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ý
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Bermuda
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98-0429991
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(State or other jurisdiction
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(I.R.S. employer
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of incorporation)
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identification no.)
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Page
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PART I.
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FINANCIAL INFORMATION
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ITEM 1.
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FINANCIAL STATEMENTS
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As of
March 31, 2013 |
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As of
December 31, 2012 |
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Assets
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Investment portfolio:
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Fixed maturity securities, available-for-sale, at fair value (amortized cost of $9,363 and $9,346)
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$
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9,985
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$
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10,056
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Short term investments, at fair value
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729
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817
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Other invested assets
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148
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212
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|
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Total investment portfolio
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10,862
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|
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11,085
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Cash
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125
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|
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138
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Premiums receivable, net of ceding commissions payable
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956
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1,005
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Ceded unearned premium reserve
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535
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561
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Deferred acquisition costs
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116
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116
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Reinsurance recoverable on unpaid losses
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56
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58
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Salvage and subrogation recoverable
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543
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456
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Credit derivative assets
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125
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141
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Deferred tax asset, net
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872
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721
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Financial guaranty variable interest entities’ assets, at fair value
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2,813
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2,688
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Other assets
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296
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273
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Total assets
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$
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17,299
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$
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17,242
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Liabilities and shareholders’ equity
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Unearned premium reserve
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$
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4,982
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$
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5,207
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Loss and loss adjustment expense reserve
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532
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601
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Reinsurance balances payable, net
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193
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219
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Long-term debt
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832
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836
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Credit derivative liabilities
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2,518
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1,934
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Financial guaranty variable interest entities’ liabilities with recourse, at fair value
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2,071
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2,090
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Financial guaranty variable interest entities’ liabilities without recourse, at fair value
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1,107
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1,051
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Other liabilities
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340
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310
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Total liabilities
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12,575
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12,248
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Commitments and contingencies (See Note 14)
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Common stock ($0.01 par value, 500,000,000 shares authorized; 192,337,826 and 194,003,297 shares issued and outstanding)
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2
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2
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Additional paid-in capital
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2,685
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2,724
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Retained earnings
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1,586
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1,749
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Accumulated other comprehensive income, net of tax of $169 and $198
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447
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515
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Deferred equity compensation (320,193 and 320,193 shares)
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4
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4
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Total shareholders’ equity
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4,724
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4,994
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Total liabilities and shareholders’ equity
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$
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17,299
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$
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17,242
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Three Months Ended March 31,
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2013
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2012
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Revenues
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Net earned premiums
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$
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248
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$
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194
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Net investment income
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94
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98
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Net realized investment gains (losses):
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Other-than-temporary impairment losses
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(1
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)
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(28
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)
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Less: portion of other-than-temporary impairment loss recognized in other comprehensive income
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4
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(23
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)
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Other net realized investment gains (losses)
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33
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6
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Net realized investment gains (losses)
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28
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1
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Net change in fair value of credit derivatives:
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Realized gains (losses) and other settlements
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18
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(57
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)
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Net unrealized gains (losses)
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(610
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)
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(634
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)
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Net change in fair value of credit derivatives
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(592
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)
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(691
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)
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Fair value gains (losses) on committed capital securities
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(10
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)
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(14
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)
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Fair value gains (losses) on financial guaranty variable interest entities
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70
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(41
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)
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Other income
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(14
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)
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91
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Total revenues
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(176
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)
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(362
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)
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Expenses
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Loss and loss adjustment expenses
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(48
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)
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242
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Amortization of deferred acquisition costs
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3
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5
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Interest expense
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21
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25
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Other operating expenses
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60
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62
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Total expenses
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36
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334
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Income (loss) before income taxes
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(212
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)
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(696
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)
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Provision (benefit) for income taxes
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Current
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55
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29
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Deferred
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(123
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)
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(242
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)
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Total provision (benefit) for income taxes
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(68
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)
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(213
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)
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Net income (loss)
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$
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(144
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)
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$
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(483
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)
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Earnings per share:
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Basic
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$
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(0.74
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)
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$
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(2.65
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)
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Diluted
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$
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(0.74
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)
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$
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(2.65
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)
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Dividends per share
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$
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0.10
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$
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0.09
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Three Months Ended March 31,
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||||||
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2013
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|
2012
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Net income (loss)
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$
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(144
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)
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$
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(483
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)
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Unrealized holding gains (losses) arising during the period on:
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Investments with no other-than-temporary impairment, net of tax provision (benefit) of $(19) and $19
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(50
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)
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42
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Investments with other-than-temporary impairment, net of tax provision (benefit) of $(8) and $(7)
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(16
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)
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(14
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)
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Unrealized holding gains (losses) arising during the period, net of tax
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(66
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)
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28
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Less: reclassification adjustment for gains (losses) included in net income (loss), net of tax provision (benefit) of $(2) and $(1)
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(3
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)
|
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(1
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)
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Change in net unrealized gains on investments
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(63
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)
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29
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Other, net of tax provision
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(5
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)
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2
|
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Other comprehensive income (loss)
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$
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(68
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)
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$
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31
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Comprehensive income (loss)
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$
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(212
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)
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$
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(452
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)
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Common Stock
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Additional
Paid-in
Capital
|
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Retained Earnings
|
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Accumulated
Other
Comprehensive Income
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Deferred
Equity Compensation
|
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Total
Shareholders’ Equity
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|||||||||||||||
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Shares
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Amount
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Balance at December 31, 2012
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194,003,297
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$
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2
|
|
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$
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2,724
|
|
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$
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1,749
|
|
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$
|
515
|
|
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$
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4
|
|
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$
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4,994
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Net loss
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—
|
|
|
—
|
|
|
—
|
|
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(144
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)
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—
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|
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—
|
|
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(144
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)
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Dividends ($0.10 per share)
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—
|
|
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—
|
|
|
—
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|
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(19
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)
|
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—
|
|
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—
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|
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(19
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)
|
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Common stock repurchases
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(1,914,566
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)
|
|
0
|
|
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(39
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)
|
|
—
|
|
|
—
|
|
|
—
|
|
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(39
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)
|
||||||
Share-based compensation and other
|
249,095
|
|
|
0
|
|
|
0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0
|
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
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(68
|
)
|
|
—
|
|
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(68
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)
|
||||||
Balance at March 31, 2013
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192,337,826
|
|
|
$
|
2
|
|
|
$
|
2,685
|
|
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$
|
1,586
|
|
|
$
|
447
|
|
|
$
|
4
|
|
|
$
|
4,724
|
|
|
Three Months Ended March 31,
|
||||||
|
2013
|
|
2012
|
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Net cash flows provided by (used in) operating activities
|
$
|
(14
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)
|
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$
|
75
|
|
Investing activities
|
|
|
|
|
|
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Fixed maturity securities:
|
|
|
|
|
|
||
Purchases
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(510
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)
|
|
(383
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)
|
||
Sales
|
183
|
|
|
189
|
|
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Maturities
|
283
|
|
|
253
|
|
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Net sales (purchases) of short-term investments
|
88
|
|
|
(143
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)
|
||
Net proceeds from paydowns on financial guaranty variable interest entities’ assets
|
138
|
|
|
138
|
|
||
Other
|
55
|
|
|
53
|
|
||
Net cash flows provided by (used in) investing activities
|
237
|
|
|
107
|
|
||
Financing activities
|
|
|
|
|
|
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Dividends paid
|
(19
|
)
|
|
(16
|
)
|
||
Repurchases of common stock
|
(39
|
)
|
|
—
|
|
||
Share activity under option and incentive plans
|
(2
|
)
|
|
(3
|
)
|
||
Net paydowns of financial guaranty variable interest entities’ liabilities
|
(167
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)
|
|
(193
|
)
|
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Repayment of long-term debt
|
(6
|
)
|
|
(5
|
)
|
||
Net cash flows provided by (used in) financing activities
|
(233
|
)
|
|
(217
|
)
|
||
Effect of exchange rate changes
|
(3
|
)
|
|
2
|
|
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Increase (decrease) in cash
|
(13
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)
|
|
(33
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)
|
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Cash at beginning of period
|
138
|
|
|
215
|
|
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Cash at end of period
|
$
|
125
|
|
|
$
|
182
|
|
Supplemental cash flow information
|
|
|
|
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|
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Cash paid (received) during the period for:
|
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|
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|
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Income taxes
|
$
|
32
|
|
|
$
|
2
|
|
Interest
|
$
|
9
|
|
|
$
|
12
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1.
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Business and Basis of Presentation
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•
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Assured Guaranty Municipal Corp. ("AGM"), domiciled in New York;
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•
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Assured Guaranty Corp. ("AGC"), domiciled in Maryland; and
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•
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Assured Guaranty Re Ltd. (“AG Re”), domiciled in Bermuda.
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•
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Assured Guaranty (Europe) Ltd. and one other insurance subsidiary, organized in the United Kingdom;
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•
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Municipal Assurance Corp., domiciled in New York, that has not yet commenced insurance operations; and
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•
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a U.S. and a Bermuda insurance subsidiary that participate in a pooling agreement with AGM.
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2.
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Business Changes and Accounting Developments
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•
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Note 5, Expected Loss to be Paid
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•
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Note 8, Financial Guaranty Contracts Accounted for as Credit Derivatives
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•
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Note 13, Reinsurance and Other Monoline Exposures
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•
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Note 15, Long Term Debt and Credit Facilities (regarding the impact on the Company's insured leveraged lease transactions)
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•
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In First Quarter 2013, under the current authorization, the Company repurchased
1.9 million
common shares for
$39 million
at an average price of
$20.46
per share. On May 8, 2013, the Company's board of directors authorized an additional
$115 million
of repurchases of the Company’s common shares, bringing the total authorization in 2013 to
$315 million
, of which the Company had repurchased a total of
5.6 million
shares for approximately
$115 million
at an average price of
$20.29
per share through May 6, 2013.
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•
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On May 6, 2013, the Company entered into an agreement with UBS Real Estate Securities Inc. and affiliates ("UBS") and a third party resolving the Company’s claims and liabilities related to specified residential mortgage-backed securities ("RMBS") transactions that were issued, underwritten or sponsored by UBS and insured by AGM or AGC under financial guaranty insurance policies. See Note 5, Expected Loss to be Paid.
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3.
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Outstanding Exposure
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|
Gross Debt Service
Outstanding
|
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Net Debt Service
Outstanding
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||||||||||||
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March 31,
2013 |
|
December 31,
2012 |
|
March 31,
2013 |
|
December 31,
2012 |
||||||||
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(in millions)
|
||||||||||||||
Public finance
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$
|
696,771
|
|
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$
|
722,562
|
|
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$
|
654,113
|
|
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$
|
677,369
|
|
Structured finance
|
104,976
|
|
|
112,388
|
|
|
97,628
|
|
|
104,811
|
|
||||
Total financial guaranty
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$
|
801,747
|
|
|
$
|
834,950
|
|
|
$
|
751,741
|
|
|
$
|
782,180
|
|
|
|
Public Finance
U.S.
|
|
Public Finance
Non-U.S.
|
|
Structured Finance
U.S
|
|
Structured Finance
Non-U.S
|
|
Total
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|||||||||||||||||||||||||
Rating
Category
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|||||||||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||||||||||||||||
Super senior
|
|
$
|
—
|
|
|
—
|
%
|
|
$
|
1,071
|
|
|
3.1
|
%
|
|
$
|
13,259
|
|
|
18.9
|
%
|
|
$
|
4,522
|
|
|
25.1
|
%
|
|
$
|
18,852
|
|
|
3.8
|
%
|
AAA
|
|
4,053
|
|
|
1.1
|
|
|
580
|
|
|
1.7
|
|
|
26,628
|
|
|
37.9
|
|
|
7,504
|
|
|
41.7
|
|
|
38,765
|
|
|
7.7
|
|
|||||
AA
|
|
120,812
|
|
|
31.9
|
|
|
661
|
|
|
1.9
|
|
|
10,041
|
|
|
14.2
|
|
|
687
|
|
|
3.8
|
|
|
132,201
|
|
|
26.3
|
|
|||||
A
|
|
206,112
|
|
|
54.5
|
|
|
9,158
|
|
|
26.1
|
|
|
3,149
|
|
|
4.5
|
|
|
958
|
|
|
5.3
|
|
|
219,377
|
|
|
43.7
|
|
|||||
BBB
|
|
42,890
|
|
|
11.3
|
|
|
21,590
|
|
|
61.5
|
|
|
3,351
|
|
|
4.8
|
|
|
2,437
|
|
|
13.5
|
|
|
70,268
|
|
|
14.0
|
|
|||||
Below-investment-grade (“BIG”)
|
|
4,589
|
|
|
1.2
|
|
|
2,007
|
|
|
5.7
|
|
|
13,852
|
|
|
19.7
|
|
|
1,906
|
|
|
10.6
|
|
|
22,354
|
|
|
4.5
|
|
|||||
Total net par outstanding
|
|
$
|
378,456
|
|
|
100.0
|
%
|
|
$
|
35,067
|
|
|
100.0
|
%
|
|
$
|
70,280
|
|
|
100.0
|
%
|
|
$
|
18,014
|
|
|
100.0
|
%
|
|
$
|
501,817
|
|
|
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
|
|
$
|
—
|
|
|
—
|
%
|
|
$
|
1,130
|
|
|
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
|
%
|
|
Greece
|
|
Hungary (2)
|
|
Ireland
|
|
Italy
|
|
Portugal
|
|
Spain (2)
|
|
Total
|
||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||
Sovereign and sub-sovereign exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Public finance
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
978
|
|
|
$
|
105
|
|
|
$
|
258
|
|
|
$
|
1,341
|
|
Infrastructure finance
|
—
|
|
|
408
|
|
|
23
|
|
|
83
|
|
|
96
|
|
|
164
|
|
|
774
|
|
|||||||
Sub-total
|
—
|
|
|
408
|
|
|
23
|
|
|
1,061
|
|
|
201
|
|
|
422
|
|
|
2,115
|
|
|||||||
Non-sovereign exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Regulated utilities
|
—
|
|
|
—
|
|
|
—
|
|
|
215
|
|
|
—
|
|
|
8
|
|
|
223
|
|
|||||||
RMBS
|
—
|
|
|
205
|
|
|
135
|
|
|
476
|
|
|
—
|
|
|
—
|
|
|
816
|
|
|||||||
Commercial receivables
|
—
|
|
|
2
|
|
|
13
|
|
|
61
|
|
|
14
|
|
|
2
|
|
|
92
|
|
|||||||
Pooled corporate
|
22
|
|
|
—
|
|
|
177
|
|
|
226
|
|
|
15
|
|
|
498
|
|
|
938
|
|
|||||||
Sub-total
|
22
|
|
|
207
|
|
|
325
|
|
|
978
|
|
|
29
|
|
|
508
|
|
|
2,069
|
|
|||||||
Total
|
$
|
22
|
|
|
$
|
615
|
|
|
$
|
348
|
|
|
$
|
2,039
|
|
|
$
|
230
|
|
|
$
|
930
|
|
|
$
|
4,184
|
|
Total BIG
|
$
|
—
|
|
|
$
|
576
|
|
|
$
|
7
|
|
|
$
|
2
|
|
|
$
|
121
|
|
|
$
|
406
|
|
|
$
|
1,112
|
|
(2)
|
See Note 5, 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 Total Net Par |
|||||||||||||||||
|
BIG 1
|
|
BIG 2
|
|
BIG 3
|
|
Total BIG
|
|
Outstanding
|
|
Outstanding
|
|||||||||||
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|||||||||||
First lien U.S. RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Prime first lien
|
$
|
27
|
|
|
$
|
422
|
|
|
$
|
10
|
|
|
$
|
459
|
|
|
$
|
619
|
|
|
0.1
|
%
|
Alt-A first lien
|
98
|
|
|
1,937
|
|
|
1,430
|
|
|
3,465
|
|
|
4,439
|
|
|
0.7
|
|
|||||
Option ARM
|
65
|
|
|
339
|
|
|
362
|
|
|
766
|
|
|
1,387
|
|
|
0.2
|
|
|||||
Subprime
|
162
|
|
|
1,219
|
|
|
1,006
|
|
|
2,387
|
|
|
7,130
|
|
|
0.5
|
|
|||||
Second lien U.S. RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Closed end second lien
|
—
|
|
|
61
|
|
|
279
|
|
|
340
|
|
|
452
|
|
|
0.1
|
|
|||||
Home equity lines of credit (“HELOCs”)
|
72
|
|
|
12
|
|
|
2,526
|
|
|
2,610
|
|
|
3,059
|
|
|
0.5
|
|
|||||
Total U.S. RMBS
|
424
|
|
|
3,990
|
|
|
5,613
|
|
|
10,027
|
|
|
17,086
|
|
|
2.1
|
|
|||||
Trust preferred securities (“TruPS”)
|
1,873
|
|
|
—
|
|
|
941
|
|
|
2,814
|
|
|
5,496
|
|
|
0.5
|
|
|||||
Other structured finance
|
1,240
|
|
|
379
|
|
|
1,298
|
|
|
2,917
|
|
|
65,712
|
|
|
0.6
|
|
|||||
U.S. public finance
|
3,359
|
|
|
520
|
|
|
710
|
|
|
4,589
|
|
|
378,456
|
|
|
0.9
|
|
|||||
Non-U.S. public finance
|
983
|
|
|
1,024
|
|
|
—
|
|
|
2,007
|
|
|
35,067
|
|
|
0.4
|
|
|||||
Total
|
$
|
7,879
|
|
|
$
|
5,913
|
|
|
$
|
8,562
|
|
|
$
|
22,354
|
|
|
$
|
501,817
|
|
|
4.5
|
%
|
|
BIG Net Par Outstanding
|
|
Net Par
|
|
BIG Net Par as
a % of Total 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 (including net interest margin securities)
|
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
|
|
|||||
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
|
|
|||||
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
|
%
|
|
|
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
|
|
$
|
6,148
|
|
|
$
|
1,731
|
|
|
$
|
7,879
|
|
|
143
|
|
|
30
|
|
|
173
|
|
Category 2
|
|
3,289
|
|
|
2,624
|
|
|
5,913
|
|
|
82
|
|
|
26
|
|
|
108
|
|
|||
Category 3
|
|
6,611
|
|
|
1,951
|
|
|
8,562
|
|
|
147
|
|
|
29
|
|
|
176
|
|
|||
Total BIG
|
|
$
|
16,048
|
|
|
$
|
6,306
|
|
|
$
|
22,354
|
|
|
372
|
|
|
85
|
|
|
457
|
|
|
|
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
|
|
(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
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Scheduled net earned premiums
|
$
|
128
|
|
|
$
|
152
|
|
Acceleration of premium earnings
|
113
|
|
|
37
|
|
||
Accretion of discount on net premiums receivable
|
7
|
|
|
5
|
|
||
Total financial guaranty insurance
|
248
|
|
|
194
|
|
||
Other
|
0
|
|
|
0
|
|
||
Total net earned premiums(1)
|
$
|
248
|
|
|
$
|
194
|
|
(1)
|
Excludes $
18 million
and $
17 million
for First Quarter 2013 and 2012, respectively, related to consolidated FG VIEs.
|
|
As of March 31, 2013
|
|
As of December 31, 2012
|
||||||||||||||||||||
|
Gross
|
|
Ceded
|
|
Net(1)
|
|
Gross
|
|
Ceded
|
|
Net(1)
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Deferred premium revenue:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Financial guaranty
|
$
|
5,090
|
|
|
$
|
558
|
|
|
$
|
4,532
|
|
|
$
|
5,349
|
|
|
$
|
586
|
|
|
$
|
4,763
|
|
Other
|
7
|
|
|
—
|
|
|
7
|
|
|
7
|
|
|
—
|
|
|
7
|
|
||||||
Total deferred premium revenue
|
$
|
5,097
|
|
|
$
|
558
|
|
|
$
|
4,539
|
|
|
$
|
5,356
|
|
|
$
|
586
|
|
|
$
|
4,770
|
|
Contra-paid
|
(115
|
)
|
|
(23
|
)
|
|
(92
|
)
|
|
(149
|
)
|
|
(25
|
)
|
|
(124
|
)
|
||||||
Total
|
$
|
4,982
|
|
|
$
|
535
|
|
|
$
|
4,447
|
|
|
$
|
5,207
|
|
|
$
|
561
|
|
|
$
|
4,646
|
|
(1)
|
Excludes $
244 million
and $
262 million
of deferred premium revenue, and
$72 million
and
$98 million
of contra-paid related to FG VIEs as of
March 31, 2013
and
December 31, 2012
, respectively.
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Balance beginning of period
|
$
|
4,770
|
|
|
$
|
5,327
|
|
Premium written, net
|
14
|
|
|
13
|
|
||
Net premium earned, excluding accretion
|
(241
|
)
|
|
(189
|
)
|
||
Commutations and changes in expected premiums
|
1
|
|
|
130
|
|
||
Foreign exchange translation
|
(4
|
)
|
|
3
|
|
||
Consolidation of FG VIEs
|
(1
|
)
|
|
(5
|
)
|
||
Balance, end of period
|
$
|
4,539
|
|
|
$
|
5,279
|
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Balance beginning of period
|
$
|
1,005
|
|
|
$
|
1,003
|
|
Premium written, net of ceding commissions
|
17
|
|
|
56
|
|
||
Premium payments received, net of ceding commissions
|
(53
|
)
|
|
(86
|
)
|
||
Adjustments:
|
|
|
|
||||
Changes in the expected term of financial guaranty insurance contracts
|
1
|
|
|
33
|
|
||
Accretion of discount, net of ceding commissions
|
9
|
|
|
6
|
|
||
Foreign exchange translation
|
(23
|
)
|
|
12
|
|
||
Consolidation of FG VIEs
|
0
|
|
|
(5
|
)
|
||
Balance, end of period (1)
|
$
|
956
|
|
|
$
|
1,019
|
|
(1)
|
Excludes $
28 million
and $
33 million
as of
March 31, 2013
and March 31, 2012, respectively, related to consolidated FG VIEs.
|
|
March 31, 2013
|
||
|
(in millions)
|
||
2013 (April 1 – June 30)
|
$
|
53
|
|
2013 (July 1 – September 30)
|
26
|
|
|
2013 (October 1 – December 31)
|
29
|
|
|
2014
|
105
|
|
|
2015
|
93
|
|
|
2016
|
87
|
|
|
2017
|
80
|
|
|
2018-2022
|
315
|
|
|
2023-2027
|
197
|
|
|
2028-2032
|
135
|
|
|
After 2032
|
154
|
|
|
Total(1)
|
$
|
1,274
|
|
(1)
|
Excludes expected cash collections on FG VIEs of $
35 million
.
|
|
As of March 31, 2013
|
||
|
(in millions)
|
||
2013 (April 1 - June 30)
|
$
|
121
|
|
2013 (July 1 - September 30)
|
118
|
|
|
2013 (October 1–December 31)
|
112
|
|
|
Subtotal 2013
|
351
|
|
|
2014
|
422
|
|
|
2015
|
371
|
|
|
2016
|
338
|
|
|
2017
|
303
|
|
|
2018 - 2022
|
1,164
|
|
|
2023 - 2027
|
732
|
|
|
2028 - 2032
|
437
|
|
|
After 2032
|
414
|
|
|
Total present value basis(1)
|
4,532
|
|
|
Discount
|
250
|
|
|
Total future value
|
$
|
4,782
|
|
(1)
|
Excludes scheduled net earned premiums on consolidated FG VIEs of $
244 million
.
|
|
As of
March 31, 2013 |
|
As of
December 31, 2012 |
||||
|
(dollars in millions)
|
||||||
Premiums receivable, net of ceding commission payable
|
$
|
956
|
|
|
$
|
1,005
|
|
Gross deferred premium revenue
|
1,788
|
|
|
1,908
|
|
||
Weighted-average risk-free rate used to discount premiums
|
3.6
|
%
|
|
3.5
|
%
|
||
Weighted-average period of premiums receivable (in years)
|
9.5
|
|
|
9.6
|
|
5.
|
Expected Loss to be Paid
|
|
Net Expected
Loss to be
Paid as of
December 31, 2012(2)
|
|
Economic Loss
Development
|
|
(Paid)
Recovered
Losses(1)
|
|
Net Expected
Loss to be Paid as of March 31, 2013(2) |
||||||||
|
(in millions)
|
||||||||||||||
U.S. RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
||||
First lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Prime first lien
|
$
|
10
|
|
|
$
|
6
|
|
|
$
|
(1
|
)
|
|
$
|
15
|
|
Alt-A first lien
|
693
|
|
|
1
|
|
|
(19
|
)
|
|
675
|
|
||||
Option ARM
|
460
|
|
|
15
|
|
|
(112
|
)
|
|
363
|
|
||||
Subprime
|
351
|
|
|
29
|
|
|
(4
|
)
|
|
376
|
|
||||
Total first lien
|
1,514
|
|
|
51
|
|
|
(136
|
)
|
|
1,429
|
|
||||
Second lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Closed-end second lien
|
99
|
|
|
(8
|
)
|
|
(4
|
)
|
|
87
|
|
||||
HELOCs
|
39
|
|
|
14
|
|
|
(14
|
)
|
|
39
|
|
||||
Total second lien
|
138
|
|
|
6
|
|
|
(18
|
)
|
|
126
|
|
||||
Total U.S. RMBS
|
1,652
|
|
|
57
|
|
|
(154
|
)
|
|
1,555
|
|
||||
TruPS
|
27
|
|
|
(3
|
)
|
|
(1
|
)
|
|
23
|
|
||||
Other structured finance
|
312
|
|
|
(2
|
)
|
|
(3
|
)
|
|
307
|
|
||||
U.S. public finance
|
7
|
|
|
7
|
|
|
(23
|
)
|
|
(9
|
)
|
||||
Non-U.S public finance
|
52
|
|
|
10
|
|
|
—
|
|
|
62
|
|
||||
Other
|
(3
|
)
|
|
(10
|
)
|
|
—
|
|
|
(13
|
)
|
||||
Total
|
$
|
2,047
|
|
|
$
|
59
|
|
|
$
|
(181
|
)
|
|
$
|
1,925
|
|
|
Net Expected
Loss to be
Paid as of
December 31, 2011
|
|
Economic Loss
Development
|
|
(Paid)
Recovered
Losses(1)
|
|
Expected
Loss to be Paid as of March 31, 2012 |
||||||||
|
(in millions)
|
||||||||||||||
U.S. RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
||||
First lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Prime first lien
|
$
|
5
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
6
|
|
Alt-A first lien
|
702
|
|
|
25
|
|
|
(26
|
)
|
|
701
|
|
||||
Option ARM
|
935
|
|
|
26
|
|
|
(107
|
)
|
|
854
|
|
||||
Subprime
|
342
|
|
|
11
|
|
|
(9
|
)
|
|
344
|
|
||||
Total first lien
|
1,984
|
|
|
63
|
|
|
(142
|
)
|
|
1,905
|
|
||||
Second lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Closed-end second lien
|
138
|
|
|
(5
|
)
|
|
(12
|
)
|
|
121
|
|
||||
HELOCs
|
159
|
|
|
10
|
|
|
(71
|
)
|
|
98
|
|
||||
Total second lien
|
297
|
|
|
5
|
|
|
(83
|
)
|
|
219
|
|
||||
Total U.S. RMBS
|
2,281
|
|
|
68
|
|
|
(225
|
)
|
|
2,124
|
|
||||
TruPS
|
64
|
|
|
(4
|
)
|
|
(2
|
)
|
|
58
|
|
||||
Other structured finance
|
342
|
|
|
(22
|
)
|
|
(24
|
)
|
|
296
|
|
||||
U.S. public finance
|
16
|
|
|
23
|
|
|
(6
|
)
|
|
33
|
|
||||
Non-U.S public finance
|
51
|
|
|
198
|
|
|
54
|
|
|
303
|
|
||||
Other
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||
Total
|
$
|
2,756
|
|
|
$
|
263
|
|
|
$
|
(203
|
)
|
|
$
|
2,816
|
|
(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 $
31 million
as of
March 31, 2013
and $
39 million
as of
December 31, 2012
. The Company paid
$13 million
and
$9 million
in LAE for First Quarter 2013 and
2012
, respectively.
|
|
Future Net
R&W Benefit as of
December 31, 2012
|
|
R&W Development
and Accretion of Discount During First Quarter 2013 |
|
R&W Recovered
During First Quarter 2013(1) |
|
Future Net
R&W Benefit as of March 31, 2013(2) |
||||||||
|
(in millions)
|
||||||||||||||
U.S. RMBS:
|
|
|
|
|
|
|
|
||||||||
First lien:
|
|
|
|
|
|
|
|
||||||||
Prime first lien
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
Alt-A first lien
|
378
|
|
|
(8
|
)
|
|
(8
|
)
|
|
362
|
|
||||
Option ARM
|
591
|
|
|
153
|
|
|
(54
|
)
|
|
690
|
|
||||
Subprime
|
109
|
|
|
4
|
|
|
—
|
|
|
113
|
|
||||
Total first lien
|
1,082
|
|
|
149
|
|
|
(62
|
)
|
|
1,169
|
|
||||
Second lien:
|
|
|
|
|
|
|
|
||||||||
Closed end second lien
|
138
|
|
|
(9
|
)
|
|
(21
|
)
|
|
108
|
|
||||
HELOC
|
150
|
|
|
17
|
|
|
(6
|
)
|
|
161
|
|
||||
Total second lien
|
288
|
|
|
8
|
|
|
(27
|
)
|
|
269
|
|
||||
Total
|
$
|
1,370
|
|
|
$
|
157
|
|
|
$
|
(89
|
)
|
|
$
|
1,438
|
|
|
Future Net
R&W Benefit as of
December 31, 2011
|
|
R&W Development
and Accretion of Discount During First Quarter 2012 |
|
R&W Recovered
During First Quarter 2012(1) |
|
Future Net
R&W Benefit as of March 31, 2012 (2) |
||||||||
|
(in millions)
|
||||||||||||||
U.S. RMBS:
|
|
|
|
|
|
|
|
||||||||
First lien:
|
|
|
|
|
|
|
|
||||||||
Prime first lien
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
4
|
|
Alt-A first lien
|
407
|
|
|
27
|
|
|
(1
|
)
|
|
433
|
|
||||
Option ARM
|
725
|
|
|
28
|
|
|
(18
|
)
|
|
735
|
|
||||
Subprime
|
101
|
|
|
(5
|
)
|
|
—
|
|
|
96
|
|
||||
Total first lien
|
1,236
|
|
|
51
|
|
|
(19
|
)
|
|
1,268
|
|
||||
Second lien:
|
|
|
|
|
|
|
|
||||||||
Closed end second lien
|
224
|
|
|
(2
|
)
|
|
—
|
|
|
222
|
|
||||
HELOC
|
190
|
|
|
2
|
|
|
(51
|
)
|
|
141
|
|
||||
Total second lien
|
414
|
|
|
—
|
|
|
(51
|
)
|
|
363
|
|
||||
Total
|
$
|
1,650
|
|
|
$
|
51
|
|
|
$
|
(70
|
)
|
|
$
|
1,631
|
|
(1)
|
Gross amounts recovered were
$92 million
and $
77 million
for First Quarter 2013 and 2012, respectively.
|
(2)
|
Includes excess spread that the Company will receive as salvage as a result of a settlement agreement with an R&W provider.
|
|
Net Expected
Loss to be
Paid as of
December 31, 2012
|
|
Economic Loss
Development
|
|
(Paid)
Recovered
Losses(1)
|
|
Net Expected
Loss to be Paid as of March 31, 2013 |
||||||||
|
(in millions)
|
||||||||||||||
U.S. RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
||||
First lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Prime first lien
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
(1
|
)
|
|
$
|
11
|
|
Alt-A first lien
|
315
|
|
|
9
|
|
|
(11
|
)
|
|
313
|
|
||||
Option ARM
|
(131
|
)
|
|
(138
|
)
|
|
(58
|
)
|
|
(327
|
)
|
||||
Subprime
|
242
|
|
|
25
|
|
|
(4
|
)
|
|
263
|
|
||||
Total first lien
|
432
|
|
|
(98
|
)
|
|
(74
|
)
|
|
260
|
|
||||
Second lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Closed-end second lien
|
(39
|
)
|
|
1
|
|
|
17
|
|
|
(21
|
)
|
||||
HELOCs
|
(111
|
)
|
|
(3
|
)
|
|
(8
|
)
|
|
(122
|
)
|
||||
Total second lien
|
(150
|
)
|
|
(2
|
)
|
|
9
|
|
|
(143
|
)
|
||||
Total U.S. RMBS
|
282
|
|
|
(100
|
)
|
|
(65
|
)
|
|
117
|
|
||||
TruPS
|
27
|
|
|
(3
|
)
|
|
(1
|
)
|
|
23
|
|
||||
Other structured finance
|
312
|
|
|
(2
|
)
|
|
(3
|
)
|
|
307
|
|
||||
U.S. public finance
|
7
|
|
|
7
|
|
|
(23
|
)
|
|
(9
|
)
|
||||
Non-U.S public finance
|
52
|
|
|
10
|
|
|
—
|
|
|
62
|
|
||||
Other
|
(3
|
)
|
|
(10
|
)
|
|
—
|
|
|
(13
|
)
|
||||
Total
|
$
|
677
|
|
|
$
|
(98
|
)
|
|
$
|
(92
|
)
|
|
$
|
487
|
|
|
Net Expected
Loss to be
Paid as of
December 31, 2011
|
|
Economic Loss
Development
|
|
(Paid)
Recovered
Losses(1)
|
|
Expected
Loss to be Paid as of March 31, 2012 |
||||||||
|
(in millions)
|
||||||||||||||
U.S. RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
||||
First lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Prime first lien
|
$
|
2
|
|
|
$
|
0
|
|
|
$
|
—
|
|
|
$
|
2
|
|
Alt-A first lien
|
295
|
|
|
(2
|
)
|
|
(25
|
)
|
|
268
|
|
||||
Option ARM
|
210
|
|
|
(2
|
)
|
|
(89
|
)
|
|
119
|
|
||||
Subprime
|
241
|
|
|
16
|
|
|
(9
|
)
|
|
248
|
|
||||
Total first lien
|
748
|
|
|
12
|
|
|
(123
|
)
|
|
637
|
|
||||
Second lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Closed-end second lien
|
(86
|
)
|
|
(3
|
)
|
|
(12
|
)
|
|
(101
|
)
|
||||
HELOCs
|
(31
|
)
|
|
8
|
|
|
(20
|
)
|
|
(43
|
)
|
||||
Total second lien
|
(117
|
)
|
|
5
|
|
|
(32
|
)
|
|
(144
|
)
|
||||
Total U.S. RMBS
|
631
|
|
|
17
|
|
|
(155
|
)
|
|
493
|
|
||||
TruPS
|
64
|
|
|
(4
|
)
|
|
(2
|
)
|
|
58
|
|
||||
Other structured finance
|
342
|
|
|
(22
|
)
|
|
(24
|
)
|
|
296
|
|
||||
U.S. public finance
|
16
|
|
|
23
|
|
|
(6
|
)
|
|
33
|
|
||||
Non-U.S public finance
|
51
|
|
|
198
|
|
|
54
|
|
|
303
|
|
||||
Other
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||
Total
|
$
|
1,106
|
|
|
$
|
212
|
|
|
$
|
(133
|
)
|
|
$
|
1,185
|
|
(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
|
|
|
$
|
—
|
|
|
$
|
7
|
|
|
$
|
11
|
|
Alt-A first lien
|
163
|
|
|
26
|
|
|
124
|
|
|
313
|
|
||||
Option ARM
|
(252
|
)
|
|
(82
|
)
|
|
7
|
|
|
(327
|
)
|
||||
Subprime
|
128
|
|
|
54
|
|
|
81
|
|
|
263
|
|
||||
Total first lien
|
43
|
|
|
(2
|
)
|
|
219
|
|
|
260
|
|
||||
Second Lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Closed-end second lien
|
(38
|
)
|
|
27
|
|
|
(10
|
)
|
|
(21
|
)
|
||||
HELOCs
|
41
|
|
|
(163
|
)
|
|
—
|
|
|
(122
|
)
|
||||
Total second lien
|
3
|
|
|
(136
|
)
|
|
(10
|
)
|
|
(143
|
)
|
||||
Total U.S. RMBS
|
46
|
|
|
(138
|
)
|
|
209
|
|
|
117
|
|
||||
TruPS
|
1
|
|
|
—
|
|
|
22
|
|
|
23
|
|
||||
Other structured finance
|
211
|
|
|
—
|
|
|
96
|
|
|
307
|
|
||||
U.S. public finance
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
||||
Non-U.S. public finance
|
61
|
|
|
—
|
|
|
1
|
|
|
62
|
|
||||
Subtotal
|
$
|
310
|
|
|
$
|
(138
|
)
|
|
$
|
328
|
|
|
500
|
|
|
Other
|
|
|
|
|
|
|
(13
|
)
|
|||||||
Total
|
|
|
|
|
|
|
$
|
487
|
|
|
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(2)
|
|
Total
|
||||||||
|
(in millions)
|
||||||||||||||
US RMBS:
|
|
|
|
|
|
|
|
||||||||
First lien:
|
|
|
|
|
|
|
|
||||||||
Prime first lien
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
6
|
|
Alt-A first lien
|
5
|
|
|
(1
|
)
|
|
5
|
|
|
9
|
|
||||
Option ARM
|
(93
|
)
|
|
(37
|
)
|
|
(8
|
)
|
|
(138
|
)
|
||||
Subprime
|
12
|
|
|
4
|
|
|
9
|
|
|
25
|
|
||||
Total first lien
|
(76
|
)
|
|
(34
|
)
|
|
12
|
|
|
(98
|
)
|
||||
Second Lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Closed-end second lien
|
5
|
|
|
(3
|
)
|
|
(1
|
)
|
|
1
|
|
||||
HELOCs
|
(7
|
)
|
|
4
|
|
|
—
|
|
|
(3
|
)
|
||||
Total second lien
|
(2
|
)
|
|
1
|
|
|
(1
|
)
|
|
(2
|
)
|
||||
Total U.S. RMBS
|
(78
|
)
|
|
(33
|
)
|
|
11
|
|
|
(100
|
)
|
||||
TruPS
|
0
|
|
|
—
|
|
|
(3
|
)
|
|
(3
|
)
|
||||
Other structured finance
|
(10
|
)
|
|
—
|
|
|
8
|
|
|
(2
|
)
|
||||
U.S. public finance
|
7
|
|
|
—
|
|
|
—
|
|
|
7
|
|
||||
Non-U.S. public finance
|
9
|
|
|
—
|
|
|
1
|
|
|
10
|
|
||||
Subtotal
|
$
|
(72
|
)
|
|
$
|
(33
|
)
|
|
$
|
17
|
|
|
(88
|
)
|
|
Other
|
|
|
|
|
|
|
(10
|
)
|
|||||||
Total
|
|
|
|
|
|
|
$
|
(98
|
)
|
|
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
|
(4
|
)
|
|
(5
|
)
|
|
7
|
|
|
(2
|
)
|
||||
Option ARM
|
4
|
|
|
(6
|
)
|
|
—
|
|
|
(2
|
)
|
||||
Subprime
|
3
|
|
|
8
|
|
|
5
|
|
|
16
|
|
||||
Total first lien
|
4
|
|
|
(3
|
)
|
|
11
|
|
|
12
|
|
||||
Second Lien:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Closed-end second lien
|
3
|
|
|
(4
|
)
|
|
(2
|
)
|
|
(3
|
)
|
||||
HELOCs
|
12
|
|
|
(4
|
)
|
|
—
|
|
|
8
|
|
||||
Total second lien
|
15
|
|
|
(8
|
)
|
|
(2
|
)
|
|
5
|
|
||||
Total U.S. RMBS
|
19
|
|
|
(11
|
)
|
|
9
|
|
|
17
|
|
||||
TruPS
|
(5
|
)
|
|
—
|
|
|
1
|
|
|
(4
|
)
|
||||
Other structured finance
|
(19
|
)
|
|
—
|
|
|
(3
|
)
|
|
(22
|
)
|
||||
U.S. public finance
|
23
|
|
|
—
|
|
|
—
|
|
|
23
|
|
||||
Non-U.S. public finance
|
198
|
|
|
—
|
|
|
—
|
|
|
198
|
|
||||
Subtotal
|
$
|
216
|
|
|
$
|
(11
|
)
|
|
$
|
7
|
|
|
212
|
|
|
Other
|
|
|
|
|
|
|
—
|
|
|||||||
Total
|
|
|
|
|
|
|
$
|
212
|
|
•
|
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.
|
HELOC key assumptions
|
|
As of
March 31, 2013 |
|
As of
December 31, 2012 |
||||||
Plateau CDR
|
|
5.0
|
%
|
–
|
17.2%
|
|
3.8
|
%
|
–
|
15.9%
|
Final CDR trended down to
|
|
0.4
|
%
|
–
|
3.2%
|
|
0.4
|
%
|
–
|
3.2%
|
Expected period until final CDR
|
|
36 months
|
|
36 months
|
||||||
Initial CPR
|
|
2.4
|
%
|
–
|
18.9%
|
|
2.9
|
%
|
–
|
15.4%
|
Final CPR
|
|
10%
|
|
10%
|
||||||
Loss severity
|
|
98%
|
|
98%
|
||||||
Initial draw rate
|
|
0.0
|
%
|
–
|
3.3%
|
|
0.0
|
%
|
–
|
4.8%
|
Closed-end second lien key assumptions
|
|
As of
March 31, 2013 |
|
As of
December 31, 2012 |
||||||
Plateau CDR
|
|
6.7
|
%
|
–
|
18.6%
|
|
7.3
|
%
|
–
|
20.7%
|
Final CDR trended down to
|
|
3.5
|
%
|
–
|
9.1%
|
|
3.5
|
%
|
–
|
9.1%
|
Expected period until final CDR
|
|
36 months
|
|
36 months
|
||||||
Initial CPR
|
|
2.7
|
%
|
–
|
13.4%
|
|
1.9
|
%
|
–
|
12.5%
|
Final CPR
|
|
10%
|
|
10%
|
||||||
Loss severity
|
|
98%
|
|
98%
|
(1)
|
Represents variables for most heavily weighted scenario (the “base case”).
|
|
March 31, 2013
|
|
December 31, 2012
|
30 – 59 Days Delinquent
|
|
|
|
Alt A and Prime
|
35%
|
|
35%
|
Option ARM
|
50
|
|
50
|
Subprime
|
30
|
|
30
|
60 – 89 Days Delinquent
|
|
|
|
Alt A and Prime
|
55
|
|
55
|
Option ARM
|
65
|
|
65
|
Subprime
|
45
|
|
45
|
90+ Days Delinquent
|
|
|
|
Alt A and Prime
|
65
|
|
65
|
Option ARM
|
75
|
|
75
|
Subprime
|
60
|
|
60
|
Bankruptcy
|
|
|
|
Alt A and Prime
|
55
|
|
55
|
Option ARM
|
70
|
|
70
|
Subprime
|
50
|
|
50
|
Foreclosure
|
|
|
|
Alt A and Prime
|
85
|
|
85
|
Option ARM
|
85
|
|
85
|
Subprime
|
80
|
|
80
|
Real Estate Owned ("REO")
|
|
|
|
All
|
100
|
|
100
|
|
As of
March 31, 2013 |
|
As of
December 31, 2012 |
||||||
Alt-A First Lien
|
|
|
|
|
|
|
|
||
Plateau CDR
|
3.7
|
%
|
–
|
22.6%
|
|
3.8
|
%
|
–
|
23.2%
|
Intermediate CDR
|
0.7
|
%
|
–
|
4.5%
|
|
0.8
|
%
|
–
|
4.6%
|
Final CDR
|
0.2
|
%
|
–
|
1.1%
|
|
0.2
|
%
|
–
|
1.2%
|
Initial loss severity
|
65%
|
|
65%
|
||||||
Initial CPR
|
0.1
|
%
|
–
|
39.6%
|
|
0.0
|
%
|
–
|
39.4%
|
Final CPR
|
15%
|
|
15%
|
||||||
Option ARM
|
|
|
|
|
|
|
|
||
Plateau CDR
|
6.4
|
%
|
–
|
25.2%
|
|
7.0
|
%
|
–
|
26.1%
|
Intermediate CDR
|
1.3
|
%
|
–
|
5.0%
|
|
1.4
|
%
|
–
|
5.2%
|
Final CDR
|
0.3
|
%
|
–
|
1.3%
|
|
0.4
|
%
|
–
|
1.3%
|
Initial loss severity
|
65%
|
|
65%
|
||||||
Initial CPR
|
0.3
|
%
|
–
|
10.6%
|
|
0.0
|
%
|
–
|
10.7%
|
Final CPR
|
15%
|
|
15%
|
||||||
Subprime
|
|
|
|
|
|
|
|
||
Plateau CDR
|
7.8
|
%
|
–
|
25.6%
|
|
7.3
|
%
|
–
|
26.2%
|
Intermediate CDR
|
1.6
|
%
|
–
|
5.1%
|
|
1.5
|
%
|
–
|
5.2%
|
Final CDR
|
0.4
|
%
|
–
|
1.3%
|
|
0.4
|
%
|
–
|
1.3%
|
Initial loss severity
|
90%
|
|
90%
|
||||||
Initial CPR
|
0.0
|
%
|
–
|
14.7%
|
|
0.0
|
%
|
–
|
17.6%
|
Final CPR
|
15%
|
|
15%
|
•
|
Under the Deutsche Bank Agreement, Deutsche Bank agreed (in addition to making payments since received by the Company and other consideration) to reimburse the Company for
80%
of claims the Company pays in the future on the DB Covered Transactions until the aggregate lifetime claims (before reimbursement) reach
$319 million
. As of March 31, 2013, the Company was projecting in its base case that such aggregate lifetime claims would remain below
$319 million
. The Deutsche Agreement further requires Deutsche Bank to reimburse the Company for
85%
of the claims the Company pays in the future on DB Covered Transactions to the extent aggregate lifetime claims (before reimbursement) are between
$389 million
and
$600 million
. Deutsche Bank is not required to reimburse the Company for claims the Company pays between the lifetime aggregates of
$319 million
and
$389 million
or to the extent they exceed
$600 million
.
|
•
|
The Deutsche Bank Agreement also requires Deutsche Bank to reimburse the Company for future claims it pays on certain RMBS re-securitizations that include uninsured tranches (“Uninsured Tranches”) of the
three
DB Covered Transactions. Deutsche Bank is obligated to reimburse the Company under the re-securitization transactions in an amount calculated as a percent of the losses in the Uninsured Tranches. That percent is
60%
of losses up to
$141 million
and then from
$161 million
to
$185 million
, and
100%
from
$185 million
to
$248 million
. There is no reimbursement from
$141 million
to
$161 million
and above
$248 million
. As of March 31, 2013, the Company was projecting in its base case that such losses would be
$146 million
.
|
•
|
Deutsche Bank was required to place eligible assets in trust to collateralize its reimbursement obligation, and the amount it is required to post may be increased or decreased from time to time as determined by rating agency requirements. As of March 31, 2013 Deutsche Bank had placed
$274 million
of eligible assets in this trust account which, based on the Company's projections, is sufficient to collateralize Deutsche Bank's obligations under the Deutsche Bank Agreement. Reimbursement payments are made quarterly and have been made timely.
|
•
|
Except for the reimbursement obligation relating to the Uninsured Tranches, the Deutsche Bank Agreement does not include transactions where the Company has provided protection to Deutsche Bank on RMBS transaction in CDS form.
|
|
Number of Risks (1) as of
|
|
Debt Service as of
|
||||||||||
|
March 31, 2013
|
|
December 31, 2012
|
|
March 31, 2013
|
|
December 31, 2012
|
||||||
|
|
|
|
|
(dollars in millions)
|
||||||||
Prime first lien
|
1
|
|
|
1
|
|
|
$
|
33
|
|
|
$
|
35
|
|
Alt-A first lien
|
28
|
|
|
26
|
|
|
3,929
|
|
|
4,030
|
|
||
Option ARM
|
10
|
|
|
10
|
|
|
926
|
|
|
1,101
|
|
||
Subprime
|
5
|
|
|
5
|
|
|
810
|
|
|
820
|
|
||
Closed-end second lien
|
4
|
|
|
4
|
|
|
119
|
|
|
196
|
|
||
HELOC
|
7
|
|
|
7
|
|
|
518
|
|
|
549
|
|
||
Total
|
55
|
|
|
53
|
|
|
$
|
6,335
|
|
|
$
|
6,731
|
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Inclusion or removal of deals with breaches of R&W during period
|
$
|
0
|
|
|
$
|
—
|
|
Change in recovery assumptions as the result of additional file review and recovery success
|
11
|
|
|
80
|
|
||
Estimated increase (decrease) in defaults that will result in additional (lower) breaches
|
1
|
|
|
(82
|
)
|
||
Results of settlements/judgments
|
142
|
|
|
48
|
|
||
Accretion of discount on balance
|
3
|
|
|
5
|
|
||
Total
|
$
|
157
|
|
|
$
|
51
|
|
•
|
Flagstar
: AGM has sued Flagstar Bank, FSB, Flagstar Capital Markets Corporation and Flagstar ABS, LLC (collectively, "Flagstar") on the Flagstar Home Equity Loan Trust, Series 2005-1 and Series 2006-2 second lien transactions. On February 5, 2013, the court granted judgment in favor of AGM on its claims for breach of contract plus contractual interest and attorneys' fees and costs to be determined. On April 1, 2013, the court issued a final judgment awarding AGM damages of
$90.7 million
and pre-judgment interest of
$15.9 million
, for a total of
$106.5 million
. The court deferred ruling on AGM's requests for attorneys' fees and expenses until the resolution of any appeal by Flagstar of the final judgment. On April 10, 2013, Flagstar filed a notice of appeal indicating that it appeals both the February 5, 2013 order and the April 1, 2013 final judgment.
|
•
|
Deutsche Bank
: AGM has sued Deutsche Bank AG affiliates DB Structured Products, Inc. and ACE Securities Corp. in the Supreme Court of the State of New York 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 ("EMC"), 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. On April 4, 2013, the Supreme Court of the State of New York ruled that AGC's sole remedy on its breach of contract claims is to compel EMC to repurchase defective loans, but allowed AGC to maintain its contractual reimbursement claim against EMC for its reasonable attorneys' fees and costs incurred in enforcing EMC's obligation to repurchase such loans. The Court also allowed AGC to pursue its repurchase claim against JP Morgan Securities, as an alter ego of EMC and successor to Bear Stearns & Co. As to the remaining claims, the Court (i) permitted AGC to bring a tortious-interference claim against JPMorgan Securities for instructing its subsidiary EMC to not repurchase defective loans, (ii) dismissed as premature AGC's breach of contract claim against EMC in respect of EMC's transfer of assets to JPMorgan without AGC's consent because AGC has not yet demonstrated actual damage from the breach, (iii) did not address or dismiss AGC's successor liability claim against JPMorgan Chase Bank, (iv) stated that it would postpone ruling on EMC's motion to dismiss AGC's fraud claim until after the New York appellate court rules on a similar motion in a separate litigation to which AGC is not a party.
|
•
|
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.
|
•
|
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.
|
|
As of March 31, 2013
|
|
As of December 31, 2012
|
||||||||||||||||||||
|
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
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
3
|
|
Alt-A first lien
|
90
|
|
|
—
|
|
|
90
|
|
|
93
|
|
|
—
|
|
|
93
|
|
||||||
Option ARM
|
36
|
|
|
377
|
|
|
(341
|
)
|
|
52
|
|
|
216
|
|
|
(164
|
)
|
||||||
Subprime
|
92
|
|
|
0
|
|
|
92
|
|
|
82
|
|
|
0
|
|
|
82
|
|
||||||
Total first lien
|
221
|
|
|
377
|
|
|
(156
|
)
|
|
230
|
|
|
216
|
|
|
14
|
|
||||||
Second lien:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Closed-end second lien
|
5
|
|
|
51
|
|
|
(46
|
)
|
|
5
|
|
|
72
|
|
|
(67
|
)
|
||||||
HELOC
|
28
|
|
|
193
|
|
|
(165
|
)
|
|
37
|
|
|
196
|
|
|
(159
|
)
|
||||||
Total second lien
|
33
|
|
|
244
|
|
|
(211
|
)
|
|
42
|
|
|
268
|
|
|
(226
|
)
|
||||||
Total U.S. RMBS
|
254
|
|
|
621
|
|
|
(367
|
)
|
|
272
|
|
|
484
|
|
|
(212
|
)
|
||||||
TruPS
|
1
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||||
Other structured finance
|
184
|
|
|
4
|
|
|
180
|
|
|
197
|
|
|
4
|
|
|
193
|
|
||||||
U.S. public finance
|
71
|
|
|
124
|
|
|
(53
|
)
|
|
104
|
|
|
134
|
|
|
(30
|
)
|
||||||
Non-U.S. public finance
|
32
|
|
|
—
|
|
|
32
|
|
|
31
|
|
|
—
|
|
|
31
|
|
||||||
Total financial guaranty
|
542
|
|
|
750
|
|
|
(208
|
)
|
|
605
|
|
|
622
|
|
|
(17
|
)
|
||||||
Other
|
2
|
|
|
5
|
|
|
(3
|
)
|
|
2
|
|
|
5
|
|
|
(3
|
)
|
||||||
Subtotal
|
544
|
|
|
755
|
|
|
(211
|
)
|
|
607
|
|
|
627
|
|
|
(20
|
)
|
||||||
Effect of consolidating FG VIEs
|
(68
|
)
|
|
(262
|
)
|
|
194
|
|
|
(64
|
)
|
|
(217
|
)
|
|
153
|
|
||||||
Total (1)
|
$
|
476
|
|
|
$
|
493
|
|
|
$
|
(17
|
)
|
|
$
|
543
|
|
|
$
|
410
|
|
|
$
|
133
|
|
(1)
|
See “Components of Net Reserves (Salvage)” table for loss and LAE reserve and salvage and subrogation recoverable components.
|
|
As of
March 31, 2013 |
|
As of
December 31, 2012 |
||||
|
(in millions)
|
||||||
Loss and LAE reserve
|
$
|
532
|
|
|
$
|
601
|
|
Reinsurance recoverable on unpaid losses
|
(56
|
)
|
|
(58
|
)
|
||
Subtotal
|
476
|
|
|
543
|
|
||
Salvage and subrogation recoverable
|
(543
|
)
|
|
(456
|
)
|
||
Salvage and subrogation payable(1)
|
50
|
|
|
46
|
|
||
Subtotal
|
(493
|
)
|
|
(410
|
)
|
||
Other recoveries(2)
|
(27
|
)
|
|
(30
|
)
|
||
Subtotal
|
(520
|
)
|
|
(440
|
)
|
||
Total
|
(44
|
)
|
|
103
|
|
||
Less: other (non-financial guaranty business)
|
(3
|
)
|
|
(3
|
)
|
||
Financial guaranty net reserves (salvage)
|
$
|
(41
|
)
|
|
$
|
106
|
|
(1)
|
Recorded as a component of reinsurance balances payable.
|
(2)
|
R&W recoveries recorded in other assets on the consolidated balance sheet.
|
|
As of March 31, 2013
|
|
As of December 31, 2012
|
||||||||||||||||||||
|
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
|
$
|
600
|
|
|
$
|
(236
|
)
|
|
$
|
364
|
|
|
$
|
449
|
|
|
$
|
(169
|
)
|
|
$
|
280
|
|
Loss and LAE reserve
|
522
|
|
|
(39
|
)
|
|
483
|
|
|
571
|
|
|
(33
|
)
|
|
538
|
|
(1)
|
The remaining benefit for R&W is either recorded at fair value in FG VIE assets, or not recorded on the balance sheet until the expected loss, net of R&W, exceeds unearned premium reserve.
|
|
As of
March 31, 2013 |
||
|
(in millions)
|
||
Net expected loss to be paid
|
$
|
172
|
|
Less: net expected loss to be paid for FG VIEs
|
(138
|
)
|
|
Total
|
310
|
|
|
Contra-paid, net
|
92
|
|
|
Salvage and subrogation recoverable, net of reinsurance
|
488
|
|
|
Loss and LAE reserve, net of reinsurance
|
(474
|
)
|
|
Other recoveries (1)
|
27
|
|
|
Net expected loss to be expensed (2)
|
$
|
443
|
|
(1)
|
R&W recoveries recorded in other assets on the consolidated balance sheet.
|
(2)
|
Excludes
$130 million
as of
March 31, 2013
, related to consolidated FG VIEs.
|
|
As of March 31, 2013
|
||
|
(in millions)
|
||
2013 (April 1 - June 30)
|
$
|
18
|
|
2013 (July 1 - September 30)
|
16
|
|
|
2013 (October 1–December 31)
|
16
|
|
|
Subtotal 2013
|
50
|
|
|
2014
|
50
|
|
|
2015
|
43
|
|
|
2016
|
37
|
|
|
2017
|
34
|
|
|
2018 - 2022
|
122
|
|
|
2023 - 2027
|
60
|
|
|
2028 - 2032
|
28
|
|
|
After 2032
|
19
|
|
|
Total present value basis(1)
|
443
|
|
|
Discount
|
333
|
|
|
Total future value
|
$
|
776
|
|
(1)
|
Consolidation of FG VIEs resulted in reductions of $
130 million
in net expected loss to be expensed.
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
U.S. RMBS:
|
|
|
|
||||
First lien:
|
|
|
|
||||
Prime first lien
|
$
|
—
|
|
|
$
|
—
|
|
Alt-A first lien
|
9
|
|
|
(1
|
)
|
||
Option ARM
|
(83
|
)
|
|
52
|
|
||
Subprime
|
11
|
|
|
8
|
|
||
Total first lien
|
(63
|
)
|
|
59
|
|
||
Second lien:
|
|
|
|
||||
Closed end second lien
|
20
|
|
|
(1
|
)
|
||
HELOC
|
3
|
|
|
15
|
|
||
Total second lien
|
23
|
|
|
14
|
|
||
Total U.S. RMBS
|
(40
|
)
|
|
73
|
|
||
TruPS
|
—
|
|
|
(4
|
)
|
||
Other structured finance
|
(12
|
)
|
|
(28
|
)
|
||
U.S. public finance
|
(4
|
)
|
|
19
|
|
||
Non-U.S. public finance
|
1
|
|
|
190
|
|
||
Subtotal
|
(55
|
)
|
|
250
|
|
||
Other
|
—
|
|
|
—
|
|
||
Total insurance contracts before FG VIE consolidation
|
(55
|
)
|
|
250
|
|
||
Effect of consolidating FG VIEs
|
7
|
|
|
(8
|
)
|
||
Total loss and LAE
|
$
|
(48
|
)
|
|
$
|
242
|
|
|
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)
|
143
|
|
|
(48
|
)
|
|
82
|
|
|
(26
|
)
|
|
147
|
|
|
(54
|
)
|
|
372
|
|
|
—
|
|
|
372
|
|
|||||||||
Remaining weighted-average contract period (in years)
|
11.1
|
|
|
8.0
|
|
|
10.6
|
|
|
13.7
|
|
|
8.7
|
|
|
6.6
|
|
|
10.3
|
|
|
—
|
|
|
10.3
|
|
|||||||||
Outstanding exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Principal
|
$
|
7,320
|
|
|
$
|
(1,172
|
)
|
|
$
|
3,695
|
|
|
$
|
(406
|
)
|
|
$
|
7,148
|
|
|
$
|
(537
|
)
|
|
$
|
16,048
|
|
|
$
|
—
|
|
|
$
|
16,048
|
|
Interest
|
4,033
|
|
|
(483
|
)
|
|
1,873
|
|
|
(184
|
)
|
|
2,244
|
|
|
(157
|
)
|
|
7,326
|
|
|
—
|
|
|
7,326
|
|
|||||||||
Total(2)
|
$
|
11,353
|
|
|
$
|
(1,655
|
)
|
|
$
|
5,568
|
|
|
$
|
(590
|
)
|
|
$
|
9,392
|
|
|
$
|
(694
|
)
|
|
$
|
23,374
|
|
|
$
|
—
|
|
|
$
|
23,374
|
|
Expected cash outflows (inflows)
|
$
|
1,267
|
|
|
$
|
(445
|
)
|
|
$
|
1,111
|
|
|
$
|
(188
|
)
|
|
$
|
3,036
|
|
|
$
|
(155
|
)
|
|
$
|
4,626
|
|
|
$
|
(737
|
)
|
|
$
|
3,889
|
|
Potential recoveries(3)
|
(1,324
|
)
|
|
452
|
|
|
(771
|
)
|
|
125
|
|
|
(2,702
|
)
|
|
141
|
|
|
(4,079
|
)
|
|
833
|
|
|
(3,246
|
)
|
|||||||||
Subtotal
|
(57
|
)
|
|
7
|
|
|
340
|
|
|
(63
|
)
|
|
334
|
|
|
(14
|
)
|
|
547
|
|
|
96
|
|
|
643
|
|
|||||||||
Discount
|
(3
|
)
|
|
0
|
|
|
(87
|
)
|
|
19
|
|
|
(309
|
)
|
|
5
|
|
|
(375
|
)
|
|
42
|
|
|
(333
|
)
|
|||||||||
Present value of expected cash flows
|
$
|
(60
|
)
|
|
$
|
7
|
|
|
$
|
253
|
|
|
$
|
(44
|
)
|
|
$
|
25
|
|
|
$
|
(9
|
)
|
|
$
|
172
|
|
|
$
|
138
|
|
|
$
|
310
|
|
Deferred premium revenue
|
$
|
148
|
|
|
$
|
(38
|
)
|
|
$
|
226
|
|
|
$
|
(29
|
)
|
|
$
|
693
|
|
|
$
|
(85
|
)
|
|
$
|
915
|
|
|
$
|
(234
|
)
|
|
$
|
681
|
|
Reserves (salvage)(4)
|
$
|
(97
|
)
|
|
$
|
11
|
|
|
$
|
101
|
|
|
$
|
(28
|
)
|
|
$
|
(234
|
)
|
|
$
|
12
|
|
|
$
|
(235
|
)
|
|
$
|
194
|
|
|
$
|
(41
|
)
|
|
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
|
|
(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).”
|
7.
|
Fair Value Measurement
|
•
|
How gross spread is calculated.
|
•
|
The allocation of gross spread among:
|
◦
|
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”).
|
•
|
The weighted average life which is based on expected remaining contractual cash flows and Debt Service schedules. .
|
•
|
The rates used to discount future expected premium cash flows.
|
•
|
Actual collateral specific credit spreads (if up-to-date and reliable market-based spreads are available).
|
•
|
Deals priced or closed during a specific quarter within a specific asset class and specific rating.
|
•
|
Credit spreads interpolated based upon market indices.
|
•
|
Credit spreads provided by the counterparty of the CDS.
|
•
|
Credit spreads extrapolated based upon transactions of similar asset classes, similar ratings, and similar time to maturity.
|
|
As of
March 31, 2013 |
|
As of
December 31, 2012 |
||
Based on actual collateral specific spreads
|
6
|
%
|
|
6
|
%
|
Based on market indices
|
88
|
%
|
|
88
|
%
|
Provided by the CDS counterparty
|
6
|
%
|
|
6
|
%
|
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
|
%
|
•
|
The model takes into account the transaction structure and the key drivers of market value. The transaction structure includes par insured, weighted average life, level of subordination and composition of collateral.
|
•
|
The model maximizes the use of market-driven inputs whenever they are available. The key inputs to the model are market-based spreads for the collateral, and the credit rating of referenced entities. These are viewed by the Company to be the key parameters that affect fair value of the transaction.
|
•
|
The model is a consistent approach to valuing positions. The Company has developed a hierarchy for market-based spread inputs that helps mitigate the degree of subjectivity during periods of high illiquidity.
|
•
|
There is no exit market or actual exit transactions. Therefore the Company’s exit market is a hypothetical one based on the Company’s entry market.
|
•
|
There is a very limited market in which to validate the reasonableness of the fair values developed by the Company’s model.
|
•
|
At
March 31, 2013
and December 31, 2012, the markets for the inputs to the model were highly illiquid, which impacts their reliability.
|
•
|
Due to the non-standard terms under which the Company enters into derivative contracts, the fair value of its credit derivatives may not reflect the same prices observed in an actively traded market of credit derivatives that do not contain terms and conditions similar to those observed in the financial guaranty market.
|
|
|
|
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
|
$
|
877
|
|
|
$
|
—
|
|
|
$
|
877
|
|
|
$
|
—
|
|
Obligations of state and political subdivisions
|
5,602
|
|
|
—
|
|
|
5,567
|
|
|
35
|
|
||||
Corporate securities
|
1,040
|
|
|
—
|
|
|
1,040
|
|
|
—
|
|
||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|||||||
RMBS
|
1,196
|
|
|
—
|
|
|
975
|
|
|
221
|
|
||||
Commercial mortgage-backed securities ("CMBS")
|
505
|
|
|
—
|
|
|
505
|
|
|
—
|
|
||||
Asset-backed securities
|
495
|
|
|
—
|
|
|
209
|
|
|
286
|
|
||||
Foreign government securities
|
270
|
|
|
—
|
|
|
270
|
|
|
—
|
|
||||
Total fixed maturity securities
|
9,985
|
|
|
—
|
|
|
9,443
|
|
|
542
|
|
||||
Short-term investments
|
729
|
|
|
562
|
|
|
167
|
|
|
—
|
|
||||
Other invested assets(1)
|
80
|
|
|
—
|
|
|
73
|
|
|
7
|
|
||||
Credit derivative assets
|
125
|
|
|
—
|
|
|
—
|
|
|
125
|
|
||||
FG VIEs’ assets, at fair value
|
2,813
|
|
|
—
|
|
|
—
|
|
|
2,813
|
|
||||
Other assets(2)
|
58
|
|
|
27
|
|
|
5
|
|
|
26
|
|
||||
Total assets carried at fair value
|
$
|
13,790
|
|
|
$
|
589
|
|
|
$
|
9,688
|
|
|
$
|
3,513
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit derivative liabilities
|
$
|
2,518
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,518
|
|
FG VIEs’ liabilities with recourse, at fair value
|
2,071
|
|
|
—
|
|
|
—
|
|
|
2,071
|
|
||||
FG VIEs’ liabilities without recourse, at fair value
|
1,107
|
|
|
—
|
|
|
—
|
|
|
1,107
|
|
||||
Total liabilities carried at fair value
|
$
|
5,696
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,696
|
|
|
|
|
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 (3)
|
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
|
|
(1)
|
Includes mortgage loans that are recorded at fair value on a non-recurring basis. At
March 31, 2013
and
December 31, 2012
, such investments were carried at their market value of
$6 million
and
$7 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, 2012
|
$
|
35
|
|
|
|
$
|
219
|
|
|
|
$
|
306
|
|
|
|
$
|
1
|
|
|
$
|
2,688
|
|
|
|
$
|
36
|
|
|
|
$
|
(1,793
|
)
|
|
$
|
(2,090
|
)
|
|
$
|
(1,051
|
)
|
|
|||
Total pretax realized and unrealized gains/(losses) recorded in:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net income (loss)
|
1
|
|
(2
|
)
|
5
|
|
(2
|
)
|
4
|
|
(2
|
)
|
0
|
|
|
215
|
|
(3
|
)
|
(10
|
)
|
(4
|
)
|
(592
|
)
|
(6
|
)
|
(81
|
)
|
(3
|
)
|
(74
|
)
|
(3
|
)
|
|||||||||
Other comprehensive income (loss)
|
0
|
|
|
|
7
|
|
|
|
(22
|
)
|
|
|
0
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|||||||||
Purchases
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|||||||||
Settlements
|
(1
|
)
|
|
(11
|
)
|
|
(2
|
)
|
|
—
|
|
|
(138
|
)
|
|
—
|
|
|
|
(8
|
)
|
|
|
112
|
|
|
|
55
|
|
|
|
|||||||||||||
FG VIE consolidations
|
—
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
—
|
|
|
48
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(12
|
)
|
|
(37
|
)
|
|
|
||||||||||
Fair value as of March 31, 2013
|
$
|
35
|
|
|
|
$
|
221
|
|
|
|
$
|
286
|
|
|
|
$
|
1
|
|
|
$
|
2,813
|
|
|
|
$
|
26
|
|
|
|
$
|
(2,393
|
)
|
|
$
|
(2,071
|
)
|
|
$
|
(1,107
|
)
|
|
|||
Change in unrealized gains/(losses) related to financial instruments held as of March 31, 2013
|
$
|
0
|
|
|
$
|
9
|
|
|
$
|
(22
|
)
|
|
$
|
0
|
|
|
$
|
199
|
|
|
$
|
(10
|
)
|
|
$
|
(611
|
)
|
|
$
|
(83
|
)
|
|
$
|
(94
|
)
|
|
|
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)
|
0
|
|
|
1
|
|
(2
|
)
|
6
|
|
(2
|
)
|
—
|
|
|
132
|
|
(3
|
)
|
(14
|
)
|
(4
|
)
|
(691
|
)
|
(6
|
)
|
(86
|
)
|
(3
|
)
|
(80
|
)
|
(3
|
)
|
||||||||
Other comprehensive income (loss)
|
0
|
|
|
10
|
|
|
|
0
|
|
|
|
0
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|||||||||
Purchases
|
—
|
|
|
—
|
|
|
|
18
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|||||||||
Settlements
|
(1
|
)
|
|
(9
|
)
|
|
(1
|
)
|
|
—
|
|
|
(138
|
)
|
|
—
|
|
|
42
|
|
|
|
138
|
|
|
|
55
|
|
|
|
||||||||||||
FG VIE consolidations
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
15
|
|
|
|
—
|
|
|
—
|
|
|
|
(20
|
)
|
|
|
|
|
|
||||||||||
Fair value as of March 31, 2012
|
$
|
9
|
|
|
$
|
136
|
|
|
|
$
|
258
|
|
|
|
$
|
2
|
|
|
$
|
2,828
|
|
|
|
$
|
40
|
|
|
$
|
(1,953
|
)
|
|
|
$
|
(2,365
|
)
|
|
(1,086
|
)
|
|
|||
Change in unrealized gains/(losses) related to financial instruments held as of March 31, 2012
|
$
|
0
|
|
|
$
|
10
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
231
|
|
|
$
|
(14
|
)
|
|
$
|
(635
|
)
|
|
$
|
(107
|
)
|
|
(118
|
)
|
|
(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
|
|
Fair Value at
March 31, 2013 (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%
|
||||||
|
|
|
|
Yield
|
4.3
|
%
|
|
9.0%
|
||||||
|
|
|
|
Collateral recovery period
|
1 month
|
|
-
|
43 years
|
||||||
|
|
|
|
|
|
|
|
|
|
|
||||
RMBS
|
|
221
|
|
|
Discounted
|
|
CPR
|
|
0.8
|
%
|
-
|
7.5%
|
||
|
|
cash flow
|
|
CDR
|
|
4.4
|
%
|
-
|
25.8%
|
|||||
|
|
|
|
Severity
|
|
47.9
|
%
|
-
|
102.8%
|
|||||
|
|
|
|
Yield
|
|
3.0
|
%
|
-
|
9.6%
|
|||||
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
|
|
162
|
|
|
Discounted cash flow
|
|
Liquidation value (in millions)
|
|
|
$217
|
|
-
|
$242
|
|
|
|
|
Years to liquidation
|
|
0 years
|
|
-
|
3 years
|
||||||
|
|
|
Collateral recovery period
|
|
9 months
|
|
-
|
6 years
|
||||||
|
|
|
Discount factor
|
|
15.3%
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
||||
XXX life insurance transactions
|
|
61
|
|
|
Discounted
|
|
Yield
|
|
12.0%
|
|||||
|
|
cash flow
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
||||
Other invested assets
|
|
7
|
|
|
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
|
|
2,813
|
|
|
Discounted
|
|
CPR
|
|
0.4
|
%
|
-
|
11.0%
|
||
|
|
cash flow
|
|
CDR
|
|
1.8
|
%
|
-
|
28.6%
|
|||||
|
|
|
|
Loss severity
|
|
37.5
|
%
|
-
|
106.4%
|
|||||
|
|
|
|
Yield
|
|
3.0
|
%
|
-
|
20.0%
|
Financial Instrument Description
|
|
Fair Value at
March 31, 2013 (in millions) |
|
Valuation
Technique |
|
Significant Unobservable Inputs
|
|
Range
|
||||
Other assets
|
|
26
|
|
|
Discounted cash flow
|
|
Quotes from third party pricing
|
|
$51
|
-
|
$55
|
|
|
|
|
|
Term (years)
|
|
3 years
|
||||||
|
|
|
|
|
|
|
|
|
|
|
||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit derivative liabilities, net
|
|
(2,393
|
)
|
|
Discounted
|
|
Year 1 loss estimates
|
|
0.0
|
%
|
-
|
68.0%
|
|
|
|
cash flow
|
|
Hedge cost (in bps)
|
|
14.8
|
|
-
|
397.5
|
||
|
|
|
|
|
Bank profit (in bps)
|
|
1.0
|
|
-
|
1,336.5
|
||
|
|
|
|
|
Internal floor (in bps)
|
|
7.0
|
|
-
|
100.0
|
||
|
|
|
|
|
Internal credit rating
|
|
AAA
|
|
-
|
BIG
|
||
|
|
|
|
|
|
|
|
|
|
|
||
FG VIEs’ liabilities, at fair value
|
|
(3,178
|
)
|
|
Discounted
|
|
CPR
|
|
0.4
|
%
|
-
|
11.0%
|
|
|
cash flow
|
|
CDR
|
|
1.8
|
%
|
-
|
28.6%
|
|||
|
|
|
|
Loss severity
|
|
37.5
|
%
|
-
|
106.4%
|
|||
|
|
|
|
Yield
|
|
3.0
|
%
|
-
|
20.0%
|
Financial Instrument Description
|
|
Fair Value at
December 31, 2012 (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
March 31, 2013 |
|
As of
December 31, 2012 |
||||||||||||
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
||||||||
|
(in millions)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturity securities
|
$
|
9,985
|
|
|
$
|
9,985
|
|
|
$
|
10,056
|
|
|
$
|
10,056
|
|
Short-term investments
|
729
|
|
|
729
|
|
|
817
|
|
|
817
|
|
||||
Other invested assets
|
119
|
|
|
122
|
|
|
177
|
|
|
182
|
|
||||
Credit derivative assets
|
125
|
|
|
125
|
|
|
141
|
|
|
141
|
|
||||
FG VIEs’ assets, at fair value
|
2,813
|
|
|
2,813
|
|
|
2,688
|
|
|
2,688
|
|
||||
Other assets
|
210
|
|
|
210
|
|
|
166
|
|
|
166
|
|
||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial guaranty insurance contracts(1)
|
3,591
|
|
|
5,955
|
|
|
3,918
|
|
|
6,537
|
|
||||
Long-term debt
|
832
|
|
|
1,131
|
|
|
836
|
|
|
1,091
|
|
||||
Credit derivative liabilities
|
2,518
|
|
|
2,518
|
|
|
1,934
|
|
|
1,934
|
|
||||
FG VIEs’ liabilities with recourse, at fair value
|
2,071
|
|
|
2,071
|
|
|
2,090
|
|
|
2,090
|
|
||||
FG VIEs’ liabilities without recourse, at fair value
|
1,107
|
|
|
1,107
|
|
|
1,051
|
|
|
1,051
|
|
||||
Other liabilities
|
88
|
|
|
88
|
|
|
47
|
|
|
47
|
|
(1)
|
Carrying amount includes the assets and liabilities related to financial guaranty insurance contract premiums, losses, and salvage and subrogation and other recoverables net of reinsurance.
|
8.
|
Financial Guaranty Contracts Accounted for as Credit Derivatives
|
|
|
As of March 31, 2013
|
|
As of December 31, 2012
|
||||||||||||||||||||
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
|
|
$
|
26,342
|
|
|
32.3
|
%
|
|
34.0
|
%
|
|
AAA
|
|
$
|
29,142
|
|
|
32.8
|
%
|
|
33.3
|
%
|
|
AAA
|
Synthetic investment grade pooled corporate
|
|
9,592
|
|
|
21.6
|
|
|
19.7
|
|
|
AAA
|
|
9,658
|
|
|
21.6
|
|
|
19.7
|
|
|
AAA
|
||
Synthetic high yield pooled corporate
|
|
2,690
|
|
|
47.2
|
|
|
41.1
|
|
|
AAA
|
|
3,626
|
|
|
35.0
|
|
|
30.3
|
|
|
AAA
|
||
TruPS CDOs
|
|
3,967
|
|
|
46.4
|
|
|
33.4
|
|
|
BB
|
|
4,099
|
|
|
46.5
|
|
|
32.7
|
|
|
BB
|
||
Market value CDOs of corporate obligations
|
|
3,648
|
|
|
29.7
|
|
|
31.7
|
|
|
AAA
|
|
3,595
|
|
|
30.1
|
|
|
32.0
|
|
|
AAA
|
||
Total pooled corporate obligations
|
|
46,239
|
|
|
31.9
|
|
|
31.2
|
|
|
AAA
|
|
50,120
|
|
|
31.7
|
|
|
30.4
|
|
|
AAA
|
||
U.S. RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Option ARM and Alt-A first lien
|
|
3,259
|
|
|
20.1
|
|
|
10.2
|
|
|
B+
|
|
3,381
|
|
|
20.2
|
|
|
10.4
|
|
|
B+
|
||
Subprime first lien
|
|
3,360
|
|
|
29.9
|
|
|
52.5
|
|
|
AA-
|
|
3,494
|
|
|
29.8
|
|
|
52.6
|
|
|
A+
|
||
Prime first lien
|
|
318
|
|
|
10.9
|
|
|
5.2
|
|
|
B
|
|
333
|
|
|
10.9
|
|
|
5.2
|
|
|
B
|
||
Closed end second lien and HELOCs
|
|
47
|
|
|
—
|
|
|
—
|
|
|
B-
|
|
49
|
|
|
—
|
|
|
—
|
|
|
B-
|
||
Total U.S. RMBS
|
|
6,984
|
|
|
24.2
|
|
|
30.2
|
|
|
BBB
|
|
7,257
|
|
|
24.2
|
|
|
30.4
|
|
|
BBB
|
||
CMBS
|
|
3,983
|
|
|
33.3
|
|
|
42.0
|
|
|
AAA
|
|
4,094
|
|
|
33.3
|
|
|
41.8
|
|
|
AAA
|
||
Other
|
|
8,694
|
|
|
—
|
|
|
—
|
|
|
A
|
|
9,310
|
|
|
—
|
|
|
—
|
|
|
A-
|
||
Total
|
|
$
|
65,900
|
|
|
|
|
|
|
|
|
AA+
|
|
$
|
70,781
|
|
|
|
|
|
|
|
|
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 March 31, 2013
|
|
As of December 31, 2012
|
||||||||||
Ratings
|
|
Net Par
Outstanding
|
|
% of Total
|
|
Net Par
Outstanding
|
|
% of Total
|
||||||
|
|
(dollars in millions)
|
||||||||||||
Super Senior
|
|
$
|
18,184
|
|
|
27.6
|
%
|
|
$
|
18,908
|
|
|
26.7
|
%
|
AAA
|
|
29,699
|
|
|
45.1
|
|
|
32,010
|
|
|
45.2
|
|
||
AA
|
|
3,784
|
|
|
5.7
|
|
|
3,083
|
|
|
4.4
|
|
||
A
|
|
3,316
|
|
|
5.0
|
|
|
5,487
|
|
|
7.8
|
|
||
BBB
|
|
4,611
|
|
|
7.0
|
|
|
4,584
|
|
|
6.4
|
|
||
BIG
|
|
6,306
|
|
|
9.6
|
|
|
6,709
|
|
|
9.5
|
|
||
Total credit derivative net par outstanding
|
|
$
|
65,900
|
|
|
100.0
|
%
|
|
$
|
70,781
|
|
|
100.0
|
%
|
|
|
As of March 31, 2013
|
|
Net Change in Unrealized Gain (Loss)
|
||||||||||||
Vintage
|
|
Net Par
Outstanding
|
|
Original
Subordination(1)
|
|
Current
Subordination(1)
|
|
Weighted
Average
Credit Rating
|
|
First Quarter 2013
|
||||||
|
|
(in millions)
|
|
|
|
|
|
|
|
(in millions)
|
||||||
2004 and Prior
|
|
$
|
119
|
|
|
5.8
|
%
|
|
17.0
|
%
|
|
BBB+
|
|
$
|
(1
|
)
|
2005
|
|
1,909
|
|
|
31.4
|
|
|
67.3
|
|
|
AA+
|
|
1
|
|
||
2006
|
|
1,558
|
|
|
29.4
|
|
|
34.2
|
|
|
A+
|
|
(64
|
)
|
||
2007
|
|
3,398
|
|
|
18.4
|
|
|
8.1
|
|
|
B
|
|
(393
|
)
|
||
Total
|
|
$
|
6,984
|
|
|
24.2
|
%
|
|
30.2
|
%
|
|
BBB
|
|
$
|
(457
|
)
|
(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.
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Net credit derivative premiums received and receivable
|
$
|
27
|
|
|
$
|
29
|
|
Net ceding commissions (paid and payable) received and receivable
|
1
|
|
|
0
|
|
||
Realized gains on credit derivatives
|
28
|
|
|
29
|
|
||
Net credit derivative losses (paid and payable) recovered and recoverable
|
(10
|
)
|
|
(86
|
)
|
||
Total realized gains (losses) and other settlements on credit derivatives
|
18
|
|
|
(57
|
)
|
||
Net unrealized gains (losses) on credit derivatives
|
(610
|
)
|
|
(634
|
)
|
||
Net change in fair value of credit derivatives
|
$
|
(592
|
)
|
|
$
|
(691
|
)
|
|
|
First Quarter
|
||||||
Asset Type
|
|
2013
|
|
2012
|
||||
|
|
(in millions)
|
||||||
|
|
|
|
|
||||
Pooled corporate obligations:
|
|
|
|
|
||||
CLOs/Collateral bond obligations
|
|
$
|
(54
|
)
|
|
$
|
7
|
|
Synthetic investment grade pooled corporate
|
|
2
|
|
|
2
|
|
||
Synthetic high yield pooled corporate
|
|
(1
|
)
|
|
11
|
|
||
TruPS CDOs
|
|
(39
|
)
|
|
(14
|
)
|
||
Market value CDOs of corporate obligations
|
|
(13
|
)
|
|
(1
|
)
|
||
Total pooled corporate obligations
|
|
(105
|
)
|
|
5
|
|
||
U.S. RMBS:
|
|
|
|
|
||||
Option ARMs and Alt-A first lien
|
|
(295
|
)
|
|
(518
|
)
|
||
Subprime first lien
|
|
(79
|
)
|
|
(26
|
)
|
||
Prime first lien
|
|
(83
|
)
|
|
(86
|
)
|
||
Closed end second lien and HELOCs
|
|
—
|
|
|
1
|
|
||
Total U.S. RMBS
|
|
(457
|
)
|
|
(629
|
)
|
||
CMBS
|
|
(3
|
)
|
|
0
|
|
||
Other
|
|
(45
|
)
|
|
(10
|
)
|
||
Total
|
|
$
|
(610
|
)
|
|
$
|
(634
|
)
|
|
As of
March 31, 2013 |
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
|||
Quoted price of CDS contract (in basis points):
|
|
|
|
|
|
|
|
|
AGC
|
397
|
|
|
678
|
|
|
1,140
|
|
AGM
|
380
|
|
|
536
|
|
|
778
|
|
|
As of
March 31, 2013 |
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
|||
Quoted price of CDS contract (in basis points):
|
|
|
|
|
|
|
|
|
AGC
|
59
|
|
|
270
|
|
|
965
|
|
AGM
|
60
|
|
|
257
|
|
|
538
|
|
|
As of
March 31, 2013 |
|
As of
December 31, 2012 |
||||
|
(in millions)
|
||||||
Credit derivative assets
|
$
|
125
|
|
|
$
|
141
|
|
Credit derivative liabilities
|
(2,518
|
)
|
|
(1,934
|
)
|
||
Net fair value of credit derivatives
|
$
|
(2,393
|
)
|
|
$
|
(1,793
|
)
|
|
As of
March 31, 2013 |
|
As of
December 31, 2012 |
||||
|
(in millions)
|
||||||
Fair value of credit derivatives before effect of AGC and AGM credit spreads
|
$
|
(4,296
|
)
|
|
$
|
(4,809
|
)
|
Plus: Effect of AGC and AGM credit spreads
|
1,903
|
|
|
3,016
|
|
||
Net fair value of credit derivatives
|
$
|
(2,393
|
)
|
|
$
|
(1,793
|
)
|
|
|
Fair Value of Credit Derivative
Asset (Liability), net
|
|
Present Value of Expected Claim
(Payments) Recoveries(1)
|
||||||||||||
Asset Type
|
|
As of
March 31, 2013 |
|
As of
December 31, 2012 |
|
As of
March 31, 2013 |
|
As of
December 31, 2012 |
||||||||
|
|
(in millions)
|
||||||||||||||
Pooled corporate obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
CLOs/ Collateralized bond obligations
|
|
$
|
(52
|
)
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Synthetic investment grade pooled corporate
|
|
(3
|
)
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
||||
Synthetic high-yield pooled corporate
|
|
2
|
|
|
3
|
|
|
—
|
|
|
—
|
|
||||
TruPS CDOs
|
|
(37
|
)
|
|
3
|
|
|
(13
|
)
|
|
(16
|
)
|
||||
Market value CDOs of corporate obligations
|
|
(11
|
)
|
|
2
|
|
|
—
|
|
|
—
|
|
||||
Total pooled corporate obligations
|
|
(101
|
)
|
|
6
|
|
|
(13
|
)
|
|
(16
|
)
|
||||
U.S. RMBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Option ARM and Alt-A first lien
|
|
(1,394
|
)
|
|
(1,076
|
)
|
|
(109
|
)
|
|
(121
|
)
|
||||
Subprime first lien
|
|
(109
|
)
|
|
(52
|
)
|
|
(77
|
)
|
|
(70
|
)
|
||||
Prime first lien
|
|
(179
|
)
|
|
(99
|
)
|
|
(6
|
)
|
|
—
|
|
||||
Closed-end second lien and HELOCs
|
|
(11
|
)
|
|
(10
|
)
|
|
10
|
|
|
10
|
|
||||
Total U.S. RMBS
|
|
(1,693
|
)
|
|
(1,237
|
)
|
|
(182
|
)
|
|
(181
|
)
|
||||
CMBS
|
|
(5
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
||||
Other
|
|
(594
|
)
|
|
(560
|
)
|
|
(91
|
)
|
|
(85
|
)
|
||||
Total
|
|
$
|
(2,393
|
)
|
|
$
|
(1,793
|
)
|
|
$
|
(286
|
)
|
|
$
|
(282
|
)
|
(1)
|
Represents amount in excess of the present value of future installment fees to be received of $
42 million
as of
March 31, 2013
and $
43 million
as of
December 31, 2012
. Includes R&W benefit of $
226 million
as of
March 31, 2013
and $
237 million
as of
December 31, 2012
.
|
•
|
For approximately
$11.9 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
$709 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
$709 million
being posted by the Company's insurance subsidiaries, approximately
$64 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
|
|
$
|
(4,859
|
)
|
|
$
|
(2,466
|
)
|
50% widening in spreads
|
|
(3,626
|
)
|
|
(1,233
|
)
|
||
25% widening in spreads
|
|
(3,010
|
)
|
|
(617
|
)
|
||
10% widening in spreads
|
|
(2,640
|
)
|
|
(247
|
)
|
||
Base Scenario
|
|
(2,393
|
)
|
|
—
|
|
||
10% narrowing in spreads
|
|
(2,169
|
)
|
|
224
|
|
||
25% narrowing in spreads
|
|
(1,837
|
)
|
|
556
|
|
||
50% narrowing in spreads
|
|
(1,285
|
)
|
|
1,108
|
|
(1)
|
Includes the effects of spreads on both the underlying asset classes and the Company’s own credit spread.
|
9.
|
Consolidation of Variable Interest Entities
|
|
As of
March 31, 2013 |
|
As of
December 31, 2012 |
||
|
|
||||
Beginning of the period
|
33
|
|
|
33
|
|
Consolidated(1)
|
11
|
|
|
2
|
|
Matured
|
(1
|
)
|
|
(2
|
)
|
End of the period
|
43
|
|
|
33
|
|
(1)
|
Net loss on consolidation was
$0.5 million
in First Quarter 2013 and
$6 million
in 2012 and recorded in “fair value gains (losses) on FG VIEs” in the consolidated statement of operations.
|
|
As of March 31, 2013
|
|
As of December 31, 2012
|
||||||||||||||||||
|
Number of
FG VIEs
|
|
Assets
|
|
Liabilities
|
|
Number of
FG VIEs
|
|
Assets
|
|
Liabilities
|
||||||||||
|
(dollars in millions)
|
||||||||||||||||||||
With recourse:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
HELOCs
|
8
|
|
|
$
|
582
|
|
|
$
|
764
|
|
|
8
|
|
|
$
|
525
|
|
|
$
|
786
|
|
First liens:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Alt-A first lien
|
5
|
|
|
178
|
|
|
168
|
|
|
5
|
|
|
177
|
|
|
162
|
|
||||
Option ARM
|
2
|
|
|
41
|
|
|
158
|
|
|
2
|
|
|
42
|
|
|
170
|
|
||||
Subprime
|
18
|
|
|
415
|
|
|
502
|
|
|
7
|
|
|
399
|
|
|
493
|
|
||||
Closed-end second lien
|
8
|
|
|
103
|
|
|
126
|
|
|
8
|
|
|
108
|
|
|
129
|
|
||||
Automobile loans
|
1
|
|
|
17
|
|
|
17
|
|
|
2
|
|
|
39
|
|
|
39
|
|
||||
Life insurance
|
1
|
|
|
336
|
|
|
336
|
|
|
1
|
|
|
311
|
|
|
311
|
|
||||
Total with recourse
|
43
|
|
|
1,672
|
|
|
2,071
|
|
|
33
|
|
|
1,601
|
|
|
2,090
|
|
||||
Without recourse
|
—
|
|
|
1,141
|
|
|
1,107
|
|
|
—
|
|
|
1,087
|
|
|
1,051
|
|
||||
Total
|
43
|
|
|
$
|
2,813
|
|
|
$
|
3,178
|
|
|
33
|
|
|
$
|
2,688
|
|
|
$
|
3,141
|
|
|
As of
March 31, 2013 |
|
As of
December 31, 2012 |
||||
|
(in millions)
|
||||||
Gross unpaid principal for FG VIEs’ liabilities with recourse (1)
|
$
|
2,707
|
|
|
$
|
2,808
|
|
(1)
|
FG VIE liabilities with recourse will mature at various dates ranging from 2018 to 2047, except for
$17 million
maturing in 2014.
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Net earned premiums
|
$
|
(18
|
)
|
|
$
|
(17
|
)
|
Net investment income
|
(3
|
)
|
|
(3
|
)
|
||
Net realized investment gains (losses)
|
1
|
|
|
1
|
|
||
Fair value gains (losses) on FG VIEs
|
70
|
|
|
(41
|
)
|
||
Loss and LAE
|
(7
|
)
|
|
8
|
|
||
Total pretax effect on net income
|
43
|
|
|
(52
|
)
|
||
Less: tax provision (benefit)
|
15
|
|
|
(18
|
)
|
||
Total effect on net income (loss)
|
$
|
28
|
|
|
$
|
(34
|
)
|
|
As of
March 31, 2013 |
|
As of
December 31, 2012 |
||||
|
(in millions)
|
||||||
Total (decrease) increase on shareholders’ equity
|
$
|
(322
|
)
|
|
$
|
(348
|
)
|
10.
|
Investments and Cash
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Income from fixed maturity securities in general investment portfolio
|
$
|
79
|
|
|
$
|
87
|
|
Income from fixed maturity securities purchased or obtained for loss mitigation purposes
|
16
|
|
|
12
|
|
||
Other (1)
|
1
|
|
|
1
|
|
||
Gross investment income
|
96
|
|
|
100
|
|
||
Investment expenses
|
(2
|
)
|
|
(2
|
)
|
||
Net investment income
|
$
|
94
|
|
|
$
|
98
|
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Realized gains on investment portfolio
|
$
|
39
|
|
|
$
|
9
|
|
Realized losses on investment portfolio
|
(6
|
)
|
|
(3
|
)
|
||
Other-than-temporary impairment ("OTTI") (1)
|
(5
|
)
|
|
(5
|
)
|
||
Net realized investment gains (losses)
|
$
|
28
|
|
|
$
|
1
|
|
(1)
|
Substantially all amounts relate to the credit component of OTTI securities as opposed to OTTI due to intent to sell.
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Balance, beginning of period
|
$
|
64
|
|
|
$
|
47
|
|
Additions for credit losses on securities for which an OTTI was not previously recognized
|
1
|
|
|
2
|
|
||
Additions for credit losses on securities for which an OTTI was previously recognized
|
4
|
|
|
2
|
|
||
Balance, end of period
|
$
|
69
|
|
|
$
|
51
|
|
Investment Category
|
|
Percent
of
Total(1)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair
Value
|
|
AOCI
Gain
(Loss) on
Securities
with
OTTI
|
|
Weighted
Average
Credit
Quality
(3)
|
|||||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
U.S. government and agencies
|
|
7
|
%
|
|
$
|
732
|
|
|
$
|
62
|
|
|
$
|
0
|
|
|
$
|
794
|
|
|
$
|
—
|
|
|
AA+
|
Obligations of state and political subdivisions
|
|
51
|
|
|
5,153
|
|
|
489
|
|
|
(11
|
)
|
|
5,631
|
|
|
9
|
|
|
AA
|
|||||
Corporate securities
|
|
9
|
|
|
930
|
|
|
80
|
|
|
0
|
|
|
1,010
|
|
|
0
|
|
|
AA-
|
|||||
Mortgage-backed securities(4):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
RMBS
|
|
13
|
|
|
1,281
|
|
|
62
|
|
|
(77
|
)
|
|
1,266
|
|
|
(59
|
)
|
|
A+
|
|||||
CMBS
|
|
5
|
|
|
482
|
|
|
38
|
|
|
0
|
|
|
520
|
|
|
—
|
|
|
AAA
|
|||||
Asset-backed securities
|
|
5
|
|
|
482
|
|
|
59
|
|
|
(10
|
)
|
|
531
|
|
|
43
|
|
|
BIG
|
|||||
Foreign government securities
|
|
2
|
|
|
286
|
|
|
18
|
|
|
0
|
|
|
304
|
|
|
0
|
|
|
AAA
|
|||||
Total fixed maturity securities
|
|
92
|
|
|
9,346
|
|
|
808
|
|
|
(98
|
)
|
|
10,056
|
|
|
(7
|
)
|
|
AA-
|
|||||
Short-term investments
|
|
8
|
|
|
817
|
|
|
0
|
|
|
0
|
|
|
817
|
|
|
—
|
|
|
AAA
|
|||||
Total investment portfolio
|
|
100
|
%
|
|
$
|
10,163
|
|
|
$
|
808
|
|
|
$
|
(98
|
)
|
|
$
|
10,873
|
|
|
$
|
(7
|
)
|
|
AA-
|
(1)
|
Based on amortized cost.
|
(2)
|
Accumulated Other Comprehensive Income ("AOCI"). See also Note 17.
|
(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
60%
of mortgage backed securities as of
March 31, 2013
and
61%
as of
December 31, 2012
based on fair value.
|
State
|
|
State
General
Obligation
|
|
Local
General
Obligation
|
|
Revenue
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Average
Credit
Rating
|
||||||||||
|
|
(in millions)
|
||||||||||||||||||||
Texas
|
|
$
|
87
|
|
|
$
|
336
|
|
|
$
|
339
|
|
|
$
|
762
|
|
|
$
|
701
|
|
|
AA
|
New York
|
|
12
|
|
|
66
|
|
|
586
|
|
|
664
|
|
|
618
|
|
|
AA
|
|||||
California
|
|
27
|
|
|
73
|
|
|
360
|
|
|
460
|
|
|
428
|
|
|
A+
|
|||||
Florida
|
|
47
|
|
|
49
|
|
|
264
|
|
|
360
|
|
|
325
|
|
|
AA-
|
|||||
Illinois
|
|
14
|
|
|
78
|
|
|
189
|
|
|
281
|
|
|
257
|
|
|
A+
|
|||||
Massachusetts
|
|
41
|
|
|
18
|
|
|
163
|
|
|
222
|
|
|
199
|
|
|
AA
|
|||||
Washington
|
|
33
|
|
|
21
|
|
|
144
|
|
|
198
|
|
|
182
|
|
|
AA
|
|||||
Arizona
|
|
—
|
|
|
8
|
|
|
178
|
|
|
186
|
|
|
170
|
|
|
AA
|
|||||
Michigan
|
|
—
|
|
|
29
|
|
|
110
|
|
|
139
|
|
|
127
|
|
|
AA-
|
|||||
Pennsylvania
|
|
67
|
|
|
31
|
|
|
39
|
|
|
137
|
|
|
129
|
|
|
AA-
|
|||||
All others
|
|
238
|
|
|
222
|
|
|
1,178
|
|
|
1,638
|
|
|
1,512
|
|
|
AA
|
|||||
Total
|
|
$
|
566
|
|
|
$
|
931
|
|
|
$
|
3,550
|
|
|
$
|
5,047
|
|
|
$
|
4,648
|
|
|
AA-
|
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-
|
|
|
As of March 31, 2013
|
|
As of December 31, 2012
|
||||||||||||
Type
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
||||||||
|
|
(in millions)
|
||||||||||||||
Tax backed
|
|
$
|
712
|
|
|
$
|
654
|
|
|
$
|
720
|
|
|
$
|
656
|
|
Transportation
|
|
711
|
|
|
644
|
|
|
717
|
|
|
646
|
|
||||
Municipal utilities
|
|
562
|
|
|
516
|
|
|
567
|
|
|
519
|
|
||||
Water and sewer
|
|
549
|
|
|
508
|
|
|
567
|
|
|
520
|
|
||||
Higher education
|
|
440
|
|
|
403
|
|
|
430
|
|
|
389
|
|
||||
Healthcare
|
|
328
|
|
|
302
|
|
|
323
|
|
|
296
|
|
||||
All others
|
|
248
|
|
|
246
|
|
|
250
|
|
|
247
|
|
||||
Total
|
|
$
|
3,550
|
|
|
$
|
3,273
|
|
|
$
|
3,574
|
|
|
$
|
3,273
|
|
|
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
|
$
|
43
|
|
|
$
|
0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
43
|
|
|
$
|
0
|
|
Obligations of state and political subdivisions
|
158
|
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
158
|
|
|
(12
|
)
|
||||||
Corporate securities
|
76
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
76
|
|
|
(1
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
RMBS
|
184
|
|
|
(15
|
)
|
|
99
|
|
|
(53
|
)
|
|
283
|
|
|
(68
|
)
|
||||||
CMBS
|
16
|
|
|
0
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|
0
|
|
||||||
Asset-backed securities
|
19
|
|
|
0
|
|
|
38
|
|
|
(8
|
)
|
|
57
|
|
|
(8
|
)
|
||||||
Foreign government securities
|
62
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
62
|
|
|
(2
|
)
|
||||||
Total
|
$
|
558
|
|
|
$
|
(30
|
)
|
|
$
|
137
|
|
|
$
|
(61
|
)
|
|
$
|
695
|
|
|
$
|
(91
|
)
|
Number of securities
|
|
|
|
105
|
|
|
|
|
|
12
|
|
|
|
|
|
117
|
|
||||||
Number of securities with OTTI
|
|
|
|
5
|
|
|
|
|
|
5
|
|
|
|
|
|
10
|
|
|
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
|
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||
|
(in millions)
|
||||||
Due within one year
|
$
|
152
|
|
|
$
|
153
|
|
Due after one year through five years
|
1,623
|
|
|
1,700
|
|
||
Due after five years through 10 years
|
2,328
|
|
|
2,527
|
|
||
Due after 10 years
|
3,576
|
|
|
3,904
|
|
||
Mortgage-backed securities:
|
|
|
|
|
|
||
RMBS
|
1,210
|
|
|
1,196
|
|
||
CMBS
|
474
|
|
|
505
|
|
||
Total
|
$
|
9,363
|
|
|
$
|
9,985
|
|
|
As of
March 31, 2013 |
|
As of
December 31, 2012 |
||||
|
(in millions)
|
||||||
Fixed maturity securities:
|
|
|
|
||||
Obligations of state and political subdivisions
|
$
|
35
|
|
|
$
|
35
|
|
RMBS
|
216
|
|
|
215
|
|
||
Asset-backed securities
|
286
|
|
|
306
|
|
||
Other invested assets:
|
|
|
|
||||
Assets acquired in refinancing transactions
|
67
|
|
|
72
|
|
||
Other
|
25
|
|
|
42
|
|
||
Total
|
$
|
629
|
|
|
$
|
670
|
|
11.
|
Insurance Company Regulatory Requirements
|
•
|
Dividends shall not exceed outstanding statutory surplus or
$440 million
.
|
•
|
Dividends on annual basis shall not exceed
25%
of its total statutory capital and surplus (as set out in its previous years' financial statements ) or
$321 million
unless it files (at least
seven
days before payment of such dividends) with the Bermuda Monetary Authority an affidavit stating that it will continue to meet the required margins.
|
•
|
Capital distributions on an annual basis shall not exceed
15%
of its total statutory capital (as set out in its previous years' financial statements ) or $
127 million
, unless approval is granted by the Bermuda Monetary Authority.
|
•
|
Dividends are limited by requirements that the subject company must at all times (i) maintain the minimum solvency margin and the Company's applicable enhanced capital requirements required under the Insurance Act of 1978 and (ii) have relevant assets in an amount at least equal to
75%
of relevant liabilities, both as defined under the Insurance Act of 1978.
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Dividends paid by AGC to AGUS
|
$
|
—
|
|
|
$
|
15
|
|
Dividends paid by AGM to AGMH
|
—
|
|
|
30
|
|
||
Dividends paid by AG Re to AGL
|
40
|
|
|
30
|
|
12.
|
Income Taxes
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Expected tax provision (benefit) at statutory rates in taxable jurisdictions
|
$
|
(48
|
)
|
|
$
|
(199
|
)
|
Tax-exempt interest
|
(14
|
)
|
|
(15
|
)
|
||
Change in liability for uncertain tax positions
|
(8
|
)
|
|
0
|
|
||
Other
|
2
|
|
|
1
|
|
||
Total provision (benefit) for income taxes
|
$
|
(68
|
)
|
|
$
|
(213
|
)
|
Effective tax rate
|
31.8
|
%
|
|
30.6
|
%
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
United States
|
$
|
(127
|
)
|
|
$
|
(285
|
)
|
Bermuda
|
(49
|
)
|
|
(77
|
)
|
||
UK
|
0
|
|
|
0
|
|
||
Total
|
$
|
(176
|
)
|
|
$
|
(362
|
)
|
|
As of March 31, 2013
|
|
As of December 31, 2012
|
||||
|
(in millions)
|
||||||
Balance at the beginning of the period
|
$
|
22
|
|
|
$
|
20
|
|
Decrease due to closing of IRS audit
|
(9
|
)
|
|
—
|
|
||
Increase in unrecognized tax benefits as a result of position taken during the current period
|
1
|
|
|
2
|
|
||
Balance, end of period
|
$
|
14
|
|
|
$
|
22
|
|
13.
|
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.
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Increase (decrease) in net unearned premium reserve
|
$
|
—
|
|
|
$
|
106
|
|
Increase (decrease) in net par outstanding
|
—
|
|
|
19,073
|
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Premiums Written:
|
|
|
|
||||
Direct
|
$
|
19
|
|
|
$
|
62
|
|
Assumed(1)
|
(2
|
)
|
|
26
|
|
||
Ceded(2)
|
(2
|
)
|
|
87
|
|
||
Net
|
$
|
15
|
|
|
$
|
175
|
|
Premiums Earned:
|
|
|
|
||||
Direct
|
$
|
267
|
|
|
$
|
206
|
|
Assumed
|
13
|
|
|
14
|
|
||
Ceded
|
(32
|
)
|
|
(26
|
)
|
||
Net
|
$
|
248
|
|
|
$
|
194
|
|
Loss and LAE:
|
|
|
|
||||
Direct
|
$
|
(27
|
)
|
|
$
|
304
|
|
Assumed
|
(14
|
)
|
|
17
|
|
||
Ceded
|
(7
|
)
|
|
(79
|
)
|
||
Net
|
$
|
(48
|
)
|
|
$
|
242
|
|
(1)
|
Negative assumed premiums written were due to 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
|
||||||||||||
|
|
May 9, 2013
|
|
As of March 31, 2013
|
||||||||||||
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
|
|
$
|
9,387
|
|
|
$
|
—
|
|
|
$
|
24
|
|
Tokio Marine & Nichido Fire Insurance Co., Ltd.
|
|
Aa3(3)
|
|
AA-(3)
|
|
7,938
|
|
|
—
|
|
|
—
|
|
|||
Radian Asset Assurance Inc.
|
|
Ba1
|
|
B+
|
|
5,002
|
|
|
42
|
|
|
1,331
|
|
|||
Syncora Guarantee Inc.
|
|
WR
|
|
WR
|
|
4,001
|
|
|
1,886
|
|
|
162
|
|
|||
Mitsui Sumitomo Insurance Co. Ltd.
|
|
A1
|
|
A+(3)
|
|
2,213
|
|
|
—
|
|
|
—
|
|
|||
ACA Financial Guaranty Corp.
|
|
NR
|
|
WR
|
|
819
|
|
|
6
|
|
|
1
|
|
|||
Swiss Reinsurance Co.
|
|
A1
|
|
AA-
|
|
426
|
|
|
—
|
|
|
—
|
|
|||
Ambac
|
|
WR
|
|
WR
|
|
85
|
|
|
6,669
|
|
|
20,040
|
|
|||
CIFG Assurance North America Inc. ("CIFG")
|
|
WR
|
|
WR
|
|
61
|
|
|
255
|
|
|
5,392
|
|
|||
MBIA Inc.
|
|
(4)
|
|
(4)
|
|
—
|
|
|
10,616
|
|
|
7,834
|
|
|||
Financial Guaranty Insurance Co.
|
|
WR
|
|
WR
|
|
—
|
|
|
3,052
|
|
|
1,932
|
|
|||
Other
|
|
Various
|
|
Various
|
|
997
|
|
|
1,935
|
|
|
45
|
|
|||
Total
|
|
|
|
|
|
$
|
30,929
|
|
|
$
|
24,461
|
|
|
$
|
36,761
|
|
(1)
|
Includes $
3,720 million
in ceded par outstanding related to insured credit derivatives.
|
(4)
|
MBIA Inc. includes various subsidiaries which are rated BB, CCC, WR by S&P and Caa2, B3, Baa2, WR and NR by Moody’s.
|
|
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
|
$
|
—
|
|
|
$
|
(11
|
)
|
|
$
|
—
|
|
|
$
|
6
|
|
Tokio Marine & Nichido Fire Insurance Co., Ltd.
|
—
|
|
|
(25
|
)
|
|
—
|
|
|
30
|
|
||||
Radian Asset Assurance Inc.
|
—
|
|
|
(19
|
)
|
|
—
|
|
|
(4
|
)
|
||||
Syncora Guarantee Inc.
|
—
|
|
|
(40
|
)
|
|
19
|
|
|
1
|
|
||||
Mitsui Sumitomo Insurance Co. Ltd.
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
7
|
|
||||
Swiss Reinsurance Co.
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
2
|
|
||||
Ambac
|
73
|
|
|
—
|
|
|
(71
|
)
|
|
—
|
|
||||
CIFG
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||
MBIA Inc.
|
—
|
|
|
—
|
|
|
(17
|
)
|
|
—
|
|
||||
Financial Guaranty Insurance Co.
|
8
|
|
|
—
|
|
|
(35
|
)
|
|
—
|
|
||||
Other
|
—
|
|
|
(42
|
)
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
81
|
|
|
$
|
(145
|
)
|
|
$
|
(104
|
)
|
|
$
|
46
|
|
14.
|
Commitments and Contingencies
|
•
|
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.
|
15.
|
Long-Term Debt and Credit Facilities
|
|
As of March 31, 2013
|
|
As of December 31, 2012
|
||||||||||||
|
Principal
|
|
Carrying
Value
|
|
Principal
|
|
Carrying
Value
|
||||||||
|
(in millions)
|
||||||||||||||
AGUS:
|
|
|
|
|
|
|
|
|
|
|
|
||||
7.0% Senior Notes
|
$
|
200
|
|
|
$
|
198
|
|
|
$
|
200
|
|
|
$
|
197
|
|
Series A Enhanced Junior Subordinated Debentures
|
150
|
|
|
150
|
|
|
150
|
|
|
150
|
|
||||
Total AGUS
|
350
|
|
|
348
|
|
|
350
|
|
|
347
|
|
||||
AGMH:
|
|
|
|
|
|
|
|
|
|
|
|
||||
6
7
/
8
% QUIBS
|
100
|
|
|
68
|
|
|
100
|
|
|
68
|
|
||||
6.25% Notes
|
230
|
|
|
137
|
|
|
230
|
|
|
137
|
|
||||
5.60% Notes
|
100
|
|
|
54
|
|
|
100
|
|
|
54
|
|
||||
Junior Subordinated Debentures
|
300
|
|
|
165
|
|
|
300
|
|
|
164
|
|
||||
Total AGMH
|
730
|
|
|
424
|
|
|
730
|
|
|
423
|
|
||||
AGM:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Notes Payable
|
55
|
|
|
60
|
|
|
61
|
|
|
66
|
|
||||
Total AGM
|
55
|
|
|
60
|
|
|
61
|
|
|
66
|
|
||||
Total
|
$
|
1,135
|
|
|
$
|
832
|
|
|
$
|
1,141
|
|
|
$
|
836
|
|
16.
|
Earnings Per Share
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions, except per share amounts)
|
||||||
Basic earnings per share ("EPS"):
|
|
|
|
||||
Net income (loss) attributable to AGL
|
$
|
(144
|
)
|
|
$
|
(483
|
)
|
Less: Distributed and undistributed income (loss) available to nonvested shareholders
|
0
|
|
|
0
|
|
||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic
|
$
|
(144
|
)
|
|
$
|
(483
|
)
|
Basic shares
|
193.9
|
|
|
182.4
|
|
||
Basic EPS
|
$
|
(0.74
|
)
|
|
$
|
(2.65
|
)
|
|
|
|
|
||||
Diluted EPS:
|
|
|
|
||||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic
|
$
|
(144
|
)
|
|
$
|
(483
|
)
|
Plus: Re-allocation of undistributed income (loss) available to nonvested shareholders of AGL and subsidiaries
|
—
|
|
|
—
|
|
||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, diluted
|
$
|
(144
|
)
|
|
$
|
(483
|
)
|
|
|
|
|
||||
Basic shares
|
193.9
|
|
|
182.4
|
|
||
Effect of dilutive securities:
|
|
|
|
||||
Options and restricted stock awards
|
—
|
|
|
—
|
|
||
Equity units
|
—
|
|
|
—
|
|
||
Diluted shares
|
193.9
|
|
|
182.4
|
|
||
Diluted EPS
|
$
|
(0.74
|
)
|
|
$
|
(2.65
|
)
|
Potentially dilutive securities excluded from computation of EPS because of antidilutive effect
|
5.1
|
|
|
18.7
|
|
17.
|
Other Comprehensive Income
|
|
Net Unrealized
Gains (Losses) on
Investments with no OTTI
|
|
Net Unrealized
Gains (Losses) on
Investments with OTTI
|
|
Cumulative
Translation
Adjustment
|
|
Cash Flow Hedge
|
|
Total Accumulated
Other
Comprehensive
Income
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Balance, December 31, 2012
|
$
|
517
|
|
|
$
|
(5
|
)
|
|
$
|
(6
|
)
|
|
$
|
9
|
|
|
$
|
515
|
|
Other comprehensive income (loss) before reclassifications
|
(50
|
)
|
|
(16
|
)
|
|
(5
|
)
|
|
—
|
|
|
(71
|
)
|
|||||
Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
||||||||||
Other net realized investment gains (losses)
|
(1
|
)
|
|
6
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
0
|
|
|
—
|
|
|||||
Total before tax
|
(1
|
)
|
|
6
|
|
|
—
|
|
|
0
|
|
|
5
|
|
|||||
Tax (provision) benefit
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
0
|
|
|
(2
|
)
|
|||||
Total amounts reclassified from AOCI, net of tax
|
(1
|
)
|
|
4
|
|
|
—
|
|
|
0
|
|
|
3
|
|
|||||
Net current period other comprehensive income
|
(51
|
)
|
|
(12
|
)
|
|
(5
|
)
|
|
0
|
|
|
(68
|
)
|
|||||
Balance, March 31, 2013
|
$
|
466
|
|
|
$
|
(17
|
)
|
|
$
|
(11
|
)
|
|
$
|
9
|
|
|
$
|
447
|
|
|
Net Unrealized
Gains (Losses) on
Investments with no OTTI
|
|
Net Unrealized
Gains (Losses) on
Investments with OTTI
|
|
Cumulative
Translation
Adjustment
|
|
Cash Flow Hedge
|
|
Total Accumulated
Other
Comprehensive
Income
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Balance, December 31, 2011
|
$
|
365
|
|
|
$
|
2
|
|
|
$
|
(8
|
)
|
|
$
|
9
|
|
|
$
|
368
|
|
Other comprehensive income (loss)
|
43
|
|
|
(14
|
)
|
|
2
|
|
|
0
|
|
|
31
|
|
|||||
Balance, March 31, 2012
|
$
|
408
|
|
|
$
|
(12
|
)
|
|
$
|
(6
|
)
|
|
$
|
9
|
|
|
$
|
399
|
|
18.
|
Subsidiary Information
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total investment portfolio and cash
|
$
|
212
|
|
|
$
|
15
|
|
|
$
|
48
|
|
|
$
|
11,012
|
|
|
$
|
(300
|
)
|
|
$
|
10,987
|
|
Investment in subsidiaries
|
4,487
|
|
|
3,826
|
|
|
3,326
|
|
|
—
|
|
|
(11,639
|
)
|
|
—
|
|
||||||
Premiums receivable, net of ceding commissions payable
|
—
|
|
|
—
|
|
|
—
|
|
|
1,091
|
|
|
(135
|
)
|
|
956
|
|
||||||
Ceded unearned premium reserve
|
—
|
|
|
—
|
|
|
—
|
|
|
1,494
|
|
|
(959
|
)
|
|
535
|
|
||||||
Deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
185
|
|
|
(69
|
)
|
|
116
|
|
||||||
Reinsurance recoverable on unpaid losses
|
—
|
|
|
—
|
|
|
—
|
|
|
205
|
|
|
(149
|
)
|
|
56
|
|
||||||
Credit derivative assets
|
—
|
|
|
—
|
|
|
—
|
|
|
640
|
|
|
(515
|
)
|
|
125
|
|
||||||
Deferred tax asset, net
|
—
|
|
|
48
|
|
|
(93
|
)
|
|
943
|
|
|
(26
|
)
|
|
872
|
|
||||||
Intercompany receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
173
|
|
|
(173
|
)
|
|
—
|
|
||||||
Financial guaranty variable interest entities’ assets, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
2,813
|
|
|
—
|
|
|
2,813
|
|
||||||
Other
|
31
|
|
|
2
|
|
|
10
|
|
|
961
|
|
|
(165
|
)
|
|
839
|
|
||||||
TOTAL ASSETS
|
$
|
4,730
|
|
|
$
|
3,891
|
|
|
$
|
3,291
|
|
|
$
|
19,517
|
|
|
$
|
(14,130
|
)
|
|
$
|
17,299
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Unearned premium reserves
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,913
|
|
|
$
|
(931
|
)
|
|
$
|
4,982
|
|
Loss and LAE reserve
|
—
|
|
|
—
|
|
|
—
|
|
|
698
|
|
|
(166
|
)
|
|
532
|
|
||||||
Long-term debt
|
—
|
|
|
348
|
|
|
424
|
|
|
60
|
|
|
—
|
|
|
832
|
|
||||||
Intercompany payable
|
—
|
|
|
173
|
|
|
—
|
|
|
300
|
|
|
(473
|
)
|
|
—
|
|
||||||
Credit derivative liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
3,033
|
|
|
(515
|
)
|
|
2,518
|
|
||||||
Financial guaranty variable interest entities’ liabilities, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
3,178
|
|
|
—
|
|
|
3,178
|
|
||||||
Other
|
6
|
|
|
(16
|
)
|
|
1
|
|
|
838
|
|
|
(296
|
)
|
|
533
|
|
||||||
TOTAL LIABILITIES
|
6
|
|
|
505
|
|
|
425
|
|
|
14,020
|
|
|
(2,381
|
)
|
|
12,575
|
|
||||||
TOTAL SHAREHOLDERS’ EQUITY
|
4,724
|
|
|
3,386
|
|
|
2,866
|
|
|
5,497
|
|
|
(11,749
|
)
|
|
4,724
|
|
||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
4,730
|
|
|
$
|
3,891
|
|
|
$
|
3,291
|
|
|
$
|
19,517
|
|
|
$
|
(14,130
|
)
|
|
$
|
17,299
|
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total investment portfolio and cash
|
$
|
245
|
|
|
$
|
15
|
|
|
$
|
30
|
|
|
$
|
11,233
|
|
|
$
|
(300
|
)
|
|
$
|
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
|
—
|
|
|
—
|
|
|
—
|
|
|
173
|
|
|
(173
|
)
|
|
—
|
|
||||||
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
Entities
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
246
|
|
|
$
|
2
|
|
|
$
|
248
|
|
Net investment income
|
0
|
|
|
0
|
|
|
0
|
|
|
99
|
|
|
(5
|
)
|
|
94
|
|
||||||
Net realized investment gains (losses)
|
0
|
|
|
—
|
|
|
0
|
|
|
28
|
|
|
—
|
|
|
28
|
|
||||||
Net change in fair value of credit derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Realized gains (losses) and other settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
18
|
|
||||||
Net unrealized gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
(610
|
)
|
|
—
|
|
|
(610
|
)
|
||||||
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
(592
|
)
|
|
—
|
|
|
(592
|
)
|
||||||
Equity in earnings of subsidiaries
|
(139
|
)
|
|
(82
|
)
|
|
162
|
|
|
—
|
|
|
59
|
|
|
—
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
47
|
|
|
(1
|
)
|
|
46
|
|
||||||
TOTAL REVENUES
|
(139
|
)
|
|
(82
|
)
|
|
162
|
|
|
(172
|
)
|
|
55
|
|
|
(176
|
)
|
||||||
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
(44
|
)
|
|
(4
|
)
|
|
(48
|
)
|
||||||
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
(5
|
)
|
|
3
|
|
||||||
Interest expense
|
—
|
|
|
7
|
|
|
13
|
|
|
6
|
|
|
(5
|
)
|
|
21
|
|
||||||
Other operating expenses
|
5
|
|
|
0
|
|
|
—
|
|
|
58
|
|
|
(3
|
)
|
|
60
|
|
||||||
TOTAL EXPENSES
|
5
|
|
|
7
|
|
|
13
|
|
|
28
|
|
|
(17
|
)
|
|
36
|
|
||||||
INCOME (LOSS) BEFORE INCOME TAXES
|
(144
|
)
|
|
(89
|
)
|
|
149
|
|
|
(200
|
)
|
|
72
|
|
|
(212
|
)
|
||||||
Total provision (benefit) for income taxes
|
—
|
|
|
(3
|
)
|
|
(5
|
)
|
|
(65
|
)
|
|
5
|
|
|
(68
|
)
|
||||||
NET INCOME (LOSS)
|
$
|
(144
|
)
|
|
$
|
(86
|
)
|
|
$
|
154
|
|
|
$
|
(135
|
)
|
|
$
|
67
|
|
|
$
|
(144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
COMPREHENSIVE INCOME (LOSS)
|
$
|
(212
|
)
|
|
$
|
(137
|
)
|
|
$
|
117
|
|
|
$
|
(253
|
)
|
|
$
|
273
|
|
|
$
|
(212
|
)
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
189
|
|
|
$
|
5
|
|
|
$
|
194
|
|
Net investment income
|
—
|
|
|
—
|
|
|
0
|
|
|
101
|
|
|
(3
|
)
|
|
98
|
|
||||||
Net realized investment gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||||
Net change in fair value of credit derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Realized gains (losses) and other settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
(57
|
)
|
|
—
|
|
|
(57
|
)
|
||||||
Net unrealized gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
(634
|
)
|
|
—
|
|
|
(634
|
)
|
||||||
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
(691
|
)
|
|
—
|
|
|
(691
|
)
|
||||||
Equity in earnings of subsidiaries
|
(476
|
)
|
|
(353
|
)
|
|
(7
|
)
|
|
(360
|
)
|
|
1,196
|
|
|
—
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
36
|
|
|
—
|
|
|
36
|
|
||||||
TOTAL REVENUES
|
(476
|
)
|
|
(353
|
)
|
|
(7
|
)
|
|
(724
|
)
|
|
1,198
|
|
|
(362
|
)
|
||||||
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
244
|
|
|
(2
|
)
|
|
242
|
|
||||||
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
(4
|
)
|
|
5
|
|
||||||
Interest expense
|
—
|
|
|
10
|
|
|
13
|
|
|
5
|
|
|
(3
|
)
|
|
25
|
|
||||||
Other operating expenses
|
7
|
|
|
1
|
|
|
—
|
|
|
55
|
|
|
(1
|
)
|
|
62
|
|
||||||
TOTAL EXPENSES
|
7
|
|
|
11
|
|
|
13
|
|
|
313
|
|
|
(10
|
)
|
|
334
|
|
||||||
INCOME (LOSS) BEFORE INCOME TAXES
|
(483
|
)
|
|
(364
|
)
|
|
(20
|
)
|
|
(1,037
|
)
|
|
1,208
|
|
|
(696
|
)
|
||||||
Total provision (benefit) for income taxes
|
—
|
|
|
(4
|
)
|
|
(12
|
)
|
|
(208
|
)
|
|
11
|
|
|
(213
|
)
|
||||||
NET INCOME (LOSS)
|
$
|
(483
|
)
|
|
$
|
(360
|
)
|
|
$
|
(8
|
)
|
|
$
|
(829
|
)
|
|
$
|
1,197
|
|
|
$
|
(483
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
COMPREHENSIVE INCOME (LOSS)
|
$
|
(452
|
)
|
|
$
|
(335
|
)
|
|
$
|
9
|
|
|
$
|
(773
|
)
|
|
$
|
1,099
|
|
|
$
|
(452
|
)
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
Net cash flows provided by (used in) operating activities
|
$
|
36
|
|
|
$
|
1
|
|
|
$
|
(6
|
)
|
|
$
|
(5
|
)
|
|
$
|
(40
|
)
|
|
$
|
(14
|
)
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchases
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(509
|
)
|
|
—
|
|
|
(510
|
)
|
||||||
Sales
|
40
|
|
|
—
|
|
|
7
|
|
|
136
|
|
|
—
|
|
|
183
|
|
||||||
Maturities
|
18
|
|
|
—
|
|
|
1
|
|
|
264
|
|
|
—
|
|
|
283
|
|
||||||
Sales (purchases) of short-term investments, net
|
(34
|
)
|
|
—
|
|
|
(27
|
)
|
|
149
|
|
|
—
|
|
|
88
|
|
||||||
Net proceeds from financial guaranty variable entities’ assets
|
—
|
|
|
—
|
|
|
—
|
|
|
138
|
|
|
—
|
|
|
138
|
|
||||||
Investment in subsidiary
|
—
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
(25
|
)
|
|
—
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
55
|
|
|
—
|
|
|
55
|
|
||||||
Net cash flows provided by (used in) investing activities
|
24
|
|
|
(1
|
)
|
|
6
|
|
|
233
|
|
|
(25
|
)
|
|
237
|
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Return of capital
|
—
|
|
|
—
|
|
|
—
|
|
|
(25
|
)
|
|
25
|
|
|
—
|
|
||||||
Dividends paid
|
(19
|
)
|
|
—
|
|
|
—
|
|
|
(40
|
)
|
|
40
|
|
|
(19
|
)
|
||||||
Repurchases of common stock
|
(39
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(39
|
)
|
||||||
Share activity under option and incentive plans
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
Net paydowns of financial guaranty variable entities’ liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(167
|
)
|
|
—
|
|
|
(167
|
)
|
||||||
Payment of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(6
|
)
|
||||||
Net cash flows provided by (used in) financing activities
|
(60
|
)
|
|
—
|
|
|
—
|
|
|
(238
|
)
|
|
65
|
|
|
(233
|
)
|
||||||
Effect of exchange rate changes
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
||||||
Increase (decrease) in cash
|
—
|
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
—
|
|
|
(13
|
)
|
||||||
Cash at beginning of period
|
—
|
|
|
13
|
|
|
0
|
|
|
125
|
|
|
—
|
|
|
138
|
|
||||||
Cash at end of period
|
$
|
—
|
|
|
$
|
13
|
|
|
$
|
0
|
|
|
$
|
112
|
|
|
$
|
—
|
|
|
$
|
125
|
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
Net cash flows provided by (used in) operating activities
|
$
|
29
|
|
|
$
|
(68
|
)
|
|
$
|
37
|
|
|
$
|
182
|
|
|
$
|
(105
|
)
|
|
$
|
75
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchases
|
—
|
|
|
—
|
|
|
(11
|
)
|
|
(372
|
)
|
|
—
|
|
|
(383
|
)
|
||||||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
189
|
|
|
—
|
|
|
189
|
|
||||||
Maturities
|
—
|
|
|
—
|
|
|
1
|
|
|
252
|
|
|
—
|
|
|
253
|
|
||||||
Sales (purchases) of short-term investments, net
|
(10
|
)
|
|
27
|
|
|
3
|
|
|
(163
|
)
|
|
—
|
|
|
(143
|
)
|
||||||
Net proceeds from financial guaranty variable entities’ assets
|
—
|
|
|
—
|
|
|
—
|
|
|
138
|
|
|
—
|
|
|
138
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
53
|
|
|
—
|
|
|
53
|
|
||||||
Net cash flows provided by (used in) investing activities
|
(10
|
)
|
|
27
|
|
|
(7
|
)
|
|
97
|
|
|
—
|
|
|
107
|
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Dividends paid
|
(16
|
)
|
|
—
|
|
|
(30
|
)
|
|
(75
|
)
|
|
105
|
|
|
(16
|
)
|
||||||
Share activity under option and incentive plans
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
||||||
Net paydowns of financial guaranty variable entities’ liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(193
|
)
|
|
—
|
|
|
(193
|
)
|
||||||
Payment of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
||||||
Net cash flows provided by (used in) financing activities
|
(19
|
)
|
|
—
|
|
|
(30
|
)
|
|
(273
|
)
|
|
105
|
|
|
(217
|
)
|
||||||
Effect of exchange rate changes
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||||
Increase (decrease) in cash
|
—
|
|
|
(41
|
)
|
|
—
|
|
|
8
|
|
|
—
|
|
|
(33
|
)
|
||||||
Cash at beginning of period
|
0
|
|
|
72
|
|
|
—
|
|
|
143
|
|
|
—
|
|
|
215
|
|
||||||
Cash at end of period
|
$
|
0
|
|
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
151
|
|
|
$
|
—
|
|
|
$
|
182
|
|
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions, except per share amounts)
|
||||||
Selected income statement data
|
|
|
|
|
|||
Net earned premiums
|
$
|
248
|
|
|
$
|
194
|
|
Net investment income
|
94
|
|
|
98
|
|
||
Realized gains (losses) and other settlements on credit derivatives
|
18
|
|
|
(57
|
)
|
||
Net unrealized gains (losses) on credit derivatives
|
(610
|
)
|
|
(634
|
)
|
||
Fair value gains (losses) on financial guaranty variable interest entities
|
70
|
|
|
(41
|
)
|
||
Loss and loss adjustment (expenses) benefit
|
48
|
|
|
(242
|
)
|
||
Other operating expenses
|
(60
|
)
|
|
(62
|
)
|
||
Net income (loss)
|
(144
|
)
|
|
(483
|
)
|
||
Diluted loss per share
|
$
|
(0.74
|
)
|
|
$
|
(2.65
|
)
|
Selected non-GAAP measures(1)
|
|
|
|
||||
Operating income
|
$
|
260
|
|
|
$
|
71
|
|
Operating income per share
|
$
|
1.34
|
|
|
$
|
0.38
|
|
Present value of new business production (“PVP”)
|
$
|
18
|
|
|
$
|
56
|
|
(1)
|
Please refer to “—Non-GAAP Financial Measures.”
|
|
First Quarter 2013
|
|
Year Ended December 31, 2012
|
||||||||||
|
Par
|
|
Number of
issues
|
|
Par
|
|
Number of
issues
|
||||||
|
(dollars in billions, except number of issues)
|
||||||||||||
New municipal bonds issued
|
$
|
2.1
|
|
|
261
|
|
|
$
|
366.7
|
|
|
12,544
|
|
Insured by AGC and AGM(1)
|
1.2
|
|
|
129
|
|
|
13.2
|
|
|
1,157
|
|
(1)
|
Represents 54.9% for First Quarter 2013 and 99.8% for 2012 of market share of bonds, based on par issued with insurance.
|
|
First Quarter
|
|
Year Ended December 31,
|
||
|
2013
|
|
2012
|
|
2012
|
Market penetration par
|
2.6%
|
|
4.7%
|
|
3.6%
|
Market penetration based on number of issues
|
9.4
|
|
11.9
|
|
9.2
|
% of single A par sold
|
7.9
|
|
18.2
|
|
11.9
|
% of single A transactions sold
|
29.0
|
|
36.6
|
|
29.5
|
% of under $25 million par sold
|
10.8
|
|
14.9
|
|
11.7
|
% of under $25 million transactions sold
|
11.1
|
|
13.6
|
|
10.3
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
PVP (1):
|
|
|
|
||||
Public Finance—U.S.
|
|
|
|
||||
Assumed from Radian (2)
|
$
|
—
|
|
|
$
|
22
|
|
Direct
|
16
|
|
|
30
|
|
||
Structured Finance—U.S.
|
2
|
|
|
4
|
|
||
Total PVP
|
$
|
18
|
|
|
$
|
56
|
|
Gross Par Written:
|
|
|
|
||||
Public Finance—U.S.
|
|
|
|
||||
Assumed from Radian
|
$
|
—
|
|
|
$
|
1,797
|
|
Direct
|
1,580
|
|
|
3,046
|
|
||
Structured Finance—U.S.
|
14
|
|
|
38
|
|
||
Total gross par written
|
$
|
1,594
|
|
|
$
|
4,881
|
|
(1)
|
PVP represents the present value of estimated future earnings primarily on new financial guaranty contracts written in the period, before consideration of cessions to reinsurers. See “—Non-GAAP Measures—PVP or Present Value of New Business Production.”
|
(2)
|
Represents assumed public finance business from Radian, the Company's first third party assumed reinsurance treaty written since 2009.
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Revenues:
|
|
|
|
||||
Net earned premiums
|
$
|
248
|
|
|
$
|
194
|
|
Net investment income
|
94
|
|
|
98
|
|
||
Net realized investment gains (losses)
|
28
|
|
|
1
|
|
||
Net change in fair value of credit derivatives:
|
|
|
|
||||
Realized gains (losses) and other settlements
|
18
|
|
|
(57
|
)
|
||
Net unrealized gains
|
(610
|
)
|
|
(634
|
)
|
||
Net change in fair value of credit derivatives
|
(592
|
)
|
|
(691
|
)
|
||
Fair value gains (losses) on committed capital securities ("CCS")
|
(10
|
)
|
|
(14
|
)
|
||
Fair value gains (losses) on FG VIEs
|
70
|
|
|
(41
|
)
|
||
Other income
|
(14
|
)
|
|
91
|
|
||
Total revenues
|
(176
|
)
|
|
(362
|
)
|
||
Expenses:
|
|
|
|
||||
Loss and loss adjustment expenses ("LAE")
|
(48
|
)
|
|
242
|
|
||
Amortization of deferred acquisition costs
|
3
|
|
|
5
|
|
||
Interest expense
|
21
|
|
|
25
|
|
||
Other operating expenses
|
60
|
|
|
62
|
|
||
Total expenses
|
36
|
|
|
334
|
|
||
Income (loss) before provision for income taxes
|
(212
|
)
|
|
(696
|
)
|
||
Provision (benefit) for income taxes
|
(68
|
)
|
|
(213
|
)
|
||
Net income (loss)
|
$
|
(144
|
)
|
|
$
|
(483
|
)
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Financial guaranty:
|
|
|
|
||||
Public finance
|
|
|
—
|
|
|||
Scheduled net earned premiums and accretion
|
$
|
77
|
|
|
$
|
83
|
|
Accelerations(1)
|
66
|
|
|
37
|
|
||
Total public finance
|
143
|
|
|
120
|
|
||
Structured finance(2)
|
|
|
|
||||
Scheduled net earned premiums and accretion
|
58
|
|
|
74
|
|
||
Accelerations(1)
|
47
|
|
|
—
|
|
||
Total structured finance
|
105
|
|
|
74
|
|
||
Total net earned premiums
|
$
|
248
|
|
|
$
|
194
|
|
(1)
|
Reflects the unscheduled refunding or early termination of underlying insured obligations.
|
(2)
|
Excludes $
18 million
and $
17 million
for First Quarter 2013 and 2012, respectively, related to consolidated FG VIEs.
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Realized investment gains (losses) on sales of investments
|
$
|
33
|
|
|
$
|
6
|
|
OTTl
|
(5
|
)
|
|
(5
|
)
|
||
Net realized investment gains (losses)
|
$
|
28
|
|
|
$
|
1
|
|
(1)
|
Net realized investment gains (losses) exclude $
1 million
OTTI for First Quarter 2013 and $
1 million
OTTI for First Quarter 2012 related to consolidated FG VIEs.
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Foreign exchange gain (loss) on remeasurement of premium receivable and loss reserves
|
$
|
(16
|
)
|
|
$
|
10
|
|
Commutation gains (losses)
|
—
|
|
|
83
|
|
||
Other
|
2
|
|
|
(2
|
)
|
||
Total other income
|
$
|
(14
|
)
|
|
$
|
91
|
|
|
|
Net Par Outstanding
as of |
|
Number of Risks (1)
as of |
||||||||||
Description
|
|
March 31, 2013
|
|
December 31, 2012
|
|
March 31, 2013
|
|
December 31, 2012
|
||||||
|
|
(dollars in millions)
|
||||||||||||
BIG:
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Category 1
|
|
$
|
7,879
|
|
|
$
|
9,254
|
|
|
173
|
|
|
183
|
|
Category 2
|
|
5,913
|
|
|
5,107
|
|
|
108
|
|
|
103
|
|
||
Category 3
|
|
8,562
|
|
|
9,031
|
|
|
176
|
|
|
174
|
|
||
Total BIG
|
|
$
|
22,354
|
|
|
$
|
23,392
|
|
|
457
|
|
|
460
|
|
(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
|
||||||||||||
|
First Quarter
|
|
First Quarter
|
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(in millions)
|
||||||||||||||
U.S. RMBS before benefit for recoveries for breaches of R&W
|
$
|
57
|
|
|
$
|
68
|
|
|
$
|
(154
|
)
|
|
$
|
(225
|
)
|
Net benefit for recoveries for breaches of R&W
|
(157
|
)
|
|
(51
|
)
|
|
89
|
|
|
70
|
|
||||
U.S. RMBS after benefit for recoveries for breaches of R&W
|
(100
|
)
|
|
17
|
|
|
(65
|
)
|
|
(155
|
)
|
||||
Other structured finance
|
(5
|
)
|
|
(26
|
)
|
|
(4
|
)
|
|
(26
|
)
|
||||
Public finance
|
17
|
|
|
221
|
|
|
(23
|
)
|
|
48
|
|
||||
Other
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
(98
|
)
|
|
$
|
212
|
|
|
$
|
(92
|
)
|
|
$
|
(133
|
)
|
(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
March 31, 2013 |
|
As of
December 31, 2012 |
||||
|
(in millions)
|
||||||
U.S. RMBS before benefit for recoveries for breaches of R&W
|
$
|
1,555
|
|
|
$
|
1,652
|
|
Net benefit for recoveries for breaches of R&W
|
(1,438
|
)
|
|
(1,370
|
)
|
||
U.S. RMBS after benefit for recoveries for breaches of R&W
|
117
|
|
|
282
|
|
||
Other structured finance
|
330
|
|
|
339
|
|
||
Public finance
|
53
|
|
|
59
|
|
||
Other
|
(13
|
)
|
|
(3
|
)
|
||
Total
|
$
|
487
|
|
|
$
|
677
|
|
•
|
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.
|
|
First Quarter 2013
|
||
|
(in millions)
|
||
Inclusion (removal) of deals with breaches of R&W during period
|
$
|
0
|
|
Change in recovery assumptions as the result of additional file review and recovery success
|
11
|
|
|
Estimated increase (decrease) in defaults that will result in additional (lower) breaches
|
1
|
|
|
Results of settlements and judgments
|
142
|
|
|
Accretion of discount on balance
|
3
|
|
|
Total
|
$
|
157
|
|
|
First Quarter 2012
|
||
|
(in millions)
|
||
Inclusion (removal) of deals with breaches of R&W during period
|
$
|
—
|
|
Change in recovery assumptions as the result of additional file review and recovery success
|
80
|
|
|
Estimated increase (decrease) in defaults that will result in additional (lower) breaches
|
(82
|
)
|
|
Results of settlements
|
48
|
|
|
Accretion of discount on balance
|
5
|
|
|
Total
|
$
|
51
|
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
U.S. RMBS
|
$
|
(40
|
)
|
|
$
|
73
|
|
Other structured finance
|
(12
|
)
|
|
(32
|
)
|
||
Public finance
|
(3
|
)
|
|
209
|
|
||
Total insurance contracts before FG VIE consolidation
|
(55
|
)
|
|
250
|
|
||
Effect of consolidating FG VIEs
|
7
|
|
|
(8
|
)
|
||
Total loss and LAE
|
$
|
(48
|
)
|
|
$
|
242
|
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
U.S. RMBS
|
$
|
(16
|
)
|
|
$
|
75
|
|
Other structured finance
|
(16
|
)
|
|
(37
|
)
|
||
Public finance
|
(3
|
)
|
|
209
|
|
||
Other
|
(10
|
)
|
|
—
|
|
||
Total
|
$
|
(45
|
)
|
|
$
|
247
|
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Loss and LAE
|
$
|
(48
|
)
|
|
$
|
242
|
|
Credit derivative loss expense
|
10
|
|
|
(2
|
)
|
||
FG VIE loss expense
|
(7
|
)
|
|
7
|
|
||
Loss expense included in operating income
|
$
|
(45
|
)
|
|
$
|
247
|
|
|
Net Expected Loss to be Expensed(1)
|
||||||
|
In GAAP
Reported
Income
|
|
In Non-GAAP
Operating
Income
|
||||
|
(in millions)
|
||||||
2013 (April 1 - June 30)
|
$
|
18
|
|
|
$
|
22
|
|
2013 (July 1 - September 30)
|
16
|
|
|
21
|
|
||
2013 (October 1 - December 31)
|
16
|
|
|
20
|
|
||
Subtotal 2013
|
50
|
|
|
63
|
|
||
2014
|
50
|
|
|
68
|
|
||
2015
|
43
|
|
|
58
|
|
||
2016
|
37
|
|
|
49
|
|
||
2017
|
34
|
|
|
44
|
|
||
2018-2022
|
122
|
|
|
152
|
|
||
2023-2027
|
60
|
|
|
73
|
|
||
2028-2032
|
28
|
|
|
37
|
|
||
After 2032
|
19
|
|
|
29
|
|
||
Total expected PV of net expected loss to be expensed
|
443
|
|
|
573
|
|
||
Discount
|
333
|
|
|
375
|
|
||
Total future value
|
$
|
776
|
|
|
$
|
948
|
|
(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.
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Net credit derivative premiums received and receivable
|
$
|
27
|
|
|
$
|
29
|
|
Net ceding commissions (paid and payable) received and receivable
|
1
|
|
|
0
|
|
||
Realized gains on credit derivatives
|
28
|
|
|
29
|
|
||
Net credit derivative losses (paid and payable) recovered and recoverable
|
(10
|
)
|
|
(86
|
)
|
||
Total realized gains (losses) and other settlements on credit derivatives
|
18
|
|
|
(57
|
)
|
||
Net unrealized gains (losses) on credit derivatives
|
(610
|
)
|
|
(634
|
)
|
||
Net change in fair value of credit derivatives
|
$
|
(592
|
)
|
|
$
|
(691
|
)
|
|
|
First Quarter
|
||||||
Asset Type
|
|
2013
|
|
2012
|
||||
|
|
(in millions)
|
||||||
U.S. RMBS:
|
|
|
|
|
||||
Option ARM and Alt-A first lien
|
|
$
|
(295
|
)
|
|
$
|
(518
|
)
|
Subprime first lien
|
|
(79
|
)
|
|
(26
|
)
|
||
Prime first lien
|
|
(83
|
)
|
|
(86
|
)
|
||
Closed end second lien and home equity lines of credit ("HELOCs")
|
|
—
|
|
|
1
|
|
||
Total U.S. RMBS
|
|
(457
|
)
|
|
(629
|
)
|
||
Pooled corporate obligations
|
|
(105
|
)
|
|
5
|
|
||
Commercial mortgage-backed securities ("CMBS")
|
|
(3
|
)
|
|
0
|
|
||
Other(1)
|
|
(45
|
)
|
|
(10
|
)
|
||
Total
|
|
$
|
(610
|
)
|
|
$
|
(634
|
)
|
(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
March 31, 2013 |
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
|||
Quoted price of CDS contract (in basis points):
|
|
|
|
|
|
|
|
|
AGC
|
397
|
|
|
678
|
|
|
1,140
|
|
AGM
|
380
|
|
|
536
|
|
|
778
|
|
|
As of
March 31, 2013 |
|
As of
December 31, 2012 |
|
As of
December 31, 2011 |
|||
Quoted price of CDS contract (in basis points):
|
|
|
|
|
|
|
|
|
AGC
|
59
|
|
|
270
|
|
|
965
|
|
AGM
|
60
|
|
|
257
|
|
|
538
|
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Change in unrealized gains (losses) of credit derivatives:
|
|
|
|
||||
Before considering implication of the Company’s credit spreads
|
$
|
504
|
|
|
$
|
713
|
|
Resulting from change in the Company’s credit spreads
|
(1,114
|
)
|
|
(1,347
|
)
|
||
After considering implication of the Company’s credit spreads
|
$
|
(610
|
)
|
|
$
|
(634
|
)
|
|
As of
March 31, 2013 |
|
As of
December 31, 2012 |
||||
|
(in millions)
|
||||||
Credit derivative assets
|
$
|
125
|
|
|
$
|
141
|
|
Credit derivative liabilities
|
(2,518
|
)
|
|
(1,934
|
)
|
||
Net fair value of credit derivatives
|
$
|
(2,393
|
)
|
|
$
|
(1,793
|
)
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Total provision (benefit) for income taxes
|
$
|
(68
|
)
|
|
$
|
(213
|
)
|
Effective tax rate
|
31.8
|
%
|
|
30.6
|
%
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Net earned premiums
|
$
|
(18
|
)
|
|
$
|
(17
|
)
|
Net investment income
|
(3
|
)
|
|
(3
|
)
|
||
Net realized investment gains (losses)
|
1
|
|
|
1
|
|
||
Fair value gains (losses) on FG VIEs
|
70
|
|
|
(41
|
)
|
||
Loss and LAE
|
(7
|
)
|
|
8
|
|
||
Total pretax effect on net income
|
43
|
|
|
(52
|
)
|
||
Less: tax provision (benefit)
|
15
|
|
|
(18
|
)
|
||
Total effect on net income (loss)
|
$
|
28
|
|
|
$
|
(34
|
)
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
|
||||||
Net income (loss)
|
$
|
(144
|
)
|
|
$
|
(483
|
)
|
Less after-tax adjustments:
|
|
|
|
||||
Realized gains (losses) on investments
|
19
|
|
|
(1
|
)
|
||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
(434
|
)
|
|
(517
|
)
|
||
Fair value gains (losses) on CCS
|
(6
|
)
|
|
(9
|
)
|
||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
|
(11
|
)
|
|
7
|
|
||
Effect of consolidating FG VIEs
|
28
|
|
|
(34
|
)
|
||
Operating income
|
$
|
260
|
|
|
$
|
71
|
|
|
|
|
|
||||
Effective tax rate on operating income
|
25.8
|
%
|
|
17.9
|
%
|
|
As of March 31, 2013
|
|
As of December 31, 2012
|
||||||||||||
|
Total
|
|
Per Share
|
|
Total
|
|
Per Share
|
||||||||
|
(dollars in millions, except
per share amounts)
|
||||||||||||||
Shareholders’ equity
|
$
|
4,724
|
|
|
$
|
24.56
|
|
|
$
|
4,994
|
|
|
$
|
25.74
|
|
Less after-tax adjustments:
|
|
|
|
|
|
|
|
||||||||
Effect of consolidating FG VIEs
|
(322
|
)
|
|
(1.67
|
)
|
|
(348
|
)
|
|
(1.79
|
)
|
||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
(1,447
|
)
|
|
(7.52
|
)
|
|
(988
|
)
|
|
(5.09
|
)
|
||||
Fair value gains (losses) on CCS
|
17
|
|
|
0.09
|
|
|
23
|
|
|
0.12
|
|
||||
Unrealized gain (loss) on investment portfolio excluding foreign exchange effect
|
421
|
|
|
2.18
|
|
|
477
|
|
|
2.45
|
|
||||
Operating shareholders’ equity
|
6,055
|
|
|
31.48
|
|
|
5,830
|
|
|
30.05
|
|
||||
After-tax adjustments:
|
|
|
|
|
|
|
|
|
|
|
|||||
Less: Deferred acquisition costs
|
163
|
|
|
0.85
|
|
|
165
|
|
|
0.85
|
|
||||
Plus: Net present value of estimated net future credit derivative revenue
|
201
|
|
|
1.04
|
|
|
220
|
|
|
1.14
|
|
||||
Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed
|
3,125
|
|
|
16.25
|
|
|
3,266
|
|
|
16.83
|
|
||||
Adjusted book value
|
$
|
9,218
|
|
|
$
|
47.92
|
|
|
$
|
9,151
|
|
|
$
|
47.17
|
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Total PVP
|
$
|
18
|
|
|
$
|
56
|
|
Less: Financial guaranty installment premium PVP
|
1
|
|
|
4
|
|
||
Total: Financial guaranty upfront gross written premiums
|
17
|
|
|
52
|
|
||
Plus: Financial guaranty installment gross written premiums
|
—
|
|
|
36
|
|
||
Total gross written premiums
|
$
|
17
|
|
|
$
|
88
|
|
|
|
As of March 31, 2013
|
|
As of December 31, 2012
|
||||||||
Sector
|
|
Net Par
Outstanding
|
|
Avg.
Rating
|
|
Net Par
Outstanding
|
|
Avg.
Rating
|
||||
|
|
(dollars in millions)
|
||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
|
||
U.S.:
|
|
|
|
|
|
|
|
|
|
|
||
General obligation
|
|
$
|
166,316
|
|
|
A+
|
|
$
|
169,985
|
|
|
A+
|
Tax backed
|
|
72,339
|
|
|
A+
|
|
73,787
|
|
|
A+
|
||
Municipal utilities
|
|
60,450
|
|
|
A
|
|
62,116
|
|
|
A
|
||
Transportation
|
|
32,278
|
|
|
A
|
|
33,799
|
|
|
A
|
||
Healthcare
|
|
17,165
|
|
|
A
|
|
17,838
|
|
|
A
|
||
Higher education
|
|
15,620
|
|
|
A+
|
|
15,770
|
|
|
A+
|
||
Housing
|
|
4,319
|
|
|
AA-
|
|
4,633
|
|
|
AA-
|
||
Infrastructure finance
|
|
4,204
|
|
|
BBB
|
|
4,210
|
|
|
BBB
|
||
Investor-owned utilities
|
|
1,052
|
|
|
A-
|
|
1,069
|
|
|
A-
|
||
Other public finance—U.S.
|
|
4,713
|
|
|
A
|
|
4,760
|
|
|
A
|
||
Total public finance—U.S.
|
|
378,456
|
|
|
A
|
|
387,967
|
|
|
A+
|
||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|
||
Infrastructure finance
|
|
14,944
|
|
|
BBB
|
|
15,812
|
|
|
BBB
|
||
Regulated utilities
|
|
11,329
|
|
|
BBB+
|
|
12,494
|
|
|
BBB+
|
||
Pooled infrastructure
|
|
3,006
|
|
|
AA-
|
|
3,200
|
|
|
AA-
|
||
Other public finance—non-U.S.
|
|
5,788
|
|
|
A
|
|
6,034
|
|
|
A
|
||
Total public finance—non-U.S.
|
|
35,067
|
|
|
BBB+
|
|
37,540
|
|
|
BBB+
|
||
Total public finance
|
|
413,523
|
|
|
A
|
|
425,507
|
|
|
A
|
||
Structured finance:
|
|
|
|
|
|
|
|
|
|
|
||
U.S.:
|
|
|
|
|
|
|
|
|
|
|
||
Pooled corporate obligations
|
|
38,884
|
|
|
AAA
|
|
41,886
|
|
|
AAA
|
||
RMBS
|
|
17,086
|
|
|
BB+
|
|
17,827
|
|
|
BB+
|
||
CMBS and other commercial real estate related exposures
|
|
4,152
|
|
|
AAA
|
|
4,247
|
|
|
AAA
|
||
Financial products
|
|
3,316
|
|
|
AA-
|
|
3,653
|
|
|
AA-
|
||
Consumer receivables
|
|
2,313
|
|
|
BBB+
|
|
2,369
|
|
|
BBB+
|
||
Insurance securitizations
|
|
2,190
|
|
|
A+
|
|
2,190
|
|
|
A+
|
||
Commercial receivables
|
|
959
|
|
|
BBB+
|
|
1,025
|
|
|
BBB+
|
||
Structured credit
|
|
314
|
|
|
B
|
|
319
|
|
|
CCC+
|
||
Other structured finance—U.S.
|
|
1,066
|
|
|
A-
|
|
1,179
|
|
|
BBB+
|
||
Total structured finance—U.S.
|
|
70,280
|
|
|
AA-
|
|
74,695
|
|
|
AA-
|
||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|
||
Pooled corporate obligations
|
|
13,417
|
|
|
AAA
|
|
14,813
|
|
|
AAA
|
||
Commercial receivables
|
|
1,405
|
|
|
A-
|
|
1,463
|
|
|
A-
|
||
RMBS
|
|
1,337
|
|
|
AA-
|
|
1,424
|
|
|
AA-
|
||
Insurance securitizations
|
|
923
|
|
|
CCC-
|
|
923
|
|
|
CCC-
|
||
Structured credit
|
|
495
|
|
|
BBB
|
|
591
|
|
|
BBB
|
||
CMBS and other commercial real estate related exposures
|
|
60
|
|
|
AAA
|
|
100
|
|
|
AAA
|
||
Other structured finance—non-U.S.
|
|
377
|
|
|
Super Senior
|
|
377
|
|
|
Super Senior
|
||
Total structured finance—non-U.S.
|
|
18,014
|
|
|
AA
|
|
19,691
|
|
|
AA
|
||
Total structured finance
|
|
88,294
|
|
|
AA-
|
|
94,386
|
|
|
AA-
|
||
Total net par outstanding
|
|
$
|
501,817
|
|
|
A+
|
|
$
|
519,893
|
|
|
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
|
|
$
|
—
|
|
|
—
|
%
|
|
$
|
1,071
|
|
|
3.1
|
%
|
|
$
|
13,259
|
|
|
18.9
|
%
|
|
$
|
4,522
|
|
|
25.1
|
%
|
|
$
|
18,852
|
|
|
3.8
|
%
|
AAA
|
|
4,053
|
|
|
1.1
|
|
|
580
|
|
|
1.7
|
|
|
26,628
|
|
|
37.9
|
|
|
7,504
|
|
|
41.7
|
|
|
38,765
|
|
|
7.7
|
|
|||||
AA
|
|
120,812
|
|
|
31.9
|
|
|
661
|
|
|
1.9
|
|
|
10,041
|
|
|
14.2
|
|
|
687
|
|
|
3.8
|
|
|
132,201
|
|
|
26.3
|
|
|||||
A
|
|
206,112
|
|
|
54.5
|
|
|
9,158
|
|
|
26.1
|
|
|
3,149
|
|
|
4.5
|
|
|
958
|
|
|
5.3
|
|
|
219,377
|
|
|
43.7
|
|
|||||
BBB
|
|
42,890
|
|
|
11.3
|
|
|
21,590
|
|
|
61.5
|
|
|
3,351
|
|
|
4.8
|
|
|
2,437
|
|
|
13.5
|
|
|
70,268
|
|
|
14.0
|
|
|||||
BIG
|
|
4,589
|
|
|
1.2
|
|
|
2,007
|
|
|
5.7
|
|
|
13,852
|
|
|
19.7
|
|
|
1,906
|
|
|
10.6
|
|
|
22,354
|
|
|
4.5
|
|
|||||
Total net par outstanding
|
|
$
|
378,456
|
|
|
100.0
|
%
|
|
$
|
35,067
|
|
|
100.0
|
%
|
|
$
|
70,280
|
|
|
100.0
|
%
|
|
$
|
18,014
|
|
|
100.0
|
%
|
|
$
|
501,817
|
|
|
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
|
|
$
|
—
|
|
|
—
|
%
|
|
$
|
1,130
|
|
|
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
|
%
|
|
Greece
|
|
Hungary
|
|
Ireland
|
|
Italy
|
|
Portugal
|
|
Spain
|
|
Total
|
||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||
Sovereign and sub-sovereign exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Public finance
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,313
|
|
|
$
|
125
|
|
|
$
|
414
|
|
|
$
|
1,852
|
|
Infrastructure finance
|
—
|
|
|
433
|
|
|
23
|
|
|
84
|
|
|
96
|
|
|
167
|
|
|
803
|
|
|||||||
Sub-total
|
—
|
|
|
433
|
|
|
23
|
|
|
1,397
|
|
|
221
|
|
|
581
|
|
|
2,655
|
|
|||||||
Non-sovereign exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Regulated utilities
|
—
|
|
|
—
|
|
|
—
|
|
|
233
|
|
|
—
|
|
|
8
|
|
|
241
|
|
|||||||
RMBS
|
—
|
|
|
215
|
|
|
135
|
|
|
544
|
|
|
—
|
|
|
—
|
|
|
894
|
|
|||||||
Commercial receivables
|
—
|
|
|
2
|
|
|
13
|
|
|
63
|
|
|
15
|
|
|
2
|
|
|
95
|
|
|||||||
Pooled corporate
|
23
|
|
|
—
|
|
|
203
|
|
|
246
|
|
|
15
|
|
|
549
|
|
|
1,036
|
|
|||||||
Sub-total
|
23
|
|
|
217
|
|
|
351
|
|
|
1,086
|
|
|
30
|
|
|
559
|
|
|
2,266
|
|
|||||||
Total
|
$
|
23
|
|
|
$
|
650
|
|
|
$
|
374
|
|
|
$
|
2,483
|
|
|
$
|
251
|
|
|
$
|
1,140
|
|
|
$
|
4,921
|
|
Total BIG
|
$
|
—
|
|
|
$
|
611
|
|
|
$
|
8
|
|
|
$
|
2
|
|
|
$
|
141
|
|
|
$
|
565
|
|
|
$
|
1,327
|
|
|
Greece
|
|
Hungary
|
|
Ireland
|
|
Italy
|
|
Portugal
|
|
Spain
|
|
Total
|
||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||
Sovereign and sub-sovereign exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Public finance
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
978
|
|
|
$
|
105
|
|
|
$
|
258
|
|
|
$
|
1,341
|
|
Infrastructure finance
|
—
|
|
|
408
|
|
|
23
|
|
|
83
|
|
|
96
|
|
|
164
|
|
|
774
|
|
|||||||
Sub-total
|
—
|
|
|
408
|
|
|
23
|
|
|
1,061
|
|
|
201
|
|
|
422
|
|
|
2,115
|
|
|||||||
Non-sovereign exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Regulated utilities
|
—
|
|
|
—
|
|
|
—
|
|
|
215
|
|
|
—
|
|
|
8
|
|
|
223
|
|
|||||||
RMBS
|
—
|
|
|
205
|
|
|
135
|
|
|
476
|
|
|
—
|
|
|
—
|
|
|
816
|
|
|||||||
Commercial receivables
|
—
|
|
|
2
|
|
|
13
|
|
|
61
|
|
|
14
|
|
|
2
|
|
|
92
|
|
|||||||
Pooled corporate
|
22
|
|
|
—
|
|
|
177
|
|
|
226
|
|
|
15
|
|
|
498
|
|
|
938
|
|
|||||||
Sub-total
|
22
|
|
|
207
|
|
|
325
|
|
|
978
|
|
|
29
|
|
|
508
|
|
|
2,069
|
|
|||||||
Total
|
$
|
22
|
|
|
$
|
615
|
|
|
$
|
348
|
|
|
$
|
2,039
|
|
|
$
|
230
|
|
|
$
|
930
|
|
|
$
|
4,184
|
|
Total BIG
|
$
|
—
|
|
|
$
|
576
|
|
|
$
|
7
|
|
|
$
|
2
|
|
|
$
|
121
|
|
|
$
|
406
|
|
|
$
|
1,112
|
|
|
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
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total non-sovereign exposure
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
$
|
—
|
|
|
$
|
(9
|
)
|
|
$
|
(1
|
)
|
|
$
|
(3
|
)
|
|
$
|
(4
|
)
|
|
$
|
(1
|
)
|
|
Greece
|
|
Hungary
|
|
Ireland
|
|
Italy
|
|
Portugal
|
|
Spain
|
|
Total
|
||||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||||||
Pooled corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
$ millions
|
$
|
22
|
|
|
$
|
—
|
|
|
$
|
177
|
|
|
$
|
226
|
|
|
$
|
15
|
|
|
$
|
498
|
|
|
$
|
938
|
|
Average proportion
|
1.9
|
%
|
|
—
|
|
|
2.4
|
%
|
|
3.1
|
%
|
|
1.0
|
%
|
|
4.4
|
%
|
|
3.3
|
%
|
|||||||
Commercial receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
$ millions
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
13
|
|
|
$
|
61
|
|
|
$
|
14
|
|
|
$
|
2
|
|
|
$
|
92
|
|
Average proportion
|
—
|
|
|
0.7
|
%
|
|
8.3
|
%
|
|
8.6
|
%
|
|
2.4
|
%
|
|
1.8
|
%
|
|
5.0
|
%
|
|||||||
Total $ millions
|
$
|
22
|
|
|
$
|
2
|
|
|
$
|
190
|
|
|
$
|
287
|
|
|
$
|
29
|
|
|
$
|
500
|
|
|
$
|
1,030
|
|
|
|
Ratings at
|
|
Par Outstanding
|
||||||||||||
|
|
May 9, 2013
|
|
As of March 31, 2013
|
||||||||||||
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
|
|
$
|
9,387
|
|
|
$
|
—
|
|
|
$
|
24
|
|
Tokio
|
|
Aa3(3)
|
|
AA-(3)
|
|
7,938
|
|
|
—
|
|
|
—
|
|
|||
Radian
|
|
Ba1
|
|
B+
|
|
5,002
|
|
|
42
|
|
|
1,331
|
|
|||
Syncora Guarantee Inc.
|
|
WR
|
|
WR
|
|
4,001
|
|
|
1,886
|
|
|
162
|
|
|||
Mitsui Sumitomo Insurance Co. Ltd.
|
|
A1
|
|
A+(3)
|
|
2,213
|
|
|
—
|
|
|
—
|
|
|||
ACA Financial Guaranty Corp.
|
|
NR
|
|
WR
|
|
819
|
|
|
6
|
|
|
1
|
|
|||
Swiss Reinsurance Co.
|
|
A1
|
|
AA-
|
|
426
|
|
|
—
|
|
|
—
|
|
|||
Ambac Assurance Corporation ("Ambac")
|
|
WR
|
|
WR
|
|
85
|
|
|
6,669
|
|
|
20,040
|
|
|||
CIFG Assurance North America Inc. ("CIFG")
|
|
WR
|
|
WR
|
|
61
|
|
|
255
|
|
|
5,392
|
|
|||
MBIA Inc.
|
|
(4)
|
|
(4)
|
|
—
|
|
|
10,616
|
|
|
7,834
|
|
|||
Financial Guaranty Insurance Co.
|
|
WR
|
|
WR
|
|
—
|
|
|
3,052
|
|
|
1,932
|
|
|||
Other
|
|
Various
|
|
Various
|
|
997
|
|
|
1,935
|
|
|
45
|
|
|||
Total
|
|
|
|
|
|
$
|
30,929
|
|
|
$
|
24,461
|
|
|
$
|
36,761
|
|
(1)
|
Includes $
3,720 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)
|
MBIA Inc. includes various subsidiaries which are rated BB, CCC, WR 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)
|
$
|
224
|
|
|
$
|
1,145
|
|
|
$
|
3,145
|
|
|
$
|
2,843
|
|
|
$
|
1,541
|
|
|
$
|
489
|
|
|
$
|
9,387
|
|
|
Tokio
|
311
|
|
|
1,010
|
|
|
1,277
|
|
|
2,354
|
|
|
2,293
|
|
|
693
|
|
|
7,938
|
|
||||||||
Radian
|
10
|
|
|
255
|
|
|
321
|
|
|
2,459
|
|
|
1,592
|
|
|
365
|
|
|
5,002
|
|
||||||||
Syncora Guarantee Inc.
|
—
|
|
|
—
|
|
|
242
|
|
|
736
|
|
|
2,364
|
|
|
659
|
|
|
4,001
|
|
||||||||
Mitsui Sumitomo Insurance Co. Ltd.
|
7
|
|
|
151
|
|
|
695
|
|
|
875
|
|
|
428
|
|
|
57
|
|
|
2,213
|
|
||||||||
ACA Financial Guaranty Corp
|
—
|
|
|
—
|
|
|
474
|
|
|
325
|
|
|
20
|
|
|
—
|
|
|
819
|
|
||||||||
Swiss Reinsurance Co.
|
—
|
|
|
8
|
|
|
5
|
|
|
267
|
|
|
104
|
|
|
42
|
|
|
426
|
|
||||||||
Ambac
|
—
|
|
|
—
|
|
|
—
|
|
|
85
|
|
|
—
|
|
|
—
|
|
|
85
|
|
||||||||
CIFG
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
61
|
|
|
61
|
|
||||||||
Other
|
—
|
|
|
—
|
|
|
104
|
|
|
819
|
|
|
74
|
|
|
—
|
|
|
997
|
|
||||||||
Total
|
$
|
552
|
|
|
$
|
2,569
|
|
|
$
|
6,263
|
|
|
$
|
10,763
|
|
|
$
|
8,416
|
|
|
$
|
2,366
|
|
|
$
|
30,929
|
|
|
Public Finance
|
|
Structured Finance
|
|
|
||||||||||||||||||||||||||||||||||||||||||
|
AAA
|
|
AA
|
|
A
|
|
BBB
|
|
BIG
|
|
Super
Senior
|
|
AAA
|
|
AA
|
|
A
|
|
BBB
|
|
BIG
|
|
Total
|
||||||||||||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||||||||||||||||||||||
Radian
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13
|
|
|
$
|
18
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
42
|
|
Syncora Guarantee Inc.
|
—
|
|
|
25
|
|
|
378
|
|
|
730
|
|
|
334
|
|
|
—
|
|
|
152
|
|
|
—
|
|
|
71
|
|
|
—
|
|
|
196
|
|
|
1,886
|
|
||||||||||||
ACA Financial Guaranty Corp.
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
||||||||||||
Ambac
|
—
|
|
|
1,421
|
|
|
3,299
|
|
|
1,196
|
|
|
80
|
|
|
—
|
|
|
11
|
|
|
52
|
|
|
1
|
|
|
306
|
|
|
303
|
|
|
6,669
|
|
||||||||||||
CIFG
|
—
|
|
|
11
|
|
|
69
|
|
|
131
|
|
|
44
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
255
|
|
||||||||||||
MBIA Inc.
|
69
|
|
|
2,583
|
|
|
4,150
|
|
|
1,948
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,399
|
|
|
45
|
|
|
203
|
|
|
219
|
|
|
10,616
|
|
||||||||||||
Financial Guaranty Insurance Co.
|
—
|
|
|
130
|
|
|
1,158
|
|
|
338
|
|
|
363
|
|
|
291
|
|
|
581
|
|
|
—
|
|
|
140
|
|
|
—
|
|
|
51
|
|
|
3,052
|
|
||||||||||||
Other
|
—
|
|
|
—
|
|
|
1,935
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,935
|
|
||||||||||||
Total
|
$
|
69
|
|
|
$
|
4,173
|
|
|
$
|
11,002
|
|
|
$
|
4,364
|
|
|
$
|
832
|
|
|
$
|
291
|
|
|
$
|
744
|
|
|
$
|
1,451
|
|
|
$
|
257
|
|
|
$
|
509
|
|
|
$
|
769
|
|
|
$
|
24,461
|
|
(1)
|
Assured Guaranty’s internal rating.
|
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
|
|
$
|
4
|
|
|
$
|
0
|
|
|
$
|
59
|
|
|
$
|
253
|
|
|
$
|
—
|
|
|
$
|
2,338
|
|
|
$
|
2,655
|
|
AA
|
|
111
|
|
|
111
|
|
|
132
|
|
|
444
|
|
|
496
|
|
|
1,991
|
|
|
3,287
|
|
|||||||
A
|
|
2
|
|
|
0
|
|
|
239
|
|
|
9
|
|
|
94
|
|
|
122
|
|
|
466
|
|
|||||||
BBB
|
|
43
|
|
|
—
|
|
|
19
|
|
|
267
|
|
|
31
|
|
|
291
|
|
|
651
|
|
|||||||
BIG
|
|
459
|
|
|
340
|
|
|
2,610
|
|
|
3,465
|
|
|
766
|
|
|
2,387
|
|
|
10,027
|
|
|||||||
Total exposures
|
|
$
|
619
|
|
|
$
|
452
|
|
|
$
|
3,059
|
|
|
$
|
4,439
|
|
|
$
|
1,387
|
|
|
$
|
7,130
|
|
|
$
|
17,086
|
|
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
|
|
$
|
31
|
|
|
$
|
1
|
|
|
$
|
227
|
|
|
$
|
98
|
|
|
$
|
35
|
|
|
$
|
1,348
|
|
|
$
|
1,740
|
|
2005
|
|
167
|
|
|
—
|
|
|
691
|
|
|
568
|
|
|
53
|
|
|
213
|
|
|
1,692
|
|
|||||||
2006
|
|
102
|
|
|
194
|
|
|
900
|
|
|
371
|
|
|
182
|
|
|
2,864
|
|
|
4,615
|
|
|||||||
2007
|
|
319
|
|
|
257
|
|
|
1,240
|
|
|
2,229
|
|
|
1,049
|
|
|
2,627
|
|
|
7,720
|
|
|||||||
2008
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,173
|
|
|
69
|
|
|
77
|
|
|
1,319
|
|
|||||||
Total exposures
|
|
$
|
619
|
|
|
$
|
452
|
|
|
$
|
3,059
|
|
|
$
|
4,439
|
|
|
$
|
1,387
|
|
|
$
|
7,130
|
|
|
$
|
17,086
|
|
Year
insured:
|
|
AAA
Rated
|
|
AA
Rated
|
|
A
Rated
|
|
BBB
Rated
|
|
BIG
Rated
|
|
Total
|
||||||||||||
|
|
(dollars in millions)
|
||||||||||||||||||||||
2004 and prior
|
|
$
|
1,133
|
|
|
$
|
80
|
|
|
$
|
51
|
|
|
$
|
122
|
|
|
$
|
354
|
|
|
$
|
1,740
|
|
2005
|
|
137
|
|
|
190
|
|
|
—
|
|
|
38
|
|
|
1,327
|
|
|
1,692
|
|
||||||
2006
|
|
1,285
|
|
|
1,624
|
|
|
67
|
|
|
115
|
|
|
1,524
|
|
|
4,615
|
|
||||||
2007
|
|
5
|
|
|
1,393
|
|
|
280
|
|
|
375
|
|
|
5,667
|
|
|
7,720
|
|
||||||
2008
|
|
95
|
|
|
—
|
|
|
69
|
|
|
—
|
|
|
1,155
|
|
|
1,319
|
|
||||||
Total exposures
|
|
$
|
2,655
|
|
|
$
|
3,287
|
|
|
$
|
466
|
|
|
$
|
651
|
|
|
$
|
10,027
|
|
|
$
|
17,086
|
|
% of total
|
|
15.6
|
%
|
|
19.2
|
%
|
|
2.7
|
%
|
|
3.8
|
%
|
|
58.7
|
%
|
|
100.0
|
%
|
Year
insured:
|
|
Net Par
Outstanding
|
|
Pool
Factor
|
|
Subordination
|
|
Cumulative
Losses
|
|
60+ Day
Delinquencies
|
|
Number of
Transactions
|
|||||||
|
|
(dollars in millions)
|
|||||||||||||||||
2005
|
|
$
|
164
|
|
|
28.4
|
%
|
|
4.5
|
%
|
|
2.4
|
%
|
|
12.1
|
%
|
|
6
|
|
2006
|
|
102
|
|
|
50.2
|
%
|
|
8.4
|
%
|
|
0.6
|
%
|
|
17.5
|
%
|
|
1
|
|
|
2007
|
|
319
|
|
|
40.3
|
%
|
|
4.8
|
%
|
|
5.9
|
%
|
|
21.4
|
%
|
|
1
|
|
|
2008
|
|
—
|
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
|
|
Total
|
|
$
|
585
|
|
|
38.7
|
%
|
|
5.4
|
%
|
|
4.0
|
%
|
|
18.1
|
%
|
|
8
|
|
Year
insured:
|
|
Net Par
Outstanding
|
|
Pool
Factor
|
|
Subordination
|
|
Cumulative
Losses
|
|
60+ Day
Delinquencies
|
|
Number of
Transactions
|
|||||||
|
|
(dollars in millions)
|
|||||||||||||||||
2005
|
|
$
|
—
|
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
|
2006
|
|
185
|
|
|
12.1
|
%
|
|
—
|
%
|
|
60.0
|
%
|
|
5.8
|
%
|
|
1
|
|
|
2007
|
|
257
|
|
|
14.4
|
%
|
|
—
|
%
|
|
69.7
|
%
|
|
7.2
|
%
|
|
8
|
|
|
2008
|
|
—
|
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
|
|
Total
|
|
$
|
442
|
|
|
13.4
|
%
|
|
—
|
%
|
|
65.7
|
%
|
|
6.6
|
%
|
|
9
|
|
Year
insured:
|
|
Net Par
Outstanding
|
|
Pool
Factor
|
|
Subordination
|
|
Cumulative
Losses
|
|
60+ Day
Delinquencies
|
|
Number of
Transactions
|
|||||||
|
|
(dollars in millions)
|
|||||||||||||||||
2005
|
|
$
|
648
|
|
|
14.1
|
%
|
|
3.0
|
%
|
|
17.1
|
%
|
|
12.7
|
%
|
|
6
|
|
2006
|
|
883
|
|
|
22.3
|
%
|
|
3.5
|
%
|
|
36.8
|
%
|
|
10.4
|
%
|
|
7
|
|
|
2007
|
|
1,240
|
|
|
36.4
|
%
|
|
2.6
|
%
|
|
32.3
|
%
|
|
6.7
|
%
|
|
9
|
|
|
2008
|
|
—
|
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
|
|
Total
|
|
$
|
2,771
|
|
|
26.7
|
%
|
|
3.0
|
%
|
|
30.2
|
%
|
|
9.3
|
%
|
|
22
|
|
Year
insured:
|
|
Net Par
Outstanding
|
|
Pool
Factor
|
|
Subordination
|
|
Cumulative
Losses
|
|
60+ Day
Delinquencies
|
|
Number of
Transactions
|
|||||||
|
|
(dollars in millions)
|
|||||||||||||||||
2005
|
|
$
|
566
|
|
|
27.2
|
%
|
|
8.4
|
%
|
|
7.3
|
%
|
|
19.5
|
%
|
|
21
|
|
2006
|
|
371
|
|
|
33.1
|
%
|
|
0.0
|
%
|
|
20.6
|
%
|
|
38.9
|
%
|
|
7
|
|
|
2007
|
|
2,229
|
|
|
41.3
|
%
|
|
1.4
|
%
|
|
16.5
|
%
|
|
30.5
|
%
|
|
12
|
|
|
2008
|
|
1,173
|
|
|
39.2
|
%
|
|
16.4
|
%
|
|
15.9
|
%
|
|
27.8
|
%
|
|
5
|
|
|
Total
|
|
$
|
4,339
|
|
|
38.2
|
%
|
|
6.2
|
%
|
|
15.5
|
%
|
|
29.0
|
%
|
|
45
|
|
Year
insured:
|
|
Net Par
Outstanding
|
|
Pool
Factor
|
|
Subordination
|
|
Cumulative
Losses
|
|
60+ Day
Delinquencies
|
|
Number of
Transactions
|
|||||||
|
|
(dollars in millions)
|
|||||||||||||||||
2005
|
|
$
|
46
|
|
|
16.9
|
%
|
|
10.9
|
%
|
|
10.4
|
%
|
|
18.9
|
%
|
|
3
|
|
2006
|
|
177
|
|
|
35.3
|
%
|
|
—
|
%
|
|
20.6
|
%
|
|
40.6
|
%
|
|
5
|
|
|
2007
|
|
1,049
|
|
|
40.6
|
%
|
|
1.1
|
%
|
|
21.4
|
%
|
|
35.0
|
%
|
|
11
|
|
|
2008
|
|
69
|
|
|
42.9
|
%
|
|
48.4
|
%
|
|
16.0
|
%
|
|
28.6
|
%
|
|
1
|
|
|
Total
|
|
$
|
1,341
|
|
|
39.2
|
%
|
|
3.7
|
%
|
|
20.6
|
%
|
|
34.8
|
%
|
|
20
|
|
Year
insured:
|
|
Net Par
Outstanding
|
|
Pool
Factor
|
|
Subordination
|
|
Cumulative
Losses
|
|
60+ Day
Delinquencies
|
|
Number of
Transactions
|
|||||||
|
|
(dollars in millions)
|
|||||||||||||||||
2005
|
|
$
|
204
|
|
|
35.9
|
%
|
|
20.9
|
%
|
|
8.1
|
%
|
|
30.7
|
%
|
|
4
|
|
2006
|
|
2,859
|
|
|
19.0
|
%
|
|
61.4
|
%
|
|
19.2
|
%
|
|
34.3
|
%
|
|
4
|
|
|
2007
|
|
2,627
|
|
|
43.8
|
%
|
|
13.6
|
%
|
|
25.0
|
%
|
|
42.8
|
%
|
|
13
|
|
|
2008
|
|
77
|
|
|
55.2
|
%
|
|
18.2
|
%
|
|
20.7
|
%
|
|
32.3
|
%
|
|
1
|
|
|
Total
|
|
$
|
5,767
|
|
|
31.4
|
%
|
|
37.6
|
%
|
|
21.5
|
%
|
|
38.0
|
%
|
|
22
|
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Dividends and return of capital from subsidiaries
|
$
|
65
|
|
|
$
|
75
|
|
Dividends paid to AGL shareholders
|
(19
|
)
|
|
(16
|
)
|
||
Repurchases of common shares
|
(39
|
)
|
|
—
|
|
||
Interest paid
|
(7
|
)
|
|
(10
|
)
|
•
|
claims on the insured portfolio,
|
•
|
operating expenses,
|
•
|
purchase of loss mitigation bonds
|
•
|
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.
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Claims paid before R&W recoveries, net of reinsurance
|
$
|
181
|
|
|
$
|
203
|
|
R&W recoveries
|
(89
|
)
|
|
(70
|
)
|
||
Claims paid, net of reinsurance(1)
|
$
|
92
|
|
|
$
|
133
|
|
(1)
|
Includes $9 million and $37 million paid for consolidated FG VIEs for First Quarter
2013
and
2012
, respectively.
|
•
|
Dividends shall not exceed outstanding statutory surplus or
$440 million
.
|
•
|
Dividends on annual basis shall not exceed
25%
of its total statutory capital and surplus (as set out in its previous years' financial statements) or
$321 million
unless it files (at least
seven
days before payment of such dividends) with the Bermuda Monetary Authority an affidavit stating that it will continue to meet the required margins.
|
•
|
Capital distributions shall not exceed
15%
of its total statutory capital (as set out in its previous years' financial statements) or $
127 million
, unless approval is granted by the Bermuda Monetary Authority.
|
•
|
Dividends are limited by requirements that the subject company must at all times (i) maintain the minimum solvency margin and the Company's applicable enhanced capital requirements required under the Insurance Act of 1978 and (ii) have relevant assets in an amount at least equal to
75%
of relevant liabilities, both as defined under the Insurance Act of 1978.
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Dividends paid by AGC to AGUS
|
$
|
—
|
|
|
$
|
15
|
|
Dividends paid by AGM to AGMH
|
—
|
|
|
30
|
|
||
Dividends paid by AG Re to AGL
|
40
|
|
|
30
|
|
|
First Quarter
|
||||||
|
2013
|
|
2012
|
||||
|
(in millions)
|
||||||
Net cash flows provided by (used in) operating activities
|
$
|
(14
|
)
|
|
$
|
75
|
|
Net cash flows provided by (used in) investing activities
|
237
|
|
|
107
|
|
||
Net cash flows provided by (used in) financing activities
|
(233
|
)
|
|
(217
|
)
|
||
Effect of exchange rate changes
|
(3
|
)
|
|
2
|
|
||
Cash at beginning of period
|
138
|
|
|
215
|
|
||
Total cash at the end of the period
|
$
|
125
|
|
|
$
|
182
|
|
|
Principal Amount
|
|
Interest Paid
|
||||||||||||
|
As of March 31,
|
|
As of December 31,
|
|
First Quarter
|
||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(in millions)
|
||||||||||||||
AGUS:
|
|
|
|
|
|
|
|
|
|
|
|
||||
7.0% Senior Notes
|
$
|
200
|
|
|
$
|
200
|
|
|
$
|
3
|
|
|
$
|
3
|
|
8.5% Senior Notes
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||
Series A Enhanced Junior Subordinated Debentures
|
150
|
|
|
150
|
|
|
3
|
|
|
3
|
|
||||
Total AGUS
|
350
|
|
|
350
|
|
|
6
|
|
|
10
|
|
||||
AGMH(1):
|
|
|
|
|
|
|
|
|
|
|
|
||||
6
7
/
8
% QUIBS
|
100
|
|
|
100
|
|
|
2
|
|
|
2
|
|
||||
6.25% Notes
|
230
|
|
|
230
|
|
|
4
|
|
|
4
|
|
||||
5.60% Notes
|
100
|
|
|
100
|
|
|
2
|
|
|
2
|
|
||||
Junior Subordinated Debentures
|
300
|
|
|
300
|
|
|
6
|
|
|
6
|
|
||||
Total AGMH
|
730
|
|
|
730
|
|
|
14
|
|
|
14
|
|
||||
AGM(1):
|
|
|
|
|
|
|
|
|
|
|
|
||||
Notes Payable
|
55
|
|
|
61
|
|
|
1
|
|
|
1
|
|
||||
Total AGM
|
55
|
|
|
61
|
|
|
1
|
|
|
1
|
|
||||
Total
|
$
|
1,135
|
|
|
$
|
1,141
|
|
|
$
|
21
|
|
|
$
|
25
|
|
(1)
|
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 March 31, 2013
|
|
As of December 31, 2012
|
||||||||||||
|
Amortized
Cost
|
|
Estimated
Fair Value
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||||||
|
(in millions)
|
||||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government and agencies
|
$
|
819
|
|
|
$
|
877
|
|
|
$
|
732
|
|
|
$
|
794
|
|
Obligations of state and political subdivisions
|
5,161
|
|
|
5,601
|
|
|
5,153
|
|
|
5,631
|
|
||||
Corporate securities
|
970
|
|
|
1,040
|
|
|
930
|
|
|
1,010
|
|
||||
Mortgage-backed securities(1):
|
|
|
|
|
|
|
|
|
|||||||
RMBS
|
1,210
|
|
|
1,196
|
|
|
1,281
|
|
|
1,266
|
|
||||
CMBS
|
474
|
|
|
505
|
|
|
482
|
|
|
520
|
|
||||
Asset-backed securities
|
469
|
|
|
496
|
|
|
482
|
|
|
531
|
|
||||
Foreign government securities
|
260
|
|
|
270
|
|
|
286
|
|
|
304
|
|
||||
Total fixed maturity securities
|
9,363
|
|
|
9,985
|
|
|
9,346
|
|
|
10,056
|
|
||||
Short-term investments
|
729
|
|
|
729
|
|
|
817
|
|
|
817
|
|
||||
Total fixed maturity and short-term investments
|
$
|
10,092
|
|
|
$
|
10,714
|
|
|
$
|
10,163
|
|
|
$
|
10,873
|
|
(1)
|
Government-agency obligations were approximately
60%
of mortgage backed securities as of
March 31, 2013
and
61%
as of
December 31, 2012
, 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
|
$
|
43
|
|
|
$
|
0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
43
|
|
|
$
|
0
|
|
Obligations of state and political subdivisions
|
158
|
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
158
|
|
|
(12
|
)
|
||||||
Corporate securities
|
76
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
76
|
|
|
(1
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
RMBS
|
184
|
|
|
(15
|
)
|
|
99
|
|
|
(53
|
)
|
|
283
|
|
|
(68
|
)
|
||||||
CMBS
|
16
|
|
|
0
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|
0
|
|
||||||
Asset-backed securities
|
19
|
|
|
0
|
|
|
38
|
|
|
(8
|
)
|
|
57
|
|
|
(8
|
)
|
||||||
Foreign government securities
|
62
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
62
|
|
|
(2
|
)
|
||||||
Total
|
$
|
558
|
|
|
$
|
(30
|
)
|
|
$
|
137
|
|
|
$
|
(61
|
)
|
|
$
|
695
|
|
|
$
|
(91
|
)
|
Number of securities
|
|
|
|
105
|
|
|
|
|
|
12
|
|
|
|
|
|
117
|
|
||||||
Number of securities with OTTI
|
|
|
|
5
|
|
|
|
|
|
5
|
|
|
|
|
|
10
|
|
|
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
|
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||
|
(in millions)
|
||||||
Due within one year
|
$
|
152
|
|
|
$
|
153
|
|
Due after one year through five years
|
1,623
|
|
|
1,700
|
|
||
Due after five years through 10 years
|
2,328
|
|
|
2,527
|
|
||
Due after 10 years
|
3,576
|
|
|
3,904
|
|
||
Mortgage-backed securities:
|
|
|
|
|
|
||
RMBS
|
1,210
|
|
|
1,196
|
|
||
CMBS
|
474
|
|
|
505
|
|
||
Total
|
$
|
9,363
|
|
|
$
|
9,985
|
|
Rating
|
|
As of
March 31, 2013 |
|
As of
December 31, 2012 |
||
AAA
|
|
14.6
|
%
|
|
18.5
|
%
|
AA
|
|
63.2
|
|
|
61.3
|
|
A
|
|
16.5
|
|
|
14.3
|
|
BBB
|
|
0.3
|
|
|
0.4
|
|
BIG(1)
|
|
5.4
|
|
|
5.5
|
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
(1)
|
Includes securities purchased or obtained as part of loss mitigation or other risk management strategies of $1,129 million in par with carrying value of $537 million or 5.4% of fixed maturity securities as of
March 31, 2013
and of $1,160 million in par with carrying value of $556 million or 5.5% of fixed maturity securities as of
December 31, 2012
.
|
Guarantor
|
|
As of
March 31, 2013 |
||
|
|
(in millions)
|
||
National Public Finance Guarantee Corporation
|
|
$
|
596
|
|
Ambac
|
|
499
|
|
|
CIFG
|
|
22
|
|
|
Berkshire Hathaway Assurance Corporation
|
|
5
|
|
|
Syncora Guarantee Inc.
|
|
3
|
|
|
Total
|
|
$
|
1,125
|
|
(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 $4.2 billion as of March 31, 2013 as a result of GIC amortization (approximately $1.4 billion of which was outstanding as of
March 31, 2013
), 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
March 31, 2013
, 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 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
PART II.
|
OTHER INFORMATION
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
•
|
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 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period
|
|
Total
Number of
Shares
Purchased
|
|
Average
Price Paid
Per Share
|
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Program (1)
|
|
Maximum Number (or Approximate Dollar Value)
of Shares that
May Yet Be
Purchased
Under the Program(2)
|
||||||
January 1 - January 31
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
200,000,000
|
|
February 1 - February 28
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
200,000,000
|
|
March 1 - March 31
|
|
1,914,566
|
|
|
$
|
20.46
|
|
|
1,914,566
|
|
|
$
|
160,837,418
|
|
Total
|
|
1,914,566
|
|
|
$
|
20.46
|
|
|
1,914,566
|
|
|
|
|
(1)
|
On January 18, 2013, the Company's Board of Directors authorized a $200 million share repurchase program.
|
(2)
|
Excludes commissions.
|
ITEM 6.
|
EXHIBITS.
|
|
ASSURED GUARANTY LTD.
(Registrant)
|
|
|
|
|
Dated May 10, 2013
|
By:
|
/s/ ROBERT A. BAILENSON
|
|
|
|
|
|
Robert A. Bailenson
Chief Financial Officer (Principal Financial and
Accounting Officer and Duly Authorized Officer)
|
Exhibit
Number
|
|
Description of Document
|
|
10.1
|
|
|
2013 Form of Executive Non-Qualified Stock Option Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan*
|
10.2
|
|
|
2013 Form of Executive Restricted Stock Unit Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan *
|
10.3
|
|
|
2013 Form of Executive Performance-Based Restricted Stock Unit Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan *
|
10.4
|
|
|
Terms of Performance Retention Award Four Year Installment Vesting Granted on February 7, 2013 for Participants Subject to $1 million Limit *
|
10.5
|
|
|
Assured Guaranty Ltd. Employee Stock Purchase Plan, as amended through the second amendment *
|
10.6
|
|
|
Director Compensation Summary *
|
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
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32.2
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Certification of CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes- Oxley Act of 2002
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101.1
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The following financial information from Assured Guaranty Ltd.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 formatted in XBRL: (i) Consolidated Balance Sheets at March 31, 2013 and December 31, 2012; (ii) Consolidated Statements of Operations for the Three Months ended March 31, 2013 and 2012; (iii) Consolidated Statements of Comprehensive Income for the Three Months ended March 31, 2013 and 2012 (iv) Consolidated Statement of Shareholders’ Equity for the Three Months ended March 31, 2013; (v) Consolidated Statements of Cash Flows for the Three Months ended March 31, 2013 and 2012; and (vi) Notes to Consolidated Financial Statements.
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(a)
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The "Participant" is ________________________________
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(b)
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The "Grant Date" is February 7, 2013
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(c)
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The number of "Covered Shares" shall be ________________ shares of Stock.
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(d)
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The "Exercise Price" is $ ____________ per share.
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(e)
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The “Performance Determination Date” is the earlier to occur of (i) December 31, 2015 and (ii) the date of a Change in Control.
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(f)
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The “Performance Period” is January 1, 2013 through the Performance Determination Date.
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(g)
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The “Term” of the Option is the period beginning on the Grant Date and ending on the seven-year anniversary of the Grant Date.
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(h)
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The “Vesting Date” is the earliest to occur of (i) February 7, 2016, (ii) the date of a Vesting Change in Control, and (iii) the Participant’s Date of Termination if the Date of Termination is due to death, Disability, Retirement or a Qualifying Termination occurring on or after a Change in Control.
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Performance Level
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AGO High Stock Price in Performance Period
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% of Options Vesting (the “Performance Percentage”)
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Outstanding
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$30 or higher
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100%
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Target
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$24
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50%
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Threshold
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$18
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35%
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< Threshold
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less than $18
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0%
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(a)
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Death or Disability Prior to a Change in Control
. If the Participant’s Date of Termination occurs prior to the Vesting Date and prior to a Change in Control due to the Participant’s death or Disability, then this subparagraph (a) of Section 4 shall apply and Option shall become exercisable on and after the Vesting Date with respect to the number of Covered Shares determined as of the Vesting Date by multiplying (a) the number of Covered Shares by (b) the Performance Percentage (with such percentage converted to a number by dividing such percentage by 100) by (c) the Pro-Rata Fraction. The portion of the Option with respect to any Covered Shares which does not become exercisable as of the Vesting Date pursuant to the previous sentence shall be forfeited as of the Vesting Date.
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(b)
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Retirement Prior to a Change in Control
. If the Participant’s Date of Termination occurs prior to the Vesting Date and prior to a Change in Control due to a Retirement, then this subparagraph (b) of Section 4 shall apply and the Option shall become exercisable on and after the Vesting Date with respect to the number of Covered Shares determined as of the Vesting Date by multiplying (a) the number of Covered Shares by (b) the Performance Percentage (with such percentage converted to a number by dividing such percentage by 100), subject to the following: the Option shall not become exercisable following a Retirement if the Participant engages in any Competitive Activity or Post-Retirement Activity prior to the Vesting Date or if the Participant fails to sign (and not revoke) a general release and waiver of all claims against the Company as required by Section 7.1 of the Severance Plan. The portion of the Option with respect to any Covered Shares which does not become exercisable as of the Vesting Date pursuant to the previous sentence shall be forfeited as of the Vesting Date. If the release is not effective within the sixty-day period required by Section 7.1 of the Severance Plan or in the event that the Participant engages in a Competitive Activity or Post-Retirement Activity prior to the Vesting Date, the Participant shall immediately forfeit the Option with respect to all Covered Shares.
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(c)
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Qualifying Termination Prior to a Change in Control
. If the Participant’s Date of Termination occurs prior to the Vesting Date and prior to a Change in Control due to a Qualifying Termination, then this subparagraph (c) of Section 4 shall apply and the Option shall become exercisable on and after the Vesting Date with respect to the number of Covered Shares determined as of the Vesting Date by multiplying (a) the number of Covered Shares by (b) the Performance Percentage (with such percentage converted to a number by dividing such percentage by 100) by (c) the Pro-Rata Fraction subject to the following: the Option shall not become exercisable following a Qualifying Termination if the Participant engages in any Competitive Activity prior to the Vesting Date or if the Participant fails to sign (and not revoke) a general release and waiver of all claims against the Company as required by Section 7.1 of the Severance Plan. The portion of the Option with respect to any Covered Shares which does not become exercisable as of the Vesting Date pursuant to the previous sentence shall be forfeited as of the Vesting Date. If the release is not effective within the sixty-day period required by Section 7.1 of the Severance Plan or in the event that the Participant engages in a Competitive Activity prior to the Vesting Date, the Participant shall immediately forfeit the Option with respect to all Covered Shares.
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(d)
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Death or Disability On or After a Change in Control
. If the Participant’s Date of Termination occurs prior to the Vesting Date but on or after the date of a Change in Control that is not a Vesting Change in Control due to the Participant’s death or Disability, then this subparagraph (d) of Section 4 shall apply, such Date of Termination shall be treated as the Vesting Date and the Option shall become exercisable on and after the Vesting Date with respect to the number of Covered Shares determined as of the Vesting Date by multiplying (a) the number of Covered Shares by (b) the Performance Percentage (with such percentage converted to a number by dividing such percentage by 100). The portion of the Option with respect to any Covered Shares which does not
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(e)
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Retirement On or After a Change in Control
. If the Participant’s Date of Termination occurs prior to the Vesting Date but on or after the date of a Change in Control that is not a Vesting Change in Control due to a Retirement, then this subparagraph (e) of Section 4 shall apply, such Date of Termination shall be treated as the Vesting Date and the Option shall become exercisable on and after the Vesting Date with respect to the number of Covered Shares determined as of the Vesting Date by multiplying (a) the number of Covered Shares by (b) the Performance Percentage (with such percentage converted to a number by dividing such percentage by 100), subject to the following: the Option shall not become exercisable on or after a Retirement if the Participant fails to sign (and not revoke) a general release and waiver of all claims against the Company as required by Section 7.1 of the Severance Plan. The portion of the Option with respect to any Covered Shares which does not become exercisable as of the Vesting Date pursuant to the previous sentence shall be forfeited as of the Vesting Date. If the release is not effective within the sixty-day period required by Section 7.1 of the Severance Plan, the Participant shall immediately forfeit the Option with respect to all Covered Shares.
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(f)
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Qualifying Termination On or After a Change in Control
. If the Participant’s Date of Termination occurs prior to the Vesting Date but on or after the date of a Change in Control that is not a Vesting Change in Control due to a Qualifying Termination, then this subparagraph (f) of Section 4 shall apply, such Date of Termination shall be treated as the Vesting Date and the Option shall become exercisable on and after the Vesting Date with respect to the number of Covered Shares determined as of the Vesting Date by multiplying (a) the number of Covered Shares by (b) the Performance Percentage (with such percentage converted to a number by dividing such percentage by 100), subject to the following: the Option shall not become exercisable on or after a Qualifying Termination if the Participant fails to sign (and not revoke) a general release and waiver of all claims against the Company as required by Section 7.1 of the Severance Plan. The portion of the Option with respect to any Covered Shares which does not become exercisable as of the Vesting Date pursuant to the previous sentence shall be forfeited as of the Vesting Date. If the release is not effective within the sixty-day period required by Section 7.1 of the Severance Plan, the Participant shall immediately forfeit the Option with respect to all Covered Shares.
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(a)
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if the Participant's Date of Termination occurs by reason of death, Disability or Retirement, the Expiration Date shall be the later to occur of (i) the one-year anniversary of the Date of Termination and (ii) the ninety-day anniversary of the Vesting Date;
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(b)
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if the Participant's Date of Termination occurs for Cause, the Expiration Date shall be the Date of Termination;
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(c)
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if the Participant’s Date of Termination occurs because of a Qualifying Termination, the Expiration Date shall be the later to occur of (i) the ninety-day anniversary of the Date of Termination and (ii) the ninety-day anniversary of the Vesting Date;
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(d)
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if the Participant's Date of Termination occurs for any reason other than those listed in subparagraph (a), (b), or (c) of this Section 5, the Expiration Date shall be the ninety-day anniversary of such Date of Termination.
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(a)
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The Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict the Option at any time if the Participant engages in any "Competitive Activity" and, in the case of a Participant whose Date of Termination has occurred due to Retirement, if the Participant engages in any Post-Retirement Activity.
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(b)
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Upon exercise of the Option, the Participant shall certify, to the extent provided by the Committee, in a manner acceptable to the Committee, that the Participant is not engaging and has not engaged in any Competitive Activity and, in the case of a Participant whose Date of Termination has occurred due to Retirement, that the Participant is not engaging and has not engaged in any Post-Retirement Activity. In the event a Participant has engaged in any Competitive Activity or, if applicable, any Post-Retirement Activity, prior to, or during the twelve months after, any exercise of the Option (the “Restrictive Covenant Period”), such exercise may be rescinded by the Committee within two years after the end of the Restrictive Covenant Period. In the event of any such rescission, the Participant shall pay to the Company the amount of any gain realized as a result of the rescinded exercise, in such manner and on such terms and conditions as may be required, and the Company shall be entitled to set-off against the amount of any such gain any amount owed to the Participant by the Company and/or Subsidiary.
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(a)
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Notwithstanding anything in this Agreement to the contrary, the Participant’s rights with respect to the Option shall be subject to the Assured Guaranty Ltd. Executive Officer Recoupment Policy as amended from time to time.
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(b)
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Notwithstanding anything in this Agreement to the contrary, but subject to subparagraph (a) of this Section 13 above, this Agreement shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the office of the Secretary of the Company; and this Agreement is subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time pursuant to the Plan.
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(a)
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AGO High Stock Price
. The term “AGO High Stock Price” shall mean the highest forty-trading day average stock price of a share of Stock as traded on the New York Stock Exchange during the Performance Period.
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(b)
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Cause
. The term “Cause” is defined in Section 1 of the Severance Plan.
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(c)
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Change in Control
. The term "Change in Control" shall be defined as set forth in the Plan.
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(d)
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Competitive Activity
. The term “Competitive Activity” shall mean (i) the Participant’s engaging in an activity, directly or indirectly, whether as an employee, consultant, partner, principal, agent, distributor, representative, stockholder (except as a less than one percent stockholder of a publicly traded company or a less than five percent stockholder of a privately held company) or otherwise, within the United States, Bermuda, or the Cayman Islands, if such activities involve insurance or reinsurance of United States based entities or risks that are competitive with the financial guaranty insurance business then being conducted by the Company or any affiliate and which, during the period covered by the Participant's employment, were conducted by the Company or any affiliate; or (ii) the Participant’s engaging in any activity, directly or indirectly, whether on behalf of himself or herself or any other person or entity (x) to solicit any client and/or customer of the
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(e)
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Date of Termination
. A Participant's "Date of Termination" means, with respect to an employee, the date on which the Participant's employment with the Company and Subsidiaries terminates for any reason, and with respect to a Director, the date immediately following the last day on which the Participant serves as a Director; provided that a Date of Termination shall not be deemed to occur by reason of a Participant's transfer of employment between the Company and a Subsidiary or between two Subsidiaries; further provided that a Date of Termination shall not be deemed to occur by reason of a Participant's cessation of service as a Director if immediately following such cessation of service the Participant becomes or continues to be employed by the Company or a Subsidiary, nor by reason of a Participant's termination of employment with the Company or a Subsidiary if immediately following such termination of employment the Participant becomes or continues to be a Director; and further provided that a Participant's employment shall not be considered terminated while the Participant is on a leave of absence from the Company or a Subsidiary approved by the Participant's employer.
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(f)
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Director
. The term "Director" means a member of the Board of Directors of Assured Guaranty Ltd., who may or may not be an employee of the Company or a Subsidiary.
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(g)
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Disability
. The Participant shall be considered to have a "Disability" during the period in which the Participant is unable, by reason of a medically determinable physical or mental impairment, to engage in any substantial gainful activity, which condition, in the opinion of a physician selected by the Committee, is expected to have a duration of not less than 120 days.
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(h)
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Post-Retirement Activity
. The term “Post-Retirement Activity” shall mean the Participant’s provision of significant commercial or business services to any one or more persons or entities, regardless of whether such entity is owned or controlled by the Participant; provided that the Participant’s devotion of reasonable time to the supervision of his personal investments, and activities involving professional, charitable, community, educational, religious and similar types of organizations, speaking engagements, membership on the boards of directors of other organizations, and similar types of activities shall not be considered Post-Retirement Activity, to the extent that the Committee, in its discretion, determines that such activities are consistent with the Participant’s Retirement. At the request of the Participant, the Committee shall determine whether a proposed activity of the Participant will be considered a Post-Retirement Activity for purposes of this Agreement. Such request shall be accompanied by a description of the proposed activities, and the Participant shall provide such additional information as the Committee may determine is necessary to make the determination. Such a determination shall be made promptly, but in no event more than 30 days after the
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(i)
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Pro-Rata Fraction
. The term “Pro-Rata Fraction” shall mean a fraction, the numerator of which shall be equal to the number of days between the Grant Date and the Participant’s Date of Termination and the denominator of which shall be 1095.
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(j)
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Qualifying Termination
. The term “Qualifying Termination” is defined in Section 1 of the Severance Plan.
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(k)
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Retirement
. The term “Retirement” means the occurrence of a Participant’s Date of Termination due to the voluntary termination of employment with the consent of the Committee (as described below) by a Participant who meets the following requirements as of such Date of Termination: (i) the Participant is age 65 or older and (ii) the Participant has a minimum of 10 years of service. For purposes of defining “Retirement,” years of service shall be determined in accordance with rules which may be established by the Committee, and shall take into account service with the Company and the Subsidiaries. If, on or before the date of the initial public offering of stock of the Company, the Participant was employed by the Company or its Subsidiaries, years of service shall also include service with ACE Limited and its subsidiaries occurring prior to such the initial public offering. For purposes of this Agreement, the Participant’s Date of Termination shall not be considered to be a Retirement unless, prior to such Date of Termination, the Committee approved treating such Participant’s Date of Termination as a Retirement for purposes of all or a portion of the Covered Shares for the option granted pursuant to this Agreement. The determination of whether to treat the Participant’s Date of Termination as a Retirement for all or a portion of the Covered Shares shall be made in the sole discretion of the Committee and such determination shall be final and binding on all persons.
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(l)
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Severance Plan
. The term “Severance Plan” shall mean the Assured Guaranty Ltd. Executive Severance Plan.
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(m)
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Vesting Change in Control
. The term “Vesting Change in Control” shall mean the date of a Change in Control where this Non-Qualified Stock Option is terminated pursuant to Section 7(b) of this Agreement.
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(a)
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The "Participant" is
__________
______________________
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(b)
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The "Grant Date" is February 7, 2013
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(c)
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The number of “Covered Units” granted under this Agreement is _____ Units. Each “Unit” represents the right to receive one share of Stock on the Delivery Date, subject to the terms of this Agreement and the Plan.
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(d)
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The “Delivery Date” with respect to the Covered Units shall be the earliest to occur of: (i) the third anniversary of the Grant Date; (ii) the Participant’s death; and (iii) the date on which the Participant becomes Permanently Disabled.
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(a)
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Death or Disability
. If the Participant’s Date of Termination occurs due to the Participant’s death or Disability prior to the last day of the Restricted Period, the Restricted Period shall immediately lapse upon such Date of Termination.
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(b)
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Retirement
. If the Participant’s Date of Termination occurs due to a Retirement prior to the last day of the Restricted Period, then the Participant shall be treated as if his Date of Termination had not occurred prior to the last day of the Restricted Period, subject to the Participant not engaging in any Competitive Activity or any Post-Retirement Activity prior to the last day of the Restricted Period and subject to the Participant signing and not revoking a general release and waiver of all claims against the Company as required by Section 7.1 of the Severance Plan. If such release is not effective within the sixty-day period required by Section 7.1 of the Severance Plan or in the event that the Participant engages in a Competitive Activity or a Post-Retirement Activity prior to the last day of the Restricted Period, the Participant shall immediately forfeit all of the Covered Units.
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(c)
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Qualifying Termination Before a Change in Control
. If the Participant’s Date of Termination occurs due to a Qualifying Termination prior to the last day of the Restricted Period and prior to the date of a Change in Control, then the Participant shall be treated as if his Date of Termination had not occurred prior to the last day of the Restricted Period, subject to the Participant not engaging in any Competitive Activity prior to the last day of the Restricted Period and subject to the Participant signing and not revoking a general release and waiver of all claims against the Company as required by Section 7.1 of the Severance Plan. If such release is not effective within the sixty-day period required by Section 7.1 of the Severance Plan or in the event that the Participant engages in a Competitive Activity prior to the last day of the Restricted Period, the Participant shall immediately forfeit all of the Covered Units.
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(d)
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Qualifying Termination On or After a Change in Control
. If the Participant’s Date of Termination occurs due to a Qualifying Termination prior to the last day of the Restricted Period but on or after the date of a Change in Control that is not a Vesting Change in Control, then the Participant shall be treated as if his Date of Termination had not occurred prior to the last day of the Restricted Period subject to the Participant signing and not revoking a general release and waiver of all claims against the Company as required by Section 7.1 of the Severance Plan. If such release is not effective within the sixty-day period required by Section 7.1 of the Severance Plan, the Participant shall immediately forfeit all of the Covered Units.
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(a)
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The Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict the Restricted Stock Unit Award at any time if the Participant engages in any "Competitive Activity" or, in the case of a Participant whose Date of Termination has occurred due to Retirement, if the Participant engages in any Post-Retirement Activity.
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(b)
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Immediately prior to the Delivery Date and prior to the transfer of the shares of Stock to the Participant, the Participant shall certify, to the extent required by the Committee, in a manner acceptable to the Committee, that the Participant is not engaging and has not engaged in any Competitive Activity and, in the case of a Participant whose Date of Termination has occurred due to Retirement, that the Participant is not engaging and has not engaged in any Post-Retirement Activity. In the event a Participant has engaged in any Competitive Activity or, if applicable, any Post-Retirement Activity, prior to, or during the twelve months after, the later to occur of the Delivery Date or the last day of the Restricted Period (the “Restrictive Covenant Period”) with respect to any Covered Units, the right to delivery of shares with respect to such Covered Units may be rescinded by the Committee within two years of the last day of the Restrictive Covenant Period. In the event of any such rescission, the Participant shall pay to the Company the amount of any gain realized as a result of the prior delivery of shares applicable to the rescinded Covered Units, in such manner and on such terms and conditions as may be required by the Company, and the Company shall be entitled to set-off against the amount of any such gain any amount owed to the Participant by the Company and/or Subsidiary.
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(a)
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Change in Control
. The term "Change in Control" shall be defined as set forth in the Plan.
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(b)
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Competitive Activity
. The term “Competitive Activity” shall mean (i) the Participant’s engaging in an activity, directly or indirectly, whether as an employee, consultant, partner, principal, agent, distributor, representative, stockholder (except as a less than one percent stockholder of a publicly traded company or a less than five percent stockholder of a privately held company) or otherwise, within the United States, Bermuda, or the Cayman Islands, if such activities involve insurance or reinsurance of United States based entities or risks that are competitive with the financial guaranty insurance business then being conducted by the Company or any affiliate and which, during the period covered by the Participant's employment, were conducted by the Company or any affiliate; or (ii) the Participant’s engaging in any activity, directly or indirectly, whether on behalf of himself or herself or any other person or entity (x) to solicit any client and/or customer of the Company or any affiliate or (y) to hire any employee or former employee of the Company or any present or former affiliate of the Company or encourage any employee of the Company or affiliate to leave the employ of the Company or affiliate; or (iii) the Participant’s violation of Section 7.3 of the Severance Plan (relating to confidentiality).
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(c)
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Date of Termination
. A Participant's "Date of Termination" means, with respect to an employee, the date on which the Participant's employment with the Company and Subsidiaries terminates for any reason, and with respect to a Director, the date immediately following the last day on which the Participant serves as a Director; provided that a Date of Termination shall not be deemed to occur by reason of a Participant's transfer of employment between the Company and a Subsidiary or between two Subsidiaries; further provided that a Date of Termination shall not be deemed to occur by reason of a Participant's cessation of service as a Director if immediately following such cessation of service the Participant becomes or continues to be employed by the Company or a Subsidiary, nor by reason of a Participant's termination of employment with the Company or a Subsidiary if immediately following such termination of employment the Participant becomes or continues to be a Director; and further provided that a Participant's employment shall not be considered terminated while the Participant is on a leave of absence from the Company or a Subsidiary approved by the Participant's employer.
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(d)
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Director
. The term "Director" means a member of the Board of Directors of Assured Guaranty, Ltd., who may or may not be an employee of the Company or a Subsidiary.
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(e)
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Disability
. The Participant shall be considered to have a "Disability" during the period in which the Participant is unable, by reason of a medically determinable physical or mental impairment, to engage in any substantial gainful activity, which condition, in the opinion of a physician selected by the Committee, is expected to have a duration of not less than 120 days.
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(f)
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Permanent Disability
. The Participant shall be considered to be “Permanently Disabled” if he would be treated as “disabled” in accordance with the provisions of Treas. Reg. §1.409A-3(i)(4).
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(g)
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Post-Retirement Activity
. The term “Post-Retirement Activity” shall mean the Participant’s provision of significant commercial or business services to any one or more persons or entities, regardless of whether such entity is owned or controlled by the Participant; provided that the Participant’s devotion of reasonable time to the supervision of his personal investments, and activities involving professional, charitable, community, educational, religious and similar types of organizations, speaking engagements, membership on the boards of directors of other organizations, and similar types of activities shall not be considered Post-Retirement Activity, to the extent that the Committee, in its discretion, determines that such activities are consistent with the Participant’s Retirement. At the request of the Participant, the Committee shall determine whether a proposed activity of the Participant will be considered a Post-Retirement Activity for purposes of this Agreement. Such request shall be accompanied by a description of the proposed activities, and the Participant shall provide such additional information as the Committee may determine is necessary to make the determination. Such a determination shall be made promptly, but in no event more than 30 days after the written request, together with any additional information requested of the Participant, is delivered to the Committee.
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(h)
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Qualifying Termination
. The term “Qualifying Termination” is defined in Section 1 of the Severance Plan.
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(i)
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Retirement
. The term “Retirement” means the occurrence of a Participant’s Date of Termination due to the voluntary termination of employment with the consent of the Committee (as described below) by a Participant who meets the following requirements as of such Date of Termination: (i) the Participant is age 65 or older and (ii) the Participant has a minimum of 10 years of service. For purposes of defining “Retirement,” years of service shall be determined in accordance with rules which may be established by the Committee, and shall take into account service with the Company and the Subsidiaries. If, on or before the date of the initial public offering of stock of the Company, the Participant was employed by the Company or its Subsidiaries, years of service shall also include service with ACE Limited and its subsidiaries occurring prior to such the initial public offering. For purposes of this Agreement, the Participant’s Date of Termination shall not be considered to be a Retirement unless, prior to such Date of Termination, the Committee approved treating such Participant’s Date of Termination as a Retirement for purposes of all or a portion of the Covered Units (which have not previously been forfeited or cancelled) granted pursuant to this Agreement. The determination of whether to treat the Participant’s Date of Termination as a Retirement for all or a portion of the Covered Units shall be made in the sole discretion of the Committee and such determination shall be final and binding on all persons.
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(j)
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Severance Plan
. The term “Severance Plan” shall mean the Assured Guaranty Ltd. Executive Severance Plan.
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(k)
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Vesting Change in Control
. The term “Vesting Change in Control” shall mean the date of a Change in Control where this Restricted Stock Unit Award is terminated pursuant to Section 6(b) of this Agreement.
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(a)
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The "Participant" is
__________
______________________
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(b)
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The "Grant Date" is February 7, 2013
.
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(c)
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The number of “Covered Units” granted under this Agreement is _____ Covered Units.
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(d)
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The “Delivery Date” with respect to the Covered Units shall be the third anniversary of the Grant Date.
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(e)
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The “Performance Determination Date” is the earlier to occur of (i) December 31, 2015; (ii) the date of a Change in Control.
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(f)
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The “Performance Period” is January 1, 2013 through the Performance Determination Date.
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Performance Level
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AGO High Stock Price in Performance Period
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% of Units Vesting (the “Performance Percentage”)
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Outstanding
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$30 or higher
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200%
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Target
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$24
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100%
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Threshold
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$18
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35%
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< Threshold
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Less than $18
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0%
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(a)
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Death or Disability
. If the Participant’s Date of Termination occurs due to the Participant’s death or Disability prior to the last day of the Restricted Period, the Restricted Period shall immediately lapse upon such Date of Termination.
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(b)
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Retirement
. If the Participant’s Date of Termination occurs due to a Retirement prior to the last day of the Restricted Period, then the Participant shall be treated as if his Date of Termination had not occurred prior to the last day of the Restricted Period, subject to the Participant not engaging in any Competitive Activity or any Post-Retirement Activity prior to the last day of the Restricted Period and subject to the Participant signing and not revoking a general release and waiver of all claims against the Company as required by Section 7.1 of the Severance Plan. If such release is not effective within the sixty-day period required by Section 7.1 of the Severance Plan or in the event that the Participant engages in a Competitive Activity or a Post-Retirement Activity prior to the last day of the Restricted Period, the Participant shall immediately forfeit all of the Covered Units.
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(c)
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Qualifying Termination Before a Change in Control
. If the Participant’s Date of Termination occurs due to a Qualifying Termination prior to the last day of the Restricted Period and prior to the date of a Change in Control, then, only for purposes of this Section 5 (and not for purposes of determining the Pro-Rata Fraction), the Participant shall be treated as if his Date of Termination had not occurred prior to the last day of the Restricted Period, subject to the Participant not engaging in any Competitive Activity prior to the last day of the Restricted Period and subject to the Participant signing and not revoking a general release and waiver of all claims against the Company as required by Section 7.1 of the Severance Plan. If such release is not effective within the sixty-day period required by Section 7.1 of the Severance Plan or in the event that the Participant engages in a Competitive Activity prior to the last day of the Restricted Period, the Participant shall immediately forfeit all of the Covered Units.
|
(d)
|
Qualifying Termination On or After a Change in Control
. If the Participant’s Date of Termination occurs due to a Qualifying Termination prior to the last day of the Restricted Period but on or after the date of a Change in Control that is not a Vesting Change in Control, then, only for purposes of this Section 5 (and not for purposes of determining the Pro-Rata Fraction), the Participant shall be treated as if his Date of Termination had not occurred prior to the last day of the Restricted Period subject to the Participant signing and not revoking a general release and waiver of all claims against the Company as required by Section 7.1 of the Severance Plan. If such release is not effective within the sixty-day period required by Section 7.1 of the Severance Plan, the Participant shall immediately forfeit all of the Covered Units.
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|
|
|
|
|
|
(a)
|
The Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict the Performance-Based Restricted Stock Unit Award at any time if the Participant engages in any "Competitive Activity" or, in the case of a Participant whose Date of Termination has occurred due to Retirement, if the Participant engages in any Post-Retirement Activity.
|
(b)
|
Immediately prior to the Delivery Date (or, if earlier, a 457A Delivery Date) and prior to the transfer of the shares of Stock to the Participant, the Participant shall certify, to the extent required by the Committee, in a manner acceptable to the Committee, that the Participant is not engaging and has not engaged in any Competitive Activity and, in the case of a Participant whose Date of Termination has occurred due to Retirement, that the Participant is not engaging and has not engaged in any Post-Retirement Activity. In the event a Participant has engaged in any Competitive Activity or, if applicable, any Post-Retirement Activity, prior to, or during the twelve months after, the later to occur of the Delivery Date or the last day of the Restricted Period with respect to any Covered Units (the “Restrictive Covenant Period”), the right to delivery of shares of Stock with respect to such Covered Units (including the delivery or vesting of any Restricted Shares) may be rescinded by the Committee within two years of the end of the Restricted Covenant Period. In the event of any such rescission, the Participant shall pay to the Company the amount of any gain realized as a result of the prior delivery of shares of Stock applicable to the rescinded Covered Units, in such manner and on such terms and conditions as may be required by the Company, and the Company shall be entitled to set-off against the amount of any such gain any amount owed to the Participant by the Company and/or Subsidiary.
|
(a)
|
Notwithstanding anything in this Agreement to the contrary, the Participant’s rights with respect to the Performance-Based Restricted Stock Unit Award shall be subject to the Assured Guaranty Ltd. Executive Officer Recoupment Policy as amended from time to time.
|
(b)
|
Notwithstanding anything in this Agreement to the contrary, but subject to subparagraph (a) of this Section 14 above, this Agreement shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the office of the Secretary of the Company; and this Agreement is subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time pursuant to the Plan.
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(a)
|
AGO High Stock Price
. The term “AGO High Stock Price” shall mean the highest forty-trading day average stock price of a share of Stock as traded on the New York Stock Exchange during the Performance Period.
|
(b)
|
Change in Control
. The term "Change in Control" shall be defined as set forth in the Plan.
|
(c)
|
Competitive Activity
. The term “Competitive Activity” shall mean (i) the Participant’s engaging in an activity, directly or indirectly, whether as an employee, consultant, partner, principal, agent, distributor, representative, stockholder (except as a less than one percent stockholder of a publicly traded company or a less than five percent stockholder of a privately held company) or otherwise, within the United States, Bermuda, or the Cayman Islands, if such activities involve insurance or reinsurance of United States based entities or risks that are competitive with the financial guaranty insurance business then being conducted by the Company or any affiliate and which, during the period covered by the Participant's employment, were conducted by the Company or any affiliate; or (ii) the Participant’s engaging in any activity, directly or indirectly, whether on behalf of himself or herself or any other person or entity (x) to solicit any client and/or customer of the Company or any affiliate or (y) to hire any employee or former employee of the Company or any present or former affiliate of the Company or encourage any employee of the Company or affiliate to leave the employ of the Company or affiliate; or (iii) the Participant’s violation of Section 7.3 of the Severance Plan (relating to confidentiality).
|
(d)
|
Date of Termination
. A Participant's "Date of Termination" means, with respect to an employee, the date on which the Participant's employment with the Company and Subsidiaries terminates for any reason, and with respect to a Director, the date immediately following the last day on which the Participant serves as a Director; provided that a Date of Termination shall not be deemed to occur by reason of a Participant's transfer of employment between the Company and a Subsidiary or between two Subsidiaries; further provided that a Date of Termination shall not be deemed to occur by reason of a Participant's cessation of service as a Director if immediately following such cessation of service the Participant becomes or continues to be employed by the Company or a Subsidiary, nor by reason of a Participant's termination of employment with the Company or a Subsidiary if immediately following such
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(e)
|
Director
. The term "Director" means a member of the Board of Directors of Assured Guaranty, Ltd., who may or may not be an employee of the Company or a Subsidiary.
|
(f)
|
Disability
. The Participant shall be considered to have a "Disability" during the period in which the Participant is unable, by reason of a medically determinable physical or mental impairment, to engage in any substantial gainful activity, which condition, in the opinion of a physician selected by the Committee, is expected to have a duration of not less than 120 days.
|
(g)
|
Post-Retirement Activity
. The term “Post-Retirement Activity” shall mean the Participant’s provision of significant commercial or business services to any one or more persons or entities, regardless of whether such entity is owned or controlled by the Participant; provided that the Participant’s devotion of reasonable time to the supervision of his personal investments, and activities involving professional, charitable, community, educational, religious and similar types of organizations, speaking engagements, membership on the boards of directors of other organizations, and similar types of activities shall not be considered Post-Retirement Activity, to the extent that the Committee, in its discretion, determines that such activities are consistent with the Participant’s Retirement. At the request of the Participant, the Committee shall determine whether a proposed activity of the Participant will be considered a Post-Retirement Activity for purposes of this Agreement. Such request shall be accompanied by a description of the proposed activities, and the Participant shall provide such additional information as the Committee may determine is necessary to make the determination. Such a determination shall be made promptly, but in no event more than 30 days after the written request, together with any additional information requested of the Participant, is delivered to the Committee.
|
(h)
|
Pro-Rata Fraction
. The term “Pro-Rata Fraction” shall mean a fraction, the numerator of which shall be equal to the number of days between the Grant Date and the Participant’s Date of Termination and the denominator of which shall be 1095.
|
(i)
|
Qualifying Termination
. The term “Qualifying Termination” is defined in Section 1 of the Severance Plan.
|
(j)
|
Retirement
. The term “Retirement” means the occurrence of a Participant’s Date of Termination due to the voluntary termination of employment with the consent of the Committee (as described below) by a Participant who meets the following requirements as of such Date of Termination: (i) the Participant is age 65 or older and (ii) the Participant has a minimum of 10 years of service. For purposes of defining “Retirement,” years of service shall be determined in accordance with rules which may be established by the Committee, and shall take into account service with the Company
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|
|
|
(k)
|
Severance Plan
. The term “Severance Plan” shall mean the Assured Guaranty Ltd. Executive Severance Plan.
|
(l)
|
Vesting Change in Control
. The term “Vesting Change in Control” shall mean the date of a Change in Control where this Performance-Based Restricted Stock Unit Award is terminated pursuant to Section 7(b) of this Agreement.
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|
|
Installment Number
:
|
First Day of Performance Period
:
|
Last Day of Performance Period
:
|
Portion of Principal Amount Attributable to Installment
:
|
1
|
January 1, 2013
|
December 31, 2014
|
25% of Principal Amount
|
2
|
January 1, 2013
|
December 31, 2015
|
25% of Principal Amount
|
3
|
January 1, 2013
|
December 31, 2016
|
50% of Principal Amount
|
(a)
|
The Award Payment for each Installment will equal the sum of the amounts described in paragraph (i) below and paragraph (ii) below:
|
(b)
|
The amount determined under both paragraph (a)(i) above and paragraph (a)(ii) above will be zero if both of the following are true:
|
(c)
|
Notwithstanding the foregoing provisions of this paragraph 2 (but subject to the provisions of paragraph 5), if:
|
(a)
|
If, in accordance with the following provisions of this paragraph 3, the Participant is vested in the Award Payment for any Performance Period, the Award Payment (if any) for that Performance Period will be due on the Payment Date as described in paragraph 4, subject to the terms of the Plan and these Award Terms. If the
|
(b)
|
If, with respect to any Installment, the Participant’s Date of Termination does not occur before the last day of the Performance Period for that Installment, the Participant will be vested in the Award Payment. Subject to paragraph 5, if the Participant’s Date of Termination occurs before the last day of the Performance Period for that Installment, the Participant will not be vested in the Award Payment for that Installment.
|
(a)
|
Except as otherwise provided in this paragraph 4, and subject to paragraphs 2(b), 2(c), and 5, the Participant’s Award Payment attributable to any Installment will be due on the last day of the Performance Period with respect to that Installment (the “Payment Date” with respect to that Installment).
|
(b)
|
The Award will be paid to the Participant in a cash lump sum in US dollars. Payment will be due on the Payment Date, and will be paid no later than the 15th day of the third month following the end of the Participant’s first taxable year in which the right to the payment is no longer subject to a substantial risk of forfeiture (as determined in accordance with Treas. Reg. §1.409A-1(b)(4)).
|
(c)
|
Notwithstanding the foregoing, except in the case of a Performance Period ending by reason of the Participant’s death or Permanent Disability, no payment will be made unless, on or before the date of payment, the Committee has certified that the performance goals for the Performance Period and any other material provisions of the Award Terms have in fact been satisfied.
|
(a)
|
Death
. If the Participant’s Date of Termination occurs by reason of death, the following provisions of this paragraph (a) will apply:
|
(b)
|
Permanent Disability
. If the Participant incurs a Permanent Disability prior to his Date of Termination, the following provisions of this paragraph (b) will apply:
|
(c)
|
Disability
. If the Participant’s Date of Termination occurs by reason of Disability (and unless he has previously incurred a Permanent Disability), the following provisions of this paragraph (c) will apply:
|
(d)
|
Retirement
. If the Participant’s Date of Termination occurs by reason of Retirement, the following provisions of this paragraph (d) will apply:
|
(a)
|
Notwithstanding anything in this Agreement to the contrary, the Participant’s rights with respect to the Award shall be subject to the Assured Guaranty Ltd. Executive Officer Recoupment Policy as amended from time to time.
|
(b)
|
The Award Payments described in the Award Letter are granted under and pursuant to the terms of the Plan and Section 4 (relating to Cash Incentive Awards) of the Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (the "LTIP") and are intended to constitute performance-based compensation as that term is used in the LTIP and section 162(m) of the Code. In no event may the amount payable under these Award Terms, when added to any other amounts payable under Section 4 of the LTIP to the Participant that are intended to constitute “performance-based compensation” as that term is used in the LTIP and section 162(m) of the Code, exceed the limit imposed by Section 5.2(e)(v) of the
|
(a)
|
The Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict the Performance Retention Award at any time if the Participant engages in any "Competitive Activity" or, in the case of a Participant whose Date of Termination has occurred due to Retirement, if the Participant engages in any Post-Retirement Activity.
|
(b)
|
Immediately prior to the Payment Date with respect to an Installment and prior to the payment of the Award Payment attributable to such Installment to the Participant, the Participant shall certify, to the extent required by the Committee, in a manner acceptable to the Committee, that the Participant is not engaging and has not engaged in any Competitive Activity and, in the case of a Participant whose Date of Termination has occurred due to Retirement, that the Participant is not engaging and has not engaged in any Post-Retirement Activity. In the event a Participant has engaged in any Competitive Activity or, if applicable, any Post-Retirement Activity, prior to, or during the twelve months after, the Payment Date with respect to any Installment (the “Restrictive Covenant Period”), the right to payment of the Award Payment attributable to such Installment may be rescinded by the Committee within two years of the end of the Restricted Covenant Period. In the event of any such rescission, the Participant shall pay to the Company the amount Award Payment attributable to such Installment, in such manner and on such terms and conditions as may be required by the Company, and the Company shall be entitled to set-off against the amount of any such gain any amount owed to the Participant by the Company and/or Subsidiary.
|
(a)
|
Adjusted Book Value
. The “Adjusted Book Value” of the Company as of any date shall equal shareholders’ equity attributable to Assured Guaranty Ltd. (which excludes noncontrolling interest in consolidated entities), as reported under
|
(b)
|
Competitive Activity
. The term “Competitive Activity” shall mean (i) the Participant’s engaging in an activity, directly or indirectly, whether as an employee, consultant, partner, principal, agent, distributor, representative, stockholder (except as a less than one percent stockholder of a publicly traded company or a less than five percent stockholder of a privately held company) or otherwise, within the United States, Bermuda, or the Cayman Islands, if such activities involve insurance or reinsurance of United States based entities or risks that are competitive with the financial guaranty insurance business then being
|
(c)
|
Date of Termination
. A Participant's “Date of Termination” means the first day on which the Participant is not employed by the Company or any Subsidiary, regardless of the reason for the termination of employment; provided that a termination of employment shall not be deemed to occur by reason of a transfer of the Participant between the Company and a Subsidiary or between two Subsidiaries, nor by reason of a Participant’s termination of employment with the Company or a Subsidiary if immediately following such termination of employment the Participant continues to be or becomes a Director; and further provided that the Participant’s employment shall not be considered terminated while the Participant is on a leave of absence from the Company or a Subsidiary approved by the Participant’s employer. If, as a result of a sale or other transaction, the Participant’s employer ceases to be a Subsidiary (and the Participant’s employer is or becomes an entity that is separate from the Company), and the Participant is not, at the end of the 30‑day period following the transaction, employed by the Company or an entity that is then a Subsidiary, then the occurrence of such transaction shall be treated as the Date of Termination.
|
(d)
|
Director
. The term "Director" means a member of the Board, who may or may not be an employee of the Company or a Subsidiary.
|
(e)
|
Disabled
. The Participant shall be considered to have a "Disability" during the period in which the Participant is unable, by reason of a medically determinable physical or mental impairment, to engage in any substantial gainful activity, which condition, in the opinion of a physician selected by the Committee, is expected to have a duration of not less than 180 days. The Participant shall be considered to be Permanently Disabled if he would be treated as “disabled” in accordance with the provisions of Treas. Reg. §1.409A-3(i)(4).
|
(f)
|
Operating Return on Equity
. Operating Return on Equity represents operating income (as defined below) for the specified period divided by the average of operating shareholders' equity at the beginning and the end of that period. Operating shareholders’ equity is a non-GAAP financial measure calculated as shareholders’ equity attributable to Assured Guaranty Ltd. as reported under GAAP, adjusted for the following:
|
(g)
|
Operating Income
. Operating income is a non-GAAP financial measure defined as net income (loss) attributable to Assured Guaranty Ltd., as reported under GAAP, adjusted for the following:
|
(h)
|
Performance Period
. The “Performance Period” will be determined in accordance with paragraph 1.
|
(i)
|
Plan
. “Plan” means the Assured Guaranty Ltd. Performance Retention Plan.
|
(j)
|
Post-Retirement Activity
. The term “Post-Retirement Activity” shall mean the Participant’s provision of significant commercial or business services to any one or more persons or entities such that the Participant will not be considered to have retired (or have terminated by reason of Retirement) pursuant to paragraph 9(l)(iii) below.
|
(k)
|
Principal Amount
. The "Principal Amount" with respect to the Participant will be the Principal Amount as stated in the Award Letter.
|
(l)
|
Retirement
. “Retirement" of a Participant will be determined in accordance with the following:
|
(a)
|
An employee who has been employed less than 500 hours and less than six months.
|
(b)
|
An employee whose customary employment is 20 hours or less per week.
|
(c)
|
An employee whose customary employment is for not more than five months in any calendar year.
|
(d)
|
An employee who owns, or who would own upon the exercise of any rights extended under the Plan and the exercise of any other option held by the employee (whether qualified or non-qualified), shares possessing 5% or more of the total combined voting power or value of all classes of stock of the Company or of any parent or subsidiary corporation.
|
|
|
|
(a)
|
The “Purchase Price” per share shall be equal to 85% of the lesser of (i) the fair market value of Stock on the first day of the Subscription Period; or (ii) the fair market value of Stock on the Exercise Date (or such higher price as may be determined by the Committee from time to time). In no event shall the Purchase Price be less than the par value of the Stock.
|
(b)
|
A Participant shall be deemed to have elected to purchase the shares of Stock which he became entitled to purchase on the Exercise Date unless he shall notify the Company prior to the Exercise Date, or such other time as the Committee may establish, that the Participant he elects not to make such purchase.
|
(c)
|
Any accumulated payroll deductions that are not used to purchase full shares of Stock under the Plan shall be paid to the Participant without interest.
|
|
|
|
(d)
|
No employee shall have the right to purchase more than $25,000 in value of Stock under the Plan (and any other employee stock purchase plan described in Code section 423 and maintained by the Company or any Related Company) in any calendar year, such value being based on the fair market value of Stock as of the date on which the option to purchase the Stock is granted, as determined in accordance with subsection 2.2 of the Plan.
|
(a)
|
The shares of Stock which may be purchased under the Plan shall be currently authorized but unissued shares, or shares purchased in the open market by a direct or indirect wholly owned subsidiary of the Company (as determined by the President, Chief Financial Officer or General Counsel of the Company). The Company may contribute to the subsidiary an amount sufficient to accomplish the purchase in the open market of the shares of Stock to be so acquired (as determined by the Chairman or any Executive Vice President of the Company).
|
(b)
|
Subject to the provisions of subsection 3.3 and the following provisions of this paragraph (b), the number of shares of Stock which may be purchased under the Plan shall not exceed 350,000 shares of Stock; provided that, contingent on approval by the Company’s shareholders at the Company’s 2013 annual meeting of the increase in the number of shares reserved for purchase as set forth below, the number of shares of Stock that may be purchased under the Plan shall not exceed 600,000 shares of Stock (which number includes all shares available for delivery under this paragraph (b) since the establishment of the Plan in 2004, determined in accordance with the terms of the Plan). To the extent
|
|
|
|
(c)
|
A Participant will have no interest in shares of Stock covered by his Subscription Agreement until the shares are delivered to him.
|
(a)
|
If the Company shall effect any subdivision or consolidation of shares of Stock or other capital readjustment, payment of stock dividend, stock split, combination of shares or recapitalization or other increase or reduction of the number of shares of Stock outstanding without receiving compensation therefor in money, services or property, then, subject to the requirements of Code section 423, the Committee shall adjust the number of shares of Stock available under the Plan.
|
(b)
|
If the Company is reorganized, merged or consolidated or is party to a plan of exchange with another corporation, pursuant to which reorganization, merger, consolidation or plan of exchange the shareholders of the Company receive any shares of stock or other securities or property, or the Company shall distribute securities of another corporation to its shareholders, then, subject to the requirements of Code section 423, there shall be substituted for the shares subject to outstanding rights to purchase Stock under the Plan an appropriate number of shares of each class of stock or amount of other securities or property which were distributed to the shareholders of the Company in respect of such shares.
|
(a)
|
Notwithstanding any other provision of the Plan, the Company shall have no liability to issue any shares of Stock under the Plan unless such delivery or distribution would comply with all applicable laws and the applicable requirements of any securities exchange or similar entity.
|
(b)
|
In the case of a Participant who is subject to Section 16(a) and 16(b) of the Securities Exchange Act of 1934, the Committee may, at any time, add such conditions and limitations with respect to such Participant as the Committee, in its sole discretion, deems necessary or desirable to comply with Section 16(a) or 16(b) and the rules and regulations thereunder or to obtain any exemption therefrom.
|
(c)
|
To the extent that the Plan provides for issuance of certificates to reflect the transfer of shares of Stock, the transfer of such shares may, at the direction of the Committee, be effected on a non-certificated basis, to the extent not prohibited by the provisions of Rule
|
|
|
|
(a)
|
Neither a Participant nor any other person shall, by reason of the Plan, acquire any right in or title to any assets, funds or property of the Employers whatsoever, including, without limitation, any specific funds, assets, or other property which the Employers, in their sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the amounts, if any, payable under the Plan, unsecured by any assets of the Employers. Nothing contained in the Plan shall constitute a guarantee by any of the Employers that the assets of the Employers shall be sufficient to pay any benefits to any person.
|
(b)
|
The Plan does not constitute a contract of employment, and participation in the Plan will not give any employee the right to be retained in the employ of an Employer or any Related Company, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. Except as otherwise provided in the Plan, no right to purchase shares under the Plan shall confer upon the holder thereof any right as a shareholder of the Company prior to the date on which he fulfills all service requirements and other conditions for receipt of such rights.
|
|
|
|
(a)
|
Subject to the provisions of the Plan, the Committee will have the authority and discretion to establish the terms, conditions, restrictions, and other provisions applicable to the right to purchase shares of Stock under the Plan.
|
(b)
|
The Committee will have the authority and discretion to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any agreements made pursuant to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan.
|
(c)
|
Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons.
|
|
|
|
(a)
|
Board
. The term “Board” shall mean the Board of Directors of the Company.
|
(b)
|
Code
. The term “Code” means the Internal Revenue Code of 1986, as amended. A reference to any provision of the Code shall include reference to any successor provision of the Code.
|
(c)
|
Compensation
. The term “Compensation” means total compensation paid by the Employers for the applicable period specified in Section 2.2, exclusive of any bonus payment, payment in cash or kind under any stock option plan, deferred compensation plan, or other employee benefit plan or program of the Employers.
|
(d)
|
Dollars
. As used in the Plan, the term “dollars” or numbers preceded by the symbol “$” shall mean amounts in United States Dollars.
|
(e)
|
Effective Date
. The “Effective Date” shall be the date on which the Plan is adopted by the Board.
|
|
|
|
(f)
|
Employer
. The Company and each Related Company which, with the consent of the Company, adopts the Plan for the benefit of its eligible employees are referred to collectively as the “Employers” and individually as an “Employer”.
|
(g)
|
Fair Market Value
. The “Fair Market Value” of a share of Stock of the Company as of any date shall be the closing market composite price for such Stock as reported for the New York Stock Exchange - Composite Transactions on that date or, if Stock is not traded on that date, on the next preceding date on which Stock was traded.
|
(h)
|
Participant
. The term “Participant” means any employee of the Company who is eligible and elects to participate pursuant to the provisions of Section 2.
|
(i)
|
Related Companies
. The term “Related Company” means any company during any period in which it is a “subsidiary corporation” (as that term is defined in Code section 424(f)) with respect to the Company.
|
|
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q 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 quarterly report on Form 10-Q 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
|
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Title:
President and Chief Executive Officer
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Da
te: May 10, 2
013
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ ROBERT A. BAILENSON
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Name: Robert A. Bailenson
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Title:
Chief Financial Officer
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Date: May 10, 2013
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