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): October 29, 2013

 

 

AMERICAN FINANCIAL GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Ohio		1-13653		31-1544320
(State or other jurisdiction		(Commission		(IRS Employer
of incorporation)		File Number)		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 third quarter of 2013 and the availability of the Investor Supplement on the Company’s website. The press release was issued on October 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)

Shell company transactions. Not applicable

 

(d)

Exhibits

 

Exhibit No.		Description
99.1		Earnings Release dated October 29, 2013, reporting American Financial Group Inc. third quarter results for the period ended September 30, 2013.
99.2		Investor Supplement – Third Quarter 2013

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: October 30, 2013
				By:		Karl J. Grafe
						Karl J. Grafe
						Vice President

 

2

Exhibit 99.1

American Financial Group, Inc. Announces

Third Quarter Results

 

•

Adjusted book value per share of $45.36; up 7% year-to-date

 

•

Third quarter core net operating earnings of $1.06 per share; up 29% from the prior year period

 

•

Net earnings of $0.92 per share include a $0.54 A&E charge and $0.40 in realized gains

 

•

2013 core operating earnings per share guidance increased to $4.00—$4.20, from $3.70—$4.10

Cincinnati, Ohio – October 29, 2013 – American Financial Group, Inc. (NYSE/NASDAQ: AFG) today reported 2013 third quarter net earnings attributable to shareholders of $83 million ($0.92 per share) compared to $226 million ($2.39 per share) for the 2012 third quarter. The 2013 third quarter results include an after-tax charge of $49 million ($0.54 per share) to strengthen the Company’s asbestos and environmental (“A&E”) reserves and $35 million ($0.40 per share) in after-tax realized gains. Results for the third quarter of 2012 include $148 million ($1.57 per share) in after-tax non-core earnings, primarily the result of a $101 million after-tax gain on the sale of AFG’s Medicare supplement and critical illness businesses, realized gains on securities and the results of AFG’s tax case resolution, which were offset somewhat by A&E reserve strengthening. Book value per share, excluding appropriated retained earnings and unrealized gains on fixed maturities, increased by $2.84, or 7%, to $45.36 per share during the first nine months of 2013. Including AFG’s quarterly dividend, total value creation measured as growth in book value plus dividends was $3.43 per share, or 8%, for the first nine months of the year.

Core net operating earnings were $97 million ($1.06 per share) for the 2013 third quarter, compared to $78 million ($0.82 per share) in the 2012 third quarter. Significantly higher profits in our Specialty Property and Casualty Insurance (“P&C”) operations and increased earnings from our Annuity segment were the primary drivers for the improved quarterly results. Core net operating earnings for the third quarters of 2013 and 2012 generated annualized returns on equity of 9.7% and 8.0%, respectively.

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

 

		Three months ended September 30,								Nine months ended September 30,
In millions, except per share amounts		2013				2012				2013				2012
Components of net earnings attributable to shareholders:
Core net operating earnings(a)		$	97			$	78			$	268			$	253
Non-Core Items:
Gain on sale of Med supp & critical illness businesses			—				101				—				101
Other realized gains			35				55				97				92
Special A&E charges(b)			(49	)			(21	)			(49	)			(21	)
ELNY guaranty fund assessments			—				—				(3	)			—
AFG tax case resolution			—				28				—				28
Other			—				(15	)			—				(15	)
Net earnings attributable to shareholders		$	83			$	226			$	313			$	438
Components of diluted earnings per share:
Core net operating earnings(a)		$	1.06			$	0.82			$	2.94			$	2.59
Non-Core Items:
Gain on sale of Med supp & critical illness businesses			—				1.07				—				1.04
Other realized gains			0.40				0.59				1.08				0.95
Special A&E charges(b)			(0.54	)			(0.23	)			(0.54	)			(0.22	)
ELNY guaranty fund assessments			—				—				(0.04	)			—
AFG tax case resolution			—				0.30				—				0.29
Other			—				(0.16	)			—				(0.15	)
Diluted earnings per share		$	0.92			$	2.39			$	3.44			$	4.50

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

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S. Craig Lindner and Carl H. Lindner III, AFG’s Co-Chief Executive Officers, issued this statement: “Our specialty P&C and annuity operations performed well during the third quarter, producing strong core operating earnings as we continued to grow businesses where we are achieving targeted returns. We are encouraged by the significant improvement in underwriting profitability in our P&C business and the continued positive momentum in our annuity operations, which achieved record premiums in the third quarter of 2013.

“AFG had approximately $900 million of excess capital (including parent company cash of approximately $200 million) at September 30, 2013. Our strong financial position provides the flexibility to act on strategic business opportunities with the potential to produce desired long-term returns. We will continue to evaluate opportunities to grow our business and will return value to our shareholders through opportunistic share repurchases and dividends.

“Based on results through the first nine months of 2013, we have increased our core net operating earnings guidance for 2013 to be in the range of $4.00—$4.20 per share, up from the $3.70—$4.10 estimated previously. 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 $62 million in the 2013 third quarter, compared to $16 million in the third quarter of 2012, with each of our Specialty P&C sub-segments achieving higher underwriting profitability. Losses from catastrophes were negligible during the 2013 third quarter, compared to $4 million (0.6 points on the combined ratio) in the third quarter of 2012. Results for the 2013 third quarter include $13 million (1.4 points) in favorable reserve development. By comparison, favorable reserve development in the third quarter of 2012 was $9 million (1.1 points).

Gross and net written premiums were up 17% and 18%, respectively, for the third quarter of 2013, as compared to the same period in 2012. The timing of premium recognition in our agricultural operations drove increases in gross premiums while double digit growth in our Specialty Casualty and Specialty Financial Groups were key factors impacting higher net written premiums for the quarter. Further details of AFG’s Specialty P&C operations may be found in the accompanying schedules.

The Property and Transportation Group reported an underwriting profit of $16 million in the third quarter of 2013, compared to a slight underwriting profit in the prior year period. This increase is primarily attributable to improved results in our agricultural operations and lower catastrophe losses, partially offset by lower profitability in our transportation businesses. Catastrophe losses were minimal for this group during the third quarter of 2013 as compared to $2 million (0.6 points) in the third quarter of 2012.

Gross and net written premiums in this group were 17% and 10% higher, respectively, than the comparable 2012 period. Higher crop premiums were the primary driver of the growth in the third quarter, as delayed planting and acreage reporting in the second quarter of 2013 also delayed recognition of these premiums to the third quarter of 2013. Excluding the impact of crop premiums, gross and net written premiums for this group grew by 5% and 4%, respectively, during the third quarter. Renewal pricing was up approximately 5% for the quarter following increases of 6% in the second quarter and 5% in the first quarter of 2013.

The Specialty Casualty Group reported third quarter underwriting profit of $19 million compared to an underwriting profit of $8 million in the third quarter of 2012. This increase was due primarily to higher profitability in our workers’ compensation and excess and surplus lines businesses, coupled with less adverse development in our run-off program business. Most businesses in this group produced strong underwriting profit margins through the first nine months of 2013.

 

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Gross and net written premiums were up 23% and 34%, respectively, for the third quarter of 2013 when compared to the same prior year period. While nearly all businesses in this group reported increased premium production in the third quarter, our workers’ compensation operations and excess and surplus lines were the primary sources of growth in this group. New business opportunities, increased exposures and sustained pricing increases have driven the growth in our worker’s compensation businesses. Strong premium growth in our excess and surplus operations is the result of broadening opportunities to write business coupled with the benefit from rate increases over multiple quarters. Pricing in this group was up 5% for the quarter, following 5% and 6% increases, respectively, in the second and first quarters of 2013.

The Specialty Financial Group reported an underwriting profit of $22 million in the third quarter of 2013, compared to an underwriting profit of $1 million in the third quarter of 2012. The increased profitability was due primarily to higher underwriting profits in our lender-placed mortgage property insurance business, as well as improved results in our surety and trade credit operations. Results for the third quarter of 2012 include losses from a run-off book of automotive-related business. Almost all of the businesses in this group continue to achieve excellent underwriting margins.

Gross and net written premiums were up 5% and 15%, respectively, in the 2013 third quarter when compared to the 2012 third quarter, primarily the result of growth in our financial institutions business. Renewal pricing in this group was down 1% for the third quarter and is flat on average for the first nine months of 2013.

