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☒
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ANNUAL 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)
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Name of exchange on which registered
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Common Shares
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$0.01 per share
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AGO
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New York Stock Exchange
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•
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changes in the world’s credit markets, segments thereof, interest rates, credit spreads or general economic conditions;
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•
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developments in the world’s financial and capital markets that adversely affect insured obligors’ repayment rates, Assured Guaranty’s insurance loss or recovery experience, investments of Assured Guaranty or assets it manages;
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•
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reduction in the amount of available insurance opportunities and/or in the demand for Assured Guaranty's insurance;
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•
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the loss of investors in Assured Guaranty's asset management strategies or the failure to attract new investors to Assured Guaranty's asset management business;
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•
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the possibility that budget or pension shortfalls or other factors will result in credit losses or impairments on obligations of state, territorial and local governments and their related authorities and public corporations that Assured Guaranty insures or reinsures;
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•
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insured losses in excess of those expected by Assured Guaranty or the failure of Assured Guaranty to realize loss recoveries that are assumed in its expected loss estimates for insurance exposures;
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•
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increased competition, including from new entrants into the financial guaranty industry;
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•
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poor performance of Assured Guaranty's asset management strategies compared to the performance of the asset management strategies of Assured Guaranty's competitors;
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•
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the possibility that investments made by Assured Guaranty for its investment portfolio, including alternative investments and investments it manages, do not result in the benefits anticipated or subject Assured Guaranty to reduced liquidity at a time it requires liquidity or to unanticipated consequences;
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•
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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) as well as on the mark-to-market of assets Assured Guaranty manages;
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rating agency action, including a ratings downgrade, a change in outlook, the placement of ratings on watch for downgrade, or a change in rating criteria, at any time, of AGL or any of its insurance subsidiaries, and/or of any securities AGL or any of its subsidiaries have issued, and/or of transactions that AGL’s insurance subsidiaries have insured;
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•
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the inability of Assured Guaranty to access external sources of capital on acceptable terms;
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•
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changes in applicable accounting policies or practices;
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•
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changes in applicable laws or regulations, including insurance, bankruptcy and tax laws, or other governmental actions;
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the failure of Assured Guaranty to successfully integrate the business of BlueMountain Capital Management, LLC (BlueMountain) and its associated entities;
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the possibility that acquisitions made by Assured Guaranty, including its acquisition of BlueMountain (BlueMountain Acquisition), do not result in the benefits anticipated or subject Assured Guaranty to unanticipated consequences;
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difficulties with the execution of Assured Guaranty’s business strategy;
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loss of key personnel;
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the effects of mergers, acquisitions and divestitures;
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•
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natural or man-made catastrophes or pandemics;
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•
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other risk factors identified in AGL’s filings with the United States (U.S.) Securities and Exchange Commission (the SEC);
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•
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other risks and uncertainties that have not been identified at this time; and
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•
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management’s response to these factors.
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ITEM 1.
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BUSINESS
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•
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Assured Guaranty Municipal Corp. and Municipal Assurance Corp. Since mid-2008, AGM has provided financial guaranty insurance and reinsurance only on debt obligations issued in the U.S. public finance and global infrastructure markets, including bonds issued by U.S. state or governmental authorities or notes issued to finance infrastructure projects. MAC offers insurance and reinsurance on bonds issued by U.S. state or municipal governmental authorities, focusing on investment grade obligations in select sectors of the municipal market. AGM is located and domiciled in New York. AGM was organized in 1984 as "Financial Security Assurance Inc." and until 2008 also offered insurance and reinsurance in the global structured finance market. (AGM's subsidiaries AGE UK and AGE SA still offer insurance and reinsurance in the global structured finance markets.) MAC is located and domiciled in New York and was organized in 2008. Assured Guaranty acquired MAC on May 31, 2012.
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•
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Assured Guaranty Corp. AGC is located in New York and domiciled in Maryland, was organized in 1985 and commenced operations in 1988. It provides insurance and reinsurance on debt obligations in the global structured finance market and also offers guarantees on obligations in the U.S. public finance and international infrastructure markets. AGC acquired CIFG Assurance North America, Inc. (CIFGNA) in 2016 and Radian Asset Assurance Inc. (Radian Asset) in 2015, and merged them each with and into AGC, with AGC being the surviving entity.
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•
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Assured Guaranty (Europe) plc and Assured Guaranty (Europe) SA. AGE UK and AGE SA offer financial guarantees in both the international public finance and structured finance markets. AGE UK is a U.K. incorporated company licensed as a U.K. insurance company and located in England. Through 2019, AGE UK wrote business in the U.K. and various countries throughout the European Union (EU) as well as certain other non-EU countries. AGE UK was organized in 1990 and issued its first financial guarantee in 1994. As discussed further under “-- Regulation -- United Kingdom, Position of U.K. Regulated Entities within the AGL Group” below, AGE UK has agreed with its regulator that new business it writes would be guaranteed using a co-insurance structure pursuant to which AGE UK would co-insure municipal and infrastructure transactions with AGM, and structured finance transactions with AGC. AGE SA is a French incorporated company and has been authorized by the French insurance and banking supervisory authority, the Autorité de Contrôle Prudentiel et de Résolution, to conduct financial guarantee business, and is located in France. AGE SA was established in mid-2019 to address the impact of the withdrawal of the U.K. from the EU. AGE UK intends to transfer certain existing financial guarantees in its portfolio to AGE SA. Upon such transfer, these will become the financial guarantees of AGE SA. Through AGE SA, Assured Guaranty intends to continue to write new business in the EU. AGE UK will remain the Assured Guaranty platform that writes new business in the U.K. and certain other non-EU countries.
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•
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Assured Guaranty Re Ltd. and Assured Guaranty Re Overseas Ltd. AG Re and AGRO underwrite financial guaranty reinsurance, and AGRO also underwrites other specialty insurance and reinsurance that is in line with the Company's risk profile and benefits from its underwriting experience. AG Re and AGRO write business as reinsurers of third-party primary insurers and of certain affiliated companies. AG Re is incorporated under the laws of Bermuda and is licensed as a Class 3B insurer under the Insurance Act 1978 and related regulations of Bermuda. AG Re indirectly owns AGRO, which is a Bermuda Class 3A and Class C insurer.
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•
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Instability of Rating Criteria and Methodologies. Rating agencies purport to issue ratings pursuant to published rating criteria and methodologies. Beginning during the financial crisis, the rating agencies made material changes to their rating criteria and methodologies applicable to financial guaranty insurers, sometimes through formal changes and other times through ad hoc adjustments to the conclusions reached by existing criteria. Furthermore, these criteria and methodology changes were typically implemented without any transition period, making it difficult for an insurer to comply with new standards.
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•
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Instability of Severe Stress Case Loss Assumptions. A major component in arriving at a financial guaranty insurer's rating has been the rating agency’s assessment of the insurer’s capital adequacy, with each rating agency employing its own proprietary model. These capital adequacy approaches include “stress case” loss assumptions for various risks or risk categories. Since the financial crisis, the rating agencies have at various times materially increased stress case loss assumptions for various risks or risk categories, in some cases later reducing such stress case losses. This approach has made predicting the amount of capital required to maintain or attain a certain rating more difficult.
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•
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More Reliance on Qualitative Rating Criteria. In prior years, the financial strength ratings of the Company’s insurance subsidiaries were largely consistent with the rating agency’s assessment of the insurers’ capital adequacy, such that a rating downgrade could generally be avoided by raising additional capital or otherwise improving capital adequacy under the rating agency’s model. In recent years, however, both S&P Global Ratings, a division of Standard & Poor's Financial Services LLC (S&P) and Moody’s Investors Service, Inc. (Moody’s) have applied other factors, some of which are subjective, such as the insurer's business strategy and franchise value or the anticipated future demand for its product, to justify ratings for the Company’s insurance subsidiaries significantly below the ratings implied by their own capital adequacy models. Currently, for example, S&P has concluded that Assured Guaranty has
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•
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Portfolio Risk Management Committee—The Portfolio Risk Management Committee is responsible for enterprise risk management for the Company on a consolidated basis and focuses on measuring and managing credit, market and liquidity risk for the Company. This committee establishes company-wide credit policy for the Company's direct and assumed insured business. It implements specific underwriting procedures and limits for the Company and allocates underwriting capacity among the Company's subsidiaries. All transactions in new asset classes or new jurisdictions, or otherwise outside the Company's Board-approved risk appetite statement, must be approved by this committee.
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•
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U.S. Management Committee—This committee establishes strategic policy and reviews the implementation of strategic initiatives and general business progress in the U.S. The U.S. Management Committee approves risk policy at the U.S. operating company level.
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•
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Risk Management Committees—The U.S., AG Re and AGRO risk management committees and the AGE UK Surveillance Committee conduct an in-depth review of the insured portfolios of the relevant subsidiaries, focusing on varying portions of the portfolio at each meeting. They review and may revise internal ratings assigned to the insured transactions and review sector reports, monthly product line surveillance reports and compliance reports.
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•
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Workout Committee—This committee receives reports from surveillance and workout personnel on insurance transactions that might benefit from active loss mitigation or risk reduction, and approves loss mitigation or risk reduction strategies for such transactions.
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•
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Reserve Committees—Oversight of reserving risk is vested in the U.S. Reserve Committee, the U.K. Executive Risk Committee, the AG Re Reserve Committee and the AGRO Reserve Committee. The committees review the reserve methodology and assumptions for each major asset class or significant below-investment-grade (BIG) transaction, as well as the loss projection scenarios used and the probability weights assigned to those scenarios. The reserve committees establish reserves for the relevant subsidiaries, taking into consideration supporting information provided by surveillance personnel.
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•
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Asset Management Investment Committees—These committees focus on consistent application of rigorous investment evaluation criteria for the Asset Management segment's investing activity. Each Asset Management segment investment committee consists of the Chief Investment Officer and two or more senior investment professionals with deep expertise in the markets relevant to each investment.
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•
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Asset Management Risk Committee—This focuses on preventing the Asset Management segment investment or business process from posing inappropriate risk of loss, legal or reputational damage to investors. The committee is responsible for approving Asset Management segment investment risk policy and managing the products consistently with all fiduciary objectives and constraints, including those of its affiliates. Compliance and other operational sub-committees report regularly to this committee on the full range of compliance and other operational risk matters applicable to the Asset Management segment including policies, risks and controls, audits, personal trading activity, compliance testing results, operational diligence and regulatory filings.
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•
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Valuation Committee—This committee focuses on consistent and objective oversight of the Asset Management segment's valuation policies and procedures. It meets monthly to review the month-end valuations prior to the release of net asset valuations (NAV) to fund investors. The month-end package includes details of estimated versus final NAV differences, securitized products price verification, valuation model reviews, price back testing, derivative valuation verification, administrator valuation reconciliation and latent price analysis. In addition, this committee convenes to review and decide on material changes to fund valuation methodology, material valuation changes on an Accounting Standards Codification (ASC) 820 Level 3 asset, pricing or valuation exceptions, valuation approach to new products, new model approval, guidelines and policies for classification of assets and changes to policies and procedures.
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•
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AGM is a New York domiciled insurance company licensed to write financial guaranty insurance and reinsurance in 50 U.S. states, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands.
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•
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MAC is a New York domiciled insurance company licensed to write financial guaranty insurance and reinsurance in 50 U.S. states and the District of Columbia. MAC only insures U.S. public finance debt obligations, focusing on investment grade bonds in select sectors of that market.
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•
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AGC is a Maryland domiciled insurance company licensed to write financial guaranty insurance and reinsurance in 50 U.S. states, the District of Columbia and Puerto Rico.
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•
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the insured average annual debt service for a single risk, net of qualifying reinsurance and collateral, or
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•
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the insured unpaid principal (reduced by the extent to which the unpaid principal of the supporting assets exceeds the insured unpaid principal) divided by nine, net of qualifying reinsurance and collateral,
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•
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The minimum share capital must be always issued and outstanding and cannot be reduced. For AG Re, which is registered as a Class 3B insurer, the minimum share capital is $120,000. For AGRO, which is registered both as a Class 3A and a Class C long-term insurer, the minimum share capital is $370,000.
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•
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With respect to the distribution (including repurchase of shares) of any share capital, contributed surplus or other statutory capital:
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(a)
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any such distribution that would reduce AG Re's or AGRO's total statutory capital by 15% or more of their respective total statutory capital as set out in their previous year's financial statements requires the prior approval of the Authority. Any application for such approval must include an affidavit stating that the company will continue to meet the required margins and such other information as the Authority may require; and
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(b)
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as a Class C long-term insurer, AGRO may not use the funds allocated to its long-term business fund, directly or indirectly, for any purpose other than a purpose of its long-term business except in so far as such payment can be made out of any surplus certified by AGRO's approved actuary to be available for distribution otherwise than to policyholders.
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•
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With respect to the declaration and payment of dividends:
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(a)
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each of AG Re and AGRO is prohibited from declaring or paying any dividends during any financial year if it is in breach of its solvency margin, minimum liquidity ratio or enhanced capital requirement, or if the declaration or payment of such dividends would cause such a breach (if it has failed to meet its minimum solvency margin or minimum liquidity ratio on the last day of any financial year, the insurer will be prohibited, without the approval of the Authority, from declaring or paying any dividends during the next financial year). Dividends are paid out of each insurer's statutory surplus and, therefore, dividends cannot exceed such surplus. See "Minimum Solvency Margin and Enhanced Capital Requirements" above and "Minimum Liquidity Ratio" below;
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(b)
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an insurer which at any time fails to meet its minimum solvency margin or comply with the enhanced capital requirement may not declare or pay any dividend until the failure is rectified, and also in such circumstances the insurer must report, within 14 days after becoming aware of its failure or having reason to believe that such failure has occurred, to the Authority in writing giving particulars of the circumstances leading to the failure and giving a plan detailing the manner, specific actions to be taken and time frame in which the insurer intends to rectify the failure. A failure to comply with the enhanced capital requirement will also result in the insurer furnishing certain other information to the Authority within 45 days after becoming aware of its failure or having reason to believe that such failure has occurred;
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(c)
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each of AG Re and AGRO is prohibited from declaring or paying in any financial year dividends of more than 25% of its total statutory capital and surplus (as shown on its previous financial year's statutory balance sheet) unless it files (at least seven days before payments of such dividends) with the Authority an affidavit signed by at least two directors (one of whom must be a Bermuda resident director if any of the insurer's directors are resident in Bermuda) and the principal representative stating that it will continue to meet its solvency margin and minimum liquidity ratio. Where such an affidavit is filed, it shall be available for public inspection at the offices of the Authority; and
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(d)
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as a Class C long-term insurer, AGRO may not declare or pay a dividend to any person other than a policyholder unless the value of the assets of its long-term business fund, as certified by AGRO's approved actuary, exceeds the extent (as so certified) of the liabilities of AGRO's long-term business, and the amount of any such dividend shall not exceed the aggregate of (1) that excess; and (2) any other funds properly available for the payment of dividends being funds arising out of AGRO's business other than its long-term business.
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•
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the PRA, a part of the Bank of England, is responsible for prudential regulation of certain classes of financial services firms (which includes insurance companies, among others), and
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•
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the FCA is responsible for the conduct of business regulation of all firms and the regulation of market conduct and the prudential regulation of all non-PRA firms.
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•
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an insurer must be a body corporate (other than a limited liability partnership), a registered friendly society or a member of The Society of Lloyd's;
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•
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if an insurer is a body corporate incorporated in the U.K., its head office, and in particular its mind and management, must be in the U.K;
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•
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an insurer's business must be conducted in a prudent manner — in particular, the insurer must maintain appropriate financial and non-financial resources;
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•
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the insurer must be fit and proper, and be appropriately staffed; and
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•
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the insurer and its group must be capable of being effectively supervised.
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•
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assets and liabilities are generally to be valued at their market value;
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•
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the amount of required economic capital is intended to ensure, with a probability of 99.5%, that regulated firms are able to meet their obligations to policyholders and beneficiaries over the following 12 months; and
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•
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reinsurance recoveries will be treated as a separate asset (rather than being netted against the underlying insurance liabilities).
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•
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have in place an effective system of governance that provides for the sound and prudent management of its business;
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•
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establish effective risk-management systems; and
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•
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take a comprehensive approach to considering their risks through an Own Risk and Solvency Assessment (ORSA) as proportionate to the nature, scale and complexity of the risks inherent in their business.
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ITEM 1A.
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RISK FACTORS
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•
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the Company is 25% or more owned directly, indirectly through non-U.S. entities or by attribution by U.S. Persons;
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•
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the gross RPII of AG Re or any other AGL non-U.S. subsidiary engaged in the insurance business that has not made an election under section 953(d) of the Code to be treated as a U.S. corporation for all U.S. tax purposes or are CFCs owned directly or indirectly by AGUS (each, with AG Re, a Foreign Insurance Subsidiary) equals or exceeds 20% of such Foreign Insurance Subsidiary's gross insurance income in any taxable year; and
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•
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direct or indirect insureds (and persons related to such insureds) own (or are treated as owning directly or indirectly through entities) 20% or more of the voting power or value of the Company's shares.
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•
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With respect to income, the dividends that AGL receives from its subsidiaries should be exempt from U.K. corporation tax under the exemption contained in section 931D of the Corporation Tax Act 2009.
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•
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With respect to capital gains, if AGL were to dispose of shares in its direct subsidiaries or if it were deemed to have done so, it may realize a chargeable gain for U.K. tax purposes. Any tax charge would be based on AGL’s original acquisition cost. It is anticipated that any such future gain should qualify for exemption under the substantial shareholding exemption in Schedule 7AC to the Taxation of Chargeable Gains Act 1992. However, the availability of such exemption would depend on facts at the time of disposal, in particular the “trading” nature of the relevant subsidiary. There is no statutory definition of what constitutes “trading” activities for this purpose and in practice reliance is placed on the published guidance of HMRC.
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•
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investor perceptions of the Company, its prospects and that of the financial guaranty and asset management industries and the markets in which the Company operates;
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•
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the Company's operating and financial performance;
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•
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the Company's access to financial and capital markets to raise additional capital, refinance its debt or replace existing senior secured credit and receivables-backed facilities;
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•
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the Company's ability to repay debt;
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•
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the Company's dividend policy;
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•
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the amount of share repurchases authorized by the Company;
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•
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future sales of equity or equity-related securities;
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•
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changes in earnings estimates or buy/sell recommendations by analysts; and
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•
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general financial, economic and other market conditions.
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ITEM 1B.
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UNRESOLVED STAFF COMMENTS
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ITEM 2.
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PROPERTIES
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ITEM 3.
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LEGAL PROCEEDINGS
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ITEM 4.
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MINE SAFETY DISCLOSURES
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Name
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Age
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Position(s)
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Dominic J. Frederico
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67
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President and Chief Executive Officer; Deputy Chairman
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Robert A. Bailenson
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53
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Chief Financial Officer
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Ling Chow
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49
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General Counsel and Secretary
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Howard W. Albert
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60
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Chief Risk Officer
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Laura Bieling
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53
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Chief Accounting Officer and Controller
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Russell B. Brewer II
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62
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Chief Surveillance Officer
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Stephen Donnarumma
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57
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Chief Credit Officer
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Andrew Feldstein
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55
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Chief Investment Officer and Head of Asset Management of Assured Guaranty
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ITEM 5.
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MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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Period
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Total
Number of
Shares
Purchased
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Average
Price Paid
Per Share
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Total Number of
Shares Purchased as
Part of Publicly
Announced Program (1)
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Maximum Number (or Approximate Dollar Value)
of Shares that
May Yet Be
Purchased
Under the Program(2)
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October 1 - October 31
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1,064,208
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$
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45.68
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1,062,300
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309,345,134
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November 1 - November 30
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1,078,733
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$
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48.34
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1,076,436
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257,307,202
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December 1 - December 31
|
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1,224,646
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$
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49.66
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|
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1,196,781
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197,873,422
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Total
|
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3,367,587
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$
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47.98
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3,335,517
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(1)
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After giving effect to repurchases since the beginning of 2013 through February 27, 2020 the Company has repurchased a total of 106.6 million common shares for approximately $3,256 million, excluding commissions, at an average price of $30.56 per share.
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(2)
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Excludes commissions.
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Assured Guaranty
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S&P 500 Index
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S&P 500
Financials Sector GICS Level 1 Index
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Russell Midcap Financial Services Index
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||||||||
12/31/2014
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$
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100.00
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$
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100.00
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|
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$
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100.00
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$
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100.00
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12/31/2015
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103.50
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|
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101.37
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|
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98.44
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|
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102.35
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12/31/2016
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150.70
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|
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113.49
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|
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120.83
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|
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117.86
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12/31/2017
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137.08
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|
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138.26
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|
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147.58
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|
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137.44
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12/31/2018
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157.58
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|
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132.19
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|
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128.34
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|
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123.64
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12/31/2019
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205.06
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|
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173.80
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|
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169.52
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165.13
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ITEM 6.
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SELECTED FINANCIAL DATA
|
|
Year Ended December 31,
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2019
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2018
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2017
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2016
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2015
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(dollars in millions, except per share amounts)
|
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Statement of operations data:
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Revenues:
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||||||||||
Net earned premiums
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$
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476
|
|
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$
|
548
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|
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$
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690
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|
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$
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864
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|
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$
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766
|
|
Net investment income (1)
|
378
|
|
|
395
|
|
|
417
|
|
|
408
|
|
|
423
|
|
|||||
Asset management fees
|
22
|
|
|
—
|
|
|
—
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|
|
—
|
|
|
—
|
|
|||||
Net realized investment gains (losses)
|
22
|
|
|
(32
|
)
|
|
40
|
|
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(29
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)
|
|
(26
|
)
|
|||||
Net change in fair value of credit derivatives
|
(6
|
)
|
|
112
|
|
|
111
|
|
|
98
|
|
|
728
|
|
|||||
Fair value gains (losses) on FG VIEs
|
42
|
|
|
14
|
|
|
30
|
|
|
38
|
|
|
38
|
|
|||||
Foreign exchange gains (losses) on remeasurement
|
24
|
|
|
(37
|
)
|
|
60
|
|
|
(37
|
)
|
|
(18
|
)
|
|||||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
—
|
|
|
58
|
|
|
259
|
|
|
214
|
|
|||||
Commutation gains (losses)
|
1
|
|
|
(16
|
)
|
|
328
|
|
|
8
|
|
|
28
|
|
|||||
Other income (loss) (1)
|
4
|
|
|
17
|
|
|
5
|
|
|
66
|
|
|
51
|
|
|||||
Total revenues
|
963
|
|
|
1,001
|
|
|
1,739
|
|
|
1,675
|
|
|
2,204
|
|
|||||
Expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Loss and loss adjustment expenses
|
93
|
|
|
64
|
|
|
388
|
|
|
295
|
|
|
424
|
|
|||||
Interest expense
|
89
|
|
|
94
|
|
|
97
|
|
|
102
|
|
|
101
|
|
|||||
Amortization of deferred acquisition costs (DAC)
|
18
|
|
|
16
|
|
|
19
|
|
|
18
|
|
|
20
|
|
|||||
Employee compensation and benefit expenses
|
178
|
|
|
152
|
|
|
143
|
|
|
133
|
|
|
126
|
|
|||||
Other operating expenses
|
125
|
|
|
96
|
|
|
101
|
|
|
112
|
|
|
105
|
|
|||||
Total expenses
|
503
|
|
|
422
|
|
|
748
|
|
|
660
|
|
|
776
|
|
|||||
Income (loss) before income taxes and equity in net earnings of investees
|
460
|
|
|
579
|
|
|
991
|
|
|
1,015
|
|
|
1,428
|
|
|||||
Equity in net earnings of investees (1)
|
4
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|
3
|
|
|||||
Income (loss) before income taxes
|
464
|
|
|
580
|
|
|
991
|
|
|
1,017
|
|
|
1,431
|
|
|||||
Provision (benefit) for income taxes
|
63
|
|
|
59
|
|
|
261
|
|
|
136
|
|
|
375
|
|
|||||
Net income (loss)
|
401
|
|
|
521
|
|
|
730
|
|
|
881
|
|
|
1,056
|
|
|||||
Less: Redeemable noncontrolling interests
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Net income (loss) attributable to Assured Guaranty Ltd.
|
$
|
402
|
|
|
$
|
521
|
|
|
$
|
730
|
|
|
$
|
881
|
|
|
$
|
1,056
|
|
Diluted earnings per share
|
$
|
4.00
|
|
|
$
|
4.68
|
|
|
$
|
5.96
|
|
|
$
|
6.56
|
|
|
$
|
7.08
|
|
Cash dividends declared per share
|
$
|
0.72
|
|
|
$
|
0.64
|
|
|
$
|
0.57
|
|
|
$
|
0.52
|
|
|
$
|
0.48
|
|
|
As of December 31,
|
||||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
|
(dollars in millions, except per share amounts)
|
||||||||||||||||||
Balance sheet data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Investments and cash
|
$
|
10,409
|
|
|
$
|
10,977
|
|
|
$
|
11,539
|
|
|
$
|
11,103
|
|
|
$
|
11,358
|
|
Premiums receivable, net of commissions payable
|
1,286
|
|
|
904
|
|
|
915
|
|
|
576
|
|
|
693
|
|
|||||
Ceded unearned premium reserve
|
39
|
|
|
59
|
|
|
119
|
|
|
206
|
|
|
232
|
|
|||||
Salvage and subrogation recoverable
|
747
|
|
|
490
|
|
|
572
|
|
|
365
|
|
|
126
|
|
|||||
Variable interest entities’ assets (3)
|
1,014
|
|
|
569
|
|
|
700
|
|
|
876
|
|
|
1,261
|
|
|||||
Goodwill and other intangible assets
|
216
|
|
|
24
|
|
|
24
|
|
|
25
|
|
|
24
|
|
|||||
Total assets
|
14,326
|
|
|
13,603
|
|
|
14,433
|
|
|
14,151
|
|
|
14,544
|
|
|||||
Liabilities and shareholders' equity:
|
|
|
|
|
|
|
|
|
|
||||||||||
Unearned premium reserve
|
3,736
|
|
|
3,512
|
|
|
3,475
|
|
|
3,511
|
|
|
3,996
|
|
|||||
Loss and loss adjustment expense reserve
|
1,050
|
|
|
1,177
|
|
|
1,444
|
|
|
1,127
|
|
|
1,067
|
|
|||||
Long-term debt
|
1,235
|
|
|
1,233
|
|
|
1,292
|
|
|
1,306
|
|
|
1,300
|
|
|||||
Credit derivative liabilities
|
191
|
|
|
209
|
|
|
271
|
|
|
402
|
|
|
446
|
|
|||||
Variable interest entities’ liabilities (3)
|
951
|
|
|
619
|
|
|
757
|
|
|
958
|
|
|
1,349
|
|
|||||
Total liabilities
|
7,674
|
|
|
7,048
|
|
|
7,594
|
|
|
7,647
|
|
|
8,481
|
|
|||||
Shareholders' equity attributable to Assured Guaranty Ltd.
|
6,639
|
|
|
6,555
|
|
|
6,839
|
|
|
6,504
|
|
|
6,063
|
|
|||||
Shareholders' equity
|
6,645
|
|
|
6,555
|
|
|
6,839
|
|
|
6,504
|
|
|
6,063
|
|
|||||
Shareholders' equity attributable to Assured Guaranty Ltd. per share
|
71.18
|
|
|
63.23
|
|
|
58.95
|
|
|
50.82
|
|
|
43.96
|
|
|||||
Consolidated statutory financial information:
|
|
|
|
|
|
|
|
|
|
||||||||||
Policyholders' surplus
|
$
|
5,056
|
|
|
$
|
5,148
|
|
|
$
|
5,305
|
|
|
$
|
5,126
|
|
|
$
|
4,631
|
|
Contingency reserve
|
1,607
|
|
|
1,663
|
|
|
1,750
|
|
|
2,008
|
|
|
2,263
|
|
|||||
Claims-paying resources (2)
|
11,162
|
|
|
11,815
|
|
|
12,021
|
|
|
11,954
|
|
|
12,567
|
|
|||||
Financial Guaranty Exposure:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net debt service outstanding
|
$
|
374,130
|
|
|
$
|
371,586
|
|
|
$
|
401,118
|
|
|
$
|
437,535
|
|
|
$
|
536,341
|
|
Net par outstanding
|
236,807
|
|
|
241,802
|
|
|
264,952
|
|
|
296,318
|
|
|
358,571
|
|
|||||
Asset Management Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Assets under management
|
17,827
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(1)
|
The presentation of equity in net earnings of investees was changed in 2019 to reflect amounts previously reported in net investment income and other income to a separate line item on the consolidated statements of operations.
|
(2)
|
Based on accounting practices prescribed or permitted by U.S. insurance regulatory authorities, for all insurance subsidiaries. Claims-paying resources is calculated as the sum of statutory policyholders' surplus, statutory contingency reserve, unearned premium reserves and net deferred ceding commission income, statutory loss and LAE reserves, present value of installment premium on all insurance contracts regardless of form, discounted at 6%, standby lines of credit/stop loss and excess-of-loss reinsurance facility. Total claims-paying resources is used by the Company to evaluate the adequacy of capital resources.
|
(3)
|
Beginning in 2019, variable interest entities’ assets and liabilities include consolidated investment vehicles.
|
ITEM 7.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions, except per share amounts)
|
||||||||||
GAAP Highlights
|
|
|
|
|
|
||||||
Net income (loss) attributable to AGL
|
$
|
402
|
|
|
$
|
521
|
|
|
$
|
730
|
|
Net income (loss) attributable to AGL per diluted share
|
4.00
|
|
|
4.68
|
|
|
5.96
|
|
|||
Weighted Average Diluted shares
|
100.2
|
|
|
111.3
|
|
|
122.3
|
|
|||
|
|
|
|
|
|
||||||
Adjusted operating income (loss) (1) (2)
|
|
|
|
|
|
||||||
Insurance
|
$
|
512
|
|
|
$
|
582
|
|
|
$
|
732
|
|
Asset Management
|
(10
|
)
|
|
—
|
|
|
—
|
|
|||
Corporate
|
(111
|
)
|
|
(96
|
)
|
|
(83
|
)
|
|||
Other
|
—
|
|
|
(4
|
)
|
|
12
|
|
|||
Adjusted operating income (loss)
|
391
|
|
|
482
|
|
|
661
|
|
|||
Adjusted operating income per diluted share (2)
|
3.91
|
|
|
4.34
|
|
|
5.41
|
|
|||
|
|
|
|
|
|
||||||
Insurance Segment
|
|
|
|
|
|
||||||
Gross written premiums (GWP)
|
$
|
677
|
|
|
$
|
612
|
|
|
$
|
307
|
|
Present value of new business production (PVP) (1)
|
463
|
|
|
663
|
|
|
289
|
|
|||
Gross par written
|
24,353
|
|
|
24,624
|
|
|
18,024
|
|
|||
Asset Management Segment
|
|
|
|
|
|
||||||
CLO net inflows
|
$
|
885
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Wind-down funds net outflows
|
(1,297
|
)
|
|
—
|
|
|
—
|
|
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
||||||||||||
|
|
Amount
|
|
Per Share
|
|
Amount
|
|
Per Share
|
||||||||
|
|
(in millions, except per share amounts)
|
||||||||||||||
Shareholders' equity attributable to AGL
|
|
$
|
6,639
|
|
|
$
|
71.18
|
|
|
$
|
6,555
|
|
|
$
|
63.23
|
|
Adjusted operating shareholders' equity (1) (3)
|
|
6,246
|
|
|
66.96
|
|
|
6,342
|
|
|
61.17
|
|
||||
Adjusted book value (1) (4)
|
|
9,035
|
|
|
96.86
|
|
|
8,922
|
|
|
86.06
|
|
||||
Gain (loss) related to the effect of consolidating VIEs (VIE consolidation) included in adjusted operating shareholders' equity
|
|
7
|
|
|
0.07
|
|
|
3
|
|
|
0.03
|
|
||||
Gain (loss) related to VIE consolidation included in adjusted book value
|
|
(4
|
)
|
|
(0.05
|
)
|
|
(15
|
)
|
|
(0.15
|
)
|
||||
Common shares outstanding (5)
|
|
93.3
|
|
|
|
|
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. See “-- Non-GAAP Financial Measures” for additional details.
|
(2)
|
"Adjusted operating income" was formerly known as "Non-GAAP operating income."
|
(3)
|
"Adjusted operating shareholders' equity" was formerly known as "Non-GAAP operating shareholders' equity."
|
(4)
|
"Adjusted book value" was formerly known as "Non-GAAP adjusted book value."
|
(5)
|
See “Key Business Strategies -- Capital Management” below for information on common share repurchases.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Revenues:
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
476
|
|
|
$
|
548
|
|
|
$
|
690
|
|
Net investment income
|
378
|
|
|
395
|
|
|
417
|
|
|||
Asset management fees
|
22
|
|
|
—
|
|
|
—
|
|
|||
Net realized investment gains (losses)
|
22
|
|
|
(32
|
)
|
|
40
|
|
|||
Net change in fair value of credit derivatives
|
(6
|
)
|
|
112
|
|
|
111
|
|
|||
Fair value gains (losses) on FG VIEs
|
42
|
|
|
14
|
|
|
30
|
|
|||
Foreign exchange gains (losses) on remeasurement
|
24
|
|
|
(37
|
)
|
|
60
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
—
|
|
|
58
|
|
|||
Commutation gains (losses)
|
1
|
|
|
(16
|
)
|
|
328
|
|
|||
Other income (loss)
|
4
|
|
|
17
|
|
|
5
|
|
|||
Total revenues
|
963
|
|
|
1,001
|
|
|
1,739
|
|
|||
Expenses:
|
|
|
|
|
|
||||||
Loss and LAE
|
93
|
|
|
64
|
|
|
388
|
|
|||
Interest expense
|
89
|
|
|
94
|
|
|
97
|
|
|||
Amortization of DAC
|
18
|
|
|
16
|
|
|
19
|
|
|||
Employee compensation and benefit expenses
|
178
|
|
|
152
|
|
|
143
|
|
|||
Other operating expenses
|
125
|
|
|
96
|
|
|
101
|
|
|||
Total expenses
|
503
|
|
|
422
|
|
|
748
|
|
|||
Income (loss) before provision for income taxes and equity in net earnings of investees
|
460
|
|
|
579
|
|
|
991
|
|
|||
Equity in net earnings of investees
|
4
|
|
|
1
|
|
|
—
|
|
|||
Income (loss) before income taxes
|
464
|
|
|
580
|
|
|
991
|
|
|||
Provision (benefit) for income taxes
|
63
|
|
|
59
|
|
|
261
|
|
|||
Net income (loss)
|
401
|
|
|
521
|
|
|
730
|
|
|||
Less: Redeemable noncontrolling interests
|
(1
|
)
|
|
—
|
|
|
—
|
|
|||
Net income (loss) attributable to Assured Guaranty Ltd.
|
$
|
402
|
|
|
$
|
521
|
|
|
$
|
730
|
|
Effective tax rate
|
13.7
|
%
|
|
10.2
|
%
|
|
26.3
|
%
|
•
|
fair value losses on credit derivatives and CCS in 2019 compared with gains in 2018,
|
•
|
lower earned premiums consistent with the scheduled decline net par outstanding, as well as lower accelerations for refundings and terminations,
|
•
|
higher compensation and other operating expenses attributable to the BlueMountain Acquisition and its related fourth quarter 2019 expenses, and
|
•
|
higher loss and loss adjustment expenses in 2019.
|
•
|
Insurance
|
•
|
Asset Management and Alternative Investments
|
•
|
Capital Management
|
•
|
encourages retail investors, who typically have fewer resources than the Company for analyzing municipal bonds, to purchase such bonds;
|
•
|
enables institutional investors to operate more efficiently; and
|
•
|
allows smaller, less well-known issuers to gain market access on a more cost-effective basis.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(dollars in billions, except number of issues and percent)
|
||||||||||
Par:
|
|
|
|
|
|
||||||
New municipal bonds issued
|
$
|
406.6
|
|
|
$
|
320.3
|
|
|
$
|
409.5
|
|
Total insured
|
$
|
23.9
|
|
|
$
|
18.9
|
|
|
$
|
23.0
|
|
Insured by Assured Guaranty
|
$
|
14.0
|
|
|
$
|
10.5
|
|
|
$
|
13.5
|
|
Number of issues:
|
|
|
|
|
|
||||||
New municipal bonds issued
|
10,590
|
|
|
8,555
|
|
|
10,589
|
|
|||
Total insured
|
1,724
|
|
|
1,246
|
|
|
1,637
|
|
|||
Insured by Assured Guaranty
|
839
|
|
|
596
|
|
|
833
|
|
|||
Bond insurance market penetration based on:
|
|
|
|
|
|
||||||
Par
|
5.9
|
%
|
|
5.9
|
%
|
|
5.6
|
%
|
|||
Number of issues
|
16.3
|
%
|
|
14.6
|
%
|
|
15.5
|
%
|
|||
Single A par sold
|
21.4
|
%
|
|
17.8
|
%
|
|
23.3
|
%
|
|||
Single A transactions sold
|
54.9
|
%
|
|
52.8
|
%
|
|
57.3
|
%
|
|||
$25 million and under par sold
|
18.1
|
%
|
|
17.2
|
%
|
|
18.7
|
%
|
|||
$25 million and under transactions sold
|
19.7
|
%
|
|
17.1
|
%
|
|
18.3
|
%
|
(1)
|
Source: The amounts in the table are those reported by Thomson Reuters. The table excludes Corporate-CUSIP healthcare and project finance transactions insured by Assured Guaranty, which the company also considers to be public finance business.
|
•
|
CLO products are typically issued on a quarterly basis when market conditions permit and generally have a stated maturity of 12-13 years with a potential reinvestment period. Once the reinvestment period expires, CLO noteholders will receive distributions through the maturity of the CLO, unless Assured Investment Management and the noteholders agree to reset the period of the CLOs for an extended reinvestment period.
|
•
|
Opportunity funds invest in a mix of strategies that may have higher concentrations in illiquid strategies. Typically, opportunity funds have limited withdrawal or redemption rights, and instead offer contractual cashflow distributions based on the legal agreement of each respective opportunity fund.
|
|
Amount
|
|
Number of Shares
|
|
Average price per share
|
|||||
|
(in millions, except per share data)
|
|||||||||
2013-2018
|
$
|
2,716
|
|
|
94.556
|
|
|
$
|
28.73
|
|
2019
|
500
|
|
|
11.164
|
|
|
44.79
|
|
||
2020 (through February 27, 2020)
|
40
|
|
|
0.844
|
|
|
47.41
|
|
||
Cumulative repurchases since the beginning of 2013
|
$
|
3,256
|
|
|
106.564
|
|
|
$
|
30.56
|
|
|
|
Year Ended December 31,
|
|
|
|
|
||||||||||
|
|
2019
|
|
2018
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||||||
|
|
(per share)
|
||||||||||||||
Net income attributable to AGL
|
|
$
|
1.60
|
|
|
$
|
1.73
|
|
|
|
|
|
||||
Adjusted operating income
|
|
1.56
|
|
|
1.58
|
|
|
|
|
|
||||||
Shareholders' equity attributable to AGL
|
|
|
|
|
|
$
|
21.44
|
|
|
$
|
16.26
|
|
||||
Adjusted operating shareholders' equity
|
|
|
|
|
|
19.24
|
|
|
15.29
|
|
||||||
Adjusted book value
|
|
|
|
|
|
35.06
|
|
|
27.07
|
|
(1)
|
Represents the estimated accretive effect of cumulative repurchases since the beginning of 2013.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Adjusted operating income (loss) by segment:
|
|
|
|
|
|
||||||
Insurance
|
$
|
512
|
|
|
$
|
582
|
|
|
$
|
732
|
|
Asset management
|
(10
|
)
|
|
—
|
|
|
—
|
|
|||
Corporate
|
(111
|
)
|
|
(96
|
)
|
|
(83
|
)
|
|||
Other
|
—
|
|
|
(4
|
)
|
|
12
|
|
|||
Adjusted operating income (loss)
|
391
|
|
|
482
|
|
|
661
|
|
|||
Reconciling items from adjusted operating income to net income (loss) attributable to AGL:
|
|
|
|
|
|
||||||
Plus pre-tax adjustments:
|
|
|
|
|
|
||||||
Realized gains (losses) on investments
|
22
|
|
|
(32
|
)
|
|
40
|
|
|||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
(10
|
)
|
|
101
|
|
|
43
|
|
|||
Fair value gains (losses) on CCS
|
(22
|
)
|
|
14
|
|
|
(2
|
)
|
|||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
|
22
|
|
|
(32
|
)
|
|
57
|
|
|||
Total pre-tax adjustments
|
12
|
|
|
51
|
|
|
138
|
|
|||
Plus tax effect on pre-tax adjustments
|
(1
|
)
|
|
(12
|
)
|
|
(69
|
)
|
|||
Net income (loss) attributable to AGL
|
$
|
402
|
|
|
$
|
521
|
|
|
$
|
730
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Revenues
|
|
|
|
|
|
||||||
Net earned premiums and credit derivative revenues
|
$
|
511
|
|
|
$
|
580
|
|
|
$
|
734
|
|
Net investment income
|
383
|
|
|
396
|
|
|
423
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
—
|
|
|
58
|
|
|||
Commutation gains (losses)
|
1
|
|
|
(16
|
)
|
|
328
|
|
|||
Other income (loss)
|
22
|
|
|
32
|
|
|
16
|
|
|||
Total revenues
|
917
|
|
|
992
|
|
|
1,559
|
|
|||
Expenses
|
|
|
|
|
|
||||||
Loss expense
|
86
|
|
|
70
|
|
|
352
|
|
|||
Amortization of deferred acquisition cost (DAC)
|
18
|
|
|
16
|
|
|
19
|
|
|||
Employee compensation and benefit expenses
|
137
|
|
|
134
|
|
|
127
|
|
|||
Other operating expenses
|
83
|
|
|
82
|
|
|
88
|
|
|||
Total expenses
|
324
|
|
|
302
|
|
|
586
|
|
|||
Equity in net earnings of investees
|
2
|
|
|
1
|
|
|
—
|
|
|||
Adjusted operating income (loss) before income taxes
|
595
|
|
|
691
|
|
|
973
|
|
|||
Provision (benefit) for income taxes
|
83
|
|
|
109
|
|
|
241
|
|
|||
Adjusted operating income (loss)
|
$
|
512
|
|
|
$
|
582
|
|
|
$
|
732
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
GWP
|
|
|
|
|
|
||||||
Public Finance—U.S.
|
$
|
198
|
|
|
$
|
320
|
|
|
$
|
190
|
|
Public Finance—non-U.S.
|
417
|
|
|
115
|
|
|
105
|
|
|||
Structured Finance—U.S.
|
57
|
|
|
167
|
|
|
(1
|
)
|
|||
Structured Finance—non-U.S.
|
5
|
|
|
10
|
|
|
13
|
|
|||
Total GWP
|
$
|
677
|
|
|
$
|
612
|
|
|
$
|
307
|
|
PVP (1):
|
|
|
|
|
|
||||||
Public Finance—U.S.
|
$
|
201
|
|
|
$
|
391
|
|
|
$
|
196
|
|
Public Finance—non-U.S.
|
211
|
|
|
94
|
|
|
66
|
|
|||
Structured Finance—U.S.
|
45
|
|
|
166
|
|
|
12
|
|
|||
Structured Finance—non-U.S.
|
6
|
|
|
12
|
|
|
15
|
|
|||
Total PVP
|
$
|
463
|
|
|
$
|
663
|
|
|
$
|
289
|
|
Gross Par Written (1):
|
|
|
|
|
|
||||||
Public Finance—U.S.
|
$
|
16,337
|
|
|
$
|
19,572
|
|
|
$
|
15,957
|
|
Public Finance—non-U.S.
|
6,347
|
|
|
3,817
|
|
|
1,376
|
|
|||
Structured Finance—U.S.
|
1,581
|
|
|
902
|
|
|
489
|
|
|||
Structured Finance—non-U.S.
|
88
|
|
|
333
|
|
|
202
|
|
|||
Total gross par written
|
$
|
24,353
|
|
|
$
|
24,624
|
|
|
$
|
18,024
|
|
|
|
|
|
|
|
||||||
Average rating on new business written
|
A
|
|
A-
|
|
A-
|
(1)
|
PVP and Gross Par Written in the table above are based on "close date," when the transaction settles. See “-- Non-GAAP Financial Measures -- PVP or Present Value of New Business Production.”
|
•
|
privately executed, bilateral guarantees on a large number of European sub-sovereign credits,
|
•
|
additional premiums upon the conversion of several existing transactions from credit default swaps to financial guaranty insurance contracts,
|
•
|
several U.K financings for the construction of new student accommodations, and
|
•
|
debt refinancings, including a Spanish solar plant transaction, which was the first insured issuance in Spain since the 2008 financial crisis, and a previously insured regulated utility transaction.
|
|
GWP
|
|
PVP (1)
|
|
|
||||||||||||||
|
Financial Guaranty
|
|
Financial Guaranty
|
|
Credit
Derivatives
|
|
Total
|
|
Gross Par Written (1)
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Public Finance—U.S.
|
$
|
123
|
|
|
$
|
118
|
|
|
$
|
67
|
|
|
$
|
185
|
|
|
$
|
7,559
|
|
Public Finance—non-U.S.
|
50
|
|
|
38
|
|
|
12
|
|
|
50
|
|
|
3,345
|
|
|||||
Structured Finance—U.S.
|
157
|
|
|
156
|
|
|
—
|
|
|
156
|
|
|
349
|
|
|||||
Structured Finance—non-U.S.
