Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
See the risk factors set forth in Part I, “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (2022 Annual Report) and Part II, “Item 1A. Risk Factors” for the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (Q2 Quarterly Report). Except for the risk factors entitled, “Expansion of the categories and types of the Company’s investments (including those accounted for as CIVs) may expose it to increased credit, interest rate, liquidity and other risks” and “AGL, AG Re and AGRO may become subject to taxes in Bermuda after March 2035, which may adversely affect the Company’s future results of operations and on an investment in the Company,” set forth in the 2022 Annual Report, which are removed and replaced in their entirety as set forth below, there have been no material changes to the risk factors disclosed in the 2022 Annual Report or the Q2 Quarterly Report during the nine months ended September 30, 2023.
Expansion of the categories and types of the Company’s investments (including those accounted for as CIVs) , i ncluding allocations of investments to Sound Point and exclusivity arrangement with Sound Point may expose it to increased credit, interest rate, liquidity and other risks.
The Company is using Sound Point’s investment knowledge and experience to expand the categories and types of its alternative investments (including those accounted for as CIVs) by: (a) allocating $1 billion of capital in Sound Point managed funds; (b) redeploying initial amounts allocated to Sound Point in future Sound Point funds; and (c) having Sound Point serve as the U.S. Insurance Subsidiaries’ sole alternative credit manager. This expansion of categories and types of investments, allocations to Sound Point and exclusivity arrangement with Sound Point may increase the credit, interest rate and liquidity risk in the Company’s investments (including those accounted for as CIVs). In addition, the fair value of most of these assets are reported in results of operations and may be more volatile than other investments made by the Company. As a result of the Company’s expansion of the categories and types of its investments, as of September 30, 2023, the U.S. Insurance Subsidiaries had investments in Sound Point managed funds with a fair value of $378 million. In addition, the Company had $252 million of other non-Sound Point alternative investments reported in the consolidated financial statements. This expansion also has resulted in the Company investing a portion of its portfolio in assets that are less liquid than some of its other investments, and so may increase the risks described under “— Operational Risks — The ability of AGL and its subsidiaries to meet their liquidity needs may be limited”. Expanding the categories and types of Company investments (including those accounted for as CIVs), allocations to Sound Point and exclusivity arrangement with Sound Point may also expose the Company to other types of risks, including reputational risks.
AGL, AG Re and AGRO may become subject to taxes in Bermuda, which may adversely affect the Company’s future results of operations and an investment in the Company.
The Bermuda Minister of Finance, under Bermuda’s Exempted Undertakings Tax Protection Act 1966, as amended, has given AGL, AG Re and AGRO an assurance that if any legislation is enacted in Bermuda that would impose tax computed on profits or income, or computed on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, then subject to certain limitations the imposition of any such tax will not be applicable to AGL, AG Re or AGRO, or any of AGL’s or its subsidiaries’ operations, stocks, debentures or other obligations until March 31, 2035. Given the limited duration of the Minister of Finance’s assurance, the Company cannot be certain that it will not be subject to Bermuda tax after March 31, 2035.
Further, on August 8, 2023, the Bermuda Government issued the first of a series of public consultation papers as part of its considerations on the introduction of a corporate income tax that would be taken into account in calculating the effective
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tax rate of Bermuda businesses under the OECD’s global anti-base erosion (GloBE) rules. The second public consultation paper issued October 8, 2023, indicates that the Bermuda Government believes it is reasonable and proportionate for any new Bermuda corporate income tax regime to supersede any existing tax assurance certificates held by entities within the scope of the new Bermuda corporate income tax. Under the current proposal, Bermuda corporate income tax would apply only to large multinational enterprises (MNEs), as defined in the GloBE rules, with EUR 750 million or more in total global revenue in at least two of the previous four accounting periods. The proposed Bermuda corporate income tax legislation is currently anticipated to be effective for tax years beginning on or after January 1, 2025. The Bermuda Government is considering if amendments are necessary to the existing tax assurance certificate regime to ensure that tax may be collected in Bermuda from entities which are subject to the proposed Bermuda corporate income tax regime. Although we cannot predict when or if any new Bermuda corporate income tax law will be adopted or will become effective, the imposition of a Bermuda corporate income tax could, if applicable to the Company (or any Bermuda incorporated subsidiary of the Company), have an adverse effect on the Company's financial condition and results of operations.
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