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Income Taxes | 9 Months Ended
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Sep. 30, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The following is a reconciliation of income taxes at the statutory rate (21% in 2018 and 35% in 2017) to the provision for income taxes as shown in AFG’s Statement of Earnings (dollars in millions):
| Three months ended September 30, |  | Nine months ended September 30,
| 2018 |  | 2017 |  | 2018 |  | 2017
| Amount |  | % of EBT |  | Amount |  | % of EBT |  | Amount |  | % of EBT |  | Amount |  | % of EBT
Earnings before income taxes (“EBT”) | $ | 244 |  |  |  |  | $ | 29 |  |  |  |  | $ | 678 |  |  |  |  | $ | 457 |  |  |
Income taxes at statutory rate | $ | 51 |  |  | 21 | % |  | $ | 10 |  |  | 35 | % |  | $ | 142 |  |  | 21 | % |  | $ | 160 |  |  | 35 | %
Effect of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Adjustment to prior year taxes | (9 | ) |  | (4 | %) |  | (2 | ) |  | (7 | %) |  | (9 | ) |  | (1 | %) |  | (2 | ) |  | (1 | %)
Tax exempt interest | (3 | ) |  | (1 | %) |  | (5 | ) |  | (17 | %) |  | (10 | ) |  | (1 | %) |  | (17 | ) |  | (4 | %)
Dividends received deduction | (1 | ) |  | — | % |  | (2 | ) |  | (7 | %) |  | (3 | ) |  | — | % |  | (6 | ) |  | (1 | %)
Employee Stock Ownership Plan dividends paid deduction | (1 | ) |  | — | % |  | — |  |  | — | % |  | (2 | ) |  | — | % |  | (2 | ) |  | — | %
Stock-based compensation | — |  |  | — | % |  | (1 | ) |  | (3 | %) |  | (7 | ) |  | (1 | %) |  | (14 | ) |  | (3 | %)
Foreign operations | — |  |  | — | % |  | 1 |  |  | 3 | % |  | 3 |  |  | — | % |  | 7 |  |  | 2 | %
Nondeductible expenses | 1 |  |  | — | % |  | 2 |  |  | 7 | % |  | 5 |  |  | 1 | % |  | 5 |  |  | 1 | %
Change in valuation allowance | 1 |  |  | — | % |  | 16 |  |  | 55 | % |  | 3 |  |  | — | % |  | 16 |  |  | 4 | %
Other | 2 |  |  | 1 | % |  | (1 | ) |  | (4 | %) |  | 4 |  |  | — | % |  | (1 | ) |  | (1 | %)
Provision for income taxes as shown in the statement of earnings | $ | 41 |  |  | 17 | % |  | $ | 18 |  |  | 62 | % |  | $ | 126 |  |  | 19 | % |  | $ | 146 |  |  | 32 | %
AFG’s effective tax rate for the three months ended September 30, 2017 reflects the impact of catastrophe losses in the Neon Lloyd’s insurance business for which no tax benefit is recognized. AFG maintains a full valuation allowance against the deferred tax benefits associated with losses related to Neon. Excluding the $53 million in catastrophe losses at Neon, AFG’s effective tax rate for the three months ended September 30, 2017 was 22%, which reflects the impact of a typical level of tax-favored investment income on lower earnings before income taxes. The favorable impact of stock-based compensation on AFG’s effective tax rate in the first nine months of 2018 and 2017 reflects the high volume of employee stock option exercises during that period and the increase in the market price of AFG Common Stock. The Tax Cuts and Jobs Act of 2017 (“TCJA”), which was enacted on December 22, 2017, lowered the U.S corporate tax rate to 21% and made other widespread changes to the U.S. tax code effective in 2018. Because the TCJA was enacted in December 2017, AFG recorded the $83 million decrease in its net deferred tax asset resulting from the changes in the tax code (primarily the lower corporate tax rate applicable to 2018 and future years) in the fourth quarter of 2017. The TCJA is subject to further clarification and interpretation by the U.S. Treasury Department and the Internal Revenue Service. For example, the TCJA changes the way that companies calculate their insurance claims and reserves for tax purposes, including revaluing those tax basis liabilities as of January 1, 2018, based on a methodology and discount factors that have not been published. The resulting transitional deferred tax liability (taxes payable over eight years under the TCJA) and offsetting increase in AFG’s insurance claims and reserves deferred tax assets, were recorded at December 31, 2017 using reasonable estimates based on available information and should be considered provisional in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 118 (“SAB 118”). Because the established transition liability was completely offset by an increase in related deferred tax assets, any adjustment to the provisional amount will not impact AFG’s effective tax rate. In accordance with SAB 118, the insurance claims and reserves transitional deferred tax liability (and offsetting adjustment to the related deferred tax assets) and any other changes in deferred taxes resulting from clarification and interpretation of the TCJA provided during 2018 will be recorded in the period in which the guidance is published (none through September 30, 2018). Approximately $19 million of AFG’s net operating loss carryforwards (“NOL”) subject to separate return limitation year (“SRLY”) tax rules will expire unutilized at December 31, 2018. Since AFG maintains a full valuation allowance against its SRLY NOLs, the expiration of these loss carryforwards will be offset by a corresponding reduction in the valuation allowance and will have no overall impact on AFG’s income tax expense or results of operations.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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