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AGO Assured Guaranty

Filed: 5 Nov 20, 7:00pm

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Assured Guaranty Ltd.
September 30, 2020
Financial Supplement

This financial supplement should be read in conjunction with documents filed by Assured Guaranty Ltd. (AGL and, together with its subsidiaries, Assured Guaranty or the Company) with the United States (U.S.) Securities and Exchange Commission (SEC), including its Annual Report on Form 10-K for the year ended December 31, 2019 and its Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2020, June 30, 2020, and September 30, 2020.





Cautionary Statement Regarding Forward Looking Statements


Any forward looking statements made in this supplement reflect the current views of Assured Guaranty with respect to future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. Assured Guaranty's forward looking statements could be affected by many events. These events include (1) the development, course and duration of the COVID-19 pandemic and the governmental and private actions taken in response, and the global consequences of the pandemic and such actions, including their impact on the factors listed below; (2) changes in the world’s credit markets, segments thereof, interest rates, credit spreads or general economic conditions; (3) developments in the world’s financial and capital markets that adversely affect insured obligors’ repayment rates, Assured Guaranty’s insurance loss or recovery experience, investments of Assured Guaranty or assets it manages; (4) reduction in the amount of available insurance opportunities and/or in the demand for Assured Guaranty's insurance; (5) the loss of investors in Assured Guaranty's asset management strategies or the failure to attract new investors to Assured Guaranty's asset management business; (6) the possibility that budget or pension shortfalls or other factors will result in credit losses or impairments on obligations of state, territorial and local governments and their related authorities and public corporations that Assured Guaranty insures or reinsures; (7) insured losses in excess of those expected by Assured Guaranty or the failure of Assured Guaranty to realize loss recoveries that are assumed in its expected loss estimates for insurance exposures; (8) increased competition, including from new entrants into the financial guaranty industry; (9) poor performance of Assured Guaranty's asset management strategies compared to the performance of the asset management strategies of Assured Guaranty's competitors; (10) the possibility that investments made by Assured Guaranty for its investment portfolio, including alternative investments and investments it manages, do not result in the benefits anticipated or subject Assured Guaranty to reduced liquidity at a time it requires liquidity or to unanticipated consequences; (11) the impact of market volatility on the mark-to-market of Assured Guaranty’s assets and liabilities subject to mark-to-market, including certain of its investments, most of its contracts written in credit default swap form, and variable interest entities as well as on the mark-to-market of assets Assured Guaranty manages; (12) rating agency action, including a ratings downgrade, a change in outlook, the placement of ratings on watch for downgrade, or a change in rating criteria, at any time, of AGL or any of its insurance subsidiaries, and/or of any securities AGL or any of its subsidiaries have issued, and/or of transactions that AGL’s insurance subsidiaries have insured; (13) the inability of Assured Guaranty to access external sources of capital on acceptable terms; (14) changes in applicable accounting policies or practices; (15) changes in applicable laws or regulations, including insurance, bankruptcy and tax laws, or other governmental actions; (16) the failure of Assured Guaranty to successfully integrate the business of BlueMountain Capital Management, LLC (BlueMountain) and its associated entities, now known as Assured Investment Management LLC (AssuredIM); (17) the possibility that acquisitions made by Assured Guaranty, including its acquisition of BlueMountain, do not result in the benefits anticipated or subject Assured Guaranty to unanticipated consequences; (18) difficulties with the execution of Assured Guaranty’s business strategy; (19) loss of key personnel; (20) the effects of mergers, acquisitions and divestitures; (21) natural or man-made catastrophes or pandemics; (22) other risk factors identified in AGL’s filings with the U.S. SEC; (23) other risks and uncertainties that have not been identified at this time; and; (24) management’s response to these factors. Assured Guaranty undertakes no obligation to update publicly or review any forward looking statement, whether as a result of new information, future developments or otherwise, except as required by law.



Assured Guaranty Ltd.
Selected Financial Highlights (1 of 2)
(dollars in millions, except per share amounts)
Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
GAAP Highlights
Net income (loss) attributable to AGL$86 $69 $214 $265 
Net income (loss) attributable to AGL per diluted share1.02 0.70 2.43 2.61 
Weighted average shares outstanding
Basic shares outstanding83.2 98.2 87.4 100.8 
Diluted shares outstanding
83.8 98.9 88.0 101.6 
Effective tax rate on net income(12.0)%19.2 %8.4 %18.6 %
GAAP return on equity (ROE) (3)
5.3 %4.2 %4.3 %5.4 %
Non-GAAP Highlights (1)
Adjusted operating income (loss)(1)(4)
Insurance$81 $107 $320 $379 
Asset Management(12)— (30)— 
Corporate(18)(28)(83)(79)
Other(3)(2)(7)
Adjusted operating income (loss)$48 $77 $200 $304 
Adjusted operating income (loss) per diluted share (1)(4)
0.58 0.79 2.28 3.00 
Effective tax rate on adjusted operating income (2)
(32.7)%16.3 %8.0 %17.7 %
Adjusted operating ROE (1)(3)(5)
3.2 %5.0 %4.3 %6.5 %
Insurance Segment
Gross written premiums (GWP)$121 $69 $334 $159 
Present value of new business production (PVP) (1)
117 89 264 187 
Gross par written7,432 4,909 16,477 11,799 
Asset Management Segment
Collateralized loan obligation (CLO) net inflows$123 $— $584 $— 
Opportunity funds net outflows(27)— (77)— 
Liquid strategies net inflows— — 370 — 
Wind-down funds net outflows(228)— (1,644)— 
Total net flows$(132)$— $(767)$— 
Effect of refundings and terminations on GAAP measures:
Net earned premiums, pre-tax$17 $37 $64 $83 
Net change in fair value of credit derivatives, pre-tax1  1  
Net income effect14 20 50 54 
Net income per diluted share0.17 0.20 0.57 0.52 
Effect of refundings and terminations on non-GAAP measures:
Operating net earned premiums and credit derivative revenues(6), pre-tax
$18 $37 $65 $83 
Adjusted operating income(6) effect
14 20 50 54 
Adjusted operating income per diluted share (6)
0.17 0.20 0.57 0.52 
1)    Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement and for a description of the changes to the discount rates used in the calculation of non-GAAP financial measure. The prior period has been recast to present these measures at 3%, instead of a 6% discount rate.
2)    Represents the ratio of adjusted operating provision for income taxes to adjusted operating income before income taxes.
3)    Quarterly ROE calculations represent annualized returns. See page 8 for additional information on calculation.
4)     "Adjusted operating income" was formerly known as "Non-GAAP operating income."
5)    "Adjusted operating ROE" was formerly known as "Non-GAAP operating ROE."
6)    Condensed consolidated statement of operations items mentioned in this Financial Supplement that are described as operating (i.e. operating net earned premiums) are non-GAAP measures and represent components of adjusted operating income. Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.

1


Assured Guaranty Ltd.
Selected Financial Highlights (2 of 2)
(dollars in millions, except per share amounts)
As of
September 30, 2020December 31, 2019
AmountPer ShareAmountPer Share
Shareholders' equity attributable to AGL$6,549 $79.63 $6,639 $71.18 
Adjusted operating shareholders' equity (1)(2)
6,070 73.80 6,246 66.96 
Adjusted book value (1)(3)
8,885 108.02 9,047 96.99 
Gain (loss) related to the effect of consolidating variable interest entities (VIE consolidation) included in adjusted operating shareholders' equity0.01 0.07 
Gain (loss) related to VIE consolidation included in adjusted book value(8)(0.11)(4)(0.05)
Shares outstanding at the end of period82.2 93.3 
Exposure
Financial guaranty net debt service outstanding$364,507 $374,130 
Financial guaranty net par outstanding233,075 236,807 
Claims-paying resources (4)
11,125 11,357 
Assets under management (AUM)
CLOs$13,411 $12,758 
Opportunity funds984 1,023 
Liquid strategies378 — 
Wind-down funds2,253 4,046 
Total$17,026 $17,827 

1)    Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement and for a description of the changes to the discount rates used in the calculation of non-GAAP financial measure. The prior period has been recast to present these measures at 3%, instead of a 6% discount rate.
2)    "Adjusted operating shareholders' equity" was formerly known as "Non-GAAP operating shareholders' equity."
3)    "Adjusted book value" was formerly known as "Non-GAAP adjusted book value."
4)    See page 13 for additional detail on claims-paying resources.


2


Assured Guaranty Ltd.
Condensed Consolidated Balance Sheets (unaudited)
(dollars in millions)
As of
September 30,December 31,
20202019
Assets
Investment portfolio:
Fixed-maturity securities available-for-sale, at fair value$8,556 $8,854 
Short-term investments, at fair value858 1,268 
Other invested assets113 118 
Total investment portfolio9,527 10,240 
Cash223 169 
Premiums receivable, net of commissions payable1,321 1,286 
Deferred acquisition costs (DAC)118 111 
Salvage and subrogation recoverable961 747 
Financial guaranty variable interest entities' (FG VIEs') assets, at fair value314 442 
Assets of consolidated investment vehicles1,539 572 
Goodwill and other intangible assets206 216 
Other assets486 543 
Total assets$14,695 $14,326 
Liabilities and shareholders' equity
Unearned premium reserve$3,762 $3,736 
Loss and loss adjustment expense (LAE) reserve982 1,050 
Long-term debt1,223 1,235 
Credit derivative liabilities, at fair value162 191 
FG VIEs' liabilities with recourse, at fair value336 367 
FG VIEs' liabilities without recourse, at fair value19 102 
Liabilities of consolidated investment vehicles1,092 482 
Other liabilities502 511 
Total liabilities8,078 7,674 
Redeemable noncontrolling interests in consolidated investment vehicles21 7 
Common stock
Retained earnings6,143 6,295 
Accumulated other comprehensive income404 342 
Deferred equity compensation
Total shareholders' equity attributable to Assured Guaranty Ltd.6,549 6,639 
Nonredeemable noncontrolling interests47 
Total shareholders' equity6,596 6,645 
Total liabilities, redeemable noncontrolling interests and shareholders' equity$14,695 $14,326 



3


Assured Guaranty Ltd.
Condensed Consolidated Statements of Operations (unaudited)
(dollars in millions, except per share amounts)
Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Revenues
Net earned premiums$107 $123 $331 $353 
Net investment income71 88 229 296 
Asset management fees17 — 60 — 
Net realized investment gains (losses)13 16 12 12 
Net change in fair value of credit derivatives(3)20 (25)
Fair value gains (losses) on FG VIEs— (8)42 
Fair value gains (losses) on consolidated investment vehicles18 — 37 — 
Foreign exchange gain (loss) on remeasurement40 (21)(20)(24)
Commutation gains (losses)— — 38 
Other income (loss)(9)37 12 
Total revenues268 206 736 667 
Expenses
Loss and LAE73 30 130 75 
Interest expense21 22 64 67 
Amortization of DAC11 13 
Employee compensation and benefit expenses57 38 167 118 
Other operating expenses41 27 128 71 
Total expenses196 120 500 344 
Income (loss) before provision for income taxes and equity in net earnings of investees72 86 236 323 
Equity in net earnings of investees— 
Income (loss) before income taxes79 86 239 326 
Provision (benefit) for income taxes(10)17 20 61 
Net income (loss)89 69 219 265 
Less: Noncontrolling interests— — 
Net income (loss) attributable to AGL$86 $69 $214 $265 
Earnings per share:
Basic$1.03 $0.71 $2.45 $2.63 
Diluted$1.02 $0.70 $2.43 $2.61 

4


Assured Guaranty Ltd.
Results by Segment (1 of 2)
(in millions)

Results by Segment for the Three Months Ended September 30, 2020 and September 30, 2019
Three Months Ended September 30, 2020
InsuranceAsset ManagementCorporateOtherTotal
Revenues
Net earned premiums and credit derivative revenues$113 $— $— $(2)$111 
Net investment income75 — — (4)71 
Asset management fees— 12 — 17 
Fair value gains (losses) on FG VIEs— — — — — 
Fair value gains (losses) on consolidated investment vehicles— — — 18 18 
Commutation gains (losses)— — — — — 
Other income (loss)12 — 15 
Total revenues189 14 12 17 232 
Expenses
Loss expense76 — — 77 
Interest expense— — 24 (3)21 
Amortization of DAC and intangible assets— — 
Employee compensation and benefit expenses35 19 — 57 
Other operating expenses19 38 
Total expenses134 29 32 200 
Equity in net earnings of investees20 — — (13)
Income (loss) before income taxes75 (15)(20)(1)39 
Provision (benefit) for income taxes(6)(3)(2)(1)(12)
Noncontrolling interests— — — 
Adjusted operating income (loss)$81 $(12)$(18)$(3)$48 
Three Months Ended September 30, 2019
InsuranceAsset ManagementCorporateOtherTotal
Revenues
Net earned premiums and credit derivative revenues$129 $— $— $(2)$127 
Net investment income89 — (2)88 
Fair value gains (losses) on FG VIEs— — — 
Commutation gains (losses)— — — — — 
Other income (loss)— — — 
Total revenues222 — — 223 
Expenses
Loss expense37 — — 40 
Interest expense— — 23 (1)22 
Amortization of DAC and intangible assets— — — 
Employee compensation and benefit expenses34 — — 38 
Other operating expenses23 — — 27 
Total expenses97 — 31 130 
Equity in net earnings of investees— (1)— — 
Income (loss) before income taxes126 — (31)(2)93 
Provision (benefit) for income taxes19 — (3)— 16 
Noncontrolling interests— — — — — 
Adjusted operating income (loss)$107 $— $(28)$(2)$77 



5


Assured Guaranty Ltd.
Results by Segment (2 of 2)
(in millions)

Results by Segment for the Nine Months Ended September 30, 2020 and September 30, 2019
Nine Months Ended September 30, 2020
InsuranceAsset ManagementCorporateOtherTotal
Revenues
Net earned premiums and credit derivative revenues$345 $— $— $(4)$341 
Net investment income240 — 1��(12)229 
Asset management fees— 40 — 20 60 
Fair value gains (losses) on FG VIEs— — — (8)(8)
Fair value gains (losses) on consolidated investment vehicles— — — 37 37 
Commutation gains (losses)38 — — — 38 
Other income (loss)— 19 
Total revenues631 44 33 716 
Expenses
Loss expense133 — — (7)126 
Interest expense— — 72 (8)64 
Amortization of DAC and intangible assets11 — — 20 
Employee compensation and benefit expenses105 51 11 — 167 
Other operating expenses59 21 16 23 119 
Total expenses308 81 99 496 
Equity in net earnings of investees37 — (5)(29)
Income (loss) before income taxes360 (37)(96)(4)223 
Provision (benefit) for income taxes40 (7)(13)(2)18 
Noncontrolling interests— — — 
Adjusted operating income (loss)$320 $(30)$(83)$(7)$200 
Nine Months Ended September 30, 2019
InsuranceAsset ManagementCorporateOtherTotal
Revenues
Net earned premiums and credit derivative revenues$382 $— $— $(16)$366 
Net investment income298 — (5)296 
Fair value gains (losses) on FG VIEs— — — 42 42 
Commutation gains (losses)— — — 
Other income (loss)16 — (1)— 15 
Total revenues697 — 21 720 
Expenses
Loss expense66 — — 18 84 
Interest expense— — 69 (2)67 
Amortization of DAC and intangible assets13 — — — 13 
Employee compensation and benefit expenses105 — 13 — 118 
Other operating expenses60 — 11 — 71 
Total expenses244 — 93 16 353 
Equity in net earnings of investees— — — 
Income (loss) before income taxes456 — (91)370 
Provision (benefit) for income taxes77 — (12)66 
Noncontrolling interests— — — — — 
Adjusted operating income (loss)$379 $— $(79)$$304 

6


Assured Guaranty Ltd.
Selected Financial Highlights
GAAP to Non-GAAP Reconciliations (1 of 3)
(dollars in millions, except per share amounts)
Adjusted Operating Income ReconciliationThree Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Net income (loss) attributable to AGL$86 $69 $214 $265 
Less pre-tax adjustments:
Realized gains (losses) on investments13 16 12 12 
Non-credit impairment unrealized fair value gains (losses) on credit derivatives(3)11 (29)
Fair value gains (losses) on committed capital securities (CCS)
(10)(14)13 (4)
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves40 (20)(15)(23)
Total pre-tax adjustments40 (7)16 (44)
Less tax effect on pre-tax adjustments(2)(1)(2)
Adjusted operating income (loss)$48 $77 $200 $304 
Per diluted share:
Net income (loss) attributable to AGL$1.02 $0.70 $2.43 $2.61 
Less pre-tax adjustments:
Realized gains (losses) on investments0.16 0.16 0.14 0.11 
Non-credit impairment unrealized fair value gains (losses) on credit derivatives(0.03)0.11 0.07 (0.28)
Fair value gains (losses) on CCS(0.13)(0.14)0.14 (0.04)
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves
0.48 (0.20)(0.17)(0.22)
Total pre-tax adjustments0.48 (0.07)0.18 (0.43)
Tax effect on pre-tax adjustments(0.04)(0.02)(0.03)0.04 
Adjusted operating income (loss)$0.58 $0.79 $2.28 $3.00 


Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.
7


Assured Guaranty Ltd.
Selected Financial Highlights
GAAP to Non-GAAP Reconciliations (2 of 3)
(dollars in millions)
ROE Reconciliation and Calculation
September 30,June 30,December 31,September 30,June 30,December 31,
202020202019201920192018
Shareholders' equity attributable to AGL$6,549 $6,444 $6,639 $6,652 $6,722 $6,555 
Adjusted operating shareholders' equity6,070 5,997 6,246 6,222 6,335 6,342 
Gain (loss) related to VIE consolidation included in adjusted operating shareholders' equity1 8 7 12 12 3 
Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Net income (loss) attributable to AGL$86 $69 $214 $265 
Adjusted operating income (loss)48 77 200 304 
Average shareholders' equity attributable to AGL$6,497 $6,687 $6,594 $6,604 
Average adjusted operating shareholders' equity6,034 6,279 6,158 6,282 
Gain (loss) related to VIE consolidation included in average adjusted operating shareholders' equity5 12 4 8 
GAAP ROE (1)
5.3 %4.2 %4.3 %5.4 %
Adjusted operating ROE (1)
3.2 %5.0 %4.3 %6.5 %

1)    Quarterly ROE calculations represent annualized returns.

Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.

8


Assured Guaranty Ltd.
Selected Financial Highlights
GAAP to Non-GAAP Reconciliations (3 of 3)
(dollars in millions)

As of
September 30,June 30,December 31,September 30,June 30,December 31,
202020202019201920192018
Reconciliation of shareholders' equity attributable to AGL to adjusted book value(1):
Shareholders' equity attributable to AGL$6,549 $6,444 $6,639 $6,652 $6,722 $6,555 
Less pre-tax reconciling items:
Non-credit impairment unrealized fair value gains (losses) on credit derivatives(50)(47)(56)(74)(85)(45)
Fair value gains (losses) on CCS65 76 52 70 84 74 
Unrealized gain (loss) on investment portfolio excluding foreign exchange effect563 510 486 529 478 247 
Less taxes(99)(92)(89)(95)(90)(63)
Adjusted operating shareholders' equity6,070 5,997 6,246 6,222 6,335 6,342 
Pre-tax reconciling items:
Less: Deferred acquisition costs118 116 111 107 106 105 
Plus: Net present value of estimated net future revenue183 188 206 209 211 219 
Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed3,346 3,317 3,296 2,892 2,932 3,005 
Plus taxes(596)(590)(590)(502)(511)(526)
Adjusted book value$8,885 $8,796 $9,047 $8,714 $8,861 $8,935 
Gain (loss) related to VIE consolidation included in adjusted operating shareholders' equity (net of tax (provision) benefit of $(1), $(2), $(2), $(3), $(3) and $(1))$1 $8 $7 $12 $12 $3 
Gain (loss) related to VIE consolidation included in adjusted book value (net of tax (provision) benefit of $2, $1, $1, $-, $1 and $4)$(8)$(2)$(4)$ $(2)$(15)

(1)    See Non-GAAP Financial Measures set forth at the end of this Financial Supplement for a description of the changes to the discount rates used in the calculation of non-GAAP financial measure. The discount rate used for net present value of estimated net future revenues as of September 30, 2020 is 3%. The prior periods have been recast to present the net present value of net future revenues discounted at 3% instead of 6%.

Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.


9


Assured Guaranty Ltd.
Fixed-Maturity Securities, Short-Term Investments and Cash
As of September 30, 2020
(dollars in millions)
Amortized CostAllowance for Credit LossesPre-Tax Book YieldAfter-Tax Book YieldFair Value
Annualized Investment Income (1)
Fixed maturity securities, available-for-sale:
Obligations of states and political subdivisions(2)(4)
$3,665 $(11)3.66 %3.36 %$3,999 $134 
U.S. government and agencies179 — 3.34 2.90 192 
Corporate securities (4)
2,179 (39)3.01 2.63 2,273 65 
Mortgage-backed securities:
Residential mortgage-backed securities (RMBS) (3)(4)
612 (20)4.97 4.17 606 30 
Commercial mortgage-backed securities367 — 3.51 3.03 396 13 
Asset-backed securities (ABS)
CLOs498 — 2.46 1.95 499 12 
Other ABS (4)
434 (6)7.05 5.69 448 31 
Non-U.S. government securities146 — 1.25 1.25 143 
Total fixed maturity securities8,080 (76)3.63 3.20 8,556 293 
Short-term investments858 — 0.06 0.05 858 
Cash (5)
223 — — — 223 — 
Total$9,161 $(76)3.29 %2.90 %$9,637 $294 
Ratings (6):
Fair Value% of Portfolio
U.S. government and agencies$192 2.3 %
AAA/Aaa1,296 15.1 
AA/Aa3,220 37.6 
A/A2,182 25.5 
BBB920 10.8 
Below-investment-grade (BIG) (7)
692 8.1 
Not rated54 0.6 
Total fixed maturity securities, available-for-sale$8,556 100.0 %
Duration of fixed maturity securities and short-term investments (in years):4.1
Average ratings of fixed maturity securities and short-term investmentsA+

1)    Represents annualized investment income based on amortized cost and pre-tax book yields.
2)    Includes obligations of state and local political subdivisions that have been insured by other financial guarantors. The underlying ratings of these bonds, after giving effect to the lower of the rating assigned by S&P Global Ratings, a division of Standard & Poor's Financial Services LLC (S&P) or Moody's Investors Service, Inc. (Moody's), average A. Includes fair value of $8 million insured by Assured Guaranty Municipal Corp. (AGM).
3)    Includes fair value of $200 million in subprime RMBS, which has an average rating of BIG.
4)    Includes securities purchased or obtained as part of loss mitigation or other risk management strategies.
5)    Cash is not included in the yield calculation.
6)    Ratings are represented by the lower of the Moody's and S&P classifications except for bonds purchased for loss mitigation (loss mitigation securities) or other risk management strategies which use internal ratings classifications.
7)    Includes below investment grade securities that were purchased or obtained as part of loss mitigation or other risk management strategies of $1,062 million in par with carrying value of $691 million.


10

























Insurance Segment
11


Assured Guaranty Ltd.
Insurance Segment Results
(dollars in millions)

Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Revenues
Net earned premiums and credit derivative revenues$113 $129 $345 $382 
Net investment income75 89 240 298 
Commutation gains (losses)— — 38 
Other income (loss)16 
Total revenues189 222 631 697 
Expenses
Loss expense76 37 133 66 
Amortization of DAC11 13 
Employee compensation and benefit expenses35 34 105 105 
Other operating expenses19 23 59 60 
Total expenses134 97 308 244 
Equity in net earnings of investees20 37 
Adjusted operating income (loss) before income taxes75 126 360 456 
Provision (benefit) for income taxes(6)19 40 77 
Adjusted operating income (loss)$81 $107 $320 $379 

12


Assured Guaranty Ltd.
Claims-Paying Resources
(dollars in millions)
As of September 30, 2020
Assured Guaranty Municipal Corp.Assured Guaranty Corp.Municipal Assurance Corp.
Assured Guaranty Re Ltd. (7)
Eliminations(2)
Consolidated
Claims-paying resources
Policyholders' surplus$2,671 $1,734 $275 $823 $(478)$5,025 
Contingency reserve(1)
1,042 627 204 — (204)1,669 
Qualified statutory capital3,713 2,361 479 823 (682)6,694 
Unearned premium reserve and net deferred ceding commission income(1)
2,111 400 119 573 (194)3,009 
Loss and LAE reserves (1)
106 (18)(1)134 222 
Total policyholders' surplus and reserves5,930 2,743 597 1,530 (875)9,925 
Present value of installment premium (8)
411 189 — 200 — 800 
CCS200 200 — — — 400 
Total claims-paying resources (including proportionate MAC ownership for AGM and AGC)6,541 3,132 597 1,730 (875)11,125 
Adjustment for MAC (3)
362 235 — — (597)— 
Total claims-paying resources (excluding proportionate MAC ownership for AGM and AGC)$6,179 $2,897 $597 $1,730 $(278)$11,125 
Statutory net exposure (4)
$134,270 $21,216 $14,892 $59,895 $(590)$229,683 
Equity method adjustment (3)
9,039 5,853 — — (14,892)— 
Adjusted statutory net exposure (1)
$143,309 $27,069 $14,892 $59,895 $(15,482)$229,683 
Net debt service outstanding (4)
$215,942 $32,029 $22,013 $91,725 $(1,266)$360,443 
Equity method adjustment (3)
13,362 8,651 — — (22,013)— 
Adjusted net debt service outstanding (1)
$229,304 $40,680 $22,013 $91,725 $(23,279)$360,443 
Ratios:
Adjusted net exposure to qualified statutory capital39:111:131:173:134:1
Capital ratio (5)
62:117:146:1111:154:1
Financial resources ratio (6)
35:113:137:153:132:1
Adjusted statutory net exposure to claims-paying resources (incl. MAC adj. for AGM and AGC)22:19:125:135:121:1

1)    The numbers shown for AGM and Assured Guaranty Corp. (AGC) have been adjusted to include their indirect share of Municipal Assurance Corp. (MAC). AGM and AGC own 60.7% and 39.3%, respectively, of the outstanding stock of Municipal Assurance Holdings Inc., which owns 100% of the outstanding common stock of MAC. AGM has been adjusted to include 100% share of its United Kingdom and French insurance subsidiaries. Amounts include financial guaranty insurance and credit derivatives.
2)    Eliminations are primarily for (i) intercompany surplus notes between AGM and AGC, and (ii) MAC amounts, whose proportionate share are included in AGM and AGC based on ownership percentages, and (iii) eliminations of intercompany deferred ceding commissions. Net exposure and net debt service outstanding eliminations relate to second-to-pay policies under which an Assured Guaranty insurance subsidiary guarantees an obligation already insured by another Assured Guaranty insurance subsidiary, and net exposure related to intercompany cessions from AGM and AGC to MAC.
3)    Represents adjustments for AGM's and AGC's interest and indirect ownership of MAC.
4)    Net exposure and net debt service outstanding are presented on a statutory basis. Includes $1,108 million of specialty insurance and reinsurance exposure.
5)    The capital ratio is calculated by dividing adjusted net debt service outstanding by qualified statutory capital.
6)    The financial resources ratio is calculated by dividing adjusted net debt service outstanding by total claims-paying resources (including MAC adjustment for AGM and AGC).
7)    Assured Guaranty Re Ltd. (AG Re) numbers represent the Company's estimate of U.S. statutory accounting practices prescribed or permitted by insurance regulatory authorities, except for contingency reserves.
8)    Discount rate was changed to 3% in first quarter of 2020 from a 6% discount rate.

Please refer to the Glossary for an explanation of changes in the presentation of net debt service and net par outstanding.

13


Assured Guaranty Ltd.
New Business Production
(dollars in millions)

Reconciliation of GWP to PVP for the Three Months Ended September 30, 2020 and September 30, 2019 (1)

Three Months EndedThree Months Ended
September 30, 2020September 30, 2019
Public FinanceStructured FinancePublic FinanceStructured Finance
U.S.Non - U.S.
U.S.
Non - U.S.TotalU.S.Non - U.S.U.S.Non - U.S.Total
Total GWP$93 $28 $1 $(1)$121 $46 $20 $2 $1 $69 
Less: Installment GWP and other GAAP adjustments(2)
— 28 (1)28 — 20 (1)21 
Upfront GWP93 — — — 93 46 — — 48 
Plus: Installment premium PVP— 24 — — 24 — 16 25 — 41 
Total PVP$93 $24 $— $— $117 $46 $16 $25 $$89 
Gross par written$6,932 $500 $ $ $7,432 $4,212 $237 $438 $22 $4,909 


Reconciliation of GWP to PVP for the Nine Months Ended September 30, 2020 and September 30, 2019 (1)

Nine Months EndedNine Months Ended
September 30, 2020September 30, 2019
Public FinanceStructured FinancePublic FinanceStructured Finance
U.S.Non - U.S.U.S.Non - U.S.TotalU.S.Non - U.S.U.S.Non - U.S.Total
Total GWP$182 $143 $10 $(1)$334 $119 $34 $4 $2 $159 
Less: Installment GWP and other GAAP adjustments(2)
— 143 10 (1)152 (3)34 (1)33 
Upfront GWP182 — — — 182 122 — 126 
Plus: Installment premium PVP— 73 — 82 — 28 32 61 
Total PVP$182 $73 $$— $264 $122 $28 $33 $$187 
Gross par written$14,855 $1,434 $188 $ $16,477 $9,885 $712 $1,159 $43 $11,799 

1)    See Non-GAAP Financial Measures set forth at the end of this Financial Supplement for a description of the changes to the discount rates used in the calculation of non-GAAP financial measure. The discount rate used for PVP as of September 30, 2020 is 3%. Prior period has been recast to present PVP discounted at 3% instead of 6%.

2)    Includes present value of new business on installment policies discounted at the prescribed GAAP discount rates, GWP adjustments on existing installment policies due to changes in assumptions, and other GAAP adjustments.


Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.
14


Assured Guaranty Ltd.
Gross Par Written
(dollars in millions)

Gross Par Written by Asset Type

Three Months EndedNine Months Ended
September 30, 2020September 30, 2020
Gross Par WrittenAvg. Internal RatingGross Par WrittenAvg. Internal Rating
Sector:
U.S. public finance
General obligation$2,578 A-$6,601 A-
Healthcare1,472 BBB+2,428 BBB
Municipal utilities1,125 A-2,179 A-
Taxed backed895 A-1,733 A-
Higher Education861 BBB+1,426 BBB+
TransportationBBB-429 BBB+
Housing revenue— 59 BBB-
Total U.S. public finance6,932 BBB+14,855 A-
Non-U.S. public finance:
Renewable energy383 BBB1,103 BBB
Sovereign and sub-sovereign— 214 A+
Infrastructure finance117 BBB+117 BBB+
Total non-U.S. public finance500 BBB1,434 BBB+
Total public finance7,432 BBB+16,289 A-
U.S. structured finance:
Insurance securitization— 140 AA
Structured credit— 48 BBB
Total U.S. structured finance— 188 A+
Non-U.S. structured finance:
Total non-U.S. structured finance— — 
Total structured finance 188 A+
Total gross par written$7,432 BBB+$16,477 A-


Please refer to the Glossary for a description of internal ratings and sectors.



15


Assured Guaranty Ltd.
New Business Production by Quarter
(dollars in millions)

Nine Months
1Q-192Q-193Q-194Q-191Q-202Q-203Q-2020192020
PVP (1):
Public finance - U.S.$32 $44 $46 $79 $29 $60 $93 $122 $182 
Public finance - non-U.S.16 280 21 28 24 28 73 
Structured finance - U.S.25 20 — 33 
Structured finance - non-U.S.— — — — 
Total PVP$42 $56 $89 $382 $51 $96 $117 $187 $264 
Reconciliation of GWP to PVP:
Total GWP$39 $51 $69 $518 $64 $149 $121 $159 $334 
Less: Installment GWP and other GAAP adjustments21 436 35 89 28 33 152 
Upfront GWP34 44 48 82 29 60 93 126 182 
Plus: Installment premium PVP12 41 300 22 36 24 61 82 
Total PVP (1)
$42 $56 $89 $382 $51 $96 $117 $187 $264 
Gross par written:
Public finance - U.S.$2,016 $3,657 $4,212 $6,452 $2,641 $5,282 $6,932 $9,885 $14,855 
Public finance - non-U.S.176 299 237 5,635 377 557 500 712 1,434 
Structured finance - U.S.494 227 438 422 15 173 — 1,159 188 
Structured finance - non-U.S.21 — 22 45 — — — 43 — 
Total$2,707 $4,183 $4,909 $12,554 $3,033 $6,012 $7,432 $11,799 $16,477 

1)    See Non-GAAP Financial Measures set forth at the end of this Financial Supplement for a description of the changes to the discount rates used in the calculation of non-GAAP financial measure. Prior periods have been recast to present PVP discounted at 3% for first quarter of 2020 and all quarters of 2019, instead of a 6% discount rate.

Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.

16


Assured Guaranty Ltd.
Estimated Net Exposure Amortization(1) and Estimated Future Financial Guaranty Net Premium
and Credit Derivative Revenues
(dollars in millions)
Financial Guaranty Insurance (2)
Estimated Net Debt Service AmortizationEstimated Ending Net Debt Service OutstandingExpected PV Net Earned PremiumsAccretion of DiscountEffect of FG VIE Consolidation on Expected PV Net Earned Premiums and Accretion of Discount
Future Credit Derivative Revenues (3)
2020 (as of September 30)$364,507 
2020 Q4$5,975 358,532 $83 $$$
202123,447 335,085 313 20 11 
202220,855 314,230 287 18 10 
202318,041 296,189 265 17 10 
202418,931 277,258 244 16 
2020-202487,249 277,258 1,192 76 15 43 
2025-202984,518 192,740 956 65 12 40 
2030-203469,574 123,166 669 43 12 32 
2035-203951,231 71,935 400 28 24 
After 203971,935 — 540 48 — 18 
Total$364,507 $3,757 $260 $46 $157 

1)    Represents the future expected amortization of current debt service outstanding (principal and interest), assuming no advance refundings, as of September 30, 2020. Actual amortization differs from expected maturities because borrowers may have the right to call or prepay guaranteed obligations, terminations and because of management's assumptions on structured finance amortization.

2)    See page 20, ‘‘Net Expected Loss to be Expensed.’’

3)     Represents a non-GAAP financial measure. Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.






17


Assured Guaranty Ltd.
Rollforward of Net Expected Loss and LAE to be Paid
(dollars in millions)

Rollforward of Net Expected Loss and LAE to be Paid(1) for the Three Months Ended September 30, 2020

Net Expected Loss to be Paid/(Recovered) as of June 30, 2020Economic Loss Development/(Benefit) During 3Q-20(Paid)/Recovered Losses
During 3Q-20
Net Expected Loss to be Paid/(Recovered) as of September 30, 2020
Public Finance:
U.S. public finance (2)$543 $56 $(336)$263 
Non-U.S public finance29 — 33 
Public Finance572 60 (336)296 
Structured Finance:
U.S. RMBS (3)128 137 
Other structured finance35 (6)38 
Structured Finance163 10 175 
Total$735 $70 $(334)$471 
Rollforward of Net Expected Loss and LAE to be Paid(1) for the Nine Months Ended September 30, 2020

Net Expected Loss to be Paid/(Recovered) as of December 31, 2019Economic Loss Development/(Benefit) During 2020(Paid)/Recovered Losses
During 2020
Net Expected Loss to be Paid/(Recovered) as of September 30, 2020
Public Finance:
U.S. public finance (2)
$531 $142 $(410)$263 
Non-U.S public finance23 33 
Public Finance554 151 (409)296 
Structured Finance:
U.S. RMBS (3)
146 (61)52 137 
Other structured finance37 11 (10)38 
Structured Finance183 (50)42 175 
Total$737 $101 $(367)$471 

1)    Includes expected loss to be paid, economic loss development and paid (recovered) losses for all contracts (i.e. those accounted for as insurance, credit derivatives and FG VIEs).

2)    The total net expected loss for troubled U.S. public finance exposures is net of a credit for estimated future recoveries of $1,025 million as of September 30, 2020 and $819 million as of December 31, 2019, for claims already paid .

3)    Includes future net representations and warranties payable of $82 million as of September 30, 2020 and $53 million as of December 31, 2019.
18


Assured Guaranty Ltd.
Loss Measures
As of September 30, 2020
(dollars in millions)

Three Months Ended September 30, 2020Nine Months Ended September 30, 2020
 Total Net Par Outstanding for BIG Transactions
GAAP Loss and
LAE (1)
Loss and LAE included in Adjusted Operating Income (2)Insurance Segment
Loss and
LAE (3)
GAAP Loss and
LAE (1)
Loss and LAE included in Adjusted Operating Income (2)Insurance Segment
Loss and
LAE (3)
Public finance:
U.S. public finance$5,351 $61 $61 $61 $153 $153 $153 
Non-U.S public finance860 3 3 
Public finance6,211 64 64 64 156 156 156 
Structured finance:
U.S. RMBS1,524 6 (32)(39)(32)
Other structured finance232 3 6 
Structured finance1,756 9 13 12 (26)(30)(23)
Total$7,967 $73 $77 $76 $130 $126 $133 

1)    Includes loss expense related to contracts that are accounted for as insurance contracts.
2)    Includes loss expense related to contracts that are accounted for as insurance contracts and credit derivatives.
3)    Includes loss expense related to contracts that are accounted for as insurance contracts, credit derivatives, and consolidated FG VIEs.




Please refer to the Glossary for an explanation of the presentation of net par outstanding and of the various sectors.

19


Assured Guaranty Ltd.
Net Expected Loss to be Expensed (1)
As of September 30, 2020
(dollars in millions)

GAAP
2020 Q4$9 
202138 
202237 
202333 
202432 
2025-2029135 
2030-203487 
2035-203931 
After 20399 
Total expected present value of net expected loss to be expensed(2)
411 
Future accretion61 
Total expected future loss and LAE$472 

1)    The present value of net expected loss to be paid is discounted using risk free rates ranging from 0.0% to 1.52% for U.S. dollar denominated obligations.

2)      Excludes $32 million related to FG VIEs, which are eliminated in consolidation.


20


Assured Guaranty Ltd.
Financial Guaranty Profile (1 of 3)
(dollars in millions)

Net Par Outstanding and Average Rating by Asset Type
As of September 30, 2020As of December 31, 2019
Net Par OutstandingAvg. Internal RatingNet Par OutstandingAvg. Internal Rating
U.S. public finance:
General obligation$72,452 A-$73,467 A-
Tax backed34,723 A-37,047 A-
Municipal utilities25,596 A-26,195 A-
Transportation15,503 BBB+16,209 BBB+
Healthcare8,688 BBB+7,148 A-
Higher education6,340 A-5,916 A-
Infrastructure finance5,393 A-5,429 A-
Housing revenue1,278 BBB1,321 BBB+
Investor-owned utilities645 A-655 A-
Renewable energy207 A-210 A-
Other public finance1,745 A-1,890 A-
Total public finance172,570 A-175,487 A-
Non-U.S. public finance:
Regulated utilities18,377 BBB+18,995 BBB+
Infrastructure finance17,451 BBB17,952 BBB
Sovereign and sub-sovereign11,368 A+11,341 A+
Renewable energy2,672 A-1,555 A
Pooled infrastructure1,374 AAA1,416 AAA
Total non-U.S. public finance51,242 A-51,259 A-
Total public finance$223,812 A-$226,746 A-
U.S. structured finance:
RMBS$3,132 BBB-$3,546 BBB-
Life insurance transactions1,987 AA-1,776 AA-
Pooled corporate obligations1,299 AA-1,401 AA-
Financial products826 AA-1,019 AA-
Consumer receivables815 A-962 A-
Other structured finance522 BBB596 BBB+
Total U.S. structured finance8,581 A-9,300 A-
Non-U.S. structured finance:
RMBS394 A427 A
Pooled corporate obligations55 BB+55 BB+
Other structured finance233 A+279 A+
Total non-U.S. structured finance682 A761 A
Total structured finance$9,263 A-$10,061 A-
Total$233,075 A-$236,807 A-


Please refer to the Glossary for an explanation of the presentation of net par outstanding and the Company's internal rating approach, and of the various sectors.


21


Assured Guaranty Ltd.
Financial Guaranty Profile (2 of 3)
As of September 30, 2020
(dollars in millions)

Distribution by Ratings of Financial Guaranty Portfolio
Public Finance - U.S.     Public Finance - Non-U.S.Structured Finance - U.S.Structured Finance - Non-U.S.Total
Ratings:Net Par Outstanding%Net Par Outstanding%Net Par Outstanding%Net Par Outstanding%Net Par Outstanding%
AAA$360 0.2 %$2,529 4.9 %$1,068 12.4 %$151 22.1 %$4,108 1.8 %
AA17,046 9.9 5,053 9.9 3,887 45.3 35 5.1 26,021 11.2 
A91,769 53.2 10,628 20.7 1,001 11.7 177 26.0 103,575 44.4 
BBB58,044 33.6 32,172 62.8 910 10.6 278 40.8 91,404 39.2 
BIG5,351 3.1 860 1.7 1,715 20.0 41 6.0 7,967 3.4 
Net Par Outstanding (1)
$172,570 100.0 %$51,242 100.0 %$8,581 100.0 %$682 100.0 %$233,075 100.0 %

1)    As of September 30, 2020, the Company excluded $1.4 billion of net par attributable to loss mitigation securities.


Please refer to the Glossary for an explanation of the presentation of net par outstanding and the Company's internal rating approach, and of the various sectors.




22


Assured Guaranty Ltd.
Financial Guaranty Profile (3 of 3)
As of September 30, 2020
(dollars in millions)


Geographic Distribution of Financial Guaranty Portfolio
Net Par Outstanding% of Total
U.S.:
U.S. public finance:
California$33,609 14.4 %
Pennsylvania15,520 6.6 
New York15,460 6.6 
Texas14,845 6.4 
Illinois13,784 5.9 
New Jersey10,484 4.5 
Florida7,312 3.1 
Michigan5,327 2.3 
Louisiana4,856 2.1 
Puerto Rico4,097 1.8 
Other47,276 20.3 
Total U.S. public finance172,570 74.0 
U.S. structured finance8,581 3.7 
Total U.S.181,151 77.7 
Non-U.S.:
United Kingdom36,967 15.9 
France3,276 1.4 
Canada2,385 1.0 
Australia2,144 0.9 
Spain1,775 0.8 
Other5,377 2.3 
Total non-U.S.51,924 22.3 
Total net par outstanding$233,075 100.0 %

Please refer to the Glossary for an explanation of the presentation of net par outstanding and of the various sectors.


23


Assured Guaranty Ltd.
Specialty Insurance and Reinsurance Exposure
As of September 30, 2020
(dollars in millions)

Gross ExposureNet Exposure
As ofAs of
September 30, 2020December 31, 2019September 30, 2020December 31, 2019
Life insurance transactions (1)
$1,025 $1,046 $883 $898 
Aircraft residual value insurance policies (2)
380 398 225 243 
Total$1,405 $1,444 $1,108 $1,141 

1)    The life insurance transactions net exposure is projected to increase to approximately $0.9 billion by September 30, 2026.

2)    As of September 30, 2020, $30 million of aircraft residual value insurance exposure was rated BIG.

24


Assured Guaranty Ltd.
Expected Amortization of Net Par Outstanding
(dollars in millions)

Structured Finance
Estimated Net Par Amortization
U.S. and Non-U.S. Pooled CorporateU.S. RMBSFinancial ProductsOther Structured FinanceTotalEstimated Ending Net Par Outstanding
2020 (as of September 30)$9,263 
2020 Q4$39 $154 $(8)$82 $267 8,996 
2021293 478 476 1,249 7,747 
2022260 405 17 57 739 7,008 
2023147 318 10 149 624 6,384 
202429 307 14 120 470 5,914 
2020-2024768 1,662 35 884 3,349 5,914 
2025-2029186 813 163 812 1,974 3,940 
2030-2034136 183 547 946 1,812 2,128 
2035-2039169 468 79 944 1,660 468 
After 203995 365 468 — 
Total structured finance$1,354 $3,132 $826 $3,951 $9,263 

Public Finance
Estimated Net Par AmortizationEstimated Ending Net Par Outstanding
2020 (as of September 30)$223,812 
2020 Q4$3,348 220,464 
202112,676 207,788 
202211,036 196,752 
20238,822 187,930 
202410,263 177,667 
2020-202446,145 177,667 
2025-202948,402 129,265 
2030-203444,065 85,200 
2035-203934,651 50,549 
After 203950,549 — 
Total public finance$223,812 

Net par outstanding (end of period)
1Q-192Q-193Q-194Q-191Q-202Q-203Q-20
Public finance - U.S.$181,408 $180,537 $176,515 $175,487 $172,795 $173,143 $172,570 
Public finance - non-U.S.44,615 44,488 42,882 51,259 48,575 49,293 51,242 
Structured finance - U.S.10,337 9,549 9,226 9,300 8,806 8,822 8,581 
Structured finance - non-U.S.965 793 752 761 722 701 682 
Net par outstanding$237,325 $235,367 $229,375 $236,807 $230,898 $231,959 $233,075 


Please refer to the Glossary for an explanation of the presentation of net par outstanding and of the various sectors.
25


Assured Guaranty Ltd.
Exposure to Puerto Rico (1 of 3)
As of September 30, 2020
(dollars in millions)

Exposure to Puerto Rico
Par OutstandingDebt Service Outstanding
 GrossNetGrossNet
   Total$4,161 $4,096 $6,435 $6,352 


Exposure to Puerto Rico by Risk
Net Par Outstanding
 AGMAGCAG Re
Eliminations (1)
Total Net Par OutstandingGross Par Outstanding
Commonwealth Constitutionally Guaranteed
Commonwealth of Puerto Rico - General Obligation Bonds (2)
$574 $185 $353 $— $1,112 $1,150 
Puerto Rico Public Buildings Authority (PBA) (2)
134 — (2)134 140 
Public Corporations - Certain Revenues Potentially Subject to Clawback
Puerto Rico Highways and Transportation Authority (PRHTA) (Transportation revenue) (2)
244 472 180 (79)817 817 
PRHTA (Highway revenue) (2)
399 63 31 — 493 493 
Puerto Rico Convention Center District Authority (PRCCDA)— 152 — — 152 152 
Puerto Rico Infrastructure Financing Authority (PRIFA)— 15 — 16 16 
Other Public Corporations
Puerto Rico Electric Power Authority (PREPA)(2)
489 71 215 — 775 787 
Puerto Rico Aqueduct and Sewer Authority (PRASA) (3)
— 284 89 — 373 373 
Puerto Rico Municipal Finance Agency (MFA) (3)
151 23 49 — 223 232 
University of Puerto Rico (U of PR) (3)
— — — 
Total exposure to Puerto Rico$1,859 $1,400 $918 $(81)$4,096 $4,161 

1)    Net par outstanding eliminations relate to second-to-pay policies under which an Assured Guaranty insurance subsidiary guarantees an obligation already insured by another Assured Guaranty insurance subsidiary.

2)    As of the date of this filing, the seven-member financial oversight board established by the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) has certified a filing under Title III of PROMESA for these exposures.

3)    As of the date of this filing, the Company has not paid claims on these credits.





26


Assured Guaranty Ltd.
Exposure to Puerto Rico (2 of 3)
As of September 30, 2020
(dollars in millions)

Amortization Schedule of Net Par Outstanding of Puerto Rico
 2020 (4Q)2021 (1Q)2021 (2Q)2021 (3Q)2021 (4Q)202220232024202520262027202820292030 - 20342035 - 20392040 - 20442045 - 2047Total
Commonwealth Constitutionally Guaranteed
Commonwealth of Puerto Rico - General Obligation Bonds$— $— $— $15 $— $37 $14 $73 $68 $34 $90 $33 $64 $419 $265 $— $— $1,112 
PBA— — — 13 — — — 11 40 — 38 18 — — 134 
Public Corporations - Certain Revenues Potentially Subject to Clawback
PRHTA (Transportation revenue)— — — 18 — 28 33 29 24 29 34 49 180 307 82 — 817 
PRHTA (Highway revenue)— — — 35 — 40 32 33 34 — 10 13 192 103 — — 493 
PRCCDA— — — — — — — — — — 19 — — 76 57 — — 152 
PRIFA— — — — — — — — — — — — — — 16 
Other Public Corporations
PREPA— — — 28 — 28 95 93 68 106 105 68 39 141 — — 775 
PRASA— — — — — — — 25 27 28 29 — — 15 246 373 
MFA— — — 44 — 43 23 19 18 37 15 12 — — — 223 
U of PR— — — — — — — — — — — — — — — — 
Total$— $— $— $153 $— $176 $206 $223 $248 $240 $326 $187 $172 $1,052 $763 $104 $246 $4,096 



27


Assured Guaranty Ltd.
Exposure to Puerto Rico (3 of 3)
As of September 30, 2020
(dollars in millions)

Amortization Schedule of Net Debt Service Outstanding of Puerto Rico
 2020 (4Q)2021 (1Q)2021 (2Q)2021 (3Q)2021 (4Q)202220232024202520262027202820292030 - 20342035 - 20392040 - 20442045 - 2047Total
Commonwealth Constitutionally Guaranteed
Commonwealth of Puerto Rico - General Obligation Bonds$— $29 $— $45 $— $95 $70 $128 $119 $82 $136 $74 $103 $572 $294 $— $— $1,747 
PBA— — 16 — 13 13 17 45 50 20 — — 196 
Public Corporations - Certain Revenues Potentially Subject to Clawback
PRHTA (Transportation revenue)— 21 — 40 — 69 74 42 67 61 64 67 81 314 371 89 — 1,360 
PRHTA (Highway revenue)— 13 — 48 — 64 54 53 53 18 17 27 29 253 111 — — 740 
PRCCDA— — — 26 103 61 — — 243 
PRIFA— — — — — 10 — 30 
Other Public Corporations
PREPA15 43 62 128 122 91 126 122 80 47 157 — — 1,007 
PRASA— 10 — 10 — 19 19 20 44 44 44 44 14 68 70 82 272 760 
MFA— — 49 — 52 29 24 22 41 17 14 — — — 268 
U of PR— — — — — — — — — — — — — — — — 
Total$$101 $$254 $$375 $396 $403 $417 $397 $472 $316 $292 $1,527 $942 $179 $272 $6,352 



28


Assured Guaranty Ltd.
U.S. RMBS Profile
As of September 30, 2020
(dollars in millions)

Distribution of U.S. RMBS by Rating and Type of Exposure
Ratings:Prime First LienAlt-A First LienOption ARMsSubprime
First Lien
Second LienTotal Net Par Outstanding
AAA$$115 $14 $681 $— $815 
AA30 93 181 315 
A— 26 — 25 112 163 
BBB292 315 
BIG56 299 30 964 175 1,524 
Total exposures$97 $540 $54 $1,860 $581 $3,132 


Distribution of U.S. RMBS by Year Insured and Type of Exposure
 
Year
insured:
Prime First LienAlt-A First LienOption ARMsSubprime
First Lien
Second LienTotal Net Par Outstanding
2004 and prior$18 $18 $— $508 $36 $580 
200541 190 21 211 109 572 
200638 37 205 187 476 
2007— 295 24 896 249 1,464 
2008— — — 40 — 40 
  Total exposures$97 $540 $54 $1,860 $581 $3,132 


Please refer to the Glossary for an explanation of the Company's presentation of net par outstanding and a description of sectors.
























29


Assured Guaranty Ltd.
Direct Pooled Corporate Obligations Profile
As of September 30, 2020
(dollars in millions)


Distribution of Direct Pooled Corporate Obligations by Ratings
Net Par Outstanding% of TotalAvg. Initial Credit EnhancementAvg. Current Credit Enhancement
Ratings:
AAA$198 15.1 %47.1%75.6%
AA703 53.8 %41.0%51.6%
A273 20.9 %43.0%46.2%
BBB92 7.1 %35.7%36.9%
BIG40 3.1 %N/AN/A
Total exposures$1,306 100.0 %41.8%52.2%


Distribution of Direct Pooled Corporate Obligations by Asset Class
Net Par Outstanding% of TotalAvg. Initial Credit EnhancementAvg. Current Credit EnhancementNumber of TransactionsAvg. Rating
Asset class:
Trust preferred
Banks and insurance$530 40.6 %44.3%60.1%14AA
U.S. mortgage and real estate investment trusts104 8.0 47.4%64.5%4A
CLOs558 42.7 38.5%42.5%3A+
Other pooled corporates114 8.7 N/AN/A3A+
Total exposures$1,306 100.0 %41.8%52.2%24AA-


Please refer to the Glossary for an explanation of internal ratings, performance indicators and sectors.



30


Assured Guaranty Ltd.
Below Investment Grade Exposures (1 of 3)
(dollars in millions)

BIG Exposures by Asset Exposure Type
As of
September 30,December 31,
20202019
U.S. public finance:
Tax backed$1,874 $1,858 
General obligation1,630 1,969 
Municipal utilities1,418 1,472 
Higher education146 178 
Transportation99 100 
Infrastructure finance33 35 
Healthcare30 32 
Housing revenue17 17 
Renewable energy— 
Other public finance104 107 
Total U.S. public finance5,351 5,771 
Non-U.S. public finance:
Sovereign and sub-sovereign440 415 
Infrastructure finance382 444 
Renewable energy38 39 
Total non-U.S. public finance860 898 
Total public finance$6,211 $6,669 
U.S. structured finance:
RMBS$1,524 $1,618 
Consumer receivables94 108 
Life insurance transactions40 40 
Other structured finance57 30 
Total U.S. structured finance1,715 1,796 
Non-U.S. structured finance:
Pooled corporate obligations40 40 
Other structured finance
Total non-U.S. structured finance41 41 
Total structured finance$1,756 $1,837 
Total BIG net par outstanding$7,967 $8,506 


Please refer to the Glossary for an explanation of the Company's presentation of net par outstanding and a description of various sectors.


31


Assured Guaranty Ltd.
Below Investment Grade Exposures (2 of 3)
(dollars in millions)


Net Par Outstanding by BIG Category(1)
As of
September 30,December 31,
20202019
BIG Category 1
U.S. public finance$1,318 $1,582 
Non-U.S. public finance812 854 
U.S. structured finance250 191 
Non-U.S. structured finance40 40 
Total BIG Category 12,420 2,667 
BIG Category 2
U.S. public finance429 430 
Non-U.S. public finance— — 
U.S. structured finance99 136 
Non-U.S. structured finance— — 
Total BIG Category 2528 566 
BIG Category 3
U.S. public finance3,604 3,759 
Non-U.S. public finance48 44 
U.S. structured finance1,366 1,469 
Non-U.S. structured finance
Total BIG Category 35,019 5,273 
BIG Total$7,967 $8,506 

1)    Assured Guaranty's surveillance department is responsible for monitoring the Company's portfolio of credits and maintains a list of BIG credits. BIG Category 1: Below-investment-grade transactions showing sufficient deterioration to make future losses possible, but for which none are currently expected. BIG Category 2: Below-investment-grade transactions for which future losses are expected but for which no claims (other than liquidity claims which are claims that the Company expects to be reimbursed within one year) have yet been paid. BIG Category 3: Below-investment-grade transactions for which future losses are expected and on which claims (other than liquidity claims) have been paid.


Please refer to the Glossary for an explanation of the Company's internal rating approach, presentation of net par outstanding and a description of various sectors.



32


Assured Guaranty Ltd.
Below Investment Grade Exposures (3 of 3)
As of September 30, 2020
(dollars in millions)

Public Finance and Structured Finance BIG Exposures with Revenue Sources Greater Than $50 Million
Net Par OutstandingInternal
Rating (1)
60+ Day Delinquencies
Name or description
U.S. public finance:
Puerto Rico Highways & Transportation Authority$1,310 CCC
Puerto Rico, General Obligation, Appropriations and Guarantees of the Commonwealth1,262 CCC
Puerto Rico Electric Power Authority775 CCC
Puerto Rico Aqueduct & Sewer Authority373 CCC
Puerto Rico Municipal Finance Agency223 CCC
Jackson Water & Sewer System, Mississippi180  BB
Virgin Islands Public Finance Authority (Gross Receipts)166 BB
Puerto Rico Convention Center District Authority152 CCC
Stockton City, California104 B
Harrisburg Parking System, Pennsylvania77 BB
Alabama State University74 BB+
Atlantic City, New Jersey55 BB
Virgin Islands Water and Power Authority52 CCC
Total U.S. public finance$4,803 
Non-U.S. public finance:
Valencia Fair$328 BB+
Road Management Services PLC (A13 Highway)169 B+
M6 Duna Autopalya Koncesszios Zrt.109 BB+
CountyRoute (A130) plc71 BB-
Total non-U.S. public finance$677 
Total$5,480 
U.S. structured finance:
RMBS:
Option One 2007-FXD2$163 CCC25.0%
Soundview 2007-WMC1154 CCC41.6%
Option One Mortgage Loan Trust 2007-HL1108 CCC21.8%
Nomura Asset Accept. Corp. 2007-197 CCC34.7%
Argent Securities Inc. 2005-W493 CCC11.1%
New Century 2005-A79 CCC27.1%
MABS 2007-NCW58 BB28.2%
ACE 2007-SL152 CCC2.2%
ACE 2007-D150 CCC18.7%
Subtotal RMBS$854 
Non-RMBS:
National Collegiate Trust Series 2006-2$51 CCC1.4%
Subtotal non-RMBS$51 
Total U.S. structured finance$905 
Total non-U.S. structured finance$— 
Total$905 

1)    Transactions below B- are categorized as CCC.

Please refer to the Glossary for an explanation of the Company's internal rating approach, presentation of net par outstanding and a description of performance indicators and sectors.
33


Assured Guaranty Ltd.
Largest Exposures by Sector (1 of 3)
As of September 30, 2020
(dollars in millions)

50 Largest U.S. Public Finance Exposures by Revenue Source
Credit Name:Net Par OutstandingInternal
Rating (1)
New Jersey (State of)$3,993 BBB
New York Metropolitan Transportation Authority1,893 A-
Pennsylvania (Commonwealth of)1,866 A-
Illinois (State of)1,705 BBB
Puerto Rico Highways & Transportation Authority1,310 CCC
Puerto Rico, General Obligation, Appropriations and Guarantees of the Commonwealth1,262 CCC
North Texas Tollway Authority1,144 A
Metro Washington Airports Authority (Dulles Toll Road)1,083 BBB
Foothill/Eastern Transportation Corridor Agency, California1,011 BBB
CommonSpirit Health, IL1,000 A-
California (State of)995 AA-
New York (City of), New York980 AA-
San Diego Family Housing, LLC938 AA
Philadelphia School District, Pennsylvania917 A-
Chicago Public Schools, Illinois913 BBB-
Great Lakes Water Authority (Sewerage), Michigan897 A-
Port Authority of New York and New Jersey865 BBB-
Massachusetts (Commonwealth of)864 AA-
Alameda Corridor Transportation Authority, California850 BBB+
Suffolk County, New York826 BBB
Massachusetts (Commonwealth of) Water Resources823 AA
Long Island Power Authority817 A-
Puerto Rico Electric Power Authority775 CCC
Pennsylvania Turnpike Commission773 A-
ProMedica Healthcare Obligated Group, Ohio750 BBB
Montefiore Medical Center, New York749 BBB-
Metropolitan Pier and Exposition Authority, Illinois748 BBB-
Jefferson County Alabama Sewer714 BBB
Nassau County, New York704 A-
Clark County School District, Nevada689 BBB+
Regional Transportation Authority (Sales Tax), Illinois626 AA-
Connecticut (State of)625 A-
Philadelphia (City of), Pennsylvania623 BBB+
Pittsburgh Water & Sewer, Pennsylvania595 A-
North Carolina Turnpike Authority586 BBB-
Hayward Unified School District, California585 A
LCOR Alexandria LLC582 BBB+
Oglethorpe Power Corporation, Georgia575 BBB
Georgia Board of Regents568 A
Chicago (City of), Illinois556 BBB
Garden State Preservation Trust, New Jersey Open Space & Farmland553 BBB+
Wisconsin (State of)521 A+
New Jersey Turnpike Authority518 A-
Sacramento County, California482 A-
San Bernardino City Unified School District, California467 A+
Yankee Stadium LLC New York City Industrial Development Authority462 BBB
New York State Thruway Authority461 A-
Harris County - Houston Sports Authority, Texas446 BBB
Jets Stadium Development, LLC443 BBB
New Haven (City of), Connecticut422 BBB-
   Total top 50 U.S. public finance exposures$43,550 
1)    Transactions below B- are categorized as CCC.

Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors.
34


Assured Guaranty Ltd.
Largest Exposures by Sector (2 of 3)
As of September 30, 2020
(dollars in millions)

25 Largest U.S. Structured Finance Exposures
Credit Name:Net Par OutstandingInternal
Rating (1)
Private US Insurance Securitization$530 AA
Private US Insurance Securitization500 AA-
Private US Insurance Securitization361 AA-
SLM Student Loan Trust 2007-A359 A+
Fortress Credit Opportunities VII CLO Limited257 AA-
Private US Insurance Securitization235 AA-
ABPCI Direct Lending Fund CLO I Ltd208 A
Option One 2007-FXD2163 CCC
SLM Student Loan Trust 2006-C158 AA-
Soundview 2007-WMC1154 CCC
Private US Insurance Securitization138 AA
Timberlake Financial, LLC Floating Insured Notes126 BBB+
CWABS 2007-4114 A+
New Century Home Equity Loan Trust 2006-1111 AAA
Option One Mortgage Loan Trust 2007-HL1108 CCC
Nomura Asset Accept. Corp. 2007-197 CCC
Soundview Home Equity Loan Trust 2006-OPT197 AAA
Brightwood Fund III Static 2018-1, LLC93 AA
Argent Securities Inc. 2005-W493 CCC
Countrywide HELOC 2006-I88 A
OwnIt Mortgage Loan ABS Certificates 2006-386 AAA
CWALT Alternative Loan Trust 2007-HY982 A
New Century 2005-A79 CCC
Preferred Term Securities XXIV, Ltd.78 AA-
Structured Asset Investment Loan Trust 2006-176 AAA
   Total top 25 U.S. structured finance exposures$4,391 

1)    Transactions below B- are categorized as CCC.

Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors.
35


Assured Guaranty Ltd.
Largest Exposures by Sector (3 of 3)
As of September 30, 2020
(dollars in millions)

50 Largest Non-U.S. Exposures by Revenue Source
Credit Name:CountryNet Par OutstandingInternal Rating
Southern Water Services LimitedUnited Kingdom$2,696 BBB
Quebec ProvinceCanada1,945 A+
Thames Water Utility Finance PLCUnited Kingdom1,866 BBB
Societe des Autoroutes du Nord et de l'Est de France S.A.France1,811 BBB+
Southern Gas Networks PLCUnited Kingdom1,741 BBB
Dwr Cymru Financing Limited (Welsh Water Plc)United Kingdom1,617 A-
Anglian Water Services Financing PLCUnited Kingdom1,473 A-
National Grid Gas PLCUnited Kingdom1,292 BBB+
British Broadcasting Corporation (BBC)United Kingdom1,238 A+
Channel Link Enterprises Finance PLCFrance, United Kingdom1,220 BBB
Verbund, Lease and Sublease of Hydro-Electric EquipmentAustria1,133 AAA
Capital Hospitals (Issuer) PLCUnited Kingdom890 BBB-
Aspire Defence Finance plcUnited Kingdom822 BBB+
Verdun Participations 2 S.A.S.France739 BBB-
Yorkshire Water Services Finance PlcUnited Kingdom662 A-
Sydney Airport Finance CompanyAustralia635 BBB+
Envestra LimitedAustralia634 A-
Campania Region - Healthcare receivableItaly606 BB+
South Lanarkshire SchoolsUnited Kingdom586 BBB
National Grid Company PLCUnited Kingdom576 BBB+
Coventry & Rugby Hospital Company (Walsgrave Hospital) PlcUnited Kingdom534 BBB-
Severn Trent Water Utilities Finance PlcUnited Kingdom524 BBB+
Derby Healthcare PLCUnited Kingdom505 BBB
Wessex Water Services Finance PlcUnited Kingdom482 BBB+
International Infrastructure PoolUnited Kingdom458 AAA
International Infrastructure PoolUnited Kingdom458 AAA
International Infrastructure PoolUnited Kingdom458 AAA
North Staffordshire PFI, 32-year EIB Index-Linked FacilityUnited Kingdom451 BBB-
Central Nottinghamshire Hospitals PLCUnited Kingdom450 BBB
United Utilities Water PLCUnited Kingdom449 BBB+
NewHospitals (St Helens & Knowsley) Finance PLCUnited Kingdom449 BBB+
South East WaterUnited Kingdom422 BBB
Japan Expressway Holding and Debt Repayment AgencyJapan418 A+
Scotland Gas Networks plcUnited Kingdom417 BBB
Comision Federal De Electricidad (CFE) El Cajon ProjectMexico413 BBB-
Q Energy - Phase IISpain390 BBB+
Hypersol Solar Inversiones, S.A.U.Spain382 BBB
BBI (DBCT) Finance Pty LimitedAustralia380 BBB
The Hospital Company (QAH Portsmouth) LimitedUnited Kingdom369 BBB
Private International Sub-Sovereign TransactionUnited Kingdom364 AA-
NATS (En Route) PLCUnited Kingdom353 A-
Q Energy - Phase IIISpain346 BBB+
Valencia FairSpain328 BB+
Octagon Healthcare Funding PLCUnited Kingdom326 BBB
Private International Sub-Sovereign TransactionUnited Kingdom321 AA
Bakethin Finance PlcUnited Kingdom307 A-
Leeds Hospital - St. James's Oncology Financing plcUnited Kingdom301 BBB
Catalyst Healthcare (Romford) Financing PLCUnited Kingdom298 BBB
Republic of PolandPoland295 A-
Dali Capital PLC-Northumbrian WaterUnited Kingdom293 BBB+
Total top 50 non-U.S. exposures$36,123 

Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors.
36















Asset Management Segment

37


Assured Guaranty Ltd.
Asset Management Segment Results (1 of 3)
(dollars in millions)
Three Months Ended September 30, 2020Nine Months Ended September 30, 2020
Revenues
Management fees:
CLOs$$12 
Opportunity funds and liquid strategies
Wind-down funds21 
Total management fees12 40 
Other income
Total revenues14 44 
Expenses
Amortization of intangible assets
Employee compensation and benefit expenses19 51 
Other operating expenses21 
Total expenses29 81 
Adjusted operating income (loss) before income taxes(15)(37)
Provision (benefit) for income taxes(3)(7)
Adjusted operating income (loss)$(12)$(30)


38


Assured Guaranty Ltd.
Asset Management Segment Results (2 of 3)
(dollars in millions)

Rollforward of Assets Under Management for the Three Months Ended September 30, 2020

 CLOsOpportunity FundsLiquid StrategiesWind-Down FundsTotal
AUM, June 30, 2020$13,212 $973 $371 $2,460 $17,016 
Inflows168 — — — 168 
Outflows:
Redemptions— — — — — 
Distributions(45)(27)— (228)(300)
Total outflows(45)(27)— (228)(300)
Net flows123 (27)— (228)(132)
Change in fund value76 38 21 142 
AUM, September 30, 2020$13,411 $984 $378 $2,253 $17,026 

Rollforward of Assets Under Management for the Nine Months Ended September 30, 2020

 CLOsOpportunity FundsLiquid StrategiesWind-Down FundsTotal
AUM, December 31, 2019$12,758 $1,023 $ $4,046 $17,827 
Inflows909 118 370 — 1,397 
Outflows:
Redemptions— — — — — 
Distributions(325)(195)— (1,644)(2,164)
Total outflows(325)(195)— (1,644)(2,164)
Net flows584 (77)370 (1,644)(767)
Change in fund value69 38 (149)(34)
AUM, September 30, 2020$13,411 $984 $378 $2,253 $17,026 
39


Assured Guaranty Ltd.
Asset Management Segment Results (3 of 3)
(dollars in millions)

Components of Assets Under Management as of September 30, 2020 and December 31, 2019

 CLOsOpportunity FundsLiquid StrategiesWind-Down FundsTotal
As of September 30, 2020:
Funded AUM (1)
$13,350 $879 $378 $2,231 $16,838 
Unfunded AUM (1)
61 105 — 22 188 
Fee Earning AUM (2)
$8,001 $805 $378 $2,093 $11,277 
Non-Fee Earning AUM (2)
5,410 179 — 160 5,749 
Intercompany AUM
Funded AUM (1)
$331 $207 $357 $— $895 
Unfunded AUM (1)
50 56 — — 106 
As of December 31, 2019:
Funded AUM (1)
$12,721 $796 $— $3,980 $17,497 
Unfunded AUM (1)
37 227 — 66 330 
Fee Earning AUM (2)
$3,438 $695 $— $3,838 $7,971 
Non-Fee Earning AUM (2)
9,320 328 — 208 9,856 
Intercompany AUM
Funded AUM (1)
$19 $58 $— $— $77 
Unfunded AUM (1)
30 84 — — 114 
1)    Funded AUM refers to assets that have been deployed or invested into the funds or CLOs. Unfunded AUM refers to unfunded capital commitments from closed-end funds and CLO warehouse fund.

2)    Fee Earning AUM refers to assets where AssuredIM collects fees or has elected not to waive or rebate fees to investors. Non-Fee Earning AUM refers to assets where AssuredIM does not collect fees or has elected to waive or rebate fees to investors.
40












Corporate Division

41


Assured Guaranty Ltd.
Corporate Results
(dollars in millions)
Three Months EndedNine Months Ended
September 30,September 30,
2020201920202019
Total revenues$12 $$$
Expenses
Interest expense24 23 72 69 
Employee compensation and benefit expenses11 13 
Other operating expenses16 11 
Total expenses32 31 99 93 
Equity in net earnings of investees— (1)(5)— 
Adjusted operating income (loss) before income taxes(20)(31)(96)(91)
Provision (benefit) for income taxes(2)(3)(13)(12)
Adjusted operating income (loss)$(18)$(28)$(83)$(79)

42













Other

43


Assured Guaranty Ltd.
Other Results (1 of 2)
(dollars in millions)
Three Months Ended September 30, 2020
FG VIEsConsolidated Investment VehiclesIntersegment Eliminations and ReclassesTotal Other
(in millions)
Revenues
Net earned premiums$(2)$— $— $(2)
Net investment income(1)— (3)(4)
Asset management fees— (2)
Fair value gains (losses) on FG VIEs— — — — 
Fair value gains (losses) on consolidated investment vehicles— 18 — 18 
Total revenues(3)16 17 
Expenses
Loss and LAE— — 
Interest expense— — (3)(3)
Other operating expenses— — 
Total expenses— 
Equity in net earnings of investees— (13)— (13)
Adjusted operating income (loss) before income taxes(4)— (1)
Provision (benefit) for income taxes(1)— — (1)
Noncontrolling interests— — 
Adjusted operating income (loss)$(3)$ $ $(3)

Three Months Ended September 30, 2019
FG VIEsConsolidated Investment VehiclesIntersegment Eliminations and ReclassesTotal Other
(in millions)
Revenues
Net earned premiums$(2)$— $— $(2)
Net investment income(1)— (1)(2)
Fair value gains (losses) on FG VIEs— — 
Total revenues— (1)— 
Expenses
Loss and LAE— — 
Interest expense— — (1)(1)
Other operating expenses— — — — 
Total expenses— (1)
Equity in net earnings of investees— — — — 
Adjusted operating income (loss) before income taxes(2)— — (2)
Provision (benefit) for income taxes— — — — 
Noncontrolling interests— — — — 
Adjusted operating income (loss)$(2)$ $ $(2)













44


Assured Guaranty Ltd.
Other Results (2 of 2)
(dollars in millions)
Nine Months Ended September 30, 2020
FG VIEsConsolidated Investment VehiclesIntersegment Eliminations and ReclassesTotal Other
(in millions)
Revenues
Net earned premiums$(4)$— $— $(4)
Net investment income(4)— (8)(12)
Asset management fees— (4)24 20 
Fair value gains (losses) on FG VIEs(8)— — (8)
Fair value gains (losses) on consolidated investment vehicles— 37 — 37 
Total revenues(16)33 16 33 
Expenses
Loss and LAE(7)— — (7)
Interest expense— — (8)(8)
Other operating expenses— (1)24 23 
Total expenses(7)(1)16 
Equity in net earnings of investees— (29)— (29)
Adjusted operating income (loss) before income taxes(9)— (4)
Provision (benefit) for income taxes(2)— — (2)
Noncontrolling interests— — 
Adjusted operating income (loss)$(7)$— $— $(7)

Nine Months Ended September 30, 2019
FG VIEsConsolidated Investment VehiclesIntersegment Eliminations and ReclassesTotal Other
(in millions)
Revenues
Net earned premiums$(16)$— $— $(16)
Net investment income(3)— (2)(5)
Fair value gains (losses) on FG VIEs42 — — 42 
Total revenues23 — (2)21 
Expenses
Loss and LAE18 — — 18 
Interest expense— — (2)(2)
Other operating expenses— — — — 
Total expenses18 — (2)16 
Equity in net earnings of investees— — — — 
Adjusted operating income (loss) before income taxes— — 
Provision (benefit) for income taxes— — 
Noncontrolling interests— — — — 
Adjusted operating income (loss)$4 $ $ $4 

45













Summary

46


Assured Guaranty Ltd.
Summary of Financial and Statistical Data
(dollars in millions, except per share amounts)
As of and for the Nine Months Ended September 30, 2020Year Ended December 31,
2019201820172016
GAAP Summary Statements of Operations Data
Net earned premiums$331 $476 $548 $690 $864 
Net investment income229 378 395 417 408 
Total expenses500 503 422 748 660 
Income (loss) before income taxes239 460 580 991 1,017 
Net income (loss) attributable to AGL214 402 521 730 881 
Net income (loss) attributable to AGL per diluted share2.43 4.00 4.68 5.96 6.56 
GAAP Summary Balance Sheet Data
Total investments and cash$9,750 $10,409 $10,977 $11,539 $11,103 
Total assets14,695 14,326 13,603 14,433 14,151 
Unearned premium reserve3,762 3,736 3,512 3,475 3,511 
Loss and LAE reserve982 1,050 1,177 1,444 1,127 
Long-term debt1,223 1,235 1,233 1,292 1,306 
Shareholders’ equity attributable to AGL6,549 6,639 6,555 6,839 6,504 
Shareholders’ equity attributable to AGL per share79.63 71.18 63.23 58.95 50.82 
Other Financial Information (GAAP Basis)
Financial guaranty:
Net debt service outstanding (end of period)$364,507 $374,130 $371,586 $401,118 $437,535 
Gross debt service outstanding (end of period)365,436 375,776 375,080 408,492 455,000 
Net par outstanding (end of period)233,075 236,807 241,802 264,952 296,318 
Gross par outstanding (end of period)233,960 238,156 244,191 269,386 307,474 
Other Financial Information (Statutory Basis)(1)
Financial guaranty:
Net debt service outstanding (end of period)$359,335 $367,630 $359,499 $373,340 $401,004 
Gross debt service outstanding (end of period)360,263 369,251 362,974 380,478 417,072 
Net par outstanding (end of period)228,574 230,984 230,664 239,003 262,468 
Gross par outstanding (end of period)229,460 232,333 233,036 243,217 272,286 
Claims-paying resources(2)
Policyholders' surplus$5,025 $5,056 $5,148 $5,305 $5,126 
Contingency reserve1,669 1,607 1,663 1,750 2,008 
Qualified statutory capital6,694 6,663 6,811 7,055 7,134 
Unearned premium reserve and net deferred ceding commission income
3,009 2,961 2,950 2,849 2,672 
Loss and LAE reserves222 529 1,023 1,092 888 
Total policyholders' surplus and reserves9,925 10,153 10,784 10,996 10,694 
Present value of installment premium (3)
800 804 577 559 616 
CCS and standby line of credit400 400 400 400 400 
Excess of loss reinsurance facility— — 180 180 360 
Total claims-paying resources$11,125 $11,357 $11,941 $12,135 $12,070 
Ratios:
Net exposure to qualified statutory capital34 :135 :134 :134 :137 :1
Capital ratio54 :155 :153 :153 :156 :1
Financial resources ratio32 :132 :130 :131 :133 :1
Adjusted statutory net exposure to claims-paying resources21 :120 :119 :120 :122 :1
Par and Debt Service Written (FG and specialty)
Gross debt service written:
Public finance - U.S.$23,125 $28,054 $31,989 $26,988 $25,423 
Public finance - non-U.S.1,861 17,907 7,166 2,811 848 
Structured finance - U.S.315 1,704 1,191 500 1,143 
Structured finance - non-U.S.— 88 369 202 30 
Total gross debt service written$25,301 $47,753 $40,715 $30,501 $27,444 
Net debt service written$25,301 $47,731 $40,630 $30,476 $27,444 
Net par written16,477 24,331 24,538 17,962 17,854 
Gross par written16,477 24,353 24,624 18,024 17,854 

1)    Statutory amounts prepared on a consolidated basis. The National Association of Insurance Commissioners Annual Statements for U.S. Domiciled Insurance Subsidiaries are prepared on a stand-alone basis.
2)    See page 13 for additional detail on claims-paying resources.
3)    Discount rate was changed from 6% to 3% in first quarter 2020. Prior periods have been updated to reflect the change.

Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.
Please refer to the Glossary for an explanation of the presentation of net debt service and net par outstanding and of the various sectors.
47


Assured Guaranty Ltd.
Summary of GAAP to Non-GAAP Reconciliations(1) (1 of 2)
(dollars in millions, except per share amounts)
Nine Months Ended September 30, 2020Year Ended December 31,
2019201820172016
Total GWP$334 $677 $612 $307 $154 
Less: Installment GWP and other GAAP adjustments (2)
152 469 119 99 (10)
Upfront GWP182 208 493 208 164 
Plus: Installment premium PVP82 361 204 107 61 
Total PVP (3)
$264 $569 $697 $315 $225 
PVP (3):
Public finance - U.S.$182 $201 $402 $197 $161 
Public finance - non-U.S.73 308 116 89 29 
Structured finance - U.S.53 167 14 34 
Structured finance - non-U.S.— 12 15 
Total PVP$264 $569 $697 $315 $225 
Adjusted operating income reconciliation:
Net income (loss) attributable to AGL$214 $402 $521 $730 $881 
Less pre-tax adjustments:
Realized gains (losses) on investments12 22 (32)40 (30)
Non-credit impairment unrealized fair value gains (losses) on credit derivatives(10)101 43 36 
Fair value gains (losses) on CCS13 (22)14 (2)— 
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves(15)22 (32)57 (33)
Total pre-tax adjustments16 12 51 138 (27)
Less tax effect on pre-tax adjustments(2)(1)(12)(69)13 
Adjusted operating income (loss)$200 $391 $482 $661 $895 
Adjusted operating income per diluted share reconciliation:
Net income (loss) attributable to AGL per diluted share$2.43 $4.00 $4.68 $5.96 $6.56 
Less pre-tax adjustments:
Realized gains (losses) on investments0.14 0.22 (0.29)0.33 (0.23)
Non-credit impairment unrealized fair value gains (losses) on credit derivatives0.07 (0.11)0.90 0.35 0.27 
Fair value gains (losses) on CCS0.14 (0.22)0.13 (0.02)— 
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves(0.17)0.21 (0.29)0.46 (0.25)
Total pre-tax adjustments0.18 0.10 0.45 1.12 (0.21)
Tax effect on pre-tax adjustments(0.03)(0.01)(0.11)(0.57)0.09 
Adjusted operating income (loss) per diluted share$2.28 $3.91 $4.34 $5.41 $6.68 

1)    Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.

2)    Includes present value of new business on installment policies discounted at the prescribed GAAP discount rates, GWP adjustments on existing installment policies due to changes in assumptions, and other GAAP adjustments.

3)    See Non-GAAP Financial Measures set forth at the end of this Financial Supplement for a description of the changes to the discount rates used in the calculation of non-GAAP financial measure. The discount rate used for PVP as of September 30, 2020 is 3%. The prior periods have been recast to present PVP discounted at 3% instead of 6%.

48


Assured Guaranty Ltd.
Summary of GAAP to Non-GAAP Reconciliations(1) (2 of 2)
(dollars in millions, except per share amounts)
As of September 30, 2020As of December 31,
2019201820172016
Adjusted book value reconciliation:
Shareholders' equity attributable to AGL$6,549 $6,639 $6,555 $6,839 $6,504 
Less pre-tax adjustments:
Non-credit impairment unrealized fair value gains (losses) on credit derivatives(50)(56)(45)(146)(189)
Fair value gains (losses) on CCS65 52 74 60 62 
Unrealized gain (loss) on investment portfolio excluding foreign exchange effect563 486 247 487 316 
Less taxes(99)(89)(63)(83)(71)
Adjusted operating shareholders' equity6,070 6,246 6,342 6,521 6,386 
Pre-tax adjustments:
Less: Deferred acquisition costs118 111 105 101 106 
Plus: Net present value of estimated net future revenue183 206 219 162 147 
Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed3,346 3,296 3,005 2,966 2,922 
Plus taxes(596)(590)(526)(515)(835)
Adjusted book value$8,885 $9,047 $8,935 $9,033 $8,514 
Gain (loss) related to VIE consolidation included in adjusted operating shareholders' equity (net of tax (provision) benefit of $(1), $(2), $(1), $(2), and $4)$$$$$(7)
Gain (loss) related to VIE consolidation included in adjusted book value (net of tax (provision) benefit of $2, $1, $4, $3, and $12)$(8)$(4)$(15)$(14)$(24)
Adjusted book value per share reconciliation:
Shareholders' equity attributable to AGL per share$79.63 $71.18 $63.23 $58.95 $50.82 
Less pre-tax adjustments:
Non-credit impairment unrealized fair value gains (losses) on credit derivatives(0.60)(0.60)(0.44)(1.26)(1.48)
Fair value gains (losses) on CCS0.79 0.56 0.72 0.52 0.48 
Unrealized gain (loss) on investment portfolio excluding foreign exchange effect6.85 5.21 2.39 4.20 2.47 
Less taxes(1.21)(0.95)(0.61)(0.71)(0.54)
Adjusted operating shareholders' equity per share73.80 66.96 61.17 56.20 49.89 
Pre-tax adjustments:
Less: Deferred acquisition costs1.44 1.19 1.01 0.87 0.83 
Plus: Net present value of estimated net future revenue2.23 2.20 2.11 1.40 1.15 
Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed40.68 35.34 28.98 25.56 22.83 
Plus taxes(7.25)(6.32)(5.07)(4.43)(6.52)
Adjusted book value per share$108.02 $96.99 $86.18 $77.86 $66.52 
Gain (loss) related to VIE consolidation included in adjusted operating shareholders' equity per share$0.01 $0.07 $0.03 $0.03 $(0.06)
Gain (loss) related to VIE consolidation included in adjusted book value per share$(0.11)$(0.05)$(0.15)$(0.12)$(0.18)

1)    See Non-GAAP Financial Measures set forth at the end of this Financial Supplement for a description of the changes to the discount rates used in the calculation of non-GAAP financial measure. The discount rate used for net present value of estimated net future revenues as of September 30, 2020 is 3%. The prior periods have been recast to present the net present value of net future revenues discounted at 3% instead of 6%.

49


Glossary

Net Par Outstanding and Internal Ratings
Net Par Outstanding is insured par exposure, net of reinsurance cessions. Unless otherwise indicated, GAAP net par outstanding amounts exclude amounts as a result of loss mitigation strategies, including securities the Company has purchased for loss mitigation purposes that are held in the investment portfolio.

Internal Rating utilizes the Company’s ratings scale, which is similar to that used by the nationally recognized statistical rating organizations; however, the ratings in the tables may not be the same as ratings assigned by any such rating agency.

Statutory Net Par and Net Debt Service Outstanding. Under statutory accounting, net par and net debt service outstanding would be reduced both when an outstanding issue is legally defeased (i.e., an issuer has legally discharged its obligations with respect to a municipal security by satisfying conditions set forth in defeasance provisions contained in transaction documents and is no longer responsible for the payment of debt service with respect to such obligations) and when such issue is economically defeased (i.e., transaction documents for a municipal security do not contain defeasance provisions but the issuer establishes an escrow account with U.S. government securities in amounts sufficient to pay the refunded bonds when due; the refunded bonds are not considered paid and continue to be outstanding under the transaction documents and the issuer remains responsible to pay debt service when due to the extent monies on deposit in the escrow account are insufficient for such purpose).

Performance Indicators
The performance information described below is obtained from third parties and/or provided by the trustee and may be subject to revision as updated or additional information is obtained:

60+ Day Delinquencies are defined as loans that are greater than 60 days delinquent and all loans that are in foreclosure, bankruptcy or real estate owned divided by current collateral balance.

Average Credit Enhancement is intended to provide a measure of the amount of equity and/or subordinated tranches that are junior in the capital structure to Assured Guaranty’s exposure, expressed as a percentage of the total transaction size, and reflects any reduction of that credit support resulting from defaults or other factors. For transactions where excess spread may be available to absorb certain losses, the amounts shown do not include any benefit from excess spread. The calculation methodologies differ for the various asset classes to reflect differences in transaction structures in order to provide a measure that management believes is comparable across asset classes. Some asset classes may not have subordinated tranches so they are excluded from the weighted averages.

Sectors
Below are brief descriptions of selected types of public and structured finance obligations that the Company insures and reinsures. For a more complete description, please refer to Assured Guaranty Ltd.’s Annual Report on Form 10-K for the year ended December 31, 2019.

Public Finance:

General Obligation Bonds are full faith and credit obligations issued by states, their political subdivisions and other municipal issuers, and are supported by the general obligation of the issuer to pay from available funds and by a pledge of the issuer to levy ad valorem taxes in an amount sufficient to provide for the full payment of the bonds.

Tax-Backed Bonds are obligations that are supported by the issuer from specific and discrete sources of taxation. They include tax-backed revenue bonds, general fund obligations and lease revenue bonds. Tax-backed obligations may be secured by a lien on specific pledged tax revenues, such as a gasoline or excise tax, or incrementally from growth in property tax revenue associated with growth in property values. These obligations also include obligations secured by special assessments levied against property owners and often benefit from issuer covenants to enforce collections of such assessments and to foreclose on delinquent properties. Lease revenue bonds typically are general fund obligations of a municipality or other governmental authority that are subject to annual appropriation or abatement; projects financed and subject to such lease payments ordinarily include real estate or equipment serving an essential public purpose. Bonds in this category also include moral obligations of municipalities or governmental authorities.

Municipal Utility Bonds are obligations of all forms of municipal utilities, including electric, water and sewer utilities and resource recovery revenue bonds. These utilities may be organized in various forms, including municipal enterprise systems, authorities or joint action agencies.

Transportation Bonds include a wide variety of revenue-supported obligations, such as bonds for airports, ports, tunnels, municipal parking facilities, toll roads and toll bridges.

Healthcare Bonds are obligations of healthcare facilities, including community-based hospitals and systems, as well as of health maintenance organizations and long-term care facilities.

Higher Education Bonds are obligations secured by revenue collected by either public or private secondary schools, colleges and universities. Such revenue can encompass all of an institution’s revenue, including tuition and fees, or in other cases, can be specifically restricted to certain auxiliary sources of revenue.

50


Glossary (continued)

Sectors (continued)

Infrastructure Bonds include obligations issued by a variety of entities engaged in the financing of infrastructure projects, such as roads, airports, ports, social infrastructure and other physical assets delivering essential services supported by long-term concession arrangements with a public sector entity.

Housing Revenue Bonds are obligations relating to both single and multi-family housing, issued by states and localities, supported by cash flow and, in some cases, insurance from entities such as the Federal Housing Administration.

Investor-Owned Utility Bonds are obligations primarily backed by investor-owned utilities, first mortgage bond obligations of for-profit electric or water utilities providing retail, industrial and commercial service, and also include sale-leaseback obligation bonds supported by such entities.

Renewable Energy Bonds are obligations backed by renewable energy sources, such as solar, wind farm, hydroelectric, geothermal and fuel cell.

Regulated Utility Obligations are obligations issued by government-regulated providers of essential services and commodities, including electric, water and gas utilities. The majority of the Company's international regulated utility business is conducted in the United Kingdom.

Pooled Infrastructure Obligations are synthetic asset-backed obligations that take the form of credit default swap obligations or credit-linked notes that reference either infrastructure finance obligations or a pool of such obligations, with a defined deductible to cover credit risks associated with the referenced obligations.

Sovereign and Sub-Sovereign Obligations primarily include obligations of local, municipal, regional or national governmental authorities or agencies outside of the United States.

Other Public Finance are obligations of, or backed by, local, municipal, regional or national governmental authorities or agencies not generally described in any of the other described categories.

Structured Finance:

Residential Mortgage-Backed Securities are obligations backed by closed-end and open-end first and second lien mortgage loans on one-to-four family residential properties, including condominiums and cooperative apartments. First lien mortgage loan products in these transactions include fixed rate, adjustable rate (ARM) and option adjustable-rate (Option ARM) mortgages. The credit quality of borrowers covers a broad range, including ‘‘prime’’, ‘‘subprime’’ and ‘‘Alt-A’’. A prime borrower is generally defined as one with strong risk characteristics as measured by factors such as payment history, credit score, and debt-to-income ratio. A subprime borrower is a borrower with higher risk characteristics, usually as determined by credit score and/or credit history. An Alt-A borrower is generally defined as a prime quality borrower that lacks certain ancillary characteristics, such as fully documented income.

Additional insured obligations within RMBS include Home Equity Lines of Credit (HELOCs), which refers to a type of residential mortgage-backed transaction backed by second-lien loan collateral consisting of home equity lines of credit. U.S. Prime First Lien is a type of residential mortgage-backed securities transaction backed primarily by prime first-lien loan collateral plus an insignificant amount of other miscellaneous RMBS transactions.

Life Insurance Transactions are obligations secured by the future earnings from pools of various types of insurance/reinsurance policies and income produced by invested assets.

Pooled Corporate Obligations are obligations primarily backed by various types of corporate debt obligations, such as secured or unsecured bonds, bank loans or loan participations and trust preferred securities (TruPS). These securities are often issued in ‘‘tranches,’’ with subordinated tranches providing credit support to the more senior tranches. The Company’s financial guaranty exposures generally are to the more senior tranches of these issues.

Consumer Receivables Securities are obligations backed by non-mortgage consumer receivables, such as student loans, automobile loans and leases, manufactured home loans and other consumer receivables.

Financial Products Business is the guaranteed investment contracts (GICs) portion of a line of business previously conducted by Assured Guaranty Municipal Holdings Inc. (AGMH) that the Company did not acquire when it purchased AGMH in 2009 from Dexia SA and that is being run off. That line of business consisted of AGMH's GICs business, its medium term notes business and the equity payment agreements associated with AGMH's leveraged lease business. Assured Guaranty is indemnified by Dexia SA and certain of its affiliates against loss from the former Financial Products Business.

Other Structured Finance Obligations are obligations backed by assets not generally described in any of the other described categories.
51


Glossary (continued)

Definitions for Asset Management Segment

The Company uses AUM as a metric to measure progress in its Asset Management segment. The Company uses measures of its AUM in its decision making process and intends to use a measure of change in AUM in its calculation of certain components of management compensation. Investors also use AUM to evaluate companies that participate in the asset management business. AUM refers to the assets managed, advised or serviced by the Asset Management segment and equals the sum of the following:

the amount of aggregate collateral balance and principal cash of AssuredIM's CLOs, including CLO equity that may be held by AssuredIM funds. This also includes CLO assets managed by BlueMountain Fuji Management, LLC (BM Fuji). AssuredIM is not the investment manager of BM Fuji CLOs, but rather has entered into a services agreement and a secondary agreement with BM Fuji pursuant to which AssuredIM provides certain services associated with the management of BM Fuji-advised CLOs and acts in the capacity of service provider, and

the net asset value of all funds and accounts other than CLOs, plus any unfunded commitments.


The Company's calculation of AUM may differ from the calculation employed by other investment managers and, as a result, this measure may not be directly comparable to similar measures presented by other investment managers. The calculation also differs from the manner in which AssuredIM affiliates registered with the SEC report “Regulatory Assets Under Management” on Form ADV and Form PF in various ways.

The Company also uses several other measurements of AUM to understand and measure its AUM in more detail and for various purposes, including its relative position in the market and its income and income potential:

"Third-party assets under management" or "3rd Party AUM" refers to the assets AssuredIM manages or advises on behalf of third-party investors. This includes current and former employee investments in AssuredIM's funds. For CLOs, this also includes CLO equity that may be held by AssuredIM's funds.

"Intercompany assets under management" or "Intercompany AUM" refers to the assets AssuredIM manages or advises on behalf of the Company. This includes investments from affiliates of Assured Guaranty along with general partners' investments of AssuredIM (or its affiliates) into the funds.

"Funded assets under management" or "Funded AUM" refers to assets that have been deployed or invested into the funds or CLOs.

"Unfunded assets under management" or "Unfunded AUM" refers to unfunded capital commitments from closed-end funds and CLO warehouse fund.

"Fee earning assets under management" or "Fee Earning AUM" refers to assets where AssuredIM collects fees and has elected not to waive or rebate fees to investors.

"Non-fee earning assets under management" or "Non-Fee Earning AUM" refers to assets where AssuredIM does not collect fees or has elected to waive or rebate fees to investors. AssuredIM reserves the right to waive some or all fees for certain investors, including investors affiliated with AssuredIM and/or the Company. Further, to the extent that the Company's wind-down and/or opportunity funds are invested in AssuredIM managed CLOs, AssuredIM may rebate any management fees and/or performance compensation earned from the CLOs to the extent such fees are attributable to the wind-down and opportunity funds’ holdings of CLOs also managed by AssuredIM.



52


Non-GAAP Financial Measures
 
To reflect the key financial measures that management analyzes in evaluating the Company’s operations and progress towards long-term goals, the Company discloses both financial measures determined in accordance with GAAP and financial measures not determined in accordance with GAAP (non-GAAP financial measures).

Financial measures identified as non-GAAP should not be considered substitutes for GAAP financial measures. The primary limitation of non-GAAP financial measures is the potential lack of comparability to financial measures of other companies, whose definitions of non-GAAP financial measures may differ from those of the Company.

By disclosing non-GAAP financial measures, the Company gives investors, analysts and financial news reporters access to information that management and the Board of Directors review internally. The Company believes its presentation of non-GAAP financial measures provides information that is necessary for analysts to calculate their estimates of Assured Guaranty’s financial results in their research reports on Assured Guaranty and for investors, analysts and the financial news media to evaluate Assured Guaranty’s financial results.

The Company also provides the effect of VIE consolidation that is embedded in each non-GAAP financial measure, as applicable, which the Company believes may also be useful to investors, analysts and financial news media to evaluate Assured Guaranty’s financial results. GAAP requires the Company to consolidate certain FG VIEs and investment vehicles. The Company does not own the consolidated FG VIEs and its exposure is limited to its obligation under the financial guaranty insurance contract. The Insurance segment presents the economic effect of the financial guaranty contracts associated with the consolidated FG VIEs. The Company does own a substantial ownership interest in its consolidated investment vehicles, which is reflected in the Insurance segment.

Management and the Board of Directors use non-GAAP financial measures further adjusted to remove the effect of VIE consolidation (which the Company refers to as its core financial measures), as well as GAAP financial measures and other factors, to evaluate the Company’s results of operations, financial condition and progress towards long-term goals. The Company uses core financial measures in its decision making process and in its calculation of certain components of management compensation.

Management believes that many investors, analysts and financial news reporters use adjusted operating shareholders’ equity, further adjusted to remove the effect of VIE consolidation, as the principal financial measure for valuing AGL’s current share price or projected share price and also as the basis of their decision to recommend, buy or sell AGL’s common shares. Management also believes that many of the Company’s fixed income investors also use this measure to evaluate the Company’s capital adequacy.

Management believes that many investors, analysts and financial news reporters also use adjusted book value, further adjusted to remove the effect of VIE consolidation, to evaluate AGL’s share price and as the basis of their decision to recommend, buy or sell the AGL common shares. Adjusted operating income further adjusted for the effect of VIE consolidation enables investors and analysts to evaluate the Company’s financial results in comparison with the consensus analyst estimates distributed publicly by financial databases.

The core financial measures that the Company uses to help determine compensation are: (1) adjusted operating income, further adjusted to remove the effect of VIE consolidation, (2) adjusted operating shareholders' equity, further adjusted to remove the effect of VIE consolidation, (3) growth in adjusted book value per share, further adjusted to remove the effect of VIE consolidation, and (4) PVP.

In the first quarter of 2020, the Company changed the discount rate used in the calculation of PVP and net present value of estimated future net revenues, which is a component of adjusted book value. Beginning in 2020, the discount rate is the approximate average pre-tax fixed book yield of fixed-maturity securities purchased in the prior calendar year, excluding loss mitigation bonds. In prior periods the discount rate was a constant 6% discount rate. The Company made these changes and recast prior periods to better reflect the then current interest rate environment. The reconciliation tables of GAAP to non-GAAP financial measures for PVP and adjusted book value indicate the new discount rate for each relevant period. The following paragraphs define each non-GAAP financial measure disclosed by the Company and describe why it is useful. To the extent there is a directly comparable GAAP financial measure, a reconciliation of the non-GAAP financial measure and the most directly comparable GAAP financial measure is presented within this financial supplement.

Adjusted Operating Income: Management believes that adjusted operating income is a useful measure because it clarifies the understanding of the underwriting results of the Company. Adjusted operating income is defined as net income (loss) attributable to AGL, as reported under GAAP, adjusted for the following:

1)    Elimination of realized gains (losses) on the Company’s investments, except for gains and losses on securities classified as trading. The timing of realized gains and losses, which depends largely on market credit cycles, can vary considerably across periods. The timing of sales is largely subject to the Company’s discretion and influenced by market opportunities, as well as the Company’s tax and capital profile.

2)    Elimination of non-credit-impairment unrealized fair value gains (losses) on credit derivatives that are recognized in net income, which is the amount of unrealized fair value gains (losses) in excess of the present value of the expected estimated economic credit losses, and non-economic payments. Such fair value adjustments are heavily affected by, and in part fluctuate with, changes in market interest rates, the Company's credit spreads, and other market factors and are not expected to result in an economic gain or loss.
 
53


Non-GAAP Financial Measures (continued)

3)    Elimination of fair value gains (losses) on the Company’s CCS that are recognized in net income. Such amounts are affected by changes in market interest rates, the Company's credit spreads, price indications on the Company's publicly traded debt, and other market factors and are not expected to result in an economic gain or loss.

4)    Elimination of foreign exchange gains (losses) on remeasurement of net premium receivables and loss and LAE reserves that are recognized in net income. Long-dated receivables and loss and LAE reserves represent the present value of future contractual or expected cash flows. Therefore, the current period’s foreign exchange remeasurement gains (losses) are not necessarily indicative of the total foreign exchange gains (losses) that the Company will ultimately recognize.
 
5)    Elimination of the tax effects related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.

Adjusted Operating Shareholders’ Equity and Adjusted Book Value: Management believes that adjusted operating shareholders’ equity is a useful measure because it excludes the fair value adjustments on investments, credit derivatives and CCS that are not expected to result in economic gain or loss.

Adjusted operating shareholders’ equity is the basis of the calculation of adjusted book value (see below). Adjusted operating shareholders’ equity is defined as shareholders’ equity attributable to AGL, as reported under GAAP, adjusted for the following:

1)    Elimination of non-credit-impairment unrealized fair value gains (losses) on credit derivatives, which is the amount of unrealized fair value gains (losses) in excess of the present value of the expected estimated economic credit losses, and non-economic payments. Such fair value adjustments are heavily affected by, and in part fluctuate with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss.

2)    Elimination of fair value gains (losses) on the Company’s CCS. Such amounts are affected by changes in market interest rates, the Company's credit spreads, price indications on the Company's publicly traded debt, and other market factors and are not expected to result in an economic gain or loss.
 
3)    Elimination of unrealized gains (losses) on the Company’s investments that are recorded as a component of accumulated other comprehensive income (AOCI) (excluding foreign exchange remeasurement). The AOCI component of the fair value adjustment on the investment portfolio is not deemed economic because the Company generally holds these investments to maturity and therefore should not recognize an economic gain or loss.

4)     Elimination of the tax effects related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.

Management uses adjusted book value, further adjusted for VIE consolidation, to measure the intrinsic value of the Company, excluding franchise value. Growth in adjusted book value per share, further adjusted for VIE consolidation (core adjusted book value), is one of the key financial measures used in determining the amount of certain long-term compensation elements to management and employees and used by rating agencies and investors. Management believes that adjusted book value is a useful measure because it enables an evaluation of the Company’s in-force premiums and revenues net of expected losses. Adjusted book value is adjusted operating shareholders’ equity, as defined above, further adjusted for the following:

1)    Elimination of deferred acquisition costs, net. These amounts represent net deferred expenses that have already been paid or accrued and will be expensed in future accounting periods.

2)    Addition of the net present value of estimated net future revenue. See below.
 
3)    Addition of the deferred premium revenue on financial guaranty contracts in excess of expected loss to be expensed, net of reinsurance. This amount represents the present value of the expected future net earned premiums, net of the present value of expected losses to be expensed, which are not reflected in GAAP equity.

4)     Elimination of the tax effects related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.

The unearned premiums and revenues included in adjusted book value will be earned in future periods, but actual earnings may differ materially from the estimated amounts used in determining current adjusted book value due to changes in foreign exchange rates, prepayment speeds, terminations, credit defaults and other factors.

54


Non-GAAP Financial Measures (continued)

Adjusted Operating Return on Equity (Adjusted Operating ROE): Adjusted Operating ROE represents adjusted operating income for a specified period divided by the average of adjusted operating shareholders’ equity at the beginning and the end of that period. Management believes that adjusted operating ROE is a useful measure to evaluate the Company’s return on invested capital. Many investors, analysts and members of the financial news media use adjusted operating ROE, adjusted for VIE consolidation, to evaluate AGL’s share price and as the basis of their decision to recommend, buy or sell the AGL common shares. Quarterly and year-to-date adjusted operating ROE are calculated on an annualized basis. Adjusted operating ROE, adjusted for VIE consolidation, is one of the key management financial measures used in determining the amount of certain long-term compensation to management and employees and used by rating agencies and investors.

Net Present Value of Estimated Net Future Revenue: Management believes that this amount is a useful measure because it enables an evaluation of the value of the present value of estimated net future revenue for contracts other than financial guaranty insurance contracts (such as specialty insurance and reinsurance contracts and credit derivatives). This amount represents the net present value of estimated future revenue from these contracts (other than credit derivatives with net expected losses), net of reinsurance, ceding commissions and premium taxes.

Future installment premiums are discounted at the approximate average pre-tax book yield of fixed maturity securities purchased during the prior calendar year, other than loss mitigation securities. The discount rate is recalculated annually and updated as necessary. Net present value of estimated future revenue for an obligation may change from period to period due to a change in the discount rate or due to a change in estimated net future revenue for the obligation, which may change due to changes in foreign exchange rates, prepayment speeds, terminations, credit defaults or other factors that affect par outstanding or the ultimate maturity of an obligation. There is no corresponding GAAP financial measure.

PVP or Present Value of New Business Production: Management believes that PVP is a useful measure because it enables the evaluation of the value of new business production for the Company by taking into account the value of estimated future installment premiums on all new contracts underwritten in a reporting period as well as additional installment premium on existing contracts (which may result from supplements or fees or from the issuer not calling an insured obligation the Company projected would be called), whether in insurance or credit derivative contract form, which management believes GAAP gross written premiums and changes in fair value of credit derivatives do not adequately measure. PVP in respect of contracts written in a specified period is defined as gross upfront and installment premiums received and the present value of gross estimated future installment premiums. 

Future installment premiums are discounted at the approximate average pre-tax book yield of fixed maturity securities purchased during the prior calendar year, other than loss mitigation securities. The discount rate is recalculated annually and updated as necessary. Under GAAP, financial guaranty installment premiums are discounted at a risk-free rate. Additionally, under GAAP, management records future installment premiums on financial guaranty insurance contracts covering non-homogeneous pools of assets based on the contractual term of the transaction, whereas for PVP purposes, management records an estimate of the future installment premiums the Company expects to receive, which may be based upon a shorter period of time than the contractual term of the transaction.

Actual installment premiums may differ from those estimated in the Company's PVP calculation due to factors including, but not limited to, changes in foreign exchange rates, prepayment speeds, terminations, credit defaults, or other factors that affect par outstanding or the ultimate maturity of an obligation. 

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Assured Guaranty Ltd.                        
30 Woodbourne Avenue
Hamilton HM 08
Bermuda
(441) 279-5705
www.assuredguaranty.com





Contacts:

Equity and Fixed Income Investors:
Robert Tucker
Senior Managing Director, Investor Relations and Corporate Communications
(212) 339-0861
rtucker@agltd.com

Michael Walker
Managing Director, Fixed Income Investor Relations
(212) 261-5575
mwalker@agltd.com

Andre Thomas
Managing Director, Equity Investor Relations
(212) 339-3551
athomas@agltd.com

Media:
Ashweeta Durani
Vice President, Corporate Communications
(212) 408-6042
adurani@agltd.com