AMERICAN FINANCIAL GROUP INCAFG
AMERICAN FINANCIAL GROUP INC Income Taxes Disclosure
Income Taxes
The following is a reconciliation of income taxes at the statutory rate of 21% to the provision for income taxes as shown in AFG’s Statement of Earnings (dollars in millions):
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | % of EBT | Amount | % of EBT | Amount | % of EBT | ||||||||||||||||||||||||||||||
Earnings before income taxes (“EBT”) | $ | 1,073 | $ | 1,124 | $ | 1,073 | |||||||||||||||||||||||||||||
| Income taxes at statutory rate | $ | 225 | 21 | % | $ | 236 | 21 | % | $ | 225 | 21 | % | |||||||||||||||||||||||
| Effect of: | |||||||||||||||||||||||||||||||||||
State and local income taxes, net of federal income tax effect (*) | 11 | 1 | % | 9 | 1 | % | 8 | 1 | % | ||||||||||||||||||||||||||
| Foreign tax effects | (1) | — | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Changes in tax laws or rates enacted in the current period | — | — | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
Cross-border tax laws | (1) | — | % | 2 | — | % | (3) | — | % | ||||||||||||||||||||||||||
Income tax credits | (3) | — | % | (2) | — | % | (3) | — | % | ||||||||||||||||||||||||||
| Changes in valuation allowance | (5) | — | % | (2) | — | % | (2) | — | % | ||||||||||||||||||||||||||
Impact of nontaxable or nondeductible items: | |||||||||||||||||||||||||||||||||||
Tax preference investments | (6) | — | % | (6) | (1 | %) | (7) | (1 | %) | ||||||||||||||||||||||||||
| Other | 5 | — | % | 1 | — | % | 2 | — | % | ||||||||||||||||||||||||||
Changes in unrecognized income tax benefits | 3 | — | % | (1) | — | % | — | — | % | ||||||||||||||||||||||||||
| Other adjustments | 3 | — | % | — | — | % | 1 | — | % | ||||||||||||||||||||||||||
Provision for income taxes as shown in the statement of earnings | $ | 231 | 22 | % | $ | 237 | 21 | % | $ | 221 | 21 | % | |||||||||||||||||||||||
(*)State taxes in California and Florida represent the majority (greater than 50%) of the state and local net tax effect in 2025. State taxes in Florida and Illinois represent the majority of the state and local net tax effect in both 2024 and 2023.
In 2025, AFG recorded $7 million in net tax expense related to a pending state income tax examination regarding the sale of a subsidiary in a prior year. In 2024, AFG recorded $4 million in net tax expense related to a pending IRS settlement regarding the sale of a different subsidiary in a prior year.
The One Big Beautiful Bill Act (enacted on July 4, 2025), among other things, extends many of the federal tax provisions of the 2017 Tax Cuts and Jobs Act and contains provisions that accelerate the timing of certain tax deductions with an offsetting impact to deferred taxes and no impact on total income tax expense. Management does not expect the tax provisions of the bill to be material to AFG’s results of operations in future periods.
The federal excise tax on stock repurchases (in excess of any issuances) is recorded as part of the cost of the repurchases directly in shareholders’ equity.
The Organisation for Economic Co-operation and Development (“OECD”) proposed a global minimum corporate tax rate of 15%, commonly referred to as Pillar Two. Due to AFG’s limited international operations, management does not believe Pillar Two will have a material impact on AFG’s results of operations.
AFG’s 2014 — 2018 and 2021 — 2025 tax years remain subject to examination by the IRS.
