What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-08 · 415 added, 260 removed, 1072 unchanged (39% of the section changed)

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

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

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

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

presidential election;

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

• the possibility of a U.S.

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

(ii) geopolitical risk, terrorism and political violence risk, including those arising out of Russia’s invasion of Ukraine and intentional or accidental escalation between The North Atlantic Treaty Organization (NATO) and Russia, conflict in the Middle East and confrontation over Iran’s nuclear program, the polarized political environment of the 2024 United States (U.S.) presidential election and U.S.

– China strategic competition;

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

(iv) the possibility of a U.S.

government shutdown, payment defaults on the debt of the U.S.

government or instruments issued, insured or guaranteed by related institutions, agencies or instrumentalities, and downgrades to their credit ratings;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• the inability of Assured Guaranty to access external sources of capital on acceptable terms;

• changes in applicable accounting policies or practices;

• changes in applicable laws or regulations, including insurance, bankruptcy and tax laws, or other governmental actions;

• difficulties with the execution of Assured Guaranty’s business strategy;

• loss of key personnel;

• the effects of mergers, acquisitions and divestitures;

• natural or man-made catastrophes;

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

• other risk factors identified in AGL’s filings with the U.S.

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

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

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

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

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

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

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

(xiii) the possibility that strategic transactions made by Assured Guaranty, including the transactions with Sound Point and/or AHP and/or merger of Assured Guaranty Municipal Corp.

(AGM) with and into Assured Guaranty Inc.

(AG, formerly Assured Guaranty Corp.), do not result in the benefits anticipated or subject Assured Guaranty to negative consequences;

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

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

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

(xvii) the inability of Assured Guaranty to access external sources of capital on acceptable terms;

(xviii) changes in applicable accounting policies or practices;

(xix) changes in applicable laws or regulations, including insurance, bankruptcy and tax laws, or other governmental actions;

(xx) difficulties with the execution of Assured Guaranty’s business strategy;

(xxi) loss of key personnel;

(xxii) the effects of mergers, acquisitions and divestitures;

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

(xxiv) natural or man-made catastrophes;

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

(xxvi) other risk factors identified in AGL’s filings with the U.S.

Securities and Exchange Commission (SEC);

• other risks and uncertainties that have not been identified at this time;

• management’s response to these factors.

(xxvii) other risks and uncertainties that have not been identified at this time;

and (xxviii) management’s response to these factors.

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

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

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

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

Available Information

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

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

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

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

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

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

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

Beginning July 1, 2023, the

Company participates in the asset management business through its ownership interest in Sound Point.

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

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

The Corporate division primarily consists of:

(i) interest expense and any losses on the extinguishment of the debt of Assured Guaranty US Holdings Inc.

(AGUS) and Assured Guaranty Municipal Holdings Inc.

(AGMH) (the U.S.

Holding Companies), as well as other operating expenses attributed to holding company activities, including administrative services performed by certain subsidiaries for the holding companies.

Other activities include the effect of consolidating FG VIEs and CIVs (FG VIE and CIV consolidation).

Holding Companies);

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

Holding Companies.

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

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

Economic Environment

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

Real gross domestic product increased at an annual rate of 2.8% in the three-month period ended June 30, 2024 (second quarter 2024), compared to an increase of 1.4% in the three-month period ended March 31, 2024 (first quarter 2024), according to the second quarter 2024 advance estimate news release issued by the U.S.

Bureau of Economic Analysis.

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

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

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

unemployment rate, seasonally adjusted, stood at 4.1%, higher than where it stood at the end of first quarter 2024 at 3.8%.

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

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

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

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

before seasonal adjustment for the 12-month period ending June 2024, as measured by the Consumer Price Index for All Urban Consumers, was 3.0%, as compared to 3.5% for the 12-month period ending March 2024.

According to the United Kingdom’s (U.K.) Office for National Statistics, the Consumer Prices Index including owner occupiers’ housing costs rose 2.8% for the 12 months through June 2024, down from 3.8% for the 12 months ended March 2024.

Consumer price inflation in the U.K.

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

increases reported net par outstanding for certain U.K.

exposures with approximately $22.7 billion of net par outstanding as of June 30, 2024, and also increases projected future installment premiums on the portion of such exposure that pays at least a portion of the premium on an installment basis over the term of the exposure.

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

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

Since its July 2023 meeting, the FOMC has maintained the federal funds rate at 5.25% to 5.50%, including through its most recent meeting held July 30-31, 2024, stating that it would continue to assess additional information and its implications for monetary policy.

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

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

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

In considering any adjustments to the target range for the federal funds rate, the FOMC has indicated it will carefully assess incoming data, the evolving outlook, and the balance of risks, and that it does not expect it will be appropriate to reduce the target range until it has greater confidence that inflation is moving sustainably towards 2%.

These assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

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

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public finance.

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

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

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

The MMD rate averaged 3.82% for the quarter ended June 2024, higher than the 3.57% average for the quarter ended March 2024, and higher than the 3.41% average for the quarter ended June 2023.

Meanwhile, the difference, or credit spread, between the 30-year BBB-rated general obligation relative to the 30-year AAA MMD averaged 90 basis points (bps) in the quarter ended June 2024, which is slightly narrower than the 92 bps average for the quarter ended March 2024, and narrower than the 101 bps average for the quarter ended June 2023.

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

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

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

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

The National Association of Realtors reported that year-over-year existing-home sales decreased 5.4% from June 2023 to June 2024, while the median existing-home sales price increased 4.1% from June 2023 ($410,100) to June 2024 ($426,900).

Key Business Strategies

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and (iii) capital management.

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

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

Growth of the Insured Portfolio

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Based on Sale Date

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

Six Months 2024 Six Months 2023 Year Ended December 31, 2023

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

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

Merger of the U.S.

Insurance Subsidiaries

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

Upon the merger all liabilities of AGM, including insurance policies issued or assumed by AGM, became obligations of AG.

The Company believes that the combination of AG and AGM will simplify Assured Guaranty’s organizational and capital structure and grow its business.

The combined company, as compared with either AG or AGM before the merger, has a larger, more highly diversified insured portfolio, a larger investment portfolio and a larger capital base, creating a more efficient capital structure and greater claims-paying resources.

In addition, the combined company, as compared with either AG or AGM before the merger, has larger regulatory single risk limits.

Such limits are applicable to each financial guaranty insurer for obligations issued by a single entity and backed by a single revenue source.

Since the combined company has greater policyholder’s surplus and contingency reserves, as compared to standalone AG or AGM before the merger, the dollar amounts for its single risk limits on obligations issued by a single entity and backed by a single revenue source are also greater.

Prior to the merger, AG had been directly owned by AGUS.

As a result of the merger, effective as of August 1, 2024, AG is directly owned by AGMH, a subsidiary of AGUS.

Loss Mitigation

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

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

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

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

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

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

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

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The Company may also purchase attractively priced obligations, including below-investment-grade (BIG) obligations, that it has insured and for which it had expected losses to be paid, in order to mitigate the economic effect of insured losses (Loss Mitigation Securities).

The fair value of Loss Mitigation Securities as of March 31, 2024 (excluding the value of the Company’s insurance) was $464 million.

The fair value of Loss Mitigation Securities as of June 30, 2024 (excluding the value of the Company’s insurance) was $465 million.

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

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

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

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

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

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

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

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

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

Upon closing of the Sound Point Transaction and the AHP Transaction in July, the Company has increased the aggregate amount it has agreed to invest in alternative investments to $1.5 billion, including $1 billion in Sound Point managed investments, subject to regulatory approval.

Of the $1.5 billion, the U.S.

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

As of March 31, 2024, AGAS commitments to funds managed by Sound Point and AHP (Sound Point and AHP funds) were $772 million.

The Company has agreed to invest an aggregate amount of $1.5 billion in alternative investments, including $1 billion in Sound Point managed investments.

Capital Management

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

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

From 2013 through August 6, 2024, the Company has repurchased 148 million common shares for approximately $5.2 billion, representing approximately 76% of the total shares outstanding at the beginning of the repurchase program in 2013.

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

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

Under this and previous authorizations, as of August 6, 2024, the Company was authorized to purchase $275 million of its common shares.

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

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2024 (first quarter) 129 1.54 84.07

2024 (through May 7)

2024 (second quarter) 152 1.93 78.50

2024 (through August 6)

48 0.60 79.96

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(1) Excludes commissions and excise taxes.

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

As of June 30, 2024, the estimated accretive effect of the cumulative repurchases of common shares since the beginning of 2013 was approximately:

$51.21 per share in shareholders’ equity attributable to AGL, $55.44 per share in adjusted operating shareholders’ equity and $93.47 per share in adjusted book value.

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 AGMH.

In connection with the merger of AGM into AG, 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 AGMH in exchange for cash of $172 million and the remainder in alternative investments.

The Company considers the appropriate mix of debt and equity in its capital structure.

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Financial Results

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions, except per share amounts)

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Weighted average diluted shares 55.0 60.1 56.1 60.3

Gain (loss) related to FG VIE and CIV consolidation included in adjusted operating income $ — $ (4)

Gain (loss) related to FG VIE and CIV consolidation included in adjusted operating income per share $ — $ (0.06)

Components of total adjusted operating income (loss)

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

155 91 218 203

Gross par written 9,423 8,974 13,166 14,337

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

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

Amount Per Share Amount Per Share

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Adjusted book value (1) 8,598 161.65 8,765 155.92

Gain (loss) related to FG VIE and CIV consolidation included in adjusted operating shareholders’ equity 3 0.06 5 0.07

Gain (loss) related to FG VIE and CIV consolidation included in adjusted book value (3) (0.05) — —

Common shares outstanding (3) 53.2 56.2

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Condensed Consolidated Results of Operations

Three Months Ended March 31,

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

2024 2023 2024 2023

(in millions)

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Net income (loss) attributable to Assured Guaranty Ltd.

$ 78 $ 125 $ 187 $ 206

Effective tax rate 14.5 % 12.6 % 18.6 % 15.6 %

First Quarter 2024 Compared with First Quarter 2023

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

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

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

These increases were offset in part by:

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

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

Second Quarter 2024 Compared with Second Quarter 2023

Net income attributable to AGL for second quarter 2024 was lower compared with the three-month period ended June 30, 2023 (second quarter 2023) primarily due to:

• lower fair value gains on credit derivatives,

• foreign exchange gains on remeasurement in second quarter 2023, and

• lower fair value gains on trading securities in second quarter 2024.

