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): May 6, 2014

 

 

AMERICAN FINANCIAL GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

 

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

 

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

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

 

 

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

 

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

 

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

 

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

 

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

 

 

 

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Section 2 - Financial Information

Item 2.02 Results Of Operations And Financial Condition.

Reference is made to the press release of American Financial Group, Inc. (the “Company”) relating to the announcement of the Company’s results of operations for the first quarter of 2014 and the availability of the Investor Supplement on the Company’s website. The press release was issued on May 6, 2014. 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 May 6, 2014, reporting American Financial Group Inc. first quarter results for the period ended March 31, 2014.
99.2		Investor Supplement – First Quarter 2014

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: May 7, 2014
				By:		/s/ Karl J. Grafe
						Karl J. Grafe
						Vice President

 

2

Exhibit 99.1

American Financial Group, Inc. Announces First Quarter Results

 

•

Core net operating earnings $1.00 per share, up 9% from the comparable 2013 period

 

•

Repurchased 419,938 shares at an average price of $56.68 per share during the quarter

 

•

Adjusted book value $46.79 per share at March 31, 2014; up 2% since year end

 

•

Full year 2014 core net operating earnings guidance affirmed at $4.50 – $4.90 per share

Cincinnati, Ohio – May 6, 2014 – American Financial Group, Inc. (NYSE/NASDAQ: AFG) today reported 2014 first quarter net earnings attributable to shareholders of $103 million ($1.13 per share) compared to $120 million ($1.32 per share) for the 2013 first quarter. The 2014 first quarter results include $12 million ($0.13 per share) in after-tax net realized gains compared to $36 million ($0.40 per share) in the prior year period. Book value per share, excluding appropriated retained earnings and unrealized gains on fixed maturities, increased by 2% to $46.79 per share during the quarter. Annualized return on equity was 10.3% and 12.8% for the first quarters of 2014 and 2013, respectively.

Core net operating earnings were $91 million ($1.00 per share) for the 2014 first quarter, compared to $84 million ($0.92 per share) in the 2013 first quarter. Higher underwriting profitability in our Specialty Property and Casualty (“P&C”) insurance operations was partially offset by slightly lower earnings in our Annuity segment. Core net operating earnings for the first quarters of 2014 and 2013 generated annualized returns on equity of 9.1% and 8.9%, respectively.

During the first quarter of 2014, AFG repurchased 419,938 shares of common stock at an average price per share of $56.68.

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 March 31,
In millions, except per share amounts		2014				2013
Components of net earnings attributable to shareholders:
Core net operating earnings(a)		$	91			$	84
Realized gains			12				36
Net earnings attributable to shareholders		$	103			$	120
Components of Earnings Per Share:
Core net operating earnings(a)		$	1.00			$	0.92
Realized gains			0.13				0.40
Diluted Earnings Per Share		$	1.13			$	1.32

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

S. Craig Lindner and Carl H. Lindner III, AFG’s Co-Chief Executive Officers, issued this statement: “Our specialty insurance businesses performed well during the first three months of 2014, with solid P&C underwriting results and continued strong profitability in our Annuity segment. Our insurance professionals continue to be disciplined with pricing, yet opportunistic in growing our portfolio of niche businesses.

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“At April 1, 2014, following the acquisition of Summit, AFG had approximately $685 million of excess capital (including parent company cash of approximately $100 million). Other recent additions to our portfolio of specialty P&C insurance businesses, coupled with the recent significant growth in our Annuity segment and Specialty Casualty operations, as well as share repurchases, have provided attractive opportunities to deploy our excess capital. We will continue to invest excess capital when we see potential for healthy, profitable organic growth, and opportunities to expand our specialty niche businesses through acquisitions and start-ups that meet our target return thresholds. We will also make opportunistic share repurchases when it makes sense to do so and return capital to shareholders through dividends.

“Based on results for the first three months of the year, we continue to expect core net operating earnings in 2014 to be between $4.50 and $4.90 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 Specialty P&C insurance operations generated an underwriting profit of $59 million in the 2014 first quarter, compared to $48 million in the first quarter of 2013. The combined ratio was 92.2%, 0.9 points lower than the comparable prior year period. Higher underwriting profitability in our Specialty Casualty Group was partially offset by lower profitability in our Property and Transportation and Specialty Financial Groups.

Gross and net written premiums were up 11% and 7%, respectively, in the 2014 first quarter compared to the same quarter a year earlier. Although net written premiums were higher in all of AFG’s Specialty P&C groups, the Specialty Casualty Group was a primary driver of this growth. Further details about AFG’s specialty P&C operations may be found in the accompanying schedules.

The Property and Transportation Group reported an underwriting profit of $6 million in the first quarter of 2014 compared to $10 million in the first quarter of 2013. Improved results in our transportation and property and inland marine operations were more than offset by lower profitability in our agricultural operations. Catastrophe losses in this group were $9 million, primarily as a result of winter storms in the month of January, compared to $10 million in the 2013 first quarter. Gross and net written premiums were up 7% and 3%, respectively, during the first quarter of 2014, primarily due to higher premiums in our transportation businesses resulting from rate increases. Net written premiums were also impacted by a more conservative funding strategy for our crop insurance business. Pricing in this group was up approximately 4% on average for the quarter.

The Specialty Casualty Group reported an underwriting profit of $38 million in the first quarter of 2014, compared to $19 million in the first quarter of 2013, reflecting higher underwriting profits in our workers’ compensation and excess and surplus businesses. Gross and net written premiums for the first quarter of 2014 were up 18% and 12%, respectively. While nearly all businesses in this group reported growth, our workers’ compensation, excess and surplus lines and targeted markets businesses were primary drivers of the higher premiums. New business opportunities, increased exposures on existing accounts and sustained pricing increases have driven the growth in our workers’ compensation businesses. Strong premium growth in our excess and surplus and targeted markets businesses is the result of broadening opportunities to write business coupled with the benefit from rate increases over multiple quarters. Pricing was up approximately 3% on average for the quarter.

The Specialty Financial Group reported an underwriting profit of $10 million in the first quarter of 2014, compared to $13 million in the comparable 2013 period. Higher underwriting profits in our fidelity and crime and surety businesses were more than offset by lower profitability in our trade credit and financial institutions businesses. Gross written premiums were down slightly during the first quarter, while net written premiums increased 3%. Growth in gross written premiums was tempered by the October 2013 sale of a service contract business, which ceded all of its premiums under reinsurance contracts. Pricing in this group was flat for the first quarter of 2014.

 

Page 2

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Carl Lindner III noted, “It has been a productive and exciting quarter. We recently announced or completed additions to our Specialty P&C business with the launch of our new Aviation Division, the closing of the Summit acquisition and the purchase of renewal rights that will grow our Public Sector Division. Each of these transactions provides an attractive opportunity to enter new niches or expand our portfolio of Specialty P&C businesses. I’m also pleased that we continued to achieve organic growth in nearly all of our Specialty Casualty businesses during the quarter.

“Based on results during the first three months of the year, we continue to expect an overall 2014 calendar year combined ratio in the 91% to 95% range and estimate net written premium growth to be between 17% and 21%, which assumes the inclusion of nine months of Summit premiums. Overall renewal pricing was up 3% during the quarter, in line with our objectives.”

Annuity Segment

AFG’s annuity operations contributed $73 million in pretax core earnings in the first quarter of 2014 compared to $76 million in the first quarter of 2013, a decrease of $3 million or 4%. While AFG’s average annuity investments grew nearly 20% over the last year, the benefit of this growth was more than offset by (i) the runoff of higher yielding investments and (ii) the impact of the significant decrease in interest rates and a relatively flat stock market in the first quarter of 2014 on the accounting for fixed-indexed annuities (compared to an increase in interest rates and positive stock market performance in the first quarter of 2013). AFG’s net spread earned was 1.30% in the first quarter of 2014, a decrease of 28 basis points from the comparable previous year period.

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

The Annuity segment reported statutory premiums of $967 million in the first quarter of 2014, an increase of 55% from the comparable prior year period, but approximately 30% lower than the fourth quarter of 2013. The year-over-year increase was largely the result of growth in sales of fixed indexed annuities in the financial institutions market. New products, expanded distribution and improved market penetration within existing distribution channels contributed to this growth. The sequential decline in premium reflects the impact of lower interest rates on the attractiveness of annuities and our commitment to maintain pricing discipline, as well as seasonality in premium volume. Although the fourth quarter premium volume is historically higher than the first quarter, factors such as new market entrants and aggressive pricing by competitors also contributed to lower premiums in the first quarter of 2014.

Craig Lindner stated, “I’m very pleased with our continued strong annuity earnings. These results demonstrate careful execution of our strategy, which is focused on a balance of disciplined pricing, consumer friendly product design, superior investment results and the successful expansion and penetration of our distribution channels. Based on the results through the first three months of 2014, assuming no significant change in interest rates or the stock market, we continue to expect that the full year 2014 core pretax annuity operating earnings will be flat compared to the $328 million reported for the full year of 2013. Significant changes in market interest rates and/or the stock market could lead to significant positive or negative impacts on the Annuity segment’s results. Based on information currently available, we also continue to expect that premiums for the full year of 2014 will be flat when compared to the $4 billion achieved for the full year in 2013.”

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.

 

Page 3

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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 first quarter of 2014 compared to a pretax core operating loss of $1 million in the comparable prior year period.

Investments

AFG recorded first quarter 2014 net realized gains on securities of $12 million after tax and after deferred acquisition costs (DAC), compared to $36 million in the comparable 2013 period. Unrealized gains on fixed maturities were $556 million after tax and after DAC at March 31, 2014, an increase of $115 million since year end. Our portfolio continues to be high quality, with 86% of our fixed maturity portfolio rated investment grade and 97% with a National Association of Insurance Commissioners’ designation of NAIC 1or 2, its highest two categories.

First quarter 2014 P&C net investment income was approximately 2% higher than the comparable 2013 period.

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 in excess of $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.

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; 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.

 

Page 4

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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 2014 first quarter results at 11:30 a.m. (ET) tomorrow, Wednesday, May 7, 2014. 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 28495431. Please dial in five to ten minutes prior to the scheduled start time of the call.

A replay will be available two hours following the completion of the call and will remain available until 11:59 p.m. (ET) on May 14, 2014. To listen to the replay, dial 1-855-859-2056 (international dial-in 404-537-3406) and provide the conference ID 28495431.

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

The archived webcast will be available immediately after the call via the same link on the Investor Relations page until May 14, 2014 at 11:59 p.m. (ET). An archived audio MP3 file will be available within 24 hours of the call.

Contact:

Diane P. Weidner

Asst. Vice President – Investor Relations

(513) 369-5713

Websites:

www.AFGinc.com

www.GreatAmericanInsuranceGroup.com

# # #

(Financial summaries follow)

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

 

Page 5

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AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES

SUMMARY OF EARNINGS AND SELECTED BALANCE SHEET DATA

(In Millions, Except Per Share Data)

 

		Three months ended March 31,
		2014				2013
Revenues
P&C insurance net earned premiums		$	754			$	687
Life, accident & health net earned premiums			28				30
Net investment income			361				326
Realized gains			19				57
Income (loss) of managed investment entities:			28				34
Investment income
Loss on change in fair value of assets/liabilities			—				(8	)
Other income			21				22
Total revenues			1,211				1,148
Costs and expenses
P&C insurance losses & expenses			696				644
Annuity, life, accident & health benefits & expenses			246				210
Interest charges on borrowed money			18				18
Expenses of managed investment entities			20				22
Other expenses			70				79
Total costs and expenses			1,050				973
Earnings before income taxes			161				175
Provision for income taxes			54				62
Net earnings including noncontrolling interests			107				113
Less: Net earnings (loss) attributable to noncontrolling interests			4				(7	)
Net earnings attributable to shareholders		$	103			$	120
Diluted Earnings per Common Share		$	1.13			$	1.32
Average number of diluted shares			91.6				91.0

 

		March 31,				December 31,
Selected Balance Sheet Data:		2014				2013
Total cash and investments		$	32,727			$	31,313
Long-term debt		$	913			$	913
Shareholders’ equity(b)		$	4,747			$	4,550
Shareholders’ equity (excluding appropriated retained earnings and unrealized gains/losses on fixed maturities)(b)		$	4,191			$	4,109
Book Value Per Share:
Excluding appropriated retained earnings		$	52.99			$	50.83
Excluding appropriated retained earnings and unrealized gains/losses on fixed maturities		$	46.79			$	45.90
Common Shares Outstanding			89.6				89.5

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

 

Page 6

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AMERICAN FINANCIAL GROUP, INC.

SPECIALTY P&C OPERATIONS

(Dollars in Millions)

 

		Three months ended March 31,								Pct. Change
		2014				2013
Gross written premiums		$	1,024			$	925				11	%
Net written premiums		$	755			$	704				7	%
Ratios (GAAP):
Loss & LAE ratio			56.9	%			56.5	%
Underwriting expense ratio			35.3	%			36.6	%
Combined Ratio			92.2	%			93.1	%
Supplemental Information:(c)
Gross Written Premiums:
Property & Transportation		$	376			$	352				7	%
Specialty Casualty			507				430				18	%
Specialty Financial			141				143				(1	%)
		$	1,024			$	925				11	%
Net Written Premiums:
Property & Transportation		$	284			$	276				3	%
Specialty Casualty			331				295				12	%
Specialty Financial			116				113				3	%
Other			24				20				20	%
		$	755			$	704				7	%
Combined Ratio (GAAP):
Property & Transportation			98.1	%			96.5	%
Specialty Casualty			87.8	%			92.7	%
Specialty Financial			91.0	%			88.5	%
Total Specialty Group			92.2	%			93.1	%

 

		Three months ended March 31,
		2014				2013
Reserve Development (Favorable)/Unfavorable:
Property & Transportation		$	(4	)		$	(6	)
Specialty Casualty			(24	)			(16	)
Specialty Financial			(1	)			(6	)
Other			(3	)			(5	)
		$	(32	)		$	(33	)
Points on Combined Ratio:
Property & Transportation			(1.1	)			(2.0	)
Specialty Casualty			(7.7	)			(6.2	)
Specialty Financial			(0.7	)			(4.8	)
Total Specialty Group			(4.2	)			(4.8	)

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

 

Page 7

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AMERICAN FINANCIAL GROUP, INC.

ANNUITY SEGMENT

(Dollars in Millions)

Components of Statutory Premiums

 

		Three months ended March 31,								Pct. Change
		2014				2013
Annuity Premiums by Market:
Financial Institutions Single Premium Retail Single Premium		$	480 425			$	194 360				147 18	%  %
Education Market - 403(b)			50				55				(9	%)
Variable Annuities			12				15				(20	%)
Total Annuity Premiums		$	967			$	624				55	%
Annuity Premiums by Product Type:
Fixed-Indexed Annuities Traditional Fixed Annuities		$	772 183			$	436 173				77 6	%  %
Variable Annuities			12				15				(20	%)
Total Annuity Premiums		$	967			$	624				55	%

Components of Core Operating Earnings Before Income Taxes

 

		Three months ended March 31,								Pct. Change
		2014				2013
Revenues:
Net investment income Other income		$	275 18			$	248 14				11 29	%  %
Total revenues			293				262				12	%
Costs and Expenses:
Annuity benefits			168				134				25	%
Acquisition expenses			31				31				—
Other expenses			21				21				—
Total costs and expenses			220				186				18	%
Core operating earnings before income taxes		$	73			$	76				(4	%)

Supplemental Fixed Annuity Information*

 

		Three months ended March 31,
		2014				2013
Average Fixed Annuity Reserves		$	21,066			$	17,506
Net Interest Spread Net Spread Earned			2.81 1.30	%  %			2.99 1.58	%  %

 

*	Excludes fixed annuity portion of variable annuity business.

 

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AMERICAN FINANCIAL GROUP, INC.

Notes to Financial Schedules

 

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

 

		Three months ended March 31,
		2014				2013
Core Operating Earnings before Income Taxes:
P&C insurance segment		$	108			$	96
Annuity segment			73				76
Run-off long-term care and life			(2	)			(1	)
Interest & other corporate expense			(41	)			(45	)
Core operating earnings before income taxes			138				126
Related income taxes			47				42
Core net operating earnings		$	91			$	84

 

b)

Shareholders’ Equity at March 31, 2014 includes $556 million ($6.20 per share) in unrealized after-tax gains on fixed maturities and $49 million ($0.55 per share) of retained earnings appropriated to managed investment entities. Shareholder’s Equity at December 31, 2013 includes $441 million ($4.93 per share) in unrealized after-tax gains on fixed maturities and $49 million ($0.55 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.

 

c)	Supplemental Notes:

 

•

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

 

•

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

 

•

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

 

•

Other includes an internal reinsurance facility.

 

Page 9

Exhibit 99.2

 

		American Financial Group, Inc.   Investor Supplement - First Quarter 2014   May 6, 2014   American Financial Group, Inc. Corporate Headquarters Great American Insurance Group Tower 301 E Fourth Street Cincinnati, OH 45202 513 579 6739

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American Financial Group, Inc. Table of Contents - Investor Supplement - First Quarter 2014

 

Section		Page
Table of Contents - Investor Supplement - First Quarter 2014			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																				Twelve Months Ended
		03/31/14				12/31/13				09/30/13				06/30/13				03/31/13				12/31/13				12/31/12
Highlights
Core net operating earnings		$	91			$	117			$	97			$	87			$	84			$	385			$	314
Net earnings			103				158				83				110				120				471				488
Total assets			42,770				42,087				40,947				39,414				39,139				42,087				39,171
Adjusted shareholders’ equity (a)			4,191				4,109				4,048				3,978				3,950				4,109				3,784
Property and Casualty net written premiums			755				821				1,067				749				704				3,341				2,949
Annuity statutory premiums			967				1,381				1,167				861				624				4,033				2,991
Per share data
Core net operating earnings per share		$	1.00			$	1.28			$	1.06			$	0.96			$	0.92			$	4.22			$	3.27
Diluted earnings per share			1.13				1.73				0.92				1.20				1.32				5.16				5.09
Adjusted book value per share (a)			46.79				45.90				45.36				44.78				43.94				45.90				42.52
Cash dividends per common share			0.220				1.220				0.195				0.195				0.195				1.805				0.970
Financial ratios
Annualized core operating return on equity (b)			9.1	%			11.8	%			10.0	%			9.2	%			8.9	%			10.0	%			8.5	%
Annualized return on equity (b)			10.3	%			16.0	%			8.6	%			11.5	%			12.8	%			12.3	%			13.2	%
Property and Casualty combined ratio - Specialty:
Loss & LAE ratio			56.9	%			62.4	%			66.1	%			60.3	%			56.5	%			61.7	%			64.3	%
Underwriting expense ratio			35.3	%			28.9	%			27.4	%			36.7	%			36.6	%			31.8	%			31.1	%
Combined ratio - Specialty			92.2	%			91.3	%			93.5	%			97.0	%			93.1	%			93.5	%			95.4	%
Net spread on fixed annuities:
Net interest spread			2.81	%			2.86	%			2.89	%			3.02	%			2.99	%			2.94	%			3.12	%
Net spread earned			1.30	%			1.67	%			1.50	%			1.65	%			1.58	%			1.60	%			1.48	%

 

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

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

 

3

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

 

		Three Months Ended																				Twelve Months Ended
		03/31/14				12/31/13				09/30/13				06/30/13				03/31/13				12/31/13				12/31/12
Property and Casualty Insurance
Underwriting profit		$	58			$	75			$	62			$	19			$	43			$	199			$	118
Net investment income			67				67				65				65				66				263				275
Other expense			(17	)			(11	)			(14	)			(2	)			(13	)			(40	)			(50	)
Property and Casualty Insurance operating earnings			108				131				113				82				96				422				343
Annuity earnings			73				92				78				82				76				328				256
Run-off Long-Term Care and Life losses			(2	)			(3	)			(4	)			(2	)			(1	)			(10	)			(4	)
Medicare Supplement and Critical Illness earnings (a)			—				—				—				—				—				—				28
Interest expense of parent holding companies			(17	)			(17	)			(17	)			(17	)			(17	)			(68	)			(71	)
Other expense			(24	)			(28	)			(22	)			(22	)			(28	)			(100	)			(89	)
Pre-tax core operating earnings			138				175				148				123				126				572				463
Income tax expense			47				58				51				36				42				187				149
Core net operating earnings			91				117				97				87				84				385				314
Non-core items, net of tax:
Gain on sale of Medicare Supplement and Critical Illness			—				—				—				—				—				—				114
Other realized gains			12				41				35				26				36				138				128
Long-Term Care reserve charge			—				—				—				—				—				—				(99	)
Significant A&E charges:
Property and Casualty Insurance run-off operations			—				—				(35	)			—				—				(35	)			(20	)
Former Railroad and Manufacturing operations			—				—				(14	)			—				—				(14	)			(1	)
AFG tax case and settlement of open tax years			—				—				—				—				—				—				67
ELNY guaranty fund assessments charge (b)			—				—				—				(3	)			—				(3	)			—
Other			—				—				—				—				—				—				(15	)
Net earnings		$	103			$	158			$	83			$	110			$	120			$	471			$	488

 

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

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

 

4

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

 

		Three Months Ended																				Twelve Months Ended
		03/31/14				12/31/13				09/30/13				06/30/13				03/31/13				12/31/13				12/31/12
Core net operating earnings		$	91			$	117			$	97			$	87			$	84			$	385			$	314
Net earnings		$	103			$	158			$	83			$	110			$	120			$	471			$	488
Average number of diluted shares			91.621				91.438				91.014				91.472				91.048				91.242				95.945
Diluted earnings per share:
Core net operating earnings per share		$	1.00			$	1.28			$	1.06			$	0.96			$	0.92			$	4.22			$	3.27
Gain on sale of Medicare Supplement and Critical Illness			—				—				—				—				—				—				1.19
Other realized gains			0.13				0.45				0.40				0.28				0.40				1.52				1.34
Long-Term Care reserve charge			—				—				—				—				—				—				(1.03	)
Significant A&E charges:
Property and Casualty Insurance run-off operations			—				—				(0.39	)			—				—				(0.39	)			(0.20	)
Former Railroad and Manufacturing operations			—				—				(0.15	)			—				—				(0.15	)			(0.02	)
AFG tax case and settlement of open tax years			—				—				—				—				—				—				0.70
ELNY guaranty fund assessments charge (a)			—				—				—				(0.04	)			—				(0.04	)			—
Other			—				—				—				—				—				—				(0.16	)
Diluted earnings per share		$	1.13			$	1.73			$	0.92			$	1.20			$	1.32			$	5.16			$	5.09

 

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

 

5

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

 

		Three Months Ended																				Twelve Months Ended
		03/31/14				12/31/13				09/30/13				06/30/13				03/31/13				12/31/13				12/31/12
Property and Transportation		$	6			$	17			$	16			$	(31	)		$	10			$	12			$	19
Specialty Casualty			38				32				19				32				19				102				53
Specialty Financial			10				17				22				15				13				67				44
Other Specialty			5				9				5				5				6				25				15
Underwriting profit - Specialty			59				75				62				21				48				206				131
Other charges, included in loss and LAE			1				—				—				2				5				7				13
Underwriting profit - Core			58				75				62				19				43				199				118
Special A&E charges, included in loss and LAE			—				—				(54	)			—				—				(54	)			(31	)
Underwriting profit (loss) - Property and Casualty Insurance		$	58			$	75			$	8			$	19			$	43			$	145			$	87
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	—			$	—			$	(1	)		$	1			$	—			$	—			$	9
Catastrophe loss			12				1				2				18				10				31				37
Total current accident year catastrophe losses		$	12			$	1			$	1			$	19			$	10			$	31			$	46
Loss reserve development (favorable) / adverse		$	(31	)		$	(5	)		$	40			$	(22	)		$	(28	)		$	(15	)		$	(30	)
Combined ratio:
Property and Transportation			98.1	%			95.8	%			97.1	%			110.3	%			96.5	%			99.2	%			98.7	%
Specialty Casualty			87.8	%			89.7	%			93.4	%			88.4	%			92.7	%			90.9	%			94.5	%
Specialty Financial			91.0	%			85.2	%			82.3	%			86.6	%			88.5	%			85.6	%			89.2	%
Other Specialty			79.9	%			60.4	%			70.7	%			74.0	%			71.1	%			68.8	%			78.5	%
Combined ratio - Specialty			92.2	%			91.3	%			93.5	%			97.0	%			93.1	%			93.5	%			95.4	%
Other core charges			0.0	%			0.1	%			(0.1	%)			0.2	%			0.7	%			0.3	%			0.4	%
Special A&E charges			0.0	%			0.0	%			5.7	%			0.0	%			0.0	%			1.7	%			1.1	%
Combined ratio			92.2	%			91.4	%			99.1	%			97.2	%			93.8	%			95.5	%			96.9	%
Loss and LAE components - property and casualty insurance
Current accident year, excluding catastrophe loss			59.4	%			62.8	%			67.4	%			61.1	%			59.8	%			63.1	%			65.5	%
Prior accident year development			(4.1	%)			(0.4	%)			4.2	%			(3.2	%)			(4.1	%)			(0.4	%)			(1.0	%)
Current accident year catastrophe loss			1.6	%			0.1	%			0.1	%			2.6	%			1.5	%			1.0	%			1.3	%
Loss and LAE ratio			56.9	%			62.5	%			71.7	%			60.5	%			57.2	%			63.7	%			65.8	%

 

6

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

 

		Three Months Ended																				Twelve Months Ended
		03/31/14				12/31/13				09/30/13				06/30/13				03/31/13				12/31/13				12/31/12
Gross written premiums		$	1,024			$	1,071			$	1,768			$	1,041			$	925			$	4,805			$	4,321
Ceded reinsurance premiums			(269	)			(250	)			(701	)			(292	)			(221	)			(1,464	)			(1,372	)
Net written premiums			755				821				1,067				749				704				3,341				2,949
Change in unearned premiums			(1	)			38				(118	)			(40	)			(17	)			(137	)			(102	)
Net earned premiums			754				859				949				709				687				3,204				2,847
Loss and LAE			428				537				626				428				388				1,979				1,829
Underwriting expense			267				247				261				260				251				1,019				887
Underwriting profit		$	59			$	75			$	62			$	21			$	48			$	206			$	131
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	—			$	—			$	(1	)		$	1			$	—			$	—			$	9
Catastrophe loss			12				1				2				18				10				31				37
Total current accident year catastrophe losses		$	12			$	1			$	1			$	19			$	10			$	31			$	46
Loss reserve development (favorable) / adverse		$	(32	)		$	(5	)		$	(13	)		$	(24	)		$	(33	)		$	(75	)		$	(74	)
Combined ratio:
Loss and LAE ratio			56.9	%			62.4	%			66.1	%			60.3	%			56.5	%			61.7	%			64.3	%
Underwriting expense ratio			35.3	%			28.9	%			27.4	%			36.7	%			36.6	%			31.8	%			31.1	%
Combined ratio			92.2	%			91.3	%			93.5	%			97.0	%			93.1	%			93.5	%			95.4	%
Loss and LAE components:
Current accident year, excluding catastrophe loss			59.5	%			62.8	%			67.4	%			61.1	%			59.8	%			63.1	%			65.5	%
Prior accident year development			(4.2	%)			(0.5	%)			(1.4	%)			(3.4	%)			(4.8	%)			(2.4	%)			(2.5	%)
Current accident year catastrophe loss			1.6	%			0.1	%			0.1	%			2.6	%			1.5	%			1.0	%			1.3	%
Loss and LAE ratio			56.9	%			62.4	%			66.1	%			60.3	%			56.5	%			61.7	%			64.3	%

 

7

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

 

		Three Months Ended																				Twelve Months Ended
		03/31/14				12/31/13				09/30/13				06/30/13				03/31/13				12/31/13				12/31/12
Gross written premiums		$	376			$	447			$	1,147			$	446			$	352			$	2,392			$	2,271
Ceded reinsurance premiums			(92	)			(98	)			(553	)			(118	)			(76	)			(845	)			(798	)
Net written premiums			284				349				594				328				276				1,547				1,473
Change in unearned premiums			17				61				(77	)			(27	)			17				(26	)			(50	)
Net earned premiums			301				410				517				301				293				1,521				1,423
Loss and LAE			201				307				407				236				192				1,142				1,062
Underwriting expense			94				86				94				96				91				367				342
Underwriting profit (loss)		$	6			$	17			$	16			$	(31	)		$	10			$	12			$	19
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	—			$	—			$	(1	)		$	1			$	—			$	—			$	8
Catastrophe loss			9				—				—				17				10				27				27
Total current accident year catastrophe losses		$	9			$	—			$	(1	)		$	18			$	10			$	27			$	35
Loss reserve development (favorable) / adverse		$	(4	)		$	3			$	(1	)		$	3			$	(6	)		$	(1	)		$	(16	)
Combined ratio:
Loss and LAE ratio			67.0	%			74.9	%			78.8	%			78.5	%			65.4	%			75.1	%			74.7	%
Underwriting expense ratio			31.1	%			20.9	%			18.3	%			31.8	%			31.1	%			24.1	%			24.0	%
Combined ratio			98.1	%			95.8	%			97.1	%			110.3	%			96.5	%			99.2	%			98.7	%
Loss and LAE components:
Current accident year, excluding catastrophe loss			65.3	%			74.1	%			79.1	%			71.6	%			64.0	%			73.4	%			73.8	%
Prior accident year development			(1.1	%)			0.8	%			(0.2	%)			1.2	%			(2.0	%)			(0.1	%)			(1.0	%)
Current accident year catastrophe loss			2.8	%			0.0	%			(0.1	%)			5.7	%			3.4	%			1.8	%			1.9	%
Loss and LAE ratio			67.0	%			74.9	%			78.8	%			78.5	%			65.4	%			75.1	%			74.7	%

 

8

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

 

		Three Months Ended																				Twelve Months Ended
		03/31/14				12/31/13				09/30/13				06/30/13				03/31/13				12/31/13				12/31/12
Gross written premiums		$	507			$	459			$	461			$	440			$	430			$	1,790			$	1,484
Ceded reinsurance premiums			(176	)			(138	)			(136	)			(157	)			(135	)			(566	)			(492	)
Net written premiums			331				321				325				283				295				1,224				992
Change in unearned premiums			(18	)			(11	)			(36	)			(6	)			(36	)			(89	)			(44	)
Net earned premiums			313				310				289				277				259				1,135				948
Loss and LAE			172				183				174				148				148				653				581
Underwriting expense			103				95				96				97				92				380				314
Underwriting profit		$	38			$	32			$	19			$	32			$	19			$	102			$	53
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	—			$	—			$	—			$	—			$	—			$	—			$	—
Catastrophe loss			1				—				1				—				—				1				3
Total current accident year catastrophe losses		$	1			$	—			$	1			$	—			$	—			$	1			$	3
Loss reserve development (favorable) / adverse		$	(24	)		$	2			$	(4	)		$	(22	)		$	(16	)		$	(40	)		$	(18	)
Combined ratio:
Loss and LAE ratio			55.0	%			59.0	%			60.3	%			53.4	%			57.3	%			57.5	%			61.3	%
Underwriting expense ratio			32.8	%			30.7	%			33.1	%			35.0	%			35.4	%			33.4	%			33.2	%
Combined ratio			87.8	%			89.7	%			93.4	%			88.4	%			92.7	%			90.9	%			94.5	%
Loss and LAE components:
Current accident year, excluding catastrophe loss			62.3	%			58.5	%			61.4	%			61.2	%			63.5	%			61.0	%			62.8	%
Prior accident year development			(7.7	%)			0.5	%			(1.2	%)			(8.0	%)			(6.2	%)			(3.6	%)			(1.8	%)
Current accident year catastrophe loss			0.4	%			0.0	%			0.1	%			0.2	%			0.0	%			0.1	%			0.3	%
Loss and LAE ratio			55.0	%			59.0	%			60.3	%			53.4	%			57.3	%			57.5	%			61.3	%

 

9

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

 

		Three Months Ended																				Twelve Months Ended
		03/31/14				12/31/13				09/30/13				06/30/13				03/31/13				12/31/13				12/31/12
Gross written premiums		$	141			$	164			$	160			$	155			$	143			$	622			$	566
Ceded reinsurance premiums			(25	)			(32	)			(36	)			(38	)			(30	)			(136	)			(155	)
Net written premiums			116				132				124				117				113				486				411
Change in unearned premiums			1				(13	)			(3	)			(4	)			3				(17	)			(6	)
Net earned premiums			117				119				121				113				116				469				405
Loss and LAE			45				42				37				37				42				158				157
Underwriting expense			62				60				62				61				61				244				204
Underwriting profit		$	10			$	17			$	22			$	15			$	13			$	67			$	44
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	—			$	—			$	—			$	—			$	—			$	—			$	1
Catastrophe loss			2				1				1				1				—				3				5
Total current accident year catastrophe losses		$	2			$	1			$	1			$	1			$	—			$	3			$	6
Loss reserve development (favorable) / adverse		$	(1	)		$	(4	)		$	(4	)		$	—			$	(6	)		$	(14	)		$	(29	)
Combined ratio:
Loss and LAE ratio			37.9	%			34.2	%			31.2	%			32.9	%			35.8	%			33.5	%			38.8	%
Underwriting expense ratio			53.1	%			51.0	%			51.1	%			53.7	%			52.7	%			52.1	%			50.4	%
Combined ratio			91.0	%			85.2	%			82.3	%			86.6	%			88.5	%			85.6	%			89.2	%
Loss and LAE components:
Current accident year, excluding catastrophe loss			37.1	%			36.7	%			33.7	%			32.9	%			40.3	%			35.9	%			44.6	%
Prior accident year development			(0.7	%)			(3.2	%)			(3.2	%)			(0.7	%)			(4.8	%)			(3.0	%)			(7.1	%)
Current accident year catastrophe loss			1.5	%			0.7	%			0.7	%			0.7	%			0.3	%			0.6	%			1.3	%
Loss and LAE ratio			37.9	%			34.2	%			31.2	%			32.9	%			35.8	%			33.5	%			38.8	%

 

10

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

 

		Three Months Ended																				Twelve Months Ended
		03/31/14				12/31/13				09/30/13				06/30/13				03/31/13				12/31/13				12/31/12
Gross written premiums		$	—			$	1			$	—			$	—			$	—			$	1			$	—
Ceded reinsurance premiums			24				18				24				21				20				83				73
Net written premiums			24				19				24				21				20				84				73
Change in unearned premiums			(1	)			1				(2	)			(3	)			(1	)			(5	)			(2	)
Net earned premiums			23				20				22				18				19				79				71
Loss and LAE			10				5				8				7				6				26				29
Underwriting expense			8				6				9				6				7				28				27
Underwriting profit		$	5			$	9			$	5			$	5			$	6			$	25			$	15
Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium		$	—			$	—			$	—			$	—			$	—			$	—			$	—
Catastrophe loss			—				—				—				—				—				—				2
Total current accident year catastrophe losses		$	—			$	—			$	—			$	—			$	—			$	—			$	2
Loss reserve development (favorable) / adverse		$	(3	)		$	(6	)		$	(4	)		$	(5	)		$	(5	)		$	(20	)		$	(11	)
Combined ratio:
Loss and LAE ratio			45.8	%			28.3	%			35.0	%			35.1	%			33.7	%			32.9	%			41.3	%
Underwriting expense ratio			34.1	%			32.1	%			35.7	%			38.9	%			37.4	%			35.9	%			37.2	%
Combined ratio			79.9	%			60.4	%			70.7	%			74.0	%			71.1	%			68.8	%			78.5	%

 

11

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

 

		Three Months Ended																				Twelve Months Ended
		03/31/14				12/31/13				09/30/13				06/30/13				03/31/13				12/31/13				12/31/12
Net investment income		$	275			$	270			$	259			$	257			$	248			$	1,034			$	976
Guaranteed withdrawal benefit fees			8				7				7				6				5				25				14
Policy charges and other miscellaneous income			10				14				10				9				9				42				38
Total revenues			293				291				276				272				262				1,101				1,028
Annuity benefits			168				137				140				120				134				531				541
Acquisition expenses			31				35				35				48				31				149				150
Other expenses			21				27				23				22				21				93				81
Total costs and expenses			220				199				198				190				186				773				772
Earnings before income taxes—core			73				92				78				82				76				328				256
ELNY guaranty fund assessments charge (a)			—				—				—				(5	)			—				(5	)			—
Earnings before income taxes		$	73			$	92			$	78			$	77			$	76			$	323			$	256
Detail of annuity benefits above:
Interest credited—fixed		$	121			$	118			$	113			$	111			$	109			$	451			$	438
Interest credited—fixed component of variable annuities			1				1				2				1				2				6				7
Change in expected death and annuitization reserve			4				5				4				6				4				19				19
Amortization of sales inducements			7				7				8				8				7				30				32
Guaranteed withdrawal benefit reserve			8				10				10				10				8				38				14
Change in other benefit reserves			3				1				2				3				1				7				10
Embedded derivative mark-to-market			54				74				33				(3	)			80				184				93
Equity option mark-to-market			(30	)			(85	)			(32	)			(16	)			(77	)			(210	)			(66	)
Unlockings			—				6				—				—				—				6				(6	)
Total annuity benefits		$	168			$	137			$	140			$	120			$	134			$	531			$	541

 

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

 

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

 

		Three Months Ended																				Twelve Months Ended
		03/31/14				12/31/13				09/30/13				06/30/13				03/31/13				12/31/13				12/31/12
Average fixed annuity investments (at amortized cost)		$	21,402			$	20,524			$	19,519			$	18,615			$	17,945			$	19,151			$	16,650
Average annuity benefits accumulated			21,066				20,092				19,035				18,151				17,506				18,696				16,394
Investments in excess of annuity benefits accumulated		$	336			$	432			$	484			$	464			$	439			$	455			$	256
As % of average annuity benefits accumulated (except as noted)
Net investment income (as % of investments)			5.10	%			5.21	%			5.27	%			5.45	%			5.48	%			5.35	%			5.80	%
Interest credited			(2.29	%)			(2.35	%)			(2.38	%)			(2.43	%)			(2.49	%)			(2.41	%)			(2.68	%)
Net interest spread on fixed annuities			2.81	%			2.86	%			2.89	%			3.02	%			2.99	%			2.94	%			3.12	%
Policy charges and other miscellaneous income			0.13	%			0.22	%			0.15	%			0.13	%			0.14	%			0.16	%			0.16	%
Other annuity benefit expenses, net			(0.27	%)			(0.31	%)			(0.38	%)			(0.46	%)			(0.35	%)			(0.37	%)			(0.36	%)
Acquisition expenses			(0.55	%)			(0.75	%)			(0.72	%)			(1.00	%)			(0.69	%)			(0.79	%)			(0.75	%)
Other expenses			(0.37	%)			(0.53	%)			(0.44	%)			(0.43	%)			(0.45	%)			(0.46	%)			(0.46	%)
Change in fair value of derivatives			(0.45	%)			0.22	%			0.00	%			0.39	%			(0.06	%)			0.13	%			(0.16	%)
Unlockings			0.00	%			(0.04	%)			0.00	%			0.00	%			0.00	%			(0.01	%)			(0.07	%)
Net spread earned on fixed annuities - core			1.30	%			1.67	%			1.50	%			1.65	%			1.58	%			1.60	%			1.48	%
Average annuity benefits accumulated		$	21,066			$	20,092			$	19,035			$	18,151			$	17,506			$	18,696			$	16,394
Net spread earned on fixed annuities			1.30	%			1.67	%			1.50	%			1.65	%			1.58	%			1.60	%			1.48	%
Earnings on fixed annuity benefits accumulated		$	68			$	84			$	72			$	75			$	69			$	300			$	243
Investments in excess of annuity benefits accumulated		$	336			$	432			$	484			$	464			$	439			$	455			$	256
Net investment income (as % of investments)			5.10	%			5.21	%			5.27	%			5.45	%			5.48	%			5.35	%			5.80	%
Earnings on investments in excess of annuity benefits accumulated		$	5			$	6			$	6			$	6			$	6				24				14
Variable annuity earnings			—				2				—				1				1				4				(1	)
Earnings before income taxes - core			73				92				78				82				76				328				256
ELNY guaranty fund assessments charge (a)			—				—				—				(5	)			—				(5	)			—
Earnings before income taxes		$	73			$	92			$	78			$	77			$	76			$	323			$	256

 

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

 

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

 

		Three Months Ended																				Twelve Months Ended
		03/31/14				12/31/13				09/30/13				06/30/13				03/31/13				12/31/13				12/31/12
Retail single premium annuities - indexed		$	386			$	565			$	509			$	472			$	333			$	1,879			$	1,662
Retail single premium annuities - fixed			39				53				48				37				27				165				153
Financial institutions single premium annuities - indexed			366				498				352				169				83				1,102				291
Financial institutions single premium annuities - fixed			114				201				198				118				111				628				587
Education market - 403(b) fixed and indexed annuities			50				51				49				52				55				207				237
Subtotal fixed annuity premiums			955				1,368				1,156				848				609				3,981				2,930
Variable annuities			12				13				11				13				15				52				61
Total annuity premiums		$	967			$	1,381			$	1,167			$	861			$	624			$	4,033			$	2,991

 

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

 

		Three Months Ended																				Twelve Months Ended
		03/31/14				12/31/13				09/30/13				06/30/13				03/31/13				12/31/13				12/31/12
Beginning fixed annuity reserves		$	20,679			$	19,505			$	18,564			$	17,737			$	17,274			$	17,274			$	15,188
Premiums			955				1,368				1,156				848				609				3,981				2,930
Federal Home Loan Bank advances			—				—				—				200				—				200				—
Surrenders, benefits and other withdrawals			(375	)			(408	)			(381	)			(352	)			(352	)			(1,493	)			(1,397	)
Interest and other annuity benefit expenses:
Interest credited			121				118				113				111				109				451				438
Embedded derivative mark-to-market			54				74				33				(3	)			80				184				93
Change in other benefit reserves			19				18				20				23				17				78				32
Unlockings			—				4				—				—				—				4				(10	)
Ending fixed annuity reserves		$	21,453			$	20,679			$	19,505			$	18,564			$	17,737			$	20,679			$	17,274
Reconciliation to annuity benefits accumulated:
Ending fixed annuity reserves		$	21,453			$	20,679			$	19,505			$	18,564			$	17,737			$	20,679			$	17,274
Impact of unrealized investment gains on reserves			97				71				84				87				140				71				136
Fixed component of variable annuities			194				194				196				197				198				194				199
Annuity benefits accumulated per balance sheet		$	21,744			$	20,944			$	19,785			$	18,848			$	18,075			$	20,944			$	17,609
Annualized surrenders and other withdrawals as a % of beginning reserves			7.3	%			8.4	%			8.2	%			7.9	%			8.2	%			8.6	%			9.2	%

 

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

 

		03/31/14				12/31/13				09/30/13				06/30/13				03/31/13				12/31/12
Assets:
Total cash and investments		$	32,727			$	31,313			$	29,921			$	29,262			$	29,084			$	28,449
Recoverables from reinsurers			2,969				3,157				3,138				3,044				3,083				3,750
Prepaid reinsurance premiums			438				408				662				520				466				471
Agents’ balances and premiums receivable			735				739				801				754				649				636
Deferred policy acquisition costs			890				975				867				818				565				550
Assets of managed investment entities			2,723				2,888				2,779				2,973				3,285				3,225
Other receivables			524				854				1,078				422				384				539
Variable annuity assets (separate accounts)			666				665				629				608				614				580
Other assets			913				903				887				828				824				786
Goodwill			185				185				185				185				185				185
Total assets		$	42,770			$	42,087			$	40,947			$	39,414			$	39,139			$	39,171
Liabilities and Equity:
Unpaid losses and loss adjustment expenses		$	6,134			$	6,410			$	6,441			$	6,098			$	6,238			$	6,845
Unearned premiums			1,788				1,757				2,047				1,789				1,697				1,651
Annuity benefits accumulated			21,744				20,944				19,785				18,848				18,075				17,609
Life, accident and health reserves			2,039				2,008				2,011				2,017				2,021				2,059
Payable to reinsurers			400				508				601				367				250				475
Liabilities of managed investment entities			2,413				2,567				2,429				2,603				2,880				2,892
Long-term debt			913				913				913				949				950				953
Variable annuity liabilities (separate accounts)			666				665				629				608				614				580
Other liabilities			1,700				1,546				1,381				1,497				1,506				1,359
Total liabilities		$	37,797			$	37,318			$	36,237			$	34,776			$	34,231			$	34,423
Shareholders’ equity:
Common stock		$	90			$	90			$	89			$	89			$	90			$	89
Capital surplus			1,138				1,123				1,109				1,088				1,090				1,063
Appropriated retained earnings			49				49				45				33				64				75
Unappropriated retained earnings			2,842				2,777				2,729				2,664				2,620				2,520
Unrealized gains - fixed maturities			556				441				449				462				719				719
Unrealized gains - equities			129				121				119				138				146				104
Other comprehensive income, net of tax			(8	)			(2	)			2				(1	)			4				8
Total shareholders’ equity			4,796				4,599				4,542				4,473				4,733				4,578
Noncontrolling interests			177				170				168				165				175				170
Total liabilities and equity		$	42,770			$	42,087			$	40,947			$	39,414			$	39,139			$	39,171

 

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

 

		03/31/14				12/31/13				09/30/13				06/30/13				03/31/13				12/31/12
Shareholders’ equity		$	4,796			$	4,599			$	4,542			$	4,473			$	4,733			$	4,578
Appropriated retained earnings			(49	)			(49	)			(45	)			(33	)			(64	)			(75	)
Shareholders’ equity, excluding appropriated retained earnings			4,747				4,550				4,497				4,440				4,669				4,503
Unrealized (gains) on fixed maturities			(556	)			(441	)			(449	)			(462	)			(719	)			(719	)
Adjusted shareholders’ equity			4,191				4,109				4,048				3,978				3,950				3,784
Goodwill			(185	)			(185	)			(185	)			(185	)			(185	)			(185	)
Intangibles			(27	)			(22	)			(26	)			(29	)			(33	)			(36	)
Tangible adjusted shareholders’ equity		$	3,979			$	3,902			$	3,837			$	3,764			$	3,732			$	3,563
Common shares outstanding			89.589				89.513				89.224				88.821				89.883				88.979
Book value per share:
Excluding appropriated retained earnings (a)		$	52.99			$	50.83			$	50.40			$	49.98			$	51.94			$	50.61
Adjusted (b)			46.79				45.90				45.36				44.78				43.94				42.52
Tangible, adjusted (c)			44.42				43.59				43.00				42.38				41.52				40.04
Market capitalization
AFG’s closing common share price		$	57.71			$	57.72			$	54.06			$	48.91			$	47.38			$	39.52
Market capitalization		$	5,170			$	5,167			$	4,823			$	4,344			$	4,259			$	3,516
Price / Adjusted book value ratio			1.23				1.26				1.19				1.09				1.08				0.93

 

(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.

 

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

 

		03/31/14				12/31/13				09/30/13				06/30/13				03/31/13				12/31/12
Direct obligations of AFG		$	840			$	840			$	840			$	840			$	840			$	840
Direct obligations of subsidiaries			73				73				73				89				90				93
Payable to subsidiary trusts			—				—				—				20				20				20
Long-term debt		$	913			$	913			$	913			$	949			$	950			$	953
Obligations secured by real estate			(61	)			(61	)			(61	)			(62	)			(62	)			(62	)
Debt excluding obligations secured by real estate		$	852			$	852			$	852			$	887			$	888			$	891
Total capital (a)		$	5,837			$	5,633			$	5,578			$	5,554			$	5,794			$	5,626
Total capital excluding obligations secured by real estate (a)			5,776				5,572				5,517				5,492				5,732				5,564
Total adjusted capital (b)		$	5,281			$	5,192			$	5,129			$	5,092			$	5,074			$	4,907
Total adjusted capital excluding obligations secured by real estate (b)			5,220				5,131				5,068				5,030				5,012				4,845
Ratio of debt to total capital (a):
Including debt secured by real estate			15.6	%			16.2	%			16.4	%			17.1	%			16.4	%			16.9	%
Excluding debt secured by real estate			14.8	%			15.3	%			15.4	%			16.2	%			15.5	%			16.0	%
Ratio of debt to total adjusted capital (b):
Including debt secured by real estate			17.3	%			17.6	%			17.8	%			18.6	%			18.7	%			19.4	%
Excluding debt secured by real estate			16.3	%			16.6	%			16.8	%			17.6	%			17.7	%			18.4	%

 

(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																				Twelve Months Ended
		03/31/14				12/31/13				09/30/13				06/30/13				03/31/13				12/31/13				12/31/12
Property and Casualty Insurance
Paid Losses (GAAP)		$	510			$	577			$	417			$	520			$	357			$	1,871			$	2,026

 

		03/31/14				12/31/13				09/30/13				06/30/13				03/31/13				12/30/12
Statutory Surplus
Property and Casualty Insurance		$	1,981			$	1,896			$	2,133			$	2,096			$	2,090			$	2,015
AFG’s principal annuity subsidiaries (total adjusted capital)		$	1,688			$	1,661			$	1,590			$	1,517			$	1,483			$	1,380
Allowable dividends without regulatory approval
Property and Casualty Insurance		$	335			$	335			$	237			$	237			$	237			$	237
Annuity and Run-off			275				275				158				158				158				158
Total		$	610			$	610			$	395			$	395			$	395			$	395

 

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American Financial Group, Inc. Total Cash and Investments and Quarterly Net Investment Income March 31, 2014 ($ 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		$	661			$	682			$	533			$	—			$	1,876				6	%
Fixed maturities - Available for sale			5,214				22,164				12				—				27,390				84	%
Fixed maturities - Trading			180				117				—				—				297				1	%
Equity securities			896				360				41				—				1,297				4	%
Policy loans			—				235				—				—				235				1	%
Mortgage loans			142				746				—				—				888				2	%
Real estate and other investments			325				671				8				(260	)			744				2	%
Total cash and investments		$	7,418			$	24,975			$	594			$	(260	)		$	32,727				100	%

 

		Property and Casualty Insurance				Annuity and Run-off				Other				Consolidate CLOs				Total AFG Consolidated
Total quarterly net investment income:
Fixed maturities - Available for sale		$	51			$	272			$	—			$	—			$	323
Fixed maturities - Trading			2				2				—				—				4
Equity securities			8				8				—				—				16
Equity in investees			3				3				—				—				6
Other investments			5				16				1				(5	)			17
Gross investment income			69				301				1				(5	)			366
Investment expenses			(2	)			(3	)			—				—				(5	)
Total net investment income		$	67			$	298			$	1			$	(5	)		$	361

 

		Equity Securities
		Cost				Fair Value				Unrealized Gain (Loss)
Annuity and Run-off		$	318			$	360			$	42
Property and Casualty Insurance			733				896				163
Other			41				41				—
Total AFG consolidated		$	1,092			$	1,297			$	205

 

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American Financial Group, Inc. Fixed Maturities - By Security Type - AFG Consolidated March 31, 2014 ($ in millions )

 

		Amortized Cost				Fair Value				Unrealized Gain (Loss)				% of Fair Value				% of Investment Portfolio
US Government and government agencies		$	343			$	348			$	5				1	%			1	%
States, municipalities and political subdivisions			5,609				5,753				144				21	%			18	%
Foreign government			289				298				9				1	%			1	%
Residential mortgage-backed securities			4,203				4,591				388				17	%			14	%
Commercial mortgage-backed securities			2,442				2,626				184				9	%			8	%
Asset-backed securities			2,742				2,765				23				10	%			8	%
Corporate bonds
Manufacturing			2,186				2,308				122				8	%			7	%
Banks, lending and credit institutions			1,963				2,079				116				8	%			6	%
Gas and electric services			1,287				1,406				119				5	%			5	%
Insurance and insurance related			781				840				59				3	%			3	%
Other corporate			4,436				4,673				237				17	%			14	%
Total AFG consolidated		$	26,281			$	27,687			$	1,406				100	%			85	%
Annuity and Run-off		$	21,070			$	22,281				1,211				80	%			68	%
Property and Casualty Insurance			5,210				5,394				184				20	%			17	%
Other			1				12				11				0	%			0	%
Total AFG consolidated		$	26,281			$	27,687			$	1,406				100	%			85	%
Annualized yield on available for sale fixed maturities:
Excluding investment expense (a)			5.03	%
Net of investment expense (a)			4.95	%
Approximate average life and duration:
Approximate average life			6.5 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 March 31, 2014 ($ in millions )

 

		Amortized Cost				Fair Value				Unrealized Gain (Loss)				% of Fair Value
Annuity and Run-off:
US Government and government agencies		$	87			$	88			$	1				0	%
States, municipalities and political subdivisions			3,401				3,469				68				15	%
Foreign government			17				19				2				0	%
Residential mortgage-backed securities			3,400				3,729				329				17	%
Commercial mortgage-backed securities			2,225				2,396				171				11	%
Asset-backed securities			2,162				2,184				22				10	%
Corporate debt			9,778				10,396				618				47	%
Total Annuity and Run-off		$	21,070			$	22,281			$	1,211				100	%
Annualized yield on available for sale fixed maturities:
Excluding investment expense (a)			5.25	%
Net of investment expense (a)			5.20	%
Approximate average life and duration:
Approximate average life			7 years
Approximate duration			5 years
		Amortized Cost				Fair Value				Unrealized Gain (Loss)				% of Fair Value
Property and Casualty Insurance:
US Government and government agencies		$	256			$	260			$	4				5	%
States, municipalities and political subdivisions			2,208				2,284				76				42	%
Foreign government			272				279				7				5	%
Residential mortgage-backed securities			802				850				48				16	%
Commercial mortgage-backed securities			217				230				13				4	%
Asset-backed securities			580				581				1				11	%
Corporate debt			875				910				35				17	%
Property and Casualty Insurance		$	5,210			$	5,394			$	184				100	%
Annualized yield on available for sale fixed maturities:
Excluding investment expense (a)			4.06	%
Net of investment expense (a)			3.90	%
Tax equivalent, net of investment expense (b)			4.55	%
Approximate average life and duration:
Approximate average life			4.5 years
Approximate duration			3.5 years

 

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

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

 

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American Financial Group, Inc. Fixed Maturities - Credit Rating and NAIC Designation March 31, 2014 ($ in millions)

 

		GAAP Data
By Credit Rating		Amortized Cost				Fair Value				% of Fair Value				Unrealized Gain (Loss)
Investment grade
AAA		$	5,839			$	6,043				22	%		$	204
AA			5,375				5,516				20	%			141
A			6,638				7,009				25	%			371
BBB			4,919				5,240				19	%			321
Subtotal - Investment grade			22,771				23,808				86	%			1,037
BB			660				694				2	%			34
B			510				531				2	%			21
Other			2,340				2,654				10	%			314
Total		$	26,281			$	27,687				100	%		$	1,406

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		$	20,417				79	%		$	20,418			$	21,499			$	1,081
NAIC 2			4,766				18	%			4,766				5,064				298
			25,183				97	%			25,184				26,563				1,379
NAIC 3			480				2	%			481				506				25
NAIC 4			207				1	%			208				220				12
NAIC 5			51				0	%			52				57				5
NAIC 6			60				0	%			63				86				23
Total		$	25,981				100	%		$	25,988			$	27,432			$	1,444

 

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American Financial Group, Inc. Mortgage-Backed Securities - AFG Consolidated March 31, 2014 ($ in millions)

 

By Asset Type		Amortized Cost				Fair Value				% of Fair Value				% of Investment Portfolio				Unrealized Gain (Loss)
Residential
Agency		$	310			$	315				4	%			1	%		$	5
Prime (Non-Agency)			1,996				2,209				31	%			7	%			213
Alt-A			989				1,091				15	%			3	%			102
Subprime			908				976				14	%			3	%			68
Subtotal - Residential			4,203				4,591				64	%			14	%			388
Commercial			2,442				2,626				36	%			8	%			184
Total AFG consolidated		$	6,645			$	7,217				100	%			22	%		$	572
Annuity and Run-off		$	5,625			$	6,125				85	%			19	%			500
Property and Casualty Insurance			1,019				1,080				15	%			3	%			61
Other			1				12				0	%			0	%			11
Total AFG consolidated		$	6,645			$	7,217				100	%			22	%		$	572

 

•

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

 

•

The average amortized cost as a percent of par is—Prime 83%; Alt-A 78%; Subprime 85%; CMBS 99%.

 

•

The average FICO score of our residential MBS securities is—Prime 738; Alt-A 712; Subprime 642.

 

•

100% of our Commercial MBS portfolio is investment-grade rated (84% AAA) and the average subordination for this group assets is 38%.

 

•

The approximate average life by collateral type is—Residential 5 years; Commercial 4 years.

 

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American Financial Group, Inc. Mortgage-Backed Securities Portfolio March 31, 2014 ($ in millions)

 

Annuity and Run-off:

 

		Amortized								% of				%of Investment				Unrealized
By Asset Type		Cost				Fair Value				Fair Value				Portfolio				Gain (Loss)
Residential
Agency		$	131			$	136				2	%			1	%		$	5
Prime (Non-Agency)			1,855				2,040				33	%			8	%			185
Alt-A			769				854				14	%			3	%			85
Subprime			645				699				12	%			3	%			54
Subtotal - Residential			3,400				3,729				61	%			15	%			329
Commercial			2,225				2,396				39	%			10	%			171
Total Annuity and Run-off		$	5,625			$	6,125				100	%			25	%		$	500
Property and Casualty Insurance:
By Asset Type		Amortized Cost				Fair Value				% of Fair Value				% of Investment Portfolio				Unrealized Gain (Loss)
Residential
Agency		$	179			$	179				17	%			3	%		$	—
Prime (Non-Agency)			140				157				14	%			2	%			17
Alt-A			220				237				22	%			3	%			17
Subprime			263				277				26	%			4	%			14
Subtotal - Residential			802				850				79	%			12	%			48
Commercial			217				230				21	%			3	%			13
Total Property and Casualty Insurance		$	1,019			$	1,080				100	%			15	%		$	61

 

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American Financial Group, Inc. Mortgage-Backed Securities - Credit Rating and NAIC Designation March 31, 2014 ($ in millions)

 

		GAAP data
		Amortized								% of				Unrealized
By Credit Rating		Cost				Fair Value				Fair Value				Gain (Loss)
Investment grade
AAA		$	2,801			$	2,975				41	%		$	174
AA			370				391				6	%			21
A			574				604				8	%			30
BBB			312				335				5	%			23
Subtotal - investment grade			4,057				4,305				60	%			248
BB			304				314				4	%			10
B			438				453				6	%			15
Other			1,846				2,145				30	%			299
Total		$	6,645			$	7,217				100	%		$	572

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		$	6,229				95	%		$	6,230			$	6,831			$	601
NAIC 2			114				2	%			114				115				1
			6,343				97	%			6,344				6,946				602
NAIC 3			46				1	%			47				48				1
NAIC 4			86				1	%			87				93				6
NAIC 5			4				0	%			4				11				7
NAIC 6			39				1	%			40				56				16
Total		$	6,518				100	%		$	6,522			$	7,154			$	632

 

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