What changed in this filing

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Item 1. Financial Statements

2020-07-31 compared with 2020-05-04 · 223 added, 138 removed, 491 unchanged (42% of the section changed)

3 unchanged sentences

(in millions, except per share data)

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Consolidated revenue

7 unchanged sentences

Total consolidated expenses

Equity method loss (net)

Investment and other income

Income (loss) before income taxes

Equity method income (loss) (net)

Investment and other income (expense)

Income before income taxes

Income tax expense (benefit)

Net income (loss)

Net income (non-controlling interests)

Net loss (controlling interest)

Net income (loss) (controlling interest)

Average shares outstanding (basic)

Average shares outstanding (diluted)

Loss per share (basic)

Loss per share (diluted)

Earnings (loss) per share (basic)

Earnings (loss) per share (diluted)

The accompanying notes are an integral part of the Consolidated Financial Statements.

2 unchanged sentences

(in millions)

For the Three Months Ended March 31,

Net income (loss)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Other comprehensive income (loss), net of tax:

2 unchanged sentences

Other comprehensive income (loss), net of tax

Comprehensive loss

Comprehensive income

Comprehensive income (non-controlling interests)

Comprehensive loss (controlling interest)

Comprehensive income (loss) (controlling interest)

The accompanying notes are an integral part of the Consolidated Financial Statements.

28 unchanged sentences

(in millions)

Three Months Ended March 31, 2019

Three Months Ended June 30, 2019

Total Stockholders’ Equity

Comprehensive

March 31, 2019

Other comprehensive income (loss)

Share-based compensation

Common stock issued under share-based incentive plans

Share repurchases

Dividends ($0.32 per share)

Issuance costs and other

Affiliate equity activity:

Affiliate equity compensation

Changes in redemption value of Redeemable non-controlling interests

Transfers to Redeemable non-controlling interests

Distributions to non-controlling interests

June 30, 2019

Three Months Ended June 30, 2020

Total Stockholders’ Equity

Comprehensive

March 31, 2020

Other comprehensive income (loss)

Share-based compensation

Common stock issued under share-based incentive plans

Share repurchases

Dividends ($0.01 per share)

Affiliate equity activity:

Affiliate equity compensation

Changes in redemption value of Redeemable non-controlling interests

Transfers to Redeemable non-controlling interests

Capital contributions and other

Distributions to non-controlling interests

June 30, 2020

The accompanying notes are an integral part of the Consolidated Financial Statements.

AFFILIATED MANAGERS GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in millions)

Six Months Ended June 30, 2019

Total Stockholders' Equity

Comprehensive Loss

December 31, 2018

1 unchanged sentence

Net income (loss)

Other comprehensive income

Other comprehensive income (loss)

Share-based compensation

2 unchanged sentences

Dividends ($0.64 per share)

Issuance costs and other

Affiliate equity activity:

4 unchanged sentences

Distributions to non-controlling interests

March 31, 2019

Three Months Ended March 31, 2020

June 30, 2019

Six Months Ended June 30, 2020

Total Stockholders' Equity

1 unchanged sentence

December 31, 2019

Net income (loss)

Other comprehensive loss

Other comprehensive income (loss)

Share-based compensation

8 unchanged sentences

Distributions to non-controlling interests

March 31, 2020

June 30, 2020

The accompanying notes are an integral part of the Consolidated Financial Statements.

2 unchanged sentences

(in millions)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Cash flow from (used in) operating activities:

Net income (loss)

Adjustments to reconcile Net income (loss) to cash flow from (used in) operating activities:

Adjustments to reconcile Net income to cash flow from (used in) operating activities:

Intangible amortization and impairments

11 unchanged sentences

Decrease in payables, accrued liabilities and other liabilities

Cash flow from (used in) operating activities

Cash flow from operating activities

Cash flow from (used in) investing activities:

6 unchanged sentences

Cash flow from (used in) financing activities:

Borrowings of debt

Repayments of debt

Borrowings of senior bank debt and senior notes

Repayments of senior bank debt

Repurchases of common stock (net)

7 unchanged sentences

Cash and cash equivalents at beginning of period

Effect of deconsolidation of Affiliates and Affiliate sponsored investment products

Effect of deconsolidation of Affiliate sponsored investment products

Cash and cash equivalents at end of period

19 unchanged sentences

Recent Accounting Developments

In June 2020, the FASB extended the effective date of ASU 2016-02, Leases, for the Company’s Affiliates accounted for under the equity method.

After the extension, ASU 2016-02 is effective for annual periods beginning after December 15, 2021 and interims periods beginning after December 15, 2022.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes.

The standard is effective for interim and annual periods beginning after December 15, 2020 for the Company and its consolidated Affiliates and for annual periods beginning after December 15, 2021 and interim periods beginning after December 15, 2022, for the Company’s Affiliates accounted for under the equity method.

The standard is effective for interim and annual periods beginning after December 15, 2020 for the Company and its consolidated Affiliates, and is effective for annual periods beginning after December 15, 2021 and interim periods beginning after December 15, 2022 for the Company’s Affiliates accounted for under the equity method.

The Company is evaluating the impact of this standard on its Consolidated Financial Statements.

3 unchanged sentences

Unrealized losses

For the three months ended March 31, 2019 and 2020 , the Company received proceeds of $ 15.1 million and $ 26.2 million , respectively, from the sale of investments in marketable securities and recorded net gains (losses) of $ 0.5 million and $( 1.0 ) million , respectively.

As of December 31, 2019 and March 31, 2020 , Investments in marketable securities includes consolidated Affiliate sponsored investment products with fair values of $ 38.1 million and $ 33.2 million , respectively.

Investments in Affiliates and Affiliate Sponsored Investment Products

The Company recorded proceeds of $ 3.4 million and $ 18.5 million for the three and six months ended June 30, 2019 , respectively, and $ 37.9 million and $ 64.1 million for the three and six months ended June 30, 2020 , respectively, from the sale of investments in marketable securities.

The Company recorded net gains (losses) of $ 0.2 million and $ 0.7 million for the three

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

and six months ended June 30, 2019 , respectively, and $ 0.9 million and $( 0.1 ) million for the three and six months ended June 30, 2020 , respectively.

As of December 31, 2019 and June 30, 2020 , Investments in marketable securities includes consolidated Affiliate sponsored investment products with fair values of $ 38.1 million and $ 37.6 million , respectively.

Investments in Affiliates and Affiliate Sponsored Investment Products

In evaluating whether an investment must be consolidated, the Company evaluates the risk, rewards and significant terms of each of its Affiliates and other investments to determine if an investment is considered a voting rights entity (“VRE”) or a variable interest entity (“VIE”).

4 unchanged sentences

The Company consolidates VREs when it has control over significant operating, financial and investing decisions of the entity.

When the Company lacks such control, but is deemed to have significant influence, the Company accounts for the entity under the equity method.

Other investments in which the Company does not have rights to exercise significant influence are recorded at fair value, with changes in fair value reflected within Investment and other income on the Consolidated Statements of Income.

When the Company lacks such control, but is deemed to have significant influence, the Company accounts for the VRE under the equity method.

Other investments in which the Company does not have rights to exercise significant influence are recorded at fair value, with changes in fair value recorded in Investment and other income (expense) on the Consolidated Statements of Income.

The Company consolidates VIEs when it is the primary beneficiary of the entity, which is defined as having the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE.

10 unchanged sentences

Because these transactions take place between entities that are under common control, any gains or losses attributable to these transactions are required to be included within Additional paid-in capital in the Consolidated Balance Sheets, net of any related income tax effects in the period the transaction occurs.

When an Affiliate is accounted for under the equity method, the Company’s share of an Affiliate’s earnings or losses, net of amortization and impairments, is included in Equity method loss (net) in the Consolidated Statements of Income and the carrying value of the Affiliate is reported in Equity method investments in Affiliates (net) in the Consolidated Balance Sheets.

When an Affiliate is accounted for under the equity method, the Company’s share of an Affiliate’s earnings or losses, net of amortization and impairments, is included in Equity method income (loss) (net) in the Consolidated Statements of Income and the carrying value of the Affiliate is reported in Equity method investments in Affiliates (net) in the Consolidated Balance Sheets.

Deferred taxes recorded on intangible assets upon acquisition of an Affiliate accounted for under the equity method are presented on a gross basis within Equity method investments in Affiliates (net) and Deferred income tax liability (net) in the Consolidated Balance Sheets.

The Company’s share of income taxes incurred directly by Affiliates accounted for under the equity method is recorded within Income tax expense in the Consolidated Statements of Income.

The Company’s share of income taxes incurred directly by Affiliates accounted for under the equity method is recorded within Income tax expense (benefit) in the Consolidated Statements of Income.

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The Company periodically performs assessments to determine if fair value may have declined below related carrying value for its Affiliates accounted for under the equity method for a period that the Company considers to be other-than temporary.

Where the Company believes that such declines may have occurred, the Company determines the amount of impairment using valuation methods, such as discounted cash flow techniques.

Impairments are recorded as an expense in Equity method loss (net) to reduce the carrying value of the Affiliate to its fair value.

Impairments are recorded as an expense in Equity method income (loss) (net) to reduce the carrying value of the Affiliate to its fair value.

The unconsolidated assets, net of liabilities and non-controlling interests of Affiliates accounted for under the equity method considered VIEs, and the Company’s carrying value and maximum exposure to loss, were as follows:

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

December 31, 2019

March 31, 2020

June 30, 2020

Unconsolidated

7 unchanged sentences

Affiliates accounted for under the equity method

As of December 31, 2019 and March 31, 2020 , the carrying value and maximum exposure to loss for all of the Company’s Affiliates accounted for under the equity method was $ 2,195.6 million and $ 2,038.7 million , respectively, including Affiliates accounted for under the equity method considered VREs of $ 352.6 million and $ 200.4 million , respectively.

