Company: AFGC
Filing Date: 2025-05-08
Form Type: 10-Q
Source: 0001042046-25-000020
Chunk: 61

Company: AMERICAN FINANCIAL GROUP INC
Filing Date: 2025-05-08
Form: 10-Q
Item: Part I, Item 8
Chunk 61
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atives

As discussed under “Derivatives” in Note A — “Accounting Policies,” AFG uses derivatives to mitigate certain market risks related to its investment portfolio and deferred compensation obligations to employees.The following table presents the classification of derivative assets and liabilities included in AFG’s Balance Sheet at fair value (in millions):March 31, 2025December 31, 2024Balance Sheet LineAssetLiabilityAssetLiabilityDerivatives designated and qualifying as cash flow hedges:Interest rate swapsOther assets/Other liabilities$— $9 $1 $14 Derivatives not designated as hedging instruments:Fixed maturities with embedded derivativesFixed maturities70 — 81 — Total return swapOther assets/Other liabilities— 5 — 4 $70 $14 $82 $18 AFG’s interest rate swaps are designated and qualify as highly effective cash flow hedges to mitigate interest rate risk related to certain floating-rate securities included in AFG’s portfolio of fixed maturity securities. The purpose of each of these swaps is to effectively convert a portion of AFG’s floating-rate fixed maturity securities to fixed rates by offsetting the variability in cash flows attributable to changes in the applicable Secured Overnight Financing Rate (“SOFR”).Under the terms of the swaps, AFG receives fixed-rate interest payments in exchange for variable interest payments based on SOFR. The notional amounts of the interest rate swaps generally decline over each swap’s respective life (the swaps expire between April 2025 and October 2029) in anticipation of the expected decline in AFG’s portfolio of fixed maturity securities with floating interest rates based on SOFR. The total outstanding notional amount of AFG’s interest rate swaps was $926 million at March 31, 2025 compared to $1.05 billion at December 31, 2024, reflecting scheduled amortization. Amounts reclassified from AOCI to net earnings were losses of $3 million and $7 million in the first three months of 2025 and 2024, respectively. Based on forward interest rate curves at March 31, 2025, management estimates that it will reclassify approximately $6 million of pre-tax net losses on interest rate swaps in AOCI to net investment income over the next twelve months. The actual amount will vary based on changes in SOFR. A collateral receivable supporting these swaps of $21 million and $27 million at March