|
|
|
Page
|
|
|
|
|
|
|
|
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
Assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
1,673
|
|
|
$
|
2,314
|
|
Investments:
|
|
|
|
||||
Fixed maturities, available for sale at fair value (amortized cost — $46,101 and $44,524; allowance for expected credit losses of $61 at March 31, 2020)
|
46,134
|
|
|
46,505
|
|
||
Fixed maturities, trading at fair value
|
96
|
|
|
113
|
|
||
Equity securities, at fair value
|
1,559
|
|
|
1,937
|
|
||
Investments accounted for using the equity method
|
1,763
|
|
|
1,688
|
|
||
Mortgage loans
|
1,346
|
|
|
1,329
|
|
||
Policy loans
|
161
|
|
|
164
|
|
||
Equity index call options
|
209
|
|
|
924
|
|
||
Real estate and other investments
|
280
|
|
|
278
|
|
||
Total cash and investments
|
53,221
|
|
|
55,252
|
|
||
Recoverables from reinsurers
|
3,387
|
|
|
3,415
|
|
||
Prepaid reinsurance premiums
|
708
|
|
|
678
|
|
||
Agents’ balances and premiums receivable
|
1,302
|
|
|
1,335
|
|
||
Deferred policy acquisition costs
|
1,573
|
|
|
1,037
|
|
||
Assets of managed investment entities
|
4,026
|
|
|
4,736
|
|
||
Other receivables
|
981
|
|
|
975
|
|
||
Variable annuity assets (separate accounts)
|
497
|
|
|
628
|
|
||
Other assets
|
1,741
|
|
|
1,867
|
|
||
Goodwill
|
207
|
|
|
207
|
|
||
Total assets
|
$
|
67,643
|
|
|
$
|
70,130
|
|
|
|
|
|
||||
Liabilities and Equity:
|
|
|
|
||||
Unpaid losses and loss adjustment expenses
|
$
|
10,106
|
|
|
$
|
10,232
|
|
Unearned premiums
|
2,808
|
|
|
2,830
|
|
||
Annuity benefits accumulated
|
40,463
|
|
|
40,406
|
|
||
Life, accident and health reserves
|
607
|
|
|
612
|
|
||
Payable to reinsurers
|
779
|
|
|
814
|
|
||
Liabilities of managed investment entities
|
3,865
|
|
|
4,571
|
|
||
Long-term debt
|
1,473
|
|
|
1,473
|
|
||
Variable annuity liabilities (separate accounts)
|
497
|
|
|
628
|
|
||
Other liabilities
|
1,998
|
|
|
2,295
|
|
||
Total liabilities
|
62,596
|
|
|
63,861
|
|
||
|
|
|
|
||||
Redeemable noncontrolling interests
|
—
|
|
|
—
|
|
||
|
|
|
|
||||
Shareholders’ equity:
|
|
|
|
||||
Common Stock, no par value
— 200,000,000 shares authorized
— 89,827,336 and 90,303,686 shares outstanding
|
90
|
|
|
90
|
|
||
Capital surplus
|
1,309
|
|
|
1,307
|
|
||
Retained earnings
|
3,616
|
|
|
4,009
|
|
||
Accumulated other comprehensive income, net of tax
|
32
|
|
|
863
|
|
||
Total shareholders’ equity
|
5,047
|
|
|
6,269
|
|
||
Noncontrolling interests
|
—
|
|
|
—
|
|
||
Total equity
|
5,047
|
|
|
6,269
|
|
||
Total liabilities and equity
|
$
|
67,643
|
|
|
$
|
70,130
|
|
|
Three months ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Revenues:
|
|
|
|
||||
Property and casualty insurance net earned premiums
|
$
|
1,209
|
|
|
$
|
1,173
|
|
Net investment income
|
544
|
|
|
542
|
|
||
Realized gains (losses) on securities (*)
|
(551
|
)
|
|
184
|
|
||
Income (loss) of managed investment entities:
|
|
|
|
||||
Investment income
|
59
|
|
|
69
|
|
||
Gain (loss) on change in fair value of assets/liabilities
|
(43
|
)
|
|
—
|
|
||
Other income
|
57
|
|
|
56
|
|
||
Total revenues
|
1,275
|
|
|
2,024
|
|
||
|
|
|
|
||||
Costs and Expenses:
|
|
|
|
||||
Property and casualty insurance:
|
|
|
|
||||
Losses and loss adjustment expenses
|
707
|
|
|
692
|
|
||
Commissions and other underwriting expenses
|
420
|
|
|
399
|
|
||
Annuity benefits
|
276
|
|
|
311
|
|
||
Annuity and supplemental insurance acquisition expenses
|
113
|
|
|
28
|
|
||
Interest charges on borrowed money
|
17
|
|
|
16
|
|
||
Expenses of managed investment entities
|
48
|
|
|
55
|
|
||
Other expenses
|
82
|
|
|
110
|
|
||
Total costs and expenses
|
1,663
|
|
|
1,611
|
|
||
Earnings (loss) before income taxes
|
(388
|
)
|
|
413
|
|
||
Provision (credit) for income taxes
|
(84
|
)
|
|
87
|
|
||
Net earnings (loss), including noncontrolling interests
|
(304
|
)
|
|
326
|
|
||
Less: Net earnings (loss) attributable to noncontrolling interests
|
(3
|
)
|
|
(3
|
)
|
||
Net Earnings (Loss) Attributable to Shareholders
|
$
|
(301
|
)
|
|
$
|
329
|
|
|
|
|
|
||||
Earnings (Loss) Attributable to Shareholders per Common Share:
|
|
|
|
||||
Basic
|
$
|
(3.34
|
)
|
|
$
|
3.68
|
|
Diluted
|
$
|
(3.34
|
)
|
|
$
|
3.63
|
|
Average number of Common Shares:
|
|
|
|
||||
Basic
|
90.3
|
|
|
89.4
|
|
||
Diluted
|
90.3
|
|
|
90.7
|
|
||
________________________________________
|
|
|
|
||||
(*) Consists of the following:
|
|
|
|
||||
Realized gains (losses) before impairments
|
$
|
(505
|
)
|
|
$
|
186
|
|
|
|
|
|
||||
Losses on securities with impairment
|
(69
|
)
|
|
(2
|
)
|
||
Non-credit portion recognized in other comprehensive income (loss)
|
23
|
|
|
—
|
|
||
Impairment charges recognized in earnings
|
(46
|
)
|
|
(2
|
)
|
||
Total realized gains (losses) on securities
|
$
|
(551
|
)
|
|
$
|
184
|
|
|
Three months ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Net earnings (loss), including noncontrolling interests
|
$
|
(304
|
)
|
|
$
|
326
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
||||
Net unrealized gains (losses) on securities:
|
|
|
|
||||
Unrealized holding gains (losses) on securities arising during the period
|
(865
|
)
|
|
384
|
|
||
Reclassification adjustment for realized (gains) losses included in net earnings
|
19
|
|
|
(3
|
)
|
||
Total net unrealized gains (losses) on securities
|
(846
|
)
|
|
381
|
|
||
Net unrealized gains on cash flow hedges
|
27
|
|
|
11
|
|
||
Foreign currency translation adjustments
|
(10
|
)
|
|
4
|
|
||
Other comprehensive income (loss), net of tax
|
(829
|
)
|
|
396
|
|
||
Total comprehensive income (loss), net of tax
|
(1,133
|
)
|
|
722
|
|
||
Less: Comprehensive income (loss) attributable to noncontrolling interests
|
(1
|
)
|
|
(3
|
)
|
||
Comprehensive income (loss) attributable to shareholders
|
$
|
(1,132
|
)
|
|
$
|
725
|
|
|
|
|
|
Shareholders’ Equity
|
|
|
|
|
|
Redeemable
|
|||||||||||||||||||||
Common
|
|
|
Common Stock
and Capital
|
|
Retained
|
|
Accumulated
Other Comp.
|
|
|
|
Noncon-
trolling
|
|
Total
|
|
Noncon-
trolling |
||||||||||||||||
Shares
|
|
|
Surplus
|
|
Earnings
|
|
Inc. (Loss)
|
|
Total
|
|
Interests
|
|
Equity
|
|
Interests
|
||||||||||||||||
Balance at December 31, 2019
|
90,303,686
|
|
|
|
$
|
1,397
|
|
|
$
|
4,009
|
|
|
$
|
863
|
|
|
$
|
6,269
|
|
|
$
|
—
|
|
|
$
|
6,269
|
|
|
$
|
—
|
|
Cumulative effect of accounting change
|
—
|
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|||||||
Net earnings (loss)
|
—
|
|
|
|
—
|
|
|
(301
|
)
|
|
—
|
|
|
(301
|
)
|
|
—
|
|
|
(301
|
)
|
|
(3
|
)
|
|||||||
Other comprehensive income (loss)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(831
|
)
|
|
(831
|
)
|
|
—
|
|
|
(831
|
)
|
|
2
|
|
|||||||
Dividends ($0.45 per share)
|
—
|
|
|
|
—
|
|
|
(40
|
)
|
|
—
|
|
|
(40
|
)
|
|
—
|
|
|
(40
|
)
|
|
—
|
|
|||||||
Shares issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Exercise of stock options
|
204,093
|
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|||||||
Restricted stock awards
|
227,867
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Other benefit plans
|
14,541
|
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|||||||
Dividend reinvestment plan
|
1,617
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Stock-based compensation expense
|
—
|
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|||||||
Shares acquired and retired
|
(826,283
|
)
|
|
|
(12
|
)
|
|
(49
|
)
|
|
—
|
|
|
(61
|
)
|
|
—
|
|
|
(61
|
)
|
|
—
|
|
|||||||
Shares exchanged — benefit plans
|
(95,854
|
)
|
|
|
(2
|
)
|
|
(9
|
)
|
|
—
|
|
|
(11
|
)
|
|
—
|
|
|
(11
|
)
|
|
—
|
|
|||||||
Forfeitures of restricted stock
|
(2,331
|
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Other
|
—
|
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
1
|
|
|||||||
Balance at March 31, 2020
|
89,827,336
|
|
|
|
$
|
1,399
|
|
|
$
|
3,616
|
|
|
$
|
32
|
|
|
$
|
5,047
|
|
|
$
|
—
|
|
|
$
|
5,047
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at December 31, 2018
|
89,291,724
|
|
|
|
$
|
1,334
|
|
|
$
|
3,588
|
|
|
$
|
48
|
|
|
$
|
4,970
|
|
|
$
|
2
|
|
|
$
|
4,972
|
|
|
$
|
—
|
|
Net earnings (loss)
|
—
|
|
|
|
—
|
|
|
329
|
|
|
—
|
|
|
329
|
|
|
—
|
|
|
329
|
|
|
(3
|
)
|
|||||||
Other comprehensive income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
396
|
|
|
396
|
|
|
—
|
|
|
396
|
|
|
—
|
|
|||||||
Dividends ($0.40 per share)
|
—
|
|
|
|
—
|
|
|
(36
|
)
|
|
—
|
|
|
(36
|
)
|
|
—
|
|
|
(36
|
)
|
|
—
|
|
|||||||
Shares issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Exercise of stock options
|
152,253
|
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|||||||
Restricted stock awards
|
232,565
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Other benefit plans
|
11,062
|
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|||||||
Dividend reinvestment plan
|
1,893
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Stock-based compensation expense
|
—
|
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|||||||
Shares exchanged — benefit plans
|
(43,470
|
)
|
|
|
(1
|
)
|
|
(3
|
)
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|||||||
Forfeitures of restricted stock
|
(8,314
|
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Other
|
—
|
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
|
(2
|
)
|
|
(5
|
)
|
|
3
|
|
|||||||
Balance at March 31, 2019
|
89,637,713
|
|
|
|
$
|
1,346
|
|
|
$
|
3,875
|
|
|
$
|
444
|
|
|
$
|
5,665
|
|
|
$
|
—
|
|
|
$
|
5,665
|
|
|
$
|
—
|
|
|
Three months ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Operating Activities:
|
|
|
|
||||
Net earnings (loss), including noncontrolling interests
|
$
|
(304
|
)
|
|
$
|
326
|
|
Adjustments:
|
|
|
|
||||
Depreciation and amortization
|
113
|
|
|
34
|
|
||
Annuity benefits
|
276
|
|
|
311
|
|
||
Realized (gains) losses on investing activities
|
550
|
|
|
(184
|
)
|
||
Net sales of trading securities
|
8
|
|
|
1
|
|
||
Deferred annuity and life policy acquisition costs
|
(49
|
)
|
|
(64
|
)
|
||
Change in:
|
|
|
|
||||
Reinsurance and other receivables
|
161
|
|
|
128
|
|
||
Other assets
|
410
|
|
|
(271
|
)
|
||
Insurance claims and reserves
|
(152
|
)
|
|
(112
|
)
|
||
Payable to reinsurers
|
(35
|
)
|
|
(22
|
)
|
||
Other liabilities
|
(543
|
)
|
|
304
|
|
||
Managed investment entities’ assets/liabilities
|
89
|
|
|
16
|
|
||
Other operating activities, net
|
8
|
|
|
(13
|
)
|
||
Net cash provided by operating activities
|
532
|
|
|
454
|
|
||
|
|
|
|
||||
Investing Activities:
|
|
|
|
||||
Purchases of:
|
|
|
|
||||
Fixed maturities
|
(4,140
|
)
|
|
(1,801
|
)
|
||
Equity securities
|
(232
|
)
|
|
(35
|
)
|
||
Mortgage loans
|
(21
|
)
|
|
(38
|
)
|
||
Equity index options and other investments
|
(245
|
)
|
|
(220
|
)
|
||
Real estate, property and equipment
|
(9
|
)
|
|
(10
|
)
|
||
Proceeds from:
|
|
|
|
||||
Maturities and redemptions of fixed maturities
|
1,220
|
|
|
1,032
|
|
||
Repayments of mortgage loans
|
4
|
|
|
29
|
|
||
Sales of fixed maturities
|
1,483
|
|
|
201
|
|
||
Sales of equity securities
|
80
|
|
|
95
|
|
||
Sales and settlements of equity index options and other investments
|
248
|
|
|
79
|
|
||
Sales of real estate, property and equipment
|
1
|
|
|
1
|
|
||
Managed investment entities:
|
|
|
|
||||
Purchases of investments
|
(414
|
)
|
|
(391
|
)
|
||
Proceeds from sales and redemptions of investments
|
370
|
|
|
373
|
|
||
Other investing activities, net
|
2
|
|
|
1
|
|
||
Net cash used in investing activities
|
(1,653
|
)
|
|
(684
|
)
|
||
|
|
|
|
||||
Financing Activities:
|
|
|
|
||||
Annuity receipts
|
1,410
|
|
|
1,395
|
|
||
Annuity surrenders, benefits and withdrawals
|
(813
|
)
|
|
(782
|
)
|
||
Net transfers from variable annuity assets
|
15
|
|
|
13
|
|
||
Additional long-term borrowings
|
—
|
|
|
121
|
|
||
Retirements of managed investment entities’ liabilities
|
(41
|
)
|
|
(3
|
)
|
||
Issuances of Common Stock
|
10
|
|
|
7
|
|
||
Repurchases of Common Stock
|
(61
|
)
|
|
—
|
|
||
Cash dividends paid on Common Stock
|
(40
|
)
|
|
(36
|
)
|
||
Net cash provided by financing activities
|
480
|
|
|
715
|
|
||
Net Change in Cash and Cash Equivalents
|
(641
|
)
|
|
485
|
|
||
Cash and cash equivalents at beginning of period
|
2,314
|
|
|
1,515
|
|
||
Cash and cash equivalents at end of period
|
$
|
1,673
|
|
|
$
|
2,000
|
|
INDEX TO NOTES
|
|||||
|
|
|
|
|
|
A.
|
Accounting Policies
|
|
I.
|
Goodwill and Other Intangibles
|
|
B.
|
Acquisition of Business
|
|
J.
|
Long-Term Debt
|
|
C.
|
Segments of Operations
|
|
K.
|
Shareholders’ Equity
|
|
D.
|
Fair Value Measurements
|
|
L.
|
Income Taxes
|
|
E.
|
Investments
|
|
M.
|
Contingencies
|
|
F.
|
Derivatives
|
|
N.
|
Insurance
|
|
G.
|
Deferred Policy Acquisition Costs
|
|
O.
|
Subsequent Events
|
|
H.
|
Managed Investment Entities
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Revenues
|
|
|
|
||||
Property and casualty insurance:
|
|
|
|
||||
Premiums earned:
|
|
|
|
||||
Specialty
|
|
|
|
||||
Property and transportation
|
$
|
386
|
|
|
$
|
361
|
|
Specialty casualty
|
556
|
|
|
629
|
|
||
Specialty financial
|
156
|
|
|
146
|
|
||
Other specialty
|
40
|
|
|
37
|
|
||
Other lines (a)
|
71
|
|
|
—
|
|
||
Total premiums earned
|
1,209
|
|
|
1,173
|
|
||
Net investment income (b)
|
93
|
|
|
104
|
|
||
Other income
|
5
|
|
|
3
|
|
||
Total property and casualty insurance
|
1,307
|
|
|
1,280
|
|
||
Annuity:
|
|
|
|
||||
Net investment income
|
422
|
|
|
435
|
|
||
Other income
|
35
|
|
|
28
|
|
||
Total annuity
|
457
|
|
|
463
|
|
||
Other
|
62
|
|
|
97
|
|
||
Total revenues before realized gains (losses)
|
1,826
|
|
|
1,840
|
|
||
Realized gains (losses) on securities
|
(551
|
)
|
|
184
|
|
||
Total revenues
|
$
|
1,275
|
|
|
$
|
2,024
|
|
(a)
|
Represents premiums earned in the Neon exited lines during the first three months of 2020. Neon’s $88 million in earned premiums during the first three months of 2019 are included in the Specialty casualty sub-segment.
|
(b)
|
Includes a net loss of $6 million in the Neon exited lines, primarily from the change in fair value of equity securities.
|
|
Three months ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Earnings (Loss) Before Income Taxes
|
|
|
|
||||
Property and casualty insurance:
|
|
|
|
||||
Underwriting:
|
|
|
|
||||
Specialty
|
|
|
|
||||
Property and transportation
|
$
|
27
|
|
|
$
|
39
|
|
Specialty casualty
|
52
|
|
|
36
|
|
||
Specialty financial
|
17
|
|
|
13
|
|
||
Other specialty
|
(7
|
)
|
|
—
|
|
||
Other lines (a)
|
(2
|
)
|
|
(1
|
)
|
||
Total underwriting
|
87
|
|
|
87
|
|
||
Investment and other income, net (b)
|
84
|
|
|
95
|
|
||
Total property and casualty insurance
|
171
|
|
|
182
|
|
||
Annuity
|
29
|
|
|
90
|
|
||
Other (c)
|
(37
|
)
|
|
(43
|
)
|
||
Total earnings before realized gains (losses) and income taxes
|
163
|
|
|
229
|
|
||
Realized gains (losses) on securities
|
(551
|
)
|
|
184
|
|
||
Total earnings (loss) before income taxes
|
$
|
(388
|
)
|
|
$
|
413
|
|
(a)
|
Includes a $1 million underwriting loss in the first three months of 2020 in the Neon exited lines. Neon’s $10 million underwriting loss in the first three months of 2019 is included in the Specialty casualty sub-segment.
|
(b)
|
Includes $9 million in net expenses from the Neon exited lines, before noncontrolling interest.
|
(c)
|
Includes holding company interest and expenses.
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
March 31, 2020
|
|
|
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Available for sale (“AFS”) fixed maturities:
|
|
|
|
|
|
|
|
||||||||
U.S. Government and government agencies
|
$
|
158
|
|
|
$
|
32
|
|
|
$
|
15
|
|
|
$
|
205
|
|
States, municipalities and political subdivisions
|
—
|
|
|
6,801
|
|
|
105
|
|
|
6,906
|
|
||||
Foreign government
|
—
|
|
|
170
|
|
|
—
|
|
|
170
|
|
||||
Residential MBS
|
—
|
|
|
2,968
|
|
|
163
|
|
|
3,131
|
|
||||
Commercial MBS
|
—
|
|
|
875
|
|
|
32
|
|
|
907
|
|
||||
Collateralized loan obligations
|
—
|
|
|
3,970
|
|
|
168
|
|
|
4,138
|
|
||||
Other asset-backed securities
|
—
|
|
|
5,728
|
|
|
1,030
|
|
|
6,758
|
|
||||
Corporate and other
|
25
|
|
|
22,346
|
|
|
1,548
|
|
|
23,919
|
|
||||
Total AFS fixed maturities
|
183
|
|
|
42,890
|
|
|
3,061
|
|
|
46,134
|
|
||||
Trading fixed maturities
|
1
|
|
|
95
|
|
|
—
|
|
|
96
|
|
||||
Equity securities
|
1,056
|
|
|
67
|
|
|
436
|
|
|
1,559
|
|
||||
Equity index call options
|
—
|
|
|
209
|
|
|
—
|
|
|
209
|
|
||||
Assets of managed investment entities (“MIE”)
|
169
|
|
|
3,841
|
|
|
16
|
|
|
4,026
|
|
||||
Variable annuity assets (separate accounts) (*)
|
—
|
|
|
497
|
|
|
—
|
|
|
497
|
|
||||
Other assets — derivatives
|
—
|
|
|
125
|
|
|
—
|
|
|
125
|
|
||||
Total assets accounted for at fair value
|
$
|
1,409
|
|
|
$
|
47,724
|
|
|
$
|
3,513
|
|
|
$
|
52,646
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Liabilities of managed investment entities
|
$
|
162
|
|
|
$
|
3,688
|
|
|
$
|
15
|
|
|
$
|
3,865
|
|
Derivatives in annuity benefits accumulated
|
—
|
|
|
—
|
|
|
3,099
|
|
|
3,099
|
|
||||
Other liabilities — derivatives
|
—
|
|
|
10
|
|
|
—
|
|
|
10
|
|
||||
Total liabilities accounted for at fair value
|
$
|
162
|
|
|
$
|
3,698
|
|
|
$
|
3,114
|
|
|
$
|
6,974
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2019
|
|
|
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Available for sale fixed maturities:
|
|
|
|
|
|
|
|
||||||||
U.S. Government and government agencies
|
$
|
151
|
|
|
$
|
43
|
|
|
$
|
15
|
|
|
$
|
209
|
|
States, municipalities and political subdivisions
|
—
|
|
|
6,858
|
|
|
105
|
|
|
6,963
|
|
||||
Foreign government
|
—
|
|
|
172
|
|
|
—
|
|
|
172
|
|
||||
Residential MBS
|
—
|
|
|
2,987
|
|
|
173
|
|
|
3,160
|
|
||||
Commercial MBS
|
—
|
|
|
892
|
|
|
35
|
|
|
927
|
|
||||
Collateralized loan obligations
|
—
|
|
|
4,265
|
|
|
15
|
|
|
4,280
|
|
||||
Other asset-backed securities
|
—
|
|
|
5,842
|
|
|
1,286
|
|
|
7,128
|
|
||||
Corporate and other
|
29
|
|
|
21,879
|
|
|
1,758
|
|
|
23,666
|
|
||||
Total AFS fixed maturities
|
180
|
|
|
42,938
|
|
|
3,387
|
|
|
46,505
|
|
||||
Trading fixed maturities
|
2
|
|
|
111
|
|
|
—
|
|
|
113
|
|
||||
Equity securities
|
1,433
|
|
|
67
|
|
|
437
|
|
|
1,937
|
|
||||
Equity index call options
|
—
|
|
|
924
|
|
|
—
|
|
|
924
|
|
||||
Assets of managed investment entities
|
213
|
|
|
4,506
|
|
|
17
|
|
|
4,736
|
|
||||
Variable annuity assets (separate accounts) (*)
|
—
|
|
|
628
|
|
|
—
|
|
|
628
|
|
||||
Other assets — derivatives
|
—
|
|
|
50
|
|
|
—
|
|
|
50
|
|
||||
Total assets accounted for at fair value
|
$
|
1,828
|
|
|
$
|
49,224
|
|
|
$
|
3,841
|
|
|
$
|
54,893
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Liabilities of managed investment entities
|
$
|
206
|
|
|
$
|
4,349
|
|
|
$
|
16
|
|
|
$
|
4,571
|
|
Derivatives in annuity benefits accumulated
|
—
|
|
|
—
|
|
|
3,730
|
|
|
3,730
|
|
||||
Other liabilities — derivatives
|
—
|
|
|
10
|
|
|
—
|
|
|
10
|
|
||||
Total liabilities accounted for at fair value
|
$
|
206
|
|
|
$
|
4,359
|
|
|
$
|
3,746
|
|
|
$
|
8,311
|
|
(*)
|
Variable annuity liabilities equal the fair value of variable annuity assets.
|
|
Unobservable Input
|
|
Range
|
|
|
Adjustment for insurance subsidiary’s credit risk
|
|
1.9% – 3.6% over the risk-free rate
|
|
|
Risk margin for uncertainty in cash flows
|
|
0.80% reduction in the discount rate
|
|
|
Surrenders
|
|
4% – 21% of indexed account value
|
|
|
Partial surrenders
|
|
2% – 9% of indexed account value
|
|
|
Annuitizations
|
|
0.1% – 1% of indexed account value
|
|
|
Deaths
|
|
1.9% – 10.6% of indexed account value
|
|
|
Budgeted option costs
|
|
2.5% – 3.3% of indexed account value
|
|
|
|
|
Total realized/unrealized
gains (losses) included in
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Balance at December 31, 2019
|
|
Net
earnings |
|
Other
comprehensive
income (loss)
|
|
Purchases
and
issuances
|
|
Sales and
settlements
|
|
Transfer
into
Level 3
|
|
Transfer
out of
Level 3
|
|
Balance at March 31, 2020
|
|||||||||||||||||
AFS fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
U.S. government agency
|
$
|
15
|
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15
|
|
State and municipal
|
105
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
105
|
|
||||||||
Residential MBS
|
173
|
|
|
5
|
|
|
(12
|
)
|
|
—
|
|
|
(5
|
)
|
|
2
|
|
|
—
|
|
|
163
|
|
||||||||
Commercial MBS
|
35
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
32
|
|
||||||||
Collateralized loan obligations
|
15
|
|
|
(7
|
)
|
|
2
|
|
|
—
|
|
|
—
|
|
|
158
|
|
|
—
|
|
|
168
|
|
||||||||
Other asset-backed securities
|
1,286
|
|
|
(14
|
)
|
|
(11
|
)
|
|
77
|
|
|
(178
|
)
|
|
13
|
|
|
(143
|
)
|
|
1,030
|
|
||||||||
Corporate and other
|
1,758
|
|
|
(3
|
)
|
|
(27
|
)
|
|
119
|
|
|
(36
|
)
|
|
5
|
|
|
(268
|
)
|
|
1,548
|
|
||||||||
Total AFS fixed maturities
|
3,387
|
|
|
(18
|
)
|
|
(48
|
)
|
|
196
|
|
|
(223
|
)
|
|
178
|
|
|
(411
|
)
|
|
3,061
|
|
||||||||
Equity securities
|
437
|
|
|
(24
|
)
|
|
—
|
|
|
6
|
|
|
—
|
|
|
17
|
|
|
—
|
|
|
436
|
|
||||||||
Assets of MIE
|
17
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
||||||||
Total Level 3 assets
|
$
|
3,841
|
|
|
$
|
(43
|
)
|
|
$
|
(48
|
)
|
|
$
|
202
|
|
|
$
|
(223
|
)
|
|
$
|
195
|
|
|
$
|
(411
|
)
|
|
$
|
3,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Embedded derivatives
|
$
|
(3,730
|
)
|
|
$
|
647
|
|
|
$
|
—
|
|
|
$
|
(78
|
)
|
|
$
|
62
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(3,099
|
)
|
Total Level 3 liabilities (*)
|
$
|
(3,730
|
)
|
|
$
|
647
|
|
|
$
|
—
|
|
|
$
|
(78
|
)
|
|
$
|
62
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(3,099
|
)
|
|
|
|
Total realized/unrealized
gains (losses) included in
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Balance at December 31, 2018
|
|
Net
earnings |
|
Other
comprehensive
income (loss)
|
|
Purchases
and
issuances
|
|
Sales and
settlements
|
|
Transfer
into
Level 3
|
|
Transfer
out of
Level 3
|
|
Balance at March 31, 2019
|
|||||||||||||||||
AFS fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
U.S. government agency
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8
|
|
State and municipal
|
59
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
63
|
|
||||||||
Residential MBS
|
197
|
|
|
5
|
|
|
(5
|
)
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(22
|
)
|
|
169
|
|
||||||||
Commercial MBS
|
56
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
55
|
|
||||||||
Collateralized loan obligations
|
116
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
116
|
|
||||||||
Other asset-backed securities
|
731
|
|
|
(3
|
)
|
|
8
|
|
|
75
|
|
|
(114
|
)
|
|
—
|
|
|
(143
|
)
|
|
554
|
|
||||||||
Corporate and other
|
1,996
|
|
|
2
|
|
|
31
|
|
|
432
|
|
|
(88
|
)
|
|
—
|
|
|
(27
|
)
|
|
2,346
|
|
||||||||
Total AFS fixed maturities
|
3,164
|
|
|
4
|
|
|
39
|
|
|
507
|
|
|
(211
|
)
|
|
—
|
|
|
(192
|
)
|
|
3,311
|
|
||||||||
Equity securities
|
336
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
354
|
|
||||||||
Assets of MIE
|
21
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
||||||||
Total Level 3 assets
|
$
|
3,521
|
|
|
$
|
4
|
|
|
$
|
39
|
|
|
$
|
508
|
|
|
$
|
(211
|
)
|
|
$
|
16
|
|
|
$
|
(192
|
)
|
|
$
|
3,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Embedded derivatives
|
$
|
(2,720
|
)
|
|
$
|
(462
|
)
|
|
$
|
—
|
|
|
$
|
(112
|
)
|
|
$
|
47
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(3,247
|
)
|
Total Level 3 liabilities (*)
|
$
|
(2,720
|
)
|
|
$
|
(462
|
)
|
|
$
|
—
|
|
|
$
|
(112
|
)
|
|
$
|
47
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(3,247
|
)
|
(*)
|
As previously discussed, these tables exclude the portion of MIE liabilities allocated to Level 3, which are derived from the fair value of the MIE assets.
|
|
Carrying
|
|
Fair Value
|
||||||||||||||||
|
Value
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||
March 31, 2020
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
1,673
|
|
|
$
|
1,673
|
|
|
$
|
1,673
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Mortgage loans
|
1,346
|
|
|
1,350
|
|
|
—
|
|
|
—
|
|
|
1,350
|
|
|||||
Policy loans
|
161
|
|
|
161
|
|
|
—
|
|
|
—
|
|
|
161
|
|
|||||
Total financial assets not accounted for at fair value
|
$
|
3,180
|
|
|
$
|
3,184
|
|
|
$
|
1,673
|
|
|
$
|
—
|
|
|
$
|
1,511
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Annuity benefits accumulated (*)
|
$
|
40,218
|
|
|
$
|
39,773
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
39,773
|
|
Long-term debt
|
1,473
|
|
|
1,411
|
|
|
—
|
|
|
1,408
|
|
|
3
|
|
|||||
Total financial liabilities not accounted for at fair value
|
$
|
41,691
|
|
|
$
|
41,184
|
|
|
$
|
—
|
|
|
$
|
1,408
|
|
|
$
|
39,776
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2019
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
2,314
|
|
|
$
|
2,314
|
|
|
$
|
2,314
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Mortgage loans
|
1,329
|
|
|
1,346
|
|
|
—
|
|
|
—
|
|
|
1,346
|
|
|||||
Policy loans
|
164
|
|
|
164
|
|
|
—
|
|
|
—
|
|
|
164
|
|
|||||
Total financial assets not accounted for at fair value
|
$
|
3,807
|
|
|
$
|
3,824
|
|
|
$
|
2,314
|
|
|
$
|
—
|
|
|
$
|
1,510
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Annuity benefits accumulated (*)
|
$
|
40,159
|
|
|
$
|
40,182
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
40,182
|
|
Long-term debt
|
1,473
|
|
|
1,622
|
|
|
—
|
|
|
1,619
|
|
|
3
|
|
|||||
Total financial liabilities not accounted for at fair value
|
$
|
41,632
|
|
|
$
|
41,804
|
|
|
$
|
—
|
|
|
$
|
1,619
|
|
|
$
|
40,185
|
|
(*)
|
Excludes $245 million and $247 million of life contingent annuities in the payout phase at March 31, 2020 and December 31, 2019, respectively.
|
|
Amortized
Cost
|
|
Allowance for Expected Credit Losses
|
|
Gross Unrealized
|
|
Net
Unrealized
|
|
Fair
Value
|
||||||||||||||
Gains
|
|
Losses
|
|||||||||||||||||||||
March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Government and government agencies
|
$
|
190
|
|
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
205
|
|
States, municipalities and political subdivisions
|
6,526
|
|
|
—
|
|
|
388
|
|
|
(8
|
)
|
|
380
|
|
|
6,906
|
|
||||||
Foreign government
|
164
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
|
170
|
|
||||||
Residential MBS
|
3,078
|
|
|
6
|
|
|
133
|
|
|
(74
|
)
|
|
59
|
|
|
3,131
|
|
||||||
Commercial MBS
|
892
|
|
|
—
|
|
|
20
|
|
|
(5
|
)
|
|
15
|
|
|
907
|
|
||||||
Collateralized loan obligations
|
4,456
|
|
|
17
|
|
|
5
|
|
|
(306
|
)
|
|
(301
|
)
|
|
4,138
|
|
||||||
Other asset-backed securities
|
7,069
|
|
|
14
|
|
|
65
|
|
|
(362
|
)
|
|
(297
|
)
|
|
6,758
|
|
||||||
Corporate and other
|
23,726
|
|
|
24
|
|
|
786
|
|
|
(569
|
)
|
|
217
|
|
|
23,919
|
|
||||||
Total fixed maturities
|
$
|
46,101
|
|
|
$
|
61
|
|
|
$
|
1,418
|
|
|
$
|
(1,324
|
)
|
|
$
|
94
|
|
|
$
|
46,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Government and government agencies
|
$
|
199
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
209
|
|
States, municipalities and political subdivisions
|
6,604
|
|
|
—
|
|
|
363
|
|
|
(4
|
)
|
|
359
|
|
|
6,963
|
|
||||||
Foreign government
|
170
|
|
|
—
|
|
|
3
|
|
|
(1
|
)
|
|
2
|
|
|
172
|
|
||||||
Residential MBS
|
2,900
|
|
|
—
|
|
|
265
|
|
|
(5
|
)
|
|
260
|
|
|
3,160
|
|
||||||
Commercial MBS
|
896
|
|
|
—
|
|
|
31
|
|
|
—
|
|
|
31
|
|
|
927
|
|
||||||
Collateralized loan obligations
|
4,307
|
|
|
—
|
|
|
10
|
|
|
(37
|
)
|
|
(27
|
)
|
|
4,280
|
|
||||||
Other asset-backed securities
|
6,992
|
|
|
—
|
|
|
156
|
|
|
(20
|
)
|
|
136
|
|
|
7,128
|
|
||||||
Corporate and other
|
22,456
|
|
|
—
|
|
|
1,231
|
|
|
(21
|
)
|
|
1,210
|
|
|
23,666
|
|
||||||
Total fixed maturities
|
$
|
44,524
|
|
|
$
|
—
|
|
|
$
|
2,069
|
|
|
$
|
(88
|
)
|
|
$
|
1,981
|
|
|
$
|
46,505
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||||||||||
|
|
|
|
|
Fair Value
|
|
|
|
|
|
Fair Value
|
||||||||||||
|
Actual Cost
|
|
|
|
over (under)
|
|
Actual Cost
|
|
|
|
over (under)
|
||||||||||||
|
|
Fair Value
|
|
Cost
|
|
|
Fair Value
|
|
Cost
|
||||||||||||||
Common stocks
|
$
|
1,315
|
|
|
$
|
919
|
|
|
$
|
(396
|
)
|
|
$
|
1,164
|
|
|
$
|
1,283
|
|
|
$
|
119
|
|
Perpetual preferred stocks
|
685
|
|
|
640
|
|
|
(45
|
)
|
|
640
|
|
|
654
|
|
|
14
|
|
||||||
Total equity securities carried at fair value
|
$
|
2,000
|
|
|
$
|
1,559
|
|
|
$
|
(441
|
)
|
|
$
|
1,804
|
|
|
$
|
1,937
|
|
|
$
|
133
|
|
|
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
|
|||||||||||
March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Government and government agencies
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
%
|
|
$
|
—
|
|
|
$
|
1
|
|
|
100
|
%
|
States, municipalities and political subdivisions
|
(8
|
)
|
|
235
|
|
|
97
|
%
|
|
—
|
|
|
26
|
|
|
100
|
%
|
||||
Foreign government
|
—
|
|
|
3
|
|
|
100
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
||||
Residential MBS
|
(70
|
)
|
|
1,562
|
|
|
96
|
%
|
|
(4
|
)
|
|
31
|
|
|
89
|
%
|
||||
Commercial MBS
|
(5
|
)
|
|
117
|
|
|
96
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
||||
Collateralized loan obligations
|
(141
|
)
|
|
2,234
|
|
|
94
|
%
|
|
(165
|
)
|
|
1,691
|
|
|
91
|
%
|
||||
Other asset-backed securities
|
(352
|
)
|
|
4,597
|
|
|
93
|
%
|
|
(10
|
)
|
|
94
|
|
|
90
|
%
|
||||
Corporate and other
|
(554
|
)
|
|
7,738
|
|
|
93
|
%
|
|
(15
|
)
|
|
98
|
|
|
87
|
%
|
||||
Total fixed maturities
|
$
|
(1,130
|
)
|
|
$
|
16,486
|
|
|
94
|
%
|
|
$
|
(194
|
)
|
|
$
|
1,941
|
|
|
91
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Government and government agencies
|
$
|
—
|
|
|
$
|
16
|
|
|
100
|
%
|
|
$
|
—
|
|
|
$
|
11
|
|
|
100
|
%
|
States, municipalities and political subdivisions
|
(3
|
)
|
|
254
|
|
|
99
|
%
|
|
(1
|
)
|
|
82
|
|
|
99
|
%
|
||||
Foreign government
|
(1
|
)
|
|
70
|
|
|
99
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
||||
Residential MBS
|
(4
|
)
|
|
509
|
|
|
99
|
%
|
|
(1
|
)
|
|
69
|
|
|
99
|
%
|
||||
Commercial MBS
|
—
|
|
|
17
|
|
|
100
|
%
|
|
—
|
|
|
—
|
|
|
—
|
%
|
||||
Collateralized loan obligations
|
(11
|
)
|
|
1,284
|
|
|
99
|
%
|
|
(26
|
)
|
|
1,728
|
|
|
99
|
%
|
||||
Other asset-backed securities
|
(12
|
)
|
|
1,211
|
|
|
99
|
%
|
|
(8
|
)
|
|
123
|
|
|
94
|
%
|
||||
Corporate and other
|
(13
|
)
|
|
1,100
|
|
|
99
|
%
|
|
(8
|
)
|
|
211
|
|
|
96
|
%
|
||||
Total fixed maturities
|
$
|
(44
|
)
|
|
$
|
4,461
|
|
|
99
|
%
|
|
$
|
(44
|
)
|
|
$
|
2,224
|
|
|
98
|
%
|
|
2020
|
||
Balance at January 1
|
$
|
—
|
|
Impact of adoption of new accounting policy
|
—
|
|
|
Provision for expected credit losses
|
61
|
|
|
Reductions due to sales or redemptions
|
—
|
|
|
Balance at March 31
|
$
|
61
|
|
|
Amortized
|
|
Fair Value
|
|||||||
Cost, net (*)
|
|
Amount
|
|
%
|
||||||
Maturity
|
|
|
|
|
|
|||||
One year or less
|
$
|
2,018
|
|
|
$
|
2,027
|
|
|
4
|
%
|
After one year through five years
|
10,563
|
|
|
10,710
|
|
|
23
|
%
|
||
After five years through ten years
|
14,450
|
|
|
14,722
|
|
|
32
|
%
|
||
After ten years
|
3,551
|
|
|
3,741
|
|
|
8
|
%
|
||
|
30,582
|
|
|
31,200
|
|
|
67
|
%
|
||
Collateralized loan obligations and other ABS (average life of approximately 4-1/2 years)
|
11,494
|
|
|
10,896
|
|
|
24
|
%
|
||
MBS (average life of approximately 3-1/2 years)
|
3,964
|
|
|
4,038
|
|
|
9
|
%
|
||
Total
|
$
|
46,040
|
|
|
$
|
46,134
|
|
|
100
|
%
|
(*)
|
Amortized cost, net of allowance for expected credit losses.
|
|
Pretax
|
|
Deferred Tax
|
|
Net
|
||||||
March 31, 2020
|
|
|
|
|
|
||||||
Net unrealized gain on:
|
|
|
|
|
|
||||||
Fixed maturities — annuity segment (*)
|
$
|
124
|
|
|
$
|
(26
|
)
|
|
$
|
98
|
|
Fixed maturities — all other
|
(30
|
)
|
|
7
|
|
|
(23
|
)
|
|||
Total fixed maturities
|
94
|
|
|
(19
|
)
|
|
75
|
|
|||
Deferred policy acquisition costs — annuity segment
|
(57
|
)
|
|
12
|
|
|
(45
|
)
|
|||
Annuity benefits accumulated
|
(18
|
)
|
|
3
|
|
|
(15
|
)
|
|||
Unearned revenue
|
1
|
|
|
—
|
|
|
1
|
|
|||
Total net unrealized gain on marketable securities
|
$
|
20
|
|
|
$
|
(4
|
)
|
|
$
|
16
|
|
|
|
|
|
|
|
||||||
December 31, 2019
|
|
|
|
|
|
||||||
Net unrealized gain on:
|
|
|
|
|
|
||||||
Fixed maturities — annuity segment (*)
|
$
|
1,611
|
|
|
$
|
(338
|
)
|
|
$
|
1,273
|
|
Fixed maturities — all other
|
370
|
|
|
(78
|
)
|
|
292
|
|
|||
Total fixed maturities
|
1,981
|
|
|
(416
|
)
|
|
1,565
|
|
|||
Deferred policy acquisition costs — annuity segment
|
(681
|
)
|
|
143
|
|
|
(538
|
)
|
|||
Annuity benefits accumulated
|
(219
|
)
|
|
46
|
|
|
(173
|
)
|
|||
Life, accident and health reserves
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|||
Unearned revenue
|
11
|
|
|
(2
|
)
|
|
9
|
|
|||
Total net unrealized gain on marketable securities
|
$
|
1,091
|
|
|
$
|
(229
|
)
|
|
$
|
862
|
|
(*)
|
Net unrealized gains on fixed maturity investments supporting AFG’s annuity benefits accumulated.
|
|
Three months ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Investment income:
|
|
|
|
||||
Fixed maturities
|
$
|
491
|
|
|
$
|
469
|
|
Equity securities:
|
|
|
|
||||
Dividends
|
17
|
|
|
22
|
|
||
Change in fair value (a) (b)
|
(12
|
)
|
|
11
|
|
||
Equity in earnings of partnerships and similar investments
|
25
|
|
|
21
|
|
||
Other
|
28
|
|
|
25
|
|
||
Gross investment income
|
549
|
|
|
548
|
|
||
Investment expenses
|
(5
|
)
|
|
(6
|
)
|
||
Net investment income (b)
|
$
|
544
|
|
|
$
|
542
|
|
(a)
|
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 equity securities classified as “trading” under previous guidance and on a small portfolio of limited partnership and similar investments that do not qualify for the equity method of accounting.
|
(b)
|
Net investment income in the first three months of 2020 includes a loss of $6 million on investments held by the companies that comprise the Neon exited lines due primarily to the $7 million loss recorded on equity securities that are carried at fair value through net investment income.
|
|
Three months ended March 31, 2020
|
|
Three months ended March 31, 2019
|
||||||||||||||||||||||||||||
|
Realized gains (losses)
|
|
|
|
Realized gains (losses)
|
|
|
||||||||||||||||||||||||
|
Before Impairments
|
|
Impairment Allowance
|
|
Total
|
|
Change in Unrealized
|
|
Before Impairments
|
|
Impairments
|
|
Total
|
|
Change in Unrealized
|
||||||||||||||||
Fixed maturities
|
$
|
29
|
|
|
$
|
(61
|
)
|
|
$
|
(32
|
)
|
|
$
|
(1,887
|
)
|
|
$
|
3
|
|
|
$
|
(3
|
)
|
|
$
|
—
|
|
|
$
|
853
|
|
Equity securities
|
(535
|
)
|
|
—
|
|
|
(535
|
)
|
|
—
|
|
|
182
|
|
|
—
|
|
|
182
|
|
|
—
|
|
||||||||
Mortgage loans and other investments
|
4
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Other (*)
|
(3
|
)
|
|
15
|
|
|
12
|
|
|
816
|
|
|
1
|
|
|
1
|
|
|
2
|
|
|
(370
|
)
|
||||||||
Total pretax
|
(505
|
)
|
|
(46
|
)
|
|
(551
|
)
|
|
(1,071
|
)
|
|
186
|
|
|
(2
|
)
|
|
184
|
|
|
483
|
|
||||||||
Tax effects
|
106
|
|
|
10
|
|
|
116
|
|
|
225
|
|
|
(39
|
)
|
|
—
|
|
|
(39
|
)
|
|
(102
|
)
|
||||||||
Net of tax
|
$
|
(399
|
)
|
|
$
|
(36
|
)
|
|
$
|
(435
|
)
|
|
$
|
(846
|
)
|
|
$
|
147
|
|
|
$
|
(2
|
)
|
|
$
|
145
|
|
|
$
|
381
|
|
(*)
|
Primarily adjustments to deferred policy acquisition costs and reserves related to the annuity business.
|
|
Three months ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Included in realized gains (losses)
|
$
|
(540
|
)
|
|
$
|
163
|
|
Included in net investment income
|
(5
|
)
|
|
11
|
|
||
|
$
|
(545
|
)
|
|
$
|
174
|
|
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||
Derivative
|
|
Balance Sheet Line
|
|
Asset
|
|
Liability
|
|
Asset
|
|
Liability
|
||||||||
MBS with embedded derivatives
|
|
Fixed maturities
|
|
$
|
103
|
|
|
$
|
—
|
|
|
$
|
102
|
|
|
$
|
—
|
|
Fixed-indexed and variable-indexed annuities (embedded derivative)
|
|
Annuity benefits accumulated
|
|
—
|
|
|
3,099
|
|
|
—
|
|
|
3,730
|
|
||||
Equity index call options
|
|
Equity index call options
|
|
209
|
|
|
—
|
|
|
924
|
|
|
—
|
|
||||
Equity index put options
|
|
Other liabilities
|
|
—
|
|
|
8
|
|
|
—
|
|
|
1
|
|
||||
Reinsurance contracts (embedded derivative)
|
|
Other liabilities
|
|
—
|
|
|
2
|
|
|
—
|
|
|
4
|
|
||||
|
|
|
|
$
|
312
|
|
|
$
|
3,109
|
|
|
$
|
1,026
|
|
|
$
|
3,735
|
|
|
|
|
|
Three months ended March 31,
|
||||||
Derivative
|
|
Statement of Earnings Line
|
|
2020
|
|
2019
|
||||
MBS with embedded derivatives
|
|
Realized gains (losses) on securities
|
|
$
|
4
|
|
|
$
|
6
|
|
Fixed-indexed and variable-indexed annuities (embedded derivative)
|
|
Annuity benefits
|
|
647
|
|
|
(462
|
)
|
||
Equity index call options
|
|
Annuity benefits
|
|
(628
|
)
|
|
366
|
|
||
Equity index put options
|
|
Annuity benefits
|
|
(6
|
)
|
|
1
|
|
||
Reinsurance contract (embedded derivative)
|
|
Net investment income
|
|
2
|
|
|
(1
|
)
|
||
|
|
|
|
$
|
19
|
|
|
$
|
(90
|
)
|
|
P&C
|
|
|
Annuity and Other
|
|
|
|
||||||||||||||||||||||||||
|
Deferred
|
|
|
Deferred
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
||||||||||||||||
|
Costs
|
|
|
Costs
|
|
Inducements
|
|
PVFP
|
|
Subtotal
|
|
Unrealized (*)
|
|
Total
|
|
|
Total
|
||||||||||||||||
Balance at December 31, 2019
|
$
|
322
|
|
|
|
$
|
1,303
|
|
|
$
|
75
|
|
|
$
|
36
|
|
|
$
|
1,414
|
|
|
$
|
(699
|
)
|
|
$
|
715
|
|
|
|
$
|
1,037
|
|
Additions
|
158
|
|
|
|
49
|
|
|
1
|
|
|
—
|
|
|
50
|
|
|
—
|
|
|
50
|
|
|
|
208
|
|
||||||||
Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Periodic amortization
|
(170
|
)
|
|
|
(98
|
)
|
|
(3
|
)
|
|
(2
|
)
|
|
(103
|
)
|
|
—
|
|
|
(103
|
)
|
|
|
(273
|
)
|
||||||||
Included in realized gains
|
—
|
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
10
|
|
|
|
10
|
|
||||||||
Foreign currency translation
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
||||||||
Change in unrealized
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
591
|
|
|
591
|
|
|
|
591
|
|
||||||||
Balance at March 31, 2020
|
$
|
310
|
|
|
|
$
|
1,264
|
|
|
$
|
73
|
|
|
$
|
34
|
|
|
$
|
1,371
|
|
|
$
|
(108
|
)
|
|
$
|
1,263
|
|
|
|
$
|
1,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Balance at December 31, 2018
|
$
|
299
|
|
|
|
$
|
1,285
|
|
|
$
|
86
|
|
|
$
|
42
|
|
|
$
|
1,413
|
|
|
$
|
(30
|
)
|
|
$
|
1,383
|
|
|
|
$
|
1,682
|
|
Additions
|
187
|
|
|
|
64
|
|
|
1
|
|
|
—
|
|
|
65
|
|
|
—
|
|
|
65
|
|
|
|
252
|
|
||||||||
Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Periodic amortization
|
(175
|
)
|
|
|
(15
|
)
|
|
(3
|
)
|
|
(2
|
)
|
|
(20
|
)
|
|
—
|
|
|
(20
|
)
|
|
|
(195
|
)
|
||||||||
Included in realized gains
|
—
|
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|
|
2
|
|
||||||||
Foreign currency translation
|
1
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
1
|
|
||||||||
Change in unrealized
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(295
|
)
|
|
(295
|
)
|
|
|
(295
|
)
|
||||||||
Balance at March 31, 2019
|
$
|
312
|
|
|
|
$
|
1,336
|
|
|
$
|
84
|
|
|
$
|
40
|
|
|
$
|
1,460
|
|
|
$
|
(325
|
)
|
|
$
|
1,135
|
|
|
|
$
|
1,447
|
|
(*)
|
Adjustments to DPAC related to net unrealized gains/losses on securities and cash flow hedges.
|
|
Three months ended March 31,
|
||||||
2020
|
|
2019
|
|||||
Investment in CLO tranches at end of period
|
$
|
161
|
|
|
$
|
193
|
|
Gains (losses) on change in fair value of assets/liabilities (a):
|
|
|
|
||||
Assets
|
(679
|
)
|
|
87
|
|
||
Liabilities
|
636
|
|
|
(87
|
)
|
||
Management fees paid to AFG
|
4
|
|
|
3
|
|
||
CLO earnings (losses) attributable to AFG shareholders (b)
|
(36
|
)
|
|
11
|
|
(a)
|
Included in revenues in AFG’s Statement of Earnings.
|
(b)
|
Included in earnings before income taxes in AFG’s Statement of Earnings.
|
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||||||||||
|
Principal
|
|
Discount and Issue Costs
|
|
Carrying Value
|
|
Principal
|
|
Discount and Issue Costs
|
|
Carrying Value
|
||||||||||||
Direct Senior Obligations of AFG:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
4.50% Senior Notes due June 2047
|
$
|
590
|
|
|
$
|
(2
|
)
|
|
$
|
588
|
|
|
$
|
590
|
|
|
$
|
(2
|
)
|
|
$
|
588
|
|
3.50% Senior Notes due August 2026
|
425
|
|
|
(3
|
)
|
|
422
|
|
|
425
|
|
|
(3
|
)
|
|
422
|
|
||||||
Other
|
3
|
|
|
—
|
|
|
3
|
|
|
3
|
|
|
—
|
|
|
3
|
|
||||||
|
1,018
|
|
|
(5
|
)
|
|
1,013
|
|
|
1,018
|
|
|
(5
|
)
|
|
1,013
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Direct Subordinated Obligations of AFG:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
5.125% Subordinate Debentures due December 2059
|
200
|
|
|
(6
|
)
|
|
194
|
|
|
200
|
|
|
(6
|
)
|
|
194
|
|
||||||
6% Subordinated Debentures due November 2055
|
150
|
|
|
(5
|
)
|
|
145
|
|
|
150
|
|
|
(5
|
)
|
|
145
|
|
||||||
5.875% Subordinated Debentures due March 2059
|
125
|
|
|
(4
|
)
|
|
121
|
|
|
125
|
|
|
(4
|
)
|
|
121
|
|
||||||
|
475
|
|
|
(15
|
)
|
|
460
|
|
|
475
|
|
|
(15
|
)
|
|
460
|
|
||||||
|
$
|
1,493
|
|
|
$
|
(20
|
)
|
|
$
|
1,473
|
|
|
$
|
1,493
|
|
|
$
|
(20
|
)
|
|
$
|
1,473
|
|
|
|
|
Other Comprehensive Income (Loss)
|
|
|
||||||||||||||||||||||
|
AOCI
Beginning
Balance
|
|
Pretax
|
|
Tax
|
|
Net
of
tax
|
|
Attributable to
noncontrolling
interests
|
|
Attributable to
shareholders
|
|
AOCI
Ending
Balance
|
||||||||||||||
Three months ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net unrealized gains (losses) on securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Unrealized holding losses on securities arising during the period
|
|
|
$
|
(1,095
|
)
|
|
$
|
230
|
|
|
$
|
(865
|
)
|
|
$
|
—
|
|
|
$
|
(865
|
)
|
|
|
|
|||
Reclassification adjustment for realized (gains) losses included in net earnings (*)
|
|
|
24
|
|
|
(5
|
)
|
|
19
|
|
|
—
|
|
|
19
|
|
|
|
|
||||||||
Total net unrealized gains (losses) on securities
|
$
|
862
|
|
|
(1,071
|
)
|
|
225
|
|
|
(846
|
)
|
|
—
|
|
|
(846
|
)
|
|
$
|
16
|
|
|||||
Net unrealized gains on cash flow hedges
|
17
|
|
|
34
|
|
|
(7
|
)
|
|
27
|
|
|
—
|
|
|
27
|
|
|
44
|
|
|||||||
Foreign currency translation adjustments
|
(9
|
)
|
|
(10
|
)
|
|
—
|
|
|
(10
|
)
|
|
(2
|
)
|
|
(12
|
)
|
|
(21
|
)
|
|||||||
Pension and other postretirement plans adjustments
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|||||||
Total
|
$
|
863
|
|
|
$
|
(1,047
|
)
|
|
$
|
218
|
|
|
$
|
(829
|
)
|
|
$
|
(2
|
)
|
|
$
|
(831
|
)
|
|
$
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Three months ended March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net unrealized gains on securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Unrealized holding gains on securities arising during the period
|
|
|
$
|
487
|
|
|
$
|
(103
|
)
|
|
$
|
384
|
|
|
$
|
—
|
|
|
$
|
384
|
|
|
|
||||
Reclassification adjustment for realized (gains) losses included in net earnings (*)
|
|
|
(4
|
)
|
|
1
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
|
|
|||||||||
Total net unrealized gains on securities
|
$
|
83
|
|
|
483
|
|
|
(102
|
)
|
|
381
|
|
|
—
|
|
|
381
|
|
|
$
|
464
|
|
|||||
Net unrealized gains (losses) on cash flow hedges
|
(11
|
)
|
|
14
|
|
|
(3
|
)
|
|
11
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|||||||
Foreign currency translation adjustments
|
(16
|
)
|
|
4
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
|
(12
|
)
|
|||||||
Pension and other postretirement plans adjustments
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|||||||
Total
|
$
|
48
|
|
|
$
|
501
|
|
|
$
|
(105
|
)
|
|
$
|
396
|
|
|
$
|
—
|
|
|
$
|
396
|
|
|
$
|
444
|
|
|
OCI component
|
|
Affected line in the statement of earnings
|
|
|
Pretax
|
|
Realized gains (losses) on securities
|
|
|
Tax
|
|
Provision (credit) for income taxes
|
|
|
Three months ended March 31,
|
||||||||||||
|
2020
|
|
2019
|
||||||||||
|
Amount
|
|
% of EBT
|
|
Amount
|
|
% of EBT
|
||||||
Earnings (loss) before income taxes (“EBT”)
|
$
|
(388
|
)
|
|
|
|
$
|
413
|
|
|
|
||
|
|
|
|
|
|
|
|
||||||
Income taxes at statutory rate
|
$
|
(81
|
)
|
|
21
|
%
|
|
$
|
87
|
|
|
21
|
%
|
Effect of:
|
|
|
|
|
|
|
|
||||||
Stock-based compensation
|
(4
|
)
|
|
1
|
%
|
|
(2
|
)
|
|
—
|
%
|
||
Tax exempt interest
|
(3
|
)
|
|
1
|
%
|
|
(4
|
)
|
|
(1
|
%)
|
||
Dividends received deduction
|
(1
|
)
|
|
—
|
%
|
|
(1
|
)
|
|
—
|
%
|
||
Nondeductible expenses
|
2
|
|
|
(1
|
%)
|
|
2
|
|
|
—
|
%
|
||
Change in valuation allowance
|
2
|
|
|
(1
|
%)
|
|
2
|
|
|
—
|
%
|
||
Foreign operations
|
1
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
||
Other
|
—
|
|
|
1
|
%
|
|
3
|
|
|
1
|
%
|
||
Provision (credit) for income taxes as shown in the statement of earnings
|
$
|
(84
|
)
|
|
22
|
%
|
|
$
|
87
|
|
|
21
|
%
|
|
Three months ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Balance at beginning of year
|
$
|
10,232
|
|
|
$
|
9,741
|
|
Less reinsurance recoverables, net of allowance
|
3,024
|
|
|
2,942
|
|
||
Net liability at beginning of year
|
7,208
|
|
|
6,799
|
|
||
Provision for losses and LAE occurring in the current period
|
749
|
|
|
737
|
|
||
Net increase (decrease) in the provision for claims of prior years
|
(42
|
)
|
|
(45
|
)
|
||
Total losses and LAE incurred (*)
|
707
|
|
|
692
|
|
||
Payments for losses and LAE of:
|
|
|
|
||||
Current year
|
(75
|
)
|
|
(89
|
)
|
||
Prior years
|
(676
|
)
|
|
(615
|
)
|
||
Total payments
|
(751
|
)
|
|
(704
|
)
|
||
Foreign currency translation and other
|
(22
|
)
|
|
1
|
|
||
Net liability at end of period
|
7,142
|
|
|
6,788
|
|
||
Add back reinsurance recoverables, net of allowance
|
2,964
|
|
|
2,835
|
|
||
Gross unpaid losses and LAE included in the balance sheet at end of period
|
$
|
10,106
|
|
|
$
|
9,623
|
|
(*)
|
Includes $40 million in losses and LAE incurred in the Neon exited lines in the first three months of 2020.
|
|
Recoverables from Reinsurers
|
|
Premiums Receivable
|
||||
Balance at January 1
|
$
|
18
|
|
|
$
|
13
|
|
Impact of adoption of new accounting policy
|
(6
|
)
|
|
(3
|
)
|
||
Provision (credit) for expected credit losses
|
1
|
|
|
(1
|
)
|
||
Write-offs charged against the allowance
|
—
|
|
|
—
|
|
||
Balance at March 31
|
$
|
13
|
|
|
$
|
9
|
|
INDEX TO MD&A
|
||||
|
Page
|
|
|
Page
|
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
|
|
•
|
changes in financial, political and economic conditions, including changes in interest and inflation rates, currency fluctuations and extended economic recessions or expansions in the U.S. and/or abroad;
|
•
|
performance of securities markets, including the cost of equity index options;
|
•
|
new legislation or declines in credit quality or credit ratings that could have a material impact on the valuation of securities in AFG’s investment portfolio;
|
•
|
the availability of capital;
|
•
|
changes in insurance law or regulation, including changes in statutory accounting rules and changes in regulation of the Lloyd’s market, including modifications to capital requirements, changes in costs associated with the exit from the Lloyd’s market and the run-off of AFG’s Lloyd’s based insurer, Neon;
|
•
|
the effects of the COVID-19 outbreak, including the effects on the international and national economy and credit markets, legislative or regulatory developments affecting the insurance industry, quarantines or other travel or health-related restrictions;
|
•
|
changes in the legal environment affecting AFG or its customers;
|
•
|
tax law and accounting changes;
|
•
|
levels of natural catastrophes and severe weather, terrorist activities (including any nuclear, biological, chemical or radiological events), incidents of war or losses resulting from pandemics, civil unrest and other major losses;
|
•
|
disruption caused by cyber-attacks or other technology breaches or failures by AFG or its business partners and service providers, which could negatively impact AFG’s business and/or expose AFG to litigation;
|
•
|
development of insurance loss reserves and establishment of other reserves, particularly with respect to amounts associated with asbestos and environmental claims;
|
•
|
availability of reinsurance and ability of reinsurers to pay their obligations;
|
•
|
trends in persistency and mortality;
|
•
|
competitive pressures;
|
•
|
the ability to obtain adequate rates and policy terms;
|
•
|
changes in AFG’s credit ratings or the financial strength ratings assigned by major ratings agencies to AFG’s operating subsidiaries; and
|
•
|
the impact of the conditions in the international financial markets and the global economy relating to AFG’s international operations.
|
•
|
net realized losses on securities in the first three months of 2020 compared to net realized gains on securities in the first three months of 2019,
|
•
|
lower earnings in the annuity segment reflecting negative adjustments to investments that are marked to market through net investment income,
|
•
|
lower net investment income in the property and casualty insurance segment due primarily to negative adjustments to investments that are marked to market through net investment income, and
|
•
|
lower holding company expenses.
|
•
|
the establishment of insurance reserves, especially asbestos and environmental-related reserves,
|
•
|
the recoverability of reinsurance,
|
•
|
the amortization of annuity deferred policy acquisition costs,
|
•
|
the measurement of the derivatives embedded in indexed annuity liabilities,
|
•
|
the establishment of asbestos and environmental reserves of former railroad and manufacturing operations, and
|
•
|
the valuation of investments, including the determination of other-than-temporary impairments.
|
|
|
March 31, 2020
|
|
December 31,
|
||||||||||||
Actual
|
|
Adjusted (*)
|
2019
|
|
2018
|
|||||||||||
Principal amount of long-term debt
|
|
$
|
1,493
|
|
|
$
|
1,793
|
|
|
$
|
1,493
|
|
|
$
|
1,318
|
|
Total capital
|
|
6,480
|
|
|
6,780
|
|
|
6,883
|
|
|
6,218
|
|
||||
Ratio of debt to total capital:
|
|
|
|
|
|
|
|
|
||||||||
Including subordinated debt
|
|
23.0
|
%
|
|
26.4
|
%
|
|
21.7
|
%
|
|
21.2
|
%
|
||||
Excluding subordinated debt
|
|
15.7
|
%
|
|
19.4
|
%
|
|
14.8
|
%
|
|
16.4
|
%
|
(*)
|
Reflects the impact of the April 2, 2020 issuance of $300 million of 5.25% Senior Notes due in April 2030.
|
|
|
Three Months Ended March 31, 2020
|
|
Year Ended December 31, 2019
|
||
Ratio of core earnings to fixed charges excluding annuity benefits
|
|
11.15
|
|
|
12.78
|
|
Impact of non-core items
|
|
(29.95
|
)
|
|
1.83
|
|
Ratio of earnings to fixed charges excluding annuity benefits
|
|
*
|
|
|
14.61
|
|
Impact of including interest on annuities as a fixed charge
|
|
(18.47
|
)
|
|
(12.76
|
)
|
Ratio of earnings to fixed charges including annuity benefits
|
|
*
|
|
|
1.85
|
|
*
|
Earnings for the three months ended March 31, 2020 were insufficient to cover fixed charges by $396 million.
|
|
Three months ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Net cash provided by operating activities
|
$
|
532
|
|
|
$
|
454
|
|
Net cash used in investing activities
|
(1,653
|
)
|
|
(684
|
)
|
||
Net cash provided by financing activities
|
480
|
|
|
715
|
|
||
Net change in cash and cash equivalents
|
$
|
(641
|
)
|
|
$
|
485
|
|
|
|
|
|
|
% of Reserves
|
|
||||
|
|
|
|
|
March 31,
|
|
December 31,
|
|
||
|
GMIR
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
1 — 1.99%
|
|
|
|
83%
|
|
83%
|
|
80%
|
|
|
2 — 2.99%
|
|
|
|
3%
|
|
3%
|
|
4%
|
|
|
3 — 3.99%
|
|
|
|
7%
|
|
7%
|
|
8%
|
|
|
4.00% and above
|
|
|
|
7%
|
|
7%
|
|
8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annuity benefits accumulated (in millions)
|
|
$40,463
|
|
$40,406
|
|
$36,616
|
|
Fair value of fixed maturity portfolio
|
$
|
46,230
|
|
Percentage impact on fair value of 100 bps increase in interest rates
|
(4.0
|
%)
|
|
Pretax impact on fair value of fixed maturity portfolio
|
$
|
(1,849
|
)
|
Offsetting adjustments to deferred policy acquisition costs and other balance sheet amounts
|
850
|
|
|
Estimated pretax impact on accumulated other comprehensive income
|
(999
|
)
|
|
Deferred income tax
|
210
|
|
|
Estimated after-tax impact on accumulated other comprehensive income
|
$
|
(789
|
)
|
|
|
Amortized
Cost, net (*)
|
|
Fair Value
|
|
Fair Value as
% of Cost
|
|
Unrealized
Gain (Loss)
|
|
% Rated
Investment
Grade
|
||||||||
Collateral type
|
|
|
|
|
|
|
|
|
|
|
||||||||
Residential:
|
|
|
|
|
|
|
|
|
|
|
||||||||
Agency-backed
|
|
$
|
494
|
|
|
$
|
506
|
|
|
102
|
%
|
|
$
|
12
|
|
|
100
|
%
|
Non-agency prime
|
|
1,359
|
|
|
1,383
|
|
|
102
|
%
|
|
24
|
|
|
61
|
%
|
|||
Alt-A
|
|
904
|
|
|
918
|
|
|
102
|
%
|
|
14
|
|
|
40
|
%
|
|||
Subprime
|
|
316
|
|
|
325
|
|
|
103
|
%
|
|
9
|
|
|
28
|
%
|
|||
Commercial
|
|
892
|
|
|
907
|
|
|
102
|
%
|
|
15
|
|
|
96
|
%
|
|||
|
|
$
|
3,965
|
|
|
$
|
4,039
|
|
|
102
|
%
|
|
$
|
74
|
|
|
66
|
%
|
(*)
|
Amortized cost, net of allowance for expected credit losses.
