AMERICAN FINANCIAL GROUP INCAFG
AMERICAN FINANCIAL GROUP INC Fair Value Disclosure
Fair Value Measurements
Accounting standards for measuring fair value are based on inputs used in estimating fair value. The three levels of the hierarchy are as follows:
Level 1 — Quoted prices for identical assets or liabilities in active markets (markets in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis). AFG’s Level 1 financial instruments consist primarily of publicly traded equity securities, highly liquid government bonds for which quoted market prices in active markets are available and short-term investments of managed investment entities.
Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar assets or liabilities in inactive markets (markets in which there are few transactions, the prices are not current, price quotations vary substantially over time or among market makers, or in which little information is released publicly); and valuations based on other significant inputs that are observable in active markets. AFG’s Level 2 financial instruments consist primarily of fixed maturity securities and investments of managed investment entities priced using observable inputs. Level 2 inputs include benchmark yields, reported trades, corroborated broker/dealer quotes, issuer spreads and benchmark securities. When non-binding broker quotes can be corroborated by comparison to similar securities priced using observable inputs, they are classified as Level 2.
Level 3 — Valuations derived from market valuation techniques generally consistent with those used to estimate the fair values of Level 2 financial instruments in which one or more significant inputs are unobservable or when the market for a security exhibits significantly less liquidity relative to markets supporting Level 2 fair value measurements. The unobservable inputs may include management’s own assumptions about the assumptions market participants would use based on the best information available at the valuation date. Financial instruments whose fair value is estimated based on non-binding broker quotes or internally developed using significant inputs not based on, or corroborated by, observable market information are classified as Level 3.
The contingent consideration liability related to the 2021 acquisition of Verikai, was measured using a weighted probability-based income approach which includes significant unobservable inputs and was classified as Level 3 and represented the fair value of the up to $50 million in potential acquisition-related contingent consideration. Due to slower than anticipated growth in the business supported by the Verikai technology, the fair value of this liability was reduced to zero in the third quarter of 2023. The $22 million gain from this change in fair value and a goodwill impairment charge of $26 million related to Verikai (see Note H — “Goodwill and Other Intangibles”) is included in realized gains (losses) on subsidiaries in AFG’s Statement of Earnings.
As discussed in Note A — “Accounting Policies — Managed Investment Entities,” AFG has set the carrying value of its CLO liabilities equal to the fair value of the CLO assets (which have more observable fair values) as an alternative to reporting those liabilities at separately measured fair values. As a result, the CLO liabilities are categorized within the fair value hierarchy on the same basis (proportionally) as the related CLO assets. Since the portion of the CLO liabilities allocated to Level 3 is derived from the fair value of the CLO assets, these amounts are excluded from the progression of Level 3 financial instruments.
AFG’s management is responsible for the valuation process and uses data from outside sources (including nationally recognized pricing services and broker/dealers) in establishing fair value. AFG’s internal investment group includes approximately 25 investment professionals whose primary responsibility is to manage AFG’s investment portfolio. These professionals monitor individual investments as well as overall industries and are active in the financial markets on a daily basis. The group is led by AFG’s chief investment officer, who reports directly to one of AFG’s Co-CEOs. Valuation techniques utilized by pricing services and prices obtained from external sources are reviewed by AFG’s internal investment professionals who are familiar with the securities being priced and the markets in which they trade to ensure the fair value determination is representative of an exit price. To validate the appropriateness of the prices obtained, these investment managers consider widely published indices (as benchmarks), recent trades, changes in interest rates, general economic conditions and the credit quality of the specific issuers. In addition, AFG communicates directly with the pricing services regarding the methods and assumptions used in pricing, including verifying, on a test basis, the inputs used by the service to value specific securities.
Assets and liabilities measured and carried at fair value in the financial statements are summarized below (in millions):
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Available for sale (“AFS”) fixed maturities: | |||||||||||||||||||||||
U.S. government and government agencies | $ | 157 | $ | 4 | $ | — | $ | 161 | |||||||||||||||
| States, municipalities and political subdivisions | — | 831 | 4 | 835 | |||||||||||||||||||
| Foreign government | — | 238 | — | 238 | |||||||||||||||||||
| Residential MBS | — | 2,744 | 3 | 2,747 | |||||||||||||||||||
| Collateralized loan obligations | — | 1,160 | — | 1,160 | |||||||||||||||||||
| Other asset-backed securities | — | 2,215 | 310 | 2,525 | |||||||||||||||||||
| Corporate and other | 1 | 2,990 | 395 | 3,386 | |||||||||||||||||||
| Total AFS fixed maturities | 158 | 10,182 | 712 | 11,052 | |||||||||||||||||||
| Trading fixed maturities | — | 66 | 25 | 91 | |||||||||||||||||||
| Equity securities | 478 | 51 | 256 | 785 | |||||||||||||||||||
| Assets of managed investment entities (“MIE”) | 310 | 3,725 | 15 | 4,050 | |||||||||||||||||||
Other assets — derivatives | — | 1 | — | 1 | |||||||||||||||||||
| Total assets accounted for at fair value | $ | 946 | $ | 14,025 | $ | 1,008 | $ | 15,979 | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Contingent consideration — acquisitions | $ | — | $ | — | $ | 3 | $ | 3 | |||||||||||||||
| Liabilities of managed investment entities | 298 | 3,594 | 15 | 3,907 | |||||||||||||||||||
| Other liabilities — derivatives | — | 3 | — | 3 | |||||||||||||||||||
| Total liabilities accounted for at fair value | $ | 298 | $ | 3,597 | $ | 18 | $ | 3,913 | |||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Available for sale fixed maturities: | |||||||||||||||||||||||
U.S. government and government agencies | $ | 173 | $ | — | $ | — | $ | 173 | |||||||||||||||
| States, municipalities and political subdivisions | — | 858 | 1 | 859 | |||||||||||||||||||
| Foreign government | — | 237 | — | 237 | |||||||||||||||||||
| Residential MBS | — | 1,988 | 1 | 1,989 | |||||||||||||||||||
| Collateralized loan obligations | — | 1,237 | — | 1,237 | |||||||||||||||||||
| Other asset-backed securities | — | 2,111 | 296 | 2,407 | |||||||||||||||||||
| Corporate and other | 12 | 3,014 | 470 | 3,496 | |||||||||||||||||||
| Total AFS fixed maturities | 185 | 9,445 | 768 | 10,398 | |||||||||||||||||||
| Trading fixed maturities | — | 50 | 26 | 76 | |||||||||||||||||||
| Equity securities | 419 | 40 | 292 | 751 | |||||||||||||||||||
| Assets of managed investment entities | 419 | 3,711 | 10 | 4,140 | |||||||||||||||||||
Other assets — derivatives | — | 1 | — | 1 | |||||||||||||||||||
| Total assets accounted for at fair value | $ | 1,023 | $ | 13,247 | $ | 1,096 | $ | 15,366 | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Contingent consideration — acquisitions | $ | — | $ | — | $ | 2 | $ | 2 | |||||||||||||||
| Liabilities of managed investment entities | 402 | 3,553 | 10 | 3,965 | |||||||||||||||||||
| Other liabilities — derivatives | — | 18 | — | 18 | |||||||||||||||||||
| Total liabilities accounted for at fair value | $ | 402 | $ | 3,571 | $ | 12 | $ | 3,985 | |||||||||||||||
Approximately 6% of the total assets carried at fair value at December 31, 2025, were Level 3 assets. Internally developed prices for fixed maturities are estimated using a variety of inputs, including appropriate credit spreads over the treasury yield (of a similar duration), trade information and prices of comparable securities and other security specific features (such as optional early redemption). Internally developed Level 3 asset fair values represent approximately 88% ($883 million) of the total fair value of Level 3 assets at December 31, 2025. Approximately 70% ($614 million) of these internally developed Level 3 assets are priced using a pricing model that uses a discounted cash flow approach to estimate the fair value of fixed maturity securities. The credit spread applied by management is the significant unobservable input of the pricing model. In instances where the security is currently callable at par value and the pricing
model suggests a higher price, management caps the fair value at par value. The remainder of the internally developed Level 3 investments ($269 million) are priced using internal models or inputs from third parties that are not market observable. Management believes that any justifiable changes in unobservable inputs used to determine internally developed fair values would not have resulted in a material change in AFG’s financial position.
