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☒
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Bermuda
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98-0429991
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(State or other jurisdiction
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(I.R.S. employer
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of incorporation)
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identification no.)
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Title of each class:
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Trading Symbol(s)
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Name of exchange on which registered
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Common Shares
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$0.01 par value per share
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AGO
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New York Stock Exchange
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Assured Guaranty Municipal Holdings Inc. 6-7/8% $100,000,000 Quarterly Interest Bonds due 2101 (and the related guarantee of Registrant)
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AGO PRB
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New York Stock Exchange
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Assured Guaranty Municipal Holdings Inc. 6.25% $230,000,000 Quarterly Interest Bonds due 2102 (and the related guarantee of Registrant)
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AGO PRE
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New York Stock Exchange
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Assured Guaranty Municipal Holdings Inc. 5.60% $100,000,000 Quarterly Interest Bonds due 2103 (and the related guarantee of Registrant)
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AGO PRF
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New York Stock Exchange
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Assured Guaranty US Holdings Inc. 5.000% $500,000,000 Senior Notes due 2024 (and the related guarantee of Registrant)
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AGO 24
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New York Stock Exchange
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Page
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ITEM 1.
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FINANCIAL STATEMENTS
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As of
March 31, 2020 |
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As of
December 31, 2019 |
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Assets
|
|
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|
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Investment portfolio:
|
|
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|
|
||
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $8,410 and $8,371, allowance for credit loss of $73 at March 31, 2020)
|
$
|
8,568
|
|
|
$
|
8,854
|
|
Short-term investments at fair value
|
933
|
|
|
1,268
|
|
||
Other invested assets (includes $12 and $6 measured at fair value)
|
121
|
|
|
118
|
|
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Total investment portfolio
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9,622
|
|
|
10,240
|
|
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Cash
|
139
|
|
|
169
|
|
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Premiums receivable, net of commissions payable
|
1,233
|
|
|
1,286
|
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Deferred acquisition costs
|
113
|
|
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111
|
|
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Salvage and subrogation recoverable
|
820
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|
|
747
|
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Financial guaranty variable interest entities’ assets, at fair value
|
368
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|
442
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Assets of consolidated investment vehicles (includes $557 and $558 measured at fair value)
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645
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|
572
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Goodwill and other intangible assets
|
212
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|
|
216
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|
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Other assets (includes $177 and $135 measured at fair value)
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593
|
|
|
543
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Total assets
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$
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13,745
|
|
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$
|
14,326
|
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Liabilities and shareholders’ equity
|
|
|
|
|
|
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Unearned premium reserve
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$
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3,706
|
|
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$
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3,736
|
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Loss and loss adjustment expense reserve
|
1,050
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|
1,050
|
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Long-term debt
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1,221
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|
|
1,235
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|
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Credit derivative liabilities, at fair value
|
265
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191
|
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Financial guaranty variable interest entities’ liabilities with recourse, at fair value
|
312
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367
|
|
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Financial guaranty variable interest entities’ liabilities without recourse, at fair value
|
82
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|
|
102
|
|
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Liabilities of consolidated investment vehicles (includes $426 and $481 measured at fair value)
|
431
|
|
|
482
|
|
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Other liabilities
|
405
|
|
|
511
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Total liabilities
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7,472
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|
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7,674
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Commitments and contingencies (see Note 14)
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|
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Redeemable noncontrolling interests in consolidated investment vehicles
|
8
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7
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Common stock ($0.01 par value, 500,000,000 shares authorized; 89,983,322 and 93,274,987 shares issued and outstanding)
|
1
|
|
|
1
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Retained earnings
|
6,100
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|
6,295
|
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Accumulated other comprehensive income, net of tax of $34 and $71
|
138
|
|
|
342
|
|
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Deferred equity compensation
|
1
|
|
|
1
|
|
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Total shareholders’ equity attributable to Assured Guaranty Ltd.
|
6,240
|
|
|
6,639
|
|
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Nonredeemable noncontrolling interests
|
25
|
|
|
6
|
|
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Total shareholders’ equity
|
6,265
|
|
|
6,645
|
|
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Total liabilities, redeemable noncontrolling interests and shareholders’ equity
|
$
|
13,745
|
|
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$
|
14,326
|
|
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Three Months Ended March 31,
|
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2020
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2019
|
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Revenues
|
|
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|
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Net earned premiums
|
$
|
103
|
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$
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118
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Net investment income
|
80
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|
98
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|
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Asset management fees
|
23
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|
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—
|
|
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Net realized investment gains (losses)
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(5
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)
|
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(12
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)
|
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Net change in fair value of credit derivatives
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(77
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)
|
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(22
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)
|
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Fair value gains (losses) on committed capital securities
|
48
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|
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(9
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)
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Fair value gains (losses) on financial guaranty variable interest entities
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(9
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)
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5
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Fair value gains (losses) on consolidated investment vehicles
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(12
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)
|
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—
|
|
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Foreign exchange gains (losses) on remeasurement
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(62
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)
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11
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|
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Other income (loss)
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7
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6
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Total revenues
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96
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|
195
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Expenses
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Loss and loss adjustment expenses
|
20
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46
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Interest expense
|
22
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23
|
|
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Amortization of deferred acquisition costs
|
3
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6
|
|
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Employee compensation and benefit expenses
|
64
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|
41
|
|
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Other operating expenses
|
45
|
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23
|
|
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Total expenses
|
154
|
|
|
139
|
|
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Income (loss) before income taxes and equity in net earnings of investees
|
(58
|
)
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56
|
|
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Equity in net earnings of investees
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(4
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)
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2
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Income (loss) before income taxes
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(62
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)
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58
|
|
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Provision (benefit) for income taxes
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(4
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)
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4
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|
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Net income (loss)
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(58
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)
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54
|
|
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Less: Noncontrolling interests
|
(3
|
)
|
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—
|
|
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Net income (loss) attributable to Assured Guaranty Ltd.
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$
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(55
|
)
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$
|
54
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Earnings per share:
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|
|
|
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Basic
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$
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(0.59
|
)
|
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$
|
0.52
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Diluted
|
$
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(0.59
|
)
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$
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0.52
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Three Months Ended March 31,
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||||||
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2020
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|
2019
|
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Net income (loss)
|
$
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(58
|
)
|
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$
|
54
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Change in net unrealized gains (losses) on:
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Investments with no credit impairment recognized in the statement of operations, net of tax provision (benefit) of $(27) and $25
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(162
|
)
|
|
163
|
|
||
Investments with credit impairment recognized in the statement of operations, net of tax provision (benefit) of $(13) and $0
|
(52
|
)
|
|
5
|
|
||
Change in net unrealized gains (losses) on investments
|
(214
|
)
|
|
168
|
|
||
Change in net unrealized gains (losses) on financial guaranty variable interest entities' liabilities with recourse, net of tax
|
10
|
|
|
—
|
|
||
Other, net of tax provision (benefit) of $0 and $0
|
—
|
|
|
—
|
|
||
Other comprehensive income (loss)
|
(204
|
)
|
|
168
|
|
||
Comprehensive income (loss)
|
(262
|
)
|
|
222
|
|
||
Less: Comprehensive income (loss) attributable to noncontrolling interest
|
(3
|
)
|
|
—
|
|
||
Comprehensive income (loss) attributable to Assured Guaranty Ltd.
|
$
|
(259
|
)
|
|
$
|
222
|
|
|
Common Shares Outstanding
|
|
|
Common
Stock
Par Value
|
|
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, 2019 |
93,274,987
|
|
|
|
$
|
1
|
|
|
$
|
6,295
|
|
|
$
|
342
|
|
|
$
|
1
|
|
|
$
|
6,639
|
|
|
$
|
6
|
|
|
$
|
6,645
|
|
Net loss
|
—
|
|
|
|
—
|
|
|
(55
|
)
|
|
—
|
|
|
—
|
|
|
(55
|
)
|
|
(1
|
)
|
|
(56
|
)
|
|||||||
Dividends ($0.20 per share)
|
—
|
|
|
|
—
|
|
|
(19
|
)
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
|
—
|
|
|
(19
|
)
|
|||||||
Share-based compensation
|
337,745
|
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(5
|
)
|
|||||||
Common stock repurchases
|
(3,629,410
|
)
|
|
|
—
|
|
|
(116
|
)
|
|
—
|
|
|
—
|
|
|
(116
|
)
|
|
—
|
|
|
(116
|
)
|
|||||||
Other comprehensive loss
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(204
|
)
|
|
—
|
|
|
(204
|
)
|
|
—
|
|
|
(204
|
)
|
|||||||
Contributions and reallocation of ownership interests
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
20
|
|
|||||||
Balance at
March 31, 2020 |
89,983,322
|
|
|
|
$
|
1
|
|
|
$
|
6,100
|
|
|
$
|
138
|
|
|
$
|
1
|
|
|
$
|
6,240
|
|
|
$
|
25
|
|
|
$
|
6,265
|
|
|
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, 2018 |
103,672,592
|
|
|
|
$
|
1
|
|
|
$
|
86
|
|
|
$
|
6,374
|
|
|
$
|
93
|
|
|
$
|
1
|
|
|
$
|
6,555
|
|
|
$
|
—
|
|
|
$
|
6,555
|
|
Net income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
54
|
|
|
—
|
|
|
—
|
|
|
54
|
|
|
—
|
|
|
54
|
|
||||||||
Dividends ($0.18 per share)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
|
—
|
|
|
(19
|
)
|
||||||||
Share-based compensation
|
506,422
|
|
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
(10
|
)
|
||||||||
Common stock repurchases
|
(1,908,605
|
)
|
|
|
—
|
|
|
(76
|
)
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
(79
|
)
|
|
—
|
|
|
(79
|
)
|
||||||||
Other comprehensive income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
168
|
|
|
—
|
|
|
168
|
|
|
—
|
|
|
168
|
|
||||||||
Balance at
March 31, 2019 |
102,270,409
|
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
6,406
|
|
|
$
|
261
|
|
|
$
|
1
|
|
|
$
|
6,669
|
|
|
$
|
—
|
|
|
$
|
6,669
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Net cash flows provided by (used in) operating activities
|
$
|
(164
|
)
|
|
$
|
(332
|
)
|
Investing activities
|
|
|
|
|
|
||
Fixed-maturity securities:
|
|
|
|
|
|
||
Purchases
|
(278
|
)
|
|
(196
|
)
|
||
Sales
|
86
|
|
|
471
|
|
||
Maturities and paydowns
|
217
|
|
|
177
|
|
||
Short-term investments with maturities of over three months:
|
|
|
|
||||
Purchases
|
(56
|
)
|
|
(107
|
)
|
||
Sales
|
4
|
|
|
2
|
|
||
Maturities and paydowns
|
12
|
|
|
67
|
|
||
Net sales (purchases) of short-term investments with original maturities of less than three months
|
375
|
|
|
25
|
|
||
Net proceeds from paydowns on financial guaranty variable interest entities’ assets
|
37
|
|
|
26
|
|
||
Proceeds from sales of other invested assets
|
1
|
|
|
27
|
|
||
Other
|
(9
|
)
|
|
—
|
|
||
Net cash flows provided by (used in) investing activities
|
389
|
|
|
492
|
|
||
Financing activities
|
|
|
|
|
|
||
Dividends paid
|
(20
|
)
|
|
(20
|
)
|
||
Repurchases of common stock
|
(116
|
)
|
|
(80
|
)
|
||
Net paydowns of financial guaranty variable interest entities’ liabilities
|
(35
|
)
|
|
(25
|
)
|
||
Paydown of long-term debt
|
(21
|
)
|
|
(3
|
)
|
||
Other
|
(11
|
)
|
|
(14
|
)
|
||
Contributions from noncontrolling interests to investment vehicles
|
23
|
|
|
—
|
|
||
Net cash flows provided by (used in) financing activities
|
(180
|
)
|
|
(142
|
)
|
||
Effect of foreign exchange rate changes
|
(7
|
)
|
|
1
|
|
||
Increase (decrease) in cash and restricted cash
|
38
|
|
|
19
|
|
||
Cash and restricted cash at beginning of period
|
$
|
183
|
|
|
104
|
|
|
Cash and restricted cash at end of period
|
$
|
221
|
|
|
$
|
123
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Supplemental cash flow information
|
|
|
|
||||
Cash paid (received) during the period for:
|
|
|
|
||||
Interest on long-term debt
|
9
|
|
|
9
|
|
||
|
|
|
|
||||
Supplemental disclosure of non-cash investing activities:
|
|
|
|
||||
Purchases of fixed-maturity investments
|
$
|
—
|
|
|
$
|
(139
|
)
|
|
|
|
|
||||
|
|
|
|
||||
|
As of March 31, 2020
|
|
As of March 31, 2019
|
||||
Reconciliation of cash and restricted cash to the condensed consolidated balance sheets:
|
|
|
|
||||
Cash
|
$
|
139
|
|
|
$
|
123
|
|
Cash of consolidated investment vehicles (see Note 12)
|
82
|
|
|
—
|
|
||
Cash and restricted cash at the end of period
|
$
|
221
|
|
|
$
|
123
|
|
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.
|
•
|
improve the timeliness of recognizing changes in the liability for future policy benefits and modify the rate used to discount future cash flows,
|
•
|
simplify and improve the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts,
|
•
|
simplify the amortization of deferred acquisition costs, and
|
•
|
improve the effectiveness of the required disclosures.
|
|
S&P Global Ratings, a division of Standard & Poor’s Financial Services LLC
|
|
Kroll Bond Rating
Agency
|
|
Moody’s Investors Service, Inc.
|
|
A.M. Best Company,
Inc.
|
AGM
|
AA (stable) (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) (3/4/20)
|
|
—
|
|
—
|
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 loss adjustment expense (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.
|
|
Three Months Ended March 31, 2020
|
||||||||||||||||||
|
Insurance
|
|
Asset Management
|
|
Corporate
|
|
Other
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Third-party revenues
|
$
|
193
|
|
|
$
|
16
|
|
|
$
|
(4
|
)
|
|
$
|
(15
|
)
|
|
$
|
190
|
|
Intersegment revenues
|
3
|
|
|
1
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|||||
Total revenues
|
196
|
|
|
17
|
|
|
(4
|
)
|
|
(19
|
)
|
|
190
|
|
|||||
Total expenses
|
84
|
|
|
28
|
|
|
35
|
|
|
(1
|
)
|
|
146
|
|
|||||
Income (loss) before income taxes and equity in net earnings of investees
|
112
|
|
|
(11
|
)
|
|
(39
|
)
|
|
(18
|
)
|
|
44
|
|
|||||
Equity in net earnings of investees
|
(9
|
)
|
|
—
|
|
|
(5
|
)
|
|
10
|
|
|
(4
|
)
|
|||||
Adjusted operating income (loss) before income taxes
|
103
|
|
|
(11
|
)
|
|
(44
|
)
|
|
(8
|
)
|
|
40
|
|
|||||
Provision (benefit) for income taxes
|
18
|
|
|
(2
|
)
|
|
(5
|
)
|
|
(1
|
)
|
|
10
|
|
|||||
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
(3
|
)
|
|||||
Adjusted operating income (loss)
|
$
|
85
|
|
|
$
|
(9
|
)
|
|
$
|
(39
|
)
|
|
$
|
(4
|
)
|
|
$
|
33
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Supplemental income statement information
|
|
|
|
|
|
|
|
|
|
||||||||||
Net investment income
|
$
|
83
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
(4
|
)
|
|
$
|
80
|
|
Interest expense
|
—
|
|
|
—
|
|
|
25
|
|
|
(3
|
)
|
|
22
|
|
|||||
Non-cash compensation and operating expenses (1)
|
9
|
|
|
3
|
|
|
3
|
|
|
—
|
|
|
15
|
|
|
Three Months Ended March 31, 2019
|
||||||||||||||||||
|
Insurance
|
|
Asset Management
|
|
Corporate
|
|
Other
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Third-party revenues
|
$
|
233
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
234
|
|
Intersegment revenues
|
1
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|||||
Total revenues
|
234
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
234
|
|
|||||
Total expenses
|
107
|
|
|
—
|
|
|
31
|
|
|
—
|
|
|
138
|
|
|||||
Income (loss) before income taxes and equity in net earnings of investees
|
127
|
|
|
—
|
|
|
(31
|
)
|
|
—
|
|
|
96
|
|
|||||
Equity in net earnings of investees
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|||||
Adjusted operating income (loss) before income taxes
|
128
|
|
|
—
|
|
|
(30
|
)
|
|
—
|
|
|
98
|
|
|||||
Provision (benefit) for income taxes
|
17
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
12
|
|
|||||
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Adjusted operating income (loss)
|
$
|
111
|
|
|
$
|
—
|
|
|
$
|
(25
|
)
|
|
$
|
—
|
|
|
$
|
86
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Supplemental income statement information
|
|
|
|
|
|
|
|
|
|
||||||||||
Net investment income
|
$
|
99
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
(2
|
)
|
|
$
|
98
|
|
Interest expense
|
—
|
|
|
—
|
|
|
24
|
|
|
(1
|
)
|
|
23
|
|
|||||
Non-cash compensation and operating expenses (1)
|
11
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
12
|
|
(1)
|
Consists of amortization of deferred acquisition costs and intangible assets, depreciation and share-based compensation.
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Net income (loss) attributable to AGL
|
$
|
(55
|
)
|
|
$
|
54
|
|
Less pre-tax adjustments:
|
|
|
|
||||
Realized gains (losses) on investments
|
(5
|
)
|
|
(12
|
)
|
||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
(88
|
)
|
|
(28
|
)
|
||
Fair value gains (losses) on CCS
|
48
|
|
|
(9
|
)
|
||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
|
(57
|
)
|
|
9
|
|
||
Total pre-tax adjustments
|
(102
|
)
|
|
(40
|
)
|
||
Less tax effect on pre-tax adjustments
|
14
|
|
|
8
|
|
||
Adjusted operating income (loss)
|
$
|
33
|
|
|
$
|
86
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
U.S.
|
$
|
150
|
|
|
$
|
182
|
|
Bermuda
|
34
|
|
|
44
|
|
||
U.K. and other
|
6
|
|
|
8
|
|
||
Total
|
$
|
190
|
|
|
$
|
234
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Revenues
|
|
|
|
||||
Total consolidated revenues
|
$
|
96
|
|
|
$
|
195
|
|
Less: Realized gains (losses) on investments
|
(5
|
)
|
|
(12
|
)
|
||
Less: Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
(88
|
)
|
|
(28
|
)
|
||
Less: Fair value gains (losses) on CCS
|
48
|
|
|
(9
|
)
|
||
Less: Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
|
(57
|
)
|
|
9
|
|
||
Plus: Credit derivative impairment (recoveries) (1)
|
(8
|
)
|
|
(1
|
)
|
||
Total segment revenues
|
$
|
190
|
|
|
$
|
234
|
|
|
|
|
|
||||
Expenses
|
|
|
|
||||
Total consolidated expenses
|
$
|
154
|
|
|
$
|
139
|
|
Plus: Credit derivative impairment (recoveries) (1)
|
(8
|
)
|
|
(1
|
)
|
||
Total segment expenses
|
$
|
146
|
|
|
$
|
138
|
|
(1)
|
Credit derivative impairment (recoveries) are included in "Net change in fair value of credit derivatives" in the Company's condensed consolidated statements of operations.
|
4.
|
Outstanding Insurance Exposure
|
•
|
BIG Category 1: Below-investment-grade transactions showing sufficient deterioration to make future losses possible, but for which none are currently expected.
|
•
|
BIG Category 2: Below-investment-grade transactions for which future losses are expected but for which no claims (other than liquidity claims, which are claims that the Company expects to be reimbursed within one year) have yet been paid.
|
•
|
BIG Category 3: Below-investment-grade transactions for which future losses are expected and on which claims (other than liquidity claims) have been paid.
|
•
|
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
|
•
|
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 the 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 March 31, 2020
|
|
As of December 31, 2019
|
|
As of March 31, 2020
|
|
As of December 31, 2019
|
||||||||
|
(in millions)
|
||||||||||||||
Public finance
|
$
|
353,984
|
|
|
$
|
363,497
|
|
|
$
|
353,031
|
|
|
$
|
362,361
|
|
Structured finance
|
11,372
|
|
|
12,279
|
|
|
10,862
|
|
|
11,769
|
|
||||
Total financial guaranty
|
$
|
365,356
|
|
|
$
|
375,776
|
|
|
$
|
363,893
|
|
|
$
|
374,130
|
|
|
|
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
|
|
$
|
375
|
|
|
0.2
|
%
|
|
$
|
2,453
|
|
|
5.1
|
%
|
|
$
|
1,182
|
|
|
13.4
|
%
|
|
$
|
176
|
|
|
24.4
|
%
|
|
$
|
4,186
|
|
|
1.8
|
%
|
AA
|
|
19,037
|
|
|
11.0
|
|
|
4,921
|
|
|
10.1
|
|
|
3,753
|
|
|
42.7
|
|
|
35
|
|
|
4.8
|
|
|
27,746
|
|
|
12.0
|
|
|||||
A
|
|
92,788
|
|
|
53.7
|
|
|
14,621
|
|
|
30.1
|
|
|
1,031
|
|
|
11.7
|
|
|
172
|
|
|
23.8
|
|
|
108,612
|
|
|
47.0
|
|
|||||
BBB
|
|
54,965
|
|
|
31.8
|
|
|
25,743
|
|
|
53.0
|
|
|
1,110
|
|
|
12.6
|
|
|
298
|
|
|
41.3
|
|
|
82,116
|
|
|
35.6
|
|
|||||
BIG
|
|
5,630
|
|
|
3.3
|
|
|
837
|
|
|
1.7
|
|
|
1,730
|
|
|
19.6
|
|
|
41
|
|
|
5.7
|
|
|
8,238
|
|
|
3.6
|
|
|||||
Total net par outstanding
|
|
$
|
172,795
|
|
|
100.0
|
%
|
|
$
|
48,575
|
|
|
100.0
|
%
|
|
$
|
8,806
|
|
|
100.0
|
%
|
|
$
|
722
|
|
|
100.0
|
%
|
|
$
|
230,898
|
|
|
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
|
|
$
|
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
|
%
|
|
BIG Net Par Outstanding
|
|
Net Par
|
||||||||||||||||
|
BIG 1
|
|
BIG 2
|
|
BIG 3
|
|
Total BIG
|
|
Outstanding
|
||||||||||
|
|
|
|
|
(in millions)
|
|
|
|
|
||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. public finance
|
$
|
1,441
|
|
|
$
|
430
|
|
|
$
|
3,759
|
|
|
$
|
5,630
|
|
|
$
|
172,795
|
|
Non-U.S. public finance
|
793
|
|
|
—
|
|
|
44
|
|
|
837
|
|
|
48,575
|
|
|||||
Public finance
|
2,234
|
|
|
430
|
|
|
3,803
|
|
|
6,467
|
|
|
221,370
|
|
|||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. RMBS
|
190
|
|
|
64
|
|
|
1,326
|
|
|
1,580
|
|
|
3,393
|
|
|||||
Life insurance transactions
|
—
|
|
|
—
|
|
|
40
|
|
|
40
|
|
|
1,788
|
|
|||||
Other structured finance
|
45
|
|
|
59
|
|
|
47
|
|
|
151
|
|
|
4,347
|
|
|||||
Structured finance
|
235
|
|
|
123
|
|
|
1,413
|
|
|
1,771
|
|
|
9,528
|
|
|||||
Total
|
$
|
2,469
|
|
|
$
|
553
|
|
|
$
|
5,216
|
|
|
$
|
8,238
|
|
|
$
|
230,898
|
|
|
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
|
|
|
|
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
|
|
$
|
2,380
|
|
|
$
|
89
|
|
|
$
|
2,469
|
|
|
109
|
|
|
7
|
|
|
116
|
|
Category 2
|
|
549
|
|
|
4
|
|
|
553
|
|
|
22
|
|
|
1
|
|
|
23
|
|
|||
Category 3
|
|
5,183
|
|
|
33
|
|
|
5,216
|
|
|
128
|
|
|
6
|
|
|
134
|
|
|||
Total BIG
|
|
$
|
8,112
|
|
|
$
|
126
|
|
|
$
|
8,238
|
|
|
259
|
|
|
14
|
|
|
273
|
|
|
|
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
|
|
(2)
|
A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments.
|
•
|
Constitutionally Guaranteed. The Company includes in this category public debt benefiting from Article VI of the Constitution of the Commonwealth, which expressly provides that interest and principal payments on the public debt are to be paid before other disbursements are made.
|
•
|
Public Corporations – Certain Revenues Potentially Subject to Clawback. The Company includes in this category the debt of public corporations for which applicable law permits the Commonwealth to claw back, subject to certain conditions and for the payment of public debt, at least a portion of the revenues supporting the bonds the Company insures. As a constitutional condition to clawback, available Commonwealth revenues for any fiscal year must be insufficient to pay Commonwealth debt service before the payment of any appropriations for that year. The Company believes that this condition has not been satisfied to date, and accordingly that the Commonwealth has not to date been entitled to claw back revenues supporting debt insured by the Company.
|
•
|
Other Public Corporations. The Company includes in this category the debt of public corporations that are supported by revenues it does not believe are subject to clawback.
|
General Obligation Bonds
|
|
Assured Guaranty Net Par Outstanding as of March 31, 2020
|
|
Assured Guaranty Total Net Principal Claims Paid as of March 31, 2020
|
|
Assured Guaranty Total Net Interest Claims Paid as of March 31, 2020
|
|
Base Recovery as a % of Pre-Petition Claims
|
|||||||
|
|
(in millions)
|
|
(percent)
|
|||||||||||
Vintage GO
|
|
$
|
669
|
|
|
$
|
383
|
|
|
$
|
165
|
|
|
74.9
|
%
|
2011 GO (Series D, E and PIB)
|
|
5
|
|
|
6
|
|
|
1
|
|
|
73.8
|
|
|||
2011 GO (Series C)
|
|
210
|
|
|
—
|
|
|
48
|
|
|
70.4
|
|
|||
2012 GO
|
|
369
|
|
|
—
|
|
|
72
|
|
|
69.9
|
|
|||
2014 GO
|
|
—
|
|
|
—
|
|
|
—
|
|
|
65.4
|
|
PBA Bonds
|
|
Assured Guaranty Net Par Outstanding as of March 31, 2020
|
|
Assured Guaranty Total Net Principal Claims Paid as of March 31, 2020
|
|
Assured Guaranty Total Net Interest Claims Paid as of March 31, 2020
|
|
Base Recovery as a % of Pre-Petition Claims
|
|||||||
|
|
(in millions)
|
|
(percent)
|
|||||||||||
Vintage PBA
|
|
$
|
140
|
|
|
$
|
32
|
|
|
$
|
27
|
|
|
77.6
|
%
|
2011 PBA
|
|
—
|
|
|
—
|
|
|
—
|
|
|
76.8
|
|
|||
2012 PBA
|
|
—
|
|
|
—
|
|
|
—
|
|
|
72.2
|
|
|
Gross Par Outstanding
|
|
Gross Debt Service Outstanding
|
||||||||||||
|
As of March 31, 2020
|
|
As of December 31, 2019
|
|
As of March 31, 2020
|
|
As of December 31, 2019
|
||||||||
|
(in millions)
|
||||||||||||||
Exposure to Puerto Rico
|
$
|
4,458
|
|
|
$
|
4,458
|
|
|
$
|
6,845
|
|
|
$
|
6,956
|
|
|
As of
March 31, 2020 |
|
As of
December 31, 2019 |
||||
|
(in millions)
|
||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
||||
Commonwealth of Puerto Rico - General Obligation Bonds (1)
|
$
|
1,253
|
|
|
$
|
1,253
|
|
PBA (1)
|
140
|
|
|
140
|
|
||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
||||
PRHTA (Transportation revenue) (1)
|
811
|
|
|
811
|
|
||
PRHTA (Highways revenue) (1)
|
454
|
|
|
454
|
|
||
PRCCDA
|
152
|
|
|
152
|
|
||
PRIFA
|
16
|
|
|
16
|
|
||
Other Public Corporations
|
|
|
|
||||
PREPA (1)
|
822
|
|
|
822
|
|
||
PRASA
|
373
|
|
|
373
|
|
||
MFA
|
248
|
|
|
248
|
|
||
U of PR
|
1
|
|
|
1
|
|
||
Total net exposure to Puerto Rico
|
$
|
4,270
|
|
|
$
|
4,270
|
|
(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 (April 1 - June 30)
|
$
|
—
|
|
|
$
|
3
|
|
2020 (July 1 - September 30)
|
286
|
|
|
392
|
|
||
2020 (October 1 - December 31)
|
—
|
|
|
3
|
|
||
Subtotal 2020
|
286
|
|
|
398
|
|
||
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
|
|
|
$
|
6,585
|
|
|
|
Gross Exposure
|
|
Net Exposure
|
||||||||||||
|
|
As of
March 31, 2020 |
|
As of December 31, 2019
|
|
As of
March 31, 2020 |
|
As of December 31, 2019
|
||||||||
|
|
(in millions)
|
||||||||||||||
Life insurance transactions (1)
|
|
$
|
1,091
|
|
|
$
|
1,046
|
|
|
$
|
940
|
|
|
$
|
898
|
|
Aircraft residual value insurance policies
|
|
393
|
|
|
398
|
|
|
238
|
|
|
243
|
|
||||
Total
|
|
$
|
1,484
|
|
|
$
|
1,444
|
|
|
$
|
1,178
|
|
|
$
|
1,141
|
|
(1)
|
The life insurance transactions net exposure is projected to increase to approximately $1.0 billion by September 30, 2026.
|
5.
|
Expected Loss to be Paid
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Net expected loss to be paid, beginning of period
|
$
|
737
|
|
|
$
|
1,183
|
|
Economic loss development (benefit) due to:
|
|
|
|
||||
Accretion of discount
|
4
|
|
|
8
|
|
||
Changes in discount rates
|
31
|
|
|
(4
|
)
|
||
Changes in timing and assumptions
|
(38
|
)
|
|
(6
|
)
|
||
Total economic loss development (benefit)
|
(3
|
)
|
|
(2
|
)
|
||
Net (paid) recovered losses
|
(74
|
)
|
|
(218
|
)
|
||
Net expected loss to be paid, end of period
|
$
|
660
|
|
|
$
|
963
|
|
|
First Quarter 2020
|
||||||||||||||
|
Net Expected
Loss to be Paid/(Recovered) as of December 31, 2019 |
|
Economic Loss
Development/ (Benefit) |
|
(Paid)/
Recovered
Losses (1)
|
|
Net Expected
Loss to be Paid/(Recovered) as of March 31, 2020 |
||||||||
|
(in millions)
|
||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
||||||||
U.S. public finance
|
$
|
531
|
|
|
$
|
56
|
|
|
$
|
(94
|
)
|
|
$
|
493
|
|
Non-U.S. public finance
|
23
|
|
|
3
|
|
|
—
|
|
|
26
|
|
||||
Public finance
|
554
|
|
|
59
|
|
|
(94
|
)
|
|
519
|
|
||||
Structured finance:
|
|
|
|
|
|
|
|
||||||||
U.S. RMBS
|
146
|
|
|
(63
|
)
|
|
21
|
|
|
104
|
|
||||
Other structured finance
|
37
|
|
|
1
|
|
|
(1
|
)
|
|
37
|
|
||||
Structured finance
|
183
|
|
|
(62
|
)
|
|
20
|
|
|
141
|
|
||||
Total
|
$
|
737
|
|
|
$
|
(3
|
)
|
|
$
|
(74
|
)
|
|
$
|
660
|
|
|
First Quarter 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 March 31, 2019 |
||||||||
|
(in millions)
|
||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
||||||||
U.S. public finance
|
$
|
832
|
|
|
$
|
62
|
|
|
$
|
(228
|
)
|
|
$
|
666
|
|
Non-U.S. public finance
|
32
|
|
|
(1
|
)
|
|
—
|
|
|
31
|
|
||||
Public finance
|
864
|
|
|
61
|
|
|
(228
|
)
|
|
697
|
|
||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
|
|||||
U.S. RMBS
|
293
|
|
|
(65
|
)
|
|
9
|
|
|
237
|
|
||||
Other structured finance
|
26
|
|
|
2
|
|
|
1
|
|
|
29
|
|
||||
Structured finance
|
319
|
|
|
(63
|
)
|
|
10
|
|
|
266
|
|
||||
Total
|
$
|
1,183
|
|
|
$
|
(2
|
)
|
|
$
|
(218
|
)
|
|
$
|
963
|
|
(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 First Quarter 2019 are net of the COFINA Exchange Senior Bonds and cash that were received pursuant to the COFINA Plan of Adjustment.
|
|
Net Expected Loss to be Paid/(Recovered)
|
|
Net Economic Loss Development/ (Benefit)
|
||||||||||||
|
As of
March 31, 2020 |
|
As of
December 31, 2019 |
|
First Quarter 2020
|
|
First Quarter 2019
|
||||||||
|
(in millions)
|
||||||||||||||
Insurance
|
$
|
609
|
|
|
$
|
683
|
|
|
$
|
(1
|
)
|
|
$
|
10
|
|
FG VIEs (See Note 12)
|
64
|
|
|
58
|
|
|
6
|
|
|
(10
|
)
|
||||
Credit derivatives (See Note 10)
|
(13
|
)
|
|
(4
|
)
|
|
(8
|
)
|
|
(2
|
)
|
||||
Total
|
$
|
660
|
|
|
$
|
737
|
|
|
$
|
(3
|
)
|
|
$
|
(2
|
)
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
First lien U.S. RMBS
|
$
|
(59
|
)
|
|
$
|
(31
|
)
|
Second lien U.S. RMBS
|
(4
|
)
|
|
(34
|
)
|
|
As of March 31, 2020
|
|
As of December 31, 2019
|
Delinquent/Modified in the Previous 12 Months
|
|
|
|
Alt-A and Prime
|
20%
|
|
20%
|
Option ARM
|
20
|
|
20
|
Subprime
|
20
|
|
20
|
30 – 59 Days Delinquent
|
|
|
|
Alt-A and Prime
|
30
|
|
30
|
Option ARM
|
30
|
|
35
|
Subprime
|
35
|
|
35
|
60 – 89 Days Delinquent
|
|
|
|
Alt-A and Prime
|
40
|
|
40
|
Option ARM
|
45
|
|
45
|
Subprime
|
45
|
|
45
|
90+ Days Delinquent
|
|
|
|
Alt-A and Prime
|
55
|
|
55
|
Option ARM
|
55
|
|
55
|
Subprime
|
50
|
|
50
|
Bankruptcy
|
|
|
|
Alt-A and Prime
|
45
|
|
45
|
Option ARM
|
50
|
|
50
|
Subprime
|
40
|
|
40
|
Foreclosure
|
|
|
|
Alt-A and Prime
|
65
|
|
65
|
Option ARM
|
65
|
|
65
|
Subprime
|
55
|
|
60
|
Real Estate Owned
|
|
|
|
All
|
100
|
|
100
|
|
As of
March 31, 2020 |
|
As of
December 31, 2019 |
||||||||||
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
||||||
Alt-A First Lien
|
|
|
|
|
|
|
|
|
|
|
|
||
Plateau CDR
|
0.0
|
%
|
-
|
8.3%
|
|
4.0%
|
|
0.3
|
%
|
-
|
8.4%
|
|
4.1%
|
Final CDR
|
0.0
|
%
|
-
|
0.4%
|
|
0.2%
|
|
0.0
|
%
|
-
|
0.4%
|
|
0.2%
|
Initial loss severity:
|
|
|
|
|
|
||||||||
2005 and prior
|
60%
|
|
|
|
60%
|
|
|
||||||
2006
|
70%
|
|
|
|
70%
|
|
|
||||||
2007+
|
70%
|
|
|
|
70%
|
|
|
||||||
Option ARM
|
|
|
|
|
|
|
|
||||||
Plateau CDR
|
1.7
|
%
|
-
|
7.7%
|
|
5.0%
|
|
1.8
|
%
|
-
|
8.4%
|
|
5.4%
|
Final CDR
|
0.1
|
%
|
-
|
0.4%
|
|
0.3%
|
|
0.1
|
%
|
-
|
0.4%
|
|
0.3%
|
Initial loss severity:
|
|
|
|
|
|
||||||||
2005 and prior
|
60%
|
|
|
|
60%
|
|
|
||||||
2006
|
60%
|
|
|
|
60%
|
|
|
||||||
2007+
|
70%
|
|
|
|
70%
|
|
|
||||||
Subprime
|
|
|
|
|
|
|
|
|
|
|
|
||
Plateau CDR
|
1.9
|
%
|
-
|
17.8%
|
|
5.4%
|
|
1.6
|
%
|
-
|
18.1%
|
|
5.6%
|
Final CDR
|
0.1
|
%
|
-
|
0.9%
|
|
0.3%
|
|
0.1
|
%
|
-
|
0.9%
|
|
0.3%
|
Initial loss severity:
|
|
|
|
|
|
||||||||
2005 and prior
|
75%
|
|
|
|
75%
|
|
|
||||||
2006
|
75%
|
|
|
|
75%
|
|
|
||||||
2007+
|
75%
|
|
|
|
75%
|
|
|
|
As of
March 31, 2020 |
|
As of
December 31, 2019 |
||||||||||
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
||||||
Plateau CDR
|
4.1
|
%
|
-
|
23.3%
|
|
9.6%
|
|
5.9
|
%
|
-
|
24.6%
|
|
9.5%
|
Final CDR trended down to
|
2.5
|
%
|
-
|
3.2%
|
|
2.5%
|
|
2.5
|
%
|
-
|
3.2%
|
|
2.5%
|
Liquidation rates:
|
|
|
|
|
|
|
|
|
|
|
|
||
Delinquent/Modified in the Previous 12 Months
|
20%
|
|
|
|
20%
|
|
|
||||||
30 – 59 Days Delinquent
|
30
|
|
|
|
30
|
|
|
||||||
60 – 89 Days Delinquent
|
45
|
|
|
|
45
|
|
|
||||||
90+ Days Delinquent
|
65
|
|
|
|
65
|
|
|
||||||
Bankruptcy
|
55
|
|
|
|
55
|
|
|
||||||
Foreclosure
|
55
|
|
|
|
55
|
|
|
||||||
Real Estate Owned
|
100
|
|
|
|
100
|
|
|
||||||
Loss severity (1)
|
98%
|
|
|
|
98%
|
|
|
||||||
Projected future recoveries on previously charged-off loans
|
20%
|
|
|
|
20%
|
|
|
6.
|
Contracts Accounted for as Insurance
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Financial guaranty:
|
|
|
|
||||
Scheduled net earned premiums
|
$
|
82
|
|
|
$
|
87
|
|
Accelerations from refundings and terminations
|
15
|
|
|
26
|
|
||
Accretion of discount on net premiums receivable
|
5
|
|
|
4
|
|
||
Financial guaranty insurance net earned premiums
|
102
|
|
|
117
|
|
||
Specialty net earned premiums
|
1
|
|
|
1
|
|
||
Net earned premiums (1)
|
$
|
103
|
|
|
$
|
118
|
|
(1)
|
Excludes $1 million and $3 million for First Quarter 2020 and 2019, respectively, related to consolidated FG VIEs.
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Beginning of year
|
$
|
1,286
|
|
|
$
|
904
|
|
Less: Specialty insurance premium receivable
|
2
|
|
|
1
|
|
||
Financial guaranty insurance premiums receivable
|
1,284
|
|
|
903
|
|
||
Gross written premiums on new business, net of commissions
|
67
|
|
|
41
|
|
||
Gross premiums received, net of commissions
|
(60
|
)
|
|
(54
|
)
|
||
Adjustments:
|
|
|
|
||||
Changes in the expected term
|
(4
|
)
|
|
(4
|
)
|
||
Accretion of discount, net of commissions on assumed business
|
3
|
|
|
1
|
|
||
Foreign exchange gain (loss) on remeasurement
|
(58
|
)
|
|
9
|
|
||
Financial guaranty insurance premium receivable (1)
|
1,232
|
|
|
896
|
|
||
Specialty insurance premium receivable
|
1
|
|
|
1
|
|
||
March 31,
|
$
|
1,233
|
|
|
$
|
897
|
|
(1)
|
Excludes $7 million and $8 million as of March 31, 2020 and March 31, 2019, respectively, related to consolidated FG VIEs.
|
|
As of
March 31, 2020 |
||
|
(in millions)
|
||
2020 (April 1 - June 30)
|
$
|
50
|
|
2020 (July 1 - September 30)
|
36
|
|
|
2020 (October 1 - December 31)
|
18
|
|
|
2021
|
90
|
|
|
2022
|
92
|
|
|
2023
|
80
|
|
|
2024
|
78
|
|
|
2025-2029
|
337
|
|
|
2030-2034
|
235
|
|
|
2035-2039
|
149
|
|
|
After 2039
|
338
|
|
|
Total (1)
|
$
|
1,503
|
|
(1)
|
Excludes expected cash collections on consolidated FG VIEs of $8 million.
|
|
As of
March 31, 2020 |
||
|
(in millions)
|
||
2020 (April 1 - June 30)
|
$
|
80
|
|
2020 (July 1 - September 30)
|
78
|
|
|
2020 (October 1 - December 31)
|
76
|
|
|
Subtotal 2020
|
234
|
|
|
2021
|
287
|
|
|
2022
|
265
|
|
|
2023
|
246
|
|
|
2024
|
229
|
|
|
2025-2029
|
914
|
|
|
2030-2034
|
641
|
|
|
2035-2039
|
376
|
|
|
After 2039
|
507
|
|
|
Net deferred premium revenue (1)
|
3,699
|
|
|
Future accretion
|
262
|
|
|
Total future net earned premiums
|
$
|
3,961
|
|
(1)
|
Excludes net earned premiums on consolidated FG VIEs of $46 million.
|
|
As of
March 31, 2020 |
|
As of
December 31, 2019 |
||||
|
(dollars in millions)
|
||||||
Premiums receivable, net of commission payable
|
$
|
1,232
|
|
|
$
|
1,284
|
|
Gross deferred premium revenue
|
1,635
|
|
|
1,637
|
|
||
Weighted-average risk-free rate used to discount premiums
|
1.7
|
%
|
|
1.7
|
%
|
||
Weighted-average period of premiums receivable (in years)
|
13.2
|
|
|
13.3
|
|
|
As of
March 31, 2020 |
|
As of
December 31, 2019 |
||||
|
(in millions)
|
||||||
Public finance:
|
|
|
|
||||
U.S. public finance
|
$
|
291
|
|
|
$
|
328
|
|
Non-U.S. public finance
|
5
|
|
|
5
|
|
||
Public finance
|
296
|
|
|
333
|
|
||
Structured finance:
|
|
|
|
||||
U.S. RMBS (1)
|
(110
|
)
|
|
(78
|
)
|
||
Other structured finance
|
40
|
|
|
40
|
|
||
Structured finance
|
(70
|
)
|
|
(38
|
)
|
||
Total
|
$
|
226
|
|
|
$
|
295
|
|
(1)
|
Excludes net reserves of $35 million and $33 million as of March 31, 2020 and December 31, 2019, respectively, related to consolidated FG VIEs.
|
|
As of
March 31, 2020 |
|
As of
December 31, 2019 |
||||
|
(in millions)
|
||||||
Loss and LAE reserve
|
$
|
1,050
|
|
|
$
|
1,050
|
|
Reinsurance recoverable on unpaid losses (1)
|
(35
|
)
|
|
(38
|
)
|
||
Loss and LAE reserve, net
|
1,015
|
|
|
1,012
|
|
||
Salvage and subrogation recoverable
|
(820
|
)
|
|
(747
|
)
|
||
Salvage and subrogation reinsurance payable (2)
|
31
|
|
|
30
|
|
||
Salvage and subrogation recoverable, net, and other recoverable
|
(789
|
)
|
|
(717
|
)
|
||
Net reserves (salvage)
|
$
|
226
|
|
|
$
|
295
|
|
(1)
|
Recorded as a component of other assets in the condensed consolidated balance sheets.
|
(2)
|
Recorded as a component of other liabilities in the condensed consolidated balance sheets.
|
|
As of
March 31, 2020 |
||
|
(in millions)
|
||
Net expected loss to be paid - financial guaranty insurance
|
$
|
607
|
|
Contra-paid, net
|
44
|
|
|
Salvage and subrogation recoverable, net, and other recoverable
|
789
|
|
|
Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance
|
(1,013
|
)
|
|
Net expected loss to be expensed (present value) (1)
|
$
|
427
|
|
|
As of
March 31, 2020 |
||
|
(in millions)
|
||
2020 (April 1 - June 30)
|
$
|
9
|
|
2020 (July 1 - September 30)
|
9
|
|
|
2020 (October 1 - December 31)
|
9
|
|
|
Subtotal 2020
|
27
|
|
|
2021
|
35
|
|
|
2022
|
35
|
|
|
2023
|
33
|
|
|
2024
|
32
|
|
|
2025-2029
|
134
|
|
|
2030-2034
|
90
|
|
|
2035-2039
|
32
|
|
|
After 2039
|
9
|
|
|
Net expected loss to be expensed
|
427
|
|
|
Future accretion
|
59
|
|
|
Total expected future loss and LAE
|
$
|
486
|
|
|
Loss (Benefit)
|
||||||
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Public finance:
|
|
|
|
||||
U.S. public finance
|
$
|
59
|
|
|
$
|
70
|
|
Non-U.S. public finance
|
—
|
|
|
—
|
|
||
Public finance
|
59
|
|
|
70
|
|
||
Structured finance:
|
|
|
|
||||
U.S. RMBS (1)
|
(42
|
)
|
|
(27
|
)
|
||
Other structured finance
|
3
|
|
|
3
|
|
||
Structured finance
|
(39
|
)
|
|
(24
|
)
|
||
Loss and LAE
|
$
|
20
|
|
|
$
|
46
|
|
(1)
|
Excludes a loss of $6 million and a benefit of $1 million for First Quarter 2020 and 2019 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)
|
109
|
|
|
(6
|
)
|
|
22
|
|
|
—
|
|
|
128
|
|
|
(7
|
)
|
|
259
|
|
|
—
|
|
|
259
|
|
|||||||||
Remaining weighted-average period (in years)
|
7.7
|
|
|
5.0
|
|
|
16.9
|
|
|
—
|
|
|
9.5
|
|
|
8.0
|
|
|
9.5
|
|
|
—
|
|
|
9.5
|
|
|||||||||
Outstanding exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Par
|
$
|
2,433
|
|
|
$
|
(53
|
)
|
|
$
|
549
|
|
|
$
|
—
|
|
|
$
|
5,353
|
|
|
$
|
(170
|
)
|
|
$
|
8,112
|
|
|
$
|
—
|
|
|
$
|
8,112
|
|
Interest
|
980
|
|
|
(15
|
)
|
|
459
|
|
|
—
|
|
|
2,351
|
|
|
(64
|
)
|
|
3,711
|
|
|
—
|
|
|
3,711
|
|
|||||||||
Total (2)
|
$
|
3,413
|
|
|
$
|
(68
|
)
|
|
$
|
1,008
|
|
|
$
|
—
|
|
|
$
|
7,704
|
|
|
$
|
(234
|
)
|
|
$
|
11,823
|
|
|
$
|
—
|
|
|
$
|
11,823
|
|
Expected cash outflows (inflows)
|
$
|
163
|
|
|
$
|
(3
|
)
|
|
$
|
77
|
|
|
$
|
—
|
|
|
$
|
3,984
|
|
|
$
|
(128
|
)
|
|
$
|
4,093
|
|
|
$
|
(260
|
)
|
|
$
|
3,833
|
|
Potential recoveries (3)
|
(629
|
)
|
|
21
|
|
|
(5
|
)
|
|
—
|
|
|
(2,846
|
)
|
|
105
|
|
|
(3,354
|
)
|
|
187
|
|
|
(3,167
|
)
|
|||||||||
Subtotal
|
(466
|
)
|
|
18
|
|
|
72
|
|
|
—
|
|
|
1,138
|
|
|
(23
|
)
|
|
739
|
|
|
(73
|
)
|
|
666
|
|
|||||||||
Discount
|
21
|
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
(76
|
)
|
|
(1
|
)
|
|
(68
|
)
|
|
9
|
|
|
(59
|
)
|
|||||||||
Present value of expected cash flows
|
$
|
(445
|
)
|
|
$
|
18
|
|
|
$
|
60
|
|
|
$
|
—
|
|
|
$
|
1,062
|
|
|
$
|
(24
|
)
|
|
$
|
671
|
|
|
$
|
(64
|
)
|
|
$
|
607
|
|
Deferred premium revenue
|
$
|
144
|
|
|
$
|
(1
|
)
|
|
$
|
25
|
|
|
$
|
—
|
|
|
$
|
466
|
|
|
$
|
(4
|
)
|
|
$
|
630
|
|
|
$
|
(46
|
)
|
|
$
|
584
|
|
Reserves (salvage)
|
$
|
(480
|
)
|
|
$
|
18
|
|
|
$
|
42
|
|
|
$
|
—
|
|
|
$
|
701
|
|
|
$
|
(22
|
)
|
|
$
|
259
|
|
|
$
|
(35
|
)
|
|
$
|
224
|
|
|
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 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
|
|
(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.
|
7.
|
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.
