The investment portfolio consists of both externally and internally managed portfolios. The majority of the investment portfolio is managed by three outside managers and AssuredIM, for which the Company has established investment guidelines regarding credit quality, exposure to a particular sector and exposure to a particular obligor within a sector.

The internally managed portfolio primarily consists of the Company’s investments in: (i) securities acquired for loss mitigation purposes; (ii) securities managed under an Investment Management Agreement (IMA) with AssuredIM; (iii) new recovery bonds and CVIs received in connection with the consummation of the March Puerto Rico Resolutions and (iv) other investments including certain fixed-maturity and short-term securities and equity method investments. Equity method investments primarily consist of generally less liquid alternative investments including: an investment in renewable and clean energy and private equity funds. The Company had unfunded commitments of $96 million as of March 31, 2022 related to certain of the Company’s alternative investments.


	As of
	March 31, 2022		December 31, 2021
	(in millions)
Fixed-maturity securities, available-for-sale (1):
Externally managed	$	6,316	$	6,843
Loss mitigation securities and other	789		818
AssuredIM managed	537		541
Fixed-maturity securities - Puerto Rico (2)	514		—
Fixed-maturity securities - Puerto Rico, trading (3)	174		—
Short-term investments (4)	585		1,225
Other invested assets:
Equity method investments	145		169
Other	7		12
Total	$	9,067	$	9,608

(1) 7.3% and 7.5% of fixed-maturity securities were rated BIG as of March 31, 2022 and December 31, 2021, respectively, consisting primarily of loss mitigation securities. 7.2% and 0.9% were not rated, as of March 31, 2022 and December 31, 2021, respectively.

(4) Weighted average credit rating of AAA as of both March 31, 2022 and December 31, 2021, based on the lower of the Moody’s and S&P Global Ratings, a division of Standard & Poor's Financial Services LLC (S&P) classifications.

The U.S. Insurance Subsidiaries, through their jointly owned investment subsidiary, AGAS, are authorized to invest up to $750 million in AssuredIM Funds. As of March 31, 2022, the U.S. Insurance Subsidiaries had total commitments to AssuredIM Funds of $702 million, of which $473 million represented net invested capital and $229 million was undrawn. This capital was committed to several funds, each dedicated to a single strategy, including CLOs, asset-based finance, healthcare structured capital and municipal bonds. As of March 31, 2022 and December 31, 2021, the fair value of AGAS’ interest in AssuredIM Funds was $559 million and $543 million, respectively.

AssuredIM Funds, in which AGAS (primarily) and other subsidiaries invest, and where the Company has been deemed to be the primary beneficiary, are not reported in “investments” on the condensed consolidated balance sheets, but rather, such AssuredIM Funds are consolidated and reported in “assets of consolidated investment vehicles” and “liabilities of consolidated investment vehicles”, with the portion not owned by AGAS and other subsidiaries presented as either redeemable or non-redeemable non-controlling interests. See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

Accrued investment income, which is recorded in “other assets,” was $77 million as of March 31, 2022 and $69 million as of December 31, 2021. In First Quarter 2022 and First Quarter 2021, the Company did not write off any accrued investment income.


Security Type	Percent of Total (1)		Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		AOCI (5) Pre-tax Gain (Loss) on Securities with Credit Loss		Weighted Average Credit Rating (2)
	(dollars in millions)
Obligations of state and political subdivisions	47	%	$	3,893	$	(13)	$	115	$	(54)	$	3,941	$	(3)	A
U.S. government and agencies	2		122		—		5		(5)		122		—		AA+
Corporate securities (3)	30		2,469		(5)		26		(102)		2,388		(44)		A
Mortgage-backed securities (4):
RMBS	5		437		(18)		10		(29)		400		(28)		BBB+
Commercial mortgage-backed securities (CMBS)	4		321		—		2		(1)		322		—		AAA
Asset-backed securities:
CLOs	5		440		—		—		(3)		437		—		A+
Other	5		422		(11)		22		(3)		430		(2)		CCC+
Non-U.S. government securities	2		123		—		—		(7)		116		(1)		AA-
Total available-for-sale fixed-maturity securities	100	%	$	8,227	$	(47)	$	180	$	(204)	$	8,156	$	(78)	A-


Security Type	Percent of Total (1)		Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		AOCI Pre-tax Gain (Loss) on Securities with Credit Loss		Weighted Average Credit Rating (2)
	(dollars in millions)
Obligations of state and political subdivisions	43	%	$	3,386	$	(12)	$	290	$	(4)	$	3,660	$	—	AA-
U.S. government and agencies	2		123		—		7		(2)		128		—		AA+
Corporate securities (3)	32		2,516		(1)		111		(21)		2,605		(4)		A
Mortgage-backed securities (4):
RMBS	6		454		(17)		24		(24)		437		(24)		BBB+
CMBS	4		332		—		14		—		346		—		AAA
Asset-backed securities:
CLOs	6		457		—		1		—		458		—		AA-
Other	5		420		(12)		26		(2)		432		(2)		CCC+
Non-U.S. government securities	2		134		—		5		(3)		136		—		AA-
Total available-for-sale fixed-maturity securities	100	%	$	7,822	$	(42)	$	478	$	(56)	$	8,202	$	(30)	A+

(2)Ratings represent the lower of the Moody’s and S&P classifications, except for loss mitigation and certain other securities, which use internal ratings classifications. The Company’s portfolio primarily consists of high-quality, liquid instruments. New recovery bonds received in connection with the consummation of the March Puerto Rico Resolutions are not rated.


	Less than 12 months				12 months or more				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
	(dollars in millions)
Obligations of state and political subdivisions	$	849	$	(47)	$	28	$	(4)	$	877	$	(51)
U.S. government and agencies	26		(1)		32		(4)		58		(5)
Corporate securities	825		(50)		49		(8)		874		(58)
Mortgage-backed securities:
RMBS	74		(1)		—		—		74		(1)
CMBS	100		(1)		—		—		100		(1)
Asset-backed securities:
CLOs	327		(3)		54		—		381		(3)
Other	17		(1)		—		—		17		(1)
Non-U.S. government securities	82		(4)		12		(2)		94		(6)
Total	$	2,300	$	(108)	$	175	$	(18)	$	2,475	$	(126)
Number of securities (1)			740				81				814


	Less than 12 months				12 months or more				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
	(dollars in millions)
Obligations of state and political subdivisions	$	117	$	(3)	$	10	$	(1)	$	127	$	(4)
U.S. government and agencies	26		—		32		(2)		58		(2)
Corporate securities	407		(12)		70		(5)		477		(17)
Mortgage-backed securities:
RMBS	4		—		—		—		4		—
Asset-backed securities:
CLOs	226		—		—		—		226		—
Non-U.S. government securities	24		(2)		8		(1)		32		(3)
Total	$	804	$	(17)	$	120	$	(9)	$	924	$	(26)
Number of securities (1)			355				60				410

(1) The number of securities does not add across because lots consisting of the same securities have been purchased at different times and appear in both categories above (i.e., less than 12 months and 12 months or more). If a security appears in both categories, it is counted only once in the total column.

The Company considered the credit quality, cash flows, interest rate movements, ability to hold a security to recovery and intent to sell a security in determining whether a security had a credit loss. The Company has determined that the unrealized losses recorded as of March 31, 2022 and December 31, 2021 were not related to credit quality, and in the case of First Quarter 2022, primarily attributable to rising interest rates. In addition, as of March 31, 2022 the Company did not intend to and was not required to sell investments in an unrealized loss position prior to expected recovery in value. As of March 31, 2022, of the securities in an unrealized loss position for which an allowance for credit loss was not recorded, 187 securities had unrealized losses in excess of 10% of their carrying value, whereas as of December 31, 2021, 23 securities had unrealized

The amortized cost and estimated fair value of available-for-sale fixed-maturity securities by contractual maturity as of March 31, 2022 are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Amortized Cost		Estimated Fair Value
	(in millions)
Due within one year	$	202	$	203
Due after one year through five years	1,956		1,948
Due after five years through 10 years	1,869		1,853
Due after 10 years	3,442		3,430
Mortgage-backed securities:
RMBS	437		400
CMBS	321		322
Total	$	8,227	$	8,156

Based on fair value, investments and other assets that are either held in trust for the benefit of third-party ceding insurers in accordance with statutory requirements, placed on deposit to fulfill state licensing requirements, or otherwise pledged or restricted, totaled $229 million as of March 31, 2022 and $243 million as of December 31, 2021. The investment portfolio also contains securities that are held in trust by certain AGL subsidiaries or otherwise restricted for the benefit of other AGL subsidiaries in accordance with statutory and regulatory requirements, in the amounts of $1,160 million and $1,231 million, based on fair value as of March 31, 2022 and December 31, 2021, respectively.

Net investment income is a function of the yield that the Company earns on available-for-sale fixed-maturity securities and short-term investments, and the size of such portfolio. The investment yield is a function of market interest rates at the time of investment as well as the type, credit quality and maturity of the securities in this portfolio.


	First Quarter
	2022		2021
	(in millions)
Investment income:
Externally managed	$	48	$	51
Loss mitigation securities and other	11		16
Managed by AssuredIM (1)	4		4
Investment income	63		71
Investment expenses	(1)		(1)
Net investment income	$	62	$	70

Unrealized gain (loss) on trading securities (2)	$	(4)	$	—
Equity in earnings (losses) of investees (3)	$	(11)	$	9

(3) First Quarter 2022 includes $3 million related to fair value gains on investments where the fair value option was elected utilizing the net asset value (NAV), as a practical expedient. In addition, the Company received $5 million in dividends related to the same investment. Fair value losses in First Quarter 2021 were de minimis.

The table below presents the components of net realized investment gains (losses). Realized gains and losses on sales of investments are determined using the specific identification method.


	First Quarter
	2022		2021
	(in millions)
Gross realized gains on sales available-for-sale securities	$	—	$	1
Gross realized losses on sales available-for-sale securities	(2)		(2)
Net foreign currency gains (losses)	—		1
Change in credit impairment and intent to sell	(5)		(4)
Other net realized gains (losses) (1)	10		1
Net realized investment gains (losses)	$	3	$	(3)

The following table presents the roll forward of the credit losses on available-for-sale fixed-maturity securities for which the Company has recognized an allowance for credit losses in 2022 and 2021.


	First Quarter
	2022		2021
	(in millions)
Balance, beginning of period	$	42	$	78
Additions for securities for which credit impairments were not previously recognized	4		1
Additions (reductions) for credit losses on securities for which credit impairments were previously recognized	1		2
Balance, end of period	$	47	$	81

The Company recorded credit loss expenses of $5 million in First Quarter 2022 and $3 million in First Quarter 2021. The Company did not purchase any securities with credit deterioration during the periods presented. Most of the Company’s securities with credit deterioration are loss mitigation securities.