|
ý
|
|
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Bermuda
|
|
98-0429991
|
(State or other jurisdiction
|
|
(I.R.S. employer
|
of incorporation)
|
|
identification no.)
|
|
|
|
Page
|
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
ITEM 1.
|
FINANCIAL STATEMENTS
|
|
As of
March 31, 2017 |
|
As of
December 31, 2016 |
||||
Assets
|
|
|
|
|
|
||
Investment portfolio:
|
|
|
|
|
|
||
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $10,135
a
nd $9,974)
|
$
|
10,479
|
|
|
$
|
10,233
|
|
Short-term investments, at fair value
|
689
|
|
|
590
|
|
||
Other invested assets
|
173
|
|
|
162
|
|
||
Total investment portfolio
|
11,341
|
|
|
10,985
|
|
||
Cash
|
147
|
|
|
118
|
|
||
Premiums receivable, net of commissions payable
|
876
|
|
|
576
|
|
||
Ceded unearned premium reserve
|
180
|
|
|
206
|
|
||
Deferred acquisition costs
|
106
|
|
|
106
|
|
||
Reinsurance recoverable on unpaid losses
|
74
|
|
|
80
|
|
||
Salvage and subrogation recoverable
|
405
|
|
|
365
|
|
||
Credit derivative assets
|
9
|
|
|
13
|
|
||
Deferred tax asset, net
|
438
|
|
|
497
|
|
||
Current income tax receivable
|
—
|
|
|
12
|
|
||
Financial guaranty variable interest entities’ assets, at fair value
|
781
|
|
|
876
|
|
||
Other assets
|
318
|
|
|
317
|
|
||
Total assets
|
$
|
14,675
|
|
|
$
|
14,151
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
|
||
Unearned premium reserve
|
$
|
3,827
|
|
|
$
|
3,511
|
|
Loss and loss adjustment expense reserve
|
1,193
|
|
|
1,127
|
|
||
Reinsurance balances payable, net
|
52
|
|
|
64
|
|
||
Long-term debt
|
1,307
|
|
|
1,306
|
|
||
Credit derivative liabilities
|
359
|
|
|
402
|
|
||
Current income tax payable
|
63
|
|
|
—
|
|
||
Financial guaranty variable interest entities’ liabilities with recourse, at fair value
|
721
|
|
|
807
|
|
||
Financial guaranty variable interest entities’ liabilities without recourse, at fair value
|
134
|
|
|
151
|
|
||
Other liabilities
|
382
|
|
|
279
|
|
||
Total liabilities
|
8,038
|
|
|
7,647
|
|
||
Commitments and contingencies (See Note 14)
|
|
|
|
||||
Common stock ($0.01 par value, 500,000,000 shares authorized; 123,028,528 and 127,988,230 shares issued and outstanding)
|
1
|
|
|
1
|
|
||
Additional paid-in capital
|
841
|
|
|
1,060
|
|
||
Retained earnings
|
5,588
|
|
|
5,289
|
|
||
Accumulated other comprehensive income, net of tax of $101 and $70
|
206
|
|
|
149
|
|
||
Deferred equity compensation
|
1
|
|
|
5
|
|
||
Total shareholders’ equity
|
6,637
|
|
|
6,504
|
|
||
Total liabilities and shareholders’ equity
|
$
|
14,675
|
|
|
$
|
14,151
|
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
Revenues
|
|
|
|
||||
Net earned premiums
|
$
|
164
|
|
|
$
|
183
|
|
Net investment income
|
122
|
|
|
99
|
|
||
Net realized investment gains (losses):
|
|
|
|
||||
Other-than-temporary impairment losses
|
(1
|
)
|
|
(20
|
)
|
||
Less: portion of other-than-temporary impairment loss recognized in other comprehensive income
|
8
|
|
|
(4
|
)
|
||
Net impairment loss
|
(9
|
)
|
|
(16
|
)
|
||
Other net realized investment gains (losses)
|
41
|
|
|
3
|
|
||
Net realized investment gains (losses)
|
32
|
|
|
(13
|
)
|
||
Net change in fair value of credit derivatives:
|
|
|
|
||||
Realized gains (losses) and other settlements
|
15
|
|
|
8
|
|
||
Net unrealized gains (losses)
|
39
|
|
|
(68
|
)
|
||
Net change in fair value of credit derivatives
|
54
|
|
|
(60
|
)
|
||
Fair value gains (losses) on committed capital securities
|
(2
|
)
|
|
(16
|
)
|
||
Fair value gains (losses) on financial guaranty variable interest entities
|
10
|
|
|
18
|
|
||
Bargain purchase gain and settlement of pre-existing relationships
|
58
|
|
|
—
|
|
||
Other income (loss)
|
89
|
|
|
34
|
|
||
Total revenues
|
527
|
|
|
245
|
|
||
Expenses
|
|
|
|
||||
Loss and loss adjustment expenses
|
59
|
|
|
90
|
|
||
Amortization of deferred acquisition costs
|
4
|
|
|
4
|
|
||
Interest expense
|
24
|
|
|
26
|
|
||
Other operating expenses
|
68
|
|
|
60
|
|
||
Total expenses
|
155
|
|
|
180
|
|
||
Income (loss) before income taxes
|
372
|
|
|
65
|
|
||
Provision (benefit) for income taxes
|
|
|
|
||||
Current
|
51
|
|
|
30
|
|
||
Deferred
|
4
|
|
|
(24
|
)
|
||
Total provision (benefit) for income taxes
|
55
|
|
|
6
|
|
||
Net income (loss)
|
$
|
317
|
|
|
$
|
59
|
|
|
|
|
|
||||
Earnings per share:
|
|
|
|
||||
Basic
|
$
|
2.53
|
|
|
$
|
0.43
|
|
Diluted
|
$
|
2.49
|
|
|
$
|
0.43
|
|
Dividends per share
|
$
|
0.1425
|
|
|
$
|
0.13
|
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
Net income (loss)
|
$
|
317
|
|
|
$
|
59
|
|
Unrealized holding gains (losses) arising during the period on:
|
|
|
|
||||
Investments with no other-than-temporary impairment, net of tax provision (benefit) of $23 and $31
|
44
|
|
|
95
|
|
||
Investments with other-than-temporary impairment, net of tax provision (benefit) of $28 and $(10)
|
50
|
|
|
(17
|
)
|
||
Unrealized holding gains (losses) arising during the period, net of tax
|
94
|
|
|
78
|
|
||
Less: reclassification adjustment for gains (losses) included in net income (loss), net of tax provision (benefit) of $21 and $(4)
|
39
|
|
|
(6
|
)
|
||
Change in net unrealized gains (losses) on investments
|
55
|
|
|
84
|
|
||
Other, net of tax provision
|
2
|
|
|
(2
|
)
|
||
Other comprehensive income (loss)
|
$
|
57
|
|
|
$
|
82
|
|
Comprehensive income (loss)
|
$
|
374
|
|
|
$
|
141
|
|
|
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, 2016
|
127,988,230
|
|
|
|
$
|
1
|
|
|
$
|
1,060
|
|
|
$
|
5,289
|
|
|
$
|
149
|
|
|
$
|
5
|
|
|
$
|
6,504
|
|
Net income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
317
|
|
|
—
|
|
|
—
|
|
|
317
|
|
||||||
Dividends ($0.1425 per share)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(18
|
)
|
|
—
|
|
|
—
|
|
|
(18
|
)
|
||||||
Common stock repurchases
|
(5,430,041
|
)
|
|
|
0
|
|
|
(216
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(216
|
)
|
||||||
Share-based compensation and other
|
470,339
|
|
|
|
0
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
(7
|
)
|
||||||
Other comprehensive income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57
|
|
|
—
|
|
|
57
|
|
||||||
Balance at March 31, 2017
|
123,028,528
|
|
|
|
$
|
1
|
|
|
$
|
841
|
|
|
$
|
5,588
|
|
|
$
|
206
|
|
|
$
|
1
|
|
|
$
|
6,637
|
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
Net cash flows provided by (used in) operating activities
|
$
|
102
|
|
|
$
|
(90
|
)
|
Investing activities
|
|
|
|
|
|
||
Fixed-maturity securities:
|
|
|
|
|
|
||
Purchases
|
(517
|
)
|
|
(296
|
)
|
||
Sales
|
323
|
|
|
162
|
|
||
Maturities
|
265
|
|
|
301
|
|
||
Net sales (purchases) of short-term investments
|
12
|
|
|
(63
|
)
|
||
Net proceeds from paydowns on financial guaranty variable interest entities’ assets
|
46
|
|
|
66
|
|
||
Acquisition of MBIA UK, net of cash acquired (see Note 2)
|
95
|
|
|
—
|
|
||
Other
|
(13
|
)
|
|
2
|
|
||
Net cash flows provided by (used in) investing activities
|
211
|
|
|
172
|
|
||
Financing activities
|
|
|
|
|
|
||
Dividends paid
|
(19
|
)
|
|
(18
|
)
|
||
Repurchases of common stock
|
(216
|
)
|
|
(75
|
)
|
||
Repurchases of common stock to pay withholding taxes
|
(12
|
)
|
|
(2
|
)
|
||
Net paydowns of financial guaranty variable interest entities’ liabilities
|
(48
|
)
|
|
(42
|
)
|
||
Repayment of long-term debt
|
(1
|
)
|
|
0
|
|
||
Proceeds from options exercises
|
2
|
|
|
1
|
|
||
Net cash flows provided by (used in) financing activities
|
(294
|
)
|
|
(136
|
)
|
||
Effect of foreign exchange rate changes
|
2
|
|
|
0
|
|
||
Increase (decrease) in cash and restricted cash
|
21
|
|
|
(54
|
)
|
||
Cash and restricted cash at beginning of period (see Note 10)
|
127
|
|
|
166
|
|
||
Cash and restricted cash at end of period (see Note 10)
|
$
|
148
|
|
|
$
|
112
|
|
Supplemental cash flow information
|
|
|
|
|
|
||
Cash paid (received) during the period for:
|
|
|
|
|
|
||
Income taxes
|
$
|
(5
|
)
|
|
$
|
1
|
|
Interest
|
$
|
8
|
|
|
$
|
7
|
|
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.
|
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
MBIA UK Acquisition
|
||||||
|
(in millions)
|
||||||||||
Purchase price (1)
|
$
|
334
|
|
|
$
|
—
|
|
|
$
|
334
|
|
|
|
|
|
|
|
||||||
Identifiable assets acquired:
|
|
|
|
|
|
||||||
Investments
|
459
|
|
|
—
|
|
|
459
|
|
|||
Cash
|
72
|
|
|
—
|
|
|
72
|
|
|||
Premiums receivable, net of commissions payable
|
274
|
|
|
(4
|
)
|
|
270
|
|
|||
Other assets
|
16
|
|
|
(6
|
)
|
|
10
|
|
|||
Total assets
|
821
|
|
|
(10
|
)
|
|
811
|
|
|||
|
|
|
|
|
|
|
|||||
Liabilities assumed:
|
|
|
|
|
|
||||||
Unearned premium reserves
|
389
|
|
|
(6
|
)
|
|
383
|
|
|||
Current tax payable
|
25
|
|
|
—
|
|
|
25
|
|
|||
Other liabilities
|
4
|
|
|
(5
|
)
|
|
(1
|
)
|
|||
Total liabilities
|
418
|
|
|
(11
|
)
|
|
407
|
|
|||
Net assets of MBIA UK
|
403
|
|
|
1
|
|
|
404
|
|
|||
Cash acquired from MBIA Holdings
|
23
|
|
|
—
|
|
|
23
|
|
|||
Deferred tax liability
|
(36
|
)
|
|
—
|
|
|
(36
|
)
|
|||
Net asset effect of MBIA UK Acquisition
|
390
|
|
|
1
|
|
|
391
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships resulting from MBIA UK Acquisition, after-tax
|
56
|
|
|
1
|
|
|
57
|
|
|||
Deferred tax
|
—
|
|
|
1
|
|
|
1
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships resulting from MBIA UK Acquisition, pre-tax
|
$
|
56
|
|
|
$
|
2
|
|
|
$
|
58
|
|
(1)
|
The purchase price of
$334 million
was allocated as follows: (1)
$329 million
for the purchase of net assets of
$385 million
, and (2) the settlement of pre-existing relationships between MBIA UK and Assured Guaranty at a fair value of
$5 million
.
|
|
|
First Quarter 2016
|
||
|
|
(in millions, except per share amounts)
|
||
Pro forma revenues
|
|
$
|
361
|
|
Pro forma net income
|
|
152
|
|
|
Pro forma earnings per share (EPS):
|
|
|
||
Basic
|
|
1.12
|
|
|
Diluted
|
|
1.11
|
|
•
|
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 the A3 insurance financial strength rating on AGC and AGC's subsidiary Assured Guaranty (UK) Ltd. (AGUK), raising the outlook to stable from negative. As noted above, AGC is requesting that Moody's withdraw its rating of AGC and AGUK. On January 13, 2017, Moody's upgraded AGLN to Baa2 from Ba2, reflecting its acquisition by AGC. 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 other than AGLN. On January 12, 2017, S&P placed the BB rating of AGLN on credit watch positive in anticipation of the potential combination of AGLN with the Company's other European 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 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
|
||||||||||||
|
March 31,
2017 |
|
December 31,
2016 |
|
March 31,
2017 |
|
December 31,
2016 |
||||||||
|
(in millions)
|
||||||||||||||
Public finance
|
$
|
436,426
|
|
|
$
|
425,849
|
|
|
$
|
422,496
|
|
|
$
|
409,447
|
|
Structured finance
|
24,506
|
|
|
29,151
|
|
|
23,690
|
|
|
28,088
|
|
||||
Total financial guaranty
|
$
|
460,932
|
|
|
$
|
455,000
|
|
|
$
|
446,186
|
|
|
$
|
437,535
|
|
|
|
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
|
|
$
|
1,816
|
|
|
0.8
|
%
|
|
$
|
2,156
|
|
|
5.5
|
%
|
|
$
|
6,765
|
|
|
36.7
|
%
|
|
$
|
1,032
|
|
|
42.9
|
%
|
|
$
|
11,769
|
|
|
3.9
|
%
|
AA
|
|
42,529
|
|
|
17.9
|
|
|
204
|
|
|
0.5
|
|
|
5,408
|
|
|
29.3
|
|
|
99
|
|
|
4.1
|
|
|
48,240
|
|
|
16.2
|
|
|||||
A
|
|
132,212
|
|
|
55.5
|
|
|
12,711
|
|
|
32.3
|
|
|
1,698
|
|
|
9.2
|
|
|
264
|
|
|
11.0
|
|
|
146,885
|
|
|
49.3
|
|
|||||
BBB
|
|
54,294
|
|
|
22.8
|
|
|
22,199
|
|
|
56.4
|
|
|
868
|
|
|
4.7
|
|
|
760
|
|
|
31.6
|
|
|
78,121
|
|
|
26.2
|
|
|||||
BIG
|
|
7,199
|
|
|
3.0
|
|
|
2,073
|
|
|
5.3
|
|
|
3,707
|
|
|
20.1
|
|
|
249
|
|
|
10.4
|
|
|
13,228
|
|
|
4.4
|
|
|||||
Total net par outstanding (1)
|
|
$
|
238,050
|
|
|
100.0
|
%
|
|
$
|
39,343
|
|
|
100.0
|
%
|
|
$
|
18,446
|
|
|
100.0
|
%
|
|
$
|
2,404
|
|
|
100.0
|
%
|
|
$
|
298,243
|
|
|
100.0
|
%
|
(1)
|
The
March 31, 2017
amounts include
$12.2 billion
of net par from the MBIA UK 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
|
|
$
|
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
|
%
|
|
BIG Net Par Outstanding
|
|
Net Par
|
||||||||||||||||
|
BIG 1
|
|
BIG 2
|
|
BIG 3
|
|
Total BIG
|
|
Outstanding
|
||||||||||
|
|
|
|
|
(in millions)
|
|
|
|
|
||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. public finance
|
$
|
2,424
|
|
|
$
|
2,901
|
|
|
$
|
1,874
|
|
|
$
|
7,199
|
|
|
$
|
238,050
|
|
Non-U.S. public finance
|
1,810
|
|
|
263
|
|
|
—
|
|
|
2,073
|
|
|
39,343
|
|
|||||
Public finance
|
4,234
|
|
|
3,164
|
|
|
1,874
|
|
|
9,272
|
|
|
277,393
|
|
|||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. Residential mortgage-backed securities (RMBS)
|
190
|
|
|
412
|
|
|
2,407
|
|
|
3,009
|
|
|
5,357
|
|
|||||
Triple-X life insurance transactions
|
—
|
|
|
—
|
|
|
126
|
|
|
126
|
|
|
2,057
|
|
|||||
Trust preferred securities (TruPS)
|
192
|
|
|
62
|
|
|
—
|
|
|
254
|
|
|
1,616
|
|
|||||
Other structured finance
|
298
|
|
|
193
|
|
|
76
|
|
|
567
|
|
|
11,820
|
|
|||||
Structured finance
|
680
|
|
|
667
|
|
|
2,609
|
|
|
3,956
|
|
|
20,850
|
|
|||||
Total
|
$
|
4,914
|
|
|
$
|
3,831
|
|
|
$
|
4,483
|
|
|
$
|
13,228
|
|
|
$
|
298,243
|
|
|
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
|
|
|||||
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
|
|
|
|
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
|
|
$
|
4,427
|
|
|
$
|
487
|
|
|
$
|
4,914
|
|
|
159
|
|
|
8
|
|
|
167
|
|
Category 2
|
|
3,698
|
|
|
133
|
|
|
3,831
|
|
|
71
|
|
|
5
|
|
|
76
|
|
|||
Category 3
|
|
4,351
|
|
|
132
|
|
|
4,483
|
|
|
149
|
|
|
9
|
|
|
158
|
|
|||
Total BIG
|
|
$
|
12,476
|
|
|
$
|
752
|
|
|
$
|
13,228
|
|
|
379
|
|
|
22
|
|
|
401
|
|
|
|
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
|
|
(2)
|
A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments.
|
•
|
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 claw back 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 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
|
||||||||||||
|
March 31,
2017 |
|
December 31,
2016 |
|
March 31,
2017 |
|
December 31,
2016 |
||||||||
|
(in millions)
|
||||||||||||||
Exposure to Puerto Rico
|
$
|
5,435
|
|
|
$
|
5,435
|
|
|
$
|
8,903
|
|
|
$
|
9,038
|
|
|
As of
March 31, 2017 |
|
As of
December 31, 2016 |
||||
|
(in millions)
|
||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
||||
Commonwealth of Puerto Rico - General Obligation Bonds (2)
|
$
|
1,495
|
|
|
$
|
1,476
|
|
PBA (2)
|
169
|
|
|
169
|
|
||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
||||
PRHTA (Transportation revenue) (2)
|
918
|
|
|
918
|
|
||
PRHTA (Highways revenue)
|
409
|
|
|
350
|
|
||
PRCCDA
|
152
|
|
|
152
|
|
||
PRIFA (2)
|
18
|
|
|
18
|
|
||
Other Public Corporations
|
|
|
|
||||
PREPA
|
777
|
|
|
724
|
|
||
PRASA
|
373
|
|
|
373
|
|
||
MFA
|
354
|
|
|
334
|
|
||
COFINA
|
271
|
|
|
271
|
|
||
U of PR
|
1
|
|
|
1
|
|
||
Total net exposure to Puerto Rico
|
$
|
4,937
|
|
|
$
|
4,786
|
|
(1)
|
The
March 31, 2017
amounts include
$150 million
related to the commutation of previously ceded business. See Note 13, Reinsurance and Other Monoline Exposures, for more information.
|
|
Scheduled Net Par Amortization
|
|
Scheduled Net Debt Service Amortization
|
||||
|
(in millions)
|
||||||
2017 (April 1 - June 30)
|
$
|
0
|
|
|
$
|
2
|
|
2017 (July 1 - September 30)
|
224
|
|
|
346
|
|
||
2017 (October 1 - December 31)
|
0
|
|
|
2
|
|
||
Subtotal 2017
|
224
|
|
|
350
|
|
||
2018
|
178
|
|
|
419
|
|
||
2019
|
210
|
|
|
440
|
|
||
2020
|
270
|
|
|
490
|
|
||
2021
|
129
|
|
|
336
|
|
||
2022-2026
|
900
|
|
|
1,819
|
|
||
2027-2031
|
942
|
|
|
1,609
|
|
||
2032-2036
|
1,249
|
|
|
1,669
|
|
||
2037-2041
|
417
|
|
|
588
|
|
||
2042-2047
|
418
|
|
|
492
|
|
||
Total
|
$
|
4,937
|
|
|
$
|
8,212
|
|
|
Hungary
|
|
Italy
|
|
Portugal
|
|
Spain
|
|
Turkey
|
|
Total
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Sub-sovereign exposure(2)
|
$
|
204
|
|
|
$
|
912
|
|
|
$
|
75
|
|
|
$
|
345
|
|
|
$
|
—
|
|
|
$
|
1,536
|
|
Non-sovereign exposure(3)
|
114
|
|
|
400
|
|
|
—
|
|
|
—
|
|
|
202
|
|
|
716
|
|
||||||
Total
|
$
|
318
|
|
|
$
|
1,312
|
|
|
$
|
75
|
|
|
$
|
345
|
|
|
$
|
202
|
|
|
$
|
2,252
|
|
Total BIG (See Note 5)
|
$
|
248
|
|
|
$
|
—
|
|
|
$
|
75
|
|
|
$
|
345
|
|
|
$
|
—
|
|
|
$
|
668
|
|
(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
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Net expected loss to be paid, beginning of period
|
$
|
1,198
|
|
|
$
|
1,391
|
|
Net expected loss to be paid on the MBIA UK portfolio as of January 10, 2017
|
21
|
|
|
—
|
|
||
Economic loss development due to:
|
|
|
|
||||
Accretion of discount
|
8
|
|
|
9
|
|
||
Changes in discount rates
|
11
|
|
|
63
|
|
||
Changes in timing and assumptions
|
28
|
|
|
(13
|
)
|
||
Total economic loss development
|
47
|
|
|
59
|
|
||
Net paid losses
|
(22
|
)
|
|
(113
|
)
|
||
Net expected loss to be paid, end of period
|
$
|
1,244
|
|
|
$
|
1,337
|
|
|
Net Expected
Loss to be
Paid
(Recovered)
as of
December 31, 2016
|
|
Net Expected
Loss to be Paid on MBIA UK
as of
January 10, 2017 |
|
Economic Loss
Development
|
|
(Paid)
Recovered
Losses (1)
|
|
Net Expected
Loss to be Paid
(Recovered)
as of
March 31, 2017 (2) |
||||||||||
|
(in millions)
|
||||||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. public finance
|
$
|
871
|
|
|
$
|
—
|
|
|
$
|
124
|
|
|
$
|
(25
|
)
|
|
$
|
970
|
|
Non-U.S. public finance
|
33
|
|
|
13
|
|
|
(5
|
)
|
|
—
|
|
|
41
|
|
|||||
Public finance
|
904
|
|
|
13
|
|
|
119
|
|
|
(25
|
)
|
|
1,011
|
|
|||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. RMBS
|
206
|
|
|
—
|
|
|
(22
|
)
|
|
13
|
|
|
197
|
|
|||||
Triple-X life insurance transactions
|
54
|
|
|
—
|
|
|
(53
|
)
|
|
0
|
|
|
1
|
|
|||||
Other structured finance
|
34
|
|
|
8
|
|
|
3
|
|
|
(10
|
)
|
|
35
|
|
|||||
Structured finance
|
294
|
|
|
8
|
|
|
(72
|
)
|
|
3
|
|
|
233
|
|
|||||
Total
|
$
|
1,198
|
|
|
$
|
21
|
|
|
$
|
47
|
|
|
$
|
(22
|
)
|
|
$
|
1,244
|
|
|
Net Expected
Loss to be
Paid
(Recovered)
as of
December 31, 2015
|
|
Economic Loss
Development
|
|
(Paid)
Recovered
Losses (1)
|
|
Net Expected
Loss to be Paid (Recovered)
as of
March 31, 2016 |
||||||||
|
(in millions)
|
||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
||||||||
U.S. public finance
|
$
|
771
|
|
|
$
|
98
|
|
|
$
|
(5
|
)
|
|
$
|
864
|
|
Non-U.S. public finance
|
38
|
|
|
1
|
|
|
—
|
|
|
39
|
|
||||
Public finance
|
809
|
|
|
99
|
|
|
(5
|
)
|
|
903
|
|
||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. RMBS
|
409
|
|
|
(31
|
)
|
|
(85
|
)
|
|
293
|
|
||||
Triple-X life insurance transactions
|
99
|
|
|
4
|
|
|
(1
|
)
|
|
102
|
|
||||
Other structured finance
|
74
|
|
|
(13
|
)
|
|
(22
|
)
|
|
39
|
|
||||
Structured finance
|
582
|
|
|
(40
|
)
|
|
(108
|
)
|
|
434
|
|
||||
Total
|
$
|
1,391
|
|
|
$
|
59
|
|
|
$
|
(113
|
)
|
|
$
|
1,337
|
|
(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
$2 million
and
$2 million
in
LAE for
First Quarter 2017
and
2016
, respectively.
|
(2)
|
Includes expected LAE to be paid of
$19 million
as of
March 31, 2017
and
$12 million
as of
December 31, 2016
.
|
|
Net Expected Loss to be Paid (Recovered)
|
|
Net Economic Loss Development (Benefit)
|
||||||||||||
|
As of March 31, 2017
|
|
As of December 31, 2016
|
|
First Quarter 2017
|
|
First Quarter 2016
|
||||||||
|
(in millions)
|
||||||||||||||
Financial guaranty insurance
|
$
|
1,141
|
|
|
$
|
1,083
|
|
|
$
|
66
|
|
|
$
|
61
|
|
FG VIEs (1) and other
|
99
|
|
|
105
|
|
|
(4
|
)
|
|
4
|
|
||||
Credit derivatives (2)
|
4
|
|
|
10
|
|
|
(15
|
)
|
|
(6
|
)
|
||||
Total
|
$
|
1,244
|
|
|
$
|
1,198
|
|
|
$
|
47
|
|
|
$
|
59
|
|
|
March 31, 2017
|
|
December 31, 2016
|
Current Loans Modified in the Previous 12 Months
|
|
|
|
Alt A and Prime
|
25%
|
|
25%
|
Option ARM
|
25
|
|
25
|
Subprime
|
25
|
|
25
|
Current Loans Delinquent in the Previous 12 Months
|
|
|
|
Alt A and Prime
|
25
|
|
25
|
Option ARM
|
25
|
|
25
|
Subprime
|
25
|
|
25
|
30 – 59 Days Delinquent
|
|
|
|
Alt A and Prime
|
30
|
|
35
|
Option ARM
|
35
|
|
35
|
Subprime
|
40
|
|
40
|
60 – 89 Days Delinquent
|
|
|
|
Alt A and Prime
|
45
|
|
45
|
Option ARM
|
45
|
|
50
|
Subprime
|
50
|
|
50
|
90+ Days Delinquent
|
|
|
|
Alt A and Prime
|
55
|
|
55
|
Option ARM
|
55
|
|
55
|
Subprime
|
55
|
|
55
|
Bankruptcy
|
|
|
|
Alt A and Prime
|
45
|
|
45
|
Option ARM
|
50
|
|
50
|
Subprime
|
40
|
|
40
|
Foreclosure
|
|
|
|
Alt A and Prime
|
65
|
|
65
|
Option ARM
|
65
|
|
65
|
Subprime
|
65
|
|
65
|
Real Estate Owned
|
|
|
|
All
|
100
|
|
100
|
|
As of
March 31, 2017 |
|
As of
December 31, 2016 |
||||||||||
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
||||||
Alt A and Prime
|
|
|
|
|
|
|
|
|
|
|
|
||
Plateau CDR
|
1.0
|
%
|
-
|
12.8%
|
|
5.6%
|
|
1.0
|
%
|
–
|
13.5%
|
|
5.7%
|
Final CDR
|
0.0
|
%
|
-
|
0.6%
|
|
0.3%
|
|
0.0
|
%
|
–
|
0.7%
|
|
0.3%
|
Initial loss severity:
|
|
|
|
|
|
|
|
||||||
2005 and prior
|
60%
|
|
|
|
60%
|
|
|
||||||
2006
|
80%
|
|
|
|
80%
|
|
|
||||||
2007+
|
70%
|
|
|
|
70%
|
|
|
||||||
Option ARM
|
|
|
|
|
|
|
|
|
|
|
|
||
Plateau CDR
|
3.2
|
%
|
-
|
7.1%
|
|
5.6%
|
|
3.2
|
%
|
–
|
7.0%
|
|
5.6%
|
Final CDR
|
0.2
|
%
|
-
|
0.4%
|
|
0.3%
|
|
0.2
|
%
|
–
|
0.3%
|
|
0.3%
|
Initial loss severity:
|
|
|
|
|
|
|
|
||||||
2005 and prior
|
60%
|
|
|
|
60%
|
|
|
||||||
2006
|
70%
|
|
|
|
70%
|
|
|
||||||
2007+
|
75%
|
|
|
|
75%
|
|
|
||||||
Subprime
|
|
|
|
|
|
|
|
|
|
|
|
||
Plateau CDR
|
3.8
|
%
|
-
|
14.5%
|
|
8.3%
|
|
2.8
|
%
|
–
|
14.1%
|
|
8.1%
|
Final CDR
|
0.2
|
%
|
-
|
0.7%
|
|
0.4%
|
|
0.1
|
%
|
–
|
0.7%
|
|
0.4%
|
Initial loss severity:
|
|
|
|
|
|
|
|
||||||
2005 and prior
|
80%
|
|
|
|
80%
|
|
|
||||||
2006
|
90%
|
|
|
|
90%
|
|
|
||||||
2007+
|
95%
|
|
|
|
90%
|
|
|
|
As of
March 31, 2017 |
|
As of
December 31, 2016 |
||||||||||
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
||||||
Plateau CDR
|
3.8
|
%
|
–
|
23.9%
|
|
14.1%
|
|
3.5
|
%
|
–
|
24.8%
|
|
13.6%
|
Final CDR trended down to
|
0.5
|
%
|
–
|
3.2%
|
|
1.3%
|
|
0.5
|
%
|
–
|
3.2%
|
|
1.3%
|
Liquidation rates:
|
|
|
|
|
|
|
|
|
|
|
|
||
Current Loans Modified in the Previous 12 Months
|
25%
|
|
|
|
25%
|
|
|
||||||
Current Loans Delinquent in the Previous 12 Months
|
25
|
|
|
|
25
|
|
|
||||||
30 – 59 Days Delinquent
|
50
|
|
|
|
50
|
|
|
||||||
60 – 89 Days Delinquent
|
65
|
|
|
|
65
|
|
|
||||||
90+ Days Delinquent
|
80
|
|
|
|
80
|
|
|
||||||
Bankruptcy
|
55
|
|
|
|
55
|
|
|
||||||
Foreclosure
|
75
|
|
|
|
75
|
|
|
||||||
Real Estate Owned
|
100
|
|
|
|
100
|
|
|
||||||
Loss severity
|
98%
|
|
|
|
98%
|
|
|
(1)
|
Represents variables for most heavily weighted scenario (the base case).
|
6.
|
Contracts Accounted for as Insurance
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Scheduled net earned premiums
|
$
|
103
|
|
|
$
|
91
|
|
Accelerations:
|
|
|
|
||||
Refundings
|
56
|
|
|
79
|
|
||
Terminations
|
2
|
|
|
10
|
|
||
Total Accelerations
|
58
|
|
|
89
|
|
||
Accretion of discount on net premiums receivable
|
3
|
|
|
3
|
|
||
Financial guaranty insurance net earned premiums
|
164
|
|
|
183
|
|
||
Other
|
0
|
|
|
0
|
|
||
Net earned premiums (1)
|
$
|
164
|
|
|
$
|
183
|
|
(1)
|
Excludes
$4 million
and
$5 million
for
First Quarter
2017
and
2016
, respectively, related to consolidated FG VIEs.
|
|
As of March 31, 2017
|
|
As of December 31, 2016
|
||||||||||||||||||||
|
Gross
|
|
Ceded
|
|
Net(1)
|
|
Gross
|
|
Ceded
|
|
Net(1)
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Deferred premium revenue(2)
|
3,874
|
|
|
180
|
|
|
3,694
|
|
|
3,548
|
|
|
206
|
|
|
3,342
|
|
||||||
Contra-paid (3)
|
(47
|
)
|
|
0
|
|
|
(47
|
)
|
|
(37
|
)
|
|
0
|
|
|
(37
|
)
|
||||||
Unearned premium reserve
|
$
|
3,827
|
|
|
$
|
180
|
|
|
$
|
3,647
|
|
|
$
|
3,511
|
|
|
$
|
206
|
|
|
$
|
3,305
|
|
(1)
|
Excludes
$86 million
and
$90 million
of deferred premium revenue, and
$20 million
and
$25 million
of contra-paid related to FG VIEs as of
March 31, 2017
and
December 31, 2016
, respectively.
|
(2)
|
Includes
$1 million
of other as of
March 31, 2017
. As of
December 31, 2016
, other deferred premium revenue was de minimis.
|
(3)
|
See "Financial Guaranty Insurance Losses– Insurance Contracts' Loss Information" below for an explanation of "contra-paid".
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Beginning of period, December 31
|
$
|
576
|
|
|
$
|
693
|
|
Premiums receivable from acquisitions (see Note 2)
|
270
|
|
|
—
|
|
||
Gross written premiums on new business, net of commissions on assumed business
|
110
|
|
|
41
|
|
||
Gross premiums received, net of commissions on assumed business
|
(92
|
)
|
|
(49
|
)
|
||
Adjustments:
|
|
|
|
||||
Changes in the expected term
|
(1
|
)
|
|
(22
|
)
|
||
Accretion of discount, net of commissions on assumed business
|
4
|
|
|
0
|
|
||
Foreign exchange translation
|
9
|
|
|
(1
|
)
|
||
End of period, March 31 (1)
|
$
|
876
|
|
|
$
|
662
|
|
(1)
|
Excludes
$11 million
and
$16 million
as of
March 31, 2017
and
March 31, 2016
, respectively, related to consolidated FG VIEs.
|
|
As of March 31, 2017
|
||
|
(in millions)
|
||
2017 (April 1 – June 30)
|
$
|
29
|
|
2017 (July 1 – September 30)
|
26
|
|
|
2017 (October 1 – December 31)
|
19
|
|
|
2018
|
85
|
|
|
2019
|
78
|
|
|
2020
|
75
|
|
|
2021
|
73
|
|
|
2022-2026
|
283
|
|
|
2027-2031
|
195
|
|
|
2032-2036
|
109
|
|
|
After 2036
|
102
|
|
|
Total(1)
|
$
|
1,074
|
|
(1)
|
Excludes expected cash collections on FG VIEs of
$13 million
.
|
|
As of March 31, 2017
|
||
|
(in millions)
|
||
2017 (April 1 – June 30)
|
$
|
98
|
|
2017 (July 1 – September 30)
|
93
|
|
|
2017 (October 1 – December 31)
|
90
|
|
|
2018
|
342
|
|
|
2019
|
299
|
|
|
2020
|
271
|
|
|
2021
|
250
|
|
|
2022-2026
|
967
|
|
|
2027-2031
|
621
|
|
|
2032-2036
|
367
|
|
|
After 2036
|
295
|
|
|
Net deferred premium revenue(1)
|
3,693
|
|
|
Future accretion
|
189
|
|
|
Total future net earned premiums
|
$
|
3,882
|
|
(1)
|
Excludes scheduled net earned premiums on consolidated FG VIEs of
$86 million
.
|
|
As of
March 31, 2017 |
|
As of
December 31, 2016 |
||||
|
(dollars in millions)
|
||||||
Premiums receivable, net of commission payable
|
$
|
876
|
|
|
$
|
576
|
|
Gross deferred premium revenue
|
1,290
|
|
|
1,041
|
|
||
Weighted-average risk-free rate used to discount premiums
|
3.0
|
%
|
|
3.0
|
%
|
||
Weighted-average period of premiums receivable (in years)
|
9.2
|
|
|
9.1
|
|
|
As of March 31, 2017
|
|
As of December 31, 2016
|
||||||||||||||||||||
|
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
|
$
|
809
|
|
|
$
|
96
|
|
|
$
|
713
|
|
|
$
|
711
|
|
|
$
|
86
|
|
|
$
|
625
|
|
Non-U.S. public finance
|
16
|
|
|
—
|
|
|
16
|
|
|
21
|
|
|
—
|
|
|
21
|
|
||||||
Public finance
|
825
|
|
|
96
|
|
|
729
|
|
|
732
|
|
|
86
|
|
|
646
|
|
||||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. RMBS
|
273
|
|
|
260
|
|
|
13
|
|
|
283
|
|
|
262
|
|
|
21
|
|
||||||
Triple-X life insurance transactions
|
20
|
|
|
29
|
|
|
(9
|
)
|
|
36
|
|
|
—
|
|
|
36
|
|
||||||
Other structured finance
|
59
|
|
|
—
|
|
|
59
|
|
|
60
|
|
|
—
|
|
|
60
|
|
||||||
Structured finance
|
352
|
|
|
289
|
|
|
63
|
|
|
379
|
|
|
262
|
|
|
117
|
|
||||||
Subtotal
|
1,177
|
|
|
385
|
|
|
792
|
|
|
1,111
|
|
|
348
|
|
|
763
|
|
||||||
Other recoverable (payable)
|
—
|
|
|
2
|
|
|
(2
|
)
|
|
—
|
|
|
(1
|
)
|
|
1
|
|
||||||
Subtotal
|
1,177
|
|
|
387
|
|
|
790
|
|
|
1,111
|
|
|
347
|
|
|
764
|
|
||||||
Elimination of losses attributable to FG VIEs
|
(58
|
)
|
|
—
|
|
|
(58
|
)
|
|
(64
|
)
|
|
—
|
|
|
(64
|
)
|
||||||
Total (1)
|
$
|
1,119
|
|
|
$
|
387
|
|
|
$
|
732
|
|
|
$
|
1,047
|
|
|
$
|
347
|
|
|
$
|
700
|
|
(1)
|
See “Components of Net Reserves (Salvage)” table for loss and LAE reserve and salvage and subrogation recoverable components.
|
|
As of
March 31, 2017 |
|
As of
December 31, 2016 |
||||
|
(in millions)
|
||||||
Loss and LAE reserve
|
$
|
1,193
|
|
|
$
|
1,127
|
|
Reinsurance recoverable on unpaid losses
|
(74
|
)
|
|
(80
|
)
|
||
Loss and LAE reserve, net
|
1,119
|
|
|
1,047
|
|
||
Salvage and subrogation recoverable
|
(405
|
)
|
|
(365
|
)
|
||
Salvage and subrogation payable(1)
|
20
|
|
|
17
|
|
||
Other payable (recoverable)
|
(2
|
)
|
|
1
|
|
||
Salvage and subrogation recoverable, net, and other recoverable
|
(387
|
)
|
|
(347
|
)
|
||
Net reserves (salvage)
|
$
|
732
|
|
|
$
|
700
|
|
(1)
|
Recorded as a component of reinsurance balances payable.
|
|
As of
March 31, 2017 |
||
|
(in millions)
|
||
Net expected loss to be paid - financial guaranty insurance (1)
|
$
|
1,141
|
|
Contra-paid, net
|
47
|
|
|
Salvage and subrogation recoverable, net of reinsurance
|
385
|
|
|
Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance
|
(1,118
|
)
|
|
Other recoverable (payable)
|
2
|
|
|
Net expected loss to be expensed (present value) (2)
|
$
|
457
|
|
(1)
|
See "Net Expected Loss to be Paid (Recovered) by Accounting Model" table in Note 5, Expected Loss to be Paid.
|
(2)
|
Excludes
$60 million
as of
March 31, 2017
, related to consolidated FG VIEs.
|
|
As of
March 31, 2017 |
||
|
(in millions)
|
||
2017 (April 1 – June 30)
|
$
|
10
|
|
2017 (July 1 – September 30)
|
9
|
|
|
2017 (October 1 – December 31)
|
9
|
|
|
Subtotal 2017
|
28
|
|
|
2018
|
39
|
|
|
2019
|
36
|
|
|
2020
|
33
|
|
|
2021
|
33
|
|
|
2022-2026
|
144
|
|
|
2027-2031
|
83
|
|
|
2032-2036
|
44
|
|
|
After 2036
|
17
|
|
|
Net expected loss to be expensed
|
457
|
|
|
Future accretion
|
400
|
|
|
Total expected future loss and LAE
|
$
|
857
|
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Public finance:
|
|
|
|
||||
U.S. public finance
|
$
|
112
|
|
|
$
|
97
|
|
Non-U.S. public finance
|
(3
|
)
|
|
0
|
|
||
Public finance
|
109
|
|
|
97
|
|
||
Structured finance:
|
|
|
|
||||
U.S. RMBS
|
(9
|
)
|
|
11
|
|
||
Triple-X life insurance transactions
|
(45
|
)
|
|
3
|
|
||
Other structured finance
|
6
|
|
|
(14
|
)
|
||
Structured finance
|
(48
|
)
|
|
0
|
|
||
Loss and LAE on insurance contracts before FG VIE consolidation
|
61
|
|
|
97
|
|
||
Gain (loss) related to FG VIE consolidation
|
(2
|
)
|
|
(7
|
)
|
||
Loss and LAE
|
$
|
59
|
|
|
$
|
90
|
|
|
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)
|
159
|
|
|
(33
|
)
|
|
71
|
|
|
(8
|
)
|
|
149
|
|
|
(51
|
)
|
|
379
|
|
|
—
|
|
|
379
|
|
|||||||||
Remaining weighted-average contract period (in years)
|
9.4
|
|
|
7.0
|
|
|
12.7
|
|
|
9.2
|
|
|
8.1
|
|
|
5.4
|
|
|
10.1
|
|
|
—
|
|
|
10.1
|
|
|||||||||
Outstanding exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Principal
|
$
|
4,732
|
|
|
$
|
(305
|
)
|
|
$
|
3,990
|
|
|
$
|
(292
|
)
|
|
$
|
4,634
|
|
|
$
|
(283
|
)
|
|
$
|
12,476
|
|
|
$
|
—
|
|
|
$
|
12,476
|
|
Interest
|
2,457
|
|
|
(132
|
)
|
|
2,625
|
|
|
(132
|
)
|
|
1,859
|
|
|
(69
|
)
|
|
6,608
|
|
|
—
|
|
|
6,608
|
|
|||||||||
Total(2)
|
$
|
7,189
|
|
|
$
|
(437
|
)
|
|
$
|
6,615
|
|
|
$
|
(424
|
)
|
|
$
|
6,493
|
|
|
$
|
(352
|
)
|
|
$
|
19,084
|
|
|
$
|
—
|
|
|
$
|
19,084
|
|
Expected cash outflows (inflows)
|
$
|
169
|
|
|
$
|
(18
|
)
|
|
$
|
1,525
|
|
|
$
|
(75
|
)
|
|
$
|
1,446
|
|
|
$
|
(60
|
)
|
|
$
|
2,987
|
|
|
$
|
(320
|
)
|
|
$
|
2,667
|
|
Potential recoveries(3)
|
(459
|
)
|
|
23
|
|
|
(172
|
)
|
|
3
|
|
|
(758
|
)
|
|
40
|
|
|
(1,323
|
)
|
|
197
|
|
|
(1,126
|
)
|
|||||||||
Subtotal
|
(290
|
)
|
|
5
|
|
|
1,353
|
|
|
(72
|
)
|
|
688
|
|
|
(20
|
)
|
|
1,664
|
|
|
(123
|
)
|
|
1,541
|
|
|||||||||
Discount
|
64
|
|
|
(4
|
)
|
|
(363
|
)
|
|
15
|
|
|
(136
|
)
|
|
(1
|
)
|
|
(425
|
)
|
|
25
|
|
|
(400
|
)
|
|||||||||
Present value of expected cash flows
|
$
|
(226
|
)
|
|
$
|
1
|
|
|
$
|
990
|
|
|
$
|
(57
|
)
|
|
$
|
552
|
|
|
$
|
(21
|
)
|
|
$
|
1,239
|
|
|
$
|
(98
|
)
|
|
$
|
1,141
|
|
Deferred premium revenue
|
$
|
120
|
|
|
$
|
(5
|
)
|
|
$
|
310
|
|
|
$
|
(4
|
)
|
|
$
|
459
|
|
|
$
|
(26
|
)
|
|
$
|
854
|
|
|
$
|
(83
|
)
|
|
$
|
771
|
|
Reserves (salvage)
|
$
|
(277
|
)
|
|
$
|
6
|
|
|
$
|
802
|
|
|
$
|
(52
|
)
|
|
$
|
318
|
|
|
$
|
(8
|
)
|
|
$
|
789
|
|
|
$
|
(58
|
)
|
|
$
|
731
|
|
|
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(3)
|
(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
|
|
(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 and R&W receivables and payables.
|
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.
|
◦
|
the profit the originator, usually an investment bank, realizes for structuring 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 its counterparty credit risk exposure to the Company (hedge cost).
|
•
|
Actual collateral specific credit spreads (if up-to-date and reliable market-based spreads are available).
|
•
|
Transactions 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
March 31, 2017 |
|
As of
December 31, 2016 |
||
Based on actual collateral specific spreads
|
7
|
%
|
|
7
|
%
|
Based on market indices
|
73
|
%
|
|
77
|
%
|
Provided by the CDS counterparty
|
20
|
%
|
|
16
|
%
|
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 any 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 are 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
|
$
|
5,622
|
|
|
$
|
—
|
|
|
$
|
5,580
|
|
|
$
|
42
|
|
U.S. government and agencies
|
414
|
|
|
—
|
|
|
414
|
|
|
—
|
|
||||
Corporate securities
|
1,874
|
|
|
—
|
|
|
1,812
|
|
|
62
|
|
||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|||||||
RMBS
|
992
|
|
|
—
|
|
|
590
|
|
|
402
|
|
||||
Commercial mortgage-backed securities (CMBS)
|
568
|
|
|
—
|
|
|
568
|
|
|
—
|
|
||||
Asset-backed securities
|
690
|
|
|
—
|
|
|
88
|
|
|
602
|
|
||||
Foreign government securities
|
319
|
|
|
—
|
|
|
319
|
|
|
—
|
|
||||
Total fixed-maturity securities
|
10,479
|
|
|
—
|
|
|
9,371
|
|
|
1,108
|
|
||||
Short-term investments
|
689
|
|
|
313
|
|
|
376
|
|
|
—
|
|
||||
Other invested assets (1)
|
8
|
|
|
—
|
|
|
0
|
|
|
8
|
|
||||
Credit derivative assets
|
9
|
|
|
—
|
|
|
—
|
|
|
9
|
|
||||
FG VIEs’ assets, at fair value
|
781
|
|
|
—
|
|
|
—
|
|
|
781
|
|
||||
Other assets
|
114
|
|
|
26
|
|
|
28
|
|
|
60
|
|
||||
Total assets carried at fair value
|
$
|
12,080
|
|
|
$
|
339
|
|
|
$
|
9,775
|
|
|
$
|
1,966
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|||||||
Credit derivative liabilities
|
$
|
359
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
359
|
|
FG VIEs’ liabilities with recourse, at fair value
|
721
|
|
|
—
|
|
|
—
|
|
|
721
|
|
||||
FG VIEs’ liabilities without recourse, at fair value
|
134
|
|
|
—
|
|
|
—
|
|
|
134
|
|
||||
Total liabilities carried at fair value
|
$
|
1,214
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,214
|
|
|
|
|
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
|
|
(1)
|
Excluded from the table above are investment funds of
$49 million
and
$48 million
as of
March 31, 2017
and
December 31, 2016
, 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 |
|
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, 2016
|
$
|
39
|
|
|
$
|
60
|
|
|
$
|
365
|
|
|
$
|
805
|
|
|
|
$
|
876
|
|
|
|
$
|
65
|
|
|
|
$
|
(389
|
)
|
|
$
|
(807
|
)
|
|
$
|
(151
|
)
|
|
||||||
MBIA UK Acquisition
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||||||||||||||||
Total pretax realized and unrealized gains/(losses) recorded in: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Net income (loss)
|
1
|
|
(2
|
)
|
2
|
|
(2
|
)
|
(2
|
)
|
(2
|
)
|
74
|
|
(2
|
)
|
17
|
|
(3
|
)
|
(2
|
)
|
(4
|
)
|
54
|
|
(6
|
)
|
(9
|
)
|
(3
|
)
|
(2
|
)
|
(3
|
)
|
|||||||||
Other comprehensive income (loss)
|
4
|
|
|
0
|
|
|
27
|
|
|
7
|
|
|
|
—
|
|
|
|
0
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
||||||||||||
Purchases
|
—
|
|
|
—
|
|
|
27
|
|
|
57
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
||||||||||||
Settlements
|
(2
|
)
|
|
—
|
|
|
(15
|
)
|
|
(348
|
)
|
|
(46
|
)
|
|
—
|
|
|
|
(15
|
)
|
|
|
44
|
|
|
|
4
|
|
|
|
||||||||||||||
FG VIE consolidations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
21
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
(21
|
)
|
|
|
|||||||||||||
FG VIE deconsolidations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(87
|
)
|
|
—
|
|
|
—
|
|
|
51
|
|
|
36
|
|
|
||||||||||||||||||
Fair value as of
March 31, 2017
|
$
|
42
|
|
|
$
|
62
|
|
|
$
|
402
|
|
|
$
|
602
|
|
|
|
$
|
781
|
|
|
|
$
|
63
|
|
|
|
$
|
(350
|
)
|
|
$
|
(721
|
)
|
|
$
|
(134
|
)
|
|
||||||
Change in unrealized gains/(losses) related to financial instruments held as of March 31, 2017
|
$
|
4
|
|
|
$
|
0
|
|
|
$
|
27
|
|
|
$
|
73
|
|
|
$
|
21
|
|
|
$
|
(2
|
)
|
|
$
|
25
|
|
|
$
|
(7
|
)
|
|
$
|
(2
|
)
|
|
|
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
|
)
|
|
||||||||
Total pretax realized and unrealized gains/(losses) recorded in: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Net income (loss)
|
0
|
|
(2
|
)
|
2
|
|
(2
|
)
|
(2
|
)
|
(2
|
)
|
1
|
|
(2
|
)
|
0
|
|
(2
|
)
|
(4
|
)
|
(3
|
)
|
(16
|
)
|
(4
|
)
|
(60
|
)
|
(6
|
)
|
21
|
|
(3
|
)
|
2
|
|
(3
|
)
|
||||||||||
Other comprehensive income (loss)
|
0
|
|
|
1
|
|
|
(5
|
)
|
|
(5
|
)
|
|
0
|
|
|
—
|
|
|
|
0
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|||||||||||||||
Purchases
|
—
|
|
|
—
|
|
|
34
|
|
|
—
|
|
|
—
|
|
(7
|
)
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
||||||||||||||
Settlements
|
(1
|
)
|
|
—
|
|
|
(15
|
)
|
|
(14
|
)
|
|
(60
|
)
|
|
(66
|
)
|
|
—
|
|
|
|
(9
|
)
|
|
|
39
|
|
|
|
3
|
|
|
|
||||||||||||||||
FG VIE deconsolidations
|
—
|
|
|
—
|
|
|
0
|
|
|
—
|
|
|
—
|
|
|
0
|
|
|
—
|
|
|
—
|
|
|
0
|
|
|
—
|
|
|
||||||||||||||||||||
Fair value as of
March 31, 2016
|
$
|
7
|
|
|
$
|
74
|
|
|
$
|
360
|
|
|
$
|
639
|
|
|
$
|
—
|
|
|
$
|
1,191
|
|
|
$
|
49
|
|
|
$
|
(434
|
)
|
|
$
|
(1,165
|
)
|
|
$
|
(119
|
)
|
|
||||||||||
Change in unrealized gains/(losses) related to financial instruments held as of March 31, 2016
|
$
|
0
|
|
|
$
|
1
|
|
|
$
|
(6
|
)
|
|
$
|
(5
|
)
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
(16
|
)
|
|
$
|
(79
|
)
|
|
$
|
21
|
|
|
$
|
1
|
|
|
(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
March 31, 2017 (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
|
|
$
|
42
|
|
|
Yield
|
|
4.3
|
%
|
-
|
36.0%
|
|
11.2%
|
|
|
|
|
|
|
|
|
|
|
|
|||
Corporate securities
|
|
62
|
|
|
Yield
|
|
21.0%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
RMBS
|
|
402
|
|
|
CPR
|
|
1.2
|
%
|
-
|
17.0%
|
|
5.5%
|
|
|
|
CDR
|
|
2.0
|
%
|
-
|
9.1%
|
|
6.7%
|
||||
|
|
Loss severity
|
|
35.0
|
%
|
-
|
100.0%
|
|
78.9%
|
||||
|
|
Yield
|
|
3.3
|
%
|
-
|
9.2%
|
|
5.9%
|
||||
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|||
Triple-X life insurance transactions
|
|
505
|
|
|
Yield
|
|
5.7
|
%
|
|
6.0%
|
|
5.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Collateralized loan obligations (CLO) /TruPS
|
|
32
|
|
|
Yield
|
|
2.6
|
%
|
-
|
4.8%
|
|
3.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Others
|
|
65
|
|
|
Yield
|
|
3.1
|
%
|
-
|
11.0%
|
|
10.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
FG VIEs’ assets, at fair value
|
|
781
|
|
|
CPR
|
|
3.5
|
%
|
-
|
12.8%
|
|
8.6%
|
|
|
|
CDR
|
|
2.1
|
%
|
-
|
21.7%
|
|
5.8%
|
||||
|
|
Loss severity
|
|
57.0
|
%
|
-
|
100.0%
|
|
79.2%
|
||||
|
|
Yield
|
|
2.9
|
%
|
-
|
17.9%
|
|
6.5%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
Other assets
|
|
60
|
|
|
Implied Yield
|
|
4.6%
|
-
|
5.3%
|
|
4.9%
|
||
|
|
Term (years)
|
|
10 years
|
|
|
|||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||
Credit derivative liabilities, net
|
|
(350
|
)
|
|
Year 1 loss estimates
|
|
0.0
|
%
|
-
|
54.0%
|
|
1.8%
|
|
|
|
Hedge cost (in bps)
|
|
7.8
|
|
-
|
135.8
|
|
30.6
|
||||
|
|
Bank profit (in bps)
|
|
3.8
|
|
-
|
825.0
|
|
63.5
|
||||
|
|
Internal floor (in bps)
|
|
7.0
|
|
-
|
100.0
|
|
16.1
|
||||
|
|
Internal credit rating
|
|
AAA
|
|
-
|
CCC
|
|
AA
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
FG VIEs’ liabilities, at fair value
|
|
(855
|
)
|
|
CPR
|
|
3.5
|
%
|
-
|
12.8%
|
|
8.6%
|
|
|
|
CDR
|
|
2.1
|
%
|
-
|
21.7%
|
|
5.8%
|
||||
|
|
Loss severity
|
|
57.0
|
%
|
-
|
100.0%
|
|
79.2%
|
||||
|
|
Yield
|
|
2.4
|
%
|
-
|
17.9%
|
|
4.9%
|
(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, 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
.
|
|
As of
March 31, 2017 |
|
As of
December 31, 2016 |
||||||||||||
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
||||||||
|
(in millions)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed-maturity securities
|
$
|
10,479
|
|
|
$
|
10,479
|
|
|
$
|
10,233
|
|
|
$
|
10,233
|
|
Short-term investments
|
689
|
|
|
689
|
|
|
590
|
|
|
590
|
|
||||
Other invested assets
|
149
|
|
|
151
|
|
|
146
|
|
|
147
|
|
||||
Credit derivative assets
|
9
|
|
|
9
|
|
|
13
|
|
|
13
|
|
||||
FG VIEs’ assets, at fair value
|
781
|
|
|
781
|
|
|
876
|
|
|
876
|
|
||||
Other assets
|
213
|
|
|
213
|
|
|
205
|
|
|
205
|
|
||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial guaranty insurance contracts (1)
|
3,537
|
|
|
8,363
|
|
|
3,483
|
|
|
8,738
|
|
||||
Long-term debt
|
1,307
|
|
|
1,606
|
|
|
1,306
|
|
|
1,546
|
|
||||
Credit derivative liabilities
|
359
|
|
|
359
|
|
|
402
|
|
|
402
|
|
||||
FG VIEs’ liabilities with recourse, at fair value
|
721
|
|
|
721
|
|
|
807
|
|
|
807
|
|
||||
FG VIEs’ liabilities without recourse, at fair value
|
134
|
|
|
134
|
|
|
151
|
|
|
151
|
|
||||
Other liabilities
|
151
|
|
|
151
|
|
|
12
|
|
|
12
|
|
(1)
|
Carrying amount includes the assets and liabilities related to financial guaranty insurance contract premiums, losses, and salvage and subrogation and other recoverables net of reinsurance.
|
8.
|
Contracts Accounted for as Credit Derivatives
|
|
|
As of March 31, 2017
|
|
As of December 31, 2016
|
||||||||
Asset Type
|
|
Net Par
Outstanding
|
|
Weighted
Average
Credit
Rating
|
|
Net Par
Outstanding
|
|
Weighted
Average
Credit
Rating
|
||||
|
|
(dollars in millions)
|
||||||||||
Pooled corporate obligations:
|
|
|
|
|
|
|
|
|
|
|
||
CLO/collateralized bond obligations
|
|
$
|
1,461
|
|
|
AAA
|
|
$
|
2,022
|
|
|
AAA
|
Synthetic investment grade pooled corporate
|
|
4,400
|
|
|
AAA
|
|
7,224
|
|
|
AAA
|
||
TruPS CDOs
|
|
999
|
|
|
A-
|
|
1,179
|
|
|
BBB+
|
||
Total pooled corporate obligations
|
|
6,860
|
|
|
AAA
|
|
10,425
|
|
|
AAA
|
||
U.S. RMBS
|
|
1,080
|
|
|
AA
|
|
1,142
|
|
|
AA-
|
||
Pooled infrastructure
|
|
1,363
|
|
|
AAA
|
|
1,513
|
|
|
AAA
|
||
Infrastructure finance
|
|
832
|
|
|
BBB+
|
|
1,021
|
|
|
BBB+
|
||
Other(1)
|
|
2,721
|
|
|
A-
|
|
2,896
|
|
|
A
|
||
Total
|
|
$
|
12,856
|
|
|
AA
|
|
$
|
16,997
|
|
|
AA+
|
(1)
|
This comprises numerous transactions across various asset classes, such as commercial receivables, international RMBS, regulated utilities and consumer receivables.
|
|
|
As of March 31, 2017
|
|
As of December 31, 2016
|
||||||||||
Ratings
|
|
Net Par
Outstanding
|
|
% of Total
|
|
Net Par
Outstanding
|
|
% of Total
|
||||||
|
|
(dollars in millions)
|
||||||||||||
AAA
|
|
$
|
7,493
|
|
|
58.3
|
%
|
|
$
|
10,967
|
|
|
64.6
|
%
|
AA
|
|
1,900
|
|
|
14.8
|
|
|
2,167
|
|
|
12.7
|
|
||
A
|
|
1,597
|
|
|
12.4
|
|
|
1,499
|
|
|
8.8
|
|
||
BBB
|
|
1,114
|
|
|
8.7
|
|
|
1,391
|
|
|
8.2
|
|
||
BIG
|
|
752
|
|
|
5.8
|
|
|
973
|
|
|
5.7
|
|
||
Credit derivative net par outstanding
|
|
$
|
12,856
|
|
|
100.0
|
%
|
|
$
|
16,997
|
|
|
100.0
|
%
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Realized gains on credit derivatives
|
$
|
5
|
|
|
$
|
10
|
|
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements
|
10
|
|
|
(2
|
)
|
||
Realized gains (losses) and other settlements
|
15
|
|
|
8
|
|
||
Net unrealized gains (losses):
|
|
|
|
||||
Pooled corporate obligations
|
20
|
|
|
(48
|
)
|
||
U.S. RMBS
|
9
|
|
|
(15
|
)
|
||
Pooled infrastructure
|
6
|
|
|
0
|
|
||
Infrastructure finance
|
1
|
|
|
0
|
|
||
Other
|
3
|
|
|
(5
|
)
|
||
Net unrealized gains (losses)
|
39
|
|
|
(68
|
)
|
||
Net change in fair value of credit derivatives
|
$
|
54
|
|
|
$
|
(60
|
)
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Net par of terminated credit derivative contracts
|
$
|
184
|
|
|
$
|
—
|
|
Realized gains on credit derivatives
|
0
|
|
|
0
|
|
||
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements
|
(12
|
)
|
|
—
|
|
||
Net unrealized gains (losses) on credit derivatives
|
15
|
|
|
11
|
|
|
As of
March 31, 2017 |
|
As of
December 31, 2016 |
|
As of
March 31, 2016 |
|
As of
December 31, 2015 |
||||
Five-year CDS spread:
|
|
|
|
|
|
|
|
||||
AGC
|
173
|
|
|
158
|
|
|
307
|
|
|
376
|
|
AGM
|
181
|
|
|
158
|
|
|
309
|
|
|
366
|
|
One-year CDS spread
|
|
|
|
|
|
|
|
||||
AGC
|
31
|
|
|
35
|
|
|
105
|
|
|
139
|
|
AGM
|
31
|
|
|
29
|
|
|
102
|
|
|
131
|
|
|
As of
March 31, 2017 |
|
As of
December 31, 2016 |
||||
|
(in millions)
|
||||||
Fair value of credit derivatives before effect of AGC and AGM credit spreads
|
$
|
(713
|
)
|
|
$
|
(811
|
)
|
Plus: Effect of AGC and AGM credit spreads
|
363
|
|
|
422
|
|
||
Net fair value of credit derivatives
|
$
|
(350
|
)
|
|
$
|
(389
|
)
|
|
|
As of
March 31, 2017 |
|
As of
December 31, 2016 |
||||
|
|
(in millions)
|
||||||
Fair value of credit derivative asset (liability), net
|
|
$
|
(350
|
)
|
|
$
|
(389
|
)
|
Expected loss to be (paid) recovered
|
|
(4
|
)
|
|
(10
|
)
|
Credit Spreads(1)
|
|
Estimated Net
Fair Value
(Pre-Tax)
|
|
Estimated Change
in Gain/(Loss)
(Pre-Tax)
|
||||
|
|
(in millions)
|
||||||
100% widening in spreads
|
|
$
|
(712
|
)
|
|
$
|
(362
|
)
|
50% widening in spreads
|
|
(531
|
)
|
|
(181
|
)
|
||
25% widening in spreads
|
|
(441
|
)
|
|
(91
|
)
|
||
10% widening in spreads
|
|
(387
|
)
|
|
(37
|
)
|
||
Base Scenario
|
|
(350
|
)
|
|
—
|
|
||
10% narrowing in spreads
|
|
(316
|
)
|
|
34
|
|
||
25% narrowing in spreads
|
|
(266
|
)
|
|
84
|
|
||
50% narrowing in spreads
|
|
(182
|
)
|
|
168
|
|
(1)
|
Includes the effects of spreads on both the underlying asset classes and the Company’s own credit spread.
|
9.
|
Consolidated Variable Interest Entities
|
|
First Quarter
|
||||
|
2017
|
|
2016
|
||
|
|
||||
Beginning of the period, December 31
|
32
|
|
|
34
|
|
Consolidated (1)
|
1
|
|
|
—
|
|
Deconsolidated (1)
|
(1
|
)
|
|
(1
|
)
|
End of the period, March 31
|
32
|
|
|
33
|
|
(1)
|
Net gain/loss on consolidation and deconsolidation was de minimis in
First Quarter 2017
and
2016
.
|
|
As of March 31, 2017
|
|
As of December 31, 2016
|
||||||||||||
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
||||||||
|
(in millions)
|
||||||||||||||
With recourse:
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. RMBS first lien
|
$
|
406
|
|
|
$
|
436
|
|
|
$
|
473
|
|
|
$
|
509
|
|
U.S. RMBS second lien
|
168
|
|
|
211
|
|
|
178
|
|
|
223
|
|
||||
Manufactured housing
|
73
|
|
|
74
|
|
|
74
|
|
|
75
|
|
||||
Total with recourse
|
647
|
|
|
721
|
|
|
725
|
|
|
807
|
|
||||
Without recourse
|
134
|
|
|
134
|
|
|
151
|
|
|
151
|
|
||||
Total
|
$
|
781
|
|
|
$
|
855
|
|
|
$
|
876
|
|
|
$
|
958
|
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Net earned premiums
|
$
|
(4
|
)
|
|
$
|
(5
|
)
|
Net investment income
|
(1
|
)
|
|
(5
|
)
|
||
Net realized investment gains (losses)
|
0
|
|
|
1
|
|
||
Fair value gains (losses) on FG VIEs
|
10
|
|
|
18
|
|
||
Loss and LAE
|
2
|
|
|
6
|
|
||
Effect on income before tax
|
7
|
|
|
15
|
|
||
Less: tax provision (benefit)
|
3
|
|
|
5
|
|
||
Effect on net income (loss)
|
$
|
4
|
|
|
$
|
10
|
|
|
|
|
|
||||
Effect on cash flows from operating activities
|
$
|
5
|
|
|
$
|
6
|
|
|
As of
March 31, 2017 |
|
As of
December 31, 2016 |
||||
|
(in millions)
|
||||||
Effect on shareholders' equity (decrease) increase
|
$
|
(4
|
)
|
|
$
|
(9
|
)
|
10.
|
Investments and Cash
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Income from fixed-maturity securities managed by third parties
|
$
|
75
|
|
|
$
|
79
|
|
Income from internally managed securities:
|
|
|
|
||||
Fixed maturities (1)
|
46
|
|
|
17
|
|
||
Other
|
3
|
|
|
5
|
|
||
Gross investment income
|
124
|
|
|
101
|
|
||
Investment expenses
|
(2
|
)
|
|
(2
|
)
|
||
Net investment income
|
$
|
122
|
|
|
$
|
99
|
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Gross realized gains on available-for-sale securities (1)
|
$
|
43
|
|
|
$
|
6
|
|
Gross realized losses on available-for-sale securities
|
(2
|
)
|
|
(2
|
)
|
||
Net realized gains (losses) on other invested assets
|
0
|
|
|
(1
|
)
|
||
Other-than-temporary impairment
|
(9
|
)
|
|
(16
|
)
|
||
Net realized investment gains (losses)
|
$
|
32
|
|
|
$
|
(13
|
)
|
(1)
|
First Quarter 2017
primarily consists of a gain on Zohar II Notes used as consideration for the MBIA UK Acquisition. See Note 2, Acquisitions.
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Balance, beginning of period
|
$
|
134
|
|
|
$
|
108
|
|
Additions for credit losses on securities for which an other-than-temporary-impairment was not previously recognized
|
0
|
|
|
1
|
|
||
Reductions for securities sold and other settlement during the period
|
0
|
|
|
(2
|
)
|
||
Additions for credit losses on securities for which an other-than-temporary-impairment was previously recognized
|
8
|
|
|
0
|
|
||
Balance, end of period
|
$
|
142
|
|
|
$
|
107
|
|
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
|
%
|
|
$
|
5,432
|
|
|
$
|
219
|
|
|
$
|
(29
|
)
|
|
$
|
5,622
|
|
|
$
|
13
|
|
|
AA
|
U.S. government and agencies
|
|
4
|
|
|
399
|
|
|
16
|
|
|
(1
|
)
|
|
414
|
|
|
0
|
|
|
AA+
|
|||||
Corporate securities
|
|
17
|
|
|
1,851
|
|
|
50
|
|
|
(27
|
)
|
|
1,874
|
|
|
(7
|
)
|
|
A
|
|||||
Mortgage-backed securities(4):
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
RMBS
|
|
9
|
|
|
978
|
|
|
40
|
|
|
(26
|
)
|
|
992
|
|
|
5
|
|
|
BBB+
|
|||||
CMBS
|
|
5
|
|
|
561
|
|
|
12
|
|
|
(5
|
)
|
|
568
|
|
|
—
|
|
|
AAA
|
|||||
Asset-backed securities
|
|
6
|
|
|
573
|
|
|
117
|
|
|
0
|
|
|
690
|
|
|
93
|
|
|
B-
|
|||||
Foreign government securities
|
|
3
|
|
|
341
|
|
|
7
|
|
|
(29
|
)
|
|
319
|
|
|
—
|
|
|
AA
|
|||||
Total fixed-maturity securities
|
|
94
|
|
|
10,135
|
|
|
461
|
|
|
(117
|
)
|
|
10,479
|
|
|
104
|
|
|
A+
|
|||||
Short-term investments
|
|
6
|
|
|
687
|
|
|
2
|
|
|
0
|
|
|
689
|
|
|
—
|
|
|
AAA
|
|||||
Total investment portfolio
|
|
100
|
%
|
|
$
|
10,822
|
|
|
$
|
463
|
|
|
$
|
(117
|
)
|
|
$
|
11,168
|
|
|
$
|
104
|
|
|
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
|
|
50
|
%
|
|
$
|
5,269
|
|
|
$
|
202
|
|
|
$
|
(39
|
)
|
|
$
|
5,432
|
|
|
$
|
13
|
|
|
AA
|
U.S. government and agencies
|
|
4
|
|
|
424
|
|
|
17
|
|
|
(1
|
)
|
|
440
|
|
|
0
|
|
|
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+
|
(1)
|
Based on amortized cost.
|
(2)
|
Accumulated OCI. See also Note 17, Shareholders' Equity for additional information as applicable.
|
(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
40%
of mortgage backed securities as of
March 31, 2017
and
42%
as of
December 31, 2016
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
|
$
|
994
|
|
|
$
|
(28
|
)
|
|
$
|
6
|
|
|
$
|
(1
|
)
|
|
$
|
1,000
|
|
|
$
|
(29
|
)
|
U.S. government and agencies
|
172
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
172
|
|
|
(1
|
)
|
||||||
Corporate securities
|
356
|
|
|
(8
|
)
|
|
120
|
|
|
(19
|
)
|
|
476
|
|
|
(27
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
RMBS
|
377
|
|
|
(13
|
)
|
|
93
|
|
|
(13
|
)
|
|
470
|
|
|
(26
|
)
|
||||||
CMBS
|
160
|
|
|
(5
|
)
|
|
1
|
|
|
0
|
|
|
161
|
|
|
(5
|
)
|
||||||
Asset-backed securities
|
52
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
52
|
|
|
0
|
|
||||||
Foreign government securities
|
45
|
|
|
(4
|
)
|
|
115
|
|
|
(25
|
)
|
|
160
|
|
|
(29
|
)
|
||||||
Total
|
$
|
2,156
|
|
|
$
|
(59
|
)
|
|
$
|
335
|
|
|
$
|
(58
|
)
|
|
$
|
2,491
|
|
|
$
|
(117
|
)
|
Number of securities (1)
|
|
|
|
542
|
|
|
|
|
|
62
|
|
|
|
|
|
598
|
|
||||||
Number of securities with other-than-temporary impairment
|
|
|
|
12
|
|
|
|
|
|
9
|
|
|
|
|
|
21
|
|
|
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
|
|
(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
|
$
|
284
|
|
|
$
|
283
|
|
Due after one year through five years
|
1,798
|
|
|
1,828
|
|
||
Due after five years through 10 years
|
2,171
|
|
|
2,227
|
|
||
Due after 10 years
|
4,343
|
|
|
4,581
|
|
||
Mortgage-backed securities:
|
|
|
|
|
|
||
RMBS
|
978
|
|
|
992
|
|
||
CMBS
|
561
|
|
|
568
|
|
||
Total
|
$
|
10,135
|
|
|
$
|
10,479
|
|
|
As of
March 31, 2017 |
|
As of
December 31, 2016 |
||||
|
(in millions)
|
||||||
Assets purchased for loss mitigation and other risk management purposes:
|
|
|
|
||||
Fixed-maturity securities, at fair value
|
$
|
1,304
|
|
|
$
|
1,492
|
|
Other invested assets
|
106
|
|
|
107
|
|
||
Other
|
66
|
|
|
55
|
|
||
Total
|
$
|
1,476
|
|
|
$
|
1,654
|
|
|
As of March 31, 2017
|
|
As of December 31, 2016
|
|
As of March 31, 2016
|
|
As of December 31, 2015
|
||||||||
|
(in millions)
|
||||||||||||||
Cash
|
$
|
147
|
|
|
$
|
118
|
|
|
$
|
112
|
|
|
$
|
166
|
|
Restricted cash (1)
|
1
|
|
|
9
|
|
|
0
|
|
|
0
|
|
||||
Total cash and restricted cash
|
$
|
148
|
|
|
$
|
127
|
|
|
$
|
112
|
|
|
$
|
166
|
|
(1)
|
Amounts relate to cash held in trust accounts and are reported in other assets in consolidated balance sheets. See Note 13, Reinsurance and Other Monoline Exposures, for more information.
|
11.
|
Insurance Company Regulatory Requirements
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Dividends paid by AGC to AGUS
|
$
|
28
|
|
|
$
|
—
|
|
Dividends paid by AGM to AGMH
|
79
|
|
|
95
|
|
||
Dividends paid by AG Re to AGL
|
40
|
|
|
25
|
|
||
Dividends paid by MAC to MAC Holdings (1)
|
12
|
|
|
—
|
|
(1)
|
MAC Holdings distributed the entire amount to AGM and AGC, in proportion to their ownership percentages.
|
12.
|
Income Taxes
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Expected tax provision (benefit) at statutory rates in taxable jurisdictions
|
$
|
85
|
|
|
$
|
18
|
|
Tax-exempt interest
|
(12
|
)
|
|
(13
|
)
|
||
Gain on bargain purchase
|
(20
|
)
|
|
—
|
|
||
State taxes
|
5
|
|
|
1
|
|
||
Other
|
(3
|
)
|
|
0
|
|
||
Total provision (benefit) for income taxes
|
$
|
55
|
|
|
$
|
6
|
|
Effective tax rate
|
14.7
|
%
|
|
10.0
|
%
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
United States
|
$
|
474
|
|
|
$
|
205
|
|
Bermuda
|
57
|
|
|
42
|
|
||
U.K.
|
(4
|
)
|
|
(2
|
)
|
||
Total
|
$
|
527
|
|
|
$
|
245
|
|
13.
|
Reinsurance and Other Monoline Exposures
|
•
|
if the Company fails to meet certain financial and regulatory criteria and to maintain a specified minimum financial strength rating, or
|
•
|
upon certain changes of control of the Company.
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Premiums Written:
|
|
|
|
||||
Direct
|
$
|
109
|
|
|
$
|
21
|
|
Assumed (1)
|
2
|
|
|
(2
|
)
|
||
Ceded (2)
|
11
|
|
|
(17
|
)
|
||
Net
|
$
|
122
|
|
|
$
|
2
|
|
Premiums Earned:
|
|
|
|
||||
Direct
|
$
|
167
|
|
|
$
|
190
|
|
Assumed
|
6
|
|
|
8
|
|
||
Ceded
|
(9
|
)
|
|
(15
|
)
|
||
Net
|
$
|
164
|
|
|
$
|
183
|
|
Loss and LAE:
|
|
|
|
||||
Direct
|
$
|
67
|
|
|
$
|
109
|
|
Assumed
|
3
|
|
|
(14
|
)
|
||
Ceded
|
(11
|
)
|
|
(5
|
)
|
||
Net
|
$
|
59
|
|
|
$
|
90
|
|
(1)
|
Negative assumed premiums written were due to changes in expected debt service schedules.
|
|
|
Par Outstanding
|
||||||||||
|
|
As of March 31, 2017
|
||||||||||
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)
|
|
$
|
3,269
|
|
|
$
|
—
|
|
|
$
|
—
|
|
National
|
|
—
|
|
|
4,057
|
|
|
3,962
|
|
|||
Subtotal
|
|
3,269
|
|
|
4,057
|
|
|
3,962
|
|
|||
Reinsurers rated BIG or not rated:
|
|
|
|
|
|
|
||||||
American Overseas Reinsurance Company Limited (3)
|
|
3,307
|
|
|
—
|
|
|
30
|
|
|||
Syncora (3)
|
|
1,950
|
|
|
1,097
|
|
|
654
|
|
|||
ACA Financial Guaranty Corp.
|
|
621
|
|
|
12
|
|
|
—
|
|
|||
Ambac
|
|
115
|
|
|
2,583
|
|
|
6,061
|
|
|||
MBIA
|
|
—
|
|
|
949
|
|
|
151
|
|
|||
Financial Guaranty Insurance Company and FGIC UK Limited
|
|
—
|
|
|
1,221
|
|
|
404
|
|
|||
Ambac Assurance Corp. Segregated Account
|
|
—
|
|
|
57
|
|
|
584
|
|
|||
Subtotal
|
|
5,993
|
|
|
5,919
|
|
|
7,884
|
|
|||
Other (3)
|
|
71
|
|
|
538
|
|
|
146
|
|
|||
Total
|
|
$
|
9,333
|
|
|
$
|
10,514
|
|
|
$
|
11,992
|
|
(1)
|
Of the total ceded par to reinsurers rated BIG or not rated,
$359 million
is rated BIG
.
|
(2)
|
The par on second-to-pay exposure where the primary insurer and underlying transaction rating are both BIG, and/or not rated, is
$742 million
.
|
(3)
|
The total collateral posted by all non-affiliated reinsurers required to post, or that had agreed to post, collateral as of
March 31, 2017
was approximately
$285 million
.
|
|
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
|
|
|
$
|
(9
|
)
|
|
$
|
4
|
|
|
$
|
44
|
|
Reinsurers rated BIG or not rated:
|
|
|
|
|
|
|
|
||||||||
American Overseas Reinsurance Company Limited
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
38
|
|
||||
Syncora
|
13
|
|
|
(17
|
)
|
|
—
|
|
|
(6
|
)
|
||||
Ambac
|
33
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
||||
MBIA
|
0
|
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
||||
Financial Guaranty Insurance Company and FGIC UK Limited
|
4
|
|
|
—
|
|
|
(17
|
)
|
|
—
|
|
||||
Ambac Assurance Corp. Segregated Account
|
6
|
|
|
—
|
|
|
(48
|
)
|
|
—
|
|
||||
Other
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
||||
Subtotal
|
56
|
|
|
(24
|
)
|
|
(74
|
)
|
|
32
|
|
||||
Total
|
$
|
61
|
|
|
$
|
(33
|
)
|
|
$
|
(70
|
)
|
|
$
|
76
|
|
15.
|
Long-Term Debt and Credit Facilities
|
|
As of March 31, 2017
|
|
As of December 31, 2016
|
||||||||||||
|
Principal
|
|
Carrying
Value
|
|
Principal
|
|
Carrying
Value
|
||||||||
|
(in millions)
|
||||||||||||||
AGUS:
|
|
|
|
|
|
|
|
|
|
|
|
||||
7% Senior Notes(1)
|
$
|
200
|
|
|
$
|
197
|
|
|
$
|
200
|
|
|
$
|
197
|
|
5% Senior Notes(1)
|
500
|
|
|
496
|
|
|
500
|
|
|
496
|
|
||||
Series A Enhanced Junior Subordinated Debentures(2)
|
150
|
|
|
150
|
|
|
150
|
|
|
150
|
|
||||
Total AGUS
|
850
|
|
|
843
|
|
|
850
|
|
|
843
|
|
||||
AGMH(3):
|
|
|
|
|
|
|
|
|
|
|
|
||||
67/8% QUIBS(1)
|
100
|
|
|
69
|
|
|
100
|
|
|
69
|
|
||||
6.25% Notes(1)
|
230
|
|
|
141
|
|
|
230
|
|
|
141
|
|
||||
5.6% Notes(1)
|
100
|
|
|
56
|
|
|
100
|
|
|
56
|
|
||||
Junior Subordinated Debentures(2)
|
300
|
|
|
189
|
|
|
300
|
|
|
187
|
|
||||
Total AGMH
|
730
|
|
|
455
|
|
|
730
|
|
|
453
|
|
||||
AGM(3):
|
|
|
|
|
|
|
|
|
|
|
|
||||
AGM Notes Payable
|
9
|
|
|
9
|
|
|
9
|
|
|
10
|
|
||||
Total AGM
|
9
|
|
|
9
|
|
|
9
|
|
|
10
|
|
||||
Total
|
$
|
1,589
|
|
|
$
|
1,307
|
|
|
$
|
1,589
|
|
|
$
|
1,306
|
|
(1)
|
AGL fully and unconditionally guarantees these obligations
|
(2)
|
Guaranteed by AGL on a junior subordinated basis.
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Basic EPS:
|
|
|
|
||||
Net income (loss) attributable to AGL
|
$
|
317
|
|
|
$
|
59
|
|
Less: Distributed and undistributed income (loss) available to nonvested shareholders
|
0
|
|
|
1
|
|
||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic
|
$
|
317
|
|
|
$
|
58
|
|
Basic shares
|
125.3
|
|
|
136.2
|
|
||
Basic EPS
|
$
|
2.53
|
|
|
$
|
0.43
|
|
|
|
|
|
||||
Diluted EPS:
|
|
|
|
||||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic
|
$
|
317
|
|
|
$
|
58
|
|
Plus: Re-allocation of undistributed income (loss) available to nonvested shareholders of AGL and subsidiaries
|
0
|
|
|
0
|
|
||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, diluted
|
$
|
317
|
|
|
$
|
58
|
|
|
|
|
|
||||
Basic shares
|
125.3
|
|
|
136.2
|
|
||
Dilutive securities:
|
|
|
|
||||
Options and restricted stock awards
|
1.8
|
|
|
0.8
|
|
||
Diluted shares
|
127.1
|
|
|
137.0
|
|
||
Diluted EPS
|
$
|
2.49
|
|
|
$
|
0.43
|
|
Potentially dilutive securities excluded from computation of EPS because of antidilutive effect
|
0.1
|
|
|
0.8
|
|
17.
|
Shareholders' Equity
|
|
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, 2016
|
$
|
171
|
|
|
$
|
10
|
|
|
$
|
(39
|
)
|
|
$
|
7
|
|
|
$
|
149
|
|
Other comprehensive income (loss) before reclassifications
|
44
|
|
|
50
|
|
|
2
|
|
|
—
|
|
|
96
|
|
|||||
Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net realized investment gains (losses)
|
(41
|
)
|
|
9
|
|
|
—
|
|
|
—
|
|
|
(32
|
)
|
|||||
Net investment income
|
(28
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(28
|
)
|
|||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
0
|
|
|
0
|
|
|||||
Total before tax
|
(69
|
)
|
|
9
|
|
|
—
|
|
|
0
|
|
|
(60
|
)
|
|||||
Tax (provision) benefit
|
24
|
|
|
(3
|
)
|
|
—
|
|
|
0
|
|
|
21
|
|
|||||
Total amount reclassified from AOCI, net of tax
|
(45
|
)
|
|
6
|
|
|
—
|
|
|
0
|
|
|
(39
|
)
|
|||||
Net current period other comprehensive income (loss)
|
(1
|
)
|
|
56
|
|
|
2
|
|
|
0
|
|
|
57
|
|
|||||
Balance, March 31, 2017
|
$
|
170
|
|
|
$
|
66
|
|
|
$
|
(37
|
)
|
|
$
|
7
|
|
|
$
|
206
|
|
|
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
|
95
|
|
|
(17
|
)
|
|
(2
|
)
|
|
—
|
|
|
76
|
|
|||||
Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net realized investment gains (losses)
|
(4
|
)
|
|
17
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|||||
Net investment income
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
0
|
|
|
0
|
|
|||||
Total before tax
|
(7
|
)
|
|
17
|
|
|
—
|
|
|
0
|
|
|
10
|
|
|||||
Tax (provision) benefit
|
2
|
|
|
(6
|
)
|
|
—
|
|
|
0
|
|
|
(4
|
)
|
|||||
Total amount reclassified from AOCI, net of tax
|
(5
|
)
|
|
11
|
|
|
—
|
|
|
0
|
|
|
6
|
|
|||||
Net current period other comprehensive income (loss)
|
90
|
|
|
(6
|
)
|
|
(2
|
)
|
|
0
|
|
|
82
|
|
|||||
Balance, March 31, 2016
|
$
|
350
|
|
|
$
|
(21
|
)
|
|
$
|
(18
|
)
|
|
$
|
8
|
|
|
$
|
319
|
|
Period
|
|
Number of Shares Repurchased
|
|
Total Payments(in millions)
|
|
Average Price Paid Per Share
|
|||||
2016 (January 1 - March 31)
|
|
3,038,928
|
|
|
$
|
75
|
|
|
$
|
24.69
|
|
2016 (April 1 - June 30)
|
|
2,331,474
|
|
|
60
|
|
|
25.73
|
|
||
2016 (July 1 - September 30)
|
|
2,050,229
|
|
|
55
|
|
|
26.83
|
|
||
2016 (October 1 - December 31, 2016)
|
|
3,300,617
|
|
|
116
|
|
|
35.09
|
|
||
Total 2016
|
|
10,721,248
|
|
|
306
|
|
|
28.53
|
|
||
2017 (January 1 - March 31)
|
|
5,430,041
|
|
|
216
|
|
|
39.83
|
|
||
2017 (April 1 - through May 4, 2017)
|
|
1,377,928
|
|
|
53
|
|
|
38.13
|
|
||
Total 2017
|
|
6,807,969
|
|
|
269
|
|
|
39.49
|
|
||
Cumulative repurchases since the beginning of 2013
|
|
75,451,176
|
|
|
1,984
|
|
|
26.29
|
|
18.
|
Subsidiary Information
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total investment portfolio and cash
|
$
|
12
|
|
|
$
|
312
|
|
|
$
|
20
|
|
|
$
|
11,503
|
|
|
$
|
(359
|
)
|
|
$
|
11,488
|
|
Investment in subsidiaries
|
6,504
|
|
|
5,852
|
|
|
3,805
|
|
|
299
|
|
|
(16,460
|
)
|
|
—
|
|
||||||
Premiums receivable, net of commissions payable
|
—
|
|
|
—
|
|
|
—
|
|
|
1,008
|
|
|
(132
|
)
|
|
876
|
|
||||||
Ceded unearned premium reserve
|
—
|
|
|
—
|
|
|
—
|
|
|
1,074
|
|
|
(894
|
)
|
|
180
|
|
||||||
Deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
155
|
|
|
(49
|
)
|
|
106
|
|
||||||
Reinsurance recoverable on unpaid losses
|
—
|
|
|
—
|
|
|
—
|
|
|
383
|
|
|
(309
|
)
|
|
74
|
|
||||||
Credit derivative assets
|
—
|
|
|
—
|
|
|
—
|
|
|
53
|
|
|
(44
|
)
|
|
9
|
|
||||||
Deferred tax asset, net
|
—
|
|
|
—
|
|
|
—
|
|
|
540
|
|
|
(102
|
)
|
|
438
|
|
||||||
Intercompany receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
70
|
|
|
(70
|
)
|
|
—
|
|
||||||
Financial guaranty variable interest entities’ assets, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
781
|
|
|
—
|
|
|
781
|
|
||||||
Dividend receivable from affiliate
|
125
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(125
|
)
|
|
—
|
|
||||||
Other
|
0
|
|
|
97
|
|
|
38
|
|
|
835
|
|
|
(247
|
)
|
|
723
|
|
||||||
TOTAL ASSETS
|
$
|
6,641
|
|
|
$
|
6,261
|
|
|
$
|
3,863
|
|
|
$
|
16,701
|
|
|
$
|
(18,791
|
)
|
|
$
|
14,675
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Unearned premium reserves
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,800
|
|
|
$
|
(973
|
)
|
|
$
|
3,827
|
|
Loss and LAE reserve
|
—
|
|
|
—
|
|
|
—
|
|
|
1,491
|
|
|
(298
|
)
|
|
1,193
|
|
||||||
Long-term debt
|
—
|
|
|
843
|
|
|
455
|
|
|
9
|
|
|
—
|
|
|
1,307
|
|
||||||
Intercompany payable
|
—
|
|
|
70
|
|
|
—
|
|
|
300
|
|
|
(370
|
)
|
|
—
|
|
||||||
Credit derivative liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
403
|
|
|
(44
|
)
|
|
359
|
|
||||||
Deferred tax liabilities, net
|
—
|
|
|
1
|
|
|
87
|
|
|
—
|
|
|
(88
|
)
|
|
—
|
|
||||||
Financial guaranty variable interest entities’ liabilities, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
855
|
|
|
—
|
|
|
855
|
|
||||||
Dividend payable to affiliate
|
—
|
|
|
125
|
|
|
—
|
|
|
—
|
|
|
(125
|
)
|
|
—
|
|
||||||
Other
|
4
|
|
|
20
|
|
|
26
|
|
|
857
|
|
|
(410
|
)
|
|
497
|
|
||||||
TOTAL LIABILITIES
|
4
|
|
|
1,059
|
|
|
568
|
|
|
8,715
|
|
|
(2,308
|
)
|
|
8,038
|
|
||||||
TOTAL SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO ASSURED GUARANTY LTD.
|
6,637
|
|
|
5,202
|
|
|
3,295
|
|
|
7,687
|
|
|
(16,184
|
)
|
|
6,637
|
|
||||||
Noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
299
|
|
|
(299
|
)
|
|
—
|
|
||||||
TOTAL SHAREHOLDERS' EQUITY
|
6,637
|
|
|
5,202
|
|
|
3,295
|
|
|
7,986
|
|
|
(16,483
|
)
|
|
6,637
|
|
||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
6,641
|
|
|
$
|
6,261
|
|
|
$
|
3,863
|
|
|
$
|
16,701
|
|
|
$
|
(18,791
|
)
|
|
$
|
14,675
|
|
|
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)
|
||||||||||||
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
167
|
|
|
$
|
(3
|
)
|
|
$
|
164
|
|
Net investment income
|
0
|
|
|
0
|
|
|
0
|
|
|
123
|
|
|
(1
|
)
|
|
122
|
|
||||||
Net realized investment gains (losses)
|
—
|
|
|
0
|
|
|
0
|
|
|
32
|
|
|
0
|
|
|
32
|
|
||||||
Net change in fair value of credit derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Realized gains (losses) and other settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
0
|
|
|
15
|
|
||||||
Net unrealized gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
39
|
|
|
—
|
|
|
39
|
|
||||||
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
54
|
|
|
0
|
|
|
54
|
|
||||||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
—
|
|
|
—
|
|
|
58
|
|
|
—
|
|
|
58
|
|
||||||
Other
|
3
|
|
|
—
|
|
|
—
|
|
|
142
|
|
|
(48
|
)
|
|
97
|
|
||||||
TOTAL REVENUES
|
3
|
|
|
0
|
|
|
0
|
|
|
576
|
|
|
(52
|
)
|
|
527
|
|
||||||
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
48
|
|
|
59
|
|
||||||
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
(1
|
)
|
|
4
|
|
||||||
Interest expense
|
—
|
|
|
12
|
|
|
13
|
|
|
2
|
|
|
(3
|
)
|
|
24
|
|
||||||
Other operating expenses
|
10
|
|
|
6
|
|
|
1
|
|
|
106
|
|
|
(55
|
)
|
|
68
|
|
||||||
TOTAL EXPENSES
|
10
|
|
|
18
|
|
|
14
|
|
|
124
|
|
|
(11
|
)
|
|
155
|
|
||||||
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN NET EARNINGS OF SUBSIDIARIES
|
(7
|
)
|
|
(18
|
)
|
|
(14
|
)
|
|
452
|
|
|
(41
|
)
|
|
372
|
|
||||||
Total (provision) benefit for income taxes
|
—
|
|
|
6
|
|
|
5
|
|
|
(76
|
)
|
|
10
|
|
|
(55
|
)
|
||||||
Equity in net earnings of subsidiaries
|
324
|
|
|
199
|
|
|
115
|
|
|
8
|
|
|
(646
|
)
|
|
—
|
|
||||||
NET INCOME (LOSS)
|
$
|
317
|
|
|
$
|
187
|
|
|
$
|
106
|
|
|
$
|
384
|
|
|
$
|
(677
|
)
|
|
$
|
317
|
|
Less: noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
(8
|
)
|
|
—
|
|
||||||
NET INCOME (LOSS) ATTRIBUTABLE TO ASSURED GUARANTY LTD.
|
$
|
317
|
|
|
$
|
187
|
|
|
$
|
106
|
|
|
$
|
376
|
|
|
$
|
(669
|
)
|
|
$
|
317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
COMPREHENSIVE INCOME (LOSS)
|
$
|
374
|
|
|
$
|
244
|
|
|
$
|
141
|
|
|
$
|
437
|
|
|
$
|
(822
|
)
|
|
$
|
374
|
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
192
|
|
|
$
|
(9
|
)
|
|
$
|
183
|
|
Net investment income
|
0
|
|
|
0
|
|
|
0
|
|
|
100
|
|
|
(1
|
)
|
|
99
|
|
||||||
Net realized investment gains (losses)
|
0
|
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
|
(1
|
)
|
|
(13
|
)
|
||||||
Net change in fair value of credit derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Realized gains (losses) and other settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
0
|
|
|
8
|
|
||||||
Net unrealized gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
(68
|
)
|
|
—
|
|
|
(68
|
)
|
||||||
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
(60
|
)
|
|
0
|
|
|
(60
|
)
|
||||||
Other
|
0
|
|
|
—
|
|
|
—
|
|
|
36
|
|
|
—
|
|
|
36
|
|
||||||
TOTAL REVENUES
|
0
|
|
|
0
|
|
|
0
|
|
|
256
|
|
|
(11
|
)
|
|
245
|
|
||||||
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
93
|
|
|
(3
|
)
|
|
90
|
|
||||||
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
(3
|
)
|
|
4
|
|
||||||
Interest expense
|
—
|
|
|
13
|
|
|
13
|
|
|
3
|
|
|
(3
|
)
|
|
26
|
|
||||||
Other operating expenses
|
8
|
|
|
0
|
|
|
1
|
|
|
52
|
|
|
(1
|
)
|
|
60
|
|
||||||
TOTAL EXPENSES
|
8
|
|
|
13
|
|
|
14
|
|
|
155
|
|
|
(10
|
)
|
|
180
|
|
||||||
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN NET EARNINGS OF SUBSIDIARIES
|
(8
|
)
|
|
(13
|
)
|
|
(14
|
)
|
|
101
|
|
|
(1
|
)
|
|
65
|
|
||||||
Total (provision) benefit for income taxes
|
—
|
|
|
5
|
|
|
5
|
|
|
(16
|
)
|
|
0
|
|
|
(6
|
)
|
||||||
Equity in net earnings of subsidiaries
|
67
|
|
|
50
|
|
|
77
|
|
|
9
|
|
|
(203
|
)
|
|
—
|
|
||||||
NET INCOME (LOSS)
|
$
|
59
|
|
|
$
|
42
|
|
|
$
|
68
|
|
|
$
|
94
|
|
|
$
|
(204
|
)
|
|
$
|
59
|
|
Less: noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
(9
|
)
|
|
—
|
|
||||||
NET INCOME (LOSS) ATTRIBUTABLE TO ASSURED GUARANTY LTD.
|
$
|
59
|
|
|
$
|
42
|
|
|
$
|
68
|
|
|
$
|
85
|
|
|
$
|
(195
|
)
|
|
$
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
COMPREHENSIVE INCOME (LOSS)
|
$
|
141
|
|
|
$
|
80
|
|
|
$
|
92
|
|
|
$
|
178
|
|
|
$
|
(350
|
)
|
|
$
|
141
|
|
|
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
|
$
|
220
|
|
|
$
|
105
|
|
|
$
|
72
|
|
|
$
|
105
|
|
|
$
|
(400
|
)
|
|
$
|
102
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchases
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
(512
|
)
|
|
—
|
|
|
(517
|
)
|
||||||
Sales
|
—
|
|
|
—
|
|
|
2
|
|
|
321
|
|
|
—
|
|
|
323
|
|
||||||
Maturities
|
—
|
|
|
3
|
|
|
0
|
|
|
262
|
|
|
—
|
|
|
265
|
|
||||||
Sales (purchases) of short-term investments, net
|
25
|
|
|
75
|
|
|
5
|
|
|
(93
|
)
|
|
—
|
|
|
12
|
|
||||||
Net proceeds from financial guaranty variable entities’ assets
|
—
|
|
|
—
|
|
|
—
|
|
|
46
|
|
|
—
|
|
|
46
|
|
||||||
Investment in subsidiary
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
||||||
Acquisition of MBIA UK, net of cash acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
95
|
|
|
—
|
|
|
95
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
—
|
|
|
(13
|
)
|
||||||
Net cash flows provided by (used in) investing activities
|
25
|
|
|
75
|
|
|
2
|
|
|
106
|
|
|
3
|
|
|
211
|
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Capital contribution
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
(3
|
)
|
|
—
|
|
||||||
Dividends paid
|
(19
|
)
|
|
(175
|
)
|
|
(73
|
)
|
|
(152
|
)
|
|
400
|
|
|
(19
|
)
|
||||||
Repurchases of common stock
|
(216
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(216
|
)
|
||||||
Repurchases of common stock to pay withholding taxes
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
||||||
Net paydowns of financial guaranty variable entities’ liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(48
|
)
|
|
—
|
|
|
(48
|
)
|
||||||
Payment of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||||
Proceeds from options exercises
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||||
Net cash flows provided by (used in) financing activities
|
(245
|
)
|
|
(175
|
)
|
|
(73
|
)
|
|
(198
|
)
|
|
397
|
|
|
(294
|
)
|
||||||
Effect of exchange rate changes
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||||
Increase (decrease) in cash and restricted cash
|
—
|
|
|
5
|
|
|
1
|
|
|
15
|
|
|
—
|
|
|
21
|
|
||||||
Cash and restricted cash at beginning of period
|
0
|
|
|
1
|
|
|
0
|
|
|
126
|
|
|
—
|
|
|
127
|
|
||||||
Cash and restricted cash at end of period
|
$
|
0
|
|
|
$
|
6
|
|
|
$
|
1
|
|
|
$
|
141
|
|
|
$
|
—
|
|
|
$
|
148
|
|
|
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
|
$
|
166
|
|
|
$
|
17
|
|
|
$
|
88
|
|
|
$
|
(74
|
)
|
|
$
|
(287
|
)
|
|
$
|
(90
|
)
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchases
|
(4
|
)
|
|
(11
|
)
|
|
—
|
|
|
(281
|
)
|
|
—
|
|
|
(296
|
)
|
||||||
Sales
|
1
|
|
|
—
|
|
|
—
|
|
|
161
|
|
|
—
|
|
|
162
|
|
||||||
Maturities
|
—
|
|
|
—
|
|
|
—
|
|
|
301
|
|
|
—
|
|
|
301
|
|
||||||
Sales (purchases) of short-term investments, net
|
(69
|
)
|
|
11
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(63
|
)
|
||||||
Net proceeds from financial guaranty variable entities’ assets
|
—
|
|
|
—
|
|
|
—
|
|
|
66
|
|
|
—
|
|
|
66
|
|
||||||
Investment in subsidiary
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||||
Net cash flows provided by (used in) investing activities
|
(72
|
)
|
|
0
|
|
|
—
|
|
|
244
|
|
|
—
|
|
|
172
|
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Return of capital
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Dividends paid
|
(18
|
)
|
|
(80
|
)
|
|
(87
|
)
|
|
(120
|
)
|
|
287
|
|
|
(18
|
)
|
||||||
Repurchases of common stock
|
(75
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(75
|
)
|
||||||
Repurchases of common stock to pay withholding taxes
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
Net paydowns of financial guaranty variable entities’ liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(42
|
)
|
|
—
|
|
|
(42
|
)
|
||||||
Payment of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
0
|
|
|
—
|
|
|
0
|
|
||||||
Proceeds from options exercises
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||
Net cash flows provided by (used in) financing activities
|
(94
|
)
|
|
(80
|
)
|
|
(87
|
)
|
|
(162
|
)
|
|
287
|
|
|
(136
|
)
|
||||||
Effect of exchange rate changes
|
—
|
|
|
—
|
|
|
—
|
|
|
0
|
|
|
—
|
|
|
0
|
|
||||||
Increase (decrease) in cash and restricted cash
|
—
|
|
|
(63
|
)
|
|
1
|
|
|
8
|
|
|
—
|
|
|
(54
|
)
|
||||||
Cash and restricted cash at beginning of period
|
0
|
|
|
95
|
|
|
8
|
|
|
63
|
|
|
—
|
|
|
166
|
|
||||||
Cash and restricted cash at end of period
|
$
|
0
|
|
|
$
|
32
|
|
|
$
|
9
|
|
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
112
|
|
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
reduction in the amount of available insurance opportunities and/or in the demand for Assured Guaranty's insurance;
|
•
|
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;
|
•
|
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);
|
•
|
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;
|
•
|
the failure of Assured Guaranty to realize loss recoveries that are assumed in its expected loss estimates;
|
•
|
increased competition, including from new entrants into the financial guaranty industry;
|
•
|
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;
|
•
|
the inability of Assured Guaranty to access external sources of capital on acceptable terms;
|
•
|
changes in the world’s credit markets, segments thereof, interest rates or general economic conditions;
|
•
|
the impact of market volatility on the mark-to-market of Assured Guaranty’s contracts written in credit default swap form;
|
•
|
changes in applicable accounting policies or practices;
|
•
|
changes in applicable laws or regulations, including insurance, bankruptcy and tax laws, or other governmental actions;
|
•
|
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;
|
•
|
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;
|
•
|
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;
|
•
|
difficulties with the execution of Assured Guaranty’s business strategy;
|
•
|
loss of key personnel;
|
•
|
the effects of mergers, acquisitions and divestitures;
|
•
|
natural or man-made catastrophes;
|
•
|
other risk factors identified in AGL’s filings with the U.S. Securities and Exchange Commission (the SEC);
|
•
|
other risks and uncertainties that have not been identified at this time; and
|
•
|
management’s response to these factors.
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Net income (loss)
|
$
|
317
|
|
|
$
|
59
|
|
Operating income (non-GAAP)(1)
|
273
|
|
|
123
|
|
||
Gain (loss) related to the effect of consolidating FG VIEs (FG VIE consolidation) included in operating income
|
5
|
|
|
10
|
|
||
|
|
|
|
||||
Net income (loss) per diluted share
|
$
|
2.49
|
|
|
$
|
0.43
|
|
Operating income per share (non-GAAP)(1)
|
2.14
|
|
|
0.89
|
|
||
Gain (loss) related to FG VIE consolidation included in operating income per share
|
0.03
|
|
|
0.07
|
|
||
|
|
|
|
||||
Diluted shares
|
127.1
|
|
|
137.0
|
|
||
|
|
|
|
||||
Gross written premiums (GWP)
|
$
|
111
|
|
|
$
|
19
|
|
Present value of new business production (PVP)(1)
|
99
|
|
|
38
|
|
||
Gross par written
|
4,691
|
|
|
2,749
|
|
|
As of March 31, 2017
|
|
As of December 31, 2016
|
||||||||||||
|
Amount
|
|
Per Share
|
|
Amount
|
|
Per Share
|
||||||||
|
(in millions, except per share amounts)
|
||||||||||||||
Shareholders' equity
|
$
|
6,637
|
|
|
$
|
53.95
|
|
|
$
|
6,504
|
|
|
$
|
50.82
|
|
Non-GAAP operating shareholders' equity(1)
|
6,460
|
|
|
52.51
|
|
|
6,386
|
|
|
49.89
|
|
||||
Non-GAAP adjusted book value(1)
|
8,798
|
|
|
71.51
|
|
|
8,506
|
|
|
66.46
|
|
||||
Gain (loss) related to FG VIE consolidation included in non-GAAP operating shareholders' equity
|
(3
|
)
|
|
(0.03
|
)
|
|
(7
|
)
|
|
(0.06
|
)
|
||||
Gain (loss) related to FG VIE consolidation included in non-GAAP adjusted book value
|
(20
|
)
|
|
(0.16
|
)
|
|
(24
|
)
|
|
(0.18
|
)
|
||||
Common shares outstanding (2)
|
123.0
|
|
|
|
|
128.0
|
|
|
|
(1)
|
Please refer to “—Non-GAAP Financial Measures” for a definition of the financial measures that were not determined in accordance with accounting principles generally accepted in the United States of America (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), 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.
|
|
First Quarter 2017
|
|
First Quarter 2016
|
|
Year Ended December 31, 2016
|
||||||
|
(dollars in billions, except number of issues and percent)
|
||||||||||
Par:
|
|
|
|
|
|
||||||
New municipal bonds issued
|
$
|
86.6
|
|
|
$
|
96.5
|
|
|
$
|
423.7
|
|
Total insured
|
$
|
5.2
|
|
|
$
|
5.7
|
|
|
$
|
25.3
|
|
Insured by Assured Guaranty
|
$
|
2.9
|
|
|
$
|
3.0
|
|
|
$
|
14.2
|
|
Number of issues:
|
|
|
|
|
|
||||||
New municipal bonds issued
|
2,271
|
|
|
2,787
|
|
|
12,271
|
|
|||
Total insured
|
377
|
|
|
430
|
|
|
1,889
|
|
|||
Insured by Assured Guaranty
|
181
|
|
|
198
|
|
|
904
|
|
|||
Market penetration based on:
|
|
|
|
|
|
||||||
Par
|
6.0
|
%
|
|
5.9
|
%
|
|
6.0
|
%
|
|||
Number of issues
|
16.6
|
%
|
|
15.4
|
%
|
|
15.4
|
%
|
|||
Single A par sold
|
28.4
|
%
|
|
28.0
|
%
|
|
22.6
|
%
|
|||
Single A transactions sold
|
61.6
|
%
|
|
58.7
|
%
|
|
55.8
|
%
|
|||
$25 million and under par sold
|
19.5
|
%
|
|
17.7
|
%
|
|
17.8
|
%
|
|||
$25 million and under transactions sold
|
19.5
|
%
|
|
17.7
|
%
|
|
17.5
|
%
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Gross Written Premiums
|
|
|
|
||||
Public Finance—U.S.
|
$
|
51
|
|
|
$
|
15
|
|
Public Finance—non-U.S.
|
58
|
|
|
8
|
|
||
Structured Finance—U.S.
|
1
|
|
|
(3
|
)
|
||
Structured Finance—non-U.S.
|
1
|
|
|
(1
|
)
|
||
Total gross written premiums
|
$
|
111
|
|
|
$
|
19
|
|
|
|
|
|
||||
PVP (1):
|
|
|
|
||||
Public Finance—U.S.
|
$
|
52
|
|
|
$
|
31
|
|
Public Finance—non-U.S.
|
40
|
|
|
7
|
|
||
Structured Finance—U.S. (2)
|
5
|
|
|
0
|
|
||
Structured Finance—non-U.S.
|
2
|
|
|
—
|
|
||
Total PVP
|
$
|
99
|
|
|
$
|
38
|
|
Gross Par Written:
|
|
|
|
||||
Public Finance—U.S.
|
$
|
3,430
|
|
|
$
|
2,749
|
|
Public Finance—non-U.S.
|
990
|
|
|
—
|
|
||
Structured Finance—U.S. (2)
|
243
|
|
|
—
|
|
||
Structured Finance—non-U.S.
|
28
|
|
|
—
|
|
||
Total gross par written
|
$
|
4,691
|
|
|
$
|
2,749
|
|
(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.”
|
|
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 (January 1 - March 31)
|
216
|
|
|
5.4
|
|
|
39.83
|
|
||
2017 (April 1 through May 4, 2017)
|
53
|
|
|
1.4
|
|
|
38.13
|
|
||
Cumulative repurchases since the beginning of 2013
|
$
|
1,984
|
|
|
75.4
|
|
|
$
|
26.29
|
|
|
First Quarter 2017
|
|
As of March 31, 2017
|
||||
|
(per share)
|
||||||
Net income
|
$
|
0.84
|
|
|
|
||
Operating income (non-GAAP)
|
0.71
|
|
|
|
|||
Shareholders' equity
|
|
|
$
|
10.37
|
|
||
Non-GAAP operating shareholders' equity
|
|
|
9.83
|
|
|||
Non-GAAP adjusted book value
|
|
|
16.97
|
|
(1)
|
Cumulative repurchases since the beginning of 2013.
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Revenues:
|
|
|
|
||||
Net earned premiums
|
$
|
164
|
|
|
$
|
183
|
|
Net investment income
|
122
|
|
|
99
|
|
||
Net realized investment gains (losses)
|
32
|
|
|
(13
|
)
|
||
Net change in fair value of credit derivatives:
|
|
|
|
||||
Realized gains (losses) and other settlements
|
15
|
|
|
8
|
|
||
Net unrealized gains (losses)
|
39
|
|
|
(68
|
)
|
||
Net change in fair value of credit derivatives
|
54
|
|
|
(60
|
)
|
||
Fair value gains (losses) on CCS
|
(2
|
)
|
|
(16
|
)
|
||
Fair value gains (losses) on FG VIEs
|
10
|
|
|
18
|
|
||
Bargain purchase gain and settlement of pre-existing relationships
|
58
|
|
|
—
|
|
||
Other income (loss)
|
89
|
|
|
34
|
|
||
Total revenues
|
527
|
|
|
245
|
|
||
Expenses:
|
|
|
|
||||
Loss and LAE
|
59
|
|
|
90
|
|
||
Amortization of deferred acquisition costs
|
4
|
|
|
4
|
|
||
Interest expense
|
24
|
|
|
26
|
|
||
Other operating expenses
|
68
|
|
|
60
|
|
||
Total expenses
|
155
|
|
|
180
|
|
||
Income (loss) before provision for income taxes
|
372
|
|
|
65
|
|
||
Provision (benefit) for income taxes
|
55
|
|
|
6
|
|
||
Net income (loss)
|
$
|
317
|
|
|
$
|
59
|
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Financial guaranty insurance:
|
|
|
|
||||
Public finance
|
|
|
|
||||
Scheduled net earned premiums and accretion
|
$
|
83
|
|
|
$
|
69
|
|
Accelerations:
|
|
|
|
||||
Refundings
|
56
|
|
|
79
|
|
||
Terminations
|
0
|
|
|
0
|
|
||
Total accelerations
|
56
|
|
|
79
|
|
||
Total Public finance
|
139
|
|
|
148
|
|
||
Structured finance(1)
|
|
|
|
||||
Scheduled net earned premiums and accretion
|
23
|
|
|
25
|
|
||
Terminations
|
2
|
|
|
10
|
|
||
Total structured finance
|
25
|
|
|
35
|
|
||
Other
|
0
|
|
|
0
|
|
||
Total net earned premiums
|
$
|
164
|
|
|
$
|
183
|
|
(1)
|
Excludes
$4 million
and
$5 million
for
First Quarter 2017
and
2016
, respectively, related to consolidated FG VIEs.
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Income from fixed-maturity securities managed by third parties
|
$
|
75
|
|
|
$
|
79
|
|
Income from internally managed securities:
|
|
|
|
||||
Fixed maturities
|
46
|
|
|
17
|
|
||
Other
|
3
|
|
|
5
|
|
||
Gross investment income
|
124
|
|
|
101
|
|
||
Investment expenses
|
(2
|
)
|
|
(2
|
)
|
||
Net investment income
|
$
|
122
|
|
|
$
|
99
|
|
(1)
|
Net investment income excludes
$1 million
and
$5 million
for
First Quarter 2017
and
2016
, respectively, related to securities in the investment portfolio owned by AGC and AGM that were issued by consolidated FG VIEs.
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Gross realized gains on available-for-sale securities
|
$
|
43
|
|
|
$
|
6
|
|
Gross realized losses on available-for-sale securities
|
(2
|
)
|
|
(2
|
)
|
||
Net realized gains (losses) on other invested assets
|
0
|
|
|
(1
|
)
|
||
Other-than-temporary impairment
|
(9
|
)
|
|
(16
|
)
|
||
Net realized investment gains (losses)
|
$
|
32
|
|
|
$
|
(13
|
)
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Foreign exchange gain (loss) on remeasurement of premium receivable and loss reserves
|
$
|
10
|
|
|
$
|
(2
|
)
|
Commutation gains
|
73
|
|
|
—
|
|
||
Other
|
6
|
|
|
36
|
|
||
Total other income (loss)
|
$
|
89
|
|
|
$
|
34
|
|
•
|
Note 5 for expected loss to be paid,
|
•
|
Note 6 for contracts accounted for as insurance,
|
•
|
Note 7 for fair value methodologies for credit derivatives and FG VIE assets and liabilities,
|
•
|
Note 8 for contracts accounted for as credit derivatives, and
|
•
|
Note 9 for consolidated FG VIEs.
|
•
|
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
March 31, 2017 |
|
As of
December 31, 2016 |
||||
|
(in millions)
|
||||||
Public finance
|
$
|
1,011
|
|
|
$
|
904
|
|
Structured finance
|
|
|
|
||||
U.S. RMBS
|
197
|
|
|
206
|
|
||
Other structured finance
|
36
|
|
|
88
|
|
||
Structured finance
|
233
|
|
|
294
|
|
||
Total
|
$
|
1,244
|
|
|
$
|
1,198
|
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Public finance
|
$
|
119
|
|
|
$
|
99
|
|
Structured finance
|
|
|
|
||||
U.S. RMBS
|
(22
|
)
|
|
(31
|
)
|
||
Other structured finance
|
(50
|
)
|
|
(9
|
)
|
||
Structured finance
|
(72
|
)
|
|
(40
|
)
|
||
Total
|
$
|
47
|
|
|
$
|
59
|
|
(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.
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Public finance
|
$
|
109
|
|
|
$
|
97
|
|
Structured finance:
|
|
|
|
||||
U.S. RMBS
|
(9
|
)
|
|
11
|
|
||
Other structured finance
|
(39
|
)
|
|
(11
|
)
|
||
Structured finance
|
(48
|
)
|
|
0
|
|
||
Total insurance contracts before FG VIE consolidation
|
61
|
|
|
97
|
|
||
Elimination of losses attributable to FG VIEs
|
(2
|
)
|
|
(7
|
)
|
||
Total loss and LAE (1)
|
$
|
59
|
|
|
$
|
90
|
|
(1)
|
Excludes credit derivative benefit of $18 million and $6 million for
First Quarter 2017
and
First Quarter 2016
.
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Realized gains on credit derivatives
|
$
|
5
|
|
|
$
|
10
|
|
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements
|
10
|
|
|
(2
|
)
|
||
Realized gains (losses) and other settlements(1)
|
15
|
|
|
8
|
|
||
Net unrealized gains (losses):
|
|
|
|
||||
Pooled corporate obligations
|
20
|
|
|
(48
|
)
|
||
U.S. RMBS
|
9
|
|
|
(15
|
)
|
||
Pooled infrastructure
|
6
|
|
|
0
|
|
||
Infrastructure finance
|
1
|
|
|
0
|
|
||
Other
|
3
|
|
|
(5
|
)
|
||
Net unrealized gains (losses)
|
39
|
|
|
(68
|
)
|
||
Net change in fair value of credit derivatives
|
$
|
54
|
|
|
$
|
(60
|
)
|
(1)
|
Includes realized gains and losses due to terminations and settlements of CDS contracts.
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Net par of terminated credit derivative contracts
|
$
|
184
|
|
|
$
|
—
|
|
Realized gains on credit derivatives
|
0
|
|
|
0
|
|
||
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements
|
(12
|
)
|
|
—
|
|
||
Net unrealized gains (losses) on credit derivatives
|
15
|
|
|
11
|
|
|
As of
March 31, 2017 |
|
As of
December 31, 2016 |
|
As of
March 31, 2016 |
|
As of
December 31, 2015 |
||||
Five-year CDS spread:
|
|
|
|
|
|
|
|
||||
AGC
|
173
|
|
|
158
|
|
|
307
|
|
|
376
|
|
AGM
|
181
|
|
|
158
|
|
|
309
|
|
|
366
|
|
One-year CDS spread
|
|
|
|
|
|
|
|
||||
AGC
|
31
|
|
|
35
|
|
|
105
|
|
|
139
|
|
AGM
|
31
|
|
|
29
|
|
|
102
|
|
|
131
|
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Change in unrealized gains (losses) of credit derivatives:
|
|
|
|
||||
Before considering implication of the Company’s credit spreads
|
$
|
32
|
|
|
$
|
(27
|
)
|
Resulting from change in the Company’s credit spreads
|
7
|
|
|
(41
|
)
|
||
After considering implication of the Company’s credit spreads
|
$
|
39
|
|
|
$
|
(68
|
)
|
•
|
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.
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Fair value gains (losses) on FG VIEs
|
$
|
10
|
|
|
$
|
18
|
|
Elimination of insurance and investment balances
|
(3
|
)
|
|
(3
|
)
|
||
Effect on income before tax
|
7
|
|
|
15
|
|
||
Less: tax provision (benefit)
|
3
|
|
|
5
|
|
||
Effect on net income (loss)
|
$
|
4
|
|
|
$
|
10
|
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(dollars in millions)
|
||||||
Total provision (benefit) for income taxes
|
$
|
55
|
|
|
$
|
6
|
|
Effective tax rate
|
14.7
|
%
|
|
10.0
|
%
|
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.
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Net income (loss)
|
$
|
317
|
|
|
$
|
59
|
|
Less pre-tax adjustments:
|
|
|
|
||||
Realized gains (losses) on investments
|
32
|
|
|
(14
|
)
|
||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
25
|
|
|
(60
|
)
|
||
Fair value gains (losses) on CCS
|
(2
|
)
|
|
(16
|
)
|
||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
|
10
|
|
|
(2
|
)
|
||
Total pre-tax adjustments
|
65
|
|
|
(92
|
)
|
||
Less tax effect on pre-tax adjustments
|
(21
|
)
|
|
28
|
|
||
Operating income (non-GAAP)
|
$
|
273
|
|
|
$
|
123
|
|
|
|
|
|
||||
Gain (loss) related to FG VIE consolidation (net of tax provision of $2 and $5) included in operating income
|
$
|
5
|
|
|
$
|
10
|
|
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 revenue on non financial guaranty contracts. 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
March 31, 2017 |
|
As of
December 31, 2016 |
||||||||||||
|
After-Tax
|
|
Per Share
|
|
After-Tax
|
|
Per Share
|
||||||||
|
(dollars in millions, except per share amounts)
|
||||||||||||||
Shareholders’ equity
|
$
|
6,637
|
|
|
$
|
53.95
|
|
|
$
|
6,504
|
|
|
$
|
50.82
|
|
Less pre-tax adjustments:
|
|
|
|
|
|
|
|
||||||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
(164
|
)
|
|
(1.33
|
)
|
|
(189
|
)
|
|
(1.48
|
)
|
||||
Fair value gains (losses) on CCS
|
60
|
|
|
0.49
|
|
|
62
|
|
|
0.48
|
|
||||
Unrealized gain (loss) on investment portfolio excluding foreign exchange effect
|
380
|
|
|
3.08
|
|
|
316
|
|
|
2.47
|
|
||||
Less taxes
|
(99
|
)
|
|
(0.80
|
)
|
|
(71
|
)
|
|
(0.54
|
)
|
||||
Non-GAAP operating shareholders’ equity
|
6,460
|
|
|
52.51
|
|
|
6,386
|
|
|
49.89
|
|
||||
Pre-tax adjustments:
|
|
|
|
|
|
|
|
|
|
||||||
Less: Deferred acquisition costs
|
106
|
|
|
0.86
|
|
|
106
|
|
|
0.83
|
|
||||
Plus: Net present value of estimated net future revenue
|
153
|
|
|
1.24
|
|
|
136
|
|
|
1.07
|
|
||||
Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed
|
3,236
|
|
|
26.30
|
|
|
2,922
|
|
|
22.83
|
|
||||
Plus taxes
|
(945
|
)
|
|
(7.68
|
)
|
|
(832
|
)
|
|
(6.50
|
)
|
||||
Non-GAAP adjusted book value
|
$
|
8,798
|
|
|
$
|
71.51
|
|
|
$
|
8,506
|
|
|
$
|
66.46
|
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) related to FG VIE consolidation included in non-GAAP operating shareholders' equity (net of tax benefit of $2 and $4)
|
$
|
(3
|
)
|
|
$
|
(0.03
|
)
|
|
(7
|
)
|
|
(0.06
|
)
|
||
|
|
|
|
|
|
|
|
||||||||
Gain (loss) related to FG VIE consolidation included in non-GAAP adjusted book value (net of tax benefit of $12 and $12)
|
$
|
(20
|
)
|
|
$
|
(0.16
|
)
|
|
(24
|
)
|
|
(0.18
|
)
|
|
First Quarter 2017
|
|
First Quarter 2016
|
||||||||||||||||||||||||||||||||||||
|
Public Finance
|
|
Structured Finance
|
|
|
|
Public Finance
|
|
Structured Finance
|
|
|
||||||||||||||||||||||||||||
|
U.S.
|
|
Non - U.S.
|
|
U.S.
|
|
Non - U.S.
|
|
Total
|
|
U.S.
|
|
Non - U.S.
|
|
U.S.
|
|
Non - U.S.
|
|
Total
|
||||||||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||||||||||||||
GWP
|
$
|
51
|
|
|
$
|
58
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
111
|
|
|
$
|
15
|
|
|
$
|
8
|
|
|
$
|
(3
|
)
|
|
$
|
(1
|
)
|
|
$
|
19
|
|
Less: Installment GWP and other GAAP adjustments(1)
|
(1
|
)
|
|
56
|
|
|
1
|
|
|
1
|
|
|
57
|
|
|
(16
|
)
|
|
8
|
|
|
(3
|
)
|
|
(1
|
)
|
|
(12
|
)
|
||||||||||
Plus: Financial guaranty installment premium PVP
|
—
|
|
|
38
|
|
|
—
|
|
|
—
|
|
|
38
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
7
|
|
||||||||||
Plus: PVP of non-financial guaranty insurance
|
—
|
|
|
—
|
|
|
5
|
|
|
2
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
0
|
|
|
—
|
|
|
0
|
|
||||||||||
PVP
|
$
|
52
|
|
|
$
|
40
|
|
|
$
|
5
|
|
|
$
|
2
|
|
|
$
|
99
|
|
|
$
|
31
|
|
|
$
|
7
|
|
|
$
|
0
|
|
|
$
|
—
|
|
|
$
|
38
|
|
(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 March 31, 2017
|
|
As of December 31, 2016
|
||||||||
Sector
|
|
Net Par
Outstanding
|
|
Avg.
Rating
|
|
Net Par
Outstanding
|
|
Avg.
Rating
|
||||
|
|
(dollars in millions)
|
||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
|||
U.S.:
|
|
|
|
|
|
|
|
|
|
|||
General obligation
|
|
$
|
103,696
|
|
|
A
|
|
$
|
107,717
|
|
|
A
|
Tax backed
|
|
48,772
|
|
|
A-
|
|
49,931
|
|
|
A-
|
||
Municipal utilities
|
|
36,327
|
|
|
A-
|
|
37,603
|
|
|
A
|
||
Transportation
|
|
19,443
|
|
|
A-
|
|
19,403
|
|
|
A-
|
||
Healthcare
|
|
10,955
|
|
|
A
|
|
11,238
|
|
|
A
|
||
Higher education
|
|
9,966
|
|
|
A
|
|
10,085
|
|
|
A
|
||
Infrastructure finance
|
|
4,127
|
|
|
BBB+
|
|
3,769
|
|
|
BBB+
|
||
Housing
|
|
1,344
|
|
|
A-
|
|
1,559
|
|
|
A-
|
||
Investor-owned utilities
|
|
693
|
|
|
BBB+
|
|
697
|
|
|
BBB+
|
||
Other public finance—U.S.
|
|
2,727
|
|
|
A
|
|
2,796
|
|
|
A
|
||
Total public finance—U.S.
|
|
238,050
|
|
|
A-
|
|
244,798
|
|
|
A
|
||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|||
Infrastructure finance
|
|
17,350
|
|
|
BBB
|
|
10,731
|
|
|
BBB
|
||
Regulated utilities
|
|
14,679
|
|
|
BBB+
|
|
9,263
|
|
|
BBB+
|
||
Pooled infrastructure
|
|
1,363
|
|
|
AAA
|
|
1,513
|
|
|
AAA
|
||
Other public finance
|
|
5,951
|
|
|
A
|
|
4,874
|
|
|
A
|
||
Total public finance—non-U.S.
|
|
39,343
|
|
|
BBB+
|
|
26,381
|
|
|
BBB+
|
||
Total public finance
|
|
277,393
|
|
|
A-
|
|
271,179
|
|
|
A-
|
||
Structured finance:
|
|
|
|
|
|
|
|
|
|
|||
U.S.:
|
|
|
|
|
|
|
|
|
|
|||
Pooled corporate obligations
|
|
6,860
|
|
|
AAA
|
|
10,050
|
|
|
AAA
|
||
RMBS
|
|
5,357
|
|
|
BBB-
|
|
5,637
|
|
|
BBB-
|
||
Insurance securitizations
|
|
2,307
|
|
|
A+
|
|
2,308
|
|
|
A+
|
||
Consumer receivables
|
|
1,640
|
|
|
BBB+
|
|
1,652
|
|
|
BBB+
|
||
Financial products
|
|
1,462
|
|
|
AA-
|
|
1,540
|
|
|
AA-
|
||
Commercial receivables
|
|
195
|
|
|
BBB
|
|
230
|
|
|
BBB-
|
||
Other structured finance—U.S.
|
|
625
|
|
|
AA-
|
|
640
|
|
|
AA-
|
||
Total structured finance—U.S.
|
|
18,446
|
|
|
A+
|
|
22,057
|
|
|
A+
|
||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|||
Pooled corporate obligations
|
|
900
|
|
|
AA
|
|
1,535
|
|
|
AA
|
||
RMBS
|
|
600
|
|
|
A-
|
|
604
|
|
|
A-
|
||
Commercial receivables
|
|
325
|
|
|
A-
|
|
356
|
|
|
BBB+
|
||
Other structured finance
|
|
579
|
|
|
AA
|
|
587
|
|
|
AA
|
||
Total structured finance—non-U.S.
|
|
2,404
|
|
|
A+
|
|
3,082
|
|
|
AA-
|
||
Total structured finance
|
|
20,850
|
|
|
A+
|
|
25,139
|
|
|
AA-
|
||
Total net par outstanding
|
|
$
|
298,243
|
|
|
A-
|
|
$
|
296,318
|
|
|
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
|
|
$
|
1,816
|
|
|
0.8
|
%
|
|
$
|
2,156
|
|
|
5.5
|
%
|
|
$
|
6,765
|
|
|
36.7
|
%
|
|
$
|
1,032
|
|
|
42.9
|
%
|
|
$
|
11,769
|
|
|
3.9
|
%
|
AA
|
|
42,529
|
|
|
17.9
|
|
|
204
|
|
|
0.5
|
|
|
5,408
|
|
|
29.3
|
|
|
99
|
|
|
4.1
|
|
|
48,240
|
|
|
16.2
|
|
|||||
A
|
|
132,212
|
|
|
55.5
|
|
|
12,711
|
|
|
32.3
|
|
|
1,698
|
|
|
9.2
|
|
|
264
|
|
|
11.0
|
|
|
146,885
|
|
|
49.3
|
|
|||||
BBB
|
|
54,294
|
|
|
22.8
|
|
|
22,199
|
|
|
56.4
|
|
|
868
|
|
|
4.7
|
|
|
760
|
|
|
31.6
|
|
|
78,121
|
|
|
26.2
|
|
|||||
BIG
|
|
7,199
|
|
|
3.0
|
|
|
2,073
|
|
|
5.3
|
|
|
3,707
|
|
|
20.1
|
|
|
249
|
|
|
10.4
|
|
|
13,228
|
|
|
4.4
|
|
|||||
Total net par outstanding (1)
|
|
$
|
238,050
|
|
|
100.0
|
%
|
|
$
|
39,343
|
|
|
100.0
|
%
|
|
$
|
18,446
|
|
|
100.0
|
%
|
|
$
|
2,404
|
|
|
100.0
|
%
|
|
$
|
298,243
|
|
|
100.0
|
%
|
(1)
|
The
March 31, 2017
amounts include
$12.2 billion
of net par from the MBIA UK 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
|
|
$
|
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
|
%
|
|
|
Par Outstanding
|
||||||||||
|
|
As of March 31, 2017
|
||||||||||
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)
|
|
$
|
3,269
|
|
|
$
|
—
|
|
|
$
|
—
|
|
National Public Finance Guarantee Corporation
|
|
—
|
|
|
4,057
|
|
|
3,962
|
|
|||
Subtotal
|
|
3,269
|
|
|
4,057
|
|
|
3,962
|
|
|||
Reinsurers rated BIG or not rated:
|
|
|
|
|
|
|
||||||
American Overseas Reinsurance Company Limited (3)
|
|
3,307
|
|
|
—
|
|
|
30
|
|
|||
Syncora Guarantee Inc. (3)
|
|
1,950
|
|
|
1,097
|
|
|
654
|
|
|||
ACA Financial Guaranty Corp.
|
|
621
|
|
|
12
|
|
|
—
|
|
|||
Ambac Assurance Corporation
|
|
115
|
|
|
2,583
|
|
|
6,061
|
|
|||
MBIA
|
|
—
|
|
|
949
|
|
|
151
|
|
|||
Financial Guaranty Insurance Company and FGIC UK Limited
|
|
—
|
|
|
1,221
|
|
|
404
|
|
|||
Ambac Assurance Corp. Segregated Account
|
|
—
|
|
|
57
|
|
|
584
|
|
|||
Subtotal
|
|
5,993
|
|
|
5,919
|
|
|
7,884
|
|
|||
Other (3)
|
|
71
|
|
|
538
|
|
|
146
|
|
|||
Total
|
|
$
|
9,333
|
|
|
$
|
10,514
|
|
|
$
|
11,992
|
|
(1)
|
Of the total ceded par to reinsurers rated BIG or not rated,
$359 million
is rated BIG
.
|
(2)
|
The par on second-to-pay exposure where the primary insurer and underlying transaction rating are both BIG, and/or not rated, is
$742 million
.
|
(3)
|
The total collateral posted by all non-affiliated reinsurers required to post, or that had agreed to post, collateral as of
March 31, 2017
was approximately
$285 million
.
|
(4)
|
The Company benefits from trust arrangements that satisfy the triple-A credit requirement of S&P and/or Moody’s.
|
•
|
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,
|
•
|
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
|
|
Assured Guaranty Re Ltd.
(AG Re)
|
|
Eliminations (2)
|
|
Total
Net Par Outstanding (3)
|
|
Gross
Par Outstanding
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commonwealth of Puerto Rico - General Obligation Bonds (4)
|
|
$
|
699
|
|
|
$
|
378
|
|
|
$
|
421
|
|
|
$
|
(3
|
)
|
|
$
|
1,495
|
|
|
$
|
1,577
|
|
Puerto Rico Public Buildings Authority (PBA) (4)
|
|
11
|
|
|
169
|
|
|
0
|
|
|
(11
|
)
|
|
169
|
|
|
174
|
|
||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Puerto Rico Highways and Transportation Authority (PRHTA) (Transportation revenue) (4)
|
|
273
|
|
|
519
|
|
|
209
|
|
|
(83
|
)
|
|
918
|
|
|
949
|
|
||||||
PRHTA (Highway revenue)
|
|
272
|
|
|
93
|
|
|
44
|
|
|
—
|
|
|
409
|
|
|
556
|
|
||||||
Puerto Rico Convention Center District Authority (PRCCDA)
|
|
—
|
|
|
152
|
|
|
—
|
|
|
—
|
|
|
152
|
|
|
152
|
|
||||||
Puerto Rico Infrastructure Financing Authority (PRIFA) (4)
|
|
—
|
|
|
17
|
|
|
1
|
|
|
—
|
|
|
18
|
|
|
18
|
|
||||||
Other Public Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
PREPA
|
|
470
|
|
|
73
|
|
|
234
|
|
|
—
|
|
|
777
|
|
|
876
|
|
||||||
Puerto Rico Aqueduct and Sewer Authority (PRASA)
|
|
—
|
|
|
285
|
|
|
88
|
|
|
—
|
|
|
373
|
|
|
373
|
|
||||||
Municipal Finance Agency (MFA)
|
|
195
|
|
|
61
|
|
|
98
|
|
|
—
|
|
|
354
|
|
|
488
|
|
||||||
Puerto Rico Sales Tax Financing Corporation (COFINA)
|
|
262
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
271
|
|
|
271
|
|
||||||
University of Puerto Rico (U of PR)
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||||
Total exposure to Puerto Rico
|
|
$
|
2,182
|
|
|
$
|
1,748
|
|
|
$
|
1,104
|
|
|
$
|
(97
|
)
|
|
$
|
4,937
|
|
|
$
|
5,435
|
|
(1)
|
The
March 31, 2017
amounts include
$150 million
related to the commutation of previously ceded business. See Part I, Item 1, Financial Statements, Note 13, Reinsurance and Other Monoline Exposures, for more information.
|
(2)
|
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.
|
(3)
|
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.
|
(4)
|
As of the date of this filing, the Company has paid claims on these credits.
|
|
Scheduled Net Par Amortization
|
||||||||||||||||||||||||||||||||||||||
|
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
|
|
$
|
93
|
|
$
|
0
|
|
$
|
75
|
|
$
|
82
|
|
$
|
136
|
|
$
|
16
|
|
$
|
227
|
|
$
|
272
|
|
$
|
489
|
|
$
|
105
|
|
$
|
—
|
|
$
|
1,495
|
|
PBA
|
—
|
|
28
|
|
—
|
|
—
|
|
3
|
|
5
|
|
13
|
|
24
|
|
42
|
|
54
|
|
—
|
|
—
|
|
169
|
|
|||||||||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
PRHTA (Transportation revenue)
|
0
|
|
36
|
|
0
|
|
38
|
|
32
|
|
25
|
|
18
|
|
119
|
|
156
|
|
295
|
|
194
|
|
5
|
|
918
|
|
|||||||||||||
PRHTA (Highway revenue)
|
—
|
|
10
|
|
—
|
|
10
|
|
21
|
|
22
|
|
26
|
|
30
|
|
73
|
|
217
|
|
—
|
|
—
|
|
409
|
|
|||||||||||||
PRCCDA
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
19
|
|
133
|
|
—
|
|
—
|
|
152
|
|
|||||||||||||
PRIFA
|
—
|
|
—
|
|
—
|
|
2
|
|
—
|
|
—
|
|
—
|
|
2
|
|
—
|
|
—
|
|
14
|
|
—
|
|
18
|
|
|||||||||||||
Other Public Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
PREPA
|
0
|
|
5
|
|
—
|
|
4
|
|
25
|
|
44
|
|
24
|
|
350
|
|
299
|
|
26
|
|
0
|
|
—
|
|
777
|
|
|||||||||||||
PRASA
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
53
|
|
57
|
|
—
|
|
2
|
|
261
|
|
373
|
|
|||||||||||||
MFA
|
—
|
|
52
|
|
—
|
|
50
|
|
48
|
|
39
|
|
34
|
|
100
|
|
31
|
|
—
|
|
—
|
|
—
|
|
354
|
|
|||||||||||||
COFINA
|
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
|
$
|
0
|
|
$
|
224
|
|
$
|
0
|
|
$
|
178
|
|
$
|
210
|
|
$
|
270
|
|
$
|
129
|
|
$
|
900
|
|
$
|
942
|
|
$
|
1,249
|
|
$
|
417
|
|
$
|
418
|
|
$
|
4,937
|
|
|
Scheduled Net Debt Service Amortization
|
||||||||||||||||||||||||||||||||||||||
|
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
|
|
$
|
132
|
|
$
|
0
|
|
$
|
147
|
|
$
|
151
|
|
$
|
201
|
|
$
|
74
|
|
$
|
493
|
|
$
|
469
|
|
$
|
595
|
|
$
|
111
|
|
$
|
—
|
|
$
|
2,373
|
|
PBA
|
—
|
|
32
|
|
—
|
|
7
|
|
10
|
|
12
|
|
20
|
|
55
|
|
58
|
|
62
|
|
—
|
|
—
|
|
256
|
|
|||||||||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
PRHTA (Transportation revenue)
|
0
|
|
60
|
|
0
|
|
84
|
|
76
|
|
67
|
|
59
|
|
305
|
|
308
|
|
404
|
|
229
|
|
5
|
|
1,597
|
|
|||||||||||||
PRHTA (Highway revenue)
|
—
|
|
21
|
|
—
|
|
32
|
|
42
|
|
42
|
|
45
|
|
111
|
|
145
|
|
252
|
|
—
|
|
—
|
|
690
|
|
|||||||||||||
PRCCDA
|
—
|
|
3
|
|
—
|
|
7
|
|
7
|
|
7
|
|
7
|
|
35
|
|
50
|
|
152
|
|
—
|
|
—
|
|
268
|
|
|||||||||||||
PRIFA
|
—
|
|
0
|
|
—
|
|
3
|
|
1
|
|
1
|
|
1
|
|
6
|
|
4
|
|
3
|
|
16
|
|
—
|
|
35
|
|
|||||||||||||
Other Public Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
PREPA
|
2
|
|
21
|
|
2
|
|
40
|
|
61
|
|
79
|
|
56
|
|
477
|
|
344
|
|
29
|
|
0
|
|
—
|
|
1,111
|
|
|||||||||||||
PRASA
|
—
|
|
10
|
|
—
|
|
20
|
|
19
|
|
19
|
|
19
|
|
147
|
|
129
|
|
68
|
|
70
|
|
327
|
|
828
|
|
|||||||||||||
MFA
|
—
|
|
61
|
|
—
|
|
66
|
|
60
|
|
49
|
|
42
|
|
122
|
|
34
|
|
—
|
|
—
|
|
—
|
|
434
|
|
|||||||||||||
COFINA
|
0
|
|
6
|
|
0
|
|
13
|
|
13
|
|
13
|
|
13
|
|
68
|
|
68
|
|
103
|
|
162
|
|
160
|
|
619
|
|
|||||||||||||
U of PR
|
0
|
|
0
|
|
—
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
1
|
|
—
|
|
—
|
|
1
|
|
|||||||||||||
Total
|
$
|
2
|
|
$
|
346
|
|
$
|
2
|
|
$
|
419
|
|
$
|
440
|
|
$
|
490
|
|
$
|
336
|
|
$
|
1,819
|
|
$
|
1,609
|
|
$
|
1,669
|
|
$
|
588
|
|
$
|
492
|
|
$
|
8,212
|
|
Ratings:
|
|
Prime
First
Lien
|
|
Alt-A
First Lien
|
|
Option
ARMs
|
|
Subprime
First
Lien
|
|
Second
Lien
|
|
Total Net
Par
Outstanding
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
AAA
|
|
$
|
2
|
|
|
$
|
164
|
|
|
$
|
29
|
|
|
$
|
1,381
|
|
|
$
|
0
|
|
|
$
|
1,576
|
|
AA
|
|
22
|
|
|
237
|
|
|
50
|
|
|
280
|
|
|
0
|
|
|
589
|
|
||||||
A
|
|
14
|
|
|
5
|
|
|
0
|
|
|
60
|
|
|
0
|
|
|
79
|
|
||||||
BBB
|
|
22
|
|
|
3
|
|
|
—
|
|
|
79
|
|
|
0
|
|
|
103
|
|
||||||
BIG
|
|
135
|
|
|
548
|
|
|
74
|
|
|
1,108
|
|
|
1,144
|
|
|
3,009
|
|
||||||
Total exposures
|
|
$
|
194
|
|
|
$
|
957
|
|
|
$
|
153
|
|
|
$
|
2,908
|
|
|
$
|
1,144
|
|
|
$
|
5,357
|
|
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
|
|
$
|
29
|
|
|
$
|
41
|
|
|
$
|
15
|
|
|
$
|
886
|
|
|
$
|
67
|
|
|
$
|
1,038
|
|
2005
|
|
97
|
|
|
360
|
|
|
29
|
|
|
161
|
|
|
249
|
|
|
896
|
|
||||||
2006
|
|
69
|
|
|
73
|
|
|
26
|
|
|
651
|
|
|
333
|
|
|
1,152
|
|
||||||
2007
|
|
—
|
|
|
483
|
|
|
84
|
|
|
1,145
|
|
|
495
|
|
|
2,207
|
|
||||||
2008
|
|
—
|
|
|
—
|
|
|
—
|
|
|
64
|
|
|
—
|
|
|
64
|
|
||||||
Total exposures
|
|
$
|
194
|
|
|
$
|
957
|
|
|
$
|
153
|
|
|
$
|
2,908
|
|
|
$
|
1,144
|
|
|
$
|
5,357
|
|
|
Hungary
|
|
Italy
|
|
Portugal
|
|
Spain
|
|
Turkey
|
|
Total
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Sub-sovereign exposure(2)
|
$
|
207
|
|
|
$
|
1,121
|
|
|
$
|
77
|
|
|
$
|
433
|
|
|
$
|
—
|
|
|
$
|
1,838
|
|
Non-sovereign exposure(3)
|
114
|
|
|
442
|
|
|
—
|
|
|
—
|
|
|
202
|
|
|
758
|
|
||||||
Total
|
$
|
321
|
|
|
$
|
1,563
|
|
|
$
|
77
|
|
|
$
|
433
|
|
|
$
|
202
|
|
|
$
|
2,596
|
|
Total BIG
|
$
|
250
|
|
|
$
|
—
|
|
|
$
|
77
|
|
|
$
|
433
|
|
|
$
|
—
|
|
|
$
|
760
|
|
|
Hungary
|
|
Italy
|
|
Portugal
|
|
Spain
|
|
Turkey
|
|
Total
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Sub-sovereign exposure(2)
|
$
|
204
|
|
|
$
|
912
|
|
|
$
|
75
|
|
|
$
|
345
|
|
|
$
|
—
|
|
|
$
|
1,536
|
|
Non-sovereign exposure(3)
|
114
|
|
|
400
|
|
|
—
|
|
|
—
|
|
|
202
|
|
|
716
|
|
||||||
Total
|
$
|
318
|
|
|
$
|
1,312
|
|
|
$
|
75
|
|
|
$
|
345
|
|
|
$
|
202
|
|
|
$
|
2,252
|
|
Total BIG
|
$
|
248
|
|
|
$
|
—
|
|
|
$
|
75
|
|
|
$
|
345
|
|
|
$
|
—
|
|
|
$
|
668
|
|
(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.
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Intercompany sources (uses):
|
|
|
|
||||
Dividends paid by AGC to AGUS
|
$
|
28
|
|
|
$
|
—
|
|
Dividends paid by AGM to AGMH
|
79
|
|
|
95
|
|
||
Dividends paid by AG Re to AGL
|
40
|
|
|
25
|
|
||
Dividends paid by MAC to MAC Holdings(1)
|
12
|
|
|
—
|
|
||
External sources (uses):
|
|
|
|
||||
Dividends paid to AGL shareholders
|
(19
|
)
|
|
(18
|
)
|
||
Repurchases of common shares(2)
|
(216
|
)
|
|
(75
|
)
|
||
Interest paid by AGMH and AGUS
|
(8
|
)
|
|
(7
|
)
|
(1)
|
MAC Holdings distributed the entire amount to AGM and AGC, in proportion to their ownership percentages.
|
(2)
|
See Part I, Item 1, Financial Statements, Note 17, 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
$192 million
. Of such
$192 million
,
$79 million
was distributed by AGM to AGMH in
First Quarter 2017
and
none
of such
$192 million
is available for distribution in the second quarter of 2017
.
|
•
|
The maximum amount available during 2017 for AGC to distribute as ordinary dividends is approximately
$107 million
. Of such
$107 million
,
$28 million
was distributed by AGC to AGUS in
First Quarter 2017
and approximately
$24 million
is available for distribution in the second quarter of 2017.
|
•
|
The maximum amount available during 2017 for MAC to distribute as dividends to MAC Holdings, which is owned by AGM and AGC, without regulatory approval is estimated to be approximately
$49 million
, of which approximately
$37 million
is available for distribution in the second quarter of 2017.
MAC currently intends to allocate the distribution of such
$37 million
over the remaining three quarters 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 Bermuda Monetary Authority and (ii) declare and pay dividends in an aggregate amount up to approximately
$314 million
. Such dividend capacity is further limited by the actual amount of AG Re’s unencumbered assets, which amount changes from time to time due in part to collateral posting requirements. As of
March 31, 2017
, AG Re had unencumbered assets of approximately
$543 million
.
|
•
|
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.
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Public finance
|
$
|
(25
|
)
|
|
$
|
(5
|
)
|
Structured finance:
|
|
|
|
||||
U.S. RMBS
|
13
|
|
|
(85
|
)
|
||
Other structured finance
|
(10
|
)
|
|
(23
|
)
|
||
Structured finance
|
3
|
|
|
(108
|
)
|
||
Claims (paid) recovered, net of reinsurance(1)
|
$
|
(22
|
)
|
|
$
|
(113
|
)
|
(1)
|
Includes $3 million paid and $8 million paid for consolidated FG VIEs for
First Quarter 2017
and
2016
, respectively.
|
|
First Quarter
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Net cash flows provided by (used in) operating activities before effects of FG VIE consolidation
|
$
|
97
|
|
|
$
|
(96
|
)
|
Effect of FG VIE consolidation
|
5
|
|
|
6
|
|
||
Net cash flows provided by (used in) operating activities - reported
|
102
|
|
|
(90
|
)
|
||
Net cash flows provided by (used in) investing activities before effects of FG VIE consolidation
|
168
|
|
|
136
|
|
||
Effect of FG VIE consolidation
|
43
|
|
|
36
|
|
||
Net cash flows provided by (used in) investing activities - reported
|
211
|
|
|
172
|
|
||
Net cash flows provided by (used in) financing activities before effects of FG VIE consolidation
|
(246
|
)
|
|
(94
|
)
|
||
Effect of FG VIE consolidation
|
(48
|
)
|
|
(42
|
)
|
||
Net cash flows provided by (used in) financing activities - reported (1)
|
(294
|
)
|
|
(136
|
)
|
||
Effect of exchange rate changes
|
2
|
|
|
0
|
|
||
Cash and restricted cash at beginning of period
|
127
|
|
|
166
|
|
||
Total cash and restricted cash at the end of the period
|
$
|
148
|
|
|
$
|
112
|
|
(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 March 31,
|
|
As of December 31,
|
|
First Quarter
|
||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
|
(in millions)
|
||||||||||||||
AGUS
|
$
|
850
|
|
|
$
|
850
|
|
|
$
|
1
|
|
|
$
|
—
|
|
AGMH
|
730
|
|
|
730
|
|
|
7
|
|
|
7
|
|
||||
AGM
|
9
|
|
|
9
|
|
|
0
|
|
|
0
|
|
||||
Total
|
$
|
1,589
|
|
|
$
|
1,589
|
|
|
$
|
8
|
|
|
$
|
7
|
|
|
As of March 31, 2017
|
|
As of December 31, 2016
|
||||||||||||
|
Amortized
Cost
|
|
Estimated
Fair Value
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||||||
|
(in millions)
|
||||||||||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Obligations of state and political subdivisions
|
$
|
5,432
|
|
|
$
|
5,622
|
|
|
$
|
5,269
|
|
|
$
|
5,432
|
|
U.S. government and agencies
|
399
|
|
|
414
|
|
|
424
|
|
|
440
|
|
||||
Corporate securities
|
1,851
|
|
|
1,874
|
|
|
1,612
|
|
|
1,613
|
|
||||
Mortgage-backed securities(1):
|
|
|
|
|
|
|
|
|
|||||||
RMBS
|
978
|
|
|
992
|
|
|
998
|
|
|
987
|
|
||||
Commercial mortgage-backed securities (CMBS)
|
561
|
|
|
568
|
|
|
575
|
|
|
583
|
|
||||
Asset-backed securities
|
573
|
|
|
690
|
|
|
835
|
|
|
945
|
|
||||
Foreign government securities
|
341
|
|
|
319
|
|
|
261
|
|
|
233
|
|
||||
Total fixed-maturity securities
|
10,135
|
|
|
10,479
|
|
|
9,974
|
|
|
10,233
|
|
||||
Short-term investments
|
687
|
|
|
689
|
|
|
590
|
|
|
590
|
|
||||
Total fixed-maturity and short-term investments
|
$
|
10,822
|
|
|
$
|
11,168
|
|
|
$
|
10,564
|
|
|
$
|
10,823
|
|
(1)
|
Government-agency obligations were approximately
40%
of mortgage backed securities as of
March 31, 2017
and
42%
as of
December 31, 2016
, 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
|
$
|
994
|
|
|
$
|
(28
|
)
|
|
$
|
6
|
|
|
$
|
(1
|
)
|
|
$
|
1,000
|
|
|
$
|
(29
|
)
|
U.S. government and agencies
|
172
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
172
|
|
|
(1
|
)
|
||||||
Corporate securities
|
356
|
|
|
(8
|
)
|
|
120
|
|
|
(19
|
)
|
|
476
|
|
|
(27
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
RMBS
|
377
|
|
|
(13
|
)
|
|
93
|
|
|
(13
|
)
|
|
470
|
|
|
(26
|
)
|
||||||
CMBS
|
160
|
|
|
(5
|
)
|
|
1
|
|
|
0
|
|
|
161
|
|
|
(5
|
)
|
||||||
Asset-backed securities
|
52
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
52
|
|
|
0
|
|
||||||
Foreign government securities
|
45
|
|
|
(4
|
)
|
|
115
|
|
|
(25
|
)
|
|
160
|
|
|
(29
|
)
|
||||||
Total
|
$
|
2,156
|
|
|
$
|
(59
|
)
|
|
$
|
335
|
|
|
$
|
(58
|
)
|
|
$
|
2,491
|
|
|
$
|
(117
|
)
|
Number of securities (1)
|
|
|
|
542
|
|
|
|
|
|
62
|
|
|
|
|
|
598
|
|
||||||
Number of securities with other-than-temporary impairment
|
|
|
|
12
|
|
|
|
|
|
9
|
|
|
|
|
|
21
|
|
|
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
|
|
|
—
|
|
||||||
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
|
|
(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
|
$
|
284
|
|
|
$
|
283
|
|
Due after one year through five years
|
1,798
|
|
|
1,828
|
|
||
Due after five years through 10 years
|
2,171
|
|
|
2,227
|
|
||
Due after 10 years
|
4,343
|
|
|
4,581
|
|
||
Mortgage-backed securities:
|
|
|
|
|
|
||
RMBS
|
978
|
|
|
992
|
|
||
CMBS
|
561
|
|
|
568
|
|
||
Total
|
$
|
10,135
|
|
|
$
|
10,479
|
|
Rating
|
|
As of
March 31, 2017 |
|
As of
December 31, 2016 |
||
AAA
|
|
13.2
|
%
|
|
11.6
|
%
|
AA
|
|
54.6
|
|
|
54.8
|
|
A
|
|
18.4
|
|
|
17.9
|
|
BBB
|
|
1.8
|
|
|
1.9
|
|
BIG(1)
|
|
11.6
|
|
|
13.5
|
|
Not rated
|
|
0.4
|
|
|
0.3
|
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
(1)
|
Comprised primarily of loss mitigation and other risk management assets. See Part I, Item I, Financial Statements, Note 10, Investments and Cash, for additional information.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
PART II.
|
OTHER INFORMATION
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period
|
|
Total
Number of
Shares
Purchased
|
|
Average
Price Paid
Per Share
|
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Program (1)
|
|
Maximum Number (or Approximate Dollar Value)
of Shares that
May Yet Be
Purchased
Under the Program(2)
|
||||||
January 1 - January 31
|
|
2,215,125
|
|
|
$
|
39.13
|
|
|
2,215,125
|
|
|
$
|
162,499,480
|
|
February 1 - February 28
|
|
1,917,969
|
|
|
$
|
40.57
|
|
|
1,651,244
|
|
|
$
|
395,393,966
|
|
March 1 - March 31
|
|
1,583,893
|
|
|
$
|
40.00
|
|
|
1,563,672
|
|
|
$
|
332,872,711
|
|
Total
|
|
5,716,987
|
|
|
$
|
39.85
|
|
|
5,430,041
|
|
|
|
|
(1)
|
After giving effect to repurchases since the beginning of 2013 through May 4, 2017, the Company has repurchased a total of
75.4 million
common shares for approximately
$1,984 million
, excluding commissions, at an average price of
$26.29
per share. On February 22, 2017, the Board authorized an additional
$300 million
, including a specifically authorized repurchase from the Company's Chief Executive Officer and its General Counsel. See Part I, Item 1, Financial Statements, Note 17, Shareholders' Equity, for additional information about the Company's repurchases of its common shares, including the details of the authorization of repurchases from its Chief Executive Officer and General Counsel. As of May 4, 2017,
$280 million
of total capacity remained from the authorizations, on a settlement basis.
|
(2)
|
Excludes commissions.
|
ITEM 6.
|
EXHIBITS.
|
|
ASSURED GUARANTY LTD.
(Registrant)
|
|
|
|
|
Dated May 5, 2017
|
By:
|
/s/ ROBERT A. BAILENSON
|
|
|
|
|
|
Robert A. Bailenson
Chief Financial Officer (Principal Financial and
Accounting Officer and Duly Authorized Officer)
|
Exhibit
Number
|
|
Description of Document
|
|
10.1
|
|
|
Form of Executive Restricted Stock Unit Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan for awards commencing in 2017 *
|
10.2
|
|
|
Form of Executive Performance Based Restricted Stock Unit Agreement under Assured Guaranty Ltd. 2004 Long-Term Incentive Plan *
|
10.3
|
|
|
Director Compensation Summary *
|
31.1
|
|
|
Certification of CEO Pursuant to Exchange Act Rules 13A-14 and 15D-14, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
31.2
|
|
|
Certification of CFO Pursuant to Exchange Act Rules 13A-14 and 15D-14, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
32.1
|
|
|
Certification of CEO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes- Oxley Act of 2002
|
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 Assured Guaranty Ltd.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 formatted in XBRL: (i) Consolidated Balance Sheets at March 31, 2017 and December 31, 2016; (ii) Consolidated Statements of Operations for the Three Months ended March 31, 2017 and 2016; (iii) Consolidated Statements of Comprehensive Income for the Three Months ended March 31, 2017 and 2016 (iv) Consolidated Statement of Shareholders’ Equity for the Three Months ended March 31, 2017; (v) Consolidated Statements of Cash Flows for the Three Months ended March 31, 2017 and 2016; and (vi) Notes to Consolidated Financial Statements.
|
*
|
Management contract or compensatory plan
|
(a)
|
The "Participant" is
__________
______________________
|
(b)
|
The "Grant Date" is February 22, 2017
.
|
(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 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 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
|
(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 22, 2017
.
|
(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, 2019; (ii) the date of a Change in Control.
|
(f)
|
The “Performance Period” is July 1, 2018 through December 31, 2019; provided, however, if a Change in Control occurs on or after July 1, 2018 but prior to December 31, 2019, 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, 2018, the Performance Period shall be the period beginning on January 1, 2017 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
|
$50 or higher
|
200%
|
Target
|
$46
|
100%
|
Threshold
|
$42
|
50%
|
< Threshold
|
Less than $42
|
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
|
(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 and conditions as may be required by the Company, and the Company shall be entitled to set-off against the amount of any such gain any amount owed to the Participant by the Company and/or Subsidiary.
|
(a)
|
Notwithstanding anything in this Agreement to the contrary, the Participant’s rights with respect to the Performance-Based Restricted Stock Unit Award shall be subject to the Assured Guaranty Ltd. Executive Officer Recoupment Policy as amended 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
|
(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 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 Performance-Based Restricted Stock Unit Award is terminated pursuant to Section 7(b) of this Agreement.
|
•
|
The Chairman of the Board receives an additional $225,000 annual retainer
|
•
|
The Chairman of each of the Audit Committee, the Compensation Committee, the Finance Committee, the Nominating and Governance Committee, and the Risk Oversight Committee, receives an additional $30,000 annual retainer
|
•
|
Members, other than the chairman of the committee or the Chairman of the Board, of each of the Audit Committee, the Compensation Committee, the Finance Committee, the Nominating and Governance Committee (unless also the Chairman of the Board) and the Risk Oversight Committee receive an additional $15,000 annual retainer.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Assured Guaranty Ltd.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
|
|
By:
|
/s/ DOMINIC J. FREDERICO
|
|
|
|
|
|
Dominic J. Frederico
|
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Assured Guaranty Ltd.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
|
|
By:
|
/s/ ROBERT A. BAILENSON
|
|
|
|
|
|
Robert A. Bailenson
|
|
|
Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ DOMINIC J. FREDERICO
|
|
|
|
Name: Dominic J. Frederico
|
|
Title:
President and Chief Executive Officer
|
|
Date: May 5, 2017
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ ROBERT A. BAILENSON
|
|
|
|
Name: Robert A. Bailenson
|
|
Title:
Chief Financial Officer
|
|
Date: May 5, 2017
|
|