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ý
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ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Bermuda
(State or other jurisdiction of incorporation or organization)
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98-0429991
(I.R.S. Employer Identification No.)
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Title of each class
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Name of each exchange on which registered
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Common Shares, $0.01 per share
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New York Stock Exchange, Inc.
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•
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reduction in the amount of available insurance opportunities and/or in the demand for Assured Guaranty's insurance;
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•
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rating agency action, including a ratings downgrade, a change in outlook, the placement of ratings on watch for downgrade, or a change in rating criteria, at any time, of AGL or any of its subsidiaries, and/or of any securities AGL or any of its subsidiaries have issued, and/or of transactions that AGL’s subsidiaries have insured;
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•
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developments in the world’s financial and capital markets that adversely affect obligors’ payment rates or Assured Guaranty’s loss experience;
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•
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the possibility that budget or pension shortfalls or other factors will result in credit losses or impairments on obligations of state, territorial and local governments and their related authorities and public corporations that Assured Guaranty insures or reinsures;
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•
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the failure of Assured Guaranty to realize loss recoveries that are assumed in its expected loss estimates;
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•
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increased competition, including from new entrants into the financial guaranty industry;
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•
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rating agency action on obligors, including sovereign debtors, resulting in a reduction in the value of securities in Assured Guaranty's investment portfolio and in collateral posted by and to Assured Guaranty;
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•
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the inability of Assured Guaranty to access external sources of capital on acceptable terms;
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•
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changes in the world’s credit markets, segments thereof, interest rates or general economic conditions;
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•
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the impact of market volatility on the mark-to-market of Assured Guaranty’s contracts written in credit default swap form;
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•
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changes in applicable accounting policies or practices;
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•
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changes in applicable laws or regulations, including insurance, bankruptcy and tax laws, or other governmental actions;
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•
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the impact of changes in the world’s economy and credit and currency markets and in applicable laws or regulations relating to the decision of the United Kingdom (U.K.) to exit the European Union (EU);
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•
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the possibility that acquisitions or alternative investments made by Assured Guaranty do not result in the benefits anticipated or subject Assured Guaranty to unanticipated consequences;
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•
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deterioration in the financial condition of Assured Guaranty’s reinsurers, the amount and timing of reinsurance recoverables actually received and the risk that reinsurers may dispute amounts owed to Assured Guaranty under its reinsurance agreements;
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•
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difficulties with the execution of Assured Guaranty’s business strategy;
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•
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loss of key personnel;
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•
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the effects of mergers, acquisitions and divestitures;
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•
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natural or man-made catastrophes;
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•
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other risk factors identified in AGL’s filings with the U.S. Securities and Exchange Commission (the SEC);
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•
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other risks and uncertainties that have not been identified at this time; and
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•
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management’s response to these factors.
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Page
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ITEM 1.
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BUSINESS
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•
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Assured Guaranty Municipal Corp.
AGM is located and domiciled in New York, was organized in 1984 and commenced operations in 1985. Since mid-2008, AGM has provided financial guaranty insurance and reinsurance only on debt obligations issued in the U.S. public finance and global infrastructure markets, including bonds issued by U.S. state or governmental authorities or notes issued to finance infrastructure projects. Previously, AGM also offered insurance and reinsurance in the global structured finance market, including asset-backed securities issued by special purpose entities. AGM's subsidiary AGE offers insurance and reinsurance in the global structured finance market. AGM formerly was named Financial Security Assurance Inc. Assured Guaranty acquired AGM, together with its holding company Financial Security Assurance Holdings Ltd. (renamed Assured Guaranty Municipal Holdings Inc., AGMH) and the subsidiaries owned by that holding company, on July 1, 2009.
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•
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Municipal Assurance Corp.
MAC is located and domiciled in New York and was organized in 2008. Assured Guaranty acquired MAC on May 31, 2012. On July 16, 2013, Assured Guaranty completed a series of transactions that increased the capitalization of MAC and resulted in MAC assuming a portfolio of geographically diversified U.S. public finance exposure from AGM and AGC. MAC offers insurance and reinsurance on bonds issued by U.S. state or municipal governmental authorities, focusing on investment grade obligations in select sectors of the municipal market.
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•
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Assured Guaranty Corp.
AGC is located in New York and domiciled in Maryland, was organized in 1985 and commenced operations in 1988. It provides insurance and reinsurance on debt obligations in the global structured finance market and also offers guarantees on obligations in the U.S. public finance and international infrastructure markets.
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•
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Assured Guaranty (Europe) plc
AGE is a U.K. incorporated company licensed as a U.K. insurance company and authorized to operate in various countries throughout the European Economic Area (EEA). It was organized in 1990 and issued its first financial guarantee in 1994. AGE offers financial guarantees in both the international public finance and structured finance markets and is the primary entity from which the Company writes business in the EEA. As discussed further under "Business" below, AGE has agreed with its regulator that any new business it writes would be guaranteed using a co-insurance structure pursuant to which AGE would co-insure municipal and infrastructure transactions with AGM, and structured finance transactions with AGC.
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•
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Assured Guaranty Re Ltd. and Assured Guaranty Re Overseas Ltd.
AG Re is incorporated under the laws of Bermuda and is licensed as a Class 3B insurer under the Insurance Act 1978 and related regulations of Bermuda. AG Re owns, indirectly, AGRO, which is a Bermuda Class 3A and Class C insurer. AG Re and AGRO underwrite financial guaranty reinsurance, and AGRO also underwrites other reinsurance that is in line with the Company's risk profile and benefits from its underwriting experience. AG Re and AGRO write business as reinsurers of third-party primary insurers and of certain affiliated companies.
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•
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Portfolio Risk Management Committee
—This committee establishes company-wide credit policy for the Company's direct and assumed business. It implements specific underwriting procedures and limits for the Company and allocates underwriting capacity among the Company's subsidiaries. The Portfolio Risk Management Committee focuses on measuring and managing credit, market and liquidity risk for the overall company. All transactions in new asset classes or new jurisdictions must be approved by this committee.
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•
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U.S. Management Committee
—This committee establishes strategic policy and reviews the implementation of strategic initiatives and general business progress in the U.S. The U.S. Management Committee approves risk policy at the U.S. operating company level.
|
•
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Risk Management Committees
—The U.S., U.K., AG Re and AGRO risk management committees conduct an in-depth review of the insured portfolios of the relevant subsidiaries, focusing on varying portions of the portfolio at each meeting. They assign internal ratings of the insured transactions and review sector reports, monthly product line surveillance reports and compliance reports.
|
•
|
Workout Committee
—This committee receives reports from surveillance and workout personnel on transactions that might benefit from active loss mitigation or risk reduction, and approves loss mitigation or risk reduction strategies for such transactions.
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•
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Reserve Committees
—Oversight of reserving risk is vested in the U.S. Reserve Committee, the U.K. Reserve Committee, the AG Re Reserve Committee and the AGRO Reserve Committee. The committees review the reserve methodology and assumptions for each major asset class or significant BIG transaction, as well as the loss projection scenarios used and the probability weights assigned to those scenarios. The reserve committees establish reserves for the relevant subsidiaries, taking into consideration supporting information provided by surveillance personnel.
|
•
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Instability of Rating Criteria and Methodologies.
Rating agencies purport to issue ratings pursuant to published rating criteria and methodologies. Beginning during the financial crisis, the rating agencies made material changes to their rating criteria and methodologies applicable to financial guaranty insurers, sometimes through formal changes and other times through
ad hoc
adjustments to the conclusions reached by existing criteria. Furthermore, these criteria and methodology changes were typically implemented without any transition period, making it difficult for an insurer to comply quickly with new standards.
|
•
|
Instability of Severe Stress Case Loss Assumptions.
A major component in arriving at a financial guaranty insurer's rating has been the rating agency’s assessment of the insurer’s capital adequacy, with each rating agency employing its own proprietary model. These capital adequacy approaches include “stress case” loss assumptions for various risks or risk categories. Since the financial crisis, the rating agencies have at various times materially increased stress case loss assumptions for various risks or risk categories, in some cases later reducing such stress case losses. This approach has made predicting the amount of capital required to maintain or attain a certain rating more difficult.
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•
|
More Reliance on Qualitative Rating Criteria.
In prior years, the financial strength ratings of the Company’s insurance company subsidiaries were largely consistent with the rating agency’s assessment of the insurers’ capital
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•
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AGM is a New York domiciled insurance company licensed to write financial guaranty insurance and reinsurance in 50 U.S. states, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands.
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•
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MAC is a New York domiciled insurance company licensed to write financial guaranty insurance and reinsurance in 50 U.S. states and the District of Columbia. MAC will only insure U.S. public finance debt obligations, focusing on investment grade bonds in select sectors of that market.
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•
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AGC is a Maryland domiciled insurance company licensed to write financial guaranty insurance and reinsurance in 50 U.S. states, the District of Columbia and Puerto Rico.
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•
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the insured average annual debt service for a single risk, net of qualifying reinsurance and collateral, or
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•
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the insured unpaid principal (reduced by the extent to which the unpaid principal of the supporting assets exceeds the insured unpaid principal) divided by nine, net of qualifying reinsurance and collateral, may not exceed 10% of the sum of the insurer's policyholders' surplus and contingency reserves, subject to certain conditions.
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•
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The minimum share capital must be always issued and outstanding and cannot be reduced. For AG Re, which is registered as a Class 3B insurer, the minimum share capital is $120,000. For AGRO, which is registered both as a Class 3A and a Class C long-term insurer, the minimum share capital is $370,000.
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•
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With respect to the distribution (including repurchase of shares) of any share capital, contributed surplus or other statutory capital:
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(a)
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any such distribution that would reduce AG Re's or AGRO's total statutory capital by 15% or more of their respective total statutory capital as set out in their previous year's financial statements requires the prior approval of the Authority. Any application for such approval must include an affidavit stating that the company will continue to meet the required margins and such other information as the Authority may require; and
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(b)
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as a Class C long-term insurer, AGRO may not use the funds allocated to its long-term business fund, directly or indirectly, for any purpose other than a purpose of its long-term business except in so far as such payment can be made out of any surplus certified by AGRO's approved actuary to be available for distribution otherwise than to policyholders.
|
•
|
With respect to the declaration and payment of dividends:
|
(a)
|
each of AG Re and AGRO is prohibited from declaring or paying any dividends during any financial year if it is in breach of its solvency margin, minimum liquidity ratio or enhanced capital requirement, or if the declaration or payment of such dividends would cause such a breach (if it has failed to meet its minimum solvency margin or minimum liquidity ratio on the last day of any financial year, the insurer will be prohibited, without the approval of the Authority, from declaring or paying any dividends during the next financial year). Dividends are paid out of each insurer's statutory surplus and, therefore, dividends cannot exceed such surplus. See "—Minimum Solvency Margin and Enhanced Capital Requirements" above and "—Minimum Liquidity Ratio" below;
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(b)
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an insurer which at any time fails to meet its minimum solvency margin or comply with the enhanced capital requirement may not declare or pay any dividend until the failure is rectified, and also in such circumstances the insurer must report, within 14 days after becoming aware of its failure or having reason to believe that such failure has occurred, to the Authority in writing giving particulars of the circumstances leading to the failure and giving a plan detailing the manner, specific actions to be taken and time frame in which the insurer intends to rectify the failure. A failure to comply with the enhanced capital requirement will also result in the insurer furnishing certain other information to the Authority within 45 days after becoming aware of its failure or having reason to believe that such failure has occurred;
|
(c)
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each of AG Re and AGRO is prohibited from declaring or paying in any financial year dividends of more than 25% of its total statutory capital and surplus (as shown on its previous financial year's statutory balance sheet) unless it files (at least seven days before payments of such dividends) with the Authority an affidavit signed by at least two directors (one of whom must be a Bermuda resident director if any of the insurer's directors are resident in Bermuda) and the principal representative stating that it will continue to meet its solvency margin and minimum liquidity ratio. Where such an affidavit is filed, it shall be available for public inspection at the offices of the Authority; and
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(d)
|
as a Class C long-term insurer, AGRO may not declare or pay a dividend to any person other than a policyholder unless the value of the assets of its long-term business fund, as certified by AGRO's approved actuary, exceeds the extent (as so certified) of the liabilities of AGRO's long-term business, and the amount of any such dividend shall not exceed the aggregate of (1) that excess; and (2) any other funds properly available for the payment of dividends being funds arising out of AGRO's business other than its long-term business.
|
•
|
the PRA, a part of the Bank of England, is responsible for prudential regulation of certain classes of financial services firms (which includes insurance companies, among others), and
|
•
|
the FCA is responsible for the conduct of business regulation of all firms and the regulation of market conduct and the prudential regulation of all non-PRA firms.
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•
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an insurer's head office, and in particular its mind and management, must be in the U.K. if it is incorporated in the U.K.;
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•
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an insurer's business must be conducted in a prudent manner — in particular, the insurer must maintain appropriate financial and non-financial resources;
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•
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the insurer must be fit and proper, and be appropriately staffed; and
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•
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the insurer and its group must be capable of being effectively supervised.
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•
|
assets and liabilities are generally to be valued at their market value;
|
•
|
the amount of required economic capital is intended to ensure, with a probability of 99.5%, that regulated firms are able to meet their obligations to policyholders and beneficiaries over the following 12 months; and
|
•
|
reinsurance recoveries will be treated as a separate asset (rather than being netted against the underlying insurance liabilities).
|
•
|
have in place an effective system of governance that provides for the sound and prudent management of its business;
|
•
|
establish effective risk-management systems; and
|
•
|
take a comprehensive approach to considering their risks through an Own Risk and Solvency Assessment (ORSA) as proportionate to the nature, scale and complexity of the risks inherent in their business.
|
ITEM 1A.
|
RISK FACTORS
|
•
|
the Company is 25% or more owned directly, indirectly through non-U.S. entities or by attribution by U.S. Persons;
|
•
|
the gross RPII of AG Re or any other AGL non-U.S. subsidiary engaged in the insurance business that has not made an election under section 953(d) of the Code to be treated as a U.S. corporation for all U.S. tax purposes or are CFCs owned directly or indirectly by AGUS (each, with AG Re, a Foreign Insurance Subsidiary) equals or exceeds 20% of such Foreign Insurance Subsidiary's gross insurance income in any taxable year; and
|
•
|
direct or indirect insureds (and persons related to such insureds) own (or are treated as owning directly or indirectly through entities) 20% or more of the voting power or value of the Company's shares.
|
•
|
With respect to income, the dividends that AGL receives from its subsidiaries should be exempt from U.K. corporation tax under the exemption contained in section 931D of the Corporation Tax Act 2009.
|
•
|
With respect to capital gains, if AGL were to dispose of shares in its direct subsidiaries or if it were deemed to have done so, it may realize a chargeable gain for U.K. tax purposes. Any tax charge would be based on AGL’s original acquisition cost. It is anticipated that any such future gain should qualify for exemption under the substantial shareholding exemption in Schedule 7AC to the Taxation of Chargeable Gains Act 1992. However, the availability of such exemption would depend on facts at the time of disposal, in particular the “trading” nature of the relevant subsidiary. There is no statutory definition of what constitutes “trading” activities for this purpose and in practice reliance is placed on the published guidance of HMRC.
|
•
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investor perceptions of the Company, its prospects and that of the financial guaranty industry and the markets in which the Company operates;
|
•
|
the Company's operating and financial performance;
|
•
|
the Company's access to financial and capital markets to raise additional capital, refinance its debt or replace existing senior secured credit and receivables-backed facilities;
|
•
|
the Company's ability to repay debt;
|
•
|
the Company's dividend policy;
|
•
|
the amount of share repurchases authorized by the Company;
|
•
|
future sales of equity or equity-related securities;
|
•
|
changes in earnings estimates or buy/sell recommendations by analysts; and
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•
|
general financial, economic and other market conditions.
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ITEM 1B.
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UNRESOLVED STAFF COMMENTS
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ITEM 2.
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PROPERTIES
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ITEM 3.
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LEGAL PROCEEDINGS
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ITEM 4.
|
MINE SAFETY DISCLOSURES
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Name
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Age
|
|
Position(s)
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Dominic J. Frederico
|
65
|
|
President and Chief Executive Officer; Deputy Chairman
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Robert A. Bailenson
|
51
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|
Chief Financial Officer
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Ling Chow
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47
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General Counsel and Secretary(1)
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Russell B. Brewer II
|
61
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|
Chief Surveillance Officer
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Bruce E. Stern
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63
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Executive Officer
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Howard W. Albert
|
58
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|
Chief Risk Officer
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Stephen Donnarumma
|
55
|
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Chief Credit Officer
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(1)
|
Ms. Chow became General Counsel and Secretary of AGL on January 1, 2018. James M. Michener served as General Counsel and Secretary of AGL from February 2004 through December 31, 2017. Mr. Michener has been appointed the Senior Advisor to the Chief Executive Officer through December 31, 2018, but is no longer an executive officer of AGL.
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ITEM 5.
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MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
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2017
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2016
|
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Sales Price
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Cash
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Sales Price
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Cash
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||||||||||||||||
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High
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Low
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Dividends
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High
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Low
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Dividends
|
||||||||||||
First Quarter
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$
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42.94
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$
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36.01
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$
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0.1425
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|
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$
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26.82
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|
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$
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21.79
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|
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$
|
0.13
|
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Second Quarter
|
42.49
|
|
|
36.70
|
|
|
0.1425
|
|
|
27.45
|
|
|
23.43
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|
|
0.13
|
|
||||||
Third Quarter
|
45.73
|
|
|
37.15
|
|
|
0.1425
|
|
|
28.07
|
|
|
24.69
|
|
|
0.13
|
|
||||||
Fourth Quarter
|
39.75
|
|
|
33.53
|
|
|
0.1425
|
|
|
39.03
|
|
|
27.42
|
|
|
0.13
|
|
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)
|
||||||
October 1 - October 31
|
|
533,618
|
|
|
$
|
37.48
|
|
|
533,618
|
|
|
$
|
97,872,908
|
|
November 1 - November 30
|
|
543,547
|
|
|
$
|
36.80
|
|
|
543,547
|
|
|
$
|
377,872,931
|
|
December 1 - December 31
|
|
857,825
|
|
|
$
|
34.97
|
|
|
857,825
|
|
|
$
|
347,872,935
|
|
Total
|
|
1,934,990
|
|
|
$
|
36.18
|
|
|
1,934,990
|
|
|
|
|
(1)
|
After giving effect to repurchases since the beginning of 2013 through
February 23, 2018
, the Company has repurchased a total of
82.5 million
common shares for approximately
$2,259 million
, excluding commissions, at an average price of
$27.37
per share.
|
(2)
|
Excludes commissions.
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
|
(dollars in millions, except per share amounts)
|
||||||||||||||||||
Statement of operations data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net earned premiums
|
$
|
690
|
|
|
$
|
864
|
|
|
$
|
766
|
|
|
$
|
570
|
|
|
$
|
752
|
|
Net investment income
|
418
|
|
|
408
|
|
|
423
|
|
|
403
|
|
|
393
|
|
|||||
Net realized investment gains (losses)
|
40
|
|
|
(29
|
)
|
|
(26
|
)
|
|
(60
|
)
|
|
52
|
|
|||||
Realized gains and other settlements on credit derivatives
|
(10
|
)
|
|
29
|
|
|
(18
|
)
|
|
23
|
|
|
(42
|
)
|
|||||
Net unrealized gains (losses) on credit derivatives
|
121
|
|
|
69
|
|
|
746
|
|
|
800
|
|
|
107
|
|
|||||
Fair value gains (losses) on committed capital securities
|
(2
|
)
|
|
0
|
|
|
27
|
|
|
(11
|
)
|
|
10
|
|
|||||
Fair value gains (losses) on financial guaranty variable interest entities
|
30
|
|
|
38
|
|
|
38
|
|
|
255
|
|
|
346
|
|
|||||
Bargain purchase gain and settlement of pre-existing relationships
|
58
|
|
|
259
|
|
|
214
|
|
|
—
|
|
|
—
|
|
|||||
Other income (loss)
|
394
|
|
|
39
|
|
|
37
|
|
|
14
|
|
|
(10
|
)
|
|||||
Total revenues
|
1,739
|
|
|
1,677
|
|
|
2,207
|
|
|
1,994
|
|
|
1,608
|
|
|||||
Expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Loss and loss adjustment expenses
|
388
|
|
|
295
|
|
|
424
|
|
|
126
|
|
|
154
|
|
|||||
Amortization of deferred acquisition costs
|
19
|
|
|
18
|
|
|
20
|
|
|
25
|
|
|
12
|
|
|||||
Interest expense
|
97
|
|
|
102
|
|
|
101
|
|
|
92
|
|
|
82
|
|
|||||
Other operating expenses
|
244
|
|
|
245
|
|
|
231
|
|
|
220
|
|
|
218
|
|
|||||
Total expenses
|
748
|
|
|
660
|
|
|
776
|
|
|
463
|
|
|
466
|
|
|||||
Income (loss) before (benefit) provision for income taxes
|
991
|
|
|
1,017
|
|
|
1,431
|
|
|
1,531
|
|
|
1,142
|
|
|||||
Provision (benefit) for income taxes
|
261
|
|
|
136
|
|
|
375
|
|
|
443
|
|
|
334
|
|
|||||
Net income (loss)
|
730
|
|
|
881
|
|
|
1,056
|
|
|
1,088
|
|
|
808
|
|
|||||
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
6.05
|
|
|
$
|
6.61
|
|
|
$
|
7.12
|
|
|
$
|
6.30
|
|
|
$
|
4.32
|
|
Diluted
|
$
|
5.96
|
|
|
$
|
6.56
|
|
|
$
|
7.08
|
|
|
$
|
6.26
|
|
|
$
|
4.30
|
|
Dividends per share
|
$
|
0.57
|
|
|
$
|
0.52
|
|
|
$
|
0.48
|
|
|
$
|
0.44
|
|
|
$
|
0.40
|
|
|
As of December 31,
|
||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
|
(dollars in millions, except per share amounts)
|
||||||||||||||||||
Balance sheet data (end of period):
|
|
|
|
|
|
|
|
|
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Investments and cash
|
$
|
11,539
|
|
|
$
|
11,103
|
|
|
$
|
11,358
|
|
|
$
|
11,459
|
|
|
$
|
10,969
|
|
Premiums receivable, net of commissions payable
|
915
|
|
|
576
|
|
|
693
|
|
|
729
|
|
|
876
|
|
|||||
Ceded unearned premium reserve
|
119
|
|
|
206
|
|
|
232
|
|
|
381
|
|
|
452
|
|
|||||
Salvage and subrogation recoverable
|
572
|
|
|
365
|
|
|
126
|
|
|
151
|
|
|
174
|
|
|||||
Credit derivative assets
|
2
|
|
|
13
|
|
|
81
|
|
|
68
|
|
|
94
|
|
|||||
Total assets
|
14,433
|
|
|
14,151
|
|
|
14,544
|
|
|
14,919
|
|
|
16,285
|
|
|||||
Liabilities and shareholders' equity:
|
|
|
|
|
|
|
|
|
|
||||||||||
Unearned premium reserve
|
3,475
|
|
|
3,511
|
|
|
3,996
|
|
|
4,261
|
|
|
4,595
|
|
|||||
Loss and loss adjustment expense reserve
|
1,444
|
|
|
1,127
|
|
|
1,067
|
|
|
799
|
|
|
592
|
|
|||||
Reinsurance balances payable, net
|
61
|
|
|
64
|
|
|
51
|
|
|
107
|
|
|
148
|
|
|||||
Long-term debt
|
1,292
|
|
|
1,306
|
|
|
1,300
|
|
|
1,297
|
|
|
814
|
|
|||||
Credit derivative liabilities
|
271
|
|
|
402
|
|
|
446
|
|
|
963
|
|
|
1,787
|
|
|||||
Total liabilities
|
7,594
|
|
|
7,647
|
|
|
8,481
|
|
|
9,161
|
|
|
11,170
|
|
|||||
Accumulated other comprehensive income
|
372
|
|
|
149
|
|
|
237
|
|
|
370
|
|
|
160
|
|
|||||
Shareholders' equity
|
6,839
|
|
|
6,504
|
|
|
6,063
|
|
|
5,758
|
|
|
5,115
|
|
|||||
Book value per share
|
58.95
|
|
|
50.82
|
|
|
43.96
|
|
|
36.37
|
|
|
28.07
|
|
|||||
Consolidated statutory financial information:
|
|
|
|
|
|
|
|
|
|
||||||||||
Contingency reserve
|
$
|
1,750
|
|
|
$
|
2,008
|
|
|
$
|
2,263
|
|
|
$
|
2,330
|
|
|
$
|
2,934
|
|
Policyholders' surplus
|
5,211
|
|
|
5,036
|
|
|
4,550
|
|
|
4,142
|
|
|
3,202
|
|
|||||
Claims-paying resources(1)
|
11,752
|
|
|
11,701
|
|
|
12,306
|
|
|
12,189
|
|
|
12,147
|
|
|||||
Outstanding Exposure:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net debt service outstanding
|
$
|
401,118
|
|
|
$
|
437,535
|
|
|
$
|
536,341
|
|
|
$
|
609,622
|
|
|
$
|
690,535
|
|
Net par outstanding
|
264,952
|
|
|
296,318
|
|
|
358,571
|
|
|
403,729
|
|
|
459,107
|
|
(1)
|
Based on accounting practices prescribed or permitted by U.S. insurance regulatory authorities, for all insurance subsidiaries. Claims-paying resources is calculated as the sum of statutory policyholders' surplus, statutory contingency reserve, unearned premium reserves, statutory loss and LAE reserves, present value of installment premium on financial guaranty and credit derivatives, discounted at 6%, standby lines of credit/stop loss and excess-of-loss reinsurance facility. Total claims-paying resources is used by the Company to evaluate the adequacy of capital resources.
|
ITEM 7.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions, except per share amounts)
|
||||||||||
Net income (loss)
|
$
|
730
|
|
|
$
|
881
|
|
|
$
|
1,056
|
|
Non-GAAP operating income(1)
|
661
|
|
|
895
|
|
|
710
|
|
|||
Gain (loss) related to the effect of consolidating FG VIEs (FG VIE consolidation) included in non-GAAP operating income
|
11
|
|
|
12
|
|
|
11
|
|
|||
|
|
|
|
|
|
||||||
Net income (loss) per diluted share
|
5.96
|
|
|
6.56
|
|
|
7.08
|
|
|||
Non-GAAP operating income per share(1)
|
5.41
|
|
|
6.68
|
|
|
4.76
|
|
|||
Gain (loss) related to FG VIE consolidation included in non-GAAP operating income per share
|
0.10
|
|
|
0.10
|
|
|
0.07
|
|
|||
|
|
|
|
|
|
||||||
Diluted shares
|
122.3
|
|
|
134.1
|
|
|
149.0
|
|
|||
|
|
|
|
|
|
||||||
Gross written premiums (GWP)
|
307
|
|
|
154
|
|
|
181
|
|
|||
Present value of new business production (PVP)(1)
|
289
|
|
|
214
|
|
|
179
|
|
|||
Gross par written
|
18,024
|
|
|
17,854
|
|
|
17,336
|
|
|
|
As of December 31, 2017
|
|
As of December 31, 2016
|
||||||||||||
|
|
Amount
|
|
Per Share
|
|
Amount
|
|
Per Share
|
||||||||
|
|
(in millions, except per share amounts)
|
||||||||||||||
Shareholders' equity
|
|
$
|
6,839
|
|
|
$
|
58.95
|
|
|
$
|
6,504
|
|
|
$
|
50.82
|
|
Non-GAAP operating shareholders' equity(1)
|
|
6,521
|
|
|
56.20
|
|
|
6,386
|
|
|
49.89
|
|
||||
Non-GAAP adjusted book value(1)
|
|
9,020
|
|
|
77.74
|
|
|
8,506
|
|
|
66.46
|
|
||||
Gain (loss) related to FG VIE consolidation included in non-GAAP operating shareholders' equity
|
|
5
|
|
|
0.03
|
|
|
(7
|
)
|
|
(0.06
|
)
|
||||
Gain (loss) related to FG VIE consolidation included in non-GAAP adjusted book value
|
|
(14
|
)
|
|
(0.12
|
)
|
|
(24
|
)
|
|
(0.18
|
)
|
||||
Common shares outstanding (2)
|
|
116.0
|
|
|
|
|
128.0
|
|
|
|
(1)
|
See “—Non-GAAP Financial Measures” for a definition of the financial measures that were not determined in accordance with GAAP and a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP measure, if available. See “—Non-GAAP Financial Measures” for additional details.
|
(2)
|
See "Key Business Strategies – Capital Management" below for information on common share repurchases.
|
•
|
New business production
|
•
|
Capital management
|
•
|
Alternative strategies to create value, including through acquisitions, investments and commutations
|
•
|
Loss mitigation
|
•
|
encourages retail investors, who typically have fewer resources than the Company for analyzing municipal bonds, to purchase such bonds;
|
•
|
enables institutional investors to operate more efficiently; and
|
•
|
allows smaller, less well-known issuers to gain market access on a more cost-effective basis.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(dollars in billions, except number of issues and percent)
|
||||||||||
Par:
|
|
|
|
|
|
||||||
New municipal bonds issued
|
$
|
409.5
|
|
|
$
|
423.7
|
|
|
$
|
377.6
|
|
Total insured
|
$
|
23.0
|
|
|
$
|
25.3
|
|
|
$
|
25.2
|
|
Insured by Assured Guaranty
|
$
|
13.5
|
|
|
$
|
14.2
|
|
|
$
|
15.1
|
|
Number of issues:
|
|
|
|
|
|
||||||
New municipal bonds issued
|
10,589
|
|
|
12,271
|
|
|
12,076
|
|
|||
Total insured
|
1,637
|
|
|
1,889
|
|
|
1,880
|
|
|||
Insured by Assured Guaranty
|
833
|
|
|
904
|
|
|
1,009
|
|
|||
Bond insurance market penetration based on:
|
|
|
|
|
|
||||||
Par
|
5.6
|
%
|
|
6.0
|
%
|
|
6.7
|
%
|
|||
Number of issues
|
15.5
|
%
|
|
15.4
|
%
|
|
15.6
|
%
|
|||
Single A par sold
|
23.3
|
%
|
|
22.6
|
%
|
|
22.1
|
%
|
|||
Single A transactions sold
|
57.3
|
%
|
|
55.8
|
%
|
|
54.1
|
%
|
|||
$25 million and under par sold
|
18.7
|
%
|
|
17.8
|
%
|
|
18.7
|
%
|
|||
$25 million and under transactions sold
|
18.3
|
%
|
|
17.5
|
%
|
|
17.6
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
GWP
|
|
|
|
|
|
||||||
Public Finance—U.S.
|
$
|
190
|
|
|
$
|
142
|
|
|
$
|
119
|
|
Public Finance—non-U.S.
|
105
|
|
|
15
|
|
|
41
|
|
|||
Structured Finance—U.S.
|
(1
|
)
|
|
(1
|
)
|
|
23
|
|
|||
Structured Finance—non-U.S.
|
13
|
|
|
(2
|
)
|
|
(2
|
)
|
|||
Total GWP
|
$
|
307
|
|
|
$
|
154
|
|
|
$
|
181
|
|
PVP(1):
|
|
|
|
|
|
||||||
Public Finance—U.S.
|
$
|
196
|
|
|
$
|
161
|
|
|
$
|
124
|
|
Public Finance—non-U.S.
|
66
|
|
|
25
|
|
|
27
|
|
|||
Structured Finance—U.S. (2)
|
12
|
|
|
27
|
|
|
22
|
|
|||
Structured Finance—non-U.S. (3)
|
15
|
|
|
1
|
|
|
6
|
|
|||
Total PVP
|
$
|
289
|
|
|
$
|
214
|
|
|
$
|
179
|
|
Gross Par Written (1):
|
|
|
|
|
|
||||||
Public Finance—U.S.
|
$
|
15,957
|
|
|
$
|
16,039
|
|
|
$
|
16,377
|
|
Public Finance—non-U.S.
|
1,376
|
|
|
677
|
|
|
567
|
|
|||
Structured Finance—U.S. (2)
|
489
|
|
|
1,114
|
|
|
327
|
|
|||
Structured Finance—non-U.S. (3)
|
202
|
|
|
24
|
|
|
65
|
|
|||
Total gross par written
|
$
|
18,024
|
|
|
$
|
17,854
|
|
|
$
|
17,336
|
|
(1)
|
PVP and Gross Par Written in the table above are based on "close date," when the transaction settles. See “– Non-GAAP Financial Measures – PVP or Present Value of New Business Production.”
|
(2)
|
Includes capital relief triple-X excess of loss life reinsurance transactions written in 2017 and 2016.
|
|
Amount
|
|
Number of Shares
|
|
Average price per share
|
|||||
|
(in millions, except per share data)
|
|||||||||
2013
|
$
|
264
|
|
|
12.5
|
|
|
$
|
21.12
|
|
2014
|
590
|
|
|
24.4
|
|
|
24.17
|
|
||
2015
|
555
|
|
|
21.0
|
|
|
26.43
|
|
||
2016
|
306
|
|
|
10.7
|
|
|
28.53
|
|
||
2017
|
501
|
|
|
12.7
|
|
|
39.57
|
|
||
2018 (through February 23, 2018)
|
43
|
|
|
1.2
|
|
|
34.90
|
|
||
Cumulative repurchases since the beginning of 2013
|
$
|
2,259
|
|
|
82.5
|
|
|
$
|
27.37
|
|
|
|
Year Ended December 31,
|
|
|
|
|
||||||||||
|
|
2017
|
|
2016
|
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
||||||||
|
|
(per share)
|
||||||||||||||
Net income
|
|
$
|
2.03
|
|
|
$
|
1.90
|
|
|
|
|
|
||||
Non-GAAP operating income
|
|
1.81
|
|
|
1.94
|
|
|
|
|
|
||||||
Shareholders' equity
|
|
|
|
|
|
$
|
12.92
|
|
|
$
|
8.92
|
|
||||
Non-GAAP operating shareholders' equity
|
|
|
|
|
|
11.80
|
|
|
8.59
|
|
||||||
Non-GAAP adjusted book value
|
|
|
|
|
|
20.58
|
|
|
14.38
|
|
(1)
|
Cumulative repurchases since the beginning of 2013.
|
•
|
Currency Impact.
The Company reports its accounts in U.S. dollars, while some of its income, expenses, assets and liabilities are denominated in other currencies, primarily the pound sterling and the euro. During 2016, the year in which a majority in the U.K. voted for Brexit, the value of pound sterling dropped from
£0.68 per dollar
to
£0.81 per dollar
, while the euro dropped from
€0.83 per dollar
to
€0.95 per dollar
. For the year ended 2016 the Company recognized losses of approximately
$21 million
in the consolidated statement of operations, net of tax, and approximately
$32 million
in OCI, net of tax, for foreign currency translation, that were primarily driven by the exchange rate fluctuations of the pound sterling. Currency exchange rates may also move materially as the terms of Brexit become known.
|
•
|
U.K. Business.
As of
December 31, 2017
, approximately $30.1 billion of the Company’s insured net par is to risks located in the U.K., and most of that exposure is to utilities, with much of the rest to hospital facilities, toll roads, government accommodation, housing associations, universities and other public purpose enterprises that
|
•
|
Business Elsewhere in the EU.
As of
December 31, 2017
, approximately $7.5 billion of the Company’s insured net par is to risks located in EU and EEA countries other than the U.K. Currently, EU directives allow AGE to conduct business in other EU or EEA states based on its PRA permissions. This is sometimes called “passporting”. Depending on the terms of Brexit, and of any transitional arrangements, AGE may, once Brexit is implemented, lose the ability to insure new transactions, or service existing contracts in non-U.K., EU and EEA countries without obtaining additional licenses, which may require a presence in another EU country. While pertinent laws and regulations have yet to be adopted or passed, the Company does not believe Brexit will adversely affect its surveillance and loss mitigation activities with respect to existing insured transactions in non-U.K. EU and EEA countries, except to the extent Brexit inhibits the issuance of new guaranties in distressed situations in non-U.K. EU or EEA countries. As noted above, most of the new transactions insured by AGE since 2008 have been in the U.K.
|
•
|
Employees.
While nearly one-third of the employees working in AGE’s London office are non-U.K. EU or EEA citizens, all but two of those employees currently qualify to become permanent residents under current U.K. law.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Revenues:
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
690
|
|
|
$
|
864
|
|
|
$
|
766
|
|
Net investment income
|
418
|
|
|
408
|
|
|
423
|
|
|||
Net realized investment gains (losses)
|
40
|
|
|
(29
|
)
|
|
(26
|
)
|
|||
Net change in fair value of credit derivatives:
|
|
|
|
|
|
||||||
Realized gains (losses) and other settlements
|
(10
|
)
|
|
29
|
|
|
(18
|
)
|
|||
Net unrealized gains (losses)
|
121
|
|
|
69
|
|
|
746
|
|
|||
Net change in fair value of credit derivatives
|
111
|
|
|
98
|
|
|
728
|
|
|||
Fair value gains (losses) on CCS
|
(2
|
)
|
|
0
|
|
|
27
|
|
|||
Fair value gains (losses) on FG VIEs
|
30
|
|
|
38
|
|
|
38
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships
|
58
|
|
|
259
|
|
|
214
|
|
|||
Other income (loss)
|
394
|
|
|
39
|
|
|
37
|
|
|||
Total revenues
|
1,739
|
|
|
1,677
|
|
|
2,207
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Loss and LAE
|
388
|
|
|
295
|
|
|
424
|
|
|||
Amortization of deferred acquisition costs
|
19
|
|
|
18
|
|
|
20
|
|
|||
Interest expense
|
97
|
|
|
102
|
|
|
101
|
|
|||
Other operating expenses
|
244
|
|
|
245
|
|
|
231
|
|
|||
Total expenses
|
748
|
|
|
660
|
|
|
776
|
|
|||
Income (loss) before provision for income taxes
|
991
|
|
|
1,017
|
|
|
1,431
|
|
|||
Provision (benefit) for income taxes
|
261
|
|
|
136
|
|
|
375
|
|
|||
Net income (loss)
|
$
|
730
|
|
|
$
|
881
|
|
|
$
|
1,056
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Financial guaranty insurance:
|
|
|
|
|
|
||||||
Public finance
|
|
|
|
|
|
||||||
Scheduled net earned premiums and accretion
|
$
|
315
|
|
|
$
|
299
|
|
|
$
|
308
|
|
Accelerations:
|
|
|
|
|
|
||||||
Refundings
|
269
|
|
|
390
|
|
|
294
|
|
|||
Terminations
|
2
|
|
|
34
|
|
|
23
|
|
|||
Total accelerations
|
271
|
|
|
424
|
|
|
317
|
|
|||
Total Public finance
|
586
|
|
|
723
|
|
|
625
|
|
|||
Structured finance(1)
|
|
|
|
|
|
||||||
Scheduled net earned premiums and accretion
|
87
|
|
|
96
|
|
|
125
|
|
|||
Terminations
|
15
|
|
|
45
|
|
|
14
|
|
|||
Total structured finance
|
102
|
|
|
141
|
|
|
139
|
|
|||
Other
|
2
|
|
|
0
|
|
|
2
|
|
|||
Total net earned premiums
|
$
|
690
|
|
|
$
|
864
|
|
|
$
|
766
|
|
(1)
|
Excludes net earned premiums of
$15 million
,
$16 million
and
$21 million
for
2017
,
2016
and
2015
, respectively, related to consolidated FG VIEs.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Income from fixed-maturity securities managed by third parties
|
$
|
298
|
|
|
$
|
306
|
|
|
$
|
335
|
|
Income from internally managed securities:
|
|
|
|
|
|
||||||
Fixed maturities (1)
|
120
|
|
|
103
|
|
|
61
|
|
|||
Other
|
9
|
|
|
8
|
|
|
37
|
|
|||
Gross investment income
|
427
|
|
|
417
|
|
|
433
|
|
|||
Investment expenses
|
(9
|
)
|
|
(9
|
)
|
|
(10
|
)
|
|||
Net investment income
|
$
|
418
|
|
|
$
|
408
|
|
|
$
|
423
|
|
(1)
|
Net investment income excludes
$5 million
for
2017
and
$10 million
for
2016
and
$32 million
in
2015
, related to securities in the investment portfolio owned by AGC and AGM that were issued by consolidated FG VIEs.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Gross realized gains on available-for-sale securities
|
$
|
95
|
|
|
$
|
28
|
|
|
$
|
44
|
|
Gross realized losses on available-for-sale securities
|
(12
|
)
|
|
(8
|
)
|
|
(15
|
)
|
|||
Net realized gains (losses) on other invested assets
|
0
|
|
|
2
|
|
|
(8
|
)
|
|||
Other-than-temporary impairment
|
(43
|
)
|
|
(51
|
)
|
|
(47
|
)
|
|||
Net realized investment gains (losses)
|
$
|
40
|
|
|
$
|
(29
|
)
|
|
$
|
(26
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Realized gains on credit derivatives
|
$
|
17
|
|
|
$
|
56
|
|
|
$
|
63
|
|
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements
|
(27
|
)
|
|
(27
|
)
|
|
(81
|
)
|
|||
Realized gains (losses) and other settlements (1)
|
(10
|
)
|
|
29
|
|
|
(18
|
)
|
|||
Net unrealized gains (losses):
|
|
|
|
|
|
||||||
Pooled corporate obligations
|
35
|
|
|
(16
|
)
|
|
147
|
|
|||
U.S. RMBS
|
23
|
|
|
22
|
|
|
396
|
|
|||
Pooled infrastructure
|
5
|
|
|
17
|
|
|
17
|
|
|||
Infrastructure finance
|
4
|
|
|
4
|
|
|
—
|
|
|||
Other
|
54
|
|
|
42
|
|
|
186
|
|
|||
Net unrealized gains (losses)
|
121
|
|
|
69
|
|
|
746
|
|
|||
Net change in fair value of credit derivatives
|
$
|
111
|
|
|
$
|
98
|
|
|
$
|
728
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Net par of terminated credit derivative contracts
|
$
|
331
|
|
|
$
|
3,811
|
|
|
$
|
2,777
|
|
Realized gains on credit derivatives
|
0
|
|
|
20
|
|
|
13
|
|
|||
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements
|
(15
|
)
|
|
—
|
|
|
(116
|
)
|
|||
Net unrealized gains (losses) on credit derivatives
|
26
|
|
|
103
|
|
|
465
|
|
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
|
As of
December 31, 2015 |
|||
Five-year CDS spread:
|
|
|
|
|
|
|||
AGC
|
163
|
|
|
158
|
|
|
376
|
|
AGM
|
145
|
|
|
158
|
|
|
366
|
|
|
|
|
|
|
|
|||
One-year CDS spread
|
|
|
|
|
|
|||
AGC
|
70
|
|
|
35
|
|
|
139
|
|
AGM
|
28
|
|
|
29
|
|
|
131
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Change in unrealized gains (losses) on credit derivatives:
|
|
|
|
|
|
||||||
Before considering implication of the Company’s credit spreads
|
$
|
118
|
|
|
$
|
183
|
|
|
$
|
663
|
|
Resulting from change in the Company’s credit spreads
|
3
|
|
|
(114
|
)
|
|
83
|
|
|||
After considering implication of the Company’s credit spreads
|
$
|
121
|
|
|
$
|
69
|
|
|
$
|
746
|
|
•
|
changes in fair value gains (losses) on FG VIE assets and liabilities,
|
•
|
the elimination of premiums and losses related to the AGC and AGM FG VIE liabilities with recourse, and
|
•
|
the elimination of investment balances related to the Company’s purchase of AGC and AGM insured FG VIE debt.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Fair value gains (losses) on FG VIEs
|
$
|
30
|
|
|
$
|
38
|
|
|
$
|
38
|
|
Elimination of insurance and investment balances
|
(13
|
)
|
|
(18
|
)
|
|
(13
|
)
|
|||
Effect on income before tax
|
17
|
|
|
20
|
|
|
25
|
|
|||
Less: tax provision (benefit)
|
6
|
|
|
7
|
|
|
8
|
|
|||
Effect on net income (loss)
|
$
|
11
|
|
|
$
|
13
|
|
|
$
|
17
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Bargain purchase gain
|
$
|
56
|
|
|
$
|
357
|
|
|
$
|
55
|
|
Settlement of pre-existing relationships
|
2
|
|
|
(98
|
)
|
|
159
|
|
|||
Total
|
$
|
58
|
|
|
$
|
259
|
|
|
$
|
214
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Foreign exchange gain (loss) on remeasurement of premium receivable and loss reserves (1)
|
$
|
57
|
|
|
$
|
(33
|
)
|
|
$
|
(15
|
)
|
Commutation gains
|
328
|
|
|
8
|
|
|
28
|
|
|||
Loss on extinguishment of debt (2)
|
(9
|
)
|
|
—
|
|
|
—
|
|
|||
Other (3)
|
18
|
|
|
64
|
|
|
24
|
|
|||
Total other income (loss)
|
$
|
394
|
|
|
$
|
39
|
|
|
$
|
37
|
|
(2)
|
In 2017, the loss on extinguishment of debt was related to AGUS' purchase of
$28 million
principal amount of AGMH's outstanding Junior Subordinated Debentures. The loss represents the difference between the amount paid to purchase AGMH's debt and the carrying value of the debt, which includes the remaining unamortized fair value adjustments that were recorded upon the Company's acquisition of AGMH in 2009.
|
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
||||
|
(in millions)
|
||||||
Public finance
|
$
|
1,203
|
|
|
$
|
904
|
|
Structured finance
|
|
|
|
||||
U.S. RMBS
|
73
|
|
|
206
|
|
||
Other structured finance
|
27
|
|
|
88
|
|
||
Structured finance
|
100
|
|
|
294
|
|
||
Total
|
$
|
1,303
|
|
|
$
|
1,198
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Public finance
|
$
|
549
|
|
|
$
|
269
|
|
|
$
|
405
|
|
Structured finance
|
|
|
|
|
|
||||||
U.S. RMBS
|
(181
|
)
|
|
(91
|
)
|
|
(82
|
)
|
|||
Other structured finance
|
(55
|
)
|
|
(39
|
)
|
|
(4
|
)
|
|||
Structured finance
|
(236
|
)
|
|
(130
|
)
|
|
(86
|
)
|
|||
Total
|
$
|
313
|
|
|
$
|
139
|
|
|
$
|
319
|
|
(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.
|
•
|
considers deferred premium revenue in the calculation of loss reserves and loss and LAE for financial guaranty insurance contracts. For these transactions, each transaction’s expected loss to be expensed, is compared with the deferred premium revenue of that transaction. When the expected loss to be expensed exceeds the deferred premium revenue, a loss is recognized in the consolidated statements of operations for the amount of such excess,
|
•
|
eliminates loss and LAE related to FG VIEs and
|
•
|
does not include estimated losses on credit derivatives.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Public finance
|
$
|
549
|
|
|
$
|
304
|
|
|
$
|
393
|
|
Structured finance
|
|
|
|
|
|
||||||
U.S. RMBS
|
(106
|
)
|
|
37
|
|
|
54
|
|
|||
Other structured finance
|
(48
|
)
|
|
(39
|
)
|
|
5
|
|
|||
Structured finance
|
(154
|
)
|
|
(2
|
)
|
|
59
|
|
|||
Total insurance contracts before FG VIE consolidation
|
395
|
|
|
302
|
|
|
452
|
|
|||
Elimination of losses attributable to FG VIEs
|
(7
|
)
|
|
(7
|
)
|
|
(28
|
)
|
|||
Total loss and LAE (1)
|
$
|
388
|
|
|
$
|
295
|
|
|
$
|
424
|
|
(1)
|
Excludes credit derivative benefit of $43 million and $20 million for
2017
and
2016
, respectively, and credit derivative loss expense of $22 million for
2015
.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Debt issued by AGUS
|
$
|
44
|
|
|
$
|
48
|
|
|
$
|
49
|
|
Debt issued by AGMH
|
54
|
|
|
54
|
|
|
54
|
|
|||
Notes payable by AGM
|
0
|
|
|
0
|
|
|
(2
|
)
|
|||
Purchased debt
|
(1
|
)
|
|
—
|
|
|
—
|
|
|||
Total
|
$
|
97
|
|
|
$
|
102
|
|
|
$
|
101
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Total provision (benefit) for income taxes
|
$
|
261
|
|
|
$
|
136
|
|
|
$
|
375
|
|
Effective tax rate
|
26.3
|
%
|
|
13.4
|
%
|
|
26.2
|
%
|
1)
|
Elimination of realized gains (losses) on the Company’s investments, except for gains and losses on securities classified as trading. The timing of realized gains and losses, which depends largely on market credit cycles, can vary considerably across periods. The timing of sales is largely subject to the Company’s discretion and influenced by market opportunities, as well as the Company’s tax and capital profile.
|
2)
|
Elimination of non-credit-impairment unrealized fair value gains (losses) on credit derivatives, which is the amount of unrealized fair value gains (losses) in excess of the present value of the expected estimated economic credit losses, and non-economic payments. Such fair value adjustments are heavily affected by, and in part fluctuate with, changes in market interest rates, the Company's credit spreads, and other market factors and are not expected to result in an economic gain or loss.
|
3)
|
Elimination of fair value gains (losses) on the Company’s CCS. Such amounts are affected by changes in market interest rates, the Company's credit spreads, price indications on the Company's publicly traded debt, and other market factors and are not expected to result in an economic gain or loss.
|
4)
|
Elimination of foreign exchange gains (losses) on remeasurement of net premium receivables and loss and LAE reserves. Long-dated receivables and loss and LAE reserves represent the present value of future contractual or expected cash flows. Therefore, the current period’s foreign exchange remeasurement gains (losses) are not necessarily indicative of the total foreign exchange gains (losses) that the Company will ultimately recognize.
|
5)
|
Elimination of the tax effects related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Net income (loss)
|
$
|
730
|
|
|
$
|
881
|
|
|
$
|
1,056
|
|
Less pre-tax adjustments:
|
|
|
|
|
|
||||||
Realized gains (losses) on investments
|
40
|
|
|
(30
|
)
|
|
(27
|
)
|
|||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
43
|
|
|
36
|
|
|
505
|
|
|||
Fair value gains (losses) on CCS
|
(2
|
)
|
|
0
|
|
|
27
|
|
|||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
|
57
|
|
|
(33
|
)
|
|
(15
|
)
|
|||
Total pre-tax adjustments
|
138
|
|
|
(27
|
)
|
|
490
|
|
|||
Less tax effect on pre-tax adjustments
|
(69
|
)
|
|
13
|
|
|
(144
|
)
|
|||
Non-GAAP operating income
|
$
|
661
|
|
|
$
|
895
|
|
|
$
|
710
|
|
|
|
|
|
|
|
||||||
Gain (loss) related to FG VIE consolidation (net of tax provision of $6, $7 and $4) included in non-GAAP operating income
|
$
|
11
|
|
|
$
|
12
|
|
|
$
|
11
|
|
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
|
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 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 December 31, 2017
|
|
As of December 31, 2016
|
||||||||||||
|
After-Tax
|
|
Per Share
|
|
After-Tax
|
|
Per Share
|
||||||||
|
(dollars in millions, except
per share amounts)
|
||||||||||||||
Shareholders’ equity
|
$
|
6,839
|
|
|
$
|
58.95
|
|
|
$
|
6,504
|
|
|
$
|
50.82
|
|
Less pre-tax adjustments:
|
|
|
|
|
|
|
|
||||||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
(146
|
)
|
|
(1.26
|
)
|
|
(189
|
)
|
|
(1.48
|
)
|
||||
Fair value gains (losses) on CCS
|
60
|
|
|
0.52
|
|
|
62
|
|
|
0.48
|
|
||||
Unrealized gain (loss) on investment portfolio excluding foreign exchange effect
|
487
|
|
|
4.20
|
|
|
316
|
|
|
2.47
|
|
||||
Less taxes
|
(83
|
)
|
|
(0.71
|
)
|
|
(71
|
)
|
|
(0.54
|
)
|
||||
Non-GAAP operating shareholders’ equity
|
6,521
|
|
|
56.20
|
|
|
6,386
|
|
|
49.89
|
|
||||
Pre-tax adjustments:
|
|
|
|
|
|
|
|
||||||||
Less: Deferred acquisition costs
|
101
|
|
|
0.87
|
|
|
106
|
|
|
0.83
|
|
||||
Plus: Net present value of estimated net future revenue
|
146
|
|
|
1.26
|
|
|
136
|
|
|
1.07
|
|
||||
Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed
|
2,966
|
|
|
25.56
|
|
|
2,922
|
|
|
22.83
|
|
||||
Plus taxes
|
(512
|
)
|
|
(4.41
|
)
|
|
(832
|
)
|
|
(6.50
|
)
|
||||
Non-GAAP adjusted book value
|
$
|
9,020
|
|
|
$
|
77.74
|
|
|
$
|
8,506
|
|
|
$
|
66.46
|
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) related to FG VIE consolidation included in non-GAAP operating shareholders' equity (net of tax (provision) benefit of $(2) and $4)
|
$
|
5
|
|
|
$
|
0.03
|
|
|
$
|
(7
|
)
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) related to FG VIE consolidation included in non-GAAP adjusted book value (net of tax benefit of $3 and $12)
|
$
|
(14
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(24
|
)
|
|
$
|
(0.18
|
)
|
|
Year Ended December 31, 2017
|
||||||||||||||||||
|
Public Finance
|
|
Structured Finance
|
|
|
||||||||||||||
|
U.S.
|
|
Non - U.S.
|
|
U.S.
|
|
Non - U.S.
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
GWP
|
$
|
190
|
|
|
$
|
105
|
|
|
$
|
(1
|
)
|
|
$
|
13
|
|
|
$
|
307
|
|
Less: Installment GWP and other GAAP adjustments(1)
|
(3
|
)
|
|
103
|
|
|
(1
|
)
|
|
0
|
|
|
99
|
|
|||||
Upfront GWP
|
193
|
|
|
2
|
|
|
0
|
|
|
13
|
|
|
208
|
|
|||||
Plus: Installment premium PVP
|
3
|
|
|
64
|
|
|
12
|
|
|
2
|
|
|
81
|
|
|||||
PVP
|
$
|
196
|
|
|
$
|
66
|
|
|
$
|
12
|
|
|
$
|
15
|
|
|
$
|
289
|
|
|
Year Ended December 31, 2016
|
||||||||||||||||||
|
Public Finance
|
|
Structured Finance
|
|
|
||||||||||||||
|
U.S.
|
|
Non - U.S.
|
|
U.S.
|
|
Non - U.S.
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
GWP
|
$
|
142
|
|
|
$
|
15
|
|
|
$
|
(1
|
)
|
|
$
|
(2
|
)
|
|
$
|
154
|
|
Less: Installment GWP and other GAAP adjustments(1)
|
(19
|
)
|
|
15
|
|
|
(4
|
)
|
|
(2
|
)
|
|
(10
|
)
|
|||||
Upfront GWP
|
161
|
|
|
0
|
|
|
3
|
|
|
0
|
|
|
164
|
|
|||||
Plus: Installment premium PVP
|
0
|
|
|
25
|
|
|
24
|
|
|
1
|
|
|
50
|
|
|||||
PVP
|
$
|
161
|
|
|
$
|
25
|
|
|
$
|
27
|
|
|
$
|
1
|
|
|
$
|
214
|
|
|
Year Ended December 31, 2015
|
||||||||||||||||||
|
Public Finance
|
|
Structured Finance
|
|
|
||||||||||||||
|
U.S.
|
|
Non - U.S.
|
|
U.S.
|
|
Non - U.S.
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
GWP
|
$
|
119
|
|
|
$
|
41
|
|
|
$
|
23
|
|
|
$
|
(2
|
)
|
|
$
|
181
|
|
Less: Installment GWP and other GAAP adjustments(1)
|
(5
|
)
|
|
41
|
|
|
21
|
|
|
(2
|
)
|
|
55
|
|
|||||
Upfront GWP
|
124
|
|
|
0
|
|
|
2
|
|
|
0
|
|
|
126
|
|
|||||
Plus: Installment premium PVP
|
0
|
|
|
27
|
|
|
20
|
|
|
6
|
|
|
53
|
|
|||||
PVP
|
$
|
124
|
|
|
$
|
27
|
|
|
$
|
22
|
|
|
$
|
6
|
|
|
$
|
179
|
|
(1)
|
Includes present value of new business on installment policies discounted at the prescribed GAAP discount rates, GWP adjustments on existing installment policies due to changes in assumptions, any cancellations of assumed reinsurance contracts, and other GAAP adjustments.
|
|
|
As of December 31, 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
|
|
$
|
90,705
|
|
|
A-
|
|
$
|
107,717
|
|
|
A
|
Tax backed
|
|
44,350
|
|
|
A-
|
|
49,931
|
|
|
A-
|
||
Municipal utilities
|
|
32,357
|
|
|
A-
|
|
37,603
|
|
|
A
|
||
Transportation
|
|
17,030
|
|
|
A-
|
|
19,403
|
|
|
A-
|
||
Healthcare
|
|
8,763
|
|
|
A
|
|
11,238
|
|
|
A
|
||
Higher education
|
|
8,195
|
|
|
A
|
|
10,085
|
|
|
A
|
||
Infrastructure finance
|
|
4,216
|
|
|
BBB+
|
|
3,769
|
|
|
BBB+
|
||
Housing revenue
|
|
1,319
|
|
|
BBB+
|
|
1,559
|
|
|
A-
|
||
Investor-owned utilities
|
|
523
|
|
|
A-
|
|
697
|
|
|
BBB+
|
||
Other public finance—U.S.
|
|
1,934
|
|
|
A
|
|
2,796
|
|
|
A
|
||
Total public finance—U.S.
|
|
209,392
|
|
|
A-
|
|
244,798
|
|
|
A
|
||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|||
Infrastructure finance
|
|
18,234
|
|
|
BBB
|
|
10,731
|
|
|
BBB
|
||
Regulated utilities
|
|
16,689
|
|
|
BBB+
|
|
9,263
|
|
|
BBB+
|
||
Pooled infrastructure
|
|
1,561
|
|
|
AAA
|
|
1,513
|
|
|
AAA
|
||
Other public finance
|
|
6,438
|
|
|
A
|
|
4,874
|
|
|
A
|
||
Total public finance—non-U.S.
|
|
42,922
|
|
|
BBB+
|
|
26,381
|
|
|
BBB+
|
||
Total public finance
|
|
252,314
|
|
|
A-
|
|
271,179
|
|
|
A-
|
||
Structured finance:
|
|
|
|
|
|
|
|
|
|
|||
U.S.:
|
|
|
|
|
|
|
|
|
|
|||
RMBS
|
|
4,818
|
|
|
BBB-
|
|
5,637
|
|
|
BBB-
|
||
Consumer receivables
|
|
1,590
|
|
|
A-
|
|
1,652
|
|
|
BBB+
|
||
Insurance securitizations
|
|
1,449
|
|
|
A+
|
|
2,308
|
|
|
A+
|
||
Financial products
|
|
1,418
|
|
|
AA-
|
|
1,540
|
|
|
AA-
|
||
Pooled corporate obligations
|
|
1,347
|
|
|
A
|
|
10,050
|
|
|
AAA
|
||
Commercial receivables
|
|
146
|
|
|
BBB
|
|
230
|
|
|
BBB-
|
||
Other structured finance—U.S.
|
|
456
|
|
|
A+
|
|
640
|
|
|
AA-
|
||
Total structured finance—U.S.
|
|
11,224
|
|
|
BBB+
|
|
22,057
|
|
|
A+
|
||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|||
RMBS
|
|
637
|
|
|
A-
|
|
604
|
|
|
A-
|
||
Commercial receivables
|
|
296
|
|
|
A
|
|
356
|
|
|
BBB+
|
||
Pooled corporate obligations
|
|
157
|
|
|
A+
|
|
1,535
|
|
|
AA
|
||
Other structured finance
|
|
324
|
|
|
A
|
|
587
|
|
|
AA
|
||
Total structured finance—non-U.S.
|
|
1,414
|
|
|
A
|
|
3,082
|
|
|
AA-
|
||
Total structured finance
|
|
12,638
|
|
|
A-
|
|
25,139
|
|
|
AA-
|
||
Total net par outstanding
|
|
$
|
264,952
|
|
|
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
|
|
$
|
877
|
|
|
0.4
|
%
|
|
$
|
2,541
|
|
|
5.9
|
%
|
|
$
|
1,655
|
|
|
14.7
|
%
|
|
$
|
319
|
|
|
22.5
|
%
|
|
$
|
5,392
|
|
|
2.1
|
%
|
AA
|
|
30,016
|
|
|
14.3
|
|
|
205
|
|
|
0.5
|
|
|
3,915
|
|
|
34.9
|
|
|
76
|
|
|
5.4
|
|
|
34,212
|
|
|
12.9
|
|
|||||
A
|
|
118,620
|
|
|
56.7
|
|
|
13,936
|
|
|
32.5
|
|
|
1,630
|
|
|
14.5
|
|
|
210
|
|
|
14.9
|
|
|
134,396
|
|
|
50.7
|
|
|||||
BBB
|
|
52,739
|
|
|
25.2
|
|
|
24,509
|
|
|
57.1
|
|
|
763
|
|
|
6.8
|
|
|
703
|
|
|
49.7
|
|
|
78,714
|
|
|
29.7
|
|
|||||
BIG
|
|
7,140
|
|
|
3.4
|
|
|
1,731
|
|
|
4.0
|
|
|
3,261
|
|
|
29.1
|
|
|
106
|
|
|
7.5
|
|
|
12,238
|
|
|
4.6
|
|
|||||
Total net par outstanding
|
|
$
|
209,392
|
|
|
100.0
|
%
|
|
$
|
42,922
|
|
|
100.0
|
%
|
|
$
|
11,224
|
|
|
100.0
|
%
|
|
$
|
1,414
|
|
|
100.0
|
%
|
|
$
|
264,952
|
|
|
100.0
|
%
|
|
|
Public Finance
U.S.
|
|
Public Finance
Non-U.S.
|
|
Structured Finance
U.S
|
|
Structured Finance
Non-U.S
|
|
Total
|
|||||||||||||||||||||||||
Rating
Category
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|||||||||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||||||||||||||||
AAA
|
|
$
|
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
|
%
|
|
Net Par Outstanding
|
|
Percent of Total U.S. Public Finance Net Par Outstanding
|
|
Rating
|
|||
|
(dollars in millions)
|
|||||||
New Jersey (State of)
|
$
|
4,821
|
|
|
2.3
|
%
|
|
BBB
|
Illinois (State of)
|
2,059
|
|
|
1.0
|
|
|
BBB
|
|
Chicago (City of) Illinois
|
1,659
|
|
|
0.8
|
|
|
BBB+
|
|
Puerto Rico, General Obligation, Appropriations and Guarantees of the Commonwealth
|
1,578
|
|
|
0.7
|
|
|
CCC-
|
|
Pennsylvania (Commonwealth of)
|
1,481
|
|
|
0.7
|
|
|
A-
|
|
North Texas Tollway Authority
|
1,383
|
|
|
0.7
|
|
|
A
|
|
Puerto Rico Highways & Transportation Authority
|
1,377
|
|
|
0.6
|
|
|
CC-
|
|
California (State of)
|
1,312
|
|
|
0.6
|
|
|
A
|
|
Chicago Public Schools, Illinois
|
1,227
|
|
|
0.6
|
|
|
BBB-
|
|
Massachusetts (Commonwealth of)
|
1,200
|
|
|
0.6
|
|
|
AA-
|
|
Total of top ten U.S. public finance exposures
|
$
|
18,097
|
|
|
8.6
|
%
|
|
|
|
Net Par Outstanding
|
|
Percent of Total U.S. Structured Finance Net Par Outstanding
|
|
Rating
|
|||
|
(dollars in millions)
|
|||||||
Private US Insurance Securitization
|
$
|
500
|
|
|
4.5
|
%
|
|
AA
|
SLM Private Credit Student Trust 2007-A
|
500
|
|
|
4.5
|
|
|
A+
|
|
Private US Insurance Securitization
|
424
|
|
|
3.8
|
|
|
AA
|
|
SLM Private Credit Student Loan Trust 2006-C
|
327
|
|
|
2.9
|
|
|
A+
|
|
Private US Insurance Securitization
|
250
|
|
|
2.2
|
|
|
AA
|
|
Option One 2007-FXD2
|
217
|
|
|
1.9
|
|
|
CCC
|
|
Timberlake Financial, LLC Floating Insured Notes
|
190
|
|
|
1.7
|
|
|
BBB-
|
|
Soundview 2007-WMC1
|
163
|
|
|
1.5
|
|
|
CCC
|
|
Countrywide HELOC 2006-I
|
160
|
|
|
1.4
|
|
|
BB
|
|
Nomura Asset Accept. Corp. 2007-1
|
140
|
|
|
1.2
|
|
|
CCC
|
|
Total of top ten U.S. structured finance exposures
|
$
|
2,871
|
|
|
25.6
|
%
|
|
|
|
Country
|
|
Net Par Outstanding
|
|
Percent of Total Non-U.S. Net Par Outstanding
|
|
Rating
|
|||
|
|
|
(dollars in millions)
|
|||||||
Southern Water Services Limited
|
United Kingdom
|
|
$
|
2,567
|
|
|
5.8
|
%
|
|
A-
|
Hydro-Quebec, Province of Quebec
|
Canada
|
|
2,062
|
|
|
4.6
|
|
|
A+
|
|
Societe des Autoroutes du Nord et de l'Est de France S.A.
|
France
|
|
1,808
|
|
|
4.1
|
|
|
BBB+
|
|
Thames Water Utility Finance PLC
|
United Kingdom
|
|
1,519
|
|
|
3.4
|
|
|
A-
|
|
Anglian Water Services Financing
|
United Kingdom
|
|
1,466
|
|
|
3.3
|
|
|
A-
|
|
Dwr Cymru Financing Limited
|
United Kingdom
|
|
1,447
|
|
|
3.3
|
|
|
A-
|
|
Southern Gas Networks PLC
|
United Kingdom
|
|
1,082
|
|
|
2.4
|
|
|
BBB
|
|
Channel Link Enterprises Finance PLC
|
France, United Kingdom
|
|
1,014
|
|
|
2.3
|
|
|
BBB
|
|
National Grid Gas PLC
|
United Kingdom
|
|
978
|
|
|
2.2
|
|
|
BBB+
|
|
British Broadcasting Corporation
|
United Kingdom
|
|
959
|
|
|
2.2
|
|
|
A+
|
|
Total of top ten non-U.S. exposures
|
|
|
$
|
14,902
|
|
|
33.6
|
%
|
|
|
|
Number of Risks
|
|
Net Par Outstanding
|
|
Percent of Total Net Par Outstanding
|
||||
|
(dollars in millions)
|
||||||||
U.S.:
|
|
|
|
|
|
||||
California
|
1,368
|
|
|
$
|
36,507
|
|
|
13.8
|
%
|
Texas
|
1,229
|
|
|
19,027
|
|
|
7.2
|
|
|
Pennsylvania
|
744
|
|
|
18,061
|
|
|
6.8
|
|
|
Illinois
|
702
|
|
|
17,044
|
|
|
6.4
|
|
|
New York
|
871
|
|
|
15,672
|
|
|
5.9
|
|
|
New Jersey
|
444
|
|
|
12,441
|
|
|
4.7
|
|
|
Florida
|
294
|
|
|
10,272
|
|
|
3.9
|
|
|
Michigan
|
439
|
|
|
6,353
|
|
|
2.4
|
|
|
Puerto Rico
|
18
|
|
|
4,968
|
|
|
1.9
|
|
|
Alabama
|
296
|
|
|
4,808
|
|
|
1.8
|
|
|
Other
|
3,112
|
|
|
64,239
|
|
|
24.3
|
|
|
Total U.S. public finance
|
9,517
|
|
|
209,392
|
|
|
79.1
|
|
|
U.S. Structured finance (multiple states)
|
512
|
|
|
11,224
|
|
|
4.2
|
|
|
Total U.S.
|
10,029
|
|
|
220,616
|
|
|
83.3
|
|
|
Non-U.S.:
|
|
|
|
|
|
||||
United Kingdom
|
126
|
|
|
30,062
|
|
|
11.3
|
|
|
France
|
10
|
|
|
3,167
|
|
|
1.2
|
|
|
Canada
|
9
|
|
|
2,690
|
|
|
1.0
|
|
|
Australia
|
12
|
|
|
2,309
|
|
|
0.9
|
|
|
Italy
|
9
|
|
|
1,497
|
|
|
0.6
|
|
|
Other
|
44
|
|
|
4,611
|
|
|
1.7
|
|
|
Total non-U.S.
|
210
|
|
|
44,336
|
|
|
16.7
|
|
|
Total
|
10,239
|
|
|
$
|
264,952
|
|
|
100.0
|
%
|
Original Par Amount Per Issue
|
|
Number of
Issues
|
|
Net Par
Outstanding
|
|
% of Public
Finance
Net Par
Outstanding
|
|||
|
(dollars in millions)
|
||||||||
Less than $10 million
|
13,504
|
|
$
|
35,572
|
|
|
14.1
|
%
|
|
$10 through $50 million
|
4,546
|
|
73,913
|
|
|
29.3
|
|
||
$50 through $100 million
|
802
|
|
41,516
|
|
|
16.5
|
|
||
$100 million to $200 million
|
404
|
|
40,424
|
|
|
16.0
|
|
||
$200 million or greater
|
251
|
|
60,889
|
|
|
24.1
|
|
||
Total
|
19,507
|
|
$
|
252,314
|
|
|
100.0
|
%
|
Original Par Amount Per Issue
|
|
Number of
Issues
|
|
Net Par
Outstanding
|
|
% of Structured
Finance
Net Par
Outstanding
|
|||
|
(dollars in millions)
|
||||||||
Less than $10 million
|
162
|
|
$
|
65
|
|
|
0.5
|
%
|
|
$10 through $50 million
|
191
|
|
1,286
|
|
|
10.2
|
|
||
$50 through $100 million
|
69
|
|
1,580
|
|
|
12.5
|
|
||
$100 million to $200 million
|
98
|
|
3,240
|
|
|
25.6
|
|
||
$200 million or greater
|
106
|
|
6,467
|
|
|
51.2
|
|
||
Total
|
626
|
|
$
|
12,638
|
|
|
100.0
|
%
|
•
|
Constitutionally Guaranteed.
The Company includes in this category public debt benefiting from Article VI of the Constitution of the Commonwealth, which expressly provides that interest and principal payments on the public debt are to be paid before other disbursements are made.
|
•
|
Public Corporations – Certain Revenues Potentially Subject to Clawback.
The Company includes in this category the debt of public corporations for which applicable law permits the Commonwealth to claw back,
|
•
|
Other Public Corporations.
The Company includes in this category the debt of public corporations that are supported by revenues it does not believe are subject to clawback.
|
|
|
Net Par Outstanding
|
|
|
||||||||||||||||||||
|
|
AGM
|
|
AGC
|
|
AG Re
|
|
Eliminations (2)
|
|
Total Net Par Outstanding (3)
|
|
Gross Par Outstanding
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commonwealth of Puerto Rico - General Obligation Bonds (4)
|
|
$
|
670
|
|
|
$
|
343
|
|
|
$
|
407
|
|
|
$
|
(1
|
)
|
|
$
|
1,419
|
|
|
$
|
1,469
|
|
Puerto Rico Public Buildings Authority (PBA)
|
|
9
|
|
|
141
|
|
|
0
|
|
|
(9
|
)
|
|
141
|
|
|
146
|
|
||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Puerto Rico Highways and Transportation Authority (PRHTA) (Transportation revenue) (4)
|
|
252
|
|
|
511
|
|
|
204
|
|
|
(85
|
)
|
|
882
|
|
|
913
|
|
||||||
PRHTA (Highway revenue) (4)
|
|
358
|
|
|
93
|
|
|
44
|
|
|
—
|
|
|
495
|
|
|
556
|
|
||||||
Puerto Rico Convention Center District Authority (PRCCDA)
|
|
—
|
|
|
152
|
|
|
—
|
|
|
—
|
|
|
152
|
|
|
152
|
|
||||||
Puerto Rico Infrastructure Financing Authority (PRIFA)
|
|
—
|
|
|
17
|
|
|
1
|
|
|
—
|
|
|
18
|
|
|
18
|
|
||||||
Other Public Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Puerto Rico Electric Power Authority (PREPA) (4)
|
|
547
|
|
|
73
|
|
|
233
|
|
|
—
|
|
|
853
|
|
|
870
|
|
||||||
PRASA
|
|
—
|
|
|
284
|
|
|
89
|
|
|
—
|
|
|
373
|
|
|
373
|
|
||||||
MFA
|
|
221
|
|
|
54
|
|
|
85
|
|
|
—
|
|
|
360
|
|
|
416
|
|
||||||
Puerto Rico Sales Tax Financing Corporation (COFINA) (4)
|
|
263
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
272
|
|
|
272
|
|
||||||
U of PR
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||||
Total exposure to Puerto Rico
|
|
$
|
2,320
|
|
|
$
|
1,669
|
|
|
$
|
1,072
|
|
|
$
|
(95
|
)
|
|
$
|
4,966
|
|
|
$
|
5,186
|
|
(1)
|
The
December 31, 2017
amounts include
$389 million
(which comprises
$36 million
of General Obligation Bonds,
$134 million
of PREPA,
$144 million
of PRHTA (Highways revenue), and
$75 million
of MFA) related to 2017 commutations of previously ceded business. See Part II, Item 8, Financial Statements and Supplementary Data, 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 $26 million and a fully accreted net par at maturity of $56 million. Of these amounts, current net par of $20 million and fully accreted net par at maturity of $50 million relate to the COFINA, current net par of $4 million and fully accreted net par at maturity of $4 million relate to the PRHTA, and current net par of $2 million and fully accreted net par at maturity of $2 million relate to the Commonwealth General Obligation Bonds.
|
(4)
|
As of the date of this filing, the seven-member federal financial oversight board established by PROMESA has certified a filing under Title III of PROMESA for these exposures.
|
|
Scheduled Net Par Amortization
|
|||||||||||||||||||||||||||||||||||||||||
|
2018 (1Q)
|
2018 (2Q)
|
2018 (3Q)
|
2018 (4Q)
|
2019
|
2020
|
2021
|
2022
|
2023 -2027
|
2028 -2032
|
2033 -2037
|
2038 -2042
|
2043 -2047
|
Total
|
||||||||||||||||||||||||||||
|
(in millions)
|
|||||||||||||||||||||||||||||||||||||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
Commonwealth of Puerto Rico - General Obligation Bonds
|
$
|
0
|
|
$
|
0
|
|
$
|
78
|
|
$
|
0
|
|
$
|
87
|
|
$
|
141
|
|
$
|
15
|
|
$
|
37
|
|
$
|
279
|
|
$
|
215
|
|
$
|
567
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,419
|
|
PBA
|
—
|
|
—
|
|
—
|
|
—
|
|
3
|
|
5
|
|
13
|
|
0
|
|
64
|
|
16
|
|
40
|
|
—
|
|
—
|
|
141
|
|
||||||||||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
PRHTA (Transportation revenue)
|
0
|
|
0
|
|
38
|
|
—
|
|
32
|
|
25
|
|
18
|
|
28
|
|
120
|
|
157
|
|
279
|
|
185
|
|
—
|
|
882
|
|
||||||||||||||
PRHTA (Highway revenue)
|
—
|
|
—
|
|
20
|
|
—
|
|
21
|
|
22
|
|
35
|
|
6
|
|
100
|
|
112
|
|
179
|
|
—
|
|
—
|
|
495
|
|
||||||||||||||
PRCCDA
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
19
|
|
24
|
|
109
|
|
—
|
|
—
|
|
152
|
|
||||||||||||||
PRIFA
|
—
|
|
—
|
|
2
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2
|
|
—
|
|
—
|
|
14
|
|
—
|
|
18
|
|
||||||||||||||
Other Public Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
PREPA
|
—
|
|
—
|
|
5
|
|
—
|
|
26
|
|
48
|
|
28
|
|
28
|
|
467
|
|
238
|
|
13
|
|
—
|
|
—
|
|
853
|
|
||||||||||||||
PRASA
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
81
|
|
29
|
|
—
|
|
2
|
|
261
|
|
373
|
|
||||||||||||||
MFA
|
—
|
|
—
|
|
57
|
|
—
|
|
55
|
|
45
|
|
40
|
|
40
|
|
102
|
|
21
|
|
—
|
|
—
|
|
—
|
|
360
|
|
||||||||||||||
COFINA
|
0
|
|
0
|
|
0
|
|
0
|
|
(1
|
)
|
(1
|
)
|
(2
|
)
|
(2
|
)
|
(5
|
)
|
(1
|
)
|
30
|
|
252
|
|
2
|
|
272
|
|
||||||||||||||
U of PR
|
—
|
|
—
|
|
0
|
|
—
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
1
|
|
0
|
|
—
|
|
—
|
|
1
|
|
||||||||||||||
Total
|
$
|
0
|
|
$
|
0
|
|
$
|
200
|
|
$
|
0
|
|
$
|
223
|
|
$
|
285
|
|
$
|
147
|
|
$
|
137
|
|
$
|
1,229
|
|
$
|
812
|
|
$
|
1,217
|
|
$
|
453
|
|
$
|
263
|
|
$
|
4,966
|
|
|
Scheduled Net Debt Service Amortization
|
|||||||||||||||||||||||||||||||||||||||||
|
2018 (1Q)
|
2018 (2Q)
|
2018 (3Q)
|
2018 (4Q)
|
2019
|
2020
|
2021
|
2022
|
2023 -2027
|
2028 -2032
|
2033 -2037
|
2038 -2042
|
2043 -2047
|
Total
|
||||||||||||||||||||||||||||
|
(in millions)
|
|||||||||||||||||||||||||||||||||||||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
Commonwealth of Puerto Rico - General Obligation Bonds
|
$
|
37
|
|
$
|
0
|
|
$
|
114
|
|
$
|
0
|
|
$
|
156
|
|
$
|
206
|
|
$
|
74
|
|
$
|
94
|
|
$
|
536
|
|
$
|
396
|
|
$
|
649
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,262
|
|
PBA
|
4
|
|
—
|
|
4
|
|
—
|
|
10
|
|
12
|
|
20
|
|
6
|
|
93
|
|
30
|
|
45
|
|
—
|
|
—
|
|
224
|
|
||||||||||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
PRHTA (Transportation revenue)
|
23
|
|
0
|
|
61
|
|
—
|
|
76
|
|
67
|
|
59
|
|
68
|
|
301
|
|
300
|
|
372
|
|
210
|
|
—
|
|
1,537
|
|
||||||||||||||
PRHTA (Highway revenue)
|
13
|
|
—
|
|
33
|
|
—
|
|
47
|
|
46
|
|
58
|
|
27
|
|
186
|
|
182
|
|
203
|
|
—
|
|
—
|
|
795
|
|
||||||||||||||
PRCCDA
|
3
|
|
—
|
|
3
|
|
—
|
|
7
|
|
7
|
|
7
|
|
7
|
|
54
|
|
55
|
|
121
|
|
—
|
|
—
|
|
264
|
|
||||||||||||||
PRIFA
|
0
|
|
—
|
|
2
|
|
—
|
|
1
|
|
1
|
|
1
|
|
1
|
|
6
|
|
4
|
|
3
|
|
16
|
|
—
|
|
35
|
|
||||||||||||||
Other Public Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
PREPA
|
18
|
|
3
|
|
22
|
|
3
|
|
65
|
|
87
|
|
63
|
|
62
|
|
588
|
|
273
|
|
15
|
|
—
|
|
—
|
|
1,199
|
|
||||||||||||||
PRASA
|
10
|
|
—
|
|
10
|
|
—
|
|
19
|
|
19
|
|
19
|
|
19
|
|
172
|
|
99
|
|
68
|
|
69
|
|
314
|
|
818
|
|
||||||||||||||
MFA
|
9
|
|
—
|
|
67
|
|
—
|
|
70
|
|
58
|
|
50
|
|
48
|
|
123
|
|
22
|
|
—
|
|
—
|
|
—
|
|
447
|
|
||||||||||||||
COFINA
|
6
|
|
0
|
|
6
|
|
0
|
|
13
|
|
13
|
|
13
|
|
13
|
|
70
|
|
74
|
|
96
|
|
307
|
|
2
|
|
613
|
|
||||||||||||||
U of PR
|
0
|
|
—
|
|
0
|
|
—
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
1
|
|
0
|
|
—
|
|
—
|
|
1
|
|
||||||||||||||
Total
|
$
|
123
|
|
$
|
3
|
|
$
|
322
|
|
$
|
3
|
|
$
|
464
|
|
$
|
516
|
|
$
|
364
|
|
$
|
345
|
|
$
|
2,129
|
|
$
|
1,436
|
|
$
|
1,572
|
|
$
|
602
|
|
$
|
316
|
|
$
|
8,195
|
|
Ratings:
|
|
Prime
First Lien
|
|
Alt-A
First Lien
|
|
Option
ARMs
|
|
Subprime
First Lien
|
|
Second
Lien
|
|
Total Net Par Outstanding
|
||||||||||||
|
|
(dollars in millions)
|
||||||||||||||||||||||
AAA
|
|
$
|
4
|
|
|
$
|
117
|
|
|
$
|
25
|
|
|
$
|
1,257
|
|
|
$
|
0
|
|
|
$
|
1,404
|
|
AA
|
|
25
|
|
|
207
|
|
|
31
|
|
|
238
|
|
|
—
|
|
|
500
|
|
||||||
A
|
|
0
|
|
|
—
|
|
|
0
|
|
|
85
|
|
|
0
|
|
|
85
|
|
||||||
BBB
|
|
2
|
|
|
0
|
|
|
—
|
|
|
63
|
|
|
2
|
|
|
67
|
|
||||||
BIG
|
|
117
|
|
|
490
|
|
|
59
|
|
|
1,055
|
|
|
1,039
|
|
|
2,761
|
|
||||||
Total exposures
|
|
$
|
150
|
|
|
$
|
814
|
|
|
$
|
115
|
|
|
$
|
2,698
|
|
|
$
|
1,041
|
|
|
$
|
4,818
|
|
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
|
|
$
|
19
|
|
|
$
|
37
|
|
|
$
|
13
|
|
|
$
|
815
|
|
|
$
|
51
|
|
|
$
|
935
|
|
2005
|
|
74
|
|
|
268
|
|
|
27
|
|
|
155
|
|
|
217
|
|
|
742
|
|
||||||
2006
|
|
57
|
|
|
57
|
|
|
20
|
|
|
573
|
|
|
301
|
|
|
1,009
|
|
||||||
2007
|
|
—
|
|
|
451
|
|
|
55
|
|
|
1,084
|
|
|
472
|
|
|
2,063
|
|
||||||
2008
|
|
—
|
|
|
—
|
|
|
—
|
|
|
70
|
|
|
—
|
|
|
70
|
|
||||||
Total exposures
|
|
$
|
150
|
|
|
$
|
814
|
|
|
$
|
115
|
|
|
$
|
2,698
|
|
|
$
|
1,041
|
|
|
$
|
4,818
|
|
|
As of December 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Par Outstanding:
|
|
|
|
||||
Ceded par outstanding (2)
|
$
|
4,434
|
|
|
$
|
11,156
|
|
Assumed par outstanding
|
8,383
|
|
|
13,264
|
|
||
Second-to-pay insured par outstanding (3)
|
6,605
|
|
|
11,539
|
|
(1)
|
The total collateral posted by all non-affiliated reinsurers required to post, or that had agreed to post, collateral as of
December 31, 2017
and
December 31, 2016
was approximately
$118 million
and
$387 million
, respectively.
|
(2)
|
Of the total ceded par to unrated or BIG rated reinsurers,
$296 million
and
$384 million
is rated BIG as of
December 31, 2017
and
December 31, 2016
, respectively.
|
(3)
|
The par on second-to-pay exposure where the primary insurer and underlying transaction rating are both BIG and/or not rated is
$204 million
and
$788 million
as of
December 31, 2017
and
December 31, 2016
, respectively.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Intercompany sources (uses):
|
|
|
|
|
|
||||||
Distributions to AGL from:
|
|
|
|
|
|
||||||
AG Re
|
$
|
125
|
|
|
$
|
100
|
|
|
$
|
150
|
|
AGUS
|
470
|
|
|
288
|
|
|
455
|
|
|||
Distributions to AGUS from:
|
|
|
|
|
|
||||||
AGC
|
107
|
|
|
79
|
|
|
90
|
|
|||
AGMH
|
278
|
|
|
513
|
|
|
234
|
|
|||
Distributions from AGUS to:
|
|
|
|
|
|
||||||
AGMH
|
(25
|
)
|
|
—
|
|
|
—
|
|
|||
Distributions to AGMH from:
|
|
|
|
|
|
||||||
AGM
|
297
|
|
|
547
|
|
|
240
|
|
|||
External sources (uses):
|
|
|
|
|
|
||||||
Dividends paid to AGL shareholders
|
(70
|
)
|
|
(69
|
)
|
|
(72
|
)
|
|||
Repurchases of common shares(1)
|
(501
|
)
|
|
(306
|
)
|
|
(555
|
)
|
|||
Interest paid by AGMH and AGUS(2)
|
(78
|
)
|
|
(95
|
)
|
|
(95
|
)
|
|||
Purchase of AGMH's debt by AGUS
|
(28
|
)
|
|
—
|
|
|
—
|
|
(1)
|
See Part II, Item 8, Financial Statements and Supplementary Data, Note 18, Shareholders' Equity, for additional information about share repurchases and authorizations.
|
(2)
|
See Long-Term Obligations below for interest paid by subsidiary.
|
•
|
The maximum amount available during
2018
for AGM to distribute as dividends without regulatory approval is estimated to be approximately
$190 million
, of which approximately
$73 million
is estimated to be available for distribution in the first quarter of 2018.
|
•
|
The maximum amount available during
2018
for AGC to distribute as ordinary dividends is approximately
$133 million
, of which approximately
$54 million
is available for distribution in the first quarter of
2018
.
|
•
|
The maximum amount available during
2018
for MAC to distribute as dividends to Municipal Assurance Holdings Inc. (MAC Holdings), which is owned by AGM and AGC, without regulatory approval is estimated to be approximately
$27 million
, of which approximately
$3 million
is available for distribution in the first quarter of 2018.
|
•
|
Based on the applicable law and regulations, in
2018
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
$324 million
as of December 31, 2017.
|
•
|
On December 21, 2017, the MIA approved and in January 2018, AGC repurchased
$200 million
in shares of its common stock from its direct parent, AGUS.
|
•
|
On November 20, 2017 and November 25, 2016, the New York Superintendent approved and AGM repurchased
$101 million
and
$300 million
, respectively, in shares of its common stock from its direct parent, AGMH.
|
•
|
On August 17, 2017, the New York Superintendent approved MAC's request to repurchase its shares of common stock from its direct parent, MAC Holdings, for approximately
$250 million
. On September 25, 2017, MAC transferred approximately
$104 million
in cash and
$146 million
in marketable securities to MAC Holdings, which then distributed such assets to its shareholders, AGM and AGC, in proportion to their respective
61%
and
39%
ownership interests.
|
•
|
On June 30, 2016, MAC obtained approval from the NYDFS to repay its
$300 million
surplus note to MAC Holdings and its
$100 million
surplus note (plus accrued interest) to AGM. Accordingly, on June 30, 2016, MAC transferred cash and/or marketable securities to (i) MAC Holdings in an aggregate amount equal to
$300 million
, and (ii) AGM in an aggregate amount of
$102.5 million
. MAC Holdings then distributed
$182 million
to AGM and
$118 million
to AGC.
|
•
|
operating expenses,
|
•
|
claims on the insured portfolio,
|
•
|
dividends to AGL, AGUS and/or AGMH, as applicable,
|
•
|
posting of collateral in connection with credit derivatives and reinsurance transactions,
|
•
|
reinsurance premiums,
|
•
|
principal of and, where applicable, interest on surplus notes, and
|
•
|
capital investments in their own subsidiaries, where appropriate.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Public finance
|
$
|
(263
|
)
|
|
$
|
(216
|
)
|
|
$
|
(29
|
)
|
Structured finance:
|
|
|
|
|
|
||||||
U.S. RMBS
|
48
|
|
|
(90
|
)
|
|
(97
|
)
|
|||
Other structured finance
|
(14
|
)
|
|
(48
|
)
|
|
(161
|
)
|
|||
Structured finance
|
34
|
|
|
(138
|
)
|
|
(258
|
)
|
|||
Claims (paid) recovered, net of reinsurance(1)
|
$
|
(229
|
)
|
|
$
|
(354
|
)
|
|
$
|
(287
|
)
|
(1)
|
Includes $8 million, $11 million and $21 million paid in
2017
,
2016
and
2015
, respectively, for consolidated FG VIEs.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Net cash flows provided by (used in) operating activities before effects of FG VIE consolidation
|
$
|
414
|
|
|
$
|
(156
|
)
|
|
$
|
(114
|
)
|
Effect of FG VIE consolidation
|
19
|
|
|
24
|
|
|
43
|
|
|||
Net cash flows provided by (used in) operating activities - reported
|
433
|
|
|
(132
|
)
|
|
(71
|
)
|
|||
Net cash flows provided by (used in) investing activities before effects of acquisitions and FG VIE consolidation
|
112
|
|
|
924
|
|
|
1,623
|
|
|||
Acquisitions, net of cash acquired
|
95
|
|
|
(435
|
)
|
|
(800
|
)
|
|||
Effect of FG VIE consolidation
|
138
|
|
|
587
|
|
|
171
|
|
|||
Net cash flows provided by (used in) investing activities - reported
|
345
|
|
|
1,076
|
|
|
994
|
|
|||
Net cash flows provided by (used in) financing activities before effects of dividends, share repurchases and FG VIE consolidation
|
(38
|
)
|
|
8
|
|
|
(6
|
)
|
|||
Dividends paid
|
(70
|
)
|
|
(69
|
)
|
|
(72
|
)
|
|||
Repurchases of common stock
|
(501
|
)
|
|
(306
|
)
|
|
(555
|
)
|
|||
Effect of FG VIE consolidation
|
(157
|
)
|
|
(611
|
)
|
|
(214
|
)
|
|||
Net cash flows provided by (used in) financing activities - reported (1)
|
(766
|
)
|
|
(978
|
)
|
|
(847
|
)
|
|||
Effect of exchange rate changes
|
5
|
|
|
(5
|
)
|
|
(4
|
)
|
|||
Cash and restricted cash at beginning of period
|
127
|
|
|
166
|
|
|
94
|
|
|||
Total cash and restricted cash at the end of the period
|
$
|
144
|
|
|
$
|
127
|
|
|
$
|
166
|
|
(1)
|
Claims paid on consolidated FG VIEs are presented in the consolidated cash flow statements as a component of paydowns on FG VIE liabilities in financing activities as opposed to operating activities.
|
|
Principal Amount
|
|
Interest Paid
|
||||||||||||||||
|
As of December 31,
|
|
Year Ended December 31,
|
||||||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
|
(in millions)
|
||||||||||||||||||
AGUS (1)
|
$
|
850
|
|
|
$
|
850
|
|
|
$
|
32
|
|
|
$
|
49
|
|
|
$
|
49
|
|
AGMH
|
730
|
|
|
730
|
|
|
46
|
|
|
46
|
|
|
46
|
|
|||||
AGM
|
6
|
|
|
9
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|||||
Purchased debt (2)
|
(28
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|||||
Total
|
$
|
1,558
|
|
|
$
|
1,589
|
|
|
$
|
77
|
|
|
$
|
95
|
|
|
$
|
95
|
|
(1)
|
Semi-annual debt service for 5% senior notes was paid on the last business day of 2015 and 2016 and on the first business day of 2018. Due date for the payment is the first business day of each year.
|
(2)
|
In 2017, AGUS purchased
$28 million
principal amount of AGMH's outstanding Junior Subordinated Debentures.
|
|
As of December 31, 2017
|
||||||||||||||||||
|
Less Than
1 Year
|
|
1-3
Years
|
|
3-5
Years
|
|
More Than
5 Years
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Long-term debt(1):
|
|
|
|
|
|
|
|
|
|
||||||||||
7% Senior Notes
|
$
|
14
|
|
|
$
|
28
|
|
|
$
|
28
|
|
|
$
|
360
|
|
|
$
|
430
|
|
5% Senior Notes
|
25
|
|
|
50
|
|
|
50
|
|
|
550
|
|
|
675
|
|
|||||
Series A Enhanced Junior Subordinated Debentures
|
7
|
|
|
13
|
|
|
14
|
|
|
466
|
|
|
500
|
|
|||||
6
7
/
8
% QUIBS
|
7
|
|
|
14
|
|
|
14
|
|
|
643
|
|
|
678
|
|
|||||
6.25% Notes
|
14
|
|
|
29
|
|
|
29
|
|
|
1,378
|
|
|
1,450
|
|
|||||
5.6 Notes
|
6
|
|
|
11
|
|
|
11
|
|
|
551
|
|
|
579
|
|
|||||
Junior Subordinated Debentures
|
19
|
|
|
38
|
|
|
38
|
|
|
1,145
|
|
|
1,240
|
|
|||||
Notes Payable
|
2
|
|
|
3
|
|
|
1
|
|
|
1
|
|
|
7
|
|
|||||
Operating lease obligations (2)
|
8
|
|
|
18
|
|
|
17
|
|
|
80
|
|
|
123
|
|
|||||
Other compensation plans (3)
|
13
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|||||
Estimated claim payments (4)
|
328
|
|
|
1,059
|
|
|
375
|
|
|
341
|
|
|
2,103
|
|
|||||
Ceded premium payable, net of commission
|
7
|
|
|
9
|
|
|
9
|
|
|
33
|
|
|
58
|
|
|||||
Other
|
36
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
36
|
|
|||||
Total
|
$
|
486
|
|
|
$
|
1,272
|
|
|
$
|
586
|
|
|
$
|
5,548
|
|
|
$
|
7,892
|
|
(1)
|
Includes interest and principal payments. See Part II, Item 8, Financial Statements and Supplementary Data, Note 16, Long-Term Debt and Credit Facilities, for expected maturities of debt.
|
(2)
|
Operating lease obligations exclude escalations in building operating costs and real estate taxes.
|
(3)
|
Amount excludes approximately $66 million of liabilities under various supplemental retirement plans, which are fair valued and payable at the time of termination of employment by either employer or employee. Amount also excludes approximately $17 million of liabilities under Performance Retention Plan, which are payable at the time of vesting or termination of employment by either employer or employee. Given the nature of these awards, the Company is unable to determine the year in which they will be paid.
|
(4)
|
Claim payments represent estimated expected cash outflows under direct and assumed financial guaranty contracts, whether accounted for as insurance or credit derivatives, including claim payments under contracts in consolidated FG VIEs. The amounts presented are not reduced for cessions under reinsurance contracts. Amounts include any benefit anticipated from excess spread or other recoveries within the contracts but do not reflect any benefit for recoveries under breaches of R&W.
|
|
As of December 31, 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
|
$
|
5,504
|
|
|
$
|
5,760
|
|
|
$
|
5,269
|
|
|
$
|
5,432
|
|
U.S. government and agencies
|
272
|
|
|
285
|
|
|
424
|
|
|
440
|
|
||||
Corporate securities
|
1,973
|
|
|
2,018
|
|
|
1,612
|
|
|
1,613
|
|
||||
Mortgage-backed securities(1):
|
|
|
|
|
|
|
|
|
|||||||
RMBS
|
852
|
|
|
861
|
|
|
998
|
|
|
987
|
|
||||
CMBS
|
540
|
|
|
549
|
|
|
575
|
|
|
583
|
|
||||
Asset-backed securities
|
730
|
|
|
896
|
|
|
835
|
|
|
945
|
|
||||
Foreign government securities
|
316
|
|
|
305
|
|
|
261
|
|
|
233
|
|
||||
Total fixed-maturity securities
|
10,187
|
|
|
10,674
|
|
|
9,974
|
|
|
10,233
|
|
||||
Short-term investments
|
627
|
|
|
627
|
|
|
590
|
|
|
590
|
|
||||
Total fixed-maturity and short-term investments
|
$
|
10,814
|
|
|
$
|
11,301
|
|
|
$
|
10,564
|
|
|
$
|
10,823
|
|
(1)
|
Government-agency obligations were approximately
39%
of mortgage backed securities as of
December 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
|
$
|
166
|
|
|
$
|
(4
|
)
|
|
$
|
281
|
|
|
$
|
(7
|
)
|
|
$
|
447
|
|
|
$
|
(11
|
)
|
U.S. government and agencies
|
151
|
|
|
0
|
|
|
18
|
|
|
(1
|
)
|
|
169
|
|
|
(1
|
)
|
||||||
Corporate securities
|
201
|
|
|
(1
|
)
|
|
240
|
|
|
(17
|
)
|
|
441
|
|
|
(18
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
RMBS
|
191
|
|
|
(5
|
)
|
|
213
|
|
|
(12
|
)
|
|
404
|
|
|
(17
|
)
|
||||||
CMBS
|
29
|
|
|
0
|
|
|
80
|
|
|
(3
|
)
|
|
109
|
|
|
(3
|
)
|
||||||
Asset-backed securities
|
48
|
|
|
0
|
|
|
3
|
|
|
0
|
|
|
51
|
|
|
0
|
|
||||||
Foreign government securities
|
20
|
|
|
0
|
|
|
140
|
|
|
(17
|
)
|
|
160
|
|
|
(17
|
)
|
||||||
Total
|
$
|
806
|
|
|
$
|
(10
|
)
|
|
$
|
975
|
|
|
$
|
(57
|
)
|
|
$
|
1,781
|
|
|
$
|
(67
|
)
|
Number of securities(1)
|
|
|
|
244
|
|
|
|
|
|
264
|
|
|
|
|
|
499
|
|
||||||
Number of securities with other-than-temporary impairment(1)
|
|
|
|
17
|
|
|
|
|
|
15
|
|
|
|
|
|
31
|
|
|
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
|
$
|
254
|
|
|
$
|
256
|
|
Due after one year through five years
|
1,574
|
|
|
1,604
|
|
||
Due after five years through 10 years
|
2,368
|
|
|
2,443
|
|
||
Due after 10 years
|
4,599
|
|
|
4,961
|
|
||
Mortgage-backed securities:
|
|
|
|
|
|
||
RMBS
|
852
|
|
|
861
|
|
||
CMBS
|
540
|
|
|
549
|
|
||
Total
|
$
|
10,187
|
|
|
$
|
10,674
|
|
Rating
|
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
||
AAA
|
|
14.3
|
%
|
|
11.6
|
%
|
AA
|
|
52.4
|
|
|
54.8
|
|
A
|
|
18.9
|
|
|
17.9
|
|
BBB
|
|
3.4
|
|
|
1.9
|
|
BIG(1)
|
|
10.5
|
|
|
13.5
|
|
Not rated
|
|
0.5
|
|
|
0.3
|
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
(1)
|
Comprised primarily of loss mitigation and other risk management assets. See Part II, Item 8, Financial Statements and Supplementary Data, Note 10, Investments and Cash, for additional information.
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
•
|
The fair value of credit derivatives within the financial guaranty portfolio of insured obligations which fluctuate based on changes in credit spreads of the underlying obligations and the Company's own credit spreads.
|
•
|
The fair value of the investment portfolio is primarily driven by changes in interest rates and also affected by changes in credit spreads.
|
•
|
The fair value of the investment portfolio contains foreign denominated securities whose value fluctuates based on changes in foreign exchange rates.
|
•
|
The carrying value of premiums receivable include foreign denominated receivables whose value fluctuates based on changes in foreign exchange rates.
|
•
|
The fair value of the assets and liabilities of consolidated FG VIE's may fluctuate based on changes in prepayment spreads, default rates, interest rates, and house price depreciation/appreciation. The fair value of the FG VIE liabilities would also fluctuate based on changes in the Company's credit spread.
|
|
|
As of December 31, 2017
|
|
As of December 31, 2016
|
||||||||||||
Credit Spreads(1)
|
|
Estimated Net
Fair Value
(Pre-Tax)
|
|
Estimated Change
in Gain/(Loss)
(Pre-Tax)
|
|
Estimated Net
Fair Value (Pre-Tax) |
|
Estimated Change
in Gain/(Loss) (Pre-Tax) |
||||||||
|
(in millions)
|
|||||||||||||||
100% widening in spreads
|
$
|
(501
|
)
|
|
$
|
(232
|
)
|
|
$
|
(791
|
)
|
|
$
|
(402
|
)
|
|
50% widening in spreads
|
(385
|
)
|
|
(116
|
)
|
|
(590
|
)
|
|
(201
|
)
|
|||||
25% widening in spreads
|
(327
|
)
|
|
(58
|
)
|
|
(490
|
)
|
|
(101
|
)
|
|||||
10% widening in spreads
|
(292
|
)
|
|
(23
|
)
|
|
(430
|
)
|
|
(41
|
)
|
|||||
Base Scenario
|
(269
|
)
|
|
—
|
|
|
(389
|
)
|
|
—
|
|
|||||
10% narrowing in spreads
|
(250
|
)
|
|
19
|
|
|
(351
|
)
|
|
38
|
|
|||||
25% narrowing in spreads
|
(222
|
)
|
|
47
|
|
|
(295
|
)
|
|
94
|
|
|||||
50% narrowing in spreads
|
(174
|
)
|
|
95
|
|
|
(203
|
)
|
|
186
|
|
(1)
|
Includes the effects of spreads on both the underlying asset classes and the Company's own credit spread.
|
|
Increase (Decrease) in Fair Value from Changes in Interest Rates
|
||||||||||||||||||||||
|
300 Basis
Point
Decrease
|
|
200 Basis
Point
Decrease
|
|
100 Basis
Point
Decrease
|
|
100 Basis
Point
Increase
|
|
200 Basis
Point
Increase
|
|
300 Basis
Point
Increase
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
December 31, 2017
|
$
|
1,162
|
|
|
$
|
1,033
|
|
|
$
|
552
|
|
|
$
|
(552
|
)
|
|
$
|
(1,106
|
)
|
|
$
|
(1,667
|
)
|
December 31, 2016
|
$
|
1,215
|
|
|
$
|
957
|
|
|
$
|
537
|
|
|
$
|
(528
|
)
|
|
$
|
(1,063
|
)
|
|
$
|
(1,578
|
)
|
|
Increase (Decrease) in Fair Value from Changes in Foreign Exchange Rates
|
||||||||||||||||||||||
|
30%
Decrease
|
|
20%
Decrease
|
|
10%
Decrease
|
|
10%
Increase
|
|
20%
Increase
|
|
30%
Increase
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
December 31, 2017
|
$
|
(257
|
)
|
|
$
|
(171
|
)
|
|
$
|
(86
|
)
|
|
$
|
86
|
|
|
$
|
171
|
|
|
$
|
257
|
|
December 31, 2016
|
$
|
(153
|
)
|
|
$
|
(102
|
)
|
|
$
|
(51
|
)
|
|
$
|
51
|
|
|
$
|
102
|
|
|
$
|
153
|
|
|
Increase (Decrease) in Premium Receivable from Changes in Foreign Exchange Rates
|
||||||||||||||||||||||
|
30%
Decrease
|
|
20%
Decrease
|
|
10%
Decrease
|
|
10%
Increase
|
|
20%
Increase
|
|
30%
Increase
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
December 31, 2017
|
$
|
(190
|
)
|
|
$
|
(127
|
)
|
|
$
|
(63
|
)
|
|
$
|
63
|
|
|
$
|
127
|
|
|
$
|
190
|
|
December 31, 2016
|
$
|
(77
|
)
|
|
$
|
(52
|
)
|
|
$
|
(26
|
)
|
|
$
|
26
|
|
|
$
|
52
|
|
|
$
|
77
|
|
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
||||
Assets
|
|
|
|
|
|
||
Investment portfolio:
|
|
|
|
|
|
||
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $10,187 and $9,974)
|
$
|
10,674
|
|
|
$
|
10,233
|
|
Short-term investments, at fair value
|
627
|
|
|
590
|
|
||
Other invested assets
|
94
|
|
|
162
|
|
||
Total investment portfolio
|
11,395
|
|
|
10,985
|
|
||
Cash
|
144
|
|
|
118
|
|
||
Premiums receivable, net of commissions payable
|
915
|
|
|
576
|
|
||
Ceded unearned premium reserve
|
119
|
|
|
206
|
|
||
Deferred acquisition costs
|
101
|
|
|
106
|
|
||
Reinsurance recoverable on unpaid losses
|
44
|
|
|
80
|
|
||
Salvage and subrogation recoverable
|
572
|
|
|
365
|
|
||
Credit derivative assets
|
2
|
|
|
13
|
|
||
Deferred tax asset, net
|
98
|
|
|
497
|
|
||
Current income tax receivable
|
21
|
|
|
12
|
|
||
Financial guaranty variable interest entities’ assets, at fair value
|
700
|
|
|
876
|
|
||
Other assets
|
322
|
|
|
317
|
|
||
Total assets
|
$
|
14,433
|
|
|
$
|
14,151
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
|
||
Unearned premium reserve
|
$
|
3,475
|
|
|
$
|
3,511
|
|
Loss and loss adjustment expense reserve
|
1,444
|
|
|
1,127
|
|
||
Reinsurance balances payable, net
|
61
|
|
|
64
|
|
||
Long-term debt
|
1,292
|
|
|
1,306
|
|
||
Credit derivative liabilities
|
271
|
|
|
402
|
|
||
Financial guaranty variable interest entities’ liabilities with recourse, at fair value
|
627
|
|
|
807
|
|
||
Financial guaranty variable interest entities’ liabilities without recourse, at fair value
|
130
|
|
|
151
|
|
||
Other liabilities
|
294
|
|
|
279
|
|
||
Total liabilities
|
7,594
|
|
|
7,647
|
|
||
Commitments and contingencies (see Note 15)
|
|
|
|
||||
Common stock ($0.01 par value, 500,000,000 shares authorized; 116,020,852 and 127,988,230 shares issued and outstanding)
|
1
|
|
|
1
|
|
||
Additional paid-in capital
|
573
|
|
|
1,060
|
|
||
Retained earnings
|
5,892
|
|
|
5,289
|
|
||
Accumulated other comprehensive income, net of tax of $89 and $70
|
372
|
|
|
149
|
|
||
Deferred equity compensation
|
1
|
|
|
5
|
|
||
Total shareholders’ equity
|
6,839
|
|
|
6,504
|
|
||
Total liabilities and shareholders’ equity
|
$
|
14,433
|
|
|
$
|
14,151
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Revenues
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
690
|
|
|
$
|
864
|
|
|
$
|
766
|
|
Net investment income
|
418
|
|
|
408
|
|
|
423
|
|
|||
Net realized investment gains (losses):
|
|
|
|
|
|
|
|
||||
Other-than-temporary impairment losses
|
(33
|
)
|
|
(47
|
)
|
|
(47
|
)
|
|||
Less: portion of other-than-temporary impairment loss recognized in other comprehensive income
|
10
|
|
|
4
|
|
|
0
|
|
|||
Net impairment loss
|
(43
|
)
|
|
(51
|
)
|
|
(47
|
)
|
|||
Other net realized investment gains (losses)
|
83
|
|
|
22
|
|
|
21
|
|
|||
Net realized investment gains (losses)
|
40
|
|
|
(29
|
)
|
|
(26
|
)
|
|||
Net change in fair value of credit derivatives:
|
|
|
|
|
|
||||||
Realized gains (losses) and other settlements
|
(10
|
)
|
|
29
|
|
|
(18
|
)
|
|||
Net unrealized gains (losses)
|
121
|
|
|
69
|
|
|
746
|
|
|||
Net change in fair value of credit derivatives
|
111
|
|
|
98
|
|
|
728
|
|
|||
Fair value gains (losses) on committed capital securities
|
(2
|
)
|
|
0
|
|
|
27
|
|
|||
Fair value gains (losses) on financial guaranty variable interest entities
|
30
|
|
|
38
|
|
|
38
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships, net
|
58
|
|
|
259
|
|
|
214
|
|
|||
Other income (loss) (includes commutation gains of $328 in 2017, $8 in 2016 and $28 in 2015, see Note 13)
|
394
|
|
|
39
|
|
|
37
|
|
|||
Total revenues
|
1,739
|
|
|
1,677
|
|
|
2,207
|
|
|||
Expenses
|
|
|
|
|
|
|
|
||||
Loss and loss adjustment expenses
|
388
|
|
|
295
|
|
|
424
|
|
|||
Amortization of deferred acquisition costs
|
19
|
|
|
18
|
|
|
20
|
|
|||
Interest expense
|
97
|
|
|
102
|
|
|
101
|
|
|||
Other operating expenses
|
244
|
|
|
245
|
|
|
231
|
|
|||
Total expenses
|
748
|
|
|
660
|
|
|
776
|
|
|||
Income (loss) before income taxes
|
991
|
|
|
1,017
|
|
|
1,431
|
|
|||
Provision (benefit) for income taxes
|
|
|
|
|
|
|
|
||||
Current
|
11
|
|
|
117
|
|
|
75
|
|
|||
Deferred
|
250
|
|
|
19
|
|
|
300
|
|
|||
Total provision (benefit) for income taxes
|
261
|
|
|
136
|
|
|
375
|
|
|||
Net income (loss)
|
$
|
730
|
|
|
$
|
881
|
|
|
$
|
1,056
|
|
|
|
|
|
|
|
||||||
Earnings per share:
|
|
|
|
|
|
||||||
Basic
|
$
|
6.05
|
|
|
$
|
6.61
|
|
|
$
|
7.12
|
|
Diluted
|
$
|
5.96
|
|
|
$
|
6.56
|
|
|
$
|
7.08
|
|
Dividends per share
|
$
|
0.57
|
|
|
$
|
0.52
|
|
|
$
|
0.48
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Net income (loss)
|
$
|
730
|
|
|
$
|
881
|
|
|
$
|
1,056
|
|
Unrealized holding gains (losses) arising during the period on:
|
|
|
|
|
|
|
|
||||
Investments with no other-than-temporary impairment, net of tax provision (benefit) of $61, $(34) and $(36)
|
128
|
|
|
(71
|
)
|
|
(93
|
)
|
|||
Investments with other-than-temporary impairment, net of tax provision (benefit) of $36, $(5) and $(23)
|
69
|
|
|
(9
|
)
|
|
(43
|
)
|
|||
Unrealized holding gains (losses) arising during the period, net of tax
|
197
|
|
|
(80
|
)
|
|
(136
|
)
|
|||
Less: reclassification adjustment for gains (losses) included in net income (loss), net of tax provision (benefit) of $24, $(10) and $(7)
|
44
|
|
|
(16
|
)
|
|
(10
|
)
|
|||
Change in net unrealized gains (losses) on investments
|
153
|
|
|
(64
|
)
|
|
(126
|
)
|
|||
Other, net of tax provision
|
14
|
|
|
(24
|
)
|
|
(7
|
)
|
|||
Other comprehensive income (loss)
|
167
|
|
|
(88
|
)
|
|
(133
|
)
|
|||
Comprehensive income (loss)
|
$
|
897
|
|
|
$
|
793
|
|
|
$
|
923
|
|
|
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, 2014
|
158,306,661
|
|
|
|
$
|
2
|
|
|
$
|
1,887
|
|
|
$
|
3,494
|
|
|
$
|
370
|
|
|
$
|
5
|
|
|
$
|
5,758
|
|
Net income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
1,056
|
|
|
—
|
|
|
—
|
|
|
1,056
|
|
||||||
Dividends ($0.48 per share)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(72
|
)
|
|
—
|
|
|
—
|
|
|
(72
|
)
|
||||||
Common stock repurchases
|
(20,995,419
|
)
|
|
|
(1
|
)
|
|
(554
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(555
|
)
|
||||||
Share-based compensation and other
|
617,310
|
|
|
|
0
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
||||||
Other comprehensive loss
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(133
|
)
|
|
—
|
|
|
(133
|
)
|
||||||
Balance at December 31, 2015
|
137,928,552
|
|
|
|
1
|
|
|
1,342
|
|
|
4,478
|
|
|
237
|
|
|
5
|
|
|
6,063
|
|
||||||
Net income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
881
|
|
|
—
|
|
|
—
|
|
|
881
|
|
||||||
Dividends ($0.52 per share)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(70
|
)
|
|
—
|
|
|
—
|
|
|
(70
|
)
|
||||||
Common stock repurchases
|
(10,721,248
|
)
|
|
|
0
|
|
|
(306
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(306
|
)
|
||||||
Share-based compensation and other
|
780,926
|
|
|
|
0
|
|
|
24
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24
|
|
||||||
Other comprehensive loss
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(88
|
)
|
|
—
|
|
|
(88
|
)
|
||||||
Balance at December 31, 2016
|
127,988,230
|
|
|
|
$
|
1
|
|
|
$
|
1,060
|
|
|
$
|
5,289
|
|
|
$
|
149
|
|
|
$
|
5
|
|
|
$
|
6,504
|
|
Net income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
730
|
|
|
—
|
|
|
—
|
|
|
730
|
|
||||||
Dividends ($0.57 per share)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(70
|
)
|
|
—
|
|
|
—
|
|
|
(70
|
)
|
||||||
Common stock repurchases
|
(12,669,643
|
)
|
|
|
0
|
|
|
(501
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(501
|
)
|
||||||
Share-based compensation and other
|
702,265
|
|
|
|
0
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
10
|
|
||||||
Other comprehensive income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
167
|
|
|
—
|
|
|
167
|
|
||||||
Reclassification of stranded tax effects (see Note 1)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(56
|
)
|
|
56
|
|
|
—
|
|
|
—
|
|
||||||
Other
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
|
|
|
—
|
|
|
(1
|
)
|
||||||
Balance at December 31, 2017
|
116,020,852
|
|
|
|
$
|
1
|
|
|
$
|
573
|
|
|
$
|
5,892
|
|
|
$
|
372
|
|
|
$
|
1
|
|
|
$
|
6,839
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Operating Activities:
|
|
|
|
|
|
||||||
Net Income
|
$
|
730
|
|
|
$
|
881
|
|
|
$
|
1,056
|
|
Adjustments to reconcile net income to net cash flows provided by operating activities:
|
|
|
|
|
|
||||||
Non-cash interest and operating expenses
|
26
|
|
|
39
|
|
|
27
|
|
|||
Net amortization of premium (discount) on investments
|
(46
|
)
|
|
(34
|
)
|
|
(25
|
)
|
|||
Provision (benefit) for deferred income taxes
|
250
|
|
|
19
|
|
|
300
|
|
|||
Net realized investment losses (gains)
|
(40
|
)
|
|
29
|
|
|
17
|
|
|||
Net unrealized losses (gains) on credit derivatives
|
(121
|
)
|
|
(69
|
)
|
|
(746
|
)
|
|||
Fair value losses (gains) on committed capital securities
|
2
|
|
|
0
|
|
|
(27
|
)
|
|||
Bargain purchase gain and settlement of pre-existing relationships
|
(58
|
)
|
|
(259
|
)
|
|
(214
|
)
|
|||
Change in deferred acquisition costs
|
2
|
|
|
9
|
|
|
9
|
|
|||
Change in premiums receivable, net of premiums and commissions payable
|
(69
|
)
|
|
128
|
|
|
(8
|
)
|
|||
Change in ceded unearned premium reserve
|
90
|
|
|
22
|
|
|
79
|
|
|||
Change in unearned premium reserve
|
(424
|
)
|
|
(777
|
)
|
|
(744
|
)
|
|||
Change in loss and loss adjustment expense reserve, net
|
142
|
|
|
(105
|
)
|
|
244
|
|
|||
Change in current income tax
|
(10
|
)
|
|
27
|
|
|
(45
|
)
|
|||
Change in financial guaranty variable interest entities' assets and liabilities, net
|
(15
|
)
|
|
(24
|
)
|
|
(6
|
)
|
|||
Other
|
(26
|
)
|
|
(18
|
)
|
|
12
|
|
|||
Net cash flows provided by (used in) operating activities
|
433
|
|
|
(132
|
)
|
|
(71
|
)
|
|||
Investing activities
|
|
|
|
|
|
|
|
||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
||||
Purchases
|
(2,552
|
)
|
|
(1,646
|
)
|
|
(2,577
|
)
|
|||
Sales
|
1,701
|
|
|
1,365
|
|
|
2,107
|
|
|||
Maturities
|
821
|
|
|
1,155
|
|
|
898
|
|
|||
Net sales (purchases) of short-term investments
|
74
|
|
|
17
|
|
|
897
|
|
|||
Net proceeds from paydowns on financial guaranty variable interest entities’ assets
|
147
|
|
|
629
|
|
|
400
|
|
|||
Acquisitions, net of cash acquired (see Note 2)
|
95
|
|
|
(435
|
)
|
|
(800
|
)
|
|||
Other
|
59
|
|
|
(9
|
)
|
|
69
|
|
|||
Net cash flows provided by (used in) investing activities
|
345
|
|
|
1,076
|
|
|
994
|
|
|||
Financing activities
|
|
|
|
|
|
|
|
||||
Dividends paid
|
(70
|
)
|
|
(69
|
)
|
|
(72
|
)
|
|||
Repurchases of common stock
|
(501
|
)
|
|
(306
|
)
|
|
(555
|
)
|
|||
Repurchases of common stock to pay withholding taxes
|
(13
|
)
|
|
(2
|
)
|
|
(7
|
)
|
|||
Net paydowns of financial guaranty variable interest entities’ liabilities
|
(157
|
)
|
|
(611
|
)
|
|
(214
|
)
|
|||
Paydown of long-term debt
|
(30
|
)
|
|
(2
|
)
|
|
(4
|
)
|
|||
Proceeds from option exercises
|
5
|
|
|
12
|
|
|
5
|
|
|||
Net cash flows provided by (used in) financing activities
|
(766
|
)
|
|
(978
|
)
|
|
(847
|
)
|
|||
Effect of foreign exchange rate changes
|
5
|
|
|
(5
|
)
|
|
(4
|
)
|
|||
Increase (decrease) in cash and restricted cash
|
17
|
|
|
(39
|
)
|
|
72
|
|
|||
Cash and restricted cash at beginning of period (see Note 10)
|
127
|
|
|
166
|
|
|
94
|
|
|||
Cash and restricted cash at end of period (see Note 10)
|
$
|
144
|
|
|
$
|
127
|
|
|
$
|
166
|
|
Supplemental cash flow information
|
|
|
|
|
|
|
|
||||
Cash paid (received) during the period for:
|
|
|
|
|
|
|
|
||||
Income taxes
|
$
|
10
|
|
|
$
|
74
|
|
|
$
|
103
|
|
Interest
|
$
|
77
|
|
|
$
|
95
|
|
|
$
|
95
|
|
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) plc (AGE), organized in the U.K.; and
|
•
|
Assured Guaranty Re Ltd. (AG Re) and Assured Guaranty Re Overseas Ltd. (AGRO), domiciled in Bermuda.
|
Acquisitions
|
Note 2
|
Expected loss to be paid (insurance, credit derivatives and financial guaranty (FG) VIE contracts)
|
Note 5
|
Contracts accounted for as insurance (premium revenue recognition, loss and loss adjustment expense and policy acquisition cost)
|
Note 6
|
Fair value measurement
|
Note 7
|
Credit derivatives (at fair value)
|
Note 8
|
Variable interest entities (at fair value)
|
Note 9
|
Investments and cash
|
Note 10
|
Income taxes
|
Note 12
|
Long term debt
|
Note 16
|
Earnings per share
|
Note 17
|
Stock based compensation
|
Note 19
|
•
|
for income tax effects of the Tax Act for which the accounting is incomplete and for which the Company cannot reasonably estimate an amount, qualitative disclosures must be provided;
|
•
|
for income tax effects of the Tax Act for which the accounting is incomplete but for which the Company has determined a reasonable estimate and recorded a provisional amount, disclosures of such items; and
|
•
|
for income tax effects of the Tax Act for which the Company has completed its accounting and determined a final amount, disclosure of such amounts.
|
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
|
|
|
Year Ended December 31, 2016
|
||
|
|
(in millions, except per share amounts)
|
||
Pro forma revenues
|
|
$
|
1,849
|
|
Pro forma net income
|
|
1,005
|
|
|
Pro forma earnings per share (EPS):
|
|
|
||
Basic
|
|
7.55
|
|
|
Diluted
|
|
7.49
|
|
|
Fair Value of Net Assets Acquired, before Settlement of Pre-existing Relationships
|
|
Net effect of Settlement of Pre-existing Relationships
|
|
Net Effect of CIFG Acquisition
|
||||||
|
(in millions)
|
||||||||||
Cash Purchase Price (1)
|
$
|
443
|
|
|
$
|
—
|
|
|
$
|
443
|
|
|
|
|
|
|
|
||||||
Identifiable assets acquired:
|
|
|
|
|
|
||||||
Investments
|
770
|
|
|
—
|
|
|
770
|
|
|||
Cash
|
8
|
|
|
—
|
|
|
8
|
|
|||
Premiums receivable, net of commissions payable
|
18
|
|
|
—
|
|
|
18
|
|
|||
Ceded unearned premium reserve
|
173
|
|
|
(173
|
)
|
|
—
|
|
|||
Deferred acquisition costs
|
1
|
|
|
(1
|
)
|
|
—
|
|
|||
Salvage and subrogation recoverable
|
23
|
|
|
—
|
|
|
23
|
|
|||
Credit derivative assets
|
1
|
|
|
—
|
|
|
1
|
|
|||
Deferred tax asset, net
|
194
|
|
|
34
|
|
|
228
|
|
|||
Other assets
|
4
|
|
|
—
|
|
|
4
|
|
|||
Total assets
|
1,192
|
|
|
(140
|
)
|
|
1,052
|
|
|||
|
|
|
|
|
|
|
|||||
Liabilities assumed:
|
|
|
|
|
|
||||||
Unearned premium reserves
|
306
|
|
|
(10
|
)
|
|
296
|
|
|||
Loss and loss adjustment expense reserve
|
1
|
|
|
(66
|
)
|
|
(65
|
)
|
|||
Credit derivative liabilities
|
68
|
|
|
0
|
|
|
68
|
|
|||
Other liabilities
|
17
|
|
|
—
|
|
|
17
|
|
|||
Total liabilities
|
392
|
|
|
(76
|
)
|
|
316
|
|
|||
Net asset effect of CIFG Acquisition
|
800
|
|
|
(64
|
)
|
|
736
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships resulting from CIFG Acquisition, after-tax
|
357
|
|
|
(64
|
)
|
|
293
|
|
|||
Deferred tax
|
—
|
|
|
(34
|
)
|
|
(34
|
)
|
|||
Bargain purchase gain and settlement of pre-existing relationships resulting from CIFG Acquisition, pre-tax
|
$
|
357
|
|
|
$
|
(98
|
)
|
|
$
|
259
|
|
(1)
|
The cash purchase price of
$443 million
represents the cash transferred for the acquisition which was allocated as follows: (1)
$270 million
for the purchase of net assets of
$627 million
, and (2) the settlement of pre-existing relationships between CIFGH and Assured Guaranty at a fair value of
$173 million
.
|
|
Fair Value of Net Assets Acquired, before Settlement of Pre-existing Relationships
|
|
Net effect of Settlement of Pre-existing Relationships
|
|
Net Effect of Radian Asset Acquisition
|
||||||
|
(in millions)
|
||||||||||
Cash purchase price(1)
|
$
|
804
|
|
|
$
|
—
|
|
|
$
|
804
|
|
Identifiable assets acquired:
|
|
|
|
|
|
||||||
Investments
|
1,473
|
|
|
—
|
|
|
1,473
|
|
|||
Cash
|
4
|
|
|
—
|
|
|
4
|
|
|||
Ceded unearned premium reserve
|
(3
|
)
|
|
(65
|
)
|
|
(68
|
)
|
|||
Credit derivative assets
|
30
|
|
|
—
|
|
|
30
|
|
|||
Deferred tax asset, net
|
263
|
|
|
(56
|
)
|
|
207
|
|
|||
Financial guaranty variable interest entities’ assets
|
122
|
|
|
—
|
|
|
122
|
|
|||
Other assets
|
86
|
|
|
(67
|
)
|
|
19
|
|
|||
Total assets
|
1,975
|
|
|
(188
|
)
|
|
1,787
|
|
|||
|
|
|
|
|
|
|
|||||
Liabilities assumed:
|
|
|
|
|
|
||||||
Unearned premium reserves
|
697
|
|
|
(216
|
)
|
|
481
|
|
|||
Credit derivative liabilities
|
271
|
|
|
(26
|
)
|
|
245
|
|
|||
Financial guaranty variable interest entities’ liabilities
|
118
|
|
|
—
|
|
|
118
|
|
|||
Other liabilities
|
30
|
|
|
(49
|
)
|
|
(19
|
)
|
|||
Total liabilities
|
1,116
|
|
|
(291
|
)
|
|
825
|
|
|||
Net asset effect of Radian Asset Acquisition
|
859
|
|
|
103
|
|
|
962
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships resulting from Radian Asset Acquisition, after-tax
|
55
|
|
|
103
|
|
|
158
|
|
|||
Deferred tax
|
—
|
|
|
56
|
|
|
56
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships resulting from Radian Asset Acquisition, pre-tax
|
$
|
55
|
|
|
$
|
159
|
|
|
$
|
214
|
|
(1)
|
The cash purchase price of
$804 million
was the cash transferred for the acquisition which was allocated as follows: (1)
$987 million
for the purchase of net assets of
$1,042 million
, and (2) the settlement of pre-existing relationships between Radian Asset and Assured Guaranty at a fair value of $
(183) million
.
|
|
Year Ended December 31, 2015
|
||
|
(in millions, except per share amounts)
|
||
Pro forma revenues
|
$
|
2,030
|
|
Pro forma net income
|
922
|
|
|
Pro forma EPS:
|
|
||
Basic
|
6.22
|
|
|
Diluted
|
6.18
|
|
|
S&P Global Ratings, a division of Standard & Poor’s Financial Services LLC
|
|
Kroll Bond Rating
Agency
|
|
Moody’s Investors Service, Inc.
|
|
A.M. Best Company,
Inc.
|
AGM
|
AA (stable) (6/26/17)
|
|
AA+ (stable) (1/23/18)
|
|
A2 (stable) (8/8/16)
|
|
—
|
AGC
|
AA (stable) (6/26/17)
|
|
AA (stable) (12/1/17)
|
|
(1)
|
|
—
|
MAC
|
AA (stable) (6/26/17)
|
|
AA+ (stable) (7/14/17)
|
|
—
|
|
—
|
AG Re
|
AA (stable) (6/26/17)
|
|
—
|
|
—
|
|
—
|
AGRO
|
AA (stable) (6/26/17)
|
|
—
|
|
—
|
|
A+ (stable) (6/15/17)
|
AGE
|
AA (stable) (6/26/17)
|
|
—
|
|
A2 (stable) (8/8/16)
|
|
—
|
AGUK
|
AA (stable) (6/26/17)
|
|
—
|
|
(1)
|
|
—
|
AGLN
|
BB (positive) (1/12/17)
|
|
—
|
|
(2)
|
|
—
|
CIFGE
|
—
|
|
—
|
|
—
|
|
—
|
(1)
|
AGC requested that Moody’s Investors Service, Inc. (Moody's) withdraw its financial strength ratings of AGC and AGUK in January 2017, but Moody's denied that request. Moody’s continues to rate AGC A3 (stable) and AGUK A3; Moody's put AGUK on review for upgrade on June 27, 2017, following its transfer to AGM.
|
(2)
|
Assured Guaranty did not request that Moody's rate AGLN. Moody's continues to rate AGLN, and upgraded its rating to Baa2 (stable) on January 13, 2017, following its acquisition by AGC, and then to Baa1 on review for further upgrade on June 27, 2017, following its transfer to AGM.
|
4.
|
Outstanding Exposure
|
•
|
BIG Category 1: Below-investment-grade transactions showing sufficient deterioration to make future losses possible, but for which none are currently expected.
|
•
|
BIG Category 2: Below-investment-grade transactions for which future losses are expected but for which no claims (other than liquidity claims, which are claims that the Company expects to be reimbursed within
one
year) have yet been paid.
|
•
|
BIG Category 3: Below-investment-grade transactions for which future losses are expected and on which claims (other than liquidity claims) have been paid.
|
|
Gross Debt Service
Outstanding
|
|
Net Debt Service
Outstanding
|
||||||||||||
|
December 31,
2017 |
|
December 31,
2016 |
|
December 31,
2017 |
|
December 31,
2016 |
||||||||
|
(in millions)
|
||||||||||||||
Public finance
|
$
|
393,010
|
|
|
$
|
425,849
|
|
|
$
|
386,092
|
|
|
$
|
409,447
|
|
Structured finance
|
15,482
|
|
|
29,151
|
|
|
15,026
|
|
|
28,088
|
|
||||
Total financial guaranty
|
$
|
408,492
|
|
|
$
|
455,000
|
|
|
$
|
401,118
|
|
|
$
|
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
|
|
$
|
877
|
|
|
0.4
|
%
|
|
$
|
2,541
|
|
|
5.9
|
%
|
|
$
|
1,655
|
|
|
14.7
|
%
|
|
$
|
319
|
|
|
22.5
|
%
|
|
$
|
5,392
|
|
|
2.1
|
%
|
AA
|
|
30,016
|
|
|
14.3
|
|
|
205
|
|
|
0.5
|
|
|
3,915
|
|
|
34.9
|
|
|
76
|
|
|
5.4
|
|
|
34,212
|
|
|
12.9
|
|
|||||
A
|
|
118,620
|
|
|
56.7
|
|
|
13,936
|
|
|
32.5
|
|
|
1,630
|
|
|
14.5
|
|
|
210
|
|
|
14.9
|
|
|
134,396
|
|
|
50.7
|
|
|||||
BBB
|
|
52,739
|
|
|
25.2
|
|
|
24,509
|
|
|
57.1
|
|
|
763
|
|
|
6.8
|
|
|
703
|
|
|
49.7
|
|
|
78,714
|
|
|
29.7
|
|
|||||
BIG
|
|
7,140
|
|
|
3.4
|
|
|
1,731
|
|
|
4.0
|
|
|
3,261
|
|
|
29.1
|
|
|
106
|
|
|
7.5
|
|
|
12,238
|
|
|
4.6
|
|
|||||
Total net par outstanding
|
|
$
|
209,392
|
|
|
100.0
|
%
|
|
$
|
42,922
|
|
|
100.0
|
%
|
|
$
|
11,224
|
|
|
100.0
|
%
|
|
$
|
1,414
|
|
|
100.0
|
%
|
|
$
|
264,952
|
|
|
100.0
|
%
|
|
|
Public Finance
U.S.
|
|
Public Finance
Non-U.S.
|
|
Structured Finance
U.S
|
|
Structured Finance
Non-U.S
|
|
Total
|
|||||||||||||||||||||||||
Rating
Category
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|
Net Par
Outstanding
|
|
%
|
|||||||||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||||||||||||||||
AAA
|
|
$
|
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
|
%
|
|
Gross Par Outstanding
|
|
Net Par Outstanding
|
||||||||||||
Sector
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
||||||||
|
(in millions)
|
||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||
U.S.:
|
|
|
|
|
|
|
|
|
|
||||||
General obligation
|
$
|
91,531
|
|
|
$
|
110,167
|
|
|
$
|
90,705
|
|
|
$
|
107,717
|
|
Tax backed
|
44,783
|
|
|
51,325
|
|
|
44,350
|
|
|
49,931
|
|
||||
Municipal utilities
|
32,584
|
|
|
38,442
|
|
|
32,357
|
|
|
37,603
|
|
||||
Transportation
|
17,193
|
|
|
19,915
|
|
|
17,030
|
|
|
19,403
|
|
||||
Healthcare
|
9,087
|
|
|
11,940
|
|
|
8,763
|
|
|
11,238
|
|
||||
Higher education
|
8,210
|
|
|
10,114
|
|
|
8,195
|
|
|
10,085
|
|
||||
Infrastructure finance
|
4,259
|
|
|
3,902
|
|
|
4,216
|
|
|
3,769
|
|
||||
Housing revenue
|
1,336
|
|
|
1,593
|
|
|
1,319
|
|
|
1,559
|
|
||||
Investor-owned utilities
|
523
|
|
|
697
|
|
|
523
|
|
|
697
|
|
||||
Other public finance
|
1,935
|
|
|
2,810
|
|
|
1,934
|
|
|
2,796
|
|
||||
Total public finance—U.S.
|
211,441
|
|
|
250,905
|
|
|
209,392
|
|
|
244,798
|
|
||||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
||||||
Infrastructure finance
|
18,916
|
|
|
11,818
|
|
|
18,234
|
|
|
10,731
|
|
||||
Regulated utilities
|
17,691
|
|
|
11,395
|
|
|
16,689
|
|
|
9,263
|
|
||||
Pooled infrastructure
|
1,561
|
|
|
1,621
|
|
|
1,561
|
|
|
1,513
|
|
||||
Other public finance
|
6,692
|
|
|
5,653
|
|
|
6,438
|
|
|
4,874
|
|
||||
Total public finance—non-U.S.
|
44,860
|
|
|
30,487
|
|
|
42,922
|
|
|
26,381
|
|
||||
Total public finance
|
256,301
|
|
|
281,392
|
|
|
252,314
|
|
|
271,179
|
|
||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
||||||
U.S.:
|
|
|
|
|
|
|
|
|
|
||||||
Residential Mortgage-Backed Securities (RMBS)
|
4,864
|
|
|
5,933
|
|
|
4,818
|
|
|
5,637
|
|
||||
Consumer receivables
|
1,591
|
|
|
1,707
|
|
|
1,590
|
|
|
1,652
|
|
||||
Insurance securitizations
|
1,825
|
|
|
2,355
|
|
|
1,449
|
|
|
2,308
|
|
||||
Financial products
|
1,418
|
|
|
1,540
|
|
|
1,418
|
|
|
1,540
|
|
||||
Pooled corporate obligations
|
1,347
|
|
|
10,273
|
|
|
1,347
|
|
|
10,050
|
|
||||
Commercial receivables
|
146
|
|
|
234
|
|
|
146
|
|
|
230
|
|
||||
Other structured finance
|
461
|
|
|
689
|
|
|
456
|
|
|
640
|
|
||||
Total structured finance—U.S.
|
11,652
|
|
|
22,731
|
|
|
11,224
|
|
|
22,057
|
|
||||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
||||||
RMBS
|
655
|
|
|
661
|
|
|
637
|
|
|
604
|
|
||||
Commercial receivables
|
296
|
|
|
373
|
|
|
296
|
|
|
356
|
|
||||
Pooled corporate obligations
|
157
|
|
|
1,716
|
|
|
157
|
|
|
1,535
|
|
||||
Other structured finance
|
325
|
|
|
601
|
|
|
324
|
|
|
587
|
|
||||
Total structured finance—non-U.S.
|
1,433
|
|
|
3,351
|
|
|
1,414
|
|
|
3,082
|
|
||||
Total structured finance
|
13,085
|
|
|
26,082
|
|
|
12,638
|
|
|
25,139
|
|
||||
Total net par outstanding
|
$
|
269,386
|
|
|
$
|
307,474
|
|
|
$
|
264,952
|
|
|
$
|
296,318
|
|
|
Public Finance
|
|
Structured Finance
|
|
Total
|
||||||
|
(in millions)
|
||||||||||
0 to 5 years
|
$
|
78,860
|
|
|
$
|
6,106
|
|
|
$
|
84,966
|
|
5 to 10 years
|
51,541
|
|
|
2,632
|
|
|
54,173
|
|
|||
10 to 15 years
|
45,634
|
|
|
1,718
|
|
|
47,352
|
|
|||
15 to 20 years
|
34,974
|
|
|
1,892
|
|
|
36,866
|
|
|||
20 years and above
|
41,305
|
|
|
290
|
|
|
41,595
|
|
|||
Total net par outstanding
|
$
|
252,314
|
|
|
$
|
12,638
|
|
|
$
|
264,952
|
|
|
BIG Net Par Outstanding
|
|
Net Par
|
||||||||||||||||
|
BIG 1
|
|
BIG 2
|
|
BIG 3
|
|
Total BIG
|
|
Outstanding
|
||||||||||
|
|
|
|
|
(in millions)
|
|
|
|
|
||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. public finance
|
$
|
2,368
|
|
|
$
|
663
|
|
|
$
|
4,109
|
|
|
$
|
7,140
|
|
|
$
|
209,392
|
|
Non-U.S. public finance
|
1,455
|
|
|
276
|
|
|
—
|
|
|
1,731
|
|
|
42,922
|
|
|||||
Public finance
|
3,823
|
|
|
939
|
|
|
4,109
|
|
|
8,871
|
|
|
252,314
|
|
|||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. RMBS
|
374
|
|
|
304
|
|
|
2,083
|
|
|
2,761
|
|
|
4,818
|
|
|||||
Triple-X life insurance transactions
|
—
|
|
|
—
|
|
|
85
|
|
|
85
|
|
|
1,199
|
|
|||||
Trust preferred securities (TruPS)
|
161
|
|
|
—
|
|
|
—
|
|
|
161
|
|
|
1,349
|
|
|||||
Other structured finance
|
170
|
|
|
118
|
|
|
72
|
|
|
360
|
|
|
5,272
|
|
|||||
Structured finance
|
705
|
|
|
422
|
|
|
2,240
|
|
|
3,367
|
|
|
12,638
|
|
|||||
Total
|
$
|
4,528
|
|
|
$
|
1,361
|
|
|
$
|
6,349
|
|
|
$
|
12,238
|
|
|
$
|
264,952
|
|
|
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
|
|
$
|
4,301
|
|
|
$
|
227
|
|
|
$
|
4,528
|
|
|
139
|
|
|
7
|
|
|
146
|
|
Category 2
|
|
1,344
|
|
|
17
|
|
|
1,361
|
|
|
46
|
|
|
3
|
|
|
49
|
|
|||
Category 3
|
|
6,255
|
|
|
94
|
|
|
6,349
|
|
|
150
|
|
|
9
|
|
|
159
|
|
|||
Total BIG
|
|
$
|
11,900
|
|
|
$
|
338
|
|
|
$
|
12,238
|
|
|
335
|
|
|
19
|
|
|
354
|
|
|
|
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.
|
|
Number of Risks
|
|
Net Par Outstanding
|
|
Percent of Total Net Par Outstanding
|
||||
|
(dollars in millions)
|
||||||||
U.S.:
|
|
|
|
|
|
||||
U.S. Public finance:
|
|
|
|
|
|
||||
California
|
1,368
|
|
|
$
|
36,507
|
|
|
13.8
|
%
|
Texas
|
1,229
|
|
|
19,027
|
|
|
7.2
|
|
|
Pennsylvania
|
744
|
|
|
18,061
|
|
|
6.8
|
|
|
Illinois
|
702
|
|
|
17,044
|
|
|
6.4
|
|
|
New York
|
871
|
|
|
15,672
|
|
|
5.9
|
|
|
New Jersey
|
444
|
|
|
12,441
|
|
|
4.7
|
|
|
Florida
|
294
|
|
|
10,272
|
|
|
3.9
|
|
|
Michigan
|
439
|
|
|
6,353
|
|
|
2.4
|
|
|
Puerto Rico
|
18
|
|
|
4,968
|
|
|
1.9
|
|
|
Alabama
|
296
|
|
|
4,808
|
|
|
1.8
|
|
|
Other
|
3,112
|
|
|
64,239
|
|
|
24.3
|
|
|
Total U.S. public finance
|
9,517
|
|
|
209,392
|
|
|
79.1
|
|
|
U.S. Structured finance (multiple states)
|
512
|
|
|
11,224
|
|
|
4.2
|
|
|
Total U.S.
|
10,029
|
|
|
220,616
|
|
|
83.3
|
|
|
Non-U.S.:
|
|
|
|
|
|
||||
United Kingdom
|
126
|
|
|
30,062
|
|
|
11.3
|
|
|
France
|
10
|
|
|
3,167
|
|
|
1.2
|
|
|
Canada
|
9
|
|
|
2,690
|
|
|
1.0
|
|
|
Australia
|
12
|
|
|
2,309
|
|
|
0.9
|
|
|
Italy
|
9
|
|
|
1,497
|
|
|
0.6
|
|
|
Other
|
44
|
|
|
4,611
|
|
|
1.7
|
|
|
Total non-U.S.
|
210
|
|
|
44,336
|
|
|
16.7
|
|
|
Total
|
10,239
|
|
|
$
|
264,952
|
|
|
100.0
|
%
|
•
|
Constitutionally Guaranteed.
The Company includes in this category public debt benefiting from Article VI of the Constitution of the Commonwealth, which expressly provides that interest and principal payments on the public debt are to be paid before other disbursements are made.
|
•
|
Public Corporations – Certain Revenues Potentially Subject to Clawback.
The Company includes in this category the debt of public corporations for which applicable law permits the Commonwealth to claw back, subject to certain conditions and for the payment of public debt, at least a portion of the revenues supporting the bonds the Company insures. As a constitutional condition to clawback, available Commonwealth revenues for any fiscal year must be insufficient to pay Commonwealth debt service before the payment of any appropriations for that year. The Company believes that this condition has not been satisfied to date, and accordingly that the Commonwealth has not to date been entitled to claw back revenues supporting debt insured by the Company.
Prior to the enactment of PROMESA, 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. See "Puerto Rico Recovery Litigation" below.
|
•
|
Other Public Corporations.
The Company includes in this category the debt of public corporations that are supported by revenues it does not believe are subject to clawback.
|
|
Gross Par Outstanding
|
|
Gross Debt Service Outstanding
|
||||||||||||
|
December 31,
2017 |
|
December 31,
2016 |
|
December 31,
2017 |
|
December 31,
2016 |
||||||||
|
(in millions)
|
||||||||||||||
Exposure to Puerto Rico
|
$
|
5,186
|
|
|
$
|
5,435
|
|
|
$
|
8,514
|
|
|
$
|
9,038
|
|
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
||||
|
(in millions)
|
||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
||||
Commonwealth of Puerto Rico - General Obligation Bonds (2)
|
$
|
1,419
|
|
|
$
|
1,476
|
|
PBA
|
141
|
|
|
169
|
|
||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
||||
PRHTA (Transportation revenue) (2)
|
882
|
|
|
918
|
|
||
PRHTA (Highways revenue) (2)
|
495
|
|
|
350
|
|
||
PRCCDA
|
152
|
|
|
152
|
|
||
PRIFA
|
18
|
|
|
18
|
|
||
Other Public Corporations
|
|
|
|
||||
PREPA (2)
|
853
|
|
|
724
|
|
||
PRASA
|
373
|
|
|
373
|
|
||
MFA
|
360
|
|
|
334
|
|
||
COFINA (2)
|
272
|
|
|
271
|
|
||
U of PR
|
1
|
|
|
1
|
|
||
Total net exposure to Puerto Rico
|
$
|
4,966
|
|
|
$
|
4,786
|
|
(1)
|
The
December 31, 2017
amounts include
$389 million
(which comprises
$36 million
of General Obligation Bonds,
$134 million
of PREPA,
$144 million
of PRHTA (Highways revenue), and
$75 million
of MFA) related to 2017 commutations of previously ceded business. See Note 13, Reinsurance and Other Monoline Exposures, for more information.
|
(2)
|
As of the date of this filing, the Oversight Board has certified a filing under Title III of PROMESA for these exposures.
|
|
Scheduled Net Par Amortization
|
|
Scheduled Net Debt Service Amortization
|
||||
|
(in millions)
|
||||||
2018 (January 1 - March 31)
|
$
|
0
|
|
|
$
|
123
|
|
2018 (April 1 - June 30)
|
0
|
|
|
3
|
|
||
2018 (July 1 - September 30)
|
200
|
|
|
322
|
|
||
2018 (October 1 - December 31)
|
0
|
|
|
3
|
|
||
Subtotal 2018
|
200
|
|
|
451
|
|
||
2019
|
223
|
|
|
464
|
|
||
2020
|
285
|
|
|
516
|
|
||
2021
|
147
|
|
|
364
|
|
||
2022
|
137
|
|
|
345
|
|
||
2023-2027
|
1,229
|
|
|
2,129
|
|
||
2028-2032
|
812
|
|
|
1,436
|
|
||
2033-2037
|
1,217
|
|
|
1,572
|
|
||
2038-2042
|
453
|
|
|
602
|
|
||
2043-2047
|
263
|
|
|
316
|
|
||
Total
|
$
|
4,966
|
|
|
$
|
8,195
|
|
5.
|
Expected Loss to be Paid
|
|
Year Ended December 31,
|
||||||
|
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
|
|
|
—
|
|
||
Net expected loss to be paid on the CIFG portfolio as of July 1, 2016
|
—
|
|
|
22
|
|
||
Economic loss development (benefit) due to:
|
|
|
|
||||
Accretion of discount
|
33
|
|
|
26
|
|
||
Changes in discount rates
|
25
|
|
|
(15
|
)
|
||
Changes in timing and assumptions
|
255
|
|
|
128
|
|
||
Total economic loss development (benefit)
|
313
|
|
|
139
|
|
||
Net (paid) recovered losses
|
(229
|
)
|
|
(354
|
)
|
||
Net expected loss to be paid, end of period
|
$
|
1,303
|
|
|
$
|
1,198
|
|
|
Net Expected
Loss to be Paid (Recovered) as of December 31, 2016 (2) |
|
Net Expected
Loss to be Paid on MBIA UK as of January 10, 2017 |
|
Economic Loss
Development / (Benefit)
|
|
(Paid)
Recovered
Losses (1)
|
|
Net Expected
Loss to be Paid (Recovered) as of December 31, 2017 (2) |
||||||||||
|
(in millions)
|
||||||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. public finance
|
$
|
871
|
|
|
$
|
—
|
|
|
$
|
554
|
|
|
$
|
(268
|
)
|
|
$
|
1,157
|
|
Non-U.S. public finance
|
33
|
|
|
13
|
|
|
(5
|
)
|
|
5
|
|
|
46
|
|
|||||
Public finance
|
904
|
|
|
13
|
|
|
549
|
|
|
(263
|
)
|
|
1,203
|
|
|||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. RMBS
|
206
|
|
|
—
|
|
|
(181
|
)
|
|
48
|
|
|
73
|
|
|||||
Other structured finance
|
88
|
|
|
8
|
|
|
(55
|
)
|
|
(14
|
)
|
|
27
|
|
|||||
Structured finance
|
294
|
|
|
8
|
|
|
(236
|
)
|
|
34
|
|
|
100
|
|
|||||
Total
|
$
|
1,198
|
|
|
$
|
21
|
|
|
$
|
313
|
|
|
$
|
(229
|
)
|
|
$
|
1,303
|
|
|
Net Expected
Loss to be Paid (Recovered) as of December 31, 2015 |
|
Net Expected
Loss to be Paid (Recovered) on CIFG as of July 1, 2016 |
|
Economic Loss
Development / (Benefit)
|
|
(Paid)
Recovered
Losses (1)
|
|
Net Expected
Loss to be Paid (Recovered) as of December 31, 2016 (2) |
||||||||||
|
(in millions)
|
||||||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. public finance
|
$
|
771
|
|
|
$
|
40
|
|
|
$
|
276
|
|
|
$
|
(216
|
)
|
|
$
|
871
|
|
Non-U.S. public finance
|
38
|
|
|
2
|
|
|
(7
|
)
|
|
—
|
|
|
33
|
|
|||||
Public finance
|
809
|
|
|
42
|
|
|
269
|
|
|
(216
|
)
|
|
904
|
|
|||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. RMBS
|
409
|
|
|
(22
|
)
|
|
(91
|
)
|
|
(90
|
)
|
|
206
|
|
|||||
Other structured finance
|
173
|
|
|
2
|
|
|
(39
|
)
|
|
(48
|
)
|
|
88
|
|
|||||
Structured finance
|
582
|
|
|
(20
|
)
|
|
(130
|
)
|
|
(138
|
)
|
|
294
|
|
|||||
Total
|
$
|
1,391
|
|
|
$
|
22
|
|
|
$
|
139
|
|
|
$
|
(354
|
)
|
|
$
|
1,198
|
|
(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
$24 million
and
$16 million
in LAE for the years ended
December 31, 2017
and
2016
, respectively.
|
(2)
|
Includes expected LAE to be paid of
$23 million
as of
December 31, 2017
and
$12 million
as of
December 31, 2016
.
|
|
Net Expected Loss to be Paid (Recovered)
|
|
Net Economic Loss Development (Benefit)
|
||||||||||||
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
|
Year Ended
December 31, 2017 |
|
Year Ended
December 31, 2016 |
||||||||
|
(in millions)
|
||||||||||||||
Financial guaranty insurance
|
$
|
1,226
|
|
|
$
|
1,083
|
|
|
$
|
353
|
|
|
$
|
164
|
|
FG VIEs (1) and other
|
91
|
|
|
105
|
|
|
(6
|
)
|
|
(8
|
)
|
||||
Credit derivatives (2)
|
(14
|
)
|
|
10
|
|
|
(34
|
)
|
|
(17
|
)
|
||||
Total
|
$
|
1,303
|
|
|
$
|
1,198
|
|
|
$
|
313
|
|
|
$
|
139
|
|
|
December 31, 2017
|
|
December 31, 2016
|
|
December 31, 2015
|
Delinquent/Modified in the Previous 12 Months
|
|
|
|
|
|
Alt A and Prime
|
20%
|
|
25%
|
|
25%
|
Option ARM
|
20
|
|
25
|
|
25
|
Subprime
|
20
|
|
25
|
|
25
|
30 – 59 Days Delinquent
|
|
|
|
|
|
Alt A and Prime
|
30
|
|
35
|
|
35
|
Option ARM
|
35
|
|
35
|
|
40
|
Subprime
|
40
|
|
40
|
|
45
|
60 – 89 Days Delinquent
|
|
|
|
|
|
Alt A and Prime
|
40
|
|
45
|
|
45
|
Option ARM
|
50
|
|
50
|
|
50
|
Subprime
|
50
|
|
50
|
|
55
|
90+ Days Delinquent
|
|
|
|
|
|
Alt A and Prime
|
55
|
|
55
|
|
55
|
Option ARM
|
60
|
|
55
|
|
60
|
Subprime
|
55
|
|
55
|
|
60
|
Bankruptcy
|
|
|
|
|
|
Alt A and Prime
|
45
|
|
45
|
|
45
|
Option ARM
|
50
|
|
50
|
|
50
|
Subprime
|
40
|
|
40
|
|
40
|
Foreclosure
|
|
|
|
|
|
Alt A and Prime
|
65
|
|
65
|
|
65
|
Option ARM
|
70
|
|
65
|
|
70
|
Subprime
|
65
|
|
65
|
|
70
|
Real Estate Owned
|
|
|
|
|
|
All
|
100
|
|
100
|
|
100
|
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
|
As of
December 31, 2015 |
|||||||||||||||
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|||||||||
Alt-A First Lien
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Plateau CDR
|
1.3
|
%
|
–
|
9.8%
|
|
5.2%
|
|
1.0
|
%
|
–
|
13.5%
|
|
5.7%
|
|
1.7
|
%
|
–
|
26.4%
|
|
6.4%
|
Final CDR
|
0.1
|
%
|
–
|
0.5%
|
|
0.3%
|
|
0.0
|
%
|
–
|
0.7%
|
|
0.3%
|
|
0.1
|
%
|
–
|
1.3%
|
|
0.3%
|
Initial loss severity:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
2005 and prior
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
|
|||||||||
2006
|
80%
|
|
|
|
80%
|
|
|
|
70%
|
|
|
|||||||||
2007+
|
70%
|
|
|
|
70%
|
|
|
|
65%
|
|
|
|||||||||
Option ARM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Plateau CDR
|
2.5
|
%
|
–
|
7.0%
|
|
5.9%
|
|
3.2
|
%
|
–
|
7.0%
|
|
5.6%
|
|
3.5
|
%
|
–
|
10.3%
|
|
7.8%
|
Final CDR
|
0.1
|
%
|
–
|
0.3%
|
|
0.3%
|
|
0.2
|
%
|
–
|
0.3%
|
|
0.3%
|
|
0.2
|
%
|
–
|
0.5%
|
|
0.4%
|
Initial loss severity:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
2005 and prior
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
|
|||||||||
2006
|
70%
|
|
|
|
70%
|
|
|
|
70%
|
|
|
|||||||||
2007+
|
75%
|
|
|
|
75%
|
|
|
|
65%
|
|
|
|||||||||
Subprime
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Plateau CDR
|
3.5
|
%
|
–
|
13.1%
|
|
7.8%
|
|
2.8
|
%
|
–
|
14.1%
|
|
8.1%
|
|
4.7
|
%
|
–
|
13.2%
|
|
9.5%
|
Final CDR
|
0.2
|
%
|
–
|
0.7%
|
|
0.4%
|
|
0.1
|
%
|
–
|
0.7%
|
|
0.4%
|
|
0.2
|
%
|
–
|
0.7%
|
|
0.4%
|
Initial loss severity:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
2005 and prior
|
80%
|
|
|
|
80%
|
|
|
|
75%
|
|
|
|||||||||
2006
|
90%
|
|
|
|
90%
|
|
|
|
90%
|
|
|
|||||||||
2007+
|
95%
|
|
|
|
90%
|
|
|
|
90%
|
|
|
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
|
As of
December 31, 2015 |
|||||||||||||||
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|||||||||
Plateau CDR
|
2.7
|
%
|
–
|
19.9%
|
|
11.4%
|
|
3.5
|
%
|
–
|
24.8%
|
|
13.6%
|
|
4.9
|
%
|
–
|
23.5%
|
|
10.3%
|
Final CDR trended down to
|
2.5
|
%
|
–
|
3.2%
|
|
2.5%
|
|
0.5
|
%
|
–
|
3.2%
|
|
1.3%
|
|
0.5
|
%
|
–
|
3.2%
|
|
1.2%
|
Liquidation rates:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Delinquent/Modified in the Previous 12 Months
|
20%
|
|
|
|
25%
|
|
|
|
25%
|
|
|
|||||||||
30 – 59 Days Delinquent
|
45
|
|
|
|
50
|
|
|
|
50
|
|
|
|||||||||
60 – 89 Days Delinquent
|
60
|
|
|
|
65
|
|
|
|
65
|
|
|
|||||||||
90+ Days Delinquent
|
75
|
|
|
|
80
|
|
|
|
75
|
|
|
|||||||||
Bankruptcy
|
55
|
|
|
|
55
|
|
|
|
55
|
|
|
|||||||||
Foreclosure
|
70
|
|
|
|
75
|
|
|
|
75
|
|
|
|||||||||
Real Estate Owned
|
100
|
|
|
|
100
|
|
|
|
100
|
|
|
|||||||||
Loss severity
|
98%
|
|
|
|
98%
|
|
|
|
98%
|
|
|
6.
|
Contracts Accounted for as Insurance
|
•
|
For premiums received upfront on financial guaranty insurance contracts that were originally underwritten by the Company, deferred premium revenue is equal to the amount of cash received. Upfront premiums typically relate to public finance transactions.
|
•
|
For premiums received in installments on financial guaranty insurance contracts that were originally underwritten by the Company, deferred premium revenue is the present value of either (1) contractual premiums due or (2) in cases where the underlying collateral is comprised of homogeneous pools of assets, the expected premiums to be collected over the life of the contract. To be considered a homogeneous pool of assets, prepayments must be contractually allowable, the amount of prepayments must be probable, and the timing and amount of prepayments must be reasonably estimable. When the Company adjusts prepayment assumptions or expected premium collections, an adjustment is recorded to the deferred premium revenue, with a corresponding adjustment to the premium receivable. Premiums receivable are discounted at the risk-free rate at inception and such discount rate is updated only when changes to prepayment assumptions are made that change the expected date of final maturity. Installment premiums typically relate to structured finance transactions, where the insurance premium rate is
|
•
|
For financial guaranty insurance contracts acquired in a business combination, deferred premium revenue is equal to the fair value of the Company's stand-ready obligation portion of the insurance contract at the date of acquisition based on what a hypothetical similarly rated financial guaranty insurer would have charged for the contract at that date and not the actual cash flows under the insurance contract. The amount of deferred premium revenue may differ significantly from cash collections due primarily to fair value adjustments recorded in connection with a business combination.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Scheduled net earned premiums
|
$
|
385
|
|
|
$
|
381
|
|
|
$
|
416
|
|
Accelerations
|
|
|
|
|
|
||||||
Refundings
|
269
|
|
|
390
|
|
|
294
|
|
|||
Terminations
|
17
|
|
|
79
|
|
|
37
|
|
|||
Total Accelerations
|
286
|
|
|
469
|
|
|
331
|
|
|||
Accretion of discount on net premiums receivable
|
17
|
|
|
14
|
|
|
17
|
|
|||
Financial guaranty insurance net earned premiums
|
688
|
|
|
864
|
|
|
764
|
|
|||
Other
|
2
|
|
|
0
|
|
|
2
|
|
|||
Net earned premiums (1)
|
$
|
690
|
|
|
$
|
864
|
|
|
$
|
766
|
|
(1)
|
Excludes
$15 million
,
$16 million
and
$21 million
for the year ended
December 31, 2017
,
2016
and
2015
, respectively, related to consolidated FG VIEs.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
December 31,
|
$
|
576
|
|
|
$
|
693
|
|
|
$
|
729
|
|
FG insurance
|
|
|
|
|
|
||||||
Premiums receivable from acquisitions (see Note 2)
|
270
|
|
|
18
|
|
|
2
|
|
|||
Gross written premiums on new business, net of commissions
|
301
|
|
|
193
|
|
|
198
|
|
|||
Gross premiums received, net of commissions
|
(301
|
)
|
|
(258
|
)
|
|
(206
|
)
|
|||
Adjustments:
|
|
|
|
|
|
||||||
Changes in the expected term
|
(8
|
)
|
|
(38
|
)
|
|
(19
|
)
|
|||
Accretion of discount, net of commissions on assumed business
|
12
|
|
|
9
|
|
|
18
|
|
|||
Foreign exchange translation
|
64
|
|
|
(41
|
)
|
|
(25
|
)
|
|||
Consolidation/deconsolidation of FG VIEs
|
0
|
|
|
0
|
|
|
(4
|
)
|
|||
Subtotal (1)
|
914
|
|
|
576
|
|
|
693
|
|
|||
Other
|
1
|
|
|
0
|
|
|
—
|
|
|||
December 31,
|
$
|
915
|
|
|
$
|
576
|
|
|
$
|
693
|
|
(1)
|
Excludes
$10 million
,
$11 million
and
$17 million
as of
December 31, 2017
,
2016
and
2015
, respectively, related to consolidated FG VIEs.
|
|
As of December 31, 2017
|
||
|
(in millions)
|
||
2018 (January 1 – March 31)
|
$
|
38
|
|
2018 (April 1 – June 30)
|
31
|
|
|
2018 (July 1 – September 30)
|
22
|
|
|
2018 (October 1 – December 31)
|
18
|
|
|
2019
|
82
|
|
|
2020
|
78
|
|
|
2021
|
77
|
|
|
2022
|
70
|
|
|
2023-2027
|
289
|
|
|
2028-2032
|
193
|
|
|
2033-2037
|
106
|
|
|
After 2037
|
105
|
|
|
Total(1)
|
$
|
1,109
|
|
(1)
|
Excludes expected cash collections on FG VIEs of
$12 million
.
|
|
As of December 31, 2017
|
||
|
(in millions)
|
||
2018 (January 1 – March 31)
|
$
|
89
|
|
2018 (April 1 – June 30)
|
88
|
|
|
2018 (July 1 – September 30)
|
84
|
|
|
2018 (October 1 – December 31)
|
82
|
|
|
Subtotal 2018
|
343
|
|
|
2019
|
295
|
|
|
2020
|
266
|
|
|
2021
|
244
|
|
|
2022
|
223
|
|
|
2023-2027
|
866
|
|
|
2028-2032
|
565
|
|
|
2033-2037
|
324
|
|
|
After 2037
|
281
|
|
|
Net deferred premium revenue(1)
|
3,407
|
|
|
Future accretion
|
188
|
|
|
Total future net earned premiums
|
$
|
3,595
|
|
(1)
|
Excludes scheduled net earned premiums on consolidated FG VIEs of
$76 million
, non-financial guaranty business net earned premium of
$9 million
and contra-paid related to FG VIEs of
$17 million
.
|
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
||||
|
(dollars in millions)
|
||||||
Premiums receivable, net of commission payable
|
$
|
914
|
|
|
$
|
576
|
|
Gross deferred premium revenue
|
1,205
|
|
|
1,041
|
|
||
Weighted-average risk-free rate used to discount premiums
|
2.3
|
%
|
|
3.0
|
%
|
||
Weighted-average period of premiums receivable (in years)
|
9.2
|
|
|
9.1
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
December 31,
|
$
|
106
|
|
|
$
|
114
|
|
|
$
|
121
|
|
DAC adjustments from acquisitions (see Note 2)
|
(2
|
)
|
|
0
|
|
|
1
|
|
|||
Costs deferred during the period:
|
|
|
|
|
|
||||||
Commissions on assumed and ceded business
|
0
|
|
|
(2
|
)
|
|
(1
|
)
|
|||
Premium taxes
|
5
|
|
|
4
|
|
|
2
|
|
|||
Compensation and other acquisition costs
|
11
|
|
|
9
|
|
|
11
|
|
|||
Total
|
16
|
|
|
11
|
|
|
12
|
|
|||
Costs amortized during the period
|
(19
|
)
|
|
(19
|
)
|
|
(20
|
)
|
|||
December 31,
|
$
|
101
|
|
|
$
|
106
|
|
|
$
|
114
|
|
•
|
a reduction in the corresponding loss and LAE reserve with a benefit to the income statement,
|
•
|
no entry recorded, if “total loss” is not in excess of deferred premium revenue, or
|
•
|
the recording of a salvage asset with a benefit to the income statement if the transaction is in a net recovery position at the reporting date.
|
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
||||
|
(in millions)
|
||||||
Public finance:
|
|
|
|
||||
U.S. public finance
|
$
|
901
|
|
|
$
|
625
|
|
Non-U.S. public finance
|
21
|
|
|
21
|
|
||
Public finance
|
922
|
|
|
646
|
|
||
Structured finance:
|
|
|
|
||||
U.S. RMBS
|
(59
|
)
|
|
21
|
|
||
Other structured finance
|
40
|
|
|
96
|
|
||
Structured finance
|
(19
|
)
|
|
117
|
|
||
Subtotal
|
903
|
|
|
763
|
|
||
Other recoverable (payable)
|
(4
|
)
|
|
1
|
|
||
Subtotal
|
899
|
|
|
764
|
|
||
Elimination of losses attributable to FG VIEs
|
(55
|
)
|
|
(64
|
)
|
||
Total
|
$
|
844
|
|
|
$
|
700
|
|
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
||||
|
(in millions)
|
||||||
Loss and LAE reserve
|
$
|
1,444
|
|
|
$
|
1,127
|
|
Reinsurance recoverable on unpaid losses
|
(44
|
)
|
|
(80
|
)
|
||
Loss and LAE reserve, net
|
1,400
|
|
|
1,047
|
|
||
Salvage and subrogation recoverable
|
(572
|
)
|
|
(365
|
)
|
||
Salvage and subrogation payable(1)
|
20
|
|
|
17
|
|
||
Other payable (recoverable)
|
(4
|
)
|
|
1
|
|
||
Salvage and subrogation recoverable, net, and other recoverable
|
(556
|
)
|
|
(347
|
)
|
||
Net reserves (salvage)
|
$
|
844
|
|
|
$
|
700
|
|
|
As of
December 31, 2017 |
||
|
(in millions)
|
||
Net expected loss to be paid - financial guaranty insurance (1)
|
$
|
1,226
|
|
Contra-paid, net
|
59
|
|
|
Salvage and subrogation recoverable, net of reinsurance
|
552
|
|
|
Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance
|
(1,399
|
)
|
|
Other recoverable (payable)
|
4
|
|
|
Net expected loss to be expensed (present value) (2)
|
$
|
442
|
|
(1)
|
See "Net Expected Loss to be Paid (Recovered) by Accounting Model" table in Note 5, Expected Loss to be Paid.
|
(2)
|
Excludes
$52 million
as of
December 31, 2017
related to consolidated FG VIEs.
|
|
As of
December 31, 2017 |
||
|
(in millions)
|
||
2018 (January 1 – March 31)
|
$
|
8
|
|
2018 (April 1 – June 30)
|
9
|
|
|
2018 (July 1 – September 30)
|
10
|
|
|
2018 (October 1 – December 31)
|
10
|
|
|
Subtotal 2018
|
37
|
|
|
2019
|
42
|
|
|
2020
|
39
|
|
|
2021
|
35
|
|
|
2022
|
32
|
|
|
2023-2027
|
131
|
|
|
2028-2032
|
78
|
|
|
2033-2037
|
36
|
|
|
After 2037
|
12
|
|
|
Net expected loss to be expensed
|
442
|
|
|
Future accretion
|
88
|
|
|
Total expected future loss and LAE
|
$
|
530
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Public finance:
|
|
|
|
|
|
||||||
U.S. public finance
|
$
|
553
|
|
|
$
|
307
|
|
|
$
|
392
|
|
Non-U.S. public finance
|
(4
|
)
|
|
(3
|
)
|
|
1
|
|
|||
Public finance
|
549
|
|
|
304
|
|
|
393
|
|
|||
Structured finance:
|
|
|
|
|
|
||||||
U.S. RMBS
|
(106
|
)
|
|
37
|
|
|
54
|
|
|||
Other structured finance
|
(48
|
)
|
|
(39
|
)
|
|
5
|
|
|||
Structured finance
|
(154
|
)
|
|
(2
|
)
|
|
59
|
|
|||
Loss and LAE on insurance contracts before FG VIE consolidation
|
395
|
|
|
302
|
|
|
452
|
|
|||
Gain (loss) related to FG VIE consolidation
|
(7
|
)
|
|
(7
|
)
|
|
(28
|
)
|
|||
Loss and LAE
|
$
|
388
|
|
|
$
|
295
|
|
|
$
|
424
|
|
|
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)
|
139
|
|
|
(22
|
)
|
|
46
|
|
|
(3
|
)
|
|
150
|
|
|
(41
|
)
|
|
335
|
|
|
—
|
|
|
335
|
|
|||||||||
Remaining weighted-average contract period (in years)
|
8.9
|
|
|
7.3
|
|
|
14.0
|
|
|
2.9
|
|
|
9.6
|
|
|
9.3
|
|
|
9.9
|
|
|
—
|
|
|
9.9
|
|
|||||||||
Outstanding exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Principal
|
$
|
4,397
|
|
|
$
|
(96
|
)
|
|
$
|
1,352
|
|
|
$
|
(8
|
)
|
|
$
|
6,445
|
|
|
$
|
(190
|
)
|
|
$
|
11,900
|
|
|
$
|
—
|
|
|
$
|
11,900
|
|
Interest
|
2,110
|
|
|
(42
|
)
|
|
1,002
|
|
|
(1
|
)
|
|
3,098
|
|
|
(86
|
)
|
|
6,081
|
|
|
—
|
|
|
6,081
|
|
|||||||||
Total(2)
|
$
|
6,507
|
|
|
$
|
(138
|
)
|
|
$
|
2,354
|
|
|
$
|
(9
|
)
|
|
$
|
9,543
|
|
|
$
|
(276
|
)
|
|
$
|
17,981
|
|
|
$
|
—
|
|
|
$
|
17,981
|
|
Expected cash outflows (inflows)
|
$
|
186
|
|
|
$
|
(5
|
)
|
|
$
|
492
|
|
|
$
|
(1
|
)
|
|
$
|
3,785
|
|
|
$
|
(104
|
)
|
|
$
|
4,353
|
|
|
$
|
(307
|
)
|
|
$
|
4,046
|
|
Potential recoveries(3)
|
(595
|
)
|
|
20
|
|
|
(145
|
)
|
|
0
|
|
|
(2,273
|
)
|
|
67
|
|
|
$
|
(2,926
|
)
|
|
194
|
|
|
(2,732
|
)
|
||||||||
Subtotal
|
(409
|
)
|
|
15
|
|
|
347
|
|
|
(1
|
)
|
|
1,512
|
|
|
(37
|
)
|
|
1,427
|
|
|
(113
|
)
|
|
1,314
|
|
|||||||||
Discount
|
66
|
|
|
(4
|
)
|
|
(93
|
)
|
|
0
|
|
|
(78
|
)
|
|
(2
|
)
|
|
(111
|
)
|
|
23
|
|
|
(88
|
)
|
|||||||||
Present value of expected cash flows
|
$
|
(343
|
)
|
|
$
|
11
|
|
|
$
|
254
|
|
|
$
|
(1
|
)
|
|
$
|
1,434
|
|
|
$
|
(39
|
)
|
|
$
|
1,316
|
|
|
$
|
(90
|
)
|
|
$
|
1,226
|
|
Deferred premium revenue
|
$
|
112
|
|
|
$
|
(5
|
)
|
|
$
|
129
|
|
|
$
|
0
|
|
|
$
|
540
|
|
|
$
|
(6
|
)
|
|
$
|
770
|
|
|
$
|
(74
|
)
|
|
$
|
696
|
|
Reserves (salvage)
|
$
|
(380
|
)
|
|
$
|
11
|
|
|
$
|
202
|
|
|
$
|
(1
|
)
|
|
$
|
1,100
|
|
|
$
|
(34
|
)
|
|
$
|
898
|
|
|
$
|
(55
|
)
|
|
$
|
843
|
|
|
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 for Level 3 securities, any model updates and inputs for Level 3 securities, and compares such information to management’s own market information and, where applicable, the internal models,
|
•
|
reviews internally developed analytic packages for all securities 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 for Level 3, and evaluates, documents the rationale for, and resolves any significant pricing differences for Level 3.
|
•
|
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 adjusted to reflect the non-standard terms of the Company's CDS contracts.
|
•
|
Credit spreads provided by the counterparty of the CDS.
|
•
|
Credit spreads extrapolated based upon transactions of similar asset classes, similar ratings, and similar time to maturity.
|
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
||
Based on actual collateral specific spreads
|
14
|
%
|
|
7
|
%
|
Based on market indices
|
48
|
%
|
|
77
|
%
|
Provided by the CDS counterparty
|
38
|
%
|
|
16
|
%
|
Total
|
100
|
%
|
|
100
|
%
|
•
|
The model takes into account the transaction structure and the key drivers of market value.
|
•
|
The model maximizes the use of market-driven inputs whenever they are available.
|
•
|
The model is a consistent approach to valuing positions.
|
•
|
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
|
$
|
5,760
|
|
|
$
|
—
|
|
|
$
|
5,684
|
|
|
$
|
76
|
|
U.S. government and agencies
|
285
|
|
|
—
|
|
|
285
|
|
|
—
|
|
||||
Corporate securities
|
2,018
|
|
|
—
|
|
|
1,951
|
|
|
67
|
|
||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|||||||
RMBS
|
861
|
|
|
—
|
|
|
527
|
|
|
334
|
|
||||
Commercial mortgage-backed securities (CMBS)
|
549
|
|
|
—
|
|
|
549
|
|
|
—
|
|
||||
Asset-backed securities
|
896
|
|
|
—
|
|
|
109
|
|
|
787
|
|
||||
Foreign government securities
|
305
|
|
|
—
|
|
|
305
|
|
|
—
|
|
||||
Total fixed-maturity securities
|
10,674
|
|
|
—
|
|
|
9,410
|
|
|
1,264
|
|
||||
Short-term investments
|
627
|
|
|
464
|
|
|
162
|
|
|
1
|
|
||||
Other invested assets (1)
|
7
|
|
|
—
|
|
|
0
|
|
|
7
|
|
||||
Credit derivative assets
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||
FG VIEs’ assets, at fair value
|
700
|
|
|
—
|
|
|
—
|
|
|
700
|
|
||||
Other assets
|
121
|
|
|
25
|
|
|
36
|
|
|
60
|
|
||||
Total assets carried at fair value
|
$
|
12,131
|
|
|
$
|
489
|
|
|
$
|
9,608
|
|
|
$
|
2,034
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit derivative liabilities
|
$
|
271
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
271
|
|
FG VIEs’ liabilities with recourse, at fair value
|
627
|
|
|
—
|
|
|
—
|
|
|
627
|
|
||||
FG VIEs’ liabilities without recourse, at fair value
|
130
|
|
|
—
|
|
|
—
|
|
|
130
|
|
||||
Total liabilities carried at fair value
|
$
|
1,028
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,028
|
|
|
|
|
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 investments of
$45 million
and
$48 million
as of
December 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
(7) |
|
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)
|
(13
|
)
|
(2
|
)
|
6
|
|
(2
|
)
|
27
|
|
(2
|
)
|
113
|
|
(2
|
)
|
37
|
|
(3
|
)
|
(2
|
)
|
(4
|
)
|
107
|
|
(6
|
)
|
(16
|
)
|
(3
|
)
|
(6
|
)
|
(3
|
)
|
|||||||||
Other comprehensive income (loss)
|
(2
|
)
|
|
1
|
|
|
23
|
|
|
56
|
|
|
|
—
|
|
|
|
0
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|||||||||||||
Purchases
|
—
|
|
|
—
|
|
|
42
|
|
|
173
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|||||||||||||
Settlements
|
(2
|
)
|
|
—
|
|
|
(123
|
)
|
|
(367
|
)
|
|
(147
|
)
|
|
—
|
|
|
|
13
|
|
|
|
145
|
|
|
|
12
|
|
|
|||||||||||||||
FG VIE consolidations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
39
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0
|
|
|
(39
|
)
|
|
||||||||||||||
FG VIE deconsolidations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(105
|
)
|
|
—
|
|
|
—
|
|
|
51
|
|
|
54
|
|
|
||||||||||||||||||
Transfers into Level 3
|
54
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||||||||||||||||
Fair value as of December 31, 2017
|
$
|
76
|
|
|
$
|
67
|
|
|
$
|
334
|
|
|
$
|
787
|
|
|
|
$
|
700
|
|
|
|
$
|
64
|
|
|
|
$
|
(269
|
)
|
|
$
|
(627
|
)
|
|
$
|
(130
|
)
|
|
||||||
Change in unrealized gains/(losses) related to financial instruments held as of December 31, 2017
|
$
|
(2
|
)
|
|
$
|
1
|
|
|
$
|
23
|
|
|
$
|
123
|
|
|
$
|
59
|
|
(3
|
)
|
$
|
(2
|
)
|
(4
|
)
|
$
|
96
|
|
(6
|
)
|
$
|
(11
|
)
|
(3
|
)
|
$
|
(6
|
)
|
(3
|
)
|
|
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
(8) |
|
Credit
Derivative Asset (Liability), net (5) |
|
FG VIEs' Liabilities with Recourse,
at Fair Value |
|
FG VIEs' Liabilities without Recourse,
at Fair Value |
|
||||||||||||||||||||||||||||||
|
(in millions)
|
|
||||||||||||||||||||||||||||||||||||||||||||||||
Fair value as of December 31, 2015
|
$
|
8
|
|
|
$
|
71
|
|
|
$
|
348
|
|
|
$
|
657
|
|
|
$
|
60
|
|
|
$
|
1,261
|
|
|
|
$
|
65
|
|
|
$
|
(365
|
)
|
|
|
$
|
(1,225
|
)
|
|
$
|
(124
|
)
|
|
||||||||
CIFG Acquisition
|
1
|
|
|
—
|
|
|
20
|
|
|
36
|
|
|
0
|
|
|
—
|
|
|
—
|
|
|
(67
|
)
|
|
—
|
|
|
—
|
|
|
||||||||||||||||||||
Total pretax realized and unrealized gains/(losses) recorded in: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Net income (loss)
|
2
|
|
(2
|
)
|
(16
|
)
|
(2
|
)
|
10
|
|
(2
|
)
|
51
|
|
(2
|
)
|
0
|
|
(2
|
)
|
167
|
|
(3
|
)
|
0
|
|
(4
|
)
|
74
|
|
(6
|
)
|
(125
|
)
|
(3
|
)
|
(18
|
)
|
(3
|
)
|
||||||||||
Other comprehensive income (loss)
|
(4
|
)
|
|
5
|
|
|
(13
|
)
|
|
116
|
|
|
0
|
|
|
—
|
|
|
|
0
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|||||||||||||||||
Purchases
|
33
|
|
|
—
|
|
|
70
|
|
|
76
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|||||||||||||||||
Settlements
|
(1
|
)
|
|
—
|
|
|
(70
|
)
|
|
(139
|
)
|
|
(60
|
)
|
|
(629
|
)
|
|
—
|
|
|
(31
|
)
|
|
|
597
|
|
|
|
14
|
|
|
||||||||||||||||||
FG VIE consolidations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
97
|
|
|
|
—
|
|
|
—
|
|
|
|
(54
|
)
|
|
(43
|
)
|
|
||||||||||||||||||
FG VIE deconsolidations
|
—
|
|
|
—
|
|
|
0
|
|
|
—
|
|
|
—
|
|
|
(20
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
||||||||||||||||||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||||||||||||||||||
Fair value as of December 31, 2016
|
$
|
39
|
|
|
$
|
60
|
|
|
$
|
365
|
|
|
$
|
805
|
|
|
$
|
—
|
|
|
$
|
876
|
|
|
|
$
|
65
|
|
|
$
|
(389
|
)
|
|
|
$
|
(807
|
)
|
|
$
|
(151
|
)
|
|
||||||||
Change in unrealized gains/(losses) related to financial instruments held as of December 31, 2016
|
$
|
(4
|
)
|
|
$
|
5
|
|
|
$
|
(15
|
)
|
|
$
|
116
|
|
|
$
|
—
|
|
|
$
|
93
|
|
(3
|
)
|
$
|
0
|
|
(4
|
)
|
$
|
(33
|
)
|
(6
|
)
|
$
|
(12
|
)
|
(3
|
)
|
$
|
(17
|
)
|
(3
|
)
|
(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)
|
Includes short-term investments, CCS and other invested assets.
|
(8)
|
Includes CCS and other invested assets.
|
Financial Instrument Description(1)
|
|
Fair Value at
December 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
|
|
$
|
76
|
|
|
Yield
|
|
4.5
|
%
|
-
|
40.8%
|
|
12.5%
|
|
|
|
|
|
|
|
|
|
|
|
|||
Corporate securities
|
|
67
|
|
|
Yield
|
|
22.5%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
RMBS
|
|
334
|
|
|
CPR
|
|
1.3
|
%
|
-
|
17.4%
|
|
6.4%
|
|
|
|
CDR
|
|
1.5
|
%
|
-
|
9.2%
|
|
5.9%
|
||||
|
|
Loss severity
|
|
40.0
|
%
|
-
|
125.0%
|
|
82.5%
|
||||
|
|
Yield
|
|
4.0
|
%
|
-
|
7.5%
|
|
5.6%
|
||||
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|||
Triple-X life insurance transactions
|
|
613
|
|
|
Yield
|
|
6.2
|
%
|
-
|
6.4%
|
|
6.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
CLO/TruPS
|
|
116
|
|
|
Yield
|
|
2.6
|
%
|
-
|
4.6%
|
|
3.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Others
|
|
58
|
|
|
Yield
|
|
10.7%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
FG VIEs’ assets, at fair value
|
|
700
|
|
|
CPR
|
|
3.0
|
%
|
-
|
14.9%
|
|
9.5%
|
|
|
|
CDR
|
|
1.3
|
%
|
-
|
21.7%
|
|
5.4%
|
||||
|
|
Loss severity
|
|
60.0
|
%
|
-
|
100.0%
|
|
79.6%
|
||||
|
|
Yield
|
|
3.7
|
%
|
-
|
10.0%
|
|
6.2%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
Other assets
|
|
60
|
|
|
Implied Yield
|
|
5.2
|
%
|
-
|
5.9%
|
|
5.5%
|
|
|
|
Term (years)
|
|
10 years
|
|
|
|||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||
Credit derivative liabilities, net
|
|
(269
|
)
|
|
Year 1 loss estimates
|
|
0.0
|
%
|
-
|
42.0%
|
|
3.3%
|
|
|
|
Hedge cost (in bps)
|
|
17.6
|
|
-
|
122.6
|
|
48.1
|
||||
|
|
Bank profit (in bps)
|
|
6.0
|
|
-
|
852.5
|
|
107.5
|
||||
|
|
Internal floor (in bps)
|
|
8.0
|
|
-
|
30.0
|
|
21.8
|
||||
|
|
Internal credit rating
|
|
AAA
|
|
-
|
CCC
|
|
AA-
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
FG VIEs’ liabilities, at fair value
|
|
(757
|
)
|
|
CPR
|
|
3.0
|
%
|
-
|
14.9%
|
|
9.5%
|
|
|
|
CDR
|
|
1.3
|
%
|
-
|
21.7%
|
|
5.4%
|
||||
|
|
Loss severity
|
|
60.0
|
%
|
-
|
100.0%
|
|
79.6%
|
||||
|
|
Yield
|
|
3.4
|
%
|
-
|
10.0%
|
|
4.9%
|
(1)
|
Discounted cash flow is used as valuation technique for all financial instruments.
|
(2)
|
Excludes short-term investments with fair value of
$1 million
and several investments recorded in other invested assets with fair value of
$7 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
December 31, 2017 |
|
As of
December 31, 2016 |
||||||||||||
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
||||||||
|
(in millions)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed-maturity securities
|
$
|
10,674
|
|
|
$
|
10,674
|
|
|
$
|
10,233
|
|
|
$
|
10,233
|
|
Short-term investments
|
627
|
|
|
627
|
|
|
590
|
|
|
590
|
|
||||
Other invested assets
|
60
|
|
|
61
|
|
|
146
|
|
|
147
|
|
||||
Credit derivative assets
|
2
|
|
|
2
|
|
|
13
|
|
|
13
|
|
||||
FG VIEs’ assets, at fair value
|
700
|
|
|
700
|
|
|
876
|
|
|
876
|
|
||||
Other assets
|
218
|
|
|
218
|
|
|
205
|
|
|
205
|
|
||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial guaranty insurance contracts (1)
|
3,330
|
|
|
7,104
|
|
|
3,483
|
|
|
8,738
|
|
||||
Long-term debt
|
1,292
|
|
|
1,627
|
|
|
1,306
|
|
|
1,546
|
|
||||
Credit derivative liabilities
|
271
|
|
|
271
|
|
|
402
|
|
|
402
|
|
||||
FG VIEs’ liabilities with recourse, at fair value
|
627
|
|
|
627
|
|
|
807
|
|
|
807
|
|
||||
FG VIEs’ liabilities without recourse, at fair value
|
130
|
|
|
130
|
|
|
151
|
|
|
151
|
|
||||
Other liabilities
|
55
|
|
|
55
|
|
|
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 December 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
|
|
$
|
—
|
|
|
--
|
|
$
|
2,022
|
|
|
AAA
|
Synthetic investment grade pooled corporate
|
|
—
|
|
|
--
|
|
7,224
|
|
|
AAA
|
||
TruPS CDOs
|
|
878
|
|
|
A
|
|
1,179
|
|
|
BBB+
|
||
Total pooled corporate obligations
|
|
878
|
|
|
A
|
|
10,425
|
|
|
AAA
|
||
U.S. RMBS
|
|
916
|
|
|
AA
|
|
1,142
|
|
|
AA-
|
||
Pooled infrastructure
|
|
1,561
|
|
|
AAA
|
|
1,513
|
|
|
AAA
|
||
Infrastructure finance
|
|
572
|
|
|
A
|
|
1,021
|
|
|
BBB+
|
||
Other(1)
|
|
2,280
|
|
|
A-
|
|
2,896
|
|
|
A
|
||
Total
|
|
$
|
6,207
|
|
|
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 December 31, 2017
|
|
As of December 31, 2016
|
||||||||||
Ratings
|
|
Net Par
Outstanding
|
|
% of Total
|
|
Net Par
Outstanding
|
|
% of Total
|
||||||
|
|
(dollars in millions)
|
||||||||||||
AAA
|
|
$
|
2,144
|
|
|
34.6
|
%
|
|
$
|
10,967
|
|
|
64.6
|
%
|
AA
|
|
1,170
|
|
|
18.8
|
|
|
2,167
|
|
|
12.7
|
|
||
A
|
|
1,517
|
|
|
24.5
|
|
|
1,499
|
|
|
8.8
|
|
||
BBB
|
|
1,038
|
|
|
16.7
|
|
|
1,391
|
|
|
8.2
|
|
||
BIG
|
|
338
|
|
|
5.4
|
|
|
973
|
|
|
5.7
|
|
||
Credit derivative net par outstanding
|
|
$
|
6,207
|
|
|
100.0
|
%
|
|
$
|
16,997
|
|
|
100.0
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Realized gains on credit derivatives
|
$
|
17
|
|
|
$
|
56
|
|
|
$
|
63
|
|
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements
|
(27
|
)
|
|
(27
|
)
|
|
(81
|
)
|
|||
Realized gains (losses) and other settlements
|
(10
|
)
|
|
29
|
|
|
(18
|
)
|
|||
Net unrealized gains (losses):
|
|
|
|
|
|
||||||
Pooled corporate obligations
|
35
|
|
|
(16
|
)
|
|
147
|
|
|||
U.S. RMBS
|
23
|
|
|
22
|
|
|
396
|
|
|||
Pooled infrastructure
|
5
|
|
|
17
|
|
|
17
|
|
|||
Infrastructure finance
|
4
|
|
|
4
|
|
|
0
|
|
|||
Other
|
54
|
|
|
42
|
|
|
186
|
|
|||
Net unrealized gains (losses)
|
121
|
|
|
69
|
|
|
746
|
|
|||
Net change in fair value of credit derivatives
|
$
|
111
|
|
|
$
|
98
|
|
|
$
|
728
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Net par of terminated credit derivative contracts
|
$
|
331
|
|
|
$
|
3,811
|
|
|
$
|
2,777
|
|
Realized gains on credit derivatives
|
0
|
|
|
20
|
|
|
13
|
|
|||
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements
|
(15
|
)
|
|
—
|
|
|
(116
|
)
|
|||
Net unrealized gains (losses) on credit derivatives
|
26
|
|
|
103
|
|
|
465
|
|
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
|
As of
December 31, 2015 |
|||
Five-year CDS spread:
|
|
|
|
|
|
|||
AGC
|
163
|
|
|
158
|
|
|
376
|
|
AGM
|
145
|
|
|
158
|
|
|
366
|
|
|
|
|
|
|
|
|||
One-year CDS spread
|
|
|
|
|
|
|||
AGC
|
70
|
|
|
35
|
|
|
139
|
|
AGM
|
28
|
|
|
29
|
|
|
131
|
|
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
||||
|
(in millions)
|
||||||
Fair value of credit derivatives before effect of AGC and AGM credit spreads
|
$
|
(555
|
)
|
|
$
|
(811
|
)
|
Plus: Effect of AGC and AGM credit spreads
|
286
|
|
|
422
|
|
||
Net fair value of credit derivatives
|
$
|
(269
|
)
|
|
$
|
(389
|
)
|
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
||||
|
(in millions)
|
||||||
Fair value of credit derivative asset (liability), net
|
$
|
(269
|
)
|
|
$
|
(389
|
)
|
Expected loss to be (paid) recovered
|
14
|
|
|
(10
|
)
|
|
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
||||
|
|
(in millions)
|
||||||
Gross par of CDS with collateral posting requirement
|
|
$
|
497
|
|
|
$
|
690
|
|
Maximum posting requirement
|
|
464
|
|
|
674
|
|
||
Collateral posted
|
|
18
|
|
|
116
|
|
Credit Spreads(1)
|
|
Estimated Net
Fair Value
(Pre-Tax)
|
|
Estimated Change
in Gain/(Loss)
(Pre-Tax)
|
||||
|
|
(in millions)
|
||||||
100% widening in spreads
|
|
$
|
(501
|
)
|
|
$
|
(232
|
)
|
50% widening in spreads
|
|
(385
|
)
|
|
(116
|
)
|
||
25% widening in spreads
|
|
(327
|
)
|
|
(58
|
)
|
||
10% widening in spreads
|
|
(292
|
)
|
|
(23
|
)
|
||
Base Scenario
|
|
(269
|
)
|
|
—
|
|
||
10% narrowing in spreads
|
|
(250
|
)
|
|
19
|
|
||
25% narrowing in spreads
|
|
(222
|
)
|
|
47
|
|
||
50% narrowing in spreads
|
|
(174
|
)
|
|
95
|
|
(1)
|
Includes the effects of spreads on both the underlying asset classes and the Company’s own credit spread.
|
9.
|
Consolidated Variable Interest Entities
|
|
Year Ended December 31,
|
|||||||
|
2017
|
|
2016
|
|
2015
|
|||
|
|
|||||||
Beginning of the period, December 31
|
32
|
|
|
34
|
|
|
32
|
|
Radian Asset Acquisition
|
—
|
|
|
—
|
|
|
4
|
|
Consolidated (1)
|
2
|
|
|
1
|
|
|
1
|
|
Deconsolidated (1)
|
(2
|
)
|
|
(2
|
)
|
|
(1
|
)
|
Matured
|
—
|
|
|
(1
|
)
|
|
(2
|
)
|
End of the period, December 31
|
32
|
|
|
32
|
|
|
34
|
|
(1)
|
Net loss on consolidation and deconsolidation was de minimis in
2017
and
2016
. Net loss on consolidation was
$26 million
in
2015
and was recorded in "fair value gains (losses) on FG VIEs" in the consolidated statement of operations.
|
|
As of December 31, 2017
|
|
As of December 31, 2016
|
||||||||||||
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
||||||||
|
(in millions)
|
||||||||||||||
With recourse:
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. RMBS first lien
|
$
|
362
|
|
|
$
|
385
|
|
|
$
|
473
|
|
|
$
|
509
|
|
U.S. RMBS second lien
|
144
|
|
|
177
|
|
|
178
|
|
|
223
|
|
||||
Manufactured housing
|
64
|
|
|
65
|
|
|
74
|
|
|
75
|
|
||||
Total with recourse
|
570
|
|
|
627
|
|
|
725
|
|
|
807
|
|
||||
Without recourse
|
130
|
|
|
130
|
|
|
151
|
|
|
151
|
|
||||
Total
|
$
|
700
|
|
|
$
|
757
|
|
|
$
|
876
|
|
|
$
|
958
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Net earned premiums
|
$
|
(15
|
)
|
|
$
|
(16
|
)
|
|
$
|
(21
|
)
|
Net investment income
|
(5
|
)
|
|
(10
|
)
|
|
(32
|
)
|
|||
Net realized investment gains (losses)
|
0
|
|
|
1
|
|
|
10
|
|
|||
Fair value gains (losses) on FG VIEs
|
30
|
|
|
38
|
|
|
38
|
|
|||
Bargain purchase gain
|
—
|
|
|
—
|
|
|
2
|
|
|||
Loss and LAE
|
7
|
|
|
7
|
|
|
28
|
|
|||
Effect on income before tax
|
17
|
|
|
20
|
|
|
25
|
|
|||
Less: tax provision (benefit)
|
6
|
|
|
7
|
|
|
8
|
|
|||
Effect on net income (loss)
|
$
|
11
|
|
|
$
|
13
|
|
|
$
|
17
|
|
|
|
|
|
|
|
||||||
Effect on cash flows from operating activities
|
$
|
19
|
|
|
$
|
24
|
|
|
$
|
43
|
|
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
||||
|
(in millions)
|
||||||
Effect on shareholders’ equity (decrease) increase
|
$
|
2
|
|
|
$
|
(9
|
)
|
10.
|
Investments and Cash
|
•
|
a decline in the market value of a security by
20%
or more below amortized cost for a continuous period of at least
six months
;
|
•
|
a decline in the market value of a security for a continuous period of
12
months;
|
•
|
recent credit downgrades of the applicable security or the issuer by rating agencies;
|
•
|
the financial condition of the applicable issuer;
|
•
|
whether loss of investment principal is anticipated;
|
•
|
the impact of foreign exchange rates; and
|
•
|
whether scheduled interest payments are past due.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Income from fixed-maturity securities managed by third parties
|
$
|
298
|
|
|
$
|
306
|
|
|
$
|
335
|
|
Income from internally managed securities:
|
|
|
|
|
|
||||||
Fixed maturities
|
120
|
|
|
103
|
|
|
61
|
|
|||
Other
|
9
|
|
|
8
|
|
|
37
|
|
|||
Gross investment income
|
427
|
|
|
417
|
|
|
433
|
|
|||
Investment expenses
|
(9
|
)
|
|
(9
|
)
|
|
(10
|
)
|
|||
Net investment income
|
$
|
418
|
|
|
$
|
408
|
|
|
$
|
423
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Gross realized gains on available-for-sale securities (1)
|
$
|
95
|
|
|
$
|
28
|
|
|
$
|
44
|
|
Gross realized losses on available-for-sale securities
|
(12
|
)
|
|
(8
|
)
|
|
(15
|
)
|
|||
Net realized gains (losses) on other invested assets
|
0
|
|
|
2
|
|
|
(8
|
)
|
|||
Other-than-temporary impairment
|
(43
|
)
|
|
(51
|
)
|
|
(47
|
)
|
|||
Net realized investment gains (losses)
|
$
|
40
|
|
|
$
|
(29
|
)
|
|
$
|
(26
|
)
|
(1)
|
Year ended December 31, 2017 includes a gain on Zohar II Notes used as consideration for the MBIA UK Acquisition. See Note 2, Acquisitions.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Balance, beginning of period
|
$
|
134
|
|
|
$
|
108
|
|
|
$
|
124
|
|
Additions for credit losses on securities for which an other-than-temporary-impairment was not previously recognized
|
13
|
|
|
3
|
|
|
3
|
|
|||
Reductions for securities sold and other settlements
|
(4
|
)
|
|
(4
|
)
|
|
(28
|
)
|
|||
Additions for credit losses on securities for which an other-than-temporary-impairment was previously recognized
|
19
|
|
|
27
|
|
|
9
|
|
|||
Balance, end of period
|
$
|
162
|
|
|
$
|
134
|
|
|
$
|
108
|
|
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
|
|
51
|
%
|
|
$
|
5,504
|
|
|
$
|
267
|
|
|
$
|
(11
|
)
|
|
$
|
5,760
|
|
|
$
|
23
|
|
|
AA
|
U.S. government and agencies
|
|
2
|
|
|
272
|
|
|
14
|
|
|
(1
|
)
|
|
285
|
|
|
—
|
|
|
AA+
|
|||||
Corporate securities
|
|
18
|
|
|
1,973
|
|
|
63
|
|
|
(18
|
)
|
|
2,018
|
|
|
(6
|
)
|
|
A
|
|||||
Mortgage-backed securities(4):
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
RMBS
|
|
8
|
|
|
852
|
|
|
26
|
|
|
(17
|
)
|
|
861
|
|
|
(1
|
)
|
|
BBB+
|
|||||
CMBS
|
|
5
|
|
|
540
|
|
|
12
|
|
|
(3
|
)
|
|
549
|
|
|
—
|
|
|
AAA
|
|||||
Asset-backed securities
|
|
7
|
|
|
730
|
|
|
166
|
|
|
0
|
|
|
896
|
|
|
136
|
|
|
B
|
|||||
Foreign government securities
|
|
3
|
|
|
316
|
|
|
6
|
|
|
(17
|
)
|
|
305
|
|
|
0
|
|
|
AA
|
|||||
Total fixed-maturity securities
|
|
94
|
|
|
10,187
|
|
|
554
|
|
|
(67
|
)
|
|
10,674
|
|
|
152
|
|
|
A+
|
|||||
Short-term investments
|
|
6
|
|
|
627
|
|
|
0
|
|
|
0
|
|
|
627
|
|
|
—
|
|
|
AAA
|
|||||
Total investment portfolio
|
|
100
|
%
|
|
$
|
10,814
|
|
|
$
|
554
|
|
|
$
|
(67
|
)
|
|
$
|
11,301
|
|
|
152
|
|
|
A+
|
Investment Category
|
|
Percent
of
Total(1)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair
Value
|
|
|
Weighted
Average
Credit
Rating
(3)
|
||||||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Obligations of state and political subdivisions
|
|
50
|
%
|
|
$
|
5,269
|
|
|
$
|
202
|
|
|
$
|
(39
|
)
|
|
$
|
5,432
|
|
|
$
|
13
|
|
|
AA
|
U.S. government and agencies
|
|
4
|
|
|
424
|
|
|
17
|
|
|
(1
|
)
|
|
440
|
|
|
—
|
|
|
AA+
|
|||||
Corporate securities
|
|
15
|
|
|
1,612
|
|
|
32
|
|
|
(31
|
)
|
|
1,613
|
|
|
(8
|
)
|
|
A-
|
|||||
Mortgage-backed securities(4):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
RMBS
|
|
9
|
|
|
998
|
|
|
27
|
|
|
(38
|
)
|
|
987
|
|
|
(21
|
)
|
|
A-
|
|||||
CMBS
|
|
5
|
|
|
575
|
|
|
13
|
|
|
(5
|
)
|
|
583
|
|
|
—
|
|
|
AAA
|
|||||
Asset-backed securities
|
|
8
|
|
|
835
|
|
|
110
|
|
|
0
|
|
|
945
|
|
|
33
|
|
|
B
|
|||||
Foreign government securities
|
|
3
|
|
|
261
|
|
|
4
|
|
|
(32
|
)
|
|
233
|
|
|
—
|
|
|
AA
|
|||||
Total fixed-maturity securities
|
|
94
|
|
|
9,974
|
|
|
405
|
|
|
(146
|
)
|
|
10,233
|
|
|
17
|
|
|
A+
|
|||||
Short-term investments
|
|
6
|
|
|
590
|
|
|
0
|
|
|
0
|
|
|
590
|
|
|
—
|
|
|
AAA
|
|||||
Total investment portfolio
|
|
100
|
%
|
|
$
|
10,564
|
|
|
$
|
405
|
|
|
$
|
(146
|
)
|
|
$
|
10,823
|
|
|
$
|
17
|
|
|
A+
|
(1)
|
Based on amortized cost.
|
(2)
|
Also refer to Note 20, Other Comprehensive Income.
|
(3)
|
Ratings in the tables above represent the lower of the Moody’s and S&P Global Ratings, a division of Standard & Poor's Financial Services LLC (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
39%
of mortgage backed securities as of
December 31, 2017
and
42%
as of
December 31, 2016
based on fair value.
|
State
|
|
State
General
Obligation
|
|
Local
General
Obligation
|
|
Revenue Bonds
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Average
Credit
Rating
|
||||||||||
|
|
(in millions)
|
||||||||||||||||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
New York
|
|
$
|
13
|
|
|
$
|
44
|
|
|
$
|
568
|
|
|
$
|
625
|
|
|
$
|
598
|
|
|
AA
|
California
|
|
76
|
|
|
83
|
|
|
421
|
|
|
580
|
|
|
527
|
|
|
A
|
|||||
Texas
|
|
17
|
|
|
212
|
|
|
321
|
|
|
550
|
|
|
528
|
|
|
AA
|
|||||
Washington
|
|
93
|
|
|
87
|
|
|
214
|
|
|
394
|
|
|
381
|
|
|
AA
|
|||||
Florida
|
|
5
|
|
|
17
|
|
|
244
|
|
|
266
|
|
|
254
|
|
|
AA-
|
|||||
Massachusetts
|
|
70
|
|
|
—
|
|
|
151
|
|
|
221
|
|
|
208
|
|
|
AA
|
|||||
Illinois
|
|
18
|
|
|
51
|
|
|
131
|
|
|
200
|
|
|
189
|
|
|
A
|
|||||
Ohio
|
|
16
|
|
|
22
|
|
|
102
|
|
|
140
|
|
|
136
|
|
|
AA
|
|||||
Pennsylvania
|
|
33
|
|
|
21
|
|
|
76
|
|
|
130
|
|
|
125
|
|
|
A+
|
|||||
District of Columbia
|
|
43
|
|
|
—
|
|
|
85
|
|
|
128
|
|
|
123
|
|
|
AA
|
|||||
All others
|
|
138
|
|
|
263
|
|
|
1,233
|
|
|
1,634
|
|
|
1,577
|
|
|
AA-
|
|||||
Total
|
|
$
|
522
|
|
|
$
|
800
|
|
|
$
|
3,546
|
|
|
$
|
4,868
|
|
|
$
|
4,646
|
|
|
AA-
|
State
|
|
State
General
Obligation
|
|
Local
General
Obligation
|
|
Revenue Bonds
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Average
Credit
Rating
|
||||||||||
|
|
(in millions)
|
||||||||||||||||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
New York
|
|
$
|
13
|
|
|
$
|
38
|
|
|
$
|
570
|
|
|
$
|
621
|
|
|
$
|
604
|
|
|
AA
|
California
|
|
73
|
|
|
62
|
|
|
391
|
|
|
526
|
|
|
497
|
|
|
A+
|
|||||
Texas
|
|
16
|
|
|
186
|
|
|
316
|
|
|
518
|
|
|
503
|
|
|
AA
|
|||||
Washington
|
|
81
|
|
|
68
|
|
|
201
|
|
|
350
|
|
|
348
|
|
|
AA
|
|||||
Florida
|
|
16
|
|
|
11
|
|
|
247
|
|
|
274
|
|
|
266
|
|
|
AA-
|
|||||
Massachusetts
|
|
74
|
|
|
—
|
|
|
149
|
|
|
223
|
|
|
215
|
|
|
AA
|
|||||
Illinois
|
|
18
|
|
|
65
|
|
|
127
|
|
|
210
|
|
|
205
|
|
|
A+
|
|||||
Arizona
|
|
—
|
|
|
3
|
|
|
122
|
|
|
125
|
|
|
122
|
|
|
AA
|
|||||
Georgia
|
|
—
|
|
|
9
|
|
|
104
|
|
|
113
|
|
|
109
|
|
|
A+
|
|||||
Pennsylvania
|
|
38
|
|
|
17
|
|
|
58
|
|
|
113
|
|
|
111
|
|
|
A+
|
|||||
All others
|
|
153
|
|
|
155
|
|
|
1,085
|
|
|
1,393
|
|
|
1,364
|
|
|
AA-
|
|||||
Total
|
|
$
|
482
|
|
|
$
|
614
|
|
|
$
|
3,370
|
|
|
$
|
4,466
|
|
|
$
|
4,344
|
|
|
AA-
|
(1)
|
Excludes
$892 million
and
$966 million
as of
December 31, 2017
and
2016
, respectively, of pre-refunded bonds, at fair value. The credit ratings are based on the underlying ratings and do not include any benefit from bond insurance.
|
|
|
As of December 31, 2017
|
|
As of December 31, 2016
|
||||||||||||
Type
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
||||||||
|
|
(in millions)
|
||||||||||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
||||||||
Transportation
|
|
$
|
955
|
|
|
$
|
889
|
|
|
$
|
860
|
|
|
$
|
824
|
|
Water and sewer
|
|
670
|
|
|
641
|
|
|
545
|
|
|
531
|
|
||||
Tax backed
|
|
600
|
|
|
570
|
|
|
617
|
|
|
601
|
|
||||
Higher education
|
|
515
|
|
|
492
|
|
|
513
|
|
|
499
|
|
||||
Municipal utilities
|
|
324
|
|
|
315
|
|
|
365
|
|
|
360
|
|
||||
Healthcare
|
|
308
|
|
|
293
|
|
|
310
|
|
|
298
|
|
||||
All others
|
|
174
|
|
|
169
|
|
|
160
|
|
|
158
|
|
||||
Total
|
|
$
|
3,546
|
|
|
$
|
3,369
|
|
|
$
|
3,370
|
|
|
$
|
3,271
|
|
|
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
|
$
|
166
|
|
|
$
|
(4
|
)
|
|
$
|
281
|
|
|
$
|
(7
|
)
|
|
$
|
447
|
|
|
$
|
(11
|
)
|
U.S. government and agencies
|
151
|
|
|
0
|
|
|
18
|
|
|
(1
|
)
|
|
169
|
|
|
(1
|
)
|
||||||
Corporate securities
|
201
|
|
|
(1
|
)
|
|
240
|
|
|
(17
|
)
|
|
441
|
|
|
(18
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
RMBS
|
191
|
|
|
(5
|
)
|
|
213
|
|
|
(12
|
)
|
|
404
|
|
|
(17
|
)
|
||||||
CMBS
|
29
|
|
|
0
|
|
|
80
|
|
|
(3
|
)
|
|
109
|
|
|
(3
|
)
|
||||||
Asset-backed securities
|
48
|
|
|
0
|
|
|
3
|
|
|
0
|
|
|
51
|
|
|
0
|
|
||||||
Foreign government securities
|
20
|
|
|
0
|
|
|
140
|
|
|
(17
|
)
|
|
160
|
|
|
(17
|
)
|
||||||
Total
|
$
|
806
|
|
|
$
|
(10
|
)
|
|
$
|
975
|
|
|
$
|
(57
|
)
|
|
$
|
1,781
|
|
|
$
|
(67
|
)
|
Number of securities(1)
|
|
|
|
244
|
|
|
|
|
|
264
|
|
|
|
|
|
499
|
|
||||||
Number of securities with other-than-temporary impairment(1)
|
|
|
|
17
|
|
|
|
|
|
15
|
|
|
|
|
|
31
|
|
|
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
|
$
|
254
|
|
|
$
|
256
|
|
Due after one year through five years
|
1,574
|
|
|
1,604
|
|
||
Due after five years through 10 years
|
2,368
|
|
|
2,443
|
|
||
Due after 10 years
|
4,599
|
|
|
4,961
|
|
||
Mortgage-backed securities:
|
|
|
|
|
|
||
RMBS
|
852
|
|
|
861
|
|
||
CMBS
|
540
|
|
|
549
|
|
||
Total
|
$
|
10,187
|
|
|
$
|
10,674
|
|
|
As of December 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Assets purchased for loss mitigation and other risk management purposes:
|
|
|
|
||||
Fixed-maturity securities, at fair value
|
$
|
1,231
|
|
|
$
|
1,492
|
|
Other invested assets
|
20
|
|
|
107
|
|
||
Alternative investments
|
69
|
|
|
48
|
|
||
Other
|
5
|
|
|
7
|
|
||
Total
|
$
|
1,325
|
|
|
$
|
1,654
|
|
|
As of December 31,
|
||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||
|
(in millions)
|
||||||||||||||
Cash
|
$
|
144
|
|
|
$
|
118
|
|
|
$
|
166
|
|
|
$
|
75
|
|
Restricted cash (1)
|
0
|
|
|
9
|
|
|
0
|
|
|
19
|
|
||||
Total cash and restricted cash
|
$
|
144
|
|
|
$
|
127
|
|
|
$
|
166
|
|
|
$
|
94
|
|
(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
|
|
Policyholders' Surplus
|
|
Net Income (Loss)
|
||||||||||||||||
|
As of December 31,
|
|
Year Ended December 31,
|
||||||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
|
(in millions)
|
||||||||||||||||||
U.S. statutory companies:
|
|
|
|
|
|
|
|
|
|
||||||||||
AGM(1)
|
$
|
2,254
|
|
|
$
|
2,321
|
|
|
$
|
152
|
|
|
$
|
191
|
|
|
$
|
217
|
|
AGC(1)(2)
|
2,073
|
|
|
1,896
|
|
|
219
|
|
|
108
|
|
|
(92
|
)
|
|||||
MAC
|
270
|
|
|
487
|
|
|
32
|
|
|
142
|
|
|
102
|
|
|||||
Bermuda statutory company:
|
|
|
|
|
|
|
|
|
|
||||||||||
AG Re
|
1,294
|
|
|
1,255
|
|
|
156
|
|
|
139
|
|
|
51
|
|
(1)
|
Policyholders' surplus of AGM and AGC include their indirect share of MAC. AGM and AGC own approximately
61%
and
39%
, respectively, of the outstanding stock of Municipal Assurance Holdings Inc. (MAC Holdings), which owns
100%
of the outstanding common stock of MAC.
|
(2)
|
As indicated in Note 2, Acquisitions, AGC completed the acquisition of MBIA UK (now AGLN) on January 10, 2017, CIFGH (the parent company of CIFGNA) on July 1, 2016 and Radian Asset on April 1, 2015. As mentioned in Note 1, Business and Basis of Presentation, AGC sold AGLN to AGM on June 26, 2017. Both CIFGNA and Radian Asset were merged with and into AGC, with AGC as the surviving company of the merger. The impact to AGC's policyholders' surplus was a decrease of approximately
$36 million
from the MBIA UK acquisition, on a statutory basis, as of January 10, 2017, and an increase of
$287 million
from the CIFGH acquisition, on a statutory basis, as of July 1, 2016.
|
•
|
upfront premiums are earned when related principal and interest have expired rather than earned over the expected period of coverage;
|
•
|
acquisition costs are charged to expense as incurred rather than over the period that related premiums are earned;
|
•
|
a contingency reserve is computed based on statutory requirements, whereas no such reserve is required under GAAP;
|
•
|
certain assets designated as “non-admitted assets” are charged directly to statutory surplus, rather than reflected as assets under GAAP;
|
•
|
investments in subsidiaries are carried on the balance sheet on the equity basis, to the extent admissible, rather than consolidated with the parent;
|
•
|
the amount of deferred tax assets that may be admitted is subject to an adjusted surplus threshold and is generally limited to the lesser of those assets the Company expects to realize within
three years
of the balance sheet date or
fifteen percent
of the Company's adjusted surplus. This realization period and surplus percentage is subject to change based on the amount of adjusted surplus. Under GAAP there is no non-admitted asset determination, rather a valuation allowance is recorded to reduce the deferred tax asset to an amount that is more likely than not to be realized;
|
•
|
insured credit derivatives are accounted for as insurance contracts rather than as derivative contracts measured at fair value;
|
•
|
bonds are generally carried at amortized cost rather than fair value;
|
•
|
insured obligations of VIEs and refinancing vehicles debt, where the Company is deemed the primary beneficiary, are accounted for as insurance contracts. Under GAAP, such VIEs and refinancing vehicles are consolidated and any transactions with the Company are eliminated;
|
•
|
surplus notes are recognized as surplus and each payment of principal and interest is recorded only upon approval of the insurance regulator rather than liabilities with periodic accrual of interest;
|
•
|
acquisitions are accounted for as either statutory purchases or statutory mergers, rather than the purchase method under GAAP;
|
•
|
losses are discounted at a rate of
4.0%
or
4.5%
, recorded when the loss is deemed probable and without consideration of the deferred premium revenue. Under GAAP, expected losses are discounted at the risk free rate at the end of each reporting period and are recorded only to the extent they exceed deferred premium revenue;
|
•
|
the present value of installment premiums and commissions are not recorded on the balance sheet as they are under GAAP; and
|
•
|
mergers of acquired companies are treated as statutory mergers at historical balances and financial statements are retroactively revised assuming the merger occurred at the beginning of the prior year, rather than prospectively beginning with the date of acquisition at fair value under GAAP.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Dividends paid by AGC to AGUS
|
$
|
107
|
|
|
$
|
79
|
|
|
$
|
90
|
|
Dividends paid by AGM to AGMH
|
196
|
|
|
247
|
|
|
215
|
|
|||
Dividends paid by AG Re to AGL
|
125
|
|
|
100
|
|
|
150
|
|
|||
Dividends paid by MAC to MAC Holdings (1)
|
36
|
|
|
—
|
|
|
—
|
|
|||
Redemption of common stock by AGM to AGMH
|
101
|
|
|
300
|
|
|
—
|
|
|||
Redemption of common stock by MAC to MAC Holdings (1)
|
250
|
|
|
—
|
|
|
—
|
|
|||
Repayment of surplus note by MAC to AGM
|
—
|
|
|
100
|
|
|
—
|
|
|||
Repayment of surplus note by MAC to MAC Holdings (1)
|
—
|
|
|
300
|
|
|
—
|
|
|||
Repayment of surplus note by AGM to AGMH
|
—
|
|
|
—
|
|
|
25
|
|
(1)
|
MAC Holdings distributed nearly the entire amounts to AGM and AGC, in proportion to their ownership percentages.
|
12.
|
Income Taxes
|
|
Year Ended December 31, 2017
|
||
|
(in millions)
|
||
Transition tax
|
$
|
93
|
|
Foreign tax credit realized
|
(31
|
)
|
|
Write down of unremitted earnings
|
(38
|
)
|
|
Net impact of repatriation
|
24
|
|
|
Write down of deferred tax asset due to tax rate change
|
37
|
|
|
Net impact of Tax Act
|
$
|
61
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Expected tax provision (benefit) at statutory rates in taxable jurisdictions
|
$
|
300
|
|
|
$
|
316
|
|
|
$
|
443
|
|
Tax-exempt interest
|
(49
|
)
|
|
(49
|
)
|
|
(54
|
)
|
|||
Goodwill impairment and gain on bargain purchase price
|
(20
|
)
|
|
(125
|
)
|
|
(19
|
)
|
|||
Change in liability for uncertain tax positions
|
(26
|
)
|
|
11
|
|
|
12
|
|
|||
Effect of provision to tax return filing adjustments
|
(8
|
)
|
|
(15
|
)
|
|
(11
|
)
|
|||
State taxes
|
9
|
|
|
3
|
|
|
1
|
|
|||
Effect of Tax Act
|
61
|
|
|
—
|
|
|
—
|
|
|||
Other
|
(6
|
)
|
|
(5
|
)
|
|
3
|
|
|||
Total provision (benefit) for income taxes
|
$
|
261
|
|
|
$
|
136
|
|
|
$
|
375
|
|
Effective tax rate
|
26.3
|
%
|
|
13.4
|
%
|
|
26.2
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
United States
|
$
|
1,543
|
|
|
$
|
1,442
|
|
|
$
|
1,853
|
|
Bermuda
|
216
|
|
|
239
|
|
|
361
|
|
|||
U.K.
|
(20
|
)
|
|
(4
|
)
|
|
(7
|
)
|
|||
Total
|
$
|
1,739
|
|
|
$
|
1,677
|
|
|
$
|
2,207
|
|
|
As of December 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Deferred tax assets:
|
|
|
|
||||
Unrealized losses on credit derivative financial instruments, net
|
$
|
20
|
|
|
$
|
66
|
|
Unearned premium reserves, net
|
124
|
|
|
229
|
|
||
Loss and LAE reserve
|
—
|
|
|
216
|
|
||
Tax and loss bonds
|
—
|
|
|
50
|
|
||
Alternative minimum tax credit
|
59
|
|
|
17
|
|
||
Foreign tax credit
|
43
|
|
|
20
|
|
||
DAC
|
—
|
|
|
29
|
|
||
Investment basis difference
|
63
|
|
|
76
|
|
||
Deferred compensation
|
21
|
|
|
40
|
|
||
Net operating loss
|
38
|
|
|
64
|
|
||
FG VIE
|
13
|
|
|
14
|
|
||
Other
|
14
|
|
|
29
|
|
||
Total deferred income tax assets
|
395
|
|
|
850
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Contingency reserves
|
—
|
|
|
82
|
|
||
Public debt
|
53
|
|
|
91
|
|
||
Unrealized appreciation on investments
|
91
|
|
|
84
|
|
||
Unrealized gains on CCS
|
13
|
|
|
22
|
|
||
Market discount
|
28
|
|
|
22
|
|
||
Loss and LAE reserve
|
27
|
|
|
—
|
|
||
DAC
|
12
|
|
|
—
|
|
||
Deferred balances related to non-US affiliates
|
16
|
|
|
3
|
|
||
Other
|
14
|
|
|
30
|
|
||
Total deferred income tax liabilities
|
254
|
|
|
334
|
|
||
Less: Valuation allowance
|
43
|
|
|
19
|
|
||
Net deferred income tax asset
|
$
|
98
|
|
|
$
|
497
|
|
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Balance as of January 1,
|
$
|
50
|
|
|
$
|
40
|
|
|
$
|
28
|
|
Effect of provision to tax return filing adjustments
|
8
|
|
|
6
|
|
|
10
|
|
|||
Increase in unrecognized tax positions as a result of position taken during the current period
|
1
|
|
|
4
|
|
|
2
|
|
|||
Decrease in unrecognized tax positions as a result of settlement of positions taken during the prior period
|
(31
|
)
|
|
—
|
|
|
—
|
|
|||
Balance as of December 31,
|
$
|
28
|
|
|
$
|
50
|
|
|
$
|
40
|
|
13.
|
Reinsurance and Other Monoline Exposures
|
•
|
if the Company fails to meet certain financial and regulatory criteria and to maintain a specified minimum financial strength rating, or
|
•
|
upon certain changes of control of the Company.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Premiums Written:
|
|
|
|
|
|
||||||
Direct
|
$
|
297
|
|
|
$
|
165
|
|
|
$
|
164
|
|
Assumed(1)
|
10
|
|
|
(11
|
)
|
|
17
|
|
|||
Ceded(2)
|
18
|
|
|
(17
|
)
|
|
10
|
|
|||
Net
|
$
|
325
|
|
|
$
|
137
|
|
|
$
|
191
|
|
Premiums Earned:
|
|
|
|
|
|
||||||
Direct
|
$
|
693
|
|
|
$
|
887
|
|
|
$
|
792
|
|
Assumed
|
27
|
|
|
27
|
|
|
40
|
|
|||
Ceded
|
(30
|
)
|
|
(50
|
)
|
|
(66
|
)
|
|||
Net
|
$
|
690
|
|
|
$
|
864
|
|
|
$
|
766
|
|
Loss and LAE:
|
|
|
|
|
|
||||||
Direct
|
$
|
404
|
|
|
$
|
327
|
|
|
$
|
399
|
|
Assumed
|
11
|
|
|
0
|
|
|
45
|
|
|||
Ceded
|
(27
|
)
|
|
(32
|
)
|
|
(20
|
)
|
|||
Net
|
$
|
388
|
|
|
$
|
295
|
|
|
$
|
424
|
|
(1)
|
Negative assumed premiums written were due to changes in expected debt service schedules.
|
(2)
|
Positive ceded premiums written were due to commutations and changes in expected debt service schedules.
|
|
As of December 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Due (To) From:
|
|
|
|
||||
Assumed premium, net of commissions
|
$
|
53
|
|
|
$
|
65
|
|
Ceded premium, net of commissions
|
(42
|
)
|
|
(46
|
)
|
||
Assumed expected loss to be paid
|
(71
|
)
|
|
(70
|
)
|
||
Ceded expected loss to be paid
|
29
|
|
|
87
|
|
||
Par Outstanding:
|
|
|
|
||||
Ceded par outstanding (2)
|
4,434
|
|
|
11,156
|
|
||
Assumed par outstanding
|
8,383
|
|
|
13,264
|
|
||
Second-to-pay insured par outstanding (3)
|
6,605
|
|
|
11,539
|
|
(1)
|
The total collateral posted by all non-affiliated reinsurers required to post, or that had agreed to post, collateral as of
December 31, 2017
and
December 31, 2016
was approximately
$118 million
and
$387 million
, respectively.
|
(2)
|
Of the total ceded par to unrated or BIG rated reinsurers,
$296 million
and
$384 million
is rated BIG as of
December 31, 2017
and
December 31, 2016
, respectively.
|
(3)
|
The par on second-to-pay exposure where the primary insurer and underlying transaction rating are both BIG and/or not rated is
$204 million
and
$788 million
as of
December 31, 2017
and
December 31, 2016
, respectively. Second-to-pay insured par outstanding represents transactions the Company has insured that were previously insured by such other monoline financial guaranty insurers. The Company underwrites such transactions based on the underlying insured obligation without regard to the primary insurer.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Increase (decrease) in net unearned premium reserve
|
$
|
82
|
|
|
$
|
—
|
|
|
$
|
23
|
|
Increase (decrease) in net par outstanding
|
5,107
|
|
|
28
|
|
|
855
|
|
|||
Commutation gains (losses)
|
328
|
|
|
8
|
|
|
28
|
|
14.
|
Related Party Transactions
|
15.
|
Commitments and Contingencies
|
Year
|
|
(in millions)
|
||
2018
|
$
|
8
|
|
|
2019
|
9
|
|
||
2020
|
9
|
|
||
2021
|
8
|
|
||
2022
|
9
|
|
||
Thereafter
|
80
|
|
||
Total
|
$
|
123
|
|
16.
|
Long-Term Debt and Credit Facilities
|
|
As of December 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):
|
|
|
|
|
|
|
|
|
|
|
|
||||
6
7
/
8
% QUIBS (1)
|
100
|
|
|
70
|
|
|
100
|
|
|
69
|
|
||||
6.25% Notes (1)
|
230
|
|
|
142
|
|
|
230
|
|
|
141
|
|
||||
5.6% Notes (1)
|
100
|
|
|
57
|
|
|
100
|
|
|
56
|
|
||||
Junior Subordinated Debentures (2)
|
300
|
|
|
192
|
|
|
300
|
|
|
187
|
|
||||
Total AGMH
|
730
|
|
|
461
|
|
|
730
|
|
|
453
|
|
||||
AGM(3):
|
|
|
|
|
|
|
|
|
|
|
|
||||
AGM Notes Payable
|
6
|
|
|
6
|
|
|
9
|
|
|
10
|
|
||||
Total AGM
|
6
|
|
|
6
|
|
|
9
|
|
|
10
|
|
||||
Purchased debt (4)
|
(28
|
)
|
|
(18
|
)
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
1,558
|
|
|
$
|
1,292
|
|
|
$
|
1,589
|
|
|
$
|
1,306
|
|
(1)
|
AGL fully and unconditionally guarantees these obligations.
|
(2)
|
Guaranteed by AGL on a junior subordinated basis.
|
(3)
|
Carrying amounts are different than principal amounts due primarily to fair value adjustments at the AGMH acquisition date, which are accreted or amortized into interest expense over the remaining terms of these obligations.
|
(4)
|
In 2017, AGUS purchased
$28 million
principal amount of AGMH's outstanding Junior Subordinated Debentures. The Company recognized a
$9 million
loss on extinguishment of debt, which is included in other income.
|
|
|
AGUS
|
|
AGMH
|
|
AGM
|
|
Total (1)
|
||||||||
|
|
(in millions)
|
||||||||||||||
2018-2022
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5
|
|
|
$
|
5
|
|
2023-2042
|
|
700
|
|
|
—
|
|
|
1
|
|
|
701
|
|
||||
2043-2062
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
2063-2082
|
|
150
|
|
|
300
|
|
|
—
|
|
|
450
|
|
||||
Thereafter
|
|
—
|
|
|
430
|
|
|
—
|
|
|
430
|
|
||||
Total
|
|
$
|
850
|
|
|
$
|
730
|
|
|
$
|
6
|
|
|
$
|
1,586
|
|
(1)
|
Includes AGMH's purchased debt.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
AGUS:
|
|
|
|
|
|
|
|
|
|||
7% Senior Notes
|
$
|
13
|
|
|
$
|
13
|
|
|
$
|
13
|
|
5% Senior Notes
|
26
|
|
|
26
|
|
|
26
|
|
|||
Series A Enhanced Junior Subordinated Debentures
|
5
|
|
|
9
|
|
|
10
|
|
|||
Total AGUS
|
44
|
|
|
48
|
|
|
49
|
|
|||
AGMH:
|
|
|
|
|
|
|
|
|
|||
6
7
/
8
% QUIBS
|
7
|
|
|
7
|
|
|
7
|
|
|||
6.25% Notes
|
16
|
|
|
16
|
|
|
16
|
|
|||
5.6% Notes
|
6
|
|
|
6
|
|
|
6
|
|
|||
Junior Subordinated Debentures
|
25
|
|
|
25
|
|
|
25
|
|
|||
Total AGMH
|
54
|
|
|
54
|
|
|
54
|
|
|||
AGM:
|
|
|
|
|
|
|
|
|
|||
Notes Payable
|
0
|
|
|
0
|
|
|
(2
|
)
|
|||
Total AGM
|
0
|
|
|
0
|
|
|
(2
|
)
|
|||
Purchased debt
|
(1
|
)
|
|
—
|
|
|
—
|
|
|||
Total
|
$
|
97
|
|
|
$
|
102
|
|
|
$
|
101
|
|
17.
|
Earnings Per Share
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions, except per share amounts)
|
||||||||||
Basic EPS:
|
|
|
|
|
|
||||||
Net income (loss) attributable to AGL
|
$
|
730
|
|
|
$
|
881
|
|
|
1,056
|
|
|
Less: Distributed and undistributed income (loss) available to nonvested shareholders
|
1
|
|
|
1
|
|
|
1
|
|
|||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic
|
$
|
729
|
|
|
$
|
880
|
|
|
1,055
|
|
|
Basic shares
|
120.6
|
|
|
133.0
|
|
|
148.1
|
|
|||
Basic EPS
|
$
|
6.05
|
|
|
$
|
6.61
|
|
|
$
|
7.12
|
|
|
|
|
|
|
|
||||||
Diluted EPS:
|
|
|
|
|
|
||||||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic
|
$
|
729
|
|
|
$
|
880
|
|
|
$
|
1,055
|
|
Plus: Re-allocation of undistributed income (loss) available to nonvested shareholders of AGL and subsidiaries
|
0
|
|
|
0
|
|
|
0
|
|
|||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, diluted
|
$
|
729
|
|
|
$
|
880
|
|
|
$
|
1,055
|
|
|
|
|
|
|
|
||||||
Basic shares
|
120.6
|
|
|
133.0
|
|
|
148.1
|
|
|||
Dilutive securities:
|
|
|
|
|
|
||||||
Options and restricted stock awards
|
1.7
|
|
|
1.1
|
|
|
0.9
|
|
|||
Diluted shares
|
122.3
|
|
|
134.1
|
|
|
149.0
|
|
|||
Diluted EPS
|
$
|
5.96
|
|
|
$
|
6.56
|
|
|
$
|
7.08
|
|
Potentially dilutive securities excluded from computation of EPS because of antidilutive effect
|
0.1
|
|
|
0.3
|
|
|
0.5
|
|
18.
|
Shareholders' Equity
|
Year
|
|
Number of Shares Repurchased
|
|
Total Payments
(in millions)
|
|
Average Price Paid Per Share
|
|||||
2015
|
|
20,995,419
|
|
|
$
|
555
|
|
|
$
|
26.43
|
|
2016
|
|
10,721,248
|
|
|
$
|
306
|
|
|
$
|
28.53
|
|
2017
|
|
12,669,643
|
|
|
$
|
501
|
|
|
$
|
39.57
|
|
2018 (through February 23, 2018 on a settlement date basis)
|
|
1,230,941
|
|
|
$
|
43
|
|
|
$
|
34.90
|
|
19.
|
Employee Benefit Plans
|
|
Options for
Common Shares
|
|
Weighted
Average
Exercise Price
|
|
Number of
Exercisable
Options
|
||||
Balance as of December 31, 2016
|
1,170,593
|
|
|
$
|
18.43
|
|
|
1,145,356
|
|
Options granted
|
—
|
|
|
—
|
|
|
|
||
Options exercised
|
(331,639
|
)
|
|
21.02
|
|
|
|
||
Options forfeited/expired
|
—
|
|
|
—
|
|
|
|
||
Balance as of December 31, 2017
|
838,954
|
|
|
$
|
17.41
|
|
|
838,954
|
|
|
Options for
Common Shares
|
|
Weighted
Average
Exercise Price
|
|
Number of
Exercisable
Options
|
||||
Balance as of December 31, 2016
|
221,409
|
|
|
$
|
17.89
|
|
|
221,409
|
|
Options granted
|
—
|
|
|
—
|
|
|
|
||
Options exercised
|
(30,508
|
)
|
|
18.45
|
|
|
|
||
Options forfeited/expired
|
—
|
|
|
—
|
|
|
|
||
Balance as of December 31, 2017
|
190,901
|
|
|
$
|
17.80
|
|
|
190,901
|
|
Nonvested Shares
|
|
Number of
Shares
|
|
Weighted
Average Grant
Date Fair Value
Per Share
|
|||
Nonvested at December 31, 2016
|
58,858
|
|
|
$
|
25.57
|
|
|
Granted
|
50,225
|
|
|
37.93
|
|
||
Vested
|
(58,858
|
)
|
|
25.57
|
|
||
Forfeited
|
—
|
|
|
—
|
|
||
Nonvested at December 31, 2017
|
50,225
|
|
|
$
|
37.93
|
|
Nonvested Stock Units
|
|
Number of
Stock Units
|
|
Weighted
Average Grant
Date Fair Value
Per Share
|
|||
Nonvested at December 31, 2016
|
945,509
|
|
|
$
|
24.01
|
|
|
Granted
|
245,735
|
|
|
41.37
|
|
||
Vested
|
(289,176
|
)
|
|
22.74
|
|
||
Forfeited
|
(47,449
|
)
|
|
23.35
|
|
||
Nonvested at December 31, 2017
|
854,619
|
|
|
$
|
29.67
|
|
Performance Restricted Stock Units
|
|
Number of
Performance Share Units
|
|
Weighted
Average Grant
Date Fair Value
Per Share
|
|||
Nonvested at December 31, 2016
|
609,435
|
|
|
$
|
26.22
|
|
|
Granted (1)
|
315,896
|
|
|
53.74
|
|
||
Delivered
|
(318,467
|
)
|
|
25.17
|
|
||
Forfeited
|
—
|
|
|
—
|
|
||
Nonvested at December 31, 2017 (2)
|
606,864
|
|
|
$
|
33.80
|
|
(1)
|
Includes
155,000
performance restricted stock units that were granted prior to 2017 at a weighted average grant date fair value of
$25.17
, but met performance hurdles and vested in February 2017. The weighted average grant date fair value per share excludes these shares.
|
(2)
|
Excludes
426,670
performance restricted stock units that have met performance hurdles and will be eligible for vesting after December 31, 2017.
|
|
|
2017
|
|
2016
|
|
2015
|
||||||
Dividend yield
|
|
1.37
|
%
|
|
2.12
|
%
|
|
1.90
|
%
|
|||
Expected volatility
|
|
25.19
|
%
|
|
30.84
|
%
|
|
32.20
|
%
|
|||
Risk free interest rate
|
|
1.48
|
%
|
|
0.90
|
%
|
|
0.82
|
%
|
|||
Weighted average grant date fair value
|
|
$
|
53.74
|
|
|
$
|
25.62
|
|
|
$
|
28.31
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(dollars in millions)
|
||||||||||
Proceeds from purchase of shares by employees
|
$
|
1.0
|
|
|
$
|
0.9
|
|
|
$
|
0.8
|
|
Number of shares issued by the Company
|
33,666
|
|
|
39,055
|
|
|
38,565
|
|
|||
Recorded in share-based compensation, net of deferral
|
$
|
0.3
|
|
|
$
|
0.2
|
|
|
$
|
0.2
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
(in millions)
|
||||||||||
Share‑based compensation expense
|
$
|
16
|
|
|
$
|
13
|
|
|
$
|
10
|
|
Share‑based compensation capitalized as DAC
|
0.6
|
|
|
0.4
|
|
|
0.5
|
|
|||
Income tax benefit
|
2
|
|
|
3
|
|
|
2
|
|
20.
|
Other Comprehensive Income
|
|
Net Unrealized
Gains (Losses) on
Investments with no Other-Than-Temporary Impairment
|
|
Net Unrealized
Gains (Losses) on
Investments with Other-Than-Temporary Impairment
|
|
Cumulative
Translation
Adjustment
|
|
Cash Flow Hedge
|
|
Total Accumulated
Other
Comprehensive
Income
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Balance, December 31, 2016
|
$
|
171
|
|
|
$
|
10
|
|
|
$
|
(39
|
)
|
|
$
|
7
|
|
|
$
|
149
|
|
Reclassification of stranded tax effects (see Note 1)
|
38
|
|
|
21
|
|
|
(5
|
)
|
|
2
|
|
|
56
|
|
|||||
Other comprehensive income (loss) before reclassifications
|
128
|
|
|
69
|
|
|
15
|
|
|
—
|
|
|
212
|
|
|||||
Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net realized investment gains (losses)
|
(71
|
)
|
|
31
|
|
|
—
|
|
|
—
|
|
|
(40
|
)
|
|||||
Net investment income
|
(27
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(28
|
)
|
|||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||||
Total before tax
|
(98
|
)
|
|
30
|
|
|
—
|
|
|
(1
|
)
|
|
(69
|
)
|
|||||
Tax (provision) benefit
|
34
|
|
|
(10
|
)
|
|
—
|
|
|
0
|
|
|
24
|
|
|||||
Total amount reclassified from AOCI, net of tax
|
(64
|
)
|
|
20
|
|
|
—
|
|
|
(1
|
)
|
|
(45
|
)
|
|||||
Net current period other comprehensive income (loss)
|
64
|
|
|
89
|
|
|
15
|
|
|
(1
|
)
|
|
167
|
|
|||||
Balance, December 31, 2017
|
$
|
273
|
|
|
$
|
120
|
|
|
$
|
(29
|
)
|
|
$
|
8
|
|
|
$
|
372
|
|
|
Net Unrealized
Gains (Losses) on
Investments with no Other-Than-Temporary Impairment
|
|
Net Unrealized
Gains (Losses) on
Investments with Other-Than-Temporary Impairment
|
|
Cumulative
Translation
Adjustment
|
|
Cash Flow Hedge
|
|
Total
Accumulated Other Comprehensive Income |
||||||||||
|
(in millions)
|
||||||||||||||||||
Balance, December 31, 2015
|
$
|
260
|
|
|
$
|
(15
|
)
|
|
$
|
(16
|
)
|
|
$
|
8
|
|
|
$
|
237
|
|
Other comprehensive income (loss) before reclassifications
|
(71
|
)
|
|
(9
|
)
|
|
(23
|
)
|
|
—
|
|
|
(103
|
)
|
|||||
Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net realized investment gains (losses)
|
(23
|
)
|
|
52
|
|
|
—
|
|
|
—
|
|
|
29
|
|
|||||
Net investment income
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||||
Total before tax
|
(26
|
)
|
|
52
|
|
|
—
|
|
|
(1
|
)
|
|
25
|
|
|||||
Tax (provision) benefit
|
8
|
|
|
(18
|
)
|
|
—
|
|
|
0
|
|
|
(10
|
)
|
|||||
Total amount reclassified from AOCI, net of tax
|
(18
|
)
|
|
34
|
|
|
—
|
|
|
(1
|
)
|
|
15
|
|
|||||
Net current period other comprehensive income (loss)
|
(89
|
)
|
|
25
|
|
|
(23
|
)
|
|
(1
|
)
|
|
(88
|
)
|
|||||
Balance, December 31, 2016
|
$
|
171
|
|
|
$
|
10
|
|
|
$
|
(39
|
)
|
|
$
|
7
|
|
|
$
|
149
|
|
|
Net Unrealized
Gains (Losses) on
Investments with no Other-Than-Temporary Impairment
|
|
Net Unrealized
Gains (Losses) on
Investments with Other-Than-Temporary Impairment
|
|
Cumulative
Translation
Adjustment
|
|
Cash Flow
Hedge |
|
Total
Accumulated Other Comprehensive Income |
||||||||||
|
(in millions)
|
||||||||||||||||||
Balance, December 31, 2014
|
$
|
367
|
|
|
$
|
4
|
|
|
$
|
(10
|
)
|
|
$
|
9
|
|
|
$
|
370
|
|
Other comprehensive income (loss) before reclassifications
|
(93
|
)
|
|
(43
|
)
|
|
(6
|
)
|
|
—
|
|
|
(142
|
)
|
|||||
Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net realized investment gains (losses)
|
(11
|
)
|
|
37
|
|
|
—
|
|
|
—
|
|
|
26
|
|
|||||
Net investment income
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
|||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||||
Total before tax
|
(20
|
)
|
|
37
|
|
|
—
|
|
|
(1
|
)
|
|
16
|
|
|||||
Tax (provision) benefit
|
6
|
|
|
(13
|
)
|
|
—
|
|
|
0
|
|
|
(7
|
)
|
|||||
Total amount reclassified from AOCI, net of tax
|
(14
|
)
|
|
24
|
|
|
—
|
|
|
(1
|
)
|
|
9
|
|
|||||
Net current period other comprehensive income (loss)
|
(107
|
)
|
|
(19
|
)
|
|
(6
|
)
|
|
(1
|
)
|
|
(133
|
)
|
|||||
Balance, December 31, 2015
|
$
|
260
|
|
|
$
|
(15
|
)
|
|
$
|
(16
|
)
|
|
$
|
8
|
|
|
$
|
237
|
|
21.
|
Subsidiary Information
|
|
Assured Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured Guaranty Ltd.
(Consolidated)
|
||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total investment portfolio and cash
|
$
|
36
|
|
|
$
|
319
|
|
|
$
|
28
|
|
|
$
|
11,484
|
|
|
$
|
(328
|
)
|
|
$
|
11,539
|
|
Investment in subsidiaries
|
6,794
|
|
|
6,126
|
|
|
4,048
|
|
|
216
|
|
|
(17,184
|
)
|
|
—
|
|
||||||
Premiums receivable, net of commissions payable
|
—
|
|
|
—
|
|
|
—
|
|
|
1,074
|
|
|
(159
|
)
|
|
915
|
|
||||||
Ceded unearned premium reserve
|
—
|
|
|
—
|
|
|
—
|
|
|
1,002
|
|
|
(883
|
)
|
|
119
|
|
||||||
Deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
144
|
|
|
(43
|
)
|
|
101
|
|
||||||
Reinsurance recoverable on unpaid losses
|
—
|
|
|
—
|
|
|
—
|
|
|
433
|
|
|
(389
|
)
|
|
44
|
|
||||||
Credit derivative assets
|
—
|
|
|
—
|
|
|
—
|
|
|
39
|
|
|
(37
|
)
|
|
2
|
|
||||||
Deferred tax asset, net
|
—
|
|
|
59
|
|
|
—
|
|
|
93
|
|
|
(54
|
)
|
|
98
|
|
||||||
Intercompany receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
60
|
|
|
(60
|
)
|
|
—
|
|
||||||
Financial guaranty variable interest entities’ assets, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
700
|
|
|
—
|
|
|
700
|
|
||||||
Other
|
26
|
|
|
0
|
|
|
40
|
|
|
1,171
|
|
|
(322
|
)
|
|
915
|
|
||||||
TOTAL ASSETS
|
$
|
6,856
|
|
|
$
|
6,504
|
|
|
$
|
4,116
|
|
|
$
|
16,416
|
|
|
$
|
(19,459
|
)
|
|
$
|
14,433
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Unearned premium reserves
|
—
|
|
|
—
|
|
|
—
|
|
|
4,423
|
|
|
(948
|
)
|
|
3,475
|
|
||||||
Loss and LAE reserve
|
—
|
|
|
—
|
|
|
—
|
|
|
1,793
|
|
|
(349
|
)
|
|
1,444
|
|
||||||
Long-term debt
|
—
|
|
|
843
|
|
|
461
|
|
|
6
|
|
|
(18
|
)
|
|
1,292
|
|
||||||
Intercompany payable
|
—
|
|
|
60
|
|
|
—
|
|
|
300
|
|
|
(360
|
)
|
|
—
|
|
||||||
Credit derivative liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
308
|
|
|
(37
|
)
|
|
271
|
|
||||||
Deferred tax liabilities, net
|
|
|
|
—
|
|
|
51
|
|
|
—
|
|
|
(51
|
)
|
|
—
|
|
||||||
Financial guaranty variable interest entities’ liabilities, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
757
|
|
|
—
|
|
|
757
|
|
||||||
Other
|
17
|
|
|
59
|
|
|
20
|
|
|
740
|
|
|
(481
|
)
|
|
355
|
|
||||||
TOTAL LIABILITIES
|
17
|
|
|
962
|
|
|
532
|
|
|
8,327
|
|
|
(2,244
|
)
|
|
7,594
|
|
||||||
TOTAL SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO ASSURED GUARANTY LTD.
|
6,839
|
|
|
5,542
|
|
|
3,584
|
|
|
7,873
|
|
|
(16,999
|
)
|
|
6,839
|
|
||||||
Noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
216
|
|
|
(216
|
)
|
|
—
|
|
||||||
TOTAL SHAREHOLDERS’ EQUITY
|
6,839
|
|
|
5,542
|
|
|
3,584
|
|
|
8,089
|
|
|
(17,215
|
)
|
|
6,839
|
|
||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
6,856
|
|
|
$
|
6,504
|
|
|
$
|
4,116
|
|
|
$
|
16,416
|
|
|
$
|
(19,459
|
)
|
|
$
|
14,433
|
|
|
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
|
|
|
3,799
|
|
|
296
|
|
|
(15,955
|
)
|
|
—
|
|
||||||
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
|
|
|
$
|
3,847
|
|
|
$
|
16,176
|
|
|
$
|
(18,557
|
)
|
|
$
|
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
|
|
|
3,292
|
|
|
7,405
|
|
|
(15,655
|
)
|
|
6,504
|
|
||||||
Noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
296
|
|
|
(296
|
)
|
|
—
|
|
||||||
TOTAL SHAREHOLDERS’ EQUITY
|
6,504
|
|
|
4,958
|
|
|
3,292
|
|
|
7,701
|
|
|
(15,951
|
)
|
|
6,504
|
|
||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
6,511
|
|
|
$
|
6,174
|
|
|
$
|
3,847
|
|
|
$
|
16,176
|
|
|
$
|
(18,557
|
)
|
|
$
|
14,151
|
|
|
Assured Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured Guaranty Ltd.
(Consolidated)
|
||||||||||||
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
728
|
|
|
$
|
(38
|
)
|
|
$
|
690
|
|
Net investment income
|
0
|
|
|
2
|
|
|
0
|
|
|
427
|
|
|
(11
|
)
|
|
418
|
|
||||||
Net realized investment gains (losses)
|
—
|
|
|
0
|
|
|
0
|
|
|
45
|
|
|
(5
|
)
|
|
40
|
|
||||||
Net change in fair value of credit derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Realized gains (losses) and other settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
0
|
|
|
(10
|
)
|
||||||
Net unrealized gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
121
|
|
|
—
|
|
|
121
|
|
||||||
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
111
|
|
|
0
|
|
|
111
|
|
||||||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
—
|
|
|
—
|
|
|
58
|
|
|
—
|
|
|
58
|
|
||||||
Other
|
10
|
|
|
—
|
|
|
—
|
|
|
608
|
|
|
(196
|
)
|
|
422
|
|
||||||
TOTAL REVENUES
|
10
|
|
|
2
|
|
|
0
|
|
|
1,977
|
|
|
(250
|
)
|
|
1,739
|
|
||||||
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
327
|
|
|
61
|
|
|
388
|
|
||||||
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
26
|
|
|
(7
|
)
|
|
19
|
|
||||||
Interest expense
|
—
|
|
|
47
|
|
|
54
|
|
|
11
|
|
|
(15
|
)
|
|
97
|
|
||||||
Other operating expenses
|
38
|
|
|
12
|
|
|
1
|
|
|
394
|
|
|
(201
|
)
|
|
244
|
|
||||||
TOTAL EXPENSES
|
38
|
|
|
59
|
|
|
55
|
|
|
758
|
|
|
(162
|
)
|
|
748
|
|
||||||
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN NET EARNINGS OF SUBSIDIARIES
|
(28
|
)
|
|
(57
|
)
|
|
(55
|
)
|
|
1,219
|
|
|
(88
|
)
|
|
991
|
|
||||||
Total (provision) benefit for income taxes
|
—
|
|
|
17
|
|
|
54
|
|
|
(359
|
)
|
|
27
|
|
|
(261
|
)
|
||||||
Equity in net earnings of subsidiaries
|
758
|
|
|
636
|
|
|
395
|
|
|
32
|
|
|
(1,821
|
)
|
|
—
|
|
||||||
NET INCOME (LOSS)
|
730
|
|
|
596
|
|
|
394
|
|
|
892
|
|
|
(1,882
|
)
|
|
730
|
|
||||||
Less: noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
32
|
|
|
(32
|
)
|
|
—
|
|
||||||
NET INCOME (LOSS) ATTRIBUTABLE TO ASSURED GUARANTY LTD.
|
$
|
730
|
|
|
$
|
596
|
|
|
$
|
394
|
|
|
$
|
860
|
|
|
$
|
(1,850
|
)
|
|
$
|
730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
COMPREHENSIVE INCOME (LOSS)
|
$
|
897
|
|
|
$
|
754
|
|
|
$
|
482
|
|
|
$
|
1,084
|
|
|
$
|
(2,320
|
)
|
|
$
|
897
|
|
|
Assured Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured Guaranty Ltd.
(Consolidated)
|
||||||||||||
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
892
|
|
|
$
|
(28
|
)
|
|
$
|
864
|
|
Net investment income
|
0
|
|
|
0
|
|
|
0
|
|
|
412
|
|
|
(4
|
)
|
|
408
|
|
||||||
Net realized investment gains (losses)
|
0
|
|
|
2
|
|
|
0
|
|
|
(28
|
)
|
|
(3
|
)
|
|
(29
|
)
|
||||||
Net change in fair value of credit derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Realized gains (losses) and other settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
29
|
|
|
0
|
|
|
29
|
|
||||||
Net unrealized gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
69
|
|
|
—
|
|
|
69
|
|
||||||
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
98
|
|
|
—
|
|
|
98
|
|
||||||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
—
|
|
|
—
|
|
|
257
|
|
|
2
|
|
|
259
|
|
||||||
Other
|
0
|
|
|
—
|
|
|
—
|
|
|
78
|
|
|
(1
|
)
|
|
77
|
|
||||||
TOTAL REVENUES
|
0
|
|
|
2
|
|
|
0
|
|
|
1,709
|
|
|
(34
|
)
|
|
1,677
|
|
||||||
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
296
|
|
|
(1
|
)
|
|
295
|
|
||||||
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
(12
|
)
|
|
18
|
|
||||||
Interest expense
|
—
|
|
|
52
|
|
|
54
|
|
|
10
|
|
|
(14
|
)
|
|
102
|
|
||||||
Other operating expenses
|
29
|
|
|
2
|
|
|
2
|
|
|
217
|
|
|
(5
|
)
|
|
245
|
|
||||||
TOTAL EXPENSES
|
29
|
|
|
54
|
|
|
56
|
|
|
553
|
|
|
(32
|
)
|
|
660
|
|
||||||
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN NET EARNINGS OF SUBSIDIARIES
|
(29
|
)
|
|
(52
|
)
|
|
(56
|
)
|
|
1,156
|
|
|
(2
|
)
|
|
1,017
|
|
||||||
Total (provision) benefit for income taxes
|
—
|
|
|
18
|
|
|
20
|
|
|
(175
|
)
|
|
1
|
|
|
(136
|
)
|
||||||
Equity in net earnings of subsidiaries
|
910
|
|
|
794
|
|
|
274
|
|
|
44
|
|
|
(2,022
|
)
|
|
—
|
|
||||||
NET INCOME (LOSS)
|
881
|
|
|
760
|
|
|
238
|
|
|
1,025
|
|
|
(2,023
|
)
|
|
881
|
|
||||||
Less: noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
44
|
|
|
(44
|
)
|
|
—
|
|
||||||
NET INCOME (LOSS) ATTRIBUTABLE TO ASSURED GUARANTY LTD.
|
$
|
881
|
|
|
$
|
760
|
|
|
$
|
238
|
|
|
$
|
981
|
|
|
$
|
(1,979
|
)
|
|
$
|
881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
COMPREHENSIVE INCOME (LOSS)
|
$
|
793
|
|
|
$
|
685
|
|
|
$
|
144
|
|
|
$
|
953
|
|
|
$
|
(1,782
|
)
|
|
$
|
793
|
|
|
Assured Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured Guaranty Ltd.
(Consolidated)
|
||||||||||||
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
783
|
|
|
$
|
(17
|
)
|
|
$
|
766
|
|
Net investment income
|
0
|
|
|
1
|
|
|
0
|
|
|
432
|
|
|
(10
|
)
|
|
423
|
|
||||||
Net realized investment gains (losses)
|
0
|
|
|
0
|
|
|
1
|
|
|
(19
|
)
|
|
(8
|
)
|
|
(26
|
)
|
||||||
Net change in fair value of credit derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Realized gains (losses) and other settlements
|
—
|
|
|
—
|
|
|
—
|
|
|
(18
|
)
|
|
0
|
|
|
(18
|
)
|
||||||
Net unrealized gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
773
|
|
|
(27
|
)
|
|
746
|
|
||||||
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
755
|
|
|
(27
|
)
|
|
728
|
|
||||||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
—
|
|
|
—
|
|
|
54
|
|
|
160
|
|
|
214
|
|
||||||
Other
|
—
|
|
|
0
|
|
|
—
|
|
|
102
|
|
|
0
|
|
|
102
|
|
||||||
TOTAL REVENUES
|
0
|
|
|
1
|
|
|
1
|
|
|
2,107
|
|
|
98
|
|
|
2,207
|
|
||||||
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
434
|
|
|
(10
|
)
|
|
424
|
|
||||||
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
29
|
|
|
(9
|
)
|
|
20
|
|
||||||
Interest expense
|
—
|
|
|
52
|
|
|
54
|
|
|
14
|
|
|
(19
|
)
|
|
101
|
|
||||||
Other operating expenses
|
30
|
|
|
1
|
|
|
1
|
|
|
202
|
|
|
(3
|
)
|
|
231
|
|
||||||
TOTAL EXPENSES
|
30
|
|
|
53
|
|
|
55
|
|
|
679
|
|
|
(41
|
)
|
|
776
|
|
||||||
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN NET EARNINGS OF SUBSIDIARIES
|
(30
|
)
|
|
(52
|
)
|
|
(54
|
)
|
|
1,428
|
|
|
139
|
|
|
1,431
|
|
||||||
Total (provision) benefit for income taxes
|
—
|
|
|
18
|
|
|
19
|
|
|
(365
|
)
|
|
(47
|
)
|
|
(375
|
)
|
||||||
Equity in net earnings of subsidiaries
|
1,086
|
|
|
923
|
|
|
464
|
|
|
39
|
|
|
(2,512
|
)
|
|
—
|
|
||||||
NET INCOME (LOSS)
|
1,056
|
|
|
889
|
|
|
429
|
|
|
1,102
|
|
|
(2,420
|
)
|
|
1,056
|
|
||||||
Less: noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
39
|
|
|
(39
|
)
|
|
—
|
|
||||||
NET INCOME (LOSS) ATTRIBUTABLE TO ASSURED GUARANTY LTD.
|
$
|
1,056
|
|
|
$
|
889
|
|
|
$
|
429
|
|
|
$
|
1,063
|
|
|
$
|
(2,381
|
)
|
|
$
|
1,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
COMPREHENSIVE INCOME (LOSS)
|
$
|
923
|
|
|
$
|
787
|
|
|
$
|
348
|
|
|
$
|
967
|
|
|
$
|
(2,102
|
)
|
|
$
|
923
|
|
|
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
|
$
|
579
|
|
|
$
|
442
|
|
|
$
|
158
|
|
|
$
|
477
|
|
|
$
|
(1,223
|
)
|
|
$
|
433
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchases
|
—
|
|
|
(158
|
)
|
|
(17
|
)
|
|
(2,404
|
)
|
|
27
|
|
|
(2,552
|
)
|
||||||
Sales
|
—
|
|
|
112
|
|
|
21
|
|
|
1,568
|
|
|
—
|
|
|
1,701
|
|
||||||
Maturities
|
—
|
|
|
13
|
|
|
0
|
|
|
808
|
|
|
—
|
|
|
821
|
|
||||||
Sales (purchases) of short-term investments, net
|
0
|
|
|
131
|
|
|
(8
|
)
|
|
(49
|
)
|
|
—
|
|
|
74
|
|
||||||
Net proceeds from FG VIE assets
|
—
|
|
|
—
|
|
|
—
|
|
|
147
|
|
|
—
|
|
|
147
|
|
||||||
Investment in subsidiaries
|
—
|
|
|
(28
|
)
|
|
—
|
|
|
(139
|
)
|
|
167
|
|
|
—
|
|
||||||
Intercompany debt
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
(10
|
)
|
|
—
|
|
||||||
Proceeds from sale of subsidiaries
|
—
|
|
|
—
|
|
|
—
|
|
|
139
|
|
|
(139
|
)
|
|
—
|
|
||||||
Proceeds from return of capital from subsidiaries
|
—
|
|
|
—
|
|
|
101
|
|
|
70
|
|
|
(171
|
)
|
|
—
|
|
||||||
Acquisition of MBIA UK, net of cash acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
95
|
|
|
—
|
|
|
95
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
59
|
|
|
—
|
|
|
59
|
|
||||||
Net cash flows provided by (used in) investing activities
|
0
|
|
|
70
|
|
|
97
|
|
|
304
|
|
|
(126
|
)
|
|
345
|
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Return of capital
|
—
|
|
|
—
|
|
|
—
|
|
|
(70
|
)
|
|
70
|
|
|
—
|
|
||||||
Capital contribution
|
—
|
|
|
—
|
|
|
25
|
|
|
3
|
|
|
(28
|
)
|
|
—
|
|
||||||
Dividends paid
|
(70
|
)
|
|
(470
|
)
|
|
(278
|
)
|
|
(475
|
)
|
|
1,223
|
|
|
(70
|
)
|
||||||
Repurchases of common stock
|
(501
|
)
|
|
—
|
|
|
—
|
|
|
(101
|
)
|
|
101
|
|
|
(501
|
)
|
||||||
Repurchases of common stock to pay withholding taxes
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
||||||
Net paydowns of FG VIE liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(157
|
)
|
|
—
|
|
|
(157
|
)
|
||||||
Paydown of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
(27
|
)
|
|
(30
|
)
|
||||||
Proceeds from options exercises
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
||||||
Intercompany debt
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
||||||
Net cash flows provided by (used in) financing activities
|
(579
|
)
|
|
(480
|
)
|
|
(253
|
)
|
|
(803
|
)
|
|
1,349
|
|
|
(766
|
)
|
||||||
Effect of exchange rate changes
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
||||||
Increase (decrease) in cash and restricted cash
|
0
|
|
|
32
|
|
|
2
|
|
|
(17
|
)
|
|
—
|
|
|
17
|
|
||||||
Cash and restricted cash at beginning of period
|
0
|
|
|
1
|
|
|
0
|
|
|
126
|
|
|
—
|
|
|
127
|
|
||||||
Cash and restricted cash at end of period
|
$
|
0
|
|
|
$
|
33
|
|
|
$
|
2
|
|
|
$
|
109
|
|
|
$
|
—
|
|
|
$
|
144
|
|
|
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
|
$
|
391
|
|
|
$
|
533
|
|
|
$
|
213
|
|
|
$
|
72
|
|
|
$
|
(1,341
|
)
|
|
$
|
(132
|
)
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchases
|
(4
|
)
|
|
(143
|
)
|
|
(10
|
)
|
|
(1,489
|
)
|
|
—
|
|
|
(1,646
|
)
|
||||||
Sales
|
4
|
|
|
24
|
|
|
12
|
|
|
1,325
|
|
|
—
|
|
|
1,365
|
|
||||||
Maturities
|
—
|
|
|
30
|
|
|
—
|
|
|
1,125
|
|
|
—
|
|
|
1,155
|
|
||||||
Sales (purchases) of short-term investments, net
|
(26
|
)
|
|
(237
|
)
|
|
(10
|
)
|
|
290
|
|
|
—
|
|
|
17
|
|
||||||
Net proceeds from FG VIE assets
|
—
|
|
|
—
|
|
|
—
|
|
|
629
|
|
|
—
|
|
|
629
|
|
||||||
Intercompany debt
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
(20
|
)
|
|
—
|
|
||||||
Proceeds from return of capital from subsidiaries
|
—
|
|
|
—
|
|
|
300
|
|
|
4
|
|
|
(304
|
)
|
|
—
|
|
||||||
Acquisition of CIFG, net of cash acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
(442
|
)
|
|
7
|
|
|
(435
|
)
|
||||||
Other
|
—
|
|
|
7
|
|
|
—
|
|
|
(9
|
)
|
|
(7
|
)
|
|
(9
|
)
|
||||||
Net cash flows provided by (used in) investing activities
|
(26
|
)
|
|
(319
|
)
|
|
292
|
|
|
1,453
|
|
|
(324
|
)
|
|
1,076
|
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
||||||
Return of capital
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
4
|
|
|
—
|
|
||||||
Dividends paid
|
(69
|
)
|
|
(288
|
)
|
|
(513
|
)
|
|
(540
|
)
|
|
1,341
|
|
|
(69
|
)
|
||||||
Repurchases of common stock
|
(306
|
)
|
|
—
|
|
|
—
|
|
|
(300
|
)
|
|
300
|
|
|
(306
|
)
|
||||||
Repurchases of common stock to pay withholding taxes
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
Net paydowns of FG VIE liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(611
|
)
|
|
—
|
|
|
(611
|
)
|
||||||
Paydown of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
||||||
Proceeds from options exercised
|
12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
||||||
Intercompany debt
|
—
|
|
|
(20
|
)
|
|
—
|
|
|
—
|
|
|
20
|
|
|
—
|
|
||||||
Net cash flows provided by (used in) financing activities
|
(365
|
)
|
|
(308
|
)
|
|
(513
|
)
|
|
(1,457
|
)
|
|
1,665
|
|
|
(978
|
)
|
||||||
Effect of exchange rate changes
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
||||||
Increase (decrease) in cash and restricted cash
|
—
|
|
|
(94
|
)
|
|
(8
|
)
|
|
63
|
|
|
—
|
|
|
(39
|
)
|
||||||
Cash and restricted cash at beginning of period
|
0
|
|
|
95
|
|
|
8
|
|
|
63
|
|
|
—
|
|
|
166
|
|
||||||
Cash and restricted cash at end of period
|
$
|
0
|
|
|
$
|
1
|
|
|
$
|
0
|
|
|
$
|
126
|
|
|
$
|
—
|
|
|
$
|
127
|
|
|
Assured Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured Guaranty Ltd.
(Consolidated)
|
||||||||||||
Net cash flows provided by (used in) operating activities
|
$
|
513
|
|
|
$
|
408
|
|
|
$
|
185
|
|
|
$
|
33
|
|
|
$
|
(1,210
|
)
|
|
$
|
(71
|
)
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchases
|
—
|
|
|
(72
|
)
|
|
(21
|
)
|
|
(2,550
|
)
|
|
66
|
|
|
(2,577
|
)
|
||||||
Sales
|
—
|
|
|
177
|
|
|
30
|
|
|
1,900
|
|
|
—
|
|
|
2,107
|
|
||||||
Maturities
|
—
|
|
|
9
|
|
|
—
|
|
|
889
|
|
|
—
|
|
|
898
|
|
||||||
Sales (purchases) of short-term investments, net
|
116
|
|
|
33
|
|
|
19
|
|
|
729
|
|
|
—
|
|
|
897
|
|
||||||
Net proceeds from FG VIE assets
|
—
|
|
|
—
|
|
|
—
|
|
|
400
|
|
|
—
|
|
|
400
|
|
||||||
Proceeds from repayment of surplus notes
|
—
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
(25
|
)
|
|
—
|
|
||||||
Acquisition of Radian Asset, net of cash acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
(800
|
)
|
|
—
|
|
|
(800
|
)
|
||||||
Other
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
74
|
|
|
—
|
|
|
69
|
|
||||||
Net cash flows provided by (used in) investing activities
|
116
|
|
|
142
|
|
|
53
|
|
|
642
|
|
|
41
|
|
|
994
|
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Return of capital
|
—
|
|
|
—
|
|
|
—
|
|
|
(25
|
)
|
|
25
|
|
|
—
|
|
||||||
Dividends paid
|
(72
|
)
|
|
(455
|
)
|
|
(234
|
)
|
|
(455
|
)
|
|
1,144
|
|
|
(72
|
)
|
||||||
Repurchases of common stock
|
(555
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(555
|
)
|
||||||
Repurchases of common stock to pay withholding taxes
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
||||||
Net paydowns of FG VIE liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(214
|
)
|
|
—
|
|
|
(214
|
)
|
||||||
Paydown of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
||||||
Proceeds from options exercised
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
||||||
Net cash flows provided by (used in) financing activities
|
(629
|
)
|
|
(455
|
)
|
|
(234
|
)
|
|
(698
|
)
|
|
1,169
|
|
|
(847
|
)
|
||||||
Effect of exchange rate changes
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
||||||
Increase (decrease) in cash and restricted cash
|
—
|
|
|
95
|
|
|
4
|
|
|
(27
|
)
|
|
—
|
|
|
72
|
|
||||||
Cash and restricted cash at beginning of period
|
0
|
|
|
0
|
|
|
4
|
|
|
90
|
|
|
—
|
|
|
94
|
|
||||||
Cash and restricted cash at end of period
|
$
|
0
|
|
|
$
|
95
|
|
|
$
|
8
|
|
|
$
|
63
|
|
|
$
|
—
|
|
|
$
|
166
|
|
22.
|
Quarterly Financial Information (Unaudited)
|
2017
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Full
Year
|
||||||||||
|
(dollars in millions, except per share data)
|
|||||||||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earned premiums
|
$
|
164
|
|
|
$
|
162
|
|
|
$
|
186
|
|
|
$
|
178
|
|
|
$
|
690
|
|
|
Net investment income
|
122
|
|
|
101
|
|
|
99
|
|
|
96
|
|
|
418
|
|
||||||
Net realized investment gains (losses)
|
32
|
|
|
15
|
|
|
7
|
|
|
(14
|
)
|
|
40
|
|
||||||
Net change in fair value of credit derivatives
|
54
|
|
|
(6
|
)
|
|
58
|
|
|
5
|
|
|
111
|
|
||||||
Fair value gains (losses) on CCS
|
(2
|
)
|
|
2
|
|
|
(4
|
)
|
|
2
|
|
|
(2
|
)
|
||||||
Fair value gains (losses) on FG VIEs
|
10
|
|
|
12
|
|
|
3
|
|
|
5
|
|
|
30
|
|
||||||
Bargain purchase gain and settlement of pre-existing relationships
|
58
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
58
|
|
||||||
Other income (loss)
|
89
|
|
|
22
|
|
|
274
|
|
|
9
|
|
|
394
|
|
||||||
Expenses
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loss and LAE
|
59
|
|
|
72
|
|
|
223
|
|
|
34
|
|
|
388
|
|
||||||
Amortization of DAC
|
4
|
|
|
4
|
|
|
5
|
|
|
6
|
|
|
19
|
|
||||||
Interest expense
|
24
|
|
|
25
|
|
|
24
|
|
|
24
|
|
|
97
|
|
||||||
Other operating expenses
|
68
|
|
|
57
|
|
|
58
|
|
|
61
|
|
|
244
|
|
||||||
Income (loss) before provision for income taxes
|
372
|
|
|
150
|
|
|
313
|
|
|
156
|
|
|
991
|
|
||||||
Provision (benefit) for income taxes
|
55
|
|
|
(3
|
)
|
|
105
|
|
|
104
|
|
|
261
|
|
||||||
Net income (loss)
|
317
|
|
|
153
|
|
|
208
|
|
|
52
|
|
|
730
|
|
||||||
Earnings (loss) per share(1):
|
|
|
|
|
|
|
|
|
|
|||||||||||
Basic
|
$
|
2.53
|
|
|
$
|
1.26
|
|
|
$
|
1.75
|
|
|
$
|
0.44
|
|
|
$
|
6.05
|
|
|
Diluted
|
$
|
2.49
|
|
|
$
|
1.24
|
|
|
$
|
1.72
|
|
|
$
|
0.44
|
|
|
$
|
5.96
|
|
|
Dividends per share
|
$
|
0.1425
|
|
|
$
|
0.1425
|
|
|
$
|
0.1425
|
|
|
$
|
0.1425
|
|
|
$
|
0.57
|
|
2016
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Full
Year
|
||||||||||
|
(dollars in millions, except per share data)
|
|||||||||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earned premiums
|
$
|
183
|
|
|
$
|
214
|
|
|
$
|
231
|
|
|
$
|
236
|
|
|
$
|
864
|
|
|
Net investment income
|
99
|
|
|
98
|
|
|
94
|
|
|
117
|
|
|
408
|
|
||||||
Net realized investment gains (losses)
|
(13
|
)
|
|
10
|
|
|
(2
|
)
|
|
(24
|
)
|
|
(29
|
)
|
||||||
Net change in fair value of credit derivatives
|
(60
|
)
|
|
63
|
|
|
21
|
|
|
74
|
|
|
98
|
|
||||||
Fair value gains (losses) on CCS
|
(16
|
)
|
|
(11
|
)
|
|
(23
|
)
|
|
50
|
|
|
0
|
|
||||||
Fair value gains (losses) on FG VIEs
|
18
|
|
|
4
|
|
|
(11
|
)
|
|
27
|
|
|
38
|
|
||||||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
—
|
|
|
259
|
|
|
—
|
|
|
259
|
|
||||||
Other income (loss)
|
34
|
|
|
18
|
|
|
(3
|
)
|
|
(10
|
)
|
|
39
|
|
||||||
Expenses
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loss and LAE
|
90
|
|
|
102
|
|
|
(9
|
)
|
|
112
|
|
|
295
|
|
||||||
Amortization of DAC
|
4
|
|
|
5
|
|
|
4
|
|
|
5
|
|
|
18
|
|
||||||
Interest expense
|
26
|
|
|
25
|
|
|
26
|
|
|
25
|
|
|
102
|
|
||||||
Other operating expenses
|
60
|
|
|
63
|
|
|
65
|
|
|
57
|
|
|
245
|
|
||||||
Income (loss) before provision for income taxes
|
65
|
|
|
201
|
|
|
480
|
|
|
271
|
|
|
1,017
|
|
||||||
Provision (benefit) for income taxes
|
6
|
|
|
55
|
|
|
1
|
|
|
74
|
|
|
136
|
|
||||||
Net income (loss)
|
59
|
|
|
146
|
|
|
479
|
|
|
197
|
|
|
881
|
|
||||||
Earnings (loss) per share(1):
|
|
|
|
|
|
|
|
|
|
|||||||||||
Basic
|
$
|
0.43
|
|
|
$
|
1.09
|
|
|
$
|
3.63
|
|
|
$
|
1.51
|
|
|
$
|
6.61
|
|
|
Diluted
|
$
|
0.43
|
|
|
$
|
1.09
|
|
|
$
|
3.60
|
|
|
$
|
1.49
|
|
|
$
|
6.56
|
|
|
Dividends per share
|
$
|
0.13
|
|
|
$
|
0.13
|
|
|
$
|
0.13
|
|
|
$
|
0.13
|
|
|
$
|
0.52
|
|
(1)
|
Per share amounts for the quarters and the full years have each been calculated separately. Accordingly, quarterly amounts may not sum up to the annual amounts because of differences in the average common shares outstanding during each period and, with regard to diluted per share amounts only, because of the inclusion of the effect of potentially dilutive securities only in the periods in which such effect would have been dilutive.
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9A.
|
CONTROLS AND PROCEDURES
|
ITEM 9B.
|
OTHER INFORMATION
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
ITEM 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
ITEM 15.
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|
(a)
|
Financial Statements, Financial Statement Schedules and Exhibits
|
1.
|
Financial Statements
|
*
|
Management contract or compensatory plan
|
ITEM 16.
|
FORM 10-K SUMMARY
|
|
Assured Guaranty Ltd.
|
|
|
|
|
|
|
|
|
By:
|
/s/ Dominic J. Frederico
Name: Dominic J. Frederico
Title:
President and Chief Executive Officer
|
|
|
Name
|
|
|
|
|
Position
|
|
|
|
|
Date
|
|
|
|
|
|
||||||||||||
/s/ Francisco L. Borges
Francisco L. Borges
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Chairman of the Board; Director
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February 23, 2018
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/s/ Dominic J. Frederico
Dominic J. Frederico
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President and Chief Executive Officer; Director
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February 23, 2018
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/s/ Robert A. Bailenson
Robert A. Bailenson
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Chief Financial Officer (Principal Financial and Accounting Officer and Duly Authorized Officer)
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February 23, 2018
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/s/ G. Lawrence Buhl
G. Lawrence Buhl
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Director
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February 23, 2018
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/s/ Bonnie L. Howard
Bonnie L. Howard
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Director
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February 23, 2018
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/s/ Thomas W. Jones
Thomas W. Jones
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Director
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February 23, 2018
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/s/ Patrick W. Kenny
Patrick W. Kenny
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Director
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February 23, 2018
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/s/ Alan J. Kreczko
Alan J. Kreczko
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Director
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February 23, 2018
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/s/ Simon W. Leathes
Simon W. Leathes
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Director
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February 23, 2018
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/s/ Michael T. O'Kane
Michael T. O'Kane
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Director
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February 23, 2018
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/s/ Yukiko Omura
Yukiko Omura
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Director
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February 23, 2018
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Executive Officer
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Salary
|
Dominic J. Frederico
President and Chief Executive Officer
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$1,250,000
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Robert A. Bailenson
Chief Financial Officer
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$700,000
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Russell B. Brewer II
Chief Surveillance Officer
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$525,000
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Bruce E. Stern
Executive Officer
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$500,000
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•
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To be considered to receive equity and non-equity incentive compensation for 2018 performance.
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•
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To receive other annual compensation and benefits, including employer contributions to retirement plans.
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(a)
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The Plan as set forth herein shall apply to distributions under the Plan commencing on or after the Effective Date (excluding payments made before or made after the Effective Date that are part of a series of installment payments that commenced prior to the Effective Date); provided that payments which commenced prior to the Effective Date will be subject to the applicable provisions of the Plan as in effect prior to the Effective Date.
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(b)
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All amounts deferred under the Plan will be subject to the provisions of section 409A of the Code and applicable guidance issued thereunder (“Section 409A”), regardless of whether such amounts were deferred (within the meaning of Section 409A) on, prior to, or after January 1, 2005.
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Assured Guaranty Ltd.
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30 Woodbourne Avenue, 5th Floor
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main
441 279 5700
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info@assuredguaranty.com
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www.assuredguaranty.com
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Hamilton HM 08
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fax
441 279 5701
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Bermuda
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Assured Guaranty Ltd. and its Affiliates
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By:
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/s/
Dominic Frederico
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Name:
Dominic Frederico
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Its: President and Chief Executive Officer
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Accepted and agreed:
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Date:
November 1, 2017
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/s/
James M. Michener
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Name:
James M. Michener
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(a)
|
The term “Agreement” shall include the Agreement and the Exhibits thereto, and including the plans and arrangements under which the Executive is entitled to benefits in accordance with the Agreement and the Exhibits.
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(b)
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The term “Claims” shall include (except for claims for breach of the Agreement) any and all rights, claims, demands, debts, dues, sums of money, accounts, attorneys’ fees, complaints, judgments, executions, actions and causes of action of any nature whatsoever, known or unknown, cognizable at law or equity, shall include claims related to pay, commission, hours, bonuses, pension, disability, physical or mental affliction, benefits including vacation days and payment for unused vacation, reimbursement for expenses, terms and conditions of employment and claims of discrimination on account of age, race, color, sex, sexual harassment, sexual orientation, marital status, disability, national origin, citizenship, religion, or retaliation and shall include, without limitation, claims arising under (or alleged to have arisen under) (i) the Age Discrimination in Employment Act of 1967, as amended; (ii) Title VII of the Civil Rights Act of 1964, as amended; (iii) The Civil Rights Act of 1991; (iv) Section 1981 through 1988 of Title 42 of the United States Code, as amended; (v) the Employee Retirement Income Security Act of 1974, as amended; (vi) The Immigration Reform Control Act, as amended; (vii) The Americans with Disabilities Act of 1990, as amended; (viii) The National Labor Relations Act, as amended; (ix) The Fair Labor Standards Act, as amended; (x) The Occupational Safety and Health Act, as amended; (xi) The Family and Medical Leave Act of 1993; (xii) the Sarbanes-Oxley Act; (xiii) the federal Worker Adjustment and Retraining Notification Act and any similar state laws; (xiv) any state antidiscrimination law; (xv) any state or local wage and hour law; (xvi) any other local, state or federal law, regulation or ordinance; (xvii) any whistleblower law; (xviii) any public policy, contract, tort, or common law; or (xix) any allegation for costs, fees, or other expenses including attorneys’ fees incurred in these matters. (Executive specifically releases any claim based on any amendment to the laws referenced, whenever such amendment was enacted, and specifically releases any claim under the Lily Ledbetter Fair Pay Act and any new laws enacted after January 1, 2009. Executive does not, however, release any claim which the statute provides may not be released under any circumstances.)
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(c)
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The term “Company Releasees” shall include the Company and its Affiliates, and their officers, directors, trustees, members, representatives, agents, employees, shareholders, partners, attorneys, assigns, administrators and fiduciaries under any employee benefit plan of the Company and its Affiliates, and insurers, and their predecessors and successors.
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(d)
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The term “Executive Releasors” shall include the Executive, and his family, heirs, executors, representatives, agents, insurers, administrators, successors, assigns, and any other person claiming through the Executive.
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(a)
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By this Release and Waiver, the Executive Releasors do not release or waive any right or claim which they may have which arises after the date of execution of this Release and Waiver.
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(b)
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In exchange for this Release and Waiver, the Executive hereby acknowledges that he has received separate consideration beyond that to which he is otherwise entitled under the Company’s policy or applicable law.
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(c)
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The Company hereby expressly advises the Executive to consult with an attorney of his choosing prior to executing this Release and Waiver.
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(d)
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The Executive has twenty-one (21) days from the Offer Date to consider whether or not to execute this Release and Waiver. In the event of such execution, the Executive has a further period of seven (7) days from the date of said execution in which to revoke said execution. This Release and Waiver will not become effective until expiration of such revocation period.
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(e)
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This Release and Waiver, and the commitments and obligations of all parties under the Agreement:
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(a)
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The term “Agreement” shall include the Agreement and the Exhibits thereto, and including the plans and arrangements under which the Executive is entitled to benefits in accordance with the Agreement and the Exhibits.
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(b)
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The term “Claims” shall include (except for claims for breach of the Agreement) any and all rights, claims, demands, debts, dues, sums of money, accounts, attorneys’ fees, complaints, judgments, executions, actions and causes of action of any nature whatsoever, known or unknown, cognizable at law or equity, shall include claims related to pay, commission, hours, bonuses, pension, disability, physical or mental affliction, benefits including vacation days and payment for unused vacation, reimbursement for expenses, terms and conditions of employment and claims of discrimination on account of age, race, color, sex, sexual harassment, sexual orientation, marital status, disability, national origin, citizenship, religion, or retaliation and shall include, without limitation, claims arising under (or alleged to have arisen under) (i) the Age Discrimination in Employment Act of 1967, as amended; (ii) Title VII of the Civil Rights Act of 1964, as amended; (iii) The Civil Rights Act of 1991; (iv) Section 1981 through 1988 of Title 42 of the United States Code, as amended; (v) the Employee Retirement Income Security Act of 1974, as amended; (vi) The Immigration Reform Control Act, as amended; (vii) The Americans with Disabilities Act of 1990, as amended; (viii) The National Labor Relations Act, as amended; (ix) The Fair Labor Standards Act, as amended; (x) The Occupational Safety and Health Act, as amended; (xi) The Family and Medical Leave Act of 1993; (xii) the Sarbanes-Oxley Act; (xiii) the federal Worker Adjustment and Retraining Notification Act and any similar state laws; (xiv) any state antidiscrimination law; (xv) any state or local wage and hour law; (xvi) any other local, state or federal law, regulation or ordinance; (xvii) any whistleblower law; (xviii) any public policy, contract, tort, or common law; or (xix) any allegation for costs, fees, or other expenses including attorneys’ fees incurred in these matters. (Executive specifically releases any claim based on any amendment to the laws referenced, whenever such amendment was enacted, and specifically releases any claim under the Lily Ledbetter Fair Pay Act and any new laws enacted after January 1, 2009. Executive does not, however, release any claim which the statute provides may not be released under any circumstances.)
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(c)
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The term “Company Releasees” shall include the Company and its Affiliates, and their officers, directors, trustees, members, representatives, agents, employees, shareholders, partners, attorneys, assigns, administrators and fiduciaries under any employee benefit plan of the Company and its Affiliates, and insurers, and their predecessors and successors.
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(d)
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The term “Executive Releasors” shall include the Executive, and his family, heirs, executors, representatives, agents, insurers, administrators, successors, assigns, and any other person claiming through the Executive.
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(a)
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By this Release and Waiver, the Executive Releasors do not release or waive any right or claim which they may have which arises after the date of execution of this Release and Waiver.
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(b)
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In exchange for this Release and Waiver, the Executive hereby acknowledges that he has received separate consideration beyond that to which he is otherwise entitled under the Company’s policy or applicable law.
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(c)
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The Company hereby expressly advises the Executive to consult with an attorney of his choosing prior to executing this Release and Waiver.
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(d)
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The Executive has had at least twenty-one (21) days from the Offer Date to consider whether or not to execute this Release and Waiver. In the event of such execution, the Executive has a further period of seven (7) days from the date of said execution in which to revoke said execution. This Release and Waiver will not become effective until expiration of such revocation period.
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(e)
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This Release and Waiver, and the commitments and obligations of all parties under the Agreement:
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(a)
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The "Participant" is James M. Michener
.
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(b)
|
The "Grant Date" is [_________], 2018
.
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(c)
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The number of “Covered Units” granted under this Agreement is _____ Units. Each “Unit” represents the right to receive one share of Stock on the Delivery Date, subject to the terms of this Agreement and the Plan.
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(d)
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The “First Delivery Date” with respect to fifty percent (50%) of the Covered Units shall be the earliest to occur of: (i) the first anniversary of the Grant Date; (ii) the Participant’s death; and (iii) the date on which the Participant becomes Permanently Disabled.
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(e)
|
The “Second Delivery Date” with respect to the remaining fifty percent (50%) of the Covered Units shall be the earliest to occur of: (i) the second 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 for all Covered Units for which the Vesting Date is on or after such Date of Termination shall immediately lapse upon such Date of Termination.
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(b)
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Qualifying Termination Before a Change in Control
. If the Participant’s Date of Termination occurs due to a Qualifying Termination prior to the last day of the Restricted Period and prior to the date of a Change in Control, then the Participant shall be treated as if his Date of Termination had not occurred prior to the last day of the Restricted Period, subject to the Participant not engaging in any Competitive Activity prior to the last day of the Restricted Period and subject to the Participant signing and not revoking a general release and waiver of all claims against the Company as required by Section 7.1 of the Severance Plan. If such release is not effective within the sixty-day period required by Section 7.1 of the Severance Plan or in the event that the Participant engages in a Competitive Activity prior to the last day of the Restricted Period, the Participant shall immediately forfeit all of the Covered Units.
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(c)
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Qualifying Termination On or After a Change in Control
. If the Participant’s Date of Termination occurs due to a Qualifying Termination prior to the last day of the Restricted Period but on or after the date of a Change in Control that is not a Vesting Change in Control, then the Participant shall be treated as if his Date of Termination had not occurred prior to the last day of the Restricted Period subject to the Participant signing and not revoking a general release and waiver of all claims against the Company as required by Section 7.1 of the Severance Plan. If such release is not effective within the sixty-day period required by Section 7.1 of the Severance Plan, the Participant shall immediately forfeit all of the Covered Units.
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(a)
|
The Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict the Restricted Stock Unit Award at any time if the Participant engages in any "Competitive Activity" or, in the case of a Participant whose Date of Termination has occurred due to Retirement, if the Participant engages in any Post-Retirement Activity.
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(b)
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Immediately prior to the First Delivery Date and Second 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 Second Delivery Date or the last day of the Restricted Period (the “Restrictive Covenant Period”) with respect to any Covered Units, the right to delivery of shares with respect to such Covered Units may be rescinded by the Committee within two years of the last day of the Restrictive Covenant Period. In the event of any such rescission, the Participant shall pay to the Company the amount of any gain realized as a result of the prior delivery of shares applicable to the rescinded Covered Units, in such manner and on such terms and conditions as may be required by the Company, and the Company shall be entitled to set-off against the amount of any such gain any amount owed to the Participant by the Company and/or Subsidiary.
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(a)
|
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.
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(b)
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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.
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(a)
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Change in Control
. The term "Change in Control" shall be defined as set forth in the Plan.
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(b)
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Competitive Activity
. The term “Competitive Activity” shall mean (i) the Participant’s engaging in an activity, directly or indirectly, whether as an employee, consultant, partner, principal, agent, distributor, representative, stockholder (except as a less than one percent stockholder of a publicly traded company or a less than five percent stockholder of a privately held company) or otherwise, within the United States, Bermuda, or the Cayman Islands, if such activities involve insurance or reinsurance of United States based entities or risks that are competitive with the financial guaranty insurance business then being conducted by the Company or any affiliate and which, during the period covered by the Participant's employment, were conducted by the Company or any affiliate; or (ii) the Participant’s engaging in any activity, directly or indirectly, whether on behalf of himself or herself or any other person or entity (x) to solicit any client and/or customer of the Company or any affiliate or (y) to hire any employee or former employee of the Company or any present or former affiliate of the Company or encourage any employee of the Company or affiliate to leave the employ of the Company or affiliate; or (iii) the Participant’s violation of Section 7.3 of the Severance Plan (relating to confidentiality).
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(c)
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Date of Termination
. A Participant's "Date of Termination" means, with respect to an employee, the date on which the Participant's employment with the Company and Subsidiaries terminates for any reason, and with respect to a Director, the date immediately following the last day on which the Participant serves as a Director; provided that a Date of Termination shall not be deemed to occur by reason of a Participant's transfer of employment between the Company and a Subsidiary or between two Subsidiaries; further provided that a Date of Termination shall not be deemed to occur by reason of a Participant's cessation of service as a Director if immediately following such cessation of service the Participant becomes or continues to be employed by the Company or a Subsidiary, nor by reason of a Participant's termination of employment with the Company or a Subsidiary if immediately following such termination of employment the Participant becomes or continues to be a Director; and further provided that a Participant's employment shall not be considered terminated while the Participant is on a leave of absence from the Company or a Subsidiary approved by the Participant's employer.
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(d)
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Director
. The term "Director" means a member of the Board of Directors of Assured Guaranty, Ltd., who may or may not be an employee of the Company or a Subsidiary.
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(e)
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Disability
. The Participant shall be considered to have a "Disability" during the period in which the Participant is unable, by reason of a medically determinable physical or mental impairment, to engage in any substantial gainful activity, which condition, in the opinion of a physician selected by the Committee, is expected to have a duration of not less than 120 days.
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(f)
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Permanent Disability
. The Participant shall be considered to be “Permanently Disabled” if he would be treated as “disabled” in accordance with the provisions of Treas. Reg. §1.409A-3(i)(4).
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(g)
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Post-Retirement Activity
. The term “Post-Retirement Activity” shall mean the Participant’s provision of significant commercial or business services to any one or more persons or entities, regardless of whether such entity is owned or controlled by the Participant; provided that the Participant’s devotion of reasonable time to the supervision of his personal investments, and activities involving professional, charitable, community, educational, religious and similar types of organizations, speaking engagements, membership on the boards of directors of other organizations, and similar types of activities shall not be considered Post-Retirement Activity, to the extent that the Committee, in its discretion, determines that such activities are consistent with the Participant’s Retirement. At the request of the Participant, the Committee shall determine whether a proposed activity of the Participant will be considered a Post-Retirement Activity for purposes of this Agreement. Such request shall be accompanied by a description of the proposed activities, and the Participant shall provide such additional information as the Committee may determine is necessary to make the determination. Such a determination shall be made promptly, but in no event more than 30 days after the written request, together with any additional information requested of the Participant, is delivered to the Committee.
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(h)
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Pro-Rata Fraction
. The term “Pro-Rata Fraction” shall mean a fraction, the numerator of which shall be equal to the number of days between the Grant Date and the Participant’s Date of Termination and the denominator of which shall be 1095.
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(i)
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Qualifying Termination
. The term “Qualifying Termination” is defined in Section 1 of the Severance Plan.
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(j)
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Retirement
. The term “Retirement” means the occurrence of a Participant’s Date of Termination due to the voluntary termination of employment on the Retirement Date.
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(k)
|
Severance Plan
. The term “Severance Plan” shall mean the Assured Guaranty Ltd. Executive Severance Plan.
|
(l)
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Vesting Change in Control
. The term “Vesting Change in Control” shall mean the date of a Change in Control where this Restricted Stock Unit Award is terminated pursuant to Section 6(b) of this Agreement.
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Type of Compensation
|
Base Amount
|
Payment/Vesting Date
|
Comments*
|
2014 PRP Grant
|
$157,500 (2014-2017 tranche – represents vesting of 50% of award)
|
Final distribution to be paid in cash by March 15, 2018.
|
Actual amount to be paid subject to satisfaction of the performance conditions in listed in PRP grant agreement as determined by Compensation Committee prior to payment date.
|
2015 RSU Grant
|
17,592 units
|
Distribution of shares in February 2018
|
Cash payment for dividend equivalents, if any, following distribution. In the event of a termination of employment for any reason prior to distribution, right to vesting and distribution determined in accordance with the award agreement terms.
|
2016 RSU Grant
|
20,593 units
|
Award to be vested upon Retirement Date determined as total number of units multiplied by the pro-rata fraction (1040/1095). Final distribution of shares will occur within 60 days of Retirement Date.
|
Cash payment for dividend equivalents, if any, following distribution. In the event of a termination of employment for any reason prior to Retirement Date, right to vesting and distribution determined in accordance with the award agreement terms.
|
2017 RSU Grant
|
12,594 units
|
Award to be vested upon Retirement Date determined as total number of units multiplied by the pro-rata fraction (677/1095). Final distribution of shares will occur within 60 days of Retirement Date.
|
Cash payment for dividend equivalents, if any, following distribution. In the event of a termination of employment for any reason prior to Retirement Date, right to vesting and distribution determined in accordance with the award agreement terms.
|
2015 PSU Grant
|
17,592 units
|
Distribution of shares in February 2018 (performance goal has already been reached at 200%).
|
In the event of a termination of employment for any reason prior to distribution, right to vesting and distribution determined in accordance with the award agreement terms.
|
2016 PSU Grant
|
20,593 units
|
Award to be vested upon Retirement Date (performance goal has already been reached at 200%) determined as total number of units multiplied by 200% and by the pro-rata fraction (1040/1095). Final distribution of shares will occur within 60 days of Retirement Date.
|
In the event of a termination of employment for any reason prior to Retirement Date, right to vesting and distribution determined in accordance with the award agreement terms.
|
2017 PSU Grant
|
12,594 units
|
Award to be vested following Retirement Date determined as if Executive remained employed multiplied by the pro-rata fraction (677/1095). Pursuant to original grant agreement, distribution of earned and vested shares as of Retirement Date will occur within sixty days following Retirement Date. Final distribution of any additional shares earned after Retirement Date won’t occur until February 2020.
|
Unvested units to be converted to restricted stock following Retirement Date pursuant to terms of award agreement with vesting of restricted stock subject to terms of award agreement. In the event of a termination of employment for any reason prior to Retirement Date, right to vesting and distribution determined in accordance with the award agreement terms.
Actual amount to be paid depends on actual performance through performance period. Units may vest up to 200% depending on actual performance as determined by Compensation Committee prior to distribution date.
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
Income (loss) before income taxes
|
$
|
991
|
|
|
$
|
1,017
|
|
|
$
|
1,431
|
|
|
$
|
1,531
|
|
|
$
|
1,142
|
|
Fixed Charges
|
132
|
|
|
142
|
|
|
145
|
|
|
136
|
|
|
156
|
|
|||||
Income (loss) as adjusted
|
1,123
|
|
|
1,159
|
|
|
1,576
|
|
|
1,667
|
|
|
1,298
|
|
|||||
Fixed charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense (1)
|
97
|
|
|
102
|
|
|
101
|
|
|
92
|
|
|
82
|
|
|||||
Portion of rents representative of the interest factor
|
3
|
|
|
4
|
|
|
4
|
|
|
3
|
|
|
4
|
|
|||||
Interest expense on financial guaranty variable interest entities’ (FG VIE) liabilities (1)
|
32
|
|
|
36
|
|
|
40
|
|
|
41
|
|
|
70
|
|
|||||
Total fixed charges
|
$
|
132
|
|
|
$
|
142
|
|
|
$
|
145
|
|
|
$
|
136
|
|
|
$
|
156
|
|
Ratio of consolidated earnings to fixed charges (1)
|
8.5
|
|
|
8.2
|
|
|
10.9
|
|
|
12.3
|
|
|
8.3
|
|
(1)
|
For purposes of computing the ratios, earnings consist of income (loss) before income tax expense plus fixed charges to the extent that these charges are included in the determination of earnings. Fixed charges consist of interest expense plus one-third of rent expense under operating leases, which are estimated by management to be the interest factor of these rentals. Interest expense includes interest on long term debt and interest expense on FG VIE liabilities with and without recourse. The Company is not primarily liable for the debt obligations issued by the FG VIEs they insure (i.e. with recourse) and would only be required to make payments on these obligations in the event that the issuer of such debt obligations defaults on any principal or interest due. FG VIEs’ liabilities that are insured by the Company are considered to be with recourse because the Company guarantees the payment of principal and interest regardless of the performance of the FG VIEs’ assets. FG VIEs’ liabilities that are not insured by the Company are considered to be without recourse because the payment of principal and interest on these liabilities is wholly dependent on the performance of the FG VIEs’ assets.
|
Assured Guaranty Re Ltd. (Bermuda domiciled subsidiary of Assured Guaranty Ltd.)
|
Cypress Point Funding Limited (Cayman Islands domiciled 23% owned subsidiary of Assured Guaranty Re Ltd.)
|
Assured Guaranty Overseas US Holdings Inc. (Delaware domiciled subsidiary of Assured Guaranty Re Ltd.)
|
Assured Guaranty Re Overseas Ltd. (Bermuda domiciled subsidiary of Assured Guaranty Overseas US Holdings Inc.)
|
AG Intermediary Inc. (New York domiciled subsidiary of Assured Guaranty Re Overseas Ltd.)
|
Assured Guaranty Finance Overseas Ltd. (England domiciled subsidiary of Assured Guaranty Ltd.)
|
Cedar Personnel Ltd. (Bermuda domiciled subsidiary of Assured Guaranty Ltd.)
|
Assured Guaranty US Holdings Inc. (Delaware domiciled subsidiary of Assured Guaranty Ltd.)
|
Assured Guaranty Municipal Holdings Inc. (New York domiciled subsidiary of Assured Guaranty US Holdings Inc.)
|
EFS-AGIC Master Business Trust (Delaware domiciled subsidiary of Assured Guaranty US Holdings Inc.)
|
AE Global Holdings, LLC (Delaware domiciled 50% subsidiary of Assured Guaranty US Holdings Inc.)
|
AE Global Investments, LLC (Delaware domiciled subsidiary of AE Global Holdings, LLC)
|
AE Global Asset Funding, LLC (Delaware domiciled subsidiary of AE Global Holdings, LLC)
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FSA Portfolio Management Inc. (New York domiciled subsidiary of Assured Guaranty Municipal Holdings Inc.)
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Transaction Services Corporation (New York domiciled subsidiary of Assured Guaranty Municipal Holdings Inc.)
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Assured Guaranty Municipal Corp. (New York domiciled subsidiary of Assured Guaranty Municipal Holdings Inc.)
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Wasmer, Schroeder & Company, LLC (Delaware domiciled 24.9% subsidiary of Assured Guaranty Municipal Corp.)
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Assured Guaranty (Europe) plc. (England domiciled subsidiary of Assured Guaranty Municipal Corp.)
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Assured Guaranty (London) plc. (England domiciled subsidiary of Assured Guaranty (Europe) plc)
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Assured Guaranty (UK) plc. (England domiciled subsidiary of Assured Guaranty (Europe) plc.)
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CIFG Europe S.A. (French domiciled subsidiary of Assured Guaranty (Europe) plc.)
2
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Municipal Assurance Holdings Inc. (Delaware domiciled 60.7% owned subsidiary of Assured Guaranty Municipal Corp. and 39.3% owned subsidiary of Assured Guaranty Corp.)
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Municipal Assurance Corp. (New York domiciled subsidiary of Municipal Assurance Holdings Inc.)
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AG Analytics Inc. (Delaware domiciled subsidiary of Assured Guaranty US Holdings Inc.)
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Assured Guaranty (UK) Services Limited (England domiciled subsidiary of Assured Guaranty US Holdings Inc.)
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AG US Group Services Inc. (Delaware domiciled subsidiary of Assured Guaranty US Holdings Inc.)
Assured Guaranty Corp. (Maryland domiciled subsidiary of Assured Guaranty US Holdings Inc.)
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Assured Guaranty Corp. (Maryland domiciled subsidiary of Assured Guaranty US Holdings Inc.)
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Prescott, LLC (Delaware domiciled subsidiary of Assured Guaranty Corp.)
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Four Hundred Main Street LLC (Delaware domiciled subsidiary of Assured Guaranty Corp.)
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AG PFC Holding LLC (Delaware domiciled subsidiary of Assured Guaranty Corp.)
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AGFP Holding LLC (Delaware domiciled subsidiary of AG PFC Holding LLC)
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Portfolio Funding Company LLC I (Delaware domiciled 50% owned subsidiary of AGFP Holding LLC)
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Van American Insurance Agency, Inc. (South Carolina domiciled subsidiary of Assured Guaranty Corp.)
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Hoboken I LLC (Delaware domiciled subsidiary of Assured Guaranty Corp.)
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AG Financial Products Inc. (Delaware domiciled subsidiary of Assured Guaranty US Holdings Inc.)
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CIFG Holding LLC (Delaware domiciled subsidiary of Assured Guaranty Corp.)
2
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CIFG Services, LLC (Delaware domiciled subsidiary of Assured Guaranty Corp.)
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(1)
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All subsidiaries are wholly owned except for Cypress Point Funding Limited, AE Global Holdings, LLC, AE Global Investments, LLC, AE Global Asset Funding, LLC, Wasmer, Schroeder & Company, LLC, and Portfolio Funding Company LLC I.
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(2)
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In order to comply with a French law mandating that corporations have at least seven (7) shareholders, AGC has loaned one share of CIFG Europe S.A. to each of the following six Delaware limited liability companies, each of which is wholly owned by CIFG Holding LLC, a direct, wholly owned subsidiary of AGC: CIFG Global Holdings I, LLC, CIFG Global Holdings II, LLC, CIFG Global Holdings III, LLC, CIFG Global Holdings IV, LLC, CIFG Global Holdings V, LLC, and CIFG Global Holdings VI, LLC.
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1.
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I have reviewed this Annual Report on Form 10-K of Assured Guaranty Ltd.
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
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By:
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/s/ DOMINIC J. FREDERICO
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Dominic J. Frederico
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President and Chief Executive Officer
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1.
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I have reviewed this Annual Report on Form 10-K of Assured Guaranty Ltd.
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
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By:
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/s/ ROBERT A. BAILENSON
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Robert A. Bailenson
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Chief Financial Officer
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ DOMINIC J. FREDERICO
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Name: Dominic J. Frederico
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Title:
President and Chief Executive Officer
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Date: February 23, 2018
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ ROBERT A. BAILENSON
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Name: Robert A. Bailenson
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Title:
Chief Financial Officer
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Date: February 23, 2018
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