		$	10			$	13			$	14			$	(31	)		$	6			$	(15	)
Combined ratio:
Property and Transportation			97.7	%			94.6	%			97.8	%			105.5	%			98.1	%			98.7	%			99.2	%
Specialty Casualty			94.2	%			92.9	%			93.3	%			93.6	%			87.8	%			92.3	%			90.9	%
Specialty Financial			81.7	%			85.6	%			81.6	%			87.6	%			91.0	%			86.5	%			85.6	%
Other Specialty			89.3	%			86.9	%			78.0	%			89.0	%			79.9	%			83.4	%			68.8	%
Combined ratio - Specialty			93.6	%			92.6	%			93.8	%			96.9	%			92.2	%			93.9	%			93.5	%
Other core charges			0.1	%			0.0	%			0.1	%			0.0	%			0.0	%			0.0	%			0.3	%
Special A&E charges			0.0	%			0.0	%			2.1	%			0.0	%			0.0	%			0.6	%			1.7	%
Combined ratio			93.7	%			92.6	%			96.0	%			96.9	%			92.2	%			94.5	%			95.5	%
Combined ratio excl. catastrophe and prior year development			93.8	%			91.4	%			94.5	%			94.4	%			94.8	%			93.7	%			94.9	%
Loss and LAE components - property and casualty insurance
Current accident year, excluding catastrophe loss			61.0	%			62.8	%			67.8	%			62.1	%			59.4	%			63.5	%			63.1	%
Prior accident year loss reserve development			(0.7	%)			1.0	%			1.2	%			1.4	%			(4.1	%)			0.1	%			(0.4	%)
Current accident year catastrophe loss			0.6	%			0.2	%			0.3	%			1.1	%			1.6	%			0.7	%			1.0	%
Loss and LAE ratio			60.9	%			64.0	%			69.3	%			64.6	%			56.9	%			64.3	%			63.7	%

 

6

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American Financial Group, Inc. Specialty - Underwriting Results (GAAP) ($ in millions)

 

		Three Months Ended																				Twelve Months Ended
		03/31/15				12/31/14				09/30/14				06/30/14				03/31/14				12/31/14				12/31/13
Gross written premiums		$	1,196			$	1,303			$	1,859			$	1,291			$	1,024			$	5,477			$	4,805
Ceded reinsurance premiums			(270	)			(278	)			(617	)			(293	)			(269	)			(1,457	)			(1,464	)
Net written premiums			926				1,025				1,242				998				755				4,020				3,341
Change in unearned premiums			20				36				(110	)			(67	)			(1	)			(142	)			(137	)
Net earned premiums			946				1,061				1,132				931				754				3,878				3,204
Loss and LAE			576				679				760				602				428				2,469				1,979
Underwriting expense			310				303				302				300				267				1,172				1,019
Underwriting profit		$	60			$	79			$	70			$	29			$	59			$	237			$	206
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	—			$	—			$	—			$	—			$	—			$	—			$	—
Catastrophe loss			6				3				3				10				12				28				31
Total current accident year catastrophe losses		$	6			$	3			$	3			$	10			$	12			$	28			$	31
Prior year loss reserve development (favorable) / adverse		$	(7	)		$	10			$	(11	)		$	14			$	(32	)		$	(19	)		$	(75	)
Combined ratio:
Loss and LAE ratio			60.8	%			64.0	%			67.1	%			64.6	%			56.9	%			63.7	%			61.7	%
Underwriting expense ratio			32.8	%			28.6	%			26.7	%			32.3	%			35.3	%			30.2	%			31.8	%
Combined ratio			93.6	%			92.6	%			93.8	%			96.9	%			92.2	%			93.9	%			93.5	%
Combined ratio excl. catastrophe and prior year development			93.8	%			91.4	%			94.5	%			94.4	%			94.8	%			93.7	%			94.9	%
Loss and LAE components:
Current accident year, excluding catastrophe loss			61.0	%			62.8	%			67.8	%			62.1	%			59.5	%			63.5	%			63.1	%
Prior accident year loss reserve development			(0.8	%)			1.0	%			(1.0	%)			1.4	%			(4.2	%)			(0.5	%)			(2.4	%)
Current accident year catastrophe loss			0.6	%			0.2	%			0.3	%			1.1	%			1.6	%			0.7	%			1.0	%
Loss and LAE ratio			60.8	%			64.0	%			67.1	%			64.6	%			56.9	%			63.7	%			61.7	%

 

7

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American Financial Group, Inc. Property and Transportation - Underwriting Results (GAAP) ($ in millions)

 

		Three Months Ended																				Twelve Months Ended
		03/31/15				12/31/14				09/30/14				06/30/14				03/31/14				12/31/14				12/31/13
Gross written premiums		$	376			$	482			$	995			$	489			$	376			$	2,342			$	2,392
Ceded reinsurance premiums			(88	)			(109	)			(439	)			(136	)			(92	)			(776	)			(845	)
Net written premiums			288				373				556				353				284				1,566				1,547
Change in unearned premiums			25				42				(52	)			(29	)			17				(22	)			(26	)
Net earned premiums			313				415				504				324				301				1,544				1,521
Loss and LAE			211				299				407				248				201				1,155				1,142
Underwriting expense			95				94				86				94				94				368				367
Underwriting profit (loss)		$	7			$	22			$	11			$	(18	)		$	6			$	21			$	12
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	—			$	—			$	—			$	—			$	—			$	—			$	—
Catastrophe loss			4				2				1				8				9				20				27
Total current accident year catastrophe losses		$	4			$	2			$	1			$	8			$	9			$	20			$	27
Prior year loss reserve development (favorable) / adverse		$	3			$	3			$	(5	)		$	22			$	(4	)		$	16			$	(1	)
Combined ratio:
Loss and LAE ratio			67.5	%			72.2	%			80.7	%			76.4	%			67.0	%			74.9	%			75.1	%
Underwriting expense ratio			30.2	%			22.4	%			17.1	%			29.1	%			31.1	%			23.8	%			24.1	%
Combined ratio			97.7	%			94.6	%			97.8	%			105.5	%			98.1	%			98.7	%			99.2	%
Combined ratio excl. catastrophe and prior year development			95.4	%			93.7	%			98.5	%			96.2	%			96.4	%			96.4	%			97.5	%
Loss and LAE components:
Current accident year, excluding catastrophe loss			65.2	%			71.3	%			81.4	%			67.1	%			65.3	%			72.6	%			73.4	%
Prior accident year loss reserve development			1.1	%			0.6	%			(0.9	%)			6.6	%			(1.1	%)			1.0	%			(0.1	%)
Current accident year catastrophe loss			1.2	%			0.3	%			0.2	%			2.7	%			2.8	%			1.3	%			1.8	%
Loss and LAE ratio			67.5	%			72.2	%			80.7	%			76.4	%			67.0	%			74.9	%			75.1	%

 

8

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American Financial Group, Inc. Specialty Casualty - Underwriting Results (GAAP) ($ in millions)

 

		Three Months Ended																				Twelve Months Ended
		03/31/15				12/31/14				09/30/14				06/30/14				03/31/14				12/31/14				12/31/13
Gross written premiums		$	683			$	660			$	707			$	655			$	507			$	2,529			$	1,790
Ceded reinsurance premiums			(182	)			(162	)			(171	)			(156	)			(176	)			(665	)			(566	)
Net written premiums			501				498				536				499				331				1,864				1,224
Change in unearned premiums			(11	)			1				(50	)			(32	)			(18	)			(99	)			(89	)
Net earned premiums			490				499				486				467				313				1,765				1,135
Loss and LAE			316				325				310				300				172				1,107				653
Underwriting expense			146				138				144				137				103				522				380
Underwriting profit		$	28			$	36			$	32			$	30			$	38			$	136			$	102
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	—			$	—			$	—			$	—			$	—			$	—			$	—
Catastrophe loss			1				1				1				1				1				4				1
Total current accident year catastrophe losses		$	1			$	1			$	1			$	1			$	1			$	4			$	1
Prior year loss reserve development (favorable) / adverse		$	—			$	14			$	7			$	(4	)		$	(24	)		$	(7	)		$	(40	)
Combined ratio:
Loss and LAE ratio			64.4	%			65.1	%			63.7	%			64.3	%			55.0	%			62.7	%			57.5	%
Underwriting expense ratio			29.8	%			27.8	%			29.6	%			29.3	%			32.8	%			29.6	%			33.4	%
Combined ratio			94.2	%			92.9	%			93.3	%			93.6	%			87.8	%			92.3	%			90.9	%
Combined ratio excl. catastrophe and prior year development			93.9	%			89.9	%			91.6	%			94.3	%			95.1	%			92.5	%			94.4	%
Loss and LAE components:
Current accident year, excluding catastrophe loss			64.1	%			62.1	%			62.0	%			65.0	%			62.3	%			62.9	%			61.0	%
Prior accident year loss reserve development			0.0	%			2.9	%			1.3	%			(0.8	%)			(7.7	%)			(0.4	%)			(3.6	%)
Current accident year catastrophe loss			0.3	%			0.1	%			0.4	%			0.1	%			0.4	%			0.2	%			0.1	%
Loss and LAE ratio			64.4	%			65.1	%			63.7	%			64.3	%			55.0	%			62.7	%			57.5	%

 

9

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American Financial Group, Inc. Specialty Financial - Underwriting Results (GAAP) ($ in millions)

 

		Three Months Ended																				Twelve Months Ended
		03/31/15				12/31/14				09/30/14				06/30/14				03/31/14				12/31/14				12/31/13
Gross written premiums		$	137			$	160			$	157			$	147			$	141			$	605			$	622
Ceded reinsurance premiums			(22	)			(29	)			(36	)			(27	)			(25	)			(117	)			(136	)
Net written premiums			115				131				121				120				116				488				486
Change in unearned premiums			5				(10	)			(6	)			(4	)			1				(19	)			(17	)
Net earned premiums			120				121				115				116				117				469				469
Loss and LAE			36				42				32				40				45				159				158
Underwriting expense			62				61				62				61				62				246				244
Underwriting profit		$	22			$	18			$	21			$	15			$	10			$	64			$	67
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	—			$	—			$	—			$	—			$	—			$	—			$	—
Catastrophe loss			1				—				—				1				2				3				3
Total current accident year catastrophe losses		$	1			$	—			$	—			$	1			$	2			$	3			$	3
Prior year loss reserve development (favorable) / adverse		$	(9	)		$	(4	)		$	(10	)		$	(2	)		$	(1	)		$	(17	)		$	(14	)
Combined ratio:
Loss and LAE ratio			30.4	%			34.5	%			27.7	%			35.3	%			37.9	%			33.9	%			33.5	%
Underwriting expense ratio			51.3	%			51.1	%			53.9	%			52.3	%			53.1	%			52.6	%			52.1	%
Combined ratio			81.7	%			85.6	%			81.6	%			87.6	%			91.0	%			86.5	%			85.6	%
Combined ratio excl. catastrophe and prior year development			88.5	%			88.8	%			90.3	%			88.6	%			90.2	%			89.5	%			88.0	%
Loss and LAE components:
Current accident year, excluding catastrophe loss			37.2	%			37.7	%			36.4	%			36.3	%			37.1	%			36.9	%			35.9	%
Prior accident year loss reserve development			(7.3	%)			(3.3	%)			(9.0	%)			(1.8	%)			(0.7	%)			(3.7	%)			(3.0	%)
Current accident year catastrophe loss			0.5	%			0.1	%			0.3	%			0.8	%			1.5	%			0.7	%			0.6	%
Loss and LAE ratio			30.4	%			34.5	%			27.7	%			35.3	%			37.9	%			33.9	%			33.5	%

