What changed in this filing

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Item 1. Financial Statements

2024-08-08 compared with 2024-05-08 · 583 added, 337 removed, 1835 unchanged (33% of the section changed)

3 unchanged sentences

(dollars in millions except share data)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Fixed-maturity securities, available-for-sale, at fair value, net of allowance for credit loss of $ 69 and $ 77 (amortized cost of $ 6,478 and $ 6,746 )

34 unchanged sentences

(dollars in millions except share data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net earned premiums $ 84 $ 85 $ 203 $ 166

23 unchanged sentences

Net income (loss) attributable to Assured Guaranty Ltd.

$ 78 $ 125 $ 187 $ 206

Earnings per share:

5 unchanged sentences

(in millions)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net income (loss) $ 81 $ 126 $ 194 $ 223

1 unchanged sentence

Investments with no credit impairment, net of tax provision (benefit) of $( 4 ), $( 6 ), $( 9 ), and $ 8

( 12 ) ( 30 ) ( 41 ) 59

Investments with credit impairment, net of tax provision (benefit) of $ 1 , $( 3 ), $ 1 and $( 2 )

7 ( 10 ) 8 ( 5 )

Change in net unrealized gains (losses) on investments ( 5 ) ( 40 ) ( 33 ) 54

5 unchanged sentences

Comprehensive income (loss) attributable to Assured Guaranty Ltd.

$ 73 $ 87 $ 154 $ 263

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

2 unchanged sentences

(dollars in millions, except share data)

For the Three Months Ended March 31, 2024

For the Three Months Ended June 30, 2024

Shareholders’ Equity Attributable to Assured Guaranty Ltd.

4 unchanged sentences

Shareholders’ Equity

As of December 31, 2023 56,217,305 $ 1 $ 6,070 $ ( 359 ) $ 1 $ 5,713 $ 52 $ 5,765

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

Net income — — 78 — — 78 3 81

5 unchanged sentences

Other comprehensive loss — — — ( 5 ) — ( 5 ) — ( 5 )

As of June 30, 2024 53,185,707 $ 1 $ 5,929 $ ( 392 ) $ 1 $ 5,539 $ 56 $ 5,595

For the Three Months Ended June 30, 2023

Shareholders’ Equity Attributable to Assured Guaranty Ltd.

Common Shares Outstanding Common

Par Value Retained Earnings Accumulated

Comprehensive Income (Loss) Deferred

Equity Compensation Total Nonredeemable Noncontrolling Interests

Shareholders’ Equity

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

For the Three Months Ended March 31, 2023

Net income — — 125 — — 125 1 126

Dividends ($ 0.28 per share)

— — ( 17 ) — — ( 17 ) — ( 17 )

Common shares repurchases ( 453,942 ) — ( 24 ) — — ( 24 ) — ( 24 )

Share-based compensation 29,974 — 10 — — 10 — 10

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

Contributions — — — — — — 17 17

Distributions — — — — — — ( 18 ) ( 18 )

Other comprehensive loss — — — ( 38 ) — ( 38 ) — ( 38 )

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

Assured Guaranty Ltd.

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

(dollars in millions, except share data)

For the Six Months Ended June 30, 2024

Shareholders’ Equity Attributable to Assured Guaranty Ltd.

8 unchanged sentences

— — ( 36 ) — — ( 36 ) — ( 36 )

Contributions — — — — — — 3 3

Common shares repurchases ( 3,467,606 ) — ( 285 ) — — ( 285 ) — ( 285 )

1 unchanged sentence

Distributions — — — — — — ( 3 ) ( 3 )

Other comprehensive loss — — — ( 33 ) — ( 33 ) — ( 33 )

As of June 30, 2024 53,185,707 $ 1 $ 5,929 $ ( 392 ) $ 1 $ 5,539 $ 56 $ 5,595

For the Six Months Ended June 30, 2023

Shareholders’ Equity Attributable to Assured Guaranty Ltd.

Common Shares Outstanding Common

Par Value Retained Earnings Accumulated

Comprehensive Income (Loss) Deferred

Equity Compensation Total Nonredeemable Noncontrolling Interests

Shareholders’ Equity

As of December 31, 2022 59,013,040 $ 1 $ 5,577 $ ( 515 ) $ 1 $ 5,064 $ 228 $ 5,292

Net income — — 206 — — 206 17 223

Dividends ($ 0.56 per share)

— — ( 35 ) — — ( 35 ) — ( 35 )

Common shares repurchases ( 490,311 ) — ( 26 ) — — ( 26 ) — ( 26 )

Share-based compensation 327,415 — 10 — — 10 — 10

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

Contributions — — — — — — 20 20

Distributions — — — — — — ( 70 ) ( 70 )

Other comprehensive income — — — 57 — 57 — 57

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

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

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

2 unchanged sentences

(in millions)

Three Months Ended March 31,

Six Months Ended June 30,

Net cash flows provided by (used in) operating activities $ ( 16 ) $ 436

20 unchanged sentences

Cash flows from consolidated investment vehicles:

Repayment of collateralized loan obligations — ( 1 )

Repayment of warehouse financing debt — ( 166 )

10 unchanged sentences

(in millions)

Three Months Ended March 31,

Six Months Ended June 30,

Supplemental cash flow information

Income taxes paid (received) $ 58 $ 2

Interest paid on long-term debt 45 41

3 unchanged sentences

Distributions to noncontrolling interests — 20

Distributions from equity method investments 7 —

March 31, 2024 March 31, 2023

June 30, 2024 June 30, 2023

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

Cash $ 92 $ 114

Restricted cash (included in other assets) 2 1

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

21 unchanged sentences

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

and Assured Guaranty Corp.

(collectively, the U.S.

(AGM) and Assured Guaranty Inc.

(AG, formerly known as Assured Guaranty Corp., and, together with AGM, 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.

17 unchanged sentences

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

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

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

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

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

The Company recognized expenses of $ 24 million and $ 31 million during the three-month period ended June 30, 2023 (second quarter 2023) and the six-month period ended June 30, 2023, (six months 2023) respectively, associated with the Sound Point Transaction and AHP Transaction.

Assets and Liabilities Held For Sale

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

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

The held for sale assets and liabilities were $ 28 million (reported in “other assets”) and $ 2 million (reported in “other liabilities”), respectively, as of June 30, 2024.

Basis of Presentation

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Actual results could differ from those estimates.

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

These unaudited interim condensed consolidated financial statements are as of June 30, 2024 and cover the three-month period ended June 30, 2024 (second quarter 2024), second quarter 2023, the six-month period ended June 30, 2024 (six months 2024) and six months 2023.

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

8 unchanged sentences

Securities and Exchange Commission (SEC).

The Company’s principal insurance subsidiaries are:

• Assured Guaranty Municipal Corp.

(AGM), domiciled in New York;

• Assured Guaranty Corp.

(AGC), domiciled in Maryland;

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The Company’s principal insurance subsidiaries are:

• AG, domiciled in Maryland;

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

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

3 unchanged sentences

(AGRO), domiciled in Bermuda.

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

Insurance Subsidiaries - Stock Redemptions and Merger

In May 2024, the New York State Department of Financial Services (NYDFS) approved, and AGM implemented, the redemption of approximately $ 100 million of its shares of common stock from its parent, Assured Guaranty Municipal Holdings Inc.

Until August 1, 2024, AGM was a principal insurance subsidiary of the Company.

Effective August 1, 2024, AGM merged with and into AG, with AG as the surviving company.

In connection with the merger, the Maryland Insurance Administration (MIA) approved, and on August 5, 2024 AG implemented, the redemption of approximately $ 300 million of its shares of common stock from its parent, AGMH, in exchange for cash of $ 172 million and the remainder in alternative investments.

The merger transaction is not expected to have a material impact on the Company's financial condition.

Investment Subsidiary and U.S.

Holding Companies

AG owns (and until August 1, 2024 AG and AGM jointly owned) an investment subsidiary, AGAS, which invests in funds managed by Sound Point, AHP, and, prior to July 1, 2023, AssuredIM (Sound Point and AHP funds, some of which were formerly known as AssuredIM funds).

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

(AGUS) and Assured Guaranty Municipal Holdings Inc.

(AGMH) (collectively the U.S.

(AGUS) and AGMH (collectively the U.S.

Holding Companies) - have public debt outstanding.

20 unchanged sentences

and (ii) AGAS.

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

Insurance Subsidiaries and AGAS.

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

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

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

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

Beginning in the third

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

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

The Corporate division primarily consists of:

3 unchanged sentences

Holding Companies.

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

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

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

6 unchanged sentences

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

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

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

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

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

6 unchanged sentences

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The following table presents information for the Company’s operating segments.

1 unchanged sentence

Segment Information

First Quarter

Second Quarter

Insurance Asset Management Insurance Asset Management

7 unchanged sentences

Segment adjusted operating income (loss) $ 116 $ — $ 106 $ ( 2 )

Insurance Asset Management Insurance Asset Management

(in millions)

Third-party revenues $ 413 $ 7 $ 409 $ 44

Intersegment revenues 5 1 5 27

Segment revenues 418 8 414 71

Segment expenses 155 4 189 75

Segment equity in earnings (losses) of investees 55 ( 2 ) 35 —

Segment provision (benefit) for income taxes 53 1 37 ( 1 )

Segment adjusted operating income (loss) $ 265 $ 1 $ 223 $ ( 3 )

Assured Guaranty Ltd.

