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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
|
|
Common Shares
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$0.01 par value per share
|
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
June 30, 2020 |
|
As of
December 31, 2019 |
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Assets
|
|
|
|
|
|
||
Investment portfolio:
|
|
|
|
|
|
||
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $8,237 and $8,371, allowance for credit loss of $75 at June 30, 2020)
|
$
|
8,630
|
|
|
$
|
8,854
|
|
Short-term investments at fair value
|
821
|
|
|
1,268
|
|
||
Other invested assets (includes $15 and $6 measured at fair value)
|
122
|
|
|
118
|
|
||
Total investment portfolio
|
9,573
|
|
|
10,240
|
|
||
Cash
|
293
|
|
|
169
|
|
||
Premiums receivable, net of commissions payable
|
1,294
|
|
|
1,286
|
|
||
Deferred acquisition costs
|
116
|
|
|
111
|
|
||
Salvage and subrogation recoverable
|
795
|
|
|
747
|
|
||
Financial guaranty variable interest entities’ assets, at fair value
|
318
|
|
|
442
|
|
||
Assets of consolidated investment vehicles (includes $1,452 and $558 measured at fair value)
|
1,669
|
|
|
572
|
|
||
Goodwill and other intangible assets
|
209
|
|
|
216
|
|
||
Other assets (includes $160 and $135 measured at fair value)
|
513
|
|
|
543
|
|
||
Total assets
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$
|
14,780
|
|
|
$
|
14,326
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
|
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Unearned premium reserve
|
$
|
3,742
|
|
|
$
|
3,736
|
|
Loss and loss adjustment expense reserve
|
1,076
|
|
|
1,050
|
|
||
Long-term debt
|
1,222
|
|
|
1,235
|
|
||
Credit derivative liabilities, at fair value
|
163
|
|
|
191
|
|
||
Financial guaranty variable interest entities’ liabilities with recourse, at fair value
|
332
|
|
|
367
|
|
||
Financial guaranty variable interest entities’ liabilities without recourse, at fair value
|
20
|
|
|
102
|
|
||
Liabilities of consolidated investment vehicles (includes $836 and $481 measured at fair value)
|
1,236
|
|
|
482
|
|
||
Other liabilities
|
480
|
|
|
511
|
|
||
Total liabilities
|
8,271
|
|
|
7,674
|
|
||
|
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|
|
||||
Commitments and contingencies (see Note 13)
|
|
|
|
||||
Redeemable noncontrolling interests in consolidated investment vehicles
|
20
|
|
|
7
|
|
||
|
|
|
|
||||
Common stock ($0.01 par value, 500,000,000 shares authorized; 84,062,384 and 93,274,987 shares issued and outstanding)
|
1
|
|
|
1
|
|
||
Retained earnings
|
6,109
|
|
|
6,295
|
|
||
Accumulated other comprehensive income, net of tax of $69 and $71
|
333
|
|
|
342
|
|
||
Deferred equity compensation
|
1
|
|
|
1
|
|
||
Total shareholders’ equity attributable to Assured Guaranty Ltd.
|
6,444
|
|
|
6,639
|
|
||
Nonredeemable noncontrolling interests
|
45
|
|
|
6
|
|
||
Total shareholders’ equity
|
6,489
|
|
|
6,645
|
|
||
Total liabilities, redeemable noncontrolling interests and shareholders’ equity
|
$
|
14,780
|
|
|
$
|
14,326
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Revenues
|
|
|
|
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|
|
|
||||||||
Net earned premiums
|
$
|
121
|
|
|
$
|
112
|
|
|
$
|
224
|
|
|
$
|
230
|
|
Net investment income
|
78
|
|
|
110
|
|
|
158
|
|
|
208
|
|
||||
Asset management fees
|
20
|
|
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—
|
|
|
43
|
|
|
—
|
|
||||
Net realized investment gains (losses)
|
4
|
|
|
8
|
|
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(1
|
)
|
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(4
|
)
|
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Net change in fair value of credit derivatives
|
100
|
|
|
(8
|
)
|
|
23
|
|
|
(30
|
)
|
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Fair value gains (losses) on committed capital securities
|
(25
|
)
|
|
19
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|
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23
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|
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10
|
|
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Fair value gains (losses) on financial guaranty variable interest entities
|
1
|
|
|
33
|
|
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(8
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)
|
|
38
|
|
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Fair value gains (losses) on consolidated investment vehicles
|
31
|
|
|
—
|
|
|
19
|
|
|
—
|
|
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Foreign exchange gains (losses) on remeasurement
|
2
|
|
|
(14
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)
|
|
(60
|
)
|
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(3
|
)
|
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Commutation gains (losses)
|
38
|
|
|
1
|
|
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38
|
|
|
1
|
|
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Other income (loss)
|
2
|
|
|
5
|
|
|
9
|
|
|
11
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|
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Total revenues
|
372
|
|
|
266
|
|
|
468
|
|
|
461
|
|
||||
Expenses
|
|
|
|
|
|
|
|
||||||||
Loss and loss adjustment expenses
|
37
|
|
|
(1
|
)
|
|
57
|
|
|
45
|
|
||||
Interest expense
|
21
|
|
|
22
|
|
|
43
|
|
|
45
|
|
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Amortization of deferred acquisition costs
|
4
|
|
|
4
|
|
|
7
|
|
|
10
|
|
||||
Employee compensation and benefit expenses
|
46
|
|
|
39
|
|
|
110
|
|
|
80
|
|
||||
Other operating expenses
|
42
|
|
|
21
|
|
|
87
|
|
|
44
|
|
||||
Total expenses
|
150
|
|
|
85
|
|
|
304
|
|
|
224
|
|
||||
Income (loss) before income taxes and equity in net earnings of investees
|
222
|
|
|
181
|
|
|
164
|
|
|
237
|
|
||||
Equity in net earnings of investees
|
—
|
|
|
1
|
|
|
(4
|
)
|
|
3
|
|
||||
Income (loss) before income taxes
|
222
|
|
|
182
|
|
|
160
|
|
|
240
|
|
||||
Provision (benefit) for income taxes
|
34
|
|
|
40
|
|
|
30
|
|
|
44
|
|
||||
Net income (loss)
|
188
|
|
|
142
|
|
|
130
|
|
|
196
|
|
||||
Less: Noncontrolling interests
|
5
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||
Net income (loss) attributable to Assured Guaranty Ltd.
|
$
|
183
|
|
|
$
|
142
|
|
|
$
|
128
|
|
|
$
|
196
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
2.11
|
|
|
$
|
1.40
|
|
|
$
|
1.43
|
|
|
$
|
1.92
|
|
Diluted
|
$
|
2.10
|
|
|
$
|
1.39
|
|
|
$
|
1.42
|
|
|
$
|
1.90
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Net income (loss)
|
$
|
188
|
|
|
$
|
142
|
|
|
$
|
130
|
|
|
$
|
196
|
|
Change in net unrealized gains (losses) on:
|
|
|
|
|
|
|
|
||||||||
Investments with no credit impairment recognized in the statement of operations, net of tax provision (benefit) of $31, $19, $4 and $44
|
175
|
|
|
79
|
|
|
13
|
|
|
242
|
|
||||
Investments with credit impairment recognized in the statement of operations, net of tax provision (benefit) of $6, $(12), $(7) and $(12)
|
25
|
|
|
(48
|
)
|
|
(27
|
)
|
|
(43
|
)
|
||||
Change in net unrealized gains (losses) on investments
|
200
|
|
|
31
|
|
|
(14
|
)
|
|
199
|
|
||||
Change in net unrealized gains (losses) on financial guaranty variable interest entities' liabilities with recourse, net of tax
|
(5
|
)
|
|
4
|
|
|
5
|
|
|
4
|
|
||||
Other, net of tax provision (benefit)
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||
Other comprehensive income (loss)
|
195
|
|
|
34
|
|
|
(9
|
)
|
|
202
|
|
||||
Comprehensive income (loss)
|
383
|
|
|
176
|
|
|
121
|
|
|
398
|
|
||||
Less: Comprehensive income (loss) attributable to noncontrolling interest
|
5
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||
Comprehensive income (loss) attributable to Assured Guaranty Ltd.
|
$
|
378
|
|
|
$
|
176
|
|
|
$
|
119
|
|
|
$
|
398
|
|
|
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
March 31, 2020 |
89,983,322
|
|
|
|
$
|
1
|
|
|
$
|
6,100
|
|
|
$
|
138
|
|
|
$
|
1
|
|
|
$
|
6,240
|
|
|
$
|
25
|
|
|
$
|
6,265
|
|
Net income
|
—
|
|
|
|
—
|
|
|
183
|
|
|
—
|
|
|
—
|
|
|
183
|
|
|
5
|
|
|
188
|
|
|||||||
Dividends ($0.20 per share)
|
—
|
|
|
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
(17
|
)
|
|||||||
Reallocation of ownership interests
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
8
|
|
|||||||
Contributions
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23
|
|
|
23
|
|
|||||||
Common stock repurchases
|
(5,956,422
|
)
|
|
|
—
|
|
|
(164
|
)
|
|
—
|
|
|
—
|
|
|
(164
|
)
|
|
—
|
|
|
(164
|
)
|
|||||||
Share based compensation
|
35,484
|
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
|||||||
Distributions
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16
|
)
|
|
(16
|
)
|
|||||||
Other comprehensive income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
195
|
|
|
—
|
|
|
195
|
|
|
—
|
|
|
195
|
|
|||||||
Balance at
June 30, 2020 |
84,062,384
|
|
|
|
$
|
1
|
|
|
$
|
6,109
|
|
|
$
|
333
|
|
|
$
|
1
|
|
|
$
|
6,444
|
|
|
$
|
45
|
|
|
$
|
6,489
|
|
|
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 Interest
|
|
Total
Shareholders’ Equity
|
|||||||||||||||||
Balance at
March 31, 2019 |
102,270,409
|
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
6,406
|
|
|
$
|
261
|
|
|
$
|
1
|
|
|
$
|
6,669
|
|
|
$
|
—
|
|
|
$
|
6,669
|
|
Net income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
142
|
|
|
—
|
|
|
—
|
|
|
142
|
|
|
—
|
|
|
142
|
|
||||||||
Dividends ($0.18 per share)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
|
—
|
|
|
—
|
|
|
(19
|
)
|
|
—
|
|
|
(19
|
)
|
||||||||
Common stock repurchases
|
(2,519,130
|
)
|
|
|
—
|
|
|
(7
|
)
|
|
(104
|
)
|
|
—
|
|
|
—
|
|
|
(111
|
)
|
|
—
|
|
|
(111
|
)
|
||||||||
Share-based compensation
|
49,733
|
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
||||||||
Other comprehensive income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34
|
|
|
—
|
|
|
34
|
|
|
—
|
|
|
34
|
|
||||||||
Balance at
June 30, 2019 |
99,801,012
|
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
6,425
|
|
|
$
|
295
|
|
|
$
|
1
|
|
|
$
|
6,722
|
|
|
$
|
—
|
|
|
$
|
6,722
|
|
|
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 income
|
—
|
|
|
|
—
|
|
|
128
|
|
|
—
|
|
|
—
|
|
|
128
|
|
|
4
|
|
|
132
|
|
|||||||
Dividends ($0.40 per share)
|
—
|
|
|
|
—
|
|
|
(36
|
)
|
|
—
|
|
|
—
|
|
|
(36
|
)
|
|
—
|
|
|
(36
|
)
|
|||||||
Reallocation of ownership interests
|
—
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
10
|
|
|||||||
Contributions
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41
|
|
|
41
|
|
|||||||
Common stock repurchases
|
(9,585,832
|
)
|
|
|
—
|
|
|
(280
|
)
|
|
—
|
|
|
—
|
|
|
(280
|
)
|
|
—
|
|
|
(280
|
)
|
|||||||
Share based compensation
|
373,229
|
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|||||||
Distributions
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16
|
)
|
|
(16
|
)
|
|||||||
Other comprehensive loss
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
|
—
|
|
|
(9
|
)
|
|
—
|
|
|
(9
|
)
|
|||||||
Balance at
June 30, 2020 |
84,062,384
|
|
|
|
$
|
1
|
|
|
$
|
6,109
|
|
|
$
|
333
|
|
|
$
|
1
|
|
|
$
|
6,444
|
|
|
$
|
45
|
|
|
$
|
6,489
|
|
|
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
|
—
|
|
|
|
—
|
|
|
—
|
|
|
196
|
|
|
—
|
|
|
—
|
|
|
196
|
|
|
—
|
|
|
196
|
|
||||||||
Dividends ($0.36 per share)
|
—
|
|
|
|
—
|
|
|
—
|
|
|
(38
|
)
|
|
—
|
|
|
—
|
|
|
(38
|
)
|
|
—
|
|
|
(38
|
)
|
||||||||
Common stock repurchases
|
(4,427,735
|
)
|
|
|
—
|
|
|
(83
|
)
|
|
(107
|
)
|
|
—
|
|
|
—
|
|
|
(190
|
)
|
|
—
|
|
|
(190
|
)
|
||||||||
Share-based compensation
|
556,155
|
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
||||||||
Other comprehensive income
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
202
|
|
|
—
|
|
|
202
|
|
|
—
|
|
|
202
|
|
||||||||
Balance at
June 30, 2019 |
99,801,012
|
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
6,425
|
|
|
$
|
295
|
|
|
$
|
1
|
|
|
$
|
6,722
|
|
|
$
|
—
|
|
|
$
|
6,722
|
|
|
Six Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
Net cash flows provided by (used in) operating activities
|
$
|
(445
|
)
|
|
$
|
(198
|
)
|
Investing activities
|
|
|
|
|
|
||
Fixed-maturity securities:
|
|
|
|
|
|
||
Purchases
|
(627
|
)
|
|
(503
|
)
|
||
Sales
|
490
|
|
|
914
|
|
||
Maturities and paydowns
|
373
|
|
|
506
|
|
||
Short-term investments with maturities of over three months:
|
|
|
|
||||
Purchases
|
(103
|
)
|
|
(209
|
)
|
||
Sales
|
4
|
|
|
2
|
|
||
Maturities and paydowns
|
60
|
|
|
174
|
|
||
Net sales (purchases) of short-term investments with original maturities of less than three months
|
487
|
|
|
(389
|
)
|
||
Net proceeds from paydowns on financial guaranty variable interest entities’ assets
|
55
|
|
|
50
|
|
||
Net proceeds from sales of financial guaranty variable interest entities' assets
|
—
|
|
|
51
|
|
||
Proceeds from sales and return of capital of other invested assets
|
5
|
|
|
35
|
|
||
Other
|
(11
|
)
|
|
—
|
|
||
Net cash flows provided by (used in) investing activities
|
733
|
|
|
631
|
|
||
Financing activities
|
|
|
|
|
|
||
Dividends paid
|
(37
|
)
|
|
(39
|
)
|
||
Repurchases of common stock
|
(280
|
)
|
|
(190
|
)
|
||
Net paydowns of financial guaranty variable interest entities’ liabilities
|
(52
|
)
|
|
(95
|
)
|
||
Paydown of long-term debt
|
(22
|
)
|
|
(4
|
)
|
||
Other
|
(12
|
)
|
|
(15
|
)
|
||
Cash flows from consolidated investment vehicles:
|
|
|
|
||||
Proceeds from issuance of collateralized loan obligations
|
362
|
|
|
—
|
|
||
Contributions from noncontrolling interests to investment vehicles
|
66
|
|
|
—
|
|
||
Distributions to noncontrolling interests from investment vehicles
|
(16
|
)
|
|
—
|
|
||
Net cash flows provided by (used in) financing activities
|
9
|
|
|
(343
|
)
|
||
Effect of foreign exchange rate changes
|
(7
|
)
|
|
—
|
|
||
Increase (decrease) in cash and restricted cash
|
290
|
|
|
90
|
|
||
Cash and restricted cash at beginning of period
|
$
|
183
|
|
|
104
|
|
|
Cash and restricted cash at end of period
|
$
|
473
|
|
|
$
|
194
|
|
|
Six Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
Supplemental cash flow information
|
|
|
|
||||
Cash paid (received) during the period for:
|
|
|
|
||||
Income taxes
|
$
|
—
|
|
|
$
|
(3
|
)
|
Interest on long-term debt
|
41
|
|
|
42
|
|
||
|
|
|
|
||||
Supplemental disclosure of non-cash investing activities:
|
|
|
|
||||
Purchases of fixed-maturity investments
|
$
|
—
|
|
|
$
|
(139
|
)
|
|
|
|
|
||||
|
|
|
|
||||
|
As of June 30, 2020
|
|
As of June 30, 2019
|
||||
Reconciliation of cash and restricted cash to the condensed consolidated balance sheets:
|
|
|
|
||||
Cash
|
$
|
293
|
|
|
$
|
190
|
|
Restricted cash (included in other assets)
|
5
|
|
|
4
|
|
||
Cash of consolidated investment vehicles (see Note 11)
|
175
|
|
|
—
|
|
||
Cash and restricted cash at the end of period
|
$
|
473
|
|
|
$
|
194
|
|
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.
|
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.
|
|
Second Quarter 2020
|
||||||||||||||||||
|
Insurance
|
|
Asset Management
|
|
Corporate
|
|
Other
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Third-party revenues
|
$
|
244
|
|
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
38
|
|
|
$
|
294
|
|
Intersegment revenues
|
2
|
|
|
1
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|||||
Total revenues
|
246
|
|
|
13
|
|
|
—
|
|
|
35
|
|
|
294
|
|
|||||
Total expenses
|
90
|
|
|
24
|
|
|
32
|
|
|
4
|
|
|
150
|
|
|||||
Income (loss) before income taxes and equity in net earnings of investees
|
156
|
|
|
(11
|
)
|
|
(32
|
)
|
|
31
|
|
|
144
|
|
|||||
Equity in net earnings of investees
|
26
|
|
|
—
|
|
|
—
|
|
|
(26
|
)
|
|
—
|
|
|||||
Adjusted operating income (loss) before income taxes
|
182
|
|
|
(11
|
)
|
|
(32
|
)
|
|
5
|
|
|
144
|
|
|||||
Provision (benefit) for income taxes
|
28
|
|
|
(2
|
)
|
|
(6
|
)
|
|
—
|
|
|
20
|
|
|||||
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
5
|
|
|||||
Adjusted operating income (loss)
|
$
|
154
|
|
|
$
|
(9
|
)
|
|
$
|
(26
|
)
|
|
$
|
—
|
|
|
$
|
119
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Supplemental income statement information
|
|
|
|
|
|
|
|
|
|
||||||||||
Net investment income
|
$
|
82
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(4
|
)
|
|
$
|
78
|
|
Interest expense
|
—
|
|
|
—
|
|
|
23
|
|
|
(2
|
)
|
|
21
|
|
|||||
Non-cash compensation and operating expenses (1)
|
9
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
Second Quarter 2019
|
||||||||||||||||||
|
Insurance
|
|
Asset Management
|
|
Corporate
|
|
Other
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Third-party revenues
|
$
|
241
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
21
|
|
|
$
|
263
|
|
Intersegment revenues
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total revenues
|
241
|
|
|
—
|
|
|
1
|
|
|
21
|
|
|
263
|
|
|||||
Total expenses
|
40
|
|
|
—
|
|
|
31
|
|
|
14
|
|
|
85
|
|
|||||
Income (loss) before income taxes and equity in net earnings of investees
|
201
|
|
|
—
|
|
|
(30
|
)
|
|
7
|
|
|
178
|
|
|||||
Equity in net earnings of investees
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||
Adjusted operating income (loss) before income taxes
|
202
|
|
|
—
|
|
|
(30
|
)
|
|
7
|
|
|
179
|
|
|||||
Provision (benefit) for income taxes
|
41
|
|
|
—
|
|
|
(4
|
)
|
|
1
|
|
|
38
|
|
|||||
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Adjusted operating income (loss)
|
$
|
161
|
|
|
$
|
—
|
|
|
$
|
(26
|
)
|
|
$
|
6
|
|
|
$
|
141
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Supplemental income statement information
|
|
|
|
|
|
|
|
|
|
||||||||||
Net investment income
|
$
|
110
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
|
$
|
110
|
|
Interest expense
|
—
|
|
|
—
|
|
|
22
|
|
|
—
|
|
|
22
|
|
|||||
Non-cash compensation and operating expenses (1)
|
9
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
11
|
|
|
Six Months Ended June 30, 2020
|
||||||||||||||||||
|
Insurance
|
|
Asset Management
|
|
Corporate
|
|
Other
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Third-party revenues
|
$
|
437
|
|
|
$
|
28
|
|
|
$
|
(4
|
)
|
|
$
|
23
|
|
|
$
|
484
|
|
Intersegment revenues
|
5
|
|
|
2
|
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|||||
Total revenues
|
442
|
|
|
30
|
|
|
(4
|
)
|
|
16
|
|
|
484
|
|
|||||
Total expenses
|
174
|
|
|
52
|
|
|
67
|
|
|
3
|
|
|
296
|
|
|||||
Income (loss) before income taxes and equity in net earnings of investees
|
268
|
|
|
(22
|
)
|
|
(71
|
)
|
|
13
|
|
|
188
|
|
|||||
Equity in net earnings of investees
|
17
|
|
|
—
|
|
|
(5
|
)
|
|
(16
|
)
|
|
(4
|
)
|
|||||
Adjusted operating income (loss) before income taxes
|
285
|
|
|
(22
|
)
|
|
(76
|
)
|
|
(3
|
)
|
|
184
|
|
|||||
Provision (benefit) for income taxes
|
46
|
|
|
(4
|
)
|
|
(11
|
)
|
|
(1
|
)
|
|
30
|
|
|||||
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
|||||
Adjusted operating income (loss)
|
$
|
239
|
|
|
$
|
(18
|
)
|
|
$
|
(65
|
)
|
|
$
|
(4
|
)
|
|
$
|
152
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Supplemental income statement information
|
|
|
|
|
|
|
|
|
|
||||||||||
Net investment income
|
$
|
165
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
(8
|
)
|
|
$
|
158
|
|
Interest expense
|
—
|
|
|
—
|
|
|
48
|
|
|
(5
|
)
|
|
43
|
|
|||||
Non-cash compensation and operating expenses (1)
|
18
|
|
|
9
|
|
|
3
|
|
|
—
|
|
|
30
|
|
|
Six Months Ended June 30, 2019
|
||||||||||||||||||
|
Insurance
|
|
Asset Management
|
|
Corporate
|
|
Other
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Third-party revenues
|
$
|
474
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
22
|
|
|
$
|
497
|
|
Intersegment revenues
|
1
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|||||
Total revenues
|
475
|
|
|
—
|
|
|
1
|
|
|
21
|
|
|
497
|
|
|||||
Total expenses
|
147
|
|
|
—
|
|
|
62
|
|
|
14
|
|
|
223
|
|
|||||
Income (loss) before income taxes and equity in net earnings of investees
|
328
|
|
|
—
|
|
|
(61
|
)
|
|
7
|
|
|
274
|
|
|||||
Equity in net earnings of investees
|
2
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
3
|
|
|||||
Adjusted operating income (loss) before income taxes
|
330
|
|
|
—
|
|
|
(60
|
)
|
|
7
|
|
|
277
|
|
|||||
Provision (benefit) for income taxes
|
58
|
|
|
—
|
|
|
(9
|
)
|
|
1
|
|
|
50
|
|
|||||
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Adjusted operating income (loss)
|
$
|
272
|
|
|
$
|
—
|
|
|
$
|
(51
|
)
|
|
$
|
6
|
|
|
$
|
227
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Supplemental income statement information
|
|
|
|
|
|
|
|
|
|
||||||||||
Net investment income
|
$
|
209
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
(3
|
)
|
|
$
|
208
|
|
Interest expense
|
—
|
|
|
—
|
|
|
46
|
|
|
(1
|
)
|
|
45
|
|
|||||
Non-cash compensation and operating expenses (1)
|
20
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
23
|
|
(1)
|
Consists of amortization of deferred acquisition costs and intangible assets, depreciation and share-based compensation.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Net income (loss) attributable to AGL
|
$
|
183
|
|
|
$
|
142
|
|
|
$
|
128
|
|
|
$
|
196
|
|
Less pre-tax adjustments:
|
|
|
|
|
|
|
|
||||||||
Realized gains (losses) on investments
|
4
|
|
|
8
|
|
|
(1
|
)
|
|
(4
|
)
|
||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
97
|
|
|
(12
|
)
|
|
9
|
|
|
(40
|
)
|
||||
Fair value gains (losses) on CCS
|
(25
|
)
|
|
19
|
|
|
23
|
|
|
10
|
|
||||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
|
2
|
|
|
(12
|
)
|
|
(55
|
)
|
|
(3
|
)
|
||||
Total pre-tax adjustments
|
78
|
|
|
3
|
|
|
(24
|
)
|
|
(37
|
)
|
||||
Less tax effect on pre-tax adjustments
|
(14
|
)
|
|
(2
|
)
|
|
—
|
|
|
6
|
|
||||
Adjusted operating income (loss)
|
$
|
119
|
|
|
$
|
141
|
|
|
$
|
152
|
|
|
$
|
227
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
U.S.
|
$
|
243
|
|
|
$
|
212
|
|
|
$
|
393
|
|
|
$
|
394
|
|
Bermuda
|
38
|
|
|
46
|
|
|
72
|
|
|
90
|
|
||||
U.K. and other
|
13
|
|
|
5
|
|
|
19
|
|
|
13
|
|
||||
Total
|
$
|
294
|
|
|
$
|
263
|
|
|
$
|
484
|
|
|
$
|
497
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Revenues
|
|
|
|
|
|
|
|
||||||||
Total consolidated revenues
|
$
|
372
|
|
|
$
|
266
|
|
|
$
|
468
|
|
|
$
|
461
|
|
Less: Realized gains (losses) on investments
|
4
|
|
|
8
|
|
|
(1
|
)
|
|
(4
|
)
|
||||
Less: Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
97
|
|
|
(12
|
)
|
|
9
|
|
|
(40
|
)
|
||||
Less: Fair value gains (losses) on CCS
|
(25
|
)
|
|
19
|
|
|
23
|
|
|
10
|
|
||||
Less: Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
|
2
|
|
|
(12
|
)
|
|
(55
|
)
|
|
(3
|
)
|
||||
Plus: Credit derivative impairment (recoveries) (1)
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
(1
|
)
|
||||
Total segment revenues
|
$
|
294
|
|
|
$
|
263
|
|
|
$
|
484
|
|
|
$
|
497
|
|
|
|
|
|
|
|
|
|
||||||||
Expenses
|
|
|
|
|
|
|
|
||||||||
Total consolidated expenses
|
$
|
150
|
|
|
$
|
85
|
|
|
$
|
304
|
|
|
$
|
224
|
|
Plus: Credit derivative impairment (recoveries) (1)
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
(1
|
)
|
||||
Total segment expenses
|
$
|
150
|
|
|
$
|
85
|
|
|
$
|
296
|
|
|
$
|
223
|
|
(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.
|
3.
|
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 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, 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 June 30, 2020
|
|
As of December 31, 2019
|
|
As of June 30, 2020
|
|
As of December 31, 2019
|
||||||||
|
(in millions)
|
||||||||||||||
Public finance
|
$
|
352,266
|
|
|
$
|
363,497
|
|
|
$
|
351,835
|
|
|
$
|
362,361
|
|
Structured finance
|
11,196
|
|
|
12,279
|
|
|
10,694
|
|
|
11,769
|
|
||||
Total financial guaranty
|
$
|
363,462
|
|
|
$
|
375,776
|
|
|
$
|
362,529
|
|
|
$
|
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
|
|
$
|
368
|
|
|
0.2
|
%
|
|
$
|
2,459
|
|
|
5.0
|
%
|
|
$
|
1,118
|
|
|
12.7
|
%
|
|
$
|
166
|
|
|
23.7
|
%
|
|
$
|
4,111
|
|
|
1.8
|
%
|
AA
|
|
17,800
|
|
|
10.3
|
|
|
4,916
|
|
|
10.0
|
|
|
3,885
|
|
|
44.0
|
|
|
34
|
|
|
4.9
|
|
|
26,635
|
|
|
11.4
|
|
|||||
A
|
|
92,807
|
|
|
53.6
|
|
|
10,314
|
|
|
20.9
|
|
|
1,002
|
|
|
11.3
|
|
|
172
|
|
|
24.5
|
|
|
104,295
|
|
|
45.0
|
|
|||||
BBB
|
|
56,448
|
|
|
32.6
|
|
|
30,741
|
|
|
62.3
|
|
|
1,065
|
|
|
12.1
|
|
|
288
|
|
|
41.1
|
|
|
88,542
|
|
|
38.2
|
|
|||||
BIG
|
|
5,720
|
|
|
3.3
|
|
|
863
|
|
|
1.8
|
|
|
1,752
|
|
|
19.9
|
|
|
41
|
|
|
5.8
|
|
|
8,376
|
|
|
3.6
|
|
|||||
Total net par outstanding
|
|
$
|
173,143
|
|
|
100.0
|
%
|
|
$
|
49,293
|
|
|
100.0
|
%
|
|
$
|
8,822
|
|
|
100.0
|
%
|
|
$
|
701
|
|
|
100.0
|
%
|
|
$
|
231,959
|
|
|
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
|
$
|
1,440
|
|
|
$
|
430
|
|
|
$
|
3,850
|
|
|
$
|
5,720
|
|
|
$
|
173,143
|
|
Non-U.S. public finance
|
817
|
|
|
—
|
|
|
46
|
|
|
863
|
|
|
49,293
|
|
|||||
Public finance
|
2,257
|
|
|
430
|
|
|
3,896
|
|
|
6,583
|
|
|
222,436
|
|
|||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. RMBS
|
202
|
|
|
29
|
|
|
1,323
|
|
|
1,554
|
|
|
3,281
|
|
|||||
Other structured finance
|
97
|
|
|
56
|
|
|
86
|
|
|
239
|
|
|
6,242
|
|
|||||
Structured finance
|
299
|
|
|
85
|
|
|
1,409
|
|
|
1,793
|
|
|
9,523
|
|
|||||
Total
|
$
|
2,556
|
|
|
$
|
515
|
|
|
$
|
5,305
|
|
|
$
|
8,376
|
|
|
$
|
231,959
|
|
|
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
|
|
|||||
Other structured finance
|
69
|
|
|
62
|
|
|
88
|
|
|
219
|
|
|
6,515
|
|
|||||
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
|
|
$
|
2,482
|
|
|
$
|
74
|
|
|
$
|
2,556
|
|
|
112
|
|
|
7
|
|
|
119
|
|
Category 2
|
|
511
|
|
|
4
|
|
|
515
|
|
|
19
|
|
|
1
|
|
|
20
|
|
|||
Category 3
|
|
5,258
|
|
|
47
|
|
|
5,305
|
|
|
128
|
|
|
6
|
|
|
134
|
|
|||
Total BIG
|
|
$
|
8,251
|
|
|
$
|
125
|
|
|
$
|
8,376
|
|
|
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 June 30, 2020
|
|
Assured Guaranty Total Net Principal Claims Paid as of June 30, 2020
|
|
Assured Guaranty Total Net Interest Claims Paid as of June 30, 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 June 30, 2020
|
|
Assured Guaranty Total Net Principal Claims Paid as of June 30, 2020
|
|
Assured Guaranty Total Net Interest Claims Paid as of June 30, 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 June 30, 2020
|
|
As of December 31, 2019
|
|
As of June 30, 2020
|
|
As of December 31, 2019
|
||||||||
|
(in millions)
|
||||||||||||||
Exposure to Puerto Rico
|
$
|
4,458
|
|
|
$
|
4,458
|
|
|
$
|
6,843
|
|
|
$
|
6,956
|
|
|
As of
June 30, 2020 (1) |
|
As of
December 31, 2019 |
||||
|
(in millions)
|
||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
||||
Commonwealth of Puerto Rico - General Obligation Bonds (2)
|
$
|
1,253
|
|
|
$
|
1,253
|
|
PBA (2)
|
140
|
|
|
140
|
|
||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
||||
PRHTA (Transportation revenue) (2)
|
842
|
|
|
811
|
|
||
PRHTA (Highway revenue) (2)
|
515
|
|
|
454
|
|
||
PRCCDA
|
152
|
|
|
152
|
|
||
PRIFA
|
16
|
|
|
16
|
|
||
Other Public Corporations
|
|
|
|
||||
PREPA (2)
|
825
|
|
|
822
|
|
||
PRASA
|
373
|
|
|
373
|
|
||
MFA
|
271
|
|
|
248
|
|
||
U of PR
|
1
|
|
|
1
|
|
||
Total net exposure to Puerto Rico
|
$
|
4,388
|
|
|
$
|
4,270
|
|
(1)
|
In Second Quarter 2020, the Company reassumed $118 million in net par of Puerto Rico exposures from its largest remaining legacy financial guaranty reinsurer.
|
(2)
|
As of the date of this filing, the Oversight Board has certified a filing under Title III of PROMESA for these exposures.
|
|
Scheduled Net Par Amortization
|
|
Scheduled Net Debt Service Amortization
|
||||
|
(in millions)
|
||||||
2020 (July 1 - September 30)
|
$
|
291
|
|
|
$
|
399
|
|
2020 (October 1 - December 31)
|
—
|
|
|
3
|
|
||
Subtotal 2020
|
291
|
|
|
402
|
|
||
2021
|
153
|
|
|
360
|
|
||
2022
|
176
|
|
|
375
|
|
||
2023
|
206
|
|
|
397
|
|
||
2024
|
222
|
|
|
403
|
|
||
2025-2029
|
1,173
|
|
|
1,895
|
|
||
2030-2034
|
1,053
|
|
|
1,527
|
|
||
2035-2039
|
764
|
|
|
942
|
|
||
2040-2044
|
104
|
|
|
179
|
|
||
2045-2047
|
246
|
|
|
272
|
|
||
Total
|
$
|
4,388
|
|
|
$
|
6,752
|
|
|
|
Gross Exposure
|
|
Net Exposure
|
||||||||||||
|
|
As of
June 30, 2020 |
|
As of December 31, 2019
|
|
As of
June 30, 2020 |
|
As of December 31, 2019
|
||||||||
|
|
(in millions)
|
||||||||||||||
Life insurance transactions (1)
|
|
$
|
1,063
|
|
|
$
|
1,046
|
|
|
$
|
915
|
|
|
$
|
898
|
|
Aircraft residual value insurance policies
|
|
391
|
|
|
398
|
|
|
236
|
|
|
243
|
|
||||
Total
|
|
$
|
1,454
|
|
|
$
|
1,444
|
|
|
$
|
1,151
|
|
|
$
|
1,141
|
|
(1)
|
The life insurance transactions net exposure is projected to increase to approximately $1.0 billion by September 30, 2026.
|
4.
|
Expected Loss to be Paid
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Net expected loss to be paid, beginning of period
|
$
|
660
|
|
|
$
|
963
|
|
|
$
|
737
|
|
|
$
|
1,183
|
|
Economic loss development (benefit) due to:
|
|
|
|
|
|
|
|
||||||||
Accretion of discount
|
2
|
|
|
6
|
|
|
6
|
|
|
14
|
|
||||
Changes in discount rates
|
1
|
|
|
(1
|
)
|
|
32
|
|
|
(5
|
)
|
||||
Changes in timing and assumptions
|
31
|
|
|
(42
|
)
|
|
(7
|
)
|
|
(48
|
)
|
||||
Total economic loss development (benefit)
|
34
|
|
|
(37
|
)
|
|
31
|
|
|
(39
|
)
|
||||
Net (paid) recovered losses
|
41
|
|
|
34
|
|
|
(33
|
)
|
|
(184
|
)
|
||||
Net expected loss to be paid, end of period
|
$
|
735
|
|
|
$
|
960
|
|
|
$
|
735
|
|
|
$
|
960
|
|
|
Second Quarter 2020
|
||||||||||||||
|
Net Expected
Loss to be Paid/(Recovered) as of March 31, 2020 |
|
Economic Loss
Development/ (Benefit) |
|
(Paid)/
Recovered
Losses (1)
|
|
Net Expected
Loss to be Paid/(Recovered) as of June 30, 2020 |
||||||||
|
(in millions)
|
||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
||||||||
U.S. public finance
|
$
|
493
|
|
|
$
|
30
|
|
|
$
|
20
|
|
|
$
|
543
|
|
Non-U.S. public finance
|
26
|
|
|
2
|
|
|
1
|
|
|
29
|
|
||||
Public finance
|
519
|
|
|
32
|
|
|
21
|
|
|
572
|
|
||||
Structured finance:
|
|
|
|
|
|
|
|
||||||||
U.S. RMBS
|
104
|
|
|
1
|
|
|
23
|
|
|
128
|
|
||||
Other structured finance
|
37
|
|
|
1
|
|
|
(3
|
)
|
|
35
|
|
||||
Structured finance
|
141
|
|
|
2
|
|
|
20
|
|
|
163
|
|
||||
Total
|
$
|
660
|
|
|
$
|
34
|
|
|
$
|
41
|
|
|
$
|
735
|
|
|
Second Quarter 2019
|
||||||||||||||
|
Net Expected
Loss to be Paid (Recovered) as of March 31, 2019 |
|
Economic Loss
Development / (Benefit) |
|
(Paid)
Recovered
Losses (1)
|
|
Net Expected
Loss to be Paid (Recovered) as of June 30, 2019 |
||||||||
|
(in millions)
|
||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
||||||||
U.S. public finance
|
$
|
666
|
|
|
$
|
92
|
|
|
$
|
(9
|
)
|
|
$
|
749
|
|
Non-U.S. public finance
|
31
|
|
|
(8
|
)
|
|
—
|
|
|
23
|
|
||||
Public finance
|
697
|
|
|
84
|
|
|
(9
|
)
|
|
772
|
|
||||
Structured finance:
|
|
|
|
|
|
|
|
||||||||
U.S. RMBS
|
237
|
|
|
(118
|
)
|
|
43
|
|
|
162
|
|
||||
Other structured finance
|
29
|
|
|
(3
|
)
|
|
—
|
|
|
26
|
|
||||
Structured finance
|
266
|
|
|
(121
|
)
|
|
43
|
|
|
188
|
|
||||
Total
|
$
|
963
|
|
|
$
|
(37
|
)
|
|
$
|
34
|
|
|
$
|
960
|
|
|
Six Months 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 June 30, 2020 |
||||||||
|
(in millions)
|
||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
||||||||
U.S. public finance
|
$
|
531
|
|
|
$
|
86
|
|
|
$
|
(74
|
)
|
|
$
|
543
|
|
Non-U.S. public finance
|
23
|
|
|
5
|
|
|
1
|
|
|
29
|
|
||||
Public finance
|
554
|
|
|
91
|
|
|
(73
|
)
|
|
572
|
|
||||
Structured finance:
|
|
|
|
|
|
|
|
|
|
|
|||||
U.S. RMBS
|
146
|
|
|
(62
|
)
|
|
44
|
|
|
128
|
|
||||
Other structured finance
|
37
|
|
|
2
|
|
|
(4
|
)
|
|
35
|
|
||||
Structured finance
|
183
|
|
|
(60
|
)
|
|
40
|
|
|
163
|
|
||||
Total
|
$
|
737
|
|
|
$
|
31
|
|
|
$
|
(33
|
)
|
|
$
|
735
|
|
|
Six Months 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 June 30, 2019 |
||||||||
|
(in millions)
|
||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
||||||||
U.S. public finance
|
$
|
832
|
|
|
$
|
154
|
|
|
$
|
(237
|
)
|
|
$
|
749
|
|
Non-U.S. public finance
|
32
|
|
|
(9
|
)
|
|
—
|
|
|
23
|
|
||||
Public finance
|
864
|
|
|
145
|
|
|
(237
|
)
|
|
772
|
|
||||
Structured finance:
|
|
|
|
|
|
|
|
||||||||
U.S. RMBS
|
293
|
|
|
(183
|
)
|
|
52
|
|
|
162
|
|
||||
Other structured finance
|
26
|
|
|
(1
|
)
|
|
1
|
|
|
26
|
|
||||
Structured finance
|
319
|
|
|
(184
|
)
|
|
53
|
|
|
188
|
|
||||
Total
|
$
|
1,183
|
|
|
$
|
(39
|
)
|
|
$
|
(184
|
)
|
|
$
|
960
|
|
(1)
|
Net of ceded paid losses, whether or not such amounts have been settled with reinsurers. Ceded paid losses are typically settled 45 days after the end of the reporting period. Such amounts are recorded as reinsurance recoverable on paid losses in other assets. The amounts for Six Months 2019 are net of the COFINA Exchange Senior Bonds and cash that were received pursuant to the COFINA Plan of Adjustment.
|
|
Net Expected Loss to be Paid/(Recovered)
|
|
Net Economic Loss Development/ (Benefit)
|
||||||||||||||||||||
|
As of
|
|
Second Quarter
|
|
Six Months
|
||||||||||||||||||
|
June 30, 2020
|
|
December 31, 2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Insurance
|
$
|
684
|
|
|
$
|
683
|
|
|
$
|
32
|
|
|
$
|
(22
|
)
|
|
$
|
31
|
|
|
$
|
(12
|
)
|
FG VIEs (See Note 11)
|
65
|
|
|
58
|
|
|
1
|
|
|
(14
|
)
|
|
7
|
|
|
(24
|
)
|
||||||
Credit derivatives (See Note 9)
|
(14
|
)
|
|
(4
|
)
|
|
1
|
|
|
(1
|
)
|
|
(7
|
)
|
|
(3
|
)
|
||||||
Total
|
$
|
735
|
|
|
$
|
737
|
|
|
$
|
34
|
|
|
$
|
(37
|
)
|
|
$
|
31
|
|
|
$
|
(39
|
)
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
First lien U.S. RMBS
|
$
|
4
|
|
|
$
|
(19
|
)
|
|
$
|
(55
|
)
|
|
$
|
(50
|
)
|
Second lien U.S. RMBS
|
(3
|
)
|
|
(99
|
)
|
|
(7
|
)
|
|
(133
|
)
|
|
As of June 30, 2020
|
|
As of March 31, 2020
|
|
As of December 31, 2019
|
Delinquent/Modified in the Previous 12 Months
|
|
|
|
|
|
Alt-A and Prime
|
20%
|
|
20%
|
|
20%
|
Option ARM
|
20
|
|
20
|
|
20
|
Subprime
|
20
|
|
20
|
|
20
|
30 – 59 Days Delinquent
|
|
|
|
|
|
Alt-A and Prime
|
35
|
|
30
|
|
30
|
Option ARM
|
35
|
|
30
|
|
35
|
Subprime
|
30
|
|
35
|
|
35
|
60 – 89 Days Delinquent
|
|
|
|
|
|
Alt-A and Prime
|
40
|
|
40
|
|
40
|
Option ARM
|
45
|
|
45
|
|
45
|
Subprime
|
40
|
|
45
|
|
45
|
90+ Days Delinquent
|
|
|
|
|
|
Alt-A and Prime
|
55
|
|
55
|
|
55
|
Option ARM
|
60
|
|
55
|
|
55
|
Subprime
|
45
|
|
50
|
|
50
|
Bankruptcy
|
|
|
|
|
|
Alt-A and Prime
|
45
|
|
45
|
|
45
|
Option ARM
|
50
|
|
50
|
|
50
|
Subprime
|
40
|
|
40
|
|
40
|
Foreclosure
|
|
|
|
|
|
Alt-A and Prime
|
60
|
|
65
|
|
65
|
Option ARM
|
65
|
|
65
|
|
65
|
Subprime
|
55
|
|
55
|
|
60
|
Real Estate Owned
|
|
|
|
|
|
All
|
100
|
|
100
|
|
100
|
|
As of
June 30, 2020 |
|
As of
March 31, 2020 |
|
As of
December 31, 2019 |
|||||||||||||||||
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|||||||||||
Alt-A First Lien
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Plateau CDR
|
1.6
|
%
|
-
|
9.4%
|
|
5.2%
|
|
0.0
|
%
|
-
|
8.3
|
%
|
|
4.0
|
%
|
|
0.3
|
%
|
-
|
8.4%
|
|
4.1%
|
Final CDR
|
0.1
|
%
|
-
|
0.5%
|
|
0.3%
|
|
0.0
|
%
|
-
|
0.4
|
%
|
|
0.2
|
%
|
|
0.0
|
%
|
-
|
0.4%
|
|
0.2%
|
Initial loss severity:
|
|
|
|
|
|
|||||||||||||||||
2005 and prior
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
|
|||||||||||
2006
|
70%
|
|
|
|
70%
|
|
|
|
70%
|
|
|
|||||||||||
2007+
|
70%
|
|
|
|
70%
|
|
|
|
70%
|
|
|
|||||||||||
Option ARM
|
|
|
|
|||||||||||||||||||
Plateau CDR
|
2.4
|
%
|
-
|
10.4%
|
|
5.6%
|
|
1.7
|
%
|
-
|
7.7
|
%
|
|
5.0
|
%
|
|
1.8
|
%
|
-
|
8.4%
|
|
5.4%
|
Final CDR
|
0.1
|
%
|
-
|
0.5%
|
|
0.3%
|
|
0.1
|
%
|
-
|
0.4
|
%
|
|
0.3
|
%
|
|
0.1
|
%
|
-
|
0.4%
|
|
0.3%
|
Initial loss severity:
|
|
|
|
|
|
|||||||||||||||||
2005 and prior
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
|
|||||||||||
2006
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
|
|||||||||||
2007+
|
70%
|
|
|
|
70%
|
|
|
|
70%
|
|
|
|||||||||||
Subprime
|
|
|
|
|
|
|||||||||||||||||
Plateau CDR
|
1.3
|
%
|
-
|
19.1%
|
|
5.5%
|
|
1.9
|
%
|
-
|
17.8
|
%
|
|
5.4
|
%
|
|
1.6
|
%
|
-
|
18.1%
|
|
5.6%
|
Final CDR
|
0.1
|
%
|
-
|
1.0%
|
|
0.3%
|
|
0.1
|
%
|
-
|
0.9
|
%
|
|
0.3
|
%
|
|
0.1
|
%
|
-
|
0.9%
|
|
0.3%
|
Initial loss severity:
|
|
|
|
|
|
|||||||||||||||||
2005 and prior
|
75%
|
|
|
|
75%
|
|
|
|
75%
|
|
|
|||||||||||
2006
|
75%
|
|
|
|
75%
|
|
|
|
75%
|
|
|
|||||||||||
2007+
|
75%
|
|
|
|
75%
|
|
|
|
75%
|
|
|
|
As of
June 30, 2020 |
|
As of
March 31, 2020 |
|
As of
December 31, 2019 |
|||||||||||||||
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|
Range
|
|
Weighted Average
|
|||||||||
Plateau CDR
|
6.3
|
%
|
-
|
29.8%
|
|
13.0%
|
|
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%
|
|
2.5
|
%
|
-
|
3.2%
|
|
2.5%
|
Liquidation rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Delinquent/Modified in the Previous 12 Months
|
20%
|
|
|
|
20%
|
|
|
|
20%
|
|
|
|||||||||
30 – 59 Days Delinquent
|
30
|
|
|
|
30
|
|
|
|
30
|
|
|
|||||||||
60 – 89 Days Delinquent
|
40
|
|
|
|
45
|
|
|
|
45
|
|
|
|||||||||
90+ Days Delinquent
|
60
|
|
|
|
65
|
|
|
|
65
|
|
|
|||||||||
Bankruptcy
|
55
|
|
|
|
55
|
|
|
|
55
|
|
|
|||||||||
Foreclosure
|
55
|
|
|
|
60
|
|
|
|
55
|
|
|
|||||||||
Real Estate Owned
|
100
|
|
|
|
100
|
|
|
|
100
|
|
|
|||||||||
Loss severity (1)
|
98%
|
|
|
|
98%
|
|
|
|
98%
|
|
|
|||||||||
Projected future recoveries on previously charged-off loans
|
20%
|
|
|
|
20%
|
|
|
|
20%
|
|
|
5.