Carl Lindner III stated: “Our continued focus on price adequacy and underwriting discipline has allowed us to achieve improved margins and profitably grow our specialty P&C businesses. I’m particularly pleased to see continued healthy pricing increases in our property and transportation and casualty businesses, allowing us to achieve an average overall renewal rate increase of approximately 4% for the quarter. Based on these results through the first nine months of the year, we have increased our 2013 net written premium guidance to be 11%-13% higher than 2012 levels and improved and narrowed our 2013 combined ratio guidance for our overall Specialty P&C Group to 91%-94%.”

Annuity Segment

AFG’s annuity operations contributed $78 million in pretax core earnings in the third quarter of 2013 compared to $69 million in the third quarter of 2012, a 13% increase. Higher pretax core earnings were primarily a result of maintaining interest spreads on a growing asset base, with AFG’s quarterly average balance of fixed annuity investments (at amortized cost) growing by 15% year-over-year. In addition, earnings in the third quarter of 2012 reflect the negative impact that sharply lower interest rates had on AFG’s fixed-indexed annuity business.

Net interest spread earned during the third quarter of 2013 decreased by 36 basis points from the prior year period due primarily to the run-off of higher yielding investments. However, the net spread earned during the third quarter of 2013 decreased only 7 basis points from the prior year period, reflecting the negative impact of sharply lower interest rates on the Company’s indexed annuity business in the 2012 third quarter.

The annuity operations reported record quarterly statutory premiums of $1.2 billion in the third quarter of 2013, an increase of 61% over the same period in 2012. This growth in premiums is a result of continued successful expansion of our distribution channels and product offerings. Management also believes that AFG has benefitted from its strong ratings, and that the entire annuity industry has benefitted from the rise in interest rates in 2013. Statutory premiums of $2.7 billion for the first nine months were up 9% from the comparable 2012 period and were bolstered by strong third quarter sales.

 

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Craig Lindner stated, “The increase in interest rates this year has provided us the opportunity to write increased premiums at favorable returns. For the first time in its history, AFG has exceeded $1 billion of annuity sales in a quarter. In addition, nine month operating earnings were record results for the annuity segment. This demonstrates the effectiveness of our long term strategy of operating our annuity business to be able to capitalize on market opportunities. The increase in earnings continues to be driven in large part by our strong premium growth over the last several years.

“Because of our performance in the third quarter 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 17% to 21% higher than the $252 million reported for the full year of 2012, up from the range of 13% to 18% previously estimated. In addition, based on the record sales during the third quarter, we now believe that statutory annuity premiums for the full year of 2013 will be 28% to 32% higher than 2012”.

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 $4 million in the third quarter of 2013 compared to pretax core operating earnings of $2 million in the comparable prior year period. This reduction in earnings is primarily the result of unexpectedly higher claims in both the life and long-term care operations.

Medicare Supplement and Critical Illness Segment

AFG’s Medicare supplement and critical illness segment contributed pretax core operating earnings of $10 million in the third quarter of 2012. These operations were sold in August 2012.

A&E Reserves

During the third quarter of 2013, AFG completed a comprehensive external study of its asbestos and environmental exposures relating to the run-off operations of its P&C group and exposures related to former railroad and manufacturing operations and sites. Such external studies have been periodically undertaken, generally every two years, with the aid of specialty actuarial and engineering firms, a specialty consultant and outside counsel. This year’s comprehensive external study resulted in a non-core after-tax special charge of $49 million ($76 million pretax) to increase AFG’s A&E reserves.

The P&C group’s asbestos reserves were increased by $16 million (net of reinsurance) and its environmental reserves were increased by $38 million (net of reinsurance). At September 30, 2013, the P&C group’s insurance reserves include A&E reserves of $341 million, net of reinsurance recoverables. At September 30, 2013, AFG’s three year survival ratios, excluding amounts associated with the settlements of two large asbestos claims, were 15.2x paid losses for asbestos reserves, 6.2x paid losses for environmental reserves and 10.4x paid losses for the total A&E reserves. These ratios compare favorably with data published by A.M. Best in October 2013, which indicate that industry A&E survival ratios were 10.0x paid losses for asbestos reserves, 5.8x paid losses for environmental reserves, and 8.8x paid losses for total A&E reserves at December 31, 2012.

As the overall industry exposure to asbestos has matured, the focus of litigation has shifted to smaller companies and companies with ancillary exposures. AFG’s insureds with these exposures have been the driver of our P&C asbestos reserve increases. The increase in P&C environmental reserves was attributed primarily to AFG’s increased defense costs and a number of claims where the estimated costs of remediation have increased. There were no newly identified or emerging broad industry trends that were identified in this study.

 

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In addition, the study encompassed reserves for asbestos and environmental exposures of our former railroad and manufacturing operations. As a result of the study, AFG increased its liabilities for these asbestos and environmental exposures by $22 million due primarily to slightly higher estimated operation and maintenance costs at sites where remediation is underway, coupled with higher estimated cleanup costs at a limited number of sites.

Investments

AFG recorded third quarter 2013 net realized gains on securities of $35 million after tax and after deferred acquisition costs (DAC), compared to $55 million in the prior year period. Unrealized gains on fixed maturities were $449 million, after tax, after DAC at September 30, 2013, a decrease of $13 million from June 30, 2013, and $270 million from year-end 2012, 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 nine months of 2013, P&C investment income was approximately 5% 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.

About American Financial Group, Inc.

American Financial Group is an insurance holding company, based in Cincinnati, Ohio with assets of approximately $40 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.

 

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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 historically difficult to estimate asbestos and environmental claims and AFG’s run-off long-term care business; availability of reinsurance and ability of reinsurers to pay their obligations; trends in persistency, mortality and morbidity; competitive pressures, including those in the annuity distribution channels, the ability to obtain adequate rates and policy terms; changes in AFG’s credit ratings or the financial strength ratings assigned by major ratings agencies to our operating subsidiaries; and other factors identified in our filings with the Securities and Exchange Commission.

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

Conference Call

The Company will hold a conference call to discuss 2013 third quarter results at 11:30 a.m. (ET) tomorrow, Wednesday, October 30, 2013. Toll-free telephone access will be available by dialing 1-877-459-8719 (international dial-in 424-276-6843). The conference ID for the live call is 76241182. Please dial in five to ten minutes prior to the scheduled start time of the call.

A replay will be available two hours following the completion of the call and will remain available until 11:59 p.m. (ET) on November 6, 2013. To listen to the replay, dial 1-855-859-2056 (international dial-in 404-537-3406) and provide the conference ID 76241182. 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 November 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

-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.

 

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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 September 30,								Nine months ended September 30,
		2013				2012(c)				2013				2012(c)
Revenues
P&C insurance net earned premiums		$	949			$	848			$	2,345			$	2,091
Life, accident & health net earned premiums			29				80				87				290
Net investment income			338				326				996				972
Realized gains			56				241				154				300
Income (loss) of managed investment entities:
Investment income			32				31				98				92
Gain (loss) on change in fair value of assets/liabilities			15				(13	)			(21	)			(63	)
Other income			24				25				71				67
Total revenues			1,443				1,538				3,730				3,749
Costs and expenses
P&C insurance losses & expenses			941				864				2,275				2,014
Annuity, life, accident & health benefits & expenses			222				252				642				793
Interest charges on borrowed money			18				19				54				57
Expenses of managed investment entities			22				19				68				58
Other expenses			98				99				248				260
Total costs and expenses			1,301				1,253				3,287				3,182
Earnings before income taxes			142				285				443				567
Provision for income taxes(d)			44				74				155				184
Net earnings including noncontrolling interests			98				211				288				383
Less: Net earnings (loss) attributable to noncontrolling interests			15				(15	)			(25	)			(55	)
Net earnings attributable to shareholders		$	83			$	226			$	313			$	438
Diluted Earnings per Common Share		$	0.92			$	2.39			$	3.44			$	4.50
Average number of diluted shares			91.0				94.6				91.2				97.4

 

		September 30,				December 31,
Selected Balance Sheet Data:		2013				2012
Total cash and investments		$	29,921			$	28,449
Long-term debt		$	913			$	953
Shareholders’ equity(e)		$	4,542			$	4,578
Shareholders’ equity (excluding appropriated retained earnings and unrealized gains/losses on fixed maturities)(e)		$	4,048			$	3,784
Book Value Per Share:
Excluding appropriated retained earnings		$	50.40			$	50.61
Excluding appropriated retained earnings and unrealized gains/losses on fixed maturities		$	45.36			$	42.52
Common Shares Outstanding			89.2				89.0

Footnotes (c), (d) and (e) 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 Sept 30,								Pct. Change				Nine months ended Sept 30,								Pct. Change
		2013				2012								2013				2012
Gross written premiums		$	1,768			$	1,509				17	%		$	3,734			$	3,356				11	%
Net written premiums		$	1,067			$	908				18	%		$	2,520			$	2,247				12	%
Ratios (GAAP):
Loss & LAE ratio			66.1	%			68.2	%							61.5	%			61.1	%
Underwriting expense ratio			27.4	%			30.0	%							32.9	%			33.3	%
Combined Ratio (Excluding A&E)			93.5	%			98.2	%							94.4	%			94.4	%
Combined Ratio			99.1	%			101.9	%							97.0	%			96.3	%
Supplemental Information:(f)
Gross Written Premiums:
Property & Transportation		$	1,147			$	981				17	%		$	1,945			$	1,840				6	%
Specialty Casualty			461				376				23	%			1,331				1,100				21	%
Specialty Financial			160				152				5	%			458				415				10	%
Other			—				—				—				—				1				—
		$	1,768			$	1,509				17	%		$	3,734			$	3,356				11	%
Net Written Premiums:
Property & Transportation		$	594			$	539				10	%		$	1,198			$	1,158				3	%
Specialty Casualty			325				243				34	%			903				734				23	%
Specialty Financial			124				108				15	%			354				303				17	%
Other			24				18				33	%			65				52				25	%
		$	1,067			$	908				18	%		$	2,520			$	2,247				12	%
Combined Ratio (GAAP):
Property & Transportation			97.1	%			99.8	%							100.4	%			96.8	%
Specialty Casualty			93.4	%			96.7	%							91.5	%			93.5	%
Specialty Financial			82.3	%			98.8	%							85.8	%			90.6	%
Aggregate Specialty Group			93.5	%			98.2	%							94.4	%			94.4	%

 

		Three months ended Sept 30,								Nine months ended Sept 30,
		2013				2012				2013				2012
Reserve Development (Favorable)/Unfavorable:
Property & Transportation		$	(1	)		$	(2	)		$	(4	)		$	(14	)
Specialty Casualty			(4	)			3				(42	)			(25	)
Specialty Financial			(4	)			(5	)			(10	)			(16	)
Other			(4	)			(5	)			(14	)			(7	)
Aggregate Specialty Group Excluding A&E			(13	)			(9	)			(70	)			(62	)
Special A&E Reserve Charge—P&C Run-off			54				31				54				31
Other			(1	)			—				6				8
Total Reserve Development Including A&E		$	40			$	22			$	(10	)		$	(23	)
Points on Combined Ratio:
Property & Transportation			(0.2	)			(0.5	)			(0.4	)			(1.3	)
Specialty Casualty			(1.2	)			1.2				(5.0	)			(3.7	)
Specialty Financial			(3.2	)			(5.5	)			(2.9	)			(5.5	)
Aggregate Specialty Group			(1.4	)			(1.1	)			(3.1	)			(3.0	)

Footnote (f) 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 Sept 30,								Pct. Change				Nine months ended Sept 30,								Pct. Change
		2013				2012								2013				2012
Annuity Premiums:
Retail Single Premium		$	557			$	459				21	%		$	1,426			$	1,475				(3	%)
Financial Institutions Single Premium			550				199				176	%			1,031				733				41	%
Education Market—403(b)			49				51				(4	%)			156				177				(12	%)
Variable Annuities			11				14				(21	%)			39				46				(15	%)
Total Annuity Premiums		$	1,167			$	723				61	%		$	2,652			$	2,431				9	%

Components of Core Operating Earnings Before Income Taxes

 

		Three months ended Sept 30,								Pct. Change				Nine months ended Sept 30,								Pct. Change
		2013				2012								2013				2012
Revenues:
Net investment income		$	259			$	249				4	%		$	764			$	722				6	%
Other income			17				14				21	%			46				39				18	%
Total revenues			276				263				5	%			810				761				6	%
Costs and Expenses:
Annuity benefits			140				140				—				394				417				(6	%)
Acquisition expenses			35				32				9	%			114				92				24	%
Other expenses			23				22				5	%			66				64				3	%
Total costs and expenses			198				194				2	%			574				573				—
Core operating earnings before income taxes		$	78			$	69				13	%		$	236			$	188				26	%

Supplemental Fixed Annuity Information^*

 

		Three months ended Sept 30,								Nine months ended Sept 30,
		2013				2012				2013				2012
Average Fixed Annuity Reserves		$	19,035			$	16,759			$	18,231			$	16,147
Net Interest Spread Net Spread Earned			2.89 1.50	%  %			3.25 1.57	%  %			2.97 1.58	%  %			3.10 1.45	%  %

 

*	Excludes fixed annuity portion of variable annuity business.

---

AMERICAN FINANCIAL GROUP, INC.

Notes To Financial Schedules

 

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

 

		Three months ended Sept 30,								Nine months ended Sept 30,
		2013				2012				2013				2012
Core Operating Earnings before Income Taxes:
P&C insurance segment		$	113			$	71			$	291			$	274
Annuity segment			78				69				236				188
Run-off long-term care and life segment			(4	)			2				(7	)			8
Medicare supp and critical illness segment*			—				10				—				28
Interest & other corporate expense			(39	)			(37	)			(123	)			(119	)
Core operating earnings before income taxes			148				115				397				379
Related income taxes			51				37				129				126
Core net operating earnings		$	97			$	78			$	268			$	253

 

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

 

b)	Reflects the following effects of special A&E charges during the first nine months of 2013 and 2012 (dollars in millions, except per share amounts):

 

		Pretax								After-tax								EPS
		2013				2012				2013				2012				2013				2012
A&E Charge:
P&C insurance run-off operations
Asbestos		$	16			$	19			$	10			$	12
Environmental			38				12				25				8
		$	54			$	31			$	35			$	20			$	0.39			$	0.20
Former railroad & manufacturing operations
Asbestos		$	2			$	2			$	1			$	1
Environmental			20				—				13				—
		$	22			$	2			$	14			$	1			$	0.15			$	0.02

 

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

d)

Earnings before income taxes include $12 million of non-taxable income and $30 million in non-deductible losses attributable to noncontrolling interests related to managed investment entities in the third quarter and first nine months of 2013, respectively, and $18 million and $64 million in non-deductible losses in the third quarter and first nine months of 2012, respectively.

e)

Shareholders’ Equity at September 30, 2013 includes $449 million ($5.04 per share) in unrealized after-tax gains on fixed maturities and $45 million ($0.50 per share) of retained earnings appropriated to managed investment entities. Shareholders’ Equity at December 31, 2012 includes $719 million ($8.09 per share) in unrealized after-tax gains on fixed maturities and $75 million ($0.84 per share) of retained earnings appropriated to managed investment entities. The appropriated retained earnings will ultimately inure to the benefit of the debt holders of the investment entities managed by AFG.

---

f)	Supplemental Notes:

 

•

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

 

•

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

 

Ÿ

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

 

•

Other includes an internal reinsurance facility.

Exhibit 99.2

 

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

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

 

 

Section		Page
Table of Contents—Investor Supplement—Third 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																				Nine Months Ended
		09/30/13				06/30/13				03/31/13				12/31/12				09/30/12				09/30/13				09/30/12
Highlights
Core net operating earnings		$	97			$	87			$	84			$	61			$	78			$	268			$	253
Net earnings			83				110				120				50				226				313				438
Total assets			40,947				39,414				39,139				39,171				39,633				40,947				39,633
Adjusted shareholders’ equity (a)			4,048				3,978				3,950				3,784				3,881				4,048				3,881
Property and Casualty net written premiums			1,067				749				704				702				908				2,520				2,247
Annuity statutory premiums			1,167				861				624				560				723				2,652				2,431
Per share data
Core net operating earnings per share		$	1.06			$	0.96			$	0.92			$	0.67			$	0.82			$	2.94			$	2.59
Diluted earnings per share			0.92				1.20				1.32				0.54				2.39				3.44				4.50
Adjusted book value per share (a)			45.36				44.78				43.94				42.52				42.72				45.36				42.72
Cash dividends per common share			0.1950				0.1950				0.1950				0.4450				0.1750				0.5850				0.5250
Financial ratios
Annualized core operating return on equity (a)			9.7	%			8.9	%			8.6	%			6.4	%			8.0	%			9.1	%			8.7	%
Annualized return on equity (a)			8.3	%			11.1	%			12.4	%			5.2	%			23.4	%			10.6	%			15.3	%
Property and Casualty combined ratio—Specialty:
Loss & LAE ratio			66.1	%			60.3	%			56.5	%			72.9	%			68.2	%			61.5	%			61.1	%
Underwriting expense ratio			27.4	%			36.7	%			36.6	%			25.1	%			30.0	%			32.9	%			33.3	%
Combined ratio—Specialty			93.5	%			97.0	%			93.1	%			98.0	%			98.2	%			94.4	%			94.4	%
Net spread on fixed annuities:
Net interest spread			2.89	%			3.02	%			2.99	%			3.18	%			3.25	%			2.97	%			3.10	%
Net spread earned			1.50	%			1.65	%			1.58	%			1.49	%			1.57	%			1.58	%			1.45	%

 

(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																				Nine Months Ended
		09/30/13				06/30/13				03/31/13				12/31/12				09/30/12				09/30/13				09/30/12
Property and Casualty Insurance
Underwriting profit		$	62			$	19			$	43			$	10			$	15			$	124			$	108
Net investment income			65				65				66				69				67				196				206
Other expense			(14	)			(2	)			(13	)			(10	)			(11	)			(29	)			(40	)
Property and Casualty Insurance operating earnings			113				82				96				69				71				291				274
Annuity earnings			78				82				76				68				69				236				188
Run-off Long-Term Care and Life earnings / (loss)			(4	)			(2	)			(1	)			(12	)			2				(7	)			8
Medicare Supplement and Critical Illness earnings (a)			—				—				—				—				10				—				28
Interest expense of parent holding companies			(17	)			(17	)			(17	)			(17	)			(19	)			(51	)			(54	)
Other expense			(22	)			(22	)			(28	)			(25	)			(18	)			(72	)			(65	)
Pre-tax core operating earnings			148				123				126				83				115				397				379
Income tax expense			51				36				42				22				37				129				126
Core net operating earnings			97				87				84				61				78				268				253
Non-core items, net of tax:
Gain on sale of Medicare Supplement and Critical Illness			—				—				—				13				101				—				101
Other realized gains			35				26				36				36				55				97				92
Long-Term Care reserve charge			—				—				—				(99	)			—				—				—
Significant A&E charges:
Property and Casualty Insurance run-off operations			(35	)			—				—				—				(20	)			(35	)			(20	)
Former Railroad and Manufacturing operations			(14	)			—				—				—				(1	)			(14	)			(1	)
AFG tax case and settlement of open years			—				—				—				39				28				—				28
ELNY guaranty fund assessments (b)			—				(3	)			—				—				—				(3	)			—
Other			—				—				—				—				(15	)			—				(15	)
Net earnings		$	83			$	110			$	120			$	50			$	226			$	313			$	438

 

(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																				Nine Months Ended
		09/30/13				06/30/13				03/31/13				12/31/12				09/30/12				09/30/13				09/30/12
Core net operating earnings		$	97			$	87			$	84			$	61			$	78			$	268			$	253
Net earnings		$	83			$	110			$	120			$	50			$	226			$	313			$	438
Average number of diluted shares			91.014				91.472				91.048				91.413				94.625				91.176				97.418
Diluted earnings per share:
Core net operating earnings per share		$	1.06			$	0.96			$	0.92			$	0.67			$	0.82			$	2.94			$	2.59
Gain on sale of Medicare Supplement and Critical Illness			—				—				—				0.15				1.07				—				1.04
Other realized gains			0.40				0.28				0.40				0.37				0.59				1.08				0.95
Long-Term Care reserve charge			—				—				—				(1.08	)			—				—				—
Significant A&E charges:
Property and Casualty Insurance run-off operations			(0.39	)			—				—				—				(0.22	)			(0.39	)			(0.20	)
Former Railroad and Manufacturing operations			(0.15	)			—				—				—				(0.01	)			(0.15	)			(0.02	)
AFG tax case and settlement of open years			—				—				—				0.43				0.30				—				0.29
ELNY guaranty fund assessment (a)			—				(0.04	)			—				—				—				(0.04	)			—
Other			—				—				—				—				(0.16	)			—				(0.15	)
Diluted earnings per share		$	0.92			$	1.20			$	1.32			$	0.54			$	2.39			$	3.44			$	4.50

 

(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																				Nine Months Ended
		09/30/13				06/30/13				03/31/13				12/31/12				09/30/12				09/30/13				09/30/12
Property and Transportation		$	16			$	(31	)		$	10			$	(14	)		$	—			$	(5	)		$	33
Specialty Casualty			19				32				19				8				8				70				45
Specialty Financial			22				15				13				16				1				50				28
Other Specialty			5				5				6				5				7				16				10
Underwriting profit—Specialty			62				21				48				15				16				131				116
Other charges, included in loss and LAE			—				2				5				5				1				7				8
Underwriting profit—Core			62				19				43				10				15				124				108
Special A&E charges, included in loss and LAE			(54	)			—				—				—				(31	)			(54	)			(31	)
Underwriting profit (loss)—Property and Casualty Insurance		$	8			$	19			$	43			$	10			$	(16	)		$	70			$	77
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	(1	)		$	1			$	—			$	9			$	—			$	—			$	—
Catastrophe loss			2				18				10				24				4				30				13
Total current accident year catastrophe losses		$	1			$	19			$	10			$	33			$	4			$	30			$	13
Loss reserve development (favorable) / adverse		$	40			$	(22	)		$	(28	)		$	(7	)		$	23			$	(10	)		$	(23	)
Combined ratio:
Property and Transportation			97.1	%			110.3	%			96.5	%			103.7	%			99.8	%			100.4	%			96.8	%
Specialty Casualty			93.4	%			88.4	%			92.7	%			96.8	%			96.7	%			91.5	%			93.5	%
Specialty Financial			82.3	%			86.6	%			88.5	%			84.9	%			98.8	%			85.8	%			90.6	%
Other Specialty			70.7	%			74.0	%			71.1	%			70.0	%			68.4	%			71.9	%			82.0	%
Combined ratio—Specialty			93.5	%			97.0	%			93.1	%			98.0	%			98.2	%			94.4	%			94.4	%
Other core charges			(0.1	%)			0.2	%			0.7	%			0.7	%			0.0	%			0.3	%			0.4	%
Special A&E charges			5.7	%			0.0	%			0.0	%			0.0	%			3.7	%			2.3	%			1.5	%
Combined ratio			99.1	%			97.2	%			93.8	%			98.7	%			101.9	%			97.0	%			96.3	%
Loss and LAE components—property and casualty insurance
Current accident year, excluding catastrophe loss			67.4	%			61.1	%			59.8	%			71.2	%			68.7	%			63.3	%			63.5	%
Prior accident year development			4.2	%			(3.2	%)			(4.1	%)			(0.8	%)			2.6	%			(0.5	%)			(1.1	%)
Current accident year catastrophe loss			0.1	%			2.6	%			1.5	%			3.2	%			0.6	%			1.3	%			0.6	%
Loss and LAE ratio			71.7	%			60.5	%			57.2	%			73.6	%			71.9	%			64.1	%			63.0	%

 

6

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

 

 

 

		Three Months Ended																				Nine Months Ended
		09/30/13				06/30/13				03/31/13				12/31/12				09/30/12				09/30/13				09/30/12
Gross written premiums		$	1,768			$	1,041			$	925			$	965			$	1,509			$	3,734			$	3,356
Ceded reinsurance premiums			(701	)			(292	)			(221	)			(263	)			(601	)			(1,214	)			(1,109	)
Net written premiums			1,067				749				704				702				908				2,520				2,247
Change in unearned premiums			(118	)			(40	)			(17	)			54				(60	)			(175	)			(156	)
Net earned premiums			949				709				687				756				848				2,345				2,091
Loss and LAE			626				428				388				551				578				1,442				1,278
Underwriting expense			261				260				251				190				254				772				697
Underwriting profit		$	62			$	21			$	48			$	15			$	16			$	131			$	116
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	(1	)		$	1			$	—			$	9			$	—			$	—			$	—
Catastrophe loss			2				18				10				24				4				30				13
Total current accident year catastrophe losses		$	1			$	19			$	10			$	33			$	4			$	30			$	13
Loss reserve development (favorable) / adverse		$	(13	)		$	(24	)		$	(33	)		$	(12	)		$	(9	)		$	(70	)		$	(62	)
Combined ratio:
Loss and LAE ratio			66.1	%			60.3	%			56.5	%			72.9	%			68.2	%			61.5	%			61.1	%
Underwriting expense ratio			27.4	%			36.7	%			36.6	%			25.1	%			30.0	%			32.9	%			33.3	%
Combined ratio			93.5	%			97.0	%			93.1	%			98.0	%			98.2	%			94.4	%			94.4	%
Loss and LAE components:
Current accident year, excluding catastrophe loss			67.4	%			61.1	%			59.8	%			71.2	%			68.7	%			63.3	%			63.5	%
Prior accident year development			(1.4	%)			(3.4	%)			(4.8	%)			(1.5	%)			(1.1	%)			(3.1	%)			(3.0	%)
Current accident year catastrophe loss			0.1	%			2.6	%			1.5	%			3.2	%			0.6	%			1.3	%			0.6	%
Loss and LAE ratio			66.1	%			60.3	%			56.5	%			72.9	%			68.2	%			61.5	%			61.1	%

 

7

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

 

 

		Three Months Ended																				Nine Months Ended
		09/30/13				06/30/13				03/31/13				12/31/12				09/30/12				09/30/13				09/30/12
Gross written premiums		$	1,147			$	446			$	352			$	431			$	981			$	1,945			$	1,840
Ceded reinsurance premiums			(553	)			(118	)			(76	)			(116	)			(442	)			(747	)			(682	)
Net written premiums			594				328				276				315				539				1,198				1,158
Change in unearned premiums			(77	)			(27	)			17				68				(52	)			(87	)			(118	)
Net earned premiums			517				301				293				383				487				1,111				1,040
Loss and LAE			407				236				192				340				371				835				722
Underwriting expense			94				96				91				57				116				281				285
Underwriting profit (loss)		$	16			$	(31	)		$	10			$	(14	)		$	—			$	(5	)		$	33
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	(1	)		$	1			$	—			$	8			$	—			$	—			$	—
Catastrophe loss			—				17				10				20				2				27				7
Total current accident year catastrophe losses		$	(1	)		$	18			$	10			$	28			$	2			$	27			$	7
Loss reserve development (favorable) / adverse		$	(1	)		$	3			$	(6	)		$	(2	)		$	(2	)		$	(4	)		$	(14	)
Combined ratio:
Loss and LAE ratio			78.8	%			78.5	%			65.4	%			88.9	%			76.1	%			75.1	%			69.4	%
Underwriting expense ratio			18.3	%			31.8	%			31.1	%			14.8	%			23.7	%			25.3	%			27.4	%
Combined ratio			97.1	%			110.3	%			96.5	%			103.7	%			99.8	%			100.4	%			96.8	%
Loss and LAE components:
Current accident year, excluding catastrophe loss			79.1	%			71.6	%			64.0	%			84.3	%			76.0	%			73.1	%			70.0	%
Prior accident year development			(0.2	%)			1.2	%			(2.0	%)			(0.5	%)			(0.5	%)			(0.4	%)			(1.3	%)
Current accident year catastrophe loss			(0.1	%)			5.7	%			3.4	%			5.1	%			0.6	%			2.4	%			0.7	%
Loss and LAE ratio			78.8	%			78.5	%			65.4	%			88.9	%			76.1	%			75.1	%			69.4	%

 

8

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

 

 

		Three Months Ended																				Nine Months Ended
		09/30/13				06/30/13				03/31/13				12/31/12				09/30/12				09/30/13				09/30/12
Gross written premiums		$	461			$	440			$	430			$	384			$	376			$	1,331			$	1,100
Ceded reinsurance premiums			(136	)			(157	)			(135	)			(126	)			(133	)			(428	)			(366	)
Net written premiums			325				283				295				258				243				903				734
Change in unearned premiums			(36	)			(6	)			(36	)			(9	)			—				(78	)			(35	)
Net earned premiums			289				277				259				249				243				825				699
Loss and LAE			174				148				148				165				155				470				416
Underwriting expense			96				97				92				76				80				285				238
Underwriting profit		$	19			$	32			$	19			$	8			$	8			$	70			$	45
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	—			$	—			$	—			$	—			$	—			$	—			$	—
Catastrophe loss			1				—				—				1				1				1				2
Total current accident year catastrophe losses		$	1			$	—			$	—			$	1			$	1			$	1			$	2
Loss reserve development (favorable) / adverse		$	(4	)		$	(22	)		$	(16	)		$	7			$	3			$	(42	)		$	(25	)
Combined ratio:
Loss and LAE ratio			60.3	%			53.4	%			57.3	%			65.9	%			63.8	%			57.1	%			59.5	%
Underwriting expense ratio			33.1	%			35.0	%			35.4	%			30.9	%			32.9	%			34.4	%			34.0	%
Combined ratio			93.4	%			88.4	%			92.7	%			96.8	%			96.7	%			91.5	%			93.5	%
Loss and LAE components:
Current accident year, excluding catastrophe loss			61.4	%			61.2	%			63.5	%			62.5	%			62.3	%			62.0	%			63.0	%
Prior accident year development			(1.2	%)			(8.0	%)			(6.2	%)			3.0	%			1.2	%			(5.0	%)			(3.7	%)
Current accident year catastrophe loss			0.1	%			0.2	%			0.0	%			0.4	%			0.3	%			0.1	%			0.2	%
Loss and LAE ratio			60.3	%			53.4	%			57.3	%			65.9	%			63.8	%			57.1	%			59.5	%

 

9

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

 

 

		Three Months Ended																				Nine Months Ended
		09/30/13				06/30/13				03/31/13				12/31/12				09/30/12				09/30/13				09/30/12
Gross written premiums		$	160			$	155			$	143			$	151			$	152			$	458			$	415
Ceded reinsurance premiums			(36	)			(38	)			(30	)			(43	)			(44	)			(104	)			(112	)
Net written premiums			124				117				113				108				108				354				303
Change in unearned premiums			(3	)			(4	)			3				(4	)			(8	)			(4	)			(2	)
Net earned premiums			121				113				116				104				100				350				301
Loss and LAE			37				37				42				40				46				116				117
Underwriting expense			62				61				61				48				53				184				156
Underwriting profit		$	22			$	15			$	13			$	16			$	1			$	50			$	28
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	—			$	—			$	—			$	1			$	—			$	—			$	—
Catastrophe loss			1				1				—				2				1				2				3
Total current accident year catastrophe losses		$	1			$	1			$	—			$	3			$	1			$	2			$	3
Loss reserve development (favorable) / adverse		$	(4	)		$	—			$	(6	)		$	(13	)		$	(5	)		$	(10	)		$	(16	)
Combined ratio:
Loss and LAE ratio			31.2	%			32.9	%			35.8	%			38.2	%			46.7	%			33.3	%			38.9	%
Underwriting expense ratio			51.1	%			53.7	%			52.7	%			46.7	%			52.1	%			52.5	%			51.7	%
Combined ratio			82.3	%			86.6	%			88.5	%			84.9	%			98.8	%			85.8	%			90.6	%
Loss and LAE components:
Current accident year, excluding catastrophe loss			33.7	%			32.9	%			40.3	%			48.2	%			51.5	%			35.6	%			43.3	%
Prior accident year development			(3.2	%)			(0.7	%)			(4.8	%)			(12.1	%)			(5.5	%)			(2.9	%)			(5.5	%)
Current accident year catastrophe loss			0.7	%			0.7	%			0.3	%			2.1	%			0.7	%			0.6	%			1.1	%
Loss and LAE ratio			31.2	%			32.9	%			35.8	%			38.2	%			46.7	%			33.3	%			38.9	%

 

10

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

 

		Three Months Ended																				Nine Months Ended
		09/30/13				06/30/13				03/31/13				12/31/12				09/30/12				09/30/13				09/30/12
Gross written premiums		$	—			$	—			$	—			$	(1	)		$	—			$	—			$	1
Ceded reinsurance premiums			24				21				20				22				18				65				51
Net written premiums			24				21				20				21				18				65				52
Change in unearned premiums			(2	)			(3	)			(1	)			(1	)			—				(6	)			(1	)
Net earned premiums			22				18				19				20				18				59				51
Loss and LAE			8				7				6				6				6				21				23
Underwriting expense			9				6				7				9				5				22				18
Underwriting profit		$	5			$	5			$	6			$	5			$	7			$	16			$	10
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	—			$	—			$	—			$	—			$	—			$	—			$	—
Catastrophe loss			—				—				—				1				—				—				1
Total current accident year catastrophe losses		$	—			$	—			$	—			$	1			$	—			$	—			$	1
Loss reserve development (favorable) / adverse		$	(4	)		$	(5	)		$	(5	)		$	(4	)		$	(5	)		$	(14	)		$	(7	)
Combined ratio:
Loss and LAE ratio			35.0	%			35.1	%			33.7	%			32.7	%			31.6	%			34.6	%			44.8	%
Underwriting expense ratio			35.7	%			38.9	%			37.4	%			37.3	%			36.8	%			37.3	%			37.2	%
Combined ratio			70.7	%			74.0	%			71.1	%			70.0	%			68.4	%			71.9	%			82.0	%

 

11

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

 

		Three Months Ended																				Nine Months Ended
		09/30/13				06/30/13				03/31/13				12/31/12				09/30/12				09/30/13				09/30/12
Net investment income		$	259			$	257			$	248			$	254			$	249			$	764			$	722
Guaranteed withdrawal benefit fees			7				6				5				5				4				18				9
Policy charges and other miscellaneous income			10				9				9				8				10				28				30
Total revenues			276				272				262				267				263				810				761
Annuity benefits			140				120				134				124				140				394				417
Acquisition expenses			35				48				31				58				32				114				92
Other expenses			23				22				21				17				22				66				64
Total costs and expenses			198				190				186				199				194				574				573
Earnings before income taxes—core			78				82				76				68				69				236				188
ELNY guaranty fund assessments charge (a)			—				(5	)			—				—				—				(5	)			—
Earnings before income taxes		$	78			$	77			$	76			$	68			$	69			$	231			$	188
Detail of annuity benefits above:
Interest credited—fixed		$	113			$	111			$	109			$	109			$	107			$	333			$	329
Interest credited—fixed component of variable annuities			2				1				2				2				2				5				5
Change in expected death and annuitization reserve			4				6				4				5				5				14				14
Amortization of sales inducements			8				8				7				9				8				23				23
Guaranteed withdrawal benefit reserve			10				10				8				5				4				28				9
Change in other benefit reserves			2				3				1				(2	)			5				6				7
Embedded derivative mark-to-market			33				(3	)			80				1				40				110				97
Equity option mark-to-market			(32	)			(16	)			(77	)			1				(31	)			(125	)			(67	)
Unlockings			—				—				—				(6	)			—				—				—
Total annuity benefits		$	140			$	120			$	134			$	124			$	140			$	394			$	417

 

(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																				Nine Months Ended
		09/30/13				06/30/13				03/31/13				12/31/12				09/30/12				09/30/13				09/30/12
Average fixed annuity investments (at amortized cost)		$	19,519			$	18,615			$	17,945			$	17,485			$	16,994			$	18,693			$	16,371
Average annuity benefits accumulated			19,035				18,151				17,506				17,137				16,759				18,231				16,147
Investments in excess of annuity benefits accumulated		$	484			$	464			$	439			$	348			$	235			$	462			$	224
As % of average annuity benefits accumulated (except as noted)
Net investment income (as % of investments)			5.27	%			5.45	%			5.48	%			5.74	%			5.80	%			5.40	%			5.82	%
Interest credited			(2.38	%)			(2.43	%)			(2.49	%)			(2.56	%)			(2.55	%)			(2.43	%)			(2.72	%)
Net interest spread on fixed annuities			2.89	%			3.02	%			2.99	%			3.18	%			3.25	%			2.97	%			3.10	%
Policy charges and other miscellaneous income			0.15	%			0.13	%			0.14	%			0.14	%			0.16	%			0.14	%			0.17	%
Other annuity benefit expenses, net			(0.39	%)			(0.46	%)			(0.35	%)			(0.40	%)			(0.27	%)			(0.39	%)			(0.32	%)
Acquisition expenses			(0.72	%)			(1.00	%)			(0.69	%)			(0.85	%)			(0.72	%)			(0.80	%)			(0.72	%)
Other expenses			(0.44	%)			(0.43	%)			(0.45	%)			(0.39	%)			(0.48	%)			(0.45	%)			(0.49	%)
Change in fair value of derivatives			0.01	%			0.39	%			(0.06	%)			0.10	%			(0.37	%)			0.11	%			(0.29	%)
Unlockings			0.00	%			0.00	%			0.00	%			(0.29	%)			0.00	%			0.00	%			0.00	%
Net spread earned on fixed annuities—core			1.50	%			1.65	%			1.58	%			1.49	%			1.57	%			1.58	%			1.45	%
Average annuity benefits accumulated		$	19,035			$	18,151			$	17,506			$	17,137			$	16,759			$	18,231			$	16,147
Net spread earned on fixed annuities			1.50	%			1.65	%			1.58	%			1.49	%			1.57	%			1.58	%			1.45	%
Earnings on fixed annuity benefits accumulated		$	72			$	75			$	69			$	64			$	66				216				179
Investments in excess of annuity benefits accumulated		$	484			$	464			$	439			$	348			$	235			$	462			$	224
Net investment income (as % of investments)			5.27	%			5.45	%			5.48	%			5.74	%			5.80	%			5.40	%			5.82	%
Earnings on investments in excess of annuity benefits accumulated		$	6			$	6			$	6			$	5			$	3				18				9
Variable annuity earnings			—				1				1				(1	)			—				2				—
Earnings before income taxes—core			78				82				76				68				69				236				188
ELNY guaranty fund assessments charge (a)			—				(5	)			—				—				—				(5	)			—
Earnings before income taxes		$	78			$	77			$	76			$	68			$	69			$	231			$	188

 

(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																				Nine months ended
		09/30/13				06/30/13				03/31/13				12/31/12				09/30/12				09/30/13				09/30/12
Retail single premium annuities—indexed		$	509			$	472			$	333			$	305			$	417			$	1,314			$	1,357
Retail single premium annuities—fixed			48				37				27				35				42				112				118
Financial institutions single premium annuities—indexed			352				169				83				59				72				604				232
Financial institutions single premium annuities—fixed			198				118				111				86				127				427				501
Education market—403(b) fixed and indexed annuities			49				52				55				60				51				156				177
Subtotal fixed annuity premiums			1,156				848				609				545				709				2,613				2,385
Variable annuities			11				13				15				15				14				39				46
Total annuity premiums		$	1,167			$	861			$	624			$	560			$	723			$	2,652			$	2,431

 

14

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

 

		Three Months Ended																				Nine Months Ended
		09/30/13				06/30/13				03/31/13				12/31/12				09/30/12				09/30/13				09/30/12
Beginning fixed annuity reserves		$	18,564			$	17,737			$	17,274			$	16,999			$	16,518			$	17,274			$	15,188
Premiums			1,156				848				609				545				709				2,613				2,385
Federal Home Loan Bank advances			—				200				—				—				—				200				—
Surrenders, benefits and other withdrawals			(381	)			(352	)			(352	)			(355	)			(390	)			(1,085	)			(1,042	)
Interest and other annuity benefit expenses:
Interest credited			113				111				109				109				107				333				329
Embedded derivative mark-to-market			33				(3	)			80				1				40				110				97
Change in other benefit reserves			20				23				17				(15	)			15				60				42
Unlockings			—				—				—				(10	)			—				—				—
Ending fixed annuity reserves		$	19,505			$	18,564			$	17,737			$	17,274			$	16,999			$	19,505			$	16,999
Reconciliation to annuity benefits accumulated:
Ending fixed annuity reserves		$	19,505			$	18,564			$	17,737			$	17,274			$	16,999			$	19,505			$	16,999
Impact of unrealized investment gains on reserves			84				87				140				136				46				84				46
Fixed component of variable annuities			196				197				198				199				200				196				200
Annuity benefits accumulated per balance sheet		$	19,785			$	18,848			$	18,075			$	17,609			$	17,245			$	19,785			$	17,245
Annualized surrenders and other withdrawals as a % of beginning reserves			8.2	%			7.9	%			8.2	%			8.4	%			9.4	%			8.4	%			9.1	%

 

15

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

 

		09/30/13				06/30/13				03/31/13				12/31/12				09/30/12				06/30/12
Assets:
Total cash and investments		$	29,921			$	29,262			$	29,084			$	28,449			$	28,037			$	27,301
Recoverables from reinsurers			3,138				3,044				3,083				3,750				3,865				2,740
Prepaid reinsurance premiums			662				520				466				471				587				488
Agents’ balances and premiums receivable			801				754				649				636				750				702
Deferred policy acquisition costs			867				818				565				550				621				846
Assets of managed investment entities			2,779				2,973				3,285				3,225				3,102				2,825
Other receivables			1,078				422				384				539				1,168				673
Variable annuity assets (separate accounts)			629				608				614				580				577				574
Other assets			887				828				824				786				741				717
Goodwill			185				185				185				185				185				186
Total assets		$	40,947			$	39,414			$	39,139			$	39,171			$	39,633			$	37,052
Liabilities and Equity:
Unpaid losses and loss adjustment expenses		$	6,441			$	6,098			$	6,238			$	6,845			$	7,277			$	6,153
Unearned premiums			2,047				1,789				1,697				1,651				1,821				1,661
Annuity benefits accumulated			19,785				18,848				18,075				17,609				17,245				16,758
Life, accident and health reserves			2,011				2,017				2,021				2,059				1,699				1,750
Payable to reinsurers			601				367				250				475				656				396
Liabilities of managed investment entities			2,429				2,603				2,880				2,892				2,753				2,502
Long-term debt			913				949				950				953				966				1,158
Variable annuity liabilities (separate accounts)			629				608				614				580				577				574
Other liabilities			1,381				1,497				1,506				1,359				1,675				1,325
Total liabilities		$	36,237			$	34,776			$	34,231			$	34,423			$	34,669			$	32,277
Shareholders’ equity:
Common stock		$	89			$	89			$	90			$	89			$	91			$	95
Capital surplus			1,109				1,088				1,090				1,063				1,071				1,112
Appropriated retained earnings			45				33				64				75				109				127
Unappropriated retained earnings			2,729				2,664				2,620				2,520				2,577				2,515
Unrealized gains—fixed maturities			449				462				719				719				789				626
Unrealized gains—equities			119				138				146				104				132				145
Other comprehensive income, net of tax			2				(1	)			4				8				10				2
Total shareholders’ equity			4,542				4,473				4,733				4,578				4,779				4,622
Noncontrolling interests			168				165				175				170				185				153
Total liabilities and equity		$	40,947			$	39,414			$	39,139			$	39,171			$	39,633			$	37,052

 

16

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

 

		09/30/13				06/30/13				03/31/13				12/31/12				09/30/12				06/30/12
Shareholders’ equity		$	4,542			$	4,473			$	4,733			$	4,578			$	4,779			$	4,622
Appropriated retained earnings			(45	)			(33	)			(64	)			(75	)			(109	)			(127	)
Shareholders’ equity, excluding appropriated retained earnings			4,497				4,440				4,669				4,503				4,670				4,495
Unrealized (gains) on fixed maturities			(449	)			(462	)			(719	)			(719	)			(789	)			(626	)
Adjusted shareholders’ equity			4,048				3,978				3,950				3,784				3,881				3,869
Goodwill			(185	)			(185	)			(185	)			(185	)			(185	)			(186	)
Intangibles			(26	)			(29	)			(33	)			(36	)			(39	)			(43	)
Tangible adjusted shareholders’ equity		$	3,837			$	3,764			$	3,732			$	3,563			$	3,657			$	3,640
Common shares outstanding			89.224				88.821				89.883				88.979				90.847				94.959
Book value per share:
Excluding appropriated retained earnings (a)		$	50.40			$	49.98			$	51.94			$	50.61			$	51.40			$	47.34
Adjusted (b)			45.36				44.78				43.94				42.52				42.72				40.74
Tangible, adjusted (c)			43.00				42.38				41.52				40.04				40.26				38.34
Market capitalization
AFG’s closing common share price		$	54.06			$	48.91			$	47.38			$	39.52			$	37.90			$	39.23
Market capitalization		$	4,823			$	4,344			$	4,259			$	3,516			$	3,443			$	3,725
Price / Adjusted book value ratio			1.19				1.09				1.08				0.93				0.89				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)

 

		09/30/13				06/30/13				03/31/13				12/31/12				09/30/12				06/30/12
Direct obligations of AFG		$	840			$	840			$	840			$	840			$	840			$	830
Direct obligations of subsidiaries			73				89				90				93				106				308
Payable to subsidiary trusts			—				20				20				20				20				20
Long-term debt		$	913			$	949			$	950			$	953			$	966			$	1,158
Obligations secured by real estate			(61	)			(62	)			(62	)			(62	)			(63	)			(64	)
Debt excluding obligations secured by real estate		$	852			$	887			$	888			$	891			$	903			$	1,094
Total capital (a)		$	5,578			$	5,554			$	5,794			$	5,626			$	5,821			$	5,806
Total capital excluding obligations secured by real estate (a)			5,517				5,492				5,732				5,564				5,758				5,742
Total adjusted capital (b)		$	5,129			$	5,092			$	5,074			$	4,907			$	5,032			$	5,180
Total adjusted capital excluding obligations secured by real estate (b)			5,068				5,030				5,012				4,845				4,969				5,116
Ratio of debt to total capital (a):
Including debt secured by real estate			16.4	%			17.1	%			16.4	%			16.9	%			16.6	%			19.9	%
Excluding debt secured by real estate			15.4	%			16.2	%			15.5	%			16.0	%			15.7	%			19.1	%
Ratio of debt to total adjusted capital (b):
Including debt secured by real estate			17.8	%			18.6	%			18.7	%			19.4	%			19.2	%			22.4	%
Excluding debt secured by real estate			16.8	%			17.6	%			17.7	%			18.4	%			18.2	%			21.4	%

 

(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.

 

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

 

		Three Months Ended																				Nine months ended
		09/30/13				06/30/13				03/31/13				12/31/12				09/30/12				09/30/13				09/30/12
Property and Casualty Insurance
Paid Losses (GAAP)		$	417			$	520			$	357			$	785			$	337			$	1,294			$	1,241

 

		09/30/13				06/30/13				03/31/13				12/31/12				09/30/12				6/30/2012
Statutory Surplus
Property and Casualty Insurance		$	2,133			$	2,096			$	2,090			$	2,015			$	2,044			$	2,052
AFG’s principal annuity subsidiaries (total adjusted capital)		$	1,590			$	1,517			$	1,483			$	1,380			$	1,275			$	1,219
Allowable dividends without regulatory approval
Property and Casualty Insurance		$	237			$	237			$	237			$	237			$	375			$	375
Annuity and Run-off			158				158				158				158				171				171
Total		$	395			$	395			$	395			$	395			$	546			$	546

 

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American Financial Group, Inc. Total Cash and Investments and Quarterly Net Investment Income September 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		$	651			$	441			$	239			$	—			$	1,331				4	%
Fixed maturities			5,236				20,717				11				—				25,964				87	%
Equity securities			786				317				40				—				1,143				4	%
Policy loans			—				240				—				—				240				1	%
Mortgage loans			110				501				—				—				611				2	%
Real estate and other investments			319				608				8				(303	)			632				2	%
Total cash and investments		$	7,102			$	22,824			$	298			$	(303	)		$	29,921				100	%

 

		Property and Casualty Insurance				Annuity and Run-off				Other				Consolidate CLOs				Total AFG Consolidated
Total quarterly net investment income:
Fixed maturities		$	51			$	259			$	—			$	—			$	310
Equity securities			8				5				2				—				15
Other investments			6				19				1				(9	)			17
Gross investment income			65				283				3				(9	)			342
Investment expenses			(2	)			(2	)			—				—				(4	)
Total net investment income		$	63			$	281			$	3			$	(9	)		$	338

 

		Equity Securities
		Cost				Fair Value				Unrealized Gain (Loss)
Annuity and Run-off		$	266			$	317			$	51
Property and Casualty Insurance			650				786				136
Other			40				40				—
Total AFG consolidated		$	956			$	1,143			$	187

 

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

 

 

		Amortized Cost				Fair Value				Unrealized Gain (Loss)				% of Fair Value				% of Investment Portfolio
US Government and government agencies		$	328			$	337			$	9				1	%			1	%
States, municipalities and political subdivisions			5,023				5,104				81				20	%			17	%
Foreign government			346				357				11				1	%			1	%
Residential mortgage-backed securities			3,955				4,288				333				17	%			14	%
Commercial mortgage-backed securities			2,565				2,778				213				11	%			9	%
Asset-backed securities			2,275				2,293				18				9	%			8	%
Corporate bonds
Manufacturing			2,163				2,277				114				9	%			8	%
Banks, lending and credit institutions			1,728				1,823				95				7	%			6	%
Gas and electric services			1,261				1,383				122				5	%			5	%
Insurance and insurance related			823				873				50				3	%			3	%
Other corporate			4,259				4,451				192				17	%			15	%
Total AFG consolidated		$	24,726			$	25,964			$	1,238				100	%			87	%
Annuity and Run-off		$	19,657			$	20,717				1,060				80	%			70	%
Property and Casualty Insurance			5,068				5,236				168				20	%			17	%
Other			1				11				10				0	%			0	%
Total AFG consolidated		$	24,726			$	25,964			$	1,238				100	%			87	%
Annualized yield on fixed maturities:
Excluding investment expense (a)			5.09	%
Net of investment expense (a)			5.02	%
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 September 30, 2013 ($ in millions )

 

 

Annuity and Run-off:		Amortized Cost				Fair Value				Unrealized Gain (Loss)				% of Fair Value
US Government and government agencies		$	92			$	95			$	3				1	%
States, municipalities and political subdivisions			2,960				2,977				17				15	%
Foreign government			17				19				2				0	%
Residential mortgage-backed securities			3,299				3,581				282				17	%
Commercial mortgage-backed securities			2,320				2,518				198				12	%
Asset-backed securities			1,709				1,727				18				8	%
Corporate debt			9,260				9,800				540				47	%
Total Annuity and Run-off		$	19,657			$	20,717			$	1,060				100	%
Annualized yield on fixed maturities:
Excluding investment expense (a)			5.36	%
Net of investment expense (a)			5.32	%
Approximate average life and duration:
Approximate average life			6 years
Approximate duration			5 years
Property and Casualty Insurance:		Amortized Cost				Fair Value				Unrealized Gain (Loss)				% of Fair Value
US Government and government agencies		$	236			$	242			$	6				5	%
States, municipalities and political subdivisions			2,063				2,127				64				41	%
Foreign government			329				338				9				6	%
Residential mortgage-backed securities			655				696				41				13	%
Commercial mortgage-backed securities			245				260				15				5	%
Asset-backed securities			566				566				—				11	%
Corporate debt			974				1,007				33				19	%
Property and Casualty Insurance		$	5,068			$	5,236			$	168				100	%
Annualized yield on fixed maturities:
Excluding investment expense (a)			4.03	%
Net of investment expense (a)			3.88	%
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 September 30, 2013 ($ in millions)

 

 

		GAAP Data
By Credit Rating		Amortized Cost				Fair Value				% of Fair Value				Unrealized Gain (Loss)
Investment grade
AAA		$	5,287			$	5,505				21	%		$	218
AA			4,661				4,758				18	%			97
A			6,513				6,850				27	%			337
BBB			4,878				5,158				20	%			280
Subtotal—Investment grade			21,339				22,271				86	%			932
BB			709				730				3	%			21
B			537				551				2	%			14
Other			2,141				2,412				9	%			271
Total		$	24,726			$	25,964				100	%		$	1,238

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		$	18,834				77	%		$	18,838			$	19,805			$	967
NAIC 2			4,722				19	%			4,722				4,978				256
			23,556				96	%			23,560				24,783				1,223
NAIC 3			561				2	%			562				578				16
NAIC 4			242				1	%			243				251				8
NAIC 5			54				1	%			54				65				11
NAIC 6			17				0	%			19				45				26
Total		$	24,430				100	%		$	24,438			$	25,722			$	1,284

 

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

 

 

By Asset Type		Amortized Cost				Fair Value				% of Fair Value				% of Investment Portfolio				Unrealized Gain (Loss)
Residential
Agency		$	244			$	251				4	%			1	%		$	7
Prime (Non-Agency)			1,913				2,099				30	%			7	%			186
Alt-A			912				993				14	%			3	%			81
Subprime			886				945				13	%			3	%			59
Subtotal—Residential			3,955				4,288				61	%			14	%			333
Commercial			2,565				2,778				39	%			9	%			213
Total AFG consolidated		$	6,520			$	7,066				100	%			23	%		$	546
Annuity and Run-off		$	5,619			$	6,099				86	%			20	%			480
Property and Casualty Insurance			900				956				14	%			3	%			56
Other			1				11				0	%			0	%			10
Total AFG consolidated		$	6,520			$	7,066				100	%			23	%		$	546

 

•

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 77%; Subprime 84%; CMBS 99%.

•

The average FICO score of our residential MBS securities is—Prime 736; Alt-A 712; Subprime 643.

•

99% of our Commercial MBS portfolio is investment-grade rated (83% AAA) and the average subordination for this group assets is 37%.

•

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

 

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American Financial Group, Inc. Mortgage-Backed Securities Portfolio September 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		$	101			$	106				2	%			0	%		$	5
Prime (Non-Agency)			1,769				1,931				32	%			8	%			162
Alt-A			746				815				13	%			4	%			69
Subprime			683				729				12	%			3	%			46
Subtotal—Residential			3,299				3,581				59	%			15	%			282
Commercial			2,320				2,518				41	%			12	%			198
Total Annuity and Run-off		$	5,619			$	6,099				100	%			27	%		$	480
Property and Casualty Insurance:
By Asset Type		Amortized Cost				Fair Value				% of Fair Value				% of Investment Portfolio				Unrealized Gain (Loss)
Residential
Agency		$	143			$	145				15	%			2	%		$	2
Prime (Non-Agency)			143				157				16	%			2	%			14
Alt-A			166				178				19	%			3	%			12
Subprime			203				216				23	%			3	%			13
Subtotal—Residential			655				696				73	%			10	%			41
Commercial			245				260				27	%			4	%			15
Total Property and Casualty Insurance		$	900			$	956				100	%			14	%		$	56

 

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

 

 

		GAAP data
By Credit Rating		Amortized Cost				Fair Value				% of Fair Value				Unrealized Gain (Loss)
Investment grade
AAA		$	2,675			$	2,877				41	%		$	202
AA			393				418				6	%			25
A			619				648				9	%			29
BBB			309				330				5	%			21
Subtotal—investment grade			3,996				4,273				61	%			277
BB			349				353				5	%			4
B			450				459				6	%			9
Other			1,725				1,981				28	%			256
Total		$	6,520			$	7,066				100	%		$	546

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

 

		Statutory data
By NAIC Designation		Carrying Value				% of Carrying Value				Amortized Cost				Fair Value				Unrealized Gain (Loss)
NAIC 1		$	5,990				93	%		$	5,995			$	6,563			$	568
NAIC 2			184				3	%			184				185				1
			6,174				96	%			6,179				6,748				569
NAIC 3			122				2	%			122				123				1
NAIC 4			102				2	%			102				105				3
NAIC 5			18				0	%			18				29				11
NAIC 6			15				0	%			16				36				20
Total		$	6,431				100	%		$	6,437			$	7,041			$	604

 

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