XML 36 R16.htm IDEA: XBRL DOCUMENT
v3.23.1

Investments | 3 Months Ended
--- | ---
Mar. 31, 2023
Investments, Debt and Equity Securities [Abstract] |
Investments | Investments The majority of the investment portfolio is managed by three outside managers and AssuredIM. The Company has established investment guidelines for its investment managers regarding credit quality, exposure to a particular sector and exposure to a particular obligor within a sector. The remainder of the investment portfolio primarily consists of (i) Loss Mitigation Securities; (ii) New Recovery Bonds and CVIs received in connection with the consummation of the 2022 Puerto Rico Resolutions; and (iii) 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 $79 million as of March 31, 2023 related to certain of the Company’s alternative investments other than AssuredIM Funds. Investment Portfolio Carrying Value
| As of
| March 31, 2023 |  | December 31, 2022
| (in millions)
Fixed-maturity securities, available-for-sale (1): |  |  |
Externally managed | $ | 5,498 |  |  | $ | 5,519 |
Loss Mitigation Securities and other | 696 |  |  | 705 |
AssuredIM managed | 539 |  |  | 537 |
Puerto Rico, New Recovery Bonds (2) | 136 |  |  | 358 |
Fixed-maturity securities, trading - Puerto Rico, CVIs (2) | 300 |  |  | 303 |
Short-term investments (3) | 1,273 |  |  | 810 |
Other invested assets: |  |  |
Equity method investments | 122 |  |  | 123 |
Other | 18 |  |  | 10 |
Total | $ | 8,582 |  |  | $ | 8,365 |
____________________ (1) 7.5% and 7.4% of fixed-maturity securities were rated BIG as of March 31, 2023 and December 31, 2022, respectively, consisting primarily of Loss Mitigation Securities. 2.9% and 5.9% were not rated, as of March 31, 2023 and December 31, 2022, respectively. (2) These securities are not rated. (3) Weighted average credit rating of AAA as of both March 31, 2023 and December 31, 2022, based on the lower of the Moody’s Investors Service, Inc. (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 affiliated alternative investment funds, which currently consist of investments in AssuredIM Funds. Adding inception-to-date distributed gains, the U.S. Insurance Subsidiaries may invest a total of up to $853 million in affiliated alternative investment funds. As of March 31, 2023, the U.S. Insurance Subsidiaries had total commitments to AssuredIM Funds of $613 million, of which $366 million represented net invested capital and $247 million was undrawn. This capital was committed to several funds, each dedicated to a single strategy, including CLOs, asset-based finance and healthcare structured capital. As of March 31, 2023 and December 31, 2022, the net asset value (NAV) of investments in AssuredIM Funds was $396 million and $569 million, respectively. The decline in the carrying value of AssuredIM Funds was primarily due to distributions from the municipal bond fund. As discussed in Note 1, Business and Basis of Presentation, Sound Point Transaction, the U.S. Insurance Subsidiaries agreed after the closing of the transactions contemplated by the Transaction Agreement to engage Sound Point as their sole alternative credit manager and to transition existing investments and commitments in AssuredIM Funds and make new investments in an aggregate amount totaling $1 billion over time, subject to regulatory approval for additional amounts, in funds, other vehicles and separately managed accounts managed by Sound Point as part of the Sound Point Transaction. As of March 31, 2023, current investments and commitments in AssuredIM Funds that will transfer to Sound Point management totaled $393 million, and such amount will be applied to the $1 billion commitment described above. The Company’s $853 million authorization is available for investment in funds, vehicles and separately managed accounts managed by Sound Point and for investment in healthcare strategies. 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 noncontrolling interests (NCI). See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles. Accrued investment income, which is reported in “other assets,” was $76 million as of March 31, 2023 and $71 million as of December 31, 2022. In first quarter 2023 and first quarter 2022, the Company did not write off any accrued investment income. Available-for-Sale Fixed-Maturity Securities by Security Type As of March 31, 2023
Security Type |  | Percent of Total (1) |  | Amortized Cost |  | Allowance for Credit Losses |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Weighted Average Credit Rating (2)
|  | (dollars in millions)
Obligations of state and political subdivisions |  | 43 | % |  | $ | 3,161 |  |  | $ | (14) |  |  | $ | 46 |  |  | $ | (96) |  |  | $ | 3,097 |  |  | A+
U.S. government and agencies |  | 1 |  |  | 94 |  |  | — |  |  | 1 |  |  | (7) |  |  | 88 |  |  | AA+
Corporate securities (3) |  | 33 |  |  | 2,408 |  |  | (6) |  |  | 5 |  |  | (254) |  |  | 2,153 |  |  | A
Mortgage-backed securities (4): |  |  |  |  |  |  |  |  |  |  |  |  |  |
RMBS |  | 6 |  |  | 429 |  |  | (20) |  |  | 3 |  |  | (62) |  |  | 350 |  |  | BBB+
Commercial mortgage-backed securities (CMBS) |  | 3 |  |  | 267 |  |  | — |  |  | — |  |  | (9) |  |  | 258 |  |  | AAA
Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |
CLOs |  | 6 |  |  | 453 |  |  | — |  |  | — |  |  | (20) |  |  | 433 |  |  | A+
Other |  | 6 |  |  | 426 |  |  | (29) |  |  | 20 |  |  | (28) |  |  | 389 |  |  | CCC+
Non-U.S. government securities |  | 2 |  |  | 121 |  |  | — |  |  | — |  |  | (20) |  |  | 101 |  |  | AA-
Total available-for-sale fixed-maturity securities |  | 100 | % |  | $ | 7,359 |  |  | $ | (69) |  |  | $ | 75 |  |  | $ | (496) |  |  | $ | 6,869 |  |  | A
Available-for-Sale Fixed-Maturity Securities by Security Type As of December 31, 2022
Security Type |  | Percent of Total (1) |  | Amortized Cost |  | Allowance for Credit Losses |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Weighted Average Credit Rating (2)
|  | (dollars in millions)
Obligations of state and political subdivisions |  | 45 | % |  | $ | 3,509 |  |  | $ | (14) |  |  | $ | 37 |  |  | $ | (138) |  |  | $ | 3,394 |  |  | A
U.S. government and agencies |  | 2 |  |  | 118 |  |  | — |  |  | 1 |  |  | (8) |  |  | 111 |  |  | AA+
Corporate securities (3) |  | 31 |  |  | 2,387 |  |  | (6) |  |  | 2 |  |  | (299) |  |  | 2,084 |  |  | A
Mortgage-backed securities (4): |  |  |  |  |  |  |  |  |  |  |  |  |  |
RMBS |  | 5 |  |  | 418 |  |  | (19) |  |  | 3 |  |  | (62) |  |  | 340 |  |  | BBB
CMBS |  | 4 |  |  | 282 |  |  | — |  |  | — |  |  | (11) |  |  | 271 |  |  | AAA
Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |
CLOs |  | 6 |  |  | 449 |  |  | — |  |  | — |  |  | (21) |  |  | 428 |  |  | A+
Other |  | 5 |  |  | 423 |  |  | (26) |  |  | 22 |  |  | (26) |  |  | 393 |  |  | CCC+
Non-U.S. government securities |  | 2 |  |  | 121 |  |  | — |  |  | — |  |  | (23) |  |  | 98 |  |  | AA-
Total available-for-sale fixed-maturity securities |  | 100 | % |  | $ | 7,707 |  |  | $ | (65) |  |  | $ | 65 |  |  | $ | (588) |  |  | $ | 7,119 |  |  | A
____________________ (1)Based on amortized cost. (2)Ratings represent the lower of the Moody’s and S&P classifications, except for Loss Mitigation Securities 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 2022 Puerto Rico Resolutions are not rated. (3)Includes securities issued by taxable universities and hospitals. (4)U.S. government-agency obligations were approximately 32% and 30% of mortgage-backed securities as of March 31, 2023 and December 31, 2022, respectively, based on fair value. Gross Unrealized Loss by Length of Time for Available-for-Sale Fixed-Maturity Securities for Which a Credit Loss was Not Recorded As of March 31, 2023
| 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 | $ | 667 |  |  | $ | (10) |  |  | $ | 614 |  |  | $ | (84) |  |  | $ | 1,281 |  |  | $ | (94) |
U.S. government and agencies | 1 |  |  | — |  |  | 56 |  |  | (7) |  |  | 57 |  |  | (7) |
Corporate securities | 627 |  |  | (14) |  |  | 1,150 |  |  | (191) |  |  | 1,777 |  |  | (205) |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |
RMBS | 117 |  |  | (5) |  |  | 51 |  |  | (4) |  |  | 168 |  |  | (9) |
CMBS | 114 |  |  | (2) |  |  | 143 |  |  | (7) |  |  | 257 |  |  | (9) |
Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |
CLOs | 42 |  |  | (1) |  |  | 377 |  |  | (19) |  |  | 419 |  |  | (20) |
Other | 12 |  |  | — |  |  | 15 |  |  | (1) |  |  | 27 |  |  | (1) |
Non-U.S. government securities | 4 |  |  | — |  |  | 93 |  |  | (20) |  |  | 97 |  |  | (20) |
Total | $ | 1,584 |  |  | $ | (32) |  |  | $ | 2,499 |  |  | $ | (333) |  |  | $ | 4,083 |  |  | $ | (365) |
Number of securities (1) |  |  | 602 |  |  |  |  | 1,006 |  |  |  |  | 1,568 |
Gross Unrealized Loss by Length of Time for Available-for-Sale Fixed-Maturity Securities for Which a Credit Loss was Not Recorded As of December 31, 2022
| 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 | $ | 1,763 |  |  | $ | (79) |  |  | $ | 163 |  |  | $ | (56) |  |  | $ | 1,926 |  |  | $ | (135) |
U.S. government and agencies | 32 |  |  | — |  |  | 52 |  |  | (8) |  |  | 84 |  |  | (8) |
Corporate securities | 1,276 |  |  | (95) |  |  | 519 |  |  | (147) |  |  | 1,795 |  |  | (242) |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |
RMBS | 147 |  |  | (9) |  |  | 3 |  |  | (1) |  |  | 150 |  |  | (10) |
CMBS | 270 |  |  | (11) |  |  | — |  |  | — |  |  | 270 |  |  | (11) |
Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |
CLOs | 171 |  |  | (7) |  |  | 250 |  |  | (14) |  |  | 421 |  |  | (21) |
Other | 27 |  |  | (2) |  |  | — |  |  | — |  |  | 27 |  |  | (2) |
Non-U.S. government securities | 65 |  |  | (10) |  |  | 30 |  |  | (13) |  |  | 95 |  |  | (23) |
Total | $ | 3,751 |  |  | $ | (213) |  |  | $ | 1,017 |  |  | $ | (239) |  |  | $ | 4,768 |  |  | $ | (452) |
Number of securities (1) |  |  | 1,340 |  |  |  |  | 466 |  |  |  |  | 1,776 |
___________________ (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, 2023 and December 31, 2022 were related to higher interest rates rather than credit quality. As of March 31, 2023, 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, 2023, of the securities in an unrealized loss position for which an allowance for credit loss was not recorded, 482 securities had unrealized losses in excess of 10% of their carrying value, whereas as of December 31, 2022, 567 securities had unrealized losses in excess of 10% of their carrying value. The total unrealized loss for these securities was $253 million as of March 31, 2023 and $329 million as of December 31, 2022. The amortized cost and estimated fair value of available-for-sale fixed-maturity securities by contractual maturity as of March 31, 2023 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. Distribution of Available-for-Sale Fixed-Maturity Securities by Contractual Maturity As of March 31, 2023
| Amortized Cost |  | Estimated Fair Value
| (in millions)
Due within one year | $ | 289 |  |  | $ | 283 |
Due after one year through five years | 1,636 |  |  | 1,531 |
Due after five years through 10 years | 1,720 |  |  | 1,636 |
Due after 10 years | 3,018 |  |  | 2,811 |
Mortgage-backed securities: |  |  |
RMBS | 429 |  |  | 350 |
CMBS | 267 |  |  | 258 |
Total | $ | 7,359 |  |  | $ | 6,869 |
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, 2023 and $222 million as of December 31, 2022. 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 $1,146 million and $1,169 million based on fair value as of March 31, 2023 and December 31, 2022, respectively. Income from Investments 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. Puerto Rico CVIs in the investment portfolio are classified as trading securities. Equity in earnings (losses) of investees represents the Company’s interest in the earnings of its equity method investments. Income from Investments
| First Quarter
| 2023 |  | 2022
| (in millions)
Investment income: |  |  |
Externally managed | $ | 48 |  |  | $ | 48 |
Loss Mitigation Securities and other | 26 |  |  | 11 |
Managed by AssuredIM (1) | 8 |  |  | 4 |
Investment income | 82 |  |  | 63 |
Investment expenses | (1) |  |  | (1) |
Net investment income | $ | 81 |  |  | $ | 62 |
Fair value gains (losses) on trading securities (2) | $ | (2) |  |  | $ | (4) |
Equity in earnings (losses) of investees (3) | $ | 2 |  |  | $ | (11) |
____________________ (1) Represents interest income on a portfolio of CLOs and municipal bonds managed by AssuredIM under an IMA. (2) Fair value losses on trading securities pertaining to securities still held as of March 31, 2023 were $2 million for first quarter 2023. Fair value losses on trading securities pertaining to securities still held as of March 31, 2022 were $4 million for first quarter 2022. (3) Fair value gains (losses) on investments where the fair value option (FVO) was elected utilizing the NAV as a practical expedient were $1 million in first quarter 2023 and $3 million in first quarter 2022. Realized Investment Gains (Losses) 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. Net Realized Investment Gains (Losses)
| First Quarter
| 2023 |  | 2022
| (in millions)
Gross realized gains on sales of available-for-sale securities (1) | $ | 12 |  |  | $ | — |
Gross realized losses on sales of available-for-sale securities (2) | (9) |  |  | (2) |
Change in allowance for credit losses and intent to sell | (5) |  |  | (5) |
Other net realized gains (losses) (3) | — |  |  | 10 |
Net realized investment gains (losses) | $ | (2) |  |  | $ | 3 |
____________________ (1) First quarter 2023 related primarily to sales of New Recovery Bonds received as part of the 2022 Puerto Rico Resolutions. (2) First quarter 2023 related primarily to sales in externally managed portfolio and New Recovery Bonds received as part of the 2022 Puerto Rico Resolutions. (3) First quarter 2022 net realized gains related primarily to the sale of one of the Company’s alternative investments. The following table presents the roll forward of allowance for the credit losses on available-for-sale fixed-maturity securities. Roll Forward of Allowance for Credit Losses for Available-for-Sale Fixed-Maturity Securities
| First Quarter
| 2023 |  | 2022
| (in millions)
Balance, beginning of period | $ | 65 |  |  | $ | 42 |
Additions for securities for which credit losses were not previously recognized | — |  |  | 4 |
Additions (reductions) for securities for which credit losses were previously recognized | 4 |  |  | 1 |
Balance, end of period | $ | 69 |  |  | $ | 47 |
The Company recorded credit loss expenses of $4 million and $5 million in first quarter 2023 and first quarter 2022, respectively. The Company did not purchase any securities with credit deterioration in first quarter 2023 or first quarter 2022. Most of the Company’s securities with credit deterioration are Loss Mitigation Securities.

X
- References No definition available. + Details
Name: | us-gaap_InvestmentsDebtAndEquitySecuritiesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for cash, cash equivalents, investments in debt and equity instruments (including cost and equity investees and related income statement amounts), equity and cost method investments, investments in joint ventures and any other investment. + References No definition available. + Details
Name: | us-gaap_InvestmentsInDebtAndEquityInstrumentsCashAndCashEquivalentsUnrealizedAndRealizedGainsLossesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration