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Derivatives | 9 Months Ended
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Sep. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivatives | Derivatives As discussed under “Derivatives” in Note A — “Accounting Policies,” AFG uses derivatives to mitigate certain market risks related to its investment portfolio and deferred compensation obligations to employees. The following table presents the classification of derivative assets and liabilities included in AFG’s Balance Sheet at fair value (in millions):
|  |  | September 30, 2025 |  | December 31, 2024
| Balance Sheet Line |  | Asset |  | Liability |  | Asset |  | Liability
Derivatives designated and qualifying as cash flow hedges: |  |  |  |  |  |  |  |  |
Interest rate swaps | Other assets/Other liabilities |  | $ | 1 |  |  | $ | 5 |  |  | $ | 1 |  |  | $ | 14 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |
Fixed maturities with embedded derivatives | Fixed maturities |  | 51 |  |  | — |  |  | 81 |  |  | — |
Total return swap | Other assets/Other liabilities |  | 3 |  |  | — |  |  | — |  |  | 4 |
|  |  | $ | 55 |  |  | $ | 5 |  |  | $ | 82 |  |  | $ | 18 |
AFG’s interest rate swaps are designated and qualify as highly effective cash flow hedges to mitigate interest rate risk related to certain floating-rate securities included in AFG’s portfolio of fixed maturity securities. The purpose of each of these swaps is to effectively convert a portion of AFG’s floating-rate fixed maturity securities to fixed rates by offsetting the variability in cash flows attributable to changes in the applicable Secured Overnight Financing Rate (“SOFR”). Under the terms of the swaps, AFG receives fixed-rate interest payments in exchange for variable interest payments based on SOFR. The notional amounts of the interest rate swaps generally decline over each swap’s respective life (the swaps expire between October 2025 and October 2034) in anticipation of the expected decline in AFG’s portfolio of fixed maturity securities with floating interest rates based on SOFR. The total outstanding notional amount of AFG’s interest rate swaps was $637 million at September 30, 2025 compared to $1.05 billion at December 31, 2024, reflecting scheduled amortization, partially offset by one new swap entered into in the first nine months of 2025 ($12 million notional amount at issuance). Amounts reclassified from AOCI to net investment income were losses of $3 million and $6 million in the third quarter of 2025 and 2024 and losses of $8 million and $20 million in the first nine months of 2025 and 2024, respectively. Based on forward interest rate curves at September 30, 2025, management estimates that it will reclassify approximately $4 million of pre-tax net losses on interest rate swaps in AOCI to net investment income over the next twelve months. The actual amount will vary based on changes in SOFR. A collateral receivable supporting these swaps of $12 million and $27 million at September 30, 2025 and December 31, 2024, respectively, is included in other assets in AFG’s Balance Sheet. The fixed maturities with embedded derivatives consist of convertible fixed maturity securities and interest-only and principal-only MBS. AFG records the change in the fair value of these securities in net earnings. These investments are part of AFG’s overall investment strategy and represent a small component of AFG’s overall investment portfolio. AFG is exposed to fair value changes from certain equity and fixed maturity market-based exposures related to its deferred compensation obligations to certain employees. To mitigate this risk, AFG entered into a total return swap. AFG’s Balance Sheet includes a $2 million liability to return collateral related to the swap (included in other liabilities) and a $4 million receivable for collateral posted related to the swap (included in other assets) at September 30, 2025 and December 31, 2024, respectively. The following table summarizes the gains (losses) included in AFG’s Statement of Earnings for changes in the fair value of derivatives (in millions):
|  |  |  | Three months ended September 30, |  | Nine months ended September 30,
|  | Statement of Earnings Line |  | 2025 |  | 2024 |  | 2025 |  | 2024
Qualifying cash flow hedges: |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | Net investment income |  | $ | (3) |  |  | $ | (6) |  |  | $ | (8) |  |  | $ | (20) |
Non-designated hedges: |  |  |  |  |  |  |  |  |  |
Fixed maturities with embedded derivatives |  | Realized gains (losses) on securities |  | 1 |  |  | 3 |  |  | 2 |  |  | 2 |
Fixed maturities with embedded derivatives |  | Net investment income |  | 4 |  |  | 6 |  |  | 6 |  |  | 7 |
Total return swap |  | Other expenses |  | 6 |  |  | 5 |  |  | 12 |  |  | 11 |
Earnings (losses) on non-designated hedges |  |  |  | 11 |  |  | 14 |  |  | 20 |  |  | 20 |
Total earnings (losses) on derivatives |  |  |  | $ | 8 |  |  | $ | 8 |  |  | $ | 12 |  |  | $ | — |

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