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Fair Value Measurement | 6 Months Ended
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Jun. 30, 2023
Fair Value Disclosures [Abstract] |
Fair Value Measurement | Fair Value Measurement The Company carries a significant portion of its assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., exit price). The price represents the price available in the principal market for the asset or liability. If there is no principal market, then the price is based on a hypothetical market that maximizes the value received for an asset or minimizes the amount paid for a liability (i.e., the most advantageous market). Fair value is based on quoted market prices, where available. If listed prices or quotes are not available, fair value is based on either internally developed models that primarily use, as inputs, market-based or independently sourced market parameters, including but not limited to yield curves, interest rates and debt prices or with the assistance of an independent third party using a discounted cash flow approach and the third party’s proprietary pricing models. In addition to market information, models also incorporate transaction details, such as maturity of the instrument and contractual features designed to reduce the Company’s credit exposure, such as collateral rights as applicable. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments include amounts to reflect counterparty credit quality, the Company’s creditworthiness and constraints on liquidity. As markets and products develop and the pricing for certain products becomes more or less transparent, the Company may refine its methodologies and assumptions. During six months 2023, no changes were made to the Company’s valuation models that had, or are expected to have, a material impact on the Company’s condensed consolidated balance sheets or statements of operations and comprehensive income. The Company’s valuation methods produce fair values that may not be indicative of net realizable value or future fair values. The use of different methodologies or assumptions to determine fair value of certain financial instruments could result in a materially different estimate of fair value at the reporting date. The categorization within the fair value hierarchy is determined based on whether the inputs to valuation techniques used to measure fair value are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect Company estimates of market assumptions. The fair value hierarchy prioritizes model inputs into three broad levels, with Level 1 being the highest and Level 3 the lowest. An asset’s or liability’s categorization within the hierarchy is based on the lowest level of significant input to its valuation. Level 1—Quoted prices for identical instruments in active markets. The Company generally defines an active market as a market in which trading occurs at significant volumes. Active markets generally are more liquid and have a lower bid-ask spread than an inactive market. Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and observable inputs other than quoted prices, such as interest rates or yield curves and other inputs derived from or corroborated by observable market inputs. Level 3—Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. Level 3 financial instruments also include those for which the determination of fair value requires significant management judgment or estimation. There was a transfer of a fixed-maturity security in the investment portfolio and securities in the FG VIEs’ asset portfolio from Level 3 to Level 2 during second quarter 2022. There were no other transfers from or into Level 3 during the periods presented. Carried at Fair Value Fixed-Maturity Securities The fair value of fixed-maturity securities is generally based on prices received from third-party pricing services or alternative pricing sources with reasonable levels of price transparency. The pricing services prepare estimates of fair value using their pricing models, which take into account: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, industry and economic events and sector groupings. Additional valuation factors that can be taken into account are nominal spreads and liquidity adjustments. The pricing services evaluate each asset class based on relevant market and credit information, perceived market movements, and sector news. Benchmark yields have in many cases taken priority over reported trades for securities that trade less frequently or those that are distressed trades, and therefore may not be indicative of the market. The extent of the use of each input is dependent on the asset class and the market conditions. The valuation of fixed-maturity securities is more subjective when markets are less liquid due to the lack of market-based inputs. As of June 30, 2023, the Company used models to price 193 securities. All Level 3 securities were priced with the assistance of independent third parties. The pricing is based on a discounted cash flow approach using the third party’s proprietary pricing models. The models use inputs such as projected prepayment speeds; severity assumptions; recovery lag assumptions; estimated default rates (determined on the basis of an analysis of collateral attributes, historical collateral performance, borrower profiles and other features relevant to the evaluation of collateral credit quality); home price appreciation/depreciation rates based on macroeconomic forecasts; and recent trading activity. The yield used to discount the projected cash flows is determined by reviewing various attributes of the security including collateral type, weighted average life, sensitivity to losses, vintage, and convexity, in conjunction with market data on comparable securities. Significant changes to any of these inputs could have materially changed the expected timing of cash flows within these securities which is a significant factor in determining the fair value of the securities. Short-Term Investments Short-term investments that are traded in active markets are classified as Level 1 as their value is based on quoted market prices. Securities such as discount notes are classified as Level 2 because these securities are typically not actively traded due to their approaching maturity and, as such, their cost approximates fair value. Other Invested Assets Other invested assets that are carried at fair value primarily include equity method investments for which the Company elected the FVO using NAV, as a practical expedient, and, therefore, are excluded from the fair value hierarchy. Other Assets Committed Capital Securities Each of AGC and AGM have entered into put agreements with four separate custodial trusts allowing each of AGC and AGM to issue an aggregate of $200 million of non-cumulative redeemable perpetual preferred securities to the trusts in exchange for cash. Each custodial trust was created for the primary purpose of issuing $50 million face amount of CCS, investing the proceeds in high-quality assets and entering into put options with AGC or AGM, as applicable. The fair value of CCS, which is reported in other assets on the condensed consolidated balance sheets, represents the difference between the present value of remaining expected put option premium payments