What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-12 compared with 2024-08-08 · 320 added, 284 removed, 1203 unchanged (33% of the section changed)

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(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;

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(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;

(vii) the possibility that budget or pension shortfalls, difficulties in obtaining additional financing or other factors will result in credit losses or liquidity claims on obligations of state, territorial and local governments, their related authorities, public corporations and other obligors 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.

(x) the possibility that underwriting insurance in new jurisdictions and/or covering new sectors or classes of business does not result in the benefits anticipated or subjects Assured Guaranty to negative consequences;

(xi) 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;

(xii) 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;

(xiii) 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;

(xiv) 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.

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

(xvi) 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);

(xvii) 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;

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

(xix) changes in applicable accounting policies or practices;

(xx) changes in applicable laws or

regulations, including insurance, bankruptcy and tax laws, or other governmental actions;

(xxi) the possibility that legal or regulatory decisions or determinations subject obligations that Assured Guaranty insures or reinsures to negative consequences;

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

(xxiii) loss of key personnel;

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

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

(xxvi) natural or man-made catastrophes;

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

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

Securities and Exchange Commission (SEC);

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

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

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

and (xxx) 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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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.

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Holding Companies);

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

Holding Companies.

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

Holding Companies, and (iii) beginning in the three-month period ended September 30, 2024 (third quarter 2024), equity in earnings from certain alternative investments that were transferred from AG to AGMH as part of the share redemption that occurred on August 5, 2024 in connection with the merger of AGM with and into AG, as discussed below.

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.

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Economic Environment

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.

Real gross domestic product increased at an annual rate of 2.8% in the third quarter 2024, compared to an increase of 3.0% in the three-month period ended June 30, 2024 (second quarter 2024), according to the third quarter 2024 advance estimate news release issued by the U.S.

Bureau of Economic Analysis.

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%.

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

unemployment rate, seasonally adjusted, stood at 4.1%, the same as where it stood at the end of second quarter 2024.

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 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.

before seasonal adjustment for the 12-month period ending September 2024, as measured by the Consumer Price Index for All Urban Consumers, was 2.4%, as compared to 3.0% for the 12-month period ending June 2024.

According to the United Kingdom’s (U.K.) Office for National Statistics, the Consumer Prices Index including owner occupiers’ housing costs rose 2.6 % for the 12 months through September 2024, down from 2.8% for the 12 months ended June 2024.

The Company believes that higher inflation may put pressure on the budgets of obligors whose obligations it guarantees and make defaults more likely.

In addition, 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 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 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%.

exposures with approximately $24.0 billion of net par outstanding as of September 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.

At its September 17-18, 2024 meeting, the Federal Open Market Committee (FOMC) decided to lower the federal funds rate by 0.50% to a range of 4.75% to 5.00%, which was a reversal of the rate increases it had initiated in March 2022 to combat inflation.

The federal funds rate is the rate at which banks lend to and borrow from each other, is the benchmark for most interest rates, and tends to influence mortgage rates.

As the federal funds rate decreases, interest rates, including mortgage rates, tend to follow.

At its November 6-7, 2024 meeting, the FOMC further lowered the federal funds rate by 0.25% to a range of 4.50% to 4.75%, stating that it seeks to achieve maximum employment and inflation at the rate of 2% over the longer run, and that the risks to achieving its employment and inflation goals are roughly in balance.

In considering additional 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.

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.

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

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

municipal bond transactions.

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

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

On the other hand, lower interest rates may decrease the base on which the Company charges up-front premium on most new U.S.

municipal bond transactions and may also decrease amounts the Company can earn on fixed-maturity securities newly acquired for its investment portfolio.

Lower interest rates also are often accompanied by narrower spreads, which may also decrease the level of premiums the Company can charge for those products.

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

public finance.

The MMD rate averaged 3.82% 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 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).

The MMD rate averaged 3.60% for third quarter 2024, lower than the 3.82% average for second quarter 2024, and lower than the 3.77% average for the quarter ended September 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 third quarter 2024, which is flat compared to the 90 bps average for second quarter 2024, and narrower

than the 101 bps average for the quarter ended September 2023.

The Company believes that wider spreads could permit it to increase its premium rates on new business.

According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.08% as of September 26, 2024, down from 7.31% one year ago.

The Company believes that, despite recent decreases in mortgage interest rates, restricted housing inventory continues to influence home prices where demand outpaces supply.

Higher 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 decreased 3.5% from September 2023 to September 2024, while the median existing-home sales price increased 3.0% from September 2023 ($392,700) to September 2024 ($404,500).

Key Business Strategies

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The low interest rate environment and tight U.S.

municipal credit spreads from when the financial crisis began in 2008 through early 2020 dampened demand for bond insurance compared to the levels before the financial crisis.

municipal credit spreads from when the financial crisis began in 2008 through early 2020 dampened demand for bond insurance compared with the levels before the financial crisis.

After the onset of the COVID-19 pandemic in early 2020, credit spreads initially widened as a result of market concerns about the impact of the COVID-19 pandemic on some municipal credits, thereby improving demand for financial guaranty insurance even in a low interest rate environment, before narrowing again in 2022.

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Based on Sale Date

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

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

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

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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 Company believes that Assured Guaranty’s simplified organizational and capital structure following the merger will help it 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.

Such limits are applicable to each individual 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.

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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.

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.

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

For example, the Company initiated a number of

legal actions to enforce its rights with respect to obligations of the Commonwealth of Puerto Rico and various obligations of its related authorities and public corporations.

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).

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For more information about developments in Puerto Rico and related recovery litigation being pursued by the Company, see Item 1, Financial Statements, Note 3, Outstanding Exposure, and the “—Insured Portfolio” section below.

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

The Company is, and for several years has been, working with the servicers of some of the U.S.

RMBS transactions it insures to encourage the servicers to provide alternatives to distressed borrowers that will encourage them to continue making payments on their loans to help improve the performance of the related RMBS.

For public finance credits, the Company’s surveillance function monitors and proactively engages with the distressed credits to offer assistance aimed to improve operations and financial performance, including access to external consultants and other industry experts.

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 June 30, 2024 (excluding the value of the Company’s insurance) was $465 million.

The fair value of Loss Mitigation Securities as of September 30, 2024 (excluding the value of the Company’s insurance) was $468 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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The Company has developed strategies to efficiently manage capital within the Assured Guaranty group.

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

From 2013 through November 8, 2024, the Company has repurchased 150 million common shares for approximately $5.3 billion, representing approximately 77% of the total shares outstanding at the beginning of the repurchase program in 2013.

On May 2, 2024 and November 8, 2024, the AGL Board of Directors (the Board) authorized the repurchase of an additional $300 million and $250 million, respectively, of the Company’s common shares.

Under this and previous authorizations, as of November 8, 2024, the remaining amount the Company was authorized to purchase was approximately $385 million of its common shares.

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

The timing, form and amount of the share repurchases under the program are at the discretion of management and will depend on a variety of factors, including funds available at the parent company, other potential uses for such funds, market conditions, the Company’s capital position, legal requirements and other factors.

The repurchase program may be modified, extended or terminated by the Board at any time and it does not have an expiration date.

The repurchase program may be modified,

extended or terminated by the Board at any time and it does not have an expiration date.

See Item 1, Financial Statements, Note 12, Shareholders’ Equity, for additional information about the Company’s repurchases of its common shares.

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2024 (second quarter) 152 1.93 78.50

2024 (through August 6)

2024 (third quarter) 131 1.66 78.87

2024 (through November 8)

58 0.69 83.61

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(1) Excludes commissions and excise taxes.

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

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

$56.63 per share in shareholders’ equity attributable to AGL, $58.75 per share in adjusted operating shareholders’ equity and $97.75 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.

In May 2024, the New York State Department of Financial Services (NYDFS) approved, and AGM implemented, the redemption of approximately $100 million of AGM’s shares of common stock from AGMH.

In connection with the merger of AGM into AG, the Maryland Insurance Administration (MIA) approved, and in third quarter 2024 AG implemented, the redemption of approximately $300 million of AG’s shares of common stock from AGMH in exchange for cash of $167 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

Second Quarter Six Months

Third Quarter Nine Months

2024 2023 2024 2023

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Gross par written 7,437 5,948 20,603 20,285

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

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

Amount Per Share Amount Per Share

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Condensed Consolidated Results of Operations

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

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

2024 2023 2024 2023

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Fair value gains (losses) on trading securities 9 4 52 42

Gain on sale of asset management subsidiaries — 255 — 255

Other income (loss) 12 6 22 38

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Effective tax rate 19.9 % 21.4 % 19.2 % 18.1 %

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:

Third Quarter 2024 Compared with Third Quarter 2023

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

• a benefit in net loss and LAE in third quarter 2024 of $51 million, compared with loss and LAE of $100 million in third quarter 2023, and

• foreign exchange gains on remeasurement of $55 million in third quarter 2024, compared with foreign exchange losses of $39 million in third quarter 2023.

These increases were offset in part by:

• the gain associated with the Sound Point Transaction and AHP Transaction, net of transaction expenses, of $241 million (pre-tax) in third quarter 2023.

Nine Months 2024 Compared with Nine Months 2023

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

• the gain associated with the Sound Point Transaction and AHP Transaction, net of transaction expenses, of $215 million (pre-tax) in nine months 2023,

• 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.

• lower net investment income primarily due to lower income on Loss Mitigation Securities, which were partially offset by higher short-term income, and

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

• a benefit in net loss and LAE in nine months 2024 of $54 million, compared with loss and LAE of $159 in nine months 2023,

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

• higher foreign exchange gains on remeasurement of $43 million in nine months 2024, compared with $9 million in nine 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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Adjusted Operating Income

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..

Adjusted operating income in third quarter 2024 was $130 million compared with $206 million in third quarter 2023.

The decrease was primarily due to the gain associated with the Sound Point Transaction and AHP Transaction in third quarter 2023, offset in part by a benefit in loss expense in third quarter 2024 compared with loss expense in third quarter 2023.

Adjusted operating income in nine months 2024 was $323 million, compared with $310 million in nine months 2023.

The increase was primarily due to a benefit in loss expense in nine months 2024, compared with a loss expense in nine months 2023, offset in part by a gain from the Sound Point Transaction and AHP Transaction in nine 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 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.

Shareholders’ equity attributable to AGL as of September 30, 2024 increased compared with December 31, 2023, primarily due to net income of $358 million and other comprehensive income of $128 million, offset in part by share repurchases of $412 million and dividends of $52 million.

Adjusted operating shareholders’ equity and adjusted book value decreased primarily due to share repurchases and dividends, partially offset by operating income of $323 million and, in the case of adjusted book value, GWP of $254 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 June 30, 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 September 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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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.

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

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

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For example, higher interest rates are often accompanied by wider credit spreads, which may make the Company’s credit enhancement products more attractive in the market and increase the level of premiums it can charge for that product.

Despite the recent increases in interest rates since 2022, the pace of credit spread widening was more modest and market penetration of municipal bond insurance in the U.S.

public finance market remained relatively flat compared to 2021 when interest rates were lower.

Despite the increases in interest rates from 2022 to 2024, the pace of credit spread widening was more modest and market penetration of municipal bond insurance in the U.S.

public finance market remained relatively flat compared with 2021 when interest rates were lower.

Over time, higher interest rates also increase the amount the Company can earn on its largely fixed-maturity investment portfolio.

However, higher interest rates may, in turn, reduce the fair value of its largely fixed-rate fixed-maturity investment portfolio, dampen municipal bond issuance and negatively impact the finances of some insured obligors.

However, higher interest rates may, in turn, reduce the fair value of the Company’s largely fixed-rate fixed-maturity investment portfolio, dampen municipal bond issuance, and negatively impact the finances of some insured obligors.

See “ — Overview — Economic Environment.”

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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 $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.

In fact, the Company’s direct insurance exposure to eastern Europe generally is limited to approximately $234 million in net par outstanding as of September 30, 2024, comprising $216 million net par exposure to the sovereign debt of Poland and $18 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 $69 million in net par outstanding as of June 30, 2024, comprised of funded commitments to subscription finance facilities;

The Company’s direct insurance exposure to the Middle East is generally limited to approximately $68 million in net par outstanding as of September 30, 2024, comprised of funded commitments to subscription finance facilities;

however, such exposure may increase to a total of approximately $105 million to the extent all unfunded commitments under the facilities are ultimately funded.

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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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Insurance Segment Results

Second Quarter Six Months

Third Quarter Nine Months

2024 2023 2024 2023

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Net Earned Premiums and Credit Derivative Revenues

Second Quarter Six Months

Third Quarter Nine Months

2024 2023 2024 2023

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(1) Includes accretion of discount.

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.

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

As of September 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

Second Quarter Six Months

Third Quarter Nine Months

2024 2023 2024 2023

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Structured finance—non-U.S.

(2) 14 2 20 40

Total PVP $ 63 $ 46 $ 281 $ 249

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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% 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.

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

(2) Nine 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 .

Third Quarter 2024

public finance GWP and PVP in third quarter 2024 were higher than the comparable GWP and PVP in third quarter 2023, primarily due to an increase in insured par and higher premium rates in primary market transactions.

The Company’s direct par written represented 60% of the total U.S.

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.

municipal market insured issuance in third quarter 2024, compared with 61% in third quarter 2023, and the Company’s penetration of all municipal issuance was 4.2% in third quarter 2024 compared with 4.6% in third quarter 2023.

In third quarter 2024, non-U.S.

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

regulated utility and airport transactions in third quarter 2024.

Global structured finance GWP and PVP in third quarter 2024 were higher than the comparable GWP and PVP in third quarter 2023.

In third quarter 2024, the Company insured a transaction in Australia that provided protection on an approximately $600 million core lending portfolio for an Australian bank.

Nine Months 2024

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

The Company’s direct par written represented 57% 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.

municipal market insured issuance in nine months 2024, compared with 62% in nine months 2023, and the Company’s penetration of all municipal issuance was 4.4% in nine months 2024 compared with 5.3% in nine months 2023.

In nine months 2024, non-U.S.

public finance GWP was lower than GWP in nine-months 2023, while non-U.S.

public finance PVP in nine months 2024 was higher than PVP in nine months 2023.

GWP declined mainly due to adjustments to the consumer price index that affects the present value of future premiums on the existing book of consumer price index linked insured obligations.

New business in nine 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.

In nine months 2024, structured finance GWP and PVP were $38 million and $44 million, respectively, compared with GWP and PVP of $52 million and $82 million, respectively, in nine months 2023.

Structured finance GWP and PVP in nine months 2024 were primarily attributable to insurance securitization, bank balance sheet relief and subscription finance transactions.

Business activity in the non-U.S.

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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 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 fair value of remaining CVIs as of September 30, 2024 and December 31, 2023 was $136 million and $318 million, respectively.

Equity method investments in the Insurance segment include investments that AG Asset Strategies LLC (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.

As part of the August 5, 2024 AG stock redemption, certain alternative investments were distributed to AGMH, whose results are reported in the Corporate Division.

The carrying value of these transferred investments as of September 30, 2024 was $122 million.

Insurance Segment

Income from Investments

Second Quarter Six Months

Third Quarter Nine Months

2024 2023 2024 2023

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Intercompany loans 2 2 7 7

Other investment assets — 2 — 2

Other invested assets — — — 2

Investment income 83 102 249 277

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Equity in earnings (losses) of investees $ 28 $ 25 $ 83 $ 60

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.

Net investment income for third quarter 2024 decreased compared with third quarter 2023, primarily due to lower income on Loss Mitigation Securities.

Net investment income for nine months 2024 decreased compared with nine months 2023, primarily due to lower income on Loss Mitigation Securities, 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 4.10% as of September 30, 2024 and 4.04% as of September 30, 2023.

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

Other Income (Loss)

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.

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

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

Economic Loss Development

Economic Loss Development (Benefit)

The insured portfolio includes policies accounted for under several different accounting models depending on the characteristics of the contract and the Company’s control rights.

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

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

dollar denominated exposures were 3.74% and 4.10% as of September 30, 2024 and December 31, 2023, respectively.

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

dollar denominated exposures were 3.94% and 3.28% as of September 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 Second Quarter Six Months

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

As of Third Quarter Nine Months

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

(in millions)

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Roll Forward by Sector

Second Quarter 2024

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

Third Quarter 2024

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

Development (Benefit) (2)

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

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

(in millions)

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Total $ 447 $ (34) $ (107) $ 306

Second Quarter 2023

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

Third Quarter 2023

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

Development (Benefit) (2)

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

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

(in millions)

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Total $ 560 $ 87 $ (157) $ 490

Six Months 2024

Nine 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 June 30, 2024

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

(in millions)

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Total $ 505 $ (20) $ (179) $ 306

Six Months 2023

Nine 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 June 30, 2023

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

(in millions)

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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 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

(2) Effect of changes in the risk-free rates included in economic loss development (benefit) was a loss of $3 million in third quarter 2024, a benefit of $12 million in third quarter 2023, a loss of $1 million in nine months 2024 and a benefit of $8 million in nine months 2023.

Third Quarter 2024 Net Economic Loss Development

Public Finance:

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.

The economic benefit of $23 million for U.S.

public finance exposures was primarily attributable to certain healthcare exposures.

The economic loss development of $46 million for non-U.S.

public finance exposures was primarily attributable to certain U.K.

regulated utilities.

The economic benefit for U.S.

RMBS was $56 million and was primarily attributable to a $29 million benefit from higher assumed recoveries for charged-off second lien loans and a $15 million benefit from higher assumed recoveries for deferred principal balances of modified first lien loans.

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

Second Quarter 2023 Net Economic Loss Development

Third 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.

exposures of $135 million was primarily attributable to PREPA.

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

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

Nine 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.

The economic benefit of $14 million for U.S.

public finance exposures was primarily attributable to certain healthcare exposures, partially offset by higher expected loss adjustment expenses related to certain Puerto Rico exposures.

The economic loss development of $63 million for non-U.S.

public finance exposures was primarily attributable to certain U.K.

regulated utilities and healthcare exposures.

The economic benefit for U.S.

RMBS was $69 million and was mainly attributable to a $41 million benefit from higher assumed recoveries for charged-off first and second lien loans and a $15 million benefit from higher assumed recoveries for deferred principal first lien balances.

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

Six Months 2023 Net Economic Loss Development

Nine 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.

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

The net benefit attributable to U.S.

RMBS was $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.

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

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

Insurance Segment Loss Expense

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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.

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 regardless of accounting model, 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 losses on 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.

The following table presents the Insurance segment loss expense (benefit).

1 unchanged sentence

Loss Expense (Benefit)

Second Quarter Six Months

Third Quarter Nine Months

2024 2023 2024 2023

6 unchanged sentences

Total Insurance segment loss expense (benefit) $ (53) $ 101 $ (49) $ 154

Employee Compensation and Benefit Expenses and Other Operating Expenses

The increases in employee compensation and benefit expenses in third quarter 2024 and nine months 2024 compared with third quarter 2023 and nine months 2023, were primarily attributable to an increase in headcount and other employee benefit costs.

Other operating expenses in three months 2024 and nine months 2024 includes the write-off of $6 million of intangible assets attributable to insurance licenses in connection with AGM’s merger into AG.

Asset Management Segment Results

Second Quarter Six Months

Third Quarter Nine Months

2024 2023 2024 2023

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Segment adjusted operating income (loss) $ 4 $ — $ 5 $ (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 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.

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 the first six months of 2023, (ii) gains from Sound Point of $4 million in third quarter 2024 and $5 million in nine 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 nine months 2024 for a smaller financial services advisory firm with a carrying value of $3 million as of September 30, 2024, and (iv) other asset management related income.

Corporate Division Results

Second Quarter Six Months

Third Quarter Nine Months

2024 2023 2024 2023

(in millions)

Revenues $ 4 $ 2 $ 9 $ 4

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

Other 4 4 13 8

Total revenues 4 259 13 263

Interest expense 24 26 75 73

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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 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.

The decrease in operating

expenses in third quarter 2024 and nine months 2024, compared with third quarter 2023 and nine 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 nine months 2023, partially offset by increases in premises related expenses in nine months 2024.

Transaction related expenses in the Corporate division for Sound Point and AHP were $14 million for third quarter 2023 and $40 million for nine months 2023.

Other (Effect of Consolidating FG VIEs and CIVs)

The effect of consolidating FG VIEs and CIVs, intersegment eliminations and reclassifications of reimbursable fund expenses to revenue are presented in “other.” See Item 1, Financial Statements, Note 2, Segment Information.

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

(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.

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

As described in Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles, the types of entities the Company consolidates when it is deemed to be the primary beneficiary primarily include:

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

Consolidating FG VIEs (as opposed to accounting for the related insurance contracts in the Insurance segment) has a significant gross-up effect on the consolidated financial statements, and includes:

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Increase (Decrease)

Second Quarter Six Months

Third Quarter Nine Months

2024 2023 2024 2023

14 unchanged sentences

____________________

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

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

(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.

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

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

(3) Includes net earned premiums, net investment income, foreign exchange gains (losses) on remeasurement, other income (loss), loss and LAE (benefit), and for nine 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.

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to Adjusted Operating Income (Loss)

Second Quarter 2024 Second Quarter 2023

Third Quarter 2024 Third Quarter 2023

Total Per Diluted Share Total Per Diluted Share

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Gain (loss) related to FG VIE and CIV consolidation (net of tax provision (benefit) of $(2) and $(2)) included in adjusted operating income $ (7) $ (0.12) $ (8) $ (0.13)

Six Months 2024 Six Months 2023

Nine Months 2024 Nine Months 2023

Total Per Diluted Share Total Per Diluted Share

13 unchanged sentences

Net Realized Investment Gains (Losses)

Second Quarter Six Months

Third Quarter Nine Months

2024 2023 2024 2023

6 unchanged sentences

Net realized investment gains (losses) $ — $ (9) $ 2 $ (20)

____________________

(1) Relates primarily to loss mitigation securities.

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

6 unchanged sentences

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

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.

Nine months 2024 non-credit impairment-related unrealized fair value gains of $11 million were generated primarily due to the termination of certain structured finance policies.

Third quarter 2023 and nine months 2023 non-credit impairment unrealized fair value gains of $6 million and $109 million, respectively, were generated primarily as a result of generally lower collateral asset spreads and a widening of AG’s CDS spreads.

Fair Value Gains (Losses) on CCS

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

Fair value losses on CCS of $3 million, $20 million, $12 million and $35 million in third quarter 2024, third quarter 2023, nine months 2024 and nine months 2023, respectively, 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.

Foreign Exchange Gain (Loss) on Remeasurement

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 June 30, 2024 and December 31, 2023, respectively, are denominated in currencies other than the U.S.

Foreign exchange gains and losses of $54 million gains, $37 million losses, $42 million gains and $9 million gains in third quarter 2024, third quarter 2023, nine months 2024 and nine months 2023, respectively, 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 69% and 70% of gross premiums receivable, net of commissions payable, as of September 30, 2024 and December 31, 2023, respectively, are denominated in currencies other than the U.S.

dollar, primarily the pound sterling and euro.

4 unchanged sentences

Dollar Per Foreign Currency

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

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

Pound sterling $1.338 $1.273 $1.220 $1.208

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Management of the Company and AGL’s Board of Directors use non-GAAP financial measures further adjusted to remove the effect of FG VIE and CIV consolidation (which the Company refers to as its core financial measures), as well as GAAP financial measures and other factors, to evaluate the Company’s results of operations, financial condition and progress towards long-term goals.

The Company uses core financial measures in its decision-making process for and in its calculation of certain components of management compensation.

The Company uses core financial measures in its decision-making process for and in its calculation of

certain components of management compensation.

The financial measures that the Company uses to help determine compensation are:

45 unchanged sentences

to Adjusted Operating Shareholders’ Equity and Adjusted Book Value

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

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

Total Per Share Total Per Share

28 unchanged sentences

The discount rate is recalculated annually and updated as necessary.

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

Under GAAP, financial guaranty installment premiums are

discounted at a risk-free rate.

Additionally, under GAAP, management records future installment premiums on financial guaranty insurance contracts covering non-homogeneous pools of assets based on the contractual term of the transaction, whereas for PVP purposes, management records an estimate of the future installment premiums the Company expects to receive, which may be based upon a shorter period of time than the contractual term of the transaction.

1 unchanged sentence

Reconciliation of GWP to PVP

Second Quarter 2024 Second Quarter 2023

Third Quarter 2024 Third Quarter 2023

Public Finance Structured Finance Public Finance Structured Finance

5 unchanged sentences

PVP $ 34 $ 10 $ 5 $ 14 $ 63 $ 30 $ 2 $ 12 $ 2 $ 46

Six Months 2024 Six Months 2023

Nine Months 2024 Nine Months 2023

Public Finance Structured Finance Public Finance Structured Finance

8 unchanged sentences

(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.

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.

Nine 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

5 unchanged sentences

Net Par Outstanding by Sector

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

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

Sector (dollars in millions)

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Financial products 478 464

Consumer receivables 256 314

Subscription finance facilities 241 178

Consumer receivables 233 314

Other structured finance 865 892

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Exposure to Puerto Rico by Company

As of June 30, 2024

As of September 30, 2024

Net Par Outstanding

AGM AG AG Re Eliminations (1) Total

AG AG Re Total

Net Par Outstanding Gross

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Municipal Finance Agency (MFA)

84 6 18 — 108 114

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

University of Puerto Rico (U of PR) 1 — 1 1

Total Non-Defaulting 77 15 92 98

1 unchanged sentence

___________________

(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.

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

Consideration (e.g.

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

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

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

3 unchanged sentences

Amortization Schedule of Net Par of Puerto Rico

As of June 30, 2024

As of September 30, 2024

Scheduled Net Par Amortization

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

2024 (4Q) 2025 (1Q) 2025 (2Q) 2025 (3Q) 2025 (4Q) 2026 2027 2028 2029 - 2033 2034 - 2038 2039 - 2041 Total

(in millions)

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MFA — — — 16 — 35 15 13 12 — — 91

PRASA and U of PR 1 — — — — — — — — 1

U of PR — — — — — — — — 1 — — 1

Total Non-Defaulting — — — 16 — 35 15 13 13 — — 92

1 unchanged sentence

Amortization Schedule of Net Debt Service of Puerto Rico

As of June 30, 2024

As of September 30, 2024

Scheduled Net Debt Service Amortization

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

2024 (4Q) 2025 (1Q) 2025 (2Q) 2025 (3Q) 2025 (4Q) 2026 2027 2028 2029 - 2033 2034 - 2038 2039 - 2041 Total

(in millions)

8 unchanged sentences

MFA — 2 — 18 — 39 17 14 13 — — 103

PRASA and U of PR 1 — — — — — — — — 1

U of PR — — — — — — — — 1 — — 1

Total Non-Defaulting — 2 — 18 — 39 17 14 14 — — 104

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The liquidity of AGL and its U.S.

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.

20 unchanged sentences

Long-Term Debt and Intercompany Loans

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

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

(in millions)

8 unchanged sentences

AGUS - intercompany loans from:

AG and AGM 3.50% 2029 250 250

AG/AGM (1) 3.50% 2029 250 250

AGRO 5.00% 2028 20 20

6 unchanged sentences

____________________

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

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

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Holding Companies, excluding their investments in subsidiaries.

As of June 30, 2024

As of September 30, 2024

Holding Companies

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Receivables from affiliates (2) 55 —

Receivable from U.S.

Dividends receivable from U.S.

Holding Companies 90 —

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Payable to affiliates (2) 12 18

Payable to AGL — 110

Dividends payable to AGL — 90

Other liabilities 11 81

____________________

(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.

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

Holding Companies’ fixed-maturity securities were 10.9 years and 3.7 years, respectively.

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

Six Months 2024

Nine Months 2024

Holding Companies

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Selected Cash Flow Items

Six Months 2024

Nine Months 2024

Holding Companies

(in millions)

Dividends received from U.S.

Holding Companies $ 450 $ —

Dividends received from subsidiaries 47 266

3 unchanged sentences

Investments in subsidiaries — (10)

Redemption of stock by AGM — 100

Redemption of stock by insurance subsidiaries — 267

Dividends paid to AGL — (450)

2 unchanged sentences

____________________

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

(2) Represents distributions from Sound Point.

(1) Includes distributions from Sound Point and other alternative investments.

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

23 unchanged sentences

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

AG Re is an insurance company domiciled in Bermuda, which owns AGRO, an insurance subsidiary, also domiciled in Bermuda.

AG Re is an insurance company domiciled in Bermuda that owns AGRO, an insurance company that is also domiciled in Bermuda.

Sources and Uses of Funds

8 unchanged sentences

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 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.

As of September 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.

4 unchanged sentences

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, 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 June 30, 2024.

The Company had $531 million in insured net par outstanding of PREPA obligations as of September 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.

1 unchanged sentence

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

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

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

Furthermore, some CDS documentation requires the Company to make a payment due to an event that is unrelated to the performance of the obligation referenced in the credit derivative.

4 unchanged sentences

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 AG, AG Re and AGRO.

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 discussion of the Company’s dividend restrictions applicable to AG, AG Re and AGRO.

Dividend restrictions by insurance subsidiary are as follows:

2 unchanged sentences

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.

The Company expects the amount of ordinary dividends available for distribution by AG in 2024 to be approximately $400 million.

After giving effect to the respective $49 million and $59 million ordinary dividend amounts paid by AGM and AG (together, the U.S.

Insurance Subsidiaries) in 2024 prior to the merger, and $154 million ordinary dividend paid by AG after the merger, the amount available for distribution in the fourth quarter of 2024 is approximately $138 million.

• Based on the applicable law and regulations, in 2024 AG Re paid dividends of $47 million in the first nine months of the year and has the capacity to declare and pay additional dividends in 2024 in an aggregate amount up to $110 million as of September 30, 2024.

Additionally, in 2024 AG Re can make capital distributions in an aggregate amount up to $129 million without the prior approval of the Bermuda Monetary Authority.

Ordinary Dividends

1 unchanged sentence

to Holding Companies

Second Quarter Six Months

Third Quarter Nine Months

2024 2023 2024 2023

1 unchanged sentence

Dividends paid by AG Re to AGL $ — $ 24 $ 47 $ 53

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

Dividends paid by AGM to AGMH 2 — 49 40

Dividends paid by U.S.

Insurance Subsidiaries to U.S.

Holding Companies (1) 154 60 262 144

___________________

2 unchanged sentences

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.

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

In connection with the merger of AGM into AG, the MIA approved, and in third quarter 2024 AG implemented, the redemption of approximately $300 million of AG’s shares of common stock from AGMH in exchange for cash of $167 million and the remainder in alternative investments.

Committed Capital Securities

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.

AG is party to an arrangement that enables it to access, at its discretion, up to $400 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

1 unchanged sentence

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

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

Approximately 88% of the total available-for-sale fixed maturity investment portfolio is managed by external parties.

In accordance with the Company’s investment guidelines, each of the three external investment managers is required to maintain the Company’s investment portfolio with an overall credit quality rated at a minimum of A+/A1/A+ by S&P/Moody’s/Fitch Inc., respectively.

1 unchanged sentence

As interest rates fall, the fair value of fixed-maturity securities generally increases and, as interest rates rise, the fair value of fixed-maturity securities generally decreases.

The Company’s portfolio of fixed-maturity securities primarily consists of investment-grade, liquid instruments.

The Company’s portfolio of fixed-maturity securities primarily consists of investment-grade, liquid

Other invested assets include other alternative investments, which are generally less liquid.

2 unchanged sentences

Carrying Value

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(in millions)

5 unchanged sentences

____________________

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

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

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

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

The Company’s available-for-sale fixed-maturity securities had a duration of 4.1 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 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.

The Company’s available-for-sale fixed-maturity securities had a duration of 4.2 years and 3.9 years as of September 30, 2024 and December 31, 2023, respectively.

Available-for-Sale Fixed-Maturity Securities By Rating

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

Rating September 30, 2024 December 31, 2023

AAA 12.6 % 13.3 %

9 unchanged sentences

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 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.

As of September 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 June 30, 2024

Investment in Asset Managers and Alternative Investments by Strategy

As of September 30, 2024

Investments Consolidation Adjustments (1) Consolidated

13 unchanged sentences

and European CLOs.

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

(3) Includes $75 million in alternative investments reported in “fixed-maturity securities, available-for-sale” and “fixed-maturity securities, trading” on the condensed consolidated balance sheets.

Investment in Asset Managers and Alternative Investments by Strategy

16 unchanged sentences

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

Change in Fair Value of Alternative Investments by Strategy

Second Quarter 2024

Investment in Sound Point and Alternative Investments by Strategy

Third Quarter 2024

Investments Consolidation Adjustments (1) Consolidated

(in millions)

Sound Point $ (3) $ — $ (3)

Equity in earnings of Sound Point $ 4 $ — $ 4

Alternative investments - change in fair value:

CLOs 12 (8) 4

Private healthcare investing 6 — 6

5 unchanged sentences

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

Alternative Investments by Strategy

Third Quarter 2023

Investments Consolidation Adjustments (1) Consolidated

(in millions)

Alternative investments - change in fair value:

CLOs $ 5 $ (7) $ (2)

5 unchanged sentences

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

Investment in Sound Point and Alternative Investments by Strategy

Nine Months 2024

Investments Consolidation Adjustments (1) Consolidated

(in millions)

Sound Point $ 1 $ — $ 1

Equity in earnings of Sound Point $ 5 $ — $ 5

Alternative investments - change in fair value:

CLOs 40 (26) 14

2 unchanged sentences

Middle market direct lending 3 — 3

Other 18 — 18

Total $ 92 $ (38) $ 54

2 unchanged sentences

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 2023

Alternative Investments by Strategy

Nine Months 2023

Investments Consolidation Adjustments (1) Consolidated

(in millions)

Alternative investments - change in fair value:

CLOs $ 21 $ (23) $ (2)

1 unchanged sentence

Asset-based/specialty finance 3 (3) —

Other 13 — 13

Total $ 58 $ (35) $ 23

2 unchanged sentences

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

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.

Beginning in the 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.

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

Unfunded commitments as of September 30, 2024 were $690 million.

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

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 $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.

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 $77 million as of September 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 $1,176 million and $1,154 million as of September 30, 2024 and December 31, 2023, respectively.

Lease Obligations

12 unchanged sentences

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.

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

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

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.

2 unchanged sentences

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

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

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

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

Therefore, beginning July 1, 2023, the Company’s cash flow statements no longer includes all the operating, investing and financing cash flow activity of those deconsolidated CIVs.

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

Summarized Condensed Consolidated Cash Flows

Second Quarter Six Months

Third Quarter Nine Months

2024 2023 2024 2023

9 unchanged sentences

Repurchases of common shares (131) (64) (412) (90)

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

Redemption of debt — (330) — (330)

Other — — (28) (15)

7 unchanged sentences

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

Cash flows from operations, excluding FG VIEs and CIVs, 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.

Cash flows from operations, excluding FG VIEs and CIVs, was an outflow of $16 million in nine months 2024 and an outflow of $217 million in nine months 2023.

The decrease in cash outflows, other than those of the FG VIEs and CIVs, during

nine months 2024 was primarily due to a $97 million increase in premiums received, a $78 million decrease in net claim payments, a $31 million increase in return on capital from equity method investees, a $13 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 and the inclusion of cash flows for asset management subsidiaries in the nine months 2023 prior to the Sound Point Transaction.

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

Cash flow from operations in nine months 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 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.

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

Investing inflows in both periods 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.

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

Nine 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 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.

From October 1, 2024 through November 8, 2024, the Company repurchased an additional 692,513 of common shares.

As of November 8, 2024, the Company was authorized to purchase approximately $385 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.

2 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis