UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 29, 2013

 

 

AMERICAN FINANCIAL GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

 

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

 

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

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

 

 

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

 

¨

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

 

¨

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

 

¨

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

 

¨

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

 

 

 

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Section 2—Financial Information

 

Item 2.02

Results of Operations and Financial Condition.

Reference is made to the press release of American Financial Group, Inc. (the “Company”) relating to the announcement of the Company’s results of operations for the second quarter of 2013 and the availability of the related Investor Supplement on the Company’s website. The press release was issued on July 29, 2013. A copy of the press release is attached to this Form 8-K as Exhibit 99.1 and a copy of the Investor Supplement is attached as Exhibit 99.2 and are incorporated herein by reference.

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

Section 9—Financial Statements and Exhibits

 

Item 9.01

Financial Statements and Exhibits.

 

(a)

Financial statements of business acquired. Not applicable.

 

(b)

Pro forma financial information. Not applicable.

 

(c)

Exhibits

 

Exhibit No.		Description
99.1		News Release, dated July 29, 2013, reporting American Financial Group Inc. second quarter review for the period ended June 30, 2013.
99.2		Investor Supplement – Second Quarter 2013

 

2

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SIGNATURES

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

 

				AMERICAN FINANCIAL GROUP, INC.
Date: July 30, 2013
				By:		Karl J. Grafe
						Karl J. Grafe
						Vice President

 

3

Exhibit 99.1

American Financial Group, Inc. Announces

Second Quarter Results

 

•

Adjusted book value per share $44.78; up 2% during the quarter

 

•

Second quarter core net operating earnings $0.96 per share, up 5.5% from the prior year period

 

•

Repurchased 1.4 million shares for $67 million during the second quarter

 

•

2013 core earnings per share guidance increased to $3.70—$4.10, from $3.60—$4.00

Cincinnati, Ohio – July 29, 2013 – American Financial Group, Inc. (NYSE/NASDAQ: AFG) today reported 2013 second quarter net earnings attributable to shareholders of $110 million ($1.20 per share) compared to $99 million ($1.01 per share) for the 2012 second quarter. After-tax net realized gains were $26 million in the second quarter compared to $9 million in the comparable prior year period. The 2013 second quarter results also include an after-tax charge of $3 million ($0.04 per share) related to guaranty fund assessments expected from various state funds for the insolvency and liquidation of Executive Life Insurance Company of New York, (“ELNY”) an unaffiliated life insurance company. Book value per share, excluding appropriated retained earnings and unrealized gains on fixed maturities, increased by $0.84 to $44.78 per share during the second quarter of 2013. Annualized return on equity was 11.1% and 10.2% for the second quarters of 2013 and 2012, respectively.

Core net operating earnings were $87 million ($0.96 per share) for the 2013 second quarter, compared to $90 million ($0.91 per share) in the 2012 second quarter. Significantly higher profit in our annuity segment was partially offset by the absence of earnings from our Medicare supplement and critical illness businesses that were sold in August 2012, lower underwriting profits in our Specialty Property and Casualty Insurance (“P&C”) operations and lower P&C investment income. Per share amounts reflect the impact of share repurchases. Core net operating earnings for the second quarters of 2013 and 2012 generated annualized returns on equity of 8.9% and 9.2%, respectively.

During the second quarter of 2013, AFG repurchased approximately 1.4 million shares of common stock for $67 million (average price per share of $48.37).

AFG’s net earnings attributable to shareholders, determined in accordance with U.S. generally accepted accounting principles (“GAAP”), include certain items that may not be indicative of its ongoing core operations. The following table identifies such items and reconciles net earnings attributable to shareholders to core net operating earnings, a non-GAAP financial measure that AFG believes is a useful tool for investors and analysts in analyzing ongoing operating trends.

 

		Three months ended June  30,								Six months ended June 30,
In millions, except per share amounts		2013				2012				2013				2012
Components of net earnings attributable to shareholders:
Core net operating earnings(a)		$	87			$	90			$	171			$	175
Realized gains			26				9				62				37
ELNY guaranty fund assessments			(3	)			—				(3	)			—
Net earnings attributable to shareholders		$	110			$	99			$	230			$	212
Components of Earnings Per Share:
Core net operating earnings		$	0.96			$	0.91			$	1.88			$	1.77
Realized gains			0.28				0.10				0.68				0.38
ELNY guaranty fund assessments			(0.04	)			—				(0.04	)			—
Diluted Earnings Per Share		$	1.20			$	1.01			$	2.52			$	2.15

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

 

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Carl H. Lindner III and S. Craig Lindner, AFG’s Co-Chief Executive Officers, issued this statement: “We are especially pleased with the strong earnings in our annuity segment for the second quarter and first six months of 2013. Although underwriting profitability in our P&C businesses was lower year over year, we remain encouraged by the market firming we are seeing in selected P&C markets, which has resulted in growth opportunities for most of our P&C businesses. Our proven investment skills and mix of specialty insurance businesses have positioned us well in the current interest rate environment and amid widespread catastrophe losses in the industry.

“At June 30, 2013, AFG had approximately $650 million of excess capital (including parent company cash of approximately $265 million). While we will make opportunistic share repurchases when it makes sense to do so and return capital to shareholders through dividends, we will invest excess capital when we see potential for healthy, profitable organic growth, and look for opportunities to expand our specialty niche businesses through acquisitions and start-ups that meet our target return thresholds.

“Based on results for the first six months of 2013, we expect core net operating earnings in 2013 to be between $3.70 and $4.10 per share, up from our previous guidance of $3.60 to $4.00 per share. Our core earnings per share guidance excludes non-core items such as realized gains and losses, as well as other significant items that may not be indicative of ongoing operations.”

Specialty Property and Casualty Insurance Operations

The P&C specialty insurance operations generated an underwriting profit of $21 million in the 2013 second quarter, compared to $52 million in the second quarter of 2012. The combined ratio was 97.0%, 5.2 points higher than the comparable prior year period. The lower profit in 2013 is primarily the result of lower underwriting profits in our property and transportation group, particularly in our transportation businesses, and higher catastrophe losses. Catastrophe losses were $19 million (2.6 points on the combined ratio), compared to $6 million (0.8 points) in the 2012 second quarter.

Gross and net written premiums were up 2% for the second quarter of 2013, when compared to the same period in 2012. Double digit premium growth in our specialty casualty and specialty financial groups was offset somewhat by lower premiums in the property and transportation group, primarily the result of lower crop insurance premiums. Delayed planting of spring crops resulted in late acreage reporting and reduced overall second quarter specialty P&C premiums. Excluding crop insurance premiums, gross and net written premiums grew by 15% and 10%, respectively when compared to the prior year second quarter. Further details about AFG’s specialty P&C operations may be found in the accompanying schedules.

The Property and Transportation Group reported an underwriting loss of $31 million in the second quarter of 2013, compared to an underwriting profit of $6 million in the second quarter of 2012. This decrease is attributable to lower profitability in our transportation businesses and higher catastrophe losses impacting our property and inland marine operations. Catastrophe losses were $18 million for this group during the second quarter of 2013, primarily the result of losses from spring storms in the southeastern United States. By comparison, catastrophe losses for the second quarter of 2012 were $4 million.

Gross and net written premiums for the second quarter of 2013 were 16% and 11% lower, respectively, than the comparable 2012 period primarily due to delayed acreage reporting from insureds as a result of excess moisture and late planting of corn and soybean crops. It is expected that these delayed premiums will be included in third quarter results. Excluding crop insurance, 2013 gross and net written premium grew by 6% and 3%, respectively, when compared to the 2012 second quarter. Net written premiums were also impacted by the increased cost of reinsurance in our property and inland marine and crop insurance businesses. Renewal pricing was up approximately 6% for the quarter, following a 5% increase achieved in the first quarter of 2013.

 

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The Specialty Casualty Group reported a second quarter underwriting profit of $32 million, slightly lower than the 2012 second quarter. A modest improvement in accident year results was more than offset by lower favorable prior year reserve development. Most of our businesses in this group produced strong underwriting profit margins during the quarter.

Gross and net written premiums were up 23% and 16%, respectively, for the second quarter of 2013 when compared to the same prior year period. While nearly all businesses in this group reported growth, our workers’ compensation and excess and surplus lines were the primary sources of the higher premiums. New business opportunities, increased exposures from higher payroll on existing accounts, strong retentions and higher renewal pricing have contributed to increases in our workers’ compensation businesses. In addition, new business opportunities and general market hardening have generated increased premiums in several of our excess and surplus lines businesses. Renewal pricing in this group was up approximately 5% for the second quarter following a 6% increase achieved in the first quarter of 2013.

The Specialty Financial Group reported underwriting profit of $15 million in the second quarter of 2013, compared to $11 million in the second quarter of 2012. The increased profitability was due primarily to higher underwriting profits in our financial institutions business, primarily from lender-placed mortgage insurance. Most of the businesses in this group achieved excellent underwriting margins during the second quarter of 2013.

Gross and net written premiums were up 16% and 15% for the 2013 second quarter, respectively, from the comparable 2012 period. Gross written premiums increased primarily as a result of growth in lender-placed mortgage insurance offered by our financial institutions business. Renewal pricing in this group was down 1% for the second quarter following a 1% increase achieved in the first quarter of 2013.

Carl Lindner III stated: “I am particularly pleased with the results achieved by our specialty casualty and specialty financial groups during the quarter. We continue to see premium growth opportunities in almost all of the businesses within these groups. I am disappointed, however, by the poor results in our property and transportation businesses. We remain committed to achieving the necessary rate increases to strengthen profitability in these operations. Based on premium growth across our P&C book of business during the first six months of 2013, we continue to expect net written premium growth for the full year 2013 to be between 8%—12%. Overall renewal pricing was up about 5% during the quarter, in line with our projections, and consistent with the overall average rate increases we saw during the first quarter. Our objective remains to achieve an increase of 4%—6% in the specialty group’s overall average renewal rates in 2013.”

Annuity Segment

AFG’s annuity operations contributed $82 million in pretax core earnings in the second quarter of 2013 compared to $59 million in the second quarter of 2012, a 39% increase. Higher pretax core earnings were primarily a result of growth in annuity assets and the favorable impact that rising interest rates had on AFG’s fixed indexed annuity reserves. Over the last year, AFG’s fixed annuity investments (at amortized cost) have grown by 14%.

Net interest spread earned during the second quarter of 2013 decreased by 14 basis points from the prior year period due primarily to the run-off of higher yielding investments. However, the net spread earned during the second quarter of 2013 increased 23 basis points from the prior year period, reflecting the impact that higher interest rates had on AFG’s fixed indexed annuity business, partially offset by the run-off of higher yielding investments.

Statutory premiums of $861 million in the 2013 second quarter increased $237 million (38%) from the first quarter of 2013. This strong growth reflects successful distribution channel expansion, as well as new product development. Year to date 2013 statutory premiums were down 13% from the comparable

 

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2012 period, in line with our expectations for the first half of 2013, and primarily the result of actions taken in the second half of 2012 to reduce crediting rates and agent commissions in response to the exceptionally low interest rate environment that began in the second quarter of 2012.

Craig Lindner stated, “Our superior investing capabilities and pricing discipline have been instrumental in achieving another quarter of strong operating earnings. Because of our annuity segment performance during the first half of 2013, and assuming no major fluctuations in interest rates or the stock market, we are increasing our guidance for the annuity and run-off segments. We now expect that the full year 2013 pretax core operating earnings from our annuity and run-off operations will be 13% to 18% higher than the $252 million reported for the full year of 2012, up from the range of 8% to 12% previously estimated. In addition, based on strong sales during the second quarter, we now believe that statutory premiums for the full year of 2013 could equal or slightly exceed premiums for the full year of 2012.”

Second quarter 2013 annuity operating earnings exclude a non-core pretax charge of $5 million to cover assessments from state guaranty funds related to the insolvency and liquidation of Executive Life Insurance Company of New York, an unaffiliated life insurance company. ELNY was placed into rehabilitation by the New York Insurance Department in 1991. In April 2012, the company was declared insolvent and ordered into liquidation. Our life insurance subsidiaries started receiving guaranty fund assessments from various states in the second quarter of 2013. Our life insurance subsidiaries are required under the solvency or guaranty laws of most states in which they do business to pay assessments up to certain prescribed limits to fund policyholder losses or liabilities of insolvent insurance companies such as ELNY.

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

Run-off Long-Term Care and Life Segment

AFG’s run-off long-term care and life segment incurred a pretax core operating loss of $2 million in the second quarter of 2013 compared to pretax core operating earnings of $5 million in the comparable prior year period.

Medicare Supplement and Critical Illness Segment

AFG’s Medicare supplement and critical illness segment contributed pretax core operating earnings of $12 million in the second quarter of 2012. These operations were sold in August 2012 for $326 million.

Investments

AFG recorded second quarter 2013 net realized gains of $26 million after tax and after deferred acquisition costs (DAC), compared to $9 million in the prior year period. Unrealized gains on fixed maturities were $462 million, after tax, after DAC at June 30, 2013, a decrease of $257 million since year-end, reflecting the impact of rising interest rates. Our portfolio continues to be high quality, with 86% of our fixed maturity portfolio rated investment grade and 96% with a National Association of Insurance Commissioners’ designation of NAIC 1or 2, its highest two categories.

During the first half of 2013, P&C investment income was approximately 6% lower than the comparable 2012 period, in line with our expectations.

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

 

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About American Financial Group, Inc.

American Financial Group is an insurance holding company, based in Cincinnati, Ohio with assets in excess of $35 billion. Through the operations of Great American Insurance Group, AFG is engaged primarily in property and casualty insurance, focusing on specialized commercial products for businesses, and in the sale of fixed and fixed-indexed annuities in the retail, financial institutions and education markets. Great American Insurance Group’s roots go back to 1872 with the founding of its flagship company, Great American Insurance Company.

Forward Looking Statements

This press release contains certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements in this press release not dealing with historical results are forward-looking and are based on estimates, assumptions and projections. Examples of such forward-looking statements include statements relating to: the Company’s expectations concerning market and other conditions and their effect on future premiums, revenues, earnings and investment activities; recoverability of asset values; expected losses and the adequacy of reserves for long-term care, asbestos, environmental pollution and mass tort claims; rate changes; and improved loss experience.

Actual results and/or financial condition could differ materially from those contained in or implied by such forward-looking statements for a variety of reasons including but not limited to: changes in financial, political and economic conditions, including changes in interest and inflation rates, currency fluctuations and extended economic recessions or expansions in the U.S. and/or abroad; performance of securities markets; AFG’s ability to estimate accurately the likelihood, magnitude and timing of any losses in connection with investments in the non-agency residential mortgage market; new legislation or declines in credit quality or credit ratings that could have a material impact on the valuation of securities in AFG’s investment portfolio; the availability of capital; regulatory actions (including changes in statutory accounting rules); changes in the legal environment affecting AFG or its customers; tax law and accounting changes; levels of natural catastrophes and severe weather, terrorist activities (including any nuclear, biological, chemical or radiological events), incidents of war or losses resulting from civil unrest and other major losses; development of insurance loss reserves and establishment of other reserves, particularly with respect to amounts associated with asbestos and environmental claims and AFG’s run-off long-term care business; availability of reinsurance and ability of reinsurers to pay their obligations; the unpredictability of possible future litigation if certain settlements of current litigation do not become effective; trends in persistency, mortality and morbidity; competitive pressures, including those in the annuity distribution channels, the ability to obtain adequate rates and policy terms; changes in AFG’s credit ratings or the financial strength ratings assigned by major ratings agencies to our operating subsidiaries; and other factors identified in our filings with the Securities and Exchange Commission.

The forward-looking statements herein are made only as of the date of this press release. The Company assumes no obligation to publicly update any forward-looking statements.

Conference Call

The Company will hold a conference call to discuss 2013 second quarter results at 11:30 a.m. (ET) tomorrow, Tuesday, July 30, 2013. Toll-free telephone access will be available by dialing 1-888-892-6137 (international dial-in 706-758-4386). The conference ID for the live call is 14408747. Please dial in five to ten minutes prior to the scheduled start time of the call.

 

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A replay will be available two hours following the completion of the call and will remain available until 11:59 p.m. (ET) on August 6, 2013. To listen to the replay, dial 1-800-585-8367 (international dial-in 404-537-3406) and provide the conference ID 14408747. The conference call and accompanying webcast slides will also be broadcast live over the Internet. To listen to the call via the Internet, go to the Investor Relations page on AFG’s website, www.AFGinc.com, and follow the instructions at the Webcasts and Presentations link. The archived webcast will be available immediately after the call via the same link on the Investor Relations page until August 6, 2013 at 11:59 p.m. (ET). An archived audio MP3 file will be available within 24 hours of the call.

 

Contact:		Diane P. Weidner		Websites:
		Asst. Vice President – Investor Relations		www.AFGinc.com
		(513) 369-5713		www.GreatAmericanInsuranceGroup.com
				www.GAFRI.com

-o0o-

(Financial summaries follow)

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

AFG13-10

 

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AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES

SUMMARY OF EARNINGS AND SELECTED BALANCE SHEET DATA

(In Millions, Except Per Share Data)

 

		Three months ended June  30,								Six months ended June 30,
		2013				2012(b)				2013				2012(b)
Revenues
P&C insurance net earned premiums		$	709			$	640			$	1,396			$	1,243
Life, accident & health net earned premiums			28				105				58				210
Net investment income			332				329				658				646
Realized gains			41				15				98				59
Income (loss) of managed investment entities:
Investment income			32				32				66				61
Loss on change in fair value of assets/liabilities			(28	)			(21	)			(36	)			(50	)
Other income			25				24				47				42
Total revenues			1,139				1,124				2,287				2,211
Costs and expenses
P&C insurance losses & expenses			690				595				1,334				1,150
Annuity, life, accident & health benefits & expenses			210				276				420				541
Interest charges on borrowed money			18				19				36				38
Expenses of managed investment entities			24				20				46				39
Other expenses			71				78				150				161
Total costs and expenses			1,013				988				1,986				1,929
Earnings before income taxes			126				136				301				282
Provision for income taxes(c)			49				52				111				110
Net earnings including noncontrolling interests			77				84				190				172
Less: Net earnings (loss) attributable to noncontrolling interests			(33	)			(15	)			(40	)			(40	)
Net earnings attributable to shareholders		$	110			$	99			$	230			$	212
Diluted Earnings per Common Share		$	1.20			$	1.01			$	2.52			$	2.15
Average number of diluted shares			91.5				98.0				91.3				98.7

 

Selected Balance Sheet Data:		June 30, 2013				December 31, 2012
Total cash and investments		$	29,262			$	28,449
Long-term debt		$	949			$	953
Shareholders’ equity(d)		$	4,473			$	4,578
Shareholders’ equity (excluding appropriated retained earnings and unrealized gains/losses on fixed maturities)(d)		$	3,978			$	3,784
Book Value Per Share:
Excluding appropriated retained earnings		$	49.98			$	50.61
Excluding appropriated retained earnings and unrealized gains/losses on fixed maturities		$	44.78			$	42.52
Common Shares Outstanding			88.8				89.0

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

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AMERICAN FINANCIAL GROUP, INC.

SPECIALTY P&C OPERATIONS

(Dollars in Millions)

 

		Three months ended June  30,								Pct. Change				Six months ended June 30,								Pct. Change
		2013				2012								2013				2012
Gross written premiums		$	1,041			$	1,024				2	%		$	1,966			$	1,847				6	%
Net written premiums		$	749			$	732				2	%		$	1,453			$	1,339				9	%
Ratios (GAAP):
Loss & LAE ratio			60.3	%			55.7	%							58.4	%			56.3	%
Underwriting expense ratio			36.7	%			36.1	%							36.6	%			35.6	%
Combined Ratio			97.0	%			91.8	%							95.0	%			91.9	%
Supplemental Information:(e)
Gross Written Premiums:
Property & Transportation		$	446			$	531				(16	%)		$	798			$	859				(7	%)
Specialty Casualty			440				358				23	%			870				724				20	%
Specialty Financial			155				134				16	%			298				263				13	%
Other			—				1				—				—				1				—
		$	1,041			$	1,024				2	%		$	1,966			$	1,847				6	%
Net Written Premiums:
Property & Transportation		$	328			$	369				(11	%)		$	604			$	619				(2	%)
Specialty Casualty			283				244				16	%			578				491				18	%
Specialty Financial			117				102				15	%			230				195				18	%
Other			21				17				24	%			41				34				21	%
		$	749			$	732				2	%		$	1,453			$	1,339				9	%
Combined Ratio (GAAP):
Property & Transportation			110.3	%			98.1	%							103.5	%			94.0	%
Specialty Casualty			88.4	%			86.1	%							90.5	%			91.8	%
Specialty Financial			86.6	%			88.5	%							87.6	%			86.6	%
Aggregate Specialty Group			97.0	%			91.8	%							95.0	%			91.9	%

 

		Three months ended June 30,								Six months ended June  30,
		2013				2012				2013				2012
Reserve Development (Favorable)/Unfavorable:
Property & Transportation		$	3			$	(2	)		$	(3	)		$	(12	)
Specialty Casualty			(22	)			(27	)			(38	)			(28	)
Specialty Financial			—				(4	)			(6	)			(11	)
Other			(5	)			(1	)			(10	)			(2	)
		$	(24	)		$	(34	)		$	(57	)		$	(53	)
Points on Combined Ratio:
Property & Transportation			1.2				(0.5	)			(0.4	)			(2.1	)
Specialty Casualty			(8.0	)			(11.3	)			(7.1	)			(6.2	)
Specialty Financial			(0.7	)			(3.6	)			(2.8	)			(5.4	)
Aggregate Specialty Group			(3.4	)			(5.3	)			(4.1	)			(4.3	)

Footnote (e) is contained in the accompanying Notes To Financial Schedules at the end of this release

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AMERICAN FINANCIAL GROUP, INC.

ANNUITY SEGMENT

(Dollars in Millions)

Components of Statutory Premiums

 

		Three months ended June  30,								Pct. Change				Six months ended June 30,								Pct. Change
		2013				2012								2013				2012
Annuity Premiums:
Retail Single Premium		$	509			$	565				(10	%)		$	869			$	1,016				(14	%)
Financial Institutions Single Premium			287				259				11	%			481				534				(10	%)
Education Market—403(b)			52				64				(19	%)			107				126				(15	%)
Variable Annuities			13				17				(24	%)			28				32				(13	%)
Total Annuity Premiums		$	861			$	905				(5	%)		$	1,485			$	1,708				(13	%)

Components of Core Operating Earnings Before Income Taxes

 

		Three months ended June  30,								Pct. Change				Six months ended June  30,								Pct. Change
		2013				2012								2013				2012
Revenues:
Net investment income Other income		$	257 15			$	245 12				5 25	%  %		$	505 29			$	473 25				7 16	%  %
Total revenues			272				257				6	%			534				498				7	%
Costs and Expenses:
Annuity benefits			120				147				(18	%)			254				277				(8	%)
Acquisition expenses			48				31				55	%			79				60				32	%
Other expenses			22				20				10	%			43				42				2	%
Total costs and expenses			190				198				(4	%)			376				379				(1	%)
Core operating earnings before income taxes		$	82			$	59				39	%		$	158			$	119				33	%

Supplemental Fixed Annuity Information*

 

		Three months ended June 30,								Six months ended June 30,
		2013				2012				2013				2012
Average Fixed Annuity Reserves		$	18,151			$	16,173			$	17,829			$	15,841
Net Interest Spread			3.02	%			3.16	%			3.00	%			3.02	%
Net Spread Earned			1.65	%			1.42	%			1.61	%			1.42	%

 

*	Excludes fixed annuity portion of variable annuity business.

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AMERICAN FINANCIAL GROUP, INC.

Notes To Financial Schedules

 

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

 

		Three months ended June  30,								Six months ended June  30,
		2013				2012				2013				2012
Core Operating Earnings before Income Taxes:
P&C insurance segment Annuity segment		$	82 82			$	103 59			$	178 158			$	203 119
Run-off long-term care and life segment			(2	)			5				(3	)			6
Medicare supp and critical illness segment*			—				12				—				18
Interest & other corporate expense			(39	)			(42	)			(84	)			(82	)
Core operating earnings before income taxes			123				137				249				264
Related income taxes			36				47				78				89
Core net operating earnings		$	87			$	90			$	171			$	175

 

*	Medicare supplement and critical illness businesses were sold in August 2012.

 

b)	Certain reclassifications have been made to conform to the current year’s presentation.

 

c)

Earnings before income taxes includes $31 million and $42 million in non-deductible losses attributable to noncontrolling interests related to managed investment entities in the second quarter and first six months of 2013, respectively, and $18 million and $46 million in the second quarter and first six months of 2012, respectively.

 

d)

Shareholders’ Equity at June 30, 2013 includes $462 million ($5.20 per share) in unrealized after-tax gains on fixed maturities and $33 million ($0.38 per share) of retained earnings appropriated to managed investment entities. Shareholder’s Equity at December 31, 2012 includes $719 million ($8.09 per share) in unrealized after-tax gains on fixed maturities and $75 million ($0.84 per share) of retained earnings appropriated to managed investment entities. The appropriated retained earnings will ultimately inure to the benefit of the debt holders of the investment entities managed by AFG.

 

e)	Supplemental Notes:

 

•

Property & Transportation includes primarily physical damage and liability coverage for buses, trucks and recreational vehicles, inland and ocean marine, agricultural-related products and other property coverages.

 

•

Specialty Casualty includes primarily excess and surplus, general liability, executive liability, umbrella and excess liability, customized programs for small to mid-sized businesses and workers’ compensation insurance.

 

•

Specialty Financial includes risk management insurance programs for leasing and financing institutions (including collateral and lender-placed insurance), surety and fidelity products and trade credit insurance.

 

•

Other includes an internal reinsurance facility.

Exhibit 99.2

 

		American Financial Group, Inc.
		Investor Supplement—Second Quarter 2013
		July 29, 2013
		American Financial Group, Inc. Corporate Headquarters Great American Insurance Group Tower 301 E Fourth Street Cincinnati, OH 45202 513 579 6739

---

American Financial Group, Inc. Table of Contents—Investor Supplement—Second Quarter 2013

 

Section		Page
Table of Contents—Investor Supplement—Second Quarter 2013			2
Financial Highlights			3
Summary of Earnings			4
Earnings Per Share Summary			5
Property and Casualty Insurance Segment
Property and Casualty Insurance—Summary Underwriting Results (GAAP)			6
Specialty—Underwriting Results (GAAP)			7
Property and Transportation—Underwriting Results (GAAP)			8
Specialty Casualty—Underwriting Results (GAAP)			9
Specialty Financial—Underwriting Results (GAAP)			10
Other Specialty—Underwriting Results (GAAP)			11
Annuity Segment
Annuity Results of Operations (GAAP)			12
Net Spread on Fixed Annuities (GAAP)			13
Annuity Premiums (Statutory)			14
Fixed Annuity Benefits Accumulated (GAAP)			15
Consolidated Balance Sheet / Book Value / Debt
Consolidated Balance Sheet			16
Book Value Per Share and Price / Book Summary			17
Capitalization			18
Additional Supplemental Information			19
Consolidated Investment Supplement
Total Cash and Investments and Quarterly Net Investment Income			20
Fixed Maturities—By Security Type—AFG Consolidated			21
Fixed Maturities—By Security Type Portfolio			22
Fixed Maturities—Credit Rating and NAIC Designation			23
Mortgage-Backed Securities—AFG Consolidated			24
Mortgage-Backed Securities Portfolio			25
Mortgage-Backed Securities—Credit Rating and NAIC Designation			26

 

2

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

 

		Three Months Ended																				Six Months Ended
		06/30/13				03/31/13				12/31/12				09/30/12				06/30/12				06/30/13				06/30/12
Highlights
Core net operating earnings		$	87			$	84			$	61			$	78			$	90			$	171			$	175
Net earnings			110				120				50				226				99				230				212
Total assets			39,414				39,139				39,171				39,633				37,052				39,414				37,052
Adjusted shareholders’ equity (a)			3,978				3,950				3,784				3,881				3,869				3,978				3,869
Property and Casualty net written premiums			749				704				702				908				732				1,453				1,339
Annuity statutory premiums			861				624				560				723				905				1,485				1,708
Per share data
Core net operating earnings per share		$	0.96			$	0.92			$	0.67			$	0.82			$	0.91			$	1.88			$	1.77
Diluted earnings per share			1.20				1.32				0.54				2.39				1.01				2.52				2.15
Adjusted book value per share (a)			44.78				43.94				42.52				42.72				40.74				44.78				40.74
Cash dividends per common share			0.1950				0.1950				0.4450				0.1750				0.1750				0.3900				0.3500
Financial ratios
Annualized core operating return on equity (a)			8.9	%			8.6	%			6.4	%			8.0	%			9.2	%			8.8	%			9.1	%
Annualized return on equity (a)			11.1	%			12.4	%			5.2	%			23.4	%			10.2	%			11.8	%			11.1	%
Property and Casualty combined ratio—Specialty:
Loss & LAE ratio			60.3	%			56.5	%			72.9	%			68.2	%			55.7	%			58.4	%			56.3	%
Underwriting expense ratio			36.7	%			36.6	%			25.1	%			30.0	%			36.1	%			36.6	%			35.6	%
Combined ratio—Specialty			97.0	%			93.1	%			98.0	%			98.2	%			91.8	%			95.0	%			91.9	%
Net spread on fixed annuities:
Net interest spread			3.02	%			2.99	%			3.18	%			3.25	%			3.16	%			3.00	%			3.02	%
Net spread earned			1.65	%			1.58	%			1.49	%			1.57	%			1.42	%			1.61	%			1.42	%

 

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

 

3

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

 

		Three Months Ended																				Six Months Ended
		06/30/13				03/31/13				12/31/12				09/30/12				06/30/12				06/30/13				06/30/12
Property and Casualty Insurance
Underwriting profit		$	19			$	43			$	10			$	15			$	45			$	62			$	93
Net investment income			65				66				69				67				69				131				139
Other expense			(2	)			(13	)			(10	)			(11	)			(11	)			(15	)			(29	)
Property and Casualty Insurance operating earnings			82				96				69				71				103				178				203
Annuity earnings			82				76				68				69				59				158				119
Run-off Long-Term Care and Life earnings / (loss)			(2	)			(1	)			(12	)			2				5				(3	)			6
Medicare Supplement and Critical Illness earnings (a)			—				—				—				10				12				—				18
Interest expense of parent holding companies			(17	)			(17	)			(17	)			(19	)			(18	)			(34	)			(35	)
Other expense			(22	)			(28	)			(25	)			(18	)			(24	)			(50	)			(47	)
Pre-tax core operating earnings			123				126				83				115				137				249				264
Income tax expense			36				42				22				37				47				78				89
Core net operating earnings			87				84				61				78				90				171				175
Non-core items, net of tax:
Gain on sale of Medicare Supplement and Critical Illness			—				—				13				101				—				—				—
Other realized gains			26				36				36				55				9				62				37
Long-Term Care reserve charge			—				—				(99	)			—				—				—				—
Significant A&E charges:
Property and Casualty Insurance run-off operations			—				—				—				(20	)			—				—				—
Former Railroad and Manufacturing operations			—				—				—				(1	)			—				—				—
AFG tax case and settlement of open years			—				—				39				28				—				—				—
ELNY guaranty fund assessments (b)			(3	)			—				—				—				—				(3	)			—
Other			—				—				—				(15	)			—				—				—
Net earnings		$	110			$	120			$	50			$	226			$	99			$	230			$	212

 

(a)	Medicare Supplement and Critical Illness operations were sold August 2012.

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

 

4

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

 

		Three Months Ended																				Six Months Ended
		06/30/13				03/31/13				12/31/12				09/30/12				06/30/12				06/30/13				06/30/12
Core net operating earnings		$	87			$	84			$	61			$	78			$	90			$	171			$	175
Net earnings		$	110			$	120			$	50			$	226			$	99			$	230			$	212
Average number of diluted shares			91.472				91.048				91.413				94.625				98.004				91.260				98.690
Diluted earnings per share:
Core net operating earnings per share		$	0.96			$	0.92			$	0.67			$	0.82			$	0.91			$	1.88			$	1.77
Gain on sale of Medicare Supplement and Critical Illness			—				—				0.15				1.07				—				—				—
Other realized gains			0.28				0.40				0.37				0.59				0.10				0.68				0.38
Long-Term Care reserve charge			—				—				(1.08	)			—				—				—				—
Significant A&E charges:
Property and Casualty Insurance run-off operations			—				—				—				(0.22	)			—				—				—
Former Railroad and Manufacturing operations			—				—				—				(0.01	)			—				—				—
AFG tax case and settlement of open years			—				—				0.43				0.30				—				—				—
ELNY guaranty fund assessments (a)			(0.04	)			—				—				—				—				(0.04	)			—
Other			—				—				—				(0.16	)			—				—				—
Diluted earnings per share		$	1.20			$	1.32			$	0.54			$	2.39			$	1.01			$	2.52			$	2.15

 

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

 

5

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

 

		Three Months Ended																				Six Months Ended
		06/30/13				03/31/13				12/31/12				09/30/12				06/30/12				06/30/13				06/30/12
Property and Transportation		$	(31	)		$	10			$	(14	)		$	—			$	6			$	(21	)		$	33
Specialty Casualty			32				19				8				8				33				51				37
Specialty Financial			15				13				16				1				11				28				27
Other Specialty			5				6				5				7				2				11				3
Underwriting profit—Specialty			21				48				15				16				52				69				100
Other charges, included in loss and LAE			2				5				5				1				7				7				7
Underwriting profit—Core			19				43				10				15				45				62				93
Special A&E charges, included in loss and LAE			—				—				—				(31	)			—				—				—
Underwriting profit (loss)—Property and Casualty Insurance		$	19			$	43			$	10			$	(16	)		$	45			$	62			$	93
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	1			$	—			$	9			$	—			$	—			$	1			$	—
Catastrophe loss			18				10				24				4				6				28				9
Total current accident year catastrophe losses		$	19			$	10			$	33			$	4			$	6			$	29			$	9
Loss reserve development (favorable) / adverse		$	(22	)		$	(28	)		$	(7	)		$	23			$	(27	)		$	(50	)		$	(46	)
Combined ratio:
Property and Transportation			110.3	%			96.5	%			103.7	%			99.8	%			98.1	%			103.5	%			94.0	%
Specialty Casualty			88.4	%			92.7	%			96.8	%			96.7	%			86.1	%			90.5	%			91.8	%
Specialty Financial			86.6	%			88.5	%			84.9	%			98.8	%			88.5	%			87.6	%			86.6	%
Other Specialty			74.0	%			71.1	%			70.0	%			68.4	%			86.0	%			72.6	%			89.2	%
Combined ratio—Specialty			97.0	%			93.1	%			98.0	%			98.2	%			91.8	%			95.0	%			91.9	%
Other core charges			0.2	%			0.7	%			0.7	%			0.0	%			1.1	%			0.5	%			0.6	%
Special A&E charges			0.0	%			0.0	%			0.0	%			3.7	%			0.0	%			0.0	%			0.0	%
Combined ratio			97.2	%			93.8	%			98.7	%			101.9	%			92.9	%			95.5	%			92.5	%
Loss and LAE components—property and casualty insurance
Current accident year, excluding catastrophe loss			61.1	%			59.8	%			71.2	%			68.7	%			60.2	%			60.4	%			59.9	%
Prior accident year development			(3.2	%)			(4.1	%)			(0.8	%)			2.6	%			(4.2	%)			(3.6	%)			(3.7	%)
Current accident year catastrophe loss			2.6	%			1.5	%			3.2	%			0.6	%			0.8	%			2.1	%			0.7	%
Loss and LAE ratio			60.5	%			57.2	%			73.6	%			71.9	%			56.8	%			58.9	%			56.9	%

 

6

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

 

		Three Months Ended																				Six Months Ended
		06/30/13				03/31/13				12/31/12				09/30/12				06/30/12				06/30/13				06/30/12
Gross written premiums		$	1,041			$	925			$	965			$	1,509			$	1,024			$	1,966			$	1,847
Ceded reinsurance premiums			(292	)			(221	)			(263	)			(601	)			(292	)			(513	)			(508	)
Net written premiums			749				704				702				908				732				1,453				1,339
Change in unearned premiums			(40	)			(17	)			54				(60	)			(92	)			(57	)			(96	)
Net earned premiums			709				687				756				848				640				1,396				1,243
Loss and LAE			428				388				551				578				356				816				700
Underwriting expense			260				251				190				254				232				511				443
Underwriting profit		$	21			$	48			$	15			$	16			$	52			$	69			$	100
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	1			$	—			$	9			$	—			$	—			$	1			$	—
Catastrophe loss			18				10				24				4				6				28				9
Total current accident year catastrophe losses		$	19			$	10			$	33			$	4			$	6			$	29			$	9
Loss reserve development (favorable) / adverse		$	(24	)		$	(33	)		$	(12	)		$	(9	)		$	(34	)		$	(57	)		$	(53	)
Combined ratio:
Loss and LAE ratio			60.3	%			56.5	%			72.9	%			68.2	%			55.7	%			58.4	%			56.3	%
Underwriting expense ratio			36.7	%			36.6	%			25.1	%			30.0	%			36.1	%			36.6	%			35.6	%
Combined ratio			97.0	%			93.1	%			98.0	%			98.2	%			91.8	%			95.0	%			91.9	%
Loss and LAE components:
Current accident year, excluding catastrophe loss			61.1	%			59.8	%			71.2	%			68.7	%			60.2	%			60.4	%			59.9	%
Prior accident year development			(3.4	%)			(4.8	%)			(1.5	%)			(1.1	%)			(5.3	%)			(4.1	%)			(4.3	%)
Current accident year catastrophe loss			2.6	%			1.5	%			3.2	%			0.6	%			0.8	%			2.1	%			0.7	%
Loss and LAE ratio			60.3	%			56.5	%			72.9	%			68.2	%			55.7	%			58.4	%			56.3	%

 

7

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

 

		Three Months Ended																				Six Months Ended
		06/30/13				03/31/13				12/31/12				09/30/12				06/30/12				06/30/13				06/30/12
Gross written premiums		$	446			$	352			$	431			$	981			$	531			$	798			$	859
Ceded reinsurance premiums			(118	)			(76	)			(116	)			(442	)			(162	)			(194	)			(240	)
Net written premiums			328				276				315				539				369				604				619
Change in unearned premiums			(27	)			17				68				(52	)			(79	)			(10	)			(66	)
Net earned premiums			301				293				383				487				290				594				553
Loss and LAE			236				192				340				371				196				428				351
Underwriting expense			96				91				57				116				88				187				169
Underwriting profit (loss)		$	(31	)		$	10			$	(14	)		$	—			$	6			$	(21	)		$	33
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	1			$	—			$	8			$	—			$	—			$	1			$	—
Catastrophe loss			17				10				20				2				4				27				5
Total current accident year catastrophe losses		$	18			$	10			$	28			$	2			$	4			$	28			$	5
Loss reserve development (favorable) / adverse		$	3			$	(6	)		$	(2	)		$	(2	)		$	(2	)		$	(3	)		$	(12	)
Combined ratio:
Loss and LAE ratio			78.5	%			65.4	%			88.9	%			76.1	%			67.6	%			72.1	%			63.4	%
Underwriting expense ratio			31.8	%			31.1	%			14.8	%			23.7	%			30.5	%			31.4	%			30.6	%
Combined ratio			110.3	%			96.5	%			103.7	%			99.8	%			98.1	%			103.5	%			94.0	%
Loss and LAE components:
Current accident year, excluding catastrophe loss			71.6	%			64.0	%			84.3	%			76.0	%			66.7	%			67.9	%			64.7	%
Prior accident year development			1.2	%			(2.0	%)			(0.5	%)			(0.5	%)			(0.5	%)			(0.4	%)			(2.1	%)
Current accident year catastrophe loss			5.7	%			3.4	%			5.1	%			0.6	%			1.4	%			4.6	%			0.8	%
Loss and LAE ratio			78.5	%			65.4	%			88.9	%			76.1	%			67.6	%			72.1	%			63.4	%

 

8

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

 

		Three Months Ended																				Six Months Ended
		06/30/13				03/31/13				12/31/12				09/30/12				06/30/12				06/30/13				06/30/12
Gross written premiums		$	440			$	430			$	384			$	376			$	358			$	870			$	724
Ceded reinsurance premiums			(157	)			(135	)			(126	)			(133	)			(114	)			(292	)			(233	)
Net written premiums			283				295				258				243				244				578				491
Change in unearned premiums			(6	)			(36	)			(9	)			—				(8	)			(42	)			(35	)
Net earned premiums			277				259				249				243				236				536				456
Loss and LAE			148				148				165				155				117				296				261
Underwriting expense			97				92				76				80				86				189				158
Underwriting profit		$	32			$	19			$	8			$	8			$	33			$	51			$	37
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	—			$	—			$	—			$	—			$	—			$	—			$	—
Catastrophe loss			—				—				1				1				1				—				1
Total current accident year catastrophe losses		$	—			$	—			$	1			$	1			$	1			$	—			$	1
Loss reserve development (favorable) / adverse		$	(22	)		$	(16	)		$	7			$	3			$	(27	)		$	(38	)		$	(28	)
Combined ratio:
Loss and LAE ratio			53.4	%			57.3	%			65.9	%			63.8	%			49.9	%			55.3	%			57.3	%
Underwriting expense ratio			35.0	%			35.4	%			30.9	%			32.9	%			36.2	%			35.2	%			34.5	%
Combined ratio			88.4	%			92.7	%			96.8	%			96.7	%			86.1	%			90.5	%			91.8	%
Loss and LAE components:
Current accident year, excluding catastrophe loss			61.2	%			63.5	%			62.5	%			62.3	%			61.0	%			62.3	%			63.3	%
Prior accident year development			(8.0	%)			(6.2	%)			3.0	%			1.2	%			(11.3	%)			(7.1	%)			(6.2	%)
Current accident year catastrophe loss			0.2	%			0.0	%			0.4	%			0.3	%			0.2	%			0.1	%			0.2	%
Loss and LAE ratio			53.4	%			57.3	%			65.9	%			63.8	%			49.9	%			55.3	%			57.3	%

 

9

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

 

		Three Months Ended																				Six Months Ended
		06/30/13				03/31/13				12/31/12				09/30/12				06/30/12				06/30/13				06/30/12
Gross written premiums		$	155			$	143			$	151			$	152			$	134			$	298			$	263
Ceded reinsurance premiums			(38	)			(30	)			(43	)			(44	)			(32	)			(68	)			(68	)
Net written premiums			117				113				108				108				102				230				195
Change in unearned premiums			(4	)			3				(4	)			(8	)			(4	)			(1	)			6
Net earned premiums			113				116				104				100				98				229				201
Loss and LAE			37				42				40				46				36				79				71
Underwriting expense			61				61				48				53				51				122				103
Underwriting profit		$	15			$	13			$	16			$	1			$	11			$	28			$	27
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	—			$	—			$	1			$	—			$	—			$	—			$	—
Catastrophe loss			1				—				2				1				—				1				2
Total current accident year catastrophe losses		$	1			$	—			$	3			$	1			$	—			$	1			$	2
Loss reserve development (favorable) / adverse		$	—			$	(6	)		$	(13	)		$	(5	)		$	(4	)		$	(6	)		$	(11	)
Combined ratio:
Loss and LAE ratio			32.9	%			35.8	%			38.2	%			46.7	%			35.8	%			34.4	%			35.1	%
Underwriting expense ratio			53.7	%			52.7	%			46.7	%			52.1	%			52.7	%			53.2	%			51.5	%
Combined ratio			86.6	%			88.5	%			84.9	%			98.8	%			88.5	%			87.6	%			86.6	%
Loss and LAE components:
Current accident year, excluding catastrophe loss			32.9	%			40.3	%			48.2	%			51.5	%			39.4	%			36.7	%			39.2	%
Prior accident year development			(0.7	%)			(4.8	%)			(12.1	%)			(5.5	%)			(3.6	%)			(2.8	%)			(5.4	%)
Current accident year catastrophe loss			0.7	%			0.3	%			2.1	%			0.7	%			0.0	%			0.5	%			1.3	%
Loss and LAE ratio			32.9	%			35.8	%			38.2	%			46.7	%			35.8	%			34.4	%			35.1	%

 

10

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

 

		Three Months Ended																				Six Months Ended
		06/30/13				03/31/13				12/31/12				09/30/12				06/30/12				06/30/13				06/30/12
Gross written premiums		$	—			$	—			$	(1	)		$	—			$	1			$	—			$	1
Ceded reinsurance premiums			21				20				22				18				16				41				33
Net written premiums			21				20				21				18				17				41				34
Change in unearned premiums			(3	)			(1	)			(1	)			—				(1	)			(4	)			(1	)
Net earned premiums			18				19				20				18				16				37				33
Loss and LAE			7				6				6				6				7				13				17
Underwriting expense			6				7				9				5				7				13				13
Underwriting profit		$	5			$	6			$	5			$	7			$	2			$	11			$	3
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	—			$	—			$	—			$	—			$	—			$	—			$	—
Catastrophe loss			—				—				1				—				1				—				1
Total current accident year catastrophe losses		$	—			$	—			$	1			$	—			$	1			$	—			$	1
Loss reserve development (favorable) / adverse		$	(5	)		$	(5	)		$	(4	)		$	(5	)		$	(1	)		$	(10	)		$	(2	)
Combined ratio:
Loss and LAE ratio			35.1	%			33.7	%			32.7	%			31.6	%			48.5	%			34.4	%			51.8	%
Underwriting expense ratio			38.9	%			37.4	%			37.3	%			36.8	%			37.5	%			38.2	%			37.4	%
Combined ratio			74.0	%			71.1	%			70.0	%			68.4	%			86.0	%			72.6	%			89.2	%

 

11

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American Financial Group, Inc. Annuity Results of Operations (GAAP) ($ in millions)

 

		Three Months Ended																				Six Months Ended
		06/30/13				03/31/13				12/31/12				09/30/12				06/30/12				06/30/13				06/30/12
Net investment income		$	257			$	248			$	254			$	249			$	245			$	505			$	473
Guaranteed withdrawal benefit fees			6				5				5				4				3				11				5
Policy charges and other miscellaneous income			9				9				8				10				9				18				20
Total revenues			272				262				267				263				257				534				498
Annuity benefits			120				134				124				140				147				254				277
Acquisition expenses			48				31				58				32				31				79				60
Other expenses			22				21				17				22				20				43				42
Total costs and expenses			190				186				199				194				198				376				379
Earnings before income taxes—core			82				76				68				69				59				158				119
ELNY guaranty fund assessments (a)			(5	)			—				—				—				—				(5	)			—
Earnings before income taxes		$	77			$	76			$	68			$	69			$	59			$	153			$	119
Detail of annuity benefits above:
Interest credited—fixed		$	111			$	109			$	109			$	107			$	112			$	220			$	222
Interest credited—fixed component of variable annuities			1				2				2				2				1				3				3
Change in expected death and annuitization reserve			6				4				5				5				5				10				9
Amortization of sales inducements			8				7				9				8				7				15				15
Guaranteed withdrawal benefit reserve			10				8				5				4				3				18				5
Change in other benefit reserves			3				1				(1	)			4				1				4				2
Embedded derivative mark-to-market			(3	)			80				1				40				(3	)			77				57
Equity option mark-to-market			(16	)			(77	)			—				(30	)			21				(93	)			(36	)
Unlockings			—				—				(6	)			—				—				—				—
Total annuity benefits		$	120			$	134			$	124			$	140			$	147			$	254			$	277

 

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

 

12

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

 

		Three Months Ended																				Six Months Ended
		06/30/13				03/31/13				12/31/12				09/30/12				06/30/12				06/30/13				06/30/12
Average fixed annuity investments (at amortized cost)		$	18,615			$	17,945			$	17,485			$	16,994			$	16,373			$	18,280			$	16,060
Average annuity benefits accumulated			18,151				17,506				17,137				16,759				16,173				17,829				15,841
Investments in excess of annuity benefits accumulated		$	464			$	439			$	348			$	235			$	200			$	451			$	219
As % of average annuity benefits accumulated (except as noted)
Net investment income (as % of investments)			5.45	%			5.48	%			5.74	%			5.80	%			5.93	%			5.46	%			5.83	%
Interest credited			(2.43	%)			(2.49	%)			(2.56	%)			(2.55	%)			(2.77	%)			(2.46	%)			(2.81	%)
Net interest spread on fixed annuities			3.02	%			2.99	%			3.18	%			3.25	%			3.16	%			3.00	%			3.02	%
Policy charges and other miscellaneous income			0.13	%			0.14	%			0.14	%			0.16	%			0.17	%			0.14	%			0.18	%
Other annuity benefit expenses, net			(0.46	%)			(0.35	%)			(0.40	%)			(0.27	%)			(0.34	%)			(0.41	%)			(0.34	%)
Acquisition expenses			(1.00	%)			(0.69	%)			(0.85	%)			(0.72	%)			(0.69	%)			(0.85	%)			(0.71	%)
Other expenses			(0.43	%)			(0.45	%)			(0.39	%)			(0.48	%)			(0.46	%)			(0.44	%)			(0.49	%)
Change in fair value of derivatives			0.39	%			(0.06	%)			0.10	%			(0.37	%)			(0.42	%)			0.17	%			(0.24	%)
Unlockings			0.00	%			0.00	%			(0.29	%)			0.00	%			0.00	%			0.00	%			0.00	%
Net spread earned on fixed annuities—core			1.65	%			1.58	%			1.49	%			1.57	%			1.42	%			1.61	%			1.42	%
Average annuity benefits accumulated		$	18,151			$	17,506			$	17,137			$	16,759			$	16,173			$	17,829			$	15,841
Net spread earned on fixed annuities			1.65	%			1.58	%			1.49	%			1.57	%			1.42	%			1.61	%			1.42	%
Earnings on fixed annuity benefits accumulated		$	75			$	69			$	64			$	66			$	57			$	144			$	113
Investments in excess of annuity benefits accumulated		$	464			$	439			$	348			$	235			$	200			$	451			$	219
Net investment income (as % of investments)			5.45	%			5.48	%			5.74	%			5.80	%			5.93	%			5.46	%			5.83	%
Earnings on investments in excess of annuity benefits accumulated		$	6			$	6			$	5			$	3			$	3			$	12			$	6
Variable annuity earnings			1				1				(1	)			—				(1	)			2				—
Earnings before income taxes—core			82				76				68				69				59				158				119
ELNY guaranty fund assessments (a)			(5	)			—				—				—				—				(5	)			—
Earnings before income taxes		$	77			$	76			$	68			$	69			$	59			$	153			$	119

 

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

 

13

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

 

		Three Months Ended																				Six months ended
		06/30/13				03/31/13				12/31/12				09/30/12				06/30/12				06/30/13				06/30/12
Retail single premium annuities—indexed		$	472			$	333			$	305			$	417			$	531			$	805			$	940
Retail single premium annuities—fixed			37				27				35				42				34				64				76
Financial institutions single premium annuities—indexed			169				83				59				72				80				252				160
Financial institutions single premium annuities—fixed			118				111				86				127				179				229				374
Education market—403(b) fixed and indexed annuities			52				55				60				51				64				107				126
Subtotal fixed annuity premiums			848				609				545				709				888				1,457				1,676
Variable annuities			13				15				15				14				17				28				32
Total annuity premiums		$	861			$	624			$	560			$	723			$	905			$	1,485			$	1,708

 

14

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

 

		Three Months Ended																				Six Months Ended
		06/30/13				03/31/13				12/31/12				09/30/12				06/30/12				06/30/13				06/30/12
Beginning fixed annuity reserves		$	17,737			$	17,274			$	16,999			$	16,518			$	15,828			$	17,274			$	15,188
Premiums			848				609				545				709				888				1,457				1,676
Federal Home Loan Bank advances			200				—				—				—				—				200				—
Surrenders, benefits and other withdrawals			(352	)			(352	)			(355	)			(390	)			(328	)			(704	)			(652	)
Interest and other annuity benefit expenses:
Interest credited			111				109				109				107				112				220				222
Embedded derivative mark-to-market			(3	)			80				1				40				(3	)			77				57
Change in other benefit reserves			23				17				(15	)			15				21				40				27
Unlockings			—				—				(10	)			—				—				—				—
Ending fixed annuity reserves		$	18,564			$	17,737			$	17,274			$	16,999			$	16,518			$	18,564			$	16,518
Reconciliation to annuity benefits accumulated:
Ending fixed annuity reserves		$	18,564			$	17,737			$	17,274			$	16,999			$	16,518			$	18,564			$	16,518
Impact of unrealized investment gains on reserves			87				140				136				46				38				87				38
Fixed component of variable annuities			197				198				199				200				202				197				202
Annuity benefits accumulated per balance sheet		$	18,848			$	18,075			$	17,609			$	17,245			$	16,758			$	18,848			$	16,758
Annualized surrenders and other withdrawals as a % of beginning reserves			7.9	%			8.2	%			8.4	%			9.4	%			8.3	%			8.2	%			8.6	%

 

15

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

 

		06/30/13				03/31/13				12/31/12				09/30/12				06/30/12				03/31/12
Assets:
Total cash and investments		$	29,262			$	29,084			$	28,449			$	28,037			$	27,301			$	26,478
Recoverables from reinsurers			3,044				3,083				3,750				3,865				2,740				2,678
Prepaid reinsurance premiums			520				466				471				587				488				415
Agents’ balances and premiums receivable			754				649				636				750				702				550
Deferred policy acquisition costs			818				565				550				621				846				916
Assets of managed investment entities			2,973				3,285				3,225				3,102				2,825				2,952
Other receivables			422				384				539				1,168				673				625
Variable annuity assets (separate accounts)			608				614				580				577				574				601
Other assets			828				824				786				741				717				810
Goodwill			185				185				185				185				186				186
Total assets		$	39,414			$	39,139			$	39,171			$	39,633			$	37,052			$	36,211
Liabilities and Equity:
Unpaid losses and loss adjustment expenses		$	6,098			$	6,238			$	6,845			$	7,277			$	6,153			$	6,117
Unearned premiums			1,789				1,697				1,651				1,821				1,661				1,496
Annuity benefits accumulated			18,848				18,075				17,609				17,245				16,758				16,064
Life, accident and health reserves			2,017				2,021				2,059				1,699				1,750				1,739
Payable to reinsurers			367				250				475				656				396				292
Liabilities of managed investment entities			2,603				2,880				2,892				2,753				2,502				2,672
Long-term debt			949				950				953				966				1,158				931
Variable annuity liabilities (separate accounts)			608				614				580				577				574				601
Other liabilities			1,497				1,506				1,359				1,675				1,325				1,567
Total liabilities		$	34,776			$	34,231			$	34,423			$	34,669			$	32,277			$	31,479
Shareholders’ equity:
Common stock		$	89			$	90			$	89			$	91			$	95			$	97
Capital surplus			1,088				1,090				1,063				1,071				1,112				1,126
Appropriated retained earnings			33				64				75				109				127				145
Unappropriated retained earnings			2,664				2,620				2,520				2,577				2,515				2,498
Unrealized gains—fixed maturities			462				719				719				789				626				541
Unrealized gains—equities			138				146				104				132				145				164
Other comprehensive income, net of tax			(1	)			4				8				10				2				9
Total shareholders’ equity			4,473				4,733				4,578				4,779				4,622				4,580
Noncontrolling interests			165				175				170				185				153				152
Total liabilities and equity		$	39,414			$	39,139			$	39,171			$	39,633			$	37,052			$	36,211

 

16

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

 

		06/30/13				03/31/13				12/31/12				09/30/12				06/30/12				03/31/12
Shareholders’ equity		$	4,473			$	4,733			$	4,578			$	4,779			$	4,622			$	4,580
Appropriated retained earnings			(33	)			(64	)			(75	)			(109	)			(127	)			(145	)
Shareholders’ equity, excluding appropriated retained earnings			4,440				4,669				4,503				4,670				4,495				4,435
Unrealized (gains) on fixed maturities			(462	)			(719	)			(719	)			(789	)			(626	)			(541	)
Adjusted shareholders’ equity			3,978				3,950				3,784				3,881				3,869				3,894
Goodwill			(185	)			(185	)			(185	)			(185	)			(186	)			(186	)
Intangibles			(29	)			(33	)			(36	)			(39	)			(43	)			(46	)
Tangible adjusted shareholders’ equity		$	3,764			$	3,732			$	3,563			$	3,657			$	3,640			$	3,662
Common shares outstanding			88.821				89.883				88.979				90.847				94.959				97.178
Book value per share:
Excluding appropriated retained earnings (a)		$	49.98			$	51.94			$	50.61			$	51.40			$	47.34			$	45.65
Adjusted (b)			44.78				43.94				42.52				42.72				40.74				40.07
Tangible, adjusted (c)			42.38				41.52				40.04				40.26				38.34				37.69
Market capitalization
AFG’s closing common share price		$	48.91			$	47.38			$	39.52			$	37.90			$	39.23			$	38.58
Market capitalization		$	4,344			$	4,259			$	3,516			$	3,443			$	3,725			$	3,749
Price / Adjusted book value ratio			1.09				1.08				0.93				0.89				0.96				0.96

 

(a)	Excludes appropriated retained earnings.

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

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

 

17

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

 

		06/30/13				03/31/13				12/31/12				09/30/12				06/30/12				03/31/12
Direct obligations of AFG		$	840			$	840			$	840			$	840			$	830			$	600
Direct obligations of subsidiaries			89				90				93				106				308				311
Payable to subsidiary trusts			20				20				20				20				20				20
Long-term debt		$	949			$	950			$	953			$	966			$	1,158			$	931
Obligations secured by real estate			(62	)			(62	)			(62	)			(63	)			(64	)			(64	)
Debt excluding obligations secured by real estate		$	887			$	888			$	891			$	903			$	1,094			$	867
Total capital (a)		$	5,554			$	5,794			$	5,626			$	5,821			$	5,806			$	5,518
Total capital excluding obligations secured by real estate (a)			5,492				5,732				5,564				5,758				5,742				5,454
Total adjusted capital (b)		$	5,092			$	5,074			$	4,907			$	5,032			$	5,180			$	4,977
Total adjusted capital excluding obligations secured by real estate (b)			5,030				5,012				4,845				4,969				5,116				4,913
Ratio of debt to total capital (a):
Including debt secured by real estate			17.1	%			16.4	%			16.9	%			16.6	%			19.9	%			16.9	%
Excluding debt secured by real estate			16.2	%			15.5	%			16.0	%			15.7	%			19.1	%			15.9	%
Ratio of debt to total adjusted capital (b):
Including debt secured by real estate			18.6	%			18.7	%			19.4	%			19.2	%			22.4	%			18.7	%
Excluding debt secured by real estate			17.6	%			17.7	%			18.4	%			18.2	%			21.4	%			17.7	%

 

(a)	Includes long-term debt, noncontrolling interests and shareholders’ equity, excluding appropriated retained earnings.

(b)	Includes long-term debt, noncontrolling interests and shareholders’ equity, excluding appropriated retained earnings and unrealized gains related to fixed maturity investments.

 

18

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

 

		Three Months Ended																				Six months ended
		06/30/13				03/31/13				12/31/12				09/30/12				06/30/12				06/30/13				06/30/12
Property and Casualty Insurance
Paid Losses (GAAP)		$	520			$	357			$	785			$	337			$	409			$	877			$	904

 

		06/30/13				03/31/13				12/31/12				09/30/12				06/30/12				03/31/12
Statutory Surplus
Property and Casualty Insurance		$	2,096			$	2,090			$	2,015			$	2,044			$	2,052			$	2,037
AFG’s principal annuity subsidiaries (total adjusted capital)		$	1,517			$	1,483			$	1,380			$	1,275			$	1,219			$	1,183
Allowable dividends without regulatory approval
Property and Casualty Insurance		$	237			$	237			$	237			$	375			$	375			$	375
Annuity and Run-off			158				158				158				171				171				171
Total		$	395			$	395			$	395			$	546			$	546			$	546

 

19

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American Financial Group, Inc.
Total Cash and Investments and Quarterly Net Investment Income
June 30, 2013
($ in millions)

 

		Carrying Value
		Property and Casualty Insurance				Annuity and Run-off				Other				Consolidate CLOs				Total AFG Consolidated				% of Investment Portfolio
Total cash and investments:
Cash and cash equivalents		$	639			$	330			$	302			$	—			$	1,271				4	%
Fixed maturities			5,277				20,041				10				—				25,328				87	%
Equity securities			860				301				38				—				1,199				4	%
Policy loans			—				242				—				—				242				1	%
Mortgage loans			107				492				—				—				599				2	%
Real estate and other investments			332				619				8				(336	)			623				2	%
Total cash and investments		$	7,215			$	22,025			$	358			$	(336	)		$	29,262				100	%

 

		Property and Casualty Insurance				Annuity and Run-off				Other				Consolidate CLOs				Total AFG Consolidated
Total quarterly net investment income:
Fixed maturities		$	53			$	255			$	—			$	—			$	308
Equity securities			7				3				(1	)			—				9
Other investments			7				19				—				(7	)			19
Gross investment income			67				277				(1	)			(7	)			336
Investment expenses			(2	)			(2	)			—				—				(4	)
Total net investment income		$	65			$	275			$	(1	)		$	(7	)		$	332

 

		Equity Securities
										Unrealized
		Cost				Fair Value				Gain (Loss)
Annuity and Run-off		$	254			$	301			$	47
Property and Casualty Insurance			692				860				168
Other			38				38				—
Total AFG consolidated		$	984			$	1,199			$	215

 

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American Financial Group, Inc.
Fixed Maturities—By Security Type—AFG Consolidated
June 30, 2013
($ in millions )

 

																		% of
		Amortized								Unrealized				% of				Investment
		Cost				Fair Value				Gain (Loss)				Fair Value				Portfolio
US Government and government agencies		$	313			$	323			$	10				1	%			1	%
States, municipalities and political subdivisions			4,733				4,844				111				19	%			17	%
Foreign government			352				364				12				1	%			1	%
Residential mortgage-backed securities			3,862				4,166				304				16	%			14	%
Commercial mortgage-backed securities			2,631				2,858				227				11	%			10	%
Asset-backed securities			2,210				2,239				29				9	%			8	%
Corporate bonds
Manufacturing			2,196				2,317				121				9	%			8	%
Banks, lending and credit institutions			1,654				1,742				88				7	%			6	%
Gas and electric services			1,254				1,381				127				6	%			5	%
Insurance and insurance related			827				881				54				4	%			3	%
Other corporate			4,001				4,213				212				17	%			14	%
Total AFG consolidated		$	24,033			$	25,328			$	1,295				100	%			87	%
Annuity and Run-off		$	18,930			$	20,041				1,111				79	%			69	%
Property and Casualty Insurance			5,102				5,277				175				21	%			18	%
Other			1				10				9				0	%			0	%
Total AFG consolidated		$	24,033			$	25,328			$	1,295				100	%			87	%
Annualized yield on fixed maturities:
Excluding investment expense (a)			5.24	%
Net of investment expense (a)			5.18	%
Approximate average life and duration:
Approximate average life			6 years
Approximate duration			4.5 years

 

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

 

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American Financial Group, Inc.
Fixed Maturities—By Security Type Portfolio
June 30, 2013
($ in millions )

 

		Amortized								Unrealized				% of
Annuity and Run-off:		Cost				Fair Value				Gain (Loss)				Fair Value
US Government and government agencies		$	76			$	80			$	4				0	%
States, municipalities and political subdivisions			2,638				2,681				43				13	%
Foreign government			31				34				3				0	%
Residential mortgage-backed securities			3,262				3,519				257				18	%
Commercial mortgage-backed securities			2,311				2,520				209				13	%
Asset-backed securities			1,663				1,691				28				8	%
Corporate debt			8,949				9,516				567				48	%
Total Annuity and Run-off		$	18,930			$	20,041			$	1,111				100	%
Annualized yield on fixed maturities:
Excluding investment expense (a)			5.52	%
Net of investment expense (a)			5.47	%
Approximate average life and duration:
Approximate average life			6 years
Approximate duration			5 years

 

		Amortized								Unrealized				% of
Property and Casualty Insurance:		Cost				Fair Value				Gain (Loss)				Fair Value
US Government and government agencies		$	237			$	243			$	6				5	%
States, municipalities and political subdivisions			2,095				2,163				68				41	%
Foreign government			321				330				9				6	%
Residential mortgage-backed securities			599				637				38				12	%
Commercial mortgage-backed securities			320				338				18				7	%
Asset-backed securities			547				548				1				10	%
Corporate debt			983				1,018				35				19	%
Property and Casualty Insurance		$	5,102			$	5,277			$	175				100	%
Annualized yield on fixed maturities:
Excluding investment expense (a)			4.21	%
Net of investment expense (a)			4.08	%
Approximate average life and duration:
Approximate average life			4 years
Approximate duration			3 years

 

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

 

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American Financial Group, Inc.
Fixed Maturities—Credit Rating and NAIC Designation
June 30, 2013
($ in millions)

 

		GAAP Data
		Amortized								% of				Unrealized
By Credit Rating		Cost				Fair Value				Fair Value				Gain (Loss)
Investment grade
AAA		$	5,245			$	5,488				22	%		$	243
AA			4,530				4,650				18	%			120
A			6,214				6,575				26	%			361
BBB			4,690				4,977				20	%			287
Subtotal—Investment grade			20,679				21,690				86	%			1,011
BB			683				705				3	%			22
B			400				405				1	%			5
Other			2,271				2,528				10	%			257
Total		$	24,033			$	25,328				100	%		$	1,295

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

 

		Statutory Data
By NAIC		Carrying				% of Carrying				Amortized								Unrealized
Designation		Value				Value				Cost				Fair Value				Gain (Loss)
NAIC 1		$	18,312				77	%		$	18,311			$	19,320			$	1,009
NAIC 2			4,543				19	%			4,541				4,808				267
			22,855				96	%			22,852				24,128				1,276
NAIC 3			513				2	%			514				533				19
NAIC 4			298				1	%			301				305				4
NAIC 5			62				1	%			63				75				12
NAIC 6			23				0	%			23				50				27
Total		$	23,751				100	%		$	23,753			$	25,091			$	1,338

 

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American Financial Group, Inc. Mortgage-Backed Securities—AFG Consolidated June 30, 2013 ($ in millions)

 

By Asset Type		Amortized Cost				Fair Value				% of Fair Value				% of Investment Portfolio				Unrealized Gain (Loss)
Residential
Agency		$	226			$	232				3	%			1	%		$	6
Prime (Non-Agency)			1,922				2,094				30	%			7	%			172
Alt-A			828				895				13	%			3	%			67
Subprime			886				945				13	%			3	%			59
Subtotal—Residential			3,862				4,166				59	%			14	%			304
Commercial			2,631				2,858				41	%			10	%			227
Total AFG consolidated		$	6,493			$	7,024				100	%			24	%		$	531
Annuity and Run-off		$	5,573			$	6,039				86	%			21	%			466
Property and Casualty Insurance			919				975				14	%			3	%			56
Other			1				10				0	%			0	%			9
Total AFG consolidated		$	6,493			$	7,024				100	%			24	%		$	531

 

•

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

 

•

The average amortized cost as a percent of par is—Prime 82%; Alt-A 76%; Subprime 84%; CMBS 99%.

 

•

The average FICO score of our residential MBS securities is—Prime 737; Alt-A 713; Subprime 646.

 

•

97% of our Commercial MBS portfolio is investment-grade rated (81% AAA) and the average subordination for this group assets is 36%.

 

•

The approximate average life by collateral type is—Residential 3 years; Commercial 4 years.

 

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American Financial Group, Inc. Mortgage-Backed Securities Portfolio June 30, 2013 ($ in millions)

Annuity and Run-off:

 

By Asset Type		Amortized Cost				Fair Value				% of Fair Value				% of Investment Portfolio				Unrealized Gain (Loss)
Residential
Agency		$	81			$	85				2	%			0	%		$	4
Prime (Non-Agency)			1,800				1,949				32	%			9	%			149
Alt-A			683				739				12	%			3	%			56
Subprime			698				746				12	%			3	%			48
Subtotal—Residential			3,262				3,519				58	%			15	%			257
Commercial			2,311				2,520				42	%			12	%			209
Total Annuity and Run-off		$	5,573			$	6,039				100	%			27	%		$	466

Property and Casualty Insurance:

 

By Asset Type		Amortized Cost				Fair Value				% of Fair Value				% of Investment Portfolio				Unrealized Gain (Loss)
Residential
Agency		$	145			$	147				15	%			2	%		$	2
Prime (Non-Agency)			121				135				14	%			2	%			14
Alt-A			145				156				16	%			2	%			11
Subprime			188				199				20	%			3	%			11
Subtotal—Residential			599				637				65	%			9	%			38
Commercial			320				338				35	%			5	%			18
Total Property and Casualty Insurance		$	919			$	975				100	%			14	%		$	56

 

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American Financial Group, Inc. Mortgage-Backed Securities—Credit Rating and NAIC Designation June 30, 2013 ($ in millions)

 

		GAAP data
		Amortized								% of				Unrealized
By Credit Rating		Cost				Fair Value				Fair Value				Gain (Loss)
Investment grade
AAA		$	2,695			$	2,910				41	%		$	215
AA			431				456				7	%			25
A			604				634				9	%			30
BBB			266				283				4	%			17
Subtotal—investment grade			3,996				4,283				61	%			287
BB			339				346				5	%			7
B			368				373				5	%			5
Other			1,790				2,022				29	%			232
Total		$	6,493			$	7,024				100	%		$	531

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

 

		Statutory data
By NAIC Designation		Carrying Value				% of Carrying Value				Amortized Cost				Fair Value				Unrealized Gain (Loss)
NAIC 1		$	6,043				94	%		$	6,043			$	6,597			$	554
NAIC 2			162				3	%			162				160				(2	)
			6,205				97	%			6,205				6,757				552
NAIC 3			77				1	%			77				78				1
NAIC 4			95				2	%			95				97				2
NAIC 5			15				0	%			15				26				11
NAIC 6			16				0	%			17				39				22
Total		$	6,408				100	%		$	6,409			$	6,997			$	588

 

26