What changed in this filing

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Item 1. Financial Statements

2020-10-30 compared with 2020-07-31 · 314 added, 254 removed, 460 unchanged (55% of the section changed)

3 unchanged sentences

(in millions, except per share data)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2019 2020 2019 2020

Consolidated revenue $ 549.0 $ 494.8 $ 1,684.0 $ 1,473.2

8 unchanged sentences

Equity method income (loss) (net) 10.3 17.0 ( 318.5 ) ( 78.8 )

Investment and other income (expense)

Investment and other income 6.7 12.7 22.0 2.9

Income before income taxes 192.6 165.3 213.7 274.2

Income tax expense (benefit)

Income tax expense 30.5 37.5 4.4 43.0

Net income 162.1 127.8 209.3 231.2

Net income (non-controlling interests) ( 75.8 ) ( 56.5 ) ( 216.1 ) ( 144.9 )

8 unchanged sentences

(in millions)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2019 2020 2019 2020

Net income $ 162.1 $ 127.8 $ 209.3 $ 231.2

Other comprehensive income (loss), net of tax:

9 unchanged sentences

(in millions)

2019 September 30,

Cash and cash equivalents $ 539.6 $ 929.4

Receivables 417.1 404.8

Investments in marketable securities 59.4 68.2

Goodwill 2,651.7 2,638.8

Acquired client relationships (net) 1,182.0 1,035.2

2 unchanged sentences

Other investments 211.8 223.5

Other assets 304.0 313.3

Total assets $ 7,653.5 $ 7,669.5

Liabilities and Equity

Payables and accrued liabilities $ 634.6 $ 514.8

Debt 1,793.8 2,310.8

Deferred income tax liability (net) 450.2 400.4

8 unchanged sentences

Retained earnings 3,819.8 3,890.1

4,418.8 4,499.9

Treasury stock, at cost ( 10.4 shares in 2019 and 13.1 shares in 2020)

( 1,481.3 ) ( 1,651.0 )

Total stockholders' equity 2,937.5 2,848.9

Non-controlling interests 561.6 479.5

Total equity 3,499.1 3,328.4

Total liabilities and equity $ 7,653.5 $ 7,669.5

3 unchanged sentences

(in millions)

Three Months Ended June 30, 2019

Total Stockholders’ Equity

Three Months Ended September 30, 2019 Total Stockholders’ Equity

Stock Additional

Capital Accumulated

Comprehensive

March 31, 2019

Other comprehensive income (loss)

Loss Retained

Earnings Treasury

Interests Total

June 30, 2019 $ 0.6 $ 835.8 $ ( 95.1 ) $ 3,743.7 $ ( 1,259.7 ) $ 600.5 $ 3,825.8

Net income — — — 86.3 — 75.8 162.1

Other comprehensive loss — — ( 29.9 ) — — ( 7.2 ) ( 37.1 )

Share-based compensation — 11.7 — — — — 11.7

2 unchanged sentences

Dividends ($ 0.32 per share)

Issuance costs and other

— — — ( 16.4 ) — — ( 16.4 )

Affiliate equity activity:

Affiliate equity compensation — 2.3 — — — 6.9 9.2

Issuances — ( 2.0 ) — — — 2.3 0.3

Repurchases — 3.9 — — — — 3.9

Changes in redemption value of Redeemable non-controlling interests — ( 101.5 ) — — — — ( 101.5 )

1 unchanged sentence

Distributions to non-controlling interests — — — — — ( 83.9 ) ( 83.9 )

June 30, 2019

Three Months Ended June 30, 2020

Total Stockholders’ Equity

September 30, 2019 $ 0.6 $ 742.6 $ ( 125.0 ) $ 3,813.6 $ ( 1,361.8 ) $ 563.2 $ 3,633.2

Three Months Ended September 30, 2020 Total Stockholders’ Equity

Stock Additional

Capital Accumulated

Comprehensive

March 31, 2020

Other comprehensive income (loss)

Loss Retained

Earnings Treasury

Interests Total

June 30, 2020 $ 0.6 $ 768.2 $ ( 170.4 ) $ 3,819.3 $ ( 1,563.0 ) $ 487.2 $ 3,341.9

Net income — — — 71.3 — 56.5 127.8

Other comprehensive income — — 15.5 — — 9.4 24.9

Share-based compensation — 15.7 — — — — 15.7

2 unchanged sentences

Dividends ($ 0.01 per share)

— — — ( 0.5 ) — — ( 0.5 )

Affiliate equity activity:

Affiliate equity compensation — 3.5 — — — 6.0 9.5

Issuances — 2.9 — — — 0.2 3.1

Repurchases — 21.0 — — — ( 2.2 ) 18.8

Changes in redemption value of Redeemable non-controlling interests — ( 50.7 ) — — — — ( 50.7 )

Transfers to Redeemable non-controlling interests — — — — — ( 0.2 ) ( 0.2 )

Capital contributions and other

Distributions to non-controlling interests — — — — — ( 77.4 ) ( 77.4 )

June 30, 2020

September 30, 2020 $ 0.6 $ 764.1 $ ( 154.9 ) $ 3,890.1 $ ( 1,651.0 ) $ 479.5 $ 3,328.4

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

2 unchanged sentences

(in millions)

Six Months Ended June 30, 2019

Total Stockholders' Equity

Comprehensive Loss

Nine Months Ended September 30, 2019 Total Stockholders' Equity

Stock Additional

Capital Accumulated

Comprehensive Loss Retained

Earnings Treasury

Interests Total

December 31, 2018 $ 0.6 $ 835.6 $ ( 109.0 ) $ 3,876.8 $ ( 1,146.6 ) $ 677.5 $ 4,134.9

Impact of adoption of new accounting standards (ASU 2018-02)

Impact of adoption of new accounting standard (ASU 2018-02) — — — ( 6.6 ) — — ( 6.6 )

Net income (loss) — — — ( 6.8 ) — 216.1 209.3

Other comprehensive income (loss)

Other comprehensive loss — — ( 16.0 ) — — ( 7.9 ) ( 23.9 )

Share-based compensation — 30.7 — — — — 30.7

2 unchanged sentences

Dividends ($ 0.96 per share)

— — — ( 49.8 ) — — ( 49.8 )

Issuance costs and other — 0.2 — — — — 0.2

1 unchanged sentence

Affiliate equity compensation — 7.3 — — — 24.9 32.2

Issuances — ( 3.4 ) — — — 14.4 11.0

Repurchases — 11.6 — — — — 11.6

Changes in redemption value of Redeemable non-controlling interests — ( 97.9 ) — — — — ( 97.9 )

2 unchanged sentences

Distributions to non-controlling interests — — — — — ( 276.6 ) ( 276.6 )

June 30, 2019

Six Months Ended June 30, 2020

Total Stockholders' Equity

September 30, 2019 $ 0.6 $ 742.6 $ ( 125.0 ) $ 3,813.6 $ ( 1,361.8 ) $ 563.2 $ 3,633.2

Nine Months Ended September 30, 2020 Total Stockholders' Equity

Stock Additional

Capital Accumulated

Comprehensive

Loss Retained

Earnings Treasury

Interests Total

December 31, 2019 $ 0.6 $ 707.2 $ ( 108.8 ) $ 3,819.8 $ ( 1,481.3 ) $ 561.6 $ 3,499.1

Other comprehensive income (loss)

Net income — — — 86.3 — 144.9 231.2

Other comprehensive loss — — ( 46.1 ) — — ( 7.4 ) ( 53.5 )

Share-based compensation — 46.4 — — — — 46.4

2 unchanged sentences

Dividends ($ 0.34 per share)

— — — ( 16.0 ) — — ( 16.0 )

Affiliate equity activity:

Affiliate equity compensation — 11.4 — — — 24.9 36.3

Issuances — 1.1 — — — 18.8 19.9

Repurchases — 57.4 — — — ( 13.5 ) 43.9

Changes in redemption value of Redeemable non-controlling interests — ( 18.6 ) — — — — ( 18.6 )

2 unchanged sentences

Distributions to non-controlling interests — — — — — ( 249.1 ) ( 249.1 )

June 30, 2020

September 30, 2020 $ 0.6 $ 764.1 $ ( 154.9 ) $ 3,890.1 $ ( 1,651.0 ) $ 479.5 $ 3,328.4

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

2 unchanged sentences

(in millions)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Cash flow from (used in) operating activities:

Net income $ 209.3 $ 231.2

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

1 unchanged sentence

Depreciation and other amortization 16.7 14.7

Deferred income tax benefit

Deferred income tax (benefit) expense ( 77.0 ) 10.6

Equity method loss (net) 318.5 78.8

5 unchanged sentences

Sales of securities by consolidated Affiliate sponsored investment products 5.5 77.6

Increase in receivables

(Increase) decrease in other assets

(Increase) decrease in receivables ( 91.5 ) 9.0

Increase in other assets ( 4.0 ) ( 8.5 )

Decrease in payables, accrued liabilities and other liabilities ( 94.7 ) ( 136.7 )

6 unchanged sentences

Sale of investment securities 33.1 36.9

Cash flow from (used) in investing activities

Cash flow used in investing activities ( 139.9 ) ( 8.0 )

Cash flow from (used in) financing activities:

8 unchanged sentences

Effect of foreign currency exchange rate changes on cash and cash equivalents ( 2.9 ) ( 5.3 )

Net increase (decrease) in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents ( 160.4 ) 392.0

Cash and cash equivalents at beginning of period 565.5 539.6

Effect of deconsolidation of Affiliate sponsored investment products

Effect of deconsolidation of Affiliates and Affiliate sponsored investment products ( 2.6 ) ( 2.2 )

Cash and cash equivalents at end of period $ 402.5 $ 929.4

15 unchanged sentences

Recently Adopted Accounting Standards

Effective January 1, 2020, the Company adopted the following new Accounting Standard Updates (“ASUs”):

ASU 2016-13, Measurement of Credit Losses on Financial Instruments

Effective January 1, 2020, the Company adopted Accounting Standard Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments.

The adoption of this standard did not have a significant impact on the Company’s Consolidated Financial Statements.

Recent Accounting Developments

In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-06, Debt with Conversion and Other Options and Derivatives and Hedging - Contracts in Entity’s Own Equity.

The standard is effective for interim and annual periods beginning after December 15, 2021 for the Company and its consolidated Affiliates, and is effective for interim and annual periods beginning after December 15, 2023 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.

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.

The Company does not expect the adoption of this standard by its equity method investments to have a significant impact to its Consolidated Financial Statements.

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 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.

The Company does not expect the adoption of this standard to have a significant impact to its Consolidated Financial Statements.

Investments in Marketable Securities

The following is a summary of the cost, gross unrealized gains, gross unrealized losses and fair value of Investments in marketable securities:

Unrealized gains

Unrealized losses

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.

2019 September 30,

Cost $ 57.9 $ 67.5

Unrealized gains 2.1 2.4

Unrealized losses ( 0.6 ) ( 1.7 )

Fair value $ 59.4 $ 68.2

The Company recorded proceeds of $ 2.9 million and $ 21.4 million for the three and nine months ended September 30, 2019, respectively, and $ 16.7 million and $ 80.8 million for the three and nine months ended September 30, 2020, respectively, from the sale of investments in marketable securities.

No significant gains or losses were recorded for the three and nine months ended September 30, 2019 and 2020.

As of December 31, 2019 and September 30, 2020, Investments in marketable securities includes consolidated Affiliate sponsored investment products with fair values of $ 38.1 million and $ 43.4 million, respectively.

Investments in Affiliates and Affiliate Sponsored Investment Products

6 unchanged sentences

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.

9 unchanged sentences

The Company periodically issues, sells and repurchases the equity of its consolidated Affiliates.

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 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 (benefit) in the Consolidated Statements of Income.

Because these transactions take place between entities that are under common control, any gains or losses

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.

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.

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 periodically performs assessments to determine if the fair value of an investment may have declined below its 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 analyses.

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:

December 31, 2019

June 30, 2020

December 31, 2019 September 30, 2020

Unconsolidated

VIE Net Assets

Carrying Value and

VIE Net Assets Carrying Value and

Maximum Exposure

Unconsolidated

VIE Net Assets

Carrying Value and

to Loss Unconsolidated

VIE Net Assets Carrying Value and

Maximum Exposure

Affiliates accounted for under the equity method $ 1,141.4 $ 1,843.0 $ 1,085.2 $ 1,812.3

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.

As of December 31, 2019 and September 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 $ 1,974.7 million, respectively, including Affiliates accounted for under the equity method considered VREs of $ 352.6 million and $ 162.4 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 (expense).

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.

When the Company or its consolidated Affiliates no longer control these products, due to a reduction in ownership or other reasons, the products are deconsolidated with only the Company’s or its consolidated Affiliate’s investment in the product reported from the date of deconsolidation.

The Company’s carrying value, and maximum exposure to loss from unconsolidated Affiliate sponsored investment products, is its or its consolidated Affiliate’s interest in the unconsolidated net assets of the respective products.

The Company’s carrying value, and maximum exposure to loss from unconsolidated Affiliate sponsored investment products, is its and its consolidated Affiliate’s interest in the unconsolidated net assets of the respective products.

The net assets of unconsolidated VIEs attributable to Affiliate sponsored investment products, and the Company’s carrying value and maximum exposure to loss, were as follows:

December 31, 2019

June 30, 2020

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

December 31, 2019 September 30, 2020

Unconsolidated

VIE Net Assets

Carrying Value and

VIE Net Assets Carrying Value and

Maximum Exposure

Unconsolidated

VIE Net Assets

Carrying Value and

to Loss Unconsolidated

VIE Net Assets Carrying Value and

Maximum Exposure

Affiliate sponsored investment products $ 2,282.1 $ 0.9 $ 2,309.7 $ 0.7

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following table summarizes the Company’s Debt:

2019 September 30,

Senior bank debt $ 449.7 $ 349.8

Senior notes 743.8 1,091.5

Junior convertible securities 310.6 313.1

Junior subordinated notes 289.7 556.4

Debt $ 1,793.8 $ 2,310.8

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 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.

For the three months ended September 30, 2020, the interest rate for the Company’s borrowings under the term loan was LIBOR plus 0.875 %.

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

In the second quarter of 2020, the Company issued $ 350.0 million of senior unsecured notes with a maturity date of June 15, 2030 (the “2030 senior notes”).

The 2030 senior notes bear interest at a fixed rate of 3.3 % per annum.

Interest is payable semi-annually, and the Company has the right to redeem the 2030 senior notes 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.

Junior Subordinated Notes

In September 2020, the Company issued $ 275.0 million of junior subordinated notes with a maturity date of September 30, 2060 (the “2060 junior subordinated notes”).

The 2060 junior subordinated notes bear interest at a fixed rate of 4.750 % per annum.

Interest is payable quarterly, commencing on December 30, 2020, and the Company has the right to defer interest payments in accordance with the terms of the notes.

The 2060 junior subordinated notes were issued at 100 % of the principal amount and rank junior and subordinate in right of payment and upon liquidation to all of the Company’s current and future senior indebtedness.

On or after September 30, 2025, at the Company’s option, the 2060 junior subordinated notes may be redeemed in whole or in part, at 100 % of the principal amount, plus any accrued and unpaid interest.

Prior to September 30, 2025, at the Company’s option, the 2060 junior subordinated notes may be redeemed in whole but not in part, at 100 % of the principal amount, plus any accrued and unpaid interest, if certain changes in tax laws, regulations or interpretations occur;

or at 102 % of the principal amount, plus any accrued and unpaid interest, if a rating agency makes certain changes relating to the equity credit criteria for securities with features similar to the 2060 junior subordinated notes.

Derivative Financial Instruments

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The Company and its Affiliates may use derivative financial instruments to offset exposure to changes in interest rates, foreign currency exchange rates and markets.

7 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 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.

In the first quarter of 2020, the Company entered into an interest rate swap contract (the “interest rate swap”) with a large 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 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 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.

As of September 30, 2020, the Company held no cash collateral from the swap counterparty, and the swap counterparty held $ 2.2 million of cash collateral from the Company.

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.

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

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

December 31, 2019

June 30, 2020

December 31, 2019 September 30, 2020

Assets Liabilities Assets Liabilities

Forward contracts $ 23.8 $ ( 1.0 ) $ 2.6 $ ( 1.9 )

Put options — ( 31.0 ) — —

Call options 15.1 — — —

Interest rate swap — — — ( 2.1 )

Total $ 38.9 $ ( 32.0 ) $ 2.6 $ ( 4.0 )

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;

1 unchanged sentence

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 .

they were $ 2.2 million and $ 1.0 million, respectively, as of December 31, 2019 and $ 2.6 million and $ 4.0 million, respectively, as of September 30, 2020.

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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 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)

For the Three Months Ended September 30,

Gain (Loss) Recognized in Other Comprehensive Income (Loss) Loss Reclassified from Accumulated Other Comprehensive Loss into Earnings Gain Recognized in Earnings from Excluded Components (1)

Gain (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 $ 22.8 $ ( 0.0 ) $ 3.5 $ 0.4 $ 0.1 $ —

Put options ( 8.4 ) — — — — —

Call options ( 7.5 ) — — — — —

Interest rate swap — — — ( 0.1 ) — —

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the Six Months Ended June 30,

Gain (Loss) Recognized in Other Comprehensive Income

Gain Reclassified from Accumulated Other Comprehensive Loss into Earnings

Gain Recognized in Earnings from Excluded Components (1)

Gain (Loss) Recognized in Other Comprehensive Income

Gain Reclassified from Accumulated Other Comprehensive Loss into Earnings

Gain Recognized in Earnings from Excluded Components (1)

Total $ 6.9 $ ( 0.0 ) $ 3.5 $ 0.3 $ 0.1 $ —

For the Nine Months Ended September 30,

Gain (Loss) Recognized in Other Comprehensive Income Gain Reclassified from Accumulated Other Comprehensive Loss into Earnings Gain Recognized in Earnings from Excluded Components (1)

Forward contracts $ 32.6 $ 0.1 $ 10.4 $ 64.9 $ 0.4 $ 2.8

Put options ( 2.8 ) — — ( 47.7 ) — —

Call options ( 22.5 ) — — ( 1.3 ) — —

Interest rate swap — — — ( 2.1 ) — —

Total $ 7.3 $ 0.1 $ 10.4 $ 13.8 $ 0.4 $ 2.8

___________________________

5 unchanged sentences

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

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 .

As of September 30, 2020, these unfunded commitments were $ 129.4 million and may be called in future periods.

As of September 30, 2020, the Company was obligated to make payments related to an investment in an Affiliate accounted for under the equity method.

The maximum the Company is obligated to pay is $ 35.0 million in 2020 or 2021, and $ 37.5 million in 2022.

In addition, as of September 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 September 30, 2020, the Company expected to make payments of approximately $ 53 million.

The Company expects to make no payments in 2020.

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 .

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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.

3 unchanged sentences

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.

As of September 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

Quoted Prices in Active Markets for Identical Assets (Level 1)

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs (Level 3)

Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

Financial Assets

5 unchanged sentences

Fair Value Measurements

Quoted Prices in Active Markets for Identical Assets (Level 1)

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs (Level 3)

September 30,

Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)

Financial Assets

Investments in marketable securities $ 68.2 $ 27.5 $ 40.7 $ —

Other investments

Derivative financial instruments (1)

6 unchanged sentences

Level 3 Financial Assets and 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

The following tables present the changes in level 3 assets and liabilities for Affiliate equity repurchase obligations:

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the Six Months Ended June 30,

Contingent Payment Arrangements

Affiliate Equity Repurchase Obligations

Other Investments

Contingent Payment Arrangements

Affiliate Equity Repurchase Obligations

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2019 2020 2019 2020

Balance, beginning of period $ 57.4 $ 73.3 $ 36.2 $ 19.8

Net realized and unrealized losses (1)

Net realized and unrealized (gains) losses (1)

0.7 ( 0.2 ) 0.6 ( 4.1 )

Purchases and issuances (2)

12.1 85.8 85.1 292.8

Settlements and reductions ( 33.4 ) ( 89.0 ) ( 85.1 ) ( 238.6 )

6 unchanged sentences

Quantitative Information About Level 3 Fair Value Measurements

December 31, 2019

June 30, 2020

Weighted Average (1)

Affiliate equity repurchase obligations

Discounted cash flow

Growth rates (2)

December 31, 2019 September 30, 2020

Techniques Unobservable

Input Fair Value Range Weighted Average (1)

Fair Value Range Weighted Average (1)

Affiliate equity repurchase obligations Discounted cash flow Growth rates (2)

$ 19.8 ( 9 )% - 7 %

5 % $ 69.9 ( 1 )% - 8 %

Discount rates 14 % - 17 %

15 % 14 % - 16 %

___________________________

(1) Calculated by comparing the relative fair value of an obligation to its respective total.

1 unchanged sentence

Affiliate equity repurchase obligations include agreements to repurchase Affiliate equity.

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

As of September 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.

Investments Measured at NAV as a Practical Expedient

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.

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

June 30, 2020

Category of Investment

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 on the Consolidated Balance Sheets.

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

December 31, 2019 September 30, 2020

Category of Investment Fair Value Unfunded

Commitments Fair Value Unfunded

Private equity funds (1)

$ 203.3 $ 127.2 $ 208.7 $ 129.4

Investments in other strategies (2)

Investments measured at NAV as a practical expedient

Other investments (3)

$ 211.8 $ 127.2 $ 215.0 $ 129.4

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

___________________________

(1) 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.

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Distributions will be received as the underlying assets are liquidated over the life of the funds, which is generally up to 15 years.

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(2) These are multi-disciplinary funds that invest across various asset classes and strategies, including equity, credit and real estate.

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

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.

(3) Fair value attributable to the controlling interest was $ 137.6 million and $ 145.9 million as of December 31, 2019 and September 30, 2020, respectively.

Other Financial Assets and Liabilities Not Carried at Fair Value

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The following table summarizes the Company’s other financial liabilities not carried at fair value:

December 31, 2019

June 30, 2020

Carrying Value

Fair Value Hierarchy

Junior convertible securities

Junior subordinated notes

December 31, 2019 September 30, 2020

Carrying Value Fair Value Carrying Value Fair Value Fair Value Hierarchy

Senior notes $ 746.8 $ 797.4 $ 1,097.2 $ 1,197.2 Level 2

Junior convertible securities 315.4 415.7 317.7 390.4 Level 2

Junior subordinated notes 290.7 327.7 565.7 607.9 Level 2

As of December 31, 2019, and September 30, 2020, the Company held investments without readily determinable fair values of zero and $ 8.5 million, respectively.

Goodwill and Acquired Client Relationships

2 unchanged sentences

Foreign currency translation ( 11.0 )

Balance, as of June 30, 2020

Other ( 1.9 )

Balance, as of September 30, 2020 $ 2,638.8

As of September 30, 2020, the Company completed its annual impairment assessment on goodwill and no impairment was indicated.

Acquired Client Relationships (Net)

Definite-lived

Indefinite-lived

Definite-lived Indefinite-lived Total

Value Accumulated

Amortization Net Book

Value Net Book

Balance, as of December 31, 2019 $ 1,248.8 $ ( 1,039.0 ) $ 209.8 $ 972.2 $ 1,182.0

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Foreign currency translation ( 3.2 ) 1.7 ( 1.5 ) ( 11.9 ) ( 13.4 )

Balance, as of June 30, 2020

Transfers (1)

( 85.7 ) 85.7 — — —

Balance, as of September 30, 2020 $ 1,159.9 $ ( 1,014.3 ) $ 145.6 $ 889.6 $ 1,035.2

(1) Transfers include acquired client relationships at Affiliates that were deconsolidated during the period.

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 $ 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.

The Company recorded amortization expense within Intangible amortization and impairments in

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.

the Consolidated Statements of Income for these relationships of $ 21.1 million and $ 72.0 million for the three and nine months ended September 30, 2019, respectively, and $ 7.0 million, and $ 48.2 million for the three and nine months ended September 30, 2020, respectively.

Based on relationships existing as of September 30, 2020, the Company estimates that its consolidated amortization expense will be approximately $ 10 million for the remainder of 2020, approximately $ 30 million in each of 2021, 2022 and 2023, approximately $ 20 million in 2024 and approximately $ 10 million in 2025.

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

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 of the Affiliate’s acquired client relationships to zero as of June 30, 2020.

In July 2020, the Company sold its interest in the Affiliate and the Company recorded no significant gain or loss on the transaction.

In the third quarter of 2020, the Company completed an impairment assessment of the indefinite-lived acquired client relationships at one of its Affiliates, and determined that the fair value of the asset had declined below its carrying value.

Accordingly, the Company recorded an expense in Intangible amortization and impairments of $ 12.5 million attributable to the controlling interest ($ 14.0 million in aggregate) to reduce the carrying value of the asset to fair value.

The decline in the fair value was a result of a projected decline in assets under management that decreased the forecasted revenue associated with the asset.

The fair value of the asset was determined using a discounted cash flow analysis, a level 3 fair value measurement that included a projected growth rate of ( 14 )% for assets under management, discount rate of 15 % for asset based fees, and a market participant tax rate of 25 %.

In addition, the Company recorded an expense in Intangible amortization and impairments of $ 7.4 million attributable to the controlling interest ($ 10.9 million in aggregate) to reduce the carrying value of an indefinite-lived acquired client relationship to zero due to the closure of one of its Affiliate’s retail investment products.

As of September 30, 2020, no other impairments of indefinite-lived acquired client relationships were indicated.

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

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.

In the first quarter of 2020, the Company completed its minority investment in Comvest Partners, and in the third quarter of 2020, the Company established a minority equity interest in Inclusive Capital Partners.

The Company’s purchase price allocation for each transaction 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.

2 unchanged sentences

Balance, as of December 31, 2019 $ 2,195.6

Earnings 171.7

Intangible amortization and impairments ( 250.5 )

2 unchanged sentences

Investments in Affiliates 87.1

Balance, as of June 30, 2020

Other ( 10.4 )

Balance, as of September 30, 2020 $ 1,974.7

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 $ 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.

The Company recognized amortization expense for these relationships of $ 42.1 million and $ 104.1 million for the three and nine months ended September 30, 2019, respectively, and $ 34.3 million and $ 110.5 million for the three and nine months ended September 30, 2020, respectively.

Based on relationships

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

existing as of September 30, 2020, the Company estimates the amortization expense attributable to its Affiliates will be approximately $ 40 million for the remainder of 2020, approximately $ 120 million in 2021, and approximately $ 50 million in each of 2022, 2023, 2024 and 2025.

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

In March 2019, the Company concluded that the growth expectations of the Affiliate had declined and determined that the estimated fair value of the Affiliate had also declined meaningfully.

3 unchanged sentences

In October 2019, the Company sold its interest in the Affiliate.

In the first quarter of 2020, the Company recorded a $ 140.0 million expense to reduce the carrying value to fair value of an Affiliate.

In the third quarter of 2019, the Company recorded a $ 10.0 million expense to reduce the carrying value of an Affiliate to fair value.

The fair value of the investment was determined using a discounted cash flow analysis, a level 3 fair value measurement, that included a projected growth rate of ( 20 )%, discount rates of 11 % and 20 % for asset and performance based fees, respectively, and a market participant tax rate of 25 %.

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.

In the first quarter of 2020, the Company recorded a $ 140.0 million expense to reduce the carrying value of an Affiliate to fair value.

The decline in the fair value was a result of a decline in assets under management and a reduction in projected growth, which decreased the forecasted revenue associated with the investment.

1 unchanged sentence

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.

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.

As of September 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, or the financial performance of an Affiliate worsens as a result of net client cash outflows or performance, regardless of the performance of financial markets, 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 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.

For the three and nine months ended September 30, 2019, these Affiliates recognized revenue of $ 122.7 million and $ 429.8 million, respectively, and net income of $ 75.2 million and $ 290.9 million, respectively.

For the three and nine months ended September 30, 2020, these Affiliates recognized revenue of $ 116.2 million and $ 524.5 million, respectively, and net income of $ 74.2 million and $ 379.5 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 $ 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.

In addition, Affiliate management owners and the Company’s officers may serve as trustees or directors of certain investment vehicles from which the Company or an Affiliate earns fees.

The prior owner’s interests are presented in Other liabilities and were $ 38.5 million and $ 33.8 million as of December 31, 2019 and September 30, 2020, respectively.

The Company may invest from time to time in funds or products advised by its Affiliates.

The Company’s executive officers and directors may invest from time to time in funds advised or products offered by its Affiliates on substantially the same terms as other investors.

In addition, 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.

Affiliate management owners and the Company’s officers may serve as trustees or directors of certain investment vehicles from which the Company or an Affiliate earns fees.

The Company has related party transactions in association with its contingent payment arrangements and Affiliate equity transactions, as more fully described in Notes 7, 13 and 14.

The Company’s executive officers and directors may invest from time to time in funds advised by its Affiliates on substantially the same terms as other investors.

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Share-Based Compensation

The following table presents share-based compensation expense:

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2019 2020 2019 2020

Share-based compensation $ 11.7 $ 15.7 $ 30.7 $ 46.4

Tax benefit 2.0 2.9 6.7 8.4

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

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).

As of September 30, 2020, the Company had unrecognized share-based compensation expense of $ 88.8 million, which will be recognized over a weighted average period of approximately three years (assuming no forfeitures).

Restricted Stock

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

Restricted Stock Units

Weighted Average Grant Date Value

Restricted Stock Units Weighted Average Grant Date Value

Unvested units - December 31, 2019 1.1 $ 123.70

Units granted 0.4 73.73

Units vested ( 0.4 ) 141.67

Units forfeited ( 0.0 ) 136.54

Performance condition changes ( 0.0 ) 121.96

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.

Unvested units - September 30, 2020 1.1 99.21

For the nine months ended September 30, 2019 and 2020, the Company granted restricted stock units with fair values of $ 60.6 million and $ 31.6 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

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

performance conditions.

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.

1 unchanged sentence

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

Stock Options

Weighted Average

Exercise Price

Weighted Average

Stock Options Weighted Average

Exercise Price Weighted Average

Contractual Life

4 unchanged sentences

Performance condition changes — —

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.

Unexercised options outstanding - September 30, 2020 2.5 84.03 5.2

Exercisable at September 30, 2020 0.4 128.91 1.9

For the nine months ended September 30, 2019 and 2020, the Company granted stock options with fair values of $ 33.3 million and $ 4.4 million, respectively.

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

All stock options have been granted with exercise prices equal to the closing price of the Company’s common stock on the grant date.

Substantially all of the Company’s outstanding stock options contain both service and performance conditions.

Substantially all of the Company’s outstanding stock options contain both service and

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

performance conditions.

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 six months ended June 30, 2019 and 2020 , respectively.

The weighted average fair value of options granted was $ 18.36 and $ 18.23 , per option, for the nine months ended September 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 Six Months Ended June 30,

For the Nine Months Ended September 30,

Dividend yield 0.9 % 1.6 %

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The following table presents the changes in Redeemable non-controlling interests:

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Redeemable Non-controlling Interests

4 unchanged sentences

Changes in redemption value 18.6

Balance, as of June 30, 2020 (1)

Balance, as of September 30, 2020 (1)

___________________________

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.

(1) As of December 31, 2019 and September 30, 2020, Redeemable non-controlling interests includes consolidated Affiliate sponsored investment products primarily attributable to third-party investors of $ 21.6 million and $ 25.5 million, respectively.

Affiliate Equity

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

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.

For the nine months ended September 30, 2019 and 2020, distributions paid to Affiliate equity holders (non-controlling interests) were $ 276.6 million and $ 249.1 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 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.

For the nine months ended September 30, 2019 and 2020, the amount of cash paid for repurchases was $ 85.2 million and $ 249.6 million,

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

respectively.

For the nine months ended September 30, 2019 and 2020, the total amount of cash received for issuances was $ 10.4 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 June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2019 2020 2019 2020

Controlling interest $ 2.3 $ 3.5 $ 7.3 $ 11.4

Non-controlling interests 6.9 6.0 24.9 24.9

Total $ 9.2 $ 9.5 $ 32.2 $ 36.3

The following table presents unrecognized Affiliate equity compensation expense:

Controlling Interest

Remaining Life

Non-controlling Interests

Remaining Life

December 31, 2019

June 30, 2020

Controlling Interest Remaining Life Non-controlling Interests Remaining Life

December 31, 2019 $ 40.9 4 years $ 124.6 6 years

September 30, 2020 37.6 4 years 115.2 5 years

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 $ 12.3 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The total receivable was $ 14.8 million and $ 14.6 million as of December 31, 2019 and September 30, 2020, respectively, and was included in Other assets.

The total payable was $ 19.8 million and $ 69.9 million as of December 31, 2019 and September 30, 2020, respectively, and was included in Other liabilities.

Effects of Changes in the Company’s Ownership in Affiliates

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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 June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2019 2020 2019 2020

Net income (loss) (controlling interest) $ 86.3 $ 71.3 $ ( 6.8 ) $ 86.3

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

(Decrease) increase in controlling interest paid-in capital from Affiliate equity issuances ( 1.9 ) 2.9 ( 2.8 ) 1.6

Decrease in controlling interest paid-in capital from Affiliate equity repurchases ( 7.6 ) ( 65.4 ) ( 38.2 ) ( 226.0 )

Net income (loss) (controlling interest) including the net impact of Affiliate equity transactions $ 76.8 $ 8.8 $ ( 47.8 ) $ ( 138.1 )

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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 June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2019 2020 2019 2020

Controlling interest:

7 unchanged sentences

Total non-controlling interests 2.2 5.0 7.5 9.3

Income tax expense (benefit)

Income tax expense $ 30.5 $ 37.5 $ 4.4 $ 43.0

Income (loss) before income taxes (controlling interest) $ 114.6 $ 103.8 $ ( 9.9 ) $ 120.0

1 unchanged sentence

24.7 % 31.3 % 31.5 % 28.1 %

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.

___________________________

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

The Company’s effective tax rate (controlling interest) increased to 31.3 % for the three months ended September 30, 2020, primarily due to an $ 8.1 million deferred tax expense resulting from the revaluation of certain of the Company’s deferred tax liabilities due to an increase in the UK tax rate during the period.

The Company’s effective tax rate (controlling interest) decreased to 28.1 % for the nine months ended September 30, 2020, primarily due to a $ 129.9 million increase in Income before income taxes (controlling interest) and state and foreign income tax accruals in the nine months ended September 30, 2019 that did not recur in 2020 .

Earnings Per Share

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The calculation of Earnings (loss) per share (basic) is based on the weighted average number of shares of the Company’s common stock outstanding during the period.

Earnings (loss) per share (diluted) is similar to Earnings (loss) per share (basic), but adjusts for the dilutive effect of the potential issuance of incremental shares of the Company’s common stock.

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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 June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2019 2020 2019 2020

Net income (loss) (controlling interest) $ 86.3 $ 71.3 $ ( 6.8 ) $ 86.3

5 unchanged sentences

Average shares outstanding (diluted) 50.4 46.5 51.1 47.2

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 items excluded from the denominator in the table above:

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2019 2020 2019 2020

Stock options and restricted stock units 2.3 2.9 2.4 3.1

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 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.

For the three and nine months ended September 30, 2020, the Company repurchased 1.3 million and 2.8 million shares, respectively, of its common stock, at an average price per share of $ 67.82 and $ 72.22 , respectively.

Comprehensive Income

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

For the Three Months Ended June 30,

For the Three Months Ended September 30,

Pre-Tax Tax Benefit Net of Tax Pre-Tax Tax Expense Net of Tax

Foreign currency translation gain (loss) $ ( 41.2 ) $ 3.6 $ ( 37.6 ) $ 25.2 $ ( 0.5 ) $ 24.7

Change in net realized and unrealized loss on derivative financial instruments

Change in net realized and unrealized gain on derivative financial instruments 0.5 — 0.5 0.2 — 0.2

Other comprehensive income (loss) $ ( 40.7 ) $ 3.6 $ ( 37.1 ) $ 25.4 $ ( 0.5 ) $ 24.9

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Pre-Tax Tax Benefit Net of Tax Pre-Tax Tax (Expense)

Benefit Net of Tax

Foreign currency translation gain (loss) $ ( 34.6 ) $ 9.7 $ ( 24.9 ) $ ( 39.7 ) $ ( 11.7 ) $ ( 51.4 )

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

Change in net realized and unrealized gain (loss) on derivative financial instruments 1.0 — 1.0 ( 2.6 ) 0.5 ( 2.1 )

Other comprehensive income (loss) $ ( 33.6 ) $ 9.7 $ ( 23.9 ) $ ( 42.3 ) $ ( 11.2 ) $ ( 53.5 )

AFFILIATED MANAGERS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

Adjustment Realized and

Unrealized Gains (Losses)

on Derivative Financial Instruments

on Derivative Financial Instruments Total

Balance, as of December 31, 2019 $ ( 177.1 ) $ 1.2 $ ( 175.9 )

2 unchanged sentences

Net other comprehensive loss ( 51.4 ) ( 2.1 ) ( 53.5 )

Balance, as of June 30, 2020

Balance, as of September 30, 2020 $ ( 228.5 ) $ ( 0.9 ) $ ( 229.4 )

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