What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-08 compared with 2023-11-08 · 355 added, 618 removed, 977 unchanged (50% of the section changed)

6 unchanged sentences

Any or all of Assured Guaranty’s forward looking statements herein are based on current expectations and the current economic environment and may turn out to be incorrect.

Assured Guaranty’s actual results may vary materially.

Assured Guaranty’s actual results may vary materially from those expressed in, or implied or projected by, the forward-looking information and statements.

Among factors that could cause actual results to differ adversely are:

• significant changes in inflation, interest rates, the world’s credit markets or segments thereof, credit spreads, foreign exchange rates or general economic conditions, including the possibility of a recession or stagflation;

• geopolitical risk, including Russia’s invasion of Ukraine and the resulting economic sanctions, volatility in energy prices, potential for increased cyberattacks, and risk of intentional or accidental escalation between The North Atlantic Treaty Organization (NATO) and Russia, conflict in the Middle East, confrontation over Iran’s nuclear program, and United States (U.S.) – China strategic competition and the pursuit of technological independence;

• geopolitical risk, including Russia’s invasion of Ukraine and risk of intentional or accidental escalation between The North Atlantic Treaty Organization (NATO) and Russia, conflict in the Middle East, confrontation over Iran’s nuclear program, United States (U.S.) – China strategic competition and pursuit of technological independence;

• global terrorism risk with threats increasing from conflicts in the Middle East and Ukraine/Russia, and the polarized political environment of the 2024 U.S.

presidential election;

• the impacts of artificial intelligence, machine learning and other technological advances, including potentially increasing the risks of malicious cyber attacks, dissemination of misinformation, and disruption of markets;

• the possibility of a U.S.

2 unchanged sentences

• public health crises, including pandemics and endemics, and the governmental and private actions taken in response to such events;

• developments in the world’s financial and capital markets, including stresses in the financial condition of banking institutions in the U.S., that adversely affect repayment rates related to commercial real estate, municipalities and other insured obligors, Assured Guaranty’s insurance loss or recovery experience, or investments of Assured Guaranty;

• developments in the world’s financial and capital markets, including stresses in the financial condition of banking institutions in the U.S.

and the possibility that increasing participation of unregulated financial institutions in these markets results in losses or lower valuations of assets, reduced liquidity and credit and/or contraction of these markets, that adversely affect repayment rates of insured obligors, Assured Guaranty’s insurance loss or recovery experience, or investments of Assured Guaranty;

• reduction in the amount of available insurance opportunities and/or in the demand for Assured Guaranty’s insurance;

• the possibility that budget or pension shortfalls or other factors will result in credit losses or impairments on obligations of state, territorial and local governments and their related authorities and public corporations that Assured Guaranty insures or reinsures;

• insured losses, including losses with respect to related legal proceedings, in excess of those expected by Assured Guaranty or the failure of Assured Guaranty to realize loss recoveries that are assumed in its expected loss estimates for insurance exposures, including as a result of the final resolution of Assured Guaranty’s remaining Puerto Rico exposures or the amounts recovered on securities received in connection with the resolution of Puerto Rico exposures already resolved;

• the impact of the Company satisfying its obligations under insurance policies with respect to legacy insured Puerto Rico bonds;

• the possibility that budget or pension shortfalls or other factors will result in credit losses or liquidity claims on obligations of state, territorial and local governments and their related authorities and public corporations that Assured Guaranty insures or reinsures;

• insured losses, including losses with respect to related legal proceedings, in excess of those expected by Assured Guaranty or the failure of Assured Guaranty to realize loss recoveries that are assumed in its expected loss estimates for insurance exposures, including as a result of the final resolution of Assured Guaranty’s Puerto Rico Electric Power Authority exposure or the amounts recovered on securities received in connection with the resolution of Puerto Rico exposures already resolved;

• the impact of Assured Guaranty satisfying its obligations under insurance policies with respect to legacy insured Puerto Rico bonds;

• increased competition, including from new entrants into the financial guaranty industry, nonpayment insurance and other forms of capital saving or risk syndication available to banks and insurers;

• the possibility that investments made by Assured Guaranty for its investment portfolio, including alternative investments and investments it manages, do not result in the benefits anticipated or subject Assured Guaranty to reduced liquidity at a time it requires liquidity, or to other negative or unanticipated consequences;

• the impacts of the completion of Assured Guaranty’s transactions with Sound Point Capital Management, LP (Sound Point) and/or Assured Healthcare Partners LLC (AHP) on Assured Guaranty and its relationships with its shareholders, regulators, rating agencies, employees and the obligors it insures and on the asset management business contributed to Sound Point and on the business of AHP and their relationships with their respective clients and employees;

• the possibility that investments made by Assured Guaranty for its investment portfolio, including alternative investments, do not result in the benefits anticipated or subject Assured Guaranty to reduced liquidity at a time it requires liquidity, or to other negative or unanticipated consequences;

• the impacts of Assured Guaranty’s transactions with Sound Point Capital Management, LP (Sound Point, LP) and certain of its investment management affiliates (together with Sound Point, LP, Sound Point) and/or Assured Healthcare Partners LLC (AHP) on Assured Guaranty and its relationships with its shareholders, regulators, rating agencies, employees and the obligors it insures and on the asset management business contributed to Sound Point, LP and on the business of AHP and their relationships with their respective clients and employees;

• the possibility that strategic transactions made by Assured Guaranty, including the consummation of the transactions with Sound Point and/or AHP, do not result in the benefits anticipated or subject Assured Guaranty to negative consequences;

• the inability to control the business, management or policies of entities in which the Company holds a minority interest;

• the impact of market volatility on the mark-to-market of Assured Guaranty’s assets and liabilities subject to mark-to-market, including certain of its investments, contracts accounted for as derivatives, and certain consolidated variable interest entities (VIEs);

• the inability to control the business, management or policies of entities in which Assured Guaranty holds a minority interest;

• the impact of market volatility on the fair value of Assured Guaranty’s assets and liabilities subject to mark-to-market, including certain of its investments, contracts accounted for as derivatives, its committed capital securities, its consolidated investment vehicles and certain consolidated variable interest entities (VIEs);

• rating agency action, including a ratings downgrade, a change in outlook, the placement of ratings on watch for downgrade, or a change in rating criteria, at any time, of AGL or any of its insurance subsidiaries, and/or of any securities AGL or any of its subsidiaries have issued, and/or of transactions that AGL’s insurance subsidiaries have insured;

5 unchanged sentences

• the effects of mergers, acquisitions and divestitures;

• natural or man-made catastrophes or pandemics;

• natural or man-made catastrophes;

• the impact of climate change on Assured Guaranty’s business and regulatory actions taken related to such risk;

3 unchanged sentences

• management’s response to these factors.

The foregoing review of important factors should not be construed as exhaustive, and should be read in conjunction with the other cautionary statements and risk factors that are included in this Form 10-Q, as well as the risk factors included in the Company’s 2022 Annual Report on Form 10-K.

The foregoing review of important factors should not be construed as exhaustive, and should be read in conjunction with the other cautionary statements that are included in this Form 10-Q, as well as the risk factors included in the Company’s 2023 Annual Report on Form 10-K.

The Company undertakes no obligation to update publicly or review any forward looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

2 unchanged sentences

Any forward looking statements in this Form 10-Q reflect the Company’s current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to its operations, results of operations, growth strategy and liquidity.

For these statements, the Company claims the protection of the safe harbor for forward looking statements contained in Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act).

For these statements, the Company claims the protection of the safe harbor for forward looking statements contained in Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act).

Available Information

6 unchanged sentences

The Company uses its web site and may use its social media account as a means of disclosing material information and for complying with its disclosure obligations under SEC Regulation FD (Fair Disclosure).

Accordingly, investors should monitor the Company Statements, Investor Information and Businesses portions of the Company’s web site as well as the Company’s social media account on LinkedIn, in addition to following the Company’s press releases, SEC filings, public conference calls, presentations and webcasts.

Accordingly, investors should monitor the Company Statements, Investor Information and Businesses portions of

the Company’s web site as well as the Company’s social media account on LinkedIn, in addition to following the Company’s press releases, SEC filings, public conference calls, presentations and webcasts.

The information contained on, or that may be accessed through, the Company’s web site or social media account is not incorporated by reference into, and is not a part of, this report.

4 unchanged sentences

Until July 1, 2023, the Company served as investment advisor to 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 as described below.

Beginning July 1, 2023, the Company participates in the asset management business through its ownership interest in Sound Point.

See Item 1, Financial Statements, Note 1, Business and Basis of Presentation.

The Corporate division consists primarily of interest expense on the debt of Assured Guaranty US Holdings Inc.

4 unchanged sentences

See Item 1, Financial Statements, Note 2, Segment Information.

Asset Management Transactions

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).

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

(AGM) and Assured Guaranty Corp.

(AGC) (collectively, the U.S.

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.

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).

As of September 30, 2023, Sound Point is the fifth largest CLO manager by assets under management (AUM) in the world (based on September 30, 2023 CreditFlux CLO manager rankings).

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.

Economic Environment

Real gross domestic product (GDP) increased at an annual rate of 4.9% in the three-month period ended September 30, 2023 (third quarter 2023), compared to an increase of 2.1% in the second quarter of 2023, according to the advance estimate released by the U.S.

Bureau of Economic Analysis (BEA).

At the end of September 2023, the U.S.

unemployment rate, seasonally adjusted, stood at 3.8%, up slightly from the 3.6% rate where it had started the quarter, and down from the COVID-19 pandemic high of 14.7% in April 2020.

Real gross domestic product increased at an annual rate of 1.6% in the three-month period ended March 31, 2024 (first quarter 2024), compared to an increase of 3.4% in the fourth quarter of 2023, according to the first quarter 2024 advance estimate released by the U.S.

Bureau of Economic Analysis.

At the end of March 2024, the U.S.

unemployment rate, seasonally adjusted, stood at 3.8%, near where it started the year at 3.7%.

The Company believes a more robust economy makes it less likely that obligors whose obligations it guarantees will default.

According to the U.S.

Bureau of Labor Statistics (BLS), the inflation rate in the U.S.

before seasonal adjustment for the 12-month period ending September 2023, as measured by the Consumer Price Index for All Urban Consumers (CPI-U), was 3.7%, as compared to 3.0% for the 12-month period ending June 2023.

According to the United Kingdom’s (U.K.) Office for National Statistics, the Consumer Prices Index including owner occupiers’ housing costs (CPIH) was 6.3% for the 12 months through September 2023, down from 7.3% for the 12 months ended June 2023.

Consumer price inflation may impact the Company indirectly to the extent it makes it more difficult for obligors to make their debt payments or causes interest rates to rise more generally.

In addition, consumer price inflation in the U.K.

increases reported net par outstanding for certain U.K

exposures with approximately $21.2 billion of net par outstanding as of September 30, 2023, and also increases projected future installment premiums on the portion of such exposure that pays at least a portion of the premium on an installment basis over the term of the exposure.

Bureau of Labor Statistics, the inflation rate in the U.S.

before seasonal adjustment for the 12-month period ending March 2024, as measured by the Consumer Price Index for All Urban Consumers, was 3.5%, as compared to 3.4% for the 12-month period ending December 2023.

According to the United Kingdom’s (U.K.) Office for National Statistics, the Consumer Prices Index including owner occupiers’ housing costs was 3.8% for the 12 months to March 2024, down from 4.2% for the 12 months ended December 2023.

Consumer price inflation in the U.K.

increases reported net par outstanding for certain U.K exposures with approximately $22.7 billion of net par outstanding as of March 31, 2024, and also increases projected future installment premiums on the portion of such exposure that pays at least a portion of the premium on an installment basis over the term of the exposure.

With the Federal Open Market Committee (FOMC) acknowledging the need to combat inflation, in March 2022 the FOMC began again raising the target range for the federal funds rate and stated that it would reduce its holdings of treasury securities and agency debt and agency mortgage-backed securities.

From March 2022 through July 26, 2023, the FOMC raised the target range for the federal funds rate from a range of 0% to 0.25% where it started 2022 to a range of 5.25% to 5.50% at its July 25-26, 2023 meeting.

From March 2022 through July 2023, the FOMC raised the federal funds rate from a range of 0% to 0.25% where it started 2022 to a target range of 5.25% to 5.50%.

The FOMC has repeatedly declared that it seeks to achieve maximum employment and inflation at the rate of 2% over the longer run.

In determining the extent to which additional policy firming may be appropriate to return inflation to 2% over time, the FOMC indicated that it will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.

Since its July 25-26, 2023 meeting, the FOMC has maintained the federal funds rate at 5.25% to 5.50%, including through its most recent meeting held October 31 – November 1, 2023, stating that it would continue to assess additional information and its implications for monetary policy.

Since its July 2023 meeting, the FOMC has maintained the federal funds rate at 5.25% to 5.50%, including through its most recent meeting held April 30-May 1, 2024, stating that it would continue to assess additional information and its implications for monetary policy.

The level and direction of interest rates and credit spreads impact the Company in numerous ways.

On the one hand, higher interest rates may reduce the fair value of fixed-maturity securities currently held in the Company’s investment portfolio, dampen municipal bond issuance and negatively impact the finances of some of the obligors whose payments the Company insures.

On the other hand, higher interest rates are often accompanied by wider spreads, which may make the Company’s credit enhancement products more attractive in the U.S.

municipal bond market and increase the level of premiums it can charge for those products.

On the other hand, higher interest rates increase the base on which the Company charges premium in most U.S.

municipal bond transactions.

Higher interest rates also are often accompanied by wider spreads, which may also increase the level of premiums it can charge for those products.

The 30-year AAA Municipal Market Data (MMD) rate is a measure of interest rates in the Company’s largest financial guaranty insurance market, U.S.

public finance.

The MMD rate averaged 3.77% for the quarter ended September 2023, higher than the 3.41% average for the quarter ended June 2023, and higher than the 3.22% average for the quarter ended September 2022.

Meanwhile, the difference, or credit spread, between the 30-year BBB-rated general obligation relative to the 30-year AAA MMD averaged 101 basis points (bps) in the quarter ended September 2023, which is the same spread as the quarter ended June 2023, but wider than the 95 bps average for the quarter ended September 2022.

The MMD rate averaged 3.57% for the quarter ended March 2024, lower than the 4.06% average for the quarter ended December 2023, but higher than the 3.37% average for the quarter ended March 2023.

Meanwhile, the difference, or credit spread, between the 30-year BBB-rated general obligation relative to the 30-year AAA MMD averaged 92 basis points (bps) in the quarter ended March 2024, which is narrower than the 100 bps average for the quarter ended December 2023, and narrower than the 101 bps average for the quarter ended March 2023.

The Company believes that, over time, wider spreads could permit it to increase its premium rates on new business, and higher interest rates may also increase the amount the Company can earn on its largely fixed-maturity securities.

Additionally, the Company believes that higher interest rates are discouraging homeowners from moving as many are locked into lower mortgage interest rates at the homes in which they reside, which, in turn, is restricting housing inventory and leading to an increase in home prices as demand outpaces supply.

Additionally, the Company believes that higher interest rates are discouraging some homeowners from moving as many are locked into lower mortgage interest rates at the homes in which they reside, which, in turn, is restricting housing inventory and leading to an increase in home prices as demand outpaces supply.

The increase in housing prices may benefit distressed residential mortgage-backed securities (RMBS) the Company insures.

According to the National Association of Realtors reported that existing home sales declined 15.4% in September 2023 from one year ago.

The median existing-home price for all housing types in September 2023 was $394,300, a decrease of 3.9% from June 2023 ($410,200).

The National Association of Realtors reported that year-over-year existing-home sales declined 3.7% from March 2023 to March 2024, while the median existing-home sales price increased 4.8% from March 2023 ($375,300) to March 2024 ($393,500).

Key Business Strategies

3 unchanged sentences

and (iii) capital management.

The Company seeks to grow the insurance business through new business production, acquisitions of monoline financial guaranty companies that currently are in runoff and no longer actively writing new business (legacy monoline insurers) or reinsurance of their insured portfolios, and to continue to mitigate losses in its current insured portfolio.

The Company seeks to grow the insurance business through new business production, acquisitions of legacy financial guarantors or reinsurance of their insured portfolios, and to continue to mitigate losses in its current insured portfolio.

Growth of the Insured Portfolio

4 unchanged sentences

The Company believes that its insurance:

(i) encourages retail investors, who typically have fewer resources than the

Company for analyzing municipal bonds, to purchase such bonds;

(i) encourages retail investors, who typically have fewer resources than the Company for analyzing municipal bonds, to purchase such bonds;

(ii) enables institutional investors to operate more efficiently;

11 unchanged sentences

Based on Sale Date

Nine Months 2023 Nine Months 2022 Year Ended December 31, 2022

First Quarter 2024 First Quarter 2023 Year Ended December 31, 2023

(dollars in billions, except number of issues and percentages)

15 unchanged sentences

The amounts in the table are those reported by Thomson Reuters.

The table excludes Corporate-CUSIP transactions insured by Assured Guaranty, which the Company also considers to be public finance business.

The Company also considers opportunities to acquire financial guaranty portfolios, whether by acquiring financial guarantors who are no longer actively writing new business or their insured portfolios, generally through reinsurance.

The table excludes Corporate-CUSIP transactions insured by Assured Guaranty, certain of which the Company also considers to be public finance business.

The Company also considers opportunities to acquire financial guaranty portfolios, whether by acquiring financial guarantors that are no longer actively writing new business or their insured portfolios, generally through reinsurance or novations.

These transactions enable the Company to improve its future earnings and deploy excess capital.

2 unchanged sentences

In the public finance area, the Company believes its experience and the resources it is prepared to deploy, as well as its ability to provide bond insurance or other contributions as part of a solution, result in more favorable outcomes in distressed public finance situations than would be the case without its participation.

This has been illustrated by the Company’s role in the Detroit, Michigan and Stockton, California financial crises, and more recently by the Company’s role in negotiating various agreements in connection with the restructuring of obligations of the Commonwealth of Puerto Rico and various obligations of

its related authorities and public corporations.

This has been illustrated by the Company’s role in negotiating various agreements in connection with the restructuring of obligations of the Commonwealth of Puerto Rico and various obligations of its related authorities and public corporations, as well as Detroit, Michigan and Stockton, California.

The Company will also, where appropriate, pursue litigation to enforce its rights.

For example, the Company initiated a number of legal actions to enforce its rights with respect to obligations of the Commonwealth of Puerto Rico and various obligations of its related authorities and public corporations.

After over five years of negotiations, 2022 was a turning point for resolving a substantial portion of the Company’s Puerto Rico exposure 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 defaulting Puerto Rico credits except Puerto Rico Electric Power Authority (PREPA) (2022 Puerto Rico Resolutions) as discussed in Item 1, Financial Statements, Note 3, Outstanding Exposure—Exposure to Puerto Rico.

As a result of the 2022 Puerto Rico Resolutions, 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.

The Company believes the 2022 Puerto Rico Resolutions mark significant milestones in its Puerto Rico loss mitigation efforts.

In connection with the 2022 Puerto Rico Resolutions, the Company received substantial amounts of cash, new general obligation bonds (New GO Bonds) and new bonds backed by toll revenues (Toll Bonds, and together with New GO Bonds, New Recovery Bonds) and contingent value instruments (CVIs) associated with its direct exposures.

The Company has sold some of the New Recovery Bonds and CVIs it had received in connection with the 2022 Puerto Rico Resolutions and may continue to sell amounts it still retains, subject to market conditions.

In 2022, as a result of the resolution of the Company’s exposure to insured Puerto Rico credits experiencing payment default other than Puerto Rico Electric Power Authority (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.

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

The Company continues to work to resolve its remaining unresolved defaulted Puerto Rico exposure, PREPA.

1 unchanged sentence

The Company is, and for several years has been, working with the servicers of some of the RMBS transactions it insures to encourage the servicers to provide alternatives to distressed borrowers that will encourage them to continue making payments on their loans to help improve the performance of the related RMBS.

The Company also purchases attractively priced obligations, including below-investment-grade (BIG) obligations, 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 fair value of Loss Mitigation Securities as of September 30, 2023 (excluding the value of the Company’s insurance) was $448 million, with a par of $745 million.

In some instances, the terms of the Company’s policy give it the option to pay principal on an accelerated basis on an obligation on which it has paid a claim, thereby reducing the amount of guaranteed interest due in the future.

The Company may also purchase attractively priced obligations, including below-investment-grade (BIG) obligations, 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 fair value of Loss Mitigation Securities as of March 31, 2024 (excluding the value of the Company’s insurance) was $464 million.

In some instances, the terms of the Company’s policy or the terms of certain workout orders and resolutions give it the option to pay principal on an accelerated basis on an obligation on which it has paid a claim, thereby reducing the amount of guaranteed interest due in the future.

The Company has at times exercised this option, which uses cash but reduces projected future losses.

3 unchanged sentences

Until July 1, 2023, the Company pursued its asset management strategy through AssuredIM.

With the consummation of the Sound Point Transaction and AHP Transaction, effective as of July 1, 2023, the Company participates in the asset management business through its ownership interest in Sound Point, and will no longer directly manage investments for third parties.

With the consummation of the Sound Point Transaction and AHP Transaction, effective as of July 1, 2023, the Company participates in the asset management business through its ownership interest in Sound Point, and no longer directly manages investments for third parties.

The Company’s ownership interest in Sound Point furthers its strategy of participating in a fee-based earnings stream independent of the risk-based premiums generated by its financial guaranty business.

The Sound Point business was strengthened by the addition of AssuredIM’s AUM (excluding AUM relating to AHP).

The Company also expects its relationship with Sound Point to enhance its alternative investment opportunities.

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.

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

The Sound Point business was strengthened by the addition of AssuredIM’s assets under management (AUM) (excluding AUM relating to AHP).

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

The Company expects its relationship with Sound Point to also enhance its alternative investment opportunities.

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 $1 billion in Sound Point managed investments, subject to regulatory approval.

Of the $1.5 billion, the U.S.

Insurance Subsidiaries through their jointly owned investment subsidiary, AG Asset Strategies LLC (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 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) were $703 million.

Insurance Subsidiaries through their jointly owned investment subsidiary, AG Asset Strategies LLC (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 funds managed by Sound Point and AHP (Sound Point and AHP funds) were $772 million.

Capital Management

The Company has developed strategies to efficiently manage capital within the Assured Guaranty group.

From 2013 through November 7, 2023, the Company has repurchased 143 million common shares for approximately $4.8 billion, representing approximately 74% of the total shares outstanding at the beginning of the repurchase program in 2013.

On November 1, 2023, the AGL Board of Directors (the Board) authorized the repurchase of an additional $300 million of common shares.

Under this and previous authorizations, as of November 7, 2023, the Company was authorized to purchase $372 million of its common shares.

From 2013 through May 7, 2024, the Company has repurchased 146 million common shares for approximately $5.1 billion, representing approximately 75% of the total shares outstanding at the beginning of the repurchase program in 2013.

On May 2, 2024, the AGL Board of Directors (the Board) authorized the repurchase of an additional $300 million of the Company’s common shares.

Under this and previous authorizations, as of May 7, 2024, the Company was authorized to purchase $414 million of its common shares.

Shares may be repurchased from time to time in the open market or in privately negotiated transactions.

4 unchanged sentences

Amount (1) Number of Shares Average price

per share (1)

(in millions, except per share data)

1 unchanged sentence

2024 (first quarter) 129 1.54 84.07

2023 (Second Quarter) 24 0.454 53.08

2023 (Third Quarter) 64 1.066 59.67

2023 (through November 7) 42 0.683 61.17

2024 (through May 7)

61 0.75 80.70

Cumulative repurchases since the beginning of 2013 $ 5,050 146.38 34.50

As of September 30, 2023, the estimated accretive effect of the cumulative repurchases of common shares since the beginning of 2013 was approximately:

____________________

(1) Excludes commissions and excise taxes.

As of March 31, 2024, the estimated accretive effect of the cumulative repurchases of common shares since the beginning of 2013 was approximately:

$49.49 per share in shareholders’ equity attributable to AGL, $53.50 per share in adjusted operating shareholders’ equity and $89.47 per share in adjusted book value.

1 unchanged sentence

In 2023, the Company issued $350 million in 6.125% Senior Notes due in 2028, and used the proceeds primarily to redeem $330 million of 5% Senior Notes due in 2024.

In 2021, the Company also redeemed $600 million in long-dated high coupon debt using proceeds from the issuance of $900 million in shorter-dated, lower coupon debt.

Proceeds from the debt issuances that were not used to redeem debt were used for general corporate purposes, including share repurchases.

Since the second quarter of 2017, AGUS has also purchased $154 million in principal of AGMH’s outstanding Junior Subordinated Debentures.

1 unchanged sentence

See “— Liquidity and Capital Resources — AGL and its U.S.

Holding Companies” for the U.S.

Holding Companies’ long-term debt.

Holding Companies.”

Executive Summary

2 unchanged sentences

The primary drivers of volatility in the Company’s net income include:

loss and loss adjustment expense (LAE changes in fair value of credit derivatives, FG VIEs, CIVs and committed capital securities (CCS), as well as foreign exchange gains (losses), the level of refundings of insured obligations, changes in the value of the Company’s alternative investments, the effects of any large settlements, commutations and loss mitigation strategies, among other factors.

loss and loss adjustment expense (LAE), changes in fair value of credit derivatives, FG VIEs, CIVs, CVIs and committed capital securities (CCS), as well as foreign exchange gains (losses), the level of refundings of insured obligations, changes in the value of the Company’s alternative investments, the effects of any large transactions, settlements, commutations and loss mitigation strategies, among other factors.

Changes in laws and regulations, among other factors, may also have a significant effect on reported net income or loss in a given reporting period.

1 unchanged sentence

Financial Results

Third Quarter Nine Months

2023 2022 2023 2022

First Quarter

(in millions, except per share amounts)

16 unchanged sentences

Present value of new business production (PVP) (1)

46 95 249 240

Gross par written 3,743 5,363

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

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

Amount Per Share Amount Per Share

12 unchanged sentences

Condensed Consolidated Results of Operations

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

2023 2022 2023 2022

Three Months Ended March 31,

(in millions)

9 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

3 unchanged sentences

Amortization of deferred acquisition cost (DAC) 6 3

Employee compensation and benefit expenses 47 57 199 189

Other operating expenses 44 37 170 120

Employee compensation, benefit and other operating expenses:

Asset management subsidiaries — 45

Insurance and other subsidiaries 97 92

Total expenses 125 165

6 unchanged sentences

Net income (loss) attributable to Assured Guaranty Ltd.

$ 157 $ 11 $ 363 $ 30

Effective tax rate 21.4 % 19.1 %

Third Quarter 2023 Compared with Third Quarter 2022

The increase in net income attributable to AGL in third quarter 2023 compared with the three-month period ended September 30, 2022 (third quarter 2022) was primarily due to:

• the gain associated with the Sound Point Transaction and AHP Transaction, net of transaction expenses, of $241 million (pre-tax),

• fair value gains on credit derivatives in third quarter 2023, compared with losses in third quarter 2022,

• lower foreign exchange losses on remeasurement, and

• higher income from the fixed-maturity and alternative investment portfolio.

These increases were offset in part by losses and LAE in third quarter 2023 compared with a benefit in third quarter 2022.

Nine Months 2023 Compared with Nine Months 2022

Net income attributable to AGL for the six-month period ended September 30, 2023 (nine months 2023) was higher compared with the nine-month period ended September 30, 2022 (nine months 2022) primarily due to:

• the gain associated with the Sound Point Transaction and AHP Transaction, net of transaction expenses, of $215 million (pre-tax),

• foreign exchange gains on remeasurement in nine months 2023, compared with losses in nine months 2022,

• fair value gains on credit derivatives in nine months 2023, compared with losses in nine months 2022, and

• higher income from the fixed-maturity and alternative investment portfolio.

First Quarter 2024 Compared with First Quarter 2023

Net income attributable to AGL for first quarter 2024 was higher compared with the three-month period ended March 31, 2023 (first quarter 2023) primarily due to:

• higher net earned premiums in first quarter 2024 compared with first quarter 2023 primarily due to one large refunded transaction, and

• fair value gains on trading securities in first quarter 2024 compared with losses in first quarter 2023.

These increases were offset in part by:

• losses and LAE in nine months 2023 compared with a benefit in nine months 2022,

• lower net earned premiums in nine months 2023 compared with nine months 2022 which benefited from premium accelerations related to the 2022 Puerto Rico Resolutions, and

• higher operating expenses in nine months 2023 primarily due to $46 million in expenses associated with the Sound Point Transaction and AHP Transaction.

• foreign exchange losses on remeasurement in first quarter 2024, compared with gains in first quarter 2023, and

• lower other income due to the reversal of a previously recorded litigation accrual of $20 million in first quarter 2023.

The Company’s effective tax rate reflects the proportion of income recognized by each of the Company’s operating subsidiaries, with U.S.

2 unchanged sentences

subsidiaries taxed at the U.K.

marginal corporate tax rate of 19% prior to March 31, 2023 and 25% after April 1 2023, 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.

marginal corporate tax rate of 19% prior to March 31, 2023 and 25% after April 1 2023, the French subsidiary taxed at the French marginal corporate tax rate of 25%, and Bermuda subsidiaries taxed at the Bermuda marginal corporate tax rate of 0%, unless subject to U.S.

tax by election or as a U.S.

controlled foreign corporation.

Financial Statements, Note 12, Income Taxes.

Effective January 1, 2024, the U.K.

adopted a global minimum tax rate of 15% under the Organization for Economic Co-Operation and Development’s Base Erosion and Profit Shifting Pillar Two rules.

See Item 1, Financial Statements, Note 10, Income Taxes.

Adjusted Operating Income

Adjusted operating income in third quarter 2023 was $206 million, compared with $133 million in third quarter 2022.

The increase was primarily due to the gain associated with the Sound Point Transaction and AHP Transaction, offset in part by higher loss expense.

Adjusted operating income in nine months 2023 was $310 million, compared with $253 million in nine months 2022.

The increase was primarily due to the gain associated with the Sound Point Transaction and AHP Transaction, offset in part by higher loss expense and lower net earned premiums in nine months 2023, compared with nine months 2022 which included premium accelerations of $104 million related to the 2022 Puerto Rico Resolutions.

Adjusted operating income in first quarter 2024 was $113 million, compared with $68 million in first quarter 2023.

The increase was primarily due to higher premiums earned from accelerations due to a large refunded transaction in first quarter 2024, and fair value gains on Puerto Rico CVIs classified as trading securities, offset in part by lower other income in first quarter 2024, compared with first quarter 2023, which included the reversal of a previously recorded litigation accrual.

See “— Results of Operations — Reconciliation to GAAP” for the reconciliation of net income (loss) attributable to AGL to adjusted operating income (loss).

Book Value and Adjusted Book Value

Shareholders’ equity attributable to AGL as of September 30, 2023 increased compared with December 31, 2022, due to net income, which was partially offset by dividends, share repurchases, and unrealized losses on investments.

Adjusted operating shareholders’ equity and adjusted book value increased primarily due to operating income components of $310 million offset in part by dividends and share repurchases of $141 million, and in the case of adjusted book value, the increase was also primarily due to gross written premiums of $221 million, which was partially offset by economic loss development of $147 million.

Shareholders’ equity attributable to AGL as of March 31, 2024 decreased compared with December 31, 2023, due to share repurchases, unrealized losses on investments and dividends, offset in part by net income.

Adjusted operating shareholders’ equity and adjusted book value also decreased primarily due to share repurchases of $129 million and dividends, partially offset by operating income of $113 million and in the case of adjusted book value, GWP of $61 million.

See “— Non-GAAP Financial Measures” below for the reconciliation of shareholders’ equity attributable to AGL to adjusted operating shareholders' equity and adjusted book value.

On a per share basis, shareholders’ equity attributable to AGL, adjusted operating shareholders’ equity, and adjusted book value increased as of March 31, 2024 compared with December 31, 2023, due, in part, to the accretive effect of the share repurchase program.

See “— Non-GAAP Financial Measures” for the reconciliation of shareholders’ equity attributable to AGL to adjusted operating shareholders' equity and adjusted book value.

Other Matters

4 unchanged sentences

debt with par that accretes with increasing inflation, and also increasing projected future installment premiums on the portion of such exposure that pays at least some of the premium on an installment basis over the term of the exposure.

Consumer price inflation may also impact the Company indirectly to the extent it makes it more difficult for obligors to make their debt payments, and may be accompanied by higher interest rates that could impact the Company in several ways.

Consumer price inflation may also impact the Company indirectly to the extent it makes it more difficult for obligors to make their debt payments, and may be accompanied by higher interest rates.

Higher interest rates impact the Company in numerous other ways.

7 unchanged sentences

Russia’s invasion of Ukraine has led to the imposition of economic sanctions by many western countries against Russia and certain Russian individuals, dislocation in global energy markets, massive refugee movements, and payment default by certain Russian credits.

The economic sanctions imposed by western governments, along with decisions by private companies regarding their presence in Russia, continue to reduce western economic ties to Russia and to reshape global economic and political ties more generally, and the Company cannot predict all of the potential effects of the conflict on the world or on the Company.

economic and political ties more generally, and the Company cannot predict all of the potential effects of the conflict on the world or on the Company.

The Company’s surveillance and treasury functions have reviewed the Company’s insurance and investment portfolios, respectively, and have identified no material direct exposure to Ukraine or Russia.

In fact, the Company’s direct insurance exposure to eastern Europe generally is limited to approximately $249 million in net par outstanding as of September 30, 2023, comprising $208 million net par exposure to the sovereign debt of Poland and $41 million net par exposure to a toll road in Hungary.

In fact, the Company’s direct insurance exposure to eastern Europe generally is limited to approximately $245 million in net par outstanding as of March 31, 2024, comprising $205 million net par exposure to the sovereign debt of Poland and $40 million net par exposure to a toll road in Hungary.

The Company rates all such exposure investment grade.

2 unchanged sentences

After review, the Company’s surveillance and treasury functions have identified no material direct exposure to such area.

The Company’s direct insurance exposure to the Middle East is generally is limited to approximately $49 million in net par outstanding as of September 30, 2023, comprised of funded commitments to subscription finance facilities;

The Company’s direct insurance exposure to the Middle East is generally limited to approximately $58 million in net par outstanding as of March 31, 2024, comprised of funded commitments to subscription finance facilities;

however, such exposure may increase to a total of approximately $93 million to the extent all unfunded commitments under the facilities are ultimately funded.

The Company rates all such insurance exposure investment grade.

Internal Revenue Service and Department of the Treasury issued final and proposed regulations in October 2020 relating to the tax treatment of passive foreign investment company.

The final regulations are not expected to have a material impact to the Company’s business operation or its shareholders and the Company is continuing to evaluate the proposed regulations.

See Note 12, Income Taxes.

Results of Operations

2 unchanged sentences

Estimates are inherently subject to change and actual results could differ from those estimates, and the differences may be material to the condensed consolidated financial statements.

Critical estimates and assumptions are evaluated on an on-going basis based on historical developments, market conditions, industry trends and other information that is reasonable under the circumstances.

There can be no assurance that actual results will conform to estimates and assumptions and that reported results of operations will not be materially different in the future to reflect changes in these estimates and assumptions from time to time.

The accounting policies that the Company believes are most dependent on the application of judgment, estimates and assumptions are listed below.

See Part II, Item 8, Financial Statements and Supplementary Data, Note 1, Business and Basis of Presentation, of the Company’s 2022 Annual Report on Form 10-K, for the Company’s significant accounting policies which includes a reference to the applicable note where further details regarding the significant estimates and assumptions are provided, as well as Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of the Company’s 2022 Annual Report on Form 10-K, for further details regarding sensitivity analyses.

Critical estimates and assumptions are periodically evaluated based on historical developments, market conditions, industry trends and other information that is reasonable under the circumstances.

There can be no assurance that actual results will conform to estimates and assumptions and that reported results of operations will not be materially different in the future due to changes in these estimates and assumptions.

Listed below are the accounting policies and estimates that the Company believes are most dependent on the application of judgment and assumptions.

• Expected loss to be paid (recovered);

4 unchanged sentences

• Credit derivatives;

• Credit impairment of financial instruments;

• Other-than-temporary-impairment of equity method investments;

• Revenue recognition;

• Income tax assets and liabilities, including the recoverability of deferred tax assets (liabilities).

• Acquisition date fair value of the equity method investment in Sound Point;

• Impairments of equity method investments and financial instruments;

• Income tax assets and liabilities, including the recoverability of deferred tax assets (liabilities) including the Bermuda deferred tax asset reported in 2023.

See Part II, Item 8, Financial Statements and Supplementary Data, Note 1, Business and Basis of Presentation, of the Company’s 2023 Annual Report on Form 10-K, for the Company’s significant accounting policies which includes a reference to the applicable note where further details regarding the significant estimates and assumptions are provided, as well as Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of the Company’s 2023 Annual Report on Form 10-K, for further details regarding the sensitivity analyses.

Results of Operations by Segment

2 unchanged sentences

Insurance Segment Results

Third Quarter Nine Months

2023 2022 2023 2022

First Quarter

Segment revenues

2 unchanged sentences

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

Foreign exchange gains (losses) on remeasurement and other income (loss) 4 (6) 36 (1)

Foreign exchange gains (losses) on remeasurement — 1

Other income (loss) (2) 25

Total segment revenues 229 190

1 unchanged sentence

Loss expense (benefit) 4 9

Interest expense — — — 1

Amortization of DAC 6 3

18 unchanged sentences

When issuers pay down insured obligations, the Company is no longer on risk for payment defaults, and therefore accelerates the recognition of the remaining nonrefundable deferred premium revenue.

The amortization of the Company’s outstanding book of business along with the previously high levels of refunding activity has led to a lower volume of refunding opportunities over the last several years, except for refundings of Puerto Rico policies under the 2022 Puerto Rico Resolutions.

The amortization of the Company’s outstanding book of business along with the previously high levels of refunding activity, and the higher interest rates environment has led to a lower volume of refunding opportunities over the last several years.

Terminations are generally negotiated agreements with beneficiaries resulting in the extinguishment of the Company’s insurance obligation.

3 unchanged sentences

Net Earned Premiums and Credit Derivative Revenues

Third Quarter Nine Months

2023 2022 2023 2022

First Quarter

(in millions)

3 unchanged sentences

Scheduled net earned premiums (1) $ 65 $ 62

Accelerations:

Refundings 14 12 26 145

Total accelerations 14 12 26 145

Refundings and terminations 37 4

Total public finance 102 66

Structured finance scheduled net earned premiums (1) 16 15 47 44

Structured finance

Scheduled net earned premiums (1) 14 15

Accelerations 2 —

Total structured finance 16 15

Specialty insurance and reinsurance 2 1

1 unchanged sentence

Credit derivative revenues 2 2

Scheduled net earned premiums 2 2 6 7

Accelerations 1 — 1 2

Total credit derivative revenues 3 2 7 9

Total net earned premiums and credit derivative revenues $ 122 $ 84

1 unchanged sentence

(1) Includes accretion of discount.

Net earned premiums and credit derivative revenues increased in third quarter 2023 compared with third quarter 2022 primarily due to higher refundings in third quarter 2023 and updates to debt service assumptions in third quarter 2022.

Net earned premiums and credit derivative revenues decreased in nine months 2023 compared with nine months 2022 primarily due to refundings of $104 million related to the resolution of PRCCDA, PRIFA and GO/PBA exposures discussed in Item 1.

Financial Statements, Note 3, Outstanding Exposure.

As of September 30, 2023, $3.6 billion of net deferred premium revenue on financial guaranty insurance remained to be earned over the life of the insurance contracts.

Net earned premiums and credit derivative revenues increased in first quarter 2024 compared with first quarter 2023 primarily due to a large refunded transaction in first quarter 2024.

As of March 31, 2024, $3.6 billion of net deferred premium revenue on financial guaranty insurance remained to be earned over the life of the insurance contracts.

New Business Production

1 unchanged sentence

New Business Production

Third Quarter Nine Months

2023 2022 2023 2022

First Quarter

(in millions)

Public finance—U.S.

$ 29 $ 54 $ 129 $ 160

Public finance—non-U.S.

3 unchanged sentences

Public finance—U.S.

$ 30 $ 57 $ 129 $ 163

Public finance—non-U.S.

6 unchanged sentences

Public finance—non-U.S.

61 194 670 624

Structured finance—U.S.

267 30 1,101 106

Structured finance—non-U.S.

3 unchanged sentences

(1) PVP and Gross Par Written in the table above are based on “close date,” when the transaction settles.

See “— Non-GAAP Financial Measures — PVP or Present Value of New Business Production.” GWP may be negative due to changes in debt service assumptions.

(2) Nine months 2023 and 2022 PVP and gross par written include the present value of future gross revenues and exposure, respectively, associated with a financial guaranty written by the Company that, under GAAP, is accounted for under Accounting Standards Codification (ASC) 460, Guarantees .

Third Quarter 2023

public finance GWP and PVP in third quarter 2023 were lower than the comparable GWP and PVP in third quarter 2022, due to a large transportation revenue transaction in third quarter 2022 that did not recur in third quarter 2023, and higher credit quality new business that carry lower premium rates in third quarter 2023, compared with third quarter 2022.

The Company’s direct par written represented 61% of the total U.S.

municipal market insured issuance in third quarter 2023, compared with 56% in third quarter 2022, and the Company’s penetration of all municipal issuance was 4.6% in third quarter 2023 compared with 3.2% in third quarter 2022.

Structured finance GWP and PVP in third quarter 2023 primarily includes an insurance securitization.

Nine Months 2023

public finance GWP and PVP in nine months 2023 were lower than the comparable GWP and PVP in nine months 2022 primarily due to fewer secondary market transactions in nine months 2023, compared with nine months 2022.

See “— Non-GAAP Financial Measures — PVP or Present Value of New Business Production.” PVP was discounted at 5.0% and 4.0% in 2024 and 2023, respectively.

(2) First quarter 2023 PVP and gross par written include the present value of future gross revenues and exposure, respectively, associated with a financial guaranty written by the Company that, under GAAP, is accounted for under Accounting Standards Codification (ASC) 460, Guarantees .

public finance GWP and PVP in first quarter 2024 were higher than the comparable GWP and PVP in first quarter 2023, primarily due to several large transportation revenue transactions that closed in first quarter 2024.

The Company’s direct par written represented 53% of the total U.S.

municipal market insured issuance in nine months 2023, compared with 56% in nine months 2022, and the Company’s penetration of all municipal issuance was 5.3% in nine months 2023 compared with 4.4% in nine months 2022.

In nine months 2023, non-U.S.

public finance GWP and PVP were lower than GWP and PVP in nine months 2022 due to a large amount of secondary market transactions in nine months 2022.

In nine months 2023, new business primarily included the guaranty of a long-term sale and leaseback transaction with Glasgow City Council and several regulated utility transactions.

In nine months 2023, structured finance GWP and PVP were $52 million and $82 million, respectively, compared with GWP and PVP of $3 million and $10 million, respectively, in nine months 2022.

Structured finance GWP and PVP in nine months 2023 includes an insurance securitization and several subscription finance guaranties, as well as an excess-of-loss guaranty of a minimum amount of billed rent on a diversified portfolio of real estate properties for which no GWP was reported under GAAP because it is not accounted for as insurance.

municipal market insured issuance in first quarter 2024, compared with 60% in first quarter 2023, and the Company’s penetration of all municipal issuance was 3.8% in first quarter 2024 compared with 4.6% in first quarter 2023.

Structured finance GWP and PVP in first quarter 2024 were primarily attributable to insurance securitization and subscription finance transactions.

Business activity in the non-U.S.

public finance and structured finance sectors typically has long lead times and therefore may vary from period to period.

public finance and structured finance sectors often has long lead times and therefore may vary from period to period.

Financial Strength Ratings

Demand for the financial guaranties issued by the Company’s insurance subsidiaries may be impacted by changes in the credit ratings assigned to them by the rating agencies.

The financial strength ratings (or similar ratings) assigned to AGL’s insurance subsidiaries, along with the date of the most recent rating action (or confirmation) by the rating agency assigning the rating, are shown in the table below.

S&P Global Ratings, a division of Standard & Poor’s Financial Services LLC (S&P) Kroll Bond Rating

Agency Moody’s Ratings (Moody’s) A.M.

Best Company,

Assured Guaranty Municipal Corp.(AGM) AA (stable) (7/13/23) AA+ (stable) (10/20/23) A1 (stable) (4/30/24) —

Assured Guaranty Corp.(AGC) AA (stable) (7/13/23) AA+ (stable) (10/20/23) A1 (stable) (4/30/24) —

Assured Guaranty Re Ltd.

(AG Re) AA (stable) (7/13/23) — — —

Assured Guaranty Re Overseas Ltd.

(AGRO) AA (stable) (7/13/23) — — A+ (stable) (7/21/23)

Assured Guaranty UK Limited (AGUK) AA (stable) (7/13/23) AA+ (stable) (10/20/23) A1 (stable) (4/30/24) —

Assured Guaranty (Europe) SA (AGE) AA (stable) (7/13/23) AA+ (stable) (10/20/23) — —

Ratings are subject to continuous rating agency review and revision or withdrawal at any time.

In addition, the Company periodically assesses the value of each rating assigned to each of its companies, and as a result of such assessment may request that a rating agency add or drop a rating from certain of its companies.

There can be no assurance that any of the rating agencies will not take negative action on the financial strength ratings (or similar ratings) of AGL’s insurance subsidiaries in the future or cease to rate one or more of AGL’s insurance subsidiaries, either voluntarily or at the request of that subsidiary.

Income from Investments

2 unchanged sentences

CVIs issued by Puerto Rico and received as part of the 2022 Puerto Rico Resolutions are classified as trading with changes in fair value reported in “fair value gains (losses) on trading securities” in the condensed consolidated statements on operations.

The fair value of such instruments as of September 30, 2023 was $350 million.

The fair value of such instruments as of March 31, 2024 and December 31, 2023 was $272 million and $318 million, respectively.

Equity method investments in the Insurance segment include investments that the U.S.

Insurance Subsidiaries make in certain alternative investments, primarily Sound Point and AHP funds.

The income (loss) on such investments is reported in “equity in earnings (losses) of investees” and typically represents the change in net asset value (NAV) of these funds and the Company’s share of earnings of its other investees.

The income (loss) on such investments is reported in “equity in earnings (losses) of investees” and typically represents the Company’s share of earnings of its investees.

Insurance Segment

Income from Investments

Third Quarter Nine Months

2023 2022 2023 2022

First Quarter

(in millions)

4 unchanged sentences

Puerto Rico, New Recovery Bonds — 3

Other (2) 5 4 12 11

Short-term investments 19 12

Intercompany loans 2 2

Other investment assets — 1 2 1

Investment income 84 83

3 unchanged sentences

Equity in earnings (losses) of investees

Asset managers (3) $ — $ — $ — $ —

CLOs $ 20 $ 19

Asset-based — — 3 7

Healthcare 4 8

Other 6 (20) 13 (37)

Asset-based/specialty finance 4 1

Middle market direct lending 3 —

Equity in earnings (losses) of investees $ 40 $ 30

____________________

(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) The Company acquired its investment in Sound Point on July 1, 2023 and reports its equity in earnings on this investment on a one quarter lag.

Net investment income for third quarter 2023 increased compared to third quarter 2022 primarily due to higher income from loss mitigation securities and the increase in short-term rates and higher average short-term balances.

Net investment income for nine months 2023 increased compared to nine months 2022, primarily due to the increase in short-term rates and higher average short-term balances, and loss mitigation securities.

The overall pre-tax book yield of available-for-sale fixed-maturity securities and short-term investments was 4.04% as of September 30, 2023 and 3.01% as of September 30, 2022.

Foreign Exchange Gains (Losses) on Remeasurement and Other Income (Loss)

The gain in “foreign exchange gains (losses) on remeasurement and other income (loss)” in nine months 2023 compared with nine months 2022 was primarily attributable to the reversal of a previously recorded litigation accrual of $20 million in nine months 2023, and foreign exchange gain on remeasurement of $1 million in nine months 2023, compared with a loss of $7 million in nine months 2022.

Net investment income increased to $83 million in first quarter 2024 compared to $82 million in first quarter 2023, primarily due to the increase in short-term rates and higher average short-term balances, partially offset by lower income on Loss Mitigation Securities.

The overall pre-tax book yield of available-for-sale fixed-maturity securities and short-term investments was 3.87% as of March 31, 2024 and 3.82% as of March 31, 2023.

Equity in earnings (losses) of investees increased to $40 million in first quarter 2024 compared with $30 million in first quarter 2023 due to higher balances and changes in fair value in alternative investments.

Other Income (Loss)

The decrease in “other income (loss)” in first quarter 2024 was primarily attributable to the reversal of a previously recorded litigation accrual of $20 million in first quarter 2023.

See Item 1, Financial Statements, Note 11, Commitments and Contingencies, for additional information.

9 unchanged sentences

The discussion of losses that follows encompasses expected losses on all contracts in the insured portfolio regardless of accounting model, unless otherwise specified.

Net expected loss to be paid (recovered) primarily consists of the present value of future:

expected claim and LAE payments;

expected recoveries from issuers or excess spread;

cessions to reinsurers;

expected recoveries/payables stemming from breaches of representation and warranties (R&W);

and the effects of other loss mitigation strategies.

Assumptions used in the determination of the net expected loss to be paid (recovered) such as delinquency, severity, discount rates and expected time frames to recovery were consistent by sector regardless of the accounting model used.

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;

(ii) excess spread on underlying collateral, as applicable;

and (iii) amounts ceded to reinsurers.

Assumptions used in the determination of the net expected loss to be paid (recovered) such as delinquency, severity, discount rates and expected time frames to recovery are consistent by sector regardless of the accounting model used.

Current risk-free rates are used to discount expected losses at the end of each reporting period.

1 unchanged sentence

However, the effect of changes in discount rates is not indicative of actual credit impairment or improvement in the period.

The weighted average discount rates used to discount expected losses (recoveries) were 4.80% and 4.08% as of September 30, 2023 and December 31, 2022, respectively.

The weighted average discount rates used to discount expected losses (recoveries) for U.S.

denominated exposures were 4.44% and 4.10% as of March 31, 2024 and December 31, 2023, respectively.

The composition of economic loss development (benefit) by accounting model and by sector is presented in the tables that follow, and the drivers of economic loss development (benefit) are discussed below.

2 unchanged sentences

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)

9 unchanged sentences

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

Development (Benefit) (2)

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

(in millions)

8 unchanged sentences

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

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

Development (Benefit) (2)

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

(in millions)

12 unchanged sentences

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

Third Quarter 2023 Net Economic Loss Development

Public Finance:

The economic loss development on U.S.

exposures in third quarter 2023 of $135 million was primarily attributable to PREPA.

The economic benefit attributable to U.S.

RMBS of $48 million was primarily attributable to a $37 million benefit related to higher recoveries for secured second lien charged-off loans, an $11 million benefit related to changes in discount rates, and a $6 million benefit related to higher assumed recoveries for deferred principal in first lien transactions, partially offset by losses related to lower excess spread.

See Item 1, Financial Statements, Note 4, Expected Loss to be Paid (Recovered) for additional information.

Third Quarter 2022 Net Economic Loss Development

Public Finance:

The economic loss development on U.S.

exposures in third quarter 2022 was $24 million, and was primarily attributable to healthcare and Puerto Rico exposures, partially offset by the effect of changes in discount rates.

Public finance expected loss to be paid primarily related to U.S.

exposures, which had BIG net par outstanding of $4.2 billion as of September 30, 2022 compared with $5.4 billion as of December 31, 2021.

The reduction in net par was primarily due to 2022 Puerto Rico Resolutions.

The economic benefit attributable to U.S.

RMBS was $95 million and was primarily attributable to a $27 million benefit related to the purchase of a loss mitigation security, a $26 million benefit related to updates in the projected conditional default rate (CDR) curves, a $17 million benefit on certain assumed RMBS transactions related to a settlement between a ceding company and a R&W provider, a $16 million benefit related to improved performance in certain transactions, a $12 million benefit related to changes in discount rates and a $7 million benefit related to higher recoveries for secured second lien charged-off loans, partially offset by losses of $10 million related to lower excess spread.

Nine Months 2023 Net Economic Loss Development

Public Finance:

The economic loss development on U.S.

public finance exposures in nine months 2023 was $193 million, which was primarily attributable to PREPA and healthcare exposures, partially offset by higher projected recoveries in other municipal exposures.

The net benefit attributable to U.S.

RMBS was $52 million and was mainly attributable to a $50 million benefit related to higher recoveries for secured second lien charged-off loans, an $11 million benefit related to improved performance in certain transactions, a $9 million benefit related to changes in discount rates, and a $6 million benefit related to higher assumed recoveries for deferred principal in first lien transactions.

These benefits were partially offset by a $18 million loss development related to the return of certain funds previously received and $6 million related to lower excess spread.

Nine Months 2022 Net Economic Loss Development

(2) Effect of changes in the risk-free rates included in economic loss development (benefit) was a benefit of $3 million in first quarter 2024 and a loss of $10 million in first quarter 2023.

First Quarter 2024 Net Economic Loss Development

Public Finance:

The economic benefit on U.S.

public finance exposures in nine months 2022 was $16 million, which was primarily attributable to changes in discount rates and higher projected revenues for certain exposures, partially offset by healthcare and Puerto Rico exposures.

public finance exposures in first quarter 2024 was $3 million, which was primarily attributable to the improved performance across various credits.

The net benefit attributable to U.S.

RMBS was $127 million and was mainly related to a $56 million benefit related to changes in discount rates, a $43 million benefit related to improved performance in certain transactions, a $27 million benefit related to the purchase of a loss mitigation security, a $26 million benefit related to updates in the projected CDR curves, a $25 million benefit related to higher recoveries for secured second lien charged-off loans, a $17 million benefit on certain assumed RMBS transactions related to a settlement between a ceding company and a R&W provider, and an $12 million benefit related to lower severity assumptions, partially offset by losses of $79 million related to lower excess spread.

RMBS was $3 million and was mainly attributable to higher recoveries for secured second lien charged-off loans.

First Quarter 2023 Net Economic Loss Development

Economic loss development of $11 million was primarily due to changes in discount rates of $10 million.

Insurance Segment Loss Expense

12 unchanged sentences

Therefore, the largest differences between net economic loss development and loss and LAE on financial guaranty insurance contracts generally relate to those policies.

While expected loss to be paid (recovered) is an important measure that provides the present value of amounts that the Company expects to pay or recover in future periods on all contracts, expected loss to be expensed is important because it presents the Company’s projection of net expected losses that will be recognized in the consolidated statement of operations in future periods as deferred premium revenue amortizes into income for financial guaranty insurance policies.

presents the Company’s projection of net expected losses that will be recognized in the consolidated statement of operations in future periods as deferred premium revenue amortizes into income for financial guaranty insurance policies.

The amount of Insurance segment loss expense, which includes all policies regardless of form, is a function of the amount of economic loss development discussed above and the deferred premium revenue amortization in a given period, on a contract-by-contract basis.

2 unchanged sentences

Loss Expense (Benefit)

Third Quarter Nine Months

2023 2022 2023 2022

First Quarter

(in millions)

1 unchanged sentence

Structured finance:

RMBS (38) (82) (35) (104)

Other structured finance 1 2

1 unchanged sentence

Total Insurance segment loss expense (benefit) $ 4 $ 9

The difference between public finance loss expense and economic benefit in nine months 2022 was primarily attributable to the release of unearned premium reserve related to PRCCDA, PRIFA and GO/PBA exposures.

As a result, the Company recognized loss and LAE expense that had not previously been reported in the statement of operations, and corresponding net earned premiums were recognized for the remaining deferred premium revenue on the extinguished Puerto Rico exposures.

For additional information on the expected timing of net expected losses to be expensed see Item 1, Financial Statements, Note 5, Contracts Accounted for as Insurance.

Employee Compensation and Benefit Expenses and Other Operating Expenses

The increase in nine months 2023 compared with nine months 2022 was primarily attributable to an increase in value added taxes and increases in certain employee benefit related costs.

Financial Strength Ratings

Demand for the financial guaranties issued by the Company’s insurance subsidiaries may be impacted by changes in the credit ratings assigned to them by the rating agencies.

S&P Global Ratings, a division of Standard & Poor’s Financial Services LLC (S&P) Kroll Bond Rating

Agency Moody’s Investors Service, Inc.

(Moody’s) A.M.

Best Company,

AGM AA (stable) (7/13/23) AA+ (stable) (10/20/23) A1 (stable) (3/18/22) —

AGC AA (stable) (7/13/23) AA+ (stable) (10/20/23) (1) —

Assured Guaranty Re Ltd.

(AG Re) AA (stable) (7/13/23) — — —

Assured Guaranty Re Overseas Ltd.

(AGRO) AA (stable) (7/13/23) — — A+ (stable) (7/21/23)

Assured Guaranty UK Limited (AGUK) AA (stable) (7/13/23) AA+ (stable) (10/20/23) A1 (stable) (3/18/22) —

Assured Guaranty (Europe) SA (AGE) AA (stable) (7/13/23) AA+ (stable) (10/20/23) — —

____________________

(1) AGC requested that Moody’s withdraw its financial strength ratings of AGC in January 2017, but Moody’s denied that request.

Moody's rates AGC A2 (stable).

Ratings are subject to continuous rating agency review and revision or withdrawal at any time.

For a discussion of the effects of rating actions on the Company beyond potential effects on the demand for its insurance products, see “— Liquidity and Capital Resources — Insurance Subsidiaries” section below.

The increase in first quarter 2024 compared with first quarter 2023 was primarily attributable to an increase in headcount and employee time allocations to the insurance segment.

Asset Management Segment Results

Third Quarter Nine Months

2023 2022 2023 2022

First Quarter

(in millions)

Segment revenues $ 1 $ 41

Management fees $ — $ 18 $ 35 $ 66

Performance fees — 2 29 20

Foreign exchange gains (losses) on remeasurement and other income (loss) — 1 7 2

Total segment revenues — 21 71 88

Segment expenses — 42

Interest expense — — 1 —

Employee compensation and benefit expenses — 16 59 62

Other operating expenses — 8 15 29

Total segment expenses — 24 75 91

Equity in earnings (losses) of investees 1 —

Segment adjusted operating income (loss) before income taxes 2 (1)

1 unchanged sentence

Segment adjusted operating income (loss) $ 1 $ (1)

In the first half of 2023, prior to the Sound Point Transaction and the AHP Transaction, the Company owned and consolidated AssuredIM and reported asset management fees (primarily from CLOs and opportunity funds) in revenues.

Since July 1, 2023, the Company reports its ownership interest in Sound Point through equity in earnings of investees (on a one quarter lag).

Assets Under Management

Until July 1, 2023, the effective date of the Sound Point Transaction and the AHP Transaction, the Company used AUM as one of the metrics to measure progress in its Asset Management segment.

AUM refers to the assets managed, advised or serviced by AssuredIM.

AUM as of June 30, 2023 was $16.4 billion.

As of July 1, 2023, the management of approximately $15.1 billion of AUM (of which $385 million was attributable to the Company) was transferred to Sound Point.

Also in July 2023, the management of approximately $1.3 billion in remaining AUM (of which $185 million was attributable to the Company) was transferred with the sale of AHP to an entity owned and controlled by its managing partner.

AHP will continue to manage the healthcare funds.

In the second quarter of 2023, (i) the management of approximately $159 million in AUM in respect of certain wind-down and opportunity funds in their harvest period were transferred to a third party liquidator and (ii) management of approximately $513 million at fair value in investment grade municipal bonds and CLOs under an IMA was transferred to an internal manager and to one of the Company’s external fixed-maturity security managers.

Effective with the Sound Point Transaction and the AHP Transaction, the Company no longer has any AUM.

See Note 1, Business and Basis of Presentation.

Results in the table above represent (i) asset management and performance fees, amortization of intangible assets and compensation and other operating expenses of AssuredIM in first quarter 2023, (ii) equity in earnings of Sound Point of $4 million in first quarter 2024 (Sound Point results are reported on a one quarter lag), net of the amortization of finite-lived intangible assets associated with the basis difference in Sound Point, (iii) an impairment loss of $3 million of a smaller financial services advisory firm with a carrying value of $4 million and (iv) other asset management related income.

Corporate Division Results

Third Quarter Nine Months

2023 2022 2023 2022

First Quarter

(in millions)

Gain on sale of asset management subsidiaries $ 255 $ — $ 255 $ —

Other 4 1 8 3

Total revenues 259 1 263 3

Revenues $ 5 $ 2

Interest expense 25 23

2 unchanged sentences

Total expenses 47 48

Equity in earnings (losses) of investees — — — —

Adjusted operating income (loss) before income taxes (42) (46)

1 unchanged sentence

Adjusted operating income (loss) $ (37) $ (44)

Gain on sale of asset management subsidiaries relates to the Sound Point Transaction and AHP Transaction.

Financial Statements, Note 1, Business and Basis of Presentation.

Corporate division interest expense primarily relates to debt issued by the U.S.

Holding Companies, and also includes intersegment interest expense related primarily to the $250 million AGUS debt issued to the U.S.

Insurance Subsidiaries.

On August 21, 2023, AGUS issued $350 million of 6.125% Senior Notes due 2028.

On September 25, 2023, AGUS used the proceeds of this issuance to redeem $330 million of 5% Senior Notes due 2024.

Third quarter 2023 and nine months 2023 interest expense was higher than the comparable periods in 2022 due to additional interest expense on the 6.125% Senior Notes and higher interest on the variable rate AGMH Series A Enhanced Junior debentures.

Financial Statements, Note 11, Long-Term Debt.

Holding Companies, and also includes intersegment interest expense.

See “— Liquidity and Capital Resources — AGL and its U.S.

Holding Companies, Intercompany Loans Payable,” for additional information.

Corporate division employee compensation and benefits expenses are an allocation of expenses based on time studies and represent the costs incurred and time spent on holding company activities, capital management, corporate oversight and governance including Board of Director expenses, legal fees and other direct or allocated expenses.

In third quarter 2023 and nine months 2023, operating expenses also include expenses related to the Sound Point Transaction and AHP Transaction, and for nine months 2023 a higher charge for value added taxes.

Transaction related expenses in the corporate division for Sound Point and AHP were $14 million for third quarter 2023 and $40 million for nine months 2023, consisting primarily of $25 million advisory and consent fees and $8 million legal fees.

The decrease in operating expenses in first quarter 2024 was primarily due to expenses related to the Sound Point Transaction and higher charge for value added taxes in first quarter 2023, partially offset by increases in premises related expenses.

Other (Effect of Consolidating FG VIEs and CIVs)

2 unchanged sentences

(i) entities whose debt obligations the insurance subsidiaries insure;

(ii) custodial trusts established in connection with the consummation of the 2022 Puerto Rico Resolutions;

and (iii) investment vehicles such as (a) collateralized financing entities, CLO warehouses until July 1, 2023, and (b) Sound Point and AHP funds.

(ii) Puerto Rico Trusts;

and (iii) investment vehicles such as (a) Sound Point funds and (b) prior to July 1, 2023, AHP funds, collateralized financing entities and CLO warehouses.

The Company eliminates the effects of intercompany transactions between its FG VIEs and CIVs and its insurance and asset management subsidiaries, as well as intercompany transactions between CIVs.

1 unchanged sentence

(i) the establishment of the FG VIEs’ assets and liabilities and related changes in fair value on the condensed consolidated financial statements;

(ii) eliminating the

premiums and losses/recoveries associated with the financial guaranty insurance contracts between the insurance subsidiaries and the FG VIEs;

(ii) eliminating the premiums and losses/recoveries associated with the financial guaranty insurance contracts between the insurance subsidiaries and the FG VIEs;

and (iii) eliminating the investment balances associated with the insurance subsidiaries’ purchases of the debt obligations of the FG VIEs.

5 unchanged sentences

The economic effect of the U.S Insurance Subsidiaries’ ownership interests in CIVs is presented in the Insurance segment as equity in earnings (losses) of investees, while the effect of CIVs is presented as separate line items (“fair value gains (losses) on consolidated investment vehicles” and “noncontrolling interest) on a consolidated basis.

As a result of the Sound Point Transaction and AHP Transaction, 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”.

1, Financial Statements, Note 1, Business and Basis of Presentation and Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles, for additional information.

The table below reflects the effect of consolidating FG VIEs and CIVs on the condensed consolidated statements of operations.

The amounts represent:

(i) the revenues and expenses of the FG VIEs and the CIVs;

and (ii) the consolidation adjustments and eliminations between consolidated FG VIEs or CIVs and the operating and investment subsidiaries.

(i) the revenues and expenses of the FG VIEs and the CIVs and (ii) the consolidation adjustments and eliminations between consolidated FG VIEs or CIVs and the operating and investment subsidiaries.

Effect of Consolidating FG VIEs and CIVs on the Condensed Consolidated Statements of Operations

Increase (Decrease)

Third Quarter Nine Months

2023 2022 2023 2022

First Quarter

Effect on Financial Statement Line Item (in millions)

10 unchanged sentences

FG VIEs $ (1) $ (2)

CIVs (10) 1 (17) (2)

Effect on net income (loss) attributable to AGL $ — $ (4)

1 unchanged sentence

(1) Changes in fair value of the FG VIEs’ assets and liabilities that are attributable to factors other than (i) changes in the Company’s own credit risk on FG VIE liabilities with recourse and (ii) unrealized gains and losses on available-for-sale fixed maturity securities.

(2) Represents the elimination of the equity in earnings (losses) of investees of AGAS and the other subsidiaries’ investments in certain alternative investments, primarily Sound Point and AHP funds.

(3) Includes net earned premiums, net investment income, asset management fees, foreign exchange gains (losses) on remeasurement, other income (loss), loss and LAE (benefit) and other operating expenses.

(3) Includes net earned premiums, net investment income, asset management fees for first quarter 2023, foreign exchange gains (losses) on remeasurement, other income (loss), loss and LAE (benefit) and other operating expenses.

(4) Represents the proportion of consolidated funds managed by Sound Point and prior to July 1, 2023, AssuredIM funds’ income that is not attributable to AGAS’ or any other subsidiaries’ ownership interest.

2 unchanged sentences

to Adjusted Operating Income (Loss)

Third Quarter Nine Months

2023 2022 2023 2022

First Quarter

(in millions)

12 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 10 (5)

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

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

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

Non-Credit Impairment-Related Unrealized Fair Value Gains (Losses) on Credit Derivatives

5 unchanged sentences

Except for underlying credit impairment, which is recognized as loss expense in the Insurance segment, the fair value adjustments on credit derivatives in the insured portfolio are non-economic adjustments that reverse to zero over the remaining term of that portfolio.

The impact of changes in credit spreads will vary based upon the volume, tenor, interest rates and other market conditions at the time fair values are determined.

In addition, since each transaction has unique collateral and structural terms, the underlying change in fair value of each transaction may vary considerably.

The fair value of credit derivative contracts also reflects the change in the Company’s own credit cost based on the price to purchase credit protection on AGC.

Due to the relatively low volume and characteristics of credit default swaps (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 determines its own credit risk based on quoted CDS prices traded on AGC at each balance sheet date.

Generally, a widening of credit spreads of the underlying obligations results in unrealized losses and the tightening of credit spreads of the underlying obligations results in unrealized gains.

A widening of the CDS prices traded on AGC has an effect of offsetting unrealized losses that result from widening general market credit spreads, while a narrowing of the CDS prices traded on AGC has an effect of offsetting unrealized gains that result from narrowing general market credit spreads.

The valuation of the Company’s credit derivative contracts requires the use of models that contain significant, unobservable inputs.

The models used to determine fair value are primarily developed internally based on market conventions for similar transactions that the Company observed in the past.

There has been very limited new issuance activity in this market since 2009 and, as of September 30, 2023, market prices for the Company’s credit derivative contracts were generally not available.

Inputs to the estimate of fair value include various market indices, credit spreads, the Company’s own credit spread and estimated contractual payments.

See Item 1, Financial Statements, Note 9, Fair Value Measurement, for additional information.

Third quarter 2023 non-credit impairment unrealized fair value gains were generated primarily as a result of generally lower collateral asset spreads.

Nine months 2023 non-credit impairment unrealized fair value gains on credit derivatives were generated primarily as a result of generally lower collateral asset spreads and a widening of AGC spreads.

Third quarter 2022 non-credit impairment unrealized fair value losses were generated primarily as a result of wider asset spreads and a tightening of AGC spreads.

Nine months 2022 non-credit impairment unrealized fair value losses on credit derivatives were generated primarily as a result of wider asset spreads, partially offset by a widening of AGC spreads and changes in discount rates.

Sensitivity to Changes in Credit Spread

The following table summarizes the estimated change in fair value on the net balance of the Company’s credit derivative positions assuming an immediate shift in the net spreads assumed by the Company.

The net spread is affected by the spread of the underlying collateral and the credit spreads on AGC.

Effect of Changes in Credit Spread

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

Credit Spreads (1) Estimated Net

(Pre-Tax) Estimated Change

in Gain (Loss)

(Pre-Tax) Estimated Net

(Pre-Tax) Estimated Change

in Gain (Loss)

(in millions)

Increase of 25 bps $ (112) $ (63) $ (233) $ (71)

Base Scenario (49) — (162) —

Decrease of 25 bps (33) 16 (99) 63

All transactions priced at floor (19) 30 (27) 135

____________________

(1) Includes the effects of spreads on both the underlying asset classes and the Company’s own credit spread.

During first quarter 2024 non-credit impairment-related unrealized fair value gains were generated primarily as a result of the termination of certain structured finance policies.

During first quarter 2023, non-credit impairment-related unrealized fair value gains were generated primarily as a result of the increased cost to buy protection on AGC.

Fair Value Gains (Losses) on CCS

Fair value losses on CCS in third quarter 2023 and nine months 2023 were primarily due to a tightening in market spreads.

Fair value gains on CCS in third quarter 2022 and nine months 2022 were primarily due to a significant increase in London Interbank Offered Rate (LIBOR).

Fair value losses on CCS in first quarter 2024 and first quarter 2023 were primarily due to a tightening in market spreads.

Fair value gains (losses) of CCS are heavily affected by, and in part fluctuate with, changes in market spreads and interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss.

1 unchanged sentence

Foreign exchange gains and losses in all periods primarily relate to remeasurement of long-dated premiums receivable, for which the Company records the present value of future installment premiums, and are mainly due to changes in the exchange rate of the pound sterling and, to a lesser extent, the euro relative to the U.S.

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

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

dollar, primarily the pound sterling and euro.

4 unchanged sentences

Dollar Per Foreign Currency

As of September 30, 2023 As of December 31, 2022 As of September 30, 2022 As of December 31, 2021

As of March 31, 2024 As of December 31, 2023 As of March 31, 2023 As of December 31, 2022

Pound sterling $1.262 $1.273 $1.234 $1.208

37 unchanged sentences

Therefore, the current period’s foreign exchange remeasurement gains (losses) are not necessarily indicative of the total foreign exchange gains (losses) that the Company will ultimately recognize.

5) Elimination of the tax effects related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.

5) 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.

See “— Results of Operations — Reconciliation to GAAP” for a reconciliation of net income (loss) attributable to AGL to adjusted operating income (loss).

8 unchanged sentences

The AOCI component of the fair value adjustment on the investment portfolio is not deemed economic because the Company generally holds these investments to maturity and therefore would not recognize an economic gain or loss.

4) 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.

4) 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.

Management uses adjusted book value, further adjusted to remove the effect of FG VIE and CIV consolidation, to measure the intrinsic value of the Company, excluding franchise value.

7 unchanged sentences

This amount represents the present value of the expected future net earned premiums, net of the present value of expected losses to be expensed, which are not reflected in GAAP equity.

4) 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.

4) 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 unearned premiums and revenues included in adjusted book value will be earned in future periods, but actual earnings may differ materially from the estimated amounts used in determining current adjusted book value due to changes in foreign exchange rates, prepayment speeds, terminations, credit defaults and other factors.

1 unchanged sentence

to Adjusted Operating Shareholders’ Equity and Adjusted Book Value

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

After-Tax Per Share After-Tax Per Share

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

Total Per Share Total Per Share

(dollars in millions, except share amounts)

20 unchanged sentences

The discount rate is recalculated annually and updated as necessary.

Net present value of estimated future revenue for an obligation may change from period to period due to a change in the discount rate or due to a change in estimated net future revenue for the obligation, which may change due to changes in foreign exchange rates, prepayment speeds, terminations, credit defaults or other factors that affect par outstanding or the ultimate maturity of an obligation.

changes in foreign exchange rates, prepayment speeds, terminations, credit defaults or other factors that affect par outstanding or the ultimate maturity of an obligation.

There is no corresponding GAAP financial measure.

3 unchanged sentences

Future installment premiums are discounted at the approximate average pre-tax book yield of fixed-maturity securities purchased during the prior calendar year, other than certain fixed-maturity securities such as Loss Mitigation Securities.

discount rate is recalculated annually and updated as necessary.

The discount rate is recalculated annually and updated as necessary.

Under GAAP, financial guaranty installment premiums are discounted at a risk-free rate.

2 unchanged sentences

Reconciliation of GWP to PVP

Third Quarter 2023 Third Quarter 2022

Public Finance Structured Finance Public Finance Structured Finance

(in millions)

GWP $ 29 $ (5) $ 15 $ 1 $ 40 $ 54 $ 44 $ (2) $ (2) $ 94

Installment GWP and other GAAP adjustments (1) 6 (5) 15 1 17 — 44 (3) (2) 39

Upfront GWP 23 — — — 23 54 — 1 — 55

Installment premiums and other (2) 7 2 12 2 23 3 37 — — 40

PVP $ 30 $ 2 $ 12 $ 2 $ 46 $ 57 $ 37 $ 1 $ — $ 95

Nine Months 2023 Nine Months 2022

First Quarter 2024 First Quarter 2023

Public Finance Structured Finance Public Finance Structured Finance

7 unchanged sentences

(1) Includes the present value of new business on installment policies discounted at the prescribed GAAP discount rates, GWP adjustments on existing installment policies due to changes in assumptions and other GAAP adjustments.

(2) Includes the present value of future premiums and fees on new business paid in installments, discounted at the approximate average pre-tax book yield of fixed-maturity securities purchased during the prior calendar year, other than certain fixed-maturities such as Loss Mitigation Securities.

Nine months 2023 and 2022 also include the present value of future premiums and fees associated with other guaranties written by the Company that, under GAAP, are accounted for under Accounting Standards Codification (ASC) 460, Guarantees.

First quarter 2023 also includes the present value of future premiums and fees associated with other guaranties written by the Company that, under GAAP, are accounted for under Accounting Standards Codification (ASC) 460, Guarantees.

Insured Portfolio

5 unchanged sentences

Net Par Outstanding by Sector

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

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

Sector (dollars in millions)

24 unchanged sentences

structured finance:

Life insurance transactions 4,663 3,879

Insurance securitizations 4,557 4,379

RMBS 1,684 1,774

2 unchanged sentences

Consumer receivables 287 314

Subscription finance facilities 225 178

Other structured finance 856 892

1 unchanged sentence

structured finance:

Subscription finance facilities 612 444

Pooled corporate obligations 412 425

5 unchanged sentences

Second-to-pay insured par outstanding represents transactions the Company has insured that are already insured by another financial guaranty insurer and where the Company’s obligation to pay under its insurance of such transactions arises only if both the obligor on the underlying insured obligation and the primary financial guaranty insurer default.

The Company underwrites such transactions based on the underlying insured obligation without regard to the primary financial guaranty insurer and internally rates the transaction the higher of the rating of the underlying obligation and the rating of the primary financial guarantor.

The second-to-pay insured par outstanding as of September 30, 2023 and December 31, 2022 was $4.2 billion and $4.3 billion, respectively.

The par on second-to-pay exposure where the ratings of the primary financial guaranty insurer and underlying insured transaction were not investment grade was $16 million and $19 million as of September 30, 2023 and December 31, 2022, respectively.

financial guarantor.

The second-to-pay insured par outstanding as of March 31, 2024 and December 31, 2023 was $4.2 billion and $4.3 billion, respectively.

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 net par outstanding as of September 30, 2023, all of which was rated BIG.

Beginning on January 1, 2016, a number of Puerto Rico exposures have defaulted on bond payments, and the Company has now paid claims on all of its 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).

The following tables present information in respect of the Puerto Rico exposures to supplement the disclosures and discussions provided in Item 1, Financial Statements, Note 3, Outstanding Exposure.

The following tables present information in respect of the Puerto Rico exposures to supplement the disclosures and discussions provided in “—Liquidity and Capital Resources—Insurance Subsidiaries, Financial Guaranty Policies” below and Item 1, Financial Statements, Note 3, Outstanding Exposure.

Exposure to Puerto Rico by Company

As of September 30, 2023

As of March 31, 2024

Net Par Outstanding

7 unchanged sentences

Resolved Puerto Rico Exposures (2)

PRHTA (Transportation revenue) (2) 14 157 87 (14) 244 244

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

12 130 74 (12) 204 204

PRHTA (Highway revenue) 21 2 1 — 24 24

Total Resolved 33 132 75 (12) 228 228

Other Puerto Rico Exposures

MFA (3) 84 6 18 — 108 114

PRASA and U of PR (3) — 1 — — 1 1

Total Other 84 7 18 — 109 115

Non-Defaulting Puerto Rico Exposures (3)

Municipal Finance Agency (MFA)

84 6 18 — 108 114

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

Total Non-Defaulting 84 7 18 — 109 115

Total exposure to Puerto Rico $ 494 $ 206 $ 273 $ (12) $ 961 $ 976

2 unchanged sentences

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

Consideration received under the HTA Plan related to the remaining insured exposure is reported in FG VIEs’ assets (see Item 1, Financial Statements, Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles).

Consideration (e.g.

Toll Bonds and CVIs) received under the HTA Plan related to the remaining insured exposure is reported in FG VIEs’ assets (see Item 1, Financial Statements, Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles).

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

The following tables show the scheduled amortization of the general obligation bonds of Puerto Rico and various obligations of its related authorities and public corporations insured by the Company.

The following tables show the scheduled amortization of the various obligations of Puerto Rico’s authorities and public corporations insured by the Company.

The Company guarantees payments of debt service when those amounts are scheduled to be paid and cannot be required to pay on an accelerated basis.

1 unchanged sentence

Amortization Schedule of Net Par of Puerto Rico

As of September 30, 2023

As of March 31, 2024

Scheduled Net Par Amortization

2023 (4Q) 2024 (1Q) 2024 (2Q) 2024 (3Q) 2024 (4Q) 2025 2026 2027 2028 - 2032 2033 - 2037 2038 - 2041 Total

2024 (2Q) 2024 (3Q) 2024 (4Q) 2025 2026 2027 2028 2029 - 2033 2034 - 2038 2039 - 2041 Total

(in millions)

6 unchanged sentences

Total Resolved — — — — — — — 8 123 97 228

Other Puerto Rico Exposures

Non-Defaulting Puerto Rico Exposures

MFA — 16 — 16 35 15 13 13 — — 108

PRASA and U of PR — 1 — — — — — — — — 1

Total Other Puerto Rico Exposures — — — 17 — 16 35 15 26 — — 109

Total Non-Defaulting — 17 — 16 35 15 13 13 — — 109

Total $ — $ 110 $ — $ 84 $ 140 $ 120 $ 81 $ 197 $ 132 $ 97 $ 961

Amortization Schedule of Net Debt Service of Puerto Rico

As of September 30, 2023

As of March 31, 2024

Scheduled Net Debt Service Amortization

2023 (4Q) 2024 (1Q) 2024 (2Q) 2024 (3Q) 2024 (4Q) 2025 2026 2027 2028 - 2032 2033 - 2037 2038 - 2041 Total

2024 (2Q) 2024 (3Q) 2024 (4Q) 2025 2026 2027 2028 2029 - 2033 2034 - 2038 2039 - 2041 Total

(in millions)

6 unchanged sentences

Total Resolved — 6 — 12 12 12 12 68 161 106 389

Other Puerto Rico Exposures

Non-Defaulting Puerto Rico Exposures

MFA — 19 — 20 39 17 14 14 — — 123

PRASA and U of PR — 1 — — — — — — — — 1

Total Other Puerto Rico Exposures — 3 — 20 — 20 39 17 28 — — 127

Total Non-Defaulting — 20 — 20 39 17 14 14 — — 124

Total $ 3 $ 131 $ 3 $ 124 $ 177 $ 151 $ 106 $ 281 $ 170 $ 106 $ 1,252

Financial Guaranty Exposure to U.S.

The following table presents information in respect of the U.S.

RMBS exposures to supplement the disclosures and discussion provided in Item 1, Financial Statements, Note 3, Outstanding Exposure, and Note 4, Expected Loss to be Paid (Recovered).

RMBS exposures represent 0.8% of the total net par outstanding, and BIG U.S.

RMBS represent 18.5% of total BIG net par outstanding as of September 30, 2023.

Distribution of U.S.

RMBS by Year Insured and Type of Exposure as of September 30, 2023

First Lien Alt-A

First Lien Option

ARMs Subprime

First Lien Second

Lien Total Net Par

(in millions)

2004 and prior $ 8 $ 7 $ — $ 311 $ 10 $ 336

2005 21 112 14 180 44 371

2006 22 23 1 38 96 180

2007 — 184 16 562 138 900

2008 — — — 30 — 30

Total exposures $ 51 $ 326 $ 31 $ 1,121 $ 288 $ 1,817

Exposures rated BIG $ 31 $ 195 $ 14 $ 610 $ 106 $ 956

In the fourth quarter of 2023, all of the Toll Bonds in the Puerto Rico Trusts were called, resulting in cash proceeds of $154 million.

Such cash proceeds comprised the vast majority of the assets in the Puerto Rico Trusts as of December 31, 2023.

In January 2024, such 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.

Liquidity and Capital Resources

36 unchanged sentences

Long-Term Debt and Intercompany Loans

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

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

(in millions)

5 unchanged sentences

3.6% Senior Notes 3.60% 2051 400 400

Series A Enhanced Junior Subordinated Debentures 3 month CME Term SOFR +2.64% 2066 150 150

10 unchanged sentences

____________________

(1) Until June 30, 2023, the Series A Enhanced Junior Subordinated Debentures paid interest based on LIBOR.

The reference to LIBOR in such debentures has been replaced with a rate based on Three-Month Chicago Mercantile Exchange (CME) Term Secured Overnight Finance Rate (SOFR).

(2) In the second quarter of 2023, the final maturity of the AGRO loan was extended from 2023 to 2028 and the floating rate interest rate was converted to a fixed rate of 5%.

(3) If the AGMH Junior Subordinated Debentures are outstanding after December 15, 2036, then the principal amount of the outstanding debentures will bear interest at One-Month CME Term SOFR plus 2.33%.

(1) If the AGMH Junior Subordinated Debentures are outstanding after December 15, 2036, then the principal amount of the outstanding debentures will bear interest at One-Month Chicago Mercantile Exchange (CME) Term Secured Overnight Finance Rate (SOFR) plus 2.33%.

(3) Represents principal amount of Junior Subordinated Debentures issued by AGMH that has been purchased by AGUS.

On August 21, 2023, AGUS issued $350 million of 6.125% Senior Notes due 2028.

On September 25, 2023, AGUS redeemed $330 million of 5% Senior Notes due 2024.

Financial Statements, Note 11, Long-Term Debt.

From time to time, AGL and its subsidiaries have entered into intercompany loan facilities.

4 unchanged sentences

Accrued interest on all loans will be paid on the last day of each June and December and at maturity.

AGL must repay unpaid principal amounts

of the loans, if any, by the third anniversary of the loan commitment termination date.

AGL must repay unpaid principal amounts of the loans, if any, by the third anniversary of the loan commitment termination date.

AGL has not drawn upon the credit facility.

4 unchanged sentences

AGL fully and unconditionally guarantees the payment of the principal of, and interest on, the $1,450 million aggregate principal amount of notes issued by the U.S.

Holding Companies, and the $450 million aggregate principal amount of junior subordinated debentures issued by the U.S.

Holding Companies, the $450 million aggregate principal amount of junior subordinated debentures issued by the U.S.

Holding Companies, and the intercompany loans.

1 unchanged sentence

Holding Companies, excluding their investments in subsidiaries.

As of September 30, 2023

As of March 31, 2024

Holding Companies

13 unchanged sentences

____________________

(1) As of September 30, 2023, weighted average durations of AGL’s and the U.S.

(1) As of March 31, 2024, weighted average durations of AGL’s and the U.S.

Holding Companies’ fixed-maturity securities (excluding AGUS’s investment in AGMH’s debt) were 9.5 years and 4.1 years, respectively.

(2) Represents receivable and payables with non-guarantor subsidiaries.

Nine Months 2023

First Quarter 2024

Holding Companies

(in millions)

Gain on sale of asset management subsidiaries (1) $ — $ 258

Revenues $ 1 $ 3

Interest expense — 25

2 unchanged sentences

Net income (loss) (12) (22)

____________________

(1) Excludes a $3 million write off of goodwill reported by a subsidiary of AGUS.

The following table presents significant cash flow items for AGL and the U.S.

2 unchanged sentences

Selected Cash Flow Items

Nine Months 2023

First Quarter 2024

Holding Companies

1 unchanged sentence

Dividends received from subsidiaries (1) $ 192 $ 83

Distributions from equity method investees (2) — 10

Interest paid — (22)

3 unchanged sentences

Repurchases of common shares (3) (129) —

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

Redemption of debt — (330)

____________________

(1) AGL’s dividends include dividends from AGUS.

(2) Represents distributions from Sound Point.

(3) See Item 1, Financial Statements, Note 12, Shareholders’ Equity, for additional information about share repurchases and authorizations.

28 unchanged sentences

• capital investments in their own subsidiaries and in alternative investments, where appropriate.

Management believes that the insurance subsidiaries’ liquidity needs for the next twelve months can be met from current cash, short-term investments and operating cash flow, including premium collections and coupon payments as well as scheduled maturities and paydowns from their respective investment portfolios, although the Company may enter into secured short-term loan facilities with financial institutions to provide short-term liquidity for the payment of insurance claims it may make in connection with the future resolutions of other Puerto Rico exposures.

The Company generally targets a balance of its most liquid assets including cash and short-term securities, U.S.

Treasuries, agency RMBS and pre-refunded municipal bonds equal to 1.5 times its projected operating company cash flow needs over the next four quarters.

As of September 30, 2023, the Company intended to hold and had the ability to hold securities in an unrealized loss position until the date of anticipated recovery of amortized cost.

As of March 31, 2024, the Company intended to hold and had the ability to hold securities in an unrealized loss position until the date of anticipated recovery of amortized cost.

Beyond the next twelve months, the ability of the operating subsidiaries to declare and pay dividends may be influenced by a variety of factors, including market conditions, general economic conditions, and, in the case of the Company’s insurance subsidiaries, insurance regulations and rating agency capital requirements.

6 unchanged sentences

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

The Company had $624 million net par outstanding to PREPA on September 30, 2023.

As described in Item 1, Financial Statements, Note 3, Outstanding Exposure, in connection with the implementation of the GO/PBA Plan and the HTA Plan, certain insured bondholders elected to receive custody receipts that represent an interest in the legacy insurance policy plus cash, New Recovery Bonds and CVIs, as relevant, that constitute distributions under the GO/PBA Plan or HTA Plan.

For those who made the election, distributions under the GO/PBA Plan and HTA Plan 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.

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 under the GO/PBA Plan or HTA Plan, as applicable, are insufficient to pay or prepay such amounts after giving effect to the distributions described in the immediately preceding sentence.

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.

Consequently, as of September 30, 2023, the Company had extinguished its exposure to Puerto Rico GO/PBA and had remaining net par outstanding for Puerto Rico HTA of $372 million, which consisted of bonds where the holders elected to receive custody receipts and exposures assumed from a third-party financial guarantor.

In connection with the acquisition of AGMH, AGM agreed to retain the risks relating to the debt and strip policy portions of the leveraged lease business (described below).

In a leveraged lease transaction, a tax-exempt entity (such as a transit agency) transfers tax benefits to a tax-paying entity by transferring ownership of a depreciable asset, such as subway cars.

The tax-exempt entity then leases the asset back from its new owner.

If the lease is terminated early, the tax-exempt entity must make an early termination payment to the lessor.

A portion of this early termination payment is funded from monies that were pre-funded and invested at the closing of the leveraged lease transaction (along with earnings on those invested funds).

The tax-exempt entity is obligated to pay the remaining, unfunded portion of this early termination payment (known as the strip coverage) from its own sources.

AGM issued financial guaranty insurance policies (known as strip policies) that guaranteed the payment of these unfunded strip coverage amounts to the lessor,

in the event that a tax-exempt entity defaulted on its obligation to pay this portion of its early termination payment.

Following such events, AGM can then seek reimbursement of its strip policy payments from the tax-exempt entity, and can also sell the transferred depreciable asset and reimburse itself from the sale proceeds.

Currently, all the leveraged lease transactions in which AGM acts as strip coverage provider are breaching a rating trigger related to AGM and are subject to early termination.

However, early termination of a lease does not result in a draw on the AGM policy if the tax-exempt entity makes the required termination payment.

If all the leases were to terminate early and the tax-exempt entities did not make the required early termination payments, then AGM would be exposed to possible liquidity claims on gross exposure of approximately $393 million as of September 30, 2023.

To date, none of the leveraged lease transactions that involve AGM has experienced an early termination due to a lease default and a claim on the AGM policy.

As of September 30, 2023, approximately $1.9 billion of cumulative strip par exposure had been terminated since 2008 on a consensual basis.

The consensual terminations have resulted in no claims on AGM.

The terms of the Company’s CDS contracts generally are modified from standard CDS contract forms approved by International Swaps and Derivatives Association, Inc.

in order to provide for payments on a scheduled “pay-as-you-go” basis and to replicate the terms of a traditional financial guaranty insurance policy.

The Company had $624 million in insured net par outstanding of PREPA obligations as of March 31, 2024.

For more information, see Item 1, Financial Statements, Note 3, Outstanding Exposure, and Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

The terms of the Company’s credit default swaps (CDS) contracts generally are modified from standard CDS contract forms approved by International Swaps and Derivatives Association, Inc.

such that the circumstances giving rise to the Company’s obligation to make loss payments are similar to those for its financial guaranty insurance contracts.

The documentation for certain CDS were negotiated to require the Company to also pay if the obligor becomes bankrupt or if the reference obligation were restructured.

2 unchanged sentences

Any such payment would probably occur prior to the maturity of the reference obligation and be in an amount larger than the amount due for that period on a “pay-as-you-go” basis.

Distributions From Insurance Subsidiaries

Distributions From Insurance Subsidiaries to Holding Companies

The Company anticipates that, for the next twelve months, amounts paid by AGL’s direct and indirect insurance subsidiaries as dividends or other distributions will be a major source of the holding companies’ liquidity.

2 unchanged sentences

Dividend restrictions by insurance subsidiary are as follows:

• The maximum amount available during 2023 for AGM (a subsidiary of AGMH) to distribute as dividends without regulatory approval is approximately $257 million.

Approximately $157 million is available for distribution in the fourth quarter of 2023, of which $77 million was paid in October 2023

• The maximum amount available during 2023 for AGC (a subsidiary of AGUS) to distribute as ordinary dividends is approximately $102 million.

Approximately $58 million is available for distribution in the fourth quarter of 2023, of which $16 million was paid in October 2023.

• Based on the applicable law and regulations, in 2023 AG Re (a subsidiary of AGL) paid dividends of $53 million in the first nine months of the year and has the capacity to (i) make capital distributions in an aggregate amount up to $129 million without the prior approval of the Bermuda Monetary Authority (the Authority) and (ii) declare and pay dividends in an aggregate amount up to approximately $209 million as of September 30, 2023.

Such dividend capacity is further limited by (i) the actual amount of AG Re’s unencumbered assets, which amount changes from time to time due in part to collateral posting requirements and which was approximately $117 million as of September 30, 2023, and (ii) the amount of statutory surplus, which as of September 30, 2023 was a deficit of $41 million.

• Based on the applicable law and regulations, in 2023 AGRO (an indirect subsidiary of AG Re) has the capacity to (i) make capital distributions in an aggregate amount up to $21 million without the prior approval of the Authority and (ii) declare and pay dividends in an aggregate amount up to approximately $98 million as of September 30, 2023.

Such dividend capacity is further limited by (i) the actual amount of AGRO’s unencumbered assets, which amount changes from time to time due in part to collateral posting requirements and which was approximately

$364 million as of September 30, 2023, and (ii) the amount of statutory surplus, which as of September 30, 2023 was $259 million.

• The maximum amount available during 2024 for AGM (a subsidiary of AGMH) to distribute as dividends without regulatory approval is approximately $267 million of which approximately $2 million is available for distribution in the second quarter of 2024.

• The maximum amount available during 2024 for AGC (a subsidiary of AGUS) to distribute as ordinary dividends is approximately $117 million of which approximately $24 million is available for distribution in the second quarter of 2024.

• Based on the applicable law and regulations, in 2024 AG Re (a subsidiary of AGL) paid dividends of $47 million in the first three months of the year and has the capacity to (i) make capital distributions in an aggregate amount up to $129 million without the prior approval of the Bermuda Monetary Authority and (ii) declare and pay dividends in an aggregate amount up to approximately $226 million as of March 31, 2024.

Such dividend capacity is further limited by (i) the actual amount of AG Re’s unencumbered assets, which amount changes from time to time due in part to collateral posting requirements and which was approximately $97 million as of March 31, 2024, and (ii) the amount of statutory surplus, which as of March 31, 2024 was $20 million.

Distributions From Insurance Company Subsidiaries

Third Quarter Nine Months

2023 2022 2023 2022

to Holding Companies

First Quarter

(in millions)

Dividends paid by AG Re to AGL $ 47 $ —

Dividends paid by AGC to AGUS 35 20

Dividends paid by AGM to AGMH 47 40

Dividends paid by AG Re to AGL 24 — 53 —

Dividends from AGUK to AGM — — 127 —

Ratings Impact on Financial Guaranty Business

A downgrade of one of AGL’s insurance subsidiaries may result in increased claims under financial guaranties issued by the Company if counterparties exercise contractual rights triggered by the downgrade against insured obligors, and the insured obligors are unable to pay.

See Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Insurance Subsidiaries, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Assumed Reinsurance

Some of the Company’s insurance subsidiaries (Assuming Subsidiaries) assumed financial guaranty insurance from legacy third-party bond insurers.

The agreements under which such Assuming Subsidiaries assumed such business are generally subject to termination at the option of the ceding company (i) if the Assuming Subsidiary fails to meet certain financial and regulatory criteria;

(ii) if the Assuming Subsidiary fails to maintain a specified minimum financial strength rating;

or (iii) upon certain changes of control of the Assuming Subsidiary.

Upon termination due to one of the above events, the Assuming Subsidiary typically would be required to return to the ceding company unearned premiums (net of ceding commissions) and loss reserves, calculated on a U.S.

statutory basis, attributable to the assumed business (plus in certain cases, an additional required amount), after which the Assuming Subsidiary would be released from liability with respect to such business.

As of September 30, 2023, if each third-party company ceding business to an Assuming Subsidiary had a right to recapture such business, and chose to exercise such right, the aggregate amounts those subsidiaries could be required to pay to all such ceding companies would be approximately $264 million, including $237 million by AGC and $27 million by AG Re.

Committed Capital Securities

Each of AGC and AGM have entered into put agreements with four separate custodial trusts allowing each of AGC and AGM to issue an aggregate of $200 million of non-cumulative redeemable perpetual preferred securities to the trusts in exchange for cash.

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 Company is not the primary beneficiary of the trusts and therefore the trusts are not consolidated in Assured Guaranty’s financial statements.

The trusts provide AGC and AGM access to new equity capital at their respective sole discretion through the exercise of the put options.

Upon AGC’s or AGM’s exercise of its put option, the relevant trust will liquidate its portfolio of eligible assets and use the proceeds to purchase AGC or AGM preferred stock, as applicable.

AGC or AGM may use the proceeds from its sale of preferred stock to the trusts for any purpose, including the payment of claims.

The put agreements have no scheduled termination date or maturity.

However, each put agreement will terminate if (subject to certain grace periods) specified events occur.

Both AGC and AGM continue to have the ability to exercise their respective put options and cause the related trusts to purchase their preferred stock.

Prior to 2008 or 2007, the amounts paid on the CCS were established through an auction process.

All of those auctions failed in 2008 or 2007, and the rates paid on the CCS increased to their respective maximums.

As of July 2023, the annualized rate on the AGC CCS is one-month CME Term SOFR plus 261 bps, and the annualized rate on the AGM Committed Preferred Trust Securities is one-month CME Term SOFR plus 211 bps.

Each of AGC and AGM is party to an arrangement that enables it to access, at its discretion, up to $200 million of capital, at any time, and has the right to use such capital for any purpose, including to pay claims.

The arrangement entails four custodial trusts (Woodbourne Capital Trust I, II, III and IV) relating to AGC and four custodial trusts (Sutton Capital Trust I, II, III and IV) relating to AGM, each of which issued $50 million face amount of “committed capital securities” and invested the proceeds of that issuance in eligible assets that would enable the trust to have the cash necessary to respond to AGC’s or AGM’s exercise, respectively, of a put option.

The put option consists of a right that each of AGC and AGM has, pursuant to separate put agreements that AGC and AGM entered into with each of the trusts, to issue to each trust $50 million of non-cumulative redeemable perpetual preferred stock, in exchange for an equivalent amount of cash (i.e., an aggregate of $200 million for each of AGC and AGM).

When AGC or AGM exercises its put option, the relevant trust(s) must liquidate the portfolio of high-quality, liquid assets that it currently maintains and use the liquidation proceeds to purchase AGC or AGM preferred stock, as applicable.

The put agreements have no scheduled termination date or maturity, but may be terminated upon the occurrence of certain specified events.

None of the events that would give rise to a termination of the put agreements have occurred.

Accordingly, each of AGC and AGM currently has the ability to exercise put options to raise up to $200 million of capital at any time.

Investment Portfolio

The Company’s principal objectives in managing its investment portfolio are to support the highest possible ratings for each operating company, to manage investment risk within the context of the underlying portfolio of insurance risk, to maintain sufficient liquidity to cover unexpected stress in the insurance portfolio, and to maximize after-tax net investment income.

The Company’s principal objectives in managing its investment portfolio are to:

support the highest possible ratings for each operating company, manage investment risk within the context of the underlying portfolio of insurance risk, maintain sufficient liquidity to cover unexpected stress in the insurance portfolio, and maximize after-tax net investment income.

Approximately 61% of the total investment portfolio is managed by external parties.

7 unchanged sentences

Carrying Value

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(in millions)

5 unchanged sentences

____________________

(1) As of September 30, 2023 and December 31, 2022, includes $78 million and $358 million, respectively, of New Recovery Bonds received in connection with the consummation of the 2022 Puerto Rico Resolutions.

(2) Represents CVIs received under the 2022 Puerto Rico Resolutions.

The Company’s available-for-sale fixed-maturity securities had a duration of 4.1 years and 4.4 years as of September 30, 2023 and December 31, 2022, respectively.

Available-for-Sale Fixed-Maturity Securities By Contractual Maturity

The amortized cost and estimated fair value of the Company’s available-for-sale fixed-maturity securities, by contractual maturity, 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

Cost Estimated

(in millions)

Due within one year $ 248 $ 239

Due after one year through five years 1,526 1,406

Due after five years through 10 years 1,760 1,629

Due after 10 years 2,809 2,475

Mortgage-backed securities:

Commercial mortgage-backed securities 198 188

Total $ 6,971 $ 6,267

(1) Represents CVIs received under the 2022 Puerto Rico Resolutions, which are not rated.

(2) Excludes investments in three Sound Point funds that are consolidated.

See Item 1, Financial Statements, Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

The Company’s available-for-sale fixed-maturity securities had a duration of 4.0 years and 3.9 years as of March 31, 2024 and December 31, 2023, respectively.

Available-for-Sale and Trading Fixed-Maturity Securities By Rating

The following table summarizes the ratings distributions of the Company’s available-for-sale fixed-maturity securities as of September 30, 2023 and December 31, 2022.

The following table summarizes the ratings distributions of the Company’s available-for-sale fixed-maturity securities as of March 31, 2024 and December 31, 2023.

Ratings generally reflect the lower of Moody’s and S&P classifications, except for (i) Loss Mitigation Securities, which use Assured Guaranty’s internal ratings classifications or (ii) Puerto Rico securities received under the 2022 Puerto Rico Resolutions, which are not rated.

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

Rating September 30, 2023 December 31, 2022

Rating March 31, 2024 December 31, 2023

AAA 13.9 % 13.3 %

6 unchanged sentences

See Item 1, Financial Statements, Note 7, Investments, for additional information.

(2) Primarily includes New Recovery Bonds received in connection with the consummation of the 2022 Puerto Rico Resolutions.

The Company also had $350 million and $303 million in trading fixed-maturity securities as of September 30, 2023 and December 31, 2022, respectively, representing CVIs received under the 2022 Puerto Rico Resolutions, which are not rated.

Other Investments

Other invested assets, which are generally less liquid than fixed-maturity securities primarily consist of the investment in Sound Point and fund investments across a variety of strategies.

The Insurance segment reports AGAS’ percentage ownership of Sound Point and AHP funds’ as equity method investments with changes in NAV included in the Insurance segment adjusted operating income.

As of September 30, 2023, three of the funds in which AGAS invests are consolidated and the remaining are accounted as equity method investments in the Company’s condensed consolidated financial statements.

As of December 31, 2022, all of the funds in which AGAS directly invested were consolidated in the Company’s condensed consolidated financial statements.

Other invested assets, which are generally less liquid than fixed-maturity securities primarily consist of the investment in Sound Point and alternative investments across a variety of strategies.

The Insurance segment reports the Company’s percentage ownership of Sound Point funds and AHP funds as equity method investments with changes in net asset value (NAV) included in the Insurance segment adjusted operating income.

As of March 31, 2024 and December 31, 2023, three of the funds in which the Company invests are consolidated and the remaining are accounted as equity method investments in the Company’s consolidated financial statements.

See “— Commitments” below.

Investment in Assets Managers and Alternative Investments by Strategy

As of September 30, 2023

Investments Eliminations Consolidated

As of March 31, 2024

Investments Consolidation Adjustments (1) Consolidated

(in millions)

2 unchanged sentences

CLOs (2) 329 (233) 96

Asset-based 132 (88) 44

Healthcare 137 — 137

Asset-based/specialty finance 175 (80) 95

Middle market direct lending 28 — 28

Other 134 — 134

1 unchanged sentence

____________________

(1) The investment in Sound Point is carried at the acquisition date fair value.

On a one quarter lag, the acquisition date fair value will be adjusted for the Company’s interest in the earnings of Sound Point and amortization of intangible assets.

(1) Certain CLO and asset-based funds are CIVs.

See Item 1, Financial Statements, Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

(2) Represents primarily investments in the equity of U.S.

and European CLOs as well as the first loss equity of CLOs.

Alternative Investments by Strategy

and European CLOs.

(3) Includes $32 million in alternative investments reported in fixed-maturity securities, available-for-sale, on the condensed consolidated balance sheets.

Investment in Assets Managers and Alternative Investments by Strategy

As of December 31, 2023

Investments Eliminations Consolidated

Investments Consolidation Adjustments (1) Consolidated

(in millions)

Sound Point (1) $ 429 $ — $ 429

Alternative investments:

CLOs (2) 315 (223) 92

Asset-based 101 (101) —

Healthcare 102 — 102

Municipal bonds (1) 105 (105) —

Asset-based/specialty finance 166 (82) 84

Middle market direct lending 26 — 26

Other 130 — 130

1 unchanged sentence

____________________

(1) In the first quarter of 2023, the fund distributed substantially all of its available cash to AGAS and other investors in the fund.

(1) Certain CLO and asset-based funds are CIVs.

See Item 1, Financial Statements, Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

(2) Represents primarily investments in the equity of U.S.

and European CLOs.

(3) Includes $34 million in alternative investments reported in fixed-maturity securities, available-for-sale, on the condensed consolidated balance sheets.

Change in Fair Value of Alternative Investments by Strategy

Nine Months Ended September 30, 2023

Investments Eliminations Consolidated

First Quarter 2024

Investments Consolidation Adjustments (1) Consolidated

(in millions)

Sound Point $ 4 $ — $ 4

CLOs 21 (15) 6

Asset-based 3 (3) —

Healthcare 4 — 4

Other 13 — 13

Asset-based/specialty finance 4 (2) 2

Middle market direct lending 4 — 4

Total $ 43 $ (17) $ 26

____________________

(1) Certain CLO and asset-based funds are CIVs.

See Item 1, Financial Statements, Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

Change in Fair Value of Alternative Investments by Strategy

Nine Months Ended September 30, 2022

Investments Eliminations Consolidated

First Quarter 2023

Investments Consolidation Adjustments (1) Consolidated

(in millions)

CLOs $ 19 $ (19) $ —

Asset-based 7 (7) —

Healthcare 8 (8) —

Municipal bonds (4) 4 —

Other (34) — (34)

Asset-based 1 (1) —

Total $ 30 $ (28) $ 2

____________________

(1) Certain CLO and asset-based funds are CIVs.

See Item 1, Financial Statements, Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

Beginning in third quarter 2023, the Company records an equity method investment in Sound Point pursuant to the Sound Point Transaction described in Item 1, Financial Statements, Note 1, Business and Basis of Presentation.

Restricted Assets

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 and $222 million as of September 30, 2023 and December 31, 2022, respectively.

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

Upon closing of the Sound Point Transaction and the AHP Transaction in July, the Company has agreed to invest $1.5 billion in alternative investments, including the $1 billion in Sound Point managed investments, subject to regulatory approval, which includes $803 million of invested capital (at fair value) and $743 million in unfunded commitments.

See Item 1, Financial Statements, 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 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 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.

Restricted Assets

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 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.

Lease Obligations

The Company has entered into several lease agreements for office space in Bermuda, New York, San Francisco,

London, Paris, and other locations with various lease terms.

The Company has entered into several lease agreements for office space in Bermuda;

San Francisco;

Asheville, North Carolina;

and other locations with various lease terms.

See Part II, Item 8, Financial Statements and Supplementary Data, Note 17, Leases, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, for a table of minimum lease obligations and other lease commitments.

6 unchanged sentences

AGL’s and its insurance subsidiaries’ creditors do not have any rights with regard to the collateral supporting the debt issued by the FG VIEs.

For the Puerto Rico Trusts, the primary source of cash is the collection of debt service on the assets in the trusts and the primary use of cash is the payment of the trusts debt obligations.

The primary sources and uses of cash in the CIVs are raising capital from investors, using capital to make investments, generating cash income from investments, paying expenses, distributing cash flow to investors and borrowing funds to finance investments.

In the fourth quarter of 2023, all of the Toll Bonds in the Puerto Rico Trusts were called, resulting in cash proceeds of $154 million.

Such cash proceeds comprise the vast majority of the assets in the Puerto Rico Trusts as of December 31, 2023.

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

The remaining liabilities of the Puerto Rico Trusts are payable by the U.S.

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

The primary sources and uses of cash in the CIVs are using capital to make investments, generating cash income from investments, paying expenses, distributing cash flow to investors and borrowing funds to finance investments.

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

2 unchanged sentences

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.

1, Financial Statements, Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles, for additional information.

See Item 1, Financial Statements, Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles, for additional information.

Condensed Consolidated Cash Flows

The summarized condensed consolidated statements of cash flows in the table below present the cash flow effect for the aggregate of the Insurance and Asset Management business and holding companies, separately from the aggregate effect of consolidating FG VIEs and CIVs.

In third quarter 2023, as a result of the Sound Point Transaction and AHP Transaction, the Company deconsolidated all CLOs and CLO warehouses and certain funds.

The summarized condensed consolidated statements of cash flows in the table below present the cash flow effect for the aggregate of the Insurance and Asset Management businesses and holding companies, separately from the aggregate effect of consolidating FG VIEs and CIVs.

In the third quarter of 2023, as a result of the Sound Point Transaction and AHP Transaction, the Company deconsolidated all CLOs and CLO warehouses and certain funds.

As a result, beginning July 1, 2023, the Company’s cash flow statements will no longer include all the operating, investing and financing cash flow activity of the deconsolidated CIVs.

Financial Statements, Note 1, Business and Basis of Presentation, and Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles, for additional information.

See Item 1, Financial Statements, Note 1, Business and Basis of Presentation, and Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles, for additional information.

Summarized Condensed Consolidated Cash Flows

Third Quarter Nine Months

2023 2022 2023 2022

First Quarter

(in millions)

8 unchanged sentences

Repurchases of common shares (129) (2)

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

Redemption of debt (330) — (330) —

Other (28) (15)

1 unchanged sentence

Net cash flows provided by (used in) financing activities (1) (327) (296)

Effect of exchange rate changes,excluding FG VIEs and CIVs (2) (4) — (6)

Effect of exchange rate changes for FG VIEs and CIVs — — — —

Effect of exchange rate changes (1) 1

4 unchanged sentences

(1) Claims paid on consolidated FG VIEs are presented in the condensed consolidated statements of cash flows as a component of paydowns on FG VIEs’ liabilities in financing activities as opposed to operating activities.

Cash flows from operations, excluding FG VIEs and CIVs, were an outflow of $217 million in nine months 2023 and an outflow of $534 million in nine months 2022.

The decrease in outflows during nine months 2023 was primarily due to a $362 million decrease in net claim payments, primarily due to the 2022 Puerto Rico Resolutions, as well as a decrease of $94 million in tax payments.

Cash flows from operations attributable to FG VIE and CIV were inflows in nine months 2023 and outflows in nine months 2022, primarily because all the CLOs and CLO warehouses, which generally reported significant operating cash flows, had limited operating activities and new issuances in the first half of 2023 pending the closing of the Sound Point Transaction and AHP Transaction, at which point the CLOs and CLO warehouses were deconsolidated.

condensed consolidated statements of cash flows present the investing activities of the consolidated Sound Point funds, which were formerly known as AssuredIM funds, AssuredIM funds and CLOs as cash flows from operations.

The increase in inflows in nine months 2023 compared with nine months 2022 was mainly due to a decrease of $2,714 million in investment purchases, partially offset by a decrease of investment sales, maturities and paydowns of $850 million.

Cash flows from operations, excluding FG VIEs and CIVs, were an outflow of $62 million in first quarter 2024 and an outflow of $34 million in first quarter 2023.

The increase in cash outflows, other than those of the FG VIEs and CIVs, during first quarter 2024 was primarily due to a $48 million increase in net claim payments.

Cash flows from operations attributable to FG VIEs and CIVs were outflows in first quarter 2024 and inflows in first quarter 2023.

Cash flow form operations in first quarter 2023 included the operating activities of the CLOs and CLO warehouses in the first half of 2023 prior to the Sound Point Transaction.

The condensed consolidated statements of cash flows present the investing activities of the consolidated Sound Point funds, which were formerly known as AssuredIM funds, and CLOs as cash flows from operations.

Investing activities primarily consisted of net sales (purchases) of fixed-maturity and short-term investments and paydowns on and sales of FG VIEs’ assets.

The decrease in investing cash inflows in nine months 2023 compared with nine months 2022 was mainly attributable to an increase in short-term investments in nine months 2023 compared to net sales of short-term and fixed-maturity investments in nine months 2022.

In nine months 2022, investing inflows were used to fund claim payments under the 2022 Puerto Rico Resolutions and share repurchases.

Financial Statements, Condensed Consolidated Statements of Cash Flows, and Note 3, Outstanding Exposure, for additional information.

Financing activities primarily consist of (i) AGL share repurchases and dividends, (ii) paydowns of FG VIEs’ liabilities, and (iii) CLO issuances and CLO warehouse financing activities.

The CIVs’ financing cash flows mainly included issuances and repayments of CLOs and CLO warehouse financing debt.

The decrease in financing cash flow activity from VIEs was primarily due to a decrease of $2,254 million in issuances, partially offset by a decrease in repayments of $964 million by the previously consolidated CLOs and CLO warehouses.

The proceeds from CLO issuances and CLO warehouse borrowings were used to fund the purchases of loans.

FG VIEs’ cash flows relate to the paydowns of FG VIEs’ liabilities.

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

From October 1, 2023 through November 7, 2023, the Company repurchased an additional 682,676 of common shares.

As of November 7, 2023, the Company was authorized to purchase $372 million of its common shares.

The increase in investing cash inflows in first quarter 2024 compared with the first quarter 2023 was mainly attributable to net purchases of short-term and fixed-maturity securities in the first quarter 2023 and lower net sales of fixed-maturity securities in first quarter 2024, partially offset by higher sales of trading securities in first quarter 2024.

In the first quarter 2024, investing inflows were used to fund claim payments and share repurchases.

See Item 1, Financial Statements, Condensed Consolidated Statements of Cash Flows, and Note 3, Outstanding Exposure, for additional information.

Financing activities primarily consist of (i) AGL share repurchases and dividends, (ii) paydowns of FG VIEs’ liabilities, and (iii) until July 1, 2023, CLO issuances and CLO warehouse financing activities.

The CIVs’ financing cash flows mainly included repayments of CLO warehouse financing debt and distributions from noncontrolling interests to CIVs.

First quarter 2024 FG VIE financing cash flows included the par paydown of Puerto Rico Trust liabilities of $144 million.

See Item 1, Financial Statements, Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

From April 1, 2024 through May 7, 2024, the Company repurchased an additional 750,280 of common shares.

As of May 7, 2024, the Company was authorized to purchase $414 million of its common shares.

For more information about the Company’s share repurchases and authorizations, see Item 1, Financial Statements, Note 12, Shareholders’ Equity.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of September 30, 2023, there were no material changes to the market risks to which the Company is exposed since December 31, 2022.

There were no material changes to the market risks to which the Company is exposed since December 31, 2023.

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 2. Management’s Discussion and Analysis