2 unchanged sentences

Reconciliation of Segment Information to Consolidated Information

First Quarter 2024

Three Months Ended June 30, 2024

Equity in Earnings (Losses) of Investees Less:

18 unchanged sentences

Reconciliation of Segment Information to Consolidated Information

First Quarter 2023

Three Months Ended June 30, 2023

Equity in Earnings (Losses) of Investees Less:

15 unchanged sentences

Total consolidated $ 360 $ 221 $ 5 $ 18 $ 1 $ 125

Reconciliation of Segment Information to Consolidated Information

Six Months Ended June 30, 2024

Equity in Earnings (Losses) of Investees Less:

Net Income (Loss) Attributable to AGL

Revenues Expenses Provision (Benefit) for Income Taxes Noncontrolling Interests

(in millions)

Insurance $ 418 $ 155 $ 55 $ 53 $ — $ 265

Asset Management 8 4 ( 2 ) 1 — 1

Total segments 426 159 53 54 — 266

Corporate division 9 91 — ( 10 ) — ( 72 )

Other 20 ( 10 ) ( 24 ) — 7 ( 1 )

Subtotal 455 240 29 44 7 193

Reconciling items:

Realized gains (losses) on investments 2 — — — — 2

Non-credit impairment-related unrealized fair value gains (losses) on credit derivatives 11 ( 2 ) — — — 13

Fair value gains (losses) on CCS ( 9 ) — — — — ( 9 )

Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves ( 12 ) — — — — ( 12 )

Tax effect — — — — — —

Total consolidated $ 447 $ 238 $ 29 $ 44 $ 7 $ 187

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Reconciliation of Segment Information to Consolidated Information

Six Months Ended June 30, 2023

Equity in Earnings (Losses) of Investees Less:

Net Income (Loss) Attributable to AGL

Revenues Expenses Provision (Benefit) for Income Taxes Noncontrolling Interests

(in millions)

Insurance $ 414 $ 189 $ 35 $ 37 $ — $ 223

Asset Management 71 75 — ( 1 ) — ( 3 )

Total segments 485 264 35 36 — 220

Corporate division 4 108 — ( 10 ) — ( 94 )

Other 32 15 ( 28 ) ( 6 ) 17 ( 22 )

Subtotal 521 387 7 20 17 104

Reconciling items:

Realized gains (losses) on investments ( 11 ) — — — — ( 11 )

Non-credit impairment-related unrealized fair value gains (losses) on credit derivatives 102 ( 1 ) — — — 103

Fair value gains (losses) on CCS ( 15 ) — — — — ( 15 )

Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves 46 — — — — 46

Tax effect — — — 21 — ( 21 )

Total consolidated $ 643 $ 386 $ 7 $ 41 $ 17 $ 206

Outstanding Exposure

1 unchanged sentence

The Company may also sell credit protection by issuing policies that guarantee payment obligations under credit default swaps (CDS).

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

41 unchanged sentences

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

The Company excludes amounts

The Company excludes amounts attributable to Loss Mitigation Securities from par and debt service outstanding and instead reports Loss Mitigation Securities

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

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

in the investment portfolio.

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

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

As of both June 30, 2024 and December 31, 2023, the Company excluded net par outstanding of $ 1.2 billion attributable to Loss Mitigation Securities.

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

2 unchanged sentences

The Company calculates its debt service outstanding as follows:

• for insured obligations that are not supported by homogeneous pools of assets (which category includes most of the Company’s public finance transactions), as the total estimated contractual future debt service due through maturity, regardless of whether the obligations may be called and regardless of whether, in the case of obligations where principal payments are due when an underlying asset makes a principal payment, the Company believes the obligations will be repaid prior to contractual maturity;

• for insured obligations that are not supported by homogeneous pools of assets (which category includes most of the Company’s public finance transactions), as the total estimated contractual future debt service due through maturity, regardless of whether the obligations may be called and, in the case of obligations where principal payments are due when an underlying asset makes a principal payment, the Company believes the obligations will be repaid prior to contractual maturity;

• for insured obligations that are supported by homogeneous pools of assets that are contractually permitted to prepay principal (which category includes, for example, residential mortgage-backed securities (RMBS)), as the total estimated expected future debt service due on insured obligations through their respective expected terms, which includes the Company’s expectations as to whether the obligations may be called and, in the case of obligations where principal payments are due when an underlying asset makes a principal payment, when the Company expects principal payments to be made prior to contractual maturity.

5 unchanged sentences

Debt Service and Par Outstanding

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

As of June 30, 2024 As of December 31, 2023

Gross Net Gross Net

7 unchanged sentences

Total financial guaranty $ 254,878 $ 254,396 $ 249,535 $ 249,153

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

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

In addition to amounts shown in the table above, the Company had outstanding commitments to provide guaranties of $ 1.1 billion of public finance gross par and $ 1.6 billion of structured finance gross par as of June 30, 2024.

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

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

canceled at the counterparty’s request.

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

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

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

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

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

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

Financial Guaranty Portfolio by Internal Rating

As of March 31, 2024

As of June 30, 2024

Public Finance

40 unchanged sentences

Components of BIG Net Par Outstanding

As of March 31, 2024

As of June 30, 2024

BIG Net Par Outstanding Net Par

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BIG Net Par Outstanding and Number of Risks

As of March 31, 2024

As of June 30, 2024

Net Par Outstanding Number of Risks (2)

30 unchanged sentences

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

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

As of June 30, 2024, the Company’s only remaining outstanding insured Puerto Rico exposure subject to a payment default was the Puerto Rico Electric Power Authority (PREPA).

Puerto Rico Par and Debt Service Schedules

2 unchanged sentences

Gross Par Outstanding Gross Debt Service Outstanding

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

June 30, 2024 December 31, 2023 June 30, 2024 December 31, 2023

(in millions)

3 unchanged sentences

Net Par Outstanding

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in millions)

13 unchanged sentences

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

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

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

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

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

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

3 unchanged sentences

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Amortization Schedule of Puerto Rico

Net Par Outstanding and Net Debt Service Outstanding

As of March 31, 2024

As of June 30, 2024

Scheduled Net Par Amortization Scheduled Net Debt Service Amortization

(in millions)

2024 (April 1 - June 30) $ — $ 3

2024 (July 1 - September 30) $ 110 $ 131

5 unchanged sentences

Total $ 961 $ 1,250

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

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

As of June 30, 2024 and December 31, 2023, the Company’s net par outstanding on insured PREPA obligations was $ 624 million.

The PREPA bonds are secured by a lien on the net revenues of the electric system.

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

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

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

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

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

On April 8, 2022, the United States District Court of the District of Puerto Rico (Federal District Court of Puerto Rico) issued an order appointing three U.S.

Bankruptcy Judges as members of a PREPA mediation team.

The Federal District Court of Puerto Rico also entered a separate order establishing the terms and conditions of mediation.

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

3 unchanged sentences

The ultimate value of the claim, according to the Federal District Court of Puerto Rico, should be determined through a claim estimation proceeding.

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

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

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

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

Subject to their appeal of the Federal District Court of Puerto Rico’s ruling on the scope of lien, PREPA bondholders had sought an unsecured net revenue claim of approximately $ 8.5 billion.

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

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

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

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

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

At the end of the hearing, the Federal District Court of Puerto Rico stated that it was taking the confirmation of the FOMB PREPA Plan under advisement and gave no indication of timing for an opinion or order.

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

1 unchanged sentence

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

The FOMB PREPA Plan would split bondholders into two groups:

one that would settle litigation regarding whether creditor repayment is limited to existing accounts, and another group that would continue litigating whether bondholders are secured by PREPA’s current and future revenue collections.

The FOMB PREPA Plan also would further split settling bondholders into two sub-groups:

one consisting of certain original settling bondholders that would receive an enhanced recovery (compared to non-settling bondholders) plus other supporting creditor payments, while the second settling sub-group would receive only the enhanced recovery.

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

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

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

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

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

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

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

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

On June 12, 2024, the First Circuit issued its opinion on the appeal, holding that bondholders have a claim against PREPA for the full principal amount of the bonds, plus matured interest, that there was no need for a claim estimation proceeding because the PREPA bonds specify the amount that PREPA legally owes bondholders, and that the claim is secured by PREPA’s net revenues, including future net revenues.

On July 10, 2024, the Federal District Court of Puerto Rico ordered FOMB and bondholders to resume mediation and instituted a 60-day stay of all FOMB PREPA Plan litigation.

The Federal District Court of Puerto Rico most recently extended the term of mediation on July 30, 2024, extending the term to October 31, 2024.

Resolved Puerto Rico Exposures

2 unchanged sentences

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

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

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

As of June 30, 2024, all but $ 221 million in CVIs (at fair value) had been sold or redeemed.

