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☒
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Bermuda
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98-0429991
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(State or other jurisdiction
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(I.R.S. employer
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of incorporation)
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identification no.)
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Title of each class:
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Trading Symbol(s)
|
Name of exchange on which registered
|
|
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Common Shares
|
$0.01 per share
|
AGO
|
New York Stock Exchange
|
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Page
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Item 5.
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ITEM 1.
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FINANCIAL STATEMENTS
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|
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As of
June 30, 2019 |
|
As of
December 31, 2018 |
||||
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Assets
|
|
|
|
|
|
||
|
Investment portfolio:
|
|
|
|
|
|
||
|
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $9,137 and $9,884)
|
$
|
9,574
|
|
|
$
|
10,089
|
|
|
Short-term investments, at fair value
|
1,159
|
|
|
729
|
|
||
|
Other invested assets
|
60
|
|
|
55
|
|
||
|
Total investment portfolio
|
10,793
|
|
|
10,873
|
|
||
|
Cash
|
190
|
|
|
104
|
|
||
|
Premiums receivable, net of commissions payable
|
866
|
|
|
904
|
|
||
|
Deferred acquisition costs
|
106
|
|
|
105
|
|
||
|
Salvage and subrogation recoverable
|
580
|
|
|
490
|
|
||
|
Financial guaranty variable interest entities’ assets, at fair value
|
526
|
|
|
569
|
|
||
|
Other assets
|
520
|
|
|
558
|
|
||
|
Total assets
|
$
|
13,581
|
|
|
$
|
13,603
|
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
|
||
|
Unearned premium reserve
|
$
|
3,387
|
|
|
$
|
3,512
|
|
|
Loss and loss adjustment expense reserve
|
1,102
|
|
|
1,177
|
|
||
|
Long-term debt
|
1,233
|
|
|
1,233
|
|
||
|
Credit derivative liabilities
|
224
|
|
|
209
|
|
||
|
Financial guaranty variable interest entities’ liabilities with recourse, at fair value
|
446
|
|
|
517
|
|
||
|
Financial guaranty variable interest entities’ liabilities without recourse, at fair value
|
105
|
|
|
102
|
|
||
|
Other liabilities
|
362
|
|
|
298
|
|
||
|
Total liabilities
|
6,859
|
|
|
7,048
|
|
||
|
Commitments and contingencies (see Note 12)
|
|
|
|
||||
|
Common stock ($0.01 par value, 500,000,000 shares authorized; 99,801,012 and 103,672,592 shares issued and outstanding)
|
1
|
|
|
1
|
|
||
|
Additional paid-in capital
|
—
|
|
|
86
|
|
||
|
Retained earnings
|
6,425
|
|
|
6,374
|
|
||
|
Accumulated other comprehensive income, net of tax of $71 and $38
|
295
|
|
|
93
|
|
||
|
Deferred equity compensation
|
1
|
|
|
1
|
|
||
|
Total shareholders’ equity
|
6,722
|
|
|
6,555
|
|
||
|
Total liabilities and shareholders’ equity
|
$
|
13,581
|
|
|
$
|
13,603
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Revenues
|
|
|
|
|
|
|
|
||||||||
|
Net earned premiums
|
$
|
112
|
|
|
$
|
136
|
|
|
$
|
230
|
|
|
$
|
281
|
|
|
Net investment income
|
110
|
|
|
98
|
|
|
208
|
|
|
198
|
|
||||
|
Net realized investment gains (losses)
|
8
|
|
|
(2
|
)
|
|
(4
|
)
|
|
(7
|
)
|
||||
|
Net change in fair value of credit derivatives
|
(8
|
)
|
|
48
|
|
|
(30
|
)
|
|
82
|
|
||||
|
Fair value gains (losses) on financial guaranty variable interest entities
|
33
|
|
|
2
|
|
|
38
|
|
|
6
|
|
||||
|
Foreign exchange gain (loss) on remeasurement
|
(14
|
)
|
|
(36
|
)
|
|
(3
|
)
|
|
(14
|
)
|
||||
|
Other income (loss)
|
25
|
|
|
(26
|
)
|
|
22
|
|
|
(33
|
)
|
||||
|
Total revenues
|
266
|
|
|
220
|
|
|
461
|
|
|
513
|
|
||||
|
Expenses
|
|
|
|
|
|
|
|
||||||||
|
Loss and loss adjustment expenses
|
(1
|
)
|
|
44
|
|
|
45
|
|
|
26
|
|
||||
|
Amortization of deferred acquisition costs
|
4
|
|
|
4
|
|
|
10
|
|
|
9
|
|
||||
|
Interest expense
|
22
|
|
|
24
|
|
|
45
|
|
|
48
|
|
||||
|
Other operating expenses
|
60
|
|
|
62
|
|
|
124
|
|
|
127
|
|
||||
|
Total expenses
|
85
|
|
|
134
|
|
|
224
|
|
|
210
|
|
||||
|
Income (loss) before income taxes and equity in net earnings of investees
|
181
|
|
|
86
|
|
|
237
|
|
|
303
|
|
||||
|
Equity in net earnings of investees
|
1
|
|
|
1
|
|
|
3
|
|
|
1
|
|
||||
|
Income (loss) before income taxes
|
182
|
|
|
87
|
|
|
240
|
|
|
304
|
|
||||
|
Provision (benefit) for income taxes
|
40
|
|
|
12
|
|
|
44
|
|
|
32
|
|
||||
|
Net income (loss)
|
$
|
142
|
|
|
$
|
75
|
|
|
$
|
196
|
|
|
$
|
272
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Earnings per share:
|
|
|
|
|
|
|
|
||||||||
|
Basic
|
$
|
1.40
|
|
|
$
|
0.67
|
|
|
$
|
1.92
|
|
|
$
|
2.39
|
|
|
Diluted
|
$
|
1.39
|
|
|
$
|
0.67
|
|
|
$
|
1.90
|
|
|
$
|
2.37
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
Net income (loss)
|
$
|
142
|
|
|
$
|
75
|
|
|
$
|
196
|
|
|
$
|
272
|
|
|
Change in net unrealized gains (losses) on:
|
|
|
|
|
|
|
|
||||||||
|
Investments with no other-than-temporary impairment, net of tax provision (benefit) of $19, $(2), $44 and $(31)
|
79
|
|
|
(63
|
)
|
|
242
|
|
|
(191
|
)
|
||||
|
Investments with other-than-temporary impairment, net of tax provision (benefit) of $(12), $1, $(12) and $0
|
(48
|
)
|
|
6
|
|
|
(43
|
)
|
|
4
|
|
||||
|
Change in net unrealized gains (losses) on
investments
|
31
|
|
|
(57
|
)
|
|
199
|
|
|
(187
|
)
|
||||
|
Change in net unrealized gains (losses) on financial guaranty variable interest entities' liabilities with recourse resulting from a change in the instrument-specific credit risk, net of tax
|
4
|
|
|
4
|
|
|
4
|
|
|
2
|
|
||||
|
Other, net of tax provision (benefit)
|
(1
|
)
|
|
(9
|
)
|
|
(1
|
)
|
|
(3
|
)
|
||||
|
Other comprehensive income (loss)
|
34
|
|
|
(62
|
)
|
|
202
|
|
|
(188
|
)
|
||||
|
Comprehensive income (loss)
|
$
|
176
|
|
|
$
|
13
|
|
|
$
|
398
|
|
|
$
|
84
|
|
|
|
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
March 31, 2019 |
102,270,409
|
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
6,406
|
|
|
$
|
261
|
|
|
$
|
1
|
|
|
$
|
6,669
|
|
|
Net income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
142
|
|
|
—
|
|
|
—
|
|
|
142
|
|
||||||
|
Dividends ($0.18 per share)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
||||||
|
Common stock repurchases
|
(2,519,130
|
)
|
|
|
—
|
|
|
(7
|
)
|
|
(104
|
)
|
|
—
|
|
|
—
|
|
|
(111
|
)
|
||||||
|
Share-based compensation and other
|
49,733
|
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
||||||
|
Other comprehensive income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34
|
|
|
—
|
|
|
34
|
|
||||||
|
Balance at
June 30, 2019 |
99,801,012
|
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
6,425
|
|
|
$
|
295
|
|
|
$
|
1
|
|
|
$
|
6,722
|
|
|
|
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
March 31, 2018 |
113,709,322
|
|
|
|
$
|
1
|
|
|
$
|
466
|
|
|
$
|
6,102
|
|
|
$
|
214
|
|
|
$
|
1
|
|
|
$
|
6,784
|
|
|
Net income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
75
|
|
|
—
|
|
|
—
|
|
|
75
|
|
||||||
|
Dividends ($0.16 per share)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(18
|
)
|
|
—
|
|
|
—
|
|
|
(18
|
)
|
||||||
|
Common stock repurchases
|
(4,163,190
|
)
|
|
|
—
|
|
|
(152
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(152
|
)
|
||||||
|
Share-based compensation and other
|
68,082
|
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
||||||
|
Other comprehensive loss
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(62
|
)
|
|
—
|
|
|
(62
|
)
|
||||||
|
Balance at
June 30, 2018 |
109,614,214
|
|
|
|
$
|
1
|
|
|
$
|
321
|
|
|
$
|
6,159
|
|
|
$
|
152
|
|
|
$
|
1
|
|
|
$
|
6,634
|
|
|
|
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, 2018 |
103,672,592
|
|
|
|
$
|
1
|
|
|
$
|
86
|
|
|
$
|
6,374
|
|
|
$
|
93
|
|
|
$
|
1
|
|
|
$
|
6,555
|
|
|
Net income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
196
|
|
|
—
|
|
|
—
|
|
|
196
|
|
||||||
|
Dividends ($0.36 per share)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(38
|
)
|
|
—
|
|
|
—
|
|
|
(38
|
)
|
||||||
|
Common stock repurchases
|
(4,427,735
|
)
|
|
|
—
|
|
|
(83
|
)
|
|
(107
|
)
|
|
—
|
|
|
—
|
|
|
(190
|
)
|
||||||
|
Share-based compensation and other
|
556,155
|
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
||||||
|
Other comprehensive income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
202
|
|
|
—
|
|
|
202
|
|
||||||
|
Balance at
June 30, 2019 |
99,801,012
|
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
6,425
|
|
|
$
|
295
|
|
|
$
|
1
|
|
|
$
|
6,722
|
|
|
|
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, 2017 |
116,020,852
|
|
|
|
$
|
1
|
|
|
$
|
573
|
|
|
$
|
5,892
|
|
|
$
|
372
|
|
|
$
|
1
|
|
|
$
|
6,839
|
|
|
Net income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
272
|
|
|
—
|
|
|
—
|
|
|
272
|
|
||||||
|
Dividends ($0.32 per share)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(37
|
)
|
|
—
|
|
|
—
|
|
|
(37
|
)
|
||||||
|
Common stock repurchases
|
(6,951,126
|
)
|
|
|
—
|
|
|
(250
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(250
|
)
|
||||||
|
Share-based compensation and other
|
544,488
|
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
|
Other comprehensive loss
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(188
|
)
|
|
—
|
|
|
(188
|
)
|
||||||
|
Effect of adoption of ASU 2016-01 (see Note 14)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
32
|
|
|
(32
|
)
|
|
—
|
|
|
—
|
|
||||||
|
Balance at
June 30, 2018 |
109,614,214
|
|
|
|
$
|
1
|
|
|
$
|
321
|
|
|
$
|
6,159
|
|
|
$
|
152
|
|
|
$
|
1
|
|
|
$
|
6,634
|
|
|
|
Six Months Ended June 30,
|
||||||
|
|
2019
|
|
2018
|
||||
|
Net cash flows provided by (used in) operating activities
|
$
|
(198
|
)
|
|
$
|
444
|
|
|
Investing activities
|
|
|
|
|
|
||
|
Fixed-maturity securities:
|
|
|
|
|
|
||
|
Purchases
|
(503
|
)
|
|
(879
|
)
|
||
|
Sales
|
914
|
|
|
592
|
|
||
|
Maturities and paydowns
|
506
|
|
|
533
|
|
||
|
Short-term investments with original maturities of over three months:
|
|
|
|
||||
|
Purchases
|
(209
|
)
|
|
(121
|
)
|
||
|
Sales
|
2
|
|
|
1
|
|
||
|
Maturities and paydowns
|
174
|
|
|
104
|
|
||
|
Net sales (purchases) of short-term investments with original maturities of less than three months
|
(389
|
)
|
|
(288
|
)
|
||
|
Net proceeds from paydowns on financial guaranty variable interest entities’ assets
|
50
|
|
|
60
|
|
||
|
Net proceeds from sales of financial guaranty variable interest entities’ assets
|
51
|
|
|
—
|
|
||
|
Other
|
35
|
|
|
(16
|
)
|
||
|
Net cash flows provided by (used in) investing activities
|
631
|
|
|
(14
|
)
|
||
|
Financing activities
|
|
|
|
|
|
||
|
Dividends paid
|
(39
|
)
|
|
(37
|
)
|
||
|
Repurchases of common stock
|
(190
|
)
|
|
(250
|
)
|
||
|
Repurchases of common stock to pay withholding taxes
|
(16
|
)
|
|
(13
|
)
|
||
|
Net paydowns of financial guaranty variable interest entities’ liabilities
|
(95
|
)
|
|
(61
|
)
|
||
|
Paydown of long-term debt
|
(4
|
)
|
|
(24
|
)
|
||
|
Proceeds from option exercises
|
1
|
|
|
1
|
|
||
|
Net cash flows provided by (used in) financing activities
|
(343
|
)
|
|
(384
|
)
|
||
|
Effect of foreign exchange rate changes
|
—
|
|
|
(1
|
)
|
||
|
Increase (decrease) in cash and restricted cash
|
90
|
|
|
45
|
|
||
|
Cash and restricted cash at beginning of period (see Note 7)
|
104
|
|
|
144
|
|
||
|
Cash and restricted cash at end of period (see Note 7)
|
$
|
194
|
|
|
$
|
189
|
|
|
Supplemental cash flow information
|
|
|
|
|
|
||
|
Cash paid (received) during the period for:
|
|
|
|
|
|
||
|
Income taxes
|
$
|
(3
|
)
|
|
$
|
39
|
|
|
Interest on long-term debt
|
$
|
42
|
|
|
$
|
57
|
|
|
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.
|
|
•
|
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.
|
|
|
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) (6/27/19)
|
|
AA+ (stable) (12/21/18)
|
|
A2 (stable) (5/7/18)
|
|
—
|
|
AGC
|
AA (stable) (6/27/19)
|
|
AA (stable) (11/30/18)
|
|
(1)
|
|
—
|
|
MAC
|
AA (stable) (6/27/19)
|
|
AA+ (stable) (7/12/19)
|
|
—
|
|
—
|
|
AG Re
|
AA (stable) (6/27/19)
|
|
—
|
|
—
|
|
—
|
|
AGRO
|
AA (stable) (6/27/19)
|
|
—
|
|
—
|
|
A+ (stable) (7/12/19)
|
|
AGE
|
AA (stable) (6/27/19)
|
|
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).
|
|
3.
|
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
|
||||||||||||
|
|
As of June 30, 2019
|
|
As of December 31, 2018
|
|
As of June 30, 2019
|
|
As of December 31, 2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Public finance
|
$
|
350,977
|
|
|
$
|
361,511
|
|
|
$
|
349,779
|
|
|
$
|
358,438
|
|
|
Structured finance
|
12,734
|
|
|
13,569
|
|
|
12,220
|
|
|
13,148
|
|
||||
|
Total financial guaranty
|
$
|
363,711
|
|
|
$
|
375,080
|
|
|
$
|
361,999
|
|
|
$
|
371,586
|
|
|
|
|
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
|
|
$
|
385
|
|
|
0.2
|
%
|
|
$
|
2,460
|
|
|
5.5
|
%
|
|
$
|
1,428
|
|
|
15.0
|
%
|
|
$
|
181
|
|
|
22.8
|
%
|
|
$
|
4,454
|
|
|
1.9
|
%
|
|
AA
|
|
21,289
|
|
|
11.8
|
|
|
1,880
|
|
|
4.2
|
|
|
3,617
|
|
|
37.9
|
|
|
39
|
|
|
4.9
|
|
|
26,825
|
|
|
11.4
|
|
|||||
|
A
|
|
100,156
|
|
|
55.5
|
|
|
13,067
|
|
|
29.4
|
|
|
1,079
|
|
|
11.3
|
|
|
183
|
|
|
23.1
|
|
|
114,485
|
|
|
48.6
|
|
|||||
|
BBB
|
|
52,682
|
|
|
29.2
|
|
|
26,197
|
|
|
58.9
|
|
|
1,512
|
|
|
15.8
|
|
|
349
|
|
|
44.0
|
|
|
80,740
|
|
|
34.3
|
|
|||||
|
BIG
|
|
6,025
|
|
|
3.3
|
|
|
884
|
|
|
2.0
|
|
|
1,913
|
|
|
20.0
|
|
|
41
|
|
|
5.2
|
|
|
8,863
|
|
|
3.8
|
|
|||||
|
Total net par outstanding
|
|
$
|
180,537
|
|
|
100.0
|
%
|
|
$
|
44,488
|
|
|
100.0
|
%
|
|
$
|
9,549
|
|
|
100.0
|
%
|
|
$
|
793
|
|
|
100.0
|
%
|
|
$
|
235,367
|
|
|
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
|
|
$
|
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
|
%
|
|
|
BIG Net Par Outstanding
|
|
Net Par
|
||||||||||||||||
|
|
BIG 1
|
|
BIG 2
|
|
BIG 3
|
|
Total BIG
|
|
Outstanding
|
||||||||||
|
|
|
|
|
|
(in millions)
|
|
|
|
|
||||||||||
|
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
|
U.S. public finance
|
$
|
1,679
|
|
|
$
|
398
|
|
|
$
|
3,948
|
|
|
$
|
6,025
|
|
|
$
|
180,537
|
|
|
Non-U.S. public finance
|
884
|
|
|
—
|
|
|
—
|
|
|
884
|
|
|
44,488
|
|
|||||
|
Public finance
|
2,563
|
|
|
398
|
|
|
3,948
|
|
|
6,909
|
|
|
225,025
|
|
|||||
|
Structured finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
|
U.S. residential mortgage-backed securities (RMBS)
|
151
|
|
|
58
|
|
|
1,514
|
|
|
1,723
|
|
|
3,835
|
|
|||||
|
Life insurance transactions
|
—
|
|
|
—
|
|
|
40
|
|
|
40
|
|
|
1,228
|
|
|||||
|
Other structured finance
|
67
|
|
|
72
|
|
|
52
|
|
|
191
|
|
|
5,279
|
|
|||||
|
Structured finance
|
218
|
|
|
130
|
|
|
1,606
|
|
|
1,954
|
|
|
10,342
|
|
|||||
|
Total
|
$
|
2,781
|
|
|
$
|
528
|
|
|
$
|
5,554
|
|
|
$
|
8,863
|
|
|
$
|
235,367
|
|
|
|
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
|
|
|||||
|
Life insurance transactions
|
—
|
|
|
—
|
|
|
85
|
|
|
85
|
|
|
1,184
|
|
|||||
|
Other structured finance
|
127
|
|
|
79
|
|
|
53
|
|
|
259
|
|
|
5,683
|
|
|||||
|
Structured finance
|
495
|
|
|
293
|
|
|
1,943
|
|
|
2,731
|
|
|
11,137
|
|
|||||
|
Total
|
$
|
3,058
|
|
|
$
|
937
|
|
|
$
|
6,165
|
|
|
$
|
10,160
|
|
|
$
|
241,802
|
|
|
|
|
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
|
|
$
|
2,705
|
|
|
$
|
76
|
|
|
$
|
2,781
|
|
|
116
|
|
|
6
|
|
|
122
|
|
|
Category 2
|
|
524
|
|
|
4
|
|
|
528
|
|
|
27
|
|
|
1
|
|
|
28
|
|
|||
|
Category 3
|
|
5,486
|
|
|
68
|
|
|
5,554
|
|
|
135
|
|
|
8
|
|
|
143
|
|
|||
|
Total BIG
|
|
$
|
8,715
|
|
|
$
|
148
|
|
|
$
|
8,863
|
|
|
278
|
|
|
15
|
|
|
293
|
|
|
|
|
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
|
|
|
(2)
|
A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments.
|
|
•
|
Constitutionally Guaranteed. The Company includes in this category public debt benefiting from Article VI of the Constitution of the Commonwealth, which expressly provides that interest and principal payments on the public debt are to be paid before other disbursements are made.
|
|
•
|
Public Corporations – Certain Revenues Potentially Subject to Clawback. The Company includes in this category the debt of public corporations for which applicable law permits the Commonwealth to claw back, subject to certain conditions and for the payment of public debt, at least a portion of the revenues supporting the bonds the Company insures. As a constitutional condition to clawback, available Commonwealth revenues for any fiscal year must be insufficient to pay Commonwealth debt service before the payment of any appropriations for that year. The Company believes that this condition has not been satisfied to date, and accordingly that the Commonwealth has not to date been entitled to claw back revenues supporting debt insured by the Company.
|
|
•
|
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.
|
|
•
|
Vintage general obligation bondholders generally would receive newly issued Commonwealth bonds and cash equal to 64.3% of their outstanding claims, plus up to approximately 25.1% of their outstanding claims to a cap of 89.4% from settlement and litigation savings from the invalidation lawsuit, as well as a share of excess revenues if the Commonwealth outperforms its fiscal plan in the near term.
|
|
•
|
If the Oversight Board loses its invalidation lawsuit, holders of New general obligation bonds generally would receive the same treatment as the holders of Vintage general obligation bonds but would not share in the upside if the Commonwealth outperforms its fiscal plan.
|
|
•
|
If the Oversight Board wins its invalidation lawsuit, holders of New general obligation bonds would not receive any recovery.
|
|
•
|
In all cases, holders of general obligation bonds supporting the GO PSA are also entitled to certain fees.
|
|
•
|
Holders of Vintage PBA bonds generally would receive newly issued Commonwealth bonds and cash equal to 72.6% of their outstanding claims, plus up to approximately 16.8% of their outstanding claims to a cap of 89.4% from settlement and litigation savings from the invalidation lawsuit, as well as a share of excess revenues if the Commonwealth outperforms its fiscal plan in the near term.
|
|
•
|
If the Oversight Board loses its invalidation lawsuit, holders of New PBA bonds generally would receive the same treatment as the holders of Vintage PBA bonds but would not share in the upside if the Commonwealth outperforms its fiscal plan.
|
|
•
|
If the Oversight Board wins its invalidation lawsuit, holders of New PBA bonds would not receive any recovery.
|
|
•
|
In all cases, holders of PBA bonds supporting the GO PSA are also entitled to certain fees.
|
|
|
Gross Par Outstanding
|
|
Gross Debt Service Outstanding
|
||||||||||||
|
|
June 30, 2019
|
|
December 31, 2018
|
|
June 30, 2019
|
|
December 31, 2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Exposure to Puerto Rico
|
$
|
4,698
|
|
|
$
|
4,971
|
|
|
$
|
7,316
|
|
|
$
|
8,035
|
|
|
|
As of
June 30, 2019 |
|
As of
December 31, 2018 |
||||
|
|
(in millions)
|
||||||
|
Commonwealth Constitutionally Guaranteed
|
|
|
|
||||
|
Commonwealth of Puerto Rico - General Obligation Bonds (1)
|
$
|
1,340
|
|
|
$
|
1,340
|
|
|
PBA
|
142
|
|
|
142
|
|
||
|
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
||||
|
PRHTA (Transportation revenue) (1)
|
844
|
|
|
844
|
|
||
|
PRHTA (Highways revenue) (1)
|
475
|
|
|
475
|
|
||
|
PRCCDA
|
152
|
|
|
152
|
|
||
|
PRIFA
|
16
|
|
|
16
|
|
||
|
Other Public Corporations
|
|
|
|
||||
|
PREPA (1)
|
848
|
|
|
848
|
|
||
|
PRASA
|
373
|
|
|
373
|
|
||
|
MFA
|
303
|
|
|
303
|
|
||
|
COFINA (2)
|
—
|
|
|
273
|
|
||
|
U of PR
|
1
|
|
|
1
|
|
||
|
Total net exposure to Puerto Rico
|
$
|
4,494
|
|
|
$
|
4,767
|
|
|
(1)
|
As of the date of this filing, the Oversight Board has certified a filing under Title III of PROMESA for these exposures.
|
|
(2)
|
While the Company no longer has any insured exposure to COFINA, it does have $152 million initial par of COFINA Exchange Senior Bonds in its investment portfolio.
|
|
|
Scheduled Net Par Amortization
|
|
Scheduled Net Debt Service Amortization
|
||||
|
|
(in millions)
|
||||||
|
2019 (July 1 - September 30)
|
$
|
224
|
|
|
$
|
335
|
|
|
2019 (October 1 - December 31)
|
—
|
|
|
3
|
|
||
|
Subtotal 2019
|
224
|
|
|
338
|
|
||
|
2020
|
286
|
|
|
503
|
|
||
|
2021
|
149
|
|
|
351
|
|
||
|
2022
|
139
|
|
|
332
|
|
||
|
2023
|
205
|
|
|
392
|
|
||
|
2024-2028
|
1,213
|
|
|
1,978
|
|
||
|
2029-2033
|
884
|
|
|
1,392
|
|
||
|
2034-2038
|
957
|
|
|
1,184
|
|
||
|
2039-2043
|
176
|
|
|
259
|
|
||
|
2044-2047
|
261
|
|
|
300
|
|
||
|
Total
|
$
|
4,494
|
|
|
$
|
7,029
|
|
|
|
|
Gross Exposure
|
|
Net Exposure
|
||||||||||||
|
|
|
As of June 30, 2019
|
|
As of December 31, 2018
|
|
As of June 30, 2019
|
|
As of December 31, 2018
|
||||||||
|
|
|
(in millions)
|
||||||||||||||
|
Life insurance transactions (1)
|
|
$
|
908
|
|
|
$
|
880
|
|
|
$
|
784
|
|
|
$
|
763
|
|
|
Aircraft residual value insurance policies
|
|
360
|
|
|
340
|
|
|
239
|
|
|
218
|
|
||||
|
(1)
|
The life insurance transactions net exposure is expected to increase to approximately $949 million prior to September 30, 2036.
|
|
4.
|
Expected Loss to be Paid
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Net expected loss to be paid, beginning of period
|
$
|
963
|
|
|
$
|
1,298
|
|
|
$
|
1,183
|
|
|
$
|
1,303
|
|
|
Net expected loss to be paid on the Syncora Guarantee Inc. (SGI) portfolio as of June 1, 2018 (see Note 11)
|
—
|
|
|
131
|
|
|
—
|
|
|
131
|
|
||||
|
Economic loss development (benefit) due to:
|
|
|
|
|
|
|
|
||||||||
|
Accretion of discount
|
6
|
|
|
9
|
|
|
14
|
|
|
17
|
|
||||
|
Changes in discount rates
|
(1
|
)
|
|
—
|
|
|
(5
|
)
|
|
(6
|
)
|
||||
|
Changes in timing and assumptions
|
(42
|
)
|
|
10
|
|
|
(48
|
)
|
|
(16
|
)
|
||||
|
Total economic loss development (benefit)
|
(37
|
)
|
|
19
|
|
|
(39
|
)
|
|
(5
|
)
|
||||
|
Net (paid) recovered losses
|
34
|
|
|
(16
|
)
|
|
(184
|
)
|
|
3
|
|
||||
|
Net expected loss to be paid, end of period
|
$
|
960
|
|
|
$
|
1,432
|
|
|
$
|
960
|
|
|
$
|
1,432
|
|
|
|
Net Expected
Loss to be Paid (Recovered) as of March 31, 2019 |
|
Economic Loss
Development / (Benefit) |
|
(Paid)
Recovered
Losses (1)
|
|
Net Expected
Loss to be Paid (Recovered) as of June 30, 2019 |
||||||||
|
|
(in millions)
|
||||||||||||||
|
Public finance:
|
|
|
|
|
|
|
|
||||||||
|
U.S. public finance
|
$
|
666
|
|
|
$
|
92
|
|
|
$
|
(9
|
)
|
|
$
|
749
|
|
|
Non-U.S. public finance
|
31
|
|
|
(8
|
)
|
|
—
|
|
|
23
|
|
||||
|
Public finance
|
697
|
|
|
84
|
|
|
(9
|
)
|
|
772
|
|
||||
|
Structured finance:
|
|
|
|
|
|
|
|
||||||||
|
U.S. RMBS
|
237
|
|
|
(118
|
)
|
|
43
|
|
|
162
|
|
||||
|
Other structured finance
|
29
|
|
|
(3
|
)
|
|
—
|
|
|
26
|
|
||||
|
Structured finance
|
266
|
|
|
(121
|
)
|
|
43
|
|
|
188
|
|
||||
|
Total
|
$
|
963
|
|
|
$
|
(37
|
)
|
|
$
|
34
|
|
|
$
|
960
|
|
|
|
Net Expected
Loss to be Paid (Recovered) as of March 31, 2018 |
|
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 June 30, 2018 |
||||||||||
|
|
(in millions)
|
||||||||||||||||||
|
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
|
U.S. public finance
|
$
|
1,007
|
|
|
—
|
|
|
$
|
56
|
|
|
$
|
(22
|
)
|
|
$
|
1,041
|
|
|
|
Non-U.S. public finance
|
43
|
|
|
1
|
|
|
(3
|
)
|
|
—
|
|
|
41
|
|
|||||
|
Public finance
|
1,050
|
|
|
1
|
|
|
53
|
|
|
(22
|
)
|
|
1,082
|
|
|||||
|
Structured finance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
U.S. RMBS
|
219
|
|
|
130
|
|
|
(28
|
)
|
|
5
|
|
|
326
|
|
|||||
|
Other structured finance
|
29
|
|
|
—
|
|
|
(6
|
)
|
|
1
|
|
|
24
|
|
|||||
|
Structured finance
|
248
|
|
|
130
|
|
|
(34
|
)
|
|
6
|
|
|
350
|
|
|||||
|
Total
|
$
|
1,298
|
|
|
$
|
131
|
|
|
$
|
19
|
|
|
$
|
(16
|
)
|
|
$
|
1,432
|
|
|
|
Net Expected
Loss to be Paid (Recovered) as of December 31, 2018 |
|
Economic Loss
Development / (Benefit) |
|
(Paid)
Recovered
Losses (1)
|
|
Net Expected
Loss to be Paid (Recovered) as of June 30, 2019 |
||||||||
|
|
(in millions)
|
||||||||||||||
|
Public finance:
|
|
|
|
|
|
|
|
||||||||
|
U.S. public finance
|
$
|
832
|
|
|
$
|
154
|
|
|
$
|
(237
|
)
|
|
$
|
749
|
|
|
Non-U.S. public finance
|
32
|
|
|
(9
|
)
|
|
—
|
|
|
23
|
|
||||
|
Public finance
|
864
|
|
|
145
|
|
|
(237
|
)
|
|
772
|
|
||||
|
Structured finance:
|
|
|
|
|
|
|
|
||||||||
|
U.S. RMBS
|
293
|
|
|
(183
|
)
|
|
52
|
|
|
162
|
|
||||
|
Other structured finance
|
26
|
|
|
(1
|
)
|
|
1
|
|
|
26
|
|
||||
|
Structured finance
|
319
|
|
|
(184
|
)
|
|
53
|
|
|
188
|
|
||||
|
Total
|
$
|
1,183
|
|
|
$
|
(39
|
)
|
|
$
|
(184
|
)
|
|
$
|
960
|
|
|
|
Net Expected
Loss to be Paid (Recovered) as of December 31, 2017 |
|
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 June 30, 2018 |
||||||||||
|
|
(in millions)
|
||||||||||||||||||
|
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
|
U.S. public finance
|
$
|
1,157
|
|
|
—
|
|
|
$
|
17
|
|
|
$
|
(133
|
)
|
|
$
|
1,041
|
|
|
|
Non-U.S. public finance
|
46
|
|
|
1
|
|
|
(6
|
)
|
|
—
|
|
|
41
|
|
|||||
|
Public finance
|
1,203
|
|
|
1
|
|
|
11
|
|
|
(133
|
)
|
|
1,082
|
|
|||||
|
Structured finance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
U.S. RMBS
|
73
|
|
|
130
|
|
|
(12
|
)
|
|
135
|
|
|
326
|
|
|||||
|
Other structured finance
|
27
|
|
|
—
|
|
|
(4
|
)
|
|
1
|
|
|
24
|
|
|||||
|
Structured finance
|
100
|
|
|
130
|
|
|
(16
|
)
|
|
136
|
|
|
350
|
|
|||||
|
Total
|
$
|
1,303
|
|
|
$
|
131
|
|
|
$
|
(5
|
)
|
|
$
|
3
|
|
|
$
|
1,432
|
|
|
(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 as reinsurance recoverable on paid losses in other assets. The amounts for Six Months 2019 are net of the COFINA Exchange Senior Bonds and cash that were received pursuant to the COFINA Plan of Adjustment. See Note 3, Outstanding Exposure, for additional information.
|
|
|
Net Expected Loss to be Paid (Recovered)
|
|
Net Economic Loss Development
(Benefit)
|
||||||||||||||||||||
|
|
As of
|
|
Second Quarter
|
|
Six Months
|
||||||||||||||||||
|
|
June 30, 2019
|
|
December 31, 2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
|
Insurance
|
$
|
907
|
|
|
$
|
1,110
|
|
|
(22
|
)
|
|
23
|
|
|
$
|
(12
|
)
|
|
$
|
(10
|
)
|
||
|
Financial guaranty VIEs (FG VIEs) (See Note 9)
|
64
|
|
|
75
|
|
|
(14
|
)
|
|
(6
|
)
|
|
(24
|
)
|
|
(4
|
)
|
||||||
|
Credit derivatives (See Note 8)
|
(11
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|
2
|
|
|
(3
|
)
|
|
9
|
|
||||||
|
Total
|
$
|
960
|
|
|
$
|
1,183
|
|
|
$
|
(37
|
)
|
|
$
|
19
|
|
|
$
|
(39
|
)
|
|
$
|
(5
|
)
|
|
|
Second Quarter
|
|
Six Months
|
|||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|||||||
|
|
(in millions)
|
|||||||||||||
|
First lien U.S. RMBS
|
$
|
(19
|
)
|
|
(7
|
)
|
|
$
|
(50
|
)
|
|
$
|
17
|
|
|
Second lien U.S. RMBS
|
(99
|
)
|
|
(21
|
)
|
|
(133
|
)
|
|
(29
|
)
|
|||
|
|
As of June 30, 2019
|
|
As of March 31, 2019
|
|
As of December 31, 2018
|
|
Delinquent/Modified in the Previous 12 Months
|
|
|
|
|
|
|
Alt-A and Prime
|
20%
|
|
20%
|
|
20%
|
|
Option ARM
|
20
|
|
20
|
|
20
|
|
Subprime
|
20
|
|
20
|
|
20
|
|
30 – 59 Days Delinquent
|
|
|
|
|
|
|
Alt-A and Prime
|
30
|
|
30
|
|
30
|
|
Option ARM
|
35
|
|
35
|
|
35
|
|
Subprime
|
40
|
|
40
|
|
40
|
|
60 – 89 Days Delinquent
|
|
|
|
|
|
|
Alt-A and Prime
|
40
|
|
40
|
|
40
|
|
Option ARM
|
45
|
|
45
|
|
45
|
|
Subprime
|
45
|
|
45
|
|
45
|
|
90+ Days Delinquent
|
|
|
|
|
|
|
Alt-A and Prime
|
50
|
|
50
|
|
50
|
|
Option ARM
|
55
|
|
55
|
|
55
|
|
Subprime
|
55
|
|
50
|
|
50
|
|
Bankruptcy
|
|
|
|
|
|
|
Alt-A and Prime
|
45
|
|
45
|
|
45
|
|
Option ARM
|
50
|
|
50
|
|
50
|
|
Subprime
|
40
|
|
40
|
|
40
|
|
Foreclosure
|
|
|
|
|
|
|
Alt-A and Prime
|
60
|
|
60
|
|
60
|
|
Option ARM
|
65
|
|
65
|
|
65
|
|
Subprime
|
60
|
|
60
|
|
60
|
|
Real Estate Owned
|
|
|
|
|
|
|
All
|
100
|
|
100
|
|
100
|
|
|
As of
June 30, 2019 |
|
As of
March 31, 2019 |
|
As of
December 31, 2018 |
|||||||||||||||
|
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|||||||||
|
Alt-A First Lien
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Plateau CDR
|
0.0
|
%
|
-
|
9.5%
|
|
4.0%
|
|
1.0
|
%
|
-
|
10.7%
|
|
4.3%
|
|
1.2
|
%
|
-
|
11.4%
|
|
4.6%
|
|
Final CDR
|
0.0
|
%
|
-
|
0.5%
|
|
0.2%
|
|
0.0
|
%
|
-
|
0.5%
|
|
0.2%
|
|
0.1
|
%
|
-
|
0.6%
|
|
0.2%
|
|
Initial loss severity:
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2005 and prior
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
|
|||||||||
|
2006
|
70%
|
|
|
|
70%
|
|
|
|
70%
|
|
|
|||||||||
|
2007+
|
70%
|
|
|
|
70%
|
|
|
|
70%
|
|
|
|||||||||
|
Option ARM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Plateau CDR
|
2.4
|
%
|
-
|
7.9%
|
|
5.5%
|
|
2.1
|
%
|
-
|
9.3%
|
|
5.9%
|
|
1.8
|
%
|
-
|
8.3%
|
|
5.6%
|
|
Final CDR
|
0.1
|
%
|
-
|
0.4%
|
|
0.3%
|
|
0.1
|
%
|
-
|
0.5%
|
|
0.3%
|
|
0.1
|
%
|
-
|
0.4%
|
|
0.3%
|
|
Initial loss severity:
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2005 and prior
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
|
|||||||||
|
2006
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
|
|||||||||
|
2007+
|
70%
|
|
|
|
70%
|
|
|
|
70%
|
|
|
|||||||||
|
Subprime
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Plateau CDR
|
2.5
|
%
|
-
|
22.8%
|
|
6.0%
|
|
2.4
|
%
|
-
|
24.1%
|
|
6.2%
|
|
1.8
|
%
|
-
|
23.2%
|
|
6.2%
|
|
Final CDR
|
0.1
|
%
|
-
|
1.1%
|
|
0.3%
|
|
0.1
|
%
|
-
|
1.2%
|
|
0.3%
|
|
0.1
|
%
|
-
|
1.2%
|
|
0.3%
|
|
Initial loss severity:
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
2005 and prior
|
80%
|
|
|
|
80%
|
|
|
|
80%
|
|
|
|||||||||
|
2006
|
75%
|
|
|
|
75%
|
|
|
|
75%
|
|
|
|||||||||
|
2007+
|
95%
|
|
|
|
95%
|
|
|
|
95%
|
|
|
|||||||||
|
|
As of
June 30, 2019 |
|
As of
March 31, 2019 |
|
As of
December 31, 2018 |
|||||||||||||||
|
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|||||||||
|
Plateau CDR
|
4.6
|
%
|
-
|
23.5%
|
|
9.2%
|
|
5.5
|
%
|
-
|
25.6%
|
|
9.5%
|
|
4.6
|
%
|
-
|
26.8%
|
|
10.1%
|
|
Final CDR trended down to
|
2.5
|
%
|
-
|
3.2%
|
|
2.5%
|
|
2.5
|
%
|
-
|
3.2%
|
|
2.5%
|
|
2.5
|
%
|
-
|
3.2%
|
|
2.5%
|
|
Liquidation rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Delinquent/Modified in the Previous 12 Months
|
20%
|
|
|
|
20%
|
|
|
|
20%
|
|
|
|||||||||
|
30 – 59 Days Delinquent
|
30
|
|
|
|
30
|
|
|
|
35
|
|
|
|||||||||
|
60 – 89 Days Delinquent
|
45
|
|
|
|
45
|
|
|
|
50
|
|
|
|||||||||
|
90+ Days Delinquent
|
65
|
|
|
|
65
|
|
|
|
70
|
|
|
|||||||||
|
Bankruptcy
|
55
|
|
|
|
55
|
|
|
|
55
|
|
|
|||||||||
|
Foreclosure
|
60
|
|
|
|
60
|
|
|
|
65
|
|
|
|||||||||
|
Real Estate Owned
|
100
|
|
|
|
100
|
|
|
|
100
|
|
|
|||||||||
|
Loss severity (1)
|
98%
|
|
|
|
98%
|
|
|
|
98%
|
|
|
|||||||||
|
5.
|
Contracts Accounted for as Insurance
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Financial guaranty:
|
|
|
|
|
|
|
|
||||||||
|
Scheduled net earned premiums
|
$
|
85
|
|
|
$
|
92
|
|
|
$
|
172
|
|
|
$
|
180
|
|
|
Accelerations from refundings and terminations
|
20
|
|
|
39
|
|
|
46
|
|
|
91
|
|
||||
|
Accretion of discount on net premiums receivable
|
5
|
|
|
4
|
|
|
9
|
|
|
8
|
|
||||
|
Financial guaranty insurance net earned premiums
|
110
|
|
|
135
|
|
|
227
|
|
|
279
|
|
||||
|
Non-financial guaranty net earned premiums
|
2
|
|
|
1
|
|
|
3
|
|
|
2
|
|
||||
|
Net earned premiums (1)
|
$
|
112
|
|
|
$
|
136
|
|
|
$
|
230
|
|
|
$
|
281
|
|
|
(1)
|
Excludes $11 million and $3 million for Second Quarter 2019 and 2018, respectively, and $14 million and $6 million for Six Months 2019 and 2018, respectively, related to consolidated FG VIEs.
|
|
|
Six Months
|
||||||
|
|
2019
|
|
2018
|
||||
|
|
(in millions)
|
||||||
|
Beginning of year
|
$
|
904
|
|
|
$
|
915
|
|
|
Less: Non-financial guaranty insurance premium receivable
|
1
|
|
|
1
|
|
||
|
Financial guaranty insurance premiums receivable
|
903
|
|
|
914
|
|
||
|
Gross written premiums on new business, net of commissions (1)
|
98
|
|
|
459
|
|
||
|
Gross premiums received, net of commissions
|
(127
|
)
|
|
(415
|
)
|
||
|
Adjustments:
|
|
|
|
||||
|
Changes in the expected term
|
(10
|
)
|
|
(3
|
)
|
||
|
Accretion of discount, net of commissions on assumed business
|
4
|
|
|
—
|
|
||
|
Foreign exchange translation and remeasurement (2)
|
(3
|
)
|
|
(14
|
)
|
||
|
Cancellation of assumed reinsurance
|
—
|
|
|
(10
|
)
|
||
|
Financial guaranty insurance premium receivable (3)
|
865
|
|
|
931
|
|
||
|
Non-financial guaranty insurance premium receivable
|
1
|
|
|
1
|
|
||
|
June 30,
|
$
|
866
|
|
|
$
|
932
|
|
|
(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 premium in this table represents only the incremental amount in excess of the original gross written premiums. Six Months 2018 included $330 million of gross written premiums assumed from SGI on June 1, 2018, when the Company closed a reinsurance transaction with SGI (SGI Transaction). See Note 11, Reinsurance.
|
|
(2)
|
Includes foreign exchange loss on remeasurement recorded in the condensed consolidated statements of operations of $3 million in Six Months 2019 and $13 million in Six Months 2018. The remaining foreign exchange translation in Six Months 2018 was recorded in other comprehensive income (OCI) prior to the combination of the European subsidiaries.
|
|
(3)
|
Excludes $8 million and $9 million as of June 30, 2019 and June 30, 2018, respectively, related to consolidated FG VIEs.
|
|
|
As of
June 30, 2019 |
||
|
|
(in millions)
|
||
|
2019 (July 1 - September 30)
|
31
|
|
|
|
2019 (October 1 - December 31)
|
26
|
|
|
|
2020
|
98
|
|
|
|
2021
|
78
|
|
|
|
2022
|
78
|
|
|
|
2023
|
65
|
|
|
|
2024-2028
|
278
|
|
|
|
2029-2033
|
184
|
|
|
|
2034-2038
|
97
|
|
|
|
After 2038
|
100
|
|
|
|
Total (1)
|
$
|
1,035
|
|
|
(1)
|
Excludes expected cash collections on consolidated FG VIEs of $10 million.
|
|
|
As of
June 30, 2019 |
||
|
|
(in millions)
|
||
|
2019 (July 1 - September 30)
|
82
|
|
|
|
2019 (October 1 - December 31)
|
80
|
|
|
|
Subtotal 2019
|
162
|
|
|
|
2020
|
304
|
|
|
|
2021
|
277
|
|
|
|
2022
|
251
|
|
|
|
2023
|
230
|
|
|
|
2024-2028
|
905
|
|
|
|
2029-2033
|
615
|
|
|
|
2034-2038
|
348
|
|
|
|
After 2038
|
300
|
|
|
|
Net deferred premium revenue (1)
|
3,392
|
|
|
|
Future accretion
|
170
|
|
|
|
Total future net earned premiums
|
$
|
3,562
|
|
|
(1)
|
Excludes net earned premiums on consolidated FG VIEs of $51 million.
|
|
|
As of
June 30, 2019 |
|
As of
December 31, 2018 |
||||
|
|
(dollars in millions)
|
||||||
|
Premiums receivable, net of commission payable
|
$
|
865
|
|
|
$
|
903
|
|
|
Gross deferred premium revenue
|
1,251
|
|
|
1,313
|
|
||
|
Weighted-average risk-free rate used to discount premiums
|
2.3
|
%
|
|
2.3
|
%
|
||
|
Weighted-average period of premiums receivable (in years)
|
9.1
|
|
|
9.1
|
|
||
|
|
As of
June 30, 2019 |
|
As of
December 31, 2018 |
||||
|
|
(in millions)
|
||||||
|
Public finance:
|
|
|
|
||||
|
U.S. public finance
|
$
|
539
|
|
|
$
|
612
|
|
|
Non-U.S. public finance
|
5
|
|
|
14
|
|
||
|
Public finance
|
544
|
|
|
626
|
|
||
|
Structured finance:
|
|
|
|
||||
|
U.S. RMBS (1)
|
(79
|
)
|
|
21
|
|
||
|
Other structured finance
|
39
|
|
|
30
|
|
||
|
Structured finance
|
(40
|
)
|
|
51
|
|
||
|
Subtotal
|
504
|
|
|
677
|
|
||
|
Other payable (recoverable)
|
(1
|
)
|
|
(3
|
)
|
||
|
Total
|
$
|
503
|
|
|
$
|
674
|
|
|
(1)
|
Excludes net reserves of $39 million and $47 million as of June 30, 2019 and December 31, 2018, respectively, related to consolidated FG VIEs.
|
|
|
As of
June 30, 2019 |
|
As of
December 31, 2018 |
||||
|
|
(in millions)
|
||||||
|
Loss and LAE reserve
|
$
|
1,102
|
|
|
$
|
1,177
|
|
|
Reinsurance recoverable on unpaid losses (1)
|
(41
|
)
|
|
(34
|
)
|
||
|
Loss and LAE reserve, net
|
1,061
|
|
|
1,143
|
|
||
|
Salvage and subrogation recoverable
|
(580
|
)
|
|
(490
|
)
|
||
|
Salvage and subrogation reinsurance payable (2)
|
23
|
|
|
24
|
|
||
|
Other payable (recoverable) (1)
|
(1
|
)
|
|
(3
|
)
|
||
|
Salvage and subrogation recoverable, net, and other recoverable
|
(558
|
)
|
|
(469
|
)
|
||
|
Net reserves (salvage)
|
$
|
503
|
|
|
$
|
674
|
|
|
(1)
|
Recorded as a component of other assets in the condensed consolidated balance sheets.
|
|
(2)
|
Recorded as a component of other liabilities in the condensed consolidated balance sheets.
|
|
|
As of
June 30, 2019 |
||
|
|
(in millions)
|
||
|
Net expected loss to be paid - financial guaranty insurance
|
$
|
906
|
|
|
Contra-paid, net
|
56
|
|
|
|
Salvage and subrogation recoverable, net, and other recoverable
|
558
|
|
|
|
Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance
|
(1,060
|
)
|
|
|
Net expected loss to be expensed (present value) (1)
|
$
|
460
|
|
|
|
As of
June 30, 2019 |
||
|
|
(in millions)
|
||
|
2019 (July 1 - September 30)
|
8
|
|
|
|
2019 (October 1 - December 31)
|
9
|
|
|
|
Subtotal 2019
|
17
|
|
|
|
2020
|
38
|
|
|
|
2021
|
35
|
|
|
|
2022
|
34
|
|
|
|
2023
|
35
|
|
|
|
2024-2028
|
148
|
|
|
|
2029-2033
|
99
|
|
|
|
2034-2038
|
45
|
|
|
|
After 2038
|
9
|
|
|
|
Net expected loss to be expensed
|
460
|
|
|
|
Future accretion
|
30
|
|
|
|
Total expected future loss and LAE
|
$
|
490
|
|
|
|
Loss (Benefit)
|
||||||||||||||
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Public finance:
|
|
|
|
|
|
|
|
||||||||
|
U.S. public finance
|
94
|
|
|
62
|
|
|
$
|
164
|
|
|
$
|
34
|
|
||
|
Non-U.S. public finance
|
(8
|
)
|
|
(1
|
)
|
|
(8
|
)
|
|
(2
|
)
|
||||
|
Public finance
|
86
|
|
|
61
|
|
|
156
|
|
|
32
|
|
||||
|
Structured finance:
|
|
|
|
|
|
|
|
||||||||
|
U.S. RMBS (1)
|
(88
|
)
|
|
(12
|
)
|
|
(115
|
)
|
|
4
|
|
||||
|
Other structured finance
|
1
|
|
|
(5
|
)
|
|
4
|
|
|
(10
|
)
|
||||
|
Structured finance
|
(87
|
)
|
|
(17
|
)
|
|
(111
|
)
|
|
(6
|
)
|
||||
|
Loss and LAE
|
$
|
(1
|
)
|
|
$
|
44
|
|
|
$
|
45
|
|
|
$
|
26
|
|
|
(1)
|
Excludes a benefit of $14 million and $3 million for Second Quarter 2019 and 2018, respectively, and a benefit of $15 million and a loss of $3 million for Six Months 2019 and 2018 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)
|
116
|
|
|
7
|
|
|
27
|
|
|
—
|
|
|
135
|
|
|
6
|
|
|
278
|
|
|
—
|
|
|
278
|
|
|||||||||
|
Remaining weighted-average contract period (in years)
|
7.8
|
|
|
4.7
|
|
|
17.6
|
|
|
—
|
|
|
9.6
|
|
|
8.4
|
|
|
9.6
|
|
|
—
|
|
|
9.6
|
|
|||||||||
|
Outstanding exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Principal
|
$
|
2,771
|
|
|
$
|
(66
|
)
|
|
$
|
524
|
|
|
$
|
—
|
|
|
$
|
5,650
|
|
|
$
|
(164
|
)
|
|
$
|
8,715
|
|
|
$
|
—
|
|
|
$
|
8,715
|
|
|
Interest
|
1,215
|
|
|
(16
|
)
|
|
470
|
|
|
—
|
|
|
2,670
|
|
|
(68
|
)
|
|
4,271
|
|
|
—
|
|
|
4,271
|
|
|||||||||
|
Total (2)
|
$
|
3,986
|
|
|
$
|
(82
|
)
|
|
$
|
994
|
|
|
$
|
—
|
|
|
$
|
8,320
|
|
|
$
|
(232
|
)
|
|
$
|
12,986
|
|
|
$
|
—
|
|
|
$
|
12,986
|
|
|
Expected cash outflows (inflows)
|
$
|
108
|
|
|
$
|
(4
|
)
|
|
$
|
131
|
|
|
$
|
—
|
|
|
$
|
3,871
|
|
|
$
|
(122
|
)
|
|
$
|
3,984
|
|
|
$
|
(273
|
)
|
|
$
|
3,711
|
|
|
Potential recoveries (3)
|
(552
|
)
|
|
21
|
|
|
(51
|
)
|
|
—
|
|
|
(2,479
|
)
|
|
95
|
|
|
(2,966
|
)
|
|
191
|
|
|
(2,775
|
)
|
|||||||||
|
Subtotal
|
(444
|
)
|
|
17
|
|
|
80
|
|
|
—
|
|
|
1,392
|
|
|
(27
|
)
|
|
1,018
|
|
|
(82
|
)
|
|
936
|
|
|||||||||
|
Discount
|
79
|
|
|
(4
|
)
|
|
(18
|
)
|
|
—
|
|
|
(97
|
)
|
|
(8
|
)
|
|
(48
|
)
|
|
18
|
|
|
(30
|
)
|
|||||||||
|
Present value of expected cash flows
|
$
|
(365
|
)
|
|
$
|
13
|
|
|
$
|
62
|
|
|
$
|
—
|
|
|
$
|
1,295
|
|
|
$
|
(35
|
)
|
|
$
|
970
|
|
|
$
|
(64
|
)
|
|
$
|
906
|
|
|
Deferred premium revenue
|
$
|
172
|
|
|
$
|
(3
|
)
|
|
$
|
24
|
|
|
$
|
—
|
|
|
$
|
517
|
|
|
$
|
(2
|
)
|
|
$
|
708
|
|
|
$
|
(50
|
)
|
|
$
|
658
|
|
|
Reserves (salvage)
|
$
|
(400
|
)
|
|
$
|
15
|
|
|
$
|
43
|
|
|
$
|
—
|
|
|
$
|
916
|
|
|
$
|
(33
|
)
|
|
$
|
541
|
|
|
$
|
(39
|
)
|
|
$
|
502
|
|
|
|
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
|
|
|
(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.
|
|
6.
|
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.
|
|
•
|
Credit spreads interpolated based upon market indices adjusted to reflect the non-standard terms of the Company's CDS contracts.
|
|
•
|
Credit spreads extrapolated based upon transactions of similar asset classes, similar ratings, and similar time to maturity.
|
|
•
|
The model takes into account the transaction structure and the key drivers of market value.
|
|
•
|
The model maximizes the use of market-driven inputs whenever they are available.
|
|
•
|
The model is a consistent approach to valuing positions.
|
|
•
|
There is no exit market or any actual exit transactions; therefore, the Company’s exit market is a hypothetical one based on the Company’s entry market.
|
|
•
|
There is a very limited market in which to validate the reasonableness of the fair values developed by the Company’s model.
|
|
•
|
The markets for the inputs to the model are highly illiquid, which impacts their reliability.
|
|
•
|
Due to the non-standard terms under which the Company enters into derivative contracts, the fair value of its credit derivatives may not reflect the same prices observed in an actively traded market of credit derivatives that do not contain terms and conditions similar to those observed in the financial guaranty market.
|
|
|
|
|
Fair Value Hierarchy
|
||||||||||||
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Investment portfolio, available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Fixed-maturity securities
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Obligations of state and political subdivisions
|
$
|
4,683
|
|
|
$
|
—
|
|
|
$
|
4,578
|
|
|
$
|
105
|
|
|
U.S. government and agencies
|
165
|
|
|
—
|
|
|
165
|
|
|
—
|
|
||||
|
Corporate securities
|
2,267
|
|
|
—
|
|
|
2,219
|
|
|
48
|
|
||||
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|||||||
|
RMBS
|
938
|
|
|
—
|
|
|
613
|
|
|
325
|
|
||||
|
Commercial mortgage-backed securities (CMBS)
|
495
|
|
|
—
|
|
|
495
|
|
|
—
|
|
||||
|
Asset-backed securities
|
779
|
|
|
—
|
|
|
105
|
|
|
674
|
|
||||
|
Non-U.S. government securities
|
247
|
|
|
—
|
|
|
247
|
|
|
—
|
|
||||
|
Total fixed-maturity securities
|
9,574
|
|
|
—
|
|
|
8,422
|
|
|
1,152
|
|
||||
|
Short-term investments
|
1,159
|
|
|
893
|
|
|
266
|
|
|
—
|
|
||||
|
Other invested assets (1)
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
||||
|
FG VIEs’ assets, at fair value
|
526
|
|
|
—
|
|
|
—
|
|
|
526
|
|
||||
|
Other assets
|
166
|
|
|
32
|
|
|
42
|
|
|
92
|
|
||||
|
Total assets carried at fair value
|
$
|
11,431
|
|
|
$
|
925
|
|
|
$
|
8,730
|
|
|
$
|
1,776
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|||||||
|
Credit derivative liabilities
|
$
|
224
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
224
|
|
|
FG VIEs’ liabilities with recourse, at fair value
|
446
|
|
|
—
|
|
|
—
|
|
|
446
|
|
||||
|
FG VIEs’ liabilities without recourse, at fair value
|
105
|
|
|
—
|
|
|
—
|
|
|
105
|
|
||||
|
Total liabilities carried at fair value
|
$
|
775
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
775
|
|
|
|
|
|
Fair Value Hierarchy
|
||||||||||||
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Investment portfolio, available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Fixed-maturity securities
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Obligations of state and political subdivisions
|
$
|
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
|
|
||||
|
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 (1)
|
7
|
|
|
—
|
|
|
—
|
|
|
7
|
|
||||
|
FG VIEs’ assets, at fair value
|
569
|
|
|
—
|
|
|
—
|
|
|
569
|
|
||||
|
Other assets
|
139
|
|
|
25
|
|
|
38
|
|
|
76
|
|
||||
|
Total assets carried at fair value
|
$
|
11,533
|
|
|
$
|
454
|
|
|
$
|
9,016
|
|
|
$
|
2,063
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Credit derivative liabilities
|
$
|
209
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
209
|
|
|
FG VIEs’ liabilities with recourse, at fair value
|
517
|
|
|
—
|
|
|
—
|
|
|
517
|
|
||||
|
FG VIEs’ liabilities without recourse, at fair value
|
102
|
|
|
—
|
|
|
—
|
|
|
102
|
|
||||
|
Total liabilities carried at fair value
|
$
|
828
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
828
|
|
|
(1)
|
Includes Level 3 mortgage loans that are recorded at fair value on a non-recurring basis.
|
|
|
Fixed-Maturity Securities
|
|
|
|
|
|
|
|
FG VIEs’ Liabilities, at Fair Value
|
|
|||||||||||||||||||||||||||||||||||
|
|
Obligations
of State and Political Subdivisions |
|
Corporate Securities
|
|
RMBS
|
|
Asset-
Backed Securities |
|
FG VIEs’
Assets at Fair Value |
|
Other
(6)
|
|
Credit
Derivative Asset (Liability), net (4) |
|
With
Recourse |
|
Without
Recourse |
|
|||||||||||||||||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||||||||||||||||||||||||
|
Fair value as of
March 31, 2019 |
$
|
104
|
|
|
$
|
48
|
|
|
$
|
318
|
|
|
$
|
958
|
|
|
$
|
560
|
|
|
$
|
68
|
|
|
$
|
(228
|
)
|
|
$
|
(505
|
)
|
|
$
|
(104
|
)
|
|
|||||||||
|
Total pretax realized and unrealized gains/(losses) recorded in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Net income (loss)
|
1
|
|
(1
|
)
|
1
|
|
(1
|
)
|
5
|
|
(1
|
)
|
30
|
|
(1
|
)
|
47
|
|
(2
|
)
|
19
|
|
(3
|
)
|
(8
|
)
|
(5
|
)
|
(20
|
)
|
(2
|
)
|
(3
|
)
|
(2
|
)
|
|||||||||
|
Other comprehensive income (loss)
|
—
|
|
|
(1
|
)
|
|
15
|
|
|
(85
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
|
|||||||||||||||||
|
Purchases
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|||||||||||||||||
|
Settlements
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
(238
|
)
|
|
(75
|
)
|
|
—
|
|
|
20
|
|
|
69
|
|
|
1
|
|
|
|
|||||||||||||||||
|
FG VIE deconsolidation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
5
|
|
|
1
|
|
|
||||||||||||||||||
|
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||||||||||||||||
|
Fair value as of
June 30, 2019 |
$
|
105
|
|
|
$
|
48
|
|
|
$
|
325
|
|
|
$
|
674
|
|
|
$
|
526
|
|
|
$
|
87
|
|
|
$
|
(216
|
)
|
|
$
|
(446
|
)
|
|
$
|
(105
|
)
|
|
|||||||||
|
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of June 30, 2019
|
|
|
|
|
|
|
|
|
$
|
52
|
|
(2
|
)
|
$
|
19
|
|
(3
|
)
|
$
|
(7
|
)
|
(5
|
)
|
$
|
(20
|
)
|
(2
|
)
|
$
|
(12
|
)
|
(2
|
)
|
||||||||||||
|
Change in unrealized
gains/(losses) included
in OCI related to
financial instruments
held as of June 30, 2019
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
15
|
|
|
$
|
8
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
5
|
|
|
|
|
|||||||||||||||
|
|
Fixed-Maturity Securities
|
|
|
|
|
|
|
|
FG VIEs’ Liabilities, at Fair Value
|
|
|||||||||||||||||||||||||||||||||||
|
|
Obligations
of State and Political Subdivisions |
|
Corporate Securities
|
|
RMBS
|
|
Asset-
Backed Securities |
|
FG VIEs’
Assets at Fair Value |
|
Other
(6)
|
|
Credit
Derivative Asset (Liability), net (4) |
|
With
Recourse |
|
Without
Recourse |
|
|||||||||||||||||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||||||||||||||||||||||||
|
Fair value as of
March 31, 2018 |
$
|
83
|
|
|
$
|
62
|
|
|
$
|
314
|
|
|
$
|
809
|
|
|
$
|
651
|
|
|
$
|
62
|
|
|
|
$
|
(236
|
)
|
|
$
|
(598
|
)
|
|
$
|
(110
|
)
|
|
||||||||
|
Total pretax realized and unrealized gains/(losses) recorded in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Net income (loss)
|
1
|
|
(1
|
)
|
1
|
|
(1
|
)
|
6
|
|
(1
|
)
|
14
|
|
(1
|
)
|
3
|
|
(2
|
)
|
(1
|
)
|
(3
|
)
|
48
|
|
(5
|
)
|
(4
|
)
|
(2
|
)
|
1
|
|
(2
|
)
|
|||||||||
|
Other comprehensive income (loss)
|
8
|
|
|
—
|
|
|
(3
|
)
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
|
|||||||||||||||||
|
Purchases
|
—
|
|
|
—
|
|
|
9
|
|
|
91
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|||||||||||||||||
|
Issuances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(68
|
)
|
(7
|
)
|
—
|
|
|
—
|
|
|
|||||||||||||||||
|
Settlements
|
—
|
|
|
—
|
|
|
(15
|
)
|
|
(23
|
)
|
|
(27
|
)
|
|
—
|
|
|
(1
|
)
|
|
27
|
|
|
1
|
|
|
|
|||||||||||||||||
|
Fair value as of
June 30, 2018 |
$
|
92
|
|
|
$
|
63
|
|
|
$
|
311
|
|
|
$
|
897
|
|
|
$
|
627
|
|
|
$
|
61
|
|
|
$
|
(257
|
)
|
|
$
|
(571
|
)
|
|
$
|
(108
|
)
|
|
|||||||||
|
Change in unrealized gains/(losses) related to financial instruments held as of June 30, 2018
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
6
|
|
|
$
|
6
|
|
(2
|
)
|
$
|
(1
|
)
|
(3
|
)
|
$
|
46
|
|
(5
|
)
|
$
|
2
|
|
(2
|
)
|
$
|
1
|
|
(2
|
)
|
||||
|
|
Fixed-Maturity Securities
|
|
|
|
|
|
|
|
FG VIEs’ Liabilities, at Fair Value
|
|
|||||||||||||||||||||||||||||||||||
|
|
Obligations
of State and Political Subdivisions |
|
Corporate Securities
|
|
RMBS
|
|
Asset-
Backed Securities |
|
FG VIEs’
Assets at Fair Value |
|
Other
(6)
|
|
Credit
Derivative Asset (Liability), net (4) |
|
With
Recourse |
|
Without
Recourse |
|
|||||||||||||||||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||||||||||||||||||||||||
|
Fair value as of
December 31, 2018 |
$
|
99
|
|
|
$
|
56
|
|
|
$
|
309
|
|
|
$
|
947
|
|
|
$
|
569
|
|
|
$
|
77
|
|
|
$
|
(207
|
)
|
|
$
|
(517
|
)
|
|
$
|
(102
|
)
|
|
|||||||||
|
Total pretax realized and unrealized gains/(losses) recorded in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
Net income (loss)
|
2
|
|
(1
|
)
|
(10
|
)
|
(1
|
)
|
11
|
|
(1
|
)
|
44
|
|
(1
|
)
|
64
|
|
(2
|
)
|
10
|
|
(3
|
)
|
(30
|
)
|
(5
|
)
|
(31
|
)
|
(2
|
)
|
(7
|
)
|
(2
|
)
|
|||||||||
|
Other comprehensive income (loss)
|
5
|
|
|
2
|
|
|
20
|
|
|
(94
|
)
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
|
|
—
|
|
|
|
|||||||||||||
|
Purchases
|
—
|
|
|
—
|
|
|
11
|
|
|
18
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|||||||||||||
|
Settlements
|
(1
|
)
|
|
—
|
|
|
(26
|
)
|
|
(242
|
)
|
|
(101
|
)
|
|
—
|
|
|
|
21
|
|
|
|
92
|
|
|
|
3
|
|
|
|
||||||||||||||
|
FG VIE deconsolidation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
5
|
|
|
1
|
|
|
||||||||||||||||||
|
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||||||||||||||||
|
Fair value as of
June 30, 2019 |
$
|
105
|
|
|
$
|
48
|
|
|
$
|
325
|
|
|
$
|
674
|
|
|
$
|
526
|
|
|
$
|
87
|
|
|
$
|
(216
|
)
|
|
$
|
(446
|
)
|
|
$
|
(105
|
)
|
|
|||||||||
|
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of June 30, 2019
|
|
|
|
|
|
|
|
|
$
|
72
|
|
(2
|
)
|
$
|
10
|
|
(3
|
)
|
$
|
(28
|
)
|
(5
|
)
|
$
|
(31
|
)
|
(2
|
)
|
$
|
(15
|
)
|
(2
|
)
|
||||||||||||
|
Change in unrealized
gains/(losses) included
in OCI related to
financial instruments
held as of June 30, 2019
|
$
|
5
|
|
|
$
|
2
|
|
|
$
|
20
|
|
|
$
|
11
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
5
|
|
|
|
|
|||||||||||||||
|
|
Fixed-Maturity Securities
|
|
|
|
|
|
|
|
FG VIEs’ Liabilities, at Fair Value
|
|
|||||||||||||||||||||||||||||||||||
|
|
Obligations
of State and Political Subdivisions |
|
Corporate Securities
|
|
RMBS
|
|
Asset-
Backed Securities |
|
FG VIEs’
Assets at Fair Value |
|
Other
(6)
|
|
Credit
Derivative Asset (Liability), net (4) |
|
With Recourse |
|
Without Recourse |
|
|||||||||||||||||||||||||||
|
|
(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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
|
Net income (loss)
|
2
|
|
(1
|
)
|
(4
|
)
|
(1
|
)
|
13
|
|
(1
|
)
|
29
|
|
(1
|
)
|
4
|
|
(2
|
)
|
(2
|
)
|
(3
|
)
|
82
|
|
(5
|
)
|
(4
|
)
|
(2
|
)
|
2
|
|
(2
|
)
|
|||||||||
|
Other comprehensive income (loss)
|
11
|
|
|
—
|
|
|
(10
|
)
|
|
9
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
|
||||||||||||||
|
Purchases
|
4
|
|
|
—
|
|
|
9
|
|
|
100
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
||||||||||||||
|
Issuances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(68
|
)
|
(7
|
)
|
—
|
|
|
—
|
|
|
|||||||||||||||||
|
Settlements
|
(1
|
)
|
|
—
|
|
|
(35
|
)
|
|
(28
|
)
|
|
(60
|
)
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
57
|
|
|
|
4
|
|
|
|
||||||||||||||
|
FG VIE deconsolidations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
—
|
|
|
1
|
|
|
16
|
|
|
||||||||||||||||||
|
Fair value as of
June 30, 2018 |
$
|
92
|
|
|
$
|
63
|
|
|
$
|
311
|
|
|
$
|
897
|
|
|
$
|
627
|
|
|
$
|
61
|
|
|
$
|
(257
|
)
|
|
$
|
(571
|
)
|
|
$
|
(108
|
)
|
|
|||||||||
|
Change in unrealized gains/(losses) related to financial instruments held as of June 30, 2018
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
(8
|
)
|
|
$
|
10
|
|
|
$
|
10
|
|
(2
|
)
|
$
|
(2
|
)
|
(3
|
)
|
$
|
73
|
|
(5
|
)
|
$
|
(1
|
)
|
(2
|
)
|
$
|
1
|
|
(2
|
)
|
||||
|
(1)
|
Included in net realized investment gains (losses) and net investment income.
|
|
(2)
|
Included in fair value gains (losses) on FG VIEs.
|
|
(3)
|
Recorded in net investment income and other income.
|
|
(4)
|
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 as either assets or liabilities in the condensed consolidated balance sheet based on net exposure by counterparty.
|
|
(5)
|
Reported in net change in fair value of credit derivatives.
|
|
(6)
|
Includes CCS and other invested assets.
|
|
(7)
|
Relates to SGI Transaction. See Note 11, Reinsurance.
|
|
Financial Instrument Description (1)
|
|
Fair Value at
June 30, 2019 (in millions) |
|
Significant Unobservable Inputs
|
|
Range
|
|
Weighted Average as a Percentage of Current Par Outstanding
|
|||||
|
Assets (liabilities) (2):
|
|
|
|
|
|
|
|
|
|
||||
|
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Obligations of state and political subdivisions
|
|
$
|
105
|
|
|
Yield
|
|
4.5
|
%
|
-
|
33.0%
|
|
7.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Corporate securities
|
|
48
|
|
|
Yield
|
|
30.9%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
RMBS
|
|
325
|
|
|
CPR
|
|
1.5
|
%
|
-
|
18.2%
|
|
5.9%
|
|
|
|
|
CDR
|
|
1.5
|
%
|
-
|
6.9%
|
|
4.9%
|
||||
|
|
|
Loss severity
|
|
40.0
|
%
|
-
|
125.0%
|
|
85.5%
|
||||
|
|
|
Yield
|
|
3.8
|
%
|
-
|
6.2%
|
|
4.5%
|
||||
|
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|||
|
Life insurance transactions
|
|
337
|
|
|
Yield
|
|
5.6%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Collateralized loan obligations (CLOs) /Trust preferred securities (TruPS)
|
|
280
|
|
|
Yield
|
|
2.8
|
%
|
-
|
5.1%
|
|
3.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Others
|
|
57
|
|
|
Yield
|
|
10.4%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
FG VIEs’ assets, at fair value
|
|
526
|
|
|
CPR
|
|
0.9
|
%
|
-
|
18.3%
|
|
8.9%
|
|
|
|
|
CDR
|
|
1.3
|
%
|
-
|
24.2%
|
|
4.6%
|
||||
|
|
|
Loss severity
|
|
60.0
|
%
|
-
|
100.0%
|
|
78.4%
|
||||
|
|
|
Yield
|
|
3.6
|
%
|
-
|
8.5%
|
|
5.3%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Other assets
|
|
84
|
|
|
Implied Yield
|
|
6.7
|
%
|
-
|
7.3%
|
|
7.0%
|
|
|
|
|
Term (years)
|
|
10 years
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Credit derivative liabilities, net
|
|
(216
|
)
|
|
Year 1 loss estimates
|
|
0.0
|
%
|
-
|
80.0%
|
|
1.8%
|
|
|
|
|
Hedge cost (in basis points (bps))
|
|
7.0
|
|
-
|
42.0
|
|
15.0
|
||||
|
|
|
Bank profit (in bps)
|
|
38.0
|
|
-
|
215.0
|
|
88.0
|
||||
|
|
|
Internal floor (in bps)
|
|
30.0
|
|
|
|||||||
|
|
|
Internal credit rating
|
|
AAA
|
|
-
|
CCC
|
|
A+
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
FG VIEs’ liabilities, at fair value
|
|
(551
|
)
|
|
CPR
|
|
0.9
|
%
|
-
|
18.3%
|
|
8.9%
|
|
|
|
|
CDR
|
|
1.3
|
%
|
-
|
24.2%
|
|
4.6%
|
||||
|
|
|
Loss severity
|
|
60.0
|
%
|
-
|
100.0%
|
|
78.4%
|
||||
|
|
|
Yield
|
|
3.5
|
%
|
-
|
8.5%
|
|
4.3%
|
||||
|
(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 $6 million.
|
|
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 (liabilities) (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:
|
|
|
|
|
|
|
|
|
|
|
|||
|
Life insurance transactions
|
|
620
|
|
|
Yield
|
|
6.5
|
%
|
-
|
7.1%
|
|
6.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
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
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Credit derivative liabilities, net
|
|
(207
|
)
|
|
Year 1 loss estimates
|
|
0.0
|
%
|
-
|
66.0%
|
|
2.2%
|
|
|
|
|
Hedge cost (in 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.
|
|
|
As of
June 30, 2019 |
|
As of
December 31, 2018 |
||||||||||||
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Assets (liabilities):
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Other invested assets
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
Other assets (1)
|
91
|
|
|
91
|
|
|
130
|
|
|
130
|
|
||||
|
Financial guaranty insurance contracts (2)
|
(2,995
|
)
|
|
(5,870
|
)
|
|
(3,240
|
)
|
|
(5,932
|
)
|
||||
|
Long-term debt
|
(1,233
|
)
|
|
(1,545
|
)
|
|
(1,233
|
)
|
|
(1,496
|
)
|
||||
|
Other liabilities (1)
|
(22
|
)
|
|
(22
|
)
|
|
(12
|
)
|
|
(12
|
)
|
||||
|
(1)
|
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.
|
|
(2)
|
Carrying amount includes the assets and liabilities related to financial guaranty insurance contract premiums, losses, and salvage and subrogation and other recoverables net of reinsurance.
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Income from fixed-maturity securities managed by third parties
|
$
|
69
|
|
|
$
|
74
|
|
|
$
|
141
|
|
|
$
|
149
|
|
|
Income from internally managed securities
|
43
|
|
|
27
|
|
|
71
|
|
|
54
|
|
||||
|
Gross investment income
|
112
|
|
|
101
|
|
|
212
|
|
|
203
|
|
||||
|
Investment expenses
|
(2
|
)
|
|
(3
|
)
|
|
(4
|
)
|
|
(5
|
)
|
||||
|
Net investment income
|
$
|
110
|
|
|
$
|
98
|
|
|
$
|
208
|
|
|
$
|
198
|
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Gross realized gains on available-for-sale securities
|
$
|
13
|
|
|
$
|
2
|
|
|
$
|
19
|
|
|
$
|
11
|
|
|
Gross realized losses on available-for-sale securities
|
(1
|
)
|
|
(1
|
)
|
|
(3
|
)
|
|
(6
|
)
|
||||
|
Net realized gains (losses) on other invested assets
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||
|
Other-than-temporary impairment (OTTI):
|
|
|
|
|
|
|
|
||||||||
|
Total OTTI
|
(4
|
)
|
|
(4
|
)
|
|
(17
|
)
|
|
(15
|
)
|
||||
|
Less: portion of OTTI recognized in OCI
|
—
|
|
|
(1
|
)
|
|
3
|
|
|
(4
|
)
|
||||
|
Net OTTI recognized in net income (loss) (1)
|
(4
|
)
|
|
(3
|
)
|
|
(20
|
)
|
|
(11
|
)
|
||||
|
Net realized investment gains (losses)
|
$
|
8
|
|
|
$
|
(2
|
)
|
|
$
|
(4
|
)
|
|
$
|
(7
|
)
|
|
(1)
|
Net OTTI recognized in net income was mainly attributable to change in foreign exchange rates in Second Quarter 2019. OTTI for all other periods presented was primarily attributable to securities purchased for loss mitigation and other risk management purposes.
