AMERICAN FINANCIAL GROUP INC - FORM 8-K - EX-99.2

Attached files

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8-K - FORM 8-K - AMERICAN FINANCIAL GROUP INC	d722601d8k.htm
EX-99.1 - EX-99.1 - AMERICAN FINANCIAL GROUP INC	d722601dex991.htm

Exhibit 99.2

American Financial Group, Inc.

Investor Supplement - First Quarter 2014

May 6, 2014

American Financial Group, Inc.

Corporate Headquarters

Great American Insurance Group Tower

301 E Fourth Street

Cincinnati, OH 45202

513 579 6739

American Financial Group, Inc.

Table of Contents - Investor Supplement - First Quarter 2014


Section	Page

Table of Contents - Investor Supplement - First Quarter 2014		2
Financial Highlights		3
Summary of Earnings		4
Earnings Per Share Summary		5

Property and Casualty Insurance Segment
Property and Casualty Insurance - Summary Underwriting Results (GAAP)		6
Specialty - Underwriting Results (GAAP)		7
Property and Transportation - Underwriting Results (GAAP)		8
Specialty Casualty - Underwriting Results (GAAP)		9
Specialty Financial - Underwriting Results (GAAP)		10
Other Specialty - Underwriting Results (GAAP)		11

Annuity Segment
Annuity Results of Operations (GAAP)		12
Net Spread on Fixed Annuities (GAAP)		13
Annuity Premiums (Statutory)		14
Fixed Annuity Benefits Accumulated (GAAP)		15

Consolidated Balance Sheet / Book Value / Debt
Consolidated Balance Sheet		16
Book Value Per Share and Price / Book Summary		17
Capitalization		18
Additional Supplemental Information		19

Consolidated Investment Supplement
Total Cash and Investments and Quarterly Net Investment Income		20
Fixed Maturities - By Security Type - AFG Consolidated		21
Fixed Maturities - By Security Type Portfolio		22
Fixed Maturities - Credit Rating and NAIC Designation		23
Mortgage-Backed Securities - AFG Consolidated		24
Mortgage-Backed Securities Portfolio		25
Mortgage-Backed Securities - Credit Rating and NAIC Designation		26

American Financial Group, Inc.

Financial Highlights

(in millions, except per share information)


	Three Months Ended															Twelve Months Ended
	03/31/14			12/31/13			09/30/13			06/30/13			03/31/13			12/31/13			12/31/12
Highlights
Core net operating earnings	$	91		$	117		$	97		$	87		$	84		$	385		$	314
Net earnings		103			158			83			110			120			471			488
Total assets		42,770			42,087			40,947			39,414			39,139			42,087			39,171
Adjusted shareholders’ equity (a)		4,191			4,109			4,048			3,978			3,950			4,109			3,784
Property and Casualty net written premiums		755			821			1,067			749			704			3,341			2,949
Annuity statutory premiums		967			1,381			1,167			861			624			4,033			2,991
Per share data
Core net operating earnings per share	$	1.00		$	1.28		$	1.06		$	0.96		$	0.92		$	4.22		$	3.27
Diluted earnings per share		1.13			1.73			0.92			1.20			1.32			5.16			5.09
Adjusted book value per share (a)		46.79			45.90			45.36			44.78			43.94			45.90			42.52
Cash dividends per common share		0.220			1.220			0.195			0.195			0.195			1.805			0.970
Financial ratios
Annualized core operating return on equity (b)		9.1	%		11.8	%		10.0	%		9.2	%		8.9	%		10.0	%		8.5	%
Annualized return on equity (b)		10.3	%		16.0	%		8.6	%		11.5	%		12.8	%		12.3	%		13.2	%
Property and Casualty combined ratio - Specialty:
Loss & LAE ratio		56.9	%		62.4	%		66.1	%		60.3	%		56.5	%		61.7	%		64.3	%
Underwriting expense ratio		35.3	%		28.9	%		27.4	%		36.7	%		36.6	%		31.8	%		31.1	%

Combined ratio - Specialty		92.2	%		91.3	%		93.5	%		97.0	%		93.1	%		93.5	%		95.4	%

Net spread on fixed annuities:
Net interest spread		2.81	%		2.86	%		2.89	%		3.02	%		2.99	%		2.94	%		3.12	%
Net spread earned		1.30	%		1.67	%		1.50	%		1.65	%		1.58	%		1.60	%		1.48	%

(a)	Excludes appropriated retained earnings and unrealized gains related to fixed maturity investments.

(b)	Excludes appropriated retained earnings and accumulated other comprehensive income.

American Financial Group, Inc.

Summary of Earnings

($ in millions)


	Three Months Ended															Twelve Months Ended
	03/31/14			12/31/13			09/30/13			06/30/13			03/31/13			12/31/13			12/31/12
Property and Casualty Insurance
Underwriting profit	$	58		$	75		$	62		$	19		$	43		$	199		$	118
Net investment income		67			67			65			65			66			263			275
Other expense		(17	)		(11	)		(14	)		(2	)		(13	)		(40	)		(50	)

Property and Casualty Insurance operating earnings		108			131			113			82			96			422			343
Annuity earnings		73			92			78			82			76			328			256
Run-off Long-Term Care and Life losses		(2	)		(3	)		(4	)		(2	)		(1	)		(10	)		(4	)
Medicare Supplement and Critical Illness earnings (a)		—			—			—			—			—			—			28
Interest expense of parent holding companies		(17	)		(17	)		(17	)		(17	)		(17	)		(68	)		(71	)
Other expense		(24	)		(28	)		(22	)		(22	)		(28	)		(100	)		(89	)

Pre-tax core operating earnings		138			175			148			123			126			572			463
Income tax expense		47			58			51			36			42			187			149

Core net operating earnings		91			117			97			87			84			385			314
Non-core items, net of tax:
Gain on sale of Medicare Supplement and Critical Illness		—			—			—			—			—			—			114
Other realized gains		12			41			35			26			36			138			128
Long-Term Care reserve charge		—			—			—			—			—			—			(99	)
Significant A&E charges:
Property and Casualty Insurance run-off operations		—			—			(35	)		—			—			(35	)		(20	)
Former Railroad and Manufacturing operations		—			—			(14	)		—			—			(14	)		(1	)
AFG tax case and settlement of open tax years		—			—			—			—			—			—			67
ELNY guaranty fund assessments charge (b)		—			—			—			(3	)		—			(3	)		—
Other		—			—			—			—			—			—			(15	)

Net earnings	$	103		$	158		$	83		$	110		$	120		$	471		$	488

(a)	Medicare Supplement and Critical Illness operations were sold August 2012.

(b)	The ELNY guaranty fund assessments charge represent guaranty fund assessments in connection with the insolvency and liquidation of Executive Life Insurance Company of New York, an unaffiliated life insurance company.

American Financial Group, Inc.

Earnings Per Share Summary

(in millions, except per share information)


	Three Months Ended												Twelve Months Ended
	03/31/14		12/31/13		09/30/13			06/30/13			03/31/13		12/31/13			12/31/12
Core net operating earnings	$	91	$	117	$	97		$	87		$	84	$	385		$	314

Net earnings	$	103	$	158	$	83		$	110		$	120	$	471		$	488

Average number of diluted shares		91.621		91.438		91.014			91.472			91.048		91.242			95.945
Diluted earnings per share:
Core net operating earnings per share	$	1.00	$	1.28	$	1.06		$	0.96		$	0.92	$	4.22		$	3.27
Gain on sale of Medicare Supplement and Critical Illness		—		—		—			—			—		—			1.19
Other realized gains		0.13		0.45		0.40			0.28			0.40		1.52			1.34
Long-Term Care reserve charge		—		—		—			—			—		—			(1.03	)
Significant A&E charges:
Property and Casualty Insurance run-off operations		—		—		(0.39	)		—			—		(0.39	)		(0.20	)
Former Railroad and Manufacturing operations		—		—		(0.15	)		—			—		(0.15	)		(0.02	)
AFG tax case and settlement of open tax years		—		—		—			—			—		—			0.70
ELNY guaranty fund assessments charge (a)		—		—		—			(0.04	)		—		(0.04	)		—
Other		—		—		—			—			—		—			(0.16	)

Diluted earnings per share	$	1.13	$	1.73	$	0.92		$	1.20		$	1.32	$	5.16		$	5.09

(a)	The ELNY guaranty fund assessments charge represent guaranty fund assessments in connection with the insolvency and liquidation of Executive Life Insurance Company of New York, an unaffiliated life insurance company.

American Financial Group, Inc.

Property and Casualty Insurance - Summary Underwriting Results (GAAP)

($ in millions)


	Three Months Ended															Twelve Months Ended
	03/31/14			12/31/13			09/30/13			06/30/13			03/31/13			12/31/13			12/31/12
Property and Transportation	$	6		$	17		$	16		$	(31	)	$	10		$	12		$	19
Specialty Casualty		38			32			19			32			19			102			53
Specialty Financial		10			17			22			15			13			67			44
Other Specialty		5			9			5			5			6			25			15

Underwriting profit - Specialty		59			75			62			21			48			206			131
Other charges, included in loss and LAE		1			—			—			2			5			7			13

Underwriting profit - Core		58			75			62			19			43			199			118
Special A&E charges, included in loss and LAE		—			—			(54	)		—			—			(54	)		(31	)

Underwriting profit (loss) - Property and Casualty Insurance	$	58		$	75		$	8		$	19		$	43		$	145		$	87

Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium	$	—		$	—		$	(1	)	$	1		$	—		$	—		$	9
Catastrophe loss		12			1			2			18			10			31			37

Total current accident year catastrophe losses	$	12		$	1		$	1		$	19		$	10		$	31		$	46

Loss reserve development (favorable) / adverse	$	(31	)	$	(5	)	$	40		$	(22	)	$	(28	)	$	(15	)	$	(30	)

Combined ratio:
Property and Transportation		98.1	%		95.8	%		97.1	%		110.3	%		96.5	%		99.2	%		98.7	%
Specialty Casualty		87.8	%		89.7	%		93.4	%		88.4	%		92.7	%		90.9	%		94.5	%
Specialty Financial		91.0	%		85.2	%		82.3	%		86.6	%		88.5	%		85.6	%		89.2	%
Other Specialty		79.9	%		60.4	%		70.7	%		74.0	%		71.1	%		68.8	%		78.5	%
Combined ratio - Specialty		92.2	%		91.3	%		93.5	%		97.0	%		93.1	%		93.5	%		95.4	%
Other core charges		0.0	%		0.1	%		(0.1	%)		0.2	%		0.7	%		0.3	%		0.4	%
Special A&E charges		0.0	%		0.0	%		5.7	%		0.0	%		0.0	%		1.7	%		1.1	%

Combined ratio		92.2	%		91.4	%		99.1	%		97.2	%		93.8	%		95.5	%		96.9	%

Loss and LAE components - property and casualty insurance
Current accident year, excluding catastrophe loss		59.4	%		62.8	%		67.4	%		61.1	%		59.8	%		63.1	%		65.5	%
Prior accident year development		(4.1	%)		(0.4	%)		4.2	%		(3.2	%)		(4.1	%)		(0.4	%)		(1.0	%)
Current accident year catastrophe loss		1.6	%		0.1	%		0.1	%		2.6	%		1.5	%		1.0	%		1.3	%

Loss and LAE ratio		56.9	%		62.5	%		71.7	%		60.5	%		57.2	%		63.7	%		65.8	%

American Financial Group, Inc.

Specialty - Underwriting Results (GAAP)

($ in millions)


	Three Months Ended															Twelve Months Ended
	03/31/14			12/31/13			09/30/13			06/30/13			03/31/13			12/31/13			12/31/12
Gross written premiums	$	1,024		$	1,071		$	1,768		$	1,041		$	925		$	4,805		$	4,321
Ceded reinsurance premiums		(269	)		(250	)		(701	)		(292	)		(221	)		(1,464	)		(1,372	)

Net written premiums		755			821			1,067			749			704			3,341			2,949
Change in unearned premiums		(1	)		38			(118	)		(40	)		(17	)		(137	)		(102	)

Net earned premiums		754			859			949			709			687			3,204			2,847
Loss and LAE		428			537			626			428			388			1,979			1,829
Underwriting expense		267			247			261			260			251			1,019			887

Underwriting profit	$	59		$	75		$	62		$	21		$	48		$	206		$	131

Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium	$	—		$	—		$	(1	)	$	1		$	—		$	—		$	9
Catastrophe loss		12			1			2			18			10			31			37

Total current accident year catastrophe losses	$	12		$	1		$	1		$	19		$	10		$	31		$	46

Loss reserve development (favorable) / adverse	$	(32	)	$	(5	)	$	(13	)	$	(24	)	$	(33	)	$	(75	)	$	(74	)

Combined ratio:
Loss and LAE ratio		56.9	%		62.4	%		66.1	%		60.3	%		56.5	%		61.7	%		64.3	%
Underwriting expense ratio		35.3	%		28.9	%		27.4	%		36.7	%		36.6	%		31.8	%		31.1	%

Combined ratio		92.2	%		91.3	%		93.5	%		97.0	%		93.1	%		93.5	%		95.4	%

Loss and LAE components:
Current accident year, excluding catastrophe loss		59.5	%		62.8	%		67.4	%		61.1	%		59.8	%		63.1	%		65.5	%
Prior accident year development		(4.2	%)		(0.5	%)		(1.4	%)		(3.4	%)		(4.8	%)		(2.4	%)		(2.5	%)
Current accident year catastrophe loss		1.6	%		0.1	%		0.1	%		2.6	%		1.5	%		1.0	%		1.3	%

Loss and LAE ratio		56.9	%		62.4	%		66.1	%		60.3	%		56.5	%		61.7	%		64.3	%

American Financial Group, Inc.

Property and Transportation - Underwriting Results (GAAP)

($ in millions)

LOGO


	Three Months Ended															Twelve Months Ended
	03/31/14			12/31/13			09/30/13			06/30/13			03/31/13			12/31/13			12/31/12
Gross written premiums	$	376		$	447		$	1,147		$	446		$	352		$	2,392		$	2,271
Ceded reinsurance premiums		(92	)		(98	)		(553	)		(118	)		(76	)		(845	)		(798	)

Net written premiums		284			349			594			328			276			1,547			1,473
Change in unearned premiums		17			61			(77	)		(27	)		17			(26	)		(50	)

Net earned premiums		301			410			517			301			293			1,521			1,423
Loss and LAE		201			307			407			236			192			1,142			1,062
Underwriting expense		94			86			94			96			91			367			342

Underwriting profit (loss)	$	6		$	17		$	16		$	(31	)	$	10		$	12		$	19

Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium	$	—		$	—		$	(1	)	$	1		$	—		$	—		$	8
Catastrophe loss		9			—			—			17			10			27			27

Total current accident year catastrophe losses	$	9		$	—		$	(1	)	$	18		$	10		$	27		$	35

Loss reserve development (favorable) / adverse	$	(4	)	$	3		$	(1	)	$	3		$	(6	)	$	(1	)	$	(16	)

Combined ratio:
Loss and LAE ratio		67.0	%		74.9	%		78.8	%		78.5	%		65.4	%		75.1	%		74.7	%
Underwriting expense ratio		31.1	%		20.9	%		18.3	%		31.8	%		31.1	%		24.1	%		24.0	%

Combined ratio		98.1	%		95.8	%		97.1	%		110.3	%		96.5	%		99.2	%		98.7	%

Loss and LAE components:
Current accident year, excluding catastrophe loss		65.3	%		74.1	%		79.1	%		71.6	%		64.0	%		73.4	%		73.8	%
Prior accident year development		(1.1	%)		0.8	%		(0.2	%)		1.2	%		(2.0	%)		(0.1	%)		(1.0	%)
Current accident year catastrophe loss		2.8	%		0.0	%		(0.1	%)		5.7	%		3.4	%		1.8	%		1.9	%

Loss and LAE ratio		67.0	%		74.9	%		78.8	%		78.5	%		65.4	%		75.1	%		74.7	%

American Financial Group, Inc.

Specialty Casualty - Underwriting Results (GAAP)

($ in millions)

LOGO


	Three Months Ended															Twelve Months Ended
	03/31/14			12/31/13			09/30/13			06/30/13			03/31/13			12/31/13			12/31/12
Gross written premiums	$	507		$	459		$	461		$	440		$	430		$	1,790		$	1,484
Ceded reinsurance premiums		(176	)		(138	)		(136	)		(157	)		(135	)		(566	)		(492	)

Net written premiums		331			321			325			283			295			1,224			992
Change in unearned premiums		(18	)		(11	)		(36	)		(6	)		(36	)		(89	)		(44	)

Net earned premiums		313			310			289			277			259			1,135			948
Loss and LAE		172			183			174			148			148			653			581
Underwriting expense		103			95			96			97			92			380			314

Underwriting profit	$	38		$	32		$	19		$	32		$	19		$	102		$	53

Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Catastrophe loss		1			—			1			—			—			1			3

Total current accident year catastrophe losses	$	1		$	—		$	1		$	—		$	—		$	1		$	3

Loss reserve development (favorable) / adverse	$	(24	)	$	2		$	(4	)	$	(22	)	$	(16	)	$	(40	)	$	(18	)

Combined ratio:
Loss and LAE ratio		55.0	%		59.0	%		60.3	%		53.4	%		57.3	%		57.5	%		61.3	%
Underwriting expense ratio		32.8	%		30.7	%		33.1	%		35.0	%		35.4	%		33.4	%		33.2	%

Combined ratio		87.8	%		89.7	%		93.4	%		88.4	%		92.7	%		90.9	%		94.5	%

Loss and LAE components:
Current accident year, excluding catastrophe loss		62.3	%		58.5	%		61.4	%		61.2	%		63.5	%		61.0	%		62.8	%
Prior accident year development		(7.7	%)		0.5	%		(1.2	%)		(8.0	%)		(6.2	%)		(3.6	%)		(1.8	%)
Current accident year catastrophe loss		0.4	%		0.0	%		0.1	%		0.2	%		0.0	%		0.1	%		0.3	%

Loss and LAE ratio		55.0	%		59.0	%		60.3	%		53.4	%		57.3	%		57.5	%		61.3	%

American Financial Group, Inc.

Specialty Financial - Underwriting Results (GAAP)

($ in millions)

LOGO


	Three Months Ended															Twelve Months Ended
	03/31/14			12/31/13			09/30/13			06/30/13			03/31/13			12/31/13			12/31/12
Gross written premiums	$	141		$	164		$	160		$	155		$	143		$	622		$	566
Ceded reinsurance premiums		(25	)		(32	)		(36	)		(38	)		(30	)		(136	)		(155	)

Net written premiums		116			132			124			117			113			486			411
Change in unearned premiums		1			(13	)		(3	)		(4	)		3			(17	)		(6	)

Net earned premiums		117			119			121			113			116			469			405
Loss and LAE		45			42			37			37			42			158			157
Underwriting expense		62			60			62			61			61			244			204

Underwriting profit	$	10		$	17		$	22		$	15		$	13		$	67		$	44

Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium	$	—		$	—		$	—		$	—		$	—		$	—		$	1
Catastrophe loss		2			1			1			1			—			3			5

Total current accident year catastrophe losses	$	2		$	1		$	1		$	1		$	—		$	3		$	6

Loss reserve development (favorable) / adverse	$	(1	)	$	(4	)	$	(4	)	$	—		$	(6	)	$	(14	)	$	(29	)

Combined ratio:
Loss and LAE ratio		37.9	%		34.2	%		31.2	%		32.9	%		35.8	%		33.5	%		38.8	%
Underwriting expense ratio		53.1	%		51.0	%		51.1	%		53.7	%		52.7	%		52.1	%		50.4	%

Combined ratio		91.0	%		85.2	%		82.3	%		86.6	%		88.5	%		85.6	%		89.2	%

Loss and LAE components:
Current accident year, excluding catastrophe loss		37.1	%		36.7	%		33.7	%		32.9	%		40.3	%		35.9	%		44.6	%
Prior accident year development		(0.7	%)		(3.2	%)		(3.2	%)		(0.7	%)		(4.8	%)		(3.0	%)		(7.1	%)
Current accident year catastrophe loss		1.5	%		0.7	%		0.7	%		0.7	%		0.3	%		0.6	%		1.3	%

Loss and LAE ratio		37.9	%		34.2	%		31.2	%		32.9	%		35.8	%		33.5	%		38.8	%

American Financial Group, Inc.

Other Specialty - Underwriting Results (GAAP)

($ in millions)

LOGO


	Three Months Ended															Twelve Months Ended
	03/31/14			12/31/13			09/30/13			06/30/13			03/31/13			12/31/13			12/31/12
Gross written premiums	$	—		$	1		$	—		$	—		$	—		$	1		$	—
Ceded reinsurance premiums		24			18			24			21			20			83			73

Net written premiums		24			19			24			21			20			84			73
Change in unearned premiums		(1	)		1			(2	)		(3	)		(1	)		(5	)		(2	)

Net earned premiums		23			20			22			18			19			79			71
Loss and LAE		10			5			8			7			6			26			29
Underwriting expense		8			6			9			6			7			28			27

Underwriting profit	$	5		$	9		$	5		$	5		$	6		$	25		$	15

Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Catastrophe loss		—			—			—			—			—			—			2

Total current accident year catastrophe losses	$	—		$	—		$	—		$	—		$	—		$	—		$	2

Loss reserve development (favorable) / adverse	$	(3	)	$	(6	)	$	(4	)	$	(5	)	$	(5	)	$	(20	)	$	(11	)

Combined ratio:
Loss and LAE ratio		45.8	%		28.3	%		35.0	%		35.1	%		33.7	%		32.9	%		41.3	%
Underwriting expense ratio		34.1	%		32.1	%		35.7	%		38.9	%		37.4	%		35.9	%		37.2	%

Combined ratio		79.9	%		60.4	%		70.7	%		74.0	%		71.1	%		68.8	%		78.5	%

American Financial Group, Inc.

Annuity Results of Operations (GAAP)

($ in millions)


	Three Months Ended															Twelve Months Ended
	03/31/14			12/31/13			09/30/13			06/30/13			03/31/13			12/31/13			12/31/12
Net investment income	$	275		$	270		$	259		$	257		$	248		$	1,034		$	976
Guaranteed withdrawal benefit fees		8			7			7			6			5			25			14
Policy charges and other miscellaneous income		10			14			10			9			9			42			38

Total revenues		293			291			276			272			262			1,101			1,028
Annuity benefits		168			137			140			120			134			531			541
Acquisition expenses		31			35			35			48			31			149			150
Other expenses		21			27			23			22			21			93			81

Total costs and expenses		220			199			198			190			186			773			772

Earnings before income taxes—core		73			92			78			82			76			328			256
ELNY guaranty fund assessments charge (a)		—			—			—			(5	)		—			(5	)		—

Earnings before income taxes	$	73		$	92		$	78		$	77		$	76		$	323		$	256

Detail of annuity benefits above:
Interest credited—fixed	$	121		$	118		$	113		$	111		$	109		$	451		$	438
Interest credited—fixed component of variable annuities		1			1			2			1			2			6			7
Change in expected death and annuitization reserve		4			5			4			6			4			19			19
Amortization of sales inducements		7			7			8			8			7			30			32
Guaranteed withdrawal benefit reserve		8			10			10			10			8			38			14
Change in other benefit reserves		3			1			2			3			1			7			10
Embedded derivative mark-to-market		54			74			33			(3	)		80			184			93
Equity option mark-to-market		(30	)		(85	)		(32	)		(16	)		(77	)		(210	)		(66	)
Unlockings		—			6			—			—			—			6			(6	)

Total annuity benefits	$	168		$	137		$	140		$	120		$	134		$	531		$	541

(a)	The ELNY guaranty fund assessments charge represent guaranty fund assessments in connection with the insolvency and liquidation of Executive Life Insurance Company of New York, an unaffiliated life insurance company.

American Financial Group, Inc.

Net Spread on Fixed Annuities (GAAP)

($ in millions)


	Three Months Ended															Twelve Months Ended
	03/31/14			12/31/13			09/30/13			06/30/13			03/31/13			12/31/13			12/31/12
Average fixed annuity investments (at amortized cost)	$	21,402		$	20,524		$	19,519		$	18,615		$	17,945		$	19,151		$	16,650
Average annuity benefits accumulated		21,066			20,092			19,035			18,151			17,506			18,696			16,394

Investments in excess of annuity benefits accumulated	$	336		$	432		$	484		$	464		$	439		$	455		$	256

As % of average annuity benefits accumulated (except as noted)
Net investment income (as % of investments)		5.10	%		5.21	%		5.27	%		5.45	%		5.48	%		5.35	%		5.80	%
Interest credited		(2.29	%)		(2.35	%)		(2.38	%)		(2.43	%)		(2.49	%)		(2.41	%)		(2.68	%)

Net interest spread on fixed annuities		2.81	%		2.86	%		2.89	%		3.02	%		2.99	%		2.94	%		3.12	%
Policy charges and other miscellaneous income		0.13	%		0.22	%		0.15	%		0.13	%		0.14	%		0.16	%		0.16	%
Other annuity benefit expenses, net		(0.27	%)		(0.31	%)		(0.38	%)		(0.46	%)		(0.35	%)		(0.37	%)		(0.36	%)
Acquisition expenses		(0.55	%)		(0.75	%)		(0.72	%)		(1.00	%)		(0.69	%)		(0.79	%)		(0.75	%)
Other expenses		(0.37	%)		(0.53	%)		(0.44	%)		(0.43	%)		(0.45	%)		(0.46	%)		(0.46	%)
Change in fair value of derivatives		(0.45	%)		0.22	%		0.00	%		0.39	%		(0.06	%)		0.13	%		(0.16	%)
Unlockings		0.00	%		(0.04	%)		0.00	%		0.00	%		0.00	%		(0.01	%)		(0.07	%)

Net spread earned on fixed annuities - core		1.30	%		1.67	%		1.50	%		1.65	%		1.58	%		1.60	%		1.48	%

Average annuity benefits accumulated	$	21,066		$	20,092		$	19,035		$	18,151		$	17,506		$	18,696		$	16,394
Net spread earned on fixed annuities		1.30	%		1.67	%		1.50	%		1.65	%		1.58	%		1.60	%		1.48	%

Earnings on fixed annuity benefits accumulated	$	68		$	84		$	72		$	75		$	69		$	300		$	243
Investments in excess of annuity benefits accumulated	$	336		$	432		$	484		$	464		$	439		$	455		$	256
Net investment income (as % of investments)		5.10	%		5.21	%		5.27	%		5.45	%		5.48	%		5.35	%		5.80	%

Earnings on investments in excess of annuity benefits accumulated	$	5		$	6		$	6		$	6		$	6			24			14
Variable annuity earnings		—			2			—			1			1			4			(1	)

Earnings before income taxes - core		73			92			78			82			76			328			256
ELNY guaranty fund assessments charge (a)		—			—			—			(5	)		—			(5	)		—

Earnings before income taxes	$	73		$	92		$	78		$	77		$	76		$	323		$	256

(a)	The ELNY guaranty fund assessments represent guaranty fund assessments charge in connection with the insolvency and liquidation of Executive Life Insurance Company of New York, an unaffiliated life insurance company.

American Financial Group

Annuity Premiums (Statutory)

($ in millions)


	Three Months Ended										Twelve Months Ended
	03/31/14		12/31/13		09/30/13		06/30/13		03/31/13		12/31/13		12/31/12
Retail single premium annuities - indexed	$	386	$	565	$	509	$	472	$	333	$	1,879	$	1,662
Retail single premium annuities - fixed		39		53		48		37		27		165		153
Financial institutions single premium annuities - indexed		366		498		352		169		83		1,102		291
Financial institutions single premium annuities - fixed		114		201		198		118		111		628		587
Education market - 403(b) fixed and indexed annuities		50		51		49		52		55		207		237

Subtotal fixed annuity premiums		955		1,368		1,156		848		609		3,981		2,930
Variable annuities		12		13		11		13		15		52		61

Total annuity premiums	$	967	$	1,381	$	1,167	$	861	$	624	$	4,033	$	2,991

American Financial Group, Inc.

Fixed Annuity Benefits Accumulated (GAAP)

($ in millions)


	Three Months Ended															Twelve Months Ended
	03/31/14			12/31/13			09/30/13			06/30/13			03/31/13			12/31/13			12/31/12
Beginning fixed annuity reserves	$	20,679		$	19,505		$	18,564		$	17,737		$	17,274		$	17,274		$	15,188
Premiums		955			1,368			1,156			848			609			3,981			2,930
Federal Home Loan Bank advances		—			—			—			200			—			200			—
Surrenders, benefits and other withdrawals		(375	)		(408	)		(381	)		(352	)		(352	)		(1,493	)		(1,397	)
Interest and other annuity benefit expenses:
Interest credited		121			118			113			111			109			451			438
Embedded derivative mark-to-market		54			74			33			(3	)		80			184			93
Change in other benefit reserves		19			18			20			23			17			78			32
Unlockings		—			4			—			—			—			4			(10	)

Ending fixed annuity reserves	$	21,453		$	20,679		$	19,505		$	18,564		$	17,737		$	20,679		$	17,274

Reconciliation to annuity benefits accumulated:
Ending fixed annuity reserves	$	21,453		$	20,679		$	19,505		$	18,564		$	17,737		$	20,679		$	17,274
Impact of unrealized investment gains on reserves		97			71			84			87			140			71			136
Fixed component of variable annuities		194			194			196			197			198			194			199

Annuity benefits accumulated per balance sheet	$	21,744		$	20,944		$	19,785		$	18,848		$	18,075		$	20,944		$	17,609

Annualized surrenders and other withdrawals as a % of beginning reserves		7.3	%		8.4	%		8.2	%		7.9	%		8.2	%		8.6	%		9.2	%


American Financial Group, Inc. Consolidated Balance Sheet ($ in millions)


	03/31/14			12/31/13			09/30/13		06/30/13			03/31/13		12/31/12
Assets:
Total cash and investments	$	32,727		$	31,313		$	29,921	$	29,262		$	29,084	$	28,449
Recoverables from reinsurers		2,969			3,157			3,138		3,044			3,083		3,750
Prepaid reinsurance premiums		438			408			662		520			466		471
Agents’ balances and premiums receivable		735			739			801		754			649		636
Deferred policy acquisition costs		890			975			867		818			565		550
Assets of managed investment entities		2,723			2,888			2,779		2,973			3,285		3,225
Other receivables		524			854			1,078		422			384		539
Variable annuity assets (separate accounts)		666			665			629		608			614		580
Other assets		913			903			887		828			824		786
Goodwill		185			185			185		185			185		185

Total assets	$	42,770		$	42,087		$	40,947	$	39,414		$	39,139	$	39,171

Liabilities and Equity:
Unpaid losses and loss adjustment expenses	$	6,134		$	6,410		$	6,441	$	6,098		$	6,238	$	6,845
Unearned premiums		1,788			1,757			2,047		1,789			1,697		1,651
Annuity benefits accumulated		21,744			20,944			19,785		18,848			18,075		17,609
Life, accident and health reserves		2,039			2,008			2,011		2,017			2,021		2,059
Payable to reinsurers		400			508			601		367			250		475
Liabilities of managed investment entities		2,413			2,567			2,429		2,603			2,880		2,892
Long-term debt		913			913			913		949			950		953
Variable annuity liabilities (separate accounts)		666			665			629		608			614		580
Other liabilities		1,700			1,546			1,381		1,497			1,506		1,359

Total liabilities	$	37,797		$	37,318		$	36,237	$	34,776		$	34,231	$	34,423
Shareholders’ equity:
Common stock	$	90		$	90		$	89	$	89		$	90	$	89
Capital surplus		1,138			1,123			1,109		1,088			1,090		1,063
Appropriated retained earnings		49			49			45		33			64		75
Unappropriated retained earnings		2,842			2,777			2,729		2,664			2,620		2,520
Unrealized gains - fixed maturities		556			441			449		462			719		719
Unrealized gains - equities		129			121			119		138			146		104
Other comprehensive income, net of tax		(8	)		(2	)		2		(1	)		4		8

Total shareholders’ equity		4,796			4,599			4,542		4,473			4,733		4,578
Noncontrolling interests		177			170			168		165			175		170

Total liabilities and equity	$	42,770		$	42,087		$	40,947	$	39,414		$	39,139	$	39,171


American Financial Group, Inc. Book Value Per Share and Price / Book Summary (in millions, except per share information)


	03/31/14			12/31/13			09/30/13			06/30/13			03/31/13			12/31/12
Shareholders’ equity	$	4,796		$	4,599		$	4,542		$	4,473		$	4,733		$	4,578
Appropriated retained earnings		(49	)		(49	)		(45	)		(33	)		(64	)		(75	)

Shareholders’ equity, excluding appropriated retained earnings		4,747			4,550			4,497			4,440			4,669			4,503
Unrealized (gains) on fixed maturities		(556	)		(441	)		(449	)		(462	)		(719	)		(719	)

Adjusted shareholders’ equity		4,191			4,109			4,048			3,978			3,950			3,784
Goodwill		(185	)		(185	)		(185	)		(185	)		(185	)		(185	)
Intangibles		(27	)		(22	)		(26	)		(29	)		(33	)		(36	)

Tangible adjusted shareholders’ equity	$	3,979		$	3,902		$	3,837		$	3,764		$	3,732		$	3,563

Common shares outstanding		89.589			89.513			89.224			88.821			89.883			88.979
Book value per share:
Excluding appropriated retained earnings (a)	$	52.99		$	50.83		$	50.40		$	49.98		$	51.94		$	50.61
Adjusted (b)		46.79			45.90			45.36			44.78			43.94			42.52
Tangible, adjusted (c)		44.42			43.59			43.00			42.38			41.52			40.04
Market capitalization
AFG’s closing common share price	$	57.71		$	57.72		$	54.06		$	48.91		$	47.38		$	39.52
Market capitalization	$	5,170		$	5,167		$	4,823		$	4,344		$	4,259		$	3,516
Price / Adjusted book value ratio		1.23			1.26			1.19			1.09			1.08			0.93

(a)	Excludes appropriated retained earnings.

(b)	Excludes appropriated retained earnings and unrealized gains related to fixed maturity investments.

(c)	Excludes appropriated retained earnings, unrealized gains related to fixed maturity investments, goodwill and intangibles.

American Financial Group, Inc.

Capitalization

($ in millions)


	03/31/14			12/31/13			09/30/13			06/30/13			03/31/13			12/31/12
Direct obligations of AFG	$	840		$	840		$	840		$	840		$	840		$	840
Direct obligations of subsidiaries		73			73			73			89			90			93
Payable to subsidiary trusts		—			—			—			20			20			20

Long-term debt	$	913		$	913		$	913		$	949		$	950		$	953
Obligations secured by real estate		(61	)		(61	)		(61	)		(62	)		(62	)		(62	)

Debt excluding obligations secured by real estate	$	852		$	852		$	852		$	887		$	888		$	891

Total capital (a)	$	5,837		$	5,633		$	5,578		$	5,554		$	5,794		$	5,626
Total capital excluding obligations secured by real estate (a)		5,776			5,572			5,517			5,492			5,732			5,564
Total adjusted capital (b)	$	5,281		$	5,192		$	5,129		$	5,092		$	5,074		$	4,907
Total adjusted capital excluding obligations secured by real estate (b)		5,220			5,131			5,068			5,030			5,012			4,845
Ratio of debt to total capital (a):
Including debt secured by real estate		15.6	%		16.2	%		16.4	%		17.1	%		16.4	%		16.9	%
Excluding debt secured by real estate		14.8	%		15.3	%		15.4	%		16.2	%		15.5	%		16.0	%
Ratio of debt to total adjusted capital (b):
Including debt secured by real estate		17.3	%		17.6	%		17.8	%		18.6	%		18.7	%		19.4	%
Excluding debt secured by real estate		16.3	%		16.6	%		16.8	%		17.6	%		17.7	%		18.4	%

(a)	Includes long-term debt, noncontrolling interests and shareholders’ equity, excluding appropriated retained earnings.

(b)	Includes long-term debt, noncontrolling interests and shareholders’ equity, excluding appropriated retained earnings and unrealized gains related to fixed maturity investments.

American Financial Group, Inc.

Additional Supplemental Information

($ in millions)


	Three Months Ended										Twelve Months Ended
	03/31/14		12/31/13		09/30/13		06/30/13		03/31/13		12/31/13		12/31/12
Property and Casualty Insurance
Paid Losses (GAAP)	$	510	$	577	$	417	$	520	$	357	$	1,871	$	2,026


	03/31/14		12/31/13		09/30/13		06/30/13		03/31/13		12/30/12
Statutory Surplus
Property and Casualty Insurance	$	1,981	$	1,896	$	2,133	$	2,096	$	2,090	$	2,015
AFG’s principal annuity subsidiaries (total adjusted capital)	$	1,688	$	1,661	$	1,590	$	1,517	$	1,483	$	1,380
Allowable dividends without regulatory approval
Property and Casualty Insurance	$	335	$	335	$	237	$	237	$	237	$	237
Annuity and Run-off		275		275		158		158		158		158

Total	$	610	$	610	$	395	$	395	$	395	$	395

American Financial Group, Inc.

Total Cash and Investments and Quarterly Net Investment Income

March 31, 2014

($ in millions)


	Carrying Value
	Property and Casualty Insurance		Annuity and Run-off		Other		Consolidate CLOs			Total AFG Consolidated		% of Investment Portfolio
Total cash and investments:
Cash and cash equivalents	$	661	$	682	$	533	$	—		$	1,876		6	%
Fixed maturities - Available for sale		5,214		22,164		12		—			27,390		84	%
Fixed maturities - Trading		180		117		—		—			297		1	%
Equity securities		896		360		41		—			1,297		4	%
Policy loans		—		235		—		—			235		1	%
Mortgage loans		142		746		—		—			888		2	%
Real estate and other investments		325		671		8		(260	)		744		2	%

Total cash and investments	$	7,418	$	24,975	$	594	$	(260	)	$	32,727		100	%


	Property and Casualty Insurance			Annuity and Run-off			Other		Consolidate CLOs			Total AFG Consolidated
Total quarterly net investment income:
Fixed maturities - Available for sale	$	51		$	272		$	—	$	—		$	323
Fixed maturities - Trading		2			2			—		—			4
Equity securities		8			8			—		—			16
Equity in investees		3			3			—		—			6
Other investments		5			16			1		(5	)		17

Gross investment income		69			301			1		(5	)		366
Investment expenses		(2	)		(3	)		—		—			(5	)

Total net investment income	$	67		$	298		$	1	$	(5	)	$	361


	Equity Securities
	Cost		Fair Value		Unrealized Gain (Loss)
Annuity and Run-off	$	318	$	360	$	42
Property and Casualty Insurance		733		896		163
Other		41		41		—

Total AFG consolidated	$	1,092	$	1,297	$	205

American Financial Group, Inc.

Fixed Maturities - By Security Type - AFG Consolidated

March 31, 2014

($ in millions )

LOGO


	Amortized Cost			Fair Value		Unrealized Gain (Loss)		% of Fair Value			% of Investment Portfolio
US Government and government agencies	$	343		$	348	$	5		1	%		1	%
States, municipalities and political subdivisions		5,609			5,753		144		21	%		18	%
Foreign government		289			298		9		1	%		1	%
Residential mortgage-backed securities		4,203			4,591		388		17	%		14	%
Commercial mortgage-backed securities		2,442			2,626		184		9	%		8	%
Asset-backed securities		2,742			2,765		23		10	%		8	%
Corporate bonds
Manufacturing		2,186			2,308		122		8	%		7	%
Banks, lending and credit institutions		1,963			2,079		116		8	%		6	%
Gas and electric services		1,287			1,406		119		5	%		5	%
Insurance and insurance related		781			840		59		3	%		3	%
Other corporate		4,436			4,673		237		17	%		14	%

Total AFG consolidated	$	26,281		$	27,687	$	1,406		100	%		85	%

Annuity and Run-off	$	21,070		$	22,281		1,211		80	%		68	%
Property and Casualty Insurance		5,210			5,394		184		20	%		17	%
Other		1			12		11		0	%		0	%

Total AFG consolidated	$	26,281		$	27,687	$	1,406		100	%		85	%

Annualized yield on available for sale fixed maturities:
Excluding investment expense (a)		5.03	%
Net of investment expense (a)		4.95	%
Approximate average life and duration:
Approximate average life		6.5 years
Approximate duration		4.5 years

(a)	Annualized yield is calculated by dividing investment income for the quarter by the average cost over the quarter. Average cost is the average of the beginning and ending quarter asset balances.

American Financial Group, Inc.

Fixed Maturities - By Security Type Portfolio

March 31, 2014

($ in millions )

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	Amortized Cost			Fair Value		Unrealized Gain (Loss)		% of Fair Value
Annuity and Run-off:
US Government and government agencies	$	87		$	88	$	1		0	%
States, municipalities and political subdivisions		3,401			3,469		68		15	%
Foreign government		17			19		2		0	%
Residential mortgage-backed securities		3,400			3,729		329		17	%
Commercial mortgage-backed securities		2,225			2,396		171		11	%
Asset-backed securities		2,162			2,184		22		10	%
Corporate debt		9,778			10,396		618		47	%

Total Annuity and Run-off	$	21,070		$	22,281	$	1,211		100	%

Annualized yield on available for sale fixed maturities:
Excluding investment expense (a)		5.25	%
Net of investment expense (a)		5.20	%
Approximate average life and duration:
Approximate average life		7 years
Approximate duration		5 years

	Amortized Cost			Fair Value		Unrealized Gain (Loss)		% of Fair Value
Property and Casualty Insurance:
US Government and government agencies	$	256		$	260	$	4		5	%
States, municipalities and political subdivisions		2,208			2,284		76		42	%
Foreign government		272			279		7		5	%
Residential mortgage-backed securities		802			850		48		16	%
Commercial mortgage-backed securities		217			230		13		4	%
Asset-backed securities		580			581		1		11	%
Corporate debt		875			910		35		17	%

Property and Casualty Insurance	$	5,210		$	5,394	$	184		100	%

Annualized yield on available for sale fixed maturities:
Excluding investment expense (a)		4.06	%
Net of investment expense (a)		3.90	%
Tax equivalent, net of investment expense (b)		4.55	%
Approximate average life and duration:
Approximate average life		4.5 years
Approximate duration		3.5 years

(a)	Annualized yield is calculated by dividing investment income for the quarter by the average cost over the quarter. Average cost is the average of the beginning and ending quarter asset balances.

(b)	Adjusts the yield on tax-exempt bonds to the fully taxable equivalent yield.

American Financial Group, Inc.

Fixed Maturities - Credit Rating and NAIC Designation

March 31, 2014

($ in millions)

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	GAAP Data
By Credit Rating	Amortized Cost		Fair Value		% of Fair Value			Unrealized Gain (Loss)
Investment grade
AAA	$	5,839	$	6,043		22	%	$	204
AA		5,375		5,516		20	%		141
A		6,638		7,009		25	%		371
BBB		4,919		5,240		19	%		321

Subtotal - Investment grade		22,771		23,808		86	%		1,037
BB		660		694		2	%		34
B		510		531		2	%		21
Other		2,340		2,654		10	%		314

Total	$	26,281	$	27,687		100	%	$	1,406

If two agencies rate a security, the rating displayed above is the lower of the two; if three or more agencies rate a security, the rating displayed is the second lowest.


	Statutory Data
By NAIC Designation	Carrying Value		% of Carrying Value			Amortized Cost		Fair Value		Unrealized Gain (Loss)
NAIC 1	$	20,417		79	%	$	20,418	$	21,499	$	1,081
NAIC 2		4,766		18	%		4,766		5,064		298

		25,183		97	%		25,184		26,563		1,379
NAIC 3		480		2	%		481		506		25
NAIC 4		207		1	%		208		220		12
NAIC 5		51		0	%		52		57		5
NAIC 6		60		0	%		63		86		23

Total	$	25,981		100	%	$	25,988	$	27,432	$	1,444

American Financial Group, Inc.

Mortgage-Backed Securities - AFG Consolidated

March 31, 2014

($ in millions)

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By Asset Type	Amortized Cost		Fair Value		% of Fair Value			% of Investment Portfolio			Unrealized Gain (Loss)
Residential
Agency	$	310	$	315		4	%		1	%	$	5
Prime (Non-Agency)		1,996		2,209		31	%		7	%		213
Alt-A		989		1,091		15	%		3	%		102
Subprime		908		976		14	%		3	%		68

Subtotal - Residential		4,203		4,591		64	%		14	%		388
Commercial		2,442		2,626		36	%		8	%		184

Total AFG consolidated	$	6,645	$	7,217		100	%		22	%	$	572

Annuity and Run-off	$	5,625	$	6,125		85	%		19	%		500
Property and Casualty Insurance		1,019		1,080		15	%		3	%		61
Other		1		12		0	%		0	%		11

Total AFG consolidated	$	6,645	$	7,217		100	%		22	%	$	572

•

Substantially all of AFG’s MBS securities are either senior tranches of securitizations or collateralized by senior tranches of securitizations.

•

The average amortized cost as a percent of par is—Prime 83%; Alt-A 78%; Subprime 85%; CMBS 99%.

•

The average FICO score of our residential MBS securities is—Prime 738; Alt-A 712; Subprime 642.

•

100% of our Commercial MBS portfolio is investment-grade rated (84% AAA) and the average subordination for this group assets is 38%.

•

The approximate average life by collateral type is—Residential 5 years; Commercial 4 years.

American Financial Group, Inc.

Mortgage-Backed Securities Portfolio

March 31, 2014

($ in millions)

Annuity and Run-off:


	Amortized				% of			%of Investment			Unrealized
By Asset Type	Cost		Fair Value		Fair Value			Portfolio			Gain (Loss)
Residential
Agency	$	131	$	136		2	%		1	%	$	5
Prime (Non-Agency)		1,855		2,040		33	%		8	%		185
Alt-A		769		854		14	%		3	%		85
Subprime		645		699		12	%		3	%		54

Subtotal - Residential		3,400		3,729		61	%		15	%		329
Commercial		2,225		2,396		39	%		10	%		171

Total Annuity and Run-off	$	5,625	$	6,125		100	%		25	%	$	500


Property and Casualty Insurance:
By Asset Type	Amortized Cost		Fair Value		% of Fair Value			% of Investment Portfolio			Unrealized Gain (Loss)
Residential
Agency	$	179	$	179		17	%		3	%	$	—
Prime (Non-Agency)		140		157		14	%		2	%		17
Alt-A		220		237		22	%		3	%		17
Subprime		263		277		26	%		4	%		14

Subtotal - Residential		802		850		79	%		12	%		48
Commercial		217		230		21	%		3	%		13

Total Property and Casualty Insurance	$	1,019	$	1,080		100	%		15	%	$	61

American Financial Group, Inc.

Mortgage-Backed Securities - Credit Rating and NAIC Designation

March 31, 2014

($ in millions)


	GAAP data
	Amortized				% of			Unrealized
By Credit Rating	Cost		Fair Value		Fair Value			Gain (Loss)
Investment grade
AAA	$	2,801	$	2,975		41	%	$	174
AA		370		391		6	%		21
A		574		604		8	%		30
BBB		312		335		5	%		23

Subtotal - investment grade		4,057		4,305		60	%		248
BB		304		314		4	%		10
B		438		453		6	%		15
Other		1,846		2,145		30	%		299

Total	$	6,645	$	7,217		100	%	$	572

If two agencies rate a security, the rating displayed above is the lower of the two; if three or more agencies rate a security, the rating displayed is the second lowest.


	Statutory data
By NAIC	Carrying		% of Carrying			Amortized				Unrealized
Designation	Value		Value			Cost		Fair Value		Gain (Loss)
NAIC 1	$	6,229		95	%	$	6,230	$	6,831	$	601
NAIC 2		114		2	%		114		115		1

		6,343		97	%		6,344		6,946		602
NAIC 3		46		1	%		47		48		1
NAIC 4		86		1	%		87		93		6
NAIC 5		4		0	%		4		11		7
NAIC 6		39		1	%		40		56		16

Total	$	6,518		100	%	$	6,522	$	7,154	$	632

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AMERICAN FINANCIAL GROUP INC Reports