As of December 31, 2019 and June 30, 2020 , the carrying value and maximum exposure to loss for all of the Company’s Affiliates accounted for under the equity method was $ 2,195.6 million and $ 1,991.0 million , respectively, including Affiliates accounted for under the equity method considered VREs of $ 352.6 million and $ 174.8 million , respectively.

Affiliate Sponsored Investment Products

4 unchanged sentences

As a result, the Company does not generally consolidate these products unless the Company’s or its consolidated Affiliate’s interest in the product is considered substantial.

When the Company’s or its consolidated Affiliates’ interests are considered substantial and the products are consolidated, the Company retains the specialized investment company accounting principles of the underlying products, and all of the underlying investments are carried at fair value in Investments in marketable securities in the Consolidated Balance Sheets, with corresponding changes in the investments’ fair values reflected in Investment and other income.

Purchases and sales of securities are presented within purchases and sales by consolidated Affiliate sponsored investment products in the Consolidated Statements of Cash Flows and the third-party investors’ interests are recorded in Redeemable non-controlling interests.

3 unchanged sentences

December 31, 2019

March 31, 2020

June 30, 2020

Unconsolidated

7 unchanged sentences

Affiliate sponsored investment products

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table summarizes the Company’s Debt:

2 unchanged sentences

Junior subordinated notes

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The Company’s senior notes, junior convertible securities and junior subordinated notes are carried at amortized cost.

5 unchanged sentences

The Company pays interest on any outstanding obligations under the credit facilities at specified rates, based either on an applicable LIBOR or prime rate, plus a marginal rate determined based on its credit rating.

For the three months ended March 31, 2020 , the interest rate for substantially all of the Company’s borrowings under the credit facilities was LIBOR plus 1.1 % for the revolver and LIBOR plus 0.875 % for the term loan.

As of December 31, 2019 and March 31, 2020 , the Company had no outstanding borrowings and $ 250.0 million of outstanding borrowings under the revolver, respectively.

For the three months ended June 30, 2020 , the interest rate for substantially all of the Company’s borrowings under the credit facilities was LIBOR plus 1.1 % for the revolver and LIBOR plus 0.875 % for the term loan.

As of December 31, 2019 and June 30, 2020 , the Company had no outstanding borrowings under the revolver.

On June 5, 2020, the Company issued $ 350.0 million aggregate principal amount of 3.3 % senior unsecured notes due June 15, 2030 (the “2030 senior notes”).

The 2030 senior notes pay interest semi-annually and may be redeemed at any time, in whole or in part, at a make-whole redemption price plus accrued and unpaid interest.

In addition to customary event of default provisions, the indenture governing the 2030 senior notes limits the Company's ability to consolidate, merge or sell all or substantially all of its assets and requires the Company to make an offer to repurchase the 2030 senior notes upon certain change of control triggering events.

Derivative Financial Instruments

3 unchanged sentences

The combinations of the forward contracts and the collar contracts were designated as net investment hedges against fluctuations in foreign currency exchange rates on certain of the Company’s investments in Affiliates with the pound sterling as their functional currency.

In March 2020, the Company terminated the forward contracts and the corresponding collar contracts, and upon settlement received net proceeds of $ 24.9 million .

In the first quarter of 2020, the Company terminated the forward contracts and the corresponding collar contracts, and upon settlement received net proceeds of $ 24.9 million .

The net proceeds from the termination of the contracts are presented within sale of investment securities in the Consolidated Statements of Cash Flows.

2 unchanged sentences

As of December 31, 2019 , the Company held $ 8.7 million of cash collateral from the counterparty, and the counterparty held no cash collateral from the Company.

In March 2020, the Company entered into an interest rate swap contract (the “interest rate swap”) with a financial institution (the “swap counterparty”), which will expire in March 2023.

The interest rate swap, which is designated as a cash flow hedge, is used to exchange the Company’s LIBOR-based interest payments for fixed rate payments.

The Company receives payments based on a one month LIBOR and makes payments based on an annual fixed rate of 0.5135 % on a notional amount of $ 250.0 million .

In the first quarter of 2020, the Company entered into an interest rate swap contract (the “interest rate swap”) with a financial institution (the “swap counterparty”), which will expire in March 2023.

The interest rate swap, which is designated as

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

a cash flow hedge, is used to exchange the Company’s LIBOR-based interest payments for fixed rate payments.

The Company receives payments based on one month LIBOR and makes payments based on an annual fixed rate of 0.5135 % on a notional amount of $ 250.0 million .

The terms of the contract also require the Company and the swap counterparty to post cash collateral in certain circumstances throughout the duration of the contract.

As of March 31, 2020, the Company held no cash collateral from the swap counterparty, and the swap counterparty held $ 0.6 million of cash collateral from the Company.

Certain of the Company’s Affiliates use forward foreign currency contracts to hedge the risk of foreign exchange rate movements, which were not significant for the three months ended March 31, 2019 and 2020 .

As of June 30, 2020 , the Company held no cash collateral from the swap counterparty, and the swap counterparty held $ 1.6 million of cash collateral from the Company.

Certain of the Company’s Affiliates use forward foreign currency contracts to hedge the risk of foreign exchange rate movements, which were not significant.

Changes in the fair values of cash flow hedges are reported in Change in net realized and unrealized gain (loss) on derivative financial instruments in the Consolidated Statements of Comprehensive Income.

3 unchanged sentences

The Company assesses hedge effectiveness on a quarterly basis.

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table summarizes the Company’s and its Affiliates’ derivative financial instruments measured at fair value on a recurring basis:

December 31, 2019

March 31, 2020

June 30, 2020

Forward contracts

Interest rate swap

The forward and collar contracts included a set-off right and were, therefore presented on a net basis in Other assets and were $ 5.6 million as of December 31, 2019 .

The Company and certain of its consolidated Affiliates have also entered into contracts that do not include set-off rights and are, therefore presented on a gross basis in Other assets and Other liabilities and were $ 2.2 million and $ 1.0 million , respectively, as of December 31, 2019 and $ 1.2 million and $ 1.2 million , respectively, as of March 31, 2020 .

The forward and collar contracts entered into in 2018 included a set-off right and were therefore, presented on a net basis in Other assets;

they were $ 5.7 million as of December 31, 2019 .

The Company and certain of its consolidated Affiliates have also entered into contracts that do not include set-off rights and are therefore, presented on a gross basis in Other assets and Other liabilities;

they were $ 2.2 million and $ 1.0 million , respectively, as of December 31, 2019 and $ 1.0 million and $ 2.6 million , respectively, as of June 30, 2020 .

The following tables summarize the effects of derivative financial instruments on the Consolidated Statements of Comprehensive Income and the Consolidated Statements of Income:

For the Three Months Ended March 31,

For the Three Months Ended June 30,

Gain (Loss) Recognized in Other Comprehensive Income (Loss)

Gain Reclassified from Accumulated Other Comprehensive Loss into Earnings

Gain Recognized in Earnings from Excluded Components (1)

Loss Recognized in Other Comprehensive Income (Loss)

Gain Reclassified from Accumulated Other Comprehensive Loss into Earnings

Gain (Loss) Recognized in Earnings from Excluded Components (1)

Forward contracts

Interest rate swap

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the Six Months Ended June 30,

Gain (Loss) Recognized in Other Comprehensive Income

Loss Reclassified from Accumulated Other Comprehensive Loss into Earnings

Gain Reclassified from Accumulated Other Comprehensive Loss into Earnings

Gain Recognized in Earnings from Excluded Components (1)

11 unchanged sentences

The Company has committed to co-invest in certain Affiliate sponsored investment products.

As of March 31, 2020 , these unfunded commitments were $ 127.0 million and may be called in future periods.

As of March 31, 2020 , the Company was contingently liable to make payments related to the achievement of specified financial targets by certain of its Affiliates accounted for under the equity method, of which $ 150.0 million may become payable in 2021, $ 77.5 million in 2022 and $ 62.5 million from 2023 through 2025.

As of March 31, 2020 , the Company expected to make payments of approximately $ 48 million .

As of June 30, 2020 , these unfunded commitments were $ 135.3 million and may be called in future periods.

As of June 30, 2020 , the Company was obligated to make payments related to an investment in an Affiliate.

The maximum the Company is obligated to pay is $ 10.0 million in 2020, $ 25.0 million in 2021, and $ 37.5 million in 2022.

In addition, as of June 30, 2020 , the Company was contingently liable to make payments related to the achievement of specified financial targets by certain of its Affiliates accounted for under the equity method, of which $ 150.0 million may become payable in 2021, $ 77.5 million in 2022 and $ 62.5 million from 2023 through 2025.

As of June 30, 2020 , the Company expected to make payments to an Affiliate accounted for under the equity method of approximately $ 53 million .

The Company expects to make no payments in 2020.

In the event certain financial targets are not met, the Company may receive payments of up to $ 12.5 million and also has the option to reduce its ownership interest and receive an incremental $ 25.0 million .

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

In the event certain financial targets are not met at one of the Company’s Affiliates, the Company may receive payments of up to $ 12.5 million and also has the option to reduce its ownership interest and receive an incremental payment of $ 25.0 million .

Affiliate equity interests provide holders with a conditional right to put their interests to the Company over time.

2 unchanged sentences

In the fourth quarter of 2019, the Company was notified by the minority owner that it had elected to sell a 5 % interest in the Affiliate to the Company.

In the three months ended March 31, 2020 , with the consent of the Company, the minority owner rescinded this notice.

As of March 31, 2020 , the minority owner maintains a 14 % ownership interest in the Affiliate.

In the first quarter of 2020, with the consent of the Company, the minority owner rescinded this notice.

As of June 30, 2020 , the minority owner maintains a 14 % ownership interest in the Affiliate.

The Company and certain of its consolidated Affiliates operate under regulatory authorities that require the maintenance of minimum financial or capital requirements.