Approximately 9% ($91 million) of the Level 3 assets were investments whose prices were determined based on financial information provided by third party asset managers. Approximately 3% ($34 million) of Level 3 assets were priced using non-binding broker quotes or pricing services, for which there is a lack of transparency as to the inputs used to determine fair value.
Changes in balances of Level 3 financial assets and liabilities carried at fair value during 2025, 2024 and 2023 are presented below (in millions). The transfers into and out of Level 3 were due to changes in the availability of market observable inputs. All transfers are reflected in the table at fair value as of the end of the reporting period.
| Total realized/unrealized gains (losses) included in | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | Purchases and issuances | Sales and settlements | Transfer into Level 3 | Transfer out of Level 3 | Balance at December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||
| AFS fixed maturities: | |||||||||||||||||||||||||||||||||||||||||||||||
| State and municipal | $ | 1 | $ | — | $ | — | $ | — | $ | (1) | $ | 5 | $ | (1) | $ | 4 | |||||||||||||||||||||||||||||||
| Residential MBS | 1 | — | — | — | — | 2 | — | 3 | |||||||||||||||||||||||||||||||||||||||
Other asset-backed securities | 296 | — | 9 | 63 | (58) | — | — | 310 | |||||||||||||||||||||||||||||||||||||||
| Corporate and other | 470 | 15 | 8 | 91 | (172) | 3 | (20) | 395 | |||||||||||||||||||||||||||||||||||||||
Total AFS fixed maturities | 768 | 15 | 17 | 154 | (231) | 10 | (21) | 712 | |||||||||||||||||||||||||||||||||||||||
Trading fixed maturities | 26 | 2 | — | 11 | (14) | — | — | 25 | |||||||||||||||||||||||||||||||||||||||
Equity securities | 292 | (1) | — | 28 | (23) | 7 | (47) | 256 | |||||||||||||||||||||||||||||||||||||||
| Assets of MIE | 10 | (5) | — | 10 | — | — | — | 15 | |||||||||||||||||||||||||||||||||||||||
Total Level 3 assets | $ | 1,096 | $ | 11 | $ | 17 | $ | 203 | $ | (268) | $ | 17 | $ | (68) | $ | 1,008 | |||||||||||||||||||||||||||||||
| Contingent consideration — acquisitions | $ | (2) | $ | — | $ | — | $ | (2) | $ | 1 | $ | — | $ | — | $ | (3) | |||||||||||||||||||||||||||||||
| Total Level 3 liabilities | $ | (2) | $ | — | $ | — | $ | (2) | $ | 1 | $ | — | $ | — | $ | (3) | |||||||||||||||||||||||||||||||
| Total realized/unrealized gains (losses) included in | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | Net earnings | Other comprehensive income (loss) | Purchases and issuances | Sales and settlements | Transfer into Level 3 | Transfer out of Level 3 | Balance at December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||
| AFS fixed maturities: | |||||||||||||||||||||||||||||||||||||||||||||||
| State and municipal | $ | 2 | $ | — | $ | — | $ | — | $ | (1) | $ | — | $ | — | $ | 1 | |||||||||||||||||||||||||||||||
| Residential MBS | 2 | — | — | — | — | — | (1) | 1 | |||||||||||||||||||||||||||||||||||||||
Collateralized loan obligations | 1 | (1) | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Other asset-backed securities | 351 | (1) | 8 | 59 | (100) | 5 | (26) | 296 | |||||||||||||||||||||||||||||||||||||||
| Corporate and other | 380 | 16 | 6 | 105 | (31) | 4 | (10) | 470 | |||||||||||||||||||||||||||||||||||||||
Total AFS fixed maturities | 736 | 14 | 14 | 164 | (132) | 9 | (37) | 768 | |||||||||||||||||||||||||||||||||||||||
Trading fixed maturities | — | 2 | — | 24 | — | — | — | 26 | |||||||||||||||||||||||||||||||||||||||
Equity securities (*) | 485 | 60 | — | 174 | (57) | — | (370) | 292 | |||||||||||||||||||||||||||||||||||||||
| Assets of MIE | 9 | — | (5) | 6 | — | — | — | 10 | |||||||||||||||||||||||||||||||||||||||
Total Level 3 assets | $ | 1,230 | $ | 76 | $ | 9 | $ | 368 | $ | (189) | $ | 9 | $ | (407) | $ | 1,096 | |||||||||||||||||||||||||||||||
| Contingent consideration — acquisitions | $ | (2) | $ | (1) | $ | — | $ | (1) | $ | 2 | $ | — | $ | — | $ | (2) | |||||||||||||||||||||||||||||||
| Total Level 3 liabilities | $ | (2) | $ | (1) | $ | — | $ | (1) | $ | 2 | $ | — | $ | — | $ | (2) | |||||||||||||||||||||||||||||||
(*)Transfers out primarily relate to investments now accounted for using the equity method.
| Total realized/unrealized gains (losses) included in | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | Net earnings | Other comprehensive income (loss) | Purchases and issuances | Sales and settlements | Transfer into Level 3 | Transfer out of Level 3 | Balance at December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||
| AFS fixed maturities: | |||||||||||||||||||||||||||||||||||||||||||||||
| State and municipal | $ | 5 | $ | — | $ | — | $ | — | $ | (1) | $ | 1 | $ | (3) | $ | 2 | |||||||||||||||||||||||||||||||
| Residential MBS | 9 | 1 | (1) | — | (3) | 5 | (9) | 2 | |||||||||||||||||||||||||||||||||||||||
Collateralized loan obligations | 2 | (2) | 1 | — | — | 1 | (1) | 1 | |||||||||||||||||||||||||||||||||||||||
Other asset-backed securities | 329 | 1 | 6 | 55 | (39) | 31 | (32) | 351 | |||||||||||||||||||||||||||||||||||||||
| Corporate and other | 319 | (4) | 5 | 92 | (27) | 8 | (13) | 380 | |||||||||||||||||||||||||||||||||||||||
Total AFS fixed maturities | 664 | (4) | 11 | 147 | (70) | 46 | (58) | 736 | |||||||||||||||||||||||||||||||||||||||
| Equity securities | 427 | 15 | — | 121 | (39) | — | (39) | 485 | |||||||||||||||||||||||||||||||||||||||
| Assets of MIE | 11 | (4) | — | 2 | — | — | — | 9 | |||||||||||||||||||||||||||||||||||||||
Total Level 3 assets | $ | 1,102 | $ | 7 | $ | 11 | $ | 270 | $ | (109) | $ | 46 | $ | (97) | $ | 1,230 | |||||||||||||||||||||||||||||||
| Contingent consideration — acquisitions | $ | (25) | $ | 23 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (2) | |||||||||||||||||||||||||||||||
| Total Level 3 liabilities | $ | (25) | $ | 23 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (2) | |||||||||||||||||||||||||||||||
Fair Value of Financial Instruments The carrying value and fair value of financial instruments that are not carried at fair value in the financial statements at December 31 are summarized below (in millions):
| Carrying | Fair Value | ||||||||||||||||||||||||||||
| Value | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
| 2025 | |||||||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 1,727 | $ | 1,727 | $ | 1,727 | $ | — | $ | — | |||||||||||||||||||
| Mortgage loans | 947 | 937 | — | — | 937 | ||||||||||||||||||||||||
Total financial assets not accounted for at fair value | $ | 2,674 | $ | 2,664 | $ | 1,727 | $ | — | $ | 937 | |||||||||||||||||||
| Long-term debt | $ | 1,820 | $ | 1,609 | $ | — | $ | 1,606 | $ | 3 | |||||||||||||||||||
Total financial liabilities not accounted for at fair value | $ | 1,820 | $ | 1,609 | $ | — | $ | 1,606 | $ | 3 | |||||||||||||||||||
| 2024 | |||||||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 1,406 | $ | 1,406 | $ | 1,406 | $ | — | $ | — | |||||||||||||||||||
| Mortgage loans | 791 | 754 | — | — | 754 | ||||||||||||||||||||||||
Total financial assets not accounted for at fair value | $ | 2,197 | $ | 2,160 | $ | 1,406 | $ | — | $ | 754 | |||||||||||||||||||
| Long-term debt | $ | 1,475 | $ | 1,276 | $ | — | $ | 1,273 | $ | 3 | |||||||||||||||||||
Total financial liabilities not accounted for at fair value | $ | 1,475 | $ | 1,276 | $ | — | $ | 1,273 | $ | 3 | |||||||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Feb 26, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.