What changed in this filing

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Item 1. Financial Statements

2024-05-08 compared with 2023-11-08 · 552 added, 1120 removed, 1620 unchanged (51% of the section changed)

3 unchanged sentences

(dollars in millions except share data)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Fixed-maturity securities, available-for-sale, at fair value, net of allowance for credit loss of $ 67 and $ 77 (amortized cost of $ 6,553 and $ 6,746 )

2 unchanged sentences

Short-term investments, at fair value 1,649 1,661

Other invested assets 765 133

Other invested assets (includes $ 4 and $ 3 , at fair value)

Total investments 8,887 9,115

4 unchanged sentences

Assets of consolidated investment vehicles (includes $ 353 and $ 331 , at fair value)

Goodwill and other intangible assets 6 163

Other assets (includes $ 123 and $ 123 , at fair value)

5 unchanged sentences

Financial guaranty variable interest entities’ liabilities, at fair value (with recourse $ 389 and $ 543 , without recourse $ 10 and $ 11 )

Liabilities of consolidated investment vehicles (includes $ 0 and $ 4,431 , at fair value)

Other liabilities 430 439

Total liabilities 6,486 6,774

Commitments and contingencies (Note 13)

Commitments and contingencies (Notes 3, 7 and 11)

Shareholders’ equity

13 unchanged sentences

(dollars in millions except share data)

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Net earned premiums $ 119 $ 81

8 unchanged sentences

Fair value gains (losses) on trading securities 26 ( 2 )

Gain on sale of asset management subsidiaries 255 — 255 —

Other income (loss) 1 27

13 unchanged sentences

Net income (loss) attributable to Assured Guaranty Ltd.

$ 157 $ 11 $ 363 $ 30

Earnings per share:

5 unchanged sentences

(in millions)

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Net income (loss) $ 113 $ 97

1 unchanged sentence

Investments with no credit impairment, net of tax provision (benefit) of $( 5 ) and $ 14

( 113 ) ( 277 ) ( 54 ) ( 857 )

Investments with credit impairment, net of tax provision (benefit) of $ 0 and $ 1

( 8 ) 2 ( 13 ) ( 81 )

Change in net unrealized gains (losses) on investments ( 28 ) 94

Change in instrument-specific credit risk on financial guaranty variable interest entities’ liabilities with recourse, net of tax 10 ( 3 ) 11 ( 1 )

Other, net of tax 4 ( 4 ) 6 ( 13 )

Change in instrument-specific credit risk on financial guaranty variable interest entities’ liabilities with recourse, net of tax provision (benefit) ( 1 ) ( 1 )

Other, net of tax provision (benefit) 1 2

Other comprehensive income (loss) ( 28 ) 95

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Comprehensive income (loss) attributable to Assured Guaranty Ltd.

$ 50 $ ( 271 ) $ 313 $ ( 922 )

The accompanying notes are an integral part of these condensed consolidated financial statements.

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(dollars in millions, except share data)

For the Three Months Ended September 30, 2023

Shareholders’ Equity Attributable to Assured Guaranty Ltd.

Common Shares Outstanding Common

Par Value Retained Earnings Accumulated

Comprehensive Income (Loss) Deferred

Equity Compensation Total Nonredeemable Noncontrolling Interests

Shareholders’ Equity

As of June 30, 2023 58,850,144 $ 1 $ 5,732 $ ( 458 ) $ 1 $ 5,276 $ 179 $ 5,455

Net income — — 157 — — 157 2 159

Dividends ($ 0.28 per share)

— — ( 16 ) — — ( 16 ) — ( 16 )

Common shares repurchases ( 1,065,902 ) — ( 64 ) — — ( 64 ) — ( 64 )

Share-based compensation 35,490 — 6 — — 6 — 6

Other comprehensive loss — — — ( 107 ) — ( 107 ) — ( 107 )

Deconsolidation of investment vehicles — — — — — — ( 132 ) ( 132 )

As of September 30, 2023 57,819,732 $ 1 $ 5,815 $ ( 565 ) $ 1 $ 5,252 $ 49 $ 5,301

For the Three Months Ended September 30, 2022

Shareholders’ Equity Attributable to Assured Guaranty Ltd.

Common Shares Outstanding Common

Par Value Retained Earnings Accumulated

Comprehensive Income (Loss) Deferred

Equity Compensation Total Nonredeemable Noncontrolling Interests

Shareholders’ Equity

As of June 30, 2022 62,475,739 $ 1 $ 5,672 $ ( 370 ) $ 1 $ 5,304 $ 243 $ 5,547

Net income (loss) — — 11 — — 11 ( 6 ) 5

Dividends ($ 0.25 per share)

— — ( 16 ) — — ( 16 ) — ( 16 )

Common shares repurchases ( 1,790,395 ) — ( 97 ) — — ( 97 ) — ( 97 )

Share-based compensation 34,087 — 9 — — 9 — 9

Contributions — — — — — — 23 23

Distributions — — — — — — ( 36 ) ( 36 )

Other comprehensive loss — — — ( 282 ) — ( 282 ) — ( 282 )

As of September 30, 2022 60,719,431 $ 1 $ 5,579 $ ( 652 ) $ 1 $ 4,929 $ 224 $ 5,153

Assured Guaranty Ltd.

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

(dollars in millions, except share data)

For the Nine Months Ended September 30, 2023

For the Three Months Ended March 31, 2024

Shareholders’ Equity Attributable to Assured Guaranty Ltd.

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Share-based compensation 403,557 — ( 15 ) — — ( 15 ) — ( 15 )

Reclassification to liabilities — — — — — — ( 16 ) ( 16 )

Contributions — — — — — — 20 20

Distributions — — — — — — ( 3 ) ( 3 )

Other comprehensive loss — — — ( 28 ) — ( 28 ) — ( 28 )

Deconsolidation of investment vehicles — — — — — — ( 132 ) ( 132 )

As of September 30, 2023 57,819,732 $ 1 $ 5,815 $ ( 565 ) $ 1 $ 5,252 $ 49 $ 5,301

For the Nine Months Ended September 30, 2022

As of March 31, 2024 55,081,584 $ 1 $ 6,014 $ ( 387 ) $ 1 $ 5,629 $ 53 $ 5,682

For the Three Months Ended March 31, 2023

Shareholders’ Equity Attributable to Assured Guaranty Ltd.

8 unchanged sentences

— — ( 18 ) — — ( 18 ) — ( 18 )

Contributions — — — — — — 3 3

Common shares repurchases ( 36,369 ) — ( 2 ) — — ( 2 ) — ( 2 )

Share-based compensation 297,441 — — — — — — —

Contributions — — — — — — 63 63

Distributions — — — — — — ( 52 ) ( 52 )

Other comprehensive loss — — — ( 952 ) — ( 952 ) — ( 952 )

As of September 30, 2022 60,719,431 $ 1 $ 5,579 $ ( 652 ) $ 1 $ 4,929 $ 224 $ 5,153

Other comprehensive income — — — 95 — 95 — 95

As of March 31, 2023 59,274,112 $ 1 $ 5,638 $ ( 420 ) $ 1 $ 5,220 $ 195 $ 5,415

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(in millions)

Nine Months Ended September 30,

Three Months Ended March 31,

Net cash flows provided by (used in) operating activities $ ( 74 ) $ 312

10 unchanged sentences

Paydowns of financial guaranty variable interest entities’ assets 6 7

Purchases of other invested assets ( 128 ) ( 11 )

Sales and return of capital of other invested assets 16 35

Sale of asset management subsidiaries, net of cash ( 14 ) —

Purchases of and contributions to other invested assets ( 56 ) ( 10 )

Sales of and return of capital from other invested assets 17 5

Other ( 1 ) ( 1 )

4 unchanged sentences

Net paydowns of financial guaranty variable interest entities’ liabilities ( 148 ) ( 9 )

Issuance of long-term debt, net of issuance costs 345 —

Redemption of debt ( 330 ) —

Other ( 28 ) ( 15 )

Cash flows from consolidated investment vehicles:

Proceeds from issuance of collateralized loan obligations — 1,372

Repayment of collateralized loan obligations ( 1 ) ( 373 )

Proceeds from issuance of warehouse financing debt — 882

Repayment of warehouse financing debt — ( 152 )

Borrowing (payment) under credit facilities — ( 30 )

Contributions from noncontrolling interests to consolidated investment vehicles — 52

Distributions to noncontrolling interests from consolidated investment vehicles ( 3 ) ( 70 )

8 unchanged sentences

(in millions)

Nine Months Ended September 30,

Three Months Ended March 31,

Supplemental cash flow information

Income taxes paid (received) $ 3 $ 97

Interest paid on long-term debt $ 22 $ 10

Supplemental disclosure of non-cash activities:

Puerto Rico Plan Consideration (see Note 3)

Fixed-maturity securities, available-for-sale, received as salvage $ — $ 1

Fixed-maturity securities, available-for-sale, ceded to a reinsurer — 27

Fixed-maturity securities, trading, received as salvage — 550

Fixed-maturity securities, trading, ceded to a reinsurer — 6

Debt securities of financial guaranty variable interest entities received as salvage — 54

Contributions from noncontrolling interests — 3

Distributions to noncontrolling interests — 3

Sale of asset management subsidiaries (see Note 1)

Assets acquired 444 —

Assets transferred 241 —

Liabilities transferred 66 —

September 30, 2023 September 30, 2022

Distributions from equity method investments 7 —

March 31, 2024 March 31, 2023

Reconciliation of cash and cash equivalents and restricted cash to the condensed consolidated balance sheets:

Cash $ 115 $ 118

Restricted cash (included in other assets) — 1

Cash and cash equivalents of consolidated investment vehicles (See Note 8)

Cash (included in assets held for sale) — 25

Cash and cash equivalents and restricted cash at the end of period $ 137 $ 130

6 unchanged sentences

public finance (including infrastructure) and structured finance markets.

Assured Guaranty also participates in the asset management business, as described below.

Assured Guaranty also participates in the asset management business.

Through its insurance subsidiaries, the Company applies its credit underwriting judgment, risk management skills and capital markets experience primarily to offer financial guaranty insurance that protects holders of debt instruments and other monetary obligations from defaults in scheduled payments.

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and the United Kingdom (U.K.), and also guarantees obligations issued in other countries and regions, including Western Europe.

The Company also provides specialty insurance and reinsurance on transactions with risk profiles similar to those of its structured finance exposure`s written in financial guaranty form.

The Company also provides specialty insurance and reinsurance on transactions with risk profiles similar to those of its structured finance exposures written in financial guaranty form.

Asset Management

Until July 1, 2023, the Company served as an investment advisor to collateralized loan obligations (CLOs) and opportunity funds, as well as certain legacy hedge and opportunity funds subject to an orderly wind-down, through Assured Investment Management LLC (AssuredIM LLC) and its investment management affiliates (together with AssuredIM LLC, AssuredIM).

Beginning July 1, 2023, the Company participates in the asset management business through its ownership interest in Sound Point Capital Management, LP (Sound Point), as described below.

On July 1, 2023, Assured Guaranty contributed to Sound Point most of its asset management business, other than that conducted by Assured Healthcare Partners LLC (AssuredIM Contributed Business), as contemplated by the transaction agreement entered into with Sound Point on April 5, 2023 (Transaction Agreement).

Until July 1, 2023, the Company served as an investment advisor to primarily collateralized loan obligations (CLOs) and opportunity funds, through Assured Investment Management LLC (AssuredIM LLC) and its investment management affiliates (together with AssuredIM LLC, AssuredIM).

Beginning July 1, 2023, the Company participates in the asset management business through its ownership interest in Sound Point Capital Management, LP (Sound Point, LP) and certain of its investment management affiliates (together with Sound Point, LP, Sound Point), as described below.

On July 1, 2023, Assured Guaranty contributed to Sound Point, LP most of its asset management business, other than that conducted by Assured Healthcare Partners LLC (AHP) (AssuredIM Contributed Business), as contemplated by the transaction agreement entered into with Sound Point on April 5, 2023 (Transaction Agreement).

Assured Guaranty received, subject to certain potential post-closing adjustments, approximately 30 % of the common interests in Sound Point, LP, and certain other interests in Sound Point.

In addition, in accordance with the terms of a letter agreement (Letter Agreement), effective July 1, 2023 Assured Guaranty Municipal Corp.

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Insurance Subsidiaries) (i) engaged Sound Point as their sole alternative credit manager and (ii) transitioned to Sound Point the management of certain existing alternative investments and related commitments.

The Letter Agreement also provides that, in the first two years of Sound Point’s engagement, the U.S.

Insurance Subsidiaries would, subject to regulatory approval, make new investments in funds, other vehicles and separately managed accounts managed by Sound Point which, when aggregated with the alternative investments and commitments transitioned from AssuredIM, will total $ 1 billion.

The Letter Agreement also provides that, within the first two years of Sound Point’s engagement, the U.S.

Insurance Subsidiaries, including through their investment subsidiary AG Asset Strategies LLC (AGAS), would, subject to regulatory approval, cure terms and other terms of the Letter Agreement, make new investments in funds, other vehicles and separately managed accounts managed by Sound Point which, when aggregated with the alternative investments and commitments transitioned from AssuredIM and any reinvestments (collectively, Sound Point Investments), and investments made by other Assured Guaranty affiliates, will total $ 1 billion.

The Letter Agreement contemplates a long-term investment partnership between Sound Point and Assured Guaranty, whereby the U.S.

Insurance Subsidiaries have agreed to reinvest all returns of capital from Sound Point Investments for a period of 15 years, until July 1, 2038.

Similarly, the Letter Agreement provides for reinvestment by the U.S.

Insurance Subsidiaries of all gains and dividends from Sound Point Investments for the first two years of Sound Point’s engagement, and reinvestment of half of all such gains and dividends thereafter until July 1, 2033 (the transactions contemplated under the Transaction Agreement and the Letter Agreement, the Sound Point Transaction).

On July 1, 2028, the U.S.

Insurance Subsidiaries may choose to reduce the amounts invested or required to be reinvested in certain Sound Point Investments under the Letter Agreement, subject to adjustment in Assured Guaranty’s portion of its ownership interest in Sound Point.

To the extent not required to be reinvested by the Letter Agreement, all proceeds from Sound Point Investments received in accordance with their operative investment documents can be distributed to the U.S.

Insurance Subsidiaries.

See Note 7, Investments.

Assured Guaranty received, subject to certain potential post-closing adjustments, common interests in Sound Point representing a 30 % participation percentage in Sound Point, and certain other interests in related Sound Point entities (the transactions contemplated under the Transaction Agreement and the Letter Agreement, the Sound Point Transaction).

In July 2023, Assured Guaranty sold all of its equity interests in Assured Healthcare Partners LLC (AHP), which manages healthcare funds, to an entity owned and controlled by the managing partner of AHP (AHP Transaction).

In connection with the AHP Transaction, the Company agreed to remain a strategic investor in certain AHP investment vehicles, is retaining certain carried interest in AHP entities and received other consideration.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

In July 2023, Assured Guaranty sold all of its equity interests in AHP, which manages healthcare funds, to an entity owned and controlled by the managing partner of AHP (AHP Transaction).

In connection with the AHP Transaction, the Company agreed to remain a strategic investor in certain AHP managed funds, is retaining its portion of carried interest in certain AHP managed funds, and received other consideration.

Upon closing of the Sound Point Transaction and the AHP Transaction, the Company deconsolidated most of the corresponding AssuredIM entities (which had previously been classified as held for sale) and reported an investment in Sound Point that is accounted for under the equity method.

1 unchanged sentence

See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The following table presents the calculation of the gain associated with the Sound Point Transaction and AHP Transaction.

Gain on Sound Point Transaction and AHP Transaction

(in millions)

Fair value of investment in Sound Point $ 419

Fair value of other consideration 25

Total consideration 444

Less net asset carrying value of transferred AssuredIM subsidiaries (1) 189

Gain on sale of asset management subsidiaries (2) $ 255

____________________

(1) Consists primarily of goodwill and intangible assets of $ 155 million.

(2) Consists of a $ 248 million gain on the Sound Point Transaction, and a $ 7 million gain on the AHP Transaction, which were both reported in the corporate division.

The Company’s interest in Sound Point is reported in other invested assets on the consolidated balance sheet.

On the date of acquisition, the Company’s cost basis of its investment in Sound Point is the fair value of the Company’s ownership in Sound Point, and certain other interests in related Sound Point entities (collectively, Sound Point entities).

The acquisition date cost basis includes a basis difference, which is the excess of the fair value of the Company’s ownership interest in Sound Point entities of $ 419 million, over the Company’s proportionate share of the equity of the Sound Point entities.

The basis difference must be allocated between identifiable assets and liabilities.

The carrying value on the date of acquisition is periodically adjusted for the Company’s share in the comprehensive income or loss of Sound Point entities (on a one-quarter lag), distributions, contributions and the amortization of definite-lived intangible assets.

As of the filing of this report, the Company has not finalized the calculation of the basis difference or the allocation of such basis difference.

The equity method investment in Sound Point is subject to a periodic other-than-temporary-impairment (OTTI) analysis.

The Company recognized expenses of $ 14 million and $ 46 million during the three-month period ended September 30, 2023 (third quarter 2023) and the nine-month period ended September 30, 2023 (nine months 2023), respectively, associated with the Sound Point Transaction and AHP Transaction.

After the Sound Point Transaction and AHP Transaction, the Company continues to consolidate the general partner of a fund that Sound Point now manages and may report performance fees reported in “other income.”

Prior to the Sound Point Transaction and AHP Transaction, the Company received management fees, as well as performance fees, incentive allocations or carried interest (collectively referred to as performance fees) in exchange for AssuredIM providing investment advisory services to manage investment funds and CLOs.

Prior to the Sound Point Transaction and the AHP Transaction, these fees were reported in “asset management fees” in the condensed consolidated financial statements.

Assets and Liabilities Held For Sale

The Company designated certain assets and liabilities supporting the Insurance segment as held for sale in the first quarter of 2023 and expects the sale of such assets to be completed in 2024.

A disposal group is measured at the lower of carrying amount or fair value less any costs associated with the transaction.

The Company assessed the disposal group for impairment and determined no impairment existed as of September 30, 2023.

Upon classification of the disposal group as held for sale, the Company ceased depreciating held for sale fixed assets and amortizing held for sale intangibles.

Assets held for sale were $ 28 million and liabilities held for sale were $ 2 million as of September 30, 2023 and were reported in “other assets” and “other liabilities,” respectively.

The Company designated certain assets and liabilities supporting the Insurance segment as held for sale in the first quarter of 2023.

The held for sale assets and liabilities were $ 28 million (reported in “other assets”) and $ 3 million (reported in “other liabilities”), respectively, as of March 31, 2024.

Basis of Presentation

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Actual results could differ from those estimates.

These unaudited interim condensed consolidated financial statements are as of September 30, 2023 and cover third quarter 2023, the three-month period ended September 30, 2022 (third quarter 2022), nine months 2023 and the nine-month period ended September 30, 2022 (nine months 2022).

Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but is not required for interim reporting purposes, has been condensed

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

These unaudited interim condensed consolidated financial statements are as of March 31, 2024 and cover the three-month period ended March 31, 2024 (first quarter 2024) and the three-month period ended March 31, 2023 (first quarter 2023).

Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but is not required for interim reporting purposes, has been condensed or omitted.

The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.

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Intercompany accounts and transactions between and among all consolidated entities have been eliminated.

All amounts are reported in U.S.

dollars, unless otherwise specified.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2023 filed with the U.S.

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• Assured Guaranty UK Limited (AGUK), organized in the U.K.;

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

• Assured Guaranty (Europe) SA (AGE), organized in France;

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(AGRO), domiciled in Bermuda.

Insurance Subsidiaries jointly own an investment subsidiary, AG Asset Strategies LLC (AGAS), which invests in funds managed by Sound Point, AHP, and, prior to July 1, 2023, AssuredIM (Sound Point and AHP funds, some of which were formerly known as AssuredIM funds).

Insurance Subsidiaries jointly own an investment subsidiary, AGAS, which invests in funds managed by Sound Point, AHP, and, prior to July 1, 2023, AssuredIM (Sound Point and AHP funds, some of which were formerly known as AssuredIM funds).

AGL directly or indirectly owns several holding companies, two of which - Assured Guaranty US Holdings Inc.

(AGUS) and Assured Guaranty Municipal Holdings Inc.

(AGMH and, together with AGUS, the U.S.

(AGMH) (collectively the U.S.

Holding Companies) - have public debt outstanding.

See Note 11, Long-Term Debt.

Recent Accounting Standards Adopted

Targeted Improvements to the Accounting for Long-Duration Contracts

In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-12, Financial Services - Insurance (Topic 944):

Targeted Improvements to the Accounting for Long-Duration Contracts .

The Company’s adoption of this ASU on January 1, 2023 did not have any effect on the Company’s consolidated financial statements.

Recent Accounting Standards Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

The amendments in this ASU require disclosure of significant segment expenses regularly provided to the chief operating decision maker (CODM), extend certain annual disclosures to interim periods, and permit more than one measure of segment profit or loss to be reported under certain conditions.

This ASU is effective in fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company will adopt this ASU during the fourth quarter of 2024 and apply its amendments retrospectively to all prior periods presented in its consolidated financial statements.

In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The amendments require enhanced annual disclosures regarding the rate reconciliation and income taxes paid.

This ASU is effective for fiscal years beginning after December 15, 2024.

The Company will apply the amendments in this ASU prospectively to all annual periods beginning after December 15, 2024.

The adoption of this ASU will affect certain of the Company’s income tax disclosures.

Segment Information

The Company reports its results of operations in two segments:

Insurance and Asset Management, separate from its Corporate division and the effects of consolidating FG VIEs and CIVs, which is consistent with the manner in which the Company’s chief operating decision maker (CODM) reviews the business to assess performance and allocate resources.

Insurance and Asset Management.

The Company separately reports the results of its Corporate division and the effects of consolidating FG VIEs and CIVs.

This presentation is consistent with the manner in which the Company’s CODM reviews the business to assess performance and allocate resources.

The Insurance segment primarily consists of:

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and (ii) AGAS.

Prior to July 1, 2023, the Asset Management segment consisted of AssuredIM, which provided asset management services to third-party investors as well as to the U.S.

Prior to July 1, 2023, the Asset Management segment consisted of AssuredIM, which provided asset management services to third-party investors, the U.S.

Insurance Subsidiaries and AGAS.

Beginning in July 2023, the Company participates in the asset management business through its investment in Sound Point as described in Note 1, Business and Basis of Presentation.

Beginning in third quarter 2023, the Asset Management segment primarily includes the results of the Company’s equity method investment in Sound Point entities, which are reported on a one-quarter lag.

The Corporate division primarily consists of interest expense on the debt of the U.S.

Holding Companies and any losses on extinguishment or repurchases of their debt, as well as any gains and losses and other operating expenses attributed to the corporate activities of AGL and the U.S.

Holding Companies, including the gain associated with the Sound Point Transaction and the AHP Transaction.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The Other category primarily includes the effect of consolidating FG VIEs and CIVs, intersegment eliminations and the reclassification of reimbursable fund expenses.

Beginning in July 2023, the Company participates in the asset management business through its ownership interest in Sound Point as described in Note 1, Business and Basis of Presentation.

Beginning in the third quarter of 2023, the Asset Management segment primarily includes the results of the Company’s equity method investment in Sound Point.

The Corporate division primarily consists of:

(i) interest expense and any losses on the extinguishment of the U.S.

Holding Companies’ debt;

and (ii) other corporate operating expenses of AGL and the U.S.

Holding Companies.

The Other category primarily includes the effect of consolidating FG VIEs, CIVs, intersegment eliminations and, prior to July 1, 2023, the reclassification of reimbursable fund expenses.

See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

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(i) premiums and losses from the financial guaranty insurance policies issued by the U.S.

Insurance Subsidiaries which guarantee the FG VIEs’ debt;

and (ii) AGAS’ share of earnings from investments in Sound Point and AHP funds in “equity in earnings (losses) of investees.” Under GAAP, (i) FG VIEs are consolidated by the U.S.

