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Income Taxes (Tables) | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Reconciliation of income taxes at the statutory rate and income taxes shown in the Statement of Earnings | The following is a reconciliation of income taxes at the statutory rate (21% in 2018 and 35% in both 2017 and 2016) to the provision for income taxes as shown in AFG’s Statement of Earnings (dollars in millions):
| 2018 |  | 2017 |  | 2016
| Amount |  | % of EBT |  | Amount |  | % of EBT |  | Amount |  | % of EBT
Earnings before income taxes (“EBT”) | $ | 639 |  |  |  |  | $ | 724 |  |  |  |  | $ | 787 |  |  |
Income taxes at statutory rate | $ | 134 |  |  | 21 | % |  | $ | 253 |  |  | 35 | % |  | $ | 275 |  |  | 35 | %
Effect of: |  |  |  |  |  |  |  |  |  |  |
Tax exempt interest | (13 | ) |  | (2 | %) |  | (23 | ) |  | (3 | %) |  | (24 | ) |  | (3 | %)
Adjustment to prior year taxes | (8 | ) |  | (1 | %) |  | (4 | ) |  | (1 | %) |  | (2 | ) |  | — | %
Stock-based compensation | (8 | ) |  | (1 | %) |  | (16 | ) |  | (2 | %) |  | (9 | ) |  | (1 | %)
Dividend received deduction | (4 | ) |  | (1 | %) |  | (8 | ) |  | (1 | %) |  | (7 | ) |  | (1 | %)
Employee stock ownership plan dividend paid deduction | (3 | ) |  | (1 | %) |  | (5 | ) |  | (1 | %) |  | (2 | ) |  | — | %
Foreign operations | (2 | ) |  | — | % |  | 21 |  |  | 3 | % |  | 5 |  |  | — | %
Change in valuation allowance (excluding change in tax rate) | 11 |  |  | 2 | % |  | (7 | ) |  | (1 | %) |  | 52 |  |  | 7 | %
Nondeductible expenses | 7 |  |  | 1 | % |  | 6 |  |  | 1 | % |  | 7 |  |  | 1 | %
Neon restructuring | — |  |  | — | % |  | (56 | ) |  | (8 | %) |  | (111 | ) |  | (14 | %)
Change in U.S corporate tax rate | — |  |  | — | % |  | 83 |  |  | 11 | % |  | — |  |  | — | %
Acquisition of noncontrolling interest in NATL | — |  |  | — | % |  | — |  |  | — | % |  | (66 | ) |  | (8 | %)
Subsidiaries not in AFG’s tax return | — |  |  | — | % |  | — |  |  | — | % |  | 3 |  |  | — | %
Other | 8 |  |  | 1 | % |  | 3 |  |  | 1 | % |  | (2 | ) |  | (1 | %)
Provision for income taxes as shown in the statement of earnings | $ | 122 |  |  | 19 | % |  | $ | 247 |  |  | 34 | % |  | $ | 119 |  |  | 15 | %
Components of income tax provision (credit) | The total income tax provision (credit) consists of (in millions):
| 2018 |  | 2017 |  | 2016
Current taxes: |  |  |  |  |
Federal | $ | 196 |  |  | $ | 153 |  |  | $ | 299 |
State | 8 |  |  | 6 |  |  | 12 |
Deferred taxes: |  |  |  |  |
Federal | (82 | ) |  | 5 |  |  | (192 | )
Impact of change in U.S. corporate tax rate | — |  |  | 83 |  |  | — |
Total Federal deferred taxes | (82 | ) |  | 88 |  |  | (192 | )
Provision for income taxes | $ | 122 |  |  | $ | 247 |  |  | $ | 119 |
Summary of operating loss carryforwards | For income tax purposes, AFG and its subsidiaries had the following carryforwards available at December 31, 2018 (in millions):
| Expiring |  | Amount |
Operating Loss – U.S. | 2019 - 2022 |  | $ | 112 |  |
Operating Loss – United Kingdom | indefinite |  | 215 |  | (*)
(*) | £168 million
Components of deferred tax assets and liabilities | Deferred income tax assets and liabilities reflect temporary differences between the carrying amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for tax purposes. The significant components of deferred tax assets and liabilities included in AFG’s Balance Sheet at December 31 were as follows (in millions):
| 2018 |  | 2017
| Excluding Unrealized Gains |  | Impact of Unrealized Gains |  | Total |  | Excluding Unrealized Gains |  | Impact of Unrealized Gains |  | Total
Deferred tax assets: |  |  |  |  |  |  |  |  |  |  |
Federal net operating loss carryforwards | $ | 23 |  |  | $ | — |  |  | $ | 23 |  |  | $ | 27 |  |  | $ | — |  |  | $ | 27 |
Foreign underwriting losses | 93 |  |  | — |  |  | 93 |  |  | 80 |  |  | — |  |  | 80 |
Capital loss carryforwards | — |  |  | — |  |  | — |  |  | 32 |  |  | — |  |  | 32 |
Insurance claims and reserves | 740 |  |  | 3 |  |  | 743 |  |  | 665 |  |  | 29 |  |  | 694 |
Employee benefits | 88 |  |  | — |  |  | 88 |  |  | 84 |  |  | — |  |  | 84 |
Other, net | 44 |  |  | — |  |  | 44 |  |  | 48 |  |  | (3 | ) |  | 45 |
Total deferred tax assets before valuation allowance | 988 |  |  | 3 |  |  | 991 |  |  | 936 |  |  | 26 |  |  | 962 |
Valuation allowance against deferred tax assets | (119 | ) |  | — |  |  | (119 | ) |  | (109 | ) |  | — |  |  | (109 | )
Total deferred tax assets | 869 |  |  | 3 |  |  | 872 |  |  | 827 |  |  | 26 |  |  | 853 |
Deferred tax liabilities: |  |  |  |  |  |  |  |  |  |  |
Investment securities | (36 | ) |  | (34 | ) |  | (70 | ) |  | (1 | ) |  | (340 | ) |  | (341 | )
Deferred policy acquisition costs | (300 | ) |  | 9 |  |  | (291 | ) |  | (293 | ) |  | 91 |  |  | (202 | )
Insurance claims and reserves transition liability | (110 | ) |  | — |  |  | (110 | ) |  | (128 | ) |  | — |  |  | (128 | )
Real estate, property and equipment | (36 | ) |  | — |  |  | (36 | ) |  | (35 | ) |  | — |  |  | (35 | )
Total deferred tax liabilities | (482 | ) |  | (25 | ) |  | (507 | ) |  | (457 | ) |  | (249 | ) |  | (706 | )
Net deferred tax asset (liability) | $ | 387 |  |  | $ | (22 | ) |  | $ | 365 |  |  | $ | 370 |  |  | $ | (223 | ) |  | $ | 147 |
Progression of the liability for uncertain tax positions, excluding interest and penalties | A progression of the liability for uncertain tax positions, excluding interest and penalties, follows (in millions):
| 2018 |  | 2017 |  | 2016
Balance at January 1 | $ | — |  |  | $ | 1 |  |  | $ | 1 |
Additions for tax positions of prior years | — |  |  | — |  |  | — |
Reductions for tax positions of prior years | — |  |  | — |  |  | — |
Additions for tax positions of current year | — |  |  | — |  |  | — |
Settlements | — |  |  | (1 | ) |  | — |
Balance at December 31 | $ | — |  |  | $ | — |  |  | $ | 1 |

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- Definition Tabular disclosure for tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities and other income tax contingencies. Includes, but is not limited to, interest and penalties, reconciliation of unrecognized tax benefits, unrecognized tax benefits that would affect the effective tax rate, tax years that remain subject to examination by tax jurisdictions, and information about positions for which it is reasonably possible that amounts unrecognized will significantly change within 12 months. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15A -URI http://asc.fasb.org/extlink&oid=84230637&loc=SL6600010-109319 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32718-109319 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 19 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32840-109319 + Details
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