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19
|
|
|||||
Total
|
$
|
330
|
|
|
$
|
312
|
|
|
$
|
79
|
|
|
$
|
391
|
|
|
$
|
11,272
|
|
(1)
|
See “-- Non-GAAP Financial Measures -- PVP or Present Value of New Business Production.”
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Financial guaranty insurance:
|
|
|
|
|
|
||||||
Public finance
|
|
|
|
|
|
||||||
Scheduled net earned premiums
|
$
|
278
|
|
|
$
|
300
|
|
|
$
|
315
|
|
Accelerations:
|
|
|
|
|
|
||||||
Refundings
|
115
|
|
|
139
|
|
|
269
|
|
|||
Terminations
|
10
|
|
|
14
|
|
|
2
|
|
|||
Total accelerations
|
125
|
|
|
153
|
|
|
271
|
|
|||
Total public finance
|
403
|
|
|
453
|
|
|
586
|
|
|||
Structured finance
|
|
|
|
|
|
||||||
Scheduled net earned premiums
|
78
|
|
|
97
|
|
|
102
|
|
|||
Accelerations
|
7
|
|
|
6
|
|
|
15
|
|
|||
Total structured finance
|
85
|
|
|
103
|
|
|
117
|
|
|||
Specialty insurance and reinsurance
|
6
|
|
|
4
|
|
|
2
|
|
|||
Total net earned premiums
|
494
|
|
|
560
|
|
|
705
|
|
|||
Credit derivative revenues
|
17
|
|
|
20
|
|
|
29
|
|
|||
Total net earned premiums and credit derivative revenues
|
$
|
511
|
|
|
$
|
580
|
|
|
$
|
734
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Income from fixed-maturity securities managed by third parties
|
$
|
272
|
|
|
$
|
293
|
|
|
$
|
296
|
|
Income from internally managed securities
|
120
|
|
|
112
|
|
|
136
|
|
|||
Gross investment income
|
392
|
|
|
405
|
|
|
432
|
|
|||
Investment expenses
|
(9
|
)
|
|
(9
|
)
|
|
(9
|
)
|
|||
Net investment income
|
$
|
383
|
|
|
$
|
396
|
|
|
$
|
423
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Foreign exchange gain (loss) on remeasurement (1)
|
$
|
3
|
|
|
$
|
(5
|
)
|
|
$
|
5
|
|
Fair value gains (losses) on equity investments (2)
|
—
|
|
|
27
|
|
|
—
|
|
|||
Other
|
19
|
|
|
10
|
|
|
11
|
|
|||
Total other income (loss)
|
$
|
22
|
|
|
$
|
32
|
|
|
$
|
16
|
|
(1)
|
Primarily relate to cash.
|
(2)
|
The Company recorded a gain on change in fair value of equity securities in 2018 related to the Company's minority interest in the parent company of TMC Bonds LLC, which it sold in third quarter of 2018.
|
|
Net Expected Loss to be Paid (Recovered)
|
|
Net Economic Loss Development (Benefit)
|
||||||||||||||||
|
As of December 31,
|
|
Year Ended December 31,
|
||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2017
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Insurance
|
$
|
683
|
|
|
$
|
1,110
|
|
|
$
|
14
|
|
|
$
|
(9
|
)
|
|
$
|
353
|
|
FG VIEs
|
58
|
|
|
75
|
|
|
(29
|
)
|
|
(13
|
)
|
|
(6
|
)
|
|||||
Credit derivatives
|
(4
|
)
|
|
(2
|
)
|
|
14
|
|
|
17
|
|
|
(34
|
)
|
|||||
Total
|
$
|
737
|
|
|
$
|
1,183
|
|
|
$
|
(1
|
)
|
|
$
|
(5
|
)
|
|
$
|
313
|
|
|
Net Expected Loss to be Paid (Recovered)
|
|
Net Economic Loss Development (Benefit)
|
||||||||||||||||
|
As of December 31,
|
|
Year Ended December 31,
|
||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2017
|
||||||||||
|
(in millions)
|
||||||||||||||||||
U.S. public finance
|
$
|
531
|
|
|
$
|
832
|
|
|
$
|
224
|
|
|
$
|
70
|
|
|
$
|
554
|
|
Non-U.S. public finance
|
23
|
|
|
32
|
|
|
(9
|
)
|
|
$
|
(14
|
)
|
|
$
|
(5
|
)
|
|||
Structured finance
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. RMBS
|
146
|
|
|
293
|
|
|
(234
|
)
|
|
(69
|
)
|
|
(181
|
)
|
|||||
Other structured finance
|
37
|
|
|
26
|
|
|
18
|
|
|
8
|
|
|
(55
|
)
|
|||||
Structured finance
|
183
|
|
|
319
|
|
|
(216
|
)
|
|
(61
|
)
|
|
(236
|
)
|
|||||
Total
|
$
|
737
|
|
|
$
|
1,183
|
|
|
$
|
(1
|
)
|
|
$
|
(5
|
)
|
|
$
|
313
|
|
|
Risk-Free Rates used in Expected Loss for U.S. Dollar Denominated Obligations
|
|
Economic Loss Development (Benefit) Attributable to Changes in Risk Free Rates
|
||||||||
|
As of December 31,
|
|
Year Ended December 31,
|
||||||||
|
Range
|
|
Weighted Average
|
|
(in millions)
|
||||||
2019
|
0.0
|
%
|
-
|
2.45%
|
|
1.94
|
%
|
|
$
|
(11
|
)
|
2018
|
0.0
|
%
|
-
|
3.06%
|
|
2.74
|
%
|
|
(17
|
)
|
|
2017
|
0.0
|
%
|
-
|
2.78%
|
|
2.38
|
%
|
|
25
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
U.S. public finance
|
$
|
247
|
|
|
$
|
90
|
|
|
$
|
553
|
|
Non-U.S. public finance
|
(7
|
)
|
|
(7
|
)
|
|
(4
|
)
|
|||
Structured finance
|
|
|
|
|
|
||||||
U.S. RMBS
|
(176
|
)
|
|
(19
|
)
|
|
(142
|
)
|
|||
Other structured finance
|
22
|
|
|
6
|
|
|
(55
|
)
|
|||
Structured finance
|
(154
|
)
|
|
(13
|
)
|
|
(197
|
)
|
|||
Total loss and LAE (benefit)
|
$
|
86
|
|
|
$
|
70
|
|
|
$
|
352
|
|
•
|
2019 was mainly driven by higher losses on certain Puerto Rico exposures, partially offset by improved recoveries in U.S. RMBS,
|
•
|
2018 was mainly driven by higher loss reserves on certain Puerto Rico exposures, partially offset by the reduction of loss reserves on the City of Hartford, CT, exposure and a benefit on structured finance exposures, and
|
•
|
2017 was mainly driven by higher loss reserves on certain Puerto Rico exposures, partially offset by a benefit from R&W settlements of $105 million, and a life insurance litigation settlement.
|
|
Year Ended
December 31, 2019 |
||
|
(in millions)
|
||
Revenues
|
|
||
Management fees:
|
|
||
CLOs
|
$
|
3
|
|
Opportunity funds
|
2
|
|
|
Wind-down funds
|
13
|
|
|
Total management fees
|
18
|
|
|
Performance fees
|
4
|
|
|
Total asset management fees
|
22
|
|
|
Total revenues
|
22
|
|
|
Expenses
|
|
||
Restructuring expenses
|
7
|
|
|
Amortization of intangible assets
|
3
|
|
|
Employee compensation and benefit expenses
|
17
|
|
|
Other operating expenses
|
7
|
|
|
Total expenses
|
34
|
|
|
Adjusted operating income (loss) before income taxes
|
(12
|
)
|
|
Provision (benefit) for income taxes
|
(2
|
)
|
|
Adjusted operating income (loss)
|
$
|
(10
|
)
|
•
|
the net asset value of the opportunity and wind-down funds plus any unfunded commitments;
|
•
|
the amount of aggregate collateral balance and principal cash of Assured Investment Management's CLOs, including CLO equity that may be held by Assured Investment Management funds. This also includes CLO assets managed by BlueMountain Fuji Management, LLC (BM Fuji). BlueMountain is not the investment manager of BM Fuji CLOs, but rather has entered into a services agreement and a secondment agreement with BM Fuji pursuant to which BlueMountain provides certain services associated with the management of BM Fuji-advised CLOs and acts in the capacity of service provider.
|
•
|
“Third-party assets under management” or “3rd Party AUM” refers to the assets Assured Investment Management manages or advises on behalf of third-party investors. This includes current and former employee investments in Assured Investment Management's funds. For CLOs, this also includes CLO equity that may be held by Assured Investment Management's funds.
|
•
|
“Intercompany assets under management” or “Intercompany AUM” refers to the assets Assured Investment Management manages or advises on behalf of the Company. This includes investments from affiliates of Assured Guaranty along with general partners' investments of BlueMountain (or its affiliates) into the funds.
|
•
|
“Funded assets under management” or “Funded AUM” refers to assets that have been deployed or invested into the funds or CLOs.
|
•
|
“Unfunded assets under management” or “Unfunded AUM” refers to unfunded capital commitments from closed-end funds and CLO warehouse fund.
|
•
|
“Fee earning assets under management” or “Fee Earning AUM” refers to assets where Assured Investment Management collects fees and has elected not to waive or rebate fees to investors.
|
•
|
“Non-fee earning assets under management” or “Non-Fee Earning AUM” refers to assets where Assured Investment Management does not collect fees or has elected to waive or rebate fees to investors. Assured Investment Management reserves the right to waive some or all fees for certain investors, including investors affiliated with Assured Investment Management and/or the Company. Further, to the extent that the Company's wind-down and/or opportunity funds are invested in Assured Investment Management managed CLOs, Assured Investment Management may rebate any management fees and/or performance compensation earned from the CLOs to the extent such fees are attributable to the wind-down and opportunity funds’ holdings of CLOs also managed by Assured Investment Management.
|
|
CLOs
|
|
Opportunity Funds
|
|
Wind-Down Funds
|
|
Total
|
||||||||
|
(in millions)
|
||||||||||||||
Rollforward:
|
|
|
|
|
|
|
|
||||||||
AUM, October 1, 2019
|
$
|
11,844
|
|
|
$
|
923
|
|
|
$
|
5,528
|
|
|
$
|
18,295
|
|
|
|
|
|
|
|
|
|
||||||||
Inflows
|
977
|
|
|
165
|
|
|
—
|
|
|
1,142
|
|
||||
Outflows:
|
|
|
|
|
|
|
|
||||||||
Redemptions
|
—
|
|
|
—
|
|
|
(171
|
)
|
|
(171
|
)
|
||||
Distributions
|
(92
|
)
|
|
(43
|
)
|
|
(1,126
|
)
|
|
(1,261
|
)
|
||||
Total outflows
|
(92
|
)
|
|
(43
|
)
|
|
(1,297
|
)
|
|
(1,432
|
)
|
||||
Net flows
|
885
|
|
|
122
|
|
|
(1,297
|
)
|
|
(290
|
)
|
||||
Change in fund value
|
29
|
|
|
(22
|
)
|
|
(185
|
)
|
|
(178
|
)
|
||||
AUM, end of period (1)
|
$
|
12,758
|
|
|
$
|
1,023
|
|
|
$
|
4,046
|
|
|
$
|
17,827
|
|
|
|
|
|
|
|
|
|
||||||||
Funded AUM
|
$
|
12,721
|
|
|
$
|
796
|
|
|
$
|
3,980
|
|
|
$
|
17,497
|
|
Unfunded AUM
|
37
|
|
|
227
|
|
|
66
|
|
|
330
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Fee Earning AUM
|
$
|
3,438
|
|
|
$
|
695
|
|
|
$
|
3,838
|
|
|
$
|
7,971
|
|
Non-Fee Earning AUM
|
9,320
|
|
|
328
|
|
|
208
|
|
|
9,856
|
|
(1)
|
Includes $142 million and $49 million of AUM related to intercompany investments in Assured Investment Management opportunity fund and CLO fund, respectively.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Revenues
|
|
|
|
|
|
||||||
Net investment income
|
$
|
4
|
|
|
$
|
6
|
|
|
$
|
2
|
|
Other income (loss) (1)
|
(1
|
)
|
|
(34
|
)
|
|
(10
|
)
|
|||
Total revenues
|
3
|
|
|
(28
|
)
|
|
(8
|
)
|
|||
Expenses
|
|
|
|
|
|
||||||
Interest expense
|
94
|
|
|
97
|
|
|
100
|
|
|||
Employee compensation and benefit expenses
|
17
|
|
|
18
|
|
|
16
|
|
|||
Other operating expenses
|
22
|
|
|
14
|
|
|
13
|
|
|||
Total expenses
|
133
|
|
|
129
|
|
|
129
|
|
|||
Adjusted operating income (loss) before income taxes
|
(130
|
)
|
|
(157
|
)
|
|
(137
|
)
|
|||
Provision (benefit) for income taxes
|
(19
|
)
|
|
(61
|
)
|
|
(54
|
)
|
|||
Adjusted operating income (loss)
|
$
|
(111
|
)
|
|
$
|
(96
|
)
|
|
$
|
(83
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Effect of consolidating:
|
|
|
|
|
|
||||||
FG VIEs
|
$
|
—
|
|
|
$
|
(4
|
)
|
|
$
|
11
|
|
Investment vehicles
|
—
|
|
|
—
|
|
|
—
|
|
|||
VIE consolidation effect
|
$
|
—
|
|
|
$
|
(4
|
)
|
|
$
|
11
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Net income (loss) attributable to AGL
|
$
|
402
|
|
|
$
|
521
|
|
|
$
|
730
|
|
Less pre-tax adjustments:
|
|
|
|
|
|
||||||
Realized gains (losses) on investments
|
22
|
|
|
(32
|
)
|
|
40
|
|
|||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
(10
|
)
|
|
101
|
|
|
43
|
|
|||
Fair value gains (losses) on CCS (1)
|
(22
|
)
|
|
14
|
|
|
(2
|
)
|
|||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
|
22
|
|
|
(32
|
)
|
|
57
|
|
|||
Total pre-tax adjustments
|
12
|
|
|
51
|
|
|
138
|
|
|||
Less tax effect on pre-tax adjustments
|
(1
|
)
|
|
(12
|
)
|
|
(69
|
)
|
|||
Adjusted operating income (loss)
|
$
|
391
|
|
|
$
|
482
|
|
|
$
|
661
|
|
(1)
|
Included in other income (loss) in the consolidated statements of operations.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Gross realized gains on available-for-sale securities
|
$
|
63
|
|
|
$
|
20
|
|
|
$
|
95
|
|
Gross realized losses on available-for-sale securities
|
(5
|
)
|
|
(12
|
)
|
|
(12
|
)
|
|||
Net realized gains (losses) on other invested assets
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
|||
OTTI
|
(35
|
)
|
|
(39
|
)
|
|
(43
|
)
|
|||
Net realized investment gains (losses)
|
$
|
22
|
|
|
$
|
(32
|
)
|
|
$
|
40
|
|
•
|
2019 mainly related to the sale of the COFINA Exchange Senior Bonds.
|
•
|
2018 mainly related to foreign exchange gains.
|
•
|
2017 mainly relate to sales of internally managed investments, including the gain on sale of the Zohar II 2005-1 notes exchanged in the MBIA UK Acquisition.
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
||||||||||||
|
After-Tax
|
|
Per Share
|
|
After-Tax
|
|
Per Share
|
||||||||
|
(dollars in millions, except
per share amounts)
|
||||||||||||||
Shareholders’ equity Attributable to AGL
|
$
|
6,639
|
|
|
$
|
71.18
|
|
|
$
|
6,555
|
|
|
$
|
63.23
|
|
Less pre-tax adjustments:
|
|
|
|
|
|
|
|
||||||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
(56
|
)
|
|
(0.60
|
)
|
|
(45
|
)
|
|
(0.44
|
)
|
||||
Fair value gains (losses) on CCS
|
52
|
|
|
0.56
|
|
|
74
|
|
|
0.72
|
|
||||
Unrealized gain (loss) on investment portfolio excluding foreign exchange effect
|
486
|
|
|
5.21
|
|
|
247
|
|
|
2.39
|
|
||||
Less taxes
|
(89
|
)
|
|
(0.95
|
)
|
|
(63
|
)
|
|
(0.61
|
)
|
||||
Adjusted operating shareholders’ equity
|
6,246
|
|
|
66.96
|
|
|
6,342
|
|
|
61.17
|
|
||||
Pre-tax adjustments:
|
|
|
|
|
|
|
|
||||||||
Less: Deferred acquisition costs
|
111
|
|
|
1.19
|
|
|
105
|
|
|
1.01
|
|
||||
Plus: Net present value of estimated net future revenue
|
192
|
|
|
2.05
|
|
|
204
|
|
|
1.96
|
|
||||
Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed
|
3,296
|
|
|
35.34
|
|
|
3,005
|
|
|
28.98
|
|
||||
Plus taxes
|
(588
|
)
|
|
(6.30
|
)
|
|
(524
|
)
|
|
(5.04
|
)
|
||||
Adjusted book value
|
$
|
9,035
|
|
|
$
|
96.86
|
|
|
$
|
8,922
|
|
|
$
|
86.06
|
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) related to VIE consolidation included in adjusted operating shareholders' equity (net of tax provision of $2 and $1)
|
$
|
7
|
|
|
$
|
0.07
|
|
|
$
|
3
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) related to VIE consolidation included in adjusted book value (net of tax benefit of $1 and $4)
|
$
|
(4
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(15
|
)
|
|
$
|
(0.15
|
)
|
|
Year Ended December 31, 2019
|
||||||||||||||||||
|
Public Finance
|
|
Structured Finance
|
|
|
||||||||||||||
|
U.S.
|
|
Non - U.S.
|
|
U.S.
|
|
Non - U.S.
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
GWP
|
$
|
198
|
|
|
$
|
417
|
|
|
$
|
57
|
|
|
$
|
5
|
|
|
$
|
677
|
|
Less: Installment GWP and other GAAP adjustments (1)
|
(3
|
)
|
|
417
|
|
|
55
|
|
|
—
|
|
|
469
|
|
|||||
Upfront GWP
|
201
|
|
|
—
|
|
|
2
|
|
|
5
|
|
|
208
|
|
|||||
Plus: Installment premium PVP
|
—
|
|
|
211
|
|
|
43
|
|
|
1
|
|
|
255
|
|
|||||
PVP
|
$
|
201
|
|
|
$
|
211
|
|
|
$
|
45
|
|
|
$
|
6
|
|
|
$
|
463
|
|
|
Year Ended December 31, 2018
|
||||||||||||||||||
|
Public Finance
|
|
Structured Finance
|
|
|
||||||||||||||
|
U.S.
|
|
Non - U.S.
|
|
U.S.
|
|
Non - U.S.
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
GWP
|
$
|
320
|
|
|
$
|
115
|
|
|
$
|
167
|
|
|
$
|
10
|
|
|
$
|
612
|
|
Less: Installment GWP and other GAAP adjustments (1)
|
34
|
|
|
75
|
|
|
9
|
|
|
1
|
|
|
119
|
|
|||||
Upfront GWP
|
286
|
|
|
40
|
|
|
158
|
|
|
9
|
|
|
493
|
|
|||||
Plus: Installment premium PVP (2)
|
105
|
|
|
54
|
|
|
8
|
|
|
3
|
|
|
170
|
|
|||||
PVP
|
$
|
391
|
|
|
$
|
94
|
|
|
$
|
166
|
|
|
$
|
12
|
|
|
$
|
663
|
|
|
Year Ended December 31, 2017
|
||||||||||||||||||
|
Public Finance
|
|
Structured Finance
|
|
|
||||||||||||||
|
U.S.
|
|
Non - U.S.
|
|
U.S.
|
|
Non - U.S.
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
GWP
|
$
|
190
|
|
|
$
|
105
|
|
|
$
|
(1
|
)
|
|
$
|
13
|
|
|
$
|
307
|
|
Less: Installment GWP and other GAAP adjustments (1)
|
(3
|
)
|
|
103
|
|
|
(1
|
)
|
|
—
|
|
|
99
|
|
|||||
Upfront GWP
|
193
|
|
|
2
|
|
|
—
|
|
|
13
|
|
|
208
|
|
|||||
Plus: Installment premium PVP
|
3
|
|
|
64
|
|
|
12
|
|
|
2
|
|
|
81
|
|
|||||
PVP
|
$
|
196
|
|
|
$
|
66
|
|
|
$
|
12
|
|
|
$
|
15
|
|
|
$
|
289
|
|
(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.
|
•
|
for insured obligations that are not supported by homogeneous pools of assets (which category includes most of the Company's public finance transactions), as the total estimated contractual future principal and interest due through maturity, regardless of whether the obligations may be called and regardless of whether, in the case of obligations where principal payments are due when an underlying asset makes a principal payment, the Company believes the obligations will be repaid prior to contractual maturity;
|
•
|
for insured obligations that are supported by homogeneous pools of assets that are contractually permitted to prepay principal (which category includes, for example, RMBS and CLOs), as total estimated expected future principal and interest due on insured obligations through their respective expected terms, which includes the Company's expectations as to whether the obligations may be called and, in the case of obligations where principal payments are due when an underlying asset makes a principal payment, when the Company expects principal payments to be made prior to contractual maturity.
|
|
|
As of December 31, 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
|
|
$
|
73,467
|
|
|
A-
|
|
$
|
78,800
|
|
|
A-
|
Tax backed
|
|
37,047
|
|
|
A-
|
|
40,616
|
|
|
A-
|
||
Municipal utilities
|
|
26,195
|
|
|
A-
|
|
28,402
|
|
|
A-
|
||
Transportation
|
|
16,209
|
|
|
BBB+
|
|
15,197
|
|
|
A-
|
||
Healthcare
|
|
7,148
|
|
|
A-
|
|
6,750
|
|
|
A-
|
||
Higher education
|
|
5,916
|
|
|
A-
|
|
6,643
|
|
|
A-
|
||
Infrastructure finance
|
|
5,429
|
|
|
A-
|
|
5,489
|
|
|
A-
|
||
Housing revenue
|
|
1,321
|
|
|
BBB+
|
|
1,435
|
|
|
BBB+
|
||
Investor-owned utilities
|
|
655
|
|
|
A-
|
|
846
|
|
|
A-
|
||
Renewable energy
|
|
210
|
|
|
A-
|
|
215
|
|
|
BBB+
|
||
Other public finance—U.S.
|
|
1,890
|
|
|
A-
|
|
2,169
|
|
|
A-
|
||
Total public finance—U.S.
|
|
175,487
|
|
|
A-
|
|
186,562
|
|
|
A-
|
||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|||
Regulated utilities
|
|
18,995
|
|
|
BBB+
|
|
18,124
|
|
|
BBB+
|
||
Infrastructure finance
|
|
17,952
|
|
|
BBB
|
|
17,166
|
|
|
BBB
|
||
Sovereign and sub-sovereign
|
|
11,341
|
|
|
A+
|
|
6,094
|
|
|
A
|
||
Renewable energy
|
|
1,555
|
|
|
A
|
|
1,346
|
|
|
A
|
||
Pooled infrastructure
|
|
1,416
|
|
|
AAA
|
|
1,373
|
|
|
AAA
|
||
Total public finance—non-U.S.
|
|
51,259
|
|
|
A-
|
|
44,103
|
|
|
BBB+
|
||
Total public finance
|
|
226,746
|
|
|
A-
|
|
230,665
|
|
|
A-
|
||
Structured finance:
|
|
|
|
|
|
|
|
|
|
|||
U.S.:
|
|
|
|
|
|
|
|
|
|
|||
RMBS
|
|
3,546
|
|
|
BBB-
|
|
4,270
|
|
|
BBB-
|
||
Life insurance transactions
|
|
1,776
|
|
|
AA-
|
|
1,435
|
|
|
A+
|
||
Pooled corporate obligations
|
|
1,401
|
|
|
AA-
|
|
1,215
|
|
|
AA-
|
||
Financial products
|
|
1,019
|
|
|
AA-
|
|
1,094
|
|
|
AA-
|
||
Consumer receivables
|
|
962
|
|
|
A-
|
|
1,255
|
|
|
A-
|
||
Other structured finance—U.S.
|
|
596
|
|
|
BBB+
|
|
675
|
|
|
A-
|
||
Total structured finance—U.S.
|
|
9,300
|
|
|
A-
|
|
9,944
|
|
|
A-
|
||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|||
RMBS
|
|
427
|
|
|
A
|
|
576
|
|
|
A-
|
||
Pooled corporate obligations
|
|
55
|
|
|
BB+
|
|
126
|
|
|
A
|
||
Other structured finance
|
|
279
|
|
|
A+
|
|
491
|
|
|
A
|
||
Total structured finance—non-U.S.
|
|
761
|
|
|
A
|
|
1,193
|
|
|
A
|
||
Total structured finance
|
|
10,061
|
|
|
A-
|
|
11,137
|
|
|
A-
|
||
Total net par outstanding
|
|
$
|
236,807
|
|
|
A-
|
|
$
|
241,802
|
|
|
A-
|
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
||||||||||
Rating Category
|
|
Net Par Outstanding
|
|
%
|
|
Net Par Outstanding
|
|
%
|
||||||
|
|
(dollars in millions)
|
||||||||||||
AAA
|
|
$
|
4,361
|
|
|
1.8
|
%
|
|
$
|
4,618
|
|
|
1.9
|
%
|
AA
|
|
29,037
|
|
|
12.3
|
|
|
27,021
|
|
|
11.2
|
|
||
A
|
|
111,329
|
|
|
47.0
|
|
|
119,415
|
|
|
49.4
|
|
||
BBB
|
|
83,574
|
|
|
35.3
|
|
|
80,588
|
|
|
33.3
|
|
||
BIG
|
|
8,506
|
|
|
3.6
|
|
|
10,160
|
|
|
4.2
|
|
||
Total net par outstanding
|
|
$
|
236,807
|
|
|
100.0
|
%
|
|
$
|
241,802
|
|
|
100.0
|
%
|
|
Net Par Outstanding
|
|
Percent of Total U.S. Public Finance Net Par Outstanding
|
|
Rating
|
|||
|
(dollars in millions)
|
|||||||
New Jersey (State of)
|
$
|
4,224
|
|
|
2.4
|
%
|
|
BBB
|
Pennsylvania (Commonwealth of)
|
1,978
|
|
|
1.1
|
|
|
A-
|
|
Illinois (State of)
|
1,803
|
|
|
1.1
|
|
|
BBB
|
|
New York Metropolitan Transportation Authority
|
1,630
|
|
|
0.9
|
|
|
A-
|
|
Puerto Rico, General Obligation, Appropriations and Guarantees of the Commonwealth
|
1,409
|
|
|
0.8
|
|
|
CCC
|
|
Puerto Rico Highways & Transportation Authority
|
1,265
|
|
|
0.7
|
|
|
CCC
|
|
Chicago (City of) Illinois
|
1,158
|
|
|
0.7
|
|
|
BBB
|
|
North Texas Tollway Authority
|
1,120
|
|
|
0.6
|
|
|
A
|
|
California (State of)
|
1,082
|
|
|
0.6
|
|
|
AA-
|
|
Wisconsin (State of)
|
1,053
|
|
|
0.6
|
|
|
A+
|
|
Total of top ten U.S. public finance exposures
|
$
|
16,722
|
|
|
9.5
|
%
|
|
|
|
Net Par Outstanding
|
|
Percent of Total U.S. Structured Finance Net Par Outstanding
|
|
Rating
|
|||
|
(dollars in millions)
|
|||||||
Private US Insurance Securitization
|
$
|
530
|
|
|
5.7
|
%
|
|
AA
|
Private US Insurance Securitization
|
500
|
|
|
5.4
|
|
|
AA-
|
|
SLM Private Credit Student Trust 2007-A
|
417
|
|
|
4.4
|
|
|
A+
|
|
Private US Insurance Securitization
|
340
|
|
|
3.7
|
|
|
AA-
|
|
Fortress Credit Opportunities VII CLO Limited
|
257
|
|
|
2.8
|
|
|
AA-
|
|
Private US Insurance Securitization
|
213
|
|
|
2.3
|
|
|
AA-
|
|
ABPCI Direct Lending Fund CLO I Ltd
|
208
|
|
|
2.2
|
|
|
A
|
|
SLM Private Credit Student Loan Trust 2006-C
|
194
|
|
|
2.1
|
|
|
AA-
|
|
Option One 2007-FXD2
|
177
|
|
|
1.9
|
|
|
CCC
|
|
Brightwood Fund III Static 2018-1, LLC
|
159
|
|
|
1.7
|
|
|
AA
|
|
Total of top ten U.S. structured finance exposures
|
$
|
2,995
|
|
|
32.2
|
%
|
|
|
|
Country
|
|
Net Par Outstanding
|
|
Percent of Total Non-U.S. Net Par Outstanding
|
|
Rating
|
|||
|
|
|
(dollars in millions)
|
|||||||
Southern Water Services Limited
|
United Kingdom
|
|
$
|
2,760
|
|
|
5.3
|
%
|
|
A-
|
Thames Water Utility Finance Plc
|
United Kingdom
|
|
2,068
|
|
|
4.0
|
|
|
A-
|
|
Hydro-Quebec, Province of Quebec
|
Canada
|
|
2,013
|
|
|
3.9
|
|
|
A+
|
|
Southern Gas Networks PLC
|
United Kingdom
|
|
1,739
|
|
|
3.3
|
|
|
BBB
|
|
Societe des Autoroutes du Nord et de l'Est de France S.A.
|
France
|
|
1,689
|
|
|
3.2
|
|
|
BBB+
|
|
Welsh Water PLC
|
United Kingdom
|
|
1,652
|
|
|
3.2
|
|
|
A-
|
|
Anglian Water Services Financing
|
United Kingdom
|
|
1,502
|
|
|
2.9
|
|
|
A-
|
|
National Grid Gas PLC
|
United Kingdom
|
|
1,314
|
|
|
2.5
|
|
|
BBB+
|
|
British Broadcasting Corporation (BBC)
|
United Kingdom
|
|
1,305
|
|
|
2.5
|
|
|
A+
|
|
Channel Link Enterprises Finance PLC
|
France, United Kingdom
|
|
1,234
|
|
|
2.4
|
|
|
BBB
|
|
Total of top ten non-U.S. exposures
|
|
|
$
|
17,276
|
|
|
33.2
|
%
|
|
|
|
Number of Risks
|
|
Net Par Outstanding
|
|
Percent of Total Net Par Outstanding
|
||||
|
(dollars in millions)
|
||||||||
U.S.:
|
|
|
|
|
|
||||
California
|
1,318
|
|
|
$
|
33,368
|
|
|
14.1
|
%
|
Pennsylvania
|
665
|
|
|
15,895
|
|
|
6.7
|
|
|
Texas
|
1,090
|
|
|
14,860
|
|
|
6.3
|
|
|
New York
|
749
|
|
|
14,682
|
|
|
6.2
|
|
|
Illinois
|
602
|
|
|
13,977
|
|
|
5.9
|
|
|
New Jersey
|
337
|
|
|
10,504
|
|
|
4.4
|
|
|
Florida
|
266
|
|
|
7,107
|
|
|
3.0
|
|
|
Michigan
|
305
|
|
|
5,345
|
|
|
2.3
|
|
|
Puerto Rico
|
17
|
|
|
4,270
|
|
|
1.8
|
|
|
Louisiana
|
162
|
|
|
4,167
|
|
|
1.8
|
|
|
Other
|
2,529
|
|
|
51,312
|
|
|
21.7
|
|
|
Total U.S. public finance
|
8,040
|
|
|
175,487
|
|
|
74.2
|
|
|
U.S. Structured finance (multiple states)
|
450
|
|
|
9,300
|
|
|
3.9
|
|
|
Total U.S.
|
8,490
|
|
|
184,787
|
|
|
78.1
|
|
|
Non-U.S.:
|
|
|
|
|
|
||||
United Kingdom
|
288
|
|
|
38,450
|
|
|
16.2
|
|
|
France
|
7
|
|
|
3,130
|
|
|
1.3
|
|
|
Canada
|
8
|
|
|
2,495
|
|
|
1.1
|
|
|
Australia
|
11
|
|
|
2,112
|
|
|
0.9
|
|
|
Austria
|
3
|
|
|
1,250
|
|
|
0.5
|
|
|
Other
|
42
|
|
|
4,583
|
|
|
1.9
|
|
|
Total non-U.S.
|
359
|
|
|
52,020
|
|
|
21.9
|
|
|
Total
|
8,849
|
|
|
$
|
236,807
|
|
|
100.0
|
%
|
Original Par Amount Per Issue
|
|
Number of
Issues
|
|
Net Par
Outstanding
|
|
% of Public
Finance
Net Par
Outstanding
|
|||
|
(dollars in millions)
|
||||||||
Less than $10 million
|
12,838
|
|
$
|
33,384
|
|
|
14.7
|
%
|
|
$10 through $50 million
|
3,844
|
|
62,416
|
|
|
27.6
|
|
||
$50 through $100 million
|
640
|
|
34,257
|
|
|
15.1
|
|
||
$100 million to $200 million
|
342
|
|
35,469
|
|
|
15.6
|
|
||
$200 million or greater
|
227
|
|
61,220
|
|
|
27.0
|
|
||
Total
|
17,891
|
|
$
|
226,746
|
|
|
100.0
|
%
|
Original Par Amount Per Issue
|
|
Number of
Issues
|
|
Net Par
Outstanding
|
|
% of Structured
Finance
Net Par
Outstanding
|
|||
|
(dollars in millions)
|
||||||||
Less than $10 million
|
135
|
|
$
|
108
|
|
|
1.1
|
%
|
|
$10 through $50 million
|
163
|
|
1,057
|
|
|
10.4
|
|
||
$50 through $100 million
|
57
|
|
1,117
|
|
|
11.1
|
|
||
$100 million to $200 million
|
76
|
|
2,229
|
|
|
22.2
|
|
||
$200 million or greater
|
95
|
|
5,550
|
|
|
55.2
|
|
||
Total
|
526
|
|
$
|
10,061
|
|
|
100.0
|
%
|
•
|
Constitutionally Guaranteed.
|
•
|
Public Corporations – Certain Revenues Potentially Subject to Clawback.
|
•
|
Other Public Corporations.
