Company: AFGC
Filing Date: 2025-02-25
Form Type: 10-K
Source: 0001042046-25-000011
Chunk: 163

Company: AMERICAN FINANCIAL GROUP INC
Filing Date: 2025-02-25
Form: 10-K
Item: Item 7
Chunk 163
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 reserves for A&E claims relating to policies and participations in reinsurance treaties and former operations is subject to uncertainties that are significantly greater than those presented by other types of claims. For this group of claims, traditional actuarial techniques that rely on historical loss development trends cannot be used and a range of reasonably possible losses cannot be estimated. Case reserves and expense reserves are established by the claims department as specific policies are identified. In addition to the case reserves established for known claims, management establishes additional reserves for claims not yet known or reported and for possible development on known claims. These additional reserves are management’s best estimate based on periodic comprehensive studies and internal reviews adjusted for payments and identifiable changes, supplemented by management’s review of industry information about such claims, with due consideration to individual claim situations.

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Management believes that estimating the ultimate liability for asbestos claims presents a unique and difficult challenge to the insurance industry due to, among other things, difficulty in predicting the number of future claims, inconsistent court decisions, an increase in bankruptcy filings as a result of asbestos-related liabilities, unresolved issues such as whether coverage exists, novel theories of coverage, how claims are to be allocated among triggered policies and implicated years, whether claimants who exhibit no signs of illness will be successful in pursuing their claims and judicial interpretations that often expand theories of recovery and broaden the scope of coverage. Environmental claims likewise present challenges in prediction, due to uncertainty regarding the interpretation of insurance policies, complexities regarding multi-party involvements at sites, evolving cleanup standards and protracted time periods required to assess the level of cleanup required at contaminated sites.

While management believes that AFG’s reserves for A&E claims are a reasonable estimate of ultimate liability for such claims, actual results may vary materially from the amounts currently recorded due to the factors listed above. A 1% variation in loss cost trends, caused by any of the factors previously described, would change net earnings by approximately $28 million.

The following factors could impact AFG’s A&E reserves and payments:

•There is interest at the state level to attempt to legislatively address asbestos liabilities and the manner in which asbestos claims are resolved. These developments are fluid and could result in piecemeal state-by-state solutions.

•The manner by which bankruptcy courts are addressing asbestos liabilities is in flux.

•AFG’s insureds may make claims alleging significant non-products exposures.

AFG tracks its A&E claims by policyholder. The following table shows, by type of claim, the number of policyholders that did not receive any payments in the calendar year separate