Insurance Subsidiaries and the premiums and losses/recoveries associated with the financial guaranty policies associated with the FG VIEs’ debt are eliminated (the reconciliation tables below present the FG VIEs and related eliminations in “other”) and (ii) CIVs are consolidated by either AGUS or AGAS (in the reconciliation tables below, the CIVs and related eliminations of the Insurance segment’s “equity in earnings (losses) of investees” associated with AGAS’ ownership interest in CIVs are presented in “other”).

Until July 1, 2023, under GAAP, reimbursable fund expenses were shown as a component of asset management fees and included in total revenues, whereas in the Asset Management segment in the tables below these expenses were netted in “segment expenses.”

Insurance Subsidiaries that guarantee the FG VIEs’ debt;

and (ii) the insurance segment’s share of earnings from investments in funds managed by Sound Point (prior to July 1, 2023, AssuredIM) and AHP funds in “equity in earnings (losses) of investees.” Under GAAP, (i) FG VIEs are consolidated by the U.S.

and (ii) CIVs are consolidated by either AGUS or AGAS (in the reconciliation tables below, the CIVs and related eliminations of the Insurance segment’s “equity in earnings (losses) of investees” associated with AGAS’ ownership interest in CIVs are presented in “other”).

Until July 1, 2023, under GAAP, reimbursable fund expenses were shown

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

as a component of asset management fees and included in total revenues, whereas in the Asset Management segment in the tables below these expenses were netted in “segment expenses.”

The Company analyzes the operating performance of each segment using “segment adjusted operating income (loss).” Results for each segment include specifically identifiable expenses as well as intersegment expense allocations, as applicable, based on time studies and other cost allocation methodologies based on headcount or other metrics.

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• 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.

• 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.

• 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.

The Company does not report assets by reportable segment as the CODM does not assess performance and allocate resources based on assets.

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Segment Information

Third Quarter

First Quarter

Insurance Asset Management Insurance Asset Management

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Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Insurance Asset Management Insurance Asset Management

(in millions)

Third-party revenues $ 615 $ 44 $ 558 $ 59

Intersegment revenues 7 27 6 29

Segment revenues 622 71 564 88

Segment expenses 354 75 147 91

Segment equity in earnings (losses) of investees 60 — ( 46 ) —

Segment provision (benefit) for income taxes 46 ( 1 ) 24 —

Segment adjusted operating income (loss) $ 282 $ ( 3 ) $ 347 $ ( 3 )

The tables below present a reconciliation of significant components of segment information to the comparable consolidated amounts.

Reconciliation of Segment Information to Consolidated Information

Three Months Ended September 30, 2023

Equity in Earnings (Losses) of Investees Less:

Net Income (Loss) Attributable to AGL

Revenues Expenses Provision (Benefit) for Income Taxes Noncontrolling Interests

(in millions)

Insurance $ 208 $ 165 $ 25 $ 9 $ — $ 59

Asset Management — — — — — —

Total segments 208 165 25 9 — 59

Corporate division 259 57 — 47 — 155

Other ( 4 ) ( 3 ) ( 7 ) ( 2 ) 2 ( 8 )

Subtotal 463 219 18 54 2 206

Reconciling items:

Realized gains (losses) on investments ( 9 ) — — — — ( 9 )

Non-credit impairment-related unrealized fair value gains (losses) on credit derivatives 6 — — — — 6

Fair value gains (losses) on CCS ( 20 ) — — — — ( 20 )

Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves ( 37 ) — — — — ( 37 )

Tax effect — — — ( 11 ) — 11

Total consolidated $ 403 $ 219 $ 18 $ 43 $ 2 $ 157

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Reconciliation of Segment Information to Consolidated Information

Three Months Ended September 30, 2022

Equity in Earnings (Losses) of Investees Less:

Net Income (Loss) Attributable to AGL

Revenues Expenses Provision (Benefit) for Income Taxes Noncontrolling Interests

(in millions)

Insurance $ 147 $ ( 16 ) $ ( 11 ) $ ( 7 ) $ — $ 159

Asset Management 21 24 — — — ( 3 )

Total segments 168 8 ( 11 ) ( 7 ) — 156

Corporate division 1 34 — ( 3 ) — ( 30 )

Other 13 2 ( 9 ) 1 ( 6 ) 7

Subtotal 182 44 ( 20 ) ( 9 ) ( 6 ) 133

Reconciling items:

Realized gains (losses) on investments ( 14 ) — — — — ( 14 )

Non-credit impairment-related unrealized fair value gains (losses) on credit derivatives ( 50 ) ( 1 ) — — — ( 49 )

Fair value gains (losses) on CCS 1 — — — — 1

Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves ( 78 ) — — — — ( 78 )

Tax effect — — — ( 18 ) — 18

Total consolidated $ 41 $ 43 $ ( 20 ) $ ( 27 ) $ ( 6 ) $ 11

Reconciliation of Segment Information to Consolidated Information

Nine Months Ended September 30, 2023

First Quarter 2024

Equity in Earnings (Losses) of Investees Less:

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Reconciliation of Segment Information to Consolidated Information

Nine Months Ended September 30, 2022

First Quarter 2023

Equity in Earnings (Losses) of Investees Less:

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The Company seeks to limit its exposure to losses by underwriting obligations that it views to be investment grade at inception, although on occasion it may underwrite new issuances that it views to be below-investment-grade (BIG), typically as part of its loss mitigation strategy for existing troubled exposures.

The Company also seeks to acquire portfolios of insurance from financial guarantors that are no longer writing new business by acquiring such companies or providing reinsurance on a portfolio of insurance;

The Company also seeks to acquire portfolios of insurance from financial guarantors that are no longer writing new business by acquiring such companies, providing reinsurance on, or novating, a portfolio of insurance;

in such instances, it evaluates the risk characteristics of the target portfolio, which may include some BIG exposures, as a whole in the context of the proposed transaction.

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state or municipal governmental authorities, as well as tax-supported bonds, revenue bonds and other obligations supported by covenants from state or municipal governmental authorities or other municipal obligors to impose and collect fees and charges for public services or specific infrastructure projects.

The Company includes within public finance obligations those obligations backed by the cash flow from leases or other revenues from projects serving substantial public purposes, including utilities, toll roads, healthcare facilities and government office buildings.

The Company also includes within public finance obligations similar obligations issued by U.S.

sovereign and sub-sovereign issuers and governmental authorities.

Structured finance obligations insured by the Company are generally issued by special purpose entities, including VIEs, and backed by pools of assets having an ascertainable cash flow or market value or other specialized financial obligations.

Some of these VIEs are consolidated as described in Note 8, Financial Guaranty Variable Interest Entities and

Some of these VIEs are consolidated as described in Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

Unless otherwise specified, the outstanding par and debt service amounts presented in this note include outstanding exposures on these VIEs whether or not they are consolidated.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Consolidated Investment Vehicles.

Unless otherwise specified, the outstanding par and debt service amounts presented in this note include outstanding exposures on these VIEs whether or not they are consolidated.

The Company also writes specialty business that is consistent with its risk profile and benefits from its underwriting experience and other types of financial guaranties.

The Company also provides specialty insurance and reinsurance on transactions with risk profiles similar to those of its structured finance exposures written in financial guaranty form.

Surveillance Categories

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Internal credit ratings are expressed on a ratings scale similar to that used by the rating agencies and generally reflect an approach similar to that employed by the rating agencies, except that the Company’s internal credit ratings focus on future performance rather than lifetime performance.

The Company classifies those portions of risks benefiting from reimbursement obligations collateralized by eligible assets held in trust in acceptable reimbursement structures as being the higher of AA or their current internal rating.

Unless otherwise noted, ratings disclosed herein on the Company’s insured portfolio reflect its internal ratings.

The Company monitors its insured portfolio and refreshes its internal credit ratings on individual exposures in quarterly, semi-annual or annual cycles based on the Company’s view of the exposure’s credit quality, loss potential, volatility and sector.

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The three BIG surveillance categories are:

• 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.

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Net par outstanding equals gross par outstanding net of any reinsurance.

The Company includes in its par outstanding calculation the impact of any

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

consumer price index inflator to the reporting date as well as, in the case of accreting (zero-coupon) obligations, accretion to the reporting date.

The Company includes in its par outstanding calculation the impact of any consumer price index inflator to the reporting date as well as, in the case of accreting (zero-coupon) obligations, accretion to the reporting date.

dollar denominated par outstanding is translated at the spot rate at the end of the reporting period.

The Company has, from time to time, purchased securities that it has insured, and for which it had expected losses to be paid, in order to mitigate the economic effect of insured losses (Loss Mitigation Securities).

The Company excludes amounts attributable to Loss Mitigation Securities from par and debt service outstanding and instead reports Loss Mitigation Securities in the investment portfolio.

The Company excludes amounts

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

attributable to Loss Mitigation Securities from par and debt service outstanding and instead reports Loss Mitigation Securities in the investment portfolio.

The Company manages such securities as investments and not insurance exposure.

As of September 30, 2023 and December 31, 2022, the Company excluded net par outstanding of $ 1.2 billion and $ 1.3 billion, respectively, primarily attributable to Loss Mitigation Securities.

As of both March 31, 2024 and December 31, 2023, the Company excluded net par outstanding of $ 1.2 billion attributable to Loss Mitigation Securities.

Gross debt service outstanding represents the sum of all estimated future debt service payments on the insured obligations, on an undiscounted basis.

Net debt service outstanding equals gross debt service outstanding net of any reinsurance.

Future debt service payments include the impact of any consumer price index inflator after the reporting date as well as, in the case of accreting (zero-coupon) obligations, accretion after the reporting date.

Future debt service payments include the estimated impact of any consumer price index inflator after the reporting date as well as, in the case of accreting (zero-coupon) obligations, accretion after the reporting date.

The Company calculates its debt service outstanding as follows:

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dollar denominated insured obligations and other factors.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Financial Guaranty Portfolio

Debt Service and Par Outstanding

As of September 30, 2023 As of December 31, 2022

As of March 31, 2024 As of December 31, 2023

Gross Net Gross Net

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Total financial guaranty $ 248,626 $ 248,144 $ 249,535 $ 249,153

In addition to amounts shown in the table above, the Company had outstanding commitments to provide guaranties of $ 1.5 billion of public finance direct gross par and $ 1.3 billion of structured finance direct gross par as of September 30, 2023.

These commitments are contingent on the satisfaction of all conditions set forth in the guaranties and may expire unused or be canceled at the counterparty’s request.

In addition to amounts shown in the table above, the Company had outstanding commitments to provide guaranties of $ 829 million of public finance gross par and $ 1.8 billion of structured finance gross par as of March 31, 2024.

These commitments are contingent on the satisfaction of all conditions set forth in the guaranties and may expire unused or be

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

canceled at the counterparty’s request.

Therefore, the total commitment amount does not necessarily reflect actual future guaranteed amounts.

Also, in connection with a potential transaction that would accelerate the run-off of the insured portfolio of Financial Guaranty Insurance Company (FGIC) pursuant to the First Amended Plan of Rehabilitation for FGIC, dated June 4, 2013 (the Proposed Transaction), the Company and FGIC are parties to a Novation Agreement dated as of February 8, 2024 (the Agreement) pursuant to which certain FGIC policies insuring approximately $ 353 million of public finance (including infrastructure) gross par and approximately $ 50 million of structured finance gross par as of December 31, 2023 may in the future be novated to the Company in accordance with the terms and conditions of the Agreement.

The Proposed Transaction, including the novation of certain FGIC policies to the Company, is subject in all respects to review and approval by the New York State Department of Financial Services, the reopening of FGIC’s rehabilitation proceeding, and ultimate approval by the Supreme Court of the State of New York.

In the event the Proposed Transaction does not occur on or prior to September 30, 2025, either the Company or FGIC has the right to terminate the Agreement in accordance with its terms.

Financial Guaranty Portfolio by Internal Rating

As of September 30, 2023

As of March 31, 2024

Public Finance

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Components of BIG Net Par Outstanding

As of September 30, 2023

As of March 31, 2024

BIG Net Par Outstanding Net Par

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BIG Net Par Outstanding and Number of Risks

As of September 30, 2023

As of March 31, 2024

Net Par Outstanding Number of Risks (2)

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Exposure to Puerto Rico

The Company had insured exposure to obligations of various authorities and public corporations of the Commonwealth of Puerto Rico (Puerto Rico or the Commonwealth) as well as its general obligation bonds aggregating $ 1.1 billion and $ 1.4 billion net par outstanding as of September 30, 2023 and December 31, 2022, respectively.

All of the Company’s insured exposure to Puerto Rico is rated BIG.

The Company has paid claims as a result of payment defaults on all of its outstanding Puerto Rico exposures except the Municipal Finance Agency (MFA), the Puerto Rico Aqueduct and Sewer Authority (PRASA), and the University of Puerto Rico (U of PR), each of which has continued to make timely debt service payments.

On June 30, 2016, the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) was signed into law.

PROMESA established a seven-member Financial Oversight and Management Board (the FOMB) with authority to require that balanced budgets and fiscal plans be adopted and implemented by Puerto Rico.

Title III of PROMESA provides for a process analogous to a voluntary bankruptcy process under Chapter 9 of the United States Bankruptcy Code.

After over five years of negotiations, a substantial portion of the Company’s Puerto Rico exposure was resolved in 2022 in accordance with four orders entered by the United States District Court of the District of Puerto Rico (Federal District Court of Puerto Rico) related to the Company’s exposure to all insured Puerto Rico credits experiencing payment default in 2022 except Puerto Rico Electric Power Authority (PREPA) (2022 Puerto Rico Resolutions).

As a result of the 2022 Puerto Rico Resolutions, during 2022 the Company’s obligations under its insurance policies covering debt of the Puerto Rico Convention Center District Authority (PRCCDA) and Puerto Rico Infrastructure Authority (PRIFA) were extinguished, and its insurance exposure to Puerto Rico general obligations (GO) bonds, Public Buildings Authority (PBA) bonds and Puerto Rico Highway and Transportation Authority (PRHTA) bonds was greatly reduced.

As described below, on August 31, 2023, the Company extinguished its remaining exposure to GO and PBA bonds by satisfying its obligations to insured bondholders holding custody receipts representing interests in legacy insured GO and PBA bonds.

Under the Modified Eighth Amended Title III Joint Plan of Adjustment of the Commonwealth of Puerto Rico, the Employees Retirement System of the Government of the Commonwealth of Puerto Rico, and the Puerto Rico Public Buildings Authority (GO/PBA Plan), the Company received cash, new general obligation bonds (New GO Bonds) and contingent value instruments (CVIs).

In connection with the Modified Fifth Amended Title III Plan of Adjustment for PRHTA (HTA Plan) and related arrangements, the Company received cash and new bonds backed by toll revenues (Toll Bonds, and together with the New GO Bonds, New Recovery Bonds) from the PRHTA and CVIs from the Commonwealth.

Cash, New Recovery Bonds and CVIs received pursuant to the 2022 Puerto Rico Resolutions are collectively referred to as Plan Consideration.

Plan Consideration is reported in either cash, investments or FG VIEs’ assets as described below.

• Investments and cash.

Plan Consideration received in respect of bondholders whose principal of bonds insured by the Company were accelerated against the Commonwealth and became due and payable under the 2022 Puerto Rico

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Resolutions are reported in Cash and Investments.

See Note 7, Investments, for the fair value of the New Recovery Bonds and CVIs remaining as of September 30, 2023.

• FG VIEs’ assets.

Plan Consideration received in respect of insured bondholders who elected to receive custody receipts that represent an interest in custodial trusts that hold the legacy insurance policy plus Plan Consideration that constitute distributions under the HTA Plan or the GO/PBA Plan are reported in FG VIEs’ assets.

The Company’s insurance policy continues to guarantee principal and interest coming due on the legacy insured bonds in accordance with the terms of such insurance policy on the originally scheduled legacy bond interest and principal payment dates to the extent that distributions of Plan Consideration are insufficient to pay or prepay such amounts.

On August 31, 2023, after notice to certain holders of custody receipts representing interests in legacy insured GO, PBA and HTA bonds, the Company satisfied its obligations under such legacy insured bonds with respect to $ 108 million net par outstanding as of August 31, 2023, and the custodial trusts released to AGC and AGM New Recovery Bonds and CVIs with a fair value totaling $ 73 million as of August 31, 2023.

See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles, for the fair value of New Recovery Bonds remaining as of September 30, 2023.

The Company has sold a portion of New Recovery Bonds and CVIs it received and may sell in the future any New Recovery Bonds or CVIs it continues to hold.

The fair value of any New Recovery Bonds and CVIs that the Company retains will fluctuate from their date of acquisition.

Any gains or losses on sales of New Recovery Bonds and CVIs in the investment portfolio are reported as realized gains and losses on investments and fair value gains (losses) on trading securities, respectively, rather than loss and LAE.

The CVIs are intended to provide creditors with additional recoveries tied to the outperformance of the Puerto Rico 5.5% Sales and Use Tax (SUT) receipts against May 2020 certified fiscal plan projections, subject to annual and lifetime caps.

The notional amount of a CVI represents the sum of the maximum distributions the holder could receive under the CVI, subject to the cumulative and annual caps, if the SUT sufficiently exceeds 2020 certified fiscal plan projections, without any discount for time.

As of September 30, 2023, all of the CVIs are reported in investments.

The Company is continuing its efforts to resolve the one remaining Puerto Rico insured exposure that is in payment default, PREPA.

Economic, political and legal developments, including inflation and increases in the cost of petroleum products, may impact any resolution of the Company’s PREPA insured exposure and the value of any remaining consideration received in connection with the 2022 Puerto Rico Resolutions or any future resolutions of the Company’s PREPA insured exposures.

The impact of developments relating to Puerto Rico during any quarter or year could be material to the Company’s results of operations and shareholders’ equity.

All of the Company’s insured exposure to various authorities and public corporations of the Commonwealth of Puerto Rico (Puerto Rico or the Commonwealth) is rated BIG.

As of March 31, 2024, the Company’s only remaining outstanding insured Puerto Rico exposure subject to a payment default was the Puerto Rico Electric Power Authority (PREPA).

Puerto Rico Par and Debt Service Schedules

All Puerto Rico exposures are internally rated BIG.

The following tables show the Company’s insured exposure to general obligation bonds of Puerto Rico and various obligations of its related authorities and public corporations.

The following tables show the Company’s insured exposure to various authorities and public corporations of Puerto Rico.

Gross Par and Gross Debt Service Outstanding

Gross Par Outstanding Gross Debt Service Outstanding

September 30, 2023 December 31, 2022 September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023 March 31, 2024 December 31, 2023

(in millions)

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Net Par Outstanding

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(in millions)

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Resolved Puerto Rico Exposures (1)

PRHTA (Transportation revenue) (1) 244 298

Puerto Rico Highways and Transportation Authority (PRHTA) (Transportation revenue)

PRHTA (Highway revenue) 24 128

Commonwealth of Puerto Rico - GO (1)

Total Resolved 228 372

Other Puerto Rico Exposures

MFA (2) 108 131

PRASA and U of PR (2) 1 1

Total Other 109 132

Non-Defaulting Puerto Rico Exposures (2)

Municipal Finance Agency (MFA)

Puerto Rico Aqueduct and Sewer Authority (PRASA) and University of Puerto Rico (U of PR) 1 1

Total Non-Defaulting 109 109

Total net exposure to Puerto Rico $ 961 $ 1,105

____________________

(1) Resolved pursuant to the 2022 Puerto Rico Resolutions.

(1) Resolved pursuant to the 2022 Puerto Rico Resolutions (as defined below).

In January 2024, $ 144 million of the remaining PRHTA net par was paid down.

All of the Toll Bonds (as defined below) received from the PRHTA under the 2022 Puerto Rico Resolutions for the insured PRHTA bonds have been sold or redeemed;

therefore, the remaining amounts owed for such insured PRHTA bonds are payable in full by the Company’s insurance subsidiaries under their financial guaranty policies and are no longer dependent on the credit of the PRHTA.

See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

(2) All debt service on these insured exposures have been paid to date without any insurance claim being made on the Company.

The following table shows the scheduled amortization of the insured general obligation bonds of Puerto Rico and various obligations of its related authorities and public corporations.

The following table shows the scheduled amortization of the obligations of the Puerto Rico authorities and public corporations that the Company insures.

The Company guarantees payment of interest and principal when those amounts are scheduled to be paid and cannot be required to pay on an accelerated basis, although in certain circumstances it may elect to do so.

In the event that obligors default on their obligations, the Company would only be required to pay the shortfall between the debt service due in any given period and the amount paid by the obligors.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Amortization Schedule of Puerto Rico

Net Par Outstanding and Net Debt Service Outstanding

As of September 30, 2023

As of March 31, 2024

Scheduled Net Par Amortization Scheduled Net Debt Service Amortization

(in millions)

2023 (October 1 - December 31) $ — $ 3

2024 (January 1 - March 31) — 24

2024 (April 1 - June 30) $ — $ 3

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Total $ 961 $ 1,252

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

As of September 30, 2023, the Company had $ 624 million insured net par outstanding of PREPA obligations.

As of March 31, 2024 and December 31, 2023, the Company’s net par outstanding on insured PREPA obligations was $ 624 million.

The Company believes that the PREPA bonds are secured by a lien on the revenues of the electric system.

On April 8, 2022, Judge Laura Taylor Swain of the Federal District Court of Puerto Rico issued an order appointing as members of a PREPA mediation team U.S.

The default of PREPA’s obligations has been the subject of restructuring negotiations, mediation and litigation since 2014.

On April 8, 2022, Judge Laura Taylor Swain of the United States District Court of the District of Puerto Rico (Federal District Court of Puerto Rico) issued an order appointing as members of a PREPA mediation team U.S.

Bankruptcy Judges Shelley Chapman (lead mediator), Robert Drain and Brendan Shannon.

Judge Swain also entered a separate order establishing the terms and conditions of mediation, including that the mediation would terminate on June 1, 2022.

Judge Swain has since extended the term of such mediation several times, most recently on September 29, 2023 extending the term to March 29, 2024.

The FOMB filed an initial plan of adjustment and disclosure statement for PREPA with the Federal District Court of Puerto Rico on December 16, 2022, and filed an amended version on February 9, 2023 (FOMB PREPA Plan).

On March 22, 2023, the Federal District Court of Puerto Rico held that the PREPA bondholders had perfected liens only in revenues that had been deposited in the sinking fund established under the PREPA trust agreement and related funds over which the bond trustee had control but did not have a lien in future revenues until deposited in those funds.

Judge Swain has since extended the term of such mediation several times, most recently on May 1, 2024 extending the term to July 31, 2024.

The Financial Oversight and Management Board (the FOMB) which was established under the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) filed an initial plan of adjustment and disclosure statement for PREPA with the Federal District Court of Puerto Rico on December 16, 2022.

The Federal District Court of Puerto Rico also held, however, that PREPA bondholders do have recourse under the PREPA trust agreement in the form of an unsecured net revenue claim.

2 unchanged sentences

On June 6-8, 2023, the Federal District Court of Puerto Rico held a claim estimation proceeding and, on June 26, 2023, issued an opinion and order estimating the unsecured net revenue claim to be $ 2.4 billion as of July 3, 2017.

This estimate included a determination that PREPA’s discounted cash flows, using FOMB’s base-case incremental net revenues over a 100-year collection period and a discount rate of 7 %, would be $ 3.0 billion, and should be reduced by an additional 20 % for collection risk.

This estimate included a determination that PREPA’s discounted cash flows, using the FOMB’s base-case incremental net revenues over a 100-year collection period and a discount rate of 7 %, would be $ 3.0 billion, and should be reduced by an additional 20 % for collection risk.

PREPA bondholders had sought an unsecured net revenue claim of approximately $ 8.5 billion.

The Company expects to appeal portions of the March 22, 2023 decision, including the lien scope ruling and the need for a claim estimation proceeding, as well as the June 26, 2023 claim estimation ruling, upon final adjudication by the Federal District Court of Puerto Rico of all claims and counterclaims in the PREPA lien challenge adversary proceeding.

On October 27, 2023, the FOMB filed with the Federal District Court of Puerto Rico the third modified third amended plan of adjustment for PREPA and supporting supplemental disclosure statement (FOMB PREPA Plan) based on the last revised PREPA fiscal plan certified by the FOMB on June 23, 2023 (2023 PREPA Fiscal Plan).

On November 17, 2023, the Federal District Court of Puerto Rico approved the supplemental disclosure statement (Supplemental Disclosure Statement) supporting the PREPA plan of adjustment filed by the FOMB (as amended or modified from time to time).

On February 16, 2024, FOMB filed with the Federal District Court of Puerto Rico its most recent plan of adjustment for PREPA, the Modified Fourth Amended Title III Plan of Adjustment (FOMB PREPA Plan).

The Supplemental Disclosure Statement and the FOMB PREPA Plan are based on the last revised PREPA fiscal plan certified by the FOMB on June 23, 2023 (2023 PREPA Fiscal Plan).

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

On November 28, 2023, the Federal District Court of Puerto Rico finally adjudicated all claims and counterclaims in the PREPA lien challenge adversary proceeding.

On November 30, 2023, the Company filed a notice of appeal with the United States Court of Appeals for the First Circuit (First Circuit) for portions of the March 22, 2023 decision, including the lien scope ruling and the need for a claim estimation proceeding, as well as the June 26, 2023 claim estimation ruling.

On January 29, 2024, the First Circuit heard oral arguments for the Company’s appeals.

The FOMB PREPA Plan would split bondholders into two groups:

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The FOMB asserts that, other than for pension claims, PREPA’s debt capacity is $ 2.5 billion, of which approximately $ 1.4 billion is allocated to settling creditors.

The remaining $ 1.1 billion is allocated pro rata to (i) non-settling bondholders, and (ii) general unsecured creditors (GUCs).

The remaining $ 1.1 billion is allocated to (i) non-settling bondholders, and (ii) general unsecured creditors.

The most recent revised FOMB PREPA Plan provides for reduced payments to bondholders since lower projected PREPA revenues are included in the 2023 PREPA Fiscal Plan than had been previously anticipated.

The FOMB PREPA Plan estimates that non-settling bondholders will receive a recovery of 12.5 % of their allowed unsecured net revenue claim.

The Company is opposed to the FOMB PREPA Plan and has joined with a group of non-settling bondholders that continue to litigate whether creditor repayments will include future revenue collections.

The supplemental disclosure statement hearing for the FOMB PREPA Plan is scheduled for November 14, 2023.

The confirmation hearing for the FOMB PREPA Plan is currently scheduled to occur in March 2024.

As of September 30, 2023, the Company had $ 372 million of insured net par outstanding of PRHTA bonds:

$ 244 million insured net par outstanding of PRHTA (transportation revenue) bonds and $ 128 million insured net par outstanding of PRHTA (highway revenue) bonds.

PRHTA net par outstanding primarily represents the Company’s exposure in respect of insured bondholders who elected to receive custody receipts that represent an interest in the legacy insurance policy plus Toll Bonds that constitute distributions under the HTA Plan.

The Company is opposed to the FOMB PREPA Plan and has joined with a group of non-settling bondholders that continue to litigate the lien scope and claim estimation rulings.

The confirmation hearing for the FOMB PREPA Plan occurred in March 2024.

At the end of the hearing, Judge Swain stated that she was taking the confirmation of the FOMB PREPA Plan under advisement and gave no indication of timing for an opinion or order.

On April 29, 2024, the Company and other non-settling bondholders filed a motion to reopen the record of the confirmation hearing for the FOMB PREPA Plan to include newly discovered updated forecasts of electricity usage.

Resolved Puerto Rico Exposures

In 2022, as a result of the resolution of the Company’s exposure to insured Puerto Rico credits experiencing payment default other than PREPA (2022 Puerto Rico Resolutions), the Company received cash, new general obligation bonds (New GO Bonds), new bonds backed by toll revenues (Toll Bonds, and together with New GO Bonds, New Recovery Bonds) and contingent value instruments (CVIs).

The CVIs are intended to provide creditors with additional recoveries tied to the outperformance of the Puerto Rico 5.5% Sales and Use Tax receipts against May 2020 certified fiscal plan projections, subject to annual and lifetime caps.

Cash, New Recovery Bonds and CVIs received pursuant to the 2022 Puerto Rico Resolutions are collectively referred to as Plan Consideration.

As of March 31, 2024, all but $ 272 million in CVIs (at fair value) had been sold or redeemed.

As of March 31, 2024, remaining CVIs are reported in fixed-maturity securities, trading.

See Note 7, Investments.

The Company may sell in the future any CVIs it continues to hold.

As of March 31, 2024, the Company had $ 228 million of insured net par outstanding of legacy PRHTA bonds.

This net par outstanding primarily represents the Company’s exposure in respect of legacy insured PRHTA bondholders who elected to receive custody receipts that represent an interest in the legacy insurance policy plus Plan Consideration, as described below.

The remaining amounts owed for insured PRHTA bonds are payable in full by the Company’s insurance subsidiaries under their financial guaranty policies and are no longer dependent on the credit of PRHTA.

The Company consolidates the trusts in which the PRHTA obligations are reported.

See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

Certain insured bondholders elected to receive custody receipts representing an interest in custodial trusts that hold the legacy insurance policy plus Plan Consideration that were reported in FG VIEs’ assets at the time of the receipt.

Non-Defaulting Puerto Rico Exposures

As of March 31, 2024, and December 31, 2023, the Company had $ 109 million of remaining non-defaulting Puerto Rico net par outstanding related primarily to the Municipal Finance Agency (MFA).

The MFA exposures are secured by a lien on local tax revenues and remain current on debt service payments.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Puerto Rico GO and PBA

The Company’s exposure to GO bonds and PBA bonds was extinguished on August 31, 2023, and, therefore, as of September 30, 2023, the Company had no remaining insured net par outstanding of GO bonds and PBA bonds.

Other Puerto Rico Exposures

All debt service payments for the Company’s remaining Puerto Rico exposures of $ 109 million insured net par outstanding have been made in full by the obligors as of the date of this filing.

These exposures consist primarily of $ 108 million net par outstanding of MFA bonds, which are secured by a lien on local tax revenues.

Puerto Rico Litigation

Currently, there are numerous legal actions relating to the default by the Commonwealth and certain of its instrumentalities on debt service payments, and related matters, and the Company is a party to a number of them.

The Company has taken legal action, and may take additional legal action in the future, to enforce its rights with respect to Puerto Rico obligations which the Company insures.

Currently, there are numerous legal actions relating to the default by the Commonwealth of Puerto Rico and certain of its instrumentalities on debt service payments, and related matters, and the Company is a party to a number of them.

The Company has taken legal action, and may take additional legal action in the future, to enforce its rights with respect to the remaining Puerto Rico obligations it still insures.

In addition, the Commonwealth, the FOMB and others have taken legal action naming the Company as party.

A number of legal actions involving the Company and relating to the Commonwealth, PRCCDA and PRIFA, as well as claims related to the clawback of certain excise taxes and revenues pledged to secure bonds issued by PRHTA, were resolved on March 15, 2022, and all remaining legal actions involving the Company and relating to PRHTA were resolved on December 6, 2022, which together comprised the consummation of the 2022 Puerto Rico Resolutions.

Except for one proceeding related to PREPA, all proceedings involving the Company and relating to the default by the Commonwealth or its instrumentalities remain stayed pending the Federal District Court of Puerto Rico's determination on plans of adjustment or other proceedings.

The following Puerto Rico proceeding in which the Company is involved is no longer stayed:

• On July 1, 2019, the FOMB initiated an adversary proceeding against U.S.

Certain legal actions involving the Company and relating to the Commonwealth, Puerto Rico Convention Center District Authority, Puerto Rico Infrastructure Financing Authority or PRHTA, were resolved on March 15, 2022, and all remaining legal actions involving the Company and relating to PRHTA were resolved on December 6, 2022, in connection with the consummation of the 2022 Puerto Rico Resolutions.

There remains one active proceeding related to PREPA, while there are a number of unresolved proceedings involving the Company and relating to the default by the Commonwealth or its instrumentalities that remain stayed pending the Federal District Court of Puerto Rico’s determination on the PREPA plan of adjustment.

The remaining active proceeding was initiated by the FOMB in the Federal District Court of Puerto Rico on July 1, 2019 against U.S.

Bank National Association, as trustee for PREPA’s bonds, objecting to and challenging the validity, enforceability, and extent of prepetition security interests securing those bonds and seeking other relief.

2 unchanged sentences

Summary judgment motions were filed by plaintiffs and defendants on October 24, 2022.

As noted above, on March 22, 2023, the Federal District Court of Puerto Rico granted in part and denied in part each party’s cross-motions for summary judgment.

On March 22, 2023, the Federal District Court of Puerto Rico granted in part and denied in part each party’s cross-motions for summary judgment.

The Federal District Court of Puerto Rico found that the PREPA bondholders had perfected liens only in revenues that had been deposited in the sinking fund established under the PREPA trust agreement and related funds over which the bond trustee had control.

The Federal District Court of Puerto Rico also held that the PREPA bondholders do have recourse under the trust agreement in the form of an unsecured net revenue claim, but declined to value the unsecured net revenue claim.

On April 13, 2023, the court issued an order proposing procedures to estimate the value of the unsecured net revenue claim arising from the Trustee’s ability to exercise remedies to obtain specific performance of PREPA’s covenants to fund the sinking fund, which must be done under the Bankruptcy Code for purposes of allowance.

The order also set a discovery and expert report schedule, and directed the parties to engage in good faith mediation.

A claim estimation hearing was held June 6-8, 2023, and in a June 26, 2023 opinion, the court estimated the PREPA bondholders’ allowed unsecured net revenue claim to be $ 2.4 billion, which the court calculated by largely adopting the conclusions in the FOMB’s expert report.

The Federal District Court of Puerto Rico also held that the PREPA bondholders do have recourse under the trust agreement in the form of an unsecured net revenue claim.

In a June 26, 2023 opinion, the court estimated the PREPA bondholders’ allowed unsecured net revenue claim to be $ 2.4 billion, which the court calculated by largely adopting the conclusions in the FOMB’s expert report.

On May 3, 2023, the court denied PREPA bondholders’ request to certify their interlocutory appeal of the finding that the PREPA bondholders had perfected liens only in revenues that had been deposited in the sinking fund established under the PREPA trust agreement and related funds over which the bond trustee had control.

On May 15, 2023, the FOMB filed its motion to dismiss the Trustee’s and bondholders’ counterclaims.

Unless mediation or a confirmed plan of adjustment leads to an acceptable outcome, AGM and AGC expect to appeal portions of the court’s decision, including the lien scope ruling and the result of the claim estimation proceeding, upon final adjudication by the court.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The following Puerto Rico proceedings in which the Company is involved remain stayed:

• On June 26, 2017, AGM and AGC filed a complaint in the Federal District Court of Puerto Rico to compel the FOMB to certify the PREPA RSA for implementation under Title VI of PROMESA.

On July 21, 2017, considering its PREPA Title III petition on July 2, 2017, the FOMB filed a notice of stay under PROMESA.

• On July 18, 2017, AGM and AGC filed a motion for relief in the Federal District Court of Puerto Rico from the

automatic stay filed in the PREPA Title III Bankruptcy proceeding.

The court denied the motion on September 14,

2017, but on August 8, 2018, the United States Court of Appeals for the First Circuit vacated and remanded the court’s decision.

On October 3, 2018, AGM and AGC, together with other bond insurers, filed a motion with the court to lift the automatic stay to commence an action against PREPA for the appointment of a receiver.

Following termination of mediation without a resolution and the filing of a motion to dismiss PREPA’s Title III case or to lift the automatic stay to allow for the appointment of a receiver, the court effectively stayed this matter until termination of the plan confirmation process.

• On May 20, 2019, the FOMB and the Official Committee of Unsecured Creditors filed an adversary complaint in the Federal District Court of Puerto Rico challenging the validity, enforceability, and extent of security interests in PRHTA revenues.

Relatedly, on January 16, 2020, the FOMB, on behalf of the PRHTA, brought an adversary proceeding in the Federal District Court of Puerto Rico against AGM and AGC and other insurers of PRHTA bonds, objecting to the bond insurers claims in the PRHTA Title III proceedings and seeking to disallow such claims.

These matters are currently stayed.

On October 12, 2022, the court entered an order and judgment confirming the amended plan of adjustment for PRHTA filed by the FOMB with the court on September 6, 2022 (HTA Confirmation Order), and which provides that these adversary proceeding must be dismissed with prejudice within five business days of the HTA Confirmation Order becoming a final order, which should occur after all appeals of the HTA Confirmation Order have been resolved.

• On September 30, 2019, certain parties that either had advanced funds to PREPA for the purchase of fuel or had succeeded to such claims (Fuel Line Lenders) filed an amended adversary complaint against the FOMB and other parties, including AGC and AGM, seeking subordination of PREPA bondholder claims to Fuel Line Lenders’ claims.

On November 12, 2019, AGC and AGM filed a motion to dismiss the amended adversary complaint.

On September 29, 2022, the court entered an order terminating the motion to dismiss without prejudice and indicating that the issues in the adversary proceeding will only be addressed, if necessary, after issues related to security and recourse of the PREPA bonds have been resolved or, if necessary, in connection with the confirmation of a plan of adjustment for PREPA.

• On October 30, 2019, the retirement system for PREPA employees (SREAEE) filed an amended adversary complaint in the Federal District Court of Puerto Rico against the FOMB and other parties, seeking subordination of PREPA bondholder claims to SREAEE claims.

On November 7, 2019, the court granted a motion to intervene by AGC and AGM.

On November 13, 2019, AGC and AGM filed a motion to dismiss the amended adversary complaint.

On September 29, 2022, the court entered an order terminating the motion to dismiss without prejudice, and indicating that the issues in the adversary proceeding will only be addressed, if necessary, after issues related to security and recourse of the PREPA bonds have been resolved or, if necessary, in connection with the confirmation of a plan of adjustment for PREPA.

On May 15, 2023, the FOMB filed its motion to dismiss the trustee’s and bondholders’ counterclaims, which was granted by the court on November 28, 2023.

AGM and AGC filed a notice of appeal on November 30, 2023.

On January 29, 2024, the First Circuit heard oral arguments for the Company’s appeals.

The unresolved proceedings initiated in the Federal District Court of Puerto Rico involving the Company and relating to the default by the Commonwealth or its instrumentalities that remain stayed pending the Federal District Court of Puerto Rico’s determination on the PREPA plan of adjustment are:

• AGM and AGC motion to compel the FOMB to certify the PREPA restructuring support agreement executed in May 2019 (PREPA RSA) for implementation under Title VI of PROMESA.

• AGM and AGC motion to dismiss PREPA’s Title III Bankruptcy proceeding or, in the alternative, to lift the PROMESA automatic stay to allow for the appointment of a receiver.

• Adversary complaint by certain fuel line lenders of PREPA against AGM and AGC, among other parties, including various PREPA bondholders and bond insurers, seeking, among other things, declarations that there is no valid lien securing the PREPA bonds unless and until such lenders are paid in full, as well as orders subordinating the PREPA bondholders’ lien and claims to such lenders’ claims, and declaring the PREPA RSA null and void.

• AGM and AGC motion to intervene in lawsuit by the retirement system for PREPA employees against, among others, the FOMB, PREPA, the Commonwealth, and the trustee for PREPA bondholders seeking, among other things, declarations that there is no valid lien securing the PREPA bonds other than on amounts in the sinking funds, and order subordinating the PREPA bondholders’ lien and claim to the PREPA employees’ claims.

Assured Guaranty Ltd.

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Specialty Business

As of September 30, 2023 As of December 31, 2022

As of March 31, 2024 As of December 31, 2023

Gross Exposure Net Exposure Gross Exposure Net Exposure

(in millions)

Life insurance transactions (1)

$ 1,325 $ 1,003 $ 1,314 $ 986

Aircraft residual value insurance policies

355 200 355 200

Insurance securitizations (1) $ 1,398 $ 1,067 $ 1,370 $ 1,043

Aircraft residual value insurance 355 200 355 200

Other guaranties 2,001 2,001 2,057 2,057

____________________

(1) The life insurance transactions net exposure is projected to reach $ 1.1 billion in 2024.

As of both September 30, 2023 and December 31, 2022, gross exposure of $ 144 million and net exposure of $ 84 million of aircraft residual value insurance was internally rated BIG.

All other exposures in the table above are rated investment-grade.

Specialty business includes an excess-of-loss guaranty of a minimum amount of billed rent on a diversified portfolio of real estate properties with an internal rating of AA that matures in 2042.

The Company’s maximum potential exposure under this guaranty, which is accounted for in accordance with Accounting Standards Codification (ASC) 460, Guarantees, was $ 1.6 billion as of September 30, 2023.

(1) Insurance securitizations exposure is projected to reach $ 1.5 billion gross in 2025 and $ 1.2 billion net in 2026.

All exposures in the table above are rated investment-grade, except gross exposure of $ 144 million and net exposure of $ 84 million of aircraft residual value insurance as of both March 31, 2024 and December 31, 2023.

Other guaranties in specialty business include an excess-of-loss guaranty of a minimum amount of billed rent on a diversified portfolio of real estate properties with an internal rating of AA that matures in 2042.

The Company’s maximum potential exposure under this guaranty, which is accounted for in accordance with Accounting Standards Codification (ASC) 460, Guarantees, was $ 1.5 billion as of March 31, 2024.

Expected Loss to be Paid (Recovered)

Expected loss to be paid (recovered) is equal to the present value of expected future cash outflows for loss and

Net expected loss to be paid (recovered) is equal to the present value of expected future cash outflows for loss and

LAE payments, net of:

(i) inflows for expected salvage, subrogation and other recoveries;

and (ii) excess spread on underlying

(ii) excess spread on underlying

collateral, as applicable;

and (iii) amounts ceded to reinsurers.

Cash flows are discounted at current risk-free rates.

The Company updates the discount rates each quarter and reflects the effect of such changes in economic loss development.

Net expected loss to be paid (recovered) is net of amounts ceded to reinsurers.

The Company’s net expected loss to be paid (recovered) incorporates management’s probability weighted scenarios.

Expected cash outflows and inflows are probability weighted cash flows that reflect management’s assumptions about the likelihood of all possible outcomes based on all information available to the Company.

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Expected loss to be paid (recovered) is important in that it represents the present value of amounts that the Company expects to pay or recover in future periods for all contracts.

In circumstances where the Company purchased its own insured obligations that had expected losses, and in cases

where issuers of insured obligations elected or the Company and an issuer mutually agreed as part of a negotiation to deliver the

underlying collateral, insured obligation or a new security to the Company, expected loss to be paid (recovered) is reduced and

the asset received is prospectively accounted for under the applicable guidance for that instrument.

Insured obligations with expected losses that were purchased by the Company are referred to as Loss Mitigation Securities and are recorded in the investment portfolio at fair value, excluding the value of the Company’s insurance.

Concurrently, the Company reduces any related expected loss to be paid (recovered).

For Loss Mitigation Securities, the difference between the purchase price of the insured obligation and the fair value excluding the value of the Company’s insurance (on the date of acquisition) is treated as a paid loss.

See Note 7, Investments, and Note 9, Fair Value Measurement.

Similarly, in cases where issuers of insured obligations elected (or where an issuer and the Company negotiated) to deliver the underlying collateral, insured obligation, or a new security to the Company, expected loss to be paid (recovered) is adjusted accordingly and the asset received is prospectively accounted for under the applicable guidance for that instrument.

Economic loss development represents the change in net expected loss to be paid (recovered) attributable to the effects of changes in the economic performance of insured transactions, changes in assumptions based on observed market trends, changes in discount rates, accretion of discount and the economic effects of loss mitigation efforts.

In order to effectively evaluate and manage the economics and liquidity of the entire insured portfolio, management assigns ratings and calculates expected loss to be paid (recovered) in the same manner for all its exposures regardless of form or differing accounting models.

In order to effectively evaluate and manage the economics and liquidity of the entire insured portfolio, management assigns ratings and calculates expected loss to be paid (recovered), on a contract-by-contract basis, in the same manner for all its exposures regardless of form or differing accounting models.

The exposure reported in Note 3, Outstanding Exposure, includes policies accounted for under various accounting models depending on the characteristics of the contract and the Company’s control rights.

The three primary

The three primary models are:

(i) insurance, as described in Note 5, Contracts Accounted for as Insurance;

(ii) derivatives, as described in Note 6, Contracts Accounted for as Credit Derivatives, and Note 9, Fair Value Measurement;

and (iii) FG VIE consolidation, as described in Note 8, Financial Guaranty Variable Interest Entities and

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

(1) insurance, as described in Note 5, Contracts Accounted for as Insurance;

(2) derivatives, as described in Note 6, Contracts Accounted for as Credit Derivatives, and Note 9, Fair Value Measurement;

and (3) FG VIE consolidation, as described in Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

Consolidated Investment Vehicles.

The Company has paid and expects to pay future losses and/or recover past losses on policies which fall under each of these accounting models.

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The Company’s loss reserve committees estimate expected loss to be paid (recovered) for all contracts by reviewing analyses that consider various scenarios with corresponding probabilities assigned to them.

Depending upon the nature of the risk, the Company’s view of the potential size of any loss and the information available to the Company, that analysis may be based upon individually developed cash flow models, internal credit rating assessments, sector-driven loss severity assumptions and/or judgmental assessments.

Depending upon the characteristics of the risk, the Company’s view of the potential size of any loss and the information available to the Company, that analysis may be based upon individually developed cash flow models, internal credit rating assessments, sector-driven loss severity assumptions and/or judgmental assessments.

In the case of its assumed business, the Company may conduct its own analysis as just described or, depending on the Company’s view of the potential size of any loss and the information available to the Company, the Company may use loss estimates provided by ceding insurers.

The Company monitors the performance of its transactions with expected losses and each quarter the Company’s loss reserve committees review and refresh their loss projection assumptions, scenarios and the probabilities they assign to those scenarios based on actual developments during the period and their view of future performance.

Each quarter, the Company’s loss reserve committees review and refresh their loss projection assumptions, scenarios and the probabilities they assign to those scenarios based on developments during the period and their view of future performance.

The financial guaranties issued by the Company insure the credit performance of the guaranteed obligations over an extended period of time, in some cases over 30 years, and in most circumstances the Company has no right to cancel such financial guaranties.

As a result, the Company’s estimate of ultimate loss on a policy is subject to significant uncertainty over the life of the insured transaction.

Credit performance can be adversely affected by economic, fiscal and financial market variability over the life of most contracts.

Credit performance can be affected by, among other things, economic, fiscal and financial market and political developments over the life of most contracts.

The Company does not use traditional actuarial approaches to determine its estimates of expected losses.

The determination of expected loss to be paid (recovered) is an inherently subjective process involving numerous estimates, assumptions and judgments by management, using both internal and external data sources with regard to frequency, severity of loss, economic projections, governmental actions, negotiations, recovery rates, delinquency and prepayment rates (with respect to RMBS), timing of cash flows, and other factors that affect credit performance.

The determination of expected loss to be paid (recovered) is an inherently subjective process involving numerous estimates, assumptions and judgments by management, using both internal and external data sources with regard to frequency, and severity of loss, economic projections, governmental actions, legal developments, negotiations, recovery rates, delinquency and prepayment rates, timing of cash flows and other factors that affect credit performance.

These estimates, assumptions and judgments, and the factors on which they are based, may change materially over a reporting period, and have a material effect on the Company’s financial statements.

Each quarter, the Company may revise its scenarios and update its assumptions, including the probability weightings of its scenarios based on public information as well as nonpublic information obtained through its surveillance and loss mitigation activities.

Each quarter, the Company may revise its scenarios and update its assumptions, including the probability weightings of its scenarios, based on public as well as nonpublic information obtained through its surveillance and loss mitigation activities.

