The Company sells credit protection primarily in financial guaranty insurance form. The Company may also sell credit protection by issuing policies that guarantee payment obligations under credit default swaps (CDS). The Company’s guaranties of CDS are generally structured such that the circumstances giving rise to the Company’s obligation to make loss payments are similar to those for its financial guaranty insurance contracts.

The Company seeks to limit its exposure to losses by underwriting obligations that it views to be investment grade at inception, although on occasion it may underwrite new issuances that it views to be below-investment grade (BIG), typically as part of its loss mitigation strategy for existing troubled exposures. The Company also seeks to acquire portfolios of insurance from financial guarantors that are no longer writing new business by acquiring such companies, providing reinsurance on or novating a portfolio of insurance; in such instances, it evaluates the risk characteristics of the target portfolio, which may include some BIG exposures, as a whole in the context of the proposed transaction. The Company diversifies its insured portfolio across sector and geography and, in the structured finance portfolio, generally requires subordination or collateral to protect it from loss. Reinsurance may be used in order to reduce net exposure to certain insured transactions.

Public finance obligations insured by the Company primarily consist of general obligation bonds supported by the taxing powers of U.S. state or municipal governmental authorities, as well as tax-supported bonds, revenue bonds and other obligations supported by covenants from state or municipal governmental authorities or other municipal obligors to impose and collect fees and charges for public services or specific infrastructure projects. The Company includes within public finance obligations those obligations backed by the cash flow from leases or other revenues from projects serving substantial public purposes, including utilities, toll roads, healthcare facilities and government office buildings as well as obligations issued by U.S. and non-U.S. sovereign and sub-sovereign issuers and governmental authorities.

Structured finance obligations insured by the Company are generally issued by special purpose entities, including VIEs, and backed by pools of assets having an ascertainable cash flow or market value or other specialized financial obligations. Some of these VIEs are consolidated as described in Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles. Unless otherwise specified, the outstanding par and debt service amounts presented in this note include outstanding exposures on these VIEs whether or not they are consolidated.

The Portfolio Risk Management Committee, which includes members of senior management and senior risk and surveillance officers, is responsible for enterprise risk management for the Company’s insurance business and focuses on measuring and managing credit, market and liquidity risk for the Company’s insurance business. This committee establishes company-wide credit policy for the Company’s direct and assumed insurance business. It implements specific underwriting procedures and limits and allocates underwriting capacity among the Company’s insurance subsidiaries. All insurance transactions in new asset classes or new jurisdictions, or otherwise outside the Company’s Board-approved risk appetite statement or its risk limits, must be approved by this committee.

All transactions in the insured portfolio are assigned internal credit ratings by the relevant underwriting committee at inception, and such credit ratings are updated by the relevant risk management committee based on changes in transaction credit quality. As part of the surveillance process, the Company monitors trends and changes in transaction credit quality, and recommends such remedial actions as may be necessary or appropriate. The Company also develops strategies to enforce its contractual rights and remedies and to mitigate its losses, engage in negotiation discussions with transaction participants and, when necessary, manage the Company’s litigation proceedings.

The Company segregates its insured portfolio into investment grade and BIG surveillance categories to facilitate the appropriate allocation of resources to monitoring and loss mitigation efforts and to aid in establishing the appropriate cycle for periodic review of each exposure. BIG exposures include all exposures with internal credit ratings below BBB-.

The Company’s internal credit ratings are based on internal assessments of the likelihood of default and loss severity in the event of default. Internal credit ratings are expressed on a ratings scale similar to that used by the rating agencies and generally reflect an approach similar to that employed by the rating agencies, except that the Company’s internal credit ratings focus on future performance rather than lifetime performance.

The Company monitors its insured portfolio and refreshes its internal credit ratings on individual exposures in quarterly, semi-annual or annual cycles based on the Company’s view of the exposure’s credit quality, future loss potential, volatility and sector. More extensive monitoring and intervention are employed for all BIG surveillance categories, with internal credit ratings reviewed quarterly. Exposures identified as BIG are subjected to further review to determine (i) the probability of a future loss, (ii) the calculation of the expected future loss to be paid, and (iii) whether the Company has paid a claim for which it expects to be reimbursed within one year (liquidity claim) or a claim for which it does not expect to be reimbursed within one year.

Ratings on exposures in sectors identified as under the most stress or with the most potential volatility are also reviewed every quarter, although the Company may also review a rating in response to developments impacting a credit when a ratings review is not scheduled. For assumed exposures, the Company may use the ceding company’s credit ratings of transactions where it is impractical for it to assign its own rating.

For purposes of classifying BIG exposures into one of the three BIG categories, the Company calculates the present value of projected claim payments and recoveries using the pre-tax book yield of the relevant insurance subsidiary’s investment portfolio as the applicable discount rate.

As discussed in Note 4, Expected Loss to be Paid (Recovered), for financial statement measurement purposes, the Company uses risk-free rates (as determined each quarter) for discounting, rather than pre-tax book yield of the investment portfolio, to calculate the expected losses to be paid. Expected losses to be paid (recovered) are based on probability weighted scenarios and serve as the basis for the loss reserves reported in accordance with U.S. GAAP.

The Company typically guarantees the payment of debt service when due. Since most of these payments are due in the future, the Company generally uses gross and net par outstanding as a proxy for its financial guaranty exposure. Gross par outstanding generally represents the principal amount of the insured obligation at a point in time. Net par outstanding equals gross par outstanding net of any reinsurance. The Company includes in its par outstanding calculation the impact of any consumer price index inflator to the reporting date as well as, in the case of accreting (zero-coupon) obligations, accretion to the reporting date. Non-U.S. dollar denominated par outstanding is translated at the spot rate at the end of the reporting period.

The Company has, from time to time, purchased securities that it has insured, and for which it had expected losses to be paid, in order to mitigate the economic effect of insured losses (Loss Mitigation Securities). The Company excludes amounts attributable to Loss Mitigation Securities from par and debt service outstanding, and instead reports Loss Mitigation Securities in the investment portfolio. The Company manages such securities as investments and not insurance exposure. As of both December 31, 2024 and December 31, 2023 the Company excluded net par outstanding of $1.2 billion attributable to Loss Mitigation Securities.

Gross debt service outstanding represents the sum of all estimated future debt service payments on the insured obligations, on an undiscounted basis. Net debt service outstanding equals gross debt service outstanding net of any reinsurance. Future debt service payments include the estimated impact of any consumer price index inflator after the reporting date, as well as, in the case of accreting (zero-coupon) obligations, accretion after the reporting date.

•for insured obligations that are not supported by homogeneous pools of assets (which category includes most of the Company’s public finance transactions), as the total estimated contractual future debt service due through maturity, regardless of whether the obligations may be called and regardless of whether, in the case of obligations where principal payments are due when an underlying asset makes a principal payment, the Company believes the obligations will be repaid prior to contractual maturity; and

•for insured obligations that are supported by homogeneous pools of assets that are contractually permitted to prepay principal (which category includes, for example, residential mortgage-backed securities (RMBS)), as the total estimated expected future debt service due on insured obligations through their respective expected terms, which reflects the Company’s expectations as to whether the obligations may be called and, in the case of obligations where principal payments are due when an underlying asset makes a principal payment, when the Company expects principal payments to be made prior to contractual maturity.

The calculation of debt service requires the use of estimates, which the Company updates periodically, including estimates and assumptions for the expected remaining term of insured obligations supported by homogeneous pools of assets, updated interest rates for floating and variable rate insured obligations, behavior of consumer price indices for obligations with consumer price index inflators, foreign exchange rates and other assumptions based on the characteristics of each insured obligation. Debt service is a measure of the estimated maximum potential exposure to insured obligations before considering the Company’s various legal rights to the underlying collateral and other remedies available to it under its financial guaranty contract.

Actual debt service may differ from estimated debt service due to refundings, terminations, negotiated restructurings, prepayments, changes in interest rates on variable rate insured obligations, consumer price index behavior differing from that projected, changes in foreign exchange rates on non-U.S. dollar denominated insured obligations and other factors.


	As of December 31, 2024				As of December 31, 2023
	Gross		Net		Gross		Net
	(in millions)
Debt Service
Public finance	$	403,789	$	403,718	$	386,494	$	386,419
Structured finance	12,674		12,248		11,543		11,217
Total financial guaranty	$	416,463	$	415,966	$	398,037	$	397,636

Par Outstanding
Public finance	$	250,429	$	250,375	$	239,352	$	239,296
Structured finance	11,603		11,177		10,183		9,857
Total financial guaranty	$	262,032	$	261,552	$	249,535	$	249,153

In addition to amounts shown in the table above, the Company had outstanding commitments to provide guaranties of $196 million of public finance gross par and $1.5 billion of structured finance gross par as of December 31, 2024. These commitments are contingent on the satisfaction of all conditions set forth in the guaranties and may expire unused or be canceled at the counterparty’s request. Therefore, the total commitment amount does not necessarily reflect actual future guaranteed amounts.

Also, in connection with a potential transaction that would accelerate the run-off of the insured portfolio of Financial Guaranty Insurance Company (FGIC) (the Proposed Transaction) pursuant to the First Amended Plan of Rehabilitation for FGIC, dated June 4, 2013, the Company and FGIC are parties to a novation agreement dated as of February 8, 2024 pursuant to which certain FGIC policies insuring approximately $353 million of public finance (including infrastructure) gross par and approximately $50 million of structured finance gross par as of December 31, 2023 may in the future be novated to the Company in accordance with the terms and conditions of the novation agreement. The Proposed Transaction, including the novation of certain FGIC policies to the Company, is subject in all respects to review and approval by NYDFS, the reopening of FGIC’s rehabilitation proceeding, and ultimate approval by the Supreme Court of the State of New York. On September 10, 2024, following the NYDFS’s review of the Proposed Transaction and information submitted by FGIC, FGIC received a written communication from the NYDFS stating that the NYDFS does not support the Proposed Transaction. In the event the Proposed Transaction does not occur on or prior to September 30, 2025, either the Company or FGIC has the right to terminate the novation agreement in accordance with its terms.


	Public Finance U.S.				Public Finance Non-U.S.				Structured Finance U.S.				Structured Finance Non-U.S.				Total
Rating Category	Net Par Outstanding		%		Net Par Outstanding		%		Net Par Outstanding		%		Net Par Outstanding		%		Net Par Outstanding		%
	(dollars in millions)
AAA	$	25	—	%	$	2,074	4.2	%	$	512	6.1	%	$	470	17.3	%	$	3,081	1.2	%
AA	17,664		8.8		2,854		5.8		5,386		63.7		58		2.1		25,962		9.9
A	111,502		55.5		13,046		26.5		952		11.3		2,117		77.7		127,617		48.8
BBB	69,096		34.3		24,828		50.5		707		8.3		79		2.9		94,710		36.2
BIG	2,888		1.4		6,398		13.0		896		10.6		—		—		10,182		3.9
Total net par outstanding	$	201,175	100.0	%	$	49,200	100.0	%	$	8,453	100.0	%	$	2,724	100.0	%	$	261,552	100.0	%


	Public Finance U.S.				Public Finance Non-U.S.				Structured Finance U.S.				Structured Finance Non-U.S.				Total
Rating Category	Net Par Outstanding		%		Net Par Outstanding		%		Net Par Outstanding		%		Net Par Outstanding		%		Net Par Outstanding		%
	(dollars in millions)
AAA	$	110	0.1	%	$	2,062	4.2	%	$	867	10.0	%	$	465	38.0	%	$	3,504	1.4	%
AA	17,883		9.4		3,379		6.9		4,517		52.3		89		7.3		25,868		10.4
A	102,945		54.1		12,968		26.5		1,639		19.0		571		46.6		118,123		47.4
BBB	66,080		34.7		29,467		60.1		574		6.7		100		8.1		96,221		38.6
BIG	3,271		1.7		1,131		2.3		1,035		12.0		—		—		5,437		2.2
Total net par outstanding	$	190,289	100.0	%	$	49,007	100.0	%	$	8,632	100.0	%	$	1,225	100.0	%	$	249,153	100.0	%


	As of December 31,
Sector	2024		2023
	(in millions)
Public finance:
U.S. public finance:
General obligation	$	78,162	$	74,609
Tax backed	33,288		33,060
Municipal utilities	30,036		29,300
Transportation	26,958		22,052
Healthcare	14,007		12,604
Infrastructure finance	8,663		8,796
Higher education	7,381		7,250
Housing revenue	1,272		1,152
Investor-owned utilities	325		329
Renewable energy	164		167
Other public finance	919		970
Total U.S. public finance	201,175		190,289
Non-U.S public finance:
Regulated utilities	22,361		20,545
Infrastructure finance	14,961		15,430
Sovereign and sub-sovereign	9,181		9,869
Renewable energy	1,596		2,030
Pooled infrastructure	1,101		1,133
Total non-U.S. public finance	49,200		49,007
Total public finance	250,375		239,296
Structured finance:
U.S. structured finance:
Insurance securitizations	4,495		4,379
RMBS	1,507		1,774
Pooled corporate obligations	607		631
Financial products	492		464
Consumer receivables	212		314
Subscription finance facilities	185		178
Other structured finance	955		892
Total U.S. structured finance	8,453		8,632
Non-U.S. structured finance:
Subscription finance facilities	1,385		444
Pooled corporate obligations	468		425
RMBS	221		252
Other structured finance	650		104
Total non-U.S structured finance	2,724		1,225
Total structured finance	11,177		9,857
Total net par outstanding	$	261,552	$	249,153


	Public Finance		Structured Finance		Total
	(in millions)
0 to 5 years	$	52,502	$	5,720	$	58,222
5 to 10 years	54,255		3,220		57,475
10 to 15 years	46,053		1,007		47,060
15 to 20 years	32,126		702		32,828
Over 20 years	65,439		528		65,967
Total net par outstanding	$	250,375	$	11,177	$	261,552

Actual amortization differs from expected maturities due to prepayments and terminations, and because interest rates, consumer price indices, foreign exchange rates and expected terms may be different than management had estimated. The expected maturities of structured finance obligations are, in general, shorter than their contractual maturities.


	BIG Net Par Outstanding								Net Par
	BIG 1		BIG 2		BIG 3		Total BIG		Outstanding
					(in millions)
Public finance:
U.S. public finance	$	2,119	$	137	$	632	$	2,888	$	201,175
Non-U.S. public finance	5,879		519		—		6,398		49,200
Public finance	7,998		656		632		9,286		250,375

Structured finance:
U.S. RMBS	104		29		686		819		1,507
Other structured finance	—		21		56		77		9,670
Structured finance	104		50		742		896		11,177
Total	$	8,102	$	706	$	1,374	$	10,182	$	261,552

As of December 31, 2023


	BIG Net Par Outstanding								Net Par
	BIG 1		BIG 2		BIG 3		Total BIG		Outstanding
					(in millions)
Public finance:
U.S. public finance	$	1,257	$	926	$	1,088	$	3,271	$	190,289
Non-U.S. public finance	1,131		—		—		1,131		49,007
Public finance	2,388		926		1,088		4,402		239,296

Structured finance:
U.S. RMBS	22		36		883		941		1,774
Other structured finance	—		27		67		94		8,083
Structured finance	22		63		950		1,035		9,857
Total	$	2,410	$	989	$	2,038	$	5,437	$	249,153


	Net Par Outstanding						Number of Risks (2)
Description	Financial Guaranty Insurance (1)		Credit Derivatives		Total		Financial Guaranty Insurance (1)	Credit Derivatives	Total
	(dollars in millions)
BIG 1	$	8,074	$	28	$	8,102	98	3	101
BIG 2	702		4		706		12	1	13
BIG 3	1,374		—		1,374		97	3	100
Total BIG	$	10,150	$	32	$	10,182	207	7	214


	Net Par Outstanding						Number of Risks (2)
Description	Financial Guaranty Insurance (1)		Credit Derivatives		Total		Financial Guaranty Insurance(1)	Credit Derivatives	Total
	(dollars in millions)
BIG 1	$	2,394	$	16	$	2,410	95	2	97
BIG 2	979		10		989		13	2	15
BIG 3	2,010		28		2,038		109	7	116
Total BIG	$	5,383	$	54	$	5,437	217	11	228

When the Company insures an obligation, it assigns the obligation to a geographic location or locations based on its view of the geographic location of the risk. The Company seeks to maintain a diversified portfolio of insured obligations designed to spread its risk across a number of geographic areas.


	Number of Risks	Net Par Outstanding		Percent of Total Net Par Outstanding
	(dollars in millions)
U.S.:
U.S. public finance:
California	1,182	$	36,080	13.8	%
Texas	1,145	26,004		9.9
New York	798	19,572		7.5
Pennsylvania	533	18,448		7.1
Illinois	479	12,536		4.8
Florida	218	11,353		4.3
New Jersey	248	8,824		3.4
Louisiana	139	4,994		1.9
Michigan	228	4,877		1.9
Colorado	171	4,012		1.5
Other	2,034	54,475		20.8
Total U.S. public finance	7,175	201,175		76.9
U.S. structured finance (multiple states)	328	8,453		3.2
Total U.S.	7,503	209,628		80.1

Non-U.S.:
United Kingdom	272	41,001		15.7
Australia	7	1,740		0.7
Spain	9	1,506		0.6
France	7	1,477		0.5
Canada	5	1,243		0.5
Other	49	4,957		1.9
Total non-U.S.	349	51,924		19.9
Total	7,852	$	261,552	100.0	%


	As of December 31, 2024				As of December 31, 2023
	Gross Exposure		Net Exposure		Gross Exposure		Net Exposure
	(in millions)
Diversified real estate (1)	$	2,004	$	2,004	$	1,569	$	1,569
Insurance securitizations (2)	1,449		1,126		1,370		1,043
Pooled corporate obligations	868		868		488		488
Aircraft residual value insurance	147		87		355		200

In addition to the amounts shown in the table above, as of December 31, 2024, the Company had outstanding aggregate gross and net aircraft residual value insurance commitments of $90 million and $51 million, respectively. These commitments are contingent on the satisfaction of specified conditions and may expire unused or be cancelled at the request of the respective counterparty. Therefore, the total commitment amount does not necessarily reflect actual future covered amounts.