 

10

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American Financial Group, Inc. Other Specialty - Underwriting Results (GAAP) ($ in millions)

 

		Three Months Ended																				Twelve Months Ended
		03/31/15				12/31/14				09/30/14				06/30/14				03/31/14				12/31/14				12/31/13
Gross written premiums		$	—			$	1			$	—			$	—			$	—			$	1			$	1
Ceded reinsurance premiums			22				22				29				26				24				101				83
Net written premiums			22				23				29				26				24				102				84
Change in unearned premiums			1				3				(2	)			(2	)			(1	)			(2	)			(5	)
Net earned premiums			23				26				27				24				23				100				79
Loss and LAE			13				13				11				14				10				48				26
Underwriting expense			7				10				10				8				8				36				28
Underwriting profit		$	3			$	3			$	6			$	2			$	5			$	16			$	25
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	—			$	—			$	—			$	—			$	—			$	—			$	—
Catastrophe loss			—				—				1				—				—				1				—
Total current accident year catastrophe losses		$	—			$	—			$	1			$	—			$	—			$	1			$	—
Prior year loss reserve development (favorable) / adverse		$	(1	)		$	(3	)		$	(3	)		$	(2	)		$	(3	)		$	(11	)		$	(20	)
Combined ratio:
Loss and LAE ratio			54.4	%			49.6	%			43.4	%			53.2	%			45.8	%			47.9	%			32.9	%
Underwriting expense ratio			34.9	%			37.3	%			34.6	%			35.8	%			34.1	%			35.5	%			35.9	%
Combined ratio			89.3	%			86.9	%			78.0	%			89.0	%			79.9	%			83.4	%			68.8	%
Combined ratio excl. catastrophe and prior year development			96.6	%			97.4	%			85.6	%			97.1	%			91.4	%			92.8	%			93.6	%

 

11

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American Financial Group, Inc. Annuity Earnings (GAAP) ($ in millions)

 

		Three Months Ended																				Twelve Months Ended
		03/31/15				12/31/14				09/30/14				06/30/14				03/31/14				12/31/14				12/31/13
Net investment income		$	292			$	285			$	287			$	289			$	275			$	1,136			$	1,034
Guaranteed withdrawal benefit fees			10				9				9				8				8				34				25
Policy charges and other miscellaneous income			14				12				11				11				10				44				42
Total revenues			316				306				307				308				293				1,214				1,101
Annuity benefits expense			184				157				157				166				168				648				531
Acquisition expenses			34				47				41				37				31				156				149
Other expenses			23				17				23				21				21				82				93
Total costs and expenses			241				221				221				224				220				886				773
Core Annuity earnings before income taxes			75				85				86				84				73				328				328
ELNY guaranty fund assessments charge before income tax (a)			—				—				—				—				—				—				(5	)
Annuity earnings before income taxes		$	75			$	85			$	86			$	84			$	73			$	328			$	323
Detail of core Annuity earnings before income taxes
Core earnings before income taxes and impact of fair value accounting		$	92			$	93			$	87			$	94			$	88			$	362			$	313
Impact of fair value accounting (b)			(17	)			(8	)			(1	)			(10	)			(15	)			(34	)			15
Core Annuity earnings before income taxes		$	75			$	85			$	86			$	84			$	73			$	328			$	328

 

(a)	The ELNY guaranty fund assessments charge represent guaranty fund assessments in connection with the insolvency and liquidation of Executive Life Insurance Company of New York, an unaffiliated life insurance company.

(b)	Change in fair value of derivatives offset by the estimated related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs.

