Company: AFGC
Filing Date: 2025-02-25
Form Type: 10-K
Source: 0001042046-25-000011
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Company: AMERICAN FINANCIAL GROUP INC
Filing Date: 2025-02-25
Form: 10-K
Item: Item 7A
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Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Market risk represents the potential economic loss arising from adverse changes in the fair value of financial instruments. AFG’s exposures to market risk relate primarily to its investment portfolio, which is exposed to interest rate risk and, to a lesser extent, equity price risk. To a much lesser extent, AFG’s long-term debt is also exposed to interest rate risk.

Fixed Maturity Interest Rate Risk   In general, the fair value of AFG’s fixed maturity investments is inversely correlated to changes in interest rates. AFG’s fixed maturity portfolio is comprised of primarily fixed-rate investments with intermediate-term maturities. This practice is designed to allow flexibility in reacting to fluctuations of interest rates. The portfolios of AFG’s insurance operations are managed with an attempt to achieve an adequate risk-adjusted return while maintaining sufficient liquidity to meet policyholder obligations.

Consistent with the discussion in Item 7 — Management’s Discussion and Analysis — “Investments,” the following table demonstrates the sensitivity of the fair value of AFG’s fixed maturity portfolio to reasonably likely changes in interest rates by illustrating the estimated effect on AFG’s fixed maturity portfolio that an immediate increase of 100 basis points in the interest rate yield curve would have at December 31 (based on the duration of the portfolio, dollars in millions). Effects of increases or decreases from the 100 basis points illustrated would be approximately proportional.

20242023Fair value of fixed maturity portfolio$10,474 $10,434 Percentage impact on fair value of 100 bps increase in interest rates(3.0 %)(3.0 %)Pretax impact on fair value of fixed maturity portfolio$(314)$(313)

Equity Price Risk   AFG’s equity securities are reported at fair value with holding gains and losses recognized in net earnings. At December 31, 2024 and 2023, the fair value of AFG’s equity securities totaled $751 million and $1.02 billion, respectively. These investments are exposed to price risk, which is the potential loss arising from decreases in fair value. Market prices of equity securities, in general, are subject to fluctuations, which could cause future values to differ significantly from the current reported values. General economic swings influence the performance of the underlying industries and companies within those industries. Industry and company-specific risks also have the potential to substantially affect the value of AFG’s portfolio.

AFG utilizes a total return swap