Changes over a reporting period in the Company’s loss estimates for public finance obligations supported by specified revenue streams, such as revenue bonds issued by toll road authorities, municipal utilities or airport authorities, generally will be influenced by factors impacting their revenue levels, such as changes in demand;

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For example, changes over a reporting period in the Company’s loss estimates for its RMBS transactions may be influenced by factors such as the level and timing of loan defaults experienced, changes in housing prices, results from the Company’s loss mitigation activities and other variables.

Net economic loss development (benefit) over a reporting period may be attributable to a number of interrelated factors such as changes in discount rates, improvement or deterioration of transaction performance, charge-offs, loss mitigation activity, changes to projected default curves, severity rates and dispute resolution.

Net economic loss development (benefit) over a reporting period may be attributable to a number of interrelated factors such as changes in discount rates, improvement or deterioration of transaction performance, changes in charge-offs, loss mitigation activity, changes to projected default curves, changes in severity rates and outcome of disputed issues.

Actual losses will ultimately depend on future events, transaction performance or other factors that are difficult to predict.

As a result, the Company’s current projections of losses may be subject to considerable volatility and may not reflect the Company’s ultimate claims paid.

As a result, the Company’s current projections of certain losses may be subject to considerable uncertainty and may not reflect the Company’s ultimate claims paid.

Assured Guaranty Ltd.

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Net Expected Loss to be Paid (Recovered) Net Economic Loss Development (Benefit)

As of Third Quarter Nine Months

Accounting Model September 30, 2023 December 31, 2022 2023 2022 2023 2022

As of First Quarter

Accounting Model March 31, 2024 December 31, 2023 2024 2023

(in millions)

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FG VIEs (see Note 8) (1)

235 314 ( 6 ) ( 6 ) ( 15 ) ( 16 )

Credit derivatives (see Note 6)

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The Company used risk-free rates for U.S.

dollar denominated obligations that ranged from 4.51 % to 5.45 % with a weighted average of 4.80 % as of September 30, 2023 and 3.82 % to 4.69 % with a weighted average of 4.08 % as of December 31, 2022.

dollar denominated obligations that ranged from 4.14 % to 5.33 % with a weighted average of 4.44 % as of March 31, 2024 and 3.79 % to 5.40 % with a weighted average of 4.10 % as of December 31, 2023.

Net expected losses to be paid for U.S.

dollar denominated transactions represented approximately 98.2 % and 98.5 % of the total as of September 30, 2023 and December 31, 2022, respectively.

dollar denominated transactions represented approximately 95.5 % and 96.1 % of the total as of March 31, 2024 and December 31, 2023, respectively.

Net Expected Loss to be Paid (Recovered)

Third Quarter Nine Months

2023 2022 2023 2022

First Quarter

(in millions)

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Net expected loss to be paid (recovered), end of period $ 433 $ 517

____________________

(1) Net (paid) recovered losses in 2023 include recoveries related to various Puerto Rico securities transferred to the Company's investment portfolio upon the maturity and extinguishment of certain GO, PBA and HTA insured exposure.

Net (paid) recovered losses in 2022 include the net amounts received pursuant to the 2022 Puerto Rico Resolutions, as described in Note 3, Outstanding Exposure.

Assured Guaranty Ltd.

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Roll Forward by Sector

Third Quarter 2023

Sector Net Expected Loss to be Paid (Recovered) as of June 30, 2023 Net Economic Loss

Development (Benefit) Net (Paid)

Net Expected Loss to be Paid (Recovered) as of September 30, 2023

(in millions)

Public finance:

public finance $ 433 $ 135 $ ( 169 ) $ 399

public finance 10 ( 1 ) — 9

Public finance 443 134 ( 169 ) 408

Structured finance:

RMBS 73 ( 48 ) 13 38

Other structured finance 44 1 ( 1 ) 44

Structured finance 117 ( 47 ) 12 82

Total $ 560 $ 87 $ ( 157 ) $ 490

Third Quarter 2022

Sector Net Expected Loss to be Paid (Recovered) as of June 30, 2022 Net Economic Loss

Development (Benefit) Net (Paid)

Net Expected Loss to be Paid (Recovered) as of September 30, 2022

(in millions)

Public finance:

public finance $ 210 $ 24 $ 392 $ 626

public finance 7 ( 2 ) 1 6

Public finance 217 22 393 632

Structured finance:

RMBS 179 ( 95 ) ( 32 ) 52

Other structured finance 46 1 ( 4 ) 43

Structured finance 225 ( 94 ) ( 36 ) 95

Total $ 442 $ ( 72 ) $ 357 $ 727

Nine Months 2023

First Quarter 2024

Sector Net Expected Loss to be Paid (Recovered) as of December 31, 2023 Net Economic Loss

Development (Benefit) Net (Paid)

Net Expected Loss to be Paid (Recovered) as of September 30, 2023

Net Expected Loss to be Paid (Recovered) as of March 31, 2024

(in millions)

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Total $ 505 $ ( 7 ) $ ( 65 ) $ 433

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Nine Months 2022

First Quarter 2023

Sector Net Expected Loss to be Paid (Recovered) as of December 31, 2022 Net Economic Loss

Development (Benefit) Net (Paid)

Net Expected Loss to be Paid (Recovered) as of September 30, 2022

Net Expected Loss to be Paid (Recovered) as of March 31, 2023

(in millions)

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Such amounts are recorded as reinsurance recoverable on paid losses in “other assets.”

The tables above include (i) net LAE paid of $ 9 million, $ 5 million, $ 17 million and $ 25 million for third quarter 2023, third quarter 2022, nine months 2023 and nine months 2022, respectively, and (ii) net expected LAE to be paid of $ 29 million and $ 11 million as of September 30, 2023 and December 31, 2022, respectively.

The tables above include (i) net LAE paid of $ 7 million and $ 3 million for first quarter 2024 and first quarter 2023, respectively, and (ii) net expected LAE to be paid of $ 16 million as of March 31, 2024 and $ 22 million as of December 31, 2023, respectively.

Public Finance

The largest component of public finance net expected losses to be paid (recovered) and net economic loss development (benefit) are U.S.

The largest component of the public finance net expected losses to be paid (recovered) and net economic loss development (benefit) are U.S.

exposures, including Puerto Rico exposures, which are discussed in Note 3, Outstanding Exposure.

The total net expected loss to be paid for troubled U.S.

public finance exposures is net of a credit for estimated future recoveries of claims already paid.

As of both March 31, 2024 and December 31, 2023, that credit was $ 193 million.

The Company’s net expected losses to be paid (recovered) incorporate management’s probability weighted estimates of all possible scenarios.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

RMBS Loss Projections

The Company projects losses on its insured U.S.

RMBS on a transaction-by-transaction basis by projecting the performance of the underlying pool of mortgages over time and then applying the structural features (e.g., payment priorities and tranching) of the RMBS and any expected representation and warranty (R&W) recoveries/payables to the projected performance of the collateral over time.

RMBS on a transaction-by-transaction basis by projecting the performance of the underlying pool of mortgages over time and then applying the structural features (e.g., payment priorities and tranching) of the RMBS and any expected representation and warranty recoveries/payables to the projected performance of the collateral over time.

The resulting projected claim payments or reimbursements are then discounted using risk-free rates.

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Net Economic Loss Development (Benefit)

Third Quarter Nine Months

2023 2022 2023 2022

First Quarter

(in millions)

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Second lien U.S.

RMBS ( 36 ) ( 57 ) ( 40 ) ( 93 )

First Lien U.S.

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RMBS transactions are expected to come from non-performing mortgage loans (those that are or have recently been two or more payments behind, have been modified, are in foreclosure, or have been foreclosed upon).

Changes in the amount of non-performing loans from the amount projected in the previous period

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

are one of the primary drivers of loss projections in this portfolio.

Changes in the amount of non-performing loans from the amount projected in the previous period are one of the primary drivers of loss projections in this portfolio.

Collateral losses are projected to be offset by recoveries on deferred principal balance.

In order to project the number of defaults arising from these delinquent and foreclosed loans, the Company applies a liquidation rate assumption to loans in each of various non-performing categories.

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RMBS Liquidation Rates

September 30, 2023 December 31, 2022

As of March 31, 2024 As of December 31, 2023

Range (1) Range (1)

Current but recently delinquent 20 % 20 %

Alt-A and Prime 20 % 20 %

Option ARM 20 % 20 %

Subprime 20 % 20 %

30 – 59 Days Delinquent 30 % – 35 % 30 % – 35 %

Alt-A and Prime 35 % 35 %

Option ARM 35 % 35 %

Subprime 30 % 30 %

60 – 89 Days Delinquent 40 % – 45 % 40 % – 45 %

Alt-A and Prime 40 % 40 %

Option ARM 45 % 45 %

Subprime 40 % 40 %

90+ Days Delinquent 45 % – 60 % 45 % – 60 %

Alt-A and Prime 55 % 55 %

Option ARM 60 % 60 %

Subprime 45 % 45 %

Alt-A and Prime 45 % 45 %

Option ARM 50 % 50 %

Subprime 40 % 40 %

Alt-A and Prime 60 % 60 %

Option ARM 65 % 65 %

Subprime 55 % 55 %

Bankruptcy 40 % – 50 % 40 % – 50 %

Foreclosure 55 % – 65 % 55 % – 65 %

Real Estate Owned 100 % 100 %

All 100 % 100 %

____________________

(1) The ranges represent variation in calculated liquidation rates across RMBS sectors.

While the Company uses the liquidation rates above to project defaults of non-performing loans (including current loans that were recently modified or delinquent), it projects defaults on presently current loans by applying a conditional default rate (CDR) curve.

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The CDR thus calculated individually on the delinquent collateral pool for each RMBS is then used as the starting point for the CDR curve used to project defaults of the presently performing loans.

In the most heavily weighted scenario (the base scenario), after the 36 -month CDR plateau period, each transaction’s CDR is projected to improve over 12 months to a final CDR of 5 % of the plateau CDR.

In the base scenario, the Company assumes the final CDR will be reached one year after the 36 -month CDR plateau period.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

trend after the first 36 -month period represent defaults attributable to borrowers that are currently performing or are projected to re-perform.

In the base scenario, the Company assumes the final CDR will be reached one year after the 36 -month CDR plateau period.

Under the Company’s methodology, defaults projected to occur in the first 36 months represent defaults that can be attributed to loans that were recently modified or delinquent, or that are currently delinquent or in foreclosure, while the defaults projected to occur using the projected CDR trend after the first 36 -month period represent defaults attributable to borrowers that are currently performing or are projected to re-perform.

Another important driver of loss projections is loss severity, which is the amount of loss the transaction incurs on a loan after the application of net proceeds from the disposal of the underlying property.

The Company assumes in the base scenario that recent (still historically elevated) loss severities will improve after loans with accumulated delinquencies and foreclosure cost are liquidated.

The Company is assuming in the base scenario that the recent levels generally will continue for another 18 months.

The Company determines its initial loss severity based on actual recent experience.

The Company is assuming in the base scenario that recent severity levels generally will continue for another 18 months.

The Company determines its initial loss severity based on recent experience.

Each quarter, the Company reviews available data and (if necessary) adjusts its severities based on its observations.

The Company then assumes that loss severities begin returning to levels consistent with underwriting assumptions beginning after the initial 18 -month period, declining to 40 % in the base scenario over 2.5 years.

The Company incorporates a recovery assumption into its loss modeling to reflect observed trends in recoveries of deferred principal balances of modified first lien loans.

For transactions where the Company has detailed loan information, the Company assumes, in the base scenario, that 30 % of the deferred loan balances will eventually be recovered upon sale of the collateral or refinancing of the loans.

The following table shows the range as well as the average, weighted by outstanding net insured par, for key assumptions used in the calculation of expected loss to be paid (recovered) for individual transactions for vintage 2004 - 2008 first lien U.S.

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First Lien U.S.

As of September 30, 2023 As of December 31, 2022

As of March 31, 2024 As of December 31, 2023

Range Weighted Average Range Weighted Average

Alt-A and Prime:

Plateau CDR 0.0 % - 11.8 % 4.1 % 0.0 % - 10.0 % 4.2 %

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Initial loss severity 50 % 50 %

2005 and prior 50 % 50 %

2006 50 % 50 %

2007+ 50 % 50 %

Plateau CDR 0.0 % - 9.2 % 3.6 % 2.0 % - 7.7 % 4.3 %

Final CDR 0.0 % - 0.5 % 0.2 % 0.1 % - 0.4 % 0.2 %

Initial loss severity:

2005 and prior 50 % 50 %

2006 50 % 50 %

2007+ 50 % 50 %

Plateau CDR 0.2 % - 9.6 % 4.7 % 2.7 % - 9.7 % 5.6 %

Final CDR 0.0 % - 0.5 % 0.2 % 0.1 % - 0.5 % 0.3 %

Initial loss severity:

2005 and prior 50 % 50 %

2006 50 % 50 %

2007+ 50 % 50 %

The rate at which the principal amount of loans is voluntarily prepaid may impact both the amount of losses projected (since that amount is a function of the CDR, the loss severity and the loan balance over time) as well as the amount of excess spread (the amount by which the interest paid by the borrowers on the underlying loan exceeds the amount of interest owed on the insured obligations).

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These CPR assumptions are the same as those the Company used for December 31, 2023.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The Company incorporates a recovery assumption into its reserving model to reflect observed trends in recoveries of deferred principal balances of modified first lien loans that had been previously written off.

In the first quarter of 2023, in light of volatility in interest rates, the mortgage market and home prices, the Company began incorporating a 10 % recovery of deferred principal balances in the most stressful scenario and a 50 % recovery in the least stressful scenario.

Additionally, in third quarter 2023, due to home prices reaching all time highs and high equity levels, the Company increased its scenario based recovery assumptions such that the weighted average recovery percentage increased from 20 % to approximately 30 %.

The effect of these updated assumptions on expected losses was a benefit of $ 7 million.

In estimating expected losses, the Company modeled and probability weighted sensitivities for first lien U.S.

RMBS transactions by varying its assumptions of how fast a recovery is expected to occur.

One of the variables used to model sensitivities was how quickly the CDR returned to its modeled equilibrium, which was defined as 5 % of the plateau CDR.

One of the variables used to model sensitivities was how quickly the CDR returned to its modeled equilibrium, which was defined as 5 % of the CDR plateau.

The Company also stressed CPR and the speed of recovery of loss severity rates.

The Company probability weighted a total of five scenarios as of September 30, 2023 and December 31, 2022.

Certain transactions benefit from excess spread when they are supported by large portions of fixed rate assets (either originally fixed or modified to be fixed) but have insured floating rate debt linked to Secured Overnight Finance Rate (SOFR).

An increase in projected SOFR decreases excess spread, while lower SOFR results in higher excess spread.

The Company used a similar approach to establish its scenarios as of September 30, 2023 as it used as of December 31, 2022, increasing and decreasing the periods of stress from those used in the base scenario, except as described above with regards to the increase in deferred principal recoveries.

In the Company’s most stressful scenario where 10 % of deferred principal balances were recovered, loss severities were assumed to rise and then recover over nine years and the initial ramp-down of the CDR was assumed to occur over 16 months, expected loss to be paid would increase from current projections by approximately $ 28 million for all first lien U.S.

The Company probability weighted a total of five scenarios as of March 31, 2024 and December 31, 2023.

An increase in projected SOFR decreases excess spread, while lower SOFR projections result in higher excess spread.

The Company used a similar approach to establish its scenarios as of March 31, 2024 as it used as of December 31, 2023, increasing and decreasing the periods and levels of stress from those used in the base scenario.

In the Company’s most

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

stressful scenario where 10 % of deferred principal balances are assumed to be recovered, loss severities were assumed to rise and then recover over nine years and the initial ramp-down of the CDR was assumed to occur over 16 months, expected loss to be paid would increase from current projections by approximately $ 28 million for all first lien U.S.

RMBS transactions.

5 unchanged sentences

RMBS transactions include both home equity lines of credit (HELOC) and closed end second lien mortgages.

The Company believes the primary variable affecting its expected losses in second lien RMBS transactions is the amount and timing of future losses or recoveries in the collateral pool supporting the transactions (including recoveries from previously charged-off loans).

The Company believes the primary variable affecting its expected losses in second lien U.S.

RMBS transactions is the amount and timing of future losses or recoveries in the collateral pool supporting the transactions (including recoveries from previously charged-off loans).

Expected losses are also a function of the structure of the transaction, the prepayment speeds of the collateral, the interest rate environment and assumptions about loss severity.

The Company estimates the amount of loans that will default over the next several years by first calculating expected liquidation rates for delinquent loans, and applying liquidation rates to currently delinquent loans in order to arrive at an expected dollar amount of defaults from currently delinquent collateral (plateau period defaults).

Similar to first lien U.S.

Similar to the methodology applied to first lien U.S.

RMBS transactions, the Company then calculates a CDR that will cause the targeted amount of liquidations to occur during the plateau period.

For the base scenario, the CDR (the plateau CDR) is held constant for 36 months.

For the base scenario, the CDR plateau is held constant for 36 months.

Once the plateau period ends, the CDR is assumed to trend down in uniform increments for one year to its final long-term steady state CDR ( 5 % of original plateau).

HELOC loans generally permitted the borrower to pay only interest for an initial period (often ten years ) and, after that period, require the borrower to make both the monthly interest payment and a monthly principal payment.

HELOC loans generally permit the borrower to pay only interest for an initial period (often ten years ) and, after that period, require the borrower to make both the monthly interest payment and a monthly principal payment.

This causes the borrower's total monthly payment to increase, sometimes substantially, at the end of the initial interest-only period.

A substantial number of loans in the Company’s insured transactions had been modified to extend the interest-only period to 15 years.

The majority of the modified loans had reset to fully amortizing by the end of 2022, and most of the remaining loans will reset over the next several years.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Recently, the Company has observed the performance of the modified loans that have finally reset to full amortization (which represent the majority of extended loans), and noted low levels of delinquency, even with substantial increases in monthly payments.

This observed performance lowers the level of uncertainty regarding this modified cohort as the remainder continue to reset.

The majority of the modified loans have reset to full amortization.

The Company has observed the performance of the modified loans that have finally reset to full amortization and noted low levels of delinquency, even with substantial increases in monthly payments.

This observed performance lowers the level of uncertainty regarding this modified cohort.

When a second lien loan defaults, there is generally a low recovery.

The Company assumed, as of September 30, 2023 and December 31, 2022, that it will generally recover 2 % of future defaulting collateral at the time of charge-off, with additional amounts of post charge-off recoveries projected to come in over time.

The Company assumed, as of March 31, 2024 and December 31, 2023, that it will generally recover 2 % of future defaulting collateral at the time of charge-off, with additional amounts of post charge-off recoveries projected to come in over time.

A second lien on the borrower’s home may be retained in the Company’s second lien transactions after the loan is charged off and the loss applied to the transaction, particularly in cases where the holder of the first lien has not foreclosed.

2 unchanged sentences

In instances where the Company is able to obtain information on the lien status of charged-off loans, it assumes there will be a certain level of future recoveries of the balance of the charged-off loans where the second lien is still intact.

The Company’s base scenario recovery assumption for charged-off loans is 40 % (up from 30 % in the prior quarters), as shown in the table below, based on observed trends and reasonable expectations of future recoveries.

The Company’s base scenario recovery assumption for charged-off loans is 40 %.

Such recoveries are assumed to be received evenly over the next five years .

In the first quarter of 2023, in light of volatility in interest rates, the mortgage market and home prices, as with the first lien deferred principal balances detailed earlier, the Company also expanded the range of potential recoveries as a percentage of charged off loan balances.

In third quarter 2023, this range was further expanded to represent a potential for greater future recoveries due to home prices reaching new record highs.

The assumptions for the current quarter ranged from a 10 % recovery of charged-off loan balances in the most stressful scenario and an 80 % recovery in the least stressful scenario.

The effect of these updated assumptions on expected loss to be paid (recovered) was a benefit of $ 31 million.

The rate at which the principal amount of loans is prepaid may impact both the amount of losses projected as well as the amount of excess spread.

5 unchanged sentences

To the extent that prepayments differ from projected levels, the Company’s projected excess spread and losses could materially change.

In estimating expected losses, the Company modeled and probability weighted five scenarios, each with a different CDR curve applicable to the period preceding the return to the long-term steady state CDR.

The Company believes that the level of the elevated CDR and the length of time it will persist and the ultimate prepayment rate are the primary drivers of the amount of losses the collateral will likely suffer.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The Company believes that the level of the elevated CDR and the length of time it will persist, the ultimate prepayment rate and recoveries for charged-off loans are the primary drivers of the amount of losses the collateral will likely suffer.

The following table shows the range as well as the average, weighted by net par outstanding, for key assumptions used in the calculation of expected loss to be paid (recovered) for individual transactions for vintage 2004 - 2008 HELOCs.

Key Assumptions in Base Scenario Expected Loss Estimates

As of September 30, 2023 As of December 31, 2022

As of March 31, 2024 As of December 31, 2023

Range Weighted Average Range Weighted Average

Plateau CDR 0.0 % - 6.3 % 2.6 % 0.0 % - 9.3 % 2.6 %

Final CDR trended down to 0.0 % - 0.4 % 0.1 % 0.0 % - 0.4 % 0.2 %

Final CDR 0.0 % - 0.3 % 0.1 % 0.0 % - 0.5 % 0.1 %

Liquidation rates:

9 unchanged sentences

The Company continues to evaluate the assumptions affecting its modeling results.

The Company believes the most important driver of its projected second lien RMBS losses is the performance of its HELOC transactions.

The Company modeled scenarios with a longer period of elevated defaults and others with a shorter period of elevated defaults.

The Company believes the most important driver of its projected second lien U.S.

RMBS losses is the performance of its HELOC transactions.

The Company modeled scenarios with a longer period of elevated defaults and others with a shorter period of elevated defaults as well as various levels of assumed recoveries.

In the Company’s most stressful scenario, assuming 10 % recoveries on charged-off loans, increasing the CDR plateau to 42 months and increasing the ramp-down by four months to 16 months (for a total stress period of 58 months) would decrease the expected recovery by approximately $ 84 million for HELOC transactions.

5 unchanged sentences

See Note 3, Outstanding Exposure, for a discussion of the Company’s exposure to Puerto Rico and related recovery litigation being pursued by the Company.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Contracts Accounted for as Insurance

1 unchanged sentence

Amounts presented in this note relate only to contracts accounted for as insurance, unless otherwise specified.

See Note 6, Contracts Accounted for as Credit Derivatives, for amounts related to CDS and Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles, for amounts that are accounted for as consolidated FG VIEs.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Net Earned Premiums

Third Quarter Nine Months

2023 2022 2023 2022

First Quarter

(in millions)

6 unchanged sentences

Net earned premiums $ 119 $ 81

____________________

(1) Nine months 2022 accelerations included $ 104 million related to PRCCDA, PRIFA and GO/PBA exposures.

See Note 3, Outstanding Exposure.

Gross Premium Receivable,

Net of Commissions Payable on Assumed Business

First Quarter

(in millions)

9 unchanged sentences

Specialty insurance premium receivable 1 1

September 30, $ 1,376 $ 1,178

Approximately 70 % and 74 % of gross premiums receivable, net of commissions payable, at September 30, 2023 and December 31, 2022, respectively, are denominated in currencies other than the U.S.

March 31, $ 1,450 $ 1,346

Approximately 68 % and 70 % of gross premiums receivable, net of commissions payable, at March 31, 2024 and December 31, 2023, respectively, are denominated in currencies other than the U.S.

dollar, primarily the pound sterling and euro.