2 unchanged sentences

The following tables summarize the Company’s financial assets and liabilities that are measured at fair value on a recurring basis:

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Fair Value Measurements

14 unchanged sentences

Investments in marketable securities

Other investments

Derivative financial instruments (1)

6 unchanged sentences

Level 3 Financial Assets and Liabilities

The following tables present the changes in level 3 liabilities:

The following tables present the changes in level 3 assets and liabilities:

For the Three Months Ended June 30,

Contingent Payment Arrangements

Affiliate Equity Repurchase Obligations

Other Investments

Contingent Payment Arrangements

Affiliate Equity Repurchase Obligations

Balance, beginning of period

Net realized and unrealized losses (1)

Purchases and issuances (2)

Settlements and reductions

Balance, end of period

Net change in unrealized gains (losses) relating to instruments still held at the reporting date

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Contingent Payment Arrangements

Affiliate Equity Repurchase Obligations

Other Investments

Contingent Payment Arrangements

5 unchanged sentences

Balance, end of period

Net change in unrealized losses relating to instruments still held at the reporting date

Net change in unrealized gains (losses) relating to instruments still held at the reporting date

___________________________

4 unchanged sentences

December 31, 2019

March 31, 2020

June 30, 2020

Weighted Average (1)

8 unchanged sentences

Affiliate equity repurchase obligations include agreements to repurchase Affiliate equity.

As of March 31, 2020 , there were no changes to growth or discount rates that had a significant impact to Affiliate equity repurchase obligations recorded in prior periods.

Investments Measured at NAV as a Practical Expedient

As of June 30, 2020 , there were no changes to growth or discount rates that had a significant impact to Affiliate equity repurchase obligations recorded in prior periods.

Other Investments Carried at Fair Value

The Company’s Affiliates sponsor investment products in which the Company and its Affiliates may make general partner and seed capital investments.

The Company uses the net asset value (“NAV”) of these investments as a practical expedient for their fair values and reports these investments within Other investments.

The following table summarizes the fair values of these investments and unfunded commitments:

The Company uses the net asset value (“NAV”) of these investments as a practical expedient for their fair values.

The Company also has investments that do not utilize NAV as a practical expedient for fair value.

The following table summarizes the fair value of Other investments and any related unfunded commitments:

December 31, 2019

March 31, 2020

June 30, 2020

Category of Investment

Private equity funds (1)

Other funds (2)

Investments in other strategies (2)

Investments measured at NAV as a practical expedient

Other investments (3)

___________________________

The Company accounts for its interests in private equity funds under the equity method of accounting and, therefore uses NAV as a practical expedient, one quarter in arrears (adjusted for current period calls and distributions) to determine the

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The Company accounts for its interests in private equity funds under the equity method of accounting and, therefore, uses NAV as a practical expedient, one quarter in arrears (adjusted for current period calls and distributions) to determine the fair value.

These funds primarily invest in a broad range of third-party funds and direct investments.

2 unchanged sentences

Investments are generally redeemable on a daily, monthly or quarterly basis.

Fair value attributable to the controlling interest was $ 137.6 million and $ 155.7 million as of December 31, 2019 and March 31, 2020 , respectively.

Fair value attributable to the controlling interest was $ 137.6 million and $ 140.9 million as of December 31, 2019 and June 30, 2020 , respectively.

Other Financial Assets and Liabilities Not Carried at Fair Value

5 unchanged sentences

December 31, 2019

March 31, 2020

June 30, 2020

Carrying Value

7 unchanged sentences

Foreign currency translation

Balance, as of March 31, 2020

Balance, as of June 30, 2020

Acquired Client Relationships (Net)

4 unchanged sentences

Foreign currency translation

Balance, as of March 31, 2020

Balance, as of June 30, 2020

Definite-lived acquired client relationships at the Company’s consolidated Affiliates are amortized over their expected period of economic benefit.

The Company recorded amortization expense within Intangible amortization and impairments in the Consolidated Statements of Income for these relationships of $ 29.6 million and $ 20.6 million for the three months ended March 31, 2019 and 2020 , respectively.

Based on relationships existing as of March 31, 2020 , the Company estimates that its consolidated annual amortization expense will be approximately $ 60 million in 2020, approximately $ 30 million in each of 2021, 2022 and 2023, and approximately $ 20 million in 2024.

As of March 31, 2020, the estimated fair values of the Company’s indefinite-lived acquired client relationships exceeded their carrying values.

If financial markets remain depressed for a prolonged period of time or worsen as result of the novel coronavirus global pandemic (“COVID-19”) or other factors, the fair values of these assets could drop below their carrying values resulting in future impairments.

The Company recorded amortization expense within Intangible amortization and impairments in the Consolidated Statements of Income for these relationships of $ 21.2 million and $ 50.9 million for the three and six months ended June 30, 2019 , respectively, and $ 20.6 million , and $ 41.2 million for the three and six months ended June 30, 2020 , respectively.

Based on relationships existing as of June 30, 2020 , the Company estimates that its consolidated annual amortization expense will be approximately $ 60 million in 2020, approximately $ 30 million in each of 2021, 2022 and 2023, and approximately $ 20 million in 2024.

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

In the second quarter of 2020, the Company agreed with a consolidated Affiliate to strategically reposition their business and the Company will sell its equity interest in the Affiliate.

The transaction is expected to close in the third quarter of 2020.

The Company recorded an expense in Intangible amortization and impairments of $ 32.8 million attributable to the controlling interest ( $ 60.3 million in aggregate) to reduce the carrying value to zero of the Affiliate’s acquired client relationships.

As of June 30, 2020 , the estimated fair values of the Company’s indefinite-lived acquired client relationships exceeded their carrying values.

If financial markets worsen as a result of the novel coronavirus global pandemic (“COVID-19”) or other factors, the fair values of these assets could drop below their carrying values resulting in future impairments.

Equity Method Investments in Affiliates

On February 17, 2020, the Company completed its minority investment in Comvest Partners.

As of March 31, 2020 , the Company had not funded any portion of the purchase consideration.

The Company’s provisional purchase price allocation was measured using financial models that included assumptions of expected market performance, net client cash flows and discount rates.

The associated provisional amounts may be revised upon completion of the final valuation.

The Company will report its share of Comvest’s earnings one quarter in arrears, and therefore the Company did not record earnings from Comvest for the three months ended March 31, 2020.

The financial results of certain Affiliates accounted for under the equity method are recognized in the Consolidated Financial Statements one quarter in arrears.

In the first quarter of 2020, the Company completed its minority investment in Comvest Partners.

The Company’s purchase price allocation was measured using financial models that included assumptions of expected market performance, net client cash flows and discount rates.

The financial results of certain Affiliates accounted for under the equity method, including those of Comvest Partners, are recognized in the Consolidated Financial Statements one quarter in arrears.

The following table presents the change in Equity method investments in Affiliates (net):

5 unchanged sentences

Investments in Affiliates

Balance, as of March 31, 2020

Balance, as of June 30, 2020

Definite-lived acquired client relationships at the Company’s Affiliates accounted for under the equity method are amortized over their expected period of economic benefit.

The Company recognized amortization expense for these relationships of $ 23.2 million and $ 39.3 million for the three months ended March 31, 2019 and 2020 , respectively.

Based on relationships existing as of March 31, 2020 , the Company estimates the annual amortization expense attributable to its Affiliates will be approximately $ 150 million in 2020, approximately $ 120 million in 2021, approximately $ 60 million in 2022, approximately $ 50 million in 2023 and approximately $ 40 million in 2024.

The Company recognized amortization expense for these relationships of $ 38.9 million and $ 62.1 million for the three and six months ended June 30, 2019 , respectively, and $ 36.9 million and $ 76.2 million for the three and six months ended June 30, 2020 , respectively.

Based on relationships existing as of June 30, 2020 , the Company estimates the annual amortization expense attributable to its Affiliates will be approximately $ 150 million in 2020, approximately $ 120 million in 2021, and approximately $ 50 million in each of 2022, 2023, and 2024.

In the first quarter of 2019, the Company recorded a $ 415.0 million expense to reduce the carrying value to fair value of an Affiliate.

8 unchanged sentences

Based on the discounted cash flow analysis, the Company concluded that the fair value of its investment had declined below its carrying value and that the decline was other-than-temporary.

As of March 31, 2020, the estimated fair values of the Company’s other Affiliates accounted for under the equity method exceeded their carrying values.

If financial markets remain depressed for a prolonged period of time or worsen as result of COVID-19 or other factors, the fair values of these assets could drop below their carrying values for periods considered other than temporary, resulting in future impairments.

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

As of June 30, 2020 , the estimated fair values of the Company’s Affiliates accounted for under the equity method exceeded their carrying values.

If financial markets worsen as a result of COVID-19 or other factors, the fair values of these assets could drop below their carrying values for periods considered other than temporary, resulting in future impairments.

The Company has determined that certain of its Affiliates accounted for under the equity method are significant under Rule 10-01(b)(1) of Regulation S-X.

For the three months ended March 31, 2019 and 2020, these Affiliates recognized revenue of $ 590.5 million and $ 617.0 million , respectively, and net income of $ 328.7 million and $ 382.8 million , respectively.

For the three and six months ended June 30, 2019 , these Affiliates recognized revenue of $ 519.9 million and $ 1,168.2 million , respectively, and net income of $ 238.5 million and $ 580.7 million , respectively.

For the three and six months ended June 30, 2020 , these Affiliates recognized revenue of $ 460.1 million and $ 1,165.3 million , respectively, and net income of $ 128.5 million and $ 555.6 million , respectively.

Related Party Transactions

A prior owner of one of the Company’s consolidated Affiliates retains interests in certain of the Affiliate’s private equity partnerships and, as a result, is a related party of the Company.

The prior owner’s interests are presented in Other liabilities and were $ 38.5 million and $ 36.7 million as of December 31, 2019 and March 31, 2020 , respectively.

The prior owner’s interests are presented in Other liabilities and were $ 38.5 million and $ 32.2 million as of December 31, 2019 and June 30, 2020 , respectively.

The Company and its Affiliates earn asset and performance based fees and incur distribution and other expenses for services provided to Affiliate sponsored investment products.

4 unchanged sentences

The following table presents share-based compensation expense:

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Share-based compensation

As of December 31, 2019 , the Company had unrecognized share-based compensation expense of $ 106.6 million .

As of March 31, 2020 , the Company had unrecognized share-based compensation expense of $ 123.9 million , which will be recognized over a weighted average period of approximately three years (assuming no forfeitures).

As of June 30, 2020 , the Company had unrecognized share-based compensation expense of $ 101.7 million , which will be recognized over a weighted average period of approximately three years (assuming no forfeitures).

Restricted Stock

6 unchanged sentences

Performance condition changes

Unvested units - March 31, 2020

For the three months ended March 31, 2019 and 2020 , the Company granted restricted stock units with fair values of $ 32.6 million and $ 30.5 million , respectively.

Unvested units - June 30, 2020

For the six months ended June 30, 2019 and 2020 , the Company granted restricted stock units with fair values of $ 36.0 million and $ 30.5 million , respectively.

These restricted stock units were valued based on the closing price of the Company’s common stock on the grant date and the number of shares expected to be delivered.

Restricted stock units containing vesting conditions generally require service over a period of three years to four years and may also require the satisfaction of certain performance conditions.

For awards with performance conditions, the number of restricted stock units expected to vest may change over time depending upon the performance level achieved.

Stock Options

Restricted stock units containing vesting conditions generally require service over a period of three years to four years and may also require the satisfaction of certain

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

performance conditions.

For awards with performance conditions, the number of restricted stock units expected to vest may change over time depending upon the performance level achieved.

Stock Options

The following table summarizes transactions in the Company’s stock options:

9 unchanged sentences

Performance condition changes

Unexercised options outstanding - March 31, 2020

Exercisable at March 31, 2020

For the three months ended March 31, 2019 and 2020 , the Company granted stock options with fair values of $ 0.5 million and $ 3.9 million , respectively.

Unexercised options outstanding - June 30, 2020

Exercisable at June 30, 2020

For the six months ended June 30, 2019 and 2020 , the Company granted stock options with fair values of $ 0.5 million and $ 3.9 million , respectively, all of which were granted in the first quarter of each period.

Stock options generally vest over a period of three years to five years and expire seven years after the grant date.

2 unchanged sentences

For awards with performance conditions, the number of stock options expected to vest may change over time depending upon the performance level achieved.

The weighted average fair value of options granted was $ 33.58 and $ 17.49 , per option, for the three months ended March 31, 2019 and 2020 , respectively.

The weighted average fair value of options granted was $ 33.58 and $ 17.49 , per option, for the six months ended June 30, 2019 and 2020 , respectively.

The Company uses the Black-Scholes option pricing model to determine the fair value of options.

The weighted average grant date assumptions used to estimate the fair value of stock options granted were as follows:

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Dividend yield

19 unchanged sentences

Changes in redemption value

Balance, as of March 31, 2020 (1)

Balance, as of June 30, 2020 (1)

___________________________

As of December 31, 2019 and March 31, 2020 , Redeemable non-controlling interests includes consolidated Affiliate sponsored investment products primarily attributable to third-party investors of $ 21.6 million and $ 18.6 million , respectively.

As of December 31, 2019 and June 30, 2020 , Redeemable non-controlling interests includes consolidated Affiliate sponsored investment products primarily attributable to third-party investors of $ 21.6 million and $ 20.7 million , respectively.

Affiliate Equity

1 unchanged sentence

The Company’s Affiliates generally pay quarterly distributions to Affiliate equity holders.

For the three months ended March 31, 2019 and 2020 , distributions paid to Affiliate equity holders (non-controlling interests) were $ 104.6 million and $ 99.6 million , respectively.

For the six months ended June 30, 2019 and 2020 , distributions paid to Affiliate equity holders (non-controlling interests) were $ 192.7 million and $ 171.7 million , respectively.

The Company periodically repurchases Affiliate equity from and issues Affiliate equity to the Company’s consolidated Affiliate partners and its officers under agreements that provide the Company with a conditional right to call and Affiliate equity holders the conditional right to put their Affiliate equity interests to the Company at certain intervals.

For the three months ended March 31, 2019 and 2020 , the amount of cash paid for repurchases was $ 15.4 million and $ 96.5 million , respectively.

For the three months ended March 31, 2019 and 2020 , the total amount of cash received for issuances was $ 9.4 million and $ 12.1 million , respectively.

For the six months ended June 30, 2019 and 2020 , the amount of cash paid for repurchases was $ 51.8 million and $ 160.6 million , respectively.

For the six months ended June 30, 2019 and 2020 , the total amount of cash received for issuances was $ 9.9 million and $ 17.1 million , respectively.

Sales and repurchases of Affiliate equity generally occur at fair value;

2 unchanged sentences

The following table presents Affiliate equity compensation expense:

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Controlling interest

6 unchanged sentences

December 31, 2019

March 31, 2020

June 30, 2020

The Company records amounts receivable from, and payable to, Affiliate equity holders in connection with the transfer of Affiliate equity interests that have not settled at the end of the period and other related transactions.

The total receivable was $ 14.8 million and $ 12.2 million as of December 31, 2019 and March 31, 2020 , respectively, and was included in Other assets.

The total payable was $ 19.8 million and $ 115.1 million as of December 31, 2019 and March 31, 2020 , respectively, and was included in Other liabilities.

The total receivable was $ 14.8 million and $ 12.3 million as of December 31, 2019 and June 30, 2020 , respectively, and was included in Other assets.

The total payable was $ 19.8 million and $ 73.3 million as of December 31, 2019 and June 30, 2020 , respectively, and was included in Other liabilities.

AFFILIATED MANAGERS GROUP, INC.

5 unchanged sentences

While the Company presents the current redemption value of Affiliate equity within Redeemable non-controlling interests, with changes in the current redemption value increasing or decreasing the controlling interest’s equity over time, the following table presents the cumulative effect that ownership changes had on the controlling interest’s equity related only to Affiliate equity transactions that settled during the applicable periods:

For the Three Months Ended March 31,

Net loss (controlling interest)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Net income (loss) (controlling interest)

Decrease in controlling interest paid-in capital from Affiliate equity issuances

Decrease in controlling interest paid-in capital from Affiliate equity repurchases

Net loss (controlling interest) including the net impact of Affiliate equity transactions

Net income (loss) (controlling interest) including the net impact of Affiliate equity transactions

The Company’s consolidated income tax provision includes taxes attributable to the controlling interest and, to a lesser extent, taxes attributable to the non-controlling interests.

The following table presents the consolidated provision for income taxes:

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Controlling interest:

8 unchanged sentences

Income tax expense (benefit)

Loss before income taxes (controlling interest)

Effective tax rate (controlling interest) (1)

Income (loss) before income taxes (controlling interest)

Effective tax rate (controlling interests) (1)

___________________________

Taxes attributable to the controlling interest divided by Loss before income taxes (controlling interest) .

The Company’s effective tax rate (controlling interest) decreased to ( 1.0 )% for the three months ended March 31, 2020 from 24.4 % for the three months ended March 31, 2019, primarily due to a decrease in loss before income taxes (controlling interest), which offset the majority of the Company’s income tax expense.

As of March 31, 2020, the Company had unrecognized tax benefits of $ 65.2 million , and expects to realize approximately $ 5 million of these benefits within the next 12 months.

Taxes attributable to the controlling interest divided by Income before income taxes (controlling interest).

The Company’s effective tax rate (controlling interest) decreased to 3.4 % and 7.6 % for the three and six months ended June 30, 2020 , respectively, primarily due to a $ 5.5 million benefit related to the release of an uncertain tax position, and a $ 4.1 million capital loss benefit for an amount carried back to a year prior to the effective date of the Tax Cuts and Jobs Act.

Earnings Per Share

4 unchanged sentences

The following is a reconciliation of the numerator and denominator used in the calculation of basic and diluted earnings (loss) per share available to common stockholders:

For the Three Months Ended March 31,

Net loss (controlling interest)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Net income (loss) (controlling interest)

Interest expense on junior convertible securities, net of taxes

Net loss (controlling interest), as adjusted

Net income (loss) (controlling interest), as adjusted

Average shares outstanding (basic)

3 unchanged sentences

Average shares outstanding (diluted) in the table above excludes stock options and restricted stock units that have not met certain performance conditions and items that have an anti-dilutive effect on Loss per share (diluted).

The following is a summary of all items excluded from the denominator in the table above:

For the Three Months Ended March 31,

The following is a summary of items excluded from the denominator in the table above:

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Stock options and restricted stock units

2 unchanged sentences

Because it is the Company’s intention to settle these potential purchases in cash, the calculation of Average shares outstanding (diluted) excludes any potential dilutive effect from possible share settlements of Affiliate equity purchases.

For the three months ended March 31, 2020 , the Company repurchased 0.9 million shares of its common stock, at an average price per share of $ 78.27 .

For the three and six months ended June 30, 2020 , the Company repurchased 0.6 million and 1.5 million shares, respectively, of its common stock, at an average price per share of $ 72.85 and $ 76.03 , respectively.

Comprehensive Income

The following tables present the tax effects allocated to each component of Other comprehensive income (loss):

For the Three Months Ended March 31,

For the Three Months Ended June 30,

Foreign currency translation gain (loss)

Change in net realized and unrealized gain (loss) on derivative financial instruments

Change in net realized and unrealized loss on derivative financial instruments

Other comprehensive income (loss)

The components of accumulated other comprehensive loss, net of taxes, were as follows:

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the Six Months Ended June 30,

Foreign currency translation gain (loss)

Change in net realized and unrealized gain (loss) on derivative securities

Other comprehensive income (loss)

The components of accumulated other comprehensive loss, net of taxes, were as follows:

Unrealized Gains (Losses)

4 unchanged sentences

Net other comprehensive loss

Balance, as of March 31, 2020

Balance, as of June 30, 2020

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

What changed 10-Q

Item 1. Financial Statements