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
|
||||||
Premiums Written:
|
|
|
|
||||
Direct
|
$
|
64
|
|
|
$
|
39
|
|
Assumed
|
—
|
|
|
—
|
|
||
Ceded (1)
|
—
|
|
|
15
|
|
||
Net
|
$
|
64
|
|
|
$
|
54
|
|
Premiums Earned:
|
|
|
|
||||
Direct
|
$
|
94
|
|
|
$
|
105
|
|
Assumed
|
10
|
|
|
15
|
|
||
Ceded
|
(1
|
)
|
|
(2
|
)
|
||
Net
|
$
|
103
|
|
|
$
|
118
|
|
Loss and LAE:
|
|
|
|
||||
Direct
|
$
|
8
|
|
|
$
|
54
|
|
Assumed
|
12
|
|
|
1
|
|
||
Ceded
|
—
|
|
|
(9
|
)
|
||
Net
|
$
|
20
|
|
|
$
|
46
|
|
(1)
|
Positive ceded premiums written were due to terminations and changes in expected debt service schedules.
|
|
As of
March 31, 2020 |
|
As of
December 31, 2019 |
||||
|
(in millions)
|
||||||
Ceded premium payable, net of commissions
|
$
|
19
|
|
|
$
|
20
|
|
Ceded expected loss to be recovered (paid)
|
7
|
|
|
11
|
|
||
Financial guaranty ceded par outstanding (2)
|
1,255
|
|
|
1,349
|
|
||
Specialty ceded exposure (see Note 4)
|
306
|
|
|
303
|
|
(1)
|
The total collateral posted by all non-affiliated reinsurers required to post, or that had agreed to post, collateral as of March 31, 2020 and December 31, 2019 was approximately $67 million and $68 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, $223 million and $224 million is rated BIG as of March 31, 2020 and December 31, 2019, respectively.
|
8.
|
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
|
$
|
4,204
|
|
|
$
|
—
|
|
|
$
|
4,118
|
|
|
$
|
86
|
|
U.S. government and agencies
|
175
|
|
|
—
|
|
|
175
|
|
|
—
|
|
||||
Corporate securities
|
2,233
|
|
|
—
|
|
|
2,207
|
|
|
26
|
|
||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|||||||
RMBS
|
717
|
|
|
—
|
|
|
464
|
|
|
253
|
|
||||
Commercial mortgage-backed securities (CMBS)
|
414
|
|
|
—
|
|
|
414
|
|
|
—
|
|
||||
Asset-backed securities
|
653
|
|
|
—
|
|
|
57
|
|
|
596
|
|
||||
Non-U.S. government securities
|
172
|
|
|
—
|
|
|
172
|
|
|
—
|
|
||||
Total fixed-maturity securities
|
8,568
|
|
|
—
|
|
|
7,607
|
|
|
961
|
|
||||
Short-term investments
|
933
|
|
|
865
|
|
|
68
|
|
|
—
|
|
||||
Other invested assets (1)
|
12
|
|
|
6
|
|
|
—
|
|
|
6
|
|
||||
FG VIEs’ assets, at fair value
|
368
|
|
|
—
|
|
|
—
|
|
|
368
|
|
||||
Assets of consolidated investment vehicles
|
557
|
|
|
—
|
|
|
461
|
|
|
96
|
|
||||
Other assets
|
177
|
|
|
36
|
|
|
38
|
|
|
103
|
|
||||
Total assets carried at fair value
|
$
|
10,615
|
|
|
$
|
907
|
|
|
$
|
8,174
|
|
|
$
|
1,534
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|||||||
Credit derivative liabilities
|
$
|
265
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
265
|
|
FG VIEs’ liabilities with recourse, at fair value
|
312
|
|
|
—
|
|
|
—
|
|
|
312
|
|
||||
FG VIEs’ liabilities without recourse, at fair value
|
82
|
|
|
—
|
|
|
—
|
|
|
82
|
|
||||
Liabilities of consolidated investment vehicles
|
426
|
|
|
—
|
|
|
—
|
|
|
426
|
|
||||
Total liabilities carried at fair value
|
$
|
1,085
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,085
|
|
|
|
|
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
|
|
||||
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
|
|
(1)
|
Includes Level 3 mortgage loans that are recorded at fair value on a non-recurring basis.
|
|
Fixed-Maturity Securities
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
|
Obligations
of State and Political Subdivisions |
|
Corporate Securities
|
|
RMBS
|
|
Asset-
Backed Securities |
|
FG VIEs’
Assets at Fair Value |
|
Assets of Consolidated Investment Vehicles
|
|
Other
(7)
|
|
|||||||||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||||||||||
Fair value as of
December 31, 2019 |
$
|
107
|
|
|
$
|
41
|
|
|
$
|
308
|
|
|
$
|
658
|
|
|
$
|
442
|
|
|
$
|
64
|
|
|
$
|
55
|
|
|
|||||||
Total pretax realized and unrealized gains/(losses) recorded in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Net income (loss)
|
1
|
|
(1
|
)
|
(7
|
)
|
(1
|
)
|
3
|
|
(1
|
)
|
7
|
|
(1
|
)
|
(37
|
)
|
(2
|
)
|
1
|
|
(4
|
)
|
48
|
|
(3
|
)
|
|||||||
Other comprehensive income (loss)
|
(21
|
)
|
|
(8
|
)
|
|
(47
|
)
|
|
(59
|
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
||||||||||||
Purchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
45
|
|
|
—
|
|
|
|
||||||||||||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||||||||||||
Settlements
|
(1
|
)
|
|
—
|
|
|
(11
|
)
|
|
(7
|
)
|
|
(37
|
)
|
|
(14
|
)
|
|
—
|
|
|
|
|||||||||||||
Transfers out of Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||||||||||||
Fair value as of
March 31, 2020 |
$
|
86
|
|
|
$
|
26
|
|
|
$
|
253
|
|
|
$
|
596
|
|
|
$
|
368
|
|
|
$
|
96
|
|
|
$
|
103
|
|
|
|||||||
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of March 31, 2020
|
|
|
|
|
|
|
|
|
$
|
(35
|
)
|
(2
|
)
|
$
|
1
|
|
(4
|
)
|
$
|
48
|
|
(3
|
)
|
||||||||||||
Change in unrealized
gains/(losses) included in OCI related to financial instruments held as of March 31, 2020
|
$
|
(21
|
)
|
|
$
|
(8
|
)
|
|
$
|
(46
|
)
|
|
$
|
(58
|
)
|
|
|
|
|
|
|
|
|
|
|
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, 2019
|
$
|
(185
|
)
|
|
$
|
(367
|
)
|
|
$
|
(102
|
)
|
|
$
|
(481
|
)
|
|
||||
Total pretax realized and unrealized gains/(losses) recorded in:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net income (loss)
|
(77
|
)
|
(6
|
)
|
16
|
|
(2
|
)
|
11
|
|
(2
|
)
|
55
|
|
(4
|
)
|
||||
Other comprehensive income (loss)
|
—
|
|
|
|
13
|
|
|
|
—
|
|
|
|
—
|
|
|
|||||
Settlements
|
—
|
|
|
|
26
|
|
|
|
9
|
|
|
|
—
|
|
|
|||||
Fair value as of March 31, 2020
|
$
|
(262
|
)
|
|
$
|
(312
|
)
|
|
$
|
(82
|
)
|
|
$
|
(426
|
)
|
|
||||
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of March 31, 2020
|
$
|
(73
|
)
|
(6
|
)
|
$
|
15
|
|
(2
|
)
|
$
|
11
|
|
(2
|
)
|
$
|
55
|
|
(4
|
)
|
Change in unrealized gains/(losses) included in OCI related to financial instruments held as of March 31, 2020
|
|
|
$
|
13
|
|
|
|
|
|
|
|
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, 2018 |
$
|
99
|
|
|
$
|
56
|
|
|
$
|
309
|
|
|
$
|
947
|
|
|
$
|
569
|
|
|
$
|
77
|
|
|
$
|
(207
|
)
|
|
$
|
(517
|
)
|
|
$
|
(102
|
)
|
|
|||||||||
Total pretax realized and unrealized gains/(losses) recorded in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Net income (loss)
|
1
|
|
(1
|
)
|
(11
|
)
|
(1
|
)
|
6
|
|
(1
|
)
|
14
|
|
(1
|
)
|
17
|
|
(2
|
)
|
(9
|
)
|
(3
|
)
|
(22
|
)
|
(6
|
)
|
(11
|
)
|
(2
|
)
|
(4
|
)
|
(2
|
)
|
|||||||||
Other comprehensive income (loss)
|
5
|
|
|
3
|
|
|
5
|
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
||||||||||||||
Purchases
|
—
|
|
|
—
|
|
|
11
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
||||||||||||||
Settlements
|
(1
|
)
|
|
—
|
|
|
(13
|
)
|
|
(4
|
)
|
|
(26
|
)
|
|
—
|
|
|
|
1
|
|
|
|
23
|
|
|
|
2
|
|
|
|
||||||||||||||
Fair value as of
March 31, 2019 |
$
|
104
|
|
|
$
|
48
|
|
|
$
|
318
|
|
|
$
|
958
|
|
|
$
|
560
|
|
|
$
|
68
|
|
|
$
|
(228
|
)
|
|
$
|
(505
|
)
|
|
$
|
(104
|
)
|
|
|||||||||
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of March 31, 2019
|
|
|
|
|
|
|
|
|
$
|
20
|
|
(2
|
)
|
$
|
(9
|
)
|
(3
|
)
|
$
|
(21
|
)
|
(6
|
)
|
$
|
(11
|
)
|
(2
|
)
|
$
|
(3
|
)
|
(2
|
)
|
||||||||||||
Change in unrealized gains/(losses) included in OCI related to financial instruments held at March 31. 2019
|
$
|
5
|
|
|
$
|
3
|
|
|
$
|
5
|
|
|
$
|
(8
|
)
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
(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 fair value gains (losses) on CCS, net investment income and other income.
|
(4)
|
Recorded in fair value gains (losses) on consolidated investment vehicles.
|
(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 condensed consolidated balance sheet based on net exposure by transaction.
|
(6)
|
Reported in net change in fair value of credit derivatives.
|
(7)
|
Includes CCS and other invested assets.
|
Financial Instrument Description
|
|
Fair Value at
March 31, 2020 (in millions) |
|
Significant Unobservable Inputs
|
|
Range
|
|
Weighted Average (4)
|
|||||
Assets (2):
|
|
|
|
|
|
|
|
|
|
||||
Fixed-maturity securities (1):
|
|
|
|
|
|
|
|
|
|
|
|
||
Obligations of state and political subdivisions
|
|
$
|
86
|
|
|
Yield
|
|
5.3
|
%
|
-
|
41.4%
|
|
16.9%
|
|
|
|
|
|
|
|
|
|
|
|
|||
Corporate securities
|
|
26
|
|
|
Yield
|
|
51.7%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
RMBS
|
|
253
|
|
|
CPR
|
|
3.3
|
%
|
-
|
15.0%
|
|
6.4%
|
|
|
|
CDR
|
|
1.5
|
%
|
-
|
7.5%
|
|
4.9%
|
||||
|
|
Loss severity
|
|
40.0
|
%
|
-
|
125.0%
|
|
79.0%
|
||||
|
|
Yield
|
|
5.7
|
%
|
-
|
8.1%
|
|
6.9%
|
||||
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|||
Life insurance transactions
|
|
321
|
|
|
Yield
|
|
6.5%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
CLOs /Trust preferred securities (TruPS)
|
|
240
|
|
|
Yield
|
|
2.4
|
%
|
-
|
4.4%
|
|
3.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Others
|
|
35
|
|
|
Yield
|
|
20.7%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
FG VIEs’ assets, at fair value (1)
|
|
368
|
|
|
CPR
|
|
0.1
|
%
|
-
|
18.7%
|
|
8.4%
|
|
|
|
CDR
|
|
1.2
|
%
|
-
|
24.9%
|
|
4.9%
|
||||
|
|
Loss severity
|
|
40.0
|
%
|
-
|
100.0%
|
|
74.3%
|
||||
|
|
Yield
|
|
5.1
|
%
|
-
|
10.8%
|
|
7.2%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
Assets of consolidated investment vehicles (3)
|
|
96
|
|
|
Discount rate
|
|
15.3
|
%
|
-
|
27.6%
|
|
21.8%
|
|
|
|
|
Market multiple - enterprise/revenue value
|
|
0.6x
|
|
-
|
8.6x
|
|
|
|||
|
|
|
Yield
|
|
6.9
|
%
|
-
|
21.2%
|
|
12.7%
|
|||
|
|
|
|
|
|
|
|
|
|
|
|||
Other assets (1)
|
|
100
|
|
|
Implied Yield
|
|
5.5
|
%
|
-
|
6.3%
|
|
5.9%
|
|
|
|
Term (years)
|
|
10 years
|
|
|
Financial Instrument Description (1)
|
|
Fair Value at
March 31, 2020 (in millions) |
|
Significant Unobservable Inputs
|
|
Range
|
|
Weighted Average (4)
|
|||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
Credit derivative liabilities, net
|
|
$
|
(262
|
)
|
|
Year 1 loss estimates
|
|
0.0
|
%
|
-
|
85.0%
|
|
2.3%
|
|
|
Hedge cost (in basis points (bps))
|
|
35.0
|
-
|
168.0
|
|
67.0
|
|||||
|
|
Bank profit (in bps)
|
|
0.0
|
-
|
369.0
|
|
104.0
|
|||||
|
|
Internal floor (in bps)
|
|
9.0
|
|
-
|
30.0
|
|
14.0
|
||||
|
|
Internal credit rating
|
|
AAA
|
|
-
|
CCC
|
|
AA-
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
FG VIEs’ liabilities, at fair value
|
|
(394
|
)
|
|
CPR
|
|
0.1
|
%
|
-
|
18.7%
|
|
8.4%
|
|
|
|
CDR
|
|
1.2
|
%
|
-
|
24.9%
|
|
4.9%
|
||||
|
|
Loss severity
|
|
40.0
|
%
|
-
|
100.0%
|
|
74.3%
|
||||
|
|
Yield
|
|
4.2
|
%
|
-
|
10.8%
|
|
5.6%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
Liabilities of consolidated investment vehicles:
|
|
|
|
|
|
|
|
|
|
|
|||
CLO obligations (5)
|
|
(426
|
)
|
|
Yield
|
|
3.8%
|
|
|
||||
|
|
|
|
Discount rate
|
|
29.0%
|
|
|
(1)
|
Discounted cash flow is used as the primary valuation technique.
|
(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.
|
(4)
|
Weighted average is calculated as a percentage of current par outstanding for all categories except for assets of consolidated investment vehicles, where it is calculated as a percentage of fair value.
|
(5)
|
See CFE fair value methodology described above for CLO XXVI.
|
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/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%
|
|
21.0%
|
|
|
|
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 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%
|
|
|
(1)
|
Discounted cash flow is used as the primary valuation technique.
|
(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.
|
|
As of
March 31, 2020 |
|
As of
December 31, 2019 |
||||||||||||
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
||||||||
|
(in millions)
|
||||||||||||||
Assets (liabilities):
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other invested assets
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
2
|
|
Other assets (1)
|
93
|
|
|
93
|
|
|
97
|
|
|
97
|
|
||||
Financial guaranty insurance contracts (2)
|
(2,668
|
)
|
|
(4,306
|
)
|
|
(2,714
|
)
|
|
(4,013
|
)
|
||||
Long-term debt
|
(1,221
|
)
|
|
(1,510
|
)
|
|
(1,235
|
)
|
|
(1,573
|
)
|
||||
Other liabilities (1)
|
(18
|
)
|
|
(18
|
)
|
|
(14
|
)
|
|
(14
|
)
|
(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.
|
|
As of
March 31, 2020 |
|
As of
December 31, 2019 |
||||
|
(in millions)
|
||||||
Fixed-maturity securities (1):
|
|
|
|
||||
Externally managed
|
$
|
7,826
|
|
|
$
|
7,978
|
|
Internally managed
|
742
|
|
|
876
|
|
||
Short-term investments
|
933
|
|
|
1,268
|
|
||
Other invested assets
|
|
|
|
||||
Equity method investments
|
108
|
|
|
111
|
|
||
Other
|
13
|
|
|
7
|
|
||
Total
|
$
|
9,622
|
|
|
$
|
10,240
|
|
(1)
|
7.6% and 8.6% of fixed-maturity securities are rated BIG as of March 31, 2020 and December 31, 2019, respectively.
|
Security Type
|
|
Percent
of
Total (1)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair
Value
|
|
AOCI
Pre-tax
Gain
(Loss) on
Securities
with
OTTI
|
|
Weighted
Average
Credit
Rating (3)
|
|||||||||||
|
|
(dollars in millions)
|
|||||||||||||||||||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Obligations of state and political subdivisions
|
|
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
|
|
100
|
%
|
|
$
|
9,639
|
|
|
$
|
517
|
|
|
$
|
(34
|
)
|
|
$
|
10,122
|
|
|
$
|
59
|
|
|
AA-
|
(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 44% of mortgage backed securities as of March 31, 2020 and 42% as of December 31, 2019 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
|
$
|
104
|
|
|
$
|
(4
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
104
|
|
|
$
|
(4
|
)
|
Corporate securities
|
679
|
|
|
(29
|
)
|
|
68
|
|
|
(13
|
)
|
|
747
|
|
|
(42
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
RMBS
|
42
|
|
|
(4
|
)
|
|
5
|
|
|
—
|
|
|
47
|
|
|
(4
|
)
|
||||||
CMBS
|
36
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
39
|
|
|
—
|
|
||||||
Asset-backed securities
|
434
|
|
|
(22
|
)
|
|
132
|
|
|
(8
|
)
|
|
566
|
|
|
(30
|
)
|
||||||
Non-U.S. government securities
|
95
|
|
|
(3
|
)
|
|
52
|
|
|
(9
|
)
|
|
147
|
|
|
(12
|
)
|
||||||
Total
|
$
|
1,390
|
|
|
$
|
(62
|
)
|
|
$
|
260
|
|
|
$
|
(30
|
)
|
|
$
|
1,650
|
|
|
$
|
(92
|
)
|
Number of securities (1)
|
|
|
|
376
|
|
|
|
|
|
79
|
|
|
|
|
|
430
|
|
|
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
|
|
(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
|
$
|
300
|
|
|
$
|
300
|
|
Due after one year through five years
|
1,691
|
|
|
1,694
|
|
||
Due after five years through 10 years
|
2,028
|
|
|
2,037
|
|
||
Due after 10 years
|
3,255
|
|
|
3,406
|
|
||
Mortgage-backed securities:
|
|
|
|
|
|
||
RMBS
|
737
|
|
|
717
|
|
||
CMBS
|
399
|
|
|
414
|
|
||
Total
|
$
|
8,410
|
|
|
$
|
8,568
|
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Interest income:
|
|
|
|
||||
Externally managed
|
$
|
62
|
|
|
$
|
72
|
|
Internally managed
|
20
|
|
|
28
|
|
||
Interest income
|
82
|
|
|
100
|
|
||
Investment expenses
|
(2
|
)
|
|
(2
|
)
|
||
Net investment income
|
$
|
80
|
|
|
$
|
98
|
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Gross realized gains on available-for-sale securities
|
$
|
7
|
|
|
$
|
6
|
|
Gross realized losses on available-for-sale securities
|
(1
|
)
|
|
(2
|
)
|
||
Credit impairments (1)
|
(11
|
)
|
|
(16
|
)
|
||
Net realized investment gains (losses) (2)
|
$
|
(5
|
)
|
|
$
|
(12
|
)
|
(1)
|
Credit impairment in First Quarter 2020 related primarily to an increase in the allowance for credit loss on loss mitigation securities. Shut-downs due to COVID-19 pandemic restrictions contributed to the increase in the allowance for credit loss in First Quarter 2020. Credit impairment in First Quarter 2019 was primarily attributable to OTTI on loss mitigation securities and foreign exchange losses.
|
(2)
|
Includes foreign currency gains of $3 million and $1 million for First Quarter 2020 and First Quarter 2019, respectively.
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
|
|
||||
Balance, beginning of period
|
$
|
—
|
|
|
$
|
185
|
|
Effect of adoption of accounting guidance on credit losses on January 1, 2020
|
62
|
|
|
|
|||
Additions for credit losses on securities for which credit impairments were not previously recognized
|
2
|
|
|
—
|
|
||
Additions (reductions) for credit losses on securities for which credit impairments were previously recognized
|
9
|
|
|
12
|
|
||
Balance, end of period
|
$
|
73
|
|
|
$
|
197
|
|
10.
|
Contracts Accounted for as Credit Derivatives
|
|
|
As of March 31, 2020
|
|
As of December 31, 2019
|
||||||||||||
|
|
Net Par
Outstanding
|
|
Net Fair Value Asset (Liability)
|
|
Net Par
Outstanding
|
|
Net Fair Value Asset (Liability)
|
||||||||
|
|
(in millions)
|
||||||||||||||
U.S. public finance
|
|
$
|
2,065
|
|
|
$
|
(112
|
)
|
|
$
|
1,942
|
|
|
$
|
(83
|
)
|
Non-U.S. public finance
|
|
2,461
|
|
|
(52
|
)
|
|
2,676
|
|
|
(39
|
)
|
||||
U.S. structured finance
|
|
1,156
|
|
|
(89
|
)
|
|
1,206
|
|
|
(58
|
)
|
||||
Non-U.S. structured finance
|
|
124
|
|
|
(9
|
)
|
|
132
|
|
|
(5
|
)
|
||||
Total
|
|
$
|
5,806
|
|
|
$
|
(262
|
)
|
|
$
|
5,956
|
|
|
$
|
(185
|
)
|
|
|
As of March 31, 2020
|
|
As of December 31, 2019
|
||||||||||
Ratings
|
|
Net Par
Outstanding
|
|
% of Total
|
|
Net Par
Outstanding
|
|
% of Total
|
||||||
|
|
(dollars in millions)
|
||||||||||||
AAA
|
|
$
|
1,631
|
|
|
28.1
|
%
|
|
$
|
1,730
|
|
|
29.0
|
%
|
AA
|
|
1,702
|
|
|
29.3
|
|
|
1,695
|
|
|
28.5
|
|
||
A
|
|
1,127
|
|
|
19.4
|
|
|
1,110
|
|
|
18.6
|
|
||
BBB
|
|
1,220
|
|
|
21.0
|
|
|
1,292
|
|
|
21.7
|
|
||
BIG (1)
|
|
126
|
|
|
2.2
|
|
|
129
|
|
|
2.2
|
|
||
Credit derivative net par outstanding
|
|
$
|
5,806
|
|
|
100.0
|
%
|
|
$
|
5,956
|
|
|
100.0
|
%
|
(1)
|
All BIG credit derivatives are U.S. RMBS transactions.
