| Investments |
Investments Available for sale fixed maturities at June 30, 2025 and December 31, 2024, consisted of the following (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Amortized
Cost | | Allowance for Expected Credit Losses | | Gross Unrealized | | Net
Unrealized | | Fair
Value | | Gains | | Losses | | June 30, 2025 | | | | | | | | | | | | | Fixed maturities: | | | | | | | | | | | | | U.S. government and government agencies | $ | 188 | | | $ | — | | | $ | 1 | | | $ | (1) | | | $ | — | | | $ | 188 | | States, municipalities and political subdivisions | 910 | | | — | | | 6 | | | (48) | | | (42) | | | 868 | | Foreign government | 252 | | | — | | | 3 | | | — | | | 3 | | | 255 | | Residential MBS | 2,314 | | | 1 | | | 32 | | | (128) | | | (96) | | | 2,217 | | Collateralized loan obligations | 1,094 | | | 4 | | | 6 | | | (8) | | | (2) | | | 1,088 | | Other asset-backed securities | 2,433 | | | 5 | | | 25 | | | (47) | | | (22) | | | 2,406 | | Corporate and other | 3,441 | | | 5 | | | 69 | | | (38) | | | 31 | | | 3,467 | | | Total fixed maturities | $ | 10,632 | | | $ | 15 | | | $ | 142 | | | $ | (270) | | | $ | (128) | | | $ | 10,489 | | | | | | | | | | | | | | | December 31, 2024 | | | | | | | | | | | | | Fixed maturities: | | | | | | | | | | | | | U.S. government and government agencies | $ | 176 | | | $ | — | | | $ | — | | | $ | (3) | | | $ | (3) | | | $ | 173 | | States, municipalities and political subdivisions | 905 | | | — | | | 3 | | | (49) | | | (46) | | | 859 | | Foreign government | 236 | | | — | | | 2 | | | (1) | | | 1 | | | 237 | | Residential MBS | 2,122 | | | 1 | | | 22 | | | (154) | | | (132) | | | 1,989 | | Collateralized loan obligations | 1,243 | | | 4 | | | 10 | | | (12) | | | (2) | | | 1,237 | | Other asset-backed securities | 2,463 | | | 6 | | | 19 | | | (69) | | | (50) | | | 2,407 | | Corporate and other | 3,542 | | | 23 | | | 42 | | | (65) | | | (23) | | | 3,496 | | | Total fixed maturities | $ | 10,687 | | | $ | 34 | | | $ | 98 | | | $ | (353) | | | $ | (255) | | | $ | 10,398 | |
Equity securities which are reported at fair value with holding gains and losses recognized in net earnings, consisted of the following at June 30, 2025 and December 31, 2024 (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | June 30, 2025 | | December 31, 2024 | | Actual Cost | | Fair Value | | Fair Value Over Cost | | Actual Cost | | Fair Value | | Fair Value Over Cost | | Common stocks | $ | 347 | | | $ | 389 | | | $ | 42 | | | $ | 304 | | | $ | 336 | | | $ | 32 | | | Perpetual preferred stocks | 388 | | | 411 | | | 23 | | | 380 | | | 415 | | | 35 | | Total equity securities carried at fair value | $ | 735 | | | $ | 800 | | | $ | 65 | | | $ | 684 | | | $ | 751 | | | $ | 67 | |
The following table summarizes investments accounted for using the equity method, by strategy (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net Investment Income | | Carrying Value | | Three months ended June 30, | | Six months ended June 30, | | June 30, 2025 | | December 31, 2024 | | 2025 | | 2024 | | 2025 | | 2024 | | Real estate-related investments (*) | $ | 1,413 | | | $ | 1,392 | | | $ | (16) | | | $ | 11 | | | $ | 1 | | | $ | 5 | | | Private equity | 838 | | | 804 | | | 7 | | | 1 | | | 1 | | | 31 | | | Private debt | 90 | | | 81 | | | 3 | | | 2 | | | 5 | | | 3 | | | Total investments accounted for using the equity method | $ | 2,341 | | | $ | 2,277 | | | $ | (6) | | | $ | 14 | | | $ | 7 | | | $ | 39 | |
(*)88% of the carrying value relates to underlying investments in multi-family properties as of June 30, 2025 and December 31, 2024.
