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What changed in ASSURED GUARANTY LTD's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ASSURED GUARANTY LTD's 2022 and 2023 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 2023 report.

+822 added−1010 removedSource: 10-K (2024-02-28) vs 10-K (2023-03-01)

Top changes in ASSURED GUARANTY LTD's 2023 10-K

822 paragraphs added · 1010 removed · 609 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

198 edited+76 added−149 removed376 unchanged
Biggest changeDescription of Share Capital The following summary of AGL’s share capital is qualified in its entirety by the provisions of Bermuda law, AGL’s memorandum of association and its Bye-Laws, copies of which are incorporated by reference as exhibits to this Annual Report on Form 10-K.
Biggest changeA conveyance or transfer on sale of common shares in AGL will not be subject to U.K. stamp duty, provided that the instrument of transfer is not executed in the U.K. and does not relate to any property situated, or any matter or thing done, or to be done, in the U.K. 43 Description of Share Capital The following summary of AGL’s share capital is qualified in its entirety by the provisions of Bermuda law, AGL’s memorandum of association and its Bye-Laws, copies of which are incorporated by reference as exhibits to this Annual Report on Form 10-K.
The Company primarily conducts financial guaranty business on a direct basis from the following companies: Assured Guaranty Municipal Corp. (AGM), Assured Guaranty Corp. (AGC), Assured Guaranty UK Limited (AGUK, formerly known as Assured Guaranty (Europe) plc) and, most recently, Assured Guaranty (Europe) SA (AGE). It also conducts insurance business through its Bermuda-based reinsurers Assured Guaranty Re Ltd.
Insurance Insurance Companies The Company primarily conducts financial guaranty business on a direct basis from the following companies: Assured Guaranty Municipal Corp. (AGM), Assured Guaranty Corp. (AGC), Assured Guaranty UK Limited (AGUK, formerly known as Assured Guaranty (Europe) plc) and, most recently, Assured Guaranty (Europe) SA (AGE). It also conducts insurance business through its Bermuda-based reinsurers Assured Guaranty Re Ltd.
See Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — Economic Environment. In the U.S. public finance market, Assured Guaranty is the only financial guaranty company active before the financial crisis that began in 2008 that has maintained sufficient financial strength to write new business continuously since the crisis began.
See Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — Economic Environment. In the U.S. public finance market, Assured Guaranty is the only financial guaranty company active before the 2008 financial crisis that has maintained sufficient financial strength to write new business continuously since the crisis began.
Among other things, Solvency II introduced a revised risk-based prudential regime which includes the following features: (1) assets and liabilities are generally to be valued at their market value; (2) the amount of required economic capital is intended to ensure, with a probability of 99.5%, that regulated insurance firms are able to meet their obligations to policyholders and beneficiaries over the following 12 months; and (3) reinsurance recoveries are treated as a separate asset (rather than being netted off the underlying insurance liabilities).
Among other things, Solvency II introduced a revised risk-based prudential regime which includes the following features: (1) assets and liabilities are generally to be valued at their market value; (2) the amount of required economic capital is intended to ensure, with a probability of 99.5%, that regulated insurance firms are able to meet their obligations to policyholders and beneficiaries over the following 12 months; and (3) reinsurance recoveries are treated as a separate asset (rather than being netted off the underlying insurance liabilities).
Under the excess of loss cover of the Reinsurance Agreement, AGM is obligated to pay AGUK quarterly the amount (if any) by which (i) the sum of: (a) AGUK’s incurred losses, calculated in accordance with UK GAAP as reported by AGUK in its financial returns filed with the Prudential Regulation Authority (PRA); and (b) AGUK’s paid losses and LAE, in both cases net of all other performing reinsurance (including the reinsurance provided by AGM under the quota share cover of the Reinsurance Agreement), exceeds (ii) an amount equal to: (a) AGUK’s capital resources under U.K. law; minus (b) 110% of the greatest of the amounts as may be required by the PRA as a condition for maintaining AGUK’s authorization to carry on a financial guarantee business in the U.K.
(UK GAAP). 7 Under the excess of loss cover of the Reinsurance Agreement, AGM is obligated to pay AGUK quarterly the amount (if any) by which (i) the sum of: (a) AGUK’s incurred losses, calculated in accordance with UK GAAP as reported by AGUK in its financial returns filed with the Prudential Regulation Authority (PRA); and (b) AGUK’s paid losses and LAE, in both cases net of all other performing reinsurance (including the reinsurance provided by AGM under the quota share cover of the Reinsurance Agreement), exceeds (ii) an amount equal to: (a) AGUK’s capital resources under U.K. law; minus (b) 110% of the greatest of the amounts as may be required by the PRA as a condition for maintaining AGUK’s authorization to carry on a financial guarantee business in the U.K.
AGM secures its quota share reinsurance obligations to AGUK under the Reinsurance Agreement by posting collateral in trust equal to 102% of the sum of AGM’s assumed share of the following in respect of the reinsured AGUK 7 policies: (i) AGUK’s unearned premium reserve (net of AGUK’s reinsurance premium payable to AGM); (ii) AGUK’s provisions for unpaid losses and allocated loss adjustment expenses (LAE) (net of any salvage recoverable); and (iii) any unexpired risk provisions of AGUK, in each case (i) - (iii) as calculated by AGUK in accordance with generally accepted accounting practice in the U.K.
AGM secures its quota share reinsurance obligations to AGUK under the Reinsurance Agreement by posting collateral in trust equal to 102% of the sum of AGM’s assumed share of the following in respect of the reinsured AGUK policies: (i) AGUK’s unearned premium reserve (net of AGUK’s reinsurance premium payable to AGM); (ii) AGUK’s provisions for unpaid losses and allocated loss adjustment expenses (LAE) (net of any salvage recoverable); and (iii) any unexpired risk provisions of AGUK, in each case (i) - (iii) as calculated by AGUK in accordance with generally accepted accounting practice in the U.K.
Although we 44 cannot predict whether, when or in what form the proposed regulations might be finalized, the proposed regulations, if finalized in their current form, 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.
Although we cannot predict whether, when or in what form the proposed regulations might be finalized, the proposed regulations, if finalized in their current form, 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.
Issuers benefit when they purchase financial guaranty insurance for their new issue debt transaction because the insurance may have the effect of lowering an issuer’s interest cost over the life of the debt transaction to the extent that the insurance premium charged by the Company is less than the net present value of the difference between the yield on the obligation insured by Assured Guaranty (which carries the credit rating of the specific subsidiary that guarantees the debt obligation) and the yield on the debt obligation 9 if sold on the basis of its uninsured credit rating.
Issuers benefit when they purchase financial guaranty insurance for their new issue debt transaction because the insurance may have the effect of lowering an issuer’s interest cost over the life of the debt transaction to the extent that the insurance premium charged by the Company is less than the net present value of the difference between the yield on the obligation insured by Assured Guaranty (which carries the credit rating of the specific subsidiary that guarantees the debt obligation) and the yield on the debt obligation if sold on the basis of its uninsured credit rating.
The active conduct percentage test will 46 be satisfied if: (1) the total costs incurred by the non-U.S. insurance company with respect to its officers and employees (including officers and employees of certain related entities) for services related to core functions (other than investment activities) equal at least 50% of the total costs incurred for all such services; and (2) the non-U.S. insurer’s officers and employees oversee any part of the non-U.S. insurance company’s core functions, including investment management, that are outsourced to an unrelated party.
The active conduct percentage test will be satisfied if: (1) the total costs incurred by the non-U.S. insurance company with respect to its officers and employees (including officers and employees of certain related entities) for services related to core functions (other than investment activities) equal at least 50% of the total costs incurred for all such services; and (2) the non-U.S. insurer’s officers and employees oversee any part of the non-U.S. insurance company’s core functions, including investment management, that are outsourced to an unrelated party.
All transactions in new asset classes or new jurisdictions, or otherwise outside the Company’s Board-approved risk appetite statement, must be approved by this committee. • Risk Management Committees —The U.S., AG Re and AGRO risk management committees and the European Insurance Subsidiaries Surveillance Committees conduct an in-depth review of the insured portfolios of the relevant subsidiaries, focusing on varying portions of the portfolio at each meeting.
All transactions in new asset classes or new jurisdictions, or otherwise outside the Company’s Board-approved risk appetite statement or risk limits, must be approved by this committee. • Risk Management Committees —The U.S., AG Re and AGRO risk management committees and the European Insurance Subsidiaries Surveillance Committees conduct an in-depth review of the insured portfolios of the relevant subsidiaries, focusing on varying portions of the portfolio at each meeting.
The ACPR assesses, on an ongoing basis, whether insurers are acting in a manner consistent with safety and soundness and appropriate policyholder protection, and whether they meet, and are likely to continue to meet, threshold conditions. The ACPR is forward-looking, assessing its objectives not just against current risks, but also against those that 36 could plausibly arise in the future.
The ACPR assesses, on an ongoing basis, whether insurers are acting in a manner consistent with safety and soundness and appropriate policyholder protection, and whether they meet, and are likely to continue to meet, threshold conditions. The ACPR is forward-looking, assessing its objectives not just against current risks, but also against those that could plausibly arise in the future.
AGL’s Board in its discretion shall require that substantially similar provisions are or will be contained in 49 the Bye-Laws (or equivalent governing documents) of any direct or indirect non-U.S. subsidiaries other than AGRO and subsidiaries incorporated in the U.K. Available Information The Company maintains an Internet web site at www.assuredguaranty.com .
AGL’s Board in its discretion shall require that substantially similar provisions are or will be contained in the Bye-Laws (or equivalent governing documents) of any direct or indirect non-U.S. subsidiaries other than AGRO and subsidiaries incorporated in the U.K. Available Information The Company maintains an Internet web site at www.assuredguaranty.com .
AGM is located and domiciled in New York, and was organized in 1984 as “Financial Security Assurance Inc.” It provides financial guaranty insurance and reinsurance on debt obligations issued in the U.S. and non-U.S. public finance and infrastructure markets, including bonds issued by U.S. state or governmental authorities or notes issued to finance infrastructure projects. • Assured Guaranty Corp.
AGM is located and domiciled in New York, and was organized in 1984 as “Financial Security Assurance Inc.” It provides financial guaranty insurance and reinsurance on debt obligations issued in the U.S. and non-U.S. public finance and infrastructure markets, including bonds issued by U.S. state or governmental authorities or notes issued to finance infrastructure projects. 6 • Assured Guaranty Corp.
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).
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).
The Company has also formed an environmental risk working group composed of senior members of the Company’s credit, underwriting, surveillance, and risk management departments, to review the impact of environmental risk on the Company, including the development of objective risk 27 measures, metrics and methodologies needed to evaluate the financial impact of climate change on obligors in its insured portfolio on both aggregate and individual risk levels.
The Company has also formed an environmental risk working group composed of senior members of the Company’s credit, underwriting, surveillance, and risk management departments, to review the impact of environmental risk on the Company, including the development of objective risk measures, metrics and methodologies needed to evaluate the financial impact of climate change on obligors in its insured portfolio on both aggregate and individual risk levels.
In addition to monoline insurance companies, Assured Guaranty competes with other forms of credit enhancement, such as nonpayment insurance, letters of credit or credit derivatives provided by banks and other financial institutions, some of which are governmental enterprises, or direct guaranties of municipal, structured finance or other debt by federal or state governments or government sponsored or affiliated agencies.
In addition to financial guaranty insurance companies, Assured Guaranty competes with other forms of credit enhancement such as letters of credit or credit derivatives provided by banks and other financial institutions (some of which are governmental enterprises), nonpayment insurance, or direct guaranties of municipal, structured finance or other debt by federal or state governments or government sponsored or affiliated agencies.
AGE is a French incorporated company located in France and established in mid-2019 that has been authorized by the French insurance and banking supervisory authority, the Autorité de Contrôle Prudentiel et de Résolution (ACPR), to conduct financial guaranty business. AGE writes new business in the EEA. • Assured Guaranty Re Ltd. and Assured Guaranty Re Overseas Ltd.
AGE is a French incorporated company located in France and established in 2019 that has been authorized by the French insurance and banking supervisory authority, the Autorité de Contrôle Prudentiel et de Résolution (ACPR), to conduct financial guaranty business. AGE writes new business in the EEA. • Assured Guaranty Re Ltd. and Assured Guaranty Re Overseas Ltd.
U.K. tax is not normally charged on any capital gains realized by non-U.K. shareholders in AGL unless, in the case of a corporate shareholder, at or before the time the gain accrues, the shareholding is used in or for the purposes of a trade carried on by the non-resident shareholder through a permanent establishment in the U.K. or for the purposes of that 47 permanent establishment.
U.K. tax is not normally charged on any capital gains realized by non-U.K. shareholders in AGL unless, in the case of a corporate shareholder, at or before the time the gain accrues, the shareholding is used in or for the purposes of a trade carried on by the non-resident shareholder through a permanent establishment in the U.K. or for the purposes of that permanent establishment.
In the future, additional new entrants into the financial guaranty industry could reduce the Company’s new business prospects, including by furthering price competition or offering financial guaranty insurance on transactions with structural and 16 security features that are more favorable to the issuers than those required by Assured Guaranty.
In the future, additional new entrants into the financial guaranty industry could reduce the Company’s new business prospects, including by furthering price competition or offering financial guaranty insurance on transactions with structural and security features that are more favorable to the issuers than those required by Assured Guaranty.
Alternative credit enhancement structures, and in particular federal government credit enhancement or other programs, can interfere with the Company’s new business prospects, particularly if they provide direct governmental-level guaranties, restrict the use of third-party financial guaranties or reduce the amount of transactions that might qualify for financial guaranties.
Alternative credit enhancement structures, and in particular federal government credit enhancement or other programs, can interfere with the Company’s new business prospects, particularly if they provide direct government-level guaranties, restrict the use of third-party financial guaranties or reduce the amount of transactions that might qualify for financial guaranties.
The Company also makes available, free of charge, through its web site (under www.assuredguaranty.com/governance ) links to the Company’s Corporate Governance Guidelines, its Global Code of Ethics, AGL's Bye-Laws and the charters for its Board committees, as well as certain of the Company's environmental and social policies and statements.
The Company also makes available, free of charge, through its web site (under 45 www.assuredguaranty.com/governance ) links to the Company’s Corporate Governance Guidelines, its Global Code of Ethics, AGL's Bye-Laws and the charters for its Board committees, as well as certain of the Company's environmental and social policies and statements.
The principal focus of the due diligence is to confirm the underlying collateral was originated in accordance with the stated underwriting criteria of the asset originator. The Company also conducts audits of servicing or other management procedures, reviewing critical aspects of 14 these procedures such as cash management and collections.
The principal focus of the due diligence is to confirm the underlying collateral was originated in accordance with the stated underwriting criteria of the asset originator. The Company also conducts audits of servicing or other management procedures, reviewing critical aspects of these procedures such as cash management and collections.
Reserve Committee, the European Insurance Subsidiaries Executive Risk Committees, the AG Re Reserve Committee and the AGRO Reserve Committee. The committees review the reserve methodology and assumptions for each major asset class or significant below-investment-grade (BIG) transaction, as well as the loss projection scenarios used and the 23 probability weights assigned to those scenarios.
Reserve Committee, the European Insurance Subsidiaries Executive Risk Committees, the AG Re Reserve Committee and the AGRO Reserve Committee. The committees review the reserve methodology and assumptions for each major asset class or significant below-investment-grade (BIG) transaction, as well as the loss projection scenarios used and the probability weights assigned to those scenarios.
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.
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.
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 infrastructure 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 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.
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.
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 AGRO were to pay dividends to its U.S. holding company parent and that U.S. holding company were to pay dividends to its Bermudian parent AG Re, such dividends would be subject to U.S. withholding tax at a rate of 30%. 41 United Kingdom In November 2013, AGL became tax resident in the U.K.
If AGRO were to pay dividends to its U.S. holding company parent and that U.S. holding company were to pay dividends to its Bermudian parent AG Re, such dividends would be subject to U.S. withholding tax at a rate of 30%. United Kingdom In November 2013, AGL became tax resident in the U.K.
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.
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.
The PRA carries out the prudential 34 supervision of insurance companies like AGUK through a variety of methods, including the collection of information from statistical returns, the review of accountants’ reports and insurers’ annual reports and disclosures, visits to insurance companies and regular formal interviews. The PRA takes a risk-based approach to the supervision of insurance companies.
The PRA carries out the prudential supervision of insurance companies like AGUK through a variety of methods, including the collection of information from statistical returns, the review of accountants’ reports and insurers’ annual reports and disclosures, visits to insurance companies and regular formal interviews. The PRA takes a risk-based approach to the supervision of insurance companies.
Accordingly, the Company’s key human capital management objectives are to attract, retain, develop and support a diverse group of the highest quality employees, including talented and experienced business leaders who drive its corporate strategies and build long-term shareholder value.
Accordingly, the Company’s key human capital management objectives are to attract, hire, retain, develop, and support a diverse group of the highest quality employees, including talented and experienced business leaders who drive its corporate strategies and build long-term shareholder value.
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 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.
Broadly speaking, the 10% threshold applies to banks, insurers and reinsurers (but not brokers) and Markets in Financial Instruments Directive (MiFID) 35 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 the Solvency II Directive. 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.” 32 Bermuda The Bermuda Monetary Authority (the Authority) regulates the Company’s operating insurance and reinsurance subsidiaries in Bermuda.
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.
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.
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.
The Company has established several management committees to develop enterprise level risk management guidelines, policies and procedures for the Company’s insurance, reinsurance and asset management 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, 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.
Solvency II and Solvency Requirements Solvency II took effect from January 1, 2016, in the U.K. and remains in effect as part of the U.K.’s retained EU law after the withdrawal of the U.K. from the EU (Brexit). The reform of Solvency II as it applies in the U.K. is currently under consideration by the U.K. government.
Solvency II and Solvency Requirements Solvency II took effect from January 1, 2016, in the U.K. and remains in effect as part of the U.K.’s retained EU law after the withdrawal of the U.K. from the EU (Brexit). The reform of Solvency II as it applies in the U.K. is currently under 31 consideration by the U.K. government.
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.
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.
When the Company insures an obligation, the issuer or another party may request that one or more rating agencies providing financial strength ratings on the relevant insurance operating company assign a rating equivalent to that insurer’s financial strength rating to the specific obligation it insured.
When the Company insures an obligation, the issuer or another party may request that one or more rating agencies providing financial strength ratings on the relevant insurance operating company assign a 14 rating equivalent to that insurer’s financial strength rating to the specific obligation it insured.
These laws may 28 discourage potential acquisition proposals and may delay, deter or prevent a change of control involving AGL that some or all of AGL’s shareholders might consider to be desirable, including, in particular, unsolicited transactions.
These laws may discourage potential acquisition proposals and may delay, deter or prevent a change of control involving AGL that some or all of AGL’s shareholders might consider to be desirable, including, in particular, unsolicited transactions.
Each of these risks is addressed through the Company’s underwriting process. The underwriter is also required to assess the presence of any environmental or climate change risk and, to the extent there are notable environmental or climate change risks, work to assess the risks and present them to the credit committee.
Each of these risks is addressed through the Company’s underwriting process. The underwriter is also required to assess the presence of any environmental or climate change risk and, to the extent there are notable environmental or climate change risks, assess the risks and present them to the credit committee.
The Companies Act 1981 of Bermuda (Companies Act) also limits the declaration and payment of dividends and other distributions by Bermuda companies such as AGL and its Bermuda subsidiaries, which, in addition to AG Re and AGRO, 33 also include Cedar Personnel Ltd. (collectively, the Bermuda Subsidiaries).
The Companies Act 1981 of Bermuda (Companies Act) also limits the declaration and payment of dividends and other distributions by Bermuda companies such as AGL and its Bermuda subsidiaries, which, in addition to AG Re and AGRO, also include Cedar Personnel Ltd. (collectively, the Bermuda Subsidiaries).
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).
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).
Insurance Subsidiaries’ remaining legacy derivatives portfolios, AGL does not believe any of its U.S. subsidiaries are required to register with the Commodity Futures Trading Commission (CFTC) as a “major swap participant” or with the SEC as a “major securities-based swap participant.” Certain of the Company's subsidiaries may be subject to Dodd-Frank Act requirements to post margin for, or to clear on a regulated execution facility, future swap transactions or with respect to certain amendments to legacy swap transactions, if they enter into such transactions.
Insurance Subsidiaries’ derivatives portfolios, AGL does not believe any of the U.S. subsidiaries are required to register with the Commodity Futures Trading Commission (CFTC) as a “major swap participant” or with the SEC as a “major securities-based swap participant.” Certain of the Company's subsidiaries may be subject to Dodd-Frank Act requirements to post margin for, or to clear on a regulated execution facility, future swap transactions or with respect to certain amendments to legacy swap transactions, if they enter into such transactions.
In 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 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.
The Company believes, however, that this application of Code section 1248 under the RPII rules should not apply to dispositions of AGL’s shares because AGL will 45 not be directly engaged in the insurance business.
The Company believes, however, that this application of Code section 1248 under the RPII rules should not apply to dispositions of AGL’s shares because AGL will not be directly engaged in the insurance business.
Virgin Islands. • AGC is a Maryland domiciled insurance company licensed to write financial guaranty insurance and reinsurance in 50 U.S. states, the District of Columbia and Puerto Rico. Insurance Holding Company Regulation The U.S.
Virgin Islands. • AGC is a Maryland domiciled insurance company licensed to write financial guaranty insurance and reinsurance in 50 U.S. states, the District of Columbia and Puerto Rico. 24 Insurance Holding Company Regulation The U.S.
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 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.
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.
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.
For example, a Moody’s rating 15 was dropped from AG Re and AGRO in 2015, and was the subject of a rating withdrawal request by AGC (such request was declined by Moody’s). See Item 1A.
For example, a Moody’s rating was dropped from AG Re and AGRO in 2015, and was the subject of a rating withdrawal request by AGC (such request was declined by Moody’s). See Item 1A.
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.
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.
Risk management also uses an internally developed economic capital model to project potential credit losses in the insured portfolio as well as potential ultimate losses on investments, and analyze the related capital implications for the Company, and performs stress and scenario testing to both validate model results and assess the potential financial impact of emerging risks and major strategic initiatives such as acquisitions or releases of capital.
Risk management also uses an internally developed economic capital model to project potential ultimate losses in the insured portfolio as well as on alternative investments, and analyze the related capital implications for the Company, and performs stress and scenario testing to both validate model results and assess the potential financial impact of emerging risks and major strategic initiatives such as acquisitions or releases of capital.
In this sector the Company’s principal competition is from nonpayment insurance and other forms of capital saving or risk syndication available to banks and insurers.
In this sector the Company’s principal competition is from other forms of capital saving or risk syndication available to banks and insurers, including nonpayment insurance.
The 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 pursuant to Part VII of the Financial Services and Markets Act 2000 (FSMA) (Part VII Transfer) effective October 1, 2020 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 8 (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.
The 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.
The European Insurance Subsidiaries Executive Risk Committees are responsible for assisting the risk oversight committees of their respective board of directors in the management of risk and oversight of their respective company’s risk management framework and processes.
The European Insurance Subsidiaries Executive Risk Committees are responsible for assisting the risk oversight committees of their respective board of directors in the management of risk and 20 oversight of their respective company’s risk management framework and processes.
However, if neither S&P nor Moody’s maintained 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 difficult for such insurance subsidiary to originate the current volume of new financial guaranty business with comparable credit characteristics.
(AG Re) and Assured Guaranty Re Overseas Ltd. (AGRO). The following is a description of the Company’s principal insurance operating subsidiaries: 6 • Assured Guaranty Municipal Corp .
(AG Re) and Assured Guaranty Re Overseas Ltd. (AGRO). The following is a description of the Company’s principal insurance operating subsidiaries: • Assured Guaranty Municipal Corp .
AGUK is a U.K. incorporated private limited company licensed as a U.K. insurance company and located in England that writes new business in the U.K. and certain other countries that are not part of the European Economic Area (EEA). AGUK was organized in 1990 and issued its first financial guaranty in 1994.
AGUK is a United Kingdom (U.K.) incorporated private limited company licensed as a U.K. insurance company and located in England that writes new business in the U.K. and certain other countries that are not part of the European Economic Area (EEA). AGUK was organized in 1990 and issued its first financial guaranty in 1994.
The internal audit function (Internal Audit) provides independent assurance around effective risk management design and control execution. On a quarterly basis, or more frequently when required, Internal Audit reports its findings directly to the Audit Committee of the Board of Directors and informs the Chief Executive Officer of any material issues.
The internal audit function (Internal Audit) provides independent assurance around effective risk management design and control execution. On a quarterly basis, or more frequently when required, Internal Audit reports its findings directly to the Audit Committee of the Board of Directors and informs the Chief Executive Officer and other senior management of any material issues.
The Company’s principal objectives in managing its investment portfolio are to maintain sufficient liquidity to cover unexpected stress in the insurance portfolio; to maximize after tax book income; to manage investment risk within the context of the underlying portfolio of insurance risk; and to preserve the highest possible ratings for each Assured Guaranty subsidiaries.
The Company’s principal objectives in managing its investment portfolio are to maintain sufficient liquidity to cover unexpected stress in the insurance portfolio; to maximize after tax book income; to manage investment risk within the context of the underlying portfolio of insurance risk; and to preserve the highest possible ratings for each Assured Guaranty subsidiary.
Insurance Subsidiaries have obtained the approval of their regulators to release contingency reserves based on losses or because the accumulated reserve is deemed excessive in relation to the insurer’s outstanding insured obligations. In 2022, the U.S. Insurance Subsidiaries each requested a release of accumulated contingency reserve which were deemed excessive in relation to the Company’s outstanding insured obligations.
Insurance Subsidiaries have obtained the approval of their regulators to release contingency reserves based on losses or because the accumulated reserve is deemed excessive in relation to the insurer’s outstanding insured obligations. In 2023, the U.S. Insurance Subsidiaries each requested a release of accumulated contingency reserve which were deemed excessive in relation to the Company’s outstanding insured obligations.
In the Insurance segment, the Company applies its credit underwriting judgment, risk management skills and capital markets experience primarily to offer, through its several insurance subsidiaries, financial guaranty insurance that protects holders of debt instruments and other monetary obligations from defaults in scheduled payments.
Through its insurance subsidiaries, the Company applies its credit underwriting judgment, risk management skills and capital markets experience primarily to offer financial guaranty insurance that protects holders of debt instruments and other monetary obligations from defaults in scheduled payments.
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 24 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 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.
However, the Company believes that the presence of multiple guarantors might also increase the overall visibility and acceptance of the product by a broadening group of investors, and the fact that investors are willing to commit fresh capital to the industry may promote market confidence in the product.
However, the Company believes that the presence of additional guarantors might also increase the overall visibility and acceptance of the product by a broadening group of investors, and the fact that investors are willing to commit fresh capital to the industry may promote market confidence in the product.
The Board annually approves the Company’s business plan, factoring risk management into account. 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.
The Board annually approves the Company’s business plan, taking risk management into account. 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.
Some of those agreements have since terminated or expired, or been modified. As of December 31, 2022, the aggregate accreted GIC balance was approximately $0.5 billion, compared with approximately $10.2 billion as of December 31, 2009.
Some of those agreements have since terminated or expired, or been modified. As of December 31, 2023, the aggregate accreted GIC balance was approximately $0.5 billion, compared with approximately $10.2 billion as of December 31, 2009.
The NYDFS, the regulatory authority of the domiciliary jurisdiction of AGM, and the Maryland Insurance Administration (the MIA), the regulatory authority of the domiciliary jurisdiction of AGC, each conducts a periodic examination of insurance companies domiciled in New York and Maryland, respectively, usually at five-year intervals.
The NYDFS, the regulatory authority of the domiciliary jurisdiction of AGM, and the Maryland Insurance Administration, the regulatory authority of the domiciliary jurisdiction of AGC, each conducts a periodic financial examination of insurance companies domiciled in New York and Maryland, respectively, usually at five-year intervals.
The Company believes it has excess capital based on its internal capital model and rating agency models, and, to the extent permitted by insurance regulation or other regulatory authority, has been returning some of its excess capital to shareholders by repurchasing its common shares and paying dividends, and has been deploying some of its excess capital to acquire financial guaranty portfolios, asset management companies and alternative investments.
The Company believes it has excess capital based on its internal capital model and rating agency models, and, to the extent permitted by insurance regulation or other regulatory authority, has been returning some of its excess capital to shareholders by repurchasing its common shares and paying dividends, and has been deploying some of its excess capital to acquire financial guaranty portfolios and alternative investments.
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-income assets. 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 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.
At least once each year, risk management personnel prepare an Own Risk and Solvency Assessment for the Company as a whole and each of the operating companies (Commercial Insurer Solvency Self-Assessment for AG Re and AGRO) which reports the results of capital modeling, the status of key risk indicators and any emerging risks.
At least once each year, risk management personnel prepare an Own Risk and Solvency Assessment for the Company as a whole and each of the operating companies (Commercial Insurer Solvency Self-Assessment for AG Re and AGRO) which reports the results of capital modeling, the status of key risk indicators and any emerging risks to the Risk Oversight Committee.
Puerto Rico Trust Assets : In addition to New Recovery Bonds and CVIs described above, for bondholders that elected to receive custody receipts that represent an interest in the legacy insurance policy plus any cash, New Recovery Bonds and CVIs under the 2022 Puerto Rico Resolutions, such assets reside in consolidated trusts.
Puerto Rico Trust Assets : In addition to New Recovery Bonds and CVIs described above, for bondholders that elected to receive custody receipts that represent an interest in the legacy insurance policy plus any cash, New Recovery Bonds and CVIs under the 2022 Puerto Rico Resolutions, such assets were reported in consolidated trusts.
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, or are anticipated to be, 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 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.
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.
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.
Under FSMA, effecting or carrying out contracts of insurance by way of business in the U.K. each constitutes a “regulated activity” requiring authorization by the appropriate regulator. The PRA and the FCA are the main regulatory authorities responsible for insurance regulation in the U.K.
Under FSMA, effecting or carrying out contracts of insurance by way of business in the U.K. each constitutes a “regulated activity” requiring authorization by the appropriate regulator. The PRA and the Financial Conduct Authority (FCA) are the main regulatory authorities responsible for insurance regulation in the U.K.
The Company has imposed similar requirements, as applicable, on third parties with whom it shares personal information including through a rigorous vendor selection and management process. The Company engages its personnel and enhances data privacy and security awareness through training, which is mandatory for all employees globally on an annual basis.
The Company has imposed similar requirements, as applicable, on third parties with whom it shares personal information including through a rigorous vendor selection and management process. The Company engages its personnel and strives to enhance data privacy and security awareness through Company training, which is mandatory for all employees globally on an annual basis.
At the operating company level, the AGM and AGC boards of directors review environmental risk reports at each of their quarterly meetings. The Chief Risk Officer is designated as the AGM and AGC board member and member of senior management responsible for overseeing the management of climate risks.
At the operating company level, the AGM, AGC, AG Re and AGRO boards of directors review environmental risk reports at each of their quarterly meetings. The Chief Risk Officer is designated as the AGM, AGC, AG Re and AGRO board member and member of senior management responsible for overseeing the management of climate risks.
In addition, a dedicated internal team is currently working with a geospatial data analytics company specializing in climate change/risk analysis and its effect on cities, counties, and states, to develop analytical capabilities to evaluate climate risk and assess potential negative impacts that climate change could have on the proposed obligor’s ability to pay debt service.
In addition, a dedicated internal team works with a geospatial data analytics company specializing in climate change/risk analysis and its effect on cities, counties, and states, to develop analytical capabilities to evaluate climate risk and assess potential negative impacts that climate change could have on the proposed obligor’s ability to pay debt service.
Assured Guaranty is committed to building and sustaining at all levels of the organization a diverse workforce that is representative of its communities, in a manner consistent with its business needs, scale and resources, and fostering an inclusive culture and workplace that embrace the differences within its staff and effectively utilize the many and varied talents of its employees.
Assured Guaranty is committed to building and sustaining at all levels of the organization a diverse workforce that is representative of its communities, in a manner consistent with its business needs, scale and resources, and fostering an inclusive workplace culture that embraces the differences within its staff and effectively utilizes the many and varied talents of its employees.
An Alt-A borrower is generally defined as a prime quality borrower that lacks certain ancillary characteristics, such as fully documented income. RMBS include home equity lines of credit (HELOCs), which refers to a type of residential mortgage-backed transaction backed by second-lien loan collateral.
A subprime borrower is a borrower with higher risk characteristics. An Alt-A borrower is generally defined as a prime quality borrower that lacks certain ancillary characteristics, such as fully documented income. RMBS include home equity lines of credit (HELOCs), which refers to a type of residential mortgage-backed transaction backed by second-lien loan collateral.
In addition to these licensing, disclosure and asset transfer requirements, the Company’s foreign operations are also regulated in various jurisdictions with respect to, among other matters, policy language and terms, amount and type of reserves, amount and type of capital to be held, amount and type of local investment, local tax requirements, and restrictions on changes in control.
In addition to these licensing, disclosure and asset transfer requirements, the Company’s non-U.S. operations are also regulated in various jurisdictions with respect to, among other matters, policy language and terms, amount and type of reserves, amount and type of capital to be held, amount and type of local investment, local tax requirements, and restrictions on changes in control.
The performance of invested assets is subject to the ability of the Company and its internal and external investment managers to select and manage appropriate investments.
The performance of invested assets is subject to the ability of the Company and its investment managers to select and manage appropriate investments.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Economic, Market and Political Conditions and Natural Phenomena • Developments in the U.S. and global financial markets and economy generally. • Significant budget deficits and pension funding and revenue shortfalls of certain state and local governments and entities that issue obligations the Company insures. • Significant risks from large individual or correlated exposures. • Losses on obligations of the Commonwealth of Puerto Rico and its related authorities and public corporations insured by the Company significantly in excess of those currently expected by the Company or recoveries significantly below those currently expected by the Company. • 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. • The COVID-19 pandemic, and the governmental and private actions taken in response to the pandemic. • Changes in attitudes toward debt repayment negatively impacting the Company’s insurance portfolio. • Persistently low interest rate levels and credit spreads adversely affecting demand for financial guaranty insurance. • Global climate change adversely affecting the Company’s insurance portfolio and investments. • Credit losses and interest rate changes adversely affecting the Company’s investments and AUM. • Expansion of the categories and types of the Company’s investments exposing it to increased credit, interest rate, liquidity and other risks. 50 Risks Related to Estimates, Assumptions and Valuations • Estimates of expected insurance losses to be paid (recovered), including losses with respect to related legal proceedings, are subject to uncertainties and actual amounts may be different, causing the Company to reserve either too little or too much for future losses. • The valuation of many of the Company’s assets and liabilities and AUM includes methodologies, estimates and assumptions that are subject to differing interpretations and could result in changes to valuations of the Company’s assets and liabilities that may materially adversely affect the Company’s financial condition, results of operations, capital, business prospects and share price.
Biggest changeRisks Related to Economic, Market and Political Conditions and Natural Phenomena • Developments in the U.S. and global financial markets and economy generally. • Significant budget deficits and pension funding and revenue shortfalls of certain state and local governments and entities that issue obligations the Company insures. • Significant risks from large individual or correlated exposures. • Losses on obligations insured by the Company significantly in excess of those expected by the Company or recoveries significantly below those expected by the Company. • 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. • Changes in attitudes toward debt repayment negatively impacting the Company’s insurance portfolio. • Narrow credit spreads adversely affecting demand for financial guaranty insurance. • Global climate change adversely affecting the Company’s insurance portfolio and investments. • Credit losses and interest rate changes adversely affecting the Company’s investments. • Expansion of the categories and types of the Company’s investments (including those accounted for as CIVs), including allocations of investments to Sound Point and the exclusivity arrangement with Sound Point may expose it to increased credit, interest rate, liquidity and other risks.
Over time, the frequency and sophistication of such threats continue to increase and often become further heightened in connection with geopolitical tensions. Like other global companies, the Company has an increasing challenge of attracting and retaining highly qualified security personnel to assist in combating these security threats.
Over time, the frequency and sophistication of such threats continue to increase and often become further heightened in connection with geopolitical tensions. Like other global companies, the Company has an increasing challenge of attracting and retaining highly qualified personnel to assist in combating these security threats.
If the issuers of 54 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 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.
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.
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.
The use of different methodologies and assumptions may have a material effect on estimated fair value amounts. During periods of market disruption, including periods of rapidly changing credit spreads or illiquidity, it may be difficult to value certain of the Company’s assets and liabilities and AUM, particularly if trading becomes less frequent or market data becomes less observable.
The use of different methodologies and assumptions may have a material effect on estimated fair value amounts. During periods of market disruption, including periods of rapidly changing credit spreads or illiquidity, it may be difficult to value certain of the Company’s assets and liabilities, particularly if trading becomes less frequent or market data becomes less observable.
The total net expected loss the Company calculates related to such exposures is net of a significant 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 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.
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. Significant claim payments may reduce the Company’s liquidity.
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.
Additionally, in recent years AGM and AGC 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 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.
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.
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.
While AGL currently intends to pay dividends on its common shares, investors who require dividend income should carefully consider these risks before investing in AGL. 67 AGL is dependent on dividends from its subsidiaries, including dividends from its insurance subsidiaries, for resources to pay holders of its common shares, fund share repurchases and pursue other activities.
While AGL currently intends to pay dividends on its common shares, investors who require dividend income should carefully consider these risks before investing in AGL. AGL is dependent on dividends from its subsidiaries, including dividends from its insurance subsidiaries, for resources to pay holders of its common shares, fund share repurchases and pursue other activities.
Rating agencies may choose not to honor the Company’s request, and continue to rate a subsidiary after the Company’s request to drop the rating, as Moody’s did with respect to AGC. The insurance subsidiaries’ financial strength and financial enhancement ratings are an important competitive factor in the financial guaranty insurance and reinsurance markets.
Rating agencies may choose not to honor the Company’s request, and continue to rate a subsidiary after the Company’s request to drop the rating, as Moody’s did with respect to AGC. 54 The insurance subsidiaries’ financial strength and financial enhancement ratings are an important competitive factor in the financial guaranty insurance and reinsurance markets.
Person and such 68 controlled shares constitute 9.5% or more of the votes conferred by AGL’s issued shares, the voting rights with respect to the controlled shares of such U.S. Person (a 9.5% U.S. Shareholder) are limited, in the aggregate, to a voting power of less than 9.5%, under a formula specified in AGL’s Bye-Laws.
Person and such controlled shares constitute 9.5% or more of the votes conferred by AGL’s issued shares, the voting rights with respect to the controlled shares of such U.S. Person (a 9.5% U.S. Shareholder) are limited, in the aggregate, to a voting power of less than 9.5%, under a formula specified in AGL’s Bye-Laws.
Should the Company's risk assessments prove 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 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.
A material reduction in the statutory capital and surplus of an insurance subsidiary, whether resulting from underwriting or investment losses, a change in regulatory capital requirements or another event, or a disproportionate increase 61 in the amount of risk in force, could increase a subsidiary’s leverage ratio.
A material reduction in the statutory capital and surplus of an insurance subsidiary, whether resulting from underwriting or investment losses, a change in regulatory capital requirements or another event, or a disproportionate increase in the amount of risk in force, could increase a subsidiary’s leverage ratio.
The Company seeks to reduce this risk by 52 managing exposure to large single risks, as well as concentrations of correlated risks, through tracking its aggregate exposure to single risks in its various lines of insurance business and establishing underwriting criteria to manage risk aggregations.
The Company seeks to reduce this risk by managing exposure to large single risks, as well as concentrations of correlated risks, through tracking its aggregate exposure to single risks in its various lines of insurance business and establishing underwriting criteria to manage risk aggregations.
The Board intends to 64 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. for U.K. tax purposes and to qualify for the benefits of income tax treaties to which the U.K. is a party.
The Board intends 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. for U.K. tax purposes and to qualify for the benefits of income tax treaties to which the U.K. is a party.
The ratings assigned by the rating agencies to the Company’s insurance subsidiaries are subject to review and may be lowered by a rating agency at any time and without notice to the Company. 58 The rating agencies have changed their methodologies and criteria from time to time.
The ratings assigned by the rating agencies to the Company’s insurance subsidiaries are subject to review and may be lowered by a rating agency at any time and without notice to the Company. The rating agencies have changed their methodologies and criteria from time to time.
These or other factors may cause any past or future strategic transactions relating to financial services entities, portfolios or teams not to result in the benefits to the Company that the Company anticipated when the transaction was agreed.
These or other factors may cause any past or future strategic transactions relating to financial services entities or portfolios not to result in the benefits to the Company that the Company anticipated when the transaction was agreed.
Such strategic transactions related to entities, portfolios or teams 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, portfolio or team; (b) difficulty in estimating the value of a new entity, portfolio or team; (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 or team; (g) failure to identify legal risks associated with the strategic transaction with an entity, portfolio or team, 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.
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.
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 63 transactions.
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.
In addition to the insurance, asset management and other regulations and laws specific to the industries in which it operates, 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 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.
Further, future 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 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.
Each of AGL, AGUS and AGMH requires liquidity, either in the form of cash or in the ability to easily sell investment assets 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, and to make capital investments in operating subsidiaries.
As a result of any such reallocation of votes, the voting rights of a holder of AGL common shares might increase above 5% of the aggregate voting power of the outstanding common shares, thereby possibly resulting in such holder becoming a reporting person subject to Schedule 13D or 13G filing requirements under the Securities Exchange Act of 1934.
As a result of any such reallocation of votes, the voting rights of a holder of AGL common shares might increase above 5% of the aggregate voting power of the outstanding common shares, thereby possibly resulting in such holder becoming a reporting person subject to Schedule 13D or 13G filing requirements under the Exchange Act.
They also require liquidity to pay operating expenses, reinsurance premiums, dividends to AGUS or AGMH for debt service and dividends to AGL, as well as, where appropriate, to make capital investments in their own subsidiaries. In addition, the Company may require substantial liquidity to fund any future acquisitions.
They also require liquidity to pay operating expenses, reinsurance premiums, dividends to AGUS or AGMH for debt service and dividends to AGL, fund investments and commitments to alternative investments, as well as, where appropriate, to make capital investments in their own subsidiaries. In addition, the Company may require substantial liquidity to fund any future acquisitions.
The Company believes that AGL was not a PFIC for U.S. federal income tax purposes for taxable years through 2022 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 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.
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), 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 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.
Due to the complexity of fair value accounting and the application of GAAP 66 requirements, future amendments or interpretations of relevant accounting standards may cause the Company to modify its accounting methodology in a manner which may have an adverse impact on its financial results.
Due to the complexity of fair value methodologies and the application of GAAP requirements, future amendments or interpretations of relevant accounting standards may cause the Company to modify its accounting methodology in a manner which may have an adverse impact on its financial results.
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 /or AUM; and actual defaults and losses in its insurance portfolio and / or investments.
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.
Also, alternative investments may be less liquid than most of the Company’s other investments and so may be difficult to convert to cash or investments that do receive more favorable treatment under the capital models to which the Company is subject.
Also, alternative investments are generally less liquid than most of the Company’s other investments and so may be difficult to convert to cash or investments that do receive more favorable treatment under the capital models to which the Company is subject.
Such strategic transactions related to entities, portfolios or 57 teams may also have unintended consequences on ratings assigned by the rating agencies to the Company or its insurance subsidiaries or on the applicability of laws and regulations to the Company’s existing businesses.
Such strategic transactions related to entities or portfolios may also have unintended consequences on ratings assigned by the rating agencies to the Company or its insurance subsidiaries or on the applicability of laws and regulations to the Company’s existing businesses.
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 or the investments it manages.
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.
The Company is dependent on its information technology and that of certain third parties, and 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, could adversely affect the Company’s business.
The Company is dependent on its information technology and that of certain third parties, and a cyberattack, security breach or failure in the Company’s or a third party provider’s information technology system, or a data privacy breach of the Company’s or a vendor’s information technology system, could adversely affect the Company’s business.
If an insurance subsidiary’s surplus declines below minimum required levels, the insurance regulator could impose additional restrictions on the insurance subsidiary or initiate insolvency proceedings. Legislation, regulation or litigation arising out of the struggles of distressed obligors may adversely impact the Company’s legal rights as creditor as well as its investments and the investments it manages.
If an insurance subsidiary’s surplus declines below minimum required levels, the insurance regulator could impose additional restrictions on the insurance subsidiary or initiate insolvency proceedings. Legislation, regulation or litigation arising out of the struggles of distressed obligors may adversely impact the Company’s legal rights as creditor as well as its investments.
Additional information about the Company’s exposure to Puerto Rico and legal actions related to that exposure may be found in, Part II, Item 8, Financial Statements and Supplementary Data, Note 3, Outstanding Exposure, Exposure to Puerto Rico.
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.
If the issuers of the obligations in the Company’s public finance portfolio do not have sufficient funds to cover their expenses and are unable or unwilling to raise taxes, decrease spending or receive federal assistance, the Company may experience increased levels of losses or impairments on its insured public finance obligations.
If the issuers of the obligations in the Company’s public finance portfolio do not have sufficient funds to cover their expenses and are unable or unwilling to raise taxes, decrease spending or receive federal assistance, the Company may experience increased levels of losses or liquidity claims on its insured public finance obligations.
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. 65 by reason of arrangements between companies in the same multinational group and involving a low-tax jurisdiction, including co-insurance and reinsurance.
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.
Some of the state and local governments and entities that issue obligations the Company insures are experiencing significant budget deficits and pension funding and revenue shortfalls that could result in increased credit losses or impairments and increased rating agency capital charges on those insured obligations.
Some of the state and local governments and entities that issue obligations the Company insures are experiencing significant budget deficits and pension funding and revenue shortfalls that could result in increased credit losses or liquidity claims and increased rating agency capital charges on those insured obligations.
For example, 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 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.
Operational Risks • Fluctuations in foreign exchange rates. • Less predictable, political, credit or legal risks associated with the some of the Company’s non-U.S. operations. • 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, whether related to Puerto Rico or otherwise, 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, whether related to Puerto Rico or otherwise, 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.
Operational 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.
The global economic and political systems also have been impacted by events in the Middle East and Eastern Europe (including events in the Ukraine), as well as Africa and Southeast Asia, and could be impacted by other events in the future, including natural and man-made events and disasters.
The global economic and political systems also have been impacted by events in the Middle East and Eastern Europe (including events in the Ukraine), as well as Southeast Asia and South America, and could be impacted by other events in the future, including natural and man-made events and disasters.
Although the Company has designed its executive compensation with the goal of retaining and creating incentives for its executive officers and other key employees, including portfolio managers, the Company may not be successful in retaining their services.
Although the Company has designed its executive compensation with the goal of retaining and creating incentives for its executive officers and other key employees, the Company may not be successful in retaining their services.
AGL anticipates that its liquidity needs will be met by the ability of its operating subsidiaries to pay dividends or to make other payments; 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 investment in Sound Point; external financings; investment income from its invested assets; and current cash and short-term investments.
Business — Tax Matters — Taxation of Shareholders — United States Taxation — Passive Foreign Investment Companies. Changes in U.S. federal income tax law may adversely affect an investment in AGL’s common shares.
Business — Tax Matters — Taxation of Shareholders — United States Taxation — Passive Foreign Investment Companies. Changes in U.S. federal income tax law may adversely affect the Company and an investment in AGL’s common shares.
CFC rules, additional U.S. income taxation on their proportionate share of the Company's RPII or unrelated business taxable income rules, and 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 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. transfer pricing legislation could adversely impact Assured Guaranty’s tax liability. • 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. • 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 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.
The Company may face a sudden need to raise additional capital as a result of insurance losses, whether related to Puerto Rico or otherwise, 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 companies, which additional capital may not be available or may be available only on unfavorable terms.
The approaches used by the Company to calculate the fair value of those assets and liabilities it carries at fair value are described under, Part II, Item 8, Financial Statements and Supplementary Data, Note 9, Fair Value Measurement.
The Company carries a significant portion of its assets and liabilities at fair value. The approaches used by the Company to calculate the fair value of those assets and liabilities it carries at fair value are described under, Part II, Item 8, Financial Statements and Supplementary Data, Note 9, Fair Value Measurement.
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.
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.
The loss of the services of any of these individuals or other key members of the Company’s management team could adversely affect the implementation of its business strategy, including the Company’s development of its asset management business.
The loss of the services of any of these individuals or other key members of the Company’s management team could adversely affect the implementation of its business strategy.
The Company’s data systems and those of third parties on which it relies will continue to be vulnerable to security and data privacy breaches due to, and continue to be the target of, cyberattacks, viruses, malware, ransomware, other malicious codes, hackers, unauthorized access, or other computer-related penetrations, and other external hazards, as well as inadvertent errors, equipment and system failures, and employee misconduct.
Like many companies, the Company’s data systems and those of third parties on which it relies have been, and the Company expects will continue to be, vulnerable to and the target of, security and data privacy breaches due to cyberattacks, viruses, malware, ransomware, other malicious codes, hackers, unauthorized access, or other computer-related penetrations, and other external hazards, as well as inadvertent errors, equipment and system failures, and employee misconduct.
Credit losses and changes in interest rates could adversely affect the Company’s investments and AUM. The Company’s results of operations are affected by the performance of its investments, which primarily consist of fixed-income securities and short-term investments. As of December 31, 2022, fixed-maturity securities and short-term investments held by the Company had a fair value of approximately $8.2 billion.
Credit losses and changes in interest rates could adversely affect the Company’s investments. The Company’s results of operations are affected by the performance of its investments, which primarily consist of fixed-maturity securities and short-term investments. As of December 31, 2023, fixed-maturity securities and short-term investments held by the Company had a fair value of approximately $8.3 billion.
See Item 1. Business — Tax Matters — Taxation of AGL and Subsidiaries— United States. AGL, AG Re and AGRO may become subject to taxes in Bermuda after March 2035, which may adversely affect the Company’s future results of operations and on an investment in the Company.
See Item 1. Business — Tax Matters — Taxation of AGL and Subsidiaries— United States. AGL may, and AG Re and AGRO will, become subject to taxes in Bermuda, which may adversely affect the Company’s future results of operations and an investment in the Company.
The Company expects that while it is building its asset management business, 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, and, in the case of AGL, to repurchase its common shares.
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 or other reasons, and the amount of insurance exposure the Company has to some the 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, fraud, mismanagement or otherwise) or other reasons, and the amount of insurance exposure the Company has to some risks is quite large.
Alternative investments may not result in the benefits anticipated. The Company and its CIVs have invested in alternative investments, and may over time increase the proportion of the Company’s assets invested in alternative investments. Alternative investments may be riskier than other investments the Company makes, and may not result in the benefits anticipated at the time of the investment.
Alternative investments may not result in the benefits anticipated. The Company has invested in alternative investments, and may over time increase the proportion of the Company’s assets invested in alternative investments. Alternative investments may be riskier than other investments the Company makes, and may not result in the benefits anticipated at the time of the investment.
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 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.
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.
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.
The expansion of the Company’s asset management business segment and the establishment of AssuredIM has exposed the Company’s financial condition, results of operations, business prospects and share price to some of the risks faced by asset managers generally and the risk of AssuredIM’s investment business more specifically.
Prior to July 1, 2023, the Company’s asset management business segment and the establishment of AssuredIM exposed the Company’s financial condition, results of operations, business prospects and share price to some of the risks faced by asset managers generally and the risk of AssuredIM’s investment business more specifically.
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 asset managers, asset management contracts, legacy financial guaranty companies and financial guaranty portfolios, and other financial services 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 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.
Furthermore, future sales or other issuances of AGL equity may adversely affect the market price of its common shares. Provisions in the Code and AGL’s Bye-Laws may reduce or increase the voting rights of its common shares.
These broad market fluctuations may adversely affect the price of AGL’s common shares, regardless of AGL-specific factors. Furthermore, future sales or other issuances of AGL equity may adversely affect the market price of its common shares. Provisions in the Code and AGL’s Bye-Laws may reduce or increase the voting rights 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 and asset management 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 value of its AUM and amount of its related asset management fees (including performance fees), 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 (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.
Risks Related to GAAP, Applicable Law and Litigation • Changes in the fair value of the Company’s insured credit derivatives portfolio, its committed capital securities (CCS), its FG VIEs, its CIVs, and/or the Company’s decision to consolidate or deconsolidate one or more FG VIEs and/or CIVs during a financial reporting period, subjecting its financial condition and results of operations to volatility. • Changes in industry and other accounting practices. 51 • Changes in or inability to comply with applicable law and regulations. • Legislation, regulation or litigation arising out of the struggles of distressed obligors. • Certain insurance regulatory requirements and restrictions constraining AGL’s ability to pay dividends and fund share repurchases and other activities. • Applicable insurance laws may make it difficult to effect a change of control of AGL.
Risks Related to GAAP, Applicable Law and Litigation • An inability to obtain accurate and timely financial information from Sound Point and other alternative investment managers, including AHP, may impair the Company’s ability to comply with reporting obligations. • Changes in the fair value of the Company’s insured credit derivatives portfolio, certain of its investments, its committed capital securities (CCS), its FG VIEs, its CIVs, and/or the Company’s decision to consolidate or deconsolidate one or more FG VIEs and/or CIVs during a financial reporting period, subjecting its financial condition and results of operations to volatility. • Changes in industry and other accounting practices. • Changes in or inability to comply with applicable law and regulations. 47 • Legislation, regulation or litigation arising out of the struggles of distressed obligors. • Certain insurance regulatory requirements and restrictions constraining AGL’s ability to pay dividends and fund share repurchases and other activities. • Applicable insurance laws may make it difficult to effect a change of control of AGL.
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.
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.
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.
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.
Losses on obligations of the Commonwealth of Puerto Rico and its related authorities and public corporations insured by the Company significantly in excess of those currently expected by the Company or recoveries significantly below those currently expected by the Company could have a negative effect on the Company’s financial condition, results of operations, capital, business prospects and share price.
Losses on obligations insured by the Company significantly in excess of those expected by the Company or recoveries significantly below those expected by the Company could have a negative effect on the Company’s financial condition, results of operations, capital, business prospects and share price.
Expanding the categories and types of Company investments (including those accounted for as CIVs) may also expose the Company to other types of risks, including reputational risks.
Expanding the categories and types of Company investments (including those accounted for as CIVs), allocations to Sound Point and exclusivity arrangement with Sound Point may also expose the Company to other types of risks, including reputational risks.
During periods of strong macroeconomic performance, stress in an individual transaction generally occurs for idiosyncratic reasons or as a result of issues in a single asset class (so impacting only transactions in that sector).
During periods of strong macroeconomic performance, stress in an individual transaction generally occurs for idiosyncratic reasons or as a result of issues in a single sector.
To the extent societal attitudes toward the repayment of debt by struggling obligors softens and such obligors believe there to be less of a penalty for nonpayment, some struggling debtors may be more likely to default and, if they default, less likely to agree to repayment plans they view as burdensome.
To the extent societal attitudes toward the repayment of debt by struggling obligors softens and such obligors believe there to be less of a penalty for nonpayment due to legal rulings or debt relief programs that may absolve them of the repayment obligation or otherwise, some struggling debtors may be more likely to default and, if they default, less likely to agree to repayment plans they view as burdensome.
The diverted profits tax (DPT), which is currently levied at 25% (and due to increase to 31% from April 1, 2023), is an anti-avoidance measure, aimed at protecting the U.K. tax base against the diversion of profits away from the U.K., tax charge.
The diverted profits tax (DPT), which is currently levied at 31%, is an anti-avoidance measure, aimed at protecting the U.K. tax base against the diversion of profits away from the U.K., tax charge.
The Company’s ultimate exposure to a single risk may exceed its underwriting guidelines (caused by, for example, acquisitions, reassumptions, or amortization of the portfolio faster than the single risk). The Company is exposed to correlation risk across the various assets the Company insures and in which it invests.
The Company’s ultimate exposure to a single risk may exceed its underwriting guidelines (caused by, for example, acquisitions, reassumptions, accretion or amortization of the portfolio faster than the single risk). The Company is exposed to correlation risk across its insured exposures and in its investment portfolio.
The Company’s failure to maintain business continuity in the wake of such events, particularly if there were an interruption for an extended period, could prevent the timely completion of critical processes across its operations, including, for example, claims processing, treasury and investment operations and payroll. These failures could result in additional costs, loss of business, fines and litigation.
The Company’s failure to maintain business continuity in the wake of such events, particularly if there were an interruption for an extended period, could prevent the timely completion of critical processes across its operations, including, for example, financial reporting, claims processing, regulatory filings, treasury and investment operations and payroll.
Business — Tax Matters — Taxation of Shareholders — United States Taxation — Tax-Exempt Shareholders. U.S. Persons who hold AGL’s shares will be subject to adverse tax consequences if AGL is considered to be PFIC for U.S. federal income tax purposes. If AGL is considered a PFIC for U.S. federal income tax purposes, a U.S.
Persons who hold AGL’s shares will be subject to adverse tax consequences if AGL is considered to be PFIC for U.S. federal income tax purposes. If AGL is considered a PFIC for U.S. federal income tax purposes, a U.S.
Risks Related to Taxation • Changes in U.S. tax laws could reduce the demand or profitability of financial guaranty insurance, or negatively impact the Company’s investments. • Certain of the Company’s non-U.S. subsidiaries may be subject to U.S. tax. • AGL, AG Re and AGRO may become subject to taxes in Bermuda after March 2035. • In certain circumstances, U.S.
Risks Related to Taxation • Changes in U.S. tax laws could reduce the demand or profitability of financial guaranty insurance, or negatively impact the Company’s investments. • Certain of the Company’s non-U.S. subsidiaries may be subject to U.S. tax. • AGL may, and AG Re and AGRO will, become subject to taxes in Bermuda, which may adversely affect the Company’s future results of operations and an investment in the Company. • U.S.
U.S. tax-exempt shareholders may be subject to the unrelated business taxable income rules with respect to certain insurance income of the Foreign Insurance Subsidiaries. U.S. tax-exempt shareholders may be required to treat insurance income includable under the CFC or RPII rules as unrelated business taxable income. See Item 1.
U.S. tax-exempt shareholders may be required to treat insurance income includable under the CFC or RPII rules as unrelated business taxable income. See Item 1. Business — Tax Matters — Taxation of Shareholders — United States Taxation — Tax-Exempt Shareholders. U.S.
Persons that own or are treated as owning shares of AGL. U.S. Persons owning or treated as owning shares of AGL should consult their tax advisors as to the effect of these uncertainties. See Item 1. Business — Tax Matters — Taxation of Shareholders — United States Taxation — The RPII CFC Provisions; Disposition of AGL Shares.
Persons that own or are treated as owning shares of AGL. U.S. Persons owning or treated as owning shares of AGL should consult their tax advisors as to the effect of these uncertainties. See Item 1.
In addition, a downgrade may have a negative impact on the Company’s insurance subsidiaries in respect of transactions that they have insured or that they have assumed through reinsurance.
In addition, a downgrade may have a negative impact on the Company’s insurance subsidiaries in respect of transactions that they have insured or that they have assumed through reinsurance. For example, some of the Company’s insurance subsidiaries (Assuming Subsidiaries) assumed financial guaranty insurance from legacy financial guarantors.
Changes in such factors could impede the Company’s ability to insure, or increase the risk of loss from insuring, obligations in the non-U.S. countries in which it currently does business and limit its ability to pursue business opportunities in other non-U.S. countries. 59 The Company is dependent on key executives and the loss of any of these executives, or its inability to retain other key personnel, could adversely affect its business.
Changes in such factors could impede the Company’s ability to insure, or increase the risk of loss from insuring, obligations in the non-U.S. countries in which it currently does business and limit its ability to pursue business opportunities in other non-U.S. countries.
Risks Related to GAAP, Applicable Law and Litigation Changes in the fair value of the Company’s insured credit derivatives portfolio, its CCS, and its FG VIEs, CIVs and/or the Company’s decision to consolidate or deconsolidate one or more FG VIEs and/or CIVs during a financial reporting period, may subject its financial condition and results of operations to volatility.
Changes in the fair value of the Company’s insured credit derivatives portfolio, its CCS, and its FG VIEs, the Company’s alternative investments, including those accounted for as CIVs, and/or the Company’s decision to consolidate or deconsolidate one or more FG VIEs and/or CIVs during a financial reporting period, may subject its results of operations to volatility.
For example, the default by the Commonwealth of Puerto Rico on much of its debt has resulted in both legislation (including the enactment of PROMESA) and litigation that is continuing to impact the Company’s rights as creditor, most directly in Puerto Rico but also elsewhere in the U.S. municipal market.
For example, the default by the Commonwealth of Puerto Rico on much of its debt has resulted in both legislation (including the enactment of PROMESA) and litigation that is continuing to impact the Company’s rights as creditor, most directly in Puerto Rico but also elsewhere in the U.S. municipal market. 63 The Company is, and may be in the future, involved in litigation, both as a defendant and as a plaintiff, in the ordinary course of its insurance and asset management business and other business operations.
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.
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThis lease expires in December 2032; and ◦ 78,600 square feet of office space that previously served as the primary offices of AssuredIM. The lease expires in April 2024.
Biggest changeAs 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.
ITEM 2. PROPERTIES Management believes its office space is adequate for its current and anticipated needs. The Company’s properties include the following: • Hamilton, Bermuda: ◦ approximately 8,700 square feet of office space that serves as the principal executive offices of AGL and AG Re.
ITEM 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.
As of December 31, 2022, 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, 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.
The lease expires in April 2026 and is renewable at the option of the Company. • New York, U.S.: ◦ 103,500 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 primary offices of the U.S. Insurance Subsidiaries.
As of December 31, 2022, this space is subleased to another tenant for its remaining term. • Other: The Company leases other office space in San Francisco, California; London, England; and Paris, France.
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 February 2032, with an option, subject to certain conditions, to renew for five years at a fair market rent; 69 ◦ approximately 52,000 square feet of office space that serves as the primary offices of AssuredIM.
Part of the lease expires in February 2032, with an option, subject to certain conditions, to renew for five years at a fair market rent, and part of the lease expires in December 2032.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

9 edited+2 added−4 removed10 unchanged
Biggest changeBailenson 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.
Biggest changePrior 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.
Chow served as Deputy General Counsel of Assured Guaranty’s U.S. subsidiaries in several capacities from 2004. Before joining Assured Guaranty, Ms. Chow was an associate at law firms in New York City, where she was responsible for transactional work associated with public and private mergers and acquisitions, venture capital investments, and private and public securities offerings. David A.
Chow served as Deputy General Counsel of Assured Guaranty’s U.S. subsidiaries in several capacities from 2004. Before joining Assured Guaranty, Ms. Chow was an associate at law firms in New York City, where she was responsible for transactional work associated with public and private mergers and acquisitions, venture capital investments, and private and public securities offerings.
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. 71 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. 69 PART II
Horn has been Chief Surveillance Officer of AGL and the Company’s US 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 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.
She is responsible for legal affairs and corporate governance at the Company, including its litigation and other legal strategies relating to distressed credits, and its corporate, compliance, regulatory and disclosure efforts. She is also responsible for the Company’s human resources function. Ms.
She is responsible for legal affairs and corporate governance at the Company, including its litigation and other legal strategies relating to distressed credits, and its corporate, compliance, regulatory and disclosure efforts. She is also responsible for the Company’s human capital management function. Ms.
Frederico served in a number of executive positions with ACE Limited. Prior to joining ACE Limited, Mr. Frederico spent 13 years working for various subsidiaries of American International Group, Inc. Robert A. Bailenson has been Chief Financial Officer of AGL since June 2011. Mr. Bailenson has been with Assured Guaranty and its predecessor companies since 1990. Mr.
Frederico served in a number of executive positions with ACE Limited. Prior to joining ACE Limited, Mr. Frederico spent 13 years working for various subsidiaries of American International Group, Inc. Robert A. Bailenson has been Chief Operating Officer of AGL since January 1, 2024. Mr. Bailenson has been with Assured Guaranty and its predecessor companies since 1990.
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 70 President and Chief Executive Officer; Deputy Chairman Robert A. Bailenson 56 Chief Financial Officer Ling Chow 52 General Counsel and Secretary David A.
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.
Buzen 63 Chief Investment Officer and Head of Asset Management Stephen Donnarumma 60 Chief Credit Officer Jorge A. Gana 52 Chief Risk Officer Holly Horn 62 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 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.
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. 70 Ling Chow has been General Counsel and Secretary of AGL since January 1, 2018.
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.
Removed
Buzen has been the Chief Investment Officer (CIO) and Head of Asset Management of the Company’s U.S. Insurance Subsidiaries and Chief Executive Officer and CIO of AssuredIM since August 2020. Previously, Mr. Buzen served as Deputy CIO of BlueMountain (now AssuredIM LLC).
Added
Rosenblum 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.
Removed
Prior to that, he was the Senior Managing Director, Alternative Investments, where he was responsible for leading the Company’s efforts to enter the asset management business. Mr. Buzen joined Assured Guaranty in 2016 after the acquisition of CIFG Holding Inc., where he was President and CEO. Prior to his years at CIFG, Mr.
Added
He became a Senior Managing Director in 2015, and has been in charge of accounting and financial reporting since 2019. Ling Chow has been General Counsel and Secretary of AGL since January 1, 2018.
Removed
Buzen was Chief Financial Officer of Churchill Financial, a commercial finance and asset management company after heading DEPFA Bank’s municipal reinvestment and U.S. financial guarantee businesses. Earlier, he served as Chief Operating Officer of ACE Financial Solutions, an operating division of ACE Limited.
Removed
Before that, he was the Chief Financial Officer of Capital Re Corp., a company that was acquired by ACE Limited in 1999 and which owned the company now known as Assured Guaranty Corp. until Assured Guaranty’s 2004 IPO. He began his career in the financial guaranty industry at Ambac Financial Group.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program (1) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Program(2) October 1 - October 31 648,249 $ 52.97 648,249 $ 268,933,146 November 1 - November 30 576,084 $ 60.11 571,992 $ 234,542,994 December 1 - December 31 493,770 $ 63.34 493,175 $ 203,303,329 Total 1,718,103 $ 58.35 1,713,416 ____________________ (1) After giving effect to repurchases since the Board first authorized the repurchase program on January 18, 2013, through February 28, 2023, the Company has repurchased a total of 141 million common shares for approximately $4.7 billion, excluding commissions, at an average price of $33.09 per share.
Biggest change(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.
AGL paid quarterly cash dividends in the amount of $0.25 and $0.22 per common share in 2022 and 2021, 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 $0.28 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.
The following table reflects purchases of AGL common shares made by the Company during the fourth quarter of 2022.
The following table reflects purchases of AGL common shares made by the Company during the fourth quarter of 2023.
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 24, 2023, the approximate number of shareholders of record at the close of business on that date was 82.
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.
(2) Excludes commissions. 72 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, 2017 through December 31, 2022 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. 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.
The repurchase program has no expiration date and the Board has previously increased the authorization periodically.
The repurchase program has no expiration date and the Board has periodically increased the authorization since 2013.
Issuer’s Purchases of Equity Securities In 2022, the Company repurchased a total of 8,847,981 common shares for approximately $503 million at an average price of $56.79 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 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.
Most recently, on August 3, 2022, the Board authorized the repurchase of an additional $250 million of its common shares. As of February 28, 2023, the Company was authorized to purchase $201 million of its common shares.
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.
The chart and table depict the value on December 31 of each year from 2017 through 2022 of a $100 investment made on December 31, 2017, with all dividends reinvested: Assured Guaranty S&P 500 Index S&P 500 Financials Sector GICS Level 1 Index Russell Midcap Financial Services Index 12/31/2017 $ 100.00 $ 100.00 $ 100.00 $ 100.00 12/31/2018 114.96 95.61 86.96 89.96 12/31/2019 149.59 125.70 114.87 120.14 12/31/2020 98.82 148.81 112.85 126.08 12/31/2021 160.44 191.48 152.20 171.28 12/31/2022 202.48 156.77 136.11 149.87 ___________________ Source: Calculated from total returns published by Bloomberg. 73
The 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
Added
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.

Item 7. Management's Discussion & Analysis

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

221 edited+84 added−185 removed102 unchanged
Biggest changeIt includes all financial guaranty contracts outstanding as of the dates presented, regardless of the form written (i.e., credit derivative form or traditional financial guaranty insurance form) or the applicable accounting model (i.e., insurance, derivative or FG VIE consolidation), along with each sector’s average rating. 107 Financial Guaranty Portfolio Net Par Outstanding and Average Internal Rating by Sector As of December 31, 2022 As of December 31, 2021 Sector Net Par Outstanding Average Rating Net Par Outstanding Average Rating (dollars in millions) Public finance: U.S. public finance: General obligation $ 71,868 A- $ 72,896 A- Tax backed 33,752 A- 35,726 A- Municipal utilities 26,436 A- 25,556 A- Transportation 19,688 A- 17,241 BBB+ Healthcare 11,304 BBB+ 9,588 BBB+ Higher education 7,137 A- 6,927 A- Infrastructure finance 6,955 A- 6,329 A- Housing revenue 959 BBB- 1,000 BBB- Investor-owned utilities 332 A- 611 A- Renewable energy 180 A- 193 A- Other public finance 1,025 BBB 1,152 A- Total U.S. public finance 179,636 A- 177,219 A- Non-U.S public finance: Regulated utilities 17,855 BBB+ 18,814 BBB+ Infrastructure finance 13,915 BBB 16,475 BBB Sovereign and sub-sovereign 9,526 A+ 10,886 A+ Renewable energy 2,086 A- 2,398 A- Pooled infrastructure 1,081 AAA 1,372 AAA Total non-U.S. public finance 44,463 BBB+ 49,945 BBB+ Total public finance 224,099 A- 227,164 A- Structured finance: U.S. structured finance: Life insurance transactions 3,879 AA- 3,431 AA- RMBS 1,956 BBB- 2,391 BB+ Pooled corporate obligations 625 AAA 534 AA+ Financial products 453 AA- 770 AA- Consumer receivables 437 A 583 A+ Other structured finance 878 BBB+ 665 BBB+ Total U.S. structured finance 8,228 A 8,374 A Non-U.S. structured finance: Pooled corporate obligations 344 AAA 351 AAA RMBS 263 A- 325 A Other structured finance 324 AA- 178 AA Total non-U.S structured finance 931 AA 854 AA Total structured finance 9,159 A 9,228 A Total net par outstanding $ 233,258 A- $ 236,392 A- Second-to-pay insured par outstanding represents transactions the Company has insured that are already insured by another financial guaranty insurer and where the Company’s obligation to pay under its insurance of such transactions arises only if both the obligor on the underlying insured obligation and the primary financial guaranty insurer default.
Biggest changeFinancial Guaranty Portfolio Net Par Outstanding by Sector As of December 31, 2023 As of December 31, 2022 Sector (in millions) Public finance: U.S. public finance: General obligation $ 74,609 $ 71,868 Tax backed 33,060 33,752 Municipal utilities 29,300 26,436 Transportation 22,052 19,688 Healthcare 12,604 11,304 Infrastructure finance 8,796 6,955 Higher education 7,250 7,137 Housing revenue 1,152 959 Investor-owned utilities 329 332 Renewable energy 167 180 Other public finance 970 1,025 Total U.S. public finance 190,289 179,636 Non-U.S public finance: Regulated utilities 20,545 17,855 Infrastructure finance 15,430 13,915 Sovereign and sub-sovereign 9,869 9,526 Renewable energy 2,030 2,086 Pooled infrastructure 1,133 1,081 Total non-U.S. public finance 49,007 44,463 Total public finance 239,296 224,099 Structured finance: U.S. structured finance: Insurance securitizations 4,379 3,879 RMBS 1,774 1,956 Pooled corporate obligations 631 625 Financial products 464 453 Consumer receivables 314 437 Subscription finance facilities 178 72 Other structured finance 892 806 Total U.S. structured finance 8,632 8,228 Non-U.S. structured finance: Subscription finance facilities 444 219 Pooled corporate obligations 425 344 RMBS 252 263 Other structured finance 104 105 Total non-U.S structured finance 1,225 931 Total structured finance 9,857 9,159 Total net par outstanding $ 249,153 $ 233,258 100 Second-to-pay insured par outstanding represents transactions the Company has insured that are already insured by another financial guaranty insurer and where the Company’s obligation to pay under its insurance of such transactions arises only if both the obligor on the underlying insured obligation and the primary financial guaranty insurer default.
The accounting policies that the Company believes are most dependent on the application of judgment, estimates and assumptions are listed below.
Listed below are the accounting policies and estimates that the Company believes are most dependent on the application of judgment and assumptions.
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 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 lives of certain transactions in the in-force book of business.
In addition, since each transaction has unique collateral and structural terms, the underlying change in fair value of each transaction may vary considerably. 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.
In addition, since each transaction has unique collateral and structural terms, the underlying change in fair value of each transaction may vary considerably. The fair value of credit derivative contracts also reflects the Company’s own credit cost based on the price to purchase credit protection on AGC.
Due to the relatively low volume and characteristics of CDS contracts remaining in AGM’s portfolio, changes in AGM’s credit spreads do not significantly affect the fair value of these CDS contracts. The Company determines its own credit risk based on quoted CDS prices traded on AGC at each balance sheet date.
Due to the relatively low volume and characteristics of CDS contracts remaining in AGM’s portfolio, changes in AGM’s CDS spreads do not significantly affect the fair value of these CDS contracts. The Company determines its own credit risk based on quoted CDS prices traded on AGC at each balance sheet date.
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 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. The following table presents the foreign exchange rates as of the balance sheet dates. Foreign Exchange Rates U.S.
Holding Companies AGL directly owns (i) AG Re, an insurance company domiciled in Bermuda, and (ii) AGUS, a U.S. holding company with public debt. AGUS directly owns: (i) AGC, an insurance company domiciled in Maryland; and (ii) AGMH, a U.S. holding company with public debt outstanding. AGMH directly owns AGM, an insurance subsidiary domiciled in New York.
Holding Companies AGL directly owns (i) AG Re, an insurance company domiciled in Bermuda, and (ii) AGUS, a U.S. holding company with public debt outstanding. AGUS directly owns: (i) AGC, an insurance company domiciled in Maryland; and (ii) AGMH, a U.S. holding company with public debt outstanding. AGMH directly owns AGM, an insurance subsidiary domiciled in New York.
Total (in millions) GWP $ 248 $ 75 $ 37 $ — $ 360 Less: Installment GWP and other GAAP adjustments (1) 40 75 30 — 145 Upfront GWP 208 — 7 — 215 Plus: Installment premiums and other (2) 49 68 36 7 160 PVP $ 257 $ 68 $ 43 $ 7 $ 375 Year Ended December 31, 2021 Public Finance Structured Finance U.S.
Total (in millions) GWP $ 248 $ 75 $ 37 $ — $ 360 Less: Installment GWP and other GAAP adjustments (1) 40 75 30 — 145 Upfront GWP 208 — 7 — 215 Plus: Installment premiums and other (2) 49 68 36 7 160 PVP $ 257 $ 68 $ 43 $ 7 $ 375 98 Year Ended December 31, 2021 Public Finance Structured Finance U.S.
The Insurance 86 and Asset Management segments and the Corporate division are presented without giving effect to the consolidation of FG VIEs and CIVs. The Company analyzes the operating performance of each segment using each segment’s adjusted operating income as described in Item 8, Financial Statements and Supplementary Data, Note 2, Segment Information.
The Insurance and Asset Management segments and the Corporate division are presented without giving effect to the consolidation of FG VIEs and CIVs. The Company analyzes the operating performance of each segment using each segment’s adjusted operating income as described in Item 8, Financial Statements and Supplementary Data, Note 2, Segment Information.
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.
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.
(2) Includes the present value of future premiums and fees on new business paid in installments discounted at the approximate average pre-tax book yield of fixed-maturity securities purchased during the prior calendar year, other than certain fixed-maturities such as Loss Mitigation Securities.
(2) Includes the present value of future premiums and fees on new business paid in installments discounted at the approximate average pre-tax book yield of fixed-maturity securities purchased during the prior calendar year, other than certain fixed-maturity securities such as Loss Mitigation Securities.
The Company generally targets a 117 balance of its most liquid assets including cash and short-term securities, U.S. Treasuries, agency RMBS and pre-refunded municipal bonds equal to 1.5 times its projected operating company cash flow needs over the next four quarters.
The Company generally targets a balance of its most liquid assets including cash and short-term securities, U.S. Treasuries, agency RMBS and pre-refunded municipal bonds equal to 1.5 times its projected operating company cash flow needs over the next four quarters.
The premiums associated with the insured obligations of 87 municipalities and other public finance issuers are generally received upfront when the obligations are issued and insured. When issuers pay down insured obligations, the Company is no longer on risk for payment defaults, and therefore accelerates the recognition of the remaining nonrefundable deferred premium revenue.
The premiums associated with the insured obligations of municipalities and other public finance issuers are generally received upfront when the obligations are issued and insured. When issuers pay down insured obligations, the Company is no longer on risk for payment defaults, and therefore accelerates the recognition of the remaining nonrefundable deferred premium revenue.
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 121 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, 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.
There is no corresponding GAAP financial measure. 105 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.
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.
Insured Portfolio Financial Guaranty Exposure The following tables present information in respect of the financial guaranty insured portfolio to supplement the disclosures and discussion provided in Item 8, Financial Statements and Supplementary Data, Note 3, Outstanding Exposure. The following table presents the financial guaranty portfolio by sector, net of cessions to reinsurers.
Insured Portfolio Financial Guaranty Exposure The following tables present information in respect of the financial guaranty insured portfolio to supplement the disclosures and discussion provided in Item 8, Financial Statements and Supplementary Data, Note 3, Outstanding Exposure. 99 The following table presents the financial guaranty portfolio by sector, net of cessions to reinsurers.
AGL must repay the then unpaid principal amounts of the loans, if any, by the third anniversary of the loan commitment termination date. AGL has not drawn upon the credit facility. Intercompany Loans Payable On October 1, 2019, the U.S.
AGL must repay unpaid principal amounts of the loans, if any, by the third anniversary of the loan commitment termination date. AGL has not drawn upon the credit facility. Intercompany Loans Payable On October 1, 2019, the U.S.
The timing of new business production in the infrastructure and structured finance sectors is influenced by typically long lead times and therefore may vary from period to period. U.S.
The timing of new business production in the infrastructure and structured finance sectors is influenced by typically long lead times and therefore may vary from period to period. 74 U.S.
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 losses 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 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.
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, 2022 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, 2023 Public Finance Structured Finance U.S.
RMBS of $143 million was mainly related to a $58 million benefit related to changes in discount rates, a $49 million benefit related to improvement in transaction performance, a $30 million benefit related to higher recoveries on charged-off second lien loans, a $27 million benefit related to loss mitigation activity, a $26 million benefit related to updates in projected default curves, and a $17 million benefit on certain assumed RMBS transactions related to a settlement between a ceding company and a R&W provider.
RMBS of $143 million was mainly related to a $58 million benefit related to changes in discount rates, a $49 million benefit related to improvement in transaction performance, a $30 million benefit related to higher recoveries on charged-off second lien loans, a $27 million benefit related to loss mitigation activity, a $26 million benefit related to updates in projected default curves and a $17 million benefit on certain assumed RMBS transactions related to a settlement between a ceding company and a representations and warranties (R&W) provider.
The following table presents estimated probability weighted expected cash outflows under direct and assumed financial guaranty contracts, whether accounted for as insurance or credit derivatives, including claim payments under contracts in consolidated FG VIEs, as of December 31, 2022. This amount is not reduced for cessions under reinsurance contracts or recoveries attributable to Loss Mitigation Securities.
The following table presents estimated probability weighted expected cash outflows under direct and assumed financial guaranty contracts, whether accounted for as insurance or credit derivatives, including claim payments under contracts in consolidated FG VIEs, as of December 31, 2023. This amount is not reduced for cessions under reinsurance contracts or recoveries attributable to Loss Mitigation Securities.
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 2021 results to 2020 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 2022 results to 2021 results have been omitted in this Form 10-K.
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. 103 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 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, 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.
Executive Summary The primary drivers of volatility in the Company’s net income include: changes in fair value of credit derivatives, FG VIEs, CIVs, and CCS, as well as loss and LAE, 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 settlements, commutations and loss mitigation strategies, among other factors.
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.
See “— Overview— Key Business Strategies, Capital Management” above for information on common share repurchases. Long-Term Debt Obligations The Company has outstanding long-term debt issued by the U.S. Holding Companies. See Item 8, Financial Statements and Supplementary Data, Note 12, Long-Term Debt and Credit Facilities, and Guarantor and U.S. Holding Companies’ Summarized Financial Information, below . 113 U.S.
See “— Overview— Key Business Strategies, Capital Management” above for information on common share repurchases. 105 Long-Term Debt Obligations The Company has outstanding long-term debt issued by the U.S. Holding Companies. See Item 8, Financial Statements and Supplementary Data, Note 12, Long-Term Debt and Credit Facilities, and Guarantor and U.S. Holding Companies’ Summarized Financial Information, below. U.S.
There has been very limited new issuance activity in this market since 2009 and, as of December 31, 2022, market prices for the Company’s credit derivative contracts were generally not available. Inputs to the estimate of fair value include various market indices, credit spreads, the Company’s own credit spread and estimated contractual payments.
There has been very limited new issuance activity in this market since 2009 and, as of December 31, 2023, market prices for the Company’s credit derivative contracts were generally not available. Inputs to the estimate of fair value include various market indices, credit spreads, the Company’s own credit spread and estimated contractual payments.
These amounts represent net deferred expenses that have already been paid or accrued and will be expensed in future accounting periods. 104 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.
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.
See “— Non-GAAP Financial Measures” for the reconciliation of shareholders’ equity attributable to AGL to adjusted operating shareholders' equity and adjusted book value.
See “— Non-GAAP Financial Measures” below for the reconciliation of shareholders’ equity attributable to AGL to adjusted operating shareholders' equity and adjusted book value.
The table excludes Corporate-CUSIP transactions insured by Assured Guaranty, 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 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.
This amount includes any benefit anticipated from excess spread or other recoveries within the contracts but does not reflect any benefit for recoveries under breaches of R&W. This amount also excludes estimated recoveries related to past claims paid for policies in the public finance sector.
This amount includes any benefit anticipated from excess spread or other recoveries within the contracts but does not reflect any benefit for recoveries under breaches of R&W. This amount also excludes estimated recoveries for past claims paid for policies in the public finance sector.
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. Other expenses include Board of Director expenses, legal fees and other direct or allocated expenses.
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.
Holding Companies’ fixed-maturity securities (excluding AGUS’s investment in AGMH’s debt) were 9.9 years and 4.7 years, respectively. (2) Represents receivable and payables with non-guarantor subsidiaries. Year Ended December 31, 2022 AGL U.S.
Holding Companies’ fixed-maturity securities (excluding AGUS’s investment in AGMH’s debt) were 9.7 years and 4.2 years, respectively. (2) Represents receivable and payables with non-guarantor subsidiaries. Year Ended December 31, 2023 AGL 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, 2022. Ten Largest U.S. Public Finance Exposures by Revenue Source As of December 31, 2022 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, 2023. Ten Largest U.S. Public Finance Exposures by Revenue Source As of December 31, 2023 Net Par Outstanding Percent of Total U.S.
Lease Obligations The Company has entered into several lease agreements for office space in Bermuda, New York, San Francisco, London, Paris, and other locations with various lease terms. See Item 8, Financial Statements and Supplementary Data, Note 17, Leases, for a table of minimum lease obligations and other lease commitments.
Lease Obligations The Company has entered into several lease agreements for office space in Bermuda; New York; San Francisco; Asheville, North Carolina; London; Paris; and other locations with various lease terms. See Item 8, Financial Statements and Supplementary Data, Note 17, Leases, for a table of minimum lease obligations and other lease commitments.
There can be no assurance that actual results will conform to estimates and assumptions and that reported results of operations will not be materially different in the future to reflect changes in these estimates and assumptions from time to time.
There can be no assurance that actual results will conform to estimates and assumptions and that reported results of operations will not be materially different in the future due to changes in these estimates and assumptions from time to time.
In 2022, the Company had net recovered losses of $187 million in the U.S. public finance sector related primarily to the claims paid on $2.0 billion net par under the 2022 Puerto Rico Resolutions, net of recoveries, which were in the form of cash, New Recovery Bonds and CVIs.
In 2022, the Company had net recovered losses of $187 million in the U.S. public finance sector related primarily to the claims paid on $2.0 billion net par under the 2022 Puerto Rico Resolutions, net of recoveries, which were in the form of cash, New Recovery Bonds and CVIs. U.S. RMBS: The net benefit attributable to U.S.
Terminations are generally negotiated agreements with beneficiaries resulting in the extinguishment of the Company’s insurance obligation. Terminations are more common in the structured finance asset class, but may also occur in the public finance asset class.
Terminations are generally negotiated agreements with beneficiaries resulting in the extinguishment of the Company’s insurance obligation. Terminations have been more common in the structured finance asset class, but may also occur in the public finance asset class.
Under the credit facility, AGUS committed to lend a principal amount not exceeding $225 million in the aggregate. The commitment under the revolving credit facility terminates on October 25, 2023 (the loan commitment termination date).
Under the credit facility, AGUS committed to lend a principal amount not exceeding $225 million in the aggregate. The commitment under the revolving credit facility terminates on October 25, 2033 (the loan commitment termination date).
The operating liquidity requirements of AGL and the U.S. Holding Companies include: • principal and interest on debt issued by AGUS and AGMH; • dividends on AGL’s common shares; and • the payment of operating expenses. AGL and its U.S.
Holding Companies include: • principal and interest on debt issued by AGUS and AGMH; • dividends on AGL’s common shares; and • the payment of operating expenses. AGL and its U.S.
Growth of the Insured Portfolio The Company seeks to grow its insurance portfolio through new business production in each of its markets: public finance (including infrastructure) and structured finance.
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.
As of December 31, 2022, the Company intended to hold and had the ability to hold securities in an unrealized loss position until the date of anticipated recovery of amortized cost.
As of December 31, 2023, the Company intended to hold and had the ability to hold securities in an unrealized loss position until the date of anticipated recovery of amortized cost.
See Item 8, Financial Statements and Supplementary Data, Note 7, Investments and Cash, for additional information. (2) As of December 31, 2022, the not rated category primarily includes New Recovery Bonds received in connection with the consummation of the 2022 Puerto Rico Resolutions.
See Item 8, Financial Statements and Supplementary Data, Note 7, Investments and Cash, for additional information. (2) As of December 31, 2022, primarily includes New Recovery Bonds received in connection with the consummation of the 2022 Puerto Rico Resolutions.
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. 116 AGL and U.S. Holding Companies Selected Cash Flow Items Year Ended December 31, 2022 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, 2023 AGL U.S.
Consolidating CIVs (as opposed to accounting for them as equity method investments) has a significant effect on assets, liabilities and cash flows, and includes: (i) the establishment of the assets and liabilities of the CIVs, and related changes in fair value; (ii) eliminating the asset management fees earned by AssuredIM from the CIVs; (iii) eliminating the equity method investments of the insurance subsidiaries and related equity in earnings (losses) of investees and (iv) establishing noncontrolling interest for amounts not owned by the Company.
Consolidating CIVs (as opposed to accounting for them as equity method investments) has a significant effect on assets, liabilities and cash flows, and includes: (i) the establishment of the assets and liabilities of the CIVs, and related changes in fair value; (ii) eliminating the asset management fees earned by AssuredIM from the CIVs (prior to July 1, 2023); (iii) eliminating the equity method investments of the insurance subsidiaries and related equity in earnings (losses) of investees; and (iv) establishing noncontrolling interest (NCI) for amounts not owned by the Company.
Other (Effect of 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 reclassifications of reimbursable fund expenses to revenue are presented in “other.” See Item 8, Financial Statements and Supplementary Data, Note 2, Segment Information.
The 30-year AAA Municipal Market Data (MMD) rate is a measure of interest rates in the Company’s largest financial guaranty insurance market, U.S. public finance. The MMD rate averaged 3.00% for 2022, higher than the 1.54% average of 2021.
The 30-year AAA Municipal Market Data (MMD) rate is a measure of interest rates in the Company’s largest financial guaranty insurance market, U.S. public finance. The MMD rate averaged 3.65% for 2023, higher than the 3.00% and 1.54% average of 2022 and 2021, respectively.
GAAP requires the Company to consolidate entities where it is deemed to be the primary beneficiary which include: • FG VIEs, which the Company does not own and where its exposure is limited to its obligation under the financial guaranty insurance contract, and • CIVs in which certain subsidiaries invest and which are managed by AssuredIM.
GAAP requires the Company to consolidate entities where it is deemed to be the primary beneficiary which include: • FG VIEs, which the Company does not own and where its exposure is limited to its obligation under the financial guaranty insurance contract, and • CIVs in which certain subsidiaries invest.
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 FG VIEs and 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 (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.
The Company’s comparison of 2021 results to 2020 results is included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 202 1 , under Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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.
AGM AA (stable) (7/8/22) AA+ (stable) (10/21/22) A1 (stable) (3/18/22) — AGC AA (stable) (7/8/22) AA+ (stable) (10/21/22) (1) — AG Re AA (stable) (7/8/22) — — — AGRO AA (stable) (7/8/22) — — A+ (stable) (7/22/22) AGUK AA (stable) (7/8/22) AA+ (stable) (10/21/22) A1 (stable) (3/18/22) — AGE AA (stable) (7/8/22) AA+ (stable) (10/21/22) — — ____________________ (1) AGC requested that Moody’s withdraw its financial strength ratings of AGC in January 2017, but Moody’s denied that request.
AGM AA (stable) (7/13/23) AA+ (stable) (10/20/23) A1 (stable) (3/18/22) — AGC AA (stable) (7/13/23) AA+ (stable) (10/20/23) (1) — AG Re AA (stable) (7/13/23) — — — AGRO AA (stable) (7/13/23) — — A+ (stable) (7/21/23) AGUK AA (stable) (7/13/23) AA+ (stable) (10/20/23) A1 (stable) (3/18/22) — AGE AA (stable) (7/13/23) AA+ (stable) (10/20/23) — — ____________________ (1) AGC requested that Moody’s withdraw its financial strength ratings of AGC in January 2017, but Moody’s denied that request.
Higher interest rates may also 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, 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.
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 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).
AGM owns: (i) AGUK, an insurance subsidiary domiciled in the U.K; and (ii) AGE, an insurance company domiciled in France. AGUK and AGE are collectively referred to as the European Insurance Subsidiaries. AG Re is an insurance company domiciled in Bermuda, which owns AGRO, an insurance subsidiary, also domiciled in Bermuda.
The U.S. Insurance Subsidiaries consist of AGM and AGC. AGM owns: (i) AGUK, an insurance subsidiary domiciled in the U.K; and (ii) AGE, an insurance company domiciled in France. AGUK and AGE are collectively referred to as the European Insurance Subsidiaries. AG Re is an insurance company domiciled in Bermuda, which owns AGRO, an insurance subsidiary, also domiciled in Bermuda.
The Company underwrites such transactions based on the underlying insured obligation without regard to the primary financial guaranty insurer and internally rates the transaction the higher of the rating of the underlying obligation and the rating of the primary financial guarantor. The second-to-pay insured par outstanding as of December 31, 2022 and 2021 was $4.3 billion and $4.9 billion, respectively.
The Company underwrites such transactions based on the underlying insured obligation without regard to the primary financial guaranty insurer and internally rates the transaction the higher of the rating of the underlying obligation and the rating of the primary financial guarantor. The second-to-pay insured par outstanding as of both December 31, 2023 and 2022 was $4.3 billion.
Ratings generally reflect the lower of Moody’s and S&P classifications, except for (i) Loss Mitigation Securities, which use Assured Guaranty’s internal ratings classifications, or (ii) Puerto Rico securities received under the 2022 Puerto Rico Resolutions, which are not rated. 122 Distribution of Available-for-Sale Fixed-Maturity Securities by Rating As of December 31, Rating 2022 2021 AAA 14.2 % 14.6 % AA 37.1 38.2 A 24.4 25.1 BBB 11.0 13.7 BIG (1) 7.4 7.5 Not rated (2) 5.9 0.9 Total 100.0 % 100.0 % ____________________ (1) The BIG category primarily includes Loss Mitigation Securities.
Ratings generally reflect the lower of Moody’s and S&P classifications, except for (i) Loss Mitigation Securities, which use Assured Guaranty’s internal ratings classifications, or (ii) Puerto Rico securities received under the 2022 Puerto Rico Resolutions, which are not rated. 112 Distribution of Available-for-Sale Fixed-Maturity Securities by Rating As of December 31, Rating 2023 2022 AAA 13.3 % 14.2 % AA 38.2 37.1 A 27.6 24.4 BBB 11.7 11.0 BIG (1) 7.8 7.4 Not rated (2) 1.4 5.9 Total 100.0 % 100.0 % ____________________ (1) Includes primarily Loss Mitigation Securities.
Approximately 74% and 78% of gross premiums receivable, net of commissions payable at December 31, 2022 and December 31, 2021, respectively, are denominated in currencies other than the U.S. dollar, primarily the pound sterling and euro.
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.
Consumer price inflation in the U.K. increases reported net par outstanding for certain U.K exposures with approximately $19.8 billion of net par outstanding as of December 31, 2022, 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.
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.
Structured Finance Exposures As of December 31, 2022 Net Par Outstanding Percent of Total U.S.
Structured Finance Exposures As of December 31, 2023 Net Par Outstanding Percent of Total U.S.
Exposures As of December 31, 2022 Country Net Par Outstanding Percent of Total Non-U.S.
Exposures As of December 31, 2023 Country Net Par Outstanding Percent of Total Non-U.S.
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, books of business acquired in a business combination or reassumptions of previously ceded business.
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 amortization of the Company’s outstanding book of business along with the previously high levels of refunding activity has led to a lower volume of refunding opportunities over the last several years, except for refundings of Puerto Rico policies under the 2022 Puerto Rico Resolutions.
The amortization of the Company’s outstanding book of business along with the previously high levels of refunding activity, and the higher interest rates environment has led to a lower volume of refunding opportunities over the last several years, except for refundings of Puerto Rico policies under the 2022 Puerto Rico Resolutions.
For example, the Company made substantial claim payments in 2022 in connection with the resolution of certain Puerto Rico credits. The Company is continuing its efforts to resolve the one remaining unresolved Puerto Rico insured exposure that is in payment default, PREPA. The Company had $720 million net par outstanding to PREPA on December 31, 2022.
For example, the Company made substantial claim payments in 2022 in connection with the resolution of certain Puerto Rico credits. The Company is continuing its efforts to resolve the one remaining unresolved Puerto Rico insured exposure that is in payment default, PREPA. The Company had $624 million in insured net par outstanding of PREPA obligations as of December 31, 2023.
Higher interest rates impact the Company in numerous other ways. For example, higher interest rates are often accompanied by wider credit spreads, which may make the Company’s credit enhancement products more attractive in the market and increase the level of premiums it can charge for that product.
For example, higher interest rates are often accompanied by wider credit spreads, which may make the Company’s credit enhancement products more attractive in the market and increase the level of premiums it can charge for that product.
Management uses adjusted book value, further adjusted for FG VIE and CIV consolidation, to measure the intrinsic value of the Company, excluding franchise value.
Management uses adjusted book value, further adjusted to remove the effect of FG VIE and CIV consolidation, to measure the intrinsic value of the Company, excluding franchise value.
FG VIEs’ cash flows relate to the paydowns of FG VIEs’ liabilities. See Item 8, Financial Statements and Supplementary Data, Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles. From January 1, 2023 through February 28, 2023, the Company repurchased an additional 36 thousand common shares.
FG VIEs’ cash flows relate to the paydowns of FG VIEs’ liabilities. See Item 8, Financial Statements and Supplementary Data, Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles. From January 1, 2024 through February 27, 2024, the Company repurchased an additional 951 thousand common shares.
Bureau of Labor Statistics, the inflation rate in the U.S. before seasonal adjustment for the 12-month period ending December 2022, as measured by the Consumer Price Index for All Urban Consumers (CPI-U), was 6.5%, as compared to 8.2% for the 12-month period ending September 2022.
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.
The valuation of the Company’s credit derivative contracts requires the use of models that contain significant, unobservable inputs, and are classified as Level 3 in the fair value hierarchy. The models used to determine fair value are primarily developed internally based on market conventions for similar transactions that the Company observed in the past.
The valuation of the Company’s credit derivative contracts requires the use of models that contain significant, unobservable inputs. The models used to determine fair value are primarily developed internally based on market conventions for similar transactions that the Company observed in the past.
The financial measures that the Company uses to help determine compensation are: (1) adjusted operating income, further adjusted to remove the effect of FG VIE and CIV consolidation; (2) adjusted operating shareholders’ equity, further adjusted to remove the effect of FG VIE and CIV consolidation; (3) adjusted book value per share, further adjusted to remove the effect of FG VIE and CIV consolidation; (4) PVP, and (5) gross third-party assets raised.
The financial measures that the Company uses to help determine compensation are: (1) adjusted operating income, further adjusted to remove the effect of FG VIE and CIV consolidation; (2) adjusted operating shareholders’ equity, further adjusted to remove the effect of FG VIE and CIV consolidation; (3) adjusted book value per share, further adjusted to remove the effect of FG VIE and CIV consolidation; and (4) PVP.
Holding Companies Long-Term Debt and Intercompany Loans As of December 31, 2022 2021 (in millions) Effective Interest Rate Final Maturity Principal Amount AGUS - long-term debt 7% Senior Notes 6.40% 2034 $ 200 $ 200 5% Senior Notes 5.00% 2024 330 330 3.15% Senior Notes 3.15% 2031 500 500 3.6% Senior Notes 3.60% 2051 400 400 Series A Enhanced Junior Subordinated Debentures 3 month LIBOR +2.38% 2066 150 150 AGUS long-term debt 1,580 1,580 AGUS - intercompany loans from: AGC and AGM 3.50% 2030 250 250 AGRO 6 month LIBOR +3.00% 2023 20 20 AGUS intercompany loans 270 270 Total AGUS long-term debt and intercompany loans 1,850 1,850 AGMH Junior Subordinated Debentures 6.40% 2066 300 300 Total AGMH long-term debt 300 300 AGMH’s long-term debt purchased by AGUS (2) (154) (154) U.S.
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.
Other Matters Russia’s Invasion of Ukraine Russia’s invasion of Ukraine has led to the imposition of economic sanctions by many western countries against Russia and certain Russian individuals, dislocation in global energy markets, massive refugee movements, and payment default by certain Russian credits.
See “— Overview — Economic Environment.” Russia’s Invasion of Ukraine Russia’s invasion of Ukraine has led to the imposition of economic sanctions by many western countries against Russia and certain Russian individuals, dislocation in global energy markets, massive refugee movements, and payment default by certain Russian credits.
The investment portfolio also contains securities that are held in trust by certain AGL subsidiaries or otherwise restricted for the 124 benefit of other AGL subsidiaries in accordance with statutory and regulatory requirements in the amount of $1,169 million and $1,231 million, based on fair value as of December 31, 2022 and December 31, 2021, respectively. Commitments The U.S.
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.
Consumer price inflation may also impact the Company indirectly to the extent it makes it more difficult for obligors to make their debt payments, and may be accompanied by higher interest rates that could impact the Company in several ways.
Consumer price inflation may also impact the Company indirectly to the extent it makes it more difficult for obligors to make their debt payments, and may be accompanied by higher interest rates. 80 Higher interest rates impact the Company in numerous other ways.
Municipal Market Data and Bond Insurance Penetration Rates (1) Based on Sale Date Year Ended December 31, 2022 2021 2020 (dollars in billions) Par: New municipal bonds issued $ 359.7 $ 456.7 $ 451.8 Total insured $ 28.8 $ 37.5 $ 34.2 Insured by Assured Guaranty $ 17.0 $ 22.6 $ 19.7 Number of issues: New municipal bonds issued 7,902 11,819 11,857 Total insured 1,420 2,198 2,140 Insured by Assured Guaranty 648 1,076 982 Bond insurance market penetration based on: Par 8.0 % 8.2 % 7.6 % Number of issues 18.0 % 18.6 % 18.0 % Single A par sold 30.2 % 26.6 % 28.3 % Single A transactions sold 59.0 % 56.6 % 54.3 % $25 million and under par sold 21.9 % 21.3 % 20.9 % $25 million and under transactions sold 21.4 % 21.7 % 21.0 % ____________________ (1) Source: The amounts in the table are those reported by Thomson Reuters.
Municipal Market Data and Bond Insurance Penetration Rates (1) Based on Sale Date Year Ended December 31, 2023 2022 2021 (dollars in billions) Par: New municipal bonds issued $ 362.8 $ 359.7 $ 456.7 Total insured $ 31.8 $ 28.8 $ 37.5 Insured by Assured Guaranty $ 19.5 $ 17.0 $ 22.6 Number of issues: New municipal bonds issued 7,268 7,902 11,819 Total insured 1,397 1,420 2,198 Insured by Assured Guaranty 645 648 1,076 Bond insurance market penetration based on: Par 8.8 % 8.0 % 8.2 % Number of issues 19.2 % 18.0 % 18.6 % Single A par sold 31.1 % 30.2 % 26.6 % Single A transactions sold 61.6 % 59.0 % 56.6 % $25 million and under par sold 24.6 % 21.9 % 21.3 % $25 million and under transactions sold 23.6 % 21.4 % 21.7 % ____________________ (1) Source: The amounts in the table are those reported by Thomson Reuters.
The types of entities the Company consolidates when it is deemed to be the primary beneficiary primarily include: (i) entities whose debt obligations the insurance subsidiaries insure; (ii) custodial trusts established in connection with the consummation of the 2022 Puerto Rico Resolutions; and (iii) investment vehicles such as collateralized financing entities, CLO warehouses and AssuredIM Funds.
The types of entities the Company consolidates when it is deemed to be the primary beneficiary primarily include: (i) entities whose debt obligations the insurance subsidiaries insure; (ii) custodial trusts established in connection with the consummation of the 2022 Puerto Rico Resolutions; and (iii) investment vehicles such as (a) Sound Point and AHP funds and (b) prior to July 1, 2023, collateralized financing entities and CLO warehouses.
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. The fair value of such instruments as of December 31, 2022 was $303 million.
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.
Changes in the fair value of the Company’s credit derivatives that do not reflect actual or expected claims or credit losses have no impact on the Company’s statutory claims-paying resources, rating agency capital or regulatory capital positions.
Changes in the fair value of the Company’s credit derivatives that do not reflect actual or expected claims or credit losses have no impact on the Company’s statutory claims-paying resources, rating agency capital or regulatory capital positions. Unrealized gains (losses) on credit derivatives may fluctuate significantly in future periods.
As of December 31, 2022, $3.7 billion of net deferred premium revenue on financial guaranty insurance remained to be earned over the life of the insurance contracts. 88 New Business Production Gross Written Premiums and New Business Production Year Ended December 31, 2022 2021 2020 (in millions) GWP Public Finance—U.S. $ 248 $ 231 $ 294 Public Finance—non-U.S. 75 89 142 Structured Finance—U.S. 37 51 18 Structured Finance—non-U.S. — 6 — Total GWP $ 360 $ 377 $ 454 PVP (1): Public Finance—U.S. $ 257 $ 235 $ 292 Public Finance—non-U.S. 68 79 82 Structured Finance—U.S. 43 42 14 Structured Finance—non-U.S.
As of December 31, 2023, $3.7 billion of net deferred premium revenue on financial guaranty insurance remained to be earned over the life of the insurance contracts. 83 New Business Production Gross Written Premiums and New Business Production Year Ended December 31, 2023 2022 2021 (in millions) GWP Public finance—U.S. $ 211 $ 248 $ 231 Public finance—non-U.S. 82 75 89 Structured finance—U.S. 59 37 51 Structured finance—non-U.S. 5 — 6 Total GWP $ 357 $ 360 $ 377 PVP (1): Public finance—U.S. $ 212 $ 257 $ 235 Public finance—non-U.S. 83 68 79 Structured finance—U.S. 68 43 42 Structured finance—non-U.S.
The amounts represent: (i) the revenues and expenses of the FG VIEs and the CIVs; and (ii) the consolidation adjustments and eliminations between consolidated FG VIEs or CIVs and the operating and investment subsidiaries. 99 Effect of Consolidating FG VIEs and CIVs on the Consolidated Statements of Operations Increase (Decrease) Year Ended December 31, 2022 2021 2020 Effect on Financial Statement Line Item (in millions) Fair value gains (losses) on FG VIEs (1) $ 22 $ 23 $ (10) Fair value gains (losses) on CIVs 17 127 41 Equity in earnings (losses) of investees (2) 12 (50) (28) Other (3) (44) (34) (12) Effect on income before tax 7 66 (9) Less: Tax provision (benefit) — 6 (3) Effect on net income (loss) 7 60 (6) Less: Effect on noncontrolling interests (4) 13 30 6 Effect on net income (loss) attributable to AGL $ (6) $ 30 $ (12) By Type of VIE FG VIEs $ 4 $ (1) $ (14) CIVs (10) 31 2 Effect on net income (loss) attributable to AGL $ (6) $ 30 $ (12) ____________________ (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, 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.
The Company’s effective tax rate reflects the proportion of income recognized by each of the Company’s operating subsidiaries, with U.S. subsidiaries generally taxed at the U.S. marginal corporate income tax rate of 21%, U.K. subsidiaries taxed at the U.K. marginal corporate tax rate of 19%, the French subsidiary taxed at the French marginal corporate tax rate of 25%, and no taxes for the Company’s Bermuda subsidiaries, unless subject to U.S. tax by election or as a U.S.
The Company’s effective tax rate reflects the proportion of income recognized by each of the Company’s operating subsidiaries, with U.S. subsidiaries generally taxed at the U.S. marginal corporate income tax rate of 21%, U.K. subsidiaries taxed at the U.K. marginal corporate tax rate of 19% prior to March 31, 2023 and 25% after April 1 2023, the French subsidiary taxed at the French marginal corporate tax rate of 25%, and no taxes for the Company’s Bermuda subsidiaries, unless subject to U.S. tax by election or as a U.S. controlled foreign corporation.

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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 changeTherefore, barring credit deterioration, interest rate movements do not result in realized gains or losses unless assets are sold prior to maturity. The Company does not hedge interest rate risk; instead, interest rate fluctuation risk is managed through the investment guidelines which limit duration and prohibit investment in historically high volatility sectors.
Biggest changeThe Company’s policy is generally to hold assets in the investment portfolio to maturity. Therefore, barring a default, interest rate movements do not result in realized gains or losses unless securities are sold prior to maturity.
Since RMBS excess spread is determined by the relationship between interest rates on the underlying collateral and the trust’s certificates, it can be affected by unmatched moves in either of these interest rates.
Since RMBS excess spread is determined by the relationship between interest rates on the underlying collateral and of the trust’s certificates, it can be affected by unmatched moves in either of these interest rates.
Sensitivity of FG VIEs’ Assets and Liabilities to Market Risk The fair value of the Company’s FG VIEs’ assets 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 132 performance, borrower profiles and other features relevant to the evaluation of collateral credit quality); yields implied by market prices for similar securities; and house price depreciation/appreciation rates based on macroeconomic forecasts.
Sensitivity of FG VIEs’ Assets and Liabilities to Market Risk The fair value of the Company’s FG VIEs’ assets 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); yields implied by market prices for similar securities; and house price depreciation/appreciation rates based on macroeconomic forecasts.
For example, modifications to 130 underlying mortgage rates (e.g., rate reductions for troubled borrowers) can reduce excess spread when an upswing in short-term rates that increases the trust’s certificate interest rate is not met with equal increases to the interest rates on the underlying mortgages.
For example, modifications to underlying mortgage rates (e.g., rate reductions for troubled borrowers) can reduce excess spread when an upswing in short-term rates that increases the trust’s certificate interest rate is not met with equal increases to the interest rates on the underlying mortgages.
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 reimburse past claims under the Company’s policies. As of December 31, 2022, 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, 2023, the Company projects that the maximum potential excess spread at risk in the U.S. RMBS transactions is approximately $20 million.
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 are capped at the collateral rate.
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.
In the Company’s valuation model, the premium the Company captures is not permitted to go below the minimum rate that the Company would currently charge to assume similar risks. This assumption can have the effect of mitigating the amount of unrealized gains that are recognized on certain CDS contracts.
In the Company’s valuation model, the premium the Company captures is not permitted to go below the minimum rate that the Company would currently charge to assume similar risks. This assumption can have the effect of mitigating the amount of fair value gains that are recognized on certain CDS contracts.
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 risks it assumes.
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.
See Part II, Item 8, Financial Statements and Supplementary Data, Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles, for additional information. 133
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 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Results of Operations — Insurance Segment — New Business Production, for additional information.
See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Results of Operations — Insurance Segment — New Business Production, for additional information.
Changes in fair value of available-for-sale investments attributable to changes in foreign exchange rates are recorded in other comprehensive income. Approximately 74% and 78% of installment premiums at December 31, 2022 and December 31, 2021, 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 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.
Sensitivity of Investment Portfolio to Interest Rate Risk Interest rate risk is the risk that financial instruments’ values will change due to changes in the level of interest rates, in the spread between two rates, in the shape of the yield curve or in any other interest rate relationship.
Interest rate risk is the risk that financial instruments’ values will change due to changes in the level of interest rates, in the spread between two rates, in the shape of the yield curve or in any other interest rate relationship.
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 9.2% and 9.8% of the fixed-maturity securities and short-term investments as of December 31, 2022 and 2021, respectively.
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 effect of changes in discount rates on expected losses to be paid was a gain of $115 million in 2022, a gain of $33 million in 2021 and a loss of $13 million in 2020. 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 $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.
Sensitivity of Expected Loss to be Paid (Recovered) to Interest Rates Expected losses to be paid (recovered), and therefore loss reserves and loss and loss adjustment expenses are sensitive to changes in interest rates in several ways.
Sensitivity of Expected Loss to be Paid (Recovered) to Interest Rates Expected losses to be paid (recovered), and therefore loss reserves and loss and LAE, are sensitive to changes in interest rates in several ways.
Sensitivity of Insurance Segment Investments in CIVs to Changes in Fair Value (Pre-Tax) As of December 31, 2022 2021 (in millions) Decrease of 10% $ (19) $ (23) Increase of 10% 19 23 See Part II, Item 8, Financial Statements and Supplementary Data, Note 7, Investments and Cash, for additional information.
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.
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.
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.
Sensitivity of CIVs to Market Risk The fair value of the Company’s AssuredIM consolidated CLOs (collectively, consolidated CLOs), 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 similar loans held by the CLOs.
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.
The quoted price of five-year CDS contracts traded on AGC at December 31, 2022 and December 31, 2021 was 63 bps and 49 bps, respectively.
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.
The Company is exposed to interest rate risk in its investment portfolio. As interest rates rise for an available-for-sale investment portfolio, the fair value of fixed maturity securities generally decreases; as interest rates fall for an available-for-sale portfolio, the fair value of fixed-income securities generally increases. The Company’s policy is generally to hold assets in the investment portfolio to maturity.
Sensitivity of Investment Portfolio to Interest Rate Risk The Company is exposed to interest rate risk in its investment portfolio. As interest rates rise for an available-for-sale investment portfolio, the fair value of fixed-maturity securities generally decreases; as interest rates fall for an available-for-sale portfolio, the fair value of fixed-maturity securities generally increases.
The carrying value of premiums receivable includes foreign denominated receivables whose values fluctuate based on changes in foreign exchange rates. • Asset management revenues are sensitive to changes in the fair value of investments. • 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 price depreciation/appreciation.
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 fair value of the FG VIEs’ liabilities also fluctuates based on changes in the Company’s credit spread. Sensitivity of Credit Derivatives to Credit Risk 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 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.
Movements in AGM’s CDS prices no longer have a significant impact on the estimated fair value of the Company’s credit derivative contracts due to the relatively low volume and characteristics of CDS contracts remaining in AGM’s portfolio.
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.
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, 2022 2021 2022 2021 (in millions) Decrease of 30% $ (226) $ (280) $ (288) $ (318) Decrease of 20% (151) (186) (192) (212) Decrease of 10% (75) (93) (96) (106) Increase of 10% 75 93 96 106 Increase of 20% 151 186 192 212 Increase of 30% 226 280 288 318 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, 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.
In the case of RMBS, fluctuations in interest rates impact the amount of periodic excess spread, which is created when a trust’s assets produce interest that exceeds the amount required to pay interest on the trust’s liabilities.
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.
The Company’s primary market risk exposures include interest rate risk, foreign currency exchange rate risk and credit spread risk, and primarily affect 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 foreign denominated securities whose value also fluctuates based on changes in foreign exchange rates.
The 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.
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. 129 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, 2022 2021 (in millions) Decrease of 300 bps $ 1,315 $ 509 Decrease of 200 bps 854 508 Decrease of 100 bps 404 357 Increase of 100 bps (378) (403) Increase of 200 bps (734) (788) Increase of 300 bps (1,069) (1,176) ____________________ (1) Sensitivity analysis assumes a floor of zero for interest rates.
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.
First, expected losses to be paid are discounted at the end of each reporting period at the risk-free rate, such that an increase in discount rates has the effect of reducing net expected loss to be paid for transactions in a net expected payable position and increasing net expected loss to be paid for transactions in a net expected recoverable position.
First, expected losses to be paid are discounted at the end of each reporting period at the risk-free rate, such that an increase in discount rates has the effect of reducing net expected loss to be paid or reducing net expected recoverables.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of loss due to factors that affect the overall performance of the financial markets or movements in market prices.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of loss due to factors that affect the overall performance of the financial markets or movements in market prices. The Company’s primary market risk exposures include interest rate risk, foreign currency exchange rate risk and credit spread risk.
Significant changes to some of these inputs could materially change the fair value of the assets and liabilities of consolidated CLOs, as these are all inputs used to project and discount future cash flows.
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.
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. 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 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 addition, the value of expected recoveries that are in the form of bonds or other securities (which are sensitive to changes in interest rates), also affects the net expected loss to be paid (recovered), such that increases in interest rates generally reduce the estimated value of such recoveries and therefore increase the net expected loss to be paid.
In addition, the value of expected recoveries that are in the form of bonds or other securities (which are sensitive to changes in interest rates) also affects the net expected loss to be paid (recovered). See Item 8, Financial Statements and Supplementary Data, Note 3, Outstanding Exposure and Note 4, Expected Loss to be Paid (Recovered).
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 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.
An overall narrowing of spreads generally results in an unrealized gain on credit derivatives for the Company, and an overall widening of spreads generally results in an unrealized loss for the Company. 128 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.
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 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 is affected by the spread of the underlying collateral and the credit spreads on AGC.
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.
Effect of Changes in Credit Spread on Credit Derivatives As of December 31, 2022 As of December 31, 2021 Credit Spreads (1) 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 $ (233) $ (71) $ (250) $ (96) Base Scenario (162) — (154) — Decrease of 25 bps (99) 63 (83) 71 All transactions priced at floor (27) 135 (37) 117 ____________________ (1) Includes the effects of spreads on both the underlying asset classes and the Company’s own credit spread.
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.
Interest rate sensitivity in the investment portfolio can be estimated by projecting a hypothetical instantaneous increase or decrease in interest rates.
The Company does not hedge interest rate risk; instead, interest rate fluctuation risk is managed through the investment guidelines which limit duration and prohibit investment in historically high volatility sectors. Interest rate sensitivity in the investment portfolio can be estimated by projecting a hypothetical instantaneous increase or decrease in interest rates.
The expected yield is further calibrated by utilizing algorithms designed to aggregate market color, received by the independent third-party, on comparable bonds. For certain non-structured FG VIE assets, such as assets in Puerto Rico Trusts, interest rates and the credit worthiness of the obligor are the biggest drivers of value.
The expected yield is further calibrated by utilizing algorithms designed to aggregate market color, received by the independent third party, on comparable bonds.
As of December 31, 2022 and December 31, 2021, the use of the minimum premium did not have a significant effect on fair value. The percentage of transactions that price using the minimum premium fluctuates due to changes in AGC’s credit spreads.
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.
Removed
See Part II, Item 8, Financial Statements and Supplementary Data, Note 6, Contracts Accounted for as Credit Derivatives, for additional information.
Added
The net spread includes the spread of the underlying collateral and the credit spreads on AGC.
Removed
In the significantly higher interest rate environment of 2022, much of the Company’s benefit from future excess spread has been reduced. If future expectations of interest rates become lower, the Company could experience an additional benefit due to projected excess spread.
Removed
In the case of the Company’s Puerto Rico exposures and other troubled transactions, changes in interest rates affect the value of expected recoveries described in Item 8, Financial Statements and Supplementary Data, Note 3, Outstanding Exposure and Note 4, Expected Loss to be Paid (Recovered).
Removed
Sensitivity of Asset Management Fees to Changes in Fair Value of AssuredIM Managed Assets In the ordinary course of business, AssuredIM may manage a variety of risks, including market risk, credit risk, liquidity risk, foreign exchange risk and interest rate risk.
Removed
The Company identifies, measures and monitors risk through various 131 control mechanisms, including, but not limited to, monitoring and diversifying exposures and activities across a variety of instruments, markets and counterparties. At December 31, 2022, the majority of AssuredIM’s management fees are generated by CLOs, where the Company typically earns fees as a percentage of adjusted par outstanding.
Removed
Subordinate management fees, which are the majority of CLO fees, may be deferred if a CLO fails one or more over collateralization tests, which could be triggered by a sharp decline in loan prices. In such a scenario the CLO fees are deferred until the CLO passes the overcollateralization test.
Removed
Management fees on AssuredIM Funds are generally based on NAV, or for certain funds, based on total committed capital, and may vary based on changes in fair value of the investments in the AssuredIM Funds. In addition to management fees, the Company also receives performance fees, which are generally calculated as a portion of net profits or cash distributions.
Removed
Movements in credit markets, equity market prices, interest rates, foreign exchange rates, or all of these could cause the value of AUM to fluctuate, and the returns realized on AUM to change, which could result in lower asset management fees. Management believes that investment performance is one of the most important factors for the growth and retention of AUM.
Removed
Poor investment performance relative to applicable portfolio benchmarks and to competitors could reduce revenues and growth because existing clients might withdraw funds in favor of better performing products, which could reduce the ability to attract funds; and could result in lower asset management revenues.
Removed
As of December 31, 2022 and 2021, a decline of 10% in the fair value of AssuredIM Funds would not have had a material effect on total asset management fees reported in the consolidated statements of operations. See Part II, Item 8, Financial Statements and Supplementary Data, Note 10, Asset Management Fees, for additional information.
Removed
The fair value of the Company’s consolidated AssuredIM Funds is generally sensitive to changes in prices of comparable or similar investments; changes in financial projections of subject companies; changes in company specific risk premium, changes in the risk-free rate of return; changes in equity risk premium; and new information obtained from issuers.
Removed
These inputs are used in applying the various valuation techniques and broadly refer to the current assumptions that market participants use to make valuation decisions, including assumptions about risk. The Insurance segment’s sensitivity to changes in fair value of the AssuredIM Funds in which it invests or which it consolidates at the AGL level is summarized below.
Removed
The independent third party's valuation methods are similar to those mentioned above, aside from collateral analysis, which may not be applicable.

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