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Investments (Tables) | 9 Months Ended
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Sep. 30, 2023
Investments, Debt and Equity Securities [Abstract] |
Marketable Securities | Investment Portfolio Carrying Value
| As of
| September 30, 2023 |  | December 31, 2022
| (in millions)
Fixed-maturity securities, available-for-sale (1): |  |  |
Externally managed (2) | $ | 5,316 |  |  | $ | 5,824 |
Loss Mitigation Securities | 495 |  |  | 548 |
Puerto Rico, New Recovery Bonds (3) | 78 |  |  | 358 |
Other (4) | 378 |  |  | 389 |
Fixed-maturity securities, trading - Puerto Rico, CVIs (3) | 350 |  |  | 303 |
Short-term investments | 1,426 |  |  | 810 |
Other invested assets: |  |  |
Equity method investments: |  |  |
Sound Point | 419 |  |  | — |
Alternative investments (5) | 331 |  |  | 123 |
Other | 15 |  |  | 10 |
Total | $ | 8,808 |  |  | $ | 8,365 |
____________________ (1) 7.6% and 7.4% of fixed-maturity securities were rated BIG as of September 30, 2023 and December 31, 2022, respectively, consisting primarily of Loss Mitigation Securities. 2.4% and 5.9% were not rated, as of September 30, 2023 and December 31, 2022, respectively. (2) As of September 30, 2023 and December 31, 2022 amounts include $294 million and $305 million, respectively, of CLOs that had been managed internally by AssuredIM under an investment management agreement until it transitioned to an external manager in June 2023. (3) These securities are not rated. On August 31, 2023, the Company satisfied its obligations under certain Puerto Rico Trusts and as a result $68 million, at fair value, of Puerto Rico New Recovery Bonds and $5 million, at fair value, of CVIs were transferred from the consolidated Puerto Rico Trusts to AGC and AGM’s investment portfolios. See Note 3, Outstanding Exposure. (4) As of September 30, 2023 and December 31, 2022, amounts include $214 million and $232 million, respectively, of municipal bonds that had been managed by AssuredIM under an investment management agreement until June 2023, and are now managed by the U.S. Insurance Subsidiaries for their own accounts. (5) Excludes certain investments in funds that are consolidated and accounted for as CIVs. See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.
Fixed Maturity Securities and Short Term Investments by Security Type | Available-for-Sale Fixed-Maturity Securities by Security Type As of September 30, 2023
Security Type |  | Percent of Total (1) |  | Amortized Cost |  | Allowance for Credit Losses |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Estimated Fair Value |  |
|  | (dollars in millions)
Obligations of state and political subdivisions |  | 42 | % |  | $ | 2,938 |  |  | $ | (14) |  |  | $ | 20 |  |  | $ | (178) |  |  | $ | 2,766 |  |  |
U.S. government and agencies |  | 1 |  |  | 65 |  |  | — |  |  | — |  |  | (7) |  |  | 58 |  |  |
Corporate securities (2) |  | 33 |  |  | 2,321 |  |  | (6) |  |  | 1 |  |  | (307) |  |  | 2,009 |  |  |
Mortgage-backed securities (3): |  |  |  |  |  |  |  |  |  |  |  |  |  |
RMBS |  | 6 |  |  | 430 |  |  | (20) |  |  | 2 |  |  | (82) |  |  | 330 |  |  |
Commercial mortgage-backed securities (CMBS) |  | 3 |  |  | 198 |  |  | — |  |  | — |  |  | (10) |  |  | 188 |  |  |
Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |
CLOs |  | 7 |  |  | 463 |  |  | — |  |  | 1 |  |  | (10) |  |  | 454 |  |  |
Other |  | 6 |  |  | 440 |  |  | (46) |  |  | 6 |  |  | (31) |  |  | 369 |  |  |
Non-U.S. government securities |  | 2 |  |  | 116 |  |  | — |  |  | — |  |  | (23) |  |  | 93 |  |  |
Total available-for-sale fixed-maturity securities |  | 100 | % |  | $ | 6,971 |  |  | $ | (86) |  |  | $ | 30 |  |  | $ | (648) |  |  | $ | 6,267 |  |  |
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 |  |
|  | (dollars in millions)
Obligations of state and political subdivisions |  | 45 | % |  | $ | 3,509 |  |  | $ | (14) |  |  | $ | 37 |  |  | $ | (138) |  |  | $ | 3,394 |  |  |
U.S. government and agencies |  | 2 |  |  | 118 |  |  | — |  |  | 1 |  |  | (8) |  |  | 111 |  |  |
Corporate securities (2) |  | 31 |  |  | 2,387 |  |  | (6) |  |  | 2 |  |  | (299) |  |  | 2,084 |  |  |
Mortgage-backed securities (3): |  |  |  |  |  |  |  |  |  |  |  |  |  |
RMBS |  | 5 |  |  | 418 |  |  | (19) |  |  | 3 |  |  | (62) |  |  | 340 |  |  |
CMBS |  | 4 |  |  | 282 |  |  | — |  |  | — |  |  | (11) |  |  | 271 |  |  |
Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |
CLOs |  | 6 |  |  | 449 |  |  | — |  |  | — |  |  | (21) |  |  | 428 |  |  |
Other |  | 5 |  |  | 423 |  |  | (26) |  |  | 22 |  |  | (26) |  |  | 393 |  |  |
Non-U.S. government securities |  | 2 |  |  | 121 |  |  | — |  |  | — |  |  | (23) |  |  | 98 |  |  |
Total available-for-sale fixed-maturity securities |  | 100 | % |  | $ | 7,707 |  |  | $ | (65) |  |  | $ | 65 |  |  | $ | (588) |  |  | $ | 7,119 |  |  |
____________________ (1)Based on amortized cost. (2)Includes securities issued by taxable universities and hospitals. (3)U.S. government-agency obligations were approximately 38% and 30% of mortgage-backed securities as of September 30, 2023 and December 31, 2022, respectively, based on fair value.
Fixed-Maturity Securities Gross Unrealized Loss by Length of Time | Gross Unrealized Loss by Length of Time for Available-for-Sale Fixed-Maturity Securities for Which a Credit Loss was Not Recorded As of September 30, 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 | $ | 1,610 |  |  | $ | (39) |  |  | $ | 899 |  |  | $ | (136) |  |  | $ | 2,509 |  |  | $ | (175) |
U.S. government and agencies | 21 |  |  | — |  |  | 32 |  |  | (7) |  |  | 53 |  |  | (7) |
Corporate securities | 381 |  |  | (14) |  |  | 1,396 |  |  | (236) |  |  | 1,777 |  |  | (250) |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |
RMBS | 55 |  |  | (3) |  |  | 122 |  |  | (14) |  |  | 177 |  |  | (17) |
CMBS | 3 |  |  | — |  |  | 184 |  |  | (10) |  |  | 187 |  |  | (10) |
Asset-backed securities: |  |  |  |  |  |  |  |  |  |  |
CLOs | 18 |  |  | (2) |  |  | 402 |  |  | (8) |  |  | 420 |  |  | (10) |
Other | 1 |  |  | — |  |  | 26 |  |  | (2) |  |  | 27 |  |  | (2) |
Non-U.S. government securities | 4 |  |  | — |  |  | 89 |  |  | (23) |  |  | 93 |  |  | (23) |
Total | $ | 2,093 |  |  | $ | (58) |  |  | $ | 3,150 |  |  | $ | (436) |  |  | $ | 5,243 |  |  | $ | (494) |
Number of securities (1) |  |  | 795 |  |  |  |  | 1,308 |  |  |  |  | 2,079 |
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.
Investments Classified by Contractual Maturity Date | The amortized cost and estimated fair value of available-for-sale fixed-maturity securities by contractual maturity as of September 30, 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 September 30, 2023
| Amortized Cost |  | Estimated Fair Value
| (in millions)
Due within one year | $ | 248 |  |  | $ | 239 |
Due after one year through five years | 1,526 |  |  | 1,406 |
Due after five years through 10 years | 1,760 |  |  | 1,629 |
Due after 10 years | 2,809 |  |  | 2,475 |
Mortgage-backed securities: |  |  |
RMBS | 430 |  |  | 330 |
CMBS | 198 |  |  | 188 |
Total | $ | 6,971 |  |  | $ | 6,267 |
New Recovery Bonds, Available-for-Sale Reported in FG VIEs’ Assets Distribution by Contractual Maturity As of September 30, 2023
| Amortized Cost |  | Estimated Fair Value
| (in millions)
Due after five years through 10 years | $ | 28 |  |  | $ | 30 |
Due after 10 years | 108 |  |  | 116 |
Total | $ | 136 |  |  | $ | 146 |
Net Investment Income | Income from Investments
| Third Quarter |  | Nine Months
| 2023 |  | 2022 |  | 2023 |  | 2022
| (in millions)
Investment income: |  |  |  |  |  |  |
Fixed-maturity securities, available-for-sale: |  |  |  |  |  |  |
Externally managed (1) | $ | 51 |  |  | $ | 50 |  |  | $ | 156 |  |  | $ | 150 |
Loss Mitigation Securities | 24 |  |  | 9 |  |  | 46 |  |  | 24 |
Puerto Rico, New Recovery Bonds | 1 |  |  | 1 |  |  | 5 |  |  | 5 |
Other (2) | 5 |  |  | 4 |  |  | 12 |  |  | 11 |
Short-term investments | 21 |  |  | 4 |  |  | 53 |  |  | 5 |
Other invested assets | — |  |  | — |  |  | 2 |  |  | — |
Investment income | 102 |  |  | 68 |  |  | 274 |  |  | 195 |
Investment expenses | (2) |  |  | (1) |  |  | (4) |  |  | (4) |
Net investment income | $ | 100 |  |  | $ | 67 |  |  | $ | 270 |  |  | $ | 191 |
Fair value gains (losses) on trading securities (3) | $ | 4 |  |  | $ | (8) |  |  | $ | 42 |  |  | $ | (30) |
Equity in earnings (losses) of investees (4) | 18 |  |  | (20) |  |  | 25 |  |  | (31) |
____________________ (1) Amounts for 2022 include income on the portion of the CLO portfolio that was previously managed by AssuredIM. (2) Amounts for 2022 include income on the portion of the municipal bond portfolio that was previously managed by AssuredIM. (3) Fair value gains on trading securities pertaining to securities still held as of September 30, 2023 were $4 million for third quarter 2023 and $42 million for nine months 2023. Fair value losses on trading securities pertaining to securities still held as of September 30, 2022 were $2 million for third quarter 2022 and $18 million for nine months 2022. (4) Beginning in the fourth quarter of 2023, equity in earnings (losses) will include the Company’s share of the earnings of the Sound Point entities, which is reported on a one-quarter lag.
Net 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)
| Third Quarter |  | Nine Months
| 2023 |  | 2022 |  | 2023 |  | 2022
| (in millions)
Gross realized gains on sales of available-for-sale securities (1) | $ | 2 |  |  | $ | — |  |  | $ | 21 |  |  | $ | — |
Gross realized losses on sales of available-for-sale securities (1) | (1) |  |  | (10) |  |  | (16) |  |  | (33) |
Net foreign currency gains (losses) | (1) |  |  | — |  |  | (1) |  |  | (3) |
Change in allowance for credit losses and intent to sell | (8) |  |  | (4) |  |  | (23) |  |  | (13) |
Other net realized gains (losses) | (1) |  |  | — |  |  | (1) |  |  | 10 |
Net realized investment gains (losses) | $ | (9) |  |  | $ | (14) |  |  | $ | (20) |  |  | $ | (39) |
____________________ (1) Gross realized gains and losses on sales in all periods related primarily to sales of New Recovery Bonds received as part of the 2022 Puerto Rico Resolutions.
Rollforward of Credit Losses for Available-for-sale Fixed-Maturity Securities | 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
| Third Quarter |  | Nine Months
| 2023 |  | 2022 |  | 2023 |  | 2022
| (in millions)
Balance, beginning of period | $ | 79 |  |  | $ | 51 |  |  | $ | 65 |  |  | $ | 42 |
Additions for securities for which credit losses were not previously recognized | — |  |  | 1 |  |  | — |  |  | 4 |
Additions for purchases of securities accounted for as purchased financial assets with credit deterioration | — |  |  | 2 |  |  | — |  |  | 2 |
Additions (reductions) for securities for which credit losses were previously recognized | 7 |  |  | 3 |  |  | 21 |  |  | 9 |
Balance, end of period | $ | 86 |  |  | $ | 57 |  |  | $ | 86 |  |  | $ | 57 |

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