|
Contracts Accounted for as Insurance
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Financial guaranty:
|
|
|
|
|
|
|
|
||||||||
Scheduled net earned premiums
|
$
|
83
|
|
|
$
|
85
|
|
|
$
|
165
|
|
|
$
|
172
|
|
Accelerations from refundings and terminations
|
32
|
|
|
20
|
|
|
47
|
|
|
46
|
|
||||
Accretion of discount on net premiums receivable
|
5
|
|
|
5
|
|
|
10
|
|
|
9
|
|
||||
Financial guaranty insurance net earned premiums
|
120
|
|
|
110
|
|
|
222
|
|
|
227
|
|
||||
Specialty net earned premiums
|
1
|
|
|
2
|
|
|
2
|
|
|
3
|
|
||||
Net earned premiums (1)
|
$
|
121
|
|
|
$
|
112
|
|
|
$
|
224
|
|
|
$
|
230
|
|
(1)
|
Excludes $1 million and $11 million for Second Quarter 2020 and 2019, respectively, and $2 million and $14 million for Six Months 2020 and 2019, respectively, related to consolidated FG VIEs.
|
|
Six Months
|
||||||
|
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
|
220
|
|
|
98
|
|
||
Gross premiums received, net of commissions
|
(156
|
)
|
|
(127
|
)
|
||
Adjustments:
|
|
|
|
||||
Changes in the expected term
|
(9
|
)
|
|
(10
|
)
|
||
Accretion of discount, net of commissions on assumed business
|
9
|
|
|
4
|
|
||
Foreign exchange gain (loss) on remeasurement
|
(55
|
)
|
|
(3
|
)
|
||
Financial guaranty insurance premium receivable (1)
|
1,293
|
|
|
865
|
|
||
Specialty insurance premium receivable
|
1
|
|
|
1
|
|
||
June 30,
|
$
|
1,294
|
|
|
$
|
866
|
|
(1)
|
Excludes $6 million and $8 million as of June 30, 2020 and June 30, 2019, respectively, related to consolidated FG VIEs.
|
|
As of
June 30, 2020 |
||
|
(in millions)
|
||
2020 (July 1 - September 30)
|
$
|
86
|
|
2020 (October 1 - December 31)
|
14
|
|
|
2021
|
92
|
|
|
2022
|
106
|
|
|
2023
|
94
|
|
|
2024
|
86
|
|
|
2025-2029
|
342
|
|
|
2030-2034
|
238
|
|
|
2035-2039
|
151
|
|
|
After 2039
|
340
|
|
|
Total (1)
|
$
|
1,549
|
|
(1)
|
Excludes expected cash collections on consolidated FG VIEs of $8 million.
|
|
As of
June 30, 2020 |
||
|
(in millions)
|
||
2020 (July 1 - September 30)
|
$
|
84
|
|
2020 (October 1 - December 31)
|
82
|
|
|
Subtotal 2020
|
166
|
|
|
2021
|
306
|
|
|
2022
|
281
|
|
|
2023
|
259
|
|
|
2024
|
238
|
|
|
2025-2029
|
930
|
|
|
2030-2034
|
653
|
|
|
2035-2039
|
386
|
|
|
After 2039
|
518
|
|
|
Net deferred premium revenue (1)
|
3,737
|
|
|
Future accretion
|
256
|
|
|
Total future net earned premiums
|
$
|
3,993
|
|
(1)
|
Excludes net earned premiums on consolidated FG VIEs of $45 million.
|
|
As of
June 30, 2020 |
|
As of
December 31, 2019 |
||||
|
(dollars in millions)
|
||||||
Premiums receivable, net of commission payable
|
$
|
1,293
|
|
|
$
|
1,284
|
|
Gross deferred premium revenue
|
1,679
|
|
|
1,637
|
|
||
Weighted-average risk-free rate used to discount premiums
|
1.6
|
%
|
|
1.7
|
%
|
||
Weighted-average period of premiums receivable (in years)
|
12.7
|
|
|
13.3
|
|
|
As of
June 30, 2020 |
|
As of
December 31, 2019 |
||||
|
(in millions)
|
||||||
Public finance:
|
|
|
|
||||
U.S. public finance
|
$
|
341
|
|
|
$
|
328
|
|
Non-U.S. public finance
|
5
|
|
|
5
|
|
||
Public finance
|
346
|
|
|
333
|
|
||
Structured finance:
|
|
|
|
||||
U.S. RMBS (1)
|
(84
|
)
|
|
(78
|
)
|
||
Other structured finance
|
41
|
|
|
40
|
|
||
Structured finance
|
(43
|
)
|
|
(38
|
)
|
||
Total
|
$
|
303
|
|
|
$
|
295
|
|
(1)
|
Excludes net reserves of $37 million and $33 million as of June 30, 2020 and December 31, 2019, respectively, related to consolidated FG VIEs.
|
|
As of
June 30, 2020 |
|
As of
December 31, 2019 |
||||
|
(in millions)
|
||||||
Loss and LAE reserve
|
$
|
1,076
|
|
|
$
|
1,050
|
|
Reinsurance recoverable on unpaid losses (1)
|
(9
|
)
|
|
(38
|
)
|
||
Loss and LAE reserve, net
|
1,067
|
|
|
1,012
|
|
||
Salvage and subrogation recoverable
|
(795
|
)
|
|
(747
|
)
|
||
Salvage and subrogation reinsurance payable (2)
|
31
|
|
|
30
|
|
||
Salvage and subrogation recoverable, net
|
(764
|
)
|
|
(717
|
)
|
||
Net reserves (salvage)
|
$
|
303
|
|
|
$
|
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
June 30, 2020 |
||
|
(in millions)
|
||
Net expected loss to be paid - financial guaranty insurance
|
$
|
682
|
|
Contra-paid, net
|
39
|
|
|
Salvage and subrogation recoverable, net, and other recoverable
|
764
|
|
|
Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance
|
(1,065
|
)
|
|
Net expected loss to be expensed (present value) (1)
|
$
|
420
|
|
|
As of
June 30, 2020 |
||
|
(in millions)
|
||
2020 (July 1 - September 30)
|
$
|
9
|
|
2020 (October 1 - December 31)
|
9
|
|
|
Subtotal 2020
|
18
|
|
|
2021
|
36
|
|
|
2022
|
37
|
|
|
2023
|
34
|
|
|
2024
|
33
|
|
|
2025-2029
|
131
|
|
|
2030-2034
|
89
|
|
|
2035-2039
|
33
|
|
|
After 2039
|
9
|
|
|
Net expected loss to be expensed
|
420
|
|
|
Future accretion
|
56
|
|
|
Total expected future loss and LAE
|
$
|
476
|
|
|
Loss (Benefit)
|
||||||||||||||
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Public finance:
|
|
|
|
|
|
|
|
||||||||
U.S. public finance
|
$
|
33
|
|
|
$
|
94
|
|
|
$
|
92
|
|
|
$
|
164
|
|
Non-U.S. public finance
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
(8
|
)
|
||||
Public finance
|
33
|
|
|
86
|
|
|
92
|
|
|
156
|
|
||||
Structured finance:
|
|
|
|
|
|
|
|
||||||||
U.S. RMBS (1)
|
4
|
|
|
(88
|
)
|
|
(38
|
)
|
|
(115
|
)
|
||||
Other structured finance
|
—
|
|
|
1
|
|
|
3
|
|
|
4
|
|
||||
Structured finance
|
4
|
|
|
(87
|
)
|
|
(35
|
)
|
|
(111
|
)
|
||||
Loss and LAE
|
$
|
37
|
|
|
$
|
(1
|
)
|
|
$
|
57
|
|
|
$
|
45
|
|
(1)
|
Excludes a loss of $2 million and a benefit of $14 million for Second Quarter 2020 and 2019, respectively, and a loss of $8 million and a benefit of $15 million for Six Months 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)
|
112
|
|
|
(1
|
)
|
|
19
|
|
|
—
|
|
|
128
|
|
|
(4
|
)
|
|
259
|
|
|
—
|
|
|
259
|
|
|||||||||
Remaining weighted-average period (in years)
|
7.3
|
|
|
4.7
|
|
|
17.3
|
|
|
—
|
|
|
9.3
|
|
|
6.1
|
|
|
9.2
|
|
|
—
|
|
|
9.2
|
|
|||||||||
Outstanding exposure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Par
|
$
|
2,493
|
|
|
$
|
(11
|
)
|
|
$
|
511
|
|
|
$
|
—
|
|
|
$
|
5,326
|
|
|
$
|
(68
|
)
|
|
$
|
8,251
|
|
|
$
|
—
|
|
|
$
|
8,251
|
|
Interest
|
944
|
|
|
(3
|
)
|
|
436
|
|
|
—
|
|
|
2,291
|
|
|
(18
|
)
|
|
3,650
|
|
|
—
|
|
|
3,650
|
|
|||||||||
Total (2)
|
$
|
3,437
|
|
|
$
|
(14
|
)
|
|
$
|
947
|
|
|
$
|
—
|
|
|
$
|
7,617
|
|
|
$
|
(86
|
)
|
|
$
|
11,901
|
|
|
$
|
—
|
|
|
$
|
11,901
|
|
Expected cash outflows (inflows)
|
$
|
155
|
|
|
$
|
(1
|
)
|
|
$
|
73
|
|
|
$
|
—
|
|
|
$
|
4,057
|
|
|
$
|
(54
|
)
|
|
$
|
4,230
|
|
|
$
|
(262
|
)
|
|
$
|
3,968
|
|
Potential recoveries (3)
|
(604
|
)
|
|
21
|
|
|
(3
|
)
|
|
—
|
|
|
(2,887
|
)
|
|
55
|
|
|
(3,418
|
)
|
|
188
|
|
|
(3,230
|
)
|
|||||||||
Subtotal
|
(449
|
)
|
|
20
|
|
|
70
|
|
|
—
|
|
|
1,170
|
|
|
1
|
|
|
812
|
|
|
(74
|
)
|
|
738
|
|
|||||||||
Discount
|
18
|
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
(72
|
)
|
|
(1
|
)
|
|
(65
|
)
|
|
9
|
|
|
(56
|
)
|
|||||||||
Present value of expected cash flows
|
$
|
(431
|
)
|
|
$
|
20
|
|
|
$
|
60
|
|
|
$
|
—
|
|
|
$
|
1,098
|
|
|
$
|
—
|
|
|
$
|
747
|
|
|
$
|
(65
|
)
|
|
$
|
682
|
|
Deferred premium revenue
|
$
|
134
|
|
|
$
|
—
|
|
|
$
|
23
|
|
|
$
|
—
|
|
|
$
|
453
|
|
|
$
|
(3
|
)
|
|
$
|
607
|
|
|
$
|
(45
|
)
|
|
$
|
562
|
|
Reserves (salvage)
|
$
|
(465
|
)
|
|
$
|
20
|
|
|
$
|
41
|
|
|
$
|
—
|
|
|
$
|
740
|
|
|
$
|
2
|
|
|
$
|
338
|
|
|
$
|
(37
|
)
|
|
$
|
301
|
|
|
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.
|
6.
|
Reinsurance
|
•
|
if the Company fails to meet certain financial and regulatory criteria;
|
•
|
if the Company fails to maintain a specified minimum financial strength rating; or
|
•
|
upon certain changes of control of the Company.
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
|
||||||||||||||
Premiums Written:
|
|
|
|
|
|
|
|
||||||||
Direct
|
$
|
148
|
|
|
$
|
50
|
|
|
$
|
212
|
|
|
$
|
89
|
|
Assumed
|
1
|
|
|
1
|
|
|
1
|
|
|
1
|
|
||||
Ceded (1)
|
2
|
|
|
(2
|
)
|
|
2
|
|
|
13
|
|
||||
Net
|
$
|
151
|
|
|
$
|
49
|
|
|
$
|
215
|
|
|
$
|
103
|
|
Premiums Earned:
|
|
|
|
|
|
|
|
||||||||
Direct
|
$
|
113
|
|
|
$
|
99
|
|
|
$
|
207
|
|
|
$
|
204
|
|
Assumed
|
10
|
|
|
15
|
|
|
20
|
|
|
30
|
|
||||
Ceded
|
(2
|
)
|
|
(2
|
)
|
|
(3
|
)
|
|
(4
|
)
|
||||
Net
|
$
|
121
|
|
|
$
|
112
|
|
|
$
|
224
|
|
|
$
|
230
|
|
Loss and LAE:
|
|
|
|
|
|
|
|
||||||||
Direct
|
$
|
38
|
|
|
$
|
—
|
|
|
$
|
46
|
|
|
$
|
54
|
|
Assumed
|
(1
|
)
|
|
1
|
|
|
11
|
|
|
2
|
|
||||
Ceded
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
(11
|
)
|
||||
Net
|
$
|
37
|
|
|
$
|
(1
|
)
|
|
$
|
57
|
|
|
$
|
45
|
|
(1)
|
Positive ceded premiums written were due to commutations and changes in expected debt service schedules.
|
|
As of
June 30, 2020 |
|
As of
December 31, 2019 |
||||
|
(in millions)
|
||||||
Ceded premium payable, net of commissions
|
$
|
17
|
|
|
$
|
20
|
|
Ceded expected loss to be recovered (paid)
|
(20
|
)
|
|
11
|
|
||
Financial guaranty ceded par outstanding (2)
|
886
|
|
|
1,349
|
|
||
Specialty ceded exposure (see Note 3)
|
303
|
|
|
303
|
|
(1)
|
The total collateral posted by all non-affiliated reinsurers required to post, or that had agreed to post, collateral as of June 30, 2020 and December 31, 2019 was approximately $18 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 BIG rated reinsurers, $79 million and $224 million is rated BIG as of June 30, 2020 and December 31, 2019, respectively.
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Increase in net unearned premium reserve
|
$
|
5
|
|
|
$
|
15
|
|
|
$
|
5
|
|
|
$
|
15
|
|
Increase in net par outstanding
|
336
|
|
|
1,069
|
|
|
336
|
|
|
1,069
|
|
||||
Commutation gains (losses)
|
38
|
|
|
1
|
|
|
38
|
|
|
1
|
|
7.
|
Fair Value Measurement
|
•
|
Actual collateral specific credit spreads (if up-to-date and reliable market-based spreads are available).
|
•
|
Transactions priced or closed during a specific quarter within a specific asset class and specific rating.
|
•
|
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.
|
•
|
AHP Capital Solutions, LP (AHP),
|
•
|
AIM Asset Backed Income Fund (US) L.P. (ABIF),
|
•
|
BlueMountain CLO Warehouse Fund (US) L.P. (CLO Warehouse Fund), and
|
•
|
AIM Municipal Bond Fund L.P. (AMBF).
|
•
|
BlueMountain CLO XXVI Ltd. (CLO XXVI),
|
•
|
BlueMountain CLO XXIX Ltd. (CLO XXIX), and
|
•
|
BlueMountain CLO Warehouse Ltd. (CLOWH).
|
|
|
|
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
|
$
|
4,113
|
|
|
$
|
—
|
|
|
$
|
4,016
|
|
|
$
|
97
|
|
U.S. government and agencies
|
174
|
|
|
—
|
|
|
174
|
|
|
—
|
|
||||
Corporate securities
|
2,389
|
|
|
—
|
|
|
2,360
|
|
|
29
|
|
||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|||||||
RMBS
|
635
|
|
|
—
|
|
|
381
|
|
|
254
|
|
||||
Commercial mortgage-backed securities (CMBS)
|
411
|
|
|
—
|
|
|
411
|
|
|
—
|
|
||||
Asset-backed securities
|
768
|
|
|
—
|
|
|
54
|
|
|
714
|
|
||||
Non-U.S. government securities
|
140
|
|
|
—
|
|
|
140
|
|
|
—
|
|
||||
Total fixed-maturity securities
|
8,630
|
|
|
—
|
|
|
7,536
|
|
|
1,094
|
|
||||
Short-term investments
|
821
|
|
|
754
|
|
|
67
|
|
|
—
|
|
||||
Other invested assets (1)
|
15
|
|
|
9
|
|
|
—
|
|
|
6
|
|
||||
FG VIEs’ assets, at fair value
|
318
|
|
|
—
|
|
|
—
|
|
|
318
|
|
||||
Assets of consolidated investment vehicles:
|
|
|
|
|
|
|
|
||||||||
Fund investments
|
|
|
|
|
|
|
|
||||||||
Debt securities
|
63
|
|
|
—
|
|
|
3
|
|
|
60
|
|
||||
Equity securities and warrants
|
54
|
|
|
—
|
|
|
1
|
|
|
53
|
|
||||
Structured products
|
43
|
|
|
—
|
|
|
37
|
|
|
6
|
|
||||
Obligations of state and political subdivisions
|
39
|
|
|
—
|
|
|
39
|
|
|
—
|
|
||||
CLO investments
|
|
|
|
|
|
|
|
||||||||
Debt securities
|
850
|
|
|
—
|
|
|
850
|
|
|
—
|
|
||||
Short-term investments
|
403
|
|
|
403
|
|
|
—
|
|
|
—
|
|
||||
Total assets of consolidated investment vehicles
|
1,452
|
|
|
403
|
|
|
930
|
|
|
119
|
|
||||
Other assets
|
160
|
|
|
41
|
|
|
42
|
|
|
77
|
|
||||
Total assets carried at fair value
|
$
|
11,396
|
|
|
$
|
1,207
|
|
|
$
|
8,575
|
|
|
$
|
1,614
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|||||||
Credit derivative liabilities
|
$
|
163
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
163
|
|
FG VIEs’ liabilities with recourse, at fair value
|
332
|
|
|
—
|
|
|
—
|
|
|
332
|
|
||||
FG VIEs’ liabilities without recourse, at fair value
|
20
|
|
|
—
|
|
|
—
|
|
|
20
|
|
||||
Liabilities of consolidated investment vehicles:
|
|
|
|
|
|
|
|
||||||||
CLO obligations of CFE
|
806
|
|
|
—
|
|
|
—
|
|
|
806
|
|
||||
Securities sold short
|
30
|
|
|
—
|
|
|
30
|
|
|
—
|
|
||||
Total liabilities of consolidated investment vehicles
|
836
|
|
|
—
|
|
|
30
|
|
|
806
|
|
||||
Total liabilities carried at fair value
|
$
|
1,351
|
|
|
$
|
—
|
|
|
$
|
30
|
|
|
$
|
1,321
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
||||||||
Fund investments
|
|
|
|
|
|
|
|
||||||||
Debt securities
|
47
|
|
|
—
|
|
|
—
|
|
|
47
|
|
||||
Equity securities and warrants
|
17
|
|
|
—
|
|
|
—
|
|
|
17
|
|
||||
CLO investments
|
|
|
|
|
|
|
|
|
|||||||
Debt securities
|
494
|
|
|
—
|
|
|
494
|
|
|
—
|
|
||||
Total 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
|
|
|
|
|
|
|
|
||||||||
CLO obligations of CFE
|
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
|
|
|
|
Assets of Consolidated Investment Vehicles
|
|
|
|
|||||||||||||||||||||||||||||||||||||
|
Obligations
of State and Political Subdivisions |
|
Corporate Securities
|
|
RMBS
|
|
Asset-
Backed Securities |
|
FG VIEs’
Assets at Fair Value |
|
Debt Securities
|
|
Equity Securities and Warrants
|
|
Structured Products
|
|
Other
(7)
|
|
|||||||||||||||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||||||||||||||||||||
Fair value as of
March 31, 2020 |
$
|
86
|
|
|
$
|
26
|
|
|
$
|
253
|
|
|
$
|
596
|
|
|
$
|
368
|
|
|
$
|
52
|
|
|
$
|
32
|
|
|
$
|
12
|
|
|
$
|
103
|
|
|
|||||||||
Total pretax realized and unrealized gains/(losses) recorded in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Net income (loss)
|
1
|
|
(1
|
)
|
1
|
|
(1
|
)
|
2
|
|
(1
|
)
|
7
|
|
(1
|
)
|
(50
|
)
|
(2
|
)
|
3
|
|
(4
|
)
|
7
|
|
(4
|
)
|
3
|
|
(4
|
)
|
(25
|
)
|
(3
|
)
|
|||||||||
Other comprehensive income (loss)
|
10
|
|
|
2
|
|
|
12
|
|
|
17
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
||||||||||||||||
Purchases
|
—
|
|
|
—
|
|
|
—
|
|
|
118
|
|
|
|
—
|
|
|
5
|
|
|
17
|
|
|
5
|
|
|
—
|
|
|
|
||||||||||||||||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
(21
|
)
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
(14
|
)
|
|
—
|
|
|
||||||||||||||||||
Settlements
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
(3
|
)
|
|
(18
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|||||||||||||||||
VIE consolidations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||||||||||||||||
Fair value as of
June 30, 2020 |
$
|
97
|
|
|
$
|
29
|
|
|
$
|
254
|
|
|
$
|
714
|
|
|
$
|
318
|
|
|
$
|
60
|
|
|
$
|
53
|
|
|
$
|
6
|
|
|
$
|
78
|
|
|
|||||||||
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of June 30, 2020
|
|
|
|
|
|
|
|
|
$
|
25
|
|
(2
|
)
|
$
|
3
|
|
(4
|
)
|
$
|
7
|
|
(4
|
)
|
$
|
1
|
|
(4
|
)
|
$
|
(25
|
)
|
(3
|
)
|
||||||||||||
Change in unrealized
gains/(losses) included in OCI related to financial instruments held as of June 30, 2020
|
$
|
10
|
|
|
$
|
2
|
|
|
$
|
11
|
|
|
$
|
16
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
|
|
|
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 March 31, 2020
|
$
|
(262
|
)
|
|
$
|
(312
|
)
|
|
$
|
(82
|
)
|
|
$
|
(426
|
)
|
|
||||
Total pretax realized and unrealized gains/(losses) recorded in:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net income (loss)
|
100
|
|
(6
|
)
|
(12
|
)
|
(2
|
)
|
63
|
|
(2
|
)
|
(18
|
)
|
(4
|
)
|
||||
Other comprehensive income (loss)
|
—
|
|
|
|
(7
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|||||
Issuances
|
—
|
|
|
—
|
|
|
—
|
|
|
(362
|
)
|
|
||||||||
Settlements
|
1
|
|
|
|
15
|
|
|
|
2
|
|
|
|
—
|
|
|
|||||
VIE consolidations
|
—
|
|
|
(16
|
)
|
|
(3
|
)
|
|
—
|
|
|
||||||||
Fair value as of June 30, 2020
|
$
|
(161
|
)
|
|
$
|
(332
|
)
|
|
$
|
(20
|
)
|
|
$
|
(806
|
)
|
|
||||
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of June 30, 2020
|
$
|
100
|
|
(6
|
)
|
$
|
(11
|
)
|
(2
|
)
|
$
|
(11
|
)
|
(2
|
)
|
$
|
(18
|
)
|
(4
|
)
|
Change in unrealized gains/(losses) included in OCI related to financial instruments held as of June 30, 2020
|
|
|
$
|
(7
|
)
|
|
|
|
|
|
|
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
March 31, 2019 |
$
|
104
|
|
|
$
|
48
|
|
|
$
|
318
|
|
|
$
|
958
|
|
|
$
|
560
|
|
|
$
|
68
|
|
|
$
|
(228
|
)
|
|
$
|
(505
|
)
|
|
$
|
(104
|
)
|
|