 

12

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American Financial Group, Inc. Detail of Annuity Benefits Expense (GAAP) ($ in millions)

 

		Three Months Ended																				Twelve Months Ended
		03/31/15				12/31/14				09/30/14				06/30/14				03/31/14				12/31/14				12/31/13
Detail of annuity benefits expense:
Interest credited - fixed		$	128			$	127			$	126			$	123			$	121			$	497			$	451
Interest credited - fixed component of variable annuities			1				1				2				2				1				6				6
Change in expected death and annuitization reserve			4				4				5				5				4				18				19
Amortization of sales inducements			7				6				7				6				7				26				30
Guaranteed withdrawal benefit reserve			12				11				12				10				8				41				38
Change in other benefit reserves			2				1				3				5				3				12				7
Unlockings (a)			—				(11	)			—				—				—				(11	)			6
Subtotal before impact of fair value accounting			154				139				155				151				144				589				557
Embedded derivative mark-to-market (b)			50				87				21				78				54				240				184
Equity option mark-to-market			(20	)			(69	)			(19	)			(63	)			(30	)			(181	)			(210	)
Subtotal impact of fair value accounting			30				18				2				15				24				59				(26	)
Total annuity benefits expense		$	184			$	157			$	157			$	166			$	168			$	648			$	531

 

(a)

Includes unlockings for fixed indexed annuity embedded derivative reserves, sales inducement asset and other reserves. Does not include unlocking charge of $10mm in 2014 and income of $4mm in 2013 for deferred policy acquisition costs and unearned revenue reserves. These unlockings are included in acquisition expenses. In total AFG recorded an unlocking expense reduction of $1mm in 2014 and an unlocking charge of $2mm in 2013.

(b)	Excludes unlocking impact of ($58) million in 2014 and ($2) million in 2013.

 

13

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American Financial Group, Inc. Net Spread on Fixed Annuities (GAAP) ($ in millions)

 

		Three Months Ended																				Twelve Months Ended
		03/31/15				12/31/14				09/30/14				06/30/14				03/31/14				12/31/14				12/31/13
Average fixed annuity investments (at amortized cost)		$	23,943			$	23,334			$	22,730			$	22,098			$	21,402			$	22,391			$	19,151
Average annuity benefits accumulated			23,752				23,104				22,475				21,829				21,066				22,119				18,696
Investments in excess of annuity benefits accumulated		$	191			$	230			$	255			$	269			$	336			$	272			$	455
As % of average annuity benefits accumulated (except as noted)
Net investment income (as % of investments)			4.83	%			4.85	%			5.01	%			5.18	%			5.10	%			5.03	%			5.35	%
Interest credited			(2.16	%)			(2.21	%)			(2.24	%)			(2.26	%)			(2.29	%)			(2.25	%)			(2.41	%)
Net interest spread on fixed annuities			2.67	%			2.64	%			2.77	%			2.92	%			2.81	%			2.78	%			2.94	%
Policy charges and other miscellaneous income			0.20	%			0.14	%			0.14	%			0.14	%			0.13	%			0.14	%			0.16	%
Other annuity benefit expenses, net			(0.25	%)			(0.20	%)			(0.33	%)			(0.33	%)			(0.27	%)			(0.28	%)			(0.37	%)
Acquisition expenses			(0.55	%)			(0.61	%)			(0.69	%)			(0.64	%)			(0.55	%)			(0.63	%)			(0.79	%)
Other expenses			(0.36	%)			(0.28	%)			(0.37	%)			(0.36	%)			(0.37	%)			(0.34	%)			(0.46	%)
Change in fair value of derivatives			(0.50	%)			(0.31	%)			(0.04	%)			(0.27	%)			(0.45	%)			(0.27	%)			0.13	%
Unlockings			0.00	%			0.02	%			0.00	%			0.00	%			0.00	%			0.01	%			(0.01	%)
Net spread earned on fixed annuities - core			1.21	%			1.40	%			1.48	%			1.46	%			1.30	%			1.41	%			1.60	%
Average annuity benefits accumulated		$	23,752			$	23,104			$	22,475			$	21,829			$	21,066			$	22,119			$	18,696
Net spread earned on fixed annuities			1.21	%			1.40	%			1.48	%			1.46	%			1.30	%			1.41	%			1.60	%
Earnings on fixed annuity benefits accumulated		$	72			$	81			$	83			$	80			$	68			$	312			$	300
Investments in excess of annuity benefits accumulated		$	191			$	230			$	255			$	269			$	336			$	272			$	455
Net investment income (as % of investments)			4.83	%			4.85	%			5.01	%			5.18	%			5.10	%			5.03	%			5.35	%
Earnings on investments in excess of annuity benefits accumulated		$	2			$	3			$	3			$	3			$	5				14				24
Variable annuity earnings			1				1				—				1				—				2				4
Earnings before income taxes - core		$	75			$	85			$	86			$	84			$	73			$	328			$	328
Detail of net spread earned on fixed annuities - core
Net spread earned core - before impact of fair value accounting			1.49	%			1.54	%			1.50	%			1.64	%			1.58	%			1.56	%			1.52	%
Impact of fair value accounting (a)			(0.28	%)			(0.14	%)			(0.02	%)			(0.18	%)			(0.28	%)			(0.15	%)			0.08	%
Net spread earned core - after impact of fair value accounting			1.21	%			1.40	%			1.48	%			1.46	%			1.30	%			1.41	%			1.60	%

 

(a)	Change in fair value of derivatives offset by the estimated related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs.

