We believe our disclosures meet the requirements of Item 103 of Regulation S-K. Nonetheless, we propose adding language in Item 3 of AFG's 2009 Form 10-K to clarify that proceedings and claims related to asbestos, environmental and other substance and workplace hazards that are not specifically described in Item 3 are not individually material to AFG.

The second risk factor on page 20 refers readers to Item 3, Legal Proceedings (page 21) and Item 7, Management's Discussion and Analysis (page 39) (which includes a reference to Note L, Contingencies on page F-24) where detailed disclosures are made relating to the risk from A&E exposures at certain railroad sites formerly owned by AFG's predecessor. With respect to the "potential consequences," page 20 states that the litigation is "unpredictable and the outcome of these cases is uncertain. ... Nevertheless, American Premier believes that its accruals for potential environmental liabilities are adequate to cover the probable amount of such liabilities ..."

We intend to add disclosure similar to the following in our March 31, 2009, Form 10-Q:

Fair values for AFG's portfolio are determined by AFG's internal investment professionals using data from nationally recognized pricing services as well as non-binding broker quotes. Fair values of equity securities are generally based on closing prices obtained from the pricing services. For mortgage-backed securities ("MBS"), which comprise approximately one-third of AFG's fixed maturities, prices for each security are generally obtained from both pricing services and broker quotes. For the other two-thirds, 90% are priced using a pricing service and the balance is priced internally or by using non-binding broker quotes. When prices obtained for the same security vary, AFG's investment professionals select the price they believe is most indicative of an exit price.

The pricing services use a variety of observable inputs to estimate fair value of fixed maturities that do not trade on a daily basis. Based upon information provided by the pricing services, these inputs include, but are not limited to, recent reported trades, benchmark yields, issuer spreads, bids or offers, reference data, and measures of volatility. Included in the pricing of mortgage-backed securities are estimates of the rate of future prepayments and defaults of principal over the remaining life of the underlying collateral. Due to the lack of transparency in the process that brokers use to develop prices, valuations that are based on brokers' prices are classified as Level 3 in the GAAP hierarchy unless the price can be corroborated, for example, by comparison to similar securities priced using observable inputs.

Valuation techniques utilized by pricing services and prices obtained from external sources are reviewed by AFG's internal investment professionals who are familiar with the securities being priced and the markets in which they trade to ensure the fair value determination is representative of an exit price (consistent with SFAS No. 157). These investment managers validate the appropriateness of the prices obtained considering widely published indices as benchmarks, changes in interest rates, general economic conditions and the credit quality of the specific issuers. Prices obtained from a broker or pricing service are adjusted only in cases where they are deemed not to be representative of an appropriate exit price (fewer than 1% of the securities).

The requested disclosures are contained in the response to comment number 3, above.

We intend to adopt FASB Staff Position ("FSP") FAS 115-2 and FSP 157-4 in our March 31, 2009, Form 10-Q. Accordingly, we propose revising the paragraph that corresponds to the last paragraph on page F-15 with disclosure similar to the following. Note that the December 31, 2008 data shown below will be updated with March 31, 2009 data in the Form 10-Q.

At December 31, 2008, AFG held approximately 1,800 fixed maturity securities with a fair value of $14.1 billion and gross unrealized losses of $2.0 billion. Investment grade securities (as determined by nationally recognized rating agencies) represented approximately 87% of the total unrealized loss and 94% of the fair value. Mortgage-backed securities and corporate bonds (excluding utilities) comprised approximately 80% of the fair value of the fixed maturity portfolio at December 31, 2008, and 95% of the gross unrealized losses. Gross unrealized losses on these two groups increased significantly during 2008 as widespread deterioration in economic conditions resulted in significantly wider spreads. Approximately 38% of the gross unrealized losses on these two groups at December 31, 2008, included securities that were in an unrealized loss position for more than 12 months.

AFG recorded approximately $446 million in other than temporary impairment charges on securities in 2008 including $245 million on fixed maturities, primarily relating to corporate bonds and mortgage-backed securities. Management concluded that no additional charges for other than temporary impairment were required on these two groups of securities based on many factors, including AFG's ability and intent to hold the investments for a period of time sufficient to allow for anticipated recovery of its amortized cost, the length of time and the extent to which fair value has been below cost, analysis of historical and projected company-specific financial data, the outlook for industry sectors, credit ratings including the fact that 94% of the unrealized losses on AFG's mortgage-backed securities related to investment grade securities, expectations with respect to cash flows from the underlying collateral on mortgage-backed securities, and credit enhancement of certain issues by monoline insurers.

Nearly 70% of the gross unrealized losses on AFG's perpetual preferred stocks relate to investments in banks and credit institutions, all of which were investment grade rated. AFG believes these unrealized losses are due primarily to temporary market and sector-related factors and does not consider these securities to be other than temporarily impaired. AFG has the ability and intent to hold these securities until they recover in value.