These decreases were offset in part by:

• loss and LAE benefit in second quarter 2024 compared with loss and LAE in second quarter 2023, and

• employee compensation and operating expenses associated with the Sound Point Transaction and AHP Transaction of $24 million in second quarter 2023.

Six Months 2024 Compared with Six Months 2023

Net income attributable to AGL for six months 2024 was lower compared with the six-month period ended June 30, 2023 (six months 2023) primarily due to:

• lower fair value gains on credit derivatives,

• foreign exchange losses on remeasurement in six months 2024, compared with gains in six months 2023,

• lower fair value gains on CIVs, and

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

These decreases were offset in part by:

• a benefit in loss and LAE in six months 2024 compared with a loss and LAE in six months 2023,

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

• employee compensation and operating expenses associated with the Sound Point Transaction and AHP Transaction of $31 million in six months 2023.

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

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subsidiaries taxed at the U.K.

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

tax by election or as a U.S.

controlled foreign corporation.

marginal corporate tax rate of 19% prior to March 31, 2023 and 25% after April 1, 2023, the French subsidiary taxed at the French marginal corporate tax rate of 25%, and Assured Guaranty Re Ltd.

(AG Re) and Cedar Personnel Ltd.

taxed at the Bermuda marginal corporate tax rate of 0%.

Effective January 1, 2024, the U.K.

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Adjusted Operating Income

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

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

Adjusted operating income in second quarter 2024 was $80 million compared with $36 million in second quarter 2023.

The increase was primarily due to a benefit in loss expense in second quarter 2024 compared with loss expense in second quarter 2023 and employee compensation and operating expenses associated with the Sound Point Transaction and AHP Transaction in second quarter 2023, partially offset by lower fair value gains on Puerto Rico CVIs..

Adjusted operating income in six months 2024 was $193 million, compared with $104 million in six months 2023.

The increase was primarily due to a benefit in loss expense in six months 2024, compared with a loss expense in six months 2023.

employee compensation and operating expenses associated with the Sound Point Transaction and AHP Transaction in six months 2023, and higher net earned premiums from refundings in six months 2024, partially offset by the release of a litigation accrual in six months 2023..

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

Book Value and Adjusted Book Value

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

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

Shareholders’ equity attributable to AGL as of June 30, 2024 decreased compared with December 31, 2023, primarily due to share repurchases of $281 million and dividends of $36 million, offset in part by net income of $187 million.

Adjusted operating shareholders’ equity and adjusted book value also decreased primarily due to share repurchases and dividends, partially offset by operating income of $193 million and, in the case of adjusted book value, GWP of $193 million.

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

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

On a per share basis, shareholders’ equity attributable to AGL, adjusted operating shareholders’ equity and adjusted book value increased as of June 30, 2024 compared with December 31, 2023, due, in part, to the accretive effect of the share repurchase program.

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

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Consumer price inflation in the U.K.

impacts the Company directly by increasing exposure for certain index-linked U.K.

can impact the Company directly by increasing exposure for certain index-linked U.K.

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

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

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

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

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

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

In fact, the Company’s direct insurance exposure to eastern Europe generally is limited to approximately $233 million in net par outstanding as of June 30, 2024, comprising $194 million net par exposure to the sovereign debt of Poland and $39 million net par exposure to a toll road in Hungary.

The Company rates all such exposure investment grade.

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

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

The Company’s direct insurance exposure to the Middle East is generally limited to approximately $69 million in net par outstanding as of June 30, 2024, comprised of funded commitments to subscription finance facilities;

however, such exposure may increase to a total of approximately $102 million to the extent all unfunded commitments under the facilities are ultimately funded.

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Critical Accounting Estimates

The preparation of financial statements in accordance with GAAP requires the application of accounting policies that often involve a significant degree of judgment and require the Company to make estimates and assumptions, based on available information, that affect the amounts of assets, liabilities, revenues and expenses reported in the financial statements.

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

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

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

There can be no assurance that actual results

will conform to estimates and assumptions and that reported results of operations will not be materially different in the future due to changes in these estimates and assumptions.

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

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• Fair value of certain assets and liabilities, primarily:

• Investments

• Investments (primarily Loss Mitigation Securities and alternative investments)

• Assets and liabilities of CIVs

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• Impairments of equity method investments and financial instruments;

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

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

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

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Insurance Segment Results

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions)

Segment revenues

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

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

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

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

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Net Earned Premiums and Credit Derivative Revenues

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions)

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(1) Includes accretion of discount.

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

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

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

As of June 30, 2024, $3.7 billion of net deferred premium revenue on financial guaranty insurance remained to be earned over the life of the insurance contracts.

New Business Production

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New Business Production

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions)

Public finance—U.S.

$ 103 $ 78 $ 147 $ 100

Public finance—non-U.S.

3 unchanged sentences

Public finance—U.S.

$ 116 $ 77 $ 159 $ 99

Public finance—non-U.S.

6 unchanged sentences

Public finance—non-U.S.

1,572 249 1,572 609

Structured finance—U.S.

214 252 694 834

Structured finance—non-U.S.

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

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

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

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

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

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

Second Quarter 2024

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

The Company’s direct par written represented 58% of the total U.S.

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

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

municipal market insured issuance in second quarter 2024, compared with 64% in second quarter 2023, and the Company’s penetration of all municipal issuance was 5.2% in second quarter 2024 compared with 6.5% in second quarter 2023.

