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

Attached files

file	filename
8-K - CURRENT REPORT - AMERICAN FINANCIAL GROUP INC	d864656d8k.htm
EX-99.1 - EARNINGS RELEASE - AMERICAN FINANCIAL GROUP INC	d864656dex991.htm

Exhibit 99.2




		American Financial Group, Inc.
		Investor Supplement - Fourth Quarter 2014
		February 2, 2015

		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 - Fourth Quarter 2014


Section	Page
Table of Contents - Investor Supplement - Fourth 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 Earnings (GAAP)		12
Detail of Annuity Benefits Expense (GAAP)		13
Net Spread on Fixed Annuities (GAAP)		14
Annuity Premiums (Statutory)		15
Fixed Annuity Benefits Accumulated (GAAP)		16

Consolidated Balance Sheet / Book Value / Debt
Consolidated Balance Sheet		17
Book Value Per Share and Price / Book Summary		18
Capitalization		19
Additional Supplemental Information		20

Consolidated Investment Supplement
Total Cash and Investments and Quarterly Net Investment Income		21
Fixed Maturities - By Security Type - AFG Consolidated		22
Fixed Maturities - By Security Type Portfolio		23
Fixed Maturities - Credit Rating and NAIC Designation		24
Mortgage-Backed Securities - AFG Consolidated		25
Mortgage-Backed Securities Portfolio		26
Mortgage-Backed Securities - Credit Rating and NAIC Designation		27

Appendix
Attribution of Changes in Long-Term Care Net Loss Recognition Margin		28
Reinvestment Rates Used in Loss Recognition Testing and Annuity Unlocking		29

American Financial Group, Inc.

Financial Highlights

(in millions, except per share information)


	Three Months Ended															Twelve Months Ended
	12/31/14			09/30/14			06/30/14			03/31/14			12/31/13			12/31/14			12/31/13
Highlights
Core net operating earnings	$	122		$	127		$	99		$	91		$	117		$	439		$	385
Net earnings		127			116			106			103			158			452			471
Total assets		47,535			46,552			45,355			42,770			42,087			47,535			42,087
Adjusted shareholders’ equity (a)		4,277			4,300			4,298			4,191			4,109			4,277			4,109
Property and Casualty net written premiums		1,025			1,242			998			755			821			4,020			3,341
Annuity statutory premiums		971			809			949			967			1,381			3,696			4,033

Per share data
Core net operating earnings per share	$	1.35		$	1.40		$	1.07		$	1.00		$	1.28		$	4.82		$	4.22
Diluted earnings per share		1.41			1.28			1.15			1.13			1.73			4.97			5.16
Adjusted book value per share (a)		48.76			48.59			47.95			46.79			45.90			48.76			45.90

Cash dividends per common share		1.250			0.220			0.220			0.220			1.220			1.910			1.805

Financial ratios
Annualized core operating return on equity (b)		11.7	%		12.3	%		9.6	%		9.1	%		11.8	%		10.7	%		10.0	%
Annualized return on equity (b)		12.1	%		11.1	%		10.3	%		10.3	%		16.0	%		11.0	%		12.3	%

Property and Casualty combined ratio - Specialty:
Loss & LAE ratio		64.0	%		67.1	%		64.6	%		56.9	%		62.4	%		63.7	%		61.7	%
Underwriting expense ratio		28.6	%		26.7	%		32.3	%		35.3	%		28.9	%		30.2	%		31.8	%

Combined ratio - Specialty		92.6	%		93.8	%		96.9	%		92.2	%		91.3	%		93.9	%		93.5	%

Net spread on fixed annuities:
Net interest spread		2.64	%		2.77	%		2.92	%		2.81	%		2.86	%		2.78	%		2.94	%
Net spread earned:
Before impact of fair value accounting		1.54	%		1.50	%		1.64	%		1.58	%		1.55	%		1.56	%		1.52	%
Impact of fair value accounting (c)		(0.14	%)		(0.02	%)		(0.18	%)		(0.28	%)		0.12	%		(0.15	%)		0.08	%

After impact of fair value accounting		1.40	%		1.48	%		1.46	%		1.30	%		1.67	%		1.41	%		1.60	%

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

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

(c)	Change in fair value of derivatives offset by the estimated related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs.

American Financial Group, Inc.

Summary of Earnings

($ in millions)


	Three Months Ended															Twelve Months Ended
	12/31/14			09/30/14			06/30/14			03/31/14			12/31/13			12/31/14			12/31/13
Property and Casualty Insurance
Underwriting profit	$	79		$	70		$	29		$	58		$	75		$	236		$	199
Net investment income		75			76			76			67			67			294			263
Other expense		(13	)		(16	)		(8	)		(17	)		(11	)		(54	)		(40	)

Property and Casualty Insurance operating earnings		141			130			97			108			131			476			422

Annuity earnings		85			86			84			73			92			328			328
Run-off Long-Term Care and Life (losses)/earnings		(7	)		1			(2	)		(2	)		(3	)		(10	)		(10	)
Interest expense of parent holding companies		(19	)		(17	)		(16	)		(17	)		(17	)		(69	)		(68	)
Other expense		(16	)		(13	)		(21	)		(24	)		(28	)		(74	)		(100	)

Pre-tax core operating earnings		184			187			142			138			175			651			572

Income tax expense		62			60			43			47			58			212			187

Core net operating earnings		122			127			99			91			117			439			385

Non-core items, net of tax:
Realized gains		5			8			7			12			41			32			138
Significant A&E charges:
Property and Casualty Insurance run-off operations		—			(15	)		—			—			—			(15	)		(35	)
Former Railroad and Manufacturing operations		—			(4	)		—			—			—			(4	)		(14	)
ELNY guaranty fund assessments charge (a)		—			—			—			—			—			—			(3	)

Net earnings	$	127		$	116		$	106		$	103		$	158		$	452		$	471

(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.

Earnings Per Share Summary

(in millions, except per share information)


	Three Months Ended											Twelve Months Ended
	12/31/14		09/30/14			06/30/14		03/31/14		12/31/13		12/31/14			12/31/13
Core net operating earnings	$	122	$	127		$	99	$	91	$	117	$	439		$	385

Net earnings	$	127	$	116		$	106	$	103	$	158	$	452		$	471

Average number of diluted shares		89.772		90.873			91.593		91.621		91.438		90.960			91.242

Diluted earnings per share:
Core net operating earnings per share	$	1.35	$	1.40		$	1.07	$	1.00	$	1.28	$	4.82		$	4.22

Realized gains		0.06		0.09			0.08		0.13		0.45		0.36			1.52
Significant A&E charges:
Property and Casualty Insurance run-off operations		—		(0.17	)		—		—		—		(0.17	)		(0.39	)
Former Railroad and Manufacturing operations		—		(0.04	)		—		—		—		(0.04	)		(0.15	)
ELNY guaranty fund assessments charge (a)		—		—			—		—		—		—			(0.04	)

Diluted earnings per share	$	1.41	$	1.28		$	1.15	$	1.13	$	1.73	$	4.97		$	5.16

(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
	12/31/14			09/30/14			06/30/14			03/31/14			12/31/13			12/31/14			12/31/13
Property and Transportation	$	22		$	11		$	(18	)	$	6		$	17		$	21		$	12
Specialty Casualty		36			32			30			38			32			136			102
Specialty Financial		18			21			15			10			17			64			67
Other Specialty		3			6			2			5			9			16			25

Underwriting profit - Specialty		79			70			29			59			75			237			206

Other charges, included in loss and LAE		—			—			—			1			—			1			7

Underwriting profit - Core		79			70			29			58			75			236			199

Special A&E charges, included in loss and LAE		—			(24	)		—			—			—			(24	)		(54	)

Underwriting profit - Property and Casualty Insurance	$	79		$	46		$	29		$	58		$	75		$	212		$	145

Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Catastrophe loss		3			3			10			12			1			28			31

Total current accident year catastrophe losses	$	3		$	3		$	10		$	12		$	1		$	28		$	31

Prior year loss reserve development (favorable) / adverse	$	10		$	13		$	14		$	(31	)	$	(5	)	$	6		$	(15	)

Combined ratio:
Property and Transportation		94.6	%		97.8	%		105.5	%		98.1	%		95.8	%		98.7	%		99.2	%
Specialty Casualty		92.9	%		93.3	%		93.6	%		87.8	%		89.7	%		92.3	%		90.9	%
Specialty Financial		85.6	%		81.6	%		87.6	%		91.0	%		85.2	%		86.5	%		85.6	%
Other Specialty		86.9	%		78.0	%		89.0	%		79.9	%		60.4	%		83.4	%		68.8	%
Combined ratio - Specialty		92.6	%		93.8	%		96.9	%		92.2	%		91.3	%		93.9	%		93.5	%

Other core charges		0.0	%		0.1	%		0.0	%		0.0	%		0.1	%		0.0	%		0.3	%
Special A&E charges		0.0	%		2.1	%		0.0	%		0.0	%		0.0	%		0.6	%		1.7	%

Combined ratio		92.6	%		96.0	%		96.9	%		92.2	%		91.4	%		94.5	%		95.5	%

Combined ratio excl. catastrophe and prior year development		91.4	%		94.5	%		94.4	%		94.8	%		91.7	%		93.7	%		94.9	%

Loss and LAE components - property and casualty insurance
Current accident year, excluding catastrophe loss		62.8	%		67.8	%		62.1	%		59.4	%		62.8	%		63.5	%		63.1	%
Prior accident year loss reserve development		1.0	%		1.2	%		1.4	%		(4.1	%)		(0.4	%)		0.1	%		(0.4	%)
Current accident year catastrophe loss		0.2	%		0.3	%		1.1	%		1.6	%		0.1	%		0.7	%		1.0	%

Loss and LAE ratio		64.0	%		69.3	%		64.6	%		56.9	%		62.5	%		64.3	%		63.7	%

American Financial Group, Inc.

Specialty - Underwriting Results (GAAP)

($ in millions)


	Three Months Ended															Twelve Months Ended
	12/31/14			09/30/14			06/30/14			03/31/14			12/31/13			12/31/14			12/31/13
Gross written premiums	$	1,303		$	1,859		$	1,291		$	1,024		$	1,071		$	5,477		$	4,805
Ceded reinsurance premiums		(278	)		(617	)		(293	)		(269	)		(250	)		(1,457	)		(1,464	)

Net written premiums		1,025			1,242			998			755			821			4,020			3,341
Change in unearned premiums		36			(110	)		(67	)		(1	)		38			(142	)		(137	)

Net earned premiums		1,061			1,132			931			754			859			3,878			3,204

Loss and LAE		679			760			602			428			537			2,469			1,979
Underwriting expense		303			302			300			267			247			1,172			1,019

Underwriting profit	$	79		$	70		$	29		$	59		$	75		$	237		$	206

Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Catastrophe loss		3			3			10			12			1			28			31

Total current accident year catastrophe losses	$	3		$	3		$	10		$	12		$	1		$	28		$	31

Prior year loss reserve development (favorable) / adverse	$	10		$	(11	)	$	14		$	(32	)	$	(5	)	$	(19	)	$	(75	)

Combined ratio:
Loss and LAE ratio		64.0	%		67.1	%		64.6	%		56.9	%		62.4	%		63.7	%		61.7	%
Underwriting expense ratio		28.6	%		26.7	%		32.3	%		35.3	%		28.9	%		30.2	%		31.8	%

Combined ratio		92.6	%		93.8	%		96.9	%		92.2	%		91.3	%		93.9	%		93.5	%

Combined ratio excl. catastrophe and prior year development		91.4	%		94.5	%		94.4	%		94.8	%		91.7	%		93.7	%		94.9	%

Loss and LAE components:
Current accident year, excluding catastrophe loss		62.8	%		67.8	%		62.1	%		59.5	%		62.8	%		63.5	%		63.1	%
Prior accident year loss reserve development		1.0	%		(1.0	%)		1.4	%		(4.2	%)		(0.5	%)		(0.5	%)		(2.4	%)
Current accident year catastrophe loss		0.2	%		0.3	%		1.1	%		1.6	%		0.1	%		0.7	%		1.0	%

Loss and LAE ratio		64.0	%		67.1	%		64.6	%		56.9	%		62.4	%		63.7	%		61.7	%

American Financial Group, Inc.

Property and Transportation - Underwriting Results (GAAP)

($ in millions)


	Three Months Ended															Twelve Months Ended
	12/31/14			09/30/14			06/30/14			03/31/14			12/31/13			12/31/14			12/31/13
Gross written premiums	$	482		$	995		$	489		$	376		$	447		$	2,342		$	2,392
Ceded reinsurance premiums		(109	)		(439	)		(136	)		(92	)		(98	)		(776	)		(845	)

Net written premiums		373			556			353			284			349			1,566			1,547
Change in unearned premiums		42			(52	)		(29	)		17			61			(22	)		(26	)

Net earned premiums		415			504			324			301			410			1,544			1,521

Loss and LAE		299			407			248			201			307			1,155			1,142
Underwriting expense		94			86			94			94			86			368			367

Underwriting profit (loss)	$	22		$	11		$	(18	)	$	6		$	17		$	21		$	12

Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Catastrophe loss		2			1			8			9			—			20			27

Total current accident year catastrophe losses	$	2		$	1		$	8		$	9		$	—		$	20		$	27

Prior year loss reserve development (favorable) / adverse	$	3		$	(5	)	$	22		$	(4	)	$	3		$	16		$	(1	)

Combined ratio:
Loss and LAE ratio		72.2	%		80.7	%		76.4	%		67.0	%		74.9	%		74.9	%		75.1	%
Underwriting expense ratio		22.4	%		17.1	%		29.1	%		31.1	%		20.9	%		23.8	%		24.1	%

Combined ratio		94.6	%		97.8	%		105.5	%		98.1	%		95.8	%		98.7	%		99.2	%

Combined ratio excl. catastrophe and prior year development		93.7	%		98.5	%		96.2	%		96.4	%		95.0	%		96.4	%		97.5	%

Loss and LAE components:
Current accident year, excluding catastrophe loss		71.3	%		81.4	%		67.1	%		65.3	%		74.1	%		72.6	%		73.4	%
Prior accident year loss reserve development		0.6	%		(0.9	%)		6.6	%		(1.1	%)		0.8	%		1.0	%		(0.1	%)
Current accident year catastrophe loss		0.3	%		0.2	%		2.7	%		2.8	%		0.0	%		1.3	%		1.8	%

Loss and LAE ratio		72.2	%		80.7	%		76.4	%		67.0	%		74.9	%		74.9	%		75.1	%

American Financial Group, Inc.

Specialty Casualty - Underwriting Results (GAAP)

($ in millions)


	Three Months Ended															Twelve Months Ended
	12/31/14			09/30/14			06/30/14			03/31/14			12/31/13			12/31/14			12/31/13
Gross written premiums	$	660		$	707		$	655		$	507		$	459		$	2,529		$	1,790
Ceded reinsurance premiums		(162	)		(171	)		(156	)		(176	)		(138	)		(665	)		(566	)

Net written premiums		498			536			499			331			321			1,864			1,224
Change in unearned premiums		1			(50	)		(32	)		(18	)		(11	)		(99	)		(89	)

Net earned premiums		499			486			467			313			310			1,765			1,135

Loss and LAE		325			310			300			172			183			1,107			653
Underwriting expense		138			144			137			103			95			522			380

Underwriting profit	$	36		$	32		$	30		$	38		$	32		$	136		$	102

Included in results above:
Current accident year catastrophe losses:
Catastrophe reinstatement premium	$	—		$	—		$	—		$	—		$	—		$	—		$	—
Catastrophe loss		1			1			1			1			—			4			1

Total current accident year catastrophe losses	$	1		$	1		$	1		$	1		$	—		$	4		$	1

Prior year loss reserve development (favorable) / adverse	$	14		$	7		$	(4	)	$	(24	)	$	2		$	(7	)	$	(40	)

Combined ratio:
Loss and LAE ratio		65.1	%		63.7	%		64.3	%		55.0	%		59.0	%		62.7	%		57.5	%
Underwriting expense ratio		27.8	%		29.6	%		29.3	%		32.8	%		30.7	%		29.6	%		33.4	%

Combined ratio		92.9	%		93.3	%		93.6	%		87.8	%		89.7	%		92.3	%		90.9	%

Combined ratio excl. catastrophe and prior year development		89.9	%		91.6	%		94.3	%		95.1	%		89.2	%		92.5	%		94.4	%

Loss and LAE components:
Current accident year, excluding catastrophe loss		62.1	%		62.0	%		65.0	%		62.3	%		58.5	%		62.9	%		61.0	%
Prior accident year loss reserve development		2.9	%		1.3	%		(0.8	%)		(7.7	%)		0.5	%		(0.4	%)		(3.6	%)
Current accident year catastrophe loss		0.1	%		0.4	%		0.1	%		0.4	%		0.0	%		0.2	%		0.1	%

Loss and LAE ratio		65.1	%		63.7	%		64.3	%		55.0	%		59.0	%		62.7	%		57.5	%

American Financial Group, Inc.

Specialty Financial - Underwriting Results (GAAP)

($ in millions)


	Three Months Ended															Twelve Months Ended
	12/31/14			09/30/14			06/30/14			03/31/14			12/31/13			12/31/14			12/31/13
Gross written premiums	$	160		$	157		$	147		$	141		$	164		$	605		$	622
Ceded reinsurance premiums		(29	)		(36	)		(27	)		(25	)		(32	)		(117	)		(136	)

Net written premiums		131			121			120			116			132			488			486
Change in unearned premiums		(10	)		(6	)		(4	)		1			(13	)		(19	)		(17	)

Net earned premiums		121			115			116			117			119			469			469

Loss and LAE		42			32			40			45			42			159			158
Underwriting expense		61			62			61			62			60			246			244

Underwriting profit	$	18		$	21		$	15		$	10		$	17		$	64		$	67

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

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

Prior year loss reserve development (favorable) / adverse	$	(4	)	$	(10	)	$	(2	)	$	(1	)	$	(4	)	$	(17	)	$	(14	)

Combined ratio:
Loss and LAE ratio		34.5	%		27.7	%		35.3	%		37.9	%		34.2	%		33.9	%		33.5	%
Underwriting expense ratio		51.1	%		53.9	%		52.3	%		53.1	%		51.0	%		52.6	%		52.1	%

Combined ratio		85.6	%		81.6	%		87.6	%		91.0	%		85.2	%		86.5	%		85.6	%

Combined ratio excl. catastrophe and prior year development		88.8	%		90.3	%		88.6	%		90.2	%		87.7	%		89.5	%		88.0	%

Loss and LAE components:
Current accident year, excluding catastrophe loss		37.7	%		36.4	%		36.3	%		37.1	%		36.7	%		36.9	%		35.9	%
Prior accident year loss reserve development		(3.3	%)		(9.0	%)		(1.8	%)		(0.7	%)		(3.2	%)		(3.7	%)		(3.0	%)
Current accident year catastrophe loss		0.1	%		0.3	%		0.8	%		1.5	%		0.7	%		0.7	%		0.6	%

Loss and LAE ratio		34.5	%		27.7	%		35.3	%		37.9	%		34.2	%		33.9	%		33.5	%

American Financial Group, Inc.

Other Specialty - Underwriting Results (GAAP)

($ in millions)


	Three Months Ended															Twelve Months Ended
	12/31/14			09/30/14			06/30/14			03/31/14			12/31/13			12/31/14			12/31/13
Gross written premiums	$	1		$	—		$	—		$	—		$	1		$	1		$	1
Ceded reinsurance premiums		22			29			26			24			18			101			83

Net written premiums		23			29			26			24			19			102			84
Change in unearned premiums		3			(2	)		(2	)		(1	)		1			(2	)		(5	)

Net earned premiums		26			27			24			23			20			100			79

Loss and LAE		13			11			14			10			5			48			26
Underwriting expense		10			10			8			8			6			36			28

Underwriting profit	$	3		$	6		$	2		$	5		$	9		$	16		$	25

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

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

Prior year loss reserve development (favorable) / adverse	$	(3	)	$	(3	)	$	(2	)	$	(3	)	$	(6	)	$	(11	)	$	(20	)

Combined ratio:
Loss and LAE ratio		49.6	%		43.4	%		53.2	%		45.8	%		28.3	%		47.9	%		32.9	%
Underwriting expense ratio		37.3	%		34.6	%		35.8	%		34.1	%		32.1	%		35.5	%		35.9	%

Combined ratio		86.9	%		78.0	%		89.0	%		79.9	%		60.4	%		83.4	%		68.8	%

Combined ratio excl. catastrophe and prior year development		97.4	%		85.6	%		97.1	%		91.4	%		87.5	%		92.8	%		93.6	%

American Financial Group, Inc.

Annuity Earnings (GAAP)

($ in millions)


	Three Months Ended														Twelve Months Ended
	12/31/14			09/30/14			06/30/14			03/31/14			12/31/13		12/31/14			12/31/13
Net investment income	$	285		$	287		$	289		$	275		$	270	$	1,136		$	1,034
Guaranteed withdrawal benefit fees		9			9			8			8			7		34			25
Policy charges and other miscellaneous income		12			11			11			10			14		44			42

Total revenues		306			307			308			293			291		1,214			1,101

Annuity benefits expense		157			157			166			168			137		648			531
Acquisition expenses		47			41			37			31			35		156			149
Other expenses		17			23			21			21			27		82			93

Total costs and expenses		221			221			224			220			199		886			773

Core Annuity earnings before income taxes		85			86			84			73			92		328			328

ELNY guaranty fund assessments charge before income tax (a)		—			—			—			—			—		—			(5	)

Annuity earnings before income taxes	$	85		$	86		$	84		$	73		$	92	$	328		$	323

Detail of core Annuity earnings before income taxes
Core earnings before income taxes and impact of fair value accounting	$	93		$	87		$	94		$	88		$	86	$	362		$	313
Impact of fair value accounting (b)		(8	)		(1	)		(10	)		(15	)		6		(34	)		15

Core Annuity earnings before income taxes	$	85		$	86		$	84		$	73		$	92	$	328		$	328

(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.

(b)	Change in fair value of derivatives offset by the estimated related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs.

American Financial Group, Inc.

Detail of Annuity Benefits Expense (GAAP)

($ in millions)


	Three Months Ended															Twelve Months Ended
	12/31/14			09/30/14			06/30/14			03/31/14			12/31/13			12/31/14			12/31/13
Detail of annuity benefits expense:
Interest credited - fixed	$	127		$	126		$	123		$	121		$	118		$	497		$	451
Interest credited - fixed component of variable annuities		1			2			2			1			1			6			6
Change in expected death and annuitization reserve		4			5			5			4			5			18			19
Amortization of sales inducements		6			7			6			7			7			26			30
Guaranteed withdrawal benefit reserve		11			12			10			8			10			41			38
Change in other benefit reserves		1			3			5			3			1			12			7
Unlockings (a)		(11	)		—			—			—			6			(11	)		6

Subtotal before impact of fair value accounting		139			155			151			144			148			589			557

Embedded derivative mark-to-market (b)		87			21			78			54			74			240			184
Equity option mark-to-market		(69	)		(19	)		(63	)		(30	)		(85	)		(181	)		(210	)

Subtotal impact of fair value accounting		18			2			15			24			(11	)		59			(26	)

Total annuity benefits expense	$	157		$	157		$	166		$	168		$	137		$	648		$	531

(a)

Includes unlockings for fixed indexed annuity embedded derivative reserves, sales inducement asset and other reserves. Does not include unlocking charge of $10mm in 2014 and income of $4mm in 2013 for deferred policy acquisition costs and unearned revenue reserves. These unlockings are included in acquisition expenses. In total AFG recorded an unlocking expense reduction of $1mm in 2014 and an unlocking charge of $2mm in 2013.

(b)	Excludes unlocking impact of ($58) million in 2014 and ($2) million in 2013.

American Financial Group, Inc.

Net Spread on Fixed Annuities (GAAP)

($ in millions)


	Three Months Ended															Twelve Months Ended
	12/31/14			09/30/14			06/30/14			03/31/14			12/31/13			12/31/14			12/31/13
Average fixed annuity investments (at amortized cost)	$	23,334		$	22,730		$	22,098		$	21,402		$	20,524		$	22,391		$	19,151
Average annuity benefits accumulated		23,104			22,475			21,829			21,066			20,092			22,119			18,696

Investments in excess of annuity benefits accumulated	$	230		$	255		$	269		$	336		$	432		$	272		$	455

As % of average annuity benefits accumulated (except as noted)
Net investment income (as % of investments)		4.85	%		5.01	%		5.18	%		5.10	%		5.21	%		5.03	%		5.35	%
Interest credited		(2.21	%)		(2.24	%)		(2.26	%)		(2.29	%)		(2.35	%)		(2.25	%)		(2.41	%)

Net interest spread on fixed annuities		2.64	%		2.77	%		2.92	%		2.81	%		2.86	%		2.78	%		2.94	%

Policy charges and other miscellaneous income		0.14	%		0.14	%		0.14	%		0.13	%		0.22	%		0.14	%		0.16	%
Other annuity benefit expenses, net		(0.20	%)		(0.33	%)		(0.33	%)		(0.27	%)		(0.31	%)		(0.28	%)		(0.37	%)
Acquisition expenses		(0.61	%)		(0.69	%)		(0.64	%)		(0.55	%)		(0.75	%)		(0.63	%)		(0.79	%)
Other expenses		(0.28	%)		(0.37	%)		(0.36	%)		(0.37	%)		(0.53	%)		(0.34	%)		(0.46	%)
Change in fair value of derivatives		(0.31	%)		(0.04	%)		(0.27	%)		(0.45	%)		0.22	%		(0.27	%)		0.13	%
Unlockings		0.02	%		0.00	%		0.00	%		0.00	%		(0.04	%)		0.01	%		(0.01	%)

Net spread earned on fixed annuities - core		1.40	%		1.48	%		1.46	%		1.30	%		1.67	%		1.41	%		1.60	%

Average annuity benefits accumulated	$	23,104		$	22,475		$	21,829		$	21,066		$	20,092		$	22,119		$	18,696
Net spread earned on fixed annuities		1.40	%		1.48	%		1.46	%		1.30	%		1.67	%		1.41	%		1.60	%

Earnings on fixed annuity benefits accumulated	$	81		$	83		$	80		$	68		$	84		$	312		$	300

Investments in excess of annuity benefits accumulated	$	230		$	255		$	269		$	336		$	432		$	272		$	455
Net investment income (as % of investments)		4.85	%		5.01	%		5.18	%		5.10	%		5.21	%		5.03	%		5.35	%

Earnings on investments in excess of annuity benefits accumulated	$	3		$	3		$	3		$	5		$	6		$	14			24

Variable annuity earnings		1			—			1			—			2			2			4

Earnings before income taxes - core	$	85		$	86		$	84		$	73		$	92		$	328		$	328

Detail of net spread earned on fixed annuities - core
Net spread earned core - before impact of fair value accounting		1.54	%		1.50	%		1.64	%		1.58	%		1.55	%		1.56	%		1.52	%
Impact of fair value accounting (a)		(0.14	%)		(0.02	%)		(0.18	%)		(0.28	%)		0.12	%		(0.15	%)		0.08	%

Net spread earned core - after impact of fair value accounting		1.40	%		1.48	%		1.46	%		1.30	%		1.67	%		1.41	%		1.60	%

(a)	Change in fair value of derivatives offset by the estimated related adjustments to amortization of deferred sales inducements and deferred policy acquisition costs.

American Financial Group

Annuity Premiums (Statutory)

($ in millions)


	Three Months Ended										Twelve Months Ended
	12/31/14		09/30/14		06/30/14		03/31/14		12/31/13		12/31/14		12/31/13
Retail single premium annuities - indexed	$	405	$	339	$	403	$	386	$	565	$	1,533	$	1,879
Retail single premium annuities - fixed		19		18		25		39		53		101		165
Financial institutions single premium annuities - indexed		426		333		364		366		498		1,489		1,102
Financial institutions single premium annuities - fixed		61		62		95		114		201		332		628
Education market - fixed and indexed annuities		49		46		49		50		51		194		207

Subtotal fixed annuity premiums		960		798		936		955		1,368		3,649		3,981

Variable annuities		11		11		13		12		13		47		52

Total annuity premiums	$	971	$	809	$	949	$	967	$	1,381	$	3,696	$	4,033

American Financial Group, Inc.

Fixed Annuity Benefits Accumulated (GAAP)

($ in millions)


	Three Months Ended															Twelve Months Ended
	12/31/14			09/30/14			06/30/14			03/31/14			12/31/13			12/31/14			12/31/13
Beginning fixed annuity reserves	$	22,745		$	22,205		$	21,453		$	20,679		$	19,505		$	20,679		$	17,274
Premiums		960			798			936			955			1,368			3,649			3,981
Federal Home Loan Bank advances		—			—			—			—			—			—			200
Surrenders, benefits and other withdrawals		(464	)		(426	)		(408	)		(375	)		(408	)		(1,673	)		(1,493	)
Interest and other annuity benefit expenses:
Interest credited		127			126			123			121			118			497			451
Embedded derivative mark-to-market		87			21			78			54			74			240			184
Change in other benefit reserves		18			21			23			19			18			81			78
Unlockings		(11	)		—			—			—			4			(11	)		4

Ending fixed annuity reserves	$	23,462		$	22,745		$	22,205		$	21,453		$	20,679		$	23,462		$	20,679

Reconciliation to annuity benefits accumulated:
Ending fixed annuity reserves	$	23,462		$	22,745		$	22,205		$	21,453		$	20,679		$	23,462		$	20,679
Impact of unrealized investment gains on reserves		111			107			117			97			71			111			71
Fixed component of variable annuities		191			192			194			194			194			191			194

Annuity benefits accumulated per balance sheet	$	23,764		$	23,044		$	22,516		$	21,744		$	20,944		$	23,764		$	20,944

Annualized surrenders and other withdrawals as a % of beginning reserves		8.2	%		7.7	%		7.6	%		7.3	%		8.4	%		8.1	%		8.6	%

American Financial Group, Inc.

Consolidated Balance Sheet

($ in millions)


	12/31/14			09/30/14			06/30/14			03/31/14			12/31/13			09/30/13
Assets:
Total cash and investments	$	36,210		$	35,151		$	34,843		$	32,727		$	31,313		$	29,921
Recoverables from reinsurers		3,238			3,134			3,107			2,969			3,157			3,138
Prepaid reinsurance premiums		469			587			489			438			408			662
Agents’ balances and premiums receivable		889			901			902			735			739			801
Deferred policy acquisition costs		821			858			806			890			975			867
Assets of managed investment entities		3,108			2,946			2,799			2,723			2,888			2,779
Other receivables		910			1,140			527			524			854			1,078
Variable annuity assets (separate accounts)		662			649			681			666			665			629
Other assets		1,027			985			1,001			913			903			887
Goodwill		201			201			200			185			185			185

Total assets	$	47,535		$	46,552		$	45,355		$	42,770		$	42,087		$	40,947

Liabilities and Equity:
Unpaid losses and loss adjustment expenses	$	7,872		$	7,645		$	7,370		$	6,134		$	6,410		$	6,441
Unearned premiums		1,956			2,114			1,911			1,788			1,757			2,047
Annuity benefits accumulated		23,764			23,044			22,516			21,744			20,944			19,785
Life, accident and health reserves		2,175			2,098			2,082			2,039			2,008			2,011
Payable to reinsurers		645			673			445			400			508			601
Liabilities of managed investment entities		2,819			2,625			2,499			2,413			2,567			2,429
Long-term debt		1,061			1,062			912			913			913			913
Variable annuity liabilities (separate accounts)		662			649			681			666			665			629
Other liabilities		1,527			1,564			1,781			1,700			1,546			1,381

Total liabilities	$	42,481		$	41,474		$	40,197		$	37,797		$	37,318		$	36,237

Shareholders’ equity:
Common stock	$	88		$	88		$	90		$	90		$	90		$	89
Capital surplus		1,152			1,150			1,152			1,138			1,123			1,109
Appropriated retained earnings		(2	)		2			31			49			49			45
Unappropriated retained earnings		2,914			2,946			2,913			2,842			2,777			2,729
Unrealized gains - fixed maturities		604			602			656			556			441			449
Unrealized gains - equities		139			124			149			129			121			119
Other comprehensive income, net of tax		(16	)		(8	)		(6	)		(8	)		(2	)		2

Total shareholders’ equity		4,879			4,904			4,985			4,796			4,599			4,542

Noncontrolling interests		175			174			173			177			170			168

Total liabilities and equity	$	47,535		$	46,552		$	45,355		$	42,770		$	42,087		$	40,947

American Financial Group, Inc.

Book Value Per Share and Price / Book Summary

(in millions, except per share information)


	12/31/14			09/30/14			06/30/14			03/31/14			12/31/13			09/30/13
Shareholders’ equity	$	4,879		$	4,904		$	4,985		$	4,796		$	4,599		$	4,542
Appropriated retained earnings		2			(2	)		(31	)		(49	)		(49	)		(45	)

Shareholders’ equity, excluding appropriated retained earnings		4,881			4,902			4,954			4,747			4,550			4,497
Unrealized (gains) on fixed maturities		(604	)		(602	)		(656	)		(556	)		(441	)		(449	)

Adjusted shareholders’ equity		4,277			4,300			4,298			4,191			4,109			4,048
Goodwill		(201	)		(201	)		(200	)		(185	)		(185	)		(185	)
Intangibles		(57	)		(63	)		(66	)		(27	)		(22	)		(26	)

Tangible adjusted shareholders’ equity	$	4,019		$	4,036		$	4,032		$	3,979		$	3,902		$	3,837

Common shares outstanding		87.709			88.491			89.618			89.589			89.513			89.224

Book value per share:

Excluding appropriated retained earnings (a)	$	55.65		$	55.39		$	55.27		$	52.99		$	50.83		$	50.40
Adjusted (b)		48.76			48.59			47.95			46.79			45.90			45.36
Tangible, adjusted (c)		45.82			45.61			44.99			44.42			43.59			43.00

Market capitalization

AFG’s closing common share price	$	60.72		$	57.89		$	59.56		$	57.71		$	57.72		$	54.06

Market capitalization	$	5,326		$	5,123		$	5,338		$	5,170		$	5,167		$	4,823

Price / Adjusted book value ratio		1.25			1.19			1.24			1.23			1.26			1.19

(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)


	12/31/14			09/30/14			06/30/14			03/31/14			12/31/13			09/30/13
AFG senior obligations	$	840		$	840		$	840		$	840		$	840		$	840
Borrowings drawn under credit facility		—			—			—			—			—			—
Obligations of subsidiaries - other		12			12			12			12			12			12

Debt excluding subordinated debt & debt secured by real estate	$	852		$	852		$	852		$	852		$	852		$	852

AFG subordinated debentures		150			150			—			—			—			—
Obligations of subsidiaries - secured by real estate		59			60			60			61			61			61
Payable to subsidiary trusts - subordinated		—			—			—			—			—			—

Total Long-term debt	$	1,061		$	1,062		$	912		$	913		$	913		$	913

Shareholders’ equity		4,879			4,904			4,985			4,796			4,599			4,542
Noncontrolling interests		175			174			173			177			170			168
Less:
Appropriated retained earnings		2			(2	)		(31	)		(49	)		(49	)		(45	)
Unrealized gains related to fixed maturity investments		(604	)		(602	)		(656	)		(556	)		(441	)		(449	)

Total adjusted capital	$	5,513		$	5,536		$	5,383		$	5,281		$	5,192		$	5,129

Less:
Obligations of subsidiaries - secured by real estate		(59	)		(60	)		(60	)		(61	)		(61	)		(61	)

Total adjusted capital excluding obligations secured by real estate	$	5,454		$	5,476		$	5,323		$	5,220		$	5,131		$	5,068

Ratio of debt to total adjusted capital:
Including subordinated debt & debt secured by real estate		19.2	%		19.2	%		16.9	%		17.3	%		17.6	%		17.8	%
Excluding subordinated debt & debt secured by real estate		15.6	%		15.6	%		16.0	%		16.3	%		16.6	%		16.8	%

American Financial Group, Inc.

Additional Supplemental Information

($ in millions)


	Three Months Ended										Twelve Months Ended
	12/31/14		09/30/14		06/30/14		03/31/14		12/31/13		12/31/14		12/31/13
Property and Casualty Insurance

Paid Losses (GAAP)	$	562	$	528	$	530	$	510	$	577	$	2,130	$	1,871

	12/31/14		09/30/14		06/30/14		03/31/14		12/31/13		9/30/2013
Statutory Surplus

Property and Casualty Insurance	$	2,286	$	2,206	$	2,227	$	1,981	$	1,896	$	2,133

AFG’s principal annuity subsidiaries (total adjusted capital)	$	1,822	$	1,818	$	1,751	$	1,688	$	1,661	$	1,590

Allowable dividends without regulatory approval

Property and Casualty Insurance	$	315	$	335	$	335	$	335	$	335	$	237
Annuity and Run-off		359		275		275		275		275		158

Total	$	674	$	610	$	610	$	610	$	610	$	395

American Financial Group, Inc.

Total Cash and Investments and Quarterly Net Investment Income

December 31, 2014

($ in millions)


	Carrying Value
	Property and											% of
	Casualty		Annuity and				Consolidate			Total AFG		Investment
	Insurance		Run-off		Other		CLOs			Consolidated		Portfolio
Total cash and investments:
Cash and cash equivalents	$	693	$	320	$	330	$	—		$	1,343		4	%
Fixed maturities - Available for sale		6,409		24,313		12		—			30,734		85	%
Fixed maturities - Trading		138		128		—		—			266		1	%
Equity securities		1,190		460		46		—			1,696		4	%
Policy loans		—		228		—		—			228		1	%
Mortgage loans		229		888		—		—			1,117		3	%
Real estate and other investments		358		747		10		(289	)		826		2	%

Total cash and investments	$	9,017	$	27,084	$	398	$	(289	)	$	36,210		100	%


	Property and
	Casualty			Annuity and					Consolidate		Total AFG
	Insurance			Run-off			Other		CLOs		Consolidated
Total quarterly net investment income:
Fixed maturities - Available for sale	$	58		$	283		$	—	$	—	$	341
Fixed maturities - Trading		2			1			—		—		3
Equity securities		11			5			3		—		19
Equity in investees		1			2			—		—		3
Other investments		5			15			—		1		21

Gross investment income		77			306			3		1		387

Investment expenses		(2	)		(1	)		—		—		(3	)

Total net investment income	$	75		$	305		$	3	$	1	$	384


	Equity Securities
					Unrealized
	Cost		Fair Value		Gain (Loss)
Annuity and Run-off	$	411	$	460	$	49
Property and Casualty Insurance		1,021		1,190		169
Other		46		46		—

Total AFG consolidated	$	1,478	$	1,696	$	218

American Financial Group, Inc.

Fixed Maturities - By Security Type - AFG Consolidated

December 31, 2014

($ in millions )


											% of
	Amortized					Unrealized		% of			Investment
	Cost			Fair Value		Gain (Loss)		Fair Value			Portfolio
US Government and government agencies	$	361		$	367	$	6		1	%		1	%
States, municipalities and political subdivisions		6,423			6,777		354		22	%		19	%
Foreign government		267			277		10		1	%		1	%
Residential mortgage-backed securities		4,053			4,449		396		14	%		12	%
Commercial mortgage-backed securities		2,300			2,457		157		8	%		7	%
Asset-backed securities		3,874			3,889		15		13	%		11	%

Corporate bonds
Manufacturing		2,281			2,415		134		8	%		7	%
Banks, lending and credit institutions		2,607			2,743		136		9	%		7	%
Gas and electric services		1,284			1,403		119		4	%		4	%
Insurance and insurance related		910			975		65		3	%		3	%
Other corporate		4,980			5,248		268		17	%		14	%

Total AFG consolidated	$	29,340		$	31,000	$	1,660		100	%		86	%

Annuity and Run-off	$	22,998		$	24,441		1,443		79	%		68	%
Property and Casualty Insurance		6,341			6,547		206		21	%		18	%
Other		1			12		11		0	%		0	%

Total AFG consolidated	$	29,340		$	31,000	$	1,660		100	%		86	%

Annualized yield on available for sale fixed maturities:
Excluding investment expense (a)		4.75	%
Net of investment expense (a)		4.71	%

Approximate average life and duration:
Approximate average life		6.5 years
Approximate duration		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

December 31, 2014

($ in millions )


	Amortized					Unrealized			% of
	Cost			Fair Value		Gain (Loss)			Fair Value
Annuity and Run-off:
US Government and government agencies	$	85		$	87	$	2			0	%
States, municipalities and political subdivisions		3,799			4,051		252			17	%
Foreign government		17			20		3			0	%
Residential mortgage-backed securities		3,079			3,405		326			14	%
Commercial mortgage-backed securities		2,057			2,205		148			9	%
Asset-backed securities		2,815			2,832		17			12	%
Corporate debt		11,146			11,841		695			48	%

Total Annuity and Run-off	$	22,998		$	24,441	$	1,443			100	%

Annualized yield on available for sale fixed maturities:
Excluding investment expense (a)		5.00	%
Net of investment expense (a)		4.98	%

Approximate average life and duration:
Approximate average life		7 years
Approximate duration		5 years

	Amortized					Unrealized			% of
	Cost			Fair Value		Gain (Loss)			Fair Value
Property and Casualty Insurance:
US Government and government agencies	$	276		$	280	$	4			4	%
States, municipalities and political subdivisions		2,624			2,726		102			42	%
Foreign government		250			257		7			4	%
Residential mortgage-backed securities		973			1,032		59			16	%
Commercial mortgage-backed securities		243			252		9			4	%
Asset-backed securities		1,059			1,057		(2	)		16	%
Corporate debt		916			943		27			14	%

Property and Casualty Insurance	$	6,341		$	6,547	$	206			100	%

Annualized yield on available for sale fixed maturities:
Excluding investment expense (a)		3.81	%
Net of investment expense (a)		3.71	%
Tax equivalent, net of investment expense (b)		4.33	%

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

December 31, 2014

($ in millions)


	GAAP Data
	Amortized				Unrealized		% of
By Credit Rating	Cost		Fair Value		Gain (Loss)		Fair Value
Investment grade
AAA	$	6,680	$	6,936	$	256		22	%
AA		6,053		6,342		289		21	%
A		7,526		7,966		440		26	%
BBB		5,289		5,603		314		18	%

Subtotal - Investment grade		25,548		26,847		1,299		87	%
BB		807		834		27		3	%
B		428		440		12		1	%
Other		2,557		2,879		322		9	%

Total	$	29,340	$	31,000	$	1,660		100	%

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	$	22,829		78	%	$	22,830	$	24,166	$	1,336
NAIC 2		5,389		19	%		5,389		5,695		306

		28,218		97	%		28,219		29,861		1,642

NAIC 3		638		2	%		638		657		19
NAIC 4		142		1	%		144		146		2
NAIC 5		46		0	%		46		58		12
NAIC 6		37		0	%		40		59		19

Total	$	29,081		100	%	$	29,087	$	30,781	$	1,694


American Financial Group, Inc.
Mortgage-Backed Securities - AFG Consolidated
December 31, 2014
($ in millions)


										% of
	Amortized				Unrealized		% of			Investment
By Asset Type	Cost		Fair Value		Gain (Loss)		Fair Value			Portfolio
Residential
Agency	$	315	$	327	$	12		5	%		1	%
Prime (Non-Agency)		1,923		2,135		212		31	%		6	%
Alt-A		948		1,054		106		15	%		3	%
Subprime		867		933		66		13	%		2	%

Subtotal - Residential		4,053		4,449		396		64	%		12	%
Commercial		2,300		2,457		157		36	%		7	%

Total AFG consolidated	$	6,353	$	6,906	$	553		100	%		19	%

Annuity and Run-off	$	5,136	$	5,610	$	474		81	%		15	%
Property and Casualty Insurance		1,216		1,284		68		19	%		4	%
Other		1		12		11		0	%		0	%

Total AFG consolidated	$	6,353	$	6,906	$	553		100	%		19	%

•

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 86%; CMBS 99%.

•

The average FICO score of our residential MBS securities is - Prime 741; Alt-A 712; Subprime 639.

•

99.7% of our Commercial MBS portfolio is investment-grade rated (85% 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

December 31, 2014

($ in millions)


Annuity and Run-off:

By Asset Type	Amortized Cost		Fair Value		Unrealized Gain (Loss)		% of Fair Value			%of Investment Portfolio
Residential
Agency	$	130	$	138	$	8		3	%		1	%
Prime (Non-Agency)		1,684		1,868		184		33	%		7	%
Alt-A		698		782		84		14	%		3	%
Subprime		567		617		50		11	%		2	%

Subtotal - Residential		3,079		3,405		326		61	%		13	%
Commercial		2,057		2,205		148		39	%		8	%

Total Annuity and Run-off	$	5,136	$	5,610	$	474		100	%		21	%


Property and Casualty Insurance:
By Asset Type	Amortized Cost		Fair Value		Unrealized Gain (Loss)		% of Fair Value			% of Investment Portfolio
Residential
Agency	$	185	$	189	$	4		15	%		2	%
Prime (Non-Agency)		238		255		17		20	%		3	%
Alt-A		250		272		22		21	%		3	%
Subprime		300		316		16		24	%		3	%

Subtotal - Residential		973		1,032		59		80	%		11	%
Commercial		243		252		9		20	%		3	%

Total Property and Casualty Insurance	$	1,216	$	1,284	$	68		100	%		14	%

American Financial Group, Inc.

Mortgage-Backed Securities - Credit Rating and NAIC Designation

December 31, 2014

($ in millions)


	GAAP data
By Credit Rating	Amortized Cost		Fair Value		Unrealized Gain (Loss)		% of Fair Value
Investment grade
AAA	$	2,764	$	2,932	$	168		43	%
AA		346		362		16		5	%
A		484		512		28		7	%
BBB		216		235		19		3	%

Subtotal - investment grade		3,810		4,041		231		58	%
BB		334		347		13		5	%
B		368		380		12		6	%
Other		1,841		2,138		297		31	%

Total	$	6,353	$	6,906	$	553		100	%

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	$	6,056		97	%	$	6,057	$	6,634	$	577
NAIC 2		88		1	%		88		90		2

		6,144		98	%		6,145		6,724		579

NAIC 3		51		1	%		51		52		1
NAIC 4		55		1	%		55		59		4
NAIC 5		16		0	%		16		27		11
NAIC 6		2		0	%		2		18		16

Total	$	6,268		100	%	$	6,269	$	6,880	$	611

Appendix:

American Financial Group, Inc.

Attribution of Changes in Long-Term Care Net Loss Recognition Margin

($ in millions)


Net Loss Recognition Margin at 12/31/13	$	64

Changes in margin attributed to each updated assumption:

Claim costs	$	(50	)
Rate increases		40
Reinvestment rates		(34	)
Expenses		(11	)
Other		2

Net Loss Recognition Margin at 12/31/14	$	11

The following table illustrates the impact of changes in key assumptions on AFG’s net loss recognition margin as of December 31, 2014. Assumption changes could have either a favorable or unfavorable impact on the margin depending on the nature of the change.


Assumptions Change		Impact on Net Loss Recognition Margin (pretax)
5% morbidity change in all future years		$55 - $65
5% lapse and mortality rate change in all future years		$35 - $40
0.25% reinvestment rate change in all future years		$20 - $25
0.25% initial reinvestment rate change; no change to ultimate reinvestment rate		$8 - $10
1% change in expected rate increase approvals		$15 - $20

Once the loss recognition margin is reduced to zero, the impact of adverse changes in assumptions, unless offset by other favorable assumption changes, would be recorded as an increase in long-term care reserves through a charge to earnings. Each item reflects a change to a single assumption without changes to other assumptions. For example, assuming increased claim payments did not change the assumption on future rate increases and persistency, nor did it change projected investment yields resulting from cash flow differences. These amounts are valid for a point in time, and will change in future periods as the in-force block ages, and as actual performance deviates from the assumptions used at December 31, 2014.

Appendix:

American Financial Group, Inc.

Reinvestment Rates Used in Loss Recognition Testing and Annuity Unlocking

($ in millions)


	Initial Net Reinvestment Rate			Ultimate Net Reinvestment Rate			Years to Reach Ultimate
Segments
Run-off Long-Term Care		4.52	%		6.25	%		7 years
Annuity		3.57	%		5.54	%		7 years

Differences in reinvestment rates between segments reflect differences in expected durations of liabilities, as well as different assumed investment allocations.

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AMERICAN FINANCIAL GROUP INC Reports