SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended Commission File
September 30, 1999 No. 1-13653
AMERICAN FINANCIAL GROUP, INC.
Incorporated under IRS Employer I.D.
the Laws of Ohio No. 31-1544320
One East Fourth Street, Cincinnati, Ohio 45202
(513) 579-2121
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
As of November 1, 1999, there were 58,406,695 shares of the Registrant's
Common Stock outstanding, excluding 18,666,614 shares owned by subsidiaries.
Page 1 of 21
<PAGE>
AMERICAN FINANCIAL GROUP, INC. 10-Q
PART I
FINANCIAL INFORMATION
AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars In Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
<S> <C> <C>
Assets:
Cash and short-term investments $ 312,579 $ 296,721
Investments:
Fixed maturities - at market
(amortized cost - $10,054,347 and $9,921,344) 9,966,947 10,324,344
Other stocks - at market
(cost - $231,533 and $207,345) 427,733 430,345
Investment in investee corporation 191,179 192,138
Policy loans 217,205 220,496
Real estate and other investments 271,829 271,915
Total investments 11,074,893 11,439,238
Recoverables from reinsurers and prepaid
reinsurance premiums 2,124,232 1,973,895
Agents' balances and premiums receivable 709,348 618,198
Deferred acquisition costs 563,537 464,047
Other receivables 216,046 306,821
Assets held in separate accounts 243,444 120,049
Prepaid expenses, deferred charges and other assets 445,490 344,465
Cost in excess of net assets acquired 328,984 281,769
$16,018,553 $15,845,203
<PAGE>
Liabilities and Capital:
Unpaid losses and loss adjustment expenses $ 4,876,564 $ 4,773,377
Unearned premiums 1,260,249 1,232,848
Annuity benefits accumulated 5,473,639 5,449,633
Life, accident and health reserves 369,370 341,595
Long-term debt:
Holding companies 498,464 415,536
Subsidiaries 239,188 176,896
Liabilities related to separate accounts 243,444 120,049
Accounts payable, accrued expenses and other
liabilities 1,130,969 1,097,316
Total liabilities 14,091,887 13,607,250
Minority interest 494,774 521,776
Shareholders' Equity:
Common Stock, no par value
- 200,000,000 shares authorized
- 58,398,505 and 60,928,322 shares outstanding 58,399 60,928
Capital surplus 742,013 770,721
Retained earnings 557,380 527,028
Unrealized gains on marketable securities, net 74,100 357,500
Total shareholders' equity 1,431,892 1,716,177
$16,018,553 $15,845,203
</TABLE>
2
<PAGE>
AMERICAN FINANCIAL GROUP, INC. 10-Q
AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Income:
Property and casualty insurance
premiums $585,560 $ 696,537 $1,680,561 $2,080,003
Life, accident and health premiums 26,463 50,434 77,418 145,710
Investment income 216,927 222,683 632,302 671,923
Equity in net earnings (loss) of investee (14,797) (5,518) 2,639 26,396
Realized gains (losses) on sales of:
Securities (5,744) 14,302 5,997 28,890
Investee and subsidiaries - 11,090 - 20,510
Other investments - - - 6,843
Other income 45,709 42,276 100,343 106,153
854,118 1,031,804 2,499,260 3,086,428
Costs and Expenses:
Property and casualty insurance:
Losses and loss adjustment expenses 423,402 513,537 1,188,050 1,577,440
Commissions and other underwriting
expenses 171,824 201,777 506,646 586,409
Annuity benefits 66,516 64,514 194,977 204,735
Life, accident and health benefits 17,365 40,547 52,238 115,208
Interest charges on borrowed money 17,175 14,932 48,122 42,878
Minority interest expense 12,671 16,628 38,008 43,795
Other operating and general expenses 99,482 93,816 264,210 254,616
808,435 945,751 2,292,251 2,825,081
Earnings before income taxes,
extraordinary items and cumulative
effect of accounting change 45,683 86,053 207,009 261,347
Provision for income taxes 17,075 29,622 74,214 97,464
Earnings before extraordinary items and
cumulative effect of accounting change 28,608 56,431 132,795 163,883
Extraordinary items - gain (loss) on
prepayment of debt 1,477 (36) (2,261) (763)
Cumulative effect of accounting change - - (3,854) -
Net Earnings $ 30,085 $ 56,395 $ 126,680 $ 163,120
<PAGE>
Basic earnings (loss) per Common Share:
Before extraordinary items and
effect of accounting change $.48 $.92 $2.21 $2.67
Gain (loss) on prepayment of debt .02 - (.04) (.01)
Cumulative effect of accounting change - - (.06) -
Net earnings available to Common Shares $.50 $.92 $2.11 $2.66
Diluted earnings (loss) per Common Share:
Before extraordinary items and
effect of accounting change $.48 $.91 $2.18 $2.63
Gain (loss) on prepayment of debt .02 - (.04) (.01)
Cumulative effect of accounting change - - (.06) -
Net earnings available to Common Shares $.50 $.91 $2.08 $2.62
Average number of Common Shares:
Basic 59,623 61,374 60,177 61,278
Diluted 60,002 62,191 60,764 62,315
Cash dividends per Common Share $.25 $.25 $.75 $.75
</TABLE>
3
<PAGE>
AMERICAN FINANCIAL GROUP, INC. 10-Q
AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in Thousands)
<TABLE>
<CAPTION>
Common Stock Unrealized
Common and Capital Retained Gain on
Shares Surplus Earnings Securities Total
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1999 60,928,322 $831,649 $527,028 $357,500 $1,716,177
Net earnings - - 126,680 - 126,680
Change in unrealized - - - (283,400) (283,400)
Comprehensive income (loss) (156,720)
Dividends on Common Stock - - (45,152) - (45,152)
Shares issued:
Exercise of stock options 74,853 2,060 - - 2,060
Dividend reinvestment plan 6,099 222 - - 222
Employee stock purchase plan 48,064 1,695 - - 1,695
401-K plan company match 57,888 2,171 - - 2,171
Portion of bonuses paid in stock 38,640 1,438 - - 1,438
Directors fees paid in stock 1,865 68 - - 68
Shares repurchased (2,757,226) (37,726) (51,176) - (88,902)
Tax effect of intercompany dividends - (4,800) - - (4,800)
Other - 3,635 - - 3,635
Balance at September 30, 1999 58,398,505 $800,412 $557,380 $ 74,100 $1,431,892
Balance at January 1, 1998 61,048,904 $836,738 $477,071 $348,900 $1,662,709
Net earnings - - 163,120 - 163,120
Change in unrealized - - - 12,500 12,500
Comprehensive income 175,620
Dividends on Common Stock - - (45,960) - (45,960)
Shares issued:
Exercise of stock options 296,416 8,288 - - 8,288
Dividend reinvestment plan 7,094 294 - - 294
Employee stock purchase plan 51,323 2,089 - - 2,089
401-K plan company match 44,035 1,783 - - 1,783
Portion of bonuses paid in stock 20,300 816 - - 816
Directors fees paid in stock 1,622 68 - - 68
Shares repurchased (423,622) (5,846) (9,737) - (15,583)
Tax effect of intercompany dividends - (1,470) - - (1,470)
Other - 66 - - 66
Balance at September 30, 1998 61,046,072 $842,826 $584,494 $361,400 $1,788,720
</TABLE>
4
<PAGE>
AMERICAN FINANCIAL GROUP, INC. 10-Q
AMERICAN FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
Nine months ended
September 30,
1999 1998
Operating Activities:
Net earnings $ 126,680 $ 163,120
Adjustments:
Extraordinary items 2,261 763
Cumulative effect of accounting change 3,854 -
Depreciation and amortization 68,659 71,589
Annuity benefits 194,977 204,735
Equity in net earnings of investee (2,639) (26,396)
Realized gains on investing activities (20,749) (80,357)
Deferred annuity and life policy acquisition costs (87,009) (87,459)
Increase in reinsurance and other receivables (135,237) (247,348)
Increase in other assets (64,697) (37,681)
Increase in insurance claims and reserves 116,590 293,264
Increase in other liabilities 95,660 121,631
Increase in minority interest 8,016 9,196
Dividends from investee 3,600 3,600
Other, net (9,350) (9,031)
300,616 379,626
Investing Activities:
Purchases of and additional investments in:
Fixed maturity investments (1,562,054) (1,682,077)
Equity securities (56,041) (54,971)
Subsidiaries (204,942) (31,825)
Real estate, property and equipment (63,496) (49,425)
Maturities and redemptions of fixed maturity
investments 801,833 1,017,153
Sales of:
Fixed maturity investments 886,790 544,722
Equity securities 45,887 19,119
Subsidiaries - 164,589
Real estate, property and equipment 24,394 48,634
Cash and short-term investments of acquired (former)
subsidiaries, net 19,454 (18,146)
Decrease (increase) in other investments 12,734 (9,363)
(95,441) (51,590)
<PAGE>
Financing Activities:
Fixed annuity receipts 330,744 358,659
Annuity surrenders, benefits and withdrawals (524,148) (538,912)
Additional long-term borrowings 557,170 217,537
Reductions of long-term debt (417,015) (159,383)
Issuances of Common Stock 2,968 9,725
Repurchases of Common Stock (88,597) (14,702)
Repurchases of trust preferred securities (5,509) -
Cash dividends paid (44,930) (45,666)
(189,317) (172,742)
Net Increase in Cash and Short-term Investments 15,858 155,294
Cash and short-term investments at beginning
of period 296,721 257,117
Cash and short-term investments at end of period $ 312,579 $ 412,411
5
<PAGE>
AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Accounting Policies
Basis of Presentation The accompanying consolidated financial
statements for American Financial Group, Inc. ("AFG") and subsidiaries
are unaudited; however, management believes that all adjustments
(consisting only of normal recurring accruals unless otherwise
disclosed herein) necessary for fair presentation have been made. The
results of operations for interim periods are not necessarily indicative
of results to be expected for the year. The financial statements have
been prepared in accordance with the instructions to Form 10-Q and
therefore do not include all information and footnotes necessary to be
in conformity with generally accepted accounting principles.
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.
The preparation of the financial statements requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Changes in circumstances
could cause actual results to differ materially from those estimates.
Investments All fixed maturity securities are "available for sale" and
reported at fair value with unrealized gains and losses reported as a
separate component of shareholders' equity. Short-term investments are
carried at cost; loans receivable are carried primarily at the
aggregate unpaid balance. Premiums and discounts on mortgage-backed
securities are amortized over their expected average lives using the
interest method.
Gains or losses on sales of securities are recognized at the time of
disposition with the amount of gain or loss determined on the specific
identification basis. When a decline in the value of a specific
investment is considered to be other than temporary, a provision for
impairment is charged to earnings and the carrying value of that
investment is reduced.
Investment in Investee Corporation Investments in securities of 20%-
to 50%-owned companies are generally carried at cost, adjusted for
AFG's proportionate share of their undistributed earnings or losses.
Cost in Excess of Net Assets Acquired The excess of cost of
subsidiaries and investees over AFG's equity in the underlying net
assets ("goodwill") is being amortized over 40 years.
Insurance As discussed under "Reinsurance" below, unpaid losses and
loss adjustment expenses and unearned premiums have not been reduced
for reinsurance recoverable. To the extent that unrealized gains
(losses) from securities classified as "available for sale" would
result in adjustments to deferred acquisition costs and policyholder
liabilities had those gains (losses) actually been realized, such
balance sheet amounts are adjusted, net of deferred taxes.
<PAGE>
Reinsurance In the normal course of business, AFG's insurance
subsidiaries cede reinsurance to other companies to diversify risk and
limit maximum loss arising from large claims. To the extent that any
reinsuring companies are unable to meet obligations under the
agreements covering reinsurance ceded, AFG's insurance subsidiaries
would remain liable. Amounts recoverable from reinsurers are estimated
in a manner consistent with the claim liability associated with the
reinsured policies. AFG's insurance subsidiaries report as assets
(a) the estimated reinsurance recoverable on unpaid losses, including an
estimate for losses incurred but not reported, and (b) amounts paid to
reinsurers applicable to the unexpired terms of policies in force. AFG's
6
<PAGE>
AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
insurance subsidiaries also assume reinsurance from other companies.
Income on reinsurance assumed is recognized based on reports received
from ceding reinsurers.
Deferred Acquisition Costs Policy acquisition costs (principally
commissions, premium taxes and other underwriting expenses) related to
the production of new business are deferred ("DPAC"). For the property
and casualty companies, the deferral of acquisition costs is limited
based upon their recoverability without any consideration for
anticipated investment income. DPAC is charged against income ratably
over the terms of the related policies. For the annuity companies,
DPAC is amortized, with interest, in relation to the present value of
expected gross profits on the policies.
Unpaid Losses and Loss Adjustment Expenses The net liabilities
stated for unpaid claims and for expenses of investigation and
adjustment of unpaid claims are based upon (a) the accumulation of case
estimates for losses reported prior to the close of the accounting
period on the direct business written; (b) estimates received from
ceding reinsurers and insurance pools and associations; (c) estimates
of unreported losses based on past experience; (d) estimates based on
experience of expenses for investigating and adjusting claims and
(e) the current state of the law and coverage litigation. These
liabilities are subject to the impact of changes in claim amounts and
frequency and other factors. In spite of the variability inherent in
such estimates, management believes that the liabilities for unpaid
losses and loss adjustment expenses are adequate. Changes in estimates
of the liabilities for losses and loss adjustment expenses are
reflected in the Statement of Earnings in the period in which determined.
Annuity Benefits Accumulated Annuity receipts and benefit payments
are recorded as increases or decreases in "annuity benefits
accumulated" rather than as revenue and expense. Increases in this
liability for interest credited are charged to expense and decreases
for surrender charges are credited to other income.
Life, Accident and Health Reserves Liabilities for future policy
benefits under traditional life, accident and health policies are
computed using the net level premium method. Computations are based on
anticipated investment yield, mortality, morbidity and surrenders and
include provisions for unfavorable deviations. Reserves established
for accident and health claims are modified as necessary to reflect
actual experience and developing trends.
Assets Held In and Liabilities Related to Separate Accounts Separate
account assets and related liabilities represent variable annuity deposits.
<PAGE>
Premium Recognition Property and casualty premiums are earned over
the terms of the policies on a pro rata basis. Unearned premiums
represent that portion of premiums written which is applicable to the
unexpired terms of policies in force. On reinsurance assumed from
other insurance companies or written through various underwriting
organizations, unearned premiums are based on reports received from
such companies and organizations. For traditional life, accident and
health products, premiums are recognized as revenue when legally
collectible from policyholders. For interest-sensitive life and
universal life products, premiums are recorded in a policyholder
account which is reflected as a liability. Revenue is recognized as
amounts are assessed against the policyholder account for mortality
coverage and contract expenses.
Policyholder Dividends Dividends payable to policyholders are
included in "Accounts payable, accrued expenses and other liabilities"
and represent estimates of amounts payable on participating policies
which share in favorable underwriting results. The estimate is accrued
during the period in which the related premium is earned. Changes in
estimates are included in income in the period determined.
Policyholder dividends do not become legal liabilities unless and until
declared by the boards of directors of the insurance companies.
7
<PAGE>
AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Minority Interest For balance sheet purposes, minority interest
represents the interests of noncontrolling shareholders in AFG
subsidiaries, including American Financial Corporation ("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 and accrued
distributions on the trust preferred securities.
Issuances of Stock by Subsidiaries and Investees Changes in AFG's
equity in a subsidiary or an investee caused by issuances of the
subsidiary's or investee's stock are accounted for as gains or losses
where such issuance is not a part of a broader reorganization.
Income Taxes AFC files consolidated federal income tax returns which
include all 80%-owned U.S. subsidiaries, except for certain life insurance
subsidiaries and their subsidiaries. Because holders of AFC Preferred
Stock hold in excess of 20% of AFC's voting rights, AFG (parent) and its
direct subsidiary, AFC Holding Company ("AFC Holding" or "AFCH"), own less
than 80% of AFC, and therefore, file separate returns.
Deferred income taxes are calculated using the liability method. Under
this method, deferred income tax assets and liabilities are determined
based on differences between financial reporting and tax bases and are
measured using enacted tax rates. Deferred tax assets are recognized
if it is more likely than not that a benefit will be realized.
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."
Benefit Plans AFG provides retirement benefits to qualified employees
of participating companies through contributory and noncontributory
defined contribution plans contained in AFG's Retirement and Savings
Plan. Under the retirement portion of the plan, company contributions
(approximately 6% of covered compensation in 1998) are invested
primarily in securities of AFG and affiliates. Under the savings
portion of the plan, AFG matches a specific portion of employee
contributions. Contributions to benefit plans are charged against
earnings in the year for which they are declared.
AFG and many of its subsidiaries provide health care and life insurance
benefits to eligible retirees. AFG also provides postemployment
benefits to former or inactive employees (primarily those on
disability) who were not deemed retired under other company plans. The
projected future cost of providing these benefits is expensed over the
period the employees earn such benefits.
<PAGE>
Under AFG's stock option plan, options are granted to officers,
directors and key employees at exercise prices equal to the fair value
of the shares at the dates of grant. No compensation expense is
recognized for stock option grants.
Start-up Costs Prior to 1999, American Annuity Group, Inc. ("AAG"), an
83%-owned subsidiary, deferred certain costs associated with
introducing new products and distribution channels and amortized them
on a straight-line basis over 5 years. In 1999, AAG implemented
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities." The SOP requires that (i) costs of start-up activities be
expensed as incurred and (ii) unamortized balances of previously
deferred costs be expensed and reported as the cumulative effect of a
change in accounting principle. Accordingly, AFG expensed previously
capitalized start-up costs of $3.8 million (net of minority interest
and taxes) or $.06 per diluted share, effective January 1, 1999.
8
<PAGE>
AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Derivatives The Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities,"
during the second quarter of 1998. AFG must implement SFAS No. 133 no
later than January 1, 2001. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including derivative
instruments that are embedded in other contracts, and for hedging
activities. SFAS No. 133 requires the recognition of all derivatives
(both assets and liabilities) in the balance sheet at fair value.
Changes in fair value of derivative instruments are included in current
income or as a component of comprehensive income (outside current
income) depending on the type of derivative. Implementation of SFAS
No. 133 is not expected to have a material effect on AFG's financial
position or results of operations.
Earnings Per Share Basic earnings per share is calculated using the
weighted average number of shares of common stock outstanding during
the period. Diluted earnings per share include the following dilutive
effects of common stock options: third quarter of 1999 and 1998 -
.4 million shares and .8 million shares; nine months of 1999 and 1998 -
.6 million shares and 1.0 million shares, respectively.
Statement of Cash Flows For cash flow purposes, "investing activities"
are defined as making and collecting loans and acquiring and disposing
of debt or equity instruments and property and equipment. "Financing
activities" include obtaining resources from owners and providing them
with a return on their investments, borrowing money and repaying
amounts borrowed. Annuity receipts, benefits and withdrawals are also
reflected as financing activities. All other activities are considered
"operating". Short-term investments having original maturities of
three months or less when purchased are considered to be cash
equivalents for purposes of the financial statements.
B. Acquisitions and Sales of Subsidiaries
Worldwide Insurance Company In April 1999, AFG completed the purchase
of Worldwide Insurance Company (formerly Providian Auto and Home
Insurance Company) for $157 million in cash. Worldwide is a provider
of direct response private passenger automobile insurance.
Old Republic and Consolidated Financial In February 1999, AAG acquired
Old Republic Life Insurance Company of New York for $27 million in
cash. In July 1999, AAG acquired Consolidated Financial Corp., an
insurance agency, for $21 million in cash.
United Teacher Associates In October 1999, AAG acquired United Teacher
Associates Insurance Company of Austin, Texas ("UTA") for $81 million
in cash, subject to post-closing adjustments. UTA provides
supplemental health products and retirement annuities, and purchases
blocks of insurance policies from other insurers.
<PAGE>
Commercial lines division In December 1998, AFG completed the sale of
substantially all of its Commercial lines division to Ohio Casualty
Corporation for $300 million plus warrants to purchase 6 million (post
split) shares of Ohio Casualty common stock. AFG deferred a gain of
$103 million on the insurance ceded to Ohio Casualty and recognized a
pretax gain of $153 million on the sale of the other net assets. The
deferred gain is being recognized over the estimated remaining
settlement period (weighted average of 4.25 years) of the claims ceded.
AFG may receive up to an additional $40 million in the year 2000 based
upon the retention and growth of the insurance businesses acquired by
Ohio Casualty. The commercial lines sold generated net written
premiums of $210 million for the nine months ended September 30, 1998.
9
<PAGE>
AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Funeral Services division In September 1998, AAG sold its Funeral
Services division for approximately $165 million in cash. The division
held assets of approximately $1 billion at the sale date. AFG realized
a pretax gain of $21.6 million, before $2.7 million of minority
interest, on this sale.
C. Segments of Operations Having sold substantially all of its Commercial
lines division in December 1998, AFG's property and casualty group is
engaged primarily in private passenger automobile and specialty
insurance businesses. The Personal group consists of the nonstandard
auto group along with the preferred/standard private passenger auto and
other personal insurance business. The Specialty group includes a
highly diversified group of specialty business units. AFG's annuity
and life business markets primarily retirement products as well as life
and supplemental health insurance. In addition, AFG owns a significant
portion of the voting equity securities of Chiquita Brands
International, Inc. (an investee corporation - see Note D).
<PAGE>
The following table (in thousands) shows AFG's revenues and operating
profit (loss) by significant business segment. Operating profit (loss)
represents total revenues less operating expenses.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues (a)
Property and casualty insurance:
Premiums earned:
Personal $288,454 $ 321,701 $ 875,036 $ 980,288
Specialty 296,254 365,670 804,957 1,068,854
Other lines - primarily
discontinued 852 9,166 568 30,861
585,560 696,537 1,680,561 2,080,003
Investment and other income 110,923 123,128 329,885 376,684
696,483 819,665 2,010,446 2,456,687
Annuities and life (b) 161,474 210,842 465,348 584,834
Other 10,958 6,815 20,827 18,511
868,915 1,037,322 2,496,621 3,060,032
Equity in net earnings (loss)
of investee (14,797) (5,518) 2,639 26,396
$854,118 $1,031,804 $2,499,260 $3,086,428
Operating Profit (Loss)
Property and casualty insurance:
Underwriting:
Personal ($ 3,167) $ 8,860 ($ 1,121) $ 30,129
Specialty (9,246) (21,781) (7,925) (80,886)
Other lines - primarily
discontinued 2,747 (5,856) (5,089) (33,089)
(9,666) (18,777) (14,135) (83,846)
Investment and other income 70,212 91,076 214,477 290,185
60,546 72,299 200,342 206,339
Annuities and life 21,250 48,977 71,681 107,649
Other (c) (21,316) (29,705) (67,653) (79,037)
60,480 91,571 204,370 234,951
Equity in net earnings (loss)
of investee (14,797) (5,518) 2,639 26,396
$ 45,683 $ 86,053 $ 207,009 $ 261,347
</TABLE>
(a) Revenues include sales of products and services as well as other
income earned by the respective segments.
(b) Represents primarily investment income.
(c) Includes holding company expenses.
10
<PAGE>
AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
D. Investment in Investee Corporation Investment in investee corporation
reflects AFG's ownership of 24 million shares (36%) of Chiquita common
stock. The market value of this investment was $142 million and
$229 million at September 30, 1999 and December 31, 1998, respectively.
Chiquita is a leading international marketer, producer and distributor
of quality fresh fruits and vegetables and processed foods. Summarized
financial information for Chiquita follows (in millions):
Nine months ended September 30,
1999 1998
Net Sales $1,937 $2,094
Operating Income 93 157
Net Income 19 83
E. Long-Term Debt The carrying value of long-term debt consisted of the
following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
<S> <C> <C>
Holding Companies:
AFG 7-1/8% Senior Debentures due April 2009 $314,320 -
AFG 7-1/8% Senior Debentures due December 2007 79,600 $100,000
AFC notes payable under bank line 60,000 80,000
AFC 9-3/4% Debentures due April 2004 - 78,560
American Premier Underwriters, Inc. ("APU")
9-3/4% Subordinated Notes due August 1999 - 89,467
APU 10-5/8% Subordinated Notes due April 2000 23,885 41,518
APU 10-7/8% Subordinated Notes due May 2011 11,673 17,473
Other 8,986 8,518
$498,464 $415,536
Subsidiaries:
AAG 6-7/8% Senior Notes due June 2008 $100,000 $100,000
AAG notes payable under bank line 95,000 27,000
Notes payable secured by real estate 31,823 37,602
Other 12,365 12,294
$239,188 $176,896
</TABLE>
In April 1999, AFG issued $350 million principal amount of 7-1/8%
Senior Debentures due 2009. The proceeds from this offering were used
primarily to redeem or repurchase other debt.
<PAGE>
At September 30, 1999, sinking fund and other scheduled principal
payments on debt for the balance of 1999 and the subsequent five years
were as follows (in thousands):
Holding
Companies Subsidiaries Total
1999 $ - $ 596 $ 596
2000 23,667 3,501 27,168
2001 - 1,512 1,512
2002 66,044 36,405 102,449
2003 - 61,438 61,438
2004 - 14,391 14,391
Debentures purchased in excess of scheduled payments may be applied to
satisfy any sinking fund requirement. The scheduled principal payments
shown above assume that debentures previously purchased are applied to
the earliest scheduled retirements.
11
<PAGE>
AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
AFC and AAG each have an unsecured credit agreement with a group of
banks under which they can borrow up to $300 million and $200 million,
respectively. Borrowings bear interest at floating rates based on
prime or Eurodollar rates. Loans mature December 2002 under the AFC
credit agreement and from 2000 to 2003 under the AAG credit agreement.
F. Minority Interest Minority interest in AFG's balance sheet is
comprised of the following (in thousands):
September 30, December 31,
1999 1998
Interest of noncontrolling shareholders
in subsidiaries' common stock $103,020 $124,622
Preferred securities issued by
subsidiary trusts 319,600 325,000
AFC preferred stock 72,154 72,154
$494,774 $521,776
Preferred Securities Wholly-owned subsidiary trusts of AFCH and AAG
have issued $325 million of preferred securities and, in turn,
purchased a like amount of AFCH and AAG subordinated debt which
provides interest and principal payments to fund the respective trusts'
obligations. The preferred securities must be redeemed upon maturity
or redemption of the subordinated debt. AFCH and AAG effectively
provide unconditional guarantees of their respective trusts'
obligations and AFG guarantees AFCH's obligations.
The preferred securities consisted of the following (in thousands):
<TABLE>
<CAPTION>
Date of September 30, December 31, Optional
Issuance Issue (Maturity Date) 1999 1998 Redemption Dates
<S> <C> <C> <C> <C>
October 1996 AFCH 9-1/8% TOPrS (2026) $100,000 $100,000 On or after 10/22/2001
November 1996 AAG 9-1/4% TOPrS (2026) 74,600 75,000 On or after 11/7/2001
March 1997 AAG 8-7/8% Pfd (2027) 70,000 75,000 On or after 3/1/2007
May 1997 AAG 7-1/4% ROPES (2041) 75,000 75,000 Prior to 9/28/2000 and
after 9/28/2001
</TABLE>
In the first quarter of 1999, AAG repurchased $5.4 million of its
preferred securities for $5.5 million in cash.
AFC Preferred Stock AFC's Preferred Stock is voting, cumulative, and
consists of the following:
Series J, no par value; $25.00 liquidating value per share; annual
dividends per share $2.00; redeemable at AFC's option at $25.75 per
share beginning December 2005 declining to $25.00 at December 2007
and thereafter; 2,886,161 shares (stated value $72.2 million)
outstanding at September 30, 1999 and December 31, 1998.
<PAGE>
Minority Interest Expense Minority interest expense is comprised of
(in thousands):
Nine months ended
September 30,
1999 1998
Interest of noncontrolling shareholders
in earnings of subsidiaries $12,899 $18,323
Accrued distributions by subsidiaries
on preferred securities:
Trust issued securities 20,780 21,143
AFC preferred stock 4,329 4,329
$38,008 $43,795
12
<PAGE>
AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
G. Shareholders' Equity At September 30, 1999, there were 58,398,505
shares of AFG Common Stock outstanding, including 1,366,556 shares held
by American Premier for possible distribution to certain creditors and
other claimants upon proper claim presentation and settlement pursuant
to the 1978 plan of reorganization of The Penn Central Corporation, the
name of American Premier prior to 1994. Shares being held for
distribution are not eligible to vote but otherwise are accounted for
as issued and outstanding. AFG is authorized to issue 12.5 million
shares of Voting Preferred Stock and 12.5 million shares of Nonvoting
Preferred Stock, each without par value.
At September 30, 1999, there were 6.9 million shares of AFG Common
Stock reserved for issuance upon exercise of stock options. As of that
date, AFG had options for 4.6 million shares outstanding. Options
generally become exercisable at the rate of 20% per year commencing one
year after grant; those granted to non-employee directors of AFG are
fully exercisable upon grant. All options expire ten years after the
date of grant.
The change in unrealized gains on marketable securities for the nine
months ended September 30 included the following (in millions):
<TABLE>
<CAPTION>
Minority
Pretax Taxes Interest Net
1999
<S> <C> <C> <C> <C>
Unrealized holding gains (losses) on
securities arising during the period ($471.7) $163.4 $29.4 ($278.9)
Reclassification adjustment for
realized gains included in net income (6.0) 2.1 (.6) (4.5)
Change in unrealized gains on
marketable securities, net ($477.7) $165.5 $28.8 ($283.4)
1998
Unrealized holding gains (losses) on
securities arising during the period $ 67.2 ($ 22.0) ($ 7.0) $ 38.2
Reclassification adjustment for
realized gains included in net income
and unrealized gains of subsidiaries sold (45.1) 15.8 3.6 (25.7)
Change in unrealized gains on
marketable securities, net $ 22.1 ($ 6.2) ($ 3.4) $ 12.5
</TABLE>
<PAGE>
H. Extraordinary Items Extraordinary items represent AFG's proportionate
share of gains (losses) related to debt retirements by the following
companies. Amounts shown are net of minority interest and income taxes (in
thousands):
Nine months ended
September 30,
1999 1998
Holding Companies:
AFG (parent) $1,735 $ -
AFC (parent) (2,993) (51)
APU (parent) (1,003) (63)
Subsidiaries:
AAG - (649)
($2,261) ($763)
13
<PAGE>
AMERICAN FINANCIAL GROUP, INC. 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
I. Cash Flows - Fixed Maturity Investments "Investing activities" related
to fixed maturity investments in AFG's Statement of Cash Flows
consisted of the following (in thousands):
Available Held to
For Sale Maturity(a) Total
1999
Purchases $1,562,054 $ - $1,562,054
Maturities and redemptions 801,833 - 801,833
Sales 886,790 - 886,790
1998
Purchases $1,681,251 $ 826 $1,682,077
Maturities and redemptions 538,293 478,860 1,017,153
Sales 506,819 37,903(b) 544,722
(a) At December 31, 1998, AFG reclassified all of its "held to
maturity" fixed maturity securities to "available for sale."
(b) Sold (at a gain of $.7 million) due to significant deterioration
in the issuers' creditworthiness.
J. Commitments and Contingencies There have been no significant changes
to the matters discussed and referred to in Part II of AFG's June 30, 1999
Form 10-Q and Note L "Commitments and Contingencies" in AFG's Annual
Report on Form 10-K for 1998.
14
<PAGE>
AMERICAN FINANCIAL GROUP, INC. 10-Q
ITEM 2
Management's Discussion and Analysis
of Financial Condition and Results of Operations
GENERAL
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, shareholder dividends, and taxes.
Therefore, certain analyses are best done on a parent only basis while
others are best done on a total enterprise basis. In addition, since
most of its businesses are financial in nature, AFG does not prepare
its consolidated financial statements using a current-noncurrent
format. Consequently, certain traditional ratios and financial
analysis tests are not meaningful.
Year 2000 Status AFG's Year 2000 Project is a corporate-wide program
designed to ensure that its computer systems and other equipment using
date-sensitive computer chips will function properly in the year 2000.
The Project also encompasses communicating with agents, vendors,
financial institutions and others with which the companies conduct
business to determine their Year 2000 readiness and resulting effects
on AFG. AFG's Year 2000 Project Office monitors and coordinates the
work being performed by the various business units and reports monthly
to the Audit Committee of the Board of Directors and more frequently to
senior management.
To address the Year 2000 issue, AFG's operations were divided into
separate systems groups. All groups have completed Year 2000 program
modifications, software installations and about 98% of the tests to be
performed, and are engaged in test documentation activities.
Contingency plans are being developed for certain business processes
and systems deemed most critical to operations. These plans provide a
documented order of actions necessary to keep the business functions
operating. Such plans typically include procedures and workflow
processes for operating in a failed environment. Contingency planning
is expected to be substantially completed by November 30, 1999.
Many of the systems being replaced were planned replacements which were
accelerated due to the Year 2000 considerations. In addition, a
significant portion of AFG's Year 2000 Project is being completed using
internal staff. Therefore, cost estimates for the Year 2000 Project do
not represent solely incremental costs.
During the first nine months of 1999, AFG incurred $23 million for Year
2000 costs, of which $6 million was capitalized and $17 million was
expensed. From inception of the Year 2000 Project in the early 1990's,
AFG estimates that it has incurred approximately $70 million of such
costs, including capitalized costs of $16 million. AFG expects that an
additional $7 million will be incurred, of which about half will be
capitalized.
<PAGE>
Projected Year 2000 costs and completion dates are based on
management's best estimates. However, there can be no assurances that
these estimates will be achieved. Should software modifications and
new software installations not be completed on a timely basis, the
resulting disruptions could have a material adverse affect on
operations.
AFG's operations could also be affected by the inability of third
parties such as agents and vendors to become Year 2000 compliant.
Assessments of property and casualty agents and life and annuity agents
have been completed. Efforts to evaluate third party vendors have been
intensified and will continue to be
15
<PAGE>
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis
of Financial Condition and Results of Operations - Continued
updated through the fourth quarter. In addition, AFG's property and
casualty insurance subsidiaries are reviewing the potential impact of
the Year 2000 issue on insureds as part of their underwriting process.
They are also reviewing policy forms, issuing clarifying endorsements
where appropriate and examining coverage issues for Year 2000
exposures. While it is possible that Year 2000 claims may emerge in
future periods, it is not possible to estimate any such amounts.
IT Initiative In the third quarter of 1999, AFG's newly hired Chief
Information Officer initiated an enterprise-wide study of its
information technology ("IT") resources, needs and opportunities. AFG
expects that the initiative will entail extensive effort and costs and
may lead to substantial changes in the area, which should result in
significant cost savings, efficiencies and effectiveness in the future.
While the costs (most of which will be expensed) will precede any
savings to be realized, management expects benefits to greatly exceed
the costs incurred, all of which will be funded through available
working capital.
Forward-Looking Statements The Private Securities Litigation Reform
Act of 1995 encourages corporations to provide investors with
information about the company's anticipated performance and provides
protection from liability if future results are not the same as
management's expectations. This document contains certain forward-
looking statements that are based on assumptions which management
believes are reasonable, but by their nature, inherently uncertain.
Future results could differ materially from those projected. Factors
that could cause such differences include, but are not limited to:
changes in economic conditions especially with regard to availability
of and returns on capital, regulatory actions, changes in legal
environment, levels of catastrophe and other major losses, availability
of reinsurance, the Year 2000 issue, and competitive pressures. AFG
undertakes no obligation to update any forward-looking statements.
LIQUIDITY AND CAPITAL RESOURCES
Ratios AFG's debt to total capital ratio (at the parent holding
company level) was approximately 24% at September 30, 1999 and 18% at
December 31, 1998. AFG's ratio of earnings to fixed charges (on a
total enterprise basis) was 3.44 for the first nine months of 1999 and
3.22 for the entire year of 1998.
Sources of Funds Management believes the parent holding companies have
sufficient resources to meet their liquidity requirements through
operations in the short-term and long-term future. If funds generated
from operations, including dividends and tax payments from
subsidiaries, are insufficient to meet fixed charges in any period,
these companies would be required to generate cash through borrowings,
sales of securities or other assets, or similar transactions.
<PAGE>
AFC has a revolving credit agreement with several banks under which it
can borrow up to $300 million. The credit line provides ample
liquidity and can be used to obtain funds for operating subsidiaries
or, if necessary, for the parent companies. At September 30, 1999,
there was $60 million borrowed under the credit line.
In April 1999, AFG issued $350 million principal amount of 7-1/8%
senior debentures due 2009; the proceeds were used primarily to retire
outstanding holding company public debt and borrowings under AFC's
credit line.
Dividend payments from subsidiaries have been very important to the
liquidity and cash flow of the individual holding companies in the
past. However, the
16
<PAGE>
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis
of Financial Condition and Results of Operations - Continued
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 reduction of debt at the holding companies from historical
levels (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 noncore investments.
Investments Approximately 90% of the fixed maturities held by AFG were
rated "investment grade" (credit rating of AAA to BBB) by nationally
recognized rating agencies at September 30, 1999. Investment grade
securities generally bear lower yields and lower degrees of risk than
those that are unrated and noninvestment grade. Management believes
that the high quality investment portfolio should generate a stable and
predictable investment return.
AFG's equity securities are concentrated in a relatively limited number
of major positions. This approach allows management to more closely
monitor the companies and the industries in which they operate.
RESULTS OF OPERATIONS
General Pretax earnings before extraordinary items and cumulative
effect of accounting change for the three months and nine months ended
September 30, 1999 were $45.7 million and $207 million, respectively,
compared to $86.1 million and $261.3 million in the comparable 1998
periods. Improved underwriting results for both the three and nine
month periods were more than offset by decreases in realized gains,
investment income and investee earnings.
Property and Casualty Insurance - Underwriting AFG's property and
casualty group consists of two major business groups: Personal and
Specialty.
The Personal group consists of the nonstandard auto group along with
the preferred/standard private passenger auto and other personal
insurance business. The nonstandard automobile insurance companies
insure risks not typically accepted for standard automobile coverage
because of the applicant's driving record, type of vehicle, age or
other criteria.
The Specialty group includes a highly diversified group of business
lines. Some of the more significant areas are executive liability,
inland and ocean marine, U.S.-based operations of Japanese companies,
agricultural-related coverages, California workers' compensation,
nonprofit liability, general aviation coverages, fidelity and surety
bonds, and umbrella and excess coverages. Commercial lines businesses
sold included certain coverages in workers' compensation, commercial
multi-peril, commercial automobile, and umbrella.
<PAGE>
Underwriting profitability is measured by the combined ratio which is a
sum of the ratios of underwriting losses, loss adjustment expenses,
underwriting expenses and policyholder dividends to premiums. When the
combined ratio is under 100%, underwriting results are generally
considered profitable; when the ratio is over 100%, underwriting
results are generally considered unprofitable. The combined ratio does
not reflect investment income, other income or federal income taxes.
For certain lines of business and products where the credibility of the
range of loss projections is less certain (primarily the various
specialty businesses listed above), management believes that it is
prudent and appropriate to use conservative assumptions until such time
as the data, experience and projections have more credibility, as
evidenced by data volume, consistency and maturity of the data. While
this practice mitigates the risk of adverse development on this
business, it does not eliminate it.
17
<PAGE>
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis
of Financial Condition and Results of Operations - Continued
Net written premiums and combined ratios for AFG's property and
casualty insurance subsidiaries were as follows (dollars in millions):
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
Net Written Premiums (GAAP)
Personal $287.3 $314.3 $ 839.2 $ 998.0
Specialty 323.7 357.9 850.4 1,039.6
Other lines .7 2.1 (.8) 17.7
$611.7 $674.3 $1,688.8 $2,055.3
Combined Ratios (GAAP)
Personal 101.1% 97.3% 100.2% 96.9%
Specialty 103.2 106.0 101.0 107.5
Aggregate (including
discontinued lines) 101.7 102.8 100.8 104.1
Personal The Personal group's net written premiums for the third
quarter and first nine months of 1999 includes $22.1 million and
$42.9 million, respectively, in net premiums written by Worldwide since
its acquisition in April. The decrease in written premiums reflects
continuing strong price competition in the private passenger automobile
market. The combined ratios for 1999 increased as loss and
underwriting expenses declined at a slower rate than premiums.
Specialty The Specialty Group's net written premiums for the third
quarter and first nine months of 1999 increased slightly compared to
the 1998 periods, excluding premiums of the commercial lines division
sold in December 1998 and the effect of ceding approximately 30% of
California workers' compensation premiums under a reinsurance agreement
implemented during the third quarter of 1998.
A deferred gain of $103 million on the Commercial lines business ceded
to Ohio Casualty in December 1998 is being recognized over the
estimated settlement period (weighted average 4.25 years) of the claims
ceded. The Specialty group's underwriting results for the third
quarter and first nine months of 1999 include $6.7 million and
$20.1 million, respectively, in earnings recognized on the ceded
business. In addition, the improvement in the combined ratios for the
1999 periods reflects (i) a decrease in losses from severe weather for
the nine-month period (ii) improved underwriting margins in California
workers' compensation business largely due to favorable reinsurance
agreements and (iii) the absence of losses included in the 1998 periods
attributable to the commercial lines sold.
Life, Accident and Health Premiums and Benefits The decrease in life,
accident and health premiums and benefits reflects primarily the sale
of AAG's Funeral Services division in September 1998.
<PAGE>
Investment Income Investment income decreased approximately
$5.8 million (3%) in the third quarter of 1999 and $39.6 million (6%)
in the first nine months of 1999 compared to 1998 due primarily to the
transfer of investment assets in connection with the sales of the
Commercial lines division and Funeral Services division in 1998,
partially offset by the effect of the purchase of Worldwide in April 1999.
18
<PAGE>
AMERICAN FINANCIAL GROUP, INC. 10-Q
Management's Discussion and Analysis
of Financial Condition and Results of Operations - Continued
Investee Corporation Equity in net earnings of investee corporation
represents AFG's proportionate share of Chiquita's earnings. Chiquita
reported net losses for the third quarter of 1999 and 1998 of
$37 million and $11 million, respectively. For the first nine months
of 1999 and 1998, Chiquita reported net income of $19 million and
$83 million, respectively.
Realized Gains Realized capital gains have been an important part of
the return on investments in marketable securities. Individual
securities are sold creating gains and losses as market opportunities
exist.
Gain on Sale of Investee and Subsidiaries The gains on sales of
investees and subsidiaries in 1998 include (i) pretax gains of
$7.7 million and $1.7 million in the first and second quarters as a
result of Chiquita's public issuance of shares of its common stock,
(ii) a pretax gain of $21.6 million on AAG's sale of its Funeral
Services division in September and (iii) a third quarter charge of
$10.5 million relating to operations expected to be sold or otherwise
disposed of.
Annuity Benefits Annuity benefits reflect amounts accrued on annuity
policyholders' funds accumulated. The majority of AAG's fixed rate
annuity products permit AAG to change the crediting rate at any time
(subject to minimum interest rate guarantees of 3% or 4% per annum).
As a result, management has been able to react to changes in market
interest rates and maintain a desired interest rate spread.
Cumulative Effect of Accounting Change In the first quarter of 1999,
AAG implemented Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities." The SOP requires that costs of start-up
activities be expensed as incurred and that unamortized balances of
previously deferred costs be expensed and reported as the cumulative
effect of a change in accounting principle. Accordingly, AFG expensed
previously capitalized start-up costs of $3.8 million (net of minority
interest and taxes) in the first quarter of 1999.
19
<PAGE>
AMERICAN FINANCIAL GROUP, INC. 10-Q
Item 3
Quantitative and Qualitative Disclosure of Market Risk
The tables below show scheduled principal payments (in millions) on
fixed-rate and variable-rate long-term debt of AFG and its subsidiaries
and related average interest rates as of September 30, 1999 and
December 31, 1998.
September 30, 1999
Fixed-Rate Debt Variable-Rate Debt
Weighted Weighted
Scheduled Average Scheduled Average
Principal Interest Principal Interest
Payments Rate Payments Rate
1999 (remainder) $ .4 6.78% $ .1 7.26%
2000 27.0 9.96 .2 7.13
2001 1.4 6.81 .1 7.00
2002 1.3 6.50 101.2 6.08
2003 1.3 6.38 60.2 5.89
2004 14.2 8.38 .2 7.00
Thereafter 531.3 7.16 .1 7.00
Total $576.9 7.32% $162.1 6.01%
Market Value $549.6 $162.1
December 31, 1998
Fixed-Rate Debt Variable-Rate Debt
Weighted Weighted
Scheduled Average Scheduled Average
Principal Interest Principal Interest
Payments Rate Payments Rate
1999 $ 90.7 9.69% $ .3 5.86%
2000 49.1 9.85 .2 5.80
2001 1.2 7.13 .1 5.58
2002 1.1 6.81 85.7 5.95
2003 1.1 6.68 27.2 6.09
Thereafter 333.3 7.92 .2 5.58
Total $476.5 8.45% $113.7 5.98%
Market Value $490.6 $113.7
As of September 30, 1999, there were no material changes to the other
information provided in AFG's Form 10-K for 1998 under the caption
"Exposure to Market Risk" in Management's Discussion and Analysis of
Financial Condition and Results of Operations.
20
<PAGE>
AMERICAN FINANCIAL GROUP, INC. 10-Q
PART II
OTHER INFORMATION
Item 2
Changes In Securities and Use of Proceeds
(a) Not applicable.
(b) Not applicable.
(c) In July 1999, AFG issued 11,740 shares of its common stock without par
value to an AFG executive officer at the inception of his employment.
The shares were issued pursuant to the exemption from registration
found in Section 4(2) of the Securities Act of 1933, and are restricted
in that the recipient will not receive possession of the shares until
December 31, 1999 (one-half) and December 31, 2000 (the remaining
half). He currently receives dividends and may vote the shares.
(d) Not applicable.
Item 6
Exhibits and Reports on Form 8-K
(a) Exhibit 27.1 - Financial Data Schedule as of September 30, 1999.
For submission in electronic filing only.
(b) Reports on Form 8-K: none
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
American Financial Group, Inc. has duly caused this Report to be signed on
its behalf by the undersigned duly authorized.
American Financial Group, Inc.
November 12, 1999 BY: Fred J. Runk
Fred J. Runk
Senior Vice President and Treasurer
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from American
Financial Group, Inc. 10-Q for the nine months ended September 30, 1999 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> $312,579
<SECURITIES> 10,585,859<F1>
<RECEIVABLES> 709,348
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,018,553
<CURRENT-LIABILITIES> 0
<BONDS> 737,652
0
0
<COMMON> 58,399
<OTHER-SE> 1,373,493
<TOTAL-LIABILITY-AND-EQUITY> 16,018,553
<SALES> 0
<TOTAL-REVENUES> 2,499,260
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 264,210
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,122
<INCOME-PRETAX> 207,009
<INCOME-TAX> 74,214
<INCOME-CONTINUING> 132,795
<DISCONTINUED> 0
<EXTRAORDINARY> (2,261)
<CHANGES> (3,854)
<NET-INCOME> $126,680
<EPS-BASIC> 2.11
<EPS-DILUTED> 2.08
<FN>
<F1>Includes an investment in investee corporation of $191 million.
</FN>
</TABLE>