 

14

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American Financial Group Annuity Premiums (Statutory) ($ in millions)

 

		Three Months Ended																				Twelve Months Ended
		03/31/15				12/31/14				09/30/14				06/30/14				03/31/14				12/31/14				12/31/13
Retail single premium annuities - indexed		$	349			$	405			$	339			$	403			$	386			$	1,533			$	1,879
Retail single premium annuities - fixed			12				19				18				25				39				101				165
Financial institutions single premium annuities - indexed			356				426				333				364				366				1,489				1,102
Financial institutions single premium annuities - fixed			38				61				62				95				114				332				628
Education market - fixed and indexed annuities			47				49				46				49				50				194				207
Subtotal fixed annuity premiums			802				960				798				936				955				3,649				3,981
Variable annuities			11				11				11				13				12				47				52
Total annuity premiums		$	813			$	971			$	809			$	949			$	967			$	3,696			$	4,033

 

15

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American Financial Group, Inc. Fixed Annuity Benefits Accumulated (GAAP) ($ in millions)

 

		Three Months Ended																				Twelve Months Ended
		03/31/15				12/31/14				09/30/14				06/30/14				03/31/14				12/31/14				12/31/13
Beginning fixed annuity reserves		$	23,462			$	22,745			$	22,205			$	21,453			$	20,679			$	20,679			$	17,274
Premiums			802				960				798				936				955				3,649				3,981
Federal Home Loan Bank advances			—				—				—				—				—				—				200
Surrenders, benefits and other withdrawals			(420	)			(464	)			(426	)			(408	)			(375	)			(1,673	)			(1,493	)
Interest and other annuity benefit expenses:
Interest credited			128				127				126				123				121				497				451
Embedded derivative mark-to-market			50				87				21				78				54				240				184
Change in other benefit reserves			20				18				21				23				19				81				78
Unlockings			—				(11	)			—				—				—				(11	)			4
Ending fixed annuity reserves		$	24,042			$	23,462			$	22,745			$	22,205			$	21,453			$	23,462			$	20,679
Reconciliation to annuity benefits accumulated:
Ending fixed annuity reserves		$	24,042			$	23,462			$	22,745			$	22,205			$	21,453			$	23,462			$	20,679
Impact of unrealized investment gains on reserves			179				111				107				117				97				111				71
Fixed component of variable annuities			190				191				192				194				194				191				194
Annuity benefits accumulated per balance sheet		$	24,411			$	23,764			$	23,044			$	22,516			$	21,744			$	23,764			$	20,944
Annualized surrenders and other withdrawals as a % of beginning reserves			7.2	%			8.2	%			7.7	%			7.6	%			7.3	%			8.1	%			8.6	%

 

16

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American Financial Group, Inc. Consolidated Balance Sheet ($ in millions)

 

		03/31/15				12/31/14				09/30/14				06/30/14				03/31/14				12/31/13
Assets:
Total cash and investments		$	37,384			$	36,210			$	35,151			$	34,843			$	32,727			$	31,313
Recoverables from reinsurers			3,046				3,238				3,134				3,107				2,969				3,157
Prepaid reinsurance premiums			475				469				587				489				438				408
Agents’ balances and premiums receivable			864				889				901				902				735				739
Deferred policy acquisition costs			756				821				858				806				890				975
Assets of managed investment entities			3,279				3,108				2,946				2,799				2,723				2,888
Other receivables			641				910				1,140				527				524				854
Variable annuity assets (separate accounts)			667				662				649				681				666				665
Other assets			994				1,027				985				1,001				913				903
Goodwill			201				201				201				200				185				185
Total assets		$	48,307			$	47,535			$	46,552			$	45,355			$	42,770			$	42,087
Liabilities and Equity:
Unpaid losses and loss adjustment expenses		$	7,636			$	7,872			$	7,645			$	7,370			$	6,134			$	6,410
Unearned premiums			1,936				1,956				2,114				1,911				1,788				1,757
Annuity benefits accumulated			24,411				23,764				23,044				22,516				21,744				20,944
Life, accident and health reserves			2,195				2,175				2,098				2,082				2,039				2,008
Payable to reinsurers			494				645				673				445				400				508
Liabilities of managed investment entities			2,952				2,819				2,625				2,499				2,413				2,567
Long-term debt			1,061				1,061				1,062				912				913				913
Variable annuity liabilities (separate accounts)			667				662				649				681				666				665
Other liabilities			1,855				1,527				1,564				1,781				1,700				1,546
Total liabilities		$	43,207			$	42,481			$	41,474			$	40,197			$	37,797			$	37,318
Shareholders’ equity:
Common stock		$	88			$	88			$	88			$	90			$	90			$	90
Capital surplus			1,173				1,152				1,150				1,152				1,138				1,123
Appropriated retained earnings			—				(2	)			2				31				49				49
Unappropriated retained earnings			2,886				2,914				2,946				2,913				2,842				2,777
Unrealized gains - fixed maturities			656				604				602				656				556				441
Unrealized gains - equities			143				139				124				149				129				121
Other comprehensive income, net of tax			(23	)			(16	)			(8	)			(6	)			(8	)			(2	)
Total shareholders’ equity			4,923				4,879				4,904				4,985				4,796				4,599
Noncontrolling interests			177				175				174				173				177				170
Total liabilities and equity		$	48,307			$	47,535			$	46,552			$	45,355			$	42,770			$	42,087

 

17

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American Financial Group, Inc. Book Value Per Share and Price / Book Summary (in millions, except per share information)

 