As of June 30, 2024, remaining CVIs are reported in fixed-maturity securities, trading.

See Note 7, Investments.

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

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

As of June 30, 2024, the Company had $ 228 million of insured net par outstanding of legacy PRHTA bonds.

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

5 unchanged sentences

Non-Defaulting Puerto Rico Exposures

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

As of June 30, 2024 and December 31, 2023, the Company had $ 109 million of remaining non-defaulting Puerto Rico net par outstanding related primarily to the MFA.

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Puerto Rico Litigation

2 unchanged sentences

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

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

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

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

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

On September 30, 2022, the FOMB filed an amended complaint against the trustee (i) objecting to and challenging the validity, enforceability, and extent of prepetition security interests securing PREPA’s bonds and (ii) arguing that PREPA bondholders’ recourse was limited to certain deposit accounts held by the trustee.

On October 7, 2022, the court approved a stipulation permitting AGM and AGC to intervene as defendants.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

See Outstanding Exposure, Exposure to Puerto Rico, for a description of the PREPA proceeding.

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

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

• Adversary complaint by certain fuel line lenders of PREPA against the U.S.

Insurance Subsidiaries, among other parties, including various PREPA bondholders and bond insurers, seeking, among other things, declarations that there is no valid lien securing the PREPA bonds unless and until such lenders are paid in full, as well as orders subordinating the PREPA bondholders’ lien and claims to such lenders’ claims, and declaring the PREPA RSA null and void.

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

Assured Guaranty Ltd.

3 unchanged sentences

Specialty Business

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

As of June 30, 2024 As of December 31, 2023

Gross Exposure Net Exposure Gross Exposure Net Exposure

1 unchanged sentence

Insurance securitizations (1) $ 1,430 $ 1,099 $ 1,370 $ 1,043

Diversified real estate (2) 1,498 1,498 1,569 1,569

Pooled corporate obligations 796 796 488 488

Aircraft residual value insurance 308 177 355 200

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

____________________

(1) Insurance securitizations exposure is projected to reach $ 1.6 billion gross in 2026 and $ 1.3 billion net in 2027.

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

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

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

(2) Excess-of-loss guaranty of a minimum amount of billed rent on a diversified portfolio of real estate properties with an internal rating of AA that matures in 2042.

This guaranty is accounted for in accordance with Accounting Standards Codification (ASC) 460, Guarantees.

Expected Loss to be Paid (Recovered)

62 unchanged sentences

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

As of First Quarter

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

As of Second Quarter Six Months

Accounting Model June 30, 2024 December 31, 2023 2024 2023 2024 2023

(in millions)

2 unchanged sentences

FG VIEs (see Note 8) (1)

242 240 1 ( 14 ) 1 ( 9 )

Credit derivatives (see Note 6)

3 unchanged sentences

The following tables present a roll forward of net expected loss to be paid (recovered) for all contracts, which are accounted for under one of the following accounting models:

insurance, derivative and FG VIE.

insurance, derivative or FG VIE.

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

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

dollar denominated obligations that ranged from 4.28 % to 5.33 % with a weighted average of 4.55 % as of June 30, 2024 and 3.79 % to 5.40 % with a weighted average of 4.10 % as of December 31, 2023.

Net expected losses to be paid for U.S.

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

dollar denominated transactions represented approximately 91.8 % and 96.1 % of the total as of June 30, 2024 and December 31, 2023, respectively.

Net Expected Loss to be Paid (Recovered)

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions)

11 unchanged sentences

Roll Forward by Sector

First Quarter 2024

Second Quarter 2024

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

Development (Benefit) Net (Paid)

Net Expected Loss to be Paid (Recovered) as of June 30, 2024

(in millions)

Public finance:

public finance $ 378 $ 12 $ ( 16 ) $ 374

public finance 20 17 — 37

Public finance 398 29 ( 16 ) 411

Structured finance:

RMBS ( 2 ) ( 10 ) 12 —

Other structured finance 37 2 ( 3 ) 36

Structured finance 35 ( 8 ) 9 36

Total $ 433 $ 21 $ ( 7 ) $ 447

Second Quarter 2023

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

Development (Benefit) Net (Paid)

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

(in millions)

Public finance:

public finance $ 380 $ 57 $ ( 4 ) $ 433

public finance 13 ( 3 ) — 10

Public finance 393 54 ( 4 ) 443

Structured finance:

RMBS 82 ( 9 ) — 73

Other structured finance 42 4 ( 2 ) 44

Structured finance 124 ( 5 ) ( 2 ) 117

Total $ 517 $ 49 $ ( 6 ) $ 560

Six Months 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 March 31, 2024

Net Expected Loss to be Paid (Recovered) as of June 30, 2024

(in millions)

8 unchanged sentences

Total $ 505 $ 14 $ ( 72 ) $ 447

First Quarter 2023

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Six Months 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 March 31, 2023

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

(in millions)

12 unchanged sentences

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

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

The tables above include (i) net LAE paid of $ 13 million, $ 5 million, $ 20 million and $ 8 million for second quarter 2024, second quarter 2023, six months 2024 and six months 2023, respectively, and (ii) net expected LAE to be paid of $ 11 million as of June 30, 2024 and $ 22 million as of December 31, 2023, respectively.

Public Finance

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

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

The largest components of the public finance net expected losses to be paid (recovered) related to certain Puerto Rico and healthcare exposures.

See Note 3, Outstanding Exposure, for a discussion of Puerto Rico exposures.

Certain BIG healthcare exposures are experiencing rising labor costs due to competition for labor and shortages in certain markets.

Additionally, inflation has continued to increase the cost of medical supplies, medical equipment, and pharmacy products, while hospitals with large Medicaid and Medicare payor mixes have not seen reimbursement levels keep pace with rising costs.

The combined revenue and expense challenges have led to cash flow and liquidity stress in certain transactions.

In addition, certain credits are struggling to make necessary capital expenditures and improvements to facilities.

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

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

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

public finance exposures is net of an assumed future recovery of claims already paid.

As of June 30, 2024 and December 31, 2023, that assumed future recovery was $ 197 million and $ 193 million, respectively.

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Economic loss development in second quarter 2024 and six months 2024 was primarily attributable to certain healthcare exposures.

RMBS Loss Projections

5 unchanged sentences

The assumptions that the Company uses to project RMBS losses are shown in the sections below.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Net Economic Loss Development (Benefit)

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions)

2 unchanged sentences

Second lien U.S.

RMBS ( 8 ) ( 9 ) ( 10 ) ( 4 )

First Lien U.S.

4 unchanged sentences

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

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

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

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

4 unchanged sentences

RMBS Liquidation Rates

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

As of June 30, 2024 As of December 31, 2023

Range (1) Range (1)

12 unchanged sentences

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

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

3 unchanged sentences

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

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

The Company is assuming in the base scenario that recent severity levels generally will continue

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

for another 18 months.

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

6 unchanged sentences

First Lien U.S.

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

As of June 30, 2024 As of December 31, 2023

Range Weighted Average Range Weighted Average

11 unchanged sentences

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

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

The Company probability weighted a total of five scenarios as of June 30, 2024 and December 31, 2023.

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

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

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

In the Company’s most

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

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

The Company used a similar approach to establish its scenarios as of June 30, 2024 as it used as of December 31, 2023, increasing and decreasing the periods and levels of stress from those used in the base scenario.

In the Company’s most stressful scenario where 10 % of deferred principal balances are assumed to be recovered, loss severities were assumed to rise and then recover over nine years and the initial ramp-down of the CDR was assumed to occur over 16 months, expected loss to be paid would increase from current projections by approximately $ 26 million for all first lien U.S.

RMBS transactions.

6 unchanged sentences

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

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

RMBS transactions is the amount and timing of future losses or recoveries in the collateral pool supporting the transactions (including recoveries from

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

previously charged-off loans).

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

11 unchanged sentences

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

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

The Company assumed, as of June 30, 2024 and December 31, 2023, that it will generally recover 2 % of future defaulting collateral at the time of charge-off, with additional amounts of post charge-off recoveries projected to come in over time.

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

11 unchanged sentences

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

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

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

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

Key Assumptions in Base Scenario Expected Loss Estimates

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

As of June 30, 2024 As of December 31, 2023

Range Weighted Average Range Weighted Average

22 unchanged sentences

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Contracts Accounted for as Insurance

2 unchanged sentences

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Net Earned Premiums

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions)

8 unchanged sentences

Net of Commissions Payable on Assumed Business

First Quarter

(in millions)

9 unchanged sentences

Specialty insurance premium receivable 1 1

March 31, $ 1,450 $ 1,346

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

June 30, $ 1,472 $ 1,417

Approximately 68 % and 70 % of gross premiums receivable, net of commissions payable, at June 30, 2024 and December 31, 2023, respectively, are denominated in currencies other than the U.S.

dollar, primarily the pound sterling and euro.

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Financial Guaranty Insurance

Expected Future Premium Collections and Earnings

As of March 31, 2024

As of June 30, 2024

Future Premiums

2 unchanged sentences

(in millions)

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

2024 (July 1 - September 30) $ 59 $ 74

12 unchanged sentences

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(dollars in millions)

5 unchanged sentences

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

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

dollar denominated financial guaranty insurance obligations that ranged from 4.28 % to 5.33 % with a weighted average of 4.59 % as of June 30, 2024 and 3.79 % to 5.40 % with a weighted average of 4.17 % as of December 31, 2023.

The following tables provide information on net reserve (salvage), which includes loss and LAE reserves and salvage and subrogation recoverable, both net of reinsurance.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The following tables provide information on net reserve (salvage), which includes loss and LAE reserves and salvage and subrogation recoverable, both net of reinsurance.

Net Reserve (Salvage) by Sector

Sector March 31, 2024 December 31, 2023

Sector June 30, 2024 December 31, 2023

(in millions)

16 unchanged sentences

Financial Guaranty Insurance Contracts

As of March 31, 2024

As of June 30, 2024

(in millions)

4 unchanged sentences

Net expected loss to be expensed (present value) $ 225

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The following table provides a schedule of the expected timing of net expected losses to be expensed.

1 unchanged sentence

This table excludes amounts related to FG VIEs, which are eliminated in consolidation.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Net Expected Loss to be Expensed

Financial Guaranty Insurance Contracts

As of March 31, 2024

As of June 30, 2024

(in millions)

2024 (April 1 - June 30) $ 4

2024 (July 1 - September 30) $ 3

7 unchanged sentences

Loss and LAE (Benefit) by Sector

First Quarter

Second Quarter Six Months

Sector 2024 2023 2024 2023

5 unchanged sentences

Structured finance:

RMBS $ ( 5 ) $ ( 2 ) $ ( 3 ) $ 4

Other structured finance 2 1 1 3

6 unchanged sentences

BIG Transaction Loss Summary

As of March 31, 2024

As of June 30, 2024

Gross Net Total BIG

41 unchanged sentences

Contracts Accounted for as Credit Derivatives

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

Amounts presented in this note relate only to contracts accounted for as derivatives, which are primarily CDS.

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

8 unchanged sentences

Absent such an event of default or termination event, the Company may not unilaterally terminate a credit derivative contract;

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

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

Assured Guaranty Ltd.

1 unchanged sentence

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

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

The estimated remaining weighted average life of credit derivatives was 10.1 years and 11.1 years as of June 30, 2024 and December 31, 2023, respectively.

Credit Derivatives (1)

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

As of June 30, 2024 As of December 31, 2023

Sector Net Par

8 unchanged sentences

____________________

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

(1) Expected loss to be paid was $ 2 million as of both June 30, 2024 and December 31, 2023.

Fair Value Gains (Losses) on Credit Derivatives

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions)

4 unchanged sentences

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

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

The Company determines its own credit risk primarily based on quoted CDS prices traded on AGC at each balance sheet date.

CDS Spread on AGC (in basis points)

As of March 31,

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

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

The Company determines its own credit risk primarily based on quoted CDS prices traded on AG at each balance sheet date.

CDS Spread on AG (in basis points)

As of June 30,

2024 As of December 31, 2023 As of June 30,

2023 As of December 31, 2022

2 unchanged sentences

Fair Value of Credit Derivative Assets (Liabilities)

and Effect of AGC Credit Spread

March 31, 2024 December 31, 2023

and Effect of AG Credit Spread

June 30, 2024 December 31, 2023

(in millions)

Fair value of credit derivatives before effect of AGC credit spread $ ( 56 ) $ ( 76 )

Effect of AGC credit spread 17 26

Fair value of credit derivatives before effect of AG credit spread $ ( 57 ) $ ( 76 )

Effect of AG credit spread 23 26

Net fair value of credit derivatives $ ( 34 ) $ ( 50 )

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

The fair value of CDS contracts as of June 30, 2024, before considering the benefit applicable to AG’s credit spread, is a direct result of the relatively wider credit spreads under current market conditions compared to those at the time of underwriting for certain underlying credits with longer tenor.

Assured Guaranty Ltd.

9 unchanged sentences

Carrying Value

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in millions)

10 unchanged sentences

____________________

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

(1) 9.4 % and 9.2 % of fixed-maturity securities, available for sale, were rated BIG or not rated as of June 30, 2024 and December 31, 2023, respectively.

BIG rated securities consisted primarily of Loss Mitigation Securities.

2 unchanged sentences

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

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

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

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

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

(4) The aggregate carrying value of the Company’s investments in Sound Point and Sound Point managed funds was $ 641 million and $ 631 million as of June 30, 2024 and December 31, 2023, respectively.

The Company’s alternative investment commitments as of June 30, 2024 include $ 734 million in unfunded commitments, and funded investments with a fair value of $ 810 million, for a total of $ 1.5 billion, including a $ 1 billion commitment to invest in Sound Point managed alternative investments.

Capital allocated to alternative investments was committed to several funds pursuing various strategies, including CLOs, middle market senior lending, asset-based/specialty finance and private healthcare investing.

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

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

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

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

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

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

As of June 30, 2024, three funds in which the Company invests are accounted for as CIVs.

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

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

Accrued investment income, which is reported in “other assets,” was $ 66 million as of June 30, 2024 and $ 71 million as of December 31, 2023.

Assured Guaranty Ltd.

1 unchanged sentence

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

As of March 31, 2024

As of June 30, 2024

Security Type Percent

37 unchanged sentences

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

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

government-agency obligations were approximately 61 % and 42 % of mortgage-backed securities as of June 30, 2024 and December 31, 2023, respectively, based on fair value.

Assured Guaranty Ltd.

2 unchanged sentences

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

As of March 31, 2024

As of June 30, 2024

Less than 12 months 12 months or more Total

39 unchanged sentences

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

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

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

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

The Company has determined that the unrealized losses recorded as of June 30, 2024 and December 31, 2023 were primarily related to higher interest rates rather than credit quality.

As of June 30, 2024, the Company did not intend to and was not required to sell investments in an unrealized loss position prior to expected recovery in value.

As of June 30, 2024, of the securities in an unrealized loss position for which an allowance for credit loss was not recorded, 478 securities had unrealized losses in excess of 10% of their carrying value,

Assured Guaranty Ltd.

1 unchanged sentence

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

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

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

The total unrealized loss for these securities was $ 234 million as of June 30, 2024 and $ 200 million as of December 31, 2023.

The amortized cost and estimated fair value of available-for-sale fixed-maturity securities by contractual maturity as of June 30, 2024 are shown below.

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

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

As of March 31, 2024

As of June 30, 2024

Cost Estimated

6 unchanged sentences

Total $ 6,478 $ 6,006

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

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

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 $ 74 million as of June 30, 2024 and $ 234 million as of December 31, 2023.

The investment portfolio also contains securities that are held in trust by certain AGL subsidiaries or are otherwise restricted for the benefit of other AGL subsidiaries in accordance with statutory and regulatory requirements with a fair value of $ 1,152 million and $ 1,154 million as of June 30, 2024 and December 31, 2023, respectively.

Assured Guaranty Ltd.

3 unchanged sentences

Income from Investments

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions)

4 unchanged sentences

Puerto Rico, New Recovery Bonds — 1 — 4

Other 2 4 6 7

Short-term investments 22 18 45 32

Other invested assets — 2 — 2

Investment income 82 90 167 172

5 unchanged sentences

Funds (3) 5 — 19 —

Other 3 5 9 7

Equity in earnings (losses) of investees $ 5 $ 5 $ 29 $ 7

____________________

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

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

(1) Fair value gains on trading securities pertaining to securities still held as of June 30, 2024 were $ 14 million for second quarter 2024 and $ 31 million for six months 2024, respectively.

Fair value gains on trading securities pertaining to securities still held as of June 30, 2023 were $ 40 million for second quarter 2023 and $ 38 million for six months 2023, respectively.

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

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Realized Investment Gains (Losses)

2 unchanged sentences

Net Realized Investment Gains (Losses)

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions)

1 unchanged sentence

Gross realized losses on sales of available-for-sale securities ( 4 ) ( 6 ) ( 7 ) ( 15 )

Net foreign currency gains (losses) ( 2 ) — ( 2 ) —

Change in the allowance for credit losses and intent to sell (2) ( 2 ) ( 10 ) 8 ( 15 )

Other net realized gains (losses) 1 — 1 —

Net realized investment gains (losses) $ ( 6 ) $ ( 9 ) $ 2 $ ( 11 )

____________________

(1) Gross realized gains and losses in six months 2023 related primarily to sales of New Recovery Bonds received as part of the 2022 Puerto Rico Resolutions.

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The proceeds from sales of fixed-maturity securities classified as available-for-sale were $ 129 million in second quarter 2024, $ 239 million in second quarter 2023, $ 488 million in six months 2024 and $ 694 million in six months 2023.

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

1 unchanged sentence

for Available-for-Sale Fixed-Maturity Securities

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions)

2 unchanged sentences

Balance, end of period $ 69 $ 79 $ 69 $ 79

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

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

The Company did not purchase any securities with credit deterioration during the periods presented.

Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles

5 unchanged sentences

In the case of first loss, the insurance subsidiaries’ financial guaranty insurance policy only covers a senior layer of losses experienced by multiple obligations issued by the VIEs.

The first loss exposure with respect to the assets is either retained by the seller or sold off in the form of equity or mezzanine debt to other investors.

The first loss exposure with respect to the assets is either retained by the seller or sold off in the form of equity or mezzanine debt to

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

other investors.

In the case of excess spread, the financial assets contributed to VIEs generate interest income that is in excess of the interest payments on the debt issued by the VIE.

2 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 structured finance and other FG VIEs.

Proceeds from sales, maturities, prepayments and interest from such underlying collateral may only be used to pay debt service on structured finance and other FG VIEs’ liabilities.

Proceeds from sales, maturities, prepayments and interest from such underlying collateral may only be used to pay debt service on the respective FG VIEs’ liabilities.

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

6 unchanged sentences

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

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

4 unchanged sentences

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

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

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

As of June 30, 2024 and December 31, 2023, the Company consolidated 23 and 24 structured finance and other FG VIEs, respectively.

Puerto Rico Trusts

3 unchanged sentences

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

bonds at any time thereafter, with 30 days’ notice, by paying 100% of the then outstanding principal amount of insured bonds plus accrued interest.

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

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

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

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

The remaining liabilities of the Puerto Rico Trusts will be paid by AG under its financial guaranty policies and are no longer dependent on the credit of PRHTA.

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

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

As of both June 30, 2024 and December 31, 2023 the Company consolidated 24 custodial trusts established as part of the Puerto Rico resolutions reached in 2022.

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

2 unchanged sentences

The Company’s estimate of expected loss to be paid (recovered) for FG VIEs is included in Note 4, Expected Loss to be Paid (Recovered).

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The table below shows the carrying value of FG VIEs’ assets and liabilities segregated by type of collateral.

Consolidated FG VIEs by Type of Collateral

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in millions)

15 unchanged sentences

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Selected Information for FG VIEs’ Assets and Liabilities

Measured under the FVO

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in millions)

13 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.

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

consolidated statements of operations.

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

As of both June 30, 2024 and December 31, 2023, the Company consolidated three CIVs.

Assets and Liabilities of CIVs

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in millions)

6 unchanged sentences

____________________

(1) Includes investments with affiliated entities of $ 309 million and $ 281 million as of March 31, 2024 and December 31, 2023, respectively.

(2) The balance is reported in “other liabilities” in the condensed consolidated balance sheets.

Includes $ 3 million with affiliated entities as of both March 31, 2024 and December 31, 2023.

As of March 31, 2024 and December 31, 2023, the CIVs included derivative contracts with average notional amounts of $ 38 million and $ 41 million, respectively.

(1) Includes investments with Sound Point affiliated entities of $ 319 million and $ 281 million as of June 30, 2024 and December 31, 2023, respectively.

(2) The balance is reported in “other liabilities” in the condensed consolidated balance sheets and includes $ 3 million with Sound Point affiliated entities as of both June 30, 2024 and December 31, 2023.

As of June 30, 2024 and December 31, 2023, the CIVs included derivative contracts with average notional amounts of $ 39 million and $ 41 million, respectively.

Derivative instruments, which include forward foreign currency contracts, serve as a component of the CIVs’ investment strategies.

The fair value of derivative contracts is reported in the “assets of CIVs” or “other liabilities” in the condensed consolidated balance sheets.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Noncontrolling Interest in CIVs

4 unchanged sentences

The largest of these VIEs had assets of $ 92 million and liabilities of $ 7 million as of December 31, 2023, which were reported in “investments” and “credit derivative liabilities” on the condensed consolidated balance sheets.

In first quarter 2024, the Company deconsolidated the largest of these VIEs and recognized a $ 5 million gain on deconsolidation, which is included in “fair value gains (losses) on credit derivatives” in the condensed consolidated statements of operations.

In the first quarter of 2024, the Company deconsolidated the largest of these VIEs.

Non-Consolidated VIEs

As described in Note 3, Outstanding Exposure, the Company monitors all policies in the insured portfolio.

Of the approximately 15 thousand policies monitored as of March 31, 2024, approximately 14 thousand policies are not within the scope of FASB ASC 810 because these financial guaranties relate to the debt obligations of governmental organizations or financing entities established by a governmental organization.

Of the approximately 15 thousand policies monitored as of June 30, 2024, approximately 14 thousand policies are not within the scope of FASB ASC 810 because these financial guaranties relate to the debt obligations of governmental organizations or financing entities established by a governmental organization.

The majority of the remaining policies involve transactions where the Company is not deemed to currently have control over the FG VIEs’ most significant activities.

As of March 31, 2024 and December 31, 2023, the Company identified 60 and 68 policies, respectively, that contain provisions and experienced events that may trigger consolidation.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

As of June 30, 2024 and December 31, 2023, the Company identified 59 and 68 policies, respectively, that contain provisions and experienced events that may trigger consolidation.

The Company holds variable interests in VIEs which are not consolidated, as the Company is not the primary beneficiary.

As of March 31, 2024, the Company’s maximum exposure to losses relating to these VIEs was $ 395 million.

As of June 30, 2024, the Company’s maximum exposure to losses relating to these VIEs was $ 412 million, which is limited to the carrying value of these assets.

Fair Value Measurement

9 unchanged sentences

As markets and products develop and the pricing transparency for certain products changes, the Company may refine its methodologies and assumptions.

During first quarter 2024, no changes were made to the Company’s valuation models that had (or are expected to have) a material impact on the Company’s condensed consolidated balance sheets or statements of operations and comprehensive income.

During six months 2024, no changes were made to the Company’s valuation models that had (or are expected to have) a material impact on the Company’s condensed consolidated balance sheets or statements of operations and comprehensive income.

The Company’s valuation methods produce fair values that may not be indicative of net realizable value or future fair values.

The use of different methodologies or assumptions to determine fair value of certain financial instruments could result in a materially different estimate of fair value at the reporting date.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The categorization within the fair value hierarchy is determined based on whether the inputs to valuation techniques used to measure fair value are observable or unobservable.

11 unchanged sentences

Level 3 financial instruments also include those for which the determination of fair value requires significant management judgment or estimation.

There was a transfer of securities into Level 3 in the investment portfolio and in CIVs due to changes in observability of pricing inputs in first quarter 2024.

There was a transfer of securities into Level 3 in the investment portfolio and in CIVs due to changes in observability of pricing inputs in six months 2024.

There were no other transfers from or into Level 3 during the periods presented.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Carried at Fair Value

8 unchanged sentences

The valuation of fixed-maturity securities is more subjective when markets are less liquid due to the lack of market-based inputs.

As of March 31, 2024, the Company used models to price 186 securities.

As of June 30, 2024, the Company used models to price 177 securities.

All Level 3 securities were priced with the assistance of independent third parties.

11 unchanged sentences

Securities such as discount notes are classified as Level 2 because these securities are typically not actively traded due to their approaching maturity and, as such, their cost approximates fair value.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

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 fair value of CCS, which is reported in other assets on the condensed consolidated balance sheets, represents the difference between the present value of the remaining expected put option premium payments under AGC CCS and AGM’s Committed Preferred Trust Securities (the AGM CPS) agreements, and the estimated present value of the amounts that the Company would hypothetically have to pay currently for a comparable security.

The change in fair value of the AGC CCS and AGM CPS are reported in “fair value gains (losses) on committed capital securities” in the condensed consolidated statements of operations.

The estimated current cost of the Company’s CCS is based on several factors, including AGM and AGC CDS spreads, the Company’s publicly traded debt and an estimation of the securities’ remaining term.

The AGC CCS and AGM CPS are classified as Level 3.

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

The arrangement entails four custodial trusts (Woodbourne Capital Trust I, II, III and IV) relating to AG 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” (CCS) and invested the proceeds of that issuance in eligible assets that would enable the trust to have the cash necessary to respond to AG’s or AGM’s exercise, respectively, of a put option.

The put option consists of a right that each of AG and AGM have, pursuant to separate put agreements that AG 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 AG and AGM).

When AG 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 AG 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.

Effective August 1, 2024, AGM merged with and into AG, with AG as the surviving company.

Accordingly, effective as of August 1, 2024, all rights and obligations of AGM became rights and obligations of AG, including those under the CCS, and AG has the ability to exercise put options to raise up to $ 400 million of capital at any time.

The fair value of CCS, which is reported in other assets on the condensed consolidated balance sheets, represents the difference between the present value of the remaining expected put option premium payments under the put agreements, and the estimated present value of the amounts that the Company would hypothetically have to pay as of the reporting date for a comparable security.

The change in fair value of the CCS are reported in “fair value gains (losses) on committed capital securities” in the condensed consolidated statements of operations.

The estimated cost of the Company’s CCS as of the reporting date is based on several factors, including AGM and AG CDS spreads, the Company’s publicly traded debt and an estimation of the securities’ remaining term.

The CCS are classified as Level 3.