|
|
Securities
With
Unrealized
Gains
|
|
Securities
With
Unrealized
Losses
|
||||
Available for Sale Fixed Maturities
|
|
|
|
||||
Fair value of securities
|
$
|
26,535
|
|
|
$
|
18,427
|
|
Amortized cost of securities, net of allowance for expected credit losses
|
$
|
25,117
|
|
|
$
|
19,751
|
|
Gross unrealized gain (loss)
|
$
|
1,418
|
|
|
$
|
(1,324
|
)
|
Fair value as % of amortized cost
|
106
|
%
|
|
93
|
%
|
||
Number of security positions
|
3,520
|
|
|
1,871
|
|
||
Number individually exceeding $2 million gain or loss
|
117
|
|
|
183
|
|
||
Concentration of gains (losses) by type or industry (exceeding 5% of unrealized):
|
|
|
|
||||
States and municipalities
|
$
|
388
|
|
|
$
|
(8
|
)
|
Banks, savings and credit institutions
|
165
|
|
|
(33
|
)
|
||
Mortgage-backed securities
|
153
|
|
|
(79
|
)
|
||
Insurance
|
113
|
|
|
(29
|
)
|
||
Other financials
|
97
|
|
|
(131
|
)
|
||
Other asset-backed securities
|
65
|
|
|
(362
|
)
|
||
Energy
|
19
|
|
|
(205
|
)
|
||
Collateralized loan obligations
|
5
|
|
|
(306
|
)
|
||
Percentage rated investment grade
|
95
|
%
|
|
89
|
%
|
|
Securities
With
Unrealized
Gains
|
|
Securities
With
Unrealized
Losses
|
||
Maturity
|
|
|
|
||
One year or less
|
4
|
%
|
|
4
|
%
|
After one year through five years
|
31
|
%
|
|
12
|
%
|
After five years through ten years
|
39
|
%
|
|
24
|
%
|
After ten years
|
12
|
%
|
|
4
|
%
|
|
86
|
%
|
|
44
|
%
|
Collateralized loan obligations and other asset-backed securities (average life of approximately 4-1/2 years)
|
6
|
%
|
|
47
|
%
|
Mortgage-backed securities (average life of approximately 3-1/2 years)
|
8
|
%
|
|
9
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
Aggregate
Fair
Value
|
|
Aggregate
Unrealized
Gain (Loss)
|
|
Fair
Value as
% of Cost
|
|||||
Fixed Maturities at March 31, 2020
|
|
|
|
|
|
|
|||||
Securities with unrealized gains:
|
|
|
|
|
|
|
|||||
Exceeding $500,000 (830 securities)
|
|
$
|
13,559
|
|
|
$
|
1,036
|
|
|
108
|
%
|
$500,000 or less (2,690 securities)
|
|
12,976
|
|
|
382
|
|
|
103
|
%
|
||
|
|
$
|
26,535
|
|
|
$
|
1,418
|
|
|
106
|
%
|
Securities with unrealized losses:
|
|
|
|
|
|
|
|||||
Exceeding $500,000 (709 securities)
|
|
$
|
11,374
|
|
|
$
|
(1,172
|
)
|
|
91
|
%
|
$500,000 or less (1,162 securities)
|
|
7,053
|
|
|
(152
|
)
|
|
98
|
%
|
||
|
|
$
|
18,427
|
|
|
$
|
(1,324
|
)
|
|
93
|
%
|
|
|
Aggregate
Fair
Value
|
|
Aggregate
Unrealized
Loss
|
|
Fair
Value as
% of Cost
|
|||||
Securities with Unrealized Losses at March 31, 2020
|
|
|
|
|
|
|
|||||
Investment grade fixed maturities with losses for:
|
|
|
|
|
|
|
|||||
Less than one year (1,231 securities)
|
|
$
|
14,456
|
|
|
$
|
(921
|
)
|
|
94
|
%
|
One year or longer (151 securities)
|
|
1,865
|
|
|
(179
|
)
|
|
91
|
%
|
||
|
|
$
|
16,321
|
|
|
$
|
(1,100
|
)
|
|
94
|
%
|
Non-investment grade fixed maturities with losses for:
|
|
|
|
|
|
|
|||||
Less than one year (454 securities)
|
|
$
|
2,030
|
|
|
$
|
(209
|
)
|
|
91
|
%
|
One year or longer (35 securities)
|
|
76
|
|
|
(15
|
)
|
|
84
|
%
|
||
|
|
$
|
2,106
|
|
|
$
|
(224
|
)
|
|
90
|
%
|
|
Before CLO
Consolidation
|
|
Managed
Investment
Entities
|
|
Consol.
Entries
|
|
|
|
Consolidated
As Reported
|
||||||||
March 31, 2020
|
|
|
|
|
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||
Cash and investments
|
$
|
53,381
|
|
|
$
|
—
|
|
|
$
|
(160
|
)
|
|
(a)
|
|
$
|
53,221
|
|
Assets of managed investment entities
|
—
|
|
|
4,026
|
|
|
—
|
|
|
|
|
4,026
|
|
||||
Other assets
|
10,397
|
|
|
—
|
|
|
(1
|
)
|
|
(a)
|
|
10,396
|
|
||||
Total assets
|
$
|
63,778
|
|
|
$
|
4,026
|
|
|
$
|
(161
|
)
|
|
|
|
$
|
67,643
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||
Unpaid losses and loss adjustment expenses and unearned premiums
|
$
|
12,914
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
12,914
|
|
Annuity, life, accident and health benefits and reserves
|
41,070
|
|
|
—
|
|
|
—
|
|
|
|
|
41,070
|
|
||||
Liabilities of managed investment entities
|
—
|
|
|
4,026
|
|
|
(161
|
)
|
|
(a)
|
|
3,865
|
|
||||
Long-term debt and other liabilities
|
4,747
|
|
|
—
|
|
|
—
|
|
|
|
|
4,747
|
|
||||
Total liabilities
|
58,731
|
|
|
4,026
|
|
|
(161
|
)
|
|
|
|
62,596
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
Redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
|
||||||||
Common Stock and Capital surplus
|
1,399
|
|
|
—
|
|
|
—
|
|
|
|
|
1,399
|
|
||||
Retained earnings
|
3,616
|
|
|
—
|
|
|
—
|
|
|
|
|
3,616
|
|
||||
Accumulated other comprehensive income, net of tax
|
32
|
|
|
—
|
|
|
—
|
|
|
|
|
32
|
|
||||
Total shareholders’ equity
|
5,047
|
|
|
—
|
|
|
—
|
|
|
|
|
5,047
|
|
||||
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
||||
Total equity
|
5,047
|
|
|
—
|
|
|
—
|
|
|
|
|
5,047
|
|
||||
Total liabilities and equity
|
$
|
63,778
|
|
|
$
|
4,026
|
|
|
$
|
(161
|
)
|
|
|
|
$
|
67,643
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2019
|
|
|
|
|
|
|
|
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||
Cash and investments
|
$
|
55,416
|
|
|
$
|
—
|
|
|
$
|
(164
|
)
|
|
(a)
|
|
$
|
55,252
|
|
Assets of managed investment entities
|
—
|
|
|
4,736
|
|
|
—
|
|
|
|
|
4,736
|
|
||||
Other assets
|
10,143
|
|
|
—
|
|
|
(1
|
)
|
|
(a)
|
|
10,142
|
|
||||
Total assets
|
$
|
65,559
|
|
|
$
|
4,736
|
|
|
$
|
(165
|
)
|
|
|
|
$
|
70,130
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||
Unpaid losses and loss adjustment expenses and unearned premiums
|
$
|
13,062
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
13,062
|
|
Annuity, life, accident and health benefits and reserves
|
41,018
|
|
|
—
|
|
|
—
|
|
|
|
|
41,018
|
|
||||
Liabilities of managed investment entities
|
—
|
|
|
4,736
|
|
|
(165
|
)
|
|
(a)
|
|
4,571
|
|
||||
Long-term debt and other liabilities
|
5,210
|
|
|
—
|
|
|
—
|
|
|
|
|
5,210
|
|
||||
Total liabilities
|
59,290
|
|
|
4,736
|
|
|
(165
|
)
|
|
|
|
63,861
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
Redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
|
||||||||
Common Stock and Capital surplus
|
1,397
|
|
|
—
|
|
|
—
|
|
|
|
|
1,397
|
|
||||
Retained earnings
|
4,009
|
|
|
—
|
|
|
—
|
|
|
|
|
4,009
|
|
||||
Accumulated other comprehensive income, net of tax
|
863
|
|
|
—
|
|
|
—
|
|
|
|
|
863
|
|
||||
Total shareholders’ equity
|
6,269
|
|
|
—
|
|
|
—
|
|
|
|
|
6,269
|
|
||||
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
||||
Total equity
|
6,269
|
|
|
—
|
|
|
—
|
|
|
|
|
6,269
|
|
||||
Total liabilities and equity
|
$
|
65,559
|
|
|
$
|
4,736
|
|
|
$
|
(165
|
)
|
|
|
|
$
|
70,130
|
|
(a)
|
Elimination of the fair value of AFG’s investment in CLOs and related accrued interest.
|
|
Before CLO
Consolidation (a)
|
|
Managed
Investment
Entities
|
|
Consol.
Entries
|
|
|
|
Consolidated
As Reported
|
||||||||
Three months ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
||||||||
Insurance net earned premiums
|
$
|
1,209
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
1,209
|
|
Net investment income
|
508
|
|
|
—
|
|
|
36
|
|
|
(b)
|
|
544
|
|
||||
Realized gains (losses) on securities
|
(551
|
)
|
|
—
|
|
|
—
|
|
|
|
|
(551
|
)
|
||||
Income (loss) of managed investment entities:
|
|
|
|
|
|
|
|
|
|
||||||||
Investment income
|
—
|
|
|
59
|
|
|
—
|
|
|
|
|
59
|
|
||||
Gain (loss) on change in fair value of assets/liabilities
|
—
|
|
|
—
|
|
|
(43
|
)
|
|
(b)
|
|
(43
|
)
|
||||
Other income
|
61
|
|
|
—
|
|
|
(4
|
)
|
|
(c)
|
|
57
|
|
||||
Total revenues
|
1,227
|
|
|
59
|
|
|
(11
|
)
|
|
|
|
1,275
|
|
||||
Costs and Expenses:
|
|
|
|
|
|
|
|
|
|
||||||||
Insurance benefits and expenses
|
1,516
|
|
|
—
|
|
|
—
|
|
|
|
|
1,516
|
|
||||
Expenses of managed investment entities
|
—
|
|
|
59
|
|
|
(11
|
)
|
|
(b)(c)
|
|
48
|
|
||||
Interest charges on borrowed money and other expenses
|
99
|
|
|
—
|
|
|
—
|
|
|
|
|
99
|
|
||||
Total costs and expenses
|
1,615
|
|
|
59
|
|
|
(11
|
)
|
|
|
|
1,663
|
|
||||
Earnings (loss) before income taxes
|
(388
|
)
|
|
—
|
|
|
—
|
|
|
|
|
(388
|
)
|
||||
Provision (credit) for income taxes
|
(84
|
)
|
|
—
|
|
|
—
|
|
|
|
|
(84
|
)
|
||||
Net earnings (loss), including noncontrolling interests
|
(304
|
)
|
|
—
|
|
|
—
|
|
|
|
|
(304
|
)
|
||||
Less: Net earnings (loss) attributable to noncontrolling interests
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
|
|
(3
|
)
|
||||
Net earnings (loss) attributable to shareholders
|
$
|
(301
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
(301
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||
Three months ended March 31, 2019
|
|
|
|
|
|
|
|
|
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
||||||||
Insurance net earned premiums
|
$
|
1,173
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
1,173
|
|
Net investment income
|
553
|
|
|
—
|
|
|
(11
|
)
|
|
(b)
|
|
542
|
|
||||
Realized gains (losses) on securities
|
184
|
|
|
—
|
|
|
—
|
|
|
|
|
184
|
|
||||
Income (loss) of managed investment entities:
|
|
|
|
|
|
|
|
|
|
||||||||
Investment income
|
—
|
|
|
69
|
|
|
—
|
|
|
|
|
69
|
|
||||
Gain (loss) on change in fair value of assets/liabilities
|
—
|
|
|
(5
|
)
|
|
5
|
|
|
(b)
|
|
—
|
|
||||
Other income
|
59
|
|
|
—
|
|
|
(3
|
)
|
|
(c)
|
|
56
|
|
||||
Total revenues
|
1,969
|
|
|
64
|
|
|
(9
|
)
|
|
|
|
2,024
|
|
||||
Costs and Expenses:
|
|
|
|
|
|
|
|
|
|
||||||||
Insurance benefits and expenses
|
1,430
|
|
|
—
|
|
|
—
|
|
|
|
|
1,430
|
|
||||
Expenses of managed investment entities
|
—
|
|
|
64
|
|
|
(9
|
)
|
|
(b)(c)
|
|
55
|
|
||||
Interest charges on borrowed money and other expenses
|
126
|
|
|
—
|
|
|
—
|
|
|
|
|
126
|
|
||||
Total costs and expenses
|
1,556
|
|
|
64
|
|
|
(9
|
)
|
|
|
|
1,611
|
|
||||
Earnings (loss) before income taxes
|
413
|
|
|
—
|
|
|
—
|
|
|
|
|
413
|
|
||||
Provision (credit) for income taxes
|
87
|
|
|
—
|
|
|
—
|
|
|
|
|
87
|
|
||||
Net earnings (loss), including noncontrolling interests
|
326
|
|
|
—
|
|
|
—
|
|
|
|
|
326
|
|
||||
Less: Net earnings (loss) attributable to noncontrolling interests
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
|
|
(3
|
)
|
||||
Net earnings (loss) attributable to shareholders
|
$
|
329
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
329
|
|
(a)
|
Includes losses of $36 million in the first three months of 2020 and income of $11 million in the first three months of 2019, representing the change in fair value of AFG’s CLO investments plus $4 million and $3 million in the first three months of 2020 and 2019, respectively, in CLO management fees earned.
|
(b)
|
Elimination of the change in fair value of AFG’s investments in the CLOs, including $7 million and $6 million in the first three months of 2020 and 2019, respectively, in distributions recorded as interest expense by the CLOs.
|
(c)
|
Elimination of management fees earned by AFG.
|
|
Three months ended March 31,
|
||||||
2020
|
|
2019
|
|||||
Components of net earnings (loss) attributable to shareholders:
|
|
|
|
||||
Core operating earnings before income taxes
|
$
|
211
|
|
|
$
|
229
|
|
Pretax non-core items:
|
|
|
|
||||
Realized gains (losses) on securities
|
(551
|
)
|
|
184
|
|
||
Annuity non-core earnings (losses) (a)
|
(38
|
)
|
|
—
|
|
||
Neon exited lines (b)
|
(10
|
)
|
|
—
|
|
||
Earnings (loss) before income taxes
|
(388
|
)
|
|
413
|
|
||
Provision (credit) for income taxes:
|
|
|
|
||||
Core operating earnings
|
40
|
|
|
48
|
|
||
Non-core items:
|
|
|
|
||||
Realized gains (losses) on securities
|
(116
|
)
|
|
39
|
|
||
Annuity non-core earnings (losses) (a)
|
(8
|
)
|
|
—
|
|
||
Total provision for income taxes
|
(84
|
)
|
|
87
|
|
||
Net earnings (loss), including noncontrolling interests
|
(304
|
)
|
|
326
|
|
||
Less net earnings (loss) attributable to noncontrolling interests:
|
|
|
|
||||
Core operating earnings
|
—
|
|
|
(3
|
)
|
||
Neon exited lines (b)
|
(3
|
)
|
|
—
|
|
||
Total net earnings (loss) attributable to noncontrolling interests
|
(3
|
)
|
|
(3
|
)
|
||
Net earnings (loss) attributable to shareholders
|
$
|
(301
|
)
|
|
$
|
329
|
|
|
|
|
|
||||
Net earnings (loss):
|
|
|
|
||||
Core net operating earnings
|
$
|
171
|
|
|
$
|
184
|
|
Realized gains (losses) on securities
|
(435
|
)
|
|
145
|
|
||
Annuity non-core earnings (losses) (a)
|
(30
|
)
|
|
—
|
|
||
Neon exited lines (b)
|
(7
|
)
|
|
—
|
|
||
Net earnings (loss) attributable to shareholders
|
$
|
(301
|
)
|
|
$
|
329
|
|
|
|
|
|
||||
Diluted per share amounts:
|
|
|
|
||||
Core net operating earnings
|
$
|
1.88
|
|
|
$
|
2.02
|
|
Realized gains (losses) on securities
|
(4.81
|
)
|
|
1.61
|
|
||
Annuity non-core earnings (losses) (a)
|
(0.34
|
)
|
|
—
|
|
||
Neon exited lines (b)
|
(0.07
|
)
|
|
—
|
|
||
Net earnings (loss) attributable to shareholders
|
$
|
(3.34
|
)
|
|
$
|
3.63
|
|
(a)
|
As discussed above, beginning prospectively with the second quarter of 2019, unlocking, the impact of changes in the fair value of derivatives related to FIAs, and other impacts of changes in the stock market and interest rates on the accounting for FIAs over or under the cost of the equity index options purchased to mitigate the risk in the index-based component of those FIAs are considered annuity non-core earnings (losses).
|
(b)
|
As discussed above, beginning prospectively with the first quarter of 2020, the Neon run-off operations are considered property and casualty insurance non-core earnings (losses).
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
||||||||||||||||||
|
P&C
|
|
Annuity
|
|
Consol. MIEs
|
|
Holding Co., other and unallocated
|
|
Total
|
|
Non-core reclass
|
|
Neon exited lines (c)
|
|
GAAP Total
|
||||||||||||||||
Three months ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Property and casualty insurance net earned premiums
|
$
|
1,138
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,138
|
|
|
$
|
—
|
|
|
$
|
71
|
|
|
$
|
1,209
|
|
Net investment income
|
99
|
|
|
422
|
|
|
36
|
|
|
(7
|
)
|
|
550
|
|
|
—
|
|
|
(6
|
)
|
|
544
|
|
||||||||
Realized gains (losses) on securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(551
|
)
|
|
—
|
|
|
(551
|
)
|
||||||||
Income (loss) of MIEs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Investment income
|
—
|
|
|
—
|
|
|
59
|
|
|
—
|
|
|
59
|
|
|
—
|
|
|
—
|
|
|
59
|
|
||||||||
Gain (loss) on change in fair value of assets/liabilities
|
—
|
|
|
—
|
|
|
(43
|
)
|
|
—
|
|
|
(43
|
)
|
|
—
|
|
|
—
|
|
|
(43
|
)
|
||||||||
Other income
|
5
|
|
|
35
|
|
|
(4
|
)
|
|
21
|
|
|
57
|
|
|
—
|
|
|
—
|
|
|
57
|
|
||||||||
Total revenues
|
1,242
|
|
|
457
|
|
|
48
|
|
|
14
|
|
|
1,761
|
|
|
(551
|
)
|
|
65
|
|
|
1,275
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Costs and Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Property and casualty insurance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Losses and loss adjustment expenses
|
667
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
667
|
|
|
—
|
|
|
40
|
|
|
707
|
|
||||||||
Commissions and other underwriting expenses
|
383
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
388
|
|
|
—
|
|
|
32
|
|
|
420
|
|
||||||||
Annuity benefits
|
—
|
|
|
287
|
|
|
—
|
|
|
(8
|
)
|
|
279
|
|
|
(3
|
)
|
|
—
|
|
|
276
|
|
||||||||
Annuity and supplemental insurance acquisition expenses
|
—
|
|
|
71
|
|
|
—
|
|
|
1
|
|
|
72
|
|
|
41
|
|
|
—
|
|
|
113
|
|
||||||||
Interest charges on borrowed money
|
—
|
|
|
—
|
|
|
—
|
|
|
17
|
|
|
17
|
|
|
—
|
|
|
—
|
|
|
17
|
|
||||||||
Expenses of MIEs
|
—
|
|
|
—
|
|
|
48
|
|
|
—
|
|
|
48
|
|
|
—
|
|
|
—
|
|
|
48
|
|
||||||||
Other expenses
|
11
|
|
|
32
|
|
|
—
|
|
|
36
|
|
|
79
|
|
|
—
|
|
|
3
|
|
|
82
|
|
||||||||
Total costs and expenses
|
1,061
|
|
|
390
|
|
|
48
|
|
|
51
|
|
|
1,550
|
|
|
38
|
|
|
75
|
|
|
1,663
|
|
||||||||
Earnings (loss) before income taxes
|
181
|
|
|
67
|
|
|
—
|
|
|
(37
|
)
|
|
211
|
|
|
(589
|
)
|
|
(10
|
)
|
|
(388
|
)
|
||||||||
Provision (credit) for income taxes
|
38
|
|
|
14
|
|
|
—
|
|
|
(12
|
)
|
|
40
|
|
|
(124
|
)
|
|
—
|
|
|
(84
|
)
|
||||||||
Net earnings (loss), including noncontrolling interests
|
143
|
|
|
53
|
|
|
—
|
|
|
(25
|
)
|
|
171
|
|
|
(465
|
)
|
|
(10
|
)
|
|
(304
|
)
|
||||||||
Less: Net earnings (loss) attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
(3
|
)
|
||||||||
Core Net Operating Earnings (Loss)
|
143
|
|
|
53
|
|
|
—
|
|
|
(25
|
)
|
|
171
|
|
|
|
|
|
|
|
|||||||||||
Non-core earnings (loss) attributable to shareholders (a):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Realized gains (losses) on securities, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(435
|
)
|
|
(435
|
)
|
|
435
|
|
|
—
|
|
|
—
|
|
||||||||
Annuity non-core earnings (losses), net of tax (b)
|
—
|
|
|
(30
|
)
|
|
—
|
|
|
—
|
|
|
(30
|
)
|
|
30
|
|
|
—
|
|
|
—
|
|
||||||||
Neon exited lines (c)
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
7
|
|
|
—
|
|
||||||||
Net Earnings (Loss) Attributable to Shareholders
|
$
|
136
|
|
|
$
|
23
|
|
|
$
|
—
|
|
|
$
|
(460
|
)
|
|
$
|
(301
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(301
|
)
|
|
|
Other
|
|
|
|
|
|
|
|||||||||||||||||||
|
P&C
|
|
Annuity
|
|
Consol. MIEs
|
|
Holding Co., other and unallocated
|
|
Total
|
|
Non-core reclass
|
|
GAAP Total
|
||||||||||||||
Three months ended March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Property and casualty insurance net earned premiums
|
$
|
1,173
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,173
|
|
|
$
|
—
|
|
|
$
|
1,173
|
|
Net investment income
|
104
|
|
|
435
|
|
|
(11
|
)
|
|
14
|
|
|
542
|
|
|
—
|
|
|
542
|
|
|||||||
Realized gains (losses) on securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
184
|
|
|
184
|
|
|||||||
Income (loss) of MIEs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Investment income
|
—
|
|
|
—
|
|
|
69
|
|
|
—
|
|
|
69
|
|
|
—
|
|
|
69
|
|
|||||||
Gain (loss) on change in fair value of assets/liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Other income
|
3
|
|
|
28
|
|
|
(3
|
)
|
|
28
|
|
|
56
|
|
|
—
|
|
|
56
|
|
|||||||
Total revenues
|
1,280
|
|
|
463
|
|
|
55
|
|
|
42
|
|
|
1,840
|
|
|
184
|
|
|
2,024
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Costs and Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Property and casualty insurance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Losses and loss adjustment expenses
|
692
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
692
|
|
|
—
|
|
|
692
|
|
|||||||
Commissions and other underwriting expenses
|
394
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
399
|
|
|
—
|
|
|
399
|
|
|||||||
Annuity benefits
|
—
|
|
|
312
|
|
|
—
|
|
|
(1
|
)
|
|
311
|
|
|
—
|
|
|
311
|
|
|||||||
Annuity and supplemental insurance acquisition expenses
|
—
|
|
|
26
|
|
|
—
|
|
|
2
|
|
|
28
|
|
|
—
|
|
|
28
|
|
|||||||
Interest charges on borrowed money
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|
16
|
|
|
—
|
|
|
16
|
|
|||||||
Expenses of MIEs
|
—
|
|
|
—
|
|
|
55
|
|
|
—
|
|
|
55
|
|
|
—
|
|
|
55
|
|
|||||||
Other expenses
|
12
|
|
|
35
|
|
|
—
|
|
|
63
|
|
|
110
|
|
|
—
|
|
|
110
|
|
|||||||
Total costs and expenses
|
1,098
|
|
|
373
|
|
|
55
|
|
|
85
|
|
|
1,611
|
|
|
—
|
|
|
1,611
|
|
|||||||
Earnings (loss) before income taxes
|
182
|
|
|
90
|
|
|
—
|
|
|
(43
|
)
|
|
229
|
|
|
184
|
|
|
413
|
|
|||||||
Provision (credit) for income taxes
|
37
|
|
|
19
|
|
|
—
|
|
|
(8
|
)
|
|
48
|
|
|
39
|
|
|
87
|
|
|||||||
Net earnings (loss), including noncontrolling interests
|
145
|
|
|
71
|
|
|
—
|
|
|
(35
|
)
|
|
181
|
|
|
145
|
|
|
326
|
|
|||||||
Less: Net earnings (loss) attributable to noncontrolling interests
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
|||||||
Core Net Operating Earnings (Loss)
|
148
|
|
|
71
|
|
|
—
|
|
|
(35
|
)
|
|
184
|
|
|
|
|
|
|||||||||
Non-core earnings (loss) attributable to shareholders (a):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Realized gains (losses) on securities, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
145
|
|
|
145
|
|
|
(145
|
)
|
|
—
|
|
|||||||
Net Earnings (Loss) Attributable to Shareholders
|
$
|
148
|
|
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
110
|
|
|
$
|
329
|
|
|
$
|
—
|
|
|
$
|
329
|
|
(a)
|
See the reconciliation of core earnings to GAAP net earnings under “Results of Operations — General” for details on the tax and noncontrolling interest impacts of these reconciling items.
|
(b)
|
As discussed under “Results of Operations — General,” beginning with the second quarter of 2019, unlocking, the impact of changes in the fair value of derivatives related to FIAs, and other impacts of changes in the stock market and interest rates on the accounting for FIAs over or under the cost of the equity index options purchased to mitigate the risk in the index-based component of those FIAs are considered annuity non-core earnings (losses).
|
(c)
|
As discussed under “Results of Operations — General,” beginning with the first quarter of 2020, the Neon run-off operations are considered property and casualty insurance non-core earnings (losses).
|
|
Three months ended March 31,
|
|
|
|||||||||||||
|
2020
|
|
2019
|
|
|
|||||||||||
|
GWP
|
|
%
|
|
GWP
|
|
%
|
|
% Change
|
|||||||
Property and transportation
|
$
|
494
|
|
|
31
|
%
|
|
$
|
439
|
|
|
29
|
%
|
|
13
|
%
|
Specialty casualty
|
849
|
|
|
54
|
%
|
|
912
|
|
|
59
|
%
|
|
(7
|
%)
|
||
Specialty financial
|
183
|
|
|
11
|
%
|
|
184
|
|
|
12
|
%
|
|
(1
|
%)
|
||
Total specialty
|
1,526
|
|
|
96
|
%
|
|
1,535
|
|
|
100
|
%
|
|
(1
|
%)
|
||
Neon exited lines
|
56
|
|
|
4
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
%
|
||
Aggregate
|
$
|
1,582
|
|
|
100
|
%
|
|
$
|
1,535
|
|
|
100
|
%
|
|
3
|
%
|
|
Three months ended March 31,
|
|
|
|||||||||||||
|
2020
|
|
2019
|
|
Change in
|
|||||||||||
|
Ceded
|
|
% of GWP
|
|
Ceded
|
|
% of GWP
|
|
% of GWP
|
|||||||
Property and transportation
|
$
|
(108
|
)
|
|
22
|
%
|
|
$
|
(95
|
)
|
|
22
|
%
|
|
—
|
%
|
Specialty casualty
|
(263
|
)
|
|
31
|
%
|
|
(286
|
)
|
|
31
|
%
|
|
—
|
%
|
||
Specialty financial
|
(34
|
)
|
|
19
|
%
|
|
(39
|
)
|
|
21
|
%
|
|
(2
|
%)
|
||
Other specialty
|
44
|
|
|
|
|
32
|
|
|
|
|
|
|||||
Total specialty
|
(361
|
)
|
|
24
|
%
|
|
(388
|
)
|
|
25
|
%
|
|
(1
|
%)
|
||
Neon exited lines
|
(57
|
)
|
|
102
|
%
|
|
—
|
|
|
—
|
%
|
|
102
|
%
|
||
Aggregate
|
$
|
(418
|
)
|
|
26
|
%
|
|
$
|
(388
|
)
|
|
25
|
%
|
|
1
|
%
|
|
Three months ended March 31,
|
|
|
|||||||||||||
|
2020
|
|
2019
|
|
|
|||||||||||
|
NWP
|
|
%
|
|
NWP
|
|
%
|
|
% Change
|
|||||||
Property and transportation
|
$
|
386
|
|
|
33
|
%
|
|
$
|
344
|
|
|
30
|
%
|
|
12
|
%
|
Specialty casualty
|
586
|
|
|
50
|
%
|
|
626
|
|
|
55
|
%
|
|
(6
|
%)
|
||
Specialty financial
|
149
|
|
|
13
|
%
|
|
145
|
|
|
13
|
%
|
|
3
|
%
|
||
Other specialty
|
44
|
|
|
4
|
%
|
|
32
|
|
|
2
|
%
|
|
38
|
%
|
||
Total specialty
|
1,165
|
|
|
100
|
%
|
|
1,147
|
|
|
100
|
%
|
|
2
|
%
|
||
Neon exited lines
|
(1
|
)
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
%
|
||
Aggregate
|
$
|
1,164
|
|
|
100
|
%
|
|
$
|
1,147
|
|
|
100
|
%
|
|
1
|
%
|
|
Three months ended March 31,
|
|
|
|||||||||||||
|
2020
|
|
2019
|
|
|
|||||||||||
|
NEP
|
|
%
|
|
NEP
|
|
%
|
|
% Change
|
|||||||
Property and transportation
|
$
|
386
|
|
|
32
|
%
|
|
$
|
361
|
|
|
31
|
%
|
|
7
|
%
|
Specialty casualty
|
556
|
|
|
46
|
%
|
|
629
|
|
|
54
|
%
|
|
(12
|
%)
|
||
Specialty financial
|
156
|
|
|
13
|
%
|
|
146
|
|
|
12
|
%
|
|
7
|
%
|
||
Other specialty
|
40
|
|
|
3
|
%
|
|
37
|
|
|
3
|
%
|
|
8
|
%
|
||
Total specialty
|
1,138
|
|
|
94
|
%
|
|
1,173
|
|
|
100
|
%
|
|
(3
|
%)
|
||
Neon exited lines
|
71
|
|
|
6
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
%
|
||
Aggregate
|
$
|
1,209
|
|
|
100
|
%
|
|
$
|
1,173
|
|
|
100
|
%
|
|
3
|
%
|
|
Three months ended March 31,
|
|
|
|
Three months ended March 31,
|
|||||||||||
|
2020
|
|
2019
|
|
Change
|
|
2020
|
|
2019
|
|||||||
Property and transportation
|
|
|
|
|
|
|
|
|
|
|||||||
Loss and LAE ratio
|
61.4
|
%
|
|
62.2
|
%
|
|
(0.8
|
%)
|
|
|
|
|
||||
Underwriting expense ratio
|
31.5
|
%
|
|
26.8
|
%
|
|
4.7
|
%
|
|
|
|
|
||||
Combined ratio
|
92.9
|
%
|
|
89.0
|
%
|
|
3.9
|
%
|
|
|
|
|
||||
Underwriting profit
|
|
|
|
|
|
|
$
|
27
|
|
|
$
|
39
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||||||
Specialty casualty
|
|
|
|
|
|
|
|
|
|
|||||||
Loss and LAE ratio
|
61.1
|
%
|
|
61.6
|
%
|
|
(0.5
|
%)
|
|
|
|
|
||||
Underwriting expense ratio
|
29.6
|
%
|
|
32.6
|
%
|
|
(3.0
|
%)
|
|
|
|
|
||||
Combined ratio
|
90.7
|
%
|
|
94.2
|
%
|
|
(3.5
|
%)
|
|
|
|
|
||||
Underwriting profit
|
|
|
|
|
|
|
$
|
52
|
|
|
$
|
36
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||||||
Specialty financial
|
|
|
|
|
|
|
|
|
|
|||||||
Loss and LAE ratio
|
38.0
|
%
|
|
38.2
|
%
|
|
(0.2
|
%)
|
|
|
|
|
||||
Underwriting expense ratio
|
51.1
|
%
|
|
53.2
|
%
|
|
(2.1
|
%)
|
|
|
|
|
||||
Combined ratio
|
89.1
|
%
|
|
91.4
|
%
|
|
(2.3
|
%)
|
|
|
|
|
||||
Underwriting profit
|
|
|
|
|
|
|
$
|
17
|
|
|
$
|
13
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||||||
Total Specialty
|
|
|
|
|
|
|
|
|
|
|||||||
Loss and LAE ratio
|
58.5
|
%
|
|
58.9
|
%
|
|
(0.4
|
%)
|
|
|
|
|
||||
Underwriting expense ratio
|
33.7
|
%
|
|
33.6
|
%
|
|
0.1
|
%
|
|
|
|
|
||||
Combined ratio
|
92.2
|
%
|
|
92.5
|
%
|
|
(0.3
|
%)
|
|
|
|
|
||||
Underwriting profit
|
|
|
|
|
|
|
$
|
89
|
|
|
$
|
88
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||||||
Aggregate — including exited lines
|
|
|
|
|
|
|
|
|
|
|||||||
Loss and LAE ratio
|
58.5
|
%
|
|
59.0
|
%
|
|
(0.5
|
%)
|
|
|
|
|
||||
Underwriting expense ratio
|
34.3
|
%
|
|
33.6
|
%
|
|
0.7
|
%
|
|
|
|
|
||||
Combined ratio
|
92.8
|
%
|
|
92.6
|
%
|
|
0.2
|
%
|
|
|
|
|
||||
Underwriting profit
|
|
|
|
|
|
|
$
|
87
|
|
|
$
|
87
|
|
|
Three months ended March 31,
|
|
|
|||||||||||||
|
Amount
|
|
Ratio
|
|
Change in
|
|||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Ratio
|
|||||||
Property and transportation
|
|
|
|
|
|
|
|
|
|
|||||||
Current year, excluding catastrophe losses
|
$
|
253
|
|
|
$
|
242
|
|
|
65.4
|
%
|
|
66.8
|
%
|
|
(1.4
|
%)
|
Prior accident years development
|
(24
|
)
|
|
(26
|
)
|
|
(6.2
|
%)
|
|
(7.2
|
%)
|
|
1.0
|
%
|
||
Current year catastrophe losses
|
8
|
|
|
9
|
|
|
2.2
|
%
|
|
2.6
|
%
|
|
(0.4
|
%)
|
||
Property and transportation losses and LAE and ratio
|
$
|
237
|
|
|
$
|
225
|
|
|
61.4
|
%
|
|
62.2
|
%
|
|
(0.8
|
%)
|
|
|
|
|
|
|
|
|
|
|
|||||||
Specialty casualty
|
|
|
|
|
|
|
|
|
|
|||||||
Current year, excluding catastrophe losses
|
$
|
364
|
|
|
$
|
400
|
|
|
65.4
|
%
|
|
63.7
|
%
|
|
1.7
|
%
|
Prior accident years development
|
(24
|
)
|
|
(13
|
)
|
|
(4.3
|
%)
|
|
(2.2
|
%)
|
|
(2.1
|
%)
|
||
Current year catastrophe losses
|
—
|
|
|
1
|
|
|
—
|
%
|
|
0.1
|
%
|
|
(0.1
|
%)
|
||
Specialty casualty losses and LAE and ratio
|
$
|
340
|
|
|
$
|
388
|
|
|
61.1
|
%
|
|
61.6
|
%
|
|
(0.5
|
%)
|
|
|
|
|
|
|
|
|
|
|
|||||||
Specialty financial
|
|
|
|
|
|
|
|
|
|
|||||||
Current year, excluding catastrophe losses
|
$
|
60
|
|
|
$
|
60
|
|
|
38.6
|
%
|
|
41.1
|
%
|
|
(2.5
|
%)
|
Prior accident years development
|
(2
|
)
|
|
(6
|
)
|
|
(1.2
|
%)
|
|
(4.3
|
%)
|
|
3.1
|
%
|
||
Current year catastrophe losses
|
1
|
|
|
2
|
|
|
0.6
|
%
|
|
1.4
|
%
|
|
(0.8
|
%)
|
||
Specialty financial losses and LAE and ratio
|
$
|
59
|
|
|
$
|
56
|
|
|
38.0
|
%
|
|
38.2
|
%
|
|
(0.2
|
%)
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total Specialty
|
|
|
|
|
|
|
|
|
|
|||||||
Current year, excluding catastrophe losses
|
$
|
705
|
|
|
$
|
725
|
|
|
61.9
|
%
|
|
61.8
|
%
|
|
0.1
|
%
|
Prior accident years development
|
(48
|
)
|
|
(46
|
)
|
|
(4.2
|
%)
|
|
(4.0
|
%)
|
|
(0.2
|
%)
|
||
Current year catastrophe losses
|
9
|
|
|
12
|
|
|
0.8
|
%
|
|
1.1
|
%
|
|
(0.3
|
%)
|
||
Total Specialty losses and LAE and ratio
|
$
|
666
|
|
|
$
|
691
|
|
|
58.5
|
%
|
|
58.9
|
%
|
|
(0.4
|
%)
|
|
|
|
|
|
|
|
|
|
|
|||||||
Aggregate — including exited lines
|
|
|
|
|
|
|
|
|
|
|||||||
Current year, excluding catastrophe losses
|
$
|
740
|
|
|
$
|
725
|
|
|
61.2
|
%
|
|
61.8
|
%
|
|
(0.6
|
%)
|
Prior accident years development
|
(42
|
)
|
|
(45
|
)
|
|
(3.5
|
%)
|
|
(3.9
|
%)
|
|
0.4
|
%
|
||
Current year catastrophe losses
|
9
|
|
|
12
|
|
|
0.8
|
%
|
|
1.1
|
%
|
|
(0.3
|
%)
|
||
Aggregate losses and LAE and ratio
|
$
|
707
|
|
|
$
|
692
|
|
|
58.5
|
%
|
|
59.0
|
%
|
|
(0.5
|
%)
|
|
|
|
Approximate impact of modeled loss
|
|
|
Industry Model
|
|
on AFG’s Shareholders’ Equity
|
|
|
100-year event
|
|
1%
|
|
|
250-year event
|
|
2%
|
|
|
500-year event
|
|
6%
|
|
|
Three months ended March 31,
|
|
|
|||||||||||||
|
2020
|
|
2019
|
|
Change in
|
|||||||||||
|
U/W Exp
|
|
% of NEP
|
|
U/W Exp
|
|
% of NEP
|
|
% of NEP
|
|||||||
Property and transportation
|
$
|
122
|
|
|
31.5
|
%
|
|
$
|
97
|
|
|
26.8
|
%
|
|
4.7
|
%
|
Specialty casualty
|
164
|
|
|
29.6
|
%
|
|
205
|
|
|
32.6
|
%
|
|
(3.0
|
%)
|
||
Specialty financial
|
80
|
|
|
51.1
|
%
|
|
77
|
|
|
53.2
|
%
|
|
(2.1
|
%)
|
||
Other specialty
|
17
|
|
|
43.8
|
%
|
|
15
|
|
|
39.2
|
%
|
|
4.6
|
%
|
||
Total specialty
|
383
|
|
|
33.7
|
%
|
|
394
|
|
|
33.6
|
%
|
|
0.1
|
%
|
||
Neon exited lines
|
32
|
|
|
|
|
—
|
|
|
|
|
|
|||||
Aggregate
|
$
|
415
|
|
|
34.3
|
%
|
|
$
|
394
|
|
|
33.6
|
%
|
|
0.7
|
%
|
|
Three months ended March 31,
|
|
|
|
|
|||||||||
|
2020
|
|
2019
|
|
Change
|
|
% Change
|
|||||||
Net investment income
|
$
|
99
|
|
|
$
|
104
|
|
|
$
|
(5
|
)
|
|
(5
|
%)
|
|
|
|
|
|
|
|
|
|
||||||
Average invested assets (at amortized cost)
|
$
|
11,457
|
|
|
$
|
10,997
|
|
|
$
|
460
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
||||||
Yield (net investment income as a % of average invested assets)
|
3.46
|
%
|
|
3.78
|
%
|
|
(0.32
|
%)
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||||||
Tax equivalent yield (*)
|
3.58
|
%
|
|
3.96
|
%
|
|
(0.38
|
%)
|
|
|
(*)
|
Adjusts the yield on equity securities and tax-exempt bonds to the fully taxable equivalent yield.
|
|
Three months ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Other income
|
$
|
5
|
|
|
$
|
3
|
|
Other expenses
|
|
|
|
||||
Amortization of intangibles
|
3
|
|
|
3
|
|
||
Other
|
8
|
|
|
9
|
|
||
Total other expenses
|
11
|
|
|
12
|
|
||
Other income and expenses, net
|
$
|
(6
|
)
|
|
$
|
(9
|
)
|
|
Three months ended March 31,
|
|
|
|||||||
|
2020
|
|
2019
|
|
% Change
|
|||||
Revenues:
|
|
|
|
|
|
|||||
Net investment income
|
$
|
422
|
|
|
$
|
435
|
|
|
(3
|
%)
|
Other income:
|
|
|
|
|
|
|||||
Guaranteed withdrawal benefit fees
|
17
|
|
|
16
|
|
|
6
|
%
|
||
Policy charges and other miscellaneous income (a)
|
18
|
|
|
12
|
|
|
50
|
%
|
||
Total revenues
|
457
|
|
|
463
|
|
|
(1
|
%)
|
||
|
|
|
|
|
|
|||||
Costs and Expenses:
|
|
|
|
|
|
|||||
Annuity benefits (a)(b)
|
287
|
|
|
312
|
|
|
(8
|
%)
|
||
Acquisition expenses (a)
|
71
|
|
|
26
|
|
|
173
|
%
|
||
Other expenses
|
32
|
|
|
35
|
|
|
(9
|
%)
|
||
Total costs and expenses
|
390
|
|
|
373
|
|
|
5
|
%
|
||
Core earnings before income taxes
|
67
|
|
|
90
|
|
|
(26
|
%)
|
||
Pretax non-core earnings (losses) (a)
|
(38
|
)
|
|
—
|
|
|
—
|
%
|
||
GAAP earnings before income taxes
|
$
|
29
|
|
|
$
|
90
|
|
|
(68
|
%)
|
(a)
|
As discussed under “Results of Operations — General,” beginning prospectively with the second quarter of 2019, unlocking, the impact of changes in the fair value of derivatives related to FIAs, and other impacts of changes in the stock market and interest rates on the accounting for FIAs over or under the cost of the equity index options purchased to mitigate the risk in the index-based component of those FIAs are considered non-core earnings (losses). For the first three months of 2020, annuity benefits exclude the $3 million favorable impact of these items and acquisition expenses excludes the related $41 million unfavorable impact on the amortization of deferred policy acquisition costs.
|
(b)
|
Details of the components of annuity benefits are provided below.
|
|
Three months ended March 31,
|
|
|
|||||||
|
2020
|
|
2019
|
|
% Change
|
|||||
Earnings before income taxes — before the impact of derivatives related to FIAs and other impacts of stock market performance and interest rates on FIAs
|
$
|
67
|
|
|
$
|
101
|
|
|
(34
|
%)
|
Impact of derivatives related to FIAs and other impacts of changes in the stock market and interest rates on FIAs over or under option costs:
|
|
|
|
|
|
|||||
Change in fair value of derivatives related to FIAs
|
13
|
|
|
(95
|
)
|
|
(114
|
%)
|
||
Accretion of guaranteed minimum FIA benefits
|
(105
|
)
|
|
(99
|
)
|
|
6
|
%
|
||
Other annuity benefits
|
(55
|
)
|
|
8
|
|
|
(788
|
%)
|
||
Less cost of equity options
|
150
|
|
|
141
|
|
|
6
|
%
|
||
Related impact on the amortization of deferred policy acquisition costs
|
(41
|
)
|
|
34
|
|
|
(221
|
%)
|
||
Earnings before income taxes
|
$
|
29
|
|
|
$
|
90
|
|
|
(68
|
%)
|
|
|
Three months ended March 31,
|
|
|
|||||||||||||||||||||||
|
|
2020
|
|
2019
|
|
Total
|
|||||||||||||||||||||
|
|
Core
|
|
Non-core
|
|
Total
|
|
Core
|
|
Non-core
|
|
Total
|
|
% Change
|
|||||||||||||
Interest credited — fixed
|
|
$
|
103
|
|
|
$
|
—
|
|
|
$
|
103
|
|
|
$
|
95
|
|
|
$
|
—
|
|
|
$
|
95
|
|
|
8
|
%
|
Accretion of guaranteed minimum FIA benefits
|
|
—
|
|
|
105
|
|
|
105
|
|
|
99
|
|
|
—
|
|
|
99
|
|
|
6
|
%
|
||||||
Interest credited — fixed component of variable annuities
|
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
%
|
||||||
Cost of equity options
|
|
150
|
|
|
(150
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
%
|
||||||
Other annuity benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Amortization of sales inducements
|
|
2
|
|
|
1
|
|
|
3
|
|
|
4
|
|
|
—
|
|
|
4
|
|
|
(25
|
%)
|
||||||
Change in guaranteed withdrawal benefit reserve:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Impact of change in the stock market and interest rates
|
|
—
|
|
|
44
|
|
|
44
|
|
|
(12
|
)
|
|
—
|
|
|
(12
|
)
|
|
(467
|
%)
|
||||||
Accretion of benefits and other
|
|
25
|
|
|
—
|
|
|
25
|
|
|
19
|
|
|
—
|
|
|
19
|
|
|
32
|
%
|
||||||
Change in expected death and annuitization reserves and other
|
|
6
|
|
|
—
|
|
|
6
|
|
|
7
|
|
|
—
|
|
|
7
|
|
|
(14
|
%)
|
||||||
Change in other benefit reserves — impact of changes in interest rates and the stock market
|
|
—
|
|
|
10
|
|
|
10
|
|
|
4
|
|
|
—
|
|
|
4
|
|
|
150
|
%
|
||||||
Derivatives related to fixed-indexed annuities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Embedded derivative mark-to-market
|
|
—
|
|
|
(647
|
)
|
|
(647
|
)
|
|
462
|
|
|
—
|
|
|
462
|
|
|
(240
|
%)
|
||||||
Equity option mark-to-market
|
|
—
|
|
|
634
|
|
|
634
|
|
|
(367
|
)
|
|
—
|
|
|
(367
|
)
|
|
(273
|
%)
|
||||||
Impact of derivatives related to FIAs
|
|
—
|
|
|
(13
|
)
|
|
(13
|
)
|
|
95
|
|
|
—
|
|
|
95
|
|
|
(114
|
%)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total annuity benefits
|
|
$
|
287
|
|
|
$
|
(3
|
)
|
|
$
|
284
|
|
|
$
|
312
|
|
|
$
|
—
|
|
|
$
|
312
|
|
|
(9
|
%)
|
|
Three months ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Interest credited — fixed
|
$
|
103
|
|
|
$
|
95
|
|
Include cost of equity options
|
150
|
|
|
141
|
|
||
Cost of funds
|
253
|
|
|
236
|
|
||
|
|
|
|
||||
Interest credited — fixed component of variable annuities
|
1
|
|
|
1
|
|
||
Other annuity benefits, excluding the impact of interest rates and the stock market on FIAs
|
33
|
|
|
30
|
|
||
|
287
|
|
|
267
|
|
||
Changes in fair value of derivatives related to FIAs and other impacts of the stock market and interest rates over or under option costs:
|
|
|
|
||||
Impact of derivatives related to FIAs
|
(13
|
)
|
|
95
|
|
||
Accretion of guaranteed minimum FIA benefits
|
105
|
|
|
99
|
|
||
Other annuity benefits — impact of the stock market and interest rates on FIAs
|
55
|
|
|
(8
|
)
|
||
Less cost of equity options (included in cost of funds)
|
(150
|
)
|
|
(141
|
)
|
||
Total annuity benefits expense
|
$
|
284
|
|
|
$
|
312
|
|
|
Three months ended March 31,
|
|
|
|||||||
|
2020
|
|
2019
|
|
% Change
|
|||||
Average fixed annuity investments (at amortized cost)
|
$
|
40,073
|
|
|
$
|
36,991
|
|
|
8
|
%
|
Average fixed annuity benefits accumulated
|
40,139
|
|
|
37,078
|
|
|
8
|
%
|
||
|
|
|
|
|
|
|||||
As % of fixed annuity benefits accumulated (except as noted):
|
|
|
|
|
|
|
|
|||
Net investment income (as % of fixed annuity investments)
|
4.19
|
%
|
|
4.68
|
%
|
|
|
|||
Cost of funds
|
(2.52
|
%)
|
|
(2.54
|
%)
|
|
|
|||
Other annuity benefit expenses, net of guaranteed withdrawal benefit fees (*)
|
(0.14
|
%)
|
|
(0.14
|
%)
|
|
|
|||
Net interest spread
|
1.53
|
%
|
|
2.00
|
%
|
|
|
|||
|
|
|
|
|
|
|||||
Policy charges and other miscellaneous income (*)
|
0.15
|
%
|
|
0.09
|
%
|
|
|
|||
Acquisition expenses (*)
|
(0.67
|
%)
|
|
(0.65
|
%)
|
|
|
|||
Other expenses
|
(0.32
|
%)
|
|
(0.36
|
%)
|
|
|
|||
Net spread earned on fixed annuities excluding the impact of changes in the fair value of derivatives related to FIAs and other impacts of changes in the stock market and interest rates on FIAs
|
0.69
|
%
|
|
1.08
|
%
|
|
|
|||
Changes in fair value of derivatives related to FIAs and other impacts of the stock market and interest rates under (over) option costs:
|
|
|
|
|
|
|||||
Included in core
|
—
|
%
|
|
(0.12
|
%)
|
|
|
|||
Annuity non-core earnings (losses)
|
(0.38
|
%)
|
|
—
|
%
|
|
|
|||
Net spread earned on fixed annuities
|
0.31
|
%
|
|
0.96
|
%
|
|
|
(*)
|
Excluding the impact of changes in the fair value of derivatives related to FIAs and other impacts of changes in the stock market and interest rates on annuity benefits and the related impact on the amortization of deferred policy acquisition costs.
|
|
Three months ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Cost of equity options (FIAs)
|
$
|
150
|
|
|
$
|
141
|
|
Interest credited:
|
|
|
|
||||
Traditional fixed annuities
|
63
|
|
|
59
|
|
||
Fixed component of fixed-indexed annuities
|
25
|
|
|
22
|
|
||
Immediate annuities
|
6
|
|
|
6
|
|
||
Pension risk transfer products
|
4
|
|
|
1
|
|
||
Federal Home Loan Bank advances
|
5
|
|
|
7
|
|
||
Total cost of funds
|
$
|
253
|
|
|
$
|
236
|
|
|
Three months ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Other annuity benefits, excluding the impact of the stock market and interest rates on FIAs:
|
|
|
|
||||
Amortization of sales inducements
|
$
|
2
|
|
|
$
|
4
|
|
Change in guaranteed withdrawal benefit reserve
|
25
|
|
|
19
|
|
||
Change in other benefit reserves
|
6
|
|
|
7
|
|
||
Other annuity benefits
|
33
|
|
|
30
|
|
||
Offset guaranteed withdrawal benefit fees
|
(17
|
)
|
|
(16
|
)
|
||
Other annuity benefits excluding the impact of the stock market and interest rates, net
|
16
|
|
|
14
|
|
||
Other annuity benefits — impact of the stock market and interest rates
|
(55
|
)
|
|
8
|
|
||
Other annuity benefits, net
|
$
|
(39
|
)
|
|
$
|
22
|
|
|
Three months ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Annuity acquisition expenses before the impact of changes in the fair value of derivatives related to FIAs and other impacts of the stock market and interest rates
|
$
|
71
|
|
|
$
|
60
|
|
Impact of changes in the fair value of derivatives and other impacts of the stock market and interest rates
|
41
|
|
|
(34
|
)
|
||
Annuity acquisition expenses
|
$
|
112
|
|
|
$
|
26
|
|
|
Three months ended March 31,
|
||||
|
2020
|
|
2019
|
||
Before the impact of changes in the fair value of derivatives related to FIAs and other impacts of the stock market and interest rates
|
0.67
|
%
|
|
0.65
|
%
|
Impact of changes in fair value of derivatives and other impacts of the stock market and interest rates
|
0.41
|
%
|
|
(0.37
|
%)
|
Annuity acquisition expenses as a % of fixed annuity benefits accumulated
|
1.08
|
%
|
|
0.28
|
%
|
|
Three months ended March 31,
|
|
|
|||||||
|
2020
|
|
2019
|
|
% Change
|
|||||
Change in the fair value of derivatives related to FIAs
|
$
|
13
|
|
|
$
|
(95
|
)
|
|
(114
|
%)
|
Accretion of guaranteed minimum FIA benefits
|
(105
|
)
|
|
(99
|
)
|
|
6
|
%
|
||
Other annuity benefits
|
(55
|
)
|
|
8
|
|
|
(788
|
%)
|
||
Less cost of equity options
|
150
|
|
|
141
|
|
|
6
|
%
|
||
Related impact on the amortization of DPAC
|
(41
|
)
|
|
34
|
|
|
(221
|
%)
|
||
Impact on annuity segment earnings before income taxes
|
$
|
(38
|
)
|
|
$
|
(11
|
)
|
|
245
|
%
|
|
Three months ended March 31,
|
|
|
|||||||
|
2020
|
|
2019
|
|
% Change
|
|||||
Changes in the stock market, including volatility
|
$
|
(64
|
)
|
|
$
|
33
|
|
|
(294
|
%)
|
Changes in interest rates higher (lower) than expected
|
29
|
|
|
(45
|
)
|
|
(164
|
%)
|
||
Other
|
(3
|
)
|
|
1
|
|
|
(400
|
%)
|
||
Impact on annuity segment earnings before income taxes
|
$
|
(38
|
)
|
|
$
|
(11
|
)
|
|
245
|
%
|
|
Three months ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Beginning fixed annuity reserves
|
$
|
40,018
|
|
|
$
|
36,431
|
|
Fixed annuity premiums (receipts)
|
1,205
|
|
|
1,390
|
|
||
Federal Home Loan Bank advances
|
200
|
|
|
—
|
|
||
Surrenders, benefits and other withdrawals
|
(794
|
)
|
|
(761
|
)
|
||
Interest and other annuity benefit expenses:
|
|
|
|
||||
Cost of funds
|
253
|
|
|
236
|
|
||
Embedded derivative mark-to-market
|
(647
|
)
|
|
462
|
|
||
Change in other benefit reserves
|
25
|
|
|
(34
|
)
|
||
Ending fixed annuity reserves
|
$
|
40,260
|
|
|
$
|
37,724
|
|
|
|
|
|
||||
Reconciliation to annuity benefits accumulated per balance sheet:
|
|
|
|
||||
Ending fixed annuity reserves (from above)
|
$
|
40,260
|
|
|
$
|
37,724
|
|
Impact of unrealized investment related gains
|
38
|
|
|
108
|
|
||
Fixed component of variable annuities
|
165
|
|
|
174
|
|
||
Annuity benefits accumulated per balance sheet
|
$
|
40,463
|
|
|
$
|
38,006
|
|
|
Three months ended March 31,
|
|
|
|||||||
2020
|
|
2019
|
|
% Change
|
||||||
Financial institutions single premium annuities — indexed
|
$
|
424
|
|
|
$
|
424
|
|
|
—
|
%
|
Financial institutions single premium annuities — fixed
|
287
|
|
|
344
|
|
|
(17
|
%)
|
||
Retail single premium annuities — indexed
|
172
|
|
|
301
|
|
|
(43
|
%)
|
||
Retail single premium annuities — fixed
|
25
|
|
|
29
|
|
|
(14
|
%)
|
||
Broker dealer single premium annuities — indexed
|
138
|
|
|
227
|
|
|
(39
|
%)
|
||
Broker dealer single premium annuities — fixed
|
17
|
|
|
6
|
|
|
183
|
%
|
||
Pension risk transfer
|
103
|
|
|
10
|
|
|
930
|
%
|
||
Education market — fixed and indexed annuities
|
39
|
|
|
49
|
|
|
(20
|
%)
|
||
Total fixed annuity premiums
|
1,205
|
|
|
1,390
|
|
|
(13
|
%)
|
||
Variable annuities
|
5
|
|
|
5
|
|
|
—
|
%
|
||
Total annuity premiums
|
$
|
1,210
|
|
|
$
|
1,395
|
|
|
(13
|
%)
|
|
Three months ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Earnings on fixed annuity benefits accumulated
|
$
|
31
|
|
|
$
|
89
|
|
Earnings impact of investments in excess of fixed annuity benefits accumulated (*)
|
(1
|
)
|
|
(1
|
)
|
||
Variable annuity earnings (loss)
|
(1
|
)
|
|
2
|
|
||
Earnings before income taxes
|
$
|
29
|
|
|
$
|
90
|
|
(*)
|
Net investment income (as a % of investments) of 4.19% and 4.68% for the three months ended March 31, 2020 and 2019, respectively, multiplied by the difference between average fixed annuity investments (at amortized cost) and average fixed annuity benefits accumulated in each period.
|
|
Three months ended March 31,
|
|
|
|||||||
|
2020
|
|
2019
|
|
% Change
|
|||||
Revenues:
|
|
|
|
|
|
|||||
Life, accident and health net earned premiums
|
$
|
5
|
|
|
$
|
6
|
|
|
(17
|
%)
|
Net investment income
|
(7
|
)
|
|
14
|
|
|
(150
|
%)
|
||
Other income — P&C fees
|
17
|
|
|
15
|
|
|
13
|
%
|
||
Reclassify annuity segment option gains
|
(8
|
)
|
|
(1
|
)
|
|
700
|
%
|
||
Other income
|
7
|
|
|
8
|
|
|
(13
|
%)
|
||
Total revenues
|
14
|
|
|
42
|
|
|
(67
|
%)
|
||
|
|
|
|
|
|
|||||
Costs and Expenses:
|
|
|
|
|
|
|||||
Property and casualty insurance — commissions and other underwriting expenses
|
5
|
|
|
5
|
|
|
—
|
%
|
||
Annuity — annuity benefits
|
(8
|
)
|
|
(1
|
)
|
|
700
|
%
|
||
Life, accident and health benefits
|
10
|
|
|
9
|
|
|
11
|
%
|
||
Life, accident and health acquisition expenses
|
1
|
|
|
2
|
|
|
(50
|
%)
|
||
Other expense — expenses associated with P&C fees
|
12
|
|
|
10
|
|
|
20
|
%
|
||
Other expenses
|
14
|
|
|
44
|
|
|
(68
|
%)
|
||
Costs and expenses, excluding interest charges on borrowed money
|
34
|
|
|
69
|
|
|
(51
|
%)
|
||
Loss before income taxes, excluding realized gains and losses and interest charges on borrowed money
|
(20
|
)
|
|
(27
|
)
|
|
(26
|
%)
|
||
Interest charges on borrowed money
|
17
|
|
|
16
|
|
|
6
|
%
|
||
Loss before income taxes, excluding realized gains and losses
|
$
|
(37
|
)
|
|
$
|
(43
|
)
|
|
(14
|
%)
|
|
March 31,
2020 |
|
March 31,
2019 |
||||
Direct obligations of AFG:
|
|
|
|
||||
4.50% Senior Notes due June 2047
|
$
|
590
|
|
|
$
|
590
|
|
3.50% Senior Notes due August 2026
|
425
|
|
|
425
|
|
||
5.125% Subordinated Debentures due December 2059
|
200
|
|
|
—
|
|
||
6% Subordinated Debentures due November 2055
|
150
|
|
|
150
|
|
||
5.875% Subordinated Debentures due March 2059
|
125
|
|
|
125
|
|
||
6-1/4% Subordinated Debentures due September 2054
|
—
|
|
|
150
|
|
||
Other
|
3
|
|
|
3
|
|
||
Total principal amount of Holding Company Debt
|
$
|
1,493
|
|
|
$
|
1,443
|
|
|
|
|
|
||||
Weighted Average Interest Rate
|
4.6
|
%
|
|
4.7
|
%
|
•
|
Issued $125 million of 5.875% Subordinated Debentures in March 2019
|
•
|
Issued $200 million of 5.125% Subordinated Debentures in December 2019
|
•
|
Redeemed $150 million of 6-1/4% Subordinated Debentures in December 2019
|
|
Three months ended March 31,
|
||||||
2020
|
|
2019
|
|||||
Realized gains (losses) before impairments:
|
|
|
|
||||
Disposals
|
$
|
29
|
|
|
$
|
(3
|
)
|
Change in the fair value of equity securities
|
(535
|
)
|
|
182
|
|
||
Change in the fair value of derivatives
|
4
|
|
|
6
|
|
||
Adjustments to annuity deferred policy acquisition costs and related items
|
(3
|
)
|
|
1
|
|
||
|
(505
|
)
|
|
186
|
|
||
Impairment charges:
|
|
|
|
||||
Securities
|
(61
|
)
|
|
(3
|
)
|
||
Adjustments to annuity deferred policy acquisition costs and related items
|
15
|
|
|
1
|
|
||
|
(46
|
)
|
|
(2
|
)
|
||
Realized gains (losses) on securities
|
$
|
(551
|
)
|
|
$
|
184
|
|
•
|
Continued volatility and further disruption in financial markets which could result in additional significant declines in the fair value of AFG’s investments and could lead to investment losses due to creditor defaults and bankruptcies;
|
•
|
Declining interest rates which could reduce future investment results;
|
•
|
A negative impact on premium volumes and annuity sales due to the impact of COVID-19 on general economic activity;
|
•
|
Negative impact on the global economy or the economies of particular countries or regions, including travel, trade, tourism, the health system, food supply, consumption and overall economic output;
|
•
|
Reduced cash flows from policyholders delaying premium payments and increased surrenders and annuitizations of in-force annuities;
|
•
|
Increased claims, including annuity and life insurance death claims, losses, litigation and related expenses;
|
•
|
Legislative, regulatory, and judicial actions in response to COVID-19, including, but not limited to: actions prohibiting AFG from canceling insurance policies in accordance with policy terms; requiring AFG to cover losses when its policies specifically excluded coverage or did not provide coverage; ordering AFG to provide premium refunds; granting extended grace periods for payment of premiums; and providing for extended periods of time to pay past due premiums; and
|
•
|
Policyholder losses from COVID-19-related claims could be greater than AFG’s reserves for those losses.
|
|
Total
Number
of Shares
Purchased
|
|
Average
Price Paid
Per Share
|
|
Total Number
of Shares
Purchased as
Part of Publicly
Announced Plans
or Programs
|
|
Maximum Number
of Shares
that May
Yet be Purchased
Under the Plans
or Programs (*)
|
|||||
First Quarter:
|
|
|
|
|
|
|
|
|||||
January
|
—
|
|
|
—
|
|
|
—
|
|
|
5,000,000
|
|
|
February
|
103,679
|
|
|
$
|
95.29
|
|
|
103,679
|
|
|
4,896,321
|
|
March
|
722,604
|
|
|
71.27
|
|
|
722,604
|
|
|
4,173,717
|
|
|
Total
|
826,283
|
|
|
$
|
74.28
|
|
|
826,283
|
|
|
|
(*)
|
Represents the remaining shares that may be repurchased under the Plans authorized by AFG’s Board of Directors in February 2016 and February 2019.
|
Number
|
|
Exhibit Description
|
|
|
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
||
101.INS
|
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
|
|
101.SCH
|
|
Inline XBRL Taxonomy Extension Schema Document.
|
|
|
101.CAL
|
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
101.DEF
|
|
Inline XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
101.LAB
|
|
Inline XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
101.PRE
|
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
104
|
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
|
|
|
|
American Financial Group, Inc.
|
||
|
|
|
|
May 11, 2020
|
By:
|
|
/s/ Joseph E. (Jeff) Consolino
|
|
|
|
Joseph E. (Jeff) Consolino
|
|
|
|
Executive Vice President and Chief Financial Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of American Financial Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
May 11, 2020
|
|
By:
|
/s/ Carl H. Lindner III
|
|
|
|
|
Carl H. Lindner III
|
|
|
|
|
Co-Chief Executive Officer
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of American Financial Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
May 11, 2020
|
|
By:
|
/s/ S. Craig Lindner
|
|
|
|
|
S. Craig Lindner
|
|
|
|
|
Co-Chief Executive Officer
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of American Financial Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
May 11, 2020
|
|
By:
|
/s/ Joseph E. (Jeff) Consolino
|
|
|
|
|
Joseph E. (Jeff) Consolino
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
May 11, 2020
|
|
By:
|
/s/ S. Craig Lindner
|
|
Date
|
|
|
S. Craig Lindner
|
|
|
|
|
Co-Chief Executive Officer
|
|
|
|
|
|
|
May 11, 2020
|
|
By:
|
/s/ Carl H. Lindner III
|
|
Date
|
|
|
Carl H. Lindner III
|
|
|
|
|
Co-Chief Executive Officer
|
|
|
|
|
|
|
May 11, 2020
|
|
By:
|
/s/ Joseph E. (Jeff) Consolino
|
|
Date
|
|
|
Joseph E. (Jeff) Consolino
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|