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What changed in ASSURED GUARANTY LTD's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ASSURED GUARANTY LTD's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+841 added−948 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-28)

Top changes in ASSURED GUARANTY LTD's 2024 10-K

841 paragraphs added · 948 removed · 683 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

265 edited+48 added−114 removed271 unchanged
Biggest changeThe agreements consist of: (i) a quota share reinsurance agreement between AGE and AGM pursuant to which AGM provides the same reinsurance to AGE in respect of business that was transferred to AGE by AGUK effective October 1, 2020 pursuant to Part VII of the Financial Services and Markets Act 2000 (FSMA) (Part VII Transfer) as AGM provided to AGUK prior to such transfer (AGE also has similar agreements in effect with its affiliates, AGC and AG Re); (ii) a second quota share reinsurance agreement whereby AGM provides AGE with 90% proportional reinsurance for: a. certain business transferred to AGE pursuant to the Part VII Transfer that was not reinsured by AGM when such business was part of AGUK's insured portfolio; b. certain business originally written by AGUK pursuant to the co-insurance arrangement described above, but which was novated to, and 100% guaranteed by, AGE in connection with the Part VII Transfer; and c. any new public finance business written by AGE; and (iii) an excess of loss reinsurance agreement, similar to the excess of loss cover of AGM’s Reinsurance Agreement with AGUK, pursuant to which AGM is obligated, effectively, to ensure that AGE maintains capital resources equal to at least 110% of the most stringent amount of capital that AGE may be required to maintain as a condition of it maintaining its authorization to carry on a financial guarantee business in France. 8 Effective July 1, 2021, AGC and AGE entered into a Non-Public Finance Business Reinsurance Agreement pursuant to which AGC provides AGE with 90% proportional reinsurance for any non-public finance business written by AGE.
Biggest changeThese agreements consist of: (i) a quota share reinsurance agreement whereby AG provides AGE with 90% proportional reinsurance for new business written by AGE since its authorization in January 2020; (ii) a second quota share reinsurance agreement between AGE and AG pursuant to which AG: a. reinsures approximately 70-100% of business that was transferred to AGE by AGUK effective October 1, 2020 pursuant to the Part VII of the Financial Services and Markets Act 2000 (FSMA) (Part VII Transfer) (i.e., the same reinsurance to AGE as AGUK received prior to such transfer); and b. provides 90% proportional reinsurance for certain business transferred to AGE pursuant to the Part VII Transfer that was not reinsured by AG (or its affiliates) when such business was part of AGUK’s insured portfolio; and 15 (iii) an excess of loss reinsurance agreement, similar to the excess of loss cover of AG’s Reinsurance Agreement with AGUK, pursuant to which AG is obligated, effectively, to ensure that AGE maintains capital resources equal to at least 110% of the most stringent amount of capital that AGE may be required to maintain as a condition of it maintaining its authorization to carry on a financial guarantee business in France.
For certain transactions, debt service and operational expenses are covered by availability payments made by either a governmental entity or a not-for-profit entity. The availability payments are due if the project is available for use, regardless of whether the project actually is in use. The principal risks for such transactions are construction risk and operational risk.
For certain transactions, debt service and operational expenses are covered by availability payments made by either a governmental or not-for-profit entity. The availability payments are due if the project is available for use, regardless of whether the project actually is in use. The principal risks for such transactions are construction risk and operational risk.
Additionally, as a public company with access to both the equity and debt capital markets, Assured Guaranty may have greater flexibility to raise capital, if needed. In the non-U.S. structured finance and non-U.S. public finance markets, Assured Guaranty is the only financial guaranty insurance company currently writing new guaranties.
Additionally, as a public company with access to both the equity and debt capital markets, Assured Guaranty may have greater flexibility to raise capital, if needed. In the U.S. and non-U.S. structured finance markets, Assured Guaranty is the only financial guaranty insurance company currently writing new guaranties.
The Company has established several management committees to develop enterprise level risk management guidelines, policies and procedures for the Company’s insurance and reinsurance subsidiaries that are tailored to their respective businesses, providing multiple levels of review, analysis and control.
The Company has established several management committees to develop enterprise level risk management guidelines, and policies and procedures for the Company’s insurance and reinsurance subsidiaries that are tailored to their respective businesses, providing multiple levels of review, analysis and control.
The Environmental and Social Responsibility Committee and the Risk Oversight Committee of AGL’s Board of Directors, each consisting solely of independent directors, provide oversight of the Company's approach to addressing climate change risk in accordance with their respective charters.
The Environmental and Social Responsibility Committee and the Risk Oversight Committee of AGL’s Board, each consisting solely of independent directors, provide oversight of the Company's approach to addressing climate change risk in accordance with their respective charters.
The special RPII rules do not apply if: (i) at all times during the taxable year less than 20% of the voting power and less than 20% of the value of the stock of AGL (the 20% Ownership Exception) is owned (directly or indirectly through entities) by persons who are (directly or indirectly) insured under any policy of insurance or reinsurance issued by a Foreign Insurance Subsidiary or related persons to any such person; (ii) RPII, determined on a gross basis, is less than 20% of a Foreign Insurance Subsidiary’s gross insurance income for the taxable year (the 20% Gross Income Exception); (iii) a Foreign Insurance Subsidiary elects to be taxed on its RPII as if the RPII were effectively connected with the conduct of a U.S. trade or business, and to waive all treaty benefits with respect to RPII and meet certain other requirements; or (iv) a Foreign Insurance Subsidiary elects to be treated as a U.S. corporation and waive all treaty benefits and meet certain other requirements.
The special RPII rules do not apply if: (i) at all times during the taxable year less than 20% of the voting power and less than 20% of the value of the stock of AGL (the 20% Ownership Exception) is owned (directly or indirectly through entities) by persons who are (directly or indirectly) insured under any policy of insurance or reinsurance issued by a Foreign Insurance Subsidiary or related persons to any such person; (ii) RPII, determined on a gross basis, is less than 20% of a Foreign Insurance Subsidiary’s gross insurance income for the taxable year (the 20% Gross Income Exception); 37 (iii) a Foreign Insurance Subsidiary elects to be taxed on its RPII as if the RPII were effectively connected with the conduct of a U.S. trade or business, and to waive all treaty benefits with respect to RPII and meet certain other requirements; or (iv) a Foreign Insurance Subsidiary elects to be treated as a U.S. corporation and waive all treaty benefits and meet certain other requirements.
For example, special rules apply to certain shareholders, such as partnerships, insurance companies, regulated investment companies, real estate investment trusts, dealers or traders in securities, tax exempt organizations, expatriates, persons liable for alternative minimum tax, U.S. accrual method taxpayers subject to special tax accounting rules as a result of any item of gross income with respect to AGL’s shares being taken into account in an applicable financial statement as described in 451(b) of the Code, persons that do not hold their securities in the U.S. dollar, persons who are considered with respect to AGL or any of its non-U.S. subsidiaries as “United States shareholders” for purposes of the CFC rules of the Code (generally, a U.S.
For example, special rules apply to certain shareholders, such as partnerships, insurance companies, regulated investment companies, real estate investment trusts, dealers or traders in securities, tax exempt organizations, expatriates, persons liable for alternative minimum tax, U.S. accrual method taxpayers subject to special tax accounting rules as a result of any item of gross income with respect to AGL’s shares being taken into account in an applicable financial statement as described in section 451(b) of the Code, persons that do not hold their securities in the U.S. dollar, persons who are considered with respect to AGL or any of its non-U.S. subsidiaries as “United States shareholders” for purposes of the CFC rules of the Code (generally, a U.S.
In general, under such requirements, a ceding company that obtains reinsurance from a reinsurer that is licensed, accredited or approved by the ceding company’s state of domicile is permitted to reflect in its statutory financial statements a credit in an aggregate amount equal to the ceding company's liability for unearned premiums (which are that portion of premiums written which applies to the unexpired portion of the policy period), and loss and LAE reserves ceded to the reinsurer.
In general, under such requirements, a ceding company that obtains reinsurance from a reinsurer that is licensed, accredited or approved by the ceding company’s state jurisdiction of domicile is permitted to reflect in its statutory financial statements a credit in an aggregate amount equal to the ceding company's liability for unearned premiums (which are that portion of premiums written which applies to the unexpired portion of the policy period), and loss and LAE reserves ceded to the reinsurer.
If AG Re or another of the Company’s Bermuda subsidiaries is considered to be engaged in the conduct of an insurance business in the U.S. and is not entitled to the benefits of the Bermuda Treaty in general (because it fails to satisfy one of the limitations on treaty benefits discussed above), the Internal Revenue Code of 1986, as amended (the Code), could subject a significant portion of AG Re’s or another of the Company’s Bermuda subsidiary’s investment income to U.S. income tax.
If AG Re or another of the Company’s Bermuda subsidiaries is considered to be engaged in the conduct of an insurance business in the U.S. and is not entitled to the benefits of the Bermuda Treaty in general (because it fails to satisfy one of the limitations on treaty benefits discussed above), the Internal Revenue Code of 1986, 34 as amended (the Code), could subject a significant portion of AG Re’s or another of the Company’s Bermuda subsidiary’s investment income to U.S. income tax.
Persons own a majority of AGL’s common shares, only a portion of the current income inclusions, if any, under the CFC, RPII and PFIC rules and of dividends paid by AGL (including any gain from the sale of common shares that is treated as a dividend under section 1248 of the Code) will be treated as foreign source income for purposes of computing a shareholder’s U.S. foreign tax credit limitations.
Persons own a majority of AGL’s common shares, only a portion of the current income inclusions, if any, under the CFC, RPII and PFIC rules and of dividends paid by AGL (including any gain from the sale of common shares that is treated as a dividend under section 1248 of the Code) will be treated as foreign source income for 40 purposes of computing a shareholder’s U.S. foreign tax credit limitations.
In general, the penalty tax is equivalent to an interest charge on taxes that are deemed due during the period the shareholder owned the common shares, computed by assuming that the excess distribution or gain (in the case of a sale) with respect to the common shares was taken in equal portion at the highest applicable tax rate on ordinary income throughout the shareholder's period of ownership.
In general, the penalty tax is 39 equivalent to an interest charge on taxes that are deemed due during the period the shareholder owned the common shares, computed by assuming that the excess distribution or gain (in the case of a sale) with respect to the common shares was taken in equal portion at the highest applicable tax rate on ordinary income throughout the shareholder's period of ownership.
Treasury Department and the IRS recently issued final and proposed regulations (the 2020 Regulations) intended to clarify the application of the PFIC provisions to a non-U.S. insurance company and provide guidance on a range of issues relating to PFICs, including the application of the look-through rule, the treatment of income and assets of certain U.S. insurance subsidiaries for purposes of the look-through rule and the extension of the look-through rule to 25% or more owned partnerships.
Treasury Department and the IRS issued final and proposed regulations (the 2020 Regulations) intended to clarify the application of the PFIC provisions to a non-U.S. insurance company and provide guidance on a range of issues relating to PFICs, including the application of the look-through rule, the treatment of income and assets of certain U.S. insurance subsidiaries for purposes of the look-through rule and the extension of the look-through rule to 25% or more owned partnerships.
Subject to the discussions below relating to the potential application of the CFC, RPII and PFIC rules, cash distributions, if any, made with respect to AGL’s shares will constitute dividends for U.S. federal income tax purposes to the extent paid out of current or accumulated earnings and profits of AGL (as computed using U.S. tax principles).
Taxation of Distributions. Subject to the discussions below relating to the potential application of the CFC, RPII and PFIC rules, cash distributions, if any, made with respect to AGL’s shares will constitute dividends for U.S. federal income tax purposes to the extent paid out of current or accumulated earnings and profits of AGL (as computed using U.S. tax principles).
For any taxable year in which AGL determines that neither the 20% Gross Income Exception nor the 20% Ownership Exception applies, AGL will provide to all U.S. Persons registered as shareholders of its shares a completed IRS Form 5471 or the relevant information necessary to complete the form. Failure to file IRS Form 5471 may result in penalties.
For any taxable year in which AGL determines that neither the 20% Gross Income Exception nor the 20% Ownership Exception applies, AGL will provide to all U.S. Persons registered as shareholders of its shares a completed IRS Form 5471 or 38 the relevant information necessary to complete the form. Failure to file IRS Form 5471 may result in penalties.
Any transaction enabling a person (a company or individual), acting alone or in concert with other persons, to acquire, increase, dispose of or reduce its ownership in an insurance company licensed in France requires express or implied approval from the ACPR: (i) where such transaction results directly or indirectly in the proportion of shares or voting rights held by that person or those persons rising above 10%, 20%, one-third or 50% of all shares or voting rights; (ii) where the insurance or reinsurance company becomes a subsidiary of that person or those persons; and (iii) where the transaction allows this person or persons to exercise a significant influence over the management of this company. 33 As a matter of principle, the ACPR has 60 business days from the date on which it acknowledges receipt of the notification of the transaction to notify the reporting entity and the insurance company whose ownership change is contemplated of its refusal or approval of the transaction.
Any transaction enabling a person (a company or individual), acting alone or in concert with other persons, to acquire, increase, dispose of or reduce its ownership in an insurance company licensed in France requires express or implied approval from the ACPR: (i) where such transaction results directly or indirectly in the proportion of shares or voting rights held by that person or those persons rising above 10%, 20%, one-third or 50% of all shares or voting rights; (ii) where the insurance or reinsurance company becomes a subsidiary of that person or those persons; and (iii) where the transaction allows this person or persons to exercise a significant influence over the management of this company. 31 As a matter of principle, the ACPR has 60 business days from the date on which it acknowledges receipt of the notification of the transaction to notify the reporting entity and the insurance company whose ownership change is contemplated of its refusal or approval of the transaction.
Ratings on exposures in sectors identified as under the most stress or with the most potential volatility are reviewed every quarter, although the Company may also review a rating in response to developments impacting the credit when a ratings review is not scheduled. The review cycle and scope vary based upon transaction type and credit quality.
Ratings on exposures in sectors identified as 20 under the most stress or with the most potential volatility are reviewed every quarter, although the Company may also review a rating in response to developments impacting the credit when a ratings review is not scheduled. The review cycle and scope vary based upon transaction type and credit quality.
The Company is also exposed indirectly to climate change trends and events that might impair the performance of securities in its investment portfolio. The portfolio consists predominantly of fixed-maturity securities. Nevertheless, environmental issues, including regulatory changes, changes in supply or demand characteristics of fuels, and extreme weather events, may impact the value of certain securities.
The Company is also exposed indirectly to climate trends and extreme weather events that might impair the performance of securities in its investment portfolio. The portfolio consists predominantly of fixed-maturity securities. Nevertheless, environmental issues, including regulatory changes, changes in supply or demand characteristics of fuels, and extreme weather events, may impact the value of certain securities.
AGL, AG Re and certain of the other non-U.S. subsidiaries have and will continue to file protective U.S. federal income tax returns on a timely basis in order to preserve the right to claim income tax deductions and credits if it is ever determined that they are subject to U.S. federal income tax.
AGL, AG Re and certain of the other non-U.S. subsidiaries have filed and will continue to file protective U.S. federal income tax returns on a timely basis in order to preserve the right to claim income tax deductions and credits if it is ever determined that they are subject to U.S. federal income tax.
Insurance Acquisitions The Company has acquired financial guaranty portfolios, including by acquiring legacy financial guarantors or acquiring (through reinsurance) substantial portions of their insured portfolios, and by commuting business that the Company had previously ceded prior to 2009 to various non-affiliated legacy financial guarantors and multiline reinsurers that were active in the financial guaranty reinsurance market.
Insurance Acquisitions Since 2009, the Company has acquired financial guaranty portfolios, including by acquiring legacy financial guarantors or acquiring (through reinsurance) substantial portions of their insured portfolios, and by commuting business that the Company had previously ceded prior to 2009 to various non-affiliated legacy financial guarantors and multiline reinsurers that were active in the financial guaranty reinsurance market.
The principal benefit to investors is that the Company's guaranty provides increased certainty that scheduled payments will be received when due. A financial guaranty may also improve the marketability and liquidity of obligations, especially obligations with complex structures or backed by asset classes new to the market.
The principal benefit to investors is that the Company's guaranty provides increased certainty that scheduled payments will be received when due. A financial guaranty may also improve the marketability and liquidity of obligations, especially obligations with complex structures or backed by asset classes new to the 6 market.
To support the advancement of its employees, the Company endeavors to strengthen their knowledge and skills by providing equitable access to training, including in leadership, management and effective communication skills, mentoring opportunities, as well as tuition reimbursement assistance. The Company believes its culture is collegial and collaborative and this fosters informal mentoring and learning.
To support the advancement of its employees, the Company endeavors to strengthen their knowledge and skills by providing access to training, including in leadership, management and effective communication skills, mentoring opportunities, as well as tuition reimbursement assistance. Mentoring . The Company believes its culture is collegial and collaborative and this fosters informal mentoring and learning.
The Company assesses the obligor’s pension and other post-employment benefits obligations and funding policies and evaluates the obligor’s ability to adequately fund such obligations in the future. The Company analyzes other critical risk factors including the type of issue; the repayment source; pledged security, if any; the presence of restrictive covenants and the tenor of the risk.
The Company assesses the obligor’s pension and other post-employment benefits obligations, if applicable, and funding policies and evaluates the obligor’s ability to adequately fund such obligations in the future. The Company analyzes other critical risk factors including the type of issue; the repayment source; pledged security, if any; the presence of restrictive covenants and the tenor of the risk.
Persons owning or treated as owning shares of AGL should consult their tax advisors as to the effect of these uncertainties. 40 Information Reporting. Under certain circumstances, U.S. Persons owning shares (directly, indirectly or constructively) in a non-U.S. corporation are required to file IRS Form 5471, Information Return of U.S.
Persons owning or treated as owning shares of AGL should consult their tax advisors as to the effect of these uncertainties. Information Reporting. Under certain circumstances, U.S. Persons owning shares (directly, indirectly or constructively) in a non-U.S. corporation are required to file IRS Form 5471, Information Return of U.S.
Pursuant to its non-resident status, AGL may engage in transactions in currencies other than Bermuda dollars and there are no restrictions on its ability to transfer funds (other than funds denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to U.S. residents who are holders of its common shares.
Pursuant to its non-resident status, AGL may engage in transactions in currencies other than Bermuda dollars 28 and there are no restrictions on its ability to transfer funds (other than funds denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to U.S. residents who are holders of its common shares.
See “— Tax Matters—Taxation of AGL and Subsidiaries—Bermuda.” 30 United Kingdom Insurance and Financial Services Regulation Each of AGUK and Assured Guaranty Finance Overseas Ltd. (AGFOL) are subject to the FSMA, which covers financial services relating to deposits, insurance, investments and certain other financial products.
See “— Tax Matters—Taxation of AGL and Subsidiaries—Bermuda.” United Kingdom Insurance and Financial Services Regulation Each of AGUK and Assured Guaranty Finance Overseas Ltd. (AGFOL) are subject to the FSMA, which covers financial services relating to deposits, insurance, investments and certain other financial products.
The Treasury Department recently issued final and proposed regulations intended to clarify the application of the insurance income exception to the classification of a non-U.S. insurer as a PFIC and provide guidance on a range of issues relating to PFICs, and recently issued proposed regulations that would expand the scope of the RPII rules.
The U.S. Department of the Treasury issued final and proposed regulations intended to clarify the application of the insurance income exception to the classification of a non-U.S. insurer as a PFIC and provide guidance on a range of issues relating to PFICs, and issued proposed regulations that would expand the scope of the RPII rules.
On July 1, 2023, Assured Guaranty contributed to Sound Point, LP most of its asset management business, other than that conducted by Assured Healthcare Partners LLC (AssuredIM Contributed Business), as contemplated by the transaction agreement entered into with Sound Point on April 5, 2023 (Transaction Agreement).
On July 1, 2023, Assured Guaranty contributed to Sound Point, LP most of its asset management business, other than that conducted by Assured Healthcare Partners LLC (AHP) (AssuredIM Contributed Business), as contemplated by the transaction agreement entered into with Sound Point on April 5, 2023 (Transaction Agreement).
The Company believes that issuers and investors in securities will continue to purchase financial guaranty insurance, especially if credit spreads widen. U.S. municipalities have budgetary requirements that are best met through financings in the 16 fixed income capital markets.
The Company believes that issuers and investors in securities will continue to purchase financial guaranty insurance, especially if credit spreads widen. U.S. municipalities have budgetary requirements that are best met through financings in the fixed income capital markets.
The Credit Opportunity Strategy primarily focuses on corporate bonds, senior-secured bank loans and equities and the Loan Opportunity Strategy which primarily focuses on distressed bonds, distressed bank loans, public and private equity, and trade claims. Sound Point, LP’s Commercial Real Estate Credit Strategy focuses on commercial mortgage loans and debt where commercial real estate properties serve as the underlying collateral.
The Credit Opportunity Strategy primarily focuses on corporate bonds, senior-secured bank loans and equities and the Loan Opportunity Strategy primarily focuses on distressed bonds, distressed bank loans, public and private equity, and trade claims. Sound Point, LP’s Commercial Real Estate Credit Strategy focuses on commercial mortgage loans and debt where commercial real estate properties serve as the underlying collateral.
In addition, the Company performs in-depth reviews annually of risk topics of interest to management and the Board. To the extent potentially significant 21 business activities or operational initiatives are considered, the Chief Risk Officer analyzes the possible impact on the Company’s risk profile and capital adequacy.
In addition, the Company performs in-depth reviews annually of risk topics of interest to management and the Board. To the extent potentially significant business activities or operational initiatives are considered, the Chief Risk Officer analyzes the possible impact on the Company’s risk profile and capital adequacy.
Further, recently proposed regulations could, if finalized in their current form, substantially expand the definition of RPII to include insurance income of our Foreign Insurance Subsidiaries related to affiliate reinsurance transactions. These regulations would apply to taxable years beginning after the date the regulations are finalized.
Further, proposed regulations could, if finalized in their current form, substantially expand the definition of RPII to include insurance income of our Foreign Insurance Subsidiaries related to affiliate reinsurance transactions. These regulations would apply to taxable years beginning after the date the regulations are finalized.
A Foreign Insurance Subsidiary will be treated as a CFC under the RPII provisions if 39 RPII shareholders are treated as owning (directly, indirectly through non-U.S. entities or constructively) 25% or more of the shares of AGL by vote or value. RPII Exceptions.
A Foreign Insurance Subsidiary will be treated as a CFC under the RPII provisions if RPII shareholders are treated as owning (directly, indirectly through non-U.S. entities or constructively) 25% or more of the shares of AGL by vote or value. RPII Exceptions.
In the context of the taxation of U.S. property/casualty insurance companies such as 35 the Company, the TCJA also modifies the loss reserve discounting rules and the proration rules that apply to reduce reserve deductions to reflect the lower corporate income tax rate.
In the context of the taxation of U.S. property/casualty insurance companies such as the Company, the TCJA also modifies the loss reserve discounting rules and the proration rules that apply to reduce reserve deductions to reflect the lower corporate income tax rate.
As a U.K. tax resident company, AGL is subject to the tax rules applicable to companies resident in the U.K., including the benefits afforded by the U.K.’s tax treaties. 37 As a U.K. tax resident, AGL is required to file a corporation tax return with His Majesty’s Revenue & Customs (HMRC).
As a U.K. tax resident company, AGL is subject to the tax rules applicable to companies resident in the U.K., including the benefits afforded by the U.K.’s tax treaties. As a U.K. tax resident, AGL is required to file a corporation tax return with His Majesty’s Revenue & Customs (HMRC).
AGRO is registered and licensed as both a Class 3A insurer and a Class C long-term insurer, and therefore carries on both general and long-term business (as understood under the Insurance Act), subject to any conditions attached to its license.
AGRO is registered and licensed as both a Class 3A insurer and a Class C long-term (life) insurer, and therefore carries on both general and long-term (life) business (as understood under the Insurance Act), subject to any conditions attached to its license.
AGL is not incorporated in the U.K., but from November 6, 2013, the AGL Board has managed its affairs with the intent to maintain its status as a company that is tax resident in the U.K. Dividends.
AGL is not incorporated in the U.K., but from November 6, 2013, AGL’s Board has managed its affairs with the intent to maintain its status as a company that is tax resident in the U.K. Dividends.
The Company believes that, based on the application of the PFIC look-through 42 rules described above and the Company's plan of operations for the current and future years, AGL should not be characterized as a PFIC.
The Company believes that, based on the application of the PFIC look-through rules described above and the Company's plan of operations for the current and future years, AGL should not be characterized as a PFIC.
The Net Worth Agreement obligates AGM to provide AGUK with support similar to that which AGM also provides AGUK under the excess of loss cover of the Reinsurance Agreement, except the latter is meant to protect against erosion of AGUK’s capital resources due to insurance and/or reinsurance losses in AGUK’s insured portfolio, while the former is meant to protect against an erosion of AGUK’s capital resources for other reasons (e.g., poor investment performance or origination expenses exceeding premium).
The Net Worth Agreement obligates AG to provide AGUK with support similar to that which AG also provides AGUK under the excess of loss cover of the Reinsurance Agreement, except the latter is meant to protect against erosion of AGUK’s capital resources due to insurance and/or reinsurance losses in AGUK’s insured portfolio, while the former is meant to protect against an erosion of AGUK’s capital resources for other reasons (e.g., poor investment performance or origination expenses exceeding premium).
For example, the TCJA includes a base erosion and anti-abuse tax (BEAT) that could make affiliate reinsurance between U.S. and non-U.S. members of the Company’s group economically unfeasible.
For example, the TCJA includes a base erosion and anti-abuse tax that could make affiliate reinsurance between U.S. and non-U.S. members of the Company’s group economically unfeasible.
From November 6, 2013, the AGL Board began to manage the affairs of AGL in such a way as to maintain its status as a company that is tax resident in the U.K.
From November 6, 2013, AGL’s Board began to manage the affairs of AGL in such a way as to maintain its status as a company that is tax resident in the U.K.
Under the terms of a 9 CDS, the seller of credit protection agrees to make a specified payment to the buyer of credit protection if one or more specified credit events occurs with respect to a reference obligation or entity.
Under the terms of a CDS, the seller of credit protection agrees to make a specified payment to the buyer of credit protection if one or more specified credit events occurs with respect to a reference obligation or entity.
The Insurance Act grants to the Authority the power to cancel insurance licenses, supervise, investigate and intervene in the affairs of insurance and reinsurance companies and in certain circumstances share information with foreign regulators. 29 Shareholder Controllers Pursuant to provisions in the Insurance Act, any person who becomes a holder of 10% or more, 20% or more, 33% or more or 50% or more of the Company’s common shares must notify the Authority in writing within 45 days of becoming such a holder.
The Insurance Act grants to the Authority the power to cancel insurance licenses, supervise, investigate and intervene in the affairs of insurance and reinsurance companies and in certain circumstances share information with foreign regulators. 27 Shareholder Controllers Pursuant to provisions in the Insurance Act, any person who becomes a holder of 10% or more, 20% or more, 33% or more or 50% or more of the Company’s common shares must notify the Authority in writing within 45 days of becoming such a holder.
If granted, such status allows the certified reinsurer to post less than 100% collateral (the exact percentage depends on the certifying state's view of the reinsurer's financial strength) and the applicable ceding company will still qualify, on the basis of such reduced collateral, for full credit for reinsurance on its statutory financial statements with respect to reinsurance contracts renewed or entered into with the certified reinsurer on or after the date the reinsurer becomes certified.
If granted, such status allows the certified reinsurer to post less than 100% collateral (the exact percentage depends on the certifying jurisdiction’s view of the reinsurer's financial strength) and the applicable ceding company will still qualify, on the basis of such reduced collateral, for full credit for reinsurance on its statutory financial statements with respect to reinsurance contracts renewed or entered into with the certified reinsurer on or after the date the reinsurer becomes certified.
The highest marginal 36 federal income tax rates currently are 21% for a corporation’s effectively connected income and 30% for the “branch profits” tax. Under the income tax treaty between Bermuda and the U.S.
The highest marginal federal income tax rates currently are 21% for a corporation’s effectively connected income and 30% for the “branch profits” tax. Under the income tax treaty between Bermuda and the U.S.
However, if neither S&P nor Moody’s were to maintain financial strength ratings of an insurance subsidiary in the double-A category, or if either S&P or Moody’s were to downgrade an insurance subsidiary below the single-A level, it could be difficult for such insurance subsidiary to originate the current volume of new financial guaranty business with comparable credit characteristics.
However, if neither S&P nor Moody’s were to maintain financial strength ratings of an insurance subsidiary in the double-A category, or if either S&P or Moody’s were to downgrade an insurance subsidiary below the single-A level, it could be extremely difficult or impossible for such insurance subsidiary to originate the current volume of new financial guaranty business with comparable credit characteristics.
"Earned surplus" is that portion of AGC's surplus that represents the net earnings, gains or profits (after deduction of all losses) that have not been distributed to its shareholders as dividends or transferred to stated capital or capital surplus, or applied to other purposes permitted by law, but does not include unrealized capital gains and appreciation of assets.
"Earned surplus" is that portion of AG’s surplus that represents the net earnings, gains or profits (after deduction of all losses) that have not been distributed to its shareholders as dividends or transferred to stated capital or capital surplus, or applied to other purposes permitted by law, but does not include unrealized capital gains and appreciation of assets.
New regulations or pronouncements interpreting or clarifying such rules may be forthcoming. The Company cannot be certain if, when or in what form such regulations or pronouncements may be provided and whether such guidance will have a retroactive effect. See Part II, Item 8, Financial Statements and Supplementary Data, Note 14, Income Taxes.
New regulations or pronouncements interpreting or clarifying such rules may be forthcoming. The Company cannot be certain if, when or in what form such regulations or pronouncements may be provided and whether such guidance will have a retroactive effect. See Part II, Item 8, Financial Statements and Supplementary Data, Note 13, Income Taxes.
Under Solvency II, AGUK is subject to certain limits and requirements, including the maintenance of a minimum solvency capital requirement (which depends on the type and amount of insurance business a company writes and the other risks to which it is exposed) and the establishment of technical provisions, which include projected losses and premium earnings.
Under Solvency UK, AGUK is subject to certain limits and requirements, including the maintenance of a minimum solvency capital requirement (which depends on the type and amount of insurance business a company writes and the other risks to which it is exposed) and the establishment of technical provisions, which include projected losses and premium earnings.
Benefits include life and health (medical, dental and vision) insurance, retirement savings plans (including Company matches of employee contributions), an employee stock purchase plan, hybrid work schedules, paid time off, paid family leave, an employee assistance program, commuter benefits, tuition reimbursement, and emergency backup child, elder and pet care.
Benefits include life and health (medical, dental and vision) insurance, retirement savings plans (including Company matches of employee contributions), an employee stock purchase plan, hybrid work schedules, paid time off, paid family leave, an employee assistance program, commuter benefits, tuition reimbursement, and child, elder and pet care assistance.
For new financial guaranty business, generally a risk must be viewed by the Company as investment grade at the time of underwriting to be eligible for insurance. The underwriting manuals also articulate the Company’s exposure limits and credit policies applicable to specific products. U.S. Public Finance.
For new business, generally a risk must be viewed by the Company as investment grade at the time of underwriting to be eligible for insurance. The underwriting manuals also articulate the Company’s exposure limits and credit policies applicable to specific products. U.S. Public Finance.
The Company’s due diligence for infrastructure projects also includes: a financial review of the entity seeking the development of the project (usually a governmental entity or university); a financial and operational review of the developer, the construction companies, and the project operator; and a financial review of the various providers of operational financial protection for the bondholders (and therefore the insurer), including construction surety providers, letter-of-credit providers, liquidity banks or account banks.
The Company’s due diligence for infrastructure projects also includes: a financial review of the entity seeking the development of the project (usually a governmental entity or university); a financial and operational review of the developer, the construction companies, and the project operator; and a financial review of the various providers of operational financial protection for the bondholders (and therefore the insurer), including construction surety providers, letter-of-credit providers, and banks.
As the global community moves to address and mitigate the effects of climate change, regulators across jurisdictions have taken steps to require climate change risk management and related reporting. Several of the Company’s subsidiaries are subject to regulatory reporting with respect to managing and disclosing the impact of climate change and the related financial risks.
As the global community moves to address and mitigate the effects of climate change, regulators across jurisdictions have taken steps to require climate risk management and related reporting. Several of the Company’s subsidiaries are subject to regulatory reporting with respect to managing and disclosing the impact of changing climate conditions and the related financial risks.
Strategic Capital Strategy primarily focuses on investments in senior secured debt, junior secured debt, accounts receivable financings, mezzanine debt and equity or equity linked securities and Specialty Finance Strategy which invests in specialty finance assets, financial technology, marketplace lending, consumer finance, structured finance and securitized products related to specialty finance lenders.
Capital Solutions primarily focuses on investments in senior secured debt, junior secured debt, accounts receivable financings, mezzanine debt and equity or equity linked securities and Specialty Finance Strategy which invests in specialty finance assets, financial technology, marketplace lending, consumer finance, structured finance and securitized products related to specialty finance lenders.
In addition, the Audit Committee of the Board is responsible for, among other matters, reviewing policies and processes related to risk assessment and risk management, including the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, in coordination with the Risk Oversight Committee, as appropriate.
In addition, the Audit Committee of the Board is responsible for, among other matters, reviewing policies and processes related to risk assessment and risk management, including the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, in coordination with the Risk Oversight Committee.
The Company’s assessment of how climate change-driven risks may impact a prospective obligor’s ability to pay debt service is informed by its extensive experience in municipal finance coupled with proprietary analytics and third-party data and insights.
The Company’s assessment of how climate risks may impact a prospective obligor’s ability to pay debt service is informed by its extensive experience in municipal finance coupled with proprietary analytics and third-party data and insights.
Broadly speaking, the 10% threshold applies to banks, insurers and reinsurers (but not brokers) and Markets in Financial Instruments Directive (MiFID) investment firms, and the 20% threshold to insurance brokers and certain other firms that are Non-Directive firms for the purposes of the Solvency II Directive. U.K.
Broadly speaking, the 10% threshold applies to banks, insurers and reinsurers (but not brokers) and Markets in Financial Instruments Directive (MiFID) investment firms, and the 20% threshold to insurance brokers and certain other firms that are Non-Directive firms for the purposes of Solvency UK. U.K.
Risk Factors, Risks Related to GAAP, Applicable Law and Regulations captioned “Applicable insurance laws may make it difficult to effect a change of control of AGL.” Bermuda The Bermuda Monetary Authority (the Authority) regulates the Company’s operating insurance and reinsurance subsidiaries in Bermuda.
Risk Factors, Risks Related to Applicable Law, Litigation and GAAP, captioned “Applicable insurance laws may make it difficult to effect a change of control of AGL.” Bermuda The Bermuda Monetary Authority (the Authority) regulates the Company’s operating insurance and reinsurance subsidiaries in Bermuda.
In particular, AGRO must keep its accounts in respect of its general business and its long-term business separate in respect of any other business.
In particular, AGRO must keep its accounts in respect of its general business and its long-term (life) business separate in respect of any other business.
The following discussion generally is applicable only if the gross RPII of AG Re or any other non-U.S. insurance subsidiary that either: (i) has not made an election under section 953(d) of the Code to be treated as a U.S. corporation for all U.S. federal tax purposes or (ii) is not a CFC owned directly or indirectly by AGUS (each a “Foreign Insurance Subsidiary” or collectively, with AG Re, the “Foreign Insurance Subsidiaries”) is 20% or more of the Foreign Insurance Subsidiary’s gross insurance income for the taxable year and the 20% Ownership Exception (as defined below) is not met.
The following discussion generally is applicable only if the gross RPII of AG Re or any other non-U.S. insurance subsidiary that either: (i) has not made an election under section 953(d) of the Code to be treated as a U.S. corporation for all U.S. federal tax purposes or (ii) is not a CFC owned directly or indirectly by AGUS (each, a Foreign Insurance Subsidiary, or collectively, with AG Re, the Foreign Insurance Subsidiaries) is 20% or more of the Foreign Insurance Subsidiary’s gross insurance income for the taxable year and the 20% Ownership Exception (as defined below) is not met.
In October 2020, in preparation for Brexit, AGUK transferred to AGE certain existing AGUK policies relating to risks in the EEA under the Part VII Transfer. AGUK will continue to write new business in the U.K. and certain other non-EEA countries. Regulation of U.K.
In October 2020, in preparation for Brexit, AGUK transferred to AGE certain existing AGUK policies relating to risks in the EEA under the Part VII Transfer. AGUK will continue to write new business in the U.K. and certain other non-EEA countries.
It focuses on management's assessment and management of credit risks as well as other risks, including, but not limited to, market, financial, legal, and operational risks (including cybersecurity and data privacy risks), and risks relating to the Company's reputation and ethical standards.
It focuses on management's assessment and management of credit risks as well as other risks, including, but not limited to, market, financial, legal, operational risks (including information technology, cybersecurity and data privacy risks), and risks relating to the Company's reputation and ethical standards.
Group-wide supervision by the NYDFS results in additional regulatory oversight over Assured Guaranty, particularly with respect to group-wide enterprise risk, and may subject Assured Guaranty to new regulatory requirements and constraints. U.S. Credit for Reinsurance Requirements for Non-U.S.
Group-wide supervision by the MIA results in additional regulatory oversight over Assured Guaranty, particularly with respect to group-wide enterprise risk, and may subject Assured Guaranty to new regulatory requirements and constraints. U.S. Credit for Reinsurance Requirements for Non-U.S.
In 32 accordance with French insurance regulation and Solvency II, AGE is permitted to carry on its activities in the countries of the EEA where it is authorized to operate under the freedom to provide services regime.
In 30 accordance with French insurance regulation and Solvency II, AGE is permitted to carry on its activities in the countries of the EEA where it is authorized to operate under the freedom to provide services regime.
Failure to maintain capital at least equal to the capital requirements under Solvency II is one of the grounds on which the wide powers of intervention conferred upon the PRA may be exercised.
Failure to maintain capital at least equal to the capital requirements under Solvency UK is one of the grounds on which the wide powers of intervention conferred upon the PRA may be exercised.
The Company makes available, free of charge, on its web site (under www.assuredguaranty.com/sec-filings ) the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13 (a) or 15 (d) of the Exchange Act as soon as reasonably practicable after the Company files such material with, or furnishes it to, the SEC.
The Company makes available, free of charge, on its website (under assuredguaranty.com/sec-filings ) the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13 (a) or 15 (d) of the Exchange Act as soon as reasonably practicable after the Company files such material with, or furnishes it to, the SEC.
Other Group Support of the European Insurance Subsidiaries for Certain Legacy Business AGC and AG Re also provide reinsurance support to the European Insurance Subsidiaries for certain legacy business that was insured prior to 2009 by AGUK.
Other Group Support of the European Insurance Subsidiaries for Certain Legacy Business AG Re also provide reinsurance support to the European Insurance Subsidiaries for certain legacy business that was insured prior to 2009 by AGUK.
In general, the Company, as the seller of credit protection, specified as credit events in its CDS failure to pay interest and principal on the reference obligation, but the Company’s rights and remedies under a CDS may be different and more limited than under financial guaranty insurance of an entire issuance.
In general, the Company, as the seller of credit protection, specified as credit events in its CDS failure to pay interest and principal on the reference obligation, but the Company’s rights and remedies under a CDS may be different and more limited than under financial guaranty insurance.
If the Company’s calculations with respect to its insurance subsidiaries liabilities are incorrect or other unanticipated payment obligations arise, or if the Company improperly structures its investments to meet these and other corporate liabilities, 18 it could have unexpected losses, including losses resulting from forced liquidation of investments.
If the Company’s calculations with respect to its insurance subsidiaries’ liabilities are incorrect or other unanticipated payment obligations arise, or if the Company improperly structures its investments to meet these and other corporate liabilities, it could have unexpected losses, including losses resulting from forced liquidation of investments.
Registered investment advisers are subject to the requirements and regulations of the U.S. Investment Advisers Act of 1940, as amended 28 (the Advisers Act). As a registered investment adviser, Sound Point, LP and certain other Sound Point entities must submit periodic filings with the SEC on Forms ADV, which are publicly available.
Sound Point is registered as an investment adviser with the SEC and is subject to the requirements and regulations of the U.S. Investment Advisers Act of 1940, as amended (the Advisers Act). As a registered investment adviser, Sound Point, LP and certain other Sound Point entities must submit periodic filings with the SEC on Forms ADV, which are publicly available.
Further, with effect for accounting periods starting on or after December 31, 2023, AGL may be liable to charges under the U.K.’s multinational top-up tax to the extent that any member (or members) of the group are resident in a territory other than the U.K. and that member (or those members, collectively), have an effective tax rate of less than 15% in that territory.
Further, with effect for accounting periods starting on or after December 31, 2023, AGL may be liable to charges under the U.K.’s multinational top-up tax to the extent that any member (or members) of the group is resident in a territory other than the U.K. and that member (or those members, collectively) has an effective tax rate of less than 15% in that territory.
In general, a non-U.S. corporation will be a PFIC during a given year if: (i) 75% or more of its gross income constitutes “passive income” (the 75% test); or (ii) 50% or more of its assets produce passive income (the 50% test) and once characterized as a PFIC will generally retain PFIC status for future taxable years with respect to its U.S. shareholders in the taxable year of the initial PFIC characterization. 41 If AGL were characterized as a PFIC during a given year, each U.S.
In general, a non-U.S. corporation will be a PFIC during a given year if: (i) 75% or more of its gross income constitutes “passive income” (the 75% test); or (ii) 50% or more of its assets produce passive income (the 50% test) and once characterized as a PFIC will generally retain PFIC status for future taxable years with respect to its U.S. shareholders in the taxable year of the initial PFIC characterization.
Low financial strength ratings or uncertainty over the Company’s ability to maintain its financial strength ratings for its insurance operating companies would have a negative impact on issuers’ and investors’ perceptions of the value of the Company’s insurance product. Therefore, the Company manages its business with the goal of achieving high financial strength ratings.
Low financial strength ratings or uncertainty over the Company’s ability to maintain its financial strength ratings for its insurance subsidiaries would have a negative impact on issuers’ and investors’ perceptions of the value of the Company’s insurance product. Therefore, the Company manages its business with the goal of achieving high financial strength ratings.
See Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Insurance Subsidiaries, for the maximum amount of dividends that can be paid without regulatory approval, recent dividend history and other recent capital movements.
See Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Insurance Subsidiaries, for the maximum amount of dividends or other distributions that can be paid without regulatory approval, recent dividend and distribution history and other recent capital movements.
Each of these three investment managers has discretionary authority over the portion of the investment portfolio it manages, within the limits of the investment guidelines approved by the Company’s Board of Directors. Each manager is compensated based upon a fixed percentage of the market value of the portion of the portfolio being managed by such manager.
Each of these investment managers has discretionary authority over the portion of the investment portfolio it manages, within the limits of the investment guidelines approved by the Company’s Board of Directors (the Board or AGL’s Board). Each manager is compensated based upon a fixed percentage of the market value of the portion of the portfolio being managed by such manager.
Investment team members monitor existing investments and provide periodic reporting at least quarterly to senior management, the AGL Board and the AGL Board's Risk Oversight and Finance Committees .
Investment team members monitor existing investments and provide periodic reporting at least quarterly to senior management, AGL’s Board and the Board's Risk Oversight and Finance Committees .
Accordingly, investors should monitor the Company Statements, Investor Information and Businesses portions of the Company’s web site as well as the Company’s social media account on LinkedIn, in addition to following the Company’s press releases, SEC filings, public conference calls, presentations and webcasts.
Accordingly, investors should monitor the Company Statements, Investor Information and Businesses portions of the Company’s website as well as the Company’s social media account on LinkedIn, in addition to following the Company’s press releases, SEC filings, public conference calls, presentations and webcasts.
Applicable New York and Maryland laws and regulations require regular, quarterly contributions to contingency reserves, but such laws and regulations permit the discontinuation of such quarterly contributions to an insurer's contingency reserves when such insurer’s aggregate contingency reserves for a particular line of business (i.e., municipal or non-municipal) exceed the sum of the insurer’s outstanding principal for each specified category of obligations within the particular line of business multiplied by the specified contingency reserve factor for each such category.
Maryland laws and regulations require regular, quarterly contributions to contingency reserves, but such laws and regulations permit the discontinuation of such quarterly contributions to an insurer's contingency reserves when such insurer’s aggregate contingency reserves for a particular line of business (i.e., municipal or non-municipal) exceed the sum of the insurer’s outstanding principal for each specified category of obligations within the particular line of business multiplied by the 24 specified contingency reserve factor for each such category.
Prior to approving an application to acquire control of a domestic insurer, each state insurance commissioner will consider factors such as the financial strength of the applicant, the integrity and management of the applicant’s board of directors and executive officers, the applicant's plans for the management of the board of directors and executive officers of the insurer, the applicant’s plans for the future operations of the insurer and any anti-competitive results that may arise from the consummation of the acquisition of control.
Prior to approving an application to acquire control of a domestic insurer, the Maryland Commissioner will consider factors such as the financial strength of the applicant, the integrity and management of the applicant’s board of directors and executive officers, the applicant's plans for the management of the board of directors and executive officers of the insurer, the applicant’s plans for the future operations of the insurer and any anti-competitive results that may arise from the consummation of the acquisition of control.
The Company utilizes employee engagement surveys, conducted by a third-party provider to foster confidentiality, to gauge the effectiveness of its efforts to enhance the employee experience and to gain insight into employee perceptions about various aspects of the work environment. Diversity and Inclusion .
The Company utilizes employee engagement surveys, conducted by a third-party provider to foster confidentiality, to gauge the effectiveness of its efforts to enhance the employee experience and to gain insight into employee perceptions about various aspects of the work environment. Governance .
Beginning July 1, 2023, the Company participates in the asset management business through its ownership interest in Sound Point Capital Management, LP (Sound Point, LP) and certain of its investment management affiliates (together with Sound Point, LP, Sound Point), as described in greater detail under Item 1. Business — Asset Management — Strategic Transactions.
The Company participates in the asset management business through its ownership interest in Sound Point Capital Management, LP (Sound Point, LP) and certain of its investment management affiliates (together with Sound Point, LP, Sound Point), as described in greater detail under Item 1. Business — Asset Management — Strategic Transactions.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOperational Risks • Fluctuations in foreign exchange rates. • Some of the Company’s non-U.S. operations expose it to less predictable political, credit and legal risks. • The loss of the Company’s key executives or its inability to retain other key personnel. • A cyberattack, security breach or failure in the Company’s or a vendor's information technology system, or a data privacy breach of the Company’s or a vendor’s information technology system. • Errors in, overreliance on, or misuse of, models. • Significant claim payments may reduce the Company’s liquidity. • A sudden need to raise additional capital as a result of insurance losses or as a result of changes in regulatory or rating agency capital requirements applicable to its insurance companies, at a time when additional capital may not be available or may be available only on unfavorable terms. • Large insurance losses substantially increasing the Company’s insurance subsidiaries’ leverage ratios, and preventing them from writing new insurance. • The Company’s holding companies' ability to meet their obligations may be constrained. • The ability of AGL and its subsidiaries to meet their liquidity needs may be limited.
Biggest changeStrategic Risks • Competition in the Company’s industries. • Strategic transactions not resulting in the benefits anticipated. • The Company’s investments in Sound Point. • Minority ownership interests and the inability to control the business, management or policies of such interests. • Alternative investments, including investments managed by Sound Point and exclusivity with Sound Point, may not result in the benefits anticipated, and may increase credit, interest rate, liquidity, reputational, and other risks. • A downgrade of the financial strength or financial enhancement ratings of any of the Company’s insurance or reinsurance subsidiaries. 42 Operational Risks • Fluctuations in foreign exchange rates. • Exposure to less predictable political, credit and legal risks by underwriting insurance in non-U.S. markets and/or covering new sectors or classes of business. • Loss of senior management and other key employees and delay or inability to develop or recruit suitable replacements. • A cyberattack, security breach or failure in the Company’s or a vendor's information technology system, or a data privacy breach of the Company’s or a vendor’s information technology system. • Evolving cybersecurity, privacy and data security regulations. • The exploration of artificial intelligence used in some of the Company’s business operations. • Errors in, overreliance on, or misuse of, models. • Reduction in the Company’s liquidity from significant claim payments. • A sudden need to raise additional capital as a result of insurance losses or as a result of changes in regulatory or rating agency capital requirements applicable to its insurance subsidiaries at a time when additional capital may not be available or may be available only on unfavorable terms. • Large insurance losses substantially increasing the Company’s insurance subsidiaries’ leverage ratios, and preventing them from writing new insurance. • Constraints on the Company’s holding companies' ability to meet their obligations. • Limitations on the ability of AGL and its subsidiaries to meet their liquidity needs.
The risks discussed below could result in a significant or material adverse effect on the Company’s financial condition, results of operations, liquidity, or business prospects. Summary of Risk Factors The following summarizes some of the risks and uncertainties that may adversely affect the Company’s financial condition, results of operations, capital, liquidity, business prospects or share price.
The risks discussed below could result in a significant or material adverse effect on the Company’s financial condition, results of operations, capital, liquidity, business prospects and/or share price. Summary of Risk Factors The following summarizes some of the risks and uncertainties that may adversely affect the Company’s financial condition, results of operations, capital, liquidity, business prospects and/or share price.
The Company is exposed to the risk that issuers of obligations that it insures or other counterparties may default on their financial obligations, whether as a result of insolvency, lack of liquidity, operational failure (whether related to cybersecurity incidents, fraud, mismanagement or otherwise) or other reasons, and the amount of insurance exposure the Company has to some risks is quite large.
The Company is exposed to the risk that issuers of obligations that it insures or other counterparties may default on their financial obligations, whether as a result of insolvency, lack of liquidity, operational failure (whether related to cybersecurity incidents, mismanagement, fraud or otherwise) or other reasons, and the amount of insurance exposure the Company has to some risks is quite large.
The total net expected loss the Company calculates related to such exposures is net of credit for estimated recoveries on claims already paid, and recoveries significantly below those expected by the Company could also have a negative effect on the Company’s financial condition, results of operations, capital, liquidity, business prospects and share prices.
The total net expected loss the Company calculates related to such exposures is net of a credit for estimated recoveries on claims already paid, and recoveries significantly below those expected by the Company could also have a negative effect on the Company’s financial condition, results of operations, capital, liquidity, business prospects and share prices.
Because the Company does not control the business, management or policies of Sound Point, it relies upon Sound Point to make appropriate decisions and operate in a sound manner consistent with applicable rules and regulations.
Because the Company does not control the business, management or policies of Sound Point, it relies upon Sound Point to make appropriate decisions and operate in a manner consistent with applicable rules and regulations.
Future legislative, regulatory, judicial or other legal changes in the jurisdictions in which the Company does business may adversely affect the Company’s financial condition, results of operations, capital, liquidity, business prospects and share price by, among other things, limiting the types of risks it may insure, lowering applicable single or aggregate risk limits related to its insurance business, increasing required reserves or capital for its insurance subsidiaries, providing insured obligors with additional avenues for avoiding or restructuring the repayment of their insured liabilities, increasing the level of supervision or regulation to which the Company’s operations may be subject, imposing restrictions that make the Company’s products less attractive to potential buyers and investors, lowering the profitability of the Company’s business activities, requiring the Company to change certain of its business practices and exposing it to additional costs (including increased compliance costs).
Future legislative, regulatory, judicial or other legal changes in the jurisdictions in which the Company does business may adversely affect the Company’s financial condition, results of operations, capital, liquidity, business prospects and share price by, among other things, limiting the types of risks it may insure, lowering applicable single or aggregate risk limits related to its insurance business, increasing required reserves or capital for its insurance subsidiaries, providing insured obligors with additional avenues for avoiding or restructuring the repayment of their insured liabilities, increasing the level of supervision or regulation to which the Company’s operations may be subject, imposing restrictions that make the Company’s products less attractive to potential buyers and investors, lowering the profitability of the Company’s business activities, and requiring the Company to change certain of its business practices and exposing it to additional costs (including increased compliance costs).
Such strategic transactions related to entities or portfolios may involve some or all of the various risks commonly associated with such strategic transactions, including, among other things: (a) failure to adequately identify and value potential exposures and liabilities associated with a new entity or portfolio; (b) difficulty in estimating the value of a new entity or portfolio; (c) potential diversion of management’s time and attention; (d) exposure to asset quality issues of a new entity or portfolio; (e) difficulty and expense of integrating the operations, systems and personnel of a new entity; (f) difficulty integrating the culture of a new entity; (g) failure to identify legal risks associated with the strategic transaction with an entity or portfolio, and (h) in the case of acquisitions of a financial guaranty company or portfolio, concentration of insurance exposures, including insurance 52 exposures which may exceed single risk limits, aggregate risk limits, BIG limits and/or non-U.S. dollar exposure limits, due to the addition of the target insurance portfolio.
Such strategic transactions related to entities or portfolios may involve some or all of the various risks commonly associated with such strategic transactions, including, among other things: (a) failure to adequately identify and value potential exposures and liabilities associated with a new entity or portfolio; (b) difficulty in estimating the value of a new entity or portfolio; (c) potential diversion of management’s time and attention; (d) exposure to asset quality issues of a new entity or portfolio; (e) difficulty and expense of integrating the operations, systems and personnel of a new entity; (f) difficulty integrating the culture of a new entity; (g) failure to identify legal risks associated with the strategic transaction with an entity or portfolio, and (h) in the case of acquisitions of a financial guaranty company or portfolio, concentration of insurance exposures, including insurance exposures which may exceed single risk limits, aggregate risk limits, BIG limits and/or non-U.S. dollar exposure limits, due to the addition of the target insurance portfolio.
Person that is treated as owning 10% or more of AGL’s shares may be required to include in income for U.S. federal income tax purposes its pro rata share of certain income of AGL and its non-U.S. subsidiaries for a taxable year, even if such income is not distributed and may be subject to U.S. federal income tax on a portion of any gain upon a sale or other disposition of its shares at ordinary income tax rates.
Person that is treated as owning 10% or more of AGL’s shares may be required to include in income for U.S. federal income tax purposes its pro rata share of certain income of 55 AGL and its non-U.S. subsidiaries for a taxable year, even if such income is not distributed and may be subject to U.S. federal income tax on a portion of any gain upon a sale or other disposition of its shares at ordinary income tax rates.
If the issuers of the obligations in the Company’s public finance insurance portfolio become unwilling to raise taxes, decrease spending or receive federal assistance in order to repay their debt, the Company may experience increased levels of losses on its public finance obligations, which could adversely affect its financial condition, results of operations, capital, liquidity, business prospects and share price.
If the issuers of the obligations in 45 the Company’s public finance insurance portfolio become unwilling to raise taxes, decrease spending or receive federal assistance in order to repay their debt, the Company may experience increased levels of losses on its public finance obligations, which could adversely affect its financial condition, results of operations, capital, liquidity, business prospects and share price.
The Company cannot be certain if, when, or in what form any future regulations or pronouncements may be implemented or made, or whether such guidance will have a retroactive effect. See Item 1. Business — Tax Matters — United States Tax Reform. An ownership change under Section 382 of the Code could have adverse U.S. federal tax consequences.
The Company cannot be certain if, when, or in what form any future regulations or pronouncements may be implemented or made, or whether such guidance will have a retroactive effect. See Item 1. Business — Tax Matters — United States Tax Reform. 56 An ownership change under Section 382 of the Code could have adverse U.S. federal tax consequences.
Rapidly changing credit and equity market conditions could materially impact the valuation of assets and liabilities as reported within the financial statements, and period-to-period changes in value could vary significantly. Strategic Risks Competition in the Company’s industries may adversely affect its results of operations, business prospects and share price. As described in greater detail under Item 1.
Rapidly changing credit and equity market conditions could materially impact the valuation of assets and liabilities as reported within the financial statements, and period-to-period changes in value could vary significantly. 47 Strategic Risks Competition in the Company’s industries may adversely affect its results of operations, business prospects and share price. As described in greater detail under Item 1.
In addition, some securities that the Company could issue, such as preferred stock or securities issued by the Company's operating subsidiaries, may have rights, preferences and privileges that are senior to those of its common shares. Large insurance losses could increase substantially the Company’s insurance subsidiaries’ leverage ratios, which may prevent them from writing new insurance.
In addition, some securities that the Company could issue, such as preferred stock or securities issued by the Company's operating subsidiaries, may have rights, preferences and privileges that are senior to those of its common shares. 53 Large insurance losses could increase substantially the Company’s insurance subsidiaries’ leverage ratios, which may prevent them from writing new insurance.
It is currently unclear whether DPT would constitute a creditable tax for U.S. foreign tax credit purposes. If any member of the Assured Guaranty group is liable for DPT, this could adversely affect the Company’s results of operations. 61 Assured Guaranty’s financial results may be affected by measures taken in response to the OECD BEPS project.
It is currently unclear whether DPT would constitute a creditable tax for U.S. foreign tax credit purposes. If any member of the Assured Guaranty group is liable for DPT, this could adversely affect the Company’s results of operations. Assured Guaranty’s financial results may be affected by measures taken in response to the OECD BEPS project.
Regulation – France – Restrictions on Dividend Payments.” As a result, absent relief from the relevant regulator(s), the Company’s insurance subsidiaries may be required to retain capital in the insurance companies that is substantially in excess of what the Company believes is necessary to support its insurance businesses, reducing the Company’s ability to productively use or return to shareholders such excess capital.
Regulation – France – Restrictions on Dividend Payments.” As a result, absent relief from the relevant regulator(s), the Company’s insurance subsidiaries may be required to retain capital that is substantially in excess of what the Company believes is necessary to support its insurance businesses, reducing the Company’s ability to productively use or return to shareholders such excess capital.
If Sound Point is unable to successfully compete, it may result in decreased earnings for Sound Point and increased risk of investment losses in Sound Point funds, which could materially adversely impact the Company’s interest in Sound Point and/or its investment in Sound Point funds and, ultimately, the Company’s financial condition, results of operations, capital, business prospects and share price.
If Sound Point is unable to successfully compete, it may result in decreased earnings for Sound Point and increased risk of investment losses in Sound Point funds, which could materially adversely impact the Company’s ownership interest in Sound Point and/or its investment in Sound Point funds and, ultimately, the Company’s financial condition, results of operations, capital, business prospects and share price.
If a credit derivative is held to maturity and no credit loss is incurred, any unrealized gains or losses previously reported would be reversed as the transaction reaches maturity. The Company also expects fluctuations in the fair 62 value of its put option under its CCS to reverse over time.
If a credit derivative is held to maturity and no credit loss is incurred, any unrealized gains or losses previously reported would be reversed as the transaction reaches maturity. The Company also expects fluctuations in the fair value of its put option under its CCS to reverse over time.
The Company expects that its subsidiaries’ need for liquidity will be met by the operating cash flows of such subsidiaries; external financings; investment income from their invested assets; and proceeds derived from the sale of their investments, significant portions of which are in the form of cash or short-term investments.
The Company expects that its subsidiaries’ need for liquidity will be met by the operating cash flows of such subsidiaries; external financings; investment income from their invested assets; and proceeds derived from the sale of their investments, portions of which are in the form of cash or short-term investments.
As discussed above, AGL’s insurance subsidiaries are subject to regulatory and rating agency restrictions limiting their ability to declare and to pay dividends and make other payments to AGL. As further noted above, external financing may or may not be available to AGL or its subsidiaries in the future on satisfactory terms.
As discussed above, AGL’s insurance subsidiaries are subject to regulatory and rating agency 54 restrictions limiting their ability to declare and to pay dividends and make other payments to AGL. As further noted above, external financing may or may not be available to AGL or its subsidiaries in the future on satisfactory terms.
In addition, beneficiaries of financial guaranties issued by the Company’s insurance subsidiaries may have the right to cancel the credit protection provided by them, which would result in the loss of future premium earnings and the reversal of any fair value gains recorded by the Company.
In addition, beneficiaries of financial guaranties issued by the Company’s insurance subsidiaries 50 may have the right to cancel the credit protection provided by them, which would result in the loss of future premium earnings and the reversal of any fair value gains recorded by the Company.
This stress may manifest itself in any or all of the following: ratings downgrades of insured risks, which may require more capital in the Company’s insurance subsidiaries; a reduction in the value of the Company’s investments; and actual defaults and losses in its insurance portfolio, investments and / or CIVs.
This stress may manifest itself in any or all of the following: ratings downgrades of insured risks, which may require more capital in the Company’s insurance subsidiaries; a reduction in the value of the Company’s investments; and actual defaults and losses in its insurance portfolio and/or investments.
Moreover, the relevant provisions of the Code and AGL’s Bye-Laws may have the effect of reducing the votes of certain shareholders who would not otherwise be subject to the limitation by virtue of their direct share ownership.
Moreover, the relevant provisions of the Code and AGL’s Bye-Laws may have the effect of 61 reducing the votes of certain shareholders who would not otherwise be subject to the limitation by virtue of their direct share ownership.
If these proposed regulations are finalized in their current form, it could limit our ability to execute affiliate reinsurance transactions that would otherwise be undertaken for non-tax business reasons in the future and could increase the risk that gross RPII could constitute 20% or more of the gross insurance income of one or more of our Foreign Insurance Subsidiaries in a particular taxable year, which could result in such RPII being taxable to U.S.
If these proposed regulations are finalized in their current form, it could limit the Company’s ability to execute affiliate reinsurance transactions that would otherwise be undertaken for non-tax business reasons in the future and could increase the risk that gross RPII could constitute 20% or more of the gross insurance income of one or more of the Company’s Foreign Insurance Subsidiaries in a particular taxable year, which could result in such RPII being taxable to U.S.
While the Company has a model validation function and has adopted procedures to protect its models, the models may not operate properly (including as a result of errors or damage) and may rely on assumptions that are inherently uncertain and may prove to have been incorrect. 56 Significant claim payments may reduce the Company’s liquidity.
While the Company has a model governance and validation function and has adopted procedures to protect its models, the models may not operate properly (including as a result of errors or damage) and may rely on assumptions that are inherently uncertain and may prove to have been incorrect. Significant claim payments may reduce the Company’s liquidity.
If the Company’s actual losses exceed its current estimate, the Company’s financial condition, results of operations, capital, liquidity, business prospects, financial strength ratings and ability to raise additional capital may all be adversely affected. The Company does not use traditional actuarial approaches to determine its estimates of expected losses to be paid (recovered).
If the Company’s actual losses exceed its current estimate, the Company’s financial condition, results of operations, capital, liquidity, business prospects, financial strength ratings, ability to raise additional capital and share price may all be adversely affected. The Company does not use traditional actuarial approaches to determine its estimates of expected losses to be paid (recovered).
The failure to raise any additional required capital, or successfully address another issue or issues raised by a rating agency, could result in a downgrade of the ratings of the Company’s insurance subsidiaries and thus have an adverse impact on its business, results of operations and financial condition.
The failure to raise any additional required capital, or successfully address another issue or issues raised by a rating agency, could result in a downgrade of the ratings of the Company’s insurance subsidiaries and thus have an adverse impact on its business, results of operations, financial condition and share price.
Sound Point’s ability to increase and retain AUM is directly related to the performance of the assets it manages as measured against market averages and the performance of its competitors. Some of Sound Point’s competitors may have a lower cost of funds and access to funding and other resources that are not available to Sound Point.
Sound Point’s ability to increase and retain assets under management (AUM) is directly related to the performance of the assets it manages as measured against market averages and the performance of its competitors. Some of Sound Point’s competitors may have a lower cost of funds and access to funding and other resources that are not available to Sound Point.
The Company may face a sudden need to raise additional capital as a result of insurance losses substantially in excess of the stress scenarios for which it plans, or as a result of changes in regulatory or rating agency capital requirements applicable to its insurance companies, which additional capital may not be available or may be available only on unfavorable terms.
The Company may face a sudden need to raise additional capital as a result of insurance losses substantially in excess of the stress scenarios for which it plans, or as a result of changes in regulatory or rating agency capital requirements applicable to its insurance subsidiaries, which additional capital may not be available or may be available only on unfavorable terms.
AGL anticipates that its liquidity needs will be met by the ability of its operating subsidiaries to pay dividends or to make other payments; from earnings from its investment in Sound Point; external financings; investment income from its invested assets; and current cash and short-term investments.
AGL anticipates that its liquidity needs will be met by the ability of its operating subsidiaries to pay dividends or to make other payments; from earnings from its ownership interest in Sound Point; external financings; investment income from its invested assets; and current cash and short-term investments.
In particular, DPT may apply to profits generated by economic activities carried out in the U.K., that are not taxed in the U.K. by reason of arrangements between companies in the same multinational group and involving a low-tax jurisdiction, including co-insurance and reinsurance. In June 2023, the U.K.
In particular, DPT may apply to profits generated by economic activities carried out in the U.K., that are not taxed in the U.K. by reason of arrangements between companies in the same multinational group and involving a low-tax jurisdiction, including co-guarantees and reinsurance. In June 2023, the U.K.
Further, the Corporate Income Tax Act 2023 of Bermuda incorporates a number of measures which allow Bermuda resident companies to recognize deferred tax assets in respect of certain ETAs which may be utilized in the calculation of our effective tax rate for the purposes of top-up taxes in other jurisdictions.
Further, the Corporate Income Tax Act 2023 of Bermuda incorporates a number of measures which allow Bermuda resident companies to recognize deferred tax assets in respect of certain ETAs which may be utilized in the calculation of the Company’s effective tax rate for the purposes of top-up taxes in other jurisdictions.
The Company believes that AGL was not a PFIC for U.S. federal income tax purposes for taxable years through 2023 and, based on the application of certain PFIC look-through rules and the Company’s plan of operations for the current and future years, should not be a PFIC in the future. See Item 1.
The Company believes that AGL was not a PFIC for U.S. federal income tax purposes for taxable years through 2024 and, based on the application of certain PFIC look-through rules and the Company’s plan of operations for the current and future years, should not be a PFIC in the future. See Item 1.
The Company’s Asset Management segment now consists of its ownership interest in Sound Point, which operates in highly competitive markets. Sound Point competes with many other firms in every aspect of the asset management industry, including raising funds, seeking investments, and hiring and retaining professionals.
The Company’s Asset Management segment currently consists of its ownership interest in Sound Point, which operates in highly competitive markets. Sound Point competes with many other firms in every aspect of the asset management industry, including raising funds, seeking investments, and hiring and retaining professionals.
Because a person acquiring 10% or more of AGL’s common shares would indirectly control the same percentage of the stock of its insurance subsidiaries, the insurance change of control laws of Maryland, New York, the U.K., France and Bermuda would likely apply to such a transaction.
Because a person acquiring 10% or more of AGL’s common shares would indirectly control the same percentage of the stock of its insurance subsidiaries, the insurance change of control laws of Maryland, the U.K., France and Bermuda would likely apply to such a transaction.
The Company expects that dividends and other payments from the insurance companies will be the primary source of funds for AGL, AGUS and AGMH to meet ongoing cash requirements, including operating expenses, intercompany loan payments, any future debt service payments and other expenses, to pay dividends to their respective shareholders, to fund any acquisitions, and, in the case of AGL, to repurchase its common shares.
The Company expects that dividends and other payments from the insurance companies will be the primary source of funds for AGL, AGUS and AGMH to meet ongoing cash requirements, including operating expenses, intercompany loan payments, any future debt service payments and other expenses, to pay dividends to their respective shareholders, to fund any acquisitions, to fund investments and commitments to alternative investments, and, in the case of AGL, to repurchase its common shares.
Risks Related to AGL’s Common Shares • Volatility in the market price of AGL’s common shares. • Provisions in the Code and AGL’s Bye-Laws reducing or increasing the voting rights of its common shares. • Provisions in AGL’s Bye-Laws potentially restricting the ability to transfer common share or requiring shareholders to sell their common shares.
Risks Related to AGL’s Common Shares • Volatility in the market price of AGL’s common shares. • Provisions in the Code and AGL’s Bye-Laws reducing the voting rights of its common shares. 43 • Provisions in AGL’s Bye-Laws potentially restricting the ability to transfer common share or requiring shareholders to sell their common shares.
Persons holding AGL’s shares may be subject to taxation under the U.S. CFC rules. • U.S. Persons holding AGL’s shares may be subject to additional U.S. income taxation on their proportionate share of the Company's RPII. • U.S. tax-exempt shareholders may be subject to unrelated business taxable income rules. • U.S.
Persons holding AGL’s shares may be subject to taxation under the U.S. CFC rules. • U.S. Persons holding AGL’s shares may be subject to additional U.S. income taxation on their proportionate share of the Company's RPII. • U.S. tax-exempt shareholders may be subject to unrelated business taxable income rules. • Adverse tax consequences to U.S.
In addition, a change in the Corporate Income Tax Act 2023 or its interpretation, or any change in the regulatory treatment of the corporate income tax or matters related thereto, by Bermuda could adversely affect Assured Guaranty’s financial results. U.S.
In addition, a change in the Corporate Income Tax Act 2023 or its interpretation, or any change in the regulatory treatment of the corporate income tax or matters related thereto, by Bermuda could adversely affect Assured Guaranty’s financial results.
A cybersecurity threat or breach of the Company’s systems or the systems of its third party providers in the future could have a material adverse affect on the Company, including its business strategy, results of operations or financial condition.
A cybersecurity threat or breach of the Company’s systems or the systems of its third party providers in the future could have a material adverse effect on the Company, including its business strategy, results of operations or financial condition.
Additionally, in recent years AGM, AGC and AGUK have sought and been granted permission from their insurance regulators to make discretionary payments to their corporate parents in excess of the amounts permitted by right under the insurance laws and related regulations. There can be no assurance that such regulators will permit discretionary payments in the future.
Additionally, in recent years AG and AGUK have sought and been granted permission from their insurance regulators to make discretionary payments to their corporate parents in excess of the amounts permitted by right under the insurance laws and related regulations. There can be no assurance that such regulators will permit discretionary payments in the future.
Credit losses on the Company’s investments adversely affect the Company’s financial condition and results of operations by reducing net income and shareholders’ equity. Alternative investments, including the Company’s equity method investment in Sound Point, Loss Mitigation Securities and CVIs may be more susceptible to credit losses than most of the rest of the Company’s fixed-maturity portfolio.
Credit losses on the Company’s investments adversely affect the Company’s financial condition and results of operations by reducing net income and shareholders’ equity. Alternative investments, including the Company’s equity method ownership interest in Sound Point, Loss Mitigation Securities and CVIs may be more susceptible to credit losses than most of the rest of the Company’s fixed-maturity portfolio.
Each of AGL, AGUS and AGMH requires liquidity, either in the form of cash or in the ability to easily sell investments for cash, in order to meet its payment obligations, including, without limitation, its operating expenses, interest and principal payments on debt and dividends on common shares, and to make capital investments in operating subsidiaries.
Each of AGL, AGUS and AGMH requires liquidity, either in the form of cash or in the ability to easily sell investments for cash, in order to meet its payment obligations, including, without limitation, its operating expenses, interest and principal payments on debt and dividends on common shares, to fund investments and commitments to alternative investments, and to make capital investments in operating subsidiaries.
The asset management business is also subject to legal, regulatory, compliance, accounting, valuation and political risks that differ from those involved in the Company’s insurance business. Sound Point operates in a highly regulated industry and, as a registered investment adviser, is subject to the provisions of the Investment Advisers Act of 1940, as amended.
The asset management business is also subject to legal, regulatory, compliance, accounting, valuation and political risks that differ from those that may affect the Company’s insurance business. Sound Point operates in a highly regulated industry and, as a registered investment adviser, is subject to the provisions of the Investment Advisers Act of 1940, as amended.
In the U.S., debt ceiling and budget deficit concerns, which have increased the possibility of a U.S. government shutdown, payment defaults on the debt of the U.S. government or instruments issued, insured or guaranteed by related institutions, agencies or instrumentalities, and downgrades to their credit ratings, could weaken the U.S. dollar, global economy and banking system, cause market volatility, raise the cost of credit, negatively impact the Company’s insured and investment portfolios, and disrupt general economic conditions in ways that the Company is not able to predict, which could materially and adversely affect the Company’s business, financial condition and results of operations.
In the U.S., debt ceiling and budget deficit concerns, which have increased the possibility of a U.S. government shutdown, payment defaults on the debt of the U.S. government or instruments issued, insured or guaranteed by related institutions, agencies or instrumentalities, and downgrades to their credit ratings, could weaken the U.S. dollar, global economy and banking system, cause market volatility, raise the cost of credit, reduce public investment, increase interest rates and inflation, negatively impact the Company’s insured and investment portfolios, and disrupt general economic conditions in ways that the Company is not able to predict, which could materially and adversely affect the Company’s business, financial condition and results of operations.
The determination of fair values is made at a specific point in time, based on available market information and judgments about the assets and liabilities being valued, including estimates of timing and amounts of cash flows and the credit rating of the issuer or counterparty.
The determination of fair values is made at a specific point in time, based on available market information and judgments about the assets and liabilities being valued, including estimates of timing and amounts of cash flows and the creditworthiness of the issuer or counterparty.
Downgrades to the U.S. government’s sovereign credit ratings, or to the credit ratings of instruments issued, insured or guaranteed by related institutions, agencies or instrumentalities, could result in a deterioration in general economic conditions, increased credit losses in the Company’s insured portfolio, impairments or losses in its investment portfolio, and other risks to the Company and its credit ratings that the Company is not able to predict.
A higher U.S. debt-to-GDP ratio and/or downgrades to the U.S. government’s sovereign credit ratings, or to the credit ratings of instruments issued, insured or guaranteed by related institutions, agencies or instrumentalities, could result in a deterioration in general economic conditions, increased credit losses in the Company’s insured portfolio, impairments or losses in its investment portfolio, and other risks to the Company and its credit ratings that the Company is not able to predict.
The Company’s capital requirements depend on many factors, primarily related to its in-force book of insurance business and rating agency capital requirements for its insurance companies.
The Company’s capital requirements depend on many factors, primarily related to its in-force book of insurance business and rating agency capital requirements for its insurance subsidiaries.
Risks Related to Economic, Market and Political Conditions and Natural Phenomena Developments in the U.S. and global financial markets and economy generally may adversely affect the Company’s financial condition, results of operations, capital, liquidity, business prospects and share price.
Risks Related to Economic, Market and Political Conditions and Natural Phenomena Developments in the global financial markets, political systems and the economy generally may adversely affect the Company’s financial condition, results of operations, capital, liquidity, business prospects and share price.
Before a person can acquire control of a U.S., U.K. or French insurance company, prior written approval must be obtained from the relevant regulator commissioner of the state or country where the insurer is domiciled.
Before a person can acquire control of a U.S., U.K. or French insurance company, prior written approval must be obtained from the relevant regulatory commissioner or superintendent of the state or country where the insurer is domiciled.
For example, the Company is not be able to control the timing or amount of distributions from Sound Point and is not involved on a day-to-day basis with Sound Point’s operations or its decision-making with respect to its investment, reporting, internal control, legal, compliance or risk functions.
For example, the Company is not be able to control the timing or amount of distributions from Sound Point and is not involved on a day-to-day basis with Sound Point’s operations or its decision-making or its adoption and implementation of policies and procedures with respect to its investment, reporting, internal control, legal, compliance or risk functions.
See “– Competition in the Company’s industries may adversely affect its results of operations, business prospects and share price.” Industry competition, volatility or declines in the markets in which Sound Point invests as an asset manager, or poor performance of its investments, may negatively affect its AUM and its asset management and performance fees, and may deter future investment by third parties in Sound Point’s asset management products.
See “– Competition in the Company’s industries may adversely affect its results of operations, business prospects and share price.” Industry competition, volatility or declines in the markets in which Sound Point invests as an asset manager, or poor performance of its investments, may negatively affect its AUM and its asset management and performance fees, may deter future investment by third parties in Sound Point’s asset management products, and may result in an impairment to the Company’s ownership interest in Sound Point.
As of December 31, 2023, if each legacy financial guarantor ceding business to an Assuming Subsidiary had a right to recapture such business, and chose to exercise such right, the aggregate amounts those subsidiaries could be required to pay to all such ceding companies would be approximately $263 million.
As of December 31, 2024, if each legacy financial guarantor ceding business to an Assuming Subsidiary had a right to recapture such business, and chose to exercise such right, the aggregate amounts those subsidiaries could be required to pay to all such ceding companies would be approximately $245 million.
During a broad economic downturn or in the face of a significant natural or man-made event or disaster (such as the COVID-19 pandemic or events in Ukraine and the Middle East), a wider range of the Company’s insurance and investments could be exposed to stress at the same time.
During a broad economic downturn or in the face of a significant natural or man-made event or disaster (such as the COVID-19 pandemic), a wider range of the Company’s insurance and investments could be exposed to stress at the same time.
The Company’s interest in Sound Point is subject to the risks normally associated with a minority interest. Since the Company holds a minority interest in Sound Point after the closing of the Sound Point Transaction, it is unable to control the business, management or policies of Sound Point.
The Company’s interest in Sound Point is subject to the risks normally associated with a minority interest. Since the Company holds a minority interest in Sound Point, it is unable to control the business, management or policies of Sound Point.
Changes in U.S. federal, state or local laws that materially adversely affect the tax treatment of municipal securities or the market for those securities may lower volume and demand for municipal obligations and also may adversely impact the value and liquidity of the Company’s investments, a significant portion of which is invested in tax-exempt instruments.
Changes in U.S. federal, state or local laws that materially adversely affect the tax treatment of municipal securities, including potential loss of tax-exemption, may impact the market for those securities and result in lower volume and demand for municipal obligations and also may adversely impact the value and liquidity of the Company’s investments, a significant portion of which is invested in tax-exempt instruments.
In addition to the insurance, asset management and other regulations and laws specific to the industries in which it operates or invests, regulatory agencies in jurisdictions in which the Company operates across the globe have broad administrative power over many aspects of the Company’s business, which may include ethical issues, money laundering, privacy, recordkeeping and marketing and sales practices.
In addition to the insurance, asset management and other regulations and laws specific to the industries in which the Company operates or invests, regulatory agencies in jurisdictions in which the Company’s businesses operate have broad administrative power over many aspects of the Company’s business, which may include ethical issues, money laundering, privacy, recordkeeping and marketing and sales practices.
Recently proposed regulations could, if finalized in their current form, substantially expand the definition of RPII to include insurance income of our Foreign Insurance Subsidiaries related to affiliate reinsurance transactions.
Proposed regulations could, if finalized in their current form, substantially expand the definition of RPII to include insurance income of the Company’s Foreign Insurance Subsidiaries related to affiliate reinsurance transactions.
When interest rates are low, or when the market is relatively less risk averse, the credit spread between high-quality or insured obligations versus lower-rated obligations typically narrows. As a result, financial guaranty insurance typically provides lower interest cost savings to issuers than it would during periods of relatively wider credit spreads.
When the bond market is less volatile or is relatively less risk averse, the credit spread between high-quality or insured obligations versus lower-rated obligations typically narrows. As a result, financial guaranty insurance typically provides lower interest cost savings to issuers than it would during periods of relatively wider credit spreads.
The Company will be reliant on Sound Point and other alternative investment managers to provide accurate and timely financial reporting that will allow the Company to timely prepare and file its own financial statements in accordance with generally accepted accounting principles in the United States (GAAP) and in compliance with SEC regulations and New York Stock Exchange listing rules.
The Company will be reliant on Sound Point and other alternative investment managers to provide accurate and timely financial reporting that will allow the Company to timely prepare and file its own financial statements in accordance with generally accepted accounting principles in the United States (GAAP) and in compliance with SEC regulations and NYSE listing rules.
If the financial strength or financial enhancement ratings of one or more of the Company’s insurance subsidiaries were reduced below current levels, the Company expects the number of transactions that would benefit from the Company’s insurance would be reduced; consequently, a downgrade by rating agencies could harm the Company’s new insurance business production.
If the financial strength or financial enhancement ratings of one or more of the Company’s insurance subsidiaries were reduced below current levels, the Company expects that the number of transactions that would benefit from the Company’s insurance would be reduced and that its premium rates on new business would decrease; consequently, a downgrade by rating agencies could harm the Company’s new insurance business production.
An increase in the amount of the Company’s alternative investments in its investment portfolio and/or CIVs may increase the amount of the Company’s assets subject to this risk.
An increase in the amount of the Company’s alternative investments in its investment portfolio may increase the amount of the Company’s assets subject to this risk.
Risks Related to GAAP, Applicable Law and Litigation An inability to obtain accurate and timely financial information from Sound Point or other alternative investment managers may impair the Company’s ability to comply with reporting obligations under federal securities law.
An inability to obtain accurate and timely financial information from Sound Point or other alternative investment managers may impair the Company’s ability to comply with reporting obligations under federal securities law.
Accordingly, if the insurance subsidiaries are unable to pay sufficient dividends and other permitted payments at the times or in the amounts that are required, that would have an adverse effect on the ability of AGL, AGUS and AGMH to satisfy their ongoing cash requirements and on their ability to pay dividends to shareholders or repurchase common shares or fund other activities, including acquisitions. 57 The ability of AGL and its subsidiaries to meet their liquidity needs may be limited.
Accordingly, if the insurance subsidiaries are unable to pay sufficient dividends and other permitted payments at the times or in the amounts that are required, that would have an adverse effect on the ability of AGL, AGUS and AGMH to satisfy their ongoing cash requirements and on their ability to pay dividends to shareholders or repurchase common shares or fund other activities, including acquisitions.
While there has been support provided by the U.S. federal government designed to provide aid to state and local governments, including during the COVID-19 pandemic, certain state and local governments remain under financial stress.
While there has been support provided by the U.S. federal government designed to provide aid to state and local governments, certain state and local governments remain under financial stress.
None of the holding companies expect to have any significant operations or assets other than its ownership of the stock of its subsidiaries and its equity method investment in Sound Point.
None of the holding companies expect to have any significant operations or assets other than its ownership of the stock of its subsidiaries and its equity method ownership interest in Sound Point and certain alternative investments.
These and other risks could materially and negatively affect the Company’s ability to access the capital markets, the cost of the Company’s debt, the demand for its credit enhancement products, the amount of losses incurred on transactions it guarantees, the value and performance of its investments (including those that are accounted for as CIVs), the Company’s earnings from its investment in Sound Point, the capital and liquidity position and financial strength and enhancement ratings of its insurance subsidiaries, and the price of its common shares.
These and other risks could materially and negatively affect the Company’s ability to access the capital markets, the cost of the Company’s debt, the demand for its credit enhancement products, the amount of losses incurred on transactions it guarantees, the value and performance of its investments, the Company’s earnings from its ownership interest in Sound Point, the capital and liquidity position and financial strength and enhancement ratings of its insurance subsidiaries, and the price of its common shares.
From July 1, 2023, the Company participates in the asset management business segment through its ownership interest in Sound Point, which is subject to the risks of Sound Point’s business. See Item 1. Business — Asset Management. The Company had a carrying value for its investment in Sound Point as of December 31, 2023 of $429 million.
Since July 1, 2023, the Company participates in the asset management business through its ownership interest in Sound Point, which is subject to the risks of Sound Point’s business. See Item 1. Business — Asset Management. The Company had a carrying value for its ownership interest in Sound Point as of December 31, 2024 of $418 million.
Persons holding AGL’s shares may be subject to adverse tax consequences if AGL is considered to be a PFIC for U.S. federal income tax purposes. • Changes in U.S. federal income tax law adversely affecting the Company and an investment in AGL’s common shares. • An ownership change under Section 382 of the Code could have adverse U.S. federal tax consequences. • A change in AGL’s U.K. tax residence or its ability to otherwise qualify for the benefits of income tax treaties to which the U.K. is a party could adversely affect an investment in AGL’s common shares. • Changes in U.K. tax law or in AGL’s ability to satisfy all the conditions for exemption from U.K. taxation on dividend income or capital gains in respect of its direct subsidiaries could affect an investment in AGL’s common shares. • An adverse adjustment under U.K. legislation governing the taxation of U.K. tax resident holding companies on the profits of their non-U.K. subsidiaries adversely affecting Assured Guaranty's tax liability. • An adverse adjustment under U.K. transfer pricing legislation could adversely impact Assured Guaranty’s tax liability. • Assured Guaranty’s financial results may be affected by measures taken in response to the Organization for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) project.
Persons holding AGL’s shares if AGL is considered to be a PFIC for U.S. federal income tax purposes. • Changes in U.S. federal income tax law adversely affecting the Company and an investment in AGL’s common shares. • U.S. federal tax consequences of an ownership change under Section 382 of the Code. • A change in AGL’s U.K. tax residence or its ability to otherwise qualify for the benefits of income tax treaties to which the U.K. is a party. • Changes in U.K. tax law or in AGL’s ability to satisfy all the conditions for exemption from U.K. taxation on dividend income or capital gains in respect of its direct subsidiaries. • An adverse adjustment under U.K. legislation governing the taxation of U.K. tax resident holding companies on the profits of their non-U.K. subsidiaries. • An adverse adjustment under U.K. transfer pricing legislation. • Measures taken in response to the OECD Base Erosion and Profit Shifting (BEPS) project.
Borrower distress or default, whether or not the relevant obligation is insured by one of the Company’s insurance subsidiaries, may result in legislation, regulation or litigation that may impact the Company’s legal rights as creditor or its investments.
Borrower distress or default, whether or not the relevant obligation is insured by one of the Company’s insurance subsidiaries, may result in legislation, regulation, legal or regulatory determinations, or litigation that may adversely impact obligations insured or reinsured by the Company, the Company’s legal rights as creditor and its investments.
Conversely, if interest rates increase, the Company’s results of operations would improve as a result of higher future reinvestment income, but its financial condition would be adversely affected, since value of the fixed-rate investments generally would be reduced.
Conversely, if interest rates increase, the Company’s future results of operations could improve because of higher future reinvestment income from its new fixed rate investments, but its financial condition could be adversely affected since value of the fixed-rate investments generally would be reduced.
As private companies, Sound Point and other alternative investment managers are not subject to the reporting requirements of the Exchange Act and historically have not been required to prepare their financial statements in accordance with GAAP or in compliance with the SEC’s accounting regulations.
As private companies, Sound Point and other alternative investment managers historically have not been required to prepare their financial statements in accordance with GAAP or in compliance with the SEC’s accounting regulations.
Business — Insurance — Competition, the Company can face competition in its insurance business, either in the form of current or new providers of credit enhancement, such as nonpayment insurance, letters of credit or credit derivatives, or in terms of alternative structures, including uninsured offerings, or pricing competition. Increased competition could have an adverse effect on the Company’s insurance business.
Business — Insurance — Competition, the Company can face competition in its insurance business, either from other financial guaranty insurance companies or from current or new providers of other credit enhancement, such as nonpayment insurance, letters of credit or credit derivatives, or in terms of alternative structures, including uninsured offerings, which could have an adverse effect on the Company’s insurance business.
For example, it uses models to project future cash flows associated with pricing models, calculating insurance expected losses to be paid (recoveries), evaluating risks in its insurance and investments, valuing assets and liabilities and projecting liquidity needs.
The Company uses models for numerous purposes in its business. For example, it uses models to project future cash flows associated with pricing models, calculating insurance expected losses to be paid (recovered), evaluating risks in its insurance portfolio and investments, valuing assets and liabilities and projecting liquidity needs.
These risks include those described or referred to in this “Risk Factors” section as well as, among other things: (a) investor perceptions of the Company, its prospects and that of the financial guaranty and asset management industries and the markets in which the Company operates; (b) the Company’s operating and financial performance; (c) the Company’s access to financial and capital markets to raise additional capital, refinance its debt or obtain other financing; (d) the Company’s ability to repay debt; (e) the Company’s dividend policy; (f) the amount of share repurchases authorized by the Company; (g) future sales of equity or equity-related securities; (h) changes in earnings estimates or buy/sell recommendations by analysts; and (i) general financial, economic and other market conditions. 64 In addition, the stock market in recent years has experienced extreme price and trading volume fluctuations that often have been unrelated or disproportionate to the operating performance of individual companies.
These risks include those described or referred to in this “Risk Factors” section as well as, among other things: (a) investor perceptions of the Company, its prospects and that of the financial guaranty and asset management industries and the markets in which the Company operates; (b) the Company’s operating and financial performance; (c) the Company’s access to financial and capital markets to raise additional capital, refinance its debt or obtain other financing; (d) Company’s ability to repay debt; (e) the Company’s dividend policy; (f) the amount of share repurchases authorized by the AGL’s Board; (g) future sales of equity or equity-related securities; (h) changes in earnings estimates or buy/sell recommendations by analysts; and (i) general financial, economic and other market conditions.
Should the Company's risk assessments prove 48 inaccurate and should the applicable limits prove inadequate, the Company could be exposed to larger than anticipated losses, and could be required by the rating agencies to hold additional capital against insured exposures whether or not downgraded by the rating agencies.
Should the Company's risk assessments prove inaccurate and/or should the applicable limits prove inadequate, the Company could be exposed to larger than anticipated losses, and could be required by the rating agencies to hold additional capital against insured exposures whether or not downgraded by the rating agencies. 44 The Company is exposed to correlation risk across its insured exposures and in its investment portfolio.
However, a change in the way in which Assured Guaranty operates or any further change in the CFC regime, resulting in an attribution to AGL of any of the income profits of AGL’s non-U.K. resident subsidiaries for U.K. corporation tax purposes, could adversely affect Assured Guaranty’s financial results of operations.
However, a change in the way in which Assured Guaranty operates or any further change in the CFC regime, resulting in an attribution to AGL of any of the income profits of AGL’s non-U.K. resident subsidiaries for U.K. corporation tax purposes, could adversely affect Assured Guaranty’s financial results of operations. 57 An adverse adjustment under U.K. transfer pricing legislation or the imposition of diverted profits tax could adversely impact Assured Guaranty’s tax liability.
The Bermuda Minister of Finance, under Bermuda’s Exempted Undertakings Tax Protection Act 1966, as amended, has given AGL, AG Re and AGRO an assurance that if any legislation is enacted in Bermuda that would impose tax computed on profits or income, or computed on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, then subject to certain limitations the imposition of any such tax will not be applicable to AGL, AG Re or AGRO, or any of AGL’s or its subsidiaries’ operations, stocks, debentures or other obligations until March 31, 2035. 58 Notwithstanding the above, on December 27, 2023 the Bermuda government enacted a corporate income tax which will apply for accounting periods starting on or after January 1, 2025.
The Bermuda Minister of Finance, under Bermuda’s Exempted Undertakings Tax Protection Act 1966, as amended, has given AGL, AG Re and AGRO an assurance that if any legislation is enacted in Bermuda that would impose tax computed on profits or income, or computed on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, then subject to certain limitations the imposition of any such tax will not be applicable to AGL, AG Re or AGRO, or any of AGL’s or its subsidiaries’ operations, stocks, debentures or other obligations until March 31, 2035.
In addition, obligations supported by revenue streams, which may include both revenue and non-revenue bonds, such as those issued by toll road authorities, municipal utilities, airport authorities or mass transit, may be adversely affected by revenue declines resulting from reduced demand, changing demographics, evolving business practices that began during the COVID-19 pandemic including hybrid work models, telecommuting, video conferencing and other alternative work arrangements, or other causes.
Obligations supported by revenue streams, which may include both revenue and non-revenue bonds, such as those issued by healthcare facilities, toll road authorities, municipal utilities, airport authorities or mass transit, may be adversely affected by revenue declines resulting from reduced demand, changing demographics, evolving business practices including hybrid work models, telecommuting, and other alternative work arrangements, or other causes.
Additional information about the Company’s exposure and legal actions related to that exposure may be found in, Part II, Item 8, Financial Statements and Supplementary Data, Note 3, Outstanding Exposure.
Additional information about the Company’s exposure and legal actions related to that exposure may be found in Part II, Item 8, Financial Statements and Supplementary Data, Note 4, Expected Loss to be Paid (Recovered).
Strategic transactions may not result in the benefits anticipated. From time to time the Company evaluates strategic opportunities and conducts diligence activities with respect to transactions with other financial services companies including transactions involving legacy financial guaranty companies and financial guaranty portfolios, asset managers and other companies, and has executed a number of such transactions in the past.
Strategic transactions may not result in the benefits anticipated. From time to time the Company evaluates potential mergers, acquisitions, divestitures and other strategic opportunities, including transactions involving legacy financial guaranty companies and financial guaranty portfolios, asset managers and other companies, and has executed a number of such transactions in the past.
Numerous factors, including many over which the Company has no control, may have a significant impact on the market price of its common shares.
The market price of AGL’s common shares has experienced, and may continue to experience, significant volatility. Numerous factors, including many over which the Company has no control, may have a significant impact on the market price of its common shares.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Chief Technology Officer reported to the Board of Directors, Risk Oversight Committee and Audit Committee four times in 2023. The Chief Technology Officer has over 25 years of experience in information technology, technology research and security and operations management, with over 15 of those years focused in financial services and insurance.
Biggest changeThe Chief Technology Officer has over 25 years of experience in information technology, technology research and security and operations management, with over 15 of those years focused in financial services and insurance. The Chief Technology Officer holds a Master of Science in Information Systems and a Master of Business Administration with a focus in Management and Operations.
The Company maintains an Information Security Policy and Standards that details how material risks from cybersecurity threats are assessed, identified, and managed: • Risk assessment – a periodic risk assessment is performed by the Chief Information Security Officer using the National Institute of Standards and Technology cybersecurity framework and rates risks by criticality. • Risk identification – vulnerabilities and risks are identified through functions performed by the Chief Information Security Officer which includes assessments using automated tools, monitoring activities, reviewing threat intelligence, and responding to incidents.
The Company maintains an Information Security Policy and Standards that details how material risks from cybersecurity threats are assessed, identified, and managed: • Risk assessment – a periodic risk assessment is performed by the Chief Information Security Officer using the National Institute of Standards and Technology cybersecurity framework and rates risks by criticality. 62 • Risk identification – vulnerabilities and risks are identified through functions performed by the Chief Information Security Officer which includes assessments using automated tools, monitoring activities, reviewing threat intelligence, and responding to incidents.
The Company has procedures in place to respond to cybersecurity incidents, which include prompt meeting of the Cybersecurity Incident Disclosure Committee, a Company management committee, to assess cybersecurity incidents and determine materiality requiring disclosure on Form 8-K, notification of the Board of Directors of any material cybersecurity incidents, quarterly reporting by the Chief Information Security Officer of material and non-material incidents to the Risk Oversight Committee and management, and to the Audit Committee of such incidents related to the Company’s financial systems.
The Company has procedures in place to respond to cybersecurity incidents, which include prompt meeting of the Cybersecurity Incident Disclosure Committee, a Company management committee, to assess cybersecurity incidents and determine materiality requiring disclosure on Form 8-K, notification of the Board of any material cybersecurity incidents, quarterly reporting by the Chief Information Security Officer of material and non-material incidents to the Risk Oversight Committee and management, and to the Audit Committee of such incidents related to the Company’s financial systems.
The Company’s internal audit function, which has been outsourced to an international accounting firm, conducts periodic audits of cybersecurity and reports on such matters to the Audit Committee of the Board of Directors. The Company takes measures designed to mitigate risks associated with third-party vendors that have access to confidential information or provide business critical functions.
The Company’s internal audit function, which has been outsourced to an international accounting firm, conducts periodic audits of cybersecurity and reports on such matters to the Audit Committee of the Board. The Company takes measures designed to mitigate risks associated with third-party vendors that have access to confidential information or provide business critical functions.
Risks are also identified through independent assessments performed by third-party consultants and the internal audit function. • Risk management – the Chief Technology Officer oversees a process designed to protect against and remediate risks according to their criticality and presents to the Risk Oversight and Audit Committees of the Board of Directors and management at least semi-annually.
Risks are also identified through independent assessments performed by third-party consultants and the internal audit function. • Risk management – the Chief Technology Officer oversees a process designed to protect against and remediate risks according to their criticality and presents to the Risk Oversight and Audit Committees of the Board and management at least semi-annually.
ITEM 1C. CYBERSECURITY Risk Management and Strategy The Company has strategically integrated cybersecurity risk management into its broader risk management framework to promote a company-wide culture of cybersecurity risk management. This integration ensures that cybersecurity considerations are an integral part of our decision-making processes. The Company regularly assesses risks from cybersecurity threats and monitors its computer networks for vulnerabilities.
ITEM 1C. CYBERSECURITY Risk Management and Strategy The Company has strategically integrated cybersecurity risk management into its broader risk management framework to promote a company-wide culture of cybersecurity risk management. This integration ensures that cybersecurity considerations are an integral part of the Company’s decision-making processes. The Company regularly assesses risks from cybersecurity threats and monitors its computer networks for vulnerabilities.
The Chief Information Security Officer has over 25 years of experience in information security and is a Certified Information Systems Security Professional (CISSP), Certified Information Security Manager (CISM), and Certified Information Systems Auditor (CISA). The Chief Information Security Officer reports to the Board of Directors, its committees, and management on cybersecurity threats on a regular basis.
The Chief Information Security Officer has over 25 years of experience in information security and is a Certified Information Systems Security Professional (CISSP), Certified Information Security Manager (CISM), and Certified Information Systems Auditor (CISA). The 63 Chief Information Security Officer reports to the Board, its committees, and management on cybersecurity threats on a regular basis.
The Chief Information Security Officer also presents to the Board of Directors and Risk Oversight Committee on cybersecurity and data privacy matters at least annually. The Company’s Information Security Policy and Standards details a process for responding to cybersecurity events.
The Chief Information Security Officer also presents to the Board and Risk Oversight Committee on information technology, cybersecurity and data privacy matters at least annually. The Company’s Information Security Policy and Standards details a process for responding to cybersecurity events.
The security of the Company’s products, services and corporate network is a key priority both for the growth of the Company’s business and its responsibilities as the leading financial guaranty insurance company. The Company takes a risk-based approach to cybersecurity and has implemented cybersecurity policies throughout its operations. 66 To that end, the Company has implemented a cybersecurity governance structure.
The security of the Company’s products, services and corporate network is a key priority both for the growth of the Company’s business and its responsibilities as the leading financial guaranty insurance company. The Company takes a risk-based approach to cybersecurity and has implemented cybersecurity policies throughout its operations.
As described above in Cybersecurity – Risk Management and Strategy, the Company’s Chief Technology Officer has management responsibility for overseeing a process designed to remediate cybersecurity risks, and reports to the Board of Directors, Risk Oversight Committee, Audit Committee and management at least semi-annually.
As described above in Cybersecurity – Risk Management and Strategy, the Company’s Chief Technology Officer has management responsibility for overseeing a process designed to remediate cybersecurity risks, and reports to the Board, Risk Oversight Committee, Audit Committee and management at least semi-annually. The Chief Technology Officer reported to the Board, Risk Oversight Committee and Audit Committee four times in 2024.
The Board of Directors delegates certain cybersecurity oversight responsibilities to the Risk Oversight Committee, which oversees enterprise risk, vendor management, and information technology risks, and to the Audit Committee, whose oversight responsibility includes cybersecurity risks, data privacy and risk management related to the Company’s financial systems.
The Board delegates certain cybersecurity oversight responsibilities to the Risk Oversight Committee, which oversees enterprise risk, vendor management, and information technology risks, including assessing and managing cybersecurity and data privacy risks, and to the Audit Committee, whose oversight responsibility includes, as part of its oversight of the Company’s system of internal controls over financial reporting, assessing and managing financial risk exposures, including information technology, cybersecurity and data privacy risk related to the Company’s financial systems.
In 2023, the Chief Information Security Officer made an annual report on information technology and cybersecurity risks to the Board of Directors and Risk Oversight Committee and made four quarterly reports to the Audit Committee.
The Company has appointed a Chief Information Security Officer, who is responsible for leading the assessment and management of cybersecurity risk. In 2024, the Chief Information Security Officer made an annual report on information technology and cybersecurity risks to the Board and made four quarterly reports to the Risk Oversight Committee and the Audit Committee.
The Company has not experienced any risks from cybersecurity threats, including as a result of previous cybersecurity incidents, that have materially affected, or that it believes are reasonably likely to materially affect, the Company, including its business strategy, results of operations, or financial condition.
The Company has not experienced any cybersecurity incidents that have materially affected, or that it believes are reasonably likely to materially affect, the Company, including its business strategy, results of operations, or financial condition. Governance Under the Company’s cybersecurity governance framework, the Board has overall responsibility for overseeing management’s establishment and operation of a cybersecurity program.
The Board of Directors, some of whose members have broad-based skills in risk and management oversight and/or cybersecurity oversight certifications, oversees the risk management process. The Board of Directors employs an enterprise-wide approach to risk management that supports the Company’s business plans within a reasonable level of risk.
Members of the Board have broad-based skills in risk management oversight and/or cybersecurity oversight certifications.
Removed
Governance The Board of Directors oversees the risk management process, including overall responsibility for overseeing management’s establishment and operation of a cybersecurity program.
Added
The Company seeks contractual obligations from third-party vendors to notify it in the event of a cybersecurity incident, and monitors threat intelligence reports as well as current reports of SEC-registered vendors and their sub-service providers that have access to confidential information or provide business critical functions for cybersecurity incidents.
Removed
In the Company’s view, risk assessment and risk management entail not only understanding the risks a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for that company. The Board of Directors annually approves the Company’s business plan, factoring in risk management.
Removed
It also approves the Company’s risk appetite statement, which articulates the Company’s tolerance for risk and describes the general types of risk that the Company accepts or attempts to avoid.
Removed
The involvement of the Board of Directors in setting the Company’s business strategy is a key part of its assessment of management’s risk tolerance and a determinant of what constitutes an appropriate level of risk for the Company.
Removed
While the Board of Directors has the ultimate oversight responsibility for the risk management process, various committees of the Board of Directors also have responsibility for overseeing the Company’s risk assessment and risk management process.
Removed
The Risk Oversight Committee has specific responsibility for overseeing information technology matters, including assessing and managing cybersecurity and data privacy risks, and coordinates with the Audit Committee, which assesses and manages financial risk exposures, including cybersecurity and data privacy risks, as part of its oversight of the Company’s system of internal control over financial reporting.
Removed
The Chief Technology Officer holds a Master of Science in Information Systems and a Master of Business Administration with a focus in Management and Operations. The Company has appointed a Chief Information Security Officer, who is responsible for leading the assessment and management of cybersecurity risk.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES Management believes its office space is adequate for its current and anticipated needs. The Company’s office properties include the following: • Hamilton, Bermuda: ◦ approximately 8,700 square feet of office space that serves as the principal executive offices of AGL, AG Re and AGRO.
Biggest changeThe Company’s office properties are used by its Insurance segment and its Corporate division and include the following: • Hamilton, Bermuda: ◦ approximately 8,700 square feet of office space that serves as the principal executive office of AGL, and as the principal offices of AG Re and AGRO.
The lease expires in April 2026 and is renewable at the option of the Company. • New York, U.S.: ◦ 155,500 square feet of office space that serves as the primary offices of the U.S. Insurance Subsidiaries.
The lease expires in April 2026 and is renewable at the option of the Company. • New York, U.S.: ◦ 155,500 square feet of office space that serves as the principal office of AG.
The lease expires in September 2029, with an option, subject to certain conditions, to renew for five years at a fair market rent; and ◦ approximately 8,000 square feet of office space that previously served as the primary office of AssuredIM LLC. The lease expires in March 2024.
The lease expires in September 2029, with an option, subject to certain conditions, to renew for five years at a fair market rent. • Paris, France: ◦ approximately 2,800 square feet of office space that serves as the principal office of AGE.
As of December 31, 2023, this space is subleased to other tenants for a substantial portion of its remaining lease term. • London, U.K.: ◦ approximately 7,000 square feet of office space that serves as the primary office of AGUK.
As of December 31, 2024, approximately 24,000 square feet of this office space was subleased to another tenant. • London, U.K.: ◦ approximately 7,000 square feet of office space that serves as the principal office of AGUK.
As of December 31, 2023, this space is subleased to another tenant for its remaining term. • Other: The Company leases other space in San Francisco, California; Asheville, North Carolina; and Paris, France.
The lease expires in March 2029. • Other: The Company leases other space in San Francisco, California; Asheville, North Carolina; Sydney, Australia; and Singapore.
Removed
As of March 1, 2024, approximately 24,000 square feet of this office space will be subleased to another tenant; and 67 ◦ 78,600 square feet of office space that previously served as the primary offices of AssuredIM. The lease expires in April 2024.
Added
ITEM 2. PROPERTIES Management believes its office space is adequate for its current and anticipated needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeLEGAL PROCEEDINGS Information pertaining to legal proceedings is provided in the “Legal Proceedings” and “Litigation” sections of Part II, Item 8, Financial Statements and Supplementary Data, Note 18, Commitments and Contingencies , the “Recovery Litigation” section of Note 4, Expected Loss to be Paid (Recovered) , and the “Puerto Rico Litigation” section of Note 3, Outstanding Exposure , and is incorporated by reference herein.
Biggest changeITEM 3. LEGAL PROCEEDINGS Information pertaining to legal proceedings is provided in the “Legal Proceedings” and “Litigation” sections of Part II, Item 8, Financial Statements and Supplementary Data, Note 17, Contingencies , the “Puerto Rico Litigation” and “Recovery Litigation” sections of Note 4, Expected Loss to be Paid (Recovered) , and is incorporated by reference herein.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeRosenblum was Chief Actuary of AGL from 2021 through December 2023, and also Chief Actuary of AGM and AGC since 2010. He joined Assured Guaranty in 2004, responsible for the loss reserve function at Assured Guaranty Re Ltd. and Assured Guaranty Re Overseas Ltd., later assuming the same responsibilities at Assured Guaranty UK Limited and at Assured Guaranty (Europe) SA.
Biggest changeRosenblum was Chief Actuary of AGL from 2021 through December 2023, and also Chief Actuary of AGM (until its merger with and into AG) and AG from December 2010 to October 2024. He joined Assured Guaranty in 2004, responsible for the loss reserve function at AGRE and AGRO, later assuming the same responsibilities at AGUK and AGE.
Donnarumma was with Financial Guaranty Insurance Company from 1989 until 1993, where his responsibilities included underwriting domestic and international financial guaranty transactions. Prior to that, he served as a Director of Credit Risk Analysis at Fannie Mae from 1987 until 1989. Mr. Donnarumma was also an analyst with Moody’s Investors Services from 1985 until 1987. Jorge A.
Donnarumma was with Financial Guaranty Insurance Company from 1989 until 1993, where his responsibilities included underwriting domestic and international financial guaranty transactions. Prior to that, he served as a Director of Credit Risk Analysis at Fannie Mae from 1987 until 1989. Mr. Donnarumma was also an analyst with Moody’s Investors Services from 1985 until 1987. 65 Jorge A.
Donnarumma joined Assured Guaranty in 1993 and has held a number of positions over the years, including Deputy Chief Credit Officer of AGL, Chief Operating Officer and Chief Underwriting Officer of AG Re, Chief Risk Officer of AGC, and Senior Managing Director, Head of Mortgage and Asset-backed Securities of AGC. Prior to joining Assured Guaranty, Mr.
Donnarumma joined Assured Guaranty in 1993 and has held a number of positions over the years, including Deputy Chief Credit Officer of AGL, Chief Operating Officer and Chief Underwriting Officer of AG Re, Chief Risk Officer of AG, and Senior Managing Director, Head of Mortgage and Asset-backed Securities of AG. Prior to joining Assured Guaranty, Mr.
He was Chief Financial Officer and Treasurer of AG Re from 1999 until 2003 and was previously the Assistant Controller of Capital Re Corp., the Company’s predecessor. 68 Benjamin G. Rosenblum has been Chief Financial Officer of AGL since January 1, 2024. Prior to that, Mr.
He was Chief Financial Officer and Treasurer of AG Re from 1999 until 2003 and was previously the Assistant Controller of Capital Re Corp., the Company’s predecessor. Benjamin G. Rosenblum has been Chief Financial Officer of AGL since January 1, 2024. Prior to that, Mr.
Gana has been Chief Risk Officer of AGL and Chair of the U.S. Risk Management and Portfolio Risk Management Committees since January 1, 2023. Mr. Gana also maintains primary responsibility for the environmental aspect of Assured Guaranty’s ESG efforts. Prior to that, Mr. Gana served as Deputy Chief Risk Officer of AGM and AGC. Mr.
Gana has been Chief Risk Officer of AGL and Chair of the U.S. Risk Management and Portfolio Risk Management Committees since January 1, 2023. Mr. Gana also maintains primary responsibility for the environmental aspect of Assured Guaranty’s ESG efforts. Prior to that, Mr. Gana served as Deputy Chief Risk Officer of AGM and AG. Mr.
Prior to that, Mr Bailenson was Chief Financial Officer of AGL from June 2011 through December 2023. Prior to that, Mr. Bailenson became Chief Accounting Officer of AGC in 2003, of AGL in May 2005, and of AGM in July 2009, and served in such capacities until 2019.
Prior to that, Mr. Bailenson was Chief Financial Officer of AGL from June 2011 through December 2023. Prior to that, Mr. Bailenson became Chief Accounting Officer of AG in 2003, of AGL in May 2005, and of AGM in July 2009, and served in such capacities until 2019.
Horn began her public finance career at Inova Health System, a nationally ranked integrated health care delivery system, and subsequently served as a senior manager for the national health care strategy practice at Ernst & Young. 69 PART II
Horn began her public finance career at Inova Health System, a nationally ranked integrated health care delivery system, and subsequently served as a senior manager for the national health care strategy practice at Ernst & Young. 66 PART II
Gana continues to serve as a voting member of AGM's and AGC's Credit and Workout Committees. Prior to joining Assured Guaranty, Mr. Gana served as a Director of Global Commercial Asset Securitization for XLCA (now Syncora). Prior to XLCA, Mr.
Gana continues to serve as a voting member of AG’s Credit and Workout Committees. Prior to joining Assured Guaranty, Mr. Gana served as a Director of Global Commercial Asset Securitization for XLCA (now Syncora). Prior to XLCA, Mr.
Gana joined Assured Guaranty in 2005 as a Director in structured finance. Over the years, Mr. Gana has held a number of positions at Assured Guaranty, including Managing Director, Structured Finance at AGC, Senior Managing Director of Workouts and Government & Corporate Affairs at AGM and AGC, and chair of AGM's and AGC's Workout Committees. Mr.
Gana joined Assured Guaranty in 2005 as a Director in structured finance. Over the years, Mr. Gana has held a number of positions at Assured Guaranty, including Managing Director, Structured Finance at AG, Senior Managing Director of Workouts and Government & Corporate Affairs at AGM and AG, and chair of AGM's and AG’s Workout Committees. Mr.
Rosenblum 50 Chief Financial Officer Ling Chow 53 General Counsel and Secretary Stephen Donnarumma 61 Chief Credit Officer Jorge A. Gana 53 Chief Risk Officer Holly Horn 63 Chief Surveillance Officer Dominic J. Frederico has been a director of AGL since the Company’s 2004 initial public offering and the President and Chief Executive Officer of AGL since December 2003. Mr.
Rosenblum 51 Chief Financial Officer Ling Chow 54 General Counsel and Secretary Stephen Donnarumma 62 Chief Credit Officer Jorge A. Gana 54 Chief Risk Officer Holly Horn 64 Chief Surveillance Officer Dominic J. Frederico has been a director of AGL since the Company’s 2004 initial public offering and the President and Chief Executive Officer of AGL since December 2003. Mr.
Horn has been Chief Surveillance Officer of AGL and the Company’s U.S. Insurance Subsidiaries since January 2022. Prior to that, Ms. Horn served as AGM’s and AGC’s Chief Surveillance Officer, Public Finance where she was responsible for ongoing surveillance, monitoring and loss mitigation of municipal risks insured by the Company across all sectors of the municipal market.
Horn has been Chief Surveillance Officer of AGL and AG since January 2022. Prior to that, Ms. Horn served as AGM’s and AG’s Chief Surveillance Officer, Public Finance where she was responsible for ongoing surveillance, monitoring and loss mitigation of municipal risks insured by the Company across all sectors of the municipal market.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. Information About Our Executive Officers The table below sets forth the names, ages, positions and business experience of the executive officers of AGL. Name Age Position(s) Dominic J. Frederico 71 President and Chief Executive Officer; Deputy Chairman Robert A. Bailenson 57 Chief Operating Officer Benjamin G.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 64 Information About The Company’s Executive Officers The table below sets forth the names, ages, positions and business experience of the executive officers of AGL as of February 27, 2025. Name Age Position(s) Dominic J. Frederico 72 President and Chief Executive Officer; Deputy Chairman Robert A. Bailenson 58 Chief Operating Officer Benjamin G.
Stephen Donnarumma has been the Chief Credit Officer of AGC since 2007, and of AGM since its 2009 acquisition. Mr.
Stephen Donnarumma has been the Chief Credit Officer of AG since 2007, and of AGM from 2009 until its merger with and into AG. Mr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe chart and table depict the value on December 31 of each year from 2018 through 2023 of a $100 investment made on December 31, 2018, with all dividends reinvested: Assured Guaranty S&P 500 Index S&P 500 Financials Sector GICS Level 1 Index Russell Midcap Financial Services Index 12/31/2018 $ 100.00 $ 100.00 $ 100.00 $ 100.00 12/31/2019 130.13 131.47 132.09 133.55 12/31/2020 85.97 155.65 129.77 140.15 12/31/2021 139.57 200.29 175.02 190.40 12/31/2022 176.13 163.98 156.52 166.59 12/31/2023 215.80 207.04 175.46 188.41 ___________________ Source: Calculated from total returns published by Bloomberg. 71
Biggest changeThe chart and table depict the value on December 31 of each year from 2019 through 2024 of a $100 investment made on December 31, 2019, with all dividends reinvested: Assured Guaranty S&P 500 Stock Index S&P 500 Financials Stock Index Russell Midcap Index - Financials 12/31/2019 $ 100.00 $ 100.00 $ 100.00 $ 100.00 12/31/2020 66.06 118.39 98.24 104.94 12/31/2021 107.25 152.34 132.50 142.56 12/31/2022 135.35 124.73 118.49 124.74 12/31/2023 165.83 157.48 132.83 141.07 12/31/2024 202.43 196.85 173.35 184.55 ___________________ Source: Calculated from total returns published by Bloomberg. 68
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES AGL’s common shares are listed on the NYSE under the symbol “AGO.” On February 26, 2024, the approximate number of shareholders of record at the close of business on that date was 76.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES AGL’s common shares are listed on the NYSE under the symbol “AGO.” On February 26, 2025, the approximate number of shareholders of record at the close of business on that date was 76.
The repurchase authorization may be modified, extended or terminated by the Board at any time. It does not have an expiration date. See Item 8, Financial Statements and Supplementary Data, Note 19, Shareholders’ Equity, for additional information about share repurchases and authorizations.
The repurchase authorization may be modified, extended or terminated by the Board at any time. It does not have an expiration date. See Item 8, Financial Statements and Supplementary Data, Note 18, Shareholders’ Equity, for additional information about share repurchases and authorizations.
The following table reflects purchases of AGL common shares made by the Company during the fourth quarter of 2023.
The following table reflects purchases of AGL common shares made by the Company during the fourth quarter of 2024.
AGL paid quarterly cash dividends in the amount of $0.28 and $0.25 per common share in 2023 and 2022, respectively. For more information concerning AGL’s dividends, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources and Item 8, Financial Statements and Supplementary Data, Note 19, Shareholders’ Equity.
AGL paid quarterly cash dividends in the amount of $0.31 and $0.28 per common share in 2024 and 2023, respectively. For more information concerning AGL’s dividends, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources and Item 8, Financial Statements and Supplementary Data, Note 18, Shareholders’ Equity.
The Company added the Russell Midcap Financial Services Index in 2018 because it believes that this index, which includes the Company, provides a useful comparison to other companies in the financial services sector, and excludes companies that are included in the Standard & Poor's 500 Financials Sector GICS Level 1 Index but are many times larger than the Company.
The Company added the Russell Midcap Index - Financials in 2018 because it believes that this index, which includes the Company, provides a useful comparison to other companies in the financial services sector, and excludes companies that are included in the S&P’s 500 Financials Stock Index but are many times larger than the Company.
(2) After giving effect to repurchases since the Board first authorized the repurchase program on January 18, 2013, through February 27, 2024, the Company has repurchased a total of 145 million common shares for approximately $4.9 billion, excluding commissions, at an average price of $34.03 per share.
(2) After giving effect to repurchases since the Board first authorized the repurchase program on January 18, 2013, through February 27, 2025, the Company has repurchased a total of 151 million common shares for approximately $5.4 billion, excluding commissions, at an average price of $35.99 per share.
Issuer’s Purchases of Equity Securities In 2023, the Company repurchased a total of 3,215,893 common shares for approximately $199 million at an average price of $61.95 per share. From time to time, the Board authorizes the repurchase of additional common shares under a program without an expiration date that it initiated on January 18, 2013.
Issuer’s Purchases of Equity Securities In 2024, the Company repurchased a total of 6,180,774 common shares for approximately $502 million at an average price of $81.28 per share. From time to time, the Board authorizes the repurchase of additional common shares under a program without an expiration date that it initiated on January 18, 2013.
(3) Excludes commissions. 70 Performance Graph Set forth below are a line graph and a table comparing the dollar change in the cumulative total shareholder return on AGL’s common shares from December 31, 2018 through December 31, 2023 as compared to the cumulative total return of the Standard & Poor’s 500 Stock Index, the cumulative total return of the Standard & Poor’s 500 Financials Sector GICS Level 1 Index and the cumulative total return of the Russell Midcap Financial Services Index.
(3) Excludes commissions and excise taxes. 67 Performance Graph Set forth below are a line graph and a table comparing the dollar change in the cumulative total shareholder return on AGL’s common shares from December 31, 2019 through December 31, 2024 as compared to the cumulative total return of the S&P’s 500 Stock Index, the cumulative total return of the S&P’s 500 Financials Stock Index and the cumulative total return of the Russell Midcap Index - Financials.
Most recently, on November 1, 2023, the Board authorized the repurchase of an additional $300 million of its common shares. As of February 27, 2024, the Company was authorized to purchase $228 million of its common shares.
Most recently, on November 8, 2024, the Board authorized the repurchase of an additional $250 million of its common shares. As of February 27, 2025, the remaining amount the Company was authorized to purchase was approximately $276 million of its common shares.
Period Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program (2) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Program(3) October 1 - October 31 580,637 $ 60.76 580,637 $ 78,066,023 November 1 - November 30 596,694 $ 65.67 527,839 $ 343,390,830 December 1 - December 31 551,204 $ 71.30 551,204 $ 304,088,043 Total 1,728,535 $ 65.82 1,659,680 ____________________ (1) The total number of shares purchased also includes shares purchased as a result of employees surrendering shares as payment for withholding taxes upon vesting of share awards.
Period Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program (2) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Program(3) October 1 - October 31 601,575 $ 83.52 601,575 $ 142,267,634 November 1 - November 30 280,661 $ 89.30 280,579 $ 367,211,562 December 1 - December 31 172,573 $ 89.94 172,573 $ 351,689,856 Total 1,054,809 $ 86.11 1,054,727 ____________________ (1) The total number of shares purchased also includes shares purchased as a result of employees surrendering shares as payment for withholding taxes upon vesting of share awards.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

209 edited+70 added−116 removed82 unchanged
Biggest changeThe income (loss) on such investments is reported in “equity in earnings (losses) of investees” and typically represents the Company’s share of earnings of its other investees. 85 Insurance Segment Income from Investments Year Ended December 31, 2023 2022 2021 (in millions) Net investment income Fixed-maturity securities, available-for-sale: Externally managed (1) $ 207 $ 199 $ 210 Loss Mitigation Securities 58 35 42 Puerto Rico, New Recovery Bonds 12 7 — Other (2) 20 19 23 Short-term investments 65 13 — Intercompany loans 10 10 10 Other investment assets 3 1 1 Investment income 375 284 286 Investment expenses (5) (6) (6) Net investment income $ 370 $ 278 $ 280 Fair value gains (losses) on trading securities $ 74 $ (34) $ — Equity in earnings (losses) of investees CLOs $ 50 $ (2) $ 29 Asset-based 5 5 19 Healthcare 19 (11) 30 Other 8 (43) 66 Equity in earnings (losses) of investees $ 82 $ (51) $ 144 ____________________ (1) Includes income on the portion of the CLO portfolio that was managed by AssuredIM prior to July 1, 2023.
Biggest changeThe carrying value of these transferred investments as of December 31, 2024 was $118 million. 81 Insurance Segment Income from Investments Year Ended December 31, 2024 2023 2022 (in millions) Net investment income Fixed-maturity securities, available-for-sale $ 263 $ 297 $ 260 Short-term investments 70 65 13 Intercompany loans 10 10 10 Other invested assets 1 3 1 Investment income 344 375 284 Investment expenses (5) (5) (6) Net investment income $ 339 $ 370 $ 278 Fair value gains (losses) on trading securities $ 52 $ 74 $ (34) Equity in earnings (losses) of investees CLOs $ 47 $ 50 $ (2) Private healthcare investing 11 19 (11) Asset-based/specialty finance 24 5 5 Middle market direct lending 2 — — Other 18 8 (43) Equity in earnings (losses) of investees $ 102 $ 82 $ (51) Net investment income for 2024 decreased compared to 2023, primarily due to the lower income on Loss Mitigation Securities and lower average asset balances due in part to sale of new general obligation bonds and new bonds backed by toll revenues (together, New Recovery Bonds) received as part of the 2022 Puerto Rico Resolutions, partially offset by higher income related to the distribution of assets to alternative investments from CIVs.
Specialty business GWP is recorded as premiums are due. Credit derivatives are accounted for at fair value and therefore are not included in GWP.
Specialty business GWP is recorded as premiums are due. Credit derivatives are accounted for at fair value and therefore not included in GWP.
CVIs issued by Puerto Rico and received as part of the 2022 Puerto Rico Resolutions are classified as trading with changes in fair value reported in “fair value gains (losses) on trading securities” in the consolidated statements on operations.
CVIs issued by Puerto Rico and received as part of the 2022 Puerto Rico Resolutions are classified as trading with changes in fair value reported in “fair value gains (losses) on trading securities” in the consolidated statements of operations.
Investment Portfolio The Company’s principal objectives in managing its investment portfolio are to support the highest possible ratings for each operating company, to manage investment risk within the context of the underlying portfolio of insurance risk, to maintain sufficient liquidity to cover unexpected stress in the insurance portfolio, and to maximize after-tax net investment income.
Investment Portfolio The Company’s principal objectives in managing its investment portfolio are to support the highest possible ratings for each operating company, manage investment risk within the context of the underlying portfolio of insurance risk, maintain sufficient liquidity to cover unexpected stress in the insurance portfolio and maximize after-tax net investment income.
The AOCI component of the fair value adjustment on the investment portfolio is not deemed economic because the Company generally holds these investments to maturity and therefore would not recognize an economic gain or loss. 4) Elimination of the tax effects related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.
The AOCI component of the fair value adjustment on the investment portfolio is not deemed economic because the Company generally holds these investments to maturity and therefore would not recognize an economic gain or loss. 4) The tax effects related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.
This amount represents the net present value of estimated future revenue from these contracts (other than credit derivatives with net expected losses), net of reinsurance, ceding commissions and premium taxes. Future installment premiums are discounted at the approximate average pre-tax book yield of fixed-maturity securities purchased during the prior calendar year, other than Loss Mitigation Securities.
This amount represents the net present value of 93 estimated future revenue from these contracts (other than credit derivatives with net expected losses), net of reinsurance, ceding commissions and premium taxes. Future installment premiums are discounted at the approximate average pre-tax book yield of fixed-maturity securities purchased during the prior calendar year, other than Loss Mitigation Securities.
Total (in millions) GWP $ 211 $ 82 $ 59 $ 5 $ 357 Less: Installment GWP and other GAAP adjustments (1) 109 74 59 5 247 Upfront GWP 102 8 — — 110 Plus: Installment premiums and other (2) 110 75 68 41 294 PVP $ 212 $ 83 $ 68 $ 41 $ 404 Year Ended December 31, 2022 Public Finance Structured Finance U.S.
Total (in millions) GWP $ 211 $ 82 $ 59 $ 5 $ 357 Less: Installment GWP and other GAAP adjustments (1) 109 74 59 5 247 Upfront GWP 102 8 — — 110 Plus: Installment premiums and other (2) 110 75 68 41 294 PVP $ 212 $ 83 $ 68 $ 41 $ 404 94 Year Ended December 31, 2022 Public Finance Structured Finance U.S.
The Company believes that, over time, wider credit spreads may improve demand for bond insurance. In certain segments of the infrastructure and structured finance markets, the Company believes its financial guaranty product is competitive with other financing options. For example, certain investors may receive advantageous capital requirement treatment with the addition of the Company’s guaranty.
The Company believes that, over time, wider credit spreads may improve demand for bond insurance. 70 In certain segments of the infrastructure and structured finance markets, the Company believes its financial guaranty product is competitive with other financing options. For example, certain investors may receive advantageous capital requirement treatment with the addition of the Company’s guaranty.
The Company periodically estimates remaining 82 expected lives of its insured obligations backed by homogeneous pools of assets and makes prospective adjustments for such changes in expected lives. Scheduled net earned premiums decrease each year unless replaced by a higher amount of new business, or books of business acquired in business combinations.
The Company periodically estimates remaining expected lives of its insured obligations backed by homogeneous pools of assets and makes prospective adjustments for such changes in expected lives. Scheduled net earned premiums decrease each year unless replaced by a higher amount of new business, or books of business acquired in business combinations.
These amounts represent net deferred expenses that have already been paid or accrued and will be expensed in future accounting periods. 2) Addition of the net present value of estimated net future revenue. See below. 96 3) Addition of the deferred premium revenue on financial guaranty contracts in excess of expected loss to be expensed, net of reinsurance.
These amounts represent net deferred expenses that have already been paid or accrued and will be expensed in future accounting periods. 2) Addition of the net present value of estimated net future revenue. See below. 3) Addition of the deferred premium revenue on financial guaranty contracts in excess of expected loss to be expensed, net of reinsurance.
Results of Operations Critical Accounting Estimates The preparation of financial statements in accordance with GAAP requires the application of accounting policies that often involve a significant degree of judgment and require the Company to make estimates and assumptions, based on available information, that affect the amounts of assets, liabilities, revenues and expenses reported in the financial statements.
Results of Operations Critical Accounting Estimates The preparation of financial statements in accordance with GAAP requires the application of accounting policies that often involve a significant degree of judgment and require the Company to make estimates and assumptions, based on available information, that affect the amounts of assets, liabilities, revenues and expenses reported in the consolidated financial statements.
Financial guaranty insurance and reinsurance GWP includes: (i) amounts collected upfront on new business written; (ii) the present value of future contractual or expected premiums on new financial guaranty business written (discounted at risk-free rates); and (iii) the effects of changes in the estimated lives of certain transactions in the in-force book of business.
Financial guaranty insurance and reinsurance GWP includes: (i) amounts collected upfront on new business written; (ii) the present value of future contractual or expected premiums on new financial guaranty business written (discounted at risk-free rates); and (iii) the effects of changes in the estimated premium or lives of certain transactions in the in-force book of business.
Insurance segment loss expense includes loss and LAE on financial guaranty insurance contracts and losses on credit derivatives without giving effect to eliminations related to the consolidation of FG VIEs. 88 For financial guaranty insurance contracts, each transaction’s expected loss to be expensed is compared with the deferred premium revenue of that transaction.
Insurance segment loss expense includes loss and LAE on financial guaranty insurance contracts and losses on credit derivatives without giving effect to eliminations related to the consolidation of FG VIEs. For financial guaranty insurance contracts, each transaction’s expected loss to be expensed is compared with the deferred premium revenue of that transaction.
This amount represents the present value of the expected future net earned premiums, net of the present value of expected losses to be expensed, which are not reflected in GAAP equity. 4) Elimination of the tax effects related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.
This amount represents the present value of the expected future net earned premiums, net of the present value of expected losses to be expensed, which are not reflected in GAAP equity. 4) The tax effects related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.
The insurance subsidiaries’ ability to pay dividends depends upon their financial condition, results of operations, cash requirements, other potential uses for such funds, and compliance with rating agency requirements, and is also subject to restrictions contained in the insurance laws and related regulations of their states of domicile.
The insurance subsidiaries’ ability to pay dividends depends upon their financial condition, results of operations, cash requirements, other potential uses for such funds and compliance with rating agency requirements, and is also subject to restrictions contained in the 103 insurance laws and related regulations of their states of domicile.
Therefore, the current period’s foreign exchange remeasurement gains (losses) are not necessarily indicative of the total foreign exchange gains (losses) that the Company will ultimately recognize. 5) Elimination of the tax effects related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.
Therefore, the current period’s foreign exchange remeasurement gains (losses) are not necessarily indicative of the total foreign exchange gains (losses) that the Company will ultimately recognize. 5) The tax effects related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.
Premiums on European infrastructure and structured finance transactions typically are paid, in whole or in part, on an installment basis, whereas premiums on U.S. public finance transactions are often paid upfront. The following table presents the foreign exchange rates as of the balance sheet dates. Foreign Exchange Rates U.S.
Premiums on European infrastructure and structured finance transactions typically are paid, in whole or in part, on an installment basis, whereas premiums on U.S. public finance transactions are often paid upfront. 90 The following table presents the foreign exchange rates as of the balance sheet dates. Foreign Exchange Rates U.S.
Adjusted book value per share, further adjusted for FG VIE and CIV consolidation (core adjusted book value), is one of the key financial measures used in determining the amount of certain long-term compensation elements to management and employees and used by rating agencies and investors.
Adjusted book value per share, further adjusted for FG VIE and CIV consolidation (core adjusted book value), is one of the key financial measures used in determining the amount of 92 certain long-term compensation elements to management and employees and used by rating agencies and investors.
Middle East Conflict In light of recent events in the Middle East, the Company’s surveillance and treasury functions have reviewed the Company’s insurance and investment portfolios, respectively, for exposures to the Middle East. After review, the Company’s surveillance and treasury functions have identified no material direct exposure to such area.
Middle East Conflict In light of events in the Middle East, the Company’s surveillance and treasury functions have reviewed the Company’s insurance and investment portfolios, respectively, for exposures to the Middle East. After review, the Company’s surveillance and treasury functions have identified no material direct exposure to such area.
(2) Represents the elimination of the equity in earnings (losses) of investees of AGAS and the other subsidiaries’ investments in certain alternative investments, primarily Sound Point and AHP funds (and prior to July 1, 2023, AssuredIM managed funds).
(2) Represents the elimination of the equity in earnings (losses) of investees of AGAS and the other subsidiaries’ investments in certain alternative investments, primarily Sound Point funds (and prior to July 1, 2023, AssuredIM managed funds).
Consolidating FG VIEs (as opposed to accounting for the related insurance contracts in the Insurance segment), has a significant gross-up effect on the consolidated financial statements, and includes: (i) the establishment of the FG VIEs’ assets 91 and liabilities and related changes in fair value on the consolidated financial statements; (ii) eliminating the premiums and losses/recoveries associated with the financial guaranty insurance contracts between the insurance subsidiaries and the FG VIEs; and (iii) eliminating the investment balances associated with the insurance subsidiaries’ purchases of the debt obligations of the FG VIEs.
Consolidating FG VIEs (as opposed to accounting for the related insurance contracts in the Insurance segment), has a significant gross-up effect on the consolidated financial statements, and includes: (i) the establishment of the FG VIEs’ assets and liabilities and related changes in fair value on the consolidated financial statements; (ii) eliminating the premiums and 87 losses/recoveries associated with the financial guaranty insurance contracts between the insurance subsidiaries and the FG VIEs; and (iii) eliminating the investment balances associated with the insurance subsidiaries’ purchases of the debt obligations of the FG VIEs.
Actual installment premiums may differ from those estimated in the Company’s PVP calculation due to factors including, but not limited to, changes in foreign exchange rates, prepayment speeds, terminations, credit defaults, or other factors that affect par outstanding or the ultimate maturity of an obligation. Reconciliation of GWP to PVP Year Ended December 31, 2023 Public Finance Structured Finance U.S.
Actual installment premiums may differ from those estimated in the Company’s PVP calculation due to factors including, but not limited to, changes in foreign exchange rates, prepayment speeds, terminations, credit defaults, or other factors that affect par outstanding or the ultimate maturity of an obligation. Reconciliation of GWP to PVP Year Ended December 31, 2024 Public Finance Structured Finance U.S.
The Insurance segment reports the Company’s percentage ownership of Sound Point funds and AHP funds’ as equity method investments with changes in NAV included in the Insurance segment adjusted operating income.
The Insurance segment reports the Company’s percentage ownership of Sound Point funds and AHP funds as equity method investments with changes in NAV included in the Insurance segment adjusted operating income.
Such amounts are affected by changes in market interest rates, the Company’s credit spreads, price indications on the Company’s publicly traded debt and other market factors and are not expected to result in an economic gain or loss. 4) Elimination of foreign exchange gains (losses) on remeasurement of net premium receivables and loss and LAE reserves that are recognized in net income.
Such amounts are affected by changes in market interest rates, the Company’s credit spreads, price indications on the Company’s publicly traded debt and other market factors and are not expected to result in an economic gain or loss. 4) Elimination of foreign exchange gains (losses) on remeasurement of net premium receivables and loss and LAE reserves that are recognized in net income (loss) attributable to AGL.
The Company’s actual results could differ materially from those anticipated in these forward looking statements as a result of various factors, including those discussed below and elsewhere in this Form 10-K, particularly under the headings “Risk Factors” and “Forward Looking Statements.” Discussion related to the results of operations for the Company’s comparison of 2022 results to 2021 results have been omitted in this Form 10-K.
The Company’s actual results could differ materially from those anticipated in these forward looking statements as a result of various factors, including those discussed below and elsewhere in this Form 10-K, particularly under the headings “Risk Factors” and “Forward Looking Statements.” Discussion related to the results of operations for the Company’s comparison of 2023 results to 2022 results have been omitted in this Form 10-K.
Such fair value adjustments are heavily affected by, and in part fluctuate with, changes in market interest rates, the Company’s credit spreads, and other market factors and are not expected to result in an economic gain or loss. 3) Elimination of fair value gains (losses) on the Company’s CCS that are recognized in net income.
Such fair value adjustments are heavily affected by, and in part fluctuate with, changes in market interest rates, the Company’s credit spreads, and other market factors and are not expected to result in an economic gain or loss. 3) Elimination of fair value gains (losses) on the Company’s CCS that are recognized in net income (loss) attributable to AGL.
The terms of the Company’s CDS contracts generally are modified from standard CDS contract forms approved by International Swaps and Derivatives Association, Inc. such that the circumstances giving rise to the Company’s obligation to make loss payments are similar to those for its financial guaranty insurance contracts.
The terms of the Company’s credit default swaps (CDS) contracts generally are modified from standard CDS contract forms approved by International Swaps and Derivatives Association, Inc. such that the circumstances giving rise to the Company’s obligation to make loss payments are similar to those for its financial guaranty insurance contracts.
Corporate division employee compensation and benefits expenses are an allocation of expenses based on time studies and represent the costs incurred and time spent on holding company activities, capital management, corporate oversight and governance including Board of Director expenses, legal fees and other direct or allocated expenses.
Corporate division employee compensation and benefits expenses and other operating expenses are an allocation of expenses based on time studies and represent the costs incurred and time spent on holding company activities, capital management, corporate oversight and governance including Board of Director expenses, legal fees and other direct or allocated expense.
The amount of Insurance segment loss expense, which includes all policies regardless of form, is a function of the amount of economic loss development discussed above and the deferred premium revenue amortization in a given period, on a contract-by-contract basis. The following table presents the Insurance segment loss expense (benefit).
The amount of Insurance segment loss expense, which includes losses on policies regardless of form, is a function of the amount of economic loss development discussed above and the deferred premium revenue amortization in a given period, on a contract-by-contract basis. The following table presents the Insurance segment loss expense (benefit).
(2) See Item 8, Financial Statements and Supplementary Data, Note 19, Shareholders’ Equity, for additional information about share repurchases and authorizations. Generally, dividends paid by a U.S. company to a Bermuda holding company are subject to a 30% withholding tax.
(2) See Item 8, Financial Statements and Supplementary Data, Note 18, Shareholders’ Equity, for additional information about share repurchases and authorizations. Generally, dividends paid by a U.S. company to a Bermuda holding company are subject to a 30% withholding tax.
Holding Companies may also require liquidity to: • make capital investments in their operating subsidiaries; • fund acquisitions of new businesses; • purchase or redeem the Company’s outstanding debt; or • repurchase AGL’s common shares pursuant to AGL’s share repurchase authorization.
Holding Companies may also require liquidity to: • make capital investments in their operating subsidiaries and in alternative investments; • fund acquisitions of new businesses; • purchase or redeem the Company’s outstanding debt; or • repurchase AGL’s common shares pursuant to AGL’s share repurchase authorization.
On a per share basis, shareholders’ equity attributable to AGL, adjusted operating shareholders’ equity, and adjusted book value increased as of December 31, 2023 compared with December 31, 2022, due in part to the accretive effect of the share repurchase program.
On a per share basis, shareholders’ equity attributable to AGL, adjusted operating shareholders’ equity and adjusted book value increased as of December 31, 2024 compared with December 31, 2023, due in part to the accretive effect of the share repurchase program.
Fair value gains (losses) of CCS are heavily affected by, and in part fluctuate with, changes in market spreads and interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss.
Fair value gains (losses) on CCS are heavily affected by, and in part fluctuate with, changes in market spreads and interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss.
The tables below show the Company’s ten largest U.S. public finance, U.S. structured finance and non-U.S. exposures by revenue source, excluding related authorities and public corporations, as of December 31, 2023. Ten Largest U.S. Public Finance Exposures by Revenue Source As of December 31, 2023 Net Par Outstanding Percent of Total U.S.
The tables below show the Company’s ten largest U.S. public finance, U.S. structured finance and non-U.S. exposures by revenue source, excluding related authorities and public corporations, as of December 31, 2024. Ten Largest U.S. Public Finance Exposures by Revenue Source As of December 31, 2024 Net Par Outstanding Percent of Total U.S.
The low interest rate environment and tight U.S. municipal credit spreads from when the financial crisis began in 2008 through early 2020 dampened demand for bond insurance compared to the levels before the financial crisis.
The low interest rate environment and tight U.S. municipal credit spreads from when the financial crisis began in 2008 through early 2020 dampened demand for bond insurance compared with the levels before the financial crisis.
Therefore, the timing of loss recognition in income does not necessarily coincide with the timing of the actual credit impairment or improvement reported in net economic loss development. Transactions (particularly BIG transactions) acquired in a business combination or seasoned portfolios assumed from legacy financial guaranty insurers generally have the largest deferred premium revenue balances.
Therefore, the timing of loss recognition in income does not necessarily coincide with the timing of the actual credit impairment or improvement reported in net economic loss development. Transactions (particularly BIG transactions) acquired in business combinations or seasoned portfolios assumed from legacy financial guaranty insurers generally have the largest deferred premium revenue balances.
There is no corresponding GAAP financial measure. 97 PVP or Present Value of New Business Production Management believes that PVP is a useful measure because it enables the evaluation of the value of new business production in the Insurance segment by taking into account the value of estimated future installment premiums on all new contracts underwritten in a reporting period as well as additional installment premiums and fees on existing contracts (which may result from supplements or fees or from the issuer not calling an insured obligation the Company projected would be called), regardless of form, which management believes GAAP gross written premiums and changes in fair value of credit derivatives do not adequately measure.
PVP or Present Value of New Business Production Management believes that PVP is a useful measure because it enables the evaluation of the value of new business production in the Insurance segment by taking into account the value of estimated future installment premiums on all new contracts underwritten in a reporting period as well as additional installment premiums and fees on existing contracts (which may result from supplements or fees or from the issuer not calling an insured obligation the Company projected would be called), regardless of form, which management believes GAAP gross written premiums and changes in fair value of credit derivatives do not adequately measure.
Assumptions used in the determination of the net expected loss to be paid (recovered) such as delinquency, severity, discount rates and expected time frames to recovery were consistent by sector regardless of the accounting model used. Current risk-free rates are used to discount expected losses at the end of each reporting period.
Assumptions used in the determination of the net expected loss to be paid (recovered) such as delinquency, severity, discount rates and expected time frames to recovery are consistent for each sector regardless of the accounting model used. Current risk-free rates are used to discount expected losses at the end of each reporting period.
Holding Companies Long-Term Debt and Intercompany Loans As of December 31, 2023 2022 (in millions) Effective Interest Rate Final Maturity Principal Amount AGUS - long-term debt 5% Senior Notes 5.00% 2024 $ — $ 330 6.125% Senior Notes 6.125% 2028 350 — 3.15% Senior Notes 3.15% 2031 500 500 7% Senior Notes 6.40% 2034 200 200 3.6% Senior Notes 3.60% 2051 400 400 Series A Enhanced Junior Subordinated Debentures (1) 3 month CME Term SOFR +2.64% 2066 150 150 AGUS long-term debt 1,600 1,580 AGUS - intercompany loans from: AGC and AGM 3.50% 2029 250 250 AGRO 5.00% 2028 20 20 AGUS intercompany loans 270 270 Total AGUS long-term debt and intercompany loans 1,870 1,850 AGMH Junior Subordinated Debentures (2) 6.40% 2066 300 300 Total AGMH long-term debt 300 300 AGMH’s long-term debt purchased by AGUS (3) (154) (154) U.S.
Holding Companies Long-Term Debt and Intercompany Loans As of December 31, 2024 2023 (in millions) Effective Interest Rate Final Maturity Principal Amount AGUS - long-term debt 6.125% Senior Notes 6.125% 2028 $ 350 $ 350 3.15% Senior Notes 3.15% 2031 500 500 7% Senior Notes 6.40% 2034 200 200 3.6% Senior Notes 3.60% 2051 400 400 Series A Enhanced Junior Subordinated Debentures 3 month CME Term SOFR +2.64% 2066 150 150 AGUS long-term debt 1,600 1,600 AGUS - intercompany loans from: AG/AGM (1) 3.50% 2029 250 250 AGRO 5.00% 2028 20 20 AGUS intercompany loans 270 270 Total AGUS long-term debt and intercompany loans 1,870 1,870 AGMH Junior Subordinated Debentures (2) 6.40% 2066 300 300 Total AGMH long-term debt 300 300 AGMH’s long-term debt purchased by AGUS (3) (154) (154) U.S.
The documentation for certain CDS were negotiated to require the Company to also pay if the obligor becomes bankrupt or if the reference obligation were restructured. Furthermore, some CDS documentation requires the Company to make a payment due to an event that is unrelated to the performance of the obligation referenced in the credit derivative.
The documentation for certain CDS was negotiated to require the Company to also pay if the obligor were to become bankrupt or if the reference obligation were restructured. Furthermore, some CDS documentation requires the Company to make a payment due to an event that is unrelated to the performance of the obligation referenced in the credit derivative.
In the third quarter of 2023, as a result of the Sound Point Transaction and AHP Transaction, the Company deconsolidated all CLOs and CLO warehouses and certain funds. As a result, beginning July 1, 2023, the Company’s cash flow statements will no longer include all the operating, investing and financing cash flow activity of the deconsolidated CIVs.
In the third quarter of 2023, as a result of the Sound Point Transaction and AHP Transaction, the Company deconsolidated all CLOs and CLO warehouses and certain funds. Therefore, beginning July 1, 2023, the Company’s cash flow statements no longer include all the operating, investing and financing cash flow activity of those deconsolidated CIVs.
Restricted Assets Based on fair value, fixed-maturity securities, short-term investments and cash that are either held in trust for the benefit of third-party ceding insurers in accordance with statutory requirements, placed on deposit to fulfill state licensing requirements, or otherwise pledged or restricted totaled $234 million and $222 million, as of December 31, 2023 and December 31, 2022, respectively.
Restricted Assets Based on fair value, fixed-maturity securities, short-term investments and cash that are either held in trust for the benefit of third-party ceding insurers in accordance with statutory requirements, placed on deposit to fulfill state licensing requirements, or otherwise pledged or restricted, totaled $79 million and $234 million as of December 31, 2024 and December 31, 2023, respectively.
The timing of sales is largely subject to the Company’s discretion and influenced by market opportunities, as well as the Company’s tax and capital profile. 2) Elimination of non-credit impairment-related unrealized fair value gains (losses) on credit derivatives that are recognized in net income, which is the amount of unrealized fair value gains (losses) in excess of the present 95 value of the expected estimated economic credit losses, and non-economic payments.
The timing of sales is largely subject to the Company’s discretion and influenced by market opportunities, as well as the Company’s tax and capital profile. 2) Elimination of non-credit impairment-related unrealized fair value gains (losses) on credit derivatives that are recognized in net income (loss) attributable to AGL, which is the amount of unrealized fair value gains (losses) in excess of the present value of the expected estimated economic credit losses, and non-economic payments.
Overview Business The Company reports its results of operations in two distinct segments, Insurance and Asset Management, consistent with the manner in which the Company’s chief operating decision maker (CODM) reviews the business to assess performance and allocate resources. The Company’s Corporate division and other activities (including financial guaranty VIEs (FG VIEs) and consolidated investment vehicles (CIVs)) are presented separately.
Overview Business The Company reports its results of operations in two distinct segments, Insurance and Asset Management, consistent with the manner in which the Company’s chief operating decision maker reviews the business to assess performance and allocate resources. The Company’s Corporate division and other activities (including financial guaranty VIEs (FG VIEs) and CIVs) are presented separately.
The Company may also purchase attractively priced obligations, including BIG obligations, that it has insured and for which it had expected losses to be paid, in order to mitigate the economic effect of insured losses (Loss Mitigation Securities). The fair value of Loss Mitigation Securities as of December 31, 2023 (excluding the value of the Company’s insurance) was $459 million.
The Company may also purchase attractively priced obligations, including BIG obligations, that it has insured and for which it had expected losses to be paid, in order to mitigate the economic effect of insured losses (Loss Mitigation Securities). The fair value of Loss Mitigation Securities as of December 31, 2024 (excluding the value of the Company’s insurance) was $479 million.
See “— Non-GAAP Financial Measures” for the reconciliation of shareholders’ equity attributable to AGL to adjusted operating shareholders' equity and adjusted book value. Other Matters Inflation By some key measures, consumer price inflation in the U.S. and the U.K. was higher in recent years than it has been in decades, and interest rates generally increased.
See “— Non-GAAP Financial Measures” for the reconciliation of shareholders’ equity attributable to AGL to adjusted operating shareholders' equity and adjusted book value. Other Matters Inflation By some key measures, consumer price inflation in the U.S. and the U.K. was higher in recent years than it has been in decades.
This has been illustrated by the Company’s role in negotiating various agreements in connection with the restructuring of obligations of the Commonwealth of Puerto Rico and various obligations of its related authorities and public corporations, as well as Detroit, Michigan and Stockton, California. The Company will also, where appropriate, pursue litigation to enforce its rights.
This has been illustrated by the Company’s role in negotiating various agreements in connection with the restructuring of obligations of the Commonwealth of Puerto Rico and various obligations of its related authorities and public corporations, as well as Detroit, Michigan and Stockton, California. The Company will also, where appropriate, participate in litigation to enforce or defend its rights.
Consumer price inflation in the U.K. impacts the Company directly by increasing exposure for certain index-linked U.K. debt with par that accretes with increasing inflation, and also increasing projected future installment premiums on the portion of such exposure that pays at least some of the premium on an installment basis over the term of the exposure.
Consumer price inflation in the U.K. can impact the Company directly by increasing exposure for certain index-linked U.K. debt with par that accretes based on inflation, and also by increasing projected future installment premiums on the portion of such exposure that pays at least some of the premium on an installment basis over the term of the exposure.
On September 25, 2023, AGUS 106 redeemed $330 million of 5% Senior Notes due 2024. See Item 8, Financial Statements and Supplementary Data, Note 12, Long-Term Debt and Credit Facilities. U.S.
On September 25, 2023, AGUS redeemed $330 million of 5% Senior Notes due 2024. See Item 8, Financial Statements and Supplementary Data, Note 11, Long-Term Debt and Credit Facilities. U.S.
While expected loss to be paid (recovered) is an important measure that provides the present value of amounts that the Company expects to pay or recover in future periods on all contracts, expected loss to be expensed is important because it presents the Company’s projection of net expected losses that will be recognized in the consolidated statement of operations in future periods as deferred premium revenue amortizes into income for financial guaranty insurance policies.
While expected loss to be paid (recovered) is an important measure that provides the present value of amounts that the Company expects to pay or recover in future periods regardless of accounting model, expected loss to be expensed is important because it presents the Company’s projection of net expected losses that will be recognized in the consolidated statement of operations in future periods as deferred premium revenue amortizes into income for financial guaranty insurance policies.
Other (Effect of Consolidating FG VIEs and CIVs) The effect of consolidating FG VIEs and CIVs, intersegment eliminations, and reclassifications of reimbursable fund expenses to revenue are presented in “other.” See Item 8, Financial Statements and Supplementary Data, Note 2, Segment Information.
Other (Effect of Consolidating FG VIEs and CIVs) The effect of consolidating FG VIEs and CIVs, intersegment eliminations and, prior to July 1, 2023, reclassifications of reimbursable fund expenses to revenue, are presented in “other.” See Item 8, Financial Statements and Supplementary Data, Note 2, Segment Information.
(3) Includes net earned premiums, net investment income, asset management fees, foreign exchange gains (losses) on remeasurement, other income (loss), loss and LAE (benefit) and other operating expenses.
(3) Includes net earned premiums, net investment income, foreign exchange gains (losses) on remeasurement, other income (loss), loss and LAE (benefit), and for 2023 and 2022, other operating expenses and asset management fees.
Approximately 70% and 74% of gross premiums receivable, net of commissions payable at December 31, 2023 and December 31, 2022, respectively, are denominated in currencies other than the U.S. dollar, primarily the pound sterling and euro.
Approximately 69% and 70% of gross premiums receivable, net of commissions payable at December 31, 2024 and December 31, 2023, respectively, are denominated in currencies other than the U.S. dollar, primarily the pound sterling and euro.
Provision (Benefit) for Income Taxes The tax benefit in 2023 was primarily related to the $189 million benefit recognized in connection with the enactment of the 15% Bermuda corporate income tax in December 2023.
The tax benefit in 2023 was primarily related to the $189 million benefit recognized in connection with the enactment of the 15% Bermuda corporate income tax in December 2023.
Effect of Consolidating FG VIEs and CIVs on the Consolidated Statements of Operations Increase (Decrease) Year Ended December 31, 2023 2022 2021 Effect on Financial Statement Line Item (in millions) Fair value gains (losses) on FG VIEs (1) $ 8 $ 22 $ 23 Fair value gains (losses) on CIVs 88 17 127 Equity in earnings (losses) of investees (2) (59) 12 (50) Other (3) (41) (44) (34) Effect on income before tax (4) 7 66 Less: Tax provision (benefit) (5) — 6 Effect on net income (loss) 1 7 60 Less: Effect on noncontrolling interests (4) 22 13 30 Effect on net income (loss) attributable to AGL $ (21) $ (6) $ 30 By Type of VIE FG VIEs $ (4) $ 4 $ (1) CIVs (17) (10) 31 Effect on net income (loss) attributable to AGL $ (21) $ (6) $ 30 ____________________ (1) Changes in fair value of the FG VIEs’ assets and liabilities that are attributable to factors other than (i) changes in the Company’s own credit risk on FG VIE liabilities with recourse and (ii) unrealized gains and losses on available-for-sale fixed maturity securities.
Effect of Consolidating FG VIEs and CIVs on the Consolidated Statements of Operations Increase (Decrease) Year Ended December 31, 2024 2023 2022 Effect on Financial Statement Line Item (in millions) Fair value gains (losses) on FG VIEs (1) $ (11) $ 8 $ 22 Fair value gains (losses) on CIVs 69 88 17 Equity in earnings (losses) of investees (2) (47) (59) 12 Other (3) (3) (41) (44) Effect on income before tax 8 (4) 7 Less: Tax provision (benefit) (2) (5) — Effect on net income (loss) 10 1 7 Less: Effect on noncontrolling interests (4) 16 22 13 Effect on net income (loss) attributable to AGL $ (6) $ (21) $ (6) By Type of VIE FG VIEs $ (10) $ (4) $ 4 CIVs 4 (17) (10) Effect on net income (loss) attributable to AGL $ (6) $ (21) $ (6) ____________________ (1) Changes in fair value of the FG VIEs’ assets and liabilities that are attributable to factors other than (i) changes in the Company’s own credit risk on the FG VIEs’ liabilities with recourse and (ii) unrealized gains and losses on available-for-sale fixed maturity securities.
Structured Finance Exposures As of December 31, 2023 Net Par Outstanding Percent of Total U.S.
Structured Finance Exposures As of December 31, 2024 Net Par Outstanding Percent of Total U.S.
Exposures As of December 31, 2023 Country Net Par Outstanding Percent of Total Non-U.S.
Exposures As of December 31, 2024 Country Net Par Outstanding Percent of Total Non-U.S.
Available-for-Sale and Trading Fixed-Maturity Securities By Rating The following table summarizes the ratings distributions of the Company’s available-for-sale fixed-maturity securities as of December 31, 2023 and December 31, 2022.
Available-for-Sale Fixed-Maturity Securities By Rating The following table summarizes the ratings distributions of the Company’s available-for-sale fixed-maturity securities as of December 31, 2024 and December 31, 2023.
Holding Companies (other than investment income, operating expenses and taxes) related to distributions from subsidiaries and outflows for debt service, dividends and other capital management activities. AGL and U.S. Holding Companies Selected Cash Flow Items Year Ended December 31, 2023 AGL U.S.
Holding Companies (other than investment income, operating expenses and taxes) related to distributions from subsidiaries and outflows for debt service, dividends and other capital management activities. AGL and U.S. Holding Companies Selected Cash Flow Items Year Ended December 31, 2024 AGL U.S. Holding Companies (in millions) Dividends received from U.S.
The Company’s comparison of 2022 results to 2021 results is included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 , under Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The Company’s comparison of 2023 results to 2022 results is included in the Company’s A nnual Report on Form 10-K for the fiscal year ended December 31, 2023 , under Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The table excludes Corporate-CUSIP transactions insured by Assured Guaranty, certain of which the Company also considers to be public finance business. The Company also considers opportunities to acquire financial guaranty portfolios, whether by acquiring financial guarantors who are no longer actively writing new business or their insured portfolios, generally through reinsurance.
The table excludes private placements and Corporate-CUSIP transactions insured by Assured Guaranty, certain of which the Company also considers to be public finance business. The Company also considers opportunities to acquire financial guaranty portfolios, whether by acquiring financial guarantors that are no longer actively writing new business or their insured portfolios, generally through reinsurance or novations.
The Company’s direct insurance exposure to the Middle East is generally limited to approximately $49 million in net par outstanding as of December 31, 2023, comprised of funded commitments to subscription finance facilities; however, such exposure may increase to a total of approximately $93 million to the extent all unfunded commitments under the facilities are ultimately funded.
The Company’s direct insurance exposure to the Middle East is generally limited to approximately $110 million in net par outstanding as of December 31, 2024, comprised of funded commitments to subscription finance facilities; however, such exposure may increase to a total of approximately $165 million to the extent all unfunded commitments under the facilities are ultimately funded.
Consumer price inflation in the U.K. increases reported net par outstanding for certain U.K exposures with approximately $22.9 billion of net par outstanding as of December 31, 2023, and also increases projected future installment premiums on the portion of such exposure that pays at least a portion of the premium on an installment basis over the term of the exposure.
In addition, consumer price inflation in the U.K. increases reported net par outstanding for certain U.K. exposures with approximately $23.2 billion of net par outstanding as of December 31, 2024, and also increases projected future installment premiums on the portion of such exposure that pays at least a portion of the premium on an installment basis over the term of the exposure.
In the public finance area, the Company believes its experience and the resources it is prepared to deploy, as well as its ability to provide bond insurance or other contributions as part of a solution, result in more favorable outcomes in distressed public finance situations than would be the case without its participation.
In the public finance area, the Company believes its experience and the resources it is prepared to deploy, as well as its ability to provide bond insurance or other solutions, result in more favorable outcomes in distressed public finance situations than would be the case without its participation.
Executive Summary The primary drivers of volatility in the Company’s net income include: loss and LAE changes in fair value of credit derivatives, FG VIEs, CIVs, CVIs and CCS, as well as foreign exchange gains (losses), the level of refundings of insured obligations, changes in the value of the Company’s alternative investments, the effects of any large transactions, settlements, commutations and loss mitigation strategies, among other factors.
Holding Companies.” Executive Summary The primary drivers of volatility in the Company’s net income include: loss and loss adjustment expense (LAE), changes in fair value of credit derivatives, FG VIEs, CIVs, trading securities and CCS, as well as foreign exchange gains (losses), the level of refundings of insured obligations, changes in the value of the Company’s alternative investments, the effects of any large transactions, settlements, commutations and loss mitigation strategies, among other factors.
Other invested assets include other alternative investments, which are generally less liquid. For more information about the Investment Portfolio and a detailed description of the Company’s valuation of investments, see Item 8, Financial Statements and Supplementary Data, Note 7, Investments and Cash, and Note 9, Fair Value Measurement.
The Company’s portfolio of fixed-maturity securities primarily consists of investment-grade, liquid instruments. Other invested assets include other alternative investments, which are generally less liquid. For more information about the investment portfolio and a detailed description of the Company’s valuation of investments, see Item 8, Financial Statements and Supplementary Data, Note 7, Investments and Cash, and Note 9, Fair Value Measurement.
See Item 8, Financial Statements and Supplementary Data, Note 3, Outstanding Exposure, and Note 4, Expected Loss to be Paid (Recovered).
See Item 8, Financial Statements and Supplementary Data, Note 4, Expected Loss to be Paid (Recovered).
(2) If the AGMH Junior Subordinated Debentures are outstanding after December 15, 2036, then the principal amount of the outstanding debentures will bear interest at One-Month CME Term SOFR plus 2.33%. (3) Represents principal amount of Junior Subordinated Debentures issued by AGMH that has been purchased by AGUS. Interest Paid on U.S.
(2) If the AGMH Junior Subordinated Debentures are outstanding after December 15, 2036, then the principal amount of the outstanding debentures will bear interest at One-Month Chicago Mercantile Exchange (CME) Term Secured Overnight Finance Rate (SOFR) plus 2.33%. (3) Represents principal amount of Junior Subordinated Debentures issued by AGMH that has been purchased by AGUS. 99 Interest Paid on U.S.
Economic Environment Real gross domestic product (GDP) increased 2.5% in 2023, compared to an increase of 1.9% in 2022, according to the advance estimate released by the U.S. Bureau of Economic Analysis (BEA). Additionally, the BEA reported real GDP increased at an annual rate of 3.3% in the fourth quarter of 2023.
Economic Environment Real gross domestic product (GDP) increased 2.8% in 2024, compared to an increase of 2.9% in 2023, according to the second estimate released by the U.S. Bureau of Economic Analysis (BEA). Additionally, the BEA reported real GDP increased at an annual rate of 2.3% in the fourth quarter of 2024.
Dollar Per Foreign Currency As of December 31, 2023 2022 2021 Pound sterling $1.273 $1.208 $1.353 Euro $1.104 $1.071 $1.137 94 Non-GAAP Financial Measures The Company discloses both: (i) financial measures determined in accordance with GAAP; and (ii) financial measures not determined in accordance with GAAP (non-GAAP financial measures).
Dollar Per Foreign Currency As of December 31, 2024 2023 2022 Pound sterling $1.252 $1.273 $1.208 Euro $1.035 $1.104 $1.071 Non-GAAP Financial Measures The Company discloses both: (i) financial measures determined in accordance with GAAP; and (ii) financial measures not determined in accordance with GAAP (non-GAAP financial measures).
The investment portfolio also contains securities that are held in trust by certain AGL subsidiaries or otherwise restricted for the benefit of other AGL subsidiaries in accordance with statutory and regulatory requirements in the amount of $1,154 million and $1,169 million, based on fair value as of December 31, 2023 and December 31, 2022, respectively.
The investment portfolio also contains securities that are held in trust by certain AGL subsidiaries or otherwise restricted for the benefit of other AGL subsidiaries in accordance with statutory and regulatory requirements with a fair value of $1,135 million and $1,154 million as of December 31, 2024 and December 31, 2023, respectively.
Holding Companies’ Long-Term Debt and Intercompany Loans Year Ended December 31, 2023 2022 2021 (in millions) AGUS - long-term debt $ 68 $ 68 $ 50 AGUS - intercompany loans 10 10 10 Total AGUS 78 78 60 AGMH - long-term debt 19 19 40 AGMH’s long-term debt purchased by AGUS (10) (10) (10) Total interest paid $ 87 $ 87 $ 90 On August 21, 2023, AGUS issued $350 million of 6.125% Senior Notes due 2028.
Holding Companies’ Long-Term Debt and Intercompany Loans Year Ended December 31, 2024 2023 2022 (in millions) AGUS - long-term debt $ 79 $ 68 $ 68 AGUS - intercompany loans 10 10 10 Total AGUS 89 78 78 AGMH - long-term debt 19 19 19 AGMH’s long-term debt purchased by AGUS (10) (10) (10) Total interest paid $ 98 $ 87 $ 87 On August 21, 2023, AGUS issued $350 million of 6.125% Senior Notes due 2028.
Holding Companies, and the intercompany loans. The following tables include summarized financial information for AGL and the U.S. Holding Companies, excluding their investments in subsidiaries. 107 As of December 31, 2023 AGL U.S.
The following tables include summarized financial information for AGL and the U.S. Holding Companies, excluding their investments in subsidiaries. As of December 31, 2024 AGL U.S.
In addition, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, for further details regarding the sensitivity analyses. 81 • Expected loss to be paid (recovered); • Fair value of certain assets and liabilities, primarily: ◦ Investments ◦ Assets and liabilities of CIVs ◦ Assets and liabilities of FG VIEs ◦ Credit derivatives; • Acquisition date fair value of equity method investment in Sound Point; • Impairments of equity method investments and financial instruments; and • Income tax assets and liabilities, including the recoverability of deferred tax assets (liabilities) including the Bermuda deferred tax asset reported in 2023.
In addition, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, for further details regarding the sensitivity analyses. • Expected loss to be paid (recovered); • Fair value of certain assets and liabilities, primarily: ◦ Investments (primarily Loss Mitigation Securities and alternative investments) ◦ Assets and liabilities of FG VIEs ◦ Credit derivatives; • Acquisition date fair value of the equity method ownership interest in Sound Point; • Impairments of equity method investments and financial instruments; and • Income tax assets and liabilities, including the recoverability of all deferred tax assets (liabilities) and in particular the Bermuda deferred tax asset recorded in 2023.
Growth of the Insured Portfolio The Company seeks to grow its financial guaranty insurance portfolio through new business production in each of its markets: public finance (including infrastructure) and structured finance.
The Company also furthers its insurance strategy by mitigating losses in its insured portfolio. Growth of the Insured Portfolio The Company seeks to grow its financial guaranty insurance portfolio through new business production in each of its markets: public finance (including infrastructure) and structured finance.
Foreign Exchange Gain (Loss) on Remeasurement Foreign exchange gains and losses in all periods primarily relate to remeasurement of long-dated premiums receivable, for which the Company records the present value of future installment premiums, and are mainly due to changes in the exchange rate of the pound sterling and, to a lesser extent, the euro relative to the U.S. dollar.
Foreign Exchange Gain (Loss) on Remeasurement Foreign exchange gains and losses of $26 million losses, $51 million gains and $110 million losses in 2024, 2023 and 2022, respectively, primarily relate to remeasurement of long-dated premiums receivable, for which the Company records the present value of future installment premiums, and are mainly due to changes in the exchange rate of the pound sterling and, to a lesser extent, the euro relative to the U.S. dollar.
On the one hand, higher interest rates may reduce the fair value of fixed-maturity securities currently held in the Company’s investment portfolio, dampen municipal bond issuance and negatively impact the finances of some of the obligors whose payments the Company insures.
On the one hand, lower interest rates may increase the fair value of fixed-maturity securities currently held in the Company’s investment portfolio, encourage municipal bond issuance and positively impact the finances of some of the obligors whose payments the Company insures.
See Part II, Item 8, Financial Statements and Supplementary Data, Note 1, Business and Basis of Presentation, for a description of the Sound Point Transaction. Of the $1.5 billion mentioned above, the U.S.
See Part II, Item 8, Financial Statements and Supplementary Data, Note 1, Business and Basis of Presentation, for a description of the Sound Point Transaction.
Bureau of Labor Statistics, the inflation rate in the U.S. before seasonal adjustment for the 12-month period ending December 2023, as measured by the Consumer Price Index for All Urban Consumers (CPI-U), was 3.4%, as compared to 6.5% for the 12-month period ending December 2022.
Bureau of Labor Statistics, the inflation rate in the U.S. before seasonal adjustment for the 12-month period ending December 2024, as measured by the Consumer Price Index for All Urban Consumers, was 2.9%, as compared to 3.4% for the 12-month period ending December 2023. According to the U.K.
Estimated Expected Claim Payments (Undiscounted) As of December 31, 2023 (in millions) Less than 1 year $ 388 1-3 years 172 3-5 years 51 More than 5 years 886 Total $ 1,497 110 Distributions From Insurance Subsidiaries to Holding Companies The Company anticipates that, for the next twelve months, amounts paid by AGL’s direct and indirect insurance subsidiaries as dividends or other distributions will be a major source of the holding companies’ liquidity.
Estimated Expected Claim Payments (Undiscounted) As of December 31, 2024 (in millions) Less than 1 year $ 212 1-3 years 99 3-5 years (25) More than 5 years 785 Total $ 1,071 Ordinary Dividends From Insurance Subsidiaries to Holding Companies The Company anticipates that, for the next twelve months, amounts paid by AGL’s direct and indirect insurance subsidiaries as dividends or other distributions will be a major source of the holding companies’ liquidity.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe Company is primarily affected by market risk in the following areas. • The fair value of credit derivatives within the financial guaranty portfolio of insured obligations is sensitive to changes in credit spreads of the underlying obligations and the Company’s own credit spreads. • The fair value of the investment portfolio is primarily driven by changes in interest rates and also affected by changes in credit spreads. • New business production is sensitive to changes in interest rates. • Expected loss to be paid (recovered) is sensitive to changes in interest rates. • The fair value of the investment portfolio contains non-U.S. dollar denominated securities whose value also fluctuates based on changes in foreign exchange rates.
Biggest changeThe Company is primarily affected by market risk in the following areas. • New business production is sensitive to changes in interest rates and credit spreads. • Expected loss to be paid (recovered) is sensitive to changes in interest rates. • The fair value of the investment portfolio is primarily driven by changes in interest rates and also affected by changes in credit spreads. • The fair value of the investment portfolio contains non-U.S. dollar denominated securities whose value also fluctuates based on changes in foreign exchange rates.
These potential reductions in excess spread are often mitigated by an interest rate cap, which goes into effect once 120 the collateral rate falls below the stated certificate rate. Interest due on most of the RMBS transactions the Company insures is capped at the collateral rate.
These potential reductions in excess spread are often mitigated by an interest rate cap, which goes into effect once the collateral rate falls below the stated certificate rate. Interest due on most of the RMBS transactions the Company insures is capped at the collateral rate.
The fair value of credit derivative contracts also reflects the change in the Company’s own credit cost, based on the price to purchase credit protection on AGC. Historically, the price of CDS traded on AGC typically moved directionally the same as general market spreads, although this may not always be the case.
The fair value of credit derivative contracts also reflects the change in the Company’s own credit cost, based on the price to purchase credit protection on AG. Historically, the price of CDS traded on AG typically moved directionally the same as general market spreads, although this may not always be the case.
In certain circumstances, due to the fact that spread movements are not perfectly correlated, the narrowing or widening of the price of CDS traded on AGC can have a more significant financial statement impact than the changes in credit spread of risks it insures.
In certain circumstances, due to the fact that spread movements are not perfectly correlated, the narrowing or widening of the price of CDS traded on AG can have a more significant financial statement impact than the changes in credit spread of risks it insures.
There are several RMBS transactions in the Company’s insured portfolio which benefit from excess spread either by using it to cover losses in a particular period or to reimburse past claims under the Company’s policies. As of December 31, 2023, the Company projects that the maximum potential excess spread at risk in the U.S. RMBS transactions is approximately $20 million.
There are several RMBS transactions in the Company’s insured portfolio which benefit from excess spread either by using it to cover losses in a particular period or to reimburse past claims under the Company’s policies. As of December 31, 2024, the Company projects that the maximum potential excess spread at risk in the U.S. RMBS transactions is approximately $4 million.
See Part II, Item 8, Financial Statements and Supplementary Data, Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles, for additional information. 122
See Part II, Item 8, Financial Statements and Supplementary Data, Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles, for additional information. 114
Changes in fair value of available-for-sale investments attributable to changes in foreign exchange rates are recorded in other comprehensive income. Approximately 70% and 74% of installment premiums at December 31, 2023 and December 31, 2022, respectively, are denominated in currencies other than the U.S. dollar, primarily the pound sterling and euro.
Changes in fair value of available-for-sale investments attributable to changes in foreign exchange rates are recorded in other comprehensive income. Approximately 69% and 70% of installment premiums at December 31, 2024 and December 31, 2023, respectively, are denominated in currencies other than the U.S. dollar, primarily the pound sterling and euro.
The effect of changes in discount rates on expected losses to be paid was a loss of $3 million in 2023, a gain of $115 million in 2022, and a gain of $33 million in 2021. The gain related to changes in discount rates was highest in 2022 as interest rates rose from historically low levels during 2022.
The effect of changes in discount rates on expected losses to be paid was a loss of $4 million in 2024, a loss of $3 million in 2023 and a gain of $115 million in 2022. The gain related to changes in discount rates was highest in 2022 as interest rates rose from historically low levels during 2022.
Effect of Changes in Credit Spread on Credit Derivatives As of December 31, 2023 As of December 31, 2022 Credit Spreads Estimated Net Fair Value (Pre-Tax) Estimated Change in Gain/(Loss) (Pre-Tax) Estimated Net Fair Value (Pre-Tax) Estimated Change in Gain/(Loss) (Pre-Tax) (in millions) Increase of 25 bps $ (115) $ (65) $ (233) $ (71) Base Scenario (50) — (162) — Decrease of 25 bps (29) 21 (99) 63 All transactions priced at floor (12) 38 (27) 135 See Part II, Item 8, Financial Statements and Supplementary Data, Note 6, Contracts Accounted for as Credit Derivatives, for additional information.
Effect of Changes in Credit Spread on Credit Derivatives As of December 31, 2024 As of December 31, 2023 Credit Spreads Estimated Net Fair Value (Pre-Tax) Estimated Change in Gain/(Loss) (Pre-Tax) Estimated Net Fair Value (Pre-Tax) Estimated Change in Gain/(Loss) (Pre-Tax) (in millions) Increase of 25 bps $ (92) $ (63) $ (115) $ (65) Base Scenario (29) — (50) — Decrease of 25 bps (14) 15 (29) 21 All transactions priced at floor (12) 17 (12) 38 See Part II, Item 8, Financial Statements and Supplementary Data, Note 6, Contracts Accounted for as Credit Derivatives, for additional information.
Increase (Decrease) in Carrying Value of Fixed-Maturity Securities and Short-Term Investments and Premiums Receivable from Changes in Foreign Exchange Rates Fixed-Maturity Securities and Short-Term Investments Premium Receivable, net of Reinsurance and Commissions Payable As of December 31, As of December 31, 2023 2022 2023 2022 (in millions) Decrease of 30% $ (227) $ (226) $ (305) $ (288) Decrease of 20% (151) (151) (204) (192) Decrease of 10% (76) (75) (102) (96) Increase of 10% 76 75 102 96 Increase of 20% 151 151 204 192 Increase of 30% 227 226 305 288 See Part II, Item 8, Financial Statements and Supplementary Data, Note 7, Investments and Cash and Note 5, Contracts Accounted for as Insurance, for additional information.
Increase (Decrease) in Carrying Value of Fixed-Maturity Securities and Short-Term Investments and Premiums Receivable from Changes in Foreign Exchange Rates Fixed-Maturity Securities and Short-Term Investments Premium Receivable, net of Reinsurance and Commissions Payable As of December 31, As of December 31, 2024 2023 2024 2023 (in millions) Decrease of 30% $ (207) $ (227) $ (319) $ (305) Decrease of 20% (138) (151) (213) (204) Decrease of 10% (69) (76) (106) (102) Increase of 10% 69 76 106 102 Increase of 20% 138 151 213 204 Increase of 30% 207 227 319 305 See Part II, Item 8, Financial Statements and Supplementary Data, Note 7, Investments and Cash, and Note 5, Contracts Accounted for as Insurance, for additional information.
Market liquidity could also impact valuations of the underlying obligations. The Company considers the impact of its own credit risk, together with credit spreads on the exposures that it insured through CDS contracts, in determining their fair value. The Company determines its own credit risk based on quoted CDS prices traded on AGC at each balance sheet date.
The Company considers the impact of its own credit risk, together with credit spreads on the exposures that it insured through CDS contracts, in determining their fair value. The Company determines its own credit risk based on quoted CDS prices traded on AG at each balance sheet date.
The Company’s material exposure is to changes in U.S. dollar/pound sterling and U.S. dollar/euro exchange rates. Securities denominated in currencies other than U.S. dollar were 9.1% and 9.2% of the fixed-maturity securities and short-term investments as of December 31, 2023 and 2022, respectively.
The Company has foreign denominated securities in its investment portfolio as well as foreign denominated premium receivables. The Company’s material exposure is to changes in U.S. dollar/pound sterling and U.S. dollar/euro exchange rates. Securities denominated in currencies other than U.S. dollar were 8.9% and 9.1% of the fixed-maturity securities and short-term investments as of December 31, 2024 and 2023, respectively.
The fair value of the FG VIEs’ liabilities also fluctuates based on changes in the Company’s credit spread. Sensitivity of Credit Derivatives to Changes in Credit Spreads Fair value gains and losses on credit derivatives are sensitive to changes in credit spreads of the underlying obligations and the Company’s own credit spread.
Sensitivity of Credit Derivatives to Changes in Credit Spreads Fair value gains and losses on credit derivatives are sensitive to changes in credit spreads of the underlying obligations and the Company’s own credit spread. Market liquidity could also impact valuations of the underlying obligations.
The carrying value of premiums receivable includes foreign denominated receivables whose values fluctuate based on changes in foreign exchange rates. • The fair value of CIVs are sensitive to changes in market risk. • The fair value of the assets and liabilities of consolidated FG VIEs may fluctuate based on changes in prepayments, spreads, default rates, interest rates and house prices.
The carrying value of premiums receivable includes foreign denominated receivables whose values fluctuate based on changes in foreign exchange rates. • The fair value of credit derivatives within the financial guaranty portfolio of insured obligations is sensitive to changes in credit spreads of the underlying obligations and the Company’s own credit spreads. • The fair value of the assets and liabilities of consolidated FG VIEs may fluctuate based on changes in prepayments, spreads, default rates, interest rates and house prices.
The following table presents the estimated pre-tax change in fair value of the Company’s fixed-maturity securities and short-term investments from instantaneous parallel shifts in interest rates. 119 Increase (Decrease) in Fair Value (Pre-Tax) of Fixed-Maturity Securities and Short-Term Investments from Changes in Interest Rates (1) As of December 31, 2023 2022 (in millions) Decrease of 300 bps $ 804 $ 1,315 Decrease of 200 bps 547 854 Decrease of 100 bps 267 404 Increase of 100 bps (261) (378) Increase of 200 bps (520) (734) Increase of 300 bps (774) (1,069) ____________________ (1) Sensitivity analysis assumes a floor of zero for interest rates.
Increase (Decrease) in Fair Value (Pre-Tax) of Fixed-Maturity Securities and Short-Term Investments from Changes in Interest Rates (1) As of December 31, 2024 2023 (in millions) Decrease of 300 bps $ 875 $ 804 Decrease of 200 bps 572 547 Decrease of 100 bps 281 267 Increase of 100 bps (275) (261) Increase of 200 bps (546) (520) Increase of 300 bps (804) (774) ____________________ (1) Sensitivity analysis assumes a floor of zero for interest rates.
The impact of fluctuations in interest rates on such transactions varies, depending on, among other things, the interest rates on the underlying collateral and insured securities, the relative amounts of underlying collateral and liabilities, the structure of the transaction and the sensitivity to interest rates of the behavior of the underlying borrowers and the value of the underlying assets.
The impact of fluctuations in interest rates on such transactions varies, depending on, among other things, the interest rates on the underlying collateral and insured securities, the relative amounts of underlying collateral and liabilities, the structure of the transaction and the sensitivity to interest rates of the behavior of the underlying borrowers and the value of the underlying assets. 111 In the case of RMBS, fluctuations in interest rates impact the amount of periodic excess spread, which is created when a trust’s underlying collateral produce interest that exceeds the amount required to pay interest on the insured notes.
An overall narrowing of spreads generally results in a fair value gain on credit derivatives for the Company, and an overall widening of spreads generally results in a fair value loss for the Company.
In addition, since each transaction has unique collateral and structural terms, the underlying change in fair value of each transaction may vary considerably. An overall narrowing of spreads generally results in a fair value gain on credit derivatives for the Company, and an overall widening of spreads generally results in a fair value loss for the Company.
The percentage of transactions that price using the minimum premium fluctuates due to changes in AGC’s credit spreads. In general, when AGC’s credit spreads narrow, the cost to hedge AGC’s name declines and more transactions price above previously established floor levels.
In general, when AG’s credit spreads narrow, the cost to hedge AG’s name declines and more transactions price above previously established floor levels. Meanwhile, when AG’s credit spreads widen, the cost to hedge AG’s name increases causing more transactions to price at established floor levels.
Meanwhile, when AGC’s credit spreads widen, the cost to hedge AGC’s name increases causing more transactions to price at established floor levels. The following table summarizes the estimated change in fair values on the net balance of the Company’s credit derivative positions assuming an immediate shift in the net spreads assumed by the Company.
The following table summarizes the estimated change in fair values on the net balance of the Company’s credit derivative positions assuming an immediate shift in the net spreads assumed by the Company. The net spread includes the spread of the underlying collateral and the credit spreads on AG.
See Part II, Item 8, Financial Statements and Supplementary Data, Note 7, Investments and Cash, for additional information. Sensitivity of New Business Production to Interest Rate Risk Fluctuations in interest rates also affect the demand for the Company’s product.
See Part II, Item 8, Financial Statements and Supplementary Data, Note 7, Investments and Cash, for additional information. 112 Sensitivity to Foreign Exchange Rate Risk Foreign exchange risk is the risk that a financial instrument’s value will change due to a change in the foreign currency exchange rates.
The impact of changes in credit spreads will vary based upon the volume, tenor, interest rates and other market conditions at the time these fair values are determined. In addition, since each transaction has unique collateral and structural terms, the underlying change in fair value of each transaction may vary considerably.
The quoted price of five-year CDS contracts traded on AG at December 31, 2024 and December 31, 2023 was 75 bps and 66 bps, respectively. The impact of changes in credit spreads will vary based upon the volume, tenor, interest rates and other market conditions at the time these fair values are determined.
Removed
The quoted price of five-year CDS contracts traded on AGC at December 31, 2023 and December 31, 2022 was 66 bps and 63 bps, respectively.
Added
The fair value of the FG VIEs’ liabilities also fluctuates based on changes in the Company’s credit spread. Sensitivity of New Business Production to Changes in Interest Rates and Credit Spreads Fluctuations in interest rates and credit spreads also affect the demand for the Company’s product.
Removed
Movements in AGM’s CDS prices do not have a significant impact on the estimated fair value of the 118 Company’s credit derivative contracts due to the relatively low volume and characteristics of CDS contracts in AGM’s portfolio.
Added
The following table presents the estimated pre-tax change in fair value of the Company’s fixed-maturity securities and short-term investments from instantaneous parallel shifts in interest rates.
Removed
Based on fair value, approximately 11.5% of the Company’s CDS contracts used this minimum premium in determining fair value as of December 31, 2023. As of December 31, 2022, the use of the minimum premium did not have an effect on fair value.
Added
The minimum premium assumption had no effect on the fair 113 value of CDS contracts as of December 31, 2024 or December 31, 2023. The percentage of transactions that price using the minimum premium fluctuates due to changes in AG’s credit spreads.
Removed
The net spread includes the spread of the underlying collateral and the credit spreads on AGC.
Removed
In the case of RMBS, fluctuations in interest rates impact the amount of periodic excess spread, which is created when a trust’s underlying collateral produce interest that exceeds the amount required to pay interest on the insured notes.
Removed
Sensitivity to Foreign Exchange Rate Risk Foreign exchange risk is the risk that a financial instrument’s value will change due to a change in the foreign currency exchange rates. The Company has foreign denominated securities in its investment portfolio as well as foreign denominated premium receivables.
Removed
Sensitivity of CIVs to Market Risk The fair value of the consolidated CLO fund, which is the largest CIV, is generally sensitive to changes related to: estimated prepayment speeds; estimated default rates (determined on the basis of an analysis of collateral attributes such as historical collateral performance, borrower profiles and other features relevant to the evaluation of collateral credit quality); reinvestment assumptions; yields implied by market prices for similar securities; and changes to the market prices of loans similar to those held by the CLO fund.
Removed
Significant changes to some of these inputs could materially change the NAV of the consolidated CLO fund, as these are all inputs used to project and discount future cash flows. 121 The Company’s sensitivity to changes in fair value of the CIVs is summarized below.
Removed
Sensitivity of CIVs to Changes in Fair Value (Pre-Tax) As of December 31, 2023 2022 (in millions) Decrease of 10% $ (28) $ (19) Increase of 10% 28 19 See Part II, Item 8, Financial Statements and Supplementary Data, Note 7, Investments and Cash, for additional information.

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