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Investments | 12 Months Ended
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Dec. 31, 2023
Investments, Debt and Equity Securities [Abstract] |
Investments | Investments Available for sale fixed maturities at December 31 consisted of the following (in millions):
| Amortized Cost |  | Allowance for Expected Credit Losses |  | Gross Unrealized |  | Net Unrealized |  | Fair Value
| Gains |  | Losses |  |
December 31, 2023 |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |
U.S. Government and government agencies | $ | 243 |  |  | $ | — |  |  | $ | 1 |  |  | $ | (8) |  |  | $ | (7) |  |  | $ | 236 |
States, municipalities and political subdivisions | 1,014 |  |  | — |  |  | 8 |  |  | (38) |  |  | (30) |  |  | 984 |
Foreign government | 236 |  |  | — |  |  | 1 |  |  | (7) |  |  | (6) |  |  | 230 |
Residential MBS | 1,788 |  |  | 1 |  |  | 26 |  |  | (155) |  |  | (129) |  |  | 1,658 |
Commercial MBS | 75 |  |  | — |  |  | — |  |  | (1) |  |  | (1) |  |  | 74 |
Collateralized loan obligations | 1,709 |  |  | 3 |  |  | 9 |  |  | (28) |  |  | (19) |  |  | 1,687 |
Other asset-backed securities | 2,477 |  |  | 5 |  |  | 10 |  |  | (120) |  |  | (110) |  |  | 2,362 |
Corporate and other | 3,210 |  |  | 3 |  |  | 52 |  |  | (113) |  |  | (61) |  |  | 3,146 |
Total fixed maturities | $ | 10,752 |  |  | $ | 12 |  |  | $ | 107 |  |  | $ | (470) |  |  | $ | (363) |  |  | $ | 10,377 |
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |
U.S. Government and government agencies | $ | 233 |  |  | $ | — |  |  | $ | — |  |  | $ | (14) |  |  | $ | (14) |  |  | $ | 219 |
States, municipalities and political subdivisions | 1,234 |  |  | — |  |  | 3 |  |  | (51) |  |  | (48) |  |  | 1,186 |
Foreign government | 240 |  |  | — |  |  | — |  |  | (14) |  |  | (14) |  |  | 226 |
Residential MBS | 1,757 |  |  | 2 |  |  | 23 |  |  | (180) |  |  | (157) |  |  | 1,598 |
Commercial MBS | 88 |  |  | — |  |  | — |  |  | (3) |  |  | (3) |  |  | 85 |
Collateralized loan obligations | 1,988 |  |  | 1 |  |  | 1 |  |  | (67) |  |  | (66) |  |  | 1,921 |
Other asset-backed securities | 2,435 |  |  | 7 |  |  | 1 |  |  | (184) |  |  | (183) |  |  | 2,245 |
Corporate and other | 2,761 |  |  | 1 |  |  | 11 |  |  | (156) |  |  | (145) |  |  | 2,615 |
Total fixed maturities | $ | 10,736 |  |  | $ | 11 |  |  | $ | 39 |  |  | $ | (669) |  |  | $ | (630) |  |  | $ | 10,095 |
Equity securities which are reported at fair value with holding gains and losses recognized in net earnings, consisted of the following at December 31 (in millions):
| 2023 |  | 2022
| Actual Cost |  | Fair Value |  | Fair Value Over (Under) Cost |  | Actual Cost |  | Fair Value |  | Fair Value Over (Under) Cost
Common stocks | $ | 512 |  |  | $ | 586 |  |  | $ | 74 |  |  | $ | 556 |  |  | $ | 553 |  |  | $ | (3) |
Perpetual preferred stocks | 422 |  |  | 432 |  |  | 10 |  |  | 436 |  |  | 457 |  |  | 21 |
Total equity securities carried at fair value | $ | 934 |  |  | $ | 1,018 |  |  | $ | 84 |  |  | $ | 992 |  |  | $ | 1,010 |  |  | $ | 18 |
The following table shows the carrying value and net investment income from investments accounted for using the equity method held by AFG’s continuing operations (in millions):
| Carrying Value |  | Net Investment Income
| December 31, 2023 |  | December 31, 2022 |  | 2023 |  | 2022 |  | 2021
Real estate-related investments (*) | $ | 1,320 |  |  | $ | 1,229 |  |  | $ | 85 |  |  | $ | 233 |  |  | $ | 226 |
Private equity | 457 |  |  | 438 |  |  | 9 |  |  | 32 |  |  | 100 |
Private debt | 37 |  |  | 33 |  |  | 5 |  |  | 2 |  |  | (5) |
Total investments accounted for using the equity method | $ | 1,814 |  |  | $ | 1,700 |  |  | $ | 99 |  |  | $ | 267 |  |  | $ | 321 |
(*)92% of the carrying value relates to underlying investments in multi-family housing properties at both December 31, 2023 and December 31, 2022. The earnings (losses) from these investments are generally reported on a quarter lag due to the timing required to obtain the necessary information from the funds. AFG regularly reviews and discusses fund performance with the fund managers to corroborate the reasonableness of the underlying reported asset values and to assess whether any events have occurred within the lag period that may materially affect the valuation of these investments. With respect to partnerships and similar investments, AFG had unfunded commitments of $418 million and $396 million as of December 31, 2023 and December 31, 2022, respectively. 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
December 31, 2023 |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |
U.S. Government and government agencies | $ | — |  |  | $ | 11 |  |  | 100 | % |  | $ | (8) |  |  | $ | 191 |  |  | 96 | %
States, municipalities and political subdivisions | (1) |  |  | 76 |  |  | 99 | % |  | (37) |  |  | 526 |  |  | 93 | %
Foreign government | — |  |  | — |  |  | — | % |  | (7) |  |  | 207 |  |  | 97 | %
Residential MBS | (1) |  |  | 42 |  |  | 98 | % |  | (154) |  |  | 1,089 |  |  | 88 | %
Commercial MBS | — |  |  | — |  |  | — | % |  | (1) |  |  | 61 |  |  | 98 | %
Collateralized loan obligations | — |  |  | 25 |  |  | 100 | % |  | (28) |  |  | 807 |  |  | 97 | %
Other asset-backed securities | (1) |  |  | 151 |  |  | 99 | % |  | (119) |  |  | 1,663 |  |  | 93 | %
Corporate and other | (4) |  |  | 123 |  |  | 97 | % |  | (109) |  |  | 1,455 |  |  | 93 | %
Total fixed maturities | $ | (7) |  |  | $ | 428 |  |  | 98 | % |  | $ | (463) |  |  | $ | 5,999 |  |  | 93 | %
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |
U.S. Government and government agencies | $ | (4) |  |  | $ | 111 |  |  | 97 | % |  | $ | (10) |  |  | $ | 107 |  |  | 91 | %
States, municipalities and political subdivisions | (50) |  |  | 967 |  |  | 95 | % |  | (1) |  |  | 15 |  |  | 94 | %
Foreign government | (5) |  |  | 90 |  |  | 95 | % |  | (9) |  |  | 134 |  |  | 94 | %
Residential MBS | (115) |  |  | 1,078 |  |  | 90 | % |  | (65) |  |  | 315 |  |  | 83 | %
Commercial MBS | (2) |  |  | 44 |  |  | 96 | % |  | (1) |  |  | 33 |  |  | 97 | %
Collateralized loan obligations | (44) |  |  | 1,224 |  |  | 97 | % |  | (23) |  |  | 587 |  |  | 96 | %
Other asset-backed securities | (100) |  |  | 1,361 |  |  | 93 | % |  | (84) |  |  | 740 |  |  | 90 | %
Corporate and other | (105) |  |  | 1,665 |  |  | 94 | % |  | (51) |  |  | 413 |  |  | 89 | %
Total fixed maturities | $ | (425) |  |  | $ | 6,540 |  |  | 94 | % |  | $ | (244) |  |  | $ | 2,344 |  |  | 91 | %
At December 31, 2023, the gross unrealized losses on fixed maturities of $470 million relate to approximately 1,450 securities. Investment grade securities (as determined by nationally recognized rating agencies) represented approximately 94% of the gross unrealized loss and 95% of the fair value of securities with unrealized losses. To evaluate fixed maturities for expected credit losses (impairment), management considers whether the unrealized loss is credit-driven or a result of changes in market interest rates, the extent to which fair value is less than cost basis, historical operating, balance sheet and cash flow data from the issuer, third party research and communications with industry specialists and discussions with issuer management. AFG analyzes its MBS for expected credit losses (impairment) each quarter based upon expected future cash flows. Management estimates expected future cash flows based upon its knowledge of the MBS market, cash flow projections (which reflect loan to collateral values, subordination, vintage and geographic concentration) received from independent sources, implied cash flows inherent in security ratings and analysis of historical payment data. Management believes AFG will recover its cost basis (net of any allowance) in the securities with unrealized losses and that AFG has the ability to hold the securities until they recover in value and had no intent to sell them at December 31, 2023. A progression of the allowance for expected credit losses on available for sale fixed maturity securities held by AFG’s continuing operations is shown below (in millions):
| Structured securities (*) |  | Corporate and other |  | Total
Balance at December 31, 2020 | $ | 10 |  |  | $ | 2 |  |  | $ | 12 |
Provision for expected credit losses on securities with no previous allowance | — |  |  | 1 |  |  | 1 |
Reductions to previously recognized expected credit losses | (2) |  |  | — |  |  | (2) |
Reductions due to sales or redemptions | — |  |  | (2) |  |  | (2) |
Balance at December 31, 2021 | 8 |  |  | 1 |  |  | 9 |
Provision for expected credit losses on securities with no previous allowance | 4 |  |  | 1 |  |  | 5 |
Reductions to previously recognized expected credit losses | (2) |  |  | — |  |  | (2) |
Reductions due to sales or redemptions | — |  |  | (1) |  |  | (1) |
Balance at December 31, 2022 | 10 |  |  | 1 |  |  | 11 |
Provision for expected credit losses on securities with no previous allowance | 1 |  |  | 8 |  |  | 9 |
Additions (reductions) to previously recognized expected credit losses | 2 |  |  | (1) |  |  | 1 |
Reductions due to sales or redemptions | (4) |  |  | (5) |  |  | (9) |
Balance at December 31, 2023 | $ | 9 |  |  | $ | 3 |  |  | $ | 12 |
(*)Includes mortgage-backed securities, collateralized loan obligations and other asset-backed securities. In 2023, 2022 and 2021, AFG did not purchase any securities with expected credit losses. The table below sets forth the scheduled maturities of AFG’s available for sale fixed maturities as of December 31, 2023 (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 Cost, net (*) |  | Fair Value
| Amount |  | %
Maturity |  |  |  |  |
One year or less | $ | 531 |  |  | $ | 521 |  |  | 5 | %
After one year through five years | 2,744 |  |  | 2,663 |  |  | 26 | %
After five years through ten years | 1,147 |  |  | 1,143 |  |  | 11 | %
After ten years | 278 |  |  | 269 |  |  | 2 | %
| 4,700 |  |  | 4,596 |  |  | 44 | %
Collateralized loan obligations and other ABS (average life of approximately 3 years) | 4,178 |  |  | 4,049 |  |  | 39 | %
MBS (average life of approximately 6.5 years) | 1,862 |  |  | 1,732 |  |  | 17 | %
Total | $ | 10,740 |  |  | $ | 10,377 |  |  | 100 | %
(*)Amortized cost, net of allowance for expected credit losses. Certain risks are inherent in fixed maturity securities, including loss upon default, price volatility in reaction to changes in interest rates, and general market factors and risks associated with reinvestment of proceeds due to prepayments or redemptions in a period of declining interest rates. There were no investments in individual issuers that exceeded 10% of shareholders’ equity at December 31, 2023 or 2022. Net Investment Income The following table shows (in millions) investment income earned and investment expenses incurred in AFG’s continuing operations.