		03/31/15				12/31/14				09/30/14				06/30/14				03/31/14				12/31/13
Shareholders’ equity		$	4,923			$	4,879			$	4,904			$	4,985			$	4,796			$	4,599
Appropriated retained earnings			—				2				(2	)			(31	)			(49	)			(49	)
Shareholders’ equity, excluding appropriated retained earnings			4,923				4,881				4,902				4,954				4,747				4,550
Unrealized (gains) on fixed maturities			(656	)			(604	)			(602	)			(656	)			(556	)			(441	)
Adjusted shareholders’ equity			4,267				4,277				4,300				4,298				4,191				4,109
Goodwill			(201	)			(201	)			(201	)			(200	)			(185	)			(185	)
Intangibles			(55	)			(57	)			(63	)			(66	)			(27	)			(22	)
Tangible adjusted shareholders’ equity		$	4,011			$	4,019			$	4,036			$	4,032			$	3,979			$	3,902
Common shares outstanding			87.886				87.709				88.491				89.618				89.589				89.513
Book value per share:
Excluding appropriated retained earnings (a)		$	56.01			$	55.65			$	55.39			$	55.27			$	52.99			$	50.83
Adjusted (b)			48.55				48.76				48.59				47.95				46.79				45.90
Tangible, adjusted (c)			45.63				45.82				45.61				44.99				44.42				43.59
Market capitalization
AFG’s closing common share price		$	64.15			$	60.72			$	57.89			$	59.56			$	57.71			$	57.72
Market capitalization		$	5,638			$	5,326			$	5,123			$	5,338			$	5,170			$	5,167
Price / Adjusted book value ratio			1.32				1.25				1.19				1.24				1.23				1.26

 

(a)	Excludes appropriated retained earnings.

(b)	Excludes appropriated retained earnings and unrealized gains related to fixed maturity investments.

(c)	Excludes appropriated retained earnings, unrealized gains related to fixed maturity investments, goodwill and intangibles.

 

18

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American Financial Group, Inc. Capitalization ($ in millions)

 

		03/31/15				12/31/14				09/30/14				06/30/14				03/31/14				12/31/13
AFG senior obligations		$	840			$	840			$	840			$	840			$	840			$	840
Borrowings drawn under credit facility			—				—				—				—				—				—
Obligations of subsidiaries - other			12				12				12				12				12				12
Debt excluding subordinated debt & debt secured by real estate		$	852			$	852			$	852			$	852			$	852			$	852
AFG subordinated debentures			150				150				150				—				—				—
Obligations of subsidiaries - secured by real estate			59				59				60				60				61				61
Payable to subsidiary trusts - subordinated			—				—				—				—				—				—
Total Long-term debt		$	1,061			$	1,061			$	1,062			$	912			$	913			$	913
Shareholders’ equity			4,923				4,879				4,904				4,985				4,796				4,599
Noncontrolling interests			177				175				174				173				177				170
Less:
Appropriated retained earnings			—				2				(2	)			(31	)			(49	)			(49	)
Unrealized gains related to fixed maturity investments			(656	)			(604	)			(602	)			(656	)			(556	)			(441	)
Total adjusted capital		$	5,505			$	5,513			$	5,536			$	5,383			$	5,281			$	5,192
Less:
Obligations of subsidiaries - secured by real estate			(59	)			(59	)			(60	)			(60	)			(61	)			(61	)
Total adjusted capital excluding obligations secured by real estate		$	5,446			$	5,454			$	5,476			$	5,323			$	5,220			$	5,131
Ratio of debt to total adjusted capital:
Including subordinated debt & debt secured by real estate			19.3	%			19.2	%			19.2	%			16.9	%			17.3	%			17.6	%
Excluding subordinated debt & debt secured by real estate			15.6	%			15.6	%			15.6	%			16.0	%			16.3	%			16.6	%

 

19

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American Financial Group, Inc. Additional Supplemental Information ($ in millions)

 

		Three Months Ended																				Twelve Months Ended
		03/31/15				12/31/14				09/30/14				06/30/14				03/31/14				12/31/14				12/31/13
Property and Casualty Insurance
Paid Losses (GAAP)		$	617			$	562			$	528			$	530			$	510			$	2,130			$	1,871

 

		03/31/15				12/31/14				09/30/14				06/30/14				03/31/14				12/31/2013
Statutory Surplus
Property and Casualty Insurance		$	2,340			$	2,286			$	2,206			$	2,227			$	1,981			$	1,896
AFG’s principal annuity subsidiaries (total adjusted capital)		$	1,861			$	1,822			$	1,818			$	1,751			$	1,688			$	1,661
Allowable dividends without regulatory approval
Property and Casualty Insurance		$	315			$	315			$	335			$	335			$	335			$	335
Annuity and Run-off			358				358				275				275				275				275
Total		$	673			$	673			$	610			$	610			$	610			$	610

 

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American Financial Group, Inc. Total Cash and Investments and Quarterly Net Investment Income March 31, 2015 ($ in millions)

 

		Carrying Value
		Property and Casualty Insurance				Annuity and Run-off*				Other				Consolidate CLOs				Total AFG Consolidated				% of Investment Portfolio
Total cash and investments:
Cash and cash equivalents		$	659			$	249			$	304			$	—			$	1,212				3	%
Fixed maturities - Available for sale			6,671				25,283				14				—				31,968				85	%
Fixed maturities - Trading			147				126				—				—				273				1	%
Equity securities			1,160				504				46				—				1,710				5	%
Policy loans			—				226				—				—				226				1	%
Mortgage loans			230				861				—				—				1,091				3	%
Real estate and other investments			419				792				18				(325	)			904				2	%
Total cash and investments		$	9,286			$	28,041			$	382			$	(325	)		$	37,384				100	%

 

*	Total cash and investments in Annuity and Run-off segment includes $1.40 billion in cash and investments held by AFG’s two long-term care insurance subsidiaries, which are being sold.