The timing and cumulative amount of actual collections and net earned premiums may differ from those of expected collections and of expected net earned premiums in the table below due to factors such as foreign exchange rate fluctuations, counterparty collectability issues, accelerations, commutations, restructurings, changes in the consumer price indices, changes in expected lives and new business.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Financial Guaranty Insurance

Expected Future Premium Collections and Earnings

As of September 30, 2023

Future Gross Premiums

As of March 31, 2024

Future Premiums

to be Collected (1) Future Net Premiums

1 unchanged sentence

(in millions)

2024 (April 1 - June 30) $ 49 $ 71

2024 (July 1 - September 30) 45 71

2024 (October 1 - December 31) 23 70

Subtotal 2024 117 212

2029-2033 406 913

9 unchanged sentences

Selected Information for Financial Guaranty Insurance Policies with Premiums Paid in Installments

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(dollars in millions)

5 unchanged sentences

Loss reserves and salvage are discounted at risk-free rates for U.S.

dollar denominated financial guaranty insurance obligations that ranged from 4.51 % to 5.45 % with a weighted average of 4.86 % as of September 30, 2023 and 3.82 % to 4.69 % with a weighted average of 4.15 % as of December 31, 2022.

dollar denominated financial guaranty insurance obligations that ranged from 4.14 % to 5.33 % with a weighted average of 4.49 % as of March 31, 2024 and 3.79 % to 5.40 % with a weighted average of 4.17 % as of December 31, 2023.

Assured Guaranty Ltd.

2 unchanged sentences

Net Reserve (Salvage) by Sector

Sector September 30, 2023 December 31, 2022

Sector March 31, 2024 December 31, 2023

(in millions)

16 unchanged sentences

Financial Guaranty Insurance Contracts

As of September 30, 2023

As of March 31, 2024

(in millions)

11 unchanged sentences

Financial Guaranty Insurance Contracts

As of September 30, 2023

As of March 31, 2024

(in millions)

2024 (April 1 - June 30) $ 4

2024 (July 1 - September 30) 3

2024 (October 1 - December 31) 3

Subtotal 2024 10

After 2043 11

Net expected loss to be expensed 196

Net expected loss to be expensed (present value) 203

Future accretion ( 18 )

1 unchanged sentence

The following table presents the loss and LAE (benefit) reported in the condensed consolidated statements of operations by sector for insurance contracts.

Amounts presented are net of reinsurance.

Loss and LAE (Benefit) by Sector

Third Quarter Nine Months

First Quarter

Sector 2024 2023

5 unchanged sentences

Structured finance:

RMBS ( 35 ) ( 78 ) $ ( 31 ) $ ( 97 )

Other structured finance ( 1 ) 2

6 unchanged sentences

BIG Transaction Loss Summary

As of September 30, 2023

As of March 31, 2024

Gross Net Total BIG

41 unchanged sentences

Contracts Accounted for as Credit Derivatives

Amounts presented in this note relate only to contracts accounted for as derivatives.

The Company’s credit derivatives (contracts that meet the definition of a derivative in accordance with GAAP) are primarily CDS and also include interest rate swaps.

Amounts presented in this note relate only to contracts accounted for as derivatives, which are primarily CDS, and also include interest rate swaps.

The Company’s credit derivatives are generally governed by International Swaps and Derivatives Association, Inc.

9 unchanged sentences

however, the Company on occasion has mutually agreed with various counterparties to terminate certain CDS transactions.

The components of the Company’s credit derivative net par outstanding by sector are presented in the table below.

The estimated remaining weighted average life of credit derivatives was 11.4 years and 12.8 years as of September 30, 2023 and December 31, 2022, respectively.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The components of the Company’s credit derivative net par outstanding by sector are presented in the table below.

The estimated remaining weighted average life of credit derivatives was 10.9 years and 11.1 years as of March 31, 2024 and December 31, 2023, respectively.

Credit Derivatives (1)

As of September 30, 2023 As of December 31, 2022

As of March 31, 2024 As of December 31, 2023

Sector Net Par

8 unchanged sentences

____________________

(1) Expected loss to be paid was $ 3 million as of both September 30, 2023 and December 31, 2022.

Distribution of Credit Derivative Net Par Outstanding by Internal Rating

As of September 30, 2023 As of December 31, 2022

Rating Category Net Par

Outstanding % of Total Net Par

Outstanding % of Total

(dollars in millions)

AAA $ 1,255 36.0 % $ 1,260 39.3 %

AA 1,020 29.2 1,064 33.2

A 689 19.7 232 7.2

BBB 470 13.5 590 18.5

55 1.6 57 1.8

Credit derivative net par outstanding $ 3,489 100.0 % $ 3,203 100.0 %

(1) Expected loss to be paid was $ 1 million and $ 2 million as of March 31, 2024 and December 31, 2023, respectively.

Fair Value Gains (Losses) on Credit Derivatives

Third Quarter Nine Months

2023 2022 2023 2022

First Quarter

(in millions)

7 unchanged sentences

CDS Spread on AGC (in basis points)

As of September 30,

2023 As of December 31, 2022 As of September 30,

As of March 31,

2024 As of December 31, 2023 As of March 31,

2023 As of December 31, 2022

1 unchanged sentence

One-year CDS spread 19 23 31 26

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Fair Value of Credit Derivative Assets (Liabilities)

and Effect of AGC Credit Spread

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(in millions)

2 unchanged sentences

Net fair value of credit derivatives $ ( 39 ) $ ( 50 )

The fair value of CDS contracts as of September 30, 2023, before considering the benefit applicable to AGC’s credit spread, is a direct result of the relatively wider credit spreads under current market conditions compared to those at the time of underwriting for certain underlying credits with longer tenor.

The fair value of CDS contracts as of March 31, 2024, before considering the benefit applicable to AGC’s credit spread, is a direct result of the relatively wider credit spreads under current market conditions compared to those at the time of underwriting for certain underlying credits with longer tenor.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The majority of the investment portfolio comprises investment grade fixed-maturity securities managed by three outside managers.

1 unchanged sentence

The remainder of the investment portfolio primarily consists of (i) Loss Mitigation Securities;

(ii) New Recovery Bonds and CVIs received in connection with the consummation of the 2022 Puerto Rico Resolutions;

(ii) CVIs received in connection with the 2022 Puerto Rico Resolutions;

(iii) equity method investments;

(iv) short-term investments and (iv) other investments.

Equity method investments primarily consists of the investment in Sound Point and fund investments across a variety of strategies.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

and (iv) short-term investments.

Equity method investments primarily consist of the investment in Sound Point and fund investments across a variety of strategies.

Investment Portfolio

Carrying Value

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(in millions)

2 unchanged sentences

Loss Mitigation Securities 464 459

Puerto Rico, New Recovery Bonds (3) 78 358

Other 244 476

6 unchanged sentences

____________________

(1) 7.6 % and 7.4 % of fixed-maturity securities were rated BIG as of September 30, 2023 and December 31, 2022, respectively, consisting primarily of Loss Mitigation Securities.

2.4 % and 5.9 % were not rated, as of September 30, 2023 and December 31, 2022, respectively.

(2) As of September 30, 2023 and December 31, 2022 amounts include $ 294 million and $ 305 million, respectively, of CLOs that had been managed internally by AssuredIM under an investment management agreement until it transitioned to an external manager in June 2023.

(1) 9.5 % and 9.2 % of fixed-maturity securities, available for sale, were rated BIG or not rated as of March 31, 2024 and December 31, 2023, respectively.

BIG rated securities consisted primarily of Loss Mitigation Securities.

(2) These securities are not rated.

On August 31, 2023, the Company satisfied its obligations under certain Puerto Rico Trusts and as a result $ 68 million, at fair value, of Puerto Rico New Recovery Bonds and $ 5 million, at fair value, of CVIs were transferred from the consolidated Puerto Rico Trusts to AGC and AGM’s investment portfolios.

See Note 3, Outstanding Exposure.

(4) As of September 30, 2023 and December 31, 2022, amounts include $ 214 million and $ 232 million, respectively, of municipal bonds that had been managed by AssuredIM under an investment management agreement until June 2023, and are now managed by the U.S.

Insurance Subsidiaries for their own accounts.

(3) Excludes certain investments in funds that are consolidated and accounted for as CIVs.

See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

Upon closing of the Sound Point Transaction and the AHP Transaction in July, the Company has increased the aggregate amount it has agreed to invest in alternative investments to $ 1.5 billion, including the $ 1 billion with Sound Point, subject to regulatory approval, which includes $ 630 million of invested capital (at fair value), and $ 890 million in unfunded commitments (of which $ 332 million is committed to specific funds).

(4) The aggregate carrying value of the Company’s investments in Sound Point, and Sound Point managed funds was $ 636 million and $ 631 million as of March 31, 2024 and December 31, 2023, respectively.

The Company has agreed to invest $ 1.5 billion in alternative investments, including $ 1 billion in Sound Point managed investments, subject to regulatory approval.

The fair value of alternative investments as of March 31, 2024 was $ 803 million.

The Company had $ 743 million in unfunded commitments to alternative investments (of which $ 324 million is committed to specific funds).

See Note 1, Business and Basis of Presentation for a description of the Sound Point Transaction.

Of the $ 1.5 billion mentioned above, the U.S.

Insurance Subsidiaries through their jointly owned investment subsidiary, AGAS, are authorized to invest up to $ 750 million plus previously distributed gains of $ 132 million for a total of $ 882 million as of September 30, 2023.

As of September 30, 2023, AGAS commitments to Sound Point and AHP funds were $ 703 million (of which $ 446 million was funded with a net asset value (NAV) of $ 469 million).

This capital was committed to several funds, each dedicated to a single strategy, including CLOs, asset-based finance and healthcare structured capital.

As of September 30, 2023, three of the six funds in which AGAS invests are accounted for as CIVs.

Insurance Subsidiaries through their jointly owned investment subsidiary, AGAS, are authorized to invest up to $ 750 million plus previously distributed gains of $ 162 million for a total of $ 912 million as of March 31, 2024.

As of March 31, 2024, AGAS commitments to Sound Point and AHP funds were $ 772 million (of which $ 574 million was funded with a net asset value (NAV) of $ 632 million).

This capital was committed to several funds, each dedicated to a single strategy, including CLOs, asset-based/special finance and healthcare structured capital.

As of March 31, 2024, three of the eight funds in which AGAS invests are accounted for as CIVs.

See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

Accrued investment income, which is reported in “other assets,” was $ 78 million as of September 30, 2023 and $ 71 million as of December 31, 2022.

In nine months 2023 and nine months 2022, the Company did not write off any accrued investment income.

Accrued investment income, which is reported in “other assets,” was $ 72 million as of March 31, 2024 and $ 71 million as of December 31, 2023.

Assured Guaranty Ltd.

1 unchanged sentence

Available-for-Sale Fixed-Maturity Securities by Security Type

As of September 30, 2023

As of March 31, 2024

Security Type Percent

37 unchanged sentences

(2) Includes securities issued by taxable universities and hospitals.

government-agency obligations were approximately 38 % and 30 % of mortgage-backed securities as of September 30, 2023 and December 31, 2022, respectively, based on fair value.

government-agency obligations were approximately 56 % and 42 % of mortgage-backed securities as of March 31, 2024 and December 31, 2023, respectively, based on fair value.

Assured Guaranty Ltd.

2 unchanged sentences

for Available-for-Sale Fixed-Maturity Securities for Which a Credit Loss was Not Recorded

As of September 30, 2023

As of March 31, 2024

Less than 12 months 12 months or more Total

38 unchanged sentences

If a security appears in both categories, it is counted only once in the total column.

The Company considered the credit quality, cash flows, interest rate movements, ability to hold a security to recovery and intent to sell a security in determining whether a security had a credit loss.

The Company has determined that the unrealized losses recorded as of March 31, 2024 and December 31, 2023 were primarily related to higher interest rates rather than credit quality.

As of March 31, 2024, the Company did not intend to and was not required to sell investments in an unrealized loss position prior to expected recovery in value.

As of March 31, 2024, of the securities in an unrealized loss position for which an allowance for credit loss was not recorded, 458 securities had unrealized losses in excess of 10% of their carrying value,

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The Company has determined that the unrealized losses recorded as of September 30, 2023 and December 31, 2022 were primarily related to higher interest rates rather than credit quality.

As of September 30, 2023, the Company did not intend to and was not required to sell investments in an unrealized loss position prior to expected recovery in value.

As of September 30, 2023, of the securities in an unrealized loss position for which an allowance for credit loss was not recorded, 641 securities had unrealized losses in excess of 10% of their carrying value, whereas as of December 31, 2022, 567 securities had unrealized losses in excess of 10% of their carrying value.

The total unrealized loss for these securities was $ 351 million as of September 30, 2023 and $ 329 million as of December 31, 2022.

The amortized cost and estimated fair value of available-for-sale fixed-maturity securities by contractual maturity as of September 30, 2023 are shown below.

whereas as of December 31, 2023, 409 securities had unrealized losses in excess of 10% of their carrying value.

The total unrealized loss for these securities was $ 224 million as of March 31, 2024 and $ 200 million as of December 31, 2023.

The amortized cost and estimated fair value of available-for-sale fixed-maturity securities by contractual maturity as of March 31, 2024 are shown below.

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Distribution of Available-for-Sale Fixed-Maturity Securities by Contractual Maturity

As of September 30, 2023

As of March 31, 2024

Cost Estimated

6 unchanged sentences

Total $ 6,553 $ 6,091

Based on fair value, investments and other assets that are either held in trust for the benefit of third-party ceding insurers in accordance with statutory requirements, placed on deposit to fulfill state licensing requirements, or otherwise pledged or restricted, totaled $ 224 million as of September 30, 2023 and $ 222 million as of December 31, 2022.

The investment portfolio also contains securities that are held in trust by certain AGL subsidiaries or are otherwise restricted for the benefit of other AGL subsidiaries in accordance with statutory and regulatory requirements in the amounts of $ 1,107 million and $ 1,169 million based on fair value as of September 30, 2023 and December 31, 2022, respectively.

Income from Investments

Net investment income is a function of the yield that the Company earns on available-for-sale fixed-maturity securities and short-term investments, and the size of such portfolio.

The investment yield is a function of market interest rates at the time of investment as well as the type, credit quality and maturity of the securities in this portfolio.

Puerto Rico CVIs in the investment portfolio are classified as trading securities.

Equity in earnings (losses) of investees represents the Company’s interest in the earnings of its equity method investments.

Based on fair value, fixed-maturity securities, short-term investments and cash that are either held in trust for the benefit of third-party ceding insurers in accordance with statutory requirements, placed on deposit to fulfill state licensing requirements, or otherwise pledged or restricted, totaled $ 143 million as of March 31, 2024 and $ 234 million as of December 31, 2023.

The investment portfolio also contains securities that are held in trust by certain AGL subsidiaries or are otherwise restricted for the benefit of other AGL subsidiaries in accordance with statutory and regulatory requirements with a fair value of $ 1,144 million and $ 1,154 million as of March 31, 2024 and December 31, 2023, respectively.

Assured Guaranty Ltd.

1 unchanged sentence

Income from Investments

Third Quarter Nine Months

2023 2022 2023 2022

The components of income derived from the investment portfolio are presented in the following tables.

Income from Investments

First Quarter

(in millions)

4 unchanged sentences

Puerto Rico, New Recovery Bonds — 3

Other (2) 5 4 12 11

Short-term investments 23 13

Other invested assets — — 2 —

Investment income 85 82

3 unchanged sentences

Equity in earnings (losses) of investees:

Sound Point (2) $ 4 $ —

Funds (3) 14 —

Equity in earnings (losses) of investees $ 24 $ 2

____________________

(1) Amounts for 2022 include income on the portion of the CLO portfolio that was previously managed by AssuredIM.

(2) Amounts for 2022 include income on the portion of the municipal bond portfolio that was previously managed by AssuredIM.

(3) Fair value gains on trading securities pertaining to securities still held as of September 30, 2023 were $ 4 million for third quarter 2023 and $ 42 million for nine months 2023.

Fair value losses on trading securities pertaining to securities still held as of September 30, 2022 were $ 2 million for third quarter 2022 and $ 18 million for nine months 2022.

(4) Beginning in the fourth quarter of 2023, equity in earnings (losses) will include the Company’s share of the earnings of the Sound Point entities, which is reported on a one-quarter lag.

(1) Fair value gains on trading securities pertaining to securities still held as of March 31, 2024 were $ 22 million for first quarter 2024.

Fair value losses on trading securities pertaining to securities still held as of March 31, 2023 were $ 2 million for first quarter 2023.

(2) Beginning in the fourth quarter of 2023, equity in earnings (losses) includes the Company’s share of the earnings of Sound Point, which is reported on a one-quarter lag.

(3) Sound Point and AHP funds, and, prior to July 1 2023, AssuredIM funds.

Realized Investment Gains (Losses)

2 unchanged sentences

Net Realized Investment Gains (Losses)

Third Quarter Nine Months

2023 2022 2023 2022

First Quarter

(in millions)

1 unchanged sentence

Gross realized losses on sales of available-for-sale securities ( 3 ) ( 9 )

Net foreign currency gains (losses) ( 1 ) — ( 1 ) ( 3 )

Change in allowance for credit losses and intent to sell ( 8 ) ( 4 ) ( 23 ) ( 13 )

Other net realized gains (losses) ( 1 ) — ( 1 ) 10

Change in the allowance for credit losses and intent to sell (1) 10 ( 5 )

Net realized investment gains (losses) $ 8 $ ( 2 )

____________________

(1) Gross realized gains and losses on sales in all periods related primarily to sales of New Recovery Bonds received as part of the 2022 Puerto Rico Resolutions.

The proceeds from sales of fixed-maturity securities classified as available-for-sale were $ 73 million in third quarter 2023, $ 207 million in third quarter 2022, $ 767 million in nine months 2023 and $ 560 million in nine months 2022.

(1) Change in allowance for credit losses for all periods was primarily related to Loss Mitigation Securities.

Assured Guaranty Ltd.

1 unchanged sentence

The following table presents the roll forward of allowance for the credit losses on available-for-sale fixed-maturity securities.

Roll Forward of Allowance for

Credit Losses for Available-for-Sale Fixed-Maturity Securities

Third Quarter Nine Months

2023 2022 2023 2022

Roll Forward of Allowance for Credit Losses

for Available-for-Sale Fixed-Maturity Securities

First Quarter

(in millions)

Balance, beginning of period $ 77 $ 65

Additions for securities for which credit losses were not previously recognized — 1 — 4

Additions for purchases of securities accounted for as purchased financial assets with credit deterioration — 2 — 2

Additions (reductions) for securities for which credit losses were previously recognized ( 10 ) 4

Balance, end of period $ 67 $ 69

During third quarter 2022, the Company purchased a loss mitigation security with a fair value of $ 22 million that was accounted for as a purchased security with credit deterioration.

At acquisition, this security had an unpaid principal on remaining collateral of $ 31 million, an allowance for credit losses of $ 2 million, and a non-credit related discount of $ 7 million.

The Company did not purchase any securities with credit deterioration during third quarter 2023 and nine months 2023.

Most of the Company’s securities with credit deterioration are Loss Mitigation Securities.

The Company did not purchase any securities with credit deterioration during first quarter 2024 and first quarter 2023.

Most of the Company’s allowance for credit losses relates to Loss Mitigation Securities.

Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles

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The insurance subsidiaries provide financial guaranties with respect to debt obligations of special purpose entities, including VIEs, but do not act as the servicer or collateral manager for any VIE obligations they guarantee.

The transaction structure generally provides certain financial protection to the insurance subsidiaries.

The transaction structure generally provides certain financial protections to the insurance subsidiaries.

This financial protection can take several forms, the most common of which are overcollateralization, first loss protection (or subordination) and excess spread.

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As part of the terms of its financial guaranty contracts, the insurance subsidiaries obtain certain protective rights with respect to the VIE that give them additional controls over a VIE.

These protective rights are triggered by the occurrence of certain events, such as failure to be in compliance with a covenant due to poor deal performance or a deterioration in a servicer or collateral manager’s financial condition.

At deal inception, the insurance subsidiaries typically are not deemed to control the VIE;

however, once a trigger event occurs, the insurance subsidiaries’ control of the VIE typically increases.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

continuously evaluates its power to direct the activities that most significantly impact the economic performance of VIEs that have debt obligations insured by the insurance subsidiaries and, accordingly, where they are obligated to absorb VIE losses or receive benefits that could potentially be significant to the VIE.

The Company continuously evaluates its power to direct the activities that most significantly impact the economic performance of VIEs that have debt obligations insured by the insurance subsidiaries and, accordingly, where they are obligated to absorb VIE losses or receive benefits that could potentially be significant to the VIE.

The insurance subsidiaries are deemed to be the control party for certain VIEs under GAAP, typically when their protective rights give them the power to both terminate and replace the transaction’s servicer or collateral manager, which are characteristics specific to the Company’s financial guaranty contracts.

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If the insurance subsidiaries are deemed to no longer have those protective rights, the VIE is deconsolidated.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The structured finance and other FG VIEs’ liabilities that are guaranteed by the insurance subsidiaries are considered to be with recourse, because the insurance subsidiaries guarantee the payment of principal and interest regardless of the performance of the related FG VIEs’ assets.

The structured finance and other FG VIEs’ liabilities that are not guaranteed by the insurance subsidiaries are considered to be without recourse, because the payment of principal and interest of these liabilities is wholly dependent on the performance of the FG VIEs’ assets.

The Company has elected the FVO for all assets and all liabilities of the structured finance and other FG VIEs.

The Company has elected the fair value option (FVO) for all assets and all liabilities of the structured finance and other FG VIEs.

Upon initial adoption of the accounting guidance for VIEs in 2010, the Company elected to fair value its structured finance and other FG VIEs’ assets and liabilities as the carrying amount transition method was not practical.

To allow for consistency in the accounting for the assets and liabilities of its consolidated FG VIEs other than the Puerto Rico Trusts, the Company elected the FVO.

The change in fair value of all structured finance and other FG VIEs’ assets and liabilities is reported in “fair value gains (losses) on FG VIEs” in the condensed consolidated statement of operations, except for the change in fair value attributable to change in instrument-specific credit risk (ISCR) on the structured finance and other FG VIEs’ liabilities, which is reported in other comprehensive income (OCI).

As of both September 30, 2023 and December 31, 2022, the Company consolidated 25 structured finance and other FG VIEs.

The ISCR amount is determined by using expected cash flows at the original date of consolidation, discounted at the effective yield, less current expected cash flows discounted at that same original effective yield.

As of March 31, 2024 and December 31, 2023, the Company consolidated 23 and 24 structured finance and other FG VIEs, respectively.

Puerto Rico Trusts

With respect to certain insured securities covered by the 2022 Puerto Rico Resolutions, insured bondholders were permitted to elect to receive custody receipts that represent an interest in the legacy insurance policy plus cash, New Recovery Bonds and/or CVIs that constitute distributions under the 2022 Puerto Rico Resolutions.

(At least one separate custodial trust was set up for each legacy insured bond, and the trusts are deconsolidated as they are paid off.) For those who made this election, distributions of Plan Consideration are immediately passed through to insured bondholders under the custody receipts to the extent of any cash or proceeds of new securities held in the custodial trust and are applied to make payments and/or prepayments of amounts due under the legacy insured bonds.

At least one separate custodial trust was set up for each legacy insured bond, and the trusts are deconsolidated when their liabilities are paid off.

For those who made the election above, distributions of Plan Consideration are passed through to insured bondholders under the custody receipts to the extent of any cash or proceeds of new securities held in the custodial trust and are applied to make payments and/or prepayments of amounts due under the legacy insured bonds.

In the case of insured bondholders who elected to receive custody receipts, the Company retains the right to satisfy its obligations under the insurance policy with respect to the related legacy insured bonds at any time thereafter, with 30 days’ notice, by paying 100% of the then outstanding principal amount of insured bonds plus accrued interest.

On August 31, 2023, after notice to certain holders of custody receipts representing interests in legacy insured GO, PBA and HTA bonds, the Company satisfied its obligations under such legacy insured bonds with respect to $ 108 million net par outstanding as of August 31, 2023, and the custodial trusts released to AGC and AGM New Recovery Bonds and/or CVIs with a fair value totaling $ 73 million as of August 31, 2023.

As of September 30, 2023 and December 31, 2022, respectively, the Company consolidated 24 and 45 custodial trusts established as part of the 2022 Puerto Rico Resolutions discussed in Note 3, Outstanding Exposure, Exposure to Puerto Rico.

