ASSURED GUARANTY LTD 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm (PCAOB ID No. 238 ) 116 Consolidated Balance Sheets as of December 31, 2024 and 2023 118 Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022 119 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2024, 2023 and 2022 120 Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2024, 2023 and 2022 121 Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 122 Notes to Consolidated Financial Statements 125 1. Business and Basis of Presentation 125 2. Segment Information 128 3. Outstanding Exposure 134 4. Expected Loss to be Paid (Recovered) 143 5. Contracts Accounted for as Insurance 152 6. Contracts Accounted for as Credit Derivatives 161 7. Investments and Cash 163 8. Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles 171 9. Fair Value Measurement 177 10. Asset Management Fees 187 11. Long-Term Debt and Credit Facilities 188 12. Employee Benefit Plans 191 13. Income Taxes 195 14. Insurance Company Regulatory Requirements 199 15. Related Party Transactions 202 16. Leases 203 17. Contingencies 204 18. Shareholders’ Equity 205 19. Other Comprehensive Income 207 20. Earnings Per Share 208 21. Parent Company 210 115 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Assured Guaranty Ltd. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Assured Guaranty Ltd. and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations, of comprehensive income (loss), of shareholders’ equity and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023 , and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 116 Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of the Loss and Loss Adjustment Expense (LAE) Reserve and the Salvage and Subrogation Recoverable - Estimation of the Expected Loss to be Paid (Recovered) Related to Public Finance Obligations As described in Notes 4 and 5 to the consolidated financial statements, the loss and LAE reserve and the salvage and subrogation recoverable reported on the consolidated balance sheet relate only to direct and assumed reinsurance contracts that are accounted for as insurance, substantially all of which are financial guaranty insurance contracts. As of December 31, 2024, the loss and LAE reserve was $268 million and the salvage and subrogation recoverable was $396 million, for which a significant portion of such amounts relate to public finance obligations. A loss and LAE reserve for a financial guaranty insurance contract is recorded only to the extent, and for the amount, that expected loss to be paid plus contra-paid (total losses) exceed the deferred premium revenue, on a contract by contract basis. The expected loss to be paid (recovered) is equal to the present value of expected future cash outflows for loss and LAE payments, and net of inflows for expected salvage and subrogation, using current risk-free rates. If a transaction is in a net recovery position, this results in the recording of a salvage and subrogation recoverable. Expected cash outflows and inflows are probability weighted cash flows that reflect management's assumptions about the likelihood of all possible outcomes based on all information available to management. The determination of expected loss to be paid (recovered) is a subjective process involving numerous estimates, assumptions and judgments relating to internal credit ratings, timing of cash flows, recovery rates, and probability weightings, as used in the respective cash flow models used by management. The principal considerations for our determination that performing procedures relating to the valuation of the loss and LAE reserve and the salvage and subrogation recoverable – estimation of the expected loss to be paid (recovered) related to public finance obligations is a critical audit matter are (i) the significant judgment by management when developing the estimate of the loss and LAE reserve and the salvage and subrogation recoverable – estimation of the expected loss to be paid (recovered) related to public finance obligations, (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management's significant assumptions related to internal credit ratings, timing of cash flows, recovery rates, and probability weightings; and (iii) the audit effort included the involvement of professionals with specialized skill and knowledge. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of the loss and LAE reserve and the salvage and subrogation recoverable – estimation of the expected loss to be paid (recovered) related to public finance obligations. These procedures also included, among others, (i) testing management’s process for developing the estimate of the loss and LAE reserve and the salvage and subrogation recoverable, (ii) evaluating the appropriateness of the cash flow models used by management, (iii) testing the completeness and accuracy of the underlying data used in the cash flow models, and (iv) evaluating the reasonableness of the significant assumptions used by management related to internal credit ratings, timing of cash flows, recovery rates, and probability weightings. Evaluating management’s assumptions related to internal credit ratings, timing of cash flows, recovery rates, and probability weightings involved evaluating whether the assumptions used by management were reasonable, as considered applicable to the individual public finance obligation, considering (i) the current, past, or anticipated future performance of the obligor, and (ii) the consistency with external market and industry data. Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of the significant assumptions related to timing of cash flows, recovery rates, and probability weightings for certain public finance obligations. /s/ PricewaterhouseCoopers LLP New York, New York February 28, 2025 We have served as the Company’s auditor since 2003. 117 Assured Guaranty Ltd. Consolidated Balance Sheets (dollars in millions except share data) As of December 31, 2024 2023 Assets Investments: Fixed-maturity securities, available-for-sale, at fair value, net of allowance for credit loss of $ 60 and $ 77 (amortized cost of $ 6,827 and $ 6,746 ) $ 6,369 $ 6,307 Fixed-maturity securities, trading, at fair value 147 318 Short-term investments, at fair value 1,221 1,661 Other invested assets (includes $ 4 and $ 3 , at fair value) 926 829 Total investments 8,663 9,115 Cash 121 97 Premiums receivable, net of commissions payable 1,551 1,468 Deferred acquisition costs 176 161 Salvage and subrogation recoverable 396 298 Financial guaranty variable interest entities’ assets (includes $ 147 and $ 174 , at fair value) 147 328 Assets of consolidated investment vehicles (includes $ 99 and $ 331 , at fair value) 101 366 Other assets (includes $ 131 and $ 123 , at fair value) 746 706 Total assets $ 11,901 $ 12,539 Liabilities Unearned premium reserve $ 3,719 $ 3,658 Loss and loss adjustment expense reserve 268 376 Long-term debt 1,699 1,694 Financial guaranty variable interest entities’ liabilities, at fair value (with recourse $ 155 and $ 543 , without recourse $ 9 and $ 11 ) 164 554 Other liabilities (includes $ 34 and $ 53 at fair value) 498 492 Total liabilities 6,348 6,774 Commitments and contingencies (Notes 3, 4, 7, 17) Shareholders’ equity Common shares ($ 0.01 par value, 500,000,000 shares authorized; 50,505,320 and 56,217,305 shares issued and outstanding) 1 1 Retained earnings 5,878 6,070 Accumulated other comprehensive income (loss), net of tax of $( 75 ) and $( 67 ) ( 385 ) ( 359 ) Deferred equity compensation 1 1 Total shareholders’ equity attributable to Assured Guaranty Ltd. 5,495 5,713 Nonredeemable noncontrolling interests (Note 8) 58 52 Total shareholders’ equity 5,553 5,765 Total liabilities and shareholders’ equity $ 11,901 $ 12,539 The accompanying notes are an integral part of these consolidated financial statements. 118 Assured Guaranty Ltd. Consolidated Statements of Operations (dollars in millions except share data) Year Ended December 31, 2024 2023 2022 Revenues Net earned premiums $ 403 $ 344 $ 494 Net investment income 340 365 269 Asset management fees — 53 93 Net realized investment gains (losses) 9 ( 14 ) ( 56 ) Fair value gains (losses) on credit derivatives 24 114 ( 11 ) Fair value gains (losses) on committed capital securities ( 10 ) ( 35 ) 24 Fair value gains (losses) on financial guaranty variable interest entities ( 11 ) 8 22 Fair value gains (losses) on consolidated investment vehicles 69 88 17 Foreign exchange gains (losses) on remeasurement ( 27 ) 53 ( 112 ) Fair value gains (losses) on trading securities 52 74 ( 34 ) Gain on sale of asset management subsidiaries — 262 — Other income (loss) 23 61 17 Total revenues 872 1,373 723 Expenses Loss and loss adjustment expenses (benefit) ( 26 ) 162 16 Interest expense 91 90 81 Amortization of deferred acquisition costs 20 13 14 Employee compensation and benefit expenses 202 251 258 Other operating expenses 159 217 167 Total expenses 446 733 536 Income (loss) before income taxes and equity in earnings (losses) of investees 426 640 187 Equity in earnings (losses) of investees 62 28 ( 39 ) Income (loss) before income taxes 488 668 148 Provision (benefit) for income taxes Current 100 63 14 Deferred ( 4 ) ( 156 ) ( 3 ) Total provision (benefit) for income taxes 96 ( 93 ) 11 Net income (loss) 392 761 137 Less: Noncontrolling interests 16 22 13 Net income (loss) attributable to Assured Guaranty Ltd. $ 376 $ 739 $ 124 Earnings per share: Basic $ 7.01 $ 12.54 $ 1.95 Diluted $ 6.87 $ 12.30 $ 1.92 The accompanying notes are an integral part of these consolidated financial statements. 119 Assured Guaranty Ltd. Consolidated Statements of Comprehensive Income (Loss) (in millions) Year Ended December 31, 2024 2023 2022 Net income (loss) $ 392 $ 761 $ 137 Change in net unrealized gains (losses) on: Investments with no credit impairment, net of tax provision (benefit) of $( 10 ), $ 14 and $( 121 ) ( 33 ) 141 ( 718 ) Investments with credit impairment, net of tax provision (benefit) of $ 1 , $ 1 and $( 20 ) 5 6 ( 86 ) Change in net unrealized gains (losses) on investments ( 28 ) 147 ( 804 ) Change in instrument-specific credit risk on financial guaranty variable interest entities’ liabilities with recourse, net of tax provision (benefit) 2 3 ( 2 ) Other, net of tax provision (benefit) — 6 ( 9 ) Other comprehensive income (loss) ( 26 ) 156 ( 815 ) Comprehensive income (loss) 366 917 ( 678 ) Less: Comprehensive income (loss) attributable to noncontrolling interests 16 22 13 Comprehensive income (loss) attributable to Assured Guaranty Ltd. $ 350 $ 895 $ ( 691 ) The accompanying notes are an integral part of these consolidated financial statements. 120 Assured Guaranty Ltd. Consolidated Statements of Shareholders’ Equity (dollars in millions, except share data) Common Shares Outstanding Total Shareholders’ Equity Attributable to Assured Guaranty Ltd. Nonredeemable Noncontrolling Interests Total Shareholders’ Equity Common Shares Par Value Retained Earnings Accumulated Other Comprehensive Income (Loss) Deferred Equity Compensation Total As of December 31, 2021 67,518,424 $ 1 $ 5,990 $ 300 $ 1 $ 6,292 $ 186 $ 6,478 Net income — — 124 — — 124 14 138 Dividends ($ 1.00 per share) — — ( 64 ) — — ( 64 ) — ( 64 ) Common shares repurchases ( 8,847,981 ) — ( 503 ) — — ( 503 ) — ( 503 ) Share-based compensation 342,597 — 30 — — 30 — 30 Contributions — — — — — — 89 89 Distributions — — — — — — ( 61 ) ( 61 ) Other comprehensive loss — — — ( 815 ) — ( 815 ) — ( 815 ) As of December 31, 2022 59,013,040 1 5,577 ( 515 ) 1 5,064 228 5,292 Net income — — 739 — — 739 22 761 Dividends ($ 1.12 per share) — — ( 68 ) — — ( 68 ) — ( 68 ) Common shares repurchases ( 3,215,893 ) — ( 199 ) — — ( 199 ) — ( 199 ) Share-based compensation 420,158 — 21 — — 21 — 21 Reclassification to liabilities — — — — — — ( 16 ) ( 16 ) Contributions — — — — — — 20 20 Distributions — — — — — — ( 70 ) ( 70 ) Other comprehensive income — — — 156 — 156 — 156 Deconsolidation of investment vehicles — — — — — — ( 132 ) ( 132 ) As of December 31, 2023 56,217,305 1 6,070 ( 359 ) 1 5,713 52 5,765 Net income — — 376 — — 376 16 392 Dividends ($ 1.24 per share) — — ( 68 ) — — ( 68 ) — ( 68 ) Common shares repurchases ( 6,180,774 ) — ( 508 ) — — ( 508 ) — ( 508 ) Share-based compensation 468,789 — 8 — — 8 — 8 Distributions — — — — — — ( 10 ) ( 10 ) Other comprehensive loss — — — ( 26 ) — ( 26 ) — ( 26 ) As of December 31, 2024 50,505,320 $ 1 $ 5,878 $ ( 385 ) $ 1 $ 5,495 $ 58 $ 5,553 The accompanying notes are an integral part of these consolidated financial statements. 121 Assured Guaranty Ltd. Consolidated Statements of Cash Flows (in millions) Year Ended December 31, 2024 2023 2022 Cash flows from operating activities: Net income (loss) $ 392 $ 761 $ 137 Adjustments to reconcile net income to net cash flows provided by operating activities: Non-cash interest and operating expenses 66 58 65 Net amortization of premium (discount) on investments ( 23 ) ( 37 ) 5 Provision (benefit) for deferred income taxes ( 4 ) ( 156 ) ( 3 ) Net realized investment losses (gains) ( 9 ) 14 56 Equity in (earnings) losses of investees ( 62 ) ( 28 ) 39 Fair value losses (gains) on committed capital securities 10 35 ( 24 ) Fair value losses (gains) on trading securities ( 52 ) ( 74 ) 34 Gain on sale of asset management subsidiaries — ( 262 ) — Change in premiums receivable, net of premiums and commissions payable ( 80 ) ( 157 ) 74 Change in unearned premium reserve, net 62 26 ( 93 ) Change in loss and loss adjustment expense reserve and salvage and subrogation recoverable, net ( 202 ) 35 ( 1,207 ) Change in current income taxes ( 6 ) 72 ( 106 ) Change in credit derivative assets and liabilities, net ( 21 ) ( 112 ) 8 Distributions from equity method investments 47 7 10 Other ( 19 ) ( 97 ) ( 47 ) Cash flows from consolidated investment vehicles: Purchases of securities ( 97 ) ( 340 ) ( 3,201 ) Sales of securities 41 675 1,513 Maturities and paydowns of securities — 60 156 Proceeds from (purchases of) money market funds — 66 6 Purchases to cover securities sold short — — ( 223 ) Proceeds from securities sold short — — 188 Other changes in consolidated investment vehicles 4 ( 85 ) 134 Net cash flows provided by (used in) operating activities 47 461 ( 2,479 ) (continued) The accompanying notes are an integral part of these consolidated financial statements. 122 Assured Guaranty Ltd. Consolidated Statements of Cash Flows, Continued (in millions) Year Ended December 31, 2024 2023 2022 Cash flows from investing activities: Fixed-maturity securities, available for sale: Purchases ( 1,354 ) ( 540 ) ( 371 ) Sales 649 862 717 Maturities and paydowns 853 746 682 Short-term investments with original maturities of over three months: Purchases ( 1 ) ( 16 ) ( 63 ) Sales — 4 — Maturities and paydowns 5 36 36 Net sales (purchases) of short-term investments with original maturities of less than three months 437 ( 872 ) 439 Sales of fixed-maturity securities, trading 233 — 121 Maturities and paydowns of fixed-maturity securities, trading 21 63 87 Purchases of and contributions to other invested assets ( 119 ) ( 198 ) ( 25 ) Sales of and return of capital from other invested assets 41 29 36 Paydowns on financial guaranty variable interest entities’ assets 23 175 84 Other ( 8 ) ( 3 ) ( 3 ) Net cash flows provided by (used in) investing activities 780 286 1,740 Cash flows from financing activities: Dividends paid $ ( 68 ) $ ( 67 ) $ ( 64 ) Repurchases of common shares ( 502 ) ( 199 ) ( 500 ) Net paydowns of financial guaranty variable interest entities’ liabilities ( 375 ) ( 149 ) ( 99 ) Issuance of long-term debt, net of issuance costs — 345 — Redemptions and purchases of debt, including make-whole payment — ( 330 ) ( 2 ) Payments related to tax withholding for share-based compensation ( 30 ) ( 20 ) ( 14 ) Other 2 1 8 Cash flows from consolidated investment vehicles: Proceeds from issuance of collateralized loan obligations — — 1,372 Repayment of collateralized loan obligations — ( 1 ) ( 373 ) Proceeds from issuance of warehouse financing debt — — 991 Repayment of warehouse financing debt — ( 166 ) ( 796 ) Contributions from noncontrolling interests to consolidated investment vehicles — — 74 Distributions to noncontrolling interests from consolidated investment vehicles ( 10 ) ( 80 ) ( 26 ) Borrowing (payment) under credit facility — ( 4 ) 41 Net cash flows provided by (used in) financing activities ( 983 ) ( 670 ) 612 Effect of foreign exchange rate changes ( 2 ) 2 ( 8 ) Increase (decrease) in cash and cash equivalents and restricted cash ( 158 ) 79 ( 135 ) Cash and cash equivalents and restricted cash at beginning of period 286 207 342 Cash and cash equivalents and restricted cash at end of period $ 128 $ 286 $ 207 (continued) The accompanying notes are an integral part of these consolidated financial statements. 123 Assured Guaranty Ltd. Consolidated Statements of Cash Flows, Continued (in millions) Year Ended December 31, 2024 2023 2022 Supplemental cash flow information Income taxes paid (received) $ 90 $ 4 $ 105 Interest paid on long-term debt 88 77 77 Supplemental disclosure of non-cash activities: Puerto Rico Salvage Fixed-maturity securities, available-for-sale, received as salvage $ — $ 1 $ 986 Fixed-maturity securities, available-for-sale, ceded to a reinsurer — — 27 Fixed-maturity securities, trading, received as salvage — — 549 Fixed-maturity securities, trading, ceded to a reinsurer — — 6 Debt securities of financial guaranty variable interest entities received as salvage — — 234 Contributions from noncontrolling interests — 20 36 Distributions to noncontrolling interests — 27 56 Sale of asset management subsidiaries (See Note 1) Assets acquired — 437 — Assets transferred — 240 — Liabilities transferred — 66 — As of December 31, 2024 2023 2022 Reconciliation of cash and cash equivalents and restricted cash to the consolidated balance sheets: Cash $ 121 $ 97 $ 107 Restricted cash (included in other assets) 5 — 1 Cash of financial guaranty variable interest entities (see Note 8) — 154 2 Cash and cash equivalents of consolidated investment vehicles (see Note 8) 2 35 97 Cash and cash equivalents and restricted cash at the end of period $ 128 $ 286 $ 207 The accompanying notes are an integral part of these consolidated financial statements. 124 Assured Guaranty Ltd. Notes to Consolidated Financial Statements 1. Business and Basis of Presentation Business Assured Guaranty Ltd. (AGL and, together with its subsidiaries, Assured Guaranty or the Company) is a Bermuda-based holding company that provides, through its wholly-owned operating subsidiaries, credit protection products to the United States (U.S.) and non-U.S. public finance (including infrastructure) and structured finance markets. Assured Guaranty also participates in the asset management business. Insurance Through its insurance subsidiaries, the Company applies its credit underwriting judgment, risk management skills and capital markets experience primarily to offer financial guaranty insurance that protects holders of debt instruments and other monetary obligations from defaults in scheduled payments. If an obligor defaults on a scheduled payment due on an obligation, including a scheduled principal or interest payment (collectively, debt service), the Company is required under its unconditional and irrevocable financial guaranty to pay the amount of the shortfall to the holder of the obligation. The Company markets its financial guaranty insurance directly to issuers and underwriters of public finance and structured finance securities as well as to investors in such obligations. The Company guarantees obligations issued principally in the U.S. and the United Kingdom (U.K.), and also guarantees obligations issued in other countries and regions, including Western Europe. The Company also provides specialty insurance and reinsurance on transactions with risk profiles similar to those of its structured finance exposures written in financial guaranty form. The Company’s principal insurance subsidiaries are: • Assured Guaranty Inc. (AG), domiciled in Maryland and formerly known as Assured Guaranty Corp., and its insurance subsidiaries: • Assured Guaranty UK Limited (AGUK), organized in the U.K.; • Assured Guaranty (Europe) SA (AGE), organized in France; • Assured Guaranty Re Ltd. (AG Re), domiciled in Bermuda, and its insurance subsidiary: • Assured Guaranty Re Overseas Ltd. (AGRO), domiciled in Bermuda. Effective August 1, 2024, Assured Guaranty Municipal Corp. (AGM) merged with and into AG, with AG as the surviving company. Prior to the merger, AGM was a principal insurance subsidiary of the Company. As a result of the merger, the Company wrote-off the $ 6 million carrying value of AGM’s insurance licenses in the third quarter of 2024, which was recorded in “other operating expenses” in the Insurance segment. In connection with the merger, the Maryland Insurance Administration (MIA) approved, and in the third quarter of 2024 AG implemented, the redemption of approximately $ 300 million of AG’s shares of common stock from its parent, Assured Guaranty Municipal Holdings Inc. (AGMH), in exchange for cash of $ 167 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 its then parent, AGMH. The Company designated certain assets and liabilities supporting the Insurance segment as held for sale in the first quarter of 2023. The held for sale assets and liabilities were $ 28 million (reported in “other assets”) and $ 3 million (reported in “other liabilities”), respectively, as of December 31, 2024. Asset Management Until July 1, 2023, the Company served as an investment adviser to primarily collateralized loan obligations (CLOs) and opportunity funds, through Assured Investment Management LLC (AssuredIM LLC) and its investment management affiliates (together with AssuredIM LLC, AssuredIM). Beginning July 1, 2023, the Company participates in the asset management business through its ownership interest in Sound Point Capital Management, LP (Sound Point, LP) and certain of its investment management affiliates (together with Sound Point, LP, Sound Point), as described below. On July 1, 2023, Assured Guaranty contributed to Sound Point, LP most of its asset management business, other than that conducted by Assured Healthcare Partners LLC (AHP) (AssuredIM Contributed Business), as contemplated by the transaction agreement entered into with Sound Point on April 5, 2023 (Transaction Agreement). Assured Guaranty received, subject to certain potential post-closing adjustments, approximately 30 % of the common interests in Sound Point, LP, and certain other interests in Sound Point. 125 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued In addition, in accordance with the terms of a letter agreement (Letter Agreement), effective July 1, 2023, AG (i) engaged Sound Point as its sole alternative credit manager, and (ii) transitioned to Sound Point the management of certain existing alternative investments and related commitments. The Letter Agreement also provides that, within the first two years of Sound Point’s engagement, AG, including through its investment subsidiary AG Asset Strategies LLC (AGAS), would, subject to regulatory approval, cure terms and other terms of the Letter Agreement, make new investments in funds, other vehicles and separately managed accounts managed by Sound Point which, when aggregated with the alternative investments and commitments transitioned from AssuredIM and any reinvestments (collectively, Sound Point Investments), and investments made by other Assured Guaranty affiliates, will total $ 1 billion. The Letter Agreement contemplates a long-term investment partnership between Sound Point and Assured Guaranty, whereby AG has agreed to reinvest all returns of capital from Sound Point Investments for a period of 15 years, until July 1, 2038. Similarly, the Letter Agreement provides that AG will reinvest all gains and dividends from Sound Point Investments for the first two years of Sound Point’s engagement, and reinvest half of all such gains and dividends thereafter until July 1, 2033 (the transactions contemplated under the Transaction Agreement and the Letter Agreement, the Sound Point Transaction). On July 1, 2028, AG may choose to reduce the amounts invested or required to be reinvested in certain Sound Point Investments under the Letter Agreement, subject to adjustment of Assured Guaranty’s portion of its ownership interest in Sound Point. To the extent not required to be reinvested by the Letter Agreement, all proceeds from Sound Point Investments received in accordance with their operative investment documents can be distributed to AG. See Note 7, Investments and Cash. In July 2023, Assured Guaranty sold all of its equity interests in AHP, which manages healthcare funds, to an entity owned and controlled by the managing partner of AHP (AHP Transaction). In connection with the AHP Transaction, the Company agreed to remain a strategic investor in certain AHP managed funds, retain its portion of carried interest in certain AHP managed funds, and receive other consideration. Upon closing of the Sound Point Transaction and the AHP Transaction, the Company deconsolidated most of the corresponding AssuredIM entities (which had previously been classified as held-for-sale) and reported an ownership interest in Sound Point that is accounted for under the equity method. In connection with the Sound Point Transaction and AHP Transaction, the Company reevaluated its consolidation conclusion for each consolidated investment vehicle (CIV) and deconsolidated all but three CIVs. See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles. After the Sound Point Transaction and AHP Transaction, the Company continues to consolidate the general partner of a fund that Sound Point now manages and reports any performance fees in “other income.” The following table presents the calculation of the gain associated with the Sound Point Transaction and AHP Transaction in 2023. Gain on Sound Point Transaction and AHP Transaction (in millions) Fair value of ownership interest in Sound Point $ 425 Fair value of other consideration (1) 25 Total consideration 450 Less net asset carrying value of transferred AssuredIM subsidiaries (2) 188 Gain on sale of asset management subsidiaries (3) $ 262 ____________________ (1) Included $ 13 million of cash and a receivable reported in other assets of $ 12 million. (2) Included goodwill and intangible assets of $ 155 million. (3) Consisted of a $ 255 million gain on the Sound Point Transaction and a $ 7 million gain on the AHP Transaction, which were both reported in the Corporate division (as described in Note 2, Segment Information). The Company recognized expenses of $ 46 million during 2023 associated with the Sound Point Transaction and AHP Transaction. U.S. Holding Companies AGL directly or indirectly owns several holding companies, two of which - Assured Guaranty US Holdings Inc. (AGUS) and AGMH (collectively, the U.S. Holding Companies) - have public debt outstanding. 126 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Basis of Presentation The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). In management’s opinion, all material adjustments necessary for a fair statement of the financial condition, results of operations and cash flows of the Company, including its consolidated variable interest entities (VIEs), are reflected in the periods presented and are of a normal, recurring nature. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain prior year balances have been reclassified to conform to the current year’s presentation. The consolidated financial statements include the accounts of AGL, its direct and indirect subsidiaries, and its consolidated financial guaranty VIEs (FG VIEs) and CIVs. See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles. Intercompany accounts and transactions between and among all consolidated entities have been eliminated. All amounts are reported in U.S. dollars, unless otherwise specified. Significant Accounting Policies The Company revalues foreign currency denominated assets, liabilities, revenue, and expenses, into U.S. dollars using the applicable exchange rates prescribed by GAAP. For subsidiaries where the functional currency is the U.S. dollar, gains and losses generated by the remeasurement of foreign currency transactions are reported in the consolidated statements of operations. For consolidated entities whose functional currency is not the U.S. dollar, amounts generated by translating foreign currency financial statements to the Company’s U.S. dollar reporting currency, are reported in the consolidated statements of comprehensive income (loss). Other accounting policies are included in the following notes to the consolidated financial statements. Note Name Note Number Expected loss to be paid (recovered) Note 4 Contracts accounted for as insurance Note 5 Contracts accounted for as credit derivatives Note 6 Investments and cash Note 7 Financial guaranty variable interest entities and consolidated investment vehicles Note 8 Fair value measurement Note 9 Asset management fees Note 10 Long-term debt and credit facilities Note 11 Employee benefit plans Note 12 Income taxes Note 13 Related parties Note 15 Leases Note 16 Contingencies Note 17 Shareholders' equity Note 18 Earnings per share Note 20 Recent Accounting Standards Adopted In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . The amendments in this ASU require disclosure of significant segment expenses regularly provided to the chief operating decision maker (CODM), extend certain annual disclosures to interim periods, and permit more than one measure of segment profit or loss to be reported under certain conditions. This ASU is effective in fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company adopted this ASU during the fourth quarter of 2024 and applied its amendments retrospectively to all prior periods presented in its consolidated financial statements. See Note 2, Segment Information. 127 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Recent Accounting Standards Not Yet Adopted In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . The amendments require enhanced annual disclosures regarding the rate reconciliation and income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024. The Company will apply the amendments in this ASU prospectively to all annual periods beginning after December 15, 2024. The adoption of this ASU will affect certain of the Company’s income tax disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) . The amendments in this ASU require disclosure about specific expense categories, including employee compensation, depreciation and intangible asset amortization, in the notes to financial statements at interim and annual reporting periods. This ASU is effective in fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. Prospective application is required, and retrospective application is permitted. The Company is evaluating when and how it will adopt this ASU and the effect that the amendments in this ASU may have on its expense disclosures. 2. Segment Information The Company reports its results of operations in two segments: Insurance and Asset Management. The Company separately reports the results of its Corporate division and the effects of consolidating FG VIEs and CIVs. This presentation is consistent with the manner in which the Chief Executive Officer and President, the CODM, reviews the business to assess performance and allocate resources. The CODM uses adjusted operating income to allocate resources for each segment predominantly in the annual budget and forecasting process and to assess the performance for each segment. The Company analyzes the operating performance of each segment using “segment adjusted operating income (loss).” Results for each segment and division include specifically identifiable expenses as well as intersegment expense allocations, as applicable, based on time studies and other cost allocation methodologies based on headcount or other metrics. Segment adjusted operating income is defined as “net income (loss) attributable to AGL,” adjusted for the following items, which primarily affect the Insurance segment and Corporate division: • Elimination of realized gains (losses) on the Company’s investments, except for gains and losses on securities classified as trading. • Elimination of non-credit impairment-related unrealized fair value gains (losses) on credit derivatives that are recognized in net income, which is the amount of unrealized fair value gains (losses) in excess of the present value of the expected estimated economic credit losses, and non-economic payments. • Elimination of fair value gains (losses) on the Company’s committed capital securities (CCS) that are recognized in net income. • Elimination of foreign exchange gains (losses) on remeasurement of net premium receivables and loss and loss adjustment expense (LAE) reserves that are recognized in net income. • The tax effects related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments. In addition to the adjustments listed above, segment adjusted operating income (loss) differs from GAAP in other respects. The Insurance segment includes: (i) premiums and losses from the financial guaranty insurance policies issued by AG that guarantees the FG VIEs’ debt; and (ii) the insurance subsidiaries’ share of earnings from investments in funds managed by Sound Point and AHP funds (prior to July 1, 2023, AssuredIM) in “equity in earnings (losses) of investees.” Under GAAP, (i) FG VIEs are consolidated by AG and the premiums and losses/recoveries associated with the financial guaranty policies in respect of the FG VIEs’ debt are eliminated (the reconciliation tables below present the FG VIEs and related eliminations in “other”); and (ii) certain investments in funds managed by Sound Point (prior to July 1, 2023, AssuredIM) and AHP funds are, or were in prior periods, accounted for as CIVs, (in the reconciliation tables below, the CIVs and related eliminations of the Insurance segment’s “equity in earnings (losses) of investees” associated with the Company’s ownership interest in CIVs are presented in “other”). Until July 1, 2023, under GAAP, reimbursable fund expenses were shown as a component of “asset management fees” and included in total revenues, whereas in the Asset Management segment in the tables below these expenses were netted in “segment expenses.” The Company does not report assets by reportable segment as the CODM does not assess performance and allocate resources based on assets. 128 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued The Insurance segment primarily consists of the adjusted operating income (loss) of: (i) the Company’s insurance subsidiaries; and (ii) AGAS. Prior to July 1, 2023, the Asset Management segment consisted of the adjusted operating income (loss) of AssuredIM. Since July 2023, the Company participates in the asset management business through its ownership interest in Sound Point as described in Note 1, Business and Basis of Presentation. Beginning in the third quarter of 2023, the Asset Management segment primarily includes the results of the Company’s equity method ownership interest in Sound Point. The Corporate division primarily consists of: (i) interest expense and any losses on the extinguishment of the U.S. Holding Companies’ debt; (ii) other corporate operating expenses of AGL and the U.S. Holding Companies, and (iii) beginning in the third quarter of 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. The Corporate division also included the gain, net of transaction expenses, associated with the Sound Point Transaction and the AHP Transaction in 2023. The Other category in the tables below primarily includes the effect of consolidating FG VIEs, CIVs, intersegment eliminations and, prior to July 1, 2023, the reclassification of reimbursable fund expenses. See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles. The following table presents information for the Company’s operating segments. Intersegment revenues include transactions between and among the segments, the Corporate division and other. Segment Information Years Ended December 31, 2024 2023 (3) 2022 Insurance Asset Management Insurance Asset Management Insurance Asset Management (in millions) Third-party revenues $ 811 $ 8 $ 845 $ 49 $ 748 $ 78 Intersegment revenues 10 2 10 27 9 34 Segment revenues 821 10 855 76 757 112 Segment loss and LAE (benefit) ( 18 ) — 161 — 12 — Segment employee compensation and benefit expenses 170 — 154 59 148 80 Segment amortization of DAC 20 — 13 — 14 — Other segment items (1) 117 6 107 19 85 39 Segment expenses 289 6 435 78 259 119 Segment equity in earnings (losses) of investees 102 2 82 5 ( 51 ) — Less: Segment provision (benefit) for income taxes 109 1 ( 119 ) — 34 ( 1 ) Segment adjusted operating income (loss) $ 525 $ 5 $ 621 $ 3 $ 413 $ ( 6 ) Selected components of segment adjusted operating income: Net investment income $ 339 $ — $ 370 $ — $ 278 $ — Non-cash compensation and operating expenses (2) 60 — 38 8 41 18 _____________________ (1) Other segment items include professional services expenses, maintenance, depreciation expense, lease expense, investment management expenses and certain overhead expenses. (2) Consists of depreciation and amortization, share-based compensation (see Note 12, Employee Benefit Plans) and the write-off of long-lived intangible assets related to AGM licenses (see Note 1, Business and Basis of Presentation). (3) In 2023, the Corporate division had revenues of $ 275 million primarily consisting of a gain on the Sound Point and AHP transactions. Expenses for the Corporate division consisted of $ 99 million of interest expense, $ 38 million of employee compensation and benefit expenses, and $ 79 million of other expenses. 129 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued The tables below present a reconciliation of significant components of segment information to the comparable consolidated amounts. Reconciliation of Segment Information to Consolidated Information Year Ended December 31, 2024 Less: Net Income (Loss) Attributable to AGL Revenues Expenses Equity in Earnings (Losses) of Investees Provision (Benefit) for Income Taxes Noncontrolling Interests (in millions) Segments: Insurance $ 821 $ 289 $ 102 $ 109 $ — $ 525 Asset Management 10 6 2 1 — 5 Total segments 831 295 104 110 — 530 Corporate division 17 169 5 ( 12 ) — ( 135 ) Other 38 ( 17 ) ( 47 ) ( 2 ) 16 ( 6 ) Subtotal 886 447 62 96 16 389 Reconciling items: Realized gains (losses) on investments 9 — — — — 9 Non-credit impairment-related unrealized fair value gains (losses) on credit derivatives 13 ( 1 ) — — — 14 Fair value gains (losses) on CCS ( 10 ) — — — — ( 10 ) Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves ( 26 ) — — — — ( 26 ) Tax effect — — — — — — Total consolidated $ 872 $ 446 $ 62 $ 96 $ 16 $ 376 130 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Reconciliation of Segment Information to Consolidated Information Year Ended December 31, 2023 Less: Net Income (Loss) Attributable to AGL Revenues Expenses Equity in Earnings (Losses) of Investees Provision (Benefit) for Income Taxes (1) Noncontrolling Interests (in millions) Segments: Insurance $ 855 $ 435 $ 82 $ ( 119 ) $ — $ 621 Asset Management 76 78 5 — — 3 Total segments 931 513 87 ( 119 ) — 624 Corporate division 275 216 — 14 — 45 Other 61 6 ( 59 ) ( 5 ) 22 ( 21 ) Subtotal 1,267 735 28 ( 110 ) 22 648 Reconciling items: Realized gains (losses) on investments ( 14 ) — — — — ( 14 ) Non-credit impairment-related unrealized fair value gains (losses) on credit derivatives 104 ( 2 ) — — — 106 Fair value gains (losses) on CCS ( 35 ) — — — — ( 35 ) Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves 51 — — — — 51 Tax effect — — — 17 — ( 17 ) Total consolidated $ 1,373 $ 733 $ 28 $ ( 93 ) $ 22 $ 739 _____________________ (1) Includes $ 189 million of tax benefit related to a Bermuda tax law change, which is included in the Insurance segment. See Note 13, Income Taxes. 131 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Reconciliation of Segment Information to Consolidated Information Year Ended December 31, 2022 Less: Net Income (Loss) Attributable to AGL Revenues Expenses Equity in Earnings (Losses) of Investees Provision (Benefit) for Income Taxes Noncontrolling Interests (in millions) Segments: Insurance $ 757 $ 259 $ ( 51 ) $ 34 $ — $ 413 Asset Management 112 119 — ( 1 ) — ( 6 ) Total segments 869 378 ( 51 ) 33 — 407 Corporate division 4 143 — ( 5 ) — ( 134 ) Other 14 19 12 — 13 ( 6 ) Subtotal 887 540 ( 39 ) 28 13 267 Reconciling items: Realized gains (losses) on investments ( 56 ) — — — — ( 56 ) Non-credit impairment-related unrealized fair value gains (losses) on credit derivatives ( 22 ) ( 4 ) — — — ( 18 ) Fair value gains (losses) on CCS 24 — — — — 24 Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves ( 110 ) — — — — ( 110 ) Tax effect — — — ( 17 ) — 17 Total consolidated $ 723 $ 536 $ ( 39 ) $ 11 $ 13 $ 124 Supplemental Information Year Ended December 31, 2024 Net Earned Premiums Net Investment Income Loss and LAE (Benefit) Amortization of DAC Other Expenses(1) (in millions) Segments: Insurance $ 406 $ 339 $ ( 18 ) $ 20 $ 287 Asset Management — — — — 6 Total segments 406 339 ( 18 ) 20 293 Corporate division — 14 — — 68 Other ( 3 ) ( 13 ) ( 7 ) — — Subtotal 403 340 ( 25 ) 20 361 Reconciling items: Credit derivative impairment (recoveries) (2) — — ( 1 ) — — Total consolidated $ 403 $ 340 $ ( 26 ) $ 20 $ 361 _____________________ (1) Consists of “employee compensation and benefit expenses” and “other operating expenses.” (2) Credit derivative impairment (recoveries) are included in “fair value gains (losses) on credit derivatives” in the Company’s consolidated statements of operations and in loss and LAE (benefit) on a segment basis. 132 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Supplemental Information Year Ended December 31, 2023 Net Earned Premiums Net Investment Income Loss and LAE (Benefit) Amortization of DAC Other Expenses(1) (in millions) Segments: Insurance $ 347 $ 370 $ 161 $ 13 $ 261 Asset Management — — — — 77 Total segments 347 370 161 13 338 Corporate division — 8 — — 117 Other ( 3 ) ( 13 ) 3 — 13 Subtotal 344 365 164 13 468 Reconciling items: Credit derivative impairment (recoveries) (2) — — ( 2 ) — — Total consolidated $ 344 $ 365 $ 162 $ 13 $ 468 _____________________ (1) Consists of “employee compensation and benefit expenses” and “other operating expenses.” (2) Credit derivative impairment (recoveries) are included in “fair value gains (losses) on credit derivatives” in the Company’s consolidated statements of operations and in loss and LAE (benefit) on a segment basis. Supplemental Information Year Ended December 31, 2022 Net Earned Premiums Net Investment Income Loss and LAE (Benefit) Amortization of DAC Other Expenses(1) (in millions) Segments: Insurance $ 497 $ 278 $ 12 $ 14 $ 232 Asset Management — — — — 118 Total segments 497 278 12 14 350 Corporate division — 4 — — 54 Other ( 3 ) ( 13 ) 8 — 21 Subtotal 494 269 20 14 425 Reconciling items: Credit derivative impairment (recoveries) (2) — — ( 4 ) — — Total consolidated $ 494 $ 269 $ 16 $ 14 $ 425 _____________________ (1) Consists of “employee compensation and benefit expenses” and “other operating expenses.” (2) Credit derivative impairment (recoveries) are included in “fair value gains (losses) on credit derivatives” in the Company’s consolidated statements of operations and in loss and LAE (benefit) on a segment basis. The table below summarizes revenues for the operating segments, Corporate division and Other category by country of domicile for each period indicated, based on the country of domicile of the Company’s subsidiaries that generated the revenues. 133 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Segment, Corporate Division and Other Revenues by Country of Domicile Year Ended December 31, Country of Domicile 2024 2023 2022 (in millions) U.S. $ 685 $ 1,064 $ 727 Bermuda 168 166 129 U.K. 32 36 32 Other 1 1 ( 1 ) Total $ 886 $ 1,267 $ 887 3. Outstanding Exposure The Company sells credit protection primarily in financial guaranty insurance form. The Company may also sell credit protection by issuing policies that guarantee payment obligations under credit default swaps (CDS). The Company’s guaranties of CDS are generally structured such that the circumstances giving rise to the Company’s obligation to make loss payments are similar to those for its financial guaranty insurance contracts. The Company seeks to limit its exposure to losses by underwriting obligations that it views to be investment grade at inception, although on occasion it may underwrite new issuances that it views to be below-investment grade (BIG), typically as part of its loss mitigation strategy for existing troubled exposures. The Company also seeks to acquire portfolios of insurance from financial guarantors that are no longer writing new business by acquiring such companies, providing reinsurance on or novating a portfolio of insurance; in such instances, it evaluates the risk characteristics of the target portfolio, which may include some BIG exposures, as a whole in the context of the proposed transaction. The Company diversifies its insured portfolio across sector and geography and, in the structured finance portfolio, generally requires subordination or collateral to protect it from loss. Reinsurance may be used in order to reduce net exposure to certain insured transactions. Public finance obligations insured by the Company primarily consist of general obligation bonds supported by the taxing powers of U.S. state or municipal governmental authorities, as well as tax-supported bonds, revenue bonds and other obligations supported by covenants from state or municipal governmental authorities or other municipal obligors to impose and collect fees and charges for public services or specific infrastructure projects. The Company includes within public finance obligations those obligations backed by the cash flow from leases or other revenues from projects serving substantial public purposes, including utilities, toll roads, healthcare facilities and government office buildings as well as obligations issued by U.S. and non-U.S. sovereign and sub-sovereign issuers and governmental authorities. Structured finance obligations insured by the Company are generally issued by special purpose entities, including VIEs, and backed by pools of assets having an ascertainable cash flow or market value or other specialized financial obligations. Some of these VIEs are consolidated as described in Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles. Unless otherwise specified, the outstanding par and debt service amounts presented in this note include outstanding exposures on these VIEs whether or not they are consolidated. The Company also provides specialty insurance and reinsurance that are consistent with its risk profile and benefit from its underwriting experience and other types of financial guaranties. Significant Risk Management Activities The Portfolio Risk Management Committee, which includes members of senior management and senior risk and surveillance officers, is responsible for enterprise risk management for the Company’s insurance business and focuses on measuring and managing credit, market and liquidity risk for the Company’s insurance business. This committee establishes company-wide credit policy for the Company’s direct and assumed insurance business. It implements specific underwriting procedures and limits and allocates underwriting capacity among the Company’s insurance subsidiaries. All insurance transactions in new asset classes or new jurisdictions, or otherwise outside the Company’s Board-approved risk appetite statement or its risk limits, must be approved by this committee. The risk management committees of the insurance subsidiaries conduct in-depth reviews of the insured portfolios of the relevant subsidiaries, focusing on varying portions of the portfolio at each meeting. They review and may revise internal 134 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued ratings assigned to the insured transactions and review sector reports, monthly product line surveillance reports and compliance reports. All transactions in the insured portfolio are assigned internal credit ratings by the relevant underwriting committee at inception, and such credit ratings are updated by the relevant risk management committee based on changes in transaction credit quality. As part of the surveillance process, the Company monitors trends and changes in transaction credit quality, and recommends such remedial actions as may be necessary or appropriate. The Company also develops strategies to enforce its contractual rights and remedies and to mitigate its losses, engage in negotiation discussions with transaction participants and, when necessary, manage the Company’s litigation proceedings. Surveillance Categories The Company segregates its insured portfolio into investment grade and BIG surveillance categories to facilitate the appropriate allocation of resources to monitoring and loss mitigation efforts and to aid in establishing the appropriate cycle for periodic review of each exposure. BIG exposures include all exposures with internal credit ratings below BBB-. The Company’s internal credit ratings are based on internal assessments of the likelihood of default and loss severity in the event of default. Internal credit ratings are expressed on a ratings scale similar to that used by the rating agencies and generally reflect an approach similar to that employed by the rating agencies, except that the Company’s internal credit ratings focus on future performance rather than lifetime performance. The Company monitors its insured portfolio and refreshes its internal credit ratings on individual exposures in quarterly, semi-annual or annual cycles based on the Company’s view of the exposure’s credit quality, future loss potential, volatility and sector. More extensive monitoring and intervention are employed for all BIG surveillance categories, with internal credit ratings reviewed quarterly. Exposures identified as BIG are subjected to further review to determine (i) the probability of a future loss, (ii) the calculation of the expected future loss to be paid, and (iii) whether the Company has paid a claim for which it expects to be reimbursed within one year (liquidity claim) or a claim for which it does not expect to be reimbursed within one year. Ratings on exposures in sectors identified as under the most stress or with the most potential volatility are also reviewed every quarter, although the Company may also review a rating in response to developments impacting a credit when a ratings review is not scheduled. For assumed exposures, the Company may use the ceding company’s credit ratings of transactions where it is impractical for it to assign its own rating. The Company assigns each BIG exposure to one of the three BIG surveillance categories below, which generally represent the following: • BIG 1: Below-investment-grade exposures for which there are possible future losses, on a present value basis, and the aggregate probability weighting of scenarios with future losses is less than 50 %, regardless of whether the Company has or has not paid a liquidity claim. • BIG 2: Below-investment-grade exposures for which there are possible future losses, on a present value basis, and the aggregate probability weighting of scenarios with future losses is 50 % or more, but for which no claims (other than liquidity claims) have yet been paid. • BIG 3: Below-investment-grade exposures for which future losses are expected, on a present value basis, and the aggregate probability weighting of scenarios with future losses is 50 % or more, and for which claims, other than liquidity claims, have been paid. For purposes of classifying BIG exposures into one of the three BIG categories, the Company calculates the present value of projected claim payments and recoveries using the pre-tax book yield of the relevant insurance subsidiary’s investment portfolio as the applicable discount rate. As discussed in Note 4, Expected Loss to be Paid (Recovered), for financial statement measurement purposes, the Company uses risk-free rates (as determined each quarter) for discounting, rather than pre-tax book yield of the investment portfolio, to calculate the expected losses to be paid. Expected losses to be paid (recovered) are based on probability weighted scenarios and serve as the basis for the loss reserves reported in accordance with U.S. GAAP. 135 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Financial Guaranty Exposure The Company measures its financial guaranty exposure in terms of: (i) gross and net par outstanding; and (ii) gross and net debt service. The Company typically guarantees the payment of debt service when due. Since most of these payments are due in the future, the Company generally uses gross and net par outstanding as a proxy for its financial guaranty exposure. Gross par outstanding generally represents the principal amount of the insured obligation at a point in time. Net par outstanding equals gross par outstanding net of any reinsurance. The Company includes in its par outstanding calculation the impact of any consumer price index inflator to the reporting date as well as, in the case of accreting (zero-coupon) obligations, accretion to the reporting date. Non-U.S. dollar denominated par outstanding is translated at the spot rate at the end of the reporting period. The Company has, from time to time, purchased securities that it has insured, and for which it had expected losses to be paid, in order to mitigate the economic effect of insured losses (Loss Mitigation Securities). The Company excludes amounts attributable to Loss Mitigation Securities from par and debt service outstanding, and instead reports Loss Mitigation Securities in the investment portfolio. The Company manages such securities as investments and not insurance exposure. As of both December 31, 2024 and December 31, 2023 the Company excluded net par outstanding of $ 1.2 billion attributable to Loss Mitigation Securities. Gross debt service outstanding represents the sum of all estimated future debt service payments on the insured obligations, on an undiscounted basis. Net debt service outstanding equals gross debt service outstanding net of any reinsurance. Future debt service payments include the estimated impact of any consumer price index inflator after the reporting date, as well as, in the case of accreting (zero-coupon) obligations, accretion after the reporting date. The Company calculates its debt service outstanding as follows: • for insured obligations that are not supported by homogeneous pools of assets (which category includes most of the Company’s public finance transactions), as the total estimated contractual future debt service due through maturity, regardless of whether the obligations may be called and regardless of whether, in the case of obligations where principal payments are due when an underlying asset makes a principal payment, the Company believes the obligations will be repaid prior to contractual maturity; and • for insured obligations that are supported by homogeneous pools of assets that are contractually permitted to prepay principal (which category includes, for example, residential mortgage-backed securities (RMBS)), as the total estimated expected future debt service due on insured obligations through their respective expected terms, which reflects the Company’s expectations as to whether the obligations may be called and, in the case of obligations where principal payments are due when an underlying asset makes a principal payment, when the Company expects principal payments to be made prior to contractual maturity. The calculation of debt service requires the use of estimates, which the Company updates periodically, including estimates and assumptions for the expected remaining term of insured obligations supported by homogeneous pools of assets, updated interest rates for floating and variable rate insured obligations, behavior of consumer price indices for obligations with consumer price index inflators, foreign exchange rates and other assumptions based on the characteristics of each insured obligation. Debt service is a measure of the estimated maximum potential exposure to insured obligations before considering the Company’s various legal rights to the underlying collateral and other remedies available to it under its financial guaranty contract. Actual debt service may differ from estimated debt service due to refundings, terminations, negotiated restructurings, prepayments, changes in interest rates on variable rate insured obligations, consumer price index behavior differing from that projected, changes in foreign exchange rates on non-U.S. dollar denominated insured obligations and other factors. 136 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Financial Guaranty Portfolio Debt Service and Par Outstanding As of December 31, 2024 As of December 31, 2023 Gross Net Gross Net (in millions) Debt Service Public finance $ 403,789 $ 403,718 $ 386,494 $ 386,419 Structured finance 12,674 12,248 11,543 11,217 Total financial guaranty $ 416,463 $ 415,966 $ 398,037 $ 397,636 Par Outstanding Public finance $ 250,429 $ 250,375 $ 239,352 $ 239,296 Structured finance 11,603 11,177 10,183 9,857 Total financial guaranty $ 262,032 $ 261,552 $ 249,535 $ 249,153 In addition to amounts shown in the table above, the Company had outstanding commitments to provide guaranties of $ 196 million of public finance gross par and $ 1.5 billion of structured finance gross par as of December 31, 2024. These commitments are contingent on the satisfaction of all conditions set forth in the guaranties and may expire unused or be canceled at the counterparty’s request. Therefore, the total commitment amount does not necessarily reflect actual future guaranteed amounts. Also, in connection with a potential transaction that would accelerate the run-off of the insured portfolio of Financial Guaranty Insurance Company (FGIC) (the Proposed Transaction) pursuant to the First Amended Plan of Rehabilitation for FGIC, dated June 4, 2013, the Company and FGIC are parties to a novation agreement dated as of February 8, 2024 pursuant to which certain FGIC policies insuring approximately $ 353 million of public finance (including infrastructure) gross par and approximately $ 50 million of structured finance gross par as of December 31, 2023 may in the future be novated to the Company in accordance with the terms and conditions of the novation agreement. The Proposed Transaction, including the novation of certain FGIC policies to the Company, is subject in all respects to review and approval by NYDFS, the reopening of FGIC’s rehabilitation proceeding, and ultimate approval by the Supreme Court of the State of New York. On September 10, 2024, following the NYDFS’s review of the Proposed Transaction and information submitted by FGIC, FGIC received a written communication from the NYDFS stating that the NYDFS does not support the Proposed Transaction. In the event the Proposed Transaction does not occur on or prior to September 30, 2025, either the Company or FGIC has the right to terminate the novation agreement in accordance with its terms. Financial Guaranty Portfolio by Internal Rating As of December 31, 2024 Public Finance U.S. Public Finance Non-U.S. Structured Finance U.S. Structured Finance Non-U.S. Total Rating Category Net Par Outstanding % Net Par Outstanding % Net Par Outstanding % Net Par Outstanding % Net Par Outstanding % (dollars in millions) AAA $ 25 — % $ 2,074 4.2 % $ 512 6.1 % $ 470 17.3 % $ 3,081 1.2 % AA 17,664 8.8 2,854 5.8 5,386 63.7 58 2.1 25,962 9.9 A 111,502 55.5 13,046 26.5 952 11.3 2,117 77.7 127,617 48.8 BBB 69,096 34.3 24,828 50.5 707 8.3 79 2.9 94,710 36.2 BIG 2,888 1.4 6,398 13.0 896 10.6 — — 10,182 3.9 Total net par outstanding $ 201,175 100.0 % $ 49,200 100.0 % $ 8,453 100.0 % $ 2,724 100.0 % $ 261,552 100.0 % 137 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Financial Guaranty Portfolio by Internal Rating As of December 31, 2023 Public Finance U.S. Public Finance Non-U.S. Structured Finance U.S. Structured Finance Non-U.S. Total Rating Category Net Par Outstanding % Net Par Outstanding % Net Par Outstanding % Net Par Outstanding % Net Par Outstanding % (dollars in millions) AAA $ 110 0.1 % $ 2,062 4.2 % $ 867 10.0 % $ 465 38.0 % $ 3,504 1.4 % AA 17,883 9.4 3,379 6.9 4,517 52.3 89 7.3 25,868 10.4 A 102,945 54.1 12,968 26.5 1,639 19.0 571 46.6 118,123 47.4 BBB 66,080 34.7 29,467 60.1 574 6.7 100 8.1 96,221 38.6 BIG 3,271 1.7 1,131 2.3 1,035 12.0 — — 5,437 2.2 Total net par outstanding $ 190,289 100.0 % $ 49,007 100.0 % $ 8,632 100.0 % $ 1,225 100.0 % $ 249,153 100.0 % 138 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued The following tables present net par outstanding by sector for the financial guaranty portfolio. Financial Guaranty Portfolio Net Par Outstanding by Sector As of December 31, Sector 2024 2023 (in millions) Public finance: U.S. public finance: General obligation $ 78,162 $ 74,609 Tax backed 33,288 33,060 Municipal utilities 30,036 29,300 Transportation 26,958 22,052 Healthcare 14,007 12,604 Infrastructure finance 8,663 8,796 Higher education 7,381 7,250 Housing revenue 1,272 1,152 Investor-owned utilities 325 329 Renewable energy 164 167 Other public finance 919 970 Total U.S. public finance 201,175 190,289 Non-U.S public finance: Regulated utilities 22,361 20,545 Infrastructure finance 14,961 15,430 Sovereign and sub-sovereign 9,181 9,869 Renewable energy 1,596 2,030 Pooled infrastructure 1,101 1,133 Total non-U.S. public finance 49,200 49,007 Total public finance 250,375 239,296 Structured finance: U.S. structured finance: Insurance securitizations 4,495 4,379 RMBS 1,507 1,774 Pooled corporate obligations 607 631 Financial products 492 464 Consumer receivables 212 314 Subscription finance facilities 185 178 Other structured finance 955 892 Total U.S. structured finance 8,453 8,632 Non-U.S. structured finance: Subscription finance facilities 1,385 444 Pooled corporate obligations 468 425 RMBS 221 252 Other structured finance 650 104 Total non-U.S structured finance 2,724 1,225 Total structured finance 11,177 9,857 Total net par outstanding $ 261,552 $ 249,153 139 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Financial Guaranty Portfolio Expected Amortization of Net Par Outstanding As of December 31, 2024 Public Finance Structured Finance Total (in millions) 0 to 5 years $ 52,502 $ 5,720 $ 58,222 5 to 10 years 54,255 3,220 57,475 10 to 15 years 46,053 1,007 47,060 15 to 20 years 32,126 702 32,828 Over 20 years 65,439 528 65,967 Total net par outstanding $ 250,375 $ 11,177 $ 261,552 Actual amortization differs from expected maturities due to prepayments and terminations, and because interest rates, consumer price indices, foreign exchange rates and expected terms may be different than management had estimated. The expected maturities of structured finance obligations are, in general, shorter than their contractual maturities. Financial Guaranty Portfolio Components of BIG Net Par Outstanding As of December 31, 2024 BIG Net Par Outstanding Net Par BIG 1 BIG 2 BIG 3 Total BIG Outstanding (in millions) Public finance: U.S. public finance $ 2,119 $ 137 $ 632 $ 2,888 $ 201,175 Non-U.S. public finance 5,879 519 — 6,398 49,200 Public finance 7,998 656 632 9,286 250,375 Structured finance: U.S. RMBS 104 29 686 819 1,507 Other structured finance — 21 56 77 9,670 Structured finance 104 50 742 896 11,177 Total $ 8,102 $ 706 $ 1,374 $ 10,182 $ 261,552 Financial Guaranty Portfolio Components of BIG Net Par Outstanding As of December 31, 2023 BIG Net Par Outstanding Net Par BIG 1 BIG 2 BIG 3 Total BIG Outstanding (in millions) Public finance: U.S. public finance $ 1,257 $ 926 $ 1,088 $ 3,271 $ 190,289 Non-U.S. public finance 1,131 — — 1,131 49,007 Public finance 2,388 926 1,088 4,402 239,296 Structured finance: U.S. RMBS 22 36 883 941 1,774 Other structured finance — 27 67 94 8,083 Structured finance 22 63 950 1,035 9,857 Total $ 2,410 $ 989 $ 2,038 $ 5,437 $ 249,153 140 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Financial Guaranty Portfolio BIG Net Par Outstanding and Number of Risks As of December 31, 2024 Net Par Outstanding Number of Risks (2) Description Financial Guaranty Insurance (1) Credit Derivatives Total Financial Guaranty Insurance (1) Credit Derivatives Total (dollars in millions) BIG 1 $ 8,074 $ 28 $ 8,102 98 3 101 BIG 2 702 4 706 12 1 13 BIG 3 1,374 — 1,374 97 3 100 Total BIG $ 10,150 $ 32 $ 10,182 207 7 214 Financial Guaranty Portfolio BIG Net Par Outstanding and Number of Risks As of December 31, 2023 Net Par Outstanding Number of Risks (2) Description Financial Guaranty Insurance (1) Credit Derivatives Total Financial Guaranty Insurance(1) Credit Derivatives Total (dollars in millions) BIG 1 $ 2,394 $ 16 $ 2,410 95 2 97 BIG 2 979 10 989 13 2 15 BIG 3 2,010 28 2,038 109 7 116 Total BIG $ 5,383 $ 54 $ 5,437 217 11 228 _____________________ (1) Includes FG VIEs. (2) A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments. When the Company insures an obligation, it assigns the obligation to a geographic location or locations based on its view of the geographic location of the risk. The Company seeks to maintain a diversified portfolio of insured obligations designed to spread its risk across a number of geographic areas. 141 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Financial Guaranty Portfolio Geographic Distribution of Net Par Outstanding As of December 31, 2024 Number of Risks Net Par Outstanding Percent of Total Net Par Outstanding (dollars in millions) U.S.: U.S. public finance: California 1,182 $ 36,080 13.8 % Texas 1,145 26,004 9.9 New York 798 19,572 7.5 Pennsylvania 533 18,448 7.1 Illinois 479 12,536 4.8 Florida 218 11,353 4.3 New Jersey 248 8,824 3.4 Louisiana 139 4,994 1.9 Michigan 228 4,877 1.9 Colorado 171 4,012 1.5 Other 2,034 54,475 20.8 Total U.S. public finance 7,175 201,175 76.9 U.S. structured finance (multiple states) 328 8,453 3.2 Total U.S. 7,503 209,628 80.1 Non-U.S.: United Kingdom 272 41,001 15.7 Australia 7 1,740 0.7 Spain 9 1,506 0.6 France 7 1,477 0.5 Canada 5 1,243 0.5 Other 49 4,957 1.9 Total non-U.S. 349 51,924 19.9 Total 7,852 $ 261,552 100.0 % Specialty Business The Company also guarantees specialty business with risk profiles similar to those of its structured finance exposures written in financial guaranty form. Specialty Business As of December 31, 2024 As of December 31, 2023 Gross Exposure Net Exposure Gross Exposure Net Exposure (in millions) Diversified real estate (1) $ 2,004 $ 2,004 $ 1,569 $ 1,569 Insurance securitizations (2) 1,449 1,126 1,370 1,043 Pooled corporate obligations 868 868 488 488 Aircraft residual value insurance 147 87 355 200 ____________________ (1) Excess-of-loss guaranty of a minimum amount of billed rent on a diversified portfolio of real estate properties with an internal rating of AAA that matures in 2044. This guaranty is accounted for in accordance with Accounting Standards Codification (ASC) 460, Guarantees. (2) Insurance securitizations exposure is projected to reach $ 1.5 billion gross and $ 1.2 billion net in 2025. 142 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued All exposures in the table above are rated investment-grade, except for aircraft residual value insurance gross and net exposure of $ 5 million as of December 31, 2024 and gross exposure of $ 144 million and net exposure of $ 84 million as of December 31, 2023. In addition to the amounts shown in the table above, as of December 31, 2024, the Company had outstanding aggregate gross and net aircraft residual value insurance commitments of $ 90 million and $ 51 million, respectively. These commitments are contingent on the satisfaction of specified conditions and may expire unused or be cancelled at the request of the respective counterparty. Therefore, the total commitment amount does not necessarily reflect actual future covered amounts . 4. Expected Loss to be Paid (Recovered) Accounting Policy Net expected loss to be paid (recovered) is equal to the present value of expected future cash outflows for loss and LAE payments, net of: (i) inflows for expected salvage, subrogation and other recoveries; (ii) excess spread on underlying collateral, as applicable; and (iii) amounts ceded to reinsurers. Cash flows are discounted at current risk-free rates. The Company updates the discount rates each quarter and reflects the effect of such changes in economic loss development. Expected cash outflows and inflows are probability weighted cash flows that reflect management’s assumptions about the likelihood of all possible outcomes based on all information available to the Company. Those assumptions consider the relevant facts and circumstances and are consistent with the information tracked and monitored through the Company’s surveillance and risk-management functions. Expected loss to be paid (recovered) is important in that it represents the present value of amounts that the Company expects to pay or recover in future periods. The Company removes any related expected loss to be paid (recovered) associated with Loss Mitigation Securities. For Loss Mitigation Securities, the difference between the purchase price of the insured obligation and the fair value excluding the value of the Company’s insurance (on the date of acquisition) is treated as a paid loss. See Note 7, Investments and Cash, and Note 9, Fair Value Measurement. Similarly, in cases where issuers of insured obligations elected (or where an issuer and the Company negotiated) to deliver the underlying collateral, insured obligation or a new security to the Company, expected loss to be paid (recovered) is adjusted accordingly and the asset received is prospectively accounted for under the applicable guidance for that instrument. Economic loss development (benefit) represents the change in net expected loss to be paid (recovered) attributable to the effects of changes in the economic performance of insured transactions, changes in assumptions based on observed market trends, changes in discount rates, accretion of discount and the economic effects of loss mitigation efforts. In order to effectively evaluate and manage the economics and liquidity of the entire insured portfolio, management assigns ratings and calculates expected loss to be paid (recovered), on a contract-by-contract basis, in the same manner for all its exposures regardless of form or differing accounting models. The exposure reported in Note 3, Outstanding Exposure, includes policies accounted for under various accounting models depending on the characteristics of the contract and the Company’s control rights. The three primary models are: (i) insurance, as described in Note 5, Contracts Accounted for as Insurance; (ii) derivatives, as described in Note 6, Contracts Accounted for as Credit Derivatives, and Note 9, Fair Value Measurement; and (iii) FG VIE consolidation, as described in Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles. The Company has paid and may pay future claims and/or recover past claims on policies which fall under each of these accounting models. This note provides information regarding expected loss to be paid (recovered), regardless of the accounting method. Loss Estimation Process The financial guaranties issued by the Company insure the credit performance of the guaranteed obligations over an extended period of time, in some cases over 30 years, and in most circumstances the Company has no right to cancel such financial guaranties. As a result, the Company’s estimate of ultimate loss on a policy is subject to significant uncertainty over the life of the insured transaction. Credit performance can be affected by, among other things, economic, fiscal and financial market and political developments over the life of most contracts. The Company guarantees payment of interest and principal when those amounts are scheduled to be paid and cannot be required to pay on an accelerated basis, although in certain 143 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued circumstances it may elect to do so. When obligors default on their obligations, the Company is only required to pay the shortfall between the debt service due in any given period and the amount paid by the obligors. The Company does not use traditional actuarial approaches to determine its estimates of expected losses. The determination of expected loss to be paid (recovered) is an inherently subjective process involving numerous estimates, assumptions and judgments by management, using both internal and external data sources with regard to frequency and severity of loss, economic projections, governmental actions, legal developments, negotiations, recovery rates, delinquency and prepayment rates, timing of cash flows and other factors that affect credit performance. These estimates, assumptions and judgments, and the factors on which they are based, may change materially over a reporting period, and have a material effect on the Company’s financial statements. Each quarter, the Company may revise its scenarios and update its assumptions, including the probability weightings of its scenarios, based on public as well as nonpublic information obtained through its surveillance and loss mitigation activities. Changes over a reporting period in the Company’s loss estimates for public finance obligations supported by specified revenue streams, such as revenue bonds issued by toll road authorities, municipal utilities, airport authorities or healthcare systems, generally will be influenced by factors impacting their revenue levels, such as changes in demand; changing demographics; and other economic factors, especially if the obligations do not benefit from financial support from other tax revenues or governmental authorities. Changes over a reporting period in the Company’s loss estimates for its tax-supported and general obligation public finance transactions generally will be influenced by factors impacting the public issuer’s ability and willingness to pay, such as changes in the economy and population of the relevant area; changes in the issuer’s ability or willingness to raise taxes, decrease spending or receive federal assistance; new legislation; rating agency actions that affect the issuer’s ability to refinance maturing obligations or issue new debt at a reasonable cost; changes in the priority or amount of pensions and other obligations owed to workers; developments in restructuring or settlement negotiations; and other political and economic factors. Changes in loss estimates may also be affected by the Company’s loss mitigation efforts and other variables. Changes in the Company’s loss estimates for structured finance transactions can be influenced by the performance of the assets supporting those transactions, by macroeconomic factors and by specific actions taken to mitigate losses. For example, changes over a reporting period in the Company’s loss estimates for its RMBS transactions may be influenced by factors such as prepayments, the level and timing of loan defaults experienced, changes in housing prices, discount rates and results from the Company’s loss mitigation activities. In recent years, expected losses to be paid (recovered) for U.S. RMBS have also been affected by changes in the amount of recoveries on first lien deferred principal balances and second-lien charged-off loans. Actual losses will ultimately depend on future events, transaction performance or other factors that are difficult to predict. As a result, the Company’s current projections of certain losses may be subject to considerable uncertainty and may not reflect the Company’s ultimate claims paid. 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 losses that have been recognized in the transaction but which it is not yet required to pay, thereby reducing the amount of guaranteed interest due in the future. The Company has sometimes exercised this option, which results in an acceleration of cash outflows but reduces overall losses paid. The Company’s reserve committees estimate expected loss to be paid (recovered) by reviewing analyses that consider various scenarios with corresponding probabilities assigned to them. Depending upon the characteristics of the risk, the Company’s view of the potential size of any loss and the information available to the Company, that analysis may be based upon individually developed cash flow models, internal credit rating assessments, sector-driven loss severity assumptions and/or judgmental assessments. In the case of its assumed business, the Company may conduct its own analysis or use loss estimates provided by ceding insurers. Each quarter, the Company’s reserve committees review and refresh their loss projection assumptions, scenarios and the probabilities they assign to those scenarios based on developments during the period and their view of future performance. 144 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Net Expected Loss to be Paid (Recovered) and Net Economic Loss Development (Benefit) by Accounting Model Net Expected Loss to be Paid (Recovered) Net Economic Loss Development (Benefit) As of December 31, Year Ended December 31, Accounting Model 2024 2023 2024 2023 2022 (in millions) Insurance (see Note 5) $ 90 $ 263 $ ( 1 ) $ 174 $ ( 112 ) FG VIEs (see Note 8) (1) 16 240 ( 1 ) ( 11 ) ( 17 ) Credit derivatives (see Note 6) — 2 ( 1 ) 1 4 Total $ 106 $ 505 $ ( 3 ) $ 164 $ ( 125 ) ____________________ (1) In 2023, the net expected loss to be paid for FG VIEs primarily related to trusts established as a result of the Company’s resolution in 2022 of exposure to insured Puerto Rico credits experiencing payment default other than PREPA (2022 Puerto Rico Resolutions) (Puerto Rico Trusts), and in 2024 the Company satisfied its remaining direct insured obligations and deconsolidated the remaining Puerto Rico Trusts. The following tables present a roll forward of net expected loss to be paid (recovered) for all contracts, which are accounted for under one of the following accounting models: insurance, derivative or FG VIE. The Company used risk-free rates that ranged from 1.98 % to 5.22 % with a weighted average of 4.38 % as of December 31, 2024 and 1.90 % to 5.40 % with a weighted average of 4.09 % as of December 31, 2023. Net Expected Loss to be Paid (Recovered) Roll Forward Year Ended December 31, 2024 2023 2022 (in millions) Net expected loss to be paid (recovered), beginning of period $ 505 $ 522 $ 411 Economic loss development (benefit) due to: Accretion of discount 16 20 16 Changes in discount rates 4 3 ( 115 ) Changes in timing and assumptions ( 23 ) 141 ( 26 ) Total economic loss development (benefit) ( 3 ) 164 ( 125 ) Net (paid) recovered losses (1) ( 396 ) ( 181 ) 236 Net expected loss to be paid (recovered), end of period $ 106 $ 505 $ 522 ____________________ (1) Net (paid) recovered losses includes (i) securities received as recoveries in 2022 in connection with the 2022 Puerto Rico Resolutions, and in 2023 in connection with the satisfaction of insurance obligations in the Puerto Rico Trusts, and (ii) claims paid in 2022, 2023 and 2024 to extinguish certain insured Puerto Rico exposures. 145 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Net Expected Loss to be Paid (Recovered) Roll Forward by Sector Year Ended December 31, 2024 Sector Net Expected Loss to be Paid (Recovered) as of December 31, 2023 Net Economic Loss Development (Benefit) Net (Paid) Recovered Losses (1) Net Expected Loss to be Paid (Recovered) as of December 31, 2024 (in millions) Public finance: U.S. public finance $ 398 $ ( 9 ) $ ( 371 ) $ 18 Non-U.S. public finance 20 81 ( 3 ) 98 Public finance 418 72 ( 374 ) 116 Structured finance: U.S. RMBS 43 ( 75 ) ( 11 ) ( 43 ) Other structured finance 44 — ( 11 ) 33 Structured finance 87 ( 75 ) ( 22 ) ( 10 ) Total $ 505 $ ( 3 ) $ ( 396 ) $ 106 Year Ended December 31, 2023 Sector Net Expected Loss to be Paid (Recovered) as of December 31, 2022 Net Economic Loss Development (Benefit) Net (Paid) Recovered Losses (1) Net Expected Loss to be Paid (Recovered) as of December 31, 2023 (in millions) Public finance: U.S. public finance $ 403 $ 201 $ ( 206 ) $ 398 Non-U.S. public finance 9 11 — 20 Public finance 412 212 ( 206 ) 418 Structured finance: U.S. RMBS 66 ( 56 ) 33 43 Other structured finance 44 8 ( 8 ) 44 Structured finance 110 ( 48 ) 25 87 Total $ 522 $ 164 $ ( 181 ) $ 505 Year Ended December 31, 2022 Sector Net Expected Loss to be Paid (Recovered) as of December 31, 2021 Net Economic Loss Development (Benefit) Net (Paid) Recovered Losses (1) Net Expected Loss to be Paid (Recovered) as of December 31, 2022 (in millions) Public finance: U.S. public finance $ 197 $ 19 $ 187 $ 403 Non-U.S. public finance 12 ( 2 ) ( 1 ) 9 Public finance 209 17 186 412 Structured finance: U.S. RMBS 150 ( 143 ) 59 66 Other structured finance 52 1 ( 9 ) 44 Structured finance 202 ( 142 ) 50 110 Total $ 411 $ ( 125 ) $ 236 $ 522 ____________________ (1) Net of ceded paid losses, whether or not such amounts have been settled with reinsurers. Ceded paid losses are typically settled 45 days after the end of the reporting period. Such amounts are recorded as reinsurance recoverable on paid losses in “other assets.” The tables above include (i) net LAE paid of $ 30 million, $ 25 million and $ 33 million for the years ended 146 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued December 31, 2024, 2023 and 2022, respectively, and, (ii) net expected LAE to be paid of $ 11 million as of December 31, 2024 and $ 22 million as of December 31, 2023. Public Finance The largest components of the public finance net expected losses to be paid (recovered) relate to certain healthcare and U.K. regulated utilities exposures. The total net expected loss to be paid for U.S. public finance exposures is net of an expected recovery of certain claims already paid of $ 262 million and $ 193 million as of December 31, 2024 and December 31, 2023, respectively. In 2024, the economic loss development for public finance transactions was primarily attributable to higher expected losses for certain U.K. regulated utilities and certain Puerto Rico exposures, as well as changes in discount rates. U.K. Regulated Utilities and European Renewable Energy In the third quarter of 2024, the Company internally downgraded to BIG certain U.K. regulated utilities and European renewable energy transactions that are experiencing operational strain, high financing costs and/or other capital constraints. Healthcare Certain BIG healthcare exposures are experiencing rising labor costs due to competition for labor and shortages in certain markets. Additionally, inflation has increased the cost of medical supplies, medical equipment, and pharmacy products, while U.S. hospitals with large Medicaid and Medicare payor mixes have not seen reimbursement levels keep pace with rising costs. The combined revenue and expense challenges have led to cash flow and liquidity stress in certain transactions. In addition, certain credits are struggling to make necessary capital expenditures and improvements to facilities. Puerto Rico All of the Company’s insured exposure to the Commonwealth of Puerto Rico (Puerto Rico or the Commonwealth) and its various authorities and public corporations is rated BIG. Puerto Rico net par and net debt service outstanding as of December 31, 2024 were $ 637 million and $ 756 million respectively, compared with net par and net debt service outstanding as of December 31, 2023 of $ 1,105 million and $ 1,508 million, respectively. In 2024, the Company satisfied its remaining direct PRHTA insured obligations. Defaulting Puerto Rico Exposure As of December 31, 2024, the Company’s only unresolved outstanding insured Puerto Rico exposure subject to a payment default was the Puerto Rico Electric Power Authority (PREPA), which had net par and debt service outstanding of $ 532 million and $ 629 million, respectively. As of December 31, 2023, PREPA net par and debt service outstanding were $ 624 million and $ 751 million, respectively. The PREPA bonds are secured by a lien on the net revenues of the electric system. The default of PREPA’s obligations has been the subject of restructuring negotiations, mediation and litigation since 2014. Puerto Rico Litigation Currently, there are numerous legal actions relating to defaults by PREPA on debt service payments, and related matters, and the Company is a party to a number of them. The Company has taken legal action, and may take additional legal action in the future, to enforce its rights with respect to the remaining Puerto Rico obligations it still insures. In addition, the Commonwealth, the Financial Oversight and Management Board (the FOMB) and others have taken legal action naming the Company as a party. Certain legal actions involving the Company and relating to defaults by the Commonwealth and its authorities and public corporations were resolved in 2022. The remaining proceedings relate to PREPA’s default, including recently active proceedings and a number of proceedings that remain stayed pending the United States District Court of the District of Puerto Rico’s (Federal District Court of Puerto Rico) determination on the FOMB PREPA Plan, as described below. 147 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued PREPA – Current Proceedings On April 8, 2022, the Federal District Court of Puerto Rico issued an order appointing three U.S. Bankruptcy Judges as members of a PREPA mediation team. The Federal District Court of Puerto Rico also entered a separate order establishing the terms and conditions of mediation. Plan of Adjustment and Disclosure Statement. The FOMB which was established under the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) filed an initial plan of adjustment and disclosure statement for PREPA with the Federal District Court of Puerto Rico on December 16, 2022. On November 17, 2023, the Federal District Court of Puerto Rico approved the supplemental disclosure statement (Supplemental Disclosure Statement) supporting the PREPA plan of adjustment filed by the FOMB (as amended or modified from time to time). On February 16, 2024, the FOMB filed with the Federal District Court of Puerto Rico its most recent plan of adjustment for PREPA, the Modified Fourth Amended Title III Plan of Adjustment (FOMB PREPA Plan). The Supplemental Disclosure Statement and the FOMB PREPA Plan are based on the last revised PREPA fiscal plan certified by the FOMB on June 23, 2023. The confirmation hearing for the FOMB PREPA Plan occurred in March 2024. At the end of the hearing, the Federal District Court of Puerto Rico stated that it was taking the confirmation of the FOMB PREPA Plan under advisement and gave no indication of timing for an opinion or order. Lien Challenge Adversary Proceeding and Appeal. On March 22, 2023, the Federal District Court of Puerto Rico held that the PREPA bondholders had perfected liens only in revenues that had been deposited in the sinking fund established under the PREPA trust agreement and related funds over which the bond trustee had control but did not have a lien on future revenues until deposited in those funds. The Federal District Court of Puerto Rico also held, however, that PREPA bondholders do have recourse under the PREPA trust agreement in the form of an unsecured net revenue claim. At that time, the Federal District Court of Puerto Rico declined to value the unsecured net revenue claim or the method for its determination. The ultimate value of the claim, according to the Federal District Court of Puerto Rico, should be determined through a claim estimation proceeding. On June 26, 2023 the Federal District Court of Puerto Rico issued an opinion and order estimating the unsecured net revenue claim to be $ 2.4 billion as of July 3, 2017. Subject to their appeal of the Federal District Court of Puerto Rico’s ruling on the scope of lien, PREPA bondholders had sought an unsecured net revenue claim of approximately $ 8.5 billion. On November 28, 2023, the Federal District Court of Puerto Rico finally adjudicated all claims and counterclaims in the PREPA lien challenge adversary proceeding. On November 30, 2023, the Company filed a notice of appeal with the United States Court of Appeals for the First Circuit (First Circuit) for portions of the March 22, 2023 decision, including the lien scope ruling and the need for a claim estimation proceeding, as well as the June 26, 2023 claim estimation ruling. On June 12, 2024, the First Circuit held that bondholders have a claim against PREPA for the full principal amount of the bonds, plus matured interest, that there was no need for a claim estimation proceeding because the PREPA bonds specify the amount that PREPA legally owes bondholders, and that the claim is secured by PREPA’s net revenues, including future net revenues. The FOMB asked the First Circuit to reconsider its determination that bondholders’ security interest in future net revenues is perfected twice, once on June 26, 2024, and again on November 27, 2024. The First Circuit denied both requests, with the most recent denial published on December 31, 2024. PREPA Mediation and Stayed Proceedings On July 10, 2024, the Federal District Court of Puerto Rico ordered the FOMB and bondholders to resume mediation and instituted a 60-day stay of all PREPA litigation. The Federal District Court of Puerto Rico most recently extended the PREPA litigation stay through March 24, 2025 and the term of mediation through April 30, 2025. The following proceedings involving the Company and relating to the default by PREPA remain stayed in the Federal District Court of Puerto Rico pending its determination on the FOMB PREPA Plan: • AG motion to compel the FOMB to certify the PREPA restructuring support agreement executed in May 2019 (PREPA RSA) for implementation under Title VI of PROMESA. • AG motion to dismiss PREPA’s Title III Bankruptcy proceeding or, in the alternative, to lift the PROMESA automatic stay to allow for the appointment of a receiver. 148 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued • Adversary complaint by certain fuel line lenders of PREPA against AG, among other parties, including various PREPA bondholders and bond insurers, seeking, among other things, declarations that there is no valid lien securing the PREPA bonds unless and until such lenders are paid in full, as well as orders subordinating the PREPA bondholders’ lien and claims to such lenders’ claims, and declaring the PREPA RSA null and void. • AG motion to intervene in lawsuit by the retirement system for PREPA employees against, among others, the FOMB, PREPA, the Commonwealth, and the trustee for PREPA bondholders seeking, among other things, declarations that there is no valid lien securing the PREPA bonds other than on amounts in the sinking funds, and order subordinating the PREPA bondholders’ lien and claim to the PREPA employees’ claims. Non-Defaulting Puerto Rico Exposure As of December 31, 2024 and December 31, 2023, the Company had $ 92 million and $ 109 million, respectively, of remaining non-defaulting Puerto Rico net par outstanding related primarily to the Puerto Rico Municipal Finance Agency (MFA). The MFA exposures are secured by a lien on local tax revenues and remain current on debt service payments. U.S. RMBS Loss Projections The Company projects losses on its insured U.S. RMBS on a transaction-by-transaction basis by projecting the performance of the underlying pool of mortgages over time and then applying the structural features (e.g., payment priorities and tranching) of the RMBS and any expected representation and warranty recoveries/payables to the projected performance of the collateral over time. The resulting projected claim payments or reimbursements are then discounted using risk-free rates. The rate at which borrowers from a particular delinquency category (number of monthly payments behind) eventually default is referred to as the “liquidation rate.” The Company derives its liquidation rate assumptions from observed roll rates, which are the rates at which loans progress from one delinquency category to the next and eventually to default and liquidation. The Company applies liquidation rates to the mortgage loan collateral in each delinquency category and makes certain timing assumptions to project near-term mortgage collateral defaults from loans that are currently delinquent. Each quarter the Company reviews recent third party data and (if necessary) adjusts its liquidation rates based on its observations. Performing borrowers that eventually default will also need to progress through delinquency categories before any defaults occur. The Company projects how many of the currently performing loans will default and when they will default, by first converting the projected near term defaults of delinquent borrowers derived from liquidation rates into a vector of conditional default rates (CDR), then projecting how the CDR will develop over time. While the Company uses the liquidation rates to project defaults of non-performing loans (including current loans that were recently modified or delinquent), it projects defaults on presently current loans by applying a CDR curve. The start of that CDR curve is based on the defaults the Company projects will emerge from currently nonperforming, recently nonperforming and modified loans. The total amount of expected defaults from the non-performing loans is translated into a constant CDR (i.e., the CDR plateau), which, if applied for each of the next 36 months, results in the projection of the defaults that are expected to emerge from the various delinquency categories. The CDR thus calculated individually on the delinquent collateral pool for each RMBS is then used as the starting point for the CDR curve used to project defaults of the presently performing loans. In order to derive collateral pool losses from the collateral pool defaults it has projected, the Company applies a loss severity. The loss severity is the amount of loss the transaction experiences on a defaulted loan after the application of net proceeds from the disposal of the underlying property. The Company projects loss severities by sector and vintage based on its experience to date. The Company continues to update its evaluation of these loss severities as new information becomes available. The Company incorporates a recovery assumption into its loss modeling to reflect observed trends in recoveries of deferred principal balances of modified first lien loans that had been previously written off. For transactions where the Company has detailed loan information, the Company assumes that a percentage of the deferred loan balances will eventually be recovered upon sale of the collateral or refinancing of the loans. In 2024, due to observed trends and high levels of home equity, the Company increased its scenario-based recovery assumptions such that the weighted average recovery percentage increased from 30 % to approximately 50 %. The effect of these updated assumptions on expected losses was a benefit of $ 15 million in 2024. 149 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued When a second lien loan defaults, there is generally a low recovery. The Company assumed that it will generally recover 2 % of future defaulting collateral at the time of charge-off. Additional amounts of post charge-off recoveries are projected to come in evenly over the next five years in instances where the Company is able to obtain information on the lien status and the second lien is still intact. The Company evaluates its assumptions quarterly based on actual recoveries of charged-off loans observed from period to period and reasonable expectations of future recoveries. During 2024, due to observed trends and high levels of home equity, the Company updated its assumptions of such recoveries to reflect a base scenario and a weighted average recovery of 50 %, up from 40 %, which resulted in a benefit of $ 29 million. The Company projects the overall future cash flow from a collateral pool by adjusting the payment stream from the principal and interest contractually due on the underlying mortgages for the collateral losses it projects as described above; assumed voluntary prepayments; and servicer advances. The Company then applies an individual model of the structure of the transaction to the projected future cash flow from that transaction’s collateral pool to project the Company’s future claims and claim reimbursements for that individual transaction. Finally, the projected claims and reimbursements are discounted using risk-free rates. The Company runs several sets of assumptions regarding mortgage collateral performance, or scenarios, which are probability weighted. Each period the Company reviews the assumptions it uses to make RMBS loss projections with consideration of updates on the performance of its insured transactions (including early-stage delinquencies, late-stage delinquencies and loss severity) as well as the residential property market and economy in general. To the extent it observes changes, it makes a judgment as to whether those changes are normal fluctuations or part of a more prolonged trend. Expected losses are also a function of the structure of the transaction, the prepayment speeds of the collateral, the interest rate environment and assumptions about loss severity. Net Economic Loss Development (Benefit) U.S. RMBS Year Ended December 31, 2024 2023 2022 (in millions) First lien U.S. RMBS $ ( 27 ) $ ( 7 ) $ ( 36 ) Second lien U.S. RMBS ( 48 ) ( 49 ) ( 107 ) Total U.S. RMBS economic loss development (benefit) $ ( 75 ) $ ( 56 ) $ ( 143 ) First Lien U.S. RMBS Loss Projections: Alt-A, Prime, Option ARM and Subprime The majority of projected losses in first lien U.S. RMBS transactions are expected to come from non-performing mortgage loans (those that are or have recently been two or more payments behind, have been modified, are in foreclosure, or have been foreclosed upon). Collateral losses are projected to be offset by recoveries on deferred principal balances. In the base scenario, the Company assumes the final CDR will be reached one year after the 36 -month CDR plateau period. The Company then assumes that loss severities begin returning to levels consistent with underwriting assumptions beginning after the initial 18 -month period, staying or trending, as applicable, to 40 % in the base scenario over 2.5 years. The following table shows the range as well as the average, weighted by outstanding net insured par, for key assumptions used in the calculation of expected loss to be paid (recovered) for individual transactions for vintage 2004 - 2008 first lien U.S. RMBS. 150 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Key Assumptions in Base Scenario Expected Loss Estimates First Lien U.S. RMBS As of December 31, 2024 As of December 31, 2023 Range Weighted Average Range Weighted Average Plateau CDR 0.0 % – 8.8 % 3.4 % 0.0 % – 10.0 % 4.2 % Final CDR 0.0 % – 0.4 % 0.2 % 0.0 % – 0.5 % 0.2 % Initial loss severity 40.0 % – 50.0 % 43.1 % 50 % Future recovery for deferred principal balances 50 % 30 % Liquidation rates (1) 20 % – 50 % 20 % – 65 % ____________________ (1) The liquidation rates range from current but recently delinquent loans to foreclosed loans. Certain transactions benefit from excess spread (the amount by which the interest paid by the borrowers on the underlying loan exceeds the amount of interest owed on the insured obligations) when they are supported by large portions of fixed rate assets (either originally fixed or modified to be fixed) but have insured floating rate debt linked to the Secured Overnight Finance Rate (SOFR). An increase in projected SOFR decreases excess spread, while lower SOFR projections result in higher excess spread. The Company establishes its scenarios by increasing and decreasing the periods and levels of stress from those used in the base scenario. In the Company’s most stressful scenario where 20 % of deferred principal balances are assumed to be recovered, loss severities experience stress for nine years and the initial ramp-down of the CDR was assumed to occur over 16 months, expected loss to be paid would increase from current projections by approximately $ 31 million for all first lien U.S. RMBS transactions. In the Company’s least stressful scenario where 80 % of deferred principal balances are assumed to be recovered, the CDR plateau was six months shorter ( 30 months, effectively assuming that liquidation rates would improve) and the CDR recovery was more pronounced (including an initial ramp-down of the CDR over eight months ), expected loss to be paid would decrease from current projections by approximately $ 28 million for all first lien U.S. RMBS transactions. Second Lien U.S. RMBS Loss Projections Second lien U.S. RMBS transactions include both home equity lines of credit (HELOC) and closed end second lien mortgages. The Company believes the most important driver of its projected second lien U.S. RMBS losses is the performance of its HELOC transactions. The Company believes the primary variable affecting its expected losses in second lien U.S. RMBS transactions is the amount and timing of future losses or recoveries in the collateral pool supporting the transactions (including recoveries from previously charged-off loans). For the base scenario, the CDR plateau is held constant for 36 months. Once the plateau period ends, the CDR is assumed to trend down in uniform increments for one year to its final long-term steady state CDR ( 5 % of original plateau). The following table shows the range as well as the average, weighted by net par outstanding, for key assumptions used in the calculation of expected loss to be paid (recovered) for individual transactions for vintage 2004 - 2008 HELOCs. Key Assumptions in Base Scenario Expected Loss Estimates HELOCs As of December 31, 2024 As of December 31, 2023 Range Weighted Average Range Weighted Average Plateau CDR 0.0 % – 5.6 % 2.2 % 0.0 % – 9.3 % 2.6 % Final CDR 0.0 % – 0.3 % 0.1 % 0.0 % – 0.5 % 0.1 % Liquidation rates (1) 20 % – 55 % 20 % – 60 % Loss severity on future defaults 98 % 98 % Projected future recoveries on previously charged-off loans 50 % 40 % ____________________ (1) The liquidation rates range from current but recently delinquent loans to foreclosed loans. 151 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued The Company modeled scenarios with a longer period of elevated defaults and others with a shorter period of elevated defaults as well as various levels of assumed recoveries. In the Company’s most stressful scenario, assuming 20 % recoveries on charged-off loans, increasing the CDR plateau to 42 months, increasing the ramp-down by four months to 16 months (for a total stress period of 58 months) and using the ultimate prepayment rate of 15 % would decrease the expected recovery by approximately $ 78 million for HELOC transactions. On the other hand, in the Company’s least stressful scenario, assuming 80 % recoveries on charged-off loans, reducing the CDR plateau to 30 months, decreasing the length of the CDR ramp-down to eight months (for a total stress period of 38 months) and lowering the ultimate prepayment rate to 10 % would increase the expected recovery by approximately $ 78 million for HELOC transactions. Recovery Litigation and Dispute Resolution In the ordinary course of their respective businesses, certain of AGL’s subsidiaries are involved in litigation or other dispute resolution with third parties to recover insurance losses paid or return benefits received in prior periods or prevent or reduce losses in the future. The impact, if any, of these and other proceedings on the amount of recoveries the Company ultimately receives and losses it pays in the future is uncertain, and the impact of any one or more of these proceedings during any quarter or year could be material to the Company’s financial statements. The Company has asserted claims in a number of legal proceedings in connection with its exposure to Puerto Rico. See above for a discussion of the Company’s exposure to Puerto Rico and related recovery litigation being pursued by the Company. 5. Contracts Accounted for as Insurance The portfolio of outstanding exposures discussed in Note 3, Outstanding Exposure, and Note 4, Expected Loss to be Paid (Recovered), includes contracts that are accounted for as insurance contracts, derivatives and consolidated FG VIEs. Amounts presented in this note relate only to contracts accounted for as insurance, unless otherwise specified. See Note 6, Contracts Accounted for as Credit Derivatives, for amounts related to CDS and Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles, for amounts related to consolidated FG VIEs. Premiums Accounting Policy Financial guaranty contracts that meet the scope exception under derivative accounting guidance are subject to industry specific accounting guidance for financial guaranty insurance. Premiums receivable represent the present value of contractual or expected future premium collections, discounted using risk-free rates. Unearned premium reserve represents deferred premium revenue less claim payments made (net of recoveries received) that have not yet been recognized in the statement of operations (i.e., contra-paid). The following discussion relates to the deferred premium revenue component of the unearned premium reserve, while the contra-paid is discussed below under “Losses and Recoveries.” The amount of deferred premium revenue at contract inception is determined as follows: • For premiums received upfront on financial guaranty insurance contracts that were originally underwritten by the Company, deferred premium revenue is equal to the amount of cash received. Upfront premiums typically relate to public finance transactions. • For premiums received in installments on financial guaranty insurance contracts that were originally underwritten by the Company, deferred premium revenue is calculated as the present value (discounted at risk free rates) of either: (i) contractual premiums due; or (ii) in cases where the underlying collateral is composed of homogeneous pools of assets, the expected premiums to be collected over the life of the contract. To be considered a homogeneous pool of assets, prepayments must be contractually allowable, the amount of prepayments must be probable, and the timing and amount of prepayments must be reasonably estimable. Installment premiums typically relate to structured finance (e.g., securitized debt) and infrastructure transactions, where the insurance premium rate is determined at the inception of the contract, but the insured par is subject to prepayment throughout the life of the transaction. 152 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued • For financial guaranty insurance contracts acquired in a business combination, deferred premium revenue is equal to the fair value of the Company’s stand-ready obligation portion of the insurance contract, at the date of acquisition, based on what a hypothetical similarly rated financial guaranty insurer would have charged for the contract at that date (not the discounted future cash flows under the insurance contract). The amount of deferred premium revenue may differ significantly from cash collections primarily due to fair value adjustments recorded in connection with a business combination. When the Company adjusts prepayment assumptions for expected premium collections for obligations backed by homogeneous pools of contractually prepayable assets, an adjustment is recorded to the deferred premium revenue, with a corresponding adjustment to premiums receivable. Premiums receivable are discounted at the risk-free rate at inception and such discount rate is updated only when changes to prepayment assumptions are made that change the expected date of final maturity. Accretion of the discount on premiums receivable is reported in “net earned premiums.” The Company recognizes deferred premium revenue as earned premium over the contractual period or expected period of the contract in proportion to the amount of insurance protection provided. As premium revenue is recognized, a corresponding decrease to the deferred premium revenue is recorded. The amount of insurance protection provided is a function of the insured par amount outstanding. Accordingly, the proportionate share of premium revenue recognized in a given reporting period is a constant rate calculated based on the relationship between the insured par amounts outstanding in the reporting period compared with the sum of each of the insured par amounts outstanding for all periods. When an insured financial obligation is retired before its maturity, the financial guaranty insurance contract is extinguished, and any nonrefundable deferred premium revenue related to that contract is accelerated and recognized as premium revenue. Any unamortized acquisition costs are expensed. The Company assesses the need for an allowance for credit loss on premiums receivable each reporting period. For assumed reinsurance contracts, net earned premiums reported in the consolidated statements of operations are calculated based upon data received from ceding companies; however, some ceding companies report premium data between 30 and 90 days after the end of the reporting period. The Company estimates net earned premiums for the lag period. Differences between such estimates and actual amounts are recorded in the period in which the actual amounts are determined. When installment premiums are related to assumed reinsurance contracts, the Company assesses the credit quality and available liquidity of the ceding companies and the impact of any potential regulatory constraints to determine the collectability of such amounts. Ceded unearned premium reserve is recorded as an asset. Direct, assumed and ceded earned premiums are presented together as net earned premiums in the consolidated statements of operations. Any premiums related to FG VIEs are eliminated in consolidation. Insurance Contracts’ Premium Information Net Earned Premiums Year Ended December 31, 2024 2023 2022 (in millions) Financial guaranty insurance: Scheduled net earned premiums $ 293 $ 285 $ 287 Accelerations from refundings and terminations (1) 71 29 179 Accretion of discount on net premiums receivable 31 26 24 Financial guaranty insurance net earned premiums 395 340 490 Specialty net earned premiums 8 4 4 Net earned premiums $ 403 $ 344 $ 494 ____________________ (1) 2022 accelerations include $ 133 million related to 2022 Puerto Rico Resolutions. See Note 4, Expected Loss to be Paid (Recovered), for additional information. 153 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Gross Premium Receivable, Net of Commissions Payable on Assumed Business Roll Forward Year Ended December 31, 2024 2023 2022 (in millions) Beginning of year $ 1,468 $ 1,298 $ 1,372 Less: Specialty insurance premium receivable 1 1 1 Financial guaranty insurance premiums receivable 1,467 1,297 1,371 New business and supplemental premiums, net of commissions 467 353 356 Gross premiums received, net of commissions ( 354 ) ( 261 ) ( 345 ) Adjustments: Changes in the expected term and debt service assumptions ( 32 ) 1 2 Accretion of discount, net of commissions on assumed business 26 26 24 Foreign exchange gain (loss) on remeasurement ( 24 ) 51 ( 111 ) Financial guaranty insurance premium receivable 1,550 1,467 1,297 Specialty insurance premium receivable 1 1 1 December 31, $ 1,551 $ 1,468 $ 1,298 Approximately 69 % and 70 % of gross premiums receivable, net of commissions payable at December 31, 2024 and December 31, 2023, respectively, are denominated in currencies other than the U.S. dollar, primarily the pound sterling and euro. The timing and cumulative amount of actual collections and net earned premiums may differ from those of expected collections and of expected net earned premiums in the table below due to factors such as foreign exchange rate fluctuations, counterparty collectability issues, accelerations, commutations, restructurings, changes in the consumer price indices, changes in expected lives and new business. 154 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Financial Guaranty Insurance Expected Future Premium Collections and Earnings As of December 31, 2024 Future Net Premiums to be Earned (2) Future Premiums to be Collected (1) Earnings of Deferred Premium Revenue Accretion of Discount Total (in millions) 2025 (January 1 - March 31) $ 69 $ 76 $ 9 $ 85 2025 (April 1 - June 30) 48 75 9 84 2025 (July 1 - September 30) 33 74 9 83 2025 (October 1 - December 31) 38 72 8 80 Subtotal 2025 188 297 35 332 2026 125 275 33 308 2027 119 259 31 290 2028 113 246 29 275 2029 100 227 27 254 2030-2034 407 917 115 1,032 2035-2039 312 597 84 681 2040-2044 239 389 55 444 2045-2049 182 259 32 291 2050-2054 113 137 15 152 After 2054 121 109 12 121 Total $ 2,019 $ 3,712 $ 468 $ 4,180 ____________________ (1) Net of assumed commissions payable. (2) Net of reinsurance. Selected Information for Financial Guaranty Insurance Policies with Premiums Paid in Installments As of December 31, 2024 2023 (dollars in millions) Premiums receivable, net of commissions payable $ 1,550 $ 1,467 Deferred premium revenue $ 1,901 $ 1,768 Weighted average risk-free rate used to discount premiums 2.5 % 2.1 % Weighted average period of premiums receivable (in years) 12.3 12.5 Policy Acquisition Costs Accounting Policy Deferred acquisition costs (DAC) reported on the consolidated balance sheet represent the unamortized portion of (i) policy acquisition costs that are directly related and essential to the successful acquisition of an insurance contract and (ii) ceding commission income and expense. Deferred policy acquisition costs include the cost of underwriting personnel attributable to successful underwriting efforts. The Company conducts time studies, which requires the use of judgment, to estimate the amount of costs to be deferred. DAC is generally amortized in proportion to net earned premiums. Amortization of deferred policy acquisition costs includes the accretion of discount on ceding commission receivable and payable. When an insured obligation is retired early, the remaining related DAC is expensed at that time. Costs incurred for soliciting potential customers, market research, training, administration, unsuccessful acquisition efforts and product development as well as overhead costs are charged to expense as incurred. 155 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Expected losses and LAE, investment income and the remaining costs of servicing the insured or reinsured business are considered in determining the recoverability of DAC. Policy Acquisition Costs Roll Forward of Deferred Acquisition Costs Year Ended December 31, 2024 2023 2022 (in millions) Beginning of year $ 161 $ 147 $ 131 Costs deferred during the period 35 27 30 Costs amortized during the period ( 20 ) ( 13 ) ( 14 ) December 31, $ 176 $ 161 $ 147 Losses and Recoveries Accounting Policies Loss and LAE Reserve Loss and LAE reserve reported on the consolidated balance sheets relates only to direct and assumed reinsurance contracts that are accounted for as insurance, substantially all of which are financial guaranty insurance contracts. The portion of any contract’s reserve that is ceded to a reinsurer is reported as reinsurance recoverable on unpaid losses and reported in “other assets.” Any loss and LAE reserves related to FG VIEs are eliminated upon consolidation. Any expected losses to be paid (recovered) on credit derivatives are reflected in the fair value of credit derivatives. Under financial guaranty insurance accounting, the sum of unearned premium reserve and loss and LAE reserve represents the Company’s stand‑ready obligation. A loss and LAE reserve for a financial guaranty insurance contract is recorded only to the extent and for the amount that expected loss to be paid plus contra-paid (total losses) exceed the deferred premium revenue, on a contract-by-contract basis. As a result, the Company has expected loss to be paid that has not yet been expensed. Such amounts will be recognized in future periods as deferred premium revenue amortizes into income. When a claim or LAE payment is made on a contract, the Company first reduces any recorded loss and LAE reserve. To the extent there is insufficient loss and LAE reserve on a contract, then such claim payment is recorded as contra-paid, which reduces the unearned premium reserve. The contra-paid is recognized in “loss and loss adjustment expenses (benefit)” in the consolidated statement of operations when and for the amount that total losses exceed the remaining deferred premium revenue on the insurance contract. “Loss and loss adjustment expenses (benefit)” in the consolidated statement of operations is presented net of cessions to reinsurers. Salvage and Subrogation Recoverable Expected loss to be paid is reduced when a claim payment (or estimated future claim payment) entitles the Company to cash flows associated with salvage and subrogation rights from the underlying collateral of, or other recoveries relating to, an insured exposure. Such reduction in expected loss to be paid can result in one of the following: (i) a reduction in the corresponding loss and LAE reserve with a benefit to the consolidated statement of operations; (ii) no effect on the consolidated balance sheets or statements of operations if total loss is not in excess of deferred premium revenue; or (iii) the recording of a salvage asset with a benefit to the consolidated statements of operations if the transaction is in a net recovery position at the reporting date. The ceded component of salvage and subrogation recoverable is reported in “other liabilities.” Expected Loss to be Expensed Expected loss to be expensed represents past or expected future financial guaranty insurance net claim payments that have not yet been expensed. Such amounts will be expensed in future periods as deferred premium revenue amortizes into income. Expected loss to be expensed is the Company’s projection of incurred losses that will be recognized in future periods, excluding accretion of discount. 156 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Insurance Contracts’ Losses Reported in the Consolidated Financial Statements Loss and LAE reserve and salvage and subrogation recoverable are discounted at risk-free rates for financial guaranty insurance obligations that ranged from 1.98 % to 5.22 % with a weighted average of 4.38 % as of December 31, 2024, and 1.90 % to 5.40 % with a weighted average of 4.15 % as of December 31, 2023. The following table provides information on net reserve (salvage), which includes loss and LAE reserves and salvage and subrogation recoverable, both net of reinsurance. Net Reserve (Salvage) by Sector As of December 31, Sector 2024 2023 (in millions) Public finance: U.S. public finance $ ( 14 ) $ 119 Non-U.S. public finance 5 1 Public finance ( 9 ) 120 Structured finance: U.S. RMBS ( 151 ) ( 87 ) Other structured finance 33 42 Structured finance ( 118 ) ( 45 ) Total $ ( 127 ) $ 75 The table below provides a reconciliation of net expected loss to be paid (recovered) for financial guaranty insurance contracts to net expected loss to be expensed. Expected loss to be paid (recovered) for financial guaranty insurance contracts differs from expected loss to be expensed due to: (i) the contra-paid, which represents the claim payments made and recoveries received that have not yet been recognized in the statements of operations; (ii) salvage and subrogation recoverable for transactions that are in a net recovery position where the Company has not yet received recoveries on claims previously paid (and therefore recognized in income but not yet received); and (iii) loss reserves that have already been established (and therefore expensed but not yet paid). Reconciliation of Net Expected Loss to be Paid (Recovered) to Net Expected Loss to be Expensed Financial Guaranty Insurance Contracts As of December 31, 2024 (in millions) Net expected loss to be paid (recovered) - financial guaranty insurance $ 89 Contra-paid, net 23 Salvage and subrogation recoverable, net 393 Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance ( 265 ) Net expected loss to be expensed (present value) $ 240 The following table provides a schedule of the expected timing of financial guaranty net expected losses to be expensed. The amount and timing of actual loss and LAE may differ from the estimates shown below due to factors such as accelerations, commutations, changes in expected lives and updates to loss estimates. This table excludes amounts related to FG VIEs, which are eliminated in consolidation. 157 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Net Expected Loss to be Expensed Financial Guaranty Insurance Contracts As of December 31, 2024 (in millions) 2025 (January 1 - March 31) $ 3 2025 (April 1 - June 30) 4 2025 (July 1 - September 30) 3 2025 (October 1 - December 31) 3 Subtotal 2025 13 2026 13 2027 16 2028 18 2029 17 2030-2034 78 2035-2039 37 2040-2044 12 2045-2049 20 2050-2054 14 After 2054 2 Net expected loss to be expensed (present value) 240 Future expected accretion ( 49 ) Total expected future loss and LAE $ 191 The following table presents the loss and LAE (benefit) reported in the consolidated statements of operations by sector for insurance contracts. Loss and LAE (Benefit) by Sector Year Ended December 31, Sector 2024 2023 2022 (in millions) Public finance: U.S. public finance $ 12 $ 192 $ 125 Non-U.S. public finance 4 — — Public finance 16 192 125 Structured finance: U.S. RMBS ( 43 ) ( 34 ) ( 112 ) Other structured finance 1 4 3 Structured finance ( 42 ) ( 30 ) ( 109 ) Loss and LAE (benefit) $ ( 26 ) $ 162 $ 16 158 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued The following tables provide information on financial guaranty insurance contracts categorized as BIG. Financial Guaranty Insurance BIG Transaction Loss Summary As of December 31, 2024 Gross Net Total BIG BIG 1 BIG 2 BIG 3 Total BIG (dollars in millions) Number of risks (1) 98 12 97 207 207 Remaining weighted average period (in years) 18.6 8.8 6.1 16.6 16.6 Outstanding exposure: Par $ 8,080 $ 702 $ 1,382 $ 10,164 $ 10,150 Interest 7,546 371 421 8,338 8,335 Total (2) $ 15,626 $ 1,073 $ 1,803 $ 18,502 $ 18,485 Expected cash outflows (inflows) $ 4,016 $ 342 $ 1,307 $ 5,665 $ 5,656 Potential recoveries (3) ( 4,201 ) ( 293 ) ( 1,132 ) ( 5,626 ) ( 5,616 ) Subtotal ( 185 ) 49 175 39 40 Discount 43 29 ( 23 ) 49 49 Expected losses to be paid (recovered) $ ( 142 ) $ 78 $ 152 $ 88 $ 89 Deferred premium revenue $ 333 $ 49 $ 116 $ 498 $ 498 Reserves (salvage) $ ( 226 ) $ 35 $ 62 $ ( 129 ) $ ( 128 ) 159 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Financial Guaranty Insurance BIG Transaction Loss Summary As of December 31, 2023 Gross Net Total BIG BIG 1 BIG 2 BIG 3 Total BIG (dollars in millions) Number of risks (1) 95 13 109 217 217 Remaining weighted average period (in years) 9.6 15.9 7.5 9.9 10.0 Outstanding exposure: Par $ 2,400 $ 979 $ 2,019 $ 5,398 $ 5,383 Interest 1,126 896 818 2,840 2,836 Total (2) $ 3,526 $ 1,875 $ 2,837 $ 8,238 $ 8,219 Expected cash outflows (inflows) $ 176 $ 187 $ 1,585 $ 1,948 $ 1,938 Potential recoveries (3) ( 376 ) ( 78 ) ( 1,214 ) ( 1,668 ) ( 1,659 ) Subtotal ( 200 ) 109 371 280 279 Discount 56 ( 22 ) ( 53 ) ( 19 ) ( 19 ) Expected losses to be paid (recovered) $ ( 144 ) $ 87 $ 318 $ 261 $ 260 Deferred premium revenue $ 100 $ 63 $ 142 $ 305 $ 305 Reserves (salvage) $ ( 181 ) $ 45 $ 209 $ 73 $ 72 __________________ (1) A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments. (2) Includes amounts related to FG VIEs. The increase in BIG in 2024 relates mainly to the downgrade of certain U.K. regulated utilities. (3) Represents expected inflows from future payments by obligors pursuant to restructuring agreements, settlements, excess spread on any underlying collateral and other estimated recoveries. Potential recoveries also include recoveries on certain investment grade credits, related mainly to exposures that were previously BIG and for which claims have been paid in the past. Reinsurance The Company cedes portions of its gross insured financial guaranty exposure (Ceded Financial Guaranty Business) to third-party insurers. This Ceded Financial Guaranty Business represents $ 497 million, or approximately 0.1 %, of the Company’s total gross insured debt service of $ 416.5 billion, as of December 31, 2024. The Company also cedes $ 383 million of its $ 4.5 billion in gross insured specialty business exposure. The following table presents the components of premiums and losses reported in the consolidated statements of operations attributable to the Assumed and Ceded Businesses (both financial guaranty and specialty insurance). 160 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Components of Premiums Written, Premiums Earned and Loss and LAE (Benefit) Year Ended December 31, 2024 2023 2022 (in millions) Premiums Written: Direct $ 436 $ 307 $ 377 Assumed (1) 4 50 ( 17 ) Ceded ( 6 ) ( 16 ) — Net $ 434 $ 341 $ 360 Premiums Earned: Direct $ 378 $ 319 $ 469 Assumed 32 28 28 Ceded ( 7 ) ( 3 ) ( 3 ) Net $ 403 $ 344 $ 494 Loss and LAE (benefit): Direct (2) $ ( 30 ) $ 157 $ 32 Assumed 3 8 ( 17 ) Ceded 1 ( 3 ) 1 Net $ ( 26 ) $ 162 $ 16 ____________________ (1) Negative assumed premiums written were due to terminations and changes in expected debt service schedules. (2) See Note 4, Expected Loss to be Paid (Recovered), for additional information on the economic loss development (benefit). 6. Contracts Accounted for as Credit Derivatives The Company’s credit derivatives primarily consist of insured CDS contracts. The Company does not enter into CDS contracts with the intent to trade these contracts and may not unilaterally terminate a CDS contract absent an event or default or termination event that entitles the Company to terminate the contract. The Company and its counterparties have negotiated the termination of certain contracts from time to time. Transactions are generally terminated for an amount that approximates the present value of future premiums or a negotiated amount, rather than fair value. The terms of the Company’s CDS contracts differ from more standardized credit derivative contracts sold by companies outside the financial guaranty industry. The non-standard terms generally include the absence of collateral support agreements or immediate settlement provisions, and the Company’s insured exposure benefits from relatively high attachment points or other protections. The Company’s credit derivatives are generally governed by International Swaps and Derivatives Association, Inc. documentation and have certain characteristics that differ from financial guaranty insurance contracts. For example, the Company’s control rights with respect to a reference obligation under a CDS may be more limited than when the Company issues a financial guaranty insurance contract. In addition, there are more circumstances under which the Company may be obligated to make payments. Similar to a financial guaranty insurance contract, the Company would be obligated to pay if the obligor failed to make a scheduled payment of principal or interest in full. In certain credit derivative transactions, the Company also specifically agreed to pay if the obligor were to become bankrupt or if the reference obligation were restructured. Furthermore, in certain credit derivative transactions, the Company may be required to make a payment due to an event that is unrelated to the performance of the obligation referenced in the credit derivative. If events of default or termination events specified in the credit derivative documentation were to occur, the non-defaulting or the non-affected party, which may be either the Company or the counterparty, depending upon the circumstances, may decide to terminate a credit derivative prior to maturity. In that case, the Company may be required to make a termination payment to its swap counterparty upon such termination. Absent such an event of default or termination event, the Company may not unilaterally terminate a credit derivative contract; however, the Company on occasion has mutually agreed to terminate certain CDS with related counterparties. 161 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Accounting Policy The Company’s credit derivatives qualify as derivatives under GAAP and require fair value measurement, with changes in fair value reported in “fair value gains (losses) on credit derivatives” in the consolidated statement of operations. The fair value of credit derivatives is determined on a contract-by-contract basis and presented as either credit derivative assets reported in “other assets” or credit derivative liabilities reported in “other liabilities” in the consolidated balance sheets. See Note 9, Fair Value Measurement, for a discussion on the fair value methodology for credit derivatives. Credit Derivatives Net Par Outstanding and Fair Value The components of the Company’s credit derivative net par outstanding by sector are presented in the table below. The estimated remaining weighted average life of credit derivatives was 8.4 years and 11.1 years as of December 31, 2024 and December 31, 2023, respectively. Credit Derivatives (1) As of December 31, 2024 As of December 31, 2023 Sector Net Par Outstanding Net Fair Value Asset (Liability) Net Par Outstanding Net Fair Value Asset (Liability) (in millions) U.S. public finance $ 1,025 $ ( 12 ) $ 1,149 $ ( 15 ) Non-U.S. public finance 2,044 ( 15 ) 1,522 ( 20 ) U.S. structured finance 150 ( 2 ) 322 ( 13 ) Non-U.S. structured finance 993 — 615 ( 2 ) Total $ 4,212 $ ( 29 ) $ 3,608 $ ( 50 ) ____________________ (1) See Note 4, Expected Loss to be Paid (Recovered), for expected loss to be paid on credit derivatives. Fair Value Gains (Losses) on Credit Derivatives Year Ended December 31, 2024 2023 2022 (in millions) Realized gains (losses) and other settlements $ 3 $ 2 $ ( 2 ) Net unrealized gains (losses) 21 112 ( 9 ) Fair value gains (losses) on credit derivatives $ 24 $ 114 $ ( 11 ) The impact of changes in credit spreads will vary based upon the volume, tenor, interest rates and other market conditions at the time these fair values are determined. In addition, since each transaction has unique collateral and structural terms, the change in fair value of each transaction may vary considerably. The fair value of credit derivative contracts generally also reflects the Company’s own credit cost based on the price to purchase credit protection on AG. The Company determines its own credit risk primarily based on quoted CDS prices traded on AG at each balance sheet date. CDS Spread on AG (in basis points) As of December 31, 2024 2023 2022 Five-year CDS spread 75 66 63 One-year CDS spread 25 23 26 162 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Fair Value of Credit Derivative Assets (Liabilities) and Effect of AG Credit Spread As of December 31, 2024 2023 (in millions) Fair value of credit derivatives before effect of AG credit spread $ ( 64 ) $ ( 76 ) Plus: Effect of AG credit spread 35 26 Net fair value of credit derivatives $ ( 29 ) $ ( 50 ) The fair value of CDS contracts as of December 31, 2024, before considering the benefit applicable to AG’s credit spread, is a direct result of the relatively wider credit spreads under current market conditions, sometimes related to downgrades, compared with those at the time of underwriting for certain underlying credits with longer tenor. 7. Investments and Cash Accounting Policy All fixed-maturity securities are reported on a trade date-basis, measured at fair value and classified as either trading or available-for-sale. Changes in the fair value of trading fixed-maturity securities are reported as a component of net income, while unrealized gains and losses on available-for-sale fixed-maturity securities are reported in “accumulated other comprehensive income” (AOCI). Loss Mitigation Securities, which are a component of available-for-sale fixed-maturity securities, are accounted for based on their underlying investment type, excluding the effects of the Company’s insurance. Short-term investments, which are investments with a maturity of less than one year at the time of purchase, are carried at fair value and include amounts deposited in certain money market funds. Other invested assets primarily consist of equity method investments; the Sound Point investment being the most significant. The Company reports its interest in the earnings of equity method investments in “equity in earnings (losses) of investees” in the consolidated statement of operations. Most equity method investments are reported on a one-quarter lag. At the time of acquisition, the difference between the Company’s cost of an equity method investment (fair value) and the Company’s proportionate share of the carrying value of the investee’s net assets is referred to as the basis difference. The basis difference includes amounts attributed to finite-lived intangible assets, is amortized over the assets’ remaining useful lives, and is reported in “equity in earnings (losses) of investees.” The Company classifies distributions received from equity method investments using the cumulative earnings approach in the consolidated statements of cash flows. Under the cumulative earnings approach, distributions received up to the amount of cumulative equity in earnings recognized are treated as returns on investment within operating cash flows, and those in excess of that amount are treated as returns of investment within investing cash flows. Sound Point managed funds (and prior to July 1, 2023, AssuredIM managed funds), in which the Company invests and where the Company has been deemed to be the primary beneficiary, are not reported in “investments” on the consolidated balance sheets, but rather in “assets of consolidated investment vehicles” and “other liabilities,” with the portion not owned by the Company presented as “nonredeemable noncontrolling interests”. See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles, for further information regarding the CIVs. Cash consists of cash on hand and demand deposits. See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles, for the cash and cash equivalents of consolidated VIEs. Net investment income primarily includes the income earned on fixed-maturity securities and short-term investments, including amortization of premiums and accretion of discounts. For mortgage-backed securities and any other securities for which there is prepayment risk, prepayment assumptions are evaluated quarterly and revised as necessary. For securities other than purchased credit deteriorated (PCD) securities, any necessary adjustments due to changes in effective yields and expected maturities are recognized in net investment income using the retrospective method. PCD securities are defined as financial assets that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination. Realized gains and losses on sales of available-for-sale fixed-maturity securities and credit losses are reported in the consolidated statement of operations. Net realized investment gains (losses) include sales of investments, which are determined 163 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued using the specific identification method, reductions to amortized cost of available-for-sale investments that have been written down due to the Company’s intent to sell them or it being more-likely-than-not that the Company will be required to sell them, and the change in allowance for credit losses (including accretion) as discussed below. For all fixed-maturity securities that were originally purchased with credit deterioration, accrued interest is not separately presented but rather is a component of the amortized cost of the instrument. For all other available-for-sale securities, a separate amount for accrued interest is reported in “other assets.” Credit Losses For an available-for-sale fixed-maturity security that has experienced a decline in fair value below its amortized cost due to credit related factors, an allowance is established for the difference between the estimated recoverable value and amortized cost with a corresponding charge to “net realized investment gains (losses)” in the consolidated statements of operations. The estimated recoverable value is the present value of cash flows expected to be collected. The allowance for credit losses is limited to the difference between amortized cost and fair value. Any difference between the security’s fair value and its amortized cost that is not associated with credit related factors is presented as a component of AOCI. When estimating future cash flows for fixed-maturity securities, management considers the historical performance of underlying assets and available market information as well as bond-specific considerations. In addition, the process of estimating future cash flows includes, but is not limited to, the following critical inputs which vary by security type: • the extent to which fair value is less than amortized cost; • credit ratings; • any adverse conditions specifically related to the security, industry, and/or geographic area; • changes in the financial condition of the issuer, or underlying loan obligors; • general economic and political factors; • remaining payment terms of the security; • prepayment speeds; • expected defaults; and • the value of any embedded credit enhancements. The assessment of whether a credit loss exists is performed each reporting period. The allowance for credit losses and the corresponding charge to net realized investment gains (losses) may be reversed if conditions change. However, the allowance for credit losses is never reduced below zero. When the Company determines that all or a portion of a fixed-maturity security is uncollectible, the uncollectible amortized cost amount is written off with a corresponding reduction to the allowance for credit losses. If cash flows that were previously written off are collected, the recovery is recognized in net realized investment gains (losses). An allowance for credit losses is established upon initial recognition for available-for-sale PCD securities. On the date of acquisition, the amortized cost of a PCD security is equal to its purchase price plus the allowance for credit losses, with no credit loss expense recognized in the consolidated statements of operations. After the date of acquisition, deterioration (or improvement) in credit will result in an increase (or decrease) to the allowance and an offsetting credit loss expense (or benefit). To measure this, the Company performs a discounted cash flow analysis. For PCD securities that are also beneficial interests, favorable or adverse changes in expected cash flows are recognized as a change in the allowance for credit losses. Changes in expected cash flows that are not captured through the allowance are reflected as a prospective adjustment to the security’s yield within “net investment income” in the consolidated statements of operations. The Company has elected to not measure credit losses on its accrued interest receivable and instead write off accrued interest when it is six months past due or on the date it is deemed uncollectible, if earlier. All write-offs of accrued interest are recorded as a reduction to “net investment income” in the consolidated statements of operations. For impaired securities that (i) the Company intends to sell, or (ii) it is more-likely-than-not that the Company will be required to sell before recovering its amortized cost, the amortized cost is written down to fair value with a corresponding charge to net realized investment gains (losses). No allowance is established in these situations and any previously recorded allowance is reversed. The new cost basis is not adjusted for subsequent increases in estimated fair value. 164 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued The Company monitors its equity method investments for indicators of other-than-temporary declines in fair value on an ongoing basis. If such a decline occurs, an impairment charge is recorded, measured as the difference between the carrying value and the estimated fair value. Investment Portfolio The majority of the investment portfolio consists of investment grade fixed-maturity securities managed by outside managers. The Company has established investment guidelines for these investment managers regarding credit quality, exposure to a particular sector and exposure to a particular obligor within a sector. Investment Portfolio Carrying Value As of December 31, 2024 2023 (in millions) Fixed-maturity securities, available-for-sale $ 6,369 $ 6,307 Fixed-maturity securities, trading 147 318 Short-term investments 1,221 1,661 Other invested assets: Equity method investments: Sound Point 418 429 Funds and other investments 496 394 Other 12 6 Total (1) $ 8,663 $ 9,115 ____________________ (1) The aggregate carrying value of the Company’s investments in Sound Point managed investments, excluding the ownership interest in Sound Point of $ 418 million and $ 429 million as of December 31, 2024 and December 31, 2023, respectively, and excluding certain investments in funds that are consolidated and accounted for as CIVs, was $ 569 million and $ 202 million as of December 31, 2024 and December 31, 2023, respectively. As of December 31, 2024 and December 31, 2023, 12.6 % and 9.2 %, respectively, of the available-for-sale fixed-maturity securities, were either rated BIG or not rated, primarily consisting of Loss Mitigation Securities and CLO equity tranches. As of December 31, 2024 and December 31, 2023, the carrying value of Loss Mitigation Securities was $ 479 million and $ 459 million, respectively. As of December 31, 2024 and December 31, 2023, the carrying value of CLO equity tranches was $ 277 million and $ 13 millions, respectively. Fixed-maturity securities classified as trading securities primarily include contingent value instruments (CVIs), and are not rated. The investment portfolio includes $ 884 million in alternative investments primarily consisting of CLO equity securities, classified as available-for-sale fixed-maturity securities, and $ 508 million of investments across various asset classes that are reported in other invested assets. In addition, as of December 31, 2024 and December 31, 2023, $ 33 million and $ 305 million, respectively, of the Company’s alternative investments in Sound Point managed funds were consolidated and reported in “assets of CIVs,” “other liabilities,” and “nonredeemable noncontrolling interests.” As of December 31, 2024, one active fund in which the Company invests was accounted for as a CIV. See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles. The Company’s alternative investment commitments as of December 31, 2024 include $ 610 million in unfunded commitments, which together with its $ 884 million in funded commitments total $ 1.5 billion, including a $ 1 billion commitment to invest in Sound Point managed alternative investments. Capital allocated to alternative investments was committed to several funds pursuing various strategies, including private healthcare investing, asset-based/specialty finance, CLOs, and middle market direct lending. See Note 1, Business and Basis of Presentation, for a description of the Sound Point Transaction. In addition to the commitments above, the Company has agreed to subscribe for liquidity bonds to be issued by a U.K. regulated utility to which it has insured exposure. At this time the Company estimates that it will purchase approximately £ 110 million (or $ 139 million) in liquidity bonds under this commitment. Accrued investment income was $ 64 million and $ 71 million as of December 31, 2024 and December 31, 2023, respectively. In 2024, 2023 and 2022, the Company did not write off any accrued investment income. 165 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Available-for-Sale Fixed-Maturity Securities by Security Type As of December 31, 2024 Security Type Percent of Total (1) Amortized Cost Allowance for Credit Losses Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (dollars in millions) Obligations of state and political subdivisions 30 % $ 2,032 $ ( 14 ) $ 25 $ ( 103 ) $ 1,940 U.S. government and agencies 1 72 — 1 ( 6 ) 67 Corporate securities (2) 38 2,586 ( 7 ) 9 ( 206 ) 2,382 Mortgage-backed securities (3): RMBS 9 657 ( 21 ) 2 ( 71 ) 567 Commercial mortgage-backed securities (CMBS) 3 189 — — ( 3 ) 186 Asset-backed securities: CLOs 9 615 ( 1 ) 6 ( 9 ) 611 Other (4) 9 593 ( 17 ) 1 ( 30 ) 547 Non-U.S. government securities 1 83 — — ( 14 ) 69 Total available-for-sale fixed-maturity securities 100 % $ 6,827 $ ( 60 ) $ 44 $ ( 442 ) $ 6,369 Available-for-Sale Fixed-Maturity Securities by Security Type As of December 31, 2023 Security Type Percent of Total (1) Amortized Cost Allowance for Credit Losses Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value (dollars in millions) Obligations of state and political subdivisions 41 % $ 2,733 $ ( 13 ) $ 33 $ ( 92 ) $ 2,661 U.S. government and agencies 1 65 — 1 ( 6 ) 60 Corporate securities (2) 34 2,327 ( 6 ) 17 ( 197 ) 2,141 Mortgage-backed securities (3): RMBS 6 428 ( 21 ) 3 ( 68 ) 342 CMBS 2 157 — — ( 6 ) 151 Asset-backed securities: CLOs 7 456 — 1 ( 7 ) 450 Other (4) 7 465 ( 37 ) — ( 26 ) 402 Non-U.S. government securities 2 115 — — ( 15 ) 100 Total available-for-sale fixed-maturity securities 100 % $ 6,746 $ ( 77 ) $ 55 $ ( 417 ) $ 6,307 ____________________ (1) Based on amortized cost. (2) Includes securities issued by taxable universities and hospitals. (3) U.S. government-agency obligations were approximately 68 % of mortgage-backed securities as of December 31, 2024 and 42 % as of December 31, 2023, based on fair value. (4) Includes a security with an affiliated entity with amortized cost and fair value of $ 41 million and $ 42 million, respectively, as of December 31, 2024, and amortized cost and fair value of $ 21 million as of December 31, 2023. 166 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Gross Unrealized Loss by Length of Time for Available-for-Sale Fixed-Maturity Securities for Which a Credit Loss was Not Recorded As of December 31, 2024 Less than 12 months 12 months or more Total Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss (dollars in millions) Obligations of state and political subdivisions $ 624 $ ( 7 ) $ 964 $ ( 96 ) $ 1,588 $ ( 103 ) U.S. government and agencies 5 — 28 ( 6 ) 33 ( 6 ) Corporate securities 762 ( 20 ) 1,046 ( 150 ) 1,808 ( 170 ) Mortgage-backed securities: RMBS 255 ( 4 ) 123 ( 10 ) 378 ( 14 ) CMBS 83 — 103 ( 3 ) 186 ( 3 ) Asset-backed securities: CLOs 151 ( 5 ) 107 ( 1 ) 258 ( 6 ) Other 60 ( 1 ) 16 — 76 ( 1 ) Non-U.S. government securities 35 ( 3 ) 30 ( 11 ) 65 ( 14 ) Total $ 1,975 $ ( 40 ) $ 2,417 $ ( 277 ) $ 4,392 $ ( 317 ) Number of securities (1) 569 1,065 1,591 Gross Unrealized Loss by Length of Time for Available-for-Sale Fixed-Maturity Securities for Which a Credit Loss was Not Recorded As of December 31, 2023 Less than 12 months 12 months or more Total Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss (dollars in millions) Obligations of state and political subdivisions $ 641 $ ( 4 ) $ 931 $ ( 87 ) $ 1,572 $ ( 91 ) U.S. government and agencies — — 33 ( 6 ) 33 ( 6 ) Corporate securities 72 ( 1 ) 1,426 ( 152 ) 1,498 ( 153 ) Mortgage-backed securities: RMBS 27 ( 1 ) 124 ( 8 ) 151 ( 9 ) CMBS 3 — 148 ( 6 ) 151 ( 6 ) Asset-backed securities: CLOs 22 ( 1 ) 379 ( 6 ) 401 ( 7 ) Other 1 — 26 ( 1 ) 27 ( 1 ) Non-U.S. government securities — — 95 ( 15 ) 95 ( 15 ) Total $ 766 $ ( 7 ) $ 3,162 $ ( 281 ) $ 3,928 $ ( 288 ) Number of securities (1) 274 1,266 1,525 ___________________ (1) The number of securities does not add across because lots consisting of the same securities have been purchased at different times and appear in both categories above (i.e., less than 12 months and 12 months or more). If a security appears in both categories, it is counted only once in the total column. The Company considered the credit quality, cash flows, interest rate movements, ability to hold a security to recovery and intent to sell a security in determining whether a security had a credit loss. The Company has determined that the unrealized losses recorded as of December 31, 2024 and December 31, 2023 were primarily related to higher interest rates rather than credit quality. As of December 31, 2024, the Company did not intend to, and was not required to, sell investments in an unrealized loss position prior to expected recovery in value. As of December 31, 2024, of the securities in an unrealized loss position for which an allowance for credit loss was not recorded, 438 securities had unrealized losses in excess of 10% of their carrying value, whereas as of December 31, 2023, 409 securities had unrealized losses in excess of 10% of their carrying 167 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued value. The total unrealized loss for these securities was $ 223 million as of December 31, 2024 and $ 200 million as of December 31, 2023. The amortized cost and estimated fair value of available-for-sale fixed-maturity securities by contractual maturity as of December 31, 2024 are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Distribution of Available-for-Sale Fixed-Maturity Securities by Contractual Maturity As of December 31, 2024 Amortized Cost Estimated Fair Value (in millions) Due within one year $ 382 $ 370 Due after one year through five years 1,168 1,122 Due after five years through 10 years 1,974 1,888 Due after 10 years 2,457 2,236 Mortgage-backed securities: RMBS 657 567 CMBS 189 186 Total $ 6,827 $ 6,369 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 $ 79 million as of December 31, 2024 and $ 234 million as of December 31, 2023. The investment portfolio also contains securities that are held in trust by certain AGL subsidiaries or are otherwise restricted for the benefit of other AGL subsidiaries in accordance with statutory and regulatory requirements with a fair value of $ 1,135 million and $ 1,154 million as of December 31, 2024 and December 31, 2023, respectively. The fair value of investments that were non-income producing during twelve-month period ending December 31, 2024 was $ 42 million. No material investments of the Company were non-income producing during the twelve-month period ending December 31, 2023. 168 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Income from Investments The components of income derived from the investment portfolio are presented in the following tables. Income from Investments Year Ended December 31, 2024 2023 2022 (in millions) Investment income: Fixed-maturity securities, available-for-sale (1) $ 261 $ 294 $ 258 Short-term investments 83 73 15 Other invested assets 1 3 1 Investment income 345 370 274 Investment expenses ( 5 ) ( 5 ) ( 5 ) Net investment income $ 340 $ 365 $ 269 Fair value gains (losses) on trading securities (2) $ 52 $ 74 $ ( 34 ) Equity in earnings (losses) of investees Sound Point (3) $ 6 $ 5 $ — Funds and other (4) 56 23 ( 39 ) Equity in earnings (losses) of investees $ 62 $ 28 $ ( 39 ) ____________________ (1) Includes $ 28 million, $ 55 million and $ 31 million income on Loss Mitigation Securities for 2024, 2023 and 2022, respectively. (2) Fair value gains on trading securities pertaining to securities still held as of December 31, 2024 were $ 15 million for 2024. Fair value gains on trading securities pertaining to securities still held as of December 31, 2023 were $ 31 million for 2023. Fair value losses on trading securities pertaining to securities still held as of December 31, 2022 were $ 29 million for 2022. (3) Beginning in the fourth quarter of 2023, equity in earnings (losses) of investees includes the Company’s share of the earnings of Sound Point, which is reported on a one-quarter lag. (4) Includes Sound Point and AHP funds and, prior to July 1, 2023, AssuredIM funds. Fair Value Gains (Losses) on Trading Securities Substantially all of the trading securities are Puerto Rico CVIs. In 2022, as a result of the 2022 Puerto Rico Resolutions, the Company received cash, new general obligation bonds, new bonds backed by toll revenues (together, New Recovery Bonds) and CVIs. The CVIs are intended to provide creditors with additional recoveries tied to the outperformance of the Puerto Rico 5.5% Sales and Use Tax receipts against May 2020 certified fiscal plan projections, subject to annual and lifetime caps. As of December 31, 2024, all but $ 123 million of the CVIs (at fair value), and substantially all of the New Recovery Bonds had been sold or redeemed. The Company may sell in the future any CVIs it continues to hold. Equity in Earnings (Losses) of Investees As of December 31, 2024, the carrying value of the Company’s ownership interest in Sound Point was $ 418 million, and includes a basis difference related principally to goodwill and indefinite-lived intangible assets of $ 245 million, and finite-lived intangible assets of $ 31 million which had an average estimated term of 5.5 years. The table below presents summarized financial information for equity method investments that meet, in aggregate, the requirements for reporting summarized disclosures. Such requirements were met in 2024, and the information for 2023 and 2022 is presented for comparative purposes. 169 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Aggregate Equity Method Investments’ Summarized Balance Sheet Data As of December, 31 2024 2023 (in millions) Investments $ 2,324 $ 1,735 Assets of consolidated funds and CLOs 1,611 1,449 Other assets 754 792 Total assets $ 4,689 $ 3,976 Liabilities of consolidated funds and CLOs $ 1,494 $ 1,342 Other liabilities 526 365 Total liabilities $ 2,020 $ 1,707 Equity attributable to investees $ 2,629 $ 2,234 Noncontrolling interest 40 35 Total equity $ 2,669 $ 2,269 Aggregate Equity Method Investments’ Summarized Statement of Operations Data Year Ended December 31, 2024 2023 2022 (in millions) Fee income $ 196 $ 57 $ 15 Net gains (losses) on investments and investment income 400 129 ( 365 ) Income of consolidated funds and CLOs 138 37 — Other income 48 39 35 Total revenues $ 782 $ 262 $ ( 315 ) Expenses of consolidated funds and CLOs $ 93 $ 25 $ — Other expenses 279 108 49 Total expenses $ 372 $ 133 $ 49 Net income (loss) $ 410 $ 129 $ ( 364 ) Net income (loss) attributable to investees $ 400 $ 127 $ ( 364 ) 170 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Realized Investment Gains (Losses) The table below presents the components of net realized investment gains (losses). Net Realized Investment Gains (Losses) Year Ended December 31, 2024 2023 2022 (in millions) Gross realized gains on sales of available-for-sale securities (1) $ 3 $ 21 $ 3 Gross realized losses on sales of available-for-sale securities (2) ( 12 ) ( 19 ) ( 45 ) Net foreign currency gains (losses) ( 2 ) ( 1 ) ( 4 ) Change in the allowance for credit losses and intent to sell (3) 18 ( 14 ) ( 21 ) Other net realized gains (losses) 2 ( 1 ) 11 Net realized investment gains (losses) $ 9 $ ( 14 ) $ ( 56 ) ____________________ (1) Amounts in 2023 related primarily to sales of New Recovery Bonds received as part of the 2022 Puerto Rico Resolutions. (2) Amounts in 2022 related primarily to sales of New Recovery Bonds received as part of the 2022 Puerto Rico Resolutions. (3) Change in the allowance for credit losses for all periods was primarily related to Loss Mitigation Securities. The following table presents the roll forward of the allowance for the credit losses on available-for-sale fixed-maturity securities. Roll Forward of Allowance for Credit Losses for Available-for-Sale Fixed-Maturity Securities Year Ended December 31, 2024 2023 2022 (in millions) Balance, beginning of period $ 77 $ 65 $ 42 Additions for securities for which credit losses were not previously recognized 4 — 7 Additions for purchases of securities accounted for as purchased financial assets with credit deterioration — — 2 Additions (reductions) for securities for which credit losses were previously recognized ( 21 ) 12 14 Balance, end of period $ 60 $ 77 $ 65 During 2022, the Company purchased a Loss Mitigation Security with a fair value of $ 22 million that was accounted for as a PCD security. At acquisition, this security had unpaid principal on remaining collateral of $ 31 million, an allowance for credit losses of $ 2 million, and a non-credit related discount of $ 7 million. The Company did not purchase any other securities with credit deterioration during the periods presented. Most of the Company’s securities with credit deterioration are Loss Mitigation Securities. 8. Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles Accounting Policy The types of entities that the Company assesses for consolidation principally include: (i) financial guaranty variable interest entities, which include entities whose debt obligations the Company insures in its financial guaranty business and Puerto Rico Trusts, and (ii) investment vehicles in which the Company has a variable interest and which Sound Point manages, including (1) Sound Point funds since July 1, 2023 and (2) CLOs that are collateralized financing entities (CFEs), and CLO warehouses managed by AssuredIM prior to July 1, 2023. For each of these types of entities, the Company first determines whether the entity is a VIE or a voting interest entity (VOE) which involves assessing, among other conditions, (i) whether the equity investment at risk is sufficient to cover the 171 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued entity’s expected losses and (ii) whether the holders of the equity investment at risk (as a group) have substantive voting rights. The Company reassesses whether an entity is a VIE upon the occurrence of certain significant events. If the entity being evaluated for consolidation is not initially determined to be a VIE (or, later, if a significant event occurs that causes an entity to no longer qualify as a VIE), then the entity is a VOE. Consolidation generally is required when the Company, directly or indirectly, has a controlling financial interest of the VOE being assessed. For entities determined to be a VIE and in which the Company has a variable interest, the Company assesses whether it is the primary beneficiary of the VIE at the time it becomes involved with the entity and performs this assessment quarterly. In determining whether it is the primary beneficiary, the Company considers all facts and circumstances, including an evaluation of economic interests in the VIE held directly and indirectly through related parties. The Company is the primary beneficiary of a VIE when it has both: (i) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses (or the right to receive benefits) from the entity that could potentially be significant to the VIE. If the Company concludes that it is the primary beneficiary of the VIE, the VIE is consolidated in the Company’s consolidated financial statements. If, as part of its continual reassessment of the primary beneficiary determination, the Company concludes that it is no longer the primary beneficiary of a VIE, the Company deconsolidates the VIE and recognizes the impact of that change on the consolidated financial statements. FG VIEs For FG VIEs other than the Puerto Rico Trusts, the Company elected the fair value option (FVO) for all assets and liabilities. Upon initial adoption of the accounting guidance for VIEs in 2010, the Company elected to fair value its structured finance FG VIEs’ assets and liabilities as the carrying amount transition method was not practical. To allow for consistency in the accounting for the assets and liabilities of its consolidated FG VIEs other than the Puerto Rico Trusts, the Company elected the FVO. The consolidated Puerto Rico Trusts described below primarily included (i) cash or fixed-maturity debt securities that were carried at fair value and classified as either available-for-sale or trading securities similar to the fixed-maturity debt securities received pursuant to the 2022 Puerto Rico Resolutions and reported in the investment portfolio, and (ii) Puerto Rico Trust liabilities for which the Company elected the FVO in order to simplify the accounting for these instruments The change in fair value of FG VIEs’ assets and liabilities is reported in “fair value gains (losses) on FG VIEs” in the consolidated statement of operations, except for (i) the change in fair value attributable to change in instrument-specific credit risk (ISCR) on FG VIEs’ liabilities, and (ii) unrealized gains and losses on the New Recovery Bonds that were held in the Puerto Rico Trusts, which are both reported in “other comprehensive income (loss)” (OCI) in the consolidated statements of comprehensive income (loss). Interest income and interest expense are derived from the trustee reports and also included in “fair value gains (losses) on FG VIEs.” Investment income on the New Recovery Bonds and changes in fair value on the CVIs that were held in the Puerto Rico Trusts were all reported in “fair value gains (losses) on FG VIEs” on the consolidated statement of operations. For those FG VIE liabilities with recourse to the Company, the portion of the inception-to-date change in fair value, attributable to ISCR, is calculated by holding all current period assumptions constant for each security and isolating the effect of the change in AG’s CDS spread from the most recent date of consolidation to the current period. In general, if the Company’s CDS spread tightens, more value will be assigned to AG’s credit; however, if AG’s CDS spread widens, less value is assigned to the Company’s credit. The Company has limited contractual rights to obtain the financial records of its consolidated structured finance FG VIEs. The structured finance FG VIEs do not prepare separate GAAP financial statements; therefore, the Company compiles the FG VIE GAAP financial information based on trustee reports prepared by and received from third parties. Such trustee reports are not available to the Company in time for quarterly reporting and therefore FG VIEs other than the Puerto Rico Trusts are reported on a one-quarter lag. As a result of the lag, cash and short-term investments do not reflect any cash outflows (due to claim payments made by the Company) to the holders of the FG VIEs’ debt until the subsequent reporting period. The cash flows generated by the FG VIEs’ assets, except for interest income, are classified as cash flows from investing activities. Paydowns of FG VIEs’ liabilities are supported by the cash flows generated by FG VIEs’ assets and, for liabilities with recourse, possibly claim payments made by AGM or AG under their financial guaranty insurance 172 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued contracts. Paydowns of FG VIEs’ liabilities both with and without recourse are classified as cash flows used in financing activities. Interest income, interest expense and other expenses of the FG VIEs’ assets and liabilities are classified as operating cash flows. Claim payments made by AGM and AG under the financial guaranty contracts issued to the FG VIEs are eliminated upon consolidation. Therefore, such claim payments are treated as paydowns of the FG VIEs’ liabilities and as a financing activity as opposed to an operating activity. The Company’s exposure provided through its financial guaranties with respect to debt obligations of FG VIEs is included within net par outstanding in Note 3, Outstanding Exposure. CIVs CIVs consist of certain Sound Point (and prior to July 1, 2023, AssuredIM) funds, CLOs and CLO warehouses in which the Company is the primary beneficiary. The consolidated funds are investment companies for accounting purposes and, therefore, account for their underlying investments at fair value. All CLOs and CLO warehouses (collectively, the consolidated CLOs) were deconsolidated by the Company on July 1, 2023. Changes in the fair value of assets and liabilities of CIVs, interest income and interest expense are reported in “fair value gains (losses) on consolidated investment vehicles” in the consolidated statements of operations. Interest income from CLO assets is recorded based on contractual rates. All CIVs are reported on a one-quarter lag. Upon consolidation of a Sound Point (and prior to July 1, 2023, AssuredIM) fund, the Company records noncontrolling interest (NCI) for the portion of each fund owned by any third-party investors and employees. Investment transactions in the consolidated Sound Point (and prior to July 1, 2023, AssuredIM) funds are recorded on a trade/contract date basis. Money market investments held by these consolidated funds are classified as cash equivalents and carried at cost, consistent with those funds’ separately issued financial statements. Therefore, the Company has included these amounts in the total amount of cash and cash equivalents on the consolidated statements of cash flows. Cash flows of the CIVs attributable to such entities’ investment purchases and dispositions, as well as operating expenses of the investment vehicles, are presented as cash flows from operating activities in the consolidated statements of cash flows. Borrowings under credit facilities, debt issuances and repayments and capital cash flows to and from investors are presented as financing activities, consistent with investment company guidelines. FG VIEs Structured Finance FG VIEs The insurance subsidiaries provide financial guaranties with respect to debt obligations of special purpose entities, including VIEs, but do not act as the servicer or collateral manager for any VIE obligations they guarantee. The transaction structure generally provides certain financial protections to the insurance subsidiaries. This financial protection can take several forms, the most common of which are overcollateralization, first loss protection (or subordination) and excess spread. In the case of overcollateralization (i.e., the principal amount of the securitized assets exceeds the principal amount of the structured finance obligations), the structure allows defaults of the securitized assets before a default is experienced on the structured finance obligation guaranteed by the insurance subsidiaries. In the case of first loss, the insurance subsidiaries’ financial guaranty insurance policy only covers a senior layer of losses experienced by multiple obligations issued by the VIEs. The first loss exposure with respect to the assets is either retained by the seller or sold off in the form of equity or mezzanine debt to other investors. In the case of excess spread, the financial assets contributed to VIEs generate interest income that is in excess of the interest payments on the debt issued by the VIE. Such excess spread is typically distributed through the transaction’s cash flow waterfall and may be used to create additional credit enhancement, applied to redeem debt issued by the VIE (thereby, creating additional overcollateralization), or distributed to equity or other investors in the transaction. The insurance subsidiaries are not primarily liable for the insured debt obligations issued by the structured finance FG VIEs (which excludes the Puerto Rico Trusts described below) and would only be required to make payments on those insured debt obligations in the event that the issuer of such debt obligations defaults on any principal or interest due and only for the amount of the shortfall. AGL’s and its insurance subsidiaries’ creditors do not have any rights with regard to the collateral supporting the debt issued by the structured finance FG VIEs. Proceeds from sales, maturities, prepayments and interest from such underlying collateral may only be used to pay debt service on the respective FG VIEs’ liabilities. As part of the terms of its financial guaranty contracts, the insurance subsidiaries obtain certain protective rights with respect to the VIE that give them additional controls over a VIE. These protective rights are triggered by the occurrence of 173 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued certain events, such as failure to be in compliance with a covenant due to poor deal performance or a deterioration in a servicer’s or collateral manager’s financial condition. At deal inception, the insurance subsidiaries typically are not deemed to control the VIE; however, once a trigger event occurs, the insurance subsidiaries’ control of the VIE typically increases. The Company continuously evaluates its power to direct the activities that most significantly impact the economic performance of VIEs that have debt obligations insured by the insurance subsidiaries and, accordingly, where they are obligated to absorb VIE losses or receive benefits that could potentially be significant to the VIE. The insurance subsidiaries are deemed to be the control party for certain VIEs under GAAP, typically when their protective rights give them the power to both terminate and replace the transaction’s servicer or collateral manager, which are characteristics specific to the Company’s financial guaranty contracts. If the protective rights that could make the insurance subsidiaries the control party have not been triggered, then the VIE is not consolidated. If the insurance subsidiaries are deemed to no longer have those protective rights, the VIE is deconsolidated. The structured finance FG VIEs’ liabilities that are guaranteed by the insurance subsidiaries are considered to be with recourse, because the insurance subsidiaries guarantee the payment of principal and interest regardless of the performance of the related FG VIEs’ assets. The structured finance FG VIEs’ liabilities that are not guaranteed by the insurance subsidiaries are considered to be without recourse, because the payment of principal and interest of these liabilities is wholly dependent on the performance of the FG VIEs’ assets. Number of Consolidated Structured Finance FG VIEs Year Ended December 31, 2024 2023 2022 Beginning of year 24 25 25 Consolidated — — 2 Deconsolidated ( 1 ) ( 1 ) ( 2 ) December 31 23 24 25 Puerto Rico Trusts With respect to certain insured securities covered by the 2022 Puerto Rico Resolutions, insured bondholders were permitted to elect to receive custody receipts that represented an interest in the legacy insurance policy plus cash and investments. For those who made the election above, distributions of assets in the trusts were passed through to insured bondholders under the custody receipts to the extent of any cash or proceeds of new securities held in the custodial trust and were applied to make payments and/or prepayments of amounts due under the legacy insured bonds. As of December 31, 2023, substantially all of the securities in the Puerto Rico Trusts had been called, and the assets in the Puerto Rico Trusts consisted primarily of cash. In 2024, after notice to the remaining holders of the PRHTA custody receipts, the Company satisfied its remaining direct insured obligations and deconsolidated the 24 custodial trusts that had been consolidated as of December 31, 2023. Components of FG VIEs’ Assets and Liabilities Net fair value gains and losses on FG VIEs are expected to reverse to zero by the maturity of the FG VIEs’ debt, except for net premiums received and net claims paid by the insurance subsidiaries under the financial guaranty insurance contracts. The Company’s estimate of expected loss to be paid (recovered) for FG VIEs is included in Note 4, Expected Loss to be Paid (Recovered). 174 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued The table below shows the carrying value of FG VIEs’ assets and liabilities, segregated by type of collateral. Consolidated FG VIEs by Type of Collateral As of December 31, 2024 2023 (in millions) FG VIEs’ assets: U.S. RMBS $ 147 $ 173 Puerto Rico Trusts’ assets (includes $ 1 at fair value in 2023) (1) — 155 Total FG VIEs’ assets $ 147 $ 328 FG VIEs’ liabilities with recourse: U.S. RMBS $ 155 $ 177 Puerto Rico Trusts’ liabilities — 366 Total FG VIEs’ liabilities with recourse $ 155 $ 543 FG VIEs’ liabilities without recourse: U.S. RMBS $ 9 $ 11 Total FG VIEs’ liabilities without recourse $ 9 $ 11 ____________________ (1) Includes $ 154 million of cash as of December 31, 2023. The change in the ISCR of the FG VIEs’ assets for which the Company elected the FVO (FG VIEs’ assets at FVO) held as of December 31, 2024, 2023 and 2022 that was reported in the consolidated statements of operations was a loss of $ 5 million in 2024, gain of $ 3 million in 2023 and gain of $ 10 million in 2022. The ISCR amount is determined by using expected cash flows at the most recent date of consolidation, discounted at the effective yield, less current expected cash flows discounted at that same original effective yield. Selected Information for FG VIEs’ Assets and Liabilities Measured under the FVO As of December 31, 2024 2023 (in millions) Excess of unpaid principal over fair value of: FG VIEs’ assets $ 264 $ 259 FG VIEs’ liabilities with recourse 38 25 FG VIEs’ liabilities without recourse 16 16 Unpaid principal balance for FG VIEs’ assets that were 90 days or more past due 27 29 Unpaid principal for FG VIEs’ liabilities with recourse (1) 193 568 ____________________ (1) FG VIEs’ liabilities with recourse will mature at various dates ranging from 2025 through 2038. CIVs CIVs consist of certain Sound Point funds for which the Company is the primary beneficiary or has a controlling interest. The Company consolidates investment vehicles that are VIEs when it is deemed to be the primary beneficiary based on its power to direct the most significant activities of each VIE and its level of economic interest in the entities. As a result of the Sound Point Transaction and AHP Transaction, the Company deconsolidated CIV assets of $ 4.7 billion and CIV liabilities of $ 4.4 billion in 2023, and recognized a loss on deconsolidation of $ 16 million, which was reported in “fair value gains (losses) on CIVs.” In addition, at the time of deconsolidation, NCI decreased by $ 132 million. During 2022, the Company deconsolidated a CLO with assets and liabilities of $ 417 million. 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. Liquidity available at the Company’s 175 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued CIVs is not available for corporate liquidity needs, except to the extent of the Company’s investment in the funds, subject to redemption provisions. In 2024, two CIVs distributed substantially all of their invested assets. After the distributions, as of December 31, 2024, the Company classifies the $ 293 million of the distributed investments as either (i) available-for-sale fixed-maturity securities (CLOs with a carrying value of $ 263 million), (ii) trading securities, (iii) equity method investments, or (iv) other invested assets. The table below summarizes the change in the number of consolidated CIVs during each of the periods. During 2022, two consolidated CLO warehouses became CLOs. Roll Forward of Number of Consolidated CIVs Year Ended December 31, 2024 2023 2022 Beginning of year 3 22 20 Consolidated — — 4 Deconsolidated ( 1 ) ( 19 ) ( 2 ) December 31 2 3 22 Assets and Liabilities of CIVs As of December 31, 2024 2023 (in millions) Assets: Cash and cash equivalents $ 2 $ 35 Equity securities and warrants 99 83 Structured products — 248 Total assets (1) $ 101 $ 366 Liabilities (2) $ — $ 4 ____________________ (1) Include investments with Sound Point affiliated entities of $ 99 million and $ 281 million as of December 31, 2024 and December 31, 2023, respectively. (2) Includes $ 3 million with Sound Point affiliated entities as of December 31, 2023. As of December 31, 2024, there were no derivative contracts in CIVs. As of December 31, 2023, the CIVs included derivative contracts with average notional amounts of $ 41 million. Derivative instruments, which included forward foreign currency contracts, served as a component of the CIVs’ investment strategies. NCI in CIVs NCI represents the portion of the consolidated funds not owned by the Company and includes ownership interests of third parties and former employees. The NCI is non-redeemable and presented on the statement of shareholders’ equity. Other Consolidated VIEs In certain instances where the Company consolidates a VIE that was established as part of a loss mitigation negotiated settlement that results in the termination of the obligations under the original financial guaranty insurance or insured credit derivative contract, the Company classifies the assets and liabilities of that VIE in the line items that most accurately reflect the nature of such assets and liabilities, as opposed to within FG VIEs’ assets and FG VIEs’ liabilities. The largest of these VIEs had assets of $ 92 million and liabilities of $ 7 million as of December 31, 2023, which were reported in “investments” and “other liabilities,” respectively, on the consolidated balance sheets. In the first quarter of 2024, the Company deconsolidated the largest of these VIEs. 176 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Non-Consolidated VIEs As described in Note 3, Outstanding Exposure, the Company monitors all policies in the insured portfolio. Of the approximately 15 thousand policies monitored as of December 31, 2024, approximately 14 thousand policies are not within the scope of FASB ASC 810, Consolidation, because these financial guaranties relate to the debt obligations of governmental organizations or financing entities established by a governmental organization. The majority of the remaining policies involve transactions where the Company is not deemed to currently have control over the FG VIEs’ most significant activities. As of December 31, 2024 and 2023, the Company identified 50 and 68 policies, respectively, that contain provisions and experienced events that may trigger consolidation. The Company holds variable interests in non-FG VIEs which are not consolidated, as the Company is not the primary beneficiary. As of December 31, 2024 the Company’s maximum exposure to losses relating to these VIEs was $ 761 million, which is limited to the carrying value of these assets. 9. Fair Value Measurement Accounting Policy The Company carries a significant portion of its assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., exit or transfer price). The price represents the price available in the principal market for the asset or liability. If there is no principal market, then the price is based on a hypothetical market that maximizes the value received for an asset or minimizes the amount paid for a liability (i.e., the most advantageous market). Fair value is based on quoted market prices, where available. If listed prices or quotes are not available, fair value is based on either (i) internally developed models that primarily use, as inputs, market-based or independently sourced market parameters (including, but not limited to, yield curves, interest rates, and debt prices) or (ii) discounted cash flows, using a third party’s proprietary pricing models. In addition to market information, when applicable, the models also incorporate transaction details, such as the instrument’s maturity, and contractual features that reduce the Company’s credit exposure (e.g., collateral rights). Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments include amounts to reflect counterparty credit quality, the Company’s creditworthiness and constraints on liquidity. As markets and products develop and the pricing transparency for certain products changes, the Company may refine its methodologies and assumptions. During 2024, no changes were made to the Company’s valuation models that had (or are expected to have) a material impact on the Company’s consolidated balance sheets or statements of operations and comprehensive income. The Company’s valuation methods produce fair values that may not be indicative of net realizable value or future fair values. The use of different methodologies or assumptions to determine fair value of certain financial instruments could result in a materially different estimate of fair value at the reporting date. The categorization within the fair value hierarchy is determined based on whether the inputs to valuation techniques used to measure fair value are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect Company estimates of market assumptions. The fair value hierarchy prioritizes model inputs into three broad levels, with Level 1 being the highest and Level 3 the lowest. The categorization, of an asset or liability, within the hierarchy is based on the lowest level of significant input to its valuation. Level 1—Quoted prices for identical instruments in active markets. The Company generally defines an active market as a market in which trading occurs at significant volumes. Active markets generally are more liquid and have a lower bid-ask spread than an inactive market. Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and observable inputs other than quoted prices, such as interest rates or yield curves and other inputs derived from, or corroborated by, observable market inputs. Level 3—Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Financial instruments are considered Level 3 when their values are (i) determined using pricing models, discounted cash flow methodologies or similar techniques and (ii) at least one significant model assumption or input is 177 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued unobservable. Level 3 financial instruments also include those for which the determination of fair value requires significant management judgment or estimation. There were transfers of securities into Level 3 in the investment portfolio and CIVs, due to changes in observability of pricing inputs, and in CIVs, in connection with the distribution of assets from the CIV during 2024. There was a transfer of a fixed-maturity security in the investment portfolio from Level 3 to Level 2 during 2023. There was also a transfer of fixed-maturity securities in the investment and FG VIE portfolios from Level 2 to Level 3 during 2023. There were no other transfers from or into Level 3 during the periods presented. Carried at Fair Value Fixed-Maturity Securities The fair value of fixed-maturity securities is generally based on prices received from third-party pricing services or alternative pricing sources that provide reasonable levels of price transparency. The pricing services prepare estimates of fair value using their pricing models, which take into account: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, industry and economic events and sector groupings. Additional valuation factors that can be taken into account are nominal spreads and liquidity adjustments. The pricing services evaluate each asset class based on relevant market and credit information, perceived market movements and sector news. In many cases, benchmark yields have proven to be more reliable indicators of the market for a security, as compared to reported trades for infrequently traded securities and distressed transactions. The extent of the use of each input is dependent on the asset class and the market conditions. The valuation of fixed-maturity securities is more subjective when markets are less liquid due to the lack of market-based inputs. As of December 31, 2024, the Company used models to price 179 securities. All Level 3 securities were priced with the assistance of independent third parties. The pricing is based on a discounted cash flow approach using the third party’s proprietary pricing models. The models use inputs such as projected prepayment speeds; severity assumptions; recovery lag assumptions; estimated default rates (determined based on an analysis of collateral attributes, historical collateral performance, borrower profiles and other features relevant to the evaluation of collateral credit quality); home price appreciation/depreciation rates based on macroeconomic forecasts; and recent trading activity. The yield used to discount the projected cash flows is determined by reviewing various attributes of the security including collateral type, weighted average life, sensitivity to losses, vintage and convexity, in conjunction with market data on comparable securities. Significant changes to any of these inputs could have materially changed the expected timing of cash flows within these securities, which could have significantly affected the fair value of the securities. Short-Term Investments Short-term investments that are traded in active markets are classified as Level 1 as their value is based on quoted market prices. Securities such as discount notes are classified as Level 2 because these securities are typically not actively traded. Due to their approaching maturity, the cost of discount notes approximates fair value. Other Assets Committed Capital Securities The fair value of CCS, which is reported in “other assets” in the consolidated balance sheets, represents the difference between the present value of the remaining expected put option premium payments under the put agreements and the estimated present value of the amounts that the Company would hypothetically have to pay as of the reporting date for a comparable security (see Note 11, Long-Term Debt and Credit Facilities). The change in fair value of the CCS is reported in “fair value gains (losses) on committed capital securities” in the consolidated statements of operations. The estimated current cost of the Company’s CCS as of the reporting date is based on several factors, including AG CDS spreads, the Company’s publicly traded debt and an estimation of the securities’ remaining term. The CCS are classified as Level 3. 178 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Supplemental Executive Retirement Plans The Company classified assets included in the Company’s various supplemental executive retirement plans as either Level 1 or Level 2. The fair value of these assets is based on the observable published daily values of the underlying mutual funds included in the plans (Level 1) or based upon the net asset value (NAV) of the funds if a published daily value is not available (Level 2). The NAVs are based on observable information. The change in fair value of these assets is reported in “other operating expenses” in the consolidated statements of operations. Contracts Accounted for as Credit Derivatives There is no established market where financial guaranty insured credit derivatives are actively traded; therefore, management has determined that the exit market for the Company’s credit derivatives is a hypothetical one based on its entry market. Due to the lack of quoted prices and other observable inputs for its instruments or for similar instruments, the Company determines the fair value of its credit derivative contracts primarily through internally developed, proprietary models that use both observable and unobservable market data inputs, and such contracts are therefore classified as Level 3 in the fair value hierarchy. There are multiple unobservable inputs deemed significant to the valuation model, most importantly the Company’s estimate of the value of the non-standard terms and conditions of its credit derivative contracts and how the Company’s own credit spread affects the pricing of its transactions. The fair value of the Company’s credit derivative contracts generally represents the difference between the present value of remaining premiums the Company expects to receive and the estimated present value of premiums that a financial guarantor of comparable credit-worthiness would hypothetically charge at the reporting date for the same protection. The fair value of the Company’s credit derivatives depends on a number of factors, including notional amount of the contract, expected term, credit spreads, changes in interest rates, the credit ratings of referenced entities, the Company’s own credit risk and remaining contractual cash flows. The expected remaining contractual premium cash flows are the most readily observable inputs since they are based on the credit derivatives contractual terms. Credit spreads capture the effect of recovery rates and performance of underlying assets of these contracts, among other factors. A credit derivative liability on protection sold is the result of contractual cash inflows on in-force transactions that are lower than what a hypothetical financial guarantor could receive if it sold protection on the same risk as of the reporting date. Consistent with previous years, market conditions at December 31, 2024 were such that market prices of the Company’s CDS contracts were not available. Assumptions and Inputs The main inputs and assumptions to the measurement of fair value for CDS contracts are the gross spread, the allocation of gross spread among the bank profit, net spread and hedge cost and the weighted average life (which is based on debt service schedules). The primary sources of information used to determine gross spread and the fair value for CDS contracts include actual collateral credit spreads (if up-to-date and reliable market-based spreads are available), transactions priced or closed during a specific quarter within a specific asset class and specific rating and information provided by the counterparty of the CDS. Credit spreads may also be interpolated based upon market indices adjusted to reflect the non-standard terms of the Company’s CDS contracts or extrapolated based upon transactions of similar asset classes, similar ratings, and similar time to maturity. The Company’s own credit risk is factored into the determination of the current premium. Such credit risk is based on the quoted market price for credit protection bought on the Company as reflected by quoted market prices on CDS contracts referencing AG. The Company obtains the quoted price of CDS contracts traded on AG from market data sources published by third parties. The amount of premium a financial guaranty insurance market participant can demand (or “current premium”) is inversely related to the cost of credit protection on the insurance company as measured by market credit spreads assuming all other assumptions remain constant. This is because the buyers of credit protection typically hedge a portion of their risk to the financial guarantor because the contractual terms of the Company’s contracts typically do not require the posting of collateral by the guarantor. The extent of the hedge depends on the types of instruments insured and current market conditions. In the Company’s valuation model, the current premium is not permitted to go below the minimum rate that the Company would charge to assume similar risks in the reporting period. This assumption can have the effect of limiting the amount of unrealized gains that are recognized on certain CDS contracts. The minimum premium assumption had no effect on the fair value of CDS contracts as of December 31, 2024 or December 31, 2023. 179 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued FG VIEs’ Assets and Liabilities Structured finance FG VIEs’ assets and liabilities are carried at fair value under the FVO and are classified as Level 3. The Company elected the FVO for the Puerto Rico Trusts’ liabilities and they were classified as Level 3. The fair value of the residential mortgage loans in the FG VIEs’ assets is generally sensitive to changes in estimated prepayment speeds; estimated default rates (determined on the basis of an analysis of collateral attributes such as: historical collateral performance, borrower profiles and other features relevant to the evaluation of collateral credit quality); yields implied by market prices for similar securities; and, as applicable, house price depreciation/appreciation rates based on macroeconomic forecasts. Significant changes to some of these inputs could have materially changed the fair value of the FG VIEs’ assets and the implied collateral losses within these transactions. In general, the fair value of the FG VIEs’ assets is most sensitive to changes in the projected collateral losses, where an increase in collateral losses typically leads to a potential decrease in the fair value of FG VIEs’ assets, while a decrease in collateral losses typically leads to an increase in the fair value of FG VIEs’ assets. The prices of the assets and liabilities of the FG VIEs are generally determined with the assistance of an independent third party and based on a discounted cash flow approach. The third party pricing service utilizes an internal model to determine an appropriate yield at which to discount the cash flows of the security by factoring in collateral types, weighted average lives and other structural attributes specific to the security being priced. The expected yield is further calibrated by utilizing algorithms designed to aggregate market color, received by the independent third party, on comparable bonds. The models used to price the FG VIEs’ liabilities (other than the liabilities of the Puerto Rico Trusts) generally apply the same inputs used in determining fair value of FG VIEs’ assets. For those liabilities insured by the Company, the benefit of the Company’s insurance policy guaranteeing the timely payment of debt service is also taken into account. The liabilities of the Puerto Rico Trusts were priced based on the value of the assets in the Puerto Rico Trusts including the value of the Company’s financial guaranty policy. The timing of expected losses within an insured transaction is a significant factor in determining the implied benefit of the Company’s insurance policy, which guarantees the timely payment of principal and interest for the insured tranches of debt issued by the FG VIEs. In general, a longer time period until the Company’s expected loss payments typically leads to a decrease in the value of the Company’s insurance and a decrease in the fair value of the Company’s FG VIEs’ liabilities with recourse, while a shorter time period until the Company’s expected loss payments typically could lead to an increase in the value of the Company’s insurance and an increase in the fair value of the Company’s FG VIEs’ liabilities with recourse. Assets and Liabilities of CIVs Investments held by CIVs which are quoted on a national securities exchange are valued at their last reported sale price on the date of determination. Investments held by CIVs which are traded over-the-counter reflect third-party data and generally reflect the average of dealer offer and bid prices. The valuation methodology may include, but is not limited to: (i) performing price comparisons with similar investments; (ii) obtaining valuation-related information from issuers; (iii) calculating the present value of future cash flows; (iv) assessing other data related to the investment that is an indication of value; (v) obtaining information provided by third parties; and/or (vi) evaluating information provided by the investment manager. Inputs may include dealer price quotations, yield curves, credit curves, forward/CDS/index spreads, prepayments rates, strike and expiry dates, volatility statistics and other factors. Significant changes to any of the inputs described above could have a material effect on the fair value of the CIV’s assets and liabilities. 180 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Amounts recorded at fair value in the Company’s financial statements are presented in the tables below. Fair Value Hierarchy of Financial Instruments Carried at Fair Value As of December 31, 2024 Fair Value Hierarchy Level 1 Level 2 Level 3 Total (in millions) Assets: Fixed-maturity securities, available-for-sale: Obligations of state and political subdivisions $ — $ 1,930 $ 10 $ 1,940 U.S. government and agencies — 67 — 67 Corporate securities — 2,382 — 2,382 Mortgage-backed securities: RMBS — 422 145 567 CMBS — 186 — 186 Asset-backed securities — 127 1,031 1,158 Non-U.S. government securities — 69 — 69 Total fixed-maturity securities, available-for-sale — 5,183 1,186 6,369 Fixed-maturity securities, trading — 142 5 147 Short-term investments 1,218 3 — 1,221 Other invested assets (1) — — 4 4 FG VIEs’ assets — — 147 147 Assets of CIVs, equity securities — — 99 99 Other assets 65 59 7 131 Total assets carried at fair value $ 1,283 $ 5,387 $ 1,448 $ 8,118 Liabilities: FG VIEs’ liabilities (2) $ — $ — $ 164 $ 164 Other liabilities — — 34 34 Total liabilities carried at fair value $ — $ — $ 198 $ 198 181 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Fair Value Hierarchy of Financial Instruments Carried at Fair Value As of December 31, 2023 Fair Value Hierarchy Level 1 Level 2 Level 3 Total (in millions) Assets: Fixed-maturity securities, available-for-sale: Obligations of state and political subdivisions $ — $ 2,655 $ 6 $ 2,661 U.S. government and agencies — 60 — 60 Corporate securities — 2,141 — 2,141 Mortgage-backed securities: RMBS — 188 154 342 CMBS — 151 — 151 Asset-backed securities — 49 803 852 Non-U.S. government securities — 100 — 100 Total fixed-maturity securities, available-for-sale — 5,344 963 6,307 Fixed-maturity securities, trading — 318 — 318 Short-term investments 1,657 4 — 1,661 Other invested assets (1) — — 3 3 FG VIEs’ assets — — 174 174 Assets of CIVs: Equity securities — 3 80 83 Structured products — 59 189 248 Total assets of CIVs — 62 269 331 Other assets 55 52 16 123 Total assets carried at fair value $ 1,712 $ 5,780 $ 1,425 $ 8,917 Liabilities: FG VIEs’ liabilities (2) $ — $ — $ 554 $ 554 Other liabilities — — 53 53 Total liabilities carried at fair value $ — $ — $ 607 $ 607 ____________________ (1) Includes Level 3 mortgage loans that are recorded at fair value on a non-recurring basis. (2) Includes FG VIEs’ liabilities with recourse and FG VIEs’ liabilities without recourse. See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles. 182 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Changes in Level 3 Fair Value Measurements The tables below present a roll forward of the Company’s Level 3 financial instruments carried at fair value on a recurring basis during the years ended December 31, 2024 and 2023. Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis Year Ended December 31, 2024 Fixed-Maturity Securities, Available-for-Sale Assets of CIVs Obligations of State and Political Subdivisions RMBS Asset- Backed Securities Fixed-Maturity Securities, Trading FG VIEs’ Assets Equity Securities Structured Products Other (7) (in millions) Fair value as of December 31, 2023 $ 6 $ 154 $ 803 $ — $ 174 $ 80 $ 189 $ 14 Total pre-tax realized and unrealized gains (losses) recorded in: Net income (loss) — 14 (1) 48 (1) — ( 3 ) (2) 29 (4) ( 16 ) (4) ( 10 ) (3) Other comprehensive income (loss) 4 2 1 — ( 1 ) — — 1 Purchases — — 63 — — — 102 — Sales — — — — — ( 10 ) ( 28 ) — Settlements — ( 25 ) ( 149 ) ( 3 ) ( 23 ) — — — Reclassifications (10) — — 245 8 — — ( 253 ) — Deconsolidations — — — — — ( 1 ) ( 2 ) — Transfers into Level 3 — — 20 — — 3 10 — Transfers out of Level 3 — — — — — ( 2 ) ( 2 ) — Fair value as of December 31, 2024 $ 10 $ 145 $ 1,031 $ 5 $ 147 $ 99 $ — $ 5 Change in unrealized gains (losses) related to financial instruments held as of December 31, 2024 included in: Earnings $ — $ ( 7 ) (2) $ 29 (4) $ — $ ( 10 ) (3) OCI $ 4 $ 2 $ ( 2 ) $ ( 1 ) $ 1 Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis Year Ended December 31, 2024 Credit Derivative Liability, net (5) FG VIEs’ Liabilities (8) (in millions) Fair value as of December 31, 2023 $ ( 50 ) $ ( 554 ) Total pre-tax realized and unrealized gains (losses) recorded in: Net income (loss) 24 (6) 12 (2) Other comprehensive income (loss) — 3 Issuances ( 2 ) — Settlements ( 1 ) 375 Fair value as of December 31, 2024 $ ( 29 ) $ ( 164 ) Change in unrealized gains (losses) related to financial instruments held as of December 31, 2024 included in: Earnings $ 13 (6) $ 3 (2) OCI $ 3 183 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis Year Ended December 31, 2023 Fixed-Maturity Securities, Available-For-Sale Assets of CIVs Obligations of State and Political Subdivisions RMBS Asset- Backed Securities FG VIEs’ Assets Equity Securities and Warrants Corporate Securities Structured Products Other (7) (in millions) Fair value as of December 31, 2022 $ 47 $ 179 $ 794 $ 204 $ 297 $ 96 $ 46 $ 50 Total pre-tax realized and unrealized gains (losses) recorded in: Net income (loss) 1 (1) 13 (1) 32 (1) 9 (2) 51 (4) ( 3 ) (4) 21 (4) ( 32 ) (3) Other comprehensive income (loss) ( 2 ) ( 8 ) ( 8 ) — — — — — Purchases — — 23 — 42 6 5 — Sales — — ( 2 ) — ( 91 ) ( 15 ) ( 48 ) — Settlements ( 3 ) ( 30 ) ( 36 ) ( 33 ) — — — ( 4 ) Deconsolidations — — — ( 7 ) ( 219 ) ( 84 ) 165 — Transfers into Level 3 3 — — 1 — — — — Transfers out of Level 3 ( 40 ) — — — — — — — Fair value as of December 31, 2023 $ 6 $ 154 $ 803 $ 174 $ 80 $ — $ 189 $ 14 Change in unrealized gains (losses) related to financial instruments held as of December 31, 2023 included in: Earnings $ 4 (2) $ 11 (4) $ — $ 10 (4) $ ( 32 ) (3) OCI $ — $ ( 7 ) $ 9 $ — Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis Year Ended December 31, 2023 Credit Derivative Liability, net (5) FG VIEs’ Liabilities (8) Liabilities of CIVs (9) (in millions) Fair value as of December 31, 2022 $ ( 162 ) $ ( 715 ) $ ( 4,154 ) Total pre-tax realized and unrealized gains (losses) recorded in: Net income (loss) 114 (6) 2 (2) ( 45 ) (4) Other comprehensive income (loss) — 3 ( 13 ) Issuances ( 1 ) — — Settlements ( 1 ) 149 13 Deconsolidations — 7 4,199 Fair value as of December 31, 2023 $ ( 50 ) $ ( 554 ) $ — Change in unrealized gains (losses) related to financial instruments held as of December 31, 2023 included in: Earnings $ 112 (6) $ — $ — OCI $ 3 $ — __________________ (1) Included in “net realized investment gains (losses)” and “net investment income.” (2) Reported in “fair value gains (losses) on FG VIEs.” (3) Reported in “fair value gains (losses) on CCS,” “net investment income” and “other income (loss).” (4) Reported in “fair value gains (losses) on CIVs.” (5) Represents the net position of credit derivatives. Credit derivative assets (reported in “other assets”) and credit derivative liabilities (reported in “other liabilities”) are shown as either assets or liabilities in the consolidated balance sheets. (6) Reported in “fair value gains (losses) on credit derivatives.” (7) Includes CCS and other invested assets. (8) Includes FG VIEs’ liabilities with recourse and FG VIEs’ liabilities without recourse. (9) Includes primarily various tranches of CLO debt. The CLOs were CFEs that were consolidated until the Sound Point Transaction occurred on July 1, 2023. (10) Represents securities transferred from two of the CIVs to the investment portfolio due to the distribution of assets of these CIVs. See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles, for additional information. 184 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Level 3 Fair Value Disclosures Quantitative Information About Level 3 Fair Value Inputs As of December 31, 2024 Financial Instrument Description Fair Value Assets (Liabilities) (in millions) Significant Unobservable Inputs Range Weighted Average (4) Investments (2): Fixed-maturity securities, available-for-sale (1): Obligations of state and political subdivisions $ 10 Yield 5.5 % - 22.0 % 7.5 % RMBS 145 Conditional prepayment rate (CPR) 1.8 % - 17.0 % 2.8 % CDR 1.8 % - 18.7 % 5.4 % Loss severity 50.0 % - 125.0 % 79.9 % Yield 7.7 % - 10.8 % 9.1 % Asset-backed securities: CLOs 611 Discount margin 0.8 % - 2.9 % 1.9 % Yield 12.5 % - 22.5 % 17.9 % Others 420 Yield 6.4 % - 9.1 % 6.7 % Fixed-maturity securities, trading (1) 5 Yield 19.8 % - 169.5 % 163.8 % FG VIEs’ assets (1) 147 CPR 2.2 % - 25.0 % 5.7 % CDR 1.3 % - 41.0 % 10.7 % Loss severity 45.0 % - 100.0 % 83.2 % Yield 6.8 % - 10.8 % 9.3 % Assets of CIVs - equity securities (3) 99 Discount rate 24.3 % Market multiple-price to book 1.05 x Market multiple-price to earnings 5.25 x Terminal growth rate 4.0 % Exit multiple-price to book 1.05 x Exit multiple-price to earnings 5.50 x Other assets (1) 2 Implied Yield 6.5 % - 7.0 % 6.8 % Term (years) 10 years Credit derivative liabilities, net (1) ( 29 ) Hedge cost (in basis points)( bps) 12.8 - 30.1 16.8 Bank profit (in bps) 73.2 - 275.9 139.3 Internal floor (in bps) 10.0 - 85.5 29.7 Internal credit rating AAA - CCC A Discount rates of future expected premium cash flows 3.9 % - 4.4 % 4.3 % FG VIEs’ liabilities (1) ( 164 ) CPR 2.2 % - 25.0 % 5.7 % CDR 1.3 % - 41.0 % 10.7 % Loss severity 45.0 % - 100.0 % 83.2 % Yield 5.5 % - 10.8 % 7.0 % ____________________ (1) Discounted cash flow is used as the primary valuation technique. (2) Excludes several investments reported in “other invested assets” with a fair value of $ 4 million. (3) The primary valuation technique uses the income and/or market approach. (4) Weighted average is calculated as a percentage of current par outstanding for all categories except for assets of CIVs, for which it is calculated as a percentage of fair value. 185 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Quantitative Information About Level 3 Fair Value Inputs As of December 31, 2023 Financial Instrument Description Fair Value Assets (Liabilities) (in millions) Significant Unobservable Inputs Range Weighted Average (4) Investments (2): Fixed-maturity securities, available-for-sale (1): Obligations of state and political subdivisions $ 6 Yield 7.4 % - 22.5 % 7.8 % RMBS 154 CPR 0.1 % - 15.0 % 3.4 % CDR 1.5 % - 18.8 % 5.6 % Loss severity 50.0 % - 125.0 % 82.6 % Yield 7.5 % - 11.3 % 8.9 % Asset-backed securities: CLOs 450 Discount margin 1.1 % - 9.5 % 2.6 % Others 353 Yield 6.2 % - 11.7 % 7.8 % FG VIEs’ assets (1) 174 CPR 0.2 % - 21.4 % 7.8 % CDR 1.3 % - 41.0 % 10.4 % Loss severity 45.0 % - 100.0 % 82.9 % Yield 5.5 % - 10.9 % 9.4 % Assets of CIVs (3): Equity securities 80 Discount rate 20.9 % Market multiple-price to book 1.10 x Market multiple-price to earnings 5.50 x Terminal growth rate 4.0 % Exit multiple-price to book 1.10 x Exit multiple-price to earnings 5.50 x Structured products 189 Yield 14.7 % - 21.4 % 18.0 % Other assets (1) 13 Implied Yield 7.8 % - 8.4 % 8.1 % Term (years) 10 years Credit derivative liabilities, net (1) ( 50 ) Hedge cost (in bps) 10.2 - 26.5 15.8 Bank profit (in bps) 105.6 - 302.6 158.6 Internal floor (in bps) 10.0 Internal credit rating AAA - CCC A Discount rates of future expected premium cash flows 3.3 % - 4.8 % 3.6 % FG VIEs’ liabilities (1) ( 554 ) CPR 0.2 % - 21.4 % 7.8 % CDR 1.3 % - 41.0 % 10.4 % Loss severity 45.0 % - 100.0 % 82.9 % Yield 5.0 % - 10.7 % 5.8 % ____________________ (1) Discounted cash flow is used as the primary valuation technique. (2) Excludes several investments reported in “other invested assets” with a fair value of $ 3 million. (3) The primary valuation technique uses the income and/or market approach. (4) Weighted average is calculated as a percentage of current par outstanding for all categories except for assets of CIVs, for which it is calculated as a percentage of fair value. 186 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Not Carried at Fair Value Financial Guaranty Insurance Contracts Fair value is based on management’s estimate of the consideration that would be paid to, or received from, a similarly rated financial guaranty insurance company to acquire the Company’s in-force book of financial guaranty insurance business. It is based upon the ratio of current trends in premium pricing to risk-based expected loss for investment grade portions of the portfolio and stressed loss pricing for BIG transactions. The Company classified the fair value of financial guaranty insurance contracts as Level 3. Long-Term Debt Long-term debt issued by the U.S. Holding Companies is valued by broker-dealers using independent third-party pricing sources and standard market conventions and classified as Level 2 in the fair value hierarchy. The market conventions utilize market quotations, market transactions for the Company’s comparable instruments, and to a lesser extent, similar instruments in the broader insurance industry. Assets of CIVs Cash equivalents are recorded at cost which approximates fair value and are considered Level 1 in the fair value hierarchy. The carrying amount and estimated fair value of the Company’s financial instruments not carried at fair value are presented in the following table. Fair Value of Financial Instruments Not Carried at Fair Value As of December 31, 2024 As of December 31, 2023 Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value (in millions) Assets (liabilities): Assets of CIVs $ — $ — $ 19 $ 19 Other assets (including other invested assets) 115 116 79 80 Financial guaranty insurance contracts (1) ( 2,029 ) ( 1,136 ) ( 2,244 ) ( 1,811 ) Long-term debt ( 1,699 ) ( 1,579 ) ( 1,694 ) ( 1,593 ) Other liabilities ( 16 ) ( 16 ) ( 15 ) ( 15 ) ____________________ (1) Carrying amount includes the assets and liabilities related to financial guaranty insurance contract premiums, losses and salvage and subrogation and other recoverables net of reinsurance. 10. Asset Management Fees Prior to the Sound Point Transaction and AHP Transaction, the Company received management fees, as well as performance fees, incentive allocations or carried interest (collectively referred to as performance fees) in exchange for AssuredIM providing investment advisory services to manage investment funds and CLOs. After the Sound Point Transaction and AHP Transaction, the Company continues to consolidate the general partner of a fund that Sound Point now manages and reports any performance fees in “other income.” Accounting Policy All management, CLO and performance fees earned by the Company are accounted for as contracts with customers. The Company recognizes revenue when the contractual performance criteria are met and only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved. Performance fee contractual provisions are evaluated on an individual basis to determine the timing of revenue recognition. 187 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Asset Management Fees The following table presents the sources of asset management fees on a consolidated basis. Asset Management Fees Year Ended December 31, 2024 2023 (1) 2022 (in millions) Management fees $ — $ 21 $ 53 Performance fees — 18 19 Reimbursable fund expenses — 14 21 Total asset management fees $ — $ 53 $ 93 ____________________ (1) Represents asset management fees associated with the AssuredIM consolidated business for the first half of 2023, prior to the Sound Point Transaction and AHP Transaction. In the second half of 2023, after the consummation of the Sound Point Transaction, one AssuredIM general partnership is still consolidated in the Company’s financial statements, which had $ 10 million of revenues and $ 6 million of expenses in 2024, and $ 5 million of revenues and $ 3 million of expenses in 2023. 11. Long-Term Debt and Credit Facilities Accounting Policy Long-term debt is recorded at principal amounts net of any: (i) unamortized original issue discount or premium; (ii) unamortized acquisition date fair value adjustments for AGMH debt; and (iii) debt issuance costs. Original issue discount and premium, acquisition date fair value adjustments for AGMH debt, and debt issuance costs are accreted into interest expense over the contractual term of the applicable debt. When long-term debt is redeemed, the difference between the cash paid to redeem the debt and the carrying value of the debt is reported as a “loss on extinguishment of debt” in the consolidated statements of operations. CCS are carried at fair value with changes in fair value reported in the consolidated statement of operations. See Note 9, Fair Value Measurement, – Other Assets – Committed Capital Securities, for a discussion of the fair value measurement of the CCS. Long-Term Debt The Company’s long-term debt outstanding consists of debt issued by the U.S. Holding Companies. All of the U.S. Holding Companies’ long-term debt is fully and unconditionally guaranteed by AGL; AGL’s guarantee of the junior subordinated debentures is on a junior subordinated basis. 188 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Principal and Carrying Amounts of Debt The principal and carrying values of the Company’s debt are presented in the table below. Principal and Carrying Amounts of Long-Term Debt As of December 31, 2024 As of December 31, 2023 Principal Carrying Value Principal Carrying Value (in millions) AGUS 6.125 % Senior Notes $ 350 $ 346 $ 350 $ 345 AGUS 3.15 % Senior Notes 500 496 500 496 AGUS 7 % Senior Notes 200 198 200 198 AGUS 3.6 % Senior Notes 400 396 400 395 AGUS Series A Enhanced Junior Subordinated Debentures 150 150 150 150 AGMH Junior Subordinated Debentures (1) 146 113 146 110 Total $ 1,746 $ 1,699 $ 1,746 $ 1,694 ____________________ (1) Carrying amounts are different than principal amounts primarily due to fair value adjustments at the date of the AGMH acquisition, which are accreted into interest expense over the remaining terms of these obligations. Net of AGMH’s long-term debt purchased by AGUS. Debt Issued by AGUS 6.125 % Senior Notes. On August 21, 2023, AGUS issued $ 350 million of 6.125 % Senior Notes due 2028 ( 6.125 % Senior Notes) for net proceeds of $ 345 million. The net proceeds from the issuance were used for the redemption on September 25, 2023, of $ 330 million of AGUS’s debt maturing in 2024. AGUS may redeem all or part of the 6.125 % Senior Notes at any time or from time to time prior to August 15, 2028 (the date that is one month prior to the maturity of the 6.125 % Senior Notes), at its option, at a redemption price equal to the greater of: (i) the sum of the present values of the remaining scheduled payments of principal and interest on the 6.125 % Senior Notes being redeemed (excluding interest accrued to the redemption date) from the redemption date to August 15, 2028 discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Rate plus 30 bps; and (ii) 100 % of the principal amount of the 6.125 % Senior Notes being redeemed; plus, in each case, accrued and unpaid interest on the 6.125 % Senior Notes to be redeemed to, but excluding, the redemption date. AGUS may redeem all or part of the 6.125 % Senior Notes at any time or from time to time on and after August 15, 2028, at its option, at a redemption price equal to 100 % of the principal amount of the 6.125 % Senior Notes being redeemed, plus accrued and unpaid interest on the 6.125 % Senior Notes to be redeemed to, but excluding, the redemption date. The 6.125 % Senior Notes are senior unsecured obligations of AGUS and rank equal in right of payment with all of AGUS’s other unsecured and unsubordinated indebtedness outstanding. The 6.125 % Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by AGL and ranks equal in right of payment with all of AGL’s other unsecured and unsubordinated indebtedness outstanding. 3.15 % Senior Notes. On May 26, 2021, AGUS issued $ 500 million of 3.150 % Senior Notes due 2031 ( 3.15 % Senior Notes) for net proceeds of $ 494 million. The net proceeds from the issuance were used for the partial redemption of AGMH’s debt, with the balance being used for general corporate purposes, including share repurchases. AGUS may redeem all or part of the 3.15 % Senior Notes at any time or from time to time prior to March 15, 2031 (the date that is three months prior to the maturity of the 3.15 % Senior Notes), at its option, at a redemption price equal to the greater of: (i) 100 % of the principal amount of the 3.15 % Senior Notes being redeemed; or (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the Notes being redeemed (excluding interest accrued to the redemption date) from the redemption date to March 15, 2031 discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Rate plus 25 bps; plus, in each case, accrued and unpaid interest on the 3.15 % Senior Notes to be redeemed to, but excluding, the redemption date. AGUS may redeem all or part of the 3.15 % Senior Notes at any time or from time to time on and after March 15, 2031, at its option, at a redemption price equal to 100 % of the principal amount of the 3.15 % Senior Notes being redeemed, plus accrued and unpaid interest on the 3.15 % Senior Notes to be redeemed to, but excluding, the redemption date. The 3.15 % Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by AGL. The 3.15 % Senior Notes are senior unsecured obligations of AGUS and rank equal in right of payment with all of AGUS’s other unsecured and unsubordinated indebtedness outstanding. The guarantee is a senior 189 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued unsecured obligation of AGL and ranks equal in right of payment with all of AGL’s other unsecured and unsubordinated indebtedness outstanding. 7 % Senior Notes. On May 18, 2004, AGUS issued $ 200 million of 7 % Senior Notes due 2034 ( 7 % Senior Notes) for net proceeds of $ 197 million. Although the coupon on the Senior Notes is 7 %, the effective rate is approximately 6.4 %, taking into account the effect of a cash flow hedge executed by the Company in March 2004. The notes are redeemable, in whole or in part, at their principal amount plus accrued and unpaid interest to the date of redemption or, if greater, the make-whole redemption price. 3.6 % Senior Notes. On August 20, 2021, AGUS issued $ 400 million of 3.6 % Senior Notes due 2051 ( 3.6 % Senior Notes) for net proceeds of $ 395 million. The net proceeds from the issuance were used for the redemption on September 27, 2021, of certain AGMH’s debt and a portion of AGUS’s debt maturing in 2024, as described below. AGUS may redeem all or part of the 3.6 % Senior Notes at any time or from time to time prior to March 15, 2051 (the date that is six months prior to the maturity of the 3.6 % Senior Notes), at its option, at a redemption price equal to the greater of: (i) 100 % of the principal amount of the 3.6 % Senior Notes being redeemed; or (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the Notes being redeemed (excluding interest accrued to the redemption date) from the redemption date to March 15, 2051 discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Rate plus 30 bps; plus, in each case, accrued and unpaid interest on the 3.6 % Senior Notes to be redeemed to, but excluding, the redemption date. AGUS may redeem all or part of the 3.6 % Senior Notes at any time or from time to time on and after March 15, 2051, at its option, at a redemption price equal to 100 % of the principal amount of the 3.6 % Senior Notes being redeemed, plus accrued and unpaid interest on the 3.6 % Senior Notes to be redeemed to, but excluding, the redemption date. The 3.6 % Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by AGL. The 3.6 % Senior Notes are senior unsecured obligations of AGUS and rank equal in right of payment with all of AGUS’s other unsecured and unsubordinated indebtedness outstanding. The guarantee is a senior unsecured obligation of AGL and ranks equal in right of payment with all of AGL’s other unsecured and unsubordinated indebtedness outstanding. Series A Enhanced Junior Subordinated Debentures. On December 20, 2006, AGUS issued $ 150 million of Debentures due 2066. The Debentures pay a floating rate of interest, reset quarterly, at a rate equal to three month Chicago Mercantile Exchange (CME) Term SOFR plus a margin equal to 2.64 %. AGUS may select at one or more times to defer payment of interest for one or more consecutive periods for up to ten years . Any unpaid interest bears interest at the then applicable rate. AGUS may not defer interest past the maturity date. The debentures are redeemable, in whole or in part, at their principal amount plus accrued and unpaid interest to the date of redemption. Debt Issued by AGMH Junior Subordinated Debentures. On November 22, 2006, AGMH issued $ 300 million face amount of Junior Subordinated Debentures with a scheduled maturity date of December 15, 2036 and a final repayment date of December 15, 2066. The final repayment date of December 15, 2066 may be automatically extended up to four times in five-year increments provided certain conditions are met. The debentures are redeemable, in whole or in part, at any time prior to December 15, 2036 at their principal amount plus accrued and unpaid interest to the date of redemption or, if greater, the make-whole redemption price. Interest on the debentures will accrue from November 22, 2006 to December 15, 2036 at the annual rate of 6.4 %. If any amount of the debentures remains outstanding after December 15, 2036, then the principal amount of the outstanding debentures will bear interest at a floating interest rate equal to one-month CME Term SOFR plus 2.33 % until repaid. AGMH may elect at one or more times to defer payment of interest on the debentures for one or more consecutive interest periods that do not exceed ten years . In connection with the completion of this offering, AGMH entered into a replacement capital covenant for the benefit of persons that buy, hold or sell a specified series of AGMH long-term indebtedness ranking senior to the debentures. Under the covenant, the debentures will not be repaid, redeemed, repurchased or defeased by AGMH or any of its subsidiaries on or before the date that is 20 years prior to the final repayment date, except to the extent that AGMH has received proceeds from the sale of replacement capital securities. The proceeds from this offering were used to pay a dividend to the shareholders of AGMH. Over the past several years AGUS purchased, and as of December 31, 2024 and 2023, AGUS holds approximately $ 154 million in principal of the AGMH Subordinated Debentures. 190 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Debt Maturity and Interest Expense Scheduled principal payments of the Company’s debt are as follows: Debt Maturity Schedule (1) As of December 31, 2024 Year Principal (in millions) 2028 $ 350 2031 500 2034 200 2051 400 2066 296 Total $ 1,746 ____________________ (1) Includes eliminations of AGMH’s debt purchased by AGUS. The Company’s interest expense was $ 91 million, $ 90 million and $ 81 million for the years ended December 31, 2024, 2023 and 2022, respectively. Committed Capital Securities AG has entered into put agreements with eight separate custodial trusts allowing it to issue an aggregate of $ 400 million of non-cumulative redeemable perpetual preferred securities to the trusts in exchange for cash. The arrangement entails eight custodial trusts (Woodbourne Capital Trust I, II, III and IV and Sutton Capital Trust I, II, III and IV), each of which issued $ 50 million face amount of “committed capital securities” and invested the proceeds of that issuance in eligible assets that would enable the trust to have the cash necessary to respond to AG’s exercise of a put option. The put option consists of a right that AG has, pursuant to separate put agreements that AG entered into with each of the trusts, to issue to each trust $ 50 million of non-cumulative redeemable perpetual preferred stock, in exchange for an equivalent amount of cash (i.e., an aggregate of $ 400 million). When AG exercises its put option, the relevant trust(s) must liquidate the portfolio of high-quality, liquid assets that it currently maintains and use the liquidation proceeds to purchase AG preferred stock. The put agreements have no scheduled termination date or maturity, but may be terminated upon the occurrence of certain specified events. None of the events that would give rise to a termination of the put agreements have occurred. 12. Employee Benefit Plans Assured Guaranty Ltd. Long-Term Incentive Plan The Company maintains the Assured Guaranty Ltd. 2024 Long-Term Incentive Plan (the Incentive Plan), which is the successor plan to the Assured Guaranty Ltd. 2004 Long-Term Incentive Plan (the Prior Plan). The number of AGL common shares that may be delivered under the Incentive Plan include (i) 1,750,000 shares; plus (ii) any shares that were granted under the Prior Plan that are forfeited, expire, or are cancelled without delivery of shares or which result in the forfeiture of the shares back to the Company to the extent that such shares would have been added back to the reserve under the terms of the Prior Plan. As of December 31, 2024, 1,731,773 common shares were available to grant under the Incentive Plan. In the event of certain transactions affecting AGL’s common shares, the number or type of shares subject to the Incentive Plan, the number and type of shares subject to outstanding awards under the Incentive Plan, and the exercise price of awards under the Incentive Plan, may be adjusted. The Incentive Plan provides for the grant of full value awards, which may be granted in return for a participant's previously performed services, or in return for the participant surrendering other compensation that may be due, or may be contingent on the achievement of performance or other objectives during a specified period. The grant of full value awards are subject to a risk of forfeiture or other restrictions that will lapse upon the achievement of one or more goals relating to completion of service by the participant, or achievement of performance or other objectives. In addition to full value awards, 191 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued the Incentive Plan also provides for the grant of incentive stock options, non-qualified stock options and stock appreciation rights. The Incentive Plan is administered by the Compensation Committee of AGL’s Board of Directors (the Board), except as otherwise determined by the Board. The Board may amend or terminate the Incentive Plan. The Company issues new shares to settle share-based awards. Accounting Policy Share-based compensation expense is based on the grant date fair value using the grant date closing price or the Monte Carlo or Black-Scholes-Merton (Black-Scholes) pricing models. For retirement-eligible employees, the Company expenses the portion of the unvested time-based awards that fully vest upon retirement eligibility. Except for the time-based awards to retirement-eligible employees, the Company amortizes the fair value of share-based awards on a straight-line basis over the requisite service periods of the awards, which are generally the vesting periods. The fair value of each award under the Assured Guaranty Ltd. Employee Stock Purchase Plan is estimated at the beginning of the offering period using the Black-Scholes option valuation model and are expensed over the period which the employee participates in the plan and pays for the shares. Long-Term Incentive Plan Restricted Share Units Restricted share units are valued based on the closing price of the underlying shares at the date of grant. These restricted share units generally vest pro rata over a four-year period or all at once after a three-year period. The shares are delivered on the vesting date. Restricted Share Unit Activity Nonvested Share Units Number of Share Units Weighted Average Grant Date Fair Value Per Share Nonvested at December 31, 2023 932,728 $ 54.16 Granted 192,362 84.59 Vested ( 337,274 ) 48.49 Forfeited ( 7,335 ) 54.81 Nonvested at December 31, 2024 780,481 $ 64.03 As of December 31, 2024, the total unrecognized compensation cost related to outstanding non-vested restricted share units was $ 14 million, which the Company expects to recognize over the weighted average remaining service period of 1.6 years. The total fair value of restricted share units vested during the years ended December 31, 2024, 2023 and 2022 was $ 16 million, $ 18 million and $ 12 million, respectively. The weighted average grant-date fair value per share of restricted share units granted during the years ended December 31, 2024, 2023 and 2022 was $ 84.59 , $ 61.26 , and $ 56.46 , respectively. Performance-Based Restricted Share Units Each performance-based restricted share unit represents a contingent right to receive up to a certain number of the Company’s common shares. Awards tied to core adjusted book value per share represent the right to receive up to two shares at the end of a three-year performance period, depending on the growth in core adjusted book value per share over the three-year performance period. Performance-based restricted share units tied to total shareholder return (TSR) relative to the TSR of the 55th percentile of the Russell Midcap Index - Financials (Index) represent the right to receive up to 2.5 shares at the end of a three-year performance period. The shares related to awards tied to core adjusted book value per share are delivered on the vesting date and the shares related to awards tied to relative TSR are generally delivered on the fourth anniversary of the grant date. 192 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Performance-Based Restricted Share Unit Activity Performance-Based Restricted Share Units Number of Performance-Based Share Units Weighted Average Grant Date Fair Value Per Share Nonvested at December 31, 2023 677,856 $ 64.62 Granted (1) 478,324 94.56 Vested (2) ( 404,114 ) 41.91 Forfeited — — Nonvested at December 31, 2024 (3) 752,066 $ 72.39 ____________________ (1) Includes 118,086 adjusted book value performance-based restricted share units and 177,130 TSR performance-based restricted share units that were granted prior to 2024 at a weighted average grant date fair value of $ 44.01 and $ 60.06 , respectively, but met performance hurdles and vested during 2024. The weighted average grant date fair value per share excludes these shares. (2) Excludes 295,216 TSR performance-based restricted share units that vested during 2024 but were not delivered. (3) Excludes 157,854 performance-based restricted share units that have met performance hurdles and vest in February 2025. Includes 295,216 TSR performance-based restricted share units that vested during 2024 but will be delivered in 2025. As of December 31, 2024, the total unrecognized compensation cost related to outstanding non-vested performance-based share units was $ 18 million, which the Company expects to recognize over the weighted average remaining service period of 1.9 years. The total value of performance-based restricted share units vested during the years ended December 31, 2024, 2023 and 2022 was based on grant date fair value and was $ 17 million, $ 11 million and $ 8 million, respectively. For the 2024, 2023 and 2022 awards, the grant-date fair value of the performance-based restricted share units tied to relative TSR was calculated using a Monte Carlo simulation in order to determine the total return of the Company’s shares relative to the total return of financial companies in the Index. The inputs to the simulation include the beginning share price and historical share price volatility of each company in the Index as well as the historical correlation coefficient between the share price of each company in the Index and the Index itself. In addition, the simulation also uses the risk-free rate and a discount for liquidity. Because the simulation is calculating the total rate of return for each company in the Index, the simulation assumes that all dividends for all companies are reinvested. As a result, all dividends within the simulation are set to zero regardless of any actual (real world) dividends paid by any of the companies in the Index, so actual dividend data are not used as inputs. The following are significant assumptions used in determining the fair value of the performance-based restricted share units tied to relative TSR. Years Ended December 31, 2024 2023 2022 Expected term 3.00 years 3.00 years 2.85 years Expected volatility 20.72 % – 87.00 % 29.22 % – 110.25 % 27.19 % – 78.96 % Dividend yield 0.00 % 0.00 % 0.00 % Risk-free-rates 4.38 % 4.38 % 1.74 % Grant-date fair value per share $ 104.27 $ 80.80 $ 83.97 For the 2024, 2023 and 2022 awards, the grant-date fair value of the performance-based restricted share units tied to core adjusted book value was based on the grant date closing price. The weighted average grant-date fair values per share of all performance-based awards in 2024, 2023 and 2022 were $ 94.56 , $ 71.34 and $ 62.89 , respectively. Restricted Share Awards Restricted share awards are valued based on the closing price of the underlying shares at the date of grant. The Company awards restricted share awards to non-executive directors, and vest after one year. The shares are delivered on the vesting date. 193 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Restricted Share Award Activity Nonvested Shares Number of Shares Weighted Average Grant Date Fair Value Per Share Nonvested at December 31, 2023 38,464 $ 52.26 Granted 21,413 77.54 Vested ( 38,464 ) 52.26 Forfeited — — Nonvested at December 31, 2024 21,413 $ 77.54 As of December 31, 2024, the total unrecognized compensation cost related to outstanding non-vested restricted share awards was $ 0.5 million, which the Company expects to recognize over the weighted average remaining service period of 0.3 years. The total fair value of shares vested during the years ended December 31, 2024, 2023 and 2022 was $ 2.0 million, $ 2.2 million and $ 2.3 million, respectively. The weighted average grant-date fair values per share of shares granted during the years ended December 31, 2024, 2023 and 2022 was $ 77.54 , $ 52.26 and $ 59.47 , respectively. Employee Stock Purchase Plan The Company established the AGL Employee Stock Purchase Plan (ESPP) in accordance with Internal Revenue Code of 1986 (the Code) Section 423, and participation is available to all eligible employees. Maximum annual purchases by participants are limited to the number of whole shares that can be purchased with an amount equal to 10 % of the participant's compensation or, if less, shares having a value of $ 25,000 . Participants may purchase shares at a purchase price equal to 85 % of the lesser of the fair market value of the stock on the first day or the last day of the subscription period. The Company has reserved for issuance and purchases under the ESPP 1,200,000 AGL common shares. As of December 31, 2024, 334,490 common shares were available for grant under the ESPP. The Company issues new shares to settle share-based awards. The fair value of each award under the ESPP is estimated using the following assumptions: (i) the expected dividend yield is based on the current expected annual dividend and share price on the grant date; (ii) the expected volatility is estimated at the date of grant based on the historical share price volatility, calculated on a daily basis; (iii) the risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant; and (iv) the expected life is based on the term of the offering period. AGL Employee Stock Purchase Plan Year Ended December 31, 2024 2023 2022 (dollars in millions) Proceeds from purchase of shares by employees $ 2.2 $ 2.2 $ 2.4 Number of shares issued by the Company 33,348 47,204 53,453 Share-Based Compensation Expense The following table presents share-based compensation costs and the amount of such costs that are deferred as policy acquisition costs, pre-tax. Amortization of previously deferred share compensation costs is not shown in the table below. Share-Based Compensation Expense Summary Year Ended December 31, 2024 2023 2022 (in millions) Share‑based compensation expense $ 34 $ 36 $ 39 Share‑based compensation capitalized as DAC 2 3 3 Income tax benefit 5 5 6 194 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Defined Contribution Plan The Company maintains a savings incentive plan, which is qualified under Section 401(a) of the Code for U.S. employees. Eligible participants may contribute a percentage of their eligible compensation subject to U.S. Internal Revenue Service (IRS) limitations. The Company’s matching contribution is an amount equal to 100 % of each participant’s contributions up to 7 % of such participant’s eligible compensation, subject to IRS limitations. Certain eligible participants may also contribute a percentage of eligible compensation over the IRS limitations to a nonqualified supplemental executive retirement plan. The Company's matching contribution in the nonqualified plan is an amount equal to 100 % of each participant’s contributions up to 6 % of participant’s eligible compensation above the IRS limitations for the qualified plan. The Company also makes core contributions of 7 % of the participant’s eligible compensation to the qualified plan, subject to IRS limitations, regardless of whether the employee otherwise contributes to the plan, and a core contribution of 6 % of the participant’s eligible compensation above the IRS limitations for the qualified plan to the nonqualified plan for eligible employees. Employees become fully vested in Company contributions to the qualified and nonqualified plans after one year of service, as defined in the plan (or upon reaching age 65 for the nonqualified plan, if earlier). Plan eligibility is immediate upon hire. The Company also maintains similar non-qualified plans for non-U.S. employees. The Company recognized defined contribution expenses of $ 18 million, $ 16 million and $ 20 million for the years ended December 31, 2024, 2023 and 2022, respectively. Payable to Sound Point and AHP As of December 31, 2024 and December 31, 2023, the Company had $ 3 million and $ 8 million payable for compensation to former employees of AssuredIM in accordance with the Sound Point Transaction and the AHP Transaction, respectively. 13. Income Taxes AGL is a tax resident in the U.K. although it remains a Bermuda-based company and its administrative and head office functions continue to be carried on in Bermuda. Under Bermuda law, there was no Bermuda income, corporate or profits tax or withholding tax, capital gains tax or capital transfer tax payable by AGL or the Bermuda Subsidiaries (collectively, AG Re, AGRO and Cedar Personnel Ltd.) in 2024 and 2023. AGL’s U.S., U.K. and French subsidiaries are subject to income taxes imposed by U.S., U.K. and French authorities, respectively, and file applicable tax returns. In addition, AGRO, a Bermuda domiciled company, has elected under Section 953(d) of the IRS to be taxed as a U.S. domestic corporation. In July of 2023, the U.K. government passed legislation to implement the Organization for Economic Co-Operation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) Pillar Two income inclusion rule. This includes a multinational top-up tax which will apply to large multinational corporations for accounting periods beginning on or after December 31, 2023. This applies to AGL and its subsidiaries, requiring a minimum effective rate of 15% in all jurisdictions in which they operate. On December 27, 2023, the Bermuda government enacted a corporate income tax at the rate of 15% which will apply to the Bermuda Subsidiaries for accounting periods starting on or after January 1, 2025. The enactment of the corporate income tax regime required the Company to recognize Bermuda deferred taxes for the first time in the fourth quarter of 2023. An economic transition adjustment (ETA) equal to the difference between the fair market value and the carrying value of assets and liabilities of each of the Company’s Bermuda insurance subsidiaries as of September 30, 2023 resulted in the establishment of a deferred tax asset and corresponding benefit of $ 189 million reported in the fourth quarter of 2023 consolidated statement of operations. The ETA is expected to be utilized over 10 to 15 years, beginning in 2025. AGUS files a consolidated federal income tax return with all of its U.S. subsidiaries. Assured Guaranty Overseas US Holdings Inc. and its subsidiaries, AGRO and AG Intermediary Inc., file their own consolidated federal income tax return. Accounting Policy The provision for income taxes consists of an amount for taxes currently payable and an amount for deferred taxes. Deferred income taxes are provided for temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities, using enacted rates in effect for the year in which the differences are expected to reverse. 195 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued The Company recognizes tax benefits only if a tax position is “more likely than not” to prevail. The Company elected to account for tax associated with Global Intangible Low-Taxed Income (GILTI) as a current-period expense when incurred. Deferred and current tax assets and liabilities are reported in “other assets” or ”other liabilities” on the consolidated balance sheets. Tax Assets (Liabilities) Deferred and Current Tax Assets (Liabilities) As of December 31, 2024 2023 (in millions) Deferred tax assets (liabilities) $ 262 $ 250 Current tax assets 10 — Current tax liabilities ( 13 ) ( 9 ) Components of Net Deferred Tax Assets (Liabilities) As of December 31, 2024 2023 (in millions) Deferred tax assets: Net unrealized investment losses $ 54 $ 49 Intangible assets 149 149 Value of in-force business 45 45 Net operating loss 31 30 Depreciation 47 45 Deferred compensation 38 32 FG VIEs 49 — Other 25 32 Total deferred tax assets 438 382 Deferred tax liabilities: Investments 127 65 Other 49 67 Total deferred tax liabilities 176 132 Net deferred tax assets (liabilities) $ 262 $ 250 As part of the acquisition of CIFG Holding Inc. (CIFGH, and together with its subsidiaries, CIFG), the Company acquired $ 189 million of net operating losses (NOL). The NOL has been limited under the Code Section 382 due to a change in control as a result of the acquisition. As of December 31, 2024, AG, a U.S. subsidiary, had gross deferred tax assets of approximately $ 21 million for federal NOL carryforwards which will begin to expire in 2033. In addition, as of December 31, 2024, the Company had gross deferred tax assets for certain non-U.S. NOL carryforwards of approximately $ 10 million which do not expire. Valuation Allowance During 2022, the Company recorded a return to provision adjustment, which included the utilization of $ 19 million in foreign tax credits (FTC), thereby reducing the Company’s FTC from $ 24 million as of December 31, 2021 to $ 5 million as of December 31, 2022. FTC were established under the 2017 Tax Cuts and Jobs Act (TCJA) for use against regular tax in future years, and would expire in 2027. In analyzing the future realizability of FTC, the Company notes limitations on future foreign source income due to overall foreign losses as negative evidence. As of December 31, 2022, the Company came to the 196 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued conclusion that, after reviewing positive and negative evidence, it is more likely than not that the FTC would not be utilized, and therefore, maintained a valuation allowance of $ 5 million with respect to this tax attribute. During 2023, the Company recorded a return to provision adjustment, which included the utilization of $ 3 million in FTC, thereby reducing the Company’s FTC to $ 2 million. As of December 31, 2023, the Company believed that the weight of the positive evidence outweighed the negative evidence regarding the realization of the Company’s FTC, resulting in the release of the corresponding $ 2 million valuation allowance and bringing it to zero . The Company came to the conclusion that it is more likely than not that the deferred tax assets will be fully realized after weighing all positive and negative evidence available as required under GAAP. The positive evidence that was considered included the cumulative income the Company has earned over the last three years , and the significant unearned premium income to be included in taxable income. The positive evidence outweighs any negative evidence that exists. As such, the Company believes that no valuation allowance is necessary in connection with the remaining deferred tax assets. The Company will continue to analyze the need for a valuation allowance on a quarterly basis. Changes in market conditions since 2022, including rising interest rates, resulted in the recording of deferred tax assets related to net unrealized tax capital losses that remained as of December 31, 2024 and December 31, 2023. When assessing recoverability of these deferred tax assets, the Company considers the ability and intent to hold the underlying securities to recovery in value, if necessary, as well as other factors as noted above. As of December 31, 2024, based on all available evidence, including capital loss carryback capacity, the Company concluded that the deferred tax assets related to the unrealized tax capital losses on the available-for-sale securities portfolios are, more likely than not, expected to be realized. Provision for Income Taxes The components of the provision (benefit) for income taxes were as follows: Current and Deferred Provision (Benefit) for Income Taxes Year Ended December 31, 2024 2023 2022 (in millions) Current provision (benefit) for income taxes: Federal $ 70 $ 76 $ ( 1 ) State and local 17 ( 13 ) 15 Foreign 13 — — Total current 100 63 14 Deferred provision (benefit) for income taxes: Federal 3 31 12 Foreign ( 7 ) ( 187 ) ( 15 ) Total deferred ( 4 ) ( 156 ) ( 3 ) Total provision (benefit) for income taxes $ 96 $ ( 93 ) $ 11 The Company’s overall effective tax rate fluctuates based on the distribution of income across jurisdictions. The effective tax rates reflect the proportion of income recognized by each of the Company’s operating subsidiaries, with: • U.S. subsidiaries taxed at the U.S. marginal corporate income tax rate of 21 %; • French subsidiary taxed at the French marginal corporate tax rate of 25 %; • Bermuda Subsidiaries taxed at the Bermuda marginal corporate tax rate of 0 %, unless subject to U.S. tax by election; and • U.K. subsidiaries taxed at the U.K. marginal corporate tax rate of 25 % for periods starting April 1, 2023 and 19 % for periods ending on or before March 31, 2023. Effective January 1, 2024, the U.K. adopted a global minimum tax rate of 15 % under the OECD’s BEPS Pillar Two rules. Controlled foreign corporations (CFCs) apply the local marginal corporate tax rate. In addition, the TCJA created a new requirement that a portion of the GILTI earned by CFCs must be included currently in the gross income of the CFCs’ U.S. shareholder. 197 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued A reconciliation of the difference between the provision for income taxes and the expected tax provision at statutory rates in taxable jurisdictions is presented below. Effective Tax Rate Reconciliation Year Ended December 31, 2024 2023 2022 (in millions) Expected tax provision (benefit) $ 82 $ 122 $ 23 Tax-exempt interest ( 10 ) ( 15 ) ( 14 ) Return to provision adjustment ( 1 ) ( 6 ) ( 20 ) Noncontrolling interest ( 3 ) ( 5 ) ( 3 ) State taxes, net of federal benefit 13 ( 10 ) 12 Foreign taxes 5 11 6 Stock based compensation 1 2 5 Bermuda ETA ( 1 ) ( 189 ) — Global minimum tax 13 — — Other ( 3 ) ( 3 ) 2 Total provision (benefit) for income taxes $ 96 $ ( 93 ) $ 11 Effective tax rate 19.7 % ( 13.9 ) % 7.2 % The expected tax provision (benefit) is calculated as the sum of pre-tax income in each jurisdiction multiplied by the statutory tax rate of the jurisdiction by which it will be taxed. Where there is a pre-tax loss in one jurisdiction and pre-tax income in another, the total combined expected tax rate may be higher or lower than any of the individual statutory rates. The following tables present pre-tax income and revenue by jurisdiction. Pre-tax Income (Loss) by Tax Jurisdiction Year Ended December 31, 2024 2023 2022 (in millions) U.S. $ 445 $ 622 $ 189 Bermuda 90 79 44 U.K. ( 33 ) ( 25 ) ( 69 ) France ( 14 ) ( 8 ) ( 16 ) Total $ 488 $ 668 $ 148 Revenue by Tax Jurisdiction Year Ended December 31, 2024 2023 2022 (in millions) U.S. $ 720 $ 1,169 $ 661 Bermuda 130 165 84 U.K. 23 37 ( 15 ) France ( 1 ) 2 ( 8 ) Other — — 1 Total $ 872 $ 1,373 $ 723 Pre-tax income by jurisdiction may be disproportionate to revenue by jurisdiction to the extent that insurance losses incurred are disproportionate. 198 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Audits As of December 31, 2024, AGUS had open tax years with the U.S. IRS for 2018 forward and is currently under audit for the 2018 and 2019 tax years. As of December 31, 2024, Assured Guaranty Overseas US Holdings Inc. had open tax years with the IRS for 2021 forward and is not currently under audit with the IRS. In September 2022, His Majesty’s Revenue & Customs (HMRC) completed a business risk review of Assured Guaranty that commenced in July 2022 and assigned a low-risk rating for corporate taxes in the U.K. In December 2023, HMRC issued an inquiry into the Company’s 2021 U.K. tax returns. As of December 31, 2024, the Company’s U.K. subsidiaries had open tax years with HMRC for 2021 forward. The Company’s French subsidiary is not currently under examination and has open tax years of 2020 forward. Uncertain Tax Positions During the years ended December 31, 2024, 2023, and 2022, there were no unrecognized tax benefits. There were no accruals for the payment of interest and penalties related to income taxes as of each of December 31, 2024, 2023, and 2022. 14. Insurance Company Regulatory Requirements The following table summarizes the policyholder’s surplus and net income amounts reported to local regulatory bodies in the U.S. and Bermuda for insurance subsidiaries within the group. The discussion that follows describes the basis of accounting and differences to GAAP. Insurance Regulatory Amounts Reported U.S. and Bermuda Policyholders’ Surplus Net Income (Loss) As of December 31, Year Ended December 31, 2024 2023 2024 2023 2022 (in millions) AG (U.S. domiciled) (1)(2) $ 3,524 $ 3,997 $ 355 $ 289 $ 225 Bermuda statutory companies: AG Re 1,087 905 98 95 53 AGRO 452 412 22 16 9 ____________________ (1) Effective August 1, 2024, AGM merged with and into AG, with AG as the surviving company. Furthermore, in accordance with the National Association of Insurance Commissioners (NAIC) Annual Statement instructions, the prior year numbers have been restated to reflect the merger of AGM with and into AG. (2) Policyholders’ surplus is net of contingency reserves of $ 1,392 million and $ 1,296 million as of December 31, 2024 and December 31, 2023, respectively. Basis of Regulatory Financial Reporting United States AG’s ability to pay dividends depends, among other things, upon its financial condition, results of operations, cash requirements, compliance with rating agency requirements, and is also subject to restrictions contained in the insurance laws and related regulations of its state of domicile and other states. Financial statements prepared in accordance with accounting practices prescribed or permitted by local insurance regulatory authorities differ in certain respects from GAAP. AG prepares statutory financial statements in accordance with accounting practices prescribed or permitted by the NAIC and its respective insurance department. Prescribed statutory accounting practices (SAP) are set forth in the NAIC Accounting Practices and Procedures Manual. AG has no permitted accounting practices on a statutory basis. GAAP differs in certain significant respects from AG’s SAP prescribed or permitted by insurance regulatory authorities. The principal differences result from the SAP listed below. • Upfront premiums are earned upon expiration of risk and installment premiums are earned on a pro-rata basis over the installment period, rather than in proportion to the amount of insurance protection provided under GAAP. The timing of premium accelerations may also differ between SAP and GAAP. Under GAAP, premiums are 199 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued accelerated only upon the legal defeasance of an insured obligation, whereas statutory premiums may be accelerated earlier if an insured obligation is economically defeased prior to legal defeasance. • Acquisition costs are charged to expense as incurred rather than expensed over the period that the related premiums are earned under GAAP. Ceding commission income is earned immediately except for amounts in excess of acquisition costs, which are deferred, rather than fully deferred under GAAP. • A contingency reserve is established according to applicable insurance laws, whereas no such reserve is required under GAAP. • Certain assets designated as “non-admitted assets” are charged directly to statutory surplus, rather than reflected as assets under GAAP. • Investments in subsidiaries are carried on the balance sheet on the equity basis, to the extent admissible, rather than consolidated with the parent under GAAP. • The amount of admitted deferred tax assets are subject to an adjusted surplus threshold and subject to a limitation calculated in accordance with SAP. Under GAAP, there is no non-admitted asset determination, rather a valuation allowance is recorded to reduce the deferred tax asset to an amount that is more likely than not to be realized. • Insured credit derivatives are accounted for as insurance contracts rather than accounted for as derivative contracts that are measured at fair value under GAAP. • Bonds are reported at either amortized cost or the lower of amortized cost or fair value, rather than classified as available-for-sale or trading securities and carried at fair value under GAAP. • The impairment model for fixed-maturity securities classified as available-for-sale under GAAP differs from the statutory impairment model. Under SAP, fixed-maturity securities that have been determined to be other-than-temporarily impaired are written down to fair value or the present value of cash flows. Under GAAP, an allowance for credit losses is established, and can be reversed for subsequent increases in expected cash flows. • Insured obligations of VIEs, where the Company is deemed the primary beneficiary, are accounted for as insurance contracts. Under GAAP, such VIEs are consolidated and any transactions with the Company are eliminated. • Acquisitions are accounted for as either statutory purchases or statutory mergers, rather than under the purchase method under GAAP. • Losses are discounted at pre-tax book yields and recorded when there is a significant credit deterioration on specific insured obligations and the obligations are in default or a default is probable. Under GAAP, expected losses are discounted at the risk-free rate at the end of each reporting period and are recorded only to the extent they exceed deferred premium revenue. • The present value of contractual or expected installment premiums and commissions are not recorded on the balance sheet as they are under GAAP. • The put options in CCS are not accounted for as derivatives as they are under GAAP. • Non-U.S. dollar denominated unearned premiums reserve is remeasured at current exchange rates rather than carried at historical rates under GAAP. Bermuda AG Re, a Bermuda regulated Class 3B insurer, and AGRO, a Bermuda regulated Class 3A and Class C insurer, prepare their statutory financial statements in conformity with the accounting principles set forth in the Insurance Act 1978, amendments thereto and related regulations. As of December 31, 2016, the Bermuda Monetary Authority (the Authority) requires insurers to prepare statutory financial statements in accordance with the particular accounting principles adopted by the insurer (which, in the case of AG Re and AGRO, are GAAP), subject to certain adjustments. The adjustments relate to certain assets designated as “non-admitted assets” which are charged directly to statutory surplus rather than reflected as assets as they are under GAAP. United Kingdom AGUK prepares its Solvency and Financial Condition Report based on Solvency UK Regulations. As of December 31, 2024, AGUK’s eligible own funds were an estimated £ 439 million (or $ 549 million). As of December 31, 2023, AGUK’s own funds were an estimated £ 528 million (or $ 672 million). France AGE prepares its Solvency and Financial Condition Report and other required regulatory financial reports based on Autorité de Contrôle Prudentiel et de Résolution (ACPR) regulations and Solvency II. As of December 31, 2024, AGE’s own 200 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued funds were an estimated € 35 million (or $ 36 million). As of December 31, 2023, AGE’s own funds were an estimated € 44 million (or $ 49 million). Dividend Restrictions and Capital Requirements United States Under Maryland’s insurance law, AG may, with prior notice to the Commissioner of its domiciliary regulator, the MIA, pay an ordinary dividend in an amount that, together with all dividends and distributions paid in the prior 12 months, does not exceed the lesser of 10 % of its policyholders’ surplus (as of the prior December 31) or 100 % of its adjusted net investment income during that period. “Adjusted net investment income” means the sum of (x) AG’s net investment income during the 12-month period ending December 31 of the preceding year (excluding realized capital gains and pro rata distributions of its own securities), and (y) AG’s net investment income (excluding realized capital gains) from the three calendar years prior to the preceding calendar year that has not already been paid out as dividends. The maximum amount available during 2025 for AG to distribute as ordinary dividends is approximately $ 287 million. Such payments would be payable in the second half of 2025 because AG’s ordinary dividends were concentrated in the second half of 2024 following the August 1, 2024 merger of AGM with and into AG. However, in order to enable AG to make payments over the course of the year, AG has put in place for 2025 a quarterly process with the MIA, pursuant to which AG will confirm that the MIA does not object to AG dividending $ 71.8 million (i.e., 25 %) of the $ 287 million amount in each calendar quarter of 2025. Pursuant to this process, AG obtained the MIA’s non-objection to pay, and expects to pay, a $ 71.8 million dividend on March 7, 2025. Bermuda For AG Re, any distribution (including repurchase of shares) of any share capital, contributed surplus or other statutory capital that would reduce its total statutory capital by 15 % or more of its total statutory capital as set out in its previous year's financial statements requires the prior approval of the Authority. Separately, dividends are paid out of an insurer’s statutory surplus and cannot exceed that surplus. Furthermore, annual dividends cannot exceed 25 % of total statutory capital and surplus as set out in its previous year’s financial statements, which is $ 272 million, without AG Re certifying to the Authority that it will continue to meet required margins. Based on the foregoing limitations, in 2025 AG Re has the capacity to: (i) make capital distributions in an aggregate amount up to $ 129 million without the prior approval of the Authority; and (ii) declare and pay dividends in an aggregate amount up to approximately $ 272 million as of December 31, 2024. Such dividend capacity is further limited by: (i) the actual amount of AG Re’s unencumbered assets, which amount changes from time to time due in part to collateral posting requirements and which was approximately $ 192 million as of December 31, 2024; and (ii) the amount of statutory surplus, which as of December 31, 2024 was $ 229 million. For AGRO, a subsidiary of AG Re, annual dividends cannot exceed $ 113 million, without AGRO certifying to the Authority that it will continue to meet required margins. Based on the foregoing limitations, in 2025 AGRO has the capacity to: (i) make capital distributions in an aggregate amount up to $ 21 million without the prior approval of the Authority; and (ii) declare and pay dividends in an aggregate amount up to approximately $ 113 million as of December 31, 2024. Such dividend capacity is further limited by: (i) the actual amount of AGRO’s unencumbered assets, which amount changes from time to time due in part to collateral posting requirements and which was approximately $ 397 million as of December 31, 2024; and (ii) the amount of statutory surplus, which as of December 31, 2024 was $ 315 million. United Kingdom U.K. company law prohibits AGUK from declaring a dividend to its shareholders unless it has “profits available for distribution.” The determination of whether a company has profits available for distribution is based on its accumulated realized profits less its accumulated realized losses. While the U.K. insurance regulatory laws impose no statutory restrictions on a general insurer’s ability to declare a dividend, the Prudential Regulation Authority’s capital requirements may in practice act as a restriction on dividends for AGUK. In 2024 and 2023, AGUK made cash distributions and plans to make further distributions of excess capital in the future. France French company law prohibits AGE from declaring a dividend to its shareholders unless it has “profits and/or reserves available for distribution.” The determination of whether a company has profits available for distribution is based on its accumulated realized profits less its accumulated realized losses. While French law imposes no statutory restrictions on an 201 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued insurer’s ability to declare a dividend, the ACPR’s capital requirements may, in practice, act as a restriction on dividends for AGE. Dividend Restrictions and Capital Requirements Distributions from Insurance Subsidiaries Year Ended December 31, 2024 2023 2022 (in millions) Dividends paid by AG Re to AGL $ 97 $ 53 $ — Distributions from AGUK to its parent 128 127 — Dividends paid by AG to U.S. Holding Companies (1) 400 358 473 Stock redemptions by insurance subsidiaries 400 200 — ___________________ (1) Effective as of August 1, 2024, AGM merged with and into AG, with AG as the surviving company. Prior to the merger, AG had been directly owned by AGUS. As a result of the merger, AG is directly owned by AGMH, a subsidiary of AGUS. 15. Related Party Transactions Accounting Policy The Company follows ASC 850, “Related Party Transactions,” for the identification and disclosure of related party transactions. Pursuant to ASC 850, related parties include: (i) the Company’s affiliates; (ii) entities for which investments in their equity securities would be required, absent the election of the FVO, to be accounted for by the equity method; (iii) trusts for the benefit of employees, such as pension and profit sharing trusts that are managed by or under the trusteeship of the Company’s management; (iv) the Company’s principal owners; (v) the Company’s management; (vi) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (vii) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. Related party amounts and transactions disclosed in this note include transactions with “Related Persons” as defined in Item 404 of SEC’s Regulation S-K as well as “related parties” as defined in ASC 850. Related Party Transactions As of December 31, 2024 and December 31, 2023, each of Wellington Management Company, LLP (together with its affiliates, Wellington) and BlackRock Financial Management Inc. (together with its affiliates, BlackRock) directly or indirectly owned more than 5 % of the Company’s common shares. Both Wellington and BlackRock are Related Persons. Wellington is one of the Company’s investment managers, and BlackRock was also one of the Company’s investment managers until September 2020. BlackRock also provides investment reporting software to the Company. The investment management fees and reporting software expense incurred from transactions with Wellington and BlackRock were approximately $ 1.8 million in 2024, $ 1.9 million in 2023 and $ 2.0 million in 2022. The Company reported payables to Wellington and BlackRock in connection with these fees and transactions of less than $ 1 million as of both December 31, 2024 and December 31, 2023. Throughout the notes to these consolidated financial statements, the Company describes several affiliated balances and transactions. In Note 1, Business and Basis of Presentation, and Note 7, Investments and Cash, the Company includes a discussion of, and amounts related to, its various equity method investments, including an equity method ownership interest in Sound Point and several Sound Point managed funds. Certain of the Sound Point (and prior to July 1, 2023, AssuredIM) managed funds in which the Company invests are reported as CIVs as described in Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles. 202 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Prior to the Sound Point Transaction and AHP Transaction, the Company owned and consolidated AssuredIM and earned management and performance fees for its investment advisory and management services in respect of AssuredIM Funds. Amounts earned in respect of such services are presented in Note 10, Asset Management Fees, along with the related receivables and payables. Amounts contributed to employee retirement and savings plans, and amounts payable to Sound Point and AHP, are disclosed in Note 12, Employee Benefit Plans. 16. Leases The Company is party to various non-cancelable lease agreements, all of which are operating leases as of December 31, 2024. The majority of the Company’s leases relate to office space dedicated to the Company’s operations in various locations (primarily Hamilton, Bermuda, New York City, London, and Paris) with expiration dates ranging from 2025 to 2032. The Company subleases certain properties that are not used in its operations. Accounting Policy The Company determines if an arrangement is a lease at inception. For operating leases with an original term of more than 12 months, where the Company is the lessee, it recognizes a right-of-use (ROU) asset in “other assets” and a lease liability in “other liabilities” on the consolidated balance sheets. An ROU asset represents the Company’s right to use an underlying asset for the lease term, and a lease liability represents the Company’s obligation to make lease payments arising from the lease. At the inception of a lease, the total fixed payments under a lease agreement are discounted utilizing an incremental borrowing rate that represents the Company’s collateralized borrowing rate. The rate is determined based on the lease term as of the lease commencement date. Some of the Company’s leases include renewal options, which are not included in the lease terms unless the Company is reasonably certain it will exercise the option. The Company elected the practical expedient to account for all lease components and their associated non-lease components (i.e., common area maintenance, real estate taxes, building insurance, etc.) as a single lease component and include all fixed payments in the measurement of ROU assets and lease liabilities. Operating lease expense is recognized on a straight-line basis over the lease term. Costs related to variable lease and non-lease components for the Company’s leases are expensed in the period incurred. Sublease income is earned on a straight-line basis over the term of the lease. The Company assesses ROU assets for impairment when certain events occur or when there are changes in circumstances including potential alternative uses. If circumstances require an ROU asset to be tested for possible impairment and the carrying value of the ROU asset is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Any impairment is reported in “other operating expenses” in the consolidated statement of operations. 203 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Lease Assets and Liabilities ROU Assets and Lease Liabilities As of December 31, 2024 2023 (dollars in millions) ROU assets $ 60 $ 71 Lease liabilities $ 84 $ 97 Weighted average discount rate 2.65 % 2.60 % Weighted average remaining lease term (in years) 7.1 7.8 Lease Expense and Other Information Year Ended December 31, 2024 2023 2022 (in millions) Operating lease costs (1) $ 14 $ 20 $ 16 Variable and short-term lease costs 2 2 3 Sublease income ( 3 ) ( 7 ) ( 7 ) Total lease costs $ 13 $ 15 $ 12 Cash paid for amounts included in the measurement of lease liabilities Operating cash outflows for operating leases $ 16 $ 24 $ 23 ____________________ (1) Includes an ROU asset impairment of $ 2 million in 2024 and $ 3 million in 2023. Future Minimum Rental Payments Operating Leases As of December 31, 2024 Year (in millions) 2025 $ 13 2026 13 2027 12 2028 12 2029 13 Thereafter 29 Total lease payments 92 Less: Imputed interest 8 Total lease liabilities $ 84 17. Contingencies Legal Proceedings Lawsuits arise in the ordinary course of the Company’s business. It is the opinion of the Company’s management, based upon the information available, that the expected outcome of litigation against the Company, individually or in the aggregate, will not have a material adverse effect on the Company’s financial position, although an adverse resolution of litigation against the Company in a fiscal quarter or year could have a material adverse effect on the Company’s results of operations or liquidity in that particular quarter or year. In addition, in the ordinary course of their respective businesses, certain of AGL’s insurance subsidiaries are involved in litigation with third parties to recover insurance losses paid in prior periods or prevent or reduce losses in the future. For example, the Company is involved in a number of legal actions in the Federal District Court of Puerto Rico to enforce or defend its rights with respect to the obligations it insures of Puerto Rico and its related PREPA. There remains one active proceeding related to PREPA, while there are a number of unresolved proceedings related to PREPA that remain stayed pending the 204 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Federal District Court of Puerto Rico’s determination on the FOMB PREPA Plan. See Note 4, Expected Loss to be Paid (Recovered), Loss Estimation Process, Public Finance, Puerto Rico, for a description of such actions. The impact, if any, of these and other proceedings on the amount of recoveries the Company receives and losses it pays in the future is uncertain, and the impact of any one or more of these proceedings during any quarter or year could be material to the Company’s results of operations in that particular quarter or year. The Company also receives subpoenas and interrogatories from regulators from time to time. Accounting Policy The Company establishes accruals for litigation and regulatory matters to the extent it is probable that a loss has been incurred and the amount of that loss can be reasonably estimated. Additionally, it discloses such amounts if material to the financial position of the Company. For litigation and regulatory matters where a loss may be reasonably possible but not probable, or is probable but not reasonably estimable, no accrual is established, but the matter would be disclosed below if material. The Company reviews relevant information with respect to its litigation and regulatory matters on a quarterly basis and updates its accruals, disclosures, and estimates of reasonably possible loss based on such reviews. Litigation On November 28, 2011, Lehman Brothers International (Europe) (in administration) (LBIE) sued AG Financial Products Inc. (AGFP), an affiliate of AG, which, in the past, had provided credit protection to counterparties under CDS. Following defaults by LBIE under transaction documents governing CDS between LBIE and AGFP, AGFP terminated the CDS in compliance with the transaction documents and properly calculated that LBIE owed AGFP approximately $ 25 million in connection with the termination, whereas LBIE asserted in its complaint filed in the Supreme Court of the State of New York (the Court) that AGFP owed LBIE a termination payment of approximately $ 1.4 billion. Following a bench trial, on March 8, 2023, the Court rendered its decision and found in favor of AGFP. Accordingly, in the first quarter of 2023, the Company reduced its previously recorded accrual of $ 20 million to zero , in connection with developments in litigation. Following the exhaustion of LBIE’s appeals, the Company will recognize a gain in the first quarter of 2025 of approximately $ 103 million, which represents the full satisfaction of the judgment it was awarded and its claims for attorneys’ fees, expenses and interest in connection with this litigation. 18. Shareholders’ Equity Accounting Policy The Company records share repurchases as a reduction to “common shares” and “additional paid-in capital.” Once additional paid-in capital has been exhausted, share repurchases are recorded as a reduction to common shares and retained earnings. Any excise taxes incurred related to share repurchases are charged to additional paid-in-capital or retained earnings, as appropriate. Share Issuances AGL has authorized share capital of $ 5 million divided into 500,000,000 shares with a par value $ 0.01 per share. Except as described below, AGL’s common shares have no preemptive rights or other rights to subscribe for additional common shares, no rights of redemption, conversion or exchange and no sinking fund rights. In the event of liquidation, dissolution or winding-up, the holders of AGL’s common shares are entitled to share equally, in proportion to the number of common shares held by such holder, in AGL’s assets, if any remain after the payment of all AGL’s debts and liabilities and the liquidation preference of any outstanding preferred shares. Under certain circumstances, AGL has the right to purchase all or a portion of the shares held by a shareholder at fair market value. All of the common shares are fully paid and non-assessable. Holders of AGL’s common shares are entitled to receive dividends as lawfully may be declared from time to time by the Board. In general, and except as provided below, shareholders have one vote for each common share held by them and are entitled to vote with respect to their fully paid shares at all meetings of shareholders. However, if, and so long as, the common shares (and other of AGL’s shares) of a shareholder are treated as “controlled shares” (as determined pursuant to section 958 of the Code) of any U.S. Person and such controlled shares constitute 9.5 % or more of the votes conferred by AGL’s issued and outstanding shares, the voting rights with respect to the controlled shares owned by such U.S. Person shall be limited, in the aggregate, to a voting power of less than 9.5 % of the voting power of all issued and outstanding shares, under a formula specified in AGL’s Bye-Laws. The formula is applied repeatedly until there is no U.S. Person whose controlled shares 205 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued constitute 9.5 % or more of the voting power of all issued and outstanding shares and who generally would be required to recognize income with respect to AGL under the Code if AGL were a CFC as defined in the Code and if the ownership threshold under the Code were 9.5 % (as defined in AGL’s Bye-Laws as a 9.5 % U.S. Shareholder). Subject to AGL’s Bye-Laws and Bermuda law, AGL’s Board has the power to issue any of AGL’s unissued shares as it determines, including the issuance of any shares or class of shares with preferred, deferred or other special rights. Under AGL’s Bye-Laws and subject to Bermuda law, if AGL’s Board determines that any ownership of AGL's shares may result in adverse tax, legal or regulatory consequences to the Company, any of the Company’s subsidiaries or any of AGL’s shareholders or indirect holders of shares or its affiliates (other than such as AGL’s Board considers de minimis), the Company has the option, but not the obligation, to require such shareholder to sell to AGL, or to a third party to whom AGL assigns the repurchase right, the minimum number of common shares necessary to avoid or cure any such adverse consequences at a price determined in the discretion of the Board to represent the shares’ fair market value (as defined in AGL’s Bye-Laws). In addition, AGL’s Board may determine that shares held carry different voting rights when it deems it appropriate to do so to: (i) avoid the existence of any 9.5% U.S. Shareholder; and (ii) avoid adverse tax, legal or regulatory consequences to AGL or any of its subsidiaries or any direct or indirect holder of shares or its affiliates. “Controlled shares” includes, among other things, all shares of AGL that such U.S. Person is deemed to own directly, indirectly or constructively (within the meaning of Section 958 of the Code). Further, these provisions do not apply in the event one shareholder owns greater than 75 % of the voting power of all issued and outstanding shares. Under these provisions, certain shareholders may have their voting rights limited to less than one vote per share, while other shareholders may have voting rights in excess of one vote per share. Moreover, these provisions could have the effect of reducing the votes of certain shareholders who would not otherwise be subject to the 9.5% limitation by virtue of their direct share ownership. AGL’s Bye-Laws provide that it will use its best efforts to notify shareholders of their voting interests prior to any vote to be taken by them. Share Repurchases On May 2, 2024, and November 8, 2024 AGL’s Board authorized the repurchase of an additional $ 300 million and $ 250 million, respectively, of the Company’s common shares. As of February 27, 2025, the remaining amount the Company was authorized to purchase was approximately $ 276 million of its common shares. The Company expects to repurchase shares 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. It does not have an expiration date. Share Repurchases Year Number of Shares Repurchased Total Payments(1) (in millions) Average Price Paid Per Share 2022 8,847,981 $ 503 $ 56.79 2023 3,215,893 199 61.95 2024 6,180,774 502 81.28 2025 (through February 27, 2025 on a settlement date basis) 829,461 76 91.53 ____________________ (1) Excludes commissions and excise taxes. Deferred Compensation Certain executives of the Company elected to invest a portion of their AG US Group Services Inc. supplemental executive retirement plan (AGS SERP) accounts in the employer stock fund in the AGS SERP. Each unit in the employer stock fund represents the right to receive one AGL common share upon a distribution from the AGS SERP. Each unit equals the number of AGL common shares which could have been purchased with the value of the account deemed invested in the employer stock fund as of the date of such election. As of December 31, 2024 and 2023, there were 68,535 units and 74,309 units, respectively, in the AGS SERP. 206 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Dividends Any determination to pay dividends is at the discretion of the Board, and depends upon the Company’s results of operations, cash flows from operating activities, its financial position, capital requirements, general business conditions, legal, tax, regulatory, rating agency and contractual restrictions on the payment of dividends, other potential uses for such funds and any other factors the Board deems relevant. For more information concerning regulatory constraints that affect the Company’s ability to pay dividends, see Note 14, Insurance Company Regulatory Requirements. On February 19, 2025, the Company declared a quarterly dividend of $ 0.34 per common share compared with $ 0.31 per common share paid in 2024, an increase of 10 %. 19. Other Comprehensive Income The following tables present the changes in each component of AOCI and the effect of reclassifications out of AOCI into the respective lines in the consolidated statements of operations. Changes in Accumulated Other Comprehensive Income (Loss) by Component Year Ended December 31, 2024 Net Unrealized Gains (Losses) on Investments with: ISCR on FG VIEs ’ Liabilities with Recourse Cumulative Translation Adjustment Cash Flow Hedge Total AOCI No Credit Impairment Credit Impairment (in millions) Balance, December 31, 2023 $ ( 202 ) $ ( 104 ) $ ( 20 ) $ ( 38 ) $ 5 $ ( 359 ) Other comprehensive income (loss) before reclassifications ( 43 ) 20 — 1 — ( 22 ) Less: Amounts reclassified from AOCI to: Net realized investment gains (losses) ( 10 ) 18 — — — 8 Fair value gains (losses) on FG VIEs — — ( 3 ) — — ( 3 ) Interest expense — — — — 1 1 Total before tax ( 10 ) 18 ( 3 ) — 1 6 Tax (provision) benefit — ( 3 ) 1 — — ( 2 ) Total amount reclassified from AOCI, net of tax ( 10 ) 15 ( 2 ) — 1 4 Other comprehensive income (loss) ( 33 ) 5 2 1 ( 1 ) ( 26 ) Balance, December 31, 2024 $ ( 235 ) $ ( 99 ) $ ( 18 ) $ ( 37 ) $ 4 $ ( 385 ) 207 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Changes in Accumulated Other Comprehensive Income (Loss) by Component Year Ended December 31, 2023 Net Unrealized Gains (Losses) on Investments with: ISCR on FG VIEs ’ Liabilities with Recourse Cumulative Translation Adjustment Cash Flow Hedge Total AOCI No Credit Impairment Credit Impairment (in millions) Balance, December 31, 2022 $ ( 343 ) $ ( 110 ) $ ( 23 ) $ ( 45 ) $ 6 $ ( 515 ) Other comprehensive income (loss) before reclassifications 139 ( 5 ) — 2 — 136 Less: Amounts reclassified from AOCI to: Net realized investment gains (losses) ( 1 ) ( 13 ) — — — ( 14 ) Fair value gains (losses) on FG VIEs — — ( 3 ) — — ( 3 ) Fair value gains (losses) on CIVs — — — ( 6 ) — ( 6 ) Interest expense — — — — 1 1 Total before tax ( 1 ) ( 13 ) ( 3 ) ( 6 ) 1 ( 22 ) Tax (provision) benefit ( 1 ) 2 — 1 — 2 Total amount reclassified from AOCI, net of tax ( 2 ) ( 11 ) ( 3 ) ( 5 ) 1 ( 20 ) Other comprehensive income (loss) 141 6 3 7 ( 1 ) 156 Balance, December 31, 2023 $ ( 202 ) $ ( 104 ) $ ( 20 ) $ ( 38 ) $ 5 $ ( 359 ) Changes in Accumulated Other Comprehensive Income (Loss) by Component Year Ended December 31, 2022 Net Unrealized Gains (Losses) on Investments with: ISCR on FG VIEs ’ Liabilities with Recourse Cumulative Translation Adjustment Cash Flow Hedge Total AOCI No Credit Impairment Credit Impairment (in millions) Balance, December 31, 2021 $ 375 $ ( 24 ) $ ( 21 ) $ ( 36 ) $ 6 $ 300 Other comprehensive income (loss) before reclassifications ( 755 ) ( 103 ) ( 4 ) ( 9 ) — ( 871 ) Less: Amounts reclassified from AOCI to: Net realized investment gains (losses) ( 44 ) ( 21 ) — — — ( 65 ) Fair value gains (losses) on FG VIEs — — ( 3 ) — — ( 3 ) Total before tax ( 44 ) ( 21 ) ( 3 ) — — ( 68 ) Tax (provision) benefit 7 4 1 — — 12 Total amount reclassified from AOCI, net of tax ( 37 ) ( 17 ) ( 2 ) — — ( 56 ) Other comprehensive income (loss) ( 718 ) ( 86 ) ( 2 ) ( 9 ) — ( 815 ) Balance, December 31, 2022 $ ( 343 ) $ ( 110 ) $ ( 23 ) $ ( 45 ) $ 6 $ ( 515 ) 20. Earnings Per Share Accounting Policy The Company computes earnings per share (EPS) using the two-class method, which is an earnings allocation formula that determines EPS for: (i) each class of common shares (the Company has a single class of common shares); and (ii) participating securities according to dividends declared (or accumulated) and participation rights in undistributed earnings. Awards and share units under the AGS SERP with non-forfeitable dividends are considered participating securities. 208 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Basic EPS is computed by dividing net income (loss) available to common shareholders of Assured Guaranty by the weighted average number of common shares outstanding during the period. Diluted EPS adjusts basic EPS for the effects of restricted stock, restricted stock units, stock options and other potentially dilutive financial instruments (dilutive securities) only in the periods in which such effect is dilutive. The effect of the dilutive securities is reflected in diluted EPS by application of the more dilutive of: (1) the treasury stock method; or (2) the two-class method assuming nonvested shares are not converted into common shares. Computation of Earnings Per Share Year Ended December 31, 2024 2023 2022 (in millions, except per share amounts) Basic EPS: Net income (loss) attributable to AGL $ 376 $ 739 124 Less: Distributed and undistributed income (loss) available to nonvested shareholders 3 6 1 Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic $ 373 $ 733 123 Basic shares 53.3 58.4 62.9 Basic EPS $ 7.01 $ 12.54 $ 1.95 Diluted EPS: Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic $ 373 $ 733 $ 123 Plus: Re-allocation of undistributed income (loss) available to nonvested shareholders of AGL and subsidiaries — — — Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, diluted $ 373 $ 733 $ 123 Basic shares 53.3 58.4 62.9 Dilutive securities: Restricted stock awards 1.0 1.2 1.0 Diluted shares 54.3 59.6 63.9 Diluted EPS $ 6.87 $ 12.30 $ 1.92 Potentially dilutive securities excluded from computation of EPS because of antidilutive effect 0.1 0.1 0.6 209 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued 21. Parent Company The following tables present the condensed financial statements of Assured Guaranty Ltd. Assured Guaranty Ltd. (Parent Company) Condensed Balance Sheets (in millions) As of December 31, 2024 2023 Assets Investments $ 66 $ 40 Investments in subsidiaries 5,237 5,553 Dividends receivable from subsidiaries 150 80 Other assets (1) 69 64 Total assets $ 5,522 $ 5,737 Liabilities Other liabilities (1) $ 27 $ 24 Total liabilities $ 27 $ 24 Total shareholders’ equity attributable to AGL $ 5,495 $ 5,713 Total liabilities and shareholders’ equity $ 5,522 $ 5,737 ____________________ (1) Mainly consists of due from and due to affiliates. Assured Guaranty Ltd. (Parent Company) Condensed Statements of Operations and Comprehensive Income (in millions) Year Ended December 31, 2024 2023 2022 Revenues Net investment income $ 2 $ 1 $ 3 Net realized investment gains (losses) — ( 1 ) ( 4 ) Total revenues 2 — ( 1 ) Expenses Other expenses (1) 42 45 45 Total expenses 42 45 45 Income (loss) before equity in earnings of subsidiaries ( 40 ) ( 45 ) ( 46 ) Equity in earnings of subsidiaries 416 784 170 Net income attributable to AGL 376 739 124 Other comprehensive income (loss) attributable to AGL ( 26 ) 156 ( 815 ) Comprehensive income (loss) attributable to AGL $ 350 $ 895 $ ( 691 ) ____________________ (1) Includes expense allocations from subsidiaries. 210 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Assured Guaranty Ltd. (Parent Company) Condensed Statements of Cash Flows (in millions) Year Ended December 31, 2024 2023 2022 Cash flows from operating activities: Net income attributable to AGL $ 376 $ 739 $ 124 Adjustments to reconcile net income to net cash flows provided by operating activities: Equity in earnings of subsidiaries ( 416 ) ( 784 ) ( 170 ) Net realized investment losses (gains) — 1 4 Cash dividends from subsidiaries 637 306 437 Other 28 36 32 Net cash flows provided by (used in) operating activities 625 298 427 Cash flows from investing activities: Fixed-maturity securities, available for sale: Maturities and paydowns 3 — — Short-term investments with maturities of over three months: Sales — 4 52 Maturities and paydowns — — 5 Net sales (purchases) of short-term investments with original maturities of less than three months ( 29 ) ( 18 ) 92 Net cash flows provided by (used in) investing activities ( 26 ) ( 14 ) 149 Cash flows from financing activities: Dividends paid ( 68 ) ( 67 ) ( 64 ) Repurchases of common shares ( 502 ) ( 199 ) ( 500 ) Payments related to tax withholding for share-based compensation ( 30 ) ( 20 ) ( 14 ) Other 2 2 2 Net cash flows provided by (used in) financing activities ( 598 ) ( 284 ) ( 576 ) Increase (decrease) in cash and restricted cash 1 — — Cash and restricted cash at beginning of period — — — Cash and restricted cash at end of period $ 1 $ — $ — As of December 31, 2024 2023 2022 Reconciliation of cash and restricted cash to the balance sheets: Cash $ — $ — $ — Restricted cash (included in other assets) 1 — — Cash and restricted cash at the end of period $ 1 $ — $ — Basis of Presentation These condensed financial statements of AGL should be read in conjunction with the Company’s consolidated financial statements and notes thereto. AGL is a Bermuda-based holding company that provides, through its wholly-owned operating subsidiaries, credit protection products to the U.S. and non-U.S. public finance (including infrastructure) and structured finance markets. Assured Guaranty also participates in the asset management business. See Note 1, Business and Basis of Presentation, for further information regarding the basis of presentation. 211 Assured Guaranty Ltd. Notes to Consolidated Financial Statements, Continued Guaranties of Obligations of Affiliates AGL fully and unconditionally guarantees all of the U.S. Holding Companies’ debt. See Note 11, Long-Term Debt and Credit Facilities, for additional information. Credit Facility with Affiliate On October 25, 2013, AGL, as borrower, and AGUS, as lender, entered into a revolving credit facility pursuant to which AGL may, from time to time, borrow for general corporate purposes. Under the credit facility, AGUS committed to lend a principal amount not exceeding $ 225 million in the aggregate. In October 2023, the commitment was extended until October 25, 2033 (the loan commitment termination date). The unpaid principal amount of each loan will bear interest at a fixed rate equal to 100 % of the then applicable interest rate as determined under Section 1274(d) of the Code, and interest on all loans will be computed for the actual number of days elapsed on the basis of a year consisting of 360 days. Accrued interest on all loans will be paid on the last day of each June and December, and at maturity. AGL must repay the then unpaid principal amounts of the loans by the third anniversary of the loan commitment termination date. No amounts are currently outstanding under the credit facility. Income Taxes AGL is not subject to any income, withholding or capital gains taxes under current Bermuda law. In November 2013, AGL became tax resident in the U.K. although it remains a Bermuda-based company and its administrative and head office functions continue to be carried on in Bermuda. In July of 2023, the U.K. government passed legislation to implement the OECD BEPS Pillar Two income inclusion rule, which includes a multinational top-up tax which will apply to large multinational corporations for accounting periods beginning on or after December 31, 2023. It is expected this will apply to AGL, requiring a minimum effective rate of 15% in all jurisdictions in which it operates. See Note 13, Income Taxes, for further information regarding AGL’s income taxes. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.