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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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difficulties with the execution of Assured Guaranty’s business strategy;
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•
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loss of key personnel;
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•
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the effects of mergers, acquisitions and divestitures;
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•
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natural or man-made catastrophes;
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•
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other risk factors identified in AGL’s filings with the U.S. Securities and Exchange Commission (the SEC);
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•
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other risks and uncertainties that have not been identified at this time; and
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•
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management’s response to these factors.
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ITEM 1.
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BUSINESS
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•
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Assured Guaranty Municipal Corp.
AGM is located and domiciled in New York. 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. AGM was organized in 1984 as "Financial Security Assurance Inc." and until 2008 also offered insurance and reinsurance in the global structured finance market. AGM's subsidiary AGE offers insurance and reinsurance in the global public finance and structured finance markets.
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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. AGC acquired CIFG Assurance North America, Inc. (CIFGNA) in 2016 and Radian Asset Assurance Inc. (Radian Asset) in 2015, and merged them each with and into AGC, with AGC being the surviving entity.
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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 is currently 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 currently is the only entity from which the Company writes business in the EEA. As discussed further under "Business" below, AGE has agreed with its regulator that new business it writes would be guaranteed using a co-insurance structure pursuant to which AGE would co-insure municipal and infrastructure transactions with AGM, and structured finance transactions with AGC.
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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 indirectly owns AGRO, which is a Bermuda Class 3A and Class C insurer. AG Re and AGRO underwrite financial guaranty reinsurance, and AGRO also underwrites other non-financial guaranty insurance and 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 is responsible for enterprise risk management for the Company on a consolidated basis and focuses on measuring and managing credit, market and liquidity risk for the Company. All transactions in new asset classes or new jurisdictions must be approved by this committee.
|
•
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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 review and may revise internal ratings assigned to 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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•
|
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 with new standards. In December 2018, S&P Global Ratings, a division of Standard & Poor's Financial Services LLC (S&P), proposed changes to its ratings methodology for bond insurers which it said are unlikely to affect any existing credit ratings on bond insurers.
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•
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Instability of Severe Stress Case Loss Assumptions.
A major component in arriving at a financial guaranty insurer's rating has been the rating agency’s assessment of the insurer’s capital adequacy, with each rating agency employing its own proprietary model. These capital adequacy approaches include “stress case” loss assumptions for various risks or risk categories. Since the financial crisis, the rating agencies have at various times materially increased stress case loss assumptions for various risks or risk categories, in some cases later reducing such stress case losses. This approach has made predicting the amount of capital required to maintain or attain a certain rating more difficult.
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•
|
More Reliance on Qualitative Rating Criteria.
In prior years, the financial strength ratings of the Company’s insurance company subsidiaries were largely consistent with the rating agency’s assessment of the insurers’ capital adequacy, such that a rating downgrade could generally be avoided by raising additional capital or otherwise improving capital adequacy under the rating agency’s model. In recent years, however, both S&P and Moody’s Investors Service, Inc. (Moody’s) have applied other factors, some of which are subjective, such as the insurer's business strategy and franchise value or the anticipated future demand for its product, to justify ratings for the Company’s insurance company subsidiaries significantly below the ratings implied by their own capital adequacy models. Currently, for example, S&P has concluded that Assured Guaranty has “AAA” capital adequacy under the S&P model (but subject to a downward adjustment due to a “largest obligor test”) and Moody’s has concluded that AGM has “Aa” capital adequacy under the Moody’s model (offset by other factors including the rating agency’s assessment of competitive profile, future profitability and market share).
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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 only insures 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,
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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)
|
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)
|
as a Class C long-term insurer, AGRO may not use the funds allocated to its long-term business fund, directly or indirectly, for any purpose other than a purpose of its long-term business except in so far as such payment can be made out of any surplus certified by AGRO's approved actuary to be available for distribution otherwise than to policyholders.
|
•
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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)
|
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
|
(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.
|
•
|
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.;
|
•
|
an insurer's business must be conducted in a prudent manner — in particular, the insurer must maintain appropriate financial and non-financial resources;
|
•
|
the insurer must be fit and proper, and be appropriately staffed; and
|
•
|
the insurer and its group must be capable of being effectively supervised.
|
•
|
assets and liabilities are generally to be valued at their market value;
|
•
|
the amount of required economic capital is intended to ensure, with a probability of 99.5%, that regulated firms are able to meet their obligations to policyholders and beneficiaries over the following 12 months; and
|
•
|
reinsurance recoveries will be treated as a separate asset (rather than being netted 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
|
•
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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;
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•
|
the Company's access to financial and capital markets to raise additional capital, refinance its debt or replace existing senior secured credit and receivables-backed facilities;
|
•
|
the Company's ability to repay debt;
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•
|
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
|
•
|
general financial, economic and other market conditions.
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ITEM 1B.
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UNRESOLVED STAFF COMMENTS
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ITEM 2.
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PROPERTIES
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ITEM 3.
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LEGAL PROCEEDINGS
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ITEM 4.
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MINE SAFETY DISCLOSURES
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Name
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Age
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Position(s)
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Dominic J. Frederico
|
66
|
|
President and Chief Executive Officer; Deputy Chairman
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Robert A. Bailenson
|
52
|
|
Chief Financial Officer
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Ling Chow
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48
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|
General Counsel and Secretary
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Russell B. Brewer II
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61
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|
Chief Surveillance Officer
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Bruce E. Stern
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64
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Executive Officer
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Howard W. Albert
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59
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Chief Risk Officer
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Stephen Donnarumma
|
56
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Chief Credit Officer
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ITEM 5.
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MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Period
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Total
Number of
Shares
Purchased
|
|
Average
Price Paid
Per Share
|
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Program (1)
|
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Maximum Number (or Approximate Dollar Value)
of Shares that
May Yet Be
Purchased
Under the Program(2)
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||||||
October 1 - October 31
|
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964,544
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|
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$
|
41.47
|
|
|
964,544
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|
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$
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177,873,174
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|
November 1 - November 30
|
|
989,741
|
|
|
$
|
40.43
|
|
|
989,434
|
|
|
$
|
137,873,183
|
|
December 1 - December 31
|
|
1,038,954
|
|
|
$
|
38.50
|
|
|
1,038,954
|
|
|
$
|
97,873,184
|
|
Total
|
|
2,993,239
|
|
|
$
|
40.09
|
|
|
2,992,932
|
|
|
|
|
(1)
|
After giving effect to repurchases since the beginning of 2013 through
March 1, 2019
, the Company has repurchased a total of
95.7 million
common shares for approximately
$2,764 million
, excluding commissions, at an average price of
$28.87
per share.
|
(2)
|
Excludes commissions.
|
|
Assured Guaranty
|
|
S&P 500 Index
|
|
S&P 500
Financials Sector GICS Level 1 Index
|
|
Russell Midcap Financial Services Index
|
||||||||
12/31/2013
|
$
|
100.00
|
|
|
$
|
100.00
|
|
|
$
|
100.00
|
|
|
$
|
100.00
|
|
12/31/2014
|
112.19
|
|
|
113.68
|
|
|
115.18
|
|
|
114.64
|
|
||||
12/31/2015
|
116.12
|
|
|
115.24
|
|
|
113.38
|
|
|
117.34
|
|
||||
12/31/2016
|
169.07
|
|
|
129.02
|
|
|
139.17
|
|
|
135.11
|
|
||||
12/31/2017
|
153.79
|
|
|
157.17
|
|
|
169.98
|
|
|
157.56
|
|
||||
12/31/2018
|
176.79
|
|
|
150.27
|
|
|
147.82
|
|
|
141.74
|
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
(dollars in millions, except per share amounts)
|
||||||||||||||||||
Statement of operations data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net earned premiums
|
$
|
548
|
|
|
$
|
690
|
|
|
$
|
864
|
|
|
$
|
766
|
|
|
$
|
570
|
|
Net investment income
|
398
|
|
|
418
|
|
|
408
|
|
|
423
|
|
|
403
|
|
|||||
Net realized investment gains (losses)
|
(32
|
)
|
|
40
|
|
|
(29
|
)
|
|
(26
|
)
|
|
(60
|
)
|
|||||
Net change in fair value of credit derivatives
|
112
|
|
|
111
|
|
|
98
|
|
|
728
|
|
|
823
|
|
|||||
Fair value gains (losses) on financial guaranty variable interest entities (FG VIEs)
|
14
|
|
|
30
|
|
|
38
|
|
|
38
|
|
|
255
|
|
|||||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
58
|
|
|
259
|
|
|
214
|
|
|
—
|
|
|||||
Commutation gains (losses)
|
(16
|
)
|
|
328
|
|
|
8
|
|
|
28
|
|
|
23
|
|
|||||
Other income (loss)
|
(22
|
)
|
|
64
|
|
|
31
|
|
|
36
|
|
|
(20
|
)
|
|||||
Total revenues
|
1,002
|
|
|
1,739
|
|
|
1,677
|
|
|
2,207
|
|
|
1,994
|
|
|||||
Expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Loss and loss adjustment expenses
|
64
|
|
|
388
|
|
|
295
|
|
|
424
|
|
|
126
|
|
|||||
Amortization of deferred acquisition costs (DAC)
|
16
|
|
|
19
|
|
|
18
|
|
|
20
|
|
|
25
|
|
|||||
Interest expense
|
94
|
|
|
97
|
|
|
102
|
|
|
101
|
|
|
92
|
|
|||||
Other operating expenses
|
248
|
|
|
244
|
|
|
245
|
|
|
231
|
|
|
220
|
|
|||||
Total expenses
|
422
|
|
|
748
|
|
|
660
|
|
|
776
|
|
|
463
|
|
|||||
Income (loss) before (benefit) provision for income taxes
|
580
|
|
|
991
|
|
|
1,017
|
|
|
1,431
|
|
|
1,531
|
|
|||||
Provision (benefit) for income taxes
|
59
|
|
|
261
|
|
|
136
|
|
|
375
|
|
|
443
|
|
|||||
Net income (loss)
|
$
|
521
|
|
|
$
|
730
|
|
|
$
|
881
|
|
|
$
|
1,056
|
|
|
$
|
1,088
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
4.73
|
|
|
$
|
6.05
|
|
|
$
|
6.61
|
|
|
$
|
7.12
|
|
|
$
|
6.30
|
|
Diluted
|
$
|
4.68
|
|
|
$
|
5.96
|
|
|
$
|
6.56
|
|
|
$
|
7.08
|
|
|
$
|
6.26
|
|
Cash dividends declared per share
|
$
|
0.64
|
|
|
$
|
0.57
|
|
|
$
|
0.52
|
|
|
$
|
0.48
|
|
|
$
|
0.44
|
|
|
As of December 31,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
|
(dollars in millions, except per share amounts)
|
||||||||||||||||||
Balance sheet data (end of period):
|
|
|
|
|
|
|
|
|
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Investments and cash
|
$
|
10,977
|
|
|
$
|
11,539
|
|
|
$
|
11,103
|
|
|
$
|
11,358
|
|
|
$
|
11,459
|
|
Premiums receivable, net of commissions payable
|
904
|
|
|
915
|
|
|
576
|
|
|
693
|
|
|
729
|
|
|||||
Ceded unearned premium reserve
|
59
|
|
|
119
|
|
|
206
|
|
|
232
|
|
|
381
|
|
|||||
Salvage and subrogation recoverable
|
490
|
|
|
572
|
|
|
365
|
|
|
126
|
|
|
151
|
|
|||||
Total assets
|
13,603
|
|
|
14,433
|
|
|
14,151
|
|
|
14,544
|
|
|
14,919
|
|
|||||
Liabilities and shareholders' equity:
|
|
|
|
|
|
|
|
|
|
||||||||||
Unearned premium reserve
|
3,512
|
|
|
3,475
|
|
|
3,511
|
|
|
3,996
|
|
|
4,261
|
|
|||||
Loss and loss adjustment expense reserve
|
1,177
|
|
|
1,444
|
|
|
1,127
|
|
|
1,067
|
|
|
799
|
|
|||||
Long-term debt
|
1,233
|
|
|
1,292
|
|
|
1,306
|
|
|
1,300
|
|
|
1,297
|
|
|||||
Credit derivative liabilities
|
209
|
|
|
271
|
|
|
402
|
|
|
446
|
|
|
963
|
|
|||||
Total liabilities
|
7,048
|
|
|
7,594
|
|
|
7,647
|
|
|
8,481
|
|
|
9,161
|
|
|||||
Accumulated OCI (AOCI)
|
93
|
|
|
372
|
|
|
149
|
|
|
237
|
|
|
370
|
|
|||||
Shareholders' equity
|
6,555
|
|
|
6,839
|
|
|
6,504
|
|
|
6,063
|
|
|
5,758
|
|
|||||
Book value per share
|
63.23
|
|
|
58.95
|
|
|
50.82
|
|
|
43.96
|
|
|
36.37
|
|
|||||
Consolidated statutory financial information:
|
|
|
|
|
|
|
|
|
|
||||||||||
Contingency reserve
|
$
|
1,663
|
|
|
$
|
1,750
|
|
|
$
|
2,008
|
|
|
$
|
2,263
|
|
|
$
|
2,330
|
|
Policyholders' surplus (1)
|
5,148
|
|
|
5,305
|
|
|
5,126
|
|
|
4,631
|
|
|
4,222
|
|
|||||
Claims-paying resources (1) (2)
|
11,815
|
|
|
12,021
|
|
|
11,954
|
|
|
12,567
|
|
|
12,462
|
|
|||||
Financial Guaranty Exposure:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net debt service outstanding
|
$
|
371,586
|
|
|
$
|
401,118
|
|
|
$
|
437,535
|
|
|
$
|
536,341
|
|
|
$
|
609,622
|
|
Net par outstanding
|
241,802
|
|
|
264,952
|
|
|
296,318
|
|
|
358,571
|
|
|
403,729
|
|
(1)
|
Beginning in the second quarter of 2018, the Company incorporates deferred ceding commission income in claims-paying resources. The claims-paying resources in prior periods have been updated to reflect this change.
|
(2)
|
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 and net deferred ceding commission income, 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,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions, except per share amounts)
|
||||||||||
Net income (loss)
|
$
|
521
|
|
|
$
|
730
|
|
|
$
|
881
|
|
Non-GAAP operating income (1)
|
482
|
|
|
661
|
|
|
895
|
|
|||
Gain (loss) related to the effect of consolidating financial guaranty variable interest entities (FG VIE consolidation) included in non-GAAP operating income
|
(4
|
)
|
|
11
|
|
|
12
|
|
|||
|
|
|
|
|
|
||||||
Net income (loss) per diluted share
|
4.68
|
|
|
5.96
|
|
|
6.56
|
|
|||
Non-GAAP operating income per share (1)
|
4.34
|
|
|
5.41
|
|
|
6.68
|
|
|||
Gain (loss) related to FG VIE consolidation included in non-GAAP operating income per share
|
(0.03
|
)
|
|
0.10
|
|
|
0.10
|
|
|||
|
|
|
|
|
|
||||||
Diluted shares
|
111.3
|
|
|
122.3
|
|
|
134.1
|
|
|||
|
|
|
|
|
|
||||||
Gross written premiums (GWP)
|
612
|
|
|
307
|
|
|
154
|
|
|||
Present value of new business production (PVP) (1)
|
663
|
|
|
289
|
|
|
214
|
|
|||
Gross par written
|
24,624
|
|
|
18,024
|
|
|
17,854
|
|
|
|
As of December 31, 2018
|
|
As of December 31, 2017
|
||||||||||||
|
|
Amount
|
|
Per Share
|
|
Amount
|
|
Per Share
|
||||||||
|
|
(in millions, except per share amounts)
|
||||||||||||||
Shareholders' equity
|
|
$
|
6,555
|
|
|
$
|
63.23
|
|
|
$
|
6,839
|
|
|
$
|
58.95
|
|
Non-GAAP operating shareholders' equity (1)
|
|
6,342
|
|
|
61.17
|
|
|
6,521
|
|
|
56.20
|
|
||||
Non-GAAP adjusted book value (1)
|
|
8,922
|
|
|
86.06
|
|
|
9,020
|
|
|
77.74
|
|
||||
Gain (loss) related to FG VIE consolidation included in non-GAAP operating shareholders' equity
|
|
3
|
|
|
0.03
|
|
|
5
|
|
|
0.03
|
|
||||
Gain (loss) related to FG VIE consolidation included in non-GAAP adjusted book value
|
|
(15
|
)
|
|
(0.15
|
)
|
|
(14
|
)
|
|
(0.12
|
)
|
||||
Common shares outstanding (2)
|
|
103.7
|
|
|
|
|
116.0
|
|
|
|
(1)
|
See “—Non-GAAP Financial Measures” for a definition of the financial measures that were not determined in accordance with accounting principles generally accepted in the United States of America (GAAP) and a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP measure, if available. 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
|
•
|
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,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(dollars in billions, except number of issues and percent)
|
||||||||||
Par:
|
|
|
|
|
|
||||||
New municipal bonds issued
|
$
|
320.3
|
|
|
$
|
409.5
|
|
|
$
|
423.7
|
|
Total insured
|
$
|
18.9
|
|
|
$
|
23.0
|
|
|
$
|
25.3
|
|
Insured by Assured Guaranty
|
$
|
10.5
|
|
|
$
|
13.5
|
|
|
$
|
14.2
|
|
Number of issues:
|
|
|
|
|
|
||||||
New municipal bonds issued
|
8,555
|
|
|
10,589
|
|
|
12,271
|
|
|||
Total insured
|
1,246
|
|
|
1,637
|
|
|
1,889
|
|
|||
Insured by Assured Guaranty
|
596
|
|
|
833
|
|
|
904
|
|
|||
Bond insurance market penetration based on:
|
|
|
|
|
|
||||||
Par
|
5.9
|
%
|
|
5.6
|
%
|
|
6.0
|
%
|
|||
Number of issues
|
14.6
|
%
|
|
15.5
|
%
|
|
15.4
|
%
|
|||
Single A par sold
|
17.8
|
%
|
|
23.3
|
%
|
|
22.6
|
%
|
|||
Single A transactions sold
|
52.8
|
%
|
|
57.3
|
%
|
|
55.8
|
%
|
|||
$25 million and under par sold
|
17.2
|
%
|
|
18.7
|
%
|
|
17.8
|
%
|
|||
$25 million and under transactions sold
|
17.1
|
%
|
|
18.3
|
%
|
|
17.5
|
%
|
(1)
|
Source: The amounts in the table are those reported by Thomson Reuters. In addition, the Company considers $500 million of taxable ProMedica Toledo Hospital bonds insured by Assured Guaranty in 2018 to be public finance business.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
GWP
|
|
|
|
|
|
||||||
Public Finance—U.S.
|
$
|
320
|
|
|
$
|
190
|
|
|
$
|
142
|
|
Public Finance—non-U.S.
|
115
|
|
|
105
|
|
|
15
|
|
|||
Structured Finance—U.S.
|
167
|
|
|
(1
|
)
|
|
(1
|
)
|
|||
Structured Finance—non-U.S.
|
10
|
|
|
13
|
|
|
(2
|
)
|
|||
Total GWP
|
$
|
612
|
|
|
$
|
307
|
|
|
$
|
154
|
|
PVP (1):
|
|
|
|
|
|
||||||
Public Finance—U.S.
|
$
|
391
|
|
|
$
|
196
|
|
|
$
|
161
|
|
Public Finance—non-U.S.
|
94
|
|
|
66
|
|
|
25
|
|
|||
Structured Finance—U.S. (2)
|
166
|
|
|
12
|
|
|
27
|
|
|||
Structured Finance—non-U.S. (3)
|
12
|
|
|
15
|
|
|
1
|
|
|||
Total PVP
|
$
|
663
|
|
|
$
|
289
|
|
|
$
|
214
|
|
Gross Par Written (1):
|
|
|
|
|
|
||||||
Public Finance—U.S.
|
$
|
19,572
|
|
|
$
|
15,957
|
|
|
$
|
16,039
|
|
Public Finance—non-U.S.
|
3,817
|
|
|
1,376
|
|
|
677
|
|
|||
Structured Finance—U.S. (2)
|
902
|
|
|
489
|
|
|
1,114
|
|
|||
Structured Finance—non-U.S. (3)
|
333
|
|
|
202
|
|
|
24
|
|
|||
Total gross par written
|
$
|
24,624
|
|
|
$
|
18,024
|
|
|
$
|
17,854
|
|
|
|
|
|
|
|
||||||
Average rating on new business written
|
A-
|
|
A-
|
|
A-
|
(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 life insurance capital relief transactions in certain years.
|
|
GWP
|
|
PVP (1)
|
|
|
||||||||||||||
|
Financial Guaranty
|
|
Financial Guaranty
|
|
Credit
Derivatives
|
|
Total
|
|
Gross Par Written (1)
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Public Finance—U.S.
|
$
|
123
|
|
|
$
|
118
|
|
|
$
|
67
|
|
|
$
|
185
|
|
|
$
|
7,559
|
|
Public Finance—non-U.S.
|
50
|
|
|
38
|
|
|
12
|
|
|
50
|
|
|
3,345
|
|
|||||
Structured Finance—U.S.
|
157
|
|
|
156
|
|
|
—
|
|
|
156
|
|
|
349
|
|
|||||
Structured Finance—non-U.S.
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19
|
|
|||||
Total
|
$
|
330
|
|
|
$
|
312
|
|
|
$
|
79
|
|
|
$
|
391
|
|
|
$
|
11,272
|
|
(1)
|
See “– Non-GAAP Financial Measures – PVP or Present Value of New Business Production.”
|
|
Amount
|
|
Number of Shares
|
|
Average price per share
|
|||||
|
(in millions, except per share data)
|
|||||||||
2013
|
$
|
264
|
|
|
12.5
|
|
|
$
|
21.12
|
|
2014
|
590
|
|
|
24.4
|
|
|
24.17
|
|
||
2015
|
555
|
|
|
21.0
|
|
|
26.43
|
|
||
2016
|
306
|
|
|
10.7
|
|
|
28.53
|
|
||
2017
|
501
|
|
|
12.7
|
|
|
39.57
|
|
||
2018
|
500
|
|
|
13.2
|
|
|
37.76
|
|
||
2019 (through March 1, 2019)
|
48
|
|
|
1.2
|
|
|
40.03
|
|
||
Cumulative repurchases since the beginning of 2013
|
$
|
2,764
|
|
|
95.7
|
|
|
$
|
28.87
|
|
|
|
Year Ended December 31,
|
|
|
|
|
||||||||||
|
|
2018
|
|
2017
|
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
||||||||
|
|
(per share)
|
||||||||||||||
Net income
|
|
$
|
1.73
|
|
|
$
|
2.03
|
|
|
|
|
|
||||
Non-GAAP operating income
|
|
1.58
|
|
|
1.81
|
|
|
|
|
|
||||||
Shareholders' equity
|
|
|
|
|
|
$
|
16.26
|
|
|
$
|
12.92
|
|
||||
Non-GAAP operating shareholders' equity
|
|
|
|
|
|
15.29
|
|
|
11.80
|
|
||||||
Non-GAAP adjusted book value
|
|
|
|
|
|
27.07
|
|
|
20.58
|
|
(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, especially in the event of a No-Deal Brexit.
|
•
|
U.K. Business.
As of
December 31, 2018
, approximately $31.1 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, government accommodation, universities, toll roads and housing associations that the Company believes are not overly vulnerable to Brexit pressures. AGE is currently authorized by the PRA of the Bank of England with permissions sufficient to enable AGE to effect and carry out financial guaranty insurance and reinsurance in the U.K. Most of the new transactions insured by AGE since 2008 have been in the U.K.
|
•
|
Business Elsewhere in the EU.
As of
December 31, 2018
, approximately $7.1 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”. The Company cannot determine whether U.K. authorized financial services firms such as AGE will continue to enjoy passporting rights to the other EEA states after Brexit. This question will be particularly acute in the event of a No-Deal Brexit because the loss of passporting could occur as early as March 29, 2019, rather than at the end of the transition period under the withdrawal agreement of December 31, 2020. As a consequence, Assured Guaranty is establishing a new subsidiary in Paris, France, in order to continue with the ability to write new business, and to service existing business, in those other EEA states. That new subsidiary is unlikely to be fully licensed prior to a No-Deal Brexit, should that occur. While the Company believes that, in the event of a No-Deal Brexit or in the absence of applicable transition rules, those other EEA states outside the U.K. will permit the Company to continue to service existing business in their states, there can be no assurance that this will occur, nor can the Company fully determine the impact on its business and operations if it does not occur. As noted above, most of the new transactions insured by AGE since 2008 have been in the U.K.
|
•
|
Employees.
All of the employees working in AGE’s London office are either U.K. citizens or have U.K. resident status except one, who has started the application process to become a U.K. resident.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Revenues:
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
548
|
|
|
$
|
690
|
|
|
$
|
864
|
|
Net investment income
|
398
|
|
|
418
|
|
|
408
|
|
|||
Net realized investment gains (losses)
|
(32
|
)
|
|
40
|
|
|
(29
|
)
|
|||
Net change in fair value of credit derivatives
|
112
|
|
|
111
|
|
|
98
|
|
|||
Fair value gains (losses) on FG VIEs
|
14
|
|
|
30
|
|
|
38
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
58
|
|
|
259
|
|
|||
Commutation gains (losses)
|
(16
|
)
|
|
328
|
|
|
8
|
|
|||
Other income (loss)
|
(22
|
)
|
|
64
|
|
|
31
|
|
|||
Total revenues
|
1,002
|
|
|
1,739
|
|
|
1,677
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Loss and LAE
|
64
|
|
|
388
|
|
|
295
|
|
|||
Amortization of DAC
|
16
|
|
|
19
|
|
|
18
|
|
|||
Interest expense
|
94
|
|
|
97
|
|
|
102
|
|
|||
Other operating expenses
|
248
|
|
|
244
|
|
|
245
|
|
|||
Total expenses
|
422
|
|
|
748
|
|
|
660
|
|
|||
Income (loss) before provision for income taxes
|
580
|
|
|
991
|
|
|
1,017
|
|
|||
Provision (benefit) for income taxes
|
59
|
|
|
261
|
|
|
136
|
|
|||
Net income (loss)
|
$
|
521
|
|
|
$
|
730
|
|
|
$
|
881
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Financial guaranty insurance:
|
|
|
|
|
|
||||||
Public finance
|
|
|
|
|
|
||||||
Scheduled net earned premiums and accretion
|
$
|
300
|
|
|
$
|
315
|
|
|
$
|
299
|
|
Accelerations:
|
|
|
|
|
|
||||||
Refundings
|
139
|
|
|
269
|
|
|
390
|
|
|||
Terminations
|
14
|
|
|
2
|
|
|
34
|
|
|||
Total accelerations
|
153
|
|
|
271
|
|
|
424
|
|
|||
Total public finance
|
453
|
|
|
586
|
|
|
723
|
|
|||
Structured finance(1)
|
|
|
|
|
|
||||||
Scheduled net earned premiums and accretion
|
85
|
|
|
87
|
|
|
96
|
|
|||
Accelerations
|
6
|
|
|
15
|
|
|
45
|
|
|||
Total structured finance
|
91
|
|
|
102
|
|
|
141
|
|
|||
Non-financial guaranty
|
4
|
|
|
2
|
|
|
—
|
|
|||
Total net earned premiums
|
$
|
548
|
|
|
$
|
690
|
|
|
$
|
864
|
|
(1)
|
Excludes
$12 million
,
$15 million
and
$16 million
for
2018
,
2017
and
2016
, respectively, related to consolidated FG VIEs.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Income from fixed-maturity securities managed by third parties
|
$
|
297
|
|
|
$
|
298
|
|
|
$
|
306
|
|
Income from internally managed securities (1)
|
110
|
|
|
129
|
|
|
111
|
|
|||
Gross investment income
|
407
|
|
|
427
|
|
|
417
|
|
|||
Investment expenses
|
(9
|
)
|
|
(9
|
)
|
|
(9
|
)
|
|||
Net investment income
|
$
|
398
|
|
|
$
|
418
|
|
|
$
|
408
|
|
(1)
|
Net investment income excludes
$4 million
for
2018
,
$5 million
for
2017
and
$10 million
in
2016
, related to securities in the investment portfolio that were issued by consolidated FG VIEs.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Gross realized gains on available-for-sale securities
|
$
|
20
|
|
|
$
|
95
|
|
|
$
|
28
|
|
Gross realized losses on available-for-sale securities
|
(12
|
)
|
|
(12
|
)
|
|
(8
|
)
|
|||
Net realized gains (losses) on other invested assets
|
(1
|
)
|
|
—
|
|
|
2
|
|
|||
OTTI
|
(39
|
)
|
|
(43
|
)
|
|
(51
|
)
|
|||
Net realized investment gains (losses)
|
$
|
(32
|
)
|
|
$
|
40
|
|
|
$
|
(29
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Realized gains on credit derivatives
|
$
|
9
|
|
|
$
|
17
|
|
|
$
|
56
|
|
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements
|
(25
|
)
|
|
(27
|
)
|
|
(27
|
)
|
|||
Realized gains (losses) and other settlements (1)
|
(16
|
)
|
|
(10
|
)
|
|
29
|
|
|||
Net unrealized gains (losses)
|
128
|
|
|
121
|
|
|
69
|
|
|||
Net change in fair value of credit derivatives
|
$
|
112
|
|
|
$
|
111
|
|
|
$
|
98
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Net par of terminated credit derivative contracts
|
$
|
601
|
|
|
$
|
331
|
|
|
$
|
3,811
|
|
Realized gains (losses) and other settlements
|
1
|
|
|
(15
|
)
|
|
20
|
|
|||
Net unrealized gains (losses) on credit derivatives
|
5
|
|
|
26
|
|
|
103
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Change in unrealized gains (losses) on credit derivatives:
|
|
|
|
|
|
||||||
Before considering implication of the Company’s credit spreads
|
$
|
126
|
|
|
$
|
118
|
|
|
$
|
183
|
|
Resulting from change in the Company’s credit spreads
|
2
|
|
|
3
|
|
|
(114
|
)
|
|||
After considering implication of the Company’s credit spreads
|
$
|
128
|
|
|
$
|
121
|
|
|
$
|
69
|
|
•
|
Changes in fair value gains (losses) on FG VIEs’ assets and liabilities are recorded in the Statement of Operations (effective January 1, 2018 the change in fair value of FG VIEs’ liabilities with recourse attributable to ISCR is recorded in OCI, instead of net income - See Item 8, Financial Statements and Supplementary Data, Note 1, Business and Basis of Presentation, for additional information). Upon adoption, the Company reclassified a loss of approximately $33 million, net of tax, from retained earnings to AOCI.
|
•
|
Upon consolidation of a FG VIE, premiums and losses related to AGC's and AGM's insurance of FG VIEs’ liabilities with recourse and, any investment balances related to the Company’s purchase of AGC and AGM insured FG VIEs’ debt, are considered intercompany transactions and are therefore eliminated.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Fair value gains (losses) on FG VIEs
|
$
|
14
|
|
|
$
|
30
|
|
|
$
|
38
|
|
Elimination of insurance and investment balances
|
(19
|
)
|
|
(13
|
)
|
|
(18
|
)
|
|||
Effect on income before tax
|
(5
|
)
|
|
17
|
|
|
20
|
|
|||
Less: tax provision (benefit)
|
(1
|
)
|
|
6
|
|
|
7
|
|
|||
Effect on net income (loss)
|
$
|
(4
|
)
|
|
$
|
11
|
|
|
$
|
13
|
|
|
Year Ended December 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(in millions)
|
||||||
Bargain purchase gain
|
$
|
56
|
|
|
$
|
357
|
|
Settlement of pre-existing relationships
|
2
|
|
|
(98
|
)
|
||
Total
|
$
|
58
|
|
|
$
|
259
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Foreign exchange gain (loss) on remeasurement (1)
|
$
|
(37
|
)
|
|
$
|
60
|
|
|
$
|
(37
|
)
|
Fair value gains (losses) on equity investments (2)
|
27
|
|
|
—
|
|
|
—
|
|
|||
Loss on extinguishment of debt (3)
|
(34
|
)
|
|
(9
|
)
|
|
—
|
|
|||
Fair value gains (losses) on CCS
|
14
|
|
|
(2
|
)
|
|
—
|
|
|||
Other
|
8
|
|
|
15
|
|
|
68
|
|
|||
Total other income (loss)
|
$
|
(22
|
)
|
|
$
|
64
|
|
|
$
|
31
|
|
(1)
|
Foreign exchange gains primarily relate to remeasurement of premiums receivable and are mainly due to changes in the exchange rate of the British pound sterling relative to the U.S. dollar.
|
(2)
|
The Company recorded a gain on change in fair value of equity securities in 2018 related to the Company's minority interest in the parent company of TMC Bonds LLC, which it sold in third quarter of 2018.
|
(3)
|
The loss on extinguishment of debt is related to AGUS' purchase of a portion of the 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 unamortized fair value adjustments that were recorded upon the acquisition of AGMH in 2009. AGUS purchased
$100 million
of principal amount in 2018 and
$28 million
in 2017. See Item 8, Financial Statements and Supplementary Data, Note 16, Long-Term Debt and Credit Facilities, for additional information.
|
|
Net Expected Loss to be Paid (Recovered)
|
|
Net Economic Loss Development (Benefit) (1)
|
||||||||||||||||
|
As of December 31,
|
|
Year Ended December 31,
|
||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2016
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Financial guaranty insurance
|
$
|
1,109
|
|
|
$
|
1,226
|
|
|
$
|
(9
|
)
|
|
$
|
353
|
|
|
$
|
164
|
|
FG VIEs and other
|
76
|
|
|
91
|
|
|
(13
|
)
|
|
(6
|
)
|
|
(8
|
)
|
|||||
Credit derivatives
|
(2
|
)
|
|
(14
|
)
|
|
17
|
|
|
(34
|
)
|
|
(17
|
)
|
|||||
Total
|
$
|
1,183
|
|
|
$
|
1,303
|
|
|
$
|
(5
|
)
|
|
$
|
313
|
|
|
$
|
139
|
|
|
Net Expected Loss to be Paid (Recovered)
|
|
Net Economic Loss Development (Benefit) (1)
|
||||||||||||||||
|
As of December 31,
|
|
Year Ended December 31,
|
||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2016
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Public finance
|
$
|
864
|
|
|
$
|
1,203
|
|
|
$
|
56
|
|
|
$
|
549
|
|
|
$
|
269
|
|
Structured finance
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. RMBS
|
293
|
|
|
73
|
|
|
(69
|
)
|
|
(181
|
)
|
|
(91
|
)
|
|||||
Other structured finance
|
26
|
|
|
27
|
|
|
8
|
|
|
(55
|
)
|
|
(39
|
)
|
|||||
Structured finance
|
319
|
|
|
100
|
|
|
(61
|
)
|
|
(236
|
)
|
|
(130
|
)
|
|||||
Total
|
$
|
1,183
|
|
|
$
|
1,303
|
|
|
$
|
(5
|
)
|
|
$
|
313
|
|
|
$
|
139
|
|
(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.
|
|
Risk-Free Rates used in Expected Loss for U.S. Dollar Denominated Obligations
|
|
Effect of Changes in the Risk-Free Rates on Economic Loss Development (Benefit)
|
||||||||
|
As of December 31,
|
|
Year Ended December 31,
|
||||||||
|
Range
|
|
Weighted Average
|
|
(in millions)
|
||||||
2018
|
0.0
|
%
|
-
|
3.06%
|
|
2.74
|
%
|
|
$
|
(17
|
)
|
2017
|
0.0
|
%
|
-
|
2.78%
|
|
2.38
|
%
|
|
25
|
|
|
2016
|
0.0
|
%
|
-
|
3.23%
|
|
2.73
|
%
|
|
(15
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Public finance
|
$
|
83
|
|
|
$
|
549
|
|
|
$
|
304
|
|
Structured finance
|
|
|
|
|
|
||||||
U.S. RMBS (1)
|
(15
|
)
|
|
(113
|
)
|
|
30
|
|
|||
Other structured finance
|
(4
|
)
|
|
(48
|
)
|
|
(39
|
)
|
|||
Structured finance
|
(19
|
)
|
|
(161
|
)
|
|
(9
|
)
|
|||
Total loss and LAE (2)
|
$
|
64
|
|
|
$
|
388
|
|
|
$
|
295
|
|
(1)
|
Excludes a benefit of
$3 million
, a loss of
$7 million
and a loss of
$7 million
as of
December 31, 2018
,
December 31, 2017
and
December 31, 2016
, respectively, related to consolidated FG VIEs.
|
(2)
|
Excludes credit derivative loss of $9 million for
2018
, and credit derivative benefit of $43 million and $20 million
2017
and 2016, respectively.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Debt issued by AGUS
|
$
|
46
|
|
|
$
|
44
|
|
|
$
|
48
|
|
Debt issued by AGMH
|
53
|
|
|
54
|
|
|
54
|
|
|||
AGMH's debt purchased by AGUS (1)
|
(5
|
)
|
|
(1
|
)
|
|
—
|
|
|||
Total
|
$
|
94
|
|
|
$
|
97
|
|
|
$
|
102
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Employee compensation and benefits
|
$
|
165
|
|
|
$
|
153
|
|
|
$
|
140
|
|
Deferred costs
|
(14
|
)
|
|
(10
|
)
|
|
(7
|
)
|
|||
Total employee compensation and benefits net of deferred costs
|
151
|
|
|
143
|
|
|
133
|
|
|||
Professional fees
|
21
|
|
|
21
|
|
|
21
|
|
|||
Premises and equipment
|
19
|
|
|
19
|
|
|
30
|
|
|||
Acquisition related expenses (1)
|
4
|
|
|
7
|
|
|
8
|
|
|||
Other
|
53
|
|
|
54
|
|
|
53
|
|
|||
Other operating expenses
|
248
|
|
|
244
|
|
|
245
|
|
|||
Amortization of DAC
|
16
|
|
|
19
|
|
|
18
|
|
|||
Total other operating expenses and amortization of DAC
|
$
|
264
|
|
|
$
|
263
|
|
|
$
|
263
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Total provision (benefit) for income taxes
|
$
|
59
|
|
|
$
|
261
|
|
|
$
|
136
|
|
Effective tax rate
|
10.2
|
%
|
|
26.3
|
%
|
|
13.4
|
%
|
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 that are recognized in net income, 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 that are recognized in net income. 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 that are recognized in net income. 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,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Net income (loss)
|
$
|
521
|
|
|
$
|
730
|
|
|
$
|
881
|
|
Less pre-tax adjustments:
|
|
|
|
|
|
||||||
Realized gains (losses) on investments
|
(32
|
)
|
|
40
|
|
|
(30
|
)
|
|||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
101
|
|
|
43
|
|
|
36
|
|
|||
Fair value gains (losses) on CCS (1)
|
14
|
|
|
(2
|
)
|
|
—
|
|
|||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves (1)
|
(32
|
)
|
|
57
|
|
|
(33
|
)
|
|||
Total pre-tax adjustments
|
51
|
|
|
138
|
|
|
(27
|
)
|
|||
Less tax effect on pre-tax adjustments
|
(12
|
)
|
|
(69
|
)
|
|
13
|
|
|||
Non-GAAP operating income
|
$
|
482
|
|
|
$
|
661
|
|
|
$
|
895
|
|
|
|
|
|
|
|
||||||
Gain (loss) related to FG VIE consolidation (net of tax provision (benefit) of $(1), $6 and $7) included in non-GAAP operating income
|
$
|
(4
|
)
|
|
$
|
11
|
|
|
$
|
12
|
|
(1)
|
Included in other income (loss) in the consolidated statements of operations.
|
1)
|
Elimination of non-credit-impairment unrealized fair value gains (losses) on credit derivatives, which is the amount of unrealized fair value gains (losses) in excess of the present value of the expected estimated economic credit losses, and non-economic payments. Such fair value adjustments are heavily affected by, and in part fluctuate with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss.
|
2)
|
Elimination of fair value gains (losses) on the Company’s CCS. Such amounts are affected by changes in market interest rates, the Company's credit spreads, price indications on the Company's publicly traded debt, and other market factors and are not expected to result in an economic gain or loss.
|
3)
|
Elimination of unrealized gains (losses) on the Company’s investments that are recorded as a component of accumulated other comprehensive income (AOCI) (excluding foreign exchange remeasurement). The AOCI component of the fair value adjustment on the investment portfolio is not deemed economic because the Company generally holds these investments to maturity and therefore should not recognize an economic gain or loss.
|
1)
|
Elimination of deferred acquisition costs, net. These amounts represent net deferred expenses that have already been paid or accrued and will be expensed in future accounting periods.
|
2)
|
Addition of the net present value of estimated net future revenue. 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, 2018
|
|
As of December 31, 2017
|
||||||||||||
|
After-Tax
|
|
Per Share
|
|
After-Tax
|
|
Per Share
|
||||||||
|
(dollars in millions, except
per share amounts)
|
||||||||||||||
Shareholders’ equity
|
$
|
6,555
|
|
|
$
|
63.23
|
|
|
$
|
6,839
|
|
|
$
|
58.95
|
|
Less pre-tax adjustments:
|
|
|
|
|
|
|
|
||||||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
(45
|
)
|
|
(0.44
|
)
|
|
(146
|
)
|
|
(1.26
|
)
|
||||
Fair value gains (losses) on CCS
|
74
|
|
|
0.72
|
|
|
60
|
|
|
0.52
|
|
||||
Unrealized gain (loss) on investment portfolio excluding foreign exchange effect
|
247
|
|
|
2.39
|
|
|
487
|
|
|
4.20
|
|
||||
Less taxes
|
(63
|
)
|
|
(0.61
|
)
|
|
(83
|
)
|
|
(0.71
|
)
|
||||
Non-GAAP operating shareholders’ equity
|
6,342
|
|
|
61.17
|
|
|
6,521
|
|
|
56.20
|
|
||||
Pre-tax adjustments:
|
|
|
|
|
|
|
|
||||||||
Less: Deferred acquisition costs
|
105
|
|
|
1.01
|
|
|
101
|
|
|
0.87
|
|
||||
Plus: Net present value of estimated net future revenue
|
204
|
|
|
1.96
|
|
|
146
|
|
|
1.26
|
|
||||
Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed
|
3,005
|
|
|
28.98
|
|
|
2,966
|
|
|
25.56
|
|
||||
Plus taxes
|
(524
|
)
|
|
(5.04
|
)
|
|
(512
|
)
|
|
(4.41
|
)
|
||||
Non-GAAP adjusted book value
|
$
|
8,922
|
|
|
$
|
86.06
|
|
|
$
|
9,020
|
|
|
$
|
77.74
|
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) related to FG VIE consolidation included in non-GAAP operating shareholders' equity (net of tax provision of $1 and $2)
|
$
|
3
|
|
|
$
|
0.03
|
|
|
$
|
5
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) related to FG VIE consolidation included in non-GAAP adjusted book value (net of tax benefit of $4 and $3)
|
$
|
(15
|
)
|
|
$
|
(0.15
|
)
|
|
$
|
(14
|
)
|
|
$
|
(0.12
|
)
|
|
Year Ended December 31, 2018
|
||||||||||||||||||
|
Public Finance
|
|
Structured Finance
|
|
|
||||||||||||||
|
U.S.
|
|
Non - U.S.
|
|
U.S.
|
|
Non - U.S.
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
GWP
|
$
|
320
|
|
|
$
|
115
|
|
|
$
|
167
|
|
|
$
|
10
|
|
|
$
|
612
|
|
Less: Installment GWP and other GAAP adjustments (1)
|
34
|
|
|
75
|
|
|
9
|
|
|
1
|
|
|
119
|
|
|||||
Upfront GWP
|
286
|
|
|
40
|
|
|
158
|
|
|
9
|
|
|
493
|
|
|||||
Plus: Installment premium PVP (2)
|
105
|
|
|
54
|
|
|
8
|
|
|
3
|
|
|
170
|
|
|||||
PVP
|
$
|
391
|
|
|
$
|
94
|
|
|
$
|
166
|
|
|
$
|
12
|
|
|
$
|
663
|
|
|
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
|
)
|
|
—
|
|
|
99
|
|
|||||
Upfront GWP
|
193
|
|
|
2
|
|
|
—
|
|
|
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
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
164
|
|
|||||
Plus: Installment premium PVP
|
—
|
|
|
25
|
|
|
24
|
|
|
1
|
|
|
50
|
|
|||||
PVP
|
$
|
161
|
|
|
$
|
25
|
|
|
$
|
27
|
|
|
$
|
1
|
|
|
$
|
214
|
|
(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.
|
(2)
|
Includes PVP of credit derivatives assumed in the SGI Transaction in 2018.
|
|
|
As of December 31, 2018
|
|
As of December 31, 2017
|
||||||||
Sector
|
|
Net Par
Outstanding
|
|
Avg.
Rating
|
|
Net Par
Outstanding
|
|
Avg.
Rating
|
||||
|
|
(dollars in millions)
|
||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
|||
U.S.:
|
|
|
|
|
|
|
|
|
|
|||
General obligation
|
|
$
|
78,800
|
|
|
A-
|
|
$
|
90,705
|
|
|
A-
|
Tax backed
|
|
40,616
|
|
|
A-
|
|
44,350
|
|
|
A-
|
||
Municipal utilities
|
|
28,462
|
|
|
A-
|
|
32,357
|
|
|
A-
|
||
Transportation
|
|
15,197
|
|
|
A-
|
|
17,030
|
|
|
A-
|
||
Healthcare
|
|
6,750
|
|
|
A-
|
|
8,763
|
|
|
A
|
||
Higher education
|
|
6,643
|
|
|
A-
|
|
8,195
|
|
|
A
|
||
Infrastructure finance
|
|
5,489
|
|
|
A-
|
|
4,216
|
|
|
BBB+
|
||
Housing revenue
|
|
1,435
|
|
|
BBB+
|
|
1,319
|
|
|
BBB+
|
||
Investor-owned utilities
|
|
1,001
|
|
|
A-
|
|
523
|
|
|
A-
|
||
Other public finance—U.S.
|
|
2,169
|
|
|
A-
|
|
1,934
|
|
|
A
|
||
Total public finance—U.S.
|
|
186,562
|
|
|
A-
|
|
209,392
|
|
|
A-
|
||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|||
Regulated utilities
|
|
18,325
|
|
|
BBB+
|
|
16,689
|
|
|
BBB+
|
||
Infrastructure finance
|
|
17,216
|
|
|
BBB
|
|
18,234
|
|
|
BBB
|
||
Pooled infrastructure
|
|
1,373
|
|
|
AAA
|
|
1,561
|
|
|
AAA
|
||
Other public finance
|
|
7,189
|
|
|
A
|
|
6,438
|
|
|
A
|
||
Total public finance—non-U.S.
|
|
44,103
|
|
|
BBB+
|
|
42,922
|
|
|
BBB+
|
||
Total public finance
|
|
230,665
|
|
|
A-
|
|
252,314
|
|
|
A-
|
||
Structured finance:
|
|
|
|
|
|
|
|
|
|
|||
U.S.:
|
|
|
|
|
|
|
|
|
|
|||
RMBS
|
|
4,270
|
|
|
BBB-
|
|
4,818
|
|
|
BBB-
|
||
Insurance securitizations
|
|
1,435
|
|
|
A+
|
|
1,449
|
|
|
A+
|
||
Consumer receivables
|
|
1,255
|
|
|
A-
|
|
1,590
|
|
|
A-
|
||
Pooled corporate obligations
|
|
1,215
|
|
|
AA-
|
|
1,347
|
|
|
A
|
||
Financial products
|
|
1,094
|
|
|
AA-
|
|
1,418
|
|
|
AA-
|
||
Other structured finance—U.S.
|
|
675
|
|
|
A-
|
|
602
|
|
|
A
|
||
Total structured finance—U.S.
|
|
9,944
|
|
|
A-
|
|
11,224
|
|
|
BBB+
|
||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|||
RMBS
|
|
576
|
|
|
A-
|
|
637
|
|
|
A-
|
||
Pooled corporate obligations
|
|
126
|
|
|
A
|
|
157
|
|
|
A+
|
||
Other structured finance
|
|
491
|
|
|
A
|
|
620
|
|
|
A
|
||
Total structured finance—non-U.S.
|
|
1,193
|
|
|
A
|
|
1,414
|
|
|
A
|
||
Total structured finance
|
|
11,137
|
|
|
A-
|
|
12,638
|
|
|
A-
|
||
Total net par outstanding
|
|
$
|
241,802
|
|
|
A-
|
|
$
|
264,952
|
|
|
A-
|
|
|
As of December 31, 2018
|
|
As of December 31, 2017
|
||||||||||
Rating Category
|
|
Net Par Outstanding
|
|
%
|
|
Net Par Outstanding
|
|
%
|
||||||
|
|
(dollars in millions)
|
||||||||||||
AAA
|
|
$
|
4,618
|
|
|
1.9
|
%
|
|
$
|
5,392
|
|
|
2.1
|
%
|
AA
|
|
27,021
|
|
|
11.2
|
|
|
34,212
|
|
|
12.9
|
|
||
A
|
|
119,415
|
|
|
49.4
|
|
|
134,396
|
|
|
50.7
|
|
||
BBB
|
|
80,588
|
|
|
33.3
|
|
|
78,714
|
|
|
29.7
|
|
||
BIG
|
|
10,160
|
|
|
4.2
|
|
|
12,238
|
|
|
4.6
|
|
||
Total net par outstanding
|
|
$
|
241,802
|
|
|
100.0
|
%
|
|
$
|
264,952
|
|
|
100.0
|
%
|
|
Net Par Outstanding
|
|
Percent of Total U.S. Public Finance Net Par Outstanding
|
|
Rating
|
|||
|
(dollars in millions)
|
|||||||
New Jersey (State of)
|
$
|
4,245
|
|
|
2.3
|
%
|
|
BBB
|
Pennsylvania (Commonwealth of)
|
1,986
|
|
|
1.1
|
|
|
A-
|
|
Illinois (State of)
|
1,967
|
|
|
1.0
|
|
|
BBB
|
|
Puerto Rico, General Obligation, Appropriations and Guarantees of the Commonwealth
|
1,498
|
|
|
0.8
|
|
|
CCC
|
|
Puerto Rico Highways & Transportation Authority
|
1,319
|
|
|
0.7
|
|
|
CCC
|
|
Chicago (City of) Illinois
|
1,300
|
|
|
0.7
|
|
|
BBB
|
|
North Texas Tollway Authority
|
1,242
|
|
|
0.7
|
|
|
A
|
|
California (State of)
|
1,177
|
|
|
0.6
|
|
|
A
|
|
Massachusetts (Commonwealth of)
|
1,160
|
|
|
0.6
|
|
|
AA-
|
|
Wisconsin (State of)
|
1,124
|
|
|
0.6
|
|
|
A+
|
|
Total of top ten U.S. public finance exposures
|
$
|
17,018
|
|
|
9.1
|
%
|
|
|
|
Net Par Outstanding
|
|
Percent of Total U.S. Structured Finance Net Par Outstanding
|
|
Rating
|
|||
|
(dollars in millions)
|
|||||||
Private US Insurance Securitization
|
$
|
500
|
|
|
5.0
|
%
|
|
AA
|
SLM Private Credit Student Trust 2007-A
|
500
|
|
|
5.0
|
|
|
A+
|
|
Private US Insurance Securitization
|
424
|
|
|
4.3
|
|
|
AA
|
|
SLM Private Credit Student Loan Trust 2006-C
|
257
|
|
|
2.6
|
|
|
AA-
|
|
Private US Insurance Securitization
|
250
|
|
|
2.5
|
|
|
AA
|
|
Brightwood Fund III Static 2018-1, LLC
|
231
|
|
|
2.3
|
|
|
A-
|
|
Option One 2007-FXD2
|
196
|
|
|
2.0
|
|
|
CCC
|
|
Timberlake Financial, LLC Floating Insured Notes
|
175
|
|
|
1.8
|
|
|
BBB-
|
|
Soundview 2007-WMC1
|
160
|
|
|
1.6
|
|
|
CCC
|
|
Countrywide HELOC 2006-I
|
132
|
|
|
1.3
|
|
|
BBB-
|
|
Total of top ten U.S. structured finance exposures
|
$
|
2,825
|
|
|
28.4
|
%
|
|
|
|
Country
|
|
Net Par Outstanding
|
|
Percent of Total Non-U.S. Net Par Outstanding
|
|
Rating
|
|||
|
|
|
(dollars in millions)
|
|||||||
Southern Water Services Limited
|
United Kingdom
|
|
$
|
2,592
|
|
|
5.7
|
%
|
|
A-
|
Hydro-Quebec, Province of Quebec
|
Canada
|
|
2,060
|
|
|
4.5
|
|
|
A+
|
|
Thames Water Utility Finance PLC
|
United Kingdom
|
|
1,900
|
|
|
4.2
|
|
|
A-
|
|
Societe des Autoroutes du Nord et de l'Est de France S.A.
|
France
|
|
1,727
|
|
|
3.8
|
|
|
BBB+
|
|
Southern Gas Networks PLC
|
United Kingdom
|
|
1,635
|
|
|
3.6
|
|
|
BBB
|
|
Anglian Water Services Financing
|
United Kingdom
|
|
1,415
|
|
|
3.1
|
|
|
A-
|
|
Dwr Cymru Financing Limited
|
United Kingdom
|
|
1,392
|
|
|
3.1
|
|
|
A-
|
|
British Broadcasting Corporation (BBC)
|
United Kingdom
|
|
1,296
|
|
|
2.9
|
|
|
A+
|
|
National Grid Gas PLC
|
United Kingdom
|
|
1,247
|
|
|
2.8
|
|
|
BBB+
|
|
Channel Link Enterprises Finance PLC
|
France, United Kingdom
|
|
1,206
|
|
|
2.7
|
|
|
BBB
|
|
Total of top ten non-U.S. exposures
|
|
|
$
|
16,470
|
|
|
36.4
|
%
|
|
|
|
Number of Risks
|
|
Net Par Outstanding
|
|
Percent of Total Net Par Outstanding
|
||||
|
(dollars in millions)
|
||||||||
U.S.:
|
|
|
|
|
|
||||
California
|
1,361
|
|
|
$
|
33,847
|
|
|
14.0
|
%
|
Texas
|
1,154
|
|
|
16,915
|
|
|
7.0
|
|
|
Pennsylvania
|
704
|
|
|
16,866
|
|
|
7.0
|
|
|
New York
|
829
|
|
|
15,077
|
|
|
6.2
|
|
|
Illinois
|
642
|
|
|
14,914
|
|
|
6.2
|
|
|
New Jersey
|
370
|
|
|
10,998
|
|
|
4.5
|
|
|
Florida
|
273
|
|
|
8,518
|
|
|
3.5
|
|
|
Michigan
|
349
|
|
|
5,635
|
|
|
2.3
|
|
|
Puerto Rico
|
18
|
|
|
4,767
|
|
|
2.0
|
|
|
Alabama
|
289
|
|
|
4,230
|
|
|
1.7
|
|
|
Other
|
2,726
|
|
|
54,795
|
|
|
22.7
|
|
|
Total U.S. public finance
|
8,715
|
|
|
186,562
|
|
|
77.1
|
|
|
U.S. Structured finance (multiple states)
|
485
|
|
|
9,944
|
|
|
4.1
|
|
|
Total U.S.
|
9,200
|
|
|
196,506
|
|
|
81.2
|
|
|
Non-U.S.:
|
|
|
|
|
|
||||
United Kingdom
|
130
|
|
|
31,128
|
|
|
12.9
|
|
|
France
|
10
|
|
|
3,189
|
|
|
1.3
|
|
|
Canada
|
9
|
|
|
2,659
|
|
|
1.1
|
|
|
Australia
|
11
|
|
|
2,103
|
|
|
0.9
|
|
|
Italy
|
8
|
|
|
1,176
|
|
|
0.5
|
|
|
Other
|
45
|
|
|
5,041
|
|
|
2.1
|
|
|
Total non-U.S.
|
213
|
|
|
45,296
|
|
|
18.8
|
|
|
Total
|
9,413
|
|
|
$
|
241,802
|
|
|
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
|
12,717
|
|
$
|
32,730
|
|
|
14.2
|
%
|
|
$10 through $50 million
|
4,047
|
|
64,982
|
|
|
28.2
|
|
||
$50 through $100 million
|
693
|
|
36,171
|
|
|
15.7
|
|
||
$100 million to $200 million
|
372
|
|
37,960
|
|
|
16.4
|
|
||
$200 million or greater
|
229
|
|
58,822
|
|
|
25.5
|
|
||
Total
|
18,058
|
|
$
|
230,665
|
|
|
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
|
154
|
|
$
|
77
|
|
|
0.7
|
%
|
|
$10 through $50 million
|
178
|
|
1,235
|
|
|
11.1
|
|
||
$50 through $100 million
|
64
|
|
1,464
|
|
|
13.1
|
|
||
$100 million to $200 million
|
82
|
|
2,657
|
|
|
23.9
|
|
||
$200 million or greater
|
104
|
|
5,704
|
|
|
51.2
|
|
||
Total
|
582
|
|
$
|
11,137
|
|
|
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 (1)
|
|
Total Net Par Outstanding
|
|
Gross Par Outstanding
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commonwealth of Puerto Rico - General Obligation Bonds (2) (3)
|
|
$
|
647
|
|
|
$
|
301
|
|
|
$
|
393
|
|
|
$
|
(1
|
)
|
|
$
|
1,340
|
|
|
$
|
1,383
|
|
Puerto Rico Public Buildings Authority (PBA)
|
|
9
|
|
|
142
|
|
|
—
|
|
|
(9
|
)
|
|
142
|
|
|
148
|
|
||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
PRHTA (Transportation revenue) (3)
|
|
233
|
|
|
495
|
|
|
195
|
|
|
(79
|
)
|
|
844
|
|
|
874
|
|
||||||
PRHTA (Highway revenue) (3)
|
|
351
|
|
|
84
|
|
|
40
|
|
|
—
|
|
|
475
|
|
|
536
|
|
||||||
Puerto Rico Convention Center District Authority (PRCCDA)
|
|
—
|
|
|
152
|
|
|
—
|
|
|
—
|
|
|
152
|
|
|
152
|
|
||||||
Puerto Rico Infrastructure Financing Authority (PRIFA)
|
|
—
|
|
|
15
|
|
|
1
|
|
|
—
|
|
|
16
|
|
|
16
|
|
||||||
Other Public Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Puerto Rico Electric Power Authority (PREPA) (3)
|
|
544
|
|
|
72
|
|
|
232
|
|
|
—
|
|
|
848
|
|
|
866
|
|
||||||
PRASA
|
|
—
|
|
|
284
|
|
|
89
|
|
|
—
|
|
|
373
|
|
|
373
|
|
||||||
MFA
|
|
189
|
|
|
40
|
|
|
74
|
|
|
—
|
|
|
303
|
|
|
349
|
|
||||||
COFINA (4)
|
|
264
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
273
|
|
|
273
|
|
||||||
U of PR
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||||
Total exposure to Puerto Rico
|
|
$
|
2,237
|
|
|
$
|
1,586
|
|
|
$
|
1,033
|
|
|
$
|
(89
|
)
|
|
$
|
4,767
|
|
|
$
|
4,971
|
|
(1)
|
Net par outstanding eliminations relate to second-to-pay policies under which an Assured Guaranty insurance subsidiary guarantees an obligation already insured by another Assured Guaranty insurance subsidiary.
|
(2)
|
Includes exposure to capital appreciation bonds with a current aggregate net par outstanding of $2 million and fully accreted net par at maturity of $3 million.
|
(3)
|
As of the date of this filing, the seven-member financial oversight board established by PROMESA has certified a filing under Title III of PROMESA for these exposures.
|
(4)
|
As of the date of this filing, a plan of adjustment under PROMESA is effective for this credit.
|
|
Scheduled Net Par Amortization
|
|||||||||||||||||||||||||||||||||||||||||
|
2019 (1Q)
|
2019 (2Q)
|
2019 (3Q)
|
2019 (4Q)
|
2020
|
2021
|
2022
|
2023
|
2024 -2028
|
2029 -2033
|
2034 -2038
|
2039 -2043
|
2044 -2047
|
Total
|
||||||||||||||||||||||||||||
|
(in millions)
|
|||||||||||||||||||||||||||||||||||||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
Commonwealth of Puerto Rico - General Obligation Bonds
|
$
|
—
|
|
$
|
—
|
|
$
|
87
|
|
$
|
—
|
|
$
|
141
|
|
$
|
15
|
|
$
|
37
|
|
$
|
14
|
|
$
|
298
|
|
$
|
341
|
|
$
|
407
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,340
|
|
PBA
|
—
|
|
—
|
|
3
|
|
—
|
|
5
|
|
13
|
|
—
|
|
7
|
|
58
|
|
36
|
|
20
|
|
—
|
|
—
|
|
142
|
|
||||||||||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
PRHTA (Transportation revenue)
|
—
|
|
—
|
|
32
|
|
—
|
|
25
|
|
18
|
|
28
|
|
33
|
|
120
|
|
127
|
|
296
|
|
165
|
|
—
|
|
844
|
|
||||||||||||||
PRHTA (Highway revenue)
|
—
|
|
—
|
|
21
|
|
—
|
|
22
|
|
35
|
|
6
|
|
32
|
|
77
|
|
145
|
|
137
|
|
—
|
|
—
|
|
475
|
|
||||||||||||||
PRCCDA
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
19
|
|
50
|
|
83
|
|
—
|
|
—
|
|
152
|
|
||||||||||||||
PRIFA
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2
|
|
—
|
|
—
|
|
3
|
|
11
|
|
—
|
|
16
|
|
||||||||||||||
Other Public Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
PREPA
|
—
|
|
—
|
|
26
|
|
—
|
|
48
|
|
28
|
|
28
|
|
95
|
|
440
|
|
174
|
|
9
|
|
—
|
|
—
|
|
848
|
|
||||||||||||||
PRASA
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
110
|
|
—
|
|
2
|
|
—
|
|
261
|
|
373
|
|
||||||||||||||
MFA
|
—
|
|
—
|
|
55
|
|
—
|
|
45
|
|
40
|
|
40
|
|
22
|
|
91
|
|
10
|
|
—
|
|
—
|
|
—
|
|
303
|
|
||||||||||||||
COFINA
|
—
|
|
—
|
|
—
|
|
—
|
|
(1
|
)
|
(2
|
)
|
(2
|
)
|
1
|
|
(8
|
)
|
20
|
|
11
|
|
254
|
|
—
|
|
273
|
|
||||||||||||||
U of PR
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
—
|
|
—
|
|
—
|
|
1
|
|
||||||||||||||
Total
|
$
|
—
|
|
$
|
—
|
|
$
|
224
|
|
$
|
—
|
|
$
|
285
|
|
$
|
147
|
|
$
|
137
|
|
$
|
206
|
|
$
|
1,205
|
|
$
|
904
|
|
$
|
968
|
|
$
|
430
|
|
$
|
261
|
|
$
|
4,767
|
|
|
Scheduled Net Debt Service Amortization
|
|||||||||||||||||||||||||||||||||||||||||
|
2019 (1Q)
|
2019 (2Q)
|
2019 (3Q)
|
2019 (4Q)
|
2020
|
2021
|
2022
|
2023
|
2024 -2028
|
2029 -2033
|
2034 -2038
|
2039 -2043
|
2044 -2047
|
Total
|
||||||||||||||||||||||||||||
|
(in millions)
|
|||||||||||||||||||||||||||||||||||||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
Commonwealth of Puerto Rico - General Obligation Bonds
|
$
|
35
|
|
$
|
—
|
|
$
|
121
|
|
$
|
—
|
|
$
|
206
|
|
$
|
74
|
|
$
|
94
|
|
$
|
71
|
|
$
|
538
|
|
$
|
512
|
|
$
|
457
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,108
|
|
PBA
|
3
|
|
—
|
|
7
|
|
—
|
|
12
|
|
20
|
|
6
|
|
13
|
|
84
|
|
51
|
|
23
|
|
—
|
|
—
|
|
219
|
|
||||||||||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
PRHTA (Transportation revenue)
|
22
|
|
—
|
|
54
|
|
—
|
|
67
|
|
59
|
|
68
|
|
72
|
|
295
|
|
262
|
|
374
|
|
180
|
|
—
|
|
1,453
|
|
||||||||||||||
PRHTA (Highway revenue)
|
13
|
|
—
|
|
34
|
|
—
|
|
46
|
|
58
|
|
27
|
|
52
|
|
159
|
|
208
|
|
152
|
|
—
|
|
—
|
|
749
|
|
||||||||||||||
PRCCDA
|
3
|
|
—
|
|
4
|
|
—
|
|
7
|
|
7
|
|
7
|
|
7
|
|
53
|
|
78
|
|
91
|
|
—
|
|
—
|
|
257
|
|
||||||||||||||
PRIFA
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
1
|
|
1
|
|
2
|
|
5
|
|
3
|
|
7
|
|
12
|
|
—
|
|
32
|
|
||||||||||||||
Other Public Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
PREPA
|
17
|
|
3
|
|
43
|
|
3
|
|
87
|
|
63
|
|
62
|
|
128
|
|
540
|
|
198
|
|
10
|
|
—
|
|
—
|
|
1,154
|
|
||||||||||||||
PRASA
|
10
|
|
—
|
|
10
|
|
—
|
|
19
|
|
19
|
|
19
|
|
19
|
|
197
|
|
68
|
|
70
|
|
68
|
|
300
|
|
799
|
|
||||||||||||||
MFA
|
8
|
|
—
|
|
62
|
|
—
|
|
58
|
|
50
|
|
48
|
|
28
|
|
106
|
|
11
|
|
—
|
|
—
|
|
—
|
|
371
|
|
||||||||||||||
COFINA
|
6
|
|
—
|
|
6
|
|
—
|
|
13
|
|
13
|
|
13
|
|
16
|
|
66
|
|
95
|
|
76
|
|
296
|
|
—
|
|
600
|
|
||||||||||||||
U of PR
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
—
|
|
—
|
|
—
|
|
1
|
|
||||||||||||||
Total
|
$
|
117
|
|
$
|
3
|
|
$
|
341
|
|
$
|
3
|
|
$
|
516
|
|
$
|
364
|
|
$
|
345
|
|
$
|
408
|
|
$
|
2,043
|
|
$
|
1,487
|
|
$
|
1,260
|
|
$
|
556
|
|
$
|
300
|
|
$
|
7,743
|
|
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
|
|
$
|
27
|
|
|
$
|
23
|
|
|
$
|
2
|
|
|
$
|
724
|
|
|
$
|
68
|
|
|
$
|
844
|
|
2005
|
|
62
|
|
|
241
|
|
|
29
|
|
|
233
|
|
|
172
|
|
|
737
|
|
||||||
2006
|
|
47
|
|
|
49
|
|
|
14
|
|
|
375
|
|
|
267
|
|
|
752
|
|
||||||
2007
|
|
—
|
|
|
388
|
|
|
42
|
|
|
1,049
|
|
|
398
|
|
|
1,877
|
|
||||||
2008
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60
|
|
|
—
|
|
|
60
|
|
||||||
Total exposures
|
|
$
|
136
|
|
|
$
|
701
|
|
|
$
|
87
|
|
|
$
|
2,441
|
|
|
$
|
905
|
|
|
$
|
4,270
|
|
|
|
Gross Exposure
|
|
Net Exposure
|
||||||||||||
|
|
As of December 31, 2018
|
|
As of December 31, 2017
|
|
As of December 31, 2018
|
|
As of December 31, 2017
|
||||||||
|
|
(in millions)
|
||||||||||||||
Life insurance capital relief transactions
|
|
$
|
880
|
|
|
$
|
773
|
|
|
$
|
763
|
|
|
$
|
675
|
|
Aircraft RVI policies
|
|
340
|
|
|
201
|
|
|
218
|
|
|
140
|
|
(1)
|
The life insurance capital relief transactions net exposure is expected to increase to approximately
$1.0 billion
prior to
September 30, 2036
.
|
|
AGL
|
|
AGUS
|
|
AGMH
|
|
Other Subsidiaries
|
||||||||
|
(in millions)
|
||||||||||||||
Year ended December 31, 2018
|
|
|
|
|
|
|
|
||||||||
Intercompany sources
|
$
|
597
|
|
|
$
|
525
|
|
|
$
|
205
|
|
|
$
|
13
|
|
Intercompany (uses)
|
—
|
|
|
(485
|
)
|
|
(192
|
)
|
|
(663
|
)
|
||||
External sources (uses):
|
|
|
|
|
|
|
|
||||||||
Dividends paid to AGL shareholders
|
(71
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Repurchases of common shares (1)
|
(500
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Interest paid (2)
|
—
|
|
|
(58
|
)
|
|
(41
|
)
|
|
—
|
|
||||
Purchase of AGMH's debt by AGUS
|
—
|
|
|
(100
|
)
|
|
—
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Year ended December 31, 2017
|
|
|
|
|
|
|
|
||||||||
Intercompany sources
|
$
|
595
|
|
|
$
|
391
|
|
|
$
|
322
|
|
|
$
|
16
|
|
Intercompany (uses)
|
—
|
|
|
(511
|
)
|
|
(279
|
)
|
|
(534
|
)
|
||||
External sources (uses):
|
|
|
|
|
|
|
|
||||||||
Dividends paid to AGL shareholders
|
(70
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Repurchases of common shares (1)
|
(501
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Interest paid (2)
|
—
|
|
|
(32
|
)
|
|
(45
|
)
|
|
—
|
|
||||
Purchase of AGMH's debt by AGUS
|
—
|
|
|
(28
|
)
|
|
—
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Year ended December 31, 2016
|
|
|
|
|
|
|
|
||||||||
Intercompany sources
|
$
|
388
|
|
|
$
|
592
|
|
|
$
|
547
|
|
|
$
|
34
|
|
Intercompany (uses)
|
—
|
|
|
(322
|
)
|
|
(513
|
)
|
|
(726
|
)
|
||||
External sources (uses):
|
|
|
|
|
|
|
|
||||||||
Dividends paid to AGL shareholders
|
(69
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Repurchases of common shares (1)
|
(306
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Interest paid (2)
|
—
|
|
|
(49
|
)
|
|
(46
|
)
|
|
—
|
|
(1)
|
See 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
2019
for AGM to distribute as dividends without regulatory approval is estimated to be approximately
$172 million
, of which
$74 million
is estimated to be available for distribution in the first quarter of 2019.
|
•
|
The maximum amount available during
2019
for AGC to distribute as ordinary dividends is approximately
$123 million
, of which approximately
$42 million
is available for distribution in the first quarter of 2019.
|
•
|
The maximum amount available during
2019
for MAC to distribute as dividends to MAC Holdings, which is owned by AGM and AGC, without regulatory approval is estimated to be approximately
$32 million
, of which approximately
$5 million
is available for distribution in the first quarter of 2019.
|
•
|
Based on the applicable law and regulations, in
2019
AG Re has the capacity to (i) make capital distributions in an aggregate amount up to
$128 million
without the prior approval of the Authority and (ii) declare and pay dividends in an aggregate amount up to approximately
$312 million
as of December 31, 2018. Such dividend capacity is further limited by the actual amount of AG Re’s unencumbered assets, which amount changes from time to time due in part to collateral posting requirements. As of
December 31, 2018
, AG Re had unencumbered assets of approximately
$416 million
.
|
•
|
Based on the applicable law and regulations, in
2019
AGRO has the capacity to (i) make capital distributions in an aggregate amount up to
$21 million
without the prior approval of the Authority and (ii) declare and pay dividends in an aggregate amount up to approximately
$96 million
as of December 31, 2018. Such dividend capacity is further limited by the actual amount of AGRO’s unencumbered assets, which amount changes from time to time due in part to collateral posting requirements. As of
December 31, 2018
, AGRO had unencumbered assets of approximately
$342 million
.
|
•
|
operating expenses,
|
•
|
claims on the insured portfolio,
|
•
|
dividends or other distributions to AGL, AGUS and/or AGMH, as applicable,
|
•
|
posting of collateral in connection with reinsurance and credit derivative 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,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Public finance
|
$
|
(396
|
)
|
|
$
|
(263
|
)
|
|
$
|
(216
|
)
|
Structured finance:
|
|
|
|
|
|
||||||
U.S. RMBS
|
159
|
|
|
48
|
|
|
(90
|
)
|
|||
Other structured finance
|
(9
|
)
|
|
(14
|
)
|
|
(48
|
)
|
|||
Structured finance
|
150
|
|
|
34
|
|
|
(138
|
)
|
|||
Claims (paid) recovered, net of reinsurance (1)
|
$
|
(246
|
)
|
|
$
|
(229
|
)
|
|
$
|
(354
|
)
|
(1)
|
Includes $2 million, $8 million and $11 million paid in
2018
,
2017
and
2016
, respectively, for consolidated FG VIEs.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Net cash flows provided by (used in) operating activities before effects of FG VIE consolidation
|
$
|
451
|
|
|
$
|
414
|
|
|
$
|
(156
|
)
|
Effect of FG VIE consolidation
|
11
|
|
|
19
|
|
|
24
|
|
|||
Net cash flows provided by (used in) operating activities - reported
|
462
|
|
|
433
|
|
|
(132
|
)
|
|||
Net cash flows provided by (used in) investing activities before effects of FG VIE consolidation
|
192
|
|
|
112
|
|
|
924
|
|
|||
Acquisitions, net of cash acquired
|
—
|
|
|
95
|
|
|
(435
|
)
|
|||
Effect of FG VIE consolidation
|
105
|
|
|
138
|
|
|
587
|
|
|||
Net cash flows provided by (used in) investing activities - reported
|
297
|
|
|
345
|
|
|
1,076
|
|
|||
Net cash flows provided by (used in) financing activities before effects of FG VIE consolidation
|
(8
|
)
|
|
(10
|
)
|
|
8
|
|
|||
Dividends paid
|
(71
|
)
|
|
(70
|
)
|
|
(69
|
)
|
|||
Repurchases of common stock
|
(500
|
)
|
|
(501
|
)
|
|
(306
|
)
|
|||
Repurchase of debt
|
(100
|
)
|
|
(28
|
)
|
|
—
|
|
|||
Effect of FG VIE consolidation
|
(116
|
)
|
|
(157
|
)
|
|
(611
|
)
|
|||
Net cash flows provided by (used in) financing activities - reported (1)
|
(795
|
)
|
|
(766
|
)
|
|
(978
|
)
|
|||
Effect of exchange rate changes
|
(4
|
)
|
|
5
|
|
|
(5
|
)
|
|||
Cash and restricted cash at beginning of period
|
144
|
|
|
127
|
|
|
166
|
|
|||
Total cash and restricted cash at the end of the period
|
$
|
104
|
|
|
$
|
144
|
|
|
$
|
127
|
|
(1)
|
Claims paid on consolidated FG VIEs are presented in the consolidated cash flow statements as a component of paydowns on FG VIEs’ liabilities in financing activities as opposed to operating activities.
|
|
Principal Amount
|
|
Interest Paid
|
||||||||||||||||
|
As of December 31,
|
|
Year Ended December 31,
|
||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2016
|
||||||||||
|
(in millions)
|
||||||||||||||||||
AGUS
|
$
|
850
|
|
|
$
|
850
|
|
|
$
|
58
|
|
|
$
|
32
|
|
|
$
|
49
|
|
AGMH
|
730
|
|
|
730
|
|
|
46
|
|
|
46
|
|
|
46
|
|
|||||
AGM
|
5
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
AGMH's debt purchased by AGUS (1)
|
(128
|
)
|
|
(28
|
)
|
|
(5
|
)
|
|
(1
|
)
|
|
—
|
|
|||||
Total
|
$
|
1,457
|
|
|
$
|
1,558
|
|
|
$
|
99
|
|
|
$
|
77
|
|
|
$
|
95
|
|
(1)
|
Represents principal amount of Junior Subordinated Debentures issued by AGMH that has been purchased by AGUS. See Item 8, Financial Statements and Supplementary Data, Note 16, Long-Term Debt and Credit Facilities, for additional information.
|
|
As of December 31, 2018
|
||||||||||||||||||
|
Less Than
1 Year
|
|
1-3
Years
|
|
3-5
Years
|
|
More Than
5 Years
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Long-term debt(1):
|
|
|
|
|
|
|
|
|
|
||||||||||
AGUS:
|
|
|
|
|
|
|
|
|
|
||||||||||
7% Senior Notes
|
$
|
14
|
|
|
$
|
28
|
|
|
$
|
28
|
|
|
$
|
345
|
|
|
$
|
415
|
|
5% Senior Notes
|
25
|
|
|
50
|
|
|
50
|
|
|
525
|
|
|
650
|
|
|||||
Series A Enhanced Junior Subordinated Debentures
|
8
|
|
|
15
|
|
|
16
|
|
|
487
|
|
|
526
|
|
|||||
AGMH:
|
|
|
|
|
|
|
|
|
|
||||||||||
6
7
/
8
% QUIBS
|
7
|
|
|
14
|
|
|
14
|
|
|
636
|
|
|
671
|
|
|||||
6.25% Notes
|
14
|
|
|
29
|
|
|
29
|
|
|
1,364
|
|
|
1,436
|
|
|||||
5.6% Notes
|
6
|
|
|
11
|
|
|
11
|
|
|
546
|
|
|
574
|
|
|||||
Junior Subordinated Debentures
|
19
|
|
|
38
|
|
|
38
|
|
|
1,126
|
|
|
1,221
|
|
|||||
AGM Notes Payable
|
2
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
5
|
|
|||||
Operating lease obligations (2)
|
9
|
|
|
17
|
|
|
17
|
|
|
72
|
|
|
115
|
|
|||||
Other compensation plans (3)
|
12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|||||
Estimated claim payments (4)
|
804
|
|
|
908
|
|
|
162
|
|
|
1,228
|
|
|
3,102
|
|
|||||
Ceded premium payable, net of commission
|
7
|
|
|
7
|
|
|
6
|
|
|
15
|
|
|
35
|
|
|||||
Other
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|||||
Total
|
$
|
933
|
|
|
$
|
1,118
|
|
|
$
|
372
|
|
|
$
|
6,345
|
|
|
$
|
8,768
|
|
(1)
|
Includes interest and principal payments. See 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 $69 million of liabilities under various supplemental retirement plans, which are fair valued and payable at the time of termination of employment by either employer or employee. Amount also excludes approximately $19 million of liabilities under Performance Retention Plan, which are payable at the time of vesting or termination of employment by either employer or employee. Given the nature of these awards, 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. Amounts also exclude estimated recoveries related to past claims paid for policies in the public finance sector.
|
|
As of December 31, 2018
|
|
As of December 31, 2017
|
||||||||||||
|
Amortized
Cost
|
|
Estimated
Fair Value
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||||||
|
(in millions)
|
||||||||||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Obligations of state and political subdivisions
|
$
|
4,761
|
|
|
$
|
4,911
|
|
|
$
|
5,504
|
|
|
$
|
5,760
|
|
U.S. government and agencies
|
167
|
|
|
175
|
|
|
272
|
|
|
285
|
|
||||
Corporate securities
|
2,175
|
|
|
2,136
|
|
|
1,973
|
|
|
2,018
|
|
||||
Mortgage-backed securities (1):
|
|
|
|
|
|
|
|
|
|||||||
RMBS
|
999
|
|
|
982
|
|
|
852
|
|
|
861
|
|
||||
Commercial mortgage-backed securities (CMBS)
|
542
|
|
|
539
|
|
|
540
|
|
|
549
|
|
||||
Asset-backed securities
|
942
|
|
|
1,068
|
|
|
730
|
|
|
896
|
|
||||
Non-U.S. government securities
|
298
|
|
|
278
|
|
|
316
|
|
|
305
|
|
||||
Total fixed-maturity securities
|
9,884
|
|
|
10,089
|
|
|
10,187
|
|
|
10,674
|
|
||||
Short-term investments
|
729
|
|
|
729
|
|
|
627
|
|
|
627
|
|
||||
Total fixed-maturity and short-term investments
|
$
|
10,613
|
|
|
$
|
10,818
|
|
|
$
|
10,814
|
|
|
$
|
11,301
|
|
(1)
|
U.S. government-agency obligations were approximately
48%
of mortgage backed securities as of
December 31, 2018
and
39%
as of
December 31, 2017
, 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
|
$
|
195
|
|
|
$
|
(4
|
)
|
|
$
|
658
|
|
|
$
|
(14
|
)
|
|
$
|
853
|
|
|
$
|
(18
|
)
|
U.S. government and agencies
|
11
|
|
|
—
|
|
|
24
|
|
|
(1
|
)
|
|
35
|
|
|
(1
|
)
|
||||||
Corporate securities
|
836
|
|
|
(19
|
)
|
|
522
|
|
|
(33
|
)
|
|
1,358
|
|
|
(52
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
RMBS
|
85
|
|
|
(2
|
)
|
|
447
|
|
|
(32
|
)
|
|
532
|
|
|
(34
|
)
|
||||||
CMBS
|
111
|
|
|
(1
|
)
|
|
164
|
|
|
(6
|
)
|
|
275
|
|
|
(7
|
)
|
||||||
Asset-backed securities
|
322
|
|
|
(4
|
)
|
|
38
|
|
|
(1
|
)
|
|
360
|
|
|
(5
|
)
|
||||||
Non-U.S. government securities
|
83
|
|
|
(4
|
)
|
|
99
|
|
|
(18
|
)
|
|
182
|
|
|
(22
|
)
|
||||||
Total
|
$
|
1,643
|
|
|
$
|
(34
|
)
|
|
$
|
1,952
|
|
|
$
|
(105
|
)
|
|
$
|
3,595
|
|
|
$
|
(139
|
)
|
Number of securities (1)
|
|
|
|
417
|
|
|
|
|
|
608
|
|
|
|
|
|
997
|
|
||||||
Number of securities with OTTI (1)
|
|
|
|
22
|
|
|
|
|
|
22
|
|
|
|
|
|
42
|
|
|
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
|
|
|
—
|
|
|
18
|
|
|
(1
|
)
|
|
169
|
|
|
(1
|
)
|
||||||
Corporate securities
|
201
|
|
|
(1
|
)
|
|
240
|
|
|
(17
|
)
|
|
441
|
|
|
(18
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
RMBS
|
191
|
|
|
(5
|
)
|
|
213
|
|
|
(12
|
)
|
|
404
|
|
|
(17
|
)
|
||||||
CMBS
|
29
|
|
|
—
|
|
|
80
|
|
|
(3
|
)
|
|
109
|
|
|
(3
|
)
|
||||||
Asset-backed securities
|
48
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
51
|
|
|
—
|
|
||||||
Non-U.S. government securities
|
20
|
|
|
—
|
|
|
140
|
|
|
(17
|
)
|
|
160
|
|
|
(17
|
)
|
||||||
Total
|
$
|
806
|
|
|
$
|
(10
|
)
|
|
$
|
975
|
|
|
$
|
(57
|
)
|
|
$
|
1,781
|
|
|
$
|
(67
|
)
|
Number of securities (1)
|
|
|
|
244
|
|
|
|
|
|
264
|
|
|
|
|
|
499
|
|
||||||
Number of securities with OTTI (1)
|
|
|
|
17
|
|
|
|
|
|
15
|
|
|
|
|
|
31
|
|
(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
|
$
|
206
|
|
|
$
|
203
|
|
Due after one year through five years
|
1,507
|
|
|
1,497
|
|
||
Due after five years through 10 years
|
2,387
|
|
|
2,393
|
|
||
Due after 10 years
|
4,243
|
|
|
4,475
|
|
||
Mortgage-backed securities:
|
|
|
|
|
|
||
RMBS
|
999
|
|
|
982
|
|
||
CMBS
|
542
|
|
|
539
|
|
||
Total
|
$
|
9,884
|
|
|
$
|
10,089
|
|
Rating
|
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
||
AAA
|
|
15.7
|
%
|
|
14.3
|
%
|
AA
|
|
48.2
|
|
|
52.4
|
|
A
|
|
19.8
|
|
|
18.9
|
|
BBB
|
|
5.0
|
|
|
3.4
|
|
BIG (1)
|
|
10.8
|
|
|
10.5
|
|
Not rated
|
|
0.5
|
|
|
0.5
|
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
(1)
|
Includes primarily loss mitigation and other risk management assets. See 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 VIEs may fluctuate based on changes in prepayment spreads, default rates, interest rates, and house price depreciation/appreciation. The fair value of the FG VIEs’ liabilities would also fluctuate based on changes in the Company's credit spread.
|
|
|
As of December 31, 2018
|
|
As of December 31, 2017
|
||||||||||||
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)
|
|||||||||||||||
Increase of 25 bps
|
$
|
(348
|
)
|
|
$
|
(141
|
)
|
|
$
|
(362
|
)
|
|
$
|
(93
|
)
|
|
Base Scenario
|
(207
|
)
|
|
—
|
|
|
(269
|
)
|
|
—
|
|
|||||
Decrease of 25 bps
|
(143
|
)
|
|
64
|
|
|
(213
|
)
|
|
56
|
|
|||||
All transactions priced at floor
|
(101
|
)
|
|
106
|
|
|
(105
|
)
|
|
164
|
|
(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, 2018
|
$
|
1,226
|
|
|
$
|
1,029
|
|
|
$
|
552
|
|
|
$
|
(465
|
)
|
|
$
|
(996
|
)
|
|
$
|
(1,525
|
)
|
December 31, 2017
|
1,162
|
|
|
1,033
|
|
|
552
|
|
|
(552
|
)
|
|
(1,106
|
)
|
|
(1,667
|
)
|
|
Increase (Decrease) in Changes in Foreign Exchange Rates
|
||||||||||||||||||||||
|
30%
Decrease
|
|
20%
Decrease
|
|
10%
Decrease
|
|
10%
Increase
|
|
20%
Increase
|
|
30%
Increase
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Investment Portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
December 31, 2018
|
$
|
(239
|
)
|
|
$
|
(159
|
)
|
|
$
|
(80
|
)
|
|
$
|
80
|
|
|
$
|
159
|
|
|
$
|
239
|
|
December 31, 2017
|
(257
|
)
|
|
(171
|
)
|
|
(86
|
)
|
|
86
|
|
|
171
|
|
|
257
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Premium Receivables:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
December 31, 2018
|
(192
|
)
|
|
(128
|
)
|
|
(64
|
)
|
|
64
|
|
|
128
|
|
|
192
|
|
||||||
December 31, 2017
|
(190
|
)
|
|
(127
|
)
|
|
(63
|
)
|
|
63
|
|
|
127
|
|
|
190
|
|
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
||||
Assets
|
|
|
|
|
|
||
Investment portfolio:
|
|
|
|
|
|
||
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $9,884 and $10,187)
|
$
|
10,089
|
|
|
$
|
10,674
|
|
Short-term investments, at fair value
|
729
|
|
|
627
|
|
||
Other invested assets
|
55
|
|
|
94
|
|
||
Total investment portfolio
|
10,873
|
|
|
11,395
|
|
||
Cash
|
104
|
|
|
144
|
|
||
Premiums receivable, net of commissions payable
|
904
|
|
|
915
|
|
||
Ceded unearned premium reserve
|
59
|
|
|
119
|
|
||
Deferred acquisition costs
|
105
|
|
|
101
|
|
||
Salvage and subrogation recoverable
|
490
|
|
|
572
|
|
||
Financial guaranty variable interest entities’ assets, at fair value
|
569
|
|
|
700
|
|
||
Other assets
|
499
|
|
|
487
|
|
||
Total assets
|
$
|
13,603
|
|
|
$
|
14,433
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
|
||
Unearned premium reserve
|
$
|
3,512
|
|
|
$
|
3,475
|
|
Loss and loss adjustment expense reserve
|
1,177
|
|
|
1,444
|
|
||
Long-term debt
|
1,233
|
|
|
1,292
|
|
||
Credit derivative liabilities
|
209
|
|
|
271
|
|
||
Financial guaranty variable interest entities’ liabilities with recourse, at fair value
|
517
|
|
|
627
|
|
||
Financial guaranty variable interest entities’ liabilities without recourse, at fair value
|
102
|
|
|
130
|
|
||
Other liabilities
|
298
|
|
|
355
|
|
||
Total liabilities
|
7,048
|
|
|
7,594
|
|
||
Commitments and contingencies (see Note 15)
|
|
|
|
||||
Common stock ($0.01 par value, 500,000,000 shares authorized; 103,672,592 and 116,020,852 shares issued and outstanding)
|
1
|
|
|
1
|
|
||
Additional paid-in capital
|
86
|
|
|
573
|
|
||
Retained earnings
|
6,374
|
|
|
5,892
|
|
||
Accumulated other comprehensive income, net of tax of $38 and $89
|
93
|
|
|
372
|
|
||
Deferred equity compensation
|
1
|
|
|
1
|
|
||
Total shareholders’ equity
|
6,555
|
|
|
6,839
|
|
||
Total liabilities and shareholders’ equity
|
$
|
13,603
|
|
|
$
|
14,433
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Revenues
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
548
|
|
|
$
|
690
|
|
|
$
|
864
|
|
Net investment income
|
398
|
|
|
418
|
|
|
408
|
|
|||
Net realized investment gains (losses)
|
(32
|
)
|
|
40
|
|
|
(29
|
)
|
|||
Net change in fair value of credit derivatives
|
112
|
|
|
111
|
|
|
98
|
|
|||
Fair value gains (losses) on financial guaranty variable interest entities
|
14
|
|
|
30
|
|
|
38
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
58
|
|
|
259
|
|
|||
Commutation gains (losses)
|
(16
|
)
|
|
328
|
|
|
8
|
|
|||
Other income (loss)
|
(22
|
)
|
|
64
|
|
|
31
|
|
|||
Total revenues
|
1,002
|
|
|
1,739
|
|
|
1,677
|
|
|||
Expenses
|
|
|
|
|
|
|
|
||||
Loss and loss adjustment expenses
|
64
|
|
|
388
|
|
|
295
|
|
|||
Amortization of deferred acquisition costs
|
16
|
|
|
19
|
|
|
18
|
|
|||
Interest expense
|
94
|
|
|
97
|
|
|
102
|
|
|||
Other operating expenses
|
248
|
|
|
244
|
|
|
245
|
|
|||
Total expenses
|
422
|
|
|
748
|
|
|
660
|
|
|||
Income (loss) before income taxes
|
580
|
|
|
991
|
|
|
1,017
|
|
|||
Provision (benefit) for income taxes
|
|
|
|
|
|
|
|
||||
Current
|
(15
|
)
|
|
11
|
|
|
117
|
|
|||
Deferred
|
74
|
|
|
250
|
|
|
19
|
|
|||
Total provision (benefit) for income taxes
|
59
|
|
|
261
|
|
|
136
|
|
|||
Net income (loss)
|
$
|
521
|
|
|
$
|
730
|
|
|
$
|
881
|
|
|
|
|
|
|
|
||||||
Earnings per share:
|
|
|
|
|
|
||||||
Basic
|
$
|
4.73
|
|
|
$
|
6.05
|
|
|
$
|
6.61
|
|
Diluted
|
$
|
4.68
|
|
|
$
|
5.96
|
|
|
$
|
6.56
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net income (loss)
|
$
|
521
|
|
|
$
|
730
|
|
|
$
|
881
|
|
Change in net unrealized gains (losses) on:
|
|
|
|
|
|
|
|
||||
Investments with no other-than-temporary impairment, net of tax provision (benefit) of $(32), $27 and $(42)
|
(215
|
)
|
|
64
|
|
|
(89
|
)
|
|||
Investments with other-than-temporary impairment, net of tax provision (benefit) of $(8), $46 and $13
|
(26
|
)
|
|
89
|
|
|
25
|
|
|||
Change in net unrealized gains (losses) on investments
|
(241
|
)
|
|
153
|
|
|
(64
|
)
|
|||
Change in net unrealized gains (losses) on financial guaranty variable interest entities' liabilities with recourse, net of tax
|
2
|
|
|
—
|
|
|
—
|
|
|||
Other, net of tax provision (benefit) of $(2), $2, and (5)
|
(8
|
)
|
|
14
|
|
|
(24
|
)
|
|||
Other comprehensive income (loss)
|
(247
|
)
|
|
167
|
|
|
(88
|
)
|
|||
Comprehensive income (loss)
|
$
|
274
|
|
|
$
|
897
|
|
|
$
|
793
|
|
|
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, 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
|
)
|
|
|
—
|
|
|
(306
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(306
|
)
|
||||||
Share-based compensation and other
|
780,926
|
|
|
|
—
|
|
|
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
|
)
|
|
|
—
|
|
|
(501
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(501
|
)
|
||||||
Share-based compensation and other
|
702,265
|
|
|
|
—
|
|
|
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
|
|
Net income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
521
|
|
|
—
|
|
|
—
|
|
|
521
|
|
||||||
Dividends ($0.64 per share)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(71
|
)
|
|
—
|
|
|
—
|
|
|
(71
|
)
|
||||||
Common stock repurchases
|
(13,243,107
|
)
|
|
|
—
|
|
|
(500
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(500
|
)
|
||||||
Share-based compensation and other
|
894,847
|
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
||||||
Other comprehensive loss
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(247
|
)
|
|
—
|
|
|
(247
|
)
|
||||||
Effect of adoption of ASU 2016-01 (see Note 1)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
32
|
|
|
(32
|
)
|
|
—
|
|
|
—
|
|
||||||
Balance at December 31, 2018
|
103,672,592
|
|
|
|
$
|
1
|
|
|
$
|
86
|
|
|
$
|
6,374
|
|
|
$
|
93
|
|
|
$
|
1
|
|
|
$
|
6,555
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Operating Activities:
|
|
|
|
|
|
||||||
Net Income
|
$
|
521
|
|
|
$
|
730
|
|
|
$
|
881
|
|
Adjustments to reconcile net income to net cash flows provided by operating activities:
|
|
|
|
|
|
||||||
Non-cash interest and operating expenses
|
36
|
|
|
26
|
|
|
39
|
|
|||
Net amortization of premium (discount) on investments
|
(31
|
)
|
|
(46
|
)
|
|
(34
|
)
|
|||
Provision (benefit) for deferred income taxes
|
74
|
|
|
250
|
|
|
19
|
|
|||
Net realized investment losses (gains)
|
32
|
|
|
(40
|
)
|
|
29
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
(58
|
)
|
|
(259
|
)
|
|||
Change in premiums receivable, net of premiums and commissions payable
|
(6
|
)
|
|
(69
|
)
|
|
128
|
|
|||
Change in ceded unearned premium reserve
|
58
|
|
|
90
|
|
|
22
|
|
|||
Change in unearned premium reserve
|
39
|
|
|
(424
|
)
|
|
(777
|
)
|
|||
Change in loss and loss adjustment expense reserve, net
|
(173
|
)
|
|
142
|
|
|
(105
|
)
|
|||
Change in current income tax
|
(16
|
)
|
|
(10
|
)
|
|
27
|
|
|||
Change in financial guaranty variable interest entities' assets and liabilities, net
|
(5
|
)
|
|
(15
|
)
|
|
(24
|
)
|
|||
Change in credit derivative assets and liabilities, net
|
(62
|
)
|
|
(144
|
)
|
|
(43
|
)
|
|||
Other
|
(5
|
)
|
|
1
|
|
|
(35
|
)
|
|||
Net cash flows provided by (used in) operating activities
|
462
|
|
|
433
|
|
|
(132
|
)
|
|||
Investing activities
|
|
|
|
|
|
|
|
||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
||||
Purchases
|
(1,881
|
)
|
|
(2,552
|
)
|
|
(1,646
|
)
|
|||
Sales
|
1,180
|
|
|
1,701
|
|
|
1,365
|
|
|||
Maturities
|
962
|
|
|
821
|
|
|
1,155
|
|
|||
Short-term investments with maturities of over three months:
|
|
|
|
|
|
||||||
Purchases
|
(243
|
)
|
|
(255
|
)
|
|
(190
|
)
|
|||
Sales
|
23
|
|
|
102
|
|
|
172
|
|
|||
Maturities
|
207
|
|
|
191
|
|
|
134
|
|
|||
Net sales (purchases) of short-term investments with maturities of less than three months
|
(84
|
)
|
|
36
|
|
|
(99
|
)
|
|||
Net proceeds from paydowns on financial guaranty variable interest entities’ assets
|
116
|
|
|
147
|
|
|
629
|
|
|||
Acquisitions, net of cash acquired (see Note 2)
|
—
|
|
|
95
|
|
|
(435
|
)
|
|||
Proceeds from maturity of other invested asset
|
—
|
|
|
85
|
|
|
—
|
|
|||
Other
|
17
|
|
|
(26
|
)
|
|
(9
|
)
|
|||
Net cash flows provided by (used in) investing activities
|
297
|
|
|
345
|
|
|
1,076
|
|
|||
Financing activities
|
|
|
|
|
|
|
|
||||
Dividends paid
|
(71
|
)
|
|
(70
|
)
|
|
(69
|
)
|
|||
Repurchases of common stock
|
(500
|
)
|
|
(501
|
)
|
|
(306
|
)
|
|||
Repurchases of common stock to pay withholding taxes
|
(13
|
)
|
|
(13
|
)
|
|
(2
|
)
|
|||
Net paydowns of financial guaranty variable interest entities’ liabilities
|
(116
|
)
|
|
(157
|
)
|
|
(611
|
)
|
|||
Paydown of long-term debt
|
(101
|
)
|
|
(30
|
)
|
|
(2
|
)
|
|||
Proceeds from option exercises
|
6
|
|
|
5
|
|
|
12
|
|
|||
Net cash flows provided by (used in) financing activities
|
(795
|
)
|
|
(766
|
)
|
|
(978
|
)
|
|||
Effect of foreign exchange rate changes
|
(4
|
)
|
|
5
|
|
|
(5
|
)
|
|||
Increase (decrease) in cash and restricted cash
|
(40
|
)
|
|
17
|
|
|
(39
|
)
|
|||
Cash and restricted cash at beginning of period (see Note 10)
|
144
|
|
|
127
|
|
|
166
|
|
|||
Cash and restricted cash at end of period (see Note 10)
|
$
|
104
|
|
|
$
|
144
|
|
|
$
|
127
|
|
Supplemental cash flow information
|
|
|
|
|
|
|
|
||||
Cash paid (received) during the period for:
|
|
|
|
|
|
|
|
||||
Income taxes
|
$
|
(4
|
)
|
|
$
|
10
|
|
|
$
|
74
|
|
Interest on long-term debt
|
$
|
99
|
|
|
$
|
77
|
|
|
$
|
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.;
|
•
|
Assured Guaranty Re Ltd. (AG Re), domiciled in Bermuda; and
|
•
|
Assured Guaranty Re Overseas Ltd. (AGRO), domiciled in Bermuda.
|
Business Combinations
|
Note 2
|
Expected loss to be paid (insurance, credit derivatives and financial guaranty VIEs contracts)
|
Note 5
|
Contracts accounted for as insurance (premium revenue recognition, loss and loss adjustment expense and policy acquisition cost)
|
Note 6 and 13
|
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
|
Leases
|
Note 15
|
Long term debt
|
Note 16
|
Earnings per share
|
Note 17
|
Share repurchases
|
Note 18
|
Stock based compensation
|
Note 19
|
•
|
improve the timeliness of recognizing changes in the liability for future policy benefits and modify the rate used to discount future cash flows,
|
•
|
simplify and improve the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts,
|
•
|
simplify the amortization of deferred acquisition costs, and
|
•
|
improve the effectiveness of the required disclosures.
|
2.
|
Assumption of Insured Portfolio and Business Combinations
|
|
|
Commutation
|
|
Assumption
|
|
Total
|
||||||
|
|
(in millions)
|
||||||||||
Cash
|
|
$
|
20
|
|
|
$
|
343
|
|
|
$
|
363
|
|
|
|
|
|
|
|
|
||||||
Premiums receivable/payable, net of commissions
|
|
$
|
16
|
|
|
$
|
45
|
|
|
$
|
61
|
|
Unearned premium reserve, net
|
|
(56
|
)
|
|
(319
|
)
|
|
(375
|
)
|
|||
Credit derivative liability, net
|
|
—
|
|
|
(68
|
)
|
|
(68
|
)
|
|||
Other
|
|
2
|
|
|
(1
|
)
|
|
1
|
|
|||
Impact to net assets (liabilities), excluding cash
|
|
$
|
(38
|
)
|
|
$
|
(343
|
)
|
|
$
|
(381
|
)
|
|
|
|
|
|
|
|
||||||
Commutation loss
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
18
|
|
|
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
|
|
|
—
|
|
|
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
.
|
|
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) (6/26/18)
|
|
AA+ (stable) (12/21/18)
|
|
A2 (stable) (5/7/18)
|
|
—
|
AGC
|
AA (stable) (6/26/18)
|
|
AA (stable) (11/30/18)
|
|
(1)
|
|
—
|
MAC
|
AA (stable) (6/26/18)
|
|
AA+ (stable) (7/12/18)
|
|
—
|
|
—
|
AG Re
|
AA (stable) (6/26/18)
|
|
—
|
|
—
|
|
—
|
AGRO
|
AA (stable) (6/26/18)
|
|
—
|
|
—
|
|
A+ (stable) (7/13/18)
|
AGE (2)
|
AA (stable) (6/26/18)
|
|
AA+ (stable) (12/21/18)
|
|
A2 (stable) (5/7/18)
|
|
—
|
(1)
|
AGC requested that Moody’s Investors Service, Inc. (Moody's) withdraw its financial strength ratings of AGC in January 2017, but Moody's denied that request. Moody’s continues to rate AGC A3 (stable).
|
(2)
|
As a result of the Combination, each of S&P Global Ratings, a division of Standard & Poor’s Financial Services LLC (S&P), and Moody’s withdrew their ratings on AGLN and AGUK.
|
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,
2018 |
|
December 31,
2017 |
|
December 31,
2018 |
|
December 31,
2017 |
||||||||
|
(in millions)
|
||||||||||||||
Public finance
|
$
|
361,511
|
|
|
$
|
393,010
|
|
|
$
|
358,438
|
|
|
$
|
386,092
|
|
Structured finance
|
13,569
|
|
|
15,482
|
|
|
13,148
|
|
|
15,026
|
|
||||
Total financial guaranty
|
$
|
375,080
|
|
|
$
|
408,492
|
|
|
$
|
371,586
|
|
|
$
|
401,118
|
|
|
|
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
|
|
$
|
413
|
|
|
0.2
|
%
|
|
$
|
2,399
|
|
|
5.4
|
%
|
|
$
|
1,533
|
|
|
15.4
|
%
|
|
$
|
273
|
|
|
22.9
|
%
|
|
$
|
4,618
|
|
|
1.9
|
%
|
AA
|
|
21,646
|
|
|
11.6
|
|
|
1,711
|
|
|
3.9
|
|
|
3,599
|
|
|
36.2
|
|
|
65
|
|
|
5.4
|
|
|
27,021
|
|
|
11.2
|
|
|||||
A
|
|
105,180
|
|
|
56.4
|
|
|
13,013
|
|
|
29.5
|
|
|
1,016
|
|
|
10.2
|
|
|
206
|
|
|
17.3
|
|
|
119,415
|
|
|
49.4
|
|
|||||
BBB
|
|
52,935
|
|
|
28.4
|
|
|
25,939
|
|
|
58.8
|
|
|
1,164
|
|
|
11.7
|
|
|
550
|
|
|
46.1
|
|
|
80,588
|
|
|
33.3
|
|
|||||
BIG
|
|
6,388
|
|
|
3.4
|
|
|
1,041
|
|
|
2.4
|
|
|
2,632
|
|
|
26.5
|
|
|
99
|
|
|
8.3
|
|
|
10,160
|
|
|
4.2
|
|
|||||
Total net par outstanding
|
|
$
|
186,562
|
|
|
100.0
|
%
|
|
$
|
44,103
|
|
|
100.0
|
%
|
|
$
|
9,944
|
|
|
100.0
|
%
|
|
$
|
1,193
|
|
|
100.0
|
%
|
|
$
|
241,802
|
|
|
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
|
|
$
|
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
|
%
|
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
||||
|
(in millions)
|
||||||
U.S. public finance
|
$
|
187,919
|
|
|
$
|
211,441
|
|
Non-U.S. public finance
|
44,714
|
|
|
44,860
|
|
||
U.S. structured finance
|
10,352
|
|
|
11,652
|
|
||
Non-U.S. structured finance
|
1,206
|
|
|
1,433
|
|
||
Total gross par outstanding
|
$
|
244,191
|
|
|
$
|
269,386
|
|
Sector
|
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
||||
|
|
(in millions)
|
||||||
Public finance:
|
|
|
|
|
|
|
||
U.S.:
|
|
|
|
|
|
|
||
General obligation
|
|
$
|
78,800
|
|
|
$
|
90,705
|
|
Tax backed
|
|
40,616
|
|
|
44,350
|
|
||
Municipal utilities
|
|
28,462
|
|
|
32,357
|
|
||
Transportation
|
|
15,197
|
|
|
17,030
|
|
||
Healthcare
|
|
6,750
|
|
|
8,763
|
|
||
Higher education
|
|
6,643
|
|
|
8,195
|
|
||
Infrastructure finance
|
|
5,489
|
|
|
4,216
|
|
||
Housing revenue
|
|
1,435
|
|
|
1,319
|
|
||
Investor-owned utilities
|
|
1,001
|
|
|
523
|
|
||
Other public finance
|
|
2,169
|
|
|
1,934
|
|
||
Total public finance—U.S.
|
|
186,562
|
|
|
209,392
|
|
||
Non-U.S.:
|
|
|
|
|
|
|
||
Regulated utilities
|
|
18,325
|
|
|
16,689
|
|
||
Infrastructure finance
|
|
17,216
|
|
|
18,234
|
|
||
Pooled infrastructure
|
|
1,373
|
|
|
1,561
|
|
||
Other public finance
|
|
7,189
|
|
|
6,438
|
|
||
Total public finance—non-U.S.
|
|
44,103
|
|
|
42,922
|
|
||
Total public finance
|
|
230,665
|
|
|
252,314
|
|
||
Structured finance:
|
|
|
|
|
|
|
||
U.S.:
|
|
|
|
|
|
|
||
Residential Mortgage-Backed Securities (RMBS)
|
|
4,270
|
|
|
4,818
|
|
||
Insurance securitizations
|
|
1,435
|
|
|
1,449
|
|
||
Consumer receivables
|
|
1,255
|
|
|
1,590
|
|
||
Pooled corporate obligations
|
|
1,215
|
|
|
1,347
|
|
||
Financial products
|
|
1,094
|
|
|
1,418
|
|
||
Other structured finance
|
|
675
|
|
|
602
|
|
||
Total structured finance—U.S.
|
|
9,944
|
|
|
11,224
|
|
||
Non-U.S.:
|
|
|
|
|
|
|
||
RMBS
|
|
576
|
|
|
637
|
|
||
Pooled corporate obligations
|
|
126
|
|
|
157
|
|
||
Other structured finance
|
|
491
|
|
|
620
|
|
||
Total structured finance—non-U.S.
|
|
1,193
|
|
|
1,414
|
|
||
Total structured finance
|
|
11,137
|
|
|
12,638
|
|
||
Total net par outstanding
|
|
$
|
241,802
|
|
|
$
|
264,952
|
|
|
Public Finance
|
|
Structured Finance
|
|
Total
|
||||||
|
(in millions)
|
||||||||||
0 to 5 years
|
$
|
61,889
|
|
|
$
|
5,739
|
|
|
$
|
67,628
|
|
5 to 10 years
|
50,296
|
|
|
2,310
|
|
|
52,606
|
|
|||
10 to 15 years
|
44,188
|
|
|
1,364
|
|
|
45,552
|
|
|||
15 to 20 years
|
33,709
|
|
|
1,496
|
|
|
35,205
|
|
|||
20 years and above
|
40,583
|
|
|
228
|
|
|
40,811
|
|
|||
Total net par outstanding
|
$
|
230,665
|
|
|
$
|
11,137
|
|
|
$
|
241,802
|
|
|
BIG Net Par Outstanding
|
|
Net Par
|
||||||||||||||||
|
BIG 1
|
|
BIG 2
|
|
BIG 3
|
|
Total BIG
|
|
Outstanding
|
||||||||||
|
|
|
|
|
(in millions)
|
|
|
|
|
||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. public finance
|
$
|
1,767
|
|
|
$
|
399
|
|
|
$
|
4,222
|
|
|
$
|
6,388
|
|
|
$
|
186,562
|
|
Non-U.S. public finance
|
796
|
|
|
245
|
|
|
—
|
|
|
1,041
|
|
|
44,103
|
|
|||||
Public finance
|
2,563
|
|
|
644
|
|
|
4,222
|
|
|
7,429
|
|
|
230,665
|
|
|||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. RMBS
|
368
|
|
|
214
|
|
|
1,805
|
|
|
2,387
|
|
|
4,270
|
|
|||||
Triple-X life insurance transactions
|
—
|
|
|
—
|
|
|
85
|
|
|
85
|
|
|
1,184
|
|
|||||
Trust preferred securities (TruPS)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
953
|
|
|||||
Other structured finance
|
127
|
|
|
79
|
|
|
53
|
|
|
259
|
|
|
4,730
|
|
|||||
Structured finance
|
495
|
|
|
293
|
|
|
1,943
|
|
|
2,731
|
|
|
11,137
|
|
|||||
Total
|
$
|
3,058
|
|
|
$
|
937
|
|
|
$
|
6,165
|
|
|
$
|
10,160
|
|
|
$
|
241,802
|
|
|
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
|
|
|||||
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
|
|
|
|
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
|
|
$
|
2,981
|
|
|
$
|
77
|
|
|
$
|
3,058
|
|
|
128
|
|
|
6
|
|
|
134
|
|
Category 2
|
|
932
|
|
|
5
|
|
|
937
|
|
|
39
|
|
|
1
|
|
|
40
|
|
|||
Category 3
|
|
6,090
|
|
|
75
|
|
|
6,165
|
|
|
145
|
|
|
8
|
|
|
153
|
|
|||
Total BIG
|
|
$
|
10,003
|
|
|
$
|
157
|
|
|
$
|
10,160
|
|
|
312
|
|
|
15
|
|
|
327
|
|
|
|
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
|
|
(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
|
1,361
|
|
|
$
|
33,847
|
|
|
14.0
|
%
|
Texas
|
1,154
|
|
|
16,915
|
|
|
7.0
|
|
|
Pennsylvania
|
704
|
|
|
16,866
|
|
|
7.0
|
|
|
New York
|
829
|
|
|
15,077
|
|
|
6.2
|
|
|
Illinois
|
642
|
|
|
14,914
|
|
|
6.2
|
|
|
New Jersey
|
370
|
|
|
10,998
|
|
|
4.5
|
|
|
Florida
|
273
|
|
|
8,518
|
|
|
3.5
|
|
|
Michigan
|
349
|
|
|
5,635
|
|
|
2.3
|
|
|
Puerto Rico
|
18
|
|
|
4,767
|
|
|
2.0
|
|
|
Alabama
|
289
|
|
|
4,230
|
|
|
1.7
|
|
|
Other
|
2,726
|
|
|
54,795
|
|
|
22.7
|
|
|
Total U.S. public finance
|
8,715
|
|
|
186,562
|
|
|
77.1
|
|
|
U.S. Structured finance (multiple states)
|
485
|
|
|
9,944
|
|
|
4.1
|
|
|
Total U.S.
|
9,200
|
|
|
196,506
|
|
|
81.2
|
|
|
Non-U.S.:
|
|
|
|
|
|
||||
United Kingdom
|
130
|
|
|
31,128
|
|
|
12.9
|
|
|
France
|
10
|
|
|
3,189
|
|
|
1.3
|
|
|
Canada
|
9
|
|
|
2,659
|
|
|
1.1
|
|
|
Australia
|
11
|
|
|
2,103
|
|
|
0.9
|
|
|
Italy
|
8
|
|
|
1,176
|
|
|
0.5
|
|
|
Other
|
45
|
|
|
5,041
|
|
|
2.1
|
|
|
Total non-U.S.
|
213
|
|
|
45,296
|
|
|
18.8
|
|
|
Total
|
9,413
|
|
|
$
|
241,802
|
|
|
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.
|
•
|
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,
2018 |
|
December 31,
2017 |
|
December 31,
2018 |
|
December 31,
2017 |
||||||||
|
(in millions)
|
||||||||||||||
Exposure to Puerto Rico
|
$
|
4,971
|
|
|
$
|
5,186
|
|
|
$
|
8,035
|
|
|
$
|
8,514
|
|
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
||||
|
(in millions)
|
||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
||||
Commonwealth of Puerto Rico - General Obligation Bonds (1)
|
$
|
1,340
|
|
|
$
|
1,419
|
|
PBA
|
142
|
|
|
141
|
|
||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
||||
PRHTA (Transportation revenue) (1)
|
844
|
|
|
882
|
|
||
PRHTA (Highways revenue) (1)
|
475
|
|
|
495
|
|
||
PRCCDA
|
152
|
|
|
152
|
|
||
PRIFA
|
16
|
|
|
18
|
|
||
Other Public Corporations
|
|
|
|
||||
PREPA (1)
|
848
|
|
|
853
|
|
||
PRASA
|
373
|
|
|
373
|
|
||
MFA
|
303
|
|
|
360
|
|
||
COFINA (2)
|
273
|
|
|
272
|
|
||
U of PR
|
1
|
|
|
1
|
|
||
Total net exposure to Puerto Rico
|
$
|
4,767
|
|
|
$
|
4,966
|
|
(1)
|
As of the date of this filing, the Oversight Board has certified a filing under Title III of PROMESA for these exposures.
|
(2)
|
As of the date of this filing, a plan of adjustment under PROMESA is effective for this credit.
|
|
Scheduled Net Par Amortization
|
|
Scheduled Net Debt Service Amortization
|
||||
|
(in millions)
|
||||||
2019 (January 1 - March 31)
|
$
|
—
|
|
|
$
|
117
|
|
2019 (April 1 - June 30)
|
—
|
|
|
3
|
|
||
2019 (July 1 - September 30)
|
224
|
|
|
341
|
|
||
2019 (October 1 - December 31)
|
—
|
|
|
3
|
|
||
Subtotal 2019
|
224
|
|
|
464
|
|
||
2020
|
285
|
|
|
516
|
|
||
2021
|
147
|
|
|
364
|
|
||
2022
|
137
|
|
|
345
|
|
||
2023
|
206
|
|
|
408
|
|
||
2024-2028
|
1,205
|
|
|
2,043
|
|
||
2029-2033
|
904
|
|
|
1,487
|
|
||
2034-2038
|
968
|
|
|
1,260
|
|
||
2039-2043
|
430
|
|
|
556
|
|
||
2044-2047
|
261
|
|
|
300
|
|
||
Total
|
$
|
4,767
|
|
|
$
|
7,743
|
|
|
|
Gross Exposure
|
|
Net Exposure
|
||||||||||||
|
|
As of December 31, 2018
|
|
As of December 31, 2017
|
|
As of December 31, 2018
|
|
As of December 31, 2017
|
||||||||
|
|
(in millions)
|
||||||||||||||
Life insurance capital relief transactions (1)
|
|
$
|
880
|
|
|
$
|
773
|
|
|
$
|
763
|
|
|
$
|
675
|
|
Aircraft residual value insurance policies
|
|
340
|
|
|
201
|
|
|
218
|
|
|
140
|
|
(1)
|
The life insurance capital relief transactions net exposure is expected to increase to approximately
$1.0 billion
prior to
September 30, 2036
.
|
5.
|
Expected Loss to be Paid
|
|
Year Ended December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Net expected loss to be paid, beginning of period
|
$
|
1,303
|
|
|
$
|
1,198
|
|
Net expected loss to be paid on the SGI portfolio as of June 1, 2018 (see Note 2)
|
131
|
|
|
—
|
|
||
Net expected loss to be paid on the MBIA UK portfolio as of January 10, 2017
|
—
|
|
|
21
|
|
||
Economic loss development (benefit) due to:
|
|
|
|
||||
Accretion of discount
|
36
|
|
|
33
|
|
||
Changes in discount rates
|
(17
|
)
|
|
25
|
|
||
Changes in timing and assumptions
|
(24
|
)
|
|
255
|
|
||
Total economic loss development (benefit)
|
(5
|
)
|
|
313
|
|
||
Net (paid) recovered losses
|
(246
|
)
|
|
(229
|
)
|
||
Net expected loss to be paid, end of period
|
$
|
1,183
|
|
|
$
|
1,303
|
|
|
Net Expected
Loss to be Paid (Recovered) as of December 31, 2017 (2) |
|
Net Expected
Loss to be Paid on SGI portfolio as of June 1, 2018 |
|
Economic Loss
Development / (Benefit)
|
|
(Paid)
Recovered
Losses (1)
|
|
Net Expected
Loss to be Paid (Recovered) as of December 31, 2018 (2) |
||||||||||
|
(in millions)
|
||||||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. public finance
|
$
|
1,157
|
|
|
$
|
—
|
|
|
$
|
70
|
|
|
$
|
(395
|
)
|
|
$
|
832
|
|
Non-U.S. public finance
|
46
|
|
|
1
|
|
|
(14
|
)
|
|
(1
|
)
|
|
32
|
|
|||||
Public finance
|
1,203
|
|
|
1
|
|
|
56
|
|
|
(396
|
)
|
|
864
|
|
|||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. RMBS
|
73
|
|
|
130
|
|
|
(69
|
)
|
|
159
|
|
|
293
|
|
|||||
Other structured finance
|
27
|
|
|
—
|
|
|
8
|
|
|
(9
|
)
|
|
26
|
|
|||||
Structured finance
|
100
|
|
|
130
|
|
|
(61
|
)
|
|
150
|
|
|
319
|
|
|||||
Total
|
$
|
1,303
|
|
|
$
|
131
|
|
|
$
|
(5
|
)
|
|
$
|
(246
|
)
|
|
$
|
1,183
|
|
|
Net Expected
Loss to be Paid (Recovered) as of December 31, 2016 |
|
Net Expected
Loss to be Paid (Recovered) 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
|
|
(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
$28 million
and
$24 million
in LAE for the years ended
December 31, 2018
and
2017
, respectively.
|
(2)
|
Includes expected LAE to be paid of
$31 million
as of
December 31, 2018
and
$23 million
as of
December 31, 2017
.
|
|
Net Expected Loss to be Paid (Recovered)
|
|
Net Economic Loss Development (Benefit)
|
||||||||||||
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
|
Year Ended
December 31, 2018 |
|
Year Ended
December 31, 2017 |
||||||||
|
(in millions)
|
||||||||||||||
Financial guaranty insurance
|
$
|
1,109
|
|
|
$
|
1,226
|
|
|
$
|
(9
|
)
|
|
$
|
353
|
|
FG VIEs (1) and other
|
76
|
|
|
91
|
|
|
(13
|
)
|
|
(6
|
)
|
||||
Credit derivatives (2)
|
(2
|
)
|
|
(14
|
)
|
|
17
|
|
|
(34
|
)
|
||||
Total
|
$
|
1,183
|
|
|
$
|
1,303
|
|
|
$
|
(5
|
)
|
|
$
|
313
|
|
|
Year Ended December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
First lien U.S. RMBS
|
$
|
16
|
|
|
$
|
1
|
|
Second lien U.S. RMBS
|
(85
|
)
|
|
(182
|
)
|
|
As of December 31,
|
||||
|
2018
|
|
2017
|
|
2016
|
Delinquent/Modified in the Previous 12 Months
|
|
|
|
|
|
Alt-A and Prime
|
20%
|
|
20%
|
|
25%
|
Option ARM
|
20
|
|
20
|
|
25
|
Subprime
|
20
|
|
20
|
|
25
|
30 – 59 Days Delinquent
|
|
|
|
|
|
Alt-A and Prime
|
30
|
|
30
|
|
35
|
Option ARM
|
35
|
|
35
|
|
35
|
Subprime
|
40
|
|
40
|
|
40
|
60 – 89 Days Delinquent
|
|
|
|
|
|
Alt-A and Prime
|
40
|
|
40
|
|
45
|
Option ARM
|
45
|
|
50
|
|
50
|
Subprime
|
45
|
|
50
|
|
50
|
90+ Days Delinquent
|
|
|
|
|
|
Alt-A and Prime
|
50
|
|
55
|
|
55
|
Option ARM
|
55
|
|
60
|
|
55
|
Subprime
|
50
|
|
55
|
|
55
|
Bankruptcy
|
|
|
|
|
|
Alt-A and Prime
|
45
|
|
45
|
|
45
|
Option ARM
|
50
|
|
50
|
|
50
|
Subprime
|
40
|
|
40
|
|
40
|
Foreclosure
|
|
|
|
|
|
Alt-A and Prime
|
60
|
|
65
|
|
65
|
Option ARM
|
65
|
|
70
|
|
65
|
Subprime
|
60
|
|
65
|
|
65
|
Real Estate Owned
|
|
|
|
|
|
All
|
100
|
|
100
|
|
100
|
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
|||||||||||||||
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|||||||||
Alt-A First Lien
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Plateau CDR
|
1.2
|
%
|
–
|
11.4%
|
|
4.6%
|
|
1.3
|
%
|
–
|
9.8%
|
|
5.2%
|
|
1.0
|
%
|
–
|
13.5%
|
|
5.7%
|
Final CDR
|
0.1
|
%
|
–
|
0.6%
|
|
0.2%
|
|
0.1
|
%
|
–
|
0.5%
|
|
0.3%
|
|
0.0
|
%
|
–
|
0.7%
|
|
0.3%
|
Initial loss severity:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
2005 and prior
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
|
|||||||||
2006
|
70%
|
|
|
|
80%
|
|
|
|
80%
|
|
|
|||||||||
2007+
|
70%
|
|
|
|
70%
|
|
|
|
70%
|
|
|
|||||||||
Option ARM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Plateau CDR
|
1.8
|
%
|
–
|
8.3%
|
|
5.6%
|
|
2.5
|
%
|
–
|
7.0%
|
|
5.9%
|
|
3.2
|
%
|
–
|
7.0%
|
|
5.6%
|
Final CDR
|
0.1
|
%
|
–
|
0.4%
|
|
0.3%
|
|
0.1
|
%
|
–
|
0.3%
|
|
0.3%
|
|
0.2
|
%
|
–
|
0.3%
|
|
0.3%
|
Initial loss severity:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
2005 and prior
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
|
|||||||||
2006
|
60%
|
|
|
|
70%
|
|
|
|
70%
|
|
|
|||||||||
2007+
|
70%
|
|
|
|
75%
|
|
|
|
75%
|
|
|
|||||||||
Subprime
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Plateau CDR
|
1.8
|
%
|
–
|
23.2%
|
|
6.2%
|
|
3.5
|
%
|
–
|
13.1%
|
|
7.8%
|
|
2.8
|
%
|
–
|
14.1%
|
|
8.1%
|
Final CDR
|
0.1
|
%
|
–
|
1.2%
|
|
0.3%
|
|
0.2
|
%
|
–
|
0.7%
|
|
0.4%
|
|
0.1
|
%
|
–
|
0.7%
|
|
0.4%
|
Initial loss severity:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
2005 and prior
|
80%
|
|
|
|
80%
|
|
|
|
80%
|
|
|
|||||||||
2006
|
75%
|
|
|
|
90%
|
|
|
|
90%
|
|
|
|||||||||
2007+
|
95%
|
|
|
|
95%
|
|
|
|
90%
|
|
|
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
|||||||||||||||
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|||||||||
Plateau CDR
|
4.6
|
%
|
–
|
26.8%
|
|
10.1%
|
|
2.7
|
%
|
–
|
19.9%
|
|
11.4%
|
|
3.5
|
%
|
–
|
24.8%
|
|
13.6%
|
Final CDR trended down to
|
2.5
|
%
|
–
|
3.2%
|
|
2.5%
|
|
2.5
|
%
|
–
|
3.2%
|
|
2.5%
|
|
0.5
|
%
|
–
|
3.2%
|
|
1.3%
|
Liquidation rates:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Delinquent/Modified in the Previous 12 Months
|
20%
|
|
|
|
20%
|
|
|
|
25%
|
|
|
|||||||||
30 – 59 Days Delinquent
|
35
|
|
|
|
45
|
|
|
|
50
|
|
|
|||||||||
60 – 89 Days Delinquent
|
50
|
|
|
|
60
|
|
|
|
65
|
|
|
|||||||||
90+ Days Delinquent
|
70
|
|
|
|
75
|
|
|
|
80
|
|
|
|||||||||
Bankruptcy
|
55
|
|
|
|
55
|
|
|
|
55
|
|
|
|||||||||
Foreclosure
|
65
|
|
|
|
70
|
|
|
|
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 (discounted at risk free rates) of either (1) contractual premiums due or (2) in cases where the underlying collateral is composed 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. Installment premiums typically relate to structured finance transactions, where the insurance premium rate is determined at the inception of the contract but the insured par is subject to prepayment throughout the life of the transaction.
|
•
|
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 primarily due to fair value adjustments recorded in connection with a business combination.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Financial guaranty:
|
|
|
|
|
|
||||||
Scheduled net earned premiums
|
$
|
367
|
|
|
$
|
385
|
|
|
$
|
381
|
|
Accelerations from refundings and terminations
|
159
|
|
|
286
|
|
|
469
|
|
|||
Accretion of discount on net premiums receivable
|
18
|
|
|
17
|
|
|
14
|
|
|||
Financial guaranty insurance net earned premiums
|
544
|
|
|
688
|
|
|
864
|
|
|||
Non-financial guaranty net earned premiums
|
4
|
|
|
2
|
|
|
—
|
|
|||
Net earned premiums (1)
|
$
|
548
|
|
|
$
|
690
|
|
|
$
|
864
|
|
(1)
|
Excludes
$12 million
,
$15 million
and
$16 million
for the years ended
December 31, 2018
,
2017
and
2016
, respectively, related to consolidated FG VIEs.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Beginning of year
|
$
|
915
|
|
|
$
|
576
|
|
|
$
|
693
|
|
Less: Non-financial guaranty insurance premium receivable
|
1
|
|
|
—
|
|
|
—
|
|
|||
FG insurance premiums receivable
|
914
|
|
|
576
|
|
|
693
|
|
|||
Premiums receivable from acquisitions (see Note 2)
|
—
|
|
|
270
|
|
|
18
|
|
|||
Gross written premiums on new business, net of commissions (1)
|
610
|
|
|
301
|
|
|
193
|
|
|||
Gross premiums received, net of commissions (2)
|
(577
|
)
|
|
(301
|
)
|
|
(258
|
)
|
|||
Adjustments:
|
|
|
|
|
|
||||||
Changes in the expected term
|
(8
|
)
|
|
(8
|
)
|
|
(38
|
)
|
|||
Accretion of discount, net of commissions on assumed business
|
9
|
|
|
12
|
|
|
9
|
|
|||
Foreign exchange translation and remeasurement (3)
|
(35
|
)
|
|
64
|
|
|
(41
|
)
|
|||
Cancellation of assumed reinsurance
|
(10
|
)
|
|
—
|
|
|
—
|
|
|||
FG insurance premium receivable (4)
|
903
|
|
|
914
|
|
|
576
|
|
|||
Non-financial guaranty insurance premium receivable
|
1
|
|
|
1
|
|
|
—
|
|
|||
December 31,
|
$
|
904
|
|
|
$
|
915
|
|
|
$
|
576
|
|
(1)
|
For transactions where one of the Company's financial guaranty contracts is replaced by another of the Company's insurance subsidiary's contracts, gross written premiums in this table represents only the incremental amount in excess of the original gross written premiums. The year ended December 31, 2018 includes
$330 million
of gross written premiums assumed from SGI on June 1, 2018. See Note 2, Assumption of Insured Portfolio and Business Combinations.
|
(2)
|
The year ended December 31, 2018 includes
$275 million
of cash received from SGI on June 1, 2018.
|
(3)
|
Includes foreign exchange gain (loss) on remeasurement recorded in the consolidated statements of operations of
$(33) million
in 2018,
$61 million
in 2017,
$(36) million
in 2016. The remaining foreign exchange translation was recorded in OCI prior to the date of the Combination.
|
(4)
|
Excludes
$9 million
,
$10 million
and
$11 million
as of
December 31, 2018
,
2017
and
2016
, respectively, related to consolidated FG VIEs.
|
|
As of December 31, 2018
|
||
|
(in millions)
|
||
2019 (January 1 – March 31)
|
$
|
33
|
|
2019 (April 1 – June 30)
|
32
|
|
|
2019 (July 1 – September 30)
|
21
|
|
|
2019 (October 1 – December 31)
|
18
|
|
|
2020
|
98
|
|
|
2021
|
79
|
|
|
2022
|
79
|
|
|
2023
|
66
|
|
|
2024-2028
|
278
|
|
|
2029-2033
|
182
|
|
|
2034-2038
|
98
|
|
|
After 2038
|
100
|
|
|
Total (1)
|
$
|
1,084
|
|
(1)
|
Excludes expected cash collections on consolidated FG VIEs of
$11 million
.
|
|
As of December 31, 2018
|
||
|
(in millions)
|
||
2019 (January 1 – March 31)
|
$
|
87
|
|
2019 (April 1 – June 30)
|
84
|
|
|
2019 (July 1 – September 30)
|
82
|
|
|
2019 (October 1 – December 31)
|
79
|
|
|
Subtotal 2019
|
332
|
|
|
2020
|
302
|
|
|
2021
|
275
|
|
|
2022
|
250
|
|
|
2023
|
229
|
|
|
2024-2028
|
898
|
|
|
2029-2033
|
603
|
|
|
2034-2038
|
339
|
|
|
After 2038
|
284
|
|
|
Net deferred premium revenue (1)
|
3,512
|
|
|
Future accretion
|
181
|
|
|
Total future net earned premiums
|
$
|
3,693
|
|
(1)
|
Excludes net earned premiums on consolidated FG VIEs of
$65 million
and non-financial guaranty business net earned premium of
$12 million
.
|
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
||||
|
(dollars in millions)
|
||||||
Premiums receivable, net of commission payable
|
$
|
903
|
|
|
$
|
914
|
|
Gross deferred premium revenue
|
1,313
|
|
|
1,205
|
|
||
Weighted-average risk-free rate used to discount premiums
|
2.3
|
%
|
|
2.3
|
%
|
||
Weighted-average period of premiums receivable (in years)
|
9.1
|
|
|
9.2
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Beginning of year
|
$
|
101
|
|
|
$
|
106
|
|
|
$
|
114
|
|
DAC adjustments from acquisitions (see Note 2)
|
—
|
|
|
(2
|
)
|
|
—
|
|
|||
Costs deferred during the period
|
19
|
|
|
16
|
|
|
11
|
|
|||
Costs amortized during the period
|
(15
|
)
|
|
(19
|
)
|
|
(19
|
)
|
|||
December 31,
|
$
|
105
|
|
|
$
|
101
|
|
|
$
|
106
|
|
•
|
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, 2018 |
|
As of
December 31, 2017 |
||||
|
(in millions)
|
||||||
Public finance:
|
|
|
|
||||
U.S. public finance
|
$
|
612
|
|
|
$
|
901
|
|
Non-U.S. public finance
|
14
|
|
|
21
|
|
||
Public finance
|
626
|
|
|
922
|
|
||
Structured finance:
|
|
|
|
||||
U.S. RMBS (1)
|
21
|
|
|
(114
|
)
|
||
Other structured finance
|
30
|
|
|
40
|
|
||
Structured finance
|
51
|
|
|
(74
|
)
|
||
Subtotal
|
677
|
|
|
848
|
|
||
Other payable (recoverable)
|
(3
|
)
|
|
(4
|
)
|
||
Total
|
$
|
674
|
|
|
$
|
844
|
|
(1)
|
Excludes net reserves of
$47 million
and
$55 million
as of
December 31, 2018
and
December 31, 2017
, respectively, related to consolidated FG VIEs.
|
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
||||
|
(in millions)
|
||||||
Loss and LAE reserve
|
$
|
1,177
|
|
|
$
|
1,444
|
|
Reinsurance recoverable on unpaid losses (1)
|
(34
|
)
|
|
(44
|
)
|
||
Loss and LAE reserve, net
|
1,143
|
|
|
1,400
|
|
||
Salvage and subrogation recoverable
|
(490
|
)
|
|
(572
|
)
|
||
Salvage and subrogation payable (2)
|
24
|
|
|
20
|
|
||
Other payable (recoverable) (1)
|
(3
|
)
|
|
(4
|
)
|
||
Salvage and subrogation recoverable, net and other recoverable
|
(469
|
)
|
|
(556
|
)
|
||
Net reserves (salvage)
|
$
|
674
|
|
|
$
|
844
|
|
|
As of
December 31, 2018 |
||
|
(in millions)
|
||
Net expected loss to be paid - financial guaranty insurance (1)
|
$
|
1,109
|
|
Contra-paid, net
|
71
|
|
|
Salvage and subrogation recoverable, net, and other recoverable
|
469
|
|
|
Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance
|
(1,142
|
)
|
|
Net expected loss to be expensed (present value) (2)
|
$
|
507
|
|
(1)
|
See "Net Expected Loss to be Paid (Recovered) by Accounting Model" table in Note 5, Expected Loss to be Paid.
|
(2)
|
Excludes
$42 million
as of
December 31, 2018
related to consolidated FG VIEs.
|
|
As of
December 31, 2018 |
||
|
(in millions)
|
||
2019 (January 1 – March 31)
|
$
|
8
|
|
2019 (April 1 – June 30)
|
10
|
|
|
2019 (July 1 – September 30)
|
9
|
|
|
2019 (October 1 – December 31)
|
9
|
|
|
Subtotal 2019
|
36
|
|
|
2020
|
37
|
|
|
2021
|
39
|
|
|
2022
|
40
|
|
|
2023
|
38
|
|
|
2024-2028
|
156
|
|
|
2029-2033
|
104
|
|
|
2034-2038
|
47
|
|
|
After 2038
|
10
|
|
|
Net expected loss to be expensed
|
507
|
|
|
Future accretion
|
88
|
|
|
Total expected future loss and LAE
|
$
|
595
|
|
|
Loss (Benefit)
|
||||||||||
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Public finance:
|
|
|
|
|
|
||||||
U.S. public finance
|
$
|
90
|
|
|
$
|
553
|
|
|
$
|
307
|
|
Non-U.S. public finance
|
(7
|
)
|
|
(4
|
)
|
|
(3
|
)
|
|||
Public finance
|
83
|
|
|
549
|
|
|
304
|
|
|||
Structured finance:
|
|
|
|
|
|
||||||
U.S. RMBS (1)
|
(15
|
)
|
|
(113
|
)
|
|
30
|
|
|||
Other structured finance
|
(4
|
)
|
|
(48
|
)
|
|
(39
|
)
|
|||
Structured finance
|
(19
|
)
|
|
(161
|
)
|
|
(9
|
)
|
|||
Loss and LAE
|
$
|
64
|
|
|
$
|
388
|
|
|
$
|
295
|
|
(1)
|
Excludes a benefit of
$3 million
, a loss of
$7 million
and a loss of
$7 million
for the years ended
December 31, 2018
,
2017
and
2016
, respectively, related to consolidated FG VIEs.
|
|
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)
|
128
|
|
|
(8
|
)
|
|
39
|
|
|
(1
|
)
|
|
145
|
|
|
(7
|
)
|
|
312
|
|
|
—
|
|
|
312
|
|
|||||||||
Remaining weighted-average contract period (in years)
|
7.9
|
|
|
6.5
|
|
|
13.2
|
|
|
2.1
|
|
|
10.1
|
|
|
9.1
|
|
|
9.8
|
|
|
—
|
|
|
9.8
|
|
|||||||||
Outstanding exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Principal
|
$
|
3,052
|
|
|
$
|
(71
|
)
|
|
$
|
938
|
|
|
$
|
(6
|
)
|
|
$
|
6,249
|
|
|
$
|
(159
|
)
|
|
$
|
10,003
|
|
|
$
|
—
|
|
|
$
|
10,003
|
|
Interest
|
1,319
|
|
|
(29
|
)
|
|
592
|
|
|
(1
|
)
|
|
3,140
|
|
|
(72
|
)
|
|
4,949
|
|
|
—
|
|
|
4,949
|
|
|||||||||
Total (2)
|
$
|
4,371
|
|
|
$
|
(100
|
)
|
|
$
|
1,530
|
|
|
$
|
(7
|
)
|
|
$
|
9,389
|
|
|
$
|
(231
|
)
|
|
$
|
14,952
|
|
|
$
|
—
|
|
|
$
|
14,952
|
|
Expected cash outflows (inflows)
|
$
|
98
|
|
|
$
|
(5
|
)
|
|
$
|
264
|
|
|
$
|
(1
|
)
|
|
$
|
4,029
|
|
|
$
|
(80
|
)
|
|
$
|
4,305
|
|
|
$
|
(290
|
)
|
|
$
|
4,015
|
|
Potential recoveries (3)
|
(465
|
)
|
|
23
|
|
|
(81
|
)
|
|
—
|
|
|
(2,542
|
)
|
|
55
|
|
|
$
|
(3,010
|
)
|
|
192
|
|
|
(2,818
|
)
|
||||||||
Subtotal
|
(367
|
)
|
|
18
|
|
|
183
|
|
|
(1
|
)
|
|
1,487
|
|
|
(25
|
)
|
|
1,295
|
|
|
(98
|
)
|
|
1,197
|
|
|||||||||
Discount
|
83
|
|
|
(5
|
)
|
|
(53
|
)
|
|
—
|
|
|
(134
|
)
|
|
(2
|
)
|
|
(111
|
)
|
|
23
|
|
|
(88
|
)
|
|||||||||
Present value of expected cash flows
|
$
|
(284
|
)
|
|
$
|
13
|
|
|
$
|
130
|
|
|
$
|
(1
|
)
|
|
$
|
1,353
|
|
|
$
|
(27
|
)
|
|
$
|
1,184
|
|
|
$
|
(75
|
)
|
|
$
|
1,109
|
|
Deferred premium revenue
|
$
|
125
|
|
|
$
|
(4
|
)
|
|
$
|
151
|
|
|
$
|
—
|
|
|
$
|
518
|
|
|
$
|
(2
|
)
|
|
$
|
788
|
|
|
$
|
(64
|
)
|
|
$
|
724
|
|
Reserves (salvage)
|
$
|
(311
|
)
|
|
$
|
15
|
|
|
$
|
48
|
|
|
$
|
(1
|
)
|
|
$
|
993
|
|
|
$
|
(24
|
)
|
|
$
|
720
|
|
|
$
|
(47
|
)
|
|
$
|
673
|
|
|
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
|
)
|
|
—
|
|
|
(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
|
)
|
|
—
|
|
|
(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
|
|
|
$
|
—
|
|
|
$
|
540
|
|
|
$
|
(6
|
)
|
|
$
|
770
|
|
|
$
|
(74
|
)
|
|
$
|
696
|
|
Reserves (salvage)
|
$
|
(380
|
)
|
|
$
|
11
|
|
|
$
|
202
|
|
|
$
|
(1
|
)
|
|
$
|
1,100
|
|
|
$
|
(34
|
)
|
|
$
|
898
|
|
|
$
|
(55
|
)
|
|
$
|
843
|
|
(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)
|
Represents expected inflows for future payments by obligors pursuant to restructuring agreements, settlement or litigation judgments, excess spread on any underlying collateral and other estimated recoveries.
|
7.
|
Fair Value Measurement
|
•
|
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, 2018 |
|
As of
December 31, 2017 |
||
Based on actual collateral specific spreads
|
20
|
%
|
|
14
|
%
|
Based on market indices
|
33
|
%
|
|
48
|
%
|
Provided by the CDS counterparty
|
47
|
%
|
|
38
|
%
|
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 (1):
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed-maturity securities
|
|
|
|
|
|
|
|
|
|
|
|
||||
Obligations of state and political subdivisions
|
$
|
4,911
|
|
|
$
|
—
|
|
|
$
|
4,812
|
|
|
$
|
99
|
|
U.S. government and agencies
|
175
|
|
|
—
|
|
|
175
|
|
|
—
|
|
||||
Corporate securities
|
2,136
|
|
|
—
|
|
|
2,080
|
|
|
56
|
|
||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|||||||
RMBS
|
982
|
|
|
—
|
|
|
673
|
|
|
309
|
|
||||
Commercial mortgage-backed securities (CMBS)
|
539
|
|
|
—
|
|
|
539
|
|
|
—
|
|
||||
Asset-backed securities
|
1,068
|
|
|
—
|
|
|
121
|
|
|
947
|
|
||||
Non-U.S. government securities
|
278
|
|
|
—
|
|
|
278
|
|
|
—
|
|
||||
Total fixed-maturity securities
|
10,089
|
|
|
—
|
|
|
8,678
|
|
|
1,411
|
|
||||
Short-term investments
|
729
|
|
|
429
|
|
|
300
|
|
|
—
|
|
||||
Other invested assets (2)
|
7
|
|
|
—
|
|
|
—
|
|
|
7
|
|
||||
FG VIEs’ assets, at fair value (3)
|
569
|
|
|
—
|
|
|
—
|
|
|
569
|
|
||||
Other assets (3) (4)
|
139
|
|
|
25
|
|
|
38
|
|
|
76
|
|
||||
Total assets carried at fair value
|
$
|
11,533
|
|
|
$
|
454
|
|
|
$
|
9,016
|
|
|
$
|
2,063
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit derivative liabilities (3)
|
$
|
209
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
209
|
|
FG VIEs’ liabilities with recourse, at fair value (5)
|
517
|
|
|
—
|
|
|
—
|
|
|
517
|
|
||||
FG VIEs’ liabilities without recourse, at fair value (3)
|
102
|
|
|
—
|
|
|
—
|
|
|
102
|
|
||||
Total liabilities carried at fair value
|
$
|
828
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
828
|
|
|
|
|
Fair Value Hierarchy
|
||||||||||||
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
(in millions)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investment portfolio, available-for-sale (1):
|
|
|
|
|
|
|
|
|
|
|
|
||||
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
|
|
||||
CMBS
|
549
|
|
|
—
|
|
|
549
|
|
|
—
|
|
||||
Asset-backed securities
|
896
|
|
|
—
|
|
|
109
|
|
|
787
|
|
||||
Non-U.S. government securities
|
305
|
|
|
—
|
|
|
305
|
|
|
—
|
|
||||
Total fixed-maturity securities
|
10,674
|
|
|
—
|
|
|
9,410
|
|
|
1,264
|
|
||||
Short-term investments
|
627
|
|
|
464
|
|
|
162
|
|
|
1
|
|
||||
Other invested assets (2)
|
7
|
|
|
—
|
|
|
—
|
|
|
7
|
|
||||
FG VIEs’ assets, at fair value (3)
|
700
|
|
|
—
|
|
|
—
|
|
|
700
|
|
||||
Other assets (3) (4)
|
123
|
|
|
25
|
|
|
36
|
|
|
62
|
|
||||
Total assets carried at fair value
|
$
|
12,131
|
|
|
$
|
489
|
|
|
$
|
9,608
|
|
|
$
|
2,034
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit derivative liabilities (3)
|
$
|
271
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
271
|
|
FG VIEs’ liabilities with recourse, at fair value (3)
|
627
|
|
|
—
|
|
|
—
|
|
|
627
|
|
||||
FG VIEs’ liabilities without recourse, at fair value (3)
|
130
|
|
|
—
|
|
|
—
|
|
|
130
|
|
||||
Total liabilities carried at fair value
|
$
|
1,028
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,028
|
|
(2)
|
Excludes investments of
$45 million
as of
December 31, 2017
, measured using NAV per share with the change in fair value recorded in the consolidated statements of operations, which were sold in 2018. Includes Level 3 mortgage loans that are recorded at fair value on a non-recurring basis.
|
(5)
|
Change in fair value attributable to ISCR is recorded in OCI with the remainder of the change in fair value recorded in the consolidated statements of operations.
|
|
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, 2017 |
$
|
76
|
|
|
$
|
67
|
|
|
$
|
334
|
|
|
$
|
787
|
|
|
|
$
|
700
|
|
|
|
$
|
64
|
|
|
|
$
|
(269
|
)
|
|
$
|
(627
|
)
|
|
$
|
(130
|
)
|
|
||||||
Total pretax realized and unrealized gains/(losses) recorded in: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Net income (loss)
|
3
|
|
(2
|
)
|
(14
|
)
|
(2
|
)
|
21
|
|
(2
|
)
|
57
|
|
(2
|
)
|
2
|
|
(3
|
)
|
14
|
|
(4
|
)
|
112
|
|
(6
|
)
|
(1
|
)
|
(3
|
)
|
4
|
|
(3
|
)
|
|||||||||
Other comprehensive income (loss)
|
18
|
|
|
3
|
|
|
(17
|
)
|
|
(40
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
|||||||||||||
Purchases
|
4
|
|
|
—
|
|
|
35
|
|
|
189
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|||||||||||||
Issuances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(68
|
)
|
(8
|
)
|
—
|
|
|
—
|
|
|
|||||||||||||||||
Settlements
|
(2
|
)
|
|
—
|
|
|
(64
|
)
|
|
(46
|
)
|
|
(116
|
)
|
|
(1
|
)
|
|
|
18
|
|
|
|
108
|
|
|
|
8
|
|
|
|||||||||||||||
FG VIE deconsolidations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
—
|
|
|
1
|
|
|
16
|
|
|
||||||||||||||||||
Fair value as of
December 31, 2018 |
$
|
99
|
|
|
$
|
56
|
|
|
$
|
309
|
|
|
$
|
947
|
|
|
|
$
|
569
|
|
|
|
$
|
77
|
|
|
|
$
|
(207
|
)
|
|
$
|
(517
|
)
|
|
$
|
(102
|
)
|
|
||||||
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of
December 31, 2018 |
|
|
|
|
|
|
|
|
$
|
13
|
|
(3
|
)
|
$
|
14
|
|
(4
|
)
|
$
|
122
|
|
(6
|
)
|
$
|
1
|
|
(3
|
)
|
$
|
3
|
|
(3
|
)
|
||||||||||||
Change in unrealized gains/(losses) included in OCI related to financial instruments held as of
December 31, 2018 |
$
|
18
|
|
|
$
|
3
|
|
|
$
|
(14
|
)
|
|
$
|
(38
|
)
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2
|
|
|
|
|
|
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
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|||||||||||||||
Purchases
|
—
|
|
|
—
|
|
|
42
|
|
|
173
|
|
|
—
|
|
|
|
1
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|||||||||||||||
Settlements
|
(2
|
)
|
|
—
|
|
|
(123
|
)
|
|
(367
|
)
|
|
(147
|
)
|
|
—
|
|
|
13
|
|
|
|
145
|
|
|
|
12
|
|
|
||||||||||||||||
FG VIE consolidations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
(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
|
)
|
(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 net investment income and other income.
|
(5)
|
Represents the net position of credit derivatives. Credit derivative assets (recorded in other assets) and credit derivative liabilities (presented as a separate line item) are shown gross in the consolidated balance sheet based on net exposure by counterparty.
|
(6)
|
Reported in net change in fair value of credit derivatives.
|
(7)
|
Includes short-term investments, CCS and other invested assets.
|
Financial Instrument Description(1)
|
|
Fair Value at
December 31, 2018 (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
|
|
$
|
99
|
|
|
Yield
|
|
4.5
|
%
|
-
|
32.7%
|
|
12.0%
|
|
|
|
|
|
|
|
|
|
|
|
|||
Corporate securities
|
|
56
|
|
|
Yield
|
|
29.5%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
RMBS
|
|
309
|
|
|
CPR
|
|
3.4
|
%
|
-
|
19.4%
|
|
6.2%
|
|
|
|
CDR
|
|
1.5
|
%
|
-
|
6.9%
|
|
5.2%
|
||||
|
|
Loss severity
|
|
40.0
|
%
|
-
|
125.0%
|
|
82.7%
|
||||
|
|
Yield
|
|
5.3
|
%
|
-
|
8.1%
|
|
6.3%
|
||||
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|||
Triple-X life insurance transactions
|
|
620
|
|
|
Yield
|
|
6.5
|
%
|
-
|
7.1%
|
|
6.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Collateralized loan obligations (CLOs)/TruPS
|
|
274
|
|
|
Yield
|
|
3.8
|
%
|
-
|
4.7%
|
|
4.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Others
|
|
53
|
|
|
Yield
|
|
11.5%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
FG VIEs’ assets, at fair value
|
|
569
|
|
|
CPR
|
|
0.9
|
%
|
-
|
18.1%
|
|
9.3%
|
|
|
|
CDR
|
|
1.3
|
%
|
-
|
23.7%
|
|
5.1%
|
||||
|
|
Loss severity
|
|
60.0
|
%
|
-
|
100.0%
|
|
79.8%
|
||||
|
|
Yield
|
|
5.0
|
%
|
-
|
10.2%
|
|
7.1%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
Other assets
|
|
74
|
|
|
Implied Yield
|
|
6.6
|
%
|
-
|
7.2%
|
|
6.9%
|
|
|
|
Term (years)
|
|
10 years
|
|
|
|||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||
Credit derivative liabilities, net
|
|
(207
|
)
|
|
Year 1 loss estimates
|
|
0.0
|
%
|
-
|
66.0%
|
|
2.2%
|
|
|
|
Hedge cost (in basis points (bps))
|
|
5.5
|
|
-
|
82.5
|
|
23.3
|
||||
|
|
Bank profit (in bps)
|
|
7.2
|
|
-
|
509.9
|
|
77.3
|
||||
|
|
Internal floor (in bps)
|
|
8.8
|
|
-
|
30.0
|
|
19.0
|
||||
|
|
Internal credit rating
|
|
AAA
|
|
-
|
CCC
|
|
AA-
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
FG VIEs’ liabilities, at fair value
|
|
(619
|
)
|
|
CPR
|
|
0.9
|
%
|
-
|
18.1%
|
|
9.3%
|
|
|
|
CDR
|
|
1.3
|
%
|
-
|
23.7%
|
|
5.1%
|
||||
|
|
Loss severity
|
|
60.0
|
%
|
-
|
100.0%
|
|
79.8%
|
||||
|
|
Yield
|
|
5.0
|
%
|
-
|
10.2%
|
|
5.6%
|
(1)
|
Discounted cash flow is used as the primary valuation technique for all financial instruments listed in this table.
|
(2)
|
Excludes several investments recorded in other invested assets with fair value of
$7 million
.
|
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 the primary valuation technique for all financial instruments listed in this table.
|
(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
.
|
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
||||||||||||
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
||||||||
|
(in millions)
|
||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other invested assets
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
8
|
|
|
$
|
9
|
|
Other assets (2)
|
130
|
|
|
130
|
|
|
97
|
|
|
97
|
|
||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial guaranty insurance contracts (1)
|
3,240
|
|
|
5,932
|
|
|
3,330
|
|
|
7,104
|
|
||||
Long-term debt
|
1,233
|
|
|
1,496
|
|
|
1,292
|
|
|
1,627
|
|
||||
Other liabilities (2)
|
12
|
|
|
12
|
|
|
55
|
|
|
55
|
|
(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.
|
(2)
|
The Company’s other assets and other liabilities consist predominantly of accrued interest, receivables for securities sold and payables for securities purchased, for which the carrying value approximates fair value.
|
8.
|
Contracts Accounted for as Credit Derivatives
|
|
|
As of December 31, 2018
|
|
As of December 31, 2017
|
||||||||||||
Asset Type
|
|
Net Par
Outstanding
|
|
Net Fair Value
|
|
Net Par
Outstanding
|
|
Net Fair Value
|
||||||||
|
|
(in millions)
|
||||||||||||||
Pooled infrastructure
|
|
$
|
1,373
|
|
|
$
|
(34
|
)
|
|
$
|
1,561
|
|
|
$
|
(42
|
)
|
Infrastructure finance
|
|
1,300
|
|
|
(63
|
)
|
|
572
|
|
|
(36
|
)
|
||||
Regulated utilities
|
|
1,096
|
|
|
(11
|
)
|
|
548
|
|
|
(10
|
)
|
||||
Pooled corporate obligations (TruPS collateralized debt obligations (CDOs))
|
|
642
|
|
|
(28
|
)
|
|
878
|
|
|
(72
|
)
|
||||
U.S. RMBS
|
|
641
|
|
|
(31
|
)
|
|
916
|
|
|
(53
|
)
|
||||
Other (2)
|
|
1,130
|
|
|
(40
|
)
|
|
1,732
|
|
|
(56
|
)
|
||||
Total
|
|
$
|
6,182
|
|
|
$
|
(207
|
)
|
|
$
|
6,207
|
|
|
$
|
(269
|
)
|
(2)
|
This represents numerous transactions across various asset classes, such as health care revenue, municipal utilities and and consumer receivables.
|
|
|
As of December 31, 2018
|
|
As of December 31, 2017
|
||||||||||
Ratings
|
|
Net Par
Outstanding
|
|
% of Total
|
|
Net Par
Outstanding
|
|
% of Total
|
||||||
|
|
(dollars in millions)
|
||||||||||||
AAA
|
|
$
|
1,813
|
|
|
29.4
|
%
|
|
$
|
2,144
|
|
|
34.6
|
%
|
AA
|
|
1,690
|
|
|
27.3
|
|
|
1,170
|
|
|
18.8
|
|
||
A
|
|
1,171
|
|
|
18.9
|
|
|
1,517
|
|
|
24.5
|
|
||
BBB
|
|
1,351
|
|
|
21.9
|
|
|
1,038
|
|
|
16.7
|
|
||
BIG (1)
|
|
157
|
|
|
2.5
|
|
|
338
|
|
|
5.4
|
|
||
Credit derivative net par outstanding
|
|
$
|
6,182
|
|
|
100.0
|
%
|
|
$
|
6,207
|
|
|
100.0
|
%
|
(1)
|
BIG relates to U.S. RMBS exposures as of December 31, 2018 and both, U.S. RMBS and TruPS CDOs as of December 31, 2017.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Realized gains on credit derivatives
|
$
|
9
|
|
|
$
|
17
|
|
|
$
|
56
|
|
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements
|
(25
|
)
|
|
(27
|
)
|
|
(27
|
)
|
|||
Realized gains (losses) and other settlements
|
(16
|
)
|
|
(10
|
)
|
|
29
|
|
|||
Net unrealized gains (losses)
|
128
|
|
|
121
|
|
|
69
|
|
|||
Net change in fair value of credit derivatives
|
$
|
112
|
|
|
$
|
111
|
|
|
$
|
98
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Net par of terminated credit derivative contracts
|
$
|
601
|
|
|
$
|
331
|
|
|
$
|
3,811
|
|
Realized gains (losses) and other settlements
|
1
|
|
|
(15
|
)
|
|
20
|
|
|||
Net unrealized gains (losses) on credit derivatives
|
5
|
|
|
26
|
|
|
103
|
|
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
|
As of
December 31, 2016 |
|||
Five-year CDS spread:
|
|
|
|
|
|
|||
AGC
|
110
|
|
|
163
|
|
|
158
|
|
AGM
|
116
|
|
|
145
|
|
|
158
|
|
|
|
|
|
|
|
|||
One-year CDS spread
|
|
|
|
|
|
|||
AGC
|
22
|
|
|
70
|
|
|
35
|
|
AGM
|
24
|
|
|
28
|
|
|
29
|
|
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
||||
|
(in millions)
|
||||||
Fair value of credit derivatives before effect of AGC and AGM credit spreads
|
$
|
(407
|
)
|
|
$
|
(555
|
)
|
Plus: Effect of AGC and AGM credit spreads
|
200
|
|
|
286
|
|
||
Net fair value of credit derivatives
|
$
|
(207
|
)
|
|
$
|
(269
|
)
|
|
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
||||
|
|
(in millions)
|
||||||
Gross par of CDS with collateral posting requirement
|
|
$
|
250
|
|
|
$
|
497
|
|
Maximum posting requirement
|
|
250
|
|
|
464
|
|
||
Collateral posted
|
|
1
|
|
|
18
|
|
9.
|
Variable Interest Entities
|
|
Year Ended December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
|
|
|||||||
Beginning of year
|
32
|
|
|
32
|
|
|
34
|
|
Consolidated
|
—
|
|
|
2
|
|
|
1
|
|
Deconsolidated
|
(1
|
)
|
|
(2
|
)
|
|
(2
|
)
|
Matured
|
—
|
|
|
—
|
|
|
(1
|
)
|
December 31
|
31
|
|
|
32
|
|
|
32
|
|
|
As of December 31, 2018
|
|
As of December 31, 2017
|
||||||||||||
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
||||||||
|
(in millions)
|
||||||||||||||
With recourse:
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. RMBS first lien
|
$
|
299
|
|
|
$
|
326
|
|
|
$
|
362
|
|
|
$
|
385
|
|
U.S. RMBS second lien
|
115
|
|
|
137
|
|
|
144
|
|
|
177
|
|
||||
Manufactured housing
|
53
|
|
|
54
|
|
|
64
|
|
|
65
|
|
||||
Total with recourse
|
467
|
|
|
517
|
|
|
570
|
|
|
627
|
|
||||
Without recourse
|
102
|
|
|
102
|
|
|
130
|
|
|
130
|
|
||||
Total
|
$
|
569
|
|
|
$
|
619
|
|
|
$
|
700
|
|
|
$
|
757
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Net earned premiums
|
$
|
(12
|
)
|
|
$
|
(15
|
)
|
|
$
|
(16
|
)
|
Net investment income
|
(4
|
)
|
|
(5
|
)
|
|
(10
|
)
|
|||
Net realized investment gains (losses)
|
—
|
|
|
—
|
|
|
1
|
|
|||
Fair value gains (losses) on FG VIEs
|
14
|
|
|
30
|
|
|
38
|
|
|||
Loss and LAE
|
(3
|
)
|
|
7
|
|
|
7
|
|
|||
Effect on income before tax
|
(5
|
)
|
|
17
|
|
|
20
|
|
|||
Less: tax provision (benefit)
|
(1
|
)
|
|
6
|
|
|
7
|
|
|||
Effect on net income (loss)
|
$
|
(4
|
)
|
|
$
|
11
|
|
|
$
|
13
|
|
|
|
|
|
|
|
||||||
Effect on OCI
|
$
|
2
|
|
|
$
|
(1
|
)
|
|
$
|
1
|
|
|
|
|
|
|
|
||||||
Effect on cash flows from operating activities
|
$
|
11
|
|
|
$
|
19
|
|
|
$
|
24
|
|
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
||||
|
(in millions)
|
||||||
Effect on shareholders’ equity (decrease) increase
|
$
|
1
|
|
|
$
|
2
|
|
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,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Income from fixed-maturity securities managed by third parties
|
$
|
297
|
|
|
$
|
298
|
|
|
$
|
306
|
|
Income from internally managed securities (1)
|
110
|
|
|
129
|
|
|
111
|
|
|||
Gross investment income
|
407
|
|
|
427
|
|
|
417
|
|
|||
Investment expenses
|
(9
|
)
|
|
(9
|
)
|
|
(9
|
)
|
|||
Net investment income
|
$
|
398
|
|
|
$
|
418
|
|
|
$
|
408
|
|
(1)
|
Year ended December 31, 2017 included accretion on Zohar II Notes used as consideration for the MBIA UK Acquisition. See Note 2, Assumption of Insured Portfolio and Business Combinations.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Gross realized gains on available-for-sale securities (1)
|
$
|
20
|
|
|
$
|
95
|
|
|
$
|
28
|
|
Gross realized losses on available-for-sale securities
|
(12
|
)
|
|
(12
|
)
|
|
(8
|
)
|
|||
Net realized gains (losses) on other invested assets
|
(1
|
)
|
|
—
|
|
|
2
|
|
|||
OTTI:
|
|
|
|
|
|
||||||
Total OTTI
|
(35
|
)
|
|
(33
|
)
|
|
(47
|
)
|
|||
Less: portion of OTTI recognized in OCI
|
4
|
|
|
10
|
|
|
4
|
|
|||
Net OTTI recognized in net income (loss) (2)
|
(39
|
)
|
|
(43
|
)
|
|
(51
|
)
|
|||
Net realized investment gains (losses)
|
$
|
(32
|
)
|
|
$
|
40
|
|
|
$
|
(29
|
)
|
(1)
|
Year ended December 31, 2017 included a gain on Zohar II Notes used as consideration for the MBIA UK Acquisition. See Note 2, Assumption of Insured Portfolio and Business Combinations.
|
(2)
|
Net OTTI recognized in net income (loss) was primarily a result of a decline in expected cash flows on loss mitigation securities.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Balance, beginning of period
|
$
|
162
|
|
|
$
|
134
|
|
|
$
|
108
|
|
Additions for credit losses on securities for which an OTTI was not previously recognized
|
—
|
|
|
13
|
|
|
3
|
|
|||
Reductions for securities sold and other settlements
|
—
|
|
|
(4
|
)
|
|
(4
|
)
|
|||
Additions for credit losses on securities for which an OTTI was previously recognized
|
23
|
|
|
19
|
|
|
27
|
|
|||
Balance, end of period
|
$
|
185
|
|
|
$
|
162
|
|
|
$
|
134
|
|
|
As of December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Fixed-maturity securities (1):
|
|
|
|
||||
Externally managed
|
$
|
8,909
|
|
|
$
|
9,443
|
|
Internally managed
|
1,180
|
|
|
1,231
|
|
||
Short-term investments
|
729
|
|
|
627
|
|
||
Other invested assets:
|
|
|
|
||||
Internally managed
|
|
|
|
||||
Alternative investments
|
39
|
|
|
69
|
|
||
Other
|
16
|
|
|
25
|
|
||
Total
|
$
|
10,873
|
|
|
$
|
11,395
|
|
(1)
|
10.8%
and
10.5%
of fixed-maturity securities are rated BIG as of
December 31, 2018
and
December 31, 2017
, respectively.
|
Investment Category
|
|
Percent
of
Total(1)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair
Value
|
|
AOCI
Gain
(Loss) on
Securities
with OTTI (2)
|
|
Weighted
Average
Credit
Rating
(3)
|
|||||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Obligations of state and political subdivisions
|
|
45
|
%
|
|
$
|
4,761
|
|
|
$
|
168
|
|
|
$
|
(18
|
)
|
|
$
|
4,911
|
|
|
$
|
40
|
|
|
AA-
|
U.S. government and agencies
|
|
2
|
|
|
167
|
|
|
9
|
|
|
(1
|
)
|
|
175
|
|
|
—
|
|
|
AA+
|
|||||
Corporate securities
|
|
20
|
|
|
2,175
|
|
|
13
|
|
|
(52
|
)
|
|
2,136
|
|
|
(4
|
)
|
|
A
|
|||||
Mortgage-backed securities(4):
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
RMBS
|
|
9
|
|
|
999
|
|
|
17
|
|
|
(34
|
)
|
|
982
|
|
|
(15
|
)
|
|
A-
|
|||||
CMBS
|
|
5
|
|
|
542
|
|
|
4
|
|
|
(7
|
)
|
|
539
|
|
|
—
|
|
|
AAA
|
|||||
Asset-backed securities
|
|
9
|
|
|
942
|
|
|
131
|
|
|
(5
|
)
|
|
1,068
|
|
|
97
|
|
|
BB
|
|||||
Non-U.S. government securities
|
|
3
|
|
|
298
|
|
|
2
|
|
|
(22
|
)
|
|
278
|
|
|
—
|
|
|
AA
|
|||||
Total fixed-maturity securities
|
|
93
|
|
|
9,884
|
|
|
344
|
|
|
(139
|
)
|
|
10,089
|
|
|
118
|
|
|
A+
|
|||||
Short-term investments
|
|
7
|
|
|
729
|
|
|
—
|
|
|
—
|
|
|
729
|
|
|
—
|
|
|
AAA
|
|||||
Total investment portfolio
|
|
100
|
%
|
|
$
|
10,613
|
|
|
$
|
344
|
|
|
$
|
(139
|
)
|
|
$
|
10,818
|
|
|
$
|
118
|
|
|
A+
|
Investment Category
|
|
Percent
of
Total(1)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair
Value
|
|
AOCI
Gain (Loss) on Securities with OTTI (2) |
|
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
|
|
|
—
|
|
|
896
|
|
|
136
|
|
|
B
|
|||||
Non-U.S. government securities
|
|
3
|
|
|
316
|
|
|
6
|
|
|
(17
|
)
|
|
305
|
|
|
—
|
|
|
AA
|
|||||
Total fixed-maturity securities
|
|
94
|
|
|
10,187
|
|
|
554
|
|
|
(67
|
)
|
|
10,674
|
|
|
152
|
|
|
A+
|
|||||
Short-term investments
|
|
6
|
|
|
627
|
|
|
—
|
|
|
—
|
|
|
627
|
|
|
—
|
|
|
AAA
|
|||||
Total investment portfolio
|
|
100
|
%
|
|
$
|
10,814
|
|
|
$
|
554
|
|
|
$
|
(67
|
)
|
|
$
|
11,301
|
|
|
$
|
152
|
|
|
A+
|
(1)
|
Based on amortized cost.
|
(2)
|
See Note 20, Other Comprehensive Income.
|
(3)
|
Ratings in the tables above represent the lower of the Moody’s and S&P classifications except for bonds purchased for loss mitigation or risk management strategies, which use internal ratings classifications. The Company’s portfolio primarily consists of high-quality, liquid instruments.
|
(4)
|
U.S. government-agency obligations were approximately
48%
of mortgage backed securities as of
December 31, 2018
and
39%
as of
December 31, 2017
based on fair value.
|
State
|
|
State
General
Obligation
|
|
Local
General
Obligation
|
|
Revenue Bonds
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Average
Credit
Rating
|
||||||||||
|
|
(in millions)
|
||||||||||||||||||||
New York
|
|
$
|
5
|
|
|
$
|
49
|
|
|
$
|
492
|
|
|
$
|
546
|
|
|
$
|
536
|
|
|
AA
|
Texas
|
|
19
|
|
|
170
|
|
|
344
|
|
|
533
|
|
|
520
|
|
|
AA
|
|||||
California
|
|
63
|
|
|
77
|
|
|
378
|
|
|
518
|
|
|
482
|
|
|
A
|
|||||
Washington
|
|
80
|
|
|
81
|
|
|
193
|
|
|
354
|
|
|
349
|
|
|
AA
|
|||||
Florida
|
|
8
|
|
|
13
|
|
|
220
|
|
|
241
|
|
|
236
|
|
|
A+
|
|||||
Massachusetts
|
|
75
|
|
|
—
|
|
|
144
|
|
|
219
|
|
|
211
|
|
|
AA
|
|||||
Illinois
|
|
16
|
|
|
55
|
|
|
127
|
|
|
198
|
|
|
192
|
|
|
A
|
|||||
Pennsylvania
|
|
35
|
|
|
5
|
|
|
98
|
|
|
138
|
|
|
136
|
|
|
A+
|
|||||
District of Columbia
|
|
41
|
|
|
—
|
|
|
92
|
|
|
133
|
|
|
131
|
|
|
AA
|
|||||
Georgia
|
|
10
|
|
|
10
|
|
|
94
|
|
|
114
|
|
|
110
|
|
|
AA-
|
|||||
All others
|
|
96
|
|
|
210
|
|
|
1,103
|
|
|
1,409
|
|
|
1,369
|
|
|
AA-
|
|||||
Total
|
|
$
|
448
|
|
|
$
|
670
|
|
|
$
|
3,285
|
|
|
$
|
4,403
|
|
|
$
|
4,272
|
|
|
AA-
|
State
|
|
State
General
Obligation
|
|
Local
General
Obligation
|
|
Revenue Bonds
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Average
Credit
Rating
|
||||||||||
|
|
(in millions)
|
||||||||||||||||||||
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-
|
(1)
|
Excludes
$508 million
and
$892 million
as of
December 31, 2018
and
2017
, 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, 2018
|
|
As of December 31, 2017
|
||||||||||||
Type
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
||||||||
|
|
(in millions)
|
||||||||||||||
Transportation
|
|
$
|
967
|
|
|
$
|
925
|
|
|
$
|
955
|
|
|
$
|
889
|
|
Water and sewer
|
|
580
|
|
|
566
|
|
|
670
|
|
|
641
|
|
||||
Higher education
|
|
557
|
|
|
543
|
|
|
515
|
|
|
492
|
|
||||
Tax backed
|
|
471
|
|
|
458
|
|
|
600
|
|
|
570
|
|
||||
Municipal utilities
|
|
287
|
|
|
267
|
|
|
324
|
|
|
315
|
|
||||
Healthcare
|
|
278
|
|
|
270
|
|
|
308
|
|
|
293
|
|
||||
All others
|
|
145
|
|
|
143
|
|
|
174
|
|
|
169
|
|
||||
Total
|
|
$
|
3,285
|
|
|
$
|
3,172
|
|
|
$
|
3,546
|
|
|
$
|
3,369
|
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
||||||||||||||||||
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
||||||||||||
|
(dollars in millions)
|
||||||||||||||||||||||
Obligations of state and political subdivisions
|
$
|
195
|
|
|
$
|
(4
|
)
|
|
$
|
658
|
|
|
$
|
(14
|
)
|
|
$
|
853
|
|
|
$
|
(18
|
)
|
U.S. government and agencies
|
11
|
|
|
—
|
|
|
24
|
|
|
(1
|
)
|
|
35
|
|
|
(1
|
)
|
||||||
Corporate securities
|
836
|
|
|
(19
|
)
|
|
522
|
|
|
(33
|
)
|
|
1,358
|
|
|
(52
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
RMBS
|
85
|
|
|
(2
|
)
|
|
447
|
|
|
(32
|
)
|
|
532
|
|
|
(34
|
)
|
||||||
CMBS
|
111
|
|
|
(1
|
)
|
|
164
|
|
|
(6
|
)
|
|
275
|
|
|
(7
|
)
|
||||||
Asset-backed securities
|
322
|
|
|
(4
|
)
|
|
38
|
|
|
(1
|
)
|
|
360
|
|
|
(5
|
)
|
||||||
Non-U.S. government securities
|
83
|
|
|
(4
|
)
|
|
99
|
|
|
(18
|
)
|
|
182
|
|
|
(22
|
)
|
||||||
Total
|
$
|
1,643
|
|
|
$
|
(34
|
)
|
|
$
|
1,952
|
|
|
$
|
(105
|
)
|
|
$
|
3,595
|
|
|
$
|
(139
|
)
|
Number of securities (1)
|
|
|
|
417
|
|
|
|
|
|
608
|
|
|
|
|
|
997
|
|
||||||
Number of securities with OTTI (1)
|
|
|
|
22
|
|
|
|
|
|
22
|
|
|
|
|
|
42
|
|
|
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
|
|
|
—
|
|
|
18
|
|
|
(1
|
)
|
|
169
|
|
|
(1
|
)
|
||||||
Corporate securities
|
201
|
|
|
(1
|
)
|
|
240
|
|
|
(17
|
)
|
|
441
|
|
|
(18
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
RMBS
|
191
|
|
|
(5
|
)
|
|
213
|
|
|
(12
|
)
|
|
404
|
|
|
(17
|
)
|
||||||
CMBS
|
29
|
|
|
—
|
|
|
80
|
|
|
(3
|
)
|
|
109
|
|
|
(3
|
)
|
||||||
Asset-backed securities
|
48
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
51
|
|
|
—
|
|
||||||
Non-U.S. government securities
|
20
|
|
|
—
|
|
|
140
|
|
|
(17
|
)
|
|
160
|
|
|
(17
|
)
|
||||||
Total
|
$
|
806
|
|
|
$
|
(10
|
)
|
|
$
|
975
|
|
|
$
|
(57
|
)
|
|
$
|
1,781
|
|
|
$
|
(67
|
)
|
Number of securities (1)
|
|
|
|
244
|
|
|
|
|
|
264
|
|
|
|
|
|
499
|
|
||||||
Number of securities with OTTI (1)
|
|
|
|
17
|
|
|
|
|
|
15
|
|
|
|
|
|
31
|
|
(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
|
$
|
206
|
|
|
$
|
203
|
|
Due after one year through five years
|
1,507
|
|
|
1,497
|
|
||
Due after five years through 10 years
|
2,387
|
|
|
2,393
|
|
||
Due after 10 years
|
4,243
|
|
|
4,475
|
|
||
Mortgage-backed securities:
|
|
|
|
|
|
||
RMBS
|
999
|
|
|
982
|
|
||
CMBS
|
542
|
|
|
539
|
|
||
Total
|
$
|
9,884
|
|
|
$
|
10,089
|
|
|
As of December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Cash
|
$
|
104
|
|
|
$
|
144
|
|
Restricted cash
|
—
|
|
|
—
|
|
||
Total cash and restricted cash
|
$
|
104
|
|
|
$
|
144
|
|
11.
|
Insurance Company Regulatory Requirements
|
|
Policyholders' Surplus
|
|
Net Income (Loss)
|
||||||||||||||||
|
As of December 31,
|
|
Year Ended December 31,
|
||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2016
|
||||||||||
|
(in millions)
|
||||||||||||||||||
U.S. statutory companies:
|
|
|
|
|
|
|
|
|
|
||||||||||
AGM (1) (2)
|
$
|
2,533
|
|
|
$
|
2,254
|
|
|
$
|
172
|
|
|
$
|
152
|
|
|
$
|
191
|
|
AGC (1) (2)
|
1,793
|
|
|
2,073
|
|
|
(5
|
)
|
|
219
|
|
|
108
|
|
|||||
MAC (2)
|
321
|
|
|
270
|
|
|
55
|
|
|
32
|
|
|
142
|
|
|||||
Bermuda statutory companies:
|
|
|
|
|
|
|
|
|
|
||||||||||
AG Re
|
1,249
|
|
|
1,294
|
|
|
131
|
|
|
155
|
|
|
139
|
|
|||||
AGRO
|
383
|
|
|
380
|
|
|
10
|
|
|
10
|
|
|
8
|
|
(1)
|
Policyholders' surplus of AGM and AGC includes their indirect share of MAC. AGM and AGC own
60.7%
and
39.3%
, respectively, of the outstanding stock of Municipal Assurance Holdings Inc. (MAC Holdings), which owns
100%
of the outstanding common stock of MAC.
|
(2)
|
As of
December 31, 2018
, policyholders' surplus is net of contingency reserves of
$913 million
,
$550 million
and
$200 million
for AGM, AGC and MAC, respectively. As of
December 31, 2017
, policyholders' surplus is net of contingency reserves of
$972 million
,
$554 million
and
$224 million
for AGM, AGC and MAC, respectively.
|
•
|
Upfront premiums are earned upon expiration of risk rather than earned over the expected period of coverage. Premiums earnings are accelerated when transactions are economically defeased, rather than legally defeased.
|
•
|
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 as liabilities with periodic accrual of interest.
|
•
|
Acquisitions are accounted for as either statutory purchases or statutory mergers, rather than under the purchase method under GAAP.
|
•
|
Losses are discounted at tax equivalent yields, and 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.
|
•
|
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,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Dividends paid by AGC to AGUS
|
$
|
133
|
|
|
$
|
107
|
|
|
$
|
79
|
|
Dividends paid by AGM to AGMH
|
171
|
|
|
196
|
|
|
247
|
|
|||
Dividends paid by AG Re to AGL
|
125
|
|
|
125
|
|
|
100
|
|
|||
Dividends paid by MAC to MAC Holdings (1)
|
27
|
|
|
36
|
|
|
—
|
|
|||
Repurchase of common stock by AGM from AGMH
|
—
|
|
|
101
|
|
|
300
|
|
|||
Repurchase of common stock by AGC from AGUS
|
200
|
|
|
—
|
|
|
—
|
|
|||
Redemption of common stock by MAC from MAC Holdings (1)
|
—
|
|
|
250
|
|
|
—
|
|
|||
Repayment of surplus note by MAC to AGM
|
—
|
|
|
—
|
|
|
100
|
|
|||
Repayment of surplus note by MAC to MAC Holdings (1)
|
—
|
|
|
—
|
|
|
300
|
|
(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,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Transition tax
|
$
|
(1
|
)
|
|
$
|
93
|
|
Foreign tax credit realized
|
—
|
|
|
(31
|
)
|
||
Write down of unremitted earnings
|
—
|
|
|
(38
|
)
|
||
Net impact of repatriation
|
(1
|
)
|
|
24
|
|
||
Write down of deferred tax asset due to tax rate change
|
(3
|
)
|
|
37
|
|
||
Net impact of Tax Act
|
$
|
(4
|
)
|
|
$
|
61
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Expected tax provision (benefit) at statutory rates in taxable jurisdictions
|
$
|
97
|
|
|
$
|
300
|
|
|
$
|
316
|
|
Tax-exempt interest
|
(23
|
)
|
|
(49
|
)
|
|
(49
|
)
|
|||
Bargain purchase gain
|
—
|
|
|
(20
|
)
|
|
(125
|
)
|
|||
Change in liability for uncertain tax positions
|
(15
|
)
|
|
(26
|
)
|
|
11
|
|
|||
Effect of provision to tax return filing adjustments
|
(1
|
)
|
|
(8
|
)
|
|
(15
|
)
|
|||
State taxes
|
6
|
|
|
9
|
|
|
3
|
|
|||
Taxes on reinsurance
|
6
|
|
|
(4
|
)
|
|
(4
|
)
|
|||
Effects of transitional adjustments related to the Tax Act
|
(4
|
)
|
|
61
|
|
|
—
|
|
|||
Other
|
(7
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|||
Total provision (benefit) for income taxes
|
$
|
59
|
|
|
$
|
261
|
|
|
$
|
136
|
|
Effective tax rate
|
10.2
|
%
|
|
26.3
|
%
|
|
13.4
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
U.S.
|
$
|
802
|
|
|
$
|
1,543
|
|
|
$
|
1,442
|
|
Bermuda
|
177
|
|
|
216
|
|
|
239
|
|
|||
U.K. and Other
|
23
|
|
|
(20
|
)
|
|
(4
|
)
|
|||
Total
|
$
|
1,002
|
|
|
$
|
1,739
|
|
|
$
|
1,677
|
|
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
||||
|
(in millions)
|
||||||
Deferred tax assets (liabilities)
|
$
|
68
|
|
|
$
|
98
|
|
Current tax assets (liabilities)
|
22
|
|
|
21
|
|
(1)
|
Included in other assets or other liabilities on the consolidated balance sheets.
|
|
As of December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Deferred tax assets:
|
|
|
|
||||
Unearned premium reserves, net
|
$
|
98
|
|
|
$
|
124
|
|
Investment basis differences
|
49
|
|
|
63
|
|
||
Foreign tax credit
|
36
|
|
|
43
|
|
||
Net operating loss
|
34
|
|
|
38
|
|
||
Deferred compensation
|
25
|
|
|
21
|
|
||
Alternative minimum tax credit
|
20
|
|
|
59
|
|
||
FG VIEs
|
9
|
|
|
13
|
|
||
Unrealized losses on credit derivative financial instruments, net
|
6
|
|
|
20
|
|
||
Other
|
20
|
|
|
14
|
|
||
Total deferred income tax assets
|
297
|
|
|
395
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Unrealized appreciation on investments
|
54
|
|
|
91
|
|
||
Public debt
|
50
|
|
|
53
|
|
||
Market discount
|
31
|
|
|
28
|
|
||
DAC
|
23
|
|
|
12
|
|
||
Unrealized gains on CCS
|
16
|
|
|
13
|
|
||
Loss and LAE reserve
|
7
|
|
|
27
|
|
||
Other
|
12
|
|
|
30
|
|
||
Total deferred income tax liabilities
|
193
|
|
|
254
|
|
||
Less: Valuation allowance
|
36
|
|
|
43
|
|
||
Net deferred income tax asset
|
$
|
68
|
|
|
$
|
98
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Beginning of year
|
$
|
28
|
|
|
$
|
50
|
|
|
$
|
40
|
|
Effect of provision to tax return filing adjustments
|
1
|
|
|
8
|
|
|
6
|
|
|||
Increase in unrecognized tax positions as a result of position taken during the current period
|
—
|
|
|
1
|
|
|
4
|
|
|||
Decrease in unrecognized tax positions as a result of settlement of positions taken during the prior period
|
—
|
|
|
(31
|
)
|
|
—
|
|
|||
Reductions to unrecognized tax benefits as a result of the applicable statute of limitations
|
(15
|
)
|
|
—
|
|
|
—
|
|
|||
Balance as of December 31,
|
$
|
14
|
|
|
$
|
28
|
|
|
$
|
50
|
|
13.
|
Reinsurance
|
•
|
if the Company fails to meet certain financial and regulatory criteria;
|
•
|
if the Company fails to maintain a specified minimum financial strength rating, or
|
•
|
upon certain changes of control of the Company.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Premiums Written:
|
|
|
|
|
|
||||||
Direct
|
$
|
288
|
|
|
$
|
297
|
|
|
$
|
165
|
|
Assumed (1)
|
324
|
|
|
10
|
|
|
(11
|
)
|
|||
Ceded (2)
|
14
|
|
|
18
|
|
|
(17
|
)
|
|||
Net
|
$
|
626
|
|
|
$
|
325
|
|
|
$
|
137
|
|
Premiums Earned:
|
|
|
|
|
|
||||||
Direct
|
$
|
509
|
|
|
$
|
693
|
|
|
$
|
887
|
|
Assumed
|
51
|
|
|
27
|
|
|
27
|
|
|||
Ceded
|
(12
|
)
|
|
(30
|
)
|
|
(50
|
)
|
|||
Net
|
$
|
548
|
|
|
$
|
690
|
|
|
$
|
864
|
|
Loss and LAE:
|
|
|
|
|
|
||||||
Direct
|
$
|
68
|
|
|
$
|
404
|
|
|
$
|
327
|
|
Assumed
|
(1
|
)
|
|
11
|
|
|
—
|
|
|||
Ceded
|
(3
|
)
|
|
(27
|
)
|
|
(32
|
)
|
|||
Net
|
$
|
64
|
|
|
$
|
388
|
|
|
$
|
295
|
|
(1)
|
Negative assumed premiums written were due to changes in expected debt service schedules. Includes business assumed from SGI pursuant to the SGI Transaction.
|
(2)
|
Positive ceded premiums written were due to commutations and changes in expected debt service schedules.
|
|
As of December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Due (To) From:
|
|
|
|
||||
Assumed premium, net of commissions
|
$
|
82
|
|
|
$
|
53
|
|
Ceded premium, net of commissions
|
(26
|
)
|
|
(42
|
)
|
||
Assumed expected loss to be paid
|
(49
|
)
|
|
(71
|
)
|
||
Ceded expected loss to be paid
|
14
|
|
|
29
|
|
||
Outstanding Exposure:
|
|
|
|
||||
Financial guaranty
|
|
|
|
||||
Assumed par outstanding
|
16,904
|
|
|
8,383
|
|
||
Ceded par outstanding (2)
|
2,389
|
|
|
4,434
|
|
||
Non-financial guaranty exposure (see Note 4)
|
|
|
|
||||
Assumed
|
1,081
|
|
|
974
|
|
||
Ceded
|
239
|
|
|
159
|
|
(1)
|
The total collateral posted by all non-affiliated reinsurers required to post, or that had agreed to post, collateral as of
December 31, 2018
and
December 31, 2017
was approximately
$80 million
and
$118 million
, respectively. Such collateral is posted (i) in the case of certain reinsurers not authorized or "accredited" in the U.S., in order for the Company to receive credit for the liabilities ceded to such reinsurers, and (ii) in the case of certain reinsurers authorized in the U.S., on terms negotiated with the Company.
|
(2)
|
Of the total par ceded to unrated or BIG rated reinsurers,
$236 million
and
$296 million
is rated BIG as of
December 31, 2018
and
December 31, 2017
, respectively.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Increase in net unearned premium reserve
|
$
|
64
|
|
|
$
|
82
|
|
|
$
|
—
|
|
Increase in net par outstanding
|
1,457
|
|
|
5,107
|
|
|
28
|
|
|||
Commutation gains (losses) (1)
|
(16
|
)
|
|
328
|
|
|
8
|
|
(1)
|
Includes SGI commutation. See Note 2, Assumption of Insured Portfolio and Business Combinations.
|
14.
|
Related Party Transactions
|
15.
|
Commitments and Contingencies
|
Year
|
|
(in millions)
|
||
2019
|
$
|
9
|
|
|
2020
|
9
|
|
||
2021
|
8
|
|
||
2022
|
8
|
|
||
2023
|
9
|
|
||
Thereafter
|
72
|
|
||
Total
|
$
|
115
|
|
16.
|
Long-Term Debt and Credit Facilities
|
|
As of December 31, 2018
|
|
As of December 31, 2017
|
||||||||||||
|
Principal
|
|
Carrying
Value
|
|
Principal
|
|
Carrying
Value
|
||||||||
|
(in millions)
|
||||||||||||||
AGUS:
|
|
|
|
|
|
|
|
|
|
|
|
||||
7% Senior Notes (1)
|
$
|
200
|
|
|
$
|
197
|
|
|
$
|
200
|
|
|
$
|
197
|
|
5% Senior Notes (1)
|
500
|
|
|
497
|
|
|
500
|
|
|
496
|
|
||||
Series A Enhanced Junior Subordinated Debentures (2)
|
150
|
|
|
150
|
|
|
150
|
|
|
150
|
|
||||
Total AGUS
|
850
|
|
|
844
|
|
|
850
|
|
|
843
|
|
||||
AGMH (3):
|
|
|
|
|
|
|
|
|
|
|
|
||||
6
7
/
8
% QUIBS (1)
|
100
|
|
|
70
|
|
|
100
|
|
|
70
|
|
||||
6.25% Notes (1)
|
230
|
|
|
143
|
|
|
230
|
|
|
142
|
|
||||
5.6% Notes (1)
|
100
|
|
|
57
|
|
|
100
|
|
|
57
|
|
||||
Junior Subordinated Debentures (2)
|
300
|
|
|
198
|
|
|
300
|
|
|
192
|
|
||||
Total AGMH
|
730
|
|
|
468
|
|
|
730
|
|
|
461
|
|
||||
AGM (3):
|
|
|
|
|
|
|
|
|
|
|
|
||||
AGM Notes Payable
|
5
|
|
|
5
|
|
|
6
|
|
|
6
|
|
||||
Total AGM
|
5
|
|
|
5
|
|
|
6
|
|
|
6
|
|
||||
AGMH's debt purchased by AGUS
|
(128
|
)
|
|
(84
|
)
|
|
(28
|
)
|
|
(18
|
)
|
||||
Total
|
$
|
1,457
|
|
|
$
|
1,233
|
|
|
$
|
1,558
|
|
|
$
|
1,292
|
|
(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 primarily due to fair value adjustments at the date of the AGMH acquisition, which are accreted or amortized into interest expense over the remaining terms of these obligations.
|
|
Year Ended December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Principal amount repurchased
|
$
|
100
|
|
|
$
|
28
|
|
Loss on extinguishment of debt (1)
|
34
|
|
|
9
|
|
(1)
|
Included in other income in the consolidated statements of operations. The loss represents the difference between the amount paid to purchase AGMH's debt and the carrying value of the debt, which includes the unamortized fair value adjustments that were recorded upon the acquisition of AGMH in 2009.
|
|
|
AGUS
|
|
AGMH (1)
|
|
AGM
|
|
Total
|
||||||||
|
|
(in millions)
|
||||||||||||||
2019 - 2023
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
3
|
|
2024 - 2043
|
|
700
|
|
|
—
|
|
|
2
|
|
|
702
|
|
||||
2044 - 2063
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
2064 - 2083
|
|
150
|
|
|
300
|
|
|
—
|
|
|
450
|
|
||||
Thereafter
|
|
—
|
|
|
430
|
|
|
—
|
|
|
430
|
|
||||
Total
|
|
$
|
850
|
|
|
$
|
730
|
|
|
$
|
5
|
|
|
$
|
1,585
|
|
(1)
|
Includes AGMH's debt purchased by AGUS of
$128 million
.
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
AGUS:
|
|
|
|
|
|
|
|
|
|||
7% Senior Notes
|
$
|
13
|
|
|
$
|
13
|
|
|
$
|
13
|
|
5% Senior Notes
|
26
|
|
|
26
|
|
|
26
|
|
|||
Series A Enhanced Junior Subordinated Debentures
|
7
|
|
|
5
|
|
|
9
|
|
|||
Total AGUS
|
46
|
|
|
44
|
|
|
48
|
|
|||
AGMH:
|
|
|
|
|
|
|
|
|
|||
6
7
/
8
% QUIBS
|
7
|
|
|
7
|
|
|
7
|
|
|||
6.25% Notes
|
15
|
|
|
16
|
|
|
16
|
|
|||
5.6% Notes
|
6
|
|
|
6
|
|
|
6
|
|
|||
Junior Subordinated Debentures
|
25
|
|
|
25
|
|
|
25
|
|
|||
Total AGMH
|
53
|
|
|
54
|
|
|
54
|
|
|||
AGMH's debt purchased by AGUS
|
(5
|
)
|
|
(1
|
)
|
|
—
|
|
|||
Total
|
$
|
94
|
|
|
$
|
97
|
|
|
$
|
102
|
|
17.
|
Earnings Per Share
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions, except per share amounts)
|
||||||||||
Basic EPS:
|
|
|
|
|
|
||||||
Net income (loss) attributable to AGL
|
$
|
521
|
|
|
$
|
730
|
|
|
881
|
|
|
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
|
$
|
520
|
|
|
$
|
729
|
|
|
880
|
|
|
Basic shares
|
110.0
|
|
|
120.6
|
|
|
133.0
|
|
|||
Basic EPS
|
$
|
4.73
|
|
|
$
|
6.05
|
|
|
$
|
6.61
|
|
|
|
|
|
|
|
||||||
Diluted EPS:
|
|
|
|
|
|
||||||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic
|
$
|
520
|
|
|
$
|
729
|
|
|
$
|
880
|
|
Plus: Re-allocation of undistributed income (loss) available to nonvested shareholders of AGL and subsidiaries
|
—
|
|
|
—
|
|
|
—
|
|
|||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, diluted
|
$
|
520
|
|
|
$
|
729
|
|
|
$
|
880
|
|
|
|
|
|
|
|
||||||
Basic shares
|
110.0
|
|
|
120.6
|
|
|
133.0
|
|
|||
Dilutive securities:
|
|
|
|
|
|
||||||
Options and restricted stock awards
|
1.3
|
|
|
1.7
|
|
|
1.1
|
|
|||
Diluted shares
|
111.3
|
|
|
122.3
|
|
|
134.1
|
|
|||
Diluted EPS
|
$
|
4.68
|
|
|
$
|
5.96
|
|
|
$
|
6.56
|
|
Potentially dilutive securities excluded from computation of EPS because of antidilutive effect
|
0.1
|
|
|
0.1
|
|
|
0.3
|
|
18.
|
Shareholders' Equity
|
Year
|
|
Number of Shares Repurchased
|
|
Total Payments
(in millions)
|
|
Average Price Paid Per Share
|
|||||
2016
|
|
10,721,248
|
|
|
$
|
306
|
|
|
$
|
28.53
|
|
2017
|
|
12,669,643
|
|
|
$
|
501
|
|
|
$
|
39.57
|
|
2018
|
|
13,243,107
|
|
|
$
|
500
|
|
|
$
|
37.76
|
|
2019 (through March 1, 2019 on a settlement date basis)
|
|
1,200,501
|
|
|
$
|
48
|
|
|
$
|
40.03
|
|
19.
|
Employee Benefit Plans
|
|
Options for
Common Shares
|
|
Weighted
Average
Exercise Price
|
|
Number of
Exercisable
Options
|
||||
Balance as of December 31, 2017
|
838,954
|
|
|
$
|
17.41
|
|
|
838,954
|
|
Options granted
|
—
|
|
|
—
|
|
|
|
||
Options exercised
|
(465,326
|
)
|
|
16.32
|
|
|
|
||
Options forfeited/expired
|
—
|
|
|
—
|
|
|
|
||
Balance as of December 31, 2018
|
373,628
|
|
|
$
|
18.77
|
|
|
373,628
|
|
|
Options for
Common Shares
|
|
Weighted
Average
Exercise Price
|
|
Number of
Exercisable
Options
|
||||
Balance as of December 31, 2017
|
190,901
|
|
|
$
|
17.80
|
|
|
190,901
|
|
Options granted
|
—
|
|
|
—
|
|
|
|
||
Options exercised
|
(163,349
|
)
|
|
17.55
|
|
|
|
||
Options forfeited/expired
|
—
|
|
|
—
|
|
|
|
||
Balance as of December 31, 2018
|
27,552
|
|
|
$
|
19.24
|
|
|
27,552
|
|
Nonvested Shares
|
|
Number of
Shares
|
|
Weighted
Average Grant
Date Fair Value
Per Share
|
|||
Nonvested at December 31, 2017
|
50,225
|
|
|
$
|
37.93
|
|
|
Granted
|
51,746
|
|
|
35.56
|
|
||
Vested
|
(50,225
|
)
|
|
37.93
|
|
||
Forfeited
|
—
|
|
|
—
|
|
||
Nonvested at December 31, 2018
|
51,746
|
|
|
$
|
35.56
|
|
Nonvested Stock Units
|
|
Number of
Stock Units
|
|
Weighted
Average Grant
Date Fair Value
Per Share
|
|||
Nonvested at December 31, 2017
|
854,619
|
|
|
$
|
29.67
|
|
|
Granted
|
336,690
|
|
|
37.91
|
|
||
Vested
|
(290,588
|
)
|
|
26.31
|
|
||
Forfeited
|
(445
|
)
|
|
39.29
|
|
||
Nonvested at December 31, 2018
|
900,276
|
|
|
$
|
33.83
|
|
Performance Restricted Stock Units
|
|
Number of
Performance Share Units
|
|
Weighted
Average Grant
Date Fair Value
Per Share
|
|||
Nonvested at December 31, 2017
|
606,864
|
|
|
$
|
33.80
|
|
|
Granted (1)
|
390,570
|
|
|
45.64
|
|
||
Vested
|
(400,706
|
)
|
|
14.16
|
|
||
Forfeited
|
—
|
|
|
—
|
|
||
Nonvested at December 31, 2018 (2)
|
596,728
|
|
|
$
|
39.42
|
|
(1)
|
Includes
200,353
performance restricted stock units that were granted prior to
2018
at a weighted average grant date fair value of
$14.16
, but met performance hurdles and vested in February 2018. The weighted average grant date fair value per share excludes these shares.
|
(2)
|
Excludes
226,317
performance restricted stock units that have met performance hurdles and will be eligible for vesting after December 31,
2018
.
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
Dividend yield
|
|
1.68
|
%
|
|
1.37
|
%
|
|
2.12
|
%
|
|||
Expected volatility
|
|
27.65
|
%
|
|
25.19
|
%
|
|
30.84
|
%
|
|||
Risk free interest rate
|
|
2.43
|
%
|
|
1.48
|
%
|
|
0.90
|
%
|
|||
Weighted average grant date fair value
|
|
$
|
45.64
|
|
|
$
|
53.74
|
|
|
$
|
25.62
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(dollars in millions)
|
||||||||||
Proceeds from purchase of shares by employees
|
$
|
1.2
|
|
|
$
|
1.0
|
|
|
$
|
0.9
|
|
Number of shares issued by the Company
|
39,532
|
|
|
33,666
|
|
|
39,055
|
|
|||
Recorded in share-based compensation, net of deferral
|
$
|
0.3
|
|
|
$
|
0.3
|
|
|
$
|
0.2
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
|
(in millions)
|
||||||||||
Share‑based compensation expense
|
$
|
19
|
|
|
$
|
16
|
|
|
$
|
13
|
|
Share‑based compensation capitalized as DAC
|
0.8
|
|
|
0.6
|
|
|
0.4
|
|
|||
Income tax benefit
|
3
|
|
|
2
|
|
|
3
|
|
20.
|
Other Comprehensive Income
|
|
Net Unrealized
Gains (Losses) on
Investments with no OTTI
|
|
Net Unrealized
Gains (Losses) on
Investments with OTTI
|
|
Net Unrealized Gains (Losses) on FG VIEs’ Liabilities with Recourse due to ISCR
|
|
Cumulative
Translation
Adjustment
|
|
Cash Flow Hedge
|
|
Total Accumulated
Other
Comprehensive
Income
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Balance, December 31, 2017
|
$
|
273
|
|
|
$
|
120
|
|
|
$
|
—
|
|
|
$
|
(29
|
)
|
|
$
|
8
|
|
|
$
|
372
|
|
Effect of adoption of ASU 2016-01
|
1
|
|
|
—
|
|
|
(33
|
)
|
|
—
|
|
|
—
|
|
|
(32
|
)
|
||||||
Other comprehensive income (loss) before reclassifications
|
(208
|
)
|
|
(58
|
)
|
|
(5
|
)
|
|
(8
|
)
|
|
—
|
|
|
(279
|
)
|
||||||
Less: Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net realized investment gains (losses)
|
7
|
|
|
(38
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(31
|
)
|
||||||
Fair value gains (losses) on FG VIEs
|
—
|
|
|
—
|
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
||||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0
|
|
||||||
Total before tax
|
7
|
|
|
(38
|
)
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
(40
|
)
|
||||||
Tax (provision) benefit
|
—
|
|
|
6
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
8
|
|
||||||
Total amount reclassified from AOCI, net of tax
|
7
|
|
|
(32
|
)
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
(32
|
)
|
||||||
Net current period other comprehensive income (loss)
|
(215
|
)
|
|
(26
|
)
|
|
2
|
|
|
(8
|
)
|
|
—
|
|
|
(247
|
)
|
||||||
Balance, December 31, 2018
|
$
|
59
|
|
|
$
|
94
|
|
|
$
|
(31
|
)
|
|
$
|
(37
|
)
|
|
$
|
8
|
|
|
$
|
93
|
|
|
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
|
|
|||||
Less: 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
|
|
|
—
|
|
|
—
|
|
|
(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
|
)
|
|||||
Less: 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
|
|
|
—
|
|
|
—
|
|
|
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
|
|
21.
|
Subsidiary Information
|
|
Assured Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer) (1)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured Guaranty Ltd.
(Consolidated)
|
||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total investment portfolio and cash
|
$
|
45
|
|
|
$
|
334
|
|
|
$
|
23
|
|
|
$
|
11,000
|
|
|
$
|
(425
|
)
|
|
$
|
10,977
|
|
Investment in subsidiaries
|
6,440
|
|
|
5,835
|
|
|
3,991
|
|
|
226
|
|
|
(16,492
|
)
|
|
—
|
|
||||||
Premiums receivable, net of commissions payable
|
—
|
|
|
—
|
|
|
—
|
|
|
1,071
|
|
|
(167
|
)
|
|
904
|
|
||||||
Ceded unearned premium reserve
|
—
|
|
|
—
|
|
|
—
|
|
|
958
|
|
|
(899
|
)
|
|
59
|
|
||||||
Deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
143
|
|
|
(38
|
)
|
|
105
|
|
||||||
Deferred tax asset, net
|
—
|
|
|
—
|
|
|
—
|
|
|
162
|
|
|
(94
|
)
|
|
68
|
|
||||||
Intercompany loan receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
50
|
|
|
(50
|
)
|
|
—
|
|
||||||
FG VIEs’ assets, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
569
|
|
|
—
|
|
|
569
|
|
||||||
Dividends receivable from affiliate
|
60
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(60
|
)
|
|
—
|
|
||||||
Other
|
29
|
|
|
66
|
|
|
24
|
|
|
1,479
|
|
|
(677
|
)
|
|
921
|
|
||||||
TOTAL ASSETS
|
$
|
6,574
|
|
|
$
|
6,235
|
|
|
$
|
4,038
|
|
|
$
|
15,658
|
|
|
$
|
(18,902
|
)
|
|
$
|
13,603
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Unearned premium reserves
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,452
|
|
|
$
|
(940
|
)
|
|
$
|
3,512
|
|
Loss and LAE reserve
|
—
|
|
|
—
|
|
|
—
|
|
|
1,467
|
|
|
(290
|
)
|
|
1,177
|
|
||||||
Long-term debt
|
—
|
|
|
844
|
|
|
468
|
|
|
5
|
|
|
(84
|
)
|
|
1,233
|
|
||||||
Intercompany loan payable
|
—
|
|
|
50
|
|
|
—
|
|
|
300
|
|
|
(350
|
)
|
|
—
|
|
||||||
Credit derivative liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
236
|
|
|
(27
|
)
|
|
209
|
|
||||||
Deferred tax liabilities, net
|
—
|
|
|
49
|
|
|
50
|
|
|
—
|
|
|
(99
|
)
|
|
—
|
|
||||||
FG VIEs’ liabilities, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
619
|
|
|
—
|
|
|
619
|
|
||||||
Dividends payable to affiliate
|
—
|
|
|
60
|
|
|
—
|
|
|
—
|
|
|
(60
|
)
|
|
—
|
|
||||||
Other
|
19
|
|
|
3
|
|
|
17
|
|
|
763
|
|
|
(504
|
)
|
|
298
|
|
||||||
TOTAL LIABILITIES
|
19
|
|
|
1,006
|
|
|
535
|
|
|
7,842
|
|
|
(2,354
|
)
|
|
7,048
|
|
||||||
TOTAL SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO ASSURED GUARANTY LTD.
|
6,555
|
|
|
5,229
|
|
|
3,503
|
|
|
7,590
|
|
|
(16,322
|
)
|
|
6,555
|
|
||||||
Noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
226
|
|
|
(226
|
)
|
|
—
|
|
||||||
TOTAL SHAREHOLDERS’ EQUITY
|
6,555
|
|
|
5,229
|
|
|
3,503
|
|
|
7,816
|
|
|
(16,548
|
)
|
|
6,555
|
|
||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
6,574
|
|
|
$
|
6,235
|
|
|
$
|
4,038
|
|
|
$
|
15,658
|
|
|
$
|
(18,902
|
)
|
|
$
|
13,603
|
|
(1)
|
The fair value of investment in AGMH's debt recorded in the AGUS investment portfolio was
$125 million
. See Note 16, Long-Term Debt and Credit Facilities for more information.
|
|
Assured Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer) (1)
|
|
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
|
|
||||||
Deferred tax asset, net
|
—
|
|
|
59
|
|
|
—
|
|
|
93
|
|
|
(54
|
)
|
|
98
|
|
||||||
Intercompany loan receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
60
|
|
|
(60
|
)
|
|
—
|
|
||||||
FG VIEs’ assets, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
700
|
|
|
—
|
|
|
700
|
|
||||||
Other
|
26
|
|
|
—
|
|
|
40
|
|
|
1,643
|
|
|
(748
|
)
|
|
961
|
|
||||||
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 loan payable
|
—
|
|
|
60
|
|
|
—
|
|
|
300
|
|
|
(360
|
)
|
|
—
|
|
||||||
Credit derivative liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
308
|
|
|
(37
|
)
|
|
271
|
|
||||||
Deferred tax liabilities, net
|
—
|
|
|
—
|
|
|
51
|
|
|
—
|
|
|
(51
|
)
|
|
—
|
|
||||||
FG VIEs’ 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
|
|
(1)
|
The fair value of investment in AGMH's debt recorded in the AGUS investment portfolio was
$28 million
. See Note 16, Long-Term Debt and Credit Facilities for more information.
|
|
Assured Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured Guaranty Ltd.
(Consolidated)
|
||||||||||||
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
563
|
|
|
$
|
(15
|
)
|
|
$
|
548
|
|
Net investment income
|
1
|
|
|
9
|
|
|
1
|
|
|
401
|
|
|
(14
|
)
|
|
398
|
|
||||||
Net realized investment gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
(32
|
)
|
|
—
|
|
|
(32
|
)
|
||||||
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
112
|
|
|
—
|
|
|
112
|
|
||||||
Other
|
12
|
|
|
—
|
|
|
—
|
|
|
190
|
|
|
(226
|
)
|
|
(24
|
)
|
||||||
TOTAL REVENUES
|
13
|
|
|
9
|
|
|
1
|
|
|
1,234
|
|
|
(255
|
)
|
|
1,002
|
|
||||||
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
70
|
|
|
(6
|
)
|
|
64
|
|
||||||
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
(5
|
)
|
|
16
|
|
||||||
Interest expense
|
—
|
|
|
49
|
|
|
54
|
|
|
10
|
|
|
(19
|
)
|
|
94
|
|
||||||
Other operating expenses
|
41
|
|
|
10
|
|
|
—
|
|
|
394
|
|
|
(197
|
)
|
|
248
|
|
||||||
TOTAL EXPENSES
|
41
|
|
|
59
|
|
|
54
|
|
|
495
|
|
|
(227
|
)
|
|
422
|
|
||||||
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN NET EARNINGS OF SUBSIDIARIES
|
(28
|
)
|
|
(50
|
)
|
|
(53
|
)
|
|
739
|
|
|
(28
|
)
|
|
580
|
|
||||||
Total (provision) benefit for income taxes
|
—
|
|
|
52
|
|
|
11
|
|
|
(123
|
)
|
|
1
|
|
|
(59
|
)
|
||||||
Equity in net earnings of subsidiaries
|
549
|
|
|
412
|
|
|
277
|
|
|
24
|
|
|
(1,262
|
)
|
|
—
|
|
||||||
NET INCOME (LOSS)
|
521
|
|
|
414
|
|
|
235
|
|
|
640
|
|
|
(1,289
|
)
|
|
521
|
|
||||||
Less: noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
(24
|
)
|
|
—
|
|
||||||
NET INCOME (LOSS) ATTRIBUTABLE TO ASSURED GUARANTY LTD.
|
$
|
521
|
|
|
$
|
414
|
|
|
$
|
235
|
|
|
$
|
616
|
|
|
$
|
(1,265
|
)
|
|
$
|
521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
COMPREHENSIVE INCOME (LOSS)
|
$
|
274
|
|
|
$
|
218
|
|
|
$
|
107
|
|
|
$
|
395
|
|
|
$
|
(720
|
)
|
|
$
|
274
|
|
|
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
|
—
|
|
|
2
|
|
|
—
|
|
|
427
|
|
|
(11
|
)
|
|
418
|
|
||||||
Net realized investment gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
45
|
|
|
(5
|
)
|
|
40
|
|
||||||
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
111
|
|
|
—
|
|
|
111
|
|
||||||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
—
|
|
|
—
|
|
|
58
|
|
|
—
|
|
|
58
|
|
||||||
Other
|
10
|
|
|
—
|
|
|
—
|
|
|
608
|
|
|
(196
|
)
|
|
422
|
|
||||||
TOTAL REVENUES
|
10
|
|
|
2
|
|
|
—
|
|
|
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
|
—
|
|
|
—
|
|
|
—
|
|
|
412
|
|
|
(4
|
)
|
|
408
|
|
||||||
Net realized investment gains (losses)
|
—
|
|
|
2
|
|
|
—
|
|
|
(28
|
)
|
|
(3
|
)
|
|
(29
|
)
|
||||||
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
98
|
|
|
—
|
|
|
98
|
|
||||||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
—
|
|
|
—
|
|
|
257
|
|
|
2
|
|
|
259
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
78
|
|
|
(1
|
)
|
|
77
|
|
||||||
TOTAL REVENUES
|
—
|
|
|
2
|
|
|
—
|
|
|
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)
|
||||||||||||
Net cash flows provided by (used in) operating activities
|
$
|
587
|
|
|
$
|
308
|
|
|
$
|
183
|
|
|
$
|
517
|
|
|
$
|
(1,133
|
)
|
|
$
|
462
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchases
|
—
|
|
|
(104
|
)
|
|
(12
|
)
|
|
(1,865
|
)
|
|
100
|
|
|
(1,881
|
)
|
||||||
Sales
|
—
|
|
|
104
|
|
|
8
|
|
|
1,068
|
|
|
—
|
|
|
1,180
|
|
||||||
Maturities
|
—
|
|
|
28
|
|
|
—
|
|
|
934
|
|
|
—
|
|
|
962
|
|
||||||
Short-term investments with maturities of over three months:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Purchases
|
—
|
|
|
(34
|
)
|
|
—
|
|
|
(209
|
)
|
|
—
|
|
|
(243
|
)
|
||||||
Sales
|
—
|
|
|
22
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
23
|
|
||||||
Maturities
|
—
|
|
|
—
|
|
|
—
|
|
|
207
|
|
|
—
|
|
|
207
|
|
||||||
Net sales (purchases) of short-term investments with maturities of less than three months
|
(9
|
)
|
|
(50
|
)
|
|
7
|
|
|
(32
|
)
|
|
—
|
|
|
(84
|
)
|
||||||
Net proceeds from FG VIEs’ assets
|
—
|
|
|
—
|
|
|
—
|
|
|
116
|
|
|
—
|
|
|
116
|
|
||||||
Investment in subsidiaries
|
—
|
|
|
(9
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
11
|
|
|
—
|
|
||||||
Intercompany debt
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
(10
|
)
|
|
—
|
|
||||||
Return of capital from subsidiary
|
—
|
|
|
200
|
|
|
—
|
|
|
—
|
|
|
(200
|
)
|
|
—
|
|
||||||
Other
|
—
|
|
|
(15
|
)
|
|
—
|
|
|
32
|
|
|
—
|
|
|
17
|
|
||||||
Net cash flows provided by (used in) investing activities
|
(9
|
)
|
|
142
|
|
|
2
|
|
|
261
|
|
|
(99
|
)
|
|
297
|
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Capital contribution
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
(11
|
)
|
|
—
|
|
||||||
Dividends paid
|
(71
|
)
|
|
(472
|
)
|
|
(187
|
)
|
|
(474
|
)
|
|
1,133
|
|
|
(71
|
)
|
||||||
Repurchases of common stock
|
(500
|
)
|
|
—
|
|
|
—
|
|
|
(200
|
)
|
|
200
|
|
|
(500
|
)
|
||||||
Repurchases of common stock to pay withholding taxes
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
||||||
Net paydowns of FG VIEs’ liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(116
|
)
|
|
—
|
|
|
(116
|
)
|
||||||
Paydown of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(100
|
)
|
|
(101
|
)
|
||||||
Proceeds from options exercises
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
||||||
Intercompany debt
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
||||||
Net cash flows provided by (used in) financing activities
|
(578
|
)
|
|
(482
|
)
|
|
(187
|
)
|
|
(780
|
)
|
|
1,232
|
|
|
(795
|
)
|
||||||
Effect of exchange rate changes
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
||||||
Increase (decrease) in cash and restricted cash
|
—
|
|
|
(32
|
)
|
|
(2
|
)
|
|
(6
|
)
|
|
—
|
|
|
(40
|
)
|
||||||
Cash and restricted cash at beginning of period
|
—
|
|
|
33
|
|
|
2
|
|
|
109
|
|
|
—
|
|
|
144
|
|
||||||
Cash and restricted cash at end of period
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
103
|
|
|
$
|
—
|
|
|
$
|
104
|
|
|
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
|
|
|
—
|
|
|
808
|
|
|
—
|
|
|
821
|
|
||||||
Short-term investments with maturities of over three months:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Purchases
|
—
|
|
|
(26
|
)
|
|
(5
|
)
|
|
(224
|
)
|
|
—
|
|
|
(255
|
)
|
||||||
Sales
|
—
|
|
|
1
|
|
|
5
|
|
|
96
|
|
|
—
|
|
|
102
|
|
||||||
Maturities
|
—
|
|
|
30
|
|
|
—
|
|
|
161
|
|
|
—
|
|
|
191
|
|
||||||
Net sales (purchases) of short-term investments with maturities of less than three months
|
—
|
|
|
126
|
|
|
(8
|
)
|
|
(82
|
)
|
|
—
|
|
|
36
|
|
||||||
Net proceeds from FG VIEs’ assets
|
—
|
|
|
—
|
|
|
—
|
|
|
147
|
|
|
—
|
|
|
147
|
|
||||||
Investment in subsidiaries
|
—
|
|
|
(28
|
)
|
|
—
|
|
|
(139
|
)
|
|
167
|
|
|
—
|
|
||||||
Intercompany debt
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
(10
|
)
|
|
—
|
|
||||||
Proceeds from sale of subsidiaries
|
—
|
|
|
—
|
|
|
—
|
|
|
139
|
|
|
(139
|
)
|
|
—
|
|
||||||
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
|
—
|
|
|
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 VIEs’ liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(157
|
)
|
|
—
|
|
|
(157
|
)
|
||||||
Paydown of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
(27
|
)
|
|
(30
|
)
|
||||||
Proceeds from options exercised
|
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
|
—
|
|
|
32
|
|
|
2
|
|
|
(17
|
)
|
|
—
|
|
|
17
|
|
||||||
Cash and restricted cash at beginning of period
|
—
|
|
|
1
|
|
|
—
|
|
|
126
|
|
|
—
|
|
|
127
|
|
||||||
Cash and restricted cash at end of period
|
$
|
—
|
|
|
$
|
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
|
|
||||||
Short-term investments with maturities of over three months:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Purchases
|
—
|
|
|
(19
|
)
|
|
(1
|
)
|
|
(170
|
)
|
|
—
|
|
|
(190
|
)
|
||||||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
172
|
|
|
—
|
|
|
172
|
|
||||||
Maturities
|
—
|
|
|
14
|
|
|
1
|
|
|
119
|
|
|
—
|
|
|
134
|
|
||||||
Net sales (purchases) of short-term investments with maturities of less than three months
|
(26
|
)
|
|
(232
|
)
|
|
(10
|
)
|
|
169
|
|
|
—
|
|
|
(99
|
)
|
||||||
Net proceeds from FG VIEs’ assets
|
—
|
|
|
—
|
|
|
—
|
|
|
629
|
|
|
—
|
|
|
629
|
|
||||||
Intercompany debt
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
(20
|
)
|
|
—
|
|
||||||
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 VIEs’ 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
|
—
|
|
|
95
|
|
|
8
|
|
|
63
|
|
|
—
|
|
|
166
|
|
||||||
Cash and restricted cash at end of period
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
126
|
|
|
$
|
—
|
|
|
$
|
127
|
|
22.
|
Quarterly Financial Information (Unaudited)
|
2018
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Full
Year
|
||||||||||
|
(dollars in millions, except per share data)
|
|||||||||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earned premiums
|
$
|
145
|
|
|
$
|
136
|
|
|
$
|
142
|
|
|
$
|
125
|
|
|
$
|
548
|
|
|
Net investment income
|
101
|
|
|
99
|
|
|
98
|
|
|
100
|
|
|
398
|
|
||||||
Net realized investment gains (losses)
|
(5
|
)
|
|
(2
|
)
|
|
(7
|
)
|
|
(18
|
)
|
|
(32
|
)
|
||||||
Net change in fair value of credit derivatives
|
34
|
|
|
48
|
|
|
21
|
|
|
9
|
|
|
112
|
|
||||||
Fair value gains (losses) on FG VIEs
|
4
|
|
|
2
|
|
|
5
|
|
|
3
|
|
|
14
|
|
||||||
Commutation gains
|
1
|
|
|
(18
|
)
|
|
1
|
|
|
—
|
|
|
(16
|
)
|
||||||
Other income (loss)
|
13
|
|
|
(44
|
)
|
|
14
|
|
|
(5
|
)
|
|
(22
|
)
|
||||||
Expenses
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loss and LAE
|
(18
|
)
|
|
44
|
|
|
17
|
|
|
21
|
|
|
64
|
|
||||||
Amortization of DAC
|
5
|
|
|
4
|
|
|
3
|
|
|
4
|
|
|
16
|
|
||||||
Interest expense
|
24
|
|
|
24
|
|
|
23
|
|
|
23
|
|
|
94
|
|
||||||
Other operating expenses
|
65
|
|
|
62
|
|
|
56
|
|
|
65
|
|
|
248
|
|
||||||
Income (loss) before provision for income taxes
|
217
|
|
|
87
|
|
|
175
|
|
|
101
|
|
|
580
|
|
||||||
Provision (benefit) for income taxes
|
20
|
|
|
12
|
|
|
14
|
|
|
13
|
|
|
59
|
|
||||||
Net income (loss)
|
197
|
|
|
75
|
|
|
161
|
|
|
88
|
|
|
521
|
|
||||||
Earnings (loss) per share(1):
|
|
|
|
|
|
|
|
|
|
|||||||||||
Basic
|
$
|
1.71
|
|
|
$
|
0.67
|
|
|
$
|
1.48
|
|
|
$
|
0.84
|
|
|
$
|
4.73
|
|
|
Diluted
|
$
|
1.68
|
|
|
$
|
0.67
|
|
|
$
|
1.47
|
|
|
$
|
0.83
|
|
|
$
|
4.68
|
|
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 FG VIEs
|
10
|
|
|
12
|
|
|
3
|
|
|
5
|
|
|
30
|
|
||||||
Bargain purchase gain and settlement of pre-existing relationships
|
58
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
58
|
|
||||||
Commutation gains
|
73
|
|
|
—
|
|
|
255
|
|
|
—
|
|
|
328
|
|
||||||
Other income (loss)
|
14
|
|
|
24
|
|
|
15
|
|
|
11
|
|
|
64
|
|
||||||
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
|
|
(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:
|
Name: Dominic J. Frederico
Title:
President and Chief Executive Officer
|
|
|
Name
|
|
|
|
|
Position
|
|
|
|
|
Date
|
|
|
|
|
|
||||||||||||
Francisco L. Borges
|
Chairman of the Board; Director
|
March 1, 2019
|
||||||||||||
|
|
|
||||||||||||
Dominic J. Frederico
|
President and Chief Executive Officer; Director
|
March 1, 2019
|
||||||||||||
|
|
|
||||||||||||
Robert A. Bailenson
|
Chief Financial Officer (Principal Financial and Accounting Officer and Duly Authorized Officer)
|
March 1, 2019
|
||||||||||||
|
|
|
||||||||||||
G. Lawrence Buhl
|
Director
|
March 1, 2019
|
||||||||||||
|
|
|
||||||||||||
Bonnie L. Howard
|
Director
|
March 1, 2019
|
||||||||||||
|
|
|
||||||||||||
Thomas W. Jones
|
Director
|
March 1, 2019
|
||||||||||||
|
|
|
||||||||||||
Patrick W. Kenny
|
Director
|
March 1, 2019
|
||||||||||||
|
|
|
||||||||||||
Alan J. Kreczko
|
Director
|
March 1, 2019
|
||||||||||||
|
|
|
||||||||||||
Simon W. Leathes
|
Director
|
March 1, 2019
|
||||||||||||
|
|
|
||||||||||||
Michael T. O'Kane
|
Director
|
March 1, 2019
|
||||||||||||
|
|
|
||||||||||||
Yukiko Omura
|
Director
|
March 1, 2019
|
Executive Officer
|
Salary
|
Dominic J. Frederico
President and Chief Executive Officer
|
$1,250,000
|
Robert A. Bailenson
Chief Financial Officer
|
$700,000
|
Russell B. Brewer II
Chief Surveillance Officer
|
$525,000
|
Ling Chow
General Counsel and Secretary
|
$525,000
|
Bruce E. Stern
Executive Officer
|
$500,000
|
|
|
•
|
To be considered to receive equity and non-equity incentive compensation for 2019 performance.
|
|
|
•
|
To receive other annual compensation and benefits, including employer contributions to retirement plans.
|
(a)
|
Except as otherwise determined by the Committee or, with respect to senior executive officers of the Company other than the Chief Executive Officer, except as otherwise determined by the Chief Executive Officer, for each person who has been designated an executive officer of Assured Guaranty Ltd. for the purposes of U.S. Securities and Exchange Commission reporting requirements, for so long as such person remains an executive officer, the following perquisites shall be made available to such executive officer;
provided
,
however
, that the perquisite listed in Section 2(a)(ii) hereof shall only be available to those persons designated an executive officer prior to December 31, 2017:
|
(i)
|
Reimbursement for the reasonable cost of any tax preparation service; and
|
(ii)
|
Annual executive medical exam.
|
(b)
|
Except as otherwise determined by the Committee or, with respect to senior executive officers of the Company other than the Chief Executive Officer, except as otherwise determined by the Chief Executive Officer, for those designated executives who are United States citizens or permanent residents and who work in Bermuda, the following additional perquisites shall be made available:
|
(i)
|
Reimbursement for reasonable moving expenses for household goods in relocating to Bermuda. Upon the termination of an executive’s employment for any reason (other than for Cause, as such term is defined within the Assured Guaranty Ltd. Executive Severance Plan), the Company will reimburse the executive for reasonable moving expenses actually incurred to move the executive’s household goods to the executive’s original port of departure, or to another destination (provided that the amount reimbursed for moving to another destination will not exceed the amount required to be reimbursed if the executive returned to the executive’s original port of departure), provided that such reimbursement rights apply only during the period ending on the last day of the second taxable year following the year in which the executive’s termination of employment occurs.
|
(ii)
|
Reimbursement of up to a maximum amount determined by the Committee for the cost of suitable living accommodations in Bermuda. In the event that the executive chooses to purchase a residence in Bermuda, the Company will reimburse him or her only for the fair market rental value of said residence to the same maximum amount per month, which amount shall be reviewed from time to time in accordance with authorization from the Committee.
|
(iii)
|
Annual stipend of $15,000 per calendar year to cover cost of travel by the executive and his or her family members to and from Bermuda.
|
(iv)
|
Reimbursement for initiation fees and annual dues at a club in Bermuda selected by the executive.
|
(v)
|
Participation in the executive automobile program.
|
(a)
|
Such reimbursements shall be made promptly after the executive submits reasonable evidence of having incurred the amounts subject to reimbursement, provided that the executive is required to provide such evidence no later than October 31 of the calendar year following the year in which such expenses are incurred (or such earlier date that is generally applicable, or such later date, established by the Company that is not later than the end of the calendar year following the year in which such expenses are incurred), and shall be paid by the Company not later than the last day of the calendar year following the year in which such expenses are incurred.
|
(b)
|
To the extent required to avoid accelerated recognition of taxable income or imposition of additional tax under section 409A of the Internal Revenue Code of 1986, as amended, the amount of expenses eligible for reimbursement, or in-kind benefits provided, during the executive’s taxable year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.
|
(c)
|
The executive’s right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
|
Assured Guaranty Re Ltd. (Bermuda domiciled subsidiary of Assured Guaranty Ltd.)
|
Assured Guaranty Overseas US Holdings Inc. (Delaware domiciled subsidiary of Assured Guaranty Re Ltd.)
|
Assured Guaranty Re Overseas Ltd. (Bermuda domiciled subsidiary of Assured Guaranty Overseas US Holdings Inc.)
|
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.)
|
FSA Portfolio Management Inc. (New York domiciled subsidiary of Assured Guaranty Municipal Holdings Inc.)
|
Transaction Services Corporation (New York domiciled subsidiary of Assured Guaranty Municipal Holdings Inc.)
|
Assured Guaranty Municipal Corp. (New York domiciled subsidiary of Assured Guaranty Municipal Holdings Inc.)
|
Wasmer, Schroeder & Company, LLC (Delaware domiciled 24.9% subsidiary of Assured Guaranty Municipal Corp.)
|
Assured Guaranty (Europe) plc (England domiciled subsidiary of Assured Guaranty Municipal Corp.)
|
Municipal Assurance Holdings Inc. (Delaware domiciled 60.7% owned subsidiary of Assured Guaranty Municipal Corp. and 39.3% owned subsidiary of Assured Guaranty Corp.)
|
Municipal Assurance Corp. (New York domiciled subsidiary of Municipal Assurance Holdings Inc.)
|
AG Analytics Inc. (Delaware domiciled subsidiary of Assured Guaranty US Holdings Inc.)
|
Assured Guaranty (UK) Services Limited (England domiciled subsidiary of Assured Guaranty US Holdings Inc.)
|
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.)
|
Prescott, LLC (Delaware domiciled subsidiary of Assured Guaranty Corp.)
|
Four Hundred Main Street LLC (Delaware domiciled subsidiary of Assured Guaranty Corp.)
|
AG PFC Holding LLC (Delaware domiciled subsidiary of Assured Guaranty Corp.)
|
AGFP Holding LLC (Delaware domiciled subsidiary of AG PFC Holding LLC)
|
Portfolio Funding Company LLC I (Delaware domiciled 50% owned subsidiary of AGFP Holding LLC)
|
Van American Insurance Agency, Inc. (South Carolina domiciled subsidiary of Assured Guaranty Corp.)
|
Hoboken I, LLC (Delaware domiciled subsidiary of Assured Guaranty Corp.)
|
AG Financial Products Inc. (Delaware domiciled subsidiary of Assured Guaranty US Holdings Inc.)
|
CIFG Holding LLC (Delaware domiciled subsidiary of Assured Guaranty Corp.)
|
CIFG Services, LLC (Delaware domiciled subsidiary of Assured Guaranty Corp.)
|
(1)
|
All subsidiaries are wholly owned except for Wasmer, Schroeder & Company, LLC, and Portfolio Funding Company LLC I.
|
1.
|
I have reviewed this Annual Report on Form 10-K of Assured Guaranty Ltd.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
|
|
By:
|
/s/ DOMINIC J. FREDERICO
|
|
|
|
|
|
Dominic J. Frederico
|
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this Annual Report on Form 10-K of Assured Guaranty Ltd.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
|
|
By:
|
/s/ ROBERT A. BAILENSON
|
|
|
|
|
|
Robert A. Bailenson
|
|
|
Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ DOMINIC J. FREDERICO
|
|
|
|
Name: Dominic J. Frederico
|
|
Title:
President and Chief Executive Officer
|
|
Date: March 1, 2019
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ ROBERT A. BAILENSON
|
|
|
|
Name: Robert A. Bailenson
|
|
Title:
Chief Financial Officer
|
|
Date: March 1, 2019
|
|