Subsidiaries of AFG own several buildings in downtown Cincinnati. AFG and its affiliates occupy about three-fifths of the aggregate 650,000 square feet of commercial and office space.
AFG subsidiaries own transferable rights to develop approximately one million square feet of floor space in the Grand Central Terminal area in New York City. The development rights were derived from ownership of the land upon which the terminal is constructed.
(a) Earnings per share amounts prior to 1997 have been restated to comply with Statement of Financial Accounting Standards No. 128 - "Earnings Per Share." Net earnings available to common shares for 1997 is calculated after deducting a premium over stated value on redemption of a subsidiary's preferred stock of $153.3 million. The number of shares used for periods prior to April 1995, is the 28.3 million shares issued in exchange for AFC shares in the Mergers discussed in Note A.
(b) Prior to the Mergers, AFC's common stock was privately held by members of the Lindner family. In 1995, American Premier declared and paid cash dividends per share of $.25 prior to the Mergers; it also declared cash dividends of $.91 in 1994 and $.85 in 1993. AFG declared two quarterly $.25 per share dividends subsequent to the Mergers in 1995.
AFG's ratio of earnings to fixed charges on a total enterprise basis was 3.98, 4.22 and 2.60 for the years ended December 31, 1997, 1996 and 1995, respectively.
The National Association of Insurance Commissioners' model law for risk based capital ("RBC") applies to both life and property and casualty companies. RBC formulas determine the amount of capital that an insurance company needs to ensure that it has an acceptable expectation of not becoming financially impaired. At December 31, 1997, the capital ratios of all AFG insurance companies substantially exceeded the RBC requirements (the lowest capital ratio of any AFG subsidiary was 3.5 times its authorized control level RBC; weighted average of all AFG subsidiaries was 5.2 times).
Sources of Funds AFG and its subsidiaries, AFC Holding, AFC and American Premier, are organized as holding companies with almost all of their operations being conducted by subsidiaries. These parent corporations, however, have continuing cash needs for administrative expenses, the payment of principal and interest on borrowings, and shareholder dividends. Funds to meet these obligations come primarily from dividend and tax payments from their subsidiaries.
In the past, funds have been borrowed under bank facilities and used for working capital, capital infusions into subsidiaries, and to retire other issues of short-term or high-rate debt and preferred stock. Also, AFG believes it may be prudent and advisable to utilize portions of the bank debt in the normal course over the next year or two.
In February 1997, AFG filed a shelf registration statement for the future issuance of up to an aggregate of $500 million in common stock, debt or trust securities, with no more than $200 million of any one security being issued. The filing provides AFG with greater flexibility to access the capital markets from time to time as market and other conditions permit. In December 1997, AFG issued $100 million of 7-1/8% Senior Debentures due 2007 under this shelf registration statement. AFG used the proceeds to retire outstanding preferred stock of AFC and minority shares of a subsidiary.
Dividend payments from subsidiaries have been very important to the liquidity and cash flow of the individual holding companies in the past. However, the reliance on such dividend payments has been lessened by the combination of (i) strong capital at AFG's insurance subsidiaries (and the related decreased likelihood of a need for investment in those companies), (ii) the reductions of debt at the holding companies (and the related decrease in ongoing cash needs for interest and principal payments), (iii) AFG's ability to obtain financing in capital markets, as well as (iv) the sales of non-core investments.
Each segment of AFG's operations is comprised of multiple business units most of which utilize stand-alone computer programs. These businesses are in the process of either (i) modifying their programs utilizing the MDI software along with other internal and external resources or (ii) replacing programs with new software that is Year 2000 compliant. AFG's goal is to have program modifications and new software installations substantially completed by the end of 1998. A significant portion of AFG's Year 2000 project will be completed using internal staff. Incremental Year 2000 costs are not expected to have a material effect on AFG's financial statements.
Investments in mortgage-backed securities ("MBSs") represented approximately one-fourth of AFG's bonds and redeemable preferred stocks at December 31, 1997. AFG invests primarily in MBSs which have a reduced risk of prepayment. In addition, the majority of MBSs held by AFG were purchased at a discount. Management believes that the structure and discounted nature of the MBSs will mitigate the effect of prepayments on earnings over the anticipated life of the MBS portfolio. More than 90% of AFG's MBSs are rated "AAA" with substantially all being of investment grade quality. The market in which these securities trade is highly liquid. Aside from interest rate risk, AFG does not believe a material risk (relative to earnings or liquidity) is inherent in holding such investments.
Pretax earnings before extraordinary items were $320 million in 1997, $353 million in 1996 and $247 million in 1995.
In 1997, underwriting results of AFG's insurance operations outperformed the industry average for the twelfth consecutive year. AFG's insurance operations have been able to exceed the industry's results by focusing on growth opportunities in the more profitable areas of the specialty lines and nonstandard auto businesses.
Comparisons made in the following discussion of AFG's insurance operations include American Premier's insurance operations even though they were not consolidated in the financial statements prior to the 1995 Mergers.
NSA Group The NSA Group's 10% increase in net written premiums during 1997 is due primarily to volume increases in California resulting from enactment of legislation which requires drivers to provide proof of insurance in order to obtain a valid permit. During 1995 and early 1996, the NSA Group implemented premium rate increases in various states. In 1996, the higher rate levels along with competitive pressures in the nonstandard automobile insurance industry resulted in an 11% decline in net written premiums. These rate increases contributed to the improvement in the combined ratio in 1997 and 1996.
underwriting margins on business written in 1996 and 1997 and (ii) reserve reductions in 1996 primarily for business written prior to 1995 in response to fundamental change in the California workers' compensation market and actuarial evaluations. The specialty lines combined ratio was unusually low in 1996 due primarily to the reallocation of $40 million in reserves to A&E reserves (a combined ratio impact of 4.1 percentage points) and the 1996 reductions in California workers' compensation reserves mentioned above.
Life, Accident and Health Premiums and Benefits Life, accident and health premiums and benefits increased in 1997 due primarily to an increase in pre-need life insurance sales through the largest owner of funeral homes in the world. The increase in life, accident and health premiums and expenses in 1996 reflects AAG's acquisition of American Memorial and Loyal.
1996 compared to 1995 Investment income increased $96 million (13%) from 1995; adjusting for the effects of the 1995 Mergers retroactively to January 1, 1995, investment income increased $55 million (7%) from 1995 due primarily to an increase in the average amount of investments held.
Other Income Other income decreased $14.9 million (11%) in 1997 compared to 1996 due primarily to the absence of revenues from a non-insurance subsidiary which was sold in the first quarter of 1997.
1996 compared to 1995 Interest expense for 1996 was $76.1 million and interest expense for 1995, adjusted to reflect the effect of the 1995 Mergers retroactively to January 1, 1995, was $116.3 million. The $40 million (35%) decrease reflects significant debt retirements during both 1995 and 1996.
Minority Interest Expense Minority interest expense for 1996 includes $6.5 million related to the sale of Citicasters shares held by AFEI. Dividends paid by subsidiaries on their preferred securities have varied as the securities were issued and retired over the past three years. Prior to the Mergers in 1995, AFC (AFG's predecessor) preferred dividends of $6.3 million were not recorded as minority interest.
Income Taxes See Note K to the Financial Statements for an analysis of items affecting AFG's effective tax rate.
New Accounting Standards to be Implemented During 1997, the Financial Accounting Standards Board issued the following Statement of Financial Accounting Standards ("SFAS"); the implementation of these standards will not have a significant effect on AFG's financial position or results of operations.
SFAS No. 130 establishes standards for the reporting of a company's change in equity during the period from non-owner sources. For AFG, comprehensive income will principally consist of net income and the change in net unrealized gains on marketable securities. SFAS No. 131 establishes standards for the way companies report information about operating segments, products and services, geographic areas and major customers. Implementation of these standards will not have a significant effect on AFG's financial position, net income or reported segments.
Consolidated Statement of Cash Flows: Years ended December 31, 1997, 1996 and 1995
"Selected Quarterly Financial Data" has been included in Note O to the Consolidated Financial Statements.
A. Mergers and Reorganization I. Minority Interest B. Accounting Policies J. Capital Stock C. Acquisitions and Sales of Subsidiaries K. Income Taxes and Investees L. Extraordinary Items D. Segments of Operations M. Earnings Per Share E. Investments N. Commitments and Contingencies F. Investment in Investee Corporations O. Quarterly Operating Results G. Cost in Excess of Net Assets Acquired P. Insurance H. Long-Term Debt Q. Additional Information
Basis of Presentation The consolidated financial statements include the accounts of AFG and its subsidiaries. Mergers and changes in ownership levels of subsidiaries and investees have resulted in certain differences in the financial statements and have affected comparability between years. Certain reclassifications have been made to prior years to conform to the current year's presentation. All significant intercompany balances and transactions have been eliminated. All acquisitions have been treated as purchases. The results of operations of companies since their formation or acquisition are included in the consolidated financial statements.
Stock-Based Compensation As permitted under Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation", AFG accounts for stock options and other stock-based compensation plans using the intrinsic value based method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
Earnings Per Share In 1997, AFG implemented SFAS No. 128, "Earnings Per Share". This standard requires the presentation of basic and diluted earnings per share. Basic earnings per share are calculated using the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share are adjusted to include the dilutive effect of potentially dilutive securities. Per share amounts for prior periods have been restated to conform to the current presentation.
Buckeye In March 1996, AFG sold Buckeye Management Company to Buckeye's management (including an AFG director who resigned in March 1996) and employees for $60 million in cash, net of transaction costs. AFG recognized a $33.9 million pretax gain on the sale. In connection with the sale, the AFG director converted his AFG convertible preferred stock into 446,799 shares of AFG Common Stock and sold such shares in the open market.
Assets 1997 1996 1995 Property and casualty insurance (a) $ 7,517,856 $ 7,116,088 $ 7,443,115 Annuities and life 7,693,463 7,009,127 6,600,377 Other 343,316 726,252 603,833 15,554,635 14,851,467 14,647,325 Investment in investees 200,714 199,651 306,545
Operating Profit (Loss) Property and casualty insurance: Underwriting: Nonstandard automobile $ 33,456 $ 1,015 ($ 60,316) Specialty lines 10,888 154,329 50,690 Commercial and personal lines (33,882) (72,513) 5,315 Other lines (d) (52,021) (163,540) (31,721) (41,559) (80,709) (36,032) Investment and other income 318,613 392,250 370,579 277,054 311,541 334,547 Annuities and life 93,794 77,119 79,579 Other (e) (45,674) (18,461) (182,444) 325,174 370,199 231,682 Equity in net earnings (losses) of investees (5,564) (16,955) 15,237
Held to Maturity $ 202.8 $332.5 $ 9.3 $ 2.4 ($ 1.2) Available for Sale 1,925.8 284.8 871.8 29.6 (47.3) Total $2,128.6 $617.3 $ 881.1 $32.0 ($48.5)
Held to Maturity $ 774.8 $176.3 $ 12.9 $ 1.9 ($ 2.3) Available for Sale 1,603.6 133.3 2,297.9 88.0 (9.6) Total $2,378.4 $309.6 $2,310.8 $89.9 ($11.9)
Net Sales of Continuing Operations $2,434 $2,435 $2,566 Operating Income 100 84 176 Income (Loss) from Continuing Operations - (28) 28 Discontinued Operations - - (11) Extraordinary Loss from Debt Refinancings - (23) (8) Net Income (Loss) - (51) 9 Net Income (Loss) Attributable to Common Shares (17) (63) 1
Significant retirements of long-term debt since January 1, 1996, have been as follows (in millions):
AFC Debentures 1996 $138.2 $147.9 1997 85.0 96.7 American Premier Notes 1996 160.1 177.2 1997 11.3 12.5 AAG Notes 1996 78.0 84.2 1997 40.8 42.5 1998 (2 mos) 24.1 24.8
Cash interest payments of $50 million, $75 million and $137 million were made on long-term debt in 1997, 1996 and 1995, respectively.
Preferred Securities Wholly-owned subsidiary trusts of AFC Holding and AAG have issued $325 million of preferred securities and, in turn, purchased $325 million of newly-authorized AFC Holding and AAG subordinated debt issues which provide interest and principal payments to fund the respective trusts' obligations. The preferred securities are mandatorily redeemable upon maturity or redemption of the subordinated debt.
AFC Preferred Stock At December 31, 1997, AFC's Preferred Stock was voting, cumulative, and consisted of the following:
In December 1997, AFC retired all shares of its Series F and G Preferred Stock in exchange for approximately $244 million in cash and 2,886,161 million shares of the Series J Preferred Stock. AFG recognized a charge to retained earnings of $153.3 million representing the excess of total consideration paid over the stated value of the preferred stock retired.
Stock Options At December 31, 1997, there were 5.0 million shares of AFG Common Stock reserved for issuance under AFG's Stock Option Plan. Under the Stock Option Plan, the exercise price of each option equals the market price of AFG Common Stock at the date of grant. Options become exercisable at the rate of 20% per year commencing one year after grant; those granted to non-employee directors of AFG are generally fully exercisable upon grant. All options expire ten years after the date of grant. No compensation cost has been recognized for stock option grants. Had compensation cost been determined for stock option awards based on the fair values at grant dates consistent with the method prescribed by Statement of Financial Accounting Standards No. 123, AFG's net income and earnings per share would not have been materially different from amounts reported. For Statement No. 123 purposes, calculations were determined using the Black-Scholes option pricing
model and the following assumptions: dividend yield of 2%; expected volatility of 21% for 1997 and 20% for 1996 and 1995; risk-free interest rate of 5.8% for 1997 and 6.2% for 1996 and 1995; and expected life of 6.7 years for 1997 and 7.5 years for 1996 and 1995. Data for AFG's Stock Option Plan is presented below: 1997 1996 Average Average Exercise Exercise Shares Price Shares Price Outstanding at beginning of year 3,331,947 $26.53 3,939,986 $25.72
K. Income Taxes The following is a reconciliation of income taxes at the statutory rate of 35% and income taxes as shown in the Statement of Earnings (in thousands): 1997 1996 1995 Earnings before income taxes and extraordinary items $319,610 $353,244 $246,919 Extraordinary items before income taxes (11,287) (35,670) 536
Income taxes at statutory rate $107,912 $111,151 $ 86,609 Effect of: Minority interest 10,058 15,112 11,673 Losses utilized (3,164) (43,302) (40,292) Amortization of intangibles 3,362 3,065 3,015 Foreign income taxes 2,954 3,474 359 State income taxes (2,739) 4,140 81 Dividends received deduction (2,002) (7,450) (7,823) Tax exempt interest (384) (597) (897) Other 76 (1,319) 3,483 Total provision 116,073 84,274 56,208
1997 1996 1995 Subject to tax in: United States $317,615 $331,842 $250,423 Foreign jurisdictions (9,292) (14,268) (2,968)
1997 1996 1995 Current taxes (credits): Federal $ 35,495 $22,450 $38,512 Foreign - (1,735) (1,213) State (2,544) 6,369 124 Deferred taxes: Federal 83,581 56,869 18,233 Foreign (459) 321 552
During the past two years, AFG has continued a strategy of disposing of non-core investments. Sales of significant affiliates have included the following: MDI (December 1997); Citicasters (September 1996); and Buckeye (March 1996). See Note C for a more detailed description of these and other transactions. Sales of subsidiaries in 1997 also includes a fourth quarter pretax charge of $17 million relating to operations expected to be sold or otherwise disposed of in 1998. Realized gains (losses) on sales of securities and affiliates amounted to (in millions): 1st 2nd 3rd 4th Total Quarter Quarter Quarter Quarter Year 1997 $ 2.5 $4.2 $ 29.7 $54.6 $ 91.0 1996 52.6 5.7 172.5 (28.3) 202.5
P. Insurance Securities owned by insurance subsidiaries having a carrying value of approximately $1.4 billion at December 31, 1997, were on deposit as required by regulatory authorities.
Q. Additional Information Total rental expense for various leases of office space, data processing equipment and railroad rolling stock was $36 million, $34 million and $35 million for 1997, 1996 and 1995, respectively. Sublease rental income related to these leases totaled $5.4 million in 1997, $6.1 million in 1996 and $6.2 million in 1995.
Other operating and general expenses included charges for possible losses on agents' balances, reinsurance recoverables and other receivables in the following amounts: 1997 - $7.6 million; 1996 - $0; and 1995 - $0. The aggregate allowance for such losses amounted to approximately $131 million and $123 million at December 31, 1997 and 1996, respectively.
1997 1996* 1995* Cash and Investments $12,290 $11,739 Other Assets 3,482 3,312 Insurance Claims and Reserves 11,792 11,312 Debt 481 518 Minority Interest 590 494 Shareholders' Equity 1,607 1,554
1997 1996 Carrying Fair Carrying Fair Value Value Value Value Assets: Bonds and redeemable preferred stocks $10,653 $10,735 $9,986 $10,023 Other stocks 446 446 328 328 Investment in investee corporations 201 391 200 306
Minority Interest: Trust preferred securities $ 325 $ 339 $ 175 $ 179 AFC preferred stock 72 74 163 264
Financial Instruments with Off-Balance-Sheet Risk On occasion, AFG and its subsidiaries have entered into financial instrument transactions which may present off-balance-sheet risks of both a credit and market risk nature. These transactions include commitments to fund loans, loan guarantees and commitments to purchase and sell securities or loans. At December 31, 1997, AFG and its subsidiaries had commitments to fund credit facilities and contribute limited partnership capital totaling $29 million.
Benefit Plans AFG expensed approximately $21 million in 1997, $17 million in 1996 and $16 million in 1995 for contributions to its retirement and employee savings plans.
2. Financial Statement Schedules: A. Selected Quarterly Financial Data is included in Note O to the Consolidated Financial Statements.
B. Schedules filed herewith for 1997, 1996 and 1995: Page I - Condensed Financial Information of Registrant S-2
December 31, Assets: 1997 1996 Cash and short-term investments $ 25,890 $ 43,465 Receivables from affiliates 352,766 422,015 Investment in subsidiaries 1,473,261 1,192,239 Other assets 41,690 8,735
$1,893,607 $1,666,454 Liabilities and Shareholders' Equity: Accounts payable, accrued expenses and other liabilities $ 8,131 $ 7,121 Long-term debt 100,000 - Payables to affiliates 122,767 104,896 Shareholders' equity 1,662,709 1,554,437
Extraordinary items - gain (loss) on prepayment of debt (7,233) (28,667) 817
Net Increase (Decrease) in Cash and Short-term Investments (17,575) (52,742) 91,311
Cash and short-term investments at beginning of period 43,465 96,207 4,896
s/FRED J. RUNK Senior Vice President and March 26, 1998 Fred J. Runk Treasurer (principal financial and accounting officer)
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Financial Group, Inc. and subsidiaries at December 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
On December 2, 1997, AFG completed several transactions in furtherance of a plan to reduce corporate expenses and simplify the public company structure of certain subsidiaries (the "AFG Reorganization").
Benefit Plans AFG provides retirement benefits to qualified employees of participating companies through contributory and noncontributory defined contribution plans. Contributions to benefit plans are charged against earnings in the year for which they are declared. Prior to 1997, both AFC and American Premier had contributory employee savings plans and noncontributory Employee Stock Ownership Retirement Plans ("ESORP"). Effective January 1, 1997, these ESORP plans were combined into a new retirement and savings plan. Under the retirement portion of the plan, company contributions (approximately 6% of covered compensation in 1997) are invested primarily in securities of AFG and affiliates. Under the savings portion of the plan, AFG matches a specific portion of employee contributions.
Minority Interest For balance sheet purposes, minority interest represents the interests of non-controlling shareholders in AFG subsidiaries, including AFC preferred stock and preferred securities issued by trust subsidiaries of AFG. For income statement purposes, minority interest expense represents those shareholders' interest in the earnings of AFG subsidiaries as well as AFC preferred dividends following the 1995 Mergers and accrued distributions on the trust preferred securities.
AFEI In December 1997, AFG and AFEI engaged in a merger transaction whereby the shares of AFEI not held by AFG were exchanged either for shares of AFG common stock on a 1-for-1 basis or for $37.00 per share in cash. AFG paid approximately $23 million in cash and issued approximately 2.1 million shares of its common stock in this transaction.
D. Segments of Operations AFG operates its property and casualty insurance business in three major segments: nonstandard automobile, specialty lines, and commercial and personal lines. AFG's annuity and life business primarily sells tax-deferred annuities to employees of primary and secondary educational institutions and hospitals. These insurance businesses operate throughout the United States. In addition, AFG has owned significant portions of the voting equity securities of certain companies (investee corporations - see Note F).
The table below sets forth the scheduled maturities of bonds and redeemable preferred stocks based on carrying value as of December 31, 1997. Data based on market value is generally the same. Mortgage-backed securities had an average life of approximately 6.5 years at December 31, 1997.
Held to Available Maturity Maturity for Sale One year or less 6% 3% After one year through five years 32 18 After five years through ten years 30 37 After ten years 4 18 72 76 Mortgage-backed securities 28 24 100% 100%
Certain risks are inherent in connection with fixed maturity securities, including loss upon default, price volatility in reaction to changes in interest rates, and general market factors and risks associated with reinvestment of proceeds due to prepayments or redemptions in a period of declining interest rates.
Chiquita is a leading international marketer, producer and distributor of bananas and other quality fresh and processed food products. Summarized financial information for Chiquita at December 31, is shown below (in millions).
At December 31, 1997, sinking fund and other scheduled principal payments on debt for the subsequent five years, adjusted to reflect financing transactions through February 1998, were as follows (in thousands):
1997 1996 Interest of non-controlling shareholders in subsidiaries' common stock $115,843 $156,680 Preferred securities issued by subsidiary trusts 325,000 175,000 AFC preferred stock 72,154 162,760
AFG, AFC Holding and AAG effectively provide unconditional guarantees of their respective trusts' obligations.
In December 1996, AFC redeemed 1.6 million shares of its Series F Preferred Stock for $31.9 million and, in October, AFC purchased 250,000 shares of Series F from its ESORP for $5.0 million. In December 1996, AFC issued 1.6 million shares of its Series G Preferred Stock to its ESORP for $16.8 million. During 1995, AFC retired its mandatory redeemable preferred stock for an aggregate of $2.9 million.
The following table summarizes information about stock options outstanding at December 31, 1997: Options Outstanding Options Exercisable Average Average Average Range of Exercise Remaining Exercise Exercise Prices Shares Price Life Shares Price $17.24 - $20.00 141,723 $18.52 3.0 years 141,723 $18.52 $20.00 - $25.00 1,335,548 $23.82 5.8 854,639 $23.73 $25.00 - $30.00 314,864 $27.32 6.0 213,118 $27.45 $30.00 - $35.00 1,152,500 $30.30 8.1 511,800 $30.14 $35.00 - $44.75 743,000 $37.67 9.3 53,000 $37.87
Amounts applicable to extraordinary items 4,054 7,003 281 Provision for income taxes as shown on the Statement of Earnings $120,127 $ 91,277 $ 56,489
Expiring Amount { 1998 - 2002 $35 Operating Loss { 2003 - 2007 95 { 2008 - 2012 60 Capital Loss 1999 91 Other - Tax Credits 23
L. Extraordinary Items Extraordinary items represent AFG's proportionate share of gains and losses related to debt retirements by the following companies. Amounts shown are net of minority interest and income tax benefits (in thousands): 1997 1996 1995 Holding Companies: AFC (parent) ($5,395) ($ 9,672) ($1,713) APU (parent) (588) (3,254) 6,137 GAHC - - (611) Subsidiaries: AAG (1,250) (7,159) (201) Other - 57 - Investee: Chiquita - (8,639) (2,795)
N. Commitments and Contingencies Loss accruals have been recorded for various environmental and occupational injury and disease claims and other contingencies arising out of the railroad operations disposed of by American Premier's predecessor, Penn Central Transportation Company ("PCTC"), prior to its bankruptcy reorganization in 1978. Any ultimate liability arising therefrom in excess of previously established loss accruals would normally be attributable to pre-reorganization events and circumstances and accounted for as a reduction in capital surplus. However, under purchase accounting in connection with the 1995 Mergers, any such excess liability will be charged to earnings in AFG's financial statements.
AFG has accrued approximately $14.2 million at December 31, 1997, for environmental costs and certain other matters associated with the sales of former operations.
Liabilities: Annuity benefits accumulated $ 5,528 $ 5,319 $5,366 $ 5,180 Long-term debt: Holding companies 387 401 340 362 Subsidiaries 194 195 178 183
Restrictions on Transfer of Funds and Assets of Subsidiaries Payments of dividends, loans and advances by AFG's subsidiaries are subject to various state laws, federal regulations and debt covenants which limit the amount of dividends, loans and advances that can be paid. Under applicable restrictions, the maximum amount of dividends available to AFG in 1998 from its insurance subsidiaries without seeking regulatory clearance is approximately $221 million. Total "restrictions" on intercompany transfers from AFG's subsidiaries cannot be quantified due to the discretionary nature of the restrictions.
Earnings before income taxes and extraordinary items 319,610 353,244 246,919 Provision for income taxes 120,127 91,277 56,489
AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES SCHEDULE V - SUPPLEMENTAL INFORMATION CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS THREE YEARS ENDED DECEMBER 31, 1997 (IN MILLIONS)
s/CARL H. LINDNER Chairman of the Board March 26, 1998 Carl H. Lindner of Directors
10(f) Directors' Compensation Plan, filed as Exhibit 10(f) to AFG's Form 10-K for 1995. (*)