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Income Taxes | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The following is a reconciliation of income taxes at the statutory rate of 21% to the provision for income taxes as shown in AFG’s Statement of Earnings (dollars in millions):
| 2024 |  | 2023 |  | 2022
| Amount |  | % of EBT |  | Amount |  | % of EBT |  | Amount |  | % of EBT
Earnings before income taxes (“EBT”) | $ | 1,124 |  |  |  |  | $ | 1,073 |  |  |  |  | $ | 1,123 |  |  |
Income taxes at statutory rate | $ | 236 |  |  | 21 | % |  | $ | 225 |  |  | 21 | % |  | $ | 236 |  |  | 21 | %
Effect of: |  |  |  |  |  |  |  |  |  |  |
Employee stock ownership plan dividend paid deduction | (5) |  |  | (1 | %) |  | (5) |  |  | (1 | %) |  | (8) |  |  | (1 | %)
Tax exempt interest | (5) |  |  | (1 | %) |  | (5) |  |  | (1 | %) |  | (6) |  |  | (1 | %)
Stock-based compensation | (3) |  |  | — | % |  | (2) |  |  | — | % |  | (5) |  |  | — | %
Change in valuation allowance | (3) |  |  | — | % |  | (2) |  |  | — | % |  | (9) |  |  | (1 | %)
Dividend received deduction | (1) |  |  | — | % |  | (2) |  |  | — | % |  | (2) |  |  | — | %
Nondeductible expenses | 7 |  |  | 1 | % |  | 11 |  |  | 1 | % |  | 8 |  |  | 1 | %
Adjustment related to sale of subsidiary (*) | 4 |  |  | 1 | % |  | — |  |  | — | % |  | — |  |  | — | %
Adjustment to prior year taxes | 1 |  |  | — | % |  | (5) |  |  | — | % |  | (3) |  |  | — | %
Foreign operations | 2 |  |  | — | % |  | 6 |  |  | 1 | % |  | 7 |  |  | 1 | %
Other | 4 |  |  | — | % |  | — |  |  | — | % |  | 7 |  |  | — | %
Provision for income taxes as shown in the statement of earnings | $ | 237 |  |  | 21 | % |  | $ | 221 |  |  | 21 | % |  | $ | 225 |  |  | 20 | %
(*)In 2024, AFG recorded $4 million in net tax expense related to a pending IRS settlement regarding the sale of a subsidiary in a prior year. On January 1, 2023, the two major tax provisions in the Inflation Reduction Act ("IRA”) became effective. The IRA created a new corporate alternative minimum tax (“CAMT”) based on the earnings that a company reports in its financial statements and imposes a 1% excise tax on corporate stock repurchases. Any CAMT incurred would be available to offset taxes payable under the standard calculation in future periods. Accordingly, the CAMT is a timing difference and would result in the recording of an offsetting deferred tax asset with no impact on overall income tax expense. While AFG meets the financial statement income thresholds to be subject to CAMT, management does not believe AFG will incur a CAMT liability for 2024. The excise tax on stock repurchases in excess of any issuances is recorded as part of the cost of the repurchases directly in shareholders’ equity. Since almost all of AFG’s earnings are taxable based on U.S. tax rates, the Global Intangible Low-taxed Income (“GILTI”) provision is not expected to be material to AFG’s results of operations and will be recorded in the period that any tax arises. The Organisation for Economic Co-operation and Development, an intergovernmental organization with 38 member countries, has proposed a global minimum corporate tax rate of 15% (“Pillar Two”). Due to AFG’s limited international operations and the tax rate AFG is subject to in those jurisdictions, management does not believe Pillar Two will have a material impact on AFG’s results of operations. AFG’s 2013 — 2018 and 2021 — 2024 tax years remain subject to examination by the IRS. Total earnings before income taxes include earnings subject to tax in foreign jurisdictions of $36 million in 2024, $32 million in 2023 and $64 million in 2022. The total income tax provision consists of (in millions):
| 2024 |  | 2023 |  | 2022
Current taxes: |  |  |  |  |
Federal | $ | 218 |  |  | $ | 176 |  |  | $ | 192 |
State | 11 |  |  | 9 |  |  | 10 |
Foreign | — |  |  | (1) |  |  | 1 |
Deferred taxes: |  |  |  |  |
Federal | 8 |  |  | 37 |  |  | 22 |
Provision for income taxes | $ | 237 |  |  | $ | 221 |  |  | $ | 225 |
For income tax purposes, AFG and its subsidiaries had the following carryforwards available at December 31, 2024 (in millions):
| Expiring |  | Amount |
Operating Loss – U.S. | 2025 - 2041 |  | $ | 8 |  |
Operating Loss – United Kingdom | indefinite |  | 35 |  | (*)
(*)£28 million 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):
| 2024 |  | 2023
Deferred tax assets: |  |  |
Federal net operating loss carryforwards | $ | 2 |  |  | $ | 2 |
Foreign underwriting losses | 10 |  |  | 10 |
Insurance claims and reserves | 283 |  |  | 269 |
Employee benefits | 114 |  |  | 111 |
Lease liabilities | 45 |  |  | 38 |
Other, net | 20 |  |  | 23 |
Total deferred tax assets before valuation allowance | 474 |  |  | 453 |
Valuation allowance against deferred tax assets | (11) |  |  | (14) |
Total deferred tax assets | 463 |  |  | 439 |
Deferred tax liabilities: |  |  |
Investment securities | (233) |  |  | (177) |
Deferred policy acquisition costs | (73) |  |  | (70) |
Insurance claims and reserves transition liability | (4) |  |  | (8) |
Lease right of use assets | (42) |  |  | (36) |
Real estate, property and equipment | (7) |  |  | (12) |
Total deferred tax liabilities | (359) |  |  | (303) |
Net deferred tax asset | $ | 104 |  |  | $ | 136 |
AFG’s net deferred tax asset at December 31, 2024 and 2023 is included in other assets in AFG’s Balance Sheet. The decrease in AFG’s net deferred tax asset at December 31, 2024 compared to December 31, 2023 reflects lower net unrealized losses on fixed maturities and the increase in fair value of equity securities and carrying value of limited partnership investments still owned. The likelihood of realizing deferred tax assets is reviewed periodically. Any adjustments required to the valuation allowance are made in the period during which developments requiring an adjustment become known. At December 31, 2024, there were no unrecognized tax benefits or related interest and penalties. At December 31, 2023, there were unrecognized tax benefits and related interest and penalties of less than $1 million. AFG’s provision for income taxes in 2024, 2023 and 2022 included interest expense of less than $1 million related to unrecognized tax benefits. There were liabilities of less than $1 million for interest related to unrecognized tax benefits at December 31, 2023. There were no penalties related to unrecognized tax benefits included in AFG’s provision for income taxes in 2024, 2023 and 2022. There is no liability for penalties related to unrecognized tax benefits at December 31, 2023. Cash payments for income taxes, net of refunds, were $201 million for both 2024 and 2023 and $242 million for 2022.

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