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Realized gains on credit derivatives
|
$
|
2
|
|
|
$
|
3
|
|
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements
|
(2
|
)
|
|
(4
|
)
|
||
Realized gains (losses) and other settlements
|
—
|
|
|
(1
|
)
|
||
Net unrealized gains (losses)
|
(77
|
)
|
|
(21
|
)
|
||
Net change in fair value of credit derivatives
|
$
|
(77
|
)
|
|
$
|
(22
|
)
|
|
As of
March 31, 2020 |
|
As of
December 31, 2019 |
|
As of
March 31, 2019 |
|
As of
December 31, 2018 |
||||
Five-year CDS spread
|
224
|
|
|
41
|
|
|
74
|
|
|
110
|
|
One-year CDS spread
|
64
|
|
|
9
|
|
|
20
|
|
|
22
|
|
|
As of
March 31, 2020 |
|
As of
December 31, 2019 |
||||
|
(in millions)
|
||||||
Fair value of credit derivatives before effect of AGC credit spread
|
$
|
(478
|
)
|
|
$
|
(261
|
)
|
Plus: Effect of AGC credit spread
|
216
|
|
|
76
|
|
||
Net fair value of credit derivatives
|
$
|
(262
|
)
|
|
$
|
(185
|
)
|
|
First Quarter 2020
|
||
|
(in millions)
|
||
Management fees:
|
|
||
CLOs (1)
|
$
|
4
|
|
Opportunity funds
|
2
|
|
|
Wind-down funds
|
9
|
|
|
Total management fees
|
15
|
|
|
Reimbursable fund expenses
|
8
|
|
|
Total asset management fees (2)
|
$
|
23
|
|
(1)
|
To the extent that the Company's wind-down and/or opportunity funds are invested in BlueMountain managed CLOs, BlueMountain 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 BlueMountain. Gross management fees from CLOs, before rebates, were $10 million.
|
(2)
|
There were no performance fees for First Quarter 2020. Performance fees are recorded when the contractual performance criteria have been met and when it is probable that a significant reversal of revenues will not occur in future reporting periods. For opportunity funds, these conditions are met typically close to the end of the fund’s life. The Company's current opportunity funds were not near the end of their harvest period during the quarter, when they would typically earn performance fee.
|
12.
|
Variable Interest Entities
|
|
As of
March 31, 2020 |
|
As of
December 31, 2019 |
||||
|
(in millions)
|
||||||
Excess of unpaid principal over fair value of:
|
|
|
|
||||
FG VIEs’ assets
|
$
|
316
|
|
|
$
|
279
|
|
FG VIEs’ liabilities with recourse
|
49
|
|
|
21
|
|
||
FG VIEs’ liabilities without recourse
|
30
|
|
|
19
|
|
||
Unpaid principal balance for FG VIEs’ assets that were 90 days or more past due
|
53
|
|
|
52
|
|
||
Unpaid principal for FG VIEs’ liabilities with recourse (1)
|
361
|
|
|
388
|
|
(1)
|
FG VIEs’ liabilities with recourse will mature at various dates ranging from 2020 to 2038.
|
|
As of March 31, 2020
|
|
As of December 31, 2019
|
||||||||||||
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
||||||||
|
(in millions)
|
||||||||||||||
With recourse:
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. RMBS first lien
|
$
|
224
|
|
|
$
|
252
|
|
|
$
|
270
|
|
|
$
|
297
|
|
U.S. RMBS second lien
|
62
|
|
|
60
|
|
|
70
|
|
|
70
|
|
||||
Total with recourse
|
286
|
|
|
312
|
|
|
340
|
|
|
367
|
|
||||
Without recourse
|
82
|
|
|
82
|
|
|
102
|
|
|
102
|
|
||||
Total
|
$
|
368
|
|
|
$
|
394
|
|
|
$
|
442
|
|
|
$
|
469
|
|
|
As of
March 31, 2020 |
|
As of
December 31, 2019 |
||||
|
(in millions)
|
||||||
Assets:
|
|
|
|
||||
Cash and restricted cash (1)
|
$
|
82
|
|
|
$
|
14
|
|
Corporate loans of CFE, at fair value
|
433
|
|
|
494
|
|
||
Corporate loans, at fair value
|
53
|
|
|
47
|
|
||
Other assets (2)
|
77
|
|
|
17
|
|
||
Total assets
|
$
|
645
|
|
|
$
|
572
|
|
Liabilities:
|
|
|
|
||||
CLO obligations of CFE, at fair value (3)
|
426
|
|
|
481
|
|
||
Other liabilities
|
5
|
|
|
1
|
|
||
Total liabilities
|
$
|
431
|
|
|
$
|
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 $7 million and $9 million as of March 31, 2020 and December 31, 2019, respectively.
|
(3)
|
The weighted average maturity and weighted average interest rate of CLO obligations were 6.3 years and 3.8%, respectively, for March 31, 2020 and 12.8 years and 3.8%, respectively, for December 31, 2019. CLO obligations will mature in 2032.
|
|
First Quarter 2020
|
||
|
(in millions)
|
||
Beginning balance
|
$
|
7
|
|
Reallocation of ownership interests
|
(2
|
)
|
|
Contributions to investment vehicles
|
5
|
|
|
Net loss
|
(2
|
)
|
|
March 31,
|
$
|
8
|
|
|
As of
March 31, 2020 |
|
As of
December 31, 2019 |
||||
|
(in millions)
|
||||||
Assets
|
|
|
|
||||
Investment portfolio:
|
|
|
|
||||
Fixed maturity securities and short-term investments
|
$
|
(34
|
)
|
|
$
|
(39
|
)
|
Equity method investments (1)
|
(179
|
)
|
|
(77
|
)
|
||
Total investments
|
(213
|
)
|
|
(116
|
)
|
||
Premiums receivable, net of commissions payable
|
(7
|
)
|
|
(7
|
)
|
||
Salvage and subrogation recoverable
|
(9
|
)
|
|
(8
|
)
|
||
FG VIEs’ assets, at fair value
|
368
|
|
|
442
|
|
||
Assets of consolidated investment vehicles (1)
|
645
|
|
|
572
|
|
||
Other assets
|
(1
|
)
|
|
—
|
|
||
Total assets
|
$
|
783
|
|
|
$
|
883
|
|
Liabilities and shareholders’ equity
|
|
|
|
||||
Unearned premium reserve
|
$
|
(41
|
)
|
|
$
|
(39
|
)
|
Loss and LAE reserve
|
(44
|
)
|
|
(41
|
)
|
||
Deferred tax liabilities
|
2
|
|
|
—
|
|
||
FG VIEs’ liabilities with recourse, at fair value
|
312
|
|
|
367
|
|
||
FG VIEs’ liabilities without recourse, at fair value
|
82
|
|
|
102
|
|
||
Liabilities of consolidated investment vehicles (1)
|
431
|
|
|
482
|
|
||
Total liabilities
|
742
|
|
|
871
|
|
||
|
|
|
|
||||
Redeemable noncontrolling interests in consolidated investment vehicles (1)
|
8
|
|
|
7
|
|
||
|
|
|
|
||||
Retained earnings
|
30
|
|
|
34
|
|
||
Accumulated other comprehensive income
|
(22
|
)
|
|
(35
|
)
|
||
Total shareholders’ equity attributable to Assured Guaranty Ltd.
|
8
|
|
|
(1
|
)
|
||
Nonredeemable noncontrolling interests (1)
|
25
|
|
|
6
|
|
||
Total shareholders’ equity
|
33
|
|
|
5
|
|
||
Total liabilities, redeemable noncontrolling interests and shareholders’ equity
|
$
|
783
|
|
|
$
|
883
|
|
(1)
|
These line items represent the components of the effect of consolidating Assured Investment Management investment vehicles.
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Net earned premiums
|
$
|
(1
|
)
|
|
$
|
(3
|
)
|
Net investment income
|
(1
|
)
|
|
(1
|
)
|
||
Asset management fees
|
(1
|
)
|
|
—
|
|
||
Fair value gains (losses) on FG VIEs
|
(9
|
)
|
|
5
|
|
||
Fair value gains (losses) on consolidated investment vehicles
|
(12
|
)
|
|
—
|
|
||
Loss and LAE
|
6
|
|
|
(1
|
)
|
||
Equity in net earnings of investees
|
10
|
|
|
—
|
|
||
Effect on income before tax
|
(8
|
)
|
|
—
|
|
||
Less: Tax provision (benefit)
|
(1
|
)
|
|
—
|
|
||
Effect on net income (loss)
|
(7
|
)
|
|
—
|
|
||
Effect on redeemable noncontrolling interests
|
(3
|
)
|
|
—
|
|
||
Effect on net income (loss) attributable to AGL
|
$
|
(4
|
)
|
|
$
|
—
|
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Effect on cash flows from operating activities
|
$
|
(67
|
)
|
|
$
|
1
|
|
Effect on cash flows from investing activities
|
147
|
|
|
24
|
|
||
Effect on cash flows from financing activities
|
(12
|
)
|
|
(25
|
)
|
||
Total effect on cash flows
|
$
|
68
|
|
|
$
|
—
|
|
13.
|
Income Taxes
|
|
As of
March 31, 2020 |
|
As of
December 31, 2019 |
||||
|
(in millions)
|
||||||
Deferred tax assets (liabilities)
|
$
|
14
|
|
|
$
|
(17
|
)
|
Current tax assets (liabilities)
|
58
|
|
|
47
|
|
(1)
|
Included in other assets or other liabilities on the condensed consolidated balance sheets.
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Expected tax provision (benefit)
|
$
|
(11
|
)
|
|
$
|
9
|
|
Tax-exempt interest
|
(4
|
)
|
|
(5
|
)
|
||
State tax
|
1
|
|
|
1
|
|
||
Foreign taxes
|
8
|
|
|
1
|
|
||
Taxes on reinsurance
|
—
|
|
|
1
|
|
||
Deferred compensation
|
2
|
|
|
(2
|
)
|
||
Other
|
—
|
|
|
(1
|
)
|
||
Total provision (benefit) for income taxes
|
$
|
(4
|
)
|
|
$
|
4
|
|
Effective tax rate
|
7.1
|
%
|
|
7.8
|
%
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
U.S.
|
$
|
(26
|
)
|
|
$
|
35
|
|
Bermuda
|
(7
|
)
|
|
16
|
|
||
U.K. and other
|
(29
|
)
|
|
7
|
|
||
Total
|
$
|
(62
|
)
|
|
$
|
58
|
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
U.S.
|
$
|
93
|
|
|
$
|
149
|
|
Bermuda
|
14
|
|
|
33
|
|
||
U.K. and other
|
(11
|
)
|
|
13
|
|
||
Total
|
$
|
96
|
|
|
$
|
195
|
|
15.
|
Shareholders' Equity
|
|
Net Unrealized Gains (Losses) on Investments with no credit impairment
|
|
Net Unrealized gains (Losses) on Investments with credit impairment
|
|
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, 2019
|
$
|
352
|
|
|
$
|
48
|
|
|
$
|
(27
|
)
|
|
$
|
(38
|
)
|
|
$
|
7
|
|
|
$
|
342
|
|
Effect of adoption of accounting guidance on credit losses
|
62
|
|
|
(62
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Other comprehensive income (loss) before reclassifications
|
(156
|
)
|
|
(61
|
)
|
|
9
|
|
|
—
|
|
|
—
|
|
|
(208
|
)
|
||||||
Less: Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net realized investment gains (losses)
|
6
|
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
||||||
Net investment income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Fair value gains (losses) on FG VIEs
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
Total before tax
|
6
|
|
|
(11
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
||||||
Tax (provision) benefit
|
—
|
|
|
2
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||||
Total amount reclassified from AOCI, net of tax
|
6
|
|
|
(9
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
||||||
Net current period other comprehensive income (loss)
|
(162
|
)
|
|
(52
|
)
|
|
10
|
|
|
—
|
|
|
—
|
|
|
(204
|
)
|
||||||
Balance, March 31, 2020
|
$
|
252
|
|
|
$
|
(66
|
)
|
|
$
|
(17
|
)
|
|
$
|
(38
|
)
|
|
$
|
7
|
|
|
$
|
138
|
|
|
Net Unrealized Gains (Losses) on Investments with no credit impairment
|
|
Net Unrealized gains (Losses) on Investments with credit impairment
|
|
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
|
165
|
|
|
(7
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
156
|
|
||||||
Less: Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net realized investment gains (losses)
|
3
|
|
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
||||||
Fair value gains (losses) on FG VIEs
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
Total before tax
|
3
|
|
|
(15
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
||||||
Tax (provision) benefit
|
(1
|
)
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||||
Total amount reclassified from AOCI, net of tax
|
2
|
|
|
(12
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
||||||
Net current period other comprehensive income (loss)
|
163
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
168
|
|
||||||
Balance, March 31, 2019
|
$
|
222
|
|
|
$
|
99
|
|
|
$
|
(31
|
)
|
|
$
|
(37
|
)
|
|
$
|
8
|
|
|
$
|
261
|
|
Period
|
|
Number of Shares Repurchased
|
|
Total Payments
(in millions)
|
|
Average Price Paid Per Share
|
|||||
2019 (January 1 - March 31)
|
|
1,908,605
|
|
|
$
|
79
|
|
|
$
|
41.62
|
|
2019 (April 1 - June 30)
|
|
2,519,130
|
|
|
111
|
|
|
43.89
|
|
||
2019 (July 1 - September 30)
|
|
3,400,677
|
|
|
150
|
|
|
44.11
|
|
||
2019 (October 1 - December 31)
|
|
3,335,517
|
|
|
160
|
|
|
47.97
|
|
||
Total 2019
|
|
11,163,929
|
|
|
$
|
500
|
|
|
$
|
44.79
|
|
2020 (January 1 - March 31)
|
|
3,629,410
|
|
|
116
|
|
|
32.03
|
|
||
2020 (April 1 - May 7)
|
|
3,311,130
|
|
|
93
|
|
|
28.01
|
|
||
Total 2020
|
|
6,940,540
|
|
|
$
|
209
|
|
|
$
|
30.11
|
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions, except per share amounts)
|
||||||
Basic Earnings Per Share (EPS):
|
|
|
|
||||
Net income (loss) attributable to AGL
|
$
|
(55
|
)
|
|
$
|
54
|
|
Less: Distributed and undistributed income (loss) available to nonvested shareholders
|
—
|
|
|
—
|
|
||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic
|
$
|
(55
|
)
|
|
$
|
54
|
|
Basic shares
|
92.6
|
|
|
103.0
|
|
||
Basic EPS
|
$
|
(0.59
|
)
|
|
$
|
0.52
|
|
|
|
|
|
||||
Diluted EPS:
|
|
|
|
||||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic
|
$
|
(55
|
)
|
|
$
|
54
|
|
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
|
$
|
(55
|
)
|
|
$
|
54
|
|
|
|
|
|
||||
Basic shares
|
92.6
|
|
|
103.0
|
|
||
Dilutive securities:
|
|
|
|
||||
Options and restricted stock awards
|
—
|
|
|
1.0
|
|
||
Diluted shares
|
92.6
|
|
|
104.0
|
|
||
Diluted EPS
|
$
|
(0.59
|
)
|
|
$
|
0.52
|
|
Potentially dilutive securities excluded from computation of EPS because of antidilutive effect
|
1.7
|
|
|
—
|
|
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
the development, course and duration of the COVID-19 pandemic and the governmental and private actions taken in response, and the global consequences of the pandemic and such actions, including their impact on the factors listed below;
|
•
|
changes in the world’s credit markets, segments thereof, interest rates, credit spreads or general economic conditions;
|
•
|
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;
|
•
|
reduction in the amount of available insurance opportunities and/or in the demand for Assured Guaranty's insurance;
|
•
|
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;
|
•
|
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;
|
•
|
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;
|
•
|
increased competition, including from new entrants into the financial guaranty industry;
|
•
|
poor performance of Assured Guaranty's asset management strategies compared to the performance of the asset management strategies of Assured Guaranty's competitors;
|
•
|
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;
|
•
|
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;
|
•
|
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;
|
•
|
the inability of Assured Guaranty to access external sources of capital on acceptable terms;
|
•
|
changes in applicable accounting policies or practices;
|
•
|
changes in applicable laws or regulations, including insurance, bankruptcy and tax laws, or other governmental actions;
|
•
|
the failure of Assured Guaranty to successfully integrate the business of BlueMountain Capital Management, LLC (BlueMountain) and its associated entities;
|
•
|
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;
|
•
|
difficulties with the execution of Assured Guaranty’s business strategy;
|
•
|
loss of key personnel;
|
•
|
the effects of mergers, acquisitions and divestitures;
|
•
|
natural or man-made catastrophes or pandemics;
|
•
|
other risk factors identified in AGL’s filings with the United States (U.S.) Securities and Exchange Commission (the SEC);
|
•
|
other risks and uncertainties that have not been identified at this time; and
|
•
|
management’s response to these factors.
|
•
|
Committed to purchase at least $700 billion more in bonds as part of its new quantitative easing measures, including purchasing mortgage-backed securities in an effort to stabilize home loans.
|
•
|
Expanded the scope of its Term Asset-Backed Securities Loan Facility (TALF) program to include triple-A rated tranches of both outstanding commercial mortgage-backed securities and newly issued CLOs.
|
•
|
Announced that it would be establishing a Municipal Liquidity Facility that would offer up to $500 billion in lending to states and municipalities. The Facility would purchase short-term notes (i.e., notes maturing no later than 36 months from issuance) of “Eligible Issuers”, defined as U.S. States, the District of Columbia, U.S. cities with a population greater than 250,000 people and U.S. counties with a population greater than 500,000 people.
|
•
|
Expanded the Primary and Secondary Market Corporate Credit Facilities and the Term Asset-Backed Securities Loan Facility intended to support as much as $850 billion in credit.
|
•
|
Established the Money Market Mutual Fund Liquidity Facility, or MMLF, to broaden its program of support for the flow of credit to households and businesses. As part of this, the Federal Reserve Bank of Boston will make loans available to eligible financial institutions secured by high-quality assets purchased by the financial institution from money market mutual funds.
|
•
|
Extended U.S. dollar swap lines to other key nations, including Japan, England, Europe, Canada and Switzerland, to ensure those countries have enough dollar reserves on hand, similar to moves the Fed had made in 2008.
|
•
|
Unveiled plans to provide $2.3 trillion in loans to support households and local businesses. Created the Paycheck Protection Program (PPP) Liquidity Facility designed to supply “liquidity to participating financial institutions through term financing backed by PPP loans to small businesses” and established the Main Street Lending Program to “ensure credit flows to small and midsize businesses with the purchase of up to $600 billion in loans.”
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
GAAP Highlights
|
|
|
|
||||
Net income (loss) attributable to AGL
|
$
|
(55
|
)
|
|
$
|
54
|
|
Net income (loss) attributable to AGL per diluted share
|
(0.59
|
)
|
|
0.52
|
|
||
Weighted average diluted shares
|
92.6
|
|
|
104.0
|
|
||
|
|
|
|
||||
Adjusted operating income (loss) (1) (2)
|
|
|
|
||||
Insurance
|
$
|
85
|
|
|
$
|
111
|
|
Asset Management
|
(9
|
)
|
|
—
|
|
||
Corporate
|
(39
|
)
|
|
(25
|
)
|
||
Other
|
(4
|
)
|
|
—
|
|
||
Adjusted operating income (loss)
|
33
|
|
|
86
|
|
||
Adjusted operating income per diluted share (2)
|
0.36
|
|
|
0.82
|
|
||
|
|
|
|
||||
Insurance Segment
|
|
|
|
||||
Gross written premiums (GWP)
|
$
|
64
|
|
|
$
|
39
|
|
Present value of new business production (PVP) (1)
|
51
|
|
|
42
|
|
||
Gross par written
|
3,033
|
|
|
2,707
|
|
||
Asset Management Segment
|
|
|
|
||||
Wind-down funds net outflows
|
$
|
(875
|
)
|
|
$
|
—
|
|
|
As of March 31, 2020
|
|
As of December 31, 2019
|
||||||||||||
|
Amount
|
|
Per Share
|
|
Amount
|
|
Per Share
|
||||||||
|
(in millions, except per share amounts)
|
||||||||||||||
Shareholders' equity attributable to AGL
|
$
|
6,240
|
|
|
$
|
69.35
|
|
|
$
|
6,639
|
|
|
$
|
71.18
|
|
Adjusted operating shareholders' equity (1) (3)
|
6,051
|
|
|
67.25
|
|
|
6,246
|
|
|
66.96
|
|
||||
Adjusted book value (1) (4)
|
8,820
|
|
|
98.02
|
|
|
9,047
|
|
|
96.99
|
|
||||
Gain (loss) related to the effect of consolidating VIEs (VIE consolidation) included in adjusted operating shareholders' equity
|
12
|
|
|
0.14
|
|
|
7
|
|
|
0.07
|
|
||||
Gain (loss) related to VIE consolidation included in adjusted book value
|
2
|
|
|
0.03
|
|
|
(4
|
)
|
|
(0.05
|
)
|
||||
Common shares outstanding (5)
|
90.0
|
|
|
|
|
93.3
|
|
|
|
(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.
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Revenues:
|
|
|
|
||||
Net earned premiums
|
$
|
103
|
|
|
$
|
118
|
|
Net investment income
|
80
|
|
|
98
|
|
||
Asset management fees
|
23
|
|
|
—
|
|
||
Net realized investment gains (losses)
|
(5
|
)
|
|
(12
|
)
|
||
Net change in fair value of credit derivatives
|
(77
|
)
|
|
(22
|
)
|
||
Fair value gains (losses) on CCS
|
48
|
|
|
(9
|
)
|
||
Fair value gains (losses) on financial guaranty VIEs
|
(9
|
)
|
|
5
|
|
||
Fair value gains (losses) on consolidated investment vehicles
|
(12
|
)
|
|
—
|
|
||
Foreign exchange gain (loss) on remeasurement
|
(62
|
)
|
|
11
|
|
||
Other income (loss)
|
7
|
|
|
6
|
|
||
Total revenues
|
96
|
|
|
195
|
|
||
Expenses:
|
|
|
|
||||
Loss and loss adjustment expenses (LAE)
|
20
|
|
|
46
|
|
||
Interest expense
|
22
|
|
|
23
|
|
||
Amortization of deferred acquisition costs (DAC)
|
3
|
|
|
6
|
|
||
Employee compensation and benefit expenses
|
64
|
|
|
41
|
|
||
Other operating expenses
|
45
|
|
|
23
|
|
||
Total expenses
|
154
|
|
|
139
|
|
||
Income (loss) before provision for income taxes and equity in net earnings of investees
|
(58
|
)
|
|
56
|
|
||
Equity in net earnings of investees
|
(4
|
)
|
|
2
|
|
||
Income (loss) before income taxes
|
(62
|
)
|
|
58
|
|
||
Provision (benefit) for income taxes
|
(4
|
)
|
|
4
|
|
||
Net income (loss)
|
(58
|
)
|
|
54
|
|
||
Less: Noncontrolling interest
|
(3
|
)
|
|
—
|
|
||
Net income (loss) attributable to AGL
|
$
|
(55
|
)
|
|
$
|
54
|
|
•
|
foreign exchange losses on remeasurement in First Quarter 2020 compared with gains in First Quarter 2019,
|
•
|
higher fair value losses on credit derivatives in First Quarter 2020,
|
•
|
losses in the Asset Management segment and fair value losses in the Assured Investment Management funds, and
|
•
|
lower net investment income.
|
•
|
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.
|
|
First Quarter 2020
|
|
First Quarter 2019
|
|
Year Ended December 31, 2019
|
||||||
|
(dollars in billions, except number of issues and percent)
|
||||||||||
Par:
|
|
|
|
|
|
||||||
New municipal bonds issued
|
$
|
87.8
|
|
|
$
|
75.6
|
|
|
$
|
406.6
|
|
Total insured
|
$
|
4.8
|
|
|
$
|
3.6
|
|
|
$
|
23.9
|
|
Insured by Assured Guaranty
|
$
|
2.3
|
|
|
$
|
2.0
|
|
|
$
|
14.0
|
|
Number of issues:
|
|
|
|
|
|
||||||
New municipal bonds issued
|
2,119
|
|
|
1,811
|
|
|
10,590
|
|
|||
Total insured
|
360
|
|
|
290
|
|
|
1,724
|
|
|||
Insured by Assured Guaranty
|
161
|
|
|
163
|
|
|
839
|
|
|||
Bond insurance market penetration based on:
|
|
|
|
|
|
||||||
Par
|
5.5
|
%
|
|
4.8
|
%
|
|
5.9
|
%
|
|||
Number of issues
|
17.0
|
%
|
|
16.0
|
%
|
|
16.3
|
%
|
|||
Single A par sold
|
19.1
|
%
|
|
21.8
|
%
|
|
21.4
|
%
|
|||
Single A transactions sold
|
52.6
|
%
|
|
53.4
|
%
|
|
54.9
|
%
|
|||
$25 million and under par sold
|
20.4
|
%
|
|
17.7
|
%
|
|
18.1
|
%
|
|||
$25 million and under transactions sold
|
20.8
|
%
|
|
19.8
|
%
|
|
19.7
|
%
|
(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.
|
|
Amount
|
|
Number of Shares
|
|
Average price
per share
|
|||||
|
(in millions, except per share data)
|
|||||||||
2013 - 2019
|
$
|
3,216
|
|
|
105.72
|
|
|
$
|
30.42
|
|
2020 (First Quarter)
|
116
|
|
|
3.63
|
|
|
32.03
|
|
||
2020 (through May 7, 2020)
|
93
|
|
|
3.31
|
|
|
28.01
|
|
||
Cumulative repurchases since the beginning of 2013
|
$
|
3,425
|
|
|
112.66
|
|
|
$
|
30.40
|
|
|
First Quarter 2020
|
|
As of
March 31, 2020 |
|||
|
(per share)
|
|||||
Net income (loss) attributable to AGL
|
NA
|
|
|
|
||
Adjusted operating income
|
0.09
|
|
|
|
||
Shareholders' equity attributable to AGL
|
|
|
$
|
21.12
|
|
|
Adjusted operating shareholders' equity
|
|
|
20.03
|
|
||
Adjusted book value
|
|
|
36.86
|
|
(1)
|
Represents the estimated accretive effect of cumulative repurchases since the beginning of 2013. On a U.S. GAAP basis the Company had a net loss.
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Adjusted operating income (loss) by segment:
|
|
|
|
||||
Insurance
|
$
|
85
|
|
|
$
|
111
|
|
Asset management
|
(9
|
)
|
|
—
|
|
||
Corporate
|
(39
|
)
|
|
(25
|
)
|
||
Other
|
(4
|
)
|
|
—
|
|
||
Adjusted operating income (loss)
|
$
|
33
|
|
|
$
|
86
|
|
Reconciling items from adjusted operating income to net income (loss) attributable to AGL:
|
|
|
|
||||
Plus pre-tax adjustments:
|
|
|
|
||||
Realized gains (losses) on investments
|
$
|
(5
|
)
|
|
$
|
(12
|
)
|
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
(88
|
)
|
|
(28
|
)
|
||
Fair value gains (losses) on CCS
|
48
|
|
|
(9
|
)
|
||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
|
(57
|
)
|
|
9
|
|
||
Total pre-tax adjustments
|
(102
|
)
|
|
(40
|
)
|
||
Plus tax effect on pre-tax adjustments
|
14
|
|
|
8
|
|
||
Net income (loss) attributable to AGL
|
$
|
(55
|
)
|
|
$
|
54
|
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Revenues
|
|
|
|
||||
Net earned premiums and credit derivative revenues
|
$
|
107
|
|
|
$
|
126
|
|
Net investment income
|
83
|
|
|
99
|
|
||
Other income (loss)
|
6
|
|
|
9
|
|
||
Total revenues
|
196
|
|
|
234
|
|
||
Expenses
|
|
|
|
||||
Loss expense
|
18
|
|
|
44
|
|
||
Amortization of DAC
|
3
|
|
|
6
|
|
||
Employee compensation and benefit expenses
|
41
|
|
|
37
|
|
||
Other operating expenses
|
22
|
|
|
20
|
|
||
Total expenses
|
84
|
|
|
107
|
|
||
Equity in net earnings of investees (1)
|
(9
|
)
|
|
1
|
|
||
Adjusted operating income (loss) before income taxes
|
103
|
|
|
128
|
|
||
Provision (benefit) for income taxes
|
18
|
|
|
17
|
|
||
Adjusted operating income (loss)
|
$
|
85
|
|
|
$
|
111
|
|
(1)
|
Includes interest income of $1 million related to CLO Warehouse Fund (US) L.P. (CLO Warehouse Fund) and AIM Asset Backed Income Fund (US) L.P. (ABIF) investments in debt securities in First Quarter 2020.
|
(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.”