 

		Property and Casualty Insurance				Annuity and Run-off				Other				Consolidate CLOs				Total AFG Consolidated
Total quarterly net investment income:
Fixed maturities - Available for sale		$	61			$	285			$	—			$	—			$	346
Fixed maturities - Trading			4				2				—				—				6
Equity securities			10				7				—				—				17
Equity in investees			1				2				—				—				3
Other investments			5				19				—				(3	)			21
Gross investment income			81				315				—				(3	)			393
Investment expenses			(2	)			(3	)			—				—				(5	)
Total net investment income		$	79			$	312			$	—			$	(3	)		$	388

 

		Equity Securities
		Cost				Fair Value				Unrealized Gain (Loss)
Annuity and Run-off		$	442			$	504			$	62
Property and Casualty Insurance			998				1,160				162
Other			46				46				—
Total AFG consolidated		$	1,486			$	1,710			$	224

 

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American Financial Group, Inc. Fixed Maturities - By Security Type - AFG Consolidated March 31, 2015 ($ in millions )

 

		Amortized Cost				Fair Value				Unrealized Gain (Loss)				% of Fair Value				% of Investment Portfolio
US Government and government agencies		$	338			$	345			$	7				1	%			1	%
States, municipalities and political subdivisions			6,744				7,137				393				22	%			19	%
Foreign government			256				268				12				1	%			1	%
Residential mortgage-backed securities			3,941				4,332				391				13	%			12	%
Commercial mortgage-backed securities			2,251				2,407				156				7	%			6	%
Asset-backed securities			4,176				4,225				49				13	%			11	%
Corporate bonds
Manufacturing			2,286				2,447				161				8	%			6	%
Banks, lending and credit institutions			2,774				2,944				170				9	%			8	%
Gas and electric services			1,330				1,461				131				5	%			4	%
Insurance and insurance related			931				1,009				78				3	%			3	%
Other corporate			5,336				5,666				330				18	%			15	%
Total AFG consolidated		$	30,363			$	32,241			$	1,878				100	%			86	%
Annuity and Run-off		$	23,758			$	25,409				1,651				79	%			68	%
Property and Casualty Insurance			6,602				6,818				216				21	%			18	%
Other			3				14				11				0	%			0	%
Total AFG consolidated		$	30,363			$	32,241			$	1,878				100	%			86	%
Annualized yield on available for sale fixed maturities:
Excluding investment expense (a)			4.68	%
Net of investment expense (a)			4.62	%
Approximate average life and duration:
Approximate average life			6.5 years
Approximate duration			5 years

 

(a)	Annualized yield is calculated by dividing investment income for the quarter by the average cost over the quarter. Average cost is the average of the beginning and ending quarter asset balances.

 

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American Financial Group, Inc. Fixed Maturities - By Security Type Portfolio March 31, 2015 ($ in millions )

 

		Amortized Cost				Fair Value				Unrealized Gain (Loss)				% of Fair Value
Annuity and Run-off:
US Government and government agencies		$	83			$	85			$	2				0	%
States, municipalities and political subdivisions			4,030				4,326				296				17	%
Foreign government			17				20				3				0	%
Residential mortgage-backed securities			2,960				3,283				323				13	%
Commercial mortgage-backed securities			2,011				2,157				146				9	%
Asset-backed securities			2,946				2,987				41				12	%
Corporate debt			11,711				12,551				840				49	%
Total Annuity and Run-off		$	23,758			$	25,409			$	1,651				100	%
Annualized yield on available for sale fixed maturities:
Excluding investment expense (a)			4.91	%
Net of investment expense (a)			4.86	%
Approximate average life and duration:
Approximate average life			7 years
Approximate duration			5 years
		Amortized Cost				Fair Value				Unrealized Gain (Loss)				% of Fair Value
Property and Casualty Insurance:
US Government and government agencies		$	253			$	258			$	5				4	%
States, municipalities and political subdivisions			2,714				2,811				97				41	%
Foreign government			239				248				9				4	%
Residential mortgage-backed securities			980				1,037				57				15	%
Commercial mortgage-backed securities			240				250				10				4	%
Asset-backed securities			1,230				1,238				8				18	%
Corporate debt			946				976				30				14	%
Property and Casualty Insurance		$	6,602			$	6,818			$	216				100	%
Annualized yield on available for sale fixed maturities:
Excluding investment expense (a)			3.84	%
Net of investment expense (a)			3.72	%
Tax equivalent, net of investment expense (b)			4.34	%
Approximate average life and duration:
Approximate average life			4.5 years
Approximate duration			3.5 years

 

(a)	Annualized yield is calculated by dividing investment income for the quarter by the average cost over the quarter. Average cost is the average of the beginning and ending quarter asset balances.

(b)	Adjusts the yield on tax-exempt bonds to the fully taxable equivalent yield.

 

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American Financial Group, Inc. Fixed Maturities - Credit Rating and NAIC Designation March 31, 2015 ($ in millions)

 

		GAAP Data
By Credit Rating		Amortized Cost				Fair Value				Unrealized Gain (Loss)				% of Fair Value
Investment grade
AAA		$	6,655			$	6,930			$	275				22	%
AA			6,447				6,792				345				21	%
A			7,614				8,132				518				25	%
BBB			5,750				6,129				379				19	%
Subtotal - Investment grade			26,466				27,983				1,517				87	%
BB			835				868				33				3	%
B			440				448				8				1	%
Other			2,622				2,942				320				9	%
Total		$	30,363			$	32,241			$	1,878				100	%

If two agencies rate a security, the rating displayed above is the lower of the two; if three or more agencies rate a security, the rating displayed is the second lowest.

 

		Statutory Data
By NAIC Designation		Carrying Value				% of Carrying Value				Amortized Cost				Fair Value				Unrealized Gain (Loss)
NAIC 1		$	23,340				78	%		$	23,341			$	24,813			$	1,472
NAIC 2			5,792				19	%			5,792				6,167				375
			29,132				97	%			29,133				30,980				1,847
NAIC 3			695				2	%			695				720				25
NAIC 4			191				1	%			194				195				1
NAIC 5			49				0	%			51				61				10
NAIC 6			34				0	%			37				54				17
Total		$	30,101				100	%		$	30,110			$	32,010			$	1,900

 

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American Financial Group, Inc. Mortgage-Backed Securities - AFG Consolidated March 31, 2015 ($ in millions)

 

By Asset Type		Amortized Cost				Fair Value				Unrealized Gain (Loss)				% of Fair Value				% of Investment Portfolio
Residential
Agency		$	311			$	326			$	15				5	%			1	%
Prime (Non-Agency)			1,835				2,043				208				30	%			5	%
Alt-A			920				1,022				102				15	%			3	%
Subprime			875				941				66				14	%			3	%
Subtotal - Residential			3,941				4,332				391				64	%			12	%
Commercial			2,251				2,407				156				36	%			6	%
Total AFG consolidated		$	6,192			$	6,739			$	547				100	%			18	%
Annuity and Run-off		$	4,971			$	5,440			$	469				81	%			15	%
Property and Casualty Insurance			1,220				1,287				67				19	%			3	%
Other			1				12				11				0	%			0	%
Total AFG consolidated		$	6,192			$	6,739			$	547				100	%			18	%

 

•

Substantially all of AFG’s MBS securities are either senior tranches of securitizations or collateralized by senior tranches of securitizations.

 

•

The average amortized cost as a percent of par is - Prime 83%; Alt-A 78%; Subprime 86%; CMBS 99%.

 

•

The average FICO score of our residential MBS securities is - Prime 741; Alt-A 712; Subprime 638.

 

•

99.7% of our Commercial MBS portfolio is investment-grade rated (85% AAA) and the average subordination for this group assets is 38%.

 

•

The approximate average life by collateral type is - Residential 5.0 years; Commercial 3.5 years.

 

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American Financial Group, Inc. Mortgage-Backed Securities Portfolio March 31, 2015 ($ in millions)

Annuity and Run-off:

 

By Asset Type		Amortized Cost				Fair Value				Unrealized Gain (Loss)				% of Fair Value				% of Investment Portfolio
Residential
Agency		$	131			$	141			$	10				2	%			1	%
Prime (Non-Agency)			1,605				1,786				181				33	%			6	%
Alt-A			677				760				83				14	%			3	%
Subprime			547				596				49				11	%			2	%
Subtotal - Residential			2,960				3,283				323				60	%			12	%
Commercial			2,011				2,157				146				40	%			8	%
Total Annuity and Run-off		$	4,971			$	5,440			$	469				100	%			20	%
Property and Casualty Insurance:
By Asset Type		Amortized Cost				Fair Value				Unrealized Gain (Loss)				% of Fair Value				% of Investment Portfolio
Residential
Agency		$	180			$	185			$	5				14	%			2	%
Prime (Non-Agency)			229				245				16				19	%			3	%
Alt-A			243				262				19				20	%			3	%
Subprime			328				345				17				27	%			4	%
Subtotal - Residential			980				1,037				57				80	%			12	%
Commercial			240				250				10				20	%			3	%
Total Property and Casualty Insurance		$	1,220			$	1,287			$	67				100	%			15	%

 

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American Financial Group, Inc. Mortgage-Backed Securities - Credit Rating and NAIC Designation March 31, 2015 ($ in millions)

 

		GAAP data
By Credit Rating		Amortized Cost				Fair Value				Unrealized Gain (Loss)				% of Fair Value
Investment grade
AAA		$	2,669			$	2,841			$	172				42	%
AA			327				342				15				5	%
A			464				490				26				7	%
BBB			230				249				19				4	%
Subtotal - investment grade			3,690				3,922				232				58	%
BB			307				321				14				5	%
B			356				366				10				5	%
Other			1,839				2,130				291				32	%
Total		$	6,192			$	6,739			$	547				100	%

If two agencies rate a security, the rating displayed above is the lower of the two; if three or more agencies rate a security, the rating displayed is the second lowest.

 

		Statutory data
By NAIC Designation		Carrying Value				% of Carrying Value				Amortized Cost				Fair Value				Unrealized Gain (Loss)
NAIC 1		$	5,908				97	%		$	5,909			$	6,477			$	568
NAIC 2			61				1	%			61				63				2
			5,969				98	%			5,970				6,540				570
NAIC 3			48				1	%			48				49				1
NAIC 4			68				1	%			68				72				4
NAIC 5			22				0	%			22				35				13
NAIC 6			2				0	%			2				17				15
Total		$	6,109				100	%		$	6,110			$	6,713			$	603

 

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