Supplemental Executive Retirement Plans

1 unchanged sentence

The fair value of these assets is based on the observable published daily values of the underlying mutual funds included in the plans (Level 1) or based upon the NAV of the funds if a published daily value is not available (Level 2).

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The NAVs are based on observable information.

8 unchanged sentences

Management considers the non-standard terms of the Company’s credit derivative contracts in determining the fair value of these contracts.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

There is no established market where financial guaranty insured credit derivatives are actively traded;

6 unchanged sentences

Credit spreads capture the effect of recovery rates and performance of underlying assets of these contracts, among other factors.

Consistent with previous years, market conditions as of March 31, 2024 were such that market prices of the Company’s CDS contracts were not available.

Consistent with previous years, market conditions as of June 30, 2024 were such that market prices of the Company’s CDS contracts were not available.

Assumptions and Inputs

7 unchanged sentences

The extent of the hedge depends on the types of instruments insured and the current market conditions.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

The Company’s own credit risk is factored into the determination of the current premium based on the quoted market price for credit protection bought on the Company, as reflected by quoted market prices on CDS contracts referencing AGC.

AGM’s CDS spreads do not significantly affect the fair value of derivatives because of the characteristics of the derivative contracts remaining in its portfolio.

The Company obtains the quoted price of CDS contracts traded on AGC from market data sources published by third parties.

As the cost to acquire CDS protection referencing AGC increases, the amount of premium the Company retains on a transaction generally decreases.

The Company obtains the quoted price of CDS contracts traded on AG from market data sources published by third parties.

As the cost to acquire CDS protection referencing AG increases, the amount of premium the Company retains on a transaction generally decreases.

In the Company’s valuation model, the current premium is not permitted to go below the minimum rate that the Company would charge to assume similar risks in the reporting period.

This assumption can have the effect of limiting the amount of unrealized gains that are recognized on certain CDS contracts.

Approximately 14.2 % and 11.5 %, based on fair value, of the Company’s CDS contracts were fair valued using this minimum premium as of March 31, 2024 and December 31, 2023, respectively.

Approximately 15.8 % and 11.5 %, based on fair value, of the Company’s CDS contracts were fair valued using this minimum premium as of June 30, 2024 and December 31, 2023, respectively.

A credit derivative liability on protection sold is the result of contractual cash inflows on in-force transactions that are lower than what a hypothetical financial guarantor could receive if it sold protection on the same risk as of the reporting date.

If the Company were able to freely exchange these contracts (i.e., assuming its contracts did not contain proscriptions on transfer and there was a viable exchange market), it would realize a loss representing the difference between the lower contractual premiums to which it is entitled and the current market premiums for a similar contract.

The Company determines the fair value of its CDS contracts by applying the difference between the current premium and the contractual premium for the remaining duration of each contract to the notional value of such contract and then discounting such amounts using the applicable discount rate corresponding to the weighted average remaining life of the contract.

The rates used to discount future expected premium cash flows ranged from 3.44 % to 5.42 % as of March 31, 2024 and 3.26 % to 4.81 % as of December 31, 2023.

The Company determines the fair value

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

of its CDS contracts by applying the difference between the current premium and the contractual premium for the remaining duration of each contract to the notional value of such contract and then discounting such amounts using the applicable discount rate corresponding to the weighted average remaining life of the contract.

The rates used to discount future expected premium cash flows ranged from 3.58 % to 4.89 % as of June 30, 2024 and 3.26 % to 4.81 % as of December 31, 2023.

The Company’s credit derivative valuation model is a consistent approach that takes into account the transaction structure and the key drivers of market value and maximizes the use of market-driven inputs whenever they are available.

2 unchanged sentences

FG VIEs include Puerto Rico Trusts and structured finance and other FG VIEs.

As of March 31, 2024 and December 31, 2023, assets in the Puerto Rico Trusts, consisted of one fixed-maturity debt security classified as Level 3.

As of June 30, 2024 and December 31, 2023, assets in the Puerto Rico Trusts, consisted of one fixed-maturity debt security classified as Level 3.

The Company elected the FVO for the Puerto Rico Trusts’ liabilities and they are classified as Level 3.

12 unchanged sentences

For those liabilities insured by the Company, the benefit of the Company’s insurance policy guaranteeing the timely payment of debt service is also taken into account.

The liabilities of

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

the Puerto Rico Trusts are priced based on the value of the assets in the Puerto Rico Trusts including the value of the U.S.

The liabilities of the Puerto Rico Trusts are priced based on the value of the assets in the Puerto Rico Trusts including the value of the U.S.

Insurance Subsidiaries’ financial guaranty policies.

2 unchanged sentences

In general, extending the timing of expected loss payments by the Company typically leads to a decrease in the value of the Company’s insurance and a decrease in the fair value of the Company’s FG VIEs’ liabilities with recourse, while a shortening of the timing of expected loss payments by the Company typically could lead to an increase in the value of the Company’s insurance and an increase in the fair value of the Company’s FG VIEs’ liabilities with recourse.

The change in fair value of FG VIEs’ assets and liabilities is reported in “fair value gains (losses) on FG VIEs” in the condensed consolidated statement of operations, except for the change in fair value attributable to change in ISCR on FG VIEs’ liabilities.

Interest income and interest expense are derived from the trustee reports and also included in “fair value gains (losses) on FG VIEs.”

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Assets and Liabilities of CIVs

10 unchanged sentences

Significant changes to any of the inputs described above could have a material effect on the fair value of the consolidated assets and liabilities.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Amounts recorded at fair value in the Company’s financial statements are presented in the tables below.

Fair Value Hierarchy of Financial Instruments Carried at Fair Value

As of March 31, 2024

As of June 30, 2024

Fair Value Hierarchy

58 unchanged sentences

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

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Changes in Level 3 Fair Value Measurements

The tables below present a roll forward of the Company’s Level 3 financial instruments carried at fair value on a recurring basis during first quarter 2024 and first quarter 2023.

The tables below present a roll forward of the Company’s Level 3 financial instruments carried at fair value on a recurring basis during second quarter 2024, second quarter 2023, six months 2024 and six months 2023.

Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis

Second Quarter 2024

Fixed-Maturity Securities, Available-for-Sale Assets of CIVs

Subdivisions RMBS Asset-

Securities FG VIEs’

Assets Equity Securities Structured Products Other

(in millions)

Fair value as of March 31, 2024 $ 6 $ 153 $ 821 $ 167 $ 89 $ 220 $ 5

Total pre-tax realized and unrealized gains (losses) recorded in:

Net income (loss) — 4 (1) 1 (1) ( 1 ) (2) 4 (4) ( 9 ) (4) 2 (3)

Other comprehensive income (loss) 2 1 6 — — — ( 1 )

Purchases — — 1 — — 22 —

Sales — — — — — ( 8 ) —

Settlements ( 1 ) ( 8 ) ( 34 ) ( 6 ) — — —

Fair value as of June 30, 2024 $ 7 $ 150 $ 795 $ 160 $ 93 $ 225 $ 6

Change in unrealized gains (losses) related to financial instruments held as of June 30, 2024 included in:

Earnings $ ( 2 ) (2) $ 5 (4) $ ( 8 ) (4) $ 2 (3)

OCI $ 2 $ 1 $ 6 $ ( 1 )

Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis

Second Quarter 2024

Credit Derivative

Liability, net (5) FG VIEs’ Liabilities (8)

(in millions)

Fair value as of March 31, 2024 $ ( 39 ) $ ( 399 )

Total pre-tax realized and unrealized gains (losses) recorded in:

Net income (loss) 6 (6) —

Other comprehensive income (loss) — 2

Settlements ( 1 ) 4

Fair value as of June 30, 2024 $ ( 34 ) $ ( 393 )

Change in unrealized gains (losses) related to financial instruments held as of June 30, 2024 included in:

Earnings $ 3 (6) $ 2 (2)

Assured Guaranty Ltd.

1 unchanged sentence

Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis

First Quarter 2024

Second Quarter 2023

Fixed-Maturity Securities, Available-for-Sale Assets of CIVs

1 unchanged sentence

Securities FG VIEs’

Assets Equity Securities Corporate Securities Structured Products Other

(in millions)

Fair value as of March 31, 2023 $ 47 $ 174 $ 795 $ 197 $ 329 $ 93 $ 17 $ 34

Total pre-tax realized and unrealized gains (losses) recorded in:

Net income (loss) 1 (1) 4 (1) ( 3 ) (1) ( 2 ) (2) 7 (4) ( 1 ) (4) — 3 (3)

Other comprehensive income (loss) ( 1 ) ( 7 ) ( 5 ) — — — — —

Purchases — — 18 — 34 2 — —

Sales — — ( 2 ) — ( 80 ) ( 10 ) ( 17 ) —

Settlements ( 1 ) ( 9 ) ( 3 ) ( 7 ) — — — ( 4 )

Fair value as of June 30, 2023 $ 46 $ 162 $ 800 $ 188 $ 290 $ 84 $ — $ 33

Change in unrealized gains (losses) related to financial instruments held as of June 30, 2023 included in:

Earnings $ ( 3 ) (2) $ ( 33 ) (4) $ — $ — $ 3 (3)

OCI $ ( 1 ) $ ( 7 ) $ ( 4 ) $ —

Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis

Second Quarter 2023

Credit Derivative

Liability, net (5) FG VIEs’ Liabilities (8) Liabilities of CIVs (9)

(in millions)

Fair value as of March 31, 2023 $ ( 148 ) $ ( 704 ) $ ( 4,220 )

Total pre-tax realized and unrealized gains (losses) recorded in:

Net income (loss) 91 (6) ( 2 ) (2) 17 (4)

Other comprehensive income (loss) — 2 ( 5 )

Settlements — 5 9

Fair value as of June 30, 2023 $ ( 57 ) $ ( 699 ) $ ( 4,199 )

Change in unrealized gains (losses) related to financial instruments held as of June 30, 2023 included in:

Earnings $ 91 (6) $ 4 (2) $ ( 2 ) (4)

OCI $ 2 $ ( 5 )

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis

Six Months 2024

Fixed-Maturity Securities, Available-for-Sale Assets of CIVs

Subdivisions RMBS Asset-

Securities FG VIEs’

Assets Equity Securities Structured Products Other

8 unchanged sentences

Transfers into Level 3 — — 20 — 3 10 —

Fair value as of March 31, 2024 $ 6 $ 153 $ 821 $ 167 $ 89 $ 220 $ 5

Change in unrealized gains (losses) related to financial instruments held as of March 31, 2024 included in:

Fair value as of June 30, 2024 $ 7 $ 150 $ 795 $ 160 $ 93 $ 225 $ 6

Change in unrealized gains (losses) related to financial instruments held as of June 30, 2024 included in:

Earnings $ ( 5 ) (2) $ 12 (4) $ ( 2 ) (4) $ ( 8 ) (3)

1 unchanged sentence

Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis

First Quarter 2024

Six Months 2024

Credit Derivative

6 unchanged sentences

Settlements — 152

Fair value as of March 31, 2024 $ ( 39 ) $ ( 399 )

Change in unrealized gains (losses) related to financial instruments held as of March 31, 2024 included in:

Fair value as of June 30, 2024 $ ( 34 ) $ ( 393 )

Change in unrealized gains (losses) related to financial instruments held as of June 30, 2024 included in:

Earnings $ 7 (6) $ 4 (2)

2 unchanged sentences

Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis

First Quarter 2023

Six Months 2023

Fixed-Maturity Securities, Available-for-Sale Assets of CIVs

11 unchanged sentences

Settlements ( 2 ) ( 16 ) ( 7 ) ( 15 ) — — — ( 4 )

Fair value as of March 31, 2023 $ 47 $ 174 $ 795 $ 197 $ 329 $ 93 $ 17 $ 34

Change in unrealized gains (losses) related to financial instruments held as of March 31, 2023 included in:

Fair value as of June 30, 2023 $ 46 $ 162 $ 800 $ 188 $ 290 $ 84 $ — $ 33

Change in unrealized gains (losses) related to financial instruments held as of June 30, 2023 included in:

Earnings $ ( 3 ) (2) $ ( 1 ) (4) $ ( 3 ) (4) $ — $ ( 13 ) (3)

1 unchanged sentence

Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis

First Quarter 2023

Six Months 2023

Credit Derivative

8 unchanged sentences

Settlements ( 1 ) 14 13

Fair value as of March 31, 2023

Fair value as of June 30, 2023

$ ( 57 ) $ ( 699 ) $ ( 4,199 )

Change in unrealized gains (losses) related to financial instruments held as of March 31, 2023 included in:

Change in unrealized gains (losses) related to financial instruments held as of June 30, 2023 included in:

Earnings $ 105 (6) $ 2 (2) $ ( 67 ) (4)

16 unchanged sentences

Quantitative Information About Level 3 Fair Value Inputs

As of March 31, 2024

As of June 30, 2024

Financial Instrument Description Fair Value Assets (Liabilities)

67 unchanged sentences

Other assets (1)

13 Year 1 loss estimates 7.8 % - 8.4 % 8.1 %

13 Implied Yield 7.8 % - 8.4 % 8.1 %

Term (years) 10 years

32 unchanged sentences

Fair Value of Financial Instruments Not Carried at Fair Value

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

As of June 30, 2024 As of December 31, 2023

Amount Estimated

10 unchanged sentences

(1) Carrying amount includes the assets and liabilities related to financial guaranty insurance contract premiums, losses and salvage and subrogation and other recoverables net of reinsurance.

Under Bermuda law, there was no Bermuda income, corporate or profits tax or withholding tax, capital gains tax or capital transfer tax payable by AGL or AG Re, AGRO and Cedar Personnel Ltd.

(collectively, the Bermuda Subsidiaries) in 2023 and first quarter 2024.

AGL is a tax resident in the U.K.

although it remains a Bermuda-based company and its administrative and head office functions continue to be carried on in Bermuda.

Under Bermuda law, there was no Bermuda income, corporate or profits tax or withholding tax, capital gains tax or capital transfer tax payable by AGL or the Bermuda Subsidiaries (collectively, AG Re, AGRO and Cedar Personnel Ltd.) in 2023 and six months 2024.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

In July of 2023, the U.K.

government passed legislation to implement the Organization for Economic Co-Operation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) Pillar Two income inclusion rule.

This includes a multinational top-up tax which will apply to large multinational corporations for accounting periods beginning on or after December 31, 2023.

This applies to AGL and its subsidiaries, requiring a minimum effective rate of 15 % in all jurisdictions in which they operate.

On December 27, 2023 the Bermuda government enacted a corporate income tax at the rate of 15 % which will apply the Bermuda Subsidiaries for accounting periods starting on or after January 1, 2025.

The enactment of the corporate income tax regime required the Company to recognize Bermuda deferred taxes for the first time and was recognized in the period that includes the date of enactment.

An economic transition adjustment (ETA) equal to the difference between the fair market value and the carrying value of assets and liabilities of each of the Company’s Bermuda insurance subsidiaries as of September 30, 2023 resulted in the establishment of a deferred tax asset and corresponding benefit of $ 189 million reported in the fourth quarter of 2023 consolidated statement of operations.

The ETA is expected to be utilized over 10 to 15 years, beginning in 2025.

AGL’s U.S., U.K.

3 unchanged sentences

domestic corporation.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

AGL is a tax resident in the U.K.

although it remains a Bermuda-based company and its administrative and head office functions continue to be carried on in Bermuda.

AGUS files a consolidated federal income tax return with all of its U.S.

2 unchanged sentences

and its subsidiaries, AGRO and AG Intermediary Inc., file their own consolidated federal income tax return.

In July of 2023, the U.K.

government passed legislation to implement the Organization for Economic Co-Operation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) Pillar Two income inclusion rule.

This includes a multinational top-up tax which will apply to large multinational corporations for accounting periods beginning on or after December 31, 2023.

This will apply to AGL and its subsidiaries, requiring a minimum effective rate of 15 % in all jurisdictions in which they operate.

In addition, on December 27, 2023 the Bermuda government enacted a corporate income tax at the rate of 15 % which will apply for accounting periods starting on or after January 1, 2025.

The enactment of the corporate income tax regime required the Company to recognize Bermuda deferred taxes for the first time and was recognized in the period that includes the date of enactment.

The ETA is expected to be utilized over 10 to 15 years, beginning in 2025.

Tax Assets (Liabilities)

Deferred and Current Tax Assets (Liabilities)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in millions)

9 unchanged sentences

When assessing recoverability of these deferred tax assets, the Company considers the ability and intent to hold the underlying securities to recovery in value, if necessary, as well as other factors as noted above.

As of March 31, 2024 and December 31, 2023, based on all available evidence, including capital loss carryback capacity, the Company concluded that the deferred tax assets related to the unrealized tax capital losses on the available-for-sale securities portfolios are, more likely than not, expected to be realized.

As of June 30, 2024 and December 31, 2023, based on all available evidence, including capital loss carryback capacity, the Company concluded that the deferred tax assets related to the unrealized tax capital losses on the available-for-sale securities portfolios are, more likely than not, expected to be realized.

Provision for Income Taxes

3 unchanged sentences

The effective tax rates reflect the proportion of income recognized by each of the Company’s operating subsidiaries, with

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

subsidiaries taxed at the U.S.

1 unchanged sentence

• the French subsidiary taxed at the French marginal corporate tax rate of 25 %,

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

• Bermuda Subsidiaries taxed at the Bermuda marginal corporate tax rate of 0 %, unless subject to U.S.

6 unchanged sentences

Effective Tax Rate Reconciliation

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions)

5 unchanged sentences

Global minimum tax 2 — 7 —

Stock based compensation — 1

Other ( 1 ) ( 2 ) ( 2 ) ( 1 )

5 unchanged sentences

Pre-tax Income (Loss) by Tax Jurisdiction

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions)

$ 87 $ 117 $ 216 $ 225

Bermuda 17 33 47 58

3 unchanged sentences

Revenue by Tax Jurisdiction

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions)

$ 166 $ 293 $ 370 $ 528

Bermuda 31 58 67 93

4 unchanged sentences

Pre-tax income by jurisdiction may be disproportionate to revenue by jurisdiction to the extent that insurance losses incurred are disproportionate.