|
|
|
Net Par Outstanding
|
|
|
||||||||||||||||||||
|
|
AGM
|
|
AGC
|
|
AG Re
|
|
Eliminations (1)
|
|
Total Net Par Outstanding
|
|
Gross Par Outstanding
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commonwealth of Puerto Rico - General Obligation Bonds (2)
|
|
$
|
611
|
|
|
$
|
268
|
|
|
$
|
375
|
|
|
$
|
(1
|
)
|
|
$
|
1,253
|
|
|
$
|
1,294
|
|
Puerto Rico Public Buildings Authority (PBA) (2)
|
|
7
|
|
|
139
|
|
|
1
|
|
|
(7
|
)
|
|
140
|
|
|
145
|
|
||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Puerto Rico Highways and Transportation Authority (PRHTA) (Transportation revenue) (2)
|
|
223
|
|
|
481
|
|
|
186
|
|
|
(79
|
)
|
|
811
|
|
|
842
|
|
||||||
PRHTA (Highway revenue) (2)
|
|
345
|
|
|
74
|
|
|
35
|
|
|
—
|
|
|
454
|
|
|
515
|
|
||||||
Puerto Rico Convention Center District Authority (PRCCDA)
|
|
—
|
|
|
152
|
|
|
—
|
|
|
—
|
|
|
152
|
|
|
152
|
|
||||||
Puerto Rico Infrastructure Financing Authority (PRIFA)
|
|
—
|
|
|
15
|
|
|
1
|
|
|
—
|
|
|
16
|
|
|
16
|
|
||||||
Other Public Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
PREPA (2)
|
|
525
|
|
|
71
|
|
|
226
|
|
|
—
|
|
|
822
|
|
|
838
|
|
||||||
PRASA
|
|
—
|
|
|
284
|
|
|
89
|
|
|
—
|
|
|
373
|
|
|
373
|
|
||||||
MFA
|
|
153
|
|
|
33
|
|
|
62
|
|
|
—
|
|
|
248
|
|
|
282
|
|
||||||
U of PR
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||||
Total exposure to Puerto Rico
|
|
$
|
1,864
|
|
|
$
|
1,518
|
|
|
$
|
975
|
|
|
$
|
(87
|
)
|
|
$
|
4,270
|
|
|
$
|
4,458
|
|
(1)
|
Net par outstanding eliminations relate to second-to-pay policies under which an Assured Guaranty insurance subsidiary guarantees an obligation already insured by another Assured Guaranty insurance subsidiary.
|
(2)
|
As of the date of this filing, the seven-member financial oversight board established by PROMESA has certified a filing under Title III of PROMESA for these exposures.
|
|
Scheduled Net Par Amortization
|
|||||||||||||||||||||||||||||||||||||||||
|
2020 (1Q)
|
2020 (2Q)
|
2020 (3Q)
|
2020 (4Q)
|
2021
|
2022
|
2023
|
2024
|
2025 -2029
|
2030 -2034
|
2035 -2039
|
2040 -2044
|
2045 -2047
|
Total
|
||||||||||||||||||||||||||||
|
(in millions)
|
|||||||||||||||||||||||||||||||||||||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
Commonwealth of Puerto Rico - General Obligation Bonds
|
$
|
—
|
|
$
|
—
|
|
$
|
141
|
|
$
|
—
|
|
$
|
15
|
|
$
|
37
|
|
$
|
14
|
|
$
|
73
|
|
$
|
289
|
|
$
|
419
|
|
$
|
265
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,253
|
|
PBA
|
—
|
|
—
|
|
5
|
|
—
|
|
13
|
|
—
|
|
7
|
|
—
|
|
58
|
|
38
|
|
19
|
|
—
|
|
—
|
|
140
|
|
||||||||||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
PRHTA (Transportation revenue)
|
—
|
|
—
|
|
25
|
|
—
|
|
18
|
|
28
|
|
33
|
|
4
|
|
163
|
|
166
|
|
292
|
|
82
|
|
—
|
|
811
|
|
||||||||||||||
PRHTA (Highway revenue)
|
—
|
|
—
|
|
22
|
|
—
|
|
35
|
|
6
|
|
32
|
|
33
|
|
55
|
|
177
|
|
94
|
|
—
|
|
—
|
|
454
|
|
||||||||||||||
PRCCDA
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
19
|
|
76
|
|
57
|
|
—
|
|
—
|
|
152
|
|
||||||||||||||
PRIFA
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2
|
|
—
|
|
—
|
|
—
|
|
7
|
|
7
|
|
—
|
|
16
|
|
||||||||||||||
Other Public Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
PREPA
|
—
|
|
—
|
|
48
|
|
—
|
|
28
|
|
28
|
|
95
|
|
93
|
|
386
|
|
140
|
|
4
|
|
—
|
|
—
|
|
822
|
|
||||||||||||||
PRASA
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
109
|
|
—
|
|
2
|
|
15
|
|
246
|
|
373
|
|
||||||||||||||
MFA
|
—
|
|
—
|
|
45
|
|
—
|
|
40
|
|
40
|
|
22
|
|
18
|
|
79
|
|
4
|
|
—
|
|
—
|
|
—
|
|
248
|
|
||||||||||||||
U of PR
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
—
|
|
—
|
|
—
|
|
1
|
|
||||||||||||||
Total
|
$
|
—
|
|
$
|
—
|
|
$
|
286
|
|
$
|
—
|
|
$
|
149
|
|
$
|
139
|
|
$
|
205
|
|
$
|
222
|
|
$
|
1,158
|
|
$
|
1,021
|
|
$
|
740
|
|
$
|
104
|
|
$
|
246
|
|
$
|
4,270
|
|
|
Scheduled Net Debt Service Amortization
|
|||||||||||||||||||||||||||||||||||||||||
|
2020 (1Q)
|
2020 (2Q)
|
2020 (3Q)
|
2020 (4Q)
|
2021
|
2022
|
2023
|
2024
|
2025 -2029
|
2030 -2034
|
2035 -2039
|
2040 -2044
|
2045 -2047
|
Total
|
||||||||||||||||||||||||||||
|
(in millions)
|
|||||||||||||||||||||||||||||||||||||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
Commonwealth of Puerto Rico - General Obligation Bonds
|
$
|
33
|
|
$
|
—
|
|
$
|
173
|
|
$
|
—
|
|
$
|
74
|
|
$
|
94
|
|
$
|
70
|
|
$
|
128
|
|
$
|
514
|
|
$
|
572
|
|
$
|
294
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,952
|
|
PBA
|
4
|
|
—
|
|
9
|
|
—
|
|
20
|
|
6
|
|
13
|
|
6
|
|
81
|
|
50
|
|
20
|
|
—
|
|
—
|
|
209
|
|
||||||||||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
PRHTA (Transportation revenue)
|
21
|
|
—
|
|
46
|
|
—
|
|
59
|
|
68
|
|
72
|
|
41
|
|
331
|
|
294
|
|
356
|
|
89
|
|
—
|
|
1,377
|
|
||||||||||||||
PRHTA (Highway revenue)
|
12
|
|
—
|
|
34
|
|
—
|
|
58
|
|
27
|
|
52
|
|
51
|
|
134
|
|
233
|
|
101
|
|
—
|
|
—
|
|
702
|
|
||||||||||||||
PRCCDA
|
3
|
|
—
|
|
3
|
|
—
|
|
7
|
|
7
|
|
7
|
|
7
|
|
52
|
|
103
|
|
61
|
|
—
|
|
—
|
|
250
|
|
||||||||||||||
PRIFA
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
1
|
|
3
|
|
1
|
|
4
|
|
3
|
|
10
|
|
8
|
|
—
|
|
31
|
|
||||||||||||||
Other Public Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
PREPA
|
17
|
|
3
|
|
65
|
|
3
|
|
63
|
|
62
|
|
128
|
|
121
|
|
467
|
|
155
|
|
5
|
|
—
|
|
—
|
|
1,089
|
|
||||||||||||||
PRASA
|
10
|
|
—
|
|
10
|
|
—
|
|
19
|
|
19
|
|
19
|
|
20
|
|
190
|
|
68
|
|
70
|
|
82
|
|
272
|
|
779
|
|
||||||||||||||
MFA
|
6
|
|
—
|
|
52
|
|
—
|
|
50
|
|
48
|
|
28
|
|
23
|
|
89
|
|
5
|
|
—
|
|
—
|
|
—
|
|
301
|
|
||||||||||||||
U of PR
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
—
|
|
—
|
|
—
|
|
1
|
|
||||||||||||||
Total
|
$
|
106
|
|
$
|
3
|
|
$
|
392
|
|
$
|
3
|
|
$
|
351
|
|
$
|
332
|
|
$
|
392
|
|
$
|
398
|
|
$
|
1,862
|
|
$
|
1,484
|
|
$
|
917
|
|
$
|
179
|
|
$
|
272
|
|
$
|
6,691
|
|
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
|
|
$
|
22
|
|
|
$
|
21
|
|
|
$
|
1
|
|
|
$
|
581
|
|
|
$
|
47
|
|
|
$
|
672
|
|
2005
|
|
50
|
|
|
217
|
|
|
24
|
|
|
222
|
|
|
132
|
|
|
645
|
|
||||||
2006
|
|
38
|
|
|
42
|
|
|
11
|
|
|
280
|
|
|
217
|
|
|
588
|
|
||||||
2007
|
|
—
|
|
|
332
|
|
|
28
|
|
|
957
|
|
|
281
|
|
|
1,598
|
|
||||||
2008
|
|
—
|
|
|
—
|
|
|
—
|
|
|
43
|
|
|
—
|
|
|
43
|
|
||||||
Total exposures
|
|
$
|
110
|
|
|
$
|
612
|
|
|
$
|
64
|
|
|
$
|
2,083
|
|
|
$
|
677
|
|
|
$
|
3,546
|
|
|
|
Gross Exposure
|
|
Net Exposure
|
||||||||||||
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
Life insurance transactions (1)
|
|
$
|
1,046
|
|
|
$
|
880
|
|
|
$
|
898
|
|
|
$
|
763
|
|
Aircraft RVI policies
|
|
398
|
|
|
340
|
|
|
243
|
|
|
218
|
|
(1)
|
The life insurance transactions net exposure is projected to increase to approximately $1.0 billion by December 31, 2023.
|
|
AGL
|
|
AGUS
|
|
AGMH
|
||||||
|
(in millions)
|
||||||||||
Year ended December 31, 2019
|
|
|
|
|
|
||||||
Intercompany sources
|
$
|
689
|
|
|
$
|
667
|
|
|
$
|
220
|
|
Intercompany (uses)
|
—
|
|
|
(492
|
)
|
|
(199
|
)
|
|||
External sources (uses):
|
|
|
|
|
|
||||||
Dividends paid to AGL shareholders
|
(74
|
)
|
|
—
|
|
|
—
|
|
|||
Repurchases of common shares (1)
|
(500
|
)
|
|
—
|
|
|
—
|
|
|||
Interest paid (2)
|
—
|
|
|
(46
|
)
|
|
(38
|
)
|
|||
Purchase of AGMH's debt by AGUS
|
—
|
|
|
(3
|
)
|
|
—
|
|
|||
BlueMountain acquisition
|
—
|
|
|
(157
|
)
|
|
—
|
|
|||
|
|
|
|
|
|
||||||
Year ended December 31, 2018
|
|
|
|
|
|
||||||
Intercompany sources
|
$
|
597
|
|
|
$
|
525
|
|
|
$
|
205
|
|
Intercompany (uses)
|
—
|
|
|
(485
|
)
|
|
(192
|
)
|
|||
External sources (uses):
|
|
|
|
|
|
||||||
Dividends paid to AGL shareholders
|
(71
|
)
|
|
—
|
|
|
—
|
|
|||
Repurchases of common shares (1)
|
(500
|
)
|
|
—
|
|
|
—
|
|
|||
Interest paid (2)
|
—
|
|
|
(58
|
)
|
|
(41
|
)
|
|||
Purchase of AGMH's debt by AGUS
|
—
|
|
|
(100
|
)
|
|
—
|
|
|||
|
|
|
|
|
|
||||||
Year ended December 31, 2017
|
|
|
|
|
|
||||||
Intercompany sources
|
$
|
595
|
|
|
$
|
391
|
|
|
$
|
322
|
|
Intercompany (uses)
|
—
|
|
|
(511
|
)
|
|
(279
|
)
|
|||
External sources (uses):
|
|
|
|
|
|
||||||
Dividends paid to AGL shareholders
|
(70
|
)
|
|
—
|
|
|
—
|
|
|||
Repurchases of common shares (1)
|
(501
|
)
|
|
—
|
|
|
—
|
|
|||
Interest paid (2)
|
—
|
|
|
(32
|
)
|
|
(45
|
)
|
|||
Purchase of AGMH's debt by AGUS
|
—
|
|
|
(28
|
)
|
|
—
|
|
(1)
|
See Item 8, Financial Statements and Supplementary Data, Note 21, 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 2020 for AGM to distribute as dividends without regulatory approval is estimated to be approximately $218 million, of which $72 million is estimated to be available for distribution in the first quarter of 2020.
|
•
|
The maximum amount available during 2020 for AGC to distribute as ordinary dividends is approximately $166 million, of which approximately $85 million is available for distribution in the first quarter of 2020.
|
•
|
The maximum amount available during 2020 for MAC to distribute to MAC Holdings as dividends without regulatory approval is estimated to be approximately $21 million, none of which is available for distribution in the first quarter of 2020.
|
•
|
Based on the applicable law and regulations, in 2020 AG Re has the capacity to (i) make capital distributions in an aggregate amount up to $128 million without the prior approval of the Authority and (ii) declare and pay dividends in an aggregate amount up to approximately $274 million as of December 31, 2019. Such dividend capacity is further limited by (i) the actual amount of AG Re’s unencumbered assets, which amount changes from time to time due in part to collateral posting requirements and which was approximately $264 million as of December 31, 2019, and (ii) the amount of statutory surplus, which as of December 31, 2019 was $240 million.
|
•
|
Based on the applicable law and regulations, in 2020 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 $103 million as of December 31, 2019. Such dividend capacity is further limited by (i) the actual amount of AGRO’s unencumbered assets, which amount changes from time to time due in part to collateral posting requirements and which was approximately $383 million as of December 31, 2019, and (ii) the amount of Statutory surplus, which as of December 31, 2019 was $273 million.
|
|
Principal Amount
|
|
Interest Paid
|
||||||||||||||||
|
As of December 31,
|
|
Year Ended December 31,
|
||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2017
|
||||||||||
|
(in millions)
|
||||||||||||||||||
AGUS
|
$
|
850
|
|
|
$
|
850
|
|
|
$
|
46
|
|
|
$
|
58
|
|
|
$
|
32
|
|
Intercompany loans
|
290
|
|
|
50
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|||||
Total AGUS
|
1,140
|
|
|
900
|
|
|
49
|
|
|
61
|
|
|
35
|
|
|||||
AGMH
|
730
|
|
|
730
|
|
|
46
|
|
|
46
|
|
|
46
|
|
|||||
AGM
|
4
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
AGMH's debt purchased by AGUS (1)
|
(131
|
)
|
|
(128
|
)
|
|
(8
|
)
|
|
(5
|
)
|
|
(1
|
)
|
|||||
Elimination of intercompany loans
|
(290
|
)
|
|
(50
|
)
|
|
(3
|
)
|
|
(3
|
)
|
|
(3
|
)
|
|||||
Total
|
$
|
1,453
|
|
|
$
|
1,457
|
|
|
$
|
84
|
|
|
$
|
99
|
|
|
$
|
77
|
|
(1)
|
Represents principal amount of Junior Subordinated Debentures issued by AGMH that has been purchased by AGUS. Loss on extinguishment of debt was $1 million in 2019, $34 million in 2018 and $9 million in 2017.
|
•
|
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, if necessary,
|
•
|
reinsurance premiums,
|
•
|
principal of and, where applicable, interest on surplus notes, and
|
•
|
capital investments in their own subsidiaries, where appropriate.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
U.S. public finance
|
$
|
(525
|
)
|
|
$
|
(395
|
)
|
|
$
|
(268
|
)
|
Non-U.S. public finance
|
—
|
|
|
(1
|
)
|
|
5
|
|
|||
Structured finance:
|
|
|
|
|
|
||||||
U.S. RMBS
|
87
|
|
|
159
|
|
|
48
|
|
|||
Other structured finance
|
(7
|
)
|
|
(9
|
)
|
|
(14
|
)
|
|||
Structured finance
|
80
|
|
|
150
|
|
|
34
|
|
|||
Claims (paid) recovered, net of reinsurance (1)
|
$
|
(445
|
)
|
|
$
|
(246
|
)
|
|
$
|
(229
|
)
|
(1)
|
Includes $12 million recovered, $2 million paid, and $8 million paid in 2019, 2018 and 2017, respectively, for consolidated FG VIEs.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Net cash flows provided by (used in) operating activities before effect of VIE consolidation
|
$
|
(255
|
)
|
|
$
|
451
|
|
|
$
|
414
|
|
Effect of VIE consolidation (1)
|
(254
|
)
|
|
11
|
|
|
19
|
|
|||
Net cash flows provided by (used in) operating activities
|
(509
|
)
|
|
462
|
|
|
433
|
|
|||
|
|
|
|
|
|
||||||
Net cash flows provided by (used in) investing activities before effect of VIE consolidation
|
1,055
|
|
|
192
|
|
|
112
|
|
|||
Acquisitions, net of cash acquired
|
(145
|
)
|
|
—
|
|
|
95
|
|
|||
Effect of VIE consolidation (1)
|
259
|
|
|
105
|
|
|
138
|
|
|||
Net cash flows provided by (used in) investing activities
|
1,169
|
|
|
297
|
|
|
345
|
|
|||
|
|
|
|
|
|
||||||
Dividends paid
|
(74
|
)
|
|
(71
|
)
|
|
(70
|
)
|
|||
Repurchases of common stock
|
(500
|
)
|
|
(500
|
)
|
|
(501
|
)
|
|||
Repurchase of debt
|
(3
|
)
|
|
(100
|
)
|
|
(28
|
)
|
|||
Net cash flows provided by (used in) financing activities before effect of VIE consolidation
|
(16
|
)
|
|
(8
|
)
|
|
(10
|
)
|
|||
Effect of VIE consolidation (1)
|
9
|
|
|
(116
|
)
|
|
(157
|
)
|
|||
Net cash flows provided by (used in) financing activities (2)
|
(584
|
)
|
|
(795
|
)
|
|
(766
|
)
|
|||
|
|
|
|
|
|
||||||
Effect of exchange rate changes
|
3
|
|
|
(4
|
)
|
|
5
|
|
|||
Cash and restricted cash at beginning of period
|
104
|
|
|
144
|
|
|
127
|
|
|||
Total cash and restricted cash at the end of the period
|
$
|
183
|
|
|
$
|
104
|
|
|
$
|
144
|
|
(1)
|
VIE consolidation includes the effects of FG VIEs and consolidated investment vehicles.
|
(2)
|
Claims paid on consolidated FG VIEs are presented in the consolidated cash flow statements as a component of paydowns on FG VIEs’ liabilities in financing activities as opposed to operating activities.
|
|
As of December 31, 2019
|
||||||||||||||||||
|
Less Than
1 Year
|
|
1-3
Years
|
|
3-5
Years
|
|
More Than
5 Years
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Long-term debt(1):
|
|
|
|
|
|
|
|
|
|
||||||||||
AGUS:
|
|
|
|
|
|
|
|
|
|
||||||||||
7% Senior Notes
|
$
|
14
|
|
|
$
|
28
|
|
|
$
|
28
|
|
|
$
|
331
|
|
|
$
|
401
|
|
5% Senior Notes
|
25
|
|
|
50
|
|
|
550
|
|
|
—
|
|
|
625
|
|
|||||
Series A Enhanced Junior Subordinated Debentures
|
6
|
|
|
12
|
|
|
12
|
|
|
420
|
|
|
450
|
|
|||||
AGMH:
|
|
|
|
|
|
|
|
|
|
||||||||||
67/8% QUIBS
|
7
|
|
|
14
|
|
|
14
|
|
|
629
|
|
|
664
|
|
|||||
6.25% Notes
|
14
|
|
|
29
|
|
|
29
|
|
|
1,350
|
|
|
1,422
|
|
|||||
5.6% Notes
|
6
|
|
|
11
|
|
|
11
|
|
|
540
|
|
|
568
|
|
|||||
Junior Subordinated Debentures
|
19
|
|
|
38
|
|
|
38
|
|
|
1,107
|
|
|
1,202
|
|
|||||
AGM Notes Payable
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
4
|
|
|||||
Operating and finance lease obligations (2)
|
20
|
|
|
39
|
|
|
30
|
|
|
62
|
|
|
151
|
|
|||||
Other compensation plans (3)
|
19
|
|
|
6
|
|
|
4
|
|
|
—
|
|
|
29
|
|
|||||
Estimated claim payments (4)
|
516
|
|
|
661
|
|
|
103
|
|
|
1,265
|
|
|
2,545
|
|
|||||
Ceded premium payable, net of commission
|
4
|
|
|
5
|
|
|
4
|
|
|
16
|
|
|
29
|
|
|||||
Other
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|||||
Total (5)
|
$
|
660
|
|
|
$
|
893
|
|
|
$
|
823
|
|
|
$
|
5,722
|
|
|
$
|
8,098
|
|
(1)
|
Includes interest and principal payments. See Item 8, Financial Statements and Supplementary Data, Note 15, Long-Term Debt and Credit Facilities, for expected maturities of debt.
|
(2)
|
Operating lease obligations exclude escalations in building operating costs and real estate taxes.
|
(3)
|
Amount excludes approximately $85 million of liabilities under various supplemental retirement plans, which are payable at the time of termination of employment by either employer or employee. Amount also excludes approximately $33 million of liabilities under deferred compensation plans, which are payable at the time of vesting or termination of employment by either employer or employee. Given the nature of these awards, the Company is unable to determine the year in which they will be paid.
|
(4)
|
Claim payments represent estimated expected cash outflows under direct and assumed financial guaranty contracts, whether accounted for as insurance or credit derivatives, including claim payments under contracts in consolidated FG VIEs. The amounts presented are not reduced for cessions under reinsurance contracts. Amounts include any benefit anticipated from excess spread or other recoveries within the contracts but do not reflect any benefit for recoveries under breaches of R&W. Amounts also exclude estimated recoveries related to past claims paid for policies in the public finance sector.
|
(5)
|
See Item 8, Financial Statements and Supplementary Data, Note 14. Variable Interest Entities, for expected maturities of FG VIEs' liabilities and consolidated investment vehicles.
|
|
As of December 31, 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
|
$
|
4,036
|
|
|
$
|
4,340
|
|
|
$
|
4,761
|
|
|
$
|
4,911
|
|
U.S. government and agencies
|
137
|
|
|
147
|
|
|
167
|
|
|
175
|
|
||||
Corporate securities
|
2,137
|
|
|
2,221
|
|
|
2,175
|
|
|
2,136
|
|
||||
Mortgage-backed securities (1):
|
|
|
|
|
|
|
|
|
|||||||
RMBS
|
745
|
|
|
775
|
|
|
999
|
|
|
982
|
|
||||
Commercial mortgage-backed securities (CMBS)
|
402
|
|
|
419
|
|
|
542
|
|
|
539
|
|
||||
Asset-backed securities
|
684
|
|
|
720
|
|
|
942
|
|
|
1,068
|
|
||||
Non-U.S. government securities
|
230
|
|
|
232
|
|
|
298
|
|
|
278
|
|
||||
Total fixed-maturity securities
|
8,371
|
|
|
8,854
|
|
|
9,884
|
|
|
10,089
|
|
||||
Short-term investments
|
1,268
|
|
|
1,268
|
|
|
729
|
|
|
729
|
|
||||
Total fixed-maturity and short-term investments
|
$
|
9,639
|
|
|
$
|
10,122
|
|
|
$
|
10,613
|
|
|
$
|
10,818
|
|
(1)
|
U.S. government-agency obligations were approximately 42% of mortgage backed securities as of December 31, 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
|
$
|
45
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
45
|
|
|
$
|
(1
|
)
|
U.S. government and agencies
|
5
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
10
|
|
|
—
|
|
||||||
Corporate securities
|
61
|
|
|
—
|
|
|
119
|
|
|
(19
|
)
|
|
180
|
|
|
(19
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
RMBS
|
10
|
|
|
—
|
|
|
75
|
|
|
(7
|
)
|
|
85
|
|
|
(7
|
)
|
||||||
CMBS
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
|
—
|
|
||||||
Asset-backed securities
|
24
|
|
|
—
|
|
|
183
|
|
|
(2
|
)
|
|
207
|
|
|
(2
|
)
|
||||||
Non-U.S. government securities
|
—
|
|
|
—
|
|
|
56
|
|
|
(5
|
)
|
|
56
|
|
|
(5
|
)
|
||||||
Total
|
$
|
145
|
|
|
$
|
(1
|
)
|
|
$
|
442
|
|
|
$
|
(33
|
)
|
|
$
|
587
|
|
|
$
|
(34
|
)
|
Number of securities
|
|
|
|
57
|
|
|
|
|
|
119
|
|
|
|
|
|
176
|
|
||||||
Number of securities with OTTI
|
|
|
|
1
|
|
|
|
|
|
7
|
|
|
|
|
|
8
|
|
|
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
|
$
|
326
|
|
|
$
|
334
|
|
Due after one year through five years
|
1,538
|
|
|
1,591
|
|
||
Due after five years through 10 years
|
2,022
|
|
|
2,128
|
|
||
Due after 10 years
|
3,338
|
|
|
3,607
|
|
||
Mortgage-backed securities:
|
|
|
|
|
|
||
RMBS
|
745
|
|
|
775
|
|
||
CMBS
|
402
|
|
|
419
|
|
||
Total
|
$
|
8,371
|
|
|
$
|
8,854
|
|
Rating
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||
AAA
|
|
16.2
|
%
|
|
15.7
|
%
|
AA
|
|
45.1
|
|
|
48.2
|
|
A
|
|
21.2
|
|
|
19.8
|
|
BBB
|
|
8.2
|
|
|
5.0
|
|
BIG (1)
|
|
8.6
|
|
|
10.8
|
|
Not rated
|
|
0.7
|
|
|
0.5
|
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
(1)
|
Includes primarily loss mitigation and other risk management assets. See Item 8, Financial Statements and Supplementary Data, Note 10, Investments and Cash, for additional information.
|
•
|
FG VIEs. The primary sources of cash in FG VIEs are the collection of principal and interest on the collateral supporting its insured debt obligations, and the primary uses of cash are the payment of principal and interest due on the insured obligations.
|
•
|
Investment Vehicles. The primary sources and uses of cash in the consolidated investment vehicles are raising capital from investors, using capital to make investments, generating cash flows from operations, distributing cash flow to investors and issuing debt to finance investments (CLOs).
|
ITEM 7A.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
•
|
The fair value of credit derivatives within the financial guaranty portfolio of insured obligations fluctuates based on changes in credit spreads of the underlying obligations and the Company's own credit spreads.
|
•
|
The fair value of the investment portfolio is primarily driven by changes in interest rates and also affected by changes in credit spreads.
|
•
|
The fair value of the investment portfolio contains foreign denominated securities whose value fluctuates based on changes in foreign exchange rates.
|
•
|
The carrying value of premiums receivable include foreign denominated receivables whose value fluctuates based on changes in foreign exchange rates.
|
•
|
The fair value of the assets and liabilities of consolidated FG VIEs may fluctuate based on changes in prepayments, spreads, default rates, interest rates, and house price depreciation/appreciation. The fair value of the FG VIEs’ liabilities would also fluctuate based on changes in the Company's credit spread.
|
•
|
Asset management revenues are sensitive to changes in the fair value of investments.
|
•
|
The fair value of consolidated investment vehicles are sensitive to changes in market risk.
|
|
|
As of December 31, 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
|
$
|
(315
|
)
|
|
$
|
(130
|
)
|
|
$
|
(348
|
)
|
|
$
|
(141
|
)
|
|
Base Scenario
|
(185
|
)
|
|
—
|
|
|
(207
|
)
|
|
—
|
|
|||||
Decrease of 25 bps
|
(97
|
)
|
|
88
|
|
|
(143
|
)
|
|
64
|
|
|||||
All transactions priced at floor
|
(56
|
)
|
|
129
|
|
|
(101
|
)
|
|
106
|
|
(1)
|
Includes the effects of spreads on both the underlying asset classes and the Company's own credit spread.
|
|
Increase (Decrease) in Fair Value from Changes in Interest Rates
|
||||||||||||||||||||||
|
300 Basis
Point
Decrease
|
|
200 Basis
Point
Decrease
|
|
100 Basis
Point
Decrease
|
|
100 Basis
Point
Increase
|
|
200 Basis
Point
Increase
|
|
300 Basis
Point
Increase
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
December 31, 2019
|
$
|
641
|
|
|
$
|
624
|
|
|
$
|
404
|
|
|
$
|
(420
|
)
|
|
$
|
(852
|
)
|
|
$
|
(1,295
|
)
|
December 31, 2018
|
$
|
1,226
|
|
|
$
|
1,029
|
|
|
$
|
552
|
|
|
$
|
(465
|
)
|
|
$
|
(996
|
)
|
|
$
|
(1,525
|
)
|
|
Increase (Decrease) in Carrying Value from Changes in Foreign Exchange Rates
|
||||||||||||||||||||||
|
30%
Decrease
|
|
20%
Decrease
|
|
10%
Decrease
|
|
10%
Increase
|
|
20%
Increase
|
|
30%
Increase
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Investment Portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
December 31, 2019
|
$
|
(257
|
)
|
|
$
|
(171
|
)
|
|
$
|
(86
|
)
|
|
$
|
86
|
|
|
$
|
171
|
|
|
$
|
257
|
|
December 31, 2018
|
(239
|
)
|
|
(159
|
)
|
|
(80
|
)
|
|
80
|
|
|
159
|
|
|
239
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Premium Receivables:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
December 31, 2019
|
(301
|
)
|
|
(201
|
)
|
|
(100
|
)
|
|
100
|
|
|
201
|
|
|
301
|
|
||||||
December 31, 2018
|
(192
|
)
|
|
(128
|
)
|
|
(64
|
)
|
|
64
|
|
|
128
|
|
|
192
|
|
|
Sensitivity to Changes in Fair Value
|
||||||||||
|
Year Ended December 31, 2019
|
||||||||||
|
Management Fees
|
|
Performance Fees
|
|
Total
|
||||||
|
(in millions)
|
||||||||||
|
|
|
|
|
|
||||||
10% Decline in fair value of Assured Investment Management manged investments gain (loss)
|
$
|
(2
|
)
|
|
$
|
(4
|
)
|
|
$
|
(6
|
)
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||
Assets
|
|
|
|
|
|
||
Investment portfolio:
|
|
|
|
|
|
||
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $8,371 and $9,884)
|
$
|
8,854
|
|
|
$
|
10,089
|
|
Short-term investments, at fair value
|
1,268
|
|
|
729
|
|
||
Other invested assets (includes $6 and $7 measured at fair value)
|
118
|
|
|
55
|
|
||
Total investment portfolio
|
10,240
|
|
|
10,873
|
|
||
Cash
|
169
|
|
|
104
|
|
||
Premiums receivable, net of commissions payable
|
1,286
|
|
|
904
|
|
||
Deferred acquisition costs
|
111
|
|
|
105
|
|
||
Salvage and subrogation recoverable
|
747
|
|
|
490
|
|
||
Financial guaranty variable interest entities’ assets, at fair value
|
442
|
|
|
569
|
|
||
Assets of consolidated investment vehicles (includes $558 measured at fair value)
|
572
|
|
|
—
|
|
||
Goodwill and other intangible assets
|
216
|
|
|
24
|
|
||
Other assets (includes $135 and $139 measured at fair value)
|
543
|
|
|
534
|
|
||
Total assets
|
$
|
14,326
|
|
|
$
|
13,603
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
|
||
Unearned premium reserve
|
$
|
3,736
|
|
|
$
|
3,512
|
|
Loss and loss adjustment expense reserve
|
1,050
|
|
|
1,177
|
|
||
Long-term debt
|
1,235
|
|
|
1,233
|
|
||
Credit derivative liabilities, at fair value
|
191
|
|
|
209
|
|
||
Financial guaranty variable interest entities’ liabilities with recourse, at fair value
|
367
|
|
|
517
|
|
||
Financial guaranty variable interest entities’ liabilities without recourse, at fair value
|
102
|
|
|
102
|
|
||
Liabilities of consolidated investment vehicles (includes $481 measured at fair value)
|
482
|
|
|
—
|
|
||
Other liabilities
|
511
|
|
|
298
|
|
||
Total liabilities
|
7,674
|
|
|
7,048
|
|
||
|
|
|
|
||||
Commitments and contingencies (see Note 20)
|
|
|
|
||||
Redeemable noncontrolling interests in consolidated investment vehicles
|
7
|
|
|
—
|
|
||
|
|
|
|
||||
Common stock ($0.01 par value, 500,000,000 shares authorized; 93,274,987 and 103,672,592 shares issued and outstanding)
|
1
|
|
|
1
|
|
||
Additional paid-in capital
|
—
|
|
|
86
|
|
||
Retained earnings
|
6,295
|
|
|
6,374
|
|
||
Accumulated other comprehensive income, net of tax of $71 and $38
|
342
|
|
|
93
|
|
||
Deferred equity compensation
|
1
|
|
|
1
|
|
||
Total shareholders’ equity attributable to Assured Guaranty Ltd.
|
6,639
|
|
|
6,555
|
|
||
Nonredeemable noncontrolling interests
|
6
|
|
|
—
|
|
||
Total shareholders’ equity
|
6,645
|
|
|
6,555
|
|
||
Total liabilities, redeemable noncontrolling interests and shareholders’ equity
|
$
|
14,326
|
|
|
$
|
13,603
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Revenues
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
476
|
|
|
$
|
548
|
|
|
$
|
690
|
|
Net investment income
|
378
|
|
|
395
|
|
|
417
|
|
|||
Asset management fees
|
22
|
|
|
—
|
|
|
—
|
|
|||
Net realized investment gains (losses)
|
22
|
|
|
(32
|
)
|
|
40
|
|
|||
Net change in fair value of credit derivatives
|
(6
|
)
|
|
112
|
|
|
111
|
|
|||
Fair value gains (losses) on financial guaranty variable interest entities
|
42
|
|
|
14
|
|
|
30
|
|
|||
Foreign exchange gains (losses) on remeasurement
|
24
|
|
|
(37
|
)
|
|
60
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
—
|
|
|
58
|
|
|||
Commutation gains (losses)
|
1
|
|
|
(16
|
)
|
|
328
|
|
|||
Other income (loss)
|
4
|
|
|
17
|
|
|
5
|
|
|||
Total revenues
|
963
|
|
|
1,001
|
|
|
1,739
|
|
|||
Expenses
|
|
|
|
|
|
|
|
||||
Loss and loss adjustment expenses
|
93
|
|
|
64
|
|
|
388
|
|
|||
Interest expense
|
89
|
|
|
94
|
|
|
97
|
|
|||
Amortization of deferred acquisition costs
|
18
|
|
|
16
|
|
|
19
|
|
|||
Employee compensation and benefit expenses
|
178
|
|
|
152
|
|
|
143
|
|
|||
Other operating expenses
|
125
|
|
|
96
|
|
|
101
|
|
|||
Total expenses
|
503
|
|
|
422
|
|
|
748
|
|
|||
Income (loss) before income taxes and equity in net earnings of investees
|
460
|
|
|
579
|
|
|
991
|
|
|||
Equity in net earnings of investees
|
4
|
|
|
1
|
|
|
—
|
|
|||
Income (loss) before income taxes
|
464
|
|
|
580
|
|
|
991
|
|
|||
Provision (benefit) for income taxes
|
|
|
|
|
|
|
|
||||
Current
|
(2
|
)
|
|
(15
|
)
|
|
11
|
|
|||
Deferred
|
65
|
|
|
74
|
|
|
250
|
|
|||
Total provision (benefit) for income taxes
|
63
|
|
|
59
|
|
|
261
|
|
|||
Net income (loss)
|
401
|
|
|
521
|
|
|
730
|
|
|||
Less: Redeemable noncontrolling interests
|
(1
|
)
|
|
—
|
|
|
—
|
|
|||
Net income (loss) attributable to Assured Guaranty Ltd.
|
$
|
402
|
|
|
$
|
521
|
|
|
$
|
730
|
|
|
|
|
|
|
|
||||||
Earnings per share:
|
|
|
|
|
|
||||||
Basic
|
$
|
4.04
|
|
|
$
|
4.73
|
|
|
$
|
6.05
|
|
Diluted
|
$
|
4.00
|
|
|
$
|
4.68
|
|
|
$
|
5.96
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Net income (loss)
|
$
|
401
|
|
|
$
|
521
|
|
|
$
|
730
|
|
Change in net unrealized gains (losses) on:
|
|
|
|
|
|
|
|
||||
Investments with no other-than-temporary impairment, net of tax provision (benefit) of $46, $(32) and $27
|
293
|
|
|
(215
|
)
|
|
64
|
|
|||
Investments with other-than-temporary impairment, net of tax provision (benefit) of $(14), $(8) and $46
|
(46
|
)
|
|
(26
|
)
|
|
89
|
|
|||
Change in net unrealized gains (losses) on investments
|
247
|
|
|
(241
|
)
|
|
153
|
|
|||
Change in net unrealized gains (losses) on financial guaranty variable interest entities' liabilities with recourse, net of tax
|
4
|
|
|
2
|
|
|
—
|
|
|||
Other, net of tax provision (benefit) of $0, $(2) and $2
|
(2
|
)
|
|
(8
|
)
|
|
14
|
|
|||
Other comprehensive income (loss)
|
249
|
|
|
(247
|
)
|
|
167
|
|
|||
Comprehensive income (loss)
|
650
|
|
|
274
|
|
|
897
|
|
|||
Less: Comprehensive income (loss) attributable to noncontrolling interests
|
(1
|
)
|
|
—
|
|
|
—
|
|
|||
Comprehensive income (loss) attributable to Assured Guaranty Ltd.
|
$
|
651
|
|
|
$
|
274
|
|
|
$
|
897
|
|
|
Common Shares Outstanding
|
|
|
Common Stock Par Value
|
|
Additional
Paid-in Capital |
|
Retained Earnings
|
|
Accumulated
Other Comprehensive Income |
|
Deferred
Equity Compensation |
|
Total Shareholders’ Equity Attributable to Assured Guaranty Ltd.
|
|
Nonredeemable Noncontrolling Interests
|
|
Total
Shareholders’ Equity |
|||||||||||||||||
Balance at December 31, 2016
|
127,988,230
|
|
|
|
$
|
1
|
|
|
$
|
1,060
|
|
|
$
|
5,289
|
|
|
$
|
149
|
|
|
$
|
5
|
|
|
$
|
6,504
|
|
|
$
|
—
|
|
|
$
|
6,504
|
|
Net income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
730
|
|
|
—
|
|
|
—
|
|
|
730
|
|
|
—
|
|
|
730
|
|
||||||||
Dividends ($0.57 per share)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(70
|
)
|
|
—
|
|
|
—
|
|
|
(70
|
)
|
|
—
|
|
|
(70
|
)
|
||||||||
Common stock repurchases
|
(12,669,643
|
)
|
|
|
—
|
|
|
(501
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(501
|
)
|
|
—
|
|
|
(501
|
)
|
||||||||
Share-based compensation
|
702,265
|
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
10
|
|
|
—
|
|
|
10
|
|
||||||||
Other comprehensive income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
167
|
|
|
—
|
|
|
167
|
|
|
—
|
|
|
167
|
|
||||||||
Effect of 2017 Tax Act
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(56
|
)
|
|
56
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Other
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||||||
Balance at December 31, 2017
|
116,020,852
|
|
|
|
1
|
|
|
573
|
|
|
5,892
|
|
|
372
|
|
|
1
|
|
|
6,839
|
|
|
—
|
|
|
6,839
|
|
||||||||
Net income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
521
|
|
|
—
|
|
|
—
|
|
|
521
|
|
|
—
|
|
|
521
|
|
||||||||
Dividends ($0.64 per share)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(71
|
)
|
|
—
|
|
|
—
|
|
|
(71
|
)
|
|
—
|
|
|
(71
|
)
|
||||||||
Common stock repurchases
|
(13,243,107
|
)
|
|
|
—
|
|
|
(500
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(500
|
)
|
|
—
|
|
|
(500
|
)
|
||||||||
Share-based compensation
|
894,847
|
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
13
|
|
||||||||
Other comprehensive loss
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(247
|
)
|
|
—
|
|
|
(247
|
)
|
|
—
|
|
|
(247
|
)
|
||||||||
Effect of adoption of ASU 2016-01 (see Note 1)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
32
|
|
|
(32
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Balance at December 31, 2018
|
103,672,592
|
|
|
|
1
|
|
|
86
|
|
|
6,374
|
|
|
93
|
|
|
1
|
|
|
6,555
|
|
|
—
|
|
|
6,555
|
|
||||||||
Net income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
402
|
|
|
—
|
|
|
—
|
|
|
402
|
|
|
—
|
|
|
402
|
|
||||||||
Dividends ($0.72 per share)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(74
|
)
|
|
—
|
|
|
—
|
|
|
(74
|
)
|
|
—
|
|
|
(74
|
)
|
||||||||
Common stock repurchases
|
(11,163,929
|
)
|
|
|
—
|
|
|
(93
|
)
|
|
(407
|
)
|
|
—
|
|
|
—
|
|
|
(500
|
)
|
|
—
|
|
|
(500
|
)
|
||||||||
Share-based compensation
|
766,324
|
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
||||||||
Contributions
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
6
|
|
||||||||
Other comprehensive income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
249
|
|
|
—
|
|
|
249
|
|
|
—
|
|
|
249
|
|
||||||||
Balance at December 31, 2019
|
93,274,987
|
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
6,295
|
|
|
$
|
342
|
|
|
$
|
1
|
|
|
$
|
6,639
|
|
|
$
|
6
|
|
|
$
|
6,645
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Operating Activities:
|
|
|
|
|
|
||||||
Net Income
|
$
|
401
|
|
|
$
|
521
|
|
|
$
|
730
|
|
Adjustments to reconcile net income to net cash flows provided by operating activities:
|
|
|
|
|
|
||||||
Non-cash interest and operating expenses
|
34
|
|
|
36
|
|
|
26
|
|
|||
Net amortization of premium (discount) on investments
|
(35
|
)
|
|
(31
|
)
|
|
(46
|
)
|
|||
Provision (benefit) for deferred income taxes
|
65
|
|
|
74
|
|
|
250
|
|
|||
Net realized investment losses (gains)
|
(22
|
)
|
|
32
|
|
|
(40
|
)
|
|||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
—
|
|
|
(58
|
)
|
|||
Change in premiums receivable, net of premiums and commissions payable
|
(388
|
)
|
|
(6
|
)
|
|
(69
|
)
|
|||
Change in ceded unearned premium reserve
|
20
|
|
|
58
|
|
|
90
|
|
|||
Change in unearned premium reserve
|
224
|
|
|
39
|
|
|
(424
|
)
|
|||
Change in loss and loss adjustment expense reserve, net
|
(528
|
)
|
|
(173
|
)
|
|
142
|
|
|||
Change in financial guaranty variable interest entities' assets and liabilities, net
|
(27
|
)
|
|
(5
|
)
|
|
(15
|
)
|
|||
Change in credit derivative assets and liabilities, net
|
(1
|
)
|
|
(62
|
)
|
|
(144
|
)
|
|||
Other
|
—
|
|
|
(21
|
)
|
|
(9
|
)
|
|||
Cash flows from consolidated investment vehicles:
|
|
|
|
|
|
||||||
Purchases of securities
|
(267
|
)
|
|
—
|
|
|
—
|
|
|||
Other changes in investment vehicles
|
15
|
|
|
—
|
|
|
—
|
|
|||
Net cash flows provided by (used in) operating activities
|
(509
|
)
|
|
462
|
|
|
433
|
|
|||
Investing activities
|
|
|
|
|
|
|
|
||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
||||
Purchases
|
(873
|
)
|
|
(1,881
|
)
|
|
(2,552
|
)
|
|||
Sales
|
1,805
|
|
|
1,180
|
|
|
1,701
|
|
|||
Maturities and paydowns
|
781
|
|
|
962
|
|
|
821
|
|
|||
Short-term investments with maturities of over three months:
|
|
|
|
|
|
||||||
Purchases
|
(229
|
)
|
|
(243
|
)
|
|
(255
|
)
|
|||
Sales
|
2
|
|
|
23
|
|
|
102
|
|
|||
Maturities and paydowns
|
316
|
|
|
207
|
|
|
191
|
|
|||
Net sales (purchases) of short-term investments with original maturities of less than three months
|
(623
|
)
|
|
(84
|
)
|
|
36
|
|
|||
Net proceeds from paydowns on financial guaranty variable interest entities’ assets
|
139
|
|
|
116
|
|
|
147
|
|
|||
Net proceeds from sales of financial guaranty variable interest entities’ assets
|
51
|
|
|
—
|
|
|
—
|
|
|||
Acquisitions, net of cash acquired (see Note 2)
|
(145
|
)
|
|
—
|
|
|
95
|
|
|||
Proceeds from maturity of other invested asset
|
—
|
|
|
—
|
|
|
85
|
|
|||
Proceeds from sales of other invested assets
|
36
|
|
|
38
|
|
|
2
|
|
|||
Purchases of other invested assets
|
(88
|
)
|
|
(20
|
)
|
|
(23
|
)
|
|||
Other
|
(3
|
)
|
|
(1
|
)
|
|
(5
|
)
|
|||
Net cash flows provided by (used in) investing activities
|
$
|
1,169
|
|
|
$
|
297
|
|
|
$
|
345
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Financing activities
|
|
|
|
|
|
||||||
Dividends paid
|
$
|
(74
|
)
|
|
$
|
(71
|
)
|
|
$
|
(70
|
)
|
Repurchases of common stock
|
(500
|
)
|
|
(500
|
)
|
|
(501
|
)
|
|||
Net paydowns of financial guaranty variable interest entities’ liabilities
|
(181
|
)
|
|
(116
|
)
|
|
(157
|
)
|
|||
Paydown of long-term debt
|
(4
|
)
|
|
(101
|
)
|
|
(30
|
)
|
|||
Other
|
(15
|
)
|
|
(7
|
)
|
|
(8
|
)
|
|||
Cash flows from consolidated investment vehicles:
|
|
|
|
|
|
||||||
Proceeds from issuance of collateralized loan obligations
|
482
|
|
|
—
|
|
|
—
|
|
|||
Repayment of warehouse loans and equity
|
(306
|
)
|
|
—
|
|
|
—
|
|
|||
Contributions from noncontrolling interests to investment vehicles
|
18
|
|
|
—
|
|
|
—
|
|
|||
Distributions to redeemable noncontrolling interests from investment vehicles
|
(4
|
)
|
|
—
|
|
|
—
|
|
|||
Net cash flows provided by (used in) financing activities
|
(584
|
)
|
|
(795
|
)
|
|
(766
|
)
|
|||
Effect of foreign exchange rate changes
|
3
|
|
|
(4
|
)
|
|
5
|
|
|||
Increase (decrease) in cash and restricted cash
|
79
|
|
|
(40
|
)
|
|
17
|
|
|||
Cash and restricted cash at beginning of period
|
104
|
|
|
144
|
|
|
127
|
|
|||
Cash and restricted cash at end of period
|
$
|
183
|
|
|
$
|
104
|
|
|
$
|
144
|
|
|
|
|
|
|
|
||||||
Supplemental cash flow information
|
|
|
|
|
|
|
|
||||
Cash paid (received) during the period for:
|
|
|
|
|
|
|
|
||||
Income taxes
|
$
|
4
|
|
|
$
|
(4
|
)
|
|
$
|
10
|
|
Interest on long-term debt
|
84
|
|
|
99
|
|
|
77
|
|
|||
|
|
|
|
|
|
||||||
Supplemental disclosure of non-cash investing and financing activities:
|
|
|
|
|
|
||||||
Purchases of fixed-maturity investments
|
$
|
(188
|
)
|
|
$
|
(4
|
)
|
|
$
|
(32
|
)
|
Sales of fixed-maturity investments
|
44
|
|
|
—
|
|
|
—
|
|
|||
|
|
|
|
|
|
||||||
|
As of December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Reconciliation of cash and restricted cash to the consolidated balance sheets:
|
|
|
|
|
|
||||||
Cash
|
$
|
169
|
|
|
$
|
104
|
|
|
$
|
144
|
|
Restricted cash (included in other assets)
|
—
|
|
|
—
|
|
|
—
|
|
|||
Cash of consolidated investment vehicles
|
14
|
|
|
—
|
|
|
—
|
|
|||
Cash and restricted cash at the end of period
|
$
|
183
|
|
|
$
|
104
|
|
|
$
|
144
|
|
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 UK), organized in the U.K.;
|
•
|
Assured Guaranty (Europe) SA (AGE SA), organized in France;
|
•
|
Assured Guaranty Re Ltd. (AG Re), domiciled in Bermuda; and
|
•
|
Assured Guaranty Re Overseas Ltd. (AGRO), domiciled in Bermuda.
|
Business Combinations
|
Note 2
|
Segments
|
Note 4
|
Expected loss to be paid (insurance, credit derivatives and financial guaranty (FG) VIEs contracts)
|
Note 6
|
Contracts accounted for as insurance (premium revenue recognition, loss and loss adjustment expense and policy acquisition cost)
|
Note 7 and 8
|
Fair value measurement
|
Note 9
|
Investments and cash
|
Note 10
|
Credit derivatives
|
Note 11
|
Management fees
|
Note 12
|
Goodwill and other intangible assets
|
Note 13
|
Variable interest entities
|
Note 14
|
Long term debt
|
Note 15
|
Stock based compensation
|
Note 16
|
Income taxes
|
Note 17
|
Leases
|
Note 20
|
Share repurchases
|
Note 21
|
Earnings per share
|
Note 23
|
•
|
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 (DAC), and
|
•
|
improve the effectiveness of the required disclosures.
|
2.
|
Business Combinations and Assumption of Insured Portfolio
|
|
|
Net Effect of
BlueMountain Acquisition
|
||
|
|
(in millions)
|
||
Cash purchase price
|
|
$
|
157
|
|
|
|
|
||
Identifiable assets acquired:
|
|
|
||
Investment portfolio
|
|
3
|
|
|
Cash
|
|
12
|
|
|
Intangible assets (1)
|
|
79
|
|
|
Other assets (2)
|
|
59
|
|
|
Total assets
|
|
153
|
|
|
|
|
|
|
|
Liabilities assumed:
|
|
|
||
Compensation payable (3)
|
|
61
|
|
|
Other liabilities
|
|
52
|
|
|
Total liabilities
|
|
113
|
|
|
Net assets of BlueMountain
|
|
40
|
|
|
Goodwill recognized from BlueMountain Acquisition (1)
|
|
$
|
117
|
|
(2)
|
This includes a $5 million reduction of the right-of-use asset for unfavorable lease terms relative to market terms for leases acquired from BlueMountain.
|
|
Fair Value
|
|
Estimated Weighted Average Useful Life
|
||
|
(in millions)
|
|
|
||
CLO contracts
|
$
|
42
|
|
|
9.0 years
|
Investment management contracts
|
24
|
|
|
4.8 years
|
|
CLO distribution network
|
9
|
|
|
5.0 years
|
|
Trade name
|
3
|
|
|
10.0 years
|
|
Favorable sublease
|
1
|
|
|
4.4 years
|
|
Total finite-lived intangible assets, net
|
$
|
79
|
|
|
|
|
Year Ended
December 31, 2019 |
|
Year Ended
December 31, 2018 |
||||
|
(dollars in millions)
|
||||||
Pro forma revenues
|
$
|
1,079
|
|
|
$
|
1,210
|
|
Pro forma net income
|
358
|
|
|
436
|
|
||
Pro forma earnings per share (EPS):
|
|
|
|
||||
Basic
|
3.60
|
|
|
3.96
|
|
||
Diluted
|
3.57
|
|
|
3.92
|
|
(1)
|
Pro forma adjustments were made for transaction expenses, amortization of intangible assets and income tax impact related to the BlueMountain Acquisition as if the companies had been combined as of January 1, 2018.
|
|
Fair Value of Net Assets Acquired, before Settlement of Pre-existing Relationships
|
|
Net effect of Settlement of Pre-existing Relationships
|
|
Net Effect of
MBIA UK Acquisition
|
||||||
|
(in millions)
|
||||||||||
Purchase price (1)
|
$
|
334
|
|
|
$
|
—
|
|
|
$
|
334
|
|
|
|
|
|
|
|
||||||
Identifiable assets acquired:
|
|
|
|
|
|
||||||
Investments
|
459
|
|
|
—
|
|
|
459
|
|
|||
Cash
|
72
|
|
|
—
|
|
|
72
|
|
|||
Premiums receivable, net of commissions payable
|
274
|
|
|
(4
|
)
|
|
270
|
|
|||
Other assets
|
16
|
|
|
(6
|
)
|
|
10
|
|
|||
Total assets
|
821
|
|
|
(10
|
)
|
|
811
|
|
|||
|
|
|
|
|
|
|
|
||||
Liabilities assumed:
|
|
|
|
|
|
||||||
Unearned premium reserves
|
389
|
|
|
(6
|
)
|
|
383
|
|
|||
Current tax payable
|
25
|
|
|
—
|
|
|
25
|
|
|||
Other liabilities
|
4
|
|
|
(5
|
)
|
|
(1
|
)
|
|||
Total liabilities
|
418
|
|
|
(11
|
)
|
|
407
|
|
|||
Net assets of MBIA UK
|
403
|
|
|
1
|
|
|
404
|
|
|||
Cash acquired from MBIA Holdings
|
23
|
|
|
—
|
|
|
23
|
|
|||
Deferred tax liability
|
(36
|
)
|
|
—
|
|
|
(36
|
)
|
|||
Net asset effect of MBIA UK Acquisition
|
390
|
|
|
1
|
|
|
391
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships resulting from MBIA UK Acquisition, after-tax
|
56
|
|
|
1
|
|
|
57
|
|
|||
Deferred tax
|
—
|
|
|
1
|
|
|
1
|
|
|||
Bargain purchase gain and settlement of pre-existing relationships resulting from MBIA UK Acquisition, pre-tax
|
$
|
56
|
|
|
$
|
2
|
|
|
$
|
58
|
|
(1)
|
The purchase price of $334 million was allocated as follows: (1) $329 million for the purchase of net assets of $385 million, and (2) the settlement of pre-existing relationships between MBIA UK and Assured Guaranty at a fair value of $5 million
|
|
|
Commutation
|
|
Assumption
|
|
Total
|
||||||
|
|
(in millions)
|
||||||||||
Cash
|
|
$
|
20
|
|
|
$
|
343
|
|
|
$
|
363
|
|
|
|
|
|
|
|
|
||||||
Premiums receivable/payable, net of commissions
|
|
$
|
16
|
|
|
$
|
45
|
|
|
$
|
61
|
|
Unearned premium reserve, net
|
|
(56
|
)
|
|
(319
|
)
|
|
(375
|
)
|
|||
Credit derivative liability, net
|
|
—
|
|
|
(68
|
)
|
|
(68
|
)
|
|||
Other
|
|
2
|
|
|
(1
|
)
|
|
1
|
|
|||
Impact to net assets (liabilities), excluding cash
|
|
$
|
(38
|
)
|
|
$
|
(343
|
)
|
|
$
|
(381
|
)
|
|
|
|
|
|
|
|
||||||
Commutation loss
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
18
|
|
|
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) (11/7/19)
|
|
AA+ (stable) (12/19/19)
|
|
A2 (stable) (8/13/19)
|
|
—
|
AGC
|
AA (stable) (11/7/19)
|
|
AA (stable) (11/22/19)
|
|
(1)
|
|
—
|
MAC
|
AA (stable) (11/7/19)
|
|
AA+ (stable) (7/12/19)
|
|
—
|
|
—
|
AG Re
|
AA (stable) (11/7/19)
|
|
—
|
|
—
|
|
—
|
AGRO
|
AA (stable) (11/7/19)
|
|
—
|
|
—
|
|
A+ (stable) (7/12/19)
|
AGE UK
|
AA (stable) (11/7/19)
|
|
AA+ (stable) (12/19/19)
|
|
A2 (stable) (8/13/19)
|
|
—
|
AGE SA
|
AA (stable) (1/29/20)
|
|
AA+ (stable) (1/21/20)
|
|
—
|
|
—
|
(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).
|
1)
|
Elimination of realized gains (losses) on the Company’s investments, except for gains and losses on securities classified as trading.
|
2)
|
Elimination of non-credit-impairment unrealized fair value gains (losses) on credit derivatives that are recognized in net income, which is the amount of unrealized fair value gains (losses) in excess of the present value of the expected estimated economic credit losses, and non-economic payments.
|
3)
|
Elimination of fair value gains (losses) on the Company’s committed capital securities (CCS) that are recognized in net income.
|
4)
|
Elimination of foreign exchange gains (losses) on remeasurement of net premium receivables and loss and LAE reserves that are recognized in net income.
|
5)
|
Elimination of the tax effects related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.
|
|
Year Ended December 31, 2019
|
||||||||||||||||||
|
Insurance
|
|
Asset Management
|
|
Corporate
|
|
Other
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Net investment income
|
$
|
383
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
(9
|
)
|
|
$
|
378
|
|
Interest expense
|
—
|
|
|
—
|
|
|
94
|
|
|
(5
|
)
|
|
89
|
|
|||||
Non-cash compensation and operating expenses (1)
|
39
|
|
|
3
|
|
|
6
|
|
|
—
|
|
|
48
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Intersegment revenues
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(5
|
)
|
|
$
|
—
|
|
Third-party revenues
|
912
|
|
|
22
|
|
|
3
|
|
|
27
|
|
|
964
|
|
|||||
Total revenues
|
917
|
|
|
22
|
|
|
3
|
|
|
22
|
|
|
964
|
|
|||||
Total expenses
|
324
|
|
|
34
|
|
|
133
|
|
|
25
|
|
|
516
|
|
|||||
Income (loss) before income taxes and equity in net earnings of investees
|
593
|
|
|
(12
|
)
|
|
(130
|
)
|
|
(3
|
)
|
|
448
|
|
|||||
Equity in net earnings of investees
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
4
|
|
|||||
Adjusted operating income (loss) before income taxes
|
595
|
|
|
(12
|
)
|
|
(130
|
)
|
|
(1
|
)
|
|
452
|
|
|||||
Provision (benefit) for income taxes
|
83
|
|
|
(2
|
)
|
|
(19
|
)
|
|
—
|
|
|
62
|
|
|||||
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||||
Adjusted operating income (loss)
|
512
|
|
|
(10
|
)
|
|
(111
|
)
|
|
—
|
|
|
391
|
|
|||||
Reconciling items from adjusted operating income (loss) to net income (loss) attributable to AGL:
|
|
|
|
|
|
|
|
|
|
||||||||||
Plus pre-tax adjustments:
|
|
|
|
|
|
|
|
|
|
||||||||||
Realized gains (losses) on investments
|
|
|
|
|
|
|
|
|
22
|
|
|||||||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
|
|
|
|
|
|
|
|
(10
|
)
|
|||||||||
Fair value gains (losses) on CCS
|
|
|
|
|
|
|
|
|
(22
|
)
|
|||||||||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
|
|
|
|
|
|
|
|
|
22
|
|
|||||||||
Total pre-tax adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|||||
Plus tax effect on pre-tax adjustments
|
|
|
|
|
|
|
|
|
(1
|
)
|
|||||||||
Net income (loss) attributable to AGL
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
402
|
|
|
Year Ended December 31, 2018
|
||||||||||||||||||
|
Insurance
|
|
Asset Management
|
|
Corporate
|
|
Other
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Net investment income
|
$
|
396
|
|
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
(7
|
)
|
|
$
|
395
|
|
Interest expense
|
—
|
|
|
—
|
|
|
97
|
|
|
(3
|
)
|
|
94
|
|
|||||
Non-cash compensation and operating expenses (1)
|
35
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
41
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Intersegment revenues
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(3
|
)
|
|
$
|
—
|
|
Third-party revenues
|
989
|
|
|
—
|
|
|
(28
|
)
|
|
(2
|
)
|
|
959
|
|
|||||
Total revenues
|
992
|
|
|
—
|
|
|
(28
|
)
|
|
(5
|
)
|
|
959
|
|
|||||
Total expenses
|
302
|
|
|
—
|
|
|
129
|
|
|
—
|
|
|
431
|
|
|||||
Income (loss) before income taxes and equity in net earnings of investees
|
690
|
|
|
—
|
|
|
(157
|
)
|
|
(5
|
)
|
|
528
|
|
|||||
Equity in net earnings of investees
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||
Adjusted operating income (loss) before income taxes
|
691
|
|
|
—
|
|
|
(157
|
)
|
|
(5
|
)
|
|
529
|
|
|||||
Provision (benefit) for income taxes
|
109
|
|
|
—
|
|
|
(61
|
)
|
|
(1
|
)
|
|
47
|
|
|||||
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Adjusted operating income (loss)
|
582
|
|
|
—
|
|
|
(96
|
)
|
|
(4
|
)
|
|
482
|
|
|||||
Reconciling items from adjusted operating income (loss) to net income (loss) attributable to AGL:
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Plus pre-tax adjustments:
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Realized gains (losses) on investments
|
|
|
|
|
|
|
|
|
(32
|
)
|
|||||||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
|
|
|
|
|
|
|
|
|
|
|
101
|
|
||||||
Fair value gains (losses) on CCS
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
||||||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
|
|
|
|
|
|
|
|
|
(32
|
)
|
|||||||||
Total pre-tax adjustments
|
|
|
|
|
|
|
|
|
51
|
|
|||||||||
Plus tax effect on pre-tax adjustments
|
|
|
|
|
|
|
|
|
(12
|
)
|
|||||||||
Net income (loss) attributable to AGL
|
|
|
|
|
|
|
|
|
$
|
521
|
|
|
Year Ended December 31, 2017
|
||||||||||||||||||
|
Insurance
|
|
Asset Management
|
|
Corporate
|
|
Other
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Net investment income
|
$
|
423
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
(8
|
)
|
|
$
|
417
|
|
Interest expense
|
—
|
|
|
—
|
|
|
100
|
|
|
(3
|
)
|
|
97
|
|
|||||
Non-cash compensation and operating expenses (1)
|
36
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
41
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Intersegment revenues
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(3
|
)
|
|
$
|
—
|
|
Third-party revenues
|
1,556
|
|
|
—
|
|
|
(8
|
)
|
|
10
|
|
|
1,558
|
|
|||||
Total revenues
|
1,559
|
|
|
—
|
|
|
(8
|
)
|
|
7
|
|
|
1,558
|
|
|||||
Total expenses
|
586
|
|
|
—
|
|
|
129
|
|
|
(10
|
)
|
|
705
|
|
|||||
Income (loss) before income taxes and equity in net earnings of investees
|
973
|
|
|
—
|
|
|
(137
|
)
|
|
17
|
|
|
853
|
|
|||||
Equity in net earnings of investees
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Adjusted operating income (loss) before income taxes
|
973
|
|
|
—
|
|
|
(137
|
)
|
|
17
|
|
|
853
|
|
|||||
Provision (benefit) for income taxes
|
241
|
|
|
—
|
|
|
(54
|
)
|
|
5
|
|
|
192
|
|
|||||
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Adjusted operating income (loss)
|
732
|
|
|
—
|
|
|
(83
|
)
|
|
12
|
|
|
661
|
|
|||||
Reconciling items from adjusted operating income (loss) to net income (loss) attributable to AGL:
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Plus pre-tax adjustments:
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Realized gains (losses) on investments
|
|
|
|
|
|
|
|
|
40
|
|
|||||||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
|
|
|
|
|
|
|
|
43
|
|
|||||||||
Fair value gains (losses) on CCS
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
||||||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
|
|
|
|
|
|
|
|
|
|
|
|
57
|
|
||||||
Total pre-tax adjustments
|
|
|
|
|
|
|
|
|
138
|
|
|||||||||
Plus tax effect on pre-tax adjustments
|
|
|
|
|
|
|
|
|
(69
|
)
|
|||||||||
Net income (loss) attributable to AGL
|
|
|
|
|
|
|
|
|
$
|
730
|
|
(1)
|
Consists of amortization of DAC and intangible assets, depreciation and share-based compensation.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
U.S.
|
$
|
761
|
|
|
$
|
732
|
|
|
$
|
1,193
|
|
Bermuda
|
161
|
|
|
203
|
|
|
224
|
|
|||
U.K. and other
|
42
|
|
|
24
|
|
|
141
|
|
|||
Total
|
$
|
964
|
|
|
$
|
959
|
|
|
$
|
1,558
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Total GAAP revenues
|
$
|
963
|
|
|
$
|
1,001
|
|
|
$
|
1,739
|
|
Less: Realized gains (losses) on investments
|
22
|
|
|
(32
|
)
|
|
40
|
|
|||
Less: Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
(10
|
)
|
|
101
|
|
|
43
|
|
|||
Less: Fair value gains (losses) on CCS
|
(22
|
)
|
|
14
|
|
|
(2
|
)
|
|||
Less: Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
|
22
|
|
|
(32
|
)
|
|
57
|
|
|||
Plus: Credit derivative impairment (recoveries) (1)
|
13
|
|
|
9
|
|
|
(43
|
)
|
|||
Total segment revenues
|
$
|
964
|
|
|
$
|
959
|
|
|
$
|
1,558
|
|
(1)
|
Credit derivative impairment (recoveries) are included in "Net change in fair value of credit derivatives" in the Company's consolidated statements of operations.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Total GAAP expenses
|
$
|
503
|
|
|
$
|
422
|
|
|
$
|
748
|
|
Plus: Credit derivative impairment (recoveries) (1)
|
13
|
|
|
9
|
|
|
(43
|
)
|
|||
Total segment expenses
|
$
|
516
|
|
|
$
|
431
|
|
|
$
|
705
|
|
(1)
|
Credit derivative impairment (recoveries) are included in "Net change in fair value of credit derivatives" in the Company's consolidated statements of operations.
|
•
|
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.
|
•
|
for insured obligations that are not supported by homogeneous pools of assets (which category includes most of the Company's public finance transactions), as the total estimated contractual future principal and interest due through maturity, regardless of whether the obligations may be called and regardless of whether, in the case of obligations where principal payments are due when an underlying asset makes a principal payment, the Company believes the obligations will be repaid prior to contractual maturity;
|
•
|
for insured obligations that are supported by homogeneous pools of assets that are contractually permitted to prepay principal (which category includes, for example, residential mortgage-backed securities (RMBS) and CLOs), as total estimated expected future principal and interest due on insured obligations through their respective expected terms, which includes the Company's expectations as to whether the obligations may be called and, in the case of obligations where principal payments are due when an underlying asset makes a principal payment, when the Company expects principal payments to be made prior to contractual maturity.
|
|
Gross Debt Service
Outstanding
|
|
Net Debt Service
Outstanding
|
||||||||||||
|
As of December 31, 2019
|
|
As of December 31, 2018
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
||||||||
|
(in millions)
|
||||||||||||||
Public finance
|
$
|
363,497
|
|
|
$
|
361,511
|
|
|
$
|
362,361
|
|
|
$
|
358,438
|
|
Structured finance
|
12,279
|
|
|
13,569
|
|
|
11,769
|
|
|
13,148
|
|
||||
Total financial guaranty
|
$
|
375,776
|
|
|
$
|
375,080
|
|
|
$
|
374,130
|
|
|
$
|
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
|
|
$
|
381
|
|
|
0.2
|
%
|
|
$
|
2,541
|
|
|
5.0
|
%
|
|
$
|
1,258
|
|
|
13.5
|
%
|
|
$
|
181
|
|
|
23.8
|
%
|
|
$
|
4,361
|
|
|
1.8
|
%
|
AA
|
|
19,847
|
|
|
11.3
|
|
|
5,142
|
|
|
10.0
|
|
|
4,010
|
|
|
43.1
|
|
|
38
|
|
|
5.0
|
|
|
29,037
|
|
|
12.3
|
|
|||||
A
|
|
94,488
|
|
|
53.9
|
|
|
15,627
|
|
|
30.4
|
|
|
1,030
|
|
|
11.1
|
|
|
184
|
|
|
24.2
|
|
|
111,329
|
|
|
47.0
|
|
|||||
BBB
|
|
55,000
|
|
|
31.3
|
|
|
27,051
|
|
|
52.8
|
|
|
1,206
|
|
|
13.0
|
|
|
317
|
|
|
41.6
|
|
|
83,574
|
|
|
35.3
|
|
|||||
BIG
|
|
5,771
|
|
|
3.3
|
|
|
898
|
|
|
1.8
|
|
|
1,796
|
|
|
19.3
|
|
|
41
|
|
|
5.4
|
|
|
8,506
|
|
|
3.6
|
|
|||||
Total net par outstanding
|
|
$
|
175,487
|
|
|
100.0
|
%
|
|
$
|
51,259
|
|
|
100.0
|
%
|
|
$
|
9,300
|
|
|
100.0
|
%
|
|
$
|
761
|
|
|
100.0
|
%
|
|
$
|
236,807
|
|
|
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
|
%
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||
|
(in millions)
|
||||||
U.S. public finance
|
$
|
176,047
|
|
|
$
|
187,919
|
|
Non-U.S. public finance
|
51,538
|
|
|
44,714
|
|
||
U.S. structured finance
|
9,800
|
|
|
10,352
|
|
||
Non-U.S. structured finance
|
771
|
|
|
1,206
|
|
||
Total gross par outstanding
|
$
|
238,156
|
|
|
$
|
244,191
|
|
Sector (1)
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||
|
|
(in millions)
|
||||||
Public finance:
|
|
|
|
|
|
|
||
U.S.:
|
|
|
|
|
|
|
||
General obligation
|
|
$
|
73,467
|
|
|
$
|
78,800
|
|
Tax backed
|
|
37,047
|
|
|
40,616
|
|
||
Municipal utilities
|
|
26,195
|
|
|
28,402
|
|
||
Transportation
|
|
16,209
|
|
|
15,197
|
|
||
Healthcare
|
|
7,148
|
|
|
6,750
|
|
||
Higher education
|
|
5,916
|
|
|
6,643
|
|
||
Infrastructure finance
|
|
5,429
|
|
|
5,489
|
|
||
Housing revenue
|
|
1,321
|
|
|
1,435
|
|
||
Investor-owned utilities
|
|
655
|
|
|
846
|
|
||
Renewable energy
|
|
210
|
|
|
215
|
|
||
Other public finance
|
|
1,890
|
|
|
2,169
|
|
||
Total public finance—U.S.
|
|
175,487
|
|
|
186,562
|
|
||
Non-U.S.:
|
|
|
|
|
|
|
||
Regulated utilities
|
|
18,995
|
|
|
18,124
|
|
||
Infrastructure finance
|
|
17,952
|
|
|
17,166
|
|
||
Sovereign and sub-sovereign
|
|
11,341
|
|
|
6,094
|
|
||
Renewable energy
|
|
1,555
|
|
|
1,346
|
|
||
Pooled infrastructure
|
|
1,416
|
|
|
1,373
|
|
||
Total public finance—non-U.S.
|
|
51,259
|
|
|
44,103
|
|
||
Total public finance
|
|
226,746
|
|
|
230,665
|
|
||
Structured finance:
|
|
|
|
|
|
|
||
U.S.:
|
|
|
|
|
|
|
||
RMBS
|
|
3,546
|
|
|
4,270
|
|
||
Life insurance transactions
|
|
1,776
|
|
|
1,435
|
|
||
Pooled corporate obligations
|
|
1,401
|
|
|
1,215
|
|
||
Financial products
|
|
1,019
|
|
|
1,094
|
|
||
Consumer receivables
|
|
962
|
|
|
1,255
|
|
||
Other structured finance
|
|
596
|
|
|
675
|
|
||
Total structured finance—U.S.
|
|
9,300
|
|
|
9,944
|
|
||
Non-U.S.:
|
|
|
|
|
|
|
||
RMBS
|
|
427
|
|
|
576
|
|
||
Pooled corporate obligations
|
|
55
|
|
|
126
|
|
||
Other structured finance
|
|
279
|
|
|
491
|
|
||
Total structured finance—non-U.S.
|
|
761
|
|
|
1,193
|
|
||
Total structured finance
|
|
10,061
|
|
|
11,137
|
|
||
Total net par outstanding
|
|
$
|
236,807
|
|
|
$
|
241,802
|
|
|
Public Finance
|
|
Structured Finance
|
|
Total
|
||||||
|
(in millions)
|
||||||||||
0 to 5 years
|
$
|
55,219
|
|
|
$
|
4,161
|
|
|
$
|
59,380
|
|
5 to 10 years
|
48,500
|
|
|
1,852
|
|
|
50,352
|
|
|||
10 to 15 years
|
42,901
|
|
|
1,917
|
|
|
44,818
|
|
|||
15 to 20 years
|
33,820
|
|
|
1,698
|
|
|
35,518
|
|
|||
20 years and above
|
46,306
|
|
|
433
|
|
|
46,739
|
|
|||
Total net par outstanding
|
$
|
226,746
|
|
|
$
|
10,061
|
|
|
$
|
236,807
|
|
|
BIG Net Par Outstanding
|
|
Net Par
|
||||||||||||||||
|
BIG 1
|
|
BIG 2
|
|
BIG 3
|
|
Total BIG
|
|
Outstanding
|
||||||||||
|
|
|
|
|
(in millions)
|
|
|
|
|
||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. public finance
|
$
|
1,582
|
|
|
$
|
430
|
|
|
$
|
3,759
|
|
|
$
|
5,771
|
|
|
$
|
175,487
|
|
Non-U.S. public finance
|
854
|
|
|
—
|
|
|
44
|
|
|
898
|
|
|
51,259
|
|
|||||
Public finance
|
2,436
|
|
|
430
|
|
|
3,803
|
|
|
6,669
|
|
|
226,746
|
|
|||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. RMBS
|
162
|
|
|
74
|
|
|
1,382
|
|
|
1,618
|
|
|
3,546
|
|
|||||
Life insurance transactions
|
—
|
|
|
—
|
|
|
40
|
|
|
40
|
|
|
1,771
|
|
|||||
Other structured finance
|
69
|
|
|
62
|
|
|
48
|
|
|
179
|
|
|
4,744
|
|
|||||
Structured finance
|
231
|
|
|
136
|
|
|
1,470
|
|
|
1,837
|
|
|
10,061
|
|
|||||
Total
|
$
|
2,667
|
|
|
$
|
566
|
|
|
$
|
5,273
|
|
|
$
|
8,506
|
|
|
$
|
236,807
|
|
|
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
|
|
$
|
2,600
|
|
|
$
|
67
|
|
|
$
|
2,667
|
|
|
121
|
|
|
6
|
|
|
127
|
|
Category 2
|
|
561
|
|
|
5
|
|
|
566
|
|
|
24
|
|
|
1
|
|
|
25
|
|
|||
Category 3
|
|
5,216
|
|
|
57
|
|
|
5,273
|
|
|
131
|
|
|
7
|
|
|
138
|
|
|||
Total BIG
|
|
$
|
8,377
|
|
|
$
|
129
|
|
|
$
|
8,506
|
|
|
276
|
|
|
14
|
|
|
290
|
|
|
|
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.
|
|
Number of Risks
|
|
Net Par Outstanding
|
|
Percent of Total Net Par Outstanding
|
||||
|
(dollars in millions)
|
||||||||
U.S.:
|
|
|
|
|
|
||||
U.S. Public finance:
|
|
|
|
|
|
||||
California
|
1,318
|
|
|
$
|
33,368
|
|
|
14.1
|
%
|
Pennsylvania
|
665
|
|
|
15,895
|
|
|
6.7
|
|
|
Texas
|
1,090
|
|
|
14,860
|
|
|
6.3
|
|
|
New York
|
749
|
|
|
14,682
|
|
|
6.2
|
|
|
Illinois
|
602
|
|
|
13,977
|
|
|
5.9
|
|
|
New Jersey
|
337
|
|
|
10,504
|
|
|
4.4
|
|
|
Florida
|
266
|
|
|
7,107
|
|
|
3.0
|
|
|
Michigan
|
305
|
|
|
5,345
|
|
|
2.3
|
|
|
Puerto Rico
|
17
|
|
|
4,270
|
|
|
1.8
|
|
|
Louisiana
|
162
|
|
|
4,167
|
|
|
1.8
|
|
|
Other
|
2,529
|
|
|
51,312
|
|
|
21.7
|
|
|
Total U.S. public finance
|
8,040
|
|
|
175,487
|
|
|
74.2
|
|
|
U.S. Structured finance (multiple states)
|
450
|
|
|
9,300
|
|
|
3.9
|
|
|
Total U.S.
|
8,490
|
|
|
184,787
|
|
|
78.1
|
|
|
Non-U.S.:
|
|
|
|
|
|
||||
United Kingdom
|
288
|
|
|
38,450
|
|
|
16.2
|
|
|
France
|
7
|
|
|
3,130
|
|
|
1.3
|
|
|
Canada
|
8
|
|
|
2,495
|
|
|
1.1
|
|
|
Australia
|
11
|
|
|
2,112
|
|
|
0.9
|
|
|
Austria
|
3
|
|
|
1,250
|
|
|
0.5
|
|
|
Other
|
42
|
|
|
4,583
|
|
|
1.9
|
|
|
Total non-U.S.
|
359
|
|
|
52,020
|
|
|
21.9
|
|
|
Total
|
8,849
|
|
|
$
|
236,807
|
|
|
100.0
|
%
|
•
|
Constitutionally Guaranteed. The Company includes in this category public debt benefiting from Article VI of the Constitution of the Commonwealth, which expressly provides that interest and principal payments on the public debt are to be paid before other disbursements are made.
|
•
|
Public Corporations – Certain Revenues Potentially Subject to Clawback. The Company includes in this category the debt of public corporations for which applicable law permits the Commonwealth to claw back, subject to certain conditions and for the payment of public debt, at least a portion of the revenues supporting the bonds the Company insures. As a constitutional condition to clawback, available Commonwealth revenues for any fiscal year must be insufficient to pay Commonwealth debt service before the payment of any appropriations for that year. The Company believes that this condition has not been satisfied to date, and accordingly that the Commonwealth has not to date been entitled to claw back revenues supporting debt insured by the Company.
|
•
|
Other Public Corporations. The Company includes in this category the debt of public corporations that are supported by revenues it does not believe are subject to clawback.
|
General Obligation Bonds
|
|
Assured Guaranty
Net Par Outstanding as of December 31, 2019 |
|
Assured Guaranty
Total Net Principal Claims Paid as of December 31, 2019 |
|
Assured Guaranty
Total Net Interest Claims Paid as of December 31, 2019 |
|
Base Recovery as a % of Pre-Petition Claims
|
|||||||
|
|
(in millions)
|
(percent)
|
||||||||||||
Vintage GO
|
|
$
|
669
|
|
|
$
|
383
|
|
|
$
|
147
|
|
|
74.9
|
%
|
2011 GO (Series D, E and PIB)
|
|
5
|
|
|
6
|
|
|
1
|
|
|
73.8
|
|
|||
2011 GO (Series C)
|
|
210
|
|
|
—
|
|
|
42
|
|
|
70.4
|
|
|||
2012 GO
|
|
369
|
|
|
—
|
|
|
63
|
|
|
69.9
|
|
|||
2014 GO
|
|
—
|
|
|
—
|
|
|
—
|
|
|
65.4
|
|
PBA Bonds
|
|
Assured Guaranty
Net Par Outstanding as of December 31, 2019 |
|
Assured Guaranty
Total Net Principal Claims Paid as of December 31, 2019 |
|
Assured Guaranty
Total Net Interest Claims Paid as of December 31, 2019 |
|
Base Recovery
as % of Pre-Petition Claims
|
|||||||
|
|
(in millions)
|
|
(percent)
|
|||||||||||
Vintage PBA
|
|
$
|
140
|
|
|
$
|
32
|
|
|
$
|
24
|
|
|
77.6
|
%
|
2011 PBA
|
|
—
|
|
|
—
|
|
|
—
|
|
|
76.8
|
|
|||
2012 PBA
|
|
—
|
|
|
—
|
|
|
—
|
|
|
72.2
|
|
|
Gross Par Outstanding
|
|
Gross Debt Service Outstanding
|
||||||||||||
|
December 31,
2019 |
|
December 31,
2018 |
|
December 31,
2019 |
|
December 31,
2018 |
||||||||
|
(in millions)
|
||||||||||||||
Exposure to Puerto Rico
|
$
|
4,458
|
|
|
$
|
4,971
|
|
|
$
|
6,956
|
|
|
$
|
8,035
|
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||
|
(in millions)
|
||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
||||
Commonwealth of Puerto Rico - General Obligation Bonds (1)
|
$
|
1,253
|
|
|
$
|
1,340
|
|
PBA
|
140
|
|
|
142
|
|
||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
||||
PRHTA (Transportation revenue) (1)
|
811
|
|
|
844
|
|
||
PRHTA (Highways revenue) (1)
|
454
|
|
|
475
|
|
||
PRCCDA
|
152
|
|
|
152
|
|
||
PRIFA
|
16
|
|
|
16
|
|
||
Other Public Corporations
|
|
|
|
||||
PREPA (1)
|
822
|
|
|
848
|
|
||
PRASA
|
373
|
|
|
373
|
|
||
MFA
|
248
|
|
|
303
|
|
||
COFINA
|
—
|
|
|
273
|
|
||
U of PR
|
1
|
|
|
1
|
|
||
Total net exposure to Puerto Rico
|
$
|
4,270
|
|
|
$
|
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.
|
|
Scheduled Net Par Amortization
|
|
Scheduled Net Debt Service Amortization
|
||||
|
(in millions)
|
||||||
2020 (January 1 - March 31)
|
$
|
—
|
|
|
$
|
106
|
|
2020 (April 1 - June 30)
|
—
|
|
|
3
|
|
||
2020 (July 1 - September 30)
|
286
|
|
|
392
|
|
||
2020 (October 1 - December 31)
|
—
|
|
|
3
|
|
||
Subtotal 2020
|
286
|
|
|
504
|
|
||
2021
|
149
|
|
|
351
|
|
||
2022
|
139
|
|
|
332
|
|
||
2023
|
205
|
|
|
392
|
|
||
2024
|
222
|
|
|
398
|
|
||
2025-2029
|
1,158
|
|
|
1,862
|
|
||
2030-2034
|
1,021
|
|
|
1,484
|
|
||
2035-2039
|
740
|
|
|
917
|
|
||
2040-2044
|
104
|
|
|
179
|
|
||
2045-2047
|
246
|
|
|
272
|
|
||
Total
|
$
|
4,270
|
|
|
$
|
6,691
|
|
|
|
Gross Exposure
|
|
Net Exposure
|
||||||||||||
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
||||||||
|
|
(in millions)
|
||||||||||||||
Life insurance transactions (1)
|
|
$
|
1,046
|
|
|
$
|
880
|
|
|
$
|
898
|
|
|
$
|
763
|
|
Aircraft residual value insurance policies
|
|
398
|
|
|
340
|
|
|
243
|
|
|
218
|
|
(1)
|
The life insurance transactions net exposure is projected to increase to approximately $1.0 billion by December 31, 2023.
|
6.
|
Expected Loss to be Paid
|
|
Year Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Net expected loss to be paid, beginning of period
|
$
|
1,183
|
|
|
$
|
1,303
|
|
Net expected loss to be paid on the SGI portfolio as of June 1, 2018 (see Note 2)
|
—
|
|
|
131
|
|
||
Economic loss development (benefit) due to:
|
|
|
|
||||
Accretion of discount
|
22
|
|
|
36
|
|
||
Changes in discount rates
|
(11
|
)
|
|
(17
|
)
|
||
Changes in timing and assumptions
|
(12
|
)
|
|
(24
|
)
|
||
Total economic loss development (benefit)
|
(1
|
)
|
|
(5
|
)
|
||
Net (paid) recovered losses
|
(445
|
)
|
|
(246
|
)
|
||
Net expected loss to be paid, end of period
|
$
|
737
|
|
|
$
|
1,183
|
|
|
Year Ended December 31, 2019
|
||||||||||||||
|
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 December 31, 2019 |
||||||||
|
(in millions)
|
||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
||||||||
U.S. public finance
|
$
|
832
|
|
|
$
|
224
|
|
|
$
|
(525
|
)
|
|
$
|
531
|
|
Non-U.S. public finance
|
32
|
|
|
(9
|
)
|
|
—
|
|
|
23
|
|
||||
Public finance
|
864
|
|
|
215
|
|
|
(525
|
)
|
|
554
|
|
||||
Structured finance:
|
|
|
|
|
|
|
|
||||||||
U.S. RMBS
|
293
|
|
|
(234
|
)
|
|
87
|
|
|
146
|
|
||||
Other structured finance
|
26
|
|
|
18
|
|
|
(7
|
)
|
|
37
|
|
||||
Structured finance
|
319
|
|
|
(216
|
)
|
|
80
|
|
|
183
|
|
||||
Total
|
$
|
1,183
|
|
|
$
|
(1
|
)
|
|
$
|
(445
|
)
|
|
$
|
737
|
|
|
Year Ended December 31, 2018
|
||||||||||||||||||
|
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 December 31, 2018 |
||||||||||
|
(in millions)
|
||||||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. public finance
|
$
|
1,157
|
|
|
$
|
—
|
|
|
$
|
70
|
|
|
$
|
(395
|
)
|
|
$
|
832
|
|
Non-U.S. public finance
|
46
|
|
|
1
|
|
|
(14
|
)
|
|
(1
|
)
|
|
32
|
|
|||||
Public finance
|
1,203
|
|
|
1
|
|
|
56
|
|
|
(396
|
)
|
|
864
|
|
|||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. RMBS
|
73
|
|
|
130
|
|
|
(69
|
)
|
|
159
|
|
|
293
|
|
|||||
Other structured finance
|
27
|
|
|
—
|
|
|
8
|
|
|
(9
|
)
|
|
26
|
|
|||||
Structured finance
|
100
|
|
|
130
|
|
|
(61
|
)
|
|
150
|
|
|
319
|
|
|||||
Total
|
$
|
1,303
|
|
|
$
|
131
|
|
|
$
|
(5
|
)
|
|
$
|
(246
|
)
|
|
$
|
1,183
|
|
(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 2019 are net of the COFINA Exchange Senior Bonds and cash that were received pursuant to the COFINA Plan of Adjustment. See Note 5, Outstanding Insurance Exposure, for additional information.
|
|
Net Expected Loss to be Paid (Recovered)
|
|
Net Economic Loss Development (Benefit)
|
||||||||||||
|
As of December 31,
|
|
Year Ended December 31,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(in millions)
|
||||||||||||||
Insurance
|
$
|
683
|
|
|
$
|
1,110
|
|
|
$
|
14
|
|
|
$
|
(9
|
)
|
FG VIEs (See Note 14)
|
58
|
|
|
75
|
|
|
(29
|
)
|
|
(13
|
)
|
||||
Credit derivatives (See Note 11)
|
(4
|
)
|
|
(2
|
)
|
|
14
|
|
|
17
|
|
||||
Total
|
$
|
737
|
|
|
$
|
1,183
|
|
|
$
|
(1
|
)
|
|
$
|
(5
|
)
|
|
Year Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
First lien U.S. RMBS
|
$
|
(77
|
)
|
|
$
|
16
|
|
Second lien U.S. RMBS
|
(157
|
)
|
|
(85
|
)
|
|
As of December 31,
|
||||
|
2019
|
|
2018
|
|
2017
|
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
|
35
|
|
40
|
|
40
|
60 – 89 Days Delinquent
|
|
|
|
|
|
Alt-A and Prime
|
40
|
|
40
|
|
40
|
Option ARM
|
45
|
|
45
|
|
50
|
Subprime
|
45
|
|
45
|
|
50
|
90+ Days Delinquent
|
|
|
|
|
|
Alt-A and Prime
|
55
|
|
50
|
|
55
|
Option ARM
|
55
|
|
55
|
|
60
|
Subprime
|
50
|
|
50
|
|
55
|
Bankruptcy
|
|
|
|
|
|
Alt-A and Prime
|
45
|
|
45
|
|
45
|
Option ARM
|
50
|
|
50
|
|
50
|
Subprime
|
40
|
|
40
|
|
40
|
Foreclosure
|
|
|
|
|
|
Alt-A and Prime
|
65
|
|
60
|
|
65
|
Option ARM
|
65
|
|
65
|
|
70
|
Subprime
|
60
|
|
60
|
|
65
|
Real Estate Owned
|
|
|
|
|
|
All
|
100
|
|
100
|
|
100
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
|||||||||||||||
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|||||||||
Alt-A First Lien
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Plateau CDR
|
0.3
|
%
|
–
|
8.4%
|
|
4.1%
|
|
1.2
|
%
|
–
|
11.4%
|
|
4.6%
|
|
1.3
|
%
|
–
|
9.8%
|
|
5.2%
|
Final CDR
|
0.0
|
%
|
–
|
0.4%
|
|
0.2%
|
|
0.1
|
%
|
–
|
0.6%
|
|
0.2%
|
|
0.1
|
%
|
–
|
0.5%
|
|
0.3%
|
Initial loss severity:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
2005 and prior
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
|
|||||||||
2006
|
70%
|
|
|
|
70%
|
|
|
|
80%
|
|
|
|||||||||
2007+
|
70%
|
|
|
|
70%
|
|
|
|
70%
|
|
|
|||||||||
Option ARM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Plateau CDR
|
1.8
|
%
|
–
|
8.4%
|
|
5.4%
|
|
1.8
|
%
|
–
|
8.3%
|
|
5.6%
|
|
2.5
|
%
|
–
|
7.0%
|
|
5.9%
|
Final CDR
|
0.1
|
%
|
–
|
0.4%
|
|
0.3%
|
|
0.1
|
%
|
–
|
0.4%
|
|
0.3%
|
|
0.1
|
%
|
–
|
0.3%
|
|
0.3%
|
Initial loss severity:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
2005 and prior
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
|
|||||||||
2006
|
60%
|
|
|
|
60%
|
|
|
|
70%
|
|
|
|||||||||
2007+
|
70%
|
|
|
|
70%
|
|
|
|
75%
|
|
|
|||||||||
Subprime
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Plateau CDR
|
1.6
|
%
|
–
|
18.1%
|
|
5.6%
|
|
1.8
|
%
|
–
|
23.2%
|
|
6.2%
|
|
3.5
|
%
|
–
|
13.1%
|
|
7.8%
|
Final CDR
|
0.1
|
%
|
–
|
0.9%
|
|
0.3%
|
|
0.1
|
%
|
–
|
1.2%
|
|
0.3%
|
|
0.2
|
%
|
–
|
0.7%
|
|
0.4%
|
Initial loss severity:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
2005 and prior
|
75%
|
|
|
|
80%
|
|
|
|
80%
|
|
|
|||||||||
2006
|
75%
|
|
|
|
75%
|
|
|
|
90%
|
|
|
|||||||||
2007+
|
75%
|
|
|
|
95%
|
|
|
|
95%
|
|
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
|||||||||||||||
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|||||||||
Plateau CDR
|
5.9
|
%
|
–
|
24.6%
|
|
9.5%
|
|
4.6
|
%
|
–
|
26.8%
|
|
10.1%
|
|
2.7
|
%
|
–
|
19.9%
|
|
11.4%
|
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
|
|
|
|
35
|
|
|
|
45
|
|
|
|||||||||
60 – 89 Days Delinquent
|
45
|
|
|
|
50
|
|
|
|
60
|
|
|
|||||||||
90+ Days Delinquent
|
65
|
|
|
|
70
|
|
|
|
75
|
|
|
|||||||||
Bankruptcy
|
55
|
|
|
|
55
|
|
|
|
55
|
|
|
|||||||||
Foreclosure
|
55
|
|
|
|
65
|
|
|
|
70
|
|
|
|||||||||
Real Estate Owned
|
100
|
|
|
|
100
|
|
|
|
100
|
|
|
|||||||||
Loss severity (1)
|
98%
|
|
|
|
98%
|
|
|
|
98%
|
|
|
7.
|
Contracts Accounted for as Insurance
|
•
|
For premiums received upfront on financial guaranty insurance contracts that were originally underwritten by the Company, deferred premium revenue is equal to the amount of cash received. Upfront premiums typically relate to public finance transactions.
|
•
|
For premiums received in installments on financial guaranty insurance contracts that were originally underwritten by the Company, deferred premium revenue is the present value (discounted at risk free rates) of either (1) contractual premiums due or (2) in cases where the underlying collateral is composed of homogeneous pools of assets, the expected premiums to be collected over the life of the contract. To be considered a homogeneous pool of assets, prepayments must be contractually allowable, the amount of prepayments must be probable, and the timing and amount of prepayments must be reasonably estimable. Installment premiums typically relate to structured finance and infrastructure transactions, where the insurance premium rate is determined at the inception of the contract but the insured par is subject to prepayment throughout the life of the transaction.
|
•
|
For financial guaranty insurance contracts acquired in a business combination, deferred premium revenue is equal to the fair value of the Company's stand-ready obligation portion of the insurance contract at the date of acquisition based on what a hypothetical similarly rated financial guaranty insurer would have charged for the contract at that date and not the actual cash flows under the insurance contract. The amount of deferred premium revenue may differ significantly from cash collections primarily due to fair value adjustments recorded in connection with a business combination.
|
•
|
For premiums received in a reinsurance transaction, the cash received is allocated to individual policies in the assumed portfolio and recorded as unearned premium reserve.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Financial guaranty:
|
|
|
|
|
|
||||||
Scheduled net earned premiums
|
$
|
331
|
|
|
$
|
367
|
|
|
$
|
385
|
|
Accelerations from refundings and terminations
|
122
|
|
|
159
|
|
|
286
|
|
|||
Accretion of discount on net premiums receivable
|
17
|
|
|
18
|
|
|
17
|
|
|||
Financial guaranty insurance net earned premiums
|
470
|
|
|
544
|
|
|
688
|
|
|||
Specialty net earned premiums
|
6
|
|
|
4
|
|
|
2
|
|
|||
Net earned premiums (1)
|
$
|
476
|
|
|
$
|
548
|
|
|
$
|
690
|
|
(1)
|
Excludes $18 million, $12 million and $15 million for the years ended December 31, 2019, 2018 and 2017, respectively, related to consolidated FG VIEs.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Beginning of year
|
$
|
904
|
|
|
$
|
915
|
|
|
$
|
576
|
|
Less: Specialty insurance premium receivable
|
1
|
|
|
1
|
|
|
—
|
|
|||
Financial guaranty insurance premiums receivable
|
903
|
|
|
914
|
|
|
576
|
|
|||
Premiums receivable from acquisitions (see Note 2)
|
—
|
|
|
—
|
|
|
270
|
|
|||
Gross written premiums on new business, net of commissions (1)
|
689
|
|
|
610
|
|
|
301
|
|
|||
Gross premiums received, net of commissions
|
(318
|
)
|
|
(577
|
)
|
|
(301
|
)
|
|||
Adjustments:
|
|
|
|
|
|
||||||
Changes in the expected term
|
(21
|
)
|
|
(8
|
)
|
|
(8
|
)
|
|||
Accretion of discount, net of commissions on assumed business
|
10
|
|
|
9
|
|
|
12
|
|
|||
Foreign exchange translation and remeasurement (2)
|
21
|
|
|
(35
|
)
|
|
64
|
|
|||
Cancellation of assumed reinsurance
|
—
|
|
|
(10
|
)
|
|
—
|
|
|||
Financial guaranty insurance premium receivable (3)
|
1,284
|
|
|
903
|
|
|
914
|
|
|||
Specialty insurance premium receivable
|
2
|
|
|
1
|
|
|
1
|
|
|||
December 31,
|
$
|
1,286
|
|
|
$
|
904
|
|
|
$
|
915
|
|
(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. The year ended December 31, 2018 included $330 million of gross written premiums assumed from SGI on June 1, 2018, when the Company closed an SGI Transaction. See Note 2, Business Combinations and Assumption of Insured Portfolio.
|
(2)
|
Includes foreign exchange gain (loss) on remeasurement recorded in the consolidated statements of operations of $21 million in 2019, $(33) million in 2018, $61 million in 2017. The remaining foreign exchange translation in 2018 and 2017 was recorded in OCI prior to the Combination, some of which had functional currencies other than the U.S. dollar
|
(3)
|
Excludes $7 million, $9 million and $10 million as of December 31, 2019, 2018 and 2017, respectively, related to consolidated FG VIEs.
|
|
As of December 31, 2019
|
||
|
(in millions)
|
||
2020 (January 1 - March 31)
|
$
|
35
|
|
2020 (April 1 - June 30)
|
47
|
|
|
2020 (July 1 - September 30)
|
30
|
|
|
2020 (October 1 - December 31)
|
18
|
|
|
2021
|
92
|
|
|
2022
|
94
|
|
|
2023
|
82
|
|
|
2024
|
82
|
|
|
2025-2029
|
343
|
|
|
2030-2034
|
240
|
|
|
2035-2039
|
151
|
|
|
After 2039
|
352
|
|
|
Total (1)
|
$
|
1,566
|
|
(1)
|
Excludes expected cash collections on consolidated FG VIEs of $9 million.
|
|
As of December 31, 2019
|
||
|
(in millions)
|
||
2020 (January 1 - March 31)
|
$
|
80
|
|
2020 (April 1 - June 30)
|
79
|
|
|
2020 (July 1 - September 30)
|
77
|
|
|
2020 (October 1 - December 31)
|
75
|
|
|
Subtotal 2020
|
311
|
|
|
2021
|
284
|
|
|
2022
|
263
|
|
|
2023
|
245
|
|
|
2024
|
227
|
|
|
2025-2029
|
909
|
|
|
2030-2034
|
634
|
|
|
2035-2039
|
368
|
|
|
After 2039
|
494
|
|
|
Net deferred premium revenue (1)
|
3,735
|
|
|
Future accretion
|
281
|
|
|
Total future net earned premiums
|
$
|
4,016
|
|
(1)
|
Excludes net earned premiums on consolidated FG VIEs of $47 million.
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||
|
(dollars in millions)
|
||||||
Premiums receivable, net of commission payable
|
$
|
1,284
|
|
|
$
|
903
|
|
Gross deferred premium revenue
|
1,637
|
|
|
1,313
|
|
||
Weighted-average risk-free rate used to discount premiums
|
1.7
|
%
|
|
2.3
|
%
|
||
Weighted-average period of premiums receivable (in years)
|
13.3
|
|
|
9.1
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Beginning of year
|
$
|
105
|
|
|
$
|
101
|
|
|
$
|
106
|
|
DAC adjustments from acquisitions (see Note 2)
|
—
|
|
|
—
|
|
|
(2
|
)
|
|||
Costs deferred during the period
|
23
|
|
|
19
|
|
|
16
|
|
|||
Costs amortized during the period
|
(17
|
)
|
|
(15
|
)
|
|
(19
|
)
|
|||
December 31,
|
$
|
111
|
|
|
$
|
105
|
|
|
$
|
101
|
|
•
|
a reduction in the corresponding loss and LAE reserve with a benefit to the income statement,
|
•
|
no entry recorded, if “total loss” is not in excess of deferred premium revenue, or
|
•
|
the recording of a salvage asset with a benefit to the income statement if the transaction is in a net recovery position at the reporting date.
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||
|
(in millions)
|
||||||
Public finance:
|
|
|
|
||||
U.S. public finance
|
$
|
328
|
|
|
$
|
612
|
|
Non-U.S. public finance
|
5
|
|
|
14
|
|
||
Public finance
|
333
|
|
|
626
|
|
||
Structured finance:
|
|
|
|
||||
U.S. RMBS (1)
|
(78
|
)
|
|
21
|
|
||
Other structured finance
|
40
|
|
|
30
|
|
||
Structured finance
|
(38
|
)
|
|
51
|
|
||
Subtotal
|
295
|
|
|
677
|
|
||
Other payable (recoverable)
|
—
|
|
|
(3
|
)
|
||
Total
|
$
|
295
|
|
|
$
|
674
|
|
(1)
|
Excludes net reserves of $33 million and $47 million as of December 31, 2019 and December 31, 2018, respectively, related to consolidated FG VIEs.
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||
|
(in millions)
|
||||||
Loss and LAE reserve
|
$
|
1,050
|
|
|
$
|
1,177
|
|
Reinsurance recoverable on unpaid losses (1)
|
(38
|
)
|
|
(34
|
)
|
||
Loss and LAE reserve, net
|
1,012
|
|
|
1,143
|
|
||
Salvage and subrogation recoverable
|
(747
|
)
|
|
(490
|
)
|
||
Salvage and subrogation reinsurance payable (2)
|
30
|
|
|
24
|
|
||
Other payable (recoverable) (1)
|
—
|
|
|
(3
|
)
|
||
Salvage and subrogation recoverable, net and other recoverable
|
(717
|
)
|
|
(469
|
)
|
||
Net reserves (salvage)
|
$
|
295
|
|
|
$
|
674
|
|
|
As of
December 31, 2019 |
||
|
(in millions)
|
||
Net expected loss to be paid - financial guaranty insurance
|
$
|
683
|
|
Contra-paid, net
|
51
|
|
|
Salvage and subrogation recoverable, net, and other recoverable
|
717
|
|
|
Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance
|
(1,012
|
)
|
|
Net expected loss to be expensed (present value) (1)
|
$
|
439
|
|
(1)
|
Excludes $33 million as of December 31, 2019 related to consolidated FG VIEs.
|
|
As of
December 31, 2019 |
||
|
(in millions)
|
||
2020 (January 1 - March 31)
|
$
|
9
|
|
2020 (April 1 - June 30)
|
9
|
|
|
2020 (July 1 - September 30)
|
9
|
|
|
2020 (October 1 - December 31)
|
9
|
|
|
Subtotal 2020
|
36
|
|
|
2021
|
35
|
|
|
2022
|
34
|
|
|
2023
|
32
|
|
|
2024
|
33
|
|
|
2025-2029
|
138
|
|
|
2030-2034
|
91
|
|
|
2035-2039
|
32
|
|
|
After 2039
|
8
|
|
|
Net expected loss to be expensed
|
439
|
|
|
Future accretion
|
105
|
|
|
Total expected future loss and LAE
|
$
|
544
|
|
|
Loss (Benefit)
|
||||||||||
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Public finance:
|
|
|
|
|
|
||||||
U.S. public finance
|
$
|
247
|
|
|
$
|
90
|
|
|
$
|
553
|
|
Non-U.S. public finance
|
(7
|
)
|
|
(7
|
)
|
|
(4
|
)
|
|||
Public finance
|
240
|
|
|
83
|
|
|
549
|
|
|||
Structured finance:
|
|
|
|
|
|
||||||
U.S. RMBS (1)
|
(154
|
)
|
|
(15
|
)
|
|
(113
|
)
|
|||
Other structured finance
|
7
|
|
|
(4
|
)
|
|
(48
|
)
|
|||
Structured finance
|
(147
|
)
|
|
(19
|
)
|
|
(161
|
)
|
|||
Loss and LAE
|
$
|
93
|
|
|
$
|
64
|
|
|
$
|
388
|
|
(1)
|
Excludes a benefit of $20 million, a benefit of $3 million and a loss of $7 million for the years ended December 31, 2019, 2018 and 2017, 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)
|
121
|
|
|
(6
|
)
|
|
24
|
|
|
—
|
|
|
131
|
|
|
(7
|
)
|
|
276
|
|
|
—
|
|
|
276
|
|
|||||||||
Remaining weighted-average contract period (in years)
|
8.0
|
|
|
5.2
|
|
|
17.0
|
|
|
—
|
|
|
9.7
|
|
|
8.3
|
|
|
9.7
|
|
|
—
|
|
|
9.7
|
|
|||||||||
Outstanding exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Par
|
$
|
2,654
|
|
|
$
|
(54
|
)
|
|
$
|
561
|
|
|
$
|
—
|
|
|
$
|
5,386
|
|
|
$
|
(170
|
)
|
|
$
|
8,377
|
|
|
$
|
—
|
|
|
$
|
8,377
|
|
Interest
|
1,149
|
|
|
(15
|
)
|
|
481
|
|
|
—
|
|
|
2,507
|
|
|
(73
|
)
|
|
4,049
|
|
|
—
|
|
|
4,049
|
|
|||||||||
Total (2)
|
$
|
3,803
|
|
|
$
|
(69
|
)
|
|
$
|
1,042
|
|
|
$
|
—
|
|
|
$
|
7,893
|
|
|
$
|
(243
|
)
|
|
$
|
12,426
|
|
|
$
|
—
|
|
|
$
|
12,426
|
|
Expected cash outflows (inflows)
|
$
|
135
|
|
|
$
|
(3
|
)
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
4,185
|
|
|
$
|
(132
|
)
|
|
$
|
4,269
|
|
|
$
|
(264
|
)
|
|
$
|
4,005
|
|
Potential recoveries (3)
|
(598
|
)
|
|
21
|
|
|
(10
|
)
|
|
—
|
|
|
(2,926
|
)
|
|
107
|
|
|
$
|
(3,406
|
)
|
|
189
|
|
|
(3,217
|
)
|
||||||||
Subtotal
|
(463
|
)
|
|
18
|
|
|
74
|
|
|
—
|
|
|
1,259
|
|
|
(25
|
)
|
|
863
|
|
|
(75
|
)
|
|
788
|
|
|||||||||
Discount
|
54
|
|
|
(1
|
)
|
|
(21
|
)
|
|
—
|
|
|
(151
|
)
|
|
(3
|
)
|
|
(122
|
)
|
|
17
|
|
|
(105
|
)
|
|||||||||
Present value of expected cash flows
|
$
|
(409
|
)
|
|
$
|
17
|
|
|
$
|
53
|
|
|
$
|
—
|
|
|
$
|
1,108
|
|
|
$
|
(28
|
)
|
|
$
|
741
|
|
|
$
|
(58
|
)
|
|
$
|
683
|
|
Deferred premium revenue
|
$
|
142
|
|
|
$
|
(1
|
)
|
|
$
|
34
|
|
|
$
|
—
|
|
|
$
|
480
|
|
|
$
|
(4
|
)
|
|
$
|
651
|
|
|
$
|
(48
|
)
|
|
$
|
603
|
|
Reserves (salvage)
|
$
|
(441
|
)
|
|
$
|
17
|
|
|
$
|
35
|
|
|
$
|
—
|
|
|
$
|
742
|
|
|
$
|
(25
|
)
|
|
$
|
328
|
|
|
$
|
(33
|
)
|
|
$
|
295
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Par
|
$
|
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 amounts related to FG VIEs.
|
(3)
|
Represents expected inflows for future payments by obligors pursuant to restructuring agreements, settlements or litigation judgments, excess spread on any underlying collateral and other estimated recoveries. Potential recoveries also include recoveries on certain investment grade credits, related mainly to exposures that were previously BIG and for which claims have been paid in the past.
|
8.
|
Reinsurance
|
•
|
if the Company fails to meet certain financial and regulatory criteria;
|
•
|
if the Company fails to maintain a specified minimum financial strength rating; or
|
•
|
upon certain changes of control of the Company.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Premiums Written:
|
|
|
|
|
|
||||||
Direct
|
$
|
663
|
|
|
$
|
288
|
|
|
$
|
297
|
|
Assumed
|
14
|
|
|
324
|
|
|
10
|
|
|||
Ceded (1)
|
10
|
|
|
14
|
|
|
18
|
|
|||
Net
|
$
|
687
|
|
|
$
|
626
|
|
|
$
|
325
|
|
Premiums Earned:
|
|
|
|
|
|
||||||
Direct
|
$
|
429
|
|
|
$
|
509
|
|
|
$
|
693
|
|
Assumed
|
54
|
|
|
51
|
|
|
27
|
|
|||
Ceded
|
(7
|
)
|
|
(12
|
)
|
|
(30
|
)
|
|||
Net
|
$
|
476
|
|
|
$
|
548
|
|
|
$
|
690
|
|
Loss and LAE:
|
|
|
|
|
|
||||||
Direct
|
$
|
101
|
|
|
$
|
68
|
|
|
$
|
404
|
|
Assumed
|
2
|
|
|
(1
|
)
|
|
11
|
|
|||
Ceded
|
(10
|
)
|
|
(3
|
)
|
|
(27
|
)
|
|||
Net
|
$
|
93
|
|
|
$
|
64
|
|
|
$
|
388
|
|
(1)
|
Positive ceded premiums written were due to commutations and changes in expected debt service schedules.
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Ceded premium payable, net of commissions
|
$
|
20
|
|
|
$
|
26
|
|
Ceded expected loss to be recovered (paid)
|
11
|
|
|
14
|
|
||
Financial guaranty ceded par outstanding (2)
|
1,349
|
|
|
2,389
|
|
||
Specialty ceded exposure (see Note 5)
|
303
|
|
|
239
|
|
(1)
|
The total collateral posted by all non-affiliated reinsurers required to post, or that had agreed to post, collateral as of December 31, 2019 and December 31, 2018 was approximately $68 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, $224 million and $236 million is rated BIG as of December 31, 2019 and December 31, 2018, respectively.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Increase in net unearned premium reserve
|
$
|
15
|
|
|
$
|
64
|
|
|
$
|
82
|
|
Increase in net par outstanding
|
1,069
|
|
|
1,457
|
|
|
5,107
|
|
|||
Commutation gains (losses)
|
1
|
|
|
(16
|
)
|
|
328
|
|
9.
|
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
|
$
|
4,340
|
|
|
$
|
—
|
|
|
$
|
4,233
|
|
|
$
|
107
|
|
U.S. government and agencies
|
147
|
|
|
—
|
|
|
147
|
|
|
—
|
|
||||
Corporate securities
|
2,221
|
|
|
—
|
|
|
2,180
|
|
|
41
|
|
||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|||||||
RMBS
|
775
|
|
|
—
|
|
|
467
|
|
|
308
|
|
||||
Commercial mortgage-backed securities (CMBS)
|
419
|
|
|
—
|
|
|
419
|
|
|
—
|
|
||||
Asset-backed securities
|
720
|
|
|
—
|
|
|
62
|
|
|
658
|
|
||||
Non-U.S. government securities
|
232
|
|
|
—
|
|
|
232
|
|
|
—
|
|
||||
Total fixed-maturity securities
|
8,854
|
|
|
—
|
|
|
7,740
|
|
|
1,114
|
|
||||
Short-term investments
|
1,268
|
|
|
1,061
|
|
|
207
|
|
|
—
|
|
||||
Other invested assets (1)
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
||||
FG VIEs’ assets, at fair value
|
442
|
|
|
—
|
|
|
—
|
|
|
442
|
|
||||
Assets of consolidated investment vehicles
|
558
|
|
|
—
|
|
|
494
|
|
|
64
|
|
||||
Other assets
|
135
|
|
|
32
|
|
|
45
|
|
|
58
|
|
||||
Total assets carried at fair value
|
$
|
11,263
|
|
|
$
|
1,093
|
|
|
$
|
8,486
|
|
|
$
|
1,684
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit derivative liabilities
|
$
|
191
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
191
|
|
FG VIEs’ liabilities with recourse, at fair value
|
367
|
|
|
—
|
|
|
—
|
|
|
367
|
|
||||
FG VIEs’ liabilities without recourse, at fair value
|
102
|
|
|
—
|
|
|
—
|
|
|
102
|
|
||||
Liabilities of consolidated investment vehicles
|
481
|
|
|
—
|
|
|
—
|
|
|
481
|
|
||||
Total liabilities carried at fair value
|
$
|
1,141
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,141
|
|
|
|
|
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
|
|
|
Fixed-Maturity Securities
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
|
Obligations
of State and Political Subdivisions |
|
Corporate Securities
|
|
RMBS
|
|
Asset-
Backed Securities |
|
FG VIEs’
Assets at Fair Value |
|
Assets of Consolidated Investment Vehicles
|
|
Other
(7) |
|
|||||||||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||||||||||
Fair value as of December 31, 2018
|
$
|
99
|
|
|
$
|
56
|
|
|
$
|
309
|
|
|
$
|
947
|
|
|
|
$
|
569
|
|
|
|
$
|
—
|
|
|
$
|
77
|
|
|
|
||||
Total pretax realized and unrealized gains/(losses) recorded in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net income (loss)
|
6
|
|
(1
|
)
|
(8
|
)
|
(1
|
)
|
17
|
|
(1
|
)
|
58
|
|
(1
|
)
|
68
|
|
(2
|
)
|
—
|
|
(4
|
)
|
(22
|
)
|
(3
|
)
|
|||||||
Other comprehensive income (loss)
|
(1
|
)
|
|
(7
|
)
|
|
25
|
|
|
(91
|
)
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
|||||||||||
Purchases
|
6
|
|
|
—
|
|
|
11
|
|
|
20
|
|
|
|
—
|
|
|
|
64
|
|
|
—
|
|
|
|
|||||||||||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
(29
|
)
|
|
(51
|
)
|
|
—
|
|
|
—
|
|
|
||||||||||||||
Settlements
|
(3
|
)
|
|
—
|
|
|
(54
|
)
|
|
(248
|
)
|
|
(139
|
)
|
|
—
|
|
|
—
|
|
|
|
|||||||||||||
VIE consolidations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
||||||||||||||
VIE deconsolidations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
||||||||||||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||||||||||||
Fair value as of
December 31, 2019 |
$
|
107
|
|
|
$
|
41
|
|
|
$
|
308
|
|
|
$
|
658
|
|
|
|
$
|
442
|
|
|
|
$
|
64
|
|
|
$
|
55
|
|
|
|
||||
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of
December 31, 2019 |
|
|
|
|
|
|
|
|
$
|
77
|
|
(2
|
)
|
$
|
—
|
|
(4
|
)
|
$
|
(22
|
)
|
(3
|
)
|
||||||||||||
Change in unrealized gains/(losses) included in OCI related to financial instruments held as of
December 31, 2019 |
$
|
—
|
|
|
$
|
(7
|
)
|
|
$
|
25
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
|
FG VIEs’ Liabilities, at Fair Value
|
|
|
|
||||||||||||||
|
Credit
Derivative Asset (Liability), net (5) |
|
With Recourse
|
|
Without Recourse
|
|
Liabilities of Consolidated Investment Vehicles
|
|
||||||||||||
|
(in millions)
|
|
||||||||||||||||||
Fair value as of December 31, 2018
|
$
|
(207
|
)
|
|
$
|
(517
|
)
|
|
$
|
(102
|
)
|
|
$
|
—
|
|
|
||||
Total pretax realized and unrealized gains/(losses) recorded in:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
(6
|
)
|
(6
|
)
|
(32
|
)
|
(2
|
)
|
(9
|
)
|
(2
|
)
|
(9
|
)
|
(4
|
)
|
||||
Other comprehensive income (loss)
|
—
|
|
|
|
5
|
|
|
|
—
|
|
|
—
|
|
|
||||||
Issuances
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
(472
|
)
|
|
||||||
Settlements
|
28
|
|
|
|
173
|
|
|
|
8
|
|
|
—
|
|
|
||||||
VIE consolidations
|
—
|
|
|
(5
|
)
|
|
(1
|
)
|
|
—
|
|
|
||||||||
VIE deconsolidations
|
—
|
|
|
9
|
|
|
2
|
|
|
—
|
|
|
||||||||
Fair value as of December 31, 2019
|
$
|
(185
|
)
|
|
$
|
(367
|
)
|
|
$
|
(102
|
)
|
|
$
|
(481
|
)
|
|
||||
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of December 31, 2019
|
$
|
3
|
|
(6
|
)
|
$
|
(31
|
)
|
(2
|
)
|
$
|
(17
|
)
|
(2
|
)
|
$
|
(9
|
)
|
(4
|
)
|
Change in unrealized gains/(losses) included in OCI related to financial instruments held as of December 31, 2019
|
|
|
$
|
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
(7) |
|
Credit
Derivative Asset (Liability), net (5) |
|
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)
|
3
|
|
(1
|
)
|
(14
|
)
|
(1
|
)
|
21
|
|
(1
|
)
|
57
|
|
(1
|
)
|
2
|
|
(2
|
)
|
14
|
|
(3
|
)
|
112
|
|
(6
|
)
|
(1
|
)
|
(2
|
)
|
4
|
|
(2
|
)
|
|||||||||
Other comprehensive income (loss)
|
18
|
|
|
3
|
|
|
(17
|
)
|
|
(40
|
)
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
|||||||||||||||
Purchases
|
4
|
|
|
—
|
|
|
35
|
|
|
189
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|||||||||||||||
Issuances
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(68
|
)
|
(8
|
)
|
—
|
|
|
|
—
|
|
|
||||||||||||||||
Settlements
|
(2
|
)
|
|
—
|
|
|
(64
|
)
|
|
(46
|
)
|
|
(116
|
)
|
|
|
(1
|
)
|
|
18
|
|
|
|
108
|
|
|
8
|
|
|
||||||||||||||||
FG VIE deconsolidations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
—
|
|
|
1
|
|
|
16
|
|
|
||||||||||||||||||
Fair value as of
December 31, 2018 |
$
|
99
|
|
|
$
|
56
|
|
|
$
|
309
|
|
|
$
|
947
|
|
|
$
|
569
|
|
|
|
$
|
77
|
|
|
$
|
(207
|
)
|
|
|
$
|
(517
|
)
|
|
$
|
(102
|
)
|
|
|||||||
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of December 31, 2018
|
|
|
|
|
|
|
|
|
$
|
13
|
|
(2
|
)
|
$
|
14
|
|
(3
|
)
|
$
|
122
|
|
(6
|
)
|
$
|
1
|
|
(2
|
)
|
$
|
3
|
|
(2
|
)
|
||||||||||||
Change in unrealized gains/(losses) included in OCI related to financial instruments held as of December 31, 2018
|
$
|
18
|
|
|
$
|
3
|
|
|
$
|
(14
|
)
|
|
$
|
(38
|
)
|
|
|
|
$
|
—
|
|
|
|
|
$
|
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)
|
Recorded in other income.
|
(5)
|
Represents the net position of credit derivatives. Credit derivative assets (recorded in other assets) and credit derivative liabilities (presented as a separate line item) are shown as either assets or liabilities in the consolidated balance sheet based on net exposure by counterparty.
|
(6)
|
Reported in net change in fair value of credit derivatives.
|
(7)
|
Includes CCS and other invested assets.
|
(8)
|
Relates to SGI Transaction. See Note 2, Business Combinations and Assumption of Insured Portfolio.
|
Financial Instrument Description
|
|
Fair Value at
December 31, 2019 (in millions) |
|
Significant Unobservable Inputs
|
|
Range
|
|
Weighted Average as a Percentage of Current Par Outstanding
|
|||||
Assets (2):
|
|
|
|
|
|
|
|
|
|
|
|
||
Fixed-maturity securities (1):
|
|
|
|
|
|
|
|
|
|
|
|
||
Obligations of state and political subdivisions
|
|
$
|
107
|
|
|
Yield
|
|
4.5
|
%
|
-
|
31.1%
|
|
8.5%
|
|
|
|
|
|
|
|
|
|
|
|
|||
Corporate securities
|
|
41
|
|
|
Yield
|
|
35.9%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
RMBS
|
|
308
|
|
|
CPR
|
|
2.0
|
%
|
-
|
15.0%
|
|
6.3%
|
|
|
|
CDR
|
|
1.5
|
%
|
-
|
7.0%
|
|
4.9%
|
||||
|
|
Loss severity
|
|
40.0
|
%
|
-
|
125.0%
|
|
78.8%
|
||||
|
|
Yield
|
|
3.7
|
%
|
-
|
6.1%
|
|
4.8%
|
||||
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|||
Life insurance transactions
|
|
350
|
|
|
Yield
|
|
5.8%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
CLOs/Trust preferred securities (TruPS)
|
|
256
|
|
|
Yield
|
|
2.5
|
%
|
-
|
4.1%
|
|
2.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Others
|
|
52
|
|
|
Yield
|
|
2.3
|
%
|
-
|
9.4%
|
|
9.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
FG VIEs’ assets, at fair value (1)
|
|
442
|
|
|
CPR
|
|
0.1
|
%
|
-
|
18.6%
|
|
8.6%
|
|
|
|
CDR
|
|
1.2
|
%
|
-
|
24.7%
|
|
4.9%
|
||||
|
|
Loss severity
|
|
40.0
|
%
|
-
|
100.0%
|
|
76.1%
|
||||
|
|
Yield
|
|
3.0
|
%
|
-
|
8.4%
|
|
5.2%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
Assets of consolidated investment vehicles (3)
|
|
64
|
|
|
Discount rate
|
|
16.0
|
%
|
-
|
28.0%
|
|
21%
|
|
|
|
|
Market multiple - enterprise/revenue value
|
|
0.5x
|
|
-
|
6.7x
|
|
|
|||
|
|
|
|
Yield
|
|
12.5%
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||
Other assets (1)
|
|
52
|
|
|
Implied Yield
|
|
5.1
|
%
|
-
|
5.8%
|
|
5.5%
|
|
|
|
Term (years)
|
|
10 years
|
|
|
Financial Instrument Description(1)
|
|
Fair Value at
December 31, 2019 (in millions) |
|
Significant Unobservable Inputs
|
|
Range
|
|
Weighted Average as a Percentage of Current Par Outstanding
|
|||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|||
Credit derivative liabilities, net
|
|
$
|
(185
|
)
|
|
Year 1 loss estimates
|
|
0.0
|
%
|
-
|
46.0%
|
|
1.3%
|
|
|
Hedge cost (in basis points (bps))
|
|
5.0
|
|
-
|
31.0
|
|
11.0
|
||||
|
|
Bank profit (in bps)
|
|
51.0
|
|
-
|
212.0
|
|
76.0
|
||||
|
|
Internal floor (in bps)
|
|
30.0
|
|
|
|||||||
|
|
Internal credit rating
|
|
AAA
|
|
-
|
CCC
|
|
AA-
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
FG VIEs’ liabilities, at fair value
|
|
(469
|
)
|
|
CPR
|
|
0.1
|
%
|
-
|
18.6%
|
|
8.6%
|
|
|
|
CDR
|
|
1.2
|
%
|
-
|
24.7%
|
|
4.9%
|
||||
|
|
Loss severity
|
|
40.0
|
%
|
-
|
100.0%
|
|
76.1%
|
||||
|
|
Yield
|
|
2.7
|
%
|
-
|
8.4%
|
|
4.2%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
Liabilities of consolidated investment vehicles:
|
|
|
|
|
|
|
|
|
|
|
|||
CLO obligations
|
|
(481
|
)
|
|
Yield
|
|
10.0%
|
|
|
(2)
|
Excludes several investments recorded in other invested assets with fair value of $6 million.
|
(3)
|
The primary inputs to the valuation are recent market transaction prices, supported by market multiples and yields/discount rates.
|
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
December 31, 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)
|
97
|
|
|
97
|
|
|
130
|
|
|
130
|
|
||||
Financial guaranty insurance contracts (2)
|
(2,714
|
)
|
|
(4,013
|
)
|
|
(3,240
|
)
|
|
(5,932
|
)
|
||||
Long-term debt
|
(1,235
|
)
|
|
(1,573
|
)
|
|
(1,233
|
)
|
|
(1,496
|
)
|
||||
Other liabilities (1)
|
(14
|
)
|
|
(14
|
)
|
|
(12
|
)
|
|
(12
|
)
|
(1)
|
The Company's other assets and other liabilities consist predominantly of: accrued interest, management fees receivables, receivables for securities sold and payables for securities purchased, for which the carrying value approximates fair value, and a promissory note receivable.
|
(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.
|
10.
|
Investments and Cash
|
•
|
a decline in the market value of a security by 20% or more below amortized cost for a continuous period of at least six months;
|
•
|
a decline in the market value of a security for a continuous period of 12 months;
|
•
|
recent credit downgrades of the applicable security or the issuer by rating agencies;
|
•
|
the financial condition of the applicable issuer;
|
•
|
whether loss of investment principal is anticipated;
|
•
|
the impact of foreign exchange rates; and
|
•
|
whether scheduled interest payments are past due.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Income from securities managed by third parties
|
$
|
273
|
|
|
$
|
297
|
|
|
$
|
298
|
|
Income from internally managed securities (1)
|
114
|
|
|
107
|
|
|
128
|
|
|||
Gross investment income
|
387
|
|
|
404
|
|
|
426
|
|
|||
Investment expenses
|
(9
|
)
|
|
(9
|
)
|
|
(9
|
)
|
|||
Net investment income
|
$
|
378
|
|
|
$
|
395
|
|
|
$
|
417
|
|
(1)
|
Year ended December 31, 2017 included accretion on Zohar II Notes used as consideration for the MBIA UK Acquisition. See Note 2, Business Combinations and Assumption of Insured Portfolio.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Gross realized gains on available-for-sale securities (1)
|
$
|
63
|
|
|
$
|
20
|
|
|
$
|
95
|
|
Gross realized losses on available-for-sale securities
|
(5
|
)
|
|
(12
|
)
|
|
(12
|
)
|
|||
Net realized gains (losses) on other invested assets
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
|||
OTTI:
|
|
|
|
|
|
||||||
Total OTTI
|
(29
|
)
|
|
(35
|
)
|
|
(33
|
)
|
|||
Less: portion of OTTI recognized in OCI
|
6
|
|
|
4
|
|
|
10
|
|
|||
Net OTTI recognized in net income (loss) (2)
|
(35
|
)
|
|
(39
|
)
|
|
(43
|
)
|
|||
Net realized investment gains (losses) (3)
|
$
|
22
|
|
|
$
|
(32
|
)
|
|
$
|
40
|
|
(1)
|
Year ended December 31, 2017 included a gain on Zohar II Notes used as consideration for the MBIA UK Acquisition. See Note 2, Business Combinations and Assumption of Insured Portfolio.
|
(2)
|
Net OTTI recognized in net income for 2019, 2018 and 2017 was attributable to securities purchased for loss mitigation and other risk management purposes and change in foreign exchange rates.
|
(3)
|
Includes foreign currency gains (losses) of $(15) million, $1 million and $18 million for 2019, 2018 and 2017, respectively.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Balance, beginning of period
|
$
|
185
|
|
|
$
|
162
|
|
|
$
|
134
|
|
Additions for credit losses on securities for which an OTTI was not previously recognized
|
—
|
|
|
—
|
|
|
13
|
|
|||
Reductions for securities sold and other settlements
|
(15
|
)
|
|
—
|
|
|
(4
|
)
|
|||
Additions for credit losses on securities for which an OTTI was previously recognized
|
16
|
|
|
23
|
|
|
19
|
|
|||
Balance, end of period
|
$
|
186
|
|
|
$
|
185
|
|
|
$
|
162
|
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Fixed-maturity securities (1):
|
|
|
|
||||
Externally managed
|
$
|
7,978
|
|
|
$
|
8,909
|
|
Internally managed
|
876
|
|
|
1,180
|
|
||
Short-term investments
|
1,268
|
|
|
729
|
|
||
Other invested assets-internally managed
|
|
|
|
||||
Equity method investments
|
111
|
|
|
47
|
|
||
Other
|
7
|
|
|
8
|
|
||
Total
|
$
|
10,240
|
|
|
$
|
10,873
|
|
(1)
|
8.6% and 10.8% of fixed-maturity securities are rated BIG as of December 31, 2019 and December 31, 2018, respectively.
|
Security Type
|
|
Percent
of
Total(1)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair
Value
|
|
|
Weighted
Average
Credit
Rating
(3)
|
||||||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Obligations of state and political subdivisions
|
|
42
|
%
|
|
$
|
4,036
|
|
|
$
|
305
|
|
|
$
|
(1
|
)
|
|
$
|
4,340
|
|
|
$
|
40
|
|
|
AA-
|
U.S. government and agencies
|
|
1
|
|
|
137
|
|
|
10
|
|
|
—
|
|
|
147
|
|
|
—
|
|
|
AA+
|
|||||
Corporate securities
|
|
23
|
|
|
2,137
|
|
|
103
|
|
|
(19
|
)
|
|
2,221
|
|
|
(8
|
)
|
|
A
|
|||||
Mortgage-backed securities(4):
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
RMBS
|
|
8
|
|
|
745
|
|
|
37
|
|
|
(7
|
)
|
|
775
|
|
|
8
|
|
|
A-
|
|||||
CMBS
|
|
4
|
|
|
402
|
|
|
17
|
|
|
—
|
|
|
419
|
|
|
—
|
|
|
AAA
|
|||||
Asset-backed securities
|
|
7
|
|
|
684
|
|
|
38
|
|
|
(2
|
)
|
|
720
|
|
|
16
|
|
|
BB+
|
|||||
Non-U.S. government securities
|
|
2
|
|
|
230
|
|
|
7
|
|
|
(5
|
)
|
|
232
|
|
|
3
|
|
|
AA
|
|||||
Total fixed-maturity securities
|
|
87
|
|
|
8,371
|
|
|
517
|
|
|
(34
|
)
|
|
8,854
|
|
|
59
|
|
|
A+
|
|||||
Short-term investments
|
|
13
|
|
|
1,268
|
|
|
—
|
|
|
—
|
|
|
1,268
|
|
|
—
|
|
|
AAA
|
|||||
Total investment portfolio
|
|
100
|
%
|
|
$
|
9,639
|
|
|
$
|
517
|
|
|
$
|
(34
|
)
|
|
$
|
10,122
|
|
|
$
|
59
|
|
|
AA-
|
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 42% of mortgage backed securities as of December 31, 2019 and 48% as of December 31, 2018, based on fair value.
|
State
|
|
State
General
Obligation
|
|
Local
General
Obligation
|
|
Revenue Bonds
|
|
Total Fair
Value
|
|
Amortized
Cost
|
|
Average
Credit
Rating
|
||||||||||
|
|
(in millions)
|
||||||||||||||||||||
California
|
|
68
|
|
|
70
|
|
|
380
|
|
|
$
|
518
|
|
|
457
|
|
|
A
|
||||
New York
|
|
$
|
6
|
|
|
$
|
46
|
|
|
$
|
408
|
|
|
$
|
460
|
|
|
$
|
431
|
|
|
AA
|
Texas
|
|
23
|
|
|
122
|
|
|
287
|
|
|
432
|
|
|
404
|
|
|
AA
|
|||||
Washington
|
|
52
|
|
|
69
|
|
|
181
|
|
|
302
|
|
|
284
|
|
|
AA
|
|||||
Florida
|
|
8
|
|
|
3
|
|
|
233
|
|
|
244
|
|
|
229
|
|
|
A+
|
|||||
Illinois
|
|
18
|
|
|
53
|
|
|
125
|
|
|
196
|
|
|
182
|
|
|
A
|
|||||
Massachusetts
|
|
71
|
|
|
—
|
|
|
115
|
|
|
186
|
|
|
171
|
|
|
AA
|
|||||
Pennsylvania
|
|
38
|
|
|
4
|
|
|
95
|
|
|
137
|
|
|
128
|
|
|
A+
|
|||||
Georgia
|
|
11
|
|
|
10
|
|
|
92
|
|
|
113
|
|
|
104
|
|
|
AA-
|
|||||
District of Columbia
|
|
30
|
|
|
—
|
|
|
69
|
|
|
99
|
|
|
94
|
|
|
AA
|
|||||
All others
|
|
71
|
|
|
172
|
|
|
915
|
|
|
1,158
|
|
|
1,080
|
|
|
AA-
|
|||||
Total
|
|
$
|
396
|
|
|
$
|
549
|
|
|
$
|
2,900
|
|
|
$
|
3,845
|
|
|
$
|
3,564
|
|
|
AA-
|
State
|
|
State
General
Obligation
|
|
Local
General
Obligation
|
|
Revenue Bonds
|
|
Total Fair
Value
|
|
Amortized
Cost
|
|
Average
Credit
Rating
|
||||||||||
|
|
(in millions)
|
||||||||||||||||||||
New York
|
|
$
|
5
|
|
|
$
|
49
|
|
|
$
|
492
|
|
|
$
|
546
|
|
|
$
|
536
|
|
|
AA
|
Texas
|
|
19
|
|
|
170
|
|
|
344
|
|
|
533
|
|
|
520
|
|
|
AA
|
|||||
California
|
|
63
|
|
|
77
|
|
|
378
|
|
|
518
|
|
|
482
|
|
|
A
|
|||||
Washington
|
|
80
|
|
|
81
|
|
|
193
|
|
|
354
|
|
|
349
|
|
|
AA
|
|||||
Florida
|
|
8
|
|
|
13
|
|
|
220
|
|
|
241
|
|
|
236
|
|
|
A+
|
|||||
Massachusetts
|
|
75
|
|
|
—
|
|
|
144
|
|
|
219
|
|
|
211
|
|
|
AA
|
|||||
Illinois
|
|
16
|
|
|
55
|
|
|
127
|
|
|
198
|
|
|
192
|
|
|
A
|
|||||
Pennsylvania
|
|
35
|
|
|
5
|
|
|
98
|
|
|
138
|
|
|
136
|
|
|
A+
|
|||||
District of Columbia
|
|
41
|
|
|
—
|
|
|
92
|
|
|
133
|
|
|
131
|
|
|
AA
|
|||||
Georgia
|
|
10
|
|
|
10
|
|
|
94
|
|
|
114
|
|
|
110
|
|
|
AA-
|
|||||
All others
|
|
96
|
|
|
210
|
|
|
1,103
|
|
|
1,409
|
|
|
1,369
|
|
|
AA-
|
|||||
Total
|
|
$
|
448
|
|
|
$
|
670
|
|
|
$
|
3,285
|
|
|
$
|
4,403
|
|
|
$
|
4,272
|
|
|
AA-
|
(1)
|
Excludes $495 million and $508 million as of December 31, 2019 and 2018, respectively, of pre-refunded bonds, at fair value. The credit ratings are based on the underlying ratings and do not include any benefit from bond insurance.
|
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
||||||||||||
Type
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
||||||||
|
|
(in millions)
|
||||||||||||||
Transportation
|
|
$
|
916
|
|
|
$
|
835
|
|
|
$
|
967
|
|
|
$
|
925
|
|
Higher education
|
|
488
|
|
|
456
|
|
|
557
|
|
|
543
|
|
||||
Water and sewer
|
|
453
|
|
|
422
|
|
|
580
|
|
|
566
|
|
||||
Tax backed
|
|
426
|
|
|
397
|
|
|
471
|
|
|
458
|
|
||||
Healthcare
|
|
236
|
|
|
220
|
|
|
278
|
|
|
270
|
|
||||
Municipal utilities
|
|
234
|
|
|
212
|
|
|
287
|
|
|
267
|
|
||||
All others
|
|
147
|
|
|
137
|
|
|
145
|
|
|
143
|
|
||||
Total
|
|
$
|
2,900
|
|
|
$
|
2,679
|
|
|
$
|
3,285
|
|
|
$
|
3,172
|
|
|
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
|
$
|
45
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
45
|
|
|
$
|
(1
|
)
|
U.S. government and agencies
|
5
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
10
|
|
|
—
|
|
||||||
Corporate securities
|
61
|
|
|
—
|
|
|
119
|
|
|
(19
|
)
|
|
180
|
|
|
(19
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
RMBS
|
10
|
|
|
—
|
|
|
75
|
|
|
(7
|
)
|
|
85
|
|
|
(7
|
)
|
||||||
CMBS
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
|
—
|
|
||||||
Asset-backed securities
|
24
|
|
|
—
|
|
|
183
|
|
|
(2
|
)
|
|
207
|
|
|
(2
|
)
|
||||||
Non-U.S. government securities
|
—
|
|
|
—
|
|
|
56
|
|
|
(5
|
)
|
|
56
|
|
|
(5
|
)
|
||||||
Total
|
$
|
145
|
|
|
$
|
(1
|
)
|
|
$
|
442
|
|
|
$
|
(33
|
)
|
|
$
|
587
|
|
|
$
|
(34
|
)
|
Number of securities
|
|
|
|
57
|
|
|
|
|
|
119
|
|
|
|
|
|
176
|
|
||||||
Number of securities with OTTI
|
|
|
|
1
|
|
|
|
|
|
7
|
|
|
|
|
|
8
|
|
|
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
|
$
|
326
|
|
|
$
|
334
|
|
Due after one year through five years
|
1,538
|
|
|
1,591
|
|
||
Due after five years through 10 years
|
2,022
|
|
|
2,128
|
|
||
Due after 10 years
|
3,338
|
|
|
3,607
|
|
||
Mortgage-backed securities:
|
|
|
|
|
|
||
RMBS
|
745
|
|
|
775
|
|
||
CMBS
|
402
|
|
|
419
|
|
||
Total
|
$
|
8,371
|
|
|
$
|
8,854
|
|
11.
|
Contracts Accounted for as Credit Derivatives
|
|
|
As of December 31, 2019
|
|
As of December 31, 2018 (2)
|
||||||||||||
|
|
Net Par
Outstanding
|
|
Net Fair Value Asset (Liability)
|
|
Net Par
Outstanding
|
|
Net Fair Value Asset (Liability)
|
||||||||
|
|
(in millions)
|
||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
U.S public finance
|
|
$
|
1,942
|
|
|
$
|
(83
|
)
|
|
$
|
1,783
|
|
|
$
|
(65
|
)
|
Non-U.S public finance
|
|
2,676
|
|
|
(39
|
)
|
|
2,807
|
|
|
(51
|
)
|
||||
U.S structured finance
|
|
1,206
|
|
|
(58
|
)
|
|
1,465
|
|
|
(85
|
)
|
||||
Non-U.S structured finance
|
|
132
|
|
|
(5
|
)
|
|
127
|
|
|
(6
|
)
|
||||
Total
|
|
$
|
5,956
|
|
|
$
|
(185
|
)
|
|
$
|
6,182
|
|
|
$
|
(207
|
)
|
(2)
|
Prior year presentation has been conformed to the current year's presentation.
|
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
||||||||||
Ratings
|
|
Net Par
Outstanding
|
|
% of Total
|
|
Net Par
Outstanding
|
|
% of Total
|
||||||
|
|
(dollars in millions)
|
||||||||||||
AAA
|
|
$
|
1,730
|
|
|
29.0
|
%
|
|
$
|
1,813
|
|
|
29.4
|
%
|
AA
|
|
1,695
|
|
|
28.5
|
|
|
1,690
|
|
|
27.3
|
|
||
A
|
|
1,110
|
|
|
18.6
|
|
|
1,171
|
|
|
18.9
|
|
||
BBB
|
|
1,292
|
|
|
21.7
|
|
|
1,351
|
|
|
21.9
|
|
||
BIG (1)
|
|
129
|
|
|
2.2
|
|
|
157
|
|
|
2.5
|
|
||
Credit derivative net par outstanding
|
|
$
|
5,956
|
|
|
100.0
|
%
|
|
$
|
6,182
|
|
|
100.0
|
%
|
(1)
|
All BIG credit derivatives are U.S. RMBS transactions.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Realized gains on credit derivatives
|
$
|
8
|
|
|
$
|
9
|
|
|
$
|
17
|
|
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements
|
(35
|
)
|
|
(25
|
)
|
|
(27
|
)
|
|||
Realized gains (losses) and other settlements
|
(27
|
)
|
|
(16
|
)
|
|
(10
|
)
|
|||
Net unrealized gains (losses)
|
21
|
|
|
128
|
|
|
121
|
|
|||
Net change in fair value of credit derivatives
|
$
|
(6
|
)
|
|
$
|
112
|
|
|
$
|
111
|
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
|
As of
December 31, 2017 |
|||
Five-year CDS spread
|
41
|
|
|
110
|
|
|
163
|
|
One-year CDS spread
|
9
|
|
|
22
|
|
|
70
|
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||
|
(in millions)
|
||||||
Fair value of credit derivatives before effect of AGC credit spread
|
$
|
(261
|
)
|
|
$
|
(407
|
)
|
Plus: Effect of AGC credit spread
|
76
|
|
|
200
|
|
||
Net fair value of credit derivatives
|
$
|
(185
|
)
|
|
$
|
(207
|
)
|
12.
|
Asset Management Fees
|
•
|
Fees range from 0.70% to 2.00% per annum calculated on either the beginning of the month or quarter, or month-end NAV of the respective funds.
|
•
|
For the Company's management or servicing of the Assured Investment Management CLOs the Company receives, generally 0.35% to 0.50% (combined senior investment management fee and subordinated investment management fee) per annum based on NAV, and 20% per annum of the remaining interest proceeds and principal proceeds after the incentive management fee threshold has been satisfied. The portion of these fees that pertains to the investment by Assured Investment Management funds is typically rebated to the Assured Investment Management funds.
|
•
|
Range from 10% to 20% of the net profits in excess of the high-water mark for the respective fund, or
|
•
|
Range from 18% to 30% of the total cash received by investors in excess of certain benchmarks, or
|
•
|
30% of the net profits in excess of the high-water mark and a credit for management fees
|
|
Year Ended
December 31, 2019 |
||
|
(in millions)
|
||
Management fees:
|
|
||
CLOs (1)
|
$
|
3
|
|
Opportunity funds
|
2
|
|
|
Wind-down funds
|
13
|
|
|
Total management fees
|
18
|
|
|
Performance fees
|
4
|
|
|
Total asset management fees
|
$
|
22
|
|
(1)
|
Gross management fees from CLOs, before rebates were $11 million.
|
13.
|
Goodwill and Other Intangible Assets
|
|
Weighted Average Amortization Period as of
|
|
As of December 31
|
||||||
|
December 31, 2019
|
|
2019
|
|
2018
|
||||
|
|
|
(in millions)
|
||||||
Goodwill (1)
|
|
|
$
|
117
|
|
|
$
|
—
|
|
Finite-lived intangible assets:
|
|
|
|
|
|
||||
CLO contracts
|
8.8 years
|
|
42
|
|
|
—
|
|
||
Investment management contracts
|
4.5 years
|
|
24
|
|
|
—
|
|
||
CLO distribution network
|
4.8 years
|
|
9
|
|
|
—
|
|
||
Trade name
|
9.8 years
|
|
3
|
|
|
—
|
|
||
Favorable sublease
|
4.2 years
|
|
1
|
|
|
—
|
|
||
Lease-related intangibles
|
7.0 years
|
|
3
|
|
|
3
|
|
||
Finite-lived intangible assets, gross
|
7.0 years
|
|
82
|
|
|
3
|
|
||
Accumulated amortization
|
|
|
(5
|
)
|
|
(1
|
)
|
||
Finite-lived intangible assets, net
|
|
|
77
|
|
|
2
|
|
||
Licenses (indefinite-lived)
|
|
|
22
|
|
|
22
|
|
||
Total goodwill and other intangible assets
|
|
|
$
|
216
|
|
|
$
|
24
|
|
(1)
|
Includes goodwill allocated to the European subsidiaries of BlueMountain. The balance changes due to foreign currency translation. The amount of goodwill deductible for tax purposes was approximately $115 million as of December 31, 2019.
|
|
|
As of December 31, 2019
|
||
Year
|
|
(in millions)
|
||
2020
|
$
|
13
|
|
|
2021
|
12
|
|
||
2022
|
11
|
|
||
2023
|
11
|
|
||
2024
|
10
|
|
||
Thereafter
|
20
|
|
||
Total
|
$
|
77
|
|
14.
|
Variable Interest Entities
|
|
Year Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
2017
|
|||
|
|
|||||||
Beginning of year
|
31
|
|
|
32
|
|
|
32
|
|
Consolidated
|
1
|
|
|
—
|
|
|
2
|
|
Deconsolidated
|
(3
|
)
|
|
(1
|
)
|
|
(2
|
)
|
Matured
|
(2
|
)
|
|
—
|
|
|
—
|
|
December 31
|
27
|
|
|
31
|
|
|
32
|
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||
|
(in millions)
|
||||||
Excess of unpaid principal over fair value of:
|
|
|
|
||||
FG VIEs' assets
|
$
|
279
|
|
|
$
|
350
|
|
FG VIEs' liabilities with recourse
|
21
|
|
|
48
|
|
||
FG VIEs' liabilities without recourse
|
19
|
|
|
28
|
|
||
Unpaid principal balance for FG VIEs’ assets that were 90 days or more past due
|
52
|
|
|
71
|
|
||
Unpaid principal for FG VIEs’ liabilities with recourse (1)
|
388
|
|
|
565
|
|
|
As of December 31, 2019
|
|
As of December 31, 2018
|
||||||||||||
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
||||||||
|
(in millions)
|
||||||||||||||
With recourse:
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. RMBS first lien
|
$
|
270
|
|
|
$
|
297
|
|
|
$
|
299
|
|
|
$
|
326
|
|
U.S. RMBS second lien
|
70
|
|
|
70
|
|
|
115
|
|
|
137
|
|
||||
Manufactured housing
|
—
|
|
|
—
|
|
|
53
|
|
|
54
|
|
||||
Total with recourse
|
340
|
|
|
367
|
|
|
467
|
|
|
517
|
|
||||
Without recourse
|
102
|
|
|
102
|
|
|
102
|
|
|
102
|
|
||||
Total
|
$
|
442
|
|
|
$
|
469
|
|
|
$
|
569
|
|
|
$
|
619
|
|
|
As of
December 31, 2019 |
||
|
(in millions)
|
||
Assets:
|
|
||
Cash and restricted cash (1)
|
$
|
14
|
|
Corporate loans of CFE, at fair value
|
494
|
|
|
Corporate loans, at fair value
|
47
|
|
|
Other assets (2)
|
17
|
|
|
Total assets
|
$
|
572
|
|
Liabilities:
|
|
||
CLO obligations of CFE, at fair value (3)
|
$
|
481
|
|
Other liabilities
|
1
|
|
|
Total liabilities
|
$
|
482
|
|
(1)
|
Cash held by consolidated investment vehicles are not available to fund the general liquidity needs of the Company.
|
(2)
|
Includes investment in affiliates of $9 million.
|
(3)
|
The weighted average maturity and weighted average interest rate of CLO obligations were 12.8 years and 3.8%, respectively. CLO obligations will mature in 2032.
|
|
Year Ended December 31, 2019
|
||
|
(in millions)
|
||
Beginning balance
|
$
|
—
|
|
Contributions to investment vehicles
|
12
|
|
|
Distributions from investment vehicles
|
(4
|
)
|
|
Net loss
|
(1
|
)
|
|
December 31,
|
$
|
7
|
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||
|
(in millions)
|
||||||
Assets
|
|
|
|
||||
Investment portfolio:
|
|
|
|
||||
Fixed maturity securities and short-term investments
|
$
|
(39
|
)
|
|
$
|
(38
|
)
|
Equity method investments (1)
|
(77
|
)
|
|
—
|
|
||
Total investments
|
(116
|
)
|
|
(38
|
)
|
||
Premiums receivable, net of commissions payable
|
(7
|
)
|
|
(9
|
)
|
||
Salvage and subrogation recoverable
|
(8
|
)
|
|
(1
|
)
|
||
FG VIEs’ assets, at fair value
|
442
|
|
|
569
|
|
||
Assets of consolidated investment vehicles (1)
|
572
|
|
|
—
|
|
||
Total assets
|
$
|
883
|
|
|
$
|
521
|
|
Liabilities and shareholders’ equity
|
|
|
|
||||
Unearned premium reserve
|
$
|
(39
|
)
|
|
$
|
(51
|
)
|
Loss and LAE reserve
|
(41
|
)
|
|
(48
|
)
|
||
FG VIEs’ liabilities with recourse, at fair value
|
367
|
|
|
517
|
|
||
FG VIEs’ liabilities without recourse, at fair value
|
102
|
|
|
102
|
|
||
Liabilities of consolidated investment vehicles (1)
|
482
|
|
|
—
|
|
||
Total liabilities
|
871
|
|
|
520
|
|
||
|
|
|
|
||||
Redeemable noncontrolling interests in consolidated investment vehicles (1)
|
7
|
|
|
—
|
|
||
|
|
|
|
||||
Retained earnings
|
34
|
|
|
34
|
|
||
Accumulated other comprehensive income
|
(35
|
)
|
|
(33
|
)
|
||
Total shareholders’ equity attributable to Assured Guaranty Ltd.
|
(1
|
)
|
|
1
|
|
||
Nonredeemable noncontrolling interests (1)
|
6
|
|
|
—
|
|
||
Total shareholders’ equity
|
5
|
|
|
1
|
|
||
Total liabilities, redeemable noncontrolling interests and shareholders’ equity
|
$
|
883
|
|
|
$
|
521
|
|
(1)
|
These line items represent the components of the effect of consolidating Assured Investment Management investment vehicles.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Net earned premiums
|
$
|
(18
|
)
|
|
$
|
(12
|
)
|
|
$
|
(15
|
)
|
Net investment income
|
(4
|
)
|
|
(4
|
)
|
|
(5
|
)
|
|||
Fair value gains (losses) on FG VIEs (1)
|
42
|
|
|
14
|
|
|
30
|
|
|||
Other income (loss) (2)
|
(3
|
)
|
|
—
|
|
|
—
|
|
|||
Loss and LAE
|
(20
|
)
|
|
(3
|
)
|
|
7
|
|
|||
Equity in net earnings of investees
|
2
|
|
|
—
|
|
|
—
|
|
|||
Effect on income before tax
|
(1
|
)
|
|
(5
|
)
|
|
17
|
|
|||
Less: Tax provision (benefit)
|
—
|
|
|
(1
|
)
|
|
6
|
|
|||
Effect on net income (loss)
|
(1
|
)
|
|
(4
|
)
|
|
11
|
|
|||
Effect on redeemable noncontrolling interests
|
(1
|
)
|
|
—
|
|
|
—
|
|
|||
Effect on net income (loss) attributable to AGL
|
$
|
—
|
|
|
$
|
(4
|
)
|
|
$
|
11
|
|
(1)
|
See consolidated statements of comprehensive income and Note 22, Other Comprehensive Income, 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.
|
(2)
|
Represents change in fair value of consolidated investment vehicles.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Effect on cash flows from operating activities
|
$
|
(254
|
)
|
|
$
|
11
|
|
|
$
|
19
|
|
Effect on cash flows from investing activities
|
259
|
|
|
105
|
|
|
138
|
|
|||
Effect on cash flows from financing activities
|
9
|
|
|
(116
|
)
|
|
(157
|
)
|
|||
Total effect on cash flows
|
$
|
14
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
As of December 31, 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
|
|
||||
AGUS long-term debt
|
850
|
|
|
844
|
|
|
850
|
|
|
844
|
|
||||
Intercompany loans payable
|
290
|
|
|
290
|
|
|
50
|
|
|
50
|
|
||||
Total AGUS
|
1,140
|
|
|
1,134
|
|
|
900
|
|
|
894
|
|
||||
AGMH (3):
|
|
|
|
|
|
|
|
|
|
|
|
||||
67/8% QUIBS (1)
|
100
|
|
|
70
|
|
|
100
|
|
|
70
|
|
||||
6.25% Notes (1)
|
230
|
|
|
144
|
|
|
230
|
|
|
143
|
|
||||
5.6% Notes (1)
|
100
|
|
|
58
|
|
|
100
|
|
|
57
|
|
||||
Junior Subordinated Debentures (2)
|
300
|
|
|
204
|
|
|
300
|
|
|
198
|
|
||||
Total AGMH
|
730
|
|
|
476
|
|
|
730
|
|
|
468
|
|
||||
AGM (3):
|
|
|
|
|
|
|
|
|
|
|
|
||||
AGM Notes Payable
|
4
|
|
|
4
|
|
|
5
|
|
|
5
|
|
||||
Total AGM
|
4
|
|
|
4
|
|
|
5
|
|
|
5
|
|
||||
AGMH's debt purchased by AGUS
|
(131
|
)
|
|
(89
|
)
|
|
(128
|
)
|
|
(84
|
)
|
||||
Elimination of intercompany loans payable
|
(290
|
)
|
|
(290
|
)
|
|
(50
|
)
|
|
(50
|
)
|
||||
Total
|
$
|
1,453
|
|
|
$
|
1,235
|
|
|
$
|
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.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Principal amount repurchased
|
$
|
3
|
|
|
$
|
100
|
|
|
$
|
28
|
|
Loss on extinguishment of debt (1)
|
1
|
|
|
34
|
|
|
9
|
|
(1)
|
Included in other income in the consolidated statements of operations. The loss represents the difference between the amount paid to purchase AGMH's debt and the carrying value of the debt, which includes the unamortized fair value adjustments that were recorded upon the acquisition of AGMH in 2009.
|
|
|
AGUS
|
|
AGMH (1)
|
|
AGM
|
|
Eliminations (2)
|
|
Total
|
||||||||||
|
|
(in millions)
|
||||||||||||||||||
2020
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
2021
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
2022
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
2023
|
|
40
|
|
|
—
|
|
|
—
|
|
|
(40
|
)
|
|
—
|
|
|||||
2024
|
|
500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
500
|
|
|||||
2025-2044
|
|
450
|
|
|
—
|
|
|
2
|
|
|
(250
|
)
|
|
202
|
|
|||||
2045-2064
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
2065-2084
|
|
150
|
|
|
300
|
|
|
—
|
|
|
(131
|
)
|
|
319
|
|
|||||
Thereafter
|
|
—
|
|
|
430
|
|
|
—
|
|
|
—
|
|
|
430
|
|
|||||
Total
|
|
$
|
1,140
|
|
|
$
|
730
|
|
|
$
|
4
|
|
|
$
|
(421
|
)
|
|
$
|
1,453
|
|
(1)
|
Includes AGMH's debt purchased by AGUS of $131 million.
|
(2)
|
Includes eliminations of intercompany loans payable and AGMH's debt purchased by AGUS.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
AGUS:
|
|
|
|
|
|
|
|
|
|||
7% Senior Notes
|
$
|
13
|
|
|
$
|
13
|
|
|
$
|
13
|
|
5% Senior Notes
|
26
|
|
|
26
|
|
|
26
|
|
|||
Series A Enhanced Junior Subordinated Debentures
|
7
|
|
|
7
|
|
|
5
|
|
|||
AGUS long-term debt
|
46
|
|
|
46
|
|
|
44
|
|
|||
Intercompany loans payable
|
5
|
|
|
3
|
|
|
3
|
|
|||
Total AGUS
|
51
|
|
|
49
|
|
|
47
|
|
|||
AGMH:
|
|
|
|
|
|
|
|
|
|||
67/8% QUIBS
|
7
|
|
|
7
|
|
|
7
|
|
|||
6.25% Notes
|
16
|
|
|
15
|
|
|
16
|
|
|||
5.6% Notes
|
6
|
|
|
6
|
|
|
6
|
|
|||
Junior Subordinated Debentures
|
25
|
|
|
25
|
|
|
25
|
|
|||
Total AGMH
|
54
|
|
|
53
|
|
|
54
|
|
|||
AGMH's debt purchased by AGUS
|
(11
|
)
|
|
(5
|
)
|
|
(1
|
)
|
|||
Elimination of intercompany loans payable
|
(5
|
)
|
|
(3
|
)
|
|
(3
|
)
|
|||
Total
|
$
|
89
|
|
|
$
|
94
|
|
|
$
|
97
|
|
16.
|
Employee Benefit Plans
|
|
Options for
Common Shares
|
|
Weighted
Average
Exercise Price
|
|
Number of
Exercisable
Options
|
||||
Balance as of December 31, 2018
|
373,628
|
|
|
$
|
18.77
|
|
|
373,628
|
|
Options granted
|
—
|
|
|
—
|
|
|
|
||
Options exercised
|
(283,277
|
)
|
|
18.16
|
|
|
|
||
Options forfeited/expired
|
—
|
|
|
—
|
|
|
|
||
Balance as of December 31, 2019
|
90,351
|
|
|
$
|
20.68
|
|
|
90,351
|
|
|
Options for
Common Shares
|
|
Weighted
Average
Exercise Price
|
|
Number of
Exercisable
Options
|
||||
Balance as of December 31, 2018
|
27,552
|
|
|
$
|
19.24
|
|
|
27,552
|
|
Options granted
|
—
|
|
|
—
|
|
|
|
||
Options exercised
|
(27,552
|
)
|
|
19.24
|
|
|
|
||
Options forfeited/expired
|
—
|
|
|
—
|
|
|
|
||
Balance as of December 31, 2019
|
—
|
|
|
$
|
—
|
|
|
—
|
|
Nonvested Shares
|
|
Number of
Shares
|
|
Weighted
Average Grant
Date Fair Value
Per Share
|
|||
Nonvested at December 31, 2018
|
51,746
|
|
|
$
|
35.56
|
|
|
Granted
|
48,241
|
|
|
45.98
|
|
||
Vested
|
(51,746
|
)
|
|
35.56
|
|
||
Forfeited
|
—
|
|
|
—
|
|
||
Nonvested at December 31, 2019
|
48,241
|
|
|
$
|
45.98
|
|
Nonvested Stock Units
|
|
Number of
Stock Units
|
|
Weighted
Average Grant
Date Fair Value
Per Share
|
|||
Nonvested at December 31, 2018
|
900,276
|
|
|
$
|
33.83
|
|
|
Granted
|
464,500
|
|
|
44.40
|
|
||
Vested
|
(375,981
|
)
|
|
28.03
|
|
||
Forfeited
|
(1,528
|
)
|
|
40.90
|
|
||
Nonvested at December 31, 2019
|
987,267
|
|
|
$
|
41.24
|
|
Performance Restricted Stock Units
|
|
Number of
Performance Share Units
|
|
Weighted
Average Grant
Date Fair Value
Per Share
|
|||
Nonvested at December 31, 2018
|
596,728
|
|
|
$
|
39.42
|
|
|
Granted (1)
|
436,690
|
|
|
44.00
|
|
||
Vested
|
(489,161
|
)
|
|
12.66
|
|
||
Forfeited
|
—
|
|
|
—
|
|
||
Nonvested at December 31, 2019 (2)
|
544,257
|
|
|
$
|
47.23
|
|
(1)
|
Includes 244,581 performance restricted stock units that were granted prior to 2019 at a weighted average grant date fair value of $12.66, but met performance hurdles and vested during 2019. The weighted average grant date fair value per share excludes these shares.
|
(2)
|
Excludes 263,093 performance restricted stock units that have met performance hurdles and will be eligible for vesting after December 31, 2019.
|
|
|
2018
|
|
2017
|
||||
Dividend yield
|
|
1.68
|
%
|
|
1.37
|
%
|
||
Expected volatility
|
|
27.65
|
%
|
|
25.19
|
%
|
||
Risk free interest rate
|
|
2.43
|
%
|
|
1.48
|
%
|
||
Weighted average grant date fair value
|
|
$
|
45.64
|
|
|
$
|
53.74
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(dollars in millions)
|
||||||||||
Proceeds from purchase of shares by employees
|
$
|
1.5
|
|
|
$
|
1.2
|
|
|
$
|
1.0
|
|
Number of shares issued by the Company
|
40,732
|
|
|
39,532
|
|
|
33,666
|
|
|||
Recorded in share-based compensation, net of deferral
|
$
|
0.4
|
|
|
$
|
0.3
|
|
|
$
|
0.3
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Share‑based compensation expense
|
$
|
21
|
|
|
$
|
19
|
|
|
$
|
16
|
|
Share‑based compensation capitalized as DAC
|
1.1
|
|
|
0.8
|
|
|
0.6
|
|
|||
Income tax benefit
|
3
|
|
|
3
|
|
|
2
|
|
17.
|
Income Taxes
|
|
As of
December 31, 2019 |
|
As of
December 31, 2018 |
||||
|
(in millions)
|
||||||
Deferred tax assets (liabilities)
|
$
|
(17
|
)
|
|
$
|
68
|
|
Current tax assets (liabilities)
|
47
|
|
|
22
|
|
(1)
|
Included in other assets or other liabilities on the consolidated balance sheets.
|
|
As of December 31,
|
||||||
|
2019
|
|
2018
|
||||
|
(in millions)
|
||||||
Deferred tax assets:
|
|
|
|
||||
Unearned premium reserves, net
|
$
|
76
|
|
|
$
|
98
|
|
Investment basis differences
|
48
|
|
|
49
|
|
||
Foreign tax credit
|
36
|
|
|
36
|
|
||
Net operating loss
|
32
|
|
|
34
|
|
||
Deferred compensation
|
26
|
|
|
25
|
|
||
Alternative minimum tax credit
|
12
|
|
|
20
|
|
||
Other
|
24
|
|
|
35
|
|
||
Total deferred income tax assets
|
254
|
|
|
297
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Unrealized appreciation on investments
|
86
|
|
|
54
|
|
||
Public debt
|
44
|
|
|
50
|
|
||
Market discount
|
11
|
|
|
31
|
|
||
DAC
|
33
|
|
|
23
|
|
||
Unrealized gains on CCS
|
11
|
|
|
16
|
|
||
Loss and LAE reserve
|
29
|
|
|
7
|
|
||
Other
|
21
|
|
|
12
|
|
||
Total deferred income tax liabilities
|
235
|
|
|
193
|
|
||
Less: Valuation allowance
|
36
|
|
|
36
|
|
||
Net deferred income tax asset (liabilities)
|
$
|
(17
|
)
|
|
$
|
68
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Expected tax provision (benefit)
|
$
|
91
|
|
|
$
|
97
|
|
|
$
|
300
|
|
Tax-exempt interest
|
(19
|
)
|
|
(23
|
)
|
|
(49
|
)
|
|||
Bargain purchase gain
|
—
|
|
|
—
|
|
|
(20
|
)
|
|||
Change in liability for uncertain tax positions
|
1
|
|
|
(15
|
)
|
|
(26
|
)
|
|||
Effect of provision to tax return filing adjustments
|
(6
|
)
|
|
(1
|
)
|
|
(8
|
)
|
|||
State tax
|
1
|
|
|
6
|
|
|
9
|
|
|||
Taxes on reinsurance
|
(5
|
)
|
|
6
|
|
|
(4
|
)
|
|||
Effect of adjustments to the provisional amounts as a result of 2017 Tax Cuts and Jobs Act
|
—
|
|
|
(4
|
)
|
|
61
|
|
|||
Foreign taxes
|
6
|
|
|
—
|
|
|
4
|
|
|||
Other
|
(6
|
)
|
|
(7
|
)
|
|
(6
|
)
|
|||
Total provision (benefit) for income taxes
|
$
|
63
|
|
|
$
|
59
|
|
|
$
|
261
|
|
Effective tax rate
|
13.7
|
%
|
|
10.2
|
%
|
|
26.3
|
%
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
U.S.
|
$
|
440
|
|
|
$
|
461
|
|
|
$
|
873
|
|
Bermuda
|
33
|
|
|
121
|
|
|
145
|
|
|||
U.K. and other
|
(9
|
)
|
|
(2
|
)
|
|
(27
|
)
|
|||
Total
|
$
|
464
|
|
|
$
|
580
|
|
|
$
|
991
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
U.S.
|
$
|
779
|
|
|
$
|
801
|
|
|
$
|
1,543
|
|
Bermuda
|
146
|
|
|
177
|
|
|
216
|
|
|||
U.K. and other
|
38
|
|
|
23
|
|
|
(20
|
)
|
|||
Total
|
$
|
963
|
|
|
$
|
1,001
|
|
|
$
|
1,739
|
|
|
Year Ended December 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in millions)
|
||||||
Transition tax
|
$
|
(1
|
)
|
|
$
|
93
|
|
Foreign tax credit realized
|
—
|
|
|
(31
|
)
|
||
Write down of unremitted earnings
|
—
|
|
|
(38
|
)
|
||
Net impact of repatriation
|
(1
|
)
|
|
24
|
|
||
Write down of deferred tax asset due to tax rate change
|
(3
|
)
|
|
37
|
|
||
Net impact of Tax Act
|
$
|
(4
|
)
|
|
$
|
61
|
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Beginning of year
|
$
|
14
|
|
|
$
|
28
|
|
|
$
|
50
|
|
Effect of provision to tax return filing adjustments
|
5
|
|
|
1
|
|
|
8
|
|
|||
Increase in unrecognized tax positions as a result of position taken during the current period
|
—
|
|
|
—
|
|
|
1
|
|
|||
Decrease in unrecognized tax positions as a result of settlement of positions taken during the prior period
|
—
|
|
|
—
|
|
|
(31
|
)
|
|||
Reductions to unrecognized tax benefits as a result of the applicable statute of limitations
|
(4
|
)
|
|
(15
|
)
|
|
—
|
|
|||
Balance as of December 31,
|
$
|
15
|
|
|
$
|
14
|
|
|
$
|
28
|
|
18.
|
Insurance Company Regulatory Requirements
|
|
Policyholders' Surplus
|
|
Net Income (Loss)
|
||||||||||||||||
|
As of December 31,
|
|
Year Ended December 31,
|
||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2017
|
||||||||||
|
(in millions)
|
||||||||||||||||||
U.S. statutory companies:
|
|
|
|
|
|
|
|
|
|
||||||||||
AGM (1) (2)
|
$
|
2,691
|
|
|
$
|
2,533
|
|
|
$
|
312
|
|
|
$
|
172
|
|
|
$
|
152
|
|
AGC (1) (2)
|
1,775
|
|
|
1,793
|
|
|
226
|
|
|
(5
|
)
|
|
219
|
|
|||||
MAC (2)
|
276
|
|
|
321
|
|
|
53
|
|
|
55
|
|
|
32
|
|
|||||
Bermuda statutory companies:
|
|
|
|
|
|
|
|
|
|
||||||||||
AG Re
|
1,098
|
|
|
1,249
|
|
|
45
|
|
|
131
|
|
|
155
|
|
|||||
AGRO
|
410
|
|
|
383
|
|
|
12
|
|
|
10
|
|
|
10
|
|
(1)
|
Policyholders' surplus of AGM and AGC includes their indirect share of MAC. AGM and AGC own 60.7% and 39.3%, respectively, of the outstanding stock of Municipal Assurance Holdings Inc. (MAC Holdings), which owns 100% of the outstanding common stock of MAC.
|
(2)
|
As of December 31, 2019, policyholders' surplus is net of contingency reserves of $869 million, $546 million and $192 million for AGM, AGC and MAC, respectively. As of December 31, 2018, policyholders' surplus is net of contingency reserves of $913 million, $550 million and $200 million for AGM, AGC and MAC, respectively.
|
•
|
Upfront premiums are earned upon expiration of risk rather than earned over the expected period of coverage. Premium earnings are accelerated when transactions are economically defeased, rather than legally defeased.
|
•
|
Acquisition costs are charged to expense as incurred rather than over the period that related premiums are earned.
|
•
|
A contingency reserve is computed based on statutory requirements, whereas no such reserve is required under GAAP.
|
•
|
Certain assets designated as “non-admitted assets” are charged directly to statutory surplus, rather than reflected as assets under GAAP.
|
•
|
Investments in subsidiaries are carried on the balance sheet on the equity basis, to the extent admissible, rather than consolidated with the parent.
|
•
|
Admitted deferred tax assets are subject to an adjusted surplus threshold and subject to a limitation calculated in accordance with SAP. Under GAAP there is no non-admitted asset determination, rather a valuation allowance is recorded to reduce the deferred tax asset to an amount that is more likely than not to be realized.
|
•
|
Insured credit derivatives are accounted for as insurance contracts rather than as derivative contracts measured at fair value.
|
•
|
Bonds are generally carried at amortized cost rather than fair value.
|
•
|
Insured obligations of VIEs and refinancing vehicles’ debt, where the Company is deemed the primary beneficiary, are accounted for as insurance contracts. Under GAAP, such VIEs and refinancing vehicles are consolidated and any transactions with the Company are eliminated.
|
•
|
Surplus notes are recognized as surplus and each payment of principal and interest is recorded only upon approval of the insurance regulator rather than as liabilities with periodic accrual of interest.
|
•
|
Acquisitions are accounted for as either statutory purchases or statutory mergers, rather than under the purchase method under GAAP.
|
•
|
Losses are discounted at tax equivalent yields, and recorded when the loss is deemed probable and without consideration of the deferred premium revenue. Under GAAP, expected losses are discounted at the risk free rate at the end of each reporting period and are recorded only to the extent they exceed deferred premium revenue.
|
•
|
The present value of installment premiums and commissions are not recorded on the balance sheet as they are under GAAP.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions)
|
||||||||||
Dividends paid by AGC to AGUS
|
$
|
123
|
|
|
$
|
133
|
|
|
$
|
107
|
|
Dividends paid by AGM to AGMH
|
220
|
|
|
171
|
|
|
196
|
|
|||
Dividends paid by AG Re to AGL
|
275
|
|
|
125
|
|
|
125
|
|
|||
Dividends paid by MAC to MAC Holdings (1)
|
105
|
|
|
27
|
|
|
36
|
|
|||
Repurchase of common stock by AGM from AGMH
|
—
|
|
|
—
|
|
|
101
|
|
|||
Repurchase of common stock by AGC from AGUS
|
100
|
|
|
200
|
|
|
—
|
|
|||
Redemption of common stock by MAC from MAC Holdings (1)
|
—
|
|
|
—
|
|
|
250
|
|
(1)
|
MAC Holdings distributed nearly the entire amounts to AGM and AGC, in proportion to their ownership percentages.
|
19.
|
Related Party Transactions
|
20.
|
Commitments and Contingencies
|
|
|
As of December 31, 2019
|
|||||||||||
|
|
Assets(1)
|
|
Liabilities(2)
|
|
Weighted Average Remaining Lease Term (in years)
|
|
Weighted Average Discount Rate
|
|||||
|
|
(in millions)
|
|
|
|
|
|||||||
Operating leases
|
|
$
|
100
|
|
|
$
|
130
|
|
|
9.4
|
|
2.61
|
%
|
Finance leases
|
|
2
|
|
|
2
|
|
|
1.8
|
|
1.74
|
%
|
||
Total
|
|
$
|
102
|
|
|
$
|
132
|
|
|
|
|
|
(1)
|
Recorded in other assets in the consolidated balance sheets. Finance lease assets are recorded net of accumulated amortization of $0.1 million as of December 31, 2019.
|
(2)
|
Recorded in other liabilities in the consolidated balance sheets.
|
|
|
Year Ended December 31,
|
||
|
|
2019
|
||
|
|
(in millions)
|
||
Operating lease cost
|
|
$
|
10
|
|
Variable lease cost
|
|
2
|
|
|
Total lease cost (1)
|
|
$
|
12
|
|
Cash paid for amounts included in the measurement of lease liabilities (2)
|
|
|
||
Operating cash flows from operating leases
|
|
$
|
11
|
|
ROU assets obtained in exchange for new operating lease liabilities (3)
|
|
37
|
|
|
ROU assets obtained in exchange for new finance lease liabilities (3)
|
|
2
|
|
(1)
|
Short-term lease costs, finance lease costs and sublease income are de minimis. Includes amortization on finance lease ROU assets and interest on finance lease liabilities.
|
(2)
|
Operating and financing cash flows from finance leases are de minimis.
|
(3)
|
Relates primarily to BlueMountain Acquisition. See Note 2, Business Combinations and Assumption of Insured Portfolio, for additional information.
|
|
|
As of December 31, 2019
|
||||||
Year
|
|
(in millions)
|
||||||
|
|
Operating Leases
|
|
Finance Leases
|
||||
2020
|
$
|
19
|
|
|
$
|
1
|
|
|
2021
|
19
|
|
|
1
|
|
|||
2022
|
19
|
|
|
—
|
|
|||
2023
|
19
|
|
|
—
|
|
|||
2024
|
11
|
|
|
—
|
|
|||
Thereafter
|
62
|
|
|
—
|
|
|||
Total lease payments (1)
|
149
|
|
|
2
|
|
|||
Less: imputed interest
|
19
|
|
|
—
|
|
|||
Total lease liabilities
|
$
|
130
|
|
|
$
|
2
|
|
(1)
|
Prior to the adoption of ASC 842, future lease payments under operating leases at December 31, 2018 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.
|
21.
|
Shareholders' Equity
|
Year
|
|
Number of Shares Repurchased
|
|
Total Payments
(in millions)
|
|
Average Price Paid Per Share
|
|||||
2017
|
|
12,669,643
|
|
|
$
|
501
|
|
|
$
|
39.57
|
|
2018
|
|
13,243,107
|
|
|
$
|
500
|
|
|
$
|
37.76
|
|
2019
|
|
11,163,929
|
|
|
$
|
500
|
|
|
$
|
44.79
|
|
2020 (through February 27, 2020 on a settlement date basis)
|
|
843,729
|
|
|
$
|
40
|
|
|
$
|
47.41
|
|
22.
|
Other Comprehensive Income
|
|
Net Unrealized
Gains (Losses) on
Investments with no OTTI
|
|
Net Unrealized
Gains (Losses) on
Investments with OTTI
|
|
Net Unrealized Gains (Losses) on FG VIEs’ Liabilities with Recourse due to ISCR
|
|
Cumulative
Translation
Adjustment
|
|
Cash Flow Hedge
|
|
Total AOCI
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Balance, December 31, 2018
|
$
|
59
|
|
|
$
|
94
|
|
|
$
|
(31
|
)
|
|
$
|
(37
|
)
|
|
$
|
8
|
|
|
$
|
93
|
|
Other comprehensive income (loss) before reclassifications
|
339
|
|
|
(62
|
)
|
|
(8
|
)
|
|
(1
|
)
|
|
—
|
|
|
268
|
|
||||||
Less: Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net realized investment gains (losses)
|
55
|
|
|
(32
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23
|
|
||||||
Net investment income
|
1
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
||||||
Fair value gains (losses) on FG VIEs
|
—
|
|
|
—
|
|
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
(15
|
)
|
||||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||||
Total before tax
|
56
|
|
|
(17
|
)
|
|
(15
|
)
|
|
—
|
|
|
1
|
|
|
25
|
|
||||||
Tax (provision) benefit
|
(10
|
)
|
|
1
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
||||||
Total amount reclassified from AOCI, net of tax
|
46
|
|
|
(16
|
)
|
|
(12
|
)
|
|
—
|
|
|
1
|
|
|
19
|
|
||||||
Net current period other comprehensive income (loss)
|
293
|
|
|
(46
|
)
|
|
4
|
|
|
(1
|
)
|
|
(1
|
)
|
|
249
|
|
||||||
Balance, December 31, 2019
|
$
|
352
|
|
|
$
|
48
|
|
|
$
|
(27
|
)
|
|
$
|
(38
|
)
|
|
$
|
7
|
|
|
$
|
342
|
|
|
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
|
(208
|
)
|
|
(58
|
)
|
|
(5
|
)
|
|
(8
|
)
|
|
—
|
|
|
(279
|
)
|
||||||
Less: Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net realized investment gains (losses)
|
7
|
|
|
(38
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(31
|
)
|
||||||
Fair value gains (losses) on FG VIEs
|
—
|
|
|
—
|
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
||||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total before tax
|
7
|
|
|
(38
|
)
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
(40
|
)
|
||||||
Tax (provision) benefit
|
—
|
|
|
6
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
8
|
|
||||||
Total amount reclassified from AOCI, net of tax
|
7
|
|
|
(32
|
)
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
(32
|
)
|
||||||
Net current period other comprehensive income (loss)
|
(215
|
)
|
|
(26
|
)
|
|
2
|
|
|
(8
|
)
|
|
—
|
|
|
(247
|
)
|
||||||
Balance, December 31, 2018
|
$
|
59
|
|
|
$
|
94
|
|
|
$
|
(31
|
)
|
|
$
|
(37
|
)
|
|
$
|
8
|
|
|
$
|
93
|
|
(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.
|
|
Net Unrealized
Gains (Losses) on
Investments with no OTTI
|
|
Net Unrealized
Gains (Losses) on
Investments with OTTI
|
|
Cumulative
Translation
Adjustment
|
|
Cash Flow
Hedge |
|
Total AOCI
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Balance, December 31, 2016
|
$
|
171
|
|
|
$
|
10
|
|
|
$
|
(39
|
)
|
|
$
|
7
|
|
|
$
|
149
|
|
Reclassification of stranded tax effects
|
38
|
|
|
21
|
|
|
(5
|
)
|
|
2
|
|
|
$
|
56
|
|
||||
Other comprehensive income (loss) before reclassifications
|
128
|
|
|
69
|
|
|
15
|
|
|
—
|
|
|
212
|
|
|||||
Less: Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net realized investment gains (losses)
|
71
|
|
|
(31
|
)
|
|
—
|
|
|
—
|
|
|
40
|
|
|||||
Net investment income
|
27
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
28
|
|
|||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|||||
Total before tax
|
98
|
|
|
(30
|
)
|
|
—
|
|
|
1
|
|
|
69
|
|
|||||
Tax (provision) benefit
|
(34
|
)
|
|
10
|
|
|
—
|
|
|
—
|
|
|
(24
|
)
|
|||||
Total amount reclassified from AOCI, net of tax
|
64
|
|
|
(20
|
)
|
|
—
|
|
|
1
|
|
|
45
|
|
|||||
Net current period other comprehensive income (loss)
|
64
|
|
|
89
|
|
|
15
|
|
|
(1
|
)
|
|
167
|
|
|||||
Balance, December 31, 2017
|
$
|
273
|
|
|
$
|
120
|
|
|
$
|
(29
|
)
|
|
$
|
8
|
|
|
$
|
372
|
|
23.
|
Earnings Per Share
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
|
(in millions, except per share amounts)
|
||||||||||
Basic EPS:
|
|
|
|
|
|
||||||
Net income (loss) attributable to AGL
|
$
|
402
|
|
|
$
|
521
|
|
|
730
|
|
|
Less: Distributed and undistributed income (loss) available to nonvested shareholders
|
1
|
|
|
1
|
|
|
1
|
|
|||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic
|
$
|
401
|
|
|
$
|
520
|
|
|
729
|
|
|
Basic shares
|
99.3
|
|
|
110.0
|
|
|
120.6
|
|
|||
Basic EPS
|
$
|
4.04
|
|
|
$
|
4.73
|
|
|
$
|
6.05
|
|
|
|
|
|
|
|
||||||
Diluted EPS:
|
|
|
|
|
|
||||||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic
|
$
|
401
|
|
|
$
|
520
|
|
|
$
|
729
|
|
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
|
$
|
401
|
|
|
$
|
520
|
|
|
$
|
729
|
|
|
|
|
|
|
|
||||||
Basic shares
|
99.3
|
|
|
110.0
|
|
|
120.6
|
|
|||
Dilutive securities:
|
|
|
|
|
|
||||||
Options and restricted stock awards
|
0.9
|
|
|
1.3
|
|
|
1.7
|
|
|||
Diluted shares
|
100.2
|
|
|
111.3
|
|
|
122.3
|
|
|||
Diluted EPS
|
$
|
4.00
|
|
|
$
|
4.68
|
|
|
$
|
5.96
|
|
Potentially dilutive securities excluded from computation of EPS because of antidilutive effect
|
—
|
|
|
0.1
|
|
|
0.1
|
|
24.
|
Quarterly Financial Information (Unaudited)
|
2019
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Full
Year
|
||||||||||
|
(dollars in millions, except per share data)
|
|||||||||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earned premiums
|
$
|
118
|
|
|
$
|
112
|
|
|
$
|
123
|
|
|
$
|
123
|
|
|
$
|
476
|
|
|
Net investment income
|
98
|
|
|
110
|
|
|
88
|
|
|
82
|
|
|
378
|
|
||||||
Asset management fees
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
22
|
|
||||||
Net realized investment gains (losses)
|
(12
|
)
|
|
8
|
|
|
16
|
|
|
10
|
|
|
22
|
|
||||||
Net change in fair value of credit derivatives
|
(22
|
)
|
|
(8
|
)
|
|
5
|
|
|
19
|
|
|
(6
|
)
|
||||||
Fair value gains (losses) on FG VIEs
|
5
|
|
|
33
|
|
|
4
|
|
|
—
|
|
|
42
|
|
||||||
Foreign exchange gains (losses) on remeasurement
|
11
|
|
|
(14
|
)
|
|
(21
|
)
|
|
48
|
|
|
24
|
|
||||||
Commutation gains
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||
Other income (loss)
|
(3
|
)
|
|
24
|
|
|
(9
|
)
|
|
(8
|
)
|
|
4
|
|
||||||
Expenses
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loss and LAE
|
46
|
|
|
(1
|
)
|
|
30
|
|
|
18
|
|
|
93
|
|
||||||
Interest expense
|
23
|
|
|
22
|
|
|
22
|
|
|
22
|
|
|
89
|
|
||||||
Amortization of DAC
|
6
|
|
|
4
|
|
|
3
|
|
|
5
|
|
|
18
|
|
||||||
Employee compensation and benefit expenses
|
41
|
|
|
39
|
|
|
38
|
|
|
60
|
|
|
178
|
|
||||||
Other operating expenses
|
23
|
|
|
21
|
|
|
27
|
|
|
54
|
|
|
125
|
|
||||||
Income (loss) before income taxes and equity in net earnings of investees
|
56
|
|
|
181
|
|
|
86
|
|
|
137
|
|
|
460
|
|
||||||
Equity in net earnings of investees
|
2
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
4
|
|
||||||
Income (loss) before income taxes
|
58
|
|
|
182
|
|
|
86
|
|
|
138
|
|
|
464
|
|
||||||
Provision (benefit) for income taxes
|
4
|
|
|
40
|
|
|
17
|
|
|
2
|
|
|
63
|
|
||||||
Net income (loss)
|
54
|
|
|
142
|
|
|
69
|
|
|
136
|
|
|
401
|
|
||||||
Less: Redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
||||||
Net income (loss) attributable to AGL
|
54
|
|
|
142
|
|
|
69
|
|
|
137
|
|
|
402
|
|
||||||
Earnings (loss) per share(1):
|
|
|
|
|
|
|
|
|
|
|||||||||||
Basic
|
$
|
0.52
|
|
|
$
|
1.40
|
|
|
$
|
0.71
|
|
|
$
|
1.43
|
|
|
$
|
4.04
|
|
|
Diluted
|
$
|
0.52
|
|
|
$
|
1.39
|
|
|
$
|
0.70
|
|
|
$
|
1.42
|
|
|
$
|
4.00
|
|
2018
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Full
Year
|
||||||||||
|
(dollars in millions, except per share data)
|
|||||||||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earned premiums
|
$
|
145
|
|
|
$
|
136
|
|
|
$
|
142
|
|
|
$
|
125
|
|
|
$
|
548
|
|
|
Net investment income
|
100
|
|
|
98
|
|
|
99
|
|
|
98
|
|
|
395
|
|
||||||
Net realized investment gains (losses)
|
(5
|
)
|
|
(2
|
)
|
|
(7
|
)
|
|
(18
|
)
|
|
(32
|
)
|
||||||
Net change in fair value of credit derivatives
|
34
|
|
|
48
|
|
|
21
|
|
|
9
|
|
|
112
|
|
||||||
Fair value gains (losses) on FG VIEs
|
4
|
|
|
2
|
|
|
5
|
|
|
3
|
|
|
14
|
|
||||||
Foreign exchange gains (losses) on remeasurement
|
22
|
|
|
(36
|
)
|
|
(8
|
)
|
|
(15
|
)
|
|
(37
|
)
|
||||||
Commutation gains
|
1
|
|
|
(18
|
)
|
|
1
|
|
|
—
|
|
|
(16
|
)
|
||||||
Other income (loss)
|
(8
|
)
|
|
(8
|
)
|
|
22
|
|
|
11
|
|
|
17
|
|
||||||
Expenses
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loss and LAE
|
(18
|
)
|
|
44
|
|
|
17
|
|
|
21
|
|
|
64
|
|
||||||
Interest expense
|
24
|
|
|
24
|
|
|
23
|
|
|
23
|
|
|
94
|
|
||||||
Amortization of DAC
|
5
|
|
|
4
|
|
|
3
|
|
|
4
|
|
|
16
|
|
||||||
Employee compensation and benefit expenses
|
40
|
|
|
36
|
|
|
36
|
|
|
40
|
|
|
152
|
|
||||||
Other operating expenses
|
25
|
|
|
26
|
|
|
20
|
|
|
25
|
|
|
96
|
|
||||||
Income (loss) before income taxes and equity in net earnings of investees
|
217
|
|
|
86
|
|
|
176
|
|
|
100
|
|
|
579
|
|
||||||
Equity in net earnings of investees
|
—
|
|
|
1
|
|
|
(1
|
)
|
|
1
|
|
|
1
|
|
||||||
Income (loss) before income taxes
|
217
|
|
|
87
|
|
|
175
|
|
|
101
|
|
|
580
|
|
||||||
Provision (benefit) for income taxes
|
20
|
|
|
12
|
|
|
14
|
|
|
13
|
|
|
59
|
|
||||||
Net income (loss)
|
197
|
|
|
75
|
|
|
161
|
|
|
88
|
|
|
521
|
|
||||||
Less: Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net income (loss) attributable to AGL
|
197
|
|
|
75
|
|
|
161
|
|
|
88
|
|
|
521
|
|
||||||
Earnings (loss) per share(1):
|
|
|
|
|
|
|
|
|
|
|||||||||||
Basic
|
$
|
1.71
|
|
|
$
|
0.67
|
|
|
$
|
1.48
|
|
|
$
|
0.84
|
|
|
$
|
4.73
|
|
|
Diluted
|
$
|
1.68
|
|
|
$
|
0.67
|
|
|
$
|
1.47
|
|
|
$
|
0.83
|
|
|
$
|
4.68
|
|
(1)
|
Per share amounts for the quarters and the full years have each been calculated separately. Accordingly, quarterly amounts may not sum up to the annual amounts because of differences in the average common shares outstanding during each period and, with regard to diluted per share amounts only, because of the inclusion of the effect of potentially dilutive securities only in the periods in which such effect would have been dilutive.
|
25.
|
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
|
$
|
135
|
|
|
$
|
364
|
|
|
$
|
15
|
|
|
$
|
10,408
|
|
|
$
|
(513
|
)
|
|
$
|
10,409
|
|
Investment in subsidiaries
|
6,450
|
|
|
6,224
|
|
|
4,258
|
|
|
383
|
|
|
(17,315
|
)
|
|
—
|
|
||||||
Premiums receivable, net of commissions payable
|
—
|
|
|
—
|
|
|
—
|
|
|
1,502
|
|
|
(216
|
)
|
|
1,286
|
|
||||||
Deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
145
|
|
|
(34
|
)
|
|
111
|
|
||||||
Intercompany loan receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
290
|
|
|
(290
|
)
|
|
—
|
|
||||||
FG VIEs’ assets, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
442
|
|
|
—
|
|
|
442
|
|
||||||
Assets of consolidated investment vehicles
|
—
|
|
|
—
|
|
|
—
|
|
|
595
|
|
|
(23
|
)
|
|
572
|
|
||||||
Dividends receivable from affiliate
|
40
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
(50
|
)
|
|
—
|
|
||||||
Goodwill and other intangible assets
|
—
|
|
|
—
|
|
|
—
|
|
|
216
|
|
|
—
|
|
|
216
|
|
||||||
Other
|
31
|
|
|
32
|
|
|
27
|
|
|
2,769
|
|
|
(1,569
|
)
|
|
1,290
|
|
||||||
Total assets
|
$
|
6,656
|
|
|
$
|
6,630
|
|
|
$
|
4,300
|
|
|
$
|
16,750
|
|
|
$
|
(20,010
|
)
|
|
$
|
14,326
|
|
Liabilities and shareholders' equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Unearned premium reserves
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,584
|
|
|
$
|
(848
|
)
|
|
$
|
3,736
|
|
Loss and LAE reserve
|
—
|
|
|
—
|
|
|
—
|
|
|
1,316
|
|
|
(266
|
)
|
|
1,050
|
|
||||||
Long-term debt
|
—
|
|
|
844
|
|
|
476
|
|
|
4
|
|
|
(89
|
)
|
|
1,235
|
|
||||||
Intercompany loans payable
|
—
|
|
|
290
|
|
|
—
|
|
|
300
|
|
|
(590
|
)
|
|
—
|
|
||||||
Credit derivative liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
225
|
|
|
(34
|
)
|
|
191
|
|
||||||
FG VIEs’ liabilities, at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
469
|
|
|
—
|
|
|
469
|
|
||||||
Liabilities of consolidated investment vehicles
|
—
|
|
|
—
|
|
|
—
|
|
|
505
|
|
|
(23
|
)
|
|
482
|
|
||||||
Dividends payable to affiliate
|
—
|
|
|
40
|
|
|
10
|
|
|
—
|
|
|
(50
|
)
|
|
—
|
|
||||||
Other
|
17
|
|
|
69
|
|
|
66
|
|
|
1,010
|
|
|
(651
|
)
|
|
511
|
|
||||||
Total liabilities
|
17
|
|
|
1,243
|
|
|
552
|
|
|
8,413
|
|
|
(2,551
|
)
|
|
7,674
|
|
||||||
Redeemable noncontrolling interests in consolidated investment vehicles
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
7
|
|
||||||
Total shareholders' equity attributable to AGL
|
6,639
|
|
|
5,387
|
|
|
3,748
|
|
|
7,954
|
|
|
(17,089
|
)
|
|
6,639
|
|
||||||
Nonredeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
383
|
|
|
(377
|
)
|
|
6
|
|
||||||
Total shareholders' equity
|
6,639
|
|
|
5,387
|
|
|
3,748
|
|
|
8,337
|
|
|
(17,466
|
)
|
|
6,645
|
|
||||||
Total liabilities, redeemable noncontrolling interests and shareholders' equity
|
$
|
6,656
|
|
|
$
|
6,630
|
|
|
$
|
4,300
|
|
|
$
|
16,750
|
|
|
$
|
(20,010
|
)
|
|
$
|
14,326
|
|
(1)
|
The fair value of the AGMH debt purchased by AGUS, and recorded in the AGUS investment portfolio, was $136 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 loans 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
|
|
||||||
Redeemable noncontrolling interests in consolidated investment vehicles
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total shareholders' equity attributable to AGL
|
6,555
|
|
|
5,229
|
|
|
3,503
|
|
|
7,590
|
|
|
(16,322
|
)
|
|
6,555
|
|
||||||
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
226
|
|
|
(226
|
)
|
|
—
|
|
||||||
Total shareholders' equity
|
6,555
|
|
|
5,229
|
|
|
3,503
|
|
|
7,816
|
|
|
(16,548
|
)
|
|
6,555
|
|
||||||
Total liabilities, redeemable noncontrolling interests 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
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
486
|
|
|
$
|
(10
|
)
|
|
$
|
476
|
|
Net investment income
|
—
|
|
|
11
|
|
|
1
|
|
|
388
|
|
|
(22
|
)
|
|
378
|
|
||||||
Asset management fees
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
—
|
|
|
22
|
|
||||||
Net realized investment gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
—
|
|
|
22
|
|
||||||
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(6
|
)
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
78
|
|
|
(7
|
)
|
|
71
|
|
||||||
Total revenues
|
—
|
|
|
11
|
|
|
1
|
|
|
990
|
|
|
(39
|
)
|
|
963
|
|
||||||
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
98
|
|
|
(5
|
)
|
|
93
|
|
||||||
Interest expense
|
—
|
|
|
51
|
|
|
54
|
|
|
11
|
|
|
(27
|
)
|
|
89
|
|
||||||
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
(4
|
)
|
|
18
|
|
||||||
Other operating expenses
|
31
|
|
|
10
|
|
|
—
|
|
|
266
|
|
|
(4
|
)
|
|
303
|
|
||||||
Total expenses
|
31
|
|
|
61
|
|
|
54
|
|
|
397
|
|
|
(40
|
)
|
|
503
|
|
||||||
Equity in net earnings of investees
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
|
4
|
|
||||||
Income (loss) before income taxes and equity in net earnings of subsidiaries
|
(31
|
)
|
|
(50
|
)
|
|
(53
|
)
|
|
595
|
|
|
3
|
|
|
464
|
|
||||||
Total (provision) benefit for income taxes
|
—
|
|
|
10
|
|
|
11
|
|
|
(84
|
)
|
|
—
|
|
|
(63
|
)
|
||||||
Equity in net earnings of subsidiaries
|
433
|
|
|
422
|
|
|
327
|
|
|
18
|
|
|
(1,200
|
)
|
|
—
|
|
||||||
Net income (loss)
|
402
|
|
|
382
|
|
|
285
|
|
|
529
|
|
|
(1,197
|
)
|
|
401
|
|
||||||
Less: noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
(19
|
)
|
|
(1
|
)
|
||||||
Net income (loss) attributable to AGL
|
$
|
402
|
|
|
$
|
382
|
|
|
$
|
285
|
|
|
$
|
511
|
|
|
$
|
(1,178
|
)
|
|
$
|
402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Comprehensive income (loss)
|
$
|
651
|
|
|
$
|
553
|
|
|
$
|
440
|
|
|
$
|
781
|
|
|
$
|
(1,775
|
)
|
|
$
|
650
|
|
|
Assured Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured Guaranty Ltd.
(Consolidated)
|
||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
563
|
|
|
$
|
(15
|
)
|
|
$
|
548
|
|
Net investment income
|
1
|
|
|
9
|
|
|
1
|
|
|
398
|
|
|
(14
|
)
|
|
395
|
|
||||||
Net realized investment gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
(32
|
)
|
|
—
|
|
|
(32
|
)
|
||||||
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
112
|
|
|
—
|
|
|
112
|
|
||||||
Other
|
12
|
|
|
—
|
|
|
—
|
|
|
192
|
|
|
(226
|
)
|
|
(22
|
)
|
||||||
Total revenues
|
13
|
|
|
9
|
|
|
1
|
|
|
1,233
|
|
|
(255
|
)
|
|
1,001
|
|
||||||
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
70
|
|
|
(6
|
)
|
|
64
|
|
||||||
Interest expense
|
—
|
|
|
49
|
|
|
54
|
|
|
10
|
|
|
(19
|
)
|
|
94
|
|
||||||
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
(5
|
)
|
|
16
|
|
||||||
Other operating expenses
|
41
|
|
|
10
|
|
|
—
|
|
|
394
|
|
|
(197
|
)
|
|
248
|
|
||||||
Total expenses
|
41
|
|
|
59
|
|
|
54
|
|
|
495
|
|
|
(227
|
)
|
|
422
|
|
||||||
Equity in net earnings of investees
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||||
Income (loss) before income taxes and equity in net earnings of subsidiaries
|
(28
|
)
|
|
(50
|
)
|
|
(53
|
)
|
|
739
|
|
|
(28
|
)
|
|
580
|
|
||||||
Total (provision) benefit for income taxes
|
—
|
|
|
52
|
|
|
11
|
|
|
(123
|
)
|
|
1
|
|
|
(59
|
)
|
||||||
Equity in net earnings of subsidiaries
|
549
|
|
|
412
|
|
|
277
|
|
|
24
|
|
|
(1,262
|
)
|
|
—
|
|
||||||
Net income (loss)
|
521
|
|
|
414
|
|
|
235
|
|
|
640
|
|
|
(1,289
|
)
|
|
521
|
|
||||||
Less: noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
(24
|
)
|
|
—
|
|
||||||
Net income (loss) attributable to AGL
|
$
|
521
|
|
|
$
|
414
|
|
|
$
|
235
|
|
|
$
|
616
|
|
|
$
|
(1,265
|
)
|
|
$
|
521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Comprehensive income (loss)
|
$
|
274
|
|
|
$
|
218
|
|
|
$
|
107
|
|
|
$
|
395
|
|
|
$
|
(720
|
)
|
|
$
|
274
|
|
|
Assured Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured Guaranty Ltd.
(Consolidated)
|
||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net earned premiums
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
728
|
|
|
$
|
(38
|
)
|
|
$
|
690
|
|
Net investment income
|
—
|
|
|
2
|
|
|
—
|
|
|
426
|
|
|
(11
|
)
|
|
417
|
|
||||||
Net realized investment gains (losses)
|
—
|
|
|
—
|
|
|
—
|
|
|
45
|
|
|
(5
|
)
|
|
40
|
|
||||||
Net change in fair value of credit derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
111
|
|
|
—
|
|
|
111
|
|
||||||
Bargain purchase gain and settlement of pre-existing relationships
|
—
|
|
|
—
|
|
|
—
|
|
|
58
|
|
|
—
|
|
|
58
|
|
||||||
Other
|
10
|
|
|
—
|
|
|
—
|
|
|
609
|
|
|
(196
|
)
|
|
423
|
|
||||||
Total revenues
|
10
|
|
|
2
|
|
|
—
|
|
|
1,977
|
|
|
(250
|
)
|
|
1,739
|
|
||||||
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and LAE
|
—
|
|
|
—
|
|
|
—
|
|
|
327
|
|
|
61
|
|
|
388
|
|
||||||
Interest expense
|
—
|
|
|
47
|
|
|
54
|
|
|
11
|
|
|
(15
|
)
|
|
97
|
|
||||||
Amortization of deferred acquisition costs
|
—
|
|
|
—
|
|
|
—
|
|
|
26
|
|
|
(7
|
)
|
|
19
|
|
||||||
Other operating expenses
|
38
|
|
|
12
|
|
|
1
|
|
|
394
|
|
|
(201
|
)
|
|
244
|
|
||||||
Total expenses
|
38
|
|
|
59
|
|
|
55
|
|
|
758
|
|
|
(162
|
)
|
|
748
|
|
||||||
Equity in net earnings of investees
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Income (loss) before income taxes and equity in net earnings of subsidiaries
|
(28
|
)
|
|
(57
|
)
|
|
(55
|
)
|
|
1,219
|
|
|
(88
|
)
|
|
991
|
|
||||||
Total (provision) benefit for income taxes
|
—
|
|
|
17
|
|
|
54
|
|
|
(359
|
)
|
|
27
|
|
|
(261
|
)
|
||||||
Equity in net earnings of subsidiaries
|
758
|
|
|
636
|
|
|
395
|
|
|
32
|
|
|
(1,821
|
)
|
|
—
|
|
||||||
Net income (loss)
|
730
|
|
|
596
|
|
|
394
|
|
|
892
|
|
|
(1,882
|
)
|
|
730
|
|
||||||
Less: noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
32
|
|
|
(32
|
)
|
|
—
|
|
||||||
Net income (loss) attributable to AGL
|
$
|
730
|
|
|
$
|
596
|
|
|
$
|
394
|
|
|
$
|
860
|
|
|
$
|
(1,850
|
)
|
|
$
|
730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Comprehensive income (loss)
|
$
|
897
|
|
|
$
|
754
|
|
|
$
|
482
|
|
|
$
|
1,084
|
|
|
$
|
(2,320
|
)
|
|
$
|
897
|
|
|
Assured Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured Guaranty Ltd.
(Consolidated)
|
||||||||||||
Net cash flows provided by (used in) operating activities
|
$
|
679
|
|
|
$
|
190
|
|
|
$
|
172
|
|
|
$
|
(287
|
)
|
|
$
|
(1,263
|
)
|
|
$
|
(509
|
)
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchases
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(873
|
)
|
|
3
|
|
|
(873
|
)
|
||||||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
1,805
|
|
|
—
|
|
|
1,805
|
|
||||||
Maturities and paydowns
|
—
|
|
|
11
|
|
|
8
|
|
|
762
|
|
|
—
|
|
|
781
|
|
||||||
Short-term investments with maturities of over three months:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Purchases
|
—
|
|
|
—
|
|
|
—
|
|
|
(229
|
)
|
|
—
|
|
|
(229
|
)
|
||||||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||||
Maturities and paydowns
|
—
|
|
|
12
|
|
|
—
|
|
|
304
|
|
|
—
|
|
|
316
|
|
||||||
Net sales (purchases) of short-term investments with maturities of less than three months
|
(90
|
)
|
|
(44
|
)
|
|
4
|
|
|
(493
|
)
|
|
—
|
|
|
(623
|
)
|
||||||
Net proceeds from paydowns on FG VIEs’ assets
|
—
|
|
|
—
|
|
|
—
|
|
|
139
|
|
|
—
|
|
|
139
|
|
||||||
Net proceeds from sales of FG VIEs’ assets
|
—
|
|
|
—
|
|
|
—
|
|
|
51
|
|
|
—
|
|
|
51
|
|
||||||
Repayment of intercompany loans
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
(10
|
)
|
|
—
|
|
||||||
Issuance of intercompany loans
|
—
|
|
|
—
|
|
|
—
|
|
|
(250
|
)
|
|
250
|
|
|
—
|
|
||||||
Investment in subsidiaries
|
—
|
|
|
65
|
|
|
5
|
|
|
(175
|
)
|
|
105
|
|
|
—
|
|
||||||
Return of capital from subsidiaries
|
—
|
|
|
100
|
|
|
—
|
|
|
10
|
|
|
(110
|
)
|
|
—
|
|
||||||
BlueMountain Acquisition, net of cash acquired
|
—
|
|
|
(157
|
)
|
|
—
|
|
|
12
|
|
|
—
|
|
|
(145
|
)
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
(55
|
)
|
|
—
|
|
|
(55
|
)
|
||||||
Net cash flows provided by (used in) investing activities
|
(90
|
)
|
|
(16
|
)
|
|
17
|
|
|
1,020
|
|
|
238
|
|
|
1,169
|
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Return of capital
|
—
|
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
10
|
|
|
—
|
|
||||||
Capital contribution
|
—
|
|
|
—
|
|
|
—
|
|
|
105
|
|
|
(105
|
)
|
|
—
|
|
||||||
Dividends paid
|
(74
|
)
|
|
(414
|
)
|
|
(186
|
)
|
|
(649
|
)
|
|
1,249
|
|
|
(74
|
)
|
||||||
Repurchases of common stock
|
(500
|
)
|
|
—
|
|
|
—
|
|
|
(100
|
)
|
|
100
|
|
|
(500
|
)
|
||||||
Net paydowns of FG VIEs’ liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(181
|
)
|
|
—
|
|
|
(181
|
)
|
||||||
Paydown of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(3
|
)
|
|
(4
|
)
|
||||||
Repayment of intercompany loans
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
||||||
Issuance of intercompany loans
|
—
|
|
|
250
|
|
|
—
|
|
|
—
|
|
|
(250
|
)
|
|
—
|
|
||||||
Proceeds from issuance of CLO obligations
|
—
|
|
|
—
|
|
|
—
|
|
|
482
|
|
|
—
|
|
|
482
|
|
||||||
Repayment of warehouse loans and equity
|
—
|
|
|
—
|
|
|
—
|
|
|
(306
|
)
|
|
—
|
|
|
(306
|
)
|
||||||
Contributions from noncontrolling interests to investment vehicles
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
18
|
|
||||||
Distributions to redeemable noncontrolling interests from investment vehicles
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
(4
|
)
|
||||||
Other
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15
|
)
|
||||||
Net cash flows provided by (used in) financing activities
|
(589
|
)
|
|
(174
|
)
|
|
(186
|
)
|
|
(660
|
)
|
|
1,025
|
|
|
(584
|
)
|
||||||
Effect of exchange rate changes
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
||||||
Increase (decrease) in cash and restricted cash
|
—
|
|
|
—
|
|
|
3
|
|
|
76
|
|
|
—
|
|
|
79
|
|
||||||
Cash and restricted cash at beginning of period
|
—
|
|
|
1
|
|
|
—
|
|
|
103
|
|
|
—
|
|
|
104
|
|
||||||
Cash and restricted cash at end of period
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
3
|
|
|
$
|
179
|
|
|
$
|
—
|
|
|
$
|
183
|
|
|
Assured Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured Guaranty Ltd.
(Consolidated)
|
||||||||||||
Net cash flows provided by (used in) operating activities
|
$
|
587
|
|
|
$
|
308
|
|
|
$
|
183
|
|
|
$
|
517
|
|
|
$
|
(1,133
|
)
|
|
$
|
462
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchases
|
—
|
|
|
(104
|
)
|
|
(12
|
)
|
|
(1,865
|
)
|
|
100
|
|
|
(1,881
|
)
|
||||||
Sales
|
—
|
|
|
104
|
|
|
8
|
|
|
1,068
|
|
|
—
|
|
|
1,180
|
|
||||||
Maturities and paydowns
|
—
|
|
|
28
|
|
|
—
|
|
|
934
|
|
|
—
|
|
|
962
|
|
||||||
Short-term investments with maturities of over three months:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Purchases
|
—
|
|
|
(34
|
)
|
|
—
|
|
|
(209
|
)
|
|
—
|
|
|
(243
|
)
|
||||||
Sales
|
—
|
|
|
22
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
23
|
|
||||||
Maturities and paydowns
|
—
|
|
|
—
|
|
|
—
|
|
|
207
|
|
|
—
|
|
|
207
|
|
||||||
Net sales (purchases) of short-term investments with maturities of less than three months
|
(9
|
)
|
|
(50
|
)
|
|
7
|
|
|
(32
|
)
|
|
—
|
|
|
(84
|
)
|
||||||
Net proceeds from paydowns on FG VIEs’ assets
|
—
|
|
|
—
|
|
|
—
|
|
|
116
|
|
|
—
|
|
|
116
|
|
||||||
Investment in subsidiaries
|
—
|
|
|
(9
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
11
|
|
|
—
|
|
||||||
Repayment of intercompany loans
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
(10
|
)
|
|
—
|
|
||||||
Return of capital from subsidiaries
|
—
|
|
|
200
|
|
|
—
|
|
|
—
|
|
|
(200
|
)
|
|
—
|
|
||||||
Other
|
—
|
|
|
(15
|
)
|
|
—
|
|
|
32
|
|
|
—
|
|
|
17
|
|
||||||
Net cash flows provided by (used in) investing activities
|
(9
|
)
|
|
142
|
|
|
2
|
|
|
261
|
|
|
(99
|
)
|
|
297
|
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Capital contribution
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
(11
|
)
|
|
—
|
|
||||||
Dividends paid
|
(71
|
)
|
|
(472
|
)
|
|
(187
|
)
|
|
(474
|
)
|
|
1,133
|
|
|
(71
|
)
|
||||||
Repurchases of common stock
|
(500
|
)
|
|
—
|
|
|
—
|
|
|
(200
|
)
|
|
200
|
|
|
(500
|
)
|
||||||
Net paydowns of FG VIEs’ liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(116
|
)
|
|
—
|
|
|
(116
|
)
|
||||||
Paydown of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(100
|
)
|
|
(101
|
)
|
||||||
Repayment of intercompany loans
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
||||||
Other
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
||||||
Net cash flows provided by (used in) financing activities
|
(578
|
)
|
|
(482
|
)
|
|
(187
|
)
|
|
(780
|
)
|
|
1,232
|
|
|
(795
|
)
|
||||||
Effect of exchange rate changes
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
||||||
Increase (decrease) in cash and restricted cash
|
—
|
|
|
(32
|
)
|
|
(2
|
)
|
|
(6
|
)
|
|
—
|
|
|
(40
|
)
|
||||||
Cash and restricted cash at beginning of period
|
—
|
|
|
33
|
|
|
2
|
|
|
109
|
|
|
—
|
|
|
144
|
|
||||||
Cash and restricted cash at end of period
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
103
|
|
|
$
|
—
|
|
|
$
|
104
|
|
|
Assured Guaranty Ltd.
(Parent)
|
|
AGUS
(Issuer)
|
|
AGMH
(Issuer)
|
|
Other
Entities
|
|
Consolidating
Adjustments
|
|
Assured Guaranty Ltd.
(Consolidated)
|
||||||||||||
Net cash flows provided by (used in) operating activities
|
$
|
579
|
|
|
$
|
442
|
|
|
$
|
158
|
|
|
$
|
477
|
|
|
$
|
(1,223
|
)
|
|
$
|
433
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Purchases
|
—
|
|
|
(158
|
)
|
|
(17
|
)
|
|
(2,404
|
)
|
|
27
|
|
|
(2,552
|
)
|
||||||
Sales
|
—
|
|
|
112
|
|
|
21
|
|
|
1,568
|
|
|
—
|
|
|
1,701
|
|
||||||
Maturities and paydowns
|
—
|
|
|
13
|
|
|
—
|
|
|
808
|
|
|
—
|
|
|
821
|
|
||||||
Short-term investments with maturities of over three months:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Purchases
|
—
|
|
|
(26
|
)
|
|
(5
|
)
|
|
(224
|
)
|
|
—
|
|
|
(255
|
)
|
||||||
Sales
|
—
|
|
|
1
|
|
|
5
|
|
|
96
|
|
|
—
|
|
|
102
|
|
||||||
Maturities and paydowns
|
—
|
|
|
30
|
|
|
—
|
|
|
161
|
|
|
—
|
|
|
191
|
|
||||||
Net sales (purchases) of short-term investments with maturities of less than three months
|
—
|
|
|
126
|
|
|
(8
|
)
|
|
(82
|
)
|
|
—
|
|
|
36
|
|
||||||
Net proceeds from paydowns on FG VIEs’ assets
|
—
|
|
|
—
|
|
|
—
|
|
|
147
|
|
|
—
|
|
|
147
|
|
||||||
Investment in subsidiaries
|
—
|
|
|
(28
|
)
|
|
—
|
|
|
(139
|
)
|
|
167
|
|
|
—
|
|
||||||
Repayment of intercompany loans
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
(10
|
)
|
|
—
|
|
||||||
Proceeds from sale of subsidiaries
|
—
|
|
|
—
|
|
|
—
|
|
|
139
|
|
|
(139
|
)
|
|
—
|
|
||||||
Return of capital from subsidiaries
|
—
|
|
|
—
|
|
|
101
|
|
|
70
|
|
|
(171
|
)
|
|
—
|
|
||||||
Acquisition of MBIA UK, net of cash acquired
|
—
|
|
|
—
|
|
|
—
|
|
|
95
|
|
|
—
|
|
|
95
|
|
||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
59
|
|
|
—
|
|
|
59
|
|
||||||
Net cash flows provided by (used in) investing activities
|
—
|
|
|
70
|
|
|
97
|
|
|
304
|
|
|
(126
|
)
|
|
345
|
|
||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Return of capital
|
—
|
|
|
—
|
|
|
—
|
|
|
(70
|
)
|
|
70
|
|
|
—
|
|
||||||
Capital contribution
|
—
|
|
|
—
|
|
|
25
|
|
|
3
|
|
|
(28
|
)
|
|
—
|
|
||||||
Dividends paid
|
(70
|
)
|
|
(470
|
)
|
|
(278
|
)
|
|
(475
|
)
|
|
1,223
|
|
|
(70
|
)
|
||||||
Repurchases of common stock
|
(501
|
)
|
|
—
|
|
|
—
|
|
|
(101
|
)
|
|
101
|
|
|
(501
|
)
|
||||||
Net paydowns of FG VIEs’ liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(157
|
)
|
|
—
|
|
|
(157
|
)
|
||||||
Paydown of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
(27
|
)
|
|
(30
|
)
|
||||||
Repayment of intercompany loans
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
||||||
Other
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
||||||
Net cash flows provided by (used in) financing activities
|
(579
|
)
|
|
(480
|
)
|
|
(253
|
)
|
|
(803
|
)
|
|
1,349
|
|
|
(766
|
)
|
||||||
Effect of exchange rate changes
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
||||||
Increase (decrease) in cash and restricted cash
|
—
|
|
|
32
|
|
|
2
|
|
|
(17
|
)
|
|
—
|
|
|
17
|
|
||||||
Cash and restricted cash at beginning of period
|
—
|
|
|
1
|
|
|
—
|
|
|
126
|
|
|
—
|
|
|
127
|
|
||||||
Cash and restricted cash at end of period
|
$
|
—
|
|
|
$
|
33
|
|
|
$
|
2
|
|
|
$
|
109
|
|
|
$
|
—
|
|
|
$
|
144
|
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9B.
|
OTHER INFORMATION
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
ITEM 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
ITEM 15.
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|
(a)
|
Financial Statements, Financial Statement Schedules and Exhibits
|
1.
|
Financial Statements
|
*
|
Management contract or compensatory plan
|
ITEM 16.
|
FORM 10-K SUMMARY
|
|
Assured Guaranty Ltd.
|
|
|
|
|
|
By:
|
/s/ Dominic J. Frederico
Name: Dominic J. Frederico
Title: President and Chief Executive Officer
|
|
|
Name
|
|
|
|
|
Position
|
|
|
|
|
Date
|
|
|
|
|
|
||||||||||||
/s/ Francisco L. Borges
Francisco L. Borges
|
Chairman of the Board; Director
|
February 28, 2020
|
||||||||||||
|
|
|
||||||||||||
/s/ Dominic J. Frederico
Dominic J. Frederico
|
President and Chief Executive Officer; Director
|
February 28, 2020
|
||||||||||||
|
|
|
||||||||||||
/s/ Robert A. Bailenson
Robert A. Bailenson
|
Chief Financial Officer (Principal Financial Officer)
|
February 28, 2020
|
||||||||||||
|
|
|
||||||||||||
/s/ Laura Bieling
Laura Bieling
|
Chief Accounting Officer and Controller (Principal Accounting Officer)
|
February 28, 2020
|
||||||||||||
|
|
|
||||||||||||
/s/ G. Lawrence Buhl
G. Lawrence Buhl
|
Director
|
February 28, 2020
|
||||||||||||
|
|
|
||||||||||||
/s/ Bonnie L. Howard
Bonnie L. Howard
|
Director
|
February 28, 2020
|
||||||||||||
|
|
|
||||||||||||
/s/ Thomas W. Jones
Thomas W. Jones
|
Director
|
February 28, 2020
|
||||||||||||
|
|
|
||||||||||||
/s/ Patrick W. Kenny
Patrick W. Kenny
|
Director
|
February 28, 2020
|
||||||||||||
|
|
|
||||||||||||
/s/ Alan J. Kreczko
Alan J. Kreczko
|
Director
|
February 28, 2020
|
||||||||||||
|
|
|
||||||||||||
/s/ Simon W. Leathes
Simon W. Leathes
|
Director
|
February 28, 2020
|
||||||||||||
|
|
|
||||||||||||
/s/ Michael T. O'Kane
Michael T. O'Kane
|
Director
|
February 28, 2020
|
||||||||||||
|
|
|
||||||||||||
/s/ Yukiko Omura
Yukiko Omura
|
Director
|
February 28, 2020
|
•
|
Common Shares, $0.01 par value per share ("common shares" or “share capital”);
|
•
|
Assured Guaranty US Holdings Inc. 5.000% $500,000,000 Senior Notes due 2024;
|
•
|
Assured Guaranty Municipal Holdings Inc. 6-7/8% $100,000,000 Quarterly Interest Bonds due 2101;
|
•
|
Assured Guaranty Municipal Holdings Inc. 6.25% $230,000,000 Quarterly Interest Bonds due 2102; and
|
•
|
Assured Guaranty Municipal Holdings Inc. 5.60% $100,000,000 Quarterly Interest Bonds due 2103.
|
•
|
shareholders have limited ability to remove directors;
|
•
|
if the controlled shares of any U.S. Person constitute 9.5% or more of the votes conferred by the issued shares of AGL, the voting rights with respect to the controlled shares of such U.S. Person shall be limited, in the aggregate, to a voting power of less than 9.5%;
|
•
|
AGL’s board of directors may decline to approve or register the transfer of any common shares on AGL’s share register if it appears to the board of directors, after taking into account the limitations on voting rights contained in AGL’s Bye-Laws, that any adverse tax, regulatory or legal consequences to us, any of our subsidiaries or any shareholder, would result from such transfer (other than such as AGL’s board of directors considers to be de minimis); and
|
•
|
subject to any applicable requirements of or commitments to the New York Stock Exchange, AGL’s directors may decline to record the transfer of any common shares on AGL’s share register unless the board of directors obtains: (i) a written opinion from counsel supporting the legality of the transaction under U.S. securities laws and (ii) approval from appropriate governmental authority if such approval is required.
|
•
|
a change in or an amendment to the laws (including any regulations promulgated thereunder) of a taxing jurisdiction, which change or amendment is announced after the date of the Prospectus Supplement dated June 17, 2014 (pursuant to which the AGUS Notes were offered); or
|
•
|
any change in or amendment to any official position regarding the application or interpretation of the laws or regulations of a taxing jurisdiction, which change or amendment is announced after the date of the Prospectus Supplement dated June 17, 2014 (pursuant to which the AGUS Notes were offered),
|
(1)
|
100% of the principal amount of the AGUS Notes to be redeemed; and
|
(2)
|
the sum of the present values of the remaining scheduled payments of principal and interest (excluding interest accrued to the redemption date) on the AGUS Notes discounted to the date of redemption on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the applicable Treasury Rate plus 40 basis points,
|
•
|
the principal of and any premium and interest on:
|
•
|
indebtedness for money borrowed; and
|
•
|
indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which the person is responsible or liable;
|
•
|
all capitalized lease obligations;
|
•
|
all obligations issued or assumed as the deferred purchase price of property, all conditional sale obligations and all obligations under any title retention agreement, but excluding trade accounts payable arising in the ordinary course of business;
|
•
|
all obligations for the reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit transaction, generally other than obligations with respect to letters of credit securing obligations, other than obligations of the type referred to above, entered into in the ordinary course of business to the extent these letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the third business day following receipt by such person of a demand for reimbursement following payment on the letter of credit;
|
•
|
all obligations of the type referred to above of other persons and all dividends of other persons for the payment of which, in either case, the person is responsible or liable as obligor, guarantor or otherwise;
|
•
|
all obligations of the type referred to above of other persons secured by any mortgage, pledge, lien, security interest or other encumbrance on any property or asset of the person, whether or not the obligation is assumed by the person; and
|
•
|
any amendments, modifications, refundings, renewals or extensions of any indebtedness or obligation described above.
|
•
|
consolidate or amalgamate with or merge into any person or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to any person; or
|
•
|
permit any person to consolidate or amalgamate with or merge into AGUS or AGL, respectively, or convey, transfer or lease its properties and assets as an entirety or substantially as an entirety to AGUS or AGL, respectively;
|
•
|
in the case of AGUS, the person is a corporation organized and existing under the laws of the United States of America, any state of the United States or the District of Columbia;
|
•
|
in the case of AGL, the person is a corporation organized and existing under the laws of the United States of America, any state of the United States, the District of Columbia, Bermuda or any other country that, on the date of the indenture, was a member of the Organization for Economic Cooperation and Development;
|
•
|
the surviving entity expressly assumes the payment of all amounts on all of the AGUS or AGL debt securities and the performance of AGUS’ or AGL’s obligations under the AGUS Indenture and the AGUS Notes or AGL indenture and AGL debt securities;
|
•
|
the surviving entity provides for conversion or exchange rights in accordance with the provisions of the AGL debt securities of any series that are convertible or exchangeable into common shares or other securities; and
|
•
|
immediately after giving effect to the transaction and treating any indebtedness which becomes an obligation of AGUS or AGL or a subsidiary as a result of the transaction as having been incurred by AGUS or AGL or the subsidiary at the time of the transaction, no event of default, and no event which after notice or lapse of time or both would become an event of default, will have happened and be continuing.
|
•
|
default in the payment of any interest on, or any additional amounts payable with respect to, any AGUS Notes when the interest or additional amounts become due and payable, and continuance of this default for a period of 30 days;
|
•
|
default in the payment of the principal of or any premium on, or any additional amounts payable with respect to, any AGUS Notes when the principal, premium or additional amounts become due and payable either at maturity, upon any redemption, by declaration of acceleration or otherwise;
|
•
|
default in the performance, or breach, of any covenant or warranty of AGUS or AGL for the benefit of the holders of the AGUS Notes, and the continuance of this default or breach for a period of 60 days after AGUS has received written notice from the holders;
|
•
|
if any event of default under a mortgage, indenture or instrument under which AGL or AGUS may issue, or by which AGL or AGUS may secure or evidence, any indebtedness, including an event of default under any other series of AGUS debt securities, whether the indebtedness now exists or is later created or incurred, happens and consists of default in the payment of more than $50,000,000 in principal amount of indebtedness at the maturity of the indebtedness, after giving effect to any applicable grace period, or results in the indebtedness in principal amount in excess of $50,000,000 becoming or being declared due and payable prior to the date on which it would otherwise become due and payable, and this default is not cured or the acceleration is not rescinded or annulled within a period of 30 days after AGUS has received written notice;
|
•
|
AGUS or AGL shall fail within 60 days to pay, bond or otherwise discharge any uninsured judgment or court order for the payment of money in excess of $50,000,000, which is not stayed on appeal or is not otherwise being appropriately contested in good faith; and
|
•
|
events in bankruptcy, insolvency or reorganization of AGUS or AGL.
|
•
|
change the stated maturity of the principal of, or any premium or installment of interest on or any additional amounts with respect to any AGUS Notes;
|
•
|
reduce the principal amount of, or the rate, or modify the calculation of the rate, of interest on, or any additional amounts with respect to, or any premium payable upon the redemption of, any AGUS Notes;
|
•
|
change the obligation of AGUS or AGL to pay additional amounts with respect to any AGUS Notes;
|
•
|
reduce the amount of the principal of an original issue discount security that would be due and payable upon a declaration of acceleration of the maturity of the original issue discount security or the amount provable in bankruptcy;
|
•
|
change the redemption provisions of any AGUS Notes or adversely affect the right of repayment at the option of any holder of any AGUS Notes;
|
•
|
change the place of payment or the coin or currency in which the principal of, any premium or interest on or any additional amounts with respect to any AGUS Notes is payable;
|
•
|
impair the right to institute suit for the enforcement of any payment on or after the stated maturity of any AGUS Notes, or, in the case of redemption, on or after the redemption date or, in the case of repayment at the option of any holder, on or after the repayment date;
|
•
|
reduce the percentage in principal amount of the outstanding AGUS Notes, the consent of whose holders is required in order to take specific actions;
|
•
|
reduce the requirements for quorum or voting by holders of AGUS Notes;
|
•
|
modify or effect in any manner adverse to the holders of the AGUS Notes the terms and conditions of the obligations of AGL in respect of the due and punctual payment of principal of, or any premium or interest on, or any sinking fund requirements or additional amounts with respect to, the AGUS Notes;
|
•
|
modify any of the provisions regarding the waiver of past defaults and the waiver of specified covenants by the holders of AGUS Notes, except to increase any percentage vote required or to provide that other provisions of the AGUS Indenture cannot be modified or waived without the consent of the holder of each AGUS debt security affected by the modification or waiver;
|
•
|
make any change that adversely affects the right to convert or exchange any AGUS Notes into or for other securities of AGUS, AGL or other securities, cash or property in accordance with its terms; or
|
•
|
modify any of the above provisions.
|
•
|
provide for a successor to AGUS or AGL pursuant to a consolidation, amalgamation, merger or sale of assets;
|
•
|
add to the covenants of AGUS or AGL for the benefit of the holders of all or any series of AGUS Notes or to surrender any right or power conferred upon AGUS or AGL by the applicable AGUS Indenture;
|
•
|
provide for a successor trustee with respect to the AGUS Notes of all or any series;
|
•
|
cure any ambiguity or correct or supplement any provision in either AGUS Indenture which may be defective or inconsistent with any other provision, or to make any other provisions with respect to matters or questions arising under the AGUS Indenture which will not adversely affect the interests of the holders of AGUS Notes of any series;
|
•
|
change the conditions, limitations and restrictions on the authorized amount, terms or purposes of issue, authentication and delivery of the AGUS Notes under the AGUS Indenture;
|
•
|
add any additional events of default with respect to all or any series of AGUS Notes;
|
•
|
secure the AGUS Notes;
|
•
|
provide for conversion or exchange rights of the holders of any series of AGUS Notes; or
|
•
|
make any other change that does not materially adversely affect the interests of the holders of any AGUS Notes then outstanding under the AGUS Indenture.
|
•
|
in the payment of principal, any premium or interest on or any additional amounts with respect to the AGUS Notes of the series; or
|
•
|
in respect of a covenant or provision of the AGUS Indenture that cannot be modified or amended without the consent of the holder of each outstanding AGUS Notes of any series affected.
|
•
|
the defeasance or covenant defeasance does not result in a breach or violation of, or constitute a default under, the AGUS Indenture or any other material agreement or instrument to which AGUS or AGL is a party or by which either of them is bound;
|
•
|
no event of default or event which with notice or lapse of time or both would become an event of default with respect to the AGUS Notes to be defeased will have occurred and be continuing on the date of establishment of the trust and, with respect to defeasance only, at any time during the period ending on the 123rd day after that date; and
|
•
|
AGUS or AGL has delivered to the trustee an opinion of counsel to the effect that holders of the AGUS Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the defeasance or covenant defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the defeasance or covenant defeasance had not occurred. The opinion of counsel, in the case of defeasance, must refer to and be based upon a letter ruling of the IRS received by AGUS or AGL, a Revenue Ruling published by the IRS, or a change in applicable U.S. federal income tax law occurring after the date of the AGUS Indenture.
|
•
|
a sale, transfer or other disposition of any capital stock of any Restricted Subsidiary to a wholly owned subsidiary of AGMH or that subsidiary;
|
•
|
a sale, transfer or other disposition of the entire capital stock of any Restricted Subsidiary for at least fair value; or
|
•
|
a sale, transfer or other disposition of the capital stock of any Restricted Subsidiary for at least fair value if, after giving effect to it, AGMH and its subsidiaries would own more than 80% of the issued and outstanding voting stock of that Restricted Subsidiary. (AGMH Indenture Section 3.07)
|
•
|
the successor or purchaser is a corporation organized and existing under the laws of the United States of America, any State of the United States of America or the District of Columbia;
|
•
|
the corporation formed by the consolidation or into which AGMH has been merged, or which acquired that property, expressly assumes the due and punctual payment of the principal of, and interest and premium, if any, on, all the AGMH Debt Securities under the Indenture, as well as the due and punctual performance and observance of all of AGMH’s covenants and conditions under the indenture; and
|
•
|
immediately after giving effect to that transaction, no event of default under the Indenture, and no event which, after notice or lapse of time or both, would become an event of default under the Indenture, has occurred and is continuing. (AGMH Indenture Section 9.01)
|
Type of event of default specified above
|
Percentage of holders required
|
Principal and accrued interest which may be accelerated
|
(a), (b) and (c)
|
Not less than 25% in principal amount of the debt securities of the affected series then outstanding
|
All debt securities of that series then outstanding
|
(d), with respect to less than all series, and (h), unless otherwise specified in the applicable supplemental indenture
|
Not less than 25% in principal amount of the debt securities of all affected series then outstanding, voting as a single class
|
All debt securities of the affected series then outstanding
|
(d), with respect to all series, (e), (f) or (g)
|
Not less than 25% in principal amount of all debt securities outstanding under the indenture, treated as one class
|
All debt securities then outstanding
|
Type of event of default specified above
|
Percentage of holders required
|
Debt Securities Subject to Waiver, Annulment and Recission
|
(a), (b) and (c)
|
Holders of a majority in aggregate principal amount of the debt securities of the affected series, voting as a separate class, then outstanding
|
All debt securities of that series then outstanding
|
(d), with respect to less than all series, and (h), unless otherwise specified in the applicable supplemental indenture
|
Holders of a majority in aggregate principal amount of all affected debt securities then outstanding, voting as a single class
|
All debt securities of the affected series then outstanding
|
(d), with respect to all series, (e), (f) or (g)
|
Holders of a majority in aggregate principal amount of the debt securities of all series then outstanding, voting as a single class
|
All debt securities then outstanding
|
•
|
that holder has previously given to the trustee written notice of a continuing default,
|
•
|
the holders of not less than 25% in principal amount of the debt securities of that series then outstanding have made written request on the trustee to institute such action or proceeding and have offered to the trustee any reasonable indemnity that the trustee may require relating to their request,
|
•
|
the trustee fails to institute the requested proceeding within 60 days and
|
•
|
no direction inconsistent with such written request has been given to the trustee by the holders of a majority in principal amount of the debt securities of such series then outstanding. (AGMH Indenture Section 5.06)
|
•
|
to be discharged from its obligations with respect to the debt securities of that series, subject to limited exceptions ("defeasance") and/or
|
•
|
to be released from its obligations with respect to that series of debt securities under the covenant in the AGMH indenture relating to limitations on disposition of stock of Restricted Subsidiaries and, in the case of the senior indenture, also the covenant relating to limitations on liens ("covenant defeasance").
|
•
|
extend the final maturity of any debt security,
|
•
|
reduce the principal amount of any debt security,
|
•
|
reduce the rate or extend the time of payment of interest on any debt security,
|
•
|
reduce any amount payable on redemption of any debt security,
|
•
|
reduce the amount of the principal of an original issue discount debt security that would be due and payable upon an acceleration of the maturity of that debt security or the amount of that debt security provable in bankruptcy,
|
•
|
impair or affect the right of any holder to institute suit for the payment of any debt security, if the debt securities provide for those rights,
|
•
|
impair or affect any right of repayment of any debt security at the option of the holder or
|
•
|
reduce the percentage of debt securities of any series, the consent of the holders of which is required for any supplemental indenture. (AGMH Indenture Section 8.02)
|
Executive Officer
|
Salary
|
Dominic J. Frederico
President and Chief Executive Officer
|
$1,250,000
|
Robert A. Bailenson
Chief Financial Officer
|
$800,000
|
Ling Chow
General Counsel and Secretary
|
$550,000
|
Russell B. Brewer II
Chief Surveillance Officer
|
$525,000
|
Bruce E. Stern*
Executive Officer
|
$500,000
|
|
|
•
|
To be considered to receive equity and non-equity incentive compensation for 2020 performance.
|
|
|
•
|
To receive other annual compensation and benefits, including employer contributions to retirement plans.
|
* Mr. Stern resigned as Executive Officer and as an executive officer of the Company, effective December 31, 2019. Effective January 1, 2020, Mr. Stern became the Senior Advisor to the Chief Executive Officer of Assured Guaranty US Holdings Inc.
|
|
(a)
|
The Plan as set forth herein shall apply to amounts deferred under the Plan on or after the Restatement Effective Date; provided that amounts deferred prior to the Restatement Effective Date will be subject to the applicable provisions of the Plan as in effect prior to the Restatement Effective Date.
|
(b)
|
All amounts deferred under the Plan will be subject to the provisions of section 409A of the Code and applicable guidance issued thereunder (“Section 409A”), regardless of whether such amounts were deferred (within the meaning of Section 409A) on, prior to, or after January 1, 2005.
|
(a)
|
A Deferral Election with respect to any Compensation must be submitted to the Administrator before the beginning of the calendar year during which the amount to be deferred will be earned. As of December 31 immediately preceding the first day of each calendar year, said Deferral Election is irrevocable for the calendar year.
|
(b)
|
Notwithstanding the foregoing, in a year in which an Employee first becomes an Eligible Employee and the terms of Section 3.2(a) are not satisfied for such year, and provided that such Employee is not eligible to participate in any other account balance arrangement maintained by the Company or a Related Company which is subject to Code Section 409A, such Deferral Election shall be filed within thirty (30) days after the date on which an Employee first becomes an Eligible Employee, with respect to Compensation to be earned during the remainder of the calendar year after such election is made.
|
(a)
|
Deferrals may be made in whole percentages only.
|
(b)
|
The maximum amount that a Participant may elect pursuant to a Deferral Election is six percent (6%) of the Participant’s Compensation that is payable after the contributions to the Retirement Plan for such Participant have reached the Code Section 415 limits, as described in Section 3.1.
|
(c)
|
Notwithstanding the provisions of section 3.1, a Participant’s Deferral Election under the Plan shall be effective and an amount shall be credited to the Participant’s Account in accordance with Section 3.1 (and Matching Contributions shall be credited to the Participant’s Account in accordance with section 3.5 and Employer Core Retirement Contributions shall be credited to the Participant’s Account in accordance with section 3.6) for a Plan Year only if the Participant’s before-tax elective deferral contributions pursuant to the Retirement Plan together with an Employer’s contributions pursuant to the Retirement Plan collectively have reached the maximum amount permitted under Section 415 of the Code.
|
(a)
|
Deferrals shall be credited to a Participant’s Account pursuant to Section 3.1 at the same time that before-tax elective deferral contributions would otherwise have been credited to his or her accounts under the Retirement Plan.
|
(b)
|
Matching Contributions shall be credited to a Participant’s Account pursuant to Section 3.5 at the same time that matching contributions would otherwise have been credited to his or her accounts under the Retirement Plan.
|
(c)
|
Employer Core Retirement Contributions shall be credited to a Participant’s Account pursuant to Section 3.6 at the same time that Employer Core Contributions would otherwise have been credited to his or her accounts under the Retirement Plan.
|
(d)
|
Employer Discretionary Contributions, if any, shall be credited to a Participant’s Account pursuant to the Section 3.7 at soon as practicable following the Employer’s determination to credit such contribution to Participant Accounts.
|
(a)
|
A Participant may direct that his or her Account established pursuant to Section 5.1 may be credited with earnings and losses as if they were invested in one or more Investment Funds as made available by the Company, including the Employer Stock Fund (as defined in Exhibit A), subject to the rules and regulations set forth in Exhibit A; provided, that no new election to invest in the Employer Stock Fund may be made on or after the Restatement Effective Date. The Company may from time to time change the Investment Indexes for purposes of this Plan.
|
(b)
|
The Administrator shall adjust the amounts credited to each Participant’s Account to reflect Deferrals, Matching Contributions, Employer Core Retirement Contributions, Employer Discretionary Contributions, investment experience, distributions and any other appropriate adjustments. Such adjustments shall be made as frequently as is administratively feasible (and to the extent permitted under Code section 409A).
|
(c)
|
A Participant may change his or her selection of Investment Funds no more than six (6) times each Plan Year with respect to his or her Account by filing a new election in accordance with procedures established by the Administrator. An election shall be effective as soon as administratively feasible following the date of the change as indicated in writing by the Participant.
|
(d)
|
Notwithstanding a Participant’s ability to designate the Investment Funds or Index in which his or her Account shall be deemed invested, neither the Company, any Employer, nor the Administrator shall have no obligation to invest any funds in accordance with the Participant’s election. Participants’ Account shall merely be bookkeeping entries on the applicable Employer’s books, and no Participant shall obtain any property right or interest in any Investment Index or Investment Fund.
|
(a)
|
If the Participant becomes Disabled prior to his or her Separation from Service (regardless of whether the Participant remains employed for a period after becoming Disabled), the Participant’s Account balances will be paid in a lump sum within 60 days of becoming Disabled, without regard to any election made by the Participant to receive installments. A Participant will be considered to be “Disabled” for purposes of the Plan if he or she would be treated as “disabled” in accordance with the provisions of Treas. Reg. §1.409A-3(i)(4).
|
(b)
|
If a Participant’s Separation from Service is his or her date of death, the Participant’s Account balances will be paid in a lump sum within 60 days of death.
|
(c)
|
If a Participant is a Specified Employee at the time of his or her Separation from Service, and payment of benefits under the Plan is by reason of the Participant’s Separation from Service, payments of benefits under the Plan may not be paid before the date that is six months after the Participant’s Separation from Service or, if earlier, the date of death of the Participant. At the end of the six-month period described in the preceding sentence, amounts that could not be paid by reason of the limitation in this paragraph (c) shall be paid on the first business day of the seventh month following the Separation from Service.
|
(a)
|
the specific reason or reasons for denial of the claim;
|
(b)
|
a specific reference to the Plan provisions on which the denial is based;
|
(c)
|
a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and
|
(d)
|
an explanation of the provisions of this Article.
|
(a)
|
The Administrator is expressly empowered to limit the amount of Compensation that may be deferred; to interpret the Plan and to determine all questions arising in the administration, interpretation and application of the Plan; to employ actuaries, accountants, counsel, and other persons it deems necessary in connection with the administration of the Plan; to request any information from any Employer it deems necessary to determine whether the Employer would be considered insolvent or subject to a proceeding in bankruptcy; and to take all other necessary and proper actions to fulfill its duties as Administrator.
|
(b)
|
The Administrator, including any person or committee member to whom the Board has delegated the authority to act on behalf of the Administrator, shall not be liable for any actions by it, unless due to its own negligence, willful misconduct or lack of good faith.
|
(c)
|
The Administrator, including any person or committee member to whom the Board has delegated the authority to act on behalf of the Administrator, shall be indemnified and saved harmless by the Employers from and against all personal liability to which it may be subject by reason of any act done or omitted to be done in its official capacity as Administrator in good faith in the administration of the Plan, including all expenses reasonably incurred in its defense in the event the Employers fail to provide such defense upon the request of the Administrator. Any person or committee member acting on behalf of the Administrator is relieved of all personal responsibility in connection with its duties hereunder to the fullest extent permitted by law, short of breach of duty to the beneficiaries.
|
Assured Guaranty Re Ltd. (Bermuda domiciled subsidiary of Assured Guaranty Ltd.)
|
Assured Guaranty US Holdings Inc. (Delaware domiciled subsidiary of Assured Guaranty Ltd.)
|
Assured Guaranty Municipal Holdings Inc. (New York domiciled subsidiary of Assured Guaranty US Holdings Inc.)
|
Municipal Assurance Holdings Inc. (Delaware domiciled 60.7% owned subsidiary of Assured Guaranty Municipal Corp. and 39.3% owned subsidiary of Assured Guaranty Corp.)
|
Assured Guaranty Corp. (Maryland domiciled subsidiary of Assured Guaranty US Holdings Inc.)
|
Assured Guaranty Municipal Corp. (New York domiciled subsidiary of Assured Guaranty Municipal Holdings Inc.)
|
Municipal Assurance Corp. (New York domiciled subsidiary of Municipal Assurance Holdings Inc.)
|
Assured Guaranty (Europe) plc (England domiciled subsidiary of Assured Guaranty Municipal Corp.)
|
Assured Guaranty (Europe) S.A. (French domiciled 99.997% owned subsidiary of Assured Guaranty Municipal Corp. and 0.003% owned subsidiary of Assured Guaranty Municipal Holdings Inc.)3
|
BlueMountain Capital Management, LLC (Delaware domiciled subsidiary of Assured Guaranty US Holdings Inc.)4
|
BlueMountain CLO Management, LLC (Delaware domiciled subsidiary of Assured Guaranty US Holdings Inc.)4
|
BlueMountain GP Holdings, LLC (Delaware domiciled subsidiary of Assured Guaranty US Holdings Inc.)4
|
BlueMountain Capital Partners (London) LLP (United Kingdom domiciled subsidiary of BlueMountain Capital Management, LLC)4
|
BlueMountain Montenvers GP S.å.r.l (Luxembourg domiciled subsidiary of BlueMountain Capital Management, LLC)4
|
Cedar Personnel Ltd. (Bermuda domiciled subsidiary of Assured Guaranty Ltd.)5
|
Assured Guaranty (UK) Services Limited (England domiciled subsidiary of Assured Guaranty US Holdings Inc.)5
|
AG US Group Services Inc. (Delaware domiciled subsidiary of Assured Guaranty US Holdings Inc.)5
|
(1)
|
Pursuant to Item 601(b)(21)(ii) of Regulation S-K, the names of other subsidiaries of Assured Guaranty Ltd. are omitted, because, considered in the aggregate, they would not constitute a significant subsidiary as of the end of the year covered by this report.
|
(2)
|
All subsidiaries are wholly owned.
|
(3)
|
A new subsidiary established in Paris, France; not a “significant subsidiary” (as defined in Regulation S-X).
|
(4)
|
One of the BlueMountain entities acquired on October 1, 2019; not a “significant subsidiary” (as defined in Regulation S-X) individually or in the aggregate.
|
(5)
|
A service company; not a “significant subsidiary” (as defined in Regulation S-X) individually or in the aggregate.
|
1.
|
I have reviewed this Annual Report on Form 10-K of Assured Guaranty Ltd.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
|
|
By:
|
/s/ DOMINIC J. FREDERICO
|
|
|
|
|
|
Dominic J. Frederico
|
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this Annual Report on Form 10-K of Assured Guaranty Ltd.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
|
|
By:
|
/s/ ROBERT A. BAILENSON
|
|
|
|
|
|
Robert A. Bailenson
|
|
|
Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ DOMINIC J. FREDERICO
|
|
|
|
Name: Dominic J. Frederico
|
|
Title: President and Chief Executive Officer
|
|
Date: February 28, 2020
|
|
(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: February 28, 2020
|
|