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美國證券交易委員會
華盛頓特區 20549
表格 10-Q
☑ 根據《1934年證券交易法》第13或15(d)條款的季度報告
截止至本季度結束 2024年9月30日
或
☐ 根據1934年證券交易法第13或第15(d)條的過渡報告
為過渡期從 ____ 至 ____

委員會檔案號碼。 1-13653

afglogoa04.jpg
美國金融集團，股份有限公司。
根據法律註冊的俄亥俄                                                                IRS 雇主識別號碼 31-1544320
301 East Fourth Street, 辛辛那提, 俄亥俄 45202
(513) 579-2121
根據法案第12(b)條註冊的證券：
每個班級的標題交易標的（s）註冊的每個交易所的名稱
普通股AFG紐約證券交易所
5.875% 次級公司債，到期日為2059年3月30日AFGB紐約證券交易所
5.625% 次級債券，於2060年6月1日到期AFGD紐約證券交易所
5.125% 次級債券，於2059年12月15日到期AFGC紐約證券交易所
4.50% 次級債券，於2060年9月15日到期AFGE紐約證券交易所
請勾選表示：公司已在過去12個月內按照《證券交易法》第13或15(d)條的規定提交了所有要求提交的報告，並且在過去90天內一直遵守這些報告要求。 Yes ☑ 不 ☐

請以勾選方式表明申請者在過去12個月內是否已電子提交根據S-t規則第405條所要求的每個互動數據文件。 Yes ☑ 沒有 ☐

請用勾選符號表示登記者是否為大型加速遞交人、加速遞交人、非加速遞交人、較小的報告公司或新興成長公司。參見《交易所法》第120億2條關於“大型加速遞交人”、“加速遞交人”、“較小的報告公司”和“新興成長公司”的定義。
大型加速歸檔人  ☑                        加速申報者  ☐                         非加速申報者  ☐
小型報告公司  ☐                   新興成長型企業  ☐
如果是新興成長公司，請勾選指示，如果登記人已選擇不遵守根據《交易所法》第13(a)條規定提供的任何新的或修訂後的財務會計標準的擴展過渡期。☐
請勾選表示登記者是否為外殼公司（按照交易所法案規則120億2定義）。是☐ 沒有 ☑
截至2024年11月1日， 83,931,257 註冊人的普通股已發行股份為，排除由子公司持有的1490萬股。

目錄
美國金融集團股份有限公司，10-Q
目錄
 
頁面

目錄
美國金融集團股份有限公司，10-Q
第I部分
項目 1. — 基本報表
美國金融集團股份有限公司及其子公司
未經審核的綜合賬戶表
(以百萬為單位的美元)
九月三十日，
2024		12月31日,
2023
資產：
現金及現金等價物$1,322 $1,225 
投資：
以公允價值計量的可供出售固定到期資產（攤銷成本 — $10,586 及10,752；預期信用損失准備$25 及12)
10,435 10,377 
固定到期的資產，以公允價值計量78 57 
股票證券，以公允價值計量1,081 1,018 
使用權益法核算的投資1,911 1,814 
抵押貸款765 643 
房地產業及其他投資149 129 
總現金及投資15,741 15,263 
來自再保險公司的應收款5,217 4,477 
預付再保險保費1,346 961 
代理人餘額及應收保費1,995 1,471 
延期擔保費用取得成本340 309 
受管理投資實體的資產4,332 4,484 
其他應收款1,989 1,171 
其他資產1,326 1,346 
商譽305 305 
總資產$32,591 $29,787 
負債和權益：
未支付的損失及損失調整費用$14,206 $13,087 
未賺取的保費4,320 3,451 
應付再保險公司1,620 1,186 
管理投資實體的負債4,168 4,307 
長期負債1,475 1,475 
其他負債2,094 2,023 
總負債27,883 25,529 
股東權益：
普通股，no 票面價值
       — 200,000,000 授權股份
       — 83,923,446 和 83,635,807 流通股份
84 84 
資本盈餘1,400 1,372 
保留盈餘3,360 3,121 
累計其他綜合收入（損失），稅後(136)(319)
股東權益總額4,708 4,258 
負債總額及股東權益$32,591 $29,787 
2
目錄
美國金融集團股份有限公司，10-Q
美國金融集團股份有限公司及其子公司
綜合收益報表（未經審核）
（單位：百萬美元，除每股數據外）
截至9月30日的三個月截至9月30日的九個月
2024202320242023
營業收入：
財產及意外保險淨賺取保費$2,055 $1,855 $5,186 $4,799 
净投资收益200 168 586 583 
實現的收益（損失）於：
證券
(2)(19)10 (67)
子公司
— (4)— (4)
管理投資實體的收入：
投資收益99 105 296 321 
資產/負債公允價值變動的收益（損失）
(9)16 5 12 
其他收入26 43 92 100 
總營業收入2,369 2,164 6,175 5,744 
成本和費用：
財產及意外保險：
損失和損失調整費用1,430 1,239 3,279 2,964 
佣金及其他承銷費用518 497 1,527 1,455 
借款利息費用19 19 57 57 
受管理投資實體的費用85 105 267 303 
其他支出88 85 241 227 
總成本和開支2,140 1,945 5,371 5,006 
稅前收益
229 219 804 738 
所得稅準備金
48 42 172 149 
淨收益
$181 $177 $632 $589 
每股普通股收益：
總基本收益$2.16 $2.10 $7.54 $6.93 
總稀釋收益$2.16 $2.09 $7.54 $6.93 
普通股平均數：
基本83.9 84.6 83.8 85.0 
攤薄83.9 84.7 83.9 85.1 
3
目錄
美國金融集團股份有限公司，10-Q
美國金融集團股份有限公司及其子公司
綜合損益表（未經審核）
(以百萬為單位)
 
截至9月30日的三個月截至9月30日的九個月
2024202320242023
凈利潤
$181 $177 $632 $589 
其他綜合損益（稅後淨額）：
證券之未實現收益（損失）：
期間內證券持有之未實現收益（損失）178 (64)170 (55)
重新分類調整，包括列入淨收益的實現（收益）損失12 7 17 31 
證券之總未實現收益（損失）190 (57)187 (24)
現金流動避險的未實現收益（損失）：
現金流動避險的持有收益（損失）在本期內產生的：8 (7)(6)(20)
重新分類調整投資收入納入淨收益中：5 6 16 15 
現金流動避險的總未實現收益（損失）：13 (1)10 (5)
外幣轉換調整(8)(1)(14)2 
其他全面收入（損失），稅後淨額
195 (59)183 (27)
綜合收益
$376 $118 $815 $562 
4
Table of Contents
AMERICAN FINANCIAL GROUP, INC. 10-Q
AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
(Dollars in Millions)
Shareholders’ Equity
Common Shares
Common Stock and Capital Surplus
Retained Earnings
Accumulated Other Comp. Income (Loss)
Total
Balance at June 30, 202483,897,267 $1,476 $3,239 $(331)$4,384 
Net earnings
— — 181 — 181 
Other comprehensive income
— — — 195 195 
Dividends ($0.71 per share)
— — (59)— (59)
Shares issued:
Exercise of stock options14,497 1 — — 1 
Restricted stock awards— — — — — 
Other benefit plans20,913 2 — — 2 
Dividend reinvestment plan1,842 1 — — 1 
Stock-based compensation expense— 4 — — 4 
Shares acquired and retired— — — — — 
Shares exchanged — benefit plans(5,471)— (1)— (1)
Forfeitures of restricted stock(5,602)— — — — 
Balance at September 30, 202483,923,446 $1,484 $3,360 $(136)$4,708 
Balance at June 30, 202384,858,528 $1,462 $3,042 $(511)$3,993 
Net earnings— — 177 — 177 
Other comprehensive loss
— — — (59)(59)
Dividends ($0.63 per share)
— — (52)— (52)
Shares issued:
Exercise of stock options6,230 — — — — 
Restricted stock awards— — — — — 
Other benefit plans25,212 3 — — 3 
Dividend reinvestment plan1,696 — — — — 
Stock-based compensation expense— 5 — — 5 
Shares acquired and retired(755,111)(14)(72)— (86)
Shares exchanged — benefit plans(193)— — — — 
Forfeitures of restricted stock(652)— — — — 
Balance at September 30, 202384,135,710 $1,456 $3,095 $(570)$3,981 

5
Table of Contents
AMERICAN FINANCIAL GROUP, INC. 10-Q
AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) — CONTINUED
(Dollars in Millions)
 Shareholders’ Equity
Common SharesCommon Stock and Capital SurplusRetained EarningsAccumulated Other Comp. Income (Loss)Total
Balance at December 31, 202383,635,807 $1,456 $3,121 $(319)$4,258 
Net earnings
— — 632 — 632 
Other comprehensive income
— — — 183 183 
Dividends ($4.63 per share)
— — (387)— (387)
Shares issued:
Exercise of stock options110,631 5 — — 5 
Restricted stock awards157,681 — — — — 
Other benefit plans72,074 9 — — 9 
Dividend reinvestment plan11,910 2 — — 2 
Stock-based compensation expense— 13 — — 13 
Shares acquired and retired— — — — — 
Shares exchanged — benefit plans(53,362)(1)(6)— (7)
Forfeitures of restricted stock(11,295)— — — — 
Balance at September 30, 202483,923,446 $1,484 $3,360 $(136)$4,708 
Balance at December 31, 202285,204,006 $1,453 $3,142 $(543)$4,052 
Net earnings
— — 589 — 589 
Other comprehensive loss
— — — (27)(27)
Dividends ($5.89 per share)
— — (500)— (500)
Shares issued:
Exercise of stock options83,631 3 — — 3 
Restricted stock awards165,513 — — — — 
Other benefit plans71,499 9 — — 9 
Dividend reinvestment plan14,159 2 — — 2 
Stock-based compensation expense— 14 — — 14 
Shares acquired and retired(1,329,831)(24)(129)— (153)
Shares exchanged — benefit plans(56,629)(1)(7)— (8)
Forfeitures of restricted stock(16,638)— — — — 
Balance at September 30, 202384,135,710 $1,456 $3,095 $(570)$3,981 
6
Table of Contents
AMERICAN FINANCIAL GROUP, INC. 10-Q
AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(In Millions)
Nine months ended September 30,
20242023
Operating Activities:
Net earnings$632 $589 
Adjustments:
Depreciation and amortization60 60 
Realized (gains) losses on investing activities(10)69 
Net purchases of trading securities(25)(3)
Change in:
Reinsurance and other receivables(2,470)(1,799)
Other assets(1)(63)
Insurance claims and reserves1,988 1,668 
Payable to reinsurers434 363 
Other liabilities(18)357 
Managed investment entities’ assets/liabilities(67)26 
Other operating activities, net(45)(53)
Net cash provided by operating activities
478 1,214 
Investing Activities:
Purchases of:
Fixed maturities(1,349)(1,463)
Equity securities(141)(101)
Mortgage loans(141)— 
Other investments(143)(109)
Real estate, property and equipment(100)(40)
Businesses— (234)
Proceeds from:
Maturities and redemptions of fixed maturities1,451 1,047 
Repayments of mortgage loans17 33 
Sales of fixed maturities116 551 
Sales of equity securities158 95 
Sales of other investments25 49 
Sales of real estate, property and equipment25 2 
Cash and cash equivalents of businesses acquired
— 26 
Managed investment entities:
Purchases of investments(1,383)(1,223)
Proceeds from sales and redemptions of investments1,587 1,832 
Other investing activities, net(6)(6)
Net cash provided by investing activities
116 459 
Financing Activities:
Reductions of long-term debt— (21)
Issuances of Common Stock13 11 
Repurchases of Common Stock— (153)
Cash dividends paid on Common Stock(385)(498)
Issuances of managed investment entities’ liabilities1,773 621 
Retirements of managed investment entities’ liabilities(1,898)(1,284)
Net cash used in financing activities
(497)(1,324)
Net Change in Cash and Cash Equivalents97 349 
Cash and cash equivalents at beginning of period1,225 872 
Cash and cash equivalents at end of period$1,322 $1,221 
7
Table of Contents
AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
INDEX TO NOTES
A.Accounting PoliciesH.Goodwill and Other Intangibles
B.Acquisition of BusinessI.Long-Term Debt
C.Segments of OperationsJ.Shareholders’ Equity
D.Fair Value MeasurementsK.Income Taxes
E.InvestmentsL.Contingencies
F.DerivativesM.Insurance
G.Managed Investment Entities

A.    Accounting Policies

Basis of Presentation   The accompanying consolidated financial statements for American Financial Group, Inc. and its subsidiaries (“AFG”) are unaudited; however, management believes that all adjustments (consisting only of normal recurring accruals unless otherwise disclosed herein) necessary for fair presentation have been made. The results of operations for interim periods are not necessarily indicative of results to be expected for the year. The financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary to be in conformity with U.S. generally accepted accounting principles (“GAAP”).

Certain reclassifications have been made to prior periods to conform to the current year’s presentation. All significant intercompany balances and transactions have been eliminated. The results of operations of companies since their formation or acquisition are included in the consolidated financial statements. Events or transactions occurring subsequent to September 30, 2024, and prior to the filing of this Form 10-Q, have been evaluated for potential recognition or disclosure herein.

The preparation of the financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Changes in circumstances could cause actual results to differ materially from those estimates.

Fair Value Measurements   Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. The standards establish a hierarchy of valuation techniques based on whether the assumptions that market participants would use in pricing the asset or liability (“inputs”) are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect AFG’s assumptions about the assumptions market participants would use in pricing the asset or liability. AFG did not have any material nonrecurring fair value measurements in the first nine months of 2024.

Investments   Equity securities other than those accounted for under the equity method are reported at fair value with holding gains and losses generally recorded in realized gains (losses) on securities. However, AFG records holding gains and losses on limited partnerships and similar investments that do not qualify for equity method accounting (and are therefore carried at fair value), and certain other securities classified at purchase as “fair value through net investment income” in net investment income.

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

Realized gains or losses on the disposal of fixed maturity securities are determined on the specific identification basis. Premiums and discounts on fixed maturity securities are amortized using the effective interest method. Structured securities subject to prepayment risk are amortized over a period based on estimated future principal payments, including prepayments. Prepayment assumptions are reviewed periodically and adjusted to reflect actual prepayments and changes in expectations.

8
Table of Contents
AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
Limited partnerships and similar investments are generally accounted for using the equity method of accounting. Under the equity method, AFG records its share of the earnings or losses of the investee based on when it is reported by the investee in its financial statements rather than in the period in which the investee declares a dividend. AFG’s share of the earnings or losses from equity method investments is generally recorded on a quarter lag due to the timing of the receipt of the investee’s financial statements. AFG’s equity in the earnings (losses) of limited partnerships and similar investments is included in net investment income.

Credit Losses on Fixed Maturity Investments   When a decline in the value of an available for sale fixed maturity is considered to be other-than-temporary at the balance sheet date, an allowance for credit losses (impairment), including any write-off of accrued interest, is charged to earnings (included in realized gains (losses) on securities). If management can assert that it does not intend to sell the security and it is not more likely than not that it will have to sell it before recovery of its amortized cost basis (net of allowance), then the impairment is separated into two components: (i) the allowance related to credit losses (recorded in earnings) and (ii) the amount related to all other factors (recorded in other comprehensive income). The credit-related portion is measured by comparing a security’s amortized cost to the present value of its current expected cash flows discounted at its effective yield prior to the charge. The allowance is limited to the difference between a security’s amortized cost basis and its fair value. Subsequent increases or decreases in expected credit losses are recorded immediately in net earnings through realized gains (losses). If management intends to sell an impaired security, or it is more likely than not that it will be required to sell the security before recovery, an impairment is recorded in earnings to reduce the amortized cost (net of allowance) of that security to fair value.

Credit Losses on Financial Instruments Measured at Amortized Cost   Credit-related impairments for financial instruments measured at amortized cost (mortgage loans, premiums receivable and reinsurance recoverables) reflect estimated credit losses expected over the life of an exposure or pool of exposures. The estimate of expected credit losses considers historical information, current information, as well as reasonable and supportable forecasts, including estimates of prepayments. Expected credit losses, and subsequent increases or decreases in such expected losses, are recorded immediately through net earnings as an allowance that is deducted from the amortized cost basis of the financial asset, with the net carrying value of the financial asset presented on the balance sheet at the amount expected to be collected.

Derivatives   Derivatives included in AFG’s Balance Sheet are recorded at fair value. Changes in fair value of derivatives are included in earnings unless the derivatives are designated and qualify as highly effective cash flow hedges. AFG’s derivatives that do not qualify for hedge accounting under GAAP consist primarily of components of certain fixed maturity securities (convertible fixed maturities and interest-only and principal-only mortgage-backed securities) and a total return swap related to its deferred compensation obligations to employees.

To qualify for hedge accounting, at the inception of a derivative contract, AFG formally documents the relationship between the terms of the hedge and the hedged items and its risk management objective. This documentation includes defining how hedge effectiveness is evaluated at the inception date and over the life of the derivative.

Changes in the fair value of derivatives that are designated and qualify as highly effective cash flow hedges are recorded in AOCI and are reclassified into earnings when the variability of the cash flows from the hedged items impacts earnings. When the change in the fair value of a qualifying cash flow hedge is included in earnings, it is included in the same line item in the statement of earnings as the cash flows from the hedged item. AFG uses interest rate swaps that are designated and qualify as highly effective cash flow hedges to mitigate interest rate risk related to certain floating-rate securities.

Goodwill   Goodwill represents the excess of cost of subsidiaries over AFG’s equity in their underlying net assets at the date of acquisition. Goodwill is not amortized, but is subject to an impairment test at least annually. An entity is not required to complete the quantitative annual goodwill impairment test on a reporting unit if the entity elects to perform a qualitative analysis and determines that it is more likely than not that the reporting unit’s fair value exceeds its carrying amount.

Reinsurance   Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policies. AFG reports as assets (i) the estimated reinsurance recoverable on paid and unpaid losses, including an estimate for losses incurred but not reported, and (ii) amounts paid or due to reinsurers applicable to the unexpired terms of policies in force. Payable to reinsurers includes ceded premiums due to reinsurers, as well as ceded premiums retained by AFG under contracts to fund ceded losses as they become due. AFG also assumes reinsurance from other companies. Earnings on reinsurance assumed is recognized based on information received from ceding companies.
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Table of Contents
AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

Deferred Policy Acquisition Costs (“DPAC”)   Policy acquisition costs (principally commissions, premium taxes and certain underwriting and policy issuance costs) directly related to the successful acquisition or renewal of an insurance contract are deferred. DPAC is limited based upon recoverability without any consideration for anticipated investment income and is charged against income ratably over the terms of the related policies. A premium deficiency is recognized if the sum of expected claims costs, claims adjustment expenses and unamortized acquisition costs exceed the related unearned premiums. A premium deficiency is first recognized by charging any unamortized acquisition costs to expense to the extent required to eliminate the deficiency. If the premium deficiency is greater than unamortized acquisition costs, a liability is accrued for the excess deficiency and reported with unpaid losses and loss adjustment expenses.

Managed Investment Entities   A company is considered the primary beneficiary of, and therefore must consolidate, a variable interest entity (“VIE”) based primarily on its ability to direct the activities of the VIE that most significantly impact that entity’s economic performance and the obligation to absorb losses of, or receive benefits from, the entity that could potentially be significant to the VIE.

AFG manages, and has investments in, collateralized loan obligations (“CLOs”) that are VIEs (see Note G — “Managed Investment Entities”). AFG has determined that it is the primary beneficiary of these CLOs because (i) its role as asset manager gives it the power to direct the activities that most significantly impact the economic performance of the CLOs and (ii) through its investment in the CLO debt tranches, it has exposure to CLO losses (limited to the amount AFG invested) and the right to receive CLO benefits that could potentially be significant to the CLOs.

Because AFG has no right to use the CLO assets and no obligation to pay the CLO liabilities, the assets and liabilities of the CLOs are shown separately in AFG’s Balance Sheet. AFG has elected the fair value option for reporting on the CLO assets and liabilities to improve the transparency of financial reporting related to the CLOs. The net gain or loss from accounting for the CLO assets and liabilities at fair value is presented separately in AFG’s Statement of Earnings.

The fair values of a CLO’s assets may differ from the separately measured fair values of its liabilities even though the CLO liabilities only have recourse to the CLO assets. AFG has set the carrying value of the CLO liabilities equal to the fair value of the CLO assets (which have more observable fair values) as an alternative to reporting those liabilities at a separately measured fair value. CLO earnings attributable to AFG’s shareholders are measured by the change in the fair value of AFG’s investments in the CLOs and management fees earned.

At September 30, 2024, assets and liabilities of managed investment entities included $35 million in assets and $25 million in liabilities of a temporary warehousing entity that was established to provide AFG the ability to form a new CLO. At closing, all warehoused assets will be transferred to the new CLO and the liabilities will be repaid.

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

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

Debt Issuance Costs   Debt issuance costs related to AFG’s outstanding debt are presented in its Balance Sheet as a direct reduction in the carrying value of long-term debt and are amortized over the life of the related debt using the effective interest method as a component of interest expense. Debt issuance costs related to AFG’s revolving credit facilities are included in other assets in AFG’s Balance Sheet.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
Leases   Leases for terms of longer than one year are recognized as assets and liabilities for the rights and obligations created by those leases on the balance sheet based on the present value of contractual cash flows.

At September 30, 2024 AFG has a $235 million lease liability included in other liabilities and a lease right-of-use asset of $214 million included in other assets compared to $198 million and $176 million, respectively, at December 31, 2023.

Premium Recognition   Property and casualty premiums are earned generally over the terms of the policies on a pro rata basis. Unearned premiums represent that portion of premiums written, which is applicable to the unexpired terms of policies in force. On reinsurance assumed from other insurance companies or written through various underwriting organizations, unearned premiums are based on information received from such companies and organizations.

Income Taxes   Deferred income taxes are calculated using the liability method. Under this method, deferred income tax assets and liabilities are determined based on differences between financial reporting and tax bases and are measured using enacted tax rates. A valuation allowance is established to reduce total deferred tax assets to an amount that will more likely than not be realized. The effect of a change in tax rates on deferred tax assets and liabilities is recorded in net earnings in the period that includes the enactment date.

AFG recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained under examination by the appropriate taxing authority. Interest and penalties on AFG’s reserve for uncertain tax positions are recognized as a component of tax expense.

Stock-Based Compensation   All share-based grants are recognized as compensation expense on a straight-line basis over their vesting periods based on their calculated fair value at the date of grant.

AFG records excess tax benefits or deficiencies for share-based payments through income tax expense in the statement of earnings. In addition, AFG accounts for forfeitures of awards when they occur.

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

Earnings Per Share   Although basic earnings per share only considers shares of common stock outstanding during the period, the calculation of diluted earnings per share includes the following adjustments to weighted average common shares related to stock-based compensation plans: third quarter of 2024 and 2023 — none and 0.1 million; first nine months of both 2024 and 2023 — 0.1 million.

There were no anti-dilutive potential common shares for the third quarter or the first nine months of 2024 or 2023.

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

B.    Acquisition of Business

Crop Risk Services   On July 3, 2023, AFG completed the acquisition of Crop Risk Services (“CRS”) from American International Group (“AIG”). CRS is a primary crop insurance general agent based in Decatur, Illinois, that generated crop year 2022 gross written premiums of approximately $1.2 billion and was the seventh largest provider of multi-peril crop insurance in the United States based on 2022 premiums. At closing, AFG paid AIG $234 million (based on $24 million in net tangible assets) using cash on hand.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
Expenses related to the acquisition were $3 million and were expensed as incurred. The purchase price was allocated to the acquired assets and liabilities of CRS based on management’s best estimate of fair value as of the acquisition date. The purchase price allocation is shown below (in millions).
July 3, 2023
Cash paid at purchase
$234 
Tangible assets acquired:
Cash and cash equivalents
$26 
Agents’ balances and premiums receivable
164 
Other assets
3 
Total tangible assets acquired
$193 
Liabilities acquired:
Other liabilities
$169 
Total liabilities acquired
169 
Net tangible assets acquired, at fair value
24 
Excess purchase price over net tangible assets acquired
$210 
Allocation of excess purchase price:
Intangible assets acquired (*)
$124 
Deferred tax asset (*)
1 
Goodwill
85 
$210 
(*)Included in Other assets in AFG’s Balance Sheet.

In the purchase price allocation, $124 million of the purchase price was recognized as finite lived intangible assets primarily related to existing agency relationships, which will be amortized over an average estimated life of approximately 14 years. The acquisition resulted in the recognition of $85 million in GAAP basis goodwill based on the excess of the purchase price over the fair value of the net assets acquired. The acquisition resulted in $79 million of tax basis goodwill which is deductible for tax purposes.

C.    Segments of Operations

AFG manages its business as two segments: Property and casualty insurance and Other, which includes holding company costs.

AFG reports its property and casualty insurance business in the following Specialty sub-segments: (i) Property and transportation, which includes physical damage and liability coverage for buses and trucks and other specialty transportation niches, inland and ocean marine, agricultural-related products and other commercial property coverages, (ii) Specialty casualty, which includes primarily excess and surplus, executive and professional liability, general liability, umbrella and excess liability, specialty coverages in targeted markets, customized programs for small to mid-sized businesses and workers’ compensation insurance, and (iii) Specialty financial, which includes risk management insurance programs for lending and leasing institutions (including equipment leasing and collateral and lender-placed mortgage property insurance), fidelity and surety products and trade credit insurance. Premiums and underwriting profit included under Other specialty represent business assumed by AFG’s internal reinsurance program from the operations that make up AFG’s other Specialty sub-segments and amortization of a deferred gain on a retroactive reinsurance transaction related to the sale of a business. AFG’s reportable segments and their components were determined based primarily upon similar economic characteristics, products and services.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
The following tables (in millions) show AFG’s revenues and earnings before income taxes by segment and sub-segment.
Three months ended September 30,Nine months ended September 30,
2024202320242023
Revenues
Property and casualty insurance:
Premiums earned:
Specialty
Property and transportation$981 $828 $2,037 $1,837 
Specialty casualty744 734 2,213 2,149 
Specialty financial269 232 753 623 
Other specialty61 61 183 190 
Total premiums earned2,055 1,855 5,186 4,799 
Net investment income195 170 589 568 
Other income2 5 6 13 
Total property and casualty insurance2,252 2,030 5,781 5,380 
Other119 157 384 435 
Total revenues before realized gains (losses)2,371 2,187 6,165 5,815 
Realized gains (losses) on securities
(2)(19)10 (67)
Realized loss on subsidiary
— (4)— (4)
Total revenues$2,369 $2,164 $6,175 $5,744 
Earnings Before Income Taxes
Property and casualty insurance:
Underwriting:
Specialty
Property and transportation$34 $42 $129 $117 
Specialty casualty76 78 258 261 
Specialty financial22 29 80 65 
Other specialty(15)(6)(45)(22)
Other lines(2)(1)(4)(1)
Total underwriting115 142 418 420 
Investment and other income, net176 156 532 527 
Total property and casualty insurance291 298 950 947 
Other (*)(60)(56)(156)(138)
Total earnings (loss) before realized gains (losses) and income taxes
231 242 794 809 
Realized gains (losses) on securities
(2)(19)10 (67)
Realized loss on subsidiary— (4)— (4)
Total earnings before income taxes
$229 $219 $804 $738 
(*)Includes holding company interest and expenses, which includes a gain of $1 million on retirement of debt in the first nine months of 2023 and special charges of $14 million and $15 million in the third quarter of 2024 and 2023, respectively, to increase asbestos and environmental liabilities related to AFG’s former railroad and manufacturing operations.
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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
D.    Fair Value Measurements

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

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

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

Level 3 — Valuations derived from market valuation techniques generally consistent with those used to estimate the fair values of Level 2 financial instruments in which one or more significant inputs are unobservable or when the market for a security exhibits significantly less liquidity relative to markets supporting Level 2 fair value measurements. The unobservable inputs may include management’s own assumptions about the assumptions market participants would use based on the best information available at the valuation date. Financial instruments whose fair value is estimated based on non-binding broker quotes or internally developed using significant inputs not based on, or corroborated by, observable market information are classified as Level 3.

As discussed in Note A — “Accounting Policies — Managed Investment Entities,” AFG has set the carrying value of its CLO liabilities equal to the fair value of the CLO assets (which have more observable fair values) as an alternative to reporting those liabilities at separately measured fair values. As a result, the CLO liabilities are categorized within the fair value hierarchy on the same basis (proportionally) as the related CLO assets. Since the portion of the CLO liabilities allocated to Level 3 is derived from the fair value of the CLO assets, these amounts are excluded from the progression of Level 3 financial instruments.

AFG’s management is responsible for the valuation process and uses data from outside sources (including nationally recognized pricing services and broker/dealers) in establishing fair value. AFG’s internal investment professionals are a group of approximately 20 investment professionals whose primary responsibility is to manage AFG’s investment portfolio. These professionals monitor individual investments as well as overall industries and are active in the financial markets on a daily basis. The group is led by AFG’s chief investment officer, who reports directly to one of AFG’s Co-CEOs. Valuation techniques utilized by pricing services and prices obtained from external sources are reviewed by AFG’s internal investment professionals who are familiar with the securities being priced and the markets in which they trade to ensure the fair value determination is representative of an exit price. To validate the appropriateness of the prices obtained, these investment managers consider widely published indices (as benchmarks), recent trades, changes in interest rates, general economic conditions and the credit quality of the specific issuers. In addition, AFG communicates directly with the pricing services regarding the methods and assumptions used in pricing, including verifying, on a test basis, the inputs used by the service to value specific securities.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
Assets and liabilities measured and carried at fair value in the financial statements are summarized below (in millions):
Level 1Level 2Level 3Total
September 30, 2024
Assets:
Available for sale (“AFS”) fixed maturities:
U.S. government and government agencies$180 $— $— $180 
States, municipalities and political subdivisions— 865 2 867 
Foreign government— 241 — 241 
Residential MBS— 1,809 2 1,811 
Commercial MBS— 51 — 51 
Collateralized loan obligations— 1,298 — 1,298 
Other asset-backed securities— 2,062 363 2,425 
Corporate and other12 3,102 448 3,562 
Total AFS fixed maturities192 9,428 815 10,435 
Trading fixed maturities— 53 25 78 
Equity securities421 40 620 1,081 
Assets of managed investment entities (“MIE”)371 3,950 11 4,332 
Other assets — derivatives— 3 — 3 
Total assets accounted for at fair value$984 $13,474 $1,471 $15,929 
Liabilities:
Contingent consideration — acquisitions$— $— $3 $3 
Liabilities of managed investment entities356 3,801 11 4,168 
Other liabilities — derivatives— 10 — 10 
Total liabilities accounted for at fair value$356 $3,811 $14 $4,181 
December 31, 2023
Assets:
Available for sale fixed maturities:
U.S. government and government agencies$235 $1 $— $236 
States, municipalities and political subdivisions— 982 2 984 
Foreign government— 230 — 230 
Residential MBS— 1,656 2 1,658 
Commercial MBS— 74 — 74 
Collateralized loan obligations— 1,686 1 1,687 
Other asset-backed securities— 2,011 351 2,362 
Corporate and other9 2,757 380 3,146 
Total AFS fixed maturities244 9,397 736 10,377 
Trading fixed maturities— 57 — 57 
Equity securities500 33 485 1,018 
Assets of managed investment entities335 4,140 9 4,484 
Other assets — derivatives— 6 — 6 
Total assets accounted for at fair value$1,079 $13,633 $1,230 $15,942 
Liabilities:
Contingent consideration — acquisitions$— $— $2 $2 
Liabilities of managed investment entities322 3,976 9 4,307 
Other liabilities — derivatives— 22 — 22 
Total liabilities accounted for at fair value$322 $3,998 $11 $4,331 

Approximately 9% of the total assets carried at fair value at September 30, 2024, were Level 3 assets. Approximately 30% ($438 million) of the Level 3 assets were equity investments in limited partnerships and similar investments that do not qualify for equity method accounting whose prices were determined based on financial information provided by the limited partnerships. Approximately 7% ($112 million) of Level 3 assets were priced using non-binding broker quotes, for which there is a lack of transparency as to the inputs used to determine fair value. Details as to the quantitative inputs are neither provided by the brokers nor otherwise reasonably obtainable by AFG. Approximately 1% ($9 million) of the Level 3
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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
assets were priced by pricing services where either a single price was not corroborated, prices varied enough among the providers, or other market factors led management to determine these securities be classified as Level 3 assets.

Internally developed prices for fixed maturities are estimated using a variety of inputs, including appropriate credit spreads over the treasury yield (of a similar duration), trade information and prices of comparable securities and other security specific features (such as optional early redemption). Internally developed Level 3 asset fair values represent approximately 62% ($912 million) of the total fair value of Level 3 assets at September 30, 2024. Approximately 70% ($642 million) of these internally developed Level 3 assets are priced using a pricing model that uses a discounted cash flow approach to estimate the fair value of fixed maturity securities. The credit spread applied by management is the significant unobservable input of the pricing model. In instances where the security is currently callable at par value and the pricing model suggests a higher price, management caps the fair value at par value. Approximately 19% ($177 million) of the internally developed Level 3 assets are equity securities which are priced primarily using internal models with some inputs that are not market observable. Management believes that any justifiable changes in unobservable inputs used to determine internally developed fair values would not have resulted in a material change in AFG’s financial position.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
Changes in balances of Level 3 financial assets and liabilities carried at fair value during the third quarter and first nine months of 2024 and 2023 are presented below (in millions). The transfers into and out of Level 3 were due to changes in the availability of market observable inputs. All transfers are reflected in the table at fair value as of the end of the reporting period.
Total realized/unrealized
gains (losses) included in
Balance at June 30, 2024Net
earnings (loss)		Other comprehensive income (loss)Purchases
and
issuances		Sales and
settlements		Transfer
into
Level 3		Transfer
out of
Level 3		Balance at September 30, 2024
AFS fixed maturities:
U.S. government agency
$— $— $— $— $— $— $— $— 
State and municipal2 — — — — — — 2 
Residential MBS2 — — — — — — 2 
Commercial MBS— — — — — — — — 
Collateralized loan obligations1 (1)— — — — — — 
Other asset-backed securities
340 — 7 16 (5)5 — 363 
Corporate and other411 6 7 26 (5)3 — 448 
Total AFS fixed maturities756 5 14 42 (10)8 — 815 
Trading fixed maturities
12 1 — 12 — — — 25 
Equity securities602 18 — 43 (43)— — 620 
Assets of MIE12 (1)— — — — — 11 
Total Level 3 assets$1,382 $23 $14 $97 $(53)$8 $— $1,471 
Contingent consideration — acquisitions$(2)$(1)$— $— $— $— $— $(3)
Total Level 3 liabilities$(2)$(1)$— $— $— $— $— $(3)
Total realized/unrealized
gains (losses) included in
Balance at June 30, 2023Net
earnings (loss)		Other comprehensive income (loss)Purchases
and
issuances		Sales and
settlements		Transfer
into
Level 3		Transfer
out of
Level 3		Balance at September 30, 2023
AFS fixed maturities:
U.S. government agency
$— $— $— $— $— $— $— $— 
State and municipal5 — — — (1)— (2)2 
Residential MBS5 — — — — — — 5 
Commercial MBS— — — — — — — — 
Collateralized loan obligations1 (1)1 — — — — 1 
Other asset-backed securities
321 — (4)28 (3)— (12)330 
Corporate and other369 (14)— 11 (12)5 (7)352 
Total AFS fixed maturities701 (15)(3)39 (16)5 (21)690 
Equity securities448 4 — 23 (4)— (17)454 
Assets of MIE11 (1)— — — — — 10 
Total Level 3 assets$1,160 $(12)$(3)$62 $(20)$5 $(38)$1,154 
Contingent consideration — acquisitions$(25)$23 $— $— $— $— $— $(2)
Total Level 3 liabilities$(25)$23 $— $— $— $— $— $(2)
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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
Total realized/unrealized
gains (losses) included in
Balance at December 31, 2023Net
earnings (loss)		Other comprehensive income (loss)Purchases
and
issuances		Sales and
settlements		Transfer
into
Level 3		Transfer
out of
Level 3		Balance at September 30, 2024
AFS fixed maturities:
U.S. government agency
$— $— $— $— $— $— $— $— 
State and municipal2 — — — — — — 2 
Residential MBS2 — — — — — — 2 
Commercial MBS— — — — — — — — 
Collateralized loan obligations1 (1)— — — — — — 
Other asset-backed securities
351 (1)11 40 (17)5 (26)363 
Corporate and other380 5 8 74 (17)3 (5)448 
Total AFS fixed maturities736 3 19 114 (34)8 (31)815 
Trading fixed maturities
— 1 — 24 — — — 25 
Equity securities485 53 — 133 (51)— — 620 
Assets of MIE9 (3)— 5 — — — 11 
Total Level 3 assets$1,230 $54 $19 $276 $(85)$8 $(31)$1,471 
Contingent consideration — acquisitions$(2)$(1)$— $— $— $— $— $(3)
Total Level 3 liabilities$(2)$(1)$— $— $— $— $— $(3)
Total realized/unrealized
gains (losses) included in
Balance at December 31, 2022Net
earnings (loss)		Other comprehensive income (loss)Purchases
and
issuances		Sales and
settlements		Transfer
into
Level 3		Transfer
out of
Level 3		Balance at September 30, 2023
AFS fixed maturities:
U.S. government agency
$— $— $— $— $— $— $— $— 
State and municipal5 — — — (1)— (2)2 
Residential MBS9 — — — (3)4 (5)5 
Commercial MBS— — — — — — — — 
Collateralized loan obligations2 (1)1 — — — (1)1 
Other asset-backed securities
329 (2)— 38 (34)31 (32)330 
Corporate and other319 (13)10 67 (25)7 (13)352 
Total AFS fixed maturities
664 (16)11 105 (63)42 (53)690 
Equity securities427 11 — 84 (29)— (39)454 
Assets of MIE11 (3)— 2 — — — 10 
Total Level 3 assets$1,102 $(8)$11 $191 $(92)$42 $(92)$1,154 
Contingent consideration — acquisitions$(25)$23 $— $— $— $— $— $(2)
Total Level 3 liabilities$(25)$23 $— $— $— $— $— $(2)
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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
Fair Value of Financial Instruments   The carrying value and fair value of financial instruments that are not carried at fair value in the financial statements are summarized below (in millions):
Carrying Value
Fair Value
TotalLevel 1Level 2Level 3
September 30, 2024
Financial assets:
Cash and cash equivalents$1,322 $1,322 $1,322 $— $— 
Mortgage loans765 726 — — 726 
Total financial assets not accounted for at fair value
$2,087 $2,048 $1,322 $— $726 
Long-term debt$1,475 $1,390 $— $1,387 $3 
Total financial liabilities not accounted for at fair value
$1,475 $1,390 $— $1,387 $3 
December 31, 2023
Financial assets:
Cash and cash equivalents$1,225 $1,225 $1,225 $— $— 
Mortgage loans643 596 — — 596 
Total financial assets not accounted for at fair value
$1,868 $1,821 $1,225 $— $596 
Long-term debt$1,475 $1,345 $— $1,342 $3 
Total financial liabilities not accounted for at fair value
$1,475 $1,345 $— $1,342 $3 

E.    Investments

Available for sale fixed maturities at September 30, 2024 and December 31, 2023, consisted of the following (in millions):
Amortized
Cost		Allowance for Expected Credit LossesGross UnrealizedNet
Unrealized		Fair
Value
GainsLosses
September 30, 2024
Fixed maturities:
U.S. government and government agencies$182 $— $1 $(3)$(2)$180 
States, municipalities and political subdivisions
895 — 6 (34)(28)867 
Foreign government
240 — 3 (2)1 241 
Residential MBS
1,893 1 36 (117)(81)1,811 
Commercial MBS
51 — — — — 51 
Collateralized loan obligations
1,301 3 11 (11)— 1,298 
Other asset-backed securities
2,465 6 28 (62)(34)2,425 
Corporate and other
3,559 15 88 (70)18 3,562 
Total fixed maturities$10,586 $25 $173 $(299)$(126)$10,435 
December 31, 2023
Fixed maturities:
U.S. government and government agencies$243 $— $1 $(8)$(7)$236 
States, municipalities and political subdivisions
1,014 — 8 (38)(30)984 
Foreign government
236 — 1 (7)(6)230 
Residential MBS
1,788 1 26 (155)(129)1,658 
Commercial MBS
75 — — (1)(1)74 
Collateralized loan obligations
1,709 3 9 (28)(19)1,687 
Other asset-backed securities
2,477 5 10 (120)(110)2,362 
Corporate and other
3,210 3 52 (113)(61)3,146 
Total fixed maturities$10,752 $12 $107 $(470)$(363)$10,377 

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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
Equity securities which are reported at fair value with holding gains and losses recognized in net earnings, consisted of the following at September 30, 2024 and December 31, 2023 (in millions):
September 30, 2024December 31, 2023
Actual Cost
Fair Value
Fair Value Over Cost
Actual Cost
Fair Value
Fair Value Over Cost
Common stocks$572 $653 $81 $512 $586 $74 
Perpetual preferred stocks388 428 40 422 432 10 
Total equity securities carried at fair value
$960 $1,081 $121 $934 $1,018 $84 

The following table summarizes investments accounted for using the equity method, by strategy (in millions):
Net Investment Income
Carrying ValueThree months ended September 30,Nine months ended September 30,
September 30, 2024December 31, 20232024202320242023
Real estate-related investments (*)$1,349 $1,320 $10 $11 $15 $86 
Private equity524 457 (5)5 26 12 
Private debt38 37 1 1 4 4 
Total investments accounted for using the equity method$1,911 $1,814 $6 $17 $45 $102 
(*)90% and 92% of the carrying value relates to underlying investments in multi-family properties as of September 30, 2024 and December 31, 2023, respectively.

The earnings (losses) from these investments are generally reported on a quarter lag due to the timing required to obtain the necessary information from the funds. AFG regularly reviews and discusses fund performance with the fund managers to corroborate the reasonableness of the underlying reported asset values and to assess whether any events have occurred within the lag period that may materially affect the valuation of these investments.

With respect to partnerships and similar investments, AFG had unfunded commitments of $448 million and $418 million as of September 30, 2024 and December 31, 2023, respectively.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
The following table shows gross unrealized losses (dollars in millions) on available for sale fixed maturities by investment category and length of time that individual securities have been in a continuous unrealized loss position at the following balance sheet dates.
Less Than Twelve MonthsTwelve Months or More
Unrealized
Loss		Fair
Value		Fair Value as
% of Cost		Unrealized
Loss		Fair
Value		Fair Value as
% of Cost
September 30, 2024
Fixed maturities:
U.S. government and government agencies$— $2 100 %$(3)$113 97 %
States, municipalities and political subdivisions
(1)48 98 %(33)492 94 %
Foreign government— — — %(2)130 98 %
Residential MBS(1)76 99 %(116)972 89 %
Commercial MBS— — — %— 21 100 %
Collateralized loan obligations— 106 100 %(11)291 96 %
Other asset-backed securities(1)91 99 %(61)1,370 96 %
Corporate and other(2)85 98 %(68)1,246 95 %
Total fixed maturities$(5)$408 99 %$(294)$4,635 94 %
December 31, 2023
Fixed maturities:
U.S. government and government agencies$— $11 100 %$(8)$191 96 %
States, municipalities and political subdivisions
(1)76 99 %(37)526 93 %
Foreign government— — — %(7)207 97 %
Residential MBS(1)42 98 %(154)1,089 88 %
Commercial MBS— — — %(1)61 98 %
Collateralized loan obligations— 25 100 %(28)807 97 %
Other asset-backed securities(1)151 99 %(119)1,663 93 %
Corporate and other(4)123 97 %(109)1,455 93 %
Total fixed maturities$(7)$428 98 %$(463)$5,999 93 %

At September 30, 2024, the gross unrealized losses on fixed maturities of $299 million relate to approximately 1,150 securities. Investment grade securities (as determined by nationally recognized rating agencies) represented approximately 92% of the gross unrealized loss and 95% of the fair value of securities with unrealized losses.

To evaluate fixed maturities for expected credit losses (impairment), management considers whether the unrealized loss is credit-driven or a result of changes in market interest rates, the extent to which fair value is less than cost basis, historical operating, balance sheet and cash flow data from the issuer, third party research and communications with industry specialists and discussions with issuer management.

AFG analyzes its MBS for expected credit losses (impairment) each quarter based upon expected future cash flows. Management estimates expected future cash flows based upon its knowledge of the MBS market, cash flow projections (which reflect loan to collateral values, subordination, vintage and geographic concentration) received from independent sources, implied cash flows inherent in security ratings and analysis of historical payment data.

Management believes AFG will recover its cost basis (net of any allowance) in the securities with unrealized losses and that AFG has the ability to hold the securities until they recover in value and had no intent to sell them at September 30, 2024.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
A progression of the allowance for expected credit losses on available for sale fixed maturity securities is shown below (in millions):
Structured
Securities (*)		Corporate and OtherTotal
Balance at June 30, 2024$10 $— $10 
Provision for expected credit losses on securities with no previous allowance— 15 15 
Additions to previously recognized expected credit losses
— — — 
Reductions due to sales or redemptions
— — — 
Balance at September 30, 2024$10 $15 $25 
Balance at June 30, 2023$11 $5 $16 
Provision for expected credit losses on securities with no previous allowance— 3 3 
Additions to previously recognized expected credit losses
1 — 1 
Reductions due to sales or redemptions
— — — 
Balance at September 30, 2023$12 $8 $20 
Balance at December 31, 2023$9 $3 $12 
Provision for expected credit losses on securities with no previous allowance1 15 16 
Additions to previously recognized expected credit losses
1 — 1 
Reductions due to sales or redemptions
(1)(3)(4)
Balance at September 30, 2024$10 $15 $25 
Balance at December 31, 2022$10 $1 $11 
Provision for expected credit losses on securities with no previous allowance1 8 9 
Additions (reductions) to previously recognized expected credit losses
1 (1)— 
Reductions due to sales or redemptions
— — — 
Balance at September 30, 2023$12 $8 $20 
(*)Includes mortgage-backed securities, collateralized loan obligations and other asset-backed securities (“ABS”).

In the first nine months of 2024 and 2023, AFG did not purchase any securities with expected credit losses.

The table below sets forth the scheduled maturities of AFG’s available for sale fixed maturities as of September 30, 2024 (dollars in millions). Securities with sinking funds are reported at average maturity. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid by the issuers.
AmortizedFair Value
Cost, net (*)Amount%
Maturity
One year or less$458 $449 4 %
After one year through five years2,866 2,845 27 %
After five years through ten years1,278 1,304 12 %
After ten years259 252 3 %
4,861 4,850 46 %
Collateralized loan obligations and other ABS (average life of approximately 3 years)
3,757 3,723 36 %
MBS (average life of approximately 6 years)
1,943 1,862 18 %
Total$10,561 $10,435 100 %
(*)Amortized cost, net of allowance for expected credit losses.

Certain risks are inherent in fixed maturity securities, including loss upon default, price volatility in reaction to changes in interest rates, and general market factors and risks associated with reinvestment of proceeds due to prepayments or redemptions in a period of declining interest rates.
There were no investments in individual issuers that exceeded 10% of shareholders’ equity at September 30, 2024 or December 31, 2023.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
Net Investment Income   The following table shows (in millions) investment income earned and investment expenses incurred.
Three months ended September 30,Nine months ended September 30,
2024202320242023
Investment income:
Fixed maturities:
Interest and amortization$136 $126 $406 $369 
Change in fair value (a)7 (11)7 (1)
Equity securities:
Dividends6 8 20 26 
Change in fair value (b)20 7 45 36 
Equity in earnings of partnerships and similar investments
6 17 45 102 
Other31 24 80 64 
Gross investment income206 171 603 596 
Investment expenses(6)(3)(17)(13)
Net investment income$200 $168 $586 $583 
(a)The change in the fair value of fixed maturities classified as trading and derivatives embedded in convertible fixed maturities related to limited partnerships and similar investments.
(b)AFG records holding gains and losses on limited partnerships and similar investments that do not qualify for equity method accounting and related equity investments in net investment income.
Realized gains (losses) and changes in unrealized appreciation (depreciation) included in AOCI related to fixed maturity securities are summarized as follows (in millions):
Three months ended September 30, 2024Three months ended September 30, 2023
Realized gains (losses)Realized gains (losses)
Before ImpairmentsImpairment AllowanceTotalChange in UnrealizedBefore ImpairmentsImpairment AllowanceTotalChange in Unrealized
Fixed maturities$3 $(15)$(12)$241 $(7)$(4)$(11)$(72)
Equity securities10 — 10 — (8)— (8)— 
Mortgage loans and other investments
— — — — — — — — 
Total pretax13 (15)(2)241 (15)(4)(19)(72)
Tax effects(3)3 — (51)3 1 4 15 
Net of tax
$10 $(12)$(2)$190 $(12)$(3)$(15)$(57)
Nine months ended September 30, 2024Nine months ended September 30, 2023
Realized gains (losses)Realized gains (losses)
Before ImpairmentsImpairment AllowanceTotalChange in UnrealizedBefore ImpairmentsImpairment AllowanceTotalChange in Unrealized
Fixed maturities$(2)$(17)$(19)$237 $(35)$(9)$(44)$(29)
Equity securities29 — 29 — (23)— (23)— 
Mortgage loans and other investments
— — — — — — — — 
Total pretax27 (17)10 237 (58)(9)(67)(29)
Tax effects(6)3 (3)(50)12 2 14 5 
Net of tax
$21 $(14)$7 $187 $(46)$(7)$(53)$(24)

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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
All equity securities other than those accounted for under the equity method are carried at fair value through net earnings. AFG recorded net holding gains (losses) on equity securities during the third quarter and first nine months of 2024 and 2023 on securities that were still owned at September 30, 2024 and September 30, 2023 as follows (in millions):
Three months ended September 30,Nine months ended September 30,
2024202320242023
Included in realized gains (losses)$10 $(8)$25 $(31)
Included in net investment income20 7 45 36 
$30 $(1)$70 $5 

Gross realized gains and losses (excluding changes in impairment allowance and mark-to-market of derivatives) on available for sale fixed maturity investment transactions consisted of the following (in millions):
Nine months ended September 30,
20242023
Gross gains$1 $2 
Gross losses(5)(33)

F.    Derivatives

As discussed under “Derivatives” in Note A — “Accounting Policies,” AFG uses derivatives to mitigate certain market risks related to its investment portfolio and deferred compensation obligations to employees.

The following table presents the classification of derivative assets and liabilities included in AFG’s Balance Sheet at fair value (in millions):
September 30, 2024December 31, 2023
Balance Sheet LineAssetLiabilityAssetLiability
Derivatives designated and qualifying as cash flow hedges:
Interest rate swapsOther assets/Other liabilities$1 $10 $1 $22 
Derivatives not designated as hedging instruments:
Fixed maturities with embedded derivativesFixed maturities68 — 81 — 
Total return swapOther assets/Other liabilities2 — 5 — 
$71 $10 $87 $22 

AFG’s interest rate swaps are designated and qualify as highly effective cash flow hedges to mitigate interest rate risk related to certain floating-rate securities included in AFG’s portfolio of fixed maturity securities. The purpose of each of these swaps is to effectively convert a portion of AFG’s floating-rate fixed maturity securities to fixed rates by offsetting the variability in cash flows attributable to changes in the applicable Secured Overnight Financing Rate (“SOFR”).

Under the terms of the swaps, AFG receives fixed-rate interest payments in exchange for variable interest payments based on SOFR. The notional amounts of the interest rate swaps generally decline over each swap’s respective life (the swaps expire between October 2024 and July 2028) in anticipation of the expected decline in AFG’s portfolio of fixed maturity securities with floating interest rates based on SOFR. The total outstanding notional amount of AFG’s interest rate swaps was $1.10 billion at September 30, 2024 compared to $1.30 billion at December 31, 2023, reflecting scheduled amortization and the expiration of three swaps with a total notional amount at expiration of $31 million during the third quarter of 2024. Amounts reclassified from AOCI to net earnings were losses of $6 million and $7 million in the third quarter of 2024 and 2023, respectively, and losses of $20 million and $19 million in the first nine months of 2024 and 2023, respectively. Based on forward interest rate curves at September 30, 2024, management estimates that it will reclassify approximately $10 million of pre-tax net losses on interest rate swaps in AOCI to net investment income over the next twelve months. The actual amount will vary based on changes in SOFR. A collateral receivable supporting these swaps of $29 million and $48 million at September 30, 2024 and December 31, 2023, respectively, is included in other assets in AFG’s Balance Sheet.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
The fixed maturities with embedded derivatives consist of convertible fixed maturity securities and interest-only and principal-only MBS. AFG records the change in the fair value of these securities in net earnings. These investments are part of AFG’s overall investment strategy and represent a small component of AFG’s overall investment portfolio.

AFG is exposed to fair value changes from certain equity and fixed maturity market-based exposures related to its deferred compensation obligations to certain employees. To mitigate this risk, AFG entered into a total return swap in 2022. A liability to return collateral related to the swap of $1 million and $5 million is included in other liabilities on AFG’s Balance Sheet at September 30, 2024 and December 31, 2023, respectively.

The following table summarizes the gains (losses) included in AFG’s Statement of Earnings for changes in the fair value of derivatives (in millions):
Three months ended September 30,Nine months ended September 30,
Statement of Earnings Line2024202320242023
Qualifying cash flow hedges:
Interest rate swapsNet investment income$(6)$(7)$(20)$(19)
Non-designated hedges:
Fixed maturities with embedded derivatives
Realized gains (losses) on securities
3 (1)2 (4)
Fixed maturities with embedded derivativesNet investment income6 (11)7 (1)
Total return swapOther expenses5 (6)11 3 
Earnings (losses) on non-designated hedges14 (18)20 (2)
Total earnings (losses) on derivatives$8 $(25)$— $(21)

G.    Managed Investment Entities

AFG is the investment manager and it has investments ranging from 13.3% to 100% of the most subordinate debt tranche of fourteen active collateralized loan obligation entities (“CLOs”), which are considered variable interest entities. AFG also owns portions of the senior debt tranches of certain of these CLOs. Upon formation between 2012 and 2024, these entities issued securities in various senior and subordinate classes and invested the proceeds primarily in secured bank loans, which serve as collateral for the debt securities issued by each CLO. None of the collateral was purchased from AFG. AFG’s investments in the subordinate debt tranches of these entities receive residual income from the CLOs only after the CLOs pay expenses (including management fees to AFG) and interest on and returns of capital to senior levels of debt securities. There are no contractual requirements for AFG to provide additional funding for these entities. AFG has not provided and does not intend to provide any financial support to these entities.

AFG’s maximum exposure to economic loss on the CLOs that it manages is limited to its investment in those CLOs, which had an aggregate fair value of $164 million (including $142 million invested in the most subordinate tranches and $10 million invested in a temporary warehousing entity) at September 30, 2024.

In the first nine months of 2024, AFG formed two new CLOs, which issued an aggregate $813 million face amount of liabilities (including $73 million face amount purchased by AFG). In March 2023, AFG formed one new CLO, which issued $407 million face amount of liabilities (including $16 million face amount purchased by AFG).

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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
The following table shows a progression of the fair value of AFG's investment in CLO tranches (in millions):
Three months ended September 30,Nine months ended September 30,
2024202320242023
Balance at beginning of period$158 $117 $137 $112 
Purchases— — 62 11 
Sales— — (40)— 
Distributions(8)(9)(28)(21)
Change in fair value3 12 21 18 
Change in accrued interest
— — 1 — 
Balance at end of period (*)$153 $120 $153 $120 
(*)Excludes $10 million and $23 million invested in temporary warehousing entities at September 30, 2024 and 2023, respectively, that were established to provide AFG the ability to form new CLOs.

The revenues and expenses of the CLOs are separately identified in AFG’s Statement of Earnings, after the elimination of management fees and earnings attributable to AFG as measured by the change in the fair value of AFG’s investments in the CLOs. Selected financial information related to the CLOs is shown below (in millions):
Three months ended September 30,Nine months ended September 30,
2024202320242023
Gains (losses) on change in fair value of assets/liabilities (*):
Assets$(7)$50 $(10)$116 
Liabilities(2)(34)15 (104)
Management fees paid to AFG3 4 9 12 
CLO earnings attributable to AFG
2 12 25 18 
(*)Included in revenues in AFG’s Statement of Earnings.

The aggregate unpaid principal balance of the CLOs’ fixed maturity investments exceeded the fair value of the investments by $114 million and $109 million at September 30, 2024 and December 31, 2023, respectively. The aggregate unpaid principal balance of the CLOs’ debt exceeded its carrying value by $274 million and $253 million at those dates, respectively. The CLO assets include loans with an aggregate fair value of $9 million at September 30, 2024 and $7 million at December 31, 2023, for which the CLOs are not accruing interest because the loans are in default (aggregate unpaid principal balance of $17 million at September 30, 2024 and $13 million at December 31, 2023).

In addition to the CLOs that it manages, AFG had investments in CLOs that are managed by third parties (therefore not consolidated), which are included in available for sale fixed maturity securities and had a fair value of $1.30 billion at September 30, 2024 and $1.69 billion at December 31, 2023.

H.    Goodwill and Other Intangibles

There were no changes in the goodwill balance of $305 million during the first nine months of 2024.

Included in other assets in AFG’s Balance Sheet is $199 million at September 30, 2024 and $213 million at December 31, 2023 in amortizable intangible assets related to acquisitions. These amounts are net of accumulated amortization of $53 million and $39 million, respectively. Amortization of intangibles was $5 million in both the third quarters of 2024 and 2023 and $14 million and $11 million in the first nine months of 2024 and 2023, respectively.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
I.    Long-Term Debt

Long-term debt consisted of the following (in millions):
September 30, 2024December 31, 2023
PrincipalDiscount and Issue CostsCarrying ValuePrincipalDiscount and Issue CostsCarrying Value
Direct Senior Obligations of AFG:
4.50% Senior Notes due June 2047
$567 $(1)$566 $567 $(1)$566 
5.25% Senior Notes due April 2030
253 (4)249 253 (4)249 
Other3 — 3 3 — 3 
823 (5)818 823 (5)818 
Direct Subordinated Obligations of AFG:
4.50% Subordinated Debentures due September 2060
200 (5)195 200 (5)195 
5.125% Subordinated Debentures due December 2059
200 (5)195 200 (5)195 
5.625% Subordinated Debentures due June 2060
150 (4)146 150 (4)146 
5.875% Subordinated Debentures due March 2059
125 (4)121 125 (4)121 
675 (18)657 675 (18)657 
$1,498 $(23)$1,475 $1,498 $(23)$1,475 

Scheduled principal payments on debt for the balance of 2024, the subsequent five years and thereafter are as follows: 2024 — none; 2025 — none; 2026 — none; 2027 — none; 2028 — none; 2029 — none and thereafter — $1.50 billion.

In the first six months of 2023, AFG repurchased $15 million principal amount of its 4.50% Senior Notes due in June 2047 for $13 million and $8 million principal amount of its 5.25% Senior Notes due in April 2030 for $8 million in open market transactions.

AFG can borrow up to $450 million under its revolving credit facility, which expires in June 2028. Amounts borrowed under this agreement bear interest, based on AFG’s credit rating, at rates ranging from 1.00% to 1.75% (currently 1.25%) over a SOFR-based floating rate. No amounts were borrowed under this facility at September 30, 2024 or December 31, 2023.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
J.    Shareholders’ Equity

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

Accumulated Other Comprehensive Income (Loss), Net of Tax (“AOCI”)   Comprehensive income is defined as all changes in shareholders’ equity except those arising from transactions with shareholders. Comprehensive income includes net earnings and other comprehensive income (loss), which consists primarily of changes in net unrealized gains or losses on available for sale fixed maturity securities.

The progression of the components of accumulated other comprehensive income (loss) follows (in millions):
Other Comprehensive Income (Loss)
AOCI Beginning BalancePretaxTaxNet of taxAOCI Ending Balance
Quarter ended September 30, 2024
Net unrealized gains (losses) on securities:
Unrealized holding gains (losses) on securities arising during the period$226 $(48)$178 
Reclassification adjustment for realized (gains) losses included in net earnings (*)15 (3)12 
Total net unrealized gains (losses) on securities$(290)241 (51)190 $(100)
Net unrealized gains (losses) on cash flow hedges:
Unrealized holding gains (losses) on cash flow hedges arising during the period11 (3)8 
Reclassification adjustment for investment income included in net earnings (*)6 (1)5 
Total net unrealized gains (losses) on cash flow hedges(20)17 (4)13 (7)
Foreign currency translation adjustments(23)(9)1 (8)(31)
Pension and other postretirement plan adjustments2 — — — 2 
Total$(331)$249 $(54)$195 $(136)
Quarter ended September 30, 2023
Net unrealized gains (losses) on securities:
Unrealized holding gains (losses) on securities arising during the period$(81)$17 $(64)
Reclassification adjustment for realized (gains) losses included in net earnings (*)9 (2)7 
Total net unrealized gains (losses) on securities$(464)(72)15 (57)$(521)
Net unrealized gains (losses) on cash flow hedges:
Unrealized holding gains (losses) on cash flow hedges arising during the period(9)2 (7)
Reclassification adjustment for investment income included in net earnings (*)8 (2)6 
Total net unrealized gains (losses) on cash flow hedges(33)(1)— (1)(34)
Foreign currency translation adjustments(17)— (1)(1)(18)
Pension and other postretirement plan adjustments3 — — — 3 
Total$(511)$(73)$14 $(59)$(570)
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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
Other Comprehensive Income (Loss)
AOCI Beginning BalancePretaxTaxNet of taxAOCI Ending Balance
Nine months ended September 30, 2024
Net unrealized gains (losses) on securities:
Unrealized holding gains (losses) on securities arising during the period$216 $(46)$170 
Reclassification adjustment for realized (gains) losses included in net earnings (*)21 (4)17 
Total net unrealized gains (losses) on securities$(287)237 (50)187 $(100)
Net unrealized gains (losses) on cash flow hedges:
Unrealized holding gains (losses) on cash flow hedges arising during the period(7)1 (6)
Reclassification adjustment for investment income included in net earnings (*)20 (4)16 
Total net unrealized gains (losses) on cash flow hedges(17)13 (3)10 (7)
Foreign currency translation adjustments
(17)(14)— (14)(31)
Pension and other postretirement plan adjustments2 — — — 2 
Total$(319)$236 $(53)$183 $(136)
Nine months ended September 30, 2023
Net unrealized gains (losses) on securities:
Unrealized holding gains (losses) on securities arising during the period$(69)$14 $(55)
Reclassification adjustment for realized (gains) losses included in net earnings (*)40 (9)31 
Total net unrealized gains (losses) on securities$(497)(29)5 (24)$(521)
Net unrealized gains (losses) on cash flow hedges:
Unrealized holding gains (losses) on cash flow hedges arising during the period(25)5 (20)
Reclassification adjustment for investment income included in net earnings (*)19 (4)15 
Total net unrealized gains (losses) on cash flow hedges(29)(6)1 (5)(34)
Foreign currency translation adjustments(20)2 — 2 (18)
Pension and other postretirement plan adjustments3 — — — 3 
Total$(543)$(33)$6 $(27)$(570)
(*)The reclassification adjustments affected the following lines in AFG’s Statement of Earnings:
OCI componentAffected line in the statement of earnings
Pretax - Net unrealized gains (losses) on securities
Realized gains (losses) on securities
Pretax - Net unrealized gains (losses) on cash flow hedgesNet investment income
TaxProvision for income taxes

Stock Incentive Plans   Under AFG’s stock incentive plans, employees of AFG and its subsidiaries are eligible to receive equity awards in the form of stock options, stock appreciation rights, restricted stock awards, restricted stock units and stock awards. In the first nine months of 2024, AFG issued 157,681 shares of restricted Common Stock (fair value of $126.24 per share) under the stock incentive plans.

Total compensation expense related to stock incentive plans of AFG and its subsidiaries was $4 million and $5 million in the third quarter of 2024 and 2023, respectively, and $13 million and $14 million in the first nine months of 2024 and 2023, respectively.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
K.    Income Taxes

The following is a reconciliation of income taxes at the statutory rate of 21% to the provision for income taxes as shown in AFG’s Statement of Earnings (dollars in millions):
Three months ended September 30,Nine months ended September 30,
2024202320242023
Amount% of EBTAmount% of EBTAmount% of EBTAmount% of EBT
Earnings before income taxes (“EBT”)
$229 $219 $804 $738 
Income taxes at statutory rate$48 21 %$46 21 %$169 21 %$155 21 %
Effect of:
Employee stock ownership plan dividend paid deduction(1)— %— — %(3)(1 %)(3)— %
Tax exempt interest(1)— %(2)(1 %)(3)(1 %)(4)(1 %)
Stock-based compensation— — %— — %(2)— %(2)— %
Change in valuation allowance(2)(1 %)(2)(1 %)(2)— %(2)— %
Dividends received deduction— — %— — %(1)— %(1)— %
Nondeductible expenses
2 1 %3 1 %6 1 %8 1 %
Adjustment related to sale of subsidiary
— — %— — %4 1 %— — %
Adjustment to prior year taxes1 — %(5)(2 %)1 — %(5)(1 %)
Foreign operations1 — %2 1 %1 — %6 1 %
Other— — %— — %2 — %(3)(1 %)
Provision for income taxes as shown in the statement of earnings
$48 21 %$42 19 %$172 21 %$149 20 %

In the second quarter of 2024, AFG recorded $4 million in net tax expense related to a pending IRS settlement regarding the sale of a subsidiary in a prior year.

On January 1, 2023, the two major tax provisions in the Inflation Reduction Act (“IRA”) became effective. The IRA created a new corporate alternative minimum tax (“CAMT”) based on the earnings that a company reports in its financial statements and imposes a 1% excise tax on corporate stock repurchases. Any CAMT incurred would be available to offset taxes payable under the standard calculation in future periods. Accordingly, the CAMT is a timing difference and would result in the recording of an offsetting deferred tax asset with no impact on overall income tax expense. Based on recently issued proposed regulations, while AFG meets the financial statement income thresholds to be subject to CAMT, management does not believe AFG will incur a CAMT liability for 2024. The excise tax on stock repurchases in excess of any issuances is recorded as part of the cost of the repurchases directly in shareholders’ equity.

The Organisation for Economic Co-operation and Development, an intergovernmental organization with 38 member countries, has proposed a global minimum corporate tax rate of 15% (“Pillar Two”). Due to AFG’s limited international operations and the tax rate AFG is subject to in those jurisdictions, management does not believe Pillar Two will have a material impact on AFG’s results of operations.

L.    Contingencies

There have been no significant changes to the matters discussed and referred to in Note N — “Contingencies” of AFG’s 2023 Form 10-K, which covers property and casualty insurance reserves for claims related to environmental exposures, asbestos and other mass tort claims and environmental and occupational injury and disease claims of subsidiaries’ former railroad and manufacturing operations.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
M.    Insurance

Property and Casualty Insurance Reserves The following table provides an analysis of changes in the liability for losses and loss adjustment expenses during the first nine months of 2024 and 2023 (in millions):
Nine months ended September 30,
20242023
Balance at beginning of year$13,087 $11,974 
Less reinsurance recoverables, net of allowance4,288 3,767 
Net liability at beginning of year8,799 8,207 
Provision for losses and LAE occurring in the current period3,379 3,132 
Net decrease in the provision for claims of prior years
(100)(168)
Total losses and LAE incurred3,279 2,964 
Payments for losses and LAE of:
Current year(828)(743)
Prior years(2,027)(1,745)
Total payments(2,855)(2,488)
Foreign currency translation and other(2)1 
Net liability at end of period9,221 8,684 
Add back reinsurance recoverables, net of allowance4,985 4,207 
Gross unpaid losses and LAE included in the balance sheet at end of period$14,206 $12,891 

The net decrease in the provision for claims of prior years during the first nine months of 2024 reflects (i) lower than anticipated losses in the crop business, lower than expected claim severity in the property and inland marine and aviation businesses and lower than anticipated claim severity and frequency in the ocean marine business (within the Property and transportation sub-segment), (ii) lower than anticipated claim severity in the workers’ compensation businesses and lower than expected claim frequency and severity in the executive liability business (within the Specialty casualty sub-segment) and (iii) lower than anticipated claim frequency and severity in the fidelity and financial institutions businesses and lower than expected claim frequency in the trade credit business (within the Specialty financial sub-segment). This favorable development was partially offset by (i) higher than anticipated claim severity in the umbrella and excess liability businesses, public sector and general liability businesses and higher than expected claim frequency and severity in the social services business (within the Specialty casualty sub-segment), (ii) higher than anticipated claim severity in the innovative markets and surety businesses (within the Specialty financial sub-segment) and (iii) net adverse development associated with AFG’s internal reinsurance program (within Other specialty).

The net decrease in the provision for claims of prior years during the first nine months of 2023 reflects (i) lower than anticipated losses in the crop business, lower than expected claim frequency and severity across the transportation businesses and lower than anticipated claim frequency in the property and inland marine business (within the Property and transportation sub-segment), (ii) lower than anticipated claim severity in the workers’ compensation businesses, lower than expected claim frequency in the executive liability and environmental businesses and favorable reserve development related to COVID-19 losses across several businesses (within the Specialty casualty sub-segment) and (iii) lower than anticipated claim frequency in the trade credit and financial institutions businesses and lower than expected claim frequency and severity in the surety business (within the Specialty financial sub-segment). This favorable development was partially offset by higher than anticipated claim severity in the public sector and excess liability businesses (within the Specialty casualty sub-segment).

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AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
Recoverables from Reinsurers and Premiums Receivable Progressions of the 2024 and 2023 allowance for expected credit losses on recoverables from reinsurers and premiums receivable are shown below (in millions):
Recoverables from ReinsurersPremiums Receivable
2024202320242023
Balance at June 30$10 $9 $18 $9 
Increase in allowance from acquisition of CRS— — — 4 
Provision (credit) for expected credit losses— 2 1 — 
Write-offs charged against the allowance— — — — 
Balance at September 30$10 $11 $19 $13 
Balance at December 31$10 $8 $15 $8 
Increase in allowance from acquisition of CRS— — — 4 
Provision (credit) for expected credit losses— 3 5 1 
Write-offs charged against the allowance— — (1)— 
Balance at September 30$10 $11 $19 $13 

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AMERICAN FINANCIAL GROUP, INC. 10-Q
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
INDEX TO MD&A
PagePage

FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. Some of the forward-looking statements can be identified by the use of words such as “anticipates”, “believes”, “expects”, “projects”, “estimates”, “intends”, “plans”, “seeks”, “could”, “may”, “should”, “will” or the negative version of those words or other comparable terminology. Such forward-looking statements include statements relating to: expectations concerning market and other conditions and their effect on future premiums, revenues, earnings, investment activities and the amount and timing of share repurchases and special dividends; recoverability of asset values; expected losses and the adequacy of reserves for 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 the following and the risks and uncertainties AFG describes in the “Risk Factors” section of its most recent Annual Report on Form 10-K, as updated by its other reports filed with the Securities and Exchange Commission.
•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;
•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;
•changes in insurance law or regulation, including changes in statutory accounting rules, including modifications to capital requirements;
•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 pandemics, civil unrest and other major losses;
•disruption caused by cyber-attacks or other technology breaches or failures by AFG or its business partners and service providers, which could negatively impact AFG’s business and/or expose AFG to litigation;
•development of insurance loss reserves and establishment of other reserves, particularly with respect to amounts associated with asbestos and environmental claims;
•availability of reinsurance and ability of reinsurers to pay their obligations;
•competitive pressures;
•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 AFG’s operating subsidiaries;
•the impact of the conditions in the international financial markets and the global economy relating to AFG’s international operations; and
•effects on AFG’s reputation, including as a result of environmental, social and governance matters.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
The forward-looking statements herein are made only as of the date of this report. The Company assumes no obligation to publicly update any forward-looking statements.

OBJECTIVE
The objective of Management’s Discussion and Analysis is to provide a discussion and analysis of the financial statements and other statistical data that management believes will enhance the understanding of AFG’s financial condition, changes in financial condition and results of operations. The tables and narrative that follow are presented in a manner that is consistent with the information that AFG’s management uses to make operational decisions and allocate capital resources. They are provided to demonstrate the nature of the transactions and events that could impact AFG’s financial results. This discussion should be read in conjunction with the financial statements beginning on page 2.
OVERVIEW

Financial Condition
AFG is organized as a holding company with almost all of its operations being conducted by subsidiaries. AFG, however, has continuing cash needs for administrative expenses, the payment of principal and interest on borrowings, shareholder dividends, and taxes. Therefore, certain analyses are most meaningfully presented on a parent only basis while others are best done on a total enterprise basis. In addition, because its businesses are financial in nature, AFG does not prepare its consolidated financial statements using a current-noncurrent format. Consequently, certain traditional ratios and financial analysis tests are not meaningful.

Results of Operations
Through the operations of its subsidiaries, AFG is engaged primarily in property and casualty insurance, focusing on specialized commercial products for businesses.

AFG reported net earnings of $181 million ($2.16 per share, diluted) for the third quarter of 2024 compared to $177 million ($2.09 per share, diluted) for the third quarter of 2023. Higher net investment income and lower net realized losses on securities were partially offset by lower underwriting profit.

AFG reported net earnings of $632 million ($7.54 per share, diluted) for the first nine months of 2024 compared to $589 million ($6.93 per share, diluted) for the first nine months of 2023. The year over year increase was due primarily to the impact of higher yields on fixed maturity investments coupled with net realized gains on securities in the first nine months of 2024 compared to net realized losses on securities in the first nine months of 2023. These items were partially offset by lower returns on AFG’s alternative investment portfolio and, to a lesser extent, lower underwriting profit.

Outlook
AFG’s financial condition, results of operations and cash flows are impacted by the economic, legal and regulatory environment. Economic inflation, social inflation, supply chain disruption, labor shortages and other economic conditions may impact premium levels, loss cost trends and investment returns. Management believes that AFG’s strong financial position and current liquidity and capital at its subsidiaries will give AFG the flexibility to continue to effectively address and respond to the ongoing uncertainties presented by the macro-economic environment and the conflicts in Ukraine and the Middle East. AFG’s insurance subsidiaries continue to have capital at or in excess of the levels required by ratings agencies in order to maintain their current ratings, and the parent company does not have any near-term debt maturities.

Management expects continued premium growth and strong underwriting results in the ongoing generally favorable property and casualty insurance market. In addition, management anticipates the deployment of cash during the elevated interest rate environment (since early 2022) will continue to have a positive impact on investment income on fixed maturity investments into 2025.

CRITICAL ACCOUNTING POLICIES

Significant accounting policies are summarized in Note A — “Accounting Policies” to the financial statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that can have a significant effect on amounts reported in the financial statements. As more information becomes known, these estimates and assumptions change and, thus, impact amounts reported in the future. The areas where
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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
management believes the degree of judgment required to determine amounts recorded in the financial statements is most significant are as follows:
•the valuation of investments, including the determination of impairment allowances,
•the establishment of insurance reserves, especially asbestos and environmental-related reserves,
•the recoverability of reinsurance, and
•the establishment of asbestos and environmental liabilities of former railroad and manufacturing operations.

For a discussion of these policies, see Management’s Discussion and Analysis — “Critical Accounting Policies” in AFG’s 2023 Form 10-K.

LIQUIDITY AND CAPITAL RESOURCES

Ratios
AFG’s debt to total capital ratio on a consolidated basis is shown below (dollars in millions):
December 31,
September 30, 202420232022
Principal amount of long-term debt$1,498 $1,498 $1,521 
Total capital6,342 6,075 6,116 
Ratio of debt to total capital:
Including subordinated debt23.6 %24.7 %24.9 %
Excluding subordinated debt13.0 %13.5 %13.8 %

The ratio of debt to total capital is a non-GAAP measure that management believes is useful for investors, analysts and ratings agencies to evaluate AFG’s financial strength and liquidity and to provide insight into how AFG finances its operations. The ratio is calculated by dividing the principal amount of AFG’s long-term debt by its total capital, which includes long-term debt and shareholders’ equity (excluding accumulated other comprehensive income (loss), net of tax). In addition, maintaining a ratio of debt, excluding subordinated debt and debt secured by real estate (if any), to total capital of 35% or lower is a financial covenant in AFG’s bank credit facility.

Condensed Consolidated Cash Flows
AFG’s principal sources of cash include insurance premiums, income from its investment portfolio and proceeds from the maturities, redemptions and sales of investments. Insurance premiums in excess of acquisition expenses and operating costs are invested until they are needed to meet policyholder obligations or made available to the parent company through dividends to cover debt obligations and corporate expenses, and to provide returns to shareholders through share repurchases and dividends. Cash flows from operating, investing and financing activities as detailed in AFG’s Consolidated Statement of Cash Flows are shown below (in millions):
Nine months ended September 30,
20242023
Net cash provided by operating activities$478 $1,214 
Net cash provided by investing activities116 459 
Net cash used in financing activities(497)(1,324)
Net change in cash and cash equivalents$97 $349 

Net Cash Provided by Operating Activities   AFG’s property and casualty insurance operations typically produce positive net operating cash flows as premiums collected and investment income exceed policy acquisition costs, claims payments and operating expenses. AFG’s net cash provided by operating activities is impacted by the level and timing of property and casualty premiums, claim and expense payments and recoveries from reinsurers. Cash flows provided by operating activities also include the activity of AFG’s managed investment entities (collateralized loan obligations (“CLO”)) other than those activities included in investing or financing activities. The changes in the assets and liabilities of the managed investment entities included in operating activities reduced cash flows from operating activities by $67 million during the first nine months of 2024 and increased cash flows from operating activities by $26 million in the first nine months of 2023, accounting for a $93 million decrease in cash flows from operating activities in the 2024 period compared to the 2023 period. As discussed in Note A — “Accounting Policies — Managed Investment Entities” to the financial statements, AFG has no right to use the CLO assets and no obligation to pay the CLO liabilities and such assets and
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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
liabilities are shown separately in AFG’s Balance Sheet. Excluding the impact of the managed investment entities, net cash provided by operating activities was $545 million and $1.19 billion in the first nine months of 2024 and 2023, respectively.

Net Cash Provided by Investing Activities   AFG’s investing activities consist primarily of the investment of funds provided by its property and casualty businesses. Investing activities also include the purchase and disposal of managed investment entity investments, which are presented separately in AFG’s Balance Sheet. Net investment activity in the managed investment entities was a $204 million source of cash in the first nine months of 2024 compared to $609 million in the first nine months of 2023, accounting for a $405 million decrease in net cash provided by investing activities in the first nine months of 2024 compared to the same 2023 period. See Note A — “Accounting Policies — Managed Investment Entities” and Note G — “Managed Investment Entities” to the financial statements. Investing activities for the first nine months of 2023 included the July 2023 acquisition of Crop Risk Services (“CRS”) for $234 million in cash. Excluding the acquisition of CRS and the activity of the managed investment entities, investing activities were an $88 million use of cash in the first nine months of 2024 compared to an $84 million source of cash in the first nine months of 2023.

Net Cash Used in Financing Activities   AFG’s financing activities consist primarily of issuances and retirements of long-term debt, issuances and repurchases of common stock and dividend payments. Net cash used in financing activities was $497 million for the first nine months of 2024 compared to $1.32 billion in the first nine months of 2023, a decrease of $827 million. AFG paid cash dividends totaling $385 million in the first nine months of 2024 compared to $498 million in the first nine months of 2023, a decrease in cash used by financing activities of $113 million. There were no debt retirements in the first nine months of 2024 compared to $21 million in debt retirements during the first nine months of 2023. During the first nine months of 2024, AFG did not repurchase any of its Common Stock compared to repurchases of $153 million in the comparable 2023 period. Financing activities also include issuances and retirements of managed investment entity liabilities, which are nonrecourse to AFG and presented separately in AFG’s Balance Sheet. Retirements of managed investment entity liabilities exceeded issuances by $125 million in the first nine months of 2024 compared to $663 million in the first nine months of 2023, accounting for a $538 million decrease in net cash used in financing activities in the 2024 period compared to the 2023 period. See Note A — “Accounting Policies — Managed Investment Entities” and Note G — “Managed Investment Entities” to the financial statements.

Parent and Subsidiary Liquidity

Parent Holding Company Liquidity   Management believes AFG has sufficient resources to meet its liquidity requirements. If funds generated from operations, including dividends, tax payments and borrowings from subsidiaries, are insufficient to meet fixed charges in any period, AFG would be required to utilize parent company cash and investments or to generate cash through borrowings, sales of other assets or similar transactions.

AFG's operations continue to generate significant excess capital for future returns of capital to shareholders in the form of regular and special cash dividends and through opportunistic share repurchases or to be deployed into its property and casualty businesses as management identifies the potential for profitable organic growth, and opportunities to expand through acquisitions of established businesses or start-ups that meet target return thresholds.

AFG paid a special cash dividend totaling $209 million ($2.50 per share) on February 28, 2024. On November 5, 2024, AFG declared a special cash dividend of $4.00 per share, payable on November 26, 2024. The aggregate amount of this special dividend will be approximately $335 million.

AFG may, at any time and from time to time, seek to retire or purchase its outstanding debt through cash purchases or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will be upon such terms and at such prices as management may determine, and will depend on prevailing market conditions, AFG’s liquidity requirements, contractual restrictions and other factors.

During 2023, AFG repurchased 1,872,544 shares of its Common Stock for $213 million, paid special cash dividends totaling $466 million ($4.00 per share in February and $1.50 per share in November) and repurchased $23 million principal amount of its senior notes for $21 million cash.

At September 30, 2024, AFG (parent) held approximately $382 million in cash and investments. Management believes that AFG’s cash balances are held at stable banking institutions, although the amounts of many of these deposits are in excess of federally insured balances. AFG can borrow up to $450 million under its revolving credit facility, which expires in June 2028. Amounts borrowed under this agreement bear interest at rates ranging from 1.00% to 1.75% (based on AFG’s
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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
credit rating, currently 1.25%) over a SOFR-based floating rate. There were no borrowings under AFG’s credit facilities, or under any other parent company short-term borrowing arrangements, during 2023 or the first nine months of 2024.

Under a tax allocation agreement with AFG, all 80% (or more) owned U.S. subsidiaries generally pay taxes to (or recover taxes from) AFG based on each subsidiary’s contribution to amounts due under AFG’s consolidated tax return.

Subsidiary Liquidity   The liquidity requirements of AFG’s insurance subsidiaries relate primarily to the policyholder claims and underwriting expenses and payments of dividends and taxes to AFG. Historically, cash flows from premiums and investment income have generally provided more than sufficient funds to meet these requirements. Funds received in excess of cash requirements are generally invested in marketable securities. In addition, the insurance subsidiaries generally hold a significant amount of highly liquid, short duration investments.

AFG believes its insurance subsidiaries maintain sufficient liquidity to pay claims and underwriting expenses. In addition, these subsidiaries have sufficient capital to meet commitments in the event of unforeseen events such as reserve deficiencies, inadequate premium rates or reinsurer insolvencies. Management believes that the capital levels in AFG’s insurance subsidiaries are adequate to maintain its business and rating agency ratings. Nonetheless, changes in statutory accounting rules, significant declines in the fair value of the insurance subsidiaries’ investment portfolios or significant ratings downgrades on these investments, could create a need for additional capital.

Investments
AFG’s investment portfolio at September 30, 2024, contained $10.44 billion in fixed maturity securities classified as available for sale and carried at fair value with unrealized gains and losses included in accumulated other comprehensive income (loss) and $78 million in fixed maturities classified as trading with holding gains and losses included in net investment income. In addition, AFG’s investment portfolio includes $510 million in equity securities carried at fair value with holding gains and losses included in realized gains (losses) on securities and $571 million in equity securities carried at fair value with holding gains and losses included in net investment income.

Fair values for AFG’s portfolio are determined by AFG’s internal investment professionals using data from nationally recognized pricing services, non-binding broker quotes and other market information. Fair values of equity securities are determined by published closing prices when available. For equity investments in limited partnerships and similar investments that do not qualify for equity method accounting, fair value is determined based on financial information provided by the limited partnerships. For AFG’s fixed maturity portfolio, approximately 89% was priced using pricing services at September 30, 2024 and 4% was priced using non-binding broker quotes. When prices obtained for the same security vary, AFG’s internal 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 (“MBS”) 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. To validate the appropriateness of the prices obtained, these investment managers consider widely published indices (as benchmarks), recent trades, changes in interest rates, general economic conditions and the credit quality of the specific issuers. In addition, AFG communicates directly with pricing services regarding the methods and assumptions used in pricing, including verifying, on a test basis, the inputs used by the services to value specific securities.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
In general, the fair value of AFG’s fixed maturity investments is inversely correlated to changes in interest rates. The following table demonstrates the sensitivity of such fair values to reasonably likely changes in interest rates by illustrating the estimated effect on AFG’s fixed maturity portfolio that an immediate increase of 100 basis points in the interest rate yield curve would have had at September 30, 2024 (dollars in millions). Effects of increases or decreases from the 100 basis points illustrated would be approximately proportional.

Fair value of fixed maturity portfolio$10,513 
Percentage impact on fair value of 100 bps increase in interest rates(3.0 %)
Pretax impact on fair value of fixed maturity portfolio$(315)
Approximately 94% of the fixed maturities held by AFG at September 30, 2024, were rated “investment grade” (credit rating of AAA to BBB) by nationally recognized rating agencies, 3% were rated “non-investment grade” and 3% were not rated. Investment grade securities generally bear lower yields and lower degrees of risk than those that are unrated and non-investment grade. Management believes that the high-quality investment portfolio should generate a stable and predictable investment return.
AFG has less than $100 million of direct exposure to office commercial real estate through property ownership, mortgages or equity method investments. AFG’s fixed maturity portfolio includes securities (the majority of which are AAA-rated) with a carrying value of approximately $500 million that have minimal exposure to office commercial real estate.

Summarized information for the unrealized gains and losses recorded in AFG’s Balance Sheet at September 30, 2024, is shown in the following table (dollars in millions). Approximately $415 million of available for sale fixed maturity securities had no unrealized gains or losses at September 30, 2024.
Securities
With
Unrealized
Gains		Securities
With
Unrealized
Losses
Available for Sale Fixed Maturities
Fair value of securities$4,977 $5,043 
Amortized cost of securities, net of allowance for expected credit losses$4,804 $5,342 
Gross unrealized gain (loss)$173 $(299)
Fair value as % of amortized cost104 %94 %
Number of security positions925 1,151 
Number individually exceeding $2 million gain or loss2 27 
Concentration of gains (losses) by type or industry (exceeding 5% of unrealized):
Mortgage-backed securities$36 $(117)
Other asset-backed securities28 (62)
Banking18 (17)
Collateralized loan obligations11 (11)
Asset managers11 (15)
Utilities
9 — 
States and municipalities6 (34)
Percentage rated investment grade96 %95 %

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
The table below sets forth the scheduled maturities of AFG’s available for sale fixed maturity securities at September 30, 2024, based on their fair values. Securities with sinking funds are reported at average maturity. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid by the issuers.
Securities
With
Unrealized
Gains		Securities
With
Unrealized
Losses
Maturity
One year or less1 %8 %
After one year through five years26 %26 %
After five years through ten years20 %6 %
After ten years3 %2 %
50 %42 %
Collateralized loan obligations and other asset-backed securities (average life of approximately 3 years)
35 %37 %
Mortgage-backed securities (average life of approximately 6 years)
15 %21 %
100 %100 %

The table below (dollars in millions) summarizes the unrealized gains and losses on fixed maturity securities by dollar amount:
Aggregate
Fair
Value		Aggregate
Unrealized
Gain (Loss)		Fair
Value as
% of Cost
Fixed Maturities at September 30, 2024
Securities with unrealized gains:
Exceeding $500,000 (83 securities)
$1,152 $72 107 %
$500,000 or less (842 securities)
3,825 101 103 %
$4,977 $173 104 %
Securities with unrealized losses:
Exceeding $500,000 (152 securities)
$1,860 $(209)90 %
$500,000 or less (999 securities)
3,183 (90)97 %
$5,043 $(299)94 %

The following table (dollars in millions) summarizes the unrealized losses for all securities with unrealized losses by issuer quality and the length of time those securities have been in an unrealized loss position:
Aggregate
Fair
Value		Aggregate
Unrealized
Loss		Fair
Value as
% of Cost
Securities with Unrealized Losses at September 30, 2024
Investment grade fixed maturities with losses for:
Less than one year (70 securities)
$352 $(1)100 %
One year or longer (902 securities)
4,421 (272)94 %
$4,773 $(273)95 %
Non-investment grade fixed maturities with losses for:
Less than one year (34 securities)
$56 $(4)93 %
One year or longer (145 securities)
214 (22)91 %
$270 $(26)91 %

When a decline in the value of a specific investment is considered to be other-than-temporary, an allowance for credit losses (impairment) is charged to earnings (accounted for as a realized loss). The determination of whether unrealized losses are other-than-temporary requires judgment based on subjective as well as objective factors as detailed in AFG’s 2023 Form 10-K under Management’s Discussion and Analysis — “Investments.”
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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

Based on its analysis, management believes AFG will recover its cost basis (net of any allowance) in the fixed maturity securities with unrealized losses and that AFG has the ability to hold the securities until they recover in value and had no intent to sell them at September 30, 2024. Although AFG has the ability to continue holding its fixed maturity investments with unrealized losses, its intent to hold them may change due to deterioration in the issuers’ creditworthiness, decisions to lessen exposure to a particular issuer or industry, asset/liability management decisions, market movements, changes in views about appropriate asset allocation or the desire to offset taxable realized gains. Should AFG’s ability or intent change regarding a particular security, a charge for impairment would likely be required. While it is not possible to accurately predict if or when a specific security will become impaired, increases in the allowance for credit losses could be material to results of operations in future periods. Significant declines in the fair value of AFG’s investment portfolio could have a significant adverse effect on AFG’s liquidity. For information on AFG’s realized gains (losses) on securities, see “Results of Operations — Realized Gains (Losses) on Securities.”

Uncertainties
Management believes that the areas posing the greatest risk of material loss are the adequacy of its insurance reserves and contingencies arising out of its former railroad and manufacturing operations. See Management’s Discussion and Analysis — “Uncertainties — Asbestos and Environmental-related (“A&E”) Insurance Reserves” in AFG’s 2023 Form 10–K.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
MANAGED INVESTMENT ENTITIES

Accounting standards require AFG to consolidate its investments in collateralized loan obligation (“CLO”) entities that it manages and owns an interest in (in the form of debt). See Note A — “Accounting Policies — Managed Investment Entities” and Note G — “Managed Investment Entities” to the financial statements. The effect of consolidating these entities is shown in the tables below (in millions). The “Before CLO Consolidation” columns include AFG’s investment and earnings in the CLOs on an unconsolidated basis.
CONDENSED CONSOLIDATING BALANCE SHEET
Before CLO
Consolidation		Managed
Investment
Entities		Consol.
Entries		Consolidated
As Reported
September 30, 2024
Assets:
Cash and investments$15,904 $— $(163)(*)$15,741 
Assets of managed investment entities— 4,332 — 4,332 
Other assets12,519 — (1)(*)12,518 
Total assets$28,423 $4,332 $(164)$32,591 
Liabilities:
Unpaid losses and loss adjustment expenses and unearned premiums
$18,526 $— $— $18,526 
Liabilities of managed investment entities— 4,322 (154)(*)4,168 
Long-term debt and other liabilities5,189 — — 5,189 
Total liabilities23,715 4,322 (154)27,883 
Shareholders’ equity:
Common Stock and Capital surplus1,484 10 (10)1,484 
Retained earnings3,360 — — 3,360 
Accumulated other comprehensive income (loss), net of tax(136)— — (136)
Total shareholders’ equity4,708 10 (10)4,708 
Total liabilities and shareholders’ equity$28,423 $4,332 $(164)$32,591 
December 31, 2023
Assets:
Cash and investments$15,438 $— $(175)(*)$15,263 
Assets of managed investment entities— 4,484 — 4,484 
Other assets10,042 — (2)(*)10,040 
Total assets$25,480 $4,484 $(177)$29,787 
Liabilities:
Unpaid losses and loss adjustment expenses and unearned premiums
$16,538 $— $— $16,538 
Liabilities of managed investment entities
— 4,446 (139)(*)4,307 
Long-term debt and other liabilities
4,684 — — 4,684 
Total liabilities21,222 4,446 (139)25,529 
Shareholders’ equity:
Common Stock and Capital surplus1,456 38 (38)1,456 
Retained earnings3,121 — — 3,121 
Accumulated other comprehensive income (loss), net of tax(319)— — (319)
Total shareholders’ equity4,258 38 (38)4,258 
Total liabilities and shareholders’ equity$25,480 $4,484 $(177)$29,787 
(*)Elimination of the fair value of AFG’s investment in CLOs and related accrued interest.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
Before CLO
Consol. (a)		Managed
Investment
Entities		Consol.
Entries		Consolidated
As Reported
Three months ended September 30, 2024
Revenues:
Property and casualty insurance net earned premiums$2,055 $— $— $2,055 
Net investment income202 — (2)(b)200 
Realized gains (losses) on securities
(2)— — (2)
Income of managed investment entities:
Investment income— 99 — 99 
Gain (loss) on change in fair value of assets/liabilities— (4)(5)(b)(9)
Other income29 — (3)(c)26 
Total revenues2,284 95 (10)2,369 
Costs and Expenses:
Insurance benefits and expenses1,948 — — 1,948 
Expenses of managed investment entities— 95 (10)(b)(c)85 
Interest charges on borrowed money and other expenses107 — — 107 
Total costs and expenses2,055 95 (10)2,140 
Earnings before income taxes229 — — 229 
Provision for income taxes48 — — 48 
Net earnings$181 $— $— $181 
Three months ended September 30, 2023
Revenues:
Property and casualty insurance net earned premiums$1,855 $— $— $1,855 
Net investment income180 — (12)(b)168 
Realized gains (losses) on:
Securities
(19)— — (19)
Subsidiary
(4)— — (4)
Income of managed investment entities:
Investment income— 105 — 105 
Gain (loss) on change in fair value of assets/liabilities— 11 5 (b)16 
Other income47 — (4)(c)43 
Total revenues2,059 116 (11)2,164 
Costs and Expenses:
Insurance benefits and expenses1,736 — — 1,736 
Expenses of managed investment entities— 116 (11)(b)(c)105 
Interest charges on borrowed money and other expenses104 — — 104 
Total costs and expenses1,840 116 (11)1,945 
Earnings before income taxes219 — — 219 
Provision for income taxes42 — — 42 
Net earnings$177 $— $— $177 
(a)Includes income of $2 million in the third quarter of 2024 and $12 million in the third quarter of 2023, representing the change in fair value of AFG’s CLO investments and $3 million and $4 million in the third quarter of 2024 and 2023, respectively, in CLO management fees earned.
(b)Elimination of the change in fair value of AFG’s investments in the CLOs, including $7 million in both the third quarter of 2024 and 2023, in distributions recorded as interest expense by the CLOs.
(c)Elimination of management fees earned by AFG.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
Before CLO
Consol. (a)		Managed
Investment
Entities		Consol.
Entries		Consolidated
As Reported
Nine months ended September 30, 2024
Revenues:
Property and casualty insurance net earned premiums$5,186 $— $— $5,186 
Net investment income611 — (25)(b)586 
Realized gains (losses) on securities10 — — 10 
Income of managed investment entities:
Investment income— 296 — 296 
Gain (loss) on change in fair value of assets/liabilities— 9 (4)(b)5 
Other income101 — (9)(c)92 
Total revenues5,908 305 (38)6,175 
Costs and Expenses:
Insurance benefits and expenses4,806 — — 4,806 
Expenses of managed investment entities— 301 (34)(b)(c)267 
Interest charges on borrowed money and other expenses298 — — 298 
Total costs and expenses5,104 301 (34)5,371 
Earnings before income taxes804 4 (4)804 
Provision for income taxes172 — — 172 
Net earnings$632 $4 $(4)$632 
Nine months ended September 30, 2023
Revenues:
Property and casualty insurance net earned premiums$4,799 $— $— $4,799 
Net investment income601 — (18)(b)583 
Realized gains (losses) on:
Securities
(67)— — (67)
Subsidiary
(4)— — (4)
Income of managed investment entities:
Investment income— 321 — 321 
Gain (loss) on change in fair value of assets/liabilities— 12 — (b)12 
Other income112 — (12)(c)100 
Total revenues5,441 333 (30)5,744 
Costs and Expenses:
Insurance benefits and expenses4,419 — — 4,419 
Expenses of managed investment entities— 333 (30)(b)(c)303 
Interest charges on borrowed money and other expenses284 — — 284 
Total costs and expenses4,703 333 (30)5,006 
Earnings before income taxes738 — — 738 
Provision for income taxes149 — — 149 
Net earnings$589 $— $— $589 
(a)Includes income of $25 million in the first nine months of 2024 and $18 million in the first nine months of 2023, representing the change in fair value of AFG’s CLO investments and $9 million and $12 million of income in the first nine months of 2024 and 2023, respectively, in CLO management fees earned.
(b)Elimination of the change in fair value of AFG’s investments in the CLOs, including $25 million and $18 million in the first nine months of 2024 and 2023, respectively, in distributions recorded as interest expense by the CLOs.
(c)Elimination of management fees earned by AFG.
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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
RESULTS OF OPERATIONS

General
AFG’s net earnings, determined in accordance with GAAP, include certain items that may not be indicative of its ongoing core operations. Core net operating earnings excludes realized gains (losses) on securities because such gains and losses are influenced significantly by financial markets, interest rates and the timing of sales. In addition, special charges related to coverage that AFG no longer writes, such as asbestos and environmental exposures, are excluded from core earnings.

The following table (in millions, except per share amounts) identifies non-core items and reconciles net earnings to core net operating earnings, a non-GAAP financial measure. AFG believes core net operating earnings is a useful tool for investors and analysts in analyzing ongoing operating trends and for management to evaluate financial performance against historical results because it believes this provides a more comparable measure of its continuing business.
Three months ended September 30,Nine months ended September 30,
2024202320242023
Components of net earnings:
Core operating earnings before income taxes$245 $257 $808 $823 
Pretax non-core items:
Realized gains (losses) on securities(2)(19)10 (67)
Realized loss on subsidiary
— (4)— (4)
Special A&E charges
(14)(15)(14)(15)
Gain on retirement of debt
— — — 1 
Earnings before income taxes229 219 804 738 
Provision for income taxes:
Core operating earnings51 49 168 166 
Non-core items:
Realized gains (losses) on securities— (4)3 (14)
Realized loss on subsidiary
— — 4 — 
Special A&E charges
(3)(3)(3)(3)
Gain on retirement of debt
— — — — 
Total provision for income taxes48 42 172 149 
Net earnings$181 $177 $632 $589 
Net earnings:
Core net operating earnings$194 $208 $640 $657 
Realized gains (losses) on securities(2)(15)7 (53)
Realized loss on subsidiary
— (4)(4)(4)
Special A&E charges
(11)(12)(11)(12)
Gain on retirement of debt
— — — 1 
Net earnings$181 $177 $632 $589 
Diluted per share amounts:
Core net operating earnings$2.31 $2.45 $7.63 $7.72 
Realized gains (losses) on securities(0.02)(0.17)0.09 (0.61)
Realized loss on subsidiary
— (0.04)(0.05)(0.04)
Special A&E charges
(0.13)(0.15)(0.13)(0.15)
Gain on retirement of debt
— — — 0.01 
Net earnings$2.16 $2.09 $7.54 $6.93 

Net earnings were $181 million in the third quarter of 2024 compared to $177 million in the third quarter of 2023 reflecting lower net realized losses on securities in the third quarter of 2024 compared to the third quarter of 2023, partially offset by lower core net operating earnings. Core net operating earnings for the third quarter of 2024 decreased $14 million compared to the third quarter of 2023 as higher net investment income was more than offset by lower underwriting profit.
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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
Net realized gains (losses) on securities in the third quarter of 2024 and 2023 include after-tax gains of $8 million and after-tax losses of $6 million, respectively, resulting from the change in fair value of equity securities that were still held at the balance sheet date.

Net earnings were $632 million in the first nine months of 2024 compared to $589 million in the first nine months of 2023 reflecting net realized gains on securities in the first nine months of 2024 compared to net realized losses on securities in the first nine months of 2023, partially offset by lower core net operating earnings. Core net operating earnings for the first nine months of 2024 decreased $17 million compared to the first nine months of 2023. Higher investment income outside of alternative investments was more than offset by lower returns on AFG’s alternative investment portfolio, lower underwriting profit, lower other income and higher other expenses. Net realized gains (losses) on securities in the first nine months of 2024 and 2023 include after-tax gains of $20 million and after-tax losses of $25 million, respectively, resulting from the change in fair value of equity securities that were still held at the balance sheet date.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
RESULTS OF OPERATIONS — THREE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

Segmented Statement of Earnings
AFG reports its operations as two segments: (i) Property and casualty insurance (“P&C”) and (ii) Other, which includes holding company costs and income and expenses related to the managed investment entities (“MIEs”).

AFG’s net earnings, determined in accordance with GAAP, include certain items that may not be indicative of its ongoing core operations. The following tables for the three months ended September 30, 2024 and 2023 identify such items by segment and reconcile net earnings 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 (in millions):
Other
P&CConsol. MIEsHolding Co., other and unallocatedTotalNon-core reclassGAAP Total
Three months ended September 30, 2024
Revenues:
Property and casualty insurance net earned premiums
$2,055 $— $— $2,055 $— $2,055 
Net investment income195 (2)7 200 — 200 
Realized gains (losses) on securities
— — — — (2)(2)
Income of MIEs:
Investment income— 99 — 99 — 99 
Gain (loss) on change in fair value of assets/liabilities
— (9)— (9)— (9)
Other income2 (3)27 26 — 26 
Total revenues2,252 85 34 2,371 (2)2,369 
Costs and Expenses:
Property and casualty insurance:
Losses and loss adjustment expenses1,430 — — 1,430 — 1,430 
Commissions and other underwriting expenses
510 — 8 518 — 518 
Interest charges on borrowed money— — 19 19 — 19 
Expenses of MIEs— 85 — 85 — 85 
Other expenses21 — 53 74 14 88 
Total costs and expenses1,961 85 80 2,126 14 2,140 
Earnings before income taxes291 — (46)245 (16)229 
Provision for income taxes61 — (10)51 (3)48 
Core Net Operating Earnings230 — (36)194 
Non-core earnings (loss) (*):
Realized gains (losses) on securities, net of tax— — (2)(2)2 — 
Special A&E charge, net of tax
— — (11)(11)11 — 
Net Earnings$230 $— $(49)$181 $— $181 
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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
Other
P&CConsol. MIEsHolding Co., other and unallocatedTotalNon-core reclassGAAP Total
Three months ended September 30, 2023
Revenues:
Property and casualty insurance net earned premiums
$1,855 $— $— $1,855 $— $1,855 
Net investment income170 (12)10 168 — 168 
Realized gains (losses) on:
Securities
— — — — (19)(19)
Subsidiary
— — — — (4)(4)
Income of MIEs:
Investment income— 105 — 105 — 105 
Gain (loss) on change in fair value of assets/liabilities
— 16 — 16 — 16 
Other income5 (4)42 43 — 43 
Total revenues2,030 105 52 2,187 (23)2,164 
Costs and Expenses:
Property and casualty insurance:
Losses and loss adjustment expenses1,239 — — 1,239 — 1,239 
Commissions and other underwriting expenses
474 — 23 497 — 497 
Interest charges on borrowed money— — 19 19 — 19 
Expenses of MIEs— 105 — 105 — 105 
Other expenses19 — 51 70 15 85 
Total costs and expenses1,732 105 93 1,930 15 1,945 
Earnings before income taxes298 — (41)257 (38)219 
Provision for income taxes57 — (8)49 (7)42 
Core Net Operating Earnings241 — (33)208 
Non-core earnings (loss) (*):
Realized gains (losses) on securities, net of tax— — (15)(15)15 — 
Realized loss on subsidiary(4)— — (4)4 — 
Special A&E charge, net of tax— — (12)(12)12 — 
Net Earnings$237 $— $(60)$177 $— $177 
(*)See the reconciliation of core earnings to GAAP net earnings under “Results of Operations — General” for details on the tax impacts of these reconciling items.

Property and Casualty Insurance Segment — Results of Operations
Performance measures such as underwriting profit or loss and related combined ratios are often used by property and casualty insurers to help users of their financial statements better understand the company’s performance. Underwriting profitability is measured by the combined ratio, which is a sum of the ratios of losses and loss adjustment expenses, and commissions and other underwriting expenses to premiums. A combined ratio under 100% indicates an underwriting profit. The combined ratio does not reflect net investment income, other income, other expenses or federal income taxes.

AFG’s property and casualty insurance operations contributed $291 million in GAAP pretax earnings in the third quarter of 2024 compared to $294 million in the third quarter of 2023, a decrease of $3 million (1%). Property and casualty core pretax earnings were $291 million in the third quarter of 2024 compared to $298 million in the third quarter of 2023, a decrease of $7 million (2%). The decrease in GAAP and core pretax earnings reflects lower underwriting profit, partially offset by higher net investment income in the third quarter of 2024 compared to the third quarter of 2023.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
The following table details AFG’s GAAP and core earnings before income taxes from its property and casualty insurance operations for the three months ended September 30, 2024 and 2023 (dollars in millions):
Three months ended September 30,
20242023% Change
Gross written premiums$3,748 $3,140 19 %
Reinsurance premiums ceded(1,395)(1,079)29 %
Net written premiums2,353 2,061 14 %
Change in unearned premiums(298)(206)45 %
Net earned premiums2,055 1,855 11 %
Loss and loss adjustment expenses1,430 1,239 15 %
Commissions and other underwriting expenses510 474 8 %
Underwriting gain115 142 (19 %)
Net investment income195 170 15 %
Other income and expenses, net(19)(14)36 %
Core earnings before income taxes291 298 (2 %)
Realized loss on subsidiary— (4)(100 %)
GAAP earnings before income taxes
$291 $294 (1 %)
Three months ended September 30,
20242023Change
Combined Ratios:
Specialty lines
Loss and LAE ratio69.5 %66.7 %2.8 %
Underwriting expense ratio24.8 %25.5 %(0.7 %)
Combined ratio94.3 %92.2 %2.1 %
Aggregate — including exited lines
Loss and LAE ratio69.6 %66.8 %2.8 %
Underwriting expense ratio24.8 %25.5 %(0.7 %)
Combined ratio94.4 %92.3 %2.1 %

AFG reports the underwriting performance of its Specialty property and casualty insurance business in the following sub-segments: (i) Property and transportation, (ii) Specialty casualty and (iii) Specialty financial.

To understand the overall profitability of particular lines, the timing of claims payments and the related impact of investment income must be considered. Certain “short-tail” lines of business (primarily property coverages) generally have quick loss payouts, which reduce the time funds are held, thereby limiting investment income earned thereon. In contrast, “long-tail” lines of business (primarily liability coverages and workers’ compensation) generally have payouts that are either structured over many years or take many years to settle, thereby significantly increasing investment income earned on related premiums received.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
Gross Written Premiums
Gross written premiums (“GWP”) for AFG’s property and casualty insurance segment were $3.75 billion for the third quarter of 2024 compared to $3.14 billion for the third quarter of 2023, an increase of $608 million (19%). Detail of AFG’s property and casualty gross written premiums is shown below (dollars in millions):
Three months ended September 30,
20242023
GWP%GWP%% Change
Property and transportation$2,107 56 %$1,592 51 %32 %
Specialty casualty1,297 35 %1,226 39 %6 %
Specialty financial344 9 %322 10 %7 %
$3,748 100 %$3,140 100 %19 %

Reinsurance Premiums Ceded
Reinsurance premiums ceded (“Ceded”) for AFG’s property and casualty insurance segment were 37% of gross written premiums for the third quarter of 2024 compared to 34% of gross written premiums for the third quarter of 2023, an increase of 3 percentage points. Detail of AFG’s property and casualty reinsurance premiums ceded is shown below (dollars in millions):
Three months ended September 30,
20242023Change in
Ceded% of GWPCeded% of GWP% of GWP
Property and transportation$(967)46 %$(687)43 %3 %
Specialty casualty(434)33 %(397)32 %1 %
Specialty financial(60)17 %(61)19 %(2 %)
Other specialty66 66 
$(1,395)37 %$(1,079)34 %3 %

Net Written Premiums
Net written premiums (“NWP”) for AFG’s property and casualty insurance segment were $2.35 billion for the third quarter of 2024 compared to $2.06 billion for the third quarter of 2023, an increase of $292 million (14%). Detail of AFG’s property and casualty net written premiums is shown below (dollars in millions):
Three months ended September 30,
20242023
NWP%NWP%% Change
Property and transportation$1,140 48 %$905 44 %26 %
Specialty casualty863 37 %829 40 %4 %
Specialty financial284 12 %261 13 %9 %
Other specialty66 3 %66 3 %— %
$2,353 100 %$2,061 100 %14 %

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
Net Earned Premiums
Net earned premiums (“NEP”) for AFG’s property and casualty insurance segment were $2.06 billion for the third quarter of 2024 compared to $1.86 billion for the third quarter of 2023, an increase of $200 million (11%). Detail of AFG’s property and casualty net earned premiums is shown below (dollars in millions):
Three months ended September 30,
20242023
NEP%NEP%% Change
Property and transportation$981 48 %$828 45 %18 %
Specialty casualty744 36 %734 40 %1 %
Specialty financial269 13 %232 12 %16 %
Other specialty61 3 %61 3 %— %
$2,055 100 %$1,855 100 %11 %

Gross written premiums for the third quarter of 2024 increased $608 million (19%) compared to the third quarter of 2023, driven primarily by additional premiums from the CRS acquisition. Gross and net written premiums excluding crop insurance each grew 7% year over year reflecting new business opportunities, increased exposures and a good renewal rate environment. Overall average renewal rates increased approximately 7% in the third quarter of 2024. Excluding the workers’ compensation businesses, renewal rates increased approximately 8%.

Property and transportation Gross written premiums increased $515 million (32%) in the third quarter of 2024 compared to the third quarter of 2023. The primary drivers of this growth included additional premiums from the CRS acquisition and, to a lesser extent, later reporting of crop acreage, which shifted the timing of reporting of some crop premium from the second quarter to the third quarter of 2024. Excluding crop premiums, gross and net written premiums each grew by 11% year over year in this group, which is attributable primarily to new business opportunities, a favorable rate environment and increased exposures in the commercial auto, property and inland marine and ocean marine businesses. Average renewal rates increased approximately 7% for this group in the third quarter of 2024. Reinsurance premiums ceded as a percentage of gross written premiums increased 3 percentage points in the third quarter of 2024 compared to the third quarter of 2023 reflecting the impact of higher premiums in the crop business, which cedes a larger percentage of premiums than some of the other businesses in the Property and transportation sub-segment.

Specialty casualty Gross written premiums increased $71 million (6%) in the third quarter of 2024 compared to the third quarter of 2023. Year-over-year premium growth resulted primarily from new business opportunities and favorable renewal pricing in several of the targeted markets businesses and the excess liability business. The mergers and acquisition business also benefited from an increase in mergers and acquisition activity. This growth was tempered by slightly lower workers’ compensation premiums. Average renewal rates increased approximately 8% for this group in the third quarter of 2024. Excluding the workers’ compensation businesses, renewal rates for this group increased approximately 10%. Reinsurance premiums ceded as a percentage of gross written premiums increased 1 percentage point in the third quarter of 2024 compared to the third quarter of 2023 reflecting higher cessions in the excess and surplus, mergers and acquisitions and public sector businesses, partially offset by lower cessions in the social services business.

Specialty financial Gross written premiums increased $22 million (7%) in the third quarter of 2024 compared to the third quarter of 2023 due primarily to growth in the financial institutions business. Average renewal rates increased approximately 6% for this group in the third quarter of 2024. Reinsurance premiums ceded as a percentage of gross written premiums decreased 2 percentage points in the third quarter of 2024 compared to the third quarter of 2023. The impact of lower gross written premiums in the innovative markets business, which cedes a larger percentage of premiums than some of the other businesses in the Specialty financial sub-segment was partially offset by the impact of higher cessions in the financial institutions and fidelity businesses.

Other specialty The amounts shown as reinsurance premiums ceded represent business assumed by AFG’s internal reinsurance program from the operations that make up AFG’s other Specialty property and casualty insurance sub-segments. Reinsurance premiums assumed in the third quarter of 2024 were comparable to the third quarter of 2023.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
Combined Ratio
The table below (dollars in millions) details the components of the combined ratio for AFG’s property and casualty insurance segment:
Three months ended September 30,Three months ended September 30,
20242023Change20242023
Property and transportation
Loss and LAE ratio79.3 %76.8 %2.5 %
Underwriting expense ratio17.2 %18.0 %(0.8 %)
Combined ratio96.5 %94.8 %1.7 %
Underwriting profit$34 $42 
Specialty casualty
Loss and LAE ratio63.6 %63.1 %0.5 %
Underwriting expense ratio26.4 %26.3 %0.1 %
Combined ratio90.0 %89.4 %0.6 %
Underwriting profit$76 $78 
Specialty financial
Loss and LAE ratio46.1 %39.8 %6.3 %
Underwriting expense ratio45.8 %47.8 %(2.0 %)
Combined ratio91.9 %87.6 %4.3 %
Underwriting profit$22 $29 
Total Specialty
Loss and LAE ratio69.5 %66.7 %2.8 %
Underwriting expense ratio24.8 %25.5 %(0.7 %)
Combined ratio94.3 %92.2 %2.1 %
Underwriting profit$117 $143 
Aggregate — including exited lines
Loss and LAE ratio69.6 %66.8 %2.8 %
Underwriting expense ratio24.8 %25.5 %(0.7 %)
Combined ratio94.4 %92.3 %2.1 %
Underwriting profit$115 $142 

The Specialty property and casualty insurance operations generated an underwriting profit of $117 million in the third quarter of 2024 compared to $143 million in the third quarter of 2023, a decrease of $26 million (18%), reflecting lower underwriting profits in each of the Specialty property and casualty insurance sub-segments and higher losses in the business assumed by AFG’s internal reinsurance program. Overall catastrophe losses were $90 million (4.4 points on the combined ratio) in the third quarter of 2024 compared to catastrophe losses of $56 million (3.0 points) in the third quarter of 2023.

Property and transportation Underwriting profit for this group was $34 million for the third quarter of 2024 compared to $42 million for the third quarter of 2023, a decrease of $8 million (19%). Higher year-over-year underwriting profit in the agricultural businesses was more than offset by higher catastrophe losses. Catastrophe losses were $34 million (3.6 points on the combined ratio) in the third quarter of 2024 compared to $14 million (1.7 points) in the third quarter of 2023.

Specialty casualty Underwriting profit for this group was $76 million for the third quarter of 2024 compared to $78 million for the third quarter of 2023, a decrease of $2 million (3%). Higher year-over-year underwriting profitability in the targeted markets businesses was more than offset by lower year-over-year underwriting profit in the excess and surplus businesses and, to a lesser extent, the workers’ compensation and executive liability businesses. Catastrophe losses were $16 million (2.3 points on the combined ratio) in the third quarter of 2024 compared to catastrophe losses of $17 million (2.3 points) in the third quarter of 2023.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
Specialty financial Underwriting profit for this group was $22 million for the third quarter of 2024 compared to $29 million in the third quarter of 2023, a decrease of $7 million (24%). Improved results in the lender services business were more than offset by lower year-over-year profitability in the surety and fidelity businesses. Catastrophe losses were $39 million (14.4 points on the combined ratio) compared to $22 million (9.3 points) in the third quarter of 2023.

Other specialty This group reported an underwriting loss of $15 million in the third quarter of 2024 compared to $6 million in the third quarter of 2023, an increase of $9 million (150%), reflecting higher losses in the business assumed by AFG’s internal reinsurance program from the operations that make up AFG’s other Specialty sub-segments in the third quarter of 2024 compared to the third quarter of 2023. Catastrophe losses were $1 million in the third quarter of 2024 compared to $3 million in the third quarter of 2023.

Aggregate Aggregate underwriting results for AFG’s property and casualty insurance segment includes adverse prior year reserve development of $2 million in the third quarter of 2024 and $1 million in the third quarter of 2023 related to business outside of the Specialty group that AFG no longer writes.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
Losses and Loss Adjustment Expenses
AFG’s overall loss and LAE ratio was 69.6% for the third quarter of 2024 compared to 66.8% for the third quarter of 2023, an increase of 2.8 percentage points. The components of AFG’s property and casualty losses and LAE amounts and ratio are detailed below (dollars in millions):
Three months ended September 30,
AmountRatioChange in
2024202320242023Ratio
Property and transportation
Current year, excluding catastrophe losses$758 $636 77.2 %76.8 %0.4 %
Prior accident years development(15)(14)(1.5 %)(1.7 %)0.2 %
Current year catastrophe losses including the impact of net reinstatement premiums34 14 3.6 %1.7 %1.9 %
Property and transportation losses and LAE and ratio$777 $636 79.3 %76.8 %2.5 %
Specialty casualty
Current year, excluding catastrophe losses$461 $468 61.9 %63.7 %(1.8 %)
Prior accident years development(4)(22)(0.6 %)(2.9 %)2.3 %
Current year catastrophe losses including the impact of net reinstatement premiums16 17 2.3 %2.3 %— %
Specialty casualty losses and LAE and ratio$473 $463 63.6 %63.1 %0.5 %
Specialty financial
Current year, excluding catastrophe losses$94 $81 35.1 %34.7 %0.4 %
Prior accident years development(9)(10)(3.4 %)(4.2 %)0.8 %
Current year catastrophe losses including the impact of net reinstatement premiums39 22 14.4 %9.3 %5.1 %
Specialty financial losses and LAE and ratio$124 $93 46.1 %39.8 %6.3 %
Total Specialty
Current year, excluding catastrophe losses$1,355 $1,226 65.9 %66.0 %(0.1 %)
Prior accident years development(17)(44)(0.8 %)(2.3 %)1.5 %
Current year catastrophe losses including the impact of net reinstatement premiums90 56 4.4 %3.0 %1.4 %
Total Specialty losses and LAE and ratio$1,428 $1,238 69.5 %66.7 %2.8 %
Aggregate — including exited lines
Current year, excluding catastrophe losses$1,355 $1,226 65.9 %66.0 %(0.1 %)
Prior accident years development(15)(43)(0.7 %)(2.3 %)1.6 %
Current year catastrophe losses including the impact of net reinstatement premiums90 56 4.4 %3.1 %1.3 %
Aggregate losses and LAE and ratio$1,430 $1,239 69.6 %66.8 %2.8 %

Current accident year losses and LAE, excluding catastrophe losses
The current accident year loss and LAE ratio, excluding catastrophe losses, for AFG’s Specialty property and casualty insurance operations was 65.9% for the third quarter of 2024 compared to 66.0% for the third quarter of 2023, a decrease of 0.1 percentage points.

Property and transportation   The 0.4 percentage points increase in the loss and LAE ratio for the current year, excluding catastrophe losses, reflects growth in the crop business, which has a higher loss and LAE ratio than some of the other businesses in the Property and transportation sub-segment, higher reported losses in the commercial auto businesses and the impact of unusually low losses in the ocean marine business in the third quarter of 2023.

Specialty casualty   The 1.8 percentage points decrease in the loss and LAE ratio for the current year, excluding catastrophe losses, reflects improved results in the workers’ compensation businesses and an isolated larger property
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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
loss related to the program business in the third quarter of 2023, partially offset by higher losses in the excess and surplus businesses.

Specialty financial   The 0.4 percentage points increase in the loss and LAE ratio for the current year, excluding catastrophe losses, reflects lower growth in the fidelity and surety businesses and higher reported losses in the fidelity business, partially offset by growth in the financial institutions business, which has a lower loss and LAE ratio than some of the other businesses in the Specialty financial sub-segment.

Net prior year reserve development
AFG’s Specialty property and casualty insurance operations recorded net favorable reserve development related to prior accident years of $17 million in the third quarter of 2024 compared to $44 million in the third quarter of 2023, a decrease of $27 million (61%).

Property and transportation Net favorable reserve development of $15 million in the third quarter of 2024 reflects lower than anticipated claim severity in the ocean marine business and, to a lesser extent, lower than expected claim severity in the agribusiness, crop, property and inland marine and aviation businesses. Net favorable reserve development of $14 million in the third quarter of 2023 reflects lower than expected claim frequency in the property and inland marine business and lower than anticipated claim frequency and severity across the transportation businesses.

Specialty casualty Net favorable reserve development of $4 million in the third quarter of 2024 reflects lower than anticipated claim severity in the workers’ compensation businesses, partially offset by higher than anticipated claim severity in the excess liability business. Net favorable reserve development of $22 million in the third quarter of 2023 reflects lower than anticipated claim severity in the workers’ compensation businesses and lower than expected claim frequency in the executive liability and environmental businesses, partially offset by higher than anticipated claim severity in certain targeted markets businesses.

Specialty financial Net favorable reserve development of $9 million in the third quarter of 2024 reflects lower than anticipated claim severity in the fidelity business and lower than expected claim frequency in the financial institutions business. Net favorable reserve development of $10 million in the third quarter of 2023 reflects lower than anticipated claim frequency and severity in the fidelity and surety businesses and lower than expected claim frequency in the trade credit business.

Other specialty In addition to the development discussed above, total Specialty prior year reserve development includes net adverse reserve development of $11 million in the third quarter of 2024 and $2 million in the third quarter of 2023 associated with AFG’s internal reinsurance program and the amortization of the deferred gain on the retroactive reinsurance transaction entered into in connection with the sale of a business in 1998. The net adverse reserve development in 2024 is primarily related to social inflation exposed business assumed from the Specialty casualty sub-segment.

Asbestos and environmental reserves During the third quarter of 2024, AFG completed an in-depth internal review of its asbestos and environmental exposures relating to the run-off operations of its property and casualty insurance segment and its exposures related to former railroad and manufacturing operations and sites. AFG annually conducts a comprehensive review of its asbestos and environmental reserves. In connection with its annual reviews, AFG engages with outside counsel and, as appropriate, engineering and consulting firms and specialty actuarial firms.

During the 2024 internal review, no new trends were identified and recent claims activity was generally consistent with AFG’s expectations resulting from its in-depth internal reviews in the prior three years, and the most recent external study in 2020. As a result, and consistent with the internal review in the third quarter of 2023, the 2024 review resulted in no net change to AFG’s property and casualty insurance segment’s asbestos and environmental reserves. See Management’s Discussion and Analysis — “Uncertainties — Asbestos and Environmental-related (“A&E”) Insurance Reserves” and Management’s Discussion and Analysis — “Results of Operations — Holding Company, Other and Unallocated” in AFG’s 2023 Form 10-K.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
At September 30, 2024, the property and casualty insurance segment’s insurance reserves include A&E reserves of $362 million, net of reinsurance recoverables. At September 30, 2024, the property and casualty insurance segment’s three-year survival ratios compare favorably with industry survival ratios published by S&P Global Market Intelligence (as of December 31, 2023, and adjusted for several large industry portfolio transfers) as detailed in the following table:
Property and Casualty Insurance Reserves
Three-Year Survival Ratio (Times Paid Losses)
AsbestosEnvironmentalTotal A&E
AFG (9/30/2024)
18.625.121.1
Industry (12/31/2023)
8.37.18.0
In addition, the 2024 and 2023 internal reviews encompassed reserves for asbestos and environmental exposures of AFG’s former railroad and manufacturing operations. For a discussion of the $14 million and $15 million pretax non-core special charge increases in AFG’s liabilities for those operations recorded in the third quarter of 2024 and the third quarter of 2023, respectively, see “Special A&E Charges” under “Results of Operations — Holding Company, Other and Unallocated,” for the quarters ended September 30, 2024 and 2023.

Aggregate Aggregate net prior accident years reserve development for AFG’s property and casualty insurance segment includes net adverse reserve development of $2 million in the third quarter of 2024 and $1 million in the third quarter of 2023 related to business outside of the Specialty group that AFG no longer writes.

Catastrophe losses
AFG generally seeks to reduce its exposure to catastrophes (whether resulting from climate change or otherwise) through individual risk selection, including minimizing coastal and known fault-line exposures, and the purchase of reinsurance. Based on data available at December 31, 2023, AFG’s exposure to a catastrophic earthquake or windstorm that industry models indicate should statistically occur once in every 100, 250 or 500 years as a percentage of AFG’s Shareholders’ Equity is shown below:
Approximate impact of modeled loss
Industry Modelon AFG’s Shareholders’ Equity
100-year event2%
250-year event2%
500-year event4%
AFG maintains comprehensive property catastrophe reinsurance coverage for its property and casualty insurance operations, including a $70 million per occurrence net retention, for losses up to $153 million in the vast majority of circumstances. In certain unlikely events, AFG’s ultimate loss under this coverage could be as high as $73 million for a single occurrence. AFG further maintains supplemental fully collateralized reinsurance coverage up to 94% of $324 million for catastrophe losses in excess of $153 million of traditional catastrophe reinsurance through a catastrophe bond.

Catastrophe losses of $90 million in the third quarter of 2024 resulted primarily from Hurricane Helene. Catastrophe losses of $56 million in the third quarter of 2023 resulted primarily from a higher frequency of lower severity convective storms in multiple regions of the United States.

Commissions and Other Underwriting Expenses
AFG’s property and casualty commissions and other underwriting expenses (“U/W Exp”) were $510 million in the third quarter of 2024 compared to $474 million for the third quarter of 2023, an increase of $36 million (8%). AFG’s underwriting expense ratio, calculated as commissions and other underwriting expenses divided by net premiums earned, was 24.8% for the third quarter of 2024 compared to 25.5% for the third quarter of 2023, a decrease of 0.7 percentage points. Detail
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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
of AFG’s property and casualty commissions and other underwriting expenses and underwriting expense ratios is shown below (dollars in millions):
Three months ended September 30,
20242023Change in
U/W Exp% of NEPU/W Exp% of NEP% of NEP
Property and transportation$170 17.2 %$150 18.0 %(0.8 %)
Specialty casualty195 26.4 %193 26.3 %0.1 %
Specialty financial123 45.8 %110 47.8 %(2.0 %)
Other specialty22 34.9 %21 33.6 %1.3 %
$510 24.8 %$474 25.5 %(0.7 %)

Property and transportation   Commissions and other underwriting expenses as a percentage of net earned premiums decreased 0.8 percentage points in the third quarter of 2024 compared to the third quarter of 2023. The decrease reflects the impact of higher earned premiums on the ratio, including in the crop business that has a lower commissions and other underwriting expense ratio compared to some of the other businesses in the Property and transportation sub-segment and lower average commission rates in the transportation businesses.

Specialty casualty   Commissions and other underwriting expenses as a percentage of net earned premiums increased 0.1 percentage points in the third quarter of 2024 compared to the third quarter of 2023 reflecting the impact of lower earned premiums in the workers’ compensation businesses on the ratio, partially offset by lower overall commission rates due to a change in the mix of business.

Specialty financial   Commissions and other underwriting expenses as a percentage of net earned premiums decreased 2.0 percentage points in the third quarter of 2024 compared to the third quarter of 2023 due primarily to the impact of higher earned premiums in the financial institutions business on the ratio and lower average commission rates in certain businesses.

Property and Casualty Net Investment Income
Net investment income in AFG’s property and casualty insurance operations was $195 million in the third quarter of 2024 compared to $170 million in the third quarter of 2023, an increase of $25 million (15%). The average invested assets and overall yield earned on investments held by AFG’s property and casualty insurance operations are provided below (dollars in millions):
Three months ended September 30,
20242023Change% Change
Net investment income:
Net investment income, excluding alternative investments$159 $145 $14 10 %
Alternative investments36 25 11 44 %
Total net investment income$195 $170 $25 15 %
Average invested assets (at amortized cost)$15,447 $14,899 $548 4 %
Yield (net investment income as a % of average invested assets)5.05 %4.56 %0.49 %
Tax equivalent yield (*)5.10 %4.63 %0.47 %
(*)Adjusts the yield on equity securities and tax-exempt bonds to the fully taxable equivalent yield.

The increase in the property and casualty insurance segment’s net investment income for the third quarter of 2024 compared to the third quarter of 2023 reflects the impact of higher balances of invested assets, higher returns on fixed maturity investments and higher returns on AFG’s alternative investments portfolio (partnerships and similar investments and AFG-managed CLOs). The property and casualty insurance segment’s overall yield on investments (net investment income as a percentage of average invested assets) was 5.05% for the third quarter of 2024 compared to 4.56% for the third quarter of 2023, an increase of 0.49 percentage points reflecting higher returns on both alternative investments and fixed maturity investments. The annualized return earned on alternative investments was 5.4% in the third quarter of 2024 compared to 4.2% in the prior year period.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
Property and Casualty Other Income and Expenses, Net
Other income and expenses, net for AFG’s property and casualty insurance operations was a net expense of $19 million for the third quarter of 2024 compared to $14 million for the third quarter of 2023, an increase of $5 million (36%). The table below details the items included in other income and expenses, net for AFG’s property and casualty insurance operations (in millions):
Three months ended September 30,
20242023
Other income
$2 $5 
Other expenses:
Amortization of intangibles5 5 
Interest expense on funds withheld13 9 
Other3 5 
Total other expenses21 19 
Other income and expenses, net$(19)$(14)
The decrease in other income in the third quarter of 2024 compared to the third quarter of 2023 is due to death benefits received on a company-owned life insurance policy in the third quarter of 2023. The $4 million (44%) increase in interest expense on funds withheld for the third quarter of 2024 compared to the third quarter of 2023 reflects the impact of higher interest rates paid on funds withheld.

Holding Company, Other and Unallocated — Results of Operations
AFG’s net GAAP pretax loss outside of its property and casualty insurance segment (excluding realized gains and losses) totaled $60 million in the third quarter of 2024 compared to $56 million in the third quarter of 2023, an increase of $4 million (7%). AFG’s net core pretax loss outside of its property and casualty insurance segment (excluding realized gains and losses) totaled $46 million in the third quarter of 2024 compared to $41 million in the third quarter of 2023, an increase of $5 million (12%).

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
The following table details AFG’s GAAP and core loss before income taxes from operations outside of its property and casualty insurance segment for the three months ended September 30, 2024 and 2023 (dollars in millions):
Three months ended September 30,
20242023% Change
Revenues:
Net investment income$7 $10 (30 %)
Other income — P&C fees
23 37 (38 %)
Other income
4 5 (20 %)
Total revenues
34 52 (35 %)
Costs and Expenses:
Property and casualty insurance — loss adjustment and underwriting expenses8 23 (65 %)
Other expense — expenses associated with P&C fees
15 14 7 %
Other expenses (*)38 37 3 %
Costs and expenses, excluding interest charges on borrowed money
61 74 (18 %)
Loss before income taxes, excluding realized gains and losses and interest charges on borrowed money(27)(22)23 %
Interest charges on borrowed money
19 19 — %
Core loss before income taxes, excluding realized gains and losses
(46)(41)12 %
Pretax non-core special A&E charge
(14)(15)(7 %)
GAAP loss before income taxes, excluding realized gains and losses$(60)$(56)7 %
(*)Excludes a pretax non-core special A&E charge of $14 million and $15 million in the third quarter of 2024 and the third quarter of 2023, respectively.

Holding Company and Other — Net Investment Income
AFG recorded net investment income on investments held outside of its property and casualty insurance segment of $7 million in the third quarter of 2024 compared to $10 million in the third quarter of 2023, a decrease of $3 million (30%) reflecting the impact of lower average investment balances, partially offset by higher interest rates on cash and fixed maturity investments.

Holding Company and Other — P&C Fees and Related Expenses
Summit, a workers’ compensation insurance subsidiary, collects fees from a small group of unaffiliated insurers for providing underwriting, policy administration and claims services. In addition, certain of AFG’s property and casualty insurance businesses collect fees from customers for ancillary services such as workplace safety programs and premium financing. In the third quarter of 2024, AFG collected $23 million in fees for these services compared to $22 million in the third quarter of 2023. Management views this fee income, net of the $15 million in the third quarter of 2024 and $14 million in the third quarter of 2023 in expenses incurred to generate such fees, as a reduction in the cost of underwriting its property and casualty insurance policies. In addition, AFG’s property and casualty insurance businesses earned $15 million in fees as compensation for providing services related to the administration of crop insurance business generated by CRS for its former owner prior to the acquisition date during the third quarter of 2023. The expenses related to providing such services are embedded in property and casualty underwriting expenses. Consistent with internal management reporting, these fees and the related expenses are netted and recorded as a reduction of commissions and other underwriting expenses in AFG’s segmented results.

Holding Company and Other — Other Income
Other income in the table above includes $3 million in the third quarter of 2024 and $4 million in the third quarter of 2023 in management fees paid to AFG by the AFG-managed CLOs (AFG’s consolidated managed investment entities). The management fees are eliminated in consolidation — see the other income line in the Consolidate MIEs column under “Results of Operations — Segmented Statement of Earnings.” Excluding amounts eliminated in consolidation, AFG recorded other income outside of its property and casualty insurance segment of $1 million in both the third quarter of 2024 and the third quarter of 2023.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
Holding Company and Other — Other Expenses
Excluding the non-core special A&E charges recorded in the third quarter of 2024 and 2023 discussed below, AFG’s holding companies and other operations outside of its property and casualty insurance segment recorded other expenses of $38 million in the third quarter of 2024 compared to $37 million in the third quarter of 2023, an increase of $1 million (3%).

Holding Company and Other — Special A&E Charges
During the third quarters of 2024 and 2023, AFG performed in-depth internal reviews of A&E exposures as discussed under “Asbestos and environmental reserves” under “Results of Operations — Property and Casualty Insurance Segment — Net prior year reserve development.” As a result of the 2024 and 2023 reviews, AFG’s holding companies and other operations outside of its property and casualty insurance operations recorded pretax special non-core A&E charges of $14 million in the third quarter of 2024 and $15 million in the third quarter of 2023 to increase liabilities related to the A&E exposures of AFG’s former railroad and manufacturing operations. The charges in both periods reflect changes in the scope and costs of investigation and an increase in estimated remediation costs at a limited number of sites.

Holding Company and Other — Interest Charges on Borrowed Money
AFG’s holding companies and other operations outside of its property and casualty insurance segment recorded interest expense of $19 million in both the third quarter of 2024 and the third quarter of 2023.

Realized Gains (Losses) on Securities
AFG’s realized gains (losses) on securities were net losses of $2 million in the third quarter of 2024 compared to $19 million in the third quarter of 2023, a decrease of $17 million (89%). Realized gains (losses) on securities consisted of the following (in millions):
Three months ended September 30,
20242023
Realized gains (losses) before impairment allowances:
Disposals$— $(6)
Change in the fair value of equity securities10 (8)
Change in the fair value of derivatives3 (1)
13 (15)
Change in allowance for impairments on securities(15)(4)
Realized gains (losses) on securities$(2)$(19)

The $10 million net realized gain from the change in the fair value of equity securities in the third quarter of 2024 includes gains of $6 million on investments in banks and financing companies and $3 million on investments in media companies. The $8 million net realized loss from the change in the fair value of equity securities in the third quarter of 2023 includes losses of $10 million on investments in media companies and $2 million on investments in banks and financing companies, partially offset by gains of $4 million on investments in energy companies.

The $15 million change in allowance for impairments on securities in the third quarter of 2024 relates primarily to an allowance taken on corporate bonds from a single issuer in the financial sector.

Realized Loss on Subsidiaries
During the third quarter of 2023, AFG recorded a realized loss on subsidiary of $4 million, consisting of a $26 million goodwill impairment charge, partially offset by a $22 million reduction in the fair value of a contingent consideration liability, both related to AFG’s investment in Verikai. See Note E — “Fair Value Measurements” and Note I — “Goodwill and Other Intangibles” in AFG’s 2023 Form 10-K.

Consolidated Income Taxes
AFG’s consolidated provision for income taxes was $48 million for the third quarter of 2024 compared to $42 million for the third quarter of 2023, an increase of $6 million (14%). See Note K — “Income Taxes” to the financial statements for an analysis of items affecting AFG’s effective tax rate.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
RESULTS OF OPERATIONS — NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

Segmented Statement of Earnings
AFG reports its operations as two segments: (i) Property and casualty insurance (“P&C”) and (ii) Other, which includes holding company costs and income and expenses related to the managed investment entities (“MIEs”).

AFG’s net earnings, determined in accordance with GAAP, include certain items that may not be indicative of its ongoing core operations. The following tables for the nine months ended September 30, 2024 and 2023 identify such items by segment and reconcile net earnings 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 (in millions):
Other
P&CConsol. MIEsHolding Co., other and unallocatedTotalNon-core reclassGAAP Total
Nine months ended September 30, 2024
Revenues:
Property and casualty insurance net earned premiums
$5,186 $— $— $5,186 $— $5,186 
Net investment income589 (25)22 586 — 586 
Realized gains (losses) on securities
— — — — 10 10 
Income of MIEs:
Investment income— 296 — 296 — 296 
Gain (loss) on change in fair value of assets/liabilities
— 5 — 5 — 5 
Other income6 (9)95 92 — 92 
Total revenues5,781 267 117 6,165 10 6,175 
Costs and Expenses:
Property and casualty insurance:
Losses and loss adjustment expenses3,274 — 5 3,279 — 3,279 
Commissions and other underwriting expenses
1,494 — 33 1,527 — 1,527 
Interest charges on borrowed money— — 57 57 — 57 
Expenses of MIEs— 267 — 267 — 267 
Other expenses63 — 164 227 14 241 
Total costs and expenses4,831 267 259 5,357 14 5,371 
Earnings before income taxes950 — (142)808 (4)804 
Provision for income taxes198 — (30)168 4 172 
Core Net Operating Earnings752 — (112)640 
Non-core earnings (loss) (*):
Realized gains (losses) on securities, net of tax
— — 7 7 (7)— 
Realized loss on subsidiary
(4)— — (4)4 — 
Special A&E charge, net of tax
— — (11)(11)11 — 
Net Earnings$748 $— $(116)$632 $— $632 
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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
Other
P&CConsol. MIEsHolding Co., other and unallocatedTotalNon-core reclassGAAP Total
Nine months ended September 30, 2023
Revenues:
Property and casualty insurance net earned premiums
$4,799 $— $— $4,799 $— $4,799 
Net investment income568 (18)33 583 — 583 
Realized gains (losses) on:
Securities
— — — — (67)(67)
Subsidiary
— — — — (4)(4)
Income of MIEs:
Investment income— 321 — 321 — 321 
Gain (loss) on change in fair value of assets/liabilities
— 12 — 12 — 12 
Other income13 (12)99 100 — 100 
Total revenues5,380 303 132 5,815 (71)5,744 
Costs and Expenses:
Property and casualty insurance:
Losses and loss adjustment expenses2,964 — — 2,964 — 2,964 
Commissions and other underwriting expenses
1,415 — 40 1,455 — 1,455 
Interest charges on borrowed money— — 57 57 — 57 
Expenses of MIEs— 303 — 303 — 303 
Other expenses54 — 159 213 14 227 
Total costs and expenses4,433 303 256 4,992 14 5,006 
Earnings before income taxes947 — (124)823 (85)738 
Provision for income taxes191 — (25)166 (17)149 
Core Net Operating Earnings756 — (99)657 
Non-core earnings (loss) (*):
Realized gains (losses) on securities, net of tax
— — (53)(53)53 — 
Realized loss on subsidiary
(4)— — (4)4 — 
Special A&E charge, net of tax
— — (12)(12)12 — 
Gain on retirement of debt, net of tax
— — 1 1 (1)— 
Net Earnings$752 $— $(163)$589 $— $589 
(*)See the reconciliation of core earnings to GAAP net earnings under “Results of Operations — General” for details on the tax impacts of these reconciling items.

Property and Casualty Insurance Segment — Results of Operations
AFG’s property and casualty insurance operations contributed $950 million in GAAP pretax earnings in the first nine months of 2024 compared to $943 million in the first nine months of 2023, an increase of $7 million. Property and casualty core pretax earnings were $950 million in the first nine months of 2024 compared to $947 million in the first nine months of 2023, an increase of $3 million. The increase in GAAP pretax earnings reflects higher core pretax net earnings in the first nine months of 2024 compared to the first nine months of 2023 The increase in core pretax net earnings reflects higher investment income outside of alternative investments in the first nine months of 2024 compared to the first nine months of 2023, partially offset by lower underwriting profit, lower investment income from AFG’s alternative investment portfolio (partnerships and similar investments and AFG-managed CLOs), lower other income and higher other expenses.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
The following table details AFG’s GAAP and core earnings before income taxes from its property and casualty insurance operations for the nine months ended September 30, 2024 and 2023 (dollars in millions):
Nine months ended September 30,
20242023% Change
Gross written premiums$8,490 $7,664 11 %
Reinsurance premiums ceded(2,811)(2,417)16 %
Net written premiums5,679 5,247 8 %
Change in unearned premiums(493)(448)10 %
Net earned premiums5,186 4,799 8 %
Loss and loss adjustment expenses3,274 2,964 10 %
Commissions and other underwriting expenses1,494 1,415 6 %
Underwriting gain418 420 — %
Net investment income589 568 4 %
Other income and expenses, net(57)(41)39 %
Core earnings before income taxes950 947 — %
Realized loss on subsidiary
— (4)(100 %)
GAAP earnings before income taxes
$950 $943 1 %
Nine months ended September 30,
20242023Change
Combined Ratios:
Specialty lines
Loss and LAE ratio63.1 %61.8 %1.3 %
Underwriting expense ratio28.8 %29.5 %(0.7 %)
Combined ratio91.9 %91.3 %0.6 %
Aggregate — including exited lines
Loss and LAE ratio63.1 %61.8 %1.3 %
Underwriting expense ratio28.8 %29.5 %(0.7 %)
Combined ratio91.9 %91.3 %0.6 %

AFG reports the underwriting performance of its Specialty property and casualty insurance business in the following sub-segments: (i) Property and transportation, (ii) Specialty casualty and (iii) Specialty financial.

Gross Written Premiums
Gross written premiums (“GWP”) for AFG’s property and casualty insurance segment were $8.49 billion for the first nine months of 2024 compared to $7.66 billion for the first nine months of 2023, an increase of $826 million (11%). Detail of AFG’s property and casualty gross written premiums is shown below (dollars in millions):
Nine months ended September 30,
20242023
GWP%GWP%% Change
Property and transportation$4,150 49 %$3,523 46 %18 %
Specialty casualty3,417 40 %3,299 43 %4 %
Specialty financial923 11 %842 11 %10 %
$8,490 100 %$7,664 100 %11 %

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
Reinsurance Premiums Ceded
Reinsurance premiums ceded (“Ceded”) for AFG’s property and casualty insurance segment were 33% of gross written premiums in the first nine months of 2024 compared to 32% of gross written premiums for the first nine months of 2023, an increase of 1 percentage point. Detail of AFG’s property and casualty reinsurance premiums ceded is shown below (dollars in millions):
Nine months ended September 30,
20242023Change in
Ceded% of GWPCeded% of GWP% of GWP
Property and transportation$(1,738)42 %$(1,398)40 %2 %
Specialty casualty(1,099)32 %(1,055)32 %— %
Specialty financial(157)17 %(157)19 %(2 %)
Other specialty183 193 
$(2,811)33 %$(2,417)32 %1 %

Net Written Premiums
Net written premiums (“NWP”) for AFG’s property and casualty insurance segment were $5.68 billion for the first nine months of 2024 compared to $5.25 billion for the first nine months of 2023, an increase of $432 million (8%). Detail of AFG’s property and casualty net written premiums is shown below (dollars in millions):
Nine months ended September 30,
20242023
NWP%NWP%% Change
Property and transportation$2,412 42 %$2,125 40 %14 %
Specialty casualty2,318 41 %2,244 43 %3 %
Specialty financial766 14 %685 13 %12 %
Other specialty183 3 %193 4 %(5 %)
$5,679 100 %$5,247 100 %8 %

Net Earned Premiums
Net earned premiums (“NEP”) for AFG’s property and casualty insurance segment were $5.19 billion for the first nine months of 2024 compared to $4.80 billion for the first nine months of 2023, an increase of $387 million (8%). Detail of AFG’s property and casualty net earned premiums is shown below (dollars in millions):
Nine months ended September 30,
20242023
NEP%NEP%% Change
Property and transportation$2,037 39 %$1,837 38 %11 %
Specialty casualty2,213 43 %2,149 45 %3 %
Specialty financial753 14 %623 13 %21 %
Other specialty183 4 %190 4 %(4 %)
$5,186 100 %$4,799 100 %8 %

Gross written premiums for the first nine months of 2024 increased $826 million (11%) compared to the first nine months of 2023. Year-over-year gross written premium growth was reported within each of the Specialty property and casualty sub-segments as a result of additional crop premiums from the CRS acquisition in the Property and transportation sub-segment and new business opportunities, increased exposures and a good renewal rate environment. Overall average renewal rates increased approximately 7% in the first nine months of 2024. Excluding the workers’ compensation businesses, renewal pricing increased approximately 8%.

Property and transportation Gross written premiums increased $627 million (18%) in the first nine months of 2024 compared to the first nine months of 2023. Year-over-year premium growth resulted from additional crop premium associated with the CRS acquisition as well as new business opportunities, a favorable rate environment and increased exposures in the commercial auto businesses and, to a lesser extent, in the property and inland marine and ocean marine businesses. Excluding crop premium, gross and net written premiums in this group grew by 7% and 6%, respectively. Average renewal rates increased approximately 8% for this group in the first nine months of 2024. Reinsurance premiums ceded as a percentage of gross written premiums increased 2 percentage points in the first nine months of 2024
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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
compared to the first nine months of 2023 reflecting the impact of higher premiums in the crop business and growth in alternative risk transfer products in the transportation businesses, both of which cede a higher percentage of premiums than some of the other businesses in the Property and transportation sub-segment.

Specialty casualty Gross written premiums increased $118 million (4%) in the first nine months of 2024 compared to the first nine months of 2023. The higher year-over-year premiums resulted primarily from growth in the excess and surplus, excess liability and certain targeted markets businesses as a result of rate increases, new business opportunities and strong policy retention. The mergers and acquisition business also benefited from an increase in mergers and acquisition activity. Average renewal rates increased approximately 6% for this group in the first nine months of 2024. Excluding overall rate decreases in the workers’ compensation businesses, renewal rates for this group increased approximately 9%. Reinsurance premiums ceded as a percentage of gross written premiums were comparable in the first nine months of 2024 to the first nine months of 2023 reflecting lower cessions in the social services business, offset by the impact of higher premiums in the excess and surplus businesses, which cede a larger percentage of premiums than some of the other businesses in the Specialty casualty sub-segment and higher cessions in the public sector business.

Specialty financial Gross written premiums increased $81 million (10%) in the first nine months of 2024 compared to the first nine months of 2023. Year-over-year growth in the financial institutions business was partially offset by a decision to pause writing of new intellectual property-related coverage in the innovative markets business. Average renewal rates increased approximately 7% for this group in the first nine months of 2024. Reinsurance premiums ceded as a percentage of gross written premiums decreased 2 percentage points in the first nine months of 2024 compared to the first nine months of 2023 reflecting lower gross written premiums in the innovative markets business, which cedes a larger percentage of premiums than some of the other businesses in the Specialty financial sub-segment.

Other specialty The amounts shown as reinsurance premiums ceded represent business assumed by AFG’s internal reinsurance program from the operations that make up AFG’s other Specialty property and casualty insurance sub-segments. Reinsurance premiums assumed decreased $10 million (5%) in the first nine months of 2024 compared to the first nine months of 2023, reflecting a decrease in premiums retained, primarily from businesses in the Specialty casualty sub-segment.
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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
Combined Ratio
The table below (dollars in millions) details the components of the combined ratio and underwriting profit for AFG’s property and casualty insurance segment:
Nine months ended September 30,Nine months ended September 30,
20242023Change20242023
Property and transportation
Loss and LAE ratio70.1 %69.2 %0.9 %
Underwriting expense ratio23.5 %24.4 %(0.9 %)
Combined ratio93.6 %93.6 %— %
Underwriting profit$129 $117 
Specialty casualty
Loss and LAE ratio61.4 %60.5 %0.9 %
Underwriting expense ratio27.0 %27.3 %(0.3 %)
Combined ratio88.4 %87.8 %0.6 %
Underwriting profit$258 $261 
Specialty financial
Loss and LAE ratio42.9 %39.0 %3.9 %
Underwriting expense ratio46.5 %50.6 %(4.1 %)
Combined ratio89.4 %89.6 %(0.2 %)
Underwriting profit$80 $65 
Total Specialty
Loss and LAE ratio63.1 %61.8 %1.3 %
Underwriting expense ratio28.8 %29.5 %(0.7 %)
Combined ratio91.9 %91.3 %0.6 %
Underwriting profit$422 $421 
Aggregate — including exited lines
Loss and LAE ratio63.1 %61.8 %1.3 %
Underwriting expense ratio28.8 %29.5 %(0.7 %)
Combined ratio91.9 %91.3 %0.6 %
Underwriting profit$418 $420 

The Specialty property and casualty insurance operations generated an underwriting profit of $422 million for the first nine months of 2024 compared to $421 million for the first nine months of 2023, an increase of $1 million. Higher underwriting profits in the Property and transportation and Specialty financial sub-segments were partially offset by lower underwriting profit in the Specialty casualty sub-segment and higher losses in the business assumed by AFG’s internal reinsurance program. Overall catastrophe losses were $161 million (3.1 points on the combined ratio), including $1 million in net reinstatement premiums in the first nine months of 2024 compared to catastrophe losses of $140 million (2.9 points), including $2 million in net reinstatement premiums in the first nine months of 2023.

Property and transportation Underwriting profit for this group was $129 million for the first nine months of 2024 compared to $117 million for the first nine months of 2023, an increase of $12 million (10%). Higher year-over-year underwriting profits in the property and inland marine and crop businesses were partially offset by lower underwriting profitability in the transportation businesses. Catastrophe losses were $55 million (2.7 points on the combined ratio) in the first nine months of 2024 compared to $48 million (2.7 points) in the first nine months of 2023.

Specialty casualty Underwriting profit for this group was $258 million for the first nine months of 2024 compared to $261 million for the first nine months of 2023, a decrease of $3 million (1%). Higher year-over-year underwriting profits in the workers’ compensation and the targeted markets businesses were more than offset by lower levels of favorable prior year reserve development in the executive liability business and social inflation driven adverse development in the umbrella and excess business. Catastrophe losses were $37 million (1.8 points on the combined ratio), including $1 million in net reinstatement premiums in the first nine months of 2024 compared to catastrophe losses of $28 million (1.2 points), including $2 million in net reinstatement premiums in the first nine months of 2023.
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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued

Specialty financial Underwriting profit for this group was $80 million for the first nine months of 2024 compared to $65 million for the first nine months of 2023, an increase of $15 million (23%). This year over year increase reflects higher underwriting profit in the financial institutions business, partially offset by lower profitability in the innovative markets business. Catastrophe losses were $64 million (8.4 points on the combined ratio) in the first nine months of 2024 compared to $45 million (7.2 points) in the first nine months of 2023.

Other specialty This group reported an underwriting loss of $45 million in the first nine months of 2024 compared to $22 million in the first nine months of 2023, an increase of $23 million (105%), reflecting higher losses in the business assumed by AFG’s internal reinsurance program from the operations that make up AFG’s other Specialty sub-segments in the first nine months of 2024 compared to the first nine months of 2023. Catastrophe losses were $5 million in the first nine months of 2024 compared to $19 million in the first nine months of 2023.

Aggregate Aggregate underwriting results for AFG’s property and casualty insurance segment includes adverse prior year reserve development of $4 million in the first nine months of 2024 and $1 million in the first nine months of 2023 related to business outside of the Specialty group that AFG no longer writes.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
Losses and Loss Adjustment Expenses
AFG’s overall loss and LAE ratio was 63.1% for the first nine months of 2024 compared to 61.8% for the first nine months of 2023, an increase of 1.3 percentage points. The components of AFG’s property and casualty losses and LAE amounts and ratio are detailed below (dollars in millions):
Nine months ended September 30,
AmountRatioChange in
2024202320242023Ratio
Property and transportation
Current year, excluding catastrophe losses$1,465 $1,295 71.8 %70.4 %1.4 %
Prior accident years development(91)(72)(4.4 %)(3.9 %)(0.5 %)
Current year catastrophe losses including the impact of net reinstatement premiums55 48 2.7 %2.7 %— %
Property and transportation losses and LAE and ratio$1,429 $1,271 70.1 %69.2 %0.9 %
Specialty casualty
Current year, excluding catastrophe losses$1,368 $1,348 61.7 %62.7 %(1.0 %)
Prior accident years development(46)(73)(2.1 %)(3.4 %)1.3 %
Current year catastrophe losses including the impact of net reinstatement premiums36 26 1.8 %1.2 %0.6 %
Specialty casualty losses and LAE and ratio$1,358 $1,301 61.4 %60.5 %0.9 %
Specialty financial
Current year, excluding catastrophe losses$262 $222 34.9 %35.6 %(0.7 %)
Prior accident years development(3)(24)(0.4 %)(3.8 %)3.4 %
Current year catastrophe losses including the impact of net reinstatement premiums64 45 8.4 %7.2 %1.2 %
Specialty financial losses and LAE and ratio$323 $243 42.9 %39.0 %3.9 %
Total Specialty
Current year, excluding catastrophe losses$3,214 $2,994 62.0 %62.4 %(0.4 %)
Prior accident years development(104)(169)(2.0 %)(3.5 %)1.5 %
Current year catastrophe losses including the impact of net reinstatement premiums160 138 3.1 %2.9 %0.2 %
Total Specialty losses and LAE and ratio$3,270 $2,963 63.1 %61.8 %1.3 %
Aggregate — including exited lines
Current year, excluding catastrophe losses$3,214 $2,994 62.0 %62.4 %(0.4 %)
Prior accident years development(100)(168)(1.9 %)(3.5 %)1.6 %
Current year catastrophe losses including the impact of net reinstatement premiums160 138 3.0 %2.9 %0.1 %
Aggregate losses and LAE and ratio$3,274 $2,964 63.1 %61.8 %1.3 %

Current accident year losses and LAE, excluding catastrophe losses
The current accident year loss and LAE ratio, excluding catastrophe losses, for AFG’s Specialty property and casualty insurance operations was 62.0% for the first nine months of 2024 compared to 62.4% for the first nine months of 2023, a decrease of 0.4 percentage points.

Property and transportation   The 1.4 percentage points increase in the loss and LAE ratio for the current year, excluding catastrophe losses, reflects growth in the crop business, which has a higher loss and LAE ratio than some of the other businesses in the Property and transportation sub-segment, higher reported losses in the commercial auto businesses and the impact of unusually low losses in the ocean marine business in the 2023 period.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
Specialty casualty   The 1.0 percentage points decrease in the loss and LAE ratio for the current year, excluding catastrophe losses, reflects improved results in the targeted markets and workers’ compensation businesses, partially offset by higher losses in the excess and surplus businesses.

Specialty financial   The 0.7 percentage points decrease in the loss and LAE ratio for the current year, excluding catastrophe losses, reflects growth in the financial institutions business, which has a lower loss and LAE ratio than some of the other businesses in the Specialty financial sub-segment, partially offset by lower growth in the fidelity and surety businesses and higher reported losses in the fidelity business.

Net prior year reserve development
AFG’s Specialty property and casualty insurance operations recorded net favorable reserve development related to prior accident years of $104 million in the first nine months of 2024 compared to $169 million in the first nine months of 2023, a decrease of $65 million (38%).

Property and transportation Net favorable reserve development of $91 million in the first nine months of 2024 reflects lower than anticipated losses in the crop business, lower than expected claim severity in the property and inland marine and aviation businesses and lower than anticipated claim severity and frequency in the ocean marine business. Net favorable reserve development of $72 million in the first nine months of 2023 reflects lower than anticipated losses in the crop business, lower than expected claim frequency and severity across the transportation businesses and lower than anticipated claim frequency in the property and inland marine business.

Specialty casualty Net favorable reserve development of $46 million in the first nine months of 2024 reflects lower than anticipated claim severity in the workers’ compensation businesses and lower than expected claim frequency and severity in the executive liability business, partially offset by higher than anticipated claim severity in the umbrella and excess liability businesses, public sector and general liability businesses and higher than expected claim frequency and severity in the social services business. Net favorable reserve development of $73 million in the first nine months of 2023 reflects lower than anticipated claim severity in the workers’ compensation businesses, lower than expected claim frequency in the executive liability and environmental businesses and favorable reserve development related to COVID-19 losses across several businesses, partially offset by higher than anticipated claim severity in the public sector and excess liability businesses.

Specialty financial Net favorable reserve development of $3 million in the first nine months of 2024 reflects lower than anticipated claim frequency and severity in the fidelity and financial institutions businesses and lower than expected claim frequency in the trade credit business, partially offset by higher than anticipated claim severity in the innovative markets and surety businesses. Net favorable reserve development of $24 million in the first nine months of 2023 reflects lower than anticipated claim frequency in the trade credit and financial institutions businesses and lower than expected claim frequency and severity in the surety business.

Other specialty In addition to the development discussed above, total Specialty prior year reserve development includes net adverse reserve development of $36 million in the first nine months of 2024 and net favorable reserve development of less than $1 million in the first nine months of 2023 associated with AFG’s internal reinsurance program and the amortization of the deferred gain on the retroactive reinsurance transaction entered into in connection with the sale of a business in 1998. The net adverse reserve development in 2024 is primarily related to social inflation exposed business assumed from the Specialty casualty sub-segment.

Aggregate Aggregate net prior accident years reserve development for AFG’s property and casualty insurance segment includes net adverse reserve development of $4 million in the first nine months of 2024 and $1 million in the first nine months of 2023 related to business outside the Specialty group that AFG no longer writes.

Catastrophe losses
Catastrophe losses of $160 million in the first nine months of 2024 (before $1 million in net reinstatement premiums) resulted primarily from Hurricane Helene and storms in multiple regions of the United States. Catastrophe losses of $138 million in the first nine months of 2023 (before $2 million in net reinstatement premiums) resulted primarily from storms in multiple regions of the United States.

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
Commissions and Other Underwriting Expenses
AFG’s property and casualty commissions and other underwriting expenses (“U/W Exp”) were $1.49 billion in the first nine months of 2024 compared to $1.42 billion for the first nine months of 2023, an increase of $79 million (6%). AFG’s underwriting expense ratio was 28.8% for the first nine months of 2024 compared to 29.5% for the first nine months of 2023, a decrease of 0.7 percentage points. Detail of AFG’s property and casualty commissions and other underwriting expenses and underwriting expense ratios is shown below (dollars in millions):
Nine months ended September 30,
20242023Change in
U/W Exp% of NEPU/W Exp% of NEP% of NEP
Property and transportation$479 23.5 %$449 24.4 %(0.9 %)
Specialty casualty597 27.0 %587 27.3 %(0.3 %)
Specialty financial350 46.5 %315 50.6 %(4.1 %)
Other specialty68 36.5 %64 33.0 %3.5 %
$1,494 28.8 %$1,415 29.5 %(0.7 %)

Property and transportation   Commissions and other underwriting expenses as a percentage of net earned premiums decreased 0.9 percentage points in the first nine months of 2024 compared to the first nine months of 2023 reflecting the impact of higher earned premiums on the ratio, including in the crop business that has a lower commissions and other underwriting expense ratio compared to some of the other businesses in the Property and transportation sub-segment and lower average commission rates in the transportation businesses.

Specialty casualty   Commissions and other underwriting expenses as a percentage of net earned premiums decreased 0.3 percentage points in the first nine months of 2024 compared to the first nine months of 2023 reflecting lower overall commission rates due to a change in the mix of business, partially offset by the impact of lower earned premiums in the workers’ compensation businesses on the ratio.

Specialty financial   Commissions and other underwriting expenses as a percentage of net earned premiums decreased 4.1 percentage points in the first nine months of 2024 compared to the first nine months of 2023 due primarily to the impact of higher earned premiums in the financial institutions business on the ratio and lower average commission rates in certain businesses.

Property and Casualty Net Investment Income
Net investment income in AFG’s property and casualty insurance operations was $589 million in the first nine months of 2024 compared to $568 million in the first nine months of 2023, an increase of $21 million (4%). The average invested assets and overall yield earned on investments held by AFG’s property and casualty insurance operations are provided below (dollars in millions):
Nine months ended September 30,
20242023Change% Change
Net investment income:
Net investment income, excluding alternative investments$464 $410 $54 13 %
Alternative investments125 158 (33)(21 %)
Total net investment income$589 $568 $21 4 %
Average invested assets (at amortized cost)$15,389 $14,624 $765 5 %
Yield (net investment income as a % of average invested assets)5.10 %5.18 %(0.08 %)
Tax equivalent yield (*)5.16 %5.25 %(0.09 %)
(*)Adjusts the yield on equity securities and tax-exempt bonds to the fully taxable equivalent yield.

The increase in the property and casualty insurance segment’s net investment income for the first nine months of 2024 compared to the first nine months of 2023 reflects the impact of higher balances of invested assets and higher returns on fixed maturity investments, partially offset by lower returns on AFG’s alternative investments portfolio (partnerships and similar investments and AFG-managed CLOs). The property and casualty insurance segment’s overall yield on
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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
investments (net investment income as a percentage of average invested assets) was 5.10% for the first nine months of 2024 compared to 5.18% for the first nine months of 2023, a decrease of 0.08 percentage points reflecting lower returns on alternative investments, partially offset by higher returns on fixed maturity investments. The annualized return earned on alternative investments (partnerships and similar investments and AFG-managed CLOs) was 6.5% in the first nine months of 2024 compared to 9.2% in the prior year period.

Property and Casualty Other Income and Expenses, Net
Other income and expenses, net for AFG’s property and casualty insurance operations was a net expense of $57 million for the first nine months of 2024 compared to $41 million for the first nine months of 2023, an increase of $16 million (39%). The table below details the items included in other income and expenses, net for AFG’s property and casualty insurance operations (in millions):
Nine months ended September 30,
20242023
Other income
$6 $13 
Other expenses:
Amortization of intangibles14 11 
Interest expense on funds withheld38 29 
Acquisition expenses related to CRS— 3 
Other
11 11 
Total other expenses63 54 
Other income and expenses, net$(57)$(41)
The decrease in other income in the first nine months of 2024 compared to the first nine months of 2023 is due primarily to death benefits received on a company-owned life insurance policy in the first quarter and third quarter of 2023. The higher amortization of intangibles in the first nine months of 2024 compared to the first nine months of 2023 reflects the acquisition of CRS in July 2023. The $9 million (31%) increase in interest expense on funds withheld in the first nine months of 2024 compared to the first nine months of 2023 reflects the impact of higher interest rates paid on funds withheld.

Holding Company, Other and Unallocated — Results of Operations
AFG’s net GAAP pretax loss outside of its property and casualty insurance segment (excluding realized gains and losses) totaled $156 million in the first nine months of 2024 compared to $138 million in the first nine months of 2023, an increase of $18 million (13%). AFG’s net core pretax loss outside of its property and casualty insurance segment (excluding realized gains and losses) totaled $142 million in the first nine months of 2024 compared to $124 million in the first nine months of 2023, an increase of $18 million (15%).

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AMERICAN FINANCIAL GROUP, INC. 10-Q
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
The following table details AFG’s GAAP and core loss before income taxes from operations outside of its property and casualty insurance segment for the nine months ended September 30, 2024 and 2023 (dollars in millions):
Nine months ended September 30,
20242023% Change
Revenues:
Net investment income
$22 $33 (33 %)
Other income — P&C fees
83 83 — %
Other income
12 16 (25 %)
Total revenues
117 132 (11 %)
Costs and Expenses:
Property and casualty insurance — loss adjustment and underwriting expenses38 40 (5 %)
Other expense — expenses associated with P&C fees
45 43 5 %
Other expenses (*)119 116 3 %
Costs and expenses, excluding interest charges on borrowed money
202 199 2 %
Loss before income taxes, excluding realized gains and losses and interest charges on borrowed money(85)(67)27 %
Interest charges on borrowed money
57 57 — %
Core loss before income taxes, excluding realized gains and losses(142)(124)15 %
Pretax non-core special A&E charge
(14)(15)(7 %)
Pretax non-core gain on retirement of debt
— 1 (100 %)
GAAP loss before income taxes, excluding realized gains and losses$(156)$(138)13 %
(*)Excludes a pretax non-core special A&E charge of $14 million in the first nine months of 2024 and a pretax non-core special A&E charge of $15 million and a pretax non-core gain on retirement of debt of $1 million in the first nine months of 2023.

Holding Company and Other — Net Investment Income
AFG recorded net investment income on investments held outside of its property and casualty insurance segment of $22 million in the first nine months of 2024 compared to $33 million in the first nine months of 2023, a decrease of $11 million (33%) reflecting the impact of lower average investment balances.

Holding Company and Other — P&C Fees and Related Expenses
Summit, a workers’ compensation insurance subsidiary, collects fees from a small group of unaffiliated insurers for providing underwriting, policy administration and claims services. In addition, certain of AFG’s property and casualty insurance businesses collect fees from customers for ancillary services such as workplace safety programs and premium financing. In the first nine months of 2024, AFG collected $72 million in fees for these services compared to $68 million in the first nine months of 2023. Management views this fee income, net of the $45 million in the first nine months of 2024 and $43 million in the first nine months of 2023 in expenses incurred to generate such fees, as a reduction in the cost of underwriting its property and casualty insurance policies. In addition, AFG’s property and casualty insurance businesses earned $11 million and $15 million during the first nine months of 2024 and 2023, respectively, in fees as compensation for providing services related to the administration of crop insurance business generated by CRS for its former owner prior to the acquisition date. The expenses related to providing such services are embedded in property and casualty underwriting expenses. Consistent with internal management reporting, these fees and the related expenses are netted and recorded as a reduction of commissions and other underwriting expenses in AFG’s segmented results.

Holding Company and Other — Other Income
Other income in the table above includes $9 million and $12 million in the first nine months of 2024 and the first nine months of 2023, respectively, in management fees paid to AFG by the AFG-managed CLOs (AFG’s consolidated managed investment entities). The management fees are eliminated in consolidation — see the other income line in the Consolidate MIEs column under “Results of Operations — Segmented Statement of Earnings.” Excluding amounts eliminated in consolidation, AFG recorded other income outside of its property and casualty insurance segment of $3 million in the first nine months of 2024 compared to $4 million in the first nine months of 2023, a decrease of $1 million (25%).

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Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
Holding Company and Other — Other Expenses
Excluding the non-core special A&E charges and the non-core gain on retirement of debt discussed below, AFG’s holding companies and other operations outside of its property and casualty insurance segment recorded other expenses of $119 million in the first nine months of 2024 compared to $116 million in the first nine months of 2023, an increase of $3 million (3%). Other expenses for the 2024 period includes a $4 million charge to increase liabilities related to AFG’s former railroad and manufacturing operations.

Holding Company and Other — Interest Charges on Borrowed Money
AFG’s holding companies and other operations outside of its property and casualty insurance segment recorded interest expense of $57 million in both the first nine months of 2024 and the first nine months of 2023.

Holding Company and Other — Special A&E Charges
See “Holding Company and Other — Special A&E Charges” under “Results of Operations — Holding Company, Other and Unallocated” for the quarters ended September 30, 2024 and 2023 for a discussion of the $14 million and $15 million pretax non-core special A&E charges recorded in the third quarter of 2024 and the third quarter of 2023, respectively.

Holding Company and Other — Gain on Retirement of Debt
During the first nine months of 2023, AFG repurchased $23 million principal amount of its senior notes, which resulted in a $2 million pretax non-core gain and recorded a $1 million pretax non-core loss related to the write-off of debt issue costs associated with its previous revolving credit facility, which was replaced in June 2023.

Realized Gains (Losses) on Securities
AFG’s realized gains (losses) on securities were net gains of $10 million in the first nine months of 2024 compared to net losses of $67 million in the first nine months of 2023, a change of $77 million (115%). Realized gains (losses) on securities consisted of the following (in millions):
Nine months ended September 30,
20242023
Realized gains (losses) before impairment allowances:
Disposals$(4)$(31)
Change in the fair value of equity securities29 (23)
Change in the fair value of derivatives2 (4)
27 (58)
Change in allowance for impairments on securities(17)(9)
Realized gains (losses) on securities$10 $(67)
The $31 million net realized loss from disposals in the first nine months of 2023 includes losses of $15 million from the sale of investments in banks and $5 million from the sale of municipal bonds.

The $29 million net realized gain from the change in the fair value of equity securities in the first nine months of 2024 includes gains of $19 million on investments in banks and financing companies, $5 million on investments in natural gas companies and $5 million on investments in healthcare companies. The $23 million net realized loss from the change in the fair value of equity securities in the first nine months of 2023 includes losses of $13 million on investments in media companies, $8 million on investments in banks and financing companies, $8 million on investments in healthcare companies and $3 million on investments in energy companies, partially offset by gains of $3 million on investments in capital goods companies and $3 million on investments in natural gas companies.

The $17 million change in allowance for impairments on securities in the first nine months of 2024 relates primarily to an allowance taken on corporate bonds from a single issuer in the financial sector.

Realized Loss on Subsidiaries
In the second quarter of 2024, AFG recorded $4 million in net tax expense related to a pending IRS settlement regarding the sale of a subsidiary in a prior year.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations — Continued
During the third quarter of 2023, AFG recorded a realized loss on subsidiary of $4 million, consisting of a $26 million goodwill impairment charge, partially offset by a $22 million reduction in the fair value contingent consideration liability, both related to AFG’s investment in Verikai.

Consolidated Income Taxes
AFG’s consolidated provision for income taxes was $172 million for the first nine months of 2024 compared to $149 million for the first nine months of 2023, an increase of $23 million (15%). See Note K — “Income Taxes” to the financial statements for an analysis of items affecting AFG’s effective tax rate.

ACCOUNTING STANDARDS TO BE ADOPTED

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-07 (“ASU 2023-07”), Improvements to Reportable Segment Disclosures. ASU 2023-07 will require enhanced disclosures about significant segment expenses and a description of the composition of other segment expenses by business segment. ASU 2023-07 also requires disclosure of the title and position of the chief operating decision maker (“CODM”) and an explanation of how the CODM uses the reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted, and is to be applied on a retrospective basis. As of September 30, 2024, AFG has not adopted ASU 2023-07. Management is evaluating the impact of the standard to the segment reporting disclosures. Since ASU 2023-07 only requires additional disclosure, the adoption of this guidance will not have an impact on AFG’s results of operations or financial condition.

In December 2023, the FASB issued ASU No. 2023-09 (“ASU 2023-09”), Improvements to Income Tax Disclosures. ASU 2023-09 is intended to improve income tax disclosures by requiring (i) consistent categories and greater disaggregation of information in the rate reconciliation presented in both dollar and percentage terms; (ii) the disaggregation of income taxes paid (net of refunds received), income (loss) before income taxes and income taxes by jurisdiction (federal, state and foreign taxes); and (iii) further disaggregation of income taxes paid by any individual jurisdiction equal to or exceeding five percent of total income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and is required to be applied prospectively with the option of retrospective application. As of September 30, 2024, AFG has not adopted ASU 2023-09. Management is evaluating the impact of the standard to the income tax disclosures. Since ASU 2023-09 only requires additional disclosure, the adoption of this guidance will not have an impact on AFG’s results of operations or financial condition.

ITEM 3. Quantitative and Qualitative Disclosure about Market Risk

As of September 30, 2024, there were no material changes to the information provided in Item 7A — Quantitative and Qualitative Disclosures about Market Risk of AFG’s 2023 Form 10-K.

Consistent with the discussion in Item 2 — Management’s Discussion and Analysis — “Investments,” the following table demonstrates the sensitivity of the fair value of AFG’s fixed maturity portfolio to reasonably likely changes in interest rates by illustrating the estimated effect on AFG’s fixed maturity portfolio that an immediate increase of 100 basis points in the interest rate yield curve would have at September 30, 2024 (based on the duration of the portfolio, dollars in millions). Effects of increases or decreases from the 100 basis points illustrated would be approximately proportional.

Fair value of fixed maturity portfolio$10,513 
Percentage impact on fair value of 100 bps increase in interest rates(3.0 %)
Pretax impact on fair value of fixed maturity portfolio$(315)

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ITEM 4. Controls and Procedures

AFG’s management, with participation of its Co-Chief Executive Officers and its Chief Financial Officer, has evaluated AFG’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15) as of the end of the period covered by this report. Based on that evaluation, AFG’s Co-CEOs and CFO concluded that the controls and procedures are effective. There have been no changes in AFG’s internal control over financial reporting during the third fiscal quarter of 2024 that materially affected, or are reasonably likely to materially affect, AFG’s internal control over financial reporting.

In the ordinary course of business, AFG and its subsidiaries routinely enhance their information systems by either upgrading current systems or implementing new systems. There have been no changes in AFG’s business processes and procedures during the third fiscal quarter of 2024 that have materially affected, or are reasonably likely to materially affect, AFG’s internal control over financial reporting.

PART II
OTHER INFORMATION
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities   AFG did not repurchase any shares of its Common Stock during the first nine months of 2024. As of September 30, 2024, there are 5,729,010 remaining shares that may be repurchased until December 31, 2025 under the Plans authorized by AFG’s Board of Directors in October 2020 and May 2021.

AFG acquired 47,870 shares of its Common Stock (at an average of $126.38 per share) in the first quarter of 2024, 21 shares (at $129.03 per share) in the second quarter of 2024, 4,184 shares (at an average of $123.59 per share) in July 2024, 319 shares (at $131.82 per share) in August 2024 and 968 shares (at an average of $133.63 per share) in September 2024 in connection with its stock incentive plans.

ITEM 5. Other Information
During the three months ended September 30, 2024, none of the Company’s directors or officers adopted, terminated or modified a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408.
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ITEM 6. Exhibits
 
NumberExhibit Description
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


Signature
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, thereunto duly authorized.
American Financial Group, Inc.
November 8, 2024By: /s/ Brian S. Hertzman
 Brian S. Hertzman
 Senior Vice President and Chief Financial Officer
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