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Discontinued Operations | 12 Months Ended
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Dec. 31, 2021
Discontinued Operations and Disposal Groups [Abstract] |
Discontinued Operations | Discontinued Operations Annuity Business On May 28, 2021, AFG completed the sale of its Annuity business to Massachusetts Mutual Life Insurance Company (“MassMutual”) with an effective date of May 31, 2021. MassMutual acquired Great American Life Insurance Company (“GALIC”) and its two insurance subsidiaries, Annuity Investors Life Insurance Company and Manhattan National Life Insurance Company. In addition to AFG’s annuity operations, these subsidiaries included AFG’s run-off life and long-term care operations. Proceeds from the sale were $3.57 billion (including $34 million in post-closing adjustments). AFG realized a $656 million net gain on the sale. The sale continues to be subject to tax-related post-closing adjustments, which are not expected to be material and are expected to be settled in 2022. Beginning with the first quarter of 2021, the results of the Annuity business sold were reported as discontinued operations in accordance with generally accepted accounting principles, which included adjusting prior period results to reflect these operations as discontinued. Prior to the sale, AFG acquired approximately $480 million in investments accounted for using the equity method and approximately $100 million of directly owned real estate from GALIC. Details of the assets and liabilities of the Annuity subsidiaries sold were as follows (in millions):
| May 31, 2021 |  | December 31, 2020
Assets of businesses sold: |  |  |
Cash and cash equivalents | $ | 2,060 |  |  | $ | 1,145 |
Investments | 38,323 |  |  | 38,011 |
Recoverables from reinsurers | 6,748 |  |  | 6,804 |
Other assets | 2,152 |  |  | 1,925 |
Total assets of discontinued annuity operations | 49,283 |  |  | 47,885 |
Liabilities of businesses sold: |  |  |
Annuity benefits accumulated | 43,690 |  |  | 42,573 |
Other liabilities | 1,813 |  |  | 1,885 |
Total liabilities of discontinued annuity operations | 45,503 |  |  | 44,458 |
Receivable from AFG for real estate-related investments | — |  |  | 537 |
Reclassify AOCI | (913) |  |  | (1,071) |
Net investment in annuity businesses sold, excluding AOCI | $ | 2,867 |  |  | $ | 2,893 |
Details of the results of operations for the discontinued annuity operations were (in millions):
| Year Ended December 31,
| 2021 (*) |  | 2020 |  | 2019
Net investment income | $ | 746 |  |  | $ | 1,670 |  |  | $ | 1,774 |
Realized gains on securities | 112 |  |  | 365 |  |  | 132 |
Other income | 52 |  |  | 123 |  |  | 137 |
Total revenues | 910 |  |  | 2,158 |  |  | 2,043 |
Annuity benefits | 377 |  |  | 1,192 |  |  | 1,151 |
Annuity and supplemental insurance acquisition expenses | 136 |  |  | 306 |  |  | 253 |
Other expenses | 73 |  |  | 151 |  |  | 165 |
Total costs and expenses | 586 |  |  | 1,649 |  |  | 1,569 |
Earnings before income taxes from discontinued operations | 324 |  |  | 509 |  |  | 474 |
Provision for income taxes on discontinued operations | 66 |  |  | 102 |  |  | 96 |
Net earnings from discontinued operations, net of tax | 258 |  |  | 407 |  |  | 378 |
Gain on sale of discontinued operations, net of tax | 656 |  |  | — |  |  | — |
Net earnings from discontinued operations | $ | 914 |  |  | $ | 407 |  |  | $ | 378 |
(*)Results through the May 31, 2021 effective date of the sale. Net investment income in the table above excludes $51 million, $49 million and $37 million in 2021, 2020 and 2019, respectively, related to the real estate-related entities that AFG acquired from the discontinued annuity operations prior to the completion of the sale. The impact of the sale of the annuity business is shown below (in millions):
Cash proceeds | $ | 3,571 |
Sale related expenses | (8) |
Total net proceeds | 3,563 |
Net investment in annuity businesses sold, excluding AOCI | 2,867 |
Reclassify net deferred tax asset | (199) |
Pretax gain on sale | 895 |
Income tax expense: |
Reclassify net deferred tax asset | 199 |
Tax liabilities triggered by the sale | 41 |
Other | (1) |
Total income tax expense | 239 |
Net gain on sale | $ | 656 |
Summarized cash flows for the discontinued annuity operations were (in millions):
| Year ended December 31,
| 2021 (*) |  | 2020 |  | 2019
Net cash provided by operating activities | $ | 67 |  |  | $ | 898 |  |  | $ | 1,131 |
Net cash used in investing activities | (1,689) |  |  | (285) |  |  | (2,384) |
Net cash provided by (used in) financing activities | 477 |  |  | (203) |  |  | 1,662 |
(*)Through the May 31, 2021 effective date of the sale. Derivatives The vast majority of AFG’s derivatives were held by the sold annuity subsidiaries. The following table summarizes the gains (losses) included in net earnings from discontinued operations for changes in the fair value of derivatives that did not qualify for hedge accounting for 2021, 2020 and 2019 (in millions):
Derivative |  | 2021 (*) |  | 2020 |  | 2019
MBS with embedded derivatives |  | $ | (1) |  |  | $ | (2) |  |  | $ | 5 |
Fixed-indexed and variable-indexed annuities (embedded derivative) |  | (222) |  |  | (283) |  |  | (919) |
Equity index call options |  | 237 |  |  | 223 |  |  | 804 |
Equity index put options |  | 5 |  |  | 3 |  |  | 2 |
Reinsurance contract (embedded derivative) |  | 1 |  |  | (1) |  |  | (2) |
|  | $ | 20 |  |  | $ | (60) |  |  | $ | (110) |
(*)Through the May 31, 2021 effective date of the sale.

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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