The table below highlights the portion of AFG’s earnings before income taxes that is subject to income taxes outside the United States (in millions):
| 2025 | 2024 | 2023 | |||||||||||||||
U.S. only | $ | 1,031 | $ | 1,088 | $ | 1,041 | |||||||||||
Foreign jurisdictions | 42 | 36 | 32 | ||||||||||||||
Total earnings before income taxes | $ | 1,073 | $ | 1,124 | $ | 1,073 | |||||||||||
The total income tax provision consists of (in millions):
| 2025 | 2024 | 2023 | |||||||||||||||
Current taxes: | |||||||||||||||||
U.S. federal | $ | 168 | $ | 217 | $ | 169 | |||||||||||
U.S. state and local | 17 | 11 | 9 | ||||||||||||||
| Foreign | 5 | 1 | 6 | ||||||||||||||
Total current tax expense | 190 | 229 | 184 | ||||||||||||||
Deferred taxes: | |||||||||||||||||
U.S. federal | 41 | 8 | 37 | ||||||||||||||
Total deferred tax expense | 41 | 8 | 37 | ||||||||||||||
Total income tax provision: | |||||||||||||||||
U.S. federal | 209 | 225 | 206 | ||||||||||||||
U.S. state and local | 17 | 11 | 9 | ||||||||||||||
Foreign | 5 | 1 | 6 | ||||||||||||||
Total income tax provision | $ | 231 | $ | 237 | $ | 221 | |||||||||||
For income tax purposes, AFG and its subsidiaries had the following carryforwards available at December 31, 2025 (in millions):
| Expiring | Amount | |||||||||||||
| Operating Loss – U.S. | 2041 - 2045 | $ | 14 | |||||||||||
| Operating Loss – U.S. | indefinite | 23 | ||||||||||||
| Operating Loss – United Kingdom | indefinite | 36 | (*) | |||||||||||
(*)£27 million
Deferred income tax assets and liabilities reflect temporary differences between the carrying amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for tax purposes. The significant components of deferred tax assets and liabilities included in AFG’s Balance Sheet at December 31 were as follows (in millions):
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Federal net operating loss carryforwards | $ | 8 | $ | 2 | |||||||
| Foreign underwriting losses | 9 | 10 | |||||||||
| Insurance claims and reserves | 300 | 283 | |||||||||
| Employee benefits | 117 | 114 | |||||||||
Lease liabilities | 41 | 45 | |||||||||
| Other, net | 29 | 20 | |||||||||
Total deferred tax assets before valuation allowance | 504 | 474 | |||||||||
| Valuation allowance against deferred tax assets | (12) | (11) | |||||||||
| Total deferred tax assets | 492 | 463 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Investment securities | (324) | (233) | |||||||||
| Deferred policy acquisition costs | (76) | (73) | |||||||||
| Insurance claims and reserves transition liability | — | (4) | |||||||||
Lease right of use assets | (37) | (42) | |||||||||
| Real estate, property and equipment | (42) | (7) | |||||||||
| Total deferred tax liabilities | (479) | (359) | |||||||||
| Net deferred tax asset | $ | 13 | $ | 104 | |||||||
AFG’s net deferred tax asset at December 31, 2025 and 2024 is included in other assets in AFG’s Balance Sheet. The decrease in AFG’s net deferred tax asset at December 31, 2025 compared to December 31, 2024 reflects lower net unrealized losses on fixed maturities and the increase in fair value of equity securities and carrying value of limited partnership investments still owned.
The likelihood of realizing deferred tax assets is reviewed periodically. Any adjustments required to the valuation allowance are made in the period during which developments requiring an adjustment become known.
At December 31, 2025, there are unrecognized tax benefits and related interest and penalties of $3 million (all related to penalties) that, if recognized, would impact the effective tax rate. At December 31, 2024, there were no unrecognized tax benefits or related interest and penalties. There were unrecognized tax benefits and related interest and penalties of less than $1 million at December 31, 2023.
Cash payments for income taxes, net of refunds, were as follows (in millions):
| 2025 | 2024 | 2023 | |||||||||||||||
U.S. federal | $ | 150 | $ | 187 | $ | 188 | |||||||||||
U.S. state and local | 14 | 12 | 10 | ||||||||||||||
Foreign | 4 | 2 | 3 | ||||||||||||||
Total cash payments for income taxes, net of refunds | $ | 168 | $ | 201 | $ | 201 | |||||||||||
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 Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.