AMERICAN FINANCIAL GROUP INC

Property and Casualty Insurance Segment — Results of Operations

AFG’s property and casualty insurance operations contributed $1.33 billion in GAAP pretax earnings in 2024 compared to $1.30 billion in 2023, an increase of $28 million (2%). Property and casualty core pretax earnings were $1.33 billion in 2024 compared to $1.30 billion in 2023, an increase of $24 million (2%). The increase in GAAP and core pretax earnings in 2024 compared to 2023 reflects higher investment income outside of alternative investments, partially offset by lower investment income from AFG’s alternative investment portfolio (partnerships and similar investments and AFG-managed CLOs) and lower underwriting profit.

AFG’s property and casualty insurance operations contributed $1.30 billion in GAAP pretax earnings in 2023 compared to $1.42 billion in 2022, a decrease of $119 million (8%). Property and casualty core pretax earnings were $1.30 billion in 2023 compared to $1.42 billion in 2022, a decrease of $115 million (8%). The decrease in GAAP and core pretax earnings reflects lower underwriting profit and lower investment income from alternative investments, partially offset by higher investment income outside of alternative investments in 2023 compared to 2022.

The following table details AFG’s GAAP and core earnings before income taxes from its property and casualty insurance operations for the years ended December 31, 2024, 2023 and 2022 (dollars in millions):

AFG reports the underwriting performance of its Specialty property and casualty insurance business in the following sub-segments: (i) Property and transportation, (ii) Specialty casualty and (iii) Specialty financial.

Gross Written Premiums

Gross written premiums (“GWP”) for AFG’s property and casualty insurance segment were $10.53 billion in 2024 compared to $9.66 billion in 2023, an increase of $877 million (9%). GWP increased $599 million (7%) in 2023 compared to 2022. Detail of AFG’s property and casualty gross written premiums is shown below (dollars in millions):

Reinsurance Premiums Ceded

Reinsurance premiums ceded (“Ceded”) for AFG’s property and casualty insurance segment were 32% of gross written premiums for the year ended December 31, 2024 and 31% for both years ended December 31, 2023 and December 31, 2022, an increase of 1 percentage point for 2024 compared to 2023 and 2022. Detail of AFG’s property and casualty reinsurance premiums ceded is shown below (dollars in millions):

Net Written Premiums

Net written premiums (“NWP”) for AFG’s property and casualty insurance segment were $7.14 billion in 2024 compared to $6.69 billion in 2023, an increase of $447 million (7%). NWP increased $486 million (8%) in 2023 compared to 2022. Detail of AFG’s property and casualty net written premiums is shown below (dollars in millions):

Net Earned Premiums

Net earned premiums (“NEP”) for AFG’s property and casualty insurance segment were $7.04 billion in 2024 compared to $6.53 billion in 2023, an increase of $505 million (8%). NEP increased $446 million (7%) in 2023 compared to 2022. Detail of AFG’s property and casualty net earned premiums is shown below (dollars in millions):

The $877 million (9%) increase in gross written premiums in 2024 compared to 2023 reflects growth in each of the Specialty property and casualty sub-segments as a result of additional crop premiums from the CRS acquisition in the Property and transportation sub-segment and new business opportunities, increased exposures and a good renewal rate environment. Overall average renewal rates increased approximately 7% in 2024. Excluding the workers’ compensation businesses, renewal pricing increased approximately 8%.

The $599 million (7%) increase in gross written premiums in 2023 compared to 2022 reflects growth in each of the Specialty property and casualty sub-segments as a result of a combination of new business opportunities, increased exposures and a good renewal rate environment. Overall average renewal rates increased approximately 5% in 2023. Excluding the workers’ compensation businesses, renewal pricing increased approximately 6%.

Property and transportation Gross written premiums increased $589 million (14%) in 2024 compared to 2023. Year-over-year premium growth resulted from additional crop premium associated with the CRS acquisition as well as new business opportunities, a favorable rate environment and increased exposures in the commercial auto businesses. This year-over-year premium growth was tempered by the impact of lower year-over-year commodity pricing on winter wheat premiums, coupled with elevated pricing competition and the non-renewal of certain under-performing accounts in the transportation businesses. Excluding crop premium, gross and net written premiums in this group grew by 5% and 4%, respectively. Average renewal rates increased approximately 8% for this group in 2024. Reinsurance premiums ceded as a percentage of gross written premiums increased 3 percentage points in 2024 compared to 2023 reflecting the impact of higher cessions in the crop business and growth in certain programs in the transportation businesses that cede a larger percentage of premiums than some of the other businesses in the Property and transportation sub-segment.

Gross written premiums increased $86 million (2%) in 2023 compared to 2022 reflecting the impact of increased rates, retentions and exposures in the transportation and ocean marine businesses and slightly higher crop premium related to the CRS acquisition in the fourth quarter of 2023. These items were partially offset by the impact of 2023 spring commodity futures pricing and related volatility on premiums in the crop business. Average renewal rates increased approximately 6% for this group in 2023. Reinsurance premiums ceded as a percentage of gross written premiums were comparable in 2023 and 2022 reflecting growth in alternative risk transfer products in the transportation businesses, offset by the impact of lower cessions in the crop business. Both of these businesses cede a larger percentage of premiums than some of the other businesses in the Property and transportation sub-segment.

Specialty casualty Gross written premiums increased $175 million (4%) in 2024 compared to 2023. The higher-year-over-year premiums resulted primarily from growth in the excess and surplus, excess liability and certain targeted markets businesses as a result of rate increases, new business opportunities and strong policy retention. The mergers and acquisitions liability business also benefited from an increase in mergers and acquisition activity. This growth was tempered by lower year-over-year workers’ compensation premiums. Average renewal rates increased approximately 6% for this group in 2024. Excluding overall rate decreases in the workers’ compensation businesses, renewal rates for this group increased approximately 9% in 2024. Reinsurance premiums ceded as a percentage of gross written premiums were comparable in 2024 and 2023 reflecting lower cessions in certain more heavily reinsured products in the social services business, offset by the impact of higher premiums in the excess and surplus and mergers and acquisitions liability businesses, which cede a larger percentage of premiums than some of the other businesses in the Specialty casualty sub-segment and higher cessions in the public sector business.

Gross written premiums increased $253 million (6%) in 2023 compared to 2022 due primarily to increased exposures from payroll growth and new business in the workers’ compensation businesses, new business opportunities, strong policy retention and rate increases in several of the targeted markets businesses and increased exposures and higher renewal rates in the excess and surplus and excess liability businesses. This growth was partially offset by lower premiums in the mergers and acquisitions liability and executive liability businesses. Average renewal rates increased approximately 4% for this group in 2023. Excluding overall rate decreases in the workers’ compensation businesses, renewal rates for this group increased approximately 6% in 2023. Reinsurance premiums ceded as a percentage of gross written premiums decreased 1 percentage point in 2023 compared to 2022 reflecting higher premiums in the workers’ compensation businesses (which cede a lower percentage of premiums than some of the other businesses in the Specialty casualty sub-segment) and lower cessions in the environmental and mergers and acquisitions liability businesses and at ABA Insurance Services.

Specialty financial Gross written premiums increased $113 million (10%) in 2024 compared to 2023. Year-over-year growth in the financial institutions business was partially offset by a decision to pause writing of new intellectual property-related coverage. Average renewal rates increased approximately 6% for this group in 2024. Reinsurance premiums ceded as a percentage of gross written premiums decreased 1 percentage point in 2024 compared to 2023 reflecting lower gross written premiums in the innovative markets business, which cedes a larger percentage of premiums than some of the other businesses in the Specialty financial sub-segment, partially offset by the impact of higher reinstatement premiums paid to reinsurers in the fidelity and surety businesses.

Gross written premiums increased $260 million (29%) in 2023 compared to 2022 due primarily to growth in the financial institutions business. Average renewal rates for this group increased approximately 5% in 2023. Reinsurance premiums ceded as a percentage of gross written premiums decreased 1 percentage point in 2023 compared to 2022 reflecting the impact of reinstatement premiums paid to reinsurers in 2022 related to Hurricane Ian.

Other specialty The amounts shown as reinsurance premiums ceded represent business assumed by AFG’s internal reinsurance program from the operations that make up AFG’s other Specialty property and casualty insurance sub-segments. Reinsurance premiums assumed decreased $22 million (8%) in 2024 compared to 2023 and increased $10 million (4%) in 2023 compared to 2022, reflecting changes in premiums retained, primarily from businesses in the Specialty casualty sub-segment.

Combined Ratio

The table below (dollars in millions) details the components of the combined ratio for AFG’s property and casualty insurance segment for 2024, 2023 and 2022:

The Specialty property and casualty insurance operations generated an underwriting profit of $626 million in 2024 compared to $633 million in 2023, a decrease of $7 million (1%). Higher underwriting profit in the Property and transportation and Specialty financial sub-segments was more than offset by lower underwriting profit in the Specialty casualty sub-segment and higher losses in the business assumed by AFG’s internal reinsurance program. Overall catastrophe losses were $182 million (2.6 points on the combined ratio), including $2 million in net reinstatement premiums, for 2024 compared to catastrophe losses of $165 million (2.5 points), including $3 million in net reinstatement premiums, for 2023.

The Specialty property and casualty insurance operations generated an underwriting profit of $633 million in 2023 compared to $780 million in 2022, a decrease of $147 million (19%). This decrease reflects lower underwriting profit in each of the Specialty property and casualty insurance sub-segments. Overall catastrophe losses were $165 million (2.5 points on the combined ratio), including $3 million in net reinstatement premiums, for 2023 compared to catastrophe losses of $93 million (1.5 points), including $5 million in net reinstatement premiums, for 2022.

Property and transportation Underwriting profit for this group was $211 million in 2024 compared to $184 million in 2023, an increase of $27 million (15%). Higher year-over-year underwriting profit in the property and inland marine and crop insurance operations was partially offset by lower underwriting profitability in the transportation businesses. Catastrophe losses were $65 million (2.3 points on the combined ratio), including $1 million in net reinstatement premiums, in 2024 compared to catastrophe losses of $53 million (2.0 points), including $2 million in net reinstatement premiums, in 2023.

Underwriting profit for this group was $184 million in 2023 compared to $208 million in 2022, a decrease of $24 million (12%). Below average underwriting profitability in the crop insurance operations was partially offset by higher year-over-year underwriting profit in the property and inland marine business. Catastrophe losses were $53 million (2.0 points on the combined ratio), including $2 million in net reinstatement premiums, in 2023 compared to catastrophe losses of $45 million (1.9 points), including $3 million in net reinstatement premiums, in 2022.

Specialty casualty Underwriting profit for this group was $340 million in 2024 compared to $375 million in 2023, a decrease of $35 million (9%). Higher year-over-year underwriting profit in the targeted markets businesses was more than offset by lower levels of favorable prior year reserve development in the executive liability business and social inflation driven adverse development in the umbrella and excess business. Catastrophe losses were $32 million (1.1 points on the combined ratio), including $1 million in net reinstatement premiums, in 2024 compared to catastrophe losses of $36 million (1.2 points), including $1 million in net reinstatement premiums, in 2023.

Underwriting profit for this group was $375 million in 2023 compared to $500 million in 2022, a decrease of $125 million (25%). The lower year-over-year underwriting profit was due primarily to lower favorable prior year reserve development in the workers’ compensation businesses and adverse reserve development in the public sector and excess and surplus businesses, partially offset by higher favorable prior year reserve development in the executive liability business. Catastrophe losses were $36 million (1.2 points on the combined ratio), including $1 million in net reinstatement premiums, in 2023 compared to catastrophe losses of $11 million (0.5 points) in 2022.

Specialty financial Underwriting profit for this group was $134 million in 2024 compared to $110 million in 2023, an increase of $24 million (22%). This year-over-year increase reflects higher underwriting profit in the financial institutions business, partially offset by lower profitability resulting from the pause in writing of intellectual property-related coverage. Catastrophe losses were $81 million (7.8 points on the combined ratio) in 2024 compared to catastrophe losses of $49 million (5.7 points) in 2023.

Underwriting profit for this group was $110 million in 2023 compared to $114 million in 2022, a decrease of $4 million (4%). This decrease reflects higher year-over-year catastrophe losses in the financial institutions business and lower underwriting profit in the surety business. Catastrophe losses were $49 million (5.7 points on the combined ratio) in 2023 compared to catastrophe losses of $36 million (4.9 points), including $3 million in net reinstatement premiums, in 2022.

Other specialty This group reported an underwriting loss of $59 million in 2024 compared to $36 million in 2023, an increase of $23 million (64%), reflecting higher losses in the business assumed by AFG’s internal reinsurance program from the operations that make up AFG’s other Specialty sub-segments. Catastrophe losses were $4 million in 2024 compared to $27 million in 2023.

This group reported an underwriting loss of $36 million in 2023 compared to $42 million in 2022, a decrease of $6 million (14%), reflecting lower losses in the business assumed by AFG’s internal reinsurance program from the operations that make up AFG’s other Specialty sub-segments. The underwriting loss in 2022 relates primarily to losses from social inflation exposed operations in the Specialty casualty sub-segment. Catastrophe losses were $27 million in 2023 compared to $1 million in 2022.

Aggregate Aggregate underwriting results for AFG’s property and casualty insurance segment include adverse prior year reserve development of $6 million in 2024, $2 million in 2023 and $4 million in 2022, related to business outside of the Specialty group that AFG no longer writes.

Losses and Loss Adjustment Expenses

AFG’s overall loss and LAE ratio was 63.3%, 61.6% and 59.7% in 2024, 2023 and 2022, respectively. The components of AFG’s property and casualty losses and LAE amounts and ratio are detailed below (dollars in millions):

Current accident year losses and LAE, excluding catastrophe losses

The current accident year loss and LAE ratio, excluding catastrophe losses for AFG’s Specialty property and casualty insurance operations was 61.7% in 2024, 62.4% in 2023 and 62.8% in 2022.

Property and transportation The 0.5 percentage points increase in the loss and LAE ratio for the current year, excluding catastrophe losses in 2024 compared to 2023 reflects growth in the crop business, which has a higher loss and LAE ratio than some of the other businesses in the Property and transportation sub-segment and higher reported claim severity in the commercial auto business, partially offset by the impact of improved profitability in the property and inland marine business.

The 1.1 percentage points decrease in the loss and LAE ratio for the current year, excluding catastrophe losses in 2023 compared to 2022 is due primarily to the impact of elevated large loss activity in the property and inland marine business in 2022 and improved results in certain transportation businesses, partially offset by lower profit in the crop business.

Specialty casualty The 1.2 percentage points decrease in the loss and LAE ratio for the current year, excluding catastrophe losses in 2024 compared to 2023 reflects improved results in the workers’ compensation and targeted markets businesses, partially offset by higher claim severity in the excess and surplus business.

The 1.5 percentage points increase in the loss and LAE ratio for the current year, excluding catastrophe losses in 2023 compared to 2022 reflects anticipated medical cost inflation and the impact of pressure on rates in the workers’ compensation businesses and higher claim severity in certain liability coverages.

Specialty financial The 0.9 percentage points decrease in the loss and LAE ratio for the current year, excluding catastrophe losses in 2024 compared to 2023 reflects growth in the financial institutions business, which has a lower loss and LAE ratio than some of the other businesses in the Specialty financial sub-segment, partially offset by higher reported losses and lower premiums in the fidelity and surety businesses.

The 0.2 percentage points decrease in the loss and LAE ratio for the current year, excluding catastrophe losses in 2023 compared to 2022 reflects lower claim frequency and growth in the financial institutions business, which has a lower loss and LAE ratio than some of the other businesses in the Specialty financial sub-segment, partially offset by higher claim severity in the innovative markets business.

Net prior year reserve development

AFG’s Specialty property and casualty insurance operations recorded net favorable reserve development related to prior accident years of $70 million in 2024 compared to $226 million in 2023 and $289 million in 2022, a decrease of $156 million (69%) and $63 million (22%), respectively.

Property and transportation Net favorable reserve development of $94 million in 2024 reflects lower than anticipated losses in the crop business, lower than expected claim severity in the property and inland marine and aviation businesses and lower than anticipated claim frequency and severity in the ocean marine business.

Net favorable reserve development of $84 million in 2023 reflects lower than anticipated losses in the crop business, lower than expected claim frequency and severity across the transportation businesses and lower than anticipated claim frequency in the property and inland marine and ocean marine businesses and in the Singapore operations.

Net favorable reserve development of $92 million in 2022 reflects lower than anticipated losses in the crop business, lower than expected claim frequency in the trucking and ocean marine businesses and in the Singapore operations, lower than expected claim frequency and severity in the aviation business and lower than anticipated claim severity in the property and inland marine business.

Specialty casualty Net favorable reserve development of $10 million in 2024 reflects lower than anticipated claim severity in the workers’ compensation businesses and lower than expected claim frequency and severity in the executive liability business, partially offset by higher than anticipated claim frequency and severity in the umbrella and excess liability and social services businesses and higher than expected claim severity in the public sector and general liability businesses.

Net favorable reserve development of $110 million in 2023 reflects lower than anticipated claim severity in the workers’ compensation businesses, lower than expected claim frequency in the executive liability and environmental businesses and favorable reserve development related to COVID-19 losses across several businesses, partially offset by higher than anticipated claim severity in the public sector business and higher than expected claim frequency and severity in the excess liability and general liability businesses.

Net favorable reserve development of $190 million in 2022 reflects lower than anticipated claim severity in the workers’ compensation businesses and lower than expected claim frequency in the executive liability and excess and surplus businesses, partially offset by higher than anticipated claim severity in the general liability, umbrella and excess liability, and certain targeted markets businesses.

Specialty financial Net favorable reserve development of $11 million in 2024 reflects lower than anticipated claim frequency and severity in the financial institutions and fidelity businesses and lower than expected claim frequency in the trade credit business, partially offset by higher than anticipated claim severity in the innovative markets and surety businesses.

Net favorable reserve development of $32 million in 2023 reflects lower than anticipated claim frequency in the trade credit, financial institutions and surety businesses and lower than expected claim frequency and severity in the fidelity business.

Net favorable reserve development of $47 million in 2022 reflects lower than anticipated claim frequency in the surety, trade credit and financial institutions businesses.

Other specialty In addition to the development discussed above, total Specialty prior year reserve development includes net adverse reserve development of $45 million, less than $1 million and $40 million in 2024, 2023, and 2022, respectively, primarily associated with AFG’s internal reinsurance program. The net adverse reserve development reflects $50 million, $4 million and $44 million in 2024, 2023 and 2022, respectively, of net adverse development associated with AFG’s internal reinsurance program, primarily related to social inflation exposed business assumed from the Specialty casualty sub-segment.

Aggregate Aggregate net prior accident years reserve development for AFG’s property and casualty insurance segment includes net adverse reserve development of $6 million in 2024, $2 million in 2023 and $4 million in 2022 related to business outside the Specialty group that AFG no longer writes.

Catastrophe losses

AFG generally seeks to reduce its exposure to catastrophes (whether resulting from climate change or otherwise) through individual risk selection, including minimizing coastal and known fault-line exposures, and the purchase of reinsurance. AFG recorded net catastrophe losses of $180 million in 2024 (before $2 million in net reinstatement premiums) primarily from winter and convective storms in multiple regions of the United States in the first and second quarters, Hurricane Helene in the third quarter and Hurricane Milton in the fourth quarter.

Catastrophe losses of $162 million in 2023 (before $3 million in net reinstatement premiums) resulted primarily from February and March storms across much of the United States in the first quarter and storms in multiple regions of the United States in the second, third and fourth quarters.

Catastrophe losses of $88 million in 2022 (before $5 million in net reinstatement premiums) resulted primarily from winter storms in multiple regions of the United States in the first quarter, storms in multiple regions of the United States in the second quarter, Hurricane Ian in the third quarter and Winter Storm Elliott in the fourth quarter.

Commissions and Other Underwriting Expenses

AFG’s property and casualty commissions and other underwriting expenses (“U/W Exp”) were $1.96 billion in 2024 compared to $1.88 billion in 2023, an increase of $78 million (4%). AFG’s underwriting expense ratio was 27.9% in 2024 compared to 28.8% in 2023, a decrease of 0.9 percentage points.

AFG’s property and casualty U/W Exp were $1.88 billion in 2023 compared to $1.68 billion in 2022, an increase of $203 million (12%). AFG’s underwriting expense ratio was 28.8% in 2023 compared to 27.6% in 2022, an increase of 1.2 percentage points.

Detail of AFG’s property and casualty commissions and other underwriting expenses and underwriting expense ratios is shown below (dollars in millions):

Property and transportation Commissions and other underwriting expenses as a percentage of net earned premiums decreased 1.1 percentage points in 2024 compared to 2023 reflecting the impact on the ratio of higher earned premiums, including in the crop business which has a lower commissions and other underwriting expense ratio compared to some of the other businesses in the Property and transportation sub-segment and lower average commission rates in the transportation businesses due to a change in the mix of business.

Commissions and other underwriting expenses as a percentage of net earned premiums increased 1.7 percentage points in 2023 compared to 2022 reflecting the impact of lower profit-based ceding commissions related to below average profitability in the crop operations, the impact on the ratio of lower earned premiums in the crop operations (which has a lower commissions and other underwriting expense ratio compared to some of the other businesses in the Property and transportation sub-segment) and higher expenses related to certain technology initiatives.

Specialty casualty Commissions and other underwriting expenses as a percentage of net earned premiums decreased 0.6 percentage points in 2024 compared to 2023 reflecting a change in the mix of business towards products with lower commission rates, partially offset by lower ceding commissions received in the workers’ compensation businesses.

Commissions and other underwriting expenses as a percentage of net earned premiums increased 0.2 percentage points in 2023 compared to 2022 reflecting higher expenses related to certain technology initiatives, partially offset by the impact on the ratio of growth in earned premiums in the workers’ compensation businesses.

Specialty financial Commissions and other underwriting expenses as a percentage of net earned premiums decreased 4.0 percentage points in 2024 compared to 2023 due primarily to the impact on the ratio of higher earned premiums in the financial institutions business and a change in the mix of business towards products with lower commission rates.

Commissions and other underwriting expenses as a percentage of net earned premiums decreased 0.1 percentage points in 2023 compared to 2022 reflecting the impact on the ratio of growth in earned premiums in the financial institutions and innovative markets businesses, partially offset by higher expenses related to certain technology initiatives and the impact of lower profit-based commissions to agents and lower reinstatement premiums recorded in 2022 as a result of losses from Hurricane Ian.

Property and Casualty Net Investment Income

Net investment income in AFG’s property and casualty insurance operations was $784 million in 2024 compared to $729 million in 2023, an increase of $55 million (8%). Net investment income in AFG’s property and casualty insurance operations was $729 million in 2023 compared to $683 million in 2022, an increase of $46 million (7%). The average invested assets and overall yield earned on investments held by AFG’s property and casualty insurance operations are provided below (dollars in millions):

(*)Adjusts the yield on equity securities and tax-exempt bonds to the fully taxable equivalent yield.

The increase in the property and casualty insurance segment’s net investment income in 2024 compared to 2023 reflects the impact of higher balances of invested assets and higher returns on fixed maturity investments, partially offset by lower returns on AFG’s alternative investments portfolio (partnerships and similar investments and AFG-managed CLOs). The property and casualty insurance segment’s overall yield on investments (net investment income as a percentage of average invested assets) was 5.06% in 2024 compared to 4.94% in 2023, an increase of 0.12 percentage points. The annualized return earned on alternative investments was 6.1% in 2024 compared to 7.0% in 2023.

The increase in net investment income in 2023 compared to 2022 reflects the impact of higher yields on fixed maturity investments and higher balances of invested assets, partially offset by lower returns on AFG’s alternative investments portfolio as compared to the very strong performance of this portfolio in the prior year period. The property and casualty insurance segment’s overall yield on investments was 4.94% in 2023 compared to 4.86% in 2022, an increase of 0.08 percentage points. The annualized return earned on alternative investments was 7.0% in 2023 compared to 13.2% in 2022.

Property and Casualty Other Income and Expenses, Net

Other income and expenses, net for AFG’s property and casualty insurance operations was a net expense of $76 million in 2024, $56 million in 2023 and $40 million in 2022, an increase of $20 million (36%) in 2024 compared to 2023 and an increase of $16 million (40%) in 2023 compared to 2022. The table below details the items included in other income and expenses, net for AFG’s property and casualty insurance operations (in millions):

(*)Includes $9 million of expenses in 2024, 2023 and 2022 related to certain technology initiatives.

The decrease in other income in 2024 compared to 2023 is due primarily to death benefits received in 2023 from company-owned life insurance policies. The higher amortization of intangibles in 2024 compared to 2023 and 2023 compared to 2022 reflects the acquisition of CRS in July 2023. The $9 million (22%) increase in interest expense on funds withheld in 2024 compared to 2023 and the $12 million (41%) increase in 2023 compared to 2022 reflects the impact of higher balances and higher interest rates paid on funds withheld.