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 $492 million and $457 million as of June 30, 2025 and December 31, 2024, 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 | | June 30, 2025 | | | | | | | | | | | | | Fixed maturities: | | | | | | | | | | | | | U.S. government and government agencies | $ | — | | | $ | 30 | | | 100 | % | | $ | (1) | | | $ | 84 | | | 99 | % | States, municipalities and political subdivisions | (5) | | | 129 | | | 96 | % | | (43) | | | 469 | | | 92 | % | | Foreign government | — | | | — | | | — | % | | — | | | 49 | | | 100 | % | | Residential MBS | (1) | | | 192 | | | 99 | % | | (127) | | | 903 | | | 88 | % | | Collateralized loan obligations | — | | | 58 | | | 100 | % | | (8) | | | 204 | | | 96 | % | | Other asset-backed securities | (1) | | | 298 | | | 100 | % | | (46) | | | 973 | | | 95 | % | | Corporate and other | (4) | | | 258 | | | 98 | % | | (34) | | | 972 | | | 97 | % | | Total fixed maturities | $ | (11) | | | $ | 965 | | | 99 | % | | $ | (259) | | | $ | 3,654 | | | 93 | % | | | | | | | | | | | | | | December 31, 2024 | | | | | | | | | | | | | Fixed maturities: | | | | | | | | | | | | | U.S. government and government agencies | $ | — | | | $ | 35 | | | 100 | % | | $ | (3) | | | $ | 105 | | | 97 | % | States, municipalities and political subdivisions | (5) | | | 256 | | | 98 | % | | (44) | | | 470 | | | 91 | % | | Foreign government | — | | | 98 | | | 100 | % | | (1) | | | 50 | | | 98 | % | | Residential MBS | (6) | | | 452 | | | 99 | % | | (148) | | | 916 | | | 86 | % | | Collateralized loan obligations | — | | | — | | | — | % | | (12) | | | 247 | | | 95 | % | | Other asset-backed securities | (4) | | | 332 | | | 99 | % | | (65) | | | 1,217 | | | 95 | % | | Corporate and other | (10) | | | 605 | | | 98 | % | | (55) | | | 1,151 | | | 95 | % | | Total fixed maturities | $ | (25) | | | $ | 1,778 | | | 99 | % | | $ | (328) | | | $ | 4,156 | | | 93 | % |
At June 30, 2025, the gross unrealized losses on fixed maturities of $270 million relate to approximately 1,100 securities. Investment grade securities (as determined by nationally recognized rating agencies) represented approximately 96% of the gross unrealized loss and 96% 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, communications with industry specialists and discussions with issuer management.
AFG analyzes its residential 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 June 30, 2025. A progression of the allowance for expected credit losses on available for sale fixed maturity securities is shown below (in millions): | | | | | | | | | | | | | | | | | | | Structured
Securities (*) | | Corporate and Other | | Total | | Balance at March 31, 2025 | $ | 11 | | | $ | 30 | | | $ | 41 | | | | | | | | | Provision for expected credit losses on securities with no previous allowance | — | | | 1 | | | 1 | | Reductions to previously recognized expected credit losses | (1) | | | — | | | (1) | | Reductions due to sales or redemptions | — | | | (26) | | | (26) | | | Balance at June 30, 2025 | $ | 10 | | | $ | 5 | | | $ | 15 | | | | | | | | | Balance at March 31, 2024 | $ | 11 | | | $ | — | | | $ | 11 | | | | | | | | | Provision for expected credit losses on securities with no previous allowance | — | | | — | | | — | | Additions (reductions) to previously recognized expected credit losses | — | | | — | | | — | | Reductions due to sales or redemptions | (1) | | | — | | | (1) | | | Balance at June 30, 2024 | $ | 10 | | | $ | — | | | $ | 10 | | | | | | | | | Balance at December 31, 2024 | $ | 11 | | | $ | 23 | | | $ | 34 | | | | | | | | | Provision for expected credit losses on securities with no previous allowance | — | | | 3 | | | 3 | | Additions (reductions) to previously recognized expected credit losses | (1) | | | 5 | | | 4 | | Reductions due to sales or redemptions | — | | | (26) | | | (26) | | | Balance at June 30, 2025 | $ | 10 | | | $ | 5 | | | $ | 15 | | | | | | | | | Balance at December 31, 2023 | $ | 9 | | | $ | 3 | | | $ | 12 | | | | | | | | | Provision for expected credit losses on securities with no previous allowance | 1 | | | — | | | 1 | | Additions to previously recognized expected credit losses | 1 | | | — | | | 1 | | Reductions due to sales or redemptions | (1) | | | (3) | | | (4) | | | Balance at June 30, 2024 | $ | 10 | | | $ | — | | | $ | 10 | |
(*)Includes residential MBS, CLOs and other asset-backed securities (“ABS”).
In the first six months of 2025 and 2024, 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 June 30, 2025 (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 | $ | 749 | | | $ | 735 | | | 7 | % | | After one year through five years | 2,516 | | | 2,514 | | | 24 | % | | After five years through ten years | 1,299 | | | 1,320 | | | 13 | % | | After ten years | 222 | | | 209 | | | 2 | % | | 4,786 | | | 4,778 | | | 46 | % | CLOs and other ABS (average life of approximately 3 years) | 3,518 | | | 3,494 | | | 33 | % | Residential MBS (average life of approximately 6 years) | 2,313 | | | 2,217 | | | 21 | % | | Total | $ | 10,617 | | | $ | 10,489 | | | 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 June 30, 2025 or December 31, 2024. Net Investment Income The following table shows investment income earned and investment expenses incurred (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | Three months ended June 30, | | Six months ended June 30, | | 2025 | | 2024 | | 2025 | | 2024 | | Investment income: | | | | | | | | | Fixed maturities: | | | | | | | | | Interest and amortization | $ | 141 | | | $ | 136 | | | $ | 281 | | | $ | 270 | | Change in fair value (*) | 7 | | | — | | | 2 | | | — | | | Equity securities: | | | | | | | | | Dividends | 15 | | | 7 | | | 21 | | | 14 | | Change in fair value | 4 | | | 9 | | | 4 | | | 25 | | Equity in earnings (losses) of partnerships and similar investments, net | (6) | | | 14 | | | 7 | | | 39 | | Cash and cash equivalents | 10 | | | 12 | | | 23 | | | 24 | | | Other | 19 | | | 15 | | | 32 | | | 25 | | | Gross investment income | 190 | | | 193 | | | 370 | | | 397 | | | Investment expenses | (6) | | | (5) | | | (13) | | | (11) | | | Net investment income | $ | 184 | | | $ | 188 | | | $ | 357 | | | $ | 386 | |
(*)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.
Realized gains (losses) and changes in unrealized appreciation (depreciation) included in AOCI related to fixed maturity securities are summarized as follows (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three months ended June 30, 2025 | | Three months ended June 30, 2024 | | Realized gains (losses) | | | | Realized gains (losses) | | | | Before Impairments | | Impairment Allowance | | Total | | Change in Unrealized | | Before Impairments | | Impairment Allowance | | Total | | Change in Unrealized | | Fixed maturities | $ | (8) | | | $ | — | | | $ | (8) | | | $ | 51 | | | $ | (1) | | | $ | — | | | $ | (1) | | | $ | (15) | | | Equity securities | 10 | | | — | | | 10 | | | — | | | (1) | | | — | | | (1) | | | — | | Mortgage loans and other investments | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | Total pretax | 2 | | | — | | | 2 | | | 51 | | | (2) | | | — | | | (2) | | | (15) | | | Tax effects | — | | | — | | | — | | | (11) | | | — | | | — | | | — | | | 3 | | Net of tax | $ | 2 | | | $ | — | | | $ | 2 | | | $ | 40 | | | $ | (2) | | | $ | — | | | $ | (2) | | | $ | (12) | | | | | | | | | | | | | | | | | | | Six months ended June 30, 2025 | | Six months ended June 30, 2024 | | Realized gains (losses) | | | | Realized gains (losses) | | | | Before Impairments | | Impairment Allowance | | Total | | Change in Unrealized | | Before Impairments | | Impairment Allowance | | Total | | Change in Unrealized | | Fixed maturities | $ | (7) | | | $ | (7) | | | $ | (14) | | | $ | 127 | | | $ | (5) | | | $ | (2) | | | $ | (7) | | | $ | (4) | | | Equity securities | 19 | | | — | | | 19 | | | — | | | 19 | | | — | | | 19 | | | — | | Mortgage loans and other investments | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | Total pretax | 12 | | | (7) | | | 5 | | | 127 | | | 14 | | | (2) | | | 12 | | | (4) | | | Tax effects | (2) | | | 1 | | | (1) | | | (26) | | | (3) | | | — | | | (3) | | | 1 | | Net of tax | $ | 10 | | | $ | (6) | | | $ | 4 | | | $ | 101 | | | $ | 11 | | | $ | (2) | | | $ | 9 | | | $ | (3) | |
All equity securities are carried at fair value through net earnings. AFG recorded net holding gains (losses) on equity securities during the second quarter and first six months of 2025 and 2024 on securities that were still owned at June 30, 2025 and June 30, 2024 as follows (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | Three months ended June 30, | | Six months ended June 30, | | 2025 | | 2024 | | 2025 | | 2024 | | Included in realized gains (losses) | $ | 9 | | | $ | (3) | | | $ | 16 | | | $ | 17 | | | Included in net investment income | 2 | | | 9 | | | 3 | | | 25 | | | $ | 11 | | | $ | 6 | | | $ | 19 | | | $ | 42 | |
Gross realized gains and losses (excluding changes in impairment allowance and mark-to-market of derivatives) on available for sale fixed maturity investment transactions consisted of the following (in millions): | | | | | | | | | | | | | Six months ended June 30, | | 2025 | | 2024 | | Gross gains | $ | 3 | | | $ | — | | | Gross losses | (11) | | | (4) | |
|