|
ý
|
|
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Bermuda
(State or other jurisdiction of
incorporation or organization)
|
|
98-0429991
(I.R.S. Employer Identification No.)
|
Title of each class
|
|
Name of each exchange on which registered
|
Common Shares, $0.01 per share
|
|
New York Stock Exchange, Inc.
|
Large accelerated filer
ý
|
|
Accelerated filer
o
|
|
Non-accelerated filer
o
(Do not check if a
smaller reporting company)
|
|
Smaller reporting company
o
|
|
|
|
Page
|
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
ITEM 1.
|
BUSINESS
|
•
|
AGM, an insurance company located and domiciled in New York, was organized in 1984 and commenced operations in 1985. Since mid-2008, it only provides insurance that protects against principal and interest payment defaults on debt obligations in the U.S. public finance and global infrastructure market. Previously, AGM also offered insurance and reinsurance in the global structured finance market.
|
•
|
AGM owns 100% of Assured Guaranty Municipal Insurance Company (formerly FSA Insurance Company), which primarily provides reinsurance to AGM. It was domiciled in Oklahoma and has re-domesticated to New York. AGM and Assured Guaranty Municipal Insurance Company together own Assured Guaranty (Bermuda) Ltd. (formerly Financial Security Assurance International Ltd.), a Bermuda insurance company that also provides reinsurance to AGM and previously provided insurance for transactions outside the U.S. and European markets.
|
•
|
Assured Guaranty Municipal Insurance Company in turn owns 100% of Assured Guaranty (Europe) Ltd. (formerly Financial Security Assurance (U.K.) Limited, "AGE"), a United Kingdom ("U.K.") incorporated company licensed as a U.K. insurance company and authorized to operate in various countries throughout the European Economic Area ("EEA"). AGE provides financial guaranty insurance in both the international public finance and structured finance markets and is the primary entity from which the Company writes business in the EEA.
|
•
|
AGC, an insurance company located in New York and domiciled in Maryland, was organized in 1985 and commenced operations in January 1988. It provides insurance that protects against principal and interest payment defaults on debt obligations in the U.S. public finance and the global infrastructure and structured finance markets. AGC owns 100% of Assured Guaranty (U.K.) Ltd. ("AGUK"), a company incorporated in the U.K. as a U.K. insurance company. The Company elected to place AGUK into run-off and the U.K. Financial Services Authority has approved its run-off plan.
|
•
|
Assured Guaranty Re Ltd. ("AG Re") is incorporated under the laws of Bermuda and is licensed as a Class 3B insurer under the Insurance Act 1978 and related regulations of Bermuda. AG Re owns Assured Guaranty Overseas U.S. Holdings Inc., a Delaware corporation, which owns the entire share capital of Assured Guaranty Re Overseas Ltd. ("AGRO"), which is a Bermuda Class 3A and Class C insurer. AG Re and AGRO underwrite financial guaranty reinsurance and AGRO previously also underwrote residential mortgage reinsurance. AG Re and AGRO write business as reinsurers of third-party primary insurers and as reinsurers/retrocessionaires of certain affiliated companies. AGRO, in turn, owns Assured Guaranty Mortgage Insurance Company, a New York corporation that is authorized to provide mortgage guaranty insurance.
|
•
|
The sustained low interest rate environment in the U.S.
Interest rates have been historically low in the U.S. and are expected to remain so for the near future. In 2012, the average yield on the Thomson Reuters Municipal Market Data (MMD) scale for AAA-rated bonds maturing in 30 years was 3.04%, versus 4.23% in 2011. At the same time, the difference in yield between the MMD scale for A-rated General Obligation bonds maturing in 30 years versus the AAA benchmark narrowed to 74.5 basis points in 2012, versus 87.1 basis points in 2011. As a result, the difference in yield (or the credit spread) between a bond insured by Assured Guaranty and an uninsured bond has not been substantial, and the Company has seen a lower demand for its financial guaranty insurance from issuers than it has in the past.
|
•
|
Continued uncertainty over the Company's financial strength ratings.
The Company's financial strength ratings have been subject to substantial uncertainty in recent years due to periodic rating agency reviews for possible downgrade and actual downgrades. In January 2011, Standard & Poor's Ratings Services ("S&P") requested comments on proposed changes to its bond insurance ratings criteria, noting that it could lower its financial strength ratings on existing investment-grade bond insurers by one or more rating categories if the proposed criteria were adopted. The resulting uncertainty over the Company's financial strength ratings was not resolved
|
•
|
Public Finance and Infrastructure
Public finance obligations in the U.S. consist primarily of debt obligations issued by or on behalf of states or their political subdivisions (counties, cities, towns and villages, utility districts, public universities and hospitals, public housing and transportation authorities), other public and quasi public entities, private universities and hospitals, and investor owned utilities. These obligations generally are supported by the taxing authority of the issuer, the issuer's or underlying obligor's ability to collect fees or assessments for certain projects or public services or revenues from operations. This market also includes project finance obligations, as well as other structured obligations supporting infrastructure and other public works projects. Non-U.S. public finance obligations includes regulated utility obligations and obligations of local, municipal, regional or national governmental authorities located outside of the United States; they are described in greater detail under "Non-U.S. Public Finance Obligations" below. Infrastructure obligations in the U.S. and internationally consist primarily of debt obligations issued by a project or entity where the debt service is supported by the cash flows from the underlying project. Infrastructure transactions may also benefit from payments from a governmental or municipal tax authority or revenue source, although the principal payment source for an infrastructure transaction is generally from the cash flows of the underlying project itself.
|
•
|
Structured Finance
Structured finance obligations in both the U.S. and international markets are generally backed by pools of assets, such as residential mortgage loans, consumer or trade receivables, securities or other assets having an ascertainable cash flow or market value, that are generally held by a non-recourse special purpose issuing entity. Structured finance obligations can be "funded" or "synthetic." Funded structured finance obligations generally have the benefit of one or more forms of credit enhancement, such as over-collateralization and/or excess cash flow, to cover payment default risks associated with the related assets. Synthetic structured finance obligations generally take the form of credit derivatives or credit linked notes that reference a pool of securities or loans, with a defined deductible or over-collateralization to cover credit risks associated with the referenced securities or loans.
|
•
|
Portfolio Risk Management Committee—This committee establishes company-wide credit policy for the Company's direct and assumed business. It implements specific underwriting procedures and limits for the Company and allocates underwriting capacity among the Company's subsidiaries. The Portfolio Risk Management Committee focuses on measuring and managing credit, market and liquidity risk for the overall company. All transactions in new asset classes or new jurisdictions must be approved by this committee.
|
•
|
U.S. Management Committee—This committee establishes strategic policy and reviews the implementation of strategic initiatives and general business progress in the U.S. The U.S. Management Committee approves risk policy at the U.S. operating company level.
|
•
|
Risk Management Committees—The U.S., AGE, AG UK and AG Re risk management committees conduct an in-depth review of the insured portfolios of the relevant subsidiaries, focusing on varying portions of the portfolio at each meeting. They assign internal ratings of the insured transactions and review sector reports, monthly product line surveillance reports and compliance reports.
|
•
|
Workout Committee—This committee receives reports from Surveillance and Workout personnel on transactions that might benefit from active loss mitigation and develops and approves loss mitigation strategies for such transactions.
|
•
|
Reserve Committees—Oversight of reserving risk is vested in the U.S. Reserve Committee, the AG Re Reserve Committee and the U.K. 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. The U.S. Reserve Committee establishes reserves for AGC and AGM, taking into consideration the supporting information provided by Surveillance personnel.
|
•
|
Instability of Rating Criteria and Methodologies.
Rating agencies purport to issue ratings pursuant to published rating criteria and methodologies. In recent years, the rating agencies have made material changes to their rating criteria and methodologies applicable to financial guaranty insurers, sometimes through formal changes and other times through
ad hoc
adjustments to the conclusions reached by existing criteria. Furthermore, these criteria and methodology changes are typically implemented without any transition period, making it difficult for an insurer to comply quickly with new standards.
|
•
|
Increasingly Severe Stress Case Loss Assumptions.
A major component in arriving at a financial guaranty insurer's rating has been the rating agency’s assessment of the insurer’s capital adequacy, with each rating agency employing its own proprietary model. These capital adequacy models include “stress case” loss assumptions for various risks or risk categories. In reaction to the financial crises, the rating agencies have materially increased stress case loss assumptions across numerous risk categories. However, the stress case loss assumptions applied to financial guaranty insurers do not always appear consistent with, and can appear to be materially more severe than, the assumptions the rating agencies use when rating securities in those risk categories.
|
•
|
More Reliance on Qualitative Rating Criteria.
In prior years, the financial strength ratings of the Company’s insurance company subsidiaries were largely consistent with the rating agency’s assessment of the insurers’ capital adequacy, such that a rating downgrade could generally be avoided by raising additional capital or otherwise improving capital adequacy under the rating agency’s model. In recent years, however, both S&P and Moody’s have applied other factors, some of which are subjective, such as the insurer's business strategy and franchise value or the anticipated future demand for its product, to justify ratings for the Company’s insurance company subsidiaries significantly below the ratings implied by their own capital adequacy models. Currently, for example, S&P has concluded that AGM has “AAA” capital adequacy under the S&P model (but subject to a downward adjustment due to
|
•
|
a decline in the market value of a security by 20% or more below amortized cost for a continuous period of at least six months;
|
•
|
a decline in the market value of a security for a continuous period of 12 months;
|
•
|
recent credit downgrades of the applicable security or the issuer by rating agencies;
|
•
|
the financial condition of the applicable issuer;
|
•
|
whether loss of investment principal is anticipated;
|
•
|
the impact of foreign exchange rates;
|
•
|
whether scheduled interest payments are past due; and
|
•
|
whether the Company intends to sell the security prior to its recovery in fair value.
|
•
|
AGC is a Maryland domiciled insurance company licensed to write financial guaranty insurance and reinsurance (which is classified in some states as surety or another line of insurance) in 50 U.S. states, the District of Columbia and Puerto Rico. It is registered as a foreign company in Australia and currently operates through a representative office in Sydney. AGC currently intends for the representative office to conduct activities so that it does not have a permanent establishment in Australia.
|
•
|
AGM is a New York domiciled insurance company licensed to write financial guaranty insurance and reinsurance in 50 U.S. states, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands. It operates through a service company in Sydney. In 2011, AGM submitted an application to the Insurance Business Division of the Supervision Bureau of the Financial Services Agency to invalidate its insurance license in Japan and subsequently closed its branch in Tokyo.
|
•
|
Assured Guaranty Municipal Insurance Company (formerly FSA Insurance Company) was redomesticated to New York from Oklahoma in 2010. It is licensed to write financial guaranty insurance and reinsurance in New York and Oklahoma, and in 19 other states in the U.S.
|
•
|
10% of policyholders' surplus as of its last statement filed with the New York Superintendent; or
|
•
|
100% of adjusted net investment income during this period.
|
•
|
with respect to policies written prior to July 1, 1989, in an amount equal to 50% of earned premiums less permitted reductions; and
|
•
|
with respect to policies written on and after July 1, 1989, quarterly on a pro rata basis over a period of 20 years for municipal bonds and 15 years for all other obligations, in an amount equal to the greater of 50% of premiums written for the relevant category of insurance or a percentage of the principal guaranteed, varying from 0.55% to 2.50%, depending on the type of obligation guaranteed, until the contingency reserve amount for the category equals the applicable percentage of net unpaid principal.
|
•
|
the insured average annual debt service for a single risk, net of qualifying reinsurance and collateral, or
|
•
|
the insured unpaid principal (reduced by the extent to which the unpaid principal of the supporting assets exceeds the insured unpaid principal) divided by nine, net of qualifying reinsurance and collateral, may not exceed 10% of the sum of the insurer's policyholders' surplus and contingency reserves, subject to certain conditions.
|
•
|
The minimum share capital must be always issued and outstanding and cannot be reduced (for a company registered both as a Class 3A and a Class C long-term insurer, such as AGRO, the minimum share capital is $370,000 and for a company registered as a Class 3A or Class 3B insurer only, such as AG Re and Assured Guaranty (Bermuda), the minimum share capital is $120,000).
|
•
|
With respect to the distribution (including repurchase of shares) of any share capital, contributed surplus or other statutory capital, certain restrictions under the Insurance Act may apply if the proposal is to reduce its total statutory capital. Before reducing its total statutory capital by 15% or more of the insurer's total statutory capital as set out in its previous year's financial statements, a Class 3A, Class 3B or Class C insurer must obtain the prior approval of the Authority. Any application for such approval must include an affidavit stating that it will continue to meet the required margins.
|
•
|
With respect to the declaration and payment of dividends:
|
(a)
|
each of the Bermuda Subsidiaries is prohibited from declaring or paying any dividends during any financial year if it is in breach of its solvency margin, minimum liquidity ratio or enhanced capital requirement, or if the declaration or payment of such dividends would cause such a breach (if it has failed to meet its minimum
|
(b)
|
as a Class 3B insurer, AG Re is prohibited from declaring or paying in any financial year dividends of more than 25% of its total statutory capital and surplus (as shown on its previous financial year's statutory balance sheet) unless it files (at least 7 days before payment of such dividends) with the Authority an affidavit stating that it will continue to meet the required margins;
|
(c)
|
an insurer which at any time fails to meet its minimum solvency margin or comply with the enhanced capital requirement may not declare or pay any dividend until the failure is rectified, and also in such circumstances the insurer must report, within 14 days after becoming aware of its failure or having reason to believe that such failure has occurred, to the Authority in writing giving particulars of the circumstances leading to the failure and giving a plan detailing the manner, specific actions to be taken and time frame in which the insurer intends to rectify the failure. A failure to comply with the enhanced capital requirement will also result in the insurer furnishing certain other information to the Authority within 45 days after becoming aware of its failure or having reason to believe that such failure has occurred.
|
•
|
A Class C long-term insurer may not:
|
(a)
|
use the funds allocated to its long-term business fund, directly or indirectly, for any purpose other than a purpose of its long-term business except in so far as such payment can be made out of any surplus certified by the insurer's approved actuary to be available for distribution otherwise than to policyholders; and
|
(b)
|
declare or pay a dividend to any person other than a policyholder unless the value of the assets of its long-term business fund, as certified by the insurer's approved actuary, exceeds the extent (as so certified) of the liabilities of the insurer's long-term business, and the amount of any such dividend shall not exceed the aggregate of (1) that excess; and (2) any other funds properly available for the payment of dividends being funds arising out of the business of the insurer other than its long-term business.
|
•
|
the Prudential Regulatory Authority (“PRA”), a subsidiary of the Bank of England, which will be responsible for prudential regulation of key systemically important firms (which includes credit institutions, insurance companies and investment firms that trade on their own accounts (those that have a €730,000 minimum capital resources requirement under the EU Capital Requirements Directive and FSA U.K. rules)), and
|
•
|
the Financial Conduct Authority (“FCA”), which will be responsible for the prudential regulation of all non-PRA firms, the conduct of business regulation of all firms and the regulation of market conduct.
|
•
|
to promote insurers' safety and soundness, thereby supporting the stability of the U.K. financial system; and
|
•
|
to contribute to securing an appropriate degree of protection for those who are or may become policyholders.
|
•
|
an insurer's head office, and in particular its mind and management, has to be in the United Kingdom if it is incorporated in the United Kingdom;
|
•
|
an insurer's business must be conducted in a prudent manner - in particular that the insurer maintains appropriate financial and non-financial resources;
|
•
|
the insurer must be fit and proper, and be appropriately staffed; and
|
•
|
the insurer and its group must be capable of being effectively supervised.
|
•
|
assets and liabilities are generally to be valued at their market value;
|
•
|
the amount of required economic capital is intended to ensure, with a probability of 99.5%, that regulated firms are able to meet their obligations to policyholders and beneficiaries over the following 12 months; and
|
•
|
reinsurance recoveries will be treated as a separate asset (rather than being netted off the underlying insurance liabilities).
|
ITEM 1A.
|
RISK FACTORS
|
•
|
For example, a downgrade of one of the Company's insurance subsidiaries may result in increased claims under financial guaranties such subsidiary has issued. Under variable rate demand obligations insured by AGM, the January 2013 Moody's downgrade of AGM and any further downgrades past rating levels specified in the transaction documents could result in the municipal obligor paying a higher rate of interest and in such obligations amortizing on a more accelerated basis than expected when the obligations originally were issued; if the municipal obligor is unable to make such interest or principal payments, AGM may receive a claim under its financial guaranty.
|
•
|
In addition, as discussed in greater detail under "Liquidity and Capital Resources—Commitments and Contingencies—Recourse Credit Facilities—2009 Strip Coverage Facility" within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," the January 2013 Moody's downgrade of AGM may result in early termination of all leases under leveraged lease transactions insured by AGM. Upon early termination of a lease, to the extent the early termination payment owing to the lessor within such a transaction is not paid by the municipal lessee, a claim could be made to AGM under its financial guaranty. To mitigate this risk, AGM has entered into a liquidity facility with Dexia Crédit Local S.A. to finance the potential payment of claims under these policies. See "Risks Related to the AGMH Acquisition—The Company has substantial exposure to credit and liquidity risks from Dexia" within these Risk Factors.
|
•
|
Furthermore, a downgrade of AGC and AG Re could result in ceding companies recapturing business that they had ceded to these reinsurers. See "The downgrade of the financial strength ratings of AG Re or of AGC gives reinsurance counterparties the right to recapture ceded business, which would lead to a reduction in the Company's unearned premium reserve and related earnings on such reserve" below.
|
•
|
Separately, in certain other transactions beneficiaries of financial guaranties issued by the Company's insurance subsidiaries may have the right to cancel the credit protection offered by the Company, which would result in the loss of future premium earnings and the reversal of any fair value gains or losses recorded by the Company.
|
•
|
For approximately
$12.8 billion
of such contracts, AGC has negotiated caps such that, after giving effect to the January 2013 Moody's downgrade of AGC, the posting requirement cannot exceed on a cash basis more than
$675 million
, regardless of the mark-to-market valuation of the exposure or the financial strength ratings of AGC. Such capped amount is part of the approximately
$728 million
being posted by the Company's insurance subsidiaries.
|
•
|
For the remaining approximately $
400 million
of such contracts, AGC could be required from time to time to post additional collateral based on movements in the mark-to-market valuation of the underlying exposure. Of the
$728 million
being posted by the Company's insurance subsidiaries, approximately
$68 million
relate to such
$400 million
of notional.
|
•
|
the operating cash flows of such subsidiaries,
|
•
|
external financings,
|
•
|
investment income from their invested assets, and
|
•
|
proceeds derived from the sale of its investment portfolio, a significant portion of which is in the form of cash or short-term investments.
|
•
|
the Company is 25% or more owned directly, indirectly through foreign entities or by attribution by U.S. Persons;
|
•
|
the gross RPII of AG Re or any other AGL foreign subsidiary engaged in the insurance business that has not made an election under section 953(d) of the Code to be treated as a U.S. corporation for all U.S. tax purposes or are CFCs owned directly or indirectly by AGUS (each, with AG Re, a "Foreign Insurance Subsidiary") were to equal or exceed 20% of such Foreign Insurance Subsidiary's gross insurance income in any taxable year; and
|
•
|
direct or indirect insureds (and persons related to such insureds) own (or are treated as owning directly or indirectly through entities) 20% or more of the voting power or value of the Company's shares,
|
•
|
investor perceptions of the Company, its prospects and that of the financial guaranty industry and the markets in which the Company operates;
|
•
|
the Company's operating and financial performance;
|
•
|
the Company's access to financial and capital markets to raise additional capital, refinance its debt or replace existing senior secured credit and receivables-backed facilities;
|
•
|
the Company's ability to repay debt;
|
•
|
the Company's dividend policy;
|
•
|
future sales of equity or equity-related securities;
|
•
|
changes in earnings estimates or buy/sell recommendations by analysts; and
|
•
|
general financial, economic and other market conditions.
|
ITEM 1B.
|
UNRESOLVED STAFF COMMENTS
|
ITEM 2.
|
PROPERTIES
|
•
|
AGMH received a subpoena from the Antitrust Division of the Department of Justice in November 2006 issued in connection with an ongoing criminal investigation of bid rigging of awards of municipal GICs and other municipal derivatives;
|
•
|
AGM received a subpoena from the SEC in November 2006 related to an ongoing industry-wide investigation concerning the bidding of municipal GICs and other municipal derivatives; and
|
•
|
AGMH received a "Wells Notice" from the staff of the Philadelphia Regional Office of the SEC in February 2008 relating to the investigation concerning the bidding of municipal GICs and other municipal derivatives. The Wells Notice indicates that the SEC staff is considering recommending that the SEC authorize the staff to bring a civil injunctive action and/or institute administrative proceedings against AGMH, alleging violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and Section 17(a) of the Securities Act.
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
|
2012
|
|
2011
|
||||||||||||||||||||
|
Sales Price
|
|
Cash
|
|
Sales Price
|
|
Cash
|
||||||||||||||||
|
High
|
|
Low
|
|
Dividends
|
|
High
|
|
Low
|
|
Dividends
|
||||||||||||
First Quarter
|
$
|
19.04
|
|
|
$
|
13.20
|
|
|
$
|
0.09
|
|
|
$
|
20.16
|
|
|
$
|
13.49
|
|
|
$
|
0.045
|
|
Second Quarter
|
16.58
|
|
|
11.17
|
|
|
0.09
|
|
|
18.54
|
|
|
14.03
|
|
|
0.045
|
|
||||||
Third Quarter
|
15.83
|
|
|
11.29
|
|
|
0.09
|
|
|
16.99
|
|
|
9.67
|
|
|
0.045
|
|
||||||
Fourth Quarter
|
14.80
|
|
|
12.48
|
|
|
0.09
|
|
|
14.19
|
|
|
9.16
|
|
|
0.045
|
|
|
Assured Guaranty
|
|
S&P 500 Index
|
|
S&P 500
Financial Index
|
||||||
12/31/2007
|
$
|
100.00
|
|
|
$
|
100.00
|
|
|
$
|
100.00
|
|
12/31/2008
|
43.54
|
|
|
63.00
|
|
|
44.73
|
|
|||
12/31/2009
|
84.32
|
|
|
79.68
|
|
|
52.44
|
|
|||
12/31/2010
|
69.29
|
|
|
91.68
|
|
|
58.83
|
|
|||
12/31/2011
|
52.12
|
|
|
93.62
|
|
|
48.82
|
|
|||
12/31/2012
|
57.94
|
|
|
108.59
|
|
|
62.93
|
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2012
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
||||||||||
|
|
|
(dollars in millions, except per share amounts)
|
||||||||||||||||
Statement of operations data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net earned premiums
(1)
|
$
|
853
|
|
|
$
|
920
|
|
|
$
|
1,187
|
|
|
$
|
930
|
|
|
$
|
261
|
|
Net investment income
(1)
|
404
|
|
|
396
|
|
|
361
|
|
|
262
|
|
|
163
|
|
|||||
Net realized investment gains (losses)
(1)
|
1
|
|
|
(18
|
)
|
|
(2
|
)
|
|
(33
|
)
|
|
(70
|
)
|
|||||
Realized gains and other settlements on credit derivatives
|
(108
|
)
|
|
6
|
|
|
153
|
|
|
164
|
|
|
118
|
|
|||||
Net unrealized gains (losses) on credit derivatives
|
(477
|
)
|
|
554
|
|
|
(155
|
)
|
|
(338
|
)
|
|
38
|
|
|||||
Fair value gains (losses) on committed capital securities
|
(18
|
)
|
|
35
|
|
|
9
|
|
|
(123
|
)
|
|
42
|
|
|||||
Fair value gains (losses) on financial guaranty variable interest entities
(1)
|
210
|
|
|
(132
|
)
|
|
(274
|
)
|
|
(1
|
)
|
|
—
|
|
|||||
Other income
|
108
|
|
|
58
|
|
|
34
|
|
|
56
|
|
|
1
|
|
|||||
Total revenues
|
973
|
|
|
1,819
|
|
|
1,313
|
|
|
917
|
|
|
553
|
|
|||||
Expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Loss and loss adjustment expenses
(1)
|
523
|
|
|
462
|
|
|
412
|
|
|
394
|
|
|
266
|
|
|||||
Amortization of deferred acquisition costs
(1)(2)
|
14
|
|
|
17
|
|
|
22
|
|
|
44
|
|
|
54
|
|
|||||
Assured Guaranty Municipal Holdings Inc. acquisition-related expenses
|
—
|
|
|
—
|
|
|
7
|
|
|
92
|
|
|
—
|
|
|||||
Interest expense
|
92
|
|
|
99
|
|
|
100
|
|
|
63
|
|
|
23
|
|
|||||
Goodwill and settlement of pre-existing relationship
|
—
|
|
|
—
|
|
|
—
|
|
|
23
|
|
|
—
|
|
|||||
Other operating expenses
(2)
|
212
|
|
|
212
|
|
|
238
|
|
|
192
|
|
|
112
|
|
|||||
Total expenses
|
841
|
|
|
790
|
|
|
779
|
|
|
808
|
|
|
455
|
|
|||||
Income (loss) before (benefit) provision for income taxes
|
132
|
|
|
1,029
|
|
|
534
|
|
|
109
|
|
|
98
|
|
|||||
Provision (benefit) for income taxes
|
22
|
|
|
256
|
|
|
50
|
|
|
29
|
|
|
38
|
|
|||||
Net income (loss)
|
110
|
|
|
773
|
|
|
484
|
|
|
80
|
|
|
60
|
|
|||||
Less: Noncontrolling interest of variable interest entities
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|||||
Net income (loss) attributable to Assured Guaranty Ltd.
|
$
|
110
|
|
|
$
|
773
|
|
|
$
|
484
|
|
|
$
|
82
|
|
|
$
|
60
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
0.58
|
|
|
$
|
4.21
|
|
|
$
|
2.63
|
|
|
$
|
0.64
|
|
|
$
|
0.67
|
|
Diluted
|
$
|
0.57
|
|
|
$
|
4.16
|
|
|
$
|
2.56
|
|
|
$
|
0.63
|
|
|
$
|
0.67
|
|
Dividends per share
|
$
|
0.36
|
|
|
$
|
0.18
|
|
|
$
|
0.18
|
|
|
$
|
0.18
|
|
|
$
|
0.18
|
|
|
As of December 31,
|
||||||||||||||||||
|
2012
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
||||||||||
|
|
|
(dollars in millions, except per share amounts)
|
||||||||||||||||
Balance sheet data (end of period):
|
|
|
|
|
|
|
|
|
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Investments and cash
|
$
|
11,223
|
|
|
$
|
11,314
|
|
|
$
|
10,849
|
|
|
$
|
11,013
|
|
|
$
|
3,644
|
|
Premiums receivable, net of ceding commission
(1)
|
1,005
|
|
|
1,003
|
|
|
1,168
|
|
|
1,418
|
|
|
16
|
|
|||||
Ceded unearned premium reserve
(1)
|
561
|
|
|
709
|
|
|
822
|
|
|
1,078
|
|
|
19
|
|
|||||
Salvage and subrogation recoverable
|
456
|
|
|
368
|
|
|
1,032
|
|
|
395
|
|
|
80
|
|
|||||
Credit derivative assets
|
141
|
|
|
153
|
|
|
185
|
|
|
217
|
|
|
147
|
|
|||||
Total assets
|
17,242
|
|
|
17,709
|
|
|
19,370
|
|
|
16,449
|
|
|
4,505
|
|
|||||
Liabilities and shareholders' equity:
|
|
|
|
|
|
|
|
|
|
||||||||||
Unearned premium reserve
(1)
|
5,207
|
|
|
5,963
|
|
|
6,973
|
|
|
8,381
|
|
|
1,234
|
|
|||||
Loss and loss adjustment expense reserve
(1)
|
601
|
|
|
679
|
|
|
574
|
|
|
300
|
|
|
197
|
|
|||||
Reinsurance balances payable, net
|
219
|
|
|
171
|
|
|
274
|
|
|
212
|
|
|
18
|
|
|||||
Long-term debt
|
836
|
|
|
1,038
|
|
|
1,053
|
|
|
1,066
|
|
|
347
|
|
|||||
Credit derivative liabilities
|
1,934
|
|
|
1,457
|
|
|
2,055
|
|
|
1,759
|
|
|
734
|
|
|||||
Total liabilities
|
12,248
|
|
|
13,057
|
|
|
15,700
|
|
|
12,995
|
|
|
2,629
|
|
|||||
Accumulated other comprehensive income
|
515
|
|
|
368
|
|
|
112
|
|
|
142
|
|
|
3
|
|
|||||
Shareholders' equity attributable to Assured Guaranty Ltd.
|
4,994
|
|
|
4,652
|
|
|
3,670
|
|
|
3,455
|
|
|
1,876
|
|
|||||
Shareholders' equity
|
4,994
|
|
|
4,652
|
|
|
3,670
|
|
|
3,454
|
|
|
1,876
|
|
|||||
Book value per share
|
25.74
|
|
|
25.52
|
|
|
19.97
|
|
|
18.76
|
|
|
20.62
|
|
|||||
Consolidated statutory financial information
(3)
:
|
|
|
|
|
|
|
|
|
|
||||||||||
Contingency reserve
|
$
|
2,364
|
|
|
$
|
2,571
|
|
|
$
|
2,288
|
|
|
$
|
1,879
|
|
|
$
|
712
|
|
Policyholders' surplus
|
3,579
|
|
|
3,116
|
|
|
2,627
|
|
|
2,962
|
|
|
1,598
|
|
|||||
Claims paying resources
(4)
|
12,328
|
|
|
12,839
|
|
|
12,630
|
|
|
13,051
|
|
|
4,962
|
|
|||||
Outstanding Exposure:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net debt service outstanding
|
$
|
782,180
|
|
|
$
|
845,665
|
|
|
$
|
927,143
|
|
|
$
|
958,265
|
|
|
$
|
348,816
|
|
Net par outstanding
|
519,893
|
|
|
558,048
|
|
|
617,131
|
|
|
640,422
|
|
|
222,722
|
|
(1)
|
Accounting guidance for financial guaranty insurance contracts changed effective January 1, 2009 and for VIEs effective January 1, 2010. As a result, amounts are not comparable.
|
(2)
|
Accounting guidance restricting the types and amounts of financial guaranty insurance contract acquisition costs that may be deferred was adopted and retrospectively applied effective January 1, 2012.
|
(3)
|
Prepared in accordance with accounting practices prescribed or permitted by U.S. insurance regulatory authorities, for all insurance subsidiaries.
|
(4)
|
Claims paying resources is calculated as the sum of statutory policyholders' surplus, statutory contingency reserve, statutory unearned premium reserves, statutory loss and LAE reserves, present value of installment premium on financial guaranty and credit derivatives, discounted at 6%, and standby lines of credit/stop loss. Total claims paying resources is used by the Company to evaluate the adequacy of capital resources. On December 23, 2011, AGM terminated its $298 million non-recourse credit facility and replaced such credit facility, effective as of January 1, 2012, with a $435 million excess of loss reinsurance facility for the benefit of AGM and AGC which is included in claims paying resources as of December 31, 2012 and 2011.
|
ITEM 7.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
Change
|
||||||
|
(in millions, except per share amounts)
|
||||||||||
Selected income statement data
|
|
|
|
|
|
|
|||||
Net earned premiums
|
$
|
853
|
|
|
$
|
920
|
|
|
$
|
(67
|
)
|
Net investment income
|
404
|
|
|
396
|
|
|
8
|
|
|||
Realized gains (losses) and other settlements on credit derivatives
|
(108
|
)
|
|
6
|
|
|
(114
|
)
|
|||
Net unrealized gains (losses) on credit derivatives
|
(477
|
)
|
|
554
|
|
|
(1,031
|
)
|
|||
Fair value gains (losses) on financial guaranty variable interest entities
|
210
|
|
|
(132
|
)
|
|
342
|
|
|||
Loss and loss adjustment expenses
|
(523
|
)
|
|
(462
|
)
|
|
(61
|
)
|
|||
Other operating expenses
|
(212
|
)
|
|
(212
|
)
|
|
—
|
|
|||
Net income (loss)
|
110
|
|
|
773
|
|
|
(663
|
)
|
|||
Diluted earnings per share
|
$
|
0.57
|
|
|
$
|
4.16
|
|
|
$
|
(3.59
|
)
|
Selected non-GAAP measures(1)
|
|
|
|
|
|
||||||
Operating income
|
$
|
535
|
|
|
$
|
601
|
|
|
$
|
(66
|
)
|
Operating income per share
|
$
|
2.81
|
|
|
$
|
3.24
|
|
|
$
|
(0.43
|
)
|
Present value of new business production (“PVP”)
|
$
|
210
|
|
|
$
|
243
|
|
|
$
|
(33
|
)
|
(1)
|
Please refer to “—Non-GAAP Financial Measures.”
|
•
|
loss mitigation, including the pursuit of recoveries for breaches of R&W, servicing improvements and the purchase of insured obligations;
|
•
|
new business development and reinsurance commutations; and
|
•
|
other rating agency capital improvement strategies.
|
|
Year Ended December 31,
|
|||||||||||||||||||
|
2012
|
|
2011
|
|
2010
|
|||||||||||||||
|
Par
|
|
Number of
issues
|
|
Par
|
|
Number of
issues
|
|
Par
|
|
Number of
issues
|
|||||||||
|
(dollars in billions, except number of issues)
|
|||||||||||||||||||
New municipal bonds issued
|
$
|
366.7
|
|
|
12,544
|
|
|
$
|
285.2
|
|
|
10,176
|
|
|
$
|
430.8
|
|
|
13,594
|
|
Insured by AGC and AGM(2)
|
13.2
|
|
|
1,157
|
|
|
15.2
|
|
|
1,228
|
|
|
26.8
|
|
|
1,697
|
|
(1)
|
Based on the date the transactions are sold.
|
(2)
|
Represents 99.8% for 2012, 100% for 2011 and 100% for 2010 of market share of bonds issued with insurance for all periods presented.
|
|
Year Ended December 31,
|
||||
|
2012
|
|
2011
|
|
2010
|
Market penetration par
|
3.6%
|
|
5.3%
|
|
6.2%
|
Market penetration based on number of issues
|
9.2
|
|
12.1
|
|
12.5
|
% of single A par sold
|
11.9
|
|
15.8
|
|
14.9
|
% of single A transactions sold
|
29.5
|
|
37.8
|
|
35.2
|
% of under $25 million par sold
|
11.7
|
|
14.7
|
|
15.3
|
% of under $25 million transactions sold
|
10.3
|
|
13.2
|
|
13.7
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
PVP:
|
|
|
|
|
|
||||||
Public Finance—U.S.
|
|
|
|
|
|
||||||
Assumed from Radian
|
$
|
22
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Primary Markets
|
125
|
|
|
148
|
|
|
286
|
|
|||
Secondary Markets
|
19
|
|
|
25
|
|
|
42
|
|
|||
Public Finance—non-U.S.
|
|
|
|
|
|
||||||
Primary Markets
|
1
|
|
|
3
|
|
|
—
|
|
|||
Secondary Markets
|
—
|
|
|
—
|
|
|
1
|
|
|||
Structured Finance—U.S.
|
43
|
|
|
60
|
|
|
30
|
|
|||
Structured Finance—non-U.S.
|
—
|
|
|
7
|
|
|
4
|
|
|||
Total PVP
|
$
|
210
|
|
|
$
|
243
|
|
|
363
|
|
|
Gross Par Written:
|
|
|
|
|
|
||||||
Public Finance—U.S.
|
|
|
|
|
|
||||||
Assumed from Radian
|
$
|
1,797
|
|
|
$
|
—
|
|
|
—
|
|
|
Primary Markets
|
13,055
|
|
|
14,015
|
|
|
26,195
|
|
|||
Secondary Markets
|
1,309
|
|
|
1,077
|
|
|
1,567
|
|
|||
Public Finance—non-U.S.
|
|
|
|
|
|
||||||
Primary Markets
|
35
|
|
|
127
|
|
|
—
|
|
|||
Secondary Markets
|
—
|
|
|
—
|
|
|
34
|
|
|||
Structured Finance—U.S.
|
620
|
|
|
1,673
|
|
|
2,963
|
|
|||
Structured Finance—non-U.S.
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total gross par written
|
$
|
16,816
|
|
|
$
|
16,892
|
|
|
30,759
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Revenues:
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
853
|
|
|
$
|
920
|
|
|
$
|
1,187
|
|
Net investment income
|
404
|
|
|
396
|
|
|
361
|
|
|||
Net realized investment gains (losses)
|
1
|
|
|
(18
|
)
|
|
(2
|
)
|
|||
Net change in fair value of credit derivatives:
|
|
|
|
|
|
||||||
Realized gains (losses) and other settlements
|
(108
|
)
|
|
6
|
|
|
153
|
|
|||
Net unrealized gains
|
(477
|
)
|
|
554
|
|
|
(155
|
)
|
|||
Net change in fair value of credit derivatives
|
(585
|
)
|
|
560
|
|
|
(2
|
)
|
|||
Fair value gains (losses) on committed capital securities ("CCS")
|
(18
|
)
|
|
35
|
|
|
9
|
|
|||
Fair value gains (losses) on FG VIEs
|
210
|
|
|
(132
|
)
|
|
(274
|
)
|
|||
Other income
|
108
|
|
|
58
|
|
|
34
|
|
|||
Total revenues
|
973
|
|
|
1,819
|
|
|
1,313
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Loss and LAE
|
523
|
|
|
462
|
|
|
412
|
|
|||
Amortization of deferred acquisition costs
|
14
|
|
|
17
|
|
|
22
|
|
|||
AGMH acquisition-related expenses
|
—
|
|
|
—
|
|
|
7
|
|
|||
Interest expense
|
92
|
|
|
99
|
|
|
100
|
|
|||
Other operating expenses
|
212
|
|
|
212
|
|
|
238
|
|
|||
Total expenses
|
841
|
|
|
790
|
|
|
779
|
|
|||
Income (loss) before provision for income taxes
|
132
|
|
|
1,029
|
|
|
534
|
|
|||
Provision (benefit) for income taxes
|
22
|
|
|
256
|
|
|
50
|
|
|||
Net income (loss)
|
$
|
110
|
|
|
$
|
773
|
|
|
$
|
484
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Financial guaranty:
|
|
|
|
|
|
||||||
Public finance
|
|
|
|
|
|
||||||
Scheduled net earned premiums and accretion
|
$
|
339
|
|
|
$
|
360
|
|
|
$
|
386
|
|
Accelerations(1)
|
250
|
|
|
125
|
|
|
91
|
|
|||
Total public finance
|
589
|
|
|
485
|
|
|
477
|
|
|||
Structured finance(2)
|
263
|
|
|
433
|
|
|
708
|
|
|||
Other
|
1
|
|
|
2
|
|
|
2
|
|
|||
Total net earned premiums
|
$
|
853
|
|
|
$
|
920
|
|
|
$
|
1,187
|
|
(1)
|
Reflects the unscheduled refunding or early termination of underlying insured obligations.
|
(2)
|
Excludes $
153 million
, $
75 million
and
$48 million
for 2012, 2011 and 2010, respectively, related to consolidated FG VIEs.
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Income from fixed maturity securities
|
$
|
407
|
|
|
$
|
399
|
|
|
$
|
360
|
|
Income from short-term investments
|
1
|
|
|
1
|
|
|
3
|
|
|||
Income from assets acquired in refinancing transactions
|
5
|
|
|
5
|
|
|
7
|
|
|||
Gross investment income
|
413
|
|
|
405
|
|
|
370
|
|
|||
Investment expenses
|
(9
|
)
|
|
(9
|
)
|
|
(9
|
)
|
|||
Net investment income(1)
|
$
|
404
|
|
|
$
|
396
|
|
|
$
|
361
|
|
Average fixed and short-term maturity balance
|
$
|
10,358
|
|
|
$
|
10,534
|
|
|
$
|
10,348
|
|
(1)
|
Net investment income excludes $13 million for 2012 and $8 million for 2011 related to consolidated FG VIEs.
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Realized investment gains (losses) on sales of investments
|
$
|
18
|
|
|
$
|
27
|
|
|
$
|
25
|
|
OTTI:
|
|
|
|
|
|
||||||
Intent to sell
|
0
|
|
|
(5
|
)
|
|
(4
|
)
|
|||
Credit losses on securities
|
(17
|
)
|
|
(40
|
)
|
|
(23
|
)
|
|||
OTTl
|
(17
|
)
|
|
(45
|
)
|
|
(27
|
)
|
|||
Net realized investment gains (losses)
|
$
|
1
|
|
|
$
|
(18
|
)
|
|
$
|
(2
|
)
|
(1)
|
Net realized investment gains (losses) reported in accordance with GAAP exclude $
4 million
for 2012 and $
12 million
for 2011 related to consolidated FG VIEs.
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Foreign exchange gain (loss) on remeasurement of premium receivable and loss reserves
|
$
|
22
|
|
|
$
|
(5
|
)
|
|
$
|
(29
|
)
|
Commutation gains (losses)
|
82
|
|
|
32
|
|
|
50
|
|
|||
R&W settlement benefit
|
—
|
|
|
22
|
|
|
—
|
|
|||
Other
|
4
|
|
|
9
|
|
|
13
|
|
|||
Total other income
|
$
|
108
|
|
|
$
|
58
|
|
|
$
|
34
|
|
|
|
Net Par Outstanding
as of December 31, |
|
Number of Risks (1)
as of December 31, |
||||||||||
Description
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||
|
|
(dollars in millions)
|
||||||||||||
BIG:
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Category 1
|
|
$
|
9,254
|
|
|
$
|
12,250
|
|
|
183
|
|
|
211
|
|
Category 2
|
|
5,107
|
|
|
4,981
|
|
|
103
|
|
|
104
|
|
||
Category 3
|
|
9,031
|
|
|
9,531
|
|
|
174
|
|
|
152
|
|
||
Total BIG
|
|
$
|
23,392
|
|
|
$
|
26,762
|
|
|
460
|
|
|
467
|
|
(1)
|
A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments.
|
|
Economic Loss Development(1)
|
|
(Paid) Recovered Losses
|
||||||||||||||||||||
|
Year Ended December 31,
|
|
Year Ended December 31,
|
||||||||||||||||||||
|
2012
|
|
2011
|
|
2010
|
|
2012
|
|
2011
|
|
2010
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
U.S. RMBS before benefit for recoveries for breaches of R&W
|
$
|
367
|
|
|
$
|
1,039
|
|
|
$
|
939
|
|
|
$
|
(996
|
)
|
|
$
|
(1,051
|
)
|
|
$
|
(1,066
|
)
|
Net benefit for recoveries for breaches of R&W
|
(179
|
)
|
|
(1,038
|
)
|
|
(649
|
)
|
|
459
|
|
|
1,059
|
|
|
189
|
|
||||||
U.S. RMBS after benefit for recoveries for breaches of R&W
|
188
|
|
|
1
|
|
|
290
|
|
|
(537
|
)
|
|
8
|
|
|
(877
|
)
|
||||||
Other structured finance
|
(28
|
)
|
|
80
|
|
|
147
|
|
|
(39
|
)
|
|
(26
|
)
|
|
(2
|
)
|
||||||
Public finance
|
295
|
|
|
43
|
|
|
11
|
|
|
(303
|
)
|
|
(65
|
)
|
|
(53
|
)
|
||||||
Other
|
(17
|
)
|
|
—
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
438
|
|
|
$
|
124
|
|
|
$
|
448
|
|
|
$
|
(867
|
)
|
|
$
|
(83
|
)
|
|
$
|
(932
|
)
|
(1)
|
Economic loss development includes the effects of changes in assumptions based on observed market trends, changes in discount rates, accretion of discount and the economic effects of loss mitigation efforts.
|
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
||||
|
(in millions)
|
||||||
U.S. RMBS before benefit for recoveries for breaches of R&W
|
$
|
1,652
|
|
|
$
|
2,281
|
|
Net benefit for recoveries for breaches of R&W
|
(1,370
|
)
|
|
(1,650
|
)
|
||
U.S. RMBS after benefit for recoveries for breaches of R&W
|
282
|
|
|
631
|
|
||
Other structured finance
|
339
|
|
|
406
|
|
||
Public finance
|
59
|
|
|
67
|
|
||
Other
|
(3
|
)
|
|
2
|
|
||
Total
|
$
|
677
|
|
|
$
|
1,106
|
|
•
|
in its most optimistic scenario, it reduced by
three
months the period it assumed it would take the mortgage market to recover; and
|
•
|
in its most pessimistic scenario, it increased by
three
months the period it assumed it would take the mortgage market to recover.
|
|
Year Ended December 31, 2012
|
||
|
(in millions)
|
||
Inclusion (removal) of deals with breaches of R&W during period
|
$
|
(3
|
)
|
Change in recovery assumptions as the result of additional file review and recovery success
|
70
|
|
|
Estimated increase (decrease) in defaults that will result in additional (lower) breaches
|
63
|
|
|
Results of settlements and judgments
|
40
|
|
|
Accretion of discount on balance
|
9
|
|
|
Total
|
$
|
179
|
|
•
|
based on its observation of the slow mortgage market recovery, the Company increased its base case expected period for reaching the final conditional default rate in second lien transactions and adjusted the probability weightings it applied to second lien scenarios from year-end 2010 to reflect the changes to those scenarios;
|
•
|
also based on its observation of the slow mortgage market recovery the Company added a more stressful first lien scenario at year-end 2011 reflecting an even slower potential recovery in the housing and mortgage markets, making what had prior to that been a stress scenario its base scenario;
|
•
|
based on its observation of increased loss severity rates, the Company increased its projected loss severity rates in various of its first lien scenarios; and
|
•
|
based on its observation of liquidation rates, the Company decreased the liquidation rates it applied to non-performing loans.
|
|
Year Ended December 31, 2011
|
||
|
(in millions)
|
||
Inclusion (removal) of deals with breaches of R&W during period
|
$
|
115
|
|
Change in recovery assumptions as the result of additional file review and recovery success
|
218
|
|
|
Estimated increase (decrease) in defaults that will result in additional (lower) breaches
|
17
|
|
|
Results of settlements
|
668
|
|
|
Accretion of discount on balance
|
20
|
|
|
Total
|
$
|
1,038
|
|
•
|
based on its observation of what appeared to be the beginnings of an improvement in the housing and mortgage markets in the first part of 2010, it adjusted for the second quarter 2010 how its scenarios were run;
|
•
|
then based on its observations in the third and fourth quarters of 2010 that early stage delinquencies had not trended down as much as it had anticipated in the second quarter and its concerns in the fourth quarter about the timing and strength of any recovery in the mortgage and housing markets, it adjusted its probability weightings to reflect a somewhat more pessimistic view; and
|
•
|
based on its observation of increased loss severity rates, the Company increased its projected initial loss severity rates for subprime transactions to 80%.
|
|
Year Ended December 31, 2010
|
||
|
(in millions)
|
||
Inclusion (removal) of deals with breach of R&W during period
|
$
|
180
|
|
Change in recovery assumptions as the result of additional file review and recovery success
|
253
|
|
|
Estimated increase (decrease) in defaults that will result in additional (lower) breaches
|
211
|
|
|
Accretion of discount on balance
|
5
|
|
|
Total
|
$
|
649
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
U.S. RMBS
|
$
|
308
|
|
|
$
|
389
|
|
|
$
|
381
|
|
Other structured finance
|
(7
|
)
|
|
118
|
|
|
64
|
|
|||
Public finance
|
285
|
|
|
48
|
|
|
33
|
|
|||
Other
|
(17
|
)
|
|
—
|
|
|
—
|
|
|||
Total insurance contracts before FG VIE consolidation
|
569
|
|
|
555
|
|
|
478
|
|
|||
Effect of consolidating FG VIEs
|
(46
|
)
|
|
(93
|
)
|
|
(66
|
)
|
|||
Total loss and LAE
|
$
|
523
|
|
|
$
|
462
|
|
|
$
|
412
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
U.S. RMBS
|
$
|
369
|
|
|
$
|
365
|
|
|
$
|
499
|
|
Other structured finance
|
(40
|
)
|
|
99
|
|
|
155
|
|
|||
Public finance
|
284
|
|
|
29
|
|
|
34
|
|
|||
Other
|
(17
|
)
|
|
—
|
|
|
—
|
|
|||
Total
|
$
|
596
|
|
|
$
|
493
|
|
|
$
|
688
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Loss and LAE
|
$
|
523
|
|
|
$
|
462
|
|
|
$
|
412
|
|
Credit derivative loss expense
|
28
|
|
|
(62
|
)
|
|
210
|
|
|||
FG VIE loss expense
|
45
|
|
|
93
|
|
|
66
|
|
|||
Loss expense included in operating income
|
$
|
596
|
|
|
$
|
493
|
|
|
$
|
688
|
|
|
Net Expected Loss to be Expensed(1)
|
||||||
|
In GAAP
Reported
Income
|
|
In Non-GAAP
Operating
Income
|
||||
|
(in millions)
|
||||||
2013
|
$
|
72
|
|
|
$
|
110
|
|
2014
|
48
|
|
|
70
|
|
||
2015
|
42
|
|
|
55
|
|
||
2016
|
37
|
|
|
48
|
|
||
2017
|
36
|
|
|
46
|
|
||
2018-2022
|
127
|
|
|
158
|
|
||
2023-2027
|
59
|
|
|
72
|
|
||
2028-2032
|
29
|
|
|
37
|
|
||
After 2032
|
19
|
|
|
29
|
|
||
Total expected PV of net expected loss to be expensed
|
469
|
|
|
625
|
|
||
Discount
|
251
|
|
|
287
|
|
||
Total future value
|
$
|
720
|
|
|
$
|
912
|
|
(1)
|
Net expected loss to be expensed for GAAP reported income is different than non-GAAP operating income by the amount related to consolidated FG VIEs.
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Net credit derivative premiums received and receivable
|
$
|
127
|
|
|
$
|
185
|
|
|
$
|
207
|
|
Net ceding commissions (paid and payable) received and receivable
|
1
|
|
|
3
|
|
|
3
|
|
|||
Realized gains on credit derivatives
|
128
|
|
|
188
|
|
|
210
|
|
|||
Terminations
|
(1
|
)
|
|
(23
|
)
|
|
—
|
|
|||
Net credit derivative losses (paid and payable) recovered and recoverable
|
(235
|
)
|
|
(159
|
)
|
|
(57
|
)
|
|||
Total realized gains (losses) and other settlements on credit derivatives
|
(108
|
)
|
|
6
|
|
|
153
|
|
|||
Net unrealized gains (losses) on credit derivatives
|
(477
|
)
|
|
554
|
|
|
(155
|
)
|
|||
Net change in fair value of credit derivatives
|
$
|
(585
|
)
|
|
$
|
560
|
|
|
$
|
(2
|
)
|
|
|
Year Ended December 31,
|
||||||||||
Asset Type
|
|
2012
|
|
2011
|
|
2010
|
||||||
|
|
(in millions)
|
||||||||||
U.S. RMBS:
|
|
|
|
|
|
|
||||||
Option ARM and Alt-A first lien
|
|
$
|
(447
|
)
|
|
$
|
300
|
|
|
$
|
(281
|
)
|
Subprime first lien
|
|
(55
|
)
|
|
24
|
|
|
(10
|
)
|
|||
Prime first lien
|
|
(54
|
)
|
|
47
|
|
|
(8
|
)
|
|||
Closed end second lien and home equity lines of credit ("HELOCs")
|
|
5
|
|
|
10
|
|
|
(2
|
)
|
|||
Total U.S. RMBS
|
|
(551
|
)
|
|
381
|
|
|
(301
|
)
|
|||
Pooled corporate obligations
|
|
59
|
|
|
39
|
|
|
70
|
|
|||
CMBS
|
|
2
|
|
|
11
|
|
|
10
|
|
|||
Other(1)
|
|
13
|
|
|
123
|
|
|
66
|
|
|||
Total
|
|
$
|
(477
|
)
|
|
$
|
554
|
|
|
$
|
(155
|
)
|
(1)
|
“Other” includes all other U.S. and international asset classes, such as commercial receivables, international infrastructure, international RMBS securities, and pooled infrastructure securities.
|
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
|
As of
December 31, 2010 |
|||
Quoted price of CDS contract (in basis points):
|
|
|
|
|
|
|
|
|
AGC
|
678
|
|
|
1,140
|
|
|
804
|
|
AGM
|
536
|
|
|
778
|
|
|
650
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Change in unrealized gains (losses) of credit derivatives:
|
|
|
|
|
|
||||||
Before considering implication of the Company’s credit spreads
|
$
|
798
|
|
|
$
|
(68
|
)
|
|
$
|
464
|
|
Resulting from change in the Company’s credit spreads
|
(1,275
|
)
|
|
622
|
|
|
(619
|
)
|
|||
After considering implication of the Company’s credit spreads
|
$
|
(477
|
)
|
|
$
|
554
|
|
|
$
|
(155
|
)
|
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
||||
|
(in millions)
|
||||||
Credit derivative assets
|
$
|
141
|
|
|
$
|
153
|
|
Credit derivative liabilities
|
(1,934
|
)
|
|
(1,457
|
)
|
||
Net fair value of credit derivatives
|
$
|
(1,793
|
)
|
|
$
|
(1,304
|
)
|
|
As of December 31,
|
||||||
|
2012
|
|
2011
|
||||
|
(in millions)
|
||||||
Deutsche Bank AG
|
$
|
8,893
|
|
|
$
|
9,882
|
|
Barclays Capital
|
8,336
|
|
|
9,244
|
|
||
Bank of America Corporation
|
7,042
|
|
|
7,339
|
|
||
JPMorgan Chase & Co.
|
5,787
|
|
|
7,660
|
|
||
BNP Paribas Finance Inc.
|
5,480
|
|
|
5,661
|
|
||
Belfius Bank(1)
|
5,196
|
|
|
7,103
|
|
||
Morgan Stanley
|
4,408
|
|
|
5,179
|
|
||
Groupe BPCE
|
4,107
|
|
|
4,614
|
|
||
Royal Bank of Scotland Group PLC
|
3,898
|
|
|
6,079
|
|
||
HSBC Holdings PLC
|
3,889
|
|
|
4,546
|
|
||
Other
|
13,745
|
|
|
17,740
|
|
||
Total
|
$
|
70,781
|
|
|
$
|
85,047
|
|
(1)
|
Belfius Bank was formally known as Dexia Bank Belgium as of December 31, 2011.
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
AGUS:
|
|
|
|
|
|
|
|
|
|||
7.0% Senior Notes
|
$
|
13
|
|
|
$
|
13
|
|
|
$
|
13
|
|
8.50% Senior Notes
|
8
|
|
|
16
|
|
|
16
|
|
|||
Series A Enhanced Junior Subordinated Debentures
|
10
|
|
|
10
|
|
|
10
|
|
|||
Total AGUS
|
31
|
|
|
39
|
|
|
39
|
|
|||
AGMH:
|
|
|
|
|
|
|
|
|
|||
6
7
/
8
% QUIBS
|
7
|
|
|
7
|
|
|
7
|
|
|||
6.25% Notes
|
16
|
|
|
16
|
|
|
16
|
|
|||
5.60% Notes
|
6
|
|
|
6
|
|
|
6
|
|
|||
Junior Subordinated Debentures
|
25
|
|
|
25
|
|
|
25
|
|
|||
Total AGMH
|
54
|
|
|
54
|
|
|
54
|
|
|||
AGM:
|
|
|
|
|
|
|
|
|
|||
Notes Payable
|
7
|
|
|
6
|
|
|
7
|
|
|||
Total AGM
|
7
|
|
|
6
|
|
|
7
|
|
|||
Total
|
$
|
92
|
|
|
$
|
99
|
|
|
$
|
100
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Total provision (benefit) for income taxes
|
$
|
22
|
|
|
$
|
256
|
|
|
$
|
50
|
|
Effective tax rate
|
16.5
|
%
|
|
24.9
|
%
|
|
9.4
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Net earned premiums
|
$
|
(153
|
)
|
|
$
|
(75
|
)
|
|
$
|
(48
|
)
|
Net investment income
|
(13
|
)
|
|
(8
|
)
|
|
—
|
|
|||
Net realized investment gains (losses)
|
4
|
|
|
12
|
|
|
—
|
|
|||
Fair value gains (losses) on FG VIEs
|
210
|
|
|
(132
|
)
|
|
(274
|
)
|
|||
Loss and LAE
|
46
|
|
|
93
|
|
|
66
|
|
|||
Total pretax effect on net income
|
94
|
|
|
(110
|
)
|
|
(256
|
)
|
|||
Less: tax provision (benefit)
|
32
|
|
|
(38
|
)
|
|
(90
|
)
|
|||
Total effect on net income (loss)
|
$
|
62
|
|
|
$
|
(72
|
)
|
|
$
|
(166
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
|
|
|
||||||||
Net income (loss)
|
$
|
110
|
|
|
$
|
773
|
|
|
$
|
484
|
|
Less after-tax adjustments:
|
|
|
|
|
|
||||||
Realized gains (losses) on investments
|
(4
|
)
|
|
(20
|
)
|
|
1
|
|
|||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
(486
|
)
|
|
244
|
|
|
13
|
|
|||
Fair value gains (losses) on CCS
|
(12
|
)
|
|
23
|
|
|
6
|
|
|||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
|
15
|
|
|
(3
|
)
|
|
(25
|
)
|
|||
Effect of consolidating FG VIEs
|
62
|
|
|
(72
|
)
|
|
(166
|
)
|
|||
Operating income
|
$
|
535
|
|
|
$
|
601
|
|
|
$
|
655
|
|
|
|
|
|
|
|
||||||
Effective tax rate on operating income
|
25.0
|
%
|
|
24.4
|
%
|
|
18.7
|
%
|
|
As of December 31, 2012
|
|
As of December 31, 2011
|
||||||||||||
|
Total
|
|
Per Share
|
|
Total
|
|
Per Share
|
||||||||
|
(dollars in millions, except
per share amounts)
|
||||||||||||||
Shareholders’ equity
|
$
|
4,994
|
|
|
$
|
25.74
|
|
|
$
|
4,652
|
|
|
$
|
25.52
|
|
Less after-tax adjustments:
|
|
|
|
|
|
|
|
|
|
||||||
Effect of consolidating FG VIEs
|
(348
|
)
|
|
(1.79
|
)
|
|
(405
|
)
|
|
(2.22
|
)
|
||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
(988
|
)
|
|
(5.09
|
)
|
|
(498
|
)
|
|
(2.74
|
)
|
||||
Fair value gains (losses) on CCS
|
23
|
|
|
0.12
|
|
|
35
|
|
|
0.19
|
|
||||
Unrealized gain (loss) on investment portfolio excluding foreign exchange effect
|
477
|
|
|
2.45
|
|
|
319
|
|
|
1.75
|
|
||||
Operating shareholders’ equity
|
5,830
|
|
|
30.05
|
|
|
5,201
|
|
|
28.54
|
|
||||
After-tax adjustments:
|
|
|
|
|
|
|
|
|
|
|
|||||
Less: Deferred acquisition costs
|
165
|
|
|
0.85
|
|
|
174
|
|
|
0.95
|
|
||||
Plus: Net present value of estimated net future credit derivative revenue
|
220
|
|
|
1.14
|
|
|
302
|
|
|
1.66
|
|
||||
Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed
|
3,266
|
|
|
16.83
|
|
|
3,658
|
|
|
20.07
|
|
||||
Adjusted book value
|
$
|
9,151
|
|
|
$
|
47.17
|
|
|
$
|
8,987
|
|
|
$
|
49.32
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Total PVP
|
$
|
210
|
|
|
$
|
243
|
|
|
$
|
363
|
|
Less: Financial guaranty installment premium PVP
|
45
|
|
|
69
|
|
|
33
|
|
|||
Total: Financial guaranty upfront gross written premiums
|
165
|
|
|
174
|
|
|
330
|
|
|||
Plus: Financial guaranty installment gross written premiums
|
88
|
|
|
(47
|
)
|
|
(108
|
)
|
|||
Total gross written premiums
|
$
|
253
|
|
|
$
|
127
|
|
|
$
|
222
|
|
|
|
As of December 31, 2012
|
|
As of December 31, 2011
|
||||||||
Sector
|
|
Net Par
Outstanding
|
|
Avg.
Rating
|
|
Net Par
Outstanding
|
|
Avg.
Rating
|
||||
|
|
(dollars in millions)
|
||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
|
||
U.S.:
|
|
|
|
|
|
|
|
|
|
|
||
General obligation
|
|
$
|
169,985
|
|
|
A+
|
|
$
|
173,061
|
|
|
A+
|
Tax backed
|
|
73,787
|
|
|
A+
|
|
78,006
|
|
|
A+
|
||
Municipal utilities
|
|
62,116
|
|
|
A
|
|
65,204
|
|
|
A
|
||
Transportation
|
|
33,799
|
|
|
A
|
|
35,396
|
|
|
A
|
||
Healthcare
|
|
17,838
|
|
|
A
|
|
19,495
|
|
|
A
|
||
Higher education
|
|
15,770
|
|
|
A+
|
|
15,677
|
|
|
A+
|
||
Housing
|
|
4,633
|
|
|
AA-
|
|
5,696
|
|
|
AA-
|
||
Infrastructure finance
|
|
4,210
|
|
|
BBB
|
|
4,110
|
|
|
BBB
|
||
Investor-owned utilities
|
|
1,069
|
|
|
A-
|
|
1,124
|
|
|
A-
|
||
Other public finance—U.S.
|
|
4,760
|
|
|
A
|
|
5,304
|
|
|
A-
|
||
Total public finance—U.S.
|
|
387,967
|
|
|
A
|
|
403,073
|
|
|
A+
|
||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|
||
Infrastructure finance
|
|
15,812
|
|
|
BBB
|
|
15,405
|
|
|
BBB
|
||
Regulated utilities
|
|
12,494
|
|
|
BBB+
|
|
13,260
|
|
|
BBB+
|
||
Pooled infrastructure
|
|
3,200
|
|
|
AA-
|
|
3,130
|
|
|
AA-
|
||
Other public finance—non-U.S.
|
|
6,034
|
|
|
A
|
|
7,251
|
|
|
A+
|
||
Total public finance—non-U.S.
|
|
37,540
|
|
|
BBB+
|
|
39,046
|
|
|
BBB+
|
||
Total public finance
|
|
425,507
|
|
|
A
|
|
442,119
|
|
|
A
|
||
Structured finance:
|
|
|
|
|
|
|
|
|
|
|
||
U.S.:
|
|
|
|
|
|
|
|
|
|
|
||
Pooled corporate obligations
|
|
41,886
|
|
|
AAA
|
|
51,520
|
|
|
AAA
|
||
RMBS
|
|
17,827
|
|
|
BB+
|
|
21,567
|
|
|
BB+
|
||
CMBS and other commercial real estate related exposures
|
|
4,247
|
|
|
AAA
|
|
4,774
|
|
|
AAA
|
||
Financial products
|
|
3,653
|
|
|
AA-
|
|
5,217
|
|
|
AA-
|
||
Consumer receivables
|
|
2,369
|
|
|
BBB+
|
|
4,326
|
|
|
AA-
|
||
Insurance securitizations
|
|
2,190
|
|
|
A+
|
|
1,893
|
|
|
A+
|
||
Commercial receivables
|
|
1,025
|
|
|
BBB+
|
|
1,214
|
|
|
BBB
|
||
Structured credit
|
|
319
|
|
|
CCC+
|
|
424
|
|
|
B-
|
||
Other structured finance—U.S.
|
|
1,179
|
|
|
BBB+
|
|
1,299
|
|
|
A-
|
||
Total structured finance—U.S.
|
|
74,695
|
|
|
AA-
|
|
92,234
|
|
|
AA-
|
||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|
||
Pooled corporate obligations
|
|
14,813
|
|
|
AAA
|
|
17,731
|
|
|
AAA
|
||
Commercial receivables
|
|
1,463
|
|
|
A-
|
|
1,865
|
|
|
A-
|
||
RMBS
|
|
1,424
|
|
|
AA-
|
|
1,598
|
|
|
AA
|
||
Insurance securitizations
|
|
923
|
|
|
CCC-
|
|
964
|
|
|
CCC-
|
||
Structured credit
|
|
591
|
|
|
BBB
|
|
979
|
|
|
BBB
|
||
CMBS and other commercial real estate related exposures
|
|
100
|
|
|
AAA
|
|
180
|
|
|
AAA
|
||
Other structured finance—non-U.S.
|
|
377
|
|
|
Super Senior
|
|
378
|
|
|
Super Senior
|
||
Total structured finance—non-U.S.
|
|
19,691
|
|
|
AA
|
|
23,695
|
|
|
AA
|
||
Total structured finance
|
|
94,386
|
|
|
AA-
|
|
115,929
|
|
|
AA-
|
||
Total net par outstanding
|
|
$
|
519,893
|
|
|
A+
|
|
$
|
558,048
|
|
|
A+
|
|
|
Public Finance
U.S.
|
|
Public Finance
Non-U.S.
|
|
Structured Finance
U.S
|
|
Structured Finance
Non-U.S
|
|
Total
|
|||||||||||||||||||||||||
Rating
Category
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|||||||||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||||||||||||||||
Super senior
|
|
$
|
—
|
|
|
—
|
%
|
|
$
|
1,130
|
|
|
3.0
|
%
|
|
$
|
13,572
|
|
|
18.2
|
%
|
|
$
|
4,874
|
|
|
24.7
|
%
|
|
$
|
19,576
|
|
|
3.8
|
%
|
AAA
|
|
4,502
|
|
|
1.2
|
|
|
576
|
|
|
1.5
|
|
|
28,615
|
|
|
38.3
|
|
|
8,295
|
|
|
42.1
|
|
|
41,988
|
|
|
8.1
|
|
|||||
AA
|
|
124,525
|
|
|
32.1
|
|
|
875
|
|
|
2.3
|
|
|
9,589
|
|
|
12.8
|
|
|
722
|
|
|
3.7
|
|
|
135,711
|
|
|
26.1
|
|
|||||
A
|
|
210,124
|
|
|
54.1
|
|
|
9,781
|
|
|
26.1
|
|
|
4,670
|
|
|
6.2
|
|
|
1,409
|
|
|
7.2
|
|
|
225,984
|
|
|
43.4
|
|
|||||
BBB
|
|
44,213
|
|
|
11.4
|
|
|
22,885
|
|
|
61.0
|
|
|
3,717
|
|
|
5.0
|
|
|
2,427
|
|
|
12.3
|
|
|
73,242
|
|
|
14.1
|
|
|||||
BIG
|
|
4,603
|
|
|
1.2
|
|
|
2,293
|
|
|
6.1
|
|
|
14,532
|
|
|
19.5
|
|
|
1,964
|
|
|
10.0
|
|
|
23,392
|
|
|
4.5
|
|
|||||
Total net par outstanding
|
|
$
|
387,967
|
|
|
100.0
|
%
|
|
$
|
37,540
|
|
|
100.0
|
%
|
|
$
|
74,695
|
|
|
100.0
|
%
|
|
$
|
19,691
|
|
|
100.0
|
%
|
|
$
|
519,893
|
|
|
100.0
|
%
|
|
|
Public Finance
U.S.
|
|
Public Finance
Non-U.S.
|
|
Structured Finance
U.S
|
|
Structured Finance
Non-U.S
|
|
Total
|
|||||||||||||||||||||||||
Rating Category
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|||||||||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||||||||||||||||
Super senior
|
|
$
|
—
|
|
|
—
|
%
|
|
$
|
1,138
|
|
|
2.9
|
%
|
|
$
|
16,756
|
|
|
18.2
|
%
|
|
$
|
5,660
|
|
|
23.9
|
%
|
|
$
|
23,554
|
|
|
4.2
|
%
|
AAA
|
|
5,074
|
|
|
1.3
|
|
|
1,381
|
|
|
3.5
|
|
|
35,736
|
|
|
38.7
|
|
|
10,231
|
|
|
43.2
|
|
|
52,422
|
|
|
9.4
|
|
|||||
AA
|
|
139,693
|
|
|
34.6
|
|
|
1,056
|
|
|
2.7
|
|
|
12,575
|
|
|
13.6
|
|
|
976
|
|
|
4.1
|
|
|
154,300
|
|
|
27.7
|
|
|||||
A
|
|
213,164
|
|
|
52.9
|
|
|
11,744
|
|
|
30.1
|
|
|
4,115
|
|
|
4.5
|
|
|
1,518
|
|
|
6.4
|
|
|
230,541
|
|
|
41.3
|
|
|||||
BBB
|
|
40,635
|
|
|
10.1
|
|
|
21,399
|
|
|
54.8
|
|
|
5,044
|
|
|
5.5
|
|
|
3,391
|
|
|
14.3
|
|
|
70,469
|
|
|
12.6
|
|
|||||
BIG
|
|
4,507
|
|
|
1.1
|
|
|
2,328
|
|
|
6.0
|
|
|
18,008
|
|
|
19.5
|
|
|
1,919
|
|
|
8.1
|
|
|
26,762
|
|
|
4.8
|
|
|||||
Total net par outstanding
|
|
$
|
403,073
|
|
|
100.0
|
%
|
|
$
|
39,046
|
|
|
100.0
|
%
|
|
$
|
92,234
|
|
|
100.0
|
%
|
|
$
|
23,695
|
|
|
100.0
|
%
|
|
$
|
558,048
|
|
|
100.0
|
%
|
|
Net Par Outstanding
|
|
Percent of Total U.S. Public Finance Net Par Outstanding
|
|
Rating
|
|||
|
(dollars in millions)
|
|||||||
New Jersey, State of
|
$
|
4,275
|
|
|
1.1
|
%
|
|
A+
|
California, State of
|
3,452
|
|
|
0.9
|
%
|
|
BBB+
|
|
New York, City of New York
|
3,241
|
|
|
0.8
|
%
|
|
AA-
|
|
Massachusetts, Commonwealth of
|
2,732
|
|
|
0.7
|
%
|
|
AA
|
|
Chicago, City of Illinois
|
2,726
|
|
|
0.7
|
%
|
|
A+
|
|
New York, State of
|
2,563
|
|
|
0.7
|
%
|
|
A+
|
|
Miami-Dade County Florida Aviation Authority - Miami International Airport
|
2,380
|
|
|
0.6
|
%
|
|
A
|
|
Los Angeles California Unified School District
|
2,263
|
|
|
0.6
|
%
|
|
AA-
|
|
Port Authority of New York and New Jersey
|
2,195
|
|
|
0.6
|
%
|
|
AA-
|
|
Puerto Rico, Commonwealth of
|
2,175
|
|
|
0.6
|
%
|
|
BBB-
|
|
Total of top ten U.S. public finance exposures
|
$
|
28,002
|
|
|
7.3
|
%
|
|
|
|
Net Par Outstanding
|
|
Percent of Total U.S. Structured Finance Net Par Outstanding
|
|
Rating
|
|||
|
(dollars in millions)
|
|||||||
Fortress Credit Opportunities I, LP.
|
$
|
1,328
|
|
|
1.8
|
%
|
|
AA
|
Stone Tower Credit Funding
|
1,254
|
|
|
1.7
|
%
|
|
AAA
|
|
Synthetic Investment Grade Pooled Corporate CDO
|
1,188
|
|
|
1.6
|
%
|
|
AAA
|
|
Synthetic High Yield Pooled Corporate CDO
|
978
|
|
|
1.3
|
%
|
|
AAA
|
|
Synthetic Investment Grade Pooled Corporate CDO
|
767
|
|
|
1.0
|
%
|
|
Super Senior
|
|
Synthetic Investment Grade Pooled Corporate CDO
|
763
|
|
|
1.0
|
%
|
|
Super Senior
|
|
Synthetic Investment Grade Pooled Corporate CDO
|
745
|
|
|
1.0
|
%
|
|
Super Senior
|
|
Synthetic High Yield Pooled Corporate CDO
|
734
|
|
|
1.0
|
%
|
|
AAA
|
|
Synthetic Investment Grade Pooled Corporate CDO
|
726
|
|
|
1.0
|
%
|
|
Super Senior
|
|
Mizuho II Synthetic CDO
|
718
|
|
|
1.0
|
%
|
|
A
|
|
Total of top ten U.S. structured finance exposures
|
$
|
9,201
|
|
|
12.4
|
%
|
|
|
|
Net Par Outstanding
|
|
Percent of Total Non-U.S. Net Par Outstanding
|
|
Rating
|
|||
|
(dollars in millions)
|
|||||||
Quebec Province
|
$
|
2,338
|
|
|
4.1
|
%
|
|
A+
|
Sydney Airport Finance Company
|
1,566
|
|
|
2.7
|
%
|
|
BBB
|
|
Thames Water Utility Finance PLC
|
1,558
|
|
|
2.7
|
%
|
|
A-
|
|
Channel Link Enterprises Finance PLC
|
963
|
|
|
1.7
|
%
|
|
BBB
|
|
Southern Gas Networks PLC
|
867
|
|
|
1.5
|
%
|
|
BBB
|
|
Fortress Credit Investments I
|
778
|
|
|
1.4
|
%
|
|
AAA
|
|
Capital Hospitals (Issuer) PLC
|
777
|
|
|
1.4
|
%
|
|
BBB-
|
|
Societe des Autoroutes du Nord et de l'Est de France S.A.
|
755
|
|
|
1.3
|
%
|
|
BBB+
|
|
Campania Region - Healthcare receivable
|
738
|
|
|
1.3
|
%
|
|
BBB-
|
|
Southern Water Services Limited
|
707
|
|
|
1.2
|
%
|
|
A-
|
|
Total of top ten non-U.S. exposures
|
$
|
11,047
|
|
|
19.3
|
%
|
|
|
|
Number of Risks
|
|
Net Par Outstanding
|
|
Percent of Total Net Par Outstanding
|
||||
|
|
|
(dollars in millions)
|
||||||
U.S.:
|
|
|
|
|
|
||||
U.S. Public Finance:
|
|
|
|
|
|
||||
California
|
1,532
|
|
|
$
|
57,302
|
|
|
11.0
|
%
|
New York
|
1,051
|
|
|
31,402
|
|
|
6.0
|
|
|
Pennsylvania
|
1,133
|
|
|
31,173
|
|
|
6.0
|
|
|
Texas
|
1,273
|
|
|
29,942
|
|
|
5.8
|
|
|
Illinois
|
933
|
|
|
25,297
|
|
|
4.9
|
|
|
Florida
|
446
|
|
|
24,111
|
|
|
4.6
|
|
|
New Jersey
|
704
|
|
|
15,999
|
|
|
3.1
|
|
|
Michigan
|
745
|
|
|
15,516
|
|
|
3.0
|
|
|
Georgia
|
205
|
|
|
10,001
|
|
|
1.9
|
|
|
Ohio
|
576
|
|
|
9,634
|
|
|
1.9
|
|
|
Other states
|
4,889
|
|
|
137,590
|
|
|
26.4
|
|
|
Total U.S. public finance
|
13,487
|
|
|
387,967
|
|
|
74.6
|
|
|
U.S. Structured finance (multiple states)
|
1,080
|
|
|
74,695
|
|
|
14.4
|
|
|
Total U.S.
|
14,567
|
|
|
462,662
|
|
|
89.0
|
|
|
Non-U.S.:
|
|
|
|
|
|
||||
United Kingdom
|
124
|
|
|
23,624
|
|
|
4.5
|
|
|
Australia
|
33
|
|
|
7,558
|
|
|
1.5
|
|
|
Canada
|
11
|
|
|
4,160
|
|
|
0.8
|
|
|
France
|
23
|
|
|
3,914
|
|
|
0.8
|
|
|
Italy
|
12
|
|
|
2,347
|
|
|
0.5
|
|
|
Other
|
116
|
|
|
15,628
|
|
|
2.9
|
|
|
Total non-U.S.
|
319
|
|
|
57,231
|
|
|
11.0
|
|
|
Total
|
14,886
|
|
|
$
|
519,893
|
|
|
100.0
|
%
|
|
Greece
|
|
Hungary
|
|
Ireland
|
|
Italy
|
|
Portugal
|
|
Spain
|
|
Total
|
||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||
Sovereign and sub-sovereign exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Public finance
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,351
|
|
|
$
|
125
|
|
|
$
|
428
|
|
|
$
|
1,904
|
|
Infrastructure finance
|
—
|
|
|
461
|
|
|
24
|
|
|
352
|
|
|
100
|
|
|
172
|
|
|
1,109
|
|
|||||||
Sub-total
|
—
|
|
|
461
|
|
|
24
|
|
|
1,703
|
|
|
225
|
|
|
600
|
|
|
3,013
|
|
|||||||
Non-sovereign exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Regulated utilities
|
—
|
|
|
—
|
|
|
—
|
|
|
249
|
|
|
—
|
|
|
9
|
|
|
258
|
|
|||||||
RMBS
|
—
|
|
|
230
|
|
|
139
|
|
|
567
|
|
|
—
|
|
|
—
|
|
|
936
|
|
|||||||
Commercial receivables
|
—
|
|
|
2
|
|
|
13
|
|
|
65
|
|
|
16
|
|
|
2
|
|
|
98
|
|
|||||||
Pooled corporate
|
25
|
|
|
—
|
|
|
211
|
|
|
236
|
|
|
14
|
|
|
575
|
|
|
1,061
|
|
|||||||
Sub-total
|
25
|
|
|
232
|
|
|
363
|
|
|
1,117
|
|
|
30
|
|
|
586
|
|
|
2,353
|
|
|||||||
Total
|
$
|
25
|
|
|
$
|
693
|
|
|
$
|
387
|
|
|
$
|
2,820
|
|
|
$
|
255
|
|
|
$
|
1,186
|
|
|
$
|
5,366
|
|
Total BIG
|
$
|
—
|
|
|
$
|
653
|
|
|
$
|
8
|
|
|
$
|
266
|
|
|
$
|
141
|
|
|
$
|
583
|
|
|
$
|
1,651
|
|
|
Greece
|
|
Hungary
|
|
Ireland
|
|
Italy
|
|
Portugal
|
|
Spain
|
|
Total
|
||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||
Sovereign and sub-sovereign exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Public finance
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,007
|
|
|
$
|
105
|
|
|
$
|
266
|
|
|
$
|
1,378
|
|
Infrastructure finance
|
—
|
|
|
434
|
|
|
24
|
|
|
333
|
|
|
100
|
|
|
169
|
|
|
1,060
|
|
|||||||
Sub-total
|
—
|
|
|
434
|
|
|
24
|
|
|
1,340
|
|
|
205
|
|
|
435
|
|
|
2,438
|
|
|||||||
Non-sovereign exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Regulated utilities
|
—
|
|
|
—
|
|
|
—
|
|
|
229
|
|
|
—
|
|
|
9
|
|
|
238
|
|
|||||||
RMBS
|
—
|
|
|
219
|
|
|
139
|
|
|
498
|
|
|
—
|
|
|
—
|
|
|
856
|
|
|||||||
Commercial receivables
|
—
|
|
|
2
|
|
|
13
|
|
|
63
|
|
|
15
|
|
|
2
|
|
|
95
|
|
|||||||
Pooled corporate
|
25
|
|
|
—
|
|
|
189
|
|
|
217
|
|
|
14
|
|
|
524
|
|
|
969
|
|
|||||||
Sub-total
|
25
|
|
|
221
|
|
|
341
|
|
|
1,007
|
|
|
29
|
|
|
535
|
|
|
2,158
|
|
|||||||
Total
|
$
|
25
|
|
|
$
|
655
|
|
|
$
|
365
|
|
|
$
|
2,347
|
|
|
$
|
234
|
|
|
$
|
970
|
|
|
$
|
4,596
|
|
Total BIG
|
$
|
—
|
|
|
$
|
616
|
|
|
$
|
7
|
|
|
$
|
248
|
|
|
$
|
121
|
|
|
$
|
419
|
|
|
$
|
1,411
|
|
|
Greece
|
|
Hungary
|
|
Ireland
|
|
Italy
|
|
Portugal
|
|
Spain
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Sovereign and sub-sovereign exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Public finance
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Infrastructure finance
|
—
|
|
|
(2
|
)
|
|
(1
|
)
|
|
(3
|
)
|
|
(4
|
)
|
|
(1
|
)
|
||||||
Total sovereign exposure
|
—
|
|
|
(2
|
)
|
|
(1
|
)
|
|
(3
|
)
|
|
(4
|
)
|
|
(1
|
)
|
||||||
Non-sovereign exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Regulated utilities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
RMBS
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total non-sovereign exposure
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
—
|
|
|
$
|
(6
|
)
|
|
$
|
(1
|
)
|
|
$
|
(3
|
)
|
|
$
|
(4
|
)
|
|
$
|
(1
|
)
|
|
Greece
|
|
Hungary
|
|
Ireland
|
|
Italy
|
|
Portugal
|
|
Spain
|
|
Total
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||
Pooled corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
$ millions
|
$
|
25
|
|
|
$
|
—
|
|
|
$
|
189
|
|
|
$
|
217
|
|
|
$
|
14
|
|
|
$
|
524
|
|
|
$
|
969
|
|
Average proportion
|
2.5
|
%
|
|
—
|
%
|
|
2.5
|
%
|
|
2.8
|
%
|
|
1.2
|
%
|
|
4.4
|
%
|
|
3.3
|
%
|
|||||||
Commercial receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
$ millions
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
13
|
|
|
$
|
63
|
|
|
$
|
15
|
|
|
$
|
2
|
|
|
$
|
95
|
|
Average proportion
|
—
|
%
|
|
0.7
|
%
|
|
8.3
|
%
|
|
8.6
|
%
|
|
2.4
|
%
|
|
1.8
|
%
|
|
5.0
|
%
|
|||||||
Total $ millions
|
$
|
25
|
|
|
$
|
2
|
|
|
$
|
202
|
|
|
$
|
280
|
|
|
$
|
29
|
|
|
$
|
526
|
|
|
$
|
1,064
|
|
Original Par Amount Per Issue
|
|
Number of
Issues
|
|
Net Par
Outstanding
|
|
% of Public
Finance
Net Par
Outstanding
|
|||
|
(dollars in millions)
|
||||||||
Less than $10 million
|
18,789
|
|
$
|
55,037
|
|
|
12.9
|
%
|
|
$10 through $50 million
|
7,144
|
|
126,309
|
|
|
29.7
|
%
|
||
$50 through $100 million
|
1,359
|
|
75,724
|
|
|
17.8
|
%
|
||
$100 million to $200 million
|
603
|
|
68,380
|
|
|
16.1
|
%
|
||
$200 million or greater
|
366
|
|
100,057
|
|
|
23.5
|
%
|
||
Total
|
28,261
|
|
$
|
425,507
|
|
|
100.0
|
%
|
Original Par Amount Per Issue
|
|
Number of
Issues
|
|
Net Par
Outstanding
|
|
% of Structured
Finance
Net Par
Outstanding
|
|||
|
(dollars in millions)
|
||||||||
Less than $10 million
|
306
|
|
$
|
156
|
|
|
0.2
|
%
|
|
$10 through $50 million
|
538
|
|
7,697
|
|
|
8.2
|
%
|
||
$50 through $100 million
|
208
|
|
8,588
|
|
|
9.1
|
%
|
||
$100 million to $200 million
|
261
|
|
20,896
|
|
|
22.1
|
%
|
||
$200 million or greater
|
255
|
|
57,049
|
|
|
60.4
|
%
|
||
Total
|
1,568
|
|
$
|
94,386
|
|
|
100.0
|
%
|
|
|
Ratings at
|
|
Par Outstanding
|
||||||||||||
|
|
February 26, 2013
|
|
As of December 31, 2012
|
||||||||||||
Reinsurer
|
|
Moody’s
Reinsurer
Rating
|
|
S&P
Reinsurer
Rating
|
|
Ceded
Par
Outstanding(1)
|
|
Second-to-
Pay
Insured Par
Outstanding
|
|
Assumed
Par
Outstanding
|
||||||
|
|
(dollars in millions)
|
||||||||||||||
American Overseas Reinsurance Company Limited (f/k/a Ram Re)
|
|
WR(2)
|
|
WR
|
|
$
|
9,808
|
|
|
$
|
—
|
|
|
$
|
24
|
|
Tokio
|
|
Aa3(3)
|
|
AA-(3)
|
|
8,369
|
|
|
—
|
|
|
937
|
|
|||
Radian(4)
|
|
Ba1
|
|
B+
|
|
5,250
|
|
|
44
|
|
|
1,382
|
|
|||
Syncora Guarantee Inc.
|
|
WR
|
|
WR
|
|
4,156
|
|
|
1,993
|
|
|
162
|
|
|||
Mitsui Sumitomo Insurance Co. Ltd.
|
|
A1
|
|
A+(3)
|
|
2,232
|
|
|
—
|
|
|
—
|
|
|||
ACA Financial Guaranty Corp.
|
|
NR
|
|
WR
|
|
819
|
|
|
6
|
|
|
1
|
|
|||
Swiss Reinsurance Co.
|
|
A1
|
|
AA-
|
|
429
|
|
|
—
|
|
|
—
|
|
|||
Ambac
|
|
WR
|
|
WR
|
|
85
|
|
|
7,122
|
|
|
20,579
|
|
|||
CIFG
|
|
WR
|
|
WR
|
|
65
|
|
|
255
|
|
|
5,523
|
|
|||
MBIA Inc.
|
|
(5)
|
|
(5)
|
|
—
|
|
|
10,814
|
|
|
8,143
|
|
|||
Financial Guaranty Insurance Co.
|
|
WR
|
|
WR
|
|
—
|
|
|
3,227
|
|
|
1,961
|
|
|||
Other
|
|
Various
|
|
Various
|
|
933
|
|
|
2,070
|
|
|
45
|
|
|||
Total
|
|
|
|
|
|
$
|
32,146
|
|
|
$
|
25,531
|
|
|
$
|
38,757
|
|
(1)
|
Includes $
3,928 million
in ceded par outstanding related to insured credit derivatives.
|
(2)
|
Represents “Withdrawn Rating.”
|
(3)
|
The Company has structural collateral agreements satisfying the triple-A credit requirement of S&P and/or Moody’s.
|
(4)
|
The Company entered into an agreement with Radian on January 24, 2012. See “—Key Business Strategies—New Business Development and Commutations.”
|
(5)
|
MBIA Inc. includes various subsidiaries which are rated B, BBB by S&P and Caa2, B3, Baa2, WR and NR by Moody’s.
|
Ratings:
|
|
Prime
First
Lien
|
|
Closed
End
Second
Lien
|
|
HELOC
|
|
Alt-A
First Lien
|
|
Option
ARM
|
|
Subprime
First
Lien
|
|
Total Net
Par
Outstanding
|
|||||||||||||||
|
|
(in millions)
|
|||||||||||||||||||||||||||
AAA
|
|
$
|
5
|
|
|
$
|
0
|
|
|
$
|
69
|
|
|
$
|
256
|
|
|
$
|
—
|
|
|
$
|
2,359
|
|
|
$
|
2,689
|
|
|
AA
|
|
116
|
|
|
116
|
|
|
144
|
|
|
469
|
|
|
323
|
|
|
1,316
|
|
|
2,483
|
|
||||||||
A
|
|
2
|
|
|
0
|
|
|
246
|
|
|
9
|
|
|
99
|
|
|
833
|
|
|
1,190
|
|
||||||||
BBB
|
|
45
|
|
|
—
|
|
|
20
|
|
|
280
|
|
|
31
|
|
|
485
|
|
|
861
|
|
||||||||
BIG
|
|
474
|
|
|
404
|
|
|
2,718
|
|
|
3,575
|
|
|
1,096
|
|
|
2,337
|
|
|
10,605
|
|
||||||||
Total exposures
|
|
$
|
641
|
|
|
$
|
521
|
|
|
$
|
3,196
|
|
|
$
|
4,589
|
|
|
$
|
1,550
|
|
|
$
|
7,330
|
|
17,827
|
|
$
|
17,827
|
|
Year
insured:
|
|
Prime
First
Lien
|
|
Closed
End
Second
Lien
|
|
HELOC
|
|
Alt-A
First Lien
|
|
Option
ARM
|
|
Subprime
First
Lien
|
|
Total Net
Par
Outstanding
|
||||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||||||
2004 and prior
|
|
$
|
33
|
|
|
$
|
1
|
|
|
$
|
239
|
|
|
$
|
101
|
|
|
$
|
36
|
|
|
$
|
1,386
|
|
|
$
|
1,796
|
|
2005
|
|
170
|
|
|
—
|
|
|
727
|
|
|
581
|
|
|
61
|
|
|
218
|
|
|
1,756
|
|
|||||||
2006
|
|
106
|
|
|
195
|
|
|
936
|
|
|
381
|
|
|
239
|
|
|
2,992
|
|
|
4,848
|
|
|||||||
2007
|
|
333
|
|
|
325
|
|
|
1,294
|
|
|
2,290
|
|
|
1,141
|
|
|
2,657
|
|
|
8,040
|
|
|||||||
2008
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,236
|
|
|
73
|
|
|
78
|
|
|
1,387
|
|
|||||||
Total exposures
|
|
$
|
641
|
|
|
$
|
521
|
|
|
$
|
3,196
|
|
|
$
|
4,589
|
|
|
$
|
1,550
|
|
|
$
|
7,330
|
|
|
$
|
17,827
|
|
Year
insured:
|
|
AAA
Rated
|
|
AA
Rated
|
|
A
Rated
|
|
BBB
Rated
|
|
BIG
Rated
|
|
Total
|
||||||||||||
|
|
(dollars in millions)
|
||||||||||||||||||||||
2004 and prior
|
|
$
|
1,167
|
|
|
$
|
78
|
|
|
$
|
53
|
|
|
$
|
184
|
|
|
$
|
313
|
|
|
$
|
1,796
|
|
2005
|
|
145
|
|
|
201
|
|
|
—
|
|
|
42
|
|
|
1,368
|
|
|
1,756
|
|
||||||
2006
|
|
1,270
|
|
|
994
|
|
|
814
|
|
|
187
|
|
|
1,582
|
|
|
4,848
|
|
||||||
2007
|
|
6
|
|
|
1,209
|
|
|
249
|
|
|
448
|
|
|
6,127
|
|
|
8,040
|
|
||||||
2008
|
|
101
|
|
|
—
|
|
|
73
|
|
|
—
|
|
|
1,213
|
|
|
1,387
|
|
||||||
Total exposures
|
|
$
|
2,689
|
|
|
$
|
2,483
|
|
|
$
|
1,190
|
|
|
$
|
861
|
|
|
$
|
10,605
|
|
|
$
|
17,827
|
|
% of total
|
|
15.1
|
%
|
|
13.9
|
%
|
|
6.7
|
%
|
|
4.8
|
%
|
|
59.5
|
%
|
|
100.0
|
%
|
Year
insured:
|
|
Net Par
Outstanding
|
|
Pool
Factor
|
|
Subordination
|
|
Cumulative
Losses
|
|
60+ Day
Delinquencies
|
|
Number of
Transactions
|
|||||||
|
|
(dollars in millions)
|
|||||||||||||||||
2005
|
|
$
|
167
|
|
|
30.9
|
%
|
|
4.3
|
%
|
|
2.3
|
%
|
|
11.6
|
%
|
|
6
|
|
2006
|
|
106
|
|
|
51.8
|
%
|
|
8.7
|
%
|
|
0.4
|
%
|
|
17.9
|
%
|
|
1
|
|
|
2007
|
|
333
|
|
|
42.3
|
%
|
|
5.2
|
%
|
|
5.7
|
%
|
|
18.7
|
%
|
|
1
|
|
|
2008
|
|
—
|
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
|
|
|
|
$
|
605
|
|
|
40.8
|
%
|
|
5.5
|
%
|
|
3.8
|
%
|
|
16.6
|
%
|
|
8
|
|
Year
insured:
|
|
Net Par
Outstanding
|
|
Pool
Factor
|
|
Subordination
|
|
Cumulative
Losses
|
|
60+ Day
Delinquencies
|
|
Number of
Transactions
|
|||||||
|
|
(dollars in millions)
|
|||||||||||||||||
2005
|
|
$
|
—
|
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
|
2006
|
|
186
|
|
|
12.7
|
%
|
|
—
|
%
|
|
59.7
|
%
|
|
6.4
|
%
|
|
1
|
|
|
2007
|
|
325
|
|
|
15.4
|
%
|
|
—
|
%
|
|
69.1
|
%
|
|
7.9
|
%
|
|
9
|
|
|
2008
|
|
—
|
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
|
|
|
|
$
|
510
|
|
|
14.4
|
%
|
|
—
|
%
|
|
65.7
|
%
|
|
7.3
|
%
|
|
10
|
|
Year
insured:
|
|
Net Par
Outstanding
|
|
Pool
Factor
|
|
Subordination
|
|
Cumulative
Losses
|
|
60+ Day
Delinquencies
|
|
Number of
Transactions
|
|||||||
|
|
(dollars in millions)
|
|||||||||||||||||
2005
|
|
$
|
682
|
|
|
14.8
|
%
|
|
3.0
|
%
|
|
16.7
|
%
|
|
11.2
|
%
|
|
6
|
|
2006
|
|
918
|
|
|
23.2
|
%
|
|
3.4
|
%
|
|
36.3
|
%
|
|
7.7
|
%
|
|
7
|
|
|
2007
|
|
1,294
|
|
|
37.7
|
%
|
|
2.8
|
%
|
|
31.9
|
%
|
|
5.8
|
%
|
|
9
|
|
|
2008
|
|
—
|
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
|
|
|
|
$
|
2,893
|
|
|
27.7
|
%
|
|
3.0
|
%
|
|
29.7
|
%
|
|
7.7
|
%
|
|
22
|
|
Year
insured:
|
|
Net Par
Outstanding
|
|
Pool
Factor
|
|
Subordination
|
|
Cumulative
Losses
|
|
60+ Day
Delinquencies
|
|
Number of
Transactions
|
|||||||
|
|
(dollars in millions)
|
|||||||||||||||||
2005
|
|
$
|
579
|
|
|
28.5
|
%
|
|
8.4
|
%
|
|
7.1
|
%
|
|
19.5
|
%
|
|
21
|
|
2006
|
|
381
|
|
|
34.5
|
%
|
|
0.0
|
%
|
|
20.0
|
%
|
|
39.2
|
%
|
|
7
|
|
|
2007
|
|
2,290
|
|
|
43.2
|
%
|
|
1.6
|
%
|
|
15.6
|
%
|
|
31.3
|
%
|
|
12
|
|
|
2008
|
|
1,236
|
|
|
40.8
|
%
|
|
18.8
|
%
|
|
15.2
|
%
|
|
27.2
|
%
|
|
5
|
|
|
|
|
$
|
4,486
|
|
|
39.9
|
%
|
|
7.1
|
%
|
|
14.8
|
%
|
|
29.3
|
%
|
|
45
|
|
Year
insured:
|
|
Net Par
Outstanding
|
|
Pool
Factor
|
|
Subordination
|
|
Cumulative
Losses
|
|
60+ Day
Delinquencies
|
|
Number of
Transactions
|
|||||||
|
|
(dollars in millions)
|
|||||||||||||||||
2005
|
|
$
|
53
|
|
|
17.9
|
%
|
|
9.6
|
%
|
|
10.8
|
%
|
|
21.2
|
%
|
|
3
|
|
2006
|
|
233
|
|
|
38.2
|
%
|
|
—
|
%
|
|
19.9
|
%
|
|
43.5
|
%
|
|
5
|
|
|
2007
|
|
1,141
|
|
|
42.4
|
%
|
|
1.3
|
%
|
|
20.6
|
%
|
|
36.6
|
%
|
|
11
|
|
|
2008
|
|
73
|
|
|
44.6
|
%
|
|
48.1
|
%
|
|
15.5
|
%
|
|
33.1
|
%
|
|
1
|
|
|
|
|
$
|
1,501
|
|
|
41.0
|
%
|
|
3.7
|
%
|
|
19.9
|
%
|
|
37.0
|
%
|
|
20
|
|
Year
insured:
|
|
Net Par
Outstanding
|
|
Pool
Factor
|
|
Subordination
|
|
Cumulative
Losses
|
|
60+ Day
Delinquencies
|
|
Number of
Transactions
|
|||||||
|
|
(dollars in millions)
|
|||||||||||||||||
2005
|
|
$
|
208
|
|
|
36.7
|
%
|
|
22.8
|
%
|
|
7.6
|
%
|
|
32.1
|
%
|
|
4
|
|
2006
|
|
2,986
|
|
|
19.6
|
%
|
|
52.1
|
%
|
|
18.7
|
%
|
|
35.3
|
%
|
|
4
|
|
|
2007
|
|
2,657
|
|
|
45.1
|
%
|
|
14.9
|
%
|
|
24.1
|
%
|
|
43.2
|
%
|
|
13
|
|
|
2008
|
|
78
|
|
|
56.6
|
%
|
|
19.4
|
%
|
|
19.5
|
%
|
|
33.3
|
%
|
|
1
|
|
|
|
|
$
|
5,929
|
|
|
32.1
|
%
|
|
33.9
|
%
|
|
20.7
|
%
|
|
38.7
|
%
|
|
22
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Dividends and return of capital from subsidiaries
|
$
|
286
|
|
|
$
|
166
|
|
|
$
|
124
|
|
Proceeds from issuance of common shares
|
173
|
|
|
—
|
|
|
—
|
|
|||
Dividends paid to AGL shareholders
|
(69
|
)
|
|
(33
|
)
|
|
(33
|
)
|
|||
Repurchases of common shares
|
(24
|
)
|
|
(23
|
)
|
|
(10
|
)
|
|||
Interest paid
|
(77
|
)
|
|
(85
|
)
|
|
(85
|
)
|
|||
Acquisition of MAC, net of cash acquired
|
(91
|
)
|
|
—
|
|
|
—
|
|
|||
Loans from subsidiaries
|
173
|
|
|
—
|
|
|
—
|
|
|||
Payment of long-term debt
|
(173
|
)
|
|
—
|
|
|
—
|
|
•
|
operating expenses,
|
•
|
claims on the insured portfolio,
|
•
|
collateral postings in connection with credit derivatives and reinsurance transactions,
|
•
|
reinsurance premiums,
|
•
|
dividends to AGUS, AGMH and AGL, as applicable, for debt service and dividends,
|
•
|
principal paydown on surplus notes issued, and
|
•
|
capital investments in their own subsidiaries, where appropriate.
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
|
|
|
||||||||
Claims paid before R&W recoveries, net of reinsurance
|
$
|
1,326
|
|
|
$
|
1,142
|
|
|
$
|
1,121
|
|
R&W recoveries
|
(459
|
)
|
|
(1,059
|
)
|
|
(189
|
)
|
|||
Claims paid, net of reinsurance(1)
|
$
|
867
|
|
|
$
|
83
|
|
|
$
|
932
|
|
(1)
|
Includes $38 million recovered and $200 million and $143 million paid for consolidated FG VIEs for the years ended December 31,
2012
,
2011
and 2010, respectively.
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Dividends paid by AGC to AGUS
|
$
|
55
|
|
|
$
|
30
|
|
|
$
|
50
|
|
Dividends paid by AGM to AGMH
|
30
|
|
|
—
|
|
|
—
|
|
|||
Dividends paid by AG Re to AGL
|
151
|
|
|
86
|
|
|
24
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
|
|
|
||||||||
Net cash flows provided by (used in) operating activities
|
$
|
(165
|
)
|
|
$
|
676
|
|
|
$
|
129
|
|
Net cash flows provided by (used in) investing activities
|
943
|
|
|
561
|
|
|
653
|
|
|||
Net cash flows provided by (used in) financing activities
|
(856
|
)
|
|
(1,132
|
)
|
|
(717
|
)
|
|||
Effect of exchange rate changes
|
1
|
|
|
2
|
|
|
(1
|
)
|
|||
Cash at beginning of period
|
215
|
|
|
108
|
|
|
44
|
|
|||
Total cash at the end of the period
|
$
|
138
|
|
|
$
|
215
|
|
|
$
|
108
|
|
|
Principal Amount
|
|
Interest Paid
|
||||||||||||||||
|
As of December 31,
|
|
Year Ended December 31,
|
||||||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
2010
|
||||||||||
|
(in millions)
|
||||||||||||||||||
AGUS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
7.0% Senior Notes
|
$
|
200
|
|
|
$
|
200
|
|
|
$
|
14
|
|
|
$
|
14
|
|
|
$
|
14
|
|
8.50% Senior Notes(1)
|
—
|
|
|
173
|
|
|
7
|
|
|
15
|
|
|
15
|
|
|||||
Series A Enhanced Junior Subordinated Debentures
|
150
|
|
|
150
|
|
|
10
|
|
|
10
|
|
|
10
|
|
|||||
Total AGUS
|
350
|
|
|
523
|
|
|
31
|
|
|
39
|
|
|
39
|
|
|||||
AGMH(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
6
7
/
8
% QUIBS
|
100
|
|
|
100
|
|
|
7
|
|
|
7
|
|
|
7
|
|
|||||
6.25% Notes
|
230
|
|
|
230
|
|
|
14
|
|
|
14
|
|
|
14
|
|
|||||
5.60% Notes
|
100
|
|
|
100
|
|
|
6
|
|
|
6
|
|
|
6
|
|
|||||
Junior Subordinated Debentures
|
300
|
|
|
300
|
|
|
19
|
|
|
19
|
|
|
19
|
|
|||||
Total AGMH
|
730
|
|
|
730
|
|
|
46
|
|
|
46
|
|
|
46
|
|
|||||
AGM(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Notes Payable
|
61
|
|
|
97
|
|
|
8
|
|
|
7
|
|
|
7
|
|
|||||
Total AGM
|
61
|
|
|
97
|
|
|
8
|
|
|
7
|
|
|
7
|
|
|||||
Total
|
$
|
1,141
|
|
|
$
|
1,350
|
|
|
$
|
85
|
|
|
$
|
92
|
|
|
$
|
92
|
|
(2)
|
Principal amounts vary from carrying amounts due primarily to acquisition method fair value adjustments at the Acquisition Date, which are accreted or amortized into interest expense over the remaining terms of these obligations.
|
•
|
7.0
% Senior Notes issued by AGUS
|
•
|
6 7/8
% Quarterly Income Bonds Securities (“QUIBS”) issued by AGMH
|
•
|
6.25
% Notes issued by AGMH
|
•
|
5.60
% Notes issued by AGMH
|
·
|
the applicable distribution rate on the AGC CCS Securities for the relevant period less the excess of (a) the Custodial Trust’s stated return on the Eligible Assets for the period (expressed as an annual rate) over (b) the expenses of the Custodial Trust for the period (expressed as an annual rate);
|
·
|
the aggregate face amount of the AGC CCS Securities of the Custodial Trust outstanding on the date the put premium is calculated; and
|
·
|
the number of days in the distribution period divided by 360.
|
|
As of December 31, 2012
|
||||||||||||||||||
|
Less Than
1 Year
|
|
1-3
Years
|
|
3-5
Years
|
|
After
5 Years
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Long-term debt:
|
|
|
|
|
|
|
|
|
|
||||||||||
7.0% Senior Notes
|
$
|
14
|
|
|
$
|
28
|
|
|
$
|
28
|
|
|
$
|
429
|
|
|
$
|
499
|
|
Series A Enhanced Junior Subordinated Debentures
|
10
|
|
|
19
|
|
|
19
|
|
|
620
|
|
|
668
|
|
|||||
6
7
/
8
% QUIBS
|
7
|
|
|
14
|
|
|
14
|
|
|
677
|
|
|
712
|
|
|||||
6.25% Notes
|
14
|
|
|
29
|
|
|
29
|
|
|
1,450
|
|
|
1,522
|
|
|||||
5.60% Notes
|
6
|
|
|
11
|
|
|
11
|
|
|
579
|
|
|
607
|
|
|||||
Junior Subordinated Debentures
|
19
|
|
|
38
|
|
|
38
|
|
|
1,242
|
|
|
1,337
|
|
|||||
Notes Payable
|
29
|
|
|
26
|
|
|
23
|
|
|
4
|
|
|
82
|
|
|||||
Operating lease obligations(1)
|
14
|
|
|
16
|
|
|
16
|
|
|
66
|
|
|
112
|
|
|||||
Financial guaranty claim payments(2)
|
699
|
|
|
644
|
|
|
275
|
|
|
1,772
|
|
|
3,390
|
|
|||||
Other compensation plans(3)
|
16
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
18
|
|
|||||
Total
|
$
|
828
|
|
|
$
|
826
|
|
|
$
|
454
|
|
|
$
|
6,839
|
|
|
$
|
8,947
|
|
(1)
|
Operating lease obligations exclude escalations in building operating costs and real estate taxes.
|
(2)
|
Financial guaranty claim payments represent estimated undiscounted 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. The amounts presented are not reduced for cessions under reinsurance contracts. Amounts include any benefit anticipated from excess spreads within the contracts but do not reflect any benefit for recoveries under breaches of R&W.
|
(3)
|
Amount excludes approximately $36 million of liabilities under various supplemental retirement plans, which are fair valued and payable at the time of termination of employment by either employer or employee. Amount also excludes approximately $21 million of liabilities under AGL 2004 long term incentive plan, which are fair valued and payable at the time of termination of employment by either employer or employee with change of control. Given the nature of these awards, we are unable to determine the year in which they will be paid.
|
|
As of December 31, 2012
|
|
As of December 31, 2011
|
||||||||||||
|
Amortized
Cost
|
|
Estimated
Fair Value
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||||||
|
(in millions)
|
||||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agencies
|
$
|
732
|
|
|
$
|
794
|
|
|
$
|
850
|
|
|
$
|
922
|
|
Obligations of state and political subdivisions
|
5,153
|
|
|
5,631
|
|
|
5,097
|
|
|
5,455
|
|
||||
Corporate securities
|
930
|
|
|
1,010
|
|
|
989
|
|
|
1,039
|
|
||||
Mortgage-backed securities(1):
|
|
|
|
|
|
|
|
|
|||||||
RMBS
|
1,281
|
|
|
1,266
|
|
|
1,454
|
|
|
1,428
|
|
||||
CMBS
|
482
|
|
|
520
|
|
|
476
|
|
|
500
|
|
||||
Asset-backed securities
|
482
|
|
|
531
|
|
|
439
|
|
|
458
|
|
||||
Foreign government securities
|
286
|
|
|
304
|
|
|
333
|
|
|
340
|
|
||||
Total fixed maturity securities
|
9,346
|
|
|
10,056
|
|
|
9,638
|
|
|
10,142
|
|
||||
Short-term investments
|
817
|
|
|
817
|
|
|
734
|
|
|
734
|
|
||||
Total fixed maturity and short-term investments
|
$
|
10,163
|
|
|
$
|
10,873
|
|
|
$
|
10,372
|
|
|
$
|
10,876
|
|
(1)
|
Government-agency obligations were approximately
61%
of mortgage backed securities as of
December 31, 2012
and
66%
as of
December 31, 2011
, based on fair value.
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
||||||||||||||||||
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||
U.S. government and agencies
|
$
|
62
|
|
|
$
|
0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
62
|
|
|
$
|
0
|
|
Obligations of state and political subdivisions
|
79
|
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
79
|
|
|
(11
|
)
|
||||||
Corporate securities
|
25
|
|
|
0
|
|
|
—
|
|
|
—
|
|
|
25
|
|
|
0
|
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
RMBS
|
108
|
|
|
(19
|
)
|
|
121
|
|
|
(58
|
)
|
|
229
|
|
|
(77
|
)
|
||||||
CMBS
|
5
|
|
|
0
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
0
|
|
||||||
Asset-backed securities
|
16
|
|
|
0
|
|
|
35
|
|
|
(10
|
)
|
|
51
|
|
|
(10
|
)
|
||||||
Foreign government securities
|
8
|
|
|
0
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
0
|
|
||||||
Total
|
$
|
303
|
|
|
$
|
(30
|
)
|
|
$
|
156
|
|
|
$
|
(68
|
)
|
|
$
|
459
|
|
|
$
|
(98
|
)
|
Number of securities
|
|
|
|
58
|
|
|
|
|
|
16
|
|
|
|
|
|
74
|
|
||||||
Number of securities with OTTI
|
|
|
|
5
|
|
|
|
|
|
6
|
|
|
|
|
|
11
|
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
||||||||||||||||||
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||
U.S. government and agencies
|
$
|
4
|
|
|
$
|
0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
0
|
|
Obligations of state and political subdivisions
|
17
|
|
|
0
|
|
|
21
|
|
|
(1
|
)
|
|
38
|
|
|
(1
|
)
|
||||||
Corporate securities
|
80
|
|
|
(2
|
)
|
|
3
|
|
|
—
|
|
|
83
|
|
|
(2
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
||||||
RMBS
|
187
|
|
|
(68
|
)
|
|
36
|
|
|
(22
|
)
|
|
223
|
|
|
(90
|
)
|
||||||
CMBS
|
3
|
|
|
0
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
0
|
|
||||||
Asset-backed securities
|
—
|
|
|
—
|
|
|
26
|
|
|
(19
|
)
|
|
26
|
|
|
(19
|
)
|
||||||
Foreign government securities
|
141
|
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
141
|
|
|
(6
|
)
|
||||||
Total
|
$
|
432
|
|
|
$
|
(76
|
)
|
|
$
|
86
|
|
|
$
|
(42
|
)
|
|
$
|
518
|
|
|
$
|
(118
|
)
|
Number of securities
|
|
|
|
56
|
|
|
|
|
|
20
|
|
|
|
|
|
76
|
|
||||||
Number of securities with OTTI
|
|
|
|
6
|
|
|
|
|
|
4
|
|
|
|
|
|
10
|
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||
|
(in millions)
|
||||||
Due within one year
|
$
|
315
|
|
|
$
|
318
|
|
Due after one year through five years
|
1,392
|
|
|
1,472
|
|
||
Due after five years through 10 years
|
2,284
|
|
|
2,525
|
|
||
Due after 10 years
|
3,592
|
|
|
3,955
|
|
||
Mortgage-backed securities:
|
|
|
|
|
|
||
RMBS
|
1,281
|
|
|
1,266
|
|
||
CMBS
|
482
|
|
|
520
|
|
||
Total
|
$
|
9,346
|
|
|
$
|
10,056
|
|
Rating
|
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
||
AAA
|
|
18.5
|
%
|
|
19.0
|
%
|
AA
|
|
61.3
|
|
|
62.6
|
|
A
|
|
14.3
|
|
|
14.5
|
|
BBB
|
|
0.4
|
|
|
—
|
|
BIG(1)
|
|
5.5
|
|
|
1.6
|
|
Not rated(1)
|
|
0.0
|
|
|
2.3
|
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
(1)
|
Includes securities purchased or obtained as part of loss mitigation or other risk management strategies of $1,160 million in par with carrying value of $556 million or 5.5% of fixed maturity securities as of
December 31, 2012
and of $924 million in par with carrying value of $378 million or 3.7% of fixed maturity securities as of
December 31, 2011
.
|
Guarantor
|
|
As of
December 31, 2012 |
||
|
|
(in millions)
|
||
National Public Finance Guarantee Corporation
|
|
$
|
667
|
|
Ambac (general account)
|
|
517
|
|
|
CIFG
|
|
22
|
|
|
Berkshire Hathaway Assurance Corporation
|
|
6
|
|
|
Syncora Guarantee Inc.
|
|
3
|
|
|
Total
|
|
$
|
1,215
|
|
(1)
|
99% of these securities had investment grade ratings based on the lower of Moody’s and S&P.
|
•
|
in exchange for funds in an amount generally equal to the lesser of:
|
(a)
|
the outstanding principal balance of the GICs and
|
(b)
|
the shortfall related to (i) the failure of a Dexia party to provide liquidity or collateral as required under the committed liquidity lending facilities provided by Dexia affiliates, as described below (a “Liquidity Default Trigger”), or (ii) the failure by either Dexia SA or DCL to transfer the required amount of eligible collateral under the credit support annex of the Non-Guaranteed Put Contract (a “Collateral Default Trigger”);
|
•
|
in exchange for funds in an amount equal to the outstanding principal amount of an FSAM asset with respect to which any of the following events have occurred (an “Asset Default Trigger”):
|
(a)
|
the issuer of such FSAM asset fails to pay the full amount of the expected interest when due or to pay the full amount of the expected principal when due (following expiration of any grace period) or within five business days following the scheduled due date,
|
(b)
|
a writedown or applied loss results in a reduction of the outstanding principal amount, or
|
(c)
|
the attribution of a principal deficiency or realized loss results in a reduction or subordination of the current interest payable on such FSAM asset;
|
•
|
in exchange for funds in an amount equal to the lesser of:
|
(a)
|
the aggregate outstanding principal amount of all FSAM assets and
|
(b)
|
the aggregate outstanding principal balance of all of the GICs, upon the occurrence of an insolvency event with respect to Dexia SA as set forth in the Non-Guaranteed Put Contract (a “Bankruptcy Trigger”).
|
•
|
an amended and restated revolving credit agreement (the “Liquidity Facility”) pursuant to which DCL and Belfius (formerly Dexia Bank Belgium SA prior to its sale by Dexia to the Belgian state in October 2011) commit to provide funds to FSAM in an amount up to $8.0 billion, which was further amended on June 15, 2012 reducing the aggregate facility size down from $8.0 billion to $4.7 billion and further reduced to $4.4 billion as of December 31, 2012 as a result of GIC amortization (approximately $1.6 billion of which was outstanding as of
December 31, 2012
), and
|
•
|
a master repurchase agreement (the “Repurchase Facility Agreement” and, together with the Liquidity Facility, the “Guaranteed Liquidity Facilities”) pursuant to which DCL will provide up to $3.5 billion of funds in exchange for the transfer by FSAM to DCL of FSAM securities that are not eligible to satisfy collateralization obligations of the GIC Issuers under the GICs. As of
December 31, 2012
, no amounts were outstanding under the Repurchase Facility Agreement.
|
(a)
|
may be reduced at the option of AGM without a premium or penalty; and
|
(b)
|
will be reduced in the amounts and on the dates described in the Strip Coverage Facility either in connection with the scheduled amortization of the commitment amount or to $
750 million
if AGM’s consolidated net worth as of June 30, 2014 is less than a specified consolidated net worth.
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
•
|
The fair value of credit derivatives within the financial guaranty portfolio of insured obligations which fluctuate based on changes in credit spreads of the underlying obligations and the Company's own credit spreads.
|
•
|
The Investment Portfolio's fair value is primarily driven by changes in interest rates and also affected by changes in credit spreads.
|
•
|
The Investment Portfolio also contains foreign denominated securities whose value fluctuates based on changes in foreign exchange rates.
|
•
|
Premiums receivable include foreign denominated receivables whose carrying value fluctuates based on changes in foreign exchange rates.
|
•
|
The fair value of the assets and liabilities of consolidated FG VIE's may fluctuate based on changes in prepayment spreads, default rates, interest rates, and house price depreciation/appreciation.
|
|
As of December 31, 2012
|
|||||||
Credit Spreads(1)
|
|
Estimated Net
Fair Value (Pre-Tax)
|
|
Estimated
Change in Gain/(Loss)(Pre-Tax)
|
||||
|
(in millions)
|
|||||||
100% widening in spreads
|
$
|
(3,765
|
)
|
|
$
|
(1,972
|
)
|
|
50% widening in spreads
|
(2,777
|
)
|
|
(984
|
)
|
|||
25% widening in spreads
|
(2,283
|
)
|
|
(490
|
)
|
|||
10% widening in spreads
|
(1,987
|
)
|
|
(194
|
)
|
|||
Base Scenario
|
(1,793
|
)
|
|
—
|
|
|||
10% narrowing in spreads
|
(1,634
|
)
|
|
159
|
|
|||
25% narrowing in spreads
|
(1,402
|
)
|
|
391
|
|
|||
50% narrowing in spreads
|
(1,028
|
)
|
|
765
|
|
|
As of December 31, 2011
|
|||||||
Credit Spreads(1)
|
|
Estimated Net
Fair Value (Pre-Tax)
|
|
Estimated
Change in Gain/(Loss)(Pre-Tax)
|
||||
|
(in millions)
|
|||||||
100% widening in spreads
|
$
|
(2,740
|
)
|
|
$
|
(1,436
|
)
|
|
50% widening in spreads
|
(2,024
|
)
|
|
(720
|
)
|
|||
25% widening in spreads
|
(1,666
|
)
|
|
(362
|
)
|
|||
10% widening in spreads
|
(1,451
|
)
|
|
(147
|
)
|
|||
Base Scenario
|
(1,304
|
)
|
|
—
|
|
|||
10% narrowing in spreads
|
(1,189
|
)
|
|
115
|
|
|||
25% narrowing in spreads
|
(1,018
|
)
|
|
286
|
|
|||
50% narrowing in spreads
|
(741
|
)
|
|
563
|
|
(1)
|
Includes the effects of spreads on both the underlying asset classes and the Company's own credit spread.
|
|
Change in Interest Rates
|
||||||||||||||||||||||
|
300 Basis
Point
Decrease
|
|
200 Basis
Point
Decrease
|
|
100 Basis
Point
Decrease
|
|
100 Basis
Point
Increase
|
|
200 Basis
Point
Increase
|
|
300 Basis
Point
Increase
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Estimated change in fair value
|
$
|
576
|
|
|
$
|
532
|
|
|
$
|
382
|
|
|
$
|
(478
|
)
|
|
$
|
(970
|
)
|
|
$
|
(1,456
|
)
|
|
Change in Interest Rates
|
||||||||||||||||||||||
|
300 Basis
Point
Decrease
|
|
200 Basis
Point
Decrease
|
|
100 Basis
Point
Decrease
|
|
100 Basis
Point
Increase
|
|
200 Basis
Point
Increase
|
|
300 Basis
Point
Increase
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Estimated change in fair value
|
$
|
683
|
|
|
$
|
626
|
|
|
$
|
434
|
|
|
$
|
(517
|
)
|
|
$
|
(1,033
|
)
|
|
$
|
(1,527
|
)
|
|
Change in Foreign Exchange Rates
|
||||||||||||||||||||||
|
30%
Decrease
|
|
20%
Decrease
|
|
10%
Decrease
|
|
10%
Increase
|
|
20%
Increase
|
|
30%
Increase
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Estimated change in fair value
|
$
|
(119
|
)
|
|
$
|
(79
|
)
|
|
$
|
(40
|
)
|
|
$
|
40
|
|
|
$
|
79
|
|
|
$
|
119
|
|
|
Change in Foreign Exchange Rates
|
||||||||||||||||||||||
|
30%
Decrease
|
|
20%
Decrease
|
|
10%
Decrease
|
|
10%
Increase
|
|
20%
Increase
|
|
30%
Increase
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Estimated change in fair value
|
$
|
(115
|
)
|
|
$
|
(77
|
)
|
|
$
|
(38
|
)
|
|
$
|
38
|
|
|
$
|
77
|
|
|
$
|
115
|
|
|
Change in Foreign Exchange Rates
|
||||||||||||||||||||||
|
30%
Decrease
|
|
20%
Decrease
|
|
10%
Decrease
|
|
10%
Increase
|
|
20%
Increase
|
|
30%
Increase
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Estimated change in fair value
|
$
|
(119
|
)
|
|
$
|
(79
|
)
|
|
$
|
(40
|
)
|
|
$
|
40
|
|
|
$
|
79
|
|
|
$
|
119
|
|
|
Change in Foreign Exchange Rates
|
||||||||||||||||||||||
|
30%
Decrease
|
|
20%
Decrease
|
|
10%
Decrease
|
|
10%
Increase
|
|
20%
Increase
|
|
30%
Increase
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Estimated change in fair value
|
$
|
(116
|
)
|
|
$
|
(77
|
)
|
|
$
|
(39
|
)
|
|
$
|
39
|
|
|
$
|
77
|
|
|
$
|
116
|
|
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
||||
Assets
|
|
|
|
|
|
||
Investment portfolio:
|
|
|
|
|
|
||
Fixed maturity securities, available-for-sale, at fair value (amortized cost of $9,346 and $9,638)
|
$
|
10,056
|
|
|
$
|
10,142
|
|
Short term investments, at fair value
|
817
|
|
|
734
|
|
||
Other invested assets
|
212
|
|
|
223
|
|
||
Total investment portfolio
|
11,085
|
|
|
11,099
|
|
||
Cash
|
138
|
|
|
215
|
|
||
Premiums receivable, net of ceding commissions payable
|
1,005
|
|
|
1,003
|
|
||
Ceded unearned premium reserve
|
561
|
|
|
709
|
|
||
Deferred acquisition costs
|
116
|
|
|
132
|
|
||
Reinsurance recoverable on unpaid losses
|
58
|
|
|
69
|
|
||
Salvage and subrogation recoverable
|
456
|
|
|
368
|
|
||
Credit derivative assets
|
141
|
|
|
153
|
|
||
Deferred tax asset, net
|
721
|
|
|
804
|
|
||
Current income tax receivable
|
1
|
|
|
76
|
|
||
Financial guaranty variable interest entities’ assets, at fair value
|
2,688
|
|
|
2,819
|
|
||
Other assets
|
272
|
|
|
262
|
|
||
Total assets
|
$
|
17,242
|
|
|
$
|
17,709
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
|
||
Unearned premium reserve
|
$
|
5,207
|
|
|
$
|
5,963
|
|
Loss and loss adjustment expense reserve
|
601
|
|
|
679
|
|
||
Reinsurance balances payable, net
|
219
|
|
|
171
|
|
||
Long-term debt
|
836
|
|
|
1,038
|
|
||
Credit derivative liabilities
|
1,934
|
|
|
1,457
|
|
||
Financial guaranty variable interest entities’ liabilities with recourse, at fair value
|
2,090
|
|
|
2,397
|
|
||
Financial guaranty variable interest entities’ liabilities without recourse, at fair value
|
1,051
|
|
|
1,061
|
|
||
Other liabilities
|
310
|
|
|
291
|
|
||
Total liabilities
|
12,248
|
|
|
13,057
|
|
||
Commitments and contingencies (See Note 16)
|
|
|
|
||||
Common stock ($0.01 par value, 500,000,000 shares authorized; 194,003,297 and 182,235,798 shares issued and outstanding)
|
2
|
|
|
2
|
|
||
Additional paid-in capital
|
2,724
|
|
|
2,570
|
|
||
Retained earnings
|
1,749
|
|
|
1,708
|
|
||
Accumulated other comprehensive income, net of tax of $198 and $135
|
515
|
|
|
368
|
|
||
Deferred equity compensation (320,193 and 320,193 shares)
|
4
|
|
|
4
|
|
||
Total shareholders’ equity
|
4,994
|
|
|
4,652
|
|
||
Total liabilities and shareholders’ equity
|
$
|
17,242
|
|
|
$
|
17,709
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
Revenues
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
853
|
|
|
$
|
920
|
|
|
$
|
1,187
|
|
Net investment income
|
404
|
|
|
396
|
|
|
361
|
|
|||
Net realized investment gains (losses):
|
|
|
|
|
|
|
|
||||
Other-than-temporary impairment losses
|
(58
|
)
|
|
(84
|
)
|
|
(44
|
)
|
|||
Less: portion of other-than-temporary impairment loss recognized in other comprehensive income
|
(41
|
)
|
|
(39
|
)
|
|
(17
|
)
|
|||
Other net realized investment gains (losses)
|
18
|
|
|
27
|
|
|
25
|
|
|||
Net realized investment gains (losses)
|
1
|
|
|
(18
|
)
|
|
(2
|
)
|
|||
Net change in fair value of credit derivatives:
|
|
|
|
|
|
||||||
Realized gains (losses) and other settlements
|
(108
|
)
|
|
6
|
|
|
153
|
|
|||
Net unrealized gains (losses)
|
(477
|
)
|
|
554
|
|
|
(155
|
)
|
|||
Net change in fair value of credit derivatives
|
(585
|
)
|
|
560
|
|
|
(2
|
)
|
|||
Fair value gains (losses) on committed capital securities
|
(18
|
)
|
|
35
|
|
|
9
|
|
|||
Fair value gains (losses) on financial guaranty variable interest entities
|
210
|
|
|
(132
|
)
|
|
(274
|
)
|
|||
Other income
|
108
|
|
|
58
|
|
|
34
|
|
|||
Total revenues
|
973
|
|
|
1,819
|
|
|
1,313
|
|
|||
Expenses
|
|
|
|
|
|
|
|
||||
Loss and loss adjustment expenses
|
523
|
|
|
462
|
|
|
412
|
|
|||
Amortization of deferred acquisition costs
|
14
|
|
|
17
|
|
|
22
|
|
|||
Assured Guaranty Municipal Holdings Inc. acquisition-related expenses
|
—
|
|
|
—
|
|
|
7
|
|
|||
Interest expense
|
92
|
|
|
99
|
|
|
100
|
|
|||
Other operating expenses
|
212
|
|
|
212
|
|
|
238
|
|
|||
Total expenses
|
841
|
|
|
790
|
|
|
779
|
|
|||
Income (loss) before income taxes
|
132
|
|
|
1,029
|
|
|
534
|
|
|||
Provision (benefit) for income taxes
|
|
|
|
|
|
|
|
||||
Current
|
57
|
|
|
(127
|
)
|
|
(25
|
)
|
|||
Deferred
|
(35
|
)
|
|
383
|
|
|
75
|
|
|||
Total provision (benefit) for income taxes
|
22
|
|
|
256
|
|
|
50
|
|
|||
Net income (loss)
|
$
|
110
|
|
|
$
|
773
|
|
|
$
|
484
|
|
|
|
|
|
|
|
||||||
Earnings per share:
|
|
|
|
|
|
||||||
Basic
|
$
|
0.58
|
|
|
$
|
4.21
|
|
|
$
|
2.63
|
|
Diluted
|
$
|
0.57
|
|
|
$
|
4.16
|
|
|
$
|
2.56
|
|
Dividends per share
|
$
|
0.36
|
|
|
$
|
0.18
|
|
|
$
|
0.18
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
Net income (loss)
|
$
|
110
|
|
|
$
|
773
|
|
|
$
|
484
|
|
Unrealized holding gains (losses) arising during the period on:
|
|
|
|
|
|
|
|
||||
Investments with no other-than-temporary impairment, net of tax provision (benefit) of $56, $105 and $(38)
|
148
|
|
|
234
|
|
|
(33
|
)
|
|||
Investments with other-than-temporary impairment, net of tax provision (benefit) of $(2), $5 and $(5)
|
(7
|
)
|
|
9
|
|
|
6
|
|
|||
Unrealized holding gains (losses) arising during the period, net of tax
|
141
|
|
|
243
|
|
|
(27
|
)
|
|||
Less: reclassification adjustment for gains (losses) included in net income (loss), net of tax provision (benefit) of $(7), $(7) and $(3)
|
(4
|
)
|
|
(14
|
)
|
|
2
|
|
|||
Change in net unrealized gains on investments
|
145
|
|
|
257
|
|
|
(29
|
)
|
|||
Other, net of tax provision
|
2
|
|
|
(1
|
)
|
|
(1
|
)
|
|||
Other comprehensive income (loss)
|
$
|
147
|
|
|
$
|
256
|
|
|
$
|
(30
|
)
|
Comprehensive income (loss)
|
$
|
257
|
|
|
$
|
1,029
|
|
|
$
|
454
|
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Retained Earnings
|
|
Accumulated
Other
Comprehensive Income
|
|
Deferred
Equity Compensation
|
|
Total
Shareholders’ Equity Attributable to Assured Guaranty Ltd.
|
|
Noncontrolling Interest of
Financial Guaranty Consolidated Variable Interest Entities
|
|
Total
Shareholders’ Equity
|
|||||||||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Balance at December 31, 2009 (as originally reported)
|
184,162,896
|
|
|
$
|
2
|
|
|
$
|
2,585
|
|
|
$
|
779
|
|
|
$
|
142
|
|
|
$
|
2
|
|
|
$
|
3,510
|
|
|
$
|
(1
|
)
|
|
$
|
3,509
|
|
Cumulative effect of accounting change- deferred acquisition costs (Note 5)
|
—
|
|
|
—
|
|
|
—
|
|
|
(55
|
)
|
|
—
|
|
|
—
|
|
|
(55
|
)
|
|
—
|
|
|
(55
|
)
|
||||||||
Balance at December 31, 2009 (as adjusted)
|
184,162,896
|
|
|
2
|
|
|
2,585
|
|
|
724
|
|
|
142
|
|
|
2
|
|
|
3,455
|
|
|
(1
|
)
|
|
3,454
|
|
||||||||
Cumulative effect of accounting change-consolidation of variable interest entities (Note 10)
|
—
|
|
|
—
|
|
|
—
|
|
|
(207
|
)
|
|
—
|
|
|
—
|
|
|
(207
|
)
|
|
1
|
|
|
(206
|
)
|
||||||||
Balance, January 1, 2010
|
184,162,896
|
|
|
2
|
|
|
2,585
|
|
|
517
|
|
|
142
|
|
|
2
|
|
|
3,248
|
|
|
—
|
|
|
3,248
|
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
484
|
|
|
—
|
|
|
—
|
|
|
484
|
|
|
—
|
|
|
484
|
|
||||||||
Dividends ($0.18 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(33
|
)
|
|
—
|
|
|
—
|
|
|
(33
|
)
|
|
—
|
|
|
(33
|
)
|
||||||||
Common stock repurchases
|
(707,350
|
)
|
|
0
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
(10
|
)
|
||||||||
Share-based compensation and other
|
289,109
|
|
|
0
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
11
|
|
||||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30
|
)
|
|
—
|
|
|
(30
|
)
|
|
—
|
|
|
(30
|
)
|
||||||||
Balance at December 31, 2010
|
183,744,655
|
|
|
2
|
|
|
2,586
|
|
|
968
|
|
|
112
|
|
|
2
|
|
|
3,670
|
|
|
—
|
|
|
3,670
|
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
773
|
|
|
—
|
|
|
—
|
|
|
773
|
|
|
—
|
|
|
773
|
|
||||||||
Dividends ($0.18 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(33
|
)
|
|
—
|
|
|
—
|
|
|
(33
|
)
|
|
—
|
|
|
(33
|
)
|
||||||||
Common stock repurchases
|
(2,000,000
|
)
|
|
0
|
|
|
(23
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(23
|
)
|
|
—
|
|
|
(23
|
)
|
||||||||
Share-based compensation and other
|
491,143
|
|
|
0
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
9
|
|
|
—
|
|
|
9
|
|
||||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
256
|
|
|
—
|
|
|
256
|
|
|
—
|
|
|
256
|
|
||||||||
Balance at December 31, 2011
|
182,235,798
|
|
|
$
|
2
|
|
|
$
|
2,570
|
|
|
$
|
1,708
|
|
|
$
|
368
|
|
|
$
|
4
|
|
|
$
|
4,652
|
|
|
$
|
—
|
|
|
$
|
4,652
|
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Retained Earnings
|
|
Accumulated
Other
Comprehensive Income
|
|
Deferred
Equity Compensation
|
|
Total
Shareholders’ Equity Attributable to Assured Guaranty Ltd.
|
|
Noncontrolling Interest of
Financial Guaranty Consolidated Variable Interest Entities
|
|
Total
Shareholders’ Equity
|
|||||||||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Balance at December 31, 2011
|
182,235,798
|
|
|
$
|
2
|
|
|
$
|
2,570
|
|
|
$
|
1,708
|
|
|
$
|
368
|
|
|
$
|
4
|
|
|
$
|
4,652
|
|
|
$
|
—
|
|
|
$
|
4,652
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
110
|
|
|
—
|
|
|
—
|
|
|
110
|
|
|
—
|
|
|
110
|
|
||||||||
Dividends ($0.36 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(69
|
)
|
|
—
|
|
|
—
|
|
|
(69
|
)
|
|
—
|
|
|
(69
|
)
|
||||||||
Common stock issuance, net
|
13,428,770
|
|
|
0
|
|
|
173
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
173
|
|
|
—
|
|
|
173
|
|
||||||||
Common stock repurchases
|
(2,066,759
|
)
|
|
0
|
|
|
(24
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(24
|
)
|
|
—
|
|
|
(24
|
)
|
||||||||
Share-based compensation and other
|
405,488
|
|
|
0
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
||||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
147
|
|
|
—
|
|
|
147
|
|
|
—
|
|
|
147
|
|
||||||||
Balance at December 31, 2012
|
194,003,297
|
|
|
$
|
2
|
|
|
$
|
2,724
|
|
|
$
|
1,749
|
|
|
$
|
515
|
|
|
$
|
4
|
|
|
$
|
4,994
|
|
|
$
|
—
|
|
|
$
|
4,994
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
Operating Activities:
|
|
|
|
|
|
||||||
Net Income
|
$
|
110
|
|
|
$
|
773
|
|
|
$
|
484
|
|
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:
|
|
|
|
|
|
||||||
Non-cash interest and operating expenses
|
18
|
|
|
20
|
|
|
24
|
|
|||
Net amortization of premium on fixed maturity securities
|
4
|
|
|
18
|
|
|
46
|
|
|||
Provision (benefit) for deferred income taxes
|
(35
|
)
|
|
383
|
|
|
75
|
|
|||
Net realized investment losses (gains)
|
(1
|
)
|
|
18
|
|
|
2
|
|
|||
Net unrealized losses (gains) on credit derivatives
|
477
|
|
|
(554
|
)
|
|
155
|
|
|||
Fair value loss (gains) on committed capital securities
|
18
|
|
|
(35
|
)
|
|
(9
|
)
|
|||
Non-cash items in other income
|
4
|
|
|
5
|
|
|
4
|
|
|||
Change in deferred acquisition costs
|
18
|
|
|
18
|
|
|
18
|
|
|||
Change in premiums receivable, net of ceding commissions
|
48
|
|
|
138
|
|
|
376
|
|
|||
Change in ceded unearned premium reserve
|
141
|
|
|
102
|
|
|
256
|
|
|||
Change in unearned premium reserve
|
(749
|
)
|
|
(998
|
)
|
|
(1,278
|
)
|
|||
Change in loss and loss adjustment expense reserve, net
|
(258
|
)
|
|
636
|
|
|
(471
|
)
|
|||
Change in current income tax
|
129
|
|
|
(182
|
)
|
|
(87
|
)
|
|||
Change in financial guaranty variable interest entities' assets and liabilities, net
|
(7
|
)
|
|
352
|
|
|
541
|
|
|||
(Purchases) sales of trading securities, net
|
(59
|
)
|
|
(6
|
)
|
|
—
|
|
|||
Other
|
(23
|
)
|
|
(12
|
)
|
|
(7
|
)
|
|||
Net cash flows provided by (used in) operating activities
|
(165
|
)
|
|
676
|
|
|
129
|
|
|||
Investing activities
|
|
|
|
|
|
|
|
||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
||||
Purchases
|
(1,649
|
)
|
|
(2,308
|
)
|
|
(2,462
|
)
|
|||
Sales
|
912
|
|
|
1,107
|
|
|
1,064
|
|
|||
Maturities
|
1,105
|
|
|
663
|
|
|
994
|
|
|||
Net sales (purchases) of short-term investments
|
29
|
|
|
320
|
|
|
613
|
|
|||
Net proceeds from paydowns on financial guaranty variable interest entities’ assets
|
545
|
|
|
760
|
|
|
424
|
|
|||
Acquisition of MAC, net of cash acquired
|
(91
|
)
|
|
—
|
|
|
—
|
|
|||
Other
|
92
|
|
|
19
|
|
|
20
|
|
|||
Net cash flows provided by (used in) investing activities
|
943
|
|
|
561
|
|
|
653
|
|
|||
Financing activities
|
|
|
|
|
|
|
|
||||
Proceeds from issuances of common stock
|
173
|
|
|
—
|
|
|
—
|
|
|||
Dividends paid
|
(69
|
)
|
|
(33
|
)
|
|
(33
|
)
|
|||
Repurchases of common stock
|
(24
|
)
|
|
(23
|
)
|
|
(10
|
)
|
|||
Share activity under option and incentive plans
|
(3
|
)
|
|
(1
|
)
|
|
(2
|
)
|
|||
Net paydowns of financial guaranty variable interest entities’ liabilities
|
(724
|
)
|
|
(1,053
|
)
|
|
(651
|
)
|
|||
Repayment of long-term debt
|
(209
|
)
|
|
(22
|
)
|
|
(21
|
)
|
|||
Net cash flows provided by (used in) financing activities
|
(856
|
)
|
|
(1,132
|
)
|
|
(717
|
)
|
|||
Effect of exchange rate changes
|
1
|
|
|
2
|
|
|
(1
|
)
|
|||
Increase (decrease) in cash
|
(77
|
)
|
|
107
|
|
|
64
|
|
|||
Cash at beginning of period
|
215
|
|
|
108
|
|
|
44
|
|
|||
Cash at end of period
|
$
|
138
|
|
|
$
|
215
|
|
|
$
|
108
|
|
Supplemental cash flow information
|
|
|
|
|
|
|
|
||||
Cash paid (received) during the period for:
|
|
|
|
|
|
|
|
||||
Income taxes
|
$
|
(24
|
)
|
|
$
|
34
|
|
|
$
|
39
|
|
Interest
|
$
|
85
|
|
|
$
|
92
|
|
|
$
|
92
|
|
1.
|
Business and Basis of Presentation
|
Premium revenue recognition on financial guaranty contracts accounted for as insurance
|
Note 4
|
Policy acquisition costs
|
Note 5
|
Expected loss to be paid
|
Note 6
|
Loss and loss adjustment expense on financial guaranty contracts accounted for as insurance
|
Note 7
|
Fair value measurement
|
Note 8
|
Credit derivatives
|
Note 9
|
Variable interest entities
|
Note 10
|
Investments
|
Note 11
|
Income Taxes
|
Note 13
|
Earnings per share
|
Note 18
|
Stock based compensation
|
Note 20
|
2.
|
Business Changes, Risks, Uncertainties and Accounting Developments
|
•
|
Note 6, Expected Loss to be Paid
|
•
|
Note 9, Financial Guaranty Contracts Accounted for as Credit Derivatives
|
•
|
Note 14, Reinsurance and Other Monoline Exposures
|
•
|
Note 17, Long Term Debt and Credit Facilities (regarding the impact on the Company's insured leveraged lease transactions)
|
•
|
adoption of a new VIE consolidation standard on January 1, 2010 results in the consolidation of variable interest entities of certain insured transactions (see Note 10, Consolidation of Variable Interest Entities),
|
•
|
adoption of new guidance that restricted the types and amounts of financial guaranty insurance acquisition costs that may be deferred, (see Note 5, Financial Guaranty Insurance Acquisition Costs),
|
•
|
adoption of guidance that changed the presentation of other comprehensive income (“OCI”), (see “Consolidated Statements of Comprehensive Income),” and
|
•
|
adoption of guidance requiring additional fair value disclosures (see Note 8, Fair Value Measurement).
|
•
|
There have been four settlements of representation and warranty claims over the past three years. See Note 6, Expected Loss to be Paid.
|
•
|
The Company has entered into several agreements with reinsurers, including assumption and re-assumption agreements with Radian, a re-assumption agreement with Tokio Marine & Nichido Fire Insurance Co., Ltd. (“Tokio”) and a $
435 million
excess of loss reinsurance facility. See Note 14, Reinsurance and Other Monoline Exposures.
|
•
|
On June 1, 2012, the Company completed the remarketing of the
$173 million
aggregate principal amount of
8.50%
Senior Notes issued by AGUS in 2009 that were components of the Company's Equity Units. AGUS purchased all of the Senior Notes in the remarketing at a price of
100%
of the aggregate principal amount thereof, and retired all of such notes on June 1, 2012. The proceeds from the remarketing were used to satisfy the obligations of the holders of the Equity Units to purchase AGL common shares pursuant to the forward purchase contracts that were also components of the Equity Units. Accordingly, on June 1, 2012, AGL issued
3.8924
common shares to holders of each
$50
Equity Unit, which represented a settlement rate of
3.8685
common shares plus certain anti-dilution adjustments, or an aggregate of
13,428,770
common shares. The Equity Units ceased to exist when the forward purchase contracts were settled on June 1, 2012. See Note 17, Long Term Debt and Credit Facilities.
|
3.
|
Outstanding Exposure
|
|
Gross Debt Service
Outstanding
|
|
Net Debt Service
Outstanding
|
||||||||||||
|
December 31,
2012 |
|
December 31,
2011 |
|
December 31,
2012 |
|
December 31,
2011 |
||||||||
|
(in millions)
|
||||||||||||||
Public finance
|
$
|
722,562
|
|
|
$
|
798,471
|
|
|
$
|
677,369
|
|
|
$
|
716,890
|
|
Structured finance
|
112,388
|
|
|
137,661
|
|
|
104,811
|
|
|
128,775
|
|
||||
Total financial guaranty
|
$
|
834,950
|
|
|
$
|
936,132
|
|
|
$
|
782,180
|
|
|
$
|
845,665
|
|
|
Gross Par Outstanding
|
|
Ceded Par Outstanding
|
|
Net Par Outstanding
|
||||||||||||||||||
Sector
|
As of December 31, 2012
|
|
As of December 31, 2011
|
|
As of December 31, 2012
|
|
As of December 31, 2011
|
|
As of December 31, 2012
|
|
As of December 31, 2011
|
||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
General obligation
|
$
|
175,932
|
|
|
$
|
187,857
|
|
|
$
|
5,947
|
|
|
$
|
14,796
|
|
|
$
|
169,985
|
|
|
$
|
173,061
|
|
Tax backed
|
77,932
|
|
|
85,866
|
|
|
4,145
|
|
|
7,860
|
|
|
73,787
|
|
|
78,006
|
|
||||||
Municipal utilities
|
63,933
|
|
|
69,803
|
|
|
1,817
|
|
|
4,599
|
|
|
62,116
|
|
|
65,204
|
|
||||||
Transportation
|
35,624
|
|
|
40,409
|
|
|
1,825
|
|
|
5,013
|
|
|
33,799
|
|
|
35,396
|
|
||||||
Healthcare
|
19,507
|
|
|
23,540
|
|
|
1,669
|
|
|
4,045
|
|
|
17,838
|
|
|
19,495
|
|
||||||
Higher education
|
16,244
|
|
|
16,535
|
|
|
474
|
|
|
858
|
|
|
15,770
|
|
|
15,677
|
|
||||||
Housing
|
4,792
|
|
|
6,363
|
|
|
159
|
|
|
667
|
|
|
4,633
|
|
|
5,696
|
|
||||||
Infrastructure finance
|
5,100
|
|
|
4,983
|
|
|
890
|
|
|
873
|
|
|
4,210
|
|
|
4,110
|
|
||||||
Investor-owned utilities
|
1,070
|
|
|
1,125
|
|
|
1
|
|
|
1
|
|
|
1,069
|
|
|
1,124
|
|
||||||
Other public finance—U.S.
|
4,784
|
|
|
5,380
|
|
|
24
|
|
|
76
|
|
|
4,760
|
|
|
5,304
|
|
||||||
Total public finance—U.S.
|
404,918
|
|
|
441,861
|
|
|
16,951
|
|
|
38,788
|
|
|
387,967
|
|
|
403,073
|
|
||||||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Infrastructure finance
|
18,716
|
|
|
18,231
|
|
|
2,904
|
|
|
2,826
|
|
|
15,812
|
|
|
15,405
|
|
||||||
Regulated utilities
|
16,861
|
|
|
17,639
|
|
|
4,367
|
|
|
4,379
|
|
|
12,494
|
|
|
13,260
|
|
||||||
Pooled infrastructure
|
3,430
|
|
|
3,351
|
|
|
230
|
|
|
221
|
|
|
3,200
|
|
|
3,130
|
|
||||||
Other public finance—non-U.S.
|
7,297
|
|
|
9,183
|
|
|
1,263
|
|
|
1,932
|
|
|
6,034
|
|
|
7,251
|
|
||||||
Total public finance—non-U.S.
|
46,304
|
|
|
48,404
|
|
|
8,764
|
|
|
9,358
|
|
|
37,540
|
|
|
39,046
|
|
||||||
Total public finance
|
451,222
|
|
|
490,265
|
|
|
25,715
|
|
|
48,146
|
|
|
425,507
|
|
|
442,119
|
|
||||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Pooled corporate obligations
|
44,120
|
|
|
54,585
|
|
|
2,234
|
|
|
3,065
|
|
|
41,886
|
|
|
51,520
|
|
||||||
Residential mortgage-backed security("RMBS")
|
18,914
|
|
|
22,842
|
|
|
1,087
|
|
|
1,275
|
|
|
17,827
|
|
|
21,567
|
|
||||||
Commercial mortgage-backed securities ("CMBS")
and other commercial real estate related exposures
|
4,293
|
|
|
4,827
|
|
|
46
|
|
|
53
|
|
|
4,247
|
|
|
4,774
|
|
||||||
Financial products
|
3,653
|
|
|
5,217
|
|
|
—
|
|
|
—
|
|
|
3,653
|
|
|
5,217
|
|
||||||
Consumer receivables
|
2,429
|
|
|
4,489
|
|
|
60
|
|
|
163
|
|
|
2,369
|
|
|
4,326
|
|
||||||
Insurance securitizations
|
2,238
|
|
|
1,966
|
|
|
48
|
|
|
73
|
|
|
2,190
|
|
|
1,893
|
|
||||||
Commercial receivables
|
1,033
|
|
|
1,222
|
|
|
8
|
|
|
8
|
|
|
1,025
|
|
|
1,214
|
|
||||||
Structured credit
|
373
|
|
|
489
|
|
|
54
|
|
|
65
|
|
|
319
|
|
|
424
|
|
||||||
Other structured finance—U.S.
|
2,307
|
|
|
2,453
|
|
|
1,128
|
|
|
1,154
|
|
|
1,179
|
|
|
1,299
|
|
||||||
Total structured finance—U.S.
|
79,360
|
|
|
98,090
|
|
|
4,665
|
|
|
5,856
|
|
|
74,695
|
|
|
92,234
|
|
||||||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Pooled corporate obligations
|
16,288
|
|
|
19,670
|
|
|
1,475
|
|
|
1,939
|
|
|
14,813
|
|
|
17,731
|
|
||||||
Commercial receivables
|
1,489
|
|
|
1,893
|
|
|
26
|
|
|
28
|
|
|
1,463
|
|
|
1,865
|
|
||||||
RMBS
|
1,586
|
|
|
1,765
|
|
|
162
|
|
|
167
|
|
|
1,424
|
|
|
1,598
|
|
||||||
Insurance securitizations
|
923
|
|
|
979
|
|
|
—
|
|
|
15
|
|
|
923
|
|
|
964
|
|
||||||
Structured credit
|
669
|
|
|
1,097
|
|
|
78
|
|
|
118
|
|
|
591
|
|
|
979
|
|
||||||
CMBS and other commercial real estate related exposures
|
100
|
|
|
180
|
|
|
—
|
|
|
—
|
|
|
100
|
|
|
180
|
|
||||||
Other structured finance—non-U.S.
|
402
|
|
|
403
|
|
|
25
|
|
|
25
|
|
|
377
|
|
|
378
|
|
||||||
Total structured finance—non-U.S.
|
21,457
|
|
|
25,987
|
|
|
1,766
|
|
|
2,292
|
|
|
19,691
|
|
|
23,695
|
|
||||||
Total structured finance
|
100,817
|
|
|
124,077
|
|
|
6,431
|
|
|
8,148
|
|
|
94,386
|
|
|
115,929
|
|
||||||
Total net par outstanding
|
$
|
552,039
|
|
|
$
|
614,342
|
|
|
$
|
32,146
|
|
|
$
|
56,294
|
|
|
$
|
519,893
|
|
|
$
|
558,048
|
|
|
|
Public Finance
U.S.
|
|
Public Finance
Non-U.S.
|
|
Structured Finance
U.S
|
|
Structured Finance
Non-U.S
|
|
Total
|
|||||||||||||||||||||||||
Rating
Category
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|||||||||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||||||||||||||||
Super senior
|
|
$
|
—
|
|
|
—
|
%
|
|
$
|
1,130
|
|
|
3.0
|
%
|
|
$
|
13,572
|
|
|
18.2
|
%
|
|
$
|
4,874
|
|
|
24.7
|
%
|
|
$
|
19,576
|
|
|
3.8
|
%
|
AAA
|
|
4,502
|
|
|
1.2
|
|
|
576
|
|
|
1.5
|
|
|
28,615
|
|
|
38.3
|
|
|
8,295
|
|
|
42.1
|
|
|
41,988
|
|
|
8.1
|
|
|||||
AA
|
|
124,525
|
|
|
32.1
|
|
|
875
|
|
|
2.3
|
|
|
9,589
|
|
|
12.8
|
|
|
722
|
|
|
3.7
|
|
|
135,711
|
|
|
26.1
|
|
|||||
A
|
|
210,124
|
|
|
54.1
|
|
|
9,781
|
|
|
26.1
|
|
|
4,670
|
|
|
6.2
|
|
|
1,409
|
|
|
7.2
|
|
|
225,984
|
|
|
43.4
|
|
|||||
BBB
|
|
44,213
|
|
|
11.4
|
|
|
22,885
|
|
|
61.0
|
|
|
3,717
|
|
|
5.0
|
|
|
2,427
|
|
|
12.3
|
|
|
73,242
|
|
|
14.1
|
|
|||||
Below-investment-grade (“BIG”)
|
|
4,603
|
|
|
1.2
|
|
|
2,293
|
|
|
6.1
|
|
|
14,532
|
|
|
19.5
|
|
|
1,964
|
|
|
10.0
|
|
|
23,392
|
|
|
4.5
|
|
|||||
Total net par outstanding
|
|
$
|
387,967
|
|
|
100.0
|
%
|
|
$
|
37,540
|
|
|
100.0
|
%
|
|
$
|
74,695
|
|
|
100.0
|
%
|
|
$
|
19,691
|
|
|
100.0
|
%
|
|
$
|
519,893
|
|
|
100.0
|
%
|
|
|
Public Finance
U.S.
|
|
Public Finance
Non-U.S.
|
|
Structured Finance
U.S
|
|
Structured Finance
Non-U.S
|
|
Total
|
|||||||||||||||||||||||||
Rating
Category
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|||||||||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||||||||||||||||
Super senior
|
|
$
|
—
|
|
|
—
|
%
|
|
$
|
1,138
|
|
|
2.9
|
%
|
|
$
|
16,756
|
|
|
18.2
|
%
|
|
$
|
5,660
|
|
|
23.9
|
%
|
|
$
|
23,554
|
|
|
4.2
|
%
|
AAA
|
|
5,074
|
|
|
1.3
|
|
|
1,381
|
|
|
3.5
|
|
|
35,736
|
|
|
38.7
|
|
|
10,231
|
|
|
43.2
|
|
|
52,422
|
|
|
9.4
|
|
|||||
AA
|
|
139,693
|
|
|
34.6
|
|
|
1,056
|
|
|
2.7
|
|
|
12,575
|
|
|
13.6
|
|
|
976
|
|
|
4.1
|
|
|
154,300
|
|
|
27.7
|
|
|||||
A
|
|
213,164
|
|
|
52.9
|
|
|
11,744
|
|
|
30.1
|
|
|
4,115
|
|
|
4.5
|
|
|
1,518
|
|
|
6.4
|
|
|
230,541
|
|
|
41.3
|
|
|||||
BBB
|
|
40,635
|
|
|
10.1
|
|
|
21,399
|
|
|
54.8
|
|
|
5,044
|
|
|
5.5
|
|
|
3,391
|
|
|
14.3
|
|
|
70,469
|
|
|
12.6
|
|
|||||
BIG
|
|
4,507
|
|
|
1.1
|
|
|
2,328
|
|
|
6.0
|
|
|
18,008
|
|
|
19.5
|
|
|
1,919
|
|
|
8.1
|
|
|
26,762
|
|
|
4.8
|
|
|||||
Total net par outstanding
|
|
$
|
403,073
|
|
|
100.0
|
%
|
|
$
|
39,046
|
|
|
100.0
|
%
|
|
$
|
92,234
|
|
|
100.0
|
%
|
|
$
|
23,695
|
|
|
100.0
|
%
|
|
$
|
558,048
|
|
|
100.0
|
%
|
|
Public Finance
|
|
Structured Finance
|
|
Total
|
||||||
|
(in millions)
|
||||||||||
0 to 5 years
|
$
|
110,847
|
|
|
$
|
73,805
|
|
|
$
|
184,652
|
|
5 to 10 years
|
90,846
|
|
|
9,537
|
|
|
100,383
|
|
|||
10 to 15 years
|
82,789
|
|
|
3,817
|
|
|
86,606
|
|
|||
15 to 20 years
|
62,006
|
|
|
2,127
|
|
|
64,133
|
|
|||
20 years and above
|
79,019
|
|
|
5,100
|
|
|
84,119
|
|
|||
Total net par outstanding
|
$
|
425,507
|
|
|
$
|
94,386
|
|
|
$
|
519,893
|
|
|
Number of Risks
|
|
Net Par Outstanding
|
|
Percent of Total Net Par Outstanding
|
||||
|
(dollars in millions)
|
||||||||
U.S.:
|
|
|
|
|
|
||||
U.S. Public Finance:
|
|
|
|
|
|
||||
California
|
1,532
|
|
|
$
|
57,302
|
|
|
11.0
|
%
|
New York
|
1,051
|
|
|
31,402
|
|
|
6.0
|
|
|
Pennsylvania
|
1,133
|
|
|
31,173
|
|
|
6.0
|
|
|
Texas
|
1,273
|
|
|
29,942
|
|
|
5.8
|
|
|
Illinois
|
933
|
|
|
25,297
|
|
|
4.9
|
|
|
Florida
|
446
|
|
|
24,111
|
|
|
4.6
|
|
|
New Jersey
|
704
|
|
|
15,999
|
|
|
3.1
|
|
|
Michigan
|
745
|
|
|
15,516
|
|
|
3.0
|
|
|
Georgia
|
205
|
|
|
10,001
|
|
|
1.9
|
|
|
Ohio
|
576
|
|
|
9,634
|
|
|
1.9
|
|
|
Other states
|
4,889
|
|
|
137,590
|
|
|
26.4
|
|
|
Total U.S. public finance
|
13,487
|
|
|
387,967
|
|
|
74.6
|
|
|
U.S. Structured finance (multiple states)
|
1,080
|
|
|
74,695
|
|
|
14.4
|
|
|
Total U.S.
|
14,567
|
|
|
462,662
|
|
|
89.0
|
|
|
Non-U.S.:
|
|
|
|
|
|
||||
United Kingdom
|
124
|
|
|
23,624
|
|
|
4.5
|
|
|
Australia
|
33
|
|
|
7,558
|
|
|
1.5
|
|
|
Canada
|
11
|
|
|
4,160
|
|
|
0.8
|
|
|
France
|
23
|
|
|
3,914
|
|
|
0.8
|
|
|
Italy
|
12
|
|
|
2,347
|
|
|
0.5
|
|
|
Other
|
116
|
|
|
15,628
|
|
|
2.9
|
|
|
Total non-U.S.
|
319
|
|
|
57,231
|
|
|
11.0
|
|
|
Total
|
14,886
|
|
|
$
|
519,893
|
|
|
100.0
|
%
|
|
Greece
|
|
Hungary
|
|
Ireland
|
|
Italy
|
|
Portugal
|
|
Spain (2)
|
|
Total
|
||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||
Sovereign and sub-sovereign exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Public finance
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,007
|
|
|
$
|
105
|
|
|
$
|
266
|
|
|
$
|
1,378
|
|
Infrastructure finance
|
—
|
|
|
434
|
|
|
24
|
|
|
333
|
|
|
100
|
|
|
169
|
|
|
1,060
|
|
|||||||
Sub-total
|
—
|
|
|
434
|
|
|
24
|
|
|
1,340
|
|
|
205
|
|
|
435
|
|
|
2,438
|
|
|||||||
Non-sovereign exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Regulated utilities
|
—
|
|
|
—
|
|
|
—
|
|
|
229
|
|
|
—
|
|
|
9
|
|
|
238
|
|
|||||||
RMBS
|
—
|
|
|
219
|
|
|
139
|
|
|
498
|
|
|
—
|
|
|
—
|
|
|
856
|
|
|||||||
Commercial receivables
|
—
|
|
|
2
|
|
|
13
|
|
|
63
|
|
|
15
|
|
|
2
|
|
|
95
|
|
|||||||
Pooled corporate
|
25
|
|
|
—
|
|
|
189
|
|
|
217
|
|
|
14
|
|
|
524
|
|
|
969
|
|
|||||||
Sub-total
|
25
|
|
|
221
|
|
|
341
|
|
|
1,007
|
|
|
29
|
|
|
535
|
|
|
2,158
|
|
|||||||
Total
|
$
|
25
|
|
|
$
|
655
|
|
|
$
|
365
|
|
|
$
|
2,347
|
|
|
$
|
234
|
|
|
$
|
970
|
|
|
$
|
4,596
|
|
Total BIG
|
$
|
—
|
|
|
$
|
616
|
|
|
$
|
7
|
|
|
$
|
248
|
|
|
$
|
121
|
|
|
$
|
419
|
|
|
$
|
1,411
|
|
(2)
|
See Note 6, Expected Loss to be Paid.
|
•
|
BIG Category 1: Below-investment-grade transactions showing sufficient deterioration to make lifetime losses possible, but for which none are currently expected. Transactions on which claims have been paid but are expected to be fully reimbursed (other than investment grade transactions on which only liquidity claims have been paid) are in this category.
|
•
|
BIG Category 2: Below-investment-grade transactions for which lifetime losses are expected but for which no claims (other than liquidity claims which is a claim that the Company expects to be reimbursed within
one
year) have yet been paid.
|
•
|
BIG Category 3: Below-investment-grade transactions for which lifetime losses are expected and on which claims (other than liquidity claims) have been paid. Transactions remain in this category when claims have been paid and only a recoverable remains.
|
|
BIG Net Par Outstanding
|
|
Net Par
|
|
BIG Net Par as
a % of Net Par |
|||||||||||||||||
|
BIG 1
|
|
BIG 2
|
|
BIG 3
|
|
Total BIG
|
|
Outstanding
|
|
Outstanding
|
|||||||||||
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|||||||||||
First lien U.S. RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Prime first lien
|
$
|
28
|
|
|
$
|
436
|
|
|
$
|
11
|
|
|
$
|
475
|
|
|
$
|
641
|
|
|
0.1
|
%
|
Alt-A first lien
|
109
|
|
|
1,987
|
|
|
1,479
|
|
|
3,575
|
|
|
4,589
|
|
|
0.7
|
|
|||||
Option ARM
|
61
|
|
|
392
|
|
|
643
|
|
|
1,096
|
|
|
1,550
|
|
|
0.2
|
|
|||||
Subprime
|
152
|
|
|
1,161
|
|
|
1,024
|
|
|
2,337
|
|
|
7,330
|
|
|
0.4
|
|
|||||
Second lien U.S. RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Closed end second lien
|
—
|
|
|
247
|
|
|
157
|
|
|
404
|
|
|
521
|
|
|
0.1
|
|
|||||
Home equity lines of credit (“HELOCs”)
|
91
|
|
|
—
|
|
|
2,627
|
|
|
2,718
|
|
|
3,196
|
|
|
0.5
|
|
|||||
Total U.S. RMBS
|
441
|
|
|
4,223
|
|
|
5,941
|
|
|
10,605
|
|
|
17,827
|
|
|
2.0
|
|
|||||
Trust preferred securities (“TruPS”)
|
1,920
|
|
|
—
|
|
|
952
|
|
|
2,872
|
|
|
5,693
|
|
|
0.6
|
|
|||||
Other structured finance
|
1,310
|
|
|
384
|
|
|
1,325
|
|
|
3,019
|
|
|
70,866
|
|
|
0.6
|
|
|||||
U.S. public finance
|
3,290
|
|
|
500
|
|
|
813
|
|
|
4,603
|
|
|
387,967
|
|
|
0.9
|
|
|||||
Non-U.S. public finance
|
2,293
|
|
|
—
|
|
|
—
|
|
|
2,293
|
|
|
37,540
|
|
|
0.4
|
|
|||||
Total
|
$
|
9,254
|
|
|
$
|
5,107
|
|
|
$
|
9,031
|
|
|
$
|
23,392
|
|
|
$
|
519,893
|
|
|
4.5
|
%
|
|
BIG Net Par Outstanding
|
|
Net Par
|
|
BIG Net Par as
a % of Net Par
|
|||||||||||||||||
|
BIG 1
|
|
BIG 2
|
|
BIG 3
|
|
Total BIG
|
|
Outstanding
|
|
Outstanding
|
|||||||||||
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|||||||||||
First lien U.S. RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Prime first lien
|
$
|
77
|
|
|
$
|
465
|
|
|
$
|
—
|
|
|
$
|
542
|
|
|
$
|
739
|
|
|
0.1
|
%
|
Alt-A first lien
|
1,695
|
|
|
1,028
|
|
|
1,540
|
|
|
4,263
|
|
|
5,329
|
|
|
0.8
|
|
|||||
Option ARM
|
25
|
|
|
689
|
|
|
882
|
|
|
1,596
|
|
|
2,433
|
|
|
0.3
|
|
|||||
Subprime (including net interest margin securities)
|
795
|
|
|
1,200
|
|
|
513
|
|
|
2,508
|
|
|
8,136
|
|
|
0.4
|
|
|||||
Second lien U.S. RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Closed end second lien
|
—
|
|
|
495
|
|
|
520
|
|
|
1,015
|
|
|
1,040
|
|
|
0.2
|
|
|||||
HELOCs
|
421
|
|
|
—
|
|
|
2,858
|
|
|
3,279
|
|
|
3,890
|
|
|
0.6
|
|
|||||
Total U.S. RMBS
|
3,013
|
|
|
3,877
|
|
|
6,313
|
|
|
13,203
|
|
|
21,567
|
|
|
2.4
|
|
|||||
TruPS
|
2,501
|
|
|
—
|
|
|
951
|
|
|
3,452
|
|
|
6,334
|
|
|
0.6
|
|
|||||
Other structured finance
|
1,295
|
|
|
548
|
|
|
1,429
|
|
|
3,272
|
|
|
88,028
|
|
|
0.6
|
|
|||||
U.S. public finance
|
3,395
|
|
|
274
|
|
|
838
|
|
|
4,507
|
|
|
403,073
|
|
|
0.8
|
|
|||||
Non-U.S. public finance (1)
|
2,046
|
|
|
282
|
|
|
—
|
|
|
2,328
|
|
|
39,046
|
|
|
0.4
|
|
|||||
Total
|
$
|
12,250
|
|
|
$
|
4,981
|
|
|
$
|
9,531
|
|
|
$
|
26,762
|
|
|
$
|
558,048
|
|
|
4.8
|
%
|
(1)
|
Includes $
282 million
in net par as of
December 31, 2011
, for bonds of the Hellenic Republic of Greece. See Note 6, Expected Loss to be Paid.
|
|
|
Net Par Outstanding
|
|
Number of Risks(2)
|
|||||||||||||||||
Description
|
|
Financial
Guaranty
Insurance(1)
|
|
Credit
Derivative
|
|
Total
|
|
Financial
Guaranty
Insurance(1)
|
|
Credit
Derivative
|
|
Total
|
|||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||
BIG:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Category 1
|
|
$
|
7,049
|
|
|
$
|
2,205
|
|
|
$
|
9,254
|
|
|
153
|
|
|
30
|
|
|
183
|
|
Category 2
|
|
2,606
|
|
|
2,501
|
|
|
5,107
|
|
|
76
|
|
|
27
|
|
|
103
|
|
|||
Category 3
|
|
7,028
|
|
|
2,003
|
|
|
9,031
|
|
|
142
|
|
|
32
|
|
|
174
|
|
|||
Total BIG
|
|
$
|
16,683
|
|
|
$
|
6,709
|
|
|
$
|
23,392
|
|
|
371
|
|
|
89
|
|
|
460
|
|
|
|
Net Par Outstanding
|
|
Number of Risks(2)
|
|||||||||||||||||
Description
|
|
Financial
Guaranty
Insurance(1)
|
|
Credit
Derivative
|
|
Total
|
|
Financial
Guaranty
Insurance(1)
|
|
Credit
Derivative
|
|
Total
|
|||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||
BIG:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Category 1
|
|
$
|
8,297
|
|
|
$
|
3,953
|
|
|
$
|
12,250
|
|
|
171
|
|
|
40
|
|
|
211
|
|
Category 2
|
|
3,458
|
|
|
1,523
|
|
|
4,981
|
|
|
71
|
|
|
33
|
|
|
104
|
|
|||
Category 3
|
|
7,204
|
|
|
2,327
|
|
|
9,531
|
|
|
126
|
|
|
26
|
|
|
152
|
|
|||
Total BIG
|
|
$
|
18,959
|
|
|
$
|
7,803
|
|
|
$
|
26,762
|
|
|
368
|
|
|
99
|
|
|
467
|
|
(2)
|
A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making Debt Service payments.
|
4.
|
Financial Guaranty Insurance Premiums
|
•
|
For premiums received upfront on financial guaranty insurance contracts that were originally underwritten by the Company, deferred premium revenue is equal to the amount of cash received. Upfront premiums typically relate to public finance transactions.
|
•
|
For premiums received in installments on financial guaranty insurance contracts that were originally underwritten by the Company, deferred premium revenue is the present value of either (1) contractual premiums due or (2) premiums expected to be collected over the life of the contract. For financial guaranty insurance contracts where the underlying collateral is comprised of homogeneous pools of assets, the expected premiums to be collected over the life of the contract is used to estimate the present value of future premiums. To be considered a
|
•
|
For financial guaranty insurance contracts acquired in a business combination, deferred premium revenue is equal to the fair value of the insurance contract at the date of acquisition based on what a hypothetical similarly rated financial guaranty insurer would have charged for the contract at that date and not the actual cash flows under the insurance contract. The amount of deferred premium revenue differs significantly from cash collections due primarily to fair value adjustments recorded in connection with a business combination.
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Scheduled net earned premiums
|
$
|
581
|
|
|
$
|
765
|
|
|
$
|
1,054
|
|
Acceleration of premium earnings
|
249
|
|
|
125
|
|
|
90
|
|
|||
Accretion of discount on net premiums receivable
|
22
|
|
|
28
|
|
|
40
|
|
|||
Total financial guaranty insurance
|
852
|
|
|
918
|
|
|
1,184
|
|
|||
Other
|
1
|
|
|
2
|
|
|
3
|
|
|||
Total net earned premiums(1)
|
$
|
853
|
|
|
$
|
920
|
|
|
$
|
1,187
|
|
(1)
|
Excludes $
153 million
, $
75 million
and
$48 million
for the year ended December 31, 2012, 2011 and 2010, respectively, related to consolidated FG VIEs.
|
|
As of December 31, 2012
|
|
As of December 31, 2011
|
||||||||||||||||||||
|
Gross
|
|
Ceded
|
|
Net(1)
|
|
Gross
|
|
Ceded
|
|
Net(1)
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Deferred premium revenue:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Financial guaranty
|
$
|
5,349
|
|
|
$
|
586
|
|
|
$
|
4,763
|
|
|
$
|
6,046
|
|
|
$
|
728
|
|
|
$
|
5,318
|
|
Other
|
7
|
|
|
—
|
|
|
7
|
|
|
9
|
|
|
0
|
|
|
9
|
|
||||||
Total deferred premium revenue
|
$
|
5,356
|
|
|
$
|
586
|
|
|
$
|
4,770
|
|
|
$
|
6,055
|
|
|
$
|
728
|
|
|
$
|
5,327
|
|
Contra-paid
|
(149
|
)
|
|
(25
|
)
|
|
(124
|
)
|
|
(92
|
)
|
|
(19
|
)
|
|
(73
|
)
|
||||||
Total
|
$
|
5,207
|
|
|
$
|
561
|
|
|
$
|
4,646
|
|
|
$
|
5,963
|
|
|
$
|
709
|
|
|
$
|
5,254
|
|
(1)
|
Excludes $
262 million
and $
274 million
deferred premium revenue and
$98 million
and
$133 million
contra-paid related to FG VIEs as of
December 31, 2012
and
December 31, 2011
, respectively.
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Balance beginning of period, December 31
|
$
|
5,327
|
|
|
$
|
6,272
|
|
|
$
|
7,454
|
|
Change in accounting (1)
|
—
|
|
|
—
|
|
|
(169
|
)
|
|||
Balance beginning of the period, adjusted
|
5,327
|
|
|
6,272
|
|
|
7,285
|
|
|||
Premium written, net
|
167
|
|
|
251
|
|
|
570
|
|
|||
Net premium earned, excluding accretion
|
(831
|
)
|
|
(892
|
)
|
|
(1,147
|
)
|
|||
Commutations of reinsurance contracts
|
(28
|
)
|
|
(19
|
)
|
|
—
|
|
|||
Foreign exchange translation
|
3
|
|
|
—
|
|
|
(1
|
)
|
|||
Changes in expected premium
|
137
|
|
|
(120
|
)
|
|
(247
|
)
|
|||
Consolidation of FG VIEs
|
(5
|
)
|
|
(165
|
)
|
|
(188
|
)
|
|||
Balance, end of period, December 31
|
$
|
4,770
|
|
|
$
|
5,327
|
|
|
$
|
6,272
|
|
(1)
|
Represents elimination of deferred premium revenue related to the consolidation of FG VIEs.
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Balance beginning of period, December 31
|
$
|
1,003
|
|
|
$
|
1,168
|
|
|
$
|
1,418
|
|
Change in accounting (1)
|
—
|
|
|
—
|
|
|
(19
|
)
|
|||
Balance beginning of the period, adjusted
|
1,003
|
|
|
1,168
|
|
|
1,399
|
|
|||
Premium written, net of ceding commissions
|
211
|
|
|
245
|
|
|
347
|
|
|||
Premium payments received, net of ceding commissions
|
(294
|
)
|
|
(318
|
)
|
|
(487
|
)
|
|||
Adjustments:
|
|
|
|
|
|
||||||
Changes in the expected term of financial guaranty insurance contracts
|
44
|
|
|
(104
|
)
|
|
(102
|
)
|
|||
Accretion of discount, net of ceding commissions
|
36
|
|
|
32
|
|
|
43
|
|
|||
Foreign exchange translation
|
13
|
|
|
(5
|
)
|
|
(31
|
)
|
|||
Consolidation of FG VIEs
|
(5
|
)
|
|
(10
|
)
|
|
(6
|
)
|
|||
Other adjustments
|
(3
|
)
|
|
(5
|
)
|
|
5
|
|
|||
Balance, end of period, December 31 (2)
|
$
|
1,005
|
|
|
$
|
1,003
|
|
|
$
|
1,168
|
|
(1)
|
Represents elimination of premium receivable related to the consolidation of FG VIEs.
|
(2)
|
Excludes $
29 million
, $
28 million
and
$23 million
as of
December 31, 2012
, 2011 and 2010, respectively, related to consolidated FG VIEs.
|
|
December 31, 2012
|
||
|
(in millions)
|
||
2013 (January 1 - March 31)
|
$
|
50
|
|
2013 (April 1 – June 30)
|
38
|
|
|
2013 (July 1 – September 30)
|
27
|
|
|
2013 (October 1 – December 31)
|
30
|
|
|
2014
|
105
|
|
|
2015
|
95
|
|
|
2016
|
89
|
|
|
2017
|
82
|
|
|
2018-2022
|
319
|
|
|
2023-2027
|
204
|
|
|
2028-2032
|
141
|
|
|
After 2032
|
160
|
|
|
Total(1)
|
$
|
1,340
|
|
(1)
|
Excludes expected cash collections on FG VIEs of $
36 million
.
|
|
As of December 31, 2012
|
||
|
(in millions)
|
||
2013 (January 1 - March 31)
|
$
|
131
|
|
2013 (April 1 - June 30)
|
126
|
|
|
2013 (July 1 - September 30)
|
121
|
|
|
2013 (October 1–December 31)
|
117
|
|
|
Subtotal 2013
|
495
|
|
|
2014
|
433
|
|
|
2015
|
382
|
|
|
2016
|
347
|
|
|
2017
|
311
|
|
|
2018 - 2022
|
1,188
|
|
|
2023 - 2027
|
741
|
|
|
2028 - 2032
|
443
|
|
|
After 2032
|
423
|
|
|
Total present value basis(1)
|
4,763
|
|
|
Discount
|
264
|
|
|
Total future value
|
$
|
5,027
|
|
(1)
|
Excludes scheduled net earned premiums on consolidated FG VIEs of $
262 million
.
|
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
||||
|
(dollars in millions)
|
||||||
Premiums receivable, net of ceding commission payable
|
$
|
1,005
|
|
|
$
|
1,003
|
|
Gross deferred premium revenue
|
1,908
|
|
|
2,193
|
|
||
Weighted-average risk-free rate used to discount premiums
|
3.5
|
%
|
|
3.4
|
%
|
||
Weighted-average period of premiums receivable (in years)
|
9.6
|
|
|
9.8
|
|
5.
|
Financial Guaranty Insurance Acquisition Costs
|
|
As Reported
Year Ended 2011 |
|
Retroactive Application Adjustment
|
|
As Revised Year Ended 2011
|
||||||
|
(in millions except per share amounts)
|
||||||||||
Amortization of DAC
|
$
|
31
|
|
|
$
|
(14
|
)
|
|
$
|
17
|
|
Other operating expenses
|
193
|
|
|
19
|
|
|
212
|
|
|||
Net income (loss)
|
776
|
|
|
(3
|
)
|
|
773
|
|
|||
Earnings per share:
|
|
|
|
|
|
|
|
||||
Basic
|
4.23
|
|
|
(0.02
|
)
|
|
4.21
|
|
|||
Diluted
|
4.18
|
|
|
(0.02
|
)
|
|
4.16
|
|
|
As Reported
Year Ended 2010 |
|
Retroactive Application Adjustment
|
|
As Revised Year Ended 2010
|
||||||
|
(in millions except per share amounts)
|
||||||||||
Amortization of DAC
|
$
|
34
|
|
|
$
|
(12
|
)
|
|
$
|
22
|
|
Other operating expenses
|
212
|
|
|
26
|
|
|
238
|
|
|||
Net income (loss)
|
494
|
|
|
(10
|
)
|
|
484
|
|
|||
Earnings per share:
|
|
|
|
|
|
|
|
||||
Basic
|
2.68
|
|
|
(0.05
|
)
|
|
2.63
|
|
|||
Diluted
|
2.61
|
|
|
(0.05
|
)
|
|
2.56
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Balance, beginning of period
|
$
|
132
|
|
|
$
|
146
|
|
|
$
|
162
|
|
Costs deferred during the period:
|
|
|
|
|
|
||||||
Ceded and assumed commissions
|
(13
|
)
|
|
(13
|
)
|
|
(18
|
)
|
|||
Premium taxes
|
4
|
|
|
7
|
|
|
12
|
|
|||
Compensation and other acquisition costs
|
10
|
|
|
9
|
|
|
13
|
|
|||
Total
|
1
|
|
|
3
|
|
|
7
|
|
|||
Costs amortized during the period
|
(17
|
)
|
|
(17
|
)
|
|
(22
|
)
|
|||
Foreign exchange translation
|
—
|
|
|
—
|
|
|
(1
|
)
|
|||
Balance, end of period
|
$
|
116
|
|
|
$
|
132
|
|
|
$
|
146
|
|
6.
|
Expected Loss to be Paid
|
|
Net Expected
Loss to be
Paid as of
December 31, 2011(2)
|
|
Economic Loss
Development
|
|
(Paid)
Recovered
Losses(1)
|
|
Net Expected
Loss to be Paid as of December 31, 2012(2) |
||||||||
|
(in millions)
|
||||||||||||||
U.S. RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
||||
First lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Prime first lien
|
$
|
5
|
|
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
10
|
|
Alt-A first lien
|
702
|
|
|
102
|
|
|
(111
|
)
|
|
693
|
|
||||
Option ARM
|
935
|
|
|
128
|
|
|
(603
|
)
|
|
460
|
|
||||
Subprime
|
342
|
|
|
57
|
|
|
(48
|
)
|
|
351
|
|
||||
Total first lien
|
1,984
|
|
|
292
|
|
|
(762
|
)
|
|
1,514
|
|
||||
Second lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Closed-end second lien
|
138
|
|
|
(5
|
)
|
|
(34
|
)
|
|
99
|
|
||||
HELOCs
|
159
|
|
|
80
|
|
|
(200
|
)
|
|
39
|
|
||||
Total second lien
|
297
|
|
|
75
|
|
|
(234
|
)
|
|
138
|
|
||||
Total U.S. RMBS
|
2,281
|
|
|
367
|
|
|
(996
|
)
|
|
1,652
|
|
||||
TruPS
|
64
|
|
|
(30
|
)
|
|
(7
|
)
|
|
27
|
|
||||
Other structured finance
|
342
|
|
|
2
|
|
|
(32
|
)
|
|
312
|
|
||||
U.S. public finance
|
16
|
|
|
74
|
|
|
(83
|
)
|
|
7
|
|
||||
Non-U.S public finance
|
51
|
|
|
221
|
|
|
(220
|
)
|
|
52
|
|
||||
Other insurance
|
2
|
|
|
(17
|
)
|
|
12
|
|
|
(3
|
)
|
||||
Total
|
$
|
2,756
|
|
|
$
|
617
|
|
|
$
|
(1,326
|
)
|
|
$
|
2,047
|
|
|
Net Expected
Loss to be
Paid as of
December 31, 2010
|
|
Economic Loss
Development
|
|
(Paid)
Recovered
Losses(1)
|
|
Expected
Loss to be Paid as of December 31, 2011 |
||||||||
|
(in millions)
|
||||||||||||||
U.S. RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
||||
First lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Prime first lien
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
5
|
|
Alt-A first lien
|
549
|
|
|
250
|
|
|
(97
|
)
|
|
702
|
|
||||
Option ARM
|
941
|
|
|
515
|
|
|
(521
|
)
|
|
935
|
|
||||
Subprime
|
337
|
|
|
27
|
|
|
(22
|
)
|
|
342
|
|
||||
Total first lien
|
1,829
|
|
|
795
|
|
|
(640
|
)
|
|
1,984
|
|
||||
Second lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Closed-end second lien
|
266
|
|
|
(46
|
)
|
|
(82
|
)
|
|
138
|
|
||||
HELOCs
|
198
|
|
|
290
|
|
|
(329
|
)
|
|
159
|
|
||||
Total second lien
|
464
|
|
|
244
|
|
|
(411
|
)
|
|
297
|
|
||||
Total U.S. RMBS
|
2,293
|
|
|
1,039
|
|
|
(1,051
|
)
|
|
2,281
|
|
||||
TruPS
|
90
|
|
|
(21
|
)
|
|
(5
|
)
|
|
64
|
|
||||
Other structured finance
|
262
|
|
|
101
|
|
|
(21
|
)
|
|
342
|
|
||||
U.S. public finance
|
82
|
|
|
(1
|
)
|
|
(65
|
)
|
|
16
|
|
||||
Non-U.S public finance
|
7
|
|
|
44
|
|
|
—
|
|
|
51
|
|
||||
Other insurance
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||
Total
|
$
|
2,736
|
|
|
$
|
1,162
|
|
|
$
|
(1,142
|
)
|
|
$
|
2,756
|
|
(1)
|
Net of ceded paid losses, whether or not such amounts have been settled with reinsurers. Ceded paid losses are typically settled
45 days
after the end of the reporting period. Such amounts are recorded in reinsurance recoverable on paid losses included in other assets.
|
(2)
|
Includes expected LAE to be paid for mitigating claim liabilities of $
39 million
as of
December 31, 2012
and $
35 million
as of
December 31, 2011
. The Company paid
$47 million
and
$25 million
in LAE for the years ended
December 31, 2012
and
2011
, respectively.
|
|
Future Net
R&W Benefit as of
December 31, 2011
|
|
R&W Development
and Accretion of Discount During 2012 |
|
R&W Recovered
During 2012(1) |
|
Future Net
R&W Benefit as of December 31, 2012(2) |
||||||||
|
(in millions)
|
||||||||||||||
U.S. RMBS:
|
|
|
|
|
|
|
|
||||||||
First lien:
|
|
|
|
|
|
|
|
||||||||
Prime first lien
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
4
|
|
Alt-A first lien
|
407
|
|
|
40
|
|
|
(69
|
)
|
|
378
|
|
||||
Option ARM
|
725
|
|
|
89
|
|
|
(223
|
)
|
|
591
|
|
||||
Subprime
|
101
|
|
|
8
|
|
|
—
|
|
|
109
|
|
||||
Total first lien
|
1,236
|
|
|
138
|
|
|
(292
|
)
|
|
1,082
|
|
||||
Second lien:
|
|
|
|
|
|
|
|
||||||||
Closed end second lien
|
224
|
|
|
5
|
|
|
(91
|
)
|
|
138
|
|
||||
HELOC
|
190
|
|
|
36
|
|
|
(76
|
)
|
|
150
|
|
||||
Total second lien
|
414
|
|
|
41
|
|
|
(167
|
)
|
|
288
|
|
||||
Total
|
$
|
1,650
|
|
|
$
|
179
|
|
|
$
|
(459
|
)
|
|
$
|
1,370
|
|
|
Future Net
R&W Benefit as of
December 31, 2010
|
|
R&W Development
and Accretion of Discount During 2011 |
|
R&W Recovered
During 2011(1) |
|
Future Net
R&W Benefit as of December 31, 2011 |
||||||||
|
(in millions)
|
||||||||||||||
U.S. RMBS:
|
|
|
|
|
|
|
|
||||||||
First lien:
|
|
|
|
|
|
|
|
||||||||
Prime first lien
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
3
|
|
Alt-A first lien
|
149
|
|
|
260
|
|
|
(2
|
)
|
|
407
|
|
||||
Option ARM
|
312
|
|
|
508
|
|
|
(95
|
)
|
|
725
|
|
||||
Subprime
|
27
|
|
|
74
|
|
|
—
|
|
|
101
|
|
||||
Total first lien
|
489
|
|
|
844
|
|
|
(97
|
)
|
|
1,236
|
|
||||
Second lien:
|
|
|
|
|
|
|
|
||||||||
Closed end second lien
|
178
|
|
|
55
|
|
|
(9
|
)
|
|
224
|
|
||||
HELOC
|
1,004
|
|
|
139
|
|
|
(953
|
)
|
|
190
|
|
||||
Total second lien
|
1,182
|
|
|
194
|
|
|
(962
|
)
|
|
414
|
|
||||
Total
|
$
|
1,671
|
|
|
$
|
1,038
|
|
|
$
|
(1,059
|
)
|
|
$
|
1,650
|
|
(1)
|
Gross amounts recovered were
$485 million
and $
1,212 million
for years ended December 31, 2012 and 2011, respectively.
|
(2)
|
Includes excess spread that the Company will receive as salvage as a result of a settlement agreement with a R&W provider.
|
|
Net Expected
Loss to be
Paid as of
December 31, 2011
|
|
Economic Loss
Development
|
|
(Paid)
Recovered
Losses(1)
|
|
Net Expected
Loss to be Paid as of December 31, 2012 |
||||||||
|
(in millions)
|
||||||||||||||
U.S. RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
||||
First lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Prime first lien
|
$
|
2
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
6
|
|
Alt-A first lien
|
295
|
|
|
62
|
|
|
(42
|
)
|
|
315
|
|
||||
Option ARM
|
210
|
|
|
39
|
|
|
(380
|
)
|
|
(131
|
)
|
||||
Subprime
|
241
|
|
|
49
|
|
|
(48
|
)
|
|
242
|
|
||||
Total first lien
|
748
|
|
|
154
|
|
|
(470
|
)
|
|
432
|
|
||||
Second lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Closed-end second lien
|
(86
|
)
|
|
(10
|
)
|
|
57
|
|
|
(39
|
)
|
||||
HELOCs
|
(31
|
)
|
|
44
|
|
|
(124
|
)
|
|
(111
|
)
|
||||
Total second lien
|
(117
|
)
|
|
34
|
|
|
(67
|
)
|
|
(150
|
)
|
||||
Total U.S. RMBS
|
631
|
|
|
188
|
|
|
(537
|
)
|
|
282
|
|
||||
TruPS
|
64
|
|
|
(30
|
)
|
|
(7
|
)
|
|
27
|
|
||||
Other structured finance
|
342
|
|
|
2
|
|
|
(32
|
)
|
|
312
|
|
||||
U.S. public finance
|
16
|
|
|
74
|
|
|
(83
|
)
|
|
7
|
|
||||
Non-U.S public finance
|
51
|
|
|
221
|
|
|
(220
|
)
|
|
52
|
|
||||
Other
|
2
|
|
|
(17
|
)
|
|
12
|
|
|
(3
|
)
|
||||
Total
|
$
|
1,106
|
|
|
$
|
438
|
|
|
$
|
(867
|
)
|
|
$
|
677
|
|
|
Net Expected
Loss to be
Paid as of
December 31, 2010
|
|
Economic Loss
Development
|
|
(Paid)
Recovered
Losses(1)
|
|
Expected
Loss to be Paid as of December 31, 2011 |
||||||||
|
(in millions)
|
||||||||||||||
U.S. RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
||||
First lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Prime first lien
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
2
|
|
Alt-A first lien
|
400
|
|
|
(10
|
)
|
|
(95
|
)
|
|
295
|
|
||||
Option ARM
|
629
|
|
|
7
|
|
|
(426
|
)
|
|
210
|
|
||||
Subprime
|
310
|
|
|
(47
|
)
|
|
(22
|
)
|
|
241
|
|
||||
Total first lien
|
1,340
|
|
|
(49
|
)
|
|
(543
|
)
|
|
748
|
|
||||
Second lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Closed-end second lien
|
88
|
|
|
(101
|
)
|
|
(73
|
)
|
|
(86
|
)
|
||||
HELOCs
|
(806
|
)
|
|
151
|
|
|
624
|
|
|
(31
|
)
|
||||
Total second lien
|
(718
|
)
|
|
50
|
|
|
551
|
|
|
(117
|
)
|
||||
Total U.S. RMBS
|
622
|
|
|
1
|
|
|
8
|
|
|
631
|
|
||||
TruPS
|
90
|
|
|
(21
|
)
|
|
(5
|
)
|
|
64
|
|
||||
Other structured finance
|
262
|
|
|
101
|
|
|
(21
|
)
|
|
342
|
|
||||
U.S. public finance
|
82
|
|
|
(1
|
)
|
|
(65
|
)
|
|
16
|
|
||||
Non-U.S public finance
|
7
|
|
|
44
|
|
|
—
|
|
|
51
|
|
||||
Other
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||
Total
|
$
|
1,065
|
|
|
$
|
124
|
|
|
$
|
(83
|
)
|
|
$
|
1,106
|
|
(1)
|
Net of ceded paid losses, whether or not such amounts have been settled with reinsurers. Ceded paid losses are typically settled
45 days
after the end of the reporting period. Such amounts are recorded in reinsurance recoverable on paid losses included in other assets.
|
|
Financial
Guaranty
Insurance
|
|
FG VIEs(1)
|
|
Credit
Derivatives
|
|
Total
|
||||||||
|
(in millions)
|
||||||||||||||
US RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
||||
First lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Prime first lien
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
6
|
|
Alt-A first lien
|
164
|
|
|
27
|
|
|
124
|
|
|
315
|
|
||||
Option ARM
|
(114
|
)
|
|
(37
|
)
|
|
20
|
|
|
(131
|
)
|
||||
Subprime
|
118
|
|
|
50
|
|
|
74
|
|
|
242
|
|
||||
Total first lien
|
172
|
|
|
40
|
|
|
220
|
|
|
432
|
|
||||
Second Lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Closed-end second lien
|
(60
|
)
|
|
31
|
|
|
(10
|
)
|
|
(39
|
)
|
||||
HELOCs
|
56
|
|
|
(167
|
)
|
|
—
|
|
|
(111
|
)
|
||||
Total second lien
|
(4
|
)
|
|
(136
|
)
|
|
(10
|
)
|
|
(150
|
)
|
||||
Total U.S. RMBS
|
168
|
|
|
(96
|
)
|
|
210
|
|
|
282
|
|
||||
TruPS
|
1
|
|
|
—
|
|
|
26
|
|
|
27
|
|
||||
Other structured finance
|
224
|
|
|
—
|
|
|
88
|
|
|
312
|
|
||||
U.S. public finance
|
7
|
|
|
—
|
|
|
—
|
|
|
7
|
|
||||
Non-U.S. public finance
|
51
|
|
|
—
|
|
|
1
|
|
|
52
|
|
||||
Subtotal
|
$
|
451
|
|
|
$
|
(96
|
)
|
|
$
|
325
|
|
|
680
|
|
|
Other
|
|
|
|
|
|
|
(3
|
)
|
|||||||
Total
|
|
|
|
|
|
|
$
|
677
|
|
|
Financial
Guaranty
Insurance
|
|
FG VIEs(1)
|
|
Credit
Derivatives
|
|
Total
|
||||||||
|
(in millions)
|
||||||||||||||
US RMBS:
|
|
|
|
—
|
|
|
|
|
|
|
|
||||
First lien:
|
|
|
|
—
|
|
|
|
|
|
|
|
||||
Prime first lien
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2
|
|
Alt-A first lien
|
130
|
|
|
5
|
|
|
160
|
|
|
295
|
|
||||
Option ARM
|
128
|
|
|
25
|
|
|
57
|
|
|
210
|
|
||||
Subprime
|
96
|
|
|
44
|
|
|
101
|
|
|
241
|
|
||||
Total first lien
|
356
|
|
|
74
|
|
|
318
|
|
|
748
|
|
||||
Second Lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Closed-end second lien
|
(58
|
)
|
|
(22
|
)
|
|
(6
|
)
|
|
(86
|
)
|
||||
HELOCs
|
128
|
|
|
(159
|
)
|
|
—
|
|
|
(31
|
)
|
||||
Total second lien
|
70
|
|
|
(181
|
)
|
|
(6
|
)
|
|
(117
|
)
|
||||
Total U.S. RMBS
|
426
|
|
|
(107
|
)
|
|
312
|
|
|
631
|
|
||||
TruPS
|
13
|
|
|
—
|
|
|
51
|
|
|
64
|
|
||||
Other structured finance
|
240
|
|
|
—
|
|
|
102
|
|
|
342
|
|
||||
U.S. public finance
|
16
|
|
|
—
|
|
|
—
|
|
|
16
|
|
||||
Non-U.S. public finance
|
50
|
|
|
—
|
|
|
1
|
|
|
51
|
|
||||
Subtotal
|
$
|
745
|
|
|
$
|
(107
|
)
|
|
$
|
466
|
|
|
1,104
|
|
|
Other
|
|
|
|
|
|
|
2
|
|
|||||||
Total
|
|
|
|
|
|
|
$
|
1,106
|
|
|
Financial
Guaranty
Insurance
|
|
FG VIEs(1)
|
|
Credit
Derivatives(2)
|
|
Total
|
||||||||
|
(in millions)
|
||||||||||||||
US RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
||||
First lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Prime first lien
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
4
|
|
Alt-A first lien
|
38
|
|
|
(10
|
)
|
|
34
|
|
|
62
|
|
||||
Option ARM
|
37
|
|
|
(8
|
)
|
|
10
|
|
|
39
|
|
||||
Subprime
|
31
|
|
|
7
|
|
|
11
|
|
|
49
|
|
||||
Total first lien
|
108
|
|
|
(11
|
)
|
|
57
|
|
|
154
|
|
||||
Second Lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Closed-end second lien
|
13
|
|
|
(23
|
)
|
|
—
|
|
|
(10
|
)
|
||||
HELOCs
|
37
|
|
|
7
|
|
|
—
|
|
|
44
|
|
||||
Total second lien
|
50
|
|
|
(16
|
)
|
|
—
|
|
|
34
|
|
||||
Total U.S. RMBS
|
158
|
|
|
(27
|
)
|
|
57
|
|
|
188
|
|
||||
TruPS
|
(11
|
)
|
|
—
|
|
|
(19
|
)
|
|
(30
|
)
|
||||
Other structured finance
|
15
|
|
|
—
|
|
|
(13
|
)
|
|
2
|
|
||||
U.S. public finance
|
75
|
|
|
—
|
|
|
(1
|
)
|
|
74
|
|
||||
Non-U.S. public finance
|
222
|
|
|
—
|
|
|
(1
|
)
|
|
221
|
|
||||
Subtotal
|
$
|
459
|
|
|
$
|
(27
|
)
|
|
$
|
23
|
|
|
455
|
|
|
Other
|
|
|
|
|
|
|
(17
|
)
|
|||||||
Total
|
|
|
|
|
|
|
$
|
438
|
|
|
Financial
Guaranty
Insurance
|
|
FG VIEs(1)
|
|
Credit
Derivatives(2)
|
|
Total
|
||||||||
|
(in millions)
|
||||||||||||||
US RMBS:
|
|
|
|
—
|
|
|
|
|
|
|
|
||||
First lien:
|
|
|
|
—
|
|
|
|
|
|
|
|
||||
Prime first lien
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Alt-A first lien
|
(2
|
)
|
|
17
|
|
|
(25
|
)
|
|
(10
|
)
|
||||
Option ARM
|
(94
|
)
|
|
98
|
|
|
3
|
|
|
7
|
|
||||
Subprime
|
(121
|
)
|
|
78
|
|
|
(4
|
)
|
|
(47
|
)
|
||||
Total first lien
|
(217
|
)
|
|
193
|
|
|
(25
|
)
|
|
(49
|
)
|
||||
Second Lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Closed-end second lien
|
(96
|
)
|
|
18
|
|
|
(23
|
)
|
|
(101
|
)
|
||||
HELOCs
|
318
|
|
|
(167
|
)
|
|
—
|
|
|
151
|
|
||||
Total second lien
|
222
|
|
|
(149
|
)
|
|
(23
|
)
|
|
50
|
|
||||
Total U.S. RMBS
|
5
|
|
|
44
|
|
|
(48
|
)
|
|
1
|
|
||||
TruPS
|
—
|
|
|
—
|
|
|
(21
|
)
|
|
(21
|
)
|
||||
Other structured finance
|
111
|
|
|
—
|
|
|
(10
|
)
|
|
101
|
|
||||
U.S. public finance
|
42
|
|
|
—
|
|
|
(43
|
)
|
|
(1
|
)
|
||||
Non-U.S. public finance
|
—
|
|
|
—
|
|
|
44
|
|
|
44
|
|
||||
Subtotal
|
$
|
158
|
|
|
$
|
44
|
|
|
$
|
(78
|
)
|
|
124
|
|
|
Other
|
|
|
|
|
|
|
—
|
|
|||||||
Total
|
|
|
|
|
|
|
$
|
124
|
|
•
|
in its most optimistic scenario, it reduced by
three
months the period it assumed it would take the mortgage market to recover; and
|
•
|
in its most pessimistic scenario, it increased by
three
months the period it assumed it would take the mortgage market to recover.
|
•
|
based on its observation of the slow mortgage market recovery, the Company increased its base case expected period for reaching the final conditional default rate in second lien transactions and adjusted the probability weightings it applied to second lien scenarios from year-end 2010 to reflect the changes to those scenarios;
|
•
|
also based on its observation of the slow mortgage market recovery the Company added a more stressful first lien scenario at year-end 2011 reflecting an even slower potential recovery in the housing and mortgage markets, making what had prior to that been a stress scenario its base scenario;
|
•
|
based on its observation of increased loss severity rates, the Company increased its projected loss severity rates in various of its first lien scenarios; and
|
•
|
based on its observation of liquidation rates, the Company decreased the liquidation rates it applied to non-performing loans.
|
HELOC key assumptions
|
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
|
As of
December 31, 2010 |
|||||||||
Plateau CDR
|
|
3.8
|
%
|
–
|
15.9%
|
|
4.0
|
%
|
–
|
27.4%
|
|
4.2
|
%
|
–
|
22.0%
|
Final CDR trended down to
|
|
0.4
|
%
|
–
|
3.2%
|
|
0.4
|
%
|
–
|
3.2%
|
|
0.4
|
%
|
–
|
3.2%
|
Expected period until final CDR
|
|
36 months
|
|
36 months
|
|
36 months
|
|||||||||
Initial CPR
|
|
2.9
|
%
|
–
|
15.4%
|
|
1.4
|
%
|
–
|
25.8%
|
|
3.3
|
%
|
–
|
17.5%
|
Final CPR
|
|
10%
|
|
10%
|
|
10%
|
|||||||||
Loss severity
|
|
98%
|
|
98%
|
|
98%
|
|||||||||
Initial draw rate
|
|
0.0
|
%
|
–
|
4.8%
|
|
0.0
|
%
|
–
|
15.3%
|
|
0.0
|
%
|
–
|
6.8%
|
Closed-end second lien key assumptions
|
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
|
As of
December 31, 2010 |
|||||||||
Plateau CDR
|
|
7.3
|
%
|
–
|
20.7%
|
|
6.9
|
%
|
–
|
29.5%
|
|
7.3
|
%
|
–
|
38.8%
|
Final CDR trended down to
|
|
3.5
|
%
|
–
|
9.1%
|
|
3.5
|
%
|
–
|
9.1%
|
|
3.3
|
%
|
–
|
9.1%
|
Expected period until final CDR
|
|
36 months
|
|
36 months
|
|
36 months
|
|||||||||
Initial CPR
|
|
1.9
|
%
|
–
|
12.5%
|
|
0.9
|
%
|
–
|
14.7%
|
|
1.3
|
%
|
–
|
9.7%
|
Final CPR
|
|
10%
|
|
10%
|
|
10%
|
|||||||||
Loss severity
|
|
98%
|
|
98%
|
|
98%
|
(1)
|
Represents variables for most heavily weighted scenario (the “base case”).
|
|
December 31, 2012
|
|
December 31, 2011
|
|
December 31, 2010
|
30 – 59 Days Delinquent
|
|
|
|
|
|
Alt A and Prime
|
35%
|
|
35%
|
|
50%
|
Option ARM
|
50
|
|
50
|
|
50
|
Subprime
|
30
|
|
30
|
|
45
|
60 – 89 Days Delinquent
|
|
|
|
|
|
Alt A and Prime
|
55
|
|
55
|
|
65
|
Option ARM
|
65
|
|
65
|
|
65
|
Subprime
|
45
|
|
45
|
|
65
|
90+ Days Delinquent
|
|
|
|
|
|
Alt A and Prime
|
65
|
|
65
|
|
75
|
Option ARM
|
75
|
|
75
|
|
75
|
Subprime
|
60
|
|
60
|
|
70
|
Bankruptcy
|
|
|
|
|
|
Alt A and Prime
|
55
|
|
55
|
|
75
|
Option ARM
|
70
|
|
70
|
|
75
|
Subprime
|
50
|
|
50
|
|
70
|
Foreclosure
|
|
|
|
|
|
Alt A and Prime
|
85
|
|
85
|
|
85
|
Option ARM
|
85
|
|
85
|
|
85
|
Subprime
|
80
|
|
80
|
|
85
|
Real Estate Owned ("REO")
|
|
|
|
|
|
All
|
100
|
|
100
|
|
100
|
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
|
As of
December 31, 2010 |
|||||||||
Alt-A First Lien
|
|
|
|
|
|
|
|
|
|
|
|
|||
Plateau CDR
|
3.8
|
%
|
–
|
23.2%
|
|
2.8
|
%
|
–
|
41.3%
|
|
2.4
|
%
|
–
|
42.1%
|
Intermediate CDR
|
0.8
|
%
|
–
|
4.6%
|
|
0.6
|
%
|
–
|
8.3%
|
|
0.4
|
%
|
–
|
6.3%
|
Final CDR
|
0.2
|
%
|
–
|
1.2%
|
|
0.1
|
%
|
–
|
2.1%
|
|
0.1
|
%
|
–
|
2.1%
|
Initial loss severity
|
65%
|
|
65%
|
|
60%
|
|||||||||
Initial CPR
|
0.0
|
%
|
–
|
39.4%
|
|
0.0
|
%
|
–
|
37.5%
|
|
0.0
|
%
|
–
|
37.2%
|
Final CPR
|
15%
|
|
15%
|
|
15%
|
|||||||||
Option ARM
|
|
|
|
|
|
|
|
|
|
|
|
|||
Plateau CDR
|
7.0
|
%
|
–
|
26.1%
|
|
9.6
|
%
|
–
|
31.5%
|
|
9.8
|
%
|
–
|
32.7%
|
Intermediate CDR
|
1.4
|
%
|
–
|
5.2%
|
|
1.9
|
%
|
–
|
6.3%
|
|
1.5
|
%
|
–
|
4.9%
|
Final CDR
|
0.4
|
%
|
–
|
1.3%
|
|
0.5
|
%
|
–
|
1.6%
|
|
0.5
|
%
|
–
|
1.6%
|
Initial loss severity
|
65%
|
|
65%
|
|
60%
|
|||||||||
Initial CPR
|
0.0
|
%
|
–
|
10.7%
|
|
0.0
|
%
|
–
|
29.1%
|
|
0.0
|
%
|
–
|
18.7%
|
Final CPR
|
15%
|
|
15%
|
|
15%
|
|||||||||
Subprime
|
|
|
|
|
|
|
|
|
|
|
|
|||
Plateau CDR
|
7.3
|
%
|
–
|
26.2%
|
|
8.3
|
%
|
–
|
29.9%
|
|
9.0
|
%
|
–
|
34.6%
|
Intermediate CDR
|
1.5
|
%
|
–
|
5.2%
|
|
1.7
|
%
|
–
|
6.0%
|
|
1.3
|
%
|
–
|
5.2%
|
Final CDR
|
0.4
|
%
|
–
|
1.3%
|
|
0.4
|
%
|
–
|
1.5%
|
|
0.4
|
%
|
–
|
1.7%
|
Initial loss severity
|
90%
|
|
90%
|
|
80%
|
|||||||||
Initial CPR
|
0.0
|
%
|
–
|
17.6%
|
|
0.0
|
%
|
–
|
16.3%
|
|
0.0
|
%
|
–
|
17%
|
Final CPR
|
15%
|
|
15%
|
|
15%
|
|
Number of Risks (1) as of
|
|
Debt Service as of
|
||||||||||
|
December 31, 2012
|
|
December 31, 2011
|
|
December 31, 2012
|
|
December 31, 2011
|
||||||
|
|
|
|
|
(dollars in millions)
|
||||||||
Prime first lien
|
1
|
|
|
1
|
|
|
$
|
35
|
|
|
$
|
42
|
|
Alt-A first lien
|
26
|
|
|
29
|
|
|
4,030
|
|
|
4,672
|
|
||
Option ARM
|
10
|
|
|
13
|
|
|
1,101
|
|
|
1,843
|
|
||
Subprime
|
5
|
|
|
5
|
|
|
820
|
|
|
906
|
|
||
Closed-end second lien
|
4
|
|
|
4
|
|
|
196
|
|
|
361
|
|
||
HELOC (2)
|
7
|
|
|
15
|
|
|
549
|
|
|
2,978
|
|
||
Total
|
53
|
|
|
67
|
|
|
$
|
6,731
|
|
|
$
|
10,802
|
|
|
Year Ended December 31,
|
||||||
|
2012
|
|
2011
|
||||
|
(in millions)
|
||||||
Inclusion or removal of deals with breaches of R&W during period
|
$
|
(3
|
)
|
|
$
|
115
|
|
Change in recovery assumptions as the result of additional file review and recovery success
|
70
|
|
|
218
|
|
||
Estimated increase (decrease) in defaults that will result in additional (lower) breaches
|
63
|
|
|
17
|
|
||
Results of settlements/judgments
|
40
|
|
|
668
|
|
||
Accretion of discount on balance
|
9
|
|
|
20
|
|
||
Total
|
$
|
179
|
|
|
$
|
1,038
|
|
•
|
Flagstar
: AGM has sued Flagstar Bank, FSB, Flagstar Capital Markets Corporation and Flagstar ABS, LLC on the Flagstar Home Equity Loan Trust, Series 2005-1 and Series 2006-2 second lien transactions. In February 2013, the court granted judgment in favor of AGM on its claims for breach of contract in the amount of approximately
$90 million
plus contractual interest and attorneys' fees and costs to be determined. Flagstar Bank has indicated it intends to appeal the decision.
|
•
|
Deutsche Bank
: AGM has sued Deutsche Bank AG affiliates DB Structured Products, Inc. and ACE Securities Corp. on the ACE Securities Corp. Home Equity Loan Trust, Series 2006-GP1 second lien transaction.
|
•
|
J.P. Morgan
: AGC has sued JPMorgan Chase & Co.’s affiliate EMC Mortgage LLC, J.P. Morgan Securities Inc. (formerly known as Bear, Stearns & Co. Inc.) and JPMorgan Chase Bank, N.A. on the
SACO I Trust 2005-GP1 second lien transaction and EMC Mortgage LLC on the Bear Stearns Asset Backed Securities I Trust 2005-AC5 and Bear Stearns Asset Backed Securities I Trust 2005-AC6 first lien transactions.
|
•
|
ResCap
: AGM has sued GMAC Mortgage, LLC (formerly GMAC Mortgage Corporation; Residential Asset Mortgage Products, Inc.; Ally Bank (formerly GMAC Bank); Residential Funding Company, LLC (formerly Residential Funding Corporation); Residential Capital, LLC (formerly Residential Capital Corporation, "ResCap"); Ally Financial (formerly GMAC, LLC); and Residential Funding Mortgage Securities II, Inc. on the GMAC RFC Home Equity Loan-Backed Notes, Series 2006-HSA3 and GMAC Home Equity Loan-Backed Notes, Series 2004-HE3 second lien transactions. On May 14, 2012, ResCap and several of its affiliates (the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court. The automatic stay of Bankruptcy Code Section 362 (a) stays lawsuits (such as the suit brought by AGM) against the Debtors and AGM, the Debtors and the non-Debtor affiliates have filed a stipulation with the court agreeing to extend the stay to the non-Debtor affiliates until April 30, 2013.
|
•
|
Credit Suisse
: AGM and AGC have sued DLJ and Credit Suisse on first lien U.S. RMBS transactions insured by them. The ones insured by AGM are: CSAB Mortgage-Backed Pass Through Certificates, Series 2006-2; CSAB Mortgage-Backed Pass Through Certificates, Series 2006-3; CSAB Mortgage-Backed Pass Through Certificates, Series 2006-4; and CMSC Mortgage-Backed Pass Through Certificates, Series 2007-3. The ones insured by AGC are: CSAB Mortgage-Backed Pass Through Certificates, Series 2007-1 and TBW Mortgage-Backed Pass Through Certificates, Series 2007-2. On December 6, 2011, DLJ and Credit Suisse filed a motion to dismiss the cause of action asserting breach of the document containing the condition precedent regarding the rating of the securities and claims for recissionary damages and other relief in the complaint, and on October 11, 2012, the Supreme Court of the State of New York granted the motion to dismiss. AGM and AGC intend to appeal the dismissal of certain of its claims. The causes of action against DLJ for breach of R&W and breach of its repurchase obligations remain.
|
•
|
UBS
: AGM has sued UBS on the MASTR Adjustable Rate Mortgages Trust 2006-OA2, MASTR Adjustable Rate Mortgages Trust 2007-1 and MASTR Adjustable Rate Mortgages Trust 2007-3 first lien transactions. In
|
•
|
a reduction in the corresponding loss and LAE reserve with a benefit to the income statement,
|
•
|
no entry recorded, if “total loss” is not in excess of deferred premium revenue, or
|
•
|
the recording of a salvage asset with a benefit to the income statement if the transaction is in a net recovery position at the reporting date.
|
|
As of December 31, 2012
|
|
As of December 31, 2011
|
||||||||||||||||||||
|
Loss and
LAE
Reserve, net
|
|
Salvage and
Subrogation
Recoverable, net
|
|
Net
|
|
Loss and
LAE
Reserve, net
|
|
Salvage and
Subrogation
Recoverable, net
|
|
Net
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
U.S. RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
First lien:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Prime first lien
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
1
|
|
Alt-A first lien
|
93
|
|
|
—
|
|
|
93
|
|
|
70
|
|
|
55
|
|
|
15
|
|
||||||
Option ARM
|
52
|
|
|
216
|
|
|
(164
|
)
|
|
142
|
|
|
141
|
|
|
1
|
|
||||||
Subprime
|
82
|
|
|
0
|
|
|
82
|
|
|
51
|
|
|
0
|
|
|
51
|
|
||||||
Total first lien
|
230
|
|
|
216
|
|
|
14
|
|
|
264
|
|
|
196
|
|
|
68
|
|
||||||
Second lien:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Closed-end second lien
|
5
|
|
|
72
|
|
|
(67
|
)
|
|
11
|
|
|
136
|
|
|
(125
|
)
|
||||||
HELOC
|
37
|
|
|
196
|
|
|
(159
|
)
|
|
61
|
|
|
177
|
|
|
(116
|
)
|
||||||
Total second lien
|
42
|
|
|
268
|
|
|
(226
|
)
|
|
72
|
|
|
313
|
|
|
(241
|
)
|
||||||
Total U.S. RMBS
|
272
|
|
|
484
|
|
|
(212
|
)
|
|
336
|
|
|
509
|
|
|
(173
|
)
|
||||||
TruPS
|
1
|
|
|
—
|
|
|
1
|
|
|
11
|
|
|
—
|
|
|
11
|
|
||||||
Other structured finance
|
197
|
|
|
4
|
|
|
193
|
|
|
223
|
|
|
6
|
|
|
217
|
|
||||||
U.S. public finance
|
104
|
|
|
134
|
|
|
(30
|
)
|
|
62
|
|
|
70
|
|
|
(8
|
)
|
||||||
Non-U.S. public finance
|
31
|
|
|
—
|
|
|
31
|
|
|
38
|
|
|
—
|
|
|
38
|
|
||||||
Total financial guaranty
|
605
|
|
|
622
|
|
|
(17
|
)
|
|
670
|
|
|
585
|
|
|
85
|
|
||||||
Other
|
2
|
|
|
5
|
|
|
(3
|
)
|
|
2
|
|
|
—
|
|
|
2
|
|
||||||
Subtotal
|
607
|
|
|
627
|
|
|
(20
|
)
|
|
672
|
|
|
585
|
|
|
87
|
|
||||||
Effect of consolidating FG VIEs
|
(64
|
)
|
|
(217
|
)
|
|
153
|
|
|
(62
|
)
|
|
(258
|
)
|
|
196
|
|
||||||
Total (1)
|
$
|
543
|
|
|
$
|
410
|
|
|
$
|
133
|
|
|
$
|
610
|
|
|
$
|
327
|
|
|
$
|
283
|
|
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
||||
|
(in millions)
|
||||||
Loss and LAE reserve
|
$
|
601
|
|
|
$
|
679
|
|
Reinsurance recoverable on unpaid losses
|
(58
|
)
|
|
(69
|
)
|
||
Subtotal
|
543
|
|
|
610
|
|
||
Salvage and subrogation recoverable
|
(456
|
)
|
|
(368
|
)
|
||
Salvage and subrogation payable(1)
|
46
|
|
|
41
|
|
||
Subtotal
|
(410
|
)
|
|
(327
|
)
|
||
Other recoveries(2)
|
(30
|
)
|
|
—
|
|
||
Subtotal
|
(440
|
)
|
|
(327
|
)
|
||
Total
|
103
|
|
|
283
|
|
||
Less: other
|
(3
|
)
|
|
2
|
|
||
Financial guaranty net reserves (salvage)
|
$
|
106
|
|
|
$
|
281
|
|
|
As of December 31, 2012
|
|
As of December 31, 2011
|
||||||||||||||||||||
|
For all
Financial
Guaranty
Insurance
Contracts
|
|
Effect of
Consolidating
FG VIEs
|
|
Reported on
Balance Sheet(1)
|
|
For all
Financial
Guaranty
Insurance
Contracts
|
|
Effect of
Consolidating
FG VIEs
|
|
Reported on
Balance Sheet(1)
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Salvage and subrogation recoverable
|
$
|
449
|
|
|
$
|
(169
|
)
|
|
$
|
280
|
|
|
$
|
402
|
|
|
$
|
(197
|
)
|
|
$
|
205
|
|
Loss and LAE reserve
|
571
|
|
|
(33
|
)
|
|
538
|
|
|
858
|
|
|
(75
|
)
|
|
783
|
|
(1)
|
The remaining benefit for R&W is not recorded on the balance sheet until the expected loss, net of R&W, exceeds unearned premium reserve.
|
|
As of December 31, 2012
|
||
|
(in millions)
|
||
Net expected loss to be paid
|
$
|
355
|
|
Less: net expected loss to be paid for FG VIEs
|
(96
|
)
|
|
Total
|
451
|
|
|
Contra-paid, net
|
124
|
|
|
Salvage and subrogation recoverable, net of reinsurance
|
405
|
|
|
Loss and LAE reserve, net of reinsurance
|
(541
|
)
|
|
Other recoveries (1)
|
30
|
|
|
Net expected loss to be expensed (2)
|
$
|
469
|
|
(1)
|
R&W recoveries recorded in other assets on the consolidated balance sheet.
|
(2)
|
Excludes
$156 million
and
$223 million
as of December 31, 2012 and 2011, respectively, related to consolidated FG VIEs.
|
|
As of December 31, 2012
|
||
|
(in millions)
|
||
2013 (January 1 - March 31)
|
$
|
19
|
|
2013 (April 1 - June 30)
|
19
|
|
|
2013 (July 1 - September 30)
|
18
|
|
|
2013 (October 1–December 31)
|
16
|
|
|
Subtotal 2013
|
72
|
|
|
2014
|
48
|
|
|
2015
|
42
|
|
|
2016
|
37
|
|
|
2017
|
36
|
|
|
2018 - 2022
|
127
|
|
|
2023 - 2027
|
59
|
|
|
2028 - 2032
|
29
|
|
|
After 2032
|
19
|
|
|
Total present value basis(1)
|
469
|
|
|
Discount
|
251
|
|
|
Total future value
|
$
|
720
|
|
(1)
|
Consolidation of FG VIEs resulted in reductions of $
156 million
in net expected loss to be expensed.
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
|
||||||||||
U.S. RMBS:
|
|
|
|
|
|
||||||
First lien:
|
|
|
|
|
|
||||||
Prime first lien
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
1
|
|
Alt-A first lien
|
51
|
|
|
53
|
|
|
37
|
|
|||
Option ARM
|
137
|
|
|
203
|
|
|
272
|
|
|||
Subprime
|
38
|
|
|
(39
|
)
|
|
86
|
|
|||
Total first lien
|
228
|
|
|
217
|
|
|
396
|
|
|||
Second lien:
|
|
|
|
|
|
||||||
Closed end second lien
|
31
|
|
|
1
|
|
|
5
|
|
|||
HELOC
|
49
|
|
|
171
|
|
|
(20
|
)
|
|||
Total second lien
|
80
|
|
|
172
|
|
|
(15
|
)
|
|||
Total U.S. RMBS
|
308
|
|
|
389
|
|
|
381
|
|
|||
TruPS
|
(10
|
)
|
|
11
|
|
|
(5
|
)
|
|||
Other structured finance
|
3
|
|
|
107
|
|
|
69
|
|
|||
U.S. public finance
|
51
|
|
|
15
|
|
|
28
|
|
|||
Non-U.S. public finance
|
234
|
|
|
33
|
|
|
5
|
|
|||
Subtotal
|
586
|
|
|
555
|
|
|
478
|
|
|||
Other
|
(17
|
)
|
|
—
|
|
|
—
|
|
|||
Total insurance contracts before FG VIE consolidation
|
569
|
|
|
555
|
|
|
478
|
|
|||
Effect of consolidating FG VIEs
|
(46
|
)
|
|
(93
|
)
|
|
(66
|
)
|
|||
Total loss and LAE
|
$
|
523
|
|
|
$
|
462
|
|
|
$
|
412
|
|
|
BIG Categories
|
||||||||||||||||||||||||||||||||||
|
BIG 1
|
|
BIG 2
|
|
BIG 3
|
|
Total
BIG, Net
|
|
Effect of
Consolidating
FG VIEs
|
|
Total
|
||||||||||||||||||||||||
|
Gross
|
|
Ceded
|
|
Gross
|
|
Ceded
|
|
Gross
|
|
Ceded
|
|
|
|
|||||||||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||||||||
Number of risks(1)
|
153
|
|
|
(57
|
)
|
|
76
|
|
|
(22
|
)
|
|
142
|
|
|
(51
|
)
|
|
371
|
|
|
—
|
|
|
371
|
|
|||||||||
Remaining weighted-average contract period (in years)
|
11.0
|
|
|
9.3
|
|
|
11.5
|
|
|
15.3
|
|
|
8.5
|
|
|
5.8
|
|
|
10.2
|
|
|
—
|
|
|
10.2
|
|
|||||||||
Outstanding exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Principal
|
$
|
8,533
|
|
|
$
|
(1,484
|
)
|
|
$
|
2,741
|
|
|
$
|
(135
|
)
|
|
$
|
7,568
|
|
|
$
|
(540
|
)
|
|
$
|
16,683
|
|
|
$
|
—
|
|
|
$
|
16,683
|
|
Interest
|
4,357
|
|
|
(585
|
)
|
|
1,813
|
|
|
(131
|
)
|
|
2,269
|
|
|
(137
|
)
|
|
7,586
|
|
|
—
|
|
|
7,586
|
|
|||||||||
Total(2)
|
$
|
12,890
|
|
|
$
|
(2,069
|
)
|
|
$
|
4,554
|
|
|
$
|
(266
|
)
|
|
$
|
9,837
|
|
|
$
|
(677
|
)
|
|
$
|
24,269
|
|
|
$
|
—
|
|
|
$
|
24,269
|
|
Expected cash outflows (inflows)
|
$
|
1,582
|
|
|
$
|
(677
|
)
|
|
$
|
863
|
|
|
$
|
(58
|
)
|
|
$
|
3,052
|
|
|
$
|
(156
|
)
|
|
$
|
4,606
|
|
|
$
|
(738
|
)
|
|
$
|
3,868
|
|
Potential recoveries(3)
|
(1,629
|
)
|
|
653
|
|
|
(509
|
)
|
|
18
|
|
|
(2,639
|
)
|
|
142
|
|
|
(3,964
|
)
|
|
798
|
|
|
(3,166
|
)
|
|||||||||
Subtotal
|
(47
|
)
|
|
(24
|
)
|
|
354
|
|
|
(40
|
)
|
|
413
|
|
|
(14
|
)
|
|
642
|
|
|
60
|
|
|
702
|
|
|||||||||
Discount
|
(1
|
)
|
|
9
|
|
|
(107
|
)
|
|
14
|
|
|
(202
|
)
|
|
0
|
|
|
(287
|
)
|
|
36
|
|
|
(251
|
)
|
|||||||||
Present value of expected cash flows
|
$
|
(48
|
)
|
|
$
|
(15
|
)
|
|
$
|
247
|
|
|
$
|
(26
|
)
|
|
$
|
211
|
|
|
$
|
(14
|
)
|
|
$
|
355
|
|
|
$
|
96
|
|
|
$
|
451
|
|
Deferred premium revenue
|
$
|
111
|
|
|
$
|
(24
|
)
|
|
$
|
227
|
|
|
$
|
(15
|
)
|
|
$
|
757
|
|
|
$
|
(90
|
)
|
|
$
|
966
|
|
|
$
|
(251
|
)
|
|
$
|
715
|
|
Reserves (salvage)(4)
|
$
|
(103
|
)
|
|
$
|
(4
|
)
|
|
$
|
102
|
|
|
$
|
(18
|
)
|
|
$
|
(35
|
)
|
|
$
|
11
|
|
|
$
|
(47
|
)
|
|
$
|
153
|
|
|
$
|
106
|
|
|
BIG Categories
|
||||||||||||||||||||||||||||||||||
|
BIG 1
|
|
BIG 2
|
|
BIG 3
|
|
Total
BIG, Net
|
|
Effect of
Consolidating
FG VIEs
|
|
Total
|
||||||||||||||||||||||||
|
Gross
|
|
Ceded
|
|
Gross
|
|
Ceded
|
|
Gross
|
|
Ceded
|
|
|||||||||||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||||||||||
Number of risks(1)
|
171
|
|
|
(68
|
)
|
|
71
|
|
|
(26
|
)
|
|
126
|
|
|
(48
|
)
|
|
368
|
|
|
—
|
|
|
368
|
|
|||||||||
Remaining weighted-average contract period (in years)
|
10.0
|
|
|
9.2
|
|
|
13.7
|
|
|
20.5
|
|
|
9.2
|
|
|
6.4
|
|
|
10.4
|
|
|
—
|
|
|
10.4
|
|
|||||||||
Outstanding exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Principal
|
$
|
9,675
|
|
|
$
|
(1,378
|
)
|
|
$
|
3,732
|
|
|
$
|
(274
|
)
|
|
$
|
7,831
|
|
|
$
|
(627
|
)
|
|
$
|
18,959
|
|
|
$
|
—
|
|
|
$
|
18,959
|
|
Interest
|
4,309
|
|
|
(486
|
)
|
|
2,889
|
|
|
(405
|
)
|
|
2,486
|
|
|
(170
|
)
|
|
8,623
|
|
|
—
|
|
|
8,623
|
|
|||||||||
Total(2)
|
$
|
13,984
|
|
|
$
|
(1,864
|
)
|
|
$
|
6,621
|
|
|
$
|
(679
|
)
|
|
$
|
10,317
|
|
|
$
|
(797
|
)
|
|
$
|
27,582
|
|
|
$
|
—
|
|
|
$
|
27,582
|
|
Expected cash outflows (inflows)
|
$
|
1,731
|
|
|
$
|
(659
|
)
|
|
$
|
1,833
|
|
|
$
|
(121
|
)
|
|
$
|
2,423
|
|
|
$
|
(133
|
)
|
|
$
|
5,074
|
|
|
$
|
(998
|
)
|
|
$
|
4,076
|
|
Potential recoveries(3)
|
(1,798
|
)
|
|
664
|
|
|
(1,079
|
)
|
|
39
|
|
|
(2,041
|
)
|
|
100
|
|
|
(4,115
|
)
|
|
1,060
|
|
|
(3,055
|
)
|
|||||||||
Subtotal
|
(67
|
)
|
|
5
|
|
|
754
|
|
|
(82
|
)
|
|
382
|
|
|
(33
|
)
|
|
959
|
|
|
62
|
|
|
1,021
|
|
|||||||||
Discount
|
16
|
|
|
(5
|
)
|
|
(241
|
)
|
|
32
|
|
|
(125
|
)
|
|
2
|
|
|
(321
|
)
|
|
45
|
|
|
(276
|
)
|
|||||||||
Present value of expected cash flows
|
$
|
(51
|
)
|
|
$
|
0
|
|
|
$
|
513
|
|
|
$
|
(50
|
)
|
|
$
|
257
|
|
|
$
|
(31
|
)
|
|
$
|
638
|
|
|
$
|
107
|
|
|
$
|
745
|
|
Deferred premium revenue
|
$
|
261
|
|
|
$
|
(69
|
)
|
|
$
|
281
|
|
|
$
|
(12
|
)
|
|
$
|
992
|
|
|
$
|
(127
|
)
|
|
$
|
1,326
|
|
|
$
|
(391
|
)
|
|
$
|
935
|
|
Reserves (salvage)(4)
|
$
|
(97
|
)
|
|
$
|
7
|
|
|
$
|
320
|
|
|
$
|
(42
|
)
|
|
$
|
(110
|
)
|
|
$
|
7
|
|
|
$
|
85
|
|
|
$
|
196
|
|
|
$
|
281
|
|
(1)
|
A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making Debt Service payments. The ceded number of risks represents the number of risks for which the Company ceded a portion of its exposure.
|
(2)
|
Includes BIG amounts related to FG VIEs.
|
(3)
|
Includes estimated future recoveries for breaches of R&W as well as excess spread, and draws on HELOCs.
|
(4)
|
See table “Components of net reserves (salvage).”
|
8.
|
Fair Value Measurement
|
•
|
the profit the originator, usually an investment bank, realizes for putting the deal together and funding the transaction (“bank profit”);
|
•
|
premiums paid to the Company for the Company’s credit protection provided (“net spread”); and
|
•
|
the cost of CDS protection purchased by the originator to hedge their counterparty credit risk exposure to the Company (“hedge cost”).
|
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
||
Based on actual collateral specific spreads
|
6
|
%
|
|
5
|
%
|
Based on market indices
|
88
|
%
|
|
90
|
%
|
Provided by the CDS counterparty
|
6
|
%
|
|
5
|
%
|
Total
|
100
|
%
|
|
100
|
%
|
|
Scenario 1
|
|
Scenario 2
|
||||||||
|
bps
|
|
% of Total
|
|
bps
|
|
% of Total
|
||||
Original gross spread/cash bond price (in bps)
|
185
|
|
|
|
|
|
500
|
|
|
|
|
Bank profit (in bps)
|
115
|
|
|
62
|
%
|
|
50
|
|
|
10
|
%
|
Hedge cost (in bps)
|
30
|
|
|
16
|
%
|
|
440
|
|
|
88
|
%
|
The Company premium received per annum (in bps)
|
40
|
|
|
22
|
%
|
|
10
|
|
|
2
|
%
|
|
|
|
Fair Value Hierarchy
|
||||||||||||
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
(in millions)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investment portfolio, available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agencies
|
$
|
794
|
|
|
$
|
—
|
|
|
$
|
794
|
|
|
$
|
—
|
|
Obligations of state and political subdivisions
|
5,631
|
|
|
—
|
|
|
5,596
|
|
|
35
|
|
||||
Corporate securities
|
1,010
|
|
|
—
|
|
|
1,010
|
|
|
—
|
|
||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|||||||
RMBS
|
1,266
|
|
|
—
|
|
|
1,047
|
|
|
219
|
|
||||
CMBS
|
520
|
|
|
—
|
|
|
520
|
|
|
—
|
|
||||
Asset-backed securities
|
531
|
|
|
—
|
|
|
225
|
|
|
306
|
|
||||
Foreign government securities
|
304
|
|
|
—
|
|
|
304
|
|
|
—
|
|
||||
Total fixed maturity securities
|
10,056
|
|
|
—
|
|
|
9,496
|
|
|
560
|
|
||||
Short-term investments
|
817
|
|
|
446
|
|
|
371
|
|
|
—
|
|
||||
Other invested assets(1)
|
120
|
|
|
—
|
|
|
112
|
|
|
8
|
|
||||
Credit derivative assets
|
141
|
|
|
—
|
|
|
—
|
|
|
141
|
|
||||
FG VIEs’ assets, at fair value
|
2,688
|
|
|
—
|
|
|
—
|
|
|
2,688
|
|
||||
Other assets(2)
|
65
|
|
|
24
|
|
|
5
|
|
|
36
|
|
||||
Total assets carried at fair value
|
$
|
13,887
|
|
|
$
|
470
|
|
|
$
|
9,984
|
|
|
$
|
3,433
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit derivative liabilities
|
$
|
1,934
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,934
|
|
FG VIEs’ liabilities with recourse, at fair value
|
2,090
|
|
|
—
|
|
|
—
|
|
|
2,090
|
|
||||
FG VIEs’ liabilities without recourse, at fair value
|
1,051
|
|
|
—
|
|
|
—
|
|
|
1,051
|
|
||||
Total liabilities carried at fair value
|
$
|
5,075
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,075
|
|
|
|
|
Fair Value Hierarchy
|
||||||||||||
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
(in millions)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investment portfolio, available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturity securities
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agencies
|
$
|
922
|
|
|
$
|
—
|
|
|
$
|
922
|
|
|
$
|
—
|
|
Obligations of state and political subdivisions
|
5,456
|
|
|
—
|
|
|
5,446
|
|
|
10
|
|
||||
Corporate securities
|
1,038
|
|
|
—
|
|
|
1,038
|
|
|
—
|
|
||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
RMBS
|
1,428
|
|
|
—
|
|
|
1,294
|
|
|
134
|
|
||||
CMBS
|
500
|
|
|
—
|
|
|
500
|
|
|
—
|
|
||||
Asset-backed securities
|
458
|
|
|
—
|
|
|
223
|
|
|
235
|
|
||||
Foreign government securities
|
340
|
|
|
—
|
|
|
340
|
|
|
—
|
|
||||
Total fixed maturity securities
|
10,142
|
|
|
—
|
|
|
9,763
|
|
|
379
|
|
||||
Short-term investments
|
734
|
|
|
210
|
|
|
524
|
|
|
—
|
|
||||
Other invested assets(1)
|
43
|
|
|
—
|
|
|
32
|
|
|
11
|
|
||||
Credit derivative assets
|
153
|
|
|
—
|
|
|
—
|
|
|
153
|
|
||||
FG VIEs’ assets, at fair value
|
2,819
|
|
|
—
|
|
|
—
|
|
|
2,819
|
|
||||
Other assets(2)
|
80
|
|
|
26
|
|
|
—
|
|
|
54
|
|
||||
Total assets carried at fair value
|
$
|
13,971
|
|
|
$
|
236
|
|
|
$
|
10,319
|
|
|
$
|
3,416
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit derivative liabilities
|
$
|
1,457
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,457
|
|
FG VIEs’ liabilities with recourse, at fair value
|
2,397
|
|
|
—
|
|
|
—
|
|
|
2,397
|
|
||||
FG VIEs’ liabilities without recourse, at fair value
|
1,061
|
|
|
—
|
|
|
—
|
|
|
1,061
|
|
||||
Total liabilities carried at fair value
|
$
|
4,915
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,915
|
|
(1)
|
Includes mortgage loans that are recorded at fair value on a non-recurring basis. At
December 31, 2012
and
December 31, 2011
, such investments were carried at their market value of
$7 million
and
$9 million
, respectively.
|
|
Fixed Maturity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
|
Obligations
of State and Political Subdivisions |
|
RMBS
|
|
Asset-
Backed Securities |
|
Other
Invested Assets |
|
FG VIEs’
Assets at Fair Value |
|
Other
Assets |
|
Credit
Derivative Asset (Liability), net(5) |
|
FG VIEs' Liabilities
with Recourse, at Fair Value |
|
FG VIEs’ Liabilities
without Recourse, at Fair Value |
|
||||||||||||||||||||||||||
|
(in millions)
|
|||||||||||||||||||||||||||||||||||||||||||
Fair value as of December 31, 2011
|
$
|
10
|
|
|
|
$
|
134
|
|
|
|
$
|
235
|
|
|
|
$
|
2
|
|
|
$
|
2,819
|
|
|
|
$
|
54
|
|
|
|
$
|
(1,304
|
)
|
|
$
|
(2,397
|
)
|
|
$
|
(1,061
|
)
|
|
|||
Total pretax realized and unrealized gains/(losses) recorded in:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income (loss)
|
1
|
|
(2
|
)
|
11
|
|
(2
|
)
|
29
|
|
(2
|
)
|
0
|
|
|
403
|
|
(3
|
)
|
(18
|
)
|
(4
|
)
|
(585
|
)
|
(6
|
)
|
(264
|
)
|
(3
|
)
|
(195
|
)
|
(3
|
)
|
|||||||||
Other comprehensive income (loss)
|
(10
|
)
|
|
|
16
|
|
|
|
30
|
|
|
|
(1
|
)
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|||||||||
Purchases
|
34
|
|
|
|
108
|
|
|
|
40
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|||||||||
Settlements
|
—
|
|
|
(50
|
)
|
|
(28
|
)
|
|
—
|
|
|
(549
|
)
|
|
—
|
|
|
|
96
|
|
|
|
507
|
|
|
|
205
|
|
|
|
|||||||||||||
FG VIE consolidations
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
15
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(18
|
)
|
|
—
|
|
|
|
||||||||||
FG VIE elimination
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
82
|
|
|
—
|
|
|
|||||||||||||||||
Fair value as of December 31, 2012
|
$
|
35
|
|
|
|
$
|
219
|
|
|
|
$
|
306
|
|
|
|
$
|
1
|
|
|
$
|
2,688
|
|
|
|
$
|
36
|
|
|
|
$
|
(1,793
|
)
|
|
$
|
(2,090
|
)
|
|
$
|
(1,051
|
)
|
|
|||
Change in unrealized gains/(losses) related to financial instruments held as of December 31, 2012
|
$
|
(10
|
)
|
|
$
|
11
|
|
|
$
|
33
|
|
|
$
|
(1
|
)
|
|
$
|
674
|
|
|
$
|
(18
|
)
|
|
$
|
(480
|
)
|
|
$
|
(608
|
)
|
|
$
|
50
|
|
|
|
Fixed Maturity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
|
Obligations of state and political subdivisions
|
|
RMBS
|
|
Asset Backed Securities
|
|
Other
Invested Assets |
|
FG VIEs’
Assets at Fair Value |
|
Other
Assets |
|
Credit
Derivative Asset (Liability), net(5) |
|
FG VIEs’ Liabilities
with Recourse, at Fair Value |
|
FG VIEs’ Liabilities
without Recourse, at Fair Value |
|
||||||||||||||||||||||||
|
(in millions)
|
|||||||||||||||||||||||||||||||||||||||||
Fair value as of December 31, 2010
|
$
|
—
|
|
|
$
|
100
|
|
|
|
$
|
210
|
|
|
|
$
|
2
|
|
|
$
|
3,657
|
|
|
|
$
|
—
|
|
|
$
|
(1,870
|
)
|
|
|
$
|
(3,031
|
)
|
|
(1,337
|
)
|
|
|||
Total pretax realized and unrealized gains/(losses) recorded in:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net income (loss)
|
—
|
|
|
(23
|
)
|
(2
|
)
|
(8
|
)
|
(2
|
)
|
—
|
|
|
(314
|
)
|
(3
|
)
|
34
|
|
(4
|
)
|
560
|
|
(6
|
)
|
80
|
|
(3
|
)
|
56
|
|
(3
|
)
|
||||||||
Other comprehensive income (loss)
|
1
|
|
|
(94
|
)
|
|
|
9
|
|
|
|
0
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|||||||||
Purchases
|
9
|
|
|
254
|
|
|
|
47
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|||||||||
Sales
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|||||||||||||||
Settlements
|
—
|
|
|
(35
|
)
|
|
(23
|
)
|
|
0
|
|
|
(806
|
)
|
|
—
|
|
|
6
|
|
|
|
826
|
|
|
|
283
|
|
|
|
||||||||||||
FG VIE consolidations
|
—
|
|
|
(64
|
)
|
|
|
—
|
|
|
|
—
|
|
|
282
|
|
|
|
—
|
|
|
—
|
|
|
|
(272
|
)
|
|
(63
|
)
|
|
|
||||||||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|||||||||||||||
Fair value as of December 31, 2011
|
$
|
10
|
|
|
$
|
134
|
|
|
|
$
|
235
|
|
|
|
$
|
2
|
|
|
$
|
2,819
|
|
|
|
$
|
54
|
|
|
$
|
(1,304
|
)
|
|
|
$
|
(2,397
|
)
|
|
(1,061
|
)
|
|
|||
Change in unrealized gains/(losses) related to financial instruments held as of December 31, 2011
|
$
|
—
|
|
|
$
|
(93
|
)
|
|
$
|
9
|
|
|
$
|
0
|
|
|
$
|
161
|
|
|
$
|
34
|
|
|
$
|
570
|
|
|
$
|
88
|
|
|
(78
|
)
|
|
(1)
|
Realized and unrealized gains (losses) from changes in values of Level 3 financial instruments represent gains (losses) from changes in values of those financial instruments only for the periods in which the instruments were classified as Level 3.
|
(2)
|
Included in net realized investment gains (losses) and net investment income.
|
(3)
|
Included in fair value gains (losses) on FG VIEs.
|
(4)
|
Recorded in fair value gains (losses) on committed capital securities.
|
(5)
|
Represents net position of credit derivatives. The consolidated balance sheet presents gross assets and liabilities based on net counterparty exposure.
|
(6)
|
Reported in net change in fair value of credit derivatives.
|
Financial Instrument Description
|
|
(in millions)
|
|
Valuation
Technique |
|
Significant Unobservable Inputs
|
|
Range
|
||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Obligations of state and political subdivisions
|
|
$
|
35
|
|
|
Discounted
|
|
Rate of inflation
|
|
1.0
|
%
|
-
|
3.0%
|
|
|
|
cash flow
|
|
Cash flow receipts
|
4.9
|
%
|
-
|
85.8%
|
||||||
|
|
|
|
Discount rates
|
4.3
|
%
|
|
9.0%
|
||||||
|
|
|
|
Collateral recovery period
|
1 month
|
|
-
|
43 years
|
||||||
|
|
|
|
|
|
|
|
|
|
|
||||
RMBS
|
|
219
|
|
|
Discounted
|
|
CPR
|
|
0.8
|
%
|
-
|
7.5%
|
||
|
|
cash flow
|
|
CDR
|
|
4.4
|
%
|
-
|
28.6%
|
|||||
|
|
|
|
Severity
|
|
48.1
|
%
|
-
|
102.8%
|
|||||
|
|
|
|
Yield
|
|
3.5
|
%
|
-
|
12.8%
|
|||||
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
||||
Whole business securitization
|
|
63
|
|
|
Discounted cash flow
|
|
Annual gross revenue projections (in millions)
|
|
|
$54
|
|
-
|
$96
|
|
|
|
|
Value of primary financial guaranty policy
|
|
43.8%
|
|||||||||
|
|
|
Liquidity discount
|
|
5.0
|
%
|
-
|
20.0%
|
||||||
|
|
|
|
|
|
|
|
|
|
|
||||
Investor owned utility
|
|
186
|
|
|
Discounted cash flow
|
|
Liquidation value (in millions)
|
|
|
$212
|
|
-
|
$242
|
|
|
|
|
Years to liquidation
|
|
0 years
|
|
-
|
3 years
|
||||||
|
|
|
Discount factor
|
|
15.3%
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
||||
XXX life insurance transactions
|
|
57
|
|
|
Discounted
|
|
Yield
|
|
12.5%
|
|||||
|
|
cash flow
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
||||
Other invested assets
|
|
8
|
|
|
Discounted cash flow
|
|
Discount for lack of liquidity
|
|
10.0
|
%
|
-
|
20.0%
|
||
|
|
|
Recovery on delinquent loans
|
|
20.0
|
%
|
-
|
60.0%
|
||||||
|
|
|
Default rates
|
|
1.0
|
%
|
-
|
12.0%
|
||||||
|
|
|
Loss severity
|
|
40.0
|
%
|
-
|
90.0%
|
||||||
|
|
|
Prepayment speeds
|
|
6.0
|
%
|
-
|
15.0%
|
||||||
|
|
|
|
|
|
|
|
|
|
|
||||
FG VIEs’ assets, at fair value
|
|
2,688
|
|
|
Discounted
|
|
CPR
|
|
0.5
|
%
|
-
|
10.9%
|
||
|
|
cash flow
|
|
CDR
|
|
3.0
|
%
|
-
|
28.6%
|
|||||
|
|
|
|
Loss severity
|
|
37.5
|
%
|
-
|
103.8%
|
|||||
|
|
|
|
Yield
|
|
4.5
|
%
|
-
|
20.0%
|
Financial Instrument Description
|
|
Fair Value at
December 31, 2012 (in millions) |
|
Valuation
Technique |
|
Significant Unobservable Inputs
|
|
Range
|
||||
Other assets
|
|
36
|
|
|
Discounted cash flow
|
|
Quotes from third party pricing
|
|
$38
|
-
|
$51
|
|
|
|
|
|
Term (years)
|
|
3 years
|
||||||
|
|
|
|
|
|
|
|
|
|
|
||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit derivative liabilities, net
|
|
(1,793
|
)
|
|
Discounted
|
|
Year 1 loss estimates
|
|
0.0
|
%
|
-
|
58.7%
|
|
|
|
cash flow
|
|
Hedge cost (in bps)
|
|
64.2
|
|
-
|
678.4
|
||
|
|
|
|
|
Bank profit (in bps)
|
|
1.0
|
|
-
|
1,312.9
|
||
|
|
|
|
|
Internal floor (in bps)
|
|
7.0
|
|
-
|
60.0
|
||
|
|
|
|
|
Internal credit rating
|
|
AAA
|
|
-
|
BIG
|
||
|
|
|
|
|
|
|
|
|
|
|
||
FG VIEs’ liabilities, at fair value
|
|
(3,141
|
)
|
|
Discounted
|
|
CPR
|
|
0.5
|
%
|
-
|
10.9%
|
|
|
cash flow
|
|
CDR
|
|
3.0
|
%
|
-
|
28.6%
|
|||
|
|
|
|
Loss severity
|
|
37.5
|
%
|
-
|
103.8%
|
|||
|
|
|
|
Yield
|
|
4.5
|
%
|
-
|
20.0%
|
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
||||||||||||
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
||||||||
|
(in millions)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturity securities
|
$
|
10,056
|
|
|
$
|
10,056
|
|
|
$
|
10,142
|
|
|
$
|
10,142
|
|
Short-term investments
|
817
|
|
|
817
|
|
|
734
|
|
|
734
|
|
||||
Other invested assets
|
177
|
|
|
182
|
|
|
170
|
|
|
182
|
|
||||
Credit derivative assets
|
141
|
|
|
141
|
|
|
153
|
|
|
153
|
|
||||
FG VIEs’ assets, at fair value
|
2,688
|
|
|
2,688
|
|
|
2,819
|
|
|
2,819
|
|
||||
Other assets
|
166
|
|
|
166
|
|
|
186
|
|
|
186
|
|
||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial guaranty insurance contracts(1)
|
3,918
|
|
|
6,537
|
|
|
4,657
|
|
|
4,313
|
|
||||
Long-term debt
|
836
|
|
|
1,091
|
|
|
1,038
|
|
|
1,186
|
|
||||
Credit derivative liabilities
|
1,934
|
|
|
1,934
|
|
|
1,457
|
|
|
1,457
|
|
||||
FG VIEs’ liabilities with recourse, at fair value
|
2,090
|
|
|
2,090
|
|
|
2,397
|
|
|
2,397
|
|
||||
FG VIEs’ liabilities without recourse, at fair value
|
1,051
|
|
|
1,051
|
|
|
1,061
|
|
|
1,061
|
|
||||
Other liabilities
|
47
|
|
|
47
|
|
|
16
|
|
|
16
|
|
(1)
|
Carrying amount includes the the assets and liabilities related to financial guaranty insurance contract premiums, losses, and salvage and subrogation and other recoverables net of reinsurance.
|
9.
|
Financial Guaranty Contracts Accounted for as Credit Derivatives
|
|
|
As of December 31, 2012
|
|
As of December 31, 2011
|
||||||||||||||||||||
Asset Type
|
|
Net Par
Outstanding
|
|
Original
Subordination(1)
|
|
Current
Subordination(1)
|
|
Weighted
Average
Credit
Rating
|
|
Net Par
Outstanding
|
|
Original
Subordination(1)
|
|
Current
Subordination(1)
|
|
Weighted
Average
Credit
Rating
|
||||||||
|
|
(dollars in millions)
|
||||||||||||||||||||||
Pooled corporate obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Collateralized loan obligation/collateral bond obligations
|
|
$
|
29,142
|
|
|
32.8
|
%
|
|
33.3
|
%
|
|
AAA
|
|
$
|
34,567
|
|
|
32.6
|
%
|
|
32.0
|
%
|
|
AAA
|
Synthetic investment grade pooled corporate
|
|
9,658
|
|
|
21.6
|
|
|
19.7
|
|
|
AAA
|
|
12,393
|
|
|
20.4
|
|
|
18.7
|
|
|
AAA
|
||
Synthetic high yield pooled corporate
|
|
3,626
|
|
|
35.0
|
|
|
30.3
|
|
|
AAA
|
|
5,049
|
|
|
35.7
|
|
|
30.3
|
|
|
AA+
|
||
TruPS CDOs
|
|
4,099
|
|
|
46.5
|
|
|
32.7
|
|
|
BB
|
|
4,518
|
|
|
46.6
|
|
|
31.9
|
|
|
BB
|
||
Market value CDOs of corporate obligations
|
|
3,595
|
|
|
30.1
|
|
|
32.0
|
|
|
AAA
|
|
4,546
|
|
|
30.6
|
|
|
28.9
|
|
|
AAA
|
||
Total pooled corporate obligations
|
|
50,120
|
|
|
31.7
|
|
|
30.4
|
|
|
AAA
|
|
61,073
|
|
|
31.2
|
|
|
28.9
|
|
|
AAA
|
||
U.S. RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Option ARM and Alt-A first lien
|
|
3,381
|
|
|
20.2
|
|
|
10.4
|
|
|
B+
|
|
4,060
|
|
|
19.6
|
|
|
13.6
|
|
|
BB-
|
||
Subprime first lien
|
|
3,494
|
|
|
29.8
|
|
|
52.6
|
|
|
A+
|
|
4,012
|
|
|
30.1
|
|
|
53.9
|
|
|
A+
|
||
Prime first lien
|
|
333
|
|
|
10.9
|
|
|
5.2
|
|
|
B
|
|
398
|
|
|
10.9
|
|
|
8.4
|
|
|
B
|
||
Closed end second lien and HELOCs
|
|
49
|
|
|
—
|
|
|
—
|
|
|
B-
|
|
62
|
|
|
—
|
|
|
—
|
|
|
B
|
||
Total U.S. RMBS
|
|
7,257
|
|
|
24.2
|
|
|
30.4
|
|
|
BBB
|
|
8,532
|
|
|
24.1
|
|
|
32.2
|
|
|
BBB
|
||
CMBS
|
|
4,094
|
|
|
33.3
|
|
|
41.8
|
|
|
AAA
|
|
4,612
|
|
|
32.6
|
|
|
38.9
|
|
|
AAA
|
||
Other
|
|
9,310
|
|
|
|
|
|
|
|
|
A-
|
|
10,830
|
|
|
—
|
|
|
—
|
|
|
A
|
||
Total
|
|
$
|
70,781
|
|
|
|
|
|
|
|
|
AA+
|
|
$
|
85,047
|
|
|
|
|
|
|
|
|
AA+
|
(1)
|
Represents the sum of subordinate tranches and over-collateralization and does not include any benefit from excess interest collections that may be used to absorb losses.
|
|
|
As of December 31, 2012
|
|
As of December 31, 2011
|
||||||||||
Ratings
|
|
Net Par
Outstanding
|
|
% of Total
|
|
Net Par
Outstanding
|
|
% of Total
|
||||||
|
|
(dollars in millions)
|
||||||||||||
Super Senior
|
|
$
|
18,908
|
|
|
26.7
|
%
|
|
$
|
21,802
|
|
|
25.6
|
%
|
AAA
|
|
32,010
|
|
|
45.2
|
|
|
40,240
|
|
|
47.3
|
|
||
AA
|
|
3,083
|
|
|
4.4
|
|
|
4,342
|
|
|
5.1
|
|
||
A
|
|
5,487
|
|
|
7.8
|
|
|
5,830
|
|
|
6.9
|
|
||
BBB
|
|
4,584
|
|
|
6.4
|
|
|
5,030
|
|
|
5.9
|
|
||
BIG
|
|
6,709
|
|
|
9.5
|
|
|
7,803
|
|
|
9.2
|
|
||
Total credit derivative net par outstanding
|
|
$
|
70,781
|
|
|
100.0
|
%
|
|
$
|
85,047
|
|
|
100.0
|
%
|
|
|
As of December 31, 2012
|
|
Net Change in Unrealized Gain (Loss)
|
||||||||||||
Vintage
|
|
Net Par
Outstanding
|
|
Original
Subordination(1)
|
|
Current
Subordination(1)
|
|
Weighted
Average
Credit Rating
|
|
Year Ended December 31, 2012
|
||||||
|
|
(in millions)
|
|
|
|
|
|
|
|
(in millions)
|
||||||
2004 and Prior
|
|
$
|
124
|
|
|
6.4
|
%
|
|
19.2
|
%
|
|
BBB+
|
|
$
|
3
|
|
2005
|
|
2,036
|
|
|
31.2
|
|
|
66.3
|
|
|
AA+
|
|
12
|
|
||
2006
|
|
1,572
|
|
|
29.4
|
|
|
34.5
|
|
|
A-
|
|
(63
|
)
|
||
2007
|
|
3,525
|
|
|
18.5
|
|
|
8.2
|
|
|
B
|
|
(503
|
)
|
||
Total
|
|
$
|
7,257
|
|
|
24.2
|
%
|
|
30.4
|
%
|
|
BBB
|
|
$
|
(551
|
)
|
(1)
|
Represents the sum of subordinate tranches and overcollateralization and does not include any benefit from excess interest collections that may be used to absorb losses.
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Net credit derivative premiums received and receivable
|
$
|
127
|
|
|
$
|
185
|
|
|
$
|
207
|
|
Net ceding commissions (paid and payable) received and receivable
|
1
|
|
|
3
|
|
|
3
|
|
|||
Realized gains on credit derivatives
|
128
|
|
|
188
|
|
|
210
|
|
|||
Terminations
|
(1
|
)
|
|
(23
|
)
|
|
—
|
|
|||
Net credit derivative losses (paid and payable) recovered and recoverable
|
(235
|
)
|
|
(159
|
)
|
|
(57
|
)
|
|||
Total realized gains (losses) and other settlements on credit derivatives
|
(108
|
)
|
|
6
|
|
|
153
|
|
|||
Net unrealized gains (losses) on credit derivatives
|
(477
|
)
|
|
554
|
|
|
(155
|
)
|
|||
Net change in fair value of credit derivatives
|
$
|
(585
|
)
|
|
$
|
560
|
|
|
$
|
(2
|
)
|
|
|
Year Ended December 31,
|
||||||||||
Asset Type
|
|
2012
|
|
2011
|
|
2010
|
||||||
|
|
(in millions)
|
||||||||||
|
|
|
|
|
|
|
||||||
Pooled corporate obligations:
|
|
|
|
|
|
|
||||||
CLOs/Collateral bond obligations
|
|
$
|
6
|
|
|
$
|
10
|
|
|
$
|
2
|
|
Synthetic investment grade pooled corporate
|
|
18
|
|
|
16
|
|
|
(2
|
)
|
|||
Synthetic high yield pooled corporate
|
|
21
|
|
|
(1
|
)
|
|
11
|
|
|||
TruPS CDOs
|
|
15
|
|
|
14
|
|
|
59
|
|
|||
Market value CDOs of corporate obligations
|
|
(1
|
)
|
|
0
|
|
|
0
|
|
|||
Total pooled corporate obligations
|
|
59
|
|
|
39
|
|
|
70
|
|
|||
U.S. RMBS:
|
|
|
|
|
|
|
||||||
Option ARMs and Alt-A first lien
|
|
(447
|
)
|
|
300
|
|
|
(281
|
)
|
|||
Subprime first lien
|
|
(55
|
)
|
|
24
|
|
|
(10
|
)
|
|||
Prime first lien
|
|
(54
|
)
|
|
47
|
|
|
(8
|
)
|
|||
Closed end second lien and HELOCs
|
|
5
|
|
|
10
|
|
|
(2
|
)
|
|||
Total U.S. RMBS
|
|
(551
|
)
|
|
381
|
|
|
(301
|
)
|
|||
CMBS
|
|
2
|
|
|
11
|
|
|
10
|
|
|||
Other
|
|
13
|
|
|
123
|
|
|
66
|
|
|||
Total
|
|
$
|
(477
|
)
|
|
$
|
554
|
|
|
$
|
(155
|
)
|
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
|
As of
December 31, 2010 |
|||
Quoted price of CDS contract (in basis points):
|
|
|
|
|
|
|
|
|
AGC
|
678
|
|
|
1,140
|
|
|
804
|
|
AGM
|
536
|
|
|
778
|
|
|
650
|
|
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
||||
|
(in millions)
|
||||||
Credit derivative assets
|
$
|
141
|
|
|
$
|
153
|
|
Credit derivative liabilities
|
(1,934
|
)
|
|
(1,457
|
)
|
||
Net fair value of credit derivatives
|
$
|
(1,793
|
)
|
|
$
|
(1,304
|
)
|
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
||||
|
(in millions)
|
||||||
Fair value of credit derivatives before effect of AGC and AGM credit spreads
|
$
|
(4,809
|
)
|
|
$
|
(5,596
|
)
|
Plus: Effect of AGC and AGM credit spreads
|
3,016
|
|
|
4,292
|
|
||
Net fair value of credit derivatives
|
$
|
(1,793
|
)
|
|
$
|
(1,304
|
)
|
|
|
Fair Value of Credit Derivative
Asset (Liability), net
|
|
Present Value of Expected Claim
(Payments) Recoveries(1)
|
||||||||||||
Asset Type
|
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
||||||||
|
|
(in millions)
|
||||||||||||||
Pooled corporate obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
CLOs/ Collateralized bond obligations
|
|
$
|
3
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Synthetic investment grade pooled corporate
|
|
(5
|
)
|
|
(24
|
)
|
|
—
|
|
|
—
|
|
||||
Synthetic high-yield pooled corporate
|
|
3
|
|
|
(16
|
)
|
|
—
|
|
|
(5
|
)
|
||||
TruPS CDOs
|
|
3
|
|
|
(12
|
)
|
|
(16
|
)
|
|
(40
|
)
|
||||
Market value CDOs of corporate obligations
|
|
2
|
|
|
3
|
|
|
—
|
|
|
—
|
|
||||
Total pooled corporate obligations
|
|
6
|
|
|
(50
|
)
|
|
(16
|
)
|
|
(45
|
)
|
||||
U.S. RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Option ARM and Alt-A first lien
|
|
(1,076
|
)
|
|
(596
|
)
|
|
(121
|
)
|
|
(191
|
)
|
||||
Subprime first lien
|
|
(52
|
)
|
|
(23
|
)
|
|
(70
|
)
|
|
(95
|
)
|
||||
Prime first lien
|
|
(99
|
)
|
|
(44
|
)
|
|
—
|
|
|
—
|
|
||||
Closed-end second lien and HELOCs
|
|
(10
|
)
|
|
(15
|
)
|
|
10
|
|
|
7
|
|
||||
Total U.S. RMBS
|
|
(1,237
|
)
|
|
(678
|
)
|
|
(181
|
)
|
|
(279
|
)
|
||||
CMBS
|
|
(2
|
)
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
||||
Other
|
|
(560
|
)
|
|
(571
|
)
|
|
(85
|
)
|
|
(95
|
)
|
||||
Total
|
|
$
|
(1,793
|
)
|
|
$
|
(1,304
|
)
|
|
$
|
(282
|
)
|
|
$
|
(419
|
)
|
(1)
|
Represents amount in excess of the present value of future installment fees to be received of $
43 million
as of
December 31, 2012
and $
47 million
as of
December 31, 2011
. Includes R&W benefit of $
237 million
as of
December 31, 2012
and $
215 million
as of
December 31, 2011
.
|
•
|
For approximately
$12.8 billion
of such contracts, AGC has negotiated caps such that, after giving effect to the January 2013 Moody's downgrade of AGC, the posting requirement cannot exceed a certain fixed amount, regardless of the mark-to-market valuation of the exposure or the financial strength ratings of AGC. For such contracts, AGC need not post on a cash basis more than
$675 million
, which amount is already being posted by AGC and is part of the approximately
$728 million
posted by the Company's insurance subsidiaries.
|
•
|
For the remaining approximately $
400 million
of such contracts, AGC could be required from time to time to post additional collateral based on movements in the mark-to-market valuation of the underlying exposure. Of the
$728 million
being posted by the Company's insurance subsidiaries, approximately
$68 million
relate to such
$400 million
of notional.
|
Credit Spreads(1)
|
|
Estimated Net
Fair Value
(Pre-Tax)
|
|
Estimated Change
in Gain/(Loss)
(Pre-Tax)
|
||||
|
|
(in millions)
|
||||||
100% widening in spreads
|
|
$
|
(3,765
|
)
|
|
$
|
(1,972
|
)
|
50% widening in spreads
|
|
(2,777
|
)
|
|
(984
|
)
|
||
25% widening in spreads
|
|
(2,283
|
)
|
|
(490
|
)
|
||
10% widening in spreads
|
|
(1,987
|
)
|
|
(194
|
)
|
||
Base Scenario
|
|
(1,793
|
)
|
|
—
|
|
||
10% narrowing in spreads
|
|
(1,634
|
)
|
|
159
|
|
||
25% narrowing in spreads
|
|
(1,402
|
)
|
|
391
|
|
||
50% narrowing in spreads
|
|
(1,028
|
)
|
|
765
|
|
(1)
|
Includes the effects of spreads on both the underlying asset classes and the Company’s own credit spread.
|
10.
|
Consolidation of Variable Interest Entities
|
|
Year Ended December 31,
|
|||||||
|
2012
|
|
2011
|
|
2010
|
|||
|
|
|||||||
Beginning of the year
|
33
|
|
|
29
|
|
|
21
|
|
Consolidated(1)
|
2
|
|
|
8
|
|
|
10
|
|
Deconsolidated(1)
|
—
|
|
|
—
|
|
|
(2
|
)
|
Matured
|
(2
|
)
|
|
(4
|
)
|
|
—
|
|
End of the year
|
33
|
|
33
|
|
29
|
(1)
|
Net loss on consolidation and deconsolidation was
$6 million
in 2012,
$95 million
in 2011 and
$242 million
in 2010 and recorded in “fair value gains (losses) on FG VIEs” in the consolidated statement of operations.
|
|
As of December 31, 2012
|
|
As of December 31, 2011
|
||||||||||||||||||
|
Number of
FG VIEs
|
|
Assets
|
|
Liabilities
|
|
Number of
FG VIEs
|
|
Assets
|
|
Liabilities
|
||||||||||
|
(dollars in millions)
|
||||||||||||||||||||
With recourse:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
HELOCs
|
8
|
|
|
$
|
525
|
|
|
$
|
786
|
|
|
8
|
|
|
$
|
573
|
|
|
$
|
908
|
|
First liens:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Alt-A first lien
|
5
|
|
|
200
|
|
|
162
|
|
|
5
|
|
|
176
|
|
|
169
|
|
||||
Option ARM
|
2
|
|
|
42
|
|
|
170
|
|
|
2
|
|
|
50
|
|
|
244
|
|
||||
Subprime
|
7
|
|
|
399
|
|
|
493
|
|
|
5
|
|
|
387
|
|
|
473
|
|
||||
Closed-end second lien
|
8
|
|
|
85
|
|
|
129
|
|
|
8
|
|
|
126
|
|
|
157
|
|
||||
Automobile loans
|
2
|
|
|
39
|
|
|
39
|
|
|
4
|
|
|
156
|
|
|
156
|
|
||||
Life insurance
|
1
|
|
|
311
|
|
|
311
|
|
|
1
|
|
|
290
|
|
|
290
|
|
||||
Total with recourse
|
33
|
|
|
1,601
|
|
|
2,090
|
|
|
33
|
|
|
1,758
|
|
|
2,397
|
|
||||
Without recourse
|
—
|
|
|
1,087
|
|
|
1,051
|
|
|
—
|
|
|
1,061
|
|
|
1,061
|
|
||||
Total
|
33
|
|
|
$
|
2,688
|
|
|
$
|
3,141
|
|
|
33
|
|
|
$
|
2,819
|
|
|
$
|
3,458
|
|
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
||||
|
(in millions)
|
||||||
Gross unpaid principal for FG VIEs’ liabilities with recourse
|
$
|
2,808
|
|
|
$
|
3,796
|
|
Contractual Maturity
|
|
As of
December 31, 2012 |
||
|
|
(in millions)
|
||
2013
|
|
$
|
—
|
|
2014
|
|
39
|
|
|
2015
|
|
—
|
|
|
2016
|
|
—
|
|
|
2017
|
|
—
|
|
|
Thereafter
|
|
2,769
|
|
|
Total
|
|
$
|
2,808
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Net earned premiums
|
$
|
(153
|
)
|
|
$
|
(75
|
)
|
|
$
|
(48
|
)
|
Net investment income
|
(13
|
)
|
|
(8
|
)
|
|
—
|
|
|||
Net realized investment gains (losses)
|
4
|
|
|
12
|
|
|
—
|
|
|||
Fair value gains (losses) on FG VIEs
|
210
|
|
|
(132
|
)
|
|
(274
|
)
|
|||
Loss and LAE
|
46
|
|
|
93
|
|
|
66
|
|
|||
Total pretax effect on net income
|
94
|
|
|
(110
|
)
|
|
(256
|
)
|
|||
Less: tax provision (benefit)
|
32
|
|
|
(38
|
)
|
|
(90
|
)
|
|||
Total effect on net income (loss)
|
$
|
62
|
|
|
$
|
(72
|
)
|
|
$
|
(166
|
)
|
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
||||
|
(in millions)
|
||||||
Total (decrease) increase on shareholders’ equity
|
$
|
(348
|
)
|
|
$
|
(405
|
)
|
11.
|
Investments and Cash
|
•
|
a decline in the market value of a security by
20%
or more below amortized cost for a continuous period of at least six months;
|
•
|
a decline in the market value of a security for a continuous period of
12
months;
|
•
|
recent credit downgrades of the applicable security or the issuer by rating agencies;
|
•
|
the financial condition of the applicable issuer;
|
•
|
whether loss of investment principal is anticipated;
|
•
|
the impact of foreign exchange rates;
|
•
|
whether scheduled interest payments are past due; and
|
•
|
whether we have the intent to sell the security prior to its recovery in fair value.
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Income from fixed maturity securities
|
$
|
407
|
|
|
$
|
399
|
|
|
$
|
360
|
|
Income from short-term investments
|
1
|
|
|
1
|
|
|
3
|
|
|||
Income from assets acquired in refinancing transactions
|
5
|
|
|
5
|
|
|
7
|
|
|||
Gross investment income
|
413
|
|
|
405
|
|
|
370
|
|
|||
Investment expenses
|
(9
|
)
|
|
(9
|
)
|
|
(9
|
)
|
|||
Net investment income
|
$
|
404
|
|
|
$
|
396
|
|
|
$
|
361
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Realized gains on investment portfolio
|
$
|
42
|
|
|
$
|
36
|
|
|
$
|
31
|
|
Realized losses on investment portfolio
|
(24
|
)
|
|
(9
|
)
|
|
(6
|
)
|
|||
OTTI
|
|
|
|
|
|
||||||
Intent to sell
|
0
|
|
|
(5
|
)
|
|
(4
|
)
|
|||
Credit component of OTTI securities
|
(17
|
)
|
|
(40
|
)
|
|
(23
|
)
|
|||
OTTI
|
(17
|
)
|
|
(45
|
)
|
|
(27
|
)
|
|||
Net realized investment gains (losses)
|
$
|
1
|
|
|
$
|
(18
|
)
|
|
$
|
(2
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Balance, beginning of period
|
$
|
47
|
|
|
$
|
27
|
|
|
$
|
20
|
|
Additions for credit losses on securities for which an OTTI was not previously recognized
|
14
|
|
|
27
|
|
|
7
|
|
|||
Eliminations of securities issued by FG VIEs
|
—
|
|
|
(14
|
)
|
|
—
|
|
|||
Reductions for securities sold during the period
|
—
|
|
|
(6
|
)
|
|
—
|
|
|||
Additions for credit losses on securities for which an OTTI was previously recognized
|
3
|
|
|
13
|
|
|
0
|
|
|||
Balance, end of period
|
$
|
64
|
|
|
$
|
47
|
|
|
$
|
27
|
|
(1)
|
Based on amortized cost.
|
(2)
|
Accumulated Other Comprehensive Income ("AOCI").
|
(3)
|
Ratings in the tables above represent the lower of the Moody’s and S&P classifications except for bonds purchased for loss mitigation or risk management strategies, which use internal ratings classifications. The Company’s portfolio consists primarily of high-quality, liquid instruments.
|
(4)
|
Government-agency obligations were approximately
61%
of mortgage backed securities as of
December 31, 2012
and
66%
as of
December 31, 2011
based on fair value.
|
State
|
|
State
General
Obligation
|
|
Local
General
Obligation
|
|
Revenue
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Average
Credit
Rating
|
||||||||||
|
|
(in millions)
|
||||||||||||||||||||
Texas
|
|
$
|
88
|
|
|
$
|
345
|
|
|
$
|
342
|
|
|
$
|
775
|
|
|
$
|
708
|
|
|
AA
|
New York
|
|
22
|
|
|
58
|
|
|
593
|
|
|
673
|
|
|
620
|
|
|
AA
|
|||||
California
|
|
23
|
|
|
77
|
|
|
359
|
|
|
459
|
|
|
425
|
|
|
A+
|
|||||
Florida
|
|
47
|
|
|
50
|
|
|
259
|
|
|
356
|
|
|
319
|
|
|
AA-
|
|||||
Illinois
|
|
15
|
|
|
84
|
|
|
188
|
|
|
287
|
|
|
260
|
|
|
A+
|
|||||
Massachusetts
|
|
42
|
|
|
18
|
|
|
165
|
|
|
225
|
|
|
199
|
|
|
AA
|
|||||
Washington
|
|
33
|
|
|
40
|
|
|
145
|
|
|
218
|
|
|
200
|
|
|
AA
|
|||||
Arizona
|
|
—
|
|
|
8
|
|
|
180
|
|
|
188
|
|
|
171
|
|
|
AA
|
|||||
Georgia
|
|
14
|
|
|
20
|
|
|
108
|
|
|
142
|
|
|
132
|
|
|
A+
|
|||||
Pennsylvania
|
|
68
|
|
|
32
|
|
|
40
|
|
|
140
|
|
|
129
|
|
|
AA-
|
|||||
All others
|
|
229
|
|
|
248
|
|
|
1,195
|
|
|
1,672
|
|
|
1,533
|
|
|
AA
|
|||||
Total
|
|
$
|
581
|
|
|
$
|
980
|
|
|
$
|
3,574
|
|
|
$
|
5,135
|
|
|
$
|
4,696
|
|
|
AA-
|
State
|
|
State
General
Obligation
|
|
Local
General
Obligation
|
|
Revenue
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Average
Credit
Rating
|
||||||||||
|
|
(in millions)
|
||||||||||||||||||||
Texas
|
|
$
|
86
|
|
|
$
|
342
|
|
|
$
|
346
|
|
|
$
|
774
|
|
|
$
|
724
|
|
|
AA
|
New York
|
|
12
|
|
|
60
|
|
|
623
|
|
|
695
|
|
|
654
|
|
|
AA
|
|||||
California
|
|
19
|
|
|
51
|
|
|
297
|
|
|
367
|
|
|
336
|
|
|
AA
|
|||||
Florida
|
|
34
|
|
|
62
|
|
|
247
|
|
|
343
|
|
|
317
|
|
|
AA
|
|||||
Illinois
|
|
16
|
|
|
87
|
|
|
197
|
|
|
300
|
|
|
281
|
|
|
AA
|
|||||
Massachusetts
|
|
43
|
|
|
9
|
|
|
164
|
|
|
216
|
|
|
199
|
|
|
AA
|
|||||
Washington
|
|
38
|
|
|
53
|
|
|
123
|
|
|
214
|
|
|
200
|
|
|
AA
|
|||||
Arizona
|
|
—
|
|
|
8
|
|
|
164
|
|
|
172
|
|
|
163
|
|
|
AA
|
|||||
Ohio
|
|
—
|
|
|
53
|
|
|
86
|
|
|
139
|
|
|
129
|
|
|
AA
|
|||||
Michigan
|
|
—
|
|
|
37
|
|
|
99
|
|
|
136
|
|
|
129
|
|
|
AA
|
|||||
All others
|
|
311
|
|
|
271
|
|
|
1,114
|
|
|
1,696
|
|
|
1,588
|
|
|
AA
|
|||||
Total
|
|
$
|
559
|
|
|
$
|
1,033
|
|
|
$
|
3,460
|
|
|
$
|
5,052
|
|
|
$
|
4,720
|
|
|
AA
|
|
|
As of December 31, 2012
|
|
As of December 31, 2011
|
||||||||||||
Type
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
||||||||
|
|
(in millions)
|
||||||||||||||
Tax backed
|
|
$
|
720
|
|
|
$
|
656
|
|
|
$
|
717
|
|
|
$
|
670
|
|
Transportation
|
|
717
|
|
|
646
|
|
|
800
|
|
|
749
|
|
||||
Water and sewer
|
|
567
|
|
|
520
|
|
|
530
|
|
|
501
|
|
||||
Municipal utilities
|
|
567
|
|
|
519
|
|
|
529
|
|
|
494
|
|
||||
Higher education
|
|
430
|
|
|
389
|
|
|
332
|
|
|
307
|
|
||||
Healthcare
|
|
323
|
|
|
296
|
|
|
273
|
|
|
258
|
|
||||
All others
|
|
250
|
|
|
247
|
|
|
279
|
|
|
264
|
|
||||
Total
|
|
$
|
3,574
|
|
|
$
|
3,273
|
|
|
$
|
3,460
|
|
|
$
|
3,243
|
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
||||||||||||||||||
|
Fair
value
|
|
Unrealized
loss
|
|
Fair
value
|
|
Unrealized
loss
|
|
Fair
value
|
|
Unrealized
loss
|
||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||
U.S. government and agencies
|
$
|
62
|
|
|
$
|
0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
62
|
|
|
$
|
0
|
|
Obligations of state and political subdivisions
|
79
|
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
79
|
|
|
(11
|
)
|
||||||
Corporate securities
|
25
|
|
|
0
|
|
|
—
|
|
|
—
|
|
|
25
|
|
|
0
|
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
RMBS
|
108
|
|
|
(19
|
)
|
|
121
|
|
|
(58
|
)
|
|
229
|
|
|
(77
|
)
|
||||||
CMBS
|
5
|
|
|
0
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
0
|
|
||||||
Asset-backed securities
|
16
|
|
|
0
|
|
|
35
|
|
|
(10
|
)
|
|
51
|
|
|
(10
|
)
|
||||||
Foreign government securities
|
8
|
|
|
0
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
0
|
|
||||||
Total
|
$
|
303
|
|
|
$
|
(30
|
)
|
|
$
|
156
|
|
|
$
|
(68
|
)
|
|
$
|
459
|
|
|
$
|
(98
|
)
|
Number of securities
|
|
|
|
58
|
|
|
|
|
|
16
|
|
|
|
|
|
74
|
|
||||||
Number of securities with OTTI
|
|
|
|
5
|
|
|
|
|
|
6
|
|
|
|
|
|
11
|
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
||||||||||||||||||
|
Fair
value
|
|
Unrealized
loss
|
|
Fair
value
|
|
Unrealized
loss
|
|
Fair
value
|
|
Unrealized
loss
|
||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||
U.S. government and agencies
|
$
|
4
|
|
|
$
|
0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
0
|
|
Obligations of state and political subdivisions
|
17
|
|
|
0
|
|
|
21
|
|
|
(1
|
)
|
|
38
|
|
|
(1
|
)
|
||||||
Corporate securities
|
80
|
|
|
(2
|
)
|
|
3
|
|
|
—
|
|
|
83
|
|
|
(2
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
RMBS
|
187
|
|
|
(68
|
)
|
|
36
|
|
|
(22
|
)
|
|
223
|
|
|
(90
|
)
|
||||||
CMBS
|
3
|
|
|
0
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
0
|
|
||||||
Asset-backed securities
|
—
|
|
|
—
|
|
|
26
|
|
|
(19
|
)
|
|
26
|
|
|
(19
|
)
|
||||||
Foreign government securities
|
141
|
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
141
|
|
|
(6
|
)
|
||||||
Total
|
$
|
432
|
|
|
$
|
(76
|
)
|
|
$
|
86
|
|
|
$
|
(42
|
)
|
|
$
|
518
|
|
|
$
|
(118
|
)
|
Number of securities
|
|
|
|
56
|
|
|
|
|
|
20
|
|
|
|
|
|
76
|
|
||||||
Number of securities with OTTI
|
|
|
|
6
|
|
|
|
|
|
4
|
|
|
|
|
|
10
|
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||
|
(in millions)
|
||||||
Due within one year
|
$
|
315
|
|
|
$
|
318
|
|
Due after one year through five years
|
1,392
|
|
|
1,472
|
|
||
Due after five years through 10 years
|
2,284
|
|
|
2,525
|
|
||
Due after 10 years
|
3,592
|
|
|
3,955
|
|
||
Mortgage-backed securities:
|
|
|
|
|
|
||
RMBS
|
1,281
|
|
|
1,266
|
|
||
CMBS
|
482
|
|
|
520
|
|
||
Total
|
$
|
9,346
|
|
|
$
|
10,056
|
|
|
As of December 31,
|
||||||
|
2012
|
|
2011
|
||||
|
(in millions)
|
||||||
Fixed maturity securities:
|
|
|
|
||||
Obligations of state and political subdivisions
|
$
|
35
|
|
|
$
|
9
|
|
RMBS
|
215
|
|
|
134
|
|
||
Asset-backed securities
|
306
|
|
|
235
|
|
||
Other invested assets:
|
|
|
|
||||
Assets acquired in refinancing transactions
|
72
|
|
|
107
|
|
||
Other
|
42
|
|
|
52
|
|
||
Total
|
$
|
670
|
|
|
$
|
537
|
|
12.
|
Insurance Company Regulatory Requirements
|
•
|
upfront premiums are earned when related principal and interest have expired rather than earned over the expected period of coverage;
|
•
|
acquisition costs are charged to expense as incurred rather than over the period that related premiums are earned;
|
•
|
a contingency reserve is computed based on the following statutory requirements:
|
1)
|
for all policies written prior to July 1, 1989, an amount equal to
50%
of cumulative earned premiums less permitted reductions, plus
|
2)
|
for all policies written on or after July 1, 1989, an amount equal to the greater of
50%
of premiums written for each category of insured obligation or a designated percentage of principal guaranteed for that category. These amounts are provided each quarter as either
1/60
th or
1/80
th of the total required for each category, less permitted reductions;
|
•
|
certain assets designated as “non-admitted assets” are charged directly to statutory surplus but are reflected as assets under GAAP;
|
•
|
the amount of deferred tax assets that may be admitted is subject to an adjusted surplus threshold and is generally limited to the lesser of those assets the Company expects to realize within three years of the balance sheet date or fifteen percent of the Company's adjusted surplus. This realization period and surplus percentage is subject to change based on the amount of adjusted surplus;
|
•
|
insured CDS are accounted for as insurance contracts rather than as derivative contracts recorded at fair value;
|
•
|
bonds are generally carried at amortized cost rather than fair value;
|
•
|
VIEs and refinancing vehicles are not consolidated;
|
•
|
surplus notes are recognized as surplus rather than as a liability unless approved for repayment;
|
•
|
push-down acquisition accounting is not applicable under statutory accounting practices;
|
•
|
present value of expected losses are discounted at
5%
and recorded without consideration of the deferred premium revenue as opposed to discounted at the risk free rate at the end of each reporting period and only to the extent they exceed deferred premium revenue;
|
•
|
present value of installment premiums are not recorded on the balance sheets.
|
|
Policyholders' Surplus
|
|
Net Income (Loss)
|
||||||||||||||||
|
As of December 31,
|
|
Year Ended December 31,
|
||||||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
2010
|
||||||||||
|
(in millions)
|
||||||||||||||||||
AGC(1)
|
$
|
905
|
|
|
$
|
1,021
|
|
|
$
|
31
|
|
|
$
|
230
|
|
|
$
|
(182
|
)
|
AGM
|
1,785
|
|
|
1,227
|
|
|
256
|
|
|
632
|
|
|
402
|
|
|||||
AG Re
|
1,300
|
|
|
1,282
|
|
|
133
|
|
|
133
|
|
|
(26
|
)
|
(1)
|
In 2009, AGC issued a
$300 million
surplus note to AGM. AGM records the notes in other invested assets.
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Dividends paid by AGC to AGUS
|
$
|
55
|
|
|
$
|
30
|
|
|
$
|
50
|
|
Dividends paid by AGM to AGMH
|
30
|
|
|
—
|
|
|
—
|
|
|||
Dividends paid by AG Re to AGL
|
151
|
|
|
86
|
|
|
24
|
|
13.
|
Income Taxes
|
|
Year Ended December 31,
|
|||||||||||
|
2012
|
|
2011
|
|
2010
|
|||||||
|
(in millions)
|
|||||||||||
Expected tax provision (benefit) at statutory rates in taxable jurisdictions
|
$
|
76
|
|
|
$
|
313
|
|
|
$
|
173
|
|
|
Tax-exempt interest
|
(61
|
)
|
|
(62
|
)
|
|
(61
|
)
|
||||
True-up from tax return filings(1)
|
—
|
|
|
(3
|
)
|
|
(52
|
)
|
||||
Change in liability for uncertain tax positions
|
2
|
|
|
2
|
|
|
(5
|
)
|
||||
Change in valuation allowance
|
—
|
|
—
|
|
—
|
|
|
(7
|
)
|
|||
Other
|
5
|
|
|
6
|
|
|
2
|
|
||||
Total provision (benefit) for income taxes
|
$
|
22
|
|
|
$
|
256
|
|
|
$
|
50
|
|
|
Effective tax rate
|
16.5
|
%
|
|
24.9
|
%
|
|
9.4
|
%
|
(1)
|
For the year ended December 31, 2010, the Company recorded a $
56 million
tax benefit related to an amended return for a period prior to the AGMH Acquisition, $
9 million
was related to a change in liability for uncertain tax positions.
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
United States
|
$
|
894
|
|
|
$
|
1,518
|
|
|
$
|
1,094
|
|
Bermuda
|
79
|
|
|
301
|
|
|
219
|
|
|||
UK
|
0
|
|
|
0
|
|
|
0
|
|
|||
Total
|
$
|
973
|
|
|
$
|
1,819
|
|
|
$
|
1,313
|
|
|
As of December 31,
|
||||||
|
2012
|
|
2011
|
||||
|
(in millions)
|
||||||
Deferred tax assets:
|
|
|
|
||||
Unrealized losses on credit derivative financial instruments, net
|
$
|
425
|
|
|
$
|
267
|
|
Unearned premium reserves, net
|
109
|
|
|
424
|
|
||
Loss and LAE reserve
|
90
|
|
|
—
|
|
||
Tax and loss bonds
|
15
|
|
|
71
|
|
||
NOL carry forward
|
7
|
|
|
9
|
|
||
AMT credit
|
58
|
|
|
32
|
|
||
Tax basis step-up
|
5
|
|
|
6
|
|
||
Foreign tax credit
|
30
|
|
|
30
|
|
||
FG VIEs
|
179
|
|
|
221
|
|
||
DAC
|
59
|
|
|
38
|
|
||
Investment basis difference
|
82
|
|
|
18
|
|
||
Other
|
48
|
|
|
95
|
|
||
Total deferred income tax assets
|
1,107
|
|
|
1,211
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Contingency reserves
|
15
|
|
|
76
|
|
||
Loss and LAE reserve
|
—
|
|
|
1
|
|
||
Tax basis of public debt
|
100
|
|
|
105
|
|
||
Unrealized appreciation on investments
|
198
|
|
|
136
|
|
||
Unrealized gains on CCS
|
12
|
|
|
19
|
|
||
Market discount
|
42
|
|
|
9
|
|
||
Other
|
19
|
|
|
61
|
|
||
Total deferred income tax liabilities
|
386
|
|
|
407
|
|
||
Net deferred income tax asset
|
$
|
721
|
|
|
$
|
804
|
|
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Balance as of January 1,
|
$
|
20
|
|
|
$
|
18
|
|
|
$
|
24
|
|
True-up from tax return filings
|
—
|
|
|
—
|
|
|
(8
|
)
|
|||
Increase in unrecognized tax benefits as a result of position taken during the current period
|
2
|
|
|
2
|
|
|
2
|
|
|||
Balance as of December 31,
|
$
|
22
|
|
|
$
|
20
|
|
|
$
|
18
|
|
14.
|
Reinsurance and Other Monoline Exposures
|
•
|
if the Company fails to meet certain financial and regulatory criteria and to maintain a specified minimum financial strength rating, or
|
•
|
upon certain changes of control of the Company.
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Increase (decrease) in net unearned premium reserve
|
$
|
109
|
|
|
$
|
(20
|
)
|
|
$
|
20
|
|
Increase (decrease) in net par outstanding
|
19,173
|
|
|
(780
|
)
|
|
12,373
|
|
|
Year Ended December 31,
|
|||||||||
|
2012
|
|
2011
|
|
2010
|
|||||
|
(in millions)
|
|||||||||
Premiums Written:
|
|
|
|
|
|
|||||
Direct
|
$
|
244
|
|
|
$
|
190
|
|
|
343
|
|
Assumed(1)
|
9
|
|
|
(63
|
)
|
|
(121
|
)
|
||
Ceded(2)
|
51
|
|
|
4
|
|
|
101
|
|
||
Net
|
$
|
304
|
|
|
$
|
131
|
|
|
323
|
|
Premiums Earned:
|
|
|
|
|
|
|||||
Direct
|
$
|
936
|
|
|
$
|
997
|
|
|
1,243
|
|
Assumed
|
50
|
|
|
46
|
|
|
73
|
|
||
Ceded
|
(133
|
)
|
|
(123
|
)
|
|
(129
|
)
|
||
Net
|
$
|
853
|
|
|
$
|
920
|
|
|
1,187
|
|
Loss and LAE:
|
|
|
|
|
|
|||||
Direct
|
$
|
655
|
|
|
$
|
578
|
|
|
399
|
|
Assumed
|
(4
|
)
|
|
4
|
|
|
74
|
|
||
Ceded
|
(128
|
)
|
|
(120
|
)
|
|
(61
|
)
|
||
Net
|
$
|
523
|
|
|
$
|
462
|
|
|
412
|
|
(1)
|
Negative assumed premiums written were due to cancellations and changes in expected Debt Service schedules.
|
(2)
|
Positive ceded premiums written were due to commutations and changes in expected Debt Service schedules.
|
|
|
Ratings at
|
|
Par Outstanding
|
||||||||||||
|
|
February 26, 2013
|
|
As of December 31, 2012
|
||||||||||||
Reinsurer
|
|
Moody’s
Reinsurer
Rating
|
|
S&P
Reinsurer
Rating
|
|
Ceded Par
Outstanding(1)
|
|
Second-to-
Pay Insured
Par
Outstanding
|
|
Assumed Par
Outstanding
|
||||||
|
|
(dollars in millions)
|
||||||||||||||
American Overseas Reinsurance Company Limited (f/k/a Ram Re)
|
|
WR(2)
|
|
WR
|
|
$
|
9,808
|
|
|
$
|
—
|
|
|
$
|
24
|
|
Tokio
|
|
Aa3(3)
|
|
AA-(3)
|
|
8,369
|
|
|
—
|
|
|
937
|
|
|||
Radian
|
|
Ba1
|
|
B+
|
|
5,250
|
|
|
44
|
|
|
1,382
|
|
|||
Syncora Guarantee Inc.
|
|
WR
|
|
WR
|
|
4,156
|
|
|
1,993
|
|
|
162
|
|
|||
Mitsui Sumitomo Insurance Co. Ltd.
|
|
A1
|
|
A+(3)
|
|
2,232
|
|
|
—
|
|
|
—
|
|
|||
ACA Financial Guaranty Corp.
|
|
NR
|
|
WR
|
|
819
|
|
|
6
|
|
|
1
|
|
|||
Swiss Reinsurance Co.
|
|
A1
|
|
AA-
|
|
429
|
|
|
—
|
|
|
—
|
|
|||
Ambac
|
|
WR
|
|
WR
|
|
85
|
|
|
7,122
|
|
|
20,579
|
|
|||
CIFG Assurance North America Inc. ("CIFG")
|
|
WR
|
|
WR
|
|
65
|
|
|
255
|
|
|
5,523
|
|
|||
MBIA Inc.
|
|
(4)
|
|
(4)
|
|
—
|
|
|
10,814
|
|
|
8,143
|
|
|||
Financial Guaranty Insurance Co.
|
|
WR
|
|
WR
|
|
—
|
|
|
3,227
|
|
|
1,961
|
|
|||
Other
|
|
Various
|
|
Various
|
|
933
|
|
|
2,070
|
|
|
45
|
|
|||
Total
|
|
|
|
|
|
$
|
32,146
|
|
|
$
|
25,531
|
|
|
$
|
38,757
|
|
(1)
|
Includes $
3,928 million
in ceded par outstanding related to insured credit derivatives.
|
(4)
|
MBIA Inc. includes various subsidiaries which are rated B, BBB by S&P and Caa2, B3, Baa2, WR and NR by Moody’s.
|
|
Internal Credit Rating
|
|||||||||||||||||||||||||||
Reinsurer
|
|
Super
Senior
|
|
AAA
|
|
AA
|
|
A
|
|
BBB
|
|
BIG
|
|
Total
|
||||||||||||||
|
(in millions)
|
|||||||||||||||||||||||||||
American Overseas Reinsurance Company Limited (f/k/a Ram Re)
|
$
|
229
|
|
|
$
|
1,257
|
|
|
$
|
3,237
|
|
|
$
|
2,978
|
|
|
$
|
1,598
|
|
|
$
|
509
|
|
|
$
|
9,808
|
|
|
Tokio
|
313
|
|
|
1,072
|
|
|
1,396
|
|
|
2,457
|
|
|
2,411
|
|
|
720
|
|
|
8,369
|
|
||||||||
Radian
|
10
|
|
|
256
|
|
|
334
|
|
|
2,395
|
|
|
1,877
|
|
|
378
|
|
|
5,250
|
|
||||||||
Syncora Guarantee Inc.
|
—
|
|
|
—
|
|
|
241
|
|
|
761
|
|
|
2,495
|
|
|
659
|
|
|
4,156
|
|
||||||||
Mitsui Sumitomo Insurance Co. Ltd.
|
7
|
|
|
151
|
|
|
702
|
|
|
865
|
|
|
449
|
|
|
58
|
|
|
2,232
|
|
||||||||
ACA Financial Guaranty Corp
|
—
|
|
|
—
|
|
|
474
|
|
|
325
|
|
|
20
|
|
|
—
|
|
|
819
|
|
||||||||
Swiss Reinsurance Co.
|
—
|
|
|
8
|
|
|
6
|
|
|
261
|
|
|
111
|
|
|
43
|
|
|
429
|
|
||||||||
Ambac
|
—
|
|
|
—
|
|
|
—
|
|
|
85
|
|
|
—
|
|
|
—
|
|
|
85
|
|
||||||||
CIFG
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
65
|
|
|
65
|
|
||||||||
Other
|
—
|
|
|
—
|
|
|
114
|
|
|
742
|
|
|
77
|
|
|
—
|
|
|
933
|
|
||||||||
Total
|
$
|
559
|
|
|
$
|
2,744
|
|
|
$
|
6,504
|
|
|
$
|
10,869
|
|
|
$
|
9,038
|
|
|
$
|
2,432
|
|
|
$
|
32,146
|
|
|
Public Finance
|
|
Structured Finance
|
|
|
||||||||||||||||||||||||||||||||||||||||||
|
AAA
|
|
AA
|
|
A
|
|
BBB
|
|
BIG
|
|
Super
Senior
|
|
AAA
|
|
AA
|
|
A
|
|
BBB
|
|
BIG
|
|
Total
|
||||||||||||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||||||||||||||||||||||
Radian
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13
|
|
|
$
|
19
|
|
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
44
|
|
Syncora Guarantee Inc.
|
—
|
|
|
25
|
|
|
377
|
|
|
772
|
|
|
334
|
|
|
—
|
|
|
203
|
|
|
—
|
|
|
78
|
|
|
—
|
|
|
204
|
|
|
1,993
|
|
||||||||||||
ACA Financial Guaranty Corp.
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
||||||||||||
Ambac
|
—
|
|
|
1,471
|
|
|
3,431
|
|
|
1,194
|
|
|
333
|
|
|
—
|
|
|
15
|
|
|
54
|
|
|
235
|
|
|
78
|
|
|
311
|
|
|
7,122
|
|
||||||||||||
CIFG
|
—
|
|
|
11
|
|
|
69
|
|
|
130
|
|
|
45
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
255
|
|
||||||||||||
MBIA Inc.
|
69
|
|
|
2,567
|
|
|
4,367
|
|
|
1,947
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,378
|
|
|
47
|
|
|
205
|
|
|
234
|
|
|
10,814
|
|
||||||||||||
Financial Guaranty Insurance Co.
|
—
|
|
|
130
|
|
|
966
|
|
|
560
|
|
|
361
|
|
|
372
|
|
|
635
|
|
|
—
|
|
|
149
|
|
|
—
|
|
|
54
|
|
|
3,227
|
|
||||||||||||
Other
|
—
|
|
|
—
|
|
|
2,070
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,070
|
|
||||||||||||
Total
|
$
|
69
|
|
|
$
|
4,207
|
|
|
$
|
11,293
|
|
|
$
|
4,625
|
|
|
$
|
1,085
|
|
|
$
|
372
|
|
|
$
|
853
|
|
|
$
|
1,432
|
|
|
$
|
509
|
|
|
$
|
283
|
|
|
$
|
803
|
|
|
$
|
25,531
|
|
(1)
|
Assured Guaranty’s internal rating.
|
|
Assumed
Premium, net
of Commissions
|
|
Ceded
Premium, net
of Commissions
|
|
Assumed
Expected
Loss and LAE
|
|
Ceded
Expected
Loss and LAE
|
||||||||
|
(in millions)
|
||||||||||||||
American Overseas Reinsurance Company Limited
|
$
|
—
|
|
|
$
|
(12
|
)
|
|
$
|
—
|
|
|
$
|
5
|
|
Tokio
|
—
|
|
|
(27
|
)
|
|
—
|
|
|
37
|
|
||||
Radian
|
—
|
|
|
(20
|
)
|
|
—
|
|
|
(4
|
)
|
||||
Syncora Guarantee Inc.
|
—
|
|
|
(43
|
)
|
|
28
|
|
|
1
|
|
||||
Mitsui Sumitomo Insurance Co. Ltd.
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
9
|
|
||||
Swiss Reinsurance Co.
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
2
|
|
||||
Ambac
|
76
|
|
|
—
|
|
|
(73
|
)
|
|
—
|
|
||||
CIFG
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||
MBIA Inc.
|
1
|
|
|
—
|
|
|
(19
|
)
|
|
—
|
|
||||
Financial Guaranty Insurance Co.
|
9
|
|
|
—
|
|
|
(58
|
)
|
|
—
|
|
||||
Other
|
—
|
|
|
(63
|
)
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
86
|
|
|
$
|
(173
|
)
|
|
$
|
(122
|
)
|
|
$
|
53
|
|
15.
|
Related Party Transactions
|
16.
|
Commitments and Contingencies
|
Year
|
|
(in millions)
|
||
2013
|
$
|
14
|
|
|
2014
|
8
|
|
||
2015
|
8
|
|
||
2016
|
8
|
|
||
2017
|
8
|
|
||
Thereafter
|
66
|
|
||
Total
|
$
|
112
|
|
•
|
AGMH received a subpoena from the Antitrust Division of the Department of Justice in November 2006 issued in connection with an ongoing criminal investigation of bid rigging of awards of municipal GICs and other municipal derivatives;
|
•
|
AGM received a subpoena from the Securities and Exchange Commission ("SEC") in November 2006 related to an ongoing industry-wide investigation concerning the bidding of municipal GICs and other municipal derivatives; and
|
•
|
AGMH received a “Wells Notice” from the staff of the Philadelphia Regional Office of the SEC in February 2008 relating to the investigation concerning the bidding of municipal GICs and other municipal derivatives. The Wells Notice indicates that the SEC staff is considering recommending that the SEC authorize the staff to bring a civil injunctive action and/or institute administrative proceedings against AGMH, alleging violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and Section 17(a) of the Securities Act.
|
17.
|
Long-Term Debt and Credit Facilities
|
|
As of December 31, 2012
|
|
As of December 31, 2011
|
||||||||||||
|
Principal
|
|
Carrying
Value
|
|
Principal
|
|
Carrying
Value
|
||||||||
|
(in millions)
|
||||||||||||||
AGUS:
|
|
|
|
|
|
|
|
|
|
|
|
||||
7.0% Senior Notes
|
$
|
200
|
|
|
$
|
197
|
|
|
$
|
200
|
|
|
$
|
197
|
|
8.50% Senior Notes
|
—
|
|
|
—
|
|
|
173
|
|
|
172
|
|
||||
Series A Enhanced Junior Subordinated Debentures
|
150
|
|
|
150
|
|
|
150
|
|
|
150
|
|
||||
Total AGUS
|
350
|
|
|
347
|
|
|
523
|
|
|
519
|
|
||||
AGMH:
|
|
|
|
|
|
|
|
|
|
|
|
||||
6
7
/
8
% QUIBS
|
100
|
|
|
68
|
|
|
100
|
|
|
67
|
|
||||
6.25% Notes
|
230
|
|
|
137
|
|
|
230
|
|
|
136
|
|
||||
5.60% Notes
|
100
|
|
|
54
|
|
|
100
|
|
|
54
|
|
||||
Junior Subordinated Debentures
|
300
|
|
|
164
|
|
|
300
|
|
|
158
|
|
||||
Total AGMH
|
730
|
|
|
423
|
|
|
730
|
|
|
415
|
|
||||
AGM:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Notes Payable
|
61
|
|
|
66
|
|
|
97
|
|
|
104
|
|
||||
Total AGM
|
61
|
|
|
66
|
|
|
97
|
|
|
104
|
|
||||
Total
|
$
|
1,141
|
|
|
$
|
836
|
|
|
$
|
1,350
|
|
|
$
|
1,038
|
|
Expected Withdrawal Date
|
|
AGUS
|
|
AGMH
|
|
AGM
|
|
Total
|
||||||||
|
|
(in millions)
|
||||||||||||||
2013
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
22
|
|
|
$
|
22
|
|
2014
|
|
—
|
|
|
—
|
|
|
10
|
|
|
10
|
|
||||
2015
|
|
—
|
|
|
—
|
|
|
10
|
|
|
10
|
|
||||
2016
|
|
—
|
|
|
—
|
|
|
6
|
|
|
6
|
|
||||
2017
|
|
—
|
|
|
—
|
|
|
13
|
|
|
13
|
|
||||
2018-2037
|
|
200
|
|
|
—
|
|
|
0
|
|
|
200
|
|
||||
2038-2057
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
2058-2077
|
|
150
|
|
|
300
|
|
|
—
|
|
|
450
|
|
||||
Thereafter
|
|
—
|
|
|
430
|
|
|
—
|
|
|
430
|
|
||||
Total
|
|
$
|
350
|
|
|
$
|
730
|
|
|
$
|
61
|
|
|
$
|
1,141
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
AGUS:
|
|
|
|
|
|
|
|
|
|||
7.0% Senior Notes
|
$
|
13
|
|
|
$
|
13
|
|
|
$
|
13
|
|
8.50% Senior Notes
|
8
|
|
|
16
|
|
|
16
|
|
|||
Series A Enhanced Junior Subordinated Debentures
|
10
|
|
|
10
|
|
|
10
|
|
|||
Total AGUS
|
31
|
|
|
39
|
|
|
39
|
|
|||
AGMH:
|
|
|
|
|
|
|
|
|
|||
6
7
/
8
% QUIBS
|
7
|
|
|
7
|
|
|
7
|
|
|||
6.25% Notes
|
16
|
|
|
16
|
|
|
16
|
|
|||
5.60% Notes
|
6
|
|
|
6
|
|
|
6
|
|
|||
Junior Subordinated Debentures
|
25
|
|
|
25
|
|
|
25
|
|
|||
Total AGMH
|
54
|
|
|
54
|
|
|
54
|
|
|||
AGM:
|
|
|
|
|
|
|
|
|
|||
Notes Payable
|
7
|
|
|
6
|
|
|
7
|
|
|||
Total AGM
|
7
|
|
|
6
|
|
|
7
|
|
|||
Total
|
$
|
92
|
|
|
$
|
99
|
|
|
$
|
100
|
|
18.
|
Earnings Per Share
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions, except per share amounts)
|
||||||||||
Basic EPS:
|
|
|
|
|
|
||||||
Net income (loss) attributable to AGL
|
$
|
110
|
|
|
$
|
773
|
|
|
484
|
|
|
Less: Distributed and undistributed income (loss) available to nonvested shareholders
|
0
|
|
|
1
|
|
|
0
|
|
|||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic
|
$
|
110
|
|
|
$
|
772
|
|
|
484
|
|
|
Basic shares
|
189.2
|
|
|
183.4
|
|
|
184.0
|
|
|||
Basic EPS
|
$
|
0.58
|
|
|
$
|
4.21
|
|
|
$
|
2.63
|
|
Diluted EPS:
|
|
|
|
|
|
||||||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic
|
$
|
110
|
|
|
$
|
772
|
|
|
$
|
484
|
|
Plus: Re-allocation of undistributed income (loss) available to nonvested shareholders of AGL and subsidiaries
|
—
|
|
|
0
|
|
|
0
|
|
|||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, diluted
|
$
|
110
|
|
|
$
|
772
|
|
|
$
|
484
|
|
|
|
|
|
|
|
||||||
Basic shares
|
189.2
|
|
|
183.4
|
|
|
184.0
|
|
|||
Effect of dilutive securities:
|
|
|
|
|
|
||||||
Options and restricted stock awards
|
0.8
|
|
|
0.9
|
|
|
0.9
|
|
|||
Equity units
|
0.7
|
|
|
1.2
|
|
|
4.0
|
|
|||
Diluted shares
|
190.7
|
|
|
185.5
|
|
|
188.9
|
|
|||
Diluted EPS
|
$
|
0.57
|
|
|
$
|
4.16
|
|
|
$
|
2.56
|
|
Potentially dilutive securities excluded from computation of EPS because of antidilutive effect
|
9.9
|
|
|
7.2
|
|
|
3.0
|
|
19.
|
Shareholders' Equity
|
|
Number of
Shares
|
|
Price per
Share
|
|
Proceeds
|
|
Net
Proceeds
|
|||||||
|
(in millions, except share and per share amounts)
|
|||||||||||||
June 1, 2012(1)
|
13,428,770
|
|
|
$
|
12.85
|
|
|
$
|
173
|
|
|
$
|
173
|
|
(1)
|
Relates to the settlement of forward purchase contracts. See Note 2, Business Changes, Risks, Uncertainties and Accounting Developments.
|
Year
|
|
Number of Shares Repurchased
|
|
Total Payments
|
|||
|
|
|
|
(in millions)
|
|||
2012
|
|
2,066,759
|
|
|
$
|
24
|
|
2011
|
|
2,000,000
|
|
|
23
|
|
|
2010
|
|
707,350
|
|
|
10
|
|
|
Options for
Common Shares
|
|
Weighted
Average
Exercise Price
|
|
Weighted
Average Grant
Date Fair Value
|
|
Number of
Exercisable
Options
|
|
Year of
Expiration
|
||||||
Balance as of December 31, 2011
|
4,198,597
|
|
|
$
|
20.11
|
|
|
|
|
3,808,539
|
|
|
|
||
Options granted
|
60,500
|
|
|
17.01
|
|
|
$
|
8.62
|
|
|
|
|
2019
|
||
Options exercised
|
(5,908
|
)
|
|
7.44
|
|
|
|
|
|
|
|
||||
Options forfeited
|
(23,634
|
)
|
|
17.92
|
|
|
|
|
|
|
|
||||
Balance as of December 31, 2012
|
4,229,555
|
|
|
$
|
20.10
|
|
|
|
|
4,047,374
|
|
|
|
|
|
2012
|
||
Dividend yield
|
|
2.06
|
%
|
|
Expected volatility
|
|
58.89
|
%
|
|
Risk free interest rate
|
|
1.45
|
%
|
|
Expected life
|
|
6.6 years
|
|
|
Forfeiture rate
|
|
4.5
|
%
|
|
Weighted average grant date fair value
|
|
$
|
8.62
|
|
|
|
2010
|
||
Dividend yield
|
|
0.9
|
%
|
|
Expected volatility
|
|
74.68
|
%
|
|
Risk free interest rate
|
|
2.4
|
%
|
|
Expected life
|
|
5.0 years
|
|
|
Forfeiture rate
|
|
4.5
|
%
|
|
Weighted average grant date fair value
|
|
$
|
11.51
|
|
(1)
|
No options were granted in 2011.
|
|
Options for
Common Shares
|
|
Weighted
Average
Exercise Price
|
|
Weighted
Average Grant
Date Fair Value
|
|
Number of
Exercisable
Options
|
|
Year of
Expiration
|
||||||
Balance as of December 31, 2011
|
—
|
|
|
$
|
—
|
|
|
|
|
—
|
|
|
|
||
Options granted
|
293,077
|
|
|
17.44
|
|
|
$
|
7.84
|
|
|
|
|
2019
|
||
Options exercised
|
—
|
|
|
—
|
|
|
|
|
|
|
|
||||
Options forfeited
|
—
|
|
|
—
|
|
|
|
|
|
|
|
||||
Balance as of December 31, 2012
|
293,077
|
|
|
$
|
17.44
|
|
|
|
|
0
|
|
|
|
|
2012
|
||
Dividend yield
|
2.06
|
%
|
|
Expected volatility
|
58.89
|
%
|
|
Risk free interest rate
|
1.45
|
%
|
|
Expected life
|
6.3 years
|
|
|
Forfeiture rate
|
4.5
|
%
|
|
Weighted average grant date fair value
|
$
|
7.84
|
|
Nonvested Shares
|
|
Number of
Shares
|
|
Weighted
Average
Grant-Date
Fair Value
|
|||
Nonvested at December 31, 2011
|
76,060
|
|
|
$
|
18.99
|
|
|
Granted
|
88,549
|
|
|
12.93
|
|
||
Vested
|
(76,060
|
)
|
|
18.99
|
|
||
Forfeited
|
—
|
|
|
—
|
|
||
Nonvested at December 31, 2012
|
88,549
|
|
|
$
|
12.93
|
|
Nonvested Stock Units
|
|
Number of
Stock Units
|
|
Weighted
Average
Grant-Date
Fair Value
|
|||
Nonvested at December 31, 2011
|
1,233,175
|
|
|
$
|
16.33
|
|
|
Granted
|
208,416
|
|
|
16.68
|
|
||
Delivered
|
(401,579
|
)
|
|
15.92
|
|
||
Forfeited
|
(33,601
|
)
|
|
10.12
|
|
||
Nonvested at December 31, 2012
|
1,006,411
|
|
|
$
|
16.78
|
|
Performance Restricted Stock Units
|
|
Number of
Performance Share Units
|
|
Weighted
Average
Grant-Date
Fair Value
|
|||
Nonvested at December 31, 2011
|
—
|
|
|
$
|
—
|
|
|
Granted
|
178,970
|
|
|
27.35
|
|
||
Delivered
|
—
|
|
|
—
|
|
||
Forfeited
|
—
|
|
|
—
|
|
||
Nonvested at December 31, 2012
|
178,970
|
|
|
$
|
27.35
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(dollars in millions)
|
||||||||||
Proceeds from purchase of shares by employees
|
$
|
0.6
|
|
|
$
|
0.7
|
|
|
$
|
0.7
|
|
Number of shares issued by the Company
|
54,612
|
|
|
50,523
|
|
|
54,101
|
|
|||
Recorded in share-based compensation, after the effects of DAC
|
$
|
0.2
|
|
|
$
|
0.2
|
|
|
$
|
0.3
|
|
|
Year Ended December 31,
|
||||||||||
|
2012
|
|
2011
|
|
2010
|
||||||
|
(in millions)
|
||||||||||
Share‑Based Employee Cost:
|
|
|
|
|
|
||||||
Recurring amortization
|
$
|
6
|
|
|
$
|
5
|
|
|
$
|
6
|
|
Accelerated amortization for retirement eligible employees
|
1
|
|
|
5
|
|
|
6
|
|
|||
Subtotal
|
7
|
|
|
10
|
|
|
12
|
|
|||
ESPP
|
0
|
|
|
0
|
|
|
0
|
|
|||
Total Share‑Based Employee Cost
|
7
|
|
|
10
|
|
|
12
|
|
|||
|
|
|
|
|
|
||||||
Share‑Based Directors Cost:
|
|
|
|
|
|
||||||
Restricted Stock
|
1
|
|
|
1
|
|
|
1
|
|
|||
Restricted Stock Units
|
—
|
|
|
—
|
|
|
—
|
|
|||
Stock Options
|
—
|
|
|
0
|
|
|
0
|
|
|||
Total Share‑Based Directors Cost
|
1
|
|
|
1
|
|
|
1
|
|
|||
Total Share‑Based Cost
|
8
|
|
|
11
|
|
|
13
|
|
|||
Less: Share‑based compensation capitalized as DAC
|
1
|
|
|
3
|
|
|
2
|
|
|||
Share‑based compensation expense
|
$
|
7
|
|
|
$
|
8
|
|
|
$
|
11
|
|
Income tax benefit
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
2
|
|
•
|
Operating return on equity as of any date is determined by the Compensation Committee and equals the Company's operating income as a percentage of average shareholders' equity, excluding AOCI and after-tax unrealized gains (losses) on derivative financial instruments and the effect of consolidating FG VIE's. To determine operating income, the Compensation Committee adjusts reported net income or loss to remove realized gains and losses on investments and items that are determined by the Compensation Committee to increase or decrease reported net income or loss without a corresponding increase or decrease in value of AGL.
|
•
|
To determine adjusted book value, the Compensation Committee adjusts the reported shareholder equity (i) to remove items that are determined by the Compensation Committee to increase or decrease reported shareholder equity without a corresponding increase or decrease in the value of the Company, and (ii) to include items that are determined by the Compensation Committee to increase or decrease the value of the Company without a corresponding increase or decrease to reported shareholder equity.
|
21.
|
Other Comprehensive Income
|
|
Net Unrealized
Gains (Losses) on
Investments
|
|
Cumulative
Translation
Adjustment
|
|
Cash Flow Hedge
|
|
Total Accumulated
Other
Comprehensive
Income
|
||||||||
|
(in millions)
|
||||||||||||||
Balance, December 31, 2011
|
$
|
367
|
|
|
$
|
(8
|
)
|
|
$
|
9
|
|
|
$
|
368
|
|
Other comprehensive income (loss)
|
145
|
|
|
2
|
|
|
0
|
|
|
147
|
|
||||
Balance, December 31, 2012
|
$
|
512
|
|
|
$
|
(6
|
)
|
|
$
|
9
|
|
|
$
|
515
|
|
|
Net Unrealized
Gains (Losses) on
Investments
|
|
Cumulative
Translation
Adjustment
|
|
Cash Flow Hedge
|
|
Total Accumulated
Other
Comprehensive
Income
|
||||||||
|
(in millions)
|
||||||||||||||
Balance, December 31, 2010
|
$
|
110
|
|
|
$
|
(8
|
)
|
|
$
|
10
|
|
|
$
|
112
|
|
Other comprehensive income (loss)
|
257
|
|
|
0
|
|
|
(1
|
)
|
|
256
|
|
||||
Balance, December 31, 2011
|
$
|
367
|
|
|
$
|
(8
|
)
|
|
$
|
9
|
|
|
$
|
368
|
|
|
Net Unrealized
Gains (Losses) on
Investments
|
|
Cumulative
Translation
Adjustment
|
|
Cash Flow Hedge
|
|
Total Accumulated
Other
Comprehensive
Income
|
||||||||
|
(in millions)
|
||||||||||||||
Balance, December 31, 2009
|
$
|
139
|
|
|
$
|
(7
|
)
|
|
$
|
10
|
|
|
$
|
142
|
|
Other comprehensive income (loss)
|
(29
|
)
|
|
(1
|
)
|
|
0
|
|
|
(30
|
)
|
||||
Balance, December 31, 2010
|
$
|
110
|
|
|
$
|
(8
|
)
|
|
$
|
10
|
|
|
$
|
112
|
|
22.
|
Subsidiary Information
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total investment portfolio and cash
|
$
|
245
|
|
|
$
|
15
|
|
|
$
|
30
|
|
|
$
|
10,933
|
|
|
$
|
—
|
|
|
$
|
11,223
|
|
Investment in subsidiaries
|
4,734
|
|
|
3,958
|
|
|
3,225
|
|
|
3,524
|
|
|
(15,441
|
)
|
|
—
|
|
||||||
Premiums receivable, net of ceding commissions payable
|
—
|
|
|
—
|
|
|
—
|
|
|
1,147
|
|
|
(142
|
)
|
|
1,005
|
|
||||||
Ceded unearned premium reserve
|
—
|
|
|
—
|
|
|
—
|
|
|
1,550
|
|
|
(989
|
)
|
|
561
|
|
||||||
Deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
190
|
|
|
(74
|
)
|
|
116
|
|
||||||
Reinsurance recoverable on unpaid losses
|
—
|
|
|
—
|
|
|
—
|
|
|
223
|
|
|
(165
|
)
|
|
58
|
|
||||||
Credit derivative assets
|
—
|
|
|
—
|
|
|
—
|
|
|
553
|
|
|
(412
|
)
|
|
141
|
|
||||||
Deferred tax asset, net
|
—
|
|
|
48
|
|
|
(94
|
)
|
|
789
|
|
|
(22
|
)
|
|
721
|
|
||||||
Intercompany receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
473
|
|
|
(473
|
)
|
|
—
|
|
||||||
Financial guaranty variable interest entities’ assets, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
2,688
|
|
|
—
|
|
|
2,688
|
|
||||||
Other
|
23
|
|
|
29
|
|
|
26
|
|
|
816
|
|
|
(165
|
)
|
|
729
|
|
||||||
TOTAL ASSETS
|
$
|
5,002
|
|
|
$
|
4,050
|
|
|
$
|
3,187
|
|
|
$
|
22,886
|
|
|
$
|
(17,883
|
)
|
|
$
|
17,242
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Unearned premium reserves
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,168
|
|
|
$
|
(961
|
)
|
|
$
|
5,207
|
|
Loss and LAE reserve
|
—
|
|
|
—
|
|
|
—
|
|
|
778
|
|
|
(177
|
)
|
|
601
|
|
||||||
Long-term debt
|
—
|
|
|
347
|
|
|
423
|
|
|
66
|
|
|
—
|
|
|
836
|
|
||||||
Intercompany payable
|
—
|
|
|
173
|
|
|
—
|
|
|
300
|
|
|
(473
|
)
|
|
—
|
|
||||||
Credit derivative liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
2,346
|
|
|
(412
|
)
|
|
1,934
|
|
||||||
Financial guaranty variable interest entities’ liabilities, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
3,141
|
|
|
—
|
|
|
3,141
|
|
||||||
Other
|
8
|
|
|
6
|
|
|
15
|
|
|
803
|
|
|
(303
|
)
|
|
529
|
|
||||||
TOTAL LIABILITIES
|
8
|
|
|
526
|
|
|
438
|
|
|
13,602
|
|
|
(2,326
|
)
|
|
12,248
|
|
||||||
TOTAL SHAREHOLDERS’ EQUITY
|
4,994
|
|
|
3,524
|
|
|
2,749
|
|
|
9,284
|
|
|
(15,557
|
)
|
|
4,994
|
|
||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
5,002
|
|
|
$
|
4,050
|
|
|
$
|
3,187
|
|
|
$
|
22,886
|
|
|
$
|
(17,883
|
)
|
|
$
|
17,242
|
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total investment portfolio and cash
|
$
|
33
|
|
|
$
|
99
|
|
|
$
|
61
|
|
|
$
|
11,121
|
|
|
$
|
—
|
|
|
$
|
11,314
|
|
Investment in subsidiaries
|
4,607
|
|
|
3,730
|
|
|
2,802
|
|
|
3,258
|
|
|
(14,397
|
)
|
|
—
|
|
||||||
Premiums receivable, net of ceding commissions payable
|
—
|
|
|
—
|
|
|
—
|
|
|
1,150
|
|
|
(147
|
)
|
|
1,003
|
|
||||||
Ceded unearned premium reserve
|
—
|
|
|
—
|
|
|
—
|
|
|
1,739
|
|
|
(1,030
|
)
|
|
709
|
|
||||||
Deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
223
|
|
|
(91
|
)
|
|
132
|
|
||||||
Reinsurance recoverable on unpaid losses
|
—
|
|
|
—
|
|
|
—
|
|
|
212
|
|
|
(143
|
)
|
|
69
|
|
||||||
Credit derivative assets
|
—
|
|
|
—
|
|
|
—
|
|
|
404
|
|
|
(251
|
)
|
|
153
|
|
||||||
Deferred tax asset, net
|
—
|
|
|
22
|
|
|
(77
|
)
|
|
867
|
|
|
(8
|
)
|
|
804
|
|
||||||
Intercompany receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
300
|
|
|
(300
|
)
|
|
—
|
|
||||||
Financial guaranty variable interest entities’ assets, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
2,819
|
|
|
—
|
|
|
2,819
|
|
||||||
Other
|
23
|
|
|
(71
|
)
|
|
27
|
|
|
836
|
|
|
(109
|
)
|
|
706
|
|
||||||
TOTAL ASSETS
|
$
|
4,663
|
|
|
$
|
3,780
|
|
|
$
|
2,813
|
|
|
$
|
22,929
|
|
|
$
|
(16,476
|
)
|
|
$
|
17,709
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Unearned premium reserves
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,950
|
|
|
$
|
(987
|
)
|
|
$
|
5,963
|
|
Loss and LAE reserve
|
—
|
|
|
—
|
|
|
—
|
|
|
834
|
|
|
(155
|
)
|
|
679
|
|
||||||
Long-term debt
|
—
|
|
|
519
|
|
|
415
|
|
|
104
|
|
|
—
|
|
|
1,038
|
|
||||||
Intercompany payable
|
—
|
|
|
—
|
|
|
—
|
|
|
300
|
|
|
(300
|
)
|
|
—
|
|
||||||
Credit derivative liabilities
|
—
|
|
|
0
|
|
|
—
|
|
|
1,708
|
|
|
(251
|
)
|
|
1,457
|
|
||||||
Financial guaranty variable interest entities’ liabilities, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
3,458
|
|
|
—
|
|
|
3,458
|
|
||||||
Other
|
11
|
|
|
3
|
|
|
16
|
|
|
675
|
|
|
(243
|
)
|
|
462
|
|
||||||
TOTAL LIABILITIES
|
11
|
|
|
522
|
|
|
431
|
|
|
14,029
|
|
|
(1,936
|
)
|
|
13,057
|
|
||||||
TOTAL SHAREHOLDERS’ EQUITY
|
4,652
|
|
|
3,258
|
|
|
2,382
|
|
|
8,900
|
|
|
(14,540
|
)
|
|
4,652
|
|
||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
4,663
|
|
|
$
|
3,780
|
|
|
$
|
2,813
|
|
|
$
|
22,929
|
|
|
$
|
(16,476
|
)
|
|
$
|
17,709
|
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
833
|
|
|
$
|
20
|
|
|
$
|
853
|
|
Net investment income
|
0
|
|
|
—
|
|
|
1
|
|
|
422
|
|
|
(19
|
)
|
|
404
|
|
||||||
Net realized investment gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||||
Net change in fair value of credit derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Realized gains (losses) and other settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
(108
|
)
|
|
—
|
|
|
(108
|
)
|
||||||
Net unrealized gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
(477
|
)
|
|
—
|
|
|
(477
|
)
|
||||||
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
(585
|
)
|
|
—
|
|
|
(585
|
)
|
||||||
Equity in earnings of subsidiaries
|
131
|
|
|
177
|
|
|
424
|
|
|
153
|
|
|
(885
|
)
|
|
—
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
303
|
|
|
(3
|
)
|
|
300
|
|
||||||
TOTAL REVENUES
|
131
|
|
|
177
|
|
|
425
|
|
|
1,127
|
|
|
(887
|
)
|
|
973
|
|
||||||
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
528
|
|
|
(5
|
)
|
|
523
|
|
||||||
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
28
|
|
|
(14
|
)
|
|
14
|
|
||||||
Interest expense
|
—
|
|
|
35
|
|
|
54
|
|
|
22
|
|
|
(19
|
)
|
|
92
|
|
||||||
Other operating expenses
|
21
|
|
|
2
|
|
|
1
|
|
|
194
|
|
|
(6
|
)
|
|
212
|
|
||||||
TOTAL EXPENSES
|
21
|
|
|
37
|
|
|
55
|
|
|
772
|
|
|
(44
|
)
|
|
841
|
|
||||||
INCOME (LOSS) BEFORE INCOME TAXES
|
110
|
|
|
140
|
|
|
370
|
|
|
355
|
|
|
(843
|
)
|
|
132
|
|
||||||
Total provision (benefit) for income taxes
|
—
|
|
|
(13
|
)
|
|
(19
|
)
|
|
38
|
|
|
16
|
|
|
22
|
|
||||||
NET INCOME (LOSS)
|
$
|
110
|
|
|
$
|
153
|
|
|
$
|
389
|
|
|
$
|
317
|
|
|
$
|
(859
|
)
|
|
$
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
COMPREHENSIVE INCOME (LOSS)
|
$
|
257
|
|
|
$
|
266
|
|
|
$
|
465
|
|
|
$
|
577
|
|
|
$
|
(1,308
|
)
|
|
$
|
257
|
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
904
|
|
|
$
|
16
|
|
|
$
|
920
|
|
Net investment income
|
—
|
|
|
—
|
|
|
1
|
|
|
410
|
|
|
(15
|
)
|
|
396
|
|
||||||
Net realized investment gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
(18
|
)
|
|
—
|
|
|
(18
|
)
|
||||||
Net change in fair value of credit derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Realized gains (losses) and other settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
||||||
Net unrealized gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
554
|
|
|
—
|
|
|
554
|
|
||||||
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
560
|
|
|
—
|
|
|
560
|
|
||||||
Equity in earnings of subsidiaries
|
798
|
|
|
640
|
|
|
398
|
|
|
614
|
|
|
(2,450
|
)
|
|
—
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
(34
|
)
|
|
(5
|
)
|
|
(39
|
)
|
||||||
TOTAL REVENUES
|
798
|
|
|
640
|
|
|
399
|
|
|
2,436
|
|
|
(2,454
|
)
|
|
1,819
|
|
||||||
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
454
|
|
|
8
|
|
|
462
|
|
||||||
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
37
|
|
|
(20
|
)
|
|
17
|
|
||||||
Interest expense
|
—
|
|
|
39
|
|
|
54
|
|
|
21
|
|
|
(15
|
)
|
|
99
|
|
||||||
Other operating expenses
|
25
|
|
|
1
|
|
|
1
|
|
|
194
|
|
|
(9
|
)
|
|
212
|
|
||||||
TOTAL EXPENSES
|
25
|
|
|
40
|
|
|
55
|
|
|
706
|
|
|
(36
|
)
|
|
790
|
|
||||||
INCOME (LOSS) BEFORE INCOME TAXES
|
773
|
|
|
600
|
|
|
344
|
|
|
1,730
|
|
|
(2,418
|
)
|
|
1,029
|
|
||||||
Total provision (benefit) for income taxes
|
—
|
|
|
(14
|
)
|
|
(19
|
)
|
|
277
|
|
|
12
|
|
|
256
|
|
||||||
NET INCOME (LOSS)
|
$
|
773
|
|
|
$
|
614
|
|
|
$
|
363
|
|
|
$
|
1,453
|
|
|
$
|
(2,430
|
)
|
|
$
|
773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
COMPREHENSIVE INCOME (LOSS)
|
$
|
1,029
|
|
|
$
|
824
|
|
|
$
|
507
|
|
|
$
|
1,918
|
|
|
$
|
(3,249
|
)
|
|
$
|
1,029
|
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,168
|
|
|
$
|
19
|
|
|
$
|
1,187
|
|
Net investment income
|
—
|
|
|
—
|
|
|
0
|
|
|
384
|
|
|
(23
|
)
|
|
361
|
|
||||||
Net realized investment gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
4
|
|
|
(2
|
)
|
||||||
Net change in fair value of credit derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Realized gains (losses) and other settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
153
|
|
|
—
|
|
|
153
|
|
||||||
Net unrealized gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
(155
|
)
|
|
—
|
|
|
(155
|
)
|
||||||
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
||||||
Equity in earnings of subsidiaries
|
508
|
|
|
443
|
|
|
525
|
|
|
416
|
|
|
(1,892
|
)
|
|
—
|
|
||||||
Other
|
|
|
|
|
|
|
|
|
|
(230
|
)
|
|
(1
|
)
|
|
(231
|
)
|
||||||
TOTAL REVENUES
|
508
|
|
|
443
|
|
|
525
|
|
|
1,730
|
|
|
(1,893
|
)
|
|
1,313
|
|
||||||
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
406
|
|
|
6
|
|
|
412
|
|
||||||
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
(8
|
)
|
|
22
|
|
||||||
Interest expense
|
—
|
|
|
39
|
|
|
54
|
|
|
28
|
|
|
(21
|
)
|
|
100
|
|
||||||
Other operating expenses
|
24
|
|
|
3
|
|
|
3
|
|
|
217
|
|
|
(2
|
)
|
|
245
|
|
||||||
TOTAL EXPENSES
|
24
|
|
|
42
|
|
|
57
|
|
|
681
|
|
|
(25
|
)
|
|
779
|
|
||||||
INCOME (LOSS) BEFORE INCOME TAXES
|
484
|
|
|
401
|
|
|
468
|
|
|
1,049
|
|
|
(1,868
|
)
|
|
534
|
|
||||||
Total provision (benefit) for income taxes
|
—
|
|
|
(15
|
)
|
|
(21
|
)
|
|
74
|
|
|
12
|
|
|
50
|
|
||||||
NET INCOME (LOSS)
|
$
|
484
|
|
|
$
|
416
|
|
|
$
|
489
|
|
|
$
|
975
|
|
|
$
|
(1,880
|
)
|
|
$
|
484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
COMPREHENSIVE INCOME (LOSS)
|
$
|
454
|
|
|
$
|
341
|
|
|
$
|
428
|
|
|
$
|
1,036
|
|
|
$
|
(1,805
|
)
|
|
$
|
454
|
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
Net cash flows provided by (used in) operating activities
|
$
|
138
|
|
|
$
|
6
|
|
|
$
|
20
|
|
|
$
|
5
|
|
|
$
|
(334
|
)
|
|
$
|
(165
|
)
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchases
|
(211
|
)
|
|
(1
|
)
|
|
(13
|
)
|
|
(1,424
|
)
|
|
—
|
|
|
(1,649
|
)
|
||||||
Sales
|
—
|
|
|
—
|
|
|
13
|
|
|
899
|
|
|
—
|
|
|
912
|
|
||||||
Maturities
|
3
|
|
|
—
|
|
|
6
|
|
|
1,096
|
|
|
—
|
|
|
1,105
|
|
||||||
Sales (purchases) of short-term investments, net
|
(7
|
)
|
|
27
|
|
|
26
|
|
|
(17
|
)
|
|
—
|
|
|
29
|
|
||||||
Net proceeds from financial guaranty variable entities’ assets
|
—
|
|
|
—
|
|
|
—
|
|
|
545
|
|
|
—
|
|
|
545
|
|
||||||
Acquisition of MAC
|
—
|
|
|
(91
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(91
|
)
|
||||||
Intercompany debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(173
|
)
|
|
173
|
|
|
—
|
|
||||||
Investment in subsidiary
|
—
|
|
|
—
|
|
|
46
|
|
|
—
|
|
|
(46
|
)
|
|
—
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
92
|
|
|
—
|
|
|
92
|
|
||||||
Net cash flows provided by (used in) investing activities
|
(215
|
)
|
|
(65
|
)
|
|
78
|
|
|
1,018
|
|
|
127
|
|
|
943
|
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Issuance of common stock
|
173
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
173
|
|
||||||
Return of capital
|
—
|
|
|
—
|
|
|
—
|
|
|
(50
|
)
|
|
50
|
|
|
—
|
|
||||||
Capital contribution from parent
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
(4
|
)
|
|
—
|
|
||||||
Dividends paid
|
(69
|
)
|
|
—
|
|
|
(98
|
)
|
|
(236
|
)
|
|
334
|
|
|
(69
|
)
|
||||||
Repurchases of common stock
|
(24
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(24
|
)
|
||||||
Share activity under option and incentive plans
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
||||||
Net paydowns of financial guaranty variable entities’ liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(724
|
)
|
|
—
|
|
|
(724
|
)
|
||||||
Payment of long-term debt
|
—
|
|
|
(173
|
)
|
|
—
|
|
|
(36
|
)
|
|
—
|
|
|
(209
|
)
|
||||||
Intercompany debt
|
—
|
|
|
173
|
|
|
—
|
|
|
—
|
|
|
(173
|
)
|
|
—
|
|
||||||
Net cash flows provided by (used in) financing activities
|
77
|
|
|
—
|
|
|
(98
|
)
|
|
(1,042
|
)
|
|
207
|
|
|
(856
|
)
|
||||||
Effect of exchange rate changes
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||||
Increase (decrease) in cash
|
—
|
|
|
(59
|
)
|
|
—
|
|
|
(18
|
)
|
|
—
|
|
|
(77
|
)
|
||||||
Cash at beginning of period
|
—
|
|
|
72
|
|
|
0
|
|
|
143
|
|
|
—
|
|
|
215
|
|
||||||
Cash at end of period
|
$
|
—
|
|
|
$
|
13
|
|
|
$
|
0
|
|
|
$
|
125
|
|
|
$
|
—
|
|
|
$
|
138
|
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
Net cash flows provided by (used in) operating activities
|
$
|
68
|
|
|
$
|
84
|
|
|
$
|
(36
|
)
|
|
$
|
676
|
|
|
$
|
(116
|
)
|
|
$
|
676
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchases
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
(2,294
|
)
|
|
—
|
|
|
(2,308
|
)
|
||||||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
1,107
|
|
|
—
|
|
|
1,107
|
|
||||||
Maturities
|
—
|
|
|
—
|
|
|
1
|
|
|
662
|
|
|
—
|
|
|
663
|
|
||||||
Sales (purchases) of short-term investments, net
|
(11
|
)
|
|
(25
|
)
|
|
(1
|
)
|
|
357
|
|
|
—
|
|
|
320
|
|
||||||
Net proceeds from financial guaranty variable entities’ assets
|
—
|
|
|
—
|
|
|
—
|
|
|
760
|
|
|
—
|
|
|
760
|
|
||||||
Investment in subsidiary
|
—
|
|
|
—
|
|
|
50
|
|
|
—
|
|
|
(50
|
)
|
|
—
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
19
|
|
|
—
|
|
|
19
|
|
||||||
Net cash flows provided by (used in) investing activities
|
(11
|
)
|
|
(25
|
)
|
|
36
|
|
|
611
|
|
|
(50
|
)
|
|
561
|
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Return of capital
|
—
|
|
|
—
|
|
|
—
|
|
|
(50
|
)
|
|
50
|
|
|
—
|
|
||||||
Dividends paid
|
(33
|
)
|
|
—
|
|
|
—
|
|
|
(116
|
)
|
|
116
|
|
|
(33
|
)
|
||||||
Repurchases of common stock
|
(23
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(23
|
)
|
||||||
Share activity under option and incentive plans
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||||
Net paydowns of financial guaranty variable entities’ liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,053
|
)
|
|
—
|
|
|
(1,053
|
)
|
||||||
Payment of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(22
|
)
|
|
—
|
|
|
(22
|
)
|
||||||
Net cash flows provided by (used in) financing activities
|
(57
|
)
|
|
—
|
|
|
—
|
|
|
(1,241
|
)
|
|
166
|
|
|
(1,132
|
)
|
||||||
Effect of exchange rate changes
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||||
Increase (decrease) in cash
|
—
|
|
|
59
|
|
|
—
|
|
|
48
|
|
|
—
|
|
|
107
|
|
||||||
Cash at beginning of period
|
—
|
|
|
13
|
|
|
—
|
|
|
95
|
|
|
—
|
|
|
108
|
|
||||||
Cash at end of period
|
$
|
—
|
|
|
$
|
72
|
|
|
$
|
—
|
|
|
$
|
143
|
|
|
$
|
—
|
|
|
$
|
215
|
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
Net cash flows provided by (used in) operating activities
|
$
|
15
|
|
|
$
|
12
|
|
|
$
|
(49
|
)
|
|
$
|
225
|
|
|
$
|
(74
|
)
|
|
$
|
129
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchases
|
—
|
|
|
—
|
|
|
(15
|
)
|
|
(2,447
|
)
|
|
—
|
|
|
(2,462
|
)
|
||||||
Sales
|
—
|
|
|
—
|
|
|
5
|
|
|
1,059
|
|
|
—
|
|
|
1,064
|
|
||||||
Maturities
|
—
|
|
|
—
|
|
|
6
|
|
|
988
|
|
|
—
|
|
|
994
|
|
||||||
Sales (purchases) of short-term investments, net
|
30
|
|
|
1
|
|
|
3
|
|
|
579
|
|
|
—
|
|
|
613
|
|
||||||
Net proceeds from financial guaranty variable entities’ assets
|
—
|
|
|
—
|
|
|
—
|
|
|
424
|
|
|
—
|
|
|
424
|
|
||||||
Investment in subsidiary
|
—
|
|
|
—
|
|
|
50
|
|
|
—
|
|
|
(50
|
)
|
|
—
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
—
|
|
|
20
|
|
||||||
Net cash flows provided by (used in) investing activities
|
30
|
|
|
1
|
|
|
49
|
|
|
623
|
|
|
(50
|
)
|
|
653
|
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Return of capital
|
—
|
|
|
—
|
|
|
—
|
|
|
(50
|
)
|
|
50
|
|
|
—
|
|
||||||
Dividends paid
|
(33
|
)
|
|
—
|
|
|
—
|
|
|
(74
|
)
|
|
74
|
|
|
(33
|
)
|
||||||
Repurchases of common stock
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
||||||
Share activity under option and incentive plans
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
Net paydowns of financial guaranty variable entities’ liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(651
|
)
|
|
—
|
|
|
(651
|
)
|
||||||
Payment of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(21
|
)
|
|
—
|
|
|
(21
|
)
|
||||||
Net cash flows provided by (used in) financing activities
|
(45
|
)
|
|
—
|
|
|
—
|
|
|
(796
|
)
|
|
124
|
|
|
(717
|
)
|
||||||
Effect of exchange rate changes
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||||
Increase (decrease) in cash
|
—
|
|
|
13
|
|
|
—
|
|
|
51
|
|
|
—
|
|
|
64
|
|
||||||
Cash at beginning of period
|
—
|
|
|
0
|
|
|
—
|
|
|
44
|
|
|
—
|
|
|
44
|
|
||||||
Cash at end of period
|
$
|
—
|
|
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
95
|
|
|
$
|
—
|
|
|
$
|
108
|
|
2012
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Full
Year
|
||||||||||
|
(dollars in millions, except per share data)
|
|||||||||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earned premiums
|
$
|
194
|
|
|
$
|
219
|
|
|
$
|
222
|
|
|
$
|
218
|
|
|
$
|
853
|
|
|
Net investment income
|
98
|
|
|
101
|
|
|
102
|
|
|
103
|
|
|
404
|
|
||||||
Net realized investment gains (losses)
|
1
|
|
|
(3
|
)
|
|
2
|
|
|
1
|
|
|
1
|
|
||||||
Net change in fair value of credit derivatives
|
(691
|
)
|
|
261
|
|
|
(36
|
)
|
|
(119
|
)
|
|
(585
|
)
|
||||||
Fair value gains (losses) on CCS
|
(14
|
)
|
|
4
|
|
|
(2
|
)
|
|
(6
|
)
|
|
(18
|
)
|
||||||
Fair value gains (losses) on FG VIEs
|
(36
|
)
|
|
172
|
|
|
38
|
|
|
36
|
|
|
210
|
|
||||||
Other income
|
91
|
|
|
5
|
|
|
16
|
|
|
(4
|
)
|
|
108
|
|
||||||
Expenses
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loss and LAE
|
247
|
|
|
122
|
|
|
90
|
|
|
64
|
|
|
523
|
|
||||||
Amortization of DAC
|
5
|
|
|
5
|
|
|
4
|
|
|
0
|
|
|
14
|
|
||||||
Interest expense
|
25
|
|
|
25
|
|
|
21
|
|
|
21
|
|
|
92
|
|
||||||
Other operating expenses
|
62
|
|
|
53
|
|
|
48
|
|
|
49
|
|
|
212
|
|
||||||
Income (loss) before provision for income taxes
|
(696
|
)
|
|
554
|
|
|
179
|
|
|
95
|
|
|
132
|
|
||||||
Provision (benefit) for income taxes
|
(213
|
)
|
|
177
|
|
|
37
|
|
|
21
|
|
|
22
|
|
||||||
Net income (loss)
|
(483
|
)
|
|
377
|
|
|
142
|
|
|
74
|
|
|
110
|
|
||||||
Earnings (loss) per share(1):
|
|
|
|
|
|
|
|
|
|
|||||||||||
Basic
|
$
|
(2.65
|
)
|
|
$
|
2.02
|
|
|
$
|
0.73
|
|
|
$
|
0.38
|
|
|
$
|
0.58
|
|
|
Diluted
|
$
|
(2.65
|
)
|
|
$
|
2.01
|
|
|
$
|
0.73
|
|
|
$
|
0.38
|
|
|
$
|
0.57
|
|
|
Dividends per share
|
$
|
0.09
|
|
|
$
|
0.09
|
|
|
$
|
0.09
|
|
|
$
|
0.09
|
|
|
$
|
0.36
|
|
2011
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Full
Year
|
||||||||||
|
(dollars in millions, except per share data)
|
|||||||||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earned premiums
|
$
|
254
|
|
|
$
|
230
|
|
|
$
|
211
|
|
|
$
|
225
|
|
|
$
|
920
|
|
|
Net investment income
|
97
|
|
|
103
|
|
|
95
|
|
|
101
|
|
|
396
|
|
||||||
Net realized investment gains (losses)
|
3
|
|
|
(5
|
)
|
|
(11
|
)
|
|
(5
|
)
|
|
(18
|
)
|
||||||
Net change in fair value of credit derivatives
|
(236
|
)
|
|
(65
|
)
|
|
1,156
|
|
|
(295
|
)
|
|
560
|
|
||||||
Fair value gains (losses) on CCS
|
1
|
|
|
0
|
|
|
2
|
|
|
32
|
|
|
35
|
|
||||||
Fair value gains (losses) on FG VIEs
|
119
|
|
|
(174
|
)
|
|
(99
|
)
|
|
22
|
|
|
(132
|
)
|
||||||
Other income
|
41
|
|
|
27
|
|
|
(9
|
)
|
|
(1
|
)
|
|
58
|
|
||||||
Expenses
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loss and LAE
|
(26
|
)
|
|
124
|
|
|
215
|
|
|
149
|
|
|
462
|
|
||||||
Amortization of DAC
|
3
|
|
|
6
|
|
|
4
|
|
|
4
|
|
|
17
|
|
||||||
Interest expense
|
25
|
|
|
24
|
|
|
25
|
|
|
25
|
|
|
99
|
|
||||||
Other operating expenses
|
64
|
|
|
53
|
|
|
46
|
|
|
49
|
|
|
212
|
|
||||||
Income (loss) before provision for income taxes
|
213
|
|
|
(91
|
)
|
|
1,055
|
|
|
(148
|
)
|
|
1,029
|
|
||||||
Provision (benefit) for income taxes
|
74
|
|
|
(48
|
)
|
|
294
|
|
|
(64
|
)
|
|
256
|
|
||||||
Net income (loss)
|
139
|
|
|
(43
|
)
|
|
761
|
|
|
(84
|
)
|
|
773
|
|
||||||
Earnings (loss) per share(1):
|
|
|
|
|
|
|
|
|
|
|||||||||||
Basic
|
$
|
0.76
|
|
|
$
|
(0.23
|
)
|
|
$
|
4.15
|
|
|
$
|
(0.46
|
)
|
|
$
|
4.21
|
|
|
Diluted
|
$
|
0.74
|
|
|
$
|
(0.23
|
)
|
|
$
|
4.13
|
|
|
$
|
(0.46
|
)
|
|
$
|
4.16
|
|
|
Dividends per share
|
$
|
0.045
|
|
|
$
|
0.045
|
|
|
$
|
0.045
|
|
|
$
|
0.045
|
|
|
$
|
0.18
|
|
(1)
|
Per share amounts for the quarters and the full years have each been calculated separately. Accordingly, quarterly amounts may not sum up to the annual amounts because of differences in the average common shares outstanding during each period and, with regard to diluted per share amounts only, because of the inclusion of the effect of potentially dilutive securities only in the periods in which such effect would have been dilutive.
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
ITEM 9B.
|
OTHER INFORMATION
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
ITEM 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
ITEM 15.
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|
(a)
|
Financial Statements, Financial Statement Schedules and Exhibits
|
1.
|
Financial Statements
|
|
|
Exhibit
Number
|
Description of Document
|
3.1
|
Certificate of Incorporation and Memorandum of Association of the Registrant, as amended by Certificate of Incorporation on Change of Name dated March 30, 2004 and Certificate of Deposit of Memorandum of Increase of Capital dated April 21, 2004 (Incorporated by reference to Exhibit 3.1 to Form 10-K for the year ended December 31, 2009)
|
3.2
|
First Amended and Restated Bye-laws of the Registrant, as amended (Incorporated by reference to Exhibit 3.1 to Form 8-K filed on May 10, 2011)
|
4.1
|
Specimen Common Share Certificate (Incorporated by reference to Exhibit 4.1 to Form S-1 (#333-111491))
|
4.2
|
Certificate of Incorporation and Memorandum of Association of the Registrant, as amended by Certificate of Incorporation on Change of Name dated March 30, 2004 and Certificate of Deposit of Memorandum of Increase of Capital dated April 21, 2004 (See Exhibit 3.1)
|
4.3
|
Bye-laws of the Registrant (See Exhibit 3.2)
|
4.4
|
Indenture, dated as of May 1, 2004, among the Company, Assured Guaranty U.S. Holdings Inc. and The Bank of New York, as trustee (Incorporated by reference to Exhibit 4.1 to Form 10-Q for the quarter ended March 31, 2004)
|
4.5
|
Indenture, dated as of December 1, 2006, entered into among Assured Guaranty Ltd., Assured Guaranty U.S. Holdings Inc. and The Bank of New York, as trustee (Incorporated by reference to Exhibit 4.1 to Form 8-K filed on December 20, 2006)
|
4.6
|
First Supplemental Subordinated Indenture, dated as of December 20, 2006, entered into among Assured Guaranty Ltd., Assured Guaranty U.S. Holdings Inc. and The Bank of New York, as trustee (Incorporated by reference to Exhibit 4.2 to Form 8-K filed on December 20, 2006)
|
4.7
|
Replacement Capital Covenant, dated as of December 20, 2006, between Assured Guaranty U.S. Holdings Inc. and Assured Guaranty Ltd., in favor of and for the benefit of each Covered Debtholder (as defined therein) (Incorporated by reference to Exhibit 4.1 to Form 8-K filed on December 20, 2006)
|
4.8
|
Amended and Restated Trust Indenture dated as of February 24, 1999 between Financial Security Assurance Holdings Ltd. and the Senior Debt Trustee (Incorporated by reference to Exhibit 4.1 to Financial Security Assurance Holdings Ltd.'s Registration Statement to Form S-3 (#333-74165))
|
|
|
Exhibit
Number
|
Description of Document
|
4.9
|
Form of Assured Guaranty Municipal Holdings Inc., formerly known as Financial Security Assurance Holdings Ltd. 6
7
/
8
% Quarterly Interest Bond Securities due 2101 (Incorporated by reference to Exhibit 4.1 to Form 10-Q for the quarter ended March 31, 2010)
|
4.10
|
Form of Assured Guaranty Municipal Holdings Inc., formerly known as Financial Security Assurance Holdings Ltd. 6.25% Notes due November 1, 2102 (Incorporated by reference to Exhibit 4.2 to Form 10-Q for the quarter ended March 31, 2010)
|
4.11
|
Form of Assured Guaranty Municipal Holdings Inc., formerly known as Financial Security Assurance Holdings Ltd. 5.60% Notes due July 15, 2103 (Incorporated by reference to Exhibit 4.3 to Form 10-Q for the quarter ended March 31, 2010)
|
4.12
|
Supplemental indenture, dated as of August 26, 2009, between Assured Guaranty Ltd., Financial Security Assurance Holdings Ltd. and U.S. Bank National Association, as trustee (Incorporated by reference to Exhibit 99.1 to Form 8-K filed on September 1, 2009)
|
4.13
|
Indenture, dated as of November 22, 2006, between Financial Security Assurance Holdings Ltd. and The Bank of New York, as Trustee (Incorporated by reference to Exhibit 4.1 to Financial Security Assurance Holdings Ltd.'s Form 8-K filed on November 28, 2006)
|
4.14
|
Form of Financial Security Assurance Holdings Ltd. Junior Subordinated Debenture, Series 2006-1 (Incorporated by reference to Exhibit 10.3 to Financial Security Assurance Holdings Ltd.'s Form 8-K filed on November 25, 2002)
|
4.15
|
Supplemental indenture, dated as of August 26, 2009, between Assured Guaranty Ltd., Financial Security Assurance Holdings Ltd. and The Bank of New York Mellon, as trustee (Incorporated by reference to Exhibit 99.2 to Form 8-K filed on September 1, 2009)
|
4.16
|
First Supplemental Indenture, to be dated as of June 24, 2009, between Assured Guaranty US Holdings Inc., Assured Guaranty Ltd. and The Bank of New York Mellon, as trustee (including the form of 8.50% Senior Note due 2014 of Assured Guaranty US Holdings Inc.) (Incorporated by reference to Exhibit 4.1 to Form 8-K filed on June 23, 2009)
|
10.1
|
Assured Guaranty Ltd. 2004 Long-Term Incentive Plan, as amended and restated as of May 7, 2009 (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended March 31, 2009)*
|
10.2
|
Guaranty by Assured Guaranty Re International Ltd. in favor of Assured Guaranty Re Overseas Ltd. (Incorporated by reference to Exhibit 10.31 to Form S-1 (#333-111491))
|
10.3
|
Guaranty by Assured Guaranty Re Overseas Ltd. in favor of Assured Guaranty Mortgage Insurance Company (Incorporated by reference to Exhibit 10.32 to Form S-1 (#333-111491))
|
10.4
|
Summary of Annual Compensation*
|
10.5
|
Non-Qualified Stock Option Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan to be used with employment agreement (Incorporated by reference to Exhibit 10.34 to Form 10-K for the year ended December 31, 2005)*
|
10.6
|
Non-Qualified Stock Option Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.35 to Form 10-K for the year ended December 31, 2005)*
|
10.7
|
Restricted Stock Unit Agreement for Outside Directors under Assured Guaranty Ltd. 2004 Long Term Incentive Plan (Incorporated by reference to Exhibit 10.37 to Form 10-K for the year ended December 31, 2005)*
|
10.8
|
Assured Guaranty Ltd. Employee Stock Purchase Plan (Incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended March 31, 2009)*
|
10.9
|
Form of Indemnification Agreement between the Company and its executive officers and directors (Incorporated by reference to Exhibit 10.42 to Form 10-K for the year ended December 31, 2005)*
|
10.10
|
Put Agreement between Assured Guaranty Corp. and Woodbourne Capital Trust [I][II][III][IV] (Incorporated by reference to Exhibit 10.6 to Form 10-Q for the quarter ended March 31, 2005)
|
10.11
|
Custodial Trust Expense Reimbursement Agreement (Incorporated by reference to Exhibit 10.7 to Form 10-Q for the quarter ended March 31, 2005)
|
10.12
|
Assured Guaranty Corp. Articles Supplementary Classifying and Designating Series of Preferred Stock as Series A Perpetual Preferred Stock, Series B Perpetual Preferred Stock, Series C Perpetual Preferred Stock, Series D Perpetual Preferred Stock (Incorporated by reference to Exhibit 10.8 to Form 10-Q for the quarter ended March 31, 2005)
|
10.13
|
Assured Guaranty Ltd. Performance Retention Plan (As Amended and Restated as of February 14, 2008 for Awards Granted during 2007) (Incorporated by reference to Exhibit 10.50 to Form 10-K for the year ended December 31, 2007)*
|
|
|
Exhibit
Number
|
Description of Document
|
10.14
|
Restricted Stock Unit Agreement for Outside Directors under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended June 30, 2007)*
|
10.15
|
$200.0 million soft-capital credit facility, dated as of July 31, 2007, under which Assured Guaranty Re Ltd. is the borrower and for which Deutsche Bank AG New York Branch acted as administrative agent and lead arranger (Incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended June 30, 2007)
|
10.16
|
Assured Guaranty Ltd. Performance Retention Plan (As Amended and Restated as of February 14, 2008) (Incorporated by reference to Exhibit 10.58 to Form 10-K for the year ended December 31, 2007)*
|
10.17
|
Terms of Performance Retention Award Five Year Cliff Vest Granted on February 14, 2008 (Incorporated by reference to Exhibit 10.59 to Form 10-K for the year ended December 31, 2007)*
|
10.18
|
Form of Award Letter for Performance Retention Award Five Year Cliff Vest Granted on February 14, 2008 (Incorporated by reference to Exhibit 10.60 to Form 10-K for the year ended December 31, 2007)*
|
10.19
|
Non-Qualified Stock Option Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan to be used with employment agreement (Incorporated by reference to Exhibit 10.66 to Form 10-K for the year ended December 31, 2007)*
|
10.20
|
Non-Qualified Stock Option Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.67 to Form 10-K for the year ended December 31, 2007)*
|
10.21
|
Investment Agreement dated as of February 28, 2008 between Assured Guaranty Ltd. and WLR Recovery Fund IV, L.P. (Incorporated by reference to Exhibit 10.68 to Form 10-K for the year ended December 31, 2007)
|
10.22
|
Director Compensation (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended June 30, 2012)*
|
10.23
|
Restricted Stock Unit Agreement for Outside Directors under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended June 30, 2008)*
|
10.24
|
Form of amendment to Restricted Stock Unit Awards for Outside Directors (Incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended June 30, 2008)*
|
10.25
|
Employment Agreement between Dominic J. Frederico and the Registrant (Incorporated by reference to Exhibit 10.64 to Form 10-K for the year ended December 31, 2008)*
|
10.26
|
Employment Agreement between Robert B. Mills and the Registrant (Incorporated by reference to Exhibit 10.66 to Form 10-K for the year ended December 31, 2008)*
|
10.27
|
Employment Agreement between James M. Michener and the Registrant (Incorporated by reference to Exhibit 10.67 to Form 10-K for the year ended December 31, 2008)*
|
10.28
|
Employment Agreement between Robert A. Bailenson and the Registrant (Incorporated by reference to Exhibit 10.68 to Form 10-K for the year ended December 31, 2008)*
|
10.29
|
Assured Guaranty Ltd. Executive Officer Recoupment Policy (Incorporated by reference to Exhibit 10.69 to Form 10-K for the year ended December 31, 2008)*
|
10.30
|
Form of Acknowledgement of Assured Guaranty Ltd. Executive Officer Recoupment Policy (Incorporated by reference to Exhibit 10.70 to Form 10-K for the year ended December 31, 2008)*
|
10.31
|
Non-Qualified Stock Option Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan to be used with employment agreement (Incorporated by reference to Exhibit 10.71 to Form 10-K for the year ended December 31, 2008)*
|
10.32
|
Terms of Performance Retention Award Four Year Installment Vesting Granted on February 5, 2009 (Incorporated by reference to Exhibit 10.73 to Form 10-K for the year ended December 31, 2008)*
|
10.33
|
Approval dated September 16, 2008 pursuant to Investment Agreement dated as of February 28, 2008 with WLR Recovery Fund IV, L.P. Pursuant to the Investment Agreement, WLR Recovery Fund IV, L.P. and other funds affiliated with WL Ross & Co. LLC (Incorporated by reference to Exhibit 10.1 to Form 8-K filed on September 19, 2008)
|
10.34
|
Purchase Agreement among Dexia Holdings Inc., Dexia Credit Local S.A. and the Company dated as of November 14, 2008 (Incorporated by reference to Exhibit 99.1 to Form 8-K filed on November 17, 2008)
|
10.35
|
Amendment to Investment Agreement dated as of November 13, 2008 between the Company and WLR Recovery Fund IV, L.P. (Incorporated by reference to Exhibit 99.2 to Form 8-K filed on November 17, 2008)
|
10.36
|
Amended and Restated Revolving Credit Agreement dated as of June 30, 2009 among FSA Asset Management LLC, Dexia Crédit Local S.A. and Dexia Bank Belgium S.A. (Incorporated by reference to Exhibit 10.1 to Form 8-K filed on July 8, 2009)
|
|
|
Exhibit
Number
|
Description of Document
|
10.37
|
Master Repurchase Agreement (September 1996 Version) dated as of June 30, 2009 between Dexia Crédit Local S.A. and FSA Asset Management LLC (Incorporated by reference to Exhibit 10.2.1 to Form 8-K filed on July 8, 2009)
|
10.38
|
Annex I-Committed Term Repurchase Agreement Annex dated as of June 30, 2009 between Dexia Crédit Local S.A. and FSA Asset Management LLC (Incorporated by reference to Exhibit 10.2.2 to Form 8-K filed on July 8, 2009)
|
10.39
|
ISDA Master Agreement (Multicurrency-Cross Border) dated as of June 30, 2009 among Dexia SA, Dexia Crédit Local S.A. and FSA Asset Management LLC (Incorporated by reference to Exhibit 10.3.1 to Form 8-K filed on July 8, 2009)
|
10.40
|
Schedule to the 1992 Master Agreement, Guaranteed Put Contract, dated as of June 30, 2009 among Dexia Crédit Local S.A., Dexia SA and FSA Asset Management LLC (Incorporated by reference to Exhibit 10.3.2 to Form 8-K filed on July 8, 2009)
|
10.41
|
Put Option Confirmation, Guaranteed Put Contract, dated June 30, 2009 to FSA Asset Management LLC from Dexia SA and Dexia Crédit Local S.A. (Incorporated by reference to Exhibit 10.3.3 to Form 8-K filed on July 8, 2009)
|
10.42
|
ISDA Credit Support Annex (New York Law) to the Schedule to the ISDA Master Agreement, Guaranteed Put Contract, dated as of June 30, 2009 between Dexia Crédit Local S.A. and Dexia SA and FSA Asset Management LLC (Incorporated by reference to Exhibit 10.3.4 to Form 8-K filed on July 8, 2009)
|
10.43
|
ISDA Master Agreement (Multicurrency-Cross Border) dated as of June 30, 2009 among Dexia SA, Dexia Crédit Local S.A. and FSA Asset Management LLC (Incorporated by reference to Exhibit 10.4.1 to Form 8-K filed on July 8, 2009)
|
10.44
|
Schedule to the 1992 Master Agreement, Non-Guaranteed Put Contract, dated as of June 30, 2009 among Dexia Crédit Local S.A., Dexia SA and FSA Asset Management LLC (Incorporated by reference to Exhibit 10.4.2 to Form 8-K filed on July 8, 2009)
|
10.45
|
Put Option Confirmation, Non-Guaranteed Put Contract, dated June 30, 2009 to FSA Asset Management LLC from Dexia SA and Dexia Crédit Local S.A. (Incorporated by reference to Exhibit 10.4.3 to Form 8-K filed on July 8, 2009)
|
10.46
|
ISDA Credit Support Annex (New York Law) to the Schedule to the ISDA Master Agreement, Non-Guaranteed Put Contract, dated as of June 30, 2009 between Dexia Crédit Local S.A. and Dexia SA and FSA Asset Management LLC (Incorporated by reference to Exhibit 10.4.4 to Form 8-K filed on July 8, 2009)
|
10.47
|
First Demand Guarantee Relating to the “Financial Products” Portfolio of FSA Asset Management LLC issued by the Belgian State and the French State and executed as of June 30, 2009 (Incorporated by reference to Exhibit 10.5 to Form 8-K filed on July 8, 2009)
|
10.48
|
Guaranty, dated as of June 30, 2009, made jointly and severally by Dexia SA and Dexia Crédit Local S.A., in favor of Financial Security Assurance Inc. (Incorporated by reference to Exhibit 10.6 to Form 8-K filed on July 8, 2009)
|
10.49
|
Indemnification Agreement (GIC Business) dated as of June 30, 2009 by and among Financial Security Assurance Inc., Dexia Crédit Local S.A. and Dexia SA (Incorporated by reference to Exhibit 10.7 to Form 8-K filed on July 8, 2009)
|
10.50
|
Pledge and Administration Agreement, dated as of June 30, 2009, among Dexia SA, Dexia Crédit Local S.A., Dexia Bank Belgium SA, Dexia FP Holdings Inc., Financial Security Assurance Inc., FSA Asset Management LLC, FSA Portfolio Asset Limited, FSA Capital Markets Services LLC, FSA Capital Markets Services (Caymans) Ltd., FSA Capital Management Services LLC and The Bank of New York Mellon Trust Company, National Association (Incorporated by reference to Exhibit 10.8 to Form 8-K filed on July 8, 2009)
|
10.51
|
Separation Agreement, dated as of July 1, 2009, among Dexia Crédit Local S.A., Financial Security Assurance Inc., Financial Security Assurance International, Ltd., FSA Global Funding Limited and Premier International Funding Co. (Incorporated by reference to Exhibit 10.9 to Form 8-K filed on July 8, 2009)
|
10.52
|
Funding Guaranty, dated as of July 1, 2009, made by Dexia Crédit Local S.A. in favor of Financial Security Assurance Inc. and Financial Security Assurance International, Ltd. (Incorporated by reference to Exhibit 10.10 to Form 8-K filed on July 8, 2009)
|
10.53
|
Reimbursement Guaranty, dated as of July 1, 2009, made by Dexia Crédit Local S.A. in favor of Financial Security Assurance Inc. and Financial Security Assurance International, Ltd. (Incorporated by reference to Exhibit 10.11 to Form 8-K filed on July 8, 2009)
|
10.54
|
Strip Coverage Liquidity and Security Agreement, dated as of July 1, 2009, between Financial Security Assurance Inc. and Dexia Crédit Local S.A. (Incorporated by reference to Exhibit 10.12 to Form 8-K filed on July 8, 2009)
|
|
|
Exhibit
Number
|
Description of Document
|
10.55
|
Indemnification Agreement (FSA Global Business), dated as of July 1, 2009, by and between Financial Security Assurance Inc., Assured Guaranty Ltd. and Dexia Crédit Local S.A. (Incorporated by reference to Exhibit 10.13 to Form 8-K filed on July 8, 2009)
|
10.56
|
Pledge and Administration Annex Amendment Agreement dated as of July 1, 2009 among Dexia SA, Dexia Crédit Local S.A., Dexia Bank Belgium SA, Dexia FP Holdings Inc., Financial Security Assurance Inc., FSA Asset Management LLC, FSA Portfolio Asset Limited, FSA Capital Markets Services LLC, FSA Capital Markets Services (Caymans) Ltd., FSA Capital Management Services LLC and The Bank of New York Mellon Trust Company, National Association (Incorporated by reference to Exhibit 10.14 to Form 8-K filed on July 8, 2009)
|
10.57
|
Put Confirmation Annex Amendment Agreement dated as of July 1, 2009 among Dexia SA and Dexia Crédit Local S.A. and FSA Asset Management LLC and Financial Security Assurance Inc. (Incorporated by reference to Exhibit 10.15 to Form 8-K filed on July 8, 2009)
|
10.58
|
Non-Qualified Stock Option Agreement for Outside Directors under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.19 to Form 10-Q for the quarter ended June 30, 2009)*
|
10.59
|
Master Repurchase Agreement between FSA Capital Management Services LLC and FSA Capital Markets Services LLC (Incorporated by reference to Exhibit 10.20 to Form 10-Q for the quarter ended June 30, 2009)
|
10.60
|
Confirmation to Master Repurchase Agreement (Incorporated by reference to Exhibit 10.21 to Form 10-Q for the quarter ended June 30, 2009)
|
10.61
|
Master Repurchase Agreement Annex I (Incorporated by reference to Exhibit 10.22 to Form 10-Q for the quarter ended June 30, 2009)
|
10.62
|
Financial Security Assurance Holdings Ltd. 1989 Supplemental Executive Retirement Plan (amended and restated as of December 17, 2004) (Incorporated by reference to Exhibit 10.4 to Financial Security Assurance Holdings Ltd.'s Form 8-K filed on December 17, 2004)*
|
10.63
|
Amendment to the Financial Security Assurance Holdings Ltd. 1989 Supplemental Employee Retirement Plan (Incorporated by reference to Exhibit 10.29 to Form 10-Q for the quarter ended June 30, 2009)*
|
10.64
|
Financial Security Assurance Holdings Ltd. 2004 Supplemental Executive Retirement Plan, dated as of December 17, 2004 (Incorporated by reference to Exhibit 10.3 to Financial Security Assurance Holdings Ltd.'s Form 8-K filed on December 17, 2004)*
|
10.65
|
Financial Security Assurance Holdings Ltd. 2004 Supplemental Executive Retirement Plan, as amended on May 18, 2006 (Incorporated by reference to Exhibit 10.1 to Financial Security Assurance Holdings Ltd.'s Form 8-K filed on May 22, 2006)*
|
10.66
|
Financial Security Assurance Holdings Ltd. 2004 Supplemental Executive Retirement Plan, as amended on February 14, 2008 (Incorporated by reference to Exhibit 10.3 to Financial Security Assurance Holdings Ltd.'s Form 8-K filed on February 15, 2008)*
|
10.67
|
Pledge and Intercreditor Agreement, among Dexia Crédit Local, Dexia Bank Belgium S.A., Financial Security Assurance Inc. and FSA Asset Management LLC, dated November 13, 2008 (Incorporated by reference to Exhibit 10.3 to Financial Security Assurance Holdings Ltd.'s Form 10-Q for the quarter ended September 30, 2008)
|
10.68
|
Amended and Restated Pledge and Intercreditor Agreement, dated as of February 20, 2009, between Dexia Crédit Local, Dexia Bank Belgium S.A., Financial Security Assurance Inc., FSA Asset Management LLC, FSA Capital Markets Services LLC and FSA Capital Management Services LLC (Incorporated by reference to Exhibit 10.19 to Financial Security Assurance Holdings Ltd.'s Form 10-K for the year ended December 31, 2008)
|
10.69
|
Put Option Agreement, dated as of June 23, 2003 by and between FSA and Sutton Capital Trust I (Incorporated by reference to Exhibit 99.5 to Financial Security Assurance Holdings Ltd.'s Form 10-Q for the quarter ended June 30, 2003)
|
10.70
|
Put Option Agreement, dated as of June 23, 2003 by and between FSA and Sutton Capital Trust II (Incorporated by reference to Exhibit 99.6 to Financial Security Assurance Holdings Ltd.'s Form 10-Q for the quarter ended June 30, 2003)
|
10.71
|
Put Option Agreement, dated as of June 23, 2003 by and between FSA and Sutton Capital Trust III (Incorporated by reference to Exhibit 99.7 to Financial Security Assurance Holdings Ltd.'s Form 10-Q for the quarter ended June 30, 2003)
|
10.72
|
Put Option Agreement, dated as of June 23, 2003 by and between FSA and Sutton Capital Trust IV (Incorporated by reference to Exhibit 99.8 to Financial Security Assurance Holdings Ltd.'s Form 10-Q for the quarter ended June 30, 2003)
|
|
|
Exhibit
Number
|
Description of Document
|
10.73
|
Contribution Agreement, dated as of November 22, 2006, between Dexia S.A. and Financial Security Assurance Holdings Ltd. (Incorporated by reference to Exhibit 10.4 to Financial Security Assurance Holdings Ltd.'s Form 8-K filed on November 28, 2006)
|
10.74
|
Replacement Capital Covenant, dated as of November 22, 2006, by Financial Security Assurance Holdings Ltd. (Incorporated by reference to Exhibit 10.5 to Financial Security Assurance Holdings Ltd.'s Form 8-K filed on November 28, 2006)
|
10.75
|
Agreement and Amendment between Dexia Holdings Inc., Dexia Credit Local S.A. and the Company dated as of June 9, 2009 (Incorporated by reference to Exhibit 10.1 to Form 8-K filed on June 12, 2009)
|
10.76
|
Second Amendment to Investment Agreement dated as June 10, 2009 between the Company and WLR Recovery Fund IV, L.P. (Incorporated by reference to Exhibit 10.2 to Form 8-K filed on June 12, 2009)
|
10.77
|
Restricted Stock Agreement for Outside Directors under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended June 30, 2008)*
|
10.78
|
2010 Form of Restricted Stock Unit Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan to be used with employment agreement (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended March 31, 2010)*
|
10.79
|
2010 Form of Restricted Stock Unit Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan to be used without employment agreement (Incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended March 31, 2010)*
|
10.80
|
2010 Form of Non-Qualified Stock Option Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan to be used with employment agreement (Incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended March 31, 2010)*
|
10.81
|
2010 Form of Non-Qualified Stock Option Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan for use without employment agreement (Incorporated by reference to Exhibit 10.4 to Form 10-Q for the quarter ended March 31, 2010)*
|
10.82
|
Terms of Performance Retention Award, Four Year Installment Vesting Granted on February 25, 2010 for participants subject to $1 million limit (Incorporated by reference to Exhibit 10.5 to Form 10-Q for the quarter ended March 31, 2010)*
|
10.83
|
Terms of Performance Retention Award, Four Year Installment Vesting Granted on February 9, 2011 for participants subject to $1 million limit (Incorporated by reference to Exhibit 10.5 to Form 10-Q for the quarter ended March 31, 2011)*
|
10.84
|
Form of Restricted Stock Unit Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan to be used with employment agreement (Incorporated by reference to Exhibit 10.6 to Form 10-Q for the quarter ended March 31, 2011)*
|
10.85
|
Form of Restricted Stock Unit Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan to be used without employment agreement (Incorporated by reference to Exhibit 10.7 to the Form 10-Q for the quarter ended March 31, 2011)*
|
10.86
|
Waiver Letter dated April 21, 2011 from Dominic J. Frederico (Incorporated by reference to Exhibit 10.1 to Form 8-K filed on April 22, 2011)*
|
10.87
|
Waiver Letter dated April 21, 2011 from Robert B. Mills (Incorporated by reference to Exhibit 10.2 to Form 8-K filed on April 22, 2011)*
|
10.88
|
Waiver Letter dated April 21, 2011 from James M. Michener (Incorporated by reference to Exhibit 10.3 to Form 8-K filed on April 22, 2011)*
|
10.89
|
Waiver Letter dated April 21, 2011 from Robert A. Bailenson (Incorporated by reference to Exhibit 10.4 to Form 8-K filed on April 22, 2011)*
|
10.90
|
Letter Agreement with Robert B. Mills dated May 13, 2011 (incorporated by reference to Exhibit 10.1 to Form 8-K filed on May 13, 2011)*
|
10.91
|
Letter Agreement with Robert A. Bailenson dated May 13, 2011 (incorporated by reference to Exhibit 10.2 to Form 8-K filed May on 13, 2011)*
|
10.92
|
Assured Guaranty Corp. Supplemental Executive Retirement Plan as amended through the Third Amendment thereto (Incorporated by reference to Exhibit 4.5 to Form S-8 (#333-178625))*
|
10.93
|
Employment Continuation and Termination of Employment Agreement between Dominic J. Frederico and the Registrant (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended March 31, 2012)*
|
10.94
|
Employment Continuation and Termination of Employment Agreement between James M. Michener and the Registrant (Incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended March 31, 2012)*
|
|
|
Exhibit
Number
|
Description of Document
|
10.95
|
Employment Continuation and Termination of Employment Agreement between Robert B. Mills and the Registrant (Incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended March 31, 2012)*
|
10.96
|
Employment Continuation and Termination of Employment Agreement between Robert A. Bailenson and the Registrant (Incorporated by reference to Exhibit 10.4 to Form 10-Q for the quarter ended March 31, 2012)*
|
10.97
|
Assured Guaranty Ltd. Executive Severance Plan (Incorporated by reference to Exhibit 10.5 to Form 10-Q for the quarter ended March 31, 2012)*
|
10.98
|
Assured Guaranty Ltd. Perquisite Policy (Incorporated by reference to Exhibit 10.6 to Form 10-Q for the quarter ended March 31, 2012)*
|
10.99
|
2012 Form of Executive Non-Qualified Stock Option Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.7 to Form 10-Q for the quarter ended March 31, 2012)*
|
10.100
|
2012 Form of Executive Restricted Stock Unit Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.8 to Form 10-Q for the quarter ended March 31, 2012)*
|
10.101
|
2012 Form of Executive Performance-Based Restricted Stock Unit Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.9 to Form 10-Q for the quarter ended March 31, 2012)*
|
10.102
|
Terms of Performance Retention Award Four Year Installment Vesting Granted on February 9, 2012 for participants Subject to $1 million Limit (Incorporated by reference to Exhibit 10.10 to Form 10-Q for the quarter ended March 31, 2012)*
|
10.103
|
Form of Acknowledgement Letter for Participants in Assured Guaranty Ltd. Executive Severance Plan (Incorporated by reference to Exhibit 10.11 to Form 10-Q for the quarter ended March 31, 2012)*
|
10.104
|
Assured Guaranty Ltd. Supplemental Employee Retirement Plan, as amended and restated effective January 1, 2009 and as amended by the First, Second, Third, Fourth and Fifth Amendments (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended September 30, 2012)
*
|
10.105
|
Assured Guaranty Ltd. 2004 Long-Term Incentive Plan, as amended and restated as of May 7, 2009 and as amended by the First Amendment (Incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended September 30, 2012)*
|
10.106
|
First Amendment to the Restricted Stock Unit Agreement for Outside Directors*
|
12.1
|
Computation of Ratio of Earnings to Fixed Charges
|
21.1
|
Subsidiaries of the registrant
|
23.1
|
Accountants Consent
|
31.1
|
Certification of CEO Pursuant to Exchange Act Rules 13A-14 and 15D-14, as Adopted Pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002
|
31.2
|
Certification of CFO Pursuant to Exchange Act Rules 13A-14 and 15D-14, as Adopted Pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002
|
32.1
|
Certification of CEO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes‑ Oxley Act of 2002
|
32.2
|
Certification of CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes‑ Oxley Act of 2002
|
101.1
|
The following financial information from Registrant's Annual Report on Form 10-K for the year ended December 31, 2012 formatted in XBRL (eXtensible Business Reporting Language) interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets at December 31, 2012 and 2011; (ii) Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010; (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, 2011 and 2010; (iv) Consolidated Statements of Shareholders' Equity for the years ended December 31, 2012, 2011 and 2010; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010; and (vi) Notes to Consolidated Financial Statements.
|
*
|
Management contract or compensatory plan
|
|
Assured Guaranty Ltd.
|
|
|
|
|
|
|
|
|
By:
|
/s/ Dominic J. Frederico
Name: Dominic J. Frederico
Title:
President and Chief Executive Officer
|
|
|
Name
|
|
|
|
|
Position
|
|
|
|
|
Date
|
|
|
|
|
|
||||||||||||
/s/ Walter A. Scott
Walter A. Scott
|
Chairman of the Board; Director
|
March 1, 2013
|
||||||||||||
|
|
|
||||||||||||
/s/ Dominic J. Frederico
Dominic J. Frederico
|
President and Chief Executive Officer; Director
|
March 1, 2013
|
||||||||||||
|
|
|
||||||||||||
/s/ Robert A. Bailenson
Robert A. Bailenson
|
Chief Financial Officer (Principal Financial and Accounting Officer and Duly Authorized Officer)
|
March 1, 2013
|
||||||||||||
|
|
|
||||||||||||
/s/ Neil Baron
Neil Baron
|
Director
|
March 1, 2013
|
||||||||||||
|
|
|
||||||||||||
/s/ Francisco L. Borges
Francisco L. Borges
|
Director
|
March 1, 2013
|
||||||||||||
|
|
|
||||||||||||
/s/ G. Lawrence Buhl
G. Lawrence Buhl
|
Director
|
March 1, 2013
|
||||||||||||
|
|
|
||||||||||||
/s/ Stephen A. Cozen
Stephen A. Cozen
|
Director
|
March 1, 2013
|
||||||||||||
|
|
|
||||||||||||
/s/ Bonnie L. Howard
Bonnie L. Howard
|
Director
|
March 1, 2013
|
||||||||||||
|
|
|
||||||||||||
/s/ Patrick W. Kenny
Patrick W. Kenny
|
Director
|
March 1, 2013
|
||||||||||||
|
|
|
||||||||||||
/s/ Robin Monro‑Davies
Robin Monro‑Davies
|
Director
|
March 1, 2013
|
||||||||||||
|
|
|
||||||||||||
/s/ Michael T. O'Kane
Michael T. O'Kane
|
Director
|
March 1, 2013
|
||||||||||||
|
|
|
||||||||||||
/s/ Wilbur L. Ross, Jr.
Wilbur L. Ross, Jr.
|
Director
|
March 1, 2013
|
Salary
|
|
$950,000.00
|
|
|
Salary
|
|
$450,000.00
|
|
|
Salary
|
|
$370,000.00
|
|
|
Salary
|
|
$475,000.00
|
|
|
Salary
|
|
$520,000.00
|
|
|
|
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2012
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
||||||||||
Income (loss) before income taxes
|
$
|
132
|
|
|
$
|
1,029
|
|
|
$
|
534
|
|
|
$
|
109
|
|
|
$
|
98
|
|
Fixed Charges
|
95
|
|
|
103
|
|
|
104
|
|
|
66
|
|
|
25
|
|
|||||
Income (loss) as adjusted
|
227
|
|
|
1,132
|
|
|
638
|
|
|
175
|
|
|
123
|
|
|||||
Fixed charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense
|
92
|
|
|
99
|
|
|
100
|
|
|
63
|
|
|
23
|
|
|||||
Portion of rents representative of the interest factor
|
3
|
|
|
4
|
|
|
4
|
|
|
3
|
|
|
2
|
|
|||||
Total fixed charges
|
$
|
95
|
|
|
$
|
103
|
|
|
$
|
104
|
|
|
$
|
66
|
|
|
$
|
25
|
|
Ratio of consolidated earnings to fixed charges
|
2.4
|
|
|
11.0
|
|
|
6.1
|
|
|
2.7
|
|
|
4.9
|
|
|
Assured Guaranty Re Ltd. (Bermuda domiciled subsidiary of Assured Guaranty Ltd.)
|
Assured Guaranty Overseas US Holdings Inc. (Delaware domiciled subsidiary of Assured Guaranty Re Ltd.)
|
Assured Guaranty Re Overseas Ltd. (Bermuda domiciled subsidiary of Assured Guaranty Overseas US Holdings Inc.)
|
Assured Guaranty Mortgage Insurance Company (New York domiciled subsidiary of Assured Guaranty Re Overseas Ltd.)
|
AG Intermediary Inc. (New York domiciled subsidiary of Assured Guaranty Re Overseas Ltd.)
|
Assured Guaranty Finance Overseas Ltd. (England domiciled subsidiary of Assured Guaranty Ltd.)
|
Cedar Personnel Ltd. (Bermuda domiciled subsidiary of Assured Guaranty Ltd.)
|
AG Corporate Holdings LLC (Delaware domiciled subsidiary of Assured Guaranty Ltd.)
|
Assured Guaranty US Holdings Inc. (Delaware domiciled subsidiary of AG Corporate Holdings LLC)
|
Assured Guaranty Municipal Holdings Inc. (New York domiciled subsidiary of Assured Guaranty US Holdings Inc.)
|
Assured Guaranty Municipal Corp. (New York domiciled subsidiary of Assured Guaranty Municipal Holdings Inc.)
|
Assured Guaranty Municipal Insurance Company (New York domiciled subsidiary of Assured Guaranty Municipal Corp.)
|
Assured Guaranty (Bermuda) Ltd. (Bermuda domiciled 82% owned subsidiary of Assured Guaranty Municipal Insurance Company and 18% owned subsidiary of Assured Guaranty Municipal Corp.)
|
Assured Guaranty Credit Protection (Cayman) Ltd. (Cayman Islands domiciled company)
2
|
Assured Guaranty (Europe) Ltd. (England domiciled subsidiary of Assured Guaranty Municipal Insurance Company)
|
FSA Portfolio Management Inc. (New York domiciled subsidiary of Assured Guaranty Municipal Holdings Inc.)
|
Transaction Services Corporation (New York domiciled subsidiary of Assured Guaranty Municipal Holdings Inc.)
|
Municipal Assurance Corp. (New York domiciled subsidiary of Assured Guaranty US Holdings Inc.)
3
|
Assured Guaranty (UK) Services Limited (England domiciled subsidiary of Assured Guaranty US Holdings Inc.)
|
Assured Guaranty Corp. (Maryland domiciled subsidiary of Assured Guaranty US Holdings Inc.)
|
Prescott, LLC (Delaware domiciled subsidiary of Assured Guaranty Corp.)
|
Assured Guaranty (UK) Ltd. (England domiciled subsidiary of Assured Guaranty Corp.)
|
AG PFC Holding LLC (Delaware domiciled subsidiary of Assured Guaranty Corp.)
|
AGFP Holdings LLC (Delaware domiciled subsidiary of AG PFC Holding LLC)
|
Portfolio Funding Company LLC I (Delaware domiciled 50% owned subsidiary of AGFP Holdings LLC)
4
|
AG Financial Products Inc. (Delaware domiciled subsidiary of Assured Guaranty US Holdings Inc.)
|
AG Analytics Inc. (Delaware domiciled subsidiary of Assured Guaranty US Holdings Inc.)
|
(1)
|
All subsidiaries are wholly owned except for Portfolio Funding LLC I and Assured Guaranty Credit Protection (Cayman) Ltd.
|
(2)
|
Assured Guaranty Credit Protection (Cayman) Ltd. is wholly owned by Maples FS Limited, an entity that is not owned or controlled by Assured Guaranty Ltd. The sole director of Assured Guaranty Credit Protection (Cayman) Ltd. is an officer of Assured Guaranty (Bermuda) Ltd.
|
(3)
|
Municipal Assurance Corp. (formerly Municipal and Infrastructure Assurance Corporation) was acquired by Assured Guaranty US Holdings Inc. on May 31, 2012. The company changed its name in New York, its state of domicile, effectiv
e January 9, 2013 and
intends to submit requests for approval of the name change in the other states in which it is licensed.
|
(4)
|
The remaining 50% is owned by a subsidiary of Goldman, Sachs & Co.
|
1.
|
I have reviewed this Annual Report on Form 10-K of Assured Guaranty Ltd.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
|
|
By:
|
/s/ DOMINIC J. FREDERICO
|
|
|
|
|
|
Dominic J. Frederico
|
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this Annual Report on Form 10-K of Assured Guaranty Ltd.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
|
|
By:
|
/s/ ROBERT A. BAILENSON
|
|
|
|
|
|
Robert A. Bailenson
|
|
|
Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ DOMINIC J. FREDERICO
|
|
|
|
Name: Dominic J. Frederico
|
|
Title:
President and Chief Executive Officer
|
|
Date: March 1, 2013
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ ROBERT A. BAILENSON
|
|
|
|
Name: Robert A. Bailenson
|
|
Title:
Chief Financial Officer
|
|
Date: March 1, 2013
|
|