under AGC CCS and AGM’s Committed Preferred Trust Securities (the AGM CPS) agreements, and the estimated present value that the Company would hypothetically have to pay currently for a comparable security. The change in fair value of the AGC CCS and AGM CPS are reported in “fair value gains (losses) on committed capital securities” in the condensed consolidated statements of operations. The estimated current cost of the Company’s CCS is based on several factors, including AGM and AGC CDS spreads, the Company's publicly traded debt and the term the securities are estimated to remain outstanding. The AGC CCS and AGM CPS are classified as Level 3. Supplemental Executive Retirement Plans The Company classified assets included in the Company’s various supplemental executive retirement plans as either Level 1 or Level 2. The fair value of these assets is based on the observable published daily values of the underlying mutual funds included in the plans (Level 1) or based upon the NAV of the funds if a published daily value is not available (Level 2). The NAVs are based on observable information. The change in fair value of these assets is reported in “other operating expenses” in the condensed consolidated statements of operations. Contracts Accounted for as Credit Derivatives The Company’s credit derivatives in the Insurance segment primarily consist of insured CDS contracts, and also include interest rate swaps that qualify as derivatives under GAAP, which require fair value measurement with changes in the fair value reported in the condensed consolidated statements of operations. The Company did not enter into CDS contracts with the intent to trade these contracts and the Company may not unilaterally terminate a CDS contract absent an event of default or termination event that entitles the Company to terminate such contracts; however, the Company has mutually agreed with various counterparties to terminate certain CDS transactions. In transactions where the counterparty does not have the right to terminate, such transactions were generally terminated for an amount that approximated the present value of future premiums or for a negotiated amount, rather than at fair value. The terms of the Company’s CDS contracts differ from more standardized credit derivative contracts sold by companies outside the financial guaranty industry. The non-standard terms generally include the absence of collateral support agreements or immediate settlement provisions. In addition, the Company employs relatively high attachment points and does not exit derivatives it sells, except under specific circumstances such as mutual agreements with counterparties. Management considers the non-standard terms of the Company’s credit derivative contracts in determining the fair value of these contracts. Due to the lack of quoted prices and other observable inputs for its instruments or for similar instruments, the Company determines the fair value of its credit derivative contracts primarily through internally developed, proprietary models that use both observable and unobservable market data inputs. There is no established market where financial guaranty insured credit derivatives are actively traded; therefore, management has determined that the exit market for the Company’s credit derivatives is a hypothetical one based on its entry market. These contracts are classified as Level 3 in the fair value hierarchy as there are multiple unobservable inputs deemed significant to the valuation model, most importantly the Company’s estimate of the value of the non-standard terms and conditions of its credit derivative contracts and how the Company’s own credit spread affects the pricing of its transactions. The fair value of the Company’s credit derivative contracts represents the difference between the present value of remaining premiums the Company expects to receive and the estimated present value of premiums that a financial guarantor of comparable credit-worthiness would hypothetically charge at the reporting date for the same protection. The fair value of the Company’s credit derivatives depends on a number of factors, including notional amount of the contract, expected term, credit spreads, changes in interest rates, the credit ratings of referenced entities, the Company’s own credit risk and remaining contractual cash flows. The expected remaining contractual premium cash flows are the most readily observable inputs since they are based on the CDS contractual terms. Credit spreads capture the effect of recovery rates and performance of underlying assets of these contracts, among other factors. Consistent with previous years, market conditions at June 30, 2023 were such that market prices of the Company’s CDS contracts were not available. Assumptions and Inputs The various inputs and assumptions that are key to the measurement of the Company’s fair value for CDS contracts are as follows: the gross spread, the allocation of gross spread among the bank profit, net spread and hedge cost and the weighted average life which is based on debt service schedules. The Company obtains gross spreads on its outstanding contracts from market data sources published by third parties (e.g., dealer spread tables for the collateral similar to assets within the Company’s transactions), as well as collateral-specific spreads provided by or obtained from market sources. The bank profit represents the profit the originator, usually an investment bank, realizes for structuring and funding the transaction; the net spread represents the premiums paid to the Company for the Company’s credit protection provided; and the hedge cost represents the cost of CDS protection purchased by the originator to hedge its counterparty credit risk exposure to the Company. The primary sources of information used to determine gross spread include: •Actual collateral specific credit spreads (if up-to-date and reliable market-based spreads are available). •Transactions priced or closed during a specific quarter within a specific asset class and specific rating. •Credit spreads interpolated based upon market indices adjusted to reflect the non-standard terms of the Company’s CDS contracts. •Credit spreads extrapolated based upon transactions of similar asset classes, similar ratings, and similar time to maturity. The rates used to discount future expected premium cash flows ranged from 2.94% to 5.48% at June 30, 2023 and 2.78% to 5.08% at December 31, 2022. The premium the Company receives is referred to as the “net spread.” The Company’s pricing model takes into account not only how credit spreads on risks that it assumes affect pricing, but also how the Company’s own credit spread affects the pricing of its transactions. The Company’s own credit risk is factored into the determination of net spread based on the impact of changes in the quoted market price for credit protection bought on the Company, as reflected by quoted market prices on CDS referencing AGC. Due to the relatively low volume and characteristics of CDS contracts remaining in AGM’s portfolio, changes in AGM’s credit spreads do not significantly affect the fair value of these CDS contracts. The Company obtains the quoted price of CDS contracts traded on AGC from market data sources published by third parties. The cost to acquire CDS protection referencing AGC affects the amount of spread on CDS transactions that the Company retains and, hence, their fair value. As the cost to acquire CDS protection referencing AGC increases, the amount of premium the Company retains on a transaction generally decreases. In the Company’s valuation model, the premium the Company captures is not permitted to go below the minimum rate that the Company would currently charge to assume similar risks. This assumption can have the effect of limiting the amount of unrealized gains that are recognized on certain CDS contracts. Given market conditions and the Company’s own credit spreads, approximately 10.6%, based on fair value, of the Company’s CDS contracts were fair valued using this minimum premium as of June 30, 2023. As of December 31, 2022, the use of the minimum premium did not have a significant effect on fair value. The percentage of transactions that price using the minimum premiums fluctuates due to changes in AGC’s credit spreads. In general, when AGC’s credit spreads narrow, the cost to hedge AGC’s name declines and more transactions price above previously established floor levels. Meanwhile, when AGC’s credit spreads widen, the cost to hedge AGC’s name increases causing more transactions to price at established floor levels. The Company corroborates the assumptions in its fair value model, including the portion of exposure to AGC hedged by its counterparties, with independent third parties periodically. The implied credit risk of AGC, indicated by the trading level of AGC’s own credit spread, is a significant factor in the amount of exposure to AGC that a bank or transaction hedges. When AGC’s credit spreads widen, the hedging cost of a bank or originator increases. Higher hedging costs reduce the amount of contractual cash flows AGC can capture as premium for selling its protection, while lower hedging costs increase the amount of contractual cash flows AGC can capture. The amount of premium a financial guaranty insurance market participant can demand is inversely related to the cost of credit protection on the insurance company as measured by market credit spreads assuming all other assumptions remain constant. This is because the buyers of credit protection typically hedge a portion of their risk to the financial guarantor, due to the fact that the contractual terms of the Company’s contracts typically do not require the posting of collateral by the guarantor. The extent of the hedge depends on the types of instruments insured and the current market conditions. A credit derivative liability on protection sold is the result of contractual cash inflows on in-force transactions that are lower than what a hypothetical financial guarantor could receive if it sold protection on the same risk as of the reporting date. If the Company were able to freely exchange these contracts (i.e., assuming its contracts did not contain proscriptions on transfer and there was a viable exchange market), it would realize a loss representing the difference between the lower contractual premiums to which it is entitled and the current market premiums for a similar contract. The Company determines the fair value of its CDS contracts by applying the difference between the current net spread and the contractual net spread for the remaining duration of each contract to the notional value of such contract and discounting such amounts using the applicable discount rate corresponding to the weighted average remaining life of the contract. Strengths and Weaknesses of Model The Company’s credit derivative valuation model, like any financial model, has certain strengths and weaknesses. The primary strengths of the Company’s CDS modeling techniques are: •The model takes into account the transaction structure and the key drivers of market value. •The model maximizes the use of market-driven inputs whenever they are available. •The model is a consistent approach to valuing positions. The primary weaknesses of the Company’s CDS modeling techniques are: •There is no exit market or any actual exit transactions; therefore, the Company’s exit market is a hypothetical one based on the Company’s entry market. •There is a very limited market in which to validate the reasonableness of the fair values developed by the Company’s model. •The markets for the inputs to the model are highly illiquid, which impacts their reliability. •Due to the non-standard terms under which the Company enters into derivative contracts, the fair value of its credit derivatives may not reflect the same prices observed in an actively traded market of credit derivatives that do not contain terms and conditions similar to those observed in the financial guaranty market. FG VIEs’ Assets and Liabilities FG VIEs include Puerto Rico Trusts and structured finance and other FG VIEs. Assets in the Puerto Rico Trusts, which consist of New Recovery Bonds and CVIs, are classified as Level 2. The Company elected the FVO for the Puerto Rico Trusts’ liabilities and they are classified as Level 3. See “ - Fixed Maturity Securities” above for a description of the fair value methodology for the New Recovery Bonds and CVIs in the Puerto Rico Trusts. For structured finance and other FG VIEs’ assets and liabilities the Company elected the FVO and they are classified as Level 3. The prices are generally determined with the assistance of an independent third party, based on a discounted cash flow approach. The Company records the fair value of structured finance and other FG VIEs’ assets and liabilities based on modeled prices. The fair value of the residential mortgage loan FG VIEs’ assets is generally sensitive to changes in estimated prepayment speeds; estimated default rates (determined on the basis of an analysis of collateral attributes such as: historical collateral performance, borrower profiles and other features relevant to the evaluation of collateral credit quality); yields implied by market prices for similar securities; and, as applicable, house price depreciation/appreciation rates based on macroeconomic forecasts. Significant changes to some of these inputs could have materially changed the fair value of the FG VIEs’ assets and the implied collateral losses within these transactions. In general, the fair value of the FG VIEs’ assets is most sensitive to changes in the projected collateral losses, where an increase in collateral losses typically could lead to a decrease in the fair value of FG VIEs’ assets, while a decrease in collateral losses typically leads to an increase in the fair value of FG VIEs’ assets. The third party pricing service utilizes an internal model to determine an appropriate yield at which to discount the cash flows of the security, by factoring in collateral types, weighted-average lives and other structural attributes specific to the security being priced. The expected yield is further calibrated by utilizing algorithms designed to aggregate market color, received by the independent third party, on comparable bonds. The models used to price the FG VIEs’ liabilities (other than the liabilities of the Puerto Rico Trusts) generally apply the same inputs used in determining fair value of FG VIEs’ assets. For those liabilities insured by the Company, the benefit of the Company’s insurance policy guaranteeing the timely payment of debt service is also taken into account. The liabilities of the Puerto Rico Trusts are priced based on the value of the assets in the Puerto Rico Trusts including the value of the insurance subsidiaries’ financial guaranty policies. Significant changes to any of the inputs described above could materially change the timing of expected losses within an insured transaction which is a significant factor in determining the implied benefit of the Company’s insurance policy guaranteeing the timely payment of principal and interest for the insured tranches of debt issued by the FG VIEs. In general, extending the timing of expected loss payments by the Company into the future typically could lead to a decrease in the value of the Company’s insurance and a decrease in the fair value of the Company’s FG VIEs’ liabilities with recourse, while a shortening of the timing of expected loss payments by the Company typically could lead to an increase in the value of the Company’s insurance and an increase in the fair value of the Company’s FG VIEs’ liabilities with recourse. The change in fair value of FG VIEs’ assets and liabilities is reported in “fair value gains (losses) on FG VIEs” in the condensed consolidated statement of operations, except for (i) the change in fair value attributable to change in ISCR on FG VIEs’ liabilities, and (ii) unrealized gains and losses on the New Recovery Bonds in the Puerto Rico Trusts, which are reported in OCI. Interest income and interest expense are derived from the trustee reports and also included in “fair value gains (losses) on FG VIEs.” Investment income on the New Recovery Bonds and changes in fair value on the CVIs in the Puerto Rico Trusts are all reported in “fair value gains (losses) on FG VIEs” on the condensed consolidated statement of operations. Assets and Liabilities of CIVs The consolidated CLOs are collateralized financing entities (CFEs), and therefore, the debt issued by, and loans held by, the consolidated CLOs are measured under the FVO using the CFE practical expedient. Loans in CLOs are priced using a loan pricing service which aggregates quotes from loan market participants. The loans are all Level 2 assets, which are more observable than the fair value of the Level 3 debt issued by the consolidated CLOs. As a result, the less observable CLO debt is measured on the basis of the more observable CLO loans. Under the CFE practical expedient guidance, the loans of consolidated CLOs are measured at fair value and the debt of consolidated CLOs are measured as: (1) the sum of (i) the fair value of the financial assets, and (ii) the carrying value of any nonfinancial assets held temporarily; less (2) the sum of (iii) the fair value of any beneficial interests retained by the Company (other than those that represent compensation for services), and (iv) the Company’s carrying value of any beneficial interests that represent compensation for services. The resulting amount is allocated to the individual financial liabilities (other than the underlying financial liabilities to the beneficial interests retained by the Company). Prior to securitization, when loans are warehoused in an investment vehicle, such vehicle is not considered a CFE. The Company has elected the FVO to measure the loans held and the debt issued by CLO warehouses to mitigate the accounting mismatch between such assets and liabilities when a CLO warehouse securitizes and becomes a CLO. Investments held by CIVs which are listed or quoted on a national securities exchange or market are valued at their last reported sale price on the date of determination. Investments held by CIVs which are not listed or quoted on an exchange, but are traded over-the-counter, or are listed on an exchange which has no reported sales, are valued at their fair value as determined by the Company, after giving consideration to third-party data generally at the average between the offer and bid prices. The methods and procedures to value these investments may include, but are not limited to: (i) performing comparisons with prices of comparable or similar investments; (ii) obtaining valuation-related information from issuers; (iii) calculating the present value of future cash flows; (iv) assessing other analytical data and information related to the investment that is an indication of value; (v) obtaining information provided by third parties; (vi) and/or evaluating information provided by management of these investments. These fair values are generally based on dealer quotes, indications of value or pricing models that consider the time value of money, the current market, contractual prices and potential volatilities of the underlying financial instruments. Inputs are used in applying the various valuation techniques and broadly refer to the current assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include dealer price quotations, yield curves, credit curves, forward/CDS/index spreads, prepayments rates, strike and expiry dates, volatility statistics and other factors. Investments in private equity funds are generally valued utilizing NAV. Level 2 assets in the CIVs include assets of the consolidated CLOs and certain assets of the consolidated funds. Level 3 assets in the CIVs include the remainder of the invested assets of consolidated funds. Level 2 liabilities in the CIVs include senior warehouse financing debt used to fund a CLO warehouse (measured under the FVO). Level 3 liabilities of the CIVs include various tranches of CLO debt, first loss subordinated warehouse financing and securitized borrowing. Significant changes to any of the inputs described above could have a material effect on the fair value of the consolidated assets and liabilities. Amounts recorded at fair value in the Company’s financial statements are presented in the tables below. Fair Value Hierarchy of Financial Instruments Carried at Fair Value As of June 30, 2023
| Fair Value Hierarchy |  |
| Level 1 |  | Level 2 |  | Level 3 |  | Total
| (in millions)
Assets: |  |  |  |  |  |  |
Investments: |  |  |  |  |  |  |
Fixed-maturity securities, available-for-sale |  |  |  |  |  |  |
Obligations of state and political subdivisions | $ | — |  |  | $ | 2,830 |  |  | $ | 46 |  |  | $ | 2,876 |
U.S. government and agencies | — |  |  | 64 |  |  | — |  |  | 64 |
Corporate securities | — |  |  | 2,066 |  |  | — |  |  | 2,066 |
Mortgage-backed securities: |  |  |  |  |  |  |
RMBS | — |  |  | 190 |  |  | 162 |  |  | 352 |
CMBS | — |  |  | 204 |  |  | — |  |  | 204 |
Asset-backed securities | — |  |  | 28 |  |  | 800 |  |  | 828 |
Non-U.S. government securities | — |  |  | 98 |  |  | — |  |  | 98 |
Total fixed-maturity securities, available-for-sale | — |  |  | 5,480 |  |  | 1,008 |  |  | 6,488 |
Fixed-maturity securities, trading | — |  |  | 340 |  |  | — |  |  | 340 |
Short-term investments | 1,629 |  |  | 21 |  |  | — |  |  | 1,650 |
Other invested assets (1) | — |  |  | — |  |  | 3 |  |  | 3 |
FG VIEs’ assets | — |  |  | 223 |  |  | 188 |  |  | 411 |
Assets of CIVs (2): |  |  |  |  |  |  |
Fund investments: |  |  |  |  |  |  |
Equity securities and warrants | — |  |  | 4 |  |  | 290 |  |  | 294 |
Corporate securities | — |  |  | — |  |  | 84 |  |  | 84 |
Structured products | — |  |  | 74 |  |  | — |  |  | 74 |
CLOs and CLO warehouse assets: |  |  |  |  |  |  |
Loans | — |  |  | 4,452 |  |  | — |  |  | 4,452 |
Short-term investments | 69 |  |  | — |  |  | — |  |  | 69 |
Total assets of CIVs | 69 |  |  | 4,530 |  |  | 374 |  |  | 4,973 |
Assets held for sale | 1 |  |  | — |  |  | — |  |  | 1 |
Other assets | 59 |  |  | 49 |  |  | 33 |  |  | 141 |
Total assets carried at fair value | $ | 1,758 |  |  | $ | 10,643 |  |  | $ | 1,606 |  |  | $ | 14,007 |
Liabilities: |  |  |  |  |  |  |
Credit derivative liabilities | $ | — |  |  | $ | — |  |  | $ | 58 |  |  | $ | 58 |
FG VIEs’ liabilities (3) | — |  |  | — |  |  | 699 |  |  | 699 |
Liabilities of CIVs: |  |  |  |  |  |  |
CLO obligations of CFEs | — |  |  | — |  |  | 4,138 |  |  | 4,138 |
Warehouse financing debt | — |  |  | 127 |  |  | 30 |  |  | 157 |
Securitized borrowing | — |  |  | — |  |  | 31 |  |  | 31 |
Total liabilities of CIVs | — |  |  | 127 |  |  | 4,199 |  |  | 4,326 |
Liabilities held for sale | — |  |  | 7 |  |  | — |  |  | 7 |
Total liabilities carried at fair value | $ | — |  |  | $ | 134 |  |  | $ | 4,956 |  |  | $ | 5,090 |
Fair Value Hierarchy of Financial Instruments Carried at Fair Value As of December 31, 2022
| Fair Value Hierarchy |  |
| Level 1 |  | Level 2 |  | Level 3 |  | Total
| (in millions)
Assets: |  |  |  |  |  |  |
Investments: |  |  |  |  |  |  |
Fixed-maturity securities, available-for sale |  |  |  |  |  |  |
Obligations of state and political subdivisions | $ | — |  |  | $ | 3,347 |  |  | $ | 47 |  |  | $ | 3,394 |
U.S. government and agencies | — |  |  | 111 |  |  | — |  |  | 111 |
Corporate securities | — |  |  | 2,084 |  |  | — |  |  | 2,084 |
Mortgage-backed securities: |  |  |  |  |  |  |
RMBS | — |  |  | 161 |  |  | 179 |  |  | 340 |
CMBS | — |  |  | 271 |  |  | — |  |  | 271 |
Asset-backed securities | — |  |  | 27 |  |  | 794 |  |  | 821 |
Non-U.S. government securities | — |  |  | 98 |  |  | — |  |  | 98 |
Total fixed-maturity securities, available-for-sale | — |  |  | 6,099 |  |  | 1,020 |  |  | 7,119 |
Fixed-maturity securities, trading | — |  |  | 303 |  |  | — |  |  | 303 |
Short-term investments | 771 |  |  | 39 |  |  | — |  |  | 810 |
Other invested assets (1) | 2 |  |  | — |  |  | 5 |  |  | 7 |
FG VIEs’ assets | — |  |  | 209 |  |  | 204 |  |  | 413 |
Assets of CIVs (2): |  |  |  |  |  |  |
Fund investments: |  |  |  |  |  |  |
Equity securities and warrants | — |  |  | 5 |  |  | 297 |  |  | 302 |
Corporate securities | — |  |  | — |  |  | 96 |  |  | 96 |
Structured products | — |  |  | 82 |  |  | 46 |  |  | 128 |
CLOs and CLO warehouse assets: |  |  |  |  |  |  |
Loans | — |  |  | 4,570 |  |  | — |  |  | 4,570 |
Short-term investments | 135 |  |  | — |  |  | — |  |  | 135 |
Total assets of CIVs | 135 |  |  | 4,657 |  |  | 439 |  |  | 5,231 |
Other assets | 54 |  |  | 46 |  |  | 48 |  |  | 148 |
Total assets carried at fair value | $ | 962 |  |  | $ | 11,353 |  |  | $ | 1,716 |  |  | $ | 14,031 |
Liabilities: |  |  |  |  |  |  |
Credit derivative liabilities | $ | — |  |  | $ | — |  |  | $ | 163 |  |  | $ | 163 |
FG VIEs’ liabilities (3) | — |  |  | — |  |  | 715 |  |  | 715 |
Liabilities of CIVs: |  |  |  |  |  |  |
CLO obligations of CFEs | — |  |  | — |  |  | 4,090 |  |  | 4,090 |
Warehouse financing debt | — |  |  | 277 |  |  | 36 |  |  | 313 |
Securitized borrowing | — |  |  | — |  |  | 28 |  |  | 28 |
Total liabilities of CIVs | — |  |  | 277 |  |  | 4,154 |  |  | 4,431 |
Other liabilities | — |  |  | 7 |  |  | — |  |  | 7 |
Total liabilities carried at fair value | $ | — |  |  | $ | 284 |  |  | $ | 5,032 |  |  | $ | 5,316 |
___________________ (1) Includes Level 3 mortgage loans that are recorded at fair value on a non-recurring basis. Excludes $23 million of equity method investments measured at fair value under the FVO using the NAV as a practical expedient as of both June 30, 2023 and December 31, 2022. (2) Excludes $5 million, as of both June 30, 2023 and December 31, 2022, in investments in AssuredIM Funds for which the Company records a 100% NCI. The consolidation of these funds results in a gross up of assets and NCI on the consolidated financial statements; however, it results in no economic equity or net income attributable to AGL. As of December 31, 2022, excludes $127 million investment in the AssuredIM municipal relative value master fund, which is measured using NAV as a practical expedient. (3) Includes FG VIEs’ liabilities with recourse and FG VIEs’ liabilities without recourse. See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles. Changes in Level 3 Fair Value Measurements The tables below present a roll forward of the Company’s Level 3 financial instruments carried at fair value on a recurring basis during second quarter 2023, second quarter 2022, six months 2023 and six months 2022. Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis Second Quarter 2023
| Fixed-Maturity Securities, Available-for-Sale |  |  |  | Assets of CIVs |  |  |
| Obligations of State and Political Subdivisions |  | RMBS |  | Asset- Backed Securities |  | FG VIEs’ Assets |  | Equity Securities and Warrants |  | Corporate Securities |  | Structured Products |  | Other (7) |
| (in millions)
Fair value as of March 31, 2023 | $ | 47 |  |  | $ | 174 |  |  | $ | 795 |  |  | $ | 197 |  |  | $ | 329 |  |  | $ | 93 |  |  | $ | 17 |  |  | $ | 34 |  |
Total pre-tax realized and unrealized gains (losses) recorded in: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income (loss) | 1 |  | (1) | 4 |  | (1) | (3) |  | (1) | (2) |  | (2) | 7 |  | (4) | (1) |  | (4) | — |  |  | 3 |  | (3)
Other comprehensive income (loss) | (1) |  |  | (7) |  |  | (5) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |
Purchases | — |  |  | — |  |  | 18 |  |  | — |  |  | 34 |  |  | 2 |  |  | — |  |  | — |  |
Sales | — |  |  | — |  |  | (2) |  |  | — |  |  | (80) |  |  | (10) |  |  | (17) |  |  | — |  |
Settlements | (1) |  |  | (9) |  |  | (3) |  |  | (7) |  |  | — |  |  | — |  |  | — |  |  | (4) |  |
Fair value as of June 30, 2023 | $ | 46 |  |  | $ | 162 |  |  | $ | 800 |  |  | $ | 188 |  |  | $ | 290 |  |  | $ | 84 |  |  | $ | — |  |  | $ | 33 |  |
Change in unrealized gains (losses) related to financial instruments held as of June 30, 2023 included in: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Earnings |  |  |  |  |  |  | $ | (3) |  | (2) | $ | (33) |  | (4) | $ | — |  |  | $ | — |  |  | $ | 3 |  | (3)
OCI | $ | (1) |  |  | $ | (7) |  |  | $ | (4) |  |  |  |  |  |  |  |  |  |  | $ | — |  |
Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis Second Quarter 2023
| Credit Derivative Liability, net (5) |  | FG VIEs’ Liabilities (8) |  | Liabilities of CIVs |
| (in millions)
Fair value as of March 31, 2023 | $ | (148) |  |  | $ | (704) |  |  | $ | (4,220) |  |
Total pre-tax realized and unrealized gains (losses) recorded in: |  |  |  |  |  |
Net income (loss) | 91 |  | (6) | (2) |  | (2) | 17 |  | (4)
Other comprehensive income (loss) | — |  |  | 2 |  |  | (5) |  |
Settlements | — |  |  | 5 |  |  | 9 |  |
Fair value as of June 30, 2023 | $ | (57) |  |  | $ | (699) |  |  | $ | (4,199) |  |
Change in unrealized gains (losses) related to financial instruments held as of June 30, 2023 included in: |  |  |  |  |  |
Earnings | $ | 91 |  | (6) | $ | 4 |  | (2) | $ | (2) |  | (4)
OCI |  |  | $ | 2 |  |  | $ | (5) |  |
Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis Second Quarter 2022
| Fixed-Maturity Securities, Available-for-Sale |  |  |  | Assets of CIVs |  |  |
| Obligations of State and Political Subdivisions |  | RMBS |  | Asset- Backed Securities |  | FG VIEs’ Assets |  | Equity Securities and Warrants |  | Corporate Securities |  | Structured Products |  | Other (7) |
| (in millions)
Fair value as of March 31, 2022 | $ | 70 |  |  | $ | 200 |  |  | $ | 842 |  |  | $ | 267 |  |  | $ | 243 |  |  | $ | 83 |  |  | $ | — |  |  | $ | 28 |  |
Total pre-tax realized and unrealized gains (losses) recorded in: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income (loss) | (1) |  | (1) | 6 |  | (1) | (3) |  | (1) | 1 |  | (2) | 16 |  | (4) | 7 |  | (4) | (3) |  | (4) | 10 |  | (3)
Other comprehensive income (loss) | (3) |  |  | (11) |  |  | (30) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1) |  |
Purchases | — |  |  | — |  |  | 10 |  |  | — |  |  | 5 |  |  | — |  |  | 42 |  |  | — |  |
Sales | — |  |  | — |  |  | (9) |  |  | — |  |  | (6) |  |  | — |  |  | (21) |  |  | — |  |
Settlements | (14) |  |  | (11) |  |  | (5) |  |  | (26) |  |  | — |  |  | — |  |  | — |  |  | — |  |
Deconsolidations | — |  |  | — |  |  | — |  |  | (15) |  |  | — |  |  | — |  |  | 20 |  |  | — |  |
Transfers out of Level 3 | (1) |  |  | — |  |  | — |  |  | (4) |  |  | — |  |  | — |  |  | — |  |  | — |  |
Fair value as of June 30, 2022 | $ | 51 |  |  | $ | 184 |  |  | $ | 805 |  |  | $ | 223 |  |  | $ | 258 |  |  | $ | 90 |  |  | $ | 38 |  |  | $ | 37 |  |
Change in unrealized gains (losses) related to financial instruments held as of June 30, 2022 included in: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Earnings |  |  |  |  |  |  | $ | 2 |  | (2) | $ | 10 |  | (4) | $ | 7 |  | (4) | $ | (3) |  | (4) | $ | 10 |  | (3)
OCI | $ | (4) |  |  | $ | (10) |  |  | $ | (29) |  |  |  |  |  |  |  |  |  |  | $ | (1) |  |
Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis Second Quarter 2022
| Credit Derivative Liability, net (5) |  | FG VIEs’ Liabilities (8) |  | Liabilities of CIVs |
| (in millions)
Fair value as of March 31, 2022 | $ | (156) |  |  | $ | (335) |  |  | $ | (3,650) |  |
Total pre-tax realized and unrealized gains (losses) recorded in: |  |  |  |  |  |
Net income (loss) | 9 |  | (6) | 11 |  | (2) | 250 |  | (4)
Other comprehensive income (loss) | — |  |  | 3 |  |  | 37 |  |
Issuances | — |  |  | — |  |  | (1,027) |  |
Settlements | — |  |  | 24 |  |  | 29 |  |
Deconsolidations | — |  |  | 15 |  |  | 374 |  |
Fair value as of June 30, 2022 | $ | (147) |  |  | $ | (282) |  |  | $ | (3,987) |  |
Change in unrealized gains (losses) related to financial instruments held as of June 30, 2022 included in: |  |  |  |  |  |
Earnings | $ | 8 |  | (6) | $ | 11 |  | (2) | $ | 262 |  | (4)
OCI |  |  | $ | 3 |  |  | $ | 37 |  |
Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis Six Months 2023
| Fixed-Maturity Securities, Available-for-Sale |  |  |  | Assets of CIVs |  |  |
| Obligations of State and Political Subdivisions |  | RMBS |  | Asset- Backed Securities |  | FG VIEs’ Assets |  | Equity Securities and Warrants |  | Corporate Securities |  | Structured Products |  | Other (7) |
| (in millions)
Fair value as of December 31, 2022 | $ | 47 |  |  | $ | 179 |  |  | $ | 794 |  |  | $ | 204 |  |  | $ | 297 |  |  | $ | 96 |  |  | $ | 46 |  |  | $ | 50 |  |
Total pre-tax realized and unrealized gains (losses) recorded in: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income (loss) | 1 |  | (1) | 7 |  | (1) | — |  |  | (1) |  | (2) | 40 |  | (4) | (3) |  | (4) | 2 |  | (4) | (13) |  | (3)
Other comprehensive income (loss) | — |  |  | (8) |  |  | (8) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |
Purchases | — |  |  | — |  |  | 23 |  |  | — |  |  | 38 |  |  | 6 |  |  | — |  |  | — |  |
Sales | — |  |  | — |  |  | (2) |  |  | — |  |  | (85) |  |  | (15) |  |  | (48) |  |  | — |  |
Settlements | (2) |  |  | (16) |  |  | (7) |  |  | (15) |  |  | — |  |  | — |  |  | — |  |  | (4) |  |
Fair value as of June 30, 2023 | $ | 46 |  |  | $ | 162 |  |  | $ | 800 |  |  | $ | 188 |  |  | $ | 290 |  |  | $ | 84 |  |  | $ | — |  |  | $ | 33 |  |
Change in unrealized gains (losses) related to financial instruments held as of June 30, 2023 included in: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Earnings |  |  |  |  |  |  | $ | (3) |  | (2) | $ | (1) |  | (4) | $ | (3) |  | (4) | $ | — |  |  | $ | (13) |  | (3)
OCI | $ | — |  |  | $ | (8) |  |  | $ | (7) |  |  |  |  |  |  |  |  |  |  | $ | — |  |
Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis Six Months 2023
| Credit Derivative Liability, net (5) |  | FG VIEs’ Liabilities (8) |  | Liabilities of CIVs |
| (in millions)
Fair value as of December 31, 2022 | $ | (162) |  |  | $ | (715) |  |  | $ | (4,154) |  |
Total pre-tax realized and unrealized gains (losses) recorded in: |  |  |  |  |  |
Net income (loss) | 106 |  | (6) | 1 |  | (2) | (45) |  | (4)
Other comprehensive income (loss) | — |  |  | 1 |  |  | (13) |  |
Settlements | (1) |  |  | 14 |  |  | 13 |  |
Fair value as of June 30, 2023 | $ | (57) |  |  | $ | (699) |  |  | $ | (4,199) |  |
Change in unrealized gains (losses) related to financial instruments held as of June 30, 2023 included in: |  |  |  |  |  |
Earnings | $ | 105 |  | (6) | $ | 2 |  | (2) | $ | (67) |  | (4)
OCI |  |  | $ | 1 |  |  | $ | (13) |  |
Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis Six Months 2022
| Fixed-Maturity Securities, Available-for-Sale |  |  |  | Assets of CIVs |  |  |
| Obligations of State and Political Subdivisions |  | RMBS |  | Asset- Backed Securities |  | FG VIEs’ Assets |  | Equity Securities |  | Corporate Securities |  | Structured Products |  | Other (7) |
| (in millions) |  |  |  |
Fair value as of December 31, 2021 | $ | 72 |  |  | $ | 216 |  |  | $ | 863 |  |  | $ | 260 |  |  | $ | 239 |  |  | $ | 91 |  |  | $ | — |  |  | $ | 27 |  |
Total pre-tax realized and unrealized gains (losses) recorded in: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income (loss) | — |  |  | 10 |  | (1) | — |  |  | (3) |  | (2) | 26 |  | (4) | 6 |  | (4) | (3) |  | (4) | 11 |  | (3)
Other comprehensive income (loss) | (8) |  |  | (19) |  |  | (37) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (1) |  |
Purchases | — |  |  | — |  |  | 35 |  |  | — |  |  | 5 |  |  | 1 |  |  | 42 |  |  | — |  |
Sales | — |  |  | — |  |  | (12) |  |  | — |  |  | (12) |  |  | (8) |  |  | (21) |  |  | — |  |
Settlements | (13) |  |  | (23) |  |  | (44) |  |  | (34) |  |  | — |  |  | — |  |  | — |  |  | — |  |
Consolidations | — |  |  | — |  |  | — |  |  | 15 |  |  | — |  |  | — |  |  | — |  |  | — |  |
Deconsolidations | — |  |  | — |  |  | — |  |  | (15) |  |  | — |  |  | — |  |  | 20 |  |  | — |  |
Fair value as of June 30, 2022 | $ | 51 |  |  | $ | 184 |  |  | $ | 805 |  |  | $ | 223 |  |  | $ | 258 |  |  | $ | 90 |  |  | $ | 38 |  |  | $ | 37 |  |
Change in unrealized gains (losses) related to financial instruments held as of June 30, 2022 included in: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Earnings |  |  |  |  |  |  | $ | (2) |  | (2) | $ | 18 |  | (4) | $ | 5 |  | (4) | $ | (3) |  | (4) | $ | 11 |  | (3)
OCI | $ | (10) |  |  | $ | (17) |  |  | $ | (36) |  |  |  |  |  |  |  |  |  |  | $ | (1) |  |
Roll Forward of Level 3 Assets (Liabilities) at Fair Value on a Recurring Basis Six Months 2022
| Credit Derivative Liability, net (5) |  | FG VIEs’ Liabilities (8) |  | Liabilities of CIVs |
| (in millions)
Fair value as of December 31, 2021 | $ | (154) |  |  | $ | (289) |  |  | $ | (3,705) |  |
Total pre-tax realized and unrealized gains (losses) recorded in: |  |  |  |  |  |
Net income (loss) | 6 |  | (6) | 26 |  | (2) | 295 |  | (4)
Other comprehensive income (loss) | — |  |  | 3 |  |  | 56 |  |
Issuances | — |  |  | — |  |  | (1,408) |  |
Settlements | 1 |  |  | 65 |  |  | 401 |  |
Consolidations | — |  |  | (102) |  |  | — |  |
Deconsolidations | — |  |  | 15 |  |  | 374 |  |
Fair value as of June 30, 2022 | $ | (147) |  |  | $ | (282) |  |  | $ | (3,987) |  |
Change in unrealized gains (losses) related to financial instruments held as of June 30, 2022 included in: |  |  |  |  |  |
Earnings | $ | 5 |  | (6) | $ | 49 |  | (2) | $ | 303 |  | (4)
OCI |  |  | $ | 3 |  |  | $ | 56 |  |
____________________ (1)Included in “net realized investment gains (losses)” and “net investment income.” (2)Included in “fair value gains (losses) on FG VIEs.” (3)Reported in “fair value gains (losses) on CCS”, “net investment income” and “other income (loss).” (4)Reported in “fair value gains (losses) on CIVs.” (5)Represents the net position of credit derivatives. Credit derivative assets (reported in “other assets”) and credit derivative liabilities (presented as a separate line item) are shown as either assets or liabilities in the condensed consolidated balance sheets based on net exposure by transaction. (6)Reported in “fair value gains (losses) on credit derivatives.” (7)Includes CCS and other invested assets. (8)Includes FG VIEs’ liabilities with recourse and FG VIEs’ liabilities without recourse. Level 3 Fair Value Disclosures Quantitative Information About Level 3 Fair Value Inputs As of June 30, 2023
Financial Instrument Description |  | Fair Value Assets (Liabilities) (in millions) |  | Significant Unobservable Inputs |  | Range |  | Weighted Average (4)
Investments (2): |  |  |  |  |  |  |  |
Fixed-maturity securities, available-for-sale (1): |  |  |  |  |  |  |  |  |  |
Obligations of state and political subdivisions |  | $ | 46 |  |  | Yield |  | 7.3 | % | - | 20.0% |  | 8.8%
RMBS |  | 162 |  |  | CPR |  | 1.0 | % | - | 15.1% |  | 4.2%
|  | CDR |  | 1.5 | % | - | 16.0% |  | 5.8%
|  | Loss severity |  | 50.0 | % | - | 125.0% |  | 82.6%
|  | Yield |  | 7.5 | % | - | 11.8% |  | 9.0%
Asset-backed securities: |  |  |  |  |  |  |  |  |  |
Life insurance transactions |  | 326 |  |  | Yield |  | 8.1% |  |
CLOs |  | 454 |  |  | Discount margin |  | 1.5 | % | - | 3.9% |  | 2.6%
Others |  | 20 |  |  | Yield |  | 7.0 | % | - | 12.8% |  | 12.7%
FG VIEs’ assets (1) |  | 188 |  |  | CPR |  | 0.4 | % | - | 22.1% |  | 8.3%
|  | CDR |  | 1.3 | % | - | 41.0% |  | 9.3%
|  | Loss severity |  | 45.0 | % | - | 100.0% |  | 82.5%
|  | Yield |  | 8.0 | % | - | 11.1% |  | 9.5%
Assets of CIVs (3): |  |  |  |  |  |  |  |  |  |
Equity securities and warrants |  | 290 |  |  | Yield |  | 8.7% |  |
|  |  |  | Discount rate |  | 17.1 | % | - | 27.4% |  | 23.6%
|  |  |  | Market multiple-enterprise value/revenue |  | 0.95x | - | 0.99x |  | 0.97x
|  |  |  | Market multiple-enterprise value/EBITDA (6) |  | 2.50x | - | 11.50x |  | 10.66x
|  |  |  | Market multiple-price to book |  | 1.00x |  |
|  |  |  | Market multiple-price to earnings |  | 5.25x |  |
|  |  |  | Terminal growth rate |  | 3.0 | % | - | 4.0% |  | 3.4%
|  |  |  | Exit multiple-EBITDA |  | 11.00x | - | 12.00x |  | 11.29x
|  |  |  | Exit multiple-price to book |  | 1.10x |  |
|  |  |  | Exit multiple-price to earnings |  | 5.25x |  |
|  |  |  | Cost |  | 1.00x |  |
|  |  |  | Sale scenario - discount rate |  | 4.7 | % | - | 4.8% |  | 4.8%
|  |  |  | Haircut to Holdback |  | 30.0 | % | - | 95.0% |  | 62.5%
Corporate securities |  | 84 |  |  | Discount rate |  | 17.1% |  |
|  |  |  | Yield |  | 16.3% |  |
|  |  |  | Cost |  | 1.00x |  |
|  |  |  | Market multiple-enterprise value/EBITDA |  | 2.50x | - | 2.75x |  | 2.63x
Other assets (1) |  | 32 |  |  | Implied Yield |  | 8.1 | % | - | 8.7% |  | 8.4%
|  | Term (years) |  | 10 years |  |
Financial Instrument Description |  | Fair Value Assets (Liabilities) (in millions) |  | Significant Unobservable Inputs |  | Range |  | Weighted Average (4)
Credit derivative liabilities, net (1) |  | $ | (57) |  |  | Hedge cost (in bps) |  | 17.2 | - | 39.5 |  | 24.2
|  | Bank profit (in bps) |  | 115.9 | - | 298.8 |  | 178.0
|  | Internal floor (in bps) |  | 10.0 |  |
|  | Internal credit rating |  | AAA | - | CCC |  | AA
FG VIEs’ liabilities (1) |  | (699) |  |  | CPR |  | 0.4 | % | - | 22.1% |  | 8.3%
|  | CDR |  | 1.3 | % | - | 41.0% |  | 9.3%
|  | Loss severity |  | 45.0 | % | - | 100.0% |  | 82.5%
|  | Yield |  | 4.5 | % | - | 11.1% |  | 5.5%
Liabilities of CIVs (1): |  |  |  |  |  |  |  |  |  |
CLO obligations of CFEs (5) |  | (4,138) |  |  | Yield |  | 4.8 | % | - | 24.1% |  | 7.0%
Warehouse financing debt |  | (30) |  |  | Yield |  | 0.0 | % | - | 9.3% |  | 9.3%
Securitized borrowing |  | (31) |  |  | Discount rate |  | 24.3% |  |
|  |  |  | Terminal growth rate |  | 3.0% |  |
|  |  |  | Exit multiple-EBITDA |  | 11.00x |  |
|  |  |  | Market multiple-enterprise value/EBITDA |  | 10.50x | - | 11.50x |  | 11.00x
___________________ (1) Discounted cash flow is used as the primary valuation technique. (2) Excludes several investments reported in “other invested assets” with a fair value of $3 million. (3) The primary valuation technique uses the income and/or market approach; the key inputs to the valuation are yield/discount rates and market multiples. (4) Weighted average is calculated as a percentage of current par outstanding for all categories except for assets of CIVs, for which it is calculated as a percentage of fair value. (5) See CFE fair value methodology described above for consolidated CLOs. (6) Earnings before interest, taxes, depreciation, and amortization (EBITDA). Quantitative Information About Level 3 Fair Value Inputs As of December 31, 2022
Financial Instrument Description |  | Fair Value Assets (Liabilities) (in millions) |  | Significant Unobservable Inputs |  | Range |  | Weighted Average (4)
Investments (2): |  |  |  |  |  |  |  |  |  |
Fixed-maturity securities, available-for-sale (1): |  |  |  |  |  |  |  |  |  |
Obligations of state and political subdivisions |  | $ | 47 |  |  | Yield |  | 7.4 | % | - | 13.5% |  | 9.4%
RMBS |  | 179 |  |  | CPR |  | 3.8 | % | - | 16.1% |  | 8.2%
|  | CDR |  | 1.5 | % | - | 12.0% |  | 5.9%
|  | Loss severity |  | 50.0 | % | - | 125.0% |  | 82.5%
|  | Yield |  | 7.5 | % | - | 11.3% |  | 9.0%
Asset-backed securities: |  |  |  |  |  |  |  |  |  |
Life insurance transactions |  | 342 |  |  | Yield |  | 11.3% |  |
CLOs |  | 428 |  |  | Discount margin |  | 1.8 | % | - | 4.1% |  | 3.0%
Others |  | 24 |  |  | Yield |  | 7.4 | % | - | 12.9% |  | 12.8%
FG VIEs’ assets (1) |  | 204 |  |  | CPR |  | 0.9 | % | - | 21.9% |  | 12.9%
|  | CDR |  | 1.3 | % | - | 41.0% |  | 7.6%
|  | Loss severity |  | 45.0 | % | - | 100.0% |  | 81.0%
|  | Yield |  | 6.6 | % | - | 10.9% |  | 7.5%
Assets of CIVs (3): |  |  |  |  |  |  |  |  |  |
Equity securities and warrants |  | 297 |  |  | Yield |  | 10.0% |  |
|  |  |  | Discount rate |  | 19.8% | - | 25.1% |  | 22.7%
|  |  |  | Market multiple-enterprise value/revenue |  | 1.05x | - | 1.10x |  | 1.08x
|  |  |  | Market multiple-enterprise value/EBITDA |  | 2.50x | - | 11.00x |  | 10.25x
|  |  |  | Market multiple-price to book |  | 1.15x |  |
|  |  |  | Market multiple-price to earnings |  | 4.50x |  |
|  |  |  | Terminal growth rate |  | 3.0% | - | 4.0% |  | 3.5%
|  |  |  | Exit multiple-EBITDA |  | 8.00x | - | 12.00x |  | 10.53x
|  |  |  | Exit multiple-price to book |  | 1.30x |  |
|  |  |  | Exit multiple-price to earnings |  | 5.50x |  |
|  |  |  | Cost |  | 1.00x |  |
Corporate securities |  | 96 |  |  | Discount rate |  | 20.8 | % | - | 23.8% |  | 21.7%
|  |  |  | Yield |  | 16.3% |  |
|  |  |  | Exit multiple-EBITDA |  | 8.00x |  |
|  |  |  | Cost |  | 1.00x |  |
|  |  |  | Market multiple-enterprise value/EBITDA |  | 2.50x | - | 2.75x |  | 2.63x
Structured products |  | 46 |  |  | Yield |  | 12.8 | % | - | 37.1% |  | 18.9%
Other assets (1) |  | 47 |  |  | Implied Yield |  | 7.7 | % | - | 8.4% |  | 8.1%
|  |  |  | Term (years) |  | 10 years |  |
Financial Instrument Description |  | Fair Value Assets (Liabilities) (in millions) |  | Significant Unobservable Inputs |  | Range |  | Weighted Average (4)
Credit derivative liabilities, net (1) |  | (162) |  |  | Year 1 loss estimates |  | 11.5 | % | - | 25.2% |  | 15.7%
|  | Bank profit (in bps) |  | 51.0 | - | 270.5 |  | 109.4
|  | Internal credit rating |  | AAA | - | CCC |  | AA
FG VIEs’ liabilities (1) |  | (715) |  |  | CPR |  | 0.9 | % | - | 21.9% |  | 6.3%
|  | CDR |  | 1.3 | % | - | 41.0% |  | 3.7%
|  | Loss severity |  | 45.0 | % | - | 100.0% |  | 39.9%
|  | Yield |  | 4.8 | % | - | 10.9% |  | 5.9%
Liabilities of CIVs (1): |  |  |  |  |  |  |  |  |  |
CLO obligations of CFEs (5) |  | (4,090) |  |  | Yield |  | 3.0 | % | - | 27.4% |  | 5.5%
Warehouse financing debt |  | (36) |  |  | Yield |  | 11.7 | % | - | 16.9% |  | 12.9%
Securitized borrowing |  | (28) |  |  | Discount rate |  | 20.9% |  |
|  |  |  | Terminal growth rate |  | 3.0% |  |
|  |  |  | Exit multiple-EBITDA |  | 11.00x |  |
|  |  |  | Market multiple-enterprise value/EBITDA |  | 10.00x | - | 11.00x |  | 10.50x
____________________ (1) Discounted cash flow is used as the primary valuation technique. (2) Excludes several investments reported in “other invested assets” with a fair value of $5 million. (3) The primary valuation technique uses the income and/or market approach, the key inputs to the valuation are yield/discount rates and market multiples. (4) Weighted average is calculated as a percentage of current par outstanding for all categories except for assets of CIVs, for which it is calculated as a percentage of fair value. (5) See CFE fair value methodology described above for consolidated CLOs. Not Carried at Fair Value Financial Guaranty Insurance Contracts Fair value is based on management’s estimate of what a similarly rated financial guaranty insurance company would demand to acquire the Company’s in-force book of financial guaranty insurance business. It is based on a variety of factors that may include pricing assumptions management has observed for portfolio transfers, commutations, and acquisitions that have occurred in the financial guaranty market, and also includes adjustments for stressed losses, ceding commissions and return on capital. The Company classified the fair value of financial guaranty insurance contracts as Level 3. Long-Term Debt Long-term debt issued by the U.S. Holding Companies is valued by broker-dealers using third-party independent pricing sources and standard market conventions and classified as Level 2 in the fair value hierarchy. The market conventions utilize market quotations, market transactions for the Company’s comparable instruments, and to a lesser extent, similar instruments in the broader insurance industry. Assets and Liabilities of CIVs Cash equivalents are recorded at cost which approximates fair value. Due from/to brokers and counterparties primarily consists of cash, margin deposits, cash collateral with the clearing brokers and various counterparties and the net amounts receivable/payable for securities transactions that had not settled at the balance sheet date. Due from/to brokers and counterparties represents balances on a net-by counterparty basis on the condensed consolidated balance sheets where a contractual right of offset exists under an enforceable netting arrangement. The cash at brokers is partially related to collateral for securities sold short and derivative contracts; its use is therefore restricted until the securities are purchased or the derivative contracts are closed. The carrying value approximates fair value of these items and are considered Level 1 in the fair value hierarchy. Other Liabilities As of June 30, 2023 and December 31, 2022, $36 million and $35 million, respectively, of AssuredIM’s obligation under a master repurchase agreement to finance AssuredIM’s purchase of 5% of the senior and equity notes issued by certain consolidated European CLOs, which was required to comply with its European risk retention obligations, were included in “liabilities held for sale” and “other liabilities,” respectively. The maturity dates are in 2034 and 2035. AssuredIM’s obligation under the master repurchase agreement is not guaranteed by any Assured Guaranty insurance or holding companies. The carrying amount and estimated fair value of the Company’s financial instruments not carried at fair value are presented in the following table. Fair Value of Financial Instruments Not Carried at Fair Value
| As of June 30, 2023 |  | As of December 31, 2022
| Carrying Amount |  | Estimated Fair Value |  | Carrying Amount |  | Estimated Fair Value
| (in millions)
Assets (liabilities): |  |  |  |  |  |  |
Assets of CIVs (1) | $ | 47 |  |  | $ | 47 |  |  | $ | 46 |  |  | $ | 46 |
Assets held for sale | 10 |  |  | 10 |  |  | — |  |  | — |
Other assets (including other invested assets) (2) | 130 |  |  | 131 |  |  | 92 |  |  | 93 |
Financial guaranty insurance contracts (3) | (2,291) |  |  | (1,901) |  |  | (2,335) |  |  | (986) |
Long-term debt | (1,677) |  |  | (1,491) |  |  | (1,675) |  |  | (1,477) |
Liabilities of CIVs (4) | (114) |  |  | (114) |  |  | (170) |  |  | (170) |
Liabilities held for sale | (36) |  |  | (36) |  |  | — |  |  | — |
Other liabilities (5) | (66) |  |  | (66) |  |  | (43) |  |  | (43) |
____________________ (1) Includes due from brokers and counterparties and cash equivalents. Carrying value approximates fair value. (2) Primarily includes accrued interest, management fees receivables for December 31, 2022, a participation loan, and receivables for securities sold, for which carrying value approximates fair value. (3) Carrying amount includes the assets and liabilities related to financial guaranty insurance contract premiums, losses, and salvage and subrogation and other recoverables net of reinsurance. (4) Includes due to brokers and counterparties and fund’s loan payable. Carrying value approximates fair value. (5) Primarily includes accrued interest, repurchase agreement liability as of December 31, 2022, and payables for securities purchased for which carrying value approximates fair value.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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