As of March 31, 2024, AGUS had open tax years with the U.S.

As of June 30, 2024, AGUS had open tax years with the U.S.

Internal Revenue Service (IRS) for 2018 forward and is currently under audit for the 2018 and 2019 tax years.

As of March 31, 2024, Assured Guaranty Overseas US Holdings Inc.

As of June 30, 2024, Assured Guaranty Overseas US Holdings Inc.

had open tax years with the IRS for 2020 forward and is not currently under audit with the IRS.

4 unchanged sentences

The Company’s French subsidiary is not currently under examination and has open tax years of 2020 forward.

Commitments and Contingencies

Contingencies

Legal Proceedings

2 unchanged sentences

In addition, in the ordinary course of their respective businesses, certain of AGL’s insurance subsidiaries are involved in litigation with third parties to recover insurance losses paid in prior periods or prevent or reduce losses in the future.

For example, the Company is involved in a number of legal actions in the Federal District Court of Puerto Rico to enforce or defend its rights with respect to the obligations it insures of Puerto Rico and various of its related authorities and public corporations.

See the “Exposure to Puerto Rico” section of Note 3, Outstanding Exposure, for a description of such actions.

There remains one active proceeding related to PREPA, while there are a number of unresolved proceedings related to PREPA that remain stayed pending the Federal District Court of Puerto Rico’s determination on the PREPA plan of adjustment.

See Note 3, Outstanding Exposure, Exposure to Puerto Rico, for a description of such actions.

The impact, if any, of these and other proceedings on the amount of recoveries the Company receives and losses it pays in the future is uncertain, and the impact of any one or more of these proceedings during any quarter or year could be material to the Company’s results of operations in that particular quarter or year.

In first quarter 2023, the Company reduced its previously recorded accrual of $ 20 million to zero in connection with developments in litigation.

In the first quarter of 2023, the Company reduced its previously recorded accrual of $ 20 million to zero in connection with developments in litigation.

The Company also receives subpoenas and interrogatories from regulators from time to time.

On November 28, 2011, Lehman Brothers International (Europe) (in administration) (LBIE) sued AG Financial Products Inc.

(AGFP), an affiliate of AGC, which, in the past, had provided credit protection to counterparties under CDS.

AGC acts as the credit support provider of AGFP under these CDS.

(AGFP), an affiliate of AG, which, in the past, had provided credit protection to counterparties under CDS.

AG acts as the credit support provider of AGFP under these CDS.

LBIE’s complaint, which was filed in the Supreme Court of the State of New York (the Court), asserted a claim for breach of the implied covenant of good faith and fair dealing based on AGFP's termination in December 2008 of nine credit derivative transactions between LBIE and AGFP and asserted claims for breach of contract and breach of the implied covenant of good faith and fair dealing based on AGFP’s termination in July 2009 of 28 other credit derivative transactions between LBIE and AGFP and AGFP’s calculation of the termination payment in connection with those 28 other credit derivative transactions.

5 unchanged sentences

The parties reached a confidential settlement with respect to this motion for attorneys’ fees, and AGFP withdrew the motion without prejudice on October 30, 2023.

On September 22, 2023, LBIE appealed the Court’s post-trial decision to the New York Appellate Division’s First Judicial Department (Appellate Division).

On March 14, 2024, the Appellate Division affirmed the Court’s judgment.

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

2024, LBIE moved for leave to reargue its appeal before the Appellate Division or, alternatively, to appeal to the New York Court of Appeals.

The Company did not accrue in its financial statements for the judgment it was awarded or the attorneys’ fees it sought.

September 22, 2023, LBIE appealed the Court’s post-trial decision to the New York Appellate Division’s First Judicial Department (Appellate Division).

On March 14, 2024, the Appellate Division affirmed the Court’s judgment.

On April 15, 2024, LBIE moved for leave to reargue its appeal before the Appellate Division or to appeal to the New York Court of Appeals, which the Appellate Division denied on July 18, 2024.

The Company continues to evaluate developments related to this case including any issues associated with any further appeals by the plaintiff.

The Company did not accrue in its condensed consolidated financial statements for the judgment it was awarded or the attorneys’ fees it sought.

Shareholders’ Equity

2 unchanged sentences

Changes in Accumulated Other Comprehensive Income (Loss) by Component

First Quarter 2024

Second Quarter 2024

Net Unrealized Gains (Losses) on Investments with:

4 unchanged sentences

(in millions)

Balance, March 31, 2024 $ ( 231 ) $ ( 103 ) $ ( 21 ) $ ( 37 ) $ 5 $ ( 387 )

Other comprehensive income (loss) before reclassifications ( 15 ) 4 1 ( 1 ) — ( 11 )

Amounts reclassified from AOCI to:

Net realized investment gains (losses)

( 4 ) ( 2 ) — — — ( 6 )

Total before tax

( 4 ) ( 2 ) — — — ( 6 )

Tax (provision) benefit

1 ( 1 ) — — — —

Total amount reclassified from AOCI, net of tax ( 3 ) ( 3 ) — — — ( 6 )

Other comprehensive income (loss) ( 12 ) 7 1 ( 1 ) — ( 5 )

Balance, June 30, 2024 $ ( 243 ) $ ( 96 ) $ ( 20 ) $ ( 38 ) $ 5 $ ( 392 )

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited), Continued

Changes in Accumulated Other Comprehensive Income (Loss) by Component

Second Quarter 2023

Net Unrealized Gains (Losses) on Investments with:

FG VIEs’ Liabilities with Recourse Cumulative

Adjustment Cash Flow

Hedge Total AOCI

No Credit Impairment Credit Impairment

(in millions)

Balance, March 31, 2023 $ ( 254 ) $ ( 105 ) $ ( 24 ) $ ( 43 ) $ 6 $ ( 420 )

Other comprehensive income (loss) before reclassifications ( 30 ) ( 18 ) 1 1 — ( 46 )

Amounts reclassified from AOCI to:

Net realized investment gains (losses)

1 ( 10 ) — — — ( 9 )

Fair value gains (losses) on FG VIEs

— — ( 1 ) — — ( 1 )

Interest expense — — — — 1 1

Total before tax

1 ( 10 ) ( 1 ) — 1 ( 9 )

Tax (provision) benefit

( 1 ) 2 — — — 1

Total amount reclassified from AOCI, net of tax — ( 8 ) ( 1 ) — 1 ( 8 )

Other comprehensive income (loss) ( 30 ) ( 10 ) 2 1 ( 1 ) ( 38 )

Balance, June 30, 2023 $ ( 284 ) $ ( 115 ) $ ( 22 ) $ ( 42 ) $ 5 $ ( 458 )

Changes in Accumulated Other Comprehensive Income (Loss) by Component

Six Months 2024

Net Unrealized Gains (Losses) on Investments with:

FG VIEs’ Liabilities with Recourse Cumulative

Adjustment Cash Flow

Hedge Total AOCI

No Credit Impairment Credit Impairment

(in millions)

Balance, December 31, 2023 $ ( 202 ) $ ( 104 ) $ ( 20 ) $ ( 38 ) $ 5 $ ( 359 )

11 unchanged sentences

Other comprehensive income (loss) ( 41 ) 8 — — — ( 33 )

Balance, March 31, 2024 $ ( 231 ) $ ( 103 ) $ ( 21 ) $ ( 37 ) $ 5 $ ( 387 )

Balance, June 30, 2024 $ ( 243 ) $ ( 96 ) $ ( 20 ) $ ( 38 ) $ 5 $ ( 392 )

Assured Guaranty Ltd.

1 unchanged sentence

Changes in Accumulated Other Comprehensive Income (Loss) by Component

First Quarter 2023

Six Months 2023

Net Unrealized Gains (Losses) on Investments with:

11 unchanged sentences

— — ( 2 ) — — ( 2 )

Interest expense — — — — 1 1

Total before tax

4 unchanged sentences

Other comprehensive income (loss) 59 ( 5 ) 1 3 ( 1 ) 57

Balance, March 31, 2023 $ ( 254 ) $ ( 105 ) $ ( 24 ) $ ( 43 ) $ 6 $ ( 420 )

Balance, June 30, 2023 $ ( 284 ) $ ( 115 ) $ ( 22 ) $ ( 42 ) $ 5 $ ( 458 )

Share Repurchases

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

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

As of August 6, 2024, the Company was authorized to purchase $ 275 million of its common shares.

The Company expects to repurchase shares from time to time in the open market or in privately negotiated transactions.

11 unchanged sentences

2024 (January 1 - March 31) 1,539,278 129 84.07

2024 (April 1 - May 7) 750,280 61 80.70

2024 (April 1 - June 30) 1,928,328 152 78.50

2024 (July 1 - August 6) 599,497 48 79.96

Total 2024 4,067,103 $ 329 $ 80.82

5 unchanged sentences

Computation of Earnings Per Share

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions, except per share amounts)

15 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements