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ý
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ANNUAL 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
(State or other jurisdiction of
incorporation or organization)
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98-0429991
(I.R.S. Employer Identification No.)
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Title of each class
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Name of each exchange on which registered
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Common Shares, $0.01 per share
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New York Stock Exchange, Inc.
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Large accelerated filer
ý
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a
smaller reporting company)
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Smaller reporting company
o
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•
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reduction in the amount of available insurance opportunities and/or in the demand for Assured Guaranty's insurance;
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•
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rating agency action, including a ratings downgrade, a change in outlook, the placement of ratings on watch for downgrade, or a change in rating criteria, at any time, of AGL or any of its subsidiaries, and/or of any securities AGL or any of its subsidiaries have issued, and/or of transactions that AGL’s subsidiaries have insured;
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•
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developments in the world’s financial and capital markets that adversely affect obligors’ payment rates, Assured Guaranty’s loss experience, or its exposure to refinancing risk in transactions (which could result in substantial liquidity claims on its guarantees);
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•
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the possibility that budget or pension shortfalls or other factors will result in credit losses or impairments on obligations of state, territorial and local governments and their related authorities and public corporations that Assured Guaranty insures or reinsures;
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•
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the failure of Assured Guaranty to realize loss recoveries that are assumed in its expected loss estimates;
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•
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increased competition, including from new entrants into the financial guaranty industry;
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•
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rating agency action on obligors, including sovereign debtors, resulting in a reduction in the value of securities in Assured Guaranty's investment portfolio and in collateral posted by and to Assured Guaranty;
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•
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the inability of Assured Guaranty to access external sources of capital on acceptable terms;
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•
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changes in the world’s credit markets, segments thereof, interest rates or general economic conditions;
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•
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the impact of market volatility on the mark-to-market of Assured Guaranty’s contracts written in credit default swap form;
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•
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changes in applicable accounting policies or practices;
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•
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changes in applicable laws or regulations, including insurance, bankruptcy and tax laws, or other governmental actions;
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•
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the impact of changes in the world’s economy and credit and currency markets and in applicable laws or regulations relating to the decision of the United Kingdom to exit the European Union;
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the possibility that acquisitions or alternative investments made by Assured Guaranty do not result in the benefits anticipated or subject Assured Guaranty to unanticipated consequences;
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•
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deterioration in the financial condition of Assured Guaranty’s reinsurers, the amount and timing of reinsurance recoverables actually received and the risk that reinsurers may dispute amounts owed to Assured Guaranty under its reinsurance agreements;
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difficulties with the execution of Assured Guaranty’s business strategy;
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•
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loss of key personnel;
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•
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the effects of mergers, acquisitions and divestitures;
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•
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natural or man-made catastrophes;
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•
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other risk factors identified in AGL’s filings with the U.S. Securities and Exchange Commission (the SEC);
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•
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other risks and uncertainties that have not been identified at this time; and
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•
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management’s response to these factors.
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ITEM 1.
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BUSINESS
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•
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Assured Guaranty Municipal Corp.
AGM is located and domiciled in New York, was organized in 1984 and commenced operations in 1985. Since mid-2008, AGM has provided financial guaranty insurance only on debt obligations issued in the U.S. public finance and global infrastructure markets, including bonds issued by U.S. state or governmental authorities or notes issued to finance infrastructure projects. Previously, AGM also offered insurance and reinsurance in the global structured finance market, including asset-backed securities issued by special purpose entities. AGM formerly was named Financial Security Assurance Inc. Assured Guaranty acquired AGM, together with its holding company Financial Security Assurance Holdings Ltd. (renamed Assured Guaranty Municipal Holdings Inc., AGMH) and the subsidiaries owned by that holding company, on July 1, 2009.
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•
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Municipal Assurance Corp.
MAC is located and domiciled in New York and was organized in 2008. Assured Guaranty acquired MAC on May 31, 2012. On July 16, 2013, Assured Guaranty completed a series of transactions that increased the capitalization of MAC and resulted in MAC assuming a portfolio of geographically diversified U.S. public finance exposure from AGM and AGC. MAC offers insurance and reinsurance on bonds issued by U.S. state or municipal governmental authorities, focusing on investment grade obligations in select sectors of the municipal market.
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•
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Assured Guaranty Corp.
AGC is located in New York and domiciled in Maryland, was organized in 1985 and commenced operations in 1988. It provides insurance and reinsurance on debt obligations in the global structured finance market and also offers guarantees on obligations in the U.S. public finance and international infrastructure markets.
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•
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Assured Guaranty (Europe) Ltd.
AGE is a U.K. incorporated company licensed as a U.K. insurance company and authorized to operate in various countries throughout the European Economic Area (EEA). It was organized in 1990 and issued its first financial guarantee in 1994. AGE offers financial guarantees in both the international public finance and structured finance markets and is the primary entity from which the Company writes business in the EEA. As discussed further under "Business" below, AGE has agreed with its regulator that new business it writes would be guaranteed using a co-insurance structure pursuant to which AGE would co-insure municipal and infrastructure transactions with AGM, and structured finance transactions with AGC. AGE must obtain the approval of the Prudential Regulation Authority (PRA) before it can guarantee any new structured finance transaction.
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•
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Assured Guaranty Re Ltd. and Assured Guaranty Re Overseas Ltd.
AG Re is incorporated under the laws of Bermuda and is licensed as a Class 3B insurer under the Insurance Act 1978 and related regulations of Bermuda. AG Re owns, indirectly, AGRO, which is a Bermuda Class 3A and Class C insurer. AG Re and AGRO underwrite financial guaranty reinsurance, and AGRO also underwrites other reinsurance that is in line with the Company's risk profile and benefits from its underwriting experience. AG Re and AGRO write business as reinsurers of third-party primary insurers and of certain affiliated companies.
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•
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Portfolio Risk Management Committee
—This committee establishes company-wide credit policy for the Company's direct and assumed business. It implements specific underwriting procedures and limits for the Company and allocates underwriting capacity among the Company's subsidiaries. The Portfolio Risk Management Committee focuses on measuring and managing credit, market and liquidity risk for the overall company. All transactions in new asset classes or new jurisdictions must be approved by this committee.
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•
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U.S. Management Committee
—This committee establishes strategic policy and reviews the implementation of strategic initiatives and general business progress in the U.S. The U.S. Management Committee approves risk policy at the U.S. operating company level.
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•
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Risk Management Committees
—The U.S., U.K. and AG Re risk management committees conduct an in-depth review of the insured portfolios of the relevant subsidiaries, focusing on varying portions of the portfolio at each meeting. They assign internal ratings of the insured transactions and review sector reports, monthly product line surveillance reports and compliance reports.
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•
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Workout Committee
—This committee receives reports from surveillance and workout personnel on transactions that might benefit from active loss mitigation or risk reduction, and approves loss mitigation or risk reduction strategies for such transactions.
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•
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Reserve Committees
—Oversight of reserving risk is vested in the U.S. Reserve Committee, the AG Re Reserve Committee and the U.K. Reserve Committee. The committees review the reserve methodology and assumptions for each major asset class or significant BIG transaction, as well as the loss projection scenarios used and the probability weights assigned to those scenarios. The reserve committees establish reserves for the relevant subsidiaries, taking into consideration supporting information provided by surveillance personnel.
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•
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Instability of Rating Criteria and Methodologies.
Rating agencies purport to issue ratings pursuant to published rating criteria and methodologies. In recent years, the rating agencies have made material changes to their rating criteria and methodologies applicable to financial guaranty insurers, sometimes through formal changes and other times through
ad hoc
adjustments to the conclusions reached by existing criteria. Furthermore, these criteria and methodology changes were typically implemented without any transition period, making it difficult for an insurer to comply quickly with new standards.
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•
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Instability of Severe Stress Case Loss Assumptions.
A major component in arriving at a financial guaranty insurer's rating has been the rating agency’s assessment of the insurer’s capital adequacy, with each rating agency employing its own proprietary model. These capital adequacy approaches include “stress case” loss assumptions for various risks or risk categories. Since the financial crisis, the rating agencies have at various times materially increased stress case loss assumptions for various risks or risk categories, in some cases later reducing such stress case losses. This approach has made predicting the amount of capital required to maintain or attain a certain rating more difficult.
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•
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More Reliance on Qualitative Rating Criteria.
In prior years, the financial strength ratings of the Company’s insurance company subsidiaries were largely consistent with the rating agency’s assessment of the insurers’ capital adequacy, such that a rating downgrade could generally be avoided by raising additional capital or otherwise
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•
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AGM is a New York domiciled insurance company licensed to write financial guaranty insurance and reinsurance in 50 U.S. states, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands.
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•
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MAC is a New York domiciled insurance company licensed to write financial guaranty insurance and reinsurance in 50 U.S. states and the District of Columbia. MAC will only insure U.S. public finance debt obligations, focusing on investment grade bonds in select sectors of that market.
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•
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AGC is a Maryland domiciled insurance company licensed to write financial guaranty insurance and reinsurance in 50 U.S. states, the District of Columbia and Puerto Rico.
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the insured average annual debt service for a single risk, net of qualifying reinsurance and collateral, or
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•
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the insured unpaid principal (reduced by the extent to which the unpaid principal of the supporting assets exceeds the insured unpaid principal) divided by nine, net of qualifying reinsurance and collateral,
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•
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The minimum share capital must be always issued and outstanding and cannot be reduced. For AG Re, which is registered as a Class 3B insurer, the minimum share capital is $120,000. For AGRO, which is registered both as a Class 3A and a Class C long-term insurer, the minimum share capital is $370,000.
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•
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With respect to the distribution (including repurchase of shares) of any share capital, contributed surplus or other statutory capital:
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(a)
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any such distribution that would reduce AG Re's or AGRO's total statutory capital by 15% or more of their respective total statutory capital as set out in their previous year's financial statements requires the prior approval of the Authority. Any application for such approval must include an affidavit stating that the company will continue to meet the required margins and such other information as the Authority may require; and
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(b)
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as a Class C long-term insurer, AGRO may not use the funds allocated to its long-term business fund, directly or indirectly, for any purpose other than a purpose of its long-term business except in so far as such payment can be made out of any surplus certified by AGRO's approved actuary to be available for distribution otherwise than to policyholders;
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•
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With respect to the declaration and payment of dividends:
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(a)
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each of AG Re and AGRO is prohibited from declaring or paying any dividends during any financial year if it is in breach of its solvency margin, minimum liquidity ratio or enhanced capital requirement, or if the declaration or payment of such dividends would cause such a breach (if it has failed to meet its minimum solvency margin or minimum liquidity ratio on the last day of any financial year, the insurer will be prohibited, without the approval of the Authority, from declaring or paying any dividends during the next financial year). Dividends, are paid out of each insurer's statutory surplus and, therefore, dividends cannot exceed such surplus. See "—Minimum Solvency Margin and Enhanced Capital Requirements" above and "—Minimum Liquidity Ratio" below;
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(b)
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an insurer which at any time fails to meet its minimum solvency margin or comply with the enhanced capital requirement may not declare or pay any dividend until the failure is rectified, and also in such circumstances the insurer must report, within 14 days after becoming aware of its failure or having reason to believe that such failure has occurred, to the Authority in writing giving particulars of the circumstances leading to the failure and giving a plan detailing the manner, specific actions to be taken and time frame in which the insurer intends to rectify the failure. A failure to comply with the enhanced capital requirement will also result in the insurer furnishing certain other information to the Authority within 45 days after becoming aware of its failure or having reason to believe that such failure has occurred;
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(c)
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each of AG Re and AGRO is prohibited from declaring or paying in any financial year dividends of more than 25% of its total statutory capital and surplus (as shown on its previous financial year's statutory balance sheet) unless it files (at least seven days before payments of such dividends) with the Authority an affidavit signed by at least two directors (one of whom must be a Bermuda resident director if any of the insurer's directors are resident in Bermuda) and the principal representative stating that it will continue to meet its solvency margin and minimum liquidity ratio. Where such an affidavit is filed, it shall be available for public inspection at the offices of the Authority; and
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(d)
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as a Class C long-term insurer, AGRO may not declare or pay a dividend to any person other than a policyholder unless the value of the assets of its long-term business fund, as certified by AGRO's approved actuary, exceeds the extent (as so certified) of the liabilities of AGRO's long-term business, and the amount of any such dividend shall not exceed the aggregate of (1) that excess; and (2) any other funds properly available for the payment of dividends being funds arising out of AGRO's business other than its long-term business.
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•
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the PRA, a part of the Bank of England, is responsible for prudential regulation of key systemically important firms (which includes insurance companies, among others), and
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•
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the FCA is responsible for the conduct of business regulation of all firms and the regulation of market conduct and the prudential regulation of all non-PRA firms.
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•
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an insurer's head office, and in particular its mind and management, must be in the U.K. if it is incorporated in the U.K.;
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•
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an insurer's business must be conducted in a prudent manner — in particular, the insurer must maintain appropriate financial and non-financial resources;
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•
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the insurer must be fit and proper, and be appropriately staffed; and
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•
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the insurer and its group must be capable of being effectively supervised.
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•
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assets and liabilities are generally to be valued at their market value;
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•
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the amount of required economic capital is intended to ensure, with a probability of 99.5%, that regulated firms are able to meet their obligations to policyholders and beneficiaries over the following 12 months; and
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•
|
reinsurance recoveries will be treated as a separate asset (rather than being netted against the underlying insurance liabilities).
|
•
|
have in place an effective system of governance that provides for the sound and prudent management of its business;
|
•
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establish effective risk-management systems; and
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•
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take a comprehensive approach to considering their risks through an Own Risk and Solvency Assessment (ORSA) as proportionate to the nature, scale and complexity of the risks inherent in their business.
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ITEM 1A.
|
RISK FACTORS
|
•
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the Company is 25% or more owned directly, indirectly through foreign entities or by attribution by U.S. Persons;
|
•
|
the gross RPII of AG Re or any other AGL foreign subsidiary engaged in the insurance business that has not made an election under section 953(d) of the Code to be treated as a U.S. corporation for all U.S. tax purposes or are CFCs owned directly or indirectly by AGUS (each, with AG Re, a Foreign Insurance Subsidiary) were to equal or exceed 20% of such Foreign Insurance Subsidiary's gross insurance income in any taxable year; and
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•
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direct or indirect insureds (and persons related to such insureds) own (or are treated as owning directly or indirectly through entities) 20% or more of the voting power or value of the Company's shares.
|
•
|
With respect to income, the dividends that AGL receives from its subsidiaries should be exempt from U.K. corporation tax under the exemption contained in section 931D of the Corporation Tax Act 2009.
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•
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With respect to capital gains, if AGL were to dispose of shares in its direct subsidiaries or if it were deemed to have done so, it may realize a chargeable gain for U.K. tax purposes. Any tax charge would be based on AGL’s original acquisition cost. It is anticipated that any such future gain should qualify for exemption under the substantial shareholding exemption in Schedule 7AC to the Taxation of Chargeable Gains Act 1992. However, the availability of such exemption would depend on facts at the time of disposal, in particular the “trading” nature of the relevant subsidiary (and, in respect of disposal before April 1, 2017 only, the Assured Guaranty group). There is no statutory definition of what constitutes “trading” activities for this purpose and in practice reliance is placed on the published guidance of HMRC.
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•
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investor perceptions of the Company, its prospects and that of the financial guaranty industry and the markets in which the Company operates;
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•
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the Company's operating and financial performance;
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•
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the Company's access to financial and capital markets to raise additional capital, refinance its debt or replace existing senior secured credit and receivables-backed facilities;
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•
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the Company's ability to repay debt;
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•
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the Company's dividend policy;
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•
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the amount of share repurchases authorized by the Company;
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•
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future sales of equity or equity-related securities;
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•
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changes in earnings estimates or buy/sell recommendations by analysts; and
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•
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general financial, economic and other market conditions.
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ITEM 1B.
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UNRESOLVED STAFF COMMENTS
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ITEM 2.
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PROPERTIES
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ITEM 3.
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LEGAL PROCEEDINGS
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ITEM 4.
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MINE SAFETY DISCLOSURES
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Name
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Age
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Position(s)
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Dominic J. Frederico
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64
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President and Chief Executive Officer; Deputy Chairman
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James M. Michener
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64
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General Counsel and Secretary
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Russell B. Brewer II
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59
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Chief Surveillance Officer
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Robert A. Bailenson
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50
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Chief Financial Officer
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Bruce E. Stern
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62
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Executive Officer
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Howard W. Albert
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57
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Chief Risk Officer
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ITEM 5.
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MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
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2016
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2015
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Sales Price
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Cash
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Sales Price
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Cash
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||||||||||||||||
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High
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Low
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Dividends
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High
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Low
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Dividends
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||||||||||||
First Quarter
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$
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26.82
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$
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21.79
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$
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0.13
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$
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26.96
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$
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24.21
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$
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0.12
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Second Quarter
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27.45
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23.43
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0.13
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29.75
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22.55
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0.12
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||||||
Third Quarter
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28.07
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24.69
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0.13
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26.87
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22.86
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0.12
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||||||
Fourth Quarter
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39.03
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27.42
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0.13
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29.62
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24.39
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0.12
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Period
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Total
Number of
Shares
Purchased
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Average
Price Paid
Per Share
|
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Total Number of
Shares Purchased as
Part of Publicly
Announced Program (1)
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Maximum Number (or Approximate Dollar Value)
of Shares that
May Yet Be
Purchased
Under the Program(2)
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||||||
October 1 - October 31
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692,002
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$
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28.90
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692,002
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$
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95,000,101
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November 1 - November 30
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703,510
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$
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33.21
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703,510
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$
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321,635,067
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December 1 - December 31
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1,905,105
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$
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38.03
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|
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1,905,105
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$
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249,175,822
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Total
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3,300,617
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|
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$
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35.09
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|
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3,300,617
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(1)
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After giving effect to repurchases since the beginning of 2013 through February 23, 2017, the Company has repurchased a total of
72.2 million
common shares for approximately
$1,857 million
, excluding commissions, at an average price of
$25.71
per share.
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(2)
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Excludes commissions.
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Assured Guaranty
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S&P 500 Index
|
|
S&P 500
Financial Index
|
||||||
12/31/2011
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$
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100.00
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$
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100.00
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$
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100.00
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12/31/2012
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111.17
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|
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115.99
|
|
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128.74
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|||
12/31/2013
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187.70
|
|
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153.54
|
|
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174.56
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|
|||
12/31/2014
|
210.58
|
|
|
174.54
|
|
|
201.06
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|
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12/31/2015
|
217.95
|
|
|
176.93
|
|
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197.92
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|||
12/31/2016
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317.34
|
|
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198.07
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|
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242.95
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ITEM 6.
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SELECTED FINANCIAL DATA
|
|
Year Ended December 31,
|
||||||||||||||||||
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2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
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(dollars in millions, except per share amounts)
|
||||||||||||||||||
Statement of operations data:
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|
|
|
|
|
|
|
|
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net earned premiums
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$
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864
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|
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$
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766
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|
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$
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570
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|
|
$
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752
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|
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$
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853
|
|
Net investment income
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408
|
|
|
423
|
|
|
403
|
|
|
393
|
|
|
404
|
|
|||||
Net realized investment gains (losses)
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(29
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)
|
|
(26
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)
|
|
(60
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)
|
|
52
|
|
|
1
|
|
|||||
Realized gains and other settlements on credit derivatives
|
29
|
|
|
(18
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)
|
|
23
|
|
|
(42
|
)
|
|
(108
|
)
|
|||||
Net unrealized gains (losses) on credit derivatives
|
69
|
|
|
746
|
|
|
800
|
|
|
107
|
|
|
(477
|
)
|
|||||
Fair value gains (losses) on committed capital securities
|
0
|
|
|
27
|
|
|
(11
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)
|
|
10
|
|
|
(18
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)
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|||||
Fair value gains (losses) on financial guaranty variable interest entities
|
38
|
|
|
38
|
|
|
255
|
|
|
346
|
|
|
191
|
|
|||||
Bargain purchase gain and settlement of pre-existing relationships
|
259
|
|
|
214
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Other income (loss)
|
39
|
|
|
37
|
|
|
14
|
|
|
(10
|
)
|
|
108
|
|
|||||
Total revenues
|
1,677
|
|
|
2,207
|
|
|
1,994
|
|
|
1,608
|
|
|
954
|
|
|||||
Expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Loss and loss adjustment expenses
|
295
|
|
|
424
|
|
|
126
|
|
|
154
|
|
|
504
|
|
|||||
Amortization of deferred acquisition costs
|
18
|
|
|
20
|
|
|
25
|
|
|
12
|
|
|
14
|
|
|||||
Interest expense
|
102
|
|
|
101
|
|
|
92
|
|
|
82
|
|
|
92
|
|
|||||
Other operating expenses
|
245
|
|
|
231
|
|
|
220
|
|
|
218
|
|
|
212
|
|
|||||
Total expenses
|
660
|
|
|
776
|
|
|
463
|
|
|
466
|
|
|
822
|
|
|||||
Income (loss) before (benefit) provision for income taxes
|
1,017
|
|
|
1,431
|
|
|
1,531
|
|
|
1,142
|
|
|
132
|
|
|||||
Provision (benefit) for income taxes
|
136
|
|
|
375
|
|
|
443
|
|
|
334
|
|
|
22
|
|
|||||
Net income (loss)
|
881
|
|
|
1,056
|
|
|
1,088
|
|
|
808
|
|
|
110
|
|
|||||
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
6.61
|
|
|
$
|
7.12
|
|
|
$
|
6.30
|
|
|
$
|
4.32
|
|
|
$
|
0.58
|
|
Diluted
|
$
|
6.56
|
|
|
$
|
7.08
|
|
|
$
|
6.26
|
|
|
$
|
4.30
|
|
|
$
|
0.57
|
|
Dividends per share
|
$
|
0.52
|
|
|
$
|
0.48
|
|
|
$
|
0.44
|
|
|
$
|
0.40
|
|
|
$
|
0.36
|
|
|
As of December 31,
|
||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
|
(dollars in millions, except per share amounts)
|
||||||||||||||||||
Balance sheet data (end of period):
|
|
|
|
|
|
|
|
|
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Investments and cash
|
$
|
11,103
|
|
|
$
|
11,358
|
|
|
$
|
11,459
|
|
|
$
|
10,969
|
|
|
$
|
11,223
|
|
Premiums receivable, net of commissions payable
|
576
|
|
|
693
|
|
|
729
|
|
|
876
|
|
|
1,005
|
|
|||||
Ceded unearned premium reserve
|
206
|
|
|
232
|
|
|
381
|
|
|
452
|
|
|
561
|
|
|||||
Salvage and subrogation recoverable
|
365
|
|
|
126
|
|
|
151
|
|
|
174
|
|
|
456
|
|
|||||
Credit derivative assets
|
13
|
|
|
81
|
|
|
68
|
|
|
94
|
|
|
141
|
|
|||||
Total assets
|
14,151
|
|
|
14,544
|
|
|
14,919
|
|
|
16,285
|
|
|
17,240
|
|
|||||
Liabilities and shareholders' equity:
|
|
|
|
|
|
|
|
|
|
||||||||||
Unearned premium reserve
|
3,511
|
|
|
3,996
|
|
|
4,261
|
|
|
4,595
|
|
|
5,207
|
|
|||||
Loss and loss adjustment expense reserve
|
1,127
|
|
|
1,067
|
|
|
799
|
|
|
592
|
|
|
601
|
|
|||||
Reinsurance balances payable, net
|
64
|
|
|
51
|
|
|
107
|
|
|
148
|
|
|
219
|
|
|||||
Long-term debt
|
1,306
|
|
|
1,300
|
|
|
1,297
|
|
|
814
|
|
|
834
|
|
|||||
Credit derivative liabilities
|
402
|
|
|
446
|
|
|
963
|
|
|
1,787
|
|
|
1,934
|
|
|||||
Total liabilities
|
7,647
|
|
|
8,481
|
|
|
9,161
|
|
|
11,170
|
|
|
12,246
|
|
|||||
Accumulated other comprehensive income
|
149
|
|
|
237
|
|
|
370
|
|
|
160
|
|
|
515
|
|
|||||
Shareholders' equity
|
6,504
|
|
|
6,063
|
|
|
5,758
|
|
|
5,115
|
|
|
4,994
|
|
|||||
Book value per share
|
50.82
|
|
|
43.96
|
|
|
36.37
|
|
|
28.07
|
|
|
25.74
|
|
|||||
Consolidated statutory financial information:
|
|
|
|
|
|
|
|
|
|
||||||||||
Contingency reserve
|
$
|
2,008
|
|
|
$
|
2,263
|
|
|
$
|
2,330
|
|
|
$
|
2,934
|
|
|
$
|
2,364
|
|
Policyholders' surplus
|
5,036
|
|
|
4,550
|
|
|
4,142
|
|
|
3,202
|
|
|
3,579
|
|
|||||
Claims-paying resources(1)
|
11,701
|
|
|
12,306
|
|
|
12,189
|
|
|
12,147
|
|
|
12,328
|
|
|||||
Outstanding Exposure:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net debt service outstanding
|
$
|
437,535
|
|
|
$
|
536,341
|
|
|
$
|
609,622
|
|
|
$
|
690,535
|
|
|
$
|
780,356
|
|
Net par outstanding
|
296,318
|
|
|
358,571
|
|
|
403,729
|
|
|
459,107
|
|
|
518,772
|
|
(1)
|
Based on accounting practices prescribed or permitted by U.S. insurance regulatory authorities, for all insurance subsidiaries. Claims-paying resources is calculated as the sum of statutory policyholders' surplus, statutory contingency reserve, statutory unearned premium reserves, statutory loss and LAE reserves, present value of installment premium on financial guaranty and credit derivatives, discounted at 6%, and standby lines of credit/stop loss. Total claims-paying resources is used by the Company to evaluate the adequacy of capital resources. Includes an aggregate excess-of-loss reinsurance facility for
$360 million
for December 31, 2016 and 2015, $450 million for December 31, 2014 and $435 million for December 31, 2013 and 2012. See Part II, Item 8, Financial Statements and Supplementary Data, Note 13, Reinsurance and Other Monoline Exposures.
|
ITEM 7.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions, except per share amounts)
|
||||||||||
Net income (loss)
|
$
|
881
|
|
|
$
|
1,056
|
|
|
$
|
1,088
|
|
Operating income (non-GAAP)(1)
|
895
|
|
|
710
|
|
|
647
|
|
|||
Gain (loss) related to the effect of consolidating FG VIEs (FG VIE consolidation) included in operating income
|
12
|
|
|
11
|
|
|
156
|
|
|||
|
|
|
|
|
|
||||||
Net income (loss) per diluted share
|
6.56
|
|
|
7.08
|
|
|
6.26
|
|
|||
Operating income per share (non-GAAP)(1)
|
6.68
|
|
|
4.76
|
|
|
3.73
|
|
|||
Gain (loss) related to FG VIE consolidation included in operating income per share
|
0.10
|
|
|
0.07
|
|
|
0.90
|
|
|||
|
|
|
|
|
|
||||||
Diluted shares
|
134.1
|
|
|
149.0
|
|
|
173.6
|
|
|||
|
|
|
|
|
|
||||||
Gross written premiums (GWP)
|
154
|
|
|
181
|
|
|
104
|
|
|||
Present value of new business production (PVP)(1)
|
214
|
|
|
179
|
|
|
168
|
|
|||
Gross par written
|
17,854
|
|
|
17,336
|
|
|
13,171
|
|
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
||||||||||||
|
|
Amount
|
|
Per Share
|
|
Amount
|
|
Per Share
|
||||||||
|
|
(in millions, except per share amounts)
|
||||||||||||||
Shareholders' equity
|
|
$
|
6,504
|
|
|
$
|
50.82
|
|
|
$
|
6,063
|
|
|
$
|
43.96
|
|
Non-GAAP operating shareholders' equity(1)
|
|
6,386
|
|
|
49.89
|
|
|
5,925
|
|
|
42.96
|
|
||||
Non-GAAP adjusted book value(1)
|
|
8,506
|
|
|
66.46
|
|
|
8,396
|
|
|
60.87
|
|
||||
Gain (loss) related to FG VIE consolidation included in non-GAAP operating shareholders' equity
|
|
(7
|
)
|
|
(0.06
|
)
|
|
(21
|
)
|
|
(0.15
|
)
|
||||
Gain (loss) related to FG VIE consolidation included in non-GAAP adjusted book value
|
|
(24
|
)
|
|
(0.18
|
)
|
|
(43
|
)
|
|
(0.31
|
)
|
||||
Common shares outstanding (2)
|
|
128.0
|
|
|
|
|
137.9
|
|
|
|
(1)
|
Please refer to “—Non-GAAP Financial Measures” for a definition of the financial measures that were not determined in accordance with GAAP and a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP measure, if available. Please note that the Company changed its definition of Operating Income, Non-GAAP Operating Shareholders' Equity and Non-GAAP Adjusted Book Value starting in fourth quarter 2016 in response to new non-GAAP guidance issued by the SEC in 2016. Please refer to “—Non-GAAP Financial Measures” for additional details.
|
(2)
|
Please refer to "Key Business Strategies – Capital Management" below for information on common share repurchases.
|
•
|
New business production
|
•
|
Capital management
|
•
|
Alternative strategies to create value, including through acquisitions, investments and commutations
|
•
|
Loss mitigation
|
•
|
encourages retail investors, who typically have fewer resources than the Company for analyzing municipal bonds, to purchase such bonds;
|
•
|
enables institutional investors to operate more efficiently; and
|
•
|
allows smaller, less well-known issuers to gain market access on a more cost-effective basis.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(dollars in billions, except number of issues and percent)
|
||||||||||
Par:
|
|
|
|
|
|
||||||
New municipal bonds issued
|
$
|
423.7
|
|
|
$
|
377.6
|
|
|
$
|
314.9
|
|
Total insured
|
$
|
25.3
|
|
|
$
|
25.2
|
|
|
$
|
18.5
|
|
Insured by Assured Guaranty
|
$
|
14.2
|
|
|
$
|
15.1
|
|
|
$
|
10.7
|
|
Number of issues:
|
|
|
|
|
|
||||||
New municipal bonds issued
|
12,271
|
|
|
12,076
|
|
|
10,162
|
|
|||
Total insured
|
1,889
|
|
|
1,880
|
|
|
1,403
|
|
|||
Insured by Assured Guaranty
|
904
|
|
|
1,009
|
|
|
697
|
|
|||
Market penetration based on:
|
|
|
|
|
|
||||||
Par
|
6.0
|
%
|
|
6.7
|
%
|
|
5.9
|
%
|
|||
Number of issues
|
15.4
|
%
|
|
15.6
|
%
|
|
13.8
|
%
|
|||
Single A par sold
|
22.6
|
%
|
|
22.1
|
%
|
|
19.7
|
%
|
|||
Single A transactions sold
|
55.8
|
%
|
|
54.1
|
%
|
|
49.3
|
%
|
|||
$25 million and under par sold
|
17.8
|
%
|
|
18.7
|
%
|
|
16.5
|
%
|
|||
$25 million and under transactions sold
|
17.5
|
%
|
|
17.6
|
%
|
|
15.4
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
GWP
|
|
|
|
|
|
||||||
Public Finance—U.S.
|
$
|
142
|
|
|
$
|
119
|
|
|
$
|
122
|
|
Public Finance—non-U.S.
|
15
|
|
|
41
|
|
|
6
|
|
|||
Structured Finance—U.S.
|
(1
|
)
|
|
23
|
|
|
(32
|
)
|
|||
Structured Finance—non-U.S.
|
(2
|
)
|
|
(2
|
)
|
|
8
|
|
|||
Total GWP
|
$
|
154
|
|
|
$
|
181
|
|
|
$
|
104
|
|
PVP(1):
|
|
|
|
|
|
||||||
Public Finance—U.S.
|
$
|
161
|
|
|
$
|
124
|
|
|
$
|
128
|
|
Public Finance—non-U.S.
|
25
|
|
|
27
|
|
|
7
|
|
|||
Structured Finance—U.S. (2)
|
27
|
|
|
22
|
|
|
24
|
|
|||
Structured Finance—non-U.S.
|
1
|
|
|
6
|
|
|
9
|
|
|||
Total PVP
|
$
|
214
|
|
|
$
|
179
|
|
|
$
|
168
|
|
Gross Par Written:
|
|
|
|
|
|
||||||
Public Finance—U.S.
|
$
|
16,039
|
|
|
$
|
16,377
|
|
|
$
|
12,275
|
|
Public Finance—non-U.S.
|
677
|
|
|
567
|
|
|
128
|
|
|||
Structured Finance—U.S. (2)
|
1,114
|
|
|
327
|
|
|
418
|
|
|||
Structured Finance—non-U.S.
|
24
|
|
|
65
|
|
|
350
|
|
|||
Total gross par written
|
$
|
17,854
|
|
|
$
|
17,336
|
|
|
$
|
13,171
|
|
(1)
|
PVP and Gross Par Written in the table above are based on "close date," when the transaction settles. See “– Non-GAAP Financial Measures – PVP or Present Value of New Business Production.”
|
(2)
|
Includes a structured capital relief Triple-X excess of loss life reinsurance transaction written in 2016.
|
|
Amount
|
|
Number of Shares
|
|
Average price per share
|
|||||
|
(in millions, except per share data)
|
|||||||||
2013
|
$
|
264
|
|
|
12.5
|
|
|
$
|
21.12
|
|
2014
|
590
|
|
|
24.4
|
|
|
24.17
|
|
||
2015
|
555
|
|
|
21.0
|
|
|
26.43
|
|
||
2016
|
306
|
|
|
10.7
|
|
|
28.53
|
|
||
2017 (through February 23, 2017)
|
142
|
|
|
3.6
|
|
|
39.65
|
|
||
Cumulative repurchases since the beginning of 2013
|
$
|
1,857
|
|
|
72.2
|
|
|
$
|
25.71
|
|
|
|
Year Ended December 31,
|
|
|
|
|
||||||||||
|
|
2016
|
|
2015
|
|
As of
December 31, 2016 |
|
As of
December 31, 2015 |
||||||||
|
|
(per share)
|
||||||||||||||
Net income
|
|
$
|
1.90
|
|
|
$
|
1.56
|
|
|
|
|
|
||||
Operating income
|
|
1.94
|
|
|
1.00
|
|
|
|
|
|
||||||
Shareholders' equity
|
|
|
|
|
|
$
|
8.92
|
|
|
$
|
5.75
|
|
||||
Non-GAAP operating shareholders' equity
|
|
|
|
|
|
8.59
|
|
|
5.45
|
|
||||||
Non-GAAP adjusted book value
|
|
|
|
|
|
14.38
|
|
|
10.74
|
|
(1)
|
Cumulative repurchases since the beginning of 2013.
|
•
|
Currency Impact.
The Company reports its accounts in U.S. dollars, while some of its income, expenses, assets and liabilities are denominated in other currencies, primarily the pound sterling and the euro. From December 31,
|
•
|
U.K. Business.
As of
December 31, 2016
, approximately $15.9 billion of the Company’s insured net par is to risks located in the U.K., and most of that exposure is to utilities, with much of the rest to hospital facilities, toll roads, government accommodation, housing associations, universities and other public purpose enterprises that the Company believes are not overly vulnerable to Brexit pressures. AGE is currently authorized by the PRA of the Bank of England with permissions sufficient to enable AGE to effect and carry out financial guaranty insurance and reinsurance in the U.K. Most of the new transactions insured by AGE since 2008 have been in the U.K. As of December 31, 2016, approximately $10.0 billion of insured net par of AGLN, which the Company acquired in January 2017, is to risks located in the U.K.
|
•
|
Business Elsewhere in the EU.
As of
December 31, 2016
, approximately $5.5 billion of the Company’s insured net par is to risks located in EU and EEA countries other than the U.K. As of December 31, 2016, approximately $1.5 billion of insured net par of AGLN, which the Company acquired in January 2017, is to risks located in EU and EEA countries other than the U.K. Currently, EU directives allow AGE to conduct business in other EU or EEA states based on its PRA permissions. This is sometimes called “passporting”. Depending on the terms of Brexit, AGE may, once Brexit is implemented, lose the ability to insure new transactions from London in non-U.K. EU and EEA countries without obtaining additional licenses, which may require a presence in another EU country. While pertinent laws and regulations have yet to be adopted or passed, the Company does not believe Brexit will adversely affect its surveillance and loss mitigation activities with respect to existing insured transactions in non-U.K. EU and EEA countries, except to the extent Brexit inhibits the issuance of new guaranties in distressed situations in non-U.K. EU or EEA countries. As noted above, most of the new transactions insured by AGE since 2008 have been in the U.K.
|
•
|
Employees.
While nearly one-third of the employees working in AGE’s London office are non-U.K. EU or EEA citizens, most of those employees currently qualify, and the Company expects the rest to qualify within the next two years, to become permanent residents under current U.K. law.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Revenues:
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
864
|
|
|
$
|
766
|
|
|
$
|
570
|
|
Net investment income
|
408
|
|
|
423
|
|
|
403
|
|
|||
Net realized investment gains (losses)
|
(29
|
)
|
|
(26
|
)
|
|
(60
|
)
|
|||
Net change in fair value of credit derivatives:
|
|
|
|
|
|
||||||
Realized gains (losses) and other settlements
|
29
|
|
|
(18
|
)
|
|
23
|
|
|||
Net unrealized gains (losses)
|
69
|
|
|
746
|
|
|
800
|
|
|||
Net change in fair value of credit derivatives
|
98
|
|
|
728
|
|
|
823
|
|
|||
Fair value gains (losses) on CCS
|
0
|
|
|
27
|
|
|
(11
|
)
|
|||
Fair value gains (losses) on FG VIEs
|
38
|
|
|
38
|
|
|
255
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships
|
259
|
|
|
214
|
|
|
—
|
|
|||
Other income (loss)
|
39
|
|
|
37
|
|
|
14
|
|
|||
Total revenues
|
1,677
|
|
|
2,207
|
|
|
1,994
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Loss and LAE
|
295
|
|
|
424
|
|
|
126
|
|
|||
Amortization of deferred acquisition costs
|
18
|
|
|
20
|
|
|
25
|
|
|||
Interest expense
|
102
|
|
|
101
|
|
|
92
|
|
|||
Other operating expenses
|
245
|
|
|
231
|
|
|
220
|
|
|||
Total expenses
|
660
|
|
|
776
|
|
|
463
|
|
|||
Income (loss) before provision for income taxes
|
1,017
|
|
|
1,431
|
|
|
1,531
|
|
|||
Provision (benefit) for income taxes
|
136
|
|
|
375
|
|
|
443
|
|
|||
Net income (loss)
|
$
|
881
|
|
|
$
|
1,056
|
|
|
$
|
1,088
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Financial guaranty insurance:
|
|
|
|
|
|
||||||
Public finance
|
|
|
|
|
|
||||||
Scheduled net earned premiums and accretion
|
$
|
299
|
|
|
$
|
308
|
|
|
$
|
279
|
|
Accelerations:
|
|
|
|
|
|
||||||
Refundings
|
390
|
|
|
294
|
|
|
133
|
|
|||
Terminations
|
34
|
|
|
23
|
|
|
2
|
|
|||
Total accelerations
|
424
|
|
|
317
|
|
|
135
|
|
|||
Total public finance
|
723
|
|
|
625
|
|
|
414
|
|
|||
Structured finance(1)
|
|
|
|
|
|
||||||
Scheduled net earned premiums and accretion
|
96
|
|
|
125
|
|
|
152
|
|
|||
Terminations
|
45
|
|
|
14
|
|
|
1
|
|
|||
Total structured finance
|
141
|
|
|
139
|
|
|
153
|
|
|||
Other
|
0
|
|
|
2
|
|
|
3
|
|
|||
Total net earned premiums
|
$
|
864
|
|
|
$
|
766
|
|
|
$
|
570
|
|
(1)
|
Excludes
$16 million
,
$21 million
and
$32 million
for
2016
,
2015
and
2014
, respectively, on consolidated FG VIEs.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Income from fixed-maturity securities managed by third parties
|
$
|
306
|
|
|
$
|
335
|
|
|
$
|
324
|
|
Income from internally managed securities:
|
|
|
|
|
|
||||||
Fixed maturities
|
103
|
|
|
61
|
|
|
74
|
|
|||
Other
|
7
|
|
|
37
|
|
|
14
|
|
|||
Other
|
1
|
|
|
0
|
|
|
0
|
|
|||
Gross investment income
|
417
|
|
|
433
|
|
|
412
|
|
|||
Investment expenses
|
(9
|
)
|
|
(10
|
)
|
|
(9
|
)
|
|||
Net investment income
|
$
|
408
|
|
|
$
|
423
|
|
|
$
|
403
|
|
(1)
|
Net investment income excludes
$10 million
for
2016
and
$32 million
for
2015
and
$11 million
in
2014
, related to securities in the investment portfolio owned by AGC and AGM that were issued by consolidated FG VIEs.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Gross realized gains on available-for-sale securities
|
$
|
28
|
|
|
$
|
44
|
|
|
$
|
14
|
|
Gross realized losses on available-for-sale securities
|
(8
|
)
|
|
(15
|
)
|
|
(5
|
)
|
|||
Net realized gains (losses) on other invested assets
|
2
|
|
|
(8
|
)
|
|
6
|
|
|||
Other-than-temporary impairment
|
(51
|
)
|
|
(47
|
)
|
|
(75
|
)
|
|||
Net realized investment gains (losses)
|
$
|
(29
|
)
|
|
$
|
(26
|
)
|
|
$
|
(60
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Foreign exchange gain (loss) on remeasurement of premium receivable and loss reserves
|
$
|
(33
|
)
|
|
$
|
(15
|
)
|
|
$
|
(21
|
)
|
Commutation gains
|
8
|
|
|
28
|
|
|
23
|
|
|||
Other
|
64
|
|
|
24
|
|
|
12
|
|
|||
Total other income (loss)
|
$
|
39
|
|
|
$
|
37
|
|
|
$
|
14
|
|
•
|
considers deferred premium revenue in the calculation of loss reserves and loss and LAE for financial guaranty insurance contracts,
|
•
|
eliminates loss and LAE related to FG VIEs and
|
•
|
does not include estimated losses on credit derivatives.
|
|
As of
December 31, 2016 |
|
As of
December 31, 2015 |
||||
|
(in millions)
|
||||||
Public finance
|
$
|
904
|
|
|
$
|
809
|
|
Structured finance
|
|
|
|
||||
U.S. RMBS before R&W payable (recoverable)
|
200
|
|
|
488
|
|
||
R&W payable (recoverable) (1)
|
6
|
|
|
(79
|
)
|
||
U.S. RMBS after R&W
|
206
|
|
|
409
|
|
||
Other structured finance
|
88
|
|
|
173
|
|
||
Structured finance
|
294
|
|
|
582
|
|
||
Total
|
$
|
1,198
|
|
|
$
|
1,391
|
|
(1)
|
The Company’s agreements with R&W providers generally provide that, as the Company makes claim payments, the R&W providers reimburse it for those claims; if the Company later receives reimbursement through the transaction (for example, from excess spread), the Company repays the R&W providers.
When the Company projects receiving more reimbursements in the future than it projects paying in claims on transactions covered by R&W settlement agreements, the Company will have a net R&W payable.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Public finance
|
$
|
269
|
|
|
$
|
405
|
|
|
$
|
171
|
|
Structured finance
|
|
|
|
|
|
||||||
U.S. RMBS before R&W payable (recoverable)
|
(108
|
)
|
|
(149
|
)
|
|
0
|
|
|||
R&W payable (recoverable)
|
17
|
|
|
67
|
|
|
(268
|
)
|
|||
U.S. RMBS after R&W
|
(91
|
)
|
|
(82
|
)
|
|
(268
|
)
|
|||
Other structured finance
|
(39
|
)
|
|
(4
|
)
|
|
67
|
|
|||
Structured finance
|
(130
|
)
|
|
(86
|
)
|
|
(201
|
)
|
|||
Total
|
$
|
139
|
|
|
$
|
319
|
|
|
$
|
(30
|
)
|
(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.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Public finance
|
$
|
304
|
|
|
$
|
393
|
|
|
$
|
191
|
|
Structured finance
|
|
|
|
|
|
||||||
U.S. RMBS
|
37
|
|
|
54
|
|
|
(129
|
)
|
|||
Other structured finance
|
(39
|
)
|
|
5
|
|
|
94
|
|
|||
Structured finance
|
(2
|
)
|
|
59
|
|
|
(35
|
)
|
|||
Total insurance contracts before FG VIE consolidation
|
302
|
|
|
452
|
|
|
156
|
|
|||
Elimination of losses attributable to FG VIEs
|
(7
|
)
|
|
(28
|
)
|
|
(30
|
)
|
|||
Total loss and LAE (1)
|
$
|
295
|
|
|
$
|
424
|
|
|
$
|
126
|
|
(1)
|
Excludes credit derivative benefit of $20 million for 2016, credit derivative loss expense of $22 million for 2015 and credit derivative benefit of $77 million for 2014.
|
|
As of December 31, 2016
|
||
|
(in millions)
|
||
2017 (January 1 – March 31)
|
$
|
8
|
|
2017 (April 1 – June 30)
|
10
|
|
|
2017 (July 1 – September 30)
|
8
|
|
|
2017 (October 1 – December 31)
|
9
|
|
|
Subtotal 2017
|
35
|
|
|
2018
|
34
|
|
|
2019
|
32
|
|
|
2020
|
32
|
|
|
2021
|
28
|
|
|
2022-2026
|
117
|
|
|
2027-2031
|
82
|
|
|
2032-2036
|
44
|
|
|
After 2036
|
17
|
|
|
Net expected loss to be expensed
|
421
|
|
|
Future accretion
|
373
|
|
|
Total expected future loss and LAE
|
$
|
794
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Realized gains on credit derivatives
|
$
|
56
|
|
|
$
|
63
|
|
|
$
|
73
|
|
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements
|
(27
|
)
|
|
(81
|
)
|
|
(50
|
)
|
|||
Realized gains (losses) and other settlements (1)
|
29
|
|
|
(18
|
)
|
|
23
|
|
|||
Net unrealized gains (losses):
|
|
|
|
|
|
||||||
Pooled corporate obligations
|
(16
|
)
|
|
147
|
|
|
(18
|
)
|
|||
U.S. RMBS
|
22
|
|
|
396
|
|
|
814
|
|
|||
Commercial mortgage-backed securities (CMBS)
|
0
|
|
|
42
|
|
|
2
|
|
|||
Other
|
63
|
|
|
161
|
|
|
2
|
|
|||
Net unrealized gains (losses)
|
69
|
|
|
746
|
|
|
800
|
|
|||
Net change in fair value of credit derivatives
|
$
|
98
|
|
|
$
|
728
|
|
|
$
|
823
|
|
(1)
|
Includes realized gains and losses due to terminations and settlements of CDS contracts.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Net par of terminated credit derivative contracts
|
$
|
3,811
|
|
|
$
|
2,777
|
|
|
$
|
3,591
|
|
Realized gains on credit derivatives
|
20
|
|
|
13
|
|
|
1
|
|
|||
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements
|
—
|
|
|
(116
|
)
|
|
(26
|
)
|
|||
Net unrealized gains (losses) on credit derivatives
|
103
|
|
|
465
|
|
|
546
|
|
|
As of
December 31, 2016 |
|
As of
December 31, 2015 |
|
As of
December 31, 2014 |
|||
Five-year CDS spread:
|
|
|
|
|
|
|||
AGC
|
158
|
|
|
376
|
|
|
323
|
|
AGM
|
158
|
|
|
366
|
|
|
325
|
|
|
|
|
|
|
|
|||
One-year CDS spread
|
|
|
|
|
|
|||
AGC
|
35
|
|
|
139
|
|
|
80
|
|
AGM
|
29
|
|
|
131
|
|
|
85
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Change in unrealized gains (losses) of credit derivatives:
|
|
|
|
|
|
||||||
Before considering implication of the Company’s credit spreads
|
$
|
183
|
|
|
$
|
663
|
|
|
$
|
1,396
|
|
Resulting from change in the Company’s credit spreads
|
(114
|
)
|
|
83
|
|
|
(596
|
)
|
|||
After considering implication of the Company’s credit spreads
|
$
|
69
|
|
|
$
|
746
|
|
|
$
|
800
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Debt issued by AGUS
|
$
|
48
|
|
|
$
|
49
|
|
|
$
|
36
|
|
Debt issued by AGMH
|
54
|
|
|
54
|
|
|
54
|
|
|||
Notes payable by AGM
|
0
|
|
|
(2
|
)
|
|
2
|
|
|||
Total
|
$
|
102
|
|
|
$
|
101
|
|
|
$
|
92
|
|
•
|
changes in fair value gains (losses) on FG VIE assets and liabilities,
|
•
|
the eliminations of premiums and losses related to the AGC and AGM FG VIE liabilities with recourse, and
|
•
|
the elimination of investment balances related to the Company’s purchase of AGC and AGM insured FG VIE debt.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Net earned premiums
|
$
|
(16
|
)
|
|
$
|
(21
|
)
|
|
$
|
(32
|
)
|
Net investment income
|
(10
|
)
|
|
(32
|
)
|
|
(11
|
)
|
|||
Net realized investment gains (losses)
|
1
|
|
|
10
|
|
|
(5
|
)
|
|||
Fair value gains (losses) on FG VIEs
|
38
|
|
|
38
|
|
|
255
|
|
|||
Bargain purchase gain
|
—
|
|
|
2
|
|
|
—
|
|
|||
Loss and LAE
|
7
|
|
|
28
|
|
|
30
|
|
|||
Other income (loss)
|
0
|
|
|
0
|
|
|
(2
|
)
|
|||
Effect on income before tax
|
20
|
|
|
25
|
|
|
235
|
|
|||
Less: tax provision (benefit)
|
7
|
|
|
8
|
|
|
82
|
|
|||
Effect on net income (loss)
|
$
|
13
|
|
|
$
|
17
|
|
|
$
|
153
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Total provision (benefit) for income taxes
|
$
|
136
|
|
|
$
|
375
|
|
|
$
|
443
|
|
Effective tax rate
|
13.4
|
%
|
|
26.2
|
%
|
|
28.9
|
%
|
1)
|
Elimination of realized gains (losses) on the Company’s investments, except for gains and losses on securities classified as trading. The timing of realized gains and losses, which depends largely on market credit cycles, can vary considerably across periods. The timing of sales is largely subject to the Company’s discretion and influenced by market opportunities, as well as the Company’s tax and capital profile.
|
2)
|
Elimination of non-credit-impairment unrealized fair value gains (losses) on credit derivatives, which is the amount of unrealized fair value gains (losses) in excess of the present value of the expected estimated economic credit losses, and non-economic payments. Such fair value adjustments are heavily affected by, and in part fluctuate with, changes in market interest rates, the Company's credit spreads, and other market factors and are not expected to result in an economic gain or loss.
|
3)
|
Elimination of fair value gains (losses) on the Company’s CCS. Such amounts are affected by changes in market interest rates, the Company's credit spreads, price indications on the Company's publicly traded debt, and other market factors and are not expected to result in an economic gain or loss.
|
4)
|
Elimination of foreign exchange gains (losses) on remeasurement of net premium receivables and loss and LAE reserves. Long-dated receivables and loss and LAE reserves represent the present value of future contractual or expected cash flows. Therefore, the current period’s foreign exchange remeasurement gains (losses) are not necessarily indicative of the total foreign exchange gains (losses) that the Company will ultimately recognize.
|
5)
|
Elimination of the tax effects related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Net income (loss)
|
$
|
881
|
|
|
$
|
1,056
|
|
|
$
|
1,088
|
|
Less pre-tax adjustments:
|
|
|
|
|
|
||||||
Realized gains (losses) on investments
|
(30
|
)
|
|
(27
|
)
|
|
(56
|
)
|
|||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
36
|
|
|
505
|
|
|
687
|
|
|||
Fair value gains (losses) on CCS
|
0
|
|
|
27
|
|
|
(11
|
)
|
|||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
|
(33
|
)
|
|
(15
|
)
|
|
(21
|
)
|
|||
Total pre-tax adjustments
|
(27
|
)
|
|
490
|
|
|
599
|
|
|||
Less tax effect on pre-tax adjustments
|
13
|
|
|
(144
|
)
|
|
(158
|
)
|
|||
Operating income
|
$
|
895
|
|
|
$
|
710
|
|
|
$
|
647
|
|
|
|
|
|
|
|
||||||
Gain (loss) related to FG VIE consolidation (net of tax provision of $7, $4 and $84) included in operating income
|
$
|
12
|
|
|
$
|
11
|
|
|
$
|
156
|
|
1)
|
Elimination of non-credit-impairment unrealized fair value gains (losses) on credit derivatives, which is the amount of unrealized fair value gains (losses) in excess of the present value of the expected estimated economic credit losses, and non-economic payments. Such fair value adjustments are heavily affected by, and in part fluctuate with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss.
|
2)
|
Elimination of fair value gains (losses) on the Company’s CCS. Such amounts are affected by changes in market interest rates, the Company's credit spreads, price indications on the Company's publicly traded debt, and other market factors and are not expected to result in an economic gain or loss.
|
3)
|
Elimination of unrealized gains (losses) on the Company’s investments that are recorded as a component of accumulated other comprehensive income (AOCI) (excluding foreign exchange remeasurement). The AOCI component of the fair value adjustment on the investment portfolio is not deemed economic because the Company generally holds these investments to maturity and therefore should not recognize an economic gain or loss.
|
1)
|
Elimination of deferred acquisition costs, net. These amounts represent net deferred expenses that have already been paid or accrued and will be expensed in future accounting periods.
|
2)
|
Addition of the net present value of estimated net future credit derivative revenue. See below.
|
3)
|
Addition of the deferred premium revenue on financial guaranty contracts in excess of expected loss to be expensed, net of reinsurance. This amount represents the expected future net earned premiums, net of expected losses to be expensed, which are not reflected in GAAP equity.
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
||||||||||||
|
Total
|
|
Per Share
|
|
Total
|
|
Per Share
|
||||||||
|
(dollars in millions, except
per share amounts)
|
||||||||||||||
Shareholders’ equity
|
$
|
6,504
|
|
|
$
|
50.82
|
|
|
$
|
6,063
|
|
|
$
|
43.96
|
|
Less pre-tax adjustments:
|
|
|
|
|
|
|
|
||||||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
(189
|
)
|
|
(1.48
|
)
|
|
(241
|
)
|
|
(1.75
|
)
|
||||
Fair value gains (losses) on CCS
|
62
|
|
|
0.48
|
|
|
62
|
|
|
0.45
|
|
||||
Unrealized gain (loss) on investment portfolio excluding foreign exchange effect
|
316
|
|
|
2.47
|
|
|
373
|
|
|
2.71
|
|
||||
Less taxes
|
(71
|
)
|
|
(0.54
|
)
|
|
(56
|
)
|
|
(0.41
|
)
|
||||
Non-GAAP operating shareholders’ equity
|
6,386
|
|
|
49.89
|
|
|
5,925
|
|
|
42.96
|
|
||||
Pre-tax adjustments:
|
|
|
|
|
|
|
|
||||||||
Less: Deferred acquisition costs
|
106
|
|
|
0.83
|
|
|
114
|
|
|
0.83
|
|
||||
Plus: Net present value of estimated net future credit derivative revenue
|
136
|
|
|
1.07
|
|
|
169
|
|
|
1.23
|
|
||||
Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed
|
2,922
|
|
|
22.83
|
|
|
3,384
|
|
|
24.53
|
|
||||
Plus taxes
|
(832
|
)
|
|
(6.50
|
)
|
|
(968
|
)
|
|
(7.02
|
)
|
||||
Non-GAAP adjusted book value
|
$
|
8,506
|
|
|
$
|
66.46
|
|
|
$
|
8,396
|
|
|
$
|
60.87
|
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) related to FG VIE consolidation included in non-GAAP operating shareholders' equity (net of tax benefit of $(4) and $(11))
|
$
|
(7
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(21
|
)
|
|
$
|
(0.15
|
)
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) related to FG VIE consolidation included in non-GAAP adjusted book value (net of tax benefit of $(12) and $(22))
|
$
|
(24
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(43
|
)
|
|
$
|
(0.31
|
)
|
|
Year Ended December 31, 2016
|
||||||||||||||||||
|
Public Finance
|
|
Structured Finance
|
|
|
||||||||||||||
|
U.S.
|
|
Non - U.S.
|
|
U.S.
|
|
Non - U.S.
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
GWP
|
$
|
142
|
|
|
$
|
15
|
|
|
$
|
(1
|
)
|
|
$
|
(2
|
)
|
|
$
|
154
|
|
Less: Installment GWP and other GAAP adjustments(1)
|
(19
|
)
|
|
15
|
|
|
(4
|
)
|
|
(2
|
)
|
|
(10
|
)
|
|||||
Plus: Financial guaranty installment premium PVP
|
0
|
|
|
25
|
|
|
1
|
|
|
1
|
|
|
27
|
|
|||||
Plus: PVP of non-financial guaranty insurance
|
—
|
|
|
—
|
|
|
23
|
|
|
—
|
|
|
23
|
|
|||||
PVP
|
$
|
161
|
|
|
$
|
25
|
|
|
$
|
27
|
|
|
$
|
1
|
|
|
$
|
214
|
|
|
Year Ended December 31, 2015
|
||||||||||||||||||
|
Public Finance
|
|
Structured Finance
|
|
|
||||||||||||||
|
U.S.
|
|
Non - U.S.
|
|
U.S.
|
|
Non - U.S.
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
GWP
|
$
|
119
|
|
|
$
|
41
|
|
|
$
|
23
|
|
|
$
|
(2
|
)
|
|
$
|
181
|
|
Less: Installment GWP and other GAAP adjustments(1)
|
(5
|
)
|
|
41
|
|
|
21
|
|
|
(2
|
)
|
|
55
|
|
|||||
Plus: Financial guaranty installment premium PVP
|
0
|
|
|
27
|
|
|
18
|
|
|
1
|
|
|
46
|
|
|||||
Plus: PVP of non-financial guaranty insurance
|
—
|
|
|
—
|
|
|
2
|
|
|
5
|
|
|
7
|
|
|||||
PVP
|
$
|
124
|
|
|
$
|
27
|
|
|
$
|
22
|
|
|
$
|
6
|
|
|
$
|
179
|
|
|
Year Ended December 31, 2014
|
||||||||||||||||||
|
Public Finance
|
|
Structured Finance
|
|
|
||||||||||||||
|
U.S.
|
|
Non - U.S.
|
|
U.S.
|
|
Non - U.S.
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
GWP
|
$
|
122
|
|
|
$
|
6
|
|
|
$
|
(32
|
)
|
|
$
|
8
|
|
|
$
|
104
|
|
Less: Installment GWP and other GAAP adjustments(1)
|
(2
|
)
|
|
5
|
|
|
(33
|
)
|
|
8
|
|
|
(22
|
)
|
|||||
Plus: Financial guaranty installment premium PVP
|
4
|
|
|
6
|
|
|
23
|
|
|
9
|
|
|
42
|
|
|||||
Plus: PVP of non-financial guaranty insurance
|
—
|
|
|
—
|
|
|
0
|
|
|
—
|
|
|
0
|
|
|||||
PVP
|
$
|
128
|
|
|
$
|
7
|
|
|
$
|
24
|
|
|
$
|
9
|
|
|
$
|
168
|
|
(1)
|
Includes present value of new business on installment policies discounted at the prescribed GAAP discount rates, GWP adjustments on existing installment policies due to changes in assumptions, any cancellations of assumed reinsurance contracts, and other GAAP adjustments.
|
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
||||||||
Sector
|
|
Net Par
Outstanding
|
|
Avg.
Rating
|
|
Net Par
Outstanding
|
|
Avg.
Rating
|
||||
|
|
(dollars in millions)
|
||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
|||
U.S.:
|
|
|
|
|
|
|
|
|
|
|||
General obligation
|
|
$
|
107,717
|
|
|
A
|
|
$
|
126,255
|
|
|
A
|
Tax backed
|
|
49,931
|
|
|
A-
|
|
58,062
|
|
|
A
|
||
Municipal utilities
|
|
37,603
|
|
|
A
|
|
45,936
|
|
|
A
|
||
Transportation
|
|
19,403
|
|
|
A-
|
|
23,454
|
|
|
A
|
||
Healthcare
|
|
11,238
|
|
|
A
|
|
15,006
|
|
|
A
|
||
Higher education
|
|
10,085
|
|
|
A
|
|
11,936
|
|
|
A
|
||
Infrastructure finance
|
|
3,769
|
|
|
BBB+
|
|
4,993
|
|
|
BBB
|
||
Housing
|
|
1,559
|
|
|
A-
|
|
2,037
|
|
|
A
|
||
Investor-owned utilities
|
|
697
|
|
|
BBB+
|
|
916
|
|
|
A-
|
||
Other public finance—U.S.
|
|
2,796
|
|
|
A
|
|
3,271
|
|
|
A
|
||
Total public finance—U.S.
|
|
244,798
|
|
|
A
|
|
291,866
|
|
|
A
|
||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|||
Infrastructure finance
|
|
10,731
|
|
|
BBB
|
|
12,728
|
|
|
BBB
|
||
Regulated utilities
|
|
9,263
|
|
|
BBB+
|
|
10,048
|
|
|
BBB+
|
||
Pooled infrastructure
|
|
1,513
|
|
|
AAA
|
|
1,879
|
|
|
AA
|
||
Other public finance
|
|
4,874
|
|
|
A
|
|
4,922
|
|
|
A
|
||
Total public finance—non-U.S.
|
|
26,381
|
|
|
BBB+
|
|
29,577
|
|
|
BBB+
|
||
Total public finance
|
|
271,179
|
|
|
A-
|
|
321,443
|
|
|
A
|
||
Structured finance:
|
|
|
|
|
|
|
|
|
|
|||
U.S.:
|
|
|
|
|
|
|
|
|
|
|||
Pooled corporate obligations
|
|
10,050
|
|
|
AAA
|
|
16,008
|
|
|
AAA
|
||
RMBS
|
|
5,637
|
|
|
BBB-
|
|
7,067
|
|
|
BBB-
|
||
Insurance securitizations
|
|
2,308
|
|
|
A+
|
|
3,000
|
|
|
A+
|
||
Consumer receivables
|
|
1,652
|
|
|
BBB+
|
|
2,099
|
|
|
A-
|
||
Financial products
|
|
1,540
|
|
|
AA-
|
|
1,906
|
|
|
AA-
|
||
Commercial receivables
|
|
230
|
|
|
BBB-
|
|
427
|
|
|
BBB+
|
||
CMBS and other commercial real estate related exposures
|
|
43
|
|
|
A
|
|
533
|
|
|
AAA
|
||
Other structured finance—U.S.
|
|
597
|
|
|
AA-
|
|
730
|
|
|
AA-
|
||
Total structured finance—U.S.
|
|
22,057
|
|
|
A+
|
|
31,770
|
|
|
AA-
|
||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|||
Pooled corporate obligations
|
|
1,535
|
|
|
AA
|
|
3,645
|
|
|
AA
|
||
RMBS
|
|
604
|
|
|
A-
|
|
492
|
|
|
BBB
|
||
Commercial receivables
|
|
356
|
|
|
BBB+
|
|
600
|
|
|
BBB+
|
||
Other structured finance
|
|
587
|
|
|
AA
|
|
621
|
|
|
AA-
|
||
Total structured finance—non-U.S.
|
|
3,082
|
|
|
AA-
|
|
5,358
|
|
|
AA-
|
||
Total structured finance
|
|
25,139
|
|
|
AA-
|
|
37,128
|
|
|
AA-
|
||
Total net par outstanding
|
|
$
|
296,318
|
|
|
A
|
|
$
|
358,571
|
|
|
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)
|
|||||||||||||||||||||||||||||||||
AAA
|
|
$
|
2,066
|
|
|
0.8
|
%
|
|
$
|
2,221
|
|
|
8.4
|
%
|
|
$
|
9,757
|
|
|
44.2
|
%
|
|
$
|
1,447
|
|
|
47.0
|
%
|
|
$
|
15,491
|
|
|
5.2
|
%
|
AA
|
|
46,420
|
|
|
19.0
|
|
|
170
|
|
|
0.6
|
|
|
5,773
|
|
|
26.2
|
|
|
127
|
|
|
4.1
|
|
|
52,490
|
|
|
17.7
|
|
|||||
A
|
|
133,829
|
|
|
54.7
|
|
|
6,270
|
|
|
23.8
|
|
|
1,589
|
|
|
7.2
|
|
|
456
|
|
|
14.8
|
|
|
142,144
|
|
|
48.0
|
|
|||||
BBB
|
|
55,103
|
|
|
22.5
|
|
|
16,378
|
|
|
62.1
|
|
|
879
|
|
|
4.0
|
|
|
759
|
|
|
24.6
|
|
|
73,119
|
|
|
24.7
|
|
|||||
BIG
|
|
7,380
|
|
|
3.0
|
|
|
1,342
|
|
|
5.1
|
|
|
4,059
|
|
|
18.4
|
|
|
293
|
|
|
9.5
|
|
|
13,074
|
|
|
4.4
|
|
|||||
Total net par outstanding
|
|
$
|
244,798
|
|
|
100.0
|
%
|
|
$
|
26,381
|
|
|
100.0
|
%
|
|
$
|
22,057
|
|
|
100.0
|
%
|
|
$
|
3,082
|
|
|
100.0
|
%
|
|
$
|
296,318
|
|
|
100.0
|
%
|
(1)
|
The
December 31, 2016
amounts include
$2.9 billion
of net par from the CIFG Acquisition.
|
|
|
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)
|
|||||||||||||||||||||||||||||||||
AAA
|
|
$
|
3,053
|
|
|
1.1
|
%
|
|
$
|
709
|
|
|
2.4
|
%
|
|
$
|
14,366
|
|
|
45.2
|
%
|
|
$
|
2,709
|
|
|
50.6
|
%
|
|
$
|
20,837
|
|
|
5.8
|
%
|
AA
|
|
69,274
|
|
|
23.7
|
|
|
2,017
|
|
|
6.8
|
|
|
7,934
|
|
|
25.0
|
|
|
177
|
|
|
3.3
|
|
|
79,402
|
|
|
22.1
|
|
|||||
A
|
|
157,440
|
|
|
53.9
|
|
|
6,765
|
|
|
22.9
|
|
|
2,486
|
|
|
7.8
|
|
|
555
|
|
|
10.3
|
|
|
167,246
|
|
|
46.7
|
|
|||||
BBB
|
|
54,315
|
|
|
18.6
|
|
|
18,708
|
|
|
63.2
|
|
|
1,515
|
|
|
4.8
|
|
|
1,365
|
|
|
25.5
|
|
|
75,903
|
|
|
21.2
|
|
|||||
BIG
|
|
7,784
|
|
|
2.7
|
|
|
1,378
|
|
|
4.7
|
|
|
5,469
|
|
|
17.2
|
|
|
552
|
|
|
10.3
|
|
|
15,183
|
|
|
4.2
|
|
|||||
Total net par outstanding
|
|
$
|
291,866
|
|
|
100.0
|
%
|
|
$
|
29,577
|
|
|
100.0
|
%
|
|
$
|
31,770
|
|
|
100.0
|
%
|
|
$
|
5,358
|
|
|
100.0
|
%
|
|
$
|
358,571
|
|
|
100.0
|
%
|
(1)
|
The
December 31, 2015
amounts include
$10.9 billion
of net par from the Radian Asset Acquisition.
|
|
Net Par Outstanding
|
|
Percent of Total U.S. Public Finance Net Par Outstanding
|
|
Rating
|
|||
|
(dollars in millions)
|
|||||||
New Jersey (State of)
|
$
|
4,468
|
|
|
1.8
|
%
|
|
BBB+
|
Illinois (State of)
|
2,269
|
|
|
0.9
|
|
|
BBB+
|
|
California (State of)
|
1,849
|
|
|
0.8
|
|
|
A
|
|
New York (City of) New York
|
1,804
|
|
|
0.7
|
|
|
A+
|
|
Pennsylvania (Commonwealth of)
|
1,771
|
|
|
0.7
|
|
|
A-
|
|
Chicago (City of) Illinois
|
1,699
|
|
|
0.7
|
|
|
BBB+
|
|
New York (State of)
|
1,670
|
|
|
0.7
|
|
|
A+
|
|
Puerto Rico, General Obligation, Appropriations and Guarantees of the Commonwealth
|
1,663
|
|
|
0.7
|
|
|
CCC-
|
|
Massachusetts (Commonwealth of)
|
1,627
|
|
|
0.7
|
|
|
AA
|
|
Port Authority of New York & New Jersey
|
1,337
|
|
|
0.5
|
|
|
BBB+
|
|
Total of top ten U.S. public finance exposures
|
$
|
20,157
|
|
|
8.2
|
%
|
|
|
|
Net Par Outstanding
|
|
Percent of Total U.S. Structured Finance Net Par Outstanding
|
|
Rating
|
|||
|
(dollars in millions)
|
|||||||
Private US Insurance Securitization
|
$
|
800
|
|
|
3.6
|
%
|
|
AA
|
Synthetic Investment Grade Pooled Corporate CDO
|
766
|
|
|
3.5
|
|
|
AAA
|
|
Synthetic Investment Grade Pooled Corporate CDO
|
744
|
|
|
3.4
|
|
|
AAA
|
|
Synthetic Investment Grade Pooled Corporate CDO
|
655
|
|
|
3.0
|
|
|
AAA
|
|
Synthetic Investment Grade Pooled Corporate CDO
|
563
|
|
|
2.6
|
|
|
AAA
|
|
Synthetic Investment Grade Pooled Corporate CDO
|
516
|
|
|
2.3
|
|
|
AAA
|
|
Private US Insurance Securitization
|
500
|
|
|
2.3
|
|
|
AA
|
|
Synthetic Investment Grade Pooled Corporate CDO
|
450
|
|
|
2.0
|
|
|
AAA
|
|
SLM Private Credit Student Trust 2007-A
|
450
|
|
|
2.0
|
|
|
A-
|
|
Synthetic Investment Grade Pooled Corporate CDO
|
440
|
|
|
2.0
|
|
|
AAA
|
|
Total of top ten U.S. structured finance exposures
|
$
|
5,884
|
|
|
26.7
|
%
|
|
|
|
Country
|
|
Net Par Outstanding
|
|
Percent of Total Non-U.S. Net Par Outstanding
|
|
Rating
|
|||
|
|
|
(dollars in millions)
|
|||||||
Hydro-Quebec, Province of Quebec
|
Canada
|
|
$
|
1,985
|
|
|
6.7
|
%
|
|
A+
|
Thames Water Utility Finance PLC
|
United Kingdom
|
|
1,146
|
|
|
3.9
|
|
|
A-
|
|
Societe des Autoroutes du Nord et de l'Est de France S.A.
|
France
|
|
926
|
|
|
3.1
|
|
|
BBB+
|
|
Channel Link Enterprises Finance PLC
|
France, United Kingdom
|
|
768
|
|
|
2.6
|
|
|
BBB
|
|
Verbund - Lease and Sublease of Hydro-Electric Equipment
|
Austria
|
|
677
|
|
|
2.3
|
|
|
AAA
|
|
Capital Hospitals (Barts)
|
United Kingdom
|
|
671
|
|
|
2.3
|
|
|
BBB-
|
|
Sydney Airport Finance Company
|
Australia
|
|
631
|
|
|
2.1
|
|
|
BBB
|
|
Southern Water Services Limited
|
United Kingdom
|
|
615
|
|
|
2.1
|
|
|
A-
|
|
InspirED Education (South Lanarkshire) PLC
|
United Kingdom
|
|
608
|
|
|
2.1
|
|
|
BBB-
|
|
Southern Gas Networks PLC
|
United Kingdom
|
|
556
|
|
|
1.9
|
|
|
BBB
|
|
Total of top ten non-U.S. exposures
|
|
|
$
|
8,583
|
|
|
29.1
|
%
|
|
|
|
Number of Risks
|
|
Net Par Outstanding
|
|
Percent of Total Net Par Outstanding
|
||||
|
(dollars in millions)
|
||||||||
U.S.:
|
|
|
|
|
|
||||
California
|
1,459
|
|
|
$
|
42,404
|
|
|
14.3
|
%
|
Texas
|
1,271
|
|
|
20,599
|
|
|
7.0
|
|
|
Pennsylvania
|
852
|
|
|
20,232
|
|
|
6.8
|
|
|
New York
|
935
|
|
|
19,637
|
|
|
6.6
|
|
|
Illinois
|
776
|
|
|
17,967
|
|
|
6.1
|
|
|
Florida
|
324
|
|
|
12,643
|
|
|
4.3
|
|
|
New Jersey
|
495
|
|
|
12,560
|
|
|
4.2
|
|
|
Michigan
|
506
|
|
|
7,985
|
|
|
2.7
|
|
|
Georgia
|
172
|
|
|
6,372
|
|
|
2.2
|
|
|
Ohio
|
409
|
|
|
5,554
|
|
|
1.9
|
|
|
Other states and U.S. territories
|
3,475
|
|
|
78,845
|
|
|
26.6
|
|
|
Total U.S. public finance
|
10,674
|
|
|
244,798
|
|
|
82.7
|
|
|
U.S. Structured finance (multiple states)
|
610
|
|
|
22,057
|
|
|
7.4
|
|
|
Total U.S.
|
11,284
|
|
|
266,855
|
|
|
90.1
|
|
|
Non-U.S.:
|
|
|
|
|
|
||||
United Kingdom
|
112
|
|
|
15,940
|
|
|
5.4
|
|
|
Australia
|
18
|
|
|
3,036
|
|
|
1.0
|
|
|
Canada
|
9
|
|
|
2,730
|
|
|
0.9
|
|
|
France
|
14
|
|
|
1,809
|
|
|
0.6
|
|
|
Italy
|
9
|
|
|
1,311
|
|
|
0.4
|
|
|
Other
|
53
|
|
|
4,637
|
|
|
1.6
|
|
|
Total non-U.S.
|
215
|
|
|
29,463
|
|
|
9.9
|
|
|
Total
|
11,499
|
|
|
$
|
296,318
|
|
|
100.0
|
%
|
Original Par Amount Per Issue
|
|
Number of
Issues
|
|
Net Par
Outstanding
|
|
% of Public
Finance
Net Par
Outstanding
|
|||
|
(dollars in millions)
|
||||||||
Less than $10 million
|
15,018
|
|
$
|
40,484
|
|
|
14.9
|
%
|
|
$10 through $50 million
|
5,198
|
|
86,376
|
|
|
31.9
|
|
||
$50 through $100 million
|
937
|
|
48,058
|
|
|
17.7
|
|
||
$100 million to $200 million
|
430
|
|
42,938
|
|
|
15.8
|
|
||
$200 million or greater
|
238
|
|
53,323
|
|
|
19.7
|
|
||
Total
|
21,821
|
|
$
|
271,179
|
|
|
100.0
|
%
|
Original Par Amount Per Issue
|
|
Number of
Issues
|
|
Net Par
Outstanding
|
|
% of Structured
Finance
Net Par
Outstanding
|
|||
|
(dollars in millions)
|
||||||||
Less than $10 million
|
186
|
|
$
|
94
|
|
|
0.4
|
%
|
|
$10 through $50 million
|
241
|
|
1,765
|
|
|
7.0
|
|
||
$50 through $100 million
|
85
|
|
2,469
|
|
|
9.8
|
|
||
$100 million to $200 million
|
127
|
|
4,805
|
|
|
19.1
|
|
||
$200 million or greater
|
139
|
|
16,006
|
|
|
63.7
|
|
||
Total
|
778
|
|
$
|
25,139
|
|
|
100.0
|
%
|
|
|
Par Outstanding
|
||||||||||
|
|
As of December 31, 2016
|
||||||||||
Reinsurer
|
|
Ceded Par
Outstanding (1) |
|
Second-to-
Pay Insured Par Outstanding (2) |
|
Assumed Par
Outstanding |
||||||
|
|
(in millions)
|
||||||||||
Reinsurers rated investment grade:
|
|
|
|
|
|
|
||||||
Tokio Marine & Nichido Fire Insurance Co., Ltd. (3) (4)
|
|
$
|
3,436
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Mitsui Sumitomo Insurance Co. Ltd. (3) (4)
|
|
1,273
|
|
|
—
|
|
|
—
|
|
|||
National
|
|
—
|
|
|
4,420
|
|
|
4,364
|
|
|||
Subtotal
|
|
4,709
|
|
|
4,420
|
|
|
4,364
|
|
|||
Reinsurers rated BIG, with rating withdrawn or not rated:
|
|
|
|
|
|
|
||||||
American Overseas Reinsurance Company Limited (3)
|
|
3,573
|
|
|
—
|
|
|
30
|
|
|||
Syncora Guarantee Inc. (3)
|
|
2,062
|
|
|
1,098
|
|
|
655
|
|
|||
ACA Financial Guaranty Corp.
|
|
637
|
|
|
20
|
|
|
—
|
|
|||
Ambac Assurance Corporation
|
|
115
|
|
|
2,862
|
|
|
6,695
|
|
|||
MBIA
|
|
—
|
|
|
1,024
|
|
|
165
|
|
|||
MBIA UK (5)
|
|
—
|
|
|
319
|
|
|
211
|
|
|||
FGIC (6)
|
|
—
|
|
|
1,194
|
|
|
410
|
|
|||
Ambac Assurance Corp. Segregated Account
|
|
—
|
|
|
73
|
|
|
614
|
|
|||
Other (3)
|
|
60
|
|
|
529
|
|
|
120
|
|
|||
Subtotal
|
|
6,447
|
|
|
7,119
|
|
|
8,900
|
|
|||
Total
|
|
$
|
11,156
|
|
|
$
|
11,539
|
|
|
$
|
13,264
|
|
(1)
|
Of the total ceded par to reinsurers rated BIG, had rating withdrawn or not rated,
$384 million
is rated BIG.
|
(2)
|
The par on second-to-pay exposure where the primary insurer and underlying transaction rating are both BIG is
$788 million
.
|
(3)
|
The total collateral posted by all non-affiliated reinsurers required or had agreed to post collateral as of
December 31, 2016
was approximately
$387 million
.
|
(5)
|
See Part II, Item 8, Financial Statements and Supplementary Data, Note 2, Acquisitions, for more information on MBIA UK.
|
(6)
|
FGIC includes subsidiaries Financial Guaranty Insurance Company and FGIC UK Limited.
|
•
|
Constitutionally Guaranteed.
The Company includes in this category public debt benefiting from Article VI of the Constitution of the Commonwealth, which expressly provides that interest and principal payments on the public debt are to be paid before other disbursements are made.
|
•
|
Public Corporations – Certain Revenues Potentially Subject to Clawback.
The Company includes in this category the debt of public corporations for which applicable law permits the Commonwealth to claw back, subject to certain conditions and for the payment of public debt, at least a portion of the revenues supporting the bonds the Company insures. As a Constitutional condition to clawback, available Commonwealth revenues for any fiscal year must be insufficient to pay Commonwealth debt service before the payment of any appropriations for that year. The Company believes that this condition has not been satisfied to date, and accordingly that the Commonwealth has not to date been entitled to clawback revenues supporting debt insured by the Company.
As described in Part II, Item 8, Financial Statements and Supplementary Data, Note 4, Outstanding Exposure, the Company sued various Puerto Rico governmental officials in the United States District Court, District of Puerto Rico asserting that Puerto Rico's recent attempt to claw back pledged taxes is unconstitutional, and demanding declaratory and injunctive relief.
|
•
|
Other Public Corporations.
The Company includes in this category the debt of public corporations that are supported by revenues it does not believe are subject to clawback.
|
|
|
Net Par Outstanding
|
|
|
||||||||||||||||||||
|
|
AGM
|
|
AGC
|
|
AG Re
|
|
Eliminations (1)
|
|
Total Net Par Outstanding (2)
|
|
Gross Par Outstanding
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commonwealth of Puerto Rico - General Obligation Bonds (3)
|
|
$
|
680
|
|
|
$
|
378
|
|
|
$
|
421
|
|
|
$
|
(3
|
)
|
|
$
|
1,476
|
|
|
$
|
1,577
|
|
Puerto Rico Public Buildings Authority (PBA) (3)
|
|
11
|
|
|
169
|
|
|
0
|
|
|
(11
|
)
|
|
169
|
|
|
174
|
|
||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Puerto Rico Highways and Transportation Authority (PRHTA) (Transportation revenue) (3) (4)
|
|
273
|
|
|
519
|
|
|
209
|
|
|
(83
|
)
|
|
918
|
|
|
949
|
|
||||||
PRHTA (Highway revenue)
|
|
213
|
|
|
93
|
|
|
44
|
|
|
—
|
|
|
350
|
|
|
556
|
|
||||||
Puerto Rico Convention Center District Authority (PRCCDA)
|
|
—
|
|
|
152
|
|
|
—
|
|
|
—
|
|
|
152
|
|
|
152
|
|
||||||
Puerto Rico Infrastructure Financing Authority (PRIFA) (3)
|
|
—
|
|
|
17
|
|
|
1
|
|
|
—
|
|
|
18
|
|
|
18
|
|
||||||
Other Public Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
PREPA
|
|
417
|
|
|
73
|
|
|
234
|
|
|
—
|
|
|
724
|
|
|
876
|
|
||||||
Puerto Rico Aqueduct and Sewer Authority (PRASA)
|
|
—
|
|
|
285
|
|
|
88
|
|
|
—
|
|
|
373
|
|
|
373
|
|
||||||
Municipal Finance Agency (MFA)
|
|
175
|
|
|
61
|
|
|
98
|
|
|
—
|
|
|
334
|
|
|
488
|
|
||||||
Puerto Rico Sales Tax Financing Corporation (COFINA)
|
|
262
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
271
|
|
|
271
|
|
||||||
University of Puerto Rico (U of PR)
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||||
Total net exposure to Puerto Rico
|
|
$
|
2,031
|
|
|
$
|
1,748
|
|
|
$
|
1,104
|
|
|
$
|
(97
|
)
|
|
$
|
4,786
|
|
|
$
|
5,435
|
|
(1)
|
Net par outstanding eliminations relate to second-to-pay policies under which an Assured Guaranty insurance subsidiary guarantees an obligation already insured by another Assured Guaranty insurance subsidiary.
|
(2)
|
Includes exposure to capital appreciation bonds with a current aggregate net par outstanding of $31 million and a fully accreted net par at maturity of $63 million. Of these amounts, current net par of $19 million and fully accreted net par at maturity of $50 million relate to the COFINA, current net par of $7 million and fully accreted net par at maturity of $7 million relate to the PRHTA, and current net par of $5 million and fully accreted net par at maturity of $5 million relate to the Commonwealth General Obligation Bonds.
|
(3)
|
As of the date of this filing, the Company has paid claims on these credits.
|
(4)
|
The
December 31, 2016
amount includes
$46 million
of net par from CIFG Acquisition.
|
|
Scheduled Net Par Amortization
|
|||||||||||||||||||||||||||||||||||||||||
|
2017 (1Q)
|
2017 (2Q)
|
2017 (3Q)
|
2017 (4Q)
|
2018
|
2019
|
2020
|
2021
|
2022 -2026
|
2027 -2031
|
2032 -2036
|
2037 -2041
|
2042 -2047
|
Total
|
||||||||||||||||||||||||||||
|
(in millions)
|
|||||||||||||||||||||||||||||||||||||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
Commonwealth of Puerto Rico - General Obligation Bonds
|
$
|
0
|
|
$
|
0
|
|
$
|
93
|
|
$
|
0
|
|
$
|
75
|
|
$
|
82
|
|
$
|
136
|
|
$
|
16
|
|
$
|
226
|
|
$
|
254
|
|
$
|
489
|
|
$
|
105
|
|
$
|
—
|
|
$
|
1,476
|
|
PBA
|
—
|
|
—
|
|
28
|
|
—
|
|
—
|
|
3
|
|
5
|
|
13
|
|
24
|
|
42
|
|
54
|
|
—
|
|
—
|
|
169
|
|
||||||||||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
PRHTA (Transportation revenue)
|
0
|
|
0
|
|
36
|
|
0
|
|
38
|
|
32
|
|
25
|
|
18
|
|
119
|
|
156
|
|
295
|
|
194
|
|
5
|
|
918
|
|
||||||||||||||
PRHTA (Highway revenue)
|
—
|
|
—
|
|
10
|
|
—
|
|
10
|
|
21
|
|
22
|
|
26
|
|
30
|
|
62
|
|
169
|
|
—
|
|
—
|
|
350
|
|
||||||||||||||
PRCCDA
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
19
|
|
133
|
|
—
|
|
—
|
|
152
|
|
||||||||||||||
PRIFA
|
—
|
|
—
|
|
—
|
|
—
|
|
2
|
|
—
|
|
—
|
|
—
|
|
2
|
|
—
|
|
—
|
|
14
|
|
—
|
|
18
|
|
||||||||||||||
Other Public Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
PREPA
|
0
|
|
0
|
|
5
|
|
—
|
|
4
|
|
25
|
|
42
|
|
21
|
|
322
|
|
279
|
|
26
|
|
0
|
|
—
|
|
724
|
|
||||||||||||||
PRASA
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
53
|
|
57
|
|
—
|
|
2
|
|
261
|
|
373
|
|
||||||||||||||
MFA
|
—
|
|
—
|
|
48
|
|
—
|
|
47
|
|
44
|
|
37
|
|
33
|
|
98
|
|
27
|
|
—
|
|
—
|
|
—
|
|
334
|
|
||||||||||||||
COFINA
|
0
|
|
0
|
|
0
|
|
0
|
|
(1
|
)
|
(1
|
)
|
(1
|
)
|
(2
|
)
|
(5
|
)
|
(7
|
)
|
34
|
|
102
|
|
152
|
|
271
|
|
||||||||||||||
U of PR
|
—
|
|
—
|
|
0
|
|
—
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
1
|
|
—
|
|
—
|
|
1
|
|
||||||||||||||
Total net par for Puerto Rico
|
$
|
0
|
|
$
|
0
|
|
$
|
220
|
|
$
|
0
|
|
$
|
175
|
|
$
|
206
|
|
$
|
266
|
|
$
|
125
|
|
$
|
869
|
|
$
|
889
|
|
$
|
1,201
|
|
$
|
417
|
|
$
|
418
|
|
$
|
4,786
|
|
|
Scheduled Net Debt Service Amortization
|
|||||||||||||||||||||||||||||||||||||||||
|
2017 (1Q)
|
2017 (2Q)
|
2017 (3Q)
|
2017 (4Q)
|
2018
|
2019
|
2020
|
2021
|
2022 -2026
|
2027 -2031
|
2032 -2036
|
2037 -2041
|
2042 -2047
|
Total
|
||||||||||||||||||||||||||||
|
(in millions)
|
|||||||||||||||||||||||||||||||||||||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
Commonwealth of Puerto Rico - General Obligation Bonds
|
$
|
38
|
|
$
|
0
|
|
$
|
131
|
|
$
|
0
|
|
$
|
146
|
|
$
|
150
|
|
$
|
200
|
|
$
|
73
|
|
$
|
488
|
|
$
|
445
|
|
$
|
595
|
|
$
|
112
|
|
$
|
—
|
|
$
|
2,378
|
|
PBA
|
4
|
|
—
|
|
32
|
|
—
|
|
7
|
|
10
|
|
13
|
|
20
|
|
54
|
|
58
|
|
62
|
|
—
|
|
—
|
|
260
|
|
||||||||||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
PRHTA (Transportation revenue)
|
24
|
|
0
|
|
60
|
|
0
|
|
84
|
|
76
|
|
67
|
|
59
|
|
305
|
|
308
|
|
404
|
|
229
|
|
5
|
|
1,621
|
|
||||||||||||||
PRHTA (Highway revenue)
|
10
|
|
—
|
|
19
|
|
—
|
|
29
|
|
39
|
|
39
|
|
42
|
|
96
|
|
120
|
|
196
|
|
—
|
|
—
|
|
590
|
|
||||||||||||||
PRCCDA
|
3
|
|
—
|
|
4
|
|
—
|
|
7
|
|
7
|
|
7
|
|
7
|
|
35
|
|
50
|
|
151
|
|
—
|
|
—
|
|
271
|
|
||||||||||||||
PRIFA
|
0
|
|
—
|
|
0
|
|
—
|
|
3
|
|
1
|
|
1
|
|
1
|
|
7
|
|
4
|
|
3
|
|
15
|
|
—
|
|
35
|
|
||||||||||||||
Other Public Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
PREPA
|
15
|
|
2
|
|
20
|
|
2
|
|
37
|
|
58
|
|
74
|
|
52
|
|
440
|
|
322
|
|
29
|
|
0
|
|
—
|
|
1,051
|
|
||||||||||||||
PRASA
|
10
|
|
—
|
|
10
|
|
—
|
|
20
|
|
19
|
|
19
|
|
19
|
|
147
|
|
129
|
|
68
|
|
70
|
|
327
|
|
838
|
|
||||||||||||||
MFA
|
8
|
|
—
|
|
57
|
|
—
|
|
62
|
|
56
|
|
47
|
|
40
|
|
118
|
|
30
|
|
—
|
|
—
|
|
—
|
|
418
|
|
||||||||||||||
COFINA
|
6
|
|
0
|
|
6
|
|
0
|
|
13
|
|
13
|
|
13
|
|
13
|
|
69
|
|
68
|
|
103
|
|
162
|
|
160
|
|
626
|
|
||||||||||||||
U of PR
|
0
|
|
—
|
|
0
|
|
—
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
1
|
|
—
|
|
—
|
|
1
|
|
||||||||||||||
Total net par for Puerto Rico
|
$
|
118
|
|
$
|
2
|
|
$
|
339
|
|
$
|
2
|
|
$
|
408
|
|
$
|
429
|
|
$
|
480
|
|
$
|
326
|
|
$
|
1,759
|
|
$
|
1,534
|
|
$
|
1,612
|
|
$
|
588
|
|
$
|
492
|
|
$
|
8,089
|
|
Ratings:
|
|
Prime
First Lien
|
|
Alt-A
First Lien
|
|
Option
ARMs
|
|
Subprime
First Lien
|
|
Second
Lien
|
|
Total Net Par Outstanding
|
||||||||||||
|
|
(dollars in millions)
|
||||||||||||||||||||||
AAA
|
|
$
|
2
|
|
|
$
|
174
|
|
|
$
|
28
|
|
|
$
|
1,471
|
|
|
$
|
0
|
|
|
$
|
1,675
|
|
AA
|
|
24
|
|
|
240
|
|
|
52
|
|
|
276
|
|
|
0
|
|
|
592
|
|
||||||
A
|
|
14
|
|
|
11
|
|
|
0
|
|
|
85
|
|
|
0
|
|
|
111
|
|
||||||
BBB
|
|
24
|
|
|
5
|
|
|
—
|
|
|
80
|
|
|
0
|
|
|
108
|
|
||||||
BIG
|
|
141
|
|
|
570
|
|
|
81
|
|
|
1,134
|
|
|
1,225
|
|
|
3,151
|
|
||||||
Total exposures
|
|
$
|
205
|
|
|
$
|
1,000
|
|
|
$
|
161
|
|
|
$
|
3,045
|
|
|
$
|
1,225
|
|
|
$
|
5,637
|
|
Year
insured:
|
|
Prime
First Lien
|
|
Alt-A
First Lien
|
|
Option
ARMs
|
|
Subprime
First Lien
|
|
Second
Lien
|
|
Total Net Par Outstanding
|
||||||
|
|
(in millions)
|
||||||||||||||||
2004 and prior
|
|
31
|
|
|
43
|
|
|
15
|
|
|
959
|
|
|
74
|
|
|
1,122
|
|
2005
|
|
102
|
|
|
376
|
|
|
30
|
|
|
164
|
|
|
264
|
|
|
936
|
|
2006
|
|
72
|
|
|
76
|
|
|
28
|
|
|
682
|
|
|
352
|
|
|
1,210
|
|
2007
|
|
—
|
|
|
504
|
|
|
89
|
|
|
1,176
|
|
|
536
|
|
|
2,305
|
|
2008
|
|
—
|
|
|
—
|
|
|
—
|
|
|
65
|
|
|
—
|
|
|
65
|
|
Total exposures
|
|
205
|
|
|
1,000
|
|
|
161
|
|
|
3,045
|
|
|
1,225
|
|
|
5,637
|
|
|
Hungary
|
|
Italy
|
|
Portugal
|
|
Spain
|
|
Turkey
|
|
Total
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Sub-sovereign exposure(2)
|
$
|
239
|
|
|
$
|
1,107
|
|
|
$
|
78
|
|
|
$
|
430
|
|
|
$
|
—
|
|
|
$
|
1,854
|
|
Non-sovereign exposure(3)
|
117
|
|
|
443
|
|
|
—
|
|
|
—
|
|
|
202
|
|
|
762
|
|
||||||
Total
|
$
|
356
|
|
|
$
|
1,550
|
|
|
$
|
78
|
|
|
$
|
430
|
|
|
$
|
202
|
|
|
$
|
2,616
|
|
Total BIG
|
$
|
287
|
|
|
$
|
—
|
|
|
$
|
78
|
|
|
$
|
430
|
|
|
$
|
—
|
|
|
$
|
795
|
|
|
Hungary
|
|
Italy
|
|
Portugal
|
|
Spain
|
|
Turkey
|
|
Total
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Sub-sovereign exposure(2)
|
$
|
236
|
|
|
$
|
880
|
|
|
$
|
76
|
|
|
$
|
342
|
|
|
$
|
—
|
|
|
$
|
1,534
|
|
Non-sovereign exposure(3)
|
114
|
|
|
399
|
|
|
—
|
|
|
—
|
|
|
202
|
|
|
715
|
|
||||||
Total
|
$
|
350
|
|
|
$
|
1,279
|
|
|
$
|
76
|
|
|
$
|
342
|
|
|
$
|
202
|
|
|
$
|
2,249
|
|
Total BIG
|
$
|
283
|
|
|
$
|
—
|
|
|
$
|
76
|
|
|
$
|
342
|
|
|
$
|
—
|
|
|
$
|
701
|
|
(1)
|
While exposures are shown in U.S. dollars, the obligations are in various currencies, primarily euros.
|
(2)
|
Sub-sovereign exposure in Selected European Countries includes transactions backed by receivables from, or supported by, sub-sovereigns, which are governmental or government-backed entities other than the ultimate governing body of the country.
|
(3)
|
Non-sovereign exposure in Selected European Countries includes debt of regulated utilities, RMBS and diversified payment rights (DPR) securitizations.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Intercompany sources (uses):
|
|
|
|
|
|
||||||
Dividends paid by AGC to AGUS
|
$
|
79
|
|
|
$
|
90
|
|
|
$
|
69
|
|
Dividends paid by AGM to AGMH
|
247
|
|
|
215
|
|
|
160
|
|
|||
Dividends paid by AG Re to AGL
|
100
|
|
|
150
|
|
|
82
|
|
|||
Dividends paid by other subsidiaries of AGMH
|
—
|
|
|
—
|
|
|
10
|
|
|||
Repayment of surplus note by AGM to AGMH
|
—
|
|
|
25
|
|
|
50
|
|
|||
Proceeds to AGMH from repurchase of common shares by AGM
|
300
|
|
|
—
|
|
|
—
|
|
|||
Repayment of loan by AGUS to AGRO
|
(20
|
)
|
|
—
|
|
|
—
|
|
|||
Issuance of note by AGUS to AGC(1)
|
—
|
|
|
(200
|
)
|
|
—
|
|
|||
Repayment of note by AGC to AGUS(1)
|
—
|
|
|
200
|
|
|
—
|
|
|||
External sources (uses):
|
|
|
|
|
|
||||||
Dividends paid to AGL shareholders
|
(69
|
)
|
|
(72
|
)
|
|
(76
|
)
|
|||
Repurchases of common shares by AGL(2)
|
(306
|
)
|
|
(555
|
)
|
|
(590
|
)
|
|||
Interest paid by AGMH and AGUS
|
(95
|
)
|
|
(95
|
)
|
|
(83
|
)
|
|||
Proceeds from issuance of long-term debt
|
—
|
|
|
—
|
|
|
495
|
|
(1)
|
On March 31, 2015, AGUS, as lender, provided $200 million to AGC, as borrower, from available funds to help fund the purchase of Radian Asset. AGC repaid that loan in full on April 14, 2015.
|
(2)
|
See Part II, Item 8, Financial Statements and Supplementary Data, Note 18, Shareholders' Equity, for additional information about share repurchases and authorizations.
|
•
|
The maximum amount available during 2017 for AGM to distribute as dividends without regulatory approval is estimated to be approximately
$232 million
, of which approximately
$81 million
is estimated to be available for distribution in the first quarter of 2017.
|
•
|
The maximum amount available during 2017 for AGC to distribute as ordinary dividends is approximately $
107 million
, of which approximately
$29 million
is available for distribution in the first quarter of 2017.
|
•
|
The maximum amount available during 2017 for MAC to distribute as dividends without regulatory approval is estimated to be approximately
$49 million
. MAC currently intends to allocate the distribution of such amount quarterly in 2017.
|
•
|
Based on the applicable law and regulations, in 2017 AG Re has the capacity to (i) make capital distributions in an aggregate amount up to
$128 million
without the prior approval of the Authority and (ii) declare and pay dividends in an aggregate amount up to the limit of its outstanding statutory surplus, which is
$314 million
. Such dividend capacity is further limited by the actual amount of AG Re’s unencumbered assets, which amount changes
|
•
|
operating expenses,
|
•
|
claims on the insured portfolio,
|
•
|
posting of collateral in connection with credit derivatives and reinsurance transactions,
|
•
|
reinsurance premiums,
|
•
|
dividends to AGL, AGUS and/or AGMH, as applicable,
|
•
|
principal of and, where applicable, interest on surplus notes, and
|
•
|
capital investments in their own subsidiaries, where appropriate.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Public finance
|
$
|
(216
|
)
|
|
$
|
(29
|
)
|
|
$
|
(144
|
)
|
Structured finance:
|
|
|
|
|
|
||||||
U.S. RMBS before benefit for recoveries for breaches of R&W
|
(179
|
)
|
|
(270
|
)
|
|
(304
|
)
|
|||
Net benefit for recoveries for breaches of R&W
|
89
|
|
|
173
|
|
|
663
|
|
|||
U.S. RMBS after benefit for recoveries for breaches of R&W
|
(90
|
)
|
|
(97
|
)
|
|
359
|
|
|||
Other structured finance
|
(48
|
)
|
|
(161
|
)
|
|
2
|
|
|||
Structured finance
|
(138
|
)
|
|
(258
|
)
|
|
361
|
|
|||
Claims (paid) recovered, net of reinsurance(1)
|
$
|
(354
|
)
|
|
$
|
(287
|
)
|
|
$
|
217
|
|
(1)
|
Includes $11 million, $21 million and $20 million paid in 2016, 2015 and 2014, respectively, for consolidated FG VIEs.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Net cash flows provided by (used in) operating activities before effects of FG VIE consolidation
|
$
|
(165
|
)
|
|
$
|
(95
|
)
|
|
$
|
509
|
|
Effect of FG VIE consolidation
|
24
|
|
|
43
|
|
|
68
|
|
|||
Net cash flows provided by (used in) operating activities - reported
|
(141
|
)
|
|
(52
|
)
|
|
577
|
|
|||
Net cash flows provided by (used in) investing activities before effects of FG VIE consolidation
|
489
|
|
|
823
|
|
|
(423
|
)
|
|||
Effect of FG VIE consolidation
|
587
|
|
|
171
|
|
|
327
|
|
|||
Net cash flows provided by (used in) investing activities - reported
|
1,076
|
|
|
994
|
|
|
(96
|
)
|
|||
Net cash flows provided by (used in) financing activities before effects of FG VIE consolidation
|
(367
|
)
|
|
(633
|
)
|
|
(189
|
)
|
|||
Effect of FG VIE consolidation
|
(611
|
)
|
|
(214
|
)
|
|
(396
|
)
|
|||
Net cash flows provided by (used in) financing activities - reported (1)
|
(978
|
)
|
|
(847
|
)
|
|
(585
|
)
|
|||
Effect of exchange rate changes
|
(5
|
)
|
|
(4
|
)
|
|
(5
|
)
|
|||
Cash at beginning of period
|
166
|
|
|
75
|
|
|
184
|
|
|||
Total cash at the end of the period
|
$
|
118
|
|
|
$
|
166
|
|
|
$
|
75
|
|
(1)
|
Claims paid on consolidated FG VIEs are presented in the consolidated cash flow statements as a component of paydowns on FG VIE liabilities in financing activities as opposed to operating activities.
|
|
Principal Amount
|
|
Interest Paid
|
||||||||||||||||
|
As of December 31,
|
|
Year Ended December 31,
|
||||||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
(in millions)
|
||||||||||||||||||
AGUS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
7% Senior Notes(1)
|
$
|
200
|
|
|
$
|
200
|
|
|
$
|
14
|
|
|
$
|
14
|
|
|
$
|
14
|
|
5% Senior Notes(1)
|
500
|
|
|
500
|
|
|
25
|
|
|
25
|
|
|
13
|
|
|||||
Series A Enhanced Junior Subordinated Debentures(2)
|
150
|
|
|
150
|
|
|
10
|
|
|
10
|
|
|
10
|
|
|||||
Total AGUS
|
850
|
|
|
850
|
|
|
49
|
|
|
49
|
|
|
37
|
|
|||||
AGMH(3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
6
7
/
8
% QUIBS(1)
|
100
|
|
|
100
|
|
|
7
|
|
|
7
|
|
|
7
|
|
|||||
6.25% Notes(1)
|
230
|
|
|
230
|
|
|
14
|
|
|
14
|
|
|
14
|
|
|||||
5.6% Notes(1)
|
100
|
|
|
100
|
|
|
6
|
|
|
6
|
|
|
6
|
|
|||||
Junior Subordinated Debentures(2)
|
300
|
|
|
300
|
|
|
19
|
|
|
19
|
|
|
19
|
|
|||||
Total AGMH
|
730
|
|
|
730
|
|
|
46
|
|
|
46
|
|
|
46
|
|
|||||
AGM(3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
AGM Notes Payable
|
9
|
|
|
12
|
|
|
0
|
|
|
0
|
|
|
3
|
|
|||||
Total AGM
|
9
|
|
|
12
|
|
|
0
|
|
|
0
|
|
|
3
|
|
|||||
Total
|
$
|
1,589
|
|
|
$
|
1,592
|
|
|
$
|
95
|
|
|
$
|
95
|
|
|
$
|
86
|
|
(1)
|
AGL fully and unconditionally guarantees these obligations
|
(2)
|
Guaranteed by AGL on a junior subordinated basis.
|
|
As of December 31, 2016
|
||||||||||||||||||
|
Less Than
1 Year
|
|
1-3
Years
|
|
3-5
Years
|
|
More Than
5 Years
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Long-term debt(1):
|
|
|
|
|
|
|
|
|
|
||||||||||
7% Senior Notes
|
$
|
14
|
|
|
$
|
28
|
|
|
$
|
28
|
|
|
$
|
373
|
|
|
$
|
443
|
|
5% Senior Notes
|
25
|
|
|
50
|
|
|
50
|
|
|
563
|
|
|
688
|
|
|||||
Series A Enhanced Junior Subordinated Debentures
|
5
|
|
|
11
|
|
|
12
|
|
|
443
|
|
|
471
|
|
|||||
6
7
/
8
% QUIBS
|
7
|
|
|
14
|
|
|
14
|
|
|
650
|
|
|
685
|
|
|||||
6.25% Notes
|
14
|
|
|
29
|
|
|
29
|
|
|
1,393
|
|
|
1,465
|
|
|||||
5.6 Notes
|
6
|
|
|
11
|
|
|
11
|
|
|
557
|
|
|
585
|
|
|||||
Junior Subordinated Debentures
|
19
|
|
|
38
|
|
|
38
|
|
|
1,164
|
|
|
1,259
|
|
|||||
Notes Payable
|
4
|
|
|
3
|
|
|
1
|
|
|
1
|
|
|
9
|
|
|||||
Operating lease obligations(2)
|
6
|
|
|
17
|
|
|
17
|
|
|
88
|
|
|
128
|
|
|||||
Other compensation plans(3)
|
15
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|||||
Estimated claim payments(4)
|
231
|
|
|
298
|
|
|
65
|
|
|
1,969
|
|
|
2,563
|
|
|||||
Other
|
15
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|||||
Total
|
$
|
361
|
|
|
$
|
499
|
|
|
$
|
265
|
|
|
$
|
7,201
|
|
|
$
|
8,326
|
|
(1)
|
Includes interest and principal payments. See Note 16, Long-Term Debt and Credit Facilities, in Part II, Item 8, Financial Statements and Supplementary Data for expected maturities of debt.
|
(2)
|
Operating lease obligations exclude escalations in building operating costs and real estate taxes.
|
(3)
|
Amount excludes approximately $56 million of liabilities under various supplemental retirement plans, which are fair valued and payable at the time of termination of employment by either employer or employee. Amount also excludes approximately $19 million of liabilities under Performance Retention Plan, which are payable at the time of vesting or termination of employment by either employer or employee. Given the nature of these awards, we are unable to determine the year in which they will be paid.
|
(4)
|
Claim payments represent estimated undiscounted expected cash outflows under direct and assumed financial guaranty contracts, whether accounted for as insurance or credit derivatives, including claim payments under contracts in consolidated FG VIEs. The amounts presented are not reduced for cessions under reinsurance contracts. Amounts include any benefit anticipated from excess spread or other recoveries within the contracts but do not reflect any benefit for recoveries under breaches of R&W.
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
||||||||||||
|
Amortized
Cost
|
|
Estimated
Fair Value
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||||||
|
(in millions)
|
||||||||||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Obligations of state and political subdivisions
|
$
|
5,269
|
|
|
$
|
5,432
|
|
|
$
|
5,528
|
|
|
$
|
5,841
|
|
U.S. government and agencies
|
424
|
|
|
440
|
|
|
377
|
|
|
400
|
|
||||
Corporate securities
|
1,612
|
|
|
1,613
|
|
|
1,505
|
|
|
1,520
|
|
||||
Mortgage-backed securities(1):
|
|
|
|
|
|
|
|
|
|||||||
RMBS
|
998
|
|
|
987
|
|
|
1,238
|
|
|
1,245
|
|
||||
CMBS
|
575
|
|
|
583
|
|
|
506
|
|
|
513
|
|
||||
Asset-backed securities
|
835
|
|
|
945
|
|
|
831
|
|
|
825
|
|
||||
Foreign government securities
|
261
|
|
|
233
|
|
|
290
|
|
|
283
|
|
||||
Total fixed-maturity securities
|
9,974
|
|
|
10,233
|
|
|
10,275
|
|
|
10,627
|
|
||||
Short-term investments
|
590
|
|
|
590
|
|
|
396
|
|
|
396
|
|
||||
Total fixed-maturity and short-term investments
|
$
|
10,564
|
|
|
$
|
10,823
|
|
|
$
|
10,671
|
|
|
$
|
11,023
|
|
(1)
|
Government-agency obligations were approximately
42%
of mortgage backed securities as of
December 31, 2016
and
54%
as of
December 31, 2015
, 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)
|
||||||||||||||||||||||
Obligations of state and political subdivisions
|
$
|
1,110
|
|
|
$
|
(38
|
)
|
|
$
|
6
|
|
|
$
|
(1
|
)
|
|
$
|
1,116
|
|
|
$
|
(39
|
)
|
U.S. government and agencies
|
87
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
87
|
|
|
(1
|
)
|
||||||
Corporate securities
|
492
|
|
|
(11
|
)
|
|
118
|
|
|
(20
|
)
|
|
610
|
|
|
(31
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
RMBS
|
391
|
|
|
(23
|
)
|
|
94
|
|
|
(15
|
)
|
|
485
|
|
|
(38
|
)
|
||||||
CMBS
|
165
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
165
|
|
|
(5
|
)
|
||||||
Asset-backed securities
|
36
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
36
|
|
|
0
|
|
||||||
Foreign government securities
|
44
|
|
|
(5
|
)
|
|
114
|
|
|
(27
|
)
|
|
158
|
|
|
(32
|
)
|
||||||
Total
|
$
|
2,325
|
|
|
$
|
(83
|
)
|
|
$
|
332
|
|
|
$
|
(63
|
)
|
|
$
|
2,657
|
|
|
$
|
(146
|
)
|
Number of securities(1)
|
|
|
|
622
|
|
|
|
|
|
60
|
|
|
|
|
|
676
|
|
||||||
Number of securities with other-than-temporary impairment
|
|
|
|
8
|
|
|
|
|
|
9
|
|
|
|
|
|
17
|
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
||||||||||||||||||
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||
Obligations of state and political subdivisions
|
$
|
316
|
|
|
$
|
(10
|
)
|
|
$
|
7
|
|
|
$
|
0
|
|
|
$
|
323
|
|
|
$
|
(10
|
)
|
U.S. government and agencies
|
77
|
|
|
0
|
|
|
—
|
|
|
—
|
|
|
77
|
|
|
0
|
|
||||||
Corporate securities
|
381
|
|
|
(8
|
)
|
|
95
|
|
|
(15
|
)
|
|
476
|
|
|
(23
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
RMBS
|
438
|
|
|
(8
|
)
|
|
90
|
|
|
(14
|
)
|
|
528
|
|
|
(22
|
)
|
||||||
CMBS
|
140
|
|
|
(2
|
)
|
|
2
|
|
|
0
|
|
|
142
|
|
|
(2
|
)
|
||||||
Asset-backed securities
|
517
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
517
|
|
|
(10
|
)
|
||||||
Foreign government securities
|
97
|
|
|
(4
|
)
|
|
82
|
|
|
(7
|
)
|
|
179
|
|
|
(11
|
)
|
||||||
Total
|
$
|
1,966
|
|
|
$
|
(42
|
)
|
|
$
|
276
|
|
|
$
|
(36
|
)
|
|
$
|
2,242
|
|
|
$
|
(78
|
)
|
Number of securities(1)
|
|
|
|
335
|
|
|
|
|
|
71
|
|
|
|
|
|
396
|
|
||||||
Number of securities with other-than-temporary impairment
|
|
|
|
9
|
|
|
|
|
|
4
|
|
|
|
|
|
13
|
|
(1)
|
The number of securities does not add across because lots consisting of the same securities have been purchased at different times and appear in both categories above (i.e., less than 12 months and 12 months or more). If a security appears in both categories, it is counted only once in the total column.
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||
|
(in millions)
|
||||||
Due within one year
|
$
|
482
|
|
|
$
|
550
|
|
Due after one year through five years
|
1,725
|
|
|
1,727
|
|
||
Due after five years through 10 years
|
2,112
|
|
|
2,155
|
|
||
Due after 10 years
|
4,082
|
|
|
4,231
|
|
||
Mortgage-backed securities:
|
|
|
|
|
|
||
RMBS
|
998
|
|
|
987
|
|
||
CMBS
|
575
|
|
|
583
|
|
||
Total
|
$
|
9,974
|
|
|
$
|
10,233
|
|
Rating
|
|
As of
December 31, 2016 |
|
As of
December 31, 2015 |
||
AAA
|
|
11.6
|
%
|
|
10.8
|
%
|
AA
|
|
54.8
|
|
|
59.0
|
|
A
|
|
17.9
|
|
|
17.6
|
|
BBB
|
|
1.9
|
|
|
0.9
|
|
BIG(1)
|
|
13.5
|
|
|
11.4
|
|
Not rated
|
|
0.3
|
|
|
0.3
|
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
(1)
|
Comprised primarily of loss mitigation and other risk management assets. See Part II, Item 8, Financial Statements and Supplementary Data, Note 10, Investments and Cash.
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
•
|
The fair value of credit derivatives within the financial guaranty portfolio of insured obligations which fluctuate based on changes in credit spreads of the underlying obligations and the Company's own credit spreads.
|
•
|
The fair value of the investment portfolio is primarily driven by changes in interest rates and also affected by changes in credit spreads.
|
•
|
The fair value of the investment portfolio contains foreign denominated securities whose value fluctuates based on changes in foreign exchange rates.
|
•
|
The carrying value of premiums receivable include foreign denominated receivables whose value fluctuates based on changes in foreign exchange rates.
|
•
|
The fair value of the assets and liabilities of consolidated FG VIE's may fluctuate based on changes in prepayment spreads, default rates, interest rates, and house price depreciation/appreciation. The fair value of the FG VIE liabilities would also fluctuate based on changes in the Company's credit spread.
|
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
||||||||||||
Credit Spreads(1)
|
|
Estimated Net
Fair Value
(Pre-Tax)
|
|
Estimated Change
in Gain/(Loss)
(Pre-Tax)
|
|
Estimated Net
Fair Value (Pre-Tax) |
|
Estimated Change
in Gain/(Loss) (Pre-Tax) |
||||||||
|
(in millions)
|
|||||||||||||||
100% widening in spreads
|
$
|
(791
|
)
|
|
$
|
(402
|
)
|
|
$
|
(742
|
)
|
|
$
|
(377
|
)
|
|
50% widening in spreads
|
(590
|
)
|
|
(201
|
)
|
|
(554
|
)
|
|
(189
|
)
|
|||||
25% widening in spreads
|
(490
|
)
|
|
(101
|
)
|
|
(460
|
)
|
|
(95
|
)
|
|||||
10% widening in spreads
|
(430
|
)
|
|
(41
|
)
|
|
(403
|
)
|
|
(38
|
)
|
|||||
Base Scenario
|
(389
|
)
|
|
—
|
|
|
(365
|
)
|
|
—
|
|
|||||
10% narrowing in spreads
|
(351
|
)
|
|
38
|
|
|
(330
|
)
|
|
35
|
|
|||||
25% narrowing in spreads
|
(295
|
)
|
|
94
|
|
|
(277
|
)
|
|
88
|
|
|||||
50% narrowing in spreads
|
(203
|
)
|
|
186
|
|
|
(190
|
)
|
|
175
|
|
(1)
|
Includes the effects of spreads on both the underlying asset classes and the Company's own credit spread.
|
|
Increase (Decrease) in Fair Value from Changes in Interest Rates
|
||||||||||||||||||||||
|
300 Basis
Point
Decrease
|
|
200 Basis
Point
Decrease
|
|
100 Basis
Point
Decrease
|
|
100 Basis
Point
Increase
|
|
200 Basis
Point
Increase
|
|
300 Basis
Point
Increase
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
December 31, 2016
|
$
|
1,215
|
|
|
$
|
957
|
|
|
$
|
537
|
|
|
$
|
(528
|
)
|
|
$
|
(1,063
|
)
|
|
$
|
(1,578
|
)
|
December 31, 2015
|
1,561
|
|
|
1,107
|
|
|
568
|
|
|
(557
|
)
|
|
(1,094
|
)
|
|
(1,607
|
)
|
|
Increase (Decrease) in Fair Value from Changes in Foreign Exchange Rates
|
||||||||||||||||||||||
|
30%
Decrease
|
|
20%
Decrease
|
|
10%
Decrease
|
|
10%
Increase
|
|
20%
Increase
|
|
30%
Increase
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
December 31, 2016
|
$
|
(153
|
)
|
|
$
|
(102
|
)
|
|
$
|
(51
|
)
|
|
$
|
51
|
|
|
$
|
102
|
|
|
$
|
153
|
|
December 31, 2015
|
(163
|
)
|
|
(108
|
)
|
|
(54
|
)
|
|
54
|
|
|
108
|
|
|
163
|
|
|
Increase (Decrease) in Premium Receivable from Changes in Foreign Exchange Rates
|
||||||||||||||||||||||
|
30%
Decrease
|
|
20%
Decrease
|
|
10%
Decrease
|
|
10%
Increase
|
|
20%
Increase
|
|
30%
Increase
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
December 31, 2016
|
$
|
(77
|
)
|
|
$
|
(52
|
)
|
|
$
|
(26
|
)
|
|
$
|
26
|
|
|
$
|
52
|
|
|
$
|
77
|
|
December 31, 2015
|
(96
|
)
|
|
(64
|
)
|
|
(32
|
)
|
|
32
|
|
|
64
|
|
|
96
|
|
|
As of
December 31, 2016 |
|
As of
December 31, 2015 |
||||
Assets
|
|
|
|
|
|
||
Investment portfolio:
|
|
|
|
|
|
||
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $9,974 and $10,275)
|
$
|
10,233
|
|
|
$
|
10,627
|
|
Short-term investments, at fair value
|
590
|
|
|
396
|
|
||
Other invested assets
|
162
|
|
|
169
|
|
||
Total investment portfolio
|
10,985
|
|
|
11,192
|
|
||
Cash
|
118
|
|
|
166
|
|
||
Premiums receivable, net of commissions payable
|
576
|
|
|
693
|
|
||
Ceded unearned premium reserve
|
206
|
|
|
232
|
|
||
Deferred acquisition costs
|
106
|
|
|
114
|
|
||
Reinsurance recoverable on unpaid losses
|
80
|
|
|
69
|
|
||
Salvage and subrogation recoverable
|
365
|
|
|
126
|
|
||
Credit derivative assets
|
13
|
|
|
81
|
|
||
Deferred tax asset, net
|
497
|
|
|
276
|
|
||
Current income tax receivable
|
12
|
|
|
40
|
|
||
Financial guaranty variable interest entities’ assets, at fair value
|
876
|
|
|
1,261
|
|
||
Other assets
|
317
|
|
|
294
|
|
||
Total assets
|
$
|
14,151
|
|
|
$
|
14,544
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
|
||
Unearned premium reserve
|
$
|
3,511
|
|
|
$
|
3,996
|
|
Loss and loss adjustment expense reserve
|
1,127
|
|
|
1,067
|
|
||
Reinsurance balances payable, net
|
64
|
|
|
51
|
|
||
Long-term debt
|
1,306
|
|
|
1,300
|
|
||
Credit derivative liabilities
|
402
|
|
|
446
|
|
||
Financial guaranty variable interest entities’ liabilities with recourse, at fair value
|
807
|
|
|
1,225
|
|
||
Financial guaranty variable interest entities’ liabilities without recourse, at fair value
|
151
|
|
|
124
|
|
||
Other liabilities
|
279
|
|
|
272
|
|
||
Total liabilities
|
7,647
|
|
|
8,481
|
|
||
Commitments and contingencies (See Note 15)
|
|
|
|
||||
Common stock ($0.01 par value, 500,000,000 shares authorized; 127,988,230 and 137,928,552 shares issued and outstanding)
|
1
|
|
|
1
|
|
||
Additional paid-in capital
|
1,060
|
|
|
1,342
|
|
||
Retained earnings
|
5,289
|
|
|
4,478
|
|
||
Accumulated other comprehensive income, net of tax of $70 and $104
|
149
|
|
|
237
|
|
||
Deferred equity compensation (320,193 and 320,193 shares)
|
5
|
|
|
5
|
|
||
Total shareholders’ equity
|
6,504
|
|
|
6,063
|
|
||
Total liabilities and shareholders’ equity
|
$
|
14,151
|
|
|
$
|
14,544
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Revenues
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
864
|
|
|
$
|
766
|
|
|
$
|
570
|
|
Net investment income
|
408
|
|
|
423
|
|
|
403
|
|
|||
Net realized investment gains (losses):
|
|
|
|
|
|
|
|
||||
Other-than-temporary impairment losses
|
(47
|
)
|
|
(47
|
)
|
|
(76
|
)
|
|||
Less: portion of other-than-temporary impairment loss recognized in other comprehensive income
|
4
|
|
|
0
|
|
|
(1
|
)
|
|||
Net impairment loss
|
(51
|
)
|
|
(47
|
)
|
|
(75
|
)
|
|||
Other net realized investment gains (losses)
|
22
|
|
|
21
|
|
|
15
|
|
|||
Net realized investment gains (losses)
|
(29
|
)
|
|
(26
|
)
|
|
(60
|
)
|
|||
Net change in fair value of credit derivatives:
|
|
|
|
|
|
||||||
Realized gains (losses) and other settlements
|
29
|
|
|
(18
|
)
|
|
23
|
|
|||
Net unrealized gains (losses)
|
69
|
|
|
746
|
|
|
800
|
|
|||
Net change in fair value of credit derivatives
|
98
|
|
|
728
|
|
|
823
|
|
|||
Fair value gains (losses) on committed capital securities
|
0
|
|
|
27
|
|
|
(11
|
)
|
|||
Fair value gains (losses) on financial guaranty variable interest entities
|
38
|
|
|
38
|
|
|
255
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships
|
259
|
|
|
214
|
|
|
—
|
|
|||
Other income (loss)
|
39
|
|
|
37
|
|
|
14
|
|
|||
Total revenues
|
1,677
|
|
|
2,207
|
|
|
1,994
|
|
|||
Expenses
|
|
|
|
|
|
|
|
||||
Loss and loss adjustment expenses
|
295
|
|
|
424
|
|
|
126
|
|
|||
Amortization of deferred acquisition costs
|
18
|
|
|
20
|
|
|
25
|
|
|||
Interest expense
|
102
|
|
|
101
|
|
|
92
|
|
|||
Other operating expenses
|
245
|
|
|
231
|
|
|
220
|
|
|||
Total expenses
|
660
|
|
|
776
|
|
|
463
|
|
|||
Income (loss) before income taxes
|
1,017
|
|
|
1,431
|
|
|
1,531
|
|
|||
Provision (benefit) for income taxes
|
|
|
|
|
|
|
|
||||
Current
|
117
|
|
|
75
|
|
|
96
|
|
|||
Deferred
|
19
|
|
|
300
|
|
|
347
|
|
|||
Total provision (benefit) for income taxes
|
136
|
|
|
375
|
|
|
443
|
|
|||
Net income (loss)
|
$
|
881
|
|
|
$
|
1,056
|
|
|
$
|
1,088
|
|
|
|
|
|
|
|
||||||
Earnings per share:
|
|
|
|
|
|
||||||
Basic
|
$
|
6.61
|
|
|
$
|
7.12
|
|
|
$
|
6.30
|
|
Diluted
|
$
|
6.56
|
|
|
$
|
7.08
|
|
|
$
|
6.26
|
|
Dividends per share
|
$
|
0.52
|
|
|
$
|
0.48
|
|
|
$
|
0.44
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Net income (loss)
|
$
|
881
|
|
|
$
|
1,056
|
|
|
$
|
1,088
|
|
Unrealized holding gains (losses) arising during the period on:
|
|
|
|
|
|
|
|
||||
Investments with no other-than-temporary impairment, net of tax provision (benefit) of $(34), $(36) and $80
|
(71
|
)
|
|
(93
|
)
|
|
196
|
|
|||
Investments with other-than-temporary impairment, net of tax provision (benefit) of $(5), $(23) and $(9)
|
(9
|
)
|
|
(43
|
)
|
|
(20
|
)
|
|||
Unrealized holding gains (losses) arising during the period, net of tax
|
(80
|
)
|
|
(136
|
)
|
|
176
|
|
|||
Less: reclassification adjustment for gains (losses) included in net income (loss), net of tax provision (benefit) of $(10), $(7) and $(21)
|
(16
|
)
|
|
(10
|
)
|
|
(41
|
)
|
|||
Change in net unrealized gains (losses) on investments
|
(64
|
)
|
|
(126
|
)
|
|
217
|
|
|||
Other, net of tax provision
|
(24
|
)
|
|
(7
|
)
|
|
(7
|
)
|
|||
Other comprehensive income (loss)
|
(88
|
)
|
|
(133
|
)
|
|
210
|
|
|||
Comprehensive income (loss)
|
$
|
793
|
|
|
$
|
923
|
|
|
$
|
1,298
|
|
|
Common Shares Outstanding
|
|
|
Common Stock Par Value
|
|
Additional
Paid-in Capital |
|
Retained Earnings
|
|
Accumulated
Other Comprehensive Income |
|
Deferred
Equity Compensation |
|
Total
Shareholders’ Equity |
|||||||||||||
Balance at December 31, 2013
|
182,177,866
|
|
|
|
$
|
2
|
|
|
$
|
2,466
|
|
|
$
|
2,482
|
|
|
$
|
160
|
|
|
$
|
5
|
|
|
$
|
5,115
|
|
Net income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
1,088
|
|
|
—
|
|
|
—
|
|
|
1,088
|
|
||||||
Dividends ($0.44 per share)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(76
|
)
|
|
—
|
|
|
—
|
|
|
(76
|
)
|
||||||
Common stock repurchases
|
(24,413,781
|
)
|
|
|
0
|
|
|
(590
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(590
|
)
|
||||||
Share-based compensation and other
|
542,576
|
|
|
|
0
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
||||||
Other comprehensive income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
210
|
|
|
—
|
|
|
210
|
|
||||||
Balance at December 31, 2014
|
158,306,661
|
|
|
|
2
|
|
|
1,887
|
|
|
3,494
|
|
|
370
|
|
|
5
|
|
|
5,758
|
|
||||||
Net income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
1,056
|
|
|
—
|
|
|
—
|
|
|
1,056
|
|
||||||
Dividends ($0.48 per share)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(72
|
)
|
|
—
|
|
|
—
|
|
|
(72
|
)
|
||||||
Common stock repurchases
|
(20,995,419
|
)
|
|
|
(1
|
)
|
|
(554
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(555
|
)
|
||||||
Share-based compensation and other
|
617,310
|
|
|
|
0
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
||||||
Other comprehensive loss
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(133
|
)
|
|
—
|
|
|
(133
|
)
|
||||||
Balance at December 31, 2015
|
137,928,552
|
|
|
|
$
|
1
|
|
|
$
|
1,342
|
|
|
$
|
4,478
|
|
|
$
|
237
|
|
|
$
|
5
|
|
|
$
|
6,063
|
|
Net income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
881
|
|
|
—
|
|
|
—
|
|
|
881
|
|
||||||
Dividends ($0.52 per share)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(70
|
)
|
|
—
|
|
|
—
|
|
|
(70
|
)
|
||||||
Common stock repurchases
|
(10,721,248
|
)
|
|
|
0
|
|
|
(306
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(306
|
)
|
||||||
Share-based compensation and other
|
780,926
|
|
|
|
0
|
|
|
24
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24
|
|
||||||
Other comprehensive loss
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(88
|
)
|
|
—
|
|
|
(88
|
)
|
||||||
Balance at December 31, 2016
|
127,988,230
|
|
|
|
$
|
1
|
|
|
$
|
1,060
|
|
|
$
|
5,289
|
|
|
$
|
149
|
|
|
$
|
5
|
|
|
$
|
6,504
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Operating Activities:
|
|
|
|
|
|
||||||
Net Income
|
$
|
881
|
|
|
$
|
1,056
|
|
|
$
|
1,088
|
|
Adjustments to reconcile net income to net cash flows provided by operating activities:
|
|
|
|
|
|
||||||
Non-cash interest and operating expenses
|
39
|
|
|
27
|
|
|
23
|
|
|||
Net amortization of premium (discount) on investments
|
(34
|
)
|
|
(25
|
)
|
|
(16
|
)
|
|||
Provision (benefit) for deferred income taxes
|
19
|
|
|
300
|
|
|
347
|
|
|||
Net realized investment losses (gains)
|
29
|
|
|
17
|
|
|
60
|
|
|||
Net unrealized losses (gains) on credit derivatives
|
(69
|
)
|
|
(746
|
)
|
|
(800
|
)
|
|||
Fair value losses (gains) on committed capital securities
|
0
|
|
|
(27
|
)
|
|
11
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships
|
(259
|
)
|
|
(214
|
)
|
|
—
|
|
|||
Change in deferred acquisition costs
|
9
|
|
|
9
|
|
|
3
|
|
|||
Change in premiums receivable, net of premiums and commissions payable
|
128
|
|
|
(8
|
)
|
|
108
|
|
|||
Change in ceded unearned premium reserve
|
22
|
|
|
79
|
|
|
69
|
|
|||
Change in unearned premium reserve
|
(777
|
)
|
|
(744
|
)
|
|
(332
|
)
|
|||
Change in loss and loss adjustment expense reserve, net
|
(105
|
)
|
|
244
|
|
|
182
|
|
|||
Change in current income tax
|
27
|
|
|
(45
|
)
|
|
(45
|
)
|
|||
Change in financial guaranty variable interest entities' assets and liabilities, net
|
(24
|
)
|
|
(6
|
)
|
|
(170
|
)
|
|||
(Purchases) sales of trading securities, net
|
—
|
|
|
8
|
|
|
78
|
|
|||
Other
|
(27
|
)
|
|
23
|
|
|
(29
|
)
|
|||
Net cash flows provided by (used in) operating activities
|
(141
|
)
|
|
(52
|
)
|
|
577
|
|
|||
Investing activities
|
|
|
|
|
|
|
|
||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
||||
Purchases
|
(1,646
|
)
|
|
(2,577
|
)
|
|
(2,801
|
)
|
|||
Sales
|
1,365
|
|
|
2,107
|
|
|
1,251
|
|
|||
Maturities
|
1,155
|
|
|
898
|
|
|
877
|
|
|||
Net sales (purchases) of short-term investments
|
17
|
|
|
897
|
|
|
158
|
|
|||
Net proceeds from paydowns on financial guaranty variable interest entities’ assets
|
629
|
|
|
400
|
|
|
408
|
|
|||
Acquisition of CIFG, net of cash acquired
|
(435
|
)
|
|
—
|
|
|
—
|
|
|||
Acquisition of Radian Asset, net of cash acquired
|
—
|
|
|
(800
|
)
|
|
—
|
|
|||
Other
|
(9
|
)
|
|
69
|
|
|
11
|
|
|||
Net cash flows provided by (used in) investing activities
|
1,076
|
|
|
994
|
|
|
(96
|
)
|
|||
Financing activities
|
|
|
|
|
|
|
|
||||
Dividends paid
|
(69
|
)
|
|
(72
|
)
|
|
(76
|
)
|
|||
Repurchases of common stock
|
(306
|
)
|
|
(555
|
)
|
|
(590
|
)
|
|||
Share activity under option and incentive plans
|
10
|
|
|
(2
|
)
|
|
1
|
|
|||
Net paydowns of financial guaranty variable interest entities’ liabilities
|
(611
|
)
|
|
(214
|
)
|
|
(396
|
)
|
|||
Net proceeds from issuance of long-term debt
|
—
|
|
|
—
|
|
|
495
|
|
|||
Repayment of long-term debt
|
(2
|
)
|
|
(4
|
)
|
|
(19
|
)
|
|||
Net cash flows provided by (used in) financing activities
|
(978
|
)
|
|
(847
|
)
|
|
(585
|
)
|
|||
Effect of foreign exchange rate changes
|
(5
|
)
|
|
(4
|
)
|
|
(5
|
)
|
|||
Increase (decrease) in cash
|
(48
|
)
|
|
91
|
|
|
(109
|
)
|
|||
Cash at beginning of period
|
166
|
|
|
75
|
|
|
184
|
|
|||
Cash at end of period
|
$
|
118
|
|
|
$
|
166
|
|
|
$
|
75
|
|
Supplemental cash flow information
|
|
|
|
|
|
|
|
||||
Cash paid (received) during the period for:
|
|
|
|
|
|
|
|
||||
Income taxes
|
$
|
74
|
|
|
$
|
103
|
|
|
$
|
122
|
|
Interest
|
$
|
95
|
|
|
$
|
95
|
|
|
$
|
86
|
|
1.
|
Business and Basis of Presentation
|
•
|
Assured Guaranty Municipal Corp. (AGM), domiciled in New York;
|
•
|
Municipal Assurance Corp. (MAC), domiciled in New York;
|
•
|
Assured Guaranty Corp. (AGC), domiciled in Maryland;
|
•
|
Assured Guaranty (Europe) Ltd. (AGE), organized in the U.K.; and
|
•
|
Assured Guaranty Re Ltd. (AG Re) and Assured Guaranty Re Overseas Ltd (AGRO), domiciled in Bermuda.
|
Acquisitions
|
Note 2
|
Expected loss to be paid (insurance, credit derivatives and FG VIE contracts)
|
Note 5
|
Contracts accounted for as insurance (premium revenue recognition, loss and loss adjustment expense and policy acquisition cost)
|
Note 6
|
Fair value measurement
|
Note 7
|
Credit derivatives (at fair value)
|
Note 8
|
Variable interest entities (at fair value)
|
Note 9
|
Investments and cash
|
Note 10
|
Income taxes
|
Note 12
|
Earnings per share
|
Note 17
|
Stock based compensation
|
Note 19
|
2.
|
Acquisitions
|
|
Fair Value of Net Assets Acquired, before Settlement of Pre-existing Relationships
|
|
Net effect of Settlement of Pre-existing Relationships
|
|
Net Effect of CIFG Acquisition
|
||||||
|
(in millions)
|
||||||||||
Cash Purchase Price (1)
|
$
|
443
|
|
|
$
|
—
|
|
|
$
|
443
|
|
|
|
|
|
|
|
||||||
Identifiable assets acquired:
|
|
|
|
|
|
||||||
Investments
|
770
|
|
|
—
|
|
|
770
|
|
|||
Cash
|
8
|
|
|
—
|
|
|
8
|
|
|||
Premiums receivable, net of commissions payable
|
18
|
|
|
—
|
|
|
18
|
|
|||
Ceded unearned premium reserve
|
173
|
|
|
(173
|
)
|
|
—
|
|
|||
Deferred acquisition costs
|
1
|
|
|
(1
|
)
|
|
—
|
|
|||
Salvage and subrogation recoverable
|
23
|
|
|
—
|
|
|
23
|
|
|||
Credit derivative assets
|
1
|
|
|
—
|
|
|
1
|
|
|||
Deferred tax asset, net
|
194
|
|
|
34
|
|
|
228
|
|
|||
Other assets
|
4
|
|
|
—
|
|
|
4
|
|
|||
Total assets
|
1,192
|
|
|
(140
|
)
|
|
1,052
|
|
|||
|
|
|
|
|
|
|
|||||
Liabilities assumed:
|
|
|
|
|
|
||||||
Unearned premium reserves
|
306
|
|
|
(10
|
)
|
|
296
|
|
|||
Loss and loss adjustment expense reserve
|
1
|
|
|
(66
|
)
|
|
(65
|
)
|
|||
Credit derivative liabilities
|
68
|
|
|
0
|
|
|
68
|
|
|||
Other liabilities
|
17
|
|
|
—
|
|
|
17
|
|
|||
Total liabilities
|
392
|
|
|
(76
|
)
|
|
316
|
|
|||
Net asset effect of CIFG Acquisition
|
800
|
|
|
(64
|
)
|
|
736
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships resulting from CIFG Acquisition, after-tax
|
357
|
|
|
(64
|
)
|
|
293
|
|
|||
Deferred tax
|
—
|
|
|
(34
|
)
|
|
(34
|
)
|
|||
Bargain purchase gain and settlement of pre-existing relationships resulting from CIFG Acquisition, pre-tax
|
$
|
357
|
|
|
$
|
(98
|
)
|
|
$
|
259
|
|
(1)
|
The cash purchase price of
$443 million
represents the cash transferred for the acquisition which was allocated as follows: (1)
$270 million
for the purchase of net assets of
$627 million
, and (2) the settlement of pre-existing relationships between CIFGH and Assured Guaranty at a fair value of
$173 million
.
|
|
Year Ended December 31, 2016
|
||
|
(in millions)
|
||
Professional services
|
$
|
2
|
|
Financial advisory fees
|
4
|
|
|
Total
|
$
|
6
|
|
|
Fair Value of Net Assets Acquired, before Settlement of Pre-existing Relationships
|
|
Net effect of Settlement of Pre-existing Relationships
|
|
Net Effect of Radian Asset Acquisition
|
||||||
|
(in millions)
|
||||||||||
Cash purchase price(1)
|
$
|
804
|
|
|
$
|
—
|
|
|
$
|
804
|
|
Identifiable assets acquired:
|
|
|
|
|
|
||||||
Investments
|
1,473
|
|
|
—
|
|
|
1,473
|
|
|||
Cash
|
4
|
|
|
—
|
|
|
4
|
|
|||
Ceded unearned premium reserve
|
(3
|
)
|
|
(65
|
)
|
|
(68
|
)
|
|||
Credit derivative assets
|
30
|
|
|
—
|
|
|
30
|
|
|||
Deferred tax asset, net
|
263
|
|
|
(56
|
)
|
|
207
|
|
|||
Financial guaranty variable interest entities’ assets
|
122
|
|
|
—
|
|
|
122
|
|
|||
Other assets
|
86
|
|
|
(67
|
)
|
|
19
|
|
|||
Total assets
|
1,975
|
|
|
(188
|
)
|
|
1,787
|
|
|||
|
|
|
|
|
|
|
|||||
Liabilities assumed:
|
|
|
|
|
|
||||||
Unearned premium reserves
|
697
|
|
|
(216
|
)
|
|
481
|
|
|||
Credit derivative liabilities
|
271
|
|
|
(26
|
)
|
|
245
|
|
|||
Financial guaranty variable interest entities’ liabilities
|
118
|
|
|
—
|
|
|
118
|
|
|||
Other liabilities
|
30
|
|
|
(49
|
)
|
|
(19
|
)
|
|||
Total liabilities
|
1,116
|
|
|
(291
|
)
|
|
825
|
|
|||
Net asset effect of Radian Asset Acquisition
|
859
|
|
|
103
|
|
|
962
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships resulting from Radian Asset Acquisition, after-tax
|
55
|
|
|
103
|
|
|
158
|
|
|||
Deferred tax
|
—
|
|
|
56
|
|
|
56
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships resulting from Radian Asset Acquisition, pre-tax
|
$
|
55
|
|
|
$
|
159
|
|
|
$
|
214
|
|
(1)
|
The cash purchase price of
$804 million
was the cash transferred for the acquisition which was allocated as follows: (1)
$987 million
for the purchase of net assets of
$1,042 million
, and (2) the settlement of pre-existing relationships between Radian Asset and Assured Guaranty at a fair value of $
(183) million
.
|
|
Year Ended December 31, 2015
|
||
|
(in millions)
|
||
Professional services
|
$
|
2
|
|
Financial advisory fees
|
10
|
|
|
Total
|
$
|
12
|
|
|
Year Ended December 31, 2015
|
|
Year Ended December 31, 2014
|
||||
|
(in millions, except per share amounts)
|
||||||
Pro forma revenues
|
$
|
2,030
|
|
|
$
|
2,501
|
|
Pro forma net income
|
922
|
|
|
1,531
|
|
||
Pro forma earnings per share (EPS):
|
|
|
|
||||
Basic
|
6.22
|
|
|
8.86
|
|
||
Diluted
|
6.18
|
|
|
8.81
|
|
3.
|
Rating Actions
|
•
|
On September 20, 2016, KBRA assigned a financial strength rating of AA (stable outlook) to AGC. On December 14, 2016 and July 8, 2016, KBRA affirmed the AA+ (stable outlook) financial strength ratings of AGM and MAC, respectively.
|
•
|
On August 8, 2016, Moody's affirmed the A2 (stable outlook) on AGM and AGE and A3 insurance financial strength rating on AGC and AGC's subsidiary Assured Guaranty (U.K.) Ltd. (AGUK) raising the outlook to stable from negative, although AGC has requested that Moody's withdraw its financial strength rating of AGC and AGUK. Effective April 8, 2015, at the Company's request, Moody’s withdrew the financial strength ratings it had assigned to AG Re and AGRO.
|
•
|
On July 27, 2016, S&P affirmed the AA (stable) financial strength ratings of AGL's insurance subsidiaries.
|
•
|
On May 27, 2016, Best affirmed the A+ (stable) financial strength rating, which is their second highest rating, of AGRO.
|
•
|
Note 6, Contracts Accounted for as Insurance
|
•
|
Note 8, Contracts Accounted for as Credit Derivatives
|
•
|
Note 13, Reinsurance and Other Monoline Exposures
|
4.
|
Outstanding Exposure
|
•
|
BIG Category 1: Below-investment-grade transactions showing sufficient deterioration to make future losses possible, but for which none are currently expected.
|
•
|
BIG Category 2: Below-investment-grade transactions for which future losses are expected but for which no claims (other than liquidity claims, which are claims that the Company expects to be reimbursed within
one
year) have yet been paid.
|
•
|
BIG Category 3: Below-investment-grade transactions for which future losses are expected and on which claims (other than liquidity claims) have been paid.
|
|
Gross Debt Service
Outstanding
|
|
Net Debt Service
Outstanding
|
||||||||||||
|
December 31,
2016 |
|
December 31,
2015 |
|
December 31,
2016 |
|
December 31,
2015 |
||||||||
|
(in millions)
|
||||||||||||||
Public finance
|
$
|
425,849
|
|
|
$
|
515,494
|
|
|
$
|
409,447
|
|
|
$
|
494,426
|
|
Structured finance
|
29,151
|
|
|
43,976
|
|
|
28,088
|
|
|
41,915
|
|
||||
Total financial guaranty
|
$
|
455,000
|
|
|
$
|
559,470
|
|
|
$
|
437,535
|
|
|
$
|
536,341
|
|
|
|
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)
|
|||||||||||||||||||||||||||||||||
AAA
|
|
$
|
2,066
|
|
|
0.8
|
%
|
|
$
|
2,221
|
|
|
8.4
|
%
|
|
$
|
9,757
|
|
|
44.2
|
%
|
|
$
|
1,447
|
|
|
47.0
|
%
|
|
$
|
15,491
|
|
|
5.2
|
%
|
AA
|
|
46,420
|
|
|
19.0
|
|
|
170
|
|
|
0.6
|
|
|
5,773
|
|
|
26.2
|
|
|
127
|
|
|
4.1
|
|
|
52,490
|
|
|
17.7
|
|
|||||
A
|
|
133,829
|
|
|
54.7
|
|
|
6,270
|
|
|
23.8
|
|
|
1,589
|
|
|
7.2
|
|
|
456
|
|
|
14.8
|
|
|
142,144
|
|
|
48.0
|
|
|||||
BBB
|
|
55,103
|
|
|
22.5
|
|
|
16,378
|
|
|
62.1
|
|
|
879
|
|
|
4.0
|
|
|
759
|
|
|
24.6
|
|
|
73,119
|
|
|
24.7
|
|
|||||
BIG
|
|
7,380
|
|
|
3.0
|
|
|
1,342
|
|
|
5.1
|
|
|
4,059
|
|
|
18.4
|
|
|
293
|
|
|
9.5
|
|
|
13,074
|
|
|
4.4
|
|
|||||
Total net par outstanding
|
|
$
|
244,798
|
|
|
100.0
|
%
|
|
$
|
26,381
|
|
|
100.0
|
%
|
|
$
|
22,057
|
|
|
100.0
|
%
|
|
$
|
3,082
|
|
|
100.0
|
%
|
|
$
|
296,318
|
|
|
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)
|
|||||||||||||||||||||||||||||||||
AAA
|
|
$
|
3,053
|
|
|
1.1
|
%
|
|
$
|
709
|
|
|
2.4
|
%
|
|
$
|
14,366
|
|
|
45.2
|
%
|
|
$
|
2,709
|
|
|
50.6
|
%
|
|
$
|
20,837
|
|
|
5.8
|
%
|
AA
|
|
69,274
|
|
|
23.7
|
|
|
2,017
|
|
|
6.8
|
|
|
7,934
|
|
|
25.0
|
|
|
177
|
|
|
3.3
|
|
|
79,402
|
|
|
22.1
|
|
|||||
A
|
|
157,440
|
|
|
53.9
|
|
|
6,765
|
|
|
22.9
|
|
|
2,486
|
|
|
7.8
|
|
|
555
|
|
|
10.3
|
|
|
167,246
|
|
|
46.7
|
|
|||||
BBB
|
|
54,315
|
|
|
18.6
|
|
|
18,708
|
|
|
63.2
|
|
|
1,515
|
|
|
4.8
|
|
|
1,365
|
|
|
25.5
|
|
|
75,903
|
|
|
21.2
|
|
|||||
BIG
|
|
7,784
|
|
|
2.7
|
|
|
1,378
|
|
|
4.7
|
|
|
5,469
|
|
|
17.2
|
|
|
552
|
|
|
10.3
|
|
|
15,183
|
|
|
4.2
|
|
|||||
Total net par outstanding
|
|
$
|
291,866
|
|
|
100.0
|
%
|
|
$
|
29,577
|
|
|
100.0
|
%
|
|
$
|
31,770
|
|
|
100.0
|
%
|
|
$
|
5,358
|
|
|
100.0
|
%
|
|
$
|
358,571
|
|
|
100.0
|
%
|
(1)
|
The
December 31, 2015
amounts include
$10.9 billion
of net par from the Radian Asset Acquisition.
|
|
Gross Par Outstanding
|
|
Ceded Par Outstanding
|
|
Net Par Outstanding
|
||||||||||||||||||
Sector
|
As of December 31, 2016
|
|
As of December 31, 2015
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
General obligation
|
$
|
110,167
|
|
|
$
|
129,386
|
|
|
$
|
2,450
|
|
|
$
|
3,131
|
|
|
$
|
107,717
|
|
|
$
|
126,255
|
|
Tax backed
|
51,325
|
|
|
59,649
|
|
|
1,394
|
|
|
1,587
|
|
|
49,931
|
|
|
58,062
|
|
||||||
Municipal utilities
|
38,442
|
|
|
46,951
|
|
|
839
|
|
|
1,015
|
|
|
37,603
|
|
|
45,936
|
|
||||||
Transportation
|
19,915
|
|
|
24,351
|
|
|
512
|
|
|
897
|
|
|
19,403
|
|
|
23,454
|
|
||||||
Healthcare
|
11,940
|
|
|
15,967
|
|
|
702
|
|
|
961
|
|
|
11,238
|
|
|
15,006
|
|
||||||
Higher education
|
10,114
|
|
|
11,984
|
|
|
29
|
|
|
48
|
|
|
10,085
|
|
|
11,936
|
|
||||||
Infrastructure finance
|
3,902
|
|
|
5,241
|
|
|
133
|
|
|
248
|
|
|
3,769
|
|
|
4,993
|
|
||||||
Housing
|
1,593
|
|
|
2,075
|
|
|
34
|
|
|
38
|
|
|
1,559
|
|
|
2,037
|
|
||||||
Investor-owned utilities
|
697
|
|
|
916
|
|
|
0
|
|
|
0
|
|
|
697
|
|
|
916
|
|
||||||
Other public finance
|
2,810
|
|
|
3,288
|
|
|
14
|
|
|
17
|
|
|
2,796
|
|
|
3,271
|
|
||||||
Total public finance—U.S.
|
250,905
|
|
|
299,808
|
|
|
6,107
|
|
|
7,942
|
|
|
244,798
|
|
|
291,866
|
|
||||||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Infrastructure finance
|
11,818
|
|
|
14,040
|
|
|
1,087
|
|
|
1,312
|
|
|
10,731
|
|
|
12,728
|
|
||||||
Regulated utilities
|
11,395
|
|
|
12,616
|
|
|
2,132
|
|
|
2,568
|
|
|
9,263
|
|
|
10,048
|
|
||||||
Pooled infrastructure
|
1,621
|
|
|
2,013
|
|
|
108
|
|
|
134
|
|
|
1,513
|
|
|
1,879
|
|
||||||
Other public finance
|
5,653
|
|
|
5,714
|
|
|
779
|
|
|
792
|
|
|
4,874
|
|
|
4,922
|
|
||||||
Total public finance—non-U.S.
|
30,487
|
|
|
34,383
|
|
|
4,106
|
|
|
4,806
|
|
|
26,381
|
|
|
29,577
|
|
||||||
Total public finance
|
281,392
|
|
|
334,191
|
|
|
10,213
|
|
|
12,748
|
|
|
271,179
|
|
|
321,443
|
|
||||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Pooled corporate obligations
|
10,273
|
|
|
16,757
|
|
|
223
|
|
|
749
|
|
|
10,050
|
|
|
16,008
|
|
||||||
Residential Mortgage-Backed Securities (RMBS)
|
5,933
|
|
|
7,441
|
|
|
296
|
|
|
374
|
|
|
5,637
|
|
|
7,067
|
|
||||||
Insurance securitizations
|
2,355
|
|
|
3,047
|
|
|
47
|
|
|
47
|
|
|
2,308
|
|
|
3,000
|
|
||||||
Consumer receivables
|
1,707
|
|
|
2,153
|
|
|
55
|
|
|
54
|
|
|
1,652
|
|
|
2,099
|
|
||||||
Financial products
|
1,540
|
|
|
1,906
|
|
|
—
|
|
|
—
|
|
|
1,540
|
|
|
1,906
|
|
||||||
Commercial receivables
|
234
|
|
|
432
|
|
|
4
|
|
|
5
|
|
|
230
|
|
|
427
|
|
||||||
Commercial mortgage-backed securities (CMBS) and other commercial real estate related exposures
|
43
|
|
|
549
|
|
|
—
|
|
|
16
|
|
|
43
|
|
|
533
|
|
||||||
Other structured finance
|
646
|
|
|
823
|
|
|
49
|
|
|
93
|
|
|
597
|
|
|
730
|
|
||||||
Total structured finance—U.S.
|
22,731
|
|
|
33,108
|
|
|
674
|
|
|
1,338
|
|
|
22,057
|
|
|
31,770
|
|
||||||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Pooled corporate obligations
|
1,716
|
|
|
4,087
|
|
|
181
|
|
|
442
|
|
|
1,535
|
|
|
3,645
|
|
||||||
RMBS
|
661
|
|
|
552
|
|
|
57
|
|
|
60
|
|
|
604
|
|
|
492
|
|
||||||
Commercial receivables
|
373
|
|
|
619
|
|
|
17
|
|
|
19
|
|
|
356
|
|
|
600
|
|
||||||
Other structured finance
|
601
|
|
|
635
|
|
|
14
|
|
|
14
|
|
|
587
|
|
|
621
|
|
||||||
Total structured finance—non-U.S.
|
3,351
|
|
|
5,893
|
|
|
269
|
|
|
535
|
|
|
3,082
|
|
|
5,358
|
|
||||||
Total structured finance
|
26,082
|
|
|
39,001
|
|
|
943
|
|
|
1,873
|
|
|
25,139
|
|
|
37,128
|
|
||||||
Total net par outstanding
|
$
|
307,474
|
|
|
$
|
373,192
|
|
|
$
|
11,156
|
|
|
$
|
14,621
|
|
|
$
|
296,318
|
|
|
$
|
358,571
|
|
|
Public Finance
|
|
Structured Finance
|
|
Total
|
||||||
|
(in millions)
|
||||||||||
0 to 5 years
|
$
|
90,563
|
|
|
$
|
16,394
|
|
|
$
|
106,957
|
|
5 to 10 years
|
56,351
|
|
|
3,692
|
|
|
60,043
|
|
|||
10 to 15 years
|
45,712
|
|
|
2,548
|
|
|
48,260
|
|
|||
15 to 20 years
|
37,057
|
|
|
1,859
|
|
|
38,916
|
|
|||
20 years and above
|
41,496
|
|
|
646
|
|
|
42,142
|
|
|||
Total net par outstanding
|
$
|
271,179
|
|
|
$
|
25,139
|
|
|
$
|
296,318
|
|
|
BIG Net Par Outstanding
|
|
Net Par
|
||||||||||||||||
|
BIG 1
|
|
BIG 2
|
|
BIG 3
|
|
Total BIG
|
|
Outstanding
|
||||||||||
|
|
|
|
|
(in millions)
|
|
|
|
|
||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. public finance
|
$
|
2,402
|
|
|
$
|
3,123
|
|
|
$
|
1,855
|
|
|
$
|
7,380
|
|
|
$
|
244,798
|
|
Non-U.S. public finance
|
1,288
|
|
|
54
|
|
|
—
|
|
|
1,342
|
|
|
26,381
|
|
|||||
Public finance
|
3,690
|
|
|
3,177
|
|
|
1,855
|
|
|
8,722
|
|
|
271,179
|
|
|||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. RMBS
|
197
|
|
|
493
|
|
|
2,461
|
|
|
3,151
|
|
|
5,637
|
|
|||||
Triple-X life insurance transactions
|
—
|
|
|
—
|
|
|
126
|
|
|
126
|
|
|
2,057
|
|
|||||
Trust preferred securities (TruPS)
|
304
|
|
|
126
|
|
|
—
|
|
|
430
|
|
|
1,892
|
|
|||||
Other structured finance
|
304
|
|
|
263
|
|
|
78
|
|
|
645
|
|
|
15,553
|
|
|||||
Structured finance
|
805
|
|
|
882
|
|
|
2,665
|
|
|
4,352
|
|
|
25,139
|
|
|||||
Total
|
$
|
4,495
|
|
|
$
|
4,059
|
|
|
$
|
4,520
|
|
|
$
|
13,074
|
|
|
$
|
296,318
|
|
|
BIG Net Par Outstanding
|
|
Net Par
|
||||||||||||||||
|
BIG 1
|
|
BIG 2
|
|
BIG 3
|
|
Total BIG
|
|
Outstanding
|
||||||||||
|
|
|
|
|
(in millions)
|
|
|
|
|
||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. public finance
|
$
|
4,765
|
|
|
$
|
2,883
|
|
|
$
|
136
|
|
|
$
|
7,784
|
|
|
$
|
291,866
|
|
Non-U.S. public finance
|
875
|
|
|
503
|
|
|
—
|
|
|
1,378
|
|
|
29,577
|
|
|||||
Public finance
|
5,640
|
|
|
3,386
|
|
|
136
|
|
|
9,162
|
|
|
321,443
|
|
|||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. RMBS
|
1,020
|
|
|
397
|
|
|
2,556
|
|
|
3,973
|
|
|
7,067
|
|
|||||
Triple-X life insurance transactions
|
—
|
|
|
—
|
|
|
216
|
|
|
216
|
|
|
2,750
|
|
|||||
TruPS
|
679
|
|
|
127
|
|
|
—
|
|
|
806
|
|
|
4,379
|
|
|||||
Other structured finance
|
684
|
|
|
219
|
|
|
123
|
|
|
1,026
|
|
|
22,932
|
|
|||||
Structured finance
|
2,383
|
|
|
743
|
|
|
2,895
|
|
|
6,021
|
|
|
37,128
|
|
|||||
Total
|
$
|
8,023
|
|
|
$
|
4,129
|
|
|
$
|
3,031
|
|
|
$
|
15,183
|
|
|
$
|
358,571
|
|
|
|
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
|
|
$
|
3,861
|
|
|
$
|
634
|
|
|
$
|
4,495
|
|
|
165
|
|
|
10
|
|
|
175
|
|
Category 2
|
|
3,857
|
|
|
202
|
|
|
4,059
|
|
|
79
|
|
|
6
|
|
|
85
|
|
|||
Category 3
|
|
4,383
|
|
|
137
|
|
|
4,520
|
|
|
148
|
|
|
9
|
|
|
157
|
|
|||
Total BIG
|
|
$
|
12,101
|
|
|
$
|
973
|
|
|
$
|
13,074
|
|
|
392
|
|
|
25
|
|
|
417
|
|
|
|
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
|
|
$
|
7,019
|
|
|
$
|
1,004
|
|
|
$
|
8,023
|
|
|
202
|
|
|
12
|
|
|
214
|
|
Category 2
|
|
3,655
|
|
|
474
|
|
|
4,129
|
|
|
85
|
|
|
8
|
|
|
93
|
|
|||
Category 3
|
|
2,900
|
|
|
131
|
|
|
3,031
|
|
|
132
|
|
|
12
|
|
|
144
|
|
|||
Total BIG
|
|
$
|
13,574
|
|
|
$
|
1,609
|
|
|
$
|
15,183
|
|
|
419
|
|
|
32
|
|
|
451
|
|
(2)
|
A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments.
|
|
Number of Risks
|
|
Net Par Outstanding
|
|
Percent of Total Net Par Outstanding
|
||||
|
(dollars in millions)
|
||||||||
U.S.:
|
|
|
|
|
|
||||
U.S. Public finance:
|
|
|
|
|
|
||||
California
|
1,459
|
|
|
$
|
42,404
|
|
|
14.3
|
%
|
Texas
|
1,271
|
|
|
20,599
|
|
|
7.0
|
|
|
Pennsylvania
|
852
|
|
|
20,232
|
|
|
6.8
|
|
|
New York
|
935
|
|
|
19,637
|
|
|
6.6
|
|
|
Illinois
|
776
|
|
|
17,967
|
|
|
6.1
|
|
|
Florida
|
324
|
|
|
12,643
|
|
|
4.3
|
|
|
New Jersey
|
495
|
|
|
12,560
|
|
|
4.2
|
|
|
Michigan
|
506
|
|
|
7,985
|
|
|
2.7
|
|
|
Georgia
|
172
|
|
|
6,372
|
|
|
2.2
|
|
|
Ohio
|
409
|
|
|
5,554
|
|
|
1.9
|
|
|
Other states and U.S. territories
|
3,475
|
|
|
78,845
|
|
|
26.6
|
|
|
Total U.S. public finance
|
10,674
|
|
|
244,798
|
|
|
82.7
|
|
|
U.S. Structured finance (multiple states)
|
610
|
|
|
22,057
|
|
|
7.4
|
|
|
Total U.S.
|
11,284
|
|
|
266,855
|
|
|
90.1
|
|
|
Non-U.S.:
|
|
|
|
|
|
||||
United Kingdom
|
112
|
|
|
15,940
|
|
|
5.4
|
|
|
Australia
|
18
|
|
|
3,036
|
|
|
1.0
|
|
|
Canada
|
9
|
|
|
2,730
|
|
|
0.9
|
|
|
France
|
14
|
|
|
1,809
|
|
|
0.6
|
|
|
Italy
|
9
|
|
|
1,311
|
|
|
0.4
|
|
|
Other
|
53
|
|
|
4,637
|
|
|
1.6
|
|
|
Total non-U.S.
|
215
|
|
|
29,463
|
|
|
9.9
|
|
|
Total
|
11,499
|
|
|
$
|
296,318
|
|
|
100.0
|
%
|
•
|
Constitutionally Guaranteed.
The Company includes in this category public debt benefiting from Article VI of the Constitution of the Commonwealth, which expressly provides that interest and principal payments on the public debt are to be paid before other disbursements are made.
|
•
|
Public Corporations – Certain Revenues Potentially Subject to Clawback.
The Company includes in this category the debt of public corporations for which applicable law permits the Commonwealth to claw back, subject to certain conditions and for the payment of public debt, at least a portion of the revenues supporting the bonds the Company insures. As a Constitutional condition to clawback, available Commonwealth revenues for any fiscal year must be insufficient to pay Commonwealth debt service before the payment of any appropriations for that year. The Company believes that this condition has not been satisfied to date, and accordingly that the Commonwealth has not to date been entitled to clawback revenues supporting debt insured by the Company.
As noted above, the Company sued various Puerto Rico governmental officials in the United States District Court, District of Puerto Rico asserting that Puerto Rico's recent attempt to claw back pledged taxes is unconstitutional, and demanding declaratory and injunctive relief.
|
•
|
Other Public Corporations.
The Company includes in this category the debt of public corporations that are supported by revenues it does not believe are subject to clawback.
|
|
Gross Par Outstanding
|
|
Gross Debt Service Outstanding
|
||||||||||||
|
December 31,
2016 |
|
December 31,
2015 |
|
December 31,
2016 |
|
December 31,
2015 |
||||||||
|
(in millions)
|
||||||||||||||
Exposure to Puerto Rico
|
$
|
5,435
|
|
|
$
|
5,755
|
|
|
$
|
9,038
|
|
|
$
|
9,632
|
|
|
As of
December 31, 2016 |
|
As of
December 31, 2015 |
||||
|
(in millions)
|
||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
||||
Commonwealth of Puerto Rico - General Obligation Bonds (1)
|
$
|
1,476
|
|
|
$
|
1,615
|
|
Puerto Rico Public Buildings Authority (1)
|
169
|
|
|
188
|
|
||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
||||
PRHTA (Transportation revenue) (1) (2)
|
918
|
|
|
909
|
|
||
PRHTA (Highways revenue)
|
350
|
|
|
370
|
|
||
PRCCDA
|
152
|
|
|
164
|
|
||
PRIFA (1)
|
18
|
|
|
18
|
|
||
Other Public Corporations
|
|
|
|
||||
PREPA
|
724
|
|
|
744
|
|
||
PRASA
|
373
|
|
|
388
|
|
||
MFA
|
334
|
|
|
387
|
|
||
COFINA
|
271
|
|
|
269
|
|
||
U of PR
|
1
|
|
|
1
|
|
||
Total net exposure to Puerto Rico
|
$
|
4,786
|
|
|
$
|
5,053
|
|
|
Scheduled Net Par Amortization
|
|
Scheduled Net Debt Service Amortization
|
||||
|
(in millions)
|
||||||
2017 (January 1 - March 31)
|
$
|
0
|
|
|
$
|
118
|
|
2017 (April 1 - June 30)
|
0
|
|
|
2
|
|
||
2017 (July 1 - September 30)
|
220
|
|
|
339
|
|
||
2017 (October 1 - December 31)
|
0
|
|
|
2
|
|
||
Subtotal 2017
|
220
|
|
|
461
|
|
||
2018
|
175
|
|
|
408
|
|
||
2019
|
206
|
|
|
429
|
|
||
2020
|
266
|
|
|
480
|
|
||
2021
|
125
|
|
|
326
|
|
||
2022-2026
|
869
|
|
|
1,759
|
|
||
2027-2031
|
889
|
|
|
1,534
|
|
||
2032-2036
|
1,201
|
|
|
1,612
|
|
||
2037-2041
|
417
|
|
|
588
|
|
||
2042-2047
|
418
|
|
|
492
|
|
||
Total
|
$
|
4,786
|
|
|
$
|
8,089
|
|
|
Hungary
|
|
Italy
|
|
Portugal
|
|
Spain
|
|
Turkey
|
|
Total
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Sub-sovereign exposure(2)
|
$
|
236
|
|
|
$
|
880
|
|
|
$
|
76
|
|
|
$
|
342
|
|
|
$
|
—
|
|
|
$
|
1,534
|
|
Non-sovereign exposure(3)
|
114
|
|
|
399
|
|
|
—
|
|
|
—
|
|
|
202
|
|
|
715
|
|
||||||
Total
|
$
|
350
|
|
|
$
|
1,279
|
|
|
$
|
76
|
|
|
$
|
342
|
|
|
$
|
202
|
|
|
$
|
2,249
|
|
Total BIG (See Note 5)
|
$
|
283
|
|
|
$
|
—
|
|
|
$
|
76
|
|
|
$
|
342
|
|
|
$
|
—
|
|
|
$
|
701
|
|
(1)
|
While exposures are shown in U.S. dollars, the obligations are in various currencies, primarily euros.
|
(2)
|
Sub-sovereign exposure in Selected European Countries includes transactions backed by receivables from, or supported by, sub-sovereigns, which are governmental or government-backed entities other than the ultimate governing body of the country.
|
(3)
|
Non-sovereign exposure in Selected European Countries includes debt of regulated utilities, RMBS and diversified payment rights (DPR) securitizations.
|
5.
|
Expected Loss to be Paid
|
|
Year Ended December 31,
|
||||||
|
2016
|
|
2015
|
||||
|
(in millions)
|
||||||
Net expected loss to be paid, beginning of period
|
$
|
1,391
|
|
|
$
|
1,169
|
|
Net expected loss to be paid on the CIFGH portfolio as of July 1, 2016
|
22
|
|
|
—
|
|
||
Net expected loss to be paid on Radian Asset portfolio as of April 1, 2015
|
—
|
|
|
190
|
|
||
Economic loss development due to:
|
|
|
|
||||
Accretion of discount
|
26
|
|
|
32
|
|
||
Changes in discount rates
|
(15
|
)
|
|
(23
|
)
|
||
Changes in timing and assumptions
|
128
|
|
|
310
|
|
||
Total economic loss development
|
139
|
|
|
319
|
|
||
Paid losses
|
(354
|
)
|
|
(287
|
)
|
||
Net expected loss to be paid, end of period
|
$
|
1,198
|
|
|
$
|
1,391
|
|
|
Net Expected
Loss to be
Paid (Recovered) as of
December 31, 2015(2)
|
|
Net Expected
Loss to be Paid (Recovered) on CIFG as of July 1, 2016 |
|
Economic Loss
Development
|
|
(Paid)
Recovered
Losses (1)
|
|
Net Expected
Loss to be Paid (Recovered) as of December 31, 2016 (2) |
||||||||||
|
(in millions)
|
||||||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. public finance
|
$
|
771
|
|
|
$
|
40
|
|
|
$
|
276
|
|
|
$
|
(216
|
)
|
|
$
|
871
|
|
Non-U.S. public finance
|
38
|
|
|
2
|
|
|
(7
|
)
|
|
—
|
|
|
33
|
|
|||||
Public finance
|
809
|
|
|
42
|
|
|
269
|
|
|
(216
|
)
|
|
904
|
|
|||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. RMBS
|
409
|
|
|
(22
|
)
|
|
(91
|
)
|
|
(90
|
)
|
|
206
|
|
|||||
Triple-X life insurance transactions
|
99
|
|
|
—
|
|
|
(22
|
)
|
|
(23
|
)
|
|
54
|
|
|||||
Other structured finance
|
74
|
|
|
2
|
|
|
(17
|
)
|
|
(25
|
)
|
|
34
|
|
|||||
Structured finance
|
582
|
|
|
(20
|
)
|
|
(130
|
)
|
|
(138
|
)
|
|
294
|
|
|||||
Total
|
$
|
1,391
|
|
|
$
|
22
|
|
|
$
|
139
|
|
|
$
|
(354
|
)
|
|
$
|
1,198
|
|
|
Net Expected
Loss to be
Paid (Recovered) as of
December 31, 2014
|
|
Net Expected
Loss to be Paid (Recovered) on Radian Asset portfolio as of April 1, 2015 |
|
Economic Loss
Development
|
|
(Paid)
Recovered
Losses (1)
|
|
Net Expected
Loss to be Paid (Recovered) as of December 31, 2015 (2) |
||||||||||
|
(in millions)
|
||||||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. public finance
|
$
|
303
|
|
|
$
|
81
|
|
|
$
|
416
|
|
|
$
|
(29
|
)
|
|
$
|
771
|
|
Non-U.S. public finance
|
45
|
|
|
4
|
|
|
(11
|
)
|
|
—
|
|
|
38
|
|
|||||
Public finance
|
348
|
|
|
85
|
|
|
405
|
|
|
(29
|
)
|
|
809
|
|
|||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. RMBS
|
584
|
|
|
4
|
|
|
(82
|
)
|
|
(97
|
)
|
|
409
|
|
|||||
Triple-X life insurance transactions
|
161
|
|
|
—
|
|
|
11
|
|
|
(73
|
)
|
|
99
|
|
|||||
Other structured finance
|
76
|
|
|
101
|
|
|
(15
|
)
|
|
(88
|
)
|
|
74
|
|
|||||
Structured finance
|
821
|
|
|
105
|
|
|
(86
|
)
|
|
(258
|
)
|
|
582
|
|
|||||
Total
|
$
|
1,169
|
|
|
$
|
190
|
|
|
$
|
319
|
|
|
$
|
(287
|
)
|
|
$
|
1,391
|
|
(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. The Company paid
$16 million
and
$25 million
in LAE for the years ended
December 31, 2016
and
2015
, respectively.
|
(2)
|
Includes expected LAE to be paid of
$12 million
as of
December 31, 2016
and
$12 million
as of
December 31, 2015
.
|
|
Future Net
R&W Benefit as of December 31, 2016 |
|
Future Net
R&W Benefit as of December 31, 2015 |
|
Future Net
R&W Benefit as of December 31, 2014 |
||||||
|
(in millions)
|
||||||||||
U.S. RMBS:
|
|
|
|
|
|
||||||
First lien
|
$
|
(53
|
)
|
|
$
|
0
|
|
|
$
|
232
|
|
Second lien
|
47
|
|
|
79
|
|
|
85
|
|
|||
Total
|
$
|
(6
|
)
|
|
$
|
79
|
|
|
$
|
317
|
|
(1)
|
The Company’s agreements with R&W providers generally provide that, as the Company makes claim payments, the R&W providers reimburse it for those claims; if the Company later receives reimbursement through the transaction (for example, from excess spread), the Company repays the R&W providers.
See the section “Breaches of Representations and Warranties” for information about the R&W agreements.
When the Company projects receiving more reimbursements in the future than it projects paying in claims on transactions covered by R&W settlement agreements, the Company will have a net R&W payable.
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
||||||||||||||||||||
|
Public Finance
|
|
Structured Finance
|
|
Total
|
|
Public Finance
|
|
Structured Finance
|
|
Total
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Financial guaranty insurance
|
$
|
904
|
|
|
$
|
179
|
|
|
$
|
1,083
|
|
|
$
|
809
|
|
|
$
|
430
|
|
|
$
|
1,239
|
|
FG VIEs (1) and other
|
—
|
|
|
105
|
|
|
105
|
|
|
—
|
|
|
136
|
|
|
136
|
|
||||||
Credit derivatives (2)
|
0
|
|
|
10
|
|
|
10
|
|
|
—
|
|
|
16
|
|
|
16
|
|
||||||
Total
|
$
|
904
|
|
|
$
|
294
|
|
|
$
|
1,198
|
|
|
$
|
809
|
|
|
$
|
582
|
|
|
$
|
1,391
|
|
|
Year Ended December 31, 2016
|
|
Year Ended December 31, 2015
|
||||||||||||||||||||
|
Public Finance
|
|
Structured Finance
|
|
Total
|
|
Public Finance
|
|
Structured Finance
|
|
Total
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Financial guaranty insurance
|
$
|
269
|
|
|
$
|
(105
|
)
|
|
$
|
164
|
|
|
$
|
410
|
|
|
$
|
(25
|
)
|
|
$
|
385
|
|
FG VIEs (1) and other
|
—
|
|
|
(8
|
)
|
|
(8
|
)
|
|
—
|
|
|
16
|
|
|
16
|
|
||||||
Credit derivatives (2)
|
—
|
|
|
(17
|
)
|
|
(17
|
)
|
|
(5
|
)
|
|
(77
|
)
|
|
(82
|
)
|
||||||
Total
|
$
|
269
|
|
|
$
|
(130
|
)
|
|
$
|
139
|
|
|
$
|
405
|
|
|
$
|
(86
|
)
|
|
$
|
319
|
|
|
December 31, 2016
|
|
December 31, 2015
|
|
December 31, 2014
|
Current Loans Modified in the Previous 12 Months
|
|
|
|
|
|
Alt-A and Prime
|
25%
|
|
25%
|
|
25%
|
Option ARM
|
25
|
|
25
|
|
25
|
Subprime
|
25
|
|
25
|
|
25
|
Current Loans Delinquent in the Previous 12 Months
|
|
|
|
|
|
Alt-A and Prime
|
25
|
|
25
|
|
25
|
Option ARM
|
25
|
|
25
|
|
25
|
Subprime
|
25
|
|
25
|
|
25
|
30 – 59 Days Delinquent
|
|
|
|
|
|
Alt-A and Prime
|
35
|
|
35
|
|
35
|
Option ARM
|
35
|
|
40
|
|
40
|
Subprime
|
40
|
|
45
|
|
35
|
60 – 89 Days Delinquent
|
|
|
|
|
|
Alt-A and Prime
|
45
|
|
45
|
|
50
|
Option ARM
|
50
|
|
50
|
|
55
|
Subprime
|
50
|
|
55
|
|
40
|
90+ Days Delinquent
|
|
|
|
|
|
Alt-A and Prime
|
55
|
|
55
|
|
60
|
Option ARM
|
55
|
|
60
|
|
65
|
Subprime
|
55
|
|
60
|
|
55
|
Bankruptcy
|
|
|
|
|
|
Alt-A and Prime
|
45
|
|
45
|
|
45
|
Option ARM
|
50
|
|
50
|
|
50
|
Subprime
|
40
|
|
40
|
|
40
|
Foreclosure
|
|
|
|
|
|
Alt-A and Prime
|
65
|
|
65
|
|
75
|
Option ARM
|
65
|
|
70
|
|
80
|
Subprime
|
65
|
|
70
|
|
70
|
Real Estate Owned
|
|
|
|
|
|
All
|
100
|
|
100
|
|
100
|
|
As of
December 31, 2016 |
|
As of
December 31, 2015 |
|
As of
December 31, 2014 |
|||||||||||||||
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|||||||||
Alt-A First Lien
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Plateau CDR
|
1.0
|
%
|
–
|
13.5%
|
|
5.7%
|
|
1.7
|
%
|
–
|
26.4%
|
|
6.4%
|
|
2.0
|
%
|
–
|
13.4%
|
|
7.3%
|
Final CDR
|
0.0
|
%
|
–
|
0.7%
|
|
0.3%
|
|
0.1
|
%
|
–
|
1.3%
|
|
0.3%
|
|
0.1
|
%
|
–
|
0.7%
|
|
0.3%
|
Initial loss severity:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
2005 and prior
|
60.0%
|
|
|
|
60.0%
|
|
|
|
60.0%
|
|
|
|||||||||
2006
|
80.0%
|
|
|
|
70.0%
|
|
|
|
70.0%
|
|
|
|||||||||
2007
|
70.0%
|
|
|
|
65.0%
|
|
|
|
65.0%
|
|
|
|||||||||
Option ARM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Plateau CDR
|
3.2
|
%
|
–
|
7.0%
|
|
5.6%
|
|
3.5
|
%
|
–
|
10.3%
|
|
7.8%
|
|
4.3
|
%
|
–
|
14.2%
|
|
10.6%
|
Final CDR
|
0.2
|
%
|
–
|
0.3%
|
|
0.3%
|
|
0.2
|
%
|
–
|
0.5%
|
|
0.4%
|
|
0.2
|
%
|
–
|
0.7%
|
|
0.5%
|
Initial loss severity:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
2005 and prior
|
60.0%
|
|
|
|
60.0%
|
|
|
|
60.0%
|
|
|
|||||||||
2006
|
70.0%
|
|
|
|
70.0%
|
|
|
|
70.0%
|
|
|
|||||||||
2007
|
75.0%
|
|
|
|
65.0%
|
|
|
|
65.0%
|
|
|
|||||||||
Subprime
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Plateau CDR
|
2.8
|
%
|
–
|
14.1%
|
|
8.1%
|
|
4.7
|
%
|
–
|
13.2%
|
|
9.5%
|
|
4.9
|
%
|
–
|
15.0%
|
|
10.6%
|
Final CDR
|
0.1
|
%
|
–
|
0.7%
|
|
0.4%
|
|
0.2
|
%
|
–
|
0.7%
|
|
0.4%
|
|
0.2
|
%
|
–
|
0.7%
|
|
0.4%
|
Initial loss severity:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
2005 and prior
|
80.0%
|
|
|
|
75.0%
|
|
|
|
75.0%
|
|
|
|||||||||
2006
|
90.0%
|
|
|
|
90.0%
|
|
|
|
90.0%
|
|
|
|||||||||
2007
|
90.0%
|
|
|
|
90.0%
|
|
|
|
90.0%
|
|
|
|
As of
December 31, 2016 |
|
As of
December 31, 2015 |
|
As of
December 31, 2014 |
|||||||||||||||
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|||||||||
Plateau CDR
|
3.5
|
%
|
–
|
24.8%
|
|
13.6%
|
|
4.9
|
%
|
–
|
23.5%
|
|
10.3%
|
|
2.8
|
%
|
–
|
6.8%
|
|
4.1%
|
Final CDR trended down to
|
0.5
|
%
|
–
|
3.2%
|
|
1.3%
|
|
0.5
|
%
|
–
|
3.2%
|
|
1.2%
|
|
0.5
|
%
|
–
|
3.2%
|
|
1.2%
|
Liquidation rates:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Current Loans Modified in the Previous 12 Months
|
25%
|
|
|
|
25%
|
|
|
|
25%
|
|
|
|||||||||
Current Loans Delinquent in the Previous 12 Months
|
25
|
|
|
|
25
|
|
|
|
25
|
|
|
|||||||||
30 – 59 Days Delinquent
|
50
|
|
|
|
50
|
|
|
|
55
|
|
|
|||||||||
60 – 89 Days Delinquent
|
65
|
|
|
|
65
|
|
|
|
70
|
|
|
|||||||||
90+ Days Delinquent
|
80
|
|
|
|
75
|
|
|
|
80
|
|
|
|||||||||
Bankruptcy
|
55
|
|
|
|
55
|
|
|
|
55
|
|
|
|||||||||
Foreclosure
|
75
|
|
|
|
75
|
|
|
|
75
|
|
|
|||||||||
Real Estate Owned
|
100
|
|
|
|
100
|
|
|
|
100
|
|
|
|||||||||
Loss severity
|
98%
|
|
|
|
98%
|
|
|
|
90
|
%
|
–
|
98%
|
|
90.4%
|
(1)
|
Represents variables for most heavily weighted scenario (the base case).
|
6.
|
Contracts Accounted for as Insurance
|
•
|
For premiums received upfront on financial guaranty insurance contracts that were originally underwritten by the Company, deferred premium revenue is equal to the amount of cash received. Upfront premiums typically relate to public finance transactions.
|
•
|
For premiums received in installments on financial guaranty insurance contracts that were originally underwritten by the Company, deferred premium revenue is the present value of either (1) contractual premiums due or (2) in cases where the underlying collateral is comprised of homogeneous pools of assets, the expected premiums to be
|
•
|
For financial guaranty insurance contracts acquired in a business combination, deferred premium revenue is equal to the fair value of the Company's stand-ready obligation portion of the insurance contract at the date of acquisition based on what a hypothetical similarly rated financial guaranty insurer would have charged for the contract at that date and not the actual cash flows under the insurance contract. The amount of deferred premium revenue may differ significantly from cash collections due primarily to fair value adjustments recorded in connection with a business combination.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Scheduled net earned premiums
|
$
|
381
|
|
|
$
|
416
|
|
|
$
|
415
|
|
Accelerations
|
|
|
|
|
|
||||||
Refundings
|
390
|
|
|
294
|
|
|
133
|
|
|||
Terminations
|
79
|
|
|
37
|
|
|
3
|
|
|||
Total Accelerations
|
469
|
|
|
331
|
|
|
136
|
|
|||
Accretion of discount on net premiums receivable
|
14
|
|
|
17
|
|
|
16
|
|
|||
Financial guaranty insurance net earned premiums
|
864
|
|
|
764
|
|
|
567
|
|
|||
Other
|
0
|
|
|
2
|
|
|
3
|
|
|||
Net earned premiums (1)
|
$
|
864
|
|
|
$
|
766
|
|
|
$
|
570
|
|
(1)
|
Excludes
$16 million
,
$21 million
and
$32 million
for the year ended
December 31, 2016
,
2015
and
2014
, respectively, related to consolidated FG VIEs.
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
||||||||||||||||||||
|
Gross
|
|
Ceded
|
|
Net(1)
|
|
Gross
|
|
Ceded
|
|
Net(1)
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Deferred premium revenue
|
$
|
3,548
|
|
|
$
|
206
|
|
|
$
|
3,342
|
|
|
$
|
4,008
|
|
|
$
|
238
|
|
|
$
|
3,770
|
|
Contra-paid(2)
|
(37
|
)
|
|
0
|
|
|
(37
|
)
|
|
(12
|
)
|
|
(6
|
)
|
|
(6
|
)
|
||||||
Unearned premium reserve
|
$
|
3,511
|
|
|
$
|
206
|
|
|
$
|
3,305
|
|
|
$
|
3,996
|
|
|
$
|
232
|
|
|
$
|
3,764
|
|
(1)
|
Excludes
$90 million
and $
110 million
of deferred premium revenue and
$25 million
and
$30 million
of contra-paid related to FG VIEs as of
December 31, 2016
and
December 31, 2015
, respectively.
|
(2)
|
See "Financial Guaranty Insurance Losses – Insurance Contracts' Loss Information" below for an explanation of "contra-paid".
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Beginning of period, December 31
|
$
|
693
|
|
|
$
|
729
|
|
|
$
|
876
|
|
Premiums receivable from acquisitions (see Note 2)
|
18
|
|
|
2
|
|
|
—
|
|
|||
Gross written premiums on new business, net of commissions on assumed business
|
193
|
|
|
198
|
|
|
171
|
|
|||
Gross premiums received, net of commissions on assumed business
|
(258
|
)
|
|
(206
|
)
|
|
(230
|
)
|
|||
Adjustments:
|
|
|
|
|
|
||||||
Changes in the expected term
|
(38
|
)
|
|
(19
|
)
|
|
(66
|
)
|
|||
Accretion of discount, net of commissions on assumed business
|
9
|
|
|
18
|
|
|
10
|
|
|||
Foreign exchange translation
|
(41
|
)
|
|
(25
|
)
|
|
(31
|
)
|
|||
Consolidation/deconsolidation of FG VIEs
|
0
|
|
|
(4
|
)
|
|
(1
|
)
|
|||
End of period, December 31 (1)
|
$
|
576
|
|
|
$
|
693
|
|
|
$
|
729
|
|
(1)
|
Excludes
$11 million
,
$17 million
and
$19 million
as of
December 31, 2016
,
2015
and
2014
, respectively, related to consolidated FG VIEs.
|
|
As of December 31, 2016
|
||
|
(in millions)
|
||
2017 (January 1 – March 31)
|
$
|
27
|
|
2017 (April 1 – June 30)
|
21
|
|
|
2017 (July 1 – September 30)
|
14
|
|
|
2017 (October 1 – December 31)
|
16
|
|
|
2018
|
58
|
|
|
2019
|
52
|
|
|
2020
|
50
|
|
|
2021
|
49
|
|
|
2022-2026
|
179
|
|
|
2027-2031
|
120
|
|
|
2032-2036
|
80
|
|
|
After 2036
|
65
|
|
|
Total(1)
|
$
|
731
|
|
(1)
|
Excludes expected cash collections on FG VIEs of
$13 million
.
|
|
As of December 31, 2016
|
||
|
(in millions)
|
||
2017 (January 1 – March 31)
|
$
|
89
|
|
2017 (April 1 – June 30)
|
87
|
|
|
2017 (July 1 – September 30)
|
82
|
|
|
2017 (October 1 – December 31)
|
80
|
|
|
Subtotal 2017
|
338
|
|
|
2018
|
304
|
|
|
2019
|
268
|
|
|
2020
|
243
|
|
|
2021
|
223
|
|
|
2022-2026
|
856
|
|
|
2027-2031
|
545
|
|
|
2032-2036
|
315
|
|
|
After 2036
|
250
|
|
|
Net deferred premium revenue(1)
|
3,342
|
|
|
Future accretion
|
145
|
|
|
Total future net earned premiums
|
$
|
3,487
|
|
(1)
|
Excludes scheduled net earned premiums on consolidated FG VIEs of
$90 million
.
|
|
As of
December 31, 2016 |
|
As of
December 31, 2015 |
||||
|
(dollars in millions)
|
||||||
Premiums receivable, net of commission payable
|
$
|
576
|
|
|
$
|
693
|
|
Gross deferred premium revenue
|
1,041
|
|
|
1,240
|
|
||
Weighted-average risk-free rate used to discount premiums
|
3.0
|
%
|
|
3.1
|
%
|
||
Weighted-average period of premiums receivable (in years)
|
9.1
|
|
|
9.4
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Beginning of period
|
$
|
114
|
|
|
$
|
121
|
|
|
$
|
124
|
|
DAC adjustments from acquisitions (see Note 2)
|
0
|
|
|
1
|
|
|
—
|
|
|||
Costs deferred during the period:
|
|
|
|
|
|
||||||
Commissions on assumed and ceded business
|
(2
|
)
|
|
(1
|
)
|
|
7
|
|
|||
Premium taxes
|
4
|
|
|
2
|
|
|
3
|
|
|||
Compensation and other acquisition costs
|
9
|
|
|
11
|
|
|
10
|
|
|||
Total
|
11
|
|
|
12
|
|
|
20
|
|
|||
Costs amortized during the period
|
(19
|
)
|
|
(20
|
)
|
|
(23
|
)
|
|||
End of period
|
$
|
106
|
|
|
$
|
114
|
|
|
$
|
121
|
|
•
|
a reduction in the corresponding loss and LAE reserve with a benefit to the income statement,
|
•
|
no entry recorded, if “total loss” is not in excess of deferred premium revenue, or
|
•
|
the recording of a salvage asset with a benefit to the income statement if the transaction is in a net recovery position at the reporting date.
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
||||||||||||||||||||
|
Loss and
LAE
Reserve, net
|
|
Salvage and
Subrogation
Recoverable, net
|
|
Net Reserve (Recoverable)
|
|
Loss and
LAE
Reserve, net
|
|
Salvage and
Subrogation
Recoverable, net
|
|
Net Reserve (Recoverable)
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. public finance
|
$
|
711
|
|
|
$
|
86
|
|
|
$
|
625
|
|
|
$
|
604
|
|
|
$
|
7
|
|
|
$
|
597
|
|
Non-U.S. public finance
|
21
|
|
|
—
|
|
|
21
|
|
|
25
|
|
|
—
|
|
|
25
|
|
||||||
Public finance
|
732
|
|
|
86
|
|
|
646
|
|
|
629
|
|
|
7
|
|
|
622
|
|
||||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. RMBS
|
283
|
|
|
262
|
|
|
21
|
|
|
262
|
|
|
116
|
|
|
146
|
|
||||||
Triple-X life insurance transactions
|
36
|
|
|
—
|
|
|
36
|
|
|
82
|
|
|
—
|
|
|
82
|
|
||||||
Other structured finance
|
60
|
|
|
—
|
|
|
60
|
|
|
99
|
|
|
—
|
|
|
99
|
|
||||||
Structured finance
|
379
|
|
|
262
|
|
|
117
|
|
|
443
|
|
|
116
|
|
|
327
|
|
||||||
Subtotal
|
1,111
|
|
|
348
|
|
|
763
|
|
|
1,072
|
|
|
123
|
|
|
949
|
|
||||||
Other recoverable (payable)
|
—
|
|
|
(1
|
)
|
|
1
|
|
|
—
|
|
|
3
|
|
|
(3
|
)
|
||||||
Subtotal
|
1,111
|
|
|
347
|
|
|
764
|
|
|
1,072
|
|
|
126
|
|
|
946
|
|
||||||
Elimination of losses attributable to FG VIEs
|
(64
|
)
|
|
—
|
|
|
(64
|
)
|
|
(74
|
)
|
|
0
|
|
|
(74
|
)
|
||||||
Total (1)
|
$
|
1,047
|
|
|
$
|
347
|
|
|
$
|
700
|
|
|
$
|
998
|
|
|
$
|
126
|
|
|
$
|
872
|
|
|
As of
December 31, 2016 |
|
As of
December 31, 2015 |
||||
|
(in millions)
|
||||||
Loss and LAE reserve
|
$
|
1,127
|
|
|
$
|
1,067
|
|
Reinsurance recoverable on unpaid losses
|
(80
|
)
|
|
(69
|
)
|
||
Loss and LAE reserve, net
|
1,047
|
|
|
998
|
|
||
Salvage and subrogation recoverable
|
(365
|
)
|
|
(126
|
)
|
||
Salvage and subrogation payable(1)
|
17
|
|
|
3
|
|
||
Other payable (recoverable)
|
1
|
|
|
(3
|
)
|
||
Salvage and subrogation recoverable, net, and other recoverable
|
(347
|
)
|
|
(126
|
)
|
||
Net reserves (salvage)
|
$
|
700
|
|
|
$
|
872
|
|
|
As of December 31, 2016
|
||
|
(in millions)
|
||
Net expected loss to be paid - financial guaranty insurance (1)
|
$
|
1,083
|
|
Contra-paid, net
|
37
|
|
|
Salvage and subrogation recoverable, net of reinsurance
|
348
|
|
|
Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance
|
(1,046
|
)
|
|
Other recoverable (payable)
|
(1
|
)
|
|
Net expected loss to be expensed (present value) (2)
|
$
|
421
|
|
(1)
|
See "Net Expected Loss to be Paid (Recovered) by Accounting Model" table in Note 5, Expected Loss to be Paid.
|
(2)
|
Excludes
$64 million
as of
December 31, 2016
related to consolidated FG VIEs.
|
|
As of December 31, 2016
|
||
|
(in millions)
|
||
2017 (January 1 – March 31)
|
$
|
8
|
|
2017 (April 1 – June 30)
|
10
|
|
|
2017 (July 1 – September 30)
|
8
|
|
|
2017 (October 1 – December 31)
|
9
|
|
|
Subtotal 2017
|
35
|
|
|
2018
|
34
|
|
|
2019
|
32
|
|
|
2020
|
32
|
|
|
2021
|
28
|
|
|
2022-2026
|
117
|
|
|
2027-2031
|
82
|
|
|
2032-2036
|
44
|
|
|
After 2036
|
17
|
|
|
Net expected loss to be expensed
|
421
|
|
|
Future accretion
|
373
|
|
|
Total expected future loss and LAE
|
$
|
794
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Public finance:
|
|
|
|
|
|
||||||
U.S. public finance
|
$
|
307
|
|
|
$
|
392
|
|
|
$
|
192
|
|
Non-U.S. public finance
|
(3
|
)
|
|
1
|
|
|
(1
|
)
|
|||
Public finance
|
304
|
|
|
393
|
|
|
191
|
|
|||
Structured finance:
|
|
|
|
|
|
||||||
U.S. RMBS
|
37
|
|
|
54
|
|
|
(129
|
)
|
|||
Triple-X life insurance transactions
|
(22
|
)
|
|
16
|
|
|
85
|
|
|||
Other structured finance
|
(17
|
)
|
|
(11
|
)
|
|
9
|
|
|||
Structured finance
|
(2
|
)
|
|
59
|
|
|
(35
|
)
|
|||
Loss and LAE on insurance contracts before FG VIE consolidation
|
302
|
|
|
452
|
|
|
156
|
|
|||
Gain (loss) related to FG VIE consolidation
|
(7
|
)
|
|
(28
|
)
|
|
(30
|
)
|
|||
Loss and LAE
|
$
|
295
|
|
|
$
|
424
|
|
|
$
|
126
|
|
|
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)
|
165
|
|
|
(35
|
)
|
|
79
|
|
|
(11
|
)
|
|
148
|
|
|
(49
|
)
|
|
392
|
|
|
—
|
|
|
392
|
|
|||||||||
Remaining weighted-average contract period (in years)
|
8.6
|
|
|
7.0
|
|
|
13.2
|
|
|
10.5
|
|
|
8.1
|
|
|
6.0
|
|
|
10.1
|
|
|
—
|
|
|
10.1
|
|
|||||||||
Outstanding exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Principal
|
$
|
4,187
|
|
|
$
|
(326
|
)
|
|
$
|
4,273
|
|
|
$
|
(416
|
)
|
|
$
|
4,703
|
|
|
$
|
(320
|
)
|
|
$
|
12,101
|
|
|
$
|
—
|
|
|
$
|
12,101
|
|
Interest
|
1,932
|
|
|
(140
|
)
|
|
2,926
|
|
|
(219
|
)
|
|
1,867
|
|
|
(87
|
)
|
|
6,279
|
|
|
—
|
|
|
6,279
|
|
|||||||||
Total(2)
|
$
|
6,119
|
|
|
$
|
(466
|
)
|
|
$
|
7,199
|
|
|
$
|
(635
|
)
|
|
$
|
6,570
|
|
|
$
|
(407
|
)
|
|
$
|
18,380
|
|
|
$
|
—
|
|
|
$
|
18,380
|
|
Expected cash outflows (inflows)
|
$
|
172
|
|
|
$
|
(19
|
)
|
|
$
|
1,404
|
|
|
$
|
(86
|
)
|
|
$
|
1,435
|
|
|
$
|
(65
|
)
|
|
$
|
2,841
|
|
|
$
|
(326
|
)
|
|
$
|
2,515
|
|
Potential recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Undiscounted R&W
|
120
|
|
|
(3
|
)
|
|
(2
|
)
|
|
—
|
|
|
(62
|
)
|
|
1
|
|
|
54
|
|
|
—
|
|
|
54
|
|
|||||||||
Other(3)
|
(560
|
)
|
|
26
|
|
|
(144
|
)
|
|
4
|
|
|
(681
|
)
|
|
44
|
|
|
(1,311
|
)
|
|
198
|
|
|
(1,113
|
)
|
|||||||||
Total potential recoveries
|
(440
|
)
|
|
23
|
|
|
(146
|
)
|
|
4
|
|
|
(743
|
)
|
|
45
|
|
|
(1,257
|
)
|
|
198
|
|
|
(1,059
|
)
|
|||||||||
Subtotal
|
(268
|
)
|
|
4
|
|
|
1,258
|
|
|
(82
|
)
|
|
692
|
|
|
(20
|
)
|
|
1,584
|
|
|
(128
|
)
|
|
1,456
|
|
|||||||||
Discount
|
61
|
|
|
(4
|
)
|
|
(355
|
)
|
|
19
|
|
|
(114
|
)
|
|
(4
|
)
|
|
(397
|
)
|
|
24
|
|
|
(373
|
)
|
|||||||||
Present value of expected cash flows
|
$
|
(207
|
)
|
|
$
|
0
|
|
|
$
|
903
|
|
|
$
|
(63
|
)
|
|
$
|
578
|
|
|
$
|
(24
|
)
|
|
$
|
1,187
|
|
|
$
|
(104
|
)
|
|
$
|
1,083
|
|
Deferred premium revenue
|
$
|
131
|
|
|
$
|
(5
|
)
|
|
$
|
246
|
|
|
$
|
(6
|
)
|
|
$
|
476
|
|
|
$
|
(30
|
)
|
|
$
|
812
|
|
|
$
|
(86
|
)
|
|
$
|
726
|
|
Reserves (salvage)
|
$
|
(255
|
)
|
|
$
|
5
|
|
|
$
|
738
|
|
|
$
|
(58
|
)
|
|
$
|
343
|
|
|
$
|
(10
|
)
|
|
$
|
763
|
|
|
$
|
(64
|
)
|
|
$
|
699
|
|
|
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)
|
202
|
|
|
(46
|
)
|
|
85
|
|
|
(13
|
)
|
|
132
|
|
|
(44
|
)
|
|
419
|
|
|
—
|
|
|
419
|
|
|||||||||
Remaining weighted-average contract period (in years)
|
10.0
|
|
|
8.7
|
|
|
13.8
|
|
|
9.5
|
|
|
7.7
|
|
|
5.9
|
|
|
10.7
|
|
|
—
|
|
|
10.7
|
|
|||||||||
Outstanding exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Principal
|
$
|
7,751
|
|
|
$
|
(732
|
)
|
|
$
|
3,895
|
|
|
$
|
(240
|
)
|
|
$
|
3,087
|
|
|
$
|
(187
|
)
|
|
$
|
13,574
|
|
|
$
|
—
|
|
|
$
|
13,574
|
|
Interest
|
4,109
|
|
|
(354
|
)
|
|
2,805
|
|
|
(110
|
)
|
|
1,011
|
|
|
(42
|
)
|
|
7,419
|
|
|
—
|
|
|
7,419
|
|
|||||||||
Total(2)
|
$
|
11,860
|
|
|
$
|
(1,086
|
)
|
|
$
|
6,700
|
|
|
$
|
(350
|
)
|
|
$
|
4,098
|
|
|
$
|
(229
|
)
|
|
$
|
20,993
|
|
|
$
|
—
|
|
|
$
|
20,993
|
|
Expected cash outflows (inflows)
|
386
|
|
|
(42
|
)
|
|
1,158
|
|
|
(60
|
)
|
|
1,464
|
|
|
(53
|
)
|
|
2,853
|
|
|
(343
|
)
|
|
2,510
|
|
|||||||||
Potential recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Undiscounted R&W
|
69
|
|
|
(2
|
)
|
|
(49
|
)
|
|
1
|
|
|
(85
|
)
|
|
5
|
|
|
(61
|
)
|
|
7
|
|
|
(54
|
)
|
|||||||||
Other(3)
|
(372
|
)
|
|
12
|
|
|
(167
|
)
|
|
8
|
|
|
(672
|
)
|
|
24
|
|
|
(1,167
|
)
|
|
182
|
|
|
(985
|
)
|
|||||||||
Total potential recoveries
|
(303
|
)
|
|
10
|
|
|
(216
|
)
|
|
9
|
|
|
(757
|
)
|
|
29
|
|
|
(1,228
|
)
|
|
189
|
|
|
(1,039
|
)
|
|||||||||
Subtotal
|
83
|
|
|
(32
|
)
|
|
942
|
|
|
(51
|
)
|
|
707
|
|
|
(24
|
)
|
|
1,625
|
|
|
(154
|
)
|
|
1,471
|
|
|||||||||
Discount
|
22
|
|
|
5
|
|
|
(237
|
)
|
|
11
|
|
|
27
|
|
|
(94
|
)
|
|
(266
|
)
|
|
34
|
|
|
(232
|
)
|
|||||||||
Present value of expected cash flows
|
$
|
105
|
|
|
$
|
(27
|
)
|
|
$
|
705
|
|
|
$
|
(40
|
)
|
|
$
|
734
|
|
|
$
|
(118
|
)
|
|
$
|
1,359
|
|
|
$
|
(120
|
)
|
|
$
|
1,239
|
|
Deferred premium revenue
|
$
|
371
|
|
|
$
|
(37
|
)
|
|
$
|
150
|
|
|
$
|
(4
|
)
|
|
$
|
386
|
|
|
$
|
(32
|
)
|
|
$
|
834
|
|
|
$
|
(100
|
)
|
|
$
|
734
|
|
Reserves (salvage)
|
$
|
2
|
|
|
$
|
(19
|
)
|
|
$
|
591
|
|
|
$
|
(38
|
)
|
|
$
|
404
|
|
|
$
|
(9
|
)
|
|
$
|
931
|
|
|
$
|
(74
|
)
|
|
$
|
857
|
|
(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 excess spread.
|
7.
|
Fair Value Measurement
|
•
|
reviews methodologies, any model updates and inputs and compares such information to management’s own market information and, where applicable, the internal models,
|
•
|
reviews internally developed analytic packages that highlight, at a CUSIP level, price changes from the previous quarter to the current quarter, and evaluates, documents, and resolves any significant pricing differences with the assistance of the third party pricing source, and
|
•
|
compares prices received from different third party pricing sources, and evaluates, documents the rationale for, and resolves any significant pricing differences.
|
•
|
Gross spread.
|
•
|
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 debt service schedules.
|
•
|
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. No transactions closed during the periods presented.
|
•
|
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
December 31, 2016 |
|
As of
December 31, 2015 |
||
Based on actual collateral specific spreads
|
7
|
%
|
|
13
|
%
|
Based on market indices
|
77
|
%
|
|
73
|
%
|
Provided by the CDS counterparty
|
16
|
%
|
|
14
|
%
|
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 premium the Company receives 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.
|
•
|
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
|
|
|
|
|
|
|
|
|
|
|
|
||||
Obligations of state and political subdivisions
|
$
|
5,432
|
|
|
$
|
—
|
|
|
$
|
5,393
|
|
|
$
|
39
|
|
U.S. government and agencies
|
440
|
|
|
—
|
|
|
440
|
|
|
—
|
|
||||
Corporate securities
|
1,613
|
|
|
—
|
|
|
1,553
|
|
|
60
|
|
||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|||||||
RMBS
|
987
|
|
|
—
|
|
|
622
|
|
|
365
|
|
||||
CMBS
|
583
|
|
|
—
|
|
|
583
|
|
|
—
|
|
||||
Asset-backed securities
|
945
|
|
|
—
|
|
|
140
|
|
|
805
|
|
||||
Foreign government securities
|
233
|
|
|
—
|
|
|
233
|
|
|
—
|
|
||||
Total fixed-maturity securities
|
10,233
|
|
|
—
|
|
|
8,964
|
|
|
1,269
|
|
||||
Short-term investments
|
590
|
|
|
319
|
|
|
271
|
|
|
—
|
|
||||
Other invested assets (1)
|
8
|
|
|
—
|
|
|
0
|
|
|
8
|
|
||||
Credit derivative assets
|
13
|
|
|
—
|
|
|
—
|
|
|
13
|
|
||||
FG VIEs’ assets, at fair value
|
876
|
|
|
—
|
|
|
—
|
|
|
876
|
|
||||
Other assets
|
114
|
|
|
24
|
|
|
28
|
|
|
62
|
|
||||
Total assets carried at fair value
|
$
|
11,834
|
|
|
$
|
343
|
|
|
$
|
9,263
|
|
|
$
|
2,228
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit derivative liabilities
|
$
|
402
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
402
|
|
FG VIEs’ liabilities with recourse, at fair value
|
807
|
|
|
—
|
|
|
—
|
|
|
807
|
|
||||
FG VIEs’ liabilities without recourse, at fair value
|
151
|
|
|
—
|
|
|
—
|
|
|
151
|
|
||||
Total liabilities carried at fair value
|
$
|
1,360
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,360
|
|
|
|
|
Fair Value Hierarchy
|
||||||||||||
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
(in millions)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investment portfolio, available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed-maturity securities
|
|
|
|
|
|
|
|
|
|
|
|
||||
Obligations of state and political subdivisions
|
$
|
5,841
|
|
|
$
|
—
|
|
|
$
|
5,833
|
|
|
$
|
8
|
|
U.S. government and agencies
|
400
|
|
|
—
|
|
|
400
|
|
|
—
|
|
||||
Corporate securities
|
1,520
|
|
|
—
|
|
|
1,449
|
|
|
71
|
|
||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
RMBS
|
1,245
|
|
|
—
|
|
|
897
|
|
|
348
|
|
||||
CMBS
|
513
|
|
|
—
|
|
|
513
|
|
|
—
|
|
||||
Asset-backed securities
|
825
|
|
|
—
|
|
|
168
|
|
|
657
|
|
||||
Foreign government securities
|
283
|
|
|
—
|
|
|
283
|
|
|
—
|
|
||||
Total fixed-maturity securities
|
10,627
|
|
|
—
|
|
|
9,543
|
|
|
1,084
|
|
||||
Short-term investments
|
396
|
|
|
305
|
|
|
31
|
|
|
60
|
|
||||
Other invested assets(1)
|
12
|
|
|
—
|
|
|
5
|
|
|
7
|
|
||||
Credit derivative assets
|
81
|
|
|
—
|
|
|
—
|
|
|
81
|
|
||||
FG VIEs’ assets, at fair value
|
1,261
|
|
|
—
|
|
|
—
|
|
|
1,261
|
|
||||
Other assets
|
106
|
|
|
23
|
|
|
21
|
|
|
62
|
|
||||
Total assets carried at fair value
|
$
|
12,483
|
|
|
$
|
328
|
|
|
$
|
9,600
|
|
|
$
|
2,555
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit derivative liabilities
|
$
|
446
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
446
|
|
FG VIEs’ liabilities with recourse, at fair value
|
1,225
|
|
|
—
|
|
|
—
|
|
|
1,225
|
|
||||
FG VIEs’ liabilities without recourse, at fair value
|
124
|
|
|
—
|
|
|
—
|
|
|
124
|
|
||||
Total liabilities carried at fair value
|
$
|
1,795
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,795
|
|
(1)
|
Excluded from the table above are investments funds of
$48 million
and
$45 million
as of
December 31, 2016
and
December 31, 2015
, respectively, measured using NAV per share. Includes Level 3 mortgage loans that are recorded at fair value on a non-recurring basis.
|
|
Fixed-Maturity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||
|
Obligations
of State and Political Subdivisions |
|
Corporate Securities
|
|
RMBS
|
|
Asset-
Backed Securities |
|
Short-Term Investments
|
|
FG VIEs’
Assets at Fair Value |
|
Other
Assets (8) |
|
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, 2015
|
$
|
8
|
|
|
$
|
71
|
|
|
$
|
348
|
|
|
$
|
657
|
|
|
|
$
|
60
|
|
|
$
|
1,261
|
|
|
|
$
|
65
|
|
|
|
$
|
(365
|
)
|
|
$
|
(1,225
|
)
|
|
$
|
(124
|
)
|
|
|||||||
CIFG Acquisition
|
1
|
|
|
—
|
|
|
20
|
|
|
36
|
|
|
0
|
|
|
—
|
|
|
—
|
|
|
(67
|
)
|
|
—
|
|
|
—
|
|
|
||||||||||||||||||||
Total pretax realized and unrealized gains/(losses) recorded in: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Net income (loss)
|
2
|
|
(2
|
)
|
(16
|
)
|
(2
|
)
|
10
|
|
(2
|
)
|
51
|
|
(2
|
)
|
0
|
|
(2
|
)
|
167
|
|
(3
|
)
|
0
|
|
(4
|
)
|
74
|
|
(6
|
)
|
(125
|
)
|
(3
|
)
|
(18
|
)
|
(3
|
)
|
||||||||||
Other comprehensive income (loss)
|
(4
|
)
|
|
5
|
|
|
(13
|
)
|
|
116
|
|
|
|
0
|
|
|
—
|
|
|
|
0
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|||||||||||||||
Purchases
|
33
|
|
|
—
|
|
|
70
|
|
|
76
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|||||||||||||||
Settlements
|
(1
|
)
|
|
—
|
|
|
(70
|
)
|
|
(139
|
)
|
|
(60
|
)
|
|
(629
|
)
|
|
—
|
|
|
|
(31
|
)
|
|
|
597
|
|
|
|
14
|
|
|
|||||||||||||||||
FG VIE consolidations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
97
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(54
|
)
|
|
(43
|
)
|
|
||||||||||||||||
FG VIE deconsolidations
|
—
|
|
|
—
|
|
|
0
|
|
|
—
|
|
|
—
|
|
|
(20
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
||||||||||||||||||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||||||||||||||||||
Fair value as of December 31, 2016
|
$
|
39
|
|
|
$
|
60
|
|
|
$
|
365
|
|
|
$
|
805
|
|
|
|
$
|
—
|
|
|
$
|
876
|
|
|
|
$
|
65
|
|
|
|
$
|
(389
|
)
|
|
$
|
(807
|
)
|
|
$
|
(151
|
)
|
|
|||||||
Change in unrealized gains/(losses) related to financial instruments held as of December 31, 2016
|
$
|
(4
|
)
|
|
$
|
5
|
|
|
$
|
(15
|
)
|
|
$
|
116
|
|
|
$
|
—
|
|
|
$
|
93
|
|
|
$
|
0
|
|
|
$
|
(33
|
)
|
|
$
|
(12
|
)
|
|
$
|
(17
|
)
|
|
|
Fixed-Maturity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||
|
Obligations
of State and Political Subdivisions |
|
Corporate Securities
|
|
RMBS
|
|
Asset-
Backed Securities |
|
Short-Term Investments
|
|
FG VIEs’
Assets at Fair Value |
|
Other
Assets (8) |
|
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, 2014
|
$
|
38
|
|
|
$
|
79
|
|
|
$
|
425
|
|
|
$
|
228
|
|
|
$
|
—
|
|
|
$
|
1,398
|
|
|
|
$
|
37
|
|
|
$
|
(895
|
)
|
|
|
$
|
(1,277
|
)
|
|
$
|
(142
|
)
|
|
||||||||
Radian Asset Acquisition
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
122
|
|
|
2
|
|
|
(215
|
)
|
|
(114
|
)
|
|
(4
|
)
|
|
||||||||||||||||||||
Total pretax realized and unrealized gains/(losses) recorded in: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Net income (loss)
|
3
|
|
(2
|
)
|
3
|
|
(2
|
)
|
18
|
|
(2
|
)
|
1
|
|
(2
|
)
|
24
|
|
(2
|
)
|
59
|
|
(3
|
)
|
26
|
|
(4
|
)
|
728
|
|
(6
|
)
|
111
|
|
(3
|
)
|
(28
|
)
|
(3
|
)
|
||||||||||
Other comprehensive income (loss)
|
(2
|
)
|
|
(11
|
)
|
|
(12
|
)
|
|
(9
|
)
|
|
0
|
|
|
—
|
|
|
|
0
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|||||||||||||||||
Purchases
|
—
|
|
|
—
|
|
|
48
|
|
|
471
|
|
|
52
|
|
(7
|
)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
||||||||||||||||
Settlements
|
(31
|
)
|
(7
|
)
|
—
|
|
|
(134
|
)
|
|
(34
|
)
|
|
(16
|
)
|
|
(400
|
)
|
|
—
|
|
|
17
|
|
|
|
186
|
|
|
|
28
|
|
|
|||||||||||||||||
FG VIE consolidations
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
104
|
|
|
|
—
|
|
|
—
|
|
|
|
(131
|
)
|
|
—
|
|
|
||||||||||||||||||
FG VIE deconsolidations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(22
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
||||||||||||||||||||
Fair value as of December 31, 2015
|
$
|
8
|
|
|
$
|
71
|
|
|
$
|
348
|
|
|
$
|
657
|
|
|
$
|
60
|
|
|
$
|
1,261
|
|
|
|
$
|
65
|
|
|
$
|
(365
|
)
|
|
|
$
|
(1,225
|
)
|
|
$
|
(124
|
)
|
|
||||||||
Change in unrealized gains/(losses) related to financial instruments held as of December 31, 2015
|
$
|
0
|
|
|
$
|
(11
|
)
|
|
$
|
(9
|
)
|
|
$
|
(9
|
)
|
|
$
|
0
|
|
|
$
|
110
|
|
|
$
|
26
|
|
|
$
|
281
|
|
|
$
|
4
|
|
|
$
|
(22
|
)
|
|
(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 CCS, net realized investment gains (losses), net investment income and other income.
|
(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 and other income.
|
(7)
|
Primarily non-cash transaction.
|
(8)
|
Includes CCS and other invested assets.
|
Financial Instrument Description(1)
|
|
Fair Value at December 31, 2016(in millions)
|
|
Significant Unobservable Inputs
|
|
Range
|
|
Weighted Average as a Percentage of Current Par Outstanding
|
|||||
Assets (2):
|
|
|
|
|
|
|
|
|
|
|
|
||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||
Obligations of state and political subdivisions
|
|
$
|
39
|
|
|
Yield
|
|
4.3
|
%
|
-
|
22.8%
|
|
11.1%
|
|
|
|
|
|
|
|
|
|
|
|
|||
Corporate securities
|
|
60
|
|
|
Yield
|
|
20.1%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
RMBS
|
|
365
|
|
|
CPR
|
|
1.6
|
%
|
-
|
17.0%
|
|
4.6%
|
|
|
|
CDR
|
|
1.5
|
%
|
-
|
10.1%
|
|
6.7%
|
||||
|
|
Loss severity
|
|
30.0
|
%
|
-
|
100.0%
|
|
77.8%
|
||||
|
|
Yield
|
|
3.3
|
%
|
-
|
9.7%
|
|
6.0%
|
||||
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|||
Triple-X life insurance transactions
|
|
425
|
|
|
Yield
|
|
5.7
|
%
|
-
|
6.0%
|
|
5.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Collateralized debt obligations (CDO)
|
|
332
|
|
|
Yield
|
|
10.0%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
CLO/TruPS
|
|
19
|
|
|
Yield
|
|
1.5
|
%
|
-
|
4.8%
|
|
3.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Others
|
|
29
|
|
|
Yield
|
|
7.2%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
FG VIEs’ assets, at fair value
|
|
876
|
|
|
CPR
|
|
3.5
|
%
|
-
|
12.0%
|
|
7.8%
|
|
|
|
CDR
|
|
2.5
|
%
|
-
|
21.6%
|
|
5.7%
|
||||
|
|
Loss severity
|
|
35.0
|
%
|
-
|
100.0%
|
|
78.6%
|
||||
|
|
Yield
|
|
2.9
|
%
|
-
|
20.0%
|
|
6.5%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
Other assets
|
|
62
|
|
|
Implied Yield
|
|
4.5
|
%
|
-
|
5.1%
|
|
4.8%
|
|
|
|
Term (years)
|
|
10 years
|
|
|
|||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||
Credit derivative liabilities, net
|
|
(389
|
)
|
|
Year 1 loss estimates
|
|
0.0
|
%
|
-
|
38.0%
|
|
1.3%
|
|
|
|
Hedge cost (in bps)
|
|
7.2
|
|
-
|
118.1
|
|
24.5
|
||||
|
|
Bank profit (in bps)
|
|
3.8
|
|
-
|
825.0
|
|
61.8
|
||||
|
|
Internal floor (in bps)
|
|
7.0
|
|
-
|
100.0
|
|
13.9
|
||||
|
|
Internal credit rating
|
|
AAA
|
|
-
|
CCC
|
|
AA+
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
FG VIEs’ liabilities, at fair value
|
|
(958
|
)
|
|
CPR
|
|
3.5
|
%
|
-
|
12.0%
|
|
7.8%
|
|
|
|
CDR
|
|
2.5
|
%
|
-
|
21.6%
|
|
5.7%
|
||||
|
|
Loss severity
|
|
35.0
|
%
|
-
|
100.0%
|
|
78.6%
|
||||
|
|
Yield
|
|
2.4
|
%
|
-
|
20.0%
|
|
5.0%
|
(1)
|
Discounted cash flow is used as valuation technique for all financial instruments.
|
(2)
|
Excludes several investments recorded in other invested assets with fair value of
$8 million
.
|
Financial Instrument Description(1)
|
|
Fair Value at December 31, 2015(in millions)
|
|
Significant Unobservable Inputs
|
|
Range
|
|
Weighted Average as a Percentage of Current Par Outstanding
|
|||||
Assets (2):
|
|
|
|
|
|
|
|
|
|
|
|
||
Fixed-maturity securities (3):
|
|
|
|
|
|
|
|
|
|
|
|
||
Corporate securities
|
|
$
|
71
|
|
|
Yield
|
|
21.8%
|
|
|
|||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||
RMBS
|
|
348
|
|
|
CPR
|
|
0.3
|
%
|
-
|
9.0%
|
|
2.6%
|
|
|
|
CDR
|
|
2.7
|
%
|
-
|
9.3%
|
|
7.0%
|
||||
|
|
Loss severity
|
|
60.0
|
%
|
-
|
100.0%
|
|
74.0%
|
||||
|
|
Yield
|
|
4.7
|
%
|
-
|
8.2%
|
|
6.0%
|
||||
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|||
Investor owned utility
|
|
69
|
|
|
Cash flow receipts
|
|
100.0%
|
|
|
||||
|
|
Collateral recovery period
|
|
2.9 years
|
|
|
|||||||
|
|
Discount factor
|
|
7.0%
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|||
Triple-X life insurance transactions
|
|
329
|
|
|
Yield
|
|
3.5
|
%
|
-
|
7.5%
|
|
5.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
CDO
|
|
259
|
|
|
Yield
|
|
20.0%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
Short-term investments
|
|
60
|
|
|
Yield
|
|
17.0%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
FG VIEs’ assets, at fair value
|
|
1,261
|
|
|
CPR
|
|
0.3
|
%
|
-
|
9.2%
|
|
3.9%
|
|
|
|
CDR
|
|
1.2
|
%
|
-
|
16.0%
|
|
4.7%
|
||||
|
|
Loss severity
|
|
40.0
|
%
|
-
|
100.0%
|
|
85.9%
|
||||
|
|
Yield
|
|
1.9
|
%
|
-
|
20.0%
|
|
6.4%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
Other assets
|
|
62
|
|
|
Implied Yield
|
|
5.5
|
%
|
-
|
6.4%
|
|
5.9%
|
|
|
|
|
Term (years)
|
|
5 years
|
|
|
||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||
Credit derivative liabilities, net
|
|
(365
|
)
|
|
Year 1 loss estimates
|
|
0.0
|
%
|
-
|
41.0%
|
|
0.6%
|
|
|
|
Hedge cost (in bps)
|
|
32.8
|
|
-
|
282.0
|
|
66.3
|
||||
|
|
Bank profit (in bps)
|
|
3.8
|
|
-
|
1,017.5
|
|
110.8
|
||||
|
|
Internal floor (in bps)
|
|
7.0
|
|
-
|
100.0
|
|
16.8
|
||||
|
|
Internal credit rating
|
|
AAA
|
|
-
|
CCC
|
|
AA+
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
FG VIEs’ liabilities, at fair value
|
|
(1,349
|
)
|
|
CPR
|
|
0.3
|
%
|
-
|
9.2%
|
|
3.9%
|
|
|
|
CDR
|
|
1.2
|
%
|
-
|
16.0%
|
|
4.7%
|
||||
|
|
Loss severity
|
|
40.0
|
%
|
-
|
100.0%
|
|
85.9%
|
||||
|
|
Yield
|
|
1.9
|
%
|
-
|
20.0%
|
|
5.6%
|
(1)
|
Discounted cash flow is used as valuation technique for all financial instruments.
|
(2)
|
Excludes several investments recorded in other invested assets with fair value of
$7 million
.
|
(3)
|
Excludes obligations of state and political subdivisions investments with fair value of
$8 million
.
|
|
As of
December 31, 2016 |
|
As of
December 31, 2015 |
||||||||||||
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
||||||||
|
(in millions)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed-maturity securities
|
$
|
10,233
|
|
|
$
|
10,233
|
|
|
$
|
10,627
|
|
|
$
|
10,627
|
|
Short-term investments
|
590
|
|
|
590
|
|
|
396
|
|
|
396
|
|
||||
Other invested assets(1)
|
146
|
|
|
147
|
|
|
150
|
|
|
152
|
|
||||
Credit derivative assets
|
13
|
|
|
13
|
|
|
81
|
|
|
81
|
|
||||
FG VIEs’ assets, at fair value
|
876
|
|
|
876
|
|
|
1,261
|
|
|
1,261
|
|
||||
Other assets
|
205
|
|
|
205
|
|
|
206
|
|
|
206
|
|
||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial guaranty insurance contracts(2)
|
3,483
|
|
|
8,738
|
|
|
3,998
|
|
|
8,712
|
|
||||
Long-term debt
|
1,306
|
|
|
1,546
|
|
|
1,300
|
|
|
1,512
|
|
||||
Credit derivative liabilities
|
402
|
|
|
402
|
|
|
446
|
|
|
446
|
|
||||
FG VIEs’ liabilities with recourse, at fair value
|
807
|
|
|
807
|
|
|
1,225
|
|
|
1,225
|
|
||||
FG VIEs’ liabilities without recourse, at fair value
|
151
|
|
|
151
|
|
|
124
|
|
|
124
|
|
||||
Other liabilities
|
12
|
|
|
12
|
|
|
9
|
|
|
9
|
|
(1)
|
Includes investments not carried at fair value with a carrying value of
$93 million
and
$93 million
as of
December 31, 2016
and
December 31, 2015
, respectively. Excludes investments carried under the equity method.
|
(2)
|
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.
|
Contracts Accounted for as Credit Derivatives
|
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
||||||||
Asset Type
|
|
Net Par
Outstanding
|
|
Weighted Average
Credit Rating
|
|
Net Par
Outstanding
|
|
Weighted Average
Credit Rating
|
||||
|
|
(dollars in millions)
|
||||||||||
Pooled corporate obligations:
|
|
|
|
|
|
|
|
|
|
|
||
Collateralized loan obligations (CLO) /collateralized bond obligations
|
|
$
|
2,022
|
|
|
AAA
|
|
$
|
5,873
|
|
|
AAA
|
Synthetic investment grade pooled corporate
|
|
7,224
|
|
|
AAA
|
|
7,108
|
|
|
AAA
|
||
TruPS CDOs
|
|
1,179
|
|
|
BBB+
|
|
3,429
|
|
|
A-
|
||
Market value CDOs of corporate obligations
|
|
—
|
|
|
--
|
|
1,113
|
|
|
AAA
|
||
Total pooled corporate obligations
|
|
10,425
|
|
|
AAA
|
|
17,523
|
|
|
AAA
|
||
U.S. RMBS
|
|
1,142
|
|
|
AA-
|
|
1,526
|
|
|
A+
|
||
CMBS
|
|
—
|
|
|
--
|
|
530
|
|
|
AAA
|
||
Other
|
|
5,430
|
|
|
A+
|
|
6,015
|
|
|
A
|
||
Total(1)
|
|
$
|
16,997
|
|
|
AA+
|
|
$
|
25,594
|
|
|
AA+
|
(1)
|
The
December 31, 2016
total amount includes
$1.7 billion
net par outstanding of credit derivatives from CIFG Acquisition.
|
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
||||||||||
Ratings
|
|
Net Par
Outstanding
|
|
% of Total
|
|
Net Par
Outstanding
|
|
% of Total
|
||||||
|
|
(dollars in millions)
|
||||||||||||
AAA
|
|
$
|
10,967
|
|
|
64.6
|
%
|
|
$
|
14,808
|
|
|
57.9
|
%
|
AA
|
|
2,167
|
|
|
12.7
|
|
|
4,821
|
|
|
18.8
|
|
||
A
|
|
1,499
|
|
|
8.8
|
|
|
2,144
|
|
|
8.4
|
|
||
BBB
|
|
1,391
|
|
|
8.2
|
|
|
2,212
|
|
|
8.6
|
|
||
BIG
|
|
973
|
|
|
5.7
|
|
|
1,609
|
|
|
6.3
|
|
||
Credit derivative net par outstanding
|
|
$
|
16,997
|
|
|
100.0
|
%
|
|
$
|
25,594
|
|
|
100.0
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Realized gains on credit derivatives
|
$
|
56
|
|
|
$
|
63
|
|
|
$
|
73
|
|
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements
|
(27
|
)
|
|
(81
|
)
|
|
(50
|
)
|
|||
Realized gains (losses) and other settlements
|
29
|
|
|
(18
|
)
|
|
23
|
|
|||
Net unrealized gains (losses):
|
|
|
|
|
|
||||||
Pooled corporate obligations
|
(16
|
)
|
|
147
|
|
|
(18
|
)
|
|||
U.S. RMBS
|
22
|
|
|
396
|
|
|
814
|
|
|||
CMBS
|
0
|
|
|
42
|
|
|
2
|
|
|||
Other
|
63
|
|
|
161
|
|
|
2
|
|
|||
Net unrealized gains (losses)
|
69
|
|
|
746
|
|
|
800
|
|
|||
Net change in fair value of credit derivatives
|
$
|
98
|
|
|
$
|
728
|
|
|
$
|
823
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Net par of terminated credit derivative contracts
|
$
|
3,811
|
|
|
$
|
2,777
|
|
|
$
|
3,591
|
|
Realized gains on credit derivatives
|
20
|
|
|
13
|
|
|
1
|
|
|||
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements
|
—
|
|
|
(116
|
)
|
|
(26
|
)
|
|||
Net unrealized gains (losses) on credit derivatives
|
103
|
|
|
465
|
|
|
546
|
|
|
As of
December 31, 2016 |
|
As of
December 31, 2015 |
|
As of
December 31, 2014 |
|||
Five-year CDS spread:
|
|
|
|
|
|
|||
AGC
|
158
|
|
|
376
|
|
|
323
|
|
AGM
|
158
|
|
|
366
|
|
|
325
|
|
|
|
|
|
|
|
|||
One-year CDS spread:
|
|
|
|
|
|
|||
AGC
|
35
|
|
|
139
|
|
|
80
|
|
AGM
|
29
|
|
|
131
|
|
|
85
|
|
|
As of
December 31, 2016 |
|
As of
December 31, 2015 |
||||
|
(in millions)
|
||||||
Fair value of credit derivatives before effect of AGC and AGM credit spreads
|
$
|
(811
|
)
|
|
$
|
(1,448
|
)
|
Plus: Effect of AGC and AGM credit spreads
|
422
|
|
|
1,083
|
|
||
Net fair value of credit derivatives
|
$
|
(389
|
)
|
|
$
|
(365
|
)
|
|
As of
December 31, 2016 |
|
As of
December 31, 2015 |
||||
|
(in millions)
|
||||||
Fair value of credit derivative asset (liability), net
|
$
|
(389
|
)
|
|
$
|
(365
|
)
|
Expected loss to be (paid) recovered
|
(10
|
)
|
|
(16
|
)
|
•
|
For approximately
$516 million
gross par of such contracts, AGC has negotiated caps such that 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 an aggregate of more than
$500 million
, although the value of the collateral posted may exceed such fixed amount depending on the advance rate agreed with the counterparty for the particular type of collateral posted.
|
•
|
For the remaining approximately
$174 million
gross par of such contracts, AGC could be required from time to time to post additional collateral without such cap based on movements in the mark-to-market valuation of the underlying exposure.
|
Credit Spreads(1)
|
|
Estimated Net
Fair Value
(Pre-Tax)
|
|
Estimated Change
in Gain/(Loss)
(Pre-Tax)
|
||||
|
|
(in millions)
|
||||||
100% widening in spreads
|
|
$
|
(791
|
)
|
|
$
|
(402
|
)
|
50% widening in spreads
|
|
(590
|
)
|
|
(201
|
)
|
||
25% widening in spreads
|
|
(490
|
)
|
|
(101
|
)
|
||
10% widening in spreads
|
|
(430
|
)
|
|
(41
|
)
|
||
Base Scenario
|
|
(389
|
)
|
|
—
|
|
||
10% narrowing in spreads
|
|
(351
|
)
|
|
38
|
|
||
25% narrowing in spreads
|
|
(295
|
)
|
|
94
|
|
||
50% narrowing in spreads
|
|
(203
|
)
|
|
186
|
|
(1)
|
Includes the effects of spreads on both the underlying asset classes and the Company’s own credit spread.
|
9.
|
Consolidated Variable Interest Entities
|
|
Year Ended December 31,
|
|||||||
|
2016
|
|
2015
|
|
2014
|
|||
|
|
|||||||
Beginning of the period, December 31
|
34
|
|
|
32
|
|
|
40
|
|
Radian Asset Acquisition
|
—
|
|
|
4
|
|
|
—
|
|
Consolidated(1)
|
1
|
|
|
1
|
|
|
2
|
|
Deconsolidated(1)
|
(2
|
)
|
|
(1
|
)
|
|
(8
|
)
|
Matured
|
(1
|
)
|
|
(2
|
)
|
|
(2
|
)
|
End of the period, December 31
|
32
|
|
|
34
|
|
|
32
|
|
(1)
|
Net loss on consolidation and deconsolidation was de minimis in
2016
. Net loss on consolidation was
$26 million
in
2015
. Net gain on deconsolidation was
$120 million
and net loss on consolidation was
$26 million
in
2014
.
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
||||||||||||
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
||||||||
|
(in millions)
|
||||||||||||||
With recourse:
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. RMBS first lien
|
$
|
473
|
|
|
$
|
509
|
|
|
$
|
506
|
|
|
$
|
521
|
|
U.S. RMBS second lien
|
178
|
|
|
223
|
|
|
194
|
|
|
273
|
|
||||
Life insurance
|
—
|
|
|
—
|
|
|
347
|
|
|
347
|
|
||||
Manufactured housing
|
74
|
|
|
75
|
|
|
84
|
|
|
84
|
|
||||
Total with recourse
|
725
|
|
|
807
|
|
|
1,131
|
|
|
1,225
|
|
||||
Without recourse
|
151
|
|
|
151
|
|
|
130
|
|
|
124
|
|
||||
Total
|
$
|
876
|
|
|
$
|
958
|
|
|
$
|
1,261
|
|
|
$
|
1,349
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Net earned premiums
|
$
|
(16
|
)
|
|
$
|
(21
|
)
|
|
$
|
(32
|
)
|
Net investment income
|
(10
|
)
|
|
(32
|
)
|
|
(11
|
)
|
|||
Net realized investment gains (losses)
|
1
|
|
|
10
|
|
|
(5
|
)
|
|||
Fair value gains (losses) on FG VIEs
|
38
|
|
|
38
|
|
|
255
|
|
|||
Bargain purchase gain
|
—
|
|
|
2
|
|
|
—
|
|
|||
Loss and LAE
|
7
|
|
|
28
|
|
|
30
|
|
|||
Other income (loss)
|
0
|
|
|
0
|
|
|
(2
|
)
|
|||
Effect on income before tax
|
20
|
|
|
25
|
|
|
235
|
|
|||
Less: tax provision (benefit)
|
7
|
|
|
8
|
|
|
82
|
|
|||
Effect on net income (loss)
|
$
|
13
|
|
|
$
|
17
|
|
|
$
|
153
|
|
|
|
|
|
|
|
||||||
Effect on cash flows from operating activities
|
$
|
24
|
|
|
$
|
43
|
|
|
$
|
68
|
|
|
As of
December 31, 2016 |
|
As of
December 31, 2015 |
||||
|
(in millions)
|
||||||
Effect on shareholders’ equity (decrease) increase
|
$
|
(9
|
)
|
|
$
|
(23
|
)
|
10.
|
Investments and Cash
|
•
|
a decline in the market value of a security by
20%
or more below amortized cost for a continuous period of at least
six months
;
|
•
|
a decline in the market value of a security for a continuous period of
12
months;
|
•
|
recent credit downgrades of the applicable security or the issuer by rating agencies;
|
•
|
the financial condition of the applicable issuer;
|
•
|
whether loss of investment principal is anticipated;
|
•
|
the impact of foreign exchange rates; and
|
•
|
whether scheduled interest payments are past due.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Income from fixed-maturity securities managed by third parties
|
$
|
306
|
|
|
$
|
335
|
|
|
$
|
324
|
|
Income from internally managed securities:
|
|
|
|
|
|
||||||
Fixed maturities
|
103
|
|
|
61
|
|
|
74
|
|
|||
Other
|
7
|
|
|
37
|
|
|
14
|
|
|||
Other
|
1
|
|
|
0
|
|
|
0
|
|
|||
Gross investment income
|
417
|
|
|
433
|
|
|
412
|
|
|||
Investment expenses
|
(9
|
)
|
|
(10
|
)
|
|
(9
|
)
|
|||
Net investment income
|
$
|
408
|
|
|
$
|
423
|
|
|
$
|
403
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Gross realized gains on available-for-sale securities
|
$
|
28
|
|
|
$
|
44
|
|
|
$
|
14
|
|
Gross realized losses on available-for-sale securities
|
(8
|
)
|
|
(15
|
)
|
|
(5
|
)
|
|||
Net realized gains (losses) on other invested assets
|
2
|
|
|
(8
|
)
|
|
6
|
|
|||
Other-than-temporary impairment
|
(51
|
)
|
|
(47
|
)
|
|
(75
|
)
|
|||
Net realized investment gains (losses)
|
$
|
(29
|
)
|
|
$
|
(26
|
)
|
|
$
|
(60
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Balance, beginning of period
|
$
|
108
|
|
|
$
|
124
|
|
|
$
|
80
|
|
Additions for credit losses on securities for which an other-than-temporary-impairment was not previously recognized
|
3
|
|
|
3
|
|
|
64
|
|
|||
Eliminations of securities issued by FG VIEs
|
—
|
|
|
—
|
|
|
(15
|
)
|
|||
Reductions for securities sold and other settlement during the period
|
(4
|
)
|
|
(28
|
)
|
|
(12
|
)
|
|||
Additions for credit losses on securities for which an other-than-temporary-impairment was previously recognized
|
27
|
|
|
9
|
|
|
7
|
|
|||
Balance, end of period
|
$
|
134
|
|
|
$
|
108
|
|
|
$
|
124
|
|
Investment Category
|
|
Percent
of
Total(1)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair
Value
|
|
AOCI(2)
Gain
(Loss) on
Securities
with
Other-Than-Temporary Impairment
|
|
Weighted
Average
Credit
Rating
(3)
|
|||||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Obligations of state and political subdivisions
|
|
50
|
%
|
|
$
|
5,269
|
|
|
$
|
202
|
|
|
$
|
(39
|
)
|
|
$
|
5,432
|
|
|
$
|
13
|
|
|
AA
|
U.S. government and agencies
|
|
4
|
|
|
424
|
|
|
17
|
|
|
(1
|
)
|
|
440
|
|
|
—
|
|
|
AA+
|
|||||
Corporate securities
|
|
15
|
|
|
1,612
|
|
|
32
|
|
|
(31
|
)
|
|
1,613
|
|
|
(8
|
)
|
|
A-
|
|||||
Mortgage-backed securities(4):
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
RMBS
|
|
9
|
|
|
998
|
|
|
27
|
|
|
(38
|
)
|
|
987
|
|
|
(21
|
)
|
|
A-
|
|||||
CMBS
|
|
5
|
|
|
575
|
|
|
13
|
|
|
(5
|
)
|
|
583
|
|
|
—
|
|
|
AAA
|
|||||
Asset-backed securities
|
|
8
|
|
|
835
|
|
|
110
|
|
|
0
|
|
|
945
|
|
|
33
|
|
|
B
|
|||||
Foreign government securities
|
|
3
|
|
|
261
|
|
|
4
|
|
|
(32
|
)
|
|
233
|
|
|
—
|
|
|
AA
|
|||||
Total fixed-maturity securities
|
|
94
|
|
|
9,974
|
|
|
405
|
|
|
(146
|
)
|
|
10,233
|
|
|
17
|
|
|
A+
|
|||||
Short-term investments
|
|
6
|
|
|
590
|
|
|
0
|
|
|
0
|
|
|
590
|
|
|
—
|
|
|
AAA
|
|||||
Total investment portfolio
|
|
100
|
%
|
|
$
|
10,564
|
|
|
$
|
405
|
|
|
$
|
(146
|
)
|
|
$
|
10,823
|
|
|
17
|
|
|
A+
|
Investment Category
|
|
Percent
of
Total(1)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair
Value
|
|
AOCI
Gain
(Loss) on
Securities
with
Other-Than-Temporary Impairment
|
|
Weighted
Average
Credit
Rating
(3)
|
|||||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Obligations of state and political subdivisions
|
|
52
|
%
|
|
$
|
5,528
|
|
|
$
|
323
|
|
|
$
|
(10
|
)
|
|
$
|
5,841
|
|
|
$
|
5
|
|
|
AA
|
U.S. government and agencies
|
|
3
|
|
|
377
|
|
|
23
|
|
|
0
|
|
|
400
|
|
|
—
|
|
|
AA+
|
|||||
Corporate securities
|
|
14
|
|
|
1,505
|
|
|
38
|
|
|
(23
|
)
|
|
1,520
|
|
|
(13
|
)
|
|
A-
|
|||||
Mortgage-backed securities(4):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
RMBS
|
|
11
|
|
|
1,238
|
|
|
29
|
|
|
(22
|
)
|
|
1,245
|
|
|
(7
|
)
|
|
A
|
|||||
CMBS
|
|
5
|
|
|
506
|
|
|
9
|
|
|
(2
|
)
|
|
513
|
|
|
—
|
|
|
AAA
|
|||||
Asset-backed securities
|
|
8
|
|
|
831
|
|
|
4
|
|
|
(10
|
)
|
|
825
|
|
|
(6
|
)
|
|
B+
|
|||||
Foreign government securities
|
|
3
|
|
|
290
|
|
|
4
|
|
|
(11
|
)
|
|
283
|
|
|
—
|
|
|
AA+
|
|||||
Total fixed-maturity securities
|
|
96
|
|
|
10,275
|
|
|
430
|
|
|
(78
|
)
|
|
10,627
|
|
|
(21
|
)
|
|
A+
|
|||||
Short-term investments
|
|
4
|
|
|
396
|
|
|
0
|
|
|
0
|
|
|
396
|
|
|
—
|
|
|
AA-
|
|||||
Total investment portfolio
|
|
100
|
%
|
|
$
|
10,671
|
|
|
$
|
430
|
|
|
$
|
(78
|
)
|
|
$
|
11,023
|
|
|
$
|
(21
|
)
|
|
A+
|
(1)
|
Based on amortized cost.
|
(2)
|
Accumulated OCI. See also Note 20, Other Comprehensive Income.
|
(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
42%
of mortgage backed securities as of
December 31, 2016
and
54%
as of
December 31, 2015
based on fair value.
|
State
|
|
State
General
Obligation
|
|
Local
General
Obligation
|
|
Revenue Bonds
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Average
Credit
Rating
|
||||||||||
|
|
(in millions)
|
||||||||||||||||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
New York
|
|
$
|
13
|
|
|
$
|
38
|
|
|
$
|
570
|
|
|
$
|
621
|
|
|
$
|
604
|
|
|
AA
|
California
|
|
73
|
|
|
62
|
|
|
391
|
|
|
526
|
|
|
497
|
|
|
A+
|
|||||
Texas
|
|
16
|
|
|
186
|
|
|
316
|
|
|
518
|
|
|
503
|
|
|
AA
|
|||||
Washington
|
|
81
|
|
|
68
|
|
|
201
|
|
|
350
|
|
|
348
|
|
|
AA
|
|||||
Florida
|
|
16
|
|
|
11
|
|
|
247
|
|
|
274
|
|
|
266
|
|
|
AA-
|
|||||
Massachusetts
|
|
74
|
|
|
—
|
|
|
149
|
|
|
223
|
|
|
215
|
|
|
AA
|
|||||
Illinois
|
|
18
|
|
|
65
|
|
|
127
|
|
|
210
|
|
|
205
|
|
|
A+
|
|||||
Arizona
|
|
—
|
|
|
3
|
|
|
122
|
|
|
125
|
|
|
122
|
|
|
AA
|
|||||
Georgia
|
|
—
|
|
|
9
|
|
|
104
|
|
|
113
|
|
|
109
|
|
|
A+
|
|||||
Pennsylvania
|
|
38
|
|
|
17
|
|
|
58
|
|
|
113
|
|
|
111
|
|
|
A+
|
|||||
All others
|
|
153
|
|
|
155
|
|
|
1,085
|
|
|
1,393
|
|
|
1,364
|
|
|
AA-
|
|||||
Total
|
|
$
|
482
|
|
|
$
|
614
|
|
|
$
|
3,370
|
|
|
$
|
4,466
|
|
|
$
|
4,344
|
|
|
AA-
|
State
|
|
State
General
Obligation
|
|
Local
General
Obligation
|
|
Revenue Bonds
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Average
Credit
Rating
|
||||||||||
|
|
(in millions)
|
||||||||||||||||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
New York
|
|
$
|
13
|
|
|
$
|
59
|
|
|
$
|
571
|
|
|
$
|
643
|
|
|
$
|
610
|
|
|
AA
|
Texas
|
|
28
|
|
|
224
|
|
|
325
|
|
|
577
|
|
|
542
|
|
|
AA
|
|||||
California
|
|
78
|
|
|
66
|
|
|
411
|
|
|
555
|
|
|
521
|
|
|
A+
|
|||||
Washington
|
|
59
|
|
|
79
|
|
|
200
|
|
|
338
|
|
|
323
|
|
|
AA
|
|||||
Florida
|
|
17
|
|
|
—
|
|
|
268
|
|
|
285
|
|
|
266
|
|
|
AA-
|
|||||
Illinois
|
|
47
|
|
|
69
|
|
|
128
|
|
|
244
|
|
|
234
|
|
|
A
|
|||||
Massachusetts
|
|
75
|
|
|
—
|
|
|
148
|
|
|
223
|
|
|
207
|
|
|
AA
|
|||||
Arizona
|
|
—
|
|
|
10
|
|
|
181
|
|
|
191
|
|
|
181
|
|
|
AA
|
|||||
Pennsylvania
|
|
48
|
|
|
26
|
|
|
47
|
|
|
121
|
|
|
115
|
|
|
A
|
|||||
Ohio
|
|
17
|
|
|
14
|
|
|
83
|
|
|
114
|
|
|
106
|
|
|
AA
|
|||||
All others
|
|
156
|
|
|
168
|
|
|
1,148
|
|
|
1,472
|
|
|
1,396
|
|
|
AA-
|
|||||
Subtotal
|
|
538
|
|
|
715
|
|
|
3,510
|
|
|
4,763
|
|
|
4,501
|
|
|
AA-
|
|||||
Short-term investments (2)
|
|
—
|
|
|
—
|
|
|
60
|
|
|
60
|
|
|
60
|
|
|
CC
|
|||||
Total
|
|
$
|
538
|
|
|
$
|
715
|
|
|
$
|
3,570
|
|
|
$
|
4,823
|
|
|
$
|
4,561
|
|
|
AA-
|
(1)
|
Excludes $
966 million
and $
1,078 million
as of
December 31, 2016
and
2015
, respectively, of pre-refunded bonds, at fair value. The credit ratings are based on the underlying ratings and do not include any benefit from bond insurance.
|
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
||||||||||||
Type
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
||||||||
|
|
(in millions)
|
||||||||||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
||||||||
Transportation
|
|
$
|
860
|
|
|
$
|
824
|
|
|
$
|
867
|
|
|
$
|
815
|
|
Tax backed
|
|
617
|
|
|
601
|
|
|
610
|
|
|
576
|
|
||||
Water and sewer
|
|
545
|
|
|
531
|
|
|
612
|
|
|
576
|
|
||||
Higher education
|
|
513
|
|
|
499
|
|
|
518
|
|
|
487
|
|
||||
Municipal utilities
|
|
365
|
|
|
360
|
|
|
414
|
|
|
393
|
|
||||
Healthcare
|
|
310
|
|
|
298
|
|
|
344
|
|
|
321
|
|
||||
All others
|
|
160
|
|
|
158
|
|
|
145
|
|
|
141
|
|
||||
Subtotal
|
|
3,370
|
|
|
3,271
|
|
|
3,510
|
|
|
3,309
|
|
||||
Short-term investments (1)
|
|
—
|
|
|
—
|
|
|
60
|
|
|
60
|
|
||||
Total
|
|
$
|
3,370
|
|
|
$
|
3,271
|
|
|
$
|
3,570
|
|
|
$
|
3,369
|
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
||||||||||||||||||
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||
Obligations of state and political subdivisions
|
$
|
1,110
|
|
|
$
|
(38
|
)
|
|
$
|
6
|
|
|
$
|
(1
|
)
|
|
$
|
1,116
|
|
|
$
|
(39
|
)
|
U.S. government and agencies
|
87
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
87
|
|
|
(1
|
)
|
||||||
Corporate securities
|
492
|
|
|
(11
|
)
|
|
118
|
|
|
(20
|
)
|
|
610
|
|
|
(31
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
RMBS
|
391
|
|
|
(23
|
)
|
|
94
|
|
|
(15
|
)
|
|
485
|
|
|
(38
|
)
|
||||||
CMBS
|
165
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
165
|
|
|
(5
|
)
|
||||||
Asset-backed securities
|
36
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
36
|
|
|
0
|
|
||||||
Foreign government securities
|
44
|
|
|
(5
|
)
|
|
114
|
|
|
(27
|
)
|
|
158
|
|
|
(32
|
)
|
||||||
Total
|
$
|
2,325
|
|
|
$
|
(83
|
)
|
|
$
|
332
|
|
|
$
|
(63
|
)
|
|
$
|
2,657
|
|
|
$
|
(146
|
)
|
Number of securities(1)
|
|
|
|
622
|
|
|
|
|
|
60
|
|
|
|
|
|
676
|
|
||||||
Number of securities with other-than-temporary impairment
|
|
|
|
8
|
|
|
|
|
|
9
|
|
|
|
|
|
17
|
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
||||||||||||||||||
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||
Obligations of state and political subdivisions
|
$
|
316
|
|
|
$
|
(10
|
)
|
|
$
|
7
|
|
|
$
|
0
|
|
|
$
|
323
|
|
|
$
|
(10
|
)
|
U.S. government and agencies
|
77
|
|
|
0
|
|
|
—
|
|
|
—
|
|
|
77
|
|
|
0
|
|
||||||
Corporate securities
|
381
|
|
|
(8
|
)
|
|
95
|
|
|
(15
|
)
|
|
476
|
|
|
(23
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
RMBS
|
438
|
|
|
(8
|
)
|
|
90
|
|
|
(14
|
)
|
|
528
|
|
|
(22
|
)
|
||||||
CMBS
|
140
|
|
|
(2
|
)
|
|
2
|
|
|
0
|
|
|
142
|
|
|
(2
|
)
|
||||||
Asset-backed securities
|
517
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
517
|
|
|
(10
|
)
|
||||||
Foreign government securities
|
97
|
|
|
(4
|
)
|
|
82
|
|
|
(7
|
)
|
|
179
|
|
|
(11
|
)
|
||||||
Total
|
$
|
1,966
|
|
|
$
|
(42
|
)
|
|
$
|
276
|
|
|
$
|
(36
|
)
|
|
$
|
2,242
|
|
|
$
|
(78
|
)
|
Number of securities(1)
|
|
|
|
335
|
|
|
|
|
|
71
|
|
|
|
|
|
396
|
|
||||||
Number of securities with other-than-temporary impairment
|
|
|
|
9
|
|
|
|
|
|
4
|
|
|
|
|
|
13
|
|
(1)
|
The number of securities does not add across because lots consisting of the same securities have been purchased at different times and appear in both categories above (i.e., less than 12 months and 12 months or more). If a security appears in both categories, it is counted only once in the total column.
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||
|
(in millions)
|
||||||
Due within one year
|
$
|
482
|
|
|
$
|
550
|
|
Due after one year through five years
|
1,725
|
|
|
1,727
|
|
||
Due after five years through 10 years
|
2,112
|
|
|
2,155
|
|
||
Due after 10 years
|
4,082
|
|
|
4,231
|
|
||
Mortgage-backed securities:
|
|
|
|
|
|
||
RMBS
|
998
|
|
|
987
|
|
||
CMBS
|
575
|
|
|
583
|
|
||
Total
|
$
|
9,974
|
|
|
$
|
10,233
|
|
|
As of December 31,
|
||||||
|
2016
|
|
2015
|
||||
|
(in millions)
|
||||||
Assets purchased for loss mitigation and other risk management purposes:
|
|
|
|
||||
Fixed-maturity securities, at fair value
|
$
|
1,492
|
|
|
$
|
1,266
|
|
Other invested assets
|
107
|
|
|
114
|
|
||
Other
|
55
|
|
|
55
|
|
||
Total
|
$
|
1,654
|
|
|
$
|
1,435
|
|
11.
|
Insurance Company Regulatory Requirements
|
•
|
upfront premiums are earned when related principal and interest have expired rather than earned over the expected period of coverage;
|
•
|
acquisition costs are charged to expense as incurred rather than over the period that related premiums are earned;
|
•
|
a contingency reserve is computed based on statutory requirements, whereas no such reserve is required under GAAP;
|
•
|
certain assets designated as “non-admitted assets” are charged directly to statutory surplus, rather than reflected as assets under GAAP;
|
•
|
investments in subsidiaries are carried on the balance sheet on the equity basis, to the extent admissible, rather than consolidated with the parent;
|
•
|
the amount of deferred tax assets that may be admitted is subject to an adjusted surplus threshold and is generally limited to the lesser of those assets the Company expects to realize within
three years
of the balance sheet date or
fifteen percent
of the Company's adjusted surplus. This realization period and surplus percentage is subject to change based on the amount of adjusted surplus. Under GAAP there is no non-admitted asset determination, rather a valuation allowance is recorded to reduce the deferred tax asset to an amount that is more likely than not to be realized;
|
•
|
insured credit derivatives are accounted for as insurance contracts rather than as derivative contracts measured at fair value;
|
•
|
bonds are generally carried at amortized cost rather than fair value;
|
•
|
insured obligations of VIEs and refinancing vehicles debt, where the Company is deemed the primary beneficiary, are accounted for as insurance contracts. Under GAAP, such VIEs and refinancing vehicles are consolidated and any transactions with the Company are eliminated;
|
•
|
surplus notes are recognized as surplus and each payment of principal and interest is recorded only upon approval of the insurance regulator rather than liabilities with periodic accrual of interest;
|
•
|
push-down acquisition accounting is not applicable under statutory accounting practices, as it is under GAAP;
|
•
|
losses are discounted at a rate of
4.0%
or
5.0%
, recorded when the loss is deemed probable and without consideration of the deferred premium revenue. Under GAAP, expected losses are discounted at the risk free rate at the end of each reporting period and are recorded only to the extent they exceed deferred premium revenue;
|
•
|
the present value of installment premiums and commissions are not recorded on the balance sheet as they are under GAAP; and
|
•
|
mergers of acquired companies are treated as statutory mergers at historical balances and financial statements are retroactively revised assuming the merger occurred at the beginning of the prior year, rather than prospectively beginning with the date of acquisition at fair value under GAAP.
|
|
Policyholders' Surplus
|
|
Net Income (Loss)
|
||||||||||||||||
|
As of December 31,
|
|
Year Ended December 31,
|
||||||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
(in millions)
|
||||||||||||||||||
U.S. statutory companies:
|
|
|
|
|
|
|
|
|
|
||||||||||
AGM(1)
|
$
|
2,321
|
|
|
$
|
2,441
|
|
|
$
|
191
|
|
|
$
|
217
|
|
|
$
|
304
|
|
AGC(1)(2)
|
1,896
|
|
|
1,365
|
|
|
108
|
|
|
(92
|
)
|
|
116
|
|
|||||
MAC
|
487
|
|
|
730
|
|
|
142
|
|
|
102
|
|
|
75
|
|
|||||
Bermuda statutory company:
|
|
|
|
|
|
|
|
|
|
||||||||||
AG Re
|
1,255
|
|
|
984
|
|
|
139
|
|
|
51
|
|
|
28
|
|
(1)
|
Policyholders' surplus of AGM and AGC include their indirect share of MAC. AGM and AGC own approximately
61%
and
39%
, respectively, of the outstanding stock of Municipal Assurance Holdings Inc. (MAC Holdings), which owns
100%
of the outstanding common stock of MAC.
|
(2)
|
As indicated in Note 2, Acquisitions, AGC completed the acquisition of CIFGH (the parent company of CIFGNA) on July 1, 2016 and Radian Asset on April 1, 2015. Both CIFGNA and Radian Asset was merged with and into AGC, with AGC as the surviving company of the merger. The impact to AGC's policyholders' surplus was approximately
$287 million
from the CIFGH acquisition, on a statutory basis, as of July 1, 2016 and
$333 million
from the Radian Asset acquisition, on a statutory basis, as of April 1, 2015.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Dividends paid by AGC to AGUS
|
$
|
79
|
|
|
$
|
90
|
|
|
$
|
69
|
|
Dividends paid by AGM to AGMH
|
247
|
|
|
215
|
|
|
160
|
|
|||
Dividends paid by AG Re to AGL
|
100
|
|
|
150
|
|
|
82
|
|
|||
Repayment of surplus note by AGM to AGMH
|
—
|
|
|
25
|
|
|
50
|
|
|||
Repayment of surplus note by MAC to AGM
|
100
|
|
|
—
|
|
|
—
|
|
|||
Repayment of surplus note by MAC to MAC Holdings (1)
|
300
|
|
|
—
|
|
|
—
|
|
(1)
|
MAC Holdings returned
$300 million
to AGM and AGC, in proportion to their ownership percentages, in the second quarter of 2016.
|
12.
|
Income Taxes
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Expected tax provision (benefit) at statutory rates in taxable jurisdictions
|
$
|
316
|
|
|
$
|
443
|
|
|
$
|
490
|
|
Tax-exempt interest
|
(49
|
)
|
|
(54
|
)
|
|
(53
|
)
|
|||
Gain on bargain purchase
|
(125
|
)
|
|
(19
|
)
|
|
—
|
|
|||
Change in liability for uncertain tax positions
|
11
|
|
|
12
|
|
|
9
|
|
|||
Effect of provision to tax return filing adjustments
|
(15
|
)
|
|
(11
|
)
|
|
(6
|
)
|
|||
Other
|
(2
|
)
|
|
4
|
|
|
3
|
|
|||
Total provision (benefit) for income taxes
|
$
|
136
|
|
|
$
|
375
|
|
|
$
|
443
|
|
Effective tax rate
|
13.4
|
%
|
|
26.2
|
%
|
|
28.9
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
United States
|
$
|
1,442
|
|
|
$
|
1,853
|
|
|
$
|
1,633
|
|
Bermuda
|
239
|
|
|
361
|
|
|
365
|
|
|||
U.K.
|
(4
|
)
|
|
(7
|
)
|
|
(4
|
)
|
|||
Total
|
$
|
1,677
|
|
|
$
|
2,207
|
|
|
$
|
1,994
|
|
|
As of December 31,
|
||||||
|
2016
|
|
2015
|
||||
|
(in millions)
|
||||||
Deferred tax assets:
|
|
|
|
||||
Unrealized losses on credit derivative financial instruments, net
|
$
|
66
|
|
|
$
|
33
|
|
Unearned premium reserves, net
|
229
|
|
|
254
|
|
||
Loss and LAE reserve
|
216
|
|
|
64
|
|
||
Tax and loss bonds
|
50
|
|
|
39
|
|
||
Alternative minimum tax credit
|
17
|
|
|
55
|
|
||
Foreign tax credit
|
20
|
|
|
11
|
|
||
DAC
|
29
|
|
|
27
|
|
||
Investment basis difference
|
76
|
|
|
86
|
|
||
Deferred compensation
|
40
|
|
|
41
|
|
||
Net operating loss
|
64
|
|
|
—
|
|
||
Other
|
43
|
|
|
17
|
|
||
Total deferred income tax assets
|
850
|
|
|
627
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Contingency reserves
|
82
|
|
|
64
|
|
||
Public debt
|
91
|
|
|
94
|
|
||
Unrealized appreciation on investments
|
84
|
|
|
108
|
|
||
Unrealized gains on CCS
|
22
|
|
|
22
|
|
||
Market discount
|
22
|
|
|
21
|
|
||
Other
|
33
|
|
|
31
|
|
||
Total deferred income tax liabilities
|
334
|
|
|
340
|
|
||
Less: Valuation allowance
|
19
|
|
|
11
|
|
||
Net deferred income tax asset
|
$
|
497
|
|
|
$
|
276
|
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Balance as of January 1,
|
$
|
40
|
|
|
$
|
28
|
|
|
$
|
20
|
|
Effect of provision to tax return filing adjustments
|
6
|
|
|
10
|
|
|
6
|
|
|||
Increase in unrecognized tax positions as a result of position taken during the current period
|
4
|
|
|
2
|
|
|
2
|
|
|||
Balance as of December 31,
|
$
|
50
|
|
|
$
|
40
|
|
|
$
|
28
|
|
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.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Increase (decrease) in net unearned premium reserve
|
$
|
—
|
|
|
$
|
23
|
|
|
$
|
20
|
|
Increase (decrease) in net par outstanding
|
28
|
|
|
855
|
|
|
1,167
|
|
|||
Commutation gains (losses)
|
8
|
|
|
28
|
|
|
23
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Premiums Written:
|
|
|
|
|
|
||||||
Direct
|
$
|
165
|
|
|
$
|
164
|
|
|
$
|
116
|
|
Assumed(1)
|
(11
|
)
|
|
17
|
|
|
(12
|
)
|
|||
Ceded(2)
|
(17
|
)
|
|
10
|
|
|
15
|
|
|||
Net
|
$
|
137
|
|
|
$
|
191
|
|
|
$
|
119
|
|
Premiums Earned:
|
|
|
|
|
|
||||||
Direct
|
$
|
887
|
|
|
$
|
792
|
|
|
$
|
581
|
|
Assumed
|
27
|
|
|
40
|
|
|
47
|
|
|||
Ceded
|
(50
|
)
|
|
(66
|
)
|
|
(58
|
)
|
|||
Net
|
$
|
864
|
|
|
$
|
766
|
|
|
$
|
570
|
|
Loss and LAE:
|
|
|
|
|
|
||||||
Direct
|
$
|
327
|
|
|
$
|
399
|
|
|
$
|
132
|
|
Assumed
|
0
|
|
|
45
|
|
|
37
|
|
|||
Ceded
|
(32
|
)
|
|
(20
|
)
|
|
(43
|
)
|
|||
Net
|
$
|
295
|
|
|
$
|
424
|
|
|
$
|
126
|
|
(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.
|
|
|
Par Outstanding
|
||||||||||
|
|
As of December 31, 2016
|
||||||||||
Reinsurer
|
|
Ceded Par
Outstanding (1) |
|
Second-to-
Pay Insured Par Outstanding (2) |
|
Assumed Par
Outstanding |
||||||
|
|
(in millions)
|
||||||||||
Reinsurers rated investment grade:
|
|
|
|
|
|
|
||||||
Tokio Marine & Nichido Fire Insurance Co., Ltd. (3) (4)
|
|
$
|
3,436
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Mitsui Sumitomo Insurance Co. Ltd. (3) (4)
|
|
1,273
|
|
|
—
|
|
|
—
|
|
|||
National
|
|
—
|
|
|
4,420
|
|
|
4,364
|
|
|||
Subtotal
|
|
4,709
|
|
|
4,420
|
|
|
4,364
|
|
|||
Reinsurers rated BIG, had rating withdrawn or not rated:
|
|
|
|
|
|
|
||||||
American Overseas Reinsurance Company Limited (3)
|
|
3,573
|
|
|
—
|
|
|
30
|
|
|||
Syncora (3)
|
|
2,062
|
|
|
1,098
|
|
|
655
|
|
|||
ACA Financial Guaranty Corp.
|
|
637
|
|
|
20
|
|
|
—
|
|
|||
Ambac
|
|
115
|
|
|
2,862
|
|
|
6,695
|
|
|||
MBIA
|
|
—
|
|
|
1,024
|
|
|
165
|
|
|||
MBIA UK (5)
|
|
—
|
|
|
319
|
|
|
211
|
|
|||
FGIC (6)
|
|
—
|
|
|
1,194
|
|
|
410
|
|
|||
Ambac Assurance Corp. Segregated Account
|
|
—
|
|
|
73
|
|
|
614
|
|
|||
Other (3)
|
|
60
|
|
|
529
|
|
|
120
|
|
|||
Subtotal
|
|
6,447
|
|
|
7,119
|
|
|
8,900
|
|
|||
Total
|
|
$
|
11,156
|
|
|
$
|
11,539
|
|
|
$
|
13,264
|
|
(1)
|
Of the total ceded par to reinsurers rated BIG, had rating withdrawn or not rated,
$384 million
is rated BIG.
|
(2)
|
The par on second-to-pay exposure where the primary insurer and underlying transaction rating are both BIG is
$788 million
.
|
(3)
|
The total collateral posted by all non-affiliated reinsurers required or had agreed to post collateral as of
December 31, 2016
was approximately
$387 million
.
|
(5)
|
See Note 2, Acquisitions, for more information on MBIA UK.
|
(6)
|
FGIC includes subsidiaries Financial Guaranty Insurance Company and FGIC UK Limited.
|
|
Assumed
Premium, net
of Commissions
|
|
Ceded
Premium, net
of Commissions
|
|
Assumed
Expected Loss to be Paid |
|
Ceded
Expected Loss to be Paid |
||||||||
|
(in millions)
|
||||||||||||||
Reinsurers rated investment grade
|
$
|
5
|
|
|
$
|
(11
|
)
|
|
$
|
(1
|
)
|
|
$
|
62
|
|
Reinsurers rated BIG, had rating withdrawn or not rated:
|
|
|
|
|
|
|
|
||||||||
Ambac
|
33
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
||||
Syncora
|
13
|
|
|
(18
|
)
|
|
—
|
|
|
(3
|
)
|
||||
Ambac Assurance Corp. Segregated Account
|
6
|
|
|
—
|
|
|
(47
|
)
|
|
—
|
|
||||
FGIC
|
4
|
|
|
—
|
|
|
(13
|
)
|
|
—
|
|
||||
MBIA
|
0
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
||||
MBIA UK
|
4
|
|
|
—
|
|
|
0
|
|
|
—
|
|
||||
American Overseas Reinsurance Company Limited
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
28
|
|
||||
Other
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
||||
Subtotal
|
60
|
|
|
(35
|
)
|
|
(69
|
)
|
|
25
|
|
||||
Total
|
$
|
65
|
|
|
$
|
(46
|
)
|
|
$
|
(70
|
)
|
|
$
|
87
|
|
14.
|
Related Party Transactions
|
15.
|
Commitments and Contingencies
|
Year
|
|
(in millions)
|
||
2017
|
$
|
6
|
|
|
2018
|
8
|
|
||
2019
|
9
|
|
||
2020
|
9
|
|
||
2021
|
8
|
|
||
Thereafter
|
88
|
|
||
Total
|
$
|
128
|
|
16.
|
Long-Term Debt and Credit Facilities
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
||||||||||||
|
Principal
|
|
Carrying
Value
|
|
Principal
|
|
Carrying
Value
|
||||||||
|
(in millions)
|
||||||||||||||
AGUS:
|
|
|
|
|
|
|
|
|
|
|
|
||||
7% Senior Notes
|
$
|
200
|
|
|
$
|
197
|
|
|
$
|
200
|
|
|
$
|
197
|
|
5% Senior Notes
|
500
|
|
|
496
|
|
|
500
|
|
|
495
|
|
||||
Series A Enhanced Junior Subordinated Debentures
|
150
|
|
|
150
|
|
|
150
|
|
|
150
|
|
||||
Total AGUS
|
850
|
|
|
843
|
|
|
850
|
|
|
842
|
|
||||
AGMH:
|
|
|
|
|
|
|
|
|
|
|
|
||||
6
7
/
8
% QUIBS
|
100
|
|
|
69
|
|
|
100
|
|
|
69
|
|
||||
6.25% Notes
|
230
|
|
|
141
|
|
|
230
|
|
|
140
|
|
||||
5.6% Notes
|
100
|
|
|
56
|
|
|
100
|
|
|
56
|
|
||||
Junior Subordinated Debentures
|
300
|
|
|
187
|
|
|
300
|
|
|
180
|
|
||||
Total AGMH
|
730
|
|
|
453
|
|
|
730
|
|
|
445
|
|
||||
AGM:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Notes Payable
|
9
|
|
|
10
|
|
|
12
|
|
|
13
|
|
||||
Total AGM
|
9
|
|
|
10
|
|
|
12
|
|
|
13
|
|
||||
Total
|
$
|
1,589
|
|
|
$
|
1,306
|
|
|
$
|
1,592
|
|
|
$
|
1,300
|
|
Expected Withdrawal Date
|
|
AGUS
|
|
AGMH
|
|
AGM
|
|
Total
|
||||||||
|
|
(in millions)
|
||||||||||||||
2017
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
4
|
|
2018
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
||||
2019
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||
2020
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||
2021
|
|
—
|
|
|
—
|
|
|
0
|
|
|
0
|
|
||||
2022-2041
|
|
700
|
|
|
—
|
|
|
1
|
|
|
701
|
|
||||
2042-2061
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
2062-2081
|
|
150
|
|
|
300
|
|
|
—
|
|
|
450
|
|
||||
Thereafter
|
|
—
|
|
|
430
|
|
|
—
|
|
|
430
|
|
||||
Total
|
|
$
|
850
|
|
|
$
|
730
|
|
|
$
|
9
|
|
|
$
|
1,589
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
AGUS:
|
|
|
|
|
|
|
|
|
|||
7% Senior Notes
|
$
|
13
|
|
|
$
|
13
|
|
|
$
|
13
|
|
5% Senior Notes
|
26
|
|
|
26
|
|
|
13
|
|
|||
Series A Enhanced Junior Subordinated Debentures
|
9
|
|
|
10
|
|
|
10
|
|
|||
Total AGUS
|
48
|
|
|
49
|
|
|
36
|
|
|||
AGMH:
|
|
|
|
|
|
|
|
|
|||
6
7
/
8
% QUIBS
|
7
|
|
|
7
|
|
|
7
|
|
|||
6.25% Notes
|
16
|
|
|
16
|
|
|
16
|
|
|||
5.6% Notes
|
6
|
|
|
6
|
|
|
6
|
|
|||
Junior Subordinated Debentures
|
25
|
|
|
25
|
|
|
25
|
|
|||
Total AGMH
|
54
|
|
|
54
|
|
|
54
|
|
|||
AGM:
|
|
|
|
|
|
|
|
|
|||
Notes Payable
|
0
|
|
|
(2
|
)
|
|
2
|
|
|||
Total AGM
|
0
|
|
|
(2
|
)
|
|
2
|
|
|||
Total
|
$
|
102
|
|
|
$
|
101
|
|
|
$
|
92
|
|
17.
|
Earnings Per Share
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions, except per share amounts)
|
||||||||||
Basic EPS:
|
|
|
|
|
|
||||||
Net income (loss) attributable to AGL
|
$
|
881
|
|
|
$
|
1,056
|
|
|
1,088
|
|
|
Less: Distributed and undistributed income (loss) available to nonvested shareholders
|
1
|
|
|
1
|
|
|
0
|
|
|||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic
|
$
|
880
|
|
|
$
|
1,055
|
|
|
1,088
|
|
|
Basic shares
|
133.0
|
|
|
148.1
|
|
|
172.6
|
|
|||
Basic EPS
|
$
|
6.61
|
|
|
$
|
7.12
|
|
|
$
|
6.30
|
|
|
|
|
|
|
|
||||||
Diluted EPS:
|
|
|
|
|
|
||||||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic
|
$
|
880
|
|
|
$
|
1,055
|
|
|
$
|
1,088
|
|
Plus: Re-allocation of undistributed income (loss) available to nonvested shareholders of AGL and subsidiaries
|
0
|
|
|
0
|
|
|
0
|
|
|||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, diluted
|
$
|
880
|
|
|
$
|
1,055
|
|
|
$
|
1,088
|
|
|
|
|
|
|
|
||||||
Basic shares
|
133.0
|
|
|
148.1
|
|
|
172.6
|
|
|||
Dilutive securities
|
1.1
|
|
|
0.9
|
|
|
1.0
|
|
|||
Diluted shares
|
134.1
|
|
|
149.0
|
|
|
173.6
|
|
|||
Diluted EPS
|
$
|
6.56
|
|
|
$
|
7.08
|
|
|
$
|
6.26
|
|
Potentially dilutive securities excluded from computation of EPS because of antidilutive effect
|
0.3
|
|
|
0.5
|
|
|
1.6
|
|
18.
|
Shareholders' Equity
|
Year
|
|
Number of Shares Repurchased
|
|
Total Payments
(in millions)
|
|
Average Price Paid Per Share
|
|||||
2014
|
|
24,413,781
|
|
|
$
|
590
|
|
|
$
|
24.17
|
|
2015
|
|
20,995,419
|
|
|
$
|
555
|
|
|
$
|
26.43
|
|
2016
|
|
10,721,248
|
|
|
$
|
306
|
|
|
$
|
28.53
|
|
2017 (through February 23, 2017 on a settlement date basis)
|
|
3,591,369
|
|
|
$
|
142
|
|
|
$
|
39.65
|
|
19.
|
Employee Benefit Plans
|
|
Options for
Common Shares
|
|
Weighted
Average
Exercise Price
|
|
Number of
Exercisable
Options
|
||||
Balance as of December 31, 2015
|
2,360,340
|
|
|
$
|
21.73
|
|
|
2,275,096
|
|
Options granted
|
—
|
|
|
—
|
|
|
|
||
Options exercised
|
(768,212
|
)
|
|
24.64
|
|
|
|
||
Options forfeited/expired
|
(421,535
|
)
|
|
25.50
|
|
|
|
||
Balance as of December 31, 2016
|
1,170,593
|
|
|
$
|
18.43
|
|
|
1,145,356
|
|
|
|
2014
|
||
Dividend yield
|
|
2.03
|
%
|
|
Expected volatility
|
|
53.24
|
%
|
|
Risk free interest rate
|
|
2.21
|
%
|
|
Expected life
|
|
6.6 years
|
|
|
Forfeiture rate
|
|
3.5
|
%
|
|
Weighted average grant date fair value
|
|
$
|
10.35
|
|
(1)
|
No
options were granted in 2016 and 2015.
|
|
Options for
Common Shares
|
|
Weighted
Average
Exercise Price
|
|
Number of
Exercisable
Options
|
||||
Balance as of December 31, 2015
|
239,537
|
|
|
$
|
17.92
|
|
|
166,897
|
|
Options granted
|
—
|
|
|
—
|
|
|
|
||
Options exercised
|
(5,533
|
)
|
|
19.08
|
|
|
|
||
Options forfeited/expired
|
(12,595
|
)
|
|
19.24
|
|
|
|
||
Balance as of December 31, 2016
|
221,409
|
|
|
$
|
17.89
|
|
|
221,409
|
|
Nonvested Shares
|
|
Number of
Shares
|
|
Weighted
Average Grant
Date Fair Value
Per Share
|
|||
Nonvested at December 31, 2015
|
62,145
|
|
|
$
|
25.67
|
|
|
Granted
|
58,858
|
|
|
25.57
|
|
||
Vested
|
(62,145
|
)
|
|
25.67
|
|
||
Forfeited
|
—
|
|
|
—
|
|
||
Nonvested at December 31, 2016
|
58,858
|
|
|
$
|
25.57
|
|
Nonvested Stock Units
|
|
Number of
Stock Units
|
|
Weighted
Average Grant
Date Fair Value
Per Share
|
|||
Nonvested at December 31, 2015
|
689,281
|
|
|
$
|
23.23
|
|
|
Granted
|
377,661
|
|
|
24.51
|
|
||
Vested
|
(114,701
|
)
|
|
20.88
|
|
||
Forfeited
|
(6,732
|
)
|
|
24.38
|
|
||
Nonvested at December 31, 2016
|
945,509
|
|
|
$
|
24.01
|
|
Performance Restricted Stock Units
|
|
Number of
Performance Share Units
|
|
Weighted
Average Grant
Date Fair Value
Per Share
|
|||
Nonvested at December 31, 2015
|
408,260
|
|
|
$
|
27.32
|
|
|
Granted
|
270,612
|
|
|
25.62
|
|
||
Delivered
|
(69,437
|
)
|
|
29.43
|
|
||
Forfeited
|
—
|
|
|
—
|
|
||
Nonvested at December 31, 2016 (1)
|
609,435
|
|
|
$
|
26.22
|
|
(1)
|
Excludes
355,353
performance restricted stock units that have met performance hurdles and will be eligible for vesting after December 31, 2016.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(dollars in millions)
|
||||||||||
Proceeds from purchase of shares by employees
|
$
|
0.9
|
|
|
$
|
0.8
|
|
|
$
|
0.9
|
|
Number of shares issued by the Company
|
39,055
|
|
|
38,565
|
|
|
43,273
|
|
|||
Recorded in share-based compensation, net of deferral
|
$
|
0.2
|
|
|
$
|
0.2
|
|
|
$
|
0.2
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in millions)
|
||||||||||
Share‑based compensation expense
|
$
|
13
|
|
|
$
|
10
|
|
|
$
|
10
|
|
Share‑based compensation capitalized as DAC
|
0.4
|
|
|
0.5
|
|
|
0.3
|
|
|||
Income tax benefit
|
3
|
|
|
2
|
|
|
2
|
|
20.
|
Other Comprehensive Income
|
|
Net Unrealized
Gains (Losses) on
Investments with no Other-Than-Temporary Impairment
|
|
Net Unrealized
Gains (Losses) on
Investments with Other-Than-Temporary Impairment
|
|
Cumulative
Translation
Adjustment
|
|
Cash Flow Hedge
|
|
Total Accumulated
Other
Comprehensive
Income
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Balance, December 31, 2015
|
$
|
260
|
|
|
$
|
(15
|
)
|
|
$
|
(16
|
)
|
|
$
|
8
|
|
|
$
|
237
|
|
Other comprehensive income (loss) before reclassifications
|
(71
|
)
|
|
(9
|
)
|
|
(23
|
)
|
|
—
|
|
|
(103
|
)
|
|||||
Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net realized investment gains (losses)
|
(23
|
)
|
|
52
|
|
|
—
|
|
|
—
|
|
|
29
|
|
|||||
Net investment income
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||||
Total before tax
|
(26
|
)
|
|
52
|
|
|
—
|
|
|
(1
|
)
|
|
25
|
|
|||||
Tax (provision) benefit
|
8
|
|
|
(18
|
)
|
|
—
|
|
|
0
|
|
|
(10
|
)
|
|||||
Total amount reclassified from AOCI, net of tax
|
(18
|
)
|
|
34
|
|
|
—
|
|
|
(1
|
)
|
|
15
|
|
|||||
Net current period other comprehensive income (loss)
|
(89
|
)
|
|
25
|
|
|
(23
|
)
|
|
(1
|
)
|
|
(88
|
)
|
|||||
Balance, December 31, 2016
|
$
|
171
|
|
|
$
|
10
|
|
|
$
|
(39
|
)
|
|
$
|
7
|
|
|
$
|
149
|
|
|
Net Unrealized
Gains (Losses) on
Investments with no Other-Than-Temporary Impairment
|
|
Net Unrealized
Gains (Losses) on
Investments with Other-Than-Temporary Impairment
|
|
Cumulative
Translation
Adjustment
|
|
Cash Flow Hedge
|
|
Total Accumulated
Other
Comprehensive
Income
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Balance, December 31, 2014
|
$
|
367
|
|
|
$
|
4
|
|
|
$
|
(10
|
)
|
|
$
|
9
|
|
|
$
|
370
|
|
Other comprehensive income (loss) before reclassifications
|
(93
|
)
|
|
(43
|
)
|
|
(6
|
)
|
|
—
|
|
|
(142
|
)
|
|||||
Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net realized investment gains (losses)
|
(11
|
)
|
|
37
|
|
|
—
|
|
|
—
|
|
|
26
|
|
|||||
Net investment income
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
|||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||||
Total before tax
|
(20
|
)
|
|
37
|
|
|
—
|
|
|
(1
|
)
|
|
16
|
|
|||||
Tax (provision) benefit
|
6
|
|
|
(13
|
)
|
|
—
|
|
|
0
|
|
|
(7
|
)
|
|||||
Total amount reclassified from AOCI, net of tax
|
(14
|
)
|
|
24
|
|
|
—
|
|
|
(1
|
)
|
|
9
|
|
|||||
Net current period other comprehensive income (loss)
|
(107
|
)
|
|
(19
|
)
|
|
(6
|
)
|
|
(1
|
)
|
|
(133
|
)
|
|||||
Balance, December 31, 2015
|
$
|
260
|
|
|
$
|
(15
|
)
|
|
$
|
(16
|
)
|
|
$
|
8
|
|
|
$
|
237
|
|
|
Net Unrealized
Gains (Losses) on
Investments with no Other-Than-Temporary Impairment
|
|
Net Unrealized
Gains (Losses) on
Investments with Other-Than-Temporary Impairment
|
|
Cumulative
Translation
Adjustment
|
|
Cash Flow Hedge
|
|
Total Accumulated
Other
Comprehensive
Income
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Balance, December 31, 2013
|
$
|
178
|
|
|
$
|
(24
|
)
|
|
$
|
(3
|
)
|
|
$
|
9
|
|
|
$
|
160
|
|
Other comprehensive income (loss) before reclassifications
|
196
|
|
|
(20
|
)
|
|
(7
|
)
|
|
—
|
|
|
169
|
|
|||||
Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net realized investment gains (losses)
|
(12
|
)
|
|
74
|
|
|
—
|
|
|
—
|
|
|
62
|
|
|||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
0
|
|
|
0
|
|
|||||
Total before tax
|
(12
|
)
|
|
74
|
|
|
—
|
|
|
0
|
|
|
62
|
|
|||||
Tax (provision) benefit
|
5
|
|
|
(26
|
)
|
|
—
|
|
|
0
|
|
|
(21
|
)
|
|||||
Total amount reclassified from AOCI, net of tax
|
(7
|
)
|
|
48
|
|
|
—
|
|
|
0
|
|
|
41
|
|
|||||
Net current period other comprehensive income (loss)
|
189
|
|
|
28
|
|
|
(7
|
)
|
|
0
|
|
|
210
|
|
|||||
Balance, December 31, 2014
|
$
|
367
|
|
|
$
|
4
|
|
|
$
|
(10
|
)
|
|
$
|
9
|
|
|
$
|
370
|
|
21.
|
Subsidiary Information
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total investment portfolio and cash
|
$
|
36
|
|
|
$
|
384
|
|
|
$
|
22
|
|
|
$
|
11,029
|
|
|
$
|
(368
|
)
|
|
$
|
11,103
|
|
Investment in subsidiaries
|
6,164
|
|
|
5,696
|
|
|
3,734
|
|
|
296
|
|
|
(15,890
|
)
|
|
—
|
|
||||||
Premiums receivable, net of commissions payable
|
—
|
|
|
—
|
|
|
—
|
|
|
699
|
|
|
(123
|
)
|
|
576
|
|
||||||
Ceded unearned premium reserve
|
—
|
|
|
—
|
|
|
—
|
|
|
1,099
|
|
|
(893
|
)
|
|
206
|
|
||||||
Deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
156
|
|
|
(50
|
)
|
|
106
|
|
||||||
Reinsurance recoverable on unpaid losses
|
—
|
|
|
—
|
|
|
—
|
|
|
484
|
|
|
(404
|
)
|
|
80
|
|
||||||
Credit derivative assets
|
—
|
|
|
—
|
|
|
—
|
|
|
69
|
|
|
(56
|
)
|
|
13
|
|
||||||
Deferred tax asset, net
|
—
|
|
|
16
|
|
|
—
|
|
|
597
|
|
|
(116
|
)
|
|
497
|
|
||||||
Intercompany receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
70
|
|
|
(70
|
)
|
|
—
|
|
||||||
Financial guaranty variable interest entities’ assets, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
876
|
|
|
—
|
|
|
876
|
|
||||||
Dividend receivable from affiliate
|
300
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(300
|
)
|
|
—
|
|
||||||
Other
|
11
|
|
|
78
|
|
|
26
|
|
|
801
|
|
|
(222
|
)
|
|
694
|
|
||||||
TOTAL ASSETS
|
$
|
6,511
|
|
|
$
|
6,174
|
|
|
$
|
3,782
|
|
|
$
|
16,176
|
|
|
$
|
(18,492
|
)
|
|
$
|
14,151
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Unearned premium reserves
|
—
|
|
|
—
|
|
|
—
|
|
|
4,488
|
|
|
(977
|
)
|
|
3,511
|
|
||||||
Loss and LAE reserve
|
—
|
|
|
—
|
|
|
—
|
|
|
1,596
|
|
|
(469
|
)
|
|
1,127
|
|
||||||
Long-term debt
|
—
|
|
|
843
|
|
|
453
|
|
|
10
|
|
|
—
|
|
|
1,306
|
|
||||||
Intercompany payable
|
—
|
|
|
70
|
|
|
—
|
|
|
300
|
|
|
(370
|
)
|
|
—
|
|
||||||
Credit derivative liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
458
|
|
|
(56
|
)
|
|
402
|
|
||||||
Deferred tax liabilities, net
|
—
|
|
|
—
|
|
|
88
|
|
|
—
|
|
|
(88
|
)
|
|
—
|
|
||||||
Financial guaranty variable interest entities’ liabilities, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
958
|
|
|
—
|
|
|
958
|
|
||||||
Dividend payable to affiliate
|
—
|
|
|
300
|
|
|
—
|
|
|
—
|
|
|
(300
|
)
|
|
—
|
|
||||||
Other
|
7
|
|
|
3
|
|
|
14
|
|
|
665
|
|
|
(346
|
)
|
|
343
|
|
||||||
TOTAL LIABILITIES
|
7
|
|
|
1,216
|
|
|
555
|
|
|
8,475
|
|
|
(2,606
|
)
|
|
7,647
|
|
||||||
TOTAL SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO ASSURED GUARANTY LTD.
|
6,504
|
|
|
4,958
|
|
|
3,227
|
|
|
7,405
|
|
|
(15,590
|
)
|
|
6,504
|
|
||||||
Noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
296
|
|
|
(296
|
)
|
|
—
|
|
||||||
TOTAL SHAREHOLDERS’ EQUITY
|
6,504
|
|
|
4,958
|
|
|
3,227
|
|
|
7,701
|
|
|
(15,886
|
)
|
|
6,504
|
|
||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
6,511
|
|
|
$
|
6,174
|
|
|
$
|
3,782
|
|
|
$
|
16,176
|
|
|
$
|
(18,492
|
)
|
|
$
|
14,151
|
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total investment portfolio and cash
|
$
|
10
|
|
|
$
|
156
|
|
|
$
|
22
|
|
|
$
|
11,530
|
|
|
$
|
(360
|
)
|
|
$
|
11,358
|
|
Investment in subsidiaries
|
5,961
|
|
|
5,569
|
|
|
4,081
|
|
|
377
|
|
|
(15,988
|
)
|
|
—
|
|
||||||
Premiums receivable, net of commissions payable
|
—
|
|
|
—
|
|
|
—
|
|
|
833
|
|
|
(140
|
)
|
|
693
|
|
||||||
Ceded unearned premium reserve
|
—
|
|
|
—
|
|
|
—
|
|
|
1,266
|
|
|
(1,034
|
)
|
|
232
|
|
||||||
Deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
176
|
|
|
(62
|
)
|
|
114
|
|
||||||
Reinsurance recoverable on unpaid losses
|
—
|
|
|
—
|
|
|
—
|
|
|
467
|
|
|
(398
|
)
|
|
69
|
|
||||||
Credit derivative assets
|
—
|
|
|
—
|
|
|
—
|
|
|
207
|
|
|
(126
|
)
|
|
81
|
|
||||||
Deferred tax asset, net
|
—
|
|
|
52
|
|
|
—
|
|
|
357
|
|
|
(133
|
)
|
|
276
|
|
||||||
Intercompany receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
90
|
|
|
(90
|
)
|
|
—
|
|
||||||
Financial guaranty variable interest entities’ assets, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
1,261
|
|
|
—
|
|
|
1,261
|
|
||||||
Dividend receivable from affiliate
|
69
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
69
|
|
||||||
Other
|
29
|
|
|
29
|
|
|
26
|
|
|
571
|
|
|
(264
|
)
|
|
391
|
|
||||||
TOTAL ASSETS
|
$
|
6,069
|
|
|
$
|
5,806
|
|
|
$
|
4,129
|
|
|
$
|
17,135
|
|
|
$
|
(18,595
|
)
|
|
$
|
14,544
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Unearned premium reserves
|
—
|
|
|
—
|
|
|
—
|
|
|
5,143
|
|
|
(1,147
|
)
|
|
3,996
|
|
||||||
Loss and LAE reserve
|
—
|
|
|
—
|
|
|
—
|
|
|
1,537
|
|
|
(470
|
)
|
|
1,067
|
|
||||||
Long-term debt
|
—
|
|
|
842
|
|
|
445
|
|
|
13
|
|
|
—
|
|
|
1,300
|
|
||||||
Intercompany payable
|
—
|
|
|
90
|
|
|
—
|
|
|
300
|
|
|
(390
|
)
|
|
—
|
|
||||||
Credit derivative liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
572
|
|
|
(126
|
)
|
|
446
|
|
||||||
Deferred tax liabilities, net
|
—
|
|
|
—
|
|
|
91
|
|
|
—
|
|
|
(91
|
)
|
|
—
|
|
||||||
Financial guaranty variable interest entities’ liabilities, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
1,349
|
|
|
—
|
|
|
1,349
|
|
||||||
Dividend payable to affiliate
|
—
|
|
|
69
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
69
|
|
||||||
Other
|
6
|
|
|
13
|
|
|
15
|
|
|
622
|
|
|
(402
|
)
|
|
254
|
|
||||||
TOTAL LIABILITIES
|
6
|
|
|
1,014
|
|
|
551
|
|
|
9,536
|
|
|
(2,626
|
)
|
|
8,481
|
|
||||||
TOTAL SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO ASSURED GUARANTY LTD.
|
6,063
|
|
|
4,792
|
|
|
3,578
|
|
|
7,222
|
|
|
(15,592
|
)
|
|
6,063
|
|
||||||
Noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
377
|
|
|
(377
|
)
|
|
—
|
|
||||||
TOTAL SHAREHOLDERS’ EQUITY
|
6,063
|
|
|
4,792
|
|
|
3,578
|
|
|
7,599
|
|
|
(15,969
|
)
|
|
6,063
|
|
||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
6,069
|
|
|
$
|
5,806
|
|
|
$
|
4,129
|
|
|
$
|
17,135
|
|
|
$
|
(18,595
|
)
|
|
$
|
14,544
|
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
892
|
|
|
$
|
(28
|
)
|
|
$
|
864
|
|
Net investment income
|
0
|
|
|
0
|
|
|
0
|
|
|
412
|
|
|
(4
|
)
|
|
408
|
|
||||||
Net realized investment gains (losses)
|
0
|
|
|
2
|
|
|
0
|
|
|
(28
|
)
|
|
(3
|
)
|
|
(29
|
)
|
||||||
Net change in fair value of credit derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Realized gains (losses) and other settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
29
|
|
|
0
|
|
|
29
|
|
||||||
Net unrealized gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
69
|
|
|
—
|
|
|
69
|
|
||||||
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
98
|
|
|
—
|
|
|
98
|
|
||||||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
—
|
|
|
—
|
|
|
257
|
|
|
2
|
|
|
259
|
|
||||||
Other
|
0
|
|
|
—
|
|
|
—
|
|
|
78
|
|
|
(1
|
)
|
|
77
|
|
||||||
TOTAL REVENUES
|
0
|
|
|
2
|
|
|
0
|
|
|
1,709
|
|
|
(34
|
)
|
|
1,677
|
|
||||||
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
296
|
|
|
(1
|
)
|
|
295
|
|
||||||
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
(12
|
)
|
|
18
|
|
||||||
Interest expense
|
—
|
|
|
52
|
|
|
54
|
|
|
10
|
|
|
(14
|
)
|
|
102
|
|
||||||
Other operating expenses
|
29
|
|
|
2
|
|
|
2
|
|
|
217
|
|
|
(5
|
)
|
|
245
|
|
||||||
TOTAL EXPENSES
|
29
|
|
|
54
|
|
|
56
|
|
|
553
|
|
|
(32
|
)
|
|
660
|
|
||||||
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN NET EARNINGS OF SUBSIDIARIES
|
(29
|
)
|
|
(52
|
)
|
|
(56
|
)
|
|
1,156
|
|
|
(2
|
)
|
|
1,017
|
|
||||||
Total (provision) benefit for income taxes
|
—
|
|
|
18
|
|
|
20
|
|
|
(175
|
)
|
|
1
|
|
|
(136
|
)
|
||||||
Equity in net earnings of subsidiaries
|
910
|
|
|
794
|
|
|
274
|
|
|
44
|
|
|
(2,022
|
)
|
|
—
|
|
||||||
NET INCOME (LOSS)
|
881
|
|
|
760
|
|
|
238
|
|
|
1,025
|
|
|
(2,023
|
)
|
|
881
|
|
||||||
Less: noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
44
|
|
|
(44
|
)
|
|
—
|
|
||||||
NET INCOME (LOSS) ATTRIBUTABLE TO ASSURED GUARANTY LTD.
|
$
|
881
|
|
|
$
|
760
|
|
|
$
|
238
|
|
|
$
|
981
|
|
|
$
|
(1,979
|
)
|
|
$
|
881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
COMPREHENSIVE INCOME (LOSS)
|
$
|
793
|
|
|
$
|
685
|
|
|
$
|
163
|
|
|
$
|
953
|
|
|
$
|
(1,801
|
)
|
|
$
|
793
|
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
783
|
|
|
$
|
(17
|
)
|
|
$
|
766
|
|
Net investment income
|
0
|
|
|
1
|
|
|
0
|
|
|
432
|
|
|
(10
|
)
|
|
423
|
|
||||||
Net realized investment gains (losses)
|
0
|
|
|
0
|
|
|
1
|
|
|
(19
|
)
|
|
(8
|
)
|
|
(26
|
)
|
||||||
Net change in fair value of credit derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Realized gains (losses) and other settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
(18
|
)
|
|
0
|
|
|
(18
|
)
|
||||||
Net unrealized gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
773
|
|
|
(27
|
)
|
|
746
|
|
||||||
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
755
|
|
|
(27
|
)
|
|
728
|
|
||||||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
—
|
|
|
—
|
|
|
54
|
|
|
160
|
|
|
214
|
|
||||||
Other
|
—
|
|
|
0
|
|
|
—
|
|
|
102
|
|
|
0
|
|
|
102
|
|
||||||
TOTAL REVENUES
|
0
|
|
|
1
|
|
|
1
|
|
|
2,107
|
|
|
98
|
|
|
2,207
|
|
||||||
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
434
|
|
|
(10
|
)
|
|
424
|
|
||||||
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
29
|
|
|
(9
|
)
|
|
20
|
|
||||||
Interest expense
|
—
|
|
|
52
|
|
|
54
|
|
|
14
|
|
|
(19
|
)
|
|
101
|
|
||||||
Other operating expenses
|
30
|
|
|
1
|
|
|
1
|
|
|
202
|
|
|
(3
|
)
|
|
231
|
|
||||||
TOTAL EXPENSES
|
30
|
|
|
53
|
|
|
55
|
|
|
679
|
|
|
(41
|
)
|
|
776
|
|
||||||
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN NET EARNINGS OF SUBSIDIARIES
|
(30
|
)
|
|
(52
|
)
|
|
(54
|
)
|
|
1,428
|
|
|
139
|
|
|
1,431
|
|
||||||
Total (provision) benefit for income taxes
|
—
|
|
|
18
|
|
|
19
|
|
|
(365
|
)
|
|
(47
|
)
|
|
(375
|
)
|
||||||
Equity in net earnings of subsidiaries
|
1,086
|
|
|
923
|
|
|
468
|
|
|
39
|
|
|
(2,516
|
)
|
|
—
|
|
||||||
NET INCOME (LOSS)
|
1,056
|
|
|
889
|
|
|
433
|
|
|
1,102
|
|
|
(2,424
|
)
|
|
1,056
|
|
||||||
Less: noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
39
|
|
|
(39
|
)
|
|
—
|
|
||||||
NET INCOME (LOSS) ATTRIBUTABLE TO ASSURED GUARANTY LTD.
|
$
|
1,056
|
|
|
$
|
889
|
|
|
$
|
433
|
|
|
$
|
1,063
|
|
|
$
|
(2,385
|
)
|
|
$
|
1,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
COMPREHENSIVE INCOME (LOSS)
|
$
|
923
|
|
|
$
|
787
|
|
|
$
|
359
|
|
|
$
|
967
|
|
|
$
|
(2,113
|
)
|
|
$
|
923
|
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
566
|
|
|
$
|
4
|
|
|
$
|
570
|
|
Net investment income
|
0
|
|
|
0
|
|
|
1
|
|
|
412
|
|
|
(10
|
)
|
|
403
|
|
||||||
Net realized investment gains (losses)
|
0
|
|
|
0
|
|
|
0
|
|
|
(58
|
)
|
|
(2
|
)
|
|
(60
|
)
|
||||||
Net change in fair value of credit derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Realized gains (losses) and other settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
23
|
|
|
—
|
|
|
23
|
|
||||||
Net unrealized gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
800
|
|
|
—
|
|
|
800
|
|
||||||
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
823
|
|
|
—
|
|
|
823
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
259
|
|
|
(1
|
)
|
|
258
|
|
||||||
TOTAL REVENUES
|
0
|
|
|
0
|
|
|
1
|
|
|
2,002
|
|
|
(9
|
)
|
|
1,994
|
|
||||||
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
122
|
|
|
4
|
|
|
126
|
|
||||||
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
33
|
|
|
(8
|
)
|
|
25
|
|
||||||
Interest expense
|
—
|
|
|
40
|
|
|
54
|
|
|
16
|
|
|
(18
|
)
|
|
92
|
|
||||||
Other operating expenses
|
31
|
|
|
1
|
|
|
1
|
|
|
195
|
|
|
(8
|
)
|
|
220
|
|
||||||
TOTAL EXPENSES
|
31
|
|
|
41
|
|
|
55
|
|
|
366
|
|
|
(30
|
)
|
|
463
|
|
||||||
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN NET EARNINGS OF SUBSIDIARIES
|
(31
|
)
|
|
(41
|
)
|
|
(54
|
)
|
|
1,636
|
|
|
21
|
|
|
1,531
|
|
||||||
Total (provision) benefit for income taxes
|
—
|
|
|
14
|
|
|
19
|
|
|
(469
|
)
|
|
(7
|
)
|
|
(443
|
)
|
||||||
Equity in net earnings of subsidiaries
|
1,119
|
|
|
983
|
|
|
513
|
|
|
32
|
|
|
(2,647
|
)
|
|
—
|
|
||||||
NET INCOME (LOSS)
|
1,088
|
|
|
956
|
|
|
478
|
|
|
1,199
|
|
|
(2,633
|
)
|
|
1,088
|
|
||||||
Less: noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
32
|
|
|
(32
|
)
|
|
—
|
|
||||||
NET INCOME (LOSS) ATTRIBUTABLE TO ASSURED GUARANTY LTD.
|
$
|
1,088
|
|
|
$
|
956
|
|
|
$
|
478
|
|
|
$
|
1,167
|
|
|
$
|
(2,601
|
)
|
|
$
|
1,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
COMPREHENSIVE INCOME (LOSS)
|
$
|
1,298
|
|
|
$
|
1,114
|
|
|
$
|
577
|
|
|
$
|
1,570
|
|
|
$
|
(3,261
|
)
|
|
$
|
1,298
|
|
|
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
|
$
|
390
|
|
|
$
|
533
|
|
|
$
|
213
|
|
|
$
|
64
|
|
|
$
|
(1,341
|
)
|
|
$
|
(141
|
)
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchases
|
(4
|
)
|
|
(143
|
)
|
|
(10
|
)
|
|
(1,489
|
)
|
|
—
|
|
|
(1,646
|
)
|
||||||
Sales
|
4
|
|
|
24
|
|
|
12
|
|
|
1,325
|
|
|
—
|
|
|
1,365
|
|
||||||
Maturities
|
—
|
|
|
30
|
|
|
—
|
|
|
1,125
|
|
|
—
|
|
|
1,155
|
|
||||||
Sales (purchases) of short-term investments, net
|
(26
|
)
|
|
(237
|
)
|
|
(10
|
)
|
|
290
|
|
|
—
|
|
|
17
|
|
||||||
Net proceeds from financial guaranty variable entities’ assets
|
—
|
|
|
—
|
|
|
—
|
|
|
629
|
|
|
—
|
|
|
629
|
|
||||||
Intercompany debt
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
(20
|
)
|
|
—
|
|
||||||
Proceeds from stock redemption and return of capital from subsidiaries
|
—
|
|
|
—
|
|
|
300
|
|
|
4
|
|
|
(304
|
)
|
|
—
|
|
||||||
Acquisition of CIFG, net of cash acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
(442
|
)
|
|
7
|
|
|
(435
|
)
|
||||||
Other
|
—
|
|
|
7
|
|
|
—
|
|
|
(9
|
)
|
|
(7
|
)
|
|
(9
|
)
|
||||||
Net cash flows provided by (used in) investing activities
|
(26
|
)
|
|
(319
|
)
|
|
292
|
|
|
1,453
|
|
|
(324
|
)
|
|
1,076
|
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Return of capital
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
4
|
|
|
—
|
|
||||||
Dividends paid
|
(69
|
)
|
|
(288
|
)
|
|
(513
|
)
|
|
(540
|
)
|
|
1,341
|
|
|
(69
|
)
|
||||||
Repurchases of common stock
|
(306
|
)
|
|
—
|
|
|
—
|
|
|
(300
|
)
|
|
300
|
|
|
(306
|
)
|
||||||
Share activity under option and incentive plans
|
11
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
10
|
|
||||||
Net paydowns of financial guaranty variable entities’ liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(611
|
)
|
|
—
|
|
|
(611
|
)
|
||||||
Payment of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
||||||
Intercompany debt
|
—
|
|
|
(20
|
)
|
|
—
|
|
|
—
|
|
|
20
|
|
|
—
|
|
||||||
Net cash flows provided by (used in) financing activities
|
(364
|
)
|
|
(308
|
)
|
|
(513
|
)
|
|
(1,458
|
)
|
|
1,665
|
|
|
(978
|
)
|
||||||
Effect of exchange rate changes
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
||||||
Increase (decrease) in cash
|
—
|
|
|
(94
|
)
|
|
(8
|
)
|
|
54
|
|
|
—
|
|
|
(48
|
)
|
||||||
Cash at beginning of period
|
0
|
|
|
95
|
|
|
8
|
|
|
63
|
|
|
—
|
|
|
166
|
|
||||||
Cash at end of period
|
$
|
0
|
|
|
$
|
1
|
|
|
$
|
0
|
|
|
$
|
117
|
|
|
$
|
—
|
|
|
$
|
118
|
|
|
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
|
$
|
513
|
|
|
$
|
408
|
|
|
$
|
185
|
|
|
$
|
52
|
|
|
$
|
(1,210
|
)
|
|
$
|
(52
|
)
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchases
|
—
|
|
|
(72
|
)
|
|
(21
|
)
|
|
(2,550
|
)
|
|
66
|
|
|
(2,577
|
)
|
||||||
Sales
|
—
|
|
|
177
|
|
|
30
|
|
|
1,900
|
|
|
—
|
|
|
2,107
|
|
||||||
Maturities
|
—
|
|
|
9
|
|
|
—
|
|
|
889
|
|
|
—
|
|
|
898
|
|
||||||
Sales (purchases) of short-term investments, net
|
116
|
|
|
33
|
|
|
19
|
|
|
729
|
|
|
—
|
|
|
897
|
|
||||||
Net proceeds from financial guaranty variable entities’ assets
|
—
|
|
|
—
|
|
|
—
|
|
|
400
|
|
|
—
|
|
|
400
|
|
||||||
Proceeds from repayment of surplus notes
|
—
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
(25
|
)
|
|
—
|
|
||||||
Acquisition of Radian Asset, net of cash acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
(800
|
)
|
|
—
|
|
|
(800
|
)
|
||||||
Other
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
74
|
|
|
—
|
|
|
69
|
|
||||||
Net cash flows provided by (used in) investing activities
|
116
|
|
|
142
|
|
|
53
|
|
|
642
|
|
|
41
|
|
|
994
|
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
||||||
Return of capital
|
—
|
|
|
—
|
|
|
—
|
|
|
(25
|
)
|
|
25
|
|
|
—
|
|
||||||
Dividends paid
|
(72
|
)
|
|
(455
|
)
|
|
(234
|
)
|
|
(455
|
)
|
|
1,144
|
|
|
(72
|
)
|
||||||
Repurchases of common stock
|
(555
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(555
|
)
|
||||||
Share activity under option and incentive plans
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
Net paydowns of financial guaranty variable entities’ liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(214
|
)
|
|
—
|
|
|
(214
|
)
|
||||||
Payment of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
||||||
Net cash flows provided by (used in) financing activities
|
(629
|
)
|
|
(455
|
)
|
|
(234
|
)
|
|
(698
|
)
|
|
1,169
|
|
|
(847
|
)
|
||||||
Effect of exchange rate changes
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
||||||
Increase (decrease) in cash
|
—
|
|
|
95
|
|
|
4
|
|
|
(8
|
)
|
|
—
|
|
|
91
|
|
||||||
Cash at beginning of period
|
0
|
|
|
0
|
|
|
4
|
|
|
71
|
|
|
—
|
|
|
75
|
|
||||||
Cash at end of period
|
$
|
0
|
|
|
$
|
95
|
|
|
$
|
8
|
|
|
$
|
63
|
|
|
$
|
—
|
|
|
$
|
166
|
|
|
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
|
$
|
758
|
|
|
$
|
223
|
|
|
$
|
144
|
|
|
$
|
663
|
|
|
$
|
(1,211
|
)
|
|
$
|
577
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchases
|
—
|
|
|
(540
|
)
|
|
(8
|
)
|
|
(2,253
|
)
|
|
—
|
|
|
(2,801
|
)
|
||||||
Sales
|
—
|
|
|
464
|
|
|
10
|
|
|
777
|
|
|
—
|
|
|
1,251
|
|
||||||
Maturities
|
—
|
|
|
6
|
|
|
1
|
|
|
870
|
|
|
—
|
|
|
877
|
|
||||||
Sales (purchases) of short-term investments, net
|
(93
|
)
|
|
(15
|
)
|
|
(3
|
)
|
|
269
|
|
|
—
|
|
|
158
|
|
||||||
Net proceeds from financial guaranty variable entities’ assets
|
—
|
|
|
—
|
|
|
—
|
|
|
408
|
|
|
—
|
|
|
408
|
|
||||||
Proceeds from repayment of surplus notes
|
—
|
|
|
—
|
|
|
50
|
|
|
—
|
|
|
(50
|
)
|
|
—
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
11
|
|
||||||
Net cash flows provided by (used in) investing activities
|
(93
|
)
|
|
(85
|
)
|
|
50
|
|
|
82
|
|
|
(50
|
)
|
|
(96
|
)
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Return of capital
|
—
|
|
|
—
|
|
|
—
|
|
|
(50
|
)
|
|
50
|
|
|
—
|
|
||||||
Dividends paid
|
(76
|
)
|
|
(700
|
)
|
|
(190
|
)
|
|
(321
|
)
|
|
1,211
|
|
|
(76
|
)
|
||||||
Repurchases of common stock
|
(590
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(590
|
)
|
||||||
Share activity under option and incentive plans
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||
Net paydowns of financial guaranty variable entities’ liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(396
|
)
|
|
—
|
|
|
(396
|
)
|
||||||
Net proceeds from issuance of long-term debt
|
—
|
|
|
495
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
495
|
|
||||||
Payment of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
|
—
|
|
|
(19
|
)
|
||||||
Net cash flows provided by (used in) financing activities
|
(665
|
)
|
|
(205
|
)
|
|
(190
|
)
|
|
(786
|
)
|
|
1,261
|
|
|
(585
|
)
|
||||||
Effect of exchange rate changes
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
||||||
Increase (decrease) in cash
|
—
|
|
|
(67
|
)
|
|
4
|
|
|
(46
|
)
|
|
—
|
|
|
(109
|
)
|
||||||
Cash at beginning of period
|
0
|
|
|
67
|
|
|
0
|
|
|
117
|
|
|
—
|
|
|
184
|
|
||||||
Cash at end of period
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
4
|
|
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
75
|
|
22.
|
Quarterly Financial Information (Unaudited)
|
2016
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Full
Year
|
||||||||||
|
(dollars in millions, except per share data)
|
|||||||||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earned premiums
|
$
|
183
|
|
|
$
|
214
|
|
|
$
|
231
|
|
|
$
|
236
|
|
|
$
|
864
|
|
|
Net investment income
|
99
|
|
|
98
|
|
|
94
|
|
|
117
|
|
|
408
|
|
||||||
Net realized investment gains (losses)
|
(13
|
)
|
|
10
|
|
|
(2
|
)
|
|
(24
|
)
|
|
(29
|
)
|
||||||
Net change in fair value of credit derivatives
|
(60
|
)
|
|
63
|
|
|
21
|
|
|
74
|
|
|
98
|
|
||||||
Fair value gains (losses) on CCS
|
(16
|
)
|
|
(11
|
)
|
|
(23
|
)
|
|
50
|
|
|
0
|
|
||||||
Fair value gains (losses) on FG VIEs
|
18
|
|
|
4
|
|
|
(11
|
)
|
|
27
|
|
|
38
|
|
||||||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
—
|
|
|
259
|
|
|
—
|
|
|
259
|
|
||||||
Other income (loss)
|
34
|
|
|
18
|
|
|
(3
|
)
|
|
(10
|
)
|
|
39
|
|
||||||
Expenses
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loss and LAE
|
90
|
|
|
102
|
|
|
(9
|
)
|
|
112
|
|
|
295
|
|
||||||
Amortization of DAC
|
4
|
|
|
5
|
|
|
4
|
|
|
5
|
|
|
18
|
|
||||||
Interest expense
|
26
|
|
|
25
|
|
|
26
|
|
|
25
|
|
|
102
|
|
||||||
Other operating expenses
|
60
|
|
|
63
|
|
|
65
|
|
|
57
|
|
|
245
|
|
||||||
Income (loss) before provision for income taxes
|
65
|
|
|
201
|
|
|
480
|
|
|
271
|
|
|
1,017
|
|
||||||
Provision (benefit) for income taxes
|
6
|
|
|
55
|
|
|
1
|
|
|
74
|
|
|
136
|
|
||||||
Net income (loss)
|
59
|
|
|
146
|
|
|
479
|
|
|
197
|
|
|
881
|
|
||||||
Earnings (loss) per share(1):
|
|
|
|
|
|
|
|
|
|
|||||||||||
Basic
|
$
|
0.43
|
|
|
$
|
1.09
|
|
|
$
|
3.63
|
|
|
$
|
1.51
|
|
|
$
|
6.61
|
|
|
Diluted
|
$
|
0.43
|
|
|
$
|
1.09
|
|
|
$
|
3.60
|
|
|
$
|
1.49
|
|
|
$
|
6.56
|
|
|
Dividends per share
|
$
|
0.13
|
|
|
$
|
0.13
|
|
|
$
|
0.13
|
|
|
$
|
0.13
|
|
|
$
|
0.52
|
|
2015
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Full
Year
|
||||||||||
|
(dollars in millions, except per share data)
|
|||||||||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earned premiums
|
$
|
142
|
|
|
$
|
219
|
|
|
$
|
213
|
|
|
$
|
192
|
|
|
$
|
766
|
|
|
Net investment income
|
101
|
|
|
98
|
|
|
112
|
|
|
112
|
|
|
423
|
|
||||||
Net realized investment gains (losses)
|
16
|
|
|
(9
|
)
|
|
(27
|
)
|
|
(6
|
)
|
|
(26
|
)
|
||||||
Net change in fair value of credit derivatives
|
124
|
|
|
90
|
|
|
86
|
|
|
428
|
|
|
728
|
|
||||||
Fair value gains (losses) on CCS
|
2
|
|
|
23
|
|
|
(15
|
)
|
|
17
|
|
|
27
|
|
||||||
Fair value gains (losses) on FG VIEs
|
(7
|
)
|
|
5
|
|
|
2
|
|
|
38
|
|
|
38
|
|
||||||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
214
|
|
|
—
|
|
|
—
|
|
|
214
|
|
||||||
Other income (loss)
|
(9
|
)
|
|
55
|
|
|
(3
|
)
|
|
(6
|
)
|
|
37
|
|
||||||
Expenses
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loss and LAE
|
18
|
|
|
188
|
|
|
112
|
|
|
106
|
|
|
424
|
|
||||||
Amortization of DAC
|
4
|
|
|
6
|
|
|
5
|
|
|
5
|
|
|
20
|
|
||||||
Interest expense
|
25
|
|
|
26
|
|
|
25
|
|
|
25
|
|
|
101
|
|
||||||
Other operating expenses
|
56
|
|
|
66
|
|
|
54
|
|
|
55
|
|
|
231
|
|
||||||
Income (loss) before provision for income taxes
|
266
|
|
|
409
|
|
|
172
|
|
|
584
|
|
|
1,431
|
|
||||||
Provision (benefit) for income taxes
|
65
|
|
|
112
|
|
|
43
|
|
|
155
|
|
|
375
|
|
||||||
Net income (loss)
|
201
|
|
|
297
|
|
|
129
|
|
|
429
|
|
|
1,056
|
|
||||||
Earnings (loss) per share(1):
|
|
|
|
|
|
|
|
|
|
|||||||||||
Basic
|
$
|
1.29
|
|
|
$
|
1.97
|
|
|
$
|
0.88
|
|
|
$
|
3.05
|
|
|
$
|
7.12
|
|
|
Diluted
|
$
|
1.28
|
|
|
$
|
1.96
|
|
|
$
|
0.88
|
|
|
$
|
3.03
|
|
|
$
|
7.08
|
|
|
Dividends per share
|
$
|
0.12
|
|
|
$
|
0.12
|
|
|
$
|
0.12
|
|
|
$
|
0.12
|
|
|
$
|
0.48
|
|
(1)
|
Per share amounts for the quarters and the full years have each been calculated separately. Accordingly, quarterly amounts may not sum up to the annual amounts because of differences in the average common shares outstanding during each period and, with regard to diluted per share amounts only, because of the inclusion of the effect of potentially dilutive securities only in the periods in which such effect would have been dilutive.
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
ITEM 9B.
|
OTHER INFORMATION
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
ITEM 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
ITEM 15.
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|
(a)
|
Financial Statements, Financial Statement Schedules and Exhibits
|
1.
|
Financial Statements
|
|
|
Exhibit
Number
|
Description of Document
|
3.1
|
Certificate of Incorporation and Memorandum of Association of the Registrant, as amended by Certificate of Incorporation on Change of Name dated March 30, 2004 and Certificate of Deposit of Memorandum of Increase of Capital dated April 21, 2004 (Incorporated by reference to Exhibit 3.1 to Form 10-K for the year ended December 31, 2009)
|
3.2
|
First Amended and Restated Bye-laws of the Registrant, as amended (Incorporated by reference to Exhibit 3.1 to Form 8-K filed on May 10, 2011)
|
4.1
|
Specimen Common Share Certificate (Incorporated by reference to Exhibit 4.1 to Form S-1 (#333-111491))
|
4.2
|
Certificate of Incorporation and Memorandum of Association of the Registrant, as amended by Certificate of Incorporation on Change of Name dated March 30, 2004 and Certificate of Deposit of Memorandum of Increase of Capital dated April 21, 2004 (See Exhibit 3.1)
|
4.3
|
Bye-laws of the Registrant (See Exhibit 3.2)
|
4.4
|
Indenture, dated as of May 1, 2004, among the Company, Assured Guaranty U.S. Holdings Inc. and The Bank of New York, as trustee (Incorporated by reference to Exhibit 4.1 to Form 10-Q for the quarter ended March 31, 2004)
|
4.5
|
Indenture, dated as of December 1, 2006, entered into among Assured Guaranty Ltd., Assured Guaranty U.S. Holdings Inc. and The Bank of New York, as trustee (Incorporated by reference to Exhibit 4.1 to Form 8-K filed on December 20, 2006)
|
4.6
|
First Supplemental Subordinated Indenture, dated as of December 20, 2006, entered into among Assured Guaranty Ltd., Assured Guaranty U.S. Holdings Inc. and The Bank of New York, as trustee (Incorporated by reference to Exhibit 4.2 to Form 8-K filed on December 20, 2006)
|
4.7
|
Replacement Capital Covenant, dated as of December 20, 2006, between Assured Guaranty U.S. Holdings Inc. and Assured Guaranty Ltd., in favor of and for the benefit of each Covered Debtholder (as defined therein) (Incorporated by reference to Exhibit 4.1 to Form 8-K filed on December 20, 2006)
|
4.8
|
Amended and Restated Trust Indenture dated as of February 24, 1999 between Financial Security Assurance Holdings Ltd. and the Senior Debt Trustee (Incorporated by reference to Exhibit 4.1 to Financial Security Assurance Holdings Ltd.'s Registration Statement to Form S-3 (#333-74165))
|
|
|
Exhibit
Number
|
Description of Document
|
4.9
|
Form of Assured Guaranty Municipal Holdings Inc., formerly known as Financial Security Assurance Holdings Ltd. 6
7
/
8
% Quarterly Interest Bond Securities due 2101 (Incorporated by reference to Exhibit 4.1 to Form 10-Q for the quarter ended March 31, 2010)
|
4.10
|
Form of Assured Guaranty Municipal Holdings Inc., formerly known as Financial Security Assurance Holdings Ltd. 6.25% Notes due November 1, 2102 (Incorporated by reference to Exhibit 4.2 to Form 10-Q for the quarter ended March 31, 2010)
|
4.11
|
Form of Assured Guaranty Municipal Holdings Inc., formerly known as Financial Security Assurance Holdings Ltd. 5.60% Notes due July 15, 2103 (Incorporated by reference to Exhibit 4.3 to Form 10-Q for the quarter ended March 31, 2010)
|
4.12
|
Supplemental indenture, dated as of August 26, 2009, between Assured Guaranty Ltd., Financial Security Assurance Holdings Ltd. and U.S. Bank National Association, as trustee (Incorporated by reference to Exhibit 99.1 to Form 8-K filed on September 1, 2009)
|
4.13
|
Indenture, dated as of November 22, 2006, between Financial Security Assurance Holdings Ltd. and The Bank of New York, as Trustee (Incorporated by reference to Exhibit 4.1 to Financial Security Assurance Holdings Ltd.'s Form 8-K filed on November 28, 2006)
|
4.14
|
Form of Financial Security Assurance Holdings Ltd. Junior Subordinated Debenture, Series 2006-1 (Incorporated by reference to Exhibit 10.3 to Financial Security Assurance Holdings Ltd.'s Form 8-K filed on November 25, 2002)
|
4.15
|
Supplemental indenture, dated as of August 26, 2009, between Assured Guaranty Ltd., Financial Security Assurance Holdings Ltd. and The Bank of New York Mellon, as trustee (Incorporated by reference to Exhibit 99.2 to Form 8-K filed on September 1, 2009)
|
4.16
|
First Supplemental Indenture, to be dated as of June 24, 2009, between Assured Guaranty U.S. Holdings Inc., Assured Guaranty Ltd. and The Bank of New York Mellon, as trustee (including the form of 8.50% Senior Note due 2014 of Assured Guaranty U.S. Holdings Inc.) (Incorporated by reference to Exhibit 4.1 to Form 8-K filed on June 23, 2009)
|
4.17
|
Officers’ Certificate, dated June 20, 2014, related to 5.000% Senior Notes due 2024, containing form of 5.000% Senior Notes due 2024 as Exhibit A thereto (Incorporated by reference to Exhibit 4.1 to Form 8-K filed on June 20, 2014)
|
10.1
|
Guaranty by Assured Guaranty Re Ltd. in favor of Assured Guaranty Re Overseas Ltd., amended and restated as of May 1, 2014 (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended June 30, 2014)
|
10.2
|
Put Agreement between Assured Guaranty Corp. and Woodbourne Capital Trust [I][II][III][IV] (Incorporated by reference to Exhibit 10.6 to Form 10-Q for the quarter ended March 31, 2005)
|
10.3
|
Custodial Trust Expense Reimbursement Agreement (Incorporated by reference to Exhibit 10.7 to Form 10-Q for the quarter ended March 31, 2005)
|
10.4
|
Assured Guaranty Corp. Articles Supplementary Classifying and Designating Series of Preferred Stock as Series A Perpetual Preferred Stock, Series B Perpetual Preferred Stock, Series C Perpetual Preferred Stock, Series D Perpetual Preferred Stock (Incorporated by reference to Exhibit 10.8 to Form 10-Q for the quarter ended March 31, 2005)
|
10.5
|
Purchase Agreement among Dexia Holdings Inc., Dexia Crédit Local S.A. and the Company dated as of November 14, 2008 (Incorporated by reference to Exhibit 99.1 to Form 8-K filed on November 17, 2008)
|
10.6
|
Amended and Restated Revolving Credit Agreement dated as of June 30, 2009 among FSA Asset Management LLC, Dexia Crédit Local S.A. and Dexia Bank Belgium S.A. (Incorporated by reference to Exhibit 10.1 to Form 8-K filed on July 8, 2009)
|
10.7
|
First Amendment to Amended and Restated Revolving Credit Agreement dated as of September 20, 2010 among FSA Asset Management LLC, Dexia Crédit Local S.A. and Dexia Bank Belgium S.A. (Incorporated by reference to Exhibit 10.11 to Form 10-K for the year ended December 31, 2013)
|
10.8
|
Second Amendment to Amended and Restated Revolving Credit Agreement dated as of May 16, 2012 among FSA Asset Management LLC, Dexia Crédit Local S.A. and Dexia Bank Belgium S.A. (Incorporated by reference to Exhibit 10.12 to Form 10-K for the year ended December 31, 2013)
|
10.9
|
Assignment Pursuant to the Amended and Restated Revolving Credit Agreement, as amended, dated as of December 12, 2013 between Belfius Bank SA/NV and Dexia Crédit Local S.A. (Incorporated by reference to Exhibit 10.13 to Form 10-K for the year ended December 31, 2013)
|
10.10
|
ISDA Master Agreement (Multicurrency-Cross Border) dated as of June 30, 2009 among Dexia SA, Dexia Crédit Local S.A. and FSA Asset Management LLC (Incorporated by reference to Exhibit 10.3.1 to Form 8-K filed on July 8, 2009)
|
|
|
Exhibit
Number
|
Description of Document
|
10.11
|
Schedule to the 1992 Master Agreement, Guaranteed Put Contract, dated as of June 30, 2009 among Dexia Crédit Local S.A., Dexia SA and FSA Asset Management LLC (Incorporated by reference to Exhibit 10.3.2 to Form 8-K filed on July 8, 2009)
|
10.12
|
Put Option Confirmation, Guaranteed Put Contract, dated June 30, 2009 to FSA Asset Management LLC from Dexia SA and Dexia Crédit Local S.A. (Incorporated by reference to Exhibit 10.3.3 to Form 8-K filed on July 8, 2009)
|
10.13
|
ISDA Credit Support Annex (New York Law) to the Schedule to the ISDA Master Agreement, Guaranteed Put Contract, dated as of June 30, 2009 between Dexia Crédit Local S.A. and Dexia SA and FSA Asset Management LLC (Incorporated by reference to Exhibit 10.3.4 to Form 8-K filed on July 8, 2009)
|
10.14
|
ISDA Master Agreement (Multicurrency-Cross Border) dated as of June 30, 2009 among Dexia SA, Dexia Crédit Local S.A. and FSA Asset Management LLC (Incorporated by reference to Exhibit 10.4.1 to Form 8-K filed on July 8, 2009)
|
10.15
|
Schedule to the 1992 Master Agreement, Non-Guaranteed Put Contract, dated as of June 30, 2009 among Dexia Crédit Local S.A., Dexia SA and FSA Asset Management LLC (Incorporated by reference to Exhibit 10.4.2 to Form 8-K filed on July 8, 2009)
|
10.16
|
Put Option Confirmation, Non-Guaranteed Put Contract, dated June 30, 2009 to FSA Asset Management LLC from Dexia SA and Dexia Crédit Local S.A. (Incorporated by reference to Exhibit 10.4.3 to Form 8-K filed on July 8, 2009)
|
10.17
|
ISDA Credit Support Annex (New York Law) to the Schedule to the ISDA Master Agreement, Non-Guaranteed Put Contract, dated as of June 30, 2009 between Dexia Crédit Local S.A. and Dexia SA and FSA Asset Management LLC (Incorporated by reference to Exhibit 10.4.4 to Form 8-K filed on July 8, 2009)
|
10.18
|
First Demand Guarantee Relating to the “Financial Products” Portfolio of FSA Asset Management LLC issued by the Belgian State and the French State and executed as of June 30, 2009 (Incorporated by reference to Exhibit 10.5 to Form 8-K filed on July 8, 2009)
|
10.19
|
Guaranty, dated as of June 30, 2009, made jointly and severally by Dexia SA and Dexia Crédit Local S.A., in favor of Financial Security Assurance Inc. (Incorporated by reference to Exhibit 10.6 to Form 8-K filed on July 8, 2009)
|
10.20
|
Indemnification Agreement (GIC Business) dated as of June 30, 2009 by and among Financial Security Assurance Inc., Dexia Crédit Local S.A. and Dexia SA (Incorporated by reference to Exhibit 10.7 to Form 8-K filed on July 8, 2009)
|
10.21
|
Pledge and Administration Agreement, dated as of June 30, 2009, among Dexia SA, Dexia Crédit Local S.A., Dexia Bank Belgium SA, Dexia FP Holdings Inc., Financial Security Assurance Inc., FSA Asset Management LLC, FSA Portfolio Asset Limited, FSA Capital Markets Services LLC, FSA Capital Markets Services (Caymans) Ltd., FSA Capital Management Services LLC and The Bank of New York Mellon Trust Company, National Association (Incorporated by reference to Exhibit 10.8 to Form 8-K filed on July 8, 2009)
|
10.22
|
Separation Agreement, dated as of July 1, 2009, among Dexia Crédit Local S.A., Financial Security Assurance Inc., Financial Security Assurance International, Ltd., FSA Global Funding Limited and Premier International Funding Co. (Incorporated by reference to Exhibit 10.9 to Form 8-K filed on July 8, 2009)
|
10.23
|
Funding Guaranty, dated as of July 1, 2009, made by Dexia Crédit Local S.A. in favor of Financial Security Assurance Inc. and Financial Security Assurance International, Ltd. (Incorporated by reference to Exhibit 10.10 to Form 8-K filed on July 8, 2009)
|
10.24
|
Reimbursement Guaranty, dated as of July 1, 2009, made by Dexia Crédit Local S.A. in favor of Financial Security Assurance Inc. and Financial Security Assurance International, Ltd. (Incorporated by reference to Exhibit 10.11 to Form 8-K filed on July 8, 2009)
|
10.25
|
Indemnification Agreement (FSA Global Business), dated as of July 1, 2009, by and between Financial Security Assurance Inc., Assured Guaranty Ltd. and Dexia Crédit Local S.A. (Incorporated by reference to Exhibit 10.13 to Form 8-K filed on July 8, 2009)
|
10.26
|
Pledge and Administration Annex Amendment Agreement dated as of July 1, 2009 among Dexia SA, Dexia Crédit Local S.A., Dexia Bank Belgium SA, Dexia FP Holdings Inc., Financial Security Assurance Inc., FSA Asset Management LLC, FSA Portfolio Asset Limited, FSA Capital Markets Services LLC, FSA Capital Markets Services (Caymans) Ltd., FSA Capital Management Services LLC and The Bank of New York Mellon Trust Company, National Association (Incorporated by reference to Exhibit 10.14 to Form 8-K filed on July 8, 2009)
|
10.27
|
Put Confirmation Annex Amendment Agreement dated as of July 1, 2009 among Dexia SA and Dexia Crédit Local S.A. and FSA Asset Management LLC and Financial Security Assurance Inc. (Incorporated by reference to Exhibit 10.15 to Form 8-K filed on July 8, 2009)
|
|
|
Exhibit
Number
|
Description of Document
|
10.28
|
Master Repurchase Agreement between FSA Capital Management Services LLC and FSA Capital Markets Services LLC (Incorporated by reference to Exhibit 10.20 to Form 10-Q for the quarter ended June 30, 2009)
|
10.29
|
Confirmation to Master Repurchase Agreement (Incorporated by reference to Exhibit 10.21 to Form 10-Q for the quarter ended June 30, 2009)
|
10.30
|
Master Repurchase Agreement Annex I (Incorporated by reference to Exhibit 10.22 to Form 10-Q for the quarter ended June 30, 2009)
|
10.31
|
Pledge and Intercreditor Agreement, among Dexia Crédit Local, Dexia Bank Belgium S.A., Financial Security Assurance Inc. and FSA Asset Management LLC, dated November 13, 2008 (Incorporated by reference to Exhibit 10.3 to Financial Security Assurance Holdings Ltd.'s Form 10-Q for the quarter ended September 30, 2008)
|
10.32
|
Amended and Restated Pledge and Intercreditor Agreement, dated as of February 20, 2009, between Dexia Crédit Local, Dexia Bank Belgium S.A., Financial Security Assurance Inc., FSA Asset Management LLC, FSA Capital Markets Services LLC and FSA Capital Management Services LLC (Incorporated by reference to Exhibit 10.19 to Financial Security Assurance Holdings Ltd.'s Form 10-K for the year ended December 31, 2008)
|
10.33
|
Put Option Agreement, dated as of June 23, 2003 by and between FSA and Sutton Capital Trust I (Incorporated by reference to Exhibit 99.5 to Financial Security Assurance Holdings Ltd.'s Form 10-Q for the quarter ended June 30, 2003)
|
10.34
|
Put Option Agreement, dated as of June 23, 2003 by and between FSA and Sutton Capital Trust II (Incorporated by reference to Exhibit 99.6 to Financial Security Assurance Holdings Ltd.'s Form 10-Q for the quarter ended June 30, 2003)
|
10.35
|
Put Option Agreement, dated as of June 23, 2003 by and between FSA and Sutton Capital Trust III (Incorporated by reference to Exhibit 99.7 to Financial Security Assurance Holdings Ltd.'s Form 10-Q for the quarter ended June 30, 2003)
|
10.36
|
Put Option Agreement, dated as of June 23, 2003 by and between FSA and Sutton Capital Trust IV (Incorporated by reference to Exhibit 99.8 to Financial Security Assurance Holdings Ltd.'s Form 10-Q for the quarter ended June 30, 2003)
|
10.37
|
Contribution Agreement, dated as of November 22, 2006, between Dexia S.A. and Financial Security Assurance Holdings Ltd. (Incorporated by reference to Exhibit 10.4 to Financial Security Assurance Holdings Ltd.'s Form 8-K filed on November 28, 2006)
|
10.38
|
Replacement Capital Covenant, dated as of November 22, 2006, by Financial Security Assurance Holdings Ltd. (Incorporated by reference to Exhibit 10.5 to Financial Security Assurance Holdings Ltd.'s Form 8-K filed on November 28, 2006)
|
10.39
|
Agreement and Amendment between Dexia Holdings Inc., Dexia Credit Local S.A. and the Company dated as of June 9, 2009 (Incorporated by reference to Exhibit 10.1 to Form 8-K filed on June 12, 2009)
|
10.40
|
Stock Purchase Agreement, dated as of December 22, 2014, between Assured Guaranty Corp. and Radian Guaranty Inc. (Incorporated by reference to Exhibit 10.44 to Form 10-K for the year ended December 31, 2014)
|
10.41
|
Summary of Annual Compensation*
|
10.42
|
Director Compensation Summary (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended March 31, 2016)*
|
10.43
|
Assured Guaranty Ltd. 2004 Long-Term Incentive Plan, as amended and restated as of May 7, 2009 and as amended through the Fourth Amendment*
|
10.44
|
Non-Qualified Stock Option Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan to be used with employment agreement (Incorporated by reference to Exhibit 10.34 to Form 10-K for the year ended December 31, 2005)*
|
10.45
|
Non-Qualified Stock Option Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.35 to Form 10-K for the year ended December 31, 2005)*
|
10.46
|
Non-Qualified Stock Option Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan to be used with employment agreement (Incorporated by reference to Exhibit 10.66 to Form 10-K for the year ended December 31, 2007)*
|
10.47
|
Non-Qualified Stock Option Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.67 to Form 10-K for the year ended December 31, 2007)*
|
|
|
Exhibit
Number
|
Description of Document
|
10.48
|
Non-Qualified Stock Option Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan to be used with employment agreement (Incorporated by reference to Exhibit 10.71 to Form 10-K for the year ended December 31, 2008)*
|
10.49
|
Non-Qualified Stock Option Agreement for Outside Directors under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.19 to Form 10-Q for the quarter ended June 30, 2009)*
|
10.50
|
2010 Form of Non-Qualified Stock Option Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan to be used with employment agreement (Incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended March 31, 2010)*
|
10.51
|
2010 Form of Non-Qualified Stock Option Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan for use without employment agreement (Incorporated by reference to Exhibit 10.4 to Form 10-Q for the quarter ended March 31, 2010)*
|
10.52
|
2012 Form of Executive Non-Qualified Stock Option Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.7 to Form 10-Q for the quarter ended March 31, 2012)*
|
10.53
|
2013 Form of Executive Non-Qualified Stock Option Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended March 31, 2013)*
|
10.54
|
Restricted Stock Unit Agreement for Outside Directors under Assured Guaranty Ltd. 2004 Long Term Incentive Plan (Incorporated by reference to Exhibit 10.37 to Form 10-K for the year ended December 31, 2005)*
|
10.55
|
Restricted Stock Unit Agreement for Outside Directors under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended June 30, 2007)*
|
10.56
|
Restricted Stock Unit Agreement for Outside Directors under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended June 30, 2008)*
|
10.57
|
Form of amendment to Restricted Stock Unit Awards for Outside Directors (Incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended June 30, 2008)*
|
10.58
|
Restricted Stock Agreement for Outside Directors under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended June 30, 2008)*
|
10.59
|
2014 Restricted Stock Agreement for Outside Directors under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.5 to Form 10-Q for the quarter ended June 30, 2014)*
|
10.60
|
Form of Restricted Stock Agreement for Outside Directors under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan, as in effect for awards commencing in 2015 (Incorporated by reference to Exhibit 10.4 to Form 10-Q for the quarter ended March 31, 2015)*
|
10.61
|
2013 Form of Executive Restricted Stock Unit Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended March 31, 2013)*
|
10.62
|
2014 Form of Executive Restricted Stock Unit Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended June 30, 2014)*
|
10.63
|
Form of Executive Restricted Stock Unit Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan, as in effect for awards commencing in 2015 (Incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended March 31, 2015)*
|
10.64
|
2013 Form of Executive Performance-Based Restricted Stock Unit Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended March 31, 2013)*
|
10.65
|
2014 Form of Executive Performance-Based Restricted Stock Unit Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended June 30, 2014)*
|
10.66
|
2015 Form of Executive Performance-Based Restricted Stock Unit Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended March 31, 2015)*
|
10.67
|
First Amendment to the Restricted Stock Unit Agreement for Outside Directors (Incorporated by reference to Exhibit 10.106 to Form 10-K for the year ended December 31, 2012)*
|
10.68
|
Assured Guaranty Ltd. Employee Stock Purchase Plan, as amended through the second amendment (Incorporated by reference to Exhibit 10.5 to Form 10-Q for the quarter ended March 31, 2013)*
|
10.69
|
Assured Guaranty Ltd. Performance Retention Plan (As Amended and Restated as of February 14, 2008 for Awards Granted during 2007) (Incorporated by reference to Exhibit 10.50 to Form 10-K for the year ended December 31, 2007)*
|
|
|
Exhibit
Number
|
Description of Document
|
10.70
|
Assured Guaranty Ltd. Performance Retention Plan (As Amended and Restated as of February 14, 2008) (Incorporated by reference to Exhibit 10.58 to Form 10-K for the year ended December 31, 2007)*
|
10.71
|
Terms of Performance Retention Award Four Year Installment Vesting Granted on February 9, 2012 for participants Subject to $1 million Limit (Incorporated by reference to Exhibit 10.10 to Form 10-Q for the quarter ended March 31, 2012)*
|
10.72
|
Terms of Performance Retention Award Four Year Installment Vesting Granted on February 7, 2013 for Participants Subject to $1 million Limit (Incorporated by reference to Exhibit 10.4 to Form 10-Q for the quarter ended March 31, 2013)*
|
10.73
|
Terms of Performance Retention Award Four Year Installment Vesting Granted on February 5, 2014 for Participants Subject to $1 million Limit (Incorporated by reference to Exhibit 10.4 to Form 10-Q for the quarter ended June 30, 2014)*
|
10.74
|
Assured Guaranty Ltd. Executive Severance Plan (Incorporated by reference to Exhibit 10.5 to Form 10-Q for the quarter ended March 31, 2012)*
|
10.75
|
Form of Acknowledgement Letter for Participants in Assured Guaranty Ltd. Executive Severance Plan (Incorporated by reference to Exhibit 10.11 to Form 10-Q for the quarter ended March 31, 2012)*
|
10.76
|
Assured Guaranty Ltd. Perquisite Policy (Incorporated by reference to Exhibit 10.6 to Form 10-Q for the quarter ended March 31, 2012)*
|
10.77
|
Form of Indemnification Agreement between the Company and its executive officers and directors (Incorporated by reference to Exhibit 10.42 to Form 10-K for the year ended December 31, 2005)*
|
10.78
|
Assured Guaranty Ltd. Executive Officer Recoupment Policy (Incorporated by reference to Exhibit 10.69 to Form 10-K for the year ended December 31, 2008)*
|
10.79
|
Form of Acknowledgement of Assured Guaranty Ltd. Executive Officer Recoupment Policy (Incorporated by reference to Exhibit 10.70 to Form 10-K for the year ended December 31, 2008)*
|
10.80
|
Amended and Restated Assured Guaranty Ltd. Executive Officer Recoupment Policy (amended and restated effective November 3, 2015) (Incorporated by reference to Exhibit 10.84 to Form 10-K for the year ended December 31, 2015)*
|
10.81
|
Form of Acknowledgement of Amended and Restated Assured Guaranty Ltd. Executive Officer Recoupment Policy (Incorporated by reference to Exhibit 10.85 to Form 10-K for the year ended December 31, 2015)*
|
10.82
|
Assured Guaranty Ltd. Supplemental Employee Retirement Plan, as amended and restated effective January 1, 2009 and as amended by the First, Second, Third, Fourth and Fifth Amendments (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended September 30, 2012)*
|
10.83
|
Assured Guaranty Corp. Supplemental Executive Retirement Plan as amended through the Third Amendment thereto (Incorporated by reference to Exhibit 4.5 to Form S-8 (#333-178625))*
|
10.84
|
Financial Security Assurance Holdings Ltd. 1989 Supplemental Executive Retirement Plan (amended and restated as of December 17, 2004) (Incorporated by reference to Exhibit 10.4 to Financial Security Assurance Holdings Ltd.'s Form 8-K filed on December 17, 2004)*
|
10.85
|
Amendment to the Financial Security Assurance Holdings Ltd. 1989 Supplemental Employee Retirement Plan (Incorporated by reference to Exhibit 10.29 to Form 10-Q for the quarter ended June 30, 2009)*
|
10.86
|
Financial Security Assurance Holdings Ltd. 2004 Supplemental Executive Retirement Plan, as amended on February 14, 2008 (Incorporated by reference to Exhibit 10.3 to Financial Security Assurance Holdings Ltd.'s Form 8-K filed on February 15, 2008)*
|
10.87
|
Separation Agreement, dated February 4, 2015, between Robert B. Mills and the Registrant (Incorporated by reference to Exhibit 10.91 to Form 10-K for the year ended December 31, 2014)*
|
10.88
|
Agreement and Plan of Merger, dated as of April 12, 2016, among Assured Guaranty Corp., Cultivate Merger Sub, Inc. and CIFG Holding Inc. (Incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended March 31, 2016)
|
10.89
|
Share Purchase Agreement relating to the sale and purchase of MBIA UK Insurance Limited, dated September 29, 2016, between MBIA UK (Holdings) Limited and Assured Guaranty Corp. (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended September 30, 2016)
|
10.90
|
Share Repurchase Agreement dated as of January 3, 2017 between the Company and the Chief Executive Officer*
|
10.91
|
Share Repurchase Agreement dated as of January 5, 2017 between the Company and the General Counsel*
|
10.92
|
2016 Form of Executive Restricted Stock Unit Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan*
|
|
|
Exhibit
Number
|
Description of Document
|
10.93
|
2016 Form of Performance-Based Restricted Stock Unit Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan*
|
12.1
|
Computation of Ratio of Earnings to Fixed Charges
|
21.1
|
Subsidiaries of the Registrant
|
23.1
|
Accountants Consent
|
31.1
|
Certification of CEO Pursuant to Exchange Act Rules 13A-14 and 15D-14, as Adopted Pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002
|
31.2
|
Certification of CFO Pursuant to Exchange Act Rules 13A-14 and 15D-14, as Adopted Pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002
|
32.1
|
Certification of CEO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes‑ Oxley Act of 2002
|
32.2
|
Certification of CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes‑ Oxley Act of 2002
|
101.1
|
The following financial information from Registrant's Annual Report on Form 10-K for the year ended December 31, 2016 formatted in XBRL (eXtensible Business Reporting Language) interactive data files pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets at December 31, 2016 and 2015; (ii) Consolidated Statements of Operations for the years ended December 31, 2016, 2015 and 2014; (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015 and 2014; (iv) Consolidated Statements of Shareholders' Equity for the years ended December 31, 2016, 2015 and 2014; (v) Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014; and (vi) Notes to Consolidated Financial Statements.
|
*
|
Management contract or compensatory plan
|
|
Assured Guaranty Ltd.
|
|
|
|
|
|
|
|
|
By:
|
/s/ Dominic J. Frederico
Name: Dominic J. Frederico
Title:
President and Chief Executive Officer
|
|
|
Name
|
|
|
|
|
Position
|
|
|
|
|
Date
|
|
|
|
|
|
||||||||||||
/s/ Francisco L. Borges
Francisco L. Borges
|
Chairman of the Board; Director
|
February 24, 2017
|
||||||||||||
|
|
|
||||||||||||
/s/ Dominic J. Frederico
Dominic J. Frederico
|
President and Chief Executive Officer; Director
|
February 24, 2017
|
||||||||||||
|
|
|
||||||||||||
/s/ Robert A. Bailenson
Robert A. Bailenson
|
Chief Financial Officer (Principal Financial and Accounting Officer and Duly Authorized Officer)
|
February 24, 2017
|
||||||||||||
|
|
|
||||||||||||
/s/ G. Lawrence Buhl
G. Lawrence Buhl
|
Director
|
February 24, 2017
|
||||||||||||
|
|
|
||||||||||||
/s/ Bonnie L. Howard
Bonnie L. Howard
|
Director
|
February 24, 2017
|
||||||||||||
|
|
|
||||||||||||
/s/ Thomas W. Jones
Thomas W. Jones
|
Director
|
February 24, 2017
|
||||||||||||
|
|
|
||||||||||||
/s/ Patrick W. Kenny
Patrick W. Kenny
|
Director
|
February 24, 2017
|
||||||||||||
|
|
|
||||||||||||
/s/ Alan J. Kreczko
Alan J. Kreczko
|
Director
|
February 24, 2017
|
||||||||||||
|
|
|
||||||||||||
/s/ Simon W. Leathes
Simon W. Leathes
|
Director
|
February 24, 2017
|
||||||||||||
|
|
|
||||||||||||
/s/ Michael T. O'Kane
Michael T. O'Kane
|
Director
|
February 24, 2017
|
||||||||||||
|
|
|
||||||||||||
/s/ Yukiko Omura
Yukiko Omura
|
Director
|
February 24, 2017
|
|
|
|
|
Executive Officer
|
Salary
|
Dominic J. Frederico
President and Chief Executive Officer
|
$1,250,000
|
Robert A. Bailenson
Chief Financial Officer
|
$625,000
|
James M. Michener
General Counsel
|
$625,000
|
Russell B. Brewer II
Chief Surveillance Officer
|
$500,000
|
Bruce E. Stern
Executive Officer
|
$470,000
|
|
|
•
|
To be considered to receive non-equity incentive compensation for 2017 performance.
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•
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To be considered to receive grants in 2018 under Assured Guaranty’s long-term incentive plans for 2017 performance.
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•
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To receive other annual compensation and benefits, including employer contributions to retirement plans and perquisites provided under the Assured Guaranty Ltd. Perquisite Policy.
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(a)
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The grant of an "Option" entitles the Participant to purchase Shares at an Exercise Price established by the Committee. Any Option granted under this Section 2 may be either an incentive stock option (an ISO) or a non-qualified option (an NQO), as determined in the discretion of the Committee. An "ISO" is an Option that is intended to satisfy the requirements applicable to an "incentive stock option" described in section 422(b) of the Code. An "NQO" is an Option that is not intended to be an "incentive stock option" as that term is described in section 422(b) of the Code.
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(b)
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A stock appreciation right (an SAR) entitles the Participant to receive, in cash or Shares (as determined in accordance with subsection 2.5), value equal to (or otherwise based on) the excess of: (a) the Fair Market Value of a specified number of Shares at the time of exercise; over (b) an Exercise Price established by the Committee.
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(a)
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Subject to the following provisions of this subsection 2.4, the full Exercise Price for Shares purchased upon the exercise of any Option shall be paid at the time of such exercise (except that, in the case of an exercise arrangement
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1
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(b)
|
Subject to applicable law, the full Exercise Price shall be payable in cash, by promissory note, or by tendering, by either actual delivery of shares or by attestation, Shares acceptable to the Committee (including shares otherwise distributable pursuant to the exercise of the Option), and valued at Fair Market Value as of the day of exercise, or in any combination thereof, as determined by the Committee.
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(c)
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Subject to applicable law, the Committee may permit a Participant to elect to pay the Exercise Price upon the exercise of an Option by irrevocably authorizing a third party to sell Shares (or a sufficient portion of the Shares) acquired upon exercise of the Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire Exercise Price and any tax withholding resulting from such exercise.
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(a)
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The grant shall be in consideration of a Participant’s previously performed services, or surrender of other compensation that may be due.
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(b)
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The grant shall be contingent on the achievement of performance or other objectives during a specified period.
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(c)
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The grant shall be subject to a risk of forfeiture or other restrictions that will lapse upon the achievement of one or more goals relating to completion of service by the Participant, or achievement of performance or other objectives.
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(a)
|
The Committee may designate a Full Value Award granted to any Participant as "performance-based compensation" as that term is used in section 162(m) of the Code. To the extent required by Code section 162(m), any Full Value Award so designated shall be conditioned on the achievement of one or more performance objectives. The performance objectives shall be based on Performance Measures selected by the Committee. For Awards under this Section 3
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2
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(b)
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If the right to become vested in a Full Value Award is conditioned on the completion of a specified period of service with the Company or the Subsidiaries, without achievement of Performance Measures or other performance objectives (whether or not related to the Performance Measures) being required as a condition of vesting, and without it being granted in lieu of other compensation, then the required period of service for full vesting shall be not less than three years (subject to acceleration of vesting, to the extent permitted by the Committee, in the event of the Participant’s death, disability, retirement, change in control or involuntary termination). However, the Committee may grant Full Value Awards that do not condition vesting on achievement of performance objectives, and such Awards shall not be subject to the limits of foregoing provisions of this paragraph (b), provided that the aggregate number of shares subject to Full Value Awards granted pursuant to this paragraph (b) (excluding any such Awards to the extent that they have been forfeited or cancelled) may not exceed 5% of the limit imposed by paragraph 5.2(b) (relating to the limit on Shares granted under the Plan).
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(a)
|
The Shares with respect to which Awards may be made under the Plan shall be: (i) shares currently authorized but unissued; (ii) to the extent permitted by applicable law, currently held or acquired by the Company as treasury shares, including shares purchased in the open market or in private transactions (it being recognized that at the time of adoption of the Plan the Company is not permitted to have treasury shares); or (iii) shares purchased in the open
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3
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(b)
|
Subject to the following provisions of this subsection 5.2, the maximum number of Shares that may be delivered to Participants and their beneficiaries under the Plan shall be 18,670,000 Shares (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).
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(c)
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To the extent provided by the Committee, any Award may be settled in cash rather than Shares.
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(d)
|
Only Shares, if any, actually delivered to the Participant or beneficiary on an unrestricted basis with respect to an Award shall be treated as delivered for purposes of the determination under paragraph (b) above, regardless of whether the Award is denominated in Shares or cash. Consistent with the foregoing:
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(i)
|
To the extent any Shares covered by an Award are not delivered to a Participant or beneficiary because the Award is forfeited or canceled, or the Shares are not delivered on an unrestricted basis (including, without limitation, by reason of the Award being settled in cash or used to satisfy the applicable tax withholding obligation), such Shares shall not be deemed to have been delivered for purposes of the determination under paragraph (b) above.
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(ii)
|
If the exercise price of any Option granted under the Plan or the tax withholding obligation with respect to any Award granted under the Plan is satisfied by tendering Shares to the Company (by either actual delivery or by attestation), only the number of Shares issued net of the Shares tendered shall be deemed delivered for purposes of determining the number of Shares available for delivery under the Plan.
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(e)
|
Subject to paragraph 5.2(f), the following additional maximums are imposed under the Plan:
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(i)
|
The maximum number of Shares that may be delivered to Participants and their beneficiaries with respect to ISOs granted under the Plan shall be 18,670,000 Shares (which number includes all Shares available for delivery under this paragraph (e)(i) since the establishment of the Plan in 2004, determined in accordance with the terms of the Plan); provided, however, that to the extent that Shares not delivered must be counted against this limit as a condition of satisfying the rules applicable to ISOs, such rules shall apply to the limit on ISOs granted under the Plan.
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(ii)
|
The maximum number of Shares that may be covered by Awards granted to any one Participant during any one-calendar-year period pursuant to Section 2 (relating to Options and SARs) shall be 2,500,000 Shares. For purposes of this paragraph (ii), if an Option is in tandem with an SAR, such that the exercise of the Option or SAR with respect to a Share cancels the tandem SAR or Option right, respectively, with respect to such Share, the tandem Option and SAR rights with respect to each Share shall be counted as covering but one Share for purposes of applying the limitations of this paragraph (ii).
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(iii)
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For Full Value Awards that are intended to be "performance-based compensation" (as that term is used for purposes of Code section 162(m)), no more than 1,250,000 Shares may be delivered pursuant to such Awards granted to any one Participant during any one-calendar‑year period (regardless of whether settlement of the Award is to occur prior to, at the time of, or after the time of vesting); provided that Awards described in this paragraph (iii) that are intended to be performance-based compensation shall be subject to the following:
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(A)
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If the Awards are denominated in Shares but an equivalent amount of cash is delivered in lieu of delivery of Shares, the foregoing limit shall be applied based on the methodology used by the Committee to convert the number of Shares into cash.
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(B)
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If delivery of Shares or cash is deferred until after Shares have been earned, any adjustment in the amount delivered to reflect actual or deemed investment experience after the date the Shares are earned shall be disregarded.
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4
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(iv)
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For Cash Incentive Value Awards that are intended to be "performance-based compensation" (as that term is used for purposes of Code section 162(m)), the maximum amount payable to any Participant with respect to any performance period shall equal $500,000 multiplied by the number of calendar months included in that performance period; provided that Awards described in this paragraph (iv), that are intended to be performance-based compensation, shall be subject to the following:
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(A)
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If the Awards are denominated in cash but an equivalent amount of Shares is delivered in lieu of delivery of cash, the foregoing limit shall be applied to the cash based on the methodology used by the Committee to convert the cash into Shares.
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(B)
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If delivery of Shares or cash is deferred until after cash has been earned, any adjustment in the amount delivered to reflect actual or deemed investment experience after the date the cash is earned shall be disregarded.
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(f)
|
In the event of a corporate transaction involving the Company (including, without limitation, any share dividend, share split, extraordinary cash dividend, recapitalization, reorganization, merger, amalgamation, consolidation, split-up, spin-off, sale of assets or subsidiaries, combination or exchange of shares), the Committee shall, in the manner it determines equitable in its sole discretion, adjust Awards to reflect the transactions. Action by the Committee may include: (i) adjustment of the number and kind of shares which may be delivered under the Plan; (ii) adjustment of the number and kind of shares subject to outstanding Awards; (iii) adjustment of the Exercise Price of outstanding Options and SARs; and (iv) any other adjustments that the Committee determines to be equitable (which may include, without limitation, (A) replacement of Awards with other Awards which the Committee determines have comparable value and which are based on shares of a company resulting from the transaction, and (B) cancellation of the Award in return for cash payment of the current value of the Award, determined as though the Award is fully vested at the time of payment, provided that in the case of an Option, the amount of such payment may be the excess of value of the Shares subject to the Option at the time of the transaction over the exercise price). However, in no event shall this paragraph (f) be construed to permit a modification (including a replacement) of an Option or SAR if such modification either: (i) would result in accelerated recognition of income or imposition of additional tax under Code section 409A; or (ii) would cause the Option or SAR subject to the modification (or cause a replacement Option or SAR) to be subject to Code section 409A, provided that the restriction of this clause (ii) shall not apply to any Option or SAR that, at the time it is granted or otherwise, is designated as being deferred compensation subject to Code section 409A.
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(a)
|
Notwithstanding any other provision of the Plan, the Company shall have no obligation to recognize an exercise of an Option or SAR or deliver any Shares or make any other distribution of benefits under the Plan unless such exercise, delivery or distribution complies with all applicable laws (including, without limitation, the requirements of the United States Securities Act of 1933), and the applicable requirements of any securities exchange or similar entity or other regulatory authority with respect to the issue of shares and securities by the Company.
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(b)
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To the extent that the Plan provides for issuance of share certificates to reflect the issuance of Shares, the issuance may be effected on a non-certificated basis, to the extent not prohibited by or may be made in compliance with applicable law, the Bye-laws of the Company, or the applicable rules of any stock exchange.
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5
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6
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(a)
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Neither a Participant nor any other person shall, by reason of participation in the Plan, acquire any right in or title to any assets, funds or property of the Company or any Subsidiary whatsoever, including, without limitation, any specific funds, assets, or other property which the Company or any Subsidiary, in its sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the Shares or amounts, if any, payable under the Plan, unsecured by any assets of the Company or any Subsidiary, and nothing contained in the Plan shall constitute a guarantee that the assets of the Company or any Subsidiary shall be sufficient to pay any benefits to any person.
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(b)
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The Plan does not constitute a contract of employment, and selection as a Participant will not give any participating employee or other individual the right to be retained in the employ of the Company or any Subsidiary or the right to continue to provide services to the Company or any Subsidiary, 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 Award under the Plan shall confer upon the holder thereof any rights as a shareholder of the Company prior to the date on which the individual fulfills all conditions for receipt of such rights and is registered in the Company's Register of Shareholders.
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(c)
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All Stock and shares issued under any Award or otherwise are to be held subject to the provisions of the Company's Bye-laws and each Participant is deemed to agree to be bound by the terms of the Company's Bye-laws as they stand at the time of issue of any Shares under the Plan.
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(a)
|
Neither subsection 5.5 nor any other provision of the Plan shall be construed to permit the grant of an Option or SAR if such action would cause the Option or SAR being granted or the option or stock appreciation right being replaced to be subject to Code section 409A, provided that this paragraph (a) shall not apply to any Option or SAR (or option or stock appreciation right granted under another plan) being replaced that, at the time it is granted or otherwise, is designated as being deferred compensation subject to Code section 409A.
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(b)
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Except with respect to an Option or SAR that, at the time it is granted or otherwise, is designated as being deferred compensation subject to Code section 409A, no Option or SAR shall condition the receipt of dividends with respect to an Option or SAR on the exercise of such Award, or otherwise provide for payment of such dividends in a manner that would cause the payment to be treated as an offset to or reduction of the exercise price of the Option or SAR pursuant Treas. Reg. §1.409A-1(b)(5)(i)(E).
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(c)
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The Plan shall not be construed to permit a modification of an Award, or to permit the payment of a dividend or dividend equivalent, if such actions would result in accelerated recognition of taxable income or imposition of additional tax under Code section 409A.
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7
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(a)
|
Subject to the provisions of the Plan, the Committee will have the authority and discretion to select from among the Eligible Individuals those persons who shall receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number of Shares covered by the Awards, to establish the terms, conditions, performance criteria, restrictions, and other provisions of such Awards, and (subject to the restrictions imposed by Section 8) to cancel or suspend Awards.
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(b)
|
To the extent that the Committee determines that the restrictions imposed by the Plan preclude the achievement of the material purposes of the Awards in jurisdictions outside the United States and Bermuda, the Committee will have the authority and discretion to modify those restrictions as the Committee determines to be necessary or appropriate to conform to applicable requirements or practices of jurisdictions outside of the United States and Bermuda.
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(c)
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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 Award Agreement made pursuant to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan.
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(d)
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Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons.
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(e)
|
In controlling and managing the operation and administration of the Plan, the Committee shall take action in a manner that conforms to applicable corporate law.
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(f)
|
Notwithstanding any other provision of the Plan, no benefit shall be distributed under the Plan to any person unless the Committee, in its sole discretion, determines that such person is entitled to benefits under the Plan.
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8
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(a)
|
Award
. The term "Award" means any award or benefit granted under the Plan, including, without limitation, the grant of Options, SARs, and Full Value Awards.
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(b)
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Board
. The term "Board" means the Board of Directors of the Company.
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(c)
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Change in Control
. The term "Change in Control" means the occurrence of the events described in any of paragraphs (i), (ii), (iii) or (iv) below:
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(i)
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Acquisition of Securities
. The acquisition (disregarding any Excluded Acquisitions) by any Person of ownership of any Voting Securities if, immediately after such acquisition, such Person has ownership of more than twenty-five percent (25%) of either the Outstanding Company Common Shares, or the combined voting power of the Outstanding Company Voting Securities. In no event shall a Change in Control occur by reason of ownership of Shares, Voting Securities, Outstanding Company Common Shares, or Outstanding Company Voting Securities by ACE Limited and/or any successor or Affiliate of ACE Limited.
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(ii)
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Change in Board
. Individuals who constitute the Incumbent Board cease for any reason to represent greater than 50% of the voting power of members of the Board.
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(iii)
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Corporate Transaction
. Consummation of (A) a Corporate Transaction or (B) the sale or other disposition of more than fifty percent (50%) of the operating assets of the Company (determined on a consolidated basis), but not including an Internal Reorganization.
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(iv)
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Liquidation
. Approval by the shareholders of the Company of a plan of complete liquidation or dissolution of the Company.
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(v)
|
Definitions
. The terms used in the definition of "Change in Control" shall have the following meanings:
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(A)
|
An "Affiliate" of a person or other entity shall mean a person or other entity that directly or indirectly controls, is controlled by, or is under common control with the person or other entity specified.
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(B)
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The term "Company Plan" means an employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliate of the Company.
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(C)
|
The term "Corporate Transaction" means any reorganization, merger, amalgamation, consolidation, or other business combination involving the Company.
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(D)
|
The following shall constitute "Excluded Acquisitions" of Shares or Voting Securities (whichever is applicable):
|
(I)
|
Any acquisition of Shares or Voting Securities (whichever is applicable) by a Company Plan.
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(II)
|
Any acquisition of Shares or Voting Securities (whichever is applicable) by an underwriter temporarily holding securities pursuant to an offering of such securities.
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|
9
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(III)
|
Any acquisition of Shares or Voting Securities (whichever is applicable) by any Person pursuant to an Internal Reorganization.
|
(IV)
|
Any acquisition of Shares or Voting Securities (whichever is applicable) directly from the Company (excluding any acquisition resulting from the exercise of an exercise, conversion or exchange privilege unless the security being so exercised, converted or exchanged was acquired directly from the Company).
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(V)
|
Any acquisition of Shares or Voting Securities (whichever is applicable) by the Company.
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(VI)
|
Any acquisition of Shares or Voting Securities (whichever is applicable) by ACE Limited and/or any successor or Affiliate of ACE Limited or any employee benefit plan (or related trust) maintained by any such entity.
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(E)
|
The members of the "Incumbent Board" shall mean the members of the Board of Directors as of the date immediately prior to the date of the initial public offering of the shares of the Company and shall also mean any individual becoming a director after that date whose election, or nomination for election by the Company shareholders, was approved by a vote of a least a majority of the directors then comprising the Incumbent Board;
provided
,
however
, that there shall be excluded for this purpose any such individual whose initial assumption of office occurs as a result of an actual or publicly threatened election contest (as such terms are used in Rule 14a-11 promulgated under the Securities Exchange Act of 1934) or other actual or publicly threatened solicitation of proxies or consents by or on behalf of a Person other than the Board.
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(F)
|
The term "Internal Reorganization" means a sale-leaseback or other arrangement resulting in the continued utilization of the assets being sold or otherwise transferred (or the operating products of such assets) by the Company. The term "Internal Reorganization" also means a Corporate Transaction to which all of paragraphs (I), (II), and (III) below are applicable:
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(I)
|
All or substantially all of the individuals and entities who have ownership, respectively, of the Outstanding Company Common Shares and Outstanding Company Voting Securities immediately prior to such Corporate Transaction have ownership of more than fifty percent (50%) of, respectively, the then outstanding shares of common equity securities and the combined voting power of the then outstanding Voting Securities entitled to vote generally in the election of directors, as the case may be, of the ultimate parent entity resulting from such Corporate Transaction (including, without limitation, an entity which, as a result of such transaction, has ownership of the Company or all or substantially all of the assets of the Company either directly or through one or more subsidiaries) in substantially the same relative proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Shares and Outstanding Company Voting Securities, as the case may be.
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(II)
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No Person (other than the Company, any Company Plan or related trust, the corporation resulting from such Corporate Transaction, and any Person having ownership, immediately prior to such Corporate Transaction, directly or indirectly, of more than twenty-five percent (25%) of the Outstanding Company Common Shares or the Outstanding Company Voting Securities, as the case may be) will have ownership of more than twenty-five percent (25%) of, respectively, the then outstanding common shares of the ultimate parent entity resulting from such Corporate Transaction or the combined voting power of the then outstanding Voting Securities of such entity.
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(III)
|
Individuals who were members of the Incumbent Board immediately prior to the Corporate Transaction will constitute at least a majority of the members of the board of directors of the ultimate parent entity resulting from such Corporate Transaction.
|
(G)
|
The term "Outstanding Company Common Shares" as of any date means the then outstanding common shares, of whatever subclass or series, of the Company.
|
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10
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(H)
|
The term "Outstanding Company Voting Securities" as of any date means the then outstanding Voting Securities (which shall be counted based on the number of votes that may be cast per share).
|
(I)
|
The term "ownership" means beneficial ownership within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934.
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(J)
|
The term "Person" means an individual, entity or group as that term is used in Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934.
|
(K)
|
The term "Voting Securities" as of any date means any of the outstanding securities of the Company entitled to vote generally in the election of the Company’s Board of Directors.
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(d)
|
Code
. The term "Code" means the United States 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.
|
(e)
|
Dollars
. As used in the Plan, the term "dollars" or numbers preceded by the symbol "$" means amounts in United States dollars.
|
(f)
|
Eligible Individual
. For purposes of the Plan, the term "Eligible Individual" means any employee of the Company or a Subsidiary, and any consultant, director, or other person providing services to the Company or a Subsidiary; provided, however, that to the extent required by the Code, an ISO may only be granted to an employee of the Company or a subsidiary corporation of the Company (as that term is used in section 424(f) of the Code). An Award may be granted to an employee or other individual providing services, in connection with hiring, retention or otherwise, prior to the date the employee or service provider first performs services for the Company or the Subsidiaries, provided that such Awards shall not become vested prior to the date the employee or service provider first performs such services.
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(g)
|
Fair Market Value
. Except as otherwise provided by the Committee, the “Fair Market Value” of a Share as of any date shall be the closing market composite price for such Share as reported for the New York Stock Exchange - Composite Transactions on that date or, if the Shares are not traded on that date, on the next preceding date on which the Shares were traded.
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(h)
|
Performance Measures
. The "Performance Measures" shall be based on any one or more of the following Company, Subsidiary, operating unit or division performance measures: gross premiums written; net premiums written; net premiums earned; net investment income; losses and loss expenses; underwriting and administrative expenses; operating expenses; cash flow(s); operating income; profits, earnings before interest and taxes; net income; stock price; return on equity; dividends; strategic business objectives, consisting of one or more objectives based on meeting specified cost targets, business expansion goals, and goals relating to acquisitions or divestitures; or any combination thereof. Each goal may be expressed on an absolute and/or relative basis, may be based on or otherwise employ comparisons based on internal targets, the past performance of the Company and/or the past or current performance of other companies, and in the case of earnings-based measures, may use or employ comparisons relating to capital, shareholders’ equity and/or shares outstanding, investments or to assets or net assets.
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(i)
|
Shares
. The term "Shares" means common shares of the Company.
|
(j)
|
Subsidiaries
. For purposes of the Plan, the term "Subsidiary" means any corporation, partnership, joint venture or other entity during any period in which at least a fifty percent voting or profits interest is owned, directly or indirectly, by the Company (or by any entity that is a successor to the Company), and any other business venture designated by the Committee in which the Company (or any entity that is a successor to the Company) has a significant interest, as determined in the discretion of the Committee.
|
(k)
|
Stock
. The term "Stock" is sometimes used to refer to common shares of the Company.
|
(l)
|
Termination of Service
. With respect to Awards that constitute Deferred Compensation, references to the Participant's termination of employment (including references to the Participant's employment termination, and to the Participant terminating employment, a Participant’s separation from service, and other similar reference) and references to a Participant's termination as a director (including separation from service and other similar references) shall mean, respectively, the Participant ceasing to be employed by, or ceasing to perform director services for, the Company and the Affiliates, subject to the following:
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11
|
|
(i)
|
The employment relationship or director relationship will be deemed to have ended at the time the Participant and the applicable company reasonably anticipate that a level of bona fide services the Participant would perform for the Company and the Affiliates after such date would permanently decrease to no more than 20% of the average level of bona fide services performed over the immediately preceding 36 month period (or the full period of service to the Company and the Affiliates if the Participant has performed services for the Company and the Affiliates for less than 36 months). In the absence of an expectation that the Participant will perform at the above-described level, the date of termination of employment or termination as a director will not be delayed solely by reason of the Participant continuing to be on the Company's and the Affiliates' payroll after such date.
|
(ii)
|
The employment or director relationship will be treated as continuing intact while the Participant is on a bona fide leave of absence (determined in accordance with Treas. Reg. §409A-1(h)).
|
(iii)
|
The determination of a Participant’s termination of employment or termination as a director by reason of a sale of assets, sale of stock, spin-off, or other similar transaction of the Company or an Affiliate will be made in accordance with Treas. Reg. §1.409A-1(h).
|
(iv)
|
If a Participant performs services both as an employee of the Company or an Affiliate, and a member of the board of directors of the Company or an Affiliate, the determination of whether termination of employment or termination of service as a director shall be made in accordance with Treas. Reg. §1.409A-1(h)(5) (relating to dual status service providers).
|
(v)
|
The term “Affiliates” means all persons with whom the Company is considered to be a single employer under section 414(b) of the Code and all persons with whom the Company would be considered a single employer under section 414(c) thereof.
|
(vi)
|
The term “Deferred Compensation” means payments or benefits that would be considered to be provided under a nonqualified deferred compensation plan as that term is defined in Treas. Reg. §1.409A-1.
|
|
12
|
|
(a)
|
The "Participant" is
__________
______________________
|
(b)
|
The "Grant Date" is February 24, 2016
.
|
(c)
|
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.
|
(d)
|
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.
|
(a)
|
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.
|
(b)
|
Retirement
. If the Participant’s Date of Termination occurs due to a Retirement prior to the last day of the Restricted Period, then, only for purposes of this Section 4 (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 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.
|
(c)
|
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
|
(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 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.
|
(a)
|
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.
|
(b)
|
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.
|
(a)
|
Notwithstanding anything in this Agreement to the contrary, the Participant’s rights with respect to the Restricted Stock Unit Award shall be subject to the Assured Guaranty Ltd. Executive Officer Recoupment Policy as amended and restated on November 3, 2015 and as further amended from time to time.
|
(b)
|
Notwithstanding anything in this Agreement to the contrary, 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.
|
(a)
|
Change in Control
. The term "Change in Control" shall be defined as set forth in the Plan.
|
(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 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).
|
(c)
|
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.
|
(d)
|
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.
|
(e)
|
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.
|
(f)
|
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).
|
(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 60 or older and (ii) the total of the Participant’s age and years of service equals or exceeds 70. 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 this Agreement. The determination of whether to treat the Participant’s Date of Termination as a Retirement shall be made in the sole discretion of the Committee and such determination shall be final and binding on all persons.
|
(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 Restricted Stock Unit Award is terminated pursuant to Section 6(b) of this Agreement.
|
(a)
|
The "Participant" is
__________
______________________
|
(b)
|
The "Grant Date" is February 24, 2016
.
|
(c)
|
The number of “Covered Units” granted under this Agreement is _____ Covered Units.
|
(d)
|
The “Delivery Date” with respect to the Covered Units shall be the third anniversary of the Grant Date.
|
(e)
|
The “Performance Determination Date” is the earlier to occur of (i) December 31, 2018; (ii) the date of a Change in Control.
|
(f)
|
The “Performance Period” is July 1, 2017 through December 31, 2018; provided, however, if a Change in Control occurs on or after July 1, 2017 but prior to December 31, 2018, the Performance Period shall be the eighteen month period preceding the Change in Control; provided, further, however, if a Change in Control occurs prior to July 1, 2017, the Performance Period shall be the period beginning on January 1, 2016 and ending on the date of the Change in Control.
|
Performance Level
|
AGO High Stock Price in Performance Period
|
% of Units Vesting (the Performance Percentage)
|
Outstanding
|
$36 or higher
|
200%
|
Target
|
$32
|
100%
|
Threshold
|
$28
|
50%
|
< Threshold
|
Less than $28
|
0%
|
(a)
|
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.
|
(b)
|
Retirement
. If the Participant’s Date of Termination occurs due to a Retirement prior to the last day of the Restricted Period, 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 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.
|
(c)
|
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.
|
(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
|
(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 and restated on November 3, 2015 and as further 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.
|
(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 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.
|
(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
|
(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 60 or older and (ii) the total of the Participant’s age and years of service equals or exceeds 70. 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 this Agreement. The determination of whether to treat the Participant’s Date of Termination as a Retirement shall be made in the sole discretion of the Committee and such determination shall be final and binding on all persons.
|
(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.
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
Income (loss) before income taxes
|
$
|
1,017
|
|
|
$
|
1,431
|
|
|
$
|
1,531
|
|
|
$
|
1,142
|
|
|
$
|
132
|
|
Fixed Charges
|
142
|
|
|
145
|
|
|
136
|
|
|
156
|
|
|
174
|
|
|||||
Income (loss) as adjusted
|
1,159
|
|
|
1,576
|
|
|
1,667
|
|
|
1,298
|
|
|
306
|
|
|||||
Fixed charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense (1)
|
102
|
|
|
101
|
|
|
92
|
|
|
82
|
|
|
92
|
|
|||||
Portion of rents representative of the interest factor
|
4
|
|
|
4
|
|
|
3
|
|
|
4
|
|
|
4
|
|
|||||
Interest expense on financial guaranty variable interest entities’ (“FG VIE”) liabilities (1)
|
36
|
|
|
40
|
|
|
41
|
|
|
70
|
|
|
78
|
|
|||||
Total fixed charges
|
$
|
142
|
|
|
$
|
145
|
|
|
$
|
136
|
|
|
$
|
156
|
|
|
$
|
174
|
|
Ratio of consolidated earnings to fixed charges (1)
|
8.2
|
|
|
10.9
|
|
|
12.3
|
|
|
8.3
|
|
|
1.8
|
|
(1)
|
For purposes of computing the ratios, earnings consist of income (loss) before income tax expense plus fixed charges to the extent that these charges are included in the determination of earnings. Fixed charges consist of interest expense plus one-third of rent expense under operating leases, which are estimated by management to be the interest factor of these rentals. Interest expense includes interest on long term debt and interest expense on FG VIE liabilities with and without recourse. The Company is not primarily liable for the debt obligations issued by the FG VIEs they insure (i.e. with recourse) and would only be required to make payments on these obligations in the event that the issuer of such debt obligations defaults on any principal or interest due. FG VIEs’ liabilities that are insured by the Company are considered to be with recourse because the Company guarantees the payment of principal and interest regardless of the performance of the FG VIEs’ assets. FG VIEs’ liabilities that are not insured by the Company are considered to be without recourse because the payment of principal and interest on these liabilities is wholly dependent on the performance of the FG VIEs’ assets.
|
Assured Guaranty Re Ltd. (Bermuda domiciled subsidiary of Assured Guaranty Ltd.)
|
|
|
Cypress Point Funding Limited (Cayman Islands domiciled 23% owned subsidiary of Assured Guaranty Re Ltd.)
2
|
|
|
Assured Guaranty Overseas US Holdings Inc. (Delaware domiciled subsidiary of Assured Guaranty Re Ltd.)
|
|
|
Assured Guaranty Re Overseas Ltd. (Bermuda domiciled subsidiary of Assured Guaranty Overseas US Holdings Inc.)
|
|
|
AG Intermediary Inc. (New York domiciled subsidiary of Assured Guaranty Re Overseas Ltd.)
|
|
|
AG Management Ltd. (Bermuda domiciled subsidiary of Assured Guaranty Re Overseas Ltd.)
|
|
|
Assured Guaranty Finance Overseas Ltd. (England domiciled subsidiary of Assured Guaranty Ltd.)
|
|
|
Cedar Personnel Ltd. (Bermuda domiciled subsidiary of Assured Guaranty Ltd.)
|
|
|
Assured Guaranty US Holdings Inc. (Delaware domiciled subsidiary of Assured Guaranty Ltd.)
|
|
|
Assured Guaranty Municipal Holdings Inc. (New York domiciled subsidiary of Assured Guaranty US Holdings Inc.)
|
|
|
EFS-AGIC Master Business Trust (Delaware domiciled subsidiary of Assured Guaranty US Holdings Inc.)
|
|
|
AE Global Holdings, LLC (Delaware domiciled subsidiary of Assured Guaranty US Holdings Inc.)
|
|
|
AE Global Investments, LLC (Delaware domiciled subsidiary of AE Global Holdings, LLC)
|
|
|
AE Global Asset Funding, LLC (Delaware domiciled subsidiary of AE Global Holdings, LLC)
|
|
|
FSA Portfolio Management Inc. (New York domiciled subsidiary of Assured Guaranty Municipal Holdings Inc.)
|
|
|
Transaction Services Corporation (New York domiciled subsidiary of Assured Guaranty Municipal Holdings Inc.)
|
|
|
Assured Guaranty Municipal Corp. (New York domiciled subsidiary of Assured Guaranty Municipal Holdings Inc.)
|
|
|
Assured Guaranty (Europe) Ltd. (England domiciled subsidiary of Assured Guaranty Municipal Corp.)
|
|
|
Municipal Assurance Holdings Inc. (Delaware domiciled 60.7% owned subsidiary of Assured Guaranty Municipal Corp. and 39.3% owned subsidiary of Assured Guaranty Corp.)
|
|
|
Municipal Assurance Corp. (New York domiciled subsidiary of Municipal Assurance Holdings Inc.)
|
|
|
AG Analytics Inc. (Delaware domiciled subsidiary of Assured Guaranty US Holdings Inc.)
|
|
|
Assured Guaranty (UK) Services Limited (England domiciled subsidiary of Assured Guaranty US Holdings Inc.)
|
|
|
Assured Guaranty Corp. (Maryland domiciled subsidiary of Assured Guaranty US Holdings Inc.)
|
|
|
Prescott, LLC (Delaware domiciled subsidiary of Assured Guaranty Corp.)
|
|
|
Four Hundred Main Street LLC (Delaware domiciled subsidiary of Assured Guaranty Corp)
|
|
|
AG PFC Holding LLC (Delaware domiciled subsidiary of Assured Guaranty Corp.)
|
|
|
AGFP Holdings LLC (Delaware domiciled subsidiary of AG PFC Holding LLC)
|
|
|
Portfolio Funding Company LLC I (Delaware domiciled 50% owned subsidiary of AGFP Holdings LLC)
3
|
|
|
Van American Insurance Agency, Inc. (South Carolina domiciled subsidiary of Assured Guaranty Corp.)
|
|
|
Hoboken LLC (Delaware domiciled subsidiary of Assured Guaranty Corp.)
|
|
|
Assured Guaranty (UK) Ltd. (England domiciled subsidiary of Assured Guaranty Corp.)
|
|
|
AG Financial Products Inc. (Delaware domiciled subsidiary of Assured Guaranty US Holdings Inc.)
|
|
|
AG CAT Re Ltd. (Bermuda domiciled company)
4
|
|
|
CIFG Holding LLC (Delaware domiciled subsidiary of Assured Guaranty Corp.)
5
|
|
|
CIFG Services, LLC (Delaware domiciled subsidiary of Assured Guaranty Corp.)
|
|
|
CIFG Europe, S.A. (French domiciled subsidiary of Assured Guaranty Corp.)
5
|
|
(1)
|
All subsidiaries are wholly owned except for AG CAT Re Ltd., Cypress Point Funding Limited, and Portfolio Funding Company LLC I.
|
(2)
|
The remaining 77% of Cypress Point Funding Limited (Cayman) is 23% owned by XL Insurance Ltd. and 54% owned by Maples FS Limited.
|
(3)
|
The remaining 50% of Portfolio Funding Company LLC I was owned by a subsidiary of Goldman, Sachs & Co. as of December 31, 2014, and since January 23, 2015, is owned by a subsidiary of AMC Networks Inc.
|
(4)
|
AG CAT Re Ltd. is wholly owned by Codan Trust Company Limited, an entity that is not owned or controlled by Assured Guaranty Ltd. The insurance manager of AG CAT Re Ltd. is AG Management Ltd.
|
(5)
|
In order to comply with a French law mandating that corporations have at least seven (7) shareholders, AGC has loaned one share of CIFG Europe A.A. to each of the following six Delaware limited liability companies, each of which is wholly owned by CIFG Holding LLC, a direct , wholly owned subsidiary of AGC: CIFG Global Holdings I, LLC, CIFG Global Holdings II, LLC, CIFG Global Holdings III, LLC, CIFG Global Holdings IV, LLC, CIFG Global Holdings V, LLC, and CIFG Global Holdings VI, LLC.
|
1.
|
I have reviewed this Annual Report on Form 10-K of Assured Guaranty Ltd.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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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;
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4.
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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:
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5.
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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):
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By:
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/s/ DOMINIC J. FREDERICO
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Dominic J. Frederico
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President and Chief Executive Officer
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1.
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I have reviewed this Annual Report on Form 10-K of Assured Guaranty Ltd.
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2.
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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;
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3.
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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;
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4.
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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:
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5.
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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):
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By:
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/s/ ROBERT A. BAILENSON
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Robert A. Bailenson
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Chief Financial Officer
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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/ DOMINIC J. FREDERICO
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Name: Dominic J. Frederico
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Title:
President and Chief Executive Officer
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Date: February 24, 2017
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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: February 24, 2017
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