AMERICAN FINANCIAL GROUP INC

AFG’s principal sources of cash include insurance premiums, income from its investment portfolio and proceeds from the maturities, redemptions and sales of investments. Insurance premiums in excess of acquisition expenses and operating costs are invested until they are needed to meet policyholder obligations or made available to the parent company through dividends to cover debt obligations and corporate expenses, and to provide returns to shareholders through share repurchases and dividends. Cash flows from operating, investing and financing activities as detailed in AFG’s Consolidated Statement of Cash Flows are shown below (in millions):

Net Cash Provided by Operating Activities AFG’s property and casualty insurance operations typically produce positive net operating cash flows as premiums collected and investment income exceed policy acquisition costs, claims payments and operating expenses. AFG’s net cash provided by operating activities is impacted by the level and timing of property and casualty premiums, claim and expense payments and recoveries from reinsurers. AFG’s discontinued annuity operations, which were sold in May 2021, typically produced positive net operating cash flows as investment income exceeded acquisition costs and operating expenses. Interest credited on annuity policyholder funds is a non-cash increase in AFG’s annuity benefits accumulated liability and annuity premiums, benefits and withdrawals are considered financing activities due to the deposit-type nature of annuities. Cash flows provided by operating activities also include the activity of AFG’s managed investment entities (collateralized loan obligations (“CLO”)) other than those activities included in investing or financing activities. The changes in the assets and liabilities of the managed investment entities included in operating activities increased cash flows from operating activities by $305 million in 2023 and reduced cash flows from operating activities by $183 million in 2022 and $144 million in 2021, resulting in a $488 million increase in cash flows from operating activities in 2023 compared to 2022 and a $39 million decrease in cash flows from operating activities in 2022 compared to 2021. As discussed in Note A — “Accounting Policies — Managed Investment Entities” to the financial statements, AFG has no right to use the CLO assets and no obligation to pay the CLO liabilities and such assets and liabilities are shown separately in AFG’s Balance Sheet. Excluding the impact of the managed investment entities, net cash provided by operating activities was $1.67 billion, $1.34 billion and $1.86 billion in 2023, 2022 and 2021, respectively.

Net Cash Provided by (Used in) Investing Activities AFG’s investing activities consist primarily of the investment of funds provided by its property and casualty businesses and, prior to the May 2021 sale, its discontinued annuity operations. Investing activities also include the purchase and disposal of managed investment entity investments, which are presented separately in AFG’s Balance Sheet. Net investment activity in the managed investment entities was a $762 million source of cash in 2023 compared to a $180 million use of cash in 2022, resulting in a $942 million increase in net cash provided by investing activities in 2023 compared to 2022. See Note A — “Accounting Policies — Managed Investment Entities” and Note H — “Managed Investment Entities” to the financial statements. Investing activities for 2023 include the July 2023 acquisition of Crop Risk Services (“CRS”) for $234 million in cash. Excluding the acquisition of CRS and the activity of the managed investment entities, investing activities were a $114 million use of cash in 2023 compared to $871 million in 2022, reflecting the opportunistic investment of cash on hand in the property and casualty operations during the rising interest rate environment in 2022.

Net cash used in investing activities was $1.05 billion in 2022 compared to $436 million in 2021, an increase of $615 million. Cash proceeds from the sale of the annuity operations in excess of cash and cash equivalents held in the annuity subsidiaries that were sold was a $1.51 billion source of cash provided by investing activities in 2021. Investing activities for 2021 also include the December 2021 acquisition of Verikai for $120 million in cash. Net investment activity in the managed investment entities was a $180 million use of cash in 2022 compared to $43 million in 2021, resulting in a $137 million increase in net cash used in investing activities in 2022 compared to 2021. Excluding the impact of the May 2021 sale of the annuity business ($1.51 billion source of cash), the acquisition of Verikai and the activity of the managed investment entities, net cash used in investing activities was $871 million in 2022 compared to $1.78 billion in 2021, a decrease of $912 million as the opportunistic investment of cash on hand in the property and casualty operations during the rising interest rate environment in 2022 was more than offset by the absence of investing activities from the disposed annuity operations.

Net Cash Used In Financing Activities AFG’s financing activities consist primarily of issuances and retirements of long-term debt, issuances and repurchases of common stock, dividend payments and, prior to the sale of the annuity business, transactions with annuity policyholders. Net cash used in financing activities was $2.03 billion in 2023 compared to $1.36 billion in 2022, an increase of $670 million. AFG paid cash dividends totaling $684 million in 2023 compared to $1.21 billion in 2022, resulting in a $529 million decrease in net cash used in financing activities in 2023 compared to 2022. Debt retirements were a $21 million use of cash in 2023 compared to $477 million in 2022, a decrease of $456 million. In 2023, AFG repurchased $213 million of its Common Stock compared to $11 million in 2022, resulting in a $202 million increase in net cash used in financing activities in 2023 compared to 2022. Financing activities also include issuances and retirements of managed investment entity liabilities, which are nonrecourse to AFG and presented separately in AFG’s Balance Sheet. Retirements of managed investment entity liabilities exceeded issuances by $1.13 billion in 2023 compared to issuances exceeding retirements by $324 million in 2022, resulting in a $1.45 billion increase in net cash used in financing activities in 2023 compared to 2022. See Note A — “Accounting Policies — Managed Investment Entities”and Note H — “Managed Investment Entities” to the financial statements.

Net cash used in financing activities was $1.36 billion in 2022 compared to $1.96 billion in 2021, a decrease in net cash used in financing activities of $596 million. Debt retirements were a $477 million use of cash in 2022 compared to no debt retirements in 2021. In 2022, AFG repurchased $11 million of its Common Stock compared to $319 million in 2021, resulting in a $308 million decrease in net cash used in financing activities in 2022 compared to 2021. AFG paid cash dividends totaling $1.21 billion in 2022 compared to $2.37 billion in 2021, resulting in a net $1.16 billion decrease in net cash used in financing activities in 2022 compared to 2021. Net annuity receipts exceeded annuity surrenders, benefits, withdrawals and transfers by $477 million in 2021 through the May 31, 2021 effective date of the sale, resulting in a $477 million decrease in net cash used in financing activities in 2022 compared to 2021. Issuances of managed investment entity liabilities exceeded retirements by $324 million in 2022 compared to $193 million in 2021, resulting in a $131 million increase in net cash provided by financing activities in 2022 compared to 2021.