The majority of the investment portfolio comprises investment grade fixed-maturity securities managed by three outside managers. The Company has established investment guidelines for these 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; (iii) equity method investments; (iv) short-term investments and (iv) other investments. Equity method investments primarily consists of the investment in Sound Point and fund investments across a variety of strategies.


	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.

Upon closing of the Sound Point Transaction and the AHP Transaction in July, the Company has increased the aggregate amount it has agreed to invest in alternative investments to $1.5 billion, including the $1 billion with Sound Point, subject to regulatory approval, which includes $630 million of invested capital (at fair value), and $890 million in unfunded commitments (of which $332 million is committed to specific funds). See Note 1, Business and Basis of Presentation for a description of the Sound Point Transaction.

Of the $1.5 billion mentioned above, the U.S. Insurance Subsidiaries through their jointly owned investment subsidiary, AGAS, are authorized to invest up to $750 million plus previously distributed gains of $132 million for a total of $882 million as of September 30, 2023. As of September 30, 2023, AGAS commitments to Sound Point and AHP funds were $703 million (of which $446 million was funded with a net asset value (NAV) of $469 million). This capital was committed to several funds, each dedicated to a single strategy, including CLOs, asset-based finance and healthcare structured capital. As of September 30, 2023, three of the six funds in which AGAS invests are accounted for as CIVs. See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

Accrued investment income, which is reported in “other assets,” was $78 million as of September 30, 2023 and $71 million as of December 31, 2022. In nine months 2023 and nine months 2022, the Company did not write off any accrued investment income.


Security Type	Percent of Total (1)		Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(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


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


	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


	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 September 30, 2023 and December 31, 2022 were primarily related to higher interest rates rather than credit quality. As of September 30, 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 September 30, 2023, of the securities in an unrealized loss position for which an allowance for credit loss was not recorded, 641 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 $351 million as of September 30, 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 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.


	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

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 $224 million as of September 30, 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 are otherwise restricted for the benefit of other AGL subsidiaries in accordance with statutory and regulatory requirements in the amounts of $1,107 million and $1,169 million based on fair value as of September 30, 2023 and December 31, 2022, respectively.

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

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.


	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)

(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.


	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)

The proceeds from sales of fixed-maturity securities classified as available-for-sale were $73 million in third quarter 2023, $207 million in third quarter 2022, $767 million in nine months 2023 and $560 million in nine months 2022.


	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

During third quarter 2022, the Company purchased a loss mitigation security with a fair value of $22 million that was accounted for as a purchased security with credit deterioration. At acquisition, this security had an unpaid principal on remaining collateral of $31 million, an allowance for credit losses of $2 million, and a non-credit related discount of $7 million. The Company did not purchase any securities with credit deterioration during third quarter 2023 and nine months 2023. Most of the Company’s securities with credit deterioration are Loss Mitigation Securities.