In second quarter 2024, non-U.S.

public finance GWP and PVP were higher than GWP and PVP in second quarter 2023 primarily due to secondary market guaranties of several U.K.

regulated utility and airport transactions in second quarter 2024.

Six Months 2024

public finance GWP and PVP in six months 2024 were higher than GWP and PVP in six months 2023, primarily due to several large transportation revenue transactions.

The Company’s direct par written represented 56% of the total U.S.

municipal market insured issuance in six months 2024, compared with 63% in six months 2023, and the Company’s penetration of all municipal issuance was 4.6% in six months 2024 compared with 5.7% in six months 2023.

Six months 2024, non-U.S.

public finance GWP and PVP were lower than GWP and PVP in six months 2023.

New business in six months 2024 primarily included secondary market guaranties of several U.K.

regulated utility and airport transactions, as well as the annual renewal of certain liquidity guarantees.

In six months 2024, structured finance GWP and PVP were $19 million and $25 million, respectively, compared with GWP and PVP of $36 million and $68 million, respectively, in six months 2023.

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

Business activity in the non-U.S.

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

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

Financial Strength Ratings

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Best Company,

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

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

Assured Guaranty Re Ltd.

AG AA (stable) (5/28/24) AA+ (stable) (10/20/23) A1 (stable) (7/10/24) —

AG Re AA (stable) (5/28/24) — — —

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

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

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

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

The fair value of such instruments as of June 30, 2024 and December 31, 2023 was $221 million and $318 million, respectively.

Equity method investments in the Insurance segment include investments that AGAS makes in certain alternative investments, primarily Sound Point and AHP funds.

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

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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 3 4 6 7

Short-term investments 19 16 38 28

Intercompany loans 3 3 5 5

Other investment assets — 2 — 2

Investment income 82 91 166 175

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CLOs $ 6 $ (3) $ 26 $ 16

Healthcare 4 8

Private healthcare investing (2) 1 2 9

Asset-based/specialty finance 7 2 11 3

Middle market direct lending 1 — 4 —

Other 3 5 12 7

Equity in earnings (losses) of investees $ 15 $ 5 $ 55 $ 35

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

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

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

Net investment income for second quarter 2024 and six months 2024 decreased compared to second quarter 2023 and six months 2023, primarily due to lower income on Loss Mitigation Securities and lower average balances in the externally managed portfolio, which were partially offset by higher short-term income as a result of higher short-term interest rates and higher average balances in the short-term investment portfolio.

The overall pre-tax book yield of available-for-sale fixed-maturity securities and short-term investments was 4.08% as of June 30, 2024 and 3.89% as of June 30, 2023.

Equity in earnings (losses) of investees for second quarter 2024 and six months 2024 increased compared to second quarter 2023 and six months 2023, primarily due to higher balances in the alternative investment portfolio and fair value gains on alternative investments.

Other Income (Loss)

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

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

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

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

Economic Loss Development

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

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

denominated exposures were 4.55% and 4.10% as of June 30, 2024 and December 31, 2023, respectively.

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

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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)

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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) (2)

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) (2)

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) (2)

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

Six Months 2023

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

Development (Benefit) (2)

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.”

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

First Quarter 2024 Net Economic Loss Development

(2) Effect of changes in the risk-free rates included in economic loss development (benefit) was a loss of $1 million in second quarter 2024, a benefit of $6 million in second quarter 2023, a benefit of $2 million in six months 2024 and a loss of $4 million in six months 2023.

Second Quarter 2024 Net Economic Loss Development

Public Finance:

The economic benefit on U.S.

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

The economic loss development on U.S.

and non-U.S public finance exposures in second quarter 2024 was $12 million and $17 million, respectively, and was primarily attributable to certain healthcare exposures.

The economic benefit attributable to U.S.

RMBS was $10 million and was primarily attributable to a $4 million benefit from improved transaction performance, $4 million of higher recoveries for secured second lien charged-off loans and a $2 million benefit from changes in discount rates.

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

Second Quarter 2023 Net Economic Loss Development

Public Finance:

The economic loss development on U.S.

exposures in second quarter 2023 was $57 million and was primarily attributable to $78 million for certain Puerto Rico and healthcare exposures, partially offset by higher projected recoveries of $21 million in other municipal exposures.

The economic benefit attributable to U.S.

RMBS was $9 million and was primarily attributable to a $7 million benefit related to higher recoveries for secured second lien charged-off loans, a $5 million benefit related to improved performance in certain transactions, and $3 million benefit related to changes in discount rates, partially offset by losses of $6 million related to lower excess spread.

Six Months 2024 Net Economic Loss Development

Public Finance:

The economic loss development on U.S.

public finance exposures in six months 2024 was $9 million and $17 million, respectively, and was primarily attributable to certain healthcare exposures.

The economic benefit attributable to U.S.

RMBS was $13 million and was mainly attributable to an $8 million benefit related to higher recoveries for second lien charged-off loans, a $4 million benefit related to improved performance in certain transactions and a $4 million benefit related to changes in discount rates, partially offset by a $3 million loss related to lower excess spread.

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

Six Months 2023 Net Economic Loss Development

Public Finance:

The economic loss development on U.S.

public finance exposures in six months 2023 was $58 million, which was primarily attributable to $81 million for certain Puerto Rico and healthcare exposures, partially offset by higher projected recoveries of $23 million in other municipal exposures.

The net benefit attributable to U.S.

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

First Quarter 2023 Net Economic Loss Development

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

RMBS was $4 million and was mainly attributable to a $14 million benefit related to higher recoveries for second lien charged-off loans, and a $9 million benefit related to improved performance in certain transactions, partially offset by a $15 million loss related to the return of certain funds previously received, a $2 million loss related to changes in discount rates and a $2 million loss related to lower excess spread.

Insurance Segment Loss Expense

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Transactions (particularly BIG transactions) acquired in business combinations or seasoned portfolios assumed from legacy financial guaranty insurers generally have the largest deferred premium revenue balances.

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

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

To the extent that a BIG transaction has a large deferred premium revenue, the difference between economic development and loss and LAE may be significant.

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

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

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Loss Expense (Benefit)

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions)

1 unchanged sentence

Structured finance:

RMBS (6) (3) (4) 3

Other structured finance 3 2 4 4

1 unchanged sentence

Total Insurance segment loss expense (benefit) $ — $ 44 $ 4 $ 53

Employee Compensation and Benefit Expenses and Other Operating Expenses

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

Asset Management Segment Results

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions)

5 unchanged sentences

Segment adjusted operating income (loss) $ — $ (2) $ 1 $ (3)

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

Results in the table above represent (i) asset management and performance fees, amortization of intangible assets and compensation and other operating expenses of AssuredIM in second quarter 2023 and six months 2023, (ii) losses from Sound Point of $3 million in second quarter 2024 and $1 million in six months 2024 (Sound Point results are reported on a one quarter lag), net of the amortization of finite-lived intangible assets associated with the basis difference in Sound Point, (iii) an impairment loss of $3 million in six months 2024 for a smaller financial services advisory firm with a carrying value of $4 million and (iv) other asset management related income.

Corporate Division Results

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions)

12 unchanged sentences

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

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

The decrease in operating expenses in second quarter 2024 and six months 2024 compared with second quarter 2023 and six months 2023 was primarily due to expenses related to the Sound Point Transaction and AHP Transaction in 2023, and a value added tax adjustment in six months 2023, partially offset by increases in premises related expenses.

Transaction related expenses in the Corporate division for Sound Point and AHP were $21 million for second quarter 2023 and $25 million for six months 2023.

Other (Effect of Consolidating FG VIEs and CIVs)

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The types of entities the Company consolidates when it is deemed to be the primary beneficiary primarily include:

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

(ii) Puerto Rico Trusts;

(i) Puerto Rico Trusts;

(ii) other entities whose debt obligations the insurance subsidiaries insure;

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

7 unchanged sentences

(ii) eliminating the asset management fees earned by AssuredIM from the CIVs (prior to July 1, 2023);

(iii) eliminating the equity method investments of the insurance subsidiaries and related equity in earnings (losses) of investees;

(iii) eliminating the equity method investments of the insurance subsidiaries and AGAS, and related equity in earnings (losses) of investees;

and (iv) establishing noncontrolling interest for amounts not owned by the Company.

5 unchanged sentences

Increase (Decrease)

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

Effect on Financial Statement Line Item (in millions)

10 unchanged sentences

FG VIEs $ (1) $ (13) $ (2) $ (15)

CIVs — (5) 1 (7)

Effect on net income (loss) attributable to AGL $ (1) $ (18) $ (1) $ (22)

2 unchanged sentences

(2) Represents the elimination of the equity in earnings (losses) of investees of AGAS and the other subsidiaries’ investments in certain alternative investments, primarily Sound Point and AHP funds (and prior to July 1, 2023, AssuredIM managed funds).

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

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

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

2 unchanged sentences

to Adjusted Operating Income (Loss)

First Quarter

(in millions)

Second Quarter 2024 Second Quarter 2023

Total Per Diluted Share Total Per Diluted Share

(in millions, except per share amounts)

Net income (loss) attributable to AGL $ 78 $ 1.41 $ 125 $ 2.06

8 unchanged sentences

Gain (loss) related to FG VIE and CIV consolidation (net of tax provision (benefit) of $0 and $(5)) included in adjusted operating income $ (1) $ (0.03) $ (18) $ (0.30)

Six Months 2024 Six Months 2023

Total Per Diluted Share Total Per Diluted Share

(in millions, except per share amounts)

Net income (loss) attributable to AGL $ 187 $ 3.31 $ 206 $ 3.40

Less pre-tax adjustments:

Realized gains (losses) on investments 2 0.04 (11) (0.17)

Non-credit impairment-related unrealized fair value gains (losses) on credit derivatives 13 0.23 103 1.68

Fair value gains (losses) on CCS (9) (0.16) (15) (0.25)

Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves (12) (0.21) 46 0.75

Total pre-tax adjustments (6) (0.10) 123 2.01

Less tax effect on pre-tax adjustments — — (21) (0.33)

Adjusted operating income (loss) $ 193 $ 3.41 $ 104 $ 1.72

Gain (loss) related to FG VIE and CIV consolidation (net of tax provision (benefit) of $0 and $(6)) included in adjusted operating income $ (1) $ (0.02) $ (22) $ (0.35)

Net Realized Investment Gains (Losses)

1 unchanged sentence

Net Realized Investment Gains (Losses)

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions)

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

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

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

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

Other net realized gains (losses) 1 — 1 —

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

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

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

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

Second quarter 2024 and six months 2024 non-credit impairment-related unrealized fair value gains were generated primarily due to the termination of certain structured finance policies.

Second quarter 2023 and six months 2023 non-credit impairment-related unrealized fair value gains were primarily generated by lower collateral asset spreads.

For six months 2023, the increased cost to buy protection on AG, as the market cost of AG’s credit protection increased during the period, also contributed to the gain.

Fair Value Gains (Losses) on CCS

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

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

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

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

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

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

dollar, primarily the pound sterling and euro.

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Dollar Per Foreign Currency

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

As of June 30, 2024 As of December 31, 2023 As of June 30, 2023 As of December 31, 2022

Pound sterling $1.265 $1.273 $1.270 $1.208

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to Adjusted Operating Shareholders’ Equity and Adjusted Book Value

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

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

Total Per Share Total Per Share

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The discount rate is recalculated annually and updated as necessary.

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

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

There is no corresponding GAAP financial measure.

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Reconciliation of GWP to PVP

First Quarter 2024 First Quarter 2023

Second Quarter 2024 Second Quarter 2023

Public Finance Structured Finance Public Finance Structured Finance

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PVP $ 116 $ 33 $ 4 $ 2 $ 155 $ 77 $ 6 $ 3 $ 5 $ 91

Six Months 2024 Six Months 2023

Public Finance Structured Finance Public Finance Structured Finance

(in millions)

GWP $ 147 $ 27 $ 15 $ 4 $ 193 $ 100 $ 45 $ 33 $ 3 $ 181

Installment GWP and other GAAP adjustments (1) 97 15 14 4 130 49 42 33 3 127

Upfront GWP 50 12 1 — 63 51 3 — — 54

Installment premiums and other (2) 109 22 18 6 155 48 33 30 38 149

PVP $ 159 $ 34 $ 19 $ 6 $ 218 $ 99 $ 36 $ 30 $ 38 $ 203

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

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

Six months 2023 also includes the present value of future premiums and fees associated with other guaranties written by the Company that, under GAAP, are accounted for under ASC 460, Guarantees.

Insured Portfolio

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The following table presents the financial guaranty portfolio by sector, net of cessions to reinsurers.

It includes all financial guaranty contracts outstanding as of the dates presented, regardless of the form written (i.e., credit derivative form or traditional financial guaranty insurance form) or the applicable accounting model (i.e., insurance, derivative or FG VIE consolidation).

Financial Guaranty Portfolio

Net Par Outstanding by Sector

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

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

Sector (dollars in millions)

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Total net par outstanding $ 254,396 $ 249,153

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

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

financial guarantor.

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

Exposure to Puerto Rico

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Exposure to Puerto Rico by Company

As of March 31, 2024

As of June 30, 2024

Net Par Outstanding

AGM AGC AG Re Eliminations (1) Total

AGM AG AG Re Eliminations (1) Total

Net Par Outstanding Gross

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(1) Net par outstanding eliminations relate to second-to-pay policies under which an Assured Guaranty insurance subsidiary guarantees an obligation already insured by another Assured Guaranty insurance subsidiary.

(1) Net par outstanding eliminations relate to second-to-pay policies under which an Assured Guaranty insurance subsidiary guaranteed an obligation already insured by another Assured Guaranty insurance subsidiary.

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

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Amortization Schedule of Net Par of Puerto Rico

As of March 31, 2024

As of June 30, 2024

Scheduled Net Par Amortization

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

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

(in millions)

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Amortization Schedule of Net Debt Service of Puerto Rico

As of March 31, 2024

As of June 30, 2024

Scheduled Net Debt Service Amortization

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

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

(in millions)

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Total $ 131 $ 3 $ 124 $ 177 $ 151 $ 106 $ 282 $ 170 $ 106 $ 1,250

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

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

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

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

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

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

Liquidity and Capital Resources

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holding company with public debt outstanding.

AGUS directly owns:

(i) AGC, an insurance company domiciled in Maryland;

and (ii) AGMH, a U.S.

AGUS directly owns AGMH, a U.S.

holding company with public debt outstanding.

AGMH directly owns AGM, an insurance subsidiary domiciled in New York.

As of August 1, 2024, AGMH directly owns AG, an insurance company domiciled in Maryland.

Until August 1, 2024, AGMH directly owned AGM, an insurance company domiciled in New York.

See “— Overview — Key Business Strategies — Merger of the U.S.

Insurance Subsidiaries” above.

AGUS and AGMH are collectively referred to as the U.S.

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The liquidity of AGL and its U.S.

Holding Companies is largely dependent on dividends and other distributions from their operating subsidiaries (see “— Insurance Subsidiaries — Distributions from Insurance Subsidiaries” below for a description of dividend and other capital distribution restrictions) and their access to external financing.

Holding Companies is largely dependent on dividends, stock redemptions and other distributions from their operating subsidiaries (see “— Insurance Subsidiaries — Distributions from Insurance Subsidiaries” below) and their access to external financing.

The operating liquidity requirements of AGL and the U.S.

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Holding Companies may also require liquidity to:

• make capital investments in their operating subsidiaries;

• make capital investments in their operating subsidiaries and in alternative investments;

• fund acquisitions of new businesses;

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Long-Term Debt and Intercompany Loans

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

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

(in millions)

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AGUS - intercompany loans from:

AGC and AGM 3.50% 2029 250 250

AG and AGM 3.50% 2029 250 250

AGRO 5.00% 2028 20 20

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Holding Companies, excluding their investments in subsidiaries.

As of March 31, 2024

As of June 30, 2024

Holding Companies

(in millions)

Assets, excluding investments in subsidiaries

Fixed-maturity securities (1) $ 17 $ 3

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____________________

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

(1) As of June 30, 2024, weighted average durations of AGL’s and the U.S.

Holding Companies’ fixed-maturity securities (excluding AGUS’s investment in AGMH’s debt) were 9.2 years and 3.8 years, respectively.

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

First Quarter 2024

Six Months 2024

Holding Companies

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Income (loss) before provision for income taxes and equity in earnings (losses) of investees (23) (52)

Net income (loss) (12) (22)

Net income (loss) excluding investments in subsidiaries (23) (45)

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

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Selected Cash Flow Items

First Quarter 2024

Six Months 2024

Holding Companies

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Distributions from equity method investees (2) — 17

Interest on intercompany loans — (1)

Interest paid — (50)

Investments in subsidiaries — (8)

Redemption of stock by AGM — 100

Dividends paid to AGL — (290)

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The Company has several insurance subsidiaries.

Insurance Subsidiaries consist of AGM and AGC.

AG is an insurance subsidiary domiciled in Maryland.

As of August 1, 2024, AG owns:

(i) AGUK, an insurance subsidiary domiciled in the U.K;

and (ii) AGE, an insurance company domiciled in France.

Until August 1, 2024, AGM was an insurance subsidiary of the Company domiciled in New York.

See “— Overview — Key Business Strategies — Merger of the U.S.

Insurance Subsidiaries” above.

AGUK and AGE are collectively referred to as the European Insurance Subsidiaries.

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• dividends or other distributions to parent,

• reinsurance premiums,

• principal of, and interest on, surplus notes, where applicable, and

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

• reinsurance premiums, and

• capital investments in their own subsidiaries and in alternative investments.

Management believes that the insurance subsidiaries’ liquidity needs for the next twelve months can be met from current cash, short-term investments and operating cash flow, including premium collections and coupon payments as well as scheduled maturities and paydowns from their respective investment portfolios.

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

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

As of June 30, 2024, the Company intended to hold and had the ability to hold securities in an unrealized loss position until the date of anticipated recovery of amortized cost.

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

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Payments made in settlement of the Company’s obligations arising from its insured portfolio may, and often do, vary significantly from year to year, depending primarily on the frequency and severity of payment defaults and whether the Company chooses to accelerate its payment obligations in order to mitigate future losses.

For example, the Company made substantial claim payments in 2022 in connection with the resolution of certain Puerto Rico credits.

For example, the Company made substantial claim payments in 2022 in connection with the resolution of certain Puerto Rico credits, and will continue to pay the debt service on the remaining PRHTA insured obligations with a net par of $228 million as of June 30, 2024.

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

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

The Company had $624 million in insured net par outstanding of PREPA obligations as of June 30, 2024.

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

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

Distributions From Insurance Subsidiaries to Holding Companies

Ordinary Dividends From Insurance Subsidiaries to Holding Companies

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

The insurance subsidiaries’ ability to pay dividends depends upon their financial condition, results of operations, cash requirements, other potential uses for such funds and compliance with rating agency requirements, and is also subject to restrictions contained in the insurance laws and related regulations of their states of domicile.

For more information, see Part II, Item 8, Financial Statements and Supplementary Data, Note 15, Insurance Company Regulatory Requirements, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for a complete discussion of the Company’s dividend restrictions applicable to AGC, AGM, AG Re and AGRO.

Dividend restrictions by insurance subsidiary are as follows:

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

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

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

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

Distributions From Insurance Company Subsidiaries

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

See “— Overview — Key Business Strategies — Merger of the U.S.

Insurance Subsidiaries” above.

The Company expects the remaining amount of ordinary dividends available for distribution by AG, as the surviving company, in the second half of 2024 to be approximately $291.3 million.

This expected amount, when combined with the respective $49.2 million and $59.1 million ordinary dividend amounts paid by AGM and AG (together, the U.S.

Insurance Subsidiaries) in 2024 prior to the merger, would aggregate to $399.6 million of total ordinary dividends available to be paid by the U.S.

Insurance Subsidiaries in 2024.

• Based on the applicable law and regulations, in 2024 AG Re (a subsidiary of AGL) paid dividends of $47 million in the first six months of the year and has the capacity to (i) make capital distributions in an aggregate amount up to $129 million without the prior approval of the Bermuda Monetary Authority and (ii) declare and pay dividends in an aggregate amount up to approximately $226 million as of June 30, 2024.

Such dividend capacity is further limited by (i) the actual amount of AG Re’s unencumbered assets, which amount changes from time to time due in part to collateral posting requirements and which was approximately $203 million as of June 30, 2024, and (ii) the amount of statutory surplus, which as of June 30, 2024 was $36 million.

Ordinary Dividends

From Insurance Company Subsidiaries

to Holding Companies

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions)

Dividends paid by AG Re to AGL $ — $ 29 $ 47 $ 29

Dividends paid by AGC to AGUS 35 20

Dividends paid by AG to AGUS (1) 24 24 59 44

Dividends paid by AGM to AGMH 2 — 49 40

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(1) Prior to the merger of AGM with and into AG, with AG as the surviving company, AG had been directly owned by AGUS.

As a result of the merger, effective as of August 1, 2024, AG is directly owned by AGMH, a subsidiary of AGUS.

Stock Redemptions by Insurance Subsidiaries

In May 2024, NYDFS approved, and AGM implemented, the redemption of approximately $100 million of its shares of common stock from AGMH.

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

Committed Capital Securities

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

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

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

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

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

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

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

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

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

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 access, at its discretion, up to $400 million of capital at any time under the CCS arrangement.

Investment Portfolio

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Carrying Value

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in millions)

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

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

The Company’s available-for-sale fixed-maturity securities had a duration of 4.1 years and 3.9 years as of June 30, 2024 and December 31, 2023, respectively.

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

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

The following table summarizes the ratings distributions of the Company’s available-for-sale fixed-maturity securities as of June 30, 2024 and December 31, 2023.

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

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

Rating March 31, 2024 December 31, 2023

Rating June 30, 2024 December 31, 2023

AAA 13.3 % 13.3 %

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

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

As of June 30, 2024 and December 31, 2023, three of the funds in which the Company invests are consolidated and the remaining are accounted as equity method investments in the Company’s condensed consolidated financial statements.

See “— Commitments” below.

Investment in Assets Managers and Alternative Investments by Strategy

As of March 31, 2024

As of June 30, 2024

Investments Consolidation Adjustments (1) Consolidated

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CLOs (2) 363 (248) 115

Healthcare 137 — 137

Private healthcare investing 136 — 136

Asset-based/specialty finance 152 (64) 88

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____________________

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

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

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

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(3) Includes $30 million in alternative investments reported in fixed-maturity securities, available-for-sale, on the condensed consolidated balance sheets.

Investment in Assets Managers and Alternative Investments by Strategy

Investment in Asset Managers and Alternative Investments by Strategy

As of December 31, 2023

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CLOs (2) 315 (223) 92

Healthcare 102 — 102

Private healthcare investing 102 — 102

Asset-based/specialty finance 166 (82) 84

3 unchanged sentences

____________________

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

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

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

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Change in Fair Value of Alternative Investments by Strategy

First Quarter 2024

Second Quarter 2024

Investments Consolidation Adjustments (1) Consolidated

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Sound Point $ (3) $ — $ (3)

Private healthcare investing (2) — (2)

Asset-based/specialty finance 7 (4) 3

Middle market direct lending 1 — 1

Total $ 13 $ (7) $ 6

____________________

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

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

Change in Fair Value of Alternative Investments by Strategy

Second Quarter 2023

Investments Consolidation Adjustments (1) Consolidated

(in millions)

CLOs $ (3) $ 3 $ —

Healthcare 4 — 4

Private healthcare investing 1 (1) —

Asset-based/specialty finance 2 (2) —

Total $ 6 $ — $ 6

____________________

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

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

Change in Fair Value of Alternative Investments by Strategy

Six Months 2024

Investments Consolidation Adjustments (1) Consolidated

(in millions)

Sound Point $ 1 $ — $ 1

CLOs 28 (18) 10

Private healthcare investing 2 — 2

Asset-based/specialty finance 11 (6) 5

Middle market direct lending 5 — 5

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____________________

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

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

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

Change in Fair Value of Alternative Investments by Strategy

First Quarter 2023

Six Months 2023

Investments Consolidation Adjustments (1) Consolidated

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CLOs $ 16 $ (16) $ —

Healthcare 8 (8) —

Asset-based 1 (1) —

Private healthcare investing 9 (9) —

Asset-based/specialty finance 3 (3) —

Total $ 36 $ (28) $ 8

____________________

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

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

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

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

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

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

The Company has agreed to invest an aggregate amount of $1.5 billion in alternative investments, including the $1 billion in Sound Point managed investments.

Unfunded commitments as of June 30, 2024 were $734 million.

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

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

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

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

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

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

Restricted Assets

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

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

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 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.

Lease Obligations

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

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

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

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

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

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

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

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

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The assets of the CIVs are not available to creditors of the Company, other than creditors of the applicable CIVs.

In addition, creditors of the CIVs have no recourse against the assets of the Company, other than the assets of such applicable CIVs.

In addition, creditors

of the CIVs have no recourse against the assets of the Company, other than the assets of such applicable CIVs.

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.

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Summarized Condensed Consolidated Cash Flows

First Quarter

Second Quarter Six Months

2024 2023 2024 2023

(in millions)

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

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

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

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

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

Cash flows from operations, excluding FG VIEs and CIVs, was an outflow of $4 million in six months 2024 and an outflow of $7 million in six months 2023.

The decrease in cash outflows, other than those of the FG VIEs and CIVs, during six months 2024 was primarily due to $68 million increase in premiums received, $15 million increase in return on capital from equity method investees, $14 million increase in interest on short-term investments and Sound Point Transaction and AHP Transaction expenses in 2023, which were partially offset by a $56 million increase in tax payments, a $49 million increase in net claim payments and inclusion of cash flows for asset management subsidiaries in the six months 2023 prior to the Sound

Point Transaction.

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

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

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

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

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

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

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

In six months 2024, investing inflows were used to fund claim payments and share repurchases.

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

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

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

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

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

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

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

From July 1, 2024 through August 6, 2024, the Company repurchased an additional 599,497 of common shares.

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

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis