Exhibit 99.2
American Financial Group, Inc. Investor Supplement - Fourth Quarter 2018 | ||
January 31, 2019 | ||
American Financial Group, Inc. | ||
Corporate Headquarters | ||
Great American Insurance Group Tower 301 E Fourth Street | ||
Cincinnati, OH 45202 513 579 6739 |
American Financial Group, Inc. Table of Contents - Investor Supplement - Fourth Quarter 2018 |
Section | Page | |||
Table of Contents - Investor Supplement - Fourth Quarter 2018 | 2 | |||
Financial Highlights | 3 | |||
Summary of Earnings | 4 | |||
Earnings Per Share Summary | 5 | |||
Property and Casualty Insurance Segment | ||||
Property and Casualty Insurance - Summary Underwriting Results (GAAP) | 6 | |||
Specialty - Underwriting Results (GAAP) | 7 | |||
Property and Transportation - Underwriting Results (GAAP) | 8 | |||
Specialty Casualty - Underwriting Results (GAAP) | 9 | |||
Specialty Financial - Underwriting Results (GAAP) | 10 | |||
Other Specialty - Underwriting Results (GAAP) | 11 | |||
Annuity Segment | ||||
Annuity Earnings (GAAP) | 12 | |||
Analysis of Annuity Earnings Before Impact of Fair Value Accounting for FIAs and Unlockings | 13 | |||
Analysis of Impact of Fair Value Accounting for FIAs | 14 | |||
Detail of Annuity Benefits Expense (GAAP) | 15 | |||
Net Spread on Fixed Annuities (GAAP) | 16 | |||
Statutory Annuity Premiums | 17 | |||
Fixed Annuity Benefits Accumulated (GAAP) | 18 | |||
Guaranteed Minimum Interest Rate Analysis | 19 | |||
Consolidated Balance Sheet / Book Value / Debt | ||||
Consolidated Balance Sheet | 20 | |||
Book Value Per Share and Price / Book Summary | 21 | |||
Capitalization | 22 | |||
Additional Supplemental Information | 23 | |||
Consolidated Investment Supplement | ||||
Total Cash and Investments | 24 | |||
Net Investment Income | 25 | |||
InvestmentsMarked-to-Market Through Investment Income and Investments Accounted For Using the Equity Method | 26 | |||
Fixed Maturities - By Security Type - AFG Consolidated | 27 | |||
Fixed Maturities - By Security Type Portfolio | 28 | |||
Fixed Maturities - Credit Rating | 29 | |||
Mortgage-Backed Securities - AFG Consolidated | 30 | |||
Mortgage-Backed Securities Portfolio | 31 | |||
Mortgage-Backed Securities - Credit Rating | 32 | |||
Appendix | ||||
A. Fixed Maturities - Credit Rating by Type | 33 |
Page 2
American Financial Group, Inc. Financial Highlights (in millions, except per share information) |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 12/31/18 | 12/31/17 | ||||||||||||||||||||||
Highlights | ||||||||||||||||||||||||||||
Net earnings (loss) | $ | (29 | ) | $ | 204 | $ | 210 | $ | 145 | $ | 166 | $ | 530 | $ | 475 | |||||||||||||
Core net operating earnings | 159 | 198 | 185 | 219 | 197 | 761 | 588 | |||||||||||||||||||||
Total assets | 63,456 | 64,190 | 61,834 | 60,656 | 60,658 | 63,456 | 60,658 | |||||||||||||||||||||
Adjusted shareholders’ equity (a) | 4,898 | 5,103 | 4,920 | 4,865 | 4,724 | 4,898 | 4,724 | |||||||||||||||||||||
Property and Casualty net written premiums | 1,208 | 1,456 | 1,257 | 1,102 | 1,161 | 5,023 | 4,751 | |||||||||||||||||||||
Annuity statutory premiums | 1,482 | 1,378 | 1,399 | 1,148 | 909 | 5,407 | 4,341 | |||||||||||||||||||||
Per share data | ||||||||||||||||||||||||||||
Diluted earnings per share | $ | (0.33 | ) | $ | 2.26 | $ | 2.31 | $ | 1.60 | $ | 1.84 | $ | 5.85 | $ | 5.28 | |||||||||||||
Core net operating earnings per share | 1.75 | 2.19 | 2.04 | 2.42 | 2.20 | 8.40 | 6.55 | |||||||||||||||||||||
Adjusted book value per share (a) | 54.86 | 57.22 | 55.24 | 54.74 | 53.51 | 54.86 | 53.51 | |||||||||||||||||||||
Cash dividends per common share | 1.9000 | 0.3500 | 1.8500 | 0.3500 | 2.3500 | 4.4500 | 4.7875 | |||||||||||||||||||||
Financial ratios | ||||||||||||||||||||||||||||
Annualized return on equity (b) | (2.3 | %) | 16.3 | % | 17.1 | % | 12.3 | % | 14.4 | % | 10.9 | % | 10.3 | % | ||||||||||||||
Annualized core operating return on equity (b) | 12.6 | % | 15.8 | % | 15.1 | % | 18.6 | % | 17.2 | % | 15.6 | % | 12.7 | % | ||||||||||||||
Property and Casualty combined ratio - Specialty: | ||||||||||||||||||||||||||||
Loss & LAE ratio | 62.7 | % | 64.3 | % | 59.7 | % | 57.8 | % | 59.8 | % | 61.3 | % | 62.9 | % | ||||||||||||||
Underwriting expense ratio | 29.3 | % | 31.4 | % | 34.0 | % | 33.9 | % | 27.5 | % | 32.1 | % | 30.2 | % | ||||||||||||||
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Combined ratio - Specialty | 92.0 | % | 95.7 | % | 93.7 | % | 91.7 | % | 87.3 | % | 93.4 | % | 93.1 | % | ||||||||||||||
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Net spread on fixed annuities: | ||||||||||||||||||||||||||||
Net interest spread | 2.58 | % | 2.67 | % | 2.81 | % | 2.75 | % | 2.62 | % | 2.70 | % | 2.62 | % | ||||||||||||||
Net spread earned: | ||||||||||||||||||||||||||||
Before impact of fair value accounting and unlockings | 0.81 | % | 1.37 | % | 1.46 | % | 1.38 | % | 1.40 | % | 1.26 | % | 1.34 | % | ||||||||||||||
Impact of fair value accounting (c) | (0.52 | %) | (0.02 | %) | 0.04 | % | 0.16 | % | (0.13 | %) | (0.10 | %) | (0.10 | %) | ||||||||||||||
Unlockings | (0.04 | %) | 0.00 | % | (0.32 | %) | 0.00 | % | (0.06 | %) | (0.09 | %) | (0.01 | %) | ||||||||||||||
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After impact of fair value accounting and unlockings | 0.25 | % | 1.35 | % | 1.18 | % | 1.54 | % | 1.21 | % | 1.07 | % | 1.23 | % | ||||||||||||||
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(a) | Excludes unrealized gains related to fixed maturity investments, a reconciliation to the GAAP measure is on page 19. |
(b) | Excludes accumulated other comprehensive income. |
(c) | Change in fair value of derivatives offset by the estimated related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs. |
Page 3
American Financial Group, Inc. Summary of Earnings ($ in millions) |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
12/31/18 | 09/30/18 | 06/30/18 | 3/31/18 | 12/31/17 | 12/31/18 | 12/31/17 | ||||||||||||||||||||||
Property and Casualty Insurance | ||||||||||||||||||||||||||||
Underwriting profit | $ | 101 | $ | 56 | $ | 72 | $ | 91 | $ | 155 | $ | 320 | $ | 313 | ||||||||||||||
Net investment income | 115 | 108 | 115 | 100 | 86 | 438 | 362 | |||||||||||||||||||||
Other income (expense) | (2 | ) | (6 | ) | (7 | ) | (3 | ) | (8 | ) | (18 | ) | (15 | ) | ||||||||||||||
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Property and Casualty Insurance operating earnings | 214 | 158 | 180 | 188 | 233 | 740 | 660 | |||||||||||||||||||||
Annuity earnings | 20 | 117 | 99 | 125 | 97 | 361 | 380 | |||||||||||||||||||||
Interest expense of parent holding companies | (16 | ) | (15 | ) | (16 | ) | (15 | ) | (20 | ) | (62 | ) | (85 | ) | ||||||||||||||
Other expense | (13 | ) | (22 | ) | (32 | ) | (27 | ) | (27 | ) | (94 | ) | (92 | ) | ||||||||||||||
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Pre-tax core operating earnings | 205 | 238 | 231 | 271 | 283 | 945 | 863 | |||||||||||||||||||||
Income tax expense | 46 | 40 | 46 | 52 | 86 | 184 | 275 | |||||||||||||||||||||
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Core net operating earnings | 159 | 198 | 185 | 219 | 197 | 761 | 588 | |||||||||||||||||||||
Non-core items, net of tax: | ||||||||||||||||||||||||||||
Realized gains (losses) on securities | (188 | ) | 27 | 25 | (74 | ) | 4 | (210 | ) | 3 | ||||||||||||||||||
Special A&E charges: | ||||||||||||||||||||||||||||
Property and Casualty Insurancerun-off operations | — | (14 | ) | — | — | — | (14 | ) | (58 | ) | ||||||||||||||||||
Former Railroad and Manufacturing operations | — | (7 | ) | — | — | — | (7 | ) | (16 | ) | ||||||||||||||||||
Neon exited lines charge | — | — | — | — | 18 | — | 18 | |||||||||||||||||||||
Tax benefit related to Neon restructuring | — | — | — | — | 56 | — | 56 | |||||||||||||||||||||
Tax expense related to change in U.S. corporate tax rate | — | — | — | — | (83 | ) | — | (83 | ) | |||||||||||||||||||
Loss on retirement of debt | — | — | — | — | (26 | ) | — | (33 | ) | |||||||||||||||||||
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Net earnings | $ | (29 | ) | $ | 204 | $ | 210 | $ | 145 | $ | 166 | $ | 530 | $ | 475 | |||||||||||||
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Page 4
American Financial Group, Inc. Earnings Per Share Summary (in millions, except per share information) |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 12/31/18 | 12/31/17 | ||||||||||||||||||||||
Core net operating earnings | $ | 159 | $ | 198 | $ | 185 | $ | 219 | $ | 197 | $ | 761 | $ | 588 | ||||||||||||||
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Net earnings | $ | (29 | ) | $ | 204 | $ | 210 | $ | 145 | $ | 166 | $ | 530 | $ | 475 | |||||||||||||
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Average number of diluted shares - core | 90.668 | 90.731 | 90.663 | 90.431 | 90.109 | 90.626 | 89.812 | |||||||||||||||||||||
Average number of diluted shares - net | 89.278 | 90.731 | 90.663 | 90.431 | 90.109 | 90.626 | 89.812 | |||||||||||||||||||||
Diluted earnings per share: | ||||||||||||||||||||||||||||
Core net operating earnings per share | $ | 1.75 | $ | 2.19 | $ | 2.04 | $ | 2.42 | $ | 2.20 | $ | 8.40 | $ | 6.55 | ||||||||||||||
Realized gains (losses) on securities | (2.08 | ) | 0.31 | 0.27 | (0.82 | ) | 0.04 | (2.31 | ) | 0.03 | ||||||||||||||||||
Special A&E charges: | ||||||||||||||||||||||||||||
Property and Casualty Insurancerun-off operations | — | (0.16 | ) | — | — | — | (0.16 | ) | (0.64 | ) | ||||||||||||||||||
Former Railroad and Manufacturing operations | — | (0.08 | ) | — | — | — | (0.08 | ) | (0.18 | ) | ||||||||||||||||||
Neon exited lines charge | — | — | — | — | 0.19 | — | 0.19 | |||||||||||||||||||||
Tax benefit related to Neon restructuring | — | — | — | — | 0.62 | — | 0.62 | |||||||||||||||||||||
Tax expense related to change in U.S. corporate tax rate | — | — | — | — | (0.92 | ) | — | (0.92 | ) | |||||||||||||||||||
Loss on retirement of debt | — | — | — | — | (0.29 | ) | — | (0.37 | ) | |||||||||||||||||||
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Diluted earnings per share | $ | (0.33 | ) | $ | 2.26 | $ | 2.31 | $ | 1.60 | $ | 1.84 | $ | 5.85 | $ | 5.28 | |||||||||||||
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Page 5
American Financial Group, Inc. Property and Casualty Insurance - Summary Underwriting Results (GAAP) ($ in millions) | �� |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 12/31/18 | 12/31/17 | ||||||||||||||||||||||
Property and Transportation | $ | 64 | $ | — | $ | 23 | $ | 33 | $ | 84 | $ | 120 | $ | 154 | ||||||||||||||
Specialty Casualty | 22 | 49 | 29 | 41 | 58 | 141 | 104 | |||||||||||||||||||||
Specialty Financial | 20 | 9 | 22 | 15 | 19 | 66 | 61 | |||||||||||||||||||||
Other Specialty | (4 | ) | (3 | ) | (1 | ) | 3 | (5 | ) | (5 | ) | (2 | ) | |||||||||||||||
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Underwriting profit - Specialty | 102 | 55 | 73 | 92 | 156 | 322 | 317 | |||||||||||||||||||||
Other core charges, included in loss and LAE | 1 | (1 | ) | 1 | 1 | 1 | 2 | 4 | ||||||||||||||||||||
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Underwriting profit - Core | 101 | 56 | 72 | 91 | 155 | 320 | 313 | |||||||||||||||||||||
Special A&E charges, included in loss and LAE | — | (18 | ) | — | — | — | (18 | ) | (89 | ) | ||||||||||||||||||
Neon exited lines charge, included in loss and LAE | — | — | — | — | 18 | — | 18 | |||||||||||||||||||||
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Underwriting profit (loss) - Property and Casualty Insurance | $ | 101 | $ | 38 | $ | 72 | $ | 91 | $ | 173 | $ | 302 | $ | 242 | ||||||||||||||
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Included in results above: | ||||||||||||||||||||||||||||
Current accident year catastrophe losses: | ||||||||||||||||||||||||||||
Catastrophe reinstatement premium | $ | (1 | ) | $ | 3 | $ | — | $ | — | $ | 4 | $ | 2 | $ | 10 | |||||||||||||
Catastrophe loss | 39 | 35 | 16 | 13 | 8 | 103 | 140 | |||||||||||||||||||||
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Total current accident year catastrophe losses | $ | 38 | $ | 38 | $ | 16 | $ | 13 | $ | 12 | $ | 105 | $ | 150 | ||||||||||||||
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Prior year loss reserve development (favorable) / adverse | $ | (61 | ) | $ | (31 | ) | $ | (44 | ) | $ | (56 | ) | $ | (66 | ) | $ | (192 | ) | $ | (64 | ) | |||||||
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Combined ratio: | ||||||||||||||||||||||||||||
Property and Transportation | 86.5 | % | 100.0 | % | 93.9 | % | 90.4 | % | 82.6 | % | 93.1 | % | 91.0 | % | ||||||||||||||
Specialty Casualty | 96.5 | % | 92.1 | % | 95.1 | % | 92.9 | % | 90.0 | % | 94.2 | % | 95.2 | % | ||||||||||||||
Specialty Financial | 85.5 | % | 94.4 | % | 85.6 | % | 90.2 | % | 86.2 | % | 88.9 | % | 89.4 | % | ||||||||||||||
Other Specialty | 112.3 | % | 103.0 | % | 105.5 | % | 90.7 | % | 123.0 | % | 103.7 | % | 102.7 | % | ||||||||||||||
Combined ratio - Specialty | 92.0 | % | 95.7 | % | 93.7 | % | 91.7 | % | 87.3 | % | 93.4 | % | 93.1 | % | ||||||||||||||
Other core charges | 0.0 | % | 0.0 | % | 0.0 | % | 0.1 | % | 0.1 | % | 0.0 | % | 0.1 | % | ||||||||||||||
Neon exited lines charge, loss and LAE | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | (1.4 | %) | 0.0 | % | (0.4 | %) | ||||||||||||||
Special A&E charges | 0.0 | % | 1.5 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.4 | % | 1.9 | % | ||||||||||||||
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Combined ratio | 92.0 | % | 97.2 | % | 93.7 | % | 91.8 | % | 86.0 | % | 93.8 | % | 94.7 | % | ||||||||||||||
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Combined ratio excl. catastrophe and prior year development | 93.7 | % | 96.8 | % | 96.2 | % | 95.6 | % | 90.8 | % | 95.7 | % | 93.1 | % | ||||||||||||||
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Loss and LAE components - property and casualty insurance | ||||||||||||||||||||||||||||
Current accident year, excluding catastrophe loss | 64.4 | % | 65.4 | % | 62.2 | % | 61.7 | % | 63.3 | % | 63.6 | % | 62.9 | % | ||||||||||||||
Prior accident year loss reserve development | (4.7 | %) | (2.2 | %) | (3.9 | %) | (5.0 | %) | (5.4 | %) | (4.0 | %) | (1.4 | %) | ||||||||||||||
Current accident year catastrophe loss | 3.0 | % | 2.6 | % | 1.4 | % | 1.2 | % | 0.6 | % | 2.1 | % | 3.0 | % | ||||||||||||||
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Loss and LAE ratio | 62.7 | % | 65.8 | % | 59.7 | % | 57.9 | % | 58.5 | % | 61.7 | % | 64.5 | % | ||||||||||||||
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Page 6
American Financial Group, Inc. Specialty - Underwriting Results (GAAP) ($ in millions) |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 12/31/18 | 12/31/17 | ||||||||||||||||||||||
Gross written premiums | $ | 1,613 | $ | 2,104 | $ | 1,665 | $ | 1,458 | $ | 1,571 | $ | 6,840 | $ | 6,502 | ||||||||||||||
Ceded reinsurance premiums | (405 | ) | (648 | ) | (408 | ) | (356 | ) | (410 | ) | (1,817 | ) | (1,751 | ) | ||||||||||||||
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Net written premiums | 1,208 | 1,456 | 1,257 | 1,102 | 1,161 | 5,023 | 4,751 | |||||||||||||||||||||
Change in unearned premiums | 62 | (129 | ) | (96 | ) | 5 | 64 | (158 | ) | (172 | ) | |||||||||||||||||
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Net earned premiums | 1,270 | 1,327 | 1,161 | 1,107 | 1,225 | 4,865 | 4,579 | |||||||||||||||||||||
Loss and LAE | 796 | 855 | 692 | 640 | 733 | 2,983 | 2,880 | |||||||||||||||||||||
Underwriting expense | 372 | 417 | 396 | 375 | 336 | 1,560 | 1,382 | |||||||||||||||||||||
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Underwriting profit | $ | 102 | $ | 55 | $ | 73 | $ | 92 | $ | 156 | $ | 322 | $ | 317 | ||||||||||||||
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Included in results above: | ||||||||||||||||||||||||||||
Current accident year catastrophe losses: | ||||||||||||||||||||||||||||
Catastrophe reinstatement premium | $ | (1 | ) | $ | 3 | $ | — | $ | — | $ | 4 | $ | 2 | $ | 10 | |||||||||||||
Catastrophe loss | 39 | 35 | 16 | 13 | 8 | 103 | 140 | |||||||||||||||||||||
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Total current accident year catastrophe losses | $ | 38 | $ | 38 | $ | 16 | $ | 13 | $ | 12 | $ | 105 | $ | 150 | ||||||||||||||
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Prior year loss reserve development (favorable) / adverse | $ | (61 | ) | $ | (49 | ) | $ | (45 | ) | $ | (57 | ) | $ | (49 | ) | $ | (212 | ) | $ | (139 | ) | |||||||
Combined ratio: | ||||||||||||||||||||||||||||
Loss and LAE ratio | 62.7 | % | 64.3 | % | 59.7 | % | 57.8 | % | 59.8 | % | 61.3 | % | 62.9 | % | ||||||||||||||
Underwriting expense ratio | 29.3 | % | 31.4 | % | 34.0 | % | 33.9 | % | 27.5 | % | 32.1 | % | 30.2 | % | ||||||||||||||
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Combined ratio | 92.0 | % | 95.7 | % | 93.7 | % | 91.7 | % | 87.3 | % | 93.4 | % | 93.1 | % | ||||||||||||||
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Combined ratio excl. catastrophe and prior year development | 93.7 | % | 96.8 | % | 96.2 | % | 95.6 | % | 90.8 | % | 95.7 | % | 93.1 | % | ||||||||||||||
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Loss and LAE components: | ||||||||||||||||||||||||||||
Current accident year, excluding catastrophe loss | 64.4 | % | 65.4 | % | 62.2 | % | 61.7 | % | 63.3 | % | 63.6 | % | 62.9 | % | ||||||||||||||
Prior accident year loss reserve development | (4.7 | %) | (3.7 | %) | (3.9 | %) | (5.1 | %) | (4.1 | %) | (4.4 | %) | (3.0 | %) | ||||||||||||||
Current accident year catastrophe loss | 3.0 | % | 2.6 | % | 1.4 | % | 1.2 | % | 0.6 | % | 2.1 | % | 3.0 | % | ||||||||||||||
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| |||||||||||||||
Loss and LAE ratio | 62.7 | % | 64.3 | % | 59.7 | % | 57.8 | % | 59.8 | % | 61.3 | % | 62.9 | % | ||||||||||||||
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Page 7
American Financial Group, Inc. Property and Transportation - Underwriting Results (GAAP) ($ in millions) |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 12/31/18 | 12/31/17 | ||||||||||||||||||||||
Gross written premiums | $ | 651 | $ | 953 | $ | 615 | $ | 426 | $ | 626 | $ | 2,645 | $ | 2,688 | ||||||||||||||
Ceded reinsurance premiums | (203 | ) | (393 | ) | (193 | ) | (102 | ) | (202 | ) | (891 | ) | (923 | ) | ||||||||||||||
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| |||||||||||||||
Net written premiums | 448 | 560 | 422 | 324 | 424 | 1,754 | 1,765 | |||||||||||||||||||||
Change in unearned premiums | 31 | (34 | ) | (48 | ) | 26 | 61 | (25 | ) | (54 | ) | |||||||||||||||||
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Net earned premiums | 479 | 526 | 374 | 350 | 485 | 1,729 | 1,711 | |||||||||||||||||||||
Loss and LAE | 327 | 406 | 239 | 220 | 325 | 1,192 | 1,172 | |||||||||||||||||||||
Underwriting expense | 88 | 120 | 112 | 97 | 76 | 417 | 385 | |||||||||||||||||||||
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Underwriting profit | $ | 64 | $ | — | $ | 23 | $ | 33 | $ | 84 | $ | 120 | $ | 154 | ||||||||||||||
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Included in results above: | ||||||||||||||||||||||||||||
Current accident year catastrophe losses: | ||||||||||||||||||||||||||||
Catastrophe reinstatement premium | $ | (1 | ) | $ | 1 | $ | — | $ | — | $ | — | $ | — | $ | 2 | |||||||||||||
Catastrophe loss | (1 | ) | 12 | 10 | 5 | (3 | ) | 26 | 36 | |||||||||||||||||||
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Total current accident year catastrophe losses | $ | (2 | ) | $ | 13 | $ | 10 | $ | 5 | $ | (3 | ) | $ | 26 | $ | 38 | ||||||||||||
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Prior year loss reserve development (favorable) / adverse | $ | (7 | ) | $ | (4 | ) | $ | (21 | ) | $ | (18 | ) | $ | (4 | ) | $ | (50 | ) | $ | (40 | ) | |||||||
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Combined ratio: | ||||||||||||||||||||||||||||
Loss and LAE ratio | 68.2 | % | 77.1 | % | 63.8 | % | 63.0 | % | 67.1 | % | 69.0 | % | 68.5 | % | ||||||||||||||
Underwriting expense ratio | 18.3 | % | 22.9 | % | 30.1 | % | 27.4 | % | 15.5 | % | 24.1 | % | 22.5 | % | ||||||||||||||
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Combined ratio | 86.5 | % | 100.0 | % | 93.9 | % | 90.4 | % | 82.6 | % | 93.1 | % | 91.0 | % | ||||||||||||||
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Combined ratio excl. catastrophe and prior year development | 88.2 | % | 98.5 | % | 96.8 | % | 94.1 | % | 84.0 | % | 94.4 | % | 91.2 | % | ||||||||||||||
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Loss and LAE components: | ||||||||||||||||||||||||||||
Current accident year, excluding catastrophe loss | 69.9 | % | 75.6 | % | 66.7 | % | 66.7 | % | 68.5 | % | 70.3 | % | 68.7 | % | ||||||||||||||
Prior accident year loss reserve development | (1.5 | %) | (0.8 | %) | (5.6 | %) | (5.1 | %) | (0.8 | %) | (2.8 | %) | (2.3 | %) | ||||||||||||||
Current accident year catastrophe loss | (0.2 | %) | 2.3 | % | 2.7 | % | 1.4 | % | (0.6 | %) | 1.5 | % | 2.1 | % | ||||||||||||||
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Loss and LAE ratio | 68.2 | % | 77.1 | % | 63.8 | % | 63.0 | % | 67.1 | % | 69.0 | % | 68.5 | % | ||||||||||||||
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Page 8
American Financial Group, Inc. Specialty Casualty - Underwriting Results (GAAP) ($ in millions) |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 12/31/18 | 12/31/17 | ||||||||||||||||||||||
Gross written premiums | $ | 778 | $ | 956 | $ | 858 | $ | 853 | $ | 737 | $ | 3,445 | $ | 3,087 | ||||||||||||||
Ceded reinsurance premiums | (197 | ) | (261 | ) | (219 | ) | (259 | ) | (182 | ) | (936 | ) | (807 | ) | ||||||||||||||
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Net written premiums | 581 | 695 | 639 | 594 | 555 | 2,509 | 2,280 | |||||||||||||||||||||
Change in unearned premiums | 32 | (79 | ) | (44 | ) | (15 | ) | 18 | (106 | ) | (94 | ) | ||||||||||||||||
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| |||||||||||||||
Net earned premiums | 613 | 616 | 595 | 579 | 573 | 2,403 | 2,186 | |||||||||||||||||||||
Loss and LAE | 389 | 364 | 378 | 345 | 338 | 1,476 | 1,410 | |||||||||||||||||||||
Underwriting expense | 202 | 203 | 188 | 193 | 177 | 786 | 672 | |||||||||||||||||||||
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Underwriting profit | $ | 22 | $ | 49 | $ | 29 | $ | 41 | $ | 58 | $ | 141 | $ | 104 | ||||||||||||||
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Included in results above: | ||||||||||||||||||||||||||||
Current accident year catastrophe losses: | ||||||||||||||||||||||||||||
Catastrophe reinstatement premium | $ | — | $ | 1 | $ | — | $ | — | $ | 4 | $ | 1 | $ | 6 | ||||||||||||||
Catastrophe loss | 28 | 11 | 1 | 5 | 14 | 45 | 71 | |||||||||||||||||||||
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| |||||||||||||||
Total current accident year catastrophe losses | $ | 28 | $ | 12 | $ | 1 | $ | 5 | $ | 18 | $ | 46 | $ | 77 | ||||||||||||||
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| |||||||||||||||
Prior year loss reserve development (favorable) / adverse | $ | (52 | ) | $ | (37 | ) | $ | (15 | ) | $ | (35 | ) | $ | (52 | ) | $ | (139 | ) | $ | (86 | ) | |||||||
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Combined ratio: | ||||||||||||||||||||||||||||
Loss and LAE ratio | 63.5 | % | 59.2 | % | 63.4 | % | 59.5 | % | 59.1 | % | 61.5 | % | 64.5 | % | ||||||||||||||
Underwriting expense ratio | 33.0 | % | 32.9 | % | 31.7 | % | 33.4 | % | 30.9 | % | 32.7 | % | 30.7 | % | ||||||||||||||
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| |||||||||||||||
Combined ratio | 96.5 | % | 92.1 | % | 95.1 | % | 92.9 | % | 90.0 | % | 94.2 | % | 95.2 | % | ||||||||||||||
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Combined ratio excl. catastrophe and prior year development | 100.3 | % | 96.4 | % | 97.5 | % | 97.9 | % | 96.7 | % | 98.1 | % | 95.9 | % | ||||||||||||||
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Loss and LAE components: | ||||||||||||||||||||||||||||
Current accident year, excluding catastrophe loss | 67.3 | % | 63.5 | % | 65.8 | % | 64.5 | % | 65.8 | % | 65.4 | % | 65.2 | % | ||||||||||||||
Prior accident year loss reserve development | (8.5 | %) | (6.0 | %) | (2.5 | %) | (6.0 | %) | (9.2 | %) | (5.8 | %) | (4.0 | %) | ||||||||||||||
Current accident year catastrophe loss | 4.7 | % | 1.7 | % | 0.1 | % | 1.0 | % | 2.5 | % | 1.9 | % | 3.3 | % | ||||||||||||||
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| |||||||||||||||
Loss and LAE ratio | 63.5 | % | 59.2 | % | 63.4 | % | 59.5 | % | 59.1 | % | 61.5 | % | 64.5 | % | ||||||||||||||
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Page 9
American Financial Group, Inc. Specialty Financial - Underwriting Results (GAAP) ($ in millions) |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 12/31/18 | 12/31/17 | ||||||||||||||||||||||
Gross written premiums | $ | 184 | $ | 195 | $ | 192 | 179 | $ | 208 | $ | 750 | $ | 727 | |||||||||||||||
Ceded reinsurance premiums | (42 | ) | (42 | ) | (33 | ) | (31 | ) | (52 | ) | (148 | ) | (131 | ) | ||||||||||||||
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| |||||||||||||||
Net written premiums | 142 | 153 | 159 | 148 | 156 | 602 | 596 | |||||||||||||||||||||
Change in unearned premiums | (1 | ) | (4 | ) | — | 1 | (15 | ) | (4 | ) | (20 | ) | ||||||||||||||||
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| |||||||||||||||
Net earned premiums | 141 | 149 | 159 | 149 | 141 | 598 | 576 | |||||||||||||||||||||
Loss and LAE | 51 | 60 | 54 | 60 | 47 | 225 | 227 | |||||||||||||||||||||
Underwriting expense | 70 | 80 | 83 | 74 | 75 | 307 | 288 | |||||||||||||||||||||
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| |||||||||||||||
Underwriting profit (loss) | $ | 20 | $ | 9 | $ | 22 | $ | 15 | $ | 19 | $ | 66 | $ | 61 | ||||||||||||||
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Included in results above: | ||||||||||||||||||||||||||||
Current accident year catastrophe losses: | ||||||||||||||||||||||||||||
Catastrophe reinstatement premium | $ | — | $ | 1 | $ | — | $ | — | $ | — | $ | 1 | $ | 2 | ||||||||||||||
Catastrophe loss | 10 | 12 | 3 | 3 | (5 | ) | 28 | 30 | ||||||||||||||||||||
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| |||||||||||||||
Total current accident year catastrophe losses | $ | 10 | $ | 13 | $ | 3 | $ | 3 | $ | (5 | ) | $ | 29 | $ | 32 | |||||||||||||
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| |||||||||||||||
Prior year loss reserve development (favorable) / adverse | $ | (7 | ) | $ | (8 | ) | $ | (8 | ) | $ | (3 | ) | $ | 1 | $ | (26 | ) | $ | (21 | ) | ||||||||
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Combined ratio: | ||||||||||||||||||||||||||||
Loss and LAE ratio | 36.4 | % | 40.1 | % | 33.9 | % | 40.2 | % | 33.1 | % | 37.6 | % | 39.4 | % | ||||||||||||||
Underwriting expense ratio | 49.1 | % | 54.3 | % | 51.7 | % | 50.0 | % | 53.1 | % | 51.3 | % | 50.0 | % | ||||||||||||||
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| |||||||||||||||
Combined ratio | 85.5 | % | 94.4 | % | 85.6 | % | 90.2 | % | 86.2 | % | 88.9 | % | 89.4 | % | ||||||||||||||
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| |||||||||||||||
Combined ratio excl. catastrophe and prior year development | 83.6 | % | 91.5 | % | 89.0 | % | 90.2 | % | 89.1 | % | 88.6 | % | 87.8 | % | ||||||||||||||
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| |||||||||||||||
Loss and LAE components: | ||||||||||||||||||||||||||||
Current accident year, excluding catastrophe loss | 34.5 | % | 37.2 | % | 37.3 | % | 40.2 | % | 36.0 | % | 37.3 | % | 37.8 | % | ||||||||||||||
Prior accident year loss reserve development | (5.2 | %) | (5.1 | %) | (5.4 | %) | (1.8 | %) | 0.8 | % | (4.4 | %) | (3.6 | %) | ||||||||||||||
Current accident year catastrophe loss | 7.1 | % | 8.0 | % | 2.0 | % | 1.8 | % | (3.7 | %) | 4.7 | % | 5.2 | % | ||||||||||||||
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| |||||||||||||||
Loss and LAE ratio | 36.4 | % | 40.1 | % | 33.9 | % | 40.2 | % | 33.1 | % | 37.6 | % | 39.4 | % | ||||||||||||||
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Page 10
American Financial Group, Inc. Other Specialty - Underwriting Results (GAAP) ($ in millions) |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 12/31/18 | 12/31/17 | ||||||||||||||||||||||
Gross written premiums | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Ceded reinsurance premiums | 37 | 48 | 37 | 36 | 26 | 158 | 110 | |||||||||||||||||||||
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| |||||||||||||||
Net written premiums | 37 | 48 | 37 | 36 | 26 | 158 | 110 | |||||||||||||||||||||
Change in unearned premiums | — | (12 | ) | (4 | ) | (7 | ) | — | (23 | ) | (4 | ) | ||||||||||||||||
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Net earned premiums | 37 | 36 | 33 | 29 | 26 | 135 | 106 | |||||||||||||||||||||
Loss and LAE | 29 | 25 | 21 | 15 | 23 | 90 | 71 | |||||||||||||||||||||
Underwriting expense | 12 | 14 | 13 | 11 | 8 | 50 | 37 | |||||||||||||||||||||
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| |||||||||||||||
Underwriting profit (loss) | $ | (4 | ) | $ | (3 | ) | $ | (1 | ) | $ | 3 | $ | (5 | ) | $ | (5 | ) | $ | (2 | ) | ||||||||
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Included in results above: | ||||||||||||||||||||||||||||
Current accident year catastrophe losses: | ||||||||||||||||||||||||||||
Catastrophe reinstatement premium | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Catastrophe loss | 2 | — | 2 | — | 2 | 4 | 3 | |||||||||||||||||||||
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| |||||||||||||||
Total current accident year catastrophe losses | $ | 2 | $ | — | $ | 2 | $ | — | $ | 2 | $ | 4 | $ | 3 | ||||||||||||||
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Prior year loss reserve development (favorable) / adverse | $ | 5 | $ | — | $ | (1 | ) | $ | (1 | ) | $ | 6 | $ | 3 | $ | 8 | ||||||||||||
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Combined ratio: | ||||||||||||||||||||||||||||
Loss and LAE ratio | 76.5 | % | 65.5 | % | 68.7 | % | 51.3 | % | 86.2 | % | 66.4 | % | 66.9 | % | ||||||||||||||
Underwriting expense ratio | 35.8 | % | 37.5 | % | 36.8 | % | 39.4 | % | 36.8 | % | 37.3 | % | 35.8 | % | ||||||||||||||
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| |||||||||||||||
Combined ratio | 112.3 | % | 103.0 | % | 105.5 | % | 90.7 | % | 123.0 | % | 103.7 | % | 102.7 | % | ||||||||||||||
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| |||||||||||||||
Combined ratio excl. catastrophe and prior year development | 95.6 | % | 103.7 | % | 99.6 | % | 96.6 | % | 94.5 | % | 99.0 | % | 93.0 | % | ||||||||||||||
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Page 11
American Financial Group, Inc. Annuity Earnings (GAAP) ($ in millions) |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 12/31/18 | 12/31/17 | ||||||||||||||||||||||
Net investment income | $ | 419 | $ | 413 | $ | 412 | $ | 394 | $ | 376 | $ | 1,638 | $ | 1,458 | ||||||||||||||
Guaranteed withdrawal benefit fees | 17 | 16 | 16 | 16 | 17 | 65 | 60 | |||||||||||||||||||||
Policy charges and other miscellaneous income | 10 | 11 | 11 | 10 | 7 | 42 | 43 | |||||||||||||||||||||
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| |||||||||||||||
Total revenues | 446 | 440 | 439 | 420 | 400 | 1,745 | 1,561 | |||||||||||||||||||||
Annuity benefits | 334 | 222 | 260 | 182 | 257 | 998 | 892 | |||||||||||||||||||||
Acquisition expenses | 56 | 69 | 49 | 81 | 15 | 255 | 168 | |||||||||||||||||||||
Other expenses | 36 | 32 | 31 | 32 | 31 | 131 | 121 | |||||||||||||||||||||
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| |||||||||||||||
Total costs and expenses | 426 | 323 | 340 | 295 | 303 | 1,384 | 1,181 | |||||||||||||||||||||
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| |||||||||||||||
Annuity earnings before income taxes | $ | 20 | $ | 117 | $ | 99 | $ | 125 | $ | 97 | $ | 361 | $ | 380 | ||||||||||||||
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| |||||||||||||||
Detail of Annuity earnings before income taxes | ||||||||||||||||||||||||||||
Earnings before income taxes, impact of fair value accounting and unlockings | $ | 71 | $ | 119 | $ | 123 | $ | 112 | $ | 111 | $ | 425 | $ | 416 | ||||||||||||||
Impact of fair value accounting | (47 | ) | (2 | ) | 3 | 13 | (11 | ) | (33 | ) | (33 | ) | ||||||||||||||||
Unlockings | (4 | ) | — | (27 | ) | — | (3 | ) | (31 | ) | (3 | ) | ||||||||||||||||
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| |||||||||||||||
Earnings before income taxes | $ | 20 | $ | 117 | $ | 99 | $ | 125 | $ | 97 | $ | 361 | $ | 380 | ||||||||||||||
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Page 12
American Financial Group, Inc. Analysis of Annuity Earnings Before Impact of Fair Value Accounting for FIAs and Unlockings ($ in millions) |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 12/31/18 | 12/31/17 | ||||||||||||||||||||||
Annuity Segment Pretax Earnings: | ||||||||||||||||||||||||||||
Annuity earnings before impact of fair value accounting for FIAs, unlockings and items below | $ | 85 | $ | 83 | $ | 87 | $ | 84 | $ | 91 | $ | 339 | $ | 346 | ||||||||||||||
Investments marked to market through operating earnings: | ||||||||||||||||||||||||||||
Investment income (from page 26) | 18 | 28 | 37 | 31 | 14 | 114 | 53 | |||||||||||||||||||||
Associated DAC impact | (2 | ) | (2 | ) | (4 | ) | (2 | ) | (1 | ) | (10 | ) | (4 | ) | ||||||||||||||
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Total | 16 | 26 | 33 | 29 | 13 | 104 | 49 | |||||||||||||||||||||
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Impact of stock market on (a): | ||||||||||||||||||||||||||||
Annuities with guaranteed benefits (from page 15) | (22 | ) | 7 | 2 | (1 | ) | 5 | (14 | ) | 14 | ||||||||||||||||||
DAC associated with FIAs | (8 | ) | 3 | 1 | — | 2 | (4 | ) | 7 | |||||||||||||||||||
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Total (b) | (30 | ) | 10 | 3 | (1 | ) | 7 | (18 | ) | 21 | ||||||||||||||||||
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Annuity earnings before impact of fair value accounting for FIAs and unlockings, as reported | $ | 71 | $ | 119 | $ | 123 | $ | 112 | $ | 111 | $ | 425 | $ | 416 | ||||||||||||||
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(a) Change in S&P 500 | -14 | % | +7 | % | +3 | % | -1 | % | +6 | % | -6 | % | +19 | % | ||||||||||||||
(b) Estimated impact (in millions of dollars) of a 1% change in the stock market on FIAs before fair value accounting (i.e. 1% “Rule of Thumb”) | $ | 2 | $ | 1 | $ | 1 | $ | 1 | $ | 1 | n/m | $ | 1 |
Page 13
American Financial Group, Inc. Analysis of Impact of Fair Value Accounting for FIAs ($ in millions) |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 12/31/18 | 12/31/17 | ||||||||||||||||||||||
Interest on Embedded Derivative liability | $ | (11 | ) | $ | (10 | ) | $ | (8 | ) | $ | (7 | ) | $ | (5 | ) | $ | (36 | ) | $ | (16 | ) | |||||||
Impact of changes in interest rates higher (lower) than expected (a) | (4 | ) | (2 | ) | 12 | 27 | (12 | ) | 33 | (50 | ) | |||||||||||||||||
Impact of change in stock market (b) (c) | (27 | ) | 12 | 6 | (2 | ) | 9 | (11 | ) | 29 | ||||||||||||||||||
Renewal option purchases lower (higher) than expected | 1 | — | (3 | ) | (4 | ) | — | (6 | ) | 4 | ||||||||||||||||||
Other, including impact of actual vs. expected lapses | (6 | ) | (2 | ) | (4 | ) | (1 | ) | (3 | ) | (13 | ) | — | |||||||||||||||
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Impact of Fair Value accounting, as reported | $ | (47 | ) | $ | (2 | ) | $ | 3 | $ | 13 | $ | (11 | ) | $ | (33 | ) | $ | (33 | ) | |||||||||
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Embedded Derivative liability balance at end of period | $ | 2,720 | $ | 3,105 | $ | 2,776 | $ | 2,549 | $ | 2,542 | $ | 2,720 | $ | 2,542 | ||||||||||||||
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(a) Assuming a parallel shift in rates, AFG’s general “Rule of Thumb” for Fair Value earnings impact each month is that a +/-10bps change in the average 5/15 year Corporate A2 rates, as compared to the expected change (as indicated by the forward curve at the end of each month) will equate to a +/-$7 million impact on Fair Value earnings. |
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(b) Change in S&P 500 | -14 | % | +7 | % | +3 | % | -1 | % | +6 | % | -6 | % | +19 | % | ||||||||||||||
(c) Estimated impact (in millions of dollars) of a 1% change in the stock market on the fair value accounting for FIAs (i.e. 1% “Rule of Thumb”) | $ | 2 | $ | 2 | $ | 2 | $ | 2 | $ | 2 | $ | 2 | $ | 2 |
Page 14
American Financial Group, Inc. Detail of Annuity Benefits Expense (GAAP) ($ in millions) |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 12/31/18 | 12/31/17 | ||||||||||||||||||||||
Detail of annuity benefits expense: | ||||||||||||||||||||||||||||
Interest credited - fixed | $ | 186 | $ | 179 | $ | 173 | $ | 166 | $ | 164 | $ | 704 | $ | 633 | ||||||||||||||
Interest credited - fixed component of variable annuities | 1 | 1 | 2 | 1 | 1 | 5 | 5 | |||||||||||||||||||||
Change in expected death and annuitization reserve | 4 | 5 | 4 | 4 | 5 | 17 | 18 | |||||||||||||||||||||
Amortization of sales inducements | 4 | 5 | 5 | 5 | 5 | 19 | 19 | |||||||||||||||||||||
Guaranteed withdrawal benefit reserve: | ||||||||||||||||||||||||||||
Impact of change in stock market | 22 | (7 | ) | (2 | ) | 1 | (5 | ) | 14 | (14 | ) | |||||||||||||||||
Accretion of benefits and other | 24 | 25 | 21 | 22 | 21 | 92 | 81 | |||||||||||||||||||||
Change in other benefit reserves | 8 | 10 | 11 | 8 | 9 | 37 | 45 | |||||||||||||||||||||
Unlockings (a) | 5 | — | 54 | — | 35 | 59 | 35 | |||||||||||||||||||||
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Subtotal before impact of fair value accounting | 254 | 218 | 268 | 207 | 235 | 947 | 822 | |||||||||||||||||||||
Embedded derivativemark-to-market (b) | (490 | ) | 223 | 82 | (63 | ) | 178 | (248 | ) | 564 | ||||||||||||||||||
Equity optionmark-to-market | 570 | (219 | ) | (90 | ) | 38 | (156 | ) | 299 | (494 | ) | |||||||||||||||||
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Subtotal impact in fair value accounting | 80 | 4 | (8 | ) | (25 | ) | 22 | 51 | 70 | |||||||||||||||||||
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Total annuity benefits expense | $ | 334 | $ | 222 | $ | 260 | $ | 182 | $ | 257 | $ | 998 | $ | 892 | ||||||||||||||
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(a) | Includes unlockings for fixed indexed annuity embedded derivative reserves, sales inducement asset and other reserves. Does not include unlocking income of $28 million in 2018 and $32 million in 2017 for deferred policy acquisition costs and unearned revenue reserves. These unlockings are included in acquisition expenses and other income. In total, AFG recorded an unlocking expense of $31 million in 2018 and $3 million in 2017. |
(b) | Excludes unlocking impact of $44 million in 2018 and $25 million in 2017. |
Page 15
American Financial Group, Inc. Net Spread on Fixed Annuities (GAAP) ($ in millions) |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 12/31/18 | 12/31/17 | ||||||||||||||||||||||
Average fixed annuity investments (at amortized cost) (a) | $ | 35,993 | $ | 34,955 | $ | 33,935 | $ | 33,002 | $ | 32,245 | $ | 34,471 | $ | 31,250 | ||||||||||||||
Average annuity benefits accumulated | 36,103 | 35,226 | 34,165 | 33,329 | 32,680 | 34,706 | 31,526 | |||||||||||||||||||||
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Annuity benefits accumulated in excess of investments (a) | $ | (110 | ) | $ | (271 | ) | $ | (230 | ) | $ | (327 | ) | $ | (435 | ) | $ | (235 | ) | $ | (276 | ) | |||||||
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As % of average annuity benefits accumulated (except as noted) | ||||||||||||||||||||||||||||
Net investment income (as % of investments) | 4.64 | % | 4.70 | % | 4.83 | % | 4.74 | % | 4.62 | % | 4.73 | % | 4.63 | % | ||||||||||||||
Interest credited | (2.06 | %) | (2.03 | %) | (2.02 | %) | (1.99 | %) | (2.00 | %) | (2.03 | %) | (2.01 | %) | ||||||||||||||
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Net interest spread on fixed annuities | 2.58 | % | 2.67 | % | 2.81 | % | 2.75 | % | 2.62 | % | 2.70 | % | 2.62 | % | ||||||||||||||
Policy charges and other miscellaneous income | 0.08 | % | 0.09 | % | 0.10 | % | 0.10 | % | 0.10 | % | 0.10 | % | 0.11 | % | ||||||||||||||
Other annuity benefit expenses, net | (0.51 | %) | (0.24 | %) | (0.27 | %) | (0.29 | %) | (0.21 | %) | (0.33 | %) | (0.28 | %) | ||||||||||||||
Acquisition expenses | (0.59 | %) | (0.76 | %) | (0.89 | %) | (0.94 | %) | (0.60 | %) | (0.79 | %) | (0.62 | %) | ||||||||||||||
Other expenses | (0.38 | %) | (0.36 | %) | (0.35 | %) | (0.38 | %) | (0.37 | %) | (0.37 | %) | (0.37 | %) | ||||||||||||||
Change in fair value of derivatives | (0.89 | %) | (0.05 | %) | 0.10 | % | 0.30 | % | (0.27 | %) | (0.15 | %) | (0.22 | %) | ||||||||||||||
Unlockings | (0.04 | %) | 0.00 | % | (0.32 | %) | 0.00 | % | (0.06 | %) | (0.09 | %) | (0.01 | %) | ||||||||||||||
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Net spread earned on fixed annuities | 0.25 | % | 1.35 | % | 1.18 | % | 1.54 | % | 1.21 | % | 1.07 | % | 1.23 | % | ||||||||||||||
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Average annuity benefits accumulated | $ | 36,103 | $ | 35,226 | $ | 34,165 | $ | 33,329 | $ | 32,680 | $ | 34,706 | $ | 31,526 | ||||||||||||||
Net spread earned on fixed annuities | 0.25 | % | 1.35 | % | 1.18 | % | 1.54 | % | 1.21 | % | 1.07 | % | 1.23 | % | ||||||||||||||
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Earnings on fixed annuity benefits accumulated | $ | 22 | $ | 119 | $ | 101 | $ | 128 | $ | 99 | $ | 370 | $ | 387 | ||||||||||||||
Annuity benefits accumulated in excess of investments | $ | (110 | ) | $ | (271 | ) | $ | (230 | ) | $ | (327 | ) | $ | (435 | ) | $ | (235 | ) | $ | (276 | ) | |||||||
Net investment income (as % of investments) | 4.64 | % | 4.70 | % | 4.83 | % | 4.74 | % | 4.62 | % | 4.73 | % | 4.63 | % | ||||||||||||||
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Earnings (loss) on annuity benefits accumulated in excess of investments | $ | (1 | ) | $ | (3 | ) | $ | (3 | ) | $ | (4 | ) | $ | (5 | ) | $ | (11 | ) | $ | (13 | ) | |||||||
Variable annuity earnings (includes unlockings) | (1 | ) | 1 | 1 | 1 | 3 | 2 | 6 | ||||||||||||||||||||
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Earnings before income taxes | $ | 20 | $ | 117 | $ | 99 | $ | 125 | $ | 97 | $ | 361 | $ | 380 | ||||||||||||||
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Detail of net spread earned on fixed annuities | ||||||||||||||||||||||||||||
Net spread earned - before impact of fair value accounting and unlockings | 0.81 | % | 1.37 | % | 1.46 | % | 1.38 | % | 1.40 | % | 1.26 | % | 1.34 | % | ||||||||||||||
Change in fair value of derivatives | (0.89 | %) | (0.05 | %) | 0.10 | % | 0.30 | % | (0.27 | %) | (0.15 | %) | (0.22 | %) | ||||||||||||||
Estimated net offsets to deferred sales inducements and deferred policy acquisition costs | 0.37 | % | 0.03 | % | (0.06 | %) | (0.14 | %) | 0.14 | % | 0.05 | % | 0.12 | % | ||||||||||||||
Unlockings | (0.04 | %) | 0.00 | % | (0.32 | %) | 0.00 | % | (0.06 | %) | (0.09 | %) | (0.01 | %) | ||||||||||||||
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Net spread earned - after impact of fair value accounting and unlockings | 0.25 | % | 1.35 | % | 1.18 | % | 1.54 | % | 1.21 | % | 1.07 | % | 1.23 | % | ||||||||||||||
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(a) | Excludesnon-investment assets such as deferred acquisition costs, FIA options, accrued investment income and company owned life insurance. |
Page 16
American Financial Group, Inc. Statutory Annuity Premiums ($ in millions) |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 12/31/18 | 12/31/17 | ||||||||||||||||||||||
Retail single premium annuities - indexed | $ | 392 | $ | 354 | $ | 378 | $ | 294 | $ | 239 | $ | 1,418 | $ | 990 | ||||||||||||||
Retail single premium annuities - fixed | 27 | 17 | 22 | 21 | 15 | 87 | 70 | |||||||||||||||||||||
Broker dealer single premium annuities - indexed | 335 | 322 | 355 | 259 | 174 | 1,271 | 733 | |||||||||||||||||||||
Broker dealer single premium annuities - fixed | 4 | 3 | 4 | 3 | 1 | 14 | 7 | |||||||||||||||||||||
Financial institutions single premium annuities - indexed | 455 | 460 | 448 | 413 | 364 | 1,776 | 1,711 | |||||||||||||||||||||
Financial institutions single premium annuities - fixed | 142 | 114 | 131 | 105 | 63 | 492 | 622 | |||||||||||||||||||||
Pension risk transfer (PRT) | 75 | 56 | 1 | — | 6 | 132 | 6 | |||||||||||||||||||||
Education market - fixed and indexed annuities | 46 | 46 | 54 | 46 | 41 | 192 | 174 | |||||||||||||||||||||
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Subtotal fixed annuity premiums | 1,476 | 1,372 | 1,393 | 1,141 | 903 | 5,382 | 4,313 | |||||||||||||||||||||
Variable annuities | 6 | 6 | 6 | 7 | 6 | 25 | 28 | |||||||||||||||||||||
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Total annuity premiums | $ | 1,482 | $ | 1,378 | $ | 1,399 | $ | 1,148 | $ | 909 | $ | 5,407 | $ | 4,341 | ||||||||||||||
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Summary by Distribution Channel: | ||||||||||||||||||||||||||||
Retail | $ | 419 | $ | 371 | $ | 400 | $ | 315 | $ | 254 | $ | 1,505 | $ | 1,060 | ||||||||||||||
Broker dealer | 339 | 325 | 359 | 262 | 175 | 1,285 | 740 | |||||||||||||||||||||
Financial institutions | 597 | 574 | 579 | 518 | 427 | 2,268 | 2,333 | |||||||||||||||||||||
Other | 127 | 108 | 61 | 53 | 53 | 349 | 208 | |||||||||||||||||||||
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Total annuity premiums | $ | 1,482 | $ | 1,378 | $ | 1,399 | $ | 1,148 | $ | 909 | $ | 5,407 | $ | 4,341 | ||||||||||||||
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Summary by Product Type: | ||||||||||||||||||||||||||||
Total indexed | $ | 1,211 | $ | 1,164 | $ | 1,213 | $ | 992 | $ | 802 | $ | 4,580 | $ | 3,523 | ||||||||||||||
Total fixed | 265 | 208 | 180 | 149 | 101 | 802 | 790 | |||||||||||||||||||||
Variable | 6 | 6 | 6 | 7 | 6 | 25 | 28 | |||||||||||||||||||||
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Total annuity premiums | $ | 1,482 | $ | 1,378 | $ | 1,399 | $ | 1,148 | $ | 909 | $ | 5,407 | $ | 4,341 | ||||||||||||||
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Page 17
American Financial Group, Inc. Fixed Annuity Benefits Accumulated (GAAP) ($ in millions) |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 12/31/18 | 12/31/17 | ||||||||||||||||||||||
Beginning fixed annuity reserves | $ | 35,774 | $ | 34,678 | $ | 33,652 | $ | 33,005 | $ | 32,354 | $ | 33,005 | $ | 29,647 | ||||||||||||||
Premiums | 1,476 | 1,372 | 1,393 | 1,141 | 903 | 5,382 | 4,313 | |||||||||||||||||||||
Federal Home Loan Bank (“FHLB”) advances (paydowns) | 225 | — | — | — | (64 | ) | 225 | (64 | ) | |||||||||||||||||||
Surrenders, benefits and other withdrawals | (796 | ) | (707 | ) | (706 | ) | (627 | ) | (596 | ) | (2,836 | ) | (2,246 | ) | ||||||||||||||
Interest and other annuity benefit expenses: | ||||||||||||||||||||||||||||
Interest credited | 186 | 179 | 173 | 166 | 164 | 704 | 633 | |||||||||||||||||||||
Embedded derivativemark-to-market | (490 | ) | 223 | 82 | (63 | ) | 178 | (248 | ) | 564 | ||||||||||||||||||
Change in other benefit reserves | 52 | 29 | 29 | 30 | 25 | 140 | 117 | |||||||||||||||||||||
Unlockings | 4 | — | 55 | — | 41 | 59 | 41 | |||||||||||||||||||||
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Ending fixed annuity reserves | $ | 36,431 | $ | 35,774 | $ | 34,678 | $ | 33,652 | $ | 33,005 | $ | 36,431 | $ | 33,005 | ||||||||||||||
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Reconciliation to annuity benefits accumulated: | ||||||||||||||||||||||||||||
Ending fixed annuity reserves | $ | 36,431 | $ | 35,774 | $ | 34,678 | $ | 33,652 | $ | 33,005 | $ | 36,431 | $ | 33,005 | ||||||||||||||
Impact of unrealized investment gains on reserves | 10 | 8 | 32 | 71 | 133 | 10 | 133 | |||||||||||||||||||||
Fixed component of variable annuities | 175 | 176 | 176 | 178 | �� | 178 | 175 | 178 | ||||||||||||||||||||
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Annuity benefits accumulated per balance sheet | $ | 36,616 | $ | 35,958 | $ | 34,886 | $ | 33,901 | $ | 33,316 | $ | 36,616 | $ | 33,316 | ||||||||||||||
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Annualized surrenders and other withdrawals as a % of beginning reserves | 8.9 | % | 8.2 | % | 8.4 | % | 7.6 | % | 7.4 | % | 8.6 | % | 7.6 | % | ||||||||||||||
Rider reserves included in ending fixed annuity reserves above | $ | 472 | $ | 428 | $ | 411 | $ | 381 | $ | 358 | $ | 472 | $ | 358 | ||||||||||||||
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Page 18
American Financial Group, Inc. Guaranteed Minimum Interest Rate (“GMIR”) Analysis ($ in millions) |
GMIR | 12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 9/30/17 | ||||||||||||||||||
1 - 1.99% | 79 | % | 78 | % | 78 | % | 77 | % | 76 | % | 75 | % | ||||||||||||
2 - 2.99% | 4 | % | 4 | % | 4 | % | 5 | % | 5 | % | 5 | % | ||||||||||||
3 - 3.99% | 8 | % | 9 | % | 9 | % | 9 | % | 10 | % | 10 | % | ||||||||||||
4.00% and above | 9 | % | 9 | % | 9 | % | 9 | % | 9 | % | 10 | % | ||||||||||||
Annuity Benefits Accumulated | $ | 36,616 | $ | 35,958 | $ | 34,886 | $ | 33,901 | $ | 33,316 | $ | 32,671 | ||||||||||||
Traditional Fixed and FIA Surrender Value (a) (b) | $ | 27,842 | $ | 27,434 | $ | 26,502 | $ | 25,582 | $ | 25,138 | $ | 24,428 | ||||||||||||
Ability to Lower Average Crediting Rates by (a) (c) | 1.19 | % | 1.16 | % | 1.09 | % | 1.00 | % | 0.92 | % | 0.88 | % | ||||||||||||
Pretax earnings impact of crediting guaranteed minimums (a) | $ | 331 | $ | 317 | $ | 288 | $ | 255 | $ | 230 | $ | 216 | ||||||||||||
(assumes net DAC impact over time = $0) |
(a) | Excludes Annuities with Guaranteed Withdrawal Benefits, FHLB advances, immediate reserves and certain other reserves. |
(b) | FIA Surrender Value include Host + Embedded Derivatives + Fixed Account values. |
(c) | Weighted Average Crediting Rate less GMIR |
Page 19
American Financial Group, Inc. Consolidated Balance Sheet ($ in millions) |
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 09/30/17 | |||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Total cash and investments | $ | 48,498 | $ | 47,841 | $ | 46,779 | $ | 45,949 | $ | 46,048 | $ | 45,253 | ||||||||||||
Recoverables from reinsurers | 3,349 | 3,352 | 3,073 | 3,173 | 3,369 | 3,262 | ||||||||||||||||||
Prepaid reinsurance premiums | 610 | 717 | 645 | 614 | 600 | 691 | ||||||||||||||||||
Agents’ balances and premiums receivable | 1,234 | 1,299 | 1,266 | 1,113 | 1,146 | 1,173 | ||||||||||||||||||
Deferred policy acquisition costs | 1,682 | 1,669 | 1,582 | 1,417 | 1,216 | 1,119 | ||||||||||||||||||
Assets of managed investment entities | 4,700 | 4,998 | 5,032 | 5,090 | 4,902 | 4,767 | ||||||||||||||||||
Other receivables | 1,090 | 1,633 | 1,048 | 918 | 1,030 | 1,545 | ||||||||||||||||||
Variable annuity assets (separate accounts) | 557 | 650 | 636 | 632 | 644 | 628 | ||||||||||||||||||
Other assets | 1,529 | 1,832 | 1,574 | 1,551 | 1,504 | 1,526 | ||||||||||||||||||
Goodwill | 207 | 199 | 199 | 199 | 199 | 199 | ||||||||||||||||||
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|
| |||||||||||||
Total assets | $ | 63,456 | $ | 64,190 | $ | 61,834 | $ | 60,656 | $ | 60,658 | $ | 60,163 | ||||||||||||
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|
|
|
|
|
| |||||||||||||
Liabilities and Equity: | ||||||||||||||||||||||||
Unpaid losses and loss adjustment expenses | $ | 9,741 | $ | 9,670 | $ | 9,093 | $ | 9,193 | $ | 9,678 | $ | 9,563 | ||||||||||||
Unearned premiums | 2,595 | 2,740 | 2,539 | 2,413 | 2,410 | 2,567 | ||||||||||||||||||
Annuity benefits accumulated | 36,616 | 35,958 | 34,886 | 33,901 | 33,316 | 32,671 | ||||||||||||||||||
Life, accident and health reserves | 635 | 643 | 647 | 656 | 658 | 667 | ||||||||||||||||||
Payable to reinsurers | 752 | 932 | 721 | 661 | 743 | 906 | ||||||||||||||||||
Liabilities of managed investment entities | 4,512 | 4,807 | 4,840 | 4,869 | 4,687 | 4,506 | ||||||||||||||||||
Long-term debt | 1,302 | 1,302 | 1,301 | 1,301 | 1,301 | 1,284 | ||||||||||||||||||
Variable annuity liabilities (separate accounts) | 557 | 650 | 636 | 632 | 644 | 628 | ||||||||||||||||||
Other liabilities | 1,774 | 2,324 | 2,087 | 1,847 | 1,887 | 1,992 | ||||||||||||||||||
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| �� |
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|
| |||||||||||||
Total liabilities | $ | 58,484 | $ | 59,026 | $ | 56,750 | $ | 55,473 | $ | 55,324 | $ | 54,784 | ||||||||||||
Redeemable noncontrolling interests | $ | — | $ | — | $ | — | $ | — | $ | 3 | $ | — | ||||||||||||
Shareholders’ equity: | ||||||||||||||||||||||||
Common stock | $ | 89 | $ | 89 | $ | 89 | $ | 89 | $ | 88 | $ | 88 | ||||||||||||
Capital surplus | 1,245 | 1,231 | 1,220 | 1,205 | 1,181 | 1,167 | ||||||||||||||||||
Retained earnings | 3,588 | 3,800 | 3,628 | 3,584 | 3,248 | 3,435 | ||||||||||||||||||
Unrealized gains - equities | — | — | — | — | 221 | 173 | ||||||||||||||||||
Unrealized gains - fixed maturities | 83 | 93 | 191 | 342 | 619 | 533 | ||||||||||||||||||
Unrealized gains (losses) - fixed maturity-related cash flow hedges | (11 | ) | (32 | ) | (27 | ) | (24 | ) | (13 | ) | (6 | ) | ||||||||||||
Other comprehensive income, net of tax | (24 | ) | (17 | ) | (17 | ) | (13 | ) | (14 | ) | (11 | ) | ||||||||||||
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|
| |||||||||||||
Total shareholders’ equity | 4,970 | 5,164 | 5,084 | 5,183 | 5,330 | 5,379 | ||||||||||||||||||
Noncontrolling interests | 2 | — | — | — | 1 | — | ||||||||||||||||||
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|
| |||||||||||||
Total liabilities and equity | $ | 63,456 | $ | 64,190 | $ | 61,834 | $ | 60,656 | $ | 60,658 | $ | 60,163 | ||||||||||||
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Page 20
American Financial Group, Inc. Book Value Per Share and Price / Book Summary (in millions, except per share information) |
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 09/30/17 | |||||||||||||||||||
Shareholders’ equity | $ | 4,970 | $ | 5,164 | $ | 5,084 | $ | 5,183 | $ | 5,330 | $ | 5,379 | ||||||||||||
Unrealized (gains) related to fixed maturities | (72 | ) | (61 | ) | (164 | ) | (318 | ) | (606 | ) | (527 | ) | ||||||||||||
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Adjusted shareholders’ equity | 4,898 | 5,103 | 4,920 | 4,865 | 4,724 | 4,852 | ||||||||||||||||||
Goodwill | (207 | ) | (199 | ) | (199 | ) | (199 | ) | (199 | ) | (199 | ) | ||||||||||||
Intangibles | (54 | ) | (31 | ) | (34 | ) | (36 | ) | (26 | ) | (29 | ) | ||||||||||||
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Tangible adjusted shareholders’ equity | $ | 4,637 | $ | 4,873 | $ | 4,687 | $ | 4,630 | $ | 4,499 | $ | 4,624 | ||||||||||||
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| |||||||||||||
Common shares outstanding | 89.292 | 89.189 | 89.072 | 88.881 | 88.275 | 88.093 | ||||||||||||||||||
Book value per share: | ||||||||||||||||||||||||
Book value per share | $ | 55.66 | $ | 57.90 | $ | 57.08 | $ | 58.32 | $ | 60.38 | $ | 61.06 | ||||||||||||
Adjusted (a) | 54.86 | 57.22 | 55.24 | 54.74 | 53.51 | 55.08 | ||||||||||||||||||
Tangible, adjusted (b) | 51.93 | 54.64 | 52.63 | 52.10 | 50.95 | 52.50 | ||||||||||||||||||
Market capitalization | ||||||||||||||||||||||||
AFG’s closing common share price | $ | 90.53 | $ | 110.97 | $ | 107.33 | $ | 112.22 | $ | 108.54 | $ | 103.45 | ||||||||||||
Market capitalization | $ | 8,084 | $ | 9,897 | $ | 9,560 | $ | 9,974 | $ | 9,581 | $ | 9,113 | ||||||||||||
Price / Adjusted book value ratio | 1.65 | 1.94 | 1.94 | 2.05 | 2.03 | 1.88 |
(a) | Excludes unrealized gains related to fixed maturity investments. |
(b) | Excludes unrealized gains related to fixed maturity investments, goodwill and intangibles. |
Page 21
American Financial Group, Inc. Capitalization ($ in millions) |
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 09/30/17 | |||||||||||||||||||
AFG senior obligations | $ | 1,018 | $ | 1,018 | $ | 1,018 | $ | 1,018 | $ | 1,018 | $ | 1,003 | ||||||||||||
Borrowings drawn under credit facility | — | — | — | — | — | — | ||||||||||||||||||
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Debt excluding subordinated debt | $ | 1,018 | $ | 1,018 | $ | 1,018 | $ | 1,018 | $ | 1,018 | $ | 1,003 | ||||||||||||
AFG subordinated debentures | 300 | 300 | 300 | 300 | 300 | 300 | ||||||||||||||||||
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Total principal amount of long-term debt | $ | 1,318 | $ | 1,318 | $ | 1,318 | $ | 1,318 | $ | 1,318 | $ | 1,303 | ||||||||||||
Shareholders’ equity | 4,970 | 5,164 | 5,084 | 5,183 | 5,330 | 5,379 | ||||||||||||||||||
Noncontrolling interests (including redeemable NCI) | 2 | — | — | — | 4 | — | ||||||||||||||||||
Less: | ||||||||||||||||||||||||
Unrealized (gains) related to fixed maturity investments | (72 | ) | (61 | ) | (164 | ) | (318 | ) | (606 | ) | (527 | ) | ||||||||||||
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| |||||||||||||
Total adjusted capital | $ | 6,218 | $ | 6,421 | $ | 6,238 | $ | 6,183 | $ | 6,046 | $ | 6,155 | ||||||||||||
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| |||||||||||||
Ratio of debt to total adjusted capital: | ||||||||||||||||||||||||
Including subordinated debt | 21.2 | % | 20.5 | % | 21.1 | % | 21.3 | % | 21.8 | % | 21.2 | % | ||||||||||||
Excluding subordinated debt | 16.4 | % | 15.9 | % | 16.3 | % | 16.5 | % | 16.8 | % | 16.3 | % |
Page 22
American Financial Group, Inc. Additional Supplemental Information ($ in millions) |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 12/31/18 | 12/31/17 | ||||||||||||||||||||||
Property and Casualty Insurance | ||||||||||||||||||||||||||||
Paid Losses (GAAP) | $ | 719 | $ | 614 | $ | 629 | $ | 640 | $ | 726 | $ | 2,602 | $ | 2,528 |
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 09/30/17 | |||||||||||||||||||
Statutory Surplus | ||||||||||||||||||||||||
Property and Casualty Insurance | $ | 2,867 | $ | 2,885 | $ | 2,797 | $ | 2,781 | $ | 2,729 | $ | 2,817 | ||||||||||||
AFG’s principal annuity subsidiaries (total adjusted capital) | $ | 3,015 | $ | 2,703 | $ | 2,511 | $ | 2,442 | $ | 2,442 | $ | 2,433 | ||||||||||||
Allowable dividends without regulatory approval | ||||||||||||||||||||||||
Property and Casualty Insurance | $ | 529 | $ | 563 | $ | 563 | $ | 563 | $ | 563 | $ | 496 | ||||||||||||
Annuity andRun-off (a) | 263 | 263 | 263 | 263 | 263 | 197 | ||||||||||||||||||
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| |||||||||||||
Total | $ | 792 | $ | 826 | $ | 826 | $ | 826 | $ | 826 | $ | 693 | ||||||||||||
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(a) | The amount in the 12/31/18 column represents the 9/30/18 amount. Theyear-end 2018 amount will be finalized in February 2019. |
Page 23
American Financial Group, Inc. Total Cash and Investments ($ in millions) |
Carrying Value - December 31, 2018 | ||||||||||||||||||||||||
Property and Casualty Insurance | Annuity and Run-off | Parent and Other Non- Insurance | Consolidate CLOs | Total AFG Consolidated | % of Investment Portfolio | |||||||||||||||||||
Total cash and investments: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 1,007 | $ | 339 | $ | 169 | $ | — | $ | 1,515 | 3 | % | ||||||||||||
Fixed maturities - Available for sale | 7,853 | 34,132 | 12 | — | 41,997 | 87 | % | |||||||||||||||||
Fixed maturities - Trading | 50 | 55 | — | — | 105 | 0 | % | |||||||||||||||||
Equity securities | 1,017 | 744 | 53 | — | 1,814 | 4 | % | |||||||||||||||||
Investments accounted for using the equity method | 557 | 817 | — | — | 1,374 | 3 | % | |||||||||||||||||
Mortgage loans | 289 | 779 | — | — | 1,068 | 2 | % | |||||||||||||||||
Policy loans | — | 174 | — | — | 174 | 0 | % | |||||||||||||||||
Equity index call options | — | 184 | — | — | 184 | 0 | % | |||||||||||||||||
Real estate and other investments | 134 | 276 | 44 | (187 | ) | 267 | 1 | % | ||||||||||||||||
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| |||||||||||||
Total cash and investments | $ | 10,907 | $ | 37,500 | $ | 278 | $ | (187 | ) | $ | 48,498 | 100 | % | |||||||||||
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| |||||||||||||
Carrying Value - December 31, 2017 | ||||||||||||||||||||||||
Property and Casualty Insurance | Annuity and Run-off | Parent and OtherNon- Insurance | Consolidate CLOs | Total AFG Consolidated | % of Investment Portfolio | |||||||||||||||||||
Total cash and investments: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 1,398 | $ | 625 | $ | 315 | $ | — | $ | 2,338 | 5 | % | ||||||||||||
Fixed maturities - Available for sale | 7,142 | 31,223 | 14 | — | 38,379 | 83 | % | |||||||||||||||||
Fixed maturities - Trading | 232 | 116 | — | — | 348 | 1 | % | |||||||||||||||||
Equity securities | 1,012 | 594 | 56 | — | 1,662 | 4 | % | |||||||||||||||||
Investments accounted for using the equity method | 404 | 595 | — | — | 999 | 2 | % | |||||||||||||||||
Mortgage loans | 308 | 817 | — | — | 1,125 | 2 | % | |||||||||||||||||
Policy loans | — | 184 | — | — | 184 | 0 | % | |||||||||||||||||
Equity index call options | — | 701 | — | — | 701 | 2 | % | |||||||||||||||||
Real estate and other investments | 158 | 311 | 57 | (214 | ) | 312 | 1 | % | ||||||||||||||||
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|
|
|
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|
| |||||||||||||
Total cash and investments | $ | 10,654 | $ | 35,166 | $ | 442 | $ | (214 | ) | $ | 46,048 | 100 | % | |||||||||||
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|
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| |||||||||||||
Unrealized gain/(loss) on equity securities | $ | 165 | $ | 114 | $ | — | $ | — | $ | 279 | ||||||||||||||
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Note: On January 1, 2018, AFG adopted Accounting Standards Update (“ASU”)2016-01, which requires all equity securities other than those accounted for under the equity method to be reported at fair value with holding gains and losses recognized in net earnings.
Page 24
American Financial Group, Inc. Net Investment Income ($ in millions) |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 12/31/18 | 12/31/17 | ||||||||||||||||||||||
Property and Casualty Insurance: | ||||||||||||||||||||||||||||
Gross Investment Income | ||||||||||||||||||||||||||||
Fixed maturities - Available for sale | $ | 74 | $ | 72 | $ | 72 | $ | 66 | $ | 65 | $ | 284 | $ | 258 | ||||||||||||||
Fixed maturities - Trading | 1 | — | 2 | — | — | 3 | 3 | |||||||||||||||||||||
Equity securities - dividends | 11 | 13 | 11 | 13 | 13 | 48 | 51 | |||||||||||||||||||||
Equity securities - MTM | 9 | (1 | ) | 5 | — | — | 13 | — | ||||||||||||||||||||
Equity in investees | 14 | 16 | 18 | 17 | 4 | 65 | 27 | |||||||||||||||||||||
AFG managed CLOs | (1 | ) | 1 | 1 | 1 | 2 | 2 | 7 | ||||||||||||||||||||
Other investments (a) | 10 | 9 | 8 | 5 | 6 | 32 | 26 | |||||||||||||||||||||
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|
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| |||||||||||||||
Gross investment income | 118 | 110 | 117 | 102 | 90 | 447 | 372 | |||||||||||||||||||||
Investment expenses | (3 | ) | (2 | ) | (2 | ) | (2 | ) | (4 | ) | (9 | ) | (10 | ) | ||||||||||||||
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|
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| |||||||||||||||
Total net investment income | $ | 115 | $ | 108 | $ | 115 | $ | 100 | $ | 86 | $ | 438 | $ | 362 | ||||||||||||||
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|
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| |||||||||||||||
Average cash and investments (b) | $ | 10,651 | $ | 10,388 | $ | 10,346 | $ | 10,422 | $ | 10,062 | $ | 10,497 | $ | 9,948 | ||||||||||||||
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|
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| |||||||||||||||
Average yield (c) | 4.32 | % | 4.16 | % | 4.45 | % | 3.84 | % | 3.42 | % | 4.17 | % | 3.64 | % | ||||||||||||||
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| |||||||||||||||
Fixed Annuity | ||||||||||||||||||||||||||||
Gross Investment Income | ||||||||||||||||||||||||||||
Fixed maturities - Available for sale | $ | 376 | $ | 361 | $ | 350 | $ | 338 | $ | 342 | $ | 1,425 | $ | 1,314 | ||||||||||||||
Equity securities - dividends | 9 | 6 | 7 | 8 | 7 | 30 | 22 | |||||||||||||||||||||
Equity securities - MTM | 2 | — | 11 | — | — | 13 | — | |||||||||||||||||||||
Equity in investees | 19 | 25 | 23 | 29 | 9 | 96 | 37 | |||||||||||||||||||||
AFG managed CLOs | (3 | ) | 3 | 3 | 2 | 5 | 5 | 16 | ||||||||||||||||||||
Other investments (a) | 18 | 19 | 19 | 17 | 14 | 73 | 70 | |||||||||||||||||||||
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|
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| |||||||||||||||
Gross investment income | 421 | 414 | 413 | 394 | 377 | 1,642 | 1,459 | |||||||||||||||||||||
Investment expenses | (4 | ) | (3 | ) | (3 | ) | (3 | ) | (4 | ) | (13 | ) | (11 | ) | ||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total net investment income | $ | 417 | $ | 411 | $ | 410 | $ | 391 | $ | 373 | $ | 1,629 | $ | 1,448 | ||||||||||||||
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|
|
|
|
|
|
|
|
|
| |||||||||||||||
Average cash and investments (b) | $ | 35,993 | $ | 34,955 | $ | 33,935 | $ | 33,002 | $ | 32,245 | $ | 34,471 | $ | 31,250 | ||||||||||||||
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|
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| |||||||||||||||
Average yield (c) | 4.64 | % | 4.70 | % | 4.83 | % | 4.74 | % | 4.62 | % | 4.73 | % | 4.63 | % | ||||||||||||||
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| |||||||||||||||
AFG consolidated net investment income: | ||||||||||||||||||||||||||||
Property & Casualty | $ | 115 | $ | 108 | $ | 115 | $ | 100 | $ | 86 | $ | 438 | $ | 362 | ||||||||||||||
Annuity: | ||||||||||||||||||||||||||||
Fixed Annuity | 417 | 411 | 410 | 391 | 373 | 1,629 | 1,448 | |||||||||||||||||||||
Variable Annuity | 2 | 2 | 2 | 3 | 3 | 9 | 10 | |||||||||||||||||||||
Parent & other | 4 | 10 | 7 | 4 | 10 | 25 | 34 | |||||||||||||||||||||
Consolidate CLOs | 4 | (4 | ) | (4 | ) | (3 | ) | (7 | ) | (7 | ) | (23 | ) | |||||||||||||||
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|
|
|
|
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| |||||||||||||||
Total net investment income | $ | 542 | $ | 527 | $ | 530 | $ | 495 | $ | 465 | $ | 2,094 | $ | 1,831 | ||||||||||||||
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(a) | Includes income from mortgage loans, real estate, policy loans, short-term investments, and cash equivalents. |
(b) | Average cash and investments is the average of the beginning and ending quarter balances, or the average of the five quarters balances. |
(c) | Average yield is calculated by dividing investment income for the quarter by the average cash and investment balance over the quarter. |
Page 25
American Financial Group, Inc. InvestmentsMarked-to-Market Through Investment Income and Investments Accounted For Using the Equity Method ($ in millions) |
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||
12/31/18 | 9/30/18 | 6/30/18 | 3/31/18 | 12/31/17 | 12/31/18 | 12/31/17 | ||||||||||||||||||||||
Property and Casualty Insurance: | ||||||||||||||||||||||||||||
Net Investment Income | ||||||||||||||||||||||||||||
Equity securities MTM through investment income (a) | $ | 9 | $ | (1 | ) | $ | 5 | $ | — | $ | — | $ | 13 | $ | — | |||||||||||||
Investments accounted for using the equity method (b) | 14 | 16 | 18 | 17 | 4 | 65 | 27 | |||||||||||||||||||||
AFG managed CLOs (eliminated in consolidation) | (1 | ) | 1 | 1 | 1 | 2 | 2 | 7 | ||||||||||||||||||||
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| |||||||||||||||
Total Property & Casualty | $ | 22 | $ | 16 | $ | 24 | $ | 18 | $ | 6 | $ | 80 | $ | 34 | ||||||||||||||
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| |||||||||||||||
Investments | ||||||||||||||||||||||||||||
Equity securities MTM through investment income (a) | $ | 50 | $ | 40 | $ | 40 | $ | 31 | $ | 27 | $ | 50 | $ | 27 | ||||||||||||||
Investments accounted for using the equity method (b) | 557 | 520 | 475 | 440 | 402 | 557 | 402 | |||||||||||||||||||||
AFG managed CLOs (eliminated in consolidation) | 56 | 57 | 57 | 66 | 64 | 56 | 64 | |||||||||||||||||||||
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|
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| |||||||||||||||
Total Property & Casualty | $ | 663 | $ | 617 | $ | 572 | $ | 537 | $ | 493 | $ | 663 | $ | 493 | ||||||||||||||
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| |||||||||||||||
Annualized Yield - Property & Casualty | 13.8 | % | 10.8 | % | 17.3 | % | 14.0 | % | 4.1 | % | 13.9 | % | 7.9 | % | ||||||||||||||
Fixed Annuity: | ||||||||||||||||||||||||||||
Net Investment Income | ||||||||||||||||||||||||||||
Equity securities MTM through investment income (a) | $ | 2 | $ | — | $ | 11 | $ | — | $ | — | $ | 13 | $ | — | ||||||||||||||
Investments accounted for using the equity method (b) | 19 | 25 | 23 | 29 | 9 | 96 | 37 | |||||||||||||||||||||
AFG managed CLOs (eliminated in consolidation) | (3 | ) | 3 | 3 | 2 | 5 | 5 | 16 | ||||||||||||||||||||
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|
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| |||||||||||||||
Total Fixed Annuity | $ | 18 | $ | 28 | $ | 37 | $ | 31 | $ | 14 | $ | 114 | $ | 53 | ||||||||||||||
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|
|
|
|
|
| |||||||||||||||
Investments | ||||||||||||||||||||||||||||
Equity securities MTM through investment income (a) | $ | 84 | $ | 79 | $ | 79 | $ | 57 | $ | 49 | $ | 84 | $ | 49 | ||||||||||||||
Investments accounted for using the equity method (b) | 817 | 769 | 719 | 657 | 590 | 817 | 590 | |||||||||||||||||||||
AFG managed CLOs (eliminated in consolidation) | 132 | 134 | 135 | 155 | 151 | 132 | 151 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total Fixed Annuity | $ | 1,033 | $ | 982 | $ | 933 | $ | 869 | $ | 790 | $ | 1,033 | $ | 790 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Annualized Yield - Fixed Annuity | 7.1 | % | 11.7 | % | 16.4 | % | 14.9 | % | 7.6 | % | 12.4 | % | 8.2 | % | ||||||||||||||
Combined (includes Parent amounts not shown above): |
| |||||||||||||||||||||||||||
Net Investment Income | ||||||||||||||||||||||||||||
Equity securities MTM through investment income (a) | $ | 6 | $ | 1 | $ | 16 | $ | (1 | ) | $ | 2 | $ | 22 | $ | 7 | |||||||||||||
Investments accounted for using the equity method (b) | 33 | 41 | 41 | 46 | 13 | 161 | 64 | |||||||||||||||||||||
AFG managed CLOs (eliminated in consolidation) | (4 | ) | 4 | 4 | 3 | 7 | 7 | 23 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total Combined (including Parent) | $ | 35 | $ | 46 | $ | 61 | $ | 48 | $ | 22 | $ | 190 | $ | 94 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Investments | ||||||||||||||||||||||||||||
Equity securities MTM through investment income (a) | $ | 187 | $ | 176 | $ | 173 | $ | 142 | $ | 132 | $ | 187 | $ | 132 | ||||||||||||||
Investments accounted for using the equity method (b) | 1,374 | 1,289 | 1,194 | 1,097 | 992 | 1,374 | 992 | |||||||||||||||||||||
AFG managed CLOs (eliminated in consolidation) | 188 | 191 | 192 | 221 | 215 | 188 | 215 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total Combined (including Parent) | $ | 1,749 | $ | 1,656 | $ | 1,559 | $ | 1,460 | $ | 1,339 | $ | 1,749 | $ | 1,339 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Annualized Yield - Combined | 8.2 | % | 11.4 | % | 16.2 | % | 13.7 | % | 5.7 | % | 12.2 | % | 8.3 | % |
(a) | AFG carries the small portion of its equity securities previously classified as “trading” and investments in limited partnerships and similar investments that aren’t accounted for using the equity method at fair value through net investment income. |
(b) | The majority of AFG’s investments accounted for using the equity method mark their underlying assets to market through net income. |
Page 26
American Financial Group, Inc. Fixed Maturities - By Security Type - AFG Consolidated ($ in millions ) |
December 31, 2018 | Amortized Cost | Fair Value | Unrealized Gain (Loss) | % of Fair Value | % of Investment Portfolio | |||||||||||||||
US Government and government agencies | $ | 245 | $ | 243 | $ | (2 | ) | 1 | % | 1 | % | |||||||||
States, municipalities and political subdivisions | 6,850 | 6,964 | 114 | 17 | % | 14 | % | |||||||||||||
Foreign government | 166 | 168 | 2 | 0 | % | 0 | % | |||||||||||||
Residential mortgage-backed securities | 2,478 | 2,746 | 268 | 7 | % | 6 | % | |||||||||||||
Commercial mortgage-backed securities | 905 | 920 | 15 | 2 | % | 2 | % | |||||||||||||
Asset-backed securities | 9,781 | 9,811 | 30 | 23 | % | 20 | % | |||||||||||||
Corporate and other bonds | 21,517 | 21,250 | (267 | ) | 50 | % | 44 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total AFG consolidated | $ | 41,942 | $ | 42,102 | $ | 160 | 100 | % | 87 | % | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Annualized yield on available for sale fixed maturities: |
| |||||||||||||||||||
Excluding investment expense (a) | 4.47 | % | ||||||||||||||||||
Net of investment expense (a) | 4.42 | % | ||||||||||||||||||
Approximate average life and duration: | ||||||||||||||||||||
Approximate average life | 6 years | |||||||||||||||||||
Approximate duration | 4.5 years | |||||||||||||||||||
December 31, 2017 | Amortized Cost | Fair Value | Unrealized Gain (Loss) | % of Fair Value | % of Investment Portfolio | |||||||||||||||
US Government and government agencies | $ | 293 | $ | 291 | $ | (2 | ) | 1 | % | 1 | % | |||||||||
States, municipalities and political subdivisions | 6,912 | 7,148 | 236 | 18 | % | 15 | % | |||||||||||||
Foreign government | 239 | 242 | 3 | 1 | % | 1 | % | |||||||||||||
Residential mortgage-backed securities | 2,887 | 3,230 | 343 | 8 | % | 7 | % | |||||||||||||
Commercial mortgage-backed securities | 928 | 963 | 35 | 2 | % | 2 | % | |||||||||||||
Asset-backed securities | 7,836 | 7,962 | 126 | 21 | % | 17 | % | |||||||||||||
Corporate and other bonds | 18,291 | 18,891 | 600 | 49 | % | 41 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total AFG consolidated | $ | 37,386 | $ | 38,727 | $ | 1,341 | 100 | % | 84 | % | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Annualized yield on available for sale fixed maturities: |
| |||||||||||||||||||
Excluding investment expense (a) | 4.51 | % | ||||||||||||||||||
Net of investment expense (a) | 4.43 | % | ||||||||||||||||||
Approximate average life and duration: | ||||||||||||||||||||
Approximate average life | 6.5 years | |||||||||||||||||||
Approximate duration | 5 years |
(a) | Annualized yield is calculated by dividing investment income for the quarter by the average cost over the quarter. Average cost is the average of the beginning and ending quarter asset balances. |
Page 27
American Financial Group, Inc. Fixed Maturities - By Security Type Portfolio ($ in millions) |
December 31, 2018 | December 31, 2017 | |||||||||||||||||||||||||||||||
Amortized Cost | Fair Value | Unrealized Gain (Loss) | % of Fair Value | Amortized Cost | Fair Value | Unrealized Gain (Loss) | % of Fair Value | |||||||||||||||||||||||||
Property and Casualty Insurance: | ||||||||||||||||||||||||||||||||
US Government and government agencies | $ | 203 | $ | 202 | (1 | ) | 3 | % | $ | 244 | $ | 243 | $ | (1 | ) | 3 | % | |||||||||||||||
States, municipalities and political subdivisions | 2,630 | 2,642 | 12 | 33 | % | 2,740 | 2,798 | 58 | 38 | % | ||||||||||||||||||||||
Foreign government | 155 | 156 | 1 | 2 | % | 228 | 229 | 1 | 3 | % | ||||||||||||||||||||||
Residential mortgage-backed securities | 725 | 784 | 59 | 10 | % | 843 | 918 | 75 | 13 | % | ||||||||||||||||||||||
Commercial mortgage-backed securities | 83 | 84 | 1 | 1 | % | 93 | 95 | 2 | 1 | % | ||||||||||||||||||||||
Asset-backed securities | 2,275 | 2,259 | (16 | ) | 29 | % | 1,716 | 1,724 | 8 | 23 | % | |||||||||||||||||||||
Corporate and other bonds | 1,792 | 1,776 | (16 | ) | 22 | % | 1,349 | 1,367 | 18 | 19 | % | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Property and Casualty Insurance | $ | 7,863 | $ | 7,903 | $ | 40 | 100 | % | $ | 7,213 | $ | 7,374 | $ | 161 | 100 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Annualized yield on available for sale fixed maturities: | ||||||||||||||||||||||||||||||||
Excluding investment expense (a) | 3.91 | % | 3.73 | % | ||||||||||||||||||||||||||||
Net of investment expense (a) | 3.81 | % | 3.54 | % | ||||||||||||||||||||||||||||
Tax equivalent, net of investment expense (b) | 3.99 | % | 4.03 | % | ||||||||||||||||||||||||||||
Approximate average life and duration: | �� | |||||||||||||||||||||||||||||||
Approximate average life | 4.5 years | 5 years | ||||||||||||||||||||||||||||||
Approximate duration | 3.5 years | 4 years |
December 31, 2018 | December 31, 2017 | |||||||||||||||||||||||||||||||
Amortized Cost | Fair Value | Unrealized Gain (Loss) | % of Fair Value | Amortized Cost | Fair Value | Unrealized Gain (Loss) | % of Fair Value | |||||||||||||||||||||||||
Annuity andRun-off: | ||||||||||||||||||||||||||||||||
US Government and government agencies | $ | 42 | $ | 41 | $ | (1 | ) | 0 | % | $ | 48 | $ | 47 | $ | (1 | ) | 0 | % | ||||||||||||||
States, municipalities and political subdivisions | 4,220 | 4,322 | 102 | 13 | % | 4,172 | 4,350 | 178 | 14 | % | ||||||||||||||||||||||
Foreign government | 11 | 12 | 1 | 0 | % | 11 | 13 | 2 | 0 | % | ||||||||||||||||||||||
Residential mortgage-backed securities | 1,750 | 1,950 | 200 | 6 | % | 2,041 | 2,299 | 258 | 7 | % | ||||||||||||||||||||||
Commercial mortgage-backed securities | 822 | 836 | 14 | 2 | % | 835 | 868 | 33 | 3 | % | ||||||||||||||||||||||
Asset-backed securities | 7,506 | 7,552 | 46 | 22 | % | 6,120 | 6,238 | 118 | 20 | % | ||||||||||||||||||||||
Corporate and other bonds | 19,725 | 19,474 | (251 | ) | 57 | % | 16,942 | 17,524 | 582 | 56 | % | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total Annuity andRun-off | $ | 34,076 | $ | 34,187 | $ | 111 | 100 | % | $ | 30,169 | $ | 31,339 | $ | 1,170 | 100 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Annualized yield on available for sale fixed maturities: | ||||||||||||||||||||||||||||||||
Excluding investment expense (a) | 4.59 | % | 4.66 | % | ||||||||||||||||||||||||||||
Net of investment expense (a) | 4.55 | % | 4.61 | % | ||||||||||||||||||||||||||||
Approximate average life and duration: | ||||||||||||||||||||||||||||||||
Approximate average life | 6.5 years | 6.5 years | ||||||||||||||||||||||||||||||
Approximate duration | 4.5 years | 5 years |
(a) | Annualized yield is calculated by dividing investment income for the quarter by the average cost over the quarter. Average cost is the average of the beginning and ending quarter asset balances. |
(b) | Adjusts the yield ontax-exempt bonds to the fully taxable equivalent yield. |
Page 28
American Financial Group, Inc. Fixed Maturities - Credit Rating ($ in millions) |
December 31, 2018 | ||||||||||||||||
By Credit Rating (a) | Amortized Cost | Fair Value | Unrealized Gain (Loss) | % of Fair Value | ||||||||||||
Investment grade | ||||||||||||||||
AAA | $ | 7,367 | $ | 7,359 | $ | (8 | ) | 17 | % | |||||||
AA | 8,714 | 8,831 | 117 | 21 | % | |||||||||||
A | 10,006 | 9,989 | (17 | ) | 24 | % | ||||||||||
BBB | 12,206 | 12,053 | (153 | ) | 29 | % | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal - Investment grade | 38,293 | 38,232 | (61 | ) | 91 | % | ||||||||||
BB | 703 | 685 | (18 | ) | 2 | % | ||||||||||
B | 261 | 254 | (7 | ) | 0 | % | ||||||||||
Other (b) | 2,685 | 2,931 | 246 | 7 | % | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal -Non-Investment grade | 3,649 | 3,870 | 221 | 9 | % | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 41,942 | $ | 42,102 | $ | 160 | 100 | % | ||||||||
|
|
|
|
|
|
|
|
98% of the fixed maturity portfolio is NAIC designated 1 or 2.
December 31, 2017 | ||||||||||||||||
By Credit Rating (a) | Amortized Cost | Fair Value | Unrealized Gain (Loss) | % of Fair Value | ||||||||||||
Investment grade | ||||||||||||||||
AAA | $ | 6,253 | $ | 6,356 | $ | 103 | 16 | % | ||||||||
AA | 8,150 | 8,411 | 261 | 22 | % | |||||||||||
A | 9,149 | 9,447 | 298 | 25 | % | |||||||||||
BBB | 10,146 | 10,496 | 350 | 27 | % | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal - Investment grade | 33,698 | 34,710 | 1,012 | 90 | % | |||||||||||
BB | 725 | 739 | 14 | 2 | % | |||||||||||
B | 324 | 328 | 4 | 1 | % | |||||||||||
Other (b) | 2,639 | 2,950 | 311 | 7 | % | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal -Non-Investment grade | 3,688 | 4,017 | 329 | 10 | % | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 37,386 | $ | 38,727 | $ | 1,341 | 100 | % | ||||||||
|
|
|
|
|
|
|
|
98% of the fixed maturity portfolio is NAIC designated 1 or 2.
(a) | If two agencies rate a security, the rating displayed above is the lower of the two; if three or more agencies rate a security, the rating displayed is the second lowest. |
(b) | See page 32 for more information. |
Page 29
American Financial Group, Inc. Mortgage-Backed Securities - AFG Consolidated ($ in millions) |
December 31, 2018 | Amortized Cost | Fair Value | Unrealized Gain (Loss) | % of Fair Value | % of Investment Portfolio | |||||||||||||||
Residential | ||||||||||||||||||||
Agency | $ | 170 | $ | 168 | $ | (2 | ) | 5 | % | 1 | % | |||||||||
Prime(Non-Agency) | 967 | 1,098 | 131 | 30 | % | 2 | % | |||||||||||||
Alt-A | 972 | 1,074 | 102 | 29 | % | 2 | % | |||||||||||||
Subprime | 369 | 406 | 37 | 11 | % | 1 | % | |||||||||||||
Commercial | 905 | 920 | 15 | 25 | % | 2 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total AFG consolidated | $ | 3,383 | $ | 3,666 | $ | 283 | 100 | % | 8 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
• | Substantially all of AFG’s MBS securities are either senior tranches of securitizations or collateralized by senior tranches of securitizations. |
• | The average amortized cost as a percent of par is - Prime 81%;Alt-A 80%; Subprime 83%; CMBS 99%. |
• | The average FICO score of our residential MBS securities is - Prime 734;Alt-A 698; Subprime 631. |
• | 94% of our Commercial MBS portfolio is investment-grade rated (82% AAA) and the average subordination for this group of assets is 33.5%. |
• | The approximate average life by collateral type is - Residential 4.5 years; Commercial 4.5 years. |
December 31, 2017 | Amortized Cost | Fair Value | Unrealized Gain (Loss) | % of Fair Value | % of Investment Portfolio | |||||||||||||||
Residential | ||||||||||||||||||||
Agency | $ | 207 | $ | 205 | $ | (2 | ) | 5 | % | 0 | % | |||||||||
Prime(Non-Agency) | 1,218 | 1,386 | 168 | 33 | % | 3 | % | |||||||||||||
Alt-A | 994 | 1,122 | 128 | 27 | % | 3 | % | |||||||||||||
Subprime | 468 | 517 | 49 | 12 | % | 1 | % | |||||||||||||
Commercial | 928 | 963 | 35 | 23 | % | 2 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total AFG consolidated | $ | 3,815 | $ | 4,193 | $ | 378 | 100 | % | 9 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
Page 30
American Financial Group, Inc. Mortgage-Backed Securities Portfolio ($ in millions) |
Property and Casualty Insurance:
December 31, 2018 | ||||||||||||||||||||
Amortized | Unrealized | % of | % of Inv | |||||||||||||||||
By Asset Type | Cost | Fair Value | Gain (Loss) | Fair Value | Portfolio | |||||||||||||||
Residential | ||||||||||||||||||||
Agency | $ | 137 | $ | 134 | $ | (3 | ) | 15 | % | 1 | % | |||||||||
Prime(Non-Agency) | 138 | 155 | 17 | 18 | % | 1 | % | |||||||||||||
Alt-A | 289 | 319 | 30 | 37 | % | 3 | % | |||||||||||||
Subprime | 161 | 176 | 15 | 20 | % | 2 | % | |||||||||||||
Commercial | 83 | 84 | 1 | 10 | % | 1 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 808 | $ | 868 | $ | 60 | 100 | % | 8 | % | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
December 31, 2017 | ||||||||||||||||||||
Amortized | Unrealized | % of | % of Inv | |||||||||||||||||
By Asset Type | Cost | Fair Value | Gain (Loss) | Fair Value | Portfolio | |||||||||||||||
Residential | ||||||||||||||||||||
Agency | $ | 166 | $ | 163 | $ | (3 | ) | 16 | % | 2 | % | |||||||||
Prime(Non-Agency) | 174 | 195 | 21 | 19 | % | 2 | % | |||||||||||||
Alt-A | 301 | 339 | 38 | 34 | % | 3 | % | |||||||||||||
Subprime | 202 | 221 | 19 | 22 | % | 2 | % | |||||||||||||
Commercial | 93 | 95 | 2 | 9 | % | 1 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 936 | $ | 1,013 | $ | 77 | 100 | % | 10 | % | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Annuity andRun-off: | ||||||||||||||||||||
December 31, 2018 | ||||||||||||||||||||
Amortized | Unrealized | % of | % of Inv | |||||||||||||||||
By Asset Type | Cost | Fair Value | Gain (Loss) | Fair Value | Portfolio | |||||||||||||||
Residential | ||||||||||||||||||||
Agency | $ | 33 | $ | 34 | $ | 1 | 1 | % | 0 | % | ||||||||||
Prime(Non-Agency) | 826 | 931 | 105 | 34 | % | 2 | % | |||||||||||||
Alt-A | 683 | 755 | 72 | 27 | % | 2 | % | |||||||||||||
Subprime | 208 | 230 | 22 | 8 | % | 1 | % | |||||||||||||
Commercial | 822 | 836 | 14 | 30 | % | 2 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 2,572 | $ | 2,786 | $ | 214 | 100 | % | 7 | % | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
December 31, 2017 | ||||||||||||||||||||
Amortized | Unrealized | % of | % of Inv | |||||||||||||||||
By Asset Type | Cost | Fair Value | Gain (Loss) | Fair Value | Portfolio | |||||||||||||||
Residential | ||||||||||||||||||||
Agency | $ | 41 | $ | 42 | $ | 1 | 1 | % | 0 | % | ||||||||||
Prime(Non-Agency) | 1,041 | 1,178 | 137 | 37 | % | 4 | % | |||||||||||||
Alt-A | 693 | 783 | 90 | 25 | % | 2 | % | |||||||||||||
Subprime | 266 | 296 | 30 | 10 | % | 1 | % | |||||||||||||
Commercial | 835 | 868 | 33 | 27 | % | 2 | % | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 2,876 | $ | 3,167 | $ | 291 | 100 | % | 9 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
Page 31
American Financial Group, Inc. Mortgage-Backed Securities - Credit Rating ($ in millions) |
December 31, 2018 | ||||||||||||||||
Amortized | Unrealized | % of | ||||||||||||||
By Credit Rating (a) | Cost | Fair Value | Gain (Loss) | Fair Value | ||||||||||||
Investment grade | ||||||||||||||||
AAA | $ | 1,107 | $ | 1,119 | $ | 12 | 31 | % | ||||||||
AA | 143 | 147 | 4 | 4 | % | |||||||||||
A | 263 | 270 | 7 | 7 | % | |||||||||||
BBB | 232 | 243 | 11 | 7 | % | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal - investment grade | 1,745 | 1,779 | 34 | 49 | % | |||||||||||
BB | 128 | 131 | 3 | 3 | % | |||||||||||
B | 155 | 154 | (1 | ) | 4 | % | ||||||||||
Other (b) | 1,355 | 1,602 | 247 | 44 | % | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 3,383 | $ | 3,666 | $ | 283 | 100 | % | ||||||||
|
|
|
|
|
|
|
|
96% of the mortgage-backed security portfolio has an NAIC 1 designation.
December 31, 2017 | ||||||||||||||||
Amortized | Unrealized | % of | ||||||||||||||
By Credit Rating (a) | Cost | Fair Value | Gain (Loss) | Fair Value | ||||||||||||
Investment grade | ||||||||||||||||
AAA | $ | 1,209 | $ | 1,246 | $ | 37 | 30 | % | ||||||||
AA | 90 | 93 | 3 | 2 | % | |||||||||||
A | 225 | 239 | 14 | 6 | % | |||||||||||
BBB | 170 | 182 | 12 | 4 | % | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal - investment grade | 1,694 | 1,760 | 66 | 42 | % | |||||||||||
BB | 192 | 197 | 5 | 5 | % | |||||||||||
B | 224 | 230 | 6 | 5 | % | |||||||||||
Other (b) | 1,705 | 2,006 | 301 | 48 | % | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 3,815 | $ | 4,193 | $ | 378 | 100 | % | ||||||||
|
|
|
|
|
|
|
|
97% of the mortgage-backed security portfolio has an NAIC 1 designation.
(a) | If two agencies rate a security, the rating displayed above is the lower of the two; if three or more agencies rate a security, the rating displayed is the second lowest. |
(b) | See page 33 for more information. |
Page 32
Appendix A American Financial Group, Inc. Fixed Maturities - Credit Rating by Type ($ in millions) |
Fair Value - December 31, 2018 | ||||||||||||||||||||||||||||||||||||||||
By Credit Rating (a) | US Gov | Munis | Frgn Gov | RMBS | CMBS | ABS | Corp/Oth | Total | % Total | |||||||||||||||||||||||||||||||
Investment grade | ||||||||||||||||||||||||||||||||||||||||
AAA | $ | 213 | $ | 1,889 | $ | 98 | $ | 367 | $ | 752 | $ | 3,870 | $ | 170 | $ | 7,359 | 17 | % | ||||||||||||||||||||||
AA | 22 | 4,456 | 53 | 129 | 18 | 2,570 | 1,583 | 8,831 | 21 | % | ||||||||||||||||||||||||||||||
A | — | 448 | — | 248 | 22 | 2,086 | 7,185 | 9,989 | 24 | % | ||||||||||||||||||||||||||||||
BBB | — | 110 | — | 169 | 74 | 769 | 10,931 | 12,053 | 29 | % | ||||||||||||||||||||||||||||||
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Subtotal - Investment grade | 235 | 6,903 | 151 | 913 | 866 | 9,295 | 19,869 | 38,232 | 91 | % | ||||||||||||||||||||||||||||||
BB | — | — | — | 97 | 34 | 23 | 531 | 685 | 2 | % | ||||||||||||||||||||||||||||||
B | — | 8 | — | 151 | 3 | 4 | 88 | 254 | 0 | % | ||||||||||||||||||||||||||||||
CCC, CC, C | — | — | — | 670 | 5 | 2 | 12 | 689 | 2 | % | ||||||||||||||||||||||||||||||
D | — | 3 | — | 230 | — | — | 1 | 234 | 1 | % | ||||||||||||||||||||||||||||||
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Subtotal -Non-Investment grade | — | 11 | — | 1,148 | 42 | 29 | 632 | 1,862 | 5 | % | ||||||||||||||||||||||||||||||
Not Rated | 8 | 50 | 17 | 685 | 12 | 487 | 749 | 2,008 | 4 | % | ||||||||||||||||||||||||||||||
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Total | $ | 243 | $ | 6,964 | $ | 168 | $ | 2,746 | $ | 920 | $ | 9,811 | $ | 21,250 | $ | 42,102 | 100 | % | ||||||||||||||||||||||
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Fair Value - December 31, 2017 | ||||||||||||||||||||||||||||||||||||||||
By Credit Rating (a) | US Gov | Munis | Frgn Gov | RMBS | CMBS | ABS | Corp/Oth | Total | % Total | |||||||||||||||||||||||||||||||
Investment grade | ||||||||||||||||||||||||||||||||||||||||
AAA | $ | 250 | $ | 1,848 | $ | 168 | $ | 444 | $ | 802 | $ | 2,649 | $ | 195 | $ | 6,356 | 16 | % | ||||||||||||||||||||||
AA | 34 | 4,671 | 66 | 74 | 19 | 2,242 | 1,305 | 8,411 | 22 | % | ||||||||||||||||||||||||||||||
A | — | 494 | 3 | 216 | 23 | 1,835 | 6,876 | 9,447 | 25 | % | ||||||||||||||||||||||||||||||
BBB | — | 47 | — | 106 | 76 | 800 | 9,467 | 10,496 | 27 | % | ||||||||||||||||||||||||||||||
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Subtotal - Investment grade | 284 | 7,060 | 237 | 840 | 920 | 7,526 | 17,843 | 34,710 | 90 | % | ||||||||||||||||||||||||||||||
BB | — | 4 | 4 | 173 | 24 | 23 | 511 | 739 | 2 | % | ||||||||||||||||||||||||||||||
B | — | 7 | 1 | 226 | 4 | — | 90 | 328 | 1 | % | ||||||||||||||||||||||||||||||
CCC, CC, C | — | 1 | — | 902 | 3 | 3 | 26 | 935 | 2 | % | ||||||||||||||||||||||||||||||
D | — | 5 | — | 517 | — | — | — | 522 | 1 | % | ||||||||||||||||||||||||||||||
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Subtotal -Non-Investment grade | — | 17 | 5 | 1,818 | 31 | 26 | 627 | 2,524 | 6 | % | ||||||||||||||||||||||||||||||
Not Rated | 7 | 71 | — | 572 | 12 | 410 | 421 | 1,493 | 4 | % | ||||||||||||||||||||||||||||||
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Total | $ | 291 | $ | 7,148 | $ | 242 | $ | 3,230 | $ | 963 | $ | 7,962 | $ | 18,891 | $ | 38,727 | 100 | % | ||||||||||||||||||||||
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(a) | If two agencies rate a security, the rating displayed above is the lower of the two; if three or more agencies rate a security, the rating displayed is the second lowest. |
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