New Recovery Bonds

Reported in FG VIEs’ Assets

Available-for-Sale

Losses Estimated

(dollars in millions)

As of September 30, 2023 $ 136 $ 10 $ — $ 146

As of December 31, 2022 204 4 ( 4 ) 204

As of September 30, 2023, no New Recovery Bonds in the Puerto Rico Trusts were in a gross unrealized loss position.

As of December 31, 2022, 14 New Recovery Bonds in the Puerto Rico Trusts were in a gross unrealized loss position totaling $ 4 million and had a fair value of $ 110 million, all of which were in a continuous unrealized loss position for less than 12

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The Company has determined that the unrealized losses recorded as of December 31, 2022 were primarily attributable to the change in interest rates, rather than credit quality.

The Company did not intend to and was not required to sell these investments prior to an expected recovery in value.

As of December 31, 2022, of the securities in an unrealized loss position for which an allowance for credit loss was not recorded, eight securities had unrealized losses in excess of 10% of their carrying value.

The total unrealized loss for these securities was $ 3 million.

The amortized cost and estimated fair value of available-for-sale New Recovery Bonds by contractual maturity as of September 30, 2023 are shown below.

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

New Recovery Bonds, Available-for-Sale

Reported in FG VIEs’ Assets

Distribution by Contractual Maturity

As of September 30, 2023

Cost Estimated

(in millions)

Due after five years through 10 years $ 28 $ 30

Due after 10 years 108 116

Total $ 136 $ 146

By December 31, 2023, substantially all of the securities in the Puerto Rico Trusts had been called, and the assets in the Puerto Rico Trusts consisted primarily of cash.

In January 2024, such cash proceeds were used to pay down a portion of the liabilities of the Puerto Rico Trusts.

The remaining liabilities of the Puerto Rico Trusts will be paid by the U.S.

Insurance Subsidiaries under their financial guaranty policies and are no longer dependent on the credit of PRHTA.

For the Puerto Rico Trust liabilities, the Company elected the FVO in order to simplify the accounting for these instruments.

As of both March 31, 2024 and December 31, 2023 the Company consolidated 24 custodial trusts established as part of the Puerto Rico resolutions reached in 2022.

See Note 3, Outstanding Exposure, Exposure to Puerto Rico.

Components of FG VIEs’ Assets and Liabilities

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Consolidated FG VIEs by Type of Collateral

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(in millions)

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____________________

(1) Includes $ 2 million of cash as of December 31, 2022.

The change in the ISCR of the FG VIEs’ assets for which the Company elected the FVO (FG VIEs’ assets at FVO) held as of September 30, 2023 that was reported in the condensed consolidated statements of operations for third quarter 2023 and nine months 2023 were gains of $ 3 million and $ 1 million, respectively.

The change in the ISCR of the FG VIEs’ assets at FVO held as of September 30, 2022 were gains of $ 15 million and $ 11 million for third quarter 2022 and nine months 2022, respectively.

(1) Includes $ 154 million of cash as December 31, 2023.

The inception-to-date change in fair value of the FG VIEs’ liabilities with recourse (all of which are measured at fair value under the FVO) attributable to the ISCR is calculated by holding all current period assumptions constant for each security and isolating the effect of the change in the insurance subsidiaries’ CDS spread from the most recent date of consolidation to the current period.

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Measured under the FVO

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(in millions)

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(1) FG VIEs’ liabilities with recourse will mature at various dates ranging from 2024 through 2041.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

In connection with the Sound Point Transaction and AHP Transaction the Company reevaluated its consolidation conclusion for each CIV and deconsolidated all but three CIVs.

As of September 30, 2023, CIVs consist of certain funds managed by Sound Point, that were previously managed by AssuredIM.

The Company consolidates investment vehicles when it is deemed to be the primary beneficiary, based on its power to direct the most significant activities of each VIE and its level of economic interest in the entities.

As a result of the Sound Point Transaction and AHP Transaction, during third quarter 2023 and nine months 2023, the Company deconsolidated CIV assets of $ 4.7 billion and CIV liabilities of $ 4.4 billion.

The Company recognized a loss on deconsolidation of $ 16 million, which is reported in “fair value gains (losses) on CIVs”.

During nine months 2022, the Company deconsolidated a CLO with assets and liabilities of $ 417 million.

CIVs consist of certain Sound Point funds for which the Company is the primary beneficiary or has a controlling interest.

The Company consolidates investment vehicles that are VIEs when it is deemed to be the primary beneficiary, based on its power to direct the most significant activities of each VIE and its level of economic interest in the entities.

The assets and liabilities of the Company’s CIVs are held within separate legal entities.

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Liquidity available at the Company’s CIVs is not available for corporate liquidity needs, except to the extent of the Company’s investment in the funds, subject to redemption provisions.

Changes in the fair value of assets and liabilities of CIVs, interest income and expense, and gains and losses on consolidation and deconsolidation of CIVs are reported in “fair value gains (losses) on CIVs” in the condensed consolidated statements of operations.

Interest income from CLO assets is recorded based on contractual rates.

Number of Consolidated CIVs by Type

CIV Type September 30, 2023 December 31, 2022

CLO warehouses — 4

Total number of consolidated CIVs (1) 3 22

____________________

(1) As of December 31, 2022, two CIVs were voting interest entities (VOEs).

Funds meet the criteria for consolidating a VOE when the Company possesses substantially all of the economics and all of the decision-making authority.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

consolidated statements of operations.

As of both March 31, 2024 and December 31, 2023, the Company consolidated three CIVs.

Assets and Liabilities of CIVs

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(in millions)

Cash and cash equivalents $ 22 $ 35

Fund investments, at fair value

Equity securities and warrants 79 434

Equity securities 89 83

Structured products 264 248

Corporate securities — 96

CLO and CLO warehouse assets:

CLO investments:

Loans in CLOs and CLO warehouses, FVO — 4,570

Short-term investments, at fair value — 135

Due from brokers and counterparties — 32

Total assets (1) $ 377 $ 366

CLO obligations, FVO (2)

Warehouse financing debt, FVO (3) — 313

Due to brokers and counterparties 4 112

Other liabilities (2) $ 3 $ 4

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____________________

(1) Includes investments in AssuredIM funds and other affiliated entities of $ 392 million as of December 31, 2022.

Includes assets and liabilities of a VOE of $ 58 million and $ 1 million, respectively, as of December 31, 2022.

(2) As of December 31, 2022, the weighted average maturity of CLO obligations was 6.2 years and the weighted average interest rate of CLO obligations was 5.3 %.

(3) The weighted average maturity of warehouse financing debt of CLO warehouses was 1.9 years as of December 31, 2022.

The weighted average interest rate of warehouse financing debt of CLO warehouses was 4.5 % as of December 31, 2022.

(4) As of December 31, 2022, includes redeemable noncontrolling interests (NCI).

As of September 30, 2023, the CIVs had unfunded commitments to invest of $ 143 million.

As of September 30, 2023 and December 31, 2022, the CIVs included derivative contracts with notional amounts totaling $ 36 million and $ 46 million, respectively, and average notional amounts of $ 41 million and $ 47 million, respectively.

The fair value of derivative contracts is reported in the “assets of CIVs” or “liabilities of CIVs” in the condensed consolidated balance sheets.

The net change in fair value is reported in “fair value gains (losses) on CIVs” in the condensed consolidated statements of operations.

The net change in fair value of derivative contracts were gains of $ 7 million for nine months 2022.

NCI represents the proportion of the consolidated funds not owned by the Company and includes ownership interests of third parties, employees, and former employees.

(1) Includes investments with affiliated entities of $ 309 million and $ 281 million as of March 31, 2024 and December 31, 2023, respectively.

(2) The balance is reported in “other liabilities” in the condensed consolidated balance sheets.

Includes $ 3 million with affiliated entities as of both March 31, 2024 and December 31, 2023.

As of March 31, 2024 and December 31, 2023, the CIVs included derivative contracts with average notional amounts of $ 38 million and $ 41 million, respectively.

Derivative instruments, which include forward foreign currency contracts, serve as a component of the CIVs’ investment strategies.

The fair value of derivative contracts is reported in the “assets of CIVs” or “other liabilities” in the condensed consolidated balance sheets.

Noncontrolling Interest in CIVs

Noncontrolling interest (NCI) represents the portion of the consolidated funds not owned by the Company and includes ownership interests of third parties and former employees.

The NCI is non-redeemable and presented on the statement of shareholders’ equity.

Other Consolidated VIEs

In certain instances where the Company consolidates a VIE that was established as part of a loss mitigation negotiated settlement that results in the termination of the obligations under the original financial guaranty insurance or insured credit derivative contract, the Company classifies the assets and liabilities of that VIE in the line items that most accurately reflect the

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

nature of such assets and liabilities, as opposed to within FG VIEs’ assets and FG VIEs’ liabilities.

The largest of these VIEs had assets of $ 87 million and liabilities of $ 7 million as of September 30, 2023, and assets of $ 86 million and liabilities of $ 12 million as of December 31, 2022, primarily reported in “investments” and “credit derivative liabilities” on the condensed consolidated balance sheets.

The largest of these VIEs had assets of $ 92 million and liabilities of $ 7 million as of December 31, 2023, which were reported in “investments” and “credit derivative liabilities” on the condensed consolidated balance sheets.

In first quarter 2024, the Company deconsolidated the largest of these VIEs and recognized a $ 5 million gain on deconsolidation, which is included in “fair value gains (losses) on credit derivatives” in the condensed consolidated statements of operations.

Non-Consolidated VIEs

As described in Note 3, Outstanding Exposure, the Company monitors all policies in the insured portfolio.

Of the approximately 15 thousand policies monitored as of September 30, 2023, approximately 14 thousand policies are not within the scope of FASB ASC 810 because these financial guaranties relate to the debt obligations of governmental organizations or financing entities established by a governmental organization.

Of the approximately 15 thousand policies monitored as of March 31, 2024, approximately 14 thousand policies are not within the scope of FASB ASC 810 because these financial guaranties relate to the debt obligations of governmental organizations or financing entities established by a governmental organization.

The majority of the remaining policies involve transactions where the Company is not deemed to currently have control over the FG VIEs’ most significant activities.

As of September 30, 2023 and December 31, 2022, the Company identified 66 and 85 , respectively, policies that contain provisions and experienced events that may trigger consolidation.

The Company holds variable interests in non-FG VIEs which are not consolidated, as the Company is not the primary beneficiary.

As of September 30, 2023, the Company’s maximum exposure to losses relating to these non-FG VIEs was $ 251 million, which is limited to the carrying value of these investments of $ 239 million and other assets of $ 12 million.

As of March 31, 2024 and December 31, 2023, the Company identified 60 and 68 policies, respectively, that contain provisions and experienced events that may trigger consolidation.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The Company holds variable interests in VIEs which are not consolidated, as the Company is not the primary beneficiary.

As of March 31, 2024, the Company’s maximum exposure to losses relating to these VIEs was $ 395 million.

Fair Value Measurement

The Company carries a significant portion of its assets and liabilities at fair value.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., exit price).

The price represents the price available in the principal market for the asset or liability.

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Fair value is based on quoted market prices, where available.

If listed prices or quotes are not available, fair value is based on either internally developed models that primarily use, as inputs, market-based or independently sourced market parameters, including but not limited to yield curves, interest rates and debt prices or with the assistance of an independent third party using a discounted cash flow approach and the third party’s proprietary pricing models.

In addition to market information, models also incorporate transaction details, such as maturity of the instrument and contractual features designed to reduce the Company’s credit exposure, such as collateral rights as applicable.

If listed prices or quotes are not available, fair value is based on either (i) internally developed models that primarily use, as inputs, market-based or independently sourced market parameters (including, but not limited to, yield curves, interest rates, and debt prices) or (ii) discounted cash flows using a third party’s proprietary pricing models.

In addition to market information, when applicable, the models also incorporate transaction details, such as the instrument’s maturity and contractual features that reduce the Company’s credit exposure (e.g., collateral rights).

Valuation adjustments may be made to ensure that financial instruments are recorded at fair value.

These adjustments include amounts to reflect counterparty credit quality, the Company’s creditworthiness and constraints on liquidity.

As markets and products develop and the pricing for certain products becomes more or less transparent, the Company may refine its methodologies and assumptions.

During nine months 2023, no changes were made to the Company’s valuation models that had, or are expected to have, a material impact on the Company’s condensed consolidated balance sheets or statements of operations and comprehensive income.

As markets and products develop and the pricing transparency for certain products changes, the Company may refine its methodologies and assumptions.

During first quarter 2024, no changes were made to the Company’s valuation models that had (or are expected to have) a material impact on the Company’s condensed consolidated balance sheets or statements of operations and comprehensive income.

The Company’s valuation methods produce fair values that may not be indicative of net realizable value or future fair values.

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The fair value hierarchy prioritizes model inputs into three broad levels, with Level 1 being the highest and Level 3 the lowest.

An asset’s or liability’s categorization within the hierarchy is based on the lowest level of significant input to its valuation.

The categorization, of an asset or liability, within the hierarchy is based on the lowest level of significant input to its valuation.

Level 1—Quoted prices for identical instruments in active markets.

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and observable inputs other than quoted prices, such as interest rates or yield curves and other inputs derived from or corroborated by observable market inputs.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Level 3—Model derived valuations in which one or more significant inputs or significant value drivers are unobservable.

Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

Financial instruments are considered Level 3 when their values are (i) determined using pricing models, discounted cash flow methodologies or similar techniques and (ii) at least one significant model assumption or input is unobservable.

Level 3 financial instruments also include those for which the determination of fair value requires significant management judgment or estimation.

There was a transfer of fixed-maturity security in the investment portfolio from Level 3 to Level 2 during third quarter 2023 and nine months 2023.

There was a transfer of securities into Level 3 in the investment portfolio and in CIVs due to changes in observability of pricing inputs in first quarter 2024.

There were no other transfers from or into Level 3 during the periods presented.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Carried at Fair Value

Fixed-Maturity Securities

The fair value of fixed-maturity securities is generally based on prices received from third-party pricing services or alternative pricing sources with reasonable levels of price transparency.

The fair value of fixed-maturity securities is generally based on prices received from third-party pricing services or alternative pricing sources that provide reasonable levels of price transparency.

The pricing services prepare estimates of fair value using their pricing models, which take into account:

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The pricing services evaluate each asset class based on relevant market and credit information, perceived market movements, and sector news.

Benchmark yields have in many cases taken priority over reported trades for securities that trade less frequently or those that are distressed trades, and therefore may not be indicative of the market.

In many cases, benchmark yields have proven to be more reliable indicators of the market for a security, as compared to reported trades for infrequently traded securities and distressed transactions.

The extent of the use of each input is dependent on the asset class and the market conditions.

The valuation of fixed-maturity securities is more subjective when markets are less liquid due to the lack of market-based inputs.

As of September 30, 2023, the Company used models to price 189 securities.

As of March 31, 2024, the Company used models to price 186 securities.

All Level 3 securities were priced with the assistance of independent third parties.

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recovery lag assumptions;

estimated default rates (determined on the basis of an analysis of collateral attributes, historical collateral performance, borrower profiles and other features relevant to the evaluation of collateral credit quality);

estimated default rates (determined based on an analysis of collateral attributes, historical collateral performance, borrower profiles and other features relevant to the evaluation of collateral credit quality);

home price appreciation/depreciation rates based on macroeconomic forecasts;

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The yield used to discount the projected cash flows is determined by reviewing various attributes of the security including collateral type, weighted average life, sensitivity to losses, vintage, and convexity, in conjunction with market data on comparable securities.

Significant changes to any of these inputs could have materially changed the expected timing of cash flows within these securities which is a significant factor in determining the fair value of the securities.

Significant changes to any of these inputs could have materially changed the expected timing of cash flows within these securities which could have significantly affected the fair value of the securities.

Short-Term Investments

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Each custodial trust was created for the primary purpose of issuing $ 50 million face amount of CCS, investing the proceeds in high-quality assets and entering into put options with AGC or AGM, as applicable.

The fair value of CCS, which is reported in other assets on the condensed consolidated balance sheets, represents the difference between the present value of remaining expected put option premium payments under AGC CCS and AGM’s Committed Preferred Trust Securities (the AGM CPS) agreements, and the estimated present value that the Company would hypothetically have to pay currently for a comparable security.

The fair value of CCS, which is reported in other assets on the condensed consolidated balance sheets, represents the difference between the present value of the remaining expected put option premium payments under AGC CCS and AGM’s Committed Preferred Trust Securities (the AGM CPS) agreements, and the estimated present value of the amounts that the Company would hypothetically have to pay currently for a comparable security.

The change in fair value of the AGC CCS and AGM CPS are reported in “fair value gains (losses) on committed capital securities” in the condensed consolidated statements of operations.

The estimated current cost of the Company’s CCS is based on several factors, including AGM and AGC CDS spreads, the

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Company's publicly traded debt and the term the securities are estimated to remain outstanding.

The estimated current cost of the Company’s CCS is based on several factors, including AGM and AGC CDS spreads, the Company’s publicly traded debt and an estimation of the securities’ remaining term.

The AGC CCS and AGM CPS are classified as Level 3.

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The fair value of these assets is based on the observable published daily values of the underlying mutual funds included in the plans (Level 1) or based upon the NAV of the funds if a published daily value is not available (Level 2).

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The NAVs are based on observable information.

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Contracts Accounted for as Credit Derivatives

The Company’s credit derivatives in the Insurance segment primarily consist of insured CDS contracts, and also include interest rate swaps that qualify as derivatives under GAAP, which require fair value measurement with changes in the fair value reported in the condensed consolidated statements of operations.

The Company did not enter into CDS contracts with the intent to trade these contracts and the Company may not unilaterally terminate a CDS contract absent an event of default or termination event that entitles the Company to terminate such contracts;

however, the Company has from time-to-time mutually agreed with various counterparties to terminate certain CDS transactions.

In transactions where the counterparty does not have the right to terminate, such transactions were generally terminated for an amount that approximated the present value of future premiums or for a negotiated amount, rather than at fair value.

The Company’s credit derivatives, which primarily consist of insured CDS contracts, qualify as derivatives under GAAP that require fair value measurement, with changes in fair value reported in the condensed consolidated statements of operations.

The Company does not enter into CDS contracts with the intent to trade these contracts and may not unilaterally terminate a CDS contract absent an event of default or termination event that entitles the Company to terminate such contract.

The Company and its counterparties have negotiated the termination of certain contracts from time to time.

Transactions are generally terminated for an amount that approximates the present value of future premiums or a negotiated amount, rather than fair value.

The terms of the Company’s CDS contracts differ from more standardized credit derivative contracts sold by companies outside the financial guaranty industry.

The non-standard terms generally include the absence of collateral support agreements or immediate settlement provisions.

In addition, the Company employs relatively high attachment points and does not exit derivatives it sells, except under specific circumstances such as mutual agreements with counterparties.

The non-standard terms generally include the absence of collateral support agreements or immediate settlement provisions, and the Company’s insured exposure benefits from relatively high attachment points or other protections.

Management considers the non-standard terms of the Company’s credit derivative contracts in determining the fair value of these contracts.

Due to the lack of quoted prices and other observable inputs for its instruments or for similar instruments, the Company determines the fair value of its credit derivative contracts primarily through internally developed, proprietary models that use both observable and unobservable market data inputs.

There is no established market where financial guaranty insured credit derivatives are actively traded;

therefore, management has determined that the exit market for the Company’s credit derivatives is a hypothetical one based on its entry market.

These contracts are classified as Level 3 in the fair value hierarchy as there are multiple unobservable inputs deemed significant to the valuation model, most importantly the Company’s estimate of the value of the non-standard terms and conditions of its credit derivative contracts and how the Company’s own credit spread affects the pricing of its transactions.

The fair value of the Company’s credit derivative contracts represents the difference between the present value of remaining premiums the Company expects to receive and the estimated present value of premiums that a financial guarantor of comparable credit-worthiness would hypothetically charge at the reporting date for the same protection.

There are multiple unobservable inputs deemed significant to the valuation model, most importantly the Company’s estimate of the value of the non-standard terms and conditions of its credit derivative contracts and how the Company’s own credit spread affects the pricing of its transactions.

The fair value of the Company’s credit derivative contracts generally represents the difference between the present value of remaining premiums the Company expects to receive and the estimated present value of premiums that a financial guarantor of comparable credit-worthiness would hypothetically charge at the reporting date for the same protection.

The fair value of the Company’s credit derivatives depends on a number of factors, including notional amount of the contract, expected term, credit spreads, changes in interest rates, the credit ratings of referenced entities, the Company’s own credit risk and remaining contractual cash flows.

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Credit spreads capture the effect of recovery rates and performance of underlying assets of these contracts, among other factors.

Consistent with previous years, market conditions at September 30, 2023 were such that market prices of the Company’s CDS contracts were not available.

Consistent with previous years, market conditions as of March 31, 2024 were such that market prices of the Company’s CDS contracts were not available.

Assumptions and Inputs

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the gross spread, the allocation of gross spread among the bank profit, net spread and hedge cost and the weighted average life (which is based on debt service schedules).

The Company obtains gross spreads on its outstanding contracts from market data sources published by third parties (e.g., dealer spread tables for the collateral similar to assets within the Company’s transactions), as well as collateral-specific spreads provided by or obtained from market sources.

The bank profit represents the profit the originator, usually an investment bank, realizes for structuring and funding the transaction;

the net spread represents the premiums paid to the Company for the Company’s credit protection provided;

and the hedge cost represents the cost of CDS protection purchased by the originator to hedge its counterparty credit risk exposure to the Company.

The primary sources of information used to determine gross spread and the fair value for CDS contracts include actual collateral 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, and information provided by the counterparty of the CDS.

Credit spreads may also be interpolated based upon market indices adjusted to reflect the non-standard terms of the Company’s CDS contracts, or extrapolated based upon transactions of similar asset classes, similar ratings, and similar time to maturity.

The Company’s pricing model considers not only how credit spreads on its insured risks affect pricing, but also how the Company’s own credit spread affects the pricing of its transactions.

The amount of premium a financial guaranty insurance market participant can demand (or “current premium”) is inversely related to the cost of credit protection on the insurance company as measured by market credit spreads assuming all other assumptions remain constant.

This is because the buyers of credit protection typically hedge a portion of their risk to the financial guarantor, because the contractual terms of the Company’s contracts typically do not require the posting of collateral by the guarantor.

The extent of the hedge depends on the types of instruments insured and the current market conditions.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The primary sources of information used to determine gross spread include:

• 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.

• Credit spreads provided by the counterparty of the CDS.

The rates used to discount future expected premium cash flows ranged from 3.62 % to 5.41 % at September 30, 2023 and 2.78 % to 5.08 % at December 31, 2022.

The premium the Company receives is referred to as the “net spread.” The Company’s pricing model takes into account not only how credit spreads on risks that it assumes affect pricing, but also how the Company’s own credit spread affects the pricing of its transactions.

The Company’s own credit risk is factored into the determination of net spread based on the impact of changes in the quoted market price for credit protection bought on the Company, as reflected by quoted market prices on CDS referencing AGC.

Due to the relatively low volume and characteristics of CDS contracts remaining in AGM’s portfolio, changes in AGM’s credit spreads do not significantly affect the fair value of these CDS contracts.

The Company’s own credit risk is factored into the determination of the current premium based on the quoted market price for credit protection bought on the Company, as reflected by quoted market prices on CDS contracts referencing AGC.

AGM's CDS spreads do not significantly affect the fair value of derivatives because of the characteristics of the derivative contracts remaining in its portfolio.

The Company obtains the quoted price of CDS contracts traded on AGC from market data sources published by third parties.

The cost to acquire CDS protection referencing AGC affects the amount of spread on CDS transactions that the Company retains and, hence, their fair value.

As the cost to acquire CDS protection referencing AGC increases, the amount of premium the Company retains on a transaction generally decreases.

In the Company’s valuation model, the premium the Company captures is not permitted to go below the minimum rate that the Company would currently charge to assume similar risks.