| 2023 |  | 2022 |  | 2021
Investment income: |  |  |  |  |
Fixed maturities: |  |  |  |  |
Interest and amortization | $ | 502 |  |  | $ | 376 |  |  | $ | 290 |
Change in fair value (a) | (3) |  |  | — |  |  | — |
Equity securities: |  |  |  |  |
Dividends | 34 |  |  | 39 |  |  | 30 |
Change in fair value (b) | 36 |  |  | (2) |  |  | 61 |
Equity in earnings of partnerships and similar investments | 99 |  |  | 267 |  |  | 321 |
Other | 90 |  |  | 53 |  |  | 40 |
Gross investment income | 758 |  |  | 733 |  |  | 742 |
Investment expenses | (16) |  |  | (16) |  |  | (12) |
Net investment income | $ | 742 |  |  | $ | 717 |  |  | $ | 730 |
(a)The change in the fair value of fixed maturities classified as trading and derivatives embedded in convertible fixed maturities related to limited partnerships and similar investments. (b)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 on limited partnerships and similar investments that do not qualify for equity method accounting and related equity investments in net investment income. 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):
| 2023 |  | 2022
| Realized gains (losses) |  |  |  | Realized gains (losses) |  |
| Before Impairments |  | Impairment Allowance |  | Total |  | Change in Unrealized |  | Before Impairments |  | Impairment Allowance |  | Total |  | Change in Unrealized
Fixed maturities | $ | (35) |  |  | $ | (10) |  |  | $ | (45) |  |  | $ | 267 |  |  | $ | (27) |  |  | $ | (3) |  |  | $ | (30) |  |  | $ | (803) |
Equity securities | 10 |  |  | — |  |  | 10 |  |  | — |  |  | (96) |  |  | — |  |  | (96) |  |  | — |
Mortgage loans and other investments | — |  |  | (1) |  |  | (1) |  |  | — |  |  | 10 |  |  | — |  |  | 10 |  |  | — |
Total pretax | (25) |  |  | (11) |  |  | (36) |  |  | 267 |  |  | (113) |  |  | (3) |  |  | (116) |  |  | (803) |
Tax effects | 5 |  |  | 3 |  |  | 8 |  |  | (57) |  |  | 23 |  |  | 1 |  |  | 24 |  |  | 170 |
Net of tax | $ | (20) |  |  | $ | (8) |  |  | $ | (28) |  |  | $ | 210 |  |  | $ | (90) |  |  | $ | (2) |  |  | $ | (92) |  |  | $ | (633) |
|  |  | 2021
|  |  |  |  | Realized gains (losses) |  |
|  |  |  |  |  |  |  |  | Before Impairments |  | Impairment Allowance |  | Total |  | Change in Unrealized
Fixed maturities |  |  |  |  |  |  |  |  | $ | (1) |  |  | $ | 1 |  |  | $ | — |  |  | $ | (111) |
Equity securities |  |  |  |  |  |  |  |  | 110 |  |  | — |  |  | 110 |  |  | — |
Mortgage loans and other investments |  |  |  |  |  |  |  |  | — |  |  | — |  |  | — |  |  | — |
Total pretax |  |  |  |  |  |  |  |  | 109 |  |  | 1 |  |  | 110 |  |  | (111) |
Tax effects |  |  |  |  |  |  |  |  | (23) |  |  | — |  |  | (23) |  |  | 23 |
Net of tax |  |  |  |  |  |  |  |  | $ | 86 |  |  | $ | 1 |  |  | $ | 87 |  |  | $ | (88) |
All equity securities other than those accounted for under the equity method are carried at fair value through net earnings. AFG recorded net holding gains (losses) on equity securities from continuing operations during 2023, 2022 and 2021 on securities that were still owned at December 31 of each year presented as follows (in millions):
| 2023 |  | 2022 |  | 2021
Included in realized gains (losses) | $ | (2) |  |  | $ | (95) |  |  | $ | 65 |
Included in net investment income | 36 |  |  | 5 |  |  | 54 |
| $ | 34 |  |  | $ | (90) |  |  | $ | 119 |
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):
| 2023 |  | 2022 |  | 2021
Gross gains | $ | 5 |  |  | $ | 3 |  |  | $ | 7 |
Gross losses | (38) |  |  | (18) |  |  | (1) |

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