7 unchanged sentences
• The fair value of the investment portfolio is primarily driven by changes in interest rates and also affected by changes in credit spreads.
−Removed: • The fair value of the investment portfolio contains non-U.S.
+Added: • The investment portfolio contains non-U.S.
dollar denominated securities whose value also fluctuates based on changes in foreign exchange rates.
−Removed: The carrying value of premiums receivable includes foreign denominated receivables whose values fluctuate based on changes in foreign exchange rates.
+Added: Premiums receivable includes foreign denominated receivables whose values fluctuate based on changes in foreign exchange rates.
• The fair value of credit derivatives within the financial guaranty portfolio of insured obligations is sensitive to changes in credit spreads of the underlying obligations and the Company’s own credit spreads.
2 unchanged sentences
Sensitivity of New Business Production to Changes in Interest Rates and Credit Spreads
−Removed: Fluctuations in interest rates and credit spreads also affect the demand for the Company’s product.
−Removed: When interest rates are lower or when the market is otherwise relatively less risk averse, the spread between insured and uninsured obligations typically narrows and, as a result, financial guaranty insurance typically provides lower cost savings to issuers than it would during periods of relatively wider spreads.
+Added: Fluctuations in interest rates and credit spreads affect the demand for the Company’s product.
+Added: When interest rates are lower or when the market is less risk averse, the spread between insured and uninsured obligations typically narrows and, as a result, financial guaranty insurance typically provides lower cost savings to issuers than it would during periods of relatively wider spreads.
These lower cost savings generally lead to a corresponding decrease in demand and premiums obtainable for financial guaranty insurance.
2 unchanged sentences
Sensitivity of Expected Loss to be Paid (Recovered) to Interest Rates
−Removed: Expected losses to be paid (recovered), and therefore loss reserves and loss and LAE, are sensitive to changes in interest rates in several ways.
−Removed: First, expected losses to be paid are discounted at the end of each reporting period at the risk-free rate, such that an increase in discount rates has the effect of reducing net expected loss to be paid or reducing net expected recoverables.
−Removed: The effect of changes in discount rates on expected losses to be paid was a loss of $4 million in 2024, a loss of $3 million in 2023 and a gain of $115 million in 2022.
−Removed: The gain related to changes in discount rates was highest in 2022 as interest rates rose from historically low levels during 2022.
−Removed: Some of the Company’s expected losses to be paid (recovered) relate to insured obligations with variable interest rates.
−Removed: Fluctuations in interest rates impact the performance of insured transactions where there are differences between the interest rates on the underlying collateral and the interest rates on the insured securities.
−Removed: For example, a rise in interest rates could increase the amount of losses the Company projects for certain RMBS and student loan transactions.
−Removed: The impact of fluctuations in interest rates on such transactions varies, depending on, among other things, the interest rates on the underlying collateral and insured securities, the relative amounts of underlying collateral and liabilities, the structure of the transaction and the sensitivity to interest rates of the behavior of the underlying borrowers and the value of the underlying assets.
−Removed: In the case of RMBS, fluctuations in interest rates impact the amount of periodic excess spread, which is created when a trust’s underlying collateral produce interest that exceeds the amount required to pay interest on the insured notes.
−Removed: There are several RMBS transactions in the Company’s insured portfolio which benefit from excess spread either by using it to cover losses in a particular period or to reimburse past claims under the Company’s policies.
+Added: Changes in interest rates or future interest rate expectations can affect the Company's expected loss to be paid or recovered.
+Added: Higher interest rates can decrease the present value of future expected cash flows (whether recoveries or losses), reduce excess spread recoveries in transactions with mismatches between collateral and liability interest rates and reduce the value of fixed maturity bonds that may be part of the Company's recoveries.
+Added: Lower interest rates would generally have the opposite effect.
+Added: The effect of changes in discount rates on expected losses to be paid were losses of $7 million in 2025, $4 million in 2024 and $3 million in 2023.
As of December 31, 2025, the Company projects that the maximum potential excess spread at risk in the U.S.
RMBS transactions is approximately $1 million.
−Removed: Since RMBS excess spread is determined by the relationship between interest rates on the underlying collateral and of the trust’s certificates, it can be affected by unmatched moves in either of these interest rates.
−Removed: For example, modifications to underlying mortgage rates (e.g., rate reductions for troubled borrowers) can reduce excess spread when an upswing in short-term rates that increases the trust’s certificate interest rate is not met with equal increases to the interest rates on the underlying mortgages.
−Removed: These potential reductions in excess spread are often mitigated by an interest rate cap, which goes into effect once the collateral rate falls below the stated certificate rate.
−Removed: Interest due on most of the RMBS transactions the Company insures is capped at the collateral rate.
−Removed: The Company is not obligated to pay additional claims when the collateral interest rate drops below the trust's certificate stated interest rate, rather this just causes the Company to lose the benefit of potential positive excess spread.
−Removed: Additionally, faster than expected prepayments can decrease the dollar amount of excess spread and therefore reduce the cash flow available to cover losses or reimburse past claims.
−Removed: Interest rates can also have indirect effects on the underlying performance or value of collateral backing an obligation.
−Removed: Higher interest rates can lead to slower prepayments of debt, and can cause market prices of financed assets to decline.
−Removed: Conversely, lower interest rates can lead to faster prepayment and higher potential recovery values.
−Removed: In addition, the value of expected recoveries that are in the form of bonds or other securities (which are sensitive to changes in interest rates) also affects the net expected loss to be paid (recovered).
−Removed: See Item 8, Financial Statements and Supplementary Data, Note 3, Outstanding Exposure and Note 4, Expected Loss to be Paid (Recovered).
Sensitivity of Investment Portfolio to Interest Rate Risk
21 unchanged sentences
(1) Sensitivity analysis assumes a floor of zero for interest rates.
−Removed: See Part II, Item 8, Financial Statements and Supplementary Data, Note 7, Investments and Cash, for additional information.
+Added: See Item 8, Financial Statements and Supplementary Data, Note 7.
+Added: Investments and Cash, for additional information.
Sensitivity to Foreign Exchange Rate Risk
7 unchanged sentences
Changes in fair value of available-for-sale investments attributable to changes in foreign exchange rates are recorded in other comprehensive income.
−Removed: Approximately 69% and 70% of installment premiums at December 31, 2024 and December 31, 2023, respectively, are denominated in currencies other than the U.S.
+Added: Approximately 68% and 69% of installment premiums as of December 31, 2025 and December 31, 2024, respectively, are denominated in currencies other than the U.S.
dollar, primarily the pound sterling and euro.
−Removed: Changes in premiums receivable attributable to changes in foreign exchange rates are reported in the consolidated statement of operations.
+Added: Changes in premiums receivable attributable to changes in foreign exchange rates are reported in the consolidated statements of operations.
Increase (Decrease) in Carrying Value
11 unchanged sentences
Increase of 30% 237 207 320 319
−Removed: See Part II, Item 8, Financial Statements and Supplementary Data, Note 7, Investments and Cash, and Note 5, Contracts Accounted for as Insurance, for additional information.
+Added: See Item 8, Financial Statements and Supplementary Data, Note 7.
+Added: Investments and Cash, and Note 5.
+Added: Contracts Accounted for as Insurance, for additional information.
Sensitivity of Credit Derivatives to Changes in Credit Spreads
3 unchanged sentences
The Company determines its own credit risk based on quoted CDS prices traded on AG at each balance sheet date.
−Removed: The quoted price of five-year CDS contracts traded on AG at December 31, 2024 and December 31, 2023 was 75 bps and 66 bps, respectively.
+Added: The quoted price of five-year CDS contracts traded on AG as of December 31, 2025 and December 31, 2024 was 69 bps and 75 bps, respectively.
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.
2 unchanged sentences
The fair value of credit derivative contracts also reflects the change in the Company’s own credit cost, based on the price to purchase credit protection on AG.
−Removed: Historically, the price of CDS traded on AG typically moved directionally the same as general market spreads, although this may not always be the case.
+Added: Historically, the price of CDS traded on AG typically moved directionally the same as general market spreads, although this is not always the case.
In certain circumstances, due to the fact that spread movements are not perfectly correlated, the narrowing or widening of the price of CDS traded on AG can have a more significant financial statement impact than the changes in credit spread of risks it insures.
1 unchanged sentence
This assumption can have the effect of mitigating the amount of fair value gains that are recognized on certain CDS contracts.
−Removed: The minimum premium assumption had no effect on the fair
−Removed: value of CDS contracts as of December 31, 2024 or December 31, 2023.
+Added: The minimum premium assumption had no effect on the fair value of CDS contracts as of December 31, 2025 or December 31, 2024.
The percentage of transactions that price using the minimum premium fluctuates due to changes in AG’s credit spreads.
1 unchanged sentence
Meanwhile, when AG’s credit spreads widen, the cost to hedge AG’s name increases causing more transactions to price at established floor levels.
−Removed: The following table summarizes the estimated change in fair values on the net balance of the Company’s credit derivative positions assuming an immediate shift in the net spreads assumed by the Company.
+Added: The following table summarizes the estimated change in fair value on the net balance of the Company’s credit derivative positions assuming an immediate shift in the net spreads assumed by the Company.
The net spread includes the spread of the underlying collateral and the credit spreads on AG.
12 unchanged sentences
All transactions priced at floor (5) 10 (12) 17
−Removed: See Part II, Item 8, Financial Statements and Supplementary Data, Note 6, Contracts Accounted for as Credit Derivatives, for additional information.
+Added: See Item 8, Financial Statements and Supplementary Data, Note 6.
+Added: Contracts Accounted for as Credit Derivatives, for additional information.
Sensitivity of FG VIEs’ Assets and Liabilities to Market Risk
4 unchanged sentences
and house price depreciation/appreciation rates based on macroeconomic forecasts.
−Removed: Significant changes to some of these inputs could materially change the fair value of the FG VIEs’ assets and the implied collateral losses within the transaction.
−Removed: 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 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.
+Added: Significant changes to some of these inputs could materially change the fair value of the FG VIEs’ assets and the implied collateral losses or recoveries within the transaction.
+Added: 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 or a decrease in recoveries typically leads to a decrease in the fair value of FG VIEs’ assets, while a decrease in collateral losses or an increase in recoveries typically leads to an increase in the fair value of FG VIEs’ assets.
The third-party pricing provider 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.
−Removed: The models to price the FG VIEs’ liabilities used, where appropriate, the same inputs used in determining fair value of FG VIEs’ assets and, for those liabilities insured by the Company, the benefit from the Company's insurance policy guaranteeing the timely payment of principal and interest, taking into account the Company’s own credit risk.
+Added: The models that price the FG VIEs’ liabilities used, where appropriate, the same inputs used in determining fair value of FG VIEs’ assets and, for those liabilities insured by the Company, the benefit from the Company's insurance policy guaranteeing the timely payment of principal and interest, taking into account the Company’s own credit risk.
Significant changes to certain of the inputs described above could materially change the timing of expected losses within the insured transaction which is a significant factor in determining the implied benefit from the Company’s insurance policy guaranteeing the timely payment of principal and interest for the tranches of debt issued by the FG VIEs that is insured by the Company.
In general, extending the timing of expected loss payments by the Company into the future typically leads to a decrease in the value of the Company’s insurance and a decrease in the fair value of the Company’s FG VIEs’ liabilities with recourse, while a shortening of the timing of expected loss payments by the Company typically leads 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.
−Removed: See Part II, Item 8, Financial Statements and Supplementary Data, Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles, for additional information.
+Added: See Item 8, Financial Statements and Supplementary Data, Note 8.
+Added: Variable Interest Entities, for additional information.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.