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Discontinued Operations | 3 Months Ended
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Mar. 31, 2022
Discontinued Operations and Disposal Groups [Abstract] |
Discontinued Operations | Discontinued Operations Annuity Business Effective May 31, 2021, AFG completed the sale of its Annuity business to Massachusetts Mutual Life Insurance Company (“MassMutual”). 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) and AFG realized a $656 million net gain on the sale in the first six months of 2021. The sale continues to be subject to tax-related post-closing adjustments, which are not expected to be material and are expected to be completed in 2022. Details of the assets and liabilities of the Annuity subsidiaries sold were as follows (in millions):
| May 31, 2021
Assets of businesses sold: |
Cash and cash equivalents | $ | 2,060 |
Investments | 38,323 |
Recoverables from reinsurers | 6,748 |
Other assets | 2,152 |
Total assets of discontinued annuity operations | 49,283 |
Liabilities of businesses sold: |
Annuity benefits accumulated | 43,690 |
Other liabilities | 1,813 |
Total liabilities of discontinued annuity operations | 45,503 |
Reclassify AOCI | (913) |
Net investment in annuity businesses sold, excluding AOCI | $ | 2,867 |
Details of the results of operations for the discontinued annuity operations were (in millions):
|  |  |  |  | Three months ended March 31, 2021
Net investment income |  |  |  |  | $ | 447 |
Realized gains on securities |  |  |  |  | 81 |
Other income |  |  |  |  | 32 |
Total revenues |  |  |  |  | 560 |
Annuity benefits |  |  |  |  | 161 |
Annuity and supplemental insurance acquisition expenses |  |  |  |  | 112 |
Other expenses |  |  |  |  | 46 |
Total costs and expenses |  |  |  |  | 319 |
Earnings before income taxes from discontinued operations |  |  |  |  | 241 |
Provision for income taxes on discontinued operations |  |  |  |  | 48 |
Tax liabilities triggered by pending sale |  |  |  |  | 41 |
Net earnings from discontinued operations |  |  |  |  | $ | 152 |
The impact of the sale of the annuity business is shown below (in millions):
| May 31, 2021
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 pending sale in the first quarter of 2021 | 41 |
Other | (1) |
Total income tax expense | 239 |
Net gain on sale | $ | 656 |
Summarized cash flows for the discontinued annuity operations were (in millions):
| Three months ended March 31, 2021
Net cash provided by operating activities | $ | 209 |
Net cash used in investing activities | (734) |
Net cash provided by financing activities | 16 |
Derivatives The vast majority of AFG’s derivatives that do not qualify for hedge accounting 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 do not qualify for hedge accounting for the first three months of 2021 (in millions):
Derivative |  |  |  |  |  | Three months ended March 31, 2021
MBS with embedded derivatives |  |  |  |  |  | $ | — |
Fixed-indexed and variable-indexed annuities (embedded derivative) |  |  |  |  |  | (40) |
Equity index call options |  |  |  |  |  | 114 |
Equity index put options |  |  |  |  |  | 2 |
Reinsurance contract (embedded derivative) |  |  |  |  |  | 1 |
|  |  |  |  |  | $ | 77 |

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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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