|||||||||
Total pretax realized and unrealized gains/(losses) recorded in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Net income (loss)
|
1
|
|
(1
|
)
|
1
|
|
(1
|
)
|
5
|
|
(1
|
)
|
30
|
|
(1
|
)
|
47
|
|
(2
|
)
|
19
|
|
(3
|
)
|
(8
|
)
|
(6
|
)
|
(20
|
)
|
(2
|
)
|
(3
|
)
|
(2
|
)
|
|||||||||
Other comprehensive income (loss)
|
—
|
|
|
(1
|
)
|
|
15
|
|
|
(85
|
)
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
|
|
—
|
|
|
|
||||||||||||||
Purchases
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
||||||||||||||
Settlements
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
(238
|
)
|
|
(75
|
)
|
|
—
|
|
|
|
20
|
|
|
|
69
|
|
|
|
1
|
|
|
|
||||||||||||||
FG VIE deconsolidation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
5
|
|
|
1
|
|
|
||||||||||||||||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||||||||||||||||
Fair value as of
June 30, 2019 |
$
|
105
|
|
|
$
|
48
|
|
|
$
|
325
|
|
|
$
|
674
|
|
|
$
|
526
|
|
|
$
|
87
|
|
|
$
|
(216
|
)
|
|
$
|
(446
|
)
|
|
$
|
(105
|
)
|
|
|||||||||
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of June 30, 2019
|
|
|
|
|
|
|
|
|
$
|
52
|
|
(2
|
)
|
$
|
19
|
|
(3
|
)
|
$
|
(7
|
)
|
(6
|
)
|
$
|
(20
|
)
|
(2
|
)
|
$
|
(12
|
)
|
(2
|
)
|
||||||||||||
Change in unrealized gains/(losses) included in OCI related to financial instruments held at June 30, 2019
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
15
|
|
|
$
|
8
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
5
|
|
|
|
|
|
Fixed-Maturity Securities
|
|
|
|
Assets of Consolidated Investment Vehicles
|
|
|
|
|||||||||||||||||||||||||||||||||||||
|
Obligations
of State and Political Subdivisions |
|
Corporate Securities
|
|
RMBS
|
|
Asset-
Backed Securities |
|
FG VIEs’
Assets at Fair Value |
|
Debt Securities
|
|
Equity Securities and Warrants
|
|
Structured Products
|
|
Other
(7)
|
|
|||||||||||||||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||||||||||||||||||||
Fair value as of
December 31, 2019 |
$
|
107
|
|
|
$
|
41
|
|
|
$
|
308
|
|
|
$
|
658
|
|
|
$
|
442
|
|
|
$
|
47
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
55
|
|
|
|||||||||
Total pretax realized and unrealized gains/(losses) recorded in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Net income (loss)
|
2
|
|
(1
|
)
|
(6
|
)
|
(1
|
)
|
5
|
|
(1
|
)
|
14
|
|
(1
|
)
|
(87
|
)
|
(2
|
)
|
8
|
|
(4
|
)
|
3
|
|
(4
|
)
|
3
|
|
(4
|
)
|
23
|
|
(3
|
)
|
|||||||||
Other comprehensive income (loss)
|
(11
|
)
|
|
(6
|
)
|
|
(35
|
)
|
|
(42
|
)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
||||||||||||||||
Purchases
|
—
|
|
|
—
|
|
|
—
|
|
|
118
|
|
|
|
—
|
|
|
5
|
|
|
50
|
|
|
17
|
|
|
—
|
|
|
|
||||||||||||||||
Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
(23
|
)
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
|
(14
|
)
|
|
—
|
|
|
||||||||||||||||||
Settlements
|
(1
|
)
|
|
—
|
|
|
(24
|
)
|
|
(10
|
)
|
|
(55
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|||||||||||||||||
VIE consolidations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||||||||||||||||
Transfers out of Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||||||||||||||||
Fair value as of
June 30, 2020 |
$
|
97
|
|
|
$
|
29
|
|
|
$
|
254
|
|
|
$
|
714
|
|
|
$
|
318
|
|
|
$
|
60
|
|
|
$
|
53
|
|
|
$
|
6
|
|
|
$
|
78
|
|
|
|||||||||
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of June 30, 2020
|
|
|
|
|
|
|
|
|
$
|
(11
|
)
|
(2
|
)
|
$
|
8
|
|
(4
|
)
|
$
|
3
|
|
(4
|
)
|
$
|
1
|
|
(4
|
)
|
$
|
23
|
|
(3
|
)
|
||||||||||||
Change in unrealized
gains/(losses) included in OCI related to financial instruments held as of June 30, 2020
|
$
|
(11
|
)
|
|
$
|
(6
|
)
|
|
$
|
(34
|
)
|
|
$
|
(41
|
)
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
|
|
|
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)
|
23
|
|
(6
|
)
|
4
|
|
(2
|
)
|
74
|
|
(2
|
)
|
37
|
|
(4
|
)
|
||||
Other comprehensive income (loss)
|
—
|
|
|
|
6
|
|
|
|
—
|
|
|
|
—
|
|
|
|||||
Issuances
|
—
|
|
|
—
|
|
|
—
|
|
|
(362
|
)
|
|
||||||||
Settlements
|
1
|
|
|
|
41
|
|
|
|
11
|
|
|
|
—
|
|
|
|||||
VIE consolidations
|
—
|
|
|
(16
|
)
|
|
(3
|
)
|
|
—
|
|
|
||||||||
Fair value as of June 30, 2020
|
$
|
(161
|
)
|
|
$
|
(332
|
)
|
|
$
|
(20
|
)
|
|
$
|
(806
|
)
|
|
||||
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of June 30, 2020
|
$
|
27
|
|
(6
|
)
|
$
|
4
|
|
(2
|
)
|
$
|
(1
|
)
|
(2
|
)
|
$
|
37
|
|
(4
|
)
|
Change in unrealized gains/(losses) included in OCI related to financial instruments held as of June 30, 2020
|
|
|
$
|
6
|
|
|
|
|
|
|
|
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)
|
2
|
|
(1
|
)
|
(10
|
)
|
(1
|
)
|
11
|
|
(1
|
)
|
44
|
|
(1
|
)
|
64
|
|
(2
|
)
|
10
|
|
(3
|
)
|
(30
|
)
|
(6
|
)
|
(31
|
)
|
(2
|
)
|
(7
|
)
|
(2
|
)
|
|||||||||
Other comprehensive income (loss)
|
5
|
|
|
2
|
|
|
20
|
|
|
(94
|
)
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
5
|
|
|
|
—
|
|
|
|
||||||||||||||
Purchases
|
—
|
|
|
—
|
|
|
11
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
||||||||||||||
Settlements
|
(1
|
)
|
|
—
|
|
|
(26
|
)
|
|
(242
|
)
|
|
(101
|
)
|
|
—
|
|
|
|
21
|
|
|
|
92
|
|
|
|
3
|
|
|
|
||||||||||||||
FG VIE deconsolidation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
5
|
|
|
1
|
|
|
||||||||||||||||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
||||||||||||||||||
Fair value as of
June 30, 2019 |
$
|
105
|
|
|
$
|
48
|
|
|
$
|
325
|
|
|
$
|
674
|
|
|
$
|
526
|
|
|
$
|
87
|
|
|
$
|
(216
|
)
|
|
$
|
(446
|
)
|
|
$
|
(105
|
)
|
|
|||||||||
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of June 30, 2019
|
|
|
|
|
|
|
|
|
$
|
72
|
|
(2
|
)
|
$
|
10
|
|
(3
|
)
|
$
|
(28
|
)
|
(6
|
)
|
$
|
(31
|
)
|
(2
|
)
|
$
|
(15
|
)
|
(2
|
)
|
||||||||||||
Change in unrealized gains/(losses) included in OCI related to financial instruments held at June 30. 2019
|
$
|
5
|
|
|
$
|
2
|
|
|
$
|
20
|
|
|
$
|
11
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
5
|
|
|
|
|
(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
June 30, 2020 (in millions) |
|
Significant Unobservable Inputs
|
|
Range
|
|
Weighted Average (5)
|
|||||
Assets (2):
|
|
|
|
|
|
|
|
|
|
||||
Fixed-maturity securities (1):
|
|
|
|
|
|
|
|
|
|
|
|
||
Obligations of state and political subdivisions
|
|
$
|
97
|
|
|
Yield
|
|
5.3
|
%
|
-
|
35.3%
|
|
10.9%
|
|
|
|
|
|
|
|
|
|
|
|
|||
Corporate securities
|
|
29
|
|
|
Yield
|
|
45.3%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
RMBS
|
|
254
|
|
|
CPR
|
|
2.7
|
%
|
-
|
15.0%
|
|
6.5%
|
|
|
|
CDR
|
|
1.5
|
%
|
-
|
7.5%
|
|
5.4%
|
||||
|
|
Loss severity
|
|
45.0
|
%
|
-
|
125.0%
|
|
83.4%
|
||||
|
|
Yield
|
|
4.5
|
%
|
-
|
7.2%
|
|
5.5%
|
||||
Asset-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|||
Life insurance transactions
|
|
335
|
|
|
Yield
|
|
5.5%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
CLOs /Trust preferred securities (TruPS)
|
|
342
|
|
|
Yield
|
|
1.5
|
%
|
-
|
4.2%
|
|
2.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Others
|
|
37
|
|
|
Yield
|
|
13.3%
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
FG VIEs’ assets, at fair value (1)
|
|
318
|
|
|
CPR
|
|
0.4
|
%
|
-
|
18.8%
|
|
8.6%
|
|
|
|
CDR
|
|
1.2
|
%
|
-
|
26.5%
|
|
5.3%
|
||||
|
|
Loss severity
|
|
45.0
|
%
|
-
|
100.0%
|
|
79.7%
|
||||
|
|
Yield
|
|
2.9
|
%
|
-
|
8.7%
|
|
5.9%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
Assets of consolidated investment vehicles (3):
|
|
|
|
|
|
|
|
|
|
|
|||
Debt securities
|
|
60
|
|
|
Discount rate
|
|
14.9
|
%
|
-
|
23.4%
|
|
18.5%
|
|
|
|
|
|
Market multiple - enterprise/revenue value
|
|
0.66x
|
|
|
|||||
|
|
|
|
Market multiple - enterprise/EBITDA (4)
|
|
10.0x
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||
Equity securities and warrants
|
|
53
|
|
|
Discount rate
|
|
14.9
|
%
|
-
|
26.9%
|
|
25.6%
|
|
|
|
|
Market multiple - enterprise/revenue value
|
|
0.66x
|
|
|
||||||
|
|
|
Market multiple - enterprise/EBITDA
|
|
8.1x
|
|
-
|
10.0x
|
|
|
|||
|
|
|
|
Yield
|
|
10.1%
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||
Structured products
|
|
6
|
|
|
Yield
|
|
4.8
|
%
|
-
|
11.6%
|
|
7.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Other assets (1)
|
|
75
|
|
|
Implied Yield
|
|
4.0
|
%
|
-
|
4.8%
|
|
4.4%
|
|
|
|
Term (years)
|
|
10 years
|
|
|
Financial Instrument Description (1)
|
|
Fair Value at
June 30, 2020 (in millions) |
|
Significant Unobservable Inputs
|
|
Range
|
|
Weighted Average (5)
|
|||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
Credit derivative liabilities, net
|
|
$
|
(161
|
)
|
|
Year 1 loss estimates
|
|
0.0
|
%
|
-
|
83.0%
|
|
2.1%
|
|
|
Hedge cost (in basis points (bps))
|
|
21.0
|
-
|
119.0
|
|
44.0
|
|||||
|
|
Bank profit (in bps)
|
|
44.0
|
-
|
289.0
|
|
107.0
|
|||||
|
|
Internal floor (in bps)
|
|
9.0
|
|
-
|
30.0
|
|
9.0
|
||||
|
|
Internal credit rating
|
|
AAA
|
|
-
|
CCC
|
|
AA-
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
FG VIEs’ liabilities, at fair value
|
|
(352
|
)
|
|
CPR
|
|
0.4
|
%
|
-
|
18.8%
|
|
8.6%
|
|
|
|
CDR
|
|
1.2
|
%
|
-
|
26.5%
|
|
5.3%
|
||||
|
|
Loss severity
|
|
45.0
|
%
|
-
|
100.0%
|
|
79.7%
|
||||
|
|
Yield
|
|
1.9
|
%
|
-
|
8.3%
|
|
4.6%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|||
Liabilities of consolidated investment vehicles:
|
|
|
|
|
|
|
|
|
|
|
|||
CLO obligations of CFE (6)
|
|
(806
|
)
|
|
Yield
|
|
2.6
|
%
|
-
|
13.4%
|
|
3.0%
|
(1)
|
Discounted cash flow is used as the primary valuation technique.
|
(2)
|
Excludes several investments recorded in other invested assets with a fair value of $6 million.
|
(3)
|
The primary inputs to the valuation are data on comparable companies, including market multiples, yields/discount rates, financial projections, and recent market transaction prices where available.
|
(4)
|
Earnings before interest, taxes, depreciation, and amortization.
|
(5)
|
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.
|
(6)
|
See CFE fair value methodology described above for consolidated CLOs.
|
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):
|
|
|
|
|
|
|
|
|
|
|
|||
Debt securities
|
|
47
|
|
|
Discount rate
|
|
16.0
|
%
|
-
|
28.0%
|
|
21.5%
|
|
|
|
|
|
Market multiple - enterprise/revenue value
|
|
0.5x
|
|
|
|||||
|
|
|
|
Market multiple - enterprise/EBITDA
|
|
9.5x
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||
Equity securities and warrants
|
|
17
|
|
|
Discount rate
|
|
16.0
|
%
|
-
|
28.0%
|
|
20.8%
|
|
|
|
Market multiple - enterprise/revenue value
|
|
0.5x
|
|
|
|||||||
|
|
Market multiple - enterprise/EBITDA
|
|
9.5x
|
|
|
|||||||
|
|
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 of CFE
|
|
(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 a 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
June 30, 2020 |
|
As of
December 31, 2019 |
||||||||||||
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
||||||||
|
(in millions)
|
||||||||||||||
Assets (liabilities):
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other invested assets
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
2
|
|
Other assets (1)
|
84
|
|
|
84
|
|
|
97
|
|
|
97
|
|
||||
Financial guaranty insurance contracts (2)
|
(2,724
|
)
|
|
(4,568
|
)
|
|
(2,714
|
)
|
|
(4,013
|
)
|
||||
Long-term debt
|
(1,222
|
)
|
|
(1,517
|
)
|
|
(1,235
|
)
|
|
(1,573
|
)
|
||||
Other liabilities (1)
|
(36
|
)
|
|
(36
|
)
|
|
(14
|
)
|
|
(14
|
)
|
||||
Assets (liabilities) of consolidated investment vehicles:
|
|
|
|
|
|
|
|
||||||||
Due from brokers and counterparties
|
41
|
|
|
41
|
|
|
—
|
|
|
—
|
|
||||
Due to brokers and counterparties
|
(400
|
)
|
|
(400
|
)
|
|
—
|
|
|
—
|
|
(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
June 30, 2020 |
|
As of
December 31, 2019 |
||||
|
(in millions)
|
||||||
Fixed-maturity securities (1):
|
|
|
|
||||
Externally managed
|
$
|
7,503
|
|
|
$
|
7,978
|
|
Internally managed:
|
|
|
|
||||
Assured Investment Management
|
354
|
|
|
—
|
|
||
Loss mitigation and other securities
|
773
|
|
|
876
|
|
||
Short-term investments
|
821
|
|
|
1,268
|
|
||
Other invested assets
|
|
|
|
||||
Equity method investments
|
107
|
|
|
111
|
|
||
Other
|
15
|
|
|
7
|
|
||
Total
|
$
|
9,573
|
|
|
$
|
10,240
|
|
(1)
|
7.7% and 8.6% of fixed-maturity securities are rated BIG as of June 30, 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 39% of mortgage backed securities as of June 30, 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
|
$
|
35
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
35
|
|
|
$
|
(1
|
)
|
Corporate securities
|
341
|
|
|
(8
|
)
|
|
61
|
|
|
(12
|
)
|
|
402
|
|
|
(20
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
RMBS
|
30
|
|
|
(2
|
)
|
|
1
|
|
|
—
|
|
|
31
|
|
|
(2
|
)
|
||||||
CMBS
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||||
Asset-backed securities
|
468
|
|
|
(10
|
)
|
|
118
|
|
|
(3
|
)
|
|
586
|
|
|
(13
|
)
|
||||||
Non-U.S. government securities
|
74
|
|
|
(1
|
)
|
|
40
|
|
|
(8
|
)
|
|
114
|
|
|
(9
|
)
|
||||||
Total
|
$
|
948
|
|
|
$
|
(22
|
)
|
|
$
|
221
|
|
|
$
|
(23
|
)
|
|
$
|
1,169
|
|
|
$
|
(45
|
)
|
Number of securities (1)
|
|
|
|
196
|
|
|
|
|
|
65
|
|
|
|
|
|
244
|
|
|
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
|
$
|
338
|
|
|
$
|
335
|
|
Due after one year through five years
|
1,577
|
|
|
1,631
|
|
||
Due after five years through 10 years
|
1,994
|
|
|
2,078
|
|
||
Due after 10 years
|
3,295
|
|
|
3,540
|
|
||
Mortgage-backed securities:
|
|
|
|
|
|
||
RMBS
|
649
|
|
|
635
|
|
||
CMBS
|
384
|
|
|
411
|
|
||
Total
|
$
|
8,237
|
|
|
$
|
8,630
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Interest income:
|
|
|
|
|
|
|
|
||||||||
Externally managed
|
$
|
62
|
|
|
$
|
69
|
|
|
$
|
124
|
|
|
$
|
141
|
|
Internally managed
|
18
|
|
|
43
|
|
|
38
|
|
|
71
|
|
||||
Interest income
|
80
|
|
|
112
|
|
|
162
|
|
|
212
|
|
||||
Investment expenses
|
(2
|
)
|
|
(2
|
)
|
|
(4
|
)
|
|
(4
|
)
|
||||
Net investment income
|
$
|
78
|
|
|
$
|
110
|
|
|
$
|
158
|
|
|
$
|
208
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Gross realized gains on available-for-sale securities
|
$
|
16
|
|
|
$
|
13
|
|
|
$
|
23
|
|
|
$
|
19
|
|
Gross realized losses on available-for-sale securities
|
(8
|
)
|
|
(1
|
)
|
|
(9
|
)
|
|
(3
|
)
|
||||
Credit impairments (1)
|
(4
|
)
|
|
(4
|
)
|
|
(15
|
)
|
|
(20
|
)
|
||||
Net realized investment gains (losses) (2)
|
$
|
4
|
|
|
$
|
8
|
|
|
$
|
(1
|
)
|
|
$
|
(4
|
)
|
(1)
|
Credit impairment in Second Quarter 2020 and Six Months 2020 was 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 losses in Six Months 2020. Credit impairment in Second Quarter 2019 was primarily attributable to foreign exchange losses while Six Months 2019 was primarily attributable to loss mitigation securities and foreign exchange losses.
|
(2)
|
Includes foreign currency losses of $2 million for Second Quarter 2020, $3 million for Second Quarter 2019 and $5 million for Six Months 2019, and foreign currency gains of $1 million for Six Months 2020.
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Balance, beginning of period
|
$
|
73
|
|
|
$
|
197
|
|
|
$
|
—
|
|
|
$
|
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
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Reductions for securities sold and other settlements
|
(1
|
)
|
|
(6
|
)
|
|
(1
|
)
|
|
(6
|
)
|
||||
Additions (reductions) for credit losses on securities for which credit impairments were previously recognized
|
3
|
|
|
—
|
|
|
13
|
|
|
12
|
|
||||
Balance, end of period
|
$
|
75
|
|
|
$
|
191
|
|
|
$
|
75
|
|
|
$
|
191
|
|
9.
|
Contracts Accounted for as Credit Derivatives
|
|
|
As of June 30, 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
|
|
$
|
2,195
|
|
|
$
|
(66
|
)
|
|
$
|
1,942
|
|
|
$
|
(83
|
)
|
Non-U.S. public finance
|
|
2,327
|
|
|
(29
|
)
|
|
2,676
|
|
|
(39
|
)
|
||||
U.S. structured finance
|
|
1,119
|
|
|
(61
|
)
|
|
1,206
|
|
|
(58
|
)
|
||||
Non-U.S. structured finance
|
|
124
|
|
|
(5
|
)
|
|
132
|
|
|
(5
|
)
|
||||
Total
|
|
$
|
5,765
|
|
|
$
|
(161
|
)
|
|
$
|
5,956
|
|
|
$
|
(185
|
)
|
|
|
As of June 30, 2020
|
|
As of December 31, 2019
|
||||||||||
Ratings
|
|
Net Par
Outstanding
|
|
% of Total
|
|
Net Par
Outstanding
|
|
% of Total
|
||||||
|
|
(dollars in millions)
|
||||||||||||
AAA
|
|
$
|
1,594
|
|
|
27.6
|
%
|
|
$
|
1,730
|
|
|
29.0
|
%
|
AA
|
|
1,728
|
|
|
30.0
|
|
|
1,695
|
|
|
28.5
|
|
||
A
|
|
848
|
|
|
14.7
|
|
|
1,110
|
|
|
18.6
|
|
||
BBB
|
|
1,470
|
|
|
25.5
|
|
|
1,292
|
|
|
21.7
|
|
||
BIG (1)
|
|
125
|
|
|
2.2
|
|
|
129
|
|
|
2.2
|
|
||
Credit derivative net par outstanding
|
|
$
|
5,765
|
|
|
100.0
|
%
|
|
$
|
5,956
|
|
|
100.0
|
%
|
(1)
|
All BIG credit derivatives are U.S. RMBS transactions.
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Realized gains on credit derivatives
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
3
|
|
|
$
|
4
|
|
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements
|
(1
|
)
|
|
(21
|
)
|
|
(3
|
)
|
|
(25
|
)
|
||||
Realized gains (losses) and other settlements
|
—
|
|
|
(20
|
)
|
|
—
|
|
|
(21
|
)
|
||||
Net unrealized gains (losses)
|
100
|
|
|
12
|
|
|
23
|
|
|
(9
|
)
|
||||
Net change in fair value of credit derivatives
|
$
|
100
|
|
|
$
|
(8
|
)
|
|
$
|
23
|
|
|
$
|
(30
|
)
|
|
As of
June 30, 2020 |
|
As of
March 31, 2020 |
|
As of
December 31, 2019 |
|
As of
June 30, 2019 |
|
As of
March 31, 2019 |
|
As of
December 31, 2018 |
||||||
Five-year CDS spread
|
159
|
|
|
224
|
|
|
41
|
|
|
56
|
|
|
74
|
|
|
110
|
|
One-year CDS spread
|
32
|
|
|
64
|
|
|
9
|
|
|
13
|
|
|
20
|
|
|
22
|
|
|
As of
June 30, 2020 |
|
As of
December 31, 2019 |
||||
|
(in millions)
|
||||||
Fair value of credit derivatives before effect of AGC credit spread
|
$
|
(388
|
)
|
|
$
|
(261
|
)
|
Plus: Effect of AGC credit spread
|
227
|
|
|
76
|
|
||
Net fair value of credit derivatives
|
$
|
(161
|
)
|
|
$
|
(185
|
)
|
|
Second Quarter 2020
|
|
Six Months 2020
|
||||
|
(in millions)
|
||||||
Management fees:
|
|
|
|
||||
CLOs (1)
|
$
|
3
|
|
|
$
|
7
|
|
Opportunity funds
|
2
|
|
|
4
|
|
||
Wind-down funds
|
6
|
|
|
15
|
|
||
Total management fees
|
11
|
|
|
26
|
|
||
Reimbursable fund expenses
|
9
|
|
|
17
|
|
||
Total asset management fees (2)
|
$
|
20
|
|
|
$
|
43
|
|
(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 $7 million for Second Quarter 2020 and $17 million for Six Months 2020.
|
(2)
|
There were no performance fees for Second Quarter 2020 and Six Months 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.
|
11.
|
Variable Interest Entities
|
|
As of
June 30, 2020 |
|
As of
December 31, 2019 |
||||
|
(in millions)
|
||||||
Excess of unpaid principal over fair value of:
|
|
|
|
||||
FG VIEs’ assets
|
$
|
312
|
|
|
$
|
279
|
|
FG VIEs’ liabilities with recourse
|
30
|
|
|
21
|
|
||
FG VIEs’ liabilities without recourse
|
38
|
|
|
19
|
|
||
Unpaid principal balance for FG VIEs’ assets that were 90 days or more past due
|
49
|
|
|
52
|
|
||
Unpaid principal for FG VIEs’ liabilities with recourse (1)
|
362
|
|
|
388
|
|
(1)
|
FG VIEs’ liabilities with recourse will mature at various dates ranging from 2020 to 2038.
|
|
As of June 30, 2020
|
|
As of December 31, 2019
|
||||||||||||
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
||||||||
|
(in millions)
|
||||||||||||||
With recourse:
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. RMBS first lien
|
$
|
228
|
|
|
$
|
261
|
|
|
$
|
270
|
|
|
$
|
297
|
|
U.S. RMBS second lien
|
59
|
|
|
59
|
|
|
70
|
|
|
70
|
|
||||
Other
|
11
|
|
|
12
|
|
|
—
|
|
|
—
|
|
||||
Total with recourse
|
298
|
|
|
332
|
|
|
340
|
|
|
367
|
|
||||
Without recourse
|
20
|
|
|
20
|
|
|
102
|
|
|
102
|
|
||||
Total
|
$
|
318
|
|
|
$
|
352
|
|
|
$
|
442
|
|
|
$
|
469
|
|
|
As of
June 30, 2020 |
|
As of
December 31, 2019 |
||||
|
(in millions)
|
||||||
Assets (1):
|
|
|
|
||||
Fund assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
174
|
|
|
$
|
2
|
|
Fund investments, at fair value (2)
|
|
|
|
||||
Debt securities
|
63
|
|
|
47
|
|
||
Equity securities and warrants
|
54
|
|
|
17
|
|
||
Structured products
|
43
|
|
|
—
|
|
||
Obligations of state and political subdivisions
|
39
|
|
|
—
|
|
||
Due from brokers and counterparties
|
29
|
|
|
—
|
|
||
CLO assets:
|
|
|
|
||||
Cash
|
1
|
|
|
12
|
|
||
CLO investments, at fair value
|
|
|
|
||||
Debt securities (3)
|
850
|
|
|
494
|
|
||
Short-term investments
|
403
|
|
|
—
|
|
||
Other assets
|
13
|
|
|
—
|
|
||
Total assets
|
$
|
1,669
|
|
|
$
|
572
|
|
Liabilities:
|
|
|
|
||||
CLO obligations of CFE, at fair value (4)
|
806
|
|
|
481
|
|
||
Securities sold short, at fair value
|
30
|
|
|
—
|
|
||
Due to brokers and counterparties
|
400
|
|
|
—
|
|
||
Other liabilities
|
—
|
|
|
1
|
|
||
Total liabilities
|
$
|
1,236
|
|
|
$
|
482
|
|
(1)
|
Assets held by consolidated investment vehicles are not available to fund the general liquidity needs of the Company.
|
(2)
|
Includes investment in affiliates of $53 million and $9 million as of June 30, 2020 and December 31, 2019, respectively.
|
(3)
|
Includes $846 million in corporate loans of CFEs as of June 30, 2020 and $494 million as of December 31, 2019.
|
(4)
|
The weighted average maturity and weighted average interest rate of CLO obligations were 5.9 years and 2.7%, respectively, for June 30, 2020 and 12.8 years and 3.8%, respectively, for December 31, 2019. CLO obligations will mature at various dates ranging from 2031 to 2032.
|
|
Second Quarter 2020
|
|
Six Months 2020
|
||||
|
(in millions)
|
||||||
Beginning balance
|
$
|
8
|
|
|
$
|
7
|
|
Reallocation of ownership interests
|
(8
|
)
|
|
(10
|
)
|
||
Contributions to investment vehicles
|
20
|
|
|
25
|
|
||
Net loss
|
—
|
|
|
(2
|
)
|
||
June 30,
|
$
|
20
|
|
|
$
|
20
|
|
|
As of
June 30, 2020 |
|
As of
December 31, 2019 |
||||
|
(in millions)
|
||||||
Assets
|
|
|
|
||||
Investment portfolio:
|
|
|
|
||||
Fixed maturity securities and short-term investments
|
$
|
(35
|
)
|
|
$
|
(39
|
)
|
Equity method investments (1)
|
(367
|
)
|
|
(77
|
)
|
||
Total investments
|
(402
|
)
|
|
(116
|
)
|
||
Premiums receivable, net of commissions payable
|
(6
|
)
|
|
(7
|
)
|
||
Salvage and subrogation recoverable
|
(9
|
)
|
|
(8
|
)
|
||
FG VIEs’ assets, at fair value
|
318
|
|
|
442
|
|
||
Assets of consolidated investment vehicles (1)
|
1,669
|
|
|
572
|
|
||
Other assets
|
(1
|
)
|
|
—
|
|
||
Total assets
|
$
|
1,569
|
|
|
$
|
883
|
|
Liabilities and shareholders’ equity
|
|
|
|
||||
Unearned premium reserve
|
$
|
(41
|
)
|
|
$
|
(39
|
)
|
Loss and LAE reserve
|
(46
|
)
|
|
(41
|
)
|
||
FG VIEs’ liabilities with recourse, at fair value
|
332
|
|
|
367
|
|
||
FG VIEs’ liabilities without recourse, at fair value
|
20
|
|
|
102
|
|
||
Liabilities of consolidated investment vehicles (1)
|
1,236
|
|
|
482
|
|
||
Other liabilities
|
1
|
|
|
—
|
|
||
Total liabilities
|
1,502
|
|
|
871
|
|
||
|
|
|
|
||||
Redeemable noncontrolling interests in consolidated investment vehicles (1)
|
20
|
|
|
7
|
|
||
|
|
|
|
||||
Retained earnings
|
30
|
|
|
34
|
|
||
Accumulated other comprehensive income
|
(28
|
)
|
|
(35
|
)
|
||
Total shareholders’ equity attributable to Assured Guaranty Ltd.
|
2
|
|
|
(1
|
)
|
||
Nonredeemable noncontrolling interests (1)
|
45
|
|
|
6
|
|
||
Total shareholders’ equity
|
47
|
|
|
5
|
|
||
Total liabilities, redeemable noncontrolling interests and shareholders’ equity
|
$
|
1,569
|
|
|
$
|
883
|
|
(1)
|
These line items represent the components of the effect of consolidating Assured Investment Management investment vehicles.
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Net earned premiums
|
$
|
(1
|
)
|
|
$
|
(11
|
)
|
|
$
|
(2
|
)
|
|
$
|
(14
|
)
|
Net investment income
|
(2
|
)
|
|
(1
|
)
|
|
(3
|
)
|
|
(2
|
)
|
||||
Asset management fees
|
(1
|
)
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
||||
Fair value gains (losses) on FG VIEs
|
1
|
|
|
33
|
|
|
(8
|
)
|
|
38
|
|
||||
Fair value gains (losses) on consolidated investment vehicles
|
31
|
|
|
—
|
|
|
19
|
|
|
—
|
|
||||
Loss and LAE
|
2
|
|
|
(14
|
)
|
|
8
|
|
|
(15
|
)
|
||||
Other operating expense
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Equity in net earnings of investees
|
(26
|
)
|
|
—
|
|
|
(16
|
)
|
|
—
|
|
||||
Effect on income before tax
|
5
|
|
|
7
|
|
|
(3
|
)
|
|
7
|
|
||||
Less: Tax provision (benefit)
|
—
|
|
|
1
|
|
|
(1
|
)
|
|
1
|
|
||||
Effect on net income (loss)
|
5
|
|
|
6
|
|
|
(2
|
)
|
|
6
|
|
||||
Effect on redeemable noncontrolling interests
|
5
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||
Effect on net income (loss) attributable to AGL
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
(4
|
)
|
|
$
|
6
|
|
12.
|
Income Taxes
|
|
As of
June 30, 2020 |
|
As of
December 31, 2019 |
||||
|
(in millions)
|
||||||
Deferred tax assets (liabilities)
|
$
|
(45
|
)
|
|
$
|
(17
|
)
|
Current tax assets (liabilities)
|
48
|
|
|
47
|
|
(1)
|
Included in other assets or other liabilities on the condensed consolidated balance sheets.
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Expected tax provision (benefit)
|
$
|
42
|
|
|
$
|
38
|
|
|
$
|
31
|
|
|
$
|
47
|
|
Tax-exempt interest
|
(4
|
)
|
|
(5
|
)
|
|
(8
|
)
|
|
(10
|
)
|
||||
Foreign taxes
|
(1
|
)
|
|
4
|
|
|
7
|
|
|
5
|
|
||||
Taxes on reinsurance
|
(1
|
)
|
|
3
|
|
|
(1
|
)
|
|
4
|
|
||||
Other
|
(2
|
)
|
|
—
|
|
|
1
|
|
|
(2
|
)
|
||||
Total provision (benefit) for income taxes
|
$
|
34
|
|
|
$
|
40
|
|
|
$
|
30
|
|
|
$
|
44
|
|
Effective tax rate
|
15.4
|
%
|
|
21.9
|
%
|
|
18.5
|
%
|
|
18.4
|
%
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
U.S.
|
$
|
198
|
|
|
$
|
190
|
|
|
$
|
172
|
|
|
$
|
225
|
|
Bermuda
|
22
|
|
|
—
|
|
|
15
|
|
|
16
|
|
||||
U.K. and other
|
2
|
|
|
(8
|
)
|
|
(27
|
)
|
|
(1
|
)
|
||||
Total
|
$
|
222
|
|
|
$
|
182
|
|
|
$
|
160
|
|
|
$
|
240
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
U.S.
|
$
|
313
|
|
|
$
|
227
|
|
|
$
|
406
|
|
|
$
|
376
|
|
Bermuda
|
45
|
|
|
40
|
|
|
59
|
|
|
73
|
|
||||
U.K. and other
|
14
|
|
|
(1
|
)
|
|
3
|
|
|
12
|
|
||||
Total
|
$
|
372
|
|
|
$
|
266
|
|
|
$
|
468
|
|
|
$
|
461
|
|
14.
|
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, March 31, 2020
|
$
|
252
|
|
|
$
|
(66
|
)
|
|
$
|
(17
|
)
|
|
$
|
(38
|
)
|
|
$
|
7
|
|
|
$
|
138
|
|
Other comprehensive income (loss) before reclassifications
|
184
|
|
|
19
|
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
197
|
|
||||||
Less: Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net realized investment gains (losses)
|
12
|
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||||
Fair value gains (losses) on FG VIEs
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||||
Total before tax
|
12
|
|
|
(8
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
3
|
|
||||||
Tax (provision) benefit
|
(3
|
)
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||||
Total amount reclassified from AOCI, net of tax
|
9
|
|
|
(6
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
2
|
|
||||||
Net current period other comprehensive income (loss)
|
175
|
|
|
25
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
195
|
|
||||||
Balance, June 30, 2020
|
$
|
427
|
|
|
$
|
(41
|
)
|
|
$
|
(22
|
)
|
|
$
|
(38
|
)
|
|
$
|
7
|
|
|
$
|
333
|
|
|
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, March 31, 2019
|
$
|
222
|
|
|
$
|
99
|
|
|
$
|
(31
|
)
|
|
$
|
(37
|
)
|
|
$
|
8
|
|
|
$
|
261
|
|
Other comprehensive income (loss) before reclassifications
|
90
|
|
|
(40
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|
—
|
|
|
47
|
|
||||||
Less: Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net realized investment gains (losses)
|
11
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
||||||
Net investment income
|
2
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
||||||
Fair value gains (losses) on FG VIEs
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
||||||
Total before tax
|
13
|
|
|
11
|
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
16
|
|
||||||
Tax (provision) benefit
|
(2
|
)
|
|
(3
|
)
|
|
2
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
||||||
Total amount reclassified from AOCI, net of tax
|
11
|
|
|
8
|
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
13
|
|
||||||
Net current period other comprehensive income (loss)
|
79
|
|
|
(48
|
)
|
|
4
|
|
|
(1
|
)
|
|
—
|
|
|
34
|
|
||||||
Balance, June 30, 2019
|
$
|
301
|
|
|
$
|
51
|
|
|
$
|
(27
|
)
|
|
$
|
(38
|
)
|
|
$
|
8
|
|
|
$
|
295
|
|
|
Net Unrealized Gains (Losses) on Investments with no 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
|
28
|
|
|
(42
|
)
|
|
3
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
||||||
Less: Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net realized investment gains (losses)
|
18
|
|
|
(19
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||||
Fair value gains (losses) on FG VIEs
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
||||||
Total before tax
|
18
|
|
|
(19
|
)
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
||||||
Tax (provision) benefit
|
(3
|
)
|
|
4
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||||
Total amount reclassified from AOCI, net of tax
|
15
|
|
|
(15
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
Net current period other comprehensive income (loss)
|
13
|
|
|
(27
|
)
|
|
5
|
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
||||||
Balance, June 30, 2020
|
$
|
427
|
|
|
$
|
(41
|
)
|
|
$
|
(22
|
)
|
|
$
|
(38
|
)
|
|
$
|
7
|
|
|
$
|
333
|
|
|
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
|
255
|
|
|
(47
|
)
|
|
(4
|
)
|
|
(1
|
)
|
|
—
|
|
|
203
|
|
||||||
Less: Amounts reclassified from AOCI to:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net realized investment gains (losses)
|
14
|
|
|
(18
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
||||||
Net investment income
|
2
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
||||||
Fair value gains (losses) on FG VIEs
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
||||||
Total before tax
|
16
|
|
|
(4
|
)
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
2
|
|
||||||
Tax (provision) benefit
|
(3
|
)
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||||
Total amount reclassified from AOCI, net of tax
|
13
|
|
|
(4
|
)
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||
Net current period other comprehensive income (loss)
|
242
|
|
|
(43
|
)
|
|
4
|
|
|
(1
|
)
|
|
—
|
|
|
202
|
|
||||||
Balance, June 30, 2019
|
$
|
301
|
|
|
$
|
51
|
|
|
$
|
(27
|
)
|
|
$
|
(38
|
)
|
|
$
|
8
|
|
|
$
|
295
|
|
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 - June 30)
|
|
5,956,422
|
|
|
164
|
|
|
27.49
|
|
||
2020 (July 1- August 6)
|
|
800,052
|
|
|
19
|
|
|
23.17
|
|
||
Total 2020
|
|
10,385,884
|
|
|
$
|
299
|
|
|
$
|
28.74
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions, except per share amounts)
|
||||||||||||||
Basic Earnings Per Share (EPS):
|
|
|
|
|
|
|
|
||||||||
Net income (loss) attributable to AGL
|
$
|
183
|
|
|
$
|
142
|
|
|
$
|
128
|
|
|
$
|
196
|
|
Less: Distributed and undistributed income (loss) available to nonvested shareholders
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic
|
$
|
183
|
|
|
$
|
142
|
|
|
$
|
128
|
|
|
$
|
196
|
|
Basic shares
|
86.5
|
|
|
101.2
|
|
|
89.5
|
|
|
102.1
|
|
||||
Basic EPS
|
$
|
2.11
|
|
|
$
|
1.40
|
|
|
$
|
1.43
|
|
|
$
|
1.92
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted EPS:
|
|
|
|
|
|
|
|
||||||||
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic
|
$
|
183
|
|
|
$
|
142
|
|
|
$
|
128
|
|
|
$
|
196
|
|
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
|
$
|
183
|
|
|
$
|
142
|
|
|
$
|
128
|
|
|
$
|
196
|
|
|
|
|
|
|
|
|
|
||||||||
Basic shares
|
86.5
|
|
|
101.2
|
|
|
89.5
|
|
|
102.1
|
|
||||
Dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Options and restricted stock awards
|
0.5
|
|
|
0.7
|
|
|
0.7
|
|
|
0.9
|
|
||||
Diluted shares
|
87.0
|
|
|
101.9
|
|
|
90.2
|
|
|
103.0
|
|
||||
Diluted EPS
|
$
|
2.10
|
|
|
$
|
1.39
|
|
|
$
|
1.42
|
|
|
$
|
1.90
|
|
Potentially dilutive securities excluded from computation of EPS because of antidilutive effect
|
0.6
|
|
|
0.1
|
|
|
1.2
|
|
|
—
|
|
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.
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions, except per share amounts)
|
||||||||||||||
GAAP Highlights
|
|
|
|
|
|
|
|
||||||||
Net income (loss) attributable to AGL
|
$
|
183
|
|
|
$
|
142
|
|
|
$
|
128
|
|
|
$
|
196
|
|
Net income (loss) attributable to AGL per diluted share
|
2.10
|
|
|
1.39
|
|
|
1.42
|
|
|
1.90
|
|
||||
Weighted average diluted shares
|
87.0
|
|
|
101.9
|
|
|
90.2
|
|
|
103.0
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Adjusted operating income (loss) (1) (2)
|
|
|
|
|
|
|
|
||||||||
Insurance
|
$
|
154
|
|
|
$
|
161
|
|
|
$
|
239
|
|
|
$
|
272
|
|
Asset Management
|
(9
|
)
|
|
—
|
|
|
(18
|
)
|
|
—
|
|
||||
Corporate
|
(26
|
)
|
|
(26
|
)
|
|
(65
|
)
|
|
(51
|
)
|
||||
Other
|
—
|
|
|
6
|
|
|
(4
|
)
|
|
6
|
|
||||
Adjusted operating income (loss)
|
119
|
|
|
141
|
|
|
152
|
|
|
227
|
|
||||
Adjusted operating income per diluted share (2)
|
1.36
|
|
|
1.38
|
|
|
1.68
|
|
|
2.20
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Insurance Segment
|
|
|
|
|
|
|
|
||||||||
Gross written premiums (GWP)
|
$
|
149
|
|
|
$
|
51
|
|
|
$
|
213
|
|
|
$
|
90
|
|
PVP (1)
|
96
|
|
|
56
|
|
|
147
|
|
|
98
|
|
||||
Gross par written
|
6,012
|
|
|
4,183
|
|
|
9,045
|
|
|
6,890
|
|
||||
Asset Management Segment
|
|
|
|
|
|
|
|
||||||||
CLO net inflows
|
$
|
528
|
|
|
$
|
—
|
|
|
$
|
461
|
|
|
$
|
—
|
|
Opportunity funds outflows
|
(53
|
)
|
|
—
|
|
|
(50
|
)
|
|
—
|
|
||||
Liquid strategies net inflows
|
370
|
|
|
—
|
|
|
370
|
|
|
—
|
|
||||
Wind-down funds net outflows
|
(541
|
)
|
|
—
|
|
|
(1,416
|
)
|
|
—
|
|
||||
Total net flows
|
$
|
304
|
|
|
$
|
—
|
|
|
$
|
(635
|
)
|
|
$
|
—
|
|
|
As of June 30, 2020
|
|
As of December 31, 2019
|
||||||||||||
|
Amount
|
|
Per Share
|
|
Amount
|
|
Per Share
|
||||||||
|
(in millions, except per share amounts)
|
||||||||||||||
Shareholders' equity attributable to AGL
|
$
|
6,444
|
|
|
$
|
76.66
|
|
|
$
|
6,639
|
|
|
$
|
71.18
|
|
Adjusted operating shareholders' equity (1) (3)
|
5,997
|
|
|
71.34
|
|
|
6,246
|
|
|
66.96
|
|
||||
Adjusted book value (1) (4)
|
8,796
|
|
|
104.63
|
|
|
9,047
|
|
|
96.99
|
|
||||
Gain (loss) related to the effect of consolidating VIEs (VIE consolidation) included in adjusted operating shareholders' equity
|
8
|
|
|
0.09
|
|
|
7
|
|
|
0.07
|
|
||||
Gain (loss) related to VIE consolidation included in adjusted book value
|
(2
|
)
|
|
(0.03
|
)
|
|
(4
|
)
|
|
(0.05
|
)
|
||||
Common shares outstanding (5)
|
84.1
|
|
|
|
|
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 June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Net earned premiums
|
$
|
121
|
|
|
$
|
112
|
|
|
$
|
224
|
|
|
$
|
230
|
|
Net investment income
|
78
|
|
|
110
|
|
|
158
|
|
|
208
|
|
||||
Asset management fees
|
20
|
|
|
—
|
|
|
43
|
|
|
—
|
|
||||
Net realized investment gains (losses)
|
4
|
|
|
8
|
|
|
(1
|
)
|
|
(4
|
)
|
||||
Net change in fair value of credit derivatives
|
100
|
|
|
(8
|
)
|
|
23
|
|
|
(30
|
)
|
||||
Fair value gains (losses) on CCS
|
(25
|
)
|
|
19
|
|
|
23
|
|
|
10
|
|
||||
Fair value gains (losses) on financial guaranty VIEs
|
1
|
|
|
33
|
|
|
(8
|
)
|
|
38
|
|
||||
Fair value gains (losses) on consolidated investment vehicles
|
31
|
|
|
—
|
|
|
19
|
|
|
—
|
|
||||
Foreign exchange gain (loss) on remeasurement
|
2
|
|
|
(14
|
)
|
|
(60
|
)
|
|
(3
|
)
|
||||
Commutation gains (losses)
|
38
|
|
|
1
|
|
|
38
|
|
|
1
|
|
||||
Other income (loss)
|
2
|
|
|
5
|
|
|
9
|
|
|
11
|
|
||||
Total revenues
|
372
|
|
|
266
|
|
|
468
|
|
|
461
|
|
||||
Expenses:
|
|
|
|
|
|
|
|
||||||||
Loss and loss adjustment expenses (LAE)
|
37
|
|
|
(1
|
)
|
|
57
|
|
|
45
|
|
||||
Interest expense
|
21
|
|
|
22
|
|
|
43
|
|
|
45
|
|
||||
Amortization of deferred acquisition costs (DAC)
|
4
|
|
|
4
|
|
|
7
|
|
|
10
|
|
||||
Employee compensation and benefit expenses
|
46
|
|
|
39
|
|
|
110
|
|
|
80
|
|
||||
Other operating expenses
|
42
|
|
|
21
|
|
|
87
|
|
|
44
|
|
||||
Total expenses
|
150
|
|
|
85
|
|
|
304
|
|
|
224
|
|
||||
Income (loss) before income taxes and equity in net earnings of investees
|
222
|
|
|
181
|
|
|
164
|
|
|
237
|
|
||||
Equity in net earnings of investees
|
—
|
|
|
1
|
|
|
(4
|
)
|
|
3
|
|
||||
Income (loss) before income taxes
|
222
|
|
|
182
|
|
|
160
|
|
|
240
|
|
||||
Provision (benefit) for income taxes
|
34
|
|
|
40
|
|
|
30
|
|
|
44
|
|
||||
Net income (loss)
|
188
|
|
|
142
|
|
|
130
|
|
|
196
|
|
||||
Less: Noncontrolling interest
|
5
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||
Net income (loss) attributable to AGL
|
$
|
183
|
|
|
$
|
142
|
|
|
$
|
128
|
|
|
$
|
196
|
|
•
|
fair value gains on credit derivatives in Second Quarter 2020 compared with losses in Second Quarter 2019,
|
•
|
commutation gains in Second Quarter 2020,
|
•
|
fair value gains in the consolidated Assured Investment Management funds (the consolidated investment vehicles), and
|
•
|
foreign exchange gains on remeasurement in Second Quarter 2020 compared with losses in Second Quarter 2019.
|
•
|
higher foreign exchange losses on remeasurement in Six Months 2020,
|
•
|
lower net investment income,
|
•
|
fair value losses on FG VIE in Six Months 2020 compared with gains in Six Months 2019, and
|
•
|
pretax loss in the Asset Management segment.
|
•
|
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.
|
|
Six Months 2020
|
|
Six Months 2019
|
|
Year Ended December 31, 2019
|
||||||
|
(dollars in billions, except number of issues and percent)
|
||||||||||
Par:
|
|
|
|
|
|
||||||
New municipal bonds issued
|
$
|
191.9
|
|
|
$
|
165.0
|
|
|
$
|
406.6
|
|
Total insured
|
$
|
13.9
|
|
|
$
|
9.7
|
|
|
$
|
23.9
|
|
Insured by Assured Guaranty
|
$
|
8.0
|
|
|
$
|
5.7
|
|
|
$
|
14.0
|
|
Number of issues:
|
|
|
|
|
|
||||||
New municipal bonds issued
|
5,161
|
|
|
4,637
|
|
|
10,590
|
|
|||
Total insured
|
977
|
|
|
797
|
|
|
1,724
|
|
|||
Insured by Assured Guaranty
|
478
|
|
|
423
|
|
|
839
|
|
|||
Bond insurance market penetration based on:
|
|
|
|
|
|
||||||
Par
|
7.3
|
%
|
|
5.9
|
%
|
|
5.9
|
%
|
|||
Number of issues
|
18.9
|
%
|
|
17.2
|
%
|
|
16.3
|
%
|
|||
Single A par sold
|
27.4
|
%
|
|
22.9
|
%
|
|
21.4
|
%
|
|||
Single A transactions sold
|
61.3
|
%
|
|
57.9
|
%
|
|
54.9
|
%
|
|||
$25 million and under par sold
|
22.9
|
%
|
|
18.2
|
%
|
|
18.1
|
%
|
|||
$25 million and under transactions sold
|
22.4
|
%
|
|
20.4
|
%
|
|
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 (Second Quarter)
|
164
|
|
|
5.96
|
|
|
27.49
|
|
||
2020 (through August 6, 2020)
|
19
|
|
|
0.80
|
|
|
23.17
|
|
||
Cumulative repurchases since the beginning of 2013
|
$
|
3,515
|
|
|
116.11
|
|
|
$
|
30.27
|
|
|
Second Quarter 2020
|
|
Six Months 2020
|
|
As of
June 30, 2020 |
||||||
|
(per share)
|
||||||||||
Net income (loss) attributable to AGL
|
$
|
1.07
|
|
|
$
|
0.56
|
|
|
|
||
Adjusted operating income
|
0.66
|
|
|
0.70
|
|
|
|
||||
Shareholders' equity attributable to AGL
|
|
|
|
|
$
|
26.60
|
|
||||
Adjusted operating shareholders' equity
|
|
|
|
|
23.56
|
|
|||||
Adjusted book value
|
|
|
|
|
42.76
|
|
(1)
|
Represents the estimated accretive effect of cumulative repurchases since the beginning of 2013.
|
|
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) (7/16/20)
|
|
AA+ (stable) (12/19/19)
|
|
A2 (stable) (8/13/19)
|
|
—
|
AGC
|
AA (stable) (7/16/20)
|
|
AA (stable) (11/22/19)
|
|
(1)
|
|
—
|
Municipal Assurance Corp. (MAC)
|
AA (stable) (7/16/20)
|
|
AA+ (stable) (3/4/20)
|
|
—
|
|
—
|
AG Re
|
AA (stable) (7/16/20)
|
|
—
|
|
—
|
|
—
|
AGRO
|
AA (stable) (7/16/20)
|
|
—
|
|
—
|
|
A+ (stable) (7/13/20)
|
Assured Guaranty (Europe) plc
|
AA (stable) (7/16/20)
|
|
AA+ (stable) (12/19/19)
|
|
A2 (stable) (8/13/19)
|
|
—
|
Assured Guaranty (Europe) SA
|
AA (stable) (7/16/20)
|
|
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).
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Adjusted operating income (loss) by segment:
|
|
|
|
|
|
|
|
||||||||
Insurance
|
$
|
154
|
|
|
$
|
161
|
|
|
$
|
239
|
|
|
$
|
272
|
|
Asset management
|
(9
|
)
|
|
—
|
|
|
(18
|
)
|
|
—
|
|
||||
Corporate
|
(26
|
)
|
|
(26
|
)
|
|
(65
|
)
|
|
(51
|
)
|
||||
Other
|
—
|
|
|
6
|
|
|
(4
|
)
|
|
6
|
|
||||
Adjusted operating income (loss)
|
$
|
119
|
|
|
$
|
141
|
|
|
$
|
152
|
|
|
$
|
227
|
|
Reconciling items from adjusted operating income to net income (loss) attributable to AGL:
|
|
|
|
|
|
|
|
||||||||
Plus pre-tax adjustments:
|
|
|
|
|
|
|
|
||||||||
Realized gains (losses) on investments
|
$
|
4
|
|
|
$
|
8
|
|
|
$
|
(1
|
)
|
|
$
|
(4
|
)
|
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
97
|
|
|
(12
|
)
|
|
9
|
|
|
(40
|
)
|
||||
Fair value gains (losses) on CCS
|
(25
|
)
|
|
19
|
|
|
23
|
|
|
10
|
|
||||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
|
2
|
|
|
(12
|
)
|
|
(55
|
)
|
|
(3
|
)
|
||||
Total pre-tax adjustments
|
78
|
|
|
3
|
|
|
(24
|
)
|
|
(37
|
)
|
||||
Plus tax effect on pre-tax adjustments
|
(14
|
)
|
|
(2
|
)
|
|
—
|
|
|
6
|
|
||||
Net income (loss) attributable to AGL
|
$
|
183
|
|
|
$
|
142
|
|
|
$
|
128
|
|
|
$
|
196
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Revenues
|
|
|
|
|
|
|
|
||||||||
Net earned premiums and credit derivative revenues
|
$
|
125
|
|
|
$
|
127
|
|
|
$
|
232
|
|
|
$
|
253
|
|
Net investment income
|
82
|
|
|
110
|
|
|
165
|
|
|
209
|
|
||||
Commutation gains (losses)
|
38
|
|
|
1
|
|
|
38
|
|
|
1
|
|
||||
Other income (loss)
|
1
|
|
|
3
|
|
|
7
|
|
|
12
|
|
||||
Total revenues
|
246
|
|
|
241
|
|
|
442
|
|
|
475
|
|
||||
Expenses
|
|
|
|
|
|
|
|
||||||||
Loss expense
|
39
|
|
|
(15
|
)
|
|
57
|
|
|
29
|
|
||||
Amortization of DAC
|
4
|
|
|
4
|
|
|
7
|
|
|
10
|
|
||||
Employee compensation and benefit expenses
|
29
|
|
|
34
|
|
|
70
|
|
|
71
|
|
||||
Other operating expenses
|
18
|
|
|
17
|
|
|
40
|
|
|
37
|
|
||||
Total expenses
|
90
|
|
|
40
|
|
|
174
|
|
|
147
|
|
||||
Equity in net earnings of investees
|
26
|
|
|
1
|
|
|
17
|
|
|
2
|
|
||||
Adjusted operating income (loss) before income taxes
|
182
|
|
|
202
|
|
|
285
|
|
|
330
|
|
||||
Provision (benefit) for income taxes
|
28
|
|
|
41
|
|
|
46
|
|
|
58
|
|
||||
Adjusted operating income (loss)
|
$
|
154
|
|
|
$
|
161
|
|
|
$
|
239
|
|
|
$
|
272
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
GWP
|
|
|
|
|
|
|
|
||||||||
Public Finance—U.S.
|
$
|
60
|
|
|
$
|
43
|
|
|
$
|
89
|
|
|
$
|
73
|
|
Public Finance—non-U.S.
|
81
|
|
|
12
|
|
|
115
|
|
|
14
|
|
||||
Structured Finance—U.S.
|
8
|
|
|
(4
|
)
|
|
9
|
|
|
2
|
|
||||
Structured Finance—non-U.S.
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Total GWP
|
$
|
149
|
|
|
$
|
51
|
|
|
$
|
213
|
|
|
$
|
90
|
|
PVP (1):
|
|
|
|
|
|
|
|
||||||||
Public Finance—U.S.
|
$
|
60
|
|
|
$
|
44
|
|
|
$
|
89
|
|
|
$
|
76
|
|
Public Finance—non-U.S.
|
28
|
|
|
8
|
|
|
49
|
|
|
12
|
|
||||
Structured Finance—U.S.
|
8
|
|
|
3
|
|
|
9
|
|
|
8
|
|
||||
Structured Finance—non-U.S.
|
—
|
|
|
1
|
|
|
—
|
|
|
2
|
|
||||
Total PVP
|
$
|
96
|
|
|
$
|
56
|
|
|
$
|
147
|
|
|
$
|
98
|
|
Gross Par Written (1):
|
|
|
|
|
|
|
|
||||||||
Public Finance—U.S.
|
$
|
5,282
|
|
|
$
|
3,657
|
|
|
$
|
7,923
|
|
|
$
|
5,673
|
|
Public Finance—non-U.S.
|
557
|
|
|
299
|
|
|
934
|
|
|
475
|
|
||||
Structured Finance—U.S.
|
173
|
|
|
227
|
|
|
188
|
|
|
721
|
|
||||
Structured Finance—non-U.S.
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
||||
Total gross par written
|
$
|
6,012
|
|
|
$
|
4,183
|
|
|
$
|
9,045
|
|
|
$
|
6,890
|
|
Average rating on new business written
|
A-
|
|
A-
|
|
A-
|
|
A-
|
(1)
|
PVP and Gross Par Written in the table above are based on "close date," when the transaction settles. See “– Non-GAAP Financial Measures – PVP or Present Value of New Business Production.”
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Financial guaranty insurance:
|
|
|
|
|
|
|
71
|
|
|||||||
Public finance
|
|
|
|
|
|
|
|
||||||||
Scheduled net earned premiums
|
$
|
73
|
|
|
$
|
72
|
|
|
$
|
143
|
|
|
$
|
143
|
|
Accelerations:
|
|
|
|
|
|
|
|
||||||||
Refundings
|
26
|
|
|
22
|
|
|
41
|
|
|
49
|
|
||||
Terminations
|
6
|
|
|
—
|
|
|
6
|
|
|
—
|
|
||||
Total accelerations
|
32
|
|
|
22
|
|
|
47
|
|
|
49
|
|
||||
Total public finance
|
105
|
|
|
94
|
|
|
190
|
|
|
192
|
|
||||
Structured finance
|
|
|
|
|
|
|
|
||||||||
Scheduled net earned premiums
|
16
|
|
|
20
|
|
|
34
|
|
|
43
|
|
||||
Accelerations
|
—
|
|
|
7
|
|
|
—
|
|
|
6
|
|
||||
Total structured finance
|
16
|
|
|
27
|
|
|
34
|
|
|
49
|
|
||||
Specialty insurance and reinsurance
|
1
|
|
|
2
|
|
|
2
|
|
|
3
|
|
||||
Total net earned premiums
|
$
|
122
|
|
|
$
|
123
|
|
|
$
|
226
|
|
|
$
|
244
|
|
Credit derivative revenues
|
3
|
|
|
4
|
|
|
6
|
|
|
9
|
|
||||
Total net earned premiums and credit derivative revenue
|
$
|
125
|
|
|
$
|
127
|
|
|
$
|
232
|
|
|
$
|
253
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Income from fixed-maturity securities managed by third parties
|
$
|
62
|
|
|
$
|
67
|
|
|
$
|
124
|
|
|
$
|
140
|
|
Income from internally managed securities
|
20
|
|
|
45
|
|
|
40
|
|
|
72
|
|
||||
Interest income from intercompany loans
|
2
|
|
|
—
|
|
|
5
|
|
|
1
|
|
||||
Gross investment income
|
84
|
|
|
112
|
|
|
169
|
|
|
213
|
|
||||
Investment expenses
|
(2
|
)
|
|
(2
|
)
|
|
(4
|
)
|
|
(4
|
)
|
||||
Net investment income
|
$
|
82
|
|
|
$
|
110
|
|
|
$
|
165
|
|
|
$
|
209
|
|
|
|
|
|
|
|
|
|
||||||||
Fair value gains (losses) on Assured Investment Management funds
|
$
|
26
|
|
|
$
|
—
|
|
|
$
|
16
|
|
|
$
|
—
|
|
Other
|
—
|
|
|
1
|
|
|
1
|
|
|
2
|
|
||||
Equity in net earnings of investees
|
26
|
|
|
1
|
|
|
17
|
|
|
2
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Foreign exchange gain (loss) on remeasurement (1)
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
(5
|
)
|
|
$
|
—
|
|
Other
|
1
|
|
|
4
|
|
|
12
|
|
|
12
|
|
||||
Total other income (loss)
|
$
|
1
|
|
|
$
|
3
|
|
|
$
|
7
|
|
|
$
|
12
|
|
(1)
|
Primarily related to cash.
|
|
Net Expected Loss to be Paid/ (Recovered)
|
|
Net Economic Loss Development/ (Benefit)
|
||||||||||||||||||||
|
As of
|
|
Second Quarter
|
|
Six Months
|
||||||||||||||||||
|
June 30, 2020
|
|
December 31, 2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
Insurance
|
$
|
684
|
|
|
$
|
683
|
|
|
$
|
32
|
|
|
$
|
(22
|
)
|
|
$
|
31
|
|
|
$
|
(12
|
)
|
FG VIEs
|
65
|
|
|
58
|
|
|
1
|
|
|
(14
|
)
|
|
7
|
|
|
(24
|
)
|
||||||
Credit derivatives
|
(14
|
)
|
|
(4
|
)
|
|
1
|
|
|
(1
|
)
|
|
(7
|
)
|
|
(3
|
)
|
||||||
Total
|
$
|
735
|
|
|
$
|
737
|
|
|
$
|
34
|
|
|
$
|
(37
|
)
|
|
$
|
31
|
|
|
$
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net exposure rated BIG
|
$
|
8,406
|
|
|
$
|
8,506
|
|
|
|
|
|
|
|
|
|
|
Net Expected Loss to be Paid/(Recovered)
|
|
Net Economic Loss Development/(Benefit)
|
||||||||||||||||||||
|
As of
|
|
Second Quarter
|
|
Six Months
|
||||||||||||||||||
|
June 30, 2020
|
|
December 31, 2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||||||
|
(in millions)
|
||||||||||||||||||||||
U.S. public finance (1)
|
$
|
543
|
|
|
$
|
531
|
|
|
$
|
30
|
|
|
$
|
92
|
|
|
$
|
86
|
|
|
$
|
154
|
|
Non-U.S. public finance
|
29
|
|
|
23
|
|
|
2
|
|
|
(8
|
)
|
|
5
|
|
|
(9
|
)
|
||||||
Structured finance
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. RMBS
|
128
|
|
|
146
|
|
|
1
|
|
|
(118
|
)
|
|
(62
|
)
|
|
(183
|
)
|
||||||
Other structured finance
|
35
|
|
|
37
|
|
|
1
|
|
|
(3
|
)
|
|
2
|
|
|
(1
|
)
|
||||||
Structured finance
|
163
|
|
|
183
|
|
|
2
|
|
|
(121
|
)
|
|
(60
|
)
|
|
(184
|
)
|
||||||
Total
|
$
|
735
|
|
|
$
|
737
|
|
|
$
|
34
|
|
|
$
|
(37
|
)
|
|
$
|
31
|
|
|
$
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Effect of changes in the risk-free rates included in economic loss development (benefit)
|
|
|
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
|
$
|
32
|
|
|
$
|
(5
|
)
|
(1)
|
The total net expected loss for troubled U.S. public finance exposures is net of a credit for estimated future recoveries of claims already paid of $917 million as of June 30, 2020 and $819 million as of December 31, 2019.
|
|
Risk-Free Rates used in Expected Loss for U.S. Dollar Denominated Obligations
|
||||||
|
Range
|
|
Weighted Average
|
||||
As of June 30, 2020
|
0.00
|
%
|
-
|
1.47%
|
|
0.57
|
%
|
As of March 31, 2020
|
0.00
|
%
|
-
|
1.39%
|
|
0.64
|
%
|
As of December 31, 2019
|
0.00
|
%
|
-
|
2.45%
|
|
1.94
|
%
|
As of June 30, 2019
|
0.00
|
%
|
-
|
2.63%
|
|
2.10
|
%
|
As of March 31, 2019
|
0.00
|
%
|
-
|
2.87%
|
|
2.46
|
%
|
As of December 31, 2018
|
0.00
|
%
|
-
|
3.06%
|
|
2.74
|
%
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
U.S. public finance
|
$
|
33
|
|
|
$
|
94
|
|
|
$
|
92
|
|
|
$
|
164
|
|
Non-U.S. public finance
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
(8
|
)
|
||||
Structured finance
|
|
|
|
|
|
|
|
||||||||
U.S. RMBS
|
6
|
|
|
(104
|
)
|
|
(38
|
)
|
|
(133
|
)
|
||||
Other structured finance
|
—
|
|
|
3
|
|
|
3
|
|
|
6
|
|
||||
Structured finance
|
6
|
|
|
(101
|
)
|
|
(35
|
)
|
|
(127
|
)
|
||||
Total loss and LAE (benefit)
|
$
|
39
|
|
|
$
|
(15
|
)
|
|
$
|
57
|
|
|
$
|
29
|
|
•
|
Loss and LAE in Second Quarter 2020 and Six Months 2020 was mainly driven by loss expense on certain Puerto Rico transactions. For Six Months 2020, these losses were partially offset by a benefit in first lien U.S. RMBS transactions.
|
•
|
Loss and LAE in Second Quarter 2019 was a benefit mainly driven by U.S. RMBS exposures, partially offset by losses on certain Puerto Rico exposures. Loss and LAE in Six Months 2019 was mainly driven by higher losses on certain Puerto Rico exposures, partially offset by a benefit on U.S. RMBS exposures.
|
|
Second Quarter
|
|
Six Months
|
||||
|
2020
|
|
2020
|
||||
|
(in millions)
|
||||||
Revenues
|
|
|
|
||||
Management fees:
|
|
|
|
||||
CLOs
|
$
|
2
|
|
|
$
|
7
|
|
Opportunity funds
|
3
|
|
|
5
|
|
||
Wind-down funds
|
7
|
|
|
16
|
|
||
Total management fees (1)
|
12
|
|
|
28
|
|
||
Other income
|
1
|
|
|
2
|
|
||
Total revenues
|
13
|
|
|
30
|
|
||
Expenses
|
|
|
|
||||
Amortization of intangible assets
|
3
|
|
|
6
|
|
||
Employee compensation and benefit expenses
|
14
|
|
|
32
|
|
||
Other operating expenses
|
7
|
|
|
14
|
|
||
Total expenses
|
24
|
|
|
52
|
|
||
Adjusted operating income (loss) before income taxes
|
(11
|
)
|
|
(22
|
)
|
||
Provision (benefit) for income taxes
|
(2
|
)
|
|
(4
|
)
|
||
Adjusted operating income (loss)
|
$
|
(9
|
)
|
|
$
|
(18
|
)
|
(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 amount of aggregate collateral balance and principal cash of Assured Investment Management's CLOs, including CLO equity that may be held by Assured Investment Management funds. This also includes CLO assets managed by BlueMountain Fuji Management, LLC (BM Fuji). BlueMountain is not the investment manager of BM Fuji CLOs, but rather has entered into a services agreement and a secondary 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, and
|
•
|
the net asset value of all funds and accounts other than CLOs, plus any unfunded commitments.
|
•
|
“Third-party assets under management” or “3rd Party AUM” refers to the assets Assured Investment Management manages or advises on behalf of third-party investors. This includes current and former employee investments in Assured Investment Management's funds. For CLOs, this also includes CLO equity that may be held by Assured Investment Management's funds.
|
•
|
“Intercompany assets under management” or “Intercompany AUM” refers to the assets Assured Investment Management manages or advises on behalf of the Company. This includes investments from affiliates of Assured Guaranty along with general partners' investments of BlueMountain (or its affiliates) into the funds.
|
•
|
“Funded assets under management” or “Funded AUM” refers to assets that have been deployed or invested into the funds or CLOs.
|
•
|
“Unfunded assets under management” or “Unfunded AUM” refers to unfunded capital commitments from closed-end funds and CLO warehouse fund.
|
•
|
“Fee earning assets under management” or “Fee Earning AUM” refers to assets where Assured Investment Management collects fees and has elected not to waive or rebate fees to investors.
|
•
|
“Non-fee earning assets under management” or “Non-Fee Earning AUM” refers to assets where Assured Investment Management does not collect fees or has elected to waive or rebate fees to investors. Assured Investment Management reserves the right to waive some or all fees for certain investors, including investors affiliated with Assured Investment Management and/or the Company. Further, to the extent that the Company's wind-down and/or opportunity funds are invested in Assured Investment Management managed CLOs, 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 Assured Investment Management.
|
|
CLOs
|
|
Opportunity Funds
|
|
Liquid Strategies
|
|
Wind-Down Funds
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
Second Quarter 2020
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
AUM, March 31, 2020
|
$
|
12,645
|
|
|
$
|
969
|
|
|
$
|
—
|
|
|
$
|
2,865
|
|
|
$
|
16,479
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Inflows
|
741
|
|
|
30
|
|
|
370
|
|
|
—
|
|
|
1,141
|
|
|||||
Outflows:
|
|
|
|
|
|
|
|
|
|
||||||||||
Redemptions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Distributions
|
(213
|
)
|
|
(83
|
)
|
|
—
|
|
|
(541
|
)
|
|
(837
|
)
|
|||||
Total outflows
|
(213
|
)
|
|
(83
|
)
|
|
—
|
|
|
(541
|
)
|
|
(837
|
)
|
|||||
Net flows
|
528
|
|
|
(53
|
)
|
|
370
|
|
|
(541
|
)
|
|
304
|
|
|||||
Change in fund value
|
39
|
|
|
57
|
|
|
1
|
|
|
136
|
|
|
233
|
|
|||||
AUM, June 30, 2020 (1)
|
$
|
13,212
|
|
|
$
|
973
|
|
|
$
|
371
|
|
|
$
|
2,460
|
|
|
$
|
17,016
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Six Months 2020
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
AUM, December 31, 2019
|
$
|
12,758
|
|
|
$
|
1,023
|
|
|
$
|
—
|
|
|
$
|
4,046
|
|
|
$
|
17,827
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Inflows
|
741
|
|
|
118
|
|
|
370
|
|
|
—
|
|
|
1,229
|
|
|||||
Outflows:
|
|
|
|
|
|
|
|
|
|
||||||||||
Redemptions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Distributions
|
(280
|
)
|
|
(168
|
)
|
|
—
|
|
|
(1,416
|
)
|
|
(1,864
|
)
|
|||||
Total outflows
|
(280
|
)
|
|
(168
|
)
|
|
—
|
|
|
(1,416
|
)
|
|
(1,864
|
)
|
|||||
Net flows
|
461
|
|
|
(50
|
)
|
|
370
|
|
|
(1,416
|
)
|
|
(635
|
)
|
|||||
Change in fund value
|
(7
|
)
|
|
—
|
|
|
1
|
|
|
(170
|
)
|
|
(176
|
)
|
|||||
AUM, June 30, 2020 (1)
|
$
|
13,212
|
|
|
$
|
973
|
|
|
$
|
371
|
|
|
$
|
2,460
|
|
|
$
|
17,016
|
|
(1)
|
Includes AUM of the insurance company subsidiaries (intercompany AUM) of $256 million in opportunity funds, $221 million in the CLOs and $351 million in liquid strategies.
|
|
CLOs
|
|
Opportunity Funds
|
|
Liquid Strategies
|
|
Wind-Down Funds
|
|
Total
|
||||||||||
|
(in millions)
|
||||||||||||||||||
As of June 30, 2020:
|
|
|
|
|
|
|
|
|
|
||||||||||
Funded AUM
|
$
|
13,142
|
|
|
$
|
868
|
|
|
$
|
371
|
|
|
$
|
2,438
|
|
|
$
|
16,819
|
|
Unfunded AUM
|
70
|
|
|
105
|
|
|
—
|
|
|
22
|
|
|
197
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Fee Earning AUM
|
$
|
6,513
|
|
|
$
|
804
|
|
|
$
|
371
|
|
|
$
|
2,258
|
|
|
9,946
|
|
|
Non-Fee Earning AUM
|
6,699
|
|
|
169
|
|
|
—
|
|
|
202
|
|
|
7,070
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Intercompany AUM
|
|
|
|
|
|
|
|
|
|
||||||||||
Funded AUM
|
$
|
165
|
|
|
$
|
200
|
|
|
$
|
351
|
|
|
$
|
—
|
|
|
$
|
716
|
|
Unfunded AUM
|
56
|
|
|
56
|
|
|
—
|
|
|
—
|
|
|
112
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
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
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Intercompany AUM
|
|
|
|
|
|
|
|
|
|
||||||||||
Funded AUM
|
$
|
19
|
|
|
$
|
58
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
77
|
|
Unfunded AUM
|
30
|
|
|
84
|
|
|
—
|
|
|
—
|
|
|
114
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Revenues
|
|
|
|
|
|
|
|
||||||||
Net investment income
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
2
|
|
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
(1
|
)
|
||||
Total revenues
|
—
|
|
|
1
|
|
|
(4
|
)
|
|
1
|
|
||||
Expenses
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
23
|
|
|
22
|
|
|
48
|
|
|
46
|
|
||||
Employee compensation and benefit expenses
|
3
|
|
|
5
|
|
|
8
|
|
|
9
|
|
||||
Other operating expenses
|
6
|
|
|
4
|
|
|
11
|
|
|
7
|
|
||||
Total expenses
|
32
|
|
|
31
|
|
|
67
|
|
|
62
|
|
||||
Equity in net earnings of investees
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
1
|
|
||||
Adjusted operating income (loss) before income taxes
|
(32
|
)
|
|
(30
|
)
|
|
(76
|
)
|
|
(60
|
)
|
||||
Provision (benefit) for income taxes
|
(6
|
)
|
|
(4
|
)
|
|
(11
|
)
|
|
(9
|
)
|
||||
Adjusted operating income (loss)
|
$
|
(26
|
)
|
|
$
|
(26
|
)
|
|
$
|
(65
|
)
|
|
$
|
(51
|
)
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Effect of consolidating:
|
|
|
|
|
|
|
|
||||||||
FG VIEs
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
(4
|
)
|
|
$
|
6
|
|
Investment vehicles
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
VIE consolidation effect
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
(4
|
)
|
|
$
|
6
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Net income (loss) attributable to AGL
|
$
|
183
|
|
|
$
|
142
|
|
|
$
|
128
|
|
|
$
|
196
|
|
Less pre-tax adjustments:
|
|
|
|
|
|
|
|
||||||||
Realized gains (losses) on investments
|
4
|
|
|
8
|
|
|
(1
|
)
|
|
(4
|
)
|
||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
97
|
|
|
(12
|
)
|
|
9
|
|
|
(40
|
)
|
||||
Fair value gains (losses) on CCS
|
(25
|
)
|
|
19
|
|
|
23
|
|
|
10
|
|
||||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
|
2
|
|
|
(12
|
)
|
|
(55
|
)
|
|
(3
|
)
|
||||
Total pre-tax adjustments
|
78
|
|
|
3
|
|
|
(24
|
)
|
|
(37
|
)
|
||||
Less tax effect on pre-tax adjustments
|
(14
|
)
|
|
(2
|
)
|
|
—
|
|
|
6
|
|
||||
Adjusted operating income (loss)
|
$
|
119
|
|
|
$
|
141
|
|
|
$
|
152
|
|
|
$
|
227
|
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Gross realized gains on available-for-sale securities
|
$
|
16
|
|
|
$
|
13
|
|
|
$
|
23
|
|
|
$
|
19
|
|
Gross realized losses on available-for-sale securities
|
(8
|
)
|
|
(1
|
)
|
|
(9
|
)
|
|
(3
|
)
|
||||
Credit impairments
|
(4
|
)
|
|
(4
|
)
|
|
(15
|
)
|
|
(20
|
)
|
||||
Net realized investment gains (losses)
|
$
|
4
|
|
|
$
|
8
|
|
|
$
|
(1
|
)
|
|
$
|
(4
|
)
|
|
|
As of June 30, 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 bps
|
|
$
|
(274
|
)
|
|
$
|
(113
|
)
|
|
$
|
(315
|
)
|
|
$
|
(130
|
)
|
Base Scenario
|
|
(161
|
)
|
|
—
|
|
|
(185
|
)
|
|
—
|
|
||||
Decrease of 25 bps
|
|
(105
|
)
|
|
56
|
|
|
(97
|
)
|
|
88
|
|
||||
All transactions priced at floor
|
|
(68
|
)
|
|
93
|
|
|
(56
|
)
|
|
129
|
|
(1)
|
Includes the effects of changes in the net spreads assumed by the Company.
|
|
As of June 30, 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
|
$
|
6,444
|
|
|
$
|
76.66
|
|
|
$
|
6,639
|
|
|
$
|
71.18
|
|
Less pre-tax adjustments:
|
|
|
|
|
|
|
|
||||||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives
|
(47
|
)
|
|
(0.56
|
)
|
|
(56
|
)
|
|
(0.60
|
)
|
||||
Fair value gains (losses) on CCS
|
76
|
|
|
0.90
|
|
|
52
|
|
|
0.56
|
|
||||
Unrealized gain (loss) on investment portfolio excluding foreign exchange effect
|
510
|
|
|
6.07
|
|
|
486
|
|
|
5.21
|
|
||||
Less taxes
|
(92
|
)
|
|
(1.09
|
)
|
|
(89
|
)
|
|
(0.95
|
)
|
||||
Adjusted operating shareholders’ equity
|
5,997
|
|
|
71.34
|
|
|
6,246
|
|
|
66.96
|
|
||||
Pre-tax adjustments:
|
|
|
|
|
|
|
|
|
|
||||||
Less: Deferred acquisition costs
|
116
|
|
|
1.37
|
|
|
111
|
|
|
1.19
|
|
||||
Plus: Net present value of estimated net future revenue
|
188
|
|
|
2.24
|
|
|
206
|
|
|
2.20
|
|
||||
Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed
|
3,317
|
|
|
39.46
|
|
|
3,296
|
|
|
35.34
|
|
||||
Plus taxes
|
(590
|
)
|
|
(7.04
|
)
|
|
(590
|
)
|
|
(6.32
|
)
|
||||
Adjusted book value
|
$
|
8,796
|
|
|
$
|
104.63
|
|
|
9,047
|
|
|
96.99
|
|
||
|
|
|
|
|
|
|
|
||||||||
Gain (loss) related to VIE consolidation included in adjusted operating shareholders' equity (net of tax provision of $2 and $2)
|
$
|
8
|
|
|
$
|
0.09
|
|
|
$
|
7
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) related to VIE consolidation included in adjusted book value (net of tax benefit of $1 and $1)
|
$
|
(2
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(4
|
)
|
|
$
|
(0.05
|
)
|
|
Second Quarter 2020
|
|
Second 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
|
$
|
60
|
|
|
$
|
81
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
149
|
|
|
$
|
43
|
|
|
$
|
12
|
|
|
$
|
(4
|
)
|
|
$
|
—
|
|
|
$
|
51
|
|
Less: Installment GWP and other GAAP adjustments (2)
|
—
|
|
|
81
|
|
|
8
|
|
|
—
|
|
|
89
|
|
|
(1
|
)
|
|
12
|
|
|
(4
|
)
|
|
—
|
|
|
7
|
|
||||||||||
Upfront GWP
|
60
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60
|
|
|
44
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
44
|
|
||||||||||
Plus: Installment premium PVP
|
—
|
|
|
28
|
|
|
8
|
|
|
—
|
|
|
36
|
|
|
—
|
|
|
8
|
|
|
3
|
|
|
1
|
|
|
12
|
|
||||||||||
PVP
|
$
|
60
|
|
|
$
|
28
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
96
|
|
|
$
|
44
|
|
|
$
|
8
|
|
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
56
|
|
|
Six Months 2020
|
|
Six Months 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)
|
||||||||||||||||||||||||||||||||||||||
Total GWP
|
$
|
89
|
|
|
$
|
115
|
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
213
|
|
|
$
|
73
|
|
|
$
|
14
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
90
|
|
Less: Installment GWP and other GAAP adjustments (2)
|
—
|
|
|
115
|
|
|
9
|
|
|
—
|
|
|
124
|
|
|
(3
|
)
|
|
14
|
|
|
1
|
|
|
—
|
|
|
12
|
|
||||||||||
Upfront GWP
|
89
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
89
|
|
|
76
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
78
|
|
||||||||||
Plus: Installment premium PVP
|
—
|
|
|
49
|
|
|
9
|
|
|
—
|
|
|
58
|
|
|
—
|
|
|
12
|
|
|
7
|
|
|
1
|
|
|
20
|
|
||||||||||
Total PVP
|
$
|
89
|
|
|
$
|
49
|
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
147
|
|
|
$
|
76
|
|
|
$
|
12
|
|
|
$
|
8
|
|
|
$
|
2
|
|
|
$
|
98
|
|
(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, 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 June 30, 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
|
|
$
|
73,179
|
|
|
A-
|
|
$
|
73,467
|
|
|
A-
|
Tax backed
|
|
35,419
|
|
|
A-
|
|
37,047
|
|
|
A-
|
||
Municipal utilities
|
|
25,973
|
|
|
A-
|
|
26,195
|
|
|
A-
|
||
Transportation
|
|
15,896
|
|
|
BBB+
|
|
16,209
|
|
|
BBB+
|
||
Healthcare
|
|
7,575
|
|
|
BBB+
|
|
7,148
|
|
|
A-
|
||
Higher education
|
|
5,718
|
|
|
A-
|
|
5,916
|
|
|
A-
|
||
Infrastructure finance
|
|
5,403
|
|
|
A-
|
|
5,429
|
|
|
A-
|
||
Housing revenue
|
|
1,290
|
|
|
BBB
|
|
1,321
|
|
|
BBB+
|
||
Investor-owned utilities
|
|
653
|
|
|
A-
|
|
655
|
|
|
A-
|
||
Renewable energy
|
|
207
|
|
|
A-
|
|
210
|
|
|
A-
|
||
Other public finance—U.S.
|
|
1,830
|
|
|
A-
|
|
1,890
|
|
|
A-
|
||
Total public finance—U.S.
|
|
173,143
|
|
|
A-
|
|
175,487
|
|
|
A-
|
||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|||
Regulated utilities
|
|
17,783
|
|
|
BBB+
|
|
18,995
|
|
|
BBB+
|
||
Infrastructure finance
|
|
16,880
|
|
|
BBB
|
|
17,952
|
|
|
BBB
|
||
Sovereign and sub-sovereign
|
|
11,067
|
|
|
A+
|
|
11,341
|
|
|
A+
|
||
Renewable energy
|
|
2,244
|
|
|
A
|
|
1,555
|
|
|
A
|
||
Pooled infrastructure
|
|
1,319
|
|
|
AAA
|
|
1,416
|
|
|
AAA
|
||
Total public finance—non-U.S.
|
|
49,293
|
|
|
A-
|
|
51,259
|
|
|
A-
|
||
Total public finance
|
|
222,436
|
|
|
A-
|
|
226,746
|
|
|
A-
|
||
Structured finance:
|
|
|
|
|
|
|
|
|
|
|||
U.S.:
|
|
|
|
|
|
|
|
|
|
|||
RMBS
|
|
3,281
|
|
|
BBB-
|
|
3,546
|
|
|
BBB-
|
||
Life insurance transactions
|
|
1,977
|
|
|
AA-
|
|
1,776
|
|
|
AA-
|
||
Pooled corporate obligations
|
|
1,310
|
|
|
AA-
|
|
1,401
|
|
|
AA-
|
||
Consumer receivables
|
|
861
|
|
|
A-
|
|
962
|
|
|
A-
|
||
Financial products
|
|
808
|
|
|
AA-
|
|
1,019
|
|
|
AA-
|
||
Other structured finance—U.S.
|
|
585
|
|
|
BBB
|
|
596
|
|
|
BBB+
|
||
Total structured finance—U.S.
|
|
8,822
|
|
|
A-
|
|
9,300
|
|
|
A-
|
||
Non-U.S.:
|
|
|
|
|
|
|
|
|
|
|||
RMBS
|
|
400
|
|
|
A
|
|
427
|
|
|
A
|
||
Pooled corporate obligations
|
|
55
|
|
|
BB+
|
|
55
|
|
|
BB+
|
||
Other structured finance
|
|
246
|
|
|
A
|
|
279
|
|
|
A+
|
||
Total structured finance—non-U.S.
|
|
701
|
|
|
A
|
|
761
|
|
|
A
|
||
Total structured finance
|
|
9,523
|
|
|
A-
|
|
10,061
|
|
|
A-
|
||
Total net par outstanding
|
|
$
|
231,959
|
|
|
A-
|
|
$
|
236,807
|
|
|
A-
|
|
|
As of June 30, 2020
|
|
As of December 31, 2019
|
||||||||||
Rating
Category
|
|
Net Par Outstanding
|
|
%
|
|
Net Par Outstanding
|
|
%
|
||||||
|
|
(dollars in millions)
|
||||||||||||
AAA
|
|
$
|
4,111
|
|
|
1.8
|
%
|
|
$
|
4,361
|
|
|
1.8
|
%
|
AA
|
|
26,635
|
|
|
11.4
|
|
|
29,037
|
|
|
12.3
|
|
||
A
|
|
104,295
|
|
|
45.0
|
|
|
111,329
|
|
|
47.0
|
|
||
BBB
|
|
88,542
|
|
|
38.2
|
|
|
83,574
|
|
|
35.3
|
|
||
BIG
|
|
8,376
|
|
|
3.6
|
|
|
8,506
|
|
|
3.6
|
|
||
Total net par outstanding
|
|
$
|
231,959
|
|
|
100.0
|
%
|
|
$
|
236,807
|
|
|
100.0
|
%
|
•
|
Constitutionally Guaranteed.
|
•
|
Public Corporations – Certain Revenues Potentially Subject to Clawback.
|
•
|
Other Public Corporations.
|
|
|
Net Par Outstanding
|
|
|
||||||||||||||||||||
|
|
AGM
|
|
AGC
|
|
AG Re
|
|
Eliminations (1)
|
|
Total
Net Par Outstanding
|
|
Gross
Par Outstanding
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
Commonwealth Constitutionally Guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commonwealth of Puerto Rico - General Obligation Bonds (2)
|
|
$
|
611
|
|
|
$
|
268
|
|
|
$
|
375
|
|
|
$
|
(1
|
)
|
|
$
|
1,253
|
|
|
$
|
1,294
|
|
Puerto Rico Public Buildings Authority (PBA) (2)
|
|
7
|
|
|
140
|
|
|
—
|
|
|
(7
|
)
|
|
140
|
|
|
145
|
|
||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Puerto Rico Highways and Transportation Authority (PRHTA) (Transportation revenue) (2)
|
|
254
|
|
|
480
|
|
|
187
|
|
|
(79
|
)
|
|
842
|
|
|
842
|
|
||||||
PRHTA (Highway revenue) (2)
|
|
406
|
|
|
74
|
|
|
35
|
|
|
—
|
|
|
515
|
|
|
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)
|
|
528
|
|
|
71
|
|
|
226
|
|
|
—
|
|
|
825
|
|
|
838
|
|
||||||
PRASA
|
|
—
|
|
|
284
|
|
|
89
|
|
|
—
|
|
|
373
|
|
|
373
|
|
||||||
MFA
|
|
176
|
|
|
33
|
|
|
62
|
|
|
—
|
|
|
271
|
|
|
282
|
|
||||||
U of PR
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||||
Total exposure to Puerto Rico
|
|
$
|
1,982
|
|
|
$
|
1,518
|
|
|
$
|
975
|
|
|
$
|
(87
|
)
|
|
$
|
4,388
|
|
|
$
|
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 (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
|
|
165
|
|
180
|
|
307
|
|
82
|
|
—
|
|
842
|
|
||||||||||||
PRHTA (Highway revenue)
|
22
|
|
—
|
|
35
|
|
40
|
|
32
|
|
33
|
|
58
|
|
192
|
|
103
|
|
—
|
|
—
|
|
515
|
|
||||||||||||
PRCCDA
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
19
|
|
76
|
|
57
|
|
—
|
|
—
|
|
152
|
|
||||||||||||
PRIFA
|
—
|
|
—
|
|
—
|
|
—
|
|
2
|
|
—
|
|
—
|
|
—
|
|
7
|
|
7
|
|
—
|
|
16
|
|
||||||||||||
Other Public Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
PREPA
|
49
|
|
—
|
|
28
|
|
28
|
|
95
|
|
93
|
|
386
|
|
142
|
|
4
|
|
—
|
|
—
|
|
825
|
|
||||||||||||
PRASA
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
109
|
|
—
|
|
2
|
|
15
|
|
246
|
|
373
|
|
||||||||||||
MFA
|
49
|
|
—
|
|
44
|
|
43
|
|
23
|
|
18
|
|
89
|
|
5
|
|
—
|
|
—
|
|
—
|
|
271
|
|
||||||||||||
U of PR
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
—
|
|
—
|
|
—
|
|
1
|
|
||||||||||||
Total
|
$
|
291
|
|
$
|
—
|
|
$
|
153
|
|
$
|
176
|
|
$
|
206
|
|
$
|
222
|
|
$
|
1,173
|
|
$
|
1,053
|
|
$
|
764
|
|
$
|
104
|
|
$
|
246
|
|
$
|
4,388
|
|
|
Scheduled Net Debt Service Outstanding
|
|||||||||||||||||||||||||||||||||||
|
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
|
|
$
|
95
|
|
$
|
70
|
|
$
|
128
|
|
$
|
514
|
|
$
|
572
|
|
$
|
294
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,920
|
|
PBA
|
9
|
|
—
|
|
20
|
|
6
|
|
13
|
|
6
|
|
81
|
|
50
|
|
20
|
|
—
|
|
—
|
|
205
|
|
||||||||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
PRHTA (Transportation revenue)
|
47
|
|
—
|
|
61
|
|
69
|
|
74
|
|
42
|
|
340
|
|
314
|
|
371
|
|
89
|
|
—
|
|
1,407
|
|
||||||||||||
PRHTA (Highway revenue)
|
36
|
|
—
|
|
61
|
|
64
|
|
54
|
|
53
|
|
144
|
|
253
|
|
111
|
|
—
|
|
—
|
|
776
|
|
||||||||||||
PRCCDA
|
3
|
|
—
|
|
7
|
|
7
|
|
7
|
|
7
|
|
52
|
|
103
|
|
61
|
|
—
|
|
—
|
|
247
|
|
||||||||||||
PRIFA
|
—
|
|
—
|
|
1
|
|
1
|
|
3
|
|
1
|
|
4
|
|
3
|
|
10
|
|
8
|
|
—
|
|
31
|
|
||||||||||||
Other Public Corporations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
PREPA
|
66
|
|
3
|
|
63
|
|
62
|
|
128
|
|
122
|
|
467
|
|
157
|
|
5
|
|
—
|
|
—
|
|
1,073
|
|
||||||||||||
PRASA
|
10
|
|
—
|
|
19
|
|
19
|
|
19
|
|
20
|
|
190
|
|
68
|
|
70
|
|
82
|
|
272
|
|
769
|
|
||||||||||||
MFA
|
55
|
|
—
|
|
54
|
|
52
|
|
29
|
|
24
|
|
103
|
|
6
|
|
—
|
|
—
|
|
—
|
|
323
|
|
||||||||||||
U of PR
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
—
|
|
—
|
|
—
|
|
1
|
|
||||||||||||
Total
|
$
|
399
|
|
$
|
3
|
|
$
|
360
|
|
$
|
375
|
|
$
|
397
|
|
$
|
403
|
|
$
|
1,895
|
|
$
|
1,527
|
|
$
|
942
|
|
$
|
179
|
|
$
|
272
|
|
$
|
6,752
|
|
Year
insured:
|
|
Prime
First Lien
|
|
Alt-A
First Lien
|
|
Option
ARMs
|
|
Subprime
First Lien
|
|
Second
Lien
|
|
Total Net Par
Outstanding
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
2004 and prior
|
|
$
|
19
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
525
|
|
|
$
|
40
|
|
|
$
|
602
|
|
2005
|
|
45
|
|
|
207
|
|
|
22
|
|
|
215
|
|
|
117
|
|
|
606
|
|
||||||
2006
|
|
40
|
|
|
39
|
|
|
10
|
|
|
238
|
|
|
197
|
|
|
524
|
|
||||||
2007
|
|
—
|
|
|
307
|
|
|
25
|
|
|
916
|
|
|
260
|
|
|
1,508
|
|
||||||
2008
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41
|
|
|
—
|
|
|
41
|
|
||||||
Total exposures
|
|
$
|
104
|
|
|
$
|
571
|
|
|
$
|
57
|
|
|
$
|
1,935
|
|
|
$
|
614
|
|
|
$
|
3,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Exposures rated BIG
|
|
$
|
59
|
|
|
$
|
320
|
|
|
$
|
31
|
|
|
$
|
982
|
|
|
$
|
162
|
|
|
$
|
1,554
|
|
|
Gross Exposure
|
|
Net Exposure
|
||||||||||||
|
As of June 30, 2020
|
|
As of December 31, 2019
|
|
As of June 30, 2020
|
|
As of December 31, 2019
|
||||||||
|
(in millions)
|
||||||||||||||
Life insurance transactions (1)
|
$
|
1,063
|
|
|
$
|
1,046
|
|
|
$
|
915
|
|
|
$
|
898
|
|
Aircraft residual value insurance policies
|
391
|
|
|
398
|
|
|
236
|
|
|
243
|
|
||||
Total
|
$
|
1,454
|
|
|
$
|
1,444
|
|
|
$
|
1,151
|
|
|
$
|
1,141
|
|
(1)
|
The life insurance transactions net exposure is projected to increase to approximately $1.0 billion by September 30, 2026.
|
|
As of June 30, 2020
|
|
As of December 31, 2019
|
||||||||||||
|
AGL
|
|
U.S. Holding Companies
|
|
AGL
|
|
U.S. Holding Companies
|
||||||||
|
(in millions)
|
||||||||||||||
Investments and cash (1)
|
$
|
12
|
|
|
$
|
116
|
|
|
$
|
135
|
|
|
$
|
243
|
|
Receivables from affiliates (2)
|
24
|
|
|
—
|
|
|
29
|
|
|
—
|
|
||||
Receivable from U.S. Holding Companies
|
50
|
|
|
—
|
|
|
40
|
|
|
—
|
|
||||
Other assets
|
3
|
|
|
80
|
|
|
2
|
|
|
59
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Long term debt
|
—
|
|
|
1,219
|
|
|
—
|
|
|
1,231
|
|
||||
Loans payable to affiliate
|
—
|
|
|
290
|
|
|
—
|
|
|
290
|
|
||||
Payable to affiliates (2)
|
6
|
|
|
9
|
|
|
9
|
|
|
5
|
|
||||
Payable to AGL
|
—
|
|
|
50
|
|
|
—
|
|
|
40
|
|
||||
Other liabilities
|
6
|
|
|
137
|
|
|
8
|
|
|
130
|
|
(1)
|
As of June 30, 2020 and December 31, 2019, weighted average duration of U.S. Holding Companies' fixed-maturity securities (excluding AGUS' investment in AGMH's debt) was 1.9 years and 4.4 years, respectively.
|
(2)
|
Represents receivable and payables with non-guarantor subsidiaries.
|
|
Six Months 2020
|
||||||
|
AGL
|
|
U.S. Holding Companies
|
||||
|
(in millions)
|
||||||
Revenues
|
$
|
—
|
|
|
$
|
(4
|
)
|
|
|
|
|
||||
Interest expense
|
—
|
|
|
48
|
|
||
Other expenses
|
18
|
|
|
1
|
|
||
|
|
|
|
||||
Income (loss) before provision for income taxes
|
(18
|
)
|
|
(53
|
)
|
||
Equity in net earnings of investees
|
—
|
|
|
(5
|
)
|
||
Net income (loss)
|
(18
|
)
|
|
(46
|
)
|
|
AGL
|
|
U.S. Holding Companies
|
||||
|
(in millions)
|
||||||
Second Quarter 2020
|
|
|
|
||||
Intercompany sources
|
$
|
170
|
|
|
$
|
24
|
|
Intercompany (uses)
|
—
|
|
|
(170
|
)
|
||
External sources (uses):
|
|
|
|
||||
Dividends paid to AGL shareholders
|
(17
|
)
|
|
—
|
|
||
Repurchases of common shares (1)
|
(164
|
)
|
|
—
|
|
||
Interest paid (2)
|
—
|
|
|
(32
|
)
|
||
|
|
|
|
||||
Second Quarter 2019
|
|
|
|
||||
Intercompany sources
|
$
|
132
|
|
|
$
|
128
|
|
Intercompany (uses)
|
—
|
|
|
(87
|
)
|
||
External sources (uses):
|
|
|
|
||||
Dividends paid to AGL shareholders
|
(19
|
)
|
|
—
|
|
||
Repurchases of common shares (1)
|
(110
|
)
|
|
—
|
|
||
Interest paid (2)
|
—
|
|
|
(33
|
)
|
||
|
|
|
|
||||
Six Months 2020
|
|
|
|
||||
Intercompany sources
|
210
|
|
|
181
|
|
||
Intercompany (uses)
|
—
|
|
|
(240
|
)
|
||
External sources (uses):
|
|
|
|
||||
Dividends paid to AGL shareholders
|
(37
|
)
|
|
—
|
|
||
Repurchases of common shares (1)
|
(280
|
)
|
|
—
|
|
||
Interest paid (2)
|
—
|
|
|
(41
|
)
|
||
|
|
|
|
||||
Six Months 2019
|
|
|
|
||||
Intercompany sources
|
232
|
|
|
244
|
|
||
Intercompany (uses)
|
—
|
|
|
(147
|
)
|
||
External sources (uses):
|
|
|
|
||||
Dividends paid to AGL shareholders
|
(39
|
)
|
|
—
|
|
||
Repurchases of common shares (1)
|
(190
|
)
|
|
—
|
|
||
Interest paid (2)
|
—
|
|
|
(42
|
)
|
(1)
|
See Item 1, Financial Statements, Note 14, Shareholders' Equity, for additional information about share repurchases and authorizations.
|
(2)
|
See Long-Term Obligations below for interest paid by subsidiary.
|
|
As of June 30, 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
|
|
|
479
|
|
|
730
|
|
|
476
|
|
||||
AGM
|
4
|
|
|
4
|
|
|
4
|
|
|
4
|
|
||||
AGMH's debt purchased by AGUS (1)
|
(154
|
)
|
|
(106
|
)
|
|
(131
|
)
|
|
(89
|
)
|
||||
Elimination of intercompany loans
|
(290
|
)
|
|
(290
|
)
|
|
(290
|
)
|
|
(290
|
)
|
||||
Total
|
$
|
1,430
|
|
|
$
|
1,222
|
|
|
$
|
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 Six Months 2020 and $1 million in Six Months 2019. There was no loss on extinguishment of debt in Second Quarter 2020 and Second 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.
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
|
|
|
|
|
||||||||||
Public finance
|
$
|
21
|
|
|
$
|
(9
|
)
|
|
$
|
(73
|
)
|
|
$
|
(237
|
)
|
Structured finance:
|
|
|
|
|
|
|
|
||||||||
U.S. RMBS
|
23
|
|
|
43
|
|
|
44
|
|
|
52
|
|
||||
Other structured finance
|
(3
|
)
|
|
—
|
|
|
(4
|
)
|
|
1
|
|
||||
Structured finance
|
20
|
|
|
43
|
|
|
40
|
|
|
53
|
|
||||
Claims (paid) recovered, net of reinsurance (1)
|
$
|
41
|
|
|
$
|
34
|
|
|
$
|
(33
|
)
|
|
$
|
(184
|
)
|
(1)
|
Includes $0.3 million and $11 million recovered for consolidated FG VIEs for Second Quarter 2020 and 2019, respectively, and de minimis amount paid and $12 million recovered for Six Months 2020 and Six Months 2019, respectively.
|
•
|
The maximum amount available during 2020 for AGM to distribute as dividends without regulatory approval is estimated to be approximately $193 million, of which approximately $87 million is estimated to be available for distribution in the third quarter of 2020.
|
•
|
The maximum amount available during 2020 for AGC to distribute as ordinary dividends is approximately $166 million, of which approximately $15 million is available for distribution in the third 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 $19 million, none of which is available for distribution in the third 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 June 30, 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 $226 million as of June 30, 2020, and (ii) the amount of statutory surplus, which as of June 30, 2020 was $311 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 June 30, 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 $399 million as of June 30, 2020, and (ii) the amount of statutory surplus, which as of June 30, 2020 was $286 million.
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
|
|
|
|
(in millions)
|
||||||||||
Dividends paid by AGC to AGUS
|
$
|
24
|
|
|
$
|
24
|
|
|
$
|
109
|
|
|
$
|
66
|
|
Dividends paid by AGM to AGMH
|
—
|
|
|
4
|
|
|
72
|
|
|
78
|
|
||||
Dividends paid by AG Re to AGL
|
—
|
|
|
45
|
|
|
—
|
|
|
85
|
|
||||
Dividends paid by MAC to MAC Holdings (1)
|
20
|
|
|
100
|
|
|
20
|
|
|
105
|
|
(1)
|
MAC Holdings distributed substantially all amounts to AGM and AGC, in proportion to their ownership percentages.
|
|
Second Quarter
|
|
Six Months
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Net cash flows provided by (used in) operating activities before effect of VIE consolidation
|
$
|
176
|
|
|
$
|
136
|
|
|
$
|
79
|
|
|
$
|
(197
|
)
|
Effect of VIE consolidation (1)
|
(457
|
)
|
|
(2
|
)
|
|
(524
|
)
|
|
(1
|
)
|
||||
Net cash flows provided by (used in) operating activities
|
(281
|
)
|
|
134
|
|
|
(445
|
)
|
|
(198
|
)
|
||||
Net cash flows provided by (used in) investing activities before effect of VIE consolidation
|
166
|
|
|
67
|
|
|
408
|
|
|
535
|
|
||||
Effect of VIE consolidation (1)
|
178
|
|
|
72
|
|
|
325
|
|
|
96
|
|
||||
Net cash flows provided by (used in) investing activities
|
344
|
|
|
139
|
|
|
733
|
|
|
631
|
|
||||
Dividends paid
|
(17
|
)
|
|
(19
|
)
|
|
(37
|
)
|
|
(39
|
)
|
||||
Repurchases of common stock
|
(164
|
)
|
|
(110
|
)
|
|
(280
|
)
|
|
(190
|
)
|
||||
Repurchase of debt
|
—
|
|
|
—
|
|
|
(21
|
)
|
|
(3
|
)
|
||||
Net cash flows provided by (used in) financing activities before effect of VIE consolidation
|
(2
|
)
|
|
(2
|
)
|
|
(13
|
)
|
|
(16
|
)
|
||||
Effect of VIE consolidation (1)
|
372
|
|
|
(70
|
)
|
|
360
|
|
|
(95
|
)
|
||||
Net cash flows provided by (used in) financing activities (2)
|
189
|
|
|
(201
|
)
|
|
9
|
|
|
(343
|
)
|
||||
Effect of exchange rate changes
|
—
|
|
|
(1
|
)
|
|
(7
|
)
|
|
—
|
|
||||
Cash and restricted cash at beginning of period
|
221
|
|
|
123
|
|
|
183
|
|
|
104
|
|
||||
Total cash and restricted cash at the end of the period
|
$
|
473
|
|
|
$
|
194
|
|
|
$
|
473
|
|
|
$
|
194
|
|
(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 June 30, 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
|
$
|
3,789
|
|
|
$
|
4,113
|
|
|
$
|
4,036
|
|
|
$
|
4,340
|
|
U.S. government and agencies
|
160
|
|
|
174
|
|
|
137
|
|
|
147
|
|
||||
Corporate securities
|
2,327
|
|
|
2,389
|
|
|
2,137
|
|
|
2,221
|
|
||||
Mortgage-backed securities (2):
|
|
|
|
|
|
|
|
|
|||||||
RMBS
|
649
|
|
|
635
|
|
|
745
|
|
|
775
|
|
||||
Commercial mortgage-backed securities (CMBS)
|
384
|
|
|
411
|
|
|
402
|
|
|
419
|
|
||||
Asset-backed securities
|
780
|
|
|
768
|
|
|
684
|
|
|
720
|
|
||||
Non-U.S. government securities
|
148
|
|
|
140
|
|
|
230
|
|
|
232
|
|
||||
Total fixed-maturity securities
|
8,237
|
|
|
8,630
|
|
|
8,371
|
|
|
8,854
|
|
||||
Short-term investments
|
821
|
|
|
821
|
|
|
1,268
|
|
|
1,268
|
|
||||
Total fixed-maturity and short-term investments
|
$
|
9,058
|
|
|
$
|
9,451
|
|
|
$
|
9,639
|
|
|
$
|
10,122
|
|
(1)
|
In 2020, the Company established allowance for credit looses which was $75 million as of June 30, 2020.
|
(2)
|
U.S. government-agency obligations were approximately 39% of mortgage backed securities as of June 30, 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
|
$
|
35
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
35
|
|
|
$
|
(1
|
)
|
Corporate securities
|
341
|
|
|
(8
|
)
|
|
61
|
|
|
(12
|
)
|
|
402
|
|
|
(20
|
)
|
||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
RMBS
|
30
|
|
|
(2
|
)
|
|
1
|
|
|
—
|
|
|
31
|
|
|
(2
|
)
|
||||||
CMBS
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||||
Asset-backed securities
|
468
|
|
|
(10
|
)
|
|
118
|
|
|
(3
|
)
|
|
586
|
|
|
(13
|
)
|
||||||
Non-U.S. government securities
|
74
|
|
|
(1
|
)
|
|
40
|
|
|
(8
|
)
|
|
114
|
|
|
(9
|
)
|
||||||
Total
|
$
|
948
|
|
|
$
|
(22
|
)
|
|
$
|
221
|
|
|
$
|
(23
|
)
|
|
$
|
1,169
|
|
|
$
|
(45
|
)
|
Number of securities (1)
|
|
|
|
196
|
|
|
|
|
|
65
|
|
|
|
|
|
244
|
|
|
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
|
$
|
338
|
|
|
$
|
335
|
|
Due after one year through five years
|
1,577
|
|
|
1,631
|
|
||
Due after five years through 10 years
|
1,994
|
|
|
2,078
|
|
||
Due after 10 years
|
3,295
|
|
|
3,540
|
|
||
Mortgage-backed securities:
|
|
|
|
|
|
||
RMBS
|
649
|
|
|
635
|
|
||
CMBS
|
384
|
|
|
411
|
|
||
Total
|
$
|
8,237
|
|
|
$
|
8,630
|
|
Rating
|
|
As of
June 30, 2020 |
|
As of
December 31, 2019 |
||
AAA
|
|
15.7
|
%
|
|
16.2
|
%
|
AA
|
|
41.6
|
|
|
45.1
|
|
A
|
|
24.2
|
|
|
21.2
|
|
BBB
|
|
10.1
|
|
|
8.2
|
|
BIG (1)
|
|
7.7
|
|
|
8.6
|
|
Not rated
|
|
0.7
|
|
|
0.7
|
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
(1)
|
Includes primarily loss mitigation and other risk management assets. See Item I, Financial Statements, Note 8, 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
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period
|
|
Total
Number of
Shares
Purchased
|
|
Average
Price Paid
Per Share
|
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Program (1)
|
|
Maximum Number
(or Approximate Dollar Value) of Shares that May Yet Be
Purchased
Under the Program (2)
|
||||||
April 1 - April 30
|
|
2,994,809
|
|
|
$
|
27.92
|
|
|
2,994,809
|
|
|
$
|
248,027,315
|
|
May 1 - May 31
|
|
1,856,218
|
|
|
$
|
27.02
|
|
|
1,847,911
|
|
|
$
|
198,117,218
|
|
June 1 - June 30
|
|
1,113,702
|
|
|
$
|
27.16
|
|
|
1,113,702
|
|
|
$
|
167,873,537
|
|
Total
|
|
5,964,729
|
|
|
$
|
27.50
|
|
|
5,956,422
|
|
|
|
|
(1)
|
After giving effect to repurchases since the beginning of 2013 through August 6, 2020, the Company has repurchased a total of 116.1 million common shares for approximately $3,515 million, excluding commissions, at an average price of $30.27 per share. The Board of Directors authorized, on February 26, 2020, an additional $250 million of share repurchases. As of August 6, 2020, the remaining authorization the Company was authorized to purchase was $149 million of its common shares, on a settlement basis.
|
(2)
|
Excludes commissions.
|
ITEM 6.
|
EXHIBITS
|
Exhibit
Number
|
|
|
|
10.1
|
|
|
|
31.1
|
|
|
|
31.2
|
|
|
|
32.1
|
|
|
|
32.2
|
|
|
|
101.1
|
|
|
The following financial information from Assured Guaranty Ltd.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets at June 30, 2020 and December 31, 2019; (ii) Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30, 2020 and 2019; (iii) Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months ended June 30, 2020 and 2019; (iv) Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months ended June 30, 2020 and 2019; (v) Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 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 June 30, 2020 formatted, in Inline XBRL (the cover page XBRL tags are embedded in the Inline XBRL document and included in Exhibit 101).
|
*
|
Management contract or compensatory plan
|
|
ASSURED GUARANTY LTD.
(Registrant)
|
|
|
|
|
Dated August 7, 2020
|
By:
|
/s/ ROBERT A. BAILENSON
|
|
|
|
|
|
Robert A. Bailenson
Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer)
|
(a)
|
The term “Agreement” shall include the Agreement and the Exhibits thereto, and including the plans and arrangements under which Executive is entitled to benefits in accordance with the Agreement and the Exhibits.
|
(b)
|
The term “Claims” shall include any and all rights, claims, demands, debts, dues, sums of money, accounts, attorneys’ fees, complaints, judgments, executions, suits, controversies, cross-claims, counter-claims, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs, liabilities, actions and causes of action of any nature whatsoever, known or unknown, cognizable at law or equity, and shall include claims related to pay, commission, hours, bonuses, pension, disability, physical or mental affliction, benefits including vacation days and payment for unused vacation, reimbursement for expenses, terms and conditions of employment and claims of discrimination on account of age, race, color, sex, sexual harassment, sexual orientation, marital status, disability, national origin, citizenship, religion, or retaliation and shall include, without limitation, claims arising under (or alleged to have arisen under) (i) the Age Discrimination in Employment Act of 1967, as amended (“ADEA”); (ii) Title VII of the Civil Rights Act of 1964, as amended; (iii) The Civil Rights Act of 1991; (iv) Section 1981 through 1988 of Title 42 of the United States Code, as amended; (v) the Employee Retirement Income Security Act of 1974, as amended; (vi) The Immigration Reform Control Act, as amended; (vii) The Americans with Disabilities Act of 1990, as amended; (viii) The National Labor Relations Act, as amended; (ix) The Fair Labor Standards Act, as amended; (x) The Occupational Safety and Health Act, as amended; (xi) The Family and Medical Leave Act of 1993; (xii) the Sarbanes-Oxley Act; (xiii) the federal Worker Adjustment and Retraining Notification Act and any similar state laws; (xiv) any state antidiscrimination law; (xv) any state or local wage and hour law; (xvi) any other local, state or federal law, regulation or ordinance; (xvii) any whistleblower law; (xviii) any public policy, contract, tort, or common law; or
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(c)
|
The term “Closing Date” shall have the meaning set forth in the Purchase Agreement, dated as of August 7, 2019, by and among Assured Guaranty Ltd., Assured Guaranty US Holdings Inc., Executive, and the other persons party thereto.
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(d)
|
The term “Company Releasees” shall include the Assured Guaranty Group, and their officers, directors, trustees, members, representatives, agents, employees, shareholders (other than the holders of shares publicly traded on a nationally recognized securities exchange), partners, attorneys, assigns, administrators and fiduciaries under any employee benefit plan of the Company and its Affiliates, and insurers, and their predecessors and successors.
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(e)
|
The term “Executive Releasees” shall mean Executive, Executive’s related estate planning vehicles and all successors and assigns of Executive.
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(f)
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The term “Executive Releasors” shall include Executive, and his family, heirs, executors, representatives, agents, insurers, administrators, successors, assigns, and any other person claiming through Executive.
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(g)
|
The term “Purchase Agreement” shall mean the purchase agreement by and among the Blue Mountain Operating Companies, Executive, and certain other sellers named therein pursuant to which AGUS agreed to purchase all of the equity interests in each of the BlueMountain Operating Companies (including those owned by Executive), subject to the terms and conditions contained therein.
|
(a)
|
By this Mutual Release and Waiver, the Executive Releasors and Company Releasors do not release or waive any right or claim which they may have which arises after the date of execution of this Mutual Release and Waiver.
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(b)
|
In exchange for this Mutual Release and Waiver, Executive, the Company, BCM, Parent, and AGUS each hereby acknowledge that they have received separate
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(c)
|
The Company hereby expressly advises Executive to consult with an attorney of his choosing prior to executing this Mutual Release and Waiver.
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(d)
|
Executive has twenty-one (21) days from the Offer Date to consider whether or not to execute this Mutual Release and Waiver. In the event of such execution, Executive has a further period of seven (7) days from the date of said execution in which to revoke said execution. This Mutual Release and Waiver will not become effective until expiration of such revocation period.
|
(e)
|
This Mutual Release and Waiver:
|
i.
|
shall become final and binding immediately following the expiration of Executive’s right to revoke the execution of this Mutual Release and Waiver in accordance with paragraph 6(d) of this Exhibit A;
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ii.
|
shall not become final and binding until the expiration of such right to revoke;
|
iii.
|
shall not become final and binding if Executive revokes such execution;
|
iv.
|
shall be void ab initio in the event Executive fails to execute and return this Mutual Release and Waiver within twenty-one (21) days from the Offer Date or revokes this Mutual Release and Waiver within the revocation period provided above; provided, however, the Company, BCM, Parent and AGUS shall be entitled to any rights the Company, BCM, Parent and AGUS have hereunder, under the Agreement, or otherwise that are conditioned on their execution and delivery of this Mutual Release and Waiver; and
|
v.
|
shall be void ab initio in the event the Company, BCM, Parent, or AGUS fails to execute and return this Mutual Release and Waiver within twenty one (21) days following Executive’s execution hereof; provided, however, Executive shall be entitled to any rights Executive has hereunder, under the Agreement, or otherwise that are conditioned on Executive’s execution, delivery and non-revocation of this Mutual Release and Waiver.
|
AG US Group Services, Inc.
|
BlueMountain Capital Management, LLC
|
Name:_________________________
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Name:_________________________
|
Date:_________________________
|
Date:_________________________
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Assured Guaranty US Holdings Inc.
|
Assured Guaranty Ltd.
|
Name:_________________________
|
Name:_________________________
|
Date:_________________________
|
Date:_________________________
|
(a)
|
The term “Agreement” shall include the Agreement and the Exhibits thereto, and including the plans and arrangements under which Executive is entitled to benefits in accordance with the Agreement and the Exhibits.
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(b)
|
The term “Claims” shall include any and all rights, claims, demands, debts, dues, sums of money, accounts, attorneys’ fees, complaints, judgments, executions, suits, controversies, cross-claims, counter-claims, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs, liabilities, actions and causes of action of any nature whatsoever, known or unknown, cognizable at law or equity, and shall include claims related to pay, commission, hours, bonuses, pension, disability, physical or mental affliction, benefits including vacation days and payment for unused vacation, reimbursement for expenses, terms and conditions of employment and claims of discrimination on account of age, race, color, sex, sexual harassment, sexual orientation, marital status, disability, national origin, citizenship, religion, or retaliation and shall include, without limitation, claims arising under (or alleged to have arisen under) (i) the Age Discrimination in Employment Act of 1967, as amended (“ADEA”); (ii) Title VII of the Civil Rights Act of 1964, as amended; (iii) The Civil Rights Act of 1991; (iv) Section 1981 through 1988 of Title 42 of the United States Code, as amended; (v) the Employee Retirement Income Security Act of 1974, as amended; (vi) The Immigration Reform Control Act, as amended; (vii) The Americans with Disabilities Act of 1990, as amended; (viii) The National Labor Relations Act, as amended; (ix) The Fair Labor Standards Act, as amended; (x) The Occupational Safety and Health Act, as amended; (xi) The Family and Medical Leave Act of 1993; (xii) the Sarbanes-Oxley Act; (xiii) the federal Worker Adjustment and Retraining Notification Act and any similar state laws; (xiv) any state antidiscrimination law; (xv) any state or local wage and hour law; (xvi) any other local, state or federal law, regulation or ordinance; (xvii) any whistleblower law; (xviii) any public policy, contract, tort, or common law; or
|
(c)
|
The term “Closing Date” shall have the meaning set forth in the Purchase Agreement, dated as of August 7, 2019, by and among Assured Guaranty Ltd., Assured Guaranty US Holdings Inc., Executive, and the other persons party thereto.
|
(d)
|
The term “Company Releasees” shall include the Assured Guaranty Group, and their officers, directors, trustees, members, representatives, agents, employees, shareholders (other than the holders of shares publicly traded on a nationally recognized securities exchange), partners, attorneys, assigns, administrators and fiduciaries under any employee benefit plan of the Company and its Affiliates, and insurers, and their predecessors and successors.
|
(e)
|
The term “Executive Releasees” shall mean Executive, Executive’s related estate planning vehicles and all successors and assigns of Executive.
|
(f)
|
The term “Executive Releasors” shall include Executive, and his family, heirs, executors, representatives, agents, insurers, administrators, successors, assigns, and any other person claiming through Executive.
|
(g)
|
The term “Purchase Agreement” shall mean the purchase agreement by and among the Blue Mountain Operating Companies, Executive, and certain other sellers named therein pursuant to which AGUS agreed to purchase all of the equity interests in each of the BlueMountain Operating Companies (including those owned by Executive), subject to the terms and conditions contained therein.
|
(a)
|
By this Mutual Release and Waiver, the Executive Releasors and Company Releasors do not release or waive any right or claim which they may have which arises after the date of execution of this Mutual Release and Waiver.
|
(b)
|
In exchange for this Mutual Release and Waiver, Executive, the Company, BCM, Parent, and AGUS each hereby acknowledge that they have received separate
|
(c)
|
The Company hereby expressly advises Executive to consult with an attorney of his choosing prior to executing this Mutual Release and Waiver.
|
(d)
|
Executive has had at least twenty-one (21) days from the Offer Date to consider whether or not to execute this Mutual Release and Waiver. In the event of such execution, Executive has a further period of seven (7) days from the date of said execution in which to revoke said execution. This Mutual Release and Waiver will not become effective until expiration of such revocation period.
|
(e)
|
This Mutual Release and Waiver:
|
i.
|
shall become final and binding immediately following the expiration of Executive’s right to revoke the execution of this Mutual Release and Waiver in accordance with paragraph 6(d) of this Exhibit B;
|
ii.
|
shall not become final and binding until the expiration of such right to revoke;
|
iii.
|
shall not become final and binding if Executive revokes such execution;
|
iv.
|
shall be void ab initio in the event Executive fails to execute and return this Mutual Release and Waiver within twenty-one (21) days from the Offer Date or revokes this Mutual Release and Waiver within the revocation period provided above; provided, however, the Company, BCM, Parent and AGUS shall be entitled to any rights the Company, BCM, Parent and AGUS have hereunder, under the Agreement, or otherwise that are conditioned on their execution and delivery of this Mutual Release and Waiver; and
|
v.
|
shall be void ab initio in the event the Company, BCM, Parent, or AGUS fails to execute and return this Mutual Release and Waiver within twenty one (21) days following Executive’s execution hereof; provided, however, Executive shall be entitled to any rights Executive has hereunder, under the Agreement, or otherwise that are conditioned on Executive’s execution, delivery and non-revocation of this Mutual Release and Waiver.
|
AG US Group Services, Inc.
|
BlueMountain Capital Management, LLC
|
Name:_________________________
|
Name:_________________________
|
Date:_________________________
|
Date:_________________________
|
Assured Guaranty US Holdings Inc.
|
Assured Guaranty Ltd.
|
Name:_________________________
|
Name:_________________________
|
Date:_________________________
|
Date:_________________________
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Assured Guaranty Ltd.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
|
|
By:
|
/s/ DOMINIC J. FREDERICO
|
|
|
|
|
|
Dominic J. Frederico
|
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Assured Guaranty Ltd.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
|
|
By:
|
/s/ ROBERT A. BAILENSON
|
|
|
|
|
|
Robert A. Bailenson
|
|
|
Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ DOMINIC J. FREDERICO
|
|
|
|
Name: Dominic J. Frederico
|
|
Title: President and Chief Executive Officer
|
|
Date: August 7, 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: August 7, 2020
|
|