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Document and Entity Information - USD ($) $ in Millions	12 Months Ended
Document and Entity Information - USD ($) $ in Millions	Dec. 31, 2010	Feb. 01, 2011	Jun. 30, 2010
Document and Entity Information [Abstract]
Entity Registrant Name	AMERICAN FINANCIAL GROUP INC
Entity Central Index Key	0001042046
Document Type	10-K
Document Period End Date	Dec. 31, 2010
Amendment Flag	false
Document Fiscal Year Focus	2010
Document Fiscal Period Focus	FY
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 2.2
Entity Common Stock, Shares Outstanding		104,983,657

Consolidated Balance Sheet - USD ($) $ in Millions	Dec. 31, 2010	Dec. 31, 2009
Assets:
Cash and cash equivalents	$ 1,099	$ 1,120
Investments:
Fixed maturities, available for sale at fair value (amortized cost - $18,490 and $16,730)	19,328	16,823
Fixed maturities, trading at fair value	393	372
Equity securities, at fair value (cost - $458 and $228)	690	411
Mortgage loans	468	376
Policy loans	264	276
Real estate and other investments	428	413
Total cash and investments	22,670	19,791
Recoverables from reinsurers	2,964	3,279
Prepaid reinsurance premiums	422	381
Agents' balances and premiums receivable	535	554
Deferred policy acquisition costs	1,244	1,570
Assets of managed investment entities	2,537	0
Other receivables	674	774
Variable annuity assets (separate accounts)	616	549
Other assets	606	577
Goodwill	186	208
Total assets	32,454	27,683
Liabilities and Equity:
Unpaid losses and loss adjustment expenses	6,413	6,412
Unearned premiums	1,534	1,568
Annuity benefits accumulated	12,905	11,335
Life, accident and health reserves	1,650	1,603
Payable to reinsurers	320	462
Liabilities of managed investment entities	2,323	0
Long-term debt	952	828
Variable annuity liabilities (separate accounts)	616	549
Other liabilities	1,121	1,007
Total liabilities	27,834	23,764
Shareholders' equity:
Common Stock, no par value - 200,000,000 shares authorized -105,168,366 and 113,386,343 shares outstanding	105	113
Capital surplus	1,166	1,231
Retained earnings:
Appropriated - managed investment entities	197	0
Unappropriated	2,523	2,274
Accumulated other comprehensive income, net of tax	479	163
Total shareholders' equity	4,470	3,781
Noncontrolling interests	150	138
Total equity	4,620	3,919
Total liabilities and equity	$ 32,454	$ 27,683

Consolidated Balance Sheet (Parenthetical) - USD ($)	Dec. 31, 2010	Dec. 31, 2009
Investments:
Fixed maturities, available for sale at amortized cost	$ 18,490,000,000	$ 16,730,000,000
Equity securities, at cost	458,000,000	228,000,000
Shareholders' equity:
Common Stock, par value	$ 0	$ 0
Common Stock, shares authorized	200,000,000	200,000,000
Common Stock, shares outstanding	105,168,366	113,386,343

Consolidated Statement of Earnings - USD ($) shares in Millions, $ in Millions	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Revenues:
Property and casualty insurance premiums	$ 2,550	$ 2,412	$ 2,867
Life, accident and health premiums	451	444	435
Investment income	1,191	1,200	1,123
Realized gains (losses) on:
Securities	101	43	(426)
Subsidiaries	(13)	(5)	0
Income (loss) of managed investment entities:
Investment income	93	0	0
Loss on change in fair value of assets/liabilities	(70)	0	0
Other income	194	226	294
Total revenues	4,497	4,320	4,293
Costs and Expenses:
Property and casualty losses and loss adjustment expenses	1,457	1,187	1,622
Property and casualty commissions and other underwriting expenses	797	808	890
Annuity benefits	444	435	418
Life, accident and health benefits	368	361	337
Annuity and supplemental insurance acquisition expenses	231	187	177
Interest charges on borrowed money	78	67	70
Expenses of managed investment entities	55	0	0
Other operating and general expenses	378	463	463
Total costs and expenses	3,808	3,508	3,977
Operating earnings before income taxes	689	812	316
Provision for income taxes	266	282	116
Net earnings, including noncontrolling interests	423	530	200
Less: Net earnings (loss) attributable to noncontrolling interests	(56)	11	4
Net Earnings Attributable to Shareholders	$ 479	$ 519	$ 196
Earnings Attributable to Shareholders per Common Share:
Basic	$ 4.38	$ 4.49	$ 1.71
Diluted	$ 4.33	$ 4.45	$ 1.67
Average number of Common Shares:
Basic	109.2	115.7	114.4
Diluted	110.5	116.8	116.7
Cash dividends per Common Share	$ 0.575	$ 0.52	$ 0.50
Supplemental disclosure of Realized gains (losses) on securities:
Realized gains (losses) before impairments	$ 163	$ 246	$ (24)
Losses on securities with impairment	(50)	(373)	(402)
Non-credit portion recognized in other comprehensive income (loss)	(12)	170	0
Impairment charges recognized in earnings	(62)	(203)	(402)
Total realized gains (losses) on securities	$ 101	$ 43	$ (426)

Consolidated Statement of Changes in Equity - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Statement [Line Items]
Beginning Balance	$ 3,919	$ 2,602	$ 3,146
Beginning Balance, shares	113,386,343
Cumulative effect of accounting change	$ 261
Net earnings	423	530	200
Other comprehensive income (loss), net of tax:
Change in unrealized gain (loss) on securities	315	872	(667)
Change in foreign currency translation	8	19	(46)
Change in unrealized pension and other postretirement benefits		(1)	(10)
Total comprehensive income (loss)	746	1,420	(523)
Dividends on Common Stock	(64)	(60)	(57)
Shares issued:
Redemption of convertible notes			24
Exercise of stock options	31	18	27
Other benefit plans	6	3	6
Dividend reinvestment plan			6
Stock-based compensation expense	12	11	10
Shares acquired and retired	(292)	(81)	(47)
Shares exchanged in option exercises		(4)	(7)
Noncontrolling interest of acquired subsidiary/business		10	19
Other	1		(2)
Ending Balance	$ 4,620	$ 3,919	$ 2,602
Ending Balance, shares	105,168,366	113,386,343
Common Shares
Statement [Line Items]
Beginning Balance, shares	113,386,343	115,599,169	113,499,080
Shares issued:
Redemption of convertible notes, shares			2,364,640
Exercise of stock options, shares	1,547,526	1,026,891	1,324,732
Other benefit plans, shares	479,514	207,601	205,034
Dividend reinvestment plan, shares	17,028	20,847	256,315
Shares acquired and retired, shares	(10,261,045)	(3,291,835)	(1,803,000)
Shares exchanged in option exercises, shares	(1,000)	(176,330)	(247,632)
Ending Balance, shares	105,168,366	113,386,343	115,599,169
Common Stock and Capital Surplus
Statement [Line Items]
Beginning Balance	$ 1,344	$ 1,351	$ 1,300
Shares issued:
Redemption of convertible notes			24
Exercise of stock options	31	18	27
Other benefit plans	6	3	6
Dividend reinvestment plan			6
Stock-based compensation expense	12	11	10
Shares acquired and retired	(122)	(39)	(20)
Shares exchanged in option exercises		(2)	(3)
Other		2	1
Ending Balance	1,271	1,344	1,351
Retained Earnings Approp.
Statement [Line Items]
Cumulative effect of accounting change	261
Other comprehensive income (loss), net of tax:
Allocation of losses of managed investment entities	(64)
Shares issued:
Ending Balance	197
Retained Earnings Unapprop.
Statement [Line Items]
Beginning Balance	2,274	1,842	1,734
Cumulative effect of accounting change	4	17
Net earnings	479	519	196
Other comprehensive income (loss), net of tax:
Dividends on Common Stock	(64)	(60)	(57)
Shares issued:
Shares acquired and retired	(170)	(42)	(27)
Shares exchanged in option exercises		(2)	(4)
Ending Balance	2,523	2,274	1,842
Accumulated Other Comprehensive Income (Loss)
Statement [Line Items]
Beginning Balance	163	(703)	12
Cumulative effect of accounting change	(4)	(17)
Other comprehensive income (loss), net of tax:
Change in unrealized gain (loss) on securities	313	866	(664)
Change in foreign currency translation	8	18	(41)
Change in unrealized pension and other postretirement benefits		(1)	(10)
Shares issued:
Other	(1)
Ending Balance	479	163	(703)
Total Shareholders' Equity
Statement [Line Items]
Beginning Balance	3,781	2,490	3,046
Cumulative effect of accounting change	261
Net earnings	479	519	196
Other comprehensive income (loss), net of tax:
Change in unrealized gain (loss) on securities	313	866	(664)
Change in foreign currency translation	8	18	(41)
Change in unrealized pension and other postretirement benefits		(1)	(10)
Total comprehensive income (loss)	800	1,402	(519)
Allocation of losses of managed investment entities	(64)
Dividends on Common Stock	(64)	(60)	(57)
Shares issued:
Redemption of convertible notes			24
Exercise of stock options	31	18	27
Other benefit plans	6	3	6
Dividend reinvestment plan			6
Stock-based compensation expense	12	11	10
Shares acquired and retired	(292)	(81)	(47)
Shares exchanged in option exercises		(4)	(7)
Other	(1)	2	1
Ending Balance	4,470	3,781	2,490
Noncontrolling Interests
Statement [Line Items]
Beginning Balance	138	112	100
Net earnings	(56)	11	4
Other comprehensive income (loss), net of tax:
Change in unrealized gain (loss) on securities	2	6	(3)
Change in foreign currency translation		1	(5)
Total comprehensive income (loss)	(54)	18	(4)
Allocation of losses of managed investment entities	64
Shares issued:
Noncontrolling interest of acquired subsidiary/business		10	19
Other	2	(2)	(3)
Ending Balance	$ 150	$ 138	$ 112

Consolidated Statement of Cash Flows - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Operating Activities:
Net earnings, including noncontrolling interests	$ 423	$ 530	$ 200
Adjustments:
Depreciation and amortization	214	198	221
Annuity benefits	444	435	418
Realized (gains) losses on investing activities	(92)	(34)	420
Net (purchases) sales of trading securities	(11)	(51)	67
Deferred annuity and life policy acquisition costs	(211)	(172)	(188)
Change in:
Reinsurance and other receivables	555	352	(560)
Other assets	8	145	(96)
Insurance claims and reserves	(413)	(421)	525
Payable to reinsurers	(150)	(41)	139
Other liabilities	2	(17)	(174)
Other operating activities, net	95	(9)	1
Net cash provided by operating activities	864	915	973
Investing Activities:
Purchases of fixed maturities	(4,979)	(4,855)	(6,253)
Purchases of equity securities	(223)	(21)	(147)
Purchases of mortgage loans	(159)	(82)	(34)
Purchases of real estate, property and equipment	(74)	(62)	(46)
Purchases of subsidiaries	(128)	(5)	(113)
Proceeds from maturities and redemptions of fixed maturities	2,081	1,934	1,887
Proceeds from repayments of mortgage loans	71	11	88
Proceeds from sales of fixed maturities	1,540	2,207	3,388
Proceeds from sales of equity securities	49	127	483
Proceeds from sales of real estate, property and equipment	4	1	5
Change in securities lending collateral	(2)	48	46
Managed investment entities:
Purchases of investments	(1,008)	0	0
Proceeds from sales and redemptions of investments	1,018	0	0
Cash and cash equivalents of businesses acquired or sold, net	95	(23)	44
Other investing activities, net	10	(63)	(69)
Net cash used in investing activities	(1,705)	(783)	(721)
Financing Activities:
Annuity receipts	2,282	1,434	1,649
Annuity surrenders, benefits and withdrawals	(1,221)	(1,273)	(1,466)
Net transfers from (to) variable annuity assets	7	(10)	46
Additional long-term borrowings	159	581	715
Reductions of long-term debt	(39)	(785)	(622)
Managed investment entities' retirement of liabilities	(45)	0	0
Change in securities lending obligation	2	(95)	(46)
Issuances of Common Stock	32	15	23
Repurchases of Common Stock	(292)	(81)	(47)
Cash dividends paid on Common Stock	(63)	(60)	(51)
Other financing activities, net	(2)	(2)	(5)
Net cash provided by (used in) financing activities	820	(276)	196
Net Change in Cash and Cash Equivalents	(21)	(144)	448
Cash and cash equivalents at beginning of year	1,120	1,264	816
Cash and cash equivalents at end of year	$ 1,099	$ 1,120	$ 1,264

Accounting Policies

12 Months Ended

Dec. 31, 2010

Accounting Policies [Abstract]

Accounting Policies

Accounting Policies

Basis of Presentation The consolidated financial statements include the accounts of American Financial Group, Inc. (“AFG”) and its subsidiaries. Certain reclassifications have been made to prior years to conform to the current year’s presentation. All significant intercompany balances and transactions have been eliminated. The results of operations of companies since their formation or acquisition are included in the consolidated financial statements. Events or transactions occurring subsequent to December 31, 2010, and prior to the filing of this Form 10-K, have been evaluated for potential recognition or disclosure herein.

As a result of a new accounting standard adopted on January 1, 2009, noncontrolling interests in subsidiaries (formerly referred to as minority interest) is reported in the Balance Sheet as a separate component of equity and in the Statement of Earnings as an adjustment to net income in deriving net earnings attributable to AFG’s shareholders.

The preparation of the financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Changes in circumstances could cause actual results to differ materially from those estimates.

Fair Value Measurements Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. The standards establish a hierarchy of valuation techniques based on whether the assumptions that market participants would use in pricing the asset or liability (“inputs”) are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect AFG’s assumptions about the assumptions market participants would use in pricing the asset or liability. Except for the acquisition discussed in Note B — “Acquisitions” and the impairment of goodwill discussed in Note I — “Goodwill and Other Intangibles,” AFG did not have any significant nonrecurring fair value measurements of nonfinancial assets and liabilities in 2010.

New accounting guidance adopted by AFG on January 1, 2010, requires additional disclosures about transfers between levels in the hierarchy of fair value measurements. The guidance also clarifies existing disclosure requirements related to the level of disaggregation presented and inputs used in determining fair values. Additional detail relating to the roll-forward of Level 3 fair values will be required beginning in 2011.

Investments Fixed maturity and equity securities classified as “available for sale” are reported at fair value with unrealized gains and losses included in accumulated other comprehensive income (loss) in AFG’s Balance Sheet. Fixed maturity and equity securities classified as “trading” are reported at fair value with changes in unrealized holding gains or losses during the period included in investment income. Mortgage and policy loans are carried primarily at the aggregate unpaid balance.

Premiums and discounts on fixed maturity securities are amortized using the interest method; mortgage-backed securities (“MBS”) are amortized over a period based on estimated future principal payments, including prepayments. Prepayment assumptions are reviewed periodically and adjusted to reflect actual prepayments and changes in expectations.

Gains or losses on securities are determined on the specific identification basis. When a decline in the value of a specific investment is considered to be other-than-temporary at the balance sheet date, a provision for impairment is charged to earnings (included in realized gains (losses)) and the cost basis of that investment is reduced.

In 2009, AFG adopted new accounting guidance relating to the recognition and presentation of other-than-temporary impairments. Under the guidance, if management can assert that it does not intend to sell an impaired fixed maturity security and it is not more likely than not that it will have to sell the security before recovery of its amortized cost basis, then an entity may separate other-than-temporary impairments into two components: 1) the amount related to credit losses (recorded in earnings) and 2) the amount related to all other factors (recorded in other comprehensive income (loss)). The credit-related portion of an other-than-temporary impairment is measured by comparing a security’s amortized cost to the present value of its current expected cash flows discounted at its effective yield prior to the impairment charge. Both components are required to be shown in the Statement of Earnings. If management intends to sell an impaired security, or it is more likely than not that it will be required to sell the security before recovery, an impairment charge to earnings is required to reduce the amortized cost of that security to fair value. AFG adopted this guidance effective January 1, 2009, and recorded a cumulative effect adjustment of $17 million to reclassify the non-credit component of previously recognized impairments from retained earnings to accumulated other comprehensive income (loss). Additional disclosures required by this guidance are contained in Note E — “Investments.”

Derivatives Derivatives included in AFG’s Balance Sheet are recorded at fair value and consist primarily of (i) components of certain fixed maturity securities (primarily interest-only MBS) and (ii) the equity-based component of certain annuity products (included in annuity benefits accumulated) and related call options (included in other investments) designed to be consistent with the characteristics of the liabilities and used to mitigate the risk embedded in those annuity products. Changes in the fair value of derivatives are included in earnings.

Goodwill Goodwill represents the excess of cost of subsidiaries over AFG’s equity in their underlying net assets. Goodwill is not amortized, but is subject to an impairment test at least annually.

Reinsurance Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policies. AFG’s property and casualty insurance subsidiaries report as assets (a) the estimated reinsurance recoverable on paid and unpaid losses, including an estimate for losses incurred but not reported, and (b) amounts paid to reinsurers applicable to the unexpired terms of policies in force. Payable to reinsurers includes ceded premiums due to reinsurers as well as ceded premiums retained by AFG’s property and casualty insurance subsidiaries under contracts to fund ceded losses as they become due. AFG’s insurance subsidiaries also assume reinsurance from other companies. Earnings on reinsurance assumed is recognized based on information received from ceding companies.

Certain annuity and supplemental insurance subsidiaries cede life insurance policies to a third party on a funds withheld basis whereby the subsidiaries retain the assets (securities) associated with the reinsurance contracts. Interest is credited to the reinsurer based on the actual investment performance of the retained assets. These reinsurance contracts are considered to contain embedded derivatives (that must be adjusted to fair value) because the yield on the payables is based on specific blocks of the ceding companies’ assets, rather than the overall creditworthiness of the ceding company. AFG determined that changes in the fair value of the underlying portfolios of fixed maturity securities is an appropriate measure of the value of the embedded derivative. The securities related to these transactions are classified as “trading.” The adjustment to fair value on the embedded derivatives offsets the investment income recorded on the adjustment to fair value of the related trading portfolios.

Deferred Policy Acquisition Costs (“DPAC”) Policy acquisition costs (principally commissions, premium taxes and other marketing and underwriting expenses) related to the production of new business are deferred. DPAC also includes capitalized costs associated with sales inducements offered to fixed annuity policyholders such as enhanced interest rates and premium and persistency bonuses.

For the property and casualty companies, DPAC is limited based upon recoverability without any consideration for anticipated investment income and is charged against income ratably over the terms of the related policies. A premium deficiency is recognized if the sum of expected claims costs, claims adjustment expenses, unamortized acquisition costs and policy maintenance costs exceed the related unearned premiums. A premium deficiency is first recognized by charging any unamortized acquisition costs to expense to the extent required to eliminate the deficiency. If the premium deficiency is greater than unamortized acquisition costs, a liability is accrued for the excess deficiency and reported with unpaid losses and loss adjustment expenses.

DPAC related to annuities is deferred to the extent deemed recoverable and amortized, with interest, in relation to the present value of actual and expected gross profits on the policies. Expected gross profits consist principally of estimated future investment margin (estimated future net investment income less interest credited on policyholder funds) and surrender, mortality, and other life and variable annuity policy charges, less death and annuitization benefits in excess of account balances and estimated future policy administration expenses. To the extent that realized gains and losses result in adjustments to the amortization of DPAC related to annuities, such adjustments are reflected as components of realized gains (losses).

DPAC related to traditional life and health insurance is amortized over the expected premium paying period of the related policies, in proportion to the ratio of annual premium revenues to total anticipated premium revenues.

DPAC related to annuities is also adjusted, net of tax, for the change in amortization that would have been recorded if the unrealized gains (losses) from securities had actually been realized. This adjustment is included in unrealized gains (losses) on marketable securities, a component of accumulated other comprehensive income (loss) in AFG’s Balance Sheet.

New accounting guidance issued in October 2010 specifies that a cost must be directly related to the successful acquisition of an insurance contract to qualify for deferral. The guidance is effective for periods ending after December 31, 2011, with retrospective application permitted, but not required. AFG expects that this guidance will result in fewer acquisition costs being capitalized and is currently assessing the method and impact of adoption.

DPAC includes the present value of future profits on business in force of annuity and supplemental insurance companies acquired (“PVFP”). PVFP represents the portion of the costs to acquire companies that is allocated to the value of the right to receive future cash flows from insurance contracts existing at the date of acquisition. PVFP is amortized with interest in relation to expected gross profits of the acquired policies for annuities and universal life products and in relation to the premium paying period for traditional life and health insurance products.

Managed Investment Entities In 2009, the Financial Accounting Standards Board issued a new standard changing how a company determines if it is the primary beneficiary of, and therefore must consolidate, a variable interest entity (“VIE”). This determination is based primarily on a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance and the obligation to absorb losses of, or receive benefits from, the entity that could potentially be significant to the VIE.

AFG manages, and has minor investments in, six collateralized loan obligations (“CLOs”) that are VIEs. As further described in Note H, these entities issued securities in various tranches and invested the proceeds primarily in secured bank loans, which serve as collateral for the debt securities issued by each particular CLO. Both the management fees (payment of which are subordinate to other obligations of the CLOs) and the investments in the CLOs are considered variable interests. Based on the new accounting guidance, AFG has determined that it is the primary beneficiary of the CLOs because (i) its role as asset manager gives it the power to direct the activities that most significantly impact the economic performance of the CLOs and (ii) it has exposure to CLO losses (through its investments in the CLO subordinated debt tranches) and the right to receive benefits (through its subordinated management fees and returns on its investments), both of which could potentially be significant to the CLOs. Accordingly, AFG began consolidating these entities on January 1, 2010.

Because AFG has no right to use the CLO assets and no obligation to pay the CLO liabilities, the assets and liabilities of the CLOs are shown separately in AFG’s Balance Sheet. As permitted under the new standard, the assets and liabilities of the CLOs have been recorded at fair value upon adoption of the new standard on January 1, 2010. At that date, the excess of fair value of the assets ($2.382 billion) over the fair value of the liabilities ($2.121 billion) of $261 million was included in AFG’s Balance Sheet as appropriated retained earnings — managed investment entities, representing the cumulative effect of adopting the new standard that ultimately will inure to the benefit of the CLO debt holders.

At December 31, 2009, AFG’s investments in the CLOs were included in fixed maturity securities and had a cost of less than $1 million and a fair value of $6 million. Beginning January 1, 2010, these investments are eliminated in consolidation.

AFG has elected the fair value option for reporting on the CLO assets and liabilities to improve the transparency of financial reporting related to the CLOs. The net gain or loss from accounting for the CLO assets and liabilities at fair value subsequent to January 1, 2010, is separately presented in AFG’s Statement of Earnings. CLO earnings attributable to AFG’s shareholders represent the change in fair value of AFG’s investments in the CLOs and management fees earned. As further detailed in Note H — “Managed Investment Entities,” all other CLO earnings (losses) are not attributable to AFG’s shareholders and will ultimately inure to the benefit of the other CLO debt holders. As a result, such CLO earnings (losses) are included in net earnings (loss) attributable to noncontrolling interests in AFG’s Statement of Earnings and in appropriated retained earnings — managed investment entities in the Balance Sheet. As the CLOs approach maturity (2016 to 2022), it is expected that losses attributable to noncontrolling interests will reduce appropriated retained earnings towards zero as the fair values of the assets and liabilities converge and the CLO assets are used to pay the CLO debt.

Unpaid Losses and Loss Adjustment Expenses The net liabilities stated for unpaid claims and for expenses of investigation and adjustment of unpaid claims are based upon (a) the accumulation of case estimates for losses reported prior to the close of the accounting period on direct business written; (b) estimates received from ceding reinsurers and insurance pools and associations; (c) estimates of unreported losses (including possible development on known claims) based on past experience; (d) estimates based on experience of expenses for investigating and adjusting claims; and (e) the current state of the law and coverage litigation. Establishing reserves for asbestos, environmental and other mass tort claims involves considerably more judgment than other types of claims due to, among other things, inconsistent court decisions, an increase in bankruptcy filings as a result of asbestos-related liabilities, novel theories of coverage, and judicial interpretations that often expand theories of recovery and broaden the scope of coverage.

Loss reserve liabilities are subject to the impact of changes in claim amounts and frequency and other factors. Changes in estimates of the liabilities for losses and loss adjustment expenses are reflected in the Statement of Earnings in the period in which determined. Despite the variability inherent in such estimates, management believes that the liabilities for unpaid losses and loss adjustment expenses are adequate.

Annuity Benefits Accumulated Annuity receipts and benefit payments are recorded as increases or decreases in annuity benefits accumulated rather than as revenue and expense. Increases in this liability for interest credited are charged to expense and decreases for surrender charges are credited to other income.

For certain products, annuity benefits accumulated also includes reserves for accrued persistency and premium bonuses and excess benefits expected to be paid on future deaths and annuitizations (“EDAR”). The liability for EDAR is accrued for and modified using assumptions consistent with those used in determining DPAC and DPAC amortization, except that amounts are determined in relation to the present value of total expected assessments. Total expected assessments consist principally of estimated future investment margin, surrender, mortality, and other life and variable annuity policy charges, and unearned revenues once they are recognized as income.

Life, Accident and Health Reserves Liabilities for future policy benefits under traditional life, accident and health policies are computed using the net level premium method. Computations are based on the original projections of investment yields, mortality, morbidity and surrenders and include provisions for unfavorable deviations. Claim reserves and liabilities established for accident and health claims are modified as necessary to reflect actual experience and developing trends.

Variable Annuity Assets and Liabilities Separate accounts related to variable annuities represent the fair value of deposits invested in underlying investment funds on which AFG earns a fee. Investment funds are selected and may be changed only by the policyholder, who retains all investment risk.

AFG’s variable annuity contracts contain a guaranteed minimum death benefit (“GMDB”) to be paid if the policyholder dies before the annuity payout period commences. In periods of declining equity markets, the GMDB may exceed the value of the policyholder’s account. A GMDB liability is established for future excess death benefits using assumptions together with a range of reasonably possible scenarios for investment fund performance that are consistent with DPAC capitalization and amortization assumptions.

Premium Recognition Property and casualty premiums are earned generally over the terms of the policies on a pro rata basis. Unearned premiums represent that portion of premiums written which is applicable to the unexpired terms of policies in force. On reinsurance assumed from other insurance companies or written through various underwriting organizations, unearned premiums are based on information received from such companies and organizations. For traditional life, accident and health products, premiums are recognized as revenue when legally collectible from policyholders. For interest-sensitive life and universal life products, premiums are recorded in a policyholder account, which is reflected as a liability. Revenue is recognized as amounts are assessed against the policyholder account for mortality coverage and contract expenses.

Noncontrolling Interests For Balance Sheet purposes, noncontrolling interests represents the interests of shareholders other than AFG in consolidated entities. In the Statement of Earnings, net earnings and losses attributable to noncontrolling interests represents such shareholders’ interest in the earnings and losses of those entities.

Income Taxes Deferred income taxes are calculated using the liability method. Under this method, deferred income tax assets and liabilities are determined based on differences between financial reporting and tax bases and are measured using enacted tax rates. Deferred tax assets are recognized if it is more likely than not that a benefit will be realized.

AFG records a liability for the inherent uncertainty in quantifying its income tax provisions. Related interest and penalties are recognized as a component of tax expense.

Stock-Based Compensation All share-based grants are recognized as compensation expense on a straight-line basis over their vesting periods based on their calculated “fair value” at the date of grant. AFG uses the Black-Scholes pricing model to measure the fair value of employee stock options. See Note K -“Shareholders’ Equity” for further information on stock options.

Benefit Plans AFG provides retirement benefits to qualified employees of participating companies through the AFG 401(k) Retirement and Savings Plan, a defined contribution plan. AFG makes all contributions to the retirement fund portion of the plan and matches a percentage of employee contributions to the savings fund. Company contributions are expensed in the year for which they are declared. AFG and many of its subsidiaries provide health care and life insurance benefits to eligible retirees. AFG also provides postemployment benefits to former or inactive employees (primarily those on disability) who were not deemed retired under other company plans. The projected future cost of providing these benefits is expensed over the period the employees earn such benefits.

Earnings Per Share Basic earnings per share is calculated using the weighted average number of shares of common stock outstanding during the period. The calculation of diluted earnings per share includes the following adjustments to weighted average common shares related to stock-based compensation plans: 2010 — 1.3 million, 2009 — 1.1 million and 2008 — 1.7 million. Weighted average common shares in 2008 also includes an adjustment of .6 million related to convertible notes.

AFG’s weighted average diluted shares outstanding excludes the following anti-dilutive potential common shares related to stock compensation plans: 2010 — 3.5 million, 2009 — 5.7 million and 2008 — 4.4 million. Adjustments to net earnings attributable to shareholders in the calculation of diluted earnings per share were less than $1 million in the 2010, 2009 and 2008 periods.

Statement of Cash Flows For cash flow purposes, “investing activities” are defined as making and collecting loans and acquiring and disposing of debt or equity instruments and property and equipment. “Financing activities” include obtaining resources from owners and providing them with a return on their investments, borrowing money and repaying amounts borrowed. Annuity receipts, benefits and withdrawals are also reflected as financing activities. All other activities are considered “operating.” Short-term investments having original maturities of three months or less when purchased are considered to be cash equivalents for purposes of the financial statements.

Acquisitions

12 Months Ended

Dec. 31, 2010

Acquisitions [Abstract]

Acquisitions

Acquisitions

Vanliner Group, Inc. (“Vanliner”) In July 2010, National Interstate (“NATL”), a 52%-owned subsidiary of AFG, completed the acquisition of Vanliner, a market leader in providing insurance for the moving and storage industry. Vanliner’s moving and storage insurance premiums associated with policies in force as of December 31, 2010, totaled approximately $90 million, representing approximately 78% of its total business. The $128 million initial purchase price (funded primarily with cash on hand) was based on Vanliner’s estimated tangible book value at the date of closing and is subject to certain adjustments, including a four and one-half-year balance sheet guarantee whereby both favorable and unfavorable developments related to the closing balance sheet inure to the seller, UniGroup, Inc. Adjustments subsequent to closing reduced the initial purchase price to $114 million. In accordance with accounting standards, all assets acquired and liabilities assumed were recognized at their fair values as of the acquisition date. The purchase price allocation based on these fair values resulted in a gain on purchase of $7 million (included in realized gains on subsidiaries). Pro forma results of operations for AFG assuming the acquisition of Vanliner had taken place at the beginning of 2010 would not differ significantly from actual reported results.

Marketform Group In January 2008, AFG paid $75 million in cash (including transaction costs) to acquire approximately 67% of Marketform Group Limited, an agency that focuses on medical malpractice and other specialty property and casualty insurance products outside of the United States using a Lloyd’s platform (Syndicate 2468). Approximately $36 million of the acquisition cost was recorded as an intangible asset for the present value of future profits from the acquired business and is being amortized over the estimated retention period of seven years.

Strategic Comp Holdings AFG acquired Strategic Comp Holdings, LLC in January 2008 for $37 million in cash. Additional contingent consideration could be due after seven years based on achieving certain operating milestones. Strategic Comp, headquartered in Louisiana, is a provider of workers’ compensation programs for mid-size to large commercial accounts. The entire purchase price was recorded as intangible renewal rights and is being amortized over the estimated retention period of seven years.

Segments of Operations

12 Months Ended

Dec. 31, 2010

Segments of Operations [Abstract]

Segments of Operations

Segments of Operations

AFG manages its business as three segments: (i) property and casualty insurance, (ii) annuity and supplemental insurance and (iii) other, which includes holding company assets and costs and assets and operations of the managed investment entities.

AFG reports its property and casualty insurance business in the following Specialty sub-segments: (i) Property and transportation, which includes physical damage and liability coverage for buses, trucks and recreational vehicles, inland and ocean marine, agricultural-related products and other property coverages, (ii) Specialty casualty, which includes primarily excess and surplus, general liability, executive liability, umbrella and excess liability, customized programs for small to mid-sized businesses and California workers’ compensation, and (iii) Specialty financial, which includes risk management insurance programs for lending and leasing institutions (including collateral and mortgage protection insurance), surety and fidelity products and trade credit insurance. AFG’s annuity and supplemental insurance business markets traditional fixed and indexed annuities and a variety of supplemental insurance products such as Medicare supplement.

AFG’s reportable segments and their components were determined based primarily upon similar economic characteristics, products and services.

In 2010, 2009, and 2008, less than 5% of AFG’s revenues were derived from the sale of property and casualty insurance outside of the United States.

The following tables (in millions) show AFG’s assets, revenues and operating earnings before income taxes by significant business segment and sub-segment.


	2010			2009			2008
Assets
Property and casualty insurance (a)	$	11,609		$	11,863		$	12,132
Annuity and supplemental insurance		17,766			15,476			13,933
Other		3,079			344			363


Total assets	$	32,454		$	27,683		$	26,428


Revenues
Property and casualty insurance:
Premiums earned:
Specialty
Property and transportation	$	1,167		$	909		$	1,291
Specialty casualty		873			917			1,013
Specialty financial		446			517			494
Other		64			69			69
Other lines		—			—			—

Total premiums earned		2,550			2,412			2,867
Investment income		335			414			406
Realized gains (losses)		88			123			(196	)
Other		63			106			154

Total property and casualty insurance		3,036			3,055			3,231
Annuity and supplemental insurance:
Investment income		850			784			718
Life, accident and health premiums		451			444			435
Realized gains (losses)		—			(86	)		(228	)
Other		106			114			120

Total annuity and supplemental insurance		1,407			1,256			1,045
Other		54			9			17


Total revenues	$	4,497		$	4,320		$	4,293


Operating Earnings Before Income Taxes
Property and casualty insurance:
Underwriting:
Specialty
Property and transportation	$	140		$	236		$	156
Specialty casualty		47			63			244
Specialty financial		112			134			(46	)
Other		9			(9	)		9
Other lines		(12	)		(7	)		(8	)

Total underwriting		296			417			355
Investment income, realized gains (losses) and other		381			461			147

Total property and casualty insurance		677			878			502
Annuity and supplemental insurance:
Operations		196			162			158
Realized gains (losses)		—			(86	)		(228	)

Total annuity and supplemental insurance		196			76			(70	)
Other (b)		(184	)		(142	)		(116	)


Total operating earnings before income taxes	$	689		$	812		$	316


(a)		Not allocable to sub-segments.

(b)		Includes holding company expenses and, in 2010, $32 million in earnings from managed investment entities attributable to AFG shareholders and $64 million in losses of managed investment entities attributable to noncontrolling interests.

Fair Value Measurements

12 Months Ended

Dec. 31, 2010

Fair Value Measurements [Abstract]

Fair Value Measurements

Fair Value Measurements

Accounting standards for measuring fair value are based on inputs used in estimating fair value. The three levels of the hierarchy are as follows:

Level 1 — Quoted prices for identical assets or liabilities in active markets (markets in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis). AFG’s Level 1 financial instruments consist primarily of publicly traded equity securities and highly liquid government bonds for which quoted market prices in active markets are available and short-term investments of managed investment entities.

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar assets or liabilities in inactive markets (markets in which there are few transactions, the prices are not current, price quotations vary substantially over time or among market makers, or in which little information is released publicly); and valuations based on other significant inputs that are observable in active markets. AFG’s Level 2 financial instruments include separate account assets, corporate and municipal fixed maturity securities, MBS and investments of managed investment entities priced using observable inputs. Level 2 inputs include benchmark yields, reported trades, corroborated broker/dealer quotes, issuer spreads and benchmark securities. When non-binding broker quotes can be corroborated by comparison to similar securities priced using observable inputs, they are classified as Level 2.

Level 3 — Valuations derived from market valuation techniques generally consistent with those used to estimate the fair values of Level 2 financial instruments in which one or more significant inputs are unobservable. The unobservable inputs may include management’s own assumptions about the assumptions market participants would use based on the best information available in the circumstances. AFG’s Level 3 is comprised of financial instruments, including liabilities of managed investment entities, whose fair value is estimated based on non-binding broker quotes or internally developed using significant inputs not based on, or corroborated by, observable market information.

AFG’s management is responsible for the valuation process and uses data from outside sources (including nationally recognized pricing services and broker/dealers) in establishing fair value. Valuation techniques utilized by pricing services and prices obtained from external sources are reviewed by AFG’s internal investment professionals who are familiar with the securities being priced and the markets in which they trade to ensure the fair value determination is representative of an exit price. To validate the appropriateness of the prices obtained, these investment managers consider widely published indices (as benchmarks), recent trades, changes in interest rates, general economic conditions and the credit quality of the specific issuers.

Assets and liabilities measured at fair value at December 31 are summarized below (in millions):


	Level 1		Level 2		Level 3		Total
2010
Assets:
Available for sale (“AFS”) fixed maturities:
U.S. Government and government agencies	$	249	$	218	$	—	$	467
States, municipalities and political subdivisions		—		2,919		20		2,939
Foreign government		—		278		—		278
Residential MBS		—		3,563		312		3,875
Commercial MBS		—		2,117		6		2,123
All other corporate		9		9,201		436		9,646

Total AFS fixed maturities		258		18,296		774		19,328

Trading fixed maturities		—		390		3		393
Equity securities		461		208		21		690
Assets of managed investment entities (“MIE”)		96		2,393		48		2,537
Variable annuity assets (separate accounts) (a)		—		616		—		616
Other investments		—		98		—		98

Total assets accounted for at fair value	$	815	$	22,001	$	846	$	23,662


Liabilities:
Liabilities of managed investment entities	$	65	$	—	$	2,258	$	2,323
Derivatives embedded in annuity benefits accumulated		—		—		190		190

Total liabilities accounted for at fair value	$	65	$	—	$	2,448	$	2,513


2009
Assets:
Fixed maturities:
Available for sale	$	371	$	15,683	$	769	$	16,823
Trading		—		371		1		372
Equity securities		197		189		25		411
Variable annuity assets (separate accounts)(a)		—		549		—		549
Other investments		—		85		—		85


Total assets accounted for at fair value	$	568	$	16,877	$	795	$	18,240


Liabilities:
Derivatives embedded in annuity benefits accumulated	$	—	$	—	$	113	$	113


(a)		Variable annuity liabilities equal the fair value of variable annuity assets.

During 2010, there were no significant transfers between Level 1 and Level 2. Approximately 4% of the total assets measured at fair value on December 31, 2010, were Level 3 assets. Approximately 38% of these assets were MBS whose fair values were determined primarily using non-binding broker quotes; the balance was primarily private placement debt securities whose fair values were determined internally using significant unobservable inputs, including the evaluation of underlying collateral and issuer creditworthiness, as well as certain Level 2 inputs such as comparable yields and multiples on similar publicly traded issues. The fair values of the liabilities of managed investment entities were determined using non-binding broker quotes, which were reviewed by AFG’s internal investment professionals.

Changes in balances of Level 3 financial assets and liabilities during 2010, 2009 and 2008 are presented below (in millions). The transfers into and out of Level 3 were due to changes in the availability of market observable inputs. All transfers are reflected in the table at fair value as of the end of the reporting period.


							Total
							realized/unrealized
							gains (losses)
							included in
				Consolidate						Other			Purchases,
	Balance at			Managed						comp.			sales,			Transfer		Transfer			Balance at
	December 31,			Inv.			Net			income			issuances and			into		out of			December 31,
	2009			Entities			income			(loss)			settlements			Level 3		Level 3			2010
AFS fixed maturities:
State and municipal	$	23		$	—		$	—		$	1		$	(4	)	$	17	$	(17	)	$	20
Residential MBS		435			—			7			26			17			27		(200	)		312
Commercial MBS		—			—			—			—			6			—		—			6
All other corporate		311			(6	)		(10	)		10			100			118		(87	)		436
Trading fixed maturities		1			—			—			—			4			2		(4	)		3
Equity securities		25			—			—			(1	)		—			—		(3	)		21
Assets of MIE		—			90			8			—			(16	)		26		(60	)		48
Liabilities of MIE (*)		—			(2,084	)		(220	)		—			46			—		—			(2,258	)
Embedded derivatives		(113	)		—			(20	)		—			(57	)		—		—			(190	)


(*)		Total realized/unrealized loss included in net income includes losses of $213 million related to liabilities outstanding as of December 31, 2010. See Note H — “Managed Investment Entities.”


				Total
				realized/unrealized
				gains (losses)					Purchases,		Net
	Balance at			included in					sales,		Transfer			Balance at
	December 31,						Other comp.		issuances and		out of			December 31,
	2008			Net income			income (loss)		settlements		Level 3			2009
AFS fixed maturities	$	706		$	7		$	89	$	292	$	(325	)	$	769
Trading fixed maturities		1			—			—		—		—			1
Equity securities		44			(13	)		1		1		(8	)		25
Other assets		5			—			—		—		(5	)		—
Embedded derivatives		(96	)		(29	)		—		12		—			(113	)


				Total
				realized/unrealized
				gains (losses)						Purchases,			Net
	Balance at			included in						sales,			Transfer			Balance at
	December 31,						Other comp.			issuances and			into (out of)			December 31,
	2007			Net income			income (loss)			settlements			Level 3			2008
AFS fixed maturities	$	527		$	(1	)	$	(80	)	$	175		$	85		$	706
Trading fixed maturities		11			(1	)		—			(1	)		(8	)		1
Equity securities		56			(5	)		(5	)		(10	)		8			44
Other assets		5			(1	)		—			(1	)		2			5
Embedded derivatives		(155	)		79			—			(20	)		—			(96	)

Fair Value of Financial Instruments The following table presents (in millions) the carrying value and estimated fair value of AFG’s financial instruments at December 31.


	2010				2009
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Assets:
Cash and cash equivalents	$	1,099	$	1,099	$	1,120	$	1,120
Fixed maturities		19,721		19,721		17,195		17,195
Equity securities		690		690		411		411
Mortgage loans		468		469		376		373
Policy loans		264		264		276		276
Other investments — derivatives		98		98		85		85
Assets of managed investment entities		2,537		2,537		—		—
Variable annuity assets (separate accounts)		616		616		549		549

Liabilities:
Annuity benefits accumulated (*)	$	12,696	$	12,233	$	11,123	$	10,365
Long-term debt		952		1,023		828		839
Liabilities of managed investment entities		2,323		2,323		—		—
Variable annuity liabilities (separate accounts)		616		616		549		549
Other liabilities — derivatives		14		14		5		5


(*)		Excludes life contingent annuities in the payout phase.

The carrying amount of cash and cash equivalents approximates fair value. Fair values for mortgage loans are estimated by discounting the future contractual cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings. The fair value of policy loans is estimated to approximate carrying value; policy loans have no defined maturity dates and are inseparable from insurance contracts. The fair value of annuity benefits was estimated based on expected cash flows discounted using forward interest rates adjusted for the Company’s credit risk and includes the impact of maintenance expenses and capital costs. Fair values of long-term debt are based primarily on quoted market prices.

Investments

12 Months Ended

Dec. 31, 2010

Investments [Abstract]

Investments

Investments

Available for sale fixed maturities and equity securities at December 31 consisted of the following (in millions):


	2010									2009
	Amortized		Fair		Gross Unrealized					Amortized		Fair		Gross Unrealized
	Cost		Value		Gains		Losses			Cost		Value		Gains		Losses

Fixed maturities:
U.S. Government and government agencies	$	453	$	467	$	15	$	(1	)	$	599	$	612	$	14	$	(1	)
States, municipalities and political subdivisions		2,927		2,939		53		(41	)		1,764		1,789		40		(15	)
Foreign government		269		278		9		—			261		264		4		(1	)
Residential MBS		3,781		3,875		222		(128	)		4,142		3,956		126		(312	)
Commercial MBS		1,972		2,123		153		(2	)		1,434		1,431		22		(25	)
All other corporate		9,088		9,646		602		(44	)		8,530		8,771		375		(134	)


Total fixed maturities	$	18,490	$	19,328	$	1,054	$	(216	)	$	16,730	$	16,823	$	581	$	(488	)


Common stocks	$	312	$	543	$	232	$	(1	)	$	112	$	298	$	187	$	(1	)


Perpetual preferred stocks	$	146	$	147	$	6	$	(5	)	$	116	$	113	$	6	$	(9	)

The non-credit related portion of other-than-temporary impairment charges are included in other comprehensive income (loss). Such charges taken for securities still owned at December 31, 2010 and 2009, respectively, were $258 million and $284 million for residential MBS, $1 million and $3 million for commercial MBS and $1 million and $4 million for corporate bonds.

The following tables show gross unrealized losses (in millions) on fixed maturities and equity securities by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2010 and 2009.


	Less Than Twelve Months								Twelve Months or More
	Unrealized			Fair		Fair Value as			Unrealized			Fair		Fair Value as
	Loss			Value		% of Cost			Loss			Value		% of Cost
2010
Fixed maturities:
U.S. Government and government agencies	$	(1	)	$	86		99	%	$	—		$	—		—	%
States, municipalities and political subdivisions		(38	)		1,180		97	%		(3	)		40		93	%
Foreign government		—			37		99	%		—			—		—	%
Residential MBS		(11	)		412		97	%		(117	)		551		82	%
Commercial MBS		(2	)		83		98	%		—			15		97	%
All other corporate		(24	)		1,020		98	%		(20	)		275		93	%


Total fixed maturities	$	(76	)	$	2,818		97	%	$	(140	)	$	881		86	%


Common stocks	$	—		$	21		99	%	$	(1	)	$	4		88	%


Perpetual preferred stocks	$	—		$	22		98	%	$	(5	)	$	37		88	%


2009
Fixed maturities:
U.S. Government and government agencies	$	(1	)	$	232		99	%	$	—		$	—		—	%
States, municipalities and political subdivisions		(8	)		470		98	%		(7	)		69		90	%
Foreign government		(1	)		81		99	%		—			—		—	%
Residential MBS		(37	)		458		93	%		(275	)		1,392		84	%
Commercial MBS		(1	)		209		99	%		(24	)		395		94	%
All other corporate		(19	)		895		98	%		(115	)		1,336		92	%


Total fixed maturities	$	(67	)	$	2,345		97	%	$	(421	)	$	3,192		88	%


Common stocks	$	(1	)	$	3		79	%	$	—		$	2		99	%


Perpetual preferred stocks	$	—		$	—		—	%	$	(9	)	$	47		84	%

At December 31, 2010, the gross unrealized losses on fixed maturities of $216 million relate to approximately 1,150 securities. Investment grade securities (as determined by nationally recognized rating agencies) represented approximately 58% of the gross unrealized loss and 82% of the fair value.

Gross Unrealized Losses on MBS At December 31, 2010, gross unrealized losses on AFG’s residential MBS represented 59% of the total gross unrealized loss on fixed maturity securities. Of the residential MBS that have been in an unrealized loss position (“impaired”) for 12 months or more (258 securities), approximately 40% of the unrealized losses and 47% of the fair value relate to investment grade rated securities. AFG analyzes its MBS for other-than-temporary impairment each quarter based upon expected future cash flows. Management estimates expected future cash flows based upon its knowledge of the MBS market, cash flow projections (which reflect loan to collateral values, subordination, vintage and geographic concentration) received from independent sources, implied cash flows inherent in security ratings and analysis of historical payment data. For 2010, AFG recorded in earnings $51 million and $2 million in other-than-temporary impairment charges related to its residential and commercial MBS, respectively.

Gross Unrealized Losses on All Other Corporates AFG recognized in earnings approximately $24 million in other-than-temporary impairment charges on “all other corporate” securities during 2010. Management concluded that no additional charges for other-than-temporary impairment were required based on many factors, including AFG’s ability and intent to hold the investments for a period of time sufficient to allow for anticipated recovery of its amortized cost, the length of time and the extent to which fair value has been below cost, analysis of historical and projected company-specific financial data, the outlook for industry sectors, and credit ratings.

The following table is a progression of the credit portion of other-than-temporary impairments on fixed maturity securities for which the non-credit portion of an impairment has been recognized in other comprehensive income (loss) (in millions).


	2010			2009
Balance at January 1	$	99		$	14
Additional credit impairments on:
Previously impaired securities		44			26
Securities without prior impairments		9			72
Reductions — disposals		(9	)		(13	)


Balance at December 31	$	143		$	99

The table below sets forth the scheduled maturities of available for sale fixed maturities as of December 31, 2010 (in millions). Securities with sinking funds and other securities that pay down principal over time are reported at average maturity. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid by the issuers. MBS had an average life of approximately four years at December 31, 2010.


	Amortized		Fair Value
	Cost		Amount		%
Maturity
One year or less	$	546	$	556		3	%
After one year through five years		4,922		5,182		27
After five years through ten years		5,505		5,813		30
After ten years		1,764		1,779		9

		12,737		13,330		69
MBS		5,753		5,998		31


Total	$	18,490	$	19,328		100	%

Certain risks are inherent in connection with fixed maturity securities, including loss upon default, price volatility in reaction to changes in interest rates, and general market factors and risks associated with reinvestment of proceeds due to prepayments or redemptions in a period of declining interest rates.

There were no investments in individual issuers that exceeded 10% of Shareholders’ Equity at December 31, 2010 or 2009.

Net Unrealized Gain on Marketable Securities In addition to adjusting equity securities and fixed maturity securities classified as “available for sale” to fair value, GAAP requires that deferred policy acquisition costs related to annuities and certain other balance sheet amounts be adjusted to the extent that unrealized gains and losses from securities would result in adjustments to those balances had the unrealized gains or losses actually been realized. The following table shows the components of the net unrealized gain on securities that is included in accumulated other comprehensive income in AFG’s Balance Sheet.


				Deferred Tax and
				Amounts Attributable
				to Noncontrolling
	Pre-tax			Interests			Net
December 31, 2010
Unrealized gain on:
Fixed maturity securities	$	838		$	(295	)	$	543
Equity securities		232			(82	)		150
Deferred policy acquisition costs		(340	)		118			(222	)
Annuity benefits and other liabilities		6			(2	)		4


	$	736		$	(261	)	$	475


December 31, 2009
Unrealized gain on:
Fixed maturity securities	$	93		$	(33	)	$	60
Equity securities		183			(65	)		118
Deferred policy acquisition costs		(18	)		6			(12	)


	$	258		$	(92	)	$	166

Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments are summarized as follows (in millions):


																Noncon-
	Fixed			Equity			Other						Tax			trolling
	Maturities			Securities			Investments(b)			Other(a)			Effects			Interests			Total
2010
Realized before impairments	$	146		$	36		$	(5	)	$	(14	)	$	(57	)	$	(2	)	$	104
Realized — impairments		(79	)		(1	)		(6	)		24			22			—			(40	)
Change in unrealized		751			49			—			(316	)		(169	)		(2	)		313

2009
Realized before impairments		207			61			1			(23	)		(82	)		(5	)		159
Realized — impairments		(221	)		(22	)		(28	)		68			72			1			(130	)
Change in unrealized		2,005			126			—			(788	)		(471	)		(6	)		866

2008
Realized before impairments		51			(82	)		—			7			8			2			(14	)
Realized — impairments		(245	)		(199	)		(2	)		44			138			8			(256	)
Change in unrealized		(1,822	)		48			—			747			360			3			(664	)


(a)		Primarily adjustments to deferred policy acquisition costs related to annuities.

(b)		Includes mortgage loans and other investments.

Realized gains include net gains of $50 million in 2010, $157 million in 2009 and $81 million in 2008 from the mark-to-market of certain MBS, primarily interest-only securities with interest rates that float inversely with short-term rates. Gross realized gains and losses (excluding impairment writedowns and mark-to-market of derivatives) on available for sale fixed maturity and equity security investment transactions included in the Statement of Cash Flows consisted of the following (in millions):


	2010			2009			2008
Fixed maturities:
Gross gains	$	108		$	92		$	65
Gross losses		(11	)		(43	)		(95	)

Equity securities:
Gross gains		35			82			60
Gross losses		—			(21	)		(141	)

Derivatives

12 Months Ended

Dec. 31, 2010

Derivatives [Abstract]

Derivatives

Derivatives

As discussed under “Derivatives” in Note A, AFG uses derivatives in certain areas of its operations. AFG’s derivatives do not qualify for hedge accounting under GAAP; changes in the fair value of derivatives are included in earnings.

The following derivatives are included in AFG’s Balance Sheet at fair value (in millions):


		December 31, 2010				December 31, 2009
Derivative	Balance Sheet Line	Asset		Liability		Asset		Liability
MBS with embedded derivatives	Fixed maturities	$	101	$	—	$	226	$	—
Interest rate swaptions	Other investments		21		—		24		—
Indexed annuities (embedded derivative)	Annuity benefits accumulated		—		190		—		113
Equity index call options	Other investments		77		—		61		—
Reinsurance contracts (embedded derivative)	Other liabilities		—		14		—		5


		$	199	$	204	$	311	$	118

The MBS with embedded derivatives consist primarily of interest-only MBS with interest rates that float inversely with short-term rates. AFG has elected to measure these securities (in their entirety) at fair value in its financial statements. These investments are part of AFG’s overall investment strategy and represent a small component of AFG’s overall investment portfolio.

AFG has entered into $800 million notional amount of pay-fixed interest rate swaptions (options to enter into pay-fixed/receive floating interest rate swaps at future dates expiring between 2012 and 2015) to mitigate interest rate risk in its annuity operations. AFG paid $21 million to purchase these swaptions, which represents its maximum potential economic loss over the life of the contracts.

AFG’s indexed annuities, which represented 27% of annuity benefits accumulated at December 31, 2010, provide policyholders with a crediting rate tied, in part, to the performance of an existing stock market index. AFG attempts to mitigate the risk in the index-based component of these products through the purchase of call options on the appropriate index. AFG’s strategy is designed so that an increase in the liabilities, due to an increase in the market index, will be generally offset by unrealized and realized gains on the call options purchased by AFG. Both the index-based component of the annuities and the related call options are considered derivatives.

As discussed under “Reinsurance” in Note A, certain reinsurance contracts in AFG’s annuity and supplemental insurance business are considered to contain embedded derivatives.

The following table summarizes the gain (loss) included in the Statement of Earnings for changes in the fair value of these derivatives for 2010 and 2009 (in millions):


	Statement of
Derivative	Earnings Line	2010			2009
MBS with embedded derivatives	Realized gains	$	50		$	157
Interest rate swaptions	Realized gains		(7	)		8
Indexed annuities (embedded derivative)	Annuity benefits		(20	)		(29	)
Equity index call options	Annuity benefits		41			26
Reinsurance contracts (embedded derivative)	Investment income		(9	)		(25	)


		$	55		$	137

Deferred Policy Acquisition Costs

12 Months Ended

Dec. 31, 2010

Deferred Policy Acquisition Costs [Abstract]

Deferred Policy Acquisition Costs

Deferred Policy Acquisition Costs

Deferred policy acquisition costs consisted of the following at December 31 (in millions):


	2010			2009
Property and casualty insurance	$	324		$	338
Annuity and supplemental insurance:
Policy acquisition costs		892			853
Policyholder sales inducements		204			207
Present value of future profits (“PVFP”)		164			190
Impact of unrealized gains and losses on securities		(340	)		(18	)

Total annuity and supplemental		920			1,232


	$	1,244		$	1,570

During 2010, 2009 and 2008, AFG capitalized $33 million, $32 million and $53 million, respectively, relating to sales inducements offered to annuity policyholders. Amortization of sales inducements was $36 million, $20 million and $10 million in these periods, respectively.

The PVFP amounts in the table above are net of $174 million and $148 million of accumulated amortization at December 31, 2010 and 2009, respectively. Amortization of the PVFP was $26 million in 2010, $29 million in 2009 and $30 million in 2008. During each of the next five years, the PVFP is expected to decrease at a rate of approximately one-sixth of the balance at the beginning of each respective year.

Managed Investment Entities

12 Months Ended

Dec. 31, 2010

Managed Investment Entities [Abstract]

Managed Investment Entities

Managed Investment Entities

AFG is the investment manager and has investments ranging from 7.5% to 24.4% of the most subordinate debt tranche of six collateralized loan obligation entities or “CLOs,” which are considered variable interest entities. Upon formation between 2004 and 2007, these entities issued securities in various senior and subordinate classes and invested the proceeds primarily in secured bank loans, which serve as collateral for the debt securities issued by each particular CLO. None of the collateral was purchased from AFG. AFG’s investments in these entities receive residual income from the CLOs only after the CLOs pay operating expenses (including management fees to AFG), interest on and returns of capital to senior levels of debt securities. There are no contractual requirements for AFG to provide additional funding for these entities. AFG has not provided and does not intend to provide any financial support to these entities.

In analyzing expected cash flows related to these entities, AFG determined that it will not receive a majority of the residual returns nor absorb a majority of the entities’ expected losses. Accordingly, AFG was not required to consolidate these variable interest entities prior to 2010. Beginning in 2010, accounting standards for determining the primary beneficiary of a variable interest entity changed from the above quantitative assessment to a qualitative assessment as outlined in Note A - “Accounting Policies, Managed Investment Entities.” Under the new guidance, AFG determined that it is the primary beneficiary of the CLOs it manages and began consolidating the CLOs on January 1, 2010.

AFG’s maximum ultimate exposure to economic loss on its CLOs is limited to its investment in the CLOs, which had an aggregate fair value of $17 million at December 31, 2010.

The revenues and expenses of the CLOs are separately identified in AFG’s Statement of Earnings, after elimination of $15 million in management fees and $17 million in income attributable to shareholders of AFG in 2010, as measured by the change in the fair value of AFG’s investments in the CLOs. AFG’s operating earnings before income taxes for 2010 includes $64 million in CLO losses attributable to noncontrolling interests.

The net loss from changes in the fair value of assets and liabilities of managed investment entities included in the Statement of Earnings for 2010 includes gains of $150 million from changes in the fair value of CLO assets and losses of $220 million from changes in the fair value of CLO liabilities. The aggregate unpaid principal balance of the CLOs’ fixed maturity investments exceeded the fair value of the investments by $69 million at December 31, 2010. The aggregate unpaid principal balance of the CLOs’ debt exceeded its fair value by $301 million at that date. The CLO assets include $6 million in loans (aggregate unpaid principal balance of $12 million) for which the CLOs are not accruing interest because the loans are in default.

Goodwill and Other Intangibles

12 Months Ended

Dec. 31, 2010

Goodwill and Other Intangibles [Abstract]

Goodwill and Other Intangibles

Goodwill and Other Intangibles

Changes in the carrying value of goodwill during 2009 and 2010, by reporting segment, are presented in the following table (in millions):


	Property and		Annuity and
	Casualty		Supplemental			Total
Balance January 1, 2009	$	152	$	58		$	210
Impairment charge		—		(2	)		(2	)


Balance December 31, 2009		152		56			208
Impairment charge		—		(22	)		(22	)


Balance December 31, 2010	$	152	$	34		$	186

In the third quarter of 2010, management decided to de-emphasize the sale of supplemental health insurance products through career agents, including the sale of a marketing subsidiary. As a result of this decision, AFG performed an interim impairment test of the goodwill associated with the reporting unit using an income valuation method based on discounted cash flows. Based on the results of this test, AFG recorded a goodwill impairment charge of $22 million (included in realized gains (losses) on subsidiaries) to write off all of the goodwill related to this reporting unit.

AFG recorded a goodwill impairment charge of $2 million (included in realized gains (losses) on subsidiaries) in the third quarter of 2009 to write off the goodwill associated with an annuity and supplemental insurance agency subsidiary. A review for impairment was prompted by a decrease in estimated future earnings from this agency. Fair value of the agency was estimated using the present value of expected future cash flows.

Included in other assets in AFG’s Balance Sheet is $49 million at December 31, 2010 and $60 million at December 31, 2009 in amortizable intangible assets related to property and casualty insurance acquisitions, primarily the 2008 acquisitions of Marketform and Strategic Comp. These amounts are net of accumulated amortization of $35 million and $23 million, respectively. Amortization of these intangibles was $12 million in 2010, $22 million in 2009 and $24 million in 2008. Future amortization of intangibles (weighted average amortization period of 4 years) is estimated to be $12 million in each of 2011, 2012, 2013 and 2014, and less than $1 million per year thereafter. Other assets also include $8 million in non-amortizable intangible assets related to insurance licenses acquired in the acquisition of Vanliner in 2010.

Long-Term Debt

12 Months Ended

Dec. 31, 2010

Long-Term Debt [Abstract]

Long-Term Debt

Long-Term Debt

Long-term debt consisted of the following at December 31 (in millions):


	2010		2009
Direct obligations of AFG:
9-7/8% Senior Notes due June 2019	$	350	$	350
7% Senior Notes due September 2050		132		—
7-1/8% Senior Debentures due February 2034		115		115
Other		3		3


		600		468

Subsidiaries:
Obligations of AAG Holding (guaranteed by AFG):
7-1/2% Senior Debentures due November 2033		112		112
7-1/4% Senior Debentures due January 2034		86		86
Notes payable secured by real estate due 2011 through 2016		65		66
Secured borrowings ($18 and $19 guaranteed by AFG)		41		52
National Interstate bank credit facility		20		15
American Premier Underwriters, Inc. (“American Premier”)
10-7/8% Subordinated Notes due May 2011		8		8
Other		—		1


		332		340

Payable to Subsidiary Trusts:
AAG Holding Variable Rate Subordinated Debentures due
May 2033		20		20


	$	952	$	828

At December 31, 2010, scheduled principal payments on debt for the subsequent five years were as follows: 2011 — $20 million, 2012 — $32 million, 2013 — $20 million, 2014 — $2 million and 2015 — $14 million.

As shown below at December 31 (in millions), the majority of AFG’s long-term debt is unsecured obligations of the holding company and its subsidiaries:


	2010		2009

Unsecured obligations	$	846	$	710
Obligations secured by real estate		65		66
Other secured borrowings		41		52


	$	952	$	828

In August 2010, AFG replaced its credit facility with a three-year, $500 million revolving credit line. Amounts borrowed under this agreement bear interest at rates ranging from 1.75% to 3.00% (currently 2%) over LIBOR based on AFG’s credit rating. No amounts were borrowed under this facility at December 31, 2010.

In September 2010, AFG issued $132 million of 7% Senior Notes due 2050. In April 2009, AFG paid $136 million to redeem its outstanding 7-1/8% Senior Debentures at maturity. In June 2009, AFG issued $350 million of 9-7/8% Senior Notes due 2019 and used the proceeds to repay borrowings under the bank credit facility.

In 2009, AFG subsidiaries borrowed a total of $59 million at interest rates ranging from 3.8% to 4.25% over LIBOR (weighted average interest rate of 4.3% at December 31, 2010). The loans require principal payments over the next three years.

Cash interest payments on long-term debt were $68 million in 2010, $64 million in 2009 and $58 million in 2008. Interest expense in the Statement of Earnings includes interest credited on funds held by AFG’s insurance subsidiaries under reinsurance contracts and other similar agreements as follows: 2010 — $10 million, 2009 — $7 million; and 2008 — $8 million.

Shareholders' Equity

12 Months Ended

Dec. 31, 2010

Shareholders' Equity [Abstract]

Shareholders' Equity

Shareholders’ Equity

AFG is authorized to issue 12.5 million shares of Voting Preferred Stock and 12.5 million shares of Nonvoting Preferred Stock, each without par value.

Stock Incentive Plans Under AFG’s stock incentive plans, employees of AFG and its subsidiaries are eligible to receive equity awards in the form of stock options, stock appreciation rights, restricted stock awards, restricted stock units and stock awards.

At December 31, 2010, there were 14.7 million shares of AFG Common Stock reserved for issuance under AFG’s stock incentive plans. Options are granted with an exercise price equal to the market price of AFG Common Stock at the date of grant. Options generally become exercisable at the rate of 20% per year commencing one year after grant; those granted to non-employee directors of AFG are fully exercisable upon grant. Options expire ten years after the date of grant. Data for stock options issued under AFG’s stock incentive plans is presented below:


						Average	Aggregate
				Average		Remaining	Intrinsic
				Exercise		Contractual	Value
	Shares			Price		Term	(in millions)
Outstanding at January 1, 2010		9,157,019		$	23.74

Granted		1,130,050		$	24.83
Exercised		(1,547,526	)	$	17.50
Forfeited/Cancelled		(220,285	)	$	24.79
Expired		(35,025	)	$	28.79


Outstanding at December 31, 2010		8,484,233		$	24.98	5.9 years	$	67


Options exercisable at
December 31, 2010		4,950,293		$	24.47	4.7 years	$	42


Options and other awards available for grant at December 31, 2010		6,184,784

The total intrinsic value of options exercised during 2010, 2009 and 2008 was $19 million, $11 million and $14 million, respectively. During 2010, 2009 and 2008, AFG received $27 million, $10 million and $17 million, respectively, in cash from the exercise of stock options. The total tax benefit related to the exercises was $6 million, $4 million and $5 million, respectively.

AFG uses the Black-Scholes option pricing model to calculate the “fair value” of its option grants. Expected volatility is based on historical volatility over a period equal to the estimated term. The expected term was estimated based on historical exercise patterns and post vesting cancellations. The weighted average fair value of options granted during 2010, 2009 and 2008 was $8.90 per share, $5.85 per share and $7.93 per share, respectively, based on the following assumptions:


	2010			2009			2008
Expected dividend yield		2.2	%		2.7	%		1.8	%
Expected volatility		39	%		37	%		28	%
Expected term (in years)		7.5			7.5			7.5
Risk-free rate		3.2	%		2.1	%		3.2	%

The restricted Common Stock that AFG has granted generally vests over a three or four year period. The $6 million of unamortized expense related to these grants will be expensed over the weighted average of 3.2 years. Data relating to grants of restricted stock is presented below:


				Average
				Grant Date
	Shares			Fair Value
Outstanding at January 1, 2010		79,801		$	19.10
Granted		254,560		$	27.07
Vested		(5,250	)	$	19.10
Forfeited		(6,125	)	$	24.83


Outstanding at December 31, 2010		322,986		$	25.27

AFG issued 141,264 shares of Common Stock (fair value of $24.83 per share) in the first quarter of 2010 under the Annual Co-CEO Equity Bonus Plan.

Total compensation expense related to stock incentive plans of AFG and its subsidiaries for 2010, 2009 and 2008 was $20 million, $13 million and $15 million (including $2 million in non-deductible stock awards), respectively. Related tax benefits totaled $6 million in 2010 and $3 million in both 2009 and 2008. As of December 31, 2010, there was a total of $20 million of total unrecognized compensation expense related to nonvested stock options granted under AFG’s plans. That cost is expected to be recognized over the weighted average of 2.9 years.

Accumulated Other Comprehensive Income (Loss), Net of Tax Comprehensive income (loss) is defined as all changes in Shareholders’ Equity except those arising from transactions with shareholders. Comprehensive income (loss) includes net earnings and other comprehensive income (loss), which consists primarily of changes in net unrealized gains or losses on available for sale securities and foreign currency translation. The progression of the components of accumulated other comprehensive income (loss) follows (in millions):


	Pretax			Foreign												Accumulated
	Net Unrealized			Currency									Noncon-			Other
	Gains (Losses)			Translation						Tax			trolling			Comprehensive
	on Securities			Adjustment			Other (a)			Effects			Interests			Income (Loss)

Balance at January 1, 2008	$	(31	)	$	28		$	5		$	8		$	2		$	12
Unrealized holding losses on securities arising during the year		(1,451	)		—			—			505			13			(933	)
Realized losses included in net income		424			—			—			(145	)		(10	)		269
Foreign currency translation losses		—			(46	)		—			—			5			(41	)
Other		—			—			(16	)		6			—			(10	)


Balance at December 31, 2008		(1,058	)		(18	)		(11	)		374			10			(703	)
Cumulative effect of accounting change		(27	)		—			—			10			—			(17	)
Unrealized holding gains on securities arising during the year		1,413			—			—			(490	)		(9	)		914
Realized gains included in net income		(70	)		—			—			19			3			(48	)
Foreign currency translation gains		—			19			—			—			(1	)		18
Other		—			—			(2	)		1			—			(1	)


Balance at December 31, 2009		258	(b)		1			(13	)		(86	)		3			163
Unrealized holding gains on securities arising during the year		596			—			—			(208	)		(4	)		384
Realized gains included in net income		(112	)		—			—			39			2			(71	)
Foreign currency translation gains		—			8			—			—			—			8
Other		(6	)		—			—			2			(1	)		(5	)


Balance at December 31, 2010	$	736	(b)	$	9		$	(13	)	$	(253	)	$	—		$	479


(a)		Net unrealized pension and other postretirement plan benefits.

(b)		Includes $17 million at December 31, 2010 and $98 million at December 31, 2009 in net pretax unrealized losses ($11 million and $63 million, respectively, net of tax) related to securities for which only the credit portion of an other-than-temporary impairment has been recorded in earnings.

Income Taxes

12 Months Ended

Dec. 31, 2010

Income Taxes [Abstract]

Income Taxes

Income Taxes

The following is a reconciliation of income taxes at the statutory rate of 35% and income taxes as shown in the Statement of Earnings (in millions):


	2010			2009			2008

Earnings before income taxes	$	689		$	812		$	316


Income taxes at statutory rate	$	241		$	284		$	111
Effect of:
Losses of managed investment entities		23			—			—
Goodwill impairment charge		8			—			—
Subsidiaries not in AFG’s tax return		6			8			1
Tax exempt interest		(16	)		(10	)		(8	)
Change in valuation allowance		(1	)		(7	)		8
Other		5			7			4

Provision for income taxes as shown on the Statement of Earnings	$	266		$	282		$	116

Total earnings before income taxes include income (losses) subject to tax in foreign jurisdictions of ($12 million) in 2010, ($71 million) in 2009 and $26 million in 2008.

The total income tax provision (credit) consists of (in millions):


	2010			2009			2008
Current taxes:
Federal	$	214		$	239		$	136
State		4			6			4
Foreign		(1	)		1			2
Deferred taxes:
Federal		63			51			(26	)
Foreign		(14	)		(15	)		—

Provision for income taxes	$	266		$	282		$	116

For income tax purposes, AFG and its subsidiaries had the following carryforwards available at December 31, 2010 (in millions):


	Expiring		Amount
Operating Loss — U.S.		2011 – 2020	$	74
		2021 – 2025		74
Operating Loss — United Kingdom	indefinite			43

Deferred income tax assets and liabilities reflect temporary differences between the carrying amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for tax purposes. The significant components of deferred tax assets and liabilities included in the Balance Sheet at December 31, were as follows (in millions):


	2010			2009
Deferred tax assets:
Federal net operating loss carryforwards	$	52		$	52
Foreign underwriting losses		32			17
Capital loss carryforwards		—			36
Insurance claims and reserves		404			404
Employee benefits		93			90
Other, net		68			87

Total deferred tax assets before valuation allowance		649			686
Valuation allowance for deferred tax assets		(54	)		(55	)

Total deferred tax assets		595			631
Deferred tax liabilities:
Subsidiaries not in AFG’s tax return		(56	)		(49	)
Investment securities		(324	)		(42	)
Deferred acquisition costs		(331	)		(452	)

Total deferred tax liabilities		(711	)		(543	)

Net deferred tax asset (liability)	$	(116	)	$	88

AFG’s net deferred tax liability at December 31, 2010, is included in other liabilities in AFG’s Balance Sheet; its net deferred tax asset at December 31, 2009, is included in other assets.

“Foreign underwriting losses” in the table above includes the net operating loss carryforward and other deferred tax assets related to the Marketform Lloyd’s insurance business, which resulted from underwriting losses in its run-off Italian public hospital medical malpractice business. These deferred tax assets can be carried forward indefinitely to offset future taxable income in the United Kingdom. At December 31, 2010, AFG determined that it was more likely than not that it will be able to utilize these losses based upon the historical and projected profitability of Marketform’s ongoing operations and the fact that the losses resulted from a business that has not been written since 2008.

The changes in the deferred tax liabilities related to investment securities and deferred acquisition costs at year end 2010 compared to 2009 are due primarily to the increase in unrealized gains on fixed maturity securities. The gross deferred tax asset has been reduced by a valuation allowance including $50 million related to a portion of AFG’s net operating loss carryforwards (“NOL”) that is subject to the separate return limitation year (“SRLY”) tax rules. A SRLY NOL can be used only by the entity that created it and only in years that the consolidated group has taxable income.

The likelihood of realizing deferred tax assets is reviewed periodically; any adjustments required to the valuation allowance are made in the period during which developments requiring an adjustment become known.

A progression of the liability for uncertain tax positions, excluding interest and penalties, follows (in millions):


	2010		2009		2008
Balance at January 1	$	36	$	36	$	36

Additions for tax positions of current year		16		—		—


Balance at December 31	$	52	$	36	$	36

In 2010, AFG increased its liability for uncertain tax positions by $16 million, exclusive of interest, to reflect uncertainty as to the timing of tax return inclusion of income related to certain securities. Because the ultimate recognition of income with respect to these securities is highly certain, the recording of this liability resulted in an offsetting reduction in AFG’s deferred tax liability. Accordingly, the ultimate resolution of this item will not impact AFG’s annual effective tax rate but could accelerate the payment of taxes.

The total unrecognized tax benefits and related interest that, if recognized, would impact the effective tax rate is $48 million at December 31, 2010. This amount does not include tax and interest totaling $17 million paid to the IRS in 2005 and 2006 for which a suit for refund has been filed (discussed below). AFG’s provision for income taxes included $2 million in both 2010 and 2009 and $3 million in 2008 of interest (net of federal benefit). AFG’s liability for interest related to unrecognized tax benefits was $12 million at December 31, 2010 and $10 million at December 31, 2009 (net of federal benefit); no penalties were accrued at those dates.

AFG’s 2010, 2009 and 2008 tax years remain subject to examination by the IRS. In addition, AFG has several tax years for which there are ongoing disputes. AFG filed a suit for refund in the U.S. District Court in Southern Ohio as a result of its dispute with the IRS regarding the calculation of tax reserves for certain annuity reserves pursuant to Actuarial Guideline 33. Oral arguments on joint motions for summary judgment were presented in June 2009. In March 2010, the Court issued an Order denying both motions. In June 2010, the Court issued a final judgment in favor of AFG. The IRS has appealed the decision. Ultimate resolution may require revised tax calculations for the years 1996-2005, possibly requiring a revised application of tax attribute carryovers or carrybacks, both capital and ordinary, to the affected years, and is contingent upon formal review and acceptance by the IRS. Resolution of the case could result in a decrease in the liability for unrecognized tax benefits by up to $36 million and a decrease in related accrued interest of $12 million. These amounts do not include tax and interest paid to the IRS in 2005 and 2006, for which the suit was filed, totaling $17 million.

Cash payments for income taxes, net of refunds, were $196 million, $190 million and $199 million for 2010, 2009 and 2008, respectively.

Contingencies

12 Months Ended

Dec. 31, 2010

Contingencies [Abstract]

Contingencies

Contingencies

Establishing property and casualty insurance reserves for claims related to environmental exposures, asbestos and other mass tort claims is subject to uncertainties that are significantly greater than those presented by other types of claims. In addition, accruals (included in other liabilities) have been recorded for various environmental and occupational injury and disease claims and other contingencies arising out of the railroad operations disposed of by American Premier’s predecessor, Penn Central Transportation Company (“PCTC”) and its subsidiaries, prior to its bankruptcy reorganization in 1978 and certain manufacturing operations disposed of by American Premier and GAFRI.

The insurance group’s liability for asbestos and environmental reserves was $416 million at December 31, 2010; related recoverables from reinsurers (net of allowances for doubtful accounts) at that date were $74 million.

At December 31, 2010, American Premier and its subsidiaries had liabilities for environmental and personal injury claims aggregating $90 million. The environmental claims consist of a number of proceedings and claims seeking to impose responsibility for hazardous waste remediation costs related to certain sites formerly owned or operated by the railroad and manufacturing operations. Remediation costs are difficult to estimate for a number of reasons, including the number and financial resources of other potentially responsible parties, the range of costs for remediation alternatives, changing technology and the time period over which these matters develop. The personal injury claims include pending and expected claims, primarily by former employees of PCTC, for injury or disease allegedly caused by exposure to excessive noise, asbestos or other substances in the workplace.

At December 31, 2010, GAFRI had a liability of approximately $7 million for environmental costs and certain other matters associated with the sales of its former manufacturing operations.

While management believes AFG has recorded adequate reserves for the items discussed in this note, the outcome is uncertain and could result in liabilities that may vary from amounts AFG has currently recorded. Such amounts could have a material effect on AFG’s future results of operations and financial condition.

Quarterly Operating Results (Unaudited)

12 Months Ended

Dec. 31, 2010

Quarterly Operating Results (Unaudited) [Abstract]

Quarterly Operating Results (Unaudited)

Quarterly Operating Results (Unaudited)

The operations of certain AFG business segments are seasonal in nature. While insurance premiums are recognized on a relatively level basis, claim losses related to adverse weather (snow, hail, hurricanes, tornadoes, etc.) may be seasonal. The profitability of AFG’s crop insurance business is primarily recognized during the second half of the year as crop prices and yields are determined. Quarterly results necessarily rely heavily on estimates. These estimates and certain other factors, such as the discretionary sales of assets, cause the quarterly results not to be necessarily indicative of results for longer periods of time.

The following are quarterly results of consolidated operations for the two years ended December 31, 2010 (in millions, except per share amounts). Quarterly earnings per share do not add to year-to-date amounts due to changes in shares outstanding.


	1st		2nd		3rd		4th		Total
	Quarter		Quarter		Quarter		Quarter		Year
2010
Revenues	$	1,034	$	1,052	$	1,255	$	1,156	$	4,497
Net earnings, including noncontrolling interests		88		100		126		109		423
Net earnings attributable to shareholders		106		108		132		133		479

Earnings attributable to shareholders per common share:
Basic	$	.94	$	.98	$	1.22	$	1.24	$	4.38
Diluted		.93		.97		1.21		1.23		4.33

Average number of Common Shares:
Basic		112.0		110.2		108.2		106.7		109.2
Diluted		113.1		111.8		109.5		108.1		110.5

2009
Revenues	$	1,006	$	1,096	$	1,093	$	1,125	$	4,320
Net earnings, including noncontrolling interests		110		132		131		157		530
Net earnings attributable to shareholders		104		127		127		161		519

Earnings attributable to shareholders per common share:
Basic	$	.90	$	1.10	$	1.10	$	1.40	$	4.49
Diluted		.88		1.09		1.09		1.38		4.45

Average number of Common Shares:
Basic		115.7		115.8		116.1		115.3		115.7
Diluted		116.4		116.5		117.2		116.6		116.8

Pretax realized gains (losses) on securities (including other-than-temporary impairments) and favorable (unfavorable) prior year development of AFG’s liability for losses and loss adjustment expenses (“LAE”) were as follows (in millions):


	1st			2nd		3rd		4th			Total
	Quarter			Quarter		Quarter		Quarter			Year
Realized Gains (Losses) on Securities
2010	$	4		$	11	$	57	$	29		$	101
2009		(41	)		15		9		60			43

Prior Year Development Favorable (Unfavorable)
2010	$	39		$	57	$	14	$	48		$	158
2009		63			77		76		(18	)		198

Results for 2010 include pretax catastrophe losses of $34 million in the second quarter, primarily from hailstorms in Oklahoma. Results for the third quarter of 2010 include a pretax gain of $26 million from the sale of a portion of AFG’s investment in Verisk Analytics, Inc. and $39 million in adverse reserve development related to Marketform, primarily its run-off Italian public hospital medical malpractice business.

Realized gains (losses) on securities in 2009 include pretax charges of $76 million for other-than-temporary impairments on securities in the first quarter and a pretax gain of $76 million from the sale of shares of Verisk in the fourth quarter. Prior year development in 2009 includes favorable development of $39 million, $31 million and $21 million in the second, third and fourth quarters, respectively, related to the run-off residual value insurance operations and $48 million of unfavorable development in the fourth quarter related to Marketform’s run-off Italian public hospital medical malpractice business.

Insurance

12 Months Ended

Dec. 31, 2010

Insurance [Abstract]

Insurance

Insurance

Securities owned by U.S.-based insurance subsidiaries having a carrying value of approximately $1.2 billion at December 31, 2010, were on deposit as required by regulatory authorities. At December 31, 2010, AFG and its subsidiaries had $144 million in undrawn letters of credit ($43 million of which was collateralized) supporting the underwriting capacity of its U.K.-based Lloyd’s insurer.

Property and Casualty Insurance Reserves The liability for losses and LAE for long-term scheduled payments under certain workers’ compensation insurance has been discounted at 6%, an approximation of long-term investment yields. As a result, the total liability for losses and loss adjustment expenses at December 31, 2010, has been reduced by $32 million.

The following table provides an analysis of changes in the liability for losses and loss adjustment expenses, net of reinsurance (and grossed up), over the past three years (in millions). Favorable development in 2010 was primarily in the Specialty casualty and Specialty financial sub-segments. Favorable development in 2009 was in the Specialty financial, Specialty casualty and Property and transportation sub-segments. In 2008, AFG had significant favorable reserve development in the Specialty casualty and Property and transportation sub-segments.


	2010			2009			2008

Balance at beginning of period	$	3,899		$	4,154		$	3,868

Provision for losses and LAE occurring in the current year		1,615			1,385			1,864
Net decrease in provision for claims of prior years		(158	)		(198	)		(242	)

Total losses and LAE incurred		1,457			1,187			1,622
Payments for losses and LAE of:
Current year		(368	)		(503	)		(645	)
Prior years		(1,108	)		(999	)		(811	)

Total payments		(1,476	)		(1,502	)		(1,456	)

Reserves of businesses acquired		287			—			120
Foreign — currency translation and other		(3	)		60			—

Balance at end of period		4,164			3,899			4,154

Add back reinsurance recoverables, net of allowance		2,249			2,513			2,610


Gross unpaid losses and LAE included in the Balance Sheet	$	6,413		$	6,412		$	6,764

Net Investment Income The following table shows (in millions) investment income earned and investment expenses incurred by AFG’s insurance group.


	2010			2009			2008
Insurance group investment income:
Fixed maturities	$	1,112		$	1,142		$	1,026
Equity securities		11			11			19
Other		63			46			76

Total investment income		1,186			1,199			1,121
Insurance group investment expenses (*)		(25	)		(38	)		(24	)


Net investment income	$	1,161		$	1,161		$	1,097


(*)		Included primarily in “Other operating and general expenses” in the Statement of Earnings.

Statutory Information AFG’s U.S.-based insurance subsidiaries are required to file financial statements with state insurance regulatory authorities prepared on an accounting basis prescribed or permitted by such authorities (statutory basis). Net earnings (loss) and policyholders’ surplus on a statutory basis for the insurance subsidiaries were as follows (in millions):


									Policyholders’
	Net Earnings (Loss)								Surplus
	2010		2009			2008			2010		2009

Property and casualty companies	$	624	$	574		$	170		$	2,101	$	2,061
Life insurance companies		213		(76	)		(93	)		1,153		1,023

Reinsurance In the normal course of business, AFG’s insurance subsidiaries cede reinsurance to other companies to diversify risk and limit maximum loss arising from large claims. To the extent that any reinsuring companies are unable to meet obligations under agreements covering reinsurance ceded, AFG’s insurance subsidiaries would remain liable. The following table shows (in millions) (i) amounts deducted from property and casualty written and earned premiums in connection with reinsurance ceded, (ii) written and earned premiums included in income for reinsurance assumed and (iii) reinsurance recoveries represent ceded losses and loss adjustment expenses.


	2010			2009			2008

Direct premiums written	$	3,542		$	3,731		$	4,230
Reinsurance assumed		47			32			37
Reinsurance ceded		(1,181	)		(1,452	)		(1,381	)


Net written premiums	$	2,408		$	2,311		$	2,886


Direct premiums earned	$	3,653		$	3,854		$	4,196
Reinsurance assumed		45			32			36
Reinsurance ceded		(1,148	)		(1,474	)		(1,365	)


Net earned premiums	$	2,550		$	2,412		$	2,867


Reinsurance recoveries	$	395		$	898		$	1,021

AFG has reinsured approximately $18 billion in face amount of life insurance at December 31, 2010 and $19 billion at December 31, 2009. Life premiums ceded were $49 million, $54 million and $57 million for 2010, 2009 and 2008, respectively.

Variable Annuities At December 31, 2010, the aggregate guaranteed minimum death benefit value (assuming every variable annuity policyholder died on that date) on AFG’s variable annuity policies exceeded the fair value of the underlying variable annuities by $52 million, compared to $85 million at December 31, 2009. Death benefits paid in excess of the variable annuity account balances were less than $1 million in each of the last three years.

Additional Information

12 Months Ended

Dec. 31, 2010

Additional Information [Abstract]

Additional Information

Additional Information

Losses and loss adjustment expenses included charges for possible losses on reinsurance recoverables of less than $1 million in 2010, 2009 and 2008. The aggregate allowance for losses on reinsurance recoverables amounted to approximately $28 million at December 31, 2010 and 2009.

Operating Leases Total rental expense for various leases of office space and equipment was $42 million in each of 2010, 2009 and 2008. AFG has committed to lease approximately 530,000 square feet of office space under a 15-year lease beginning in 2011. Rentals, which escalate over the lease term, average approximately $17 million per year. Future minimum rentals, related principally to office space, required under operating leases having initial or remaining noncancelable lease terms in excess of one year at December 31, 2010, were as follows: 2011 — $46 million; 2012 — $46 million; 2013 — $42 million; 2014 — $37 million; 2015 — $32 million; and $205 million thereafter.

Financial Instruments with Off-Balance-Sheet Risk On occasion, AFG and its subsidiaries have entered into financial instrument transactions that may present off-balance-sheet risks of both a credit and market risk nature. These transactions include commitments to fund loans, loan guarantees and commitments to purchase and sell securities or loans. At December 31, 2010, AFG and its subsidiaries had commitments to fund credit facilities and contribute limited partnership capital totaling up to $26 million.

Restrictions on Transfer of Funds and Assets of Subsidiaries Payments of dividends, loans and advances by AFG’s subsidiaries are subject to various state laws, federal regulations and debt covenants that limit the amount of dividends, loans and advances that can be paid. Under applicable restrictions, the maximum amount of dividends available to AFG in 2011 from its insurance subsidiaries without seeking regulatory clearance is $801 million. Additional amounts of dividends, loans and advances require regulatory approval.

Benefit Plans AFG expensed approximately $30 million in 2010, $34 million in 2009 and $19 million in 2008 for its retirement and employee savings plans.

Condensed Consolidating Information

12 Months Ended

Dec. 31, 2010

Condensed Consolidating Information [Abstract]

Condensed Consolidating Information

Condensed Consolidating Information

AFG has guaranteed all of the outstanding public debt of GAFRI and GAFRI’s wholly-owned subsidiary, AAG Holding Company, Inc. In addition, GAFRI guarantees AAG Holding’s public debt. The AFG and GAFRI guarantees are full and unconditional and joint and several. Condensed consolidating financial statements for AFG are as follows:

CONDENSED CONSOLIDATING BALANCE SHEET
(In millions)


					AAG		All Other		Consol.
	AFG		GAFRI		Holding		Subs		Entries			Consolidated
December 31, 2010

Assets:
Cash and investments	$	412	$	33	$	—	$	22,228	$	(3	)	$	22,670
Recoverables from reinsurers and prepaid reinsurance premiums		—		—		—		3,386		—			3,386
Agents’ balances and premiums receivable		—		—		—		535		—			535
Deferred policy acquisition costs		—		—		—		1,244		—			1,244
Assets of managed investment entities		—		—		—		2,537		—			2,537
Other assets		36		6		5		2,050		(15	)		2,082
Investment in subsidiaries and affiliates		4,816		1,899		1,996		671		(9,382	)		—


Total assets	$	5,264	$	1,938	$	2,001	$	32,651	$	(9,400	)	$	32,454


Liabilities and Equity:
Unpaid losses and loss adjustment expenses and unearned premiums	$	—	$	—	$	—	$	7,947	$	—		$	7,947
Annuity, life, accident and health benefits and reserves		—		—		—		14,556		(1	)		14,555
Liabilities of managed investment entities		—		—		—		2,323		—			2,323
Long-term debt		600		1		219		133		(1	)		952
Other liabilities		194		19		110		1,888		(154	)		2,057

Total liabilities		794		20		329		26,847		(156	)		27,834

Total shareholders’ equity		4,470		1,918		1,672		5,654		(9,244	)		4,470
Noncontrolling interests		—		—		—		150		—			150


Total liabilities and equity	$	5,264	$	1,938	$	2,001	$	32,651	$	(9,400	)	$	32,454


December 31, 2009

Assets:
Cash and investments	$	225	$	33	$	—	$	19,535	$	(2	)	$	19,791
Recoverables from reinsurers and prepaid reinsurance premiums		—		—		—		3,660		—			3,660
Agents’ balances and premiums receivable		—		—		—		554		—			554
Deferred policy acquisition costs		—		—		—		1,570		—			1,570
Other assets		14		5		6		2,063		20			2,108
Investment in subsidiaries and affiliates		4,189		1,539		1,624		687		(8,039	)		—


Total assets	$	4,428	$	1,577	$	1,630	$	28,069	$	(8,021	)	$	27,683


Liabilities and Equity:
Unpaid losses and loss adjustment expenses and unearned premiums	$	—	$	—	$	—	$	7,980	$	—		$	7,980
Annuity, life, accident and health benefits and reserves		—		—		—		12,939		(1	)		12,938
Long-term debt		468		1		219		140		—			828
Other liabilities		179		21		110		1,876		(168	)		2,018

Total liabilities		647		22		329		22,935		(169	)		23,764

Total shareholders’ equity		3,781		1,555		1,301		4,996		(7,852	)		3,781
Noncontrolling interests		—		—		—		138		—			138


Total liabilities and equity	$	4,428	$	1,577	$	1,630	$	28,069	$	(8,021	)	$	27,683

CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
(In millions)


						AAG		All Other			Consol.
	AFG		GAFRI			Holding		Subs			Entries			Consolidated
FOR THE YEAR ENDED DECEMBER 31, 2010

Revenues:
Property and casualty insurance premiums	$	—	$	—		$	—	$	2,550		$	—		$	2,550
Life, accident and health premiums		—		—			—		451			—			451
Realized gains (losses)		—		(2	)		—		90			—			88
Income of managed investment entities		—		—			—		23			—			23
Investment and other income		4		11			—		1,392			(22	)		1,385
Equity in earnings of subsidiaries		850		195			242		—			(1,287	)		—

Total revenues		854		204			242		4,506			(1,309	)		4,497

Costs and Expenses:
Insurance benefits and expenses		—		—			—		3,297			—			3,297
Interest charges on borrowed money		58		—			25		17			(22	)		78
Expenses of managed investment entities		—		—			—		55			—			55
Other operating and general expenses		51		16			5		306			—			378

Total costs and expenses		109		16			30		3,675			(22	)		3,808


Operating earnings before income taxes		745		188			212		831			(1,287	)		689
Provision (credit) for income taxes		266		72			72		314			(458	)		266


Net earnings, including noncontrolling interests		479		116			140		517			(829	)		423
Less: Net earnings (loss) attributable to noncontrolling interests		—		—			—		(56	)		—			(56	)


Net Earnings Attributable to Shareholders	$	479	$	116		$	140	$	573		$	(829	)	$	479


FOR THE YEAR ENDED DECEMBER 31, 2009

Revenues:
Property and casualty insurance premiums	$	—	$	—		$	—	$	2,412		$	—		$	2,412
Life, accident and health premiums		—		—			—		444			—			444
Realized gains (losses)		—		(7	)		—		44			1			38
Investment and other income		2		10			—		1,437			(23	)		1,426
Equity in earnings of subsidiaries		896		73			115		—			(1,084	)		—

Total revenues		898		76			115		4,337			(1,106	)		4,320

Costs and Expenses:
Insurance benefits and expenses		—		—			—		2,978			—			2,978
Interest charges on borrowed money		50		—			25		15			(23	)		67
Other operating and general expenses		47		20			6		391			(1	)		463

Total costs and expenses		97		20			31		3,384			(24	)		3,508


Operating earnings before income taxes		801		56			84		953			(1,082	)		812
Provision (credit) for income taxes		282		17			26		327			(370	)		282


Net earnings, including noncontrolling interests		519		39			58		626			(712	)		530
Less: Net earnings (loss) attributable to noncontrolling interests		—		—			—		11			—			11


Net Earnings Attributable to Shareholders	$	519	$	39		$	58	$	615		$	(712	)	$	519

CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
(In millions)


							AAG			All Other			Consol.
	AFG			GAFRI			Holding			Subs			Entries			Consolidated
FOR THE YEAR ENDED DECEMBER 31, 2008

Revenues:
Property and casualty insurance premiums	$	—		$	—		$	—		$	2,867		$	—		$	2,867
Life, accident and health premiums		—			—			—			435			—			435
Realized gains (losses)		(2	)		—			—			(426	)		2			(426	)
Investment and other income		(1	)		11			—			1,438			(31	)		1,417
Equity in earnings (loss) of subsidiaries		407			(87	)		(64	)		—			(256	)		—

Total revenues		404			(76	)		(64	)		4,314			(285	)		4,293

Costs and Expenses:
Insurance benefits and expenses		—			—			—			3,444			—			3,444
Interest charges on borrowed money		59			—			29			14			(32	)		70
Other operating and general expenses		33			18			6			407			(1	)		463

Total costs and expenses		92			18			35			3,865			(33	)		3,977


Operating earnings (loss) before income taxes		312			(94	)		(99	)		449			(252	)		316
Provision (credit) for income taxes		116			(34	)		(32	)		168			(102	)		116


Net earnings (loss), including noncontrolling interests		196			(60	)		(67	)		281			(150	)		200
Less: Net earnings (loss) attributable to noncontrolling interests		—			—			—			4			—			4


Net Earnings (Loss) Attributable to Shareholders	$	196		$	(60	)	$	(67	)	$	277		$	(150	)	$	196

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(In millions)


							AAG			All Other			Consol.
	AFG			GAFRI			Holding			Subs			Entries			Consolidated
FOR THE YEAR ENDED DECEMBER 31, 2010

Operating Activities:
Net earnings, including noncontrolling interests	$	479		$	116		$	140		$	517		$	(829	)	$	423
Adjustments:
Equity in net earnings of subsidiaries		(548	)		(121	)		(159	)		—			828			—
Dividends from subsidiaries		550			—			16			—			(566	)		—
Other operating activities, net		—			(2	)		1			441			1			441

Net cash provided by (used in) operating activities		481			(7	)		(2	)		958			(566	)		864


Investing Activities:
Purchases of investments, property and equipment		(13	)		(5	)		—			(5,417	)		—			(5,435	)
Purchase of subsidiaries		—			—			—			(128	)		—			(128	)
Capital contributions to subsidiaries		(97	)		(7	)		(5	)		—			109			—
Proceeds from maturities and redemptions of investments		—			11			—			2,141			—			2,152
Proceeds from sales of investments, property and equipment		—			—			—			1,593			—			1,593
Managed investment entities:
Purchases of investments		—			—			—			(1,008	)		—			(1,008	)
Proceeds from sales and redemptions of investments		—			—			—			1,018			—			1,018
Other investing activities, net		—			—			—			103			—			103

Net cash provided by (used in) investing activities		(110	)		(1	)		(5	)		(1,698	)		109			(1,705	)


Financing Activities:
Annuity receipts		—			—			—			2,282			—			2,282
Annuity surrenders, benefits and withdrawals		—			—			—			(1,221	)		—			(1,221	)
Net transfers from (to) variable annuity assets		—			—			—			7			—			7
Additional long-term borrowings		128			—			—			31			—			159
Reductions of long-term debt		—			—			—			(39	)		—			(39	)
Managed investment entities’ retirement of liabilities		—			—			—			(45	)		—			(45	)
Issuances of Common Stock		31			—			—			1			—			32
Capital contributions from parent		—			16			7			86			(109	)		—
Repurchases of Common Stock		(292	)		—			—			—			—			(292	)
Cash dividends paid		(63	)		—			—			(566	)		566			(63	)
Other financing activities, net		(2	)		—			—			2			—			—

Net cash provided by (used in) financing activities		(198	)		16			7			538			457			820


Net change in cash and cash equivalents		173			8			—			(202	)		—			(21	)
Cash and cash equivalents at beginning of year		197			12			—			911			—			1,120


Cash and cash equivalents at end of year	$	370		$	20		$	—		$	709		$	—		$	1,099

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(In millions)


							AAG			All Other			Consol.
	AFG			GAFRI			Holding			Subs			Entries			Consolidated
FOR THE YEAR ENDED DECEMBER 31, 2009

Operating Activities:
Net earnings, including noncontrolling interests	$	519		$	39		$	58		$	626		$	(712	)	$	530
Adjustments:
Equity in net earnings of subsidiaries		(583	)		(51	)		(79	)		—			713			—
Dividends from subsidiaries		636			3			—			—			(639	)		—
Other operating activities, net		14			4			(3	)		371			(1	)		385

Net cash provided by (used in) operating activities		586			(5	)		(24	)		997			(639	)		915


Investing Activities:
Purchases of investments, property and equipment		(14	)		(15	)		—			(4,991	)		—			(5,020	)
Purchase of subsidiaries		—			—			—			(5	)		—			(5	)
Capital contributions to subsidiaries		(170	)		(141	)		(116	)		—			427			—
Proceeds from maturities and redemptions of investments		1			2			—			1,942			—			1,945
Proceeds from sales of investments, property and equipment		15			1			—			2,319			—			2,335
Other investing activities, net		—			—			—			(38	)		—			(38	)

Net cash provided by (used in) investing activities		(168	)		(153	)		(116	)		(773	)		427			(783	)


Financing Activities:
Annuity receipts		—			—			—			1,434			—			1,434
Annuity surrenders, benefits and withdrawals		—			—			—			(1,273	)		—			(1,273	)
Net transfers from (to) variable annuity assets		—			—			—			(10	)		—			(10	)
Additional long-term borrowings		522			—			—			59			—			581
Reductions of long-term debt		(776	)		—			—			(9	)		—			(785	)
Issuances of Common Stock		14			—			—			1			—			15
Capital contributions from parent		—			168			140			119			(427	)		—
Repurchases of Common Stock		(81	)		—			—			—			—			(81	)
Cash dividends paid		(60	)		—			—			(639	)		639			(60	)
Other financing activities, net		—			—			—			(97	)		—			(97	)

Net cash provided by (used in) financing activities		(381	)		168			140			(415	)		212			(276	)


Net change in cash and cash equivalents		37			10			—			(191	)		—			(144	)
Cash and cash equivalents at beginning of year		160			2			—			1,102			—			1,264


Cash and cash equivalents at end of year	$	197		$	12		$	—		$	911		$	—		$	1,120

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(In millions)


							AAG			All Other			Consol.
	AFG			GAFRI			Holding			Subs			Entries			Consolidated
FOR THE YEAR ENDED DECEMBER 31, 2008

Operating Activities:
Net earnings (loss), including noncontrolling interests	$	196		$	(60	)	$	(67	)	$	281		$	(150	)	$	200
Adjustments:
Equity in net (earnings) loss of subsidiaries		(256	)		52			44			—			160			—
Dividends from subsidiaries		410			12			73			—			(495	)		—
Other operating activities, net		23			(12	)		2			770			(10	)		773

Net cash provided by (used in) operating activities		373			(8	)		52			1,051			(495	)		973


Investing Activities:
Purchases of investments, property and equipment		(5	)		(61	)		—			(6,414	)		—			(6,480	)
Purchase of subsidiaries		—			—			—			(113	)		—			(113	)
Capital contributions to subsidiaries		(293	)		(142	)		(125	)		—			560			—
Proceeds from maturities and redemptions of investments		—			6			—			1,989			(20	)		1,975
Proceeds from sales of investments, property and equipment		5			38			—			3,833			—			3,876
Other investing activities, net		(3	)		—			—			24			—			21

Net cash provided by (used in) investing activities		(296	)		(159	)		(125	)		(681	)		540			(721	)


Financing Activities:
Annuity receipts		—			—			—			1,649			—			1,649
Annuity surrenders, benefits and withdrawals		—			—			—			(1,466	)		—			(1,466	)
Net transfers from (to) variable annuity assets		—			—			—			46			—			46
Additional long-term borrowings		700			—			—			15			—			715
Reductions of long-term debt		(557	)		—			(69	)		(16	)		20			(622	)
Issuances of Common Stock		22			—			—			1			—			23
Capital contributions from parent		—			166			142			252			(560	)		—
Repurchases of Common Stock		(47	)		—			—			—			—			(47	)
Cash dividends paid		(51	)		—			—			(495	)		495			(51	)
Other financing activities, net		—			—			—			(51	)		—			(51	)

Net cash provided by (used in) financing activities		67			166			73			(65	)		(45	)		196


Net change in cash and cash equivalents		144			(1	)		—			305			—			448
Cash and cash equivalents at beginning of year		16			3			—			797			—			816


Cash and cash equivalents at end of year	$	160		$	2		$	—		$	1,102		$	—		$	1,264

Condensed Financial Information of Registrant

12 Months Ended

Dec. 31, 2010

Condensed Financial Information of Registrant [Abstract]

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

SCHEDULE I — CONDENSED FINANCIAL INFORMATION OF REGISTRANT

(In Millions)

Condensed Balance Sheet


	December 31
	2010		2009
Assets:
Cash and cash equivalents	$	370	$	197
Investment in securities		40		26
Investment in subsidiaries (a)		4,816		4,189
Other investments		2		2
Other assets		36		14


Total assets	$	5,264	$	4,428


Liabilities and Shareholders’ Equity:
Long-term debt	$	600	$	468
Other liabilities		194		179
Shareholders’ equity		4,470		3,781


Total liabilities and shareholders’ equity	$	5,264	$	4,428

Condensed Statement of Earnings


	Year Ended December 31,
	2010		2009		2008
Revenues:
Dividends from subsidiaries	$	554	$	636	$	775
Equity in undistributed earnings of subsidiaries		296		260		(368	)
Realized gains (losses) on investments		—		—		(2	)
Investment and other income (b)		4		2		(1	)

Total revenues		854		898		404

Costs and Expenses:
Interest charges on intercompany borrowings		12		13		21
Interest charges on other borrowings		46		37		38
Other operating and general expenses		51		47		33

Total costs and expenses		109		97		92


Operating earnings before income taxes		745		801		312
Provision for income taxes		266		282		116

Net Earnings Attributable to Shareholders	$	479	$	519	$	196


(a)		Investment in subsidiaries includes intercompany receivables and payables.

(b)		Includes mark-to-market adjustments on trading securities.

Condensed Statement of Cash Flows


	Year Ended December 31,
	2010			2009			2008
Operating Activities:
Net earnings attributable to shareholders	$	479		$	519		$	196
Adjustments:
Equity in net earnings of subsidiaries		(548	)		(583	)		(256	)
Dividends from subsidiaries		550			636			410
Change in:
Balances with affiliates		(12	)		(46	)		65
Other liabilities		12			56			(61	)
Other operating activities, net		—			4			19

Net cash provided by operating activities		481			586			373


Investing Activities:
Capital contributions to subsidiaries		(97	)		(170	)		(293	)
Purchases of investments, property and equipment		(13	)		(14	)		(5	)
Proceeds from maturities and redemptions of investments		—			1			—
Proceeds from sales of investments, property and equipment		—			15			5
Other investing activities, net		—			—			(3	)

Net cash used in investing activities		(110	)		(168	)		(296	)


Financing Activities:
Additional long-term borrowings		128			522			700
Reductions of long-term debt		—			(776	)		(557	)
Issuances of Common Stock		31			14			22
Repurchases of Common Stock		(292	)		(81	)		(47	)
Cash dividends paid		(63	)		(60	)		(51	)
Other financing activities, net		(2	)		—			—

Net cash provided by (used in) financing activities		(198	)		(381	)		67


Net Change in Cash and Cash Equivalents		173			37			144

Cash and cash equivalents at beginning of year		197			160			16


Cash and cash equivalents at end of year	$	370		$	197		$	160

Supplemental Information Concerning Property-Casuality Insurance Operations

12 Months Ended

Dec. 31, 2010

Supplemental Information Concerning Property-Casuality Insurance Operations [Abstract]

SUPPLEMENTAL INFORMATION CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS

SCHEDULE V — SUPPLEMENTAL INFORMATION CONCERNING

PROPERTY-CASUALTY INSURANCE OPERATIONS

THREE YEARS ENDED DECEMBER 31, 2010

(IN MILLIONS)

COLUMN A

COLUMN B

COLUMN C

COLUMN D

COLUMN E

COLUMN F

COLUMN G

COLUMN H

COLUMN I

COLUMN J

COLUMN K

(a)

RESERVES FOR

CLAIMS AND CLAIM

AMORTIZATION

PAID

DEFERRED

UNPAID CLAIMS

(b)

ADJUSTMENT EXPENSES

OF DEFERRED

CLAIMS

AFFILIATION

POLICY

AND CLAIMS

DISCOUNT

(c)

NET

INCURRED RELATED TO

POLICY

AND CLAIM

WITH

ACQUISITION

ADJUSTMENT

DEDUCTED IN

UNEARNED

EARNED

INVESTMENT

CURRENT

PRIOR

ACQUISITION

ADJUSTMENT

PREMIUMS

REGISTRANT

COSTS

EXPENSES

COLUMN C

PREMIUMS

INCOME

YEARS

COSTS

EXPENSES

WRITTEN

CONSOLIDATED PROPERTY-CASUALTY ENTITIES

2010

324

6,413

1,534

2,550

317

1,615

(158

)

637

1,476

2,408

2009

338

6,412

1,568

2,412

394

1,385

(198

)

649

1,502

2,311

2008

2,867

387

1,864

(242

)

749

1,456

2,886


(a)		Grossed up for reinsurance recoverables of $2,249 and $2,513 at December 31, 2010 and 2009, respectively.

(b)		Discounted at approximately 6%.

(c)		Grossed up for prepaid reinsurance premiums of $422 and $381 at December 31, 2010 and 2009, respectively.