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Investments (Tables) | 6 Months Ended
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Jun. 30, 2022
Investments, Debt and Equity Securities [Abstract] |
Available for sale fixed maturities | Available for sale fixed maturities at June 30, 2022 and December 31, 2021, consisted of the following (in millions):
| Amortized Cost |  | Allowance for Expected Credit Losses |  | Gross Unrealized |  | Net Unrealized |  | Fair Value
Gains |  | Losses
June 30, 2022 |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |
U.S. Government and government agencies | $ | 226 |  |  | $ | — |  |  | $ | — |  |  | $ | (10) |  |  | $ | (10) |  |  | $ | 216 |
States, municipalities and political subdivisions | 1,440 |  |  | — |  |  | 6 |  |  | (44) |  |  | (38) |  |  | 1,402 |
Foreign government | 257 |  |  | — |  |  | — |  |  | (11) |  |  | (11) |  |  | 246 |
Residential MBS | 1,645 |  |  | — |  |  | 28 |  |  | (118) |  |  | (90) |  |  | 1,555 |
Commercial MBS | 94 |  |  | — |  |  | — |  |  | (2) |  |  | (2) |  |  | 92 |
Collateralized loan obligations | 1,649 |  |  | 1 |  |  | 1 |  |  | (42) |  |  | (41) |  |  | 1,607 |
Other asset-backed securities | 2,383 |  |  | 6 |  |  | 1 |  |  | (120) |  |  | (119) |  |  | 2,258 |
Corporate and other | 2,519 |  |  | — |  |  | 5 |  |  | (107) |  |  | (102) |  |  | 2,417 |
Total fixed maturities | $ | 10,213 |  |  | $ | 7 |  |  | $ | 41 |  |  | $ | (454) |  |  | $ | (413) |  |  | $ | 9,793 |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |
U.S. Government and government agencies | $ | 216 |  |  | $ | — |  |  | $ | 2 |  |  | $ | (2) |  |  | $ | — |  |  | $ | 216 |
States, municipalities and political subdivisions | 1,758 |  |  | — |  |  | 74 |  |  | — |  |  | 74 |  |  | 1,832 |
Foreign government | 248 |  |  | — |  |  | — |  |  | (2) |  |  | (2) |  |  | 246 |
Residential MBS | 915 |  |  | — |  |  | 48 |  |  | (3) |  |  | 45 |  |  | 960 |
Commercial MBS | 102 |  |  | — |  |  | 2 |  |  | — |  |  | 2 |  |  | 104 |
Collateralized loan obligations | 1,643 |  |  | 1 |  |  | 3 |  |  | (2) |  |  | 1 |  |  | 1,643 |
Other asset-backed securities | 2,677 |  |  | 7 |  |  | 17 |  |  | (11) |  |  | 6 |  |  | 2,676 |
Corporate and other | 2,634 |  |  | 1 |  |  | 55 |  |  | (8) |  |  | 47 |  |  | 2,680 |
Total fixed maturities | $ | 10,193 |  |  | $ | 9 |  |  | $ | 201 |  |  | $ | (28) |  |  | $ | 173 |  |  | $ | 10,357 |
Equity securities reported at fair value | Equity securities which are reported at fair value with holding gains and losses recognized in net earnings, consisted of the following at June 30, 2022 and December 31, 2021 (in millions):
| June 30, 2022 |  | December 31, 2021
| Actual Cost |  |  |  | Fair Value |  | Actual Cost |  |  |  | Fair Value
|  | Fair Value |  | over Cost |  |  | Fair Value |  | over Cost
Common stocks | $ | 547 |  |  | $ | 569 |  |  | $ | 22 |  |  | $ | 491 |  |  | $ | 586 |  |  | $ | 95 |
Perpetual preferred stocks | 452 |  |  | 460 |  |  | 8 |  |  | 403 |  |  | 456 |  |  | 53 |
Total equity securities carried at fair value | $ | 999 |  |  | $ | 1,029 |  |  | $ | 30 |  |  | $ | 894 |  |  | $ | 1,042 |  |  | $ | 148 |
Investments accounted for using the equity method | Investments accounted for using the equity method held by AFG’s continuing operations, by category, carrying value and net investment income are as follows (in millions):
|  |  |  |  | Net Investment Income
| Carrying Value |  | Three months ended June 30, |  | Six months ended June 30,
| June 30, 2022 |  | December 31, 2021 |  | 2022 |  | 2021 |  | 2022 |  | 2021
Real estate-related investments (*) | $ | 1,193 |  |  | $ | 1,130 |  |  | $ | 69 |  |  | $ | 45 |  |  | $ | 169 |  |  | $ | 99 |
Private equity | 402 |  |  | 352 |  |  | 5 |  |  | 24 |  |  | 38 |  |  | 45 |
Private debt | 31 |  |  | 35 |  |  | 2 |  |  | 2 |  |  | 2 |  |  | 5 |
Total investments accounted for using the equity method | $ | 1,626 |  |  | $ | 1,517 |  |  | $ | 76 |  |  | $ | 71 |  |  | $ | 209 |  |  | $ | 149 |
(*)Includes 91% with underlying investments in multi-family properties, 1% in single family properties and 8% in other property types as of June 30, 2022 and 88% with underlying investments in multi-family properties, 1% in single family properties and 11% in other property types as of December 31, 2021.
Available for sale securities in a continuous unrealized loss position | The following table shows gross unrealized losses (dollars in millions) on available for sale fixed maturities by investment category and length of time that individual securities have been in a continuous unrealized loss position at the following balance sheet dates.
| Less Than Twelve Months |  | Twelve Months or More
Unrealized Loss |  | Fair Value |  | Fair Value as % of Cost |  | Unrealized Loss |  | Fair Value |  | Fair Value as % of Cost
June 30, 2022 |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |
U.S. Government and government agencies | $ | (5) |  |  | $ | 145 |  |  | 97 | % |  | $ | (5) |  |  | $ | 60 |  |  | 92 | %
States, municipalities and political subdivisions | (43) |  |  | 963 |  |  | 96 | % |  | (1) |  |  | 10 |  |  | 91 | %
Foreign government | (10) |  |  | 210 |  |  | 95 | % |  | (1) |  |  | 20 |  |  | 95 | %
Residential MBS | (117) |  |  | 1,279 |  |  | 92 | % |  | (1) |  |  | 16 |  |  | 94 | %
Commercial MBS | (2) |  |  | 71 |  |  | 97 | % |  | — |  |  | — |  |  | — | %
Collateralized loan obligations | (40) |  |  | 1,432 |  |  | 97 | % |  | (2) |  |  | 99 |  |  | 98 | %
Other asset-backed securities | (110) |  |  | 1,930 |  |  | 95 | % |  | (10) |  |  | 122 |  |  | 92 | %
Corporate and other | (99) |  |  | 1,803 |  |  | 95 | % |  | (8) |  |  | 82 |  |  | 91 | %
Total fixed maturities | $ | (426) |  |  | $ | 7,833 |  |  | 95 | % |  | $ | (28) |  |  | $ | 409 |  |  | 94 | %
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |
U.S. Government and government agencies | $ | (1) |  |  | $ | 92 |  |  | 99 | % |  | $ | (1) |  |  | $ | 22 |  |  | 96 | %
States, municipalities and political subdivisions | — |  |  | 9 |  |  | 100 | % |  | — |  |  | 13 |  |  | 100 | %
Foreign government | (2) |  |  | 160 |  |  | 99 | % |  | — |  |  | — |  |  | — | %
Residential MBS | (3) |  |  | 419 |  |  | 99 | % |  | — |  |  | 7 |  |  | 100 | %
Commercial MBS | — |  |  | 34 |  |  | 100 | % |  | — |  |  | — |  |  | — | %
Collateralized loan obligations | (1) |  |  | 806 |  |  | 100 | % |  | (1) |  |  | 77 |  |  | 99 | %
Other asset-backed securities | (8) |  |  | 1,250 |  |  | 99 | % |  | (3) |  |  | 81 |  |  | 96 | %
Corporate and other | (8) |  |  | 500 |  |  | 98 | % |  | — |  |  | 26 |  |  | 100 | %
Total fixed maturities | $ | (23) |  |  | $ | 3,270 |  |  | 99 | % |  | $ | (5) |  |  | $ | 226 |  |  | 98 | %
Roll forward of allowance for credit losses on fixed maturity securities | A progression of the allowance for expected credit losses on fixed maturity securities held by AFG’s continuing operations is shown below (in millions):
| Structured Securities (*) |  | Corporate and Other |  | Total
Balance at March 31, 2022 | $ | 6 |  |  | $ | 1 |  |  | $ | 7 |
Initial allowance for purchased securities with credit deterioration | — |  |  | — |  |  | — |
Provision for expected credit losses on securities with no previous allowance | 1 |  |  | — |  |  | 1 |
Additions (reductions) to previously recognized expected credit losses | — |  |  | — |  |  | — |
Reductions due to sales or redemptions | — |  |  | (1) |  |  | (1) |
Balance at June 30, 2022 | $ | 7 |  |  | $ | — |  |  | $ | 7 |
Balance at March 31, 2021 | $ | 9 |  |  | $ | 1 |  |  | $ | 10 |
Initial allowance for purchased securities with credit deterioration | — |  |  | — |  |  | — |
Provision for expected credit losses on securities with no previous allowance | — |  |  | — |  |  | — |
Additions (reductions) to previously recognized expected credit losses | (1) |  |  | 1 |  |  | — |
Reductions due to sales or redemptions | — |  |  | (1) |  |  | (1) |
Balance at June 30, 2021 | $ | 8 |  |  | $ | 1 |  |  | $ | 9 |
Balance at January 1, 2022 | $ | 8 |  |  | $ | 1 |  |  | $ | 9 |
Initial allowance for purchased securities with credit deterioration | — |  |  | — |  |  | — |
Provision for expected credit losses on securities with no previous allowance | 1 |  |  | — |  |  | 1 |
Additions (reductions) to previously recognized expected credit losses | (2) |  |  | — |  |  | (2) |
Reductions due to sales or redemptions | — |  |  | (1) |  |  | (1) |
Balance at June 30, 2022 | $ | 7 |  |  | $ | — |  |  | $ | 7 |
Balance at January 1, 2021 | $ | 10 |  |  | $ | 2 |  |  | $ | 12 |
Initial allowance for purchased securities with credit deterioration | — |  |  | — |  |  | — |
Provision for expected credit losses on securities with no previous allowance | — |  |  | — |  |  | — |
Additions (reductions) to previously recognized expected credit losses | (2) |  |  | 1 |  |  | (1) |
Reductions due to sales or redemptions | — |  |  | (2) |  |  | (2) |
Balance at June 30, 2021 | $ | 8 |  |  | $ | 1 |  |  | $ | 9 |
(*)Includes mortgage-backed securities, collateralized loan obligations and other asset-backed securities.
Available for sale fixed maturity securities by contractual maturity date | The table below sets forth the scheduled maturities of AFG’s available for sale fixed maturities as of June 30, 2022 (dollars in millions). Securities with sinking funds are reported at average maturity. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid by the issuers.
| Amortized |  | Fair Value
Cost, net (*) |  | Amount |  | %
Maturity |  |  |  |  |
One year or less | $ | 617 |  |  | $ | 618 |  |  | 6 | %
After one year through five years | 2,615 |  |  | 2,511 |  |  | 26 | %
After five years through ten years | 926 |  |  | 880 |  |  | 9 | %
After ten years | 284 |  |  | 272 |  |  | 3 | %
| 4,442 |  |  | 4,281 |  |  | 44 | %
Collateralized loan obligations and other ABS (average life of approximately 3.5 years) | 4,025 |  |  | 3,865 |  |  | 39 | %
MBS (average life of approximately 5.5 years) | 1,739 |  |  | 1,647 |  |  | 17 | %
Total | $ | 10,206 |  |  | $ | 9,793 |  |  | 100 | %
(*)Amortized cost, net of allowance for expected credit losses.
Net investment income earned and investment expenses incurred | The following table shows (in millions) investment income earned and investment expenses incurred in AFG’s continuing operations.
| Three months ended June 30, |  | Six months ended June 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
Investment income: |  |  |  |  |  |  |
Fixed maturities | $ | 85 |  |  | $ | 72 |  |  | $ | 165 |  |  | $ | 144 |
Equity securities: |  |  |  |  |  |  |
Dividends | 8 |  |  | 7 |  |  | 15 |  |  | 15 |
Change in fair value (*) | (9) |  |  | 8 |  |  | (2) |  |  | 34 |
Equity in earnings of partnerships and similar investments | 76 |  |  | 71 |  |  | 209 |  |  | 149 |
Other | 13 |  |  | 8 |  |  | 20 |  |  | 14 |
Gross investment income | 173 |  |  | 166 |  |  | 407 |  |  | 356 |
Investment expenses | (5) |  |  | (2) |  |  | (9) |  |  | (4) |
Net investment income | $ | 168 |  |  | $ | 164 |  |  | $ | 398 |  |  | $ | 352 |
(*)Although the change in the fair value of the majority of AFG’s equity securities is recorded in realized gains (losses) on securities, AFG records holding gains and losses in net investment income on its portfolio of limited partnerships and similar investments that do not qualify for equity method accounting and certain other securities classified at purchase as “fair value through net investment income.”
Realized gains (losses) and changes in unrealized appreciation (depreciation) related to fixed maturity and equity security investments | Realized gains (losses) and changes in unrealized appreciation (depreciation) from continuing operations included in AOCI related to fixed maturity securities are summarized as follows (in millions):
| Three months ended June 30, 2022 |  | Three months ended June 30, 2021
| Realized gains (losses) |  |  |  | Realized gains (losses) |  |
| Before Impairments |  | Impairment Allowance |  | Total |  | Change in Unrealized |  | Before Impairments |  | Impairment Allowance |  | Total |  | Change in Unrealized
Fixed maturities | $ | (10) |  |  | $ | (1) |  |  | $ | (11) |  |  | $ | (275) |  |  | $ | 1 |  |  | $ | — |  |  | $ | 1 |  |  | $ | 20 |
Equity securities | (82) |  |  | — |  |  | (82) |  |  | — |  |  | 42 |  |  | — |  |  | 42 |  |  | — |
Mortgage loans and other investments | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total pretax | (92) |  |  | (1) |  |  | (93) |  |  | (275) |  |  | 43 |  |  | — |  |  | 43 |  |  | 20 |
Tax effects | 20 |  |  | — |  |  | 20 |  |  | 58 |  |  | (9) |  |  | — |  |  | (9) |  |  | (4) |
Net of tax | $ | (72) |  |  | $ | (1) |  |  | $ | (73) |  |  | $ | (217) |  |  | $ | 34 |  |  | $ | — |  |  | $ | 34 |  |  | $ | 16 |
| Six months ended June 30, 2022 |  | Six months ended June 30, 2021
| Realized gains (losses) |  |  |  | Realized gains (losses) |  |
| Before Impairments |  | Impairment Allowance |  | Total |  | Change in Unrealized |  | Before Impairments |  | Impairment Allowance |  | Total |  | Change in Unrealized
Fixed maturities | $ | (14) |  |  | $ | 1 |  |  | $ | (13) |  |  | $ | (586) |  |  | $ | — |  |  | $ | 1 |  |  | $ | 1 |  |  | $ | (24) |
Equity securities | (95) |  |  | — |  |  | (95) |  |  | — |  |  | 119 |  |  | — |  |  | 119 |  |  | — |
Mortgage loans and other investments | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total pretax | (109) |  |  | 1 |  |  | (108) |  |  | (586) |  |  | 119 |  |  | 1 |  |  | 120 |  |  | (24) |
Tax effects | 23 |  |  | — |  |  | 23 |  |  | 124 |  |  | (25) |  |  | — |  |  | (25) |  |  | 5 |
Net of tax | $ | (86) |  |  | $ | 1 |  |  | $ | (85) |  |  | $ | (462) |  |  | $ | 94 |  |  | $ | 1 |  |  | $ | 95 |  |  | $ | (19) |
Holding gains (losses) on equity securities still held | AFG recorded net holding gains (losses) on equity securities from continuing operations during the second quarter and first six months of 2022 and 2021 on securities that were still owned at June 30, 2022 and June 30, 2021 as follows (in millions):
| Three months ended June 30, |  | Six months ended June 30,
| 2022 |  | 2021 |  | 2022 |  | 2021
Included in realized gains (losses) | $ | (82) |  |  | $ | 36 |  |  | $ | (96) |  |  | $ | 98 |
Included in net investment income | (9) |  |  | 8 |  |  | (4) |  |  | 34 |
| $ | (91) |  |  | $ | 44 |  |  | $ | (100) |  |  | $ | 132 |
Gross realized gains and losses on available for sale fixed maturity and equity security investments | Gross realized gains and losses (excluding changes in impairment allowance and mark-to-market of derivatives) on available for sale fixed maturity investment transactions from continuing operations consisted of the following (in millions):
| Six months ended June 30,
2022 |  | 2021
Gross gains | $ | 3 |  |  | $ | 3 |
Gross losses | (9) |  |  | (1) |

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