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Financial guaranty insurance:
|
|
|
71
|
|
|||
Public finance
|
|
|
|
||||
Scheduled net earned premiums
|
$
|
70
|
|
|
$
|
71
|
|
Accelerations:
|
|
|
|
||||
Refundings
|
15
|
|
|
27
|
|
||
Terminations
|
—
|
|
|
—
|
|
||
Total accelerations
|
15
|
|
|
27
|
|
||
Total public finance
|
85
|
|
|
98
|
|
||
Structured finance
|
|
|
|
||||
Scheduled net earned premiums
|
18
|
|
|
23
|
|
||
Terminations
|
—
|
|
|
(1
|
)
|
||
Total structured finance
|
18
|
|
|
22
|
|
||
Specialty insurance and reinsurance
|
1
|
|
|
1
|
|
||
Total net earned premiums
|
$
|
104
|
|
|
$
|
121
|
|
Credit derivative revenues
|
3
|
|
|
5
|
|
||
Total net earned premiums and credit derivative revenue
|
$
|
107
|
|
|
$
|
126
|
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Income from fixed-maturity securities managed by third parties
|
$
|
62
|
|
|
$
|
73
|
|
Income from internally managed securities
|
20
|
|
|
27
|
|
||
Interest income from intercompany loans
|
3
|
|
|
1
|
|
||
Gross investment income
|
85
|
|
|
101
|
|
||
Investment expenses
|
(2
|
)
|
|
(2
|
)
|
||
Net investment income
|
$
|
83
|
|
|
$
|
99
|
|
|
|
|
|
||||
Fair value gains (losses) on Assured Investment Management funds
|
$
|
(10
|
)
|
|
$
|
—
|
|
Other
|
1
|
|
|
1
|
|
||
Equity in net earnings of investees (1)
|
(9
|
)
|
|
1
|
|
(1)
|
Includes interest of $1 million related to CLO Warehouse Fund and ABIF investments in debt securities in First Quarter 2020.
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Foreign exchange gain (loss) on remeasurement (1)
|
$
|
(5
|
)
|
|
$
|
1
|
|
Other
|
11
|
|
|
8
|
|
||
Total other income (loss)
|
$
|
6
|
|
|
$
|
9
|
|
(1)
|
Primarily related to cash.
|
|
Net Expected Loss to be Paid/ (Recovered)
|
|
Net Economic Loss Development/ (Benefit)
|
||||||||||||
|
As of
|
|
First Quarter
|
||||||||||||
|
March 31, 2020
|
|
December 31, 2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Insurance
|
$
|
609
|
|
|
$
|
683
|
|
|
$
|
(1
|
)
|
|
$
|
10
|
|
FG VIEs
|
64
|
|
|
58
|
|
|
6
|
|
|
(10
|
)
|
||||
Credit derivatives
|
(13
|
)
|
|
(4
|
)
|
|
(8
|
)
|
|
(2
|
)
|
||||
Total
|
$
|
660
|
|
|
$
|
737
|
|
|
$
|
(3
|
)
|
|
$
|
(2
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net exposure rated BIG
|
$
|
8,268
|
|
|
$
|
8,506
|
|
|
|
|
|
|
Net Expected Loss to be Paid/(Recovered)
|
|
Net Economic Loss Development/(Benefit)
|
||||||||||||
|
As of
|
|
First Quarter
|
||||||||||||
|
March 31, 2020
|
|
December 31, 2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
U.S. public finance
|
$
|
493
|
|
|
$
|
531
|
|
|
$
|
56
|
|
|
$
|
62
|
|
Non-U.S. public finance
|
26
|
|
|
23
|
|
|
3
|
|
|
(1
|
)
|
||||
Structured finance
|
|
|
|
|
|
|
|
||||||||
U.S. RMBS
|
104
|
|
|
146
|
|
|
(63
|
)
|
|
(65
|
)
|
||||
Other structured finance
|
37
|
|
|
37
|
|
|
1
|
|
|
2
|
|
||||
Structured finance
|
141
|
|
|
183
|
|
|
(62
|
)
|
|
(63
|
)
|
||||
Total
|
$
|
660
|
|
|
$
|
737
|
|
|
$
|
(3
|
)
|
|
$
|
(2
|
)
|
|
|
|
|
|
|
|
|
||||||||
Effect of changes in the risk-free rates included in economic loss development (benefit)
|
|
|
|
|
$
|
31
|
|
|
$
|
(4
|
)
|
|
Risk-Free Rates used in Expected Loss for U.S. Dollar Denominated Obligations
|
||||||
|
Range
|
|
Weighted Average
|
||||
As of March 31, 2020
|
0.00
|
%
|
-
|
1.39%
|
|
0.64
|
%
|
As of December 31, 2019
|
0.00
|
%
|
-
|
2.45%
|
|
1.94
|
%
|
As of March 31, 2019
|
0.00
|
%
|
-
|
2.87%
|
|
2.46
|
%
|
As of December 31, 2018
|
0.00
|
%
|
-
|
3.06%
|
|
2.74
|
%
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
U.S. public finance
|
$
|
59
|
|
|
$
|
70
|
|
Structured finance
|
|
|
|
||||
U.S. RMBS
|
(44
|
)
|
|
(29
|
)
|
||
Other structured finance
|
3
|
|
|
3
|
|
||
Structured finance
|
(41
|
)
|
|
(26
|
)
|
||
Total loss and LAE (benefit)
|
$
|
18
|
|
|
$
|
44
|
|
•
|
Loss and LAE in First Quarter 2020 was mainly driven by higher losses on certain Puerto Rico exposures, partially offset by a benefit on first lien U.S. RMBS exposures.
|
•
|
Loss and LAE in First Quarter 2019 was mainly driven by higher losses on certain Puerto Rico exposures, partially offset by a benefit on U.S. RMBS exposures.
|
|
First Quarter
|
||
|
2020
|
||
|
(in millions)
|
||
Revenues
|
|
||
Management fees:
|
|
||
CLOs
|
$
|
5
|
|
Opportunity funds
|
2
|
|
|
Wind-down funds
|
9
|
|
|
Total management fees (1)
|
16
|
|
|
Other income
|
1
|
|
|
Total revenues
|
17
|
|
|
Expenses
|
|
||
Amortization of intangible assets
|
3
|
|
|
Employee compensation and benefit expenses
|
18
|
|
|
Other operating expenses
|
7
|
|
|
Total expenses
|
28
|
|
|
Adjusted operating income (loss) before income taxes
|
(11
|
)
|
|
Provision (benefit) for income taxes
|
(2
|
)
|
|
Adjusted operating income (loss)
|
$
|
(9
|
)
|
(1)
|
The Asset Management segment presents reimbursable fund expenses netted in other operating expenses, whereas on the condensed consolidated statement of operations such reimbursable expenses are shown gross, as components of asset management fees and other operating expenses.
|
•
|
the net asset value of the opportunity and wind-down funds plus any unfunded commitments; and
|
•
|
the amount of aggregate collateral balance and principal cash of BlueMountain'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 BlueMountain manages or advises on behalf of third-party investors. This includes current and former employee investments in Assured Investment Management funds. For CLOs, this also includes CLO equity that may be held by Assured Investment Management funds funds.
|
•
|
“Intercompany assets under management” or “Intercompany AUM” refers to the assets BlueMountain 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 BlueMountain 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 BlueMountain does not collect fees or has elected to waive or rebate fees to investors. BlueMountain reserves the right to waive some or all fees for certain investors, including investors affiliated with BlueMountain and/or the Company. Further, to the extent that the Company's wind-down and/or opportunity funds are invested in BlueMountain managed CLOs, BlueMountain 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 BlueMountain.
|
|
CLOs
|
|
Opportunity Funds
|
|
Wind-Down Funds
|
|
Total
|
||||||||
|
(in millions)
|
||||||||||||||
Rollforward:
|
|
|
|
|
|
|
|
||||||||
AUM, December 31, 2019
|
$
|
12,758
|
|
|
$
|
1,023
|
|
|
$
|
4,046
|
|
|
$
|
17,827
|
|
|
|
|
|
|
|
|
|
||||||||
Inflows
|
—
|
|
|
88
|
|
|
—
|
|
|
88
|
|
||||
Outflows:
|
|
|
|
|
|
|
|
||||||||
Redemptions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Distributions
|
(67
|
)
|
|
(85
|
)
|
|
(875
|
)
|
|
(1,027
|
)
|
||||
Total outflows
|
(67
|
)
|
|
(85
|
)
|
|
(875
|
)
|
|
(1,027
|
)
|
||||
Net flows
|
(67
|
)
|
|
3
|
|
|
(875
|
)
|
|
(939
|
)
|
||||
Change in fund value
|
(46
|
)
|
|
(57
|
)
|
|
(306
|
)
|
|
(409
|
)
|
||||
AUM, March 31, 2020 (1)
|
$
|
12,645
|
|
|
$
|
969
|
|
|
$
|
2,865
|
|
|
$
|
16,479
|
|
|
|
|
|
|
|
|
|
||||||||
As of March 31, 2020:
|
|
|
|
|
|
|
|
||||||||
Funded AUM
|
$
|
12,634
|
|
|
$
|
849
|
|
|
$
|
2,843
|
|
|
$
|
16,326
|
|
Unfunded AUM
|
11
|
|
|
120
|
|
|
22
|
|
|
153
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Fee Earning AUM
|
$
|
6,038
|
|
|
$
|
814
|
|
|
$
|
2,601
|
|
|
$
|
9,453
|
|
Non-Fee Earning AUM
|
6,607
|
|
|
155
|
|
|
264
|
|
|
7,026
|
|
||||
|
|
|
|
|
|
|
|
||||||||
As of December 31, 2019:
|
|
|
|
|
|
|
|
||||||||
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 AUM of the insurance company subsidiaries (intercompany AUM) of $216 million in opportunity funds and $41 million in the CLO Warehouse Fund.
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Revenues
|
|
|
|
||||
Net investment income
|
$
|
1
|
|
|
$
|
1
|
|
Loss on extinguishment of debt
|
(5
|
)
|
|
(1
|
)
|
||
Total revenues
|
(4
|
)
|
|
—
|
|
||
Expenses
|
|
|
|
||||
Interest expense
|
25
|
|
|
24
|
|
||
Employee compensation and benefit expenses
|
5
|
|
|
4
|
|
||
Other operating expenses
|
5
|
|
|
3
|
|
||
Total expenses
|
35
|
|
|
31
|
|
||
Equity in net earnings of investees
|
(5
|
)
|
|
1
|
|
||
Adjusted operating income (loss) before income taxes
|
(44
|
)
|
|
(30
|
)
|
||
Provision (benefit) for income taxes
|
(5
|
)
|
|
(5
|
)
|
||
Adjusted operating income (loss)
|
$
|
(39
|
)
|
|
$
|
(25
|
)
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Effect of consolidating:
|
|
|
|
||||
FG VIEs
|
$
|
(4
|
)
|
|
$
|
—
|
|
Investment vehicles
|
—
|
|
|
—
|
|
||
VIE consolidation effect
|
$
|
(4
|
)
|
|
$
|
—
|
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Net income (loss) attributable to AGL
|
$
|
(55
|
)
|
|
$
|
54
|
|
Less pre-tax adjustments:
|
|
|
|
||||
Realized gains (losses) on investments
|
(5
|
)
|
|
(12
|
)
|
||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
(88
|
)
|
|
(28
|
)
|
||
Fair value gains (losses) on CCS
|
48
|
|
|
(9
|
)
|
||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
|
(57
|
)
|
|
9
|
|
||
Total pre-tax adjustments
|
(102
|
)
|
|
(40
|
)
|
||
Less tax effect on pre-tax adjustments
|
14
|
|
|
8
|
|
||
Adjusted operating income (loss)
|
$
|
33
|
|
|
$
|
86
|
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Gross realized gains on available-for-sale securities
|
$
|
7
|
|
|
$
|
6
|
|
Gross realized losses on available-for-sale securities
|
(1
|
)
|
|
(2
|
)
|
||
Credit impairments
|
(11
|
)
|
|
(16
|
)
|
||
Net realized investment gains (losses)
|
$
|
(5
|
)
|
|
$
|
(12
|
)
|
|
|
As of March 31, 2020
|
|
As of December 31, 2019
|
||||||||||||
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 basis points (bps)
|
|
$
|
(378
|
)
|
|
$
|
(116
|
)
|
|
$
|
(315
|
)
|
|
$
|
(130
|
)
|
Base Scenario
|
|
(262
|
)
|
|
—
|
|
|
(185
|
)
|
|
—
|
|
||||
Decrease of 25 bps
|
|
(164
|
)
|
|
98
|
|
|
(97
|
)
|
|
88
|
|
||||
All transactions priced at floor
|
|
(65
|
)
|
|
197
|
|
|
(56
|
)
|
|
129
|
|
(1)
|
Includes the effects of changes in the net spreads assumed by the Company.
|
|
As of March 31, 2020
|
|
As of December 31, 2019
|
||||||||||||
|
After-Tax
|
|
Per Share
|
|
After-Tax
|
|
Per Share
|
||||||||
|
(dollars in millions, except per share amounts)
|
||||||||||||||
Shareholders’ equity attributable to AGL
|
$
|
6,240
|
|
|
$
|
69.35
|
|
|
$
|
6,639
|
|
|
$
|
71.18
|
|
Less pre-tax adjustments:
|
|
|
|
|
|
|
|
||||||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
(144
|
)
|
|
(1.60
|
)
|
|
(56
|
)
|
|
(0.60
|
)
|
||||
Fair value gains (losses) on CCS
|
101
|
|
|
1.12
|
|
|
52
|
|
|
0.56
|
|
||||
Unrealized gain (loss) on investment portfolio excluding foreign exchange effect
|
275
|
|
|
3.06
|
|
|
486
|
|
|
5.21
|
|
||||
Less taxes
|
(43
|
)
|
|
(0.48
|
)
|
|
(89
|
)
|
|
(0.95
|
)
|
||||
Adjusted operating shareholders’ equity
|
6,051
|
|
|
67.25
|
|
|
6,246
|
|
|
66.96
|
|
||||
Pre-tax adjustments:
|
|
|
|
|
|
|
|
|
|
||||||
Less: Deferred acquisition costs
|
113
|
|
|
1.26
|
|
|
111
|
|
|
1.19
|
|
||||
Plus: Net present value of estimated net future revenue
|
193
|
|
|
2.14
|
|
|
206
|
|
|
2.20
|
|
||||
Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed
|
3,273
|
|
|
36.37
|
|
|
3,296
|
|
|
35.34
|
|
||||
Plus taxes
|
(584
|
)
|
|
(6.48
|
)
|
|
(590
|
)
|
|
(6.32
|
)
|
||||
Adjusted book value
|
$
|
8,820
|
|
|
$
|
98.02
|
|
|
9,047
|
|
|
96.99
|
|
||
|
|
|
|
|
|
|
|
||||||||
Gain (loss) related to VIE consolidation included in adjusted operating shareholders' equity (net of tax provision of $4 and $2)
|
$
|
12
|
|
|
$
|
0.14
|
|
|
$
|
7
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) related to VIE consolidation included in adjusted book value (net of tax provision (benefit) of $2 and $(1))
|
$
|
2
|
|
|
$
|
0.03
|
|
|
$
|
(4
|
)
|
|
$
|
(0.05
|
)
|
|
First Quarter 2020
|
|
First Quarter 2019
|
||||||||||||||||||||||||||||||||||||
|
Public Finance
|
|
Structured Finance
|
|
|
|
Public Finance
|
|
Structured Finance
|
|
|
||||||||||||||||||||||||||||
|
U.S.
|
|
Non - U.S.
|
|
U.S.
|
|
Non - U.S.
|
|
Total
|
|
U.S.
|
|
Non - U.S.
|
|
U.S.
|
|
Non - U.S.
|
|
Total
|
||||||||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||||||||||||||
GWP
|
$
|
29
|
|
|
$
|
34
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
64
|
|
|
$
|
30
|
|
|
$
|
2
|
|
|
$
|
6
|
|
|
$
|
1
|
|
|
$
|
39
|
|
Less: Installment GWP and other GAAP adjustments (2)
|
—
|
|
|
34
|
|
|
1
|
|
|
—
|
|
|
35
|
|
|
(2
|
)
|
|
2
|
|
|
5
|
|
|
—
|
|
|
5
|
|
||||||||||
Upfront GWP
|
29
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29
|
|
|
32
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
34
|
|
||||||||||
Plus: Installment premium PVP
|
—
|
|
|
21
|
|
|
1
|
|
|
—
|
|
|
22
|
|
|
—
|
|
|
4
|
|
|
4
|
|
|
—
|
|
|
8
|
|
||||||||||
PVP
|
$
|
29
|
|
|
$
|
21
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
51
|
|
|
$
|
32
|
|
|
$
|
4
|
|
|
$
|
5
|
|
|
$
|
1
|
|
|
$
|
42
|
|
(1)
|
The discount rate used for PVP as of March 31, 2020 is 3%. The prior period has been recast to present PVP discounted at 3% instead of 6%.
|
(2)
|
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.
|
•
|
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; and
|
•
|
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 the 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 March 31, 2020
|
|
As of December 31, 2019
|
||||||||
Sector
|
|
Net Par
Outstanding
|
|
Avg.
Rating
|
|
Net Par
Outstanding
|
|
Avg.
Rating
|
||||
|
|
(dollars in millions)
|
||||||||||
Public finance:
|
|
|
|
|
|
|
|
|
|
|||
U.S.:
|
|
|
|
|
|
|
|
|
|
|||
General obligation
|
|
$
|
72,340
|
|
|
A-
|
|
$
|
73,467
|
|
|
A-
|
Tax backed
|
|
35,715
|
|
|
A-
|
|
37,047
|
|
|
A-
|
||
Municipal utilities
|
|
25,926
|
|
|
A-
|
|
26,195
|
|
|
A-
|
||
Transportation
|
|
16,105
|
|
|
BBB+
|
|
16,209
|
|
|
BBB+
|
||
Healthcare
|
|
7,256
|
|
|
BBB+
|
|
7,148
|
|
|
A-
|
||
Higher education
|
|
5,977
|
|
|
A-
|
|
5,916
|
|
|
A-
|
||
Infrastructure finance
|
|
5,384
|
|
|
A-
|
|
5,429
|
|
|
A-
|
||
Housing revenue
|
|
1,363
|
|
|
BBB+
|
|
1,321
|
|
|
BBB+
|
||
Investor-owned utilities
|
|
654
|
|
|
A-
|
|
655
|
|
|
A-
|
||
Renewable energy
|
|
207
|
|
|
A-
|
|
210
|
|
|
A-
|
||
Other public finance—U.S.
|
|
1,868
|
|
|
A-
|
|
1,890
|
|
|
A-
|
||
Total public finance—U.S.
|
|
172,795
|
|
|
A-
|
|
175,487
|
|
|
A-
|
||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|||
Regulated utilities
|
|
17,825
|
|
|
BBB+
|
|
18,995
|
|
|
BBB+
|
||
Infrastructure finance
|
|
16,684
|
|
|
BBB
|
|
17,952
|
|
|
BBB
|
||
Sovereign and sub-sovereign
|
|
10,834
|
|
|
A+
|
|
11,341
|
|
|
A+
|
||
Renewable energy
|
|
1,905
|
|
|
A
|
|
1,555
|
|
|
A
|
||
Pooled infrastructure
|
|
1,327
|
|
|
AAA
|
|
1,416
|
|
|
AAA
|
||
Total public finance—non-U.S.
|
|
48,575
|
|
|
A-
|
|
51,259
|
|
|
A-
|
||
Total public finance
|
|
221,370
|
|
|
A-
|
|
226,746
|
|
|
A-
|
||
Structured finance:
|
|
|
|
|
|
|
|
|
|
|||
U.S.:
|
|
|
|
|
|
|
|
|
|
|||
RMBS
|
|
3,393
|
|
|
BBB-
|
|
3,546
|
|
|
BBB-
|
||
Life insurance transactions
|
|
1,794
|
|
|
AA-
|
|
1,776
|
|
|
AA-
|
||
Pooled corporate obligations
|
|
1,350
|
|
|
AA-
|
|
1,401
|
|
|
AA-
|
||
Consumer receivables
|
|
909
|
|
|
A-
|
|
962
|
|
|
A-
|
||
Financial products
|
|
806
|
|
|
AA-
|
|
1,019
|
|
|
AA-
|
||
Other structured finance—U.S.
|
|
554
|
|
|
BBB+
|
|
596
|
|
|
BBB+
|
||
Total structured finance—U.S.
|
|
8,806
|
|
|
A-
|
|
9,300
|
|
|
A-
|
||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|||
RMBS
|
|
401
|
|
|
A
|
|
427
|
|
|
A
|
||
Pooled corporate obligations
|
|
55
|
|
|
BB+
|
|
55
|
|
|
BB+
|
||
Other structured finance
|
|
266
|
|
|
A+
|
|
279
|
|
|
A+
|
||
Total structured finance—non-U.S.
|
|
722
|
|
|
A
|
|
761
|
|
|
A
|
||
Total structured finance
|
|
9,528
|
|
|
A-
|
|
10,061
|
|
|
A-
|
||
Total net par outstanding
|
|
$
|
230,898
|
|
|
A-
|
|
$
|
236,807
|
|
|
A-
|
|
|
As of March 31, 2020
|
|
As of December 31, 2019
|
||||||||||
Rating
Category
|
|
Net Par Outstanding
|
|
%
|
|
Net Par Outstanding
|
|
%
|
||||||
|
|
(dollars in millions)
|
||||||||||||
AAA
|
|
$
|
4,186
|
|
|
1.8
|
%
|
|
$
|
4,361
|
|
|
1.8
|
%
|
AA
|
|
27,746
|
|
|
12.0
|
|
|
29,037
|
|
|
12.3
|
|
||
A
|
|
108,612
|
|
|
47.0
|
|
|
111,329
|
|
|
47.0
|
|
||
BBB
|
|
82,116
|
|
|
35.6
|
|
|
83,574
|
|
|
35.3
|
|
||
BIG
|
|
8,238
|
|
|
3.6
|
|
|
8,506
|
|
|
3.6
|
|
||
Total net par outstanding
|
|
$
|
230,898
|
|
|
100.0
|
%
|
|
$
|
236,807
|
|
|
100.0
|
%
|
•
|
Constitutionally Guaranteed.
|
•
|
Public Corporations – Certain Revenues Potentially Subject to Clawback.
|
•
|
Other Public Corporations.
|
|
|
Net Par Outstanding
|
|
|
||||||||||||||||||||
|
|
AGM
|
|
AGC
|
|
Assured Guaranty Re Ltd. (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
|
|
|
140
|
|
|
—
|
|
|
(7
|
)
|
|
140
|
|
|
145
|
|
||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Puerto Rico Highways and Transportation Authority (PRHTA) (Transportation revenue) (2)
|
|
223
|
|
|
480
|
|
|
187
|
|
|
(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 the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) has certified a filing under Title III of PROMESA for these exposures.
|
|
Scheduled Net Par Amortization
|
||||||||||||||||||||||||||||||||||||||
|
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 Outstanding
|
||||||||||||||||||||||||||||||||||||||
|
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
|
$
|
—
|
|
$
|
173
|
|
$
|
—
|
|
$
|
74
|
|
$
|
94
|
|
$
|
70
|
|
$
|
128
|
|
$
|
514
|
|
$
|
572
|
|
$
|
294
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,919
|
|
PBA
|
—
|
|
9
|
|
—
|
|
20
|
|
6
|
|
13
|
|
6
|
|
81
|
|
50
|
|
20
|
|
—
|
|
—
|
|
205
|
|
|||||||||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
PRHTA (Transportation revenue)
|
—
|
|
46
|
|
—
|
|
59
|
|
68
|
|
72
|
|
41
|
|
331
|
|
294
|
|
356
|
|
89
|
|
—
|
|
1,356
|
|
|||||||||||||
PRHTA (Highway revenue)
|
—
|
|
34
|
|
—
|
|
58
|
|
27
|
|
52
|
|
51
|
|
134
|
|
233
|
|
101
|
|
—
|
|
—
|
|
690
|
|
|||||||||||||
PRCCDA
|
—
|
|
3
|
|
—
|
|
7
|
|
7
|
|
7
|
|
7
|
|
52
|
|
103
|
|
61
|
|
—
|
|
—
|
|
247
|
|
|||||||||||||
PRIFA
|
—
|
|
—
|
|
—
|
|
1
|
|
1
|
|
3
|
|
1
|
|
4
|
|
3
|
|
10
|
|
8
|
|
—
|
|
31
|
|
|||||||||||||
Other Public Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
PREPA
|
3
|
|
65
|
|
3
|
|
63
|
|
62
|
|
128
|
|
121
|
|
467
|
|
155
|
|
5
|
|
—
|
|
—
|
|
1,072
|
|
|||||||||||||
PRASA
|
—
|
|
10
|
|
—
|
|
19
|
|
19
|
|
19
|
|
20
|
|
190
|
|
68
|
|
70
|
|
82
|
|
272
|
|
769
|
|
|||||||||||||
MFA
|
—
|
|
52
|
|
—
|
|
50
|
|
48
|
|
28
|
|
23
|
|
89
|
|
5
|
|
—
|
|
—
|
|
—
|
|
295
|
|
|||||||||||||
U of PR
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
—
|
|
—
|
|
—
|
|
1
|
|
|||||||||||||
Total
|
$
|
3
|
|
$
|
392
|
|
$
|
3
|
|
$
|
351
|
|
$
|
332
|
|
$
|
392
|
|
$
|
398
|
|
$
|
1,862
|
|
$
|
1,484
|
|
$
|
917
|
|
$
|
179
|
|
$
|
272
|
|
$
|
6,585
|
|
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
|
|
$
|
21
|
|
|
$
|
18
|
|
|
$
|
1
|
|
|
$
|
539
|
|
|
$
|
44
|
|
|
$
|
623
|
|
2005
|
|
48
|
|
|
213
|
|
|
23
|
|
|
219
|
|
|
123
|
|
|
626
|
|
||||||
2006
|
|
36
|
|
|
41
|
|
|
10
|
|
|
263
|
|
|
206
|
|
|
556
|
|
||||||
2007
|
|
—
|
|
|
316
|
|
|
26
|
|
|
934
|
|
|
270
|
|
|
1,546
|
|
||||||
2008
|
|
—
|
|
|
—
|
|
|
—
|
|
|
42
|
|
|
—
|
|
|
42
|
|
||||||
Total exposures
|
|
$
|
105
|
|
|
$
|
588
|
|
|
$
|
60
|
|
|
$
|
1,997
|
|
|
$
|
643
|
|
|
$
|
3,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Exposures rated BIG
|
|
$
|
57
|
|
|
$
|
329
|
|
|
$
|
32
|
|
|
$
|
995
|
|
|
$
|
167
|
|
|
$
|
1,580
|
|
|
Gross Exposure
|
|
Net Exposure
|
||||||||||||
|
As of March 31, 2020
|
|
As of December 31, 2019
|
|
As of March 31, 2020
|
|
As of December 31, 2019
|
||||||||
|
(in millions)
|
||||||||||||||
Life insurance transactions (1)
|
$
|
1,091
|
|
|
$
|
1,046
|
|
|
$
|
940
|
|
|
$
|
898
|
|
Aircraft residual value insurance policies
|
393
|
|
|
398
|
|
|
238
|
|
|
243
|
|
||||
Total
|
$
|
1,484
|
|
|
$
|
1,444
|
|
|
$
|
1,178
|
|
|
$
|
1,141
|
|
(1)
|
The life insurance transactions net exposure is projected to increase to approximately $1.0 billion by September 30, 2026.
|
|
As of March 31, 2020
|
|
As of December 31, 2019
|
||||||||||||
|
AGL
|
|
U.S. Holding Companies
|
|
AGL
|
|
U.S. Holding Companies
|
||||||||
|
(in millions)
|
||||||||||||||
Investments and cash (1)
|
$
|
33
|
|
|
$
|
294
|
|
|
$
|
135
|
|
|
$
|
243
|
|
Receivables from affiliates (2)
|
25
|
|
|
—
|
|
|
29
|
|
|
—
|
|
||||
Receivable from U.S. Holding Companies
|
70
|
|
|
—
|
|
|
40
|
|
|
—
|
|
||||
Other assets
|
1
|
|
|
71
|
|
|
2
|
|
|
59
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Long term debt
|
—
|
|
|
1,217
|
|
|
—
|
|
|
1,231
|
|
||||
Loans payable to affiliate
|
—
|
|
|
290
|
|
|
—
|
|
|
290
|
|
||||
Payable to affiliates (2)
|
15
|
|
|
6
|
|
|
9
|
|
|
5
|
|
||||
Payable to AGL
|
—
|
|
|
70
|
|
|
—
|
|
|
40
|
|
||||
Other liabilities
|
5
|
|
|
146
|
|
|
8
|
|
|
130
|
|
(1)
|
As of March 31, 2020 and December 31, 2019, weighted average duration of U.S. Holding Companies' fixed-maturity securities (excluding AGUS' investment in AGMH's debt) was 2.1 years and 4.4 years, respectively.
|
(2)
|
Represents receivable and payables with non-guarantor subsidiaries.
|
|
Three Months Ended March 31, 2020
|
||||||
|
AGL
|
|
U.S. Holding Companies
|
||||
|
(in millions)
|
||||||
Revenues
|
$
|
—
|
|
|
$
|
(4
|
)
|
|
|
|
|
||||
Interest expense
|
—
|
|
|
25
|
|
||
Other expenses
|
10
|
|
|
1
|
|
||
|
|
|
|
||||
Income (loss) before provision for income taxes
|
(10
|
)
|
|
(30
|
)
|
||
Equity in net earnings of investees
|
—
|
|
|
(5
|
)
|
||
Net income (loss)
|
(10
|
)
|
|
(27
|
)
|
|
AGL
|
|
U.S. Holding Companies
|
||||
|
(in millions)
|
||||||
First Quarter 2020
|
|
|
|
||||
Intercompany sources
|
$
|
40
|
|
|
$
|
157
|
|
Intercompany (uses)
|
—
|
|
|
(70
|
)
|
||
External sources (uses):
|
|
|
|
||||
Dividends paid to AGL shareholders
|
(20
|
)
|
|
—
|
|
||
Repurchases of common shares (1)
|
(116
|
)
|
|
—
|
|
||
Interest paid (2)
|
—
|
|
|
(9
|
)
|
||
|
|
|
|
||||
First Quarter 2019
|
|
|
|
||||
Intercompany sources
|
$
|
100
|
|
|
$
|
116
|
|
Intercompany (uses)
|
—
|
|
|
(60
|
)
|
||
External sources (uses):
|
|
|
|
||||
Dividends paid to AGL shareholders
|
(20
|
)
|
|
—
|
|
||
Repurchases of common shares (1)
|
(80
|
)
|
|
—
|
|
||
Interest paid (2)
|
—
|
|
|
(9
|
)
|
(1)
|
See Item 1, Financial Statements, Note 15, Shareholders' Equity, for additional information about share repurchases and authorizations.
|
(2)
|
See Long-Term Obligations below for interest paid by subsidiary.
|
|
As of March 31, 2020
|
|
As of December 31, 2019
|
||||||||||||
|
Principal
|
|
Carrying
Value |
|
Principal
|
|
Carrying
Value |
||||||||
|
(in millions)
|
||||||||||||||
AGUS
|
$
|
850
|
|
|
$
|
845
|
|
|
$
|
850
|
|
|
$
|
844
|
|
Intercompany loans
|
290
|
|
|
290
|
|
|
290
|
|
|
290
|
|
||||
Total AGUS
|
1,140
|
|
|
1,135
|
|
|
1,140
|
|
|
1,134
|
|
||||
AGMH
|
730
|
|
|
477
|
|
|
730
|
|
|
476
|
|
||||
AGM
|
4
|
|
|
4
|
|
|
4
|
|
|
4
|
|
||||
AGMH's debt purchased by AGUS (1)
|
(154
|
)
|
|
(105
|
)
|
|
(131
|
)
|
|
(89
|
)
|
||||
Elimination of intercompany loans
|
(290
|
)
|
|
(290
|
)
|
|
(290
|
)
|
|
(290
|
)
|
||||
Total
|
$
|
1,430
|
|
|
$
|
1,221
|
|
|
$
|
1,453
|
|
|
$
|
1,235
|
|
(1)
|
Represents principal amount of Junior Subordinated Debentures issued by AGMH that has been purchased by AGUS. Loss on extinguishment of debt was $5 million in First Quarter 2020 and $1 million in First Quarter 2019.
|
•
|
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.
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
|
||||||
Public finance
|
$
|
(94
|
)
|
|
$
|
(228
|
)
|
Structured finance:
|
|
|
|
||||
U.S. RMBS
|
21
|
|
|
9
|
|
||
Other structured finance
|
(1
|
)
|
|
1
|
|
||
Structured finance
|
20
|
|
|
10
|
|
||
Claims (paid) recovered, net of reinsurance (1)
|
$
|
(74
|
)
|
|
$
|
(218
|
)
|
(1)
|
Includes $0.3 million paid and $1 million recovered for consolidated FG VIEs for First Quarter 2020 and 2019, respectively.
|
•
|
The maximum amount available during 2020 for AGM to distribute as dividends without regulatory approval is estimated to be approximately $212 million, none of which is estimated to be available for distribution in the second quarter of 2020.
|
•
|
The maximum amount available during 2020 for AGC to distribute as ordinary dividends is approximately $166 million, of which approximately $24 million is available for distribution in the second quarter of 2020.
|
•
|
The maximum amount available during 2020 for MAC to distribute to MAC Assurance Holdings Inc. (MAC Holdings) as dividends without regulatory approval is estimated to be approximately $20 million, of which approximately $20 million is available for distribution in the second 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 Bermuda Monetary Authority (the Authority) and (ii) declare and pay dividends in an aggregate amount up to approximately $274 million as of March 31, 2020. 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 $261 million as of March 31, 2020, and (ii) the amount of statutory surplus, which as of March 31, 2020 was $233 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 March 31, 2020. 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 March 31, 2020, and (ii) the amount of statutory surplus, which as of March 31, 2020 was $272 million.
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Dividends paid by AGC to AGUS
|
$
|
85
|
|
|
$
|
42
|
|
Dividends paid by AGM to AGMH
|
72
|
|
|
74
|
|
||
Dividends paid by AG Re to AGL
|
—
|
|
|
40
|
|
||
Dividends paid by MAC to MAC Holdings (1)
|
—
|
|
|
5
|
|
(1)
|
MAC Holdings distributed the entire amounts to AGM and AGC, in proportion to their ownership percentages.
|
|
First Quarter
|
||||||
|
2020
|
|
2019
|
||||
|
(in millions)
|
||||||
Net cash flows provided by (used in) operating activities before effect of VIE consolidation
|
$
|
(97
|
)
|
|
$
|
(333
|
)
|
Effect of VIE consolidation (1)
|
(67
|
)
|
|
1
|
|
||
Net cash flows provided by (used in) operating activities
|
(164
|
)
|
|
(332
|
)
|
||
Net cash flows provided by (used in) investing activities before effect of VIE consolidation
|
242
|
|
|
468
|
|
||
Effect of VIE consolidation (1)
|
147
|
|
|
24
|
|
||
Net cash flows provided by (used in) investing activities
|
389
|
|
|
492
|
|
||
Dividends paid
|
(20
|
)
|
|
(20
|
)
|
||
Repurchases of common stock
|
(116
|
)
|
|
(80
|
)
|
||
Repurchase of debt
|
(21
|
)
|
|
(3
|
)
|
||
Net cash flows provided by (used in) financing activities before effect of VIE consolidation
|
(11
|
)
|
|
(14
|
)
|
||
Effect of VIE consolidation (1)
|
(12
|
)
|
|
(25
|
)
|
||
Net cash flows provided by (used in) financing activities (2)
|
(180
|
)
|
|
(142
|
)
|
||
Effect of exchange rate changes
|
(7
|
)
|
|
1
|
|
||
Cash and restricted cash at beginning of period
|
183
|
|
|
104
|
|
||
Total cash and restricted cash at the end of the period
|
$
|
221
|
|
|
$
|
123
|
|
(1)
|
VIE consolidation includes the effects of FG VIEs and consolidated investment vehicles.
|
(2)
|
Claims paid on consolidated FG VIEs are presented in the condensed consolidated cash flow statements as a component of paydowns on FG VIEs' liabilities in financing activities as opposed to operating activities.
|
|
As of March 31, 2020
|
|
As of December 31, 2019
|
||||||||||||
|
Amortized
Cost (1)
|
|
Estimated
Fair Value
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||||||
|
(in millions)
|
||||||||||||||
Fixed-maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Obligations of state and political subdivisions
|
$
|
3,952
|
|
|
$
|
4,204
|
|
|
$
|
4,036
|
|
|
$
|
4,340
|
|
U.S. government and agencies
|
160
|
|
|
175
|
|
|
137
|
|
|
147
|
|
||||
Corporate securities
|
2,292
|
|
|
2,233
|
|
|
2,137
|
|
|
2,221
|
|
||||
Mortgage-backed securities (2):
|
|
|
|
|
|
|
|
|
|||||||
RMBS
|
737
|
|
|
717
|
|
|
745
|
|
|
775
|
|
||||
Commercial mortgage-backed securities (CMBS)
|
399
|
|
|
414
|
|
|
402
|
|
|
419
|
|
||||
Asset-backed securities
|
687
|
|
|
653
|
|
|
684
|
|
|
720
|
|
||||
Non-U.S. government securities
|
183
|
|
|
172
|
|
|
230
|
|
|
232
|
|
||||
Total fixed-maturity securities
|
8,410
|
|
|
8,568
|
|
|
8,371
|
|
|
8,854
|
|
||||
Short-term investments
|
933
|
|
|
933
|
|
|
1,268
|
|
|
1,268
|
|
||||
Total fixed-maturity and short-term investments
|
$
|
9,343
|
|
|
$
|
9,501
|
|
|
$
|
9,639
|
|
|
$
|
10,122
|
|
(1)
|
In 2020, the Company established allowance for credit looses which was $73 million as of March 31, 2020.
|
(2)
|
U.S. government-agency obligations were approximately 44% of mortgage backed securities as of March 31, 2020 and 42% as of December 31, 2019, 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
|
$
|
104
|
|
|
$
|
(4
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
104
|
|
|
$
|
(4
|
)
|
Corporate securities
|
679
|
|
|
(29
|
)
|
|
68
|
|
|
(13
|
)
|
|
747
|
|
|
(42
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
RMBS
|
42
|
|
|
(4
|
)
|
|
5
|
|
|
—
|
|
|
47
|
|
|
(4
|
)
|
||||||
CMBS
|
36
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
39
|
|
|
—
|
|
||||||
Asset-backed securities
|
434
|
|
|
(22
|
)
|
|
132
|
|
|
(8
|
)
|
|
566
|
|
|
(30
|
)
|
||||||
Non-U.S. government securities
|
95
|
|
|
(3
|
)
|
|
52
|
|
|
(9
|
)
|
|
147
|
|
|
(12
|
)
|
||||||
Total
|
$
|
1,390
|
|
|
$
|
(62
|
)
|
|
$
|
260
|
|
|
$
|
(30
|
)
|
|
$
|
1,650
|
|
|
$
|
(92
|
)
|
Number of securities (1)
|
|
|
|
376
|
|
|
|
|
|
79
|
|
|
|
|
|
430
|
|
|
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
|
|
(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
|
$
|
300
|
|
|
$
|
300
|
|
Due after one year through five years
|
1,691
|
|
|
1,694
|
|
||
Due after five years through 10 years
|
2,028
|
|
|
2,037
|
|
||
Due after 10 years
|
3,255
|
|
|
3,406
|
|
||
Mortgage-backed securities:
|
|
|
|
|
|
||
RMBS
|
737
|
|
|
717
|
|
||
CMBS
|
399
|
|
|
414
|
|
||
Total
|
$
|
8,410
|
|
|
$
|
8,568
|
|
Rating
|
|
As of
March 31, 2020 |
|
As of
December 31, 2019 |
||
AAA
|
|
16.1
|
%
|
|
16.2
|
%
|
AA
|
|
45.1
|
|
|
45.1
|
|
A
|
|
22.1
|
|
|
21.2
|
|
BBB
|
|
8.5
|
|
|
8.2
|
|
BIG (1)
|
|
7.6
|
|
|
8.6
|
|
Not rated
|
|
0.6
|
|
|
0.7
|
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
(1)
|
Includes primarily loss mitigation and other risk management assets. See Item I, Financial Statements, Note 9, 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 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
PART II.
|
OTHER INFORMATION
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
•
|
“Risks Related to Economic, Market and Political Conditions and National Phenomena,”
|
•
|
“Operational Risks - Significant claim payments may reduce the Company’s liquidity,” and “-The Company may require additional capital from time to time, including from soft capital and liquidity facilities, which may not be available or may be available only on unfavorable terms,” and “-The ability of AGL and its subsidiaries to meet their liquidity needs may be limited,” and
|
•
|
“Risks Related to Estimates, Assumptions and Valuations - Estimates of expected losses are subject to uncertainties and may not be adequate to cover potential paid claims.”
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period
|
|
Total
Number of
Shares
Purchased
|
|
Average
Price Paid
Per Share
|
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Program (1)
|
|
Maximum Number
(or Approximate Dollar Value) of Shares that May Yet Be
Purchased
Under the Program (2)
|
||||||
January 1 - January 31
|
|
416,892
|
|
|
$
|
48.34
|
|
|
413,721
|
|
|
$
|
177,873,446
|
|
February 1 - February 29
|
|
678,457
|
|
|
$
|
46.33
|
|
|
430,008
|
|
|
$
|
407,873,472
|
|
March 1 - March 31
|
|
2,785,681
|
|
|
$
|
27.37
|
|
|
2,785,681
|
|
|
$
|
331,636,552
|
|
Total
|
|
3,881,030
|
|
|
$
|
32.93
|
|
|
3,629,410
|
|
|
|
|
(1)
|
After giving effect to repurchases since the beginning of 2013 through May 7, 2020, the Company has repurchased a total of 112.7 million common shares for approximately $3,425 million, excluding commissions, at an average price of $30.40 per share. The Board of Directors authorized, on February 26, 2020, an additional $250 million of share repurchases. As of May 7, 2020, the remaining authorization the Company was authorized to purchase was $239 million of its common shares, on a settlement basis.
|
(2)
|
Excludes commissions.
|
ITEM 6.
|
EXHIBITS.
|
Exhibit
Number
|
|
Description of Document
|
|
10.1
|
|
|
|
10.2
|
|
|
|
10.3
|
|
|
|
10.4
|
|
|
|
10.5
|
|
|
|
10.6
|
|
|
|
31.1
|
|
|
|
31.2
|
|
|
|
32.1
|
|
|
|
32.2
|
|
|
|
101.1
|
|
|
The following financial information from Assured Guaranty Ltd.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 formatted in inline XBRL: (i) Condensed Consolidated Balance Sheets at March 31, 2020 and December 31, 2019; (ii) Condensed Consolidated Statements of Operations for the Three Months ended March 31, 2020 and 2019; (iii) Condensed Consolidated Statements of Comprehensive Income for the Three Months ended March 31, 2020 and 2019; (iv) Condensed Consolidated Statements of Shareholders’ Equity for the Three Months ended March 31, 2020 and 2019; (v) Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2020 and 2019; and (vi) Notes to Condensed Consolidated Financial Statements.
|
104.1
|
|
|
The Cover Page Interactive DataFile from Assured Guaranty Ltd.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 formatted, in inline XBRL (the cover page XBRL tags are embedded in the inline XBRL document and included in Exhibit 101).
|
|
ASSURED GUARANTY LTD.
(Registrant)
|
|
|
|
|
Dated May 8, 2020
|
By:
|
/s/ ROBERT A. BAILENSON
|
|
|
|
|
|
Robert A. Bailenson
Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer)
|
(a)
|
The "Participant" is ________________________________
|
(b)
|
The "Grant Date" is [________], 2020.
|
(c)
|
The number of “Covered Units” granted under this Agreement is _____ Covered Units.
|
(d)
|
The “Delivery Date” with respect to the Covered Units shall be the fourth anniversary of the Grant Date.
|
(e)
|
The “Performance Determination Date” is the earlier to occur of (i) December 31, 2022 and (ii) the date of a Change in Control.
|
(f)
|
The “Performance Period” is January 1, 2020 through December 31, 2022; provided, however, if a Change in Control occurs on or after the Grant Date but prior to December 31, 2022, the Performance Period shall be the period beginning on January 1, 2020 and ending on the date of the Change in Control.
|
Performance Level
|
Assured’s Relative Total Shareholder Return
|
% of Units Vesting (the “Performance Percentage”)
|
Outstanding
|
95th Percentile or higher
|
250%
|
Target
|
55th Percentile
|
100%
|
Threshold
|
25th Percentile
|
50%
|
< Threshold
|
Less than 25th Percentile
|
0%
|
(a)
|
Death or Disability. If the Participant’s Date of Termination occurs due to the Participant’s death or Disability prior to the last day of the Restricted Period, the Restricted Period shall immediately lapse upon such Date of Termination.
|
(b)
|
Retirement. If the Participant’s Date of Termination occurs due to a Retirement prior to the last day of the Restricted Period, then, only for purposes of this Section 5, the Participant shall be treated as if his Date of Termination had not occurred prior to the last day of the Restricted Period, subject to the Participant not engaging in any Competitive Activity or any Post-Retirement Activity prior to the last day of the Restricted Period and subject to the
|
(c)
|
Qualifying Termination Before a Change in Control. If the Participant’s Date of Termination occurs due to a Qualifying Termination prior to the last day of the Restricted Period and prior to the date of a Change in Control, then, only for purposes of this Section 5 (and not for purposes of determining the Pro-Rata Fraction), the Participant shall be treated as if his Date of Termination had not occurred prior to the last day of the Restricted Period, subject to the Participant not engaging in any Competitive Activity prior to the last day of the Restricted Period and subject to the Participant signing and not revoking a general release and waiver of all claims against the Company as required by Section 7.1 of the Severance Plan. If such release is not effective within the sixty-day period required by Section 7.1 of the Severance Plan or in the event that the Participant engages in a Competitive Activity prior to the last day of the Restricted Period, the Participant shall immediately forfeit all of the Covered Units.
|
(d)
|
Qualifying Termination On or After a Change in Control. If the Participant’s Date of Termination occurs due to a Qualifying Termination prior to the last day of the Restricted Period but on or after the date of a Change in Control that is not a Vesting Change in Control, then, only for purposes of this Section 5 (and not for purposes of determining the Pro-Rata Fraction), the Participant shall be treated as if his Date of Termination had not occurred prior to the last day of the Restricted Period subject to the Participant signing and not revoking a general release and waiver of all claims against the Company as required by Section 7.1 of the Severance Plan. If such release is not effective within the sixty-day period required by Section 7.1 of the Severance Plan, the Participant shall immediately forfeit all of the Covered Units.
|
(a)
|
The Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict the Performance-Based Restricted Stock Unit Award at any time if the Participant engages in any "Competitive Activity" or, in the case of a Participant whose Date of Termination has occurred due to Retirement, if the Participant engages in any Post-Retirement Activity.
|
(b)
|
Immediately prior to the Delivery Date (or, if earlier, a 457A Delivery Date) and prior to the transfer of the shares of Stock to the Participant, the Participant shall certify, to the extent required by the Committee, in a manner acceptable to the Committee, that the Participant is not engaging and has not engaged in any Competitive Activity and, in the case of a Participant whose Date of Termination has occurred due to Retirement, that the Participant is not engaging and has not engaged in any Post-Retirement Activity. In the event a Participant has engaged in any Competitive Activity or, if applicable, any Post-Retirement Activity, prior to, or during the twelve months after, the later to occur of the Delivery Date or the last day of the Restricted Period with respect to any Covered Units (the “Restrictive Covenant Period”), the right to delivery of shares of Stock with respect to such Covered Units (including the delivery or vesting of any Restricted Shares) may be rescinded by the Committee within two years of the end of the Restricted Covenant Period. In the event of any such rescission, the Participant shall pay to the Company the amount of any gain realized as a result of the prior delivery of shares of Stock applicable to the rescinded Covered Units, in such manner and on such terms and conditions as may be required by the Company, and the Company shall be entitled to set-off against the amount of any such gain any amount owed to the Participant by the Company and/or Subsidiary.
|
(a)
|
Notwithstanding anything in this Agreement to the contrary, the Participant’s rights with respect to the Performance-Based Restricted Stock Unit Award shall be subject to the Assured Guaranty Ltd. Executive Officer Recoupment Policy as amended and restated on November 3, 2015 and as further amended from time to time.
|
(b)
|
Notwithstanding anything in this Agreement to the contrary, but subject to subparagraph (a) of this Section 14 above, this Agreement shall be subject to the terms of the Plan, a copy of
|
(a)
|
Accumulated Shares. The term “Accumulated Shares” means, for a given trading day, the sum of (i) one share and (ii) the cumulative number of shares of the company’s common stock purchasable with dividends declared on the company’s common stock to prior to such date during the Performance Period, assuming same day reinvestment of such dividends at the closing price of the ex-dividend date.
|
(b)
|
Change in Control. The term "Change in Control" shall be defined as set forth in the Plan.
|
(c)
|
Closing Average Share Value. The term “Closing Average Share Value” means the average Share Value of the forty day trading period immediately preceding the Performance Determination Date.
|
(d)
|
Competitive Activity. The term “Competitive Activity” shall mean (i) the Participant’s engaging in an activity, directly or indirectly, whether as an employee, consultant, partner, principal, agent, distributor, representative, stockholder (except as a less than one percent stockholder of a publicly traded company or a less than five percent stockholder of a privately held company) or otherwise, within the United States, Bermuda, or the Cayman Islands, if such activities involve insurance or reinsurance of United States based entities or risks that are competitive with the financial guaranty insurance business then being conducted by the Company or any affiliate and which, during the period covered by the Participant's
|
(e)
|
Date of Termination. A Participant's "Date of Termination" means, with respect to an employee, the date on which the Participant's employment with the Company and Subsidiaries terminates for any reason, and with respect to a Director, the date immediately following the last day on which the Participant serves as a Director; provided that a Date of Termination shall not be deemed to occur by reason of a Participant's transfer of employment between the Company and a Subsidiary or between two Subsidiaries; further provided that a Date of Termination shall not be deemed to occur by reason of a Participant's cessation of service as a Director if immediately following such cessation of service the Participant becomes or continues to be employed by the Company or a Subsidiary, nor by reason of a Participant's termination of employment with the Company or a Subsidiary if immediately following such termination of employment the Participant becomes or continues to be a Director; and further provided that a Participant's employment shall not be considered terminated while the Participant is on a leave of absence from the Company or a Subsidiary approved by the Participant's employer.
|
(f)
|
Director. The term "Director" means a member of the Board of Directors of Assured Guaranty Ltd., who may or may not be an employee of the Company or a Subsidiary.
|
(g)
|
Disability. The Participant shall be considered to have a "Disability" during the period in which the Participant is unable, by reason of a medically determinable physical or mental impairment, to engage in any substantial gainful activity, which condition, in the opinion of a physician selected by the Committee, is expected to have a duration of not less than 120 days.
|
(h)
|
Opening Average Share Value. The term “Opening Average Share Value” means the average Share Value of the forty day trading period immediately preceding the first day of the Performance Period.
|
(i)
|
Peer Companies. The term “Peer Companies” means all companies listed in the Russell Mid-Cap Financial Services Index as of the first day of the Performance Period as adjusted below. Each Peer Company’s “common stock” shall mean that series of common stock that is publicly traded on a registered U.S. exchange or, in the case of a non-U.S. company, an equivalent non-U.S. exchange. For purposes of calculating TSR, the value on any given trading day of any Peer Company shares traded on a foreign exchange will be converted to U.S. dollars. The Peer Companies may be changed as follows:
|
(j)
|
Post-Retirement Activity. The term “Post-Retirement Activity” shall mean the Participant’s provision of significant commercial or business services to any one or more persons or entities, regardless of whether such entity is owned or controlled by the Participant; provided that the Participant’s devotion of reasonable time to the supervision of his personal investments, and activities involving professional, charitable, community, educational, religious and similar types of organizations, speaking engagements, membership on the boards of directors of other organizations, and similar types of activities shall not be considered Post-Retirement Activity, to the extent that the Committee, in its discretion, determines that such activities are consistent with the Participant’s Retirement. At the request of the Participant, the Committee shall determine whether a proposed activity of the Participant will be considered a Post-Retirement Activity for purposes of this Agreement. Such request shall be accompanied by a description of the proposed activities, and the Participant shall provide such additional information as the Committee may determine is necessary to make the determination. Such a determination shall be made promptly, but in no event more than 30 days after the written request, together with any additional information requested of the Participant, is delivered to the Committee.
|
(k)
|
Pro-Rata Fraction. The term “Pro-Rata Fraction” shall mean a fraction, the numerator of which shall be equal to the number of days between the Grant Date and the Participant’s Date of Termination and the denominator of which shall be 1095.
|
(l)
|
Qualifying Termination. The term “Qualifying Termination” is defined in Section 1 of the Severance Plan.
|
(m)
|
Relative Total Shareholder Return. The term “Relative Total Shareholder Return” means the Company’s Total Shareholder Return relative to the Total Shareholder Return of the Peer Companies expressed as a percentile rank. Relative Total Shareholder Return will be determined by the percentile ranking of each Peer Company (including the Company) from the highest TSR to lowest TSR. The Peer Company ranked highest will be assigned the one hundred percentile (100%) rank and the Peer Company ranked lowest will be assigned a zero percentile (0.0%) rank. Each Peer Company ranked in between would be assigned a percentile equal to (1 minus ((r-1)/(n-1))), where “r” is the ranking of the Company in the list of Peer Companies and “n” is the total number of Peer Companies. For example, if there were twenty (20) Peer Companies and the Company had the fifth highest Total Shareholder Return during the Performance Period, then the Relative Total Shareholder Return would equal (1-((5-1)/(20-1))) or .79 or the 79th percentile.
|
(n)
|
Retirement. The term “Retirement” means the occurrence of a Participant’s Date of Termination due to the voluntary termination of employment with the consent of the Committee (as described below) by a Participant who meets the following requirements as of such Date of Termination: (i) the Participant is age 60 or older and (ii) the total of the Participant’s age and years of service equals or exceeds 65. For purposes of defining “Retirement,” years of service shall be determined in accordance with rules which may be established by the Committee, and shall take into account service with the Company and the Subsidiaries. If, on or before the date of the initial public offering of stock of the Company, the Participant was employed by the Company or its Subsidiaries, years of service shall also include service with ACE Limited and its subsidiaries occurring prior to such the initial public offering. For purposes of this Agreement, the Participant’s Date of Termination shall not be considered to be a Retirement unless, prior to such Date of Termination, the Committee approved treating such Participant’s Date of Termination as a Retirement for purposes of this Agreement. The determination of whether to treat the Participant’s Date of Termination as a Retirement shall be made in the sole discretion of the Committee and such determination shall be final and binding on all persons.
|
(o)
|
Retirement Percentage. The term “Retirement Percentage” means (i) one hundred percent (100%) if the Participant has an approved Retirement and the combination of his or her age and years of service as of such Date of Termination equals or exceeds 85; (ii) seventy-five percent (75%) if the Participant has an approved Retirement and the combination of his or her age and years of service as of such Date of Termination equals or exceeds 75; and (iii) fifty percent (50%) if the Participant has an approved Retirement and the combination of his or her age and years of service as of such Date of Termination equals or exceeds 65, in each case, with service determined as provided in the definition of Retirement above.
|
(p)
|
Severance Plan. The term “Severance Plan” shall mean the Assured Guaranty Ltd. Executive Severance Plan.
|
(q)
|
Share Value. The term “Share Value” means, with respect to a given trading day, the closing price of a company’s common stock multiplied by the Accumulated Shares for such trading day.
|
(r)
|
Total Shareholder Return. The term “Total Shareholder Return” means, for the Company and each of the Peer Companies, the company’s total shareholder return, expressed as a percentage, which will be calculated by dividing (i) the Closing Average Share Value by (ii) the Opening Average Share Value and subtracting one from the quotient.
|
(s)
|
Vesting Change in Control. The term “Vesting Change in Control” shall mean the date of a Change in Control where this Performance-Based Restricted Stock Unit Award is terminated pursuant to Section 7(b) of this Agreement.
|
(a)
|
The "Participant" is ________________________________
|
(b)
|
The "Grant Date" is [______], 2020.
|
(c)
|
The number of “Covered Units” granted under this Agreement is _____ Covered Units.
|
(d)
|
The “Delivery Date” with respect to the Covered Units shall be the third anniversary of the Grant Date.
|
(e)
|
The “Performance Determination Date” is the earlier to occur of (i) December 31, 2022 and (ii) the date of a Change in Control.
|
(f)
|
The “Performance Period” is January 1, 2020 through December 31, 2022; provided, however, if a Change in Control occurs on or after the Grant Date but prior to December 31, 2022, the Performance Period shall be the period beginning on January 1, 2020 and ending on the date of the Change in Control.
|
Performance Level
|
Growth in Core Adjusted Book Value During Performance Period
|
% of Units Vesting (the “Performance Percentage”)
|
Outstanding
|
18% or higher
|
200%
|
Target
|
15%
|
100%
|
Threshold
|
12%
|
50%
|
< Threshold
|
Less than 12%
|
0%
|
(a)
|
Death or Disability. If the Participant’s Date of Termination occurs due to the Participant’s death or Disability prior to the last day of the Restricted Period, the Restricted Period shall immediately lapse upon such Date of Termination.
|
(b)
|
Retirement. If the Participant’s Date of Termination occurs due to a Retirement prior to the last day of the Restricted Period, then, only for purposes of this Section 5, the Participant shall be treated as if his Date of Termination had not occurred prior to the last day of the Restricted Period, subject to the Participant not engaging in any Competitive Activity or any Post-Retirement Activity prior to the last day of the Restricted Period and subject to the Participant signing and not revoking a general release and waiver of all
|
(c)
|
Qualifying Termination Before a Change in Control. If the Participant’s Date of Termination occurs due to a Qualifying Termination prior to the last day of the Restricted Period and prior to the date of a Change in Control, then, only for purposes of this Section 5 (and not for purposes of determining the Pro-Rata Fraction), the Participant shall be treated as if his Date of Termination had not occurred prior to the last day of the Restricted Period, subject to the Participant not engaging in any Competitive Activity prior to the last day of the Restricted Period and subject to the Participant signing and not revoking a general release and waiver of all claims against the Company as required by Section 7.1 of the Severance Plan. If such release is not effective within the sixty-day period required by Section 7.1 of the Severance Plan or in the event that the Participant engages in a Competitive Activity prior to the last day of the Restricted Period, the Participant shall immediately forfeit all of the Covered Units.
|
(d)
|
Qualifying Termination On or After a Change in Control. If the Participant’s Date of Termination occurs due to a Qualifying Termination prior to the last day of the Restricted Period but on or after the date of a Change in Control that is not a Vesting Change in Control, then, only for purposes of this Section 5 (and not for purposes of determining the Pro-Rata Fraction), the Participant shall be treated as if his Date of Termination had not occurred prior to the last day of the Restricted Period subject to the Participant signing and not revoking a general release and waiver of all claims against the Company as required by Section 7.1 of the Severance Plan. If such release is not effective within the sixty-day period required by Section 7.1 of the Severance Plan, the Participant shall immediately forfeit all of the Covered Units.
|
(a)
|
The Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict the Performance-Based Restricted Stock Unit Award at any time if the Participant engages in any "Competitive Activity" or, in the case of a Participant whose Date of Termination has occurred due to Retirement, if the Participant engages in any Post-Retirement Activity.
|
(b)
|
Immediately prior to the Delivery Date (or, if earlier, a 457A Delivery Date) and prior to the transfer of the shares of Stock to the Participant, the Participant shall certify, to the extent required by the Committee, in a manner acceptable to the Committee, that the Participant is not engaging and has not engaged in any Competitive Activity and, in the case of a Participant whose Date of Termination has occurred due to Retirement, that the Participant is not engaging and has not engaged in any Post-Retirement Activity. In the event a Participant has engaged in any Competitive Activity or, if applicable, any Post-Retirement Activity, prior to, or during the twelve months after, the later to occur of the Delivery Date or the last day of the Restricted Period with respect to any Covered Units (the “Restrictive Covenant Period”), the right to delivery of shares of Stock with respect to such Covered Units (including the delivery or vesting of any Restricted Shares) may be rescinded by the Committee within two years of the end of the Restricted Covenant Period. In the event of any such rescission, the Participant shall pay to the Company the amount of any gain realized as a result of the prior delivery of shares of Stock applicable to the rescinded Covered Units, in such manner and on such terms and conditions as may be required by the Company, and the Company shall be entitled to set-off against the amount of any such gain any amount owed to the Participant by the Company and/or Subsidiary.
|
(a)
|
Notwithstanding anything in this Agreement to the contrary, the Participant’s rights with respect to the Performance-Based Restricted Stock Unit Award shall be subject
|
(b)
|
Notwithstanding anything in this Agreement to the contrary, but subject to subparagraph (a) of this Section 14 above, this Agreement shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the office of the Secretary of the Company; and this Agreement is subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time pursuant to the Plan.
|
(a)
|
Change in Control. The term "Change in Control" shall be defined as set forth in the Plan.
|
(b)
|
Competitive Activity. The term “Competitive Activity” shall mean (i) the Participant’s engaging in an activity, directly or indirectly, whether as an employee, consultant, partner, principal, agent, distributor, representative, stockholder (except as a less than one percent stockholder of a publicly traded company or a less than five percent stockholder of a privately held company) or otherwise, within the United States, Bermuda, or the Cayman Islands, if such activities involve insurance or reinsurance of United States based entities or risks that are competitive with the financial guaranty insurance business then being conducted by the Company or any affiliate and which, during the period covered by the Participant's employment, were conducted by the Company or any affiliate; or (ii) the Participant’s engaging in any activity, directly or indirectly, whether on behalf of himself or herself or any other person or entity (x) to solicit any client and/or customer of the Company or any affiliate or (y) to hire any employee or former employee of the Company or any present or former affiliate of the Company or encourage any employee
|
(c)
|
Core Adjusted Book Value. The “Core Adjusted Book Value” of the Company as of any date shall equal shareholders’ equity attributable to Assured Guaranty Ltd., as reported under accounting principles generally accepted in the United States of America (GAAP), adjusted for the following:
|
(d)
|
Date of Termination. A Participant's "Date of Termination" means, with respect to an employee, the date on which the Participant's employment with the Company and Subsidiaries terminates for any reason, and with respect to a Director, the date immediately following the last day on which the Participant serves as a Director;
|
(e)
|
Director. The term "Director" means a member of the Board of Directors of Assured Guaranty Ltd., who may or may not be an employee of the Company or a Subsidiary.
|
(f)
|
Disability. The Participant shall be considered to have a "Disability" during the period in which the Participant is unable, by reason of a medically determinable physical or mental impairment, to engage in any substantial gainful activity, which condition, in the opinion of a physician selected by the Committee, is expected to have a duration of not less than 120 days.
|
(g)
|
Post-Retirement Activity. The term “Post-Retirement Activity” shall mean the Participant’s provision of significant commercial or business services to any one or more persons or entities, regardless of whether such entity is owned or controlled by the Participant; provided that the Participant’s devotion of reasonable time to the supervision of his personal investments, and activities involving professional, charitable, community, educational, religious and similar types of organizations, speaking engagements, membership on the boards of directors of other organizations, and similar types of activities shall not be considered Post-Retirement Activity, to the extent that the Committee, in its discretion, determines that such activities are consistent with the Participant’s Retirement. At the request of the Participant, the Committee shall determine whether a proposed activity of the Participant will be considered a Post-Retirement Activity for purposes of this Agreement. Such request shall be accompanied by a description of the proposed activities, and the Participant shall provide such additional information as the Committee may determine is necessary to make the determination. Such a determination shall be made promptly, but in no event more than 30 days after the written request, together with any additional information requested of the Participant, is delivered to the Committee.
|
(h)
|
Pro-Rata Fraction. The term “Pro-Rata Fraction” shall mean a fraction, the numerator of which shall be equal to the number of days between the Grant Date and the Participant’s Date of Termination and the denominator of which shall be 1095.
|
(i)
|
Qualifying Termination. The term “Qualifying Termination” is defined in Section 1 of the Severance Plan.
|
(j)
|
Retirement. The term “Retirement” means the occurrence of a Participant’s Date of Termination due to the voluntary termination of employment with the consent of the Committee (as described below) by a Participant who meets the following requirements as of such Date of Termination: (i) the Participant is age 60 or older and (ii) the total of the Participant’s age and years of service equals or exceeds 65. For purposes of defining “Retirement,” years of service shall be determined in accordance with rules which may be established by the Committee, and shall take into account service with the Company and the Subsidiaries. If, on or before the date of the initial public offering of stock of the Company, the Participant was employed by the Company or its Subsidiaries, years of service shall also include service with ACE Limited and its subsidiaries occurring prior to such the initial public offering. For purposes of this Agreement, the Participant’s Date of Termination shall not be considered to be a Retirement unless, prior to such Date of Termination, the Committee approved treating such Participant’s Date of Termination as a Retirement for purposes of this Agreement. The determination of whether to treat the Participant’s Date of Termination as a Retirement shall be made in the sole discretion of the Committee and such determination shall be final and binding on all persons.
|
(k)
|
Retirement Percentage. The term “Retirement Percentage” means (i) one hundred percent (100%) if the Participant has an approved Retirement and the combination of his or her age and years of service as of such Date of Termination equals or exceeds 85; (ii) seventy-five percent (75%) if the Participant has an approved Retirement and the combination of his or her age and years of service as of such Date of Termination equals or exceeds 75; and (iii) fifty percent (50%) if the Participant has an approved Retirement and the combination of his or her age and years of service as of such Date of Termination equals or exceeds 65, in each case, with service determined as provided in the definition of Retirement above.
|
(l)
|
Severance Plan. The term “Severance Plan” shall mean the Assured Guaranty Ltd. Executive Severance Plan.
|
(m)
|
Vesting Change in Control. The term “Vesting Change in Control” shall mean the date of a Change in Control where this Performance-Based Restricted Stock Unit Award is terminated pursuant to Section 7(b) of this Agreement.
|
(a)
|
The "Participant" is ________________________________
|
(b)
|
The "Grant Date" is February 25, 2020
|
(c)
|
The number of “Covered Units” granted under this Agreement is _____ Units. Each “Unit” represents the right to receive one share of Stock on the Delivery Date, subject to the terms of this Agreement and the Plan.
|
(d)
|
The “Delivery Date” with respect to the Covered Units shall be the earliest to occur of: (i) the third anniversary of the Grant Date; (ii) the Participant’s death; and (iii) the date on which the Participant becomes Permanently Disabled.
|
(a)
|
Death or Disability. If the Participant’s Date of Termination occurs due to the Participant’s death or Disability prior to the last day of the Restricted Period, the Restricted Period shall immediately lapse upon such Date of Termination.
|
(b)
|
Retirement. If the Participant’s Date of Termination occurs due to a Retirement prior to the last day of the Restricted Period, then, only for purposes of this Section 4, the Participant shall be treated as if his Date of Termination had not occurred prior to the last day of the Restricted Period, subject to the Participant not engaging in any Competitive Activity or any Post-Retirement Activity prior to the last day of the Restricted Period and subject to the Participant signing and not revoking a general release and waiver of all claims against the Company as required by Section 7.1 of the Severance Plan. If such release is not effective within the sixty-day period required by Section 7.1 of the Severance Plan or in the event that the Participant engages in a Competitive Activity or a Post-Retirement Activity prior to the last day of the Restricted Period, the Participant shall immediately forfeit all of the Covered Units.
|
(c)
|
Qualifying Termination Before a Change in Control. If the Participant’s Date of Termination occurs due to a Qualifying Termination prior to the last day of the Restricted Period and prior to the date of a Change in Control, then the Participant shall be treated as if his Date of Termination had not occurred prior to the last day of the Restricted Period, subject to the Participant not engaging in any Competitive Activity prior to the last day of the Restricted Period and subject to the Participant signing and not revoking a general release and waiver of all claims against the Company as required by Section 7.1 of the Severance Plan. If such release is not effective within the sixty-day period required by Section 7.1 of the Severance Plan or in the event that the Participant engages in a Competitive Activity prior to the last day of the Restricted Period, the Participant shall immediately forfeit all of the Covered Units.
|
(d)
|
Qualifying Termination On or After a Change in Control. If the Participant’s Date of Termination occurs due to a Qualifying Termination prior to the last day of the Restricted Period but on or after the date of a Change in Control that is not a Vesting Change in Control, then the Participant shall be treated as if his Date of Termination had not occurred prior to the last day of the Restricted Period subject to the Participant signing and not revoking a general release and waiver of all claims against the Company as required by Section 7.1 of the Severance Plan. If such release is not effective within the sixty-day period required by Section 7.1 of the Severance Plan, the Participant shall immediately forfeit all of the Covered Units.
|
(a)
|
The Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict the Restricted Stock Unit Award at any time if the Participant engages in any "Competitive Activity" or, in the case of a Participant whose Date of Termination has occurred due to Retirement, if the Participant engages in any Post-Retirement Activity.
|
(b)
|
Immediately prior to the Delivery Date and prior to the transfer of the shares of Stock to the Participant, the Participant shall certify, to the extent required by the Committee, in a manner acceptable to the Committee, that the Participant is not engaging and has not engaged in any Competitive Activity and, in the case of a Participant whose Date of Termination has occurred due to Retirement, that the Participant is not engaging and has not engaged in any Post-Retirement Activity. In the event a Participant has engaged in any Competitive Activity or, if applicable, any Post-Retirement Activity, prior to, or during the twelve months after, the later to occur of the Delivery Date or the last day of the Restricted Period (the “Restrictive Covenant Period”) with respect to any Covered Units, the right to delivery of shares with respect to such Covered Units may be rescinded by the Committee within two years of the last day of the Restrictive Covenant Period. In the event of any such rescission, the Participant shall pay to the Company the amount of any gain realized as a result of the prior delivery of shares applicable to the rescinded Covered Units, in such manner and on such terms and conditions as may be required by the Company, and the Company shall be entitled to set-off against the amount of any such gain any amount owed to the Participant by the Company and/or Subsidiary.
|
(a)
|
Notwithstanding anything in this Agreement to the contrary, the Participant’s rights with respect to the Restricted Stock Unit Award shall be subject to the Assured Guaranty Ltd. Executive Officer Recoupment Policy as amended and restated on November 3, 2015 and as further amended from time to time.
|
(b)
|
Notwithstanding anything in this Agreement to the contrary, this Agreement shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the office of the Secretary of the Company; and this Agreement is subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time pursuant to the Plan.
|
(a)
|
Change in Control. The term "Change in Control" shall be defined as set forth in the Plan.
|
(b)
|
Competitive Activity. The term “Competitive Activity” shall mean (i) the Participant’s engaging in an activity, directly or indirectly, whether as an employee, consultant, partner, principal, agent, distributor, representative, stockholder (except as a less than one percent stockholder of a publicly traded company or a less than five percent stockholder of a privately held company) or otherwise, within the United States, Bermuda, or the Cayman Islands, if such activities involve insurance or reinsurance of United States based entities or risks that are competitive with the financial guaranty insurance business then being conducted by the Company or any affiliate and which, during the period covered by the Participant's employment, were conducted by the Company or any affiliate; or (ii) the Participant’s engaging in any activity, directly or indirectly, whether on behalf of himself or herself or any other person or entity (x) to solicit any client and/or customer of the Company or any affiliate or (y) to hire any employee or former employee of the Company or any present or former affiliate of the Company or encourage any employee of the Company or affiliate to leave the employ of the Company or affiliate; or (iii) the Participant’s violation of Section 7.3 of the Severance Plan (relating to confidentiality).
|
(c)
|
Date of Termination. A Participant's "Date of Termination" means, with respect to an employee, the date on which the Participant's employment with the Company and Subsidiaries terminates for any reason, and with respect to a Director, the date immediately following the last day on which the Participant serves as a Director; provided that a Date of Termination shall not be deemed to occur by reason of a Participant's transfer of employment between the Company and a Subsidiary or between two Subsidiaries; further provided that a Date of Termination shall not be deemed to occur by reason of a Participant's cessation of service as a Director if immediately
|
(d)
|
Director. The term "Director" means a member of the Board of Directors of Assured Guaranty, Ltd., who may or may not be an employee of the Company or a Subsidiary.
|
(e)
|
Disability. The Participant shall be considered to have a "Disability" during the period in which the Participant is unable, by reason of a medically determinable physical or mental impairment, to engage in any substantial gainful activity, which condition, in the opinion of a physician selected by the Committee, is expected to have a duration of not less than 120 days.
|
(f)
|
Permanent Disability. The Participant shall be considered to be “Permanently Disabled” if he would be treated as “disabled” in accordance with the provisions of Treas. Reg. §1.409A-3(i)(4).
|
(g)
|
Post-Retirement Activity. The term “Post-Retirement Activity” shall mean the Participant’s provision of significant commercial or business services to any one or more persons or entities, regardless of whether such entity is owned or controlled by the Participant; provided that the Participant’s devotion of reasonable time to the supervision of his personal investments, and activities involving professional, charitable, community, educational, religious and similar types of organizations, speaking engagements, membership on the boards of directors of other organizations, and similar types of activities shall not be considered Post-Retirement Activity, to the extent that the Committee, in its discretion, determines that such activities are consistent with the Participant’s Retirement. At the request of the Participant, the Committee shall determine whether a proposed activity of the Participant will be considered a Post-Retirement Activity for purposes of this Agreement. Such request shall be accompanied by a description of the proposed activities, and the Participant shall provide such additional information as the Committee may determine is necessary to make the determination. Such a determination shall be made promptly, but in no event more than 30 days after the written request, together with any additional information requested of the Participant, is delivered to the Committee.
|
(h)
|
Qualifying Termination. The term “Qualifying Termination” is defined in Section 1 of the Severance Plan.
|
(i)
|
Retirement. The term “Retirement” means the occurrence of a Participant’s Date of Termination due to the voluntary termination of employment with the consent of the Committee (as described below) by a Participant who meets the following requirements as of such Date of Termination: (i) the Participant is age 60 or older and (ii) the total of
|
(j)
|
Retirement Percentage. The term “Retirement Percentage” means (i) one hundred percent (100%) if the Participant has an approved Retirement and the combination of his or her age and years of service as of such Date of Termination equals or exceeds 85; (ii) seventy-five percent (75%) if the Participant has an approved Retirement and the combination of his or her age and years of service as of such Date of Termination equals or exceeds 75; and (iii) fifty percent (50%) if the Participant has an approved Retirement and the combination of his or her age and years of service as of such Date of Termination equals or exceeds 65, in each case, with service determined as provided in the definition of Retirement above.
|
(k)
|
Severance Plan. The term “Severance Plan” shall mean the Assured Guaranty Ltd. Executive Severance Plan.
|
(l)
|
Vesting Change in Control. The term “Vesting Change in Control” shall mean the date of a Change in Control where this Restricted Stock Unit Award is terminated pursuant to Section 6(b) of this Agreement.
|
(i)
|
(Base Salary * Individual Target Cash Incentive Multiple) and
|
(ii)
|
(Financial Goal Achievement Score (weighted 67%) + Individual Non-Financial Objective Achievement Score (weighted 33%))
|
Individual Non-Financial Performance Measures:
|
[Year] Objectives
|
[Year] Results
|
Weighting
|
Achievement Score
(0-200%)
|
Weighted Achievement Score
|
Contribution Towards CEO’s
Non-Financial Performance Measures
|
|
|
16.5%
|
|
|
Individual Performance Objectives
|
|
|
16.5%
|
|
|
|
|
|
33%
|
|
|
Achievement Score
|
|
|
|
|
|
Installment Number:
|
First Day of Performance Period:
|
Last Day of Performance Period:
|
Portion of Principal Amount Attributable to Installment:
|
1
|
January 1, 2020
|
December 31, 2020
|
25% of Principal Amount
|
2
|
January 1, 2020
|
December 31, 2021
|
25% of Principal Amount
|
3
|
January 1, 2020
|
December 31, 2022
|
50% of Principal Amount
|
(a)
|
The product of (i) 50% of the Portion of the Principal Amount attributable to that Installment, multiplied by (ii) a fraction, converted to an equivalent percentage, the numerator of which is the Company’s per-share Core Adjusted Book Value as of the last day of the applicable Performance Period and the denominator of which is the
|
(b)
|
The product of (i) 50% of the Portion of the Principal Amount attributable to that Installment, multiplied by (ii) a percentage equal to 100% plus (or minus if negative) the Company’s Core Operating Return on Equity for the Performance Period attributable to that Installment.
|
(a)
|
If, in accordance with the following provisions of this paragraph 3, the Participant is vested in the Award Payment for any Performance Period, the Award Payment (if any) for that Performance Period will be due on the Payment Date as described in paragraph 4, subject to the terms of the LTIP and these Award Terms. If the Participant is not vested in the Award for a Performance Period, the Participant will forfeit that Award.
|
(b)
|
If, with respect to any Installment, the Participant’s Date of Termination does not occur before the last day of the Performance Period for that Installment, the Participant will be vested in the Award Payment. Subject to paragraph 5, if the Participant’s Date of Termination occurs before the last day of the Performance Period for that Installment, the Participant will not be vested in the Award Payment for that Installment.
|
(a)
|
Except as otherwise provided in this paragraph 4, and subject to paragraph 5, the Participant’s Award Payment attributable to any Installment will be due between January 1st and March 15th of the year following the year in which the last day of the Performance Period with respect to that Installment occurs (the “Payment Date” with respect to that Installment).
|
(b)
|
The Award will be paid to the Participant in a cash lump sum in the same currency as the Principal Amount as stated in the Award Letter.
|
(c)
|
Notwithstanding the foregoing, except in the case of a Performance Period ending by reason of the Participant’s death or Permanent Disability, no payment will be made unless, on or before the date of payment, the Committee has certified that the performance goals for the Performance Period and any other material provisions of the Award Terms have in fact been satisfied.
|
(a)
|
Death. If the Participant’s Date of Termination occurs by reason of death, the following provisions of this paragraph (a) will apply:
|
(i)
|
Effect on Performance Periods. For each Installment for any Performance Period that ends after the Date of Termination, the Participant’s estate will receive, in lieu of any other payment with respect to such Installment, an amount equal to the portion of the Principal Amount attributable to that Installment (without regard to the actual performance of Core Adjusted Book Value or Core Operating Return on Equity).
|
(ii)
|
Vesting. The Participant will be vested in the amounts payable under paragraph (i) above.
|
(iii)
|
Payment Date. Payments under paragraph (i) above will be due on the Payment Date, which, for such payments, will be the Date of Termination.
|
(b)
|
Permanent Disability. If the Participant incurs a Permanent Disability prior to his or her Date of Termination, the following provisions of this paragraph (b) will apply:
|
(i)
|
Effect on Performance Periods. For each Installment for any Performance Period that ends after the Participant incurs a Permanent Disability, the Participant will receive, in lieu of any other payment with respect to such Installment, an amount equal to the portion of the Principal Amount attributable to that Installment (without regard to the actual performance of Core Adjusted Book Value or Core Operating Return on Equity).
|
(ii)
|
Vesting. The Participant will be vested in the amounts payable under paragraph (i) above.
|
(iii)
|
Payment Date. Payments under paragraph (i) above will be due on the Payment Date, which, for such payments, will be the date on which the Participant incurs a Permanent Disability.
|
(c)
|
Disability. If the Participant’s Date of Termination occurs by reason of Disability (and unless he or she has previously incurred a Permanent Disability), the following provisions of this paragraph (c) will apply:
|
(i)
|
Effect on Performance Periods. The last day of each of the Performance Periods will be determined in accordance with paragraph 1 without regard to this paragraph (c).
|
(ii)
|
Vesting. For purposes of paragraph 3, the Participant will be vested in the Award Payment for any Performance Period ending after the Date of Termination.
|
(iii)
|
Payment Date. The Payment Date will be determined in accordance with paragraph 4 without regard to this paragraph (c).
|
(d)
|
Involuntary Termination Without Cause. If the Participant’s Date of Termination occurs by reason of an involuntary termination without Cause, the following provisions of this paragraph (d) will apply:
|
(i)
|
Effect on Performance Periods. For each Installment for any Performance Period that ends after the Date of Termination, the Participant will receive, in lieu of any other payment with respect to such Installment, an amount equal to the portion of the Principal Amount attributable to that Installment (without regard to the actual performance of Core Adjusted Book Value or Core Operating Return on Equity).
|
(ii)
|
Vesting. For purposes of paragraph 3, the Participant will be vested in the Award Payment for any Performance Period ending after the Date of Termination.
|
(iii)
|
Payment Date. The Payment Date will be determined in accordance with paragraph 4 without regard to this paragraph (d).
|
(e)
|
Retirement. If the Participant’s Date of Termination occurs by reason of Retirement, the following provisions of this paragraph (e) will apply:
|
(i)
|
Effect on Performance Periods. The last day of each of the Performance Periods will be determined in accordance with paragraph 1 without regard to this paragraph (e).
|
(ii)
|
Vesting. For purposes of paragraph 3, the Participant will be vested in the Award Payment for any Performance Period ending after the Date of Termination.
|
(iii)
|
Payment Date. The Payment Date will be determined in accordance with paragraph 4 without regard to this paragraph (e).
|
(a)
|
The Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict the Performance Retention Award at any time if the Participant engages in any "Detrimental Activity" or, in the case of a Participant whose Date of Termination has occurred due to Retirement, if the Participant engages in any Post-Retirement Activity.
|
(b)
|
Immediately prior to the Payment Date with respect to an Installment and prior to the payment of the Award Payment attributable to such Installment to the Participant, the Participant shall certify, to the extent required by the Committee, in a manner acceptable to the Committee, that the Participant is not engaging and has not engaged in any Detrimental Activity and, in the case of a Participant whose Date of Termination has occurred due to Retirement, that the Participant is not engaging and has not engaged in any Post-Retirement Activity. In the event a Participant has engaged in any Detrimental Activity or, if applicable, any Post-Retirement Activity, prior to, or during the twelve months after, the Payment Date with respect to any Installment (the “Restrictive Covenant Period”), the right to payment of the Award Payment attributable to such Installment may be rescinded by the Committee within two years of the end of the Restricted Covenant Period. In the event of any such rescission, the Participant shall pay to the Company the amount of the Award Payment attributable to such Installment, in such manner and on such terms and conditions as may be required by the Company, and the Company shall be entitled to set-off against the amount of any such gain any amount owed to the Participant by the Company and/or Subsidiary.
|
(a)
|
Cause. The term "Cause" shall mean (i) the rendering of services for any organization or engaging directly or indirectly in any business which is or becomes competitive with the Company or the Subsidiaries, or which organization or business, or the rendering of services to such organization or business, is or becomes otherwise prejudicial to or in conflict with the interests of the Company or the Subsidiaries; (ii) the disclosure to anyone outside the Company or the Subsidiaries, or the use in other than the Company’s or the Subsidiaries' business, without prior written authorization from the Company or the Subsidiaries, of any confidential information or material, relating to the business of the Company or the Subsidiaries, acquired by the Participant either during or after employment with the Company or the Subsidiaries; (iii) a violation of any rules, policies, procedures or guidelines of the Company or the Subsidiaries, including but not limited to the Company’s Code of Conduct, Policy on Trading in Assured Guaranty Ltd. Securities, Management Stock Ownership Guidelines and other business conduct guidelines; (iv) any attempt directly or indirectly to induce any employee of the Company to be employed or perform services elsewhere or any attempt directly or indirectly to solicit the trade or business of any current or prospective customer, supplier or partner of the Company; (v) the Participant being convicted of, or entering a guilty plea with respect to, a felony (or, for a crime occurring outside of the United States, the Participant being convicted of, or entering a guilty plea with respect to, or otherwise admitting guilt with respect to, a crime which would otherwise constitute a felony if such crime
|
(b)
|
Core Adjusted Book Value. The “Core Adjusted Book Value” of the Company as of any date shall equal shareholders’ equity attributable to Assured Guaranty Ltd., as reported under accounting principles generally accepted in the United States of America (GAAP), adjusted for the following:
|
(i)
|
Elimination of the effects of consolidating financial guaranty variable interest entities;
|
(ii)
|
Elimination of non-credit-impairment unrealized fair value gains (losses) on credit derivatives, which is the amount of unrealized fair value gains (losses) in excess of the present value of the expected estimated economic credit losses, and non-economic payments;
|
(iii)
|
Elimination of fair value gains (losses) on the Company’s committed capital securities;
|
(iv)
|
Elimination of unrealized gains (losses) on the Company’s investments that are recorded as a component of accumulated other comprehensive income (excluding foreign exchange remeasurement);
|
(v)
|
Elimination of deferred acquisition costs, net;
|
(vii)
|
Addition of the deferred premium revenue on financial guaranty contracts in excess of expected loss to be expensed, net of reinsurance; and
|
(viii)
|
Elimination of the tax asset or liability related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.
|
(c)
|
Core Operating Income. Core Operating Income is a non-GAAP financial measure defined as net income (loss) attributable to Assured Guaranty Ltd., as reported under GAAP, adjusted for the following:
|
(i)
|
Elimination of the effects of consolidating financial guaranty variable interest entities;
|
(ii)
|
Elimination of realized gains (losses) on the Company’s investments, except for gains and losses on securities classified as trading;
|
(iii)
|
Elimination of non-credit-impairment unrealized fair value gains (losses) on credit derivatives, which is the amount of unrealized fair value gains (losses) in excess of the present value of the expected estimated economic credit losses, and non-economic payments;
|
(iv)
|
Elimination of fair value gains (losses) on the Company’s committed capital securities;
|
(v)
|
Elimination of foreign exchange gains (losses) on remeasurement of net premium receivables and loss and loss adjusted expense reserves; and
|
(vi)
|
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.
|
(d)
|
Core Operating Return on Equity. Core Operating Return on Equity represents Core Operating Income over the Performance Period attributable to the Installment divided by the average of Core Operating Shareholders' Equity at the beginning and the end of that Performance Period. Notwithstanding the foregoing, the Committee, in its discretion, may adjust the determination of the Company’s Core Operating Return on Equity as it deems necessary or desirable to achieve the purpose and/or preserve the benefits or potential benefits of the Award (including, without limitation, adjustments to reflect corporate transactions).
|
(e)
|
Core Operating Shareholders’ Equity. Core Operating Shareholders’ Equity is a non-GAAP financial measure calculated as shareholders’ equity attributable to Assured Guaranty Ltd., as reported under GAAP, adjusted for the following:
|
(i)
|
Elimination of the effects of consolidating financial guaranty variable interest entities;
|
(ii)
|
Elimination of non-credit-impairment unrealized fair value gains (losses) on credit derivatives, which is the amount of unrealized fair value gains (losses) in excess of the present value of the expected estimated economic credit losses, and non-economic payments;
|
(iii)
|
Elimination of fair value gains (losses) on the Company’s committed capital securities;
|
(iv)
|
Elimination of unrealized gains (losses) on the Company’s investments that are recorded as a component of accumulated other comprehensive income (excluding foreign exchange remeasurement); and
|
(v)
|
Elimination of the tax asset or liability related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.
|
(f)
|
Date of Termination. A Participant's “Date of Termination” means the first day on which the Participant is not employed by the Company or any Subsidiary, regardless of the reason for the termination of employment; provided that a termination of employment shall not be deemed to occur by reason of a transfer of the Participant between the Company and a Subsidiary or between two Subsidiaries, nor by reason of a Participant’s termination of employment with the Company or a Subsidiary if immediately following such termination of employment the Participant continues to be or becomes a Director; and further provided that the Participant’s employment shall not be considered terminated while the Participant is on a leave of absence from the Company or a Subsidiary approved by the Participant’s employer. If, as a result of a sale or other transaction, the Participant’s employer ceases to be a Subsidiary (and the Participant’s employer is or becomes an entity that is separate from the Company), and the Participant is not, at the end of the 30‑day period following the transaction, employed by the Company or an entity that is then a Subsidiary, then the occurrence of such transaction shall be treated as the Date of Termination.
|
(g)
|
Detrimental Activity. The term "Detrimental Activity" shall mean (i) the rendering of services for any organization or engaging directly or indirectly in any business which is or becomes competitive with the Company or the Subsidiaries, or which organization or business, or the rendering of services to such organization or business, is or becomes otherwise prejudicial to or in conflict with the interests of the Company or the Subsidiaries; (ii) the disclosure to anyone outside the Company or the
|
(h)
|
Director. The term "Director" means a member of the Board, who may or may not be an employee of the Company or a Subsidiary.
|
(i)
|
Disability. The Participant shall be considered to have a "Disability" during the period in which the Participant is unable, by reason of a medically determinable physical or mental impairment, to engage in any substantial gainful activity, which condition, in the opinion of a physician selected by the Committee, is expected to have a duration of not less than 180 days.
|
(j)
|
Performance Period. The “Performance Period” will be determined in accordance with paragraph 1.
|
(k)
|
Permanent Disability. The Participant shall be considered to have a “Permanently Disability” if he or she would be treated as “disabled” in accordance with the provisions of Treas. Reg. §1.409A-3(i)(4).
|
(l)
|
Post-Retirement Activity. The term “Post-Retirement Activity” shall mean the Participant’s provision of significant commercial or business services to any one or more persons or entities such that the Participant will not be considered to have retired (or have terminated by reason of Retirement) pursuant to paragraph 12(m)(iii) below.
|
(m)
|
Principal Amount. The "Principal Amount" with respect to the Participant will be the Principal Amount as stated in the Award Letter.
|
(n)
|
Retirement. “Retirement" of a Participant will be determined in accordance with the following:
|
(i)
|
Retirement. The term “Retirement” means the occurrence of a Participant’s Date of Termination due to the voluntary termination of employment with the consent of the Committee (as described below) by a Participant who meets the following requirements as of such Date of Termination: (i) the Participant is age 60 or older and (ii) the total of the Participant’s age and years of service equals or exceeds 70. For purposes of this Agreement, the Participant’s Date of Termination shall not be considered to be a Retirement unless, prior to such Date of Termination, the Committee or its delegate approved treating such Participant’s Date of Termination as a
|
(ii)
|
For purposes of defining “Retirement,” years of service shall be determined in accordance with rules which may be established by the Committee, and shall take into account service with the Company and the Subsidiaries. If, on or before the date of the initial public offering of stock of the Company, the Participant was employed by the Company or its Subsidiaries, years of service shall also include service with ACE Limited and its subsidiaries occurring prior to such the initial public offering.
|
(iii)
|
Notwithstanding that the Participant’s Date of Termination satisfies the requirements of paragraph (i) above, the Participant will not be considered to have retired (or have terminated by reason of Retirement) with respect to any Installment if the Committee determines that the Participant has provided significant commercial or business services to any one or more persons or entities on or before the last day of the Performance Period applicable to that Installment, regardless of whether such entity is owned or controlled by the Participant; provided that the Participant may devote reasonable time to the supervision of his or her personal investments, and activities involving professional, charitable, community, educational, religious and similar types of organizations, speaking engagements, membership on the boards of directors of other organizations, and similar types of activities, to the extent that the Committee, in its discretion, determines that such activities are consistent with the Participant’s Retirement.
|
(iv)
|
At the request of the Committee, and as a condition of receiving the Award Payment with respect to a Performance Period, the Participant shall be required to provide a listing of the activities engaged in by the Participant following the Participant’s Date of Termination and prior to the end of the Performance Period and such other information that the Committee determines may be necessary from time to time to establish whether the Participant has acted in a manner that is consistent with the requirements of paragraph (iii) above. Such listing and information shall be provided promptly by the Participant, but in no event more than 10 days after written request is delivered to the Participant.
|
(v)
|
At the request of the Participant, the Committee shall determine whether a proposed activity of the Participant will be consistent with the requirements of paragraph (iii) above. Such request shall be accompanied by a description of the proposed activities, and the Participant shall provide such additional information as the Committee may determine is necessary to make the determination. Such a determination shall be made promptly,
|
(a)
|
The "Participant" is ________________________________
|
(b)
|
The "Grant Date" is February 25, 2020.
|
(c)
|
The number of “Covered Units” granted under this Agreement is _____ Units. Each “Unit” represents the right to receive one share of Stock on the Delivery Date, to the extent that the Participant is vested in such Units as of the Delivery Date, subject to the terms of this Agreement and the Plan.
|
(d)
|
The “Delivery Date” with respect to each Installment shall be the earliest to occur of:
|
(a)
|
For Installments as to which the Restricted Period has not otherwise ended prior to the Date of Termination, the Restricted Period for such Installments shall end upon the Participant’s Date of Termination, if the Date of Termination occurs by reason of the Participant’s Disability or death or by reason of a Qualifying Termination.
|
(b)
|
If the Participant’s Date of Termination occurs because of Retirement, then for Installments as to which the Restricted Period has not otherwise ended prior to the Date of Termination, the Participant shall be vested on the Date of Termination (and the Restricted Period shall end) with respect to the Installment (if any) that would vest on or after the Date of Termination, determined as though the Participant had remained employed through such vesting date(s), but subject to paragraph 17(j) (relating to the definition of Retirement); provided, however, the number of Covered Units that shall be delivered with respect to each Installment on or after the Date of Termination due to Retirement, shall be further multiplied by the Retirement Percentage (with such percentage converted to a number by dividing such percentage by 100) and, if such Retirement Percentage is less than one hundred percent (100%), any Covered Units that do not remain eligible to become vested pursuant to this sentence shall be immediately forfeited on the Date of Termination.
|
(a)
|
The Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict the Restricted Stock Unit Award at any time if the Participant engages in any "Detrimental Activity" or, in the case of a Participant whose Date of Termination has occurred due to Retirement, if the Participant engages in any Post-Retirement Activity.
|
(b)
|
At the Delivery Date with respect to an Installment and prior to the transfer of the shares of Stock to the Participant, the Participant shall certify, to the extent required by the Committee, in a manner acceptable to the Committee, that the Participant is not engaging and has not engaged in any Detrimental Activity and, in the case of a Participant whose Date of Termination has occurred due to Retirement, that the Participant is not engaging and has not engaged in any Post-Retirement Activity. In the event a Participant has engaged in any Detrimental Activity or, if applicable, any Post-Retirement Activity, prior to, or during the twelve months after, the Delivery Date with respect to such Installment of Covered Units, the right to delivery of shares with respect to such Installment may be rescinded by the Committee within two years thereafter. In the event of any such rescission, the Participant shall pay to the Company the amount of any gain realized as a result of the prior delivery of shares applicable to the rescinded Installment(s), in such manner and on such terms and conditions as may be required by the Company, and the Company shall be entitled to set-off against the amount of any such gain any amount owed to the Participant by the Company and/or Subsidiary.
|
(a)
|
Cause. The term "Cause" shall mean (i) the rendering of services for any organization or engaging directly or indirectly in any business which is or becomes competitive with the Company or the Subsidiaries, or which organization or business, or the rendering of services to such organization or business, is or becomes otherwise prejudicial to or in conflict with the interests of the Company or the Subsidiaries; (ii) the disclosure to anyone outside the Company or the Subsidiaries, or the use in other than the Company’s or the Subsidiaries' business, without prior written authorization from the Company or the Subsidiaries, of any confidential information or material, relating to the business of the Company or the Subsidiaries, acquired by the Participant either during or after employment with the Company or the Subsidiaries; (iii) a violation of any rules, policies, procedures or guidelines of the Company or the Subsidiaries, including but not limited to the Company’s Code of Conduct, Policy on Trading in Assured Guaranty Ltd. Securities, Management Stock Ownership Guidelines and other business conduct guidelines; (iv) any attempt directly or indirectly to induce any employee of the Company or its Subsidiaries to be employed or perform services elsewhere or any attempt directly or indirectly to solicit the trade or business of any current or prospective customer, supplier or partner of the Company or its Subsidiaries; (v) the Participant being convicted of, or entering a guilty plea with respect to, a felony (or, for a crime occurring outside of the United States, the Participant being convicted of, or entering a guilty plea with respect to, a crime which would otherwise constitute a felony if such crime were prosecuted pursuant to the laws of the United States or the State of New York), whether or not connected with the Company or its Subsidiaries; or (vi) any other conduct or act determined to be injurious, detrimental or prejudicial to any interest of the Company or its Subsidiaries.
|
(b)
|
Change in Control. The term "Change in Control" shall be defined as set forth in the Plan.
|
(c)
|
Date of Termination. A Participant's "Date of Termination" means, with respect to an employee, the date on which the Participant's employment with the Company and Subsidiaries terminates for any reason, and with respect to a Director, the date immediately following the last day on which the Participant serves as a Director; provided that a Date of Termination shall not be deemed to occur by reason of a Participant's transfer of employment between the Company and a Subsidiary or between two Subsidiaries; further provided that a Date of Termination shall not be deemed to occur by reason of a Participant's cessation of service as a Director if immediately following such cessation of service the Participant becomes or continues to be employed by the Company or a Subsidiary, nor by reason of a Participant's termination of employment with the Company or a Subsidiary if immediately following such termination of employment the Participant becomes or continues to be a Director; and further provided that a Participant's employment shall not be considered terminated while
|
(d)
|
Detrimental Activity. The term "Detrimental Activity" shall mean the occurrence of actions described in clause (i) (relating to competition), (ii) (relating to confidentiality), or (iv) (relating to solicitation), all as set forth under the definition of "Cause" above.
|
(e)
|
Director. The term "Director" means a member of the Board of Directors of Assured Guaranty, Ltd., who may or may not be an employee of the Company or a Subsidiary.
|
(f)
|
Disability. The Participant shall be considered to have a "Disability" during the period in which the Participant is unable, by reason of a medically determinable physical or mental impairment, to engage in any substantial gainful activity, which condition, in the opinion of a physician selected by the Committee, is expected to have a duration of not less than 120 days.
|
(g)
|
Permanent Disability. The Participant shall be considered to have a “Permanently Disability” if he or she would be treated as “disabled” in accordance with the provisions of Treas. Reg. §1.409A-3(i)(4).
|
(h)
|
Post-Retirement Activity. The term “Post-Retirement Activity” shall mean the Participant’s provision of significant commercial or business services to any one or more persons or entities such that the Participant will not be considered to have retired (or have terminated by reason of Retirement) pursuant to Section 19(i)(iii) below.
|
(i)
|
Qualifying Termination. The term “Qualifying Termination” shall mean the occurrence of the Participant’s Date of Termination due to the involuntary termination of the Participant’s employment by the Company or a Subsidiary without Cause on or after the occurrence of a Change in Control; provided, however that such termination shall be considered a Qualifying Termination only if the Participant signs and does not revoke a Severance Agreement and Release consistent with Section 6 of the Assured Guaranty Corp. Employee Severance Plan and such release is effective no later than the sixty-day anniversary of the Date of Termination; provided, further, that if the sixty-day period described above during which the Participant may consider signing the release begins in one calendar year and ends in a second calendar year and the Participant would otherwise be entitled to receive a distribution of shares of Stock subject to signing and not revoking such release during such sixty-day period, no distribution of shares of Stock shall be made earlier than the first day of the second calendar year.
|
(j)
|
Retirement. “Retirement" of a Participant will be determined in accordance with the following:
|
(k)
|
Retirement Percentage. The term “Retirement Percentage” means (i) one hundred percent (100%) if the Participant has an approved Retirement and the combination of his or her age and years of service as of such Date of Termination equals or exceeds 85; (ii) seventy-five percent (75%) if the Participant has an approved Retirement and the combination of his or her age and years of service as of such Date of Termination equals or exceeds 75; and (iii) fifty percent (50%) if the Participant has an approved Retirement and the combination of his or her age and years of service as of such Date of Termination equals or exceeds 65, in each case, with service determined as provided in the definition of Retirement above.
|
(l)
|
Vesting Change in Control. The term “Vesting Change in Control” shall mean the date of a Change in Control where this Restricted Stock Unit Award is terminated pursuant to Section 5(b) of this Agreement.
|
(m)
|
Plan Definitions. Except where the context clearly implies or indicates the contrary, a word, term, or phrase used in the Plan is similarly used in this Agreement.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Assured Guaranty Ltd.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
|
|
By:
|
/s/ DOMINIC J. FREDERICO
|
|
|
|
|
|
Dominic J. Frederico
|
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Assured Guaranty Ltd.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
|
|
By:
|
/s/ ROBERT A. BAILENSON
|
|
|
|
|
|
Robert A. Bailenson
|
|
|
Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ DOMINIC J. FREDERICO
|
|
|
|
Name: Dominic J. Frederico
|
|
Title: President and Chief Executive Officer
|
|
Date: May 8, 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: May 8, 2020
|
|