In the Company’s valuation model, the current premium is not permitted to go below the minimum rate that the Company would charge to assume similar risks in the reporting period.

This assumption can have the effect of limiting the amount of unrealized gains that are recognized on certain CDS contracts.

Given market conditions and the Company’s own credit spreads, approximately 11.2 %, based on fair value, of the Company’s CDS contracts were fair valued using this minimum premium as of September 30, 2023.

As of December 31, 2022, the use of the minimum premium did not have a significant effect on fair value.

The percentage of transactions that price using the minimum premiums fluctuates due to changes in AGC’s credit spreads.

In general, when AGC’s credit spreads narrow, the cost to hedge AGC’s name declines and more transactions price above previously established floor levels.

Meanwhile, when AGC’s credit spreads widen, the cost to hedge AGC’s name increases causing more transactions to price at established floor levels.

The Company corroborates the assumptions in its fair value model, including the portion of exposure to AGC hedged by its counterparties, with independent third parties periodically.

The implied credit risk of AGC, indicated by the trading level of AGC’s own credit spread, is a significant factor in the amount of exposure to AGC that a bank or transaction hedges.

When AGC’s credit spreads widen, the hedging cost of a bank or originator increases.

Higher hedging costs reduce the amount of contractual cash flows AGC can capture as premium for selling its protection, while lower hedging costs increase the amount of contractual cash flows AGC can capture.

The amount of premium a financial guaranty insurance market participant can demand is inversely related to the cost of credit protection on the insurance company as measured by market credit spreads assuming all other assumptions remain constant.

This is because the buyers of credit protection typically hedge a portion of their risk to the financial guarantor, due to the fact that the contractual terms of the Company’s contracts typically do not require the posting of collateral by the guarantor.

The extent of the hedge depends on the types of instruments insured and the current market conditions.

Approximately 14.2 % and 11.5 %, based on fair value, of the Company’s CDS contracts were fair valued using this minimum premium as of March 31, 2024 and December 31, 2023, respectively.

A credit derivative liability on protection sold is the result of contractual cash inflows on in-force transactions that are lower than what a hypothetical financial guarantor could receive if it sold protection on the same risk as of the reporting date.

If the Company were able to freely exchange these contracts (i.e., assuming its contracts did not contain proscriptions on transfer and there was a viable exchange market), it would realize a loss representing the difference between the lower contractual premiums to which it is entitled and the current market premiums for a similar contract.

The Company determines the fair value of its CDS contracts by applying the difference between the current net spread and the contractual net spread for the remaining duration of each contract to the notional value of such contract and discounting such amounts using the applicable discount rate corresponding to the weighted average remaining life of the contract.

Strengths and Weaknesses of Model

The Company’s credit derivative valuation model, like any financial model, has certain strengths and weaknesses.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The primary strengths of the Company’s CDS modeling techniques are:

• 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.

The primary weaknesses of the Company’s CDS modeling techniques are:

• 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.

The Company determines the fair value of its CDS contracts by applying the difference between the current premium and the contractual premium for the remaining duration of each contract to the notional value of such contract and then discounting such amounts using the applicable discount rate corresponding to the weighted average remaining life of the contract.

The rates used to discount future expected premium cash flows ranged from 3.44 % to 5.42 % as of March 31, 2024 and 3.26 % to 4.81 % as of December 31, 2023.

The Company’s credit derivative valuation model is a consistent approach that takes into account the transaction structure and the key drivers of market value and maximizes the use of market-driven inputs whenever they are available.

However, because there is no exit market or any actual exit transactions, the Company’s exit market is a hypothetical one based on the Company’s entry market and there is a very limited and illiquid market in which to validate the reasonableness of the fair values developed by the Company’s model.

FG VIEs’ Assets and Liabilities

FG VIEs include Puerto Rico Trusts and structured finance and other FG VIEs.

Assets in the Puerto Rico Trusts, which consist of New Recovery Bonds and CVIs, are classified as Level 2.

As of March 31, 2024 and December 31, 2023, assets in the Puerto Rico Trusts, consisted of one fixed-maturity debt security classified as Level 3.

The Company elected the FVO for the Puerto Rico Trusts’ liabilities and they are classified as Level 3.

See “ - Fixed Maturity Securities” above for a description of the fair value methodology for the New Recovery Bonds and CVIs in the Puerto Rico Trusts.

Structured finance and other FG VIEs’ assets and liabilities are carried at fair value under the FVO and are classified as Level 3.

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Significant changes to some of these inputs could have materially changed the fair value of the FG VIEs’ assets and the implied collateral losses within these transactions.

In general, the fair value of the FG VIEs’ assets is most sensitive to changes in the projected collateral losses, where an increase in collateral losses typically could lead to a decrease in the fair value of FG VIEs’ assets, while a decrease in collateral losses typically leads to an increase in the fair value of FG VIEs’ assets.

In general, the fair value of the FG VIEs’ assets is most sensitive to changes in the projected collateral losses, where an increase in collateral losses typically leads to a potential decrease in the fair value of FG VIEs’ assets, while a decrease in collateral losses typically leads to an increase in the fair value of FG VIEs’ assets.

The prices of the assets and liabilities of the FG VIEs are generally determined with the assistance of an independent third party, based on a discounted cash flow approach.

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For those liabilities insured by the Company, the benefit of the Company’s insurance policy guaranteeing the timely payment of debt service is also taken into account.

The liabilities of the Puerto Rico Trusts are priced based on the value of the assets in the Puerto Rico Trusts including the value of the insurance subsidiaries’ financial guaranty policies.

Significant changes to any of the inputs described above could materially change the timing of expected losses within an insured transaction which is a significant factor in determining the implied benefit of the Company’s insurance policy guaranteeing the timely payment of principal and interest for the insured tranches of debt issued by the FG VIEs.

In general, extending the timing of expected loss payments by the Company into the future typically could lead to a decrease in the value of the Company’s insurance and a decrease in the fair value of the Company’s FG VIEs’ liabilities with recourse, while a shortening of the timing of expected loss payments by the Company typically could lead to an increase in the value of the Company’s insurance and an increase in the fair value of the Company’s FG VIEs’ liabilities with recourse.

The change in fair value of FG VIEs’ assets and liabilities is reported in “fair value gains (losses) on FG VIEs” in the condensed consolidated statement of operations, except for (i) the change in fair value attributable to change in ISCR on FG

The liabilities of

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

VIEs’ liabilities, and (ii) unrealized gains and losses on the New Recovery Bonds in the Puerto Rico Trusts, which are reported in OCI.

Interest income and interest expense are derived from the trustee reports and also included in “fair value gains (losses) on FG VIEs.” Investment income on the New Recovery Bonds and changes in fair value on the CVIs in the Puerto Rico Trusts are all reported in “fair value gains (losses) on FG VIEs” on the condensed consolidated statement of operations.

the Puerto Rico Trusts are priced based on the value of the assets in the Puerto Rico Trusts including the value of the U.S.

Insurance Subsidiaries’ financial guaranty policies.

Significant changes to any of the inputs described above could materially change the timing of expected losses within an insured transaction.

This is a significant factor in determining the implied benefit of the Company’s insurance policy which guarantees the timely payment of principal and interest for the insured tranches of debt issued by the FG VIEs.

In general, extending the timing of expected loss payments by the Company typically leads to a decrease in the value of the Company’s insurance and a decrease in the fair value of the Company’s FG VIEs’ liabilities with recourse, while a shortening of the timing of expected loss payments by the Company typically could lead to an increase in the value of the Company’s insurance and an increase in the fair value of the Company’s FG VIEs’ liabilities with recourse.

The change in fair value of FG VIEs’ assets and liabilities is reported in “fair value gains (losses) on FG VIEs” in the condensed consolidated statement of operations, except for the change in fair value attributable to change in ISCR on FG VIEs’ liabilities.

Interest income and interest expense are derived from the trustee reports and also included in “fair value gains (losses) on FG VIEs.”

Assets and Liabilities of CIVs

Investments held by CIVs which are listed or quoted on a national securities exchange or market are valued at their last reported sale price on the date of determination.

Investments held by CIVs which are not listed or quoted on an exchange, but are traded over-the-counter, or are listed on an exchange which has no reported sales, are valued at their fair value as determined by the Company, after giving consideration to third-party data generally at the average between the offer and bid prices.

The methods and procedures to value these investments may include, but are not limited to:

(i) performing comparisons with prices of comparable or similar investments;

Investments held by CIVs which are quoted on a national securities exchange are valued at their last reported sale price on the date of determination.

Investments held by CIVs which are traded over-the-counter reflect third-party data generally at the average of dealer offer and bid prices.

The valuation methodology may include, but is not limited to:

(i) performing price comparisons with similar investments;

(ii) obtaining valuation-related information from issuers;

(iii) calculating the present value of future cash flows;

(iv) assessing other analytical data and information related to the investment that is an indication of value;

(iv) assessing other data related to the investment that is an indication of value;

(v) obtaining information provided by third parties;

and/or (vi) evaluating information provided by management of these investments.

These fair values are generally based on dealer quotes, indications of value or pricing models that consider the time value of money, the current market, contractual prices and potential volatilities of the underlying financial instruments.

Inputs are used in applying the various valuation techniques and broadly refer to the current assumptions that market participants use to make valuation decisions, including assumptions about risk.

and/or (vi) evaluating information provided by the investment manager.

Inputs may include dealer price quotations, yield curves, credit curves, forward/CDS/index spreads, prepayments rates, strike and expiry dates, volatility statistics and other factors.

Investments in private equity funds are generally valued utilizing NAV.

Until July 1, 2023, the consolidated CLOs were collateralized financing entities (CFEs), and therefore, the debt issued by, and loans held by, the consolidated CLOs were measured under the FVO using the CFE practical expedient.

Loans in CLOs were priced using a loan pricing service which aggregated quotes from loan market participants.

The loans were all Level 2 assets, which are more observable than the fair value of the Level 3 debt issued by the consolidated CLOs.

As a result, the less observable CLO debt was measured on the basis of the more observable CLO loans.

Under the CFE practical expedient guidance, the loans of consolidated CLOs were measured at fair value and the debt of consolidated CLOs were measured as:

(1) the sum of (i) the fair value of the financial assets, and (ii) the carrying value of any nonfinancial assets held temporarily;

less (2) the sum of (iii) the fair value of any beneficial interests retained by the Company (other than those that represent compensation for services), and (iv) the Company’s carrying value of any beneficial interests that represent compensation for services.

The resulting amount was allocated to the individual financial liabilities (other than the underlying financial liabilities to the beneficial interests retained by the Company).

Prior to securitization, when loans were warehoused in an investment vehicle, such vehicle was not considered a CFE.

The Company had elected the FVO to measure the loans held and the debt issued by CLO warehouses to mitigate the accounting mismatch between such assets and liabilities when a CLO warehouse securitized and became a CLO.

As of December 31, 2022, Level 2 assets in the CIVs included assets of the consolidated CLOs and certain assets of the consolidated funds.

Level 3 assets in the CIVs included the remainder of the invested assets of consolidated funds.

Level 2 liabilities in the CIVs included senior warehouse financing debt used to fund a CLO warehouse (measured under the FVO).

Level 3 liabilities of the CIVs included various tranches of CLO debt, first loss subordinated warehouse financing and securitized borrowing.

Significant changes to any of the inputs described above could have a material effect on the fair value of the consolidated assets and liabilities.

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Fair Value Hierarchy of Financial Instruments Carried at Fair Value

As of September 30, 2023

As of March 31, 2024

Fair Value Hierarchy

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Assets of CIVs:

Equity securities and warrants — 4 75 79

Equity securities — — 89 89

Structured products — 44 220 264

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Assets of CIVs:

Fund investments:

Equity securities and warrants — 3 80 83

Corporate securities — — 96 96

Structured products — 59 189 248

CLOs and CLO warehouse assets:

Loans — 4,570 — 4,570

Short-term investments 135 — — 135

Total assets of CIVs — 62 269 331

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FG VIEs’ liabilities (2) — — 554 554

Liabilities of CIVs:

CLO obligations of CFEs — — 4,090 4,090

Warehouse financing debt — 277 36 313

Securitized borrowing — — 28 28

Total liabilities of CIVs — 277 4,154 4,431

Other liabilities — 7 — 7

Total liabilities carried at fair value $ — $ — $ 607 $ 607

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(1) Includes Level 3 mortgage loans that are recorded at fair value on a non-recurring basis.

(2) As of December 31, 2022, excludes $ 5 million in investments in AssuredIM funds for which the Company recorded a 100% NCI.

The consolidation of these funds resulted in a gross up of assets and NCI on the consolidated financial statements;

however, it resulted in no economic equity or net income attributable to AGL.

(2) Includes FG VIEs’ liabilities with recourse and FG VIEs’ liabilities without recourse.

See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Changes in Level 3 Fair Value Measurements

The tables below present a roll forward of the Company’s Level 3 financial instruments carried at fair value on a recurring basis during third quarter 2023, third quarter 2022, nine months 2023 and nine months 2022.

Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis

Third Quarter 2023

Fixed-Maturity Securities, Available-for-Sale Assets of CIVs

Subdivisions RMBS Asset-

Securities FG VIEs’

Assets Equity Securities and Warrants Corporate Securities Structured Products Other

(in millions)

Fair value as of June 30, 2023 $ 46 $ 162 $ 800 $ 188 $ 290 $ 84 $ — $ 33

Total pre-tax realized and unrealized gains (losses) recorded in:

Net income (loss) — 4 (1) 13 (1) 1 (2) 5 (4) — 7 (4) ( 20 ) (3)

Other comprehensive income (loss) ( 3 ) ( 6 ) ( 2 ) — — — — —

Purchases — — — — 3 — — —

Sales — — — — ( 4 ) — — —

Settlements ( 1 ) ( 7 ) ( 15 ) ( 9 ) — — — —

Consolidations — — — — — — — —

Deconsolidations — — — — ( 219 ) ( 84 ) 166 —

Transfers out of Level 3 ( 40 ) — — — — — — —

Fair value as of September 30, 2023 $ 2 $ 153 $ 796 $ 180 $ 75 $ — $ 173 $ 13

Change in unrealized gains (losses) related to financial instruments held as of September 30, 2023 included in:

Earnings $ — $ 6 (4) $ — $ 7 (4) $ ( 20 ) (3)

OCI $ — $ ( 6 ) $ 3 $ —

Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis

Third Quarter 2023

Credit Derivative

Liability, net (5) FG VIEs’ Liabilities (8) Liabilities of CIVs

(in millions)

Fair value as of June 30, 2023 $ ( 57 ) $ ( 699 ) $ ( 4,199 )

Total pre-tax realized and unrealized gains (losses) recorded in:

Net income (loss) 9 (6) 17 (2) —

Other comprehensive income (loss) — 13 —

Settlements ( 1 ) 127 —

Deconsolidations — — 4,199

Fair value as of September 30, 2023 $ ( 49 ) $ ( 542 ) $ —

Change in unrealized gains (losses) related to financial instruments held as of September 30, 2023 included in:

Earnings $ 9 (6) $ 9 (2) $ —

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis

Third Quarter 2022

Fixed-Maturity Securities, Available-for-Sale Assets of CIVs

Subdivisions RMBS Asset-

Securities FG VIEs’

Assets Equity Securities and Warrants Corporate Securities Structured Products Other

(in millions)

Fair value as of June 30, 2022 $ 51 $ 184 $ 805 $ 223 $ 258 $ 90 $ 38 $ 37

Total pre-tax realized and unrealized gains (losses) recorded in:

Net income (loss) — 3 (1) 2 (1) 3 (2) ( 11 ) (4) ( 2 ) (4) ( 3 ) (4) 1 (3)

Other comprehensive income (loss) ( 3 ) ( 8 ) 1 — — — — —

Purchases — 22 4 — 52 1 8 —

Sales — — ( 1 ) — ( 2 ) ( 2 ) — —

Settlements — ( 9 ) ( 5 ) ( 16 ) — — — —

Fair value as of September 30, 2022 $ 48 $ 192 $ 806 $ 210 $ 297 $ 87 $ 43 $ 38

Change in unrealized gains (losses) related to financial instruments held as of September 30, 2022 included in:

Earnings $ 3 (2) $ ( 11 ) (4) $ ( 2 ) (4) $ ( 3 ) (4) $ 1 (3)

OCI $ ( 3 ) $ ( 8 ) $ 1 $ —

Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis

Third Quarter 2022

Credit Derivative

Liability, net (5) FG VIEs’ Liabilities (8) Liabilities of CIVs

(in millions)

Fair value as of June 30, 2022 $ ( 147 ) $ ( 282 ) $ ( 3,987 )

Total pre-tax realized and unrealized gains (losses) recorded in:

Net income (loss) ( 48 ) (6) 8 (2) ( 31 ) (4)

Other comprehensive income (loss) — ( 4 ) 41

Issuances — — ( 8 )

Settlements 1 27 —

Consolidations — — ( 26 )

Fair value as of September 30, 2022 $ ( 194 ) $ ( 251 ) $ ( 4,009 )

Change in unrealized gains (losses) related to financial instruments held as of September 30, 2022 included in:

Earnings $ ( 46 ) (6) $ 8 (2) $ ( 13 ) (4)

OCI $ ( 4 ) $ 41

The tables below present a roll forward of the Company’s Level 3 financial instruments carried at fair value on a recurring basis during first quarter 2024 and first quarter 2023.

Assured Guaranty Ltd.

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Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis

Nine Months 2023

First Quarter 2024

Fixed-Maturity Securities, Available-for-Sale Assets of CIVs

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Securities FG VIEs’

Assets Equity Securities and Warrants Corporate Securities Structured Products Other

Assets Equity Securities Structured Products Other

(in millions)

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Settlements — ( 5 ) ( 30 ) ( 6 ) — — —

Deconsolidations — — — — ( 219 ) ( 84 ) 166 —

Transfers out of Level 3 ( 40 ) — — — — — — —

Fair value as of September 30, 2023 $ 2 $ 153 $ 796 $ 180 $ 75 $ — $ 173 $ 13

Change in unrealized gains (losses) related to financial instruments held as of September 30, 2023 included in:

Transfers into Level 3 — — 20 — 3 10 —

Fair value as of March 31, 2024 $ 6 $ 153 $ 821 $ 167 $ 89 $ 220 $ 5

Change in unrealized gains (losses) related to financial instruments held as of March 31, 2024 included in:

Earnings $ ( 3 ) (2) $ 7 (4) $ 5 (4) $ ( 10 ) (3)

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Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis

Nine Months 2023

First Quarter 2024

Credit Derivative

Liability, net (5) FG VIEs’ Liabilities (8) Liabilities of CIVs

Liability, net (5) FG VIEs’ Liabilities (8)

(in millions)

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Settlements 1 148

Deconsolidations — — 4,199

Fair value as of September 30, 2023 $ ( 49 ) $ ( 542 ) $ —

Change in unrealized gains (losses) related to financial instruments held as of September 30, 2023 included in:

Fair value as of March 31, 2024 $ ( 39 ) $ ( 399 )

Change in unrealized gains (losses) related to financial instruments held as of March 31, 2024 included in:

Earnings $ 4 (6) $ 2 (2)

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Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis

Nine Months 2022

First Quarter 2023

Fixed-Maturity Securities, Available-for-Sale Assets of CIVs

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Securities FG VIEs’

Assets Equity Securities Corporate Securities Structured Products Other

Assets Equity Securities and Warrants Corporate Securities Structured Products Other

(in millions)

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Settlements ( 1 ) ( 7 ) ( 4 ) ( 8 ) — — — —

Consolidations — — — 15 — — — —

Deconsolidations — — — ( 15 ) — — 20 —

Fair value as of September 30, 2022 $ 48 $ 192 $ 806 $ 210 $ 297 $ 87 $ 43 $ 38

Change in unrealized gains (losses) related to financial instruments held as of September 30, 2022 included in:

Fair value as of March 31, 2023 $ 47 $ 174 $ 795 $ 197 $ 329 $ 93 $ 17 $ 34

Change in unrealized gains (losses) related to financial instruments held as of March 31, 2023 included in:

Earnings $ — $ 32 (4) $ ( 3 ) (4) $ — $ ( 16 ) (3)

OCI $ 1 $ ( 1 ) $ ( 3 ) $ —

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis

Nine Months 2022

First Quarter 2023

Credit Derivative

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Other comprehensive income (loss) — ( 1 ) ( 8 )

Issuances — — ( 1,416 )

Settlements ( 1 ) 9 4

Consolidations — ( 102 ) ( 26 )

Deconsolidations — 15 374

Fair value as of September 30, 2022

Fair value as of March 31, 2023

$ ( 148 ) $ ( 704 ) $ ( 4,220 )

Change in unrealized gains (losses) related to financial instruments held as of September 30, 2022 included in:

Change in unrealized gains (losses) related to financial instruments held as of March 31, 2023 included in:

Earnings $ 14 (6) $ ( 2 ) (2) $ ( 65 ) (4)

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(5) Represents the net position of credit derivatives.

Credit derivative assets (reported 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 sheets based on net exposure by transaction.

(6) Reported in “fair value gains (losses) on credit derivatives.”

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(8) Includes FG VIEs’ liabilities with recourse and FG VIEs’ liabilities without recourse.

(9) Includes primarily various tranches of CLO debt.

The CLOs were collateralized financing entities that were consolidated until the Sound Point Transaction occurred on July 1, 2023.

Assured Guaranty Ltd.

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Quantitative Information About Level 3 Fair Value Inputs

As of September 30, 2023

As of March 31, 2024

Financial Instrument Description Fair Value Assets (Liabilities)

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Asset-backed securities:

Life insurance transactions 331 Yield 8.1 %

CLOs 439 Discount margin 1.0 % - 9.6 % 2.5 %

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Assets of CIVs (3):

Equity securities and warrants 75 Discount rate 20.9 %

Equity securities 89 Discount rate 16.5 % - 23.5 % 20.5 %

Market multiple-price to book 1.05 x

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Term (years) 10 years

Credit derivative liabilities, net (1) ( 49 ) Hedge cost (in bps) 17.2 - 39.2 24.1

Credit derivative liabilities, net (1) ( 39 ) Hedge cost (in basis points) (bps) 8.7 - 20.6 12.5

Bank profit (in bps) 83.6 - 268.3 139.4

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Asset-backed securities:

Life insurance transactions 342 Yield 11.3 %

CLOs 450 Discount margin 1.1 % - 9.5 % 2.6 %

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Assets of CIVs (3):

Equity securities and warrants 297 Yield 10.0 %

Discount rate 19.8 % - 25.1 % 22.7 %

Market multiple-enterprise value/revenue 1.05 x

Market multiple-enterprise value/EBITDA (6) 2.50 x

Equity securities 80 Discount rate 20.9 %

Market multiple-price to book 1.10 x

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Terminal growth rate 4.0 %

Exit multiple-EBITDA 8.00 x

Exit multiple-price to book 1.10 x

Exit multiple-price to earnings 5.50 x

Corporate securities 96 Discount rate 20.8 % - 23.8 % 21.7 %

Exit multiple-EBITDA 8.00 x

Market multiple-enterprise value/EBITDA 2.50 x

Structured products 189 Yield 14.7 % - 21.4 % 18.0 %

Other assets (1)

47 Implied Yield 7.7 % - 8.4 % 8.1 %

13 Year 1 loss estimates 7.8 % - 8.4 % 8.1 %

Term (years) 10 years

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Financial Instrument Description Fair Value Assets (Liabilities)

(in millions) Significant Unobservable Inputs Range Weighted Average (4)

Credit derivative liabilities, net (1) ( 162 ) Year 1 loss estimates 11.5 % - 25.2 % 15.7 %

Credit derivative liabilities, net (1) ( 50 ) Hedge cost (in bps) 10.2 - 26.5 15.8

Bank profit (in bps) 105.6 - 302.6 158.6

Internal credit rating AAA - CCC AA

Internal floor (in bps) 10.0

Internal credit rating AAA - CCC A

FG VIEs’ liabilities (1) ( 554 ) CPR 0.2 % - 21.4 % 7.8 %

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Yield 5.0 % - 10.7 % 5.8 %

Liabilities of CIVs (1):

CLO obligations of CFEs (5) ( 4,090 ) Yield 3.0 % - 27.4 % 5.5 %

Warehouse financing debt ( 36 ) Yield 11.7 % - 16.9 % 12.9 %

Securitized borrowing ( 28 ) Discount rate 20.9 %

Terminal growth rate 3.0 %

Exit multiple-EBITDA 11.00 x

Market multiple-enterprise value/EBITDA 10.00 x

____________________

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(4) Weighted average is calculated as a percentage of current par outstanding for all categories except for assets of CIVs, for which it is calculated as a percentage of fair value.

(5) See CFE fair value methodology described above for consolidated CLOs.

(6) Earnings before interest, taxes, depreciation, and amortization (EBITDA).

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Not Carried at Fair Value

1 unchanged sentence

Fair value is based on management’s estimate of what a similarly rated financial guaranty insurance company would demand to acquire the Company’s in-force book of financial guaranty insurance business.

It is based on a variety of factors that may include pricing assumptions management has observed for portfolio transfers, commutations, and acquisitions that have occurred in the financial guaranty market, and also includes adjustments for stressed losses, ceding commissions and return on capital.

It is based on a variety of factors that include pricing assumptions management has observed for portfolio transfers, commutations, and acquisitions that have occurred in the financial guaranty market, and also includes adjustments for stressed losses, ceding commissions and return on capital.

The Company classified the fair value of financial guaranty insurance contracts as Level 3.

1 unchanged sentence

Long-term debt issued by the U.S.

Holding Companies is valued by broker-dealers using third-party independent pricing sources and standard market conventions and classified as Level 2 in the fair value hierarchy.

Holding Companies is valued by broker-dealers using independent third-party pricing sources and standard market conventions and classified as Level 2 in the fair value hierarchy.

The market conventions utilize market quotations, market transactions for the Company’s comparable instruments, and to a lesser extent, similar instruments in the broader insurance industry.

3 unchanged sentences

Due from/to brokers and counterparties represents balances on a net-by counterparty basis on the condensed consolidated balance sheets where a contractual right of offset exists under an enforceable netting arrangement.

The cash at brokers is partially related to collateral for securities sold short and derivative contracts;

its use is therefore restricted until the securities are purchased or the derivative contracts are closed.

The cash at brokers is partially related to derivative contracts;

its use is therefore restricted until the derivative contracts are closed.

The carrying value approximates fair value of these items and are considered Level 1 in the fair value hierarchy.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Other Liabilities

As of December 31, 2022, $ 35 million of AssuredIM’s obligation under a master repurchase agreement to finance AssuredIM’s purchase of 5 % of the senior and equity notes issued by certain consolidated European CLOs, which was required to comply with its European risk retention obligations, were included in “other liabilities.”

The carrying amount and estimated fair value of the Company’s financial instruments not carried at fair value are presented in the following table.

Fair Value of Financial Instruments Not Carried at Fair Value

As of September 30, 2023 As of December 31, 2022

As of March 31, 2024 As of December 31, 2023

Amount Estimated

7 unchanged sentences

Long-term debt ( 1,695 ) ( 1,597 ) ( 1,694 ) ( 1,593 )

Liabilities of CIVs (4) ( 4 ) ( 4 ) ( 170 ) ( 170 )

Other liabilities ( 24 ) ( 24 ) ( 15 ) ( 15 )

____________________

(1) Includes due from brokers and counterparties and cash equivalents.

Carrying value approximates fair value.

(2) Primarily includes accrued interest, a participation loan, and receivables for securities sold, for which carrying value approximates fair value.

Also includes note receivable from Sound Point as of September 30, 2023 and management fees receivables as of December 31, 2022.

(1) 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.

(4) Includes due to brokers and counterparties and, as of December 31, 2022, fund’s loan payable.

Carrying value approximates fair value.

(5) Primarily includes accrued interest, repurchase agreement liability as of December 31, 2022, and payables for securities purchased for which carrying value approximates fair value.

Asset Management Fees

The following table presents the sources of asset management fees on a consolidated basis through the end of June 30, 2023.

Upon closing of the Sound Point Transaction and the AHP Transaction, the Company deconsolidated the transferred AssuredIM subsidiaries and reports its investment in Sound Point as an equity method investment (on a one-quarter lag).

As a result, the Company no longer has asset management fee revenues on its consolidated statement of operations.

Asset Management Fees

Third Quarter Nine Months

2023 2022 2023 2022

(in millions)

Management fees $ — $ 11 $ 21 $ 41

Performance fees — 2 18 17

Reimbursable fund expenses — 3 14 13

Total asset management fees $ — $ 16 $ 53 $ 71

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Long-Term Debt

The principal and carrying values of the Company’s debt are presented in the table below.

Principal and Carrying Amounts of Long-Term Debt

As of September 30, 2023 As of December 31, 2022

Principal Carrying

Value Principal Carrying

(in millions)

AGUS 5 % Senior Notes

$ — $ — $ 330 $ 329

AGUS 6.125 % Senior Notes

AGUS 3.15 % Senior Notes

500 495 500 495

AGUS 7 % Senior Notes

200 198 200 198

AGUS 3.6 % Senior Notes

400 395 400 395

AGUS Series A Enhanced Junior Subordinated Debentures 150 150 150 150

AGMH Junior Subordinated Debentures (1) 146 110 146 108

Total $ 1,746 $ 1,693 $ 1,726 $ 1,675

____________________

(1) Carrying amounts are different than principal amounts primarily due to fair value adjustments at the date of the AGMH acquisition, which are accreted into interest expense over the remaining terms of these obligations.

Net of AGMH’s long-term debt purchased by AGUS.

6.125 % Senior Notes.

On August 21, 2023, AGUS issued $ 350 million of 6.125 % Senior Notes due 2028 ( 6.125 % Senior Notes) for net proceeds of $ 345 million.

The net proceeds from the issuance were used for the redemption on September 25, 2023, of $ 330 million of AGUS’s debt maturing in 2024.

AGUS may redeem all or part of the 6.125 % Senior Notes at any time or from time to time prior to August 15, 2028 (the date that is one month prior to the maturity of the 6.125 % Senior Notes), at its option, at a redemption price equal to the greater of:

(i) 100 % of the principal amount of the 6.125 % Senior Notes being redeemed;

and (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the 6.125 % Senior Notes being redeemed (excluding interest accrued to the redemption date) from the redemption date to August 15, 2028 discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the treasury rate plus 30 bps;

plus, in each case, accrued and unpaid interest on the 6.125 % Senior Notes to be redeemed to, but excluding, the redemption date.

AGUS may redeem all or part of the 6.125 % Senior Notes at any time or from time to time on and after August 15, 2028, at its option, at a redemption price equal to 100 % of the principal amount of the 6.125 % Senior Notes being redeemed, plus accrued and unpaid interest on the 6.125 % Senior Notes to be redeemed to, but excluding, the redemption date.

The 6.125 % Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by AGL.

The 6.125 % Senior Notes are senior unsecured obligations of AGUS and rank equally in right of payment with all of AGUS’s other unsecured and unsubordinated indebtedness outstanding.

The guarantee is a senior unsecured obligation of AGL and ranks equally in right of payment with all of AGL’s other unsecured and unsubordinated indebtedness outstanding.

AGL and its Bermuda subsidiaries AG Re, AGRO and Cedar Personnel Ltd.

(collectively, the Bermuda Subsidiaries) are not subject to any income, withholding or capital gains taxes under current Bermuda law.

Under Bermuda law, there was no Bermuda income, corporate or profits tax or withholding tax, capital gains tax or capital transfer tax payable by AGL or AG Re, AGRO and Cedar Personnel Ltd.

(collectively, the Bermuda Subsidiaries) in 2023 and first quarter 2024.

AGL’s U.S., U.K.

1 unchanged sentence

and French authorities, respectively, and file applicable tax returns.

In addition, AGRO, a Bermuda domiciled company, has elected under Section 953(d) of the U.S.

Internal Revenue Code to be taxed as a U.S.

In addition, AGRO, a Bermuda domiciled company, has elected under Internal Revenue Code Section 953(d) to be taxed as a U.S.

domestic corporation.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

AGL is a tax resident in the U.K.

4 unchanged sentences

and its subsidiaries, AGRO and AG Intermediary Inc., file their own consolidated federal income tax return.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

In July of 2023, the U.K.

government passed legislation to implement the Organization for Economic Co-Operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) Pillar Two income inclusion rule.

government passed legislation to implement the Organization for Economic Co-Operation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) Pillar Two income inclusion rule.

This includes a multinational top-up tax which will apply to large multinational corporations for accounting periods beginning on or after December 31, 2023.

It is expected this will apply to AGL and subsidiaries, requiring a minimum effective rate of 15% in all jurisdictions in which it operates.

In addition, in August of 2023 the Bermuda government released the first of two public consultations for the introduction of a corporate income tax in Bermuda in response to the Pillar II initiatives.

The Bermuda tax is expected to be enacted in 2023 to be effective in 2025.

According to a second public consultation paper issued by the Ministry of Finance of the Bermuda Government, the Government of Bermuda believes it is reasonable and proportionate for any new Bermuda corporate income tax regime to supersede any existing tax assurances given to companies such as AGL and its Bermuda subsidiaries.

The Company is assessing the impact of both the U.K.

legislation and the Bermuda proposal.

This will apply to AGL and its subsidiaries, requiring a minimum effective rate of 15 % in all jurisdictions in which they operate.

In addition, on December 27, 2023 the Bermuda government enacted a corporate income tax at the rate of 15 % which will apply for accounting periods starting on or after January 1, 2025.

The enactment of the corporate income tax regime required the Company to recognize Bermuda deferred taxes for the first time and was recognized in the period that includes the date of enactment.

An economic transition adjustment (ETA) equal to the difference between the fair market value and the carrying value of assets and liabilities of each of the Company’s Bermuda insurance subsidiaries as of September 30, 2023 resulted in the establishment of a deferred tax asset and corresponding benefit of $ 189 million reported in the fourth quarter of 2023 consolidated statement of operations.

The ETA is expected to be utilized over 10 to 15 years, beginning in 2025.

Tax Assets (Liabilities)

Deferred and Current Tax Assets (Liabilities)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(in millions)

2 unchanged sentences

Valuation Allowance

During 2023, the Company recorded a return to provision adjustment, which included the utilization of $ 3 million in foreign tax credits, thereby reducing the Company’s foreign tax credits (FTC) from $ 5 million as of December 31, 2022 to $ 2 million as of September 30, 2023.

As of September 30, 2023, the Company believes that the weight of the positive evidence outweighs the negative evidence regarding the realization of the Company’s foreign tax credits, resulting in the release of the corresponding valuation allowance.

The Company came to the conclusion that it is more likely than not that the deferred tax assets will be fully realized after weighing all positive and negative evidence available as required under GAAP.

5 unchanged sentences

When assessing recoverability of these deferred tax assets, the Company considers the ability and intent to hold the underlying securities to recovery in value, if necessary, as well as other factors as noted above.

As of September 30, 2023 and December 31, 2022, based on all available evidence, including capital loss carryback capacity, the Company concluded that the deferred tax assets related to the unrealized tax capital losses on the available-for-sale securities portfolios are, more likely than not, expected to be realized.

As of March 31, 2024 and December 31, 2023, based on all available evidence, including capital loss carryback capacity, the Company concluded that the deferred tax assets related to the unrealized tax capital losses on the available-for-sale securities portfolios are, more likely than not, expected to be realized.

Provision for Income Taxes

1 unchanged sentence

A discrete calculation of the provision is calculated for each interim period.

The effective tax rates reflect the proportion of income recognized by each of the Company’s operating subsidiaries, with U.S.

The Company’s overall effective tax rate fluctuates based on the distribution of income across jurisdictions.

The effective tax rates reflect the proportion of income recognized by each of the Company’s operating subsidiaries, with

subsidiaries taxed at the U.S.

marginal corporate income tax rate of 21 % and the French subsidiary taxed at the French marginal corporate tax rate of 25 %, and no taxes for the Company’s Bermuda Subsidiaries unless subject to U.S.

tax by election.

For the periods between April 1, 2017 and March 31, 2023, the U.K.

corporation tax rate was 19 %.

marginal corporate income tax rate of 21 %,

• the French subsidiary taxed at the French marginal corporate tax rate of 25 %,

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

subsequent to April 1, 2023, the U.K.

corporation tax rate has been increased to 25 %.

For the full year 2023, the U.K.

subsidiaries will be taxed at the U.K.

blended marginal corporate tax rate of 23.5 %.

The Company’s overall effective tax rate fluctuates based on the distribution of income across jurisdictions.

• Bermuda Subsidiaries taxed at the Bermuda marginal corporate tax rate of 0 %, unless subject to U.S.

tax by election, and

subsidiaries taxed at the U.K.

marginal corporate tax rate of 25 % for periods starting April 1, 2023 and 19 % for periods ending on or before March 31, 2023.

Effective January 1, 2024, the U.K.

adopted a global minimum tax rate of 15 % under the OECD’s BEPS Pillar Two rules.

A reconciliation of the difference between the provision for income taxes and the expected tax provision at statutory rates in taxable jurisdictions is presented below.

Effective Tax Rate Reconciliation

Third Quarter Nine Months

2023 2022 2023 2022

First Quarter

(in millions)

2 unchanged sentences

NCI ( 1 ) ( 3 )

Return to provision adjustment ( 6 ) ( 20 ) ( 6 ) ( 20 )

State taxes 2 3

Foreign taxes 5 5

Taxes on reinsurance ( 1 ) — ( 1 ) ( 1 )

Global minimum tax 5 —

Stock based compensation — 1

6 unchanged sentences

Pre-tax Income (Loss) by Tax Jurisdiction

Third Quarter Nine Months

2023 2022 2023 2022

First Quarter

(in millions)

$ 233 $ 3 $ 458 $ 112

Bermuda 30 25

( 11 ) ( 11 )

Other ( 4 ) ( 5 ) ( 8 ) ( 15 )

France ( 4 ) ( 2 )

Total $ 144 $ 120

Revenue by Tax Jurisdiction

Third Quarter Nine Months

2023 2022 2023 2022

First Quarter

(in millions)

$ 373 $ 60 $ 901 $ 435

Bermuda 36 35

1 ( 21 ) 22 ( 39 )

Other ( 1 ) ( 2 ) — ( 8 )

France ( 1 ) —

Total $ 245 $ 283

Pre-tax income by jurisdiction may be disproportionate to revenue by jurisdiction to the extent that insurance losses incurred are disproportionate.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

As of September 30, 2023, AGUS had open tax years with the U.S.

Pre-tax income by jurisdiction may be disproportionate to revenue by jurisdiction to the extent that insurance losses incurred are disproportionate.

As of March 31, 2024, AGUS had open tax years with the U.S.

Internal Revenue Service (IRS) for 2018 forward and is currently under audit for the 2018 and 2019 tax years.

As of September 30, 2023, Assured Guaranty Overseas US Holdings Inc.

As of March 31, 2024, Assured Guaranty Overseas US Holdings Inc.

had open tax years with the IRS for 2020 forward and is not currently under audit with the IRS.

In September 2022, His Majesty’s Revenue & Customs completed a business risk review of Assured Guaranty that commenced in July 2022 and assigned a low-risk rating for corporate taxes in the U.K.

In September 2022, His Majesty’s Revenue & Customs (HMRC) completed a business risk review of Assured Guaranty that commenced in July 2022 and assigned a low-risk rating for corporate taxes in the U.K.

In December 2023, HMRC issued an inquiry into the Company’s 2021 U.K.

As of December 31, 2023, the Company's U.K.

subsidiaries had open tax years with HMRC for 2021 forward.

The Company’s French subsidiary is not currently under examination and has open tax years of 2020 forward.

2 unchanged sentences

Lawsuits arise in the ordinary course of the Company’s business.

It is the opinion of the Company’s management, based upon the information available, that the expected outcome of litigation against the Company, individually or in the aggregate, will not have a material adverse effect on the Company’s financial position, although an adverse resolution of litigation against the Company in a fiscal quarter or year could have a material adverse effect on the Company’s results of operations or liquidity in a particular quarter or year.

In addition, in the ordinary course of their respective businesses, certain of AGL’s insurance subsidiaries are involved in litigation with third parties to recover insurance losses paid in prior periods or prevent or reduce losses in the future.

2 unchanged sentences

The impact, if any, of these and other proceedings on the amount of recoveries the Company receives and losses it pays in the future is uncertain, and the impact of any one or more of these proceedings during any quarter or year could be material to the Company’s results of operations in that particular quarter or year.

In the first quarter of 2023, the Company reduced its previously recorded accrual of $ 20 million to zero in connection with developments in litigation.

In first quarter 2023, the Company reduced its previously recorded accrual of $ 20 million to zero in connection with developments in litigation.

The Company also receives subpoenas and interrogatories from regulators from time to time.

6 unchanged sentences

Following a bench trial, on March 8, 2023, the Court rendered its decision and found in favor of AGFP.

On June 30, 2023, the clerk entered judgment in favor of AGFP in the amount of approximately $ 54 million plus prejudgment simple interest at an annual rate of 8 %.

On September 22, 2023, LBIE appealed this judgment.

On June 30, 2023, the clerk entered judgment in favor of AGFP in the amount of approximately $ 54 million plus post-judgment simple interest at an annual rate of 8 %.

On July 1, 2023, AGFP moved the Court to award it approximately $ 58 million for attorneys’ fees and expenses AGFP incurred through March 2023.

The parties reached a confidential settlement with respect to this motion for attorneys’ fees, and AGFP withdrew the motion without prejudice on October 30, 2023.

The Company did not accrue in its financial statements for the judgment it was awarded or the attorneys’ fees it sought.

On September 22, 2023, LBIE appealed the Court’s post-trial decision to the New York Appellate Division’s First Judicial Department (Appellate Division).

On March 14, 2024, the Appellate Division affirmed the Court’s judgment.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

2024, LBIE moved for leave to reargue its appeal before the Appellate Division or, alternatively, to appeal to the New York Court of Appeals.

The Company did not accrue in its financial statements for the judgment it was awarded or the attorneys’ fees it sought.

Shareholders’ Equity

2 unchanged sentences

Changes in Accumulated Other Comprehensive Income (Loss) by Component

Third Quarter 2023

First Quarter 2024

Net Unrealized Gains (Losses) on Investments with:

4 unchanged sentences

(in millions)

Balance, June 30, 2023 $ ( 284 ) $ ( 115 ) $ ( 22 ) $ ( 42 ) $ 5 $ ( 458 )

Balance, December 31, 2023 $ ( 202 ) $ ( 104 ) $ ( 20 ) $ ( 38 ) $ 5 $ ( 359 )

Other comprehensive income (loss) before reclassifications ( 31 ) 10 ( 2 ) 1 — ( 22 )

2 unchanged sentences

( 2 ) 10 — — — 8

Fair value gains (losses) on CIVs

Fair value gains (losses) on FG VIEs

— — ( 1 ) — — ( 1 )

2 unchanged sentences

Tax (provision) benefit

Total amount reclassified from AOCI, net of tax ( 2 ) ( 6 ) — ( 5 ) — ( 13 )

Other comprehensive income (loss) ( 113 ) ( 8 ) 10 4 — ( 107 )

Balance, September 30, 2023 $ ( 397 ) $ ( 123 ) $ ( 12 ) $ ( 38 ) $ 5 $ ( 565 )

Changes in Accumulated Other Comprehensive Income (Loss) by Component

Third Quarter 2022

Net Unrealized Gains (Losses) on Investments with:

FG VIEs’ Liabilities with Recourse Cumulative

Adjustment Cash Flow

Hedge Total AOCI

No Credit Impairment Credit Impairment

(in millions)

Balance, June 30, 2022 $ ( 205 ) $ ( 107 ) $ ( 19 ) $ ( 45 ) $ 6 $ ( 370 )

Other comprehensive income (loss) before reclassifications ( 286 ) ( 1 ) ( 3 ) ( 4 ) — ( 294 )

Amounts reclassified from AOCI to:

Net realized investment gains (losses)

— ( 1 ) — — — ( 1 )

Total before tax

( 11 ) ( 3 ) — — — ( 14 )

Tax (provision) benefit

Total amount reclassified from AOCI, net of tax ( 2 ) 9 ( 1 ) — — 6

Other comprehensive income (loss) ( 29 ) 1 ( 1 ) 1 — ( 28 )

Balance, September 30, 2022 $ ( 482 ) $ ( 105 ) $ ( 22 ) $ ( 49 ) $ 6 $ ( 652 )

Balance, March 31, 2024 $ ( 231 ) $ ( 103 ) $ ( 21 ) $ ( 37 ) $ 5 $ ( 387 )

Assured Guaranty Ltd.

1 unchanged sentence

Changes in Accumulated Other Comprehensive Income (Loss) by Component

Nine Months 2023

First Quarter 2023

Net Unrealized Gains (Losses) on Investments with:

11 unchanged sentences

— — ( 1 ) — — ( 1 )

Fair value gains (losses) on CIVs

— — — ( 6 ) — ( 6 )

Interest expense — — — — 1 1

Total before tax

4 unchanged sentences

Other comprehensive income (loss) 89 5 ( 1 ) 2 — 95

Balance, September 30, 2023 $ ( 397 ) $ ( 123 ) $ ( 12 ) $ ( 38 ) $ 5 $ ( 565 )

Changes in Accumulated Other Comprehensive Income (Loss) by Component

Nine Months 2022

Net Unrealized Gains (Losses) on Investments with:

FG VIEs’ Liabilities with Recourse Cumulative

Adjustment Cash Flow

Hedge Total AOCI

No Credit Impairment Credit Impairment

(in millions)

Balance, December 31, 2021 $ 375 $ ( 24 ) $ ( 21 ) $ ( 36 ) $ 6 $ 300

Other comprehensive income (loss) before reclassifications ( 886 ) ( 92 ) ( 2 ) ( 13 ) — ( 993 )

Amounts reclassified from AOCI to:

Net realized investment gains (losses)

( 35 ) ( 13 ) — — — ( 48 )

Fair value gains (losses) on FG VIEs

— — ( 2 ) — — ( 2 )

Total before tax

( 35 ) ( 13 ) ( 2 ) — — ( 50 )

Tax (provision) benefit

Total amount reclassified from AOCI, net of tax ( 29 ) ( 11 ) ( 1 ) — — ( 41 )

Other comprehensive income (loss) ( 857 ) ( 81 ) ( 1 ) ( 13 ) — ( 952 )

Balance, September 30, 2022 $ ( 482 ) $ ( 105 ) $ ( 22 ) $ ( 49 ) $ 6 $ ( 652 )

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Balance, March 31, 2023 $ ( 254 ) $ ( 105 ) $ ( 24 ) $ ( 43 ) $ 6 $ ( 420 )

Share Repurchases

On November 1, 2023, the Board of Directors (the Board) authorized the repurchase of an additional $ 300 million of its common shares.

Under this and previous authorizations, as of November 7, 2023, the Company was authorized to purchase $ 372 million of its common shares.

On May 2, 2024, AGL’s Board of Directors (the Board) authorized the repurchase of an additional $ 300 million of its common shares.

As of May 7, 2024, the Company was authorized to purchase $ 414 million of its common shares.

The Company expects to repurchase shares from time to time in the open market or in privately negotiated transactions.

11 unchanged sentences

2024 (January 1 - March 31) 1,539,278 129 84.07

2023 (April 1 - June 30) 453,942 24 53.08

2023 (July 1 - September 30) 1,065,902 64 59.67

2023 (October 1 - November 7) 682,676 42 61.17

2024 (April 1 - May 7) 750,280 61 80.70

Total 2024 2,289,558 $ 190 $ 82.96

____________________

(1) Excludes commissions and excise taxes.

Assured Guaranty Ltd.

2 unchanged sentences

Computation of Earnings Per Share

Third Quarter Nine Months

2023 2022 2023 2022

First Quarter

(in millions, except per share amounts)

15 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements