Leases
AFG and its subsidiaries lease real estate that is primarily used for office space and, to a lesser extent, equipment under operating lease arrangements. Most of AFG’s real estate leases include an option to extend or renew the lease term at AFG’s option. The operating lease liability includes lease payments related to options to extend or renew the lease term if AFG is reasonably certain of exercising those options. Lease payments are discounted using the implicit discount rate in the lease. If the implicit discount rate for the lease cannot be readily determined, AFG uses an estimate of its incremental secured borrowing rate. AFG did not have any material contracts accounted for as finance or short-term leases at December 31, 2025 or December 31, 2024.
AFG’s operating lease right-of-use asset and operating lease liability are included in other assets and other liabilities, respectively, in AFG’s Balance Sheet at December 31 and are presented in the following table (in millions):
| | | | | | | | | | | |
| 2025 | | 2024 |
| Right-of-use asset | $ | 198 | | | $ | 212 | |
| Lease liability | 216 | | | 232 | |
Operating lease expense was $42 million, $41 million and $36 million in December 31, 2025, 2024 and 2023, respectively.
Other operating lease information for the years ended December 31, 2025, 2024 and 2023 (in millions):
| | | | | | | | | | | | | | | | | |
| 2025 | | 2024 | | 2023 |
| Cash paid for lease liabilities reported in operating cash flows | $ | 46 | | | $ | 40 | | | $ | 38 | |
| Right-of-use assets obtained under new leases | 18 | | | 68 | | | 102 | |
The following table presents the undiscounted contractual maturities of AFG’s operating lease liability at December 31, 2025 (in millions):
| | | | | |
| Operating lease payments: | |
| 2026 | $ | 39 | |
| 2027 | 36 | |
| 2028 | 31 | |
| 2029 | 26 | |
| 2030 | 22 | |
| Thereafter | 150 | |
| Total lease payments | 304 | |
| Impact of discounting | (88) | |
| Operating lease liability | $ | 216 | |
| | | | | |
| Weighted-average remaining lease term | 12.1 years |
| Weighted-average discount rate | 5.3 | % |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.