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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Under Bermuda law, there was no Bermuda income, corporate or profits tax or withholding tax, capital gains tax or capital transfer tax payable by AGL or AG Re, AGRO and Cedar Personnel Ltd. (collectively, the Bermuda Subsidiaries) in 2023. AGL’s U.S., U.K. and French subsidiaries are subject to income taxes imposed by U.S., U.K. and French authorities, respectively, and file applicable tax returns. In addition, AGRO, a Bermuda domiciled company, has elected under Section 953(d) of the IRS to be taxed as a U.S. domestic corporation. AGL is a tax resident in the U.K. although it remains a Bermuda-based company and its administrative and head office functions continue to be carried on in Bermuda. AGUS files a consolidated federal income tax return with all of its U.S. subsidiaries. Assured Guaranty Overseas US Holdings Inc. and its subsidiaries, AGRO and AG Intermediary Inc., file their own consolidated federal income tax return. In July of 2023, the U.K. government passed legislation to implement the Organization for Economic Co-Operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) Pillar Two income inclusion rule. This includes a multinational top-up tax which will apply to large multinational corporations for accounting periods beginning on or after December 31, 2023. It is expected this will apply to AGL and its subsidiaries, requiring a minimum effective rate of 15% in all jurisdictions in which they operate. In addition, on December 27, 2023 the Bermuda government enacted a corporate income tax at the rate of 15% which will apply for accounting periods starting on or after January 1, 2025. The enactment of the corporate income tax regime requires the Company to recognize Bermuda deferred taxes for the first time and is recognized in the period that includes the date of enactment. Effective at the beginning of 2025, AGL’s Bermuda Subsidiaries will be subject to a 15% corporate income tax. Accounting Policy The provision for income taxes consists of an amount for taxes currently payable and an amount for deferred taxes. Deferred income taxes are provided for temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities, using enacted rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded to reduce the deferred tax asset to an amount that is more likely than not to be realized. Non-interest-bearing tax and loss bonds are purchased in the amount of the tax benefit that results from deducting statutory-basis contingency reserves as provided under the Code Section 832(e). The Company records the purchase of tax and loss bonds in deferred taxes. The Company recognizes tax benefits only if a tax position is “more likely than not” to prevail. The Company elected to account for tax associated with Global Intangible Low-Taxed Income (GILTI) as a current-period expense when incurred. Deferred and current tax assets and liabilities are reported in “other assets” or ”other liabilities” on the consolidated balance sheets. Tax Assets (Liabilities) Deferred and Current Tax Assets (Liabilities)
| As of December 31,
| 2023 |  | 2022
| (in millions)
Net deferred tax assets (liabilities) | $ | 250 |  |  | $ | 114 |
Net current tax assets (liabilities) | (9) |  |  | 63 |
Components of Net Deferred Tax Assets (Liabilities)
| As of December 31,
| 2023 |  | 2022
| (in millions)
Deferred tax assets: |  |  |
Unearned premium reserves, net | $ | 11 |  |  | $ | 26 |
Net unrealized investment losses | 49 |  |  | 70 |
Intangible assets | 149 |  |  | — |
Value of in-force business | 45 |  |  | — |
Rent | 15 |  |  | 18 |
Investments | — |  |  | 4 |
Net operating loss | 30 |  |  | 37 |
Depreciation | 45 |  |  | 30 |
Deferred compensation | 32 |  |  | 30 |
Other | 6 |  |  | 28 |
Total deferred tax assets | 382 |  |  | 243 |
Deferred tax liabilities: |  |  |
Investments | 65 |  |  | — |
DAC | 12 |  |  | 15 |
Loss and LAE reserve | 13 |  |  | 74 |
Lease | 13 |  |  | 14 |
Other | 29 |  |  | 21 |
Total deferred tax liabilities | 132 |  |  | 124 |
Less: Valuation allowance | — |  |  | 5 |
Net deferred tax assets (liabilities) | $ | 250 |  |  | $ | 114 |
The new Bermuda corporate income tax allows an economic transition adjustment (ETA) equal to the difference between the fair market value and the carrying value of assets and liabilities of each of the Company’s Bermuda insurance subsidiaries as of September 30, 2023. The ETA resulted in the establishment of a deferred tax asset and corresponding benefit of $189 million reported in the fourth quarter of 2023 consolidated statement of operations. The ETA is expected to be utilized over 10 to 15 years, beginning in 2025. As part of the acquisition of CIFG Holding Inc. (CIFGH, and together with its subsidiaries, CIFG), the Company acquired $189 million of net operating losses (NOL). The NOL has been limited under the Code Section 382 due to a change in control as a result of the acquisition. As of December 31, 2023, certain U.S. subsidiaries had gross deferred tax assets of approximately $23 million for federal NOL carryforwards which will begin to expire in 2033. In addition, as of December 31, 2023, the Company had gross deferred tax assets for certain non-U.S. NOL carryforwards of approximately $7 million which do not expire. Valuation Allowance During 2023, the Company recorded a return to provision adjustment, which included the utilization of $3 million in foreign tax credits (FTC), thereby reducing the Company’s FTC from $5 million as of December 31, 2022 to $2 million. As of December 31, 2023, the Company believes that the weight of the positive evidence outweighs the negative evidence regarding the realization of the Company’s FTC, resulting in the release of the corresponding $2 million valuation allowance. During 2022, the Company recorded a return to provision adjustment, which included the utilization of $19 million in FTC, thereby reducing the Company’s FTC from $24 million as of December 31, 2021 to $5 million as of December 31, 2022. FTC were established under the 2017 Tax Cuts and Jobs Act (TCJA) for use against regular tax in future years, and will expire in 2027. In analyzing the future realizability of FTC, the Company notes limitations on future foreign source income due to overall foreign losses as negative evidence. After reviewing positive and negative evidence, the Company came to the conclusion that it is more likely than not that the remaining FTC of $5 million will not be utilized, and therefore maintained a valuation allowance with respect to this tax attribute, resulting in a decrease in the valuation allowance from $24 million as of December 31, 2021 to $5 million as of December 31, 2022. There were no changes in the valuation allowance for 2021. The Company came to the conclusion that it is more likely than not that the deferred tax assets will be fully realized after weighing all positive and negative evidence available as required under GAAP. The positive evidence that was considered included the cumulative income the Company has earned over the last three years, and the significant unearned premium income to be included in taxable income. The positive evidence outweighs any negative evidence that exists. As such, the Company believes that no valuation allowance is necessary in connection with the remaining deferred tax assets. The Company will continue to analyze the need for a valuation allowance on a quarterly basis. Changes in market conditions during 2023 and 2022, including rising interest rates, resulted in the recording of deferred tax assets related to net unrealized tax capital losses. When assessing recoverability of these deferred tax assets, the Company considers the ability and intent to hold the underlying securities to recovery in value, if necessary, as well as other factors as noted above. As of December 31, 2023, based on all available evidence, including capital loss carryback capacity, the Company concluded that the deferred tax assets related to the unrealized tax capital losses on the available-for-sale securities portfolios are, more likely than not, expected to be realized. Provision for Income Taxes The components of the provision (benefit) for income taxes were as follows: Current and Deferred Provision (Benefit) for Income Taxes
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
| (in millions)
Current provision (benefit) for income taxes: |  |  |  |  |
Federal | $ | 76 |  |  | $ | (1) |  |  | $ | 88 |
State and local | (13) |  |  | 15 |  |  | 8 |
Foreign | — |  |  | — |  |  | — |
Total current | $ | 63 |  |  | $ | 14 |  |  | $ | 96 |
Deferred provision (benefit) for income taxes: |  |  |  |  |
Federal | $ | 31 |  |  | $ | 12 |  |  | $ | (38) |
State and local | — |  |  | — |  |  | — |
Foreign | (187) |  |  | (15) |  |  | — |
Total deferred | (156) |  |  | (3) |  |  | (38) |
Total provision (benefit) for income taxes | $ | (93) |  |  | $ | 11 |  |  | $ | 58 |
The Company’s overall effective tax rate fluctuates based on the distribution of income across jurisdictions. The effective tax rates reflect the proportion of income recognized by each of the Company’s operating subsidiaries, with •U.S. subsidiaries taxed at the U.S. marginal corporate income tax rate of 21% in 2023, 2022 and 2021; •French subsidiary taxed at the French marginal corporate tax rate of 25% in 2023, 25% in 2022, and 27.5% in 2021; •no taxes on the income of the Company’s Bermuda Subsidiaries unless subject to U.S. tax by election; and •U.K. subsidiaries taxed at the U.K. blended marginal corporate tax rate of 23.5% for the full year 2023, and 19% for the periods between April 1, 2017 and March 31, 2023. For periods subsequent to April 1, 2023, the U.K. corporation tax rate was increased to 25%. Controlled foreign corporations (CFCs) apply the local marginal corporate tax rate. In addition, the TCJA created a new requirement that a portion of the GILTI earned by CFCs must be included currently in the gross income of the CFCs’ U.S. shareholder. A reconciliation of the difference between the provision for income taxes and the expected tax provision at statutory rates in taxable jurisdictions is presented below. Effective Tax Rate Reconciliation
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
| (in millions)
Expected tax provision (benefit) | $ | 122 |  |  | $ | 23 |  |  | $ | 76 |
Tax-exempt interest | (15) |  |  | (14) |  |  | (19) |
Return to provision adjustment | (6) |  |  | (20) |  |  | (4) |
Noncontrolling interest | (5) |  |  | (3) |  |  | (8) |
State taxes, net of federal benefit | (10) |  |  | 12 |  |  | 7 |
Foreign taxes | 11 |  |  | 6 |  |  | 8 |
Stock based compensation | 2 |  |  | 5 |  |  | 4 |
Bermuda ETA | (189) |  |  | — |  |  | — |
Other | (3) |  |  | 2 |  |  | (6) |
Total provision (benefit) for income taxes | $ | (93) |  |  | $ | 11 |  |  | $ | 58 |
Effective tax rate | (13.9) | % |  | 7.2 | % |  | 12.2 | %
The expected tax provision (benefit) is calculated as the sum of pre-tax income in each jurisdiction multiplied by the statutory tax rate of the jurisdiction by which it will be taxed. Where there is a pre-tax loss in one jurisdiction and pre-tax income in another, the total combined expected tax rate may be higher or lower than any of the individual statutory rates. The following tables present pre-tax income and revenue by jurisdiction. Pre-tax Income (Loss) by Tax Jurisdiction
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
| (in millions)
U.S. | $ | 622 |  |  | $ | 189 |  |  | $ | 378 |
Bermuda | 79 |  |  | 44 |  |  | 115 |
U.K. | (25) |  |  | (69) |  |  | (8) |
France | (8) |  |  | (16) |  |  | (8) |
Total | $ | 668 |  |  | $ | 148 |  |  | $ | 477 |
Revenue by Tax Jurisdiction
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
| (in millions)
U.S. | $ | 1,169 |  |  | $ | 661 |  |  | $ | 685 |
Bermuda | 165 |  |  | 84 |  |  | 123 |
U.K. | 37 |  |  | (15) |  |  | 41 |
France | 2 |  |  | (8) |  |  | (3) |
Other | — |  |  | 1 |  |  | 2 |
Total | $ | 1,373 |  |  | $ | 723 |  |  | $ | 848 |
Pre-tax income by jurisdiction may be disproportionate to revenue by jurisdiction to the extent that insurance losses incurred are disproportionate. Audits As of December 31, 2023, AGUS had open tax years with the U.S. IRS for 2018 forward and is currently under audit for the 2018 and 2019 tax years. As of December 31, 2023, Assured Guaranty Overseas US Holdings Inc. had open tax years with the IRS for 2020 forward and is not currently under audit with the IRS. In September 2022, His Majesty’s Revenue & Customs (HMRC) completed a business risk review of Assured Guaranty that commenced in July 2022 and assigned a low-risk rating for corporate taxes in the U.K. In December 2023, HMRC issued an inquiry into the Company’s 2021 U.K. tax returns. As of December 31, 2023, the Company's U.K. subsidiaries had open tax years with HMRC for 2021 forward. The Company’s French subsidiary is not currently under examination and has open tax years of 2020 forward. Uncertain Tax Positions During the years ended December 31, 2023, 2022 and 2021, there were no unrecognized tax benefits. There were no accruals for the payment of interest and penalties related to income taxes as of each of December 31, 2023, 2022 and 2021.

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