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Balance, beginning of period
|
$
|
197
|
|
|
$
|
169
|
|
|
$
|
185
|
|
|
$
|
162
|
|
|
Additions for credit losses on securities for which an OTTI was previously recognized
|
—
|
|
|
1
|
|
|
12
|
|
|
8
|
|
||||
|
Reductions for securities sold and other settlements
|
(6
|
)
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
||||
|
Balance, end of period
|
$
|
191
|
|
|
$
|
170
|
|
|
$
|
191
|
|
|
$
|
170
|
|
|
|
As of
June 30, 2019 |
|
As of
December 31, 2018 |
||||
|
|
(in millions)
|
||||||
|
Fixed-maturity securities (1):
|
|
|
|
||||
|
Externally managed
|
$
|
8,499
|
|
|
$
|
8,909
|
|
|
Internally managed
|
1,075
|
|
|
1,180
|
|
||
|
Short-term investments
|
1,159
|
|
|
729
|
|
||
|
Other invested assets:
|
|
|
|
||||
|
Internally managed
|
|
|
|
||||
|
Alternative investments
|
44
|
|
|
39
|
|
||
|
Other
|
16
|
|
|
16
|
|
||
|
Total
|
$
|
10,793
|
|
|
$
|
10,873
|
|
|
(1)
|
8.3% and 10.8% of fixed-maturity securities are rated BIG as of June 30, 2019 and December 31, 2018, respectively.
|
|
Security Type
|
|
Percent
of
Total (1)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair
Value
|
|
AOCI
Pre-tax
Gain
(Loss) on
Securities
with
OTTI
|
|
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+
|
|
(1)
|
Based on amortized cost.
|
|
(2)
|
Accumulated OCI (AOCI).
|
|
(3)
|
Ratings 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 45% of mortgage backed securities as of June 30, 2019 and 48% as of December 31, 2018 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
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
24
|
|
|
$
|
—
|
|
|
U.S. government and agencies
|
10
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
31
|
|
|
—
|
|
||||||
|
Corporate securities
|
229
|
|
|
(2
|
)
|
|
204
|
|
|
(14
|
)
|
|
433
|
|
|
(16
|
)
|
||||||
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
RMBS
|
7
|
|
|
—
|
|
|
283
|
|
|
(13
|
)
|
|
290
|
|
|
(13
|
)
|
||||||
|
CMBS
|
—
|
|
|
—
|
|
|
51
|
|
|
(1
|
)
|
|
51
|
|
|
(1
|
)
|
||||||
|
Asset-backed securities
|
226
|
|
|
(2
|
)
|
|
76
|
|
|
(1
|
)
|
|
302
|
|
|
(3
|
)
|
||||||
|
Non-U.S. government securities
|
45
|
|
|
(1
|
)
|
|
113
|
|
|
(17
|
)
|
|
158
|
|
|
(18
|
)
|
||||||
|
Total
|
$
|
524
|
|
|
$
|
(5
|
)
|
|
$
|
765
|
|
|
$
|
(46
|
)
|
|
$
|
1,289
|
|
|
$
|
(51
|
)
|
|
Number of securities (1)
|
|
|
|
112
|
|
|
|
|
|
186
|
|
|
|
|
|
291
|
|
||||||
|
Number of securities with OTTI
|
|
|
|
6
|
|
|
|
|
|
11
|
|
|
|
|
|
17
|
|
||||||
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
||||||||||||||||||
|
|
Fair
Value |
|
Unrealized
Loss |
|
Fair
Value |
|
Unrealized
Loss |
|
Fair
Value |
|
Unrealized
Loss |
||||||||||||
|
|
(dollars in millions)
|
||||||||||||||||||||||
|
Obligations of state and political subdivisions
|
$
|
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
|
|
||||||
|
(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
|
$
|
223
|
|
|
$
|
216
|
|
|
Due after one year through five years
|
1,637
|
|
|
1,665
|
|
||
|
Due after five years through 10 years
|
2,101
|
|
|
2,196
|
|
||
|
Due after 10 years
|
3,784
|
|
|
4,064
|
|
||
|
Mortgage-backed securities:
|
|
|
|
|
|
||
|
RMBS
|
914
|
|
|
938
|
|
||
|
CMBS
|
478
|
|
|
495
|
|
||
|
Total
|
$
|
9,137
|
|
|
$
|
9,574
|
|
|
|
As of
June 30, 2019 |
|
As of
December 31, 2018 |
||||
|
|
(in millions)
|
||||||
|
Cash
|
$
|
190
|
|
|
$
|
104
|
|
|
Restricted cash
|
4
|
|
|
—
|
|
||
|
Total cash and restricted cash
|
$
|
194
|
|
|
$
|
104
|
|
|
8.
|
Contracts Accounted for as Credit Derivatives
|
|
|
|
As of June 30, 2019
|
|
As of December 31, 2018
|
||||||||||||
|
|
|
Net Par
Outstanding
|
|
Net Fair Value
|
|
Net Par
Outstanding
|
|
Net Fair Value
|
||||||||
|
|
|
(in millions)
|
||||||||||||||
|
U.S. public finance
|
|
$
|
1,933
|
|
|
$
|
(105
|
)
|
|
$
|
1,783
|
|
|
$
|
(65
|
)
|
|
Non-U.S. public finance
|
|
2,798
|
|
|
(51
|
)
|
|
2,807
|
|
|
(51
|
)
|
||||
|
U.S. structured finance
|
|
1,302
|
|
|
(52
|
)
|
|
1,465
|
|
|
(85
|
)
|
||||
|
Non-U.S. structured finance
|
|
127
|
|
|
(8
|
)
|
|
127
|
|
|
(6
|
)
|
||||
|
Total
|
|
$
|
6,160
|
|
|
$
|
(216
|
)
|
|
$
|
6,182
|
|
|
$
|
(207
|
)
|
|
|
|
As of June 30, 2019
|
|
As of December 31, 2018
|
||||||||||
|
Ratings
|
|
Net Par
Outstanding
|
|
% of Total
|
|
Net Par
Outstanding
|
|
% of Total
|
||||||
|
|
|
(dollars in millions)
|
||||||||||||
|
AAA
|
|
$
|
1,730
|
|
|
28.1
|
%
|
|
$
|
1,813
|
|
|
29.4
|
%
|
|
AA
|
|
1,700
|
|
|
27.6
|
|
|
1,690
|
|
|
27.3
|
|
||
|
A
|
|
1,229
|
|
|
19.9
|
|
|
1,171
|
|
|
18.9
|
|
||
|
BBB
|
|
1,353
|
|
|
22.0
|
|
|
1,351
|
|
|
21.9
|
|
||
|
BIG (1)
|
|
148
|
|
|
2.4
|
|
|
157
|
|
|
2.5
|
|
||
|
Credit derivative net par outstanding
|
|
$
|
6,160
|
|
|
100.0
|
%
|
|
$
|
6,182
|
|
|
100.0
|
%
|
|
(1)
|
BIG relates to U.S. RMBS.
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Realized gains on credit derivatives
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
4
|
|
|
$
|
4
|
|
|
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements
|
(21
|
)
|
|
(1
|
)
|
|
(25
|
)
|
|
(1
|
)
|
||||
|
Realized gains (losses) and other settlements
|
(20
|
)
|
|
1
|
|
|
(21
|
)
|
|
3
|
|
||||
|
Net unrealized gains (losses)
|
12
|
|
|
47
|
|
|
(9
|
)
|
|
79
|
|
||||
|
Net change in fair value of credit derivatives
|
$
|
(8
|
)
|
|
$
|
48
|
|
|
$
|
(30
|
)
|
|
$
|
82
|
|
|
|
As of
June 30, 2019 |
|
As of
March 31, 2019 |
|
As of
December 31, 2018 |
|
As of
June 30, 2018 |
|
As of
March 31, 2018 |
|
As of
December 31, 2017 |
||||||
|
Five-year CDS spread:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
AGC
|
56
|
|
|
74
|
|
|
110
|
|
|
105
|
|
|
121
|
|
|
163
|
|
|
AGM
|
54
|
|
|
72
|
|
|
116
|
|
|
106
|
|
|
109
|
|
|
145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
One-year CDS spread
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
AGC
|
13
|
|
|
20
|
|
|
22
|
|
|
22
|
|
|
25
|
|
|
70
|
|
|
AGM
|
13
|
|
|
13
|
|
|
24
|
|
|
21
|
|
|
22
|
|
|
28
|
|
|
|
As of
June 30, 2019 |
|
As of
December 31, 2018 |
||||
|
|
(in millions)
|
||||||
|
Fair value of credit derivatives before effect of AGC and AGM credit spreads
|
$
|
(318
|
)
|
|
$
|
(407
|
)
|
|
Plus: Effect of AGC and AGM credit spreads
|
102
|
|
|
200
|
|
||
|
Net fair value of credit derivatives
|
$
|
(216
|
)
|
|
$
|
(207
|
)
|
|
|
As of
June 30, 2019 |
|
As of
December 31, 2018 |
||||
|
|
(in millions)
|
||||||
|
Gross par of CDS with collateral posting requirement
|
$
|
209
|
|
|
$
|
250
|
|
|
Maximum posting requirement
|
209
|
|
|
250
|
|
||
|
Collateral posted
|
1
|
|
|
1
|
|
||
|
9.
|
Variable Interest Entities
|
|
|
As of
June 30, 2019 |
|
As of
December 31, 2018 |
||||
|
|
(in millions)
|
||||||
|
Excess of unpaid principal over fair value of:
|
|
|
|
||||
|
FG VIEs' assets
|
$
|
286
|
|
|
$
|
350
|
|
|
FG VIEs' liabilities with recourse
|
22
|
|
|
48
|
|
||
|
FG VIEs' liabilities without recourse
|
20
|
|
|
28
|
|
||
|
Unpaid principal balance for the FG VIEs’ assets that were over 90 days or more past due
|
62
|
|
|
71
|
|
||
|
Unpaid principal for FG VIEs’ liabilities with recourse (1)
|
468
|
|
|
565
|
|
||
|
(1)
|
FG VIEs’ liabilities with recourse will mature at various dates ranging from 2019 to 2038.
|
|
|
As of June 30, 2019
|
|
As of December 31, 2018
|
||||||||||||
|
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
With recourse:
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
U.S. RMBS first lien
|
$
|
291
|
|
|
$
|
316
|
|
|
$
|
299
|
|
|
$
|
326
|
|
|
U.S. RMBS second lien
|
81
|
|
|
80
|
|
|
115
|
|
|
137
|
|
||||
|
Manufactured housing
|
49
|
|
|
50
|
|
|
53
|
|
|
54
|
|
||||
|
Total with recourse
|
421
|
|
|
446
|
|
|
467
|
|
|
517
|
|
||||
|
Without recourse
|
105
|
|
|
105
|
|
|
102
|
|
|
102
|
|
||||
|
Total
|
$
|
526
|
|
|
$
|
551
|
|
|
$
|
569
|
|
|
$
|
619
|
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Net earned premiums
|
$
|
(11
|
)
|
|
$
|
(3
|
)
|
|
$
|
(14
|
)
|
|
$
|
(6
|
)
|
|
Net investment income
|
(1
|
)
|
|
(1
|
)
|
|
(2
|
)
|
|
(2
|
)
|
||||
|
Fair value gains (losses) on FG VIEs (1)
|
33
|
|
|
2
|
|
|
38
|
|
|
6
|
|
||||
|
Loss and LAE
|
(14
|
)
|
|
(3
|
)
|
|
(15
|
)
|
|
3
|
|
||||
|
Effect on income before tax
|
7
|
|
|
(5
|
)
|
|
7
|
|
|
1
|
|
||||
|
Less: Tax provision (benefit)
|
1
|
|
|
(1
|
)
|
|
1
|
|
|
—
|
|
||||
|
Effect on net income (loss)
|
$
|
6
|
|
|
$
|
(4
|
)
|
|
$
|
6
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Effect on OCI
|
$
|
(1
|
)
|
|
$
|
4
|
|
|
$
|
(2
|
)
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Effect on cash flows from operating activities
|
$
|
(2
|
)
|
|
$
|
4
|
|
|
$
|
(1
|
)
|
|
$
|
6
|
|
|
(1)
|
See condensed consolidated statements of comprehensive income and Note 14, Shareholders' Equity, for information on changes in fair value of the FG VIEs’ liabilities with recourse that are attributable to changes in the Company's own credit risk.
|
|
10.
|
Income Taxes
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Expected tax provision (benefit) at statutory rates in taxable jurisdictions
|
$
|
38
|
|
|
$
|
14
|
|
|
$
|
47
|
|
|
$
|
49
|
|
|
Tax-exempt interest
|
(5
|
)
|
|
(6
|
)
|
|
(10
|
)
|
|
(12
|
)
|
||||
|
Change in liability for uncertain tax positions
|
—
|
|
|
1
|
|
|
—
|
|
|
(6
|
)
|
||||
|
Foreign taxes
|
4
|
|
|
6
|
|
|
5
|
|
|
3
|
|
||||
|
Taxes on reinsurance
|
3
|
|
|
(1
|
)
|
|
4
|
|
|
(1
|
)
|
||||
|
Other
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
|
(1
|
)
|
||||
|
Total provision (benefit) for income taxes
|
$
|
40
|
|
|
$
|
12
|
|
|
$
|
44
|
|
|
$
|
32
|
|
|
Effective tax rate
|
21.9
|
%
|
|
13.2
|
%
|
|
18.4
|
%
|
|
10.4
|
%
|
||||
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
U.S.
|
$
|
190
|
|
|
$
|
71
|
|
|
$
|
225
|
|
|
$
|
246
|
|
|
Bermuda
|
—
|
|
|
24
|
|
|
16
|
|
|
73
|
|
||||
|
U.K. and other
|
(8
|
)
|
|
(8
|
)
|
|
(1
|
)
|
|
(15
|
)
|
||||
|
Total
|
$
|
182
|
|
|
$
|
87
|
|
|
$
|
240
|
|
|
$
|
304
|
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
U.S.
|
$
|
227
|
|
|
$
|
189
|
|
|
$
|
376
|
|
|
$
|
436
|
|
|
Bermuda
|
40
|
|
|
36
|
|
|
73
|
|
|
88
|
|
||||
|
U.K. and other
|
(1
|
)
|
|
(5
|
)
|
|
12
|
|
|
(11
|
)
|
||||
|
Total
|
$
|
266
|
|
|
$
|
220
|
|
|
$
|
461
|
|
|
$
|
513
|
|
|
|
As of
June 30, 2019 |
|
As of
December 31, 2018 |
||||
|
|
(in millions)
|
||||||
|
Deferred tax assets (liabilities)
|
$
|
8
|
|
|
$
|
68
|
|
|
Current tax assets (liabilities)
|
3
|
|
|
22
|
|
||
|
(1)
|
Included in other assets or other liabilities on the condensed consolidated balance sheets.
|
|
11.
|
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.
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Premiums Written:
|
|
|
|
|
|
|
|
||||||||
|
Direct
|
$
|
50
|
|
|
$
|
62
|
|
|
$
|
89
|
|
|
$
|
135
|
|
|
Assumed
|
1
|
|
|
331
|
|
|
1
|
|
|
331
|
|
||||
|
Ceded (1)
|
(2
|
)
|
|
24
|
|
|
13
|
|
|
13
|
|
||||
|
Net
|
$
|
49
|
|
|
$
|
417
|
|
|
$
|
103
|
|
|
$
|
479
|
|
|
Premiums Earned:
|
|
|
|
|
|
|
|
||||||||
|
Direct
|
$
|
99
|
|
|
$
|
130
|
|
|
$
|
204
|
|
|
$
|
273
|
|
|
Assumed
|
15
|
|
|
9
|
|
|
30
|
|
|
14
|
|
||||
|
Ceded
|
(2
|
)
|
|
(3
|
)
|
|
(4
|
)
|
|
(6
|
)
|
||||
|
Net
|
$
|
112
|
|
|
$
|
136
|
|
|
$
|
230
|
|
|
$
|
281
|
|
|
Loss and LAE:
|
|
|
|
|
|
|
|
||||||||
|
Direct
|
$
|
—
|
|
|
$
|
49
|
|
|
$
|
54
|
|
|
$
|
35
|
|
|
Assumed
|
1
|
|
|
(5
|
)
|
|
2
|
|
|
(8
|
)
|
||||
|
Ceded
|
(2
|
)
|
|
—
|
|
|
(11
|
)
|
|
(1
|
)
|
||||
|
Net
|
$
|
(1
|
)
|
|
$
|
44
|
|
|
$
|
45
|
|
|
$
|
26
|
|
|
|
As of
June 30, 2019 |
|
As of
December 31, 2018 |
||||
|
|
(in millions)
|
||||||
|
Ceded premium payable, net of commissions
|
$
|
20
|
|
|
$
|
26
|
|
|
Ceded expected loss to be recovered (paid)
|
22
|
|
|
14
|
|
||
|
Financial guaranty ceded par outstanding (2)
|
1,372
|
|
|
2,389
|
|
||
|
Non-financial guaranty ceded exposure (see Note 3)
|
245
|
|
|
239
|
|
||
|
(1)
|
The total collateral posted by all non-affiliated reinsurers required to post, or that had agreed to post, collateral as of June 30, 2019 and December 31, 2018 was approximately $72 million and $80 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 in statutory financial statements, 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, $229 million and $236 million is rated BIG as of June 30, 2019 and December 31, 2018, respectively.
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Increase in net unearned premium reserve
|
$
|
15
|
|
|
$
|
56
|
|
|
$
|
15
|
|
|
$
|
60
|
|
|
Increase in net par outstanding
|
1,069
|
|
|
1,191
|
|
|
1,069
|
|
|
1,233
|
|
||||
|
Commutation gains (losses)
|
1
|
|
|
(18
|
)
|
|
1
|
|
|
(17
|
)
|
||||
|
|
Second Quarter 2019
|
|
Six Months 2019
|
||||
|
|
(in millions)
|
||||||
|
Lease cost (1)
|
$
|
2
|
|
|
$
|
4
|
|
|
Cash paid for amounts included in the measurement of lease liabilities
|
2
|
|
|
4
|
|
||
|
(1)
|
Variable and short-term lease costs are de minimis.
|
|
|
|
As of
June 30, 2019 |
||
|
Year
|
|
(in millions)
|
||
|
2019 (remaining six months)
|
$
|
4
|
|
|
|
2020
|
9
|
|
||
|
2021
|
8
|
|
||
|
2022
|
8
|
|
||
|
2023
|
9
|
|
||
|
Thereafter
|
72
|
|
||
|
Total lease payments (1)
|
110
|
|
||
|
Less: imputed interest
|
19
|
|
||
|
Total operating lease liabilities
|
$
|
91
|
|
|
|
(1)
|
At December 31, 2018, future lease payments were $9 million, $9 million, $8 million, $8 million, and $9 million for 2019 through 2023, respectively, and $72 million in aggregate for all years thereafter.
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions, except per share amounts)
|
||||||||||||||
|
Basic Earnings Per Share (EPS):
|
|
|
|
|
|
|
|
||||||||
|
Net income (loss) attributable to AGL
|
$
|
142
|
|
|
$
|
75
|
|
|
$
|
196
|
|
|
$
|
272
|
|
|
Less: Distributed and undistributed income (loss) available to nonvested shareholders
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
|
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic
|
$
|
142
|
|
|
$
|
75
|
|
|
$
|
196
|
|
|
$
|
272
|
|
|
Basic shares
|
101.2
|
|
|
111.7
|
|
|
102.1
|
|
|
113.4
|
|
||||
|
Basic EPS
|
$
|
1.40
|
|
|
$
|
0.67
|
|
|
$
|
1.92
|
|
|
$
|
2.39
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Diluted EPS:
|
|
|
|
|
|
|
|
||||||||
|
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic
|
$
|
142
|
|
|
$
|
75
|
|
|
$
|
196
|
|
|
$
|
272
|
|
|
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
|
$
|
142
|
|
|
$
|
75
|
|
|
$
|
196
|
|
|
$
|
272
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Basic shares
|
101.2
|
|
|
111.7
|
|
|
102.1
|
|
|
113.4
|
|
||||
|
Dilutive securities:
|
|
|
|
|
|
|
|
||||||||
|
Options and restricted stock awards
|
0.7
|
|
|
1.2
|
|
|
0.9
|
|
|
1.4
|
|
||||
|
Diluted shares
|
101.9
|
|
|
112.9
|
|
|
103.0
|
|
|
114.8
|
|
||||
|
Diluted EPS
|
$
|
1.39
|
|
|
$
|
0.67
|
|
|
$
|
1.90
|
|
|
$
|
2.37
|
|
|
Potentially dilutive securities excluded from computation of EPS because of antidilutive effect
|
0.1
|
|
|
0.1
|
|
|
—
|
|
|
0.2
|
|
||||
|
14.
|
Shareholders' Equity
|
|
|
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
AOCI |
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
|
Balance, March 31, 2019
|
$
|
222
|
|
|
$
|
99
|
|
|
$
|
(31
|
)
|
|
$
|
(37
|
)
|
|
$
|
8
|
|
|
261
|
|
|
|
Other comprehensive income (loss) before reclassifications
|
90
|
|
|
(40
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|
—
|
|
|
47
|
|
||||||
|
Less: Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Net realized investment gains (losses)
|
11
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
||||||
|
Net investment income
|
2
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
||||||
|
Fair value gains (losses) on FG VIEs
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
||||||
|
Total before tax
|
13
|
|
|
11
|
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
16
|
|
||||||
|
Tax (provision) benefit
|
(2
|
)
|
|
(3
|
)
|
|
2
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
||||||
|
Total amount reclassified from AOCI, net of tax
|
11
|
|
|
8
|
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
13
|
|
||||||
|
Net current period other comprehensive income (loss)
|
79
|
|
|
(48
|
)
|
|
4
|
|
|
(1
|
)
|
|
—
|
|
|
34
|
|
||||||
|
Balance, June 30, 2019
|
$
|
301
|
|
|
$
|
51
|
|
|
$
|
(27
|
)
|
|
$
|
(38
|
)
|
|
$
|
8
|
|
|
$
|
295
|
|
|
|
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
AOCI |
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
|
Balance, March 31, 2018
|
$
|
146
|
|
|
$
|
118
|
|
|
$
|
(35
|
)
|
|
$
|
(23
|
)
|
|
$
|
8
|
|
|
$
|
214
|
|
|
Other comprehensive income (loss) before reclassifications
|
(64
|
)
|
|
6
|
|
|
3
|
|
|
(9
|
)
|
|
—
|
|
|
(64
|
)
|
||||||
|
Less: Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Net realized investment gains (losses)
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||
|
Fair value gains (losses) on FG VIEs
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||
|
Total before tax
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||||
|
Tax (provision) benefit
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
Total amount reclassified from AOCI, net of tax
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||||
|
Net current period other comprehensive income (loss)
|
(63
|
)
|
|
6
|
|
|
4
|
|
|
(9
|
)
|
|
—
|
|
|
(62
|
)
|
||||||
|
Balance, June 30, 2018
|
$
|
83
|
|
|
$
|
124
|
|
|
$
|
(31
|
)
|
|
$
|
(32
|
)
|
|
$
|
8
|
|
|
$
|
152
|
|
|
|
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
AOCI
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
|
Balance, December 31, 2018
|
$
|
59
|
|
|
$
|
94
|
|
|
$
|
(31
|
)
|
|
$
|
(37
|
)
|
|
$
|
8
|
|
|
$
|
93
|
|
|
Other comprehensive income (loss) before reclassifications
|
255
|
|
|
(47
|
)
|
|
(4
|
)
|
|
(1
|
)
|
|
—
|
|
|
203
|
|
||||||
|
Less: Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Net realized investment gains (losses)
|
14
|
|
|
(18
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
||||||
|
Net investment income
|
2
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
||||||
|
Fair value gains (losses) on FG VIEs
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
||||||
|
Total before tax
|
16
|
|
|
(4
|
)
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
2
|
|
||||||
|
Tax (provision) benefit
|
(3
|
)
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||||
|
Total amount reclassified from AOCI, net of tax
|
13
|
|
|
(4
|
)
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||
|
Net current period other comprehensive income (loss)
|
242
|
|
|
(43
|
)
|
|
4
|
|
|
(1
|
)
|
|
—
|
|
|
202
|
|
||||||
|
Balance, June 30, 2019
|
$
|
301
|
|
|
$
|
51
|
|
|
$
|
(27
|
)
|
|
$
|
(38
|
)
|
|
$
|
8
|
|
|
$
|
295
|
|
|
|
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
AOCI
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
|
Balance, December 31, 2017
|
$
|
273
|
|
|
$
|
120
|
|
|
$
|
—
|
|
|
$
|
(29
|
)
|
|
$
|
8
|
|
|
$
|
372
|
|
|
Effect of adoption of ASU 2016-01 (1)
|
1
|
|
|
—
|
|
|
(33
|
)
|
|
—
|
|
|
—
|
|
|
(32
|
)
|
||||||
|
Other comprehensive income (loss) before reclassifications
|
(186
|
)
|
|
(5
|
)
|
|
(1
|
)
|
|
(3
|
)
|
|
—
|
|
|
(195
|
)
|
||||||
|
Less: Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Net realized investment gains (losses)
|
(5
|
)
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
||||||
|
Fair value gains (losses) on FG VIEs
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||||
|
Total before tax
|
(5
|
)
|
|
11
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
10
|
|
||||||
|
Tax (provision) benefit
|
—
|
|
|
(2
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
||||||
|
Total amount reclassified from AOCI, net of tax
|
(5
|
)
|
|
9
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
7
|
|
||||||
|
Net current period other comprehensive income (loss)
|
(191
|
)
|
|
4
|
|
|
2
|
|
|
(3
|
)
|
|
—
|
|
|
(188
|
)
|
||||||
|
Balance, June 30, 2018
|
$
|
83
|
|
|
$
|
124
|
|
|
$
|
(31
|
)
|
|
$
|
(32
|
)
|
|
$
|
8
|
|
|
$
|
152
|
|
|
(1)
|
On January 1, 2018, the Company adopted ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities, resulting in a cumulative-effect reclassification of a $32 million loss, net of tax, from retained earnings to AOCI.
|
|
Period
|
|
Number of Shares Repurchased
|
|
Total Payments
(in millions)
|
|
Average Price Paid Per Share
|
|||||
|
2018 (January 1 - March 31)
|
|
2,787,936
|
|
|
$
|
98
|
|
|
$
|
35.20
|
|
|
2018 (April 1 - June 30)
|
|
4,163,190
|
|
|
152
|
|
|
36.48
|
|
||
|
2018 (July 1 - September 30)
|
|
3,299,049
|
|
|
130
|
|
|
39.41
|
|
||
|
2018 (October 1 - December 31)
|
|
2,992,932
|
|
|
120
|
|
|
40.09
|
|
||
|
Total 2018
|
|
13,243,107
|
|
|
$
|
500
|
|
|
$
|
37.76
|
|
|
2019 (January 1 - March 31)
|
|
1,908,605
|
|
|
79
|
|
|
41.62
|
|
||
|
2019 (April 1 - June 30)
|
|
2,519,130
|
|
|
111
|
|
|
43.89
|
|
||
|
2019 (July 1 - August 7)
|
|
1,317,094
|
|
|
58
|
|
|
43.59
|
|
||
|
Total 2019
|
|
5,744,829
|
|
|
$
|
248
|
|
|
$
|
43.07
|
|
|
Cumulative repurchases since the beginning of 2013
|
|
100,300,786
|
|
|
$
|
2,964
|
|
|
$
|
29.55
|
|
|
15.
|
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
|
$
|
27
|
|
|
$
|
397
|
|
|
$
|
17
|
|
|
$
|
10,972
|
|
|
$
|
(430
|
)
|
|
$
|
10,983
|
|
|
Investment in subsidiaries
|
6,620
|
|
|
5,937
|
|
|
4,196
|
|
|
199
|
|
|
(16,952
|
)
|
|
—
|
|
||||||
|
Premiums receivable, net of commissions payable
|
—
|
|
|
—
|
|
|
—
|
|
|
1,020
|
|
|
(154
|
)
|
|
866
|
|
||||||
|
Deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
142
|
|
|
(36
|
)
|
|
106
|
|
||||||
|
Intercompany loan receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
50
|
|
|
(50
|
)
|
|
—
|
|
||||||
|
FG VIEs’ assets, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
526
|
|
|
—
|
|
|
526
|
|
||||||
|
Dividends receivable from affiliate
|
60
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(60
|
)
|
|
—
|
|
||||||
|
Other
|
27
|
|
|
82
|
|
|
30
|
|
|
2,687
|
|
|
(1,726
|
)
|
|
1,100
|
|
||||||
|
Total assets
|
$
|
6,734
|
|
|
$
|
6,416
|
|
|
$
|
4,243
|
|
|
$
|
15,596
|
|
|
$
|
(19,408
|
)
|
|
$
|
13,581
|
|
|
Liabilities and shareholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Unearned premium reserves
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,290
|
|
|
$
|
(903
|
)
|
|
$
|
3,387
|
|
|
Loss and LAE reserve
|
—
|
|
|
—
|
|
|
—
|
|
|
1,363
|
|
|
(261
|
)
|
|
1,102
|
|
||||||
|
Long-term debt
|
—
|
|
|
844
|
|
|
472
|
|
|
5
|
|
|
(88
|
)
|
|
1,233
|
|
||||||
|
Intercompany loan payable
|
—
|
|
|
50
|
|
|
—
|
|
|
300
|
|
|
(350
|
)
|
|
—
|
|
||||||
|
Credit derivative liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
259
|
|
|
(35
|
)
|
|
224
|
|
||||||
|
FG VIEs’ liabilities, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
551
|
|
|
—
|
|
|
551
|
|
||||||
|
Dividends payable to affiliate
|
—
|
|
|
60
|
|
|
—
|
|
|
—
|
|
|
(60
|
)
|
|
—
|
|
||||||
|
Other
|
12
|
|
|
66
|
|
|
68
|
|
|
918
|
|
|
(702
|
)
|
|
362
|
|
||||||
|
Total liabilities
|
12
|
|
|
1,020
|
|
|
540
|
|
|
7,686
|
|
|
(2,399
|
)
|
|
6,859
|
|
||||||
|
Total shareholders' equity attributable to Assured Guaranty Ltd.
|
6,722
|
|
|
5,396
|
|
|
3,703
|
|
|
7,711
|
|
|
(16,810
|
)
|
|
6,722
|
|
||||||
|
Noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
199
|
|
|
(199
|
)
|
|
—
|
|
||||||
|
Total shareholders' equity
|
6,722
|
|
|
5,396
|
|
|
3,703
|
|
|
7,910
|
|
|
(17,009
|
)
|
|
6,722
|
|
||||||
|
Total liabilities and shareholders' equity
|
$
|
6,734
|
|
|
$
|
6,416
|
|
|
$
|
4,243
|
|
|
$
|
15,596
|
|
|
$
|
(19,408
|
)
|
|
$
|
13,581
|
|
|
(1)
|
The fair value of the AGMH debt purchased by AGUS, and recorded in the AGUS investment portfolio, was $129 million.
|
|
|
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
|
|
||||||
|
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
|
|
|
2,437
|
|
|
(1,576
|
)
|
|
980
|
|
||||||
|
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 the AGMH debt purchased by AGUS, and recorded in the AGUS investment portfolio, was $125 million.
|
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Net earned premiums
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
114
|
|
|
$
|
(2
|
)
|
|
$
|
112
|
|
|
Net investment income
|
—
|
|
|
4
|
|
|
—
|
|
|
110
|
|
|
(4
|
)
|
|
110
|
|
||||||
|
Net realized investment gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
8
|
|
||||||
|
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
(8
|
)
|
||||||
|
Other
|
2
|
|
|
—
|
|
|
—
|
|
|
93
|
|
|
(51
|
)
|
|
44
|
|
||||||
|
Total revenues
|
2
|
|
|
4
|
|
|
—
|
|
|
317
|
|
|
(57
|
)
|
|
266
|
|
||||||
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
(6
|
)
|
|
(1
|
)
|
||||||
|
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
(1
|
)
|
|
4
|
|
||||||
|
Interest expense
|
—
|
|
|
13
|
|
|
14
|
|
|
1
|
|
|
(6
|
)
|
|
22
|
|
||||||
|
Other operating expenses
|
10
|
|
|
1
|
|
|
—
|
|
|
98
|
|
|
(49
|
)
|
|
60
|
|
||||||
|
Total expenses
|
10
|
|
|
14
|
|
|
14
|
|
|
109
|
|
|
(62
|
)
|
|
85
|
|
||||||
|
Equity in net earnings of investees
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
2
|
|
|
—
|
|
|
1
|
|
||||||
|
Income (loss) before income taxes and equity in net earnings of subsidiaries
|
(8
|
)
|
|
(11
|
)
|
|
(14
|
)
|
|
210
|
|
|
5
|
|
|
182
|
|
||||||
|
Total (provision) benefit for income taxes
|
—
|
|
|
2
|
|
|
3
|
|
|
(44
|
)
|
|
(1
|
)
|
|
(40
|
)
|
||||||
|
Equity in net earnings of subsidiaries
|
150
|
|
|
154
|
|
|
95
|
|
|
5
|
|
|
(404
|
)
|
|
—
|
|
||||||
|
Net income (loss)
|
$
|
142
|
|
|
$
|
145
|
|
|
$
|
84
|
|
|
$
|
171
|
|
|
$
|
(400
|
)
|
|
$
|
142
|
|
|
Less: noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
(5
|
)
|
|
—
|
|
||||||
|
Net income (loss) attributable to Assured Guaranty Ltd.
|
$
|
142
|
|
|
$
|
145
|
|
|
$
|
84
|
|
|
$
|
166
|
|
|
$
|
(395
|
)
|
|
$
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Comprehensive income (loss)
|
$
|
176
|
|
|
$
|
145
|
|
|
$
|
109
|
|
|
$
|
206
|
|
|
$
|
(460
|
)
|
|
$
|
176
|
|
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Net earned premiums
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
139
|
|
|
$
|
(3
|
)
|
|
$
|
136
|
|
|
Net investment income
|
—
|
|
|
2
|
|
|
—
|
|
|
99
|
|
|
(3
|
)
|
|
98
|
|
||||||
|
Net realized investment gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(2
|
)
|
||||||
|
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
48
|
|
|
—
|
|
|
48
|
|
||||||
|
Other
|
3
|
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
|
(54
|
)
|
|
(60
|
)
|
||||||
|
Total revenues
|
3
|
|
|
2
|
|
|
—
|
|
|
275
|
|
|
(60
|
)
|
|
220
|
|
||||||
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
46
|
|
|
(2
|
)
|
|
44
|
|
||||||
|
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
(1
|
)
|
|
4
|
|
||||||
|
Interest expense
|
—
|
|
|
12
|
|
|
14
|
|
|
2
|
|
|
(4
|
)
|
|
24
|
|
||||||
|
Other operating expenses
|
10
|
|
|
—
|
|
|
1
|
|
|
95
|
|
|
(44
|
)
|
|
62
|
|
||||||
|
Total expenses
|
10
|
|
|
12
|
|
|
15
|
|
|
148
|
|
|
(51
|
)
|
|
134
|
|
||||||
|
Equity in net earnings of investees
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||||
|
Income (loss) before income taxes and equity in net earnings of subsidiaries
|
(7
|
)
|
|
(10
|
)
|
|
(15
|
)
|
|
128
|
|
|
(9
|
)
|
|
87
|
|
||||||
|
Total (provision) benefit for income taxes
|
—
|
|
|
2
|
|
|
3
|
|
|
(20
|
)
|
|
3
|
|
|
(12
|
)
|
||||||
|
Equity in net earnings of subsidiaries
|
82
|
|
|
64
|
|
|
9
|
|
|
6
|
|
|
(161
|
)
|
|
—
|
|
||||||
|
Net income (loss)
|
$
|
75
|
|
|
$
|
56
|
|
|
$
|
(3
|
)
|
|
$
|
114
|
|
|
$
|
(167
|
)
|
|
$
|
75
|
|
|
Less: noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
(6
|
)
|
|
—
|
|
||||||
|
Net income (loss) attributable to Assured Guaranty Ltd.
|
$
|
75
|
|
|
$
|
56
|
|
|
$
|
(3
|
)
|
|
$
|
108
|
|
|
$
|
(161
|
)
|
|
$
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Comprehensive income (loss)
|
$
|
13
|
|
|
$
|
7
|
|
|
$
|
(53
|
)
|
|
$
|
52
|
|
|
$
|
(6
|
)
|
|
$
|
13
|
|
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Net earned premiums
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
235
|
|
|
$
|
(5
|
)
|
|
$
|
230
|
|
|
Net investment income
|
—
|
|
|
6
|
|
|
—
|
|
|
211
|
|
|
(9
|
)
|
|
208
|
|
||||||
|
Net realized investment gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
||||||
|
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
(30
|
)
|
|
—
|
|
|
(30
|
)
|
||||||
|
Other
|
4
|
|
|
—
|
|
|
—
|
|
|
159
|
|
|
(106
|
)
|
|
57
|
|
||||||
|
Total revenues
|
4
|
|
|
6
|
|
|
—
|
|
|
571
|
|
|
(120
|
)
|
|
461
|
|
||||||
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
52
|
|
|
(7
|
)
|
|
45
|
|
||||||
|
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
(2
|
)
|
|
10
|
|
||||||
|
Interest expense
|
—
|
|
|
25
|
|
|
27
|
|
|
5
|
|
|
(12
|
)
|
|
45
|
|
||||||
|
Other operating expenses
|
20
|
|
|
2
|
|
|
—
|
|
|
205
|
|
|
(103
|
)
|
|
124
|
|
||||||
|
Total expenses
|
20
|
|
|
27
|
|
|
27
|
|
|
274
|
|
|
(124
|
)
|
|
224
|
|
||||||
|
Equity in net earnings of investees
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
||||||
|
Income (loss) before income taxes and equity in net earnings of subsidiaries
|
(16
|
)
|
|
(21
|
)
|
|
(27
|
)
|
|
300
|
|
|
4
|
|
|
240
|
|
||||||
|
Total (provision) benefit for income taxes
|
—
|
|
|
4
|
|
|
6
|
|
|
(53
|
)
|
|
(1
|
)
|
|
(44
|
)
|
||||||
|
Equity in net earnings of subsidiaries
|
212
|
|
|
204
|
|
|
163
|
|
|
9
|
|
|
(588
|
)
|
|
—
|
|
||||||
|
Net income (loss)
|
$
|
196
|
|
|
$
|
187
|
|
|
$
|
142
|
|
|
$
|
256
|
|
|
$
|
(585
|
)
|
|
$
|
196
|
|
|
Less: noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
(9
|
)
|
|
—
|
|
||||||
|
Net income (loss) attributable to Assured Guaranty Ltd.
|
$
|
196
|
|
|
$
|
187
|
|
|
$
|
142
|
|
|
$
|
247
|
|
|
$
|
(576
|
)
|
|
$
|
196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Comprehensive income (loss)
|
$
|
398
|
|
|
$
|
315
|
|
|
$
|
261
|
|
|
$
|
460
|
|
|
$
|
(1,036
|
)
|
|
$
|
398
|
|
|
|
Assured
Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured
Guaranty Ltd.
(Consolidated)
|
||||||||||||
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Net earned premiums
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
288
|
|
|
$
|
(7
|
)
|
|
$
|
281
|
|
|
Net investment income
|
—
|
|
|
4
|
|
|
—
|
|
|
200
|
|
|
(6
|
)
|
|
198
|
|
||||||
|
Net realized investment gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
(7
|
)
|
||||||
|
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
82
|
|
|
—
|
|
|
82
|
|
||||||
|
Other
|
6
|
|
|
—
|
|
|
—
|
|
|
65
|
|
|
(112
|
)
|
|
(41
|
)
|
||||||
|
Total revenues
|
6
|
|
|
4
|
|
|
—
|
|
|
628
|
|
|
(125
|
)
|
|
513
|
|
||||||
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
(4
|
)
|
|
26
|
|
||||||
|
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
(2
|
)
|
|
9
|
|
||||||
|
Interest expense
|
—
|
|
|
24
|
|
|
27
|
|
|
5
|
|
|
(8
|
)
|
|
48
|
|
||||||
|
Other operating expenses
|
20
|
|
|
3
|
|
|
1
|
|
|
200
|
|
|
(97
|
)
|
|
127
|
|
||||||
|
Total expenses
|
20
|
|
|
27
|
|
|
28
|
|
|
246
|
|
|
(111
|
)
|
|
210
|
|
||||||
|
Equity in net earnings of investees
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||||
|
Income (loss) before income taxes and equity in net earnings of subsidiaries
|
(14
|
)
|
|
(23
|
)
|
|
(28
|
)
|
|
383
|
|
|
(14
|
)
|
|
304
|
|
||||||
|
Total (provision) benefit for income taxes
|
—
|
|
|
5
|
|
|
6
|
|
|
(45
|
)
|
|
2
|
|
|
(32
|
)
|
||||||
|
Equity in net earnings of subsidiaries
|
286
|
|
|
225
|
|
|
111
|
|
|
13
|
|
|
(635
|
)
|
|
—
|
|
||||||
|
Net income (loss)
|
$
|
272
|
|
|
$
|
207
|
|
|
$
|
89
|
|
|
$
|
351
|
|
|
$
|
(647
|
)
|
|
$
|
272
|
|
|
Less: noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
(13
|
)
|
|
—
|
|
||||||
|
Net income (loss) attributable to Assured Guaranty Ltd.
|
$
|
272
|
|
|
$
|
207
|
|
|
$
|
89
|
|
|
$
|
338
|
|
|
$
|
(634
|
)
|
|
$
|
272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Comprehensive income (loss)
|
$
|
84
|
|
|
$
|
74
|
|
|
$
|
(7
|
)
|
|
$
|
163
|
|
|
$
|
(230
|
)
|
|
$
|
84
|
|
|
|
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
|
$
|
226
|
|
|
$
|
110
|
|
|
$
|
56
|
|
|
$
|
(121
|
)
|
|
$
|
(469
|
)
|
|
$
|
(198
|
)
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Purchases
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(503
|
)
|
|
3
|
|
|
(503
|
)
|
||||||
|
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
914
|
|
|
—
|
|
|
914
|
|
||||||
|
Maturities and paydowns
|
—
|
|
|
—
|
|
|
2
|
|
|
504
|
|
|
—
|
|
|
506
|
|
||||||
|
Short-term investments with maturities of over three months:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Purchases
|
—
|
|
|
—
|
|
|
—
|
|
|
(209
|
)
|
|
—
|
|
|
(209
|
)
|
||||||
|
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||||
|
Maturities and paydowns
|
—
|
|
|
12
|
|
|
—
|
|
|
162
|
|
|
—
|
|
|
174
|
|
||||||
|
Net sales (purchases) of short-term investments with maturities of less than three months
|
18
|
|
|
(72
|
)
|
|
5
|
|
|
(340
|
)
|
|
—
|
|
|
(389
|
)
|
||||||
|
Net proceeds from paydowns on FG VIEs’ assets
|
—
|
|
|
—
|
|
|
—
|
|
|
50
|
|
|
—
|
|
|
50
|
|
||||||
|
Net proceeds from sales of FG VIEs’ assets
|
—
|
|
|
—
|
|
|
—
|
|
|
51
|
|
|
—
|
|
|
51
|
|
||||||
|
Proceeds from stock redemption and return of capital from subsidiaries
|
—
|
|
|
100
|
|
|
—
|
|
|
10
|
|
|
(110
|
)
|
|
—
|
|
||||||
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
35
|
|
|
—
|
|
|
35
|
|
||||||
|
Net cash flows provided by (used in) investing activities
|
18
|
|
|
37
|
|
|
7
|
|
|
676
|
|
|
(107
|
)
|
|
631
|
|
||||||
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Return of capital
|
—
|
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
10
|
|
|
—
|
|
||||||
|
Dividends paid
|
(39
|
)
|
|
(147
|
)
|
|
(62
|
)
|
|
(260
|
)
|
|
469
|
|
|
(39
|
)
|
||||||
|
Repurchases of common stock
|
(190
|
)
|
|
—
|
|
|
—
|
|
|
(100
|
)
|
|
100
|
|
|
(190
|
)
|
||||||
|
Repurchases of common stock to pay withholding taxes
|
(16
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16
|
)
|
||||||
|
Net paydowns of FG VIEs’ liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(95
|
)
|
|
—
|
|
|
(95
|
)
|
||||||
|
Paydown of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(3
|
)
|
|
(4
|
)
|
||||||
|
Proceeds from options exercises
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||
|
Net cash flows provided by (used in) financing activities
|
(244
|
)
|
|
(147
|
)
|
|
(62
|
)
|
|
(466
|
)
|
|
576
|
|
|
(343
|
)
|
||||||
|
Effect of exchange rate changes
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
Increase (decrease) in cash and restricted cash
|
—
|
|
|
—
|
|
|
1
|
|
|
89
|
|
|
—
|
|
|
90
|
|
||||||
|
Cash and restricted cash at beginning of period
|
—
|
|
|
1
|
|
|
—
|
|
|
103
|
|
|
—
|
|
|
104
|
|
||||||
|
Cash and restricted cash at end of period
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
192
|
|
|
$
|
—
|
|
|
$
|
194
|
|
|
|
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
|
$
|
296
|
|
|
$
|
88
|
|
|
$
|
43
|
|
|
$
|
524
|
|
|
$
|
(507
|
)
|
|
$
|
444
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Purchases
|
—
|
|
|
(27
|
)
|
|
(12
|
)
|
|
(863
|
)
|
|
23
|
|
|
(879
|
)
|
||||||
|
Sales
|
—
|
|
|
11
|
|
|
2
|
|
|
579
|
|
|
—
|
|
|
592
|
|
||||||
|
Maturities and paydowns
|
—
|
|
|
10
|
|
|
—
|
|
|
523
|
|
|
—
|
|
|
533
|
|
||||||
|
Short-term investments with maturities of over three months:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Purchases
|
—
|
|
|
—
|
|
|
—
|
|
|
(121
|
)
|
|
—
|
|
|
(121
|
)
|
||||||
|
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||||
|
Maturities and paydowns
|
—
|
|
|
—
|
|
|
—
|
|
|
104
|
|
|
—
|
|
|
104
|
|
||||||
|
Net sales (purchases) of short-term investments with maturities of less than three months
|
3
|
|
|
(78
|
)
|
|
16
|
|
|
(229
|
)
|
|
—
|
|
|
(288
|
)
|
||||||
|
Net proceeds from paydowns on FG VIEs’ assets
|
—
|
|
|
—
|
|
|
—
|
|
|
60
|
|
|
—
|
|
|
60
|
|
||||||
|
Proceeds from stock redemption and return of capital from subsidiaries
|
—
|
|
|
200
|
|
|
—
|
|
|
—
|
|
|
(200
|
)
|
|
—
|
|
||||||
|
Other
|
—
|
|
|
(15
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(16
|
)
|
||||||
|
Net cash flows provided by (used in) investing activities
|
3
|
|
|
101
|
|
|
6
|
|
|
53
|
|
|
(177
|
)
|
|
(14
|
)
|
||||||
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Dividends paid
|
(37
|
)
|
|
(222
|
)
|
|
(50
|
)
|
|
(235
|
)
|
|
507
|
|
|
(37
|
)
|
||||||
|
Repurchases of common stock
|
(250
|
)
|
|
—
|
|
|
—
|
|
|
(200
|
)
|
|
200
|
|
|
(250
|
)
|
||||||
|
Repurchases of common stock to pay withholding taxes
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
||||||
|
Net paydowns of FG VIEs’ liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(61
|
)
|
|
—
|
|
|
(61
|
)
|
||||||
|
Paydown of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(23
|
)
|
|
(24
|
)
|
||||||
|
Proceeds from options exercises
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||
|
Net cash flows provided by (used in) financing activities
|
(299
|
)
|
|
(222
|
)
|
|
(50
|
)
|
|
(497
|
)
|
|
684
|
|
|
(384
|
)
|
||||||
|
Effect of exchange rate changes
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||||
|
Increase (decrease) in cash and restricted cash
|
—
|
|
|
(33
|
)
|
|
(1
|
)
|
|
79
|
|
|
—
|
|
|
45
|
|
||||||
|
Cash and restricted cash at beginning of period
|
—
|
|
|
33
|
|
|
2
|
|
|
109
|
|
|
—
|
|
|
144
|
|
||||||
|
Cash and restricted cash at end of period
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
188
|
|
|
$
|
—
|
|
|
$
|
189
|
|
|
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
•
|
reduction in the amount of available insurance opportunities and/or in the demand for Assured Guaranty's insurance;
|
|
•
|
rating agency action, including a ratings downgrade, a change in outlook, the placement of ratings on watch for downgrade, or a change in rating criteria, at any time, of AGL or any of its subsidiaries, and/or of any securities AGL or any of its subsidiaries have issued, and/or of transactions that AGL’s subsidiaries have insured;
|
|
•
|
developments in the world’s financial and capital markets that adversely affect obligors’ payment rates or Assured Guaranty’s loss experience;
|
|
•
|
the possibility that budget or pension shortfalls or other factors will result in credit losses or impairments on obligations of state, territorial and local governments and their related authorities and public corporations that Assured Guaranty insures or reinsures;
|
|
•
|
the failure of Assured Guaranty to realize loss recoveries that are assumed in its expected loss estimates;
|
|
•
|
increased competition, including from new entrants into the financial guaranty industry;
|
|
•
|
rating agency action on obligors, including sovereign debtors, resulting in a reduction in the value of securities in Assured Guaranty's investment portfolio and in collateral posted by and to Assured Guaranty;
|
|
•
|
the inability of Assured Guaranty to access external sources of capital on acceptable terms;
|
|
•
|
changes in the world’s credit markets, segments thereof, interest rates or general economic conditions;
|
|
•
|
the impact of market volatility on the mark-to-market of Assured Guaranty’s assets and liabilities subject to mark-to-market, including certain of its investments, most of its contracts written in credit default swap (CDS) form, and variable interest entities (VIEs);
|
|
•
|
changes in applicable accounting policies or practices;
|
|
•
|
changes in applicable laws or regulations, including insurance, bankruptcy and tax laws, or other governmental actions;
|
|
•
|
the impact of changes in the world’s economy and credit and currency markets and in applicable laws or regulations relating to the decision of the United Kingdom (U.K.) to exit the European Union (EU);
|
|
•
|
the possibility that Assured Guaranty's planned acquisition (BlueMountain Acquisition) of all of the outstanding equity interests in BlueMountain Capital Management, LLC (BlueMountain) and its associated entities fails to close or is delayed due to the failure to fulfill or waive closing conditions, including the receipt of necessary regulatory approvals and client consents, or fails to close or is delayed for other reasons;
|
|
•
|
the impact of the announcement of Assured Guaranty's planned BlueMountain Acquisition on the Company and its relationships with its investors, regulators, rating agencies, employees and the obligors it insures and on the business of BlueMountain and its relationships with its clients and employees;
|
|
•
|
the possibility that regulators, clients of BlueMountain or others will impose conditions on their approvals or consents of the planned BlueMountain Acquisition or not provide approvals or consents Assured Guaranty anticipated receiving and receipt of which is not a condition to closing;
|
|
•
|
the failure of Assured Guaranty to successfully integrate the business of BlueMountain after closing;
|
|
•
|
the possibility that acquisitions or alternative investments made by Assured Guaranty, including its anticipated BlueMountain Acquisition, do not result in the benefits anticipated or subject Assured Guaranty to unanticipated consequences;
|
|
•
|
difficulties with the execution of Assured Guaranty’s business strategy;
|
|
•
|
loss of key personnel;
|
|
•
|
the effects of mergers, acquisitions and divestitures;
|
|
•
|
natural or man-made catastrophes;
|
|
•
|
other risk factors identified in AGL’s filings with the United States (U.S.) Securities and Exchange Commission (the SEC);
|
|
•
|
other risks and uncertainties that have not been identified at this time; and
|
|
•
|
management’s response to these factors.
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions, except per share amounts)
|
||||||||||||||
|
GAAP Highlights
|
|
|
|
|
|
|
|
||||||||
|
Net income (loss)
|
$
|
142
|
|
|
$
|
75
|
|
|
$
|
196
|
|
|
$
|
272
|
|
|
Net income (loss) per diluted share
|
1.39
|
|
|
0.67
|
|
|
1.90
|
|
|
2.37
|
|
||||
|
Weighted average diluted shares
|
101.9
|
|
|
112.9
|
|
|
103.0
|
|
|
114.8
|
|
||||
|
Gross written premiums (GWP)
|
51
|
|
|
393
|
|
|
90
|
|
|
466
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Non-GAAP Highlights(1)
|
|
|
|
|
|
|
|
||||||||
|
Non-GAAP operating income(1)
|
141
|
|
|
74
|
|
|
227
|
|
|
229
|
|
||||
|
Gain (loss) related to the effect of consolidating financial guaranty variable interest entities (FG VIE consolidation) included in non-GAAP operating income
|
6
|
|
|
(4
|
)
|
|
6
|
|
|
1
|
|
||||
|
Non-GAAP operating income (1) per diluted share
|
1.38
|
|
|
0.66
|
|
|
2.20
|
|
|
1.99
|
|
||||
|
Gain (loss) related to FG VIE consolidation included in non-GAAP operating income per diluted share
|
0.05
|
|
|
(0.03
|
)
|
|
0.06
|
|
|
0.01
|
|
||||
|
Present value of new business production (PVP) (1)
|
54
|
|
|
454
|
|
|
96
|
|
|
515
|
|
||||
|
Gross par written
|
4,183
|
|
|
14,571
|
|
|
6,890
|
|
|
16,773
|
|
||||
|
|
As of June 30, 2019
|
|
As of December 31, 2018
|
||||||||||||
|
|
Amount
|
|
Per Share
|
|
Amount
|
|
Per Share
|
||||||||
|
|
(in millions, except per share amounts)
|
||||||||||||||
|
Shareholders' equity
|
$
|
6,722
|
|
|
$
|
67.35
|
|
|
$
|
6,555
|
|
|
$
|
63.23
|
|
|
Non-GAAP operating shareholders' equity (1)
|
6,335
|
|
|
63.48
|
|
|
6,342
|
|
|
61.17
|
|
||||
|
Non-GAAP adjusted book value (1)
|
8,849
|
|
|
88.67
|
|
|
8,922
|
|
|
86.06
|
|
||||
|
Gain (loss) related to FG VIE consolidation included in non-GAAP operating shareholders' equity
|
12
|
|
|
0.12
|
|
|
3
|
|
|
0.03
|
|
||||
|
Gain (loss) related to FG VIE consolidation included in non-GAAP adjusted book value
|
(2
|
)
|
|
(0.02
|
)
|
|
(15
|
)
|
|
(0.15
|
)
|
||||
|
Common shares outstanding (2)
|
99.8
|
|
|
|
|
103.7
|
|
|
|
||||||
|
(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.
|
|
(2)
|
See "Key Business Strategies – Capital Management" below for information on common share repurchases.
|
|
•
|
Loss and LAE was a benefit of $1 million in Second Quarter 2019 which consisted of a benefit for U.S. RMBS transactions, partially offset by an increase in public finance losses, compared with a loss of $44 million in Second Quarter 2018, primarily attributable to Puerto Rico exposures.
|
|
•
|
FG VIEs gains were $33 million in Second Quarter 2019, primarily attributable to higher recoveries on second lien U.S. RMBS FG VIEs' assets, compared with gains of $2 million in Second Quarter 2018.
|
|
•
|
Foreign exchange losses were $14 million in Second Quarter 2019, compared with losses of $36 million in Second Quarter 2018. Foreign exchange gains and losses relate primarily 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.
|
|
•
|
Fair value gains on CCS recorded in other income were $19 million in Second Quarter 2019 and were primarily due to widening of spreads of comparable securities relative to changes in treasury yields during the quarter, compared with losses of $1 million in Second Quarter 2018.
|
|
•
|
Other income also includes commutation gains of $1 million in Second Quarter 2019, compared with commutation losses of $18 million in Second Quarter 2018 related to the transaction (SGI Transaction) closed on June 1, 2018 with Syncora Guarantee Inc. (SGI).
|
|
•
|
Fair value losses on credit derivatives were $8 million in Second Quarter 2019 primarily due to changes in the Company's spreads, partially offset by price improvements on the underlying collateral, compared with gains of $48 million in Second Quarter 2018 which were primarily attributable to price improvements on the underlying collateral of the Company's insured CDS. Except for credit impairment, the fair value adjustments on credit derivatives in the insured portfolio are non-economic adjustments that reverse to zero over the remaining term of that portfolio.
|
|
•
|
Net earned premiums were $112 million in Second Quarter 2019, compared with $136 million in Second Quarter 2018; the decline was due to lower accelerations from refundings and terminations, which were $20 million in Second Quarter 2019, compared with $39 million in Second Quarter 2018.
|
|
•
|
The effective tax rate in Second Quarter 2019 was 22% compared with 13% in Second Quarter 2018. The effective tax rate fluctuates from period to period based on the proportion of income in different tax jurisdictions.
|
|
•
|
Fair value losses on credit derivatives were $30 million in Six Months 2019 and were primarily due to wider implied net spreads driven by the decreased market cost to buy protection in Assured Guaranty Corp.'s (AGC) name during the period. Fair value gains on credit derivatives were $82 million in Six Months 2018, primarily attributable to the increase in credit given to the primary insurer on one of the Company's second-to-pay CDS policies, CDS terminations, and price improvements on the underlying collateral of the Company’s CDS.
|
|
•
|
Net earned premiums were $230 million in Six Months 2019, compared with $281 million in Six Months 2018; the decline was due to lower accelerations from refundings and terminations, which were $46 million in Six Months 2019, compared with $91 million in Six Months 2018.
|
|
•
|
Loss and LAE was a loss of $45 million in Six Months 2019, mainly driven by higher losses on certain Puerto Rico exposures, partially offset by a benefit on U.S. RMBS exposures, compared with a loss of $26 million in Six Months 2018, mainly driven by higher losses on certain Puerto Rico exposures, partially offset by the reduction of loss reserves on the City of Hartford, Connecticut exposure and a benefit on U.S. RMBS exposures.
|
|
•
|
The effective tax rate in Six Months 2019 was 18% compared with 10% in Six Months 2018. The effective tax rate fluctuates from period to period based on a proportion of income in different tax jurisdictions.
|
|
•
|
FG VIEs gains were $38 million in Six Months 2019, primarily attributable to higher recoveries on second lien U.S. RMBS FG VIEs' assets, compared with gains of $6 million in Six Months 2018.
|
|
•
|
Commutation gains recorded in other income were $1 million in Six Months 2019 compared with commutation losses of $17 million in Six Months 2018 related to the SGI Transaction.
|
|
•
|
Loss on extinguishment of debt was $1 million in Six Months 2019, compared with $17 million in Six Months 2018. The loss on extinguishment of debt is related to Assured Guaranty US Holdings Inc. (AGUS) purchase of a portion of the principal amount of Assured Guaranty Municipal Holdings Inc.'s (AGMH) outstanding Junior Subordinated Debentures. In Six Months 2019 and Six Months 2018, AGUS purchased $3 million and $47 million, respectively, of par.
|
|
•
|
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.
|
|
|
Six Months 2019
|
|
Six Months 2018
|
|
Year Ended December 31, 2018
|
||||||
|
|
(dollars in billions, except number of issues and percent)
|
||||||||||
|
Par:
|
|
|
|
|
|
||||||
|
New municipal bonds issued
|
$
|
165.0
|
|
|
$
|
155.9
|
|
|
$
|
320.3
|
|
|
Total insured
|
$
|
9.7
|
|
|
$
|
9.1
|
|
|
$
|
18.9
|
|
|
Insured by Assured Guaranty
|
$
|
5.7
|
|
|
$
|
5.1
|
|
|
$
|
10.5
|
|
|
Number of issues:
|
|
|
|
|
|
||||||
|
New municipal bonds issued
|
4,637
|
|
|
4,302
|
|
|
8,555
|
|
|||
|
Total insured
|
797
|
|
|
625
|
|
|
1,246
|
|
|||
|
Insured by Assured Guaranty
|
423
|
|
|
283
|
|
|
596
|
|
|||
|
Bond insurance market penetration based on:
|
|
|
|
|
|
||||||
|
Par
|
5.9
|
%
|
|
5.8
|
%
|
|
5.9
|
%
|
|||
|
Number of issues
|
17.2
|
%
|
|
14.5
|
%
|
|
14.6
|
%
|
|||
|
Single A par sold
|
22.9
|
%
|
|
19.2
|
%
|
|
17.8
|
%
|
|||
|
Single A transactions sold
|
57.9
|
%
|
|
53.2
|
%
|
|
52.8
|
%
|
|||
|
$25 million and under par sold
|
18.2
|
%
|
|
17.8
|
%
|
|
17.2
|
%
|
|||
|
$25 million and under transactions sold
|
20.4
|
%
|
|
17.0
|
%
|
|
17.1
|
%
|
|||
|
(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.
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
GWP
|
|
|
|
|
|
|
|
||||||||
|
Public Finance—U.S.
|
$
|
43
|
|
|
$
|
170
|
|
|
$
|
73
|
|
|
$
|
203
|
|
|
Public Finance—non-U.S.
|
12
|
|
|
55
|
|
|
14
|
|
|
94
|
|
||||
|
Structured Finance—U.S.
|
(4
|
)
|
|
158
|
|
|
2
|
|
|
159
|
|
||||
|
Structured Finance—non-U.S.
|
—
|
|
|
10
|
|
|
1
|
|
|
10
|
|
||||
|
Total GWP
|
$
|
51
|
|
|
$
|
393
|
|
|
$
|
90
|
|
|
$
|
466
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
PVP (1):
|
|
|
|
|
|
|
|
||||||||
|
Public Finance—U.S.
|
$
|
44
|
|
|
$
|
234
|
|
|
$
|
76
|
|
|
$
|
269
|
|
|
Public Finance—non-U.S.
|
7
|
|
|
53
|
|
|
11
|
|
|
79
|
|
||||
|
Structured Finance—U.S.
|
3
|
|
|
158
|
|
|
8
|
|
|
158
|
|
||||
|
Structured Finance—non-U.S. (2)
|
—
|
|
|
9
|
|
|
1
|
|
|
9
|
|
||||
|
Total PVP
|
$
|
54
|
|
|
$
|
454
|
|
|
$
|
96
|
|
|
$
|
515
|
|
|
Gross Par Written (1):
|
|
|
|
|
|
|
|
||||||||
|
Public Finance—U.S.
|
$
|
3,657
|
|
|
$
|
10,675
|
|
|
$
|
5,673
|
|
|
$
|
12,679
|
|
|
Public Finance—non-U.S.
|
299
|
|
|
3,345
|
|
|
475
|
|
|
3,532
|
|
||||
|
Structured Finance—U.S.
|
227
|
|
|
393
|
|
|
721
|
|
|
404
|
|
||||
|
Structured Finance—non-U.S. (2)
|
—
|
|
|
158
|
|
|
21
|
|
|
158
|
|
||||
|
Total gross par written
|
$
|
4,183
|
|
|
$
|
14,571
|
|
|
$
|
6,890
|
|
|
$
|
16,773
|
|
|
Average rating on new business written
|
A-
|
|
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.”
|
|
|
GWP
|
|
PVP
|
|
|
||||||||||||||
|
|
Financial Guaranty
|
|
Financial Guaranty
|
|
Credit
Derivatives
|
|
Total
|
|
Gross Par
Written
|
||||||||||
|
|
(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)
|
On a GAAP basis, in Second Quarter 2018, the SGI Transaction included transactions with $131 million in expected losses (discounted at a risk-free rate). On a non-GAAP basis, SGI Transaction included transactions with expected losses of $83 million (discounted at 6%, consistent with the PVP discount rate).
|
|
|
Amount
|
|
Number of Shares
|
|
Average price
per share
|
|||||
|
|
(in millions, except per share data)
|
|||||||||
|
2013 - 2018
|
$
|
2,716
|
|
|
94.556
|
|
|
$
|
28.73
|
|
|
2019 (First Quarter)
|
79
|
|
|
1.909
|
|
|
41.62
|
|
||
|
2019 (Second Quarter)
|
111
|
|
|
2.519
|
|
|
43.89
|
|
||
|
2019 (July 1 - August 7)
|
58
|
|
|
1.317
|
|
|
43.59
|
|
||
|
Cumulative repurchases since the beginning of 2013
|
$
|
2,964
|
|
|
100.301
|
|
|
$
|
29.55
|
|
|
|
Second Quarter 2019
|
|
Six Months 2019
|
|
As of
June 30, 2019 |
||||||
|
|
(per share)
|
||||||||||
|
Net income
|
$
|
0.59
|
|
|
$
|
0.70
|
|
|
|
||
|
Non-GAAP operating income
|
0.58
|
|
|
0.85
|
|
|
|
||||
|
Shareholders' equity
|
|
|
|
|
$
|
18.72
|
|
||||
|
Non-GAAP operating shareholders' equity
|
|
|
|
|
16.86
|
|
|||||
|
Non-GAAP adjusted book value
|
|
|
|
|
29.33
|
|
|||||
|
(1)
|
Represents estimated accretive effect of cumulative share repurchases since the beginning of 2013.
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Revenues:
|
|
|
|
|
|
|
|
||||||||
|
Net earned premiums
|
$
|
112
|
|
|
$
|
136
|
|
|
$
|
230
|
|
|
$
|
281
|
|
|
Net investment income
|
110
|
|
|
98
|
|
|
208
|
|
|
198
|
|
||||
|
Net realized investment gains (losses)
|
8
|
|
|
(2
|
)
|
|
(4
|
)
|
|
(7
|
)
|
||||
|
Net change in fair value of credit derivatives
|
(8
|
)
|
|
48
|
|
|
(30
|
)
|
|
82
|
|
||||
|
Fair value gains (losses) on FG VIEs
|
33
|
|
|
2
|
|
|
38
|
|
|
6
|
|
||||
|
Foreign exchange gain (loss) on remeasurement
|
(14
|
)
|
|
(36
|
)
|
|
(3
|
)
|
|
(14
|
)
|
||||
|
Other income (loss)
|
25
|
|
|
(26
|
)
|
|
22
|
|
|
(33
|
)
|
||||
|
Total revenues
|
266
|
|
|
220
|
|
|
461
|
|
|
513
|
|
||||
|
Expenses:
|
|
|
|
|
|
|
|
||||||||
|
Loss and LAE
|
(1
|
)
|
|
44
|
|
|
45
|
|
|
26
|
|
||||
|
Amortization of deferred acquisition costs
|
4
|
|
|
4
|
|
|
10
|
|
|
9
|
|
||||
|
Interest expense
|
22
|
|
|
24
|
|
|
45
|
|
|
48
|
|
||||
|
Other operating expenses
|
60
|
|
|
62
|
|
|
124
|
|
|
127
|
|
||||
|
Total expenses
|
85
|
|
|
134
|
|
|
224
|
|
|
210
|
|
||||
|
Income (loss) before provision for income taxes and equity in net earnings of investees
|
181
|
|
|
86
|
|
|
237
|
|
|
303
|
|
||||
|
Equity in net earnings of investees
|
1
|
|
|
1
|
|
|
3
|
|
|
1
|
|
||||
|
Income (loss) before income taxes
|
182
|
|
|
87
|
|
|
240
|
|
|
304
|
|
||||
|
Provision (benefit) for income taxes
|
40
|
|
|
12
|
|
|
44
|
|
|
32
|
|
||||
|
Net income (loss)
|
$
|
142
|
|
|
$
|
75
|
|
|
$
|
196
|
|
|
$
|
272
|
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Financial guaranty insurance:
|
|
|
|
|
|
|
|
||||||||
|
Public finance
|
|
|
|
|
|
|
|
||||||||
|
Scheduled net earned premiums
|
$
|
72
|
|
|
$
|
76
|
|
|
$
|
143
|
|
|
$
|
148
|
|
|
Accelerations:
|
|
|
|
|
|
|
|
||||||||
|
Refundings
|
22
|
|
|
35
|
|
|
49
|
|
|
81
|
|
||||
|
Terminations
|
—
|
|
|
1
|
|
|
—
|
|
|
7
|
|
||||
|
Total accelerations
|
22
|
|
|
36
|
|
|
49
|
|
|
88
|
|
||||
|
Total public finance
|
94
|
|
|
112
|
|
|
192
|
|
|
236
|
|
||||
|
Structured finance (1)
|
|
|
|
|
|
|
|
||||||||
|
Scheduled net earned premiums
|
18
|
|
|
20
|
|
|
38
|
|
|
40
|
|
||||
|
Terminations
|
(2
|
)
|
|
3
|
|
|
(3
|
)
|
|
3
|
|
||||
|
Total structured finance
|
16
|
|
|
23
|
|
|
35
|
|
|
43
|
|
||||
|
Non-financial guaranty
|
2
|
|
|
1
|
|
|
3
|
|
|
2
|
|
||||
|
Total net earned premiums
|
$
|
112
|
|
|
$
|
136
|
|
|
$
|
230
|
|
|
$
|
281
|
|
|
(1)
|
Excludes $11 million and $3 million for Second Quarter 2019 and Second Quarter 2018, respectively, and $14 million and $6 million for Six Months 2019 and 2018, respectively, related to consolidated FG VIEs.
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Income from fixed-maturity securities managed by third parties
|
$
|
69
|
|
|
$
|
74
|
|
|
$
|
141
|
|
|
$
|
149
|
|
|
Income from internally managed securities
|
43
|
|
|
27
|
|
|
71
|
|
|
54
|
|
||||
|
Gross investment income
|
112
|
|
|
101
|
|
|
212
|
|
|
203
|
|
||||
|
Investment expenses
|
(2
|
)
|
|
(3
|
)
|
|
(4
|
)
|
|
(5
|
)
|
||||
|
Net investment income
|
$
|
110
|
|
|
$
|
98
|
|
|
$
|
208
|
|
|
$
|
198
|
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Gross realized gains on available-for-sale securities
|
$
|
13
|
|
|
$
|
2
|
|
|
$
|
19
|
|
|
$
|
11
|
|
|
Gross realized losses on available-for-sale securities
|
(1
|
)
|
|
(1
|
)
|
|
(3
|
)
|
|
(6
|
)
|
||||
|
Net realized gains (losses) on other invested assets
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||
|
OTTI
|
(4
|
)
|
|
(3
|
)
|
|
(20
|
)
|
|
(11
|
)
|
||||
|
Net realized investment gains (losses)
|
$
|
8
|
|
|
$
|
(2
|
)
|
|
$
|
(4
|
)
|
|
$
|
(7
|
)
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Change in unrealized gains (losses) on credit derivatives:
|
|
|
|
|
|
|
|
||||||||
|
Before considering implication of the Company’s credit spreads
|
$
|
37
|
|
|
$
|
52
|
|
|
$
|
59
|
|
|
$
|
105
|
|
|
Resulting from change in the Company’s credit spreads
|
(25
|
)
|
|
(5
|
)
|
|
(68
|
)
|
|
(26
|
)
|
||||
|
After considering implication of the Company’s credit spreads
|
$
|
12
|
|
|
$
|
47
|
|
|
$
|
(9
|
)
|
|
$
|
79
|
|
|
|
|
As of June 30, 2019
|
|
As of December 31, 2018
|
||||||||||||
|
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
|
|
$
|
(353
|
)
|
|
$
|
(137
|
)
|
|
$
|
(348
|
)
|
|
$
|
(141
|
)
|
|
Base Scenario
|
|
(216
|
)
|
|
—
|
|
|
(207
|
)
|
|
—
|
|
||||
|
Decrease of 25 bps
|
|
(134
|
)
|
|
82
|
|
|
(143
|
)
|
|
64
|
|
||||
|
All transactions priced at floor
|
|
(71
|
)
|
|
145
|
|
|
(101
|
)
|
|
106
|
|
||||
|
(1)
|
Includes the effects of changes in the net spreads assumed by the Company.
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Commutation gains (losses)
|
$
|
1
|
|
|
$
|
(18
|
)
|
|
$
|
1
|
|
|
$
|
(17
|
)
|
|
Loss on extinguishment of debt (1)
|
—
|
|
|
(10
|
)
|
|
(1
|
)
|
|
(17
|
)
|
||||
|
Fair value gains (losses) on CCS (2)
|
19
|
|
|
(1
|
)
|
|
10
|
|
|
(2
|
)
|
||||
|
Other
|
5
|
|
|
3
|
|
|
12
|
|
|
3
|
|
||||
|
Total other income (loss)
|
$
|
25
|
|
|
$
|
(26
|
)
|
|
$
|
22
|
|
|
$
|
(33
|
)
|
|
(1)
|
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 $27 million in Second Quarter 2018, $3 million in Six Months 2019 and $47 million in Six Months 2018. There were no purchases in Second Quarter 2019.
|
|
(2)
|
Fair value gains on CCS recorded in Second Quarter 2019 and Six Months 2019 were primarily due to widening of spreads of comparable securities relative to changes in treasury yields during the periods.
|
|
•
|
Note 5 for expected loss to be paid,
|
|
•
|
Note 6 for contracts accounted for as insurance,
|
|
•
|
Note 7 for fair value methodologies for credit derivatives and FG VIEs’ assets and liabilities,
|
|
•
|
Note 8 for contracts accounted for as credit derivatives, and
|
|
•
|
Note 9 for FG VIEs.
|
|
|
Net Expected Loss to be Paid (Recovered)
|
|
Net Economic Loss Development (Benefit)
|
||||||||||||||||||||
|
|
As of
|
|
Second Quarter
|
|
Six Months
|
||||||||||||||||||
|
|
June 30, 2019
|
|
December 31, 2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
|
Insurance
|
$
|
907
|
|
|
$
|
1,110
|
|
|
$
|
(22
|
)
|
|
$
|
23
|
|
|
$
|
(12
|
)
|
|
$
|
(10
|
)
|
|
FG VIEs
|
64
|
|
|
75
|
|
|
(14
|
)
|
|
(6
|
)
|
|
(24
|
)
|
|
(4
|
)
|
||||||
|
Credit derivatives
|
(11
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|
2
|
|
|
(3
|
)
|
|
9
|
|
||||||
|
Total
|
$
|
960
|
|
|
$
|
1,183
|
|
|
$
|
(37
|
)
|
|
$
|
19
|
|
|
$
|
(39
|
)
|
|
$
|
(5
|
)
|
|
|
Net Expected Loss to be Paid (Recovered)
|
|
Net Economic Loss Development (Benefit)
|
||||||||||||||||||||
|
|
As of
|
|
Second Quarter
|
|
Six Months
|
||||||||||||||||||
|
|
June 30, 2019
|
|
December 31, 2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
|
Public finance
|
$
|
772
|
|
|
$
|
864
|
|
|
$
|
84
|
|
|
$
|
53
|
|
|
$
|
145
|
|
|
$
|
11
|
|
|
Structured finance
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
U.S. RMBS
|
162
|
|
|
293
|
|
|
(118
|
)
|
|
(28
|
)
|
|
(183
|
)
|
|
(12
|
)
|
||||||
|
Other structured finance
|
26
|
|
|
26
|
|
|
(3
|
)
|
|
(6
|
)
|
|
(1
|
)
|
|
(4
|
)
|
||||||
|
Structured finance
|
188
|
|
|
319
|
|
|
(121
|
)
|
|
(34
|
)
|
|
(184
|
)
|
|
(16
|
)
|
||||||
|
Total
|
$
|
960
|
|
|
$
|
1,183
|
|
|
$
|
(37
|
)
|
|
$
|
19
|
|
|
$
|
(39
|
)
|
|
$
|
(5
|
)
|
|
|
Risk-Free Rates used in Expected Loss for U.S. Dollar Denominated Obligations
|
||||||
|
|
Range
|
|
Weighted Average
|
||||
|
As of June 30, 2019
|
0.00
|
%
|
-
|
2.63%
|
|
2.10
|
%
|
|
As of March 31, 2019
|
0.00
|
|
|
2.87
|
|
2.46
|
|
|
As of December 31, 2018
|
0.00
|
|
-
|
3.06
|
|
2.74
|
|
|
As of June 30, 2018
|
0.00
|
|
-
|
3.03
|
|
2.85
|
|
|
As of March 31, 2018
|
0.00
|
|
|
3.11
|
|
2.82
|
|
|
As of December 31, 2017
|
0.00
|
|
-
|
2.78
|
|
2.38
|
|
|
|
Effect of Changes in the Risk-Free Rates on Economic Loss Development (Benefit)
|
||
|
|
(in millions)
|
||
|
Second Quarter 2019
|
$
|
(1
|
)
|
|
Second Quarter 2018
|
—
|
|
|
|
Six Months 2019
|
(5
|
)
|
|
|
Six Months 2018
|
(6
|
)
|
|
|
|
Loss (Benefit)
|
||||||||||||||
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Public finance
|
$
|
86
|
|
|
$
|
61
|
|
|
$
|
156
|
|
|
$
|
32
|
|
|
Structured finance
|
|
|
|
|
|
|
|
||||||||
|
U.S. RMBS (1)
|
(88
|
)
|
|
(12
|
)
|
|
(115
|
)
|
|
4
|
|
||||
|
Other structured finance
|
1
|
|
|
(5
|
)
|
|
4
|
|
|
(10
|
)
|
||||
|
Structured finance
|
(87
|
)
|
|
(17
|
)
|
|
(111
|
)
|
|
(6
|
)
|
||||
|
Total loss and LAE
|
$
|
(1
|
)
|
|
$
|
44
|
|
|
$
|
45
|
|
|
$
|
26
|
|
|
(1)
|
Excludes a benefit of $14 million and $3 million for Second Quarter 2019 and 2018, respectively, and a benefit of $15 million and a loss of $3 million for Six Months 2019 and 2018, respectively, related to consolidated FG VIEs.
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Employee compensation and benefits
|
$
|
42
|
|
|
$
|
39
|
|
|
$
|
87
|
|
|
$
|
83
|
|
|
Deferred costs
|
(3
|
)
|
|
(3
|
)
|
|
(7
|
)
|
|
(7
|
)
|
||||
|
Total employee compensation and benefits net of deferred costs
|
39
|
|
|
36
|
|
|
80
|
|
|
76
|
|
||||
|
Professional fees
|
5
|
|
|
6
|
|
|
10
|
|
|
11
|
|
||||
|
Premises and equipment
|
4
|
|
|
5
|
|
|
9
|
|
|
10
|
|
||||
|
SGI Transaction
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
||||
|
Other
|
12
|
|
|
11
|
|
|
25
|
|
|
26
|
|
||||
|
Other operating expenses
|
60
|
|
|
62
|
|
|
124
|
|
|
127
|
|
||||
|
Amortization of DAC
|
4
|
|
|
4
|
|
|
10
|
|
|
9
|
|
||||
|
Total other operating expenses and amortization of DAC
|
$
|
64
|
|
|
$
|
66
|
|
|
$
|
134
|
|
|
$
|
136
|
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(dollars in millions)
|
||||||||||||||
|
Total provision (benefit) for income taxes
|
$
|
40
|
|
|
$
|
12
|
|
|
$
|
44
|
|
|
$
|
32
|
|
|
Effective tax rate
|
21.9
|
%
|
|
13.2
|
%
|
|
18.4
|
%
|
|
10.4
|
%
|
||||
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Net income (loss)
|
$
|
142
|
|
|
$
|
75
|
|
|
$
|
196
|
|
|
$
|
272
|
|
|
Less pre-tax adjustments:
|
|
|
|
|
|
|
|
||||||||
|
Realized gains (losses) on investments
|
8
|
|
|
(2
|
)
|
|
(4
|
)
|
|
(7
|
)
|
||||
|
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
(12
|
)
|
|
44
|
|
|
(40
|
)
|
|
74
|
|
||||
|
Fair value gains (losses) on CCS (1)
|
19
|
|
|
(1
|
)
|
|
10
|
|
|
(2
|
)
|
||||
|
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves (1)
|
(12
|
)
|
|
(34
|
)
|
|
(3
|
)
|
|
(12
|
)
|
||||
|
Total pre-tax adjustments
|
3
|
|
|
7
|
|
|
(37
|
)
|
|
53
|
|
||||
|
Less tax effect on pre-tax adjustments
|
(2
|
)
|
|
(6
|
)
|
|
6
|
|
|
(10
|
)
|
||||
|
Non-GAAP operating income
|
$
|
141
|
|
|
$
|
74
|
|
|
$
|
227
|
|
|
$
|
229
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Gain (loss) related to FG VIE consolidation (net of tax provision (benefit) of $1, $(1), $1 and $0 included in non-GAAP operating income
|
$
|
6
|
|
|
$
|
(4
|
)
|
|
$
|
6
|
|
|
$
|
1
|
|
|
(1)
|
Included in other income (loss) in the condensed consolidated statements of operations.
|
|
|
As of June 30, 2019
|
|
As of December 31, 2018
|
||||||||||||
|
|
After-Tax
|
|
Per Share
|
|
After-Tax
|
|
Per Share
|
||||||||
|
|
(dollars in millions, except per share amounts)
|
||||||||||||||
|
Shareholders’ equity
|
$
|
6,722
|
|
|
$
|
67.35
|
|
|
$
|
6,555
|
|
|
$
|
63.23
|
|
|
Less pre-tax adjustments:
|
|
|
|
|
|
|
|
||||||||
|
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
(85
|
)
|
|
(0.85
|
)
|
|
(45
|
)
|
|
(0.44
|
)
|
||||
|
Fair value gains (losses) on CCS
|
84
|
|
|
0.84
|
|
|
74
|
|
|
0.72
|
|
||||
|
Unrealized gain (loss) on investment portfolio excluding foreign exchange effect
|
478
|
|
|
4.79
|
|
|
247
|
|
|
2.39
|
|
||||
|
Less taxes
|
(90
|
)
|
|
(0.91
|
)
|
|
(63
|
)
|
|
(0.61
|
)
|
||||
|
Non-GAAP operating shareholders’ equity
|
6,335
|
|
|
63.48
|
|
|
6,342
|
|
|
61.17
|
|
||||
|
Pre-tax adjustments:
|
|
|
|
|
|
|
|
|
|
||||||
|
Less: Deferred acquisition costs
|
106
|
|
|
1.06
|
|
|
105
|
|
|
1.01
|
|
||||
|
Plus: Net present value of estimated net future revenue
|
196
|
|
|
1.97
|
|
|
204
|
|
|
1.96
|
|
||||
|
Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed
|
2,932
|
|
|
29.37
|
|
|
3,005
|
|
|
28.98
|
|
||||
|
Plus taxes
|
(508
|
)
|
|
(5.09
|
)
|
|
(524
|
)
|
|
(5.04
|
)
|
||||
|
Non-GAAP adjusted book value
|
$
|
8,849
|
|
|
$
|
88.67
|
|
|
$
|
8,922
|
|
|
$
|
86.06
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Gain (loss) related to FG VIE consolidation included in non-GAAP operating shareholders' equity (net of tax provision of $3 and $1)
|
$
|
12
|
|
|
$
|
0.12
|
|
|
3
|
|
|
0.03
|
|
||
|
|
|
|
|
|
|
|
|
||||||||
|
Gain (loss) related to FG VIE consolidation included in non-GAAP adjusted book value (net of tax benefit of $1 and $4)
|
$
|
(2
|
)
|
|
$
|
(0.02
|
)
|
|
(15
|
)
|
|
(0.15
|
)
|
||
|
|
Second Quarter 2019
|
|
Second Quarter 2018
|
||||||||||||||||||||||||||||||||||||
|
|
Public Finance
|
|
Structured Finance
|
|
|
|
Public Finance
|
|
Structured Finance
|
|
|
||||||||||||||||||||||||||||
|
|
U.S.
|
|
Non - U.S.
|
|
U.S.
|
|
Non - U.S.
|
|
Total
|
|
U.S.
|
|
Non - U.S.
|
|
U.S.
|
|
Non - U.S.
|
|
Total
|
||||||||||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||||||||||||||||||
|
GWP
|
$
|
43
|
|
|
$
|
12
|
|
|
$
|
(4
|
)
|
|
$
|
—
|
|
|
$
|
51
|
|
|
$
|
170
|
|
|
$
|
55
|
|
|
$
|
158
|
|
|
$
|
10
|
|
|
$
|
393
|
|
|
Less: Installment GWP and other GAAP adjustments (1)
|
(1
|
)
|
|
12
|
|
|
(4
|
)
|
|
—
|
|
|
7
|
|
|
20
|
|
|
32
|
|
|
5
|
|
|
1
|
|
|
58
|
|
||||||||||
|
Upfront GWP
|
44
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
44
|
|
|
150
|
|
|
23
|
|
|
153
|
|
|
9
|
|
|
335
|
|
||||||||||
|
Plus: Installment premium PVP (2)
|
—
|
|
|
7
|
|
|
3
|
|
|
—
|
|
|
10
|
|
|
84
|
|
|
30
|
|
|
5
|
|
|
—
|
|
|
119
|
|
||||||||||
|
PVP
|
$
|
44
|
|
|
$
|
7
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
54
|
|
|
$
|
234
|
|
|
$
|
53
|
|
|
$
|
158
|
|
|
$
|
9
|
|
|
$
|
454
|
|
|
|
|
Six Months 2019
|
|
Six Months 2018
|
||||||||||||||||||||||||||||||||||||
|
|
|
Public Finance
|
|
Structured Finance
|
|
|
|
Public Finance
|
|
Structured Finance
|
|
|
||||||||||||||||||||||||||||
|
|
|
U.S.
|
|
Non - U.S.
|
|
U.S.
|
|
Non - U.S.
|
|
Total
|
|
U.S.
|
|
Non - U.S.
|
|
U.S.
|
|
Non - U.S.
|
|
Total
|
||||||||||||||||||||
|
|
|
(in millions)
|
||||||||||||||||||||||||||||||||||||||
|
GWP
|
|
$
|
73
|
|
|
$
|
14
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
90
|
|
|
$
|
203
|
|
|
$
|
94
|
|
|
$
|
159
|
|
|
$
|
10
|
|
|
$
|
466
|
|
|
Less: Installment GWP and other GAAP adjustments (1)
|
|
(3
|
)
|
|
14
|
|
|
1
|
|
|
—
|
|
|
12
|
|
|
18
|
|
|
55
|
|
|
6
|
|
|
1
|
|
|
80
|
|
||||||||||
|
Upfront GWP
|
|
76
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
78
|
|
|
185
|
|
|
39
|
|
|
153
|
|
|
9
|
|
|
386
|
|
||||||||||
|
Plus: Installment premium PVP (2)
|
|
—
|
|
|
11
|
|
|
7
|
|
|
—
|
|
|
18
|
|
|
84
|
|
|
40
|
|
|
5
|
|
|
—
|
|
|
129
|
|
||||||||||
|
PVP
|
|
$
|
76
|
|
|
$
|
11
|
|
|
$
|
8
|
|
|
$
|
1
|
|
|
$
|
96
|
|
|
$
|
269
|
|
|
$
|
79
|
|
|
$
|
158
|
|
|
$
|
9
|
|
|
$
|
515
|
|
|
(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 Second Quarter 2018.
|
|
|
|
As of June 30, 2019
|
|
As of December 31, 2018
|
||||||||
|
Sector
|
|
Net Par
Outstanding
|
|
Avg.
Rating
|
|
Net Par
Outstanding
|
|
Avg.
Rating
|
||||
|
|
|
(dollars in millions)
|
||||||||||
|
Public finance:
|
|
|
|
|
|
|
|
|
|
|||
|
U.S.:
|
|
|
|
|
|
|
|
|
|
|||
|
General obligation
|
|
$
|
76,793
|
|
|
A-
|
|
$
|
78,800
|
|
|
A-
|
|
Tax backed
|
|
39,045
|
|
|
A-
|
|
40,616
|
|
|
A-
|
||
|
Municipal utilities
|
|
27,319
|
|
|
A-
|
|
28,462
|
|
|
A-
|
||
|
Transportation
|
|
14,890
|
|
|
A-
|
|
15,197
|
|
|
A-
|
||
|
Healthcare
|
|
6,658
|
|
|
A-
|
|
6,750
|
|
|
A-
|
||
|
Higher education
|
|
6,230
|
|
|
A-
|
|
6,643
|
|
|
A-
|
||
|
Infrastructure finance
|
|
5,440
|
|
|
A-
|
|
5,489
|
|
|
A-
|
||
|
Housing revenue
|
|
1,392
|
|
|
BBB+
|
|
1,435
|
|
|
BBB+
|
||
|
Investor-owned utilities
|
|
813
|
|
|
A-
|
|
1,001
|
|
|
A-
|
||
|
Other public finance—U.S.
|
|
1,957
|
|
|
A-
|
|
2,169
|
|
|
A-
|
||
|
Total public finance—U.S.
|
|
180,537
|
|
|
A-
|
|
186,562
|
|
|
A-
|
||
|
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|||
|
Regulated utilities
|
|
18,433
|
|
|
BBB+
|
|
18,325
|
|
|
BBB+
|
||
|
Infrastructure finance
|
|
17,587
|
|
|
BBB
|
|
17,216
|
|
|
BBB
|
||
|
Pooled infrastructure
|
|
1,362
|
|
|
AAA
|
|
1,373
|
|
|
AAA
|
||
|
Other public finance
|
|
7,106
|
|
|
A
|
|
7,189
|
|
|
A
|
||
|
Total public finance—non-U.S.
|
|
44,488
|
|
|
BBB+
|
|
44,103
|
|
|
BBB+
|
||
|
Total public finance
|
|
225,025
|
|
|
A-
|
|
230,665
|
|
|
A-
|
||
|
Structured finance:
|
|
|
|
|
|
|
|
|
|
|||
|
U.S.:
|
|
|
|
|
|
|
|
|
|
|||
|
RMBS
|
|
3,835
|
|
|
BBB-
|
|
4,270
|
|
|
BBB-
|
||
|
Life insurance transactions
|
|
1,478
|
|
|
AA-
|
|
1,435
|
|
|
A+
|
||
|
Pooled corporate obligations
|
|
1,477
|
|
|
AA-
|
|
1,215
|
|
|
AA-
|
||
|
Consumer receivables
|
|
1,140
|
|
|
A-
|
|
1,255
|
|
|
A-
|
||
|
Financial products
|
|
1,002
|
|
|
AA-
|
|
1,094
|
|
|
AA-
|
||
|
Other structured finance—U.S.
|
|
617
|
|
|
BBB+
|
|
675
|
|
|
A-
|
||
|
Total structured finance—U.S.
|
|
9,549
|
|
|
A-
|
|
9,944
|
|
|
A-
|
||
|
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|||
|
RMBS
|
|
438
|
|
|
A
|
|
576
|
|
|
A-
|
||
|
Pooled corporate obligations
|
|
55
|
|
|
BB+
|
|
126
|
|
|
A
|
||
|
Other structured finance
|
|
300
|
|
|
A
|
|
491
|
|
|
A
|
||
|
Total structured finance—non-U.S.
|
|
793
|
|
|
A
|
|
1,193
|
|
|
A
|
||
|
Total structured finance
|
|
10,342
|
|
|
A-
|
|
11,137
|
|
|
A-
|
||
|
Total net par outstanding
|
|
$
|
235,367
|
|
|
A-
|
|
$
|
241,802
|
|
|
A-
|
|
|
|
As of June 30, 2019
|
|
As of December 31, 2018
|
||||||||||
|
Rating
Category
|
|
Net Par Outstanding
|
|
%
|
|
Net Par Outstanding
|
|
%
|
||||||
|
|
|
(dollars in millions)
|
||||||||||||
|
AAA
|
|
$
|
4,454
|
|
|
1.9
|
%
|
|
$
|
4,618
|
|
|
1.9
|
%
|
|
AA
|
|
26,825
|
|
|
11.4
|
|
|
27,021
|
|
|
11.2
|
|
||
|
A
|
|
114,485
|
|
|
48.6
|
|
|
119,415
|
|
|
49.4
|
|
||
|
BBB
|
|
80,740
|
|
|
34.3
|
|
|
80,588
|
|
|
33.3
|
|
||
|
BIG
|
|
8,863
|
|
|
3.8
|
|
|
10,160
|
|
|
4.2
|
|
||
|
Total net par outstanding
|
|
$
|
235,367
|
|
|
100.0
|
%
|
|
$
|
241,802
|
|
|
100.0
|
%
|
|
•
|
Constitutionally Guaranteed.
|
|
•
|
Public Corporations – Certain Revenues Potentially Subject to Clawback.
|
|
•
|
Other Public Corporations.
|
|
|
|
Net Par Outstanding
|
|
|
||||||||||||||||||||
|
|
|
AGM
|
|
AGC
|
|
AG Re
|
|
Eliminations (2)
|
|
Total
Net Par Outstanding
|
|
Gross
Par Outstanding
|
||||||||||||
|
|
|
(in millions)
|
||||||||||||||||||||||
|
Commonwealth Constitutionally Guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Commonwealth of Puerto Rico - General Obligation Bonds (3) (4)
|
|
$
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Puerto Rico Highways and Transportation Authority (PRHTA) (Transportation revenue) (4)
|
|
233
|
|
|
495
|
|
|
195
|
|
|
(79
|
)
|
|
844
|
|
|
874
|
|
||||||
|
PRHTA (Highway revenue) (4)
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
PREPA (4)
|
|
544
|
|
|
72
|
|
|
232
|
|
|
—
|
|
|
848
|
|
|
866
|
|
||||||
|
PRASA
|
|
—
|
|
|
284
|
|
|
89
|
|
|
—
|
|
|
373
|
|
|
373
|
|
||||||
|
MFA
|
|
189
|
|
|
40
|
|
|
74
|
|
|
—
|
|
|
303
|
|
|
349
|
|
||||||
|
U of PR
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||||
|
Total exposure to Puerto Rico
|
|
$
|
1,973
|
|
|
$
|
1,586
|
|
|
$
|
1,024
|
|
|
$
|
(89
|
)
|
|
$
|
4,494
|
|
|
$
|
4,698
|
|
|
(1)
|
While the Company no longer has any insured exposure to COFINA, it does have $152 million initial par of COFINA Exchange Senior Bonds in its investment portfolio.
|
|
(2)
|
Net par outstanding eliminations relate to second-to-pay policies under which an Assured Guaranty insurance subsidiary guarantees an obligation already insured by another Assured Guaranty insurance subsidiary.
|
|
(3)
|
Includes exposure to capital appreciation bonds with a current aggregate net par outstanding of $2.5 million and a fully accreted net par at maturity of $2.5 million.
|
|
(4)
|
As of the date of this filing, the seven-member financial oversight board established by the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) has certified a filing under Title III of PROMESA for these exposures.
|
|
|
Scheduled Net Par Amortization
|
|||||||||||||||||||||||||||||||||||
|
|
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
|
|
||||||||||||
|
U of PR
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
—
|
|
—
|
|
—
|
|
1
|
|
||||||||||||
|
Total
|
$
|
224
|
|
$
|
—
|
|
$
|
286
|
|
$
|
149
|
|
$
|
139
|
|
$
|
205
|
|
$
|
1,213
|
|
$
|
884
|
|
$
|
957
|
|
$
|
176
|
|
$
|
261
|
|
$
|
4,494
|
|
|
|
Scheduled Net Debt Service Amortization
|
|||||||||||||||||||||||||||||||||||
|
|
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
|
$
|
122
|
|
$
|
—
|
|
$
|
206
|
|
$
|
74
|
|
$
|
94
|
|
$
|
70
|
|
$
|
539
|
|
$
|
512
|
|
$
|
457
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,074
|
|
|
PBA
|
7
|
|
—
|
|
12
|
|
20
|
|
6
|
|
13
|
|
84
|
|
50
|
|
23
|
|
—
|
|
—
|
|
215
|
|
||||||||||||
|
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
PRHTA (Transportation revenue)
|
54
|
|
—
|
|
67
|
|
59
|
|
68
|
|
72
|
|
294
|
|
262
|
|
375
|
|
180
|
|
—
|
|
1,431
|
|
||||||||||||
|
PRHTA (Highway revenue)
|
34
|
|
—
|
|
46
|
|
58
|
|
27
|
|
52
|
|
159
|
|
208
|
|
152
|
|
—
|
|
—
|
|
736
|
|
||||||||||||
|
PRCCDA
|
3
|
|
—
|
|
7
|
|
7
|
|
7
|
|
7
|
|
53
|
|
79
|
|
91
|
|
—
|
|
—
|
|
254
|
|
||||||||||||
|
PRIFA
|
—
|
|
—
|
|
1
|
|
1
|
|
1
|
|
3
|
|
4
|
|
3
|
|
7
|
|
12
|
|
—
|
|
32
|
|
||||||||||||
|
Other Public Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
PREPA
|
43
|
|
3
|
|
87
|
|
63
|
|
62
|
|
128
|
|
541
|
|
198
|
|
9
|
|
—
|
|
—
|
|
1,134
|
|
||||||||||||
|
PRASA
|
10
|
|
—
|
|
19
|
|
19
|
|
19
|
|
19
|
|
198
|
|
68
|
|
70
|
|
67
|
|
300
|
|
789
|
|
||||||||||||
|
MFA
|
62
|
|
—
|
|
58
|
|
50
|
|
48
|
|
28
|
|
106
|
|
11
|
|
—
|
|
—
|
|
—
|
|
363
|
|
||||||||||||
|
U of PR
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
—
|
|
—
|
|
—
|
|
1
|
|
||||||||||||
|
Total
|
$
|
335
|
|
$
|
3
|
|
$
|
503
|
|
$
|
351
|
|
$
|
332
|
|
$
|
392
|
|
$
|
1,978
|
|
$
|
1,392
|
|
$
|
1,184
|
|
$
|
259
|
|
$
|
300
|
|
$
|
7,029
|
|
|
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
|
|
$
|
25
|
|
|
$
|
21
|
|
|
$
|
2
|
|
|
$
|
628
|
|
|
$
|
57
|
|
|
$
|
733
|
|
|
2005
|
|
56
|
|
|
231
|
|
|
26
|
|
|
229
|
|
|
150
|
|
|
692
|
|
||||||
|
2006
|
|
42
|
|
|
46
|
|
|
12
|
|
|
317
|
|
|
241
|
|
|
658
|
|
||||||
|
2007
|
|
—
|
|
|
358
|
|
|
34
|
|
|
1,004
|
|
|
311
|
|
|
1,707
|
|
||||||
|
2008
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45
|
|
|
—
|
|
|
45
|
|
||||||
|
Total exposures
|
|
$
|
123
|
|
|
$
|
656
|
|
|
$
|
74
|
|
|
$
|
2,223
|
|
|
$
|
759
|
|
|
$
|
3,835
|
|
|
|
Gross Exposure
|
|
Net Exposure
|
||||||||||||
|
|
As of June 30, 2019
|
|
As of December 31, 2018
|
|
As of June 30, 2019
|
|
As of December 31, 2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Life insurance transactions (1)
|
$
|
908
|
|
|
$
|
880
|
|
|
$
|
784
|
|
|
$
|
763
|
|
|
Aircraft residual value insurance policies
|
360
|
|
|
340
|
|
|
239
|
|
|
218
|
|
||||
|
(1)
|
The life insurance transactions net exposure is expected to increase to approximately $949 million prior to September 30, 2036.
|
|
|
AGL
|
|
AGUS
|
|
AGMH
|
||||||
|
|
(in millions)
|
||||||||||
|
Second Quarter 2019
|
|
|
|
|
|
||||||
|
Intercompany sources
|
$
|
132
|
|
|
$
|
143
|
|
|
$
|
4
|
|
|
Intercompany (uses)
|
—
|
|
|
(87
|
)
|
|
(19
|
)
|
|||
|
External sources (uses):
|
|
|
|
|
|
||||||
|
Dividends paid to AGL shareholders
|
(19
|
)
|
|
—
|
|
|
—
|
|
|||
|
Repurchases of common shares (1)
|
(110
|
)
|
|
—
|
|
|
—
|
|
|||
|
Interest paid (2)
|
—
|
|
|
(21
|
)
|
|
(16
|
)
|
|||
|
Purchase of AGMH's debt by AGUS
|
—
|
|
|
—
|
|
|
—
|
|
|||
|
|
|
|
|
|
|
||||||
|
Second Quarter 2018
|
|
|
|
|
|
||||||
|
Intercompany sources
|
$
|
184
|
|
|
$
|
25
|
|
|
$
|
—
|
|
|
Intercompany (uses)
|
—
|
|
|
(144
|
)
|
|
(1
|
)
|
|||
|
External sources (uses):
|
|
|
|
|
|
||||||
|
Dividends paid to AGL shareholders
|
(19
|
)
|
|
—
|
|
|
—
|
|
|||
|
Repurchases of common shares (1)
|
(150
|
)
|
|
—
|
|
|
—
|
|
|||
|
Interest paid (2)
|
—
|
|
|
(21
|
)
|
|
(16
|
)
|
|||
|
Purchase of AGMH's debt by AGUS
|
—
|
|
|
(4
|
)
|
|
—
|
|
|||
|
|
|
|
|
|
|
||||||
|
Six Months 2019
|
|
|
|
|
|
||||||
|
Intercompany sources
|
$
|
232
|
|
|
$
|
232
|
|
|
$
|
78
|
|
|
Intercompany (uses)
|
—
|
|
|
(147
|
)
|
|
(66
|
)
|
|||
|
External sources (uses):
|
|
|
|
|
|
||||||
|
Dividends paid to AGL shareholders
|
(39
|
)
|
|
—
|
|
|
—
|
|
|||
|
Repurchases of common shares (1)
|
(190
|
)
|
|
—
|
|
|
—
|
|
|||
|
Interest paid (2)
|
—
|
|
|
(23
|
)
|
|
(23
|
)
|
|||
|
Purchase of AGMH's debt by AGUS
|
—
|
|
|
(3
|
)
|
|
—
|
|
|||
|
|
|
|
|
|
|
||||||
|
Six Months 2018
|
|
|
|
|
|
||||||
|
Intercompany sources
|
$
|
302
|
|
|
$
|
327
|
|
|
$
|
73
|
|
|
Intercompany (uses)
|
—
|
|
|
(222
|
)
|
|
(51
|
)
|
|||
|
External sources (uses):
|
|
|
|
|
|
||||||
|
Dividends paid to AGL shareholders
|
(37
|
)
|
|
—
|
|
|
—
|
|
|||
|
Repurchases of common shares (1)
|
(250
|
)
|
|
—
|
|
|
—
|
|
|||
|
Interest paid (2)
|
—
|
|
|
(35
|
)
|
|
(23
|
)
|
|||
|
Purchase of AGMH's debt by AGUS
|
—
|
|
|
(23
|
)
|
|
—
|
|
|||
|
(1)
|
See Item 1, Financial Statements, Note 14, 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 $227 million, of which $109 million is estimated to be available for distribution in the third quarter of 2019.
|
|
•
|
The maximum amount available during 2019 for AGC to distribute as ordinary dividends is approximately $123 million, of which approximately $15 million is available for distribution in the third quarter of 2019.
|
|
•
|
In March 2019, MAC received approval from the New York State Department of Financial Services to dividend to MAC Holdings, which is owned by AGM and AGC, $100 million in 2019, an amount that exceeded the dividend capacity that was available for distribution without regulatory approval. MAC distributed a $100 million dividend to MAC Holdings in Second Quarter 2019. No further dividends are available for MAC to distribute in 2019 without approval from the New York State Department of Financial Services.
|
|
•
|
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 Bermuda Monetary Authority (the Authority) and (ii) declare and pay dividends in an aggregate amount up to approximately $312 million as of June 30, 2019. 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 June 30, 2019, AG Re had unencumbered assets of approximately $332 million. On July 30, 2019, AG Re declared a $90 million dividend to be paid during the third quarter of 2019.
|
|
•
|
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 June 30, 2019. 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 June 30, 2019, AGRO had unencumbered assets of approximately $360 million.
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Dividends paid by AGC to AGUS
|
$
|
24
|
|
|
$
|
24
|
|
|
$
|
66
|
|
|
$
|
76
|
|
|
Repurchase of common stock by AGC from AGUS
|
100
|
|
|
—
|
|
|
100
|
|
|
200
|
|
||||
|
Dividends paid by AGM to AGMH
|
4
|
|
|
—
|
|
|
78
|
|
|
73
|
|
||||
|
Dividends paid by AG Re to AGL
|
45
|
|
|
40
|
|
|
85
|
|
|
80
|
|
||||
|
Dividends paid by MAC to MAC Holdings (1)
|
100
|
|
|
15
|
|
|
105
|
|
|
15
|
|
||||
|
(1)
|
MAC Holdings distributed the entire amounts to AGM and AGC, in proportion to their ownership percentages.
|
|
•
|
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.
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Public finance
|
$
|
(9
|
)
|
|
$
|
(22
|
)
|
|
$
|
(237
|
)
|
|
$
|
(133
|
)
|
|
Structured finance:
|
|
|
|
|
|
|
|
||||||||
|
U.S. RMBS
|
43
|
|
|
5
|
|
|
52
|
|
|
135
|
|
||||
|
Other structured finance
|
—
|
|
|
1
|
|
|
1
|
|
|
1
|
|
||||
|
Structured finance
|
43
|
|
|
6
|
|
|
53
|
|
|
136
|
|
||||
|
Claims (paid) recovered, net of reinsurance (1)
|
$
|
34
|
|
|
$
|
(16
|
)
|
|
$
|
(184
|
)
|
|
$
|
3
|
|
|
(1)
|
Includes $11 million and $0.7 million recovered for consolidated FG VIEs for Second Quarter 2019 and 2018, respectively, and $12 million recovered and $1 million paid for Six Months 2019 and Six Months 2018, respectively. The amounts in Six Months 2019 are net of the closed lien senior bonds of COFINA validated by the PROMESA Title III Court and cash that were received pursuant to the COFINA Plan of Adjustment. See Item 1, Financial Statements, Note 3, Outstanding Exposure, for additional information.
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Net cash flows provided by (used in) operating activities before effects of FG VIE consolidation
|
$
|
136
|
|
|
$
|
413
|
|
|
$
|
(197
|
)
|
|
$
|
438
|
|
|
Effect of FG VIE consolidation
|
(2
|
)
|
|
4
|
|
|
(1
|
)
|
|
6
|
|
||||
|
Net cash flows provided by (used in) operating activities
|
134
|
|
|
417
|
|
|
(198
|
)
|
|
444
|
|
||||
|
Net cash flows provided by (used in) investing activities before effects of FG VIE consolidation
|
67
|
|
|
(164
|
)
|
|
535
|
|
|
(69
|
)
|
||||
|
Effect of FG VIE consolidation
|
72
|
|
|
24
|
|
|
96
|
|
|
55
|
|
||||
|
Net cash flows provided by (used in) investing activities
|
139
|
|
|
(140
|
)
|
|
631
|
|
|
(14
|
)
|
||||
|
Dividends paid
|
(19
|
)
|
|
(19
|
)
|
|
(39
|
)
|
|
(37
|
)
|
||||
|
Repurchases of common stock
|
(110
|
)
|
|
(150
|
)
|
|
(190
|
)
|
|
(250
|
)
|
||||
|
Repurchase of debt
|
—
|
|
|
(4
|
)
|
|
(3
|
)
|
|
(23
|
)
|
||||
|
Effect of FG VIE consolidation
|
(70
|
)
|
|
(28
|
)
|
|
(95
|
)
|
|
(61
|
)
|
||||
|
Other
|
(2
|
)
|
|
(2
|
)
|
|
(16
|
)
|
|
(13
|
)
|
||||
|
Net cash flows provided by (used in) financing activities (1)
|
(201
|
)
|
|
(203
|
)
|
|
(343
|
)
|
|
(384
|
)
|
||||
|
Effect of exchange rate changes
|
(1
|
)
|
|
(2
|
)
|
|
—
|
|
|
(1
|
)
|
||||
|
Cash and restricted cash at beginning of period
|
123
|
|
|
117
|
|
|
104
|
|
|
144
|
|
||||
|
Total cash and restricted cash at the end of the period
|
$
|
194
|
|
|
$
|
189
|
|
|
$
|
194
|
|
|
$
|
189
|
|
|
(1)
|
Claims paid on consolidated FG VIEs are presented in the condensed consolidated cash flow statements as a component of paydowns on FG VIEs' liabilities in financing activities as opposed to operating activities.
|
|
|
As of June 30, 2019
|
|
As of December 31, 2018
|
||||||||||||
|
|
Principal
|
|
Carrying
Value |
|
Principal
|
|
Carrying
Value |
||||||||
|
|
(in millions)
|
||||||||||||||
|
AGUS:
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
7% Senior Notes (1)
|
$
|
200
|
|
|
$
|
197
|
|
|
$
|
200
|
|
|
$
|
197
|
|
|
5% Senior Notes (1)
|
500
|
|
|
497
|
|
|
500
|
|
|
497
|
|
||||
|
Series A Enhanced Junior Subordinated Debentures (2)
|
150
|
|
|
150
|
|
|
150
|
|
|
150
|
|
||||
|
Total AGUS
|
850
|
|
|
844
|
|
|
850
|
|
|
844
|
|
||||
|
AGMH(3):
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
6 7/8% QUIBS (1)
|
100
|
|
|
70
|
|
|
100
|
|
|
70
|
|
||||
|
6.25% Notes (1)
|
230
|
|
|
144
|
|
|
230
|
|
|
143
|
|
||||
|
5.6% Notes (1)
|
100
|
|
|
57
|
|
|
100
|
|
|
57
|
|
||||
|
Junior Subordinated Debentures (2)
|
300
|
|
|
201
|
|
|
300
|
|
|
198
|
|
||||
|
Total AGMH
|
730
|
|
|
472
|
|
|
730
|
|
|
468
|
|
||||
|
AGM (3):
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Notes Payable
|
5
|
|
|
5
|
|
|
5
|
|
|
5
|
|
||||
|
Total AGM
|
5
|
|
|
5
|
|
|
5
|
|
|
5
|
|
||||
|
AGMH's debt purchased by AGUS
|
(131
|
)
|
|
(88
|
)
|
|
(128
|
)
|
|
(84
|
)
|
||||
|
Total
|
$
|
1,454
|
|
|
$
|
1,233
|
|
|
$
|
1,457
|
|
|
$
|
1,233
|
|
|
(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.
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Principal amount repurchased
|
$
|
—
|
|
|
$
|
27
|
|
|
$
|
3
|
|
|
$
|
47
|
|
|
Loss on extinguishment of debt (1)
|
—
|
|
|
10
|
|
|
1
|
|
|
17
|
|
||||
|
(1)
|
Included in other income in the condensed 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.
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
AGUS
|
$
|
21
|
|
|
$
|
21
|
|
|
$
|
23
|
|
|
$
|
35
|
|
|
AGMH
|
16
|
|
|
16
|
|
|
23
|
|
|
23
|
|
||||
|
AGM
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
|
AGMH's debt purchased by AGUS (1)
|
(4
|
)
|
|
(1
|
)
|
|
(4
|
)
|
|
(1
|
)
|
||||
|
Total
|
$
|
33
|
|
|
$
|
36
|
|
|
$
|
42
|
|
|
$
|
57
|
|
|
(1)
|
Represents principal amount of Junior Subordinated Debentures issued by AGMH that has been purchased by AGUS.
|
|
|
As of June 30, 2019
|
|
As of December 31, 2018
|
||||||||||||
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Obligations of state and political subdivisions
|
$
|
4,370
|
|
|
$
|
4,683
|
|
|
$
|
4,761
|
|
|
$
|
4,911
|
|
|
U.S. government and agencies
|
154
|
|
|
165
|
|
|
167
|
|
|
175
|
|
||||
|
Corporate securities
|
2,212
|
|
|
2,267
|
|
|
2,175
|
|
|
2,136
|
|
||||
|
Mortgage-backed securities (1):
|
|
|
|
|
|
|
|
|
|||||||
|
RMBS
|
914
|
|
|
938
|
|
|
999
|
|
|
982
|
|
||||
|
Commercial mortgage-backed securities (CMBS)
|
478
|
|
|
495
|
|
|
542
|
|
|
539
|
|
||||
|
Asset-backed securities
|
746
|
|
|
779
|
|
|
942
|
|
|
1,068
|
|
||||
|
Non-U.S. government securities
|
263
|
|
|
247
|
|
|
298
|
|
|
278
|
|
||||
|
Total fixed-maturity securities
|
9,137
|
|
|
9,574
|
|
|
9,884
|
|
|
10,089
|
|
||||
|
Short-term investments
|
1,159
|
|
|
1,159
|
|
|
729
|
|
|
729
|
|
||||
|
Total fixed-maturity and short-term investments
|
$
|
10,296
|
|
|
$
|
10,733
|
|
|
$
|
10,613
|
|
|
$
|
10,818
|
|
|
(1)
|
U.S. government-agency obligations were approximately 45% of mortgage backed securities as of June 30, 2019 and 48% as of December 31, 2018, 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
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
24
|
|
|
$
|
—
|
|
|
U.S. government and agencies
|
10
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
31
|
|
|
—
|
|
||||||
|
Corporate securities
|
229
|
|
|
(2
|
)
|
|
204
|
|
|
(14
|
)
|
|
433
|
|
|
(16
|
)
|
||||||
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
RMBS
|
7
|
|
|
—
|
|
|
283
|
|
|
(13
|
)
|
|
290
|
|
|
(13
|
)
|
||||||
|
CMBS
|
—
|
|
|
—
|
|
|
51
|
|
|
(1
|
)
|
|
51
|
|
|
(1
|
)
|
||||||
|
Asset-backed securities
|
226
|
|
|
(2
|
)
|
|
76
|
|
|
(1
|
)
|
|
302
|
|
|
(3
|
)
|
||||||
|
Non-U.S. government securities
|
45
|
|
|
(1
|
)
|
|
113
|
|
|
(17
|
)
|
|
158
|
|
|
(18
|
)
|
||||||
|
Total
|
$
|
524
|
|
|
$
|
(5
|
)
|
|
$
|
765
|
|
|
$
|
(46
|
)
|
|
$
|
1,289
|
|
|
$
|
(51
|
)
|
|
Number of securities (1)
|
|
|
|
112
|
|
|
|
|
|
186
|
|
|
|
|
|
291
|
|
||||||
|
Number of securities with OTTI
|
|
|
|
6
|
|
|
|
|
|
11
|
|
|
|
|
|
17
|
|
||||||
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
||||||||||||||||||
|
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
|
Fair
Value
|
|
Unrealized
Loss
|
||||||||||||
|
|
(dollars in millions)
|
||||||||||||||||||||||
|
Obligations of state and political subdivisions
|
$
|
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
|
|
||||||
|
(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
|
$
|
223
|
|
|
$
|
216
|
|
|
Due after one year through five years
|
1,637
|
|
|
1,665
|
|
||
|
Due after five years through 10 years
|
2,101
|
|
|
2,196
|
|
||
|
Due after 10 years
|
3,784
|
|
|
4,064
|
|
||
|
Mortgage-backed securities:
|
|
|
|
|
|
||
|
RMBS
|
914
|
|
|
938
|
|
||
|
CMBS
|
478
|
|
|
495
|
|
||
|
Total
|
$
|
9,137
|
|
|
$
|
9,574
|
|
|
Rating
|
|
As of
June 30, 2019 |
|
As of
December 31, 2018 |
||
|
AAA
|
|
16.0
|
%
|
|
15.7
|
%
|
|
AA
|
|
45.8
|
|
|
48.2
|
|
|
A
|
|
21.0
|
|
|
19.8
|
|
|
BBB
|
|
6.7
|
|
|
5.0
|
|
|
BIG (1)
|
|
8.3
|
|
|
10.8
|
|
|
Not rated (2)
|
|
2.2
|
|
|
0.5
|
|
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
|
(1)
|
Includes primarily loss mitigation and other risk management assets. See Item I, Financial Statements, Note 7, Investments and Cash, for additional information.
|
|
(2)
|
As of June 30, 2019, the not-rated category includes COFINA bonds with a fair value of $152 million.
|
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
|
PART II.
|
OTHER INFORMATION
|
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
|
ITEM 1A.
|
RISK FACTORS
|
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
Period
|
|
Total
Number of
Shares
Purchased
|
|
Average
Price Paid
Per Share
|
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Program (1)
|
|
Maximum Number
(or Approximate Dollar Value) of Shares that May Yet Be
Purchased
Under the Program (2)
|
||||||
|
April 1 - April 30
|
|
664,834
|
|
|
$
|
45.97
|
|
|
664,834
|
|
|
$
|
287,873,272
|
|
|
May 1 - May 31
|
|
690,781
|
|
|
$
|
44.31
|
|
|
677,615
|
|
|
$
|
257,873,299
|
|
|
June 1 - June 30
|
|
1,176,681
|
|
|
$
|
42.49
|
|
|
1,176,681
|
|
|
$
|
207,873,299
|
|
|
Total
|
|
2,532,296
|
|
|
$
|
43.90
|
|
|
2,519,130
|
|
|
|
|
|
|
(1)
|
After giving effect to repurchases since the beginning of 2013 through August 7, 2019, the Company has repurchased a total of 100.3 million common shares for approximately $2,964 million, excluding commissions, at an average price of $29.55 per share. The Board of Directors authorized, on August 7, 2019, an additional $300 million of share repurchases. As of August 7, 2019, after combining the remaining authorization and the new authorization, the Company was authorized to purchase $450 million of its common shares, on a settlement basis.
|
|
(2)
|
Excludes commissions.
|
|
ITEM 5.
|
OTHER INFORMATION
|
|
ITEM 6.
|
EXHIBITS.
|
|
Exhibit
Number
|
|
Description of Document
|
|
|
2.1
|
|
|
|
|
10.1
|
|
|
|
|
31.1
|
|
|
|
|
31.2
|
|
|
|
|
32.1
|
|
|
|
|
32.2
|
|
|
|
|
101.1
|
|
|
The following financial information from Assured Guaranty Ltd.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 formatted in inline XBRL: (i) Condensed Consolidated Balance Sheets at June 30, 2019 and December 31, 2018; (ii) Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30, 2019 and 2018; (iii) Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months ended June 30, 2019 and 2018; (iv) Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months ended June 30, 2019 and 2018; (v) Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2019 and 2018; and (vi) Notes to Condensed Consolidated Financial Statements.
|
|
104
|
|
|
The Cover page from Assured Guaranty Ltd.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 formatted, in inline XBRL (included in Exhibit 101).
|
|
|
ASSURED GUARANTY LTD.
(Registrant)
|
|
|
|
|
|
|
Dated August 8, 2019
|
By:
|
/s/ ROBERT A. BAILENSON
|
|
|
|
|
|
|
|
Robert A. Bailenson
Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer)
|
|
|
|
Page
|
|
SECTION 1.
|
PURCHASE
|
|
|
1.1
|
General
|
|
|
1.2
|
Time and Place of Closing
|
|
|
1.3
|
Purchase Price; Purchase Price Allocation
|
|
|
1.4
|
Closing Deliverables
|
|
|
1.5
|
Further Assurances
|
|
|
1.6
|
Transfer Taxes
|
|
|
1.7
|
Withholding
|
|
|
SECTION 2.
|
REPRESENTATIONS AND WARRANTIES OF THE BLUEMOUNTAIN OPERATING COMPANIES
|
|
|
2.1
|
Organization and Qualification of the BlueMountain Operating Companies
|
|
|
2.2
|
Ownership Interests of the BlueMountain Operating Companies
|
|
|
2.3
|
Subsidiaries; Investments
|
|
|
2.4
|
Authority of the BlueMountain Operating Companies
|
|
|
2.5
|
Real Property
|
|
|
2.6
|
Assets Under Management
|
|
|
2.7
|
Financial Statements
|
|
|
2.8
|
Taxes
|
|
|
2.9
|
Absence of Certain Changes
|
|
|
2.10
|
Ordinary Course
|
|
|
2.11
|
Intellectual Property
|
|
|
2.12
|
Contracts
|
|
|
2.13
|
Litigation
|
|
|
2.14
|
Compliance with Laws
|
|
|
2.15
|
Business; Registrations
|
|
|
2.16
|
Insurance
|
|
|
2.17
|
Finder’s Fee
|
|
|
2.18
|
Transactions with Interested Persons
|
|
|
2.19
|
Employee Programs
|
|
|
2.20
|
Managers, Directors, Officers and Employees
|
|
|
2.21
|
BlueMountain Funds; BlueMountain Fuji Agreements
|
|
|
2.22
|
Assets
|
|
|
2.23
|
Environmental Matters
|
|
|
2.24
|
Bank Accounts
|
|
|
SECTION 3.
|
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
|
|
|
3.1
|
Ownership Interests
|
|
|
3.2
|
Authority of Sellers
|
|
|
3.3
|
Litigation
|
|
|
3.4
|
Finder’s Fee
|
|
|
3.5
|
No Securities Matters
|
|
|
SECTION 4.
|
REPRESENTATIONS AND WARRANTIES OF PURCHASER
|
|
|
4.1
|
Organization of Purchaser and Purchaser Parent
|
|
|
4.2
|
Authority of Purchaser and Purchaser Parent
|
|
|
4.3
|
Litigation
|
|
|
4.4
|
Acquisition for Investment
|
|
|
4.5
|
Finder’s Fee
|
|
|
4.6
|
Ineligible Persons
|
|
|
4.7
|
Financing
|
|
|
4.8
|
R&W Insurance Policy
|
|
|
4.9
|
Purchaser Parent Representations
|
|
|
SECTION 5.
|
COVENANTS
|
|
|
5.1
|
Actions of the BlueMountain Operating Companies
|
|
|
5.2
|
Pre-Closing Conduct of Business
|
|
|
5.3
|
Client Consents; BlueMountain Fuji Consents
|
|
|
5.4
|
Pre-Closing Access
|
|
|
5.5
|
Regulatory Matters; Antitrust Notifications; Third Party Consents
|
|
|
5.6
|
Financial Information
|
|
|
5.7
|
Notifications
|
|
|
5.8
|
Efforts of Parties to Close
|
|
|
5.9
|
Indemnification; D&O Insurance
|
|
|
5.10
|
No Solicitation of Other Offers
|
|
|
5.11
|
Restructuring
|
|
|
5.12
|
Confidentiality
|
|
|
5.13
|
Insurance
|
|
|
5.14
|
Section 401(k) Plan Termination
|
|
|
5.15
|
R&W Insurance Policy
|
|
|
5.16
|
Resignations
|
|
|
SECTION 6.
|
CERTAIN TAX MATTERS
|
|
|
6.1
|
Tax Treatment
|
|
|
6.2
|
Tax Indemnification
|
|
|
6.3
|
Tax Returns
|
|
|
6.4
|
Apportionment
|
|
|
6.5
|
Tax Contests
|
|
|
6.6
|
Refunds
|
|
|
6.7
|
Tax Sharing Agreements
|
|
|
6.8
|
Books and Records; Cooperation
|
|
|
6.9
|
Section 754 Elections
|
|
|
6.10
|
Inconsistency
|
|
|
SECTION 7.
|
CONDITIONS TO THE OBLIGATIONS OF PURCHASER
|
|
|
7.1
|
Litigation; No Opposition
|
|
|
7.2
|
HSR Approval
|
|
|
7.3
|
Representations, Warranties and Covenants
|
|
|
7.4
|
Consents
|
|
|
7.5
|
FCA Approval
|
|
|
7.6
|
Employment Agreement
|
|
|
7.7
|
Restructuring
|
|
|
7.8
|
2018 Audited Financial Statements and Work Papers
|
|
|
7.9
|
Closing Deliverables
|
|
|
SECTION 8.
|
CONDITIONS TO THE OBLIGATIONS OF THE BLUEMOUNTAIN OPERATING COMPANIES AND THE SELLERS
|
|
|
8.1
|
Litigation; No Opposition
|
|
|
8.2
|
HSR Approval
|
|
|
8.3
|
Representations, Warranties and Covenants
|
|
|
8.4
|
FCA Approval
|
|
|
8.5
|
Closing Deliverables
|
|
|
SECTION 9.
|
INDEMNIFICATION
|
|
|
9.1
|
Survival of Representations, Warranties, Covenants and Agreements
|
|
|
9.2
|
Indemnification with respect to BlueMountain Operating Companies
|
|
|
9.3
|
Indemnification by each Seller
|
|
|
9.4
|
Limitations on Indemnification by the Sellers
|
|
|
9.5
|
Indemnification by Purchaser
|
|
|
9.6
|
Limitation on Indemnification by Purchaser
|
|
|
9.7
|
Notice; Defense of Claims
|
|
|
9.8
|
Other Indemnification Matters
|
|
|
9.9
|
Indemnification Payments; R&W Insurance Policy
|
|
|
9.10
|
Exclusive Remedy
|
|
|
9.11
|
Assignment of Claims
|
|
|
SECTION 10.
|
TERMINATION OF AGREEMENT
|
|
|
10.1
|
Termination
|
|
|
10.2
|
Effect of Termination
|
|
|
SECTION 11.
|
DEFINITIONS
|
|
|
11.1
|
Definitions
|
|
|
SECTION 12.
|
MISCELLANEOUS
|
|
|
12.1
|
Fees and Expenses
|
|
|
12.2
|
Waivers
|
|
|
12.3
|
Governing Law
|
|
|
12.4
|
Notices
|
|
|
12.5
|
Entire Agreement, Etc.
|
|
|
12.6
|
Assignability; Binding Effect
|
|
|
12.7
|
Captions; Gender; Interpretation
|
|
|
12.8
|
Execution in Counterparts
|
|
|
12.9
|
Amendments
|
|
|
12.10
|
Publicity and Disclosures
|
|
|
12.11
|
Specific Performance
|
|
|
12.12
|
Submission to Jurisdiction; Waiver of Jury Trial
|
|
|
12.13
|
No Recourse
|
|
|
12.14
|
Releases
|
|
|
12.15
|
Disclosure Schedule
|
|
|
12.16
|
Seller Representative
|
|
|
12.17
|
Guaranty of AMG Parent
|
|
|
Section 1.
|
PURCHASE
|
|
SECTION 2.
|
REPRESENTATIONS AND WARRANTIES OF THE BLUEMOUNTAIN OPERATING COMPANIES
|
|
SECTION 3.
|
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
|
|
SECTION 4.
|
REPRESENTATIONS AND WARRANTIES OF PURCHASER
|
|
SECTION 5.
|
COVENANTS
|
|
SECTION 6.
|
CERTAIN TAX MATTERS
|
|
SECTION 7.
|
CONDITIONS TO THE OBLIGATIONS OF PURCHASER
|
|
SECTION 8.
|
CONDITIONS TO THE OBLIGATIONS OF THE BLUEMOUNTAIN OPERATING COMPANIES AND THE SELLERS
|
|
SECTION 9.
|
INDEMNIFICATION
|
|
SECTION 10.
|
TERMINATION OF AGREEMENT
|
|
SECTION 11.
|
DEFINITIONS
|
|
SECTION 12.
|
MISCELLANEOUS
|
|
(A)
|
Accrued Benefits. The Accrued Benefits and any earned but unpaid AIP Grant for a completed performance year pursuant to Section 3(b);
|
|
(B)
|
Severance Pay. Payment of an amount equal to the Severance Payment in a single lump sum payment on the fifty-fifth (55th) day following the Termination Date.
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Assured Guaranty Ltd.
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
|
|
|
By:
|
/s/ DOMINIC J. FREDERICO
|
|
|
|
|
|
|
|
Dominic J. Frederico
|
|
|
|
President and Chief Executive Officer
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Assured Guaranty Ltd.
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
|
|
|
By:
|
/s/ ROBERT A. BAILENSON
|
|
|
|
|
|
|
|
Robert A. Bailenson
|
|
|
|
Chief Financial Officer
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/s/ DOMINIC J. FREDERICO
|
|
|
|
|
|
Name: Dominic J. Frederico
|
|
|
Title: President and Chief Executive Officer
|
|
|
